A championship golf course taking shape at Glendhu Bay on Lake Wanaka. ALDEN WILLIAMS/STUFF

A championship golf course taking shape at Glendhu Bay on Lake Wanaka. ALDEN WILLIAMS/STUFF

We’ve paid $65m to get rid of some of our most treasured landscapes, through an obscure process critics have described as a vast wave of privatisation. Wealthy foreigners are snapping up valuable land once owned by the public, who in some cases paid to dispose of it. As gated estates and manicured golf courses spread through our wild places, Charlie Mitchell investigates:

Who owns the high country?

ALPHA BURN STATION

A disputed section at Damper Bay on Lake Wanaka, with a public walking track around the perimeter. ALDEN WILLIAMS/STUFF

A disputed section at Damper Bay on Lake Wanaka, with a public walking track around the perimeter. ALDEN WILLIAMS/STUFF

Thousands of people each year make the pilgrimage along this narrow and dusty path, which twists through a bushy terrace overlooking a lake in the heart of New Zealand's high country.

It is a landscape millions of years in the making, composed by the rise and fall of ancient glaciers, a place where colours converge; the lake’s deep shade of cerulean, the muted and sun-tinged tussocks of gentle hills, the colossal white peak of Mt Aspiring.

The trail is important, not for where it leads but for where it does not. It follows a strict path around a spectacular piece of land, covering about 190 hectares, separated from the public path by a network of fences emerging from the scrub.

“That track is one of the most popular things that brings people to Wanaka,” says Julian Haworth, secretary of the Upper Clutha Environmental Society.

“It boosts the local economy massively.”

If you were to stand on the land at its highest point, on a ragged knob rising about 400m above Damper Bay, to your east you would see the huddled line of lake-front houses known as Millionaire's Row, which became symbolic of Wanaka's growing elite; to your west would be farmland, sheep grazing on the flat paddocks which quickly curve upwards into rugged peaks.

This land, where the old Wanaka meets the new Wanaka, is recognised as an Outstanding Natural Landscape, a legal definition offering it a level of protection only surpassed by a national park. Not long ago, it became perhaps the most sought after piece of land in the country. But only a decade earlier it had been a scrubby sheep paddock on the eastern arm of Alpha Burn Station, one of the many sprawling high country farms where the myth of the Southern Man was born.

The farm covered thousands of hectares, mostly on steep, mountainous land above the lake - but it was the fate of that one section at Damper Bay that caused a local outcry, foreshadowing a much wider debate that would continue for many years.

The dispute had been kicked off by a Government-led process called tenure review, which had been occurring, in some form or another, since 1992. It was the biggest change to ever come to the high country, an area covering more than 2 million hectares, a space larger than Israel.

Like much of the high country, Alpha Burn Station was owned by the Crown. The Crown had bought the high country from South Island Māori through a series of meagre payments, for which Māori were promised reserves and continued access to their resources. Those promises were broken by the Crown, for which it would apologise to Ngāi Tahu in 1998 for acting “unconscionably and in repeated breach of the principles of the Treaty of Waitangi”.

After buying the land, the Crown leased it to farmers, who would pay rent and look after the landscape primarily by grazing sheep. They needed express permission to do anything else, like subdivide. In the mid-20th century, when wool prices were soaring, it was ideal; but then they weren’t, and it needed to change.

The change took the form of tenure review, a voluntary process in which the Crown's lease is broken up. Some of the land is privatised and sold back to the farmer; the rest is kept by the Crown and added to the conservation estate.

In 2004, when Alpha Burn went through tenure review, dozens of farms had been through it but hundreds had yet to begin the process, which many had viewed with cautious suspicion.

There was huge interest in Alpha Burn, which is a few minutes from Wanaka and shares around 5.5km with the lake front. For some, it was seen as a test for how tenure review would work in areas with enormous landscape potential.

When the outcome was proposed, the 190ha section at Damper Bay had been earmarked for privatisation, not conservation, resulting in a brief but furious campaign to keep it as a public reserve.

At the time, Wanaka had not been overrun with gleaming mansions like it has today, but many locals could see the way the wind was blowing; the rich and powerful were moving in, house prices were rising, and there were precious few opportunities to protect valuable land for the public.

Despite the likelihood the land would be developed, it was not put into the conservation estate or protected in any way with a covenant. It was handed back to the farmer, unshackled from the rules which had left it bare for so long.

The land was ultimately privatised, without protection. About 18 months later, it was sold to a group of wealthy developers, among them Sky TV founder Craig Heatley, one of the country's wealthiest men. They sought to subdivide the land for six houses, which did not come to fruition, in part due to vigorous opposition from local advocacy groups.

They failed to get their development, but they did win consent for one house. They sold the land in 2015 for a record price, setting a new precedent in the local housing market, which was already spiralling skyward, far out of reach of most New Zealanders.

For those who had lobbied for the land to be retained for the New Zealand public before it was too late, the new buyer was particularly objectionable.

It was a company called Second Star Ltd, seemingly an homage to Peter Pan: the mythical paradise of Neverland is the “second star to the right” in the Disney adaptation.

Its sole shareholder was American billionaire Peter Thiel, the Libertarian futurist who had become a New Zealand citizen, unbeknownst to almost everyone, after spending 12 days in the country, which allowed him to buy the land without approval from the Overseas Investment Office.

The thousands of people who walk this part of the Millenium Track around Damper Bay each year are on the fringes of land that was once owned by the public.

The land it trails around is empty, a locked jewellery box on the edge of town, symbolic of the wider changes facing the high country; once a mythic space that reflected the country's ethos of stoic individualism, now carved up for the exclusive few who can afford the luxury of a mansion by a lake.

THE CROWN JEWELS

ALDEN WILLIAMS/STUFF

ALDEN WILLIAMS/STUFF

There is another branch to the story of how valuable, publicly-owned land came to be owned by an American billionaire. It is the price for which we gave it up.

Every tenure review involves two transactions. The Crown, as the landowner, buys the lease from the farmer, setting aside the land it wants to keep for conservation. The farmer buys the rest from the Crown as freehold, now entirely theirs. The two sides, effectively, buy out each other's interests.

Because the Crown is buying leasehold land (that it already owns) and selling freehold, it should, intuitively, be making money. In 1995, a Treasury policy paper estimated the Crown's share in a lease was 58 per cent, and the farmer's 42 per cent - meaning that, in theory, what the Crown was selling was worth more than what it was buying.

When the review at Alpha Burn concluded, the Crown kept one-third of the land for conservation, and sold the remaining two-thirds to the farmer.

It was later revealed the taxpayer had paid $590,000 for the lease, and sold most of the land back as freehold for $640,000. The farmer, ultimately, paid $50,000 for exclusive ownership of thousands of hectares on Lake Wanaka.

It is astonishingly cheap, given what happened next. The disputed section at Damper Bay - comprising just 6 per cent of a farm bought for $50,000 - was sold almost immediately for $10.2m, property records show. A decade later, it was sold to Thiel for $13.5m.

The chain of custody went like this; the taxpayer gave up its land for an effective rate of $190 per hectare, which was on-sold for $51,800 per hectare, which was on-sold again for $70,000 per hectare.

The capital gain over a decade was roughly 37,000 per cent, none of which was realised by the taxpayer, and has ultimately put a prime piece of land into the private ownership of an America-based billionaire while the public is confined to a thin strip of land circling around it.

And because capital gains from property are not generally taxed, the taxpayer sees very little of the money that accumulates like a snowball as the value of magnificent land rises and rises, land it once owned.

Critics see it as a worst case scenario for the management of Crown land. Once land is put into freehold, it can typically only be returned by buying it back. As land prices soar, that becomes more and more difficult.

The ripples of the Alphaburn sale are continuing more than a decade on. It’s likely that Thiel will soon have a neighbour - the empty section next door, with 1.3km of lake frontage, has been listed for sale for the first time, with an unspecified price. It offers buyers the chance to obtain “one of the most prestigious positions in New Zealand”, the listing says.

The bare land has a rateable value of around $5.6m, but could sell for much more - Thiel, for example, bought his land for nearly double its rateable value.

When Alphaburn was up for tenure review, the biggest opponent to the land's privatisation was Julian Haworth.

He had sent mailers to most of the houses in Wanaka, urging them to lobby the Crown to keep its Damper Bay land for a public reserve, warning of likely development.

It was a nasty fight; farming had a large presence in Wanaka, and many accused Haworth of trying to undermine the farm's viability. He was, ultimately, vindicated: What he said would happen largely did.

"It's a completely ridiculous process," he says about tenure review.

"First of all, the land should be retained as public land, but if there's going to be huge profits made it should come back to the state, the people who own this land.

"This has happened behind closed doors, as far as I can see. They're not looking at the interests of the public or the wider country at large."

In the dozens of tenure reviews before and after Alpha Burn, the same disparity has been repeated time and time again, often without public scrutiny: the taxpayer has not only given up valuable land, it has paid to do so.

Over the 150 tenure reviews which have been completed, not only has the public privatised nearly half a million hectares of the high country, it has paid many millions of dollars to do so.

An analysis of all tenure reviews since 1998, based on data released under the Official Information Act, shows the taxpayer has paid nearly $65m to privatise land it owned, which in some cases has been on-sold for significant capital gain, pushing up property prices at the taxpayer's expense. (Data for 36 reviews completed before 1998 was not released by Land Information New Zealand.)

A review result
Key
Land subject to tenure review
Sold
For sale
Freehold
Covenant
Crown
Before
After
Before
After
wanakaMapCrop

For its many millions of dollars, the public has gained around 370,000ha for the conservation estate, which has expanded the areas the public can access and protected some rare and threatened landscapes.

It has also gained covenants and walking access to some areas of privatised land - about 14 per cent of privatised land has some form of covenant.

The public has, however, given up all rights to 430,000ha of the high country's most productive land, parts of which have become luxury retreats, gated developments, tourism ventures and intensively farmed land.

It has happened under both Labour and National governments, and is continuing to this day. Over the last few years, more land has been privatised than conserved, and the taxpayer is still paying to privatise its own land.

"It's going to transform the landscape of the South Island, and it's something we should take very seriously," says Dr Ann Brower, a Canterbury University academic who has written extensively about tenure review.

"We're talking about 10 per cent of the country. And even if it weren't [that much land], it's been done behind closed doors, and people should be concerned about that."

GLENDHU STATION

The view from Roy’s Peak, a popular walk with a view over Lake Wanaka. SUPPLIED

The view from Roy’s Peak, a popular walk with a view over Lake Wanaka. SUPPLIED

At the summit of Roy’s Peak, the picturesque mountain which ascends above Wanaka, lines of tourists wait to pose for selfies.

It is one of the most popular tracks in the country, and came into existence through tenure review - it passes through Alpha Burn Station, which is why it closes during lambing season.

The track has become so popular that cars line the road for hundreds of metres, the small car park overrun by demand. In recent months, the Department of Conservation (DOC) built an extension to the car park, doubling its capacity. It did so by buying land from Alpha Burn Station: the taxpayer paid $18,000 for one-third of a hectare by the road. It effectively bought back land it had sold for an effective rate of $15 per hectare in 2004 for what amounts to $55,000 per hectare in 2017. The capital gain on that small section of land was 366,000 per cent.

From the summit of Roy’s Peak, you can see Thiel’s land in the foreground. To the west, you can see the beginnings of a golf course, irrigators spraying the starkly green lakefront, heavy machinery pushing away at the dirt above.

Glendhu Bay is on the corner of the lake where the road turns toward the national park and its centrepiece, Mt Aspiring.

On a thin strip of land on the lakefront, dozens of campervans are parked almost nose to tail. The land is a council reserve used as a campsite, and is one of the few public areas nearby. It is backlit by the austere tussocks of Glendhu Station, which, like neighbouring Alpha Burn, was once Crown-owned but is now in private hands.

The lease originally covered around 3100ha, much of which overlooks the lake. As a result of the tenure review, the farmers bought freehold rights to around 90 per cent of the property, giving up a few hundred hectares for conservation land.

Except it wasn’t bought, per se - despite gaining 90 per cent of the land, they were paid money by the Crown to take it. There were covenants and walking access tracks placed on the private land, which count towards how prices are calculated in a review.

The farmers paid the equivalent of $200 per hectare, while the taxpayer paid the equivalent of $2000 per hectare, for land that should, in theory, be inherently less valuable. The taxpayer paid a net $5000 to privatise nearly 3000ha of land on Lake Wanaka, securing around 300ha for the conservation estate and public access tracks.

Soon afterwards, an application to build a golf resort was filed, with at least 42 luxury homes and what would be the region's fourth championship golf course. After many years of battling the Environment Court, consent was granted to build Parkins Bay, which is now under construction.

As Julian Haworth describes it, the finished product would be an extensive development on the lakefront.

"It should never have got consent," he says.

"It's not a golf course, it's essentially a subdivision with a golf course attached."

During the public submissions process of the farm's tenure review, renowned conservationist Professor Sir Alan Mark called the deal "unacceptable", given the property's significant natural values, some of which would be privatised.

Glendhu Station, as it once existed, is now in three parts. One, the partly finished golf course, sold last year for $16.7m, property records show.

Another section is valued at $8.5m, and the other is worth $3.4m. All figures are for bare land value, not including improvements; land the taxpayer paid $5000 to privatise is now worth around $28m.

There are few public spaces at Lake Wanaka, between Alpha Burn and Glendhu stations, which make up a large part of the lakefront. As Wanaka's profile has boomed, particularly among tourists, the public spaces are increasingly filled out.

Both Alpha Burn and Glendhu stations are owned by one family, who collectively paid the taxpayer $45,000 for around 6000ha of the Wanaka lakefront, land that today is valued around $45m, a capital gain of 100,000 per cent.

As far as tenure reviews go, it was a good deal. An analysis published last year by Ann Brower found the median capital gain was 69,200 per cent.

During each review, the market value of the entire lease, the land to be freeholded, and the conservation land is established. By looking at the differential between what the land was valued at and what was paid for it, you can see how tenure review has worked in the favour of landowners.

Across all reviews since 1998, land valued at $320m was bought by farmers for $143m, while land valued at $78m was bought by the Crown for $208m.

POLITICS

Denis Marshall, David Parker, Chris Carter, Kate Wilkinson and Eugenie Sage.

Denis Marshall, David Parker, Chris Carter, Kate Wilkinson and Eugenie Sage.

When deals like the ones around Lake Wanaka were revealed, the then-Labour government started to wonder if tenure review was doing more harm than good.

In 2007, the process briefly hit the spotlight when details of a review at Richmond Station near Tekapo were released; it was proposed that 9km of lakefront land be privatised, in an area where lax rules around subdivision were seen by some as a threat to a nationally significant landscape.

In a highly unusual step, the local authority, Environment Canterbury, asked the Government to stop the review.

As pressure grew, the Government's response was to withdraw from around 40 reviews of lake-front stations, citing the risk of subdivision. At the time, then conservation minister Chris Carter said the government had learned its lesson: "What happened at Lake Wanaka was a wake-up call for us."

The problem, critics said, was that tenure review was not designed to take into account the so-called 'X factor' - because they were traditionally sheep farms, spectacular views and private access to lakes didn't matter, but they commanded a premium on the international real estate market.

But not long after the reviews were stopped, the John Key-led National Party came to power, and in 2009 restarted the process.

The new conservation minister, Kate Wilkinson, said the Crown did not need more conservation land: instead, it would seek covenants on privatised land as a means of protection, something conservationists have long criticised as weak.

And so tenure review continued, again out of the spotlight. Since 2010, when the Key government was firmly in place, the taxpayer has paid more than $30m to farmers, taking 120,000ha for conservation and privatising 145,000ha.

As recently as May this year, seemingly questionable deals have been secured. The leaseholders at Airies Station, near Burkes Pass, bought the entirety of the station as freehold, for which they paid around $2.8m.

Even though the Crown took no land for conservation, it also paid $2.8m, cancelling the payment out. The payment was likely due to a covenant on the land, which covers about one-quarter of the property, prohibiting development. But the payment implies that a covenant on one-quarter of the land, with no public access arrangement, is of equal value to 100 per cent private ownership, most of which has no added protection at all.

In her 2008 book on tenure review, Who Owns the High Country?, Ann Brower described her research topic as “unravelling the puzzle of why a government would behave so strangely”.

Today, she says she has yet to unravel the puzzle of what she called “an obscure but vast transfer of wealth and resources”.

“It’s hard to see why we continue with it,” she says.

“Is it better now than when I started? No, I don’t think so.”

GLEN NEVIS STATION

Glen Nevis Station was one of the first go through tenure review. ALDEN WILLIAMS/STUFF

Glen Nevis Station was one of the first go through tenure review. ALDEN WILLIAMS/STUFF

The Flyer used to be the pride of Kingston, but now it rots in the rain.

The steam train was the symbol of the small town on the southern tip of Lake Wakatipu, where fog creeps from the surrounding mountains and descends like smoke, hanging above a long, stony beach.

While the train slides further into decay, expansion plans for the community are enormous. Huge demand for housing in Queenstown, which is quickly becoming hemmed in by its geography, is putting responsibility on towns such as Kingston to ease the pressure.

Its 200 houses may soon become 1100, based on a private, billion dollar development consented behind the township, which would all but swallow the town.

The Kingston Village development includes 740 residential sections, a school, and an upgrade to the local golf course. It has been granted resource consent, and last year the local council received millions in funding from the former National government to improve the area's infrastructure, to make way for such a development.

High above the road leading to Kingston, the steep tussocks of Glen Nevis Station look over the lake. The farm had been owned by one family for many decades by the time it entered tenure review in the early 2000s.

It was one of the first reviews to proceed under the new legislation set in 1998, and for critics of the process, became evidence-in-chief for its flaws.

The offer privatised land high on the face of the Hector Mountains, which had significant natural values - a covenant allowed grazing at an altitude of nearly 1700m, too steep to construct a fence to stop sheep wandering onto adjoining conservation land.

An earlier report by DOC staff had said there was little economic use for land at that altitude, and its natural features were of "the highest value", but it was privatised anyway, seemingly to get an agreement with the leaseholder.

While most of the farm was kept by the Crown, the rest - with a market value around $2m - was sold back for $75,000. The farmer quickly on-sold the station for just short of $5m to Kingston Village Ltd, a subsidiary of Australia-based property developers Goodman Holdings.

The Goodman family, from Nelson, is collectively worth more than $1b, according to the NBR's Rich List. A paddock across the road from the station - which was not included in the review but had been added to the property, likely through a deal long ago relating to construction of the main road - is the site for the proposed development, which would permanently change the town and has potential for enormous capital gain.

What happened at Lake Wanaka is starting to happen at Lake Wakatipu, the long, narrow lake shaped like a backwards 'S' with Queenstown at its centre.

The lake’s water levels rise and fall in 20 minute intervals, a phenomenon local Māori likened to a heartbeat; as the legend goes, the lake is a fallen giant from the mountains, slain by a warrior who set it alight, filling its body with melted ice and leaving only its heart unscathed, forever beating in the water's depths.

Today, luxury housing dot the fringes of the lake, filling out the forested edges above the winding road to Glenorchy and the town beyond, appropriately called Paradise.

The northern stretch of Wakatipu has become symbolic, in many ways, of the social and physical evolution of this part of Otago. What used to be sprawling sheep farms is now dotted with luxury lodges and Hollywood film sets; wilderness replaced with exclusive developments, glistening mansions on land that used to be desolate and remote.

Shortly before Glenorchy, there is a lakefront terrace beneath the winding trails and rocky outcrops that form the town's backdrop that is home to one of the country’s most exclusive properties.

It used to be part of a farm called Wyuna Station, which looks like an American ranch you might see in a state like Montana; craggy mountains form an amphitheatre around the lake, and trails for horse riders unfurl into the steep country which used to be a major source of scheelite, a deep red mineral often found set in jagged crystals. When Robert Redford, Hollywood’s nostalgic archetype of the American cowboy, visited Wyuna he reportedly said it was "the way America used to be".

The farm is part-owned by American Tom Tusher, a former top-ranking executive at Levi Strauss. He bought the farm ostensibly because it surrounded Blanket Bay Lodge, which he had opened several years earlier after purchasing the land in the 1970s for a reported $21,000.

When it completed tenure review, Wyuna Station was about one-fifth its former size - most of its land went to conservation, for an area known now as the Whakaari Conservation Area - but its most valuable section, a flat terrace perched over the lake, was privatised.

That terrace is now Wyuna Preserve, one of the country's most elite developments.

A mansion in the gated community was recently put on the market for $33m, one of the most expensive properties ever sold in New Zealand. There are 30 lots in the subdivision, 21 of which have been sold; The cheapest sections sell for around $1m, the better ones for up to $4m, in a gated community with the tagline, "You've earned your lot in life".

As demand for property has grown, there has been a sudden uptake for land at Wyuna. Among those who have bought there recently are an Amazon executive, a Swedish entrepreneur, a cosmetics boss and an Australian private equity magnate, property records show. Sales don't need approval from the Overseas Investment Office, a fact prominently stated on the development's website. Several sections appear to be owned by intermediaries, concealing their true ownership.

The leaseholders paid the Crown a net $630,000 for the land, the most any leaseholder has paid in any tenure review. It has, however, been lucrative – the land has been onsold for upwards of $20m.

Wyuna Preserve has competition for the high-value dollar, just up the road. Earlier this year, New Zealand's richest man, Graeme Hart, paid $24m for a sprawling mansion at Closeburn Station, about 15 minutes from Queenstown.

His home has six bedrooms, a library, a gym, a day spa, and no fewer than seven chimneys: the empty section had been bought for $3m in 2012 by the family of an Australian businessman, who built the mansion before selling to Hart for significant capital gain. The family has since bought a section at Wyuna.

It is one of 27 sections in the development, and those who buy there get an equal share in the farming operation. Among Hart's neighbours are an American plastic surgeon, a Singaporean polo player, and a high-ranking bank executive; former residents include an Oscar-nominated film producer and a high-profile Singaporean politician.

Around 60 per cent of its residents are foreigners.

Many years ago, Closeburn Station was an unremarkable farm on a corner section, where the road to Glenorchy swings north. It was small, cold and dark, with a history of dubious management; its icy hills blocked the sun from the north, casting long shadows over the rolling tussocks. It is likely familiar as the filming location for the final scene of Lord of the Rings: Fellowship of the Ring, in which the fellowship splits up after a chaotic battle with orcs on a shrouded hillside forest.

The farm did, however, have premium views and a rare landscape. Today, the mansions at Closeburn are hidden beneath thick trees, peeking over the ridge line for views of the lake and the Remarkables.

In the early 1990s, the right to lease Closeburn was bought in part by David Broomfield, a local developer, who had wanted to protect the land.

He had no knowledge of the slowly emerging tenure review process at the time, but Closeburn became one of the first to sign up. About three-quarters of the property went to the Crown, leaving the valuable lake-front land as freehold, which was bought for around $200,000.

What had limited value as a cold, icy farm had enormous potential for luxury housing, Broomfield soon found.

"We pitched it for the top 10 per cent of the market," he says.

"The amount of money, in the way of development – both for the station and for the housing on it – is at a far higher standard than the average Kiwi could live.

"I don't live there any longer. The annual fee is $27,000 a year, to put it in perspective."

Hart's two sections, bought for $24m, represent a fraction of capital gains well over $50m, realised by owners who bought bare land, built houses and on-sold, all from an unprofitable farm largely disposed of by the Crown.

Around the same time the $33m mansion was put on the market at Wyuna Preserve, a property at Closeburn was put up for $12.5m. Another property has since been listed for $8.6m, and another is on the market for $6.5m.

While it has allowed for luxury housing, the landscape has been protected through covenants, Broomfield says, and the land is better managed than it had been under a Crown lease.

"I'm very proud of it," he says.

"I call it a success and it's a yardstick to the way a lot of these stations and rural land could be managed in the future.

"It was a passion. You have to be emotional in a development like that, and it takes time. It's not a quick flick or anything like that, like a lot of developments.

"Not many people understand or can really see what [tenure review] has achieved, especially for the country in the way of money."

There is one more station separating Wyuna and Closeburn, which may soon begin development of its own.

Mt Creighton is undergoing tenure review now, and based on its substantive proposal, which has been accepted by the leaseholder, around 5000ha will be privatised and 10,000ha conserved.

It would enable significant new public access, including the proposed Moonlight Trail, which has been mooted to join DOC’s Great Walks.

But much of the land to be privatised is lake-front, and the station’s lessees - a group of mostly American investors, among them a venture capitalist and a former ambassador - already have consent to build a sprawling, private mansion with a nearly 1-sq-km footprint.

It would mean all of the Crown-owned stations on the road to Glenorchy would have privately owned lakefronts, reserved for the dwindling few who can afford to pay.

While approving consent for the mansion at Mt Creighton, the hearings commissioner said its size meant it could, at some point, be turned into a lodge.

Luxury lodges have become a hallmark of the high country, even on land that is still owned by the Crown.

‘THEY’VE EARNED IT’

What used to be Crown-owned farmland is now a series of vineyards near Cromwell. ALDEN WILLIAMS/STUFF

What used to be Crown-owned farmland is now a series of vineyards near Cromwell. ALDEN WILLIAMS/STUFF

On its face, it sounds indefensible: the taxpayer spending millions to dispose of land it owns, some of which is sold or developed for significant private gains.

It does, however, have supporters, who say the process is fair and simply a consequence of laws made long ago.

In 2006, Land Information New Zealand (LINZ) commissioned an independent review of the tenure review process from experienced valuers, which sought to find out if it was being handled fairly.

What became known as the Armstrong report argued, yes, it was fair - if anything, farmers were paying too much in rent for their leases.

The report's lead author, Donn Armstrong, says tenure review is poorly understood, and to understand how it works requires recognition of the high country's history and the role farmers played in shaping it.

When pastoral leases were allocated in the 19th century, they were not perpetually renewable – the government could kick the farmer off the land at the end of a lease period for any reason, which discouraged them from investing in and looking after the land.

That changed in 1948, when a new law made the leases perpetually renewable; a farmer could only be removed if they broke the terms of the lease.

It meant that although the Crown owned the land, it was the farmer who had the right to occupy it. Occupation, in this case, was more valuable than ownership.

"[Perpetual leases] transferred a vast deal of property rights to the lessee," Armstrong says.

"The Crown couldn't just move and take that high country station because they wanted it to revert to tussock, or something, because they had a right of renewal. It's a very strong right. The Crown gave away the right that the people came and paid the big money for... That, essentially, is owned by the lessee, not the Crown."

In cases where lakefront properties have on-sold for extraordinary profits, it was the farmer's right - that of occupation - that was being sold.

Even if it seemed exorbitant, the Crown had given away its rights to make money from the stations long ago.

"A lot of people were saying these people who have got the leases are making a lot of money out of this, but they have every right to, because they have this right of occupation, a perpetual renewal of a lease," Armstrong says.

"People that have complained about the situation have said it's not fair the Government's not getting it, but the Government gave away those rights... The licensee, in most cases, have a significantly bigger chunk of the property rights than does the Crown, hence the differential.

"That's not understood by people. All they think is 'all these bloody high country runholders, making all this money…' well, that right was given to them in 1948, and fortuitously for them, the demand for these things moved up very substantially in the last 25 years."

It’s an argument long pushed by the High Country Accord, a group representing high country farmers, which has defended the money paid to farmers by the Crown. It has particularly opposed Brower’s research, and lists its objections on its website.

The same logic underpins the work of the agency leading tenure review, LINZ. It defended the process, while acknowledging it was still refining as it went along.

“Pastoral leases provide exclusive possession to the farmer, so they actually have a bundle of rights that’s fairly similar, in some respects, to a freehold property,” says Jerome Sheppard, deputy chief executive of Crown Property.

“People look at it and think, 'isn’t this Crown land?' At a technical level, yes it is, but as a bundle of rights, the Crown - as part of the Land Act 1948 - actually provided a really significant bundle of rights to the leaseholders and said go for it, you invest in these properties and get a return out of them.”

It isn’t right to think of a pastoral lease as a rental, he says - it is far closer to ownership.

During a review, the Crown effectively bought the lease and sold part of the freehold back. Because pastoral leases and freehold land were similar in value, the costs - once accounting for improvements on the land, which are owned by the farmer - often worked out in the leaseholder’s favour.

While some deals in the past may not have been as favourable as they could have been, the process as a whole had been fair.

“We’ve learned a bit through this process,” he says.

“There were some individual circumstances where if you had the opportunity again you’d probably improve the valuation, so maybe the outcomes for the Crown weren’t as good from a valuation perspective.

“But just like every time we do a review, we make some improvements to that process. It’s a lot clearer now. That’s not to say it’s perfect - it’s certainly not.”

Aspects of this view are disputed by Ann Brower, who says the evidence shows that even if that was the philosophy behind the payments, it still wasn’t consistent.

If the Crown's interest was indeed worth less than a leaseholder's, there would be consistency across all of the reviews.

The amounts paid by both the Crown and the leaseholder have swung wildly over the years, with no apparent overriding pattern of logic. One of the only consistencies is that the less land the Crown gets, the more it pays.

To understand the philosophical divide separating both sides, it pays to look at the review of Caithness Station, completed in 2014.

The farm covers around 2200ha near Moeraki, in Otago. The review agreed that the entire property, bar 10 hectares, would be returned to the farmer as freehold.

The Crown bought the lease for around $2m, keeping 10ha for a scientific reserve, ostensibly to protect a population of flathead galaxias, a small species of freshwater fish.

It sold the rest back as freehold for the same price, cancelling the payment out.

Part of the privatised land had a conservation covenant, but critics said it was vague - for example, it allowed stocking at a rate “that in the opinion of the minister does not adversely impact on the values” of the land, seemingly prioritising a politician’s personal view over what would be an ecological measure.

For LINZ, this is an example of a good outcome. It secured a scientific reserve and a covenant for nothing.

But look at it another way: The taxpayer effectively paid a $200,000 per hectare rate for its reserve, while the farmers paid $900 per hectare for freehold land, of which the majority had no protection at all. The premium paid by the taxpayer, for land less valuable, was roughly 22,000 per cent.

How you view the result of that review is indicative of how you see the process as a whole - is the Crown giving the land away, or is it simply recognising the murky politics of property rights?

It does not, however, answer the question of consistency.

Across the tenure reviews completed since 1998, the median ratio of what the Crown pays versus what the farmer pays is around 4.3 - meaning, per hectare, the Crown has paid around 4.3 times as much as the farmer.

(LINZ does not consider a per hectare rate during reviews, but it is a way to compare values across time and within individual examples.)

The highest this ratio has ever reached was 1257, during the review of Shirlmar Station, a large farm spread across the scorched and snowy tussocks of the Lindis Pass.

The farmer paid $6000 for freehold rights to 3500ha, while the taxpayer paid $15,000 for a tiny, 7ha piece of conservation land. The farmer's rate was $1.70 per hectare, while the taxpayer's was $2140 per hectare, a premium of around 125,000 per cent.

The farm, which the taxpayer paid $9000 to privatise, was sold 18 months later for $6.6m, property records show.

Shirlmar was one of six stations in the area that went through tenure review together; by the time the so-called Lindis Six completed their review, farmers had bought 19,000ha for $270,000 and sold 33ha to the Crown for $68,000. Another of the stations, Geordie Hills, was on-sold for $6.3m.

Sometimes, the gap is much closer, or in rare cases, reversed. At Wyuna, the leaseholder paid a rate of $541 per hectare while the Crown paid $81.

What is clear is there is no consistency in how payments are calculated, other than in one key way; farmers get a discount, while the taxpayer pays a premium.

SHUT THE GATE

A sprawling residential development on what used to be Queensberry Hills Station, a Crown-owned farm. ALDEN WILLIAMS/STUFF

A sprawling residential development on what used to be Queensberry Hills Station, a Crown-owned farm. ALDEN WILLIAMS/STUFF

There have been many ripples caused by tenure review, which threatens profound change for the high country.

Earlier this year, an Environment Court judge made an unusually frank assessment in a judgment about a council rule change in the Mackenzie District - he said there should be a moratorium on the area's tenure reviews, due to the continuing loss of rare ecosystems to development enabled by privatisation.

Partly in response to that, LINZ is reviewing its processes in the Mackenzie Basin, Sheppard says.

While tenure review has seen an unprecedented expansion of the conservation estate, opening up large areas for public access, it is not a process that gets enthusiastic support from recreation groups, which struggle with the implications of the wave of privatisation.

"Tenure review needs to be fixed," says Jan Finlayson, vice-president of the Federated Mountain Clubs.

"We have these backcountry places whose administration is so vital to everything downstream. It's highly unusual that this land is administered by the Ministry of Land, with productivity in mind."

Newly privatised land will often have easements in place, but they can be unpleasant and variable.

When Stuff visited a station near Cromwell, a farmer blocked access to the large conservation area behind the farm. Many easements are closed during lambing season, or can be shut off at the farmer's behest, effectively shutting out the public's only access to public land.

Others are simply impractical - steep, long, or unformed, sometimes through dense bush or over rivers.

The problems with tenure review are deeper than access and the money being lost, Finlayson says - it's about what, and whom, New Zealand's wild and rugged places are for.

"We need good, hard, deep consideration of how we're going to manage these lands in the future," she says.

"We've tended to look for solutions very superficially - I think we need to go far deeper and accept that Government has a role in helping to determine what takes place on the land, so that people can farm according to their environmental profile and still make a living. It seems to me that is entirely possible.”

With new restrictions on overseas buyers purchasing farmland, the cumulative impact of tenure review may start to soften.

Right now, large farms such as Lake McKay Station near Wanaka - one of the first properties to go through tenure review, and now worth upwards of $20m with the option to subdivide - are on the market, but may struggle to sell.

Whatever the case, capital gains will continue to accrue on the land that has already been privatised. Many of the increasingly popular vineyards in the Kawarau Gorge, for example, owe their existence to tenure review, as does the booming viticulture industry in Cromwell, which largely exists on what used to be Bendigo Station, known primarily as the home of Shrek the sheep.

The subdivisions appearing on luxury real estate websites - Queensberry Hills, Hillend Estates, Bendigo Hills or Wentworth Estates, to name a few - began as Crown land, sold off cheaply and developed for large capital gain, which in cumulation has cost the country both money and land.

Then there are the deals that are seemingly inexplicable. Mataura Valley Station, which the taxpayer paid $710,000 to privatise, was sold a year later for $9 million; similarly, the taxpayer paid $1.3 million to privatise Bendrose Station, also sold soon afterwards for $9 million. In both cases, the farmer made astronomical, untaxed profit at the expense of the taxpayer.

With nearly half a million hectares of once-Crown land now in private ownership, it may be more than money that has been lost.

"Nobody's going to care what money changed hands in 100 years time,” says Jan Finlayson.

“We will care about the outcome of the land, though - what condition it's in, does the public have ownership, does it have sovereignty there. That's what we'll care about, not the amount of money that changes hands."

New Zealand's fabled 'Southern Man' was forged in the high country stations. As the stations fragment, it's a way of life under threat. Read more in Stuff's 'Last of the Southern Men'.

Words Charlie Mitchell
Visuals Alden Williams
Interactive map John Harford
Layout & Design Aaron Wood
Editors John Hartevelt and Blair Ensor