High-country farmer subdivision profits released

"658-TIMES MULTIPLIER": The Alpha Burn Station, near Wanaka, was bought under tenure review by Don and Vicki McRae. They later sold 193ha for $10.1 million
"658-TIMES MULTIPLIER": The Alpha Burn Station, near Wanaka, was bought under tenure review by Don and Vicki McRae. They later sold 193ha for $10.1 million

Shell out $265,000 and collect more than $10 million. It's one of several nice little high-country earners.

That's the mark-up that one South Island runholder couple made from subdividing some of their land freeholded through the tenure review process.

Lincoln University academic and tenure-review expert Dr Ann Brower has for several years been following the money trail from the Crown's coffers to the bank accounts of high-country farmers.

Now, newly released details of some of the deals have allowed her to calculate the profits made from subdividing previously publicly owned land in some of the South Island's most pristine locations.

Federated Farmers is taking issue with Brower's findings, saying any subsequent multimillion-dollar gains from subdivision do not expose flaws in the tenure review process.

Instead it says they are merely a consequence of district council plans allowing subdivision to take place.

Alpha Burn Station on the southern shores of Lake Wanaka and on the road to the Treble Cone skifield is one of more than 100 high-country farms that have been through tenure review in the past 20 years.

Brower says that in 2002, the Crown sold 3365 of the 4579-hectare station to leaseholders Don and Vicki McRae for $267,500, the equivalent of $79.50 per ha.

The Crown then bought pastoral leasehold rights for grazing and conservation of the remaining 1214ha - higher-altitude land - for $202,500, or $166.83 per ha.

She says the McRaes then subdivided the newly freeholded land and sold just 193ha of it to Damper Bay Estates in October 2006 for $10.1 million, according to Quotable Value data.

"That's 658 times what they paid. Translated into urban terms, this is like selling a section for $100,000 then seeing it sold on for $65.8m four years later."

Brower said the 658 times multiplier was, however, "quite reasonable" compared with some other deals.

Less than half of the leasehold land the Crown had sold for $6.9m had since sold for $135.7m.

"These subdividers have on-sold land for a price per hectare ranging from 1.8 to 27,096 times the price they paid. The median multiplier was 992.

"Alpha Burn is just one, picturesque, example of what's been happening for 20 years the entire length of the Southern Alps."

Closeburn, fringing Lake Wakatipu west of Queenstown, was another instance. In 1998 the runholders paid $199,889 for 930ha of land, then sold 14ha for $17,696,000, 6088 times what they paid. Brower said ironically Alpha Burn was actually one of the four best tenure review deals for the Crown because at least the valuers had put an estimated value from subdividing the land. Valuers had estimated the proposed land for freeholding would be worth about $3m if subdivided, before the Crown then knocked the price down to $265,500.

Victoria McRae told The Press the family did not "want to get involved in any discussions" on tenure review or its outcomes for them. "It's no help for anyone else who is doing it [tenure review]. It's water under the bridge."

Federated Farmers national vice-president and high-country liaison spokesman Dr William Rolleston said Brower's research "completely misses the point".

"All the subdivisions - it isn't actually tenure review that allows a landowner to subdivide. It's the district plan and the council.

"To say tenure review is creating a whole lot of wealth for the farmers - that's not true. If there is an increase in wealth from subdivision, that is a council function not a tenure-review function."

Green Party tenure review spokeswoman Eugenie Sage said when the Crown sold assets it always undervalued them.

"What we have here is high-value pastoral lease lands being gifted virtually to runholders and they are capturing a huge private gain.

"[But] Federated Farmers will argue that the grazing rents are worth more."

The Press