Government blocks sale of Lochinver to Shanghai Pengxin on grounds any benefits aren't substantial and identifiable

Government blocks sale of Lochinver to Shanghai Pengxin on grounds any benefits aren't substantial and identifiable

By Bernard Hickey

Ministers have blocked the sale of the iconic Lochinver sheep, beef and dairy support station on the Napier-Taupo highway to Chinese firm Shanghai Pengxin on the grounds it did not meet the tougher tests under the 2010 Overseas Investment Act for creating value for the country.

This was despite the OIO saying the decision was finely balanced and it recommending that it be approved.

Associate Finance Minister Paula Bennett and Land Information Minister Louise Upston said the application to acquire the 13,800 ha farm for $88 million from Shanghai Pengxin's Pure 100 Farm Ltd was rejected because the benefits to New Zealand weren't substantial and identifiable.

“Because Lochinver Station is classified by law as sensitive land, Ministers must consider whether the application meets the requirements set out in the Overseas Investment Act,” Bennett said. 

“While we recognise and support the importance of overseas investment, the Overseas Investment Act states it is a privilege for overseas people to own sensitive New Zealand assets and therefore requires such investments to meet statutory criteria for consent." 

“After detailed and careful individual consideration, we are not satisfied there will be, or is likely to be, a substantial benefit to New Zealand – a key requirement for applications of sensitive land of this size," says Bennett.

The proposed sale was the subject of heated debate in last year's election campaign when it emerged the family-owned Stevenson Group had agreed to sell the 14,000 ha Lochinver station to Shanghai Pengxin, which owns the neighbouring Crafar Farms group, for a reported NZ$70 million. Stevenson planned to use the funds to develop an industrial estate in an old quarry in South Auckland. See more here on Interest from August 4 last year.

Bennett and Upston said the OIO had recommended approving the deal, saying the decision on the benefits was "finely balanced."

Stevenson Group CEO Mark Franklin said he was disappointed with the decision and disagreed with the assumptions used and the way the criteria was applied.

"We are concerned that this process has taken 14 months with the end result that we have been deprived of our property rights to sell to the highest value bidder for some vague national benefit which has not been defined," Franklin said, adding it was unclear why Lochinver was different to other similar deals that had been approved.

"Beyond this transaction, this decision will have significant economic ramifications for the New Zealand economy, particularly in the areas of international relations, uncertainty of foreign investment and rural land prices," he said.

Labour says 'right call made'

Labour Finance Spokesman Grant Robertson said the OIO made the right call and should take a similarly strong approach on other sales.

“This is the first time the OIO has blocked a foreign land sale since National changed the criteria in 2012. A lot of sensitive land has gone into the hands of foreign buyers in that time," Robertson said.

“Labour would strengthen overseas investment criteria by creating a publicly-searchable farm sales register, require buyers to have a clear plan to create new jobs and improve productivity and keep them to their word through spot audits," he said.

“It appears the only reason Lochinver was blocked is heightened media attention. It’s unfortunate that other sales without similar attention are being waived through."

Federated Farmers welcomed the decision.

“New Zealand absolutely needs foreign investment, but there has to be clearly demonstrated benefit to the local and national economy. This was not proven here and we believe the Lochinver decision reinforces the importance of changes made to the Overseas Investment Office rules over recent years,” said Federated Farmers President William Rolleston.

“We now have a more thorough and robust framework for making critical decisions on foreign investment in rural land, and what we’ve seen here is Ministers applying this framework as it was intended to be used. What we need is for foreign investors and those involved in the sale of rural land to work harder to find ways to demonstrate economic benefit, both on the property they are targeting and for the broader industry," he said.

“This might be the introduction to New Zealand of new technology or using their overseas networks to open up new markets for other kiwi businesses."

(Updated with reaction, detail)

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Enough jobs? Are these the sole criteria for deciding on the sale of New Zealand agricultural land?

Jobs are one measure of value. Important, yes, but one measure. Jobs in New Zealand dairying are largely filled by minimum-waged immigrant workers. We'd like the Chinese to create more of these?

How about policies that seek to create genuinely significant and extending national economic and social value? How about policies that are focused on securing longer-term well-being for our nation, its citizens and residents?

Face up to the influence on the ministers from Nats Focus Groups.
That is the real reason for the rejection.
This time the spin did not work.

Rejecting this deal will make National look good to the public, or at least not too bad after the news about the Chinese-SFF deal only a day ago.

National also hopes to secure another term so that more foreign $ can flow in to buy dairy land, whose price would be worth a lot less than the current level in 2017 without foreign bidders.

This tactic is called 'move backward in order to move forward' - 欲擒故纵 or 以进为退.

Why then have they allowed the sale of so much other similar land. Looks to me more like political expediency and a lack of pressure from the banking sector. I find it hard to believe that any foreign owner can add any more than a NZ farmer who knows the land, climate and the practices that work in this country. We have plenty of innovative farmers who are always looking for a better way. The fact that the Chinese contracted NZ farmers to run the Craffer farms is an admission that they could do no better. At the end of the day all they had to offer was stupid amounts of money to bail out the bank debts. So what is the criteria here? - looking after the banks, or the interests of New Zealanders and our future income? Obviously the former because bank debt is not an issue with the Stephenson, Lochenvers owners, whereas it was with the Craffers.

The Govt have been ignoring the public disquiet but this is the first sign they have heard it. Lets congratulate them for that at least. Of course they have a great deal of thinking change to do before they do what the public really wants which is ownership of New Zealand land to be restricted to citizens.

Would be interesting to know how the other related elements of the reorganisation were travelling through OIO, being the Crafar and Synlait on sale to Dakang Pasture
http://www.dakangmuye.com/
(the sites imploded when Bing tried to translate)

other clippings include:
http://www.stuff.co.nz/business/farming/dairy/68593520/synlait-farms-fou...
and
http://www.stuff.co.nz/business/farming/dairy/63471395/pengxin-wants-mor...
and
http://www.stuff.co.nz/business/70069555/Millions-of-Penno-assets-to-be-...
and
http://www.puratafarming.nz/

Bugger, National has just taken the wind out of Labour's sails (and Winston's for that matter)

Maybe the Chinese didn't want to go through with this one, too expensive I'd say, this deal was arranged at peak prices.They'll want better farms than this, plenty for sale in the Waikato.
There was a sheep farm in our area sold to foreigners and in the OIO report it said the benefits of the sale for NZ were, that they would increase spending on fencing, fertiliser and animal health. Really? and Kiwi farmers aren't already spending a lot of money on these things? Seems like a lame excuse to me.

Too expensive?

On a per hectare basis, Lochinver was a fraction of the price paid for Crafar Farms

Not as good land. Cold climate. Interested what others think. also it may not be what they now want, because at the time there wouldn't have been the number of fully set up dairy farms on the market that they could buy now.

Its Siberia out at Lochinvar. I dont think one dairy farm out that way would be a profitable experience for the owners. Best left to an angus cow. I lived there for a year. Snow at christmas. Howling winds most of the time. Very pretty on a good day. Yep great place to grow a good steak. Remember that farm is export certified for cattle. Could have been strategic move when dairy was all the rage.

Great decision by the Government. Chinese can hardly complain as New Zealanders can not buy Chiniese land. Its a win win decision, decreasing the demand for NZ land potentially allowing New Zealand farmers to step up to ownership.