Shanghai magnate blamed lack of due diligence For the failure of historic Sapich winery
A foreign billionaire forced to sell a historic West Auckland vineyard by the overseas investment watchdog blamed his lack of due diligence for the winery’s ultimate failure.
Documents released to the Herald under the Official Information Act show Shanghai business magnate Furu Ding had no idea the old Sapich Bros vineyard he paid $5 million for specialised in fortified wine until shortly before he took possession in 2013.
And despite playing up his extensive “business experience and acumen” when applying for Overseas Investment Office (OIO) consent, Ding closed the business and ripped out the vines when he realised the operation would “not be financially viable under his ownership”.
The documents show Ding admitted undertaking “little investigation of the business and its ongoing viability” before the purchase. He instead relied on statements made by a friend who introduced him to the investment opportunity.
Ding was forced to sell the 28ha property last year after failing to make promised investment to refurbish the former Croatian family-owned winery and increase production to supply local wine to his hotels in China. He also failed to become “ordinarily resident” in New Zealand, a condition of his consent.
Ding has considerable land holdings in New Zealand. In 2012 he was granted OIO consent to buy a huge vacant site in downtown Auckland where he planned to build the nation’s tallest skyscraper. Nine years on, the site remains vacant and a resource consent for the $350m development is due to lapse next month.
He agreed to purchase the Waitakere vineyard in July 2011 but settlement did not occur till July 2013. He was ordered to dispose of the property in April 2018 for breaching OIO consent conditions.
In August 2018, OIO principal adviser Andrew Morris wrote to Ding’s New Zealandbased lawyer.
Morris listed
An adequately funded ANZP would likely have a different, and properly researched, business plan
undertakings Ding had failed to honour, including statements from Ding that his “business commitments” had prevented him from residing in New Zealand.
“We view this outcome as highly unsatisfactory given the applicant’s original representations,” Morris wrote.
The letter quotes explanations given by Ding for his shortcomings, including his lack of due diligence.
“Not long before settling the acquisition of the land, Mr Ding met the vendor and learned that at least 70 per cent of the vines on the land would need to be replaced to produce quality wines appropriate for export to China,” Ding’s lawyers had claimed.
“He also properly appreciated for the first time that the majority of the wine produced on the property was port, rather than table wines, which was the type of wines he was intending to sell in his hotels in China.”
In response, Morris wrote that it was “difficult to reconcile this explanation” with the detailed due diligence conditions contained in the sale and purchase agreement, and “the description of the applicant’s business experience and acumen in the [consent] application”.
“If this is an accurate description of what occurred, and the applicant undertook little or no due diligence or research on the assets or the viability of his plans, then this information would have been relevant to our assessment of the original application.”
Morris’ letter challenged Ding’s claim that other buyers would have found the operation similarly unviable “given the financial state of the business, and the significant capital investment required to replace the vines”.
“We question the credibility of the applicant’s submissions for a number of reasons,” Morris wrote. “We are not persuaded that an ANZP [alternative New Zealand purchaser] would not invest in improving the productivity and performance of the assets as the applicant sought to.
“The reason the applicant’s business plan failed is specific to his situation. An adequately funded and competent ANZP would likely have a different, and properly researched, business plan.
“Alternatively, the land may have appealed to someone looking for a ‘lifestyle’ vineyard.”
The property was sold in November last year for $5.5m. The Herald understands the New Zealand buyer did not require OIO consent. The Herald asked the OIO why it had not launched a prosecution. It said disposal was the “most appropriate and proportionate enforcement action”.
The National Party’s land information spokeswoman, Louise Upston, said it was a privilege to own land in New Zealand. “The Overseas Investment Office should be taking enforcement action when conditions are not met and following through with prosecution when there is a clear case for it.”