Canada pips China as biggest source of investment after AMP Capital, forestry deals

Monday 17th August 2015

Canada eclipsed China as the biggest source of foreign direct investment in New Zealand in the past two years, after the Public Sector Pension Investment Board bought a property portfolio from AMP Capital Investors and acquired more of the Kaingaroa forest.

A total $14.2 billion of investment applications were approved by the Overseas Investment Office between January 2013 and December 2014, according to a KPMG survey. That's down from $18 billion in the preceding 2 1/2 year period. Canada accounted for 22 percent of total gross FDI in that period, followed by China at 14 percent, the US at 13 percent and Australia at 11 percent.

AMP Capital sold a portfolio of 18 New Zealand properties worth more than $1 billion last year to the Canadian pension board, which also increased its holding in the 178,000 hectare central North Island Kaingaroa forest to 30 percent as part of a selldown by Harvard Management Co, which manages Harvard University's endowment fund.

China's investments were led by state owned Beijing Capital's $950 million acquisition of Waste Management from Transpacific Industries in 2014 and the $212 million acquisition by Yashili International Holdings, which is 52 percent Chinese owned, of a milk processing plant in Pokeno. Among other investments in dairy were Yili Group's $214 million investment in Oceania Dairy to build an infant formula plant, and majority Chinese owned SFL Holdings' acquisition of Synlait Farms for $85 million.

OIO data, which covers major investments and doesn't capture residential property, shows energy and power attracted the most FDI, at 17 percent, while real estate made up 13 percent and agri-business was third at 11 percent, level pegging with materials.

Within agri-business, milk processing accounted for almost a third - 31 percent - followed by dairy farming at 20 percent. KPMG said it expects FDI in milk processing to slow with the decline in dairy prices, although there may be "speculative buying of farms in the event forced sales occur in this sector."

China was the biggest investor in agri-business, at 30 percent, followed by Hong Kong at 19 percent. The US and Singapore came next, each at 7 percent.

Of the 250,000ha of freehold and leasehold land acquired by overseas interests in the past two years, 46 percent was bought by US investors, followed by those in China, at 11 percent. Of the 595,014ha of land acquired in the past five years, 330,333ha was forestry, 177,810ha was sheep & beef farms and 72,002ha was dairy farms.

KPMG said Australia's investments are understated because of recent changes to regulations relaxing the requirements for Australian companies to obtain OIO approvals.

BusinessDesk.co.nz

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