Interested Trinity investors named in Roxburgh deal

By Deborah Hill Cone

Friday 10th September 2004

Hanover's Mark Hotchin, Sleepyhead's Graeme Turner and high flying property lawyer John Coldicutt are named as interested Trinity investors in draft documents for Roxburgh Forest, a tranche of the Trinity forestry scheme.

Cullen Forestry, whose sole shareholder is Eric Watson, was also included as a 13.5% joint venture partner, but Companies Office records show that company has since been struck off and it appears it did not go ahead with the investment.

Investors involved in the current court case being heard in the High Court at Auckland are drawn from a different tranche of investors and have their identities protected by suppression orders.

But these 1998 draft papers, obtained by the National Business Review, outline the deal for six joint venture partners to sign up to buy rights to 740ha in the Trinity scheme, backed by an opinion from major accountancy firm Ernst & Young.

The documents show investors, using a company called Roxburgh Forest, bought a 50 year licence to grow douglas fir trees on land near Roxburgh in the South Island owned by Anglican church-linked charity Trinity Foundation No 2, with an agreement to pay a licence fee of about $2 million per hectare plus GST only due in 2048 when the trees were harvested.

The proposed investors were:

Greentree Enterprises and Dougfirco, companies owned by Graeme and Lynn Turner;

Metro Resources, a company owned by wealthy Wellington fishing entrepreneur George Stavrinos and his wife Helen;

DF Forestry Holdings, owned by interests of Mark Hotchin and his brother John, a director of Vending Technologies;

Acumen Investments, owned by Mr Coldicutt, a former partner of Knight Coldicutt and Staples Rodway accountant Rob Matthew; and

Southern Oaks, a company linked to family-owned air conditioning company Holyoake Industries.

Both Acumen and Southern Oaks said they had not gone ahead with the deal.

But other potential investors may have been reassured by a 23-page tax opinion from Ernst & Young partner Andrew Tauber, who the company said has now left and is working for himself.

The opinion advised that the JV partners in Roxburgh could claim deductions on the depreciation of the licence to grow the trees, known as a fixed life intangible property (Flip) deduction.

The total amount of the annual deduction for all six investors was estimated at $30 million per year, but this depended on Roxburgh being seen to be carrying on a "business" for tax purposes.

The ways Roxburgh could demonstrate this included the fact it has the right to purchase the property (after buying an option for $1000), it can access the property for inspection and the forestry manager has to report to Roxburgh.

"Where Roxburgh has compared this transaction with similar forms of forestry businesses available and has evidence that shows this business opportunity is favourable on commercial terms along, the commissioner would have difficulty [attacking it as tax avoidance]," Tauber writes.

The draft contract sets out details of the most controversial feature of the investment product, an insurance policy which guaranteed investors they would be able to pay the licence premium in 2048 regardless of the income generated by harvesting the trees.

Companies Office records show the sole director and shareholder of Roxburgh Forest is accountant Mark Talbot, now the chief financial officer of Ilion Technology, the battery company formerly owned by Robin Johannink and now helmed by Murray Haszard.

Talbot said he no longer had the role.

Meanwhile, this week Inland Revenue general manager of policy Robin Oliver has given evidence in the test case taken by a group of shareholders who are challenging the IRD's decision to disallow their deductions.

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