Focus: David Parker announces the Government is to apply a new national interest test to overseas investment rules. Video / Mark Mitchell
A group of wealthy foreign investors have been forced to sell a large parcel of sensitive South Island land after breaching the Overseas Investment Act (OIA).
The owners of three properties in Twizel failed to seek consent from the Overseas Investment Office (OIO) before spending millions of dollars buying up 327ha of land between 2014 and 2017, said Vanessa Horne, group manager for the OIO.
"The buyers should have sought consent from the OIO as the land is considered sensitive under the Overseas Investment Act."
The land is considered sensitive because it is rural and each property is greater than 5ha.
The foreign investors failed to obtain the necessary consent before purchasing more than 300ha of sensitive land near Twizel. Image / Google
Companies Office records show the listed director of all three companies involved in the purchases is Xuqi Wu of Stanmore Bay in Auckland. The companies' shareholders are all listed as living in Remuera, Mission Bay, Howick and Fendalton.
"The OIO investigated the purchase of the land and found the investors bypassed our overseas investment rules due to incorrect legal advice," Horne said.
"We recognise this was an inadvertent mistake on their part and in December 2018 the OIO reached a settlement agreement with the investors."
The settlement agreement required the investors to dispose of two of the properties:
• 61.4585ha of land at the Junction of State Highway 8 (Tekapo-Twizel Rd) and State Highway 80; and
• 246.1899ha of land at Tekapo-Twizel Highway.
In March 2019 - as part of their settlement agreement - the investors applied to the OIO for a retrospective consent to retain ownership of other land which they'd bought for $3.5 million - 19ha at 4587 and 4589 State Highway 8, Tekapo-Twizel Rd.
"The applicant bought the land in 2015 and did not start any development – it had proposed building an observatory, wedding chapel and subdividing 60 to 80 residential lots for holiday homes.
Overseas investors have been forced to sell more than 300ha of sensitive South Island land. Photo / File
"On 8 January 2020, the OIO declined the application for a retrospective consent. We were not satisfied the benefit to New Zealand would be substantial and identifiable. The OIO had concerns about the applicant's business plan, their ability to successfully implement the proposed developments, given the lack of progress, and their consideration of how the developments would be undertaken or operated in practice," Horne said.
This case highlighted the importance of overseas investors following the rules, getting good legal advice and making sure they got necessary approval from the OIO, Horne said.
"The OIO will continue to take action against investors that don't comply with their obligations."
Each parcel of 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 State Highway 8 and State Highway 80 was bought by Pukaki Garden Limited in December 2014 for $950,000 and is currently under offer.
The 19ha parcel was bought by Lake Pukaki Development Limited. The OIO has declined a retrospective consent to retain ownership of this property and the owners must now dispose of it.
Korean doctor Won Joo Hur was convicted and fined $100,000 for breaching the Overseas Investment Act over his purchase of a $3m Helensville property. Photo / Dean Purcell
The case follows the first ever criminal prosecution by the OIO over the purchase of sensitive land in Helensville.
Korean doctor Won Joo Hur was this month convicted and fined $100,000 after he and his lawyer Jaeho Choi concocted a plan to hoodwink the OIO over the purchase of a $3 million Auckland property.
Hur and Choi were accused of forging documents and lying to investigators in an attempt to skirt foreign buyer rules.
The ruse included backdating what prosecutors labelled a fictitious loan document and drafting it by hand to avoid being sprung by a computerised date stamp.
When investigators caught wind of the deception, the pair told further lies and Choi instructed Hur to delete incriminating emails.
