US investors were the largest purchasers of NZ dairy land in 2013-2104

Friday 16th October 2015

Americans were the largest investors in New Zealand dairy farms in 2013 and 2014, according to analysis of Overseas Investment Office decisions by KPMG.

US investors accounted for 54 percent of land sold and 27 percent of the total $297 million paid. While 26 OIO decisions were approved during the period, only 18 disclosed the consideration paid.

KPMG partner Justin Ensor said the report shows there is a common misconception that there’s a thin market – comprised mainly of Chinese and Hong Kong investors – who are buying New Zealand dairy land. “In reality, though the market has a broad base of investors,” he said.

For example, when KPMG analysed OIO approvals two years ago, Germans had bought a lot of dairy land in Southland, he said.

China accounted for only one of the 24 transactions for dairy land approved by the OIO – that was Shanghai Pengxin’s acquisition of a controlling stake in Synlait Farms in Canterbury, which accounted for 12 percent of hectares sold and 21 percent of the consideration paid during the two-year period.

Sweden accounted to 6.1 percent of dairy farms sold, with the remaining investment comprised of 11 other countries. New Zealanders made up 5.9 percent of dairy land sales where they required OIO approval as part of an overseas investor consortium.

The KPMG analysis doesn’t include other farm land bought by offshore investors and then converted to dairy farms.

There was also a large variance in the price per hectare paid by overseas investors, reflecting the max and quality of land acquired, Ensor said.

Purchases were made for different reasons with some offshore investors seeking farms as part of a supply chain back to their home markets while others were investing as part of a wider diversified property fund, he said.

“Our observation is that the Asians are more focused on supply chain as opposed to US and European investors,” he said.

KPMG’s analysis didn’t probe the length of time taken for approval on the various land purchases.

Earlier this year government ministers went against OIO advice and rejected an $88 million bid from Pure 100 Farm, a Shanghai Pengxin subsidiary, to acquire the Lochinver Station’s 13,800 hectares because the benefits to New Zealand were “not substantial and identifiable”. The decision was subject to long delays.

This week Dakang New Zealand Farm Group, which is 55 percent owned by Shanghai Pengxin, quit efforts to buy 10 farms in Northland, citing five months of silence from the Overseas Investment Office since it applied for clearance and its experience trying to buy Lochinver Station.

The Shanghai based group already owns the 8,000 ha Crafar farms.

New Zealand will still be able to make its foreign investment rules "more restrictive" under the Trans-Pacific Partnership, according to a Ministry of Foreign Affairs and Trade guidance note.

That opened up a way for the Labour Party to support the controversial trade and investment pact.

One of Labour's non-negotiable bottom lines for TPP support is that a future government must be able to "further restrict" sales of sensitive land and other assets that may be deemed 'sensitive'.

There had been earlier talk after the conclusion of the trade talks in Atlanta that New Zealand would only be allowed to apply its existing Overseas Investment Act regime for sensitive land, which requires foreign purchasers to pass a 'benefit to New Zealand' test.

BusinessDesk.co.nz

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