A group of Chinese investors forced to sell a large parcel of sensitive South Island land after breaching foreign buyer rules planned to build a large scale theme park featuring roller coaster rides near a pristine alpine lake.
But after spending up to $100,000 on the plans, they had to be abandoned when the Overseas Investment Office (OIO) found several shareholders were "overseas persons" and the land purchases were likely unlawful.
An investigation report released to the Herald under the Official Information Act reveals the companies paid a total of $5.7 million for the land, and suggests the investors received bad legal advice.
Between December 2014 and January 2017, Xuqi Wu - who became a New Zealand citizen in 2005 and is listed as living in Auckland's Stanmore Bay - incorporated three New Zealand companies and purchased four pieces of land between Twizel and Lake Pukaki comprising 327ha.
The investors had a grand plan for the undeveloped sites, including a laser tag business aimed at Chinese tourists, hot air balloon base, man-made lake for salmon fishing, star gazing observatory, tourist accommodation and wedding chapel venue that would fly newlyweds up Aoraki/Mt Cook for scenic photographs.
The plans even extended to building a large scale theme park with roller coaster rides alongside a Chinese company that specialised in international theme park developments.
But the ambitious dreams began to unravel in 2016 after a phone tip off to the OIO sparked an investigation into the ownership structure of the three companies.
It found all were at least 25 per cent controlled by overseas persons, meaning consent was required under the Overseas Investment Act. No such consent had been obtained.
The companies' shareholders are all listed as living in Remuera, Mission Bay, Howick and Fendalton.
One of them, Hongbo Zhang, was not a New Zealand citizen nor "ordinarily resident" here, the documents show.
The other, Yun Yang, was in the same boat, but claimed his shareholding was "relationship property" with his Kiwi wife.
The heavily redacted report, dated April 2018, shows investigators wrote to the investors in mid-2016 issuing a "please explain", then sent compulsory information notices to the companies and several law firms.
The OIO recommended forcing the companies to dispose of the properties, but "if negotiations fail, we consider it may be appropriate to initiate legal proceedings".
Wu and the companies agreed to the demand, the documents show.
A settlement agreement was reached requiring the investors to dispose of two of the properties:
• 61.4ha of land at the Junction of State Highway 8 (Tekapo-Twizel Rd) and SH80; and
• 246.1ha of land at Tekapo-Twizel Highway.
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Then in March 2019, the investors applied to the OIO for a retrospective consent to retain ownership of other land they'd bought for $3.5m - 19ha at 4587 and 4589 SH8, Tekapo-Twizel Rd.
This was declined in January this year because investigators were "not satisfied the benefit to New Zealand would be substantial and identifiable".
The OIO also had concerns about the applicants' business plan and ability to successfully implement the proposed developments, especially given strict planning restrictions in the area that were likely to torpedo the group's development vision.
The report notes that investigators raised concerns about the first two acquisitions in August 2016. As the third purchase occurred in early 2017, Wu and the companies were therefore aware of their legal responsibilities "and issues concerning Yang and Zhang".
It found the investors did not set out to deliberately flout the rules and appeared to have received bad legal advice.
"Wu and [one of the companies] should have taken extra care to obtain appropriate legal advice and ensure the transaction did not result in further breaches of the Act.
"He stated the companies were willing to cooperate with the OIO and take steps to remedy the breaches."
Wu could not be reached for comment.
But OIO group manager Vanessa Horne said the case highlighted the importance of overseas investors following the rules, getting good legal advice and making sure they got necessary approval from the OIO.
"The OIO will continue to take action against investors that don't comply with their obligations."
On Saturday the Weekend Herald reported that wealthy American couple Michael Crandall and Michele Esposito were forced to sell an exclusive Bay of Island property this year for a massive loss after breaching foreign buyer rules designed to protect sensitive Kiwi land.
US couple Michael Rems and Julie O'Shea were also forced to sell an exclusive Waiheke Island holiday home in 2018 for a $1.2m loss after failing to move to New Zealand.
And a Korean doctor was convicted and fined $100,000 in February after he and his lawyer concocted a plan to hoodwink the OIO over the purchase of a $3m Auckland property.
Each parcel of the Twizel land was owned by a different company, but the shareholders involved in the three companies were linked.
The largest parcel of land at Tekapo-Twizel Highway was bought by Twizel Development Limited in January 2017 for $1.25m before being sold to a third party in June last year. No capital gain was made on the sale.
The next largest parcel at the Junction of SH8 and SH80 was bought by Pukaki Garden Limited in December 2014 for $950,000. It was sold to an independent third party in February for $1.1m.
The 19ha parcel was bought by Lake Pukaki Development Limited for $3.5m. The OIO has declined a retrospective consent to retain ownership of this property and the owners must now dispose of it.
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