After holding up well during the recession, the Caribbean markets are a prime location for investors.
Imagine yourself surrounded by centuries-old sugar plantations, grand stone churches, volcanic mountain peaks, a flourishing rainforest and vast stretches of sandy beaches, all part of an island bordered by the clear waters of the Caribbean Sea on one side and the Atlantic Ocean on the other. With its rich his- tory, scenic natural beauty, vibrant island culture, genuinely welcoming people and innumerable things to see and do, St. Kitts provides an ideal setting for a distinctive and sublime escape for any businessman.
Originally known as St. Christopher, the island was the first in the West Indies to be colonized by the British in 1623. French settlers soon followed after the French and English settlers combined forces to defeat the indigenous Carib people. There was a brief period of peace interrupted by some attacks from the Spanish, and then the French and English fought each other for possession for more than a hundred years. In 1782, the island came under permanent British control with the English victory over the French at Brimstone Hill.
St. Kitts & Nevis achieved Independence from Great Britain in 1983. As a relatively young nation that has only recently begun embracing tourism as the main foreign exchange earner, St. Kitts is pursuing its development carefully so that the island will never feel crowded and it will retain its authentic island culture and pristine landscape. The challenges faced as a result of the global economic crisis cannot be overlooked. Crime and deviant behaviour are becoming serious issues for this small twin island federation. However, the Government recognizes that this can disrupt the effective functioning of the country’s economy and damage social harmony for all. In an effort to combat this, the government and the Police High Command have developed a dedicated policing action plan with the help of public-private sector partnership to prevent perpetrators from destroying the island’s image.
Highly attractive Incentives to Investors
So why invest in the island of St. Kitts and Nevis? Well for one, the government is offering highly attractive incentives to foreign investors. After the sugar production plant shut down in 2005, the government committed itself to creating a diversified economy in which tourism, agriculture, light manufacturing, offshore financial services and informatics sectors all play important roles to the development of island. The development and implementation of such flexible strategies are what makes these goals achievable. One of the most appealing incentives to foreign investors is the benefit of having a corporate tax holiday of up to 15 years. This is in additional to tax rebates, exemption from import du- ties on parts, raw materials and productive machinery, repatriation of profits, dividends and imported capital, zero rated personal income tax, (also no gift tax, no wealth and inheritance tax, no estate duty and no long- term capital gains taxes) and the Hotel Aids Ordinance, which provides relief from customs duties and pier duties on items brought into the country for use in the construction, extension and the equipping of a hotel.
Citizenship by Investment
St Kitts and Nevis citizen- ship by investment (CBI) program is the oldest in the world having been established in 1984 and is therefore considered as one of the most reputable. For many investors it’s undoubtedly the most favourable option if they require a second citizenship and residence. The CBI process is nondiscriminatory and relatively straightforward as obtaining citizenship is possible for investors in as little as three to four months. It’s also worth noting that there is no obligation to take up residency in the island. The significance of this investment opportunity cannot be underestimated; having the St. Kitts and Nevis passport entitles you to visa- free travel to more than 132 countries. These include the Schengen States, Canada, Singapore and Hong Kong.
However, there are stringent rules which apply to all potential investors due to the freedom to travel to so many countries without first obtaining a visa. Each applicant prior to investing must prove that they have a good personal record and must also reveal the source of their funds for the investment. Applicants have the option of making a donation to the charity “Sugar Industry Diversification foundation” or they may invest in property in an approved Real Estate Development project; they must retain ownership of the subject property for a minimum of 5 years. Both options entitle the individual and their immediate family dependents to apply for citizenship and fees vary dependent on the number of applicants.
Every investor’s requirements differ so the Kittitian Hill team has devised tailored investment options known simply as the ‘lifestyle option’ or the ‘investment option.
After suffering major losses as a result of the recent economic crisis, many global investors are reluctant to put down their capital on a proposed new luxury real estate and lifestyle development and understandably confidence remains low in the global market. However, according to Simon Galt, Sales and marketing manager of Kittitian Hill in the island of St. Kitts, they are in a ‘solid position’ to go forward. He claims that the difference between this project and others that stalled is that the project has the sup- port of the government; this is partly due to the developer’s strong stance on sustainability and responsibility to the local community.
When asked about the new real estate project, the Prime minister of St. Kitts and Nevis, Hon Dr. Denzil l Douglas said that Kittitian Hill was the “manifestation of our belief that real estate developments in the Caribbean need not be isolated or cut off from the communities in which they are based, but instead they can be de- signed to blend and merge all that has always been here, with all that is yet to come.”
The new development sits on the sugar belt area that was hardest hit by the loss of sugar production. Therefore, the project will create new jobs, which will inevitably have a positive impact on the communities in the North of the Island. “It is therefore extremely important to the Government and people of St. Kitts that this project is completed,” said Galt. He added: “The project is in a strong financial position having a strong equity partner, and has achieved consistent steady growth in sales in 2011, which is unique in the region. (Kittitian Hill has already received commitments for 27% of the hotel cottages, 20% being fully paid up and 7% deposits paid. A number of Villa fractions have also been sold.) This success is directly attributed to the strength of the St Kitts and Nevis Citizenship by Investment Programme (CBI), the stability of the country, and a favourable ranking by the IMF prior to the crisis.”
The most noticeable advantage that the development will boast is its position as a top tourism destination (ranked number four in the top ten destinations for 2011 by a major airline.) This is coupled with a sensible approach by the developer in positioning the resort at the top end of the market as a result of hiring a world renowned design team headed up by Bill Bensley, (architect of the exquisite tented camp at the four Seasons Resort Chiang Mai in Thailand,) and handing over the management of the resort to the famous Sedona Resorts, the creators of the award winning Enchantment Resort and Mii Amo Spa in Arizona.
Every investor’s requirements differ so the Kittitian Hill team has devised tailored investment options known simply as the ‘life- style Option’ or the ‘Investment Option’ each of these two options is designed to suit a variety of buyers. In short, the In- vestment Option is ideal for those who are investing in property for Citizen- ship by Investment. According to Galt, applications are processed ‘quickly’ and ‘securely’ using the escrow services of PriceWaterhouseCoopers. He explained: “The developer is offering an investment option, ideal for investors from the middle East who want Citizenship, but may not expect to use their property very much, and there- fore do not want the headache nor costs associated with management issues. Under this option, the purchaser will receive 2% p.a. on monies in escrow until handover in Dec 2012 and 4% thereafter for 3 years.”
It is understood that during this period, the developer takes care of all maintenance costs and ownership fees, property taxes; insurance, club membership fees and the owner is also entitled to free membership in an International Exchange Programme. “After this 3-year period, the owner assumes full responsibility for their property and may choose to sell it when the mandatory 5-year ownership period is up, or they can place it in the flexible rental program and the resort will continue to manage it, with the profit being shared between the resort and the owner,” said Galt.
In contrast, the lifestyle option offers investors a flexible rental program from the outset and terms vary with the different types of properties. “The objective is to provide decent rental income for investors, translating to good potential for decent capital growth in the medium term. In achieving this, property at Kittitian Hill would then be attractive to both lifestyle and investment buyers, providing the typical CBI buyer an option to exit comfortably after the mandatory 5 year period, should they wish to do so. “Projections are based on going rates of the top resorts and recent trends in the island and closer region,” Galt explained.
For the astute investor who is environmentally conscious and interested in ‘Green’ investments, Kittitian Hill would be an ideal option. Their founding philosophy is to create a lifestyle resort that operates according to the principles of sustainability and giving back to community. A series of programs are being established to benefit the environment, people and island of St. Kitts in the areas of art and culture, social account- ability, economic development and environmental conservation. These include the Training Institute for Sustainable Tourism (TIST) an initiative to train local people in the hospitality trade and facilitate the participation of local staff in all levels of the business operation, rather than simply importing skilled workers. The initial proposal was well received by the government and a site has already been allocated according to Galt. Along with other co-sponsors, Kittitian Hill has built three computer rooms within the surrounding communities for both open use and computer skills training to facilitate the education of the locals. Al- though education is vital for the locals so too is being able to support themselves. As part of their sustainability and eco friendly ethos for the resort; the government opened Capisterre farm, which will ensure a regular supply of local fruit and vegetables and will help to reduce the current local dependency on food imports.
This community friendly approach even extends to the construction of the development. They have pledged to build the whole resort using only local contractors, something that is unheard of in the Middle East. Galt said, “We prefer to break the construction works into small contracts, allowing local contractors to participate in the resort construction in a meaningful way.”