Government ministers have declined an application for a Chinese company to buy large central North Island farm Lochinver Station, because they say the benefits to New Zealand are not substantial and identifiable.
This is contrary to the recommendations made by the Overseas Investment Office (OIO), which approved the application.
Pure 100 Farm Ltd, a subsidiary of China-based Shanghai Pengxin, applied to the OIO last year to buy the 13,800 hectare sheep and cattle farm near Taupo for $88 million.
Shanghai Pengxin already owns 29 New Zealand farms, mostly dairy, including 16 farms formerly owned by the Crafar family.
The company had previously said the company planned to convert parts of Lochinver Station into a dairy farm.
However, the sale was subject to New Zealand and Chinese regulatory approval.
The OIO has to consider applications against legal criteria, and makes recommendations to ministers, who are are not bound to follow those recommendations.
It said the question of whether the benefits of the potential investment to New Zealand were or could be substantial and identifiable was finely balanced in this case, and recommended approving the application.
However, that was rejected by Land Information Minister Louise Upston and Associate Finance Minister Paula Bennett.
Mrs Bennett said ministers had to make a decision because Lochinver Station was classified by law as sensitive land.
"While we recognise and support the importance of overseas investment, the Overseas Investment Act states it is a privilege for overseas people to own sensitive New Zealand assets and therefore requires such investments to meet statutory criteria for consent.
"After detailed and careful individual consideration, we are not satisfied there will be, or is likely to be, a substantial benefit to New Zealand - a key requirement for applications of sensitive land of this size."
"We agreed parts of the proposed investment could benefit New Zealand but in our judgement on the overall balance of evidence, the benefits are not likely to be substantial and identifiable," Land Information Minister Louise Upston added.
"This proposed sale didn't pass a test we are required to exercise ministerial judgement on."
Mrs Bennett, asked why the ministers disagreed with the recommendations made by the OIO, said they had looked at the seven criteria which had to be considered and the OIO had perhaps given a higher weighting to job creation than the ministers did.
She denied public and political opposition had influenced their decision.
"I have carefully looked at all of the factors that had to be relevant to this, trust me, I've got a lot of legal advice that came my way as well, and that [opposition] did not come into it," she said.
There has been a great deal of political opposition to the sale, particularly from the Labour Party.
In response to the decision announced today, the party's finance spokesperson Grant Robertson said ministers had made the right call but questioned the reasons for it.
"It appears the only reason Lochinver was blocked is heightened media attention... It's unfortunate that other sales without similar attention are being waived through."
Mrs Bennett said the large size of the farm coupled with a lack of job creation were factors in her decision.
"I just have absolutely no qualms in sitting here and telling you that I made the decision on what I thought was the best interests of New Zealand, and not a political decision because of public opinion at all."
She said Shanghai Pengxin's application was the first she had declined out of the 37 overseas investment applications that she had reviewed in the past year.
Shanghai Pengxin said it was surprised and extremely disappointed with the decision and would be considering its options.
It said the improvements it had made to existing assets were well known, such as its investment of more than $18 million to improve the former Crafar farms.
The company selling Lochinver Station, Stevenson Group, also said it was disappointed.
Stevenson Group chief executive Mark Franklin said the process had taken 14 months - and the company had now been deprived of its property right to sell to the highest value bidder, for what he described as a vague national benefit that had not been defined.
Mr Franklin said the decision would have significant economic implications for the New Zealand economy, particularly in the areas of international relations, uncertainty of foreign investment and rural land prices.