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Chinese buy five vineyards

Hong Kong-owned QWIL and Accolade Wines have been given the go ahead by the Overseas Investment Office to buy five vineyards from Mud House Wines.

The deal for $46.4 million involves the acquisition by QWIL of a freehold interest in five vineyards – Woolshed Vineyard in Marlborough, Home, Mound and Deans Vineyards in Canterbury, and Claim Vineyard in Otago.

The land comprises about 596ha.

A second part of the arrangement is the acquisition by Accolade of a leasehold interest in the five Vineyards being acquired by QWIL plus approximately 15ha for a café business.

QWIL’s Hong Kong corporate owners include Gold Rainbow (45.31%), Trueway International (22.05%), Triluck Assets (7.45%) and Hong Kong Public (25%). Accolade Wines NZ is owned by US interests (38%), Australians (19%), Netherlands (8%) China (8%) with various parties holding the balance of 27%.

“The applicants intend to continue to operate and develop the vineyards and various wine businesses related to the land. The investment will enhance QWIL’s existing investments in (and will provide Accolade Group with an entry into) the New Zealand wine industry,” the OIO says.

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More by Chris Hutching

Comments and questions
20

Has anyone told Winston first about this?

Just the first of many such purchases I suspect.

This is not rational thinking.

Rules around foreign investment in land and strategic assets should be tightened, not removed.

What's wrong with you all? What has happened to sheer commonsense, let along a knowledge of 1) history, and b) the way Communist China operates, behind all these investments?

Question is what is wrong with you?

Good - let them buy as we desperately need their funds, given New Zealanders owe billions of dollars in overseas debts.

You prepared to sacrifice all those lovely big screen TVs, cars, overseas holidays and baches by forsaking overseas borrowings?

We don't get their 'funds'. All 'investment' will leave our shores after having a capital gain after a few years. The Reserve Bank, OIO, Keys and co need to harden up on this.

you can't buy land in China and foreigners can only buy new homes in Australia not land or existing homes

Bring it on. Kiwis aren't interested in vineyards anymore. Just dairying, getting very leveraged, but vineyards represent good buying on a cyclical basis - very smart these Chinese purchasers.

Those who oppose these purchases by Chinese or other foreign investors - why don't you buy these vineyards? Or get together a cooperative to buy them? Because often the alternative is vineyards going into receivership (not that I'm suggesting this might have been the case here), with subsequent job losses, fire sale of plant, blow to the local economy, and so on. On the other hand, with foreign money able to purchase them, they use local know-how and expertise to manage the vineyards - the viticulture, expand, planting etc, then make the wine and that involves bottling, printing labels, designing, marketing. It's not just "buying land" - there's a huge benefit from this foreign investment. On the other hand, if no local investor has the wherewithal to buy these vineyards, they will literally wither and die. And that will be a tragedy for this country.

Deborah Coddington off-shore investors have a significant advantage over NZers as the playing field is far from level. For instance Chinese can access cheap money at 1% from Hong Kong. The same NZ based investor does not have this luxury of cheap money.

I think you should also consider the 34 odd tax treaties that NZ has which offer significant advantage to foreign investors who are based off-shore.
When an off-shore investor makes profits they repatriate those profits back to their own country which is another loss to the NZ economy in two ways. That profit is not invested back in NZ as would be the case with local investor and then there is the loss of tax revenue. There has also been a fair amount written on tax losses being able to be claimed in both countries so the off-shore investor can use our tax system in tandem with their own which offers them a far higher leverage from tax position point.

As NZ has the expertise then we should be capitalising on that expertise to maximise the full potential. Interest rates are far to high in NZ by comparison to other countries, couple this with the tax issues and NZers are highly disadvantaged.

I am not opposed to foreign investors if the playing field is level.

Foreign investors may be able to borrow offshore at 1% but they also bear the risk of foreign currency movements with the NZ$ at a high and only one real way for it to go long term. Your tax comments are rubbish, profits generated in NZ are taxed in NZ. If you have evidence of illicit means to avoid NZ tax then pass details to the IRD, they are active in this area. You then claim losses are being doubled up for tax advantage, wouldn't this require more funds to be put into NZ than taken out and therefore helping the NZ economy? Seems you are just trying to justify your prejudices.

Anonymous - I assume you have heard of Double Tax agreements and other such agreements. I also assume you have heard of AIL Approved Issuer Levy.

NRWT Non-resident withholding tax on interest is 15% but if the beneficiary qualifies as an AIL then the rate is 2%.

I also assume you have heard of tax credits.....if not perhaps you should read up on them and how they apply to international investment.

Where did I suggested that there were illicit tax avoidance schemes. I merely informed that the playing field was not level in regards to taxation and still stand by that statement.

Yes a currency move could affect an uncovered position.

Your suggestion that I have prejudices is ridiculous and adds nothing to the discussion on what is good for the NZ economy and the NZ people which is my main concern.

.

Do you even know what a double tax agreement is? You get a credit in your home country for tax paid in another country where profits have been generated. So they would have to make money in NZ and pay tax in NZ and them would not be taxed again in their home country. So how does that deprive NZ of tax revenue on profits made here?
Seems like you have read a few headlines rather than actually understanding anything you are talking about.

Anonymous you are completely missing the point of what I have written.
Maybe go back and re-read my posts.

Firstly - If profits are repatriated to the foreign investors tax jurisdiction then those profits are not being reinvested back into the NZ economy which then allows further tax to be generated in NZ. You can't keep sucking the profit component out without a balance on the other side of NZers investing off-shore and repatriating those profits back here.

You need to also consider the overall tax position and that is where NZ is not very competitive for local investors vs some foreign investors from other taxation jurisdictions.

I am aware of your covert derogatory comments.

So true, Deborah. Most of the vineyards were developed using borrowed funds (almost inevitably from the banks or finance companies) and could not withstand the first frost which impacted on the harvest. These vineyards need real capital and deep pockets to grow them to their true potential.

It's so pathetically sad we have those in NZ who think wine flow from taps and money grows on trees.

David. So true.
Remember - whoever the new Owner is they will still need to employ NZ viticulturists, winemakers and local distribution & admin staff.
Moreover, as an investor in the Industry, I can attest that the way to make a small fortune out of the Wine Industry is to start with a larger one!! So, good luck to the purchasers.. whether local or overseas!

And why does no local investor have the wherewithal to buy the vineyards? Doesn't it say something about the state of this country that we have to keep selling bits of it off to overseas buyers? Would it not be better if we were the ones who had the money to invest in both our own assets and foreign assets?

What you advocate doesn't sound in the slightest bit appealing. "It's ok, we may not own much, but at least they'll still employ a few of us". That might be ok for the portion of the country who already has the wealth to not worry, but countries are made up of more than just the wealthy.

If you want the real answer and you think you can handle the truth, it is this : New Zealanders invest like sheep. They all blindly follow whatever sector is hot and pay huge prices to get in - in the case of vineyards, pushing land values to absurd uneconomic levels all through the 1990s and 2000s.

The game was not economic returns but to pass the parcel to the next sheep who came along.

Alas, there are only so many human sheeps in NZ.

The rest is history.

Yet again this brings into focus the short-sighted interest rate policies of our
government and reserve bank who have consistently encouraged borrowing by low interest rates,this at the expense of savings.
Without strong savings we have,and will not,build some Domestic Investment Capital (DIC)
And without DIC we do not have the necessary funds to make these purchases.
When will those who control these things realise their fundamental error?
paleo

Chris Hutching, a more apt title for your article is "Hong Kong Chinese buy five vineyards"

By using title "Chinese buy five vineyards", you immediately conjure up Maoism and the People Liberation Army marching into NZ with their tanks. Hardly something a professional and responsible business journalist, such as yourself, would do.

Hi Dirk, the purpose of the article is to inform readers about an event (OIO approval) in the context of the wider debate about foreign ownership of NZ property. Therefore the heading could have included the words Hong Kong Chinese but the issue would be largely the same, cheers
Chris Hutching