COVID-19: Emerging trends

Much of the world may be observing and following some form of shelter-in-place regulations due to the current COVID-19 pandemic, but that has not stopped high-net-worth individuals from moving ahead with plans to acquire a home in the Cayman Islands for vacation or permanent residency purposes.

The British Overseas Territory’s reputation for offering modern infrastructure, sound governance, a strong economy and an absence of direct taxation has made this cosmopolitan Caribbean island attractive to individuals seeking a low-density locale. The fact that there are no restrictions on foreign ownership of land in the Cayman Islands further complements its appeal to foreign buyers.

The team of sales specialists at Provenance Properties – the official Christie’s International Real Estate affiliate in the Cayman Islands – has remained in touch with buyers from abroad by offering virtual tours and webinars, and meeting with clients online to answer questions about real estate for sale on Grand Cayman.

One of the first questions the team at Provenance Properties is often asked is, “Are there banks in the Cayman Islands which offer financing to offshore purchasers?” followed by “Can I use my existing collateral to finance real estate purchases?” We spoke to Senior Advisor, Private Wealth Management & Investment Advice at CIBC FirstCaribbean, Dan Peterson, to learn more.

Dan, what trends are you seeing with your high-net-worth clients as they respond to market conditions due to the current economic climate?

We are having more discussions with sophisticated, high-net-worth clients who are looking for opportunities coming out of this crisis. The key driver behind this has been the dislocation we are seeing in the markets due to COVID-19. That dislocation has been further exacerbated by the energy sector, which is experiencing twin shocks to both the supply and demand side.

When you look at both the high and ultra-high-net-worth client segment, they held a significant amount of cash on hand coming into 2020 and were more defensive in their asset allocation. Some of that cash is now being allocated to specific areas such as credit, structured notes and more selectively within equities.

As we come out on the other side of the economic downturn, these clients will be positioned to take advantage of opportunities that present themselves in the coming months.

You noted that there will be opportunities coming out of the other side of this current economic downturn. How do you see your high-net-worth clients preparing for that eventuality?

We now find ourselves in an extraordinary market environment where opportunities are being presented for wealthy clients to acquire investment properties, marketable securities and business assets. Consequently, we are having a number of conversations with clients who are looking to structure credit facilities and utilise some of their securities portfolio as collateral against those types of loans. The transactions we are currently engaged in range from financing investment properties to direct investment into operating companies.

As real economy opportunities arise for these individuals, we expect a focus on leverage to continue as they utilise the collateral they have to fund these new investment opportunities.

What can clients do now to be well positioned to take advantage of new market opportunities, and what can banks in the Cayman Islands do to assist?

The importance of liquidity cannot be understated and this is a key factor for wealthy clients who are looking to be opportunistic and take advantage of mispricing opportunities in various asset classes.

For high-net-worth individuals relocating to Cayman, they will find that many of the private banks here offer securities lending as part of their overall product suite. This gives more optionality to the client and can help in the overall decision-making process.

Whether it be a traditional mortgage request or a loan against a portfolio of securities, all private banks here will have a relationship manager who can assist in structuring a credit solution that is unique to the financial needs of each client.

Dan L. Peterson is a senior advisor at CIBC FirstCaribbean International Bank, Private Wealth Management & Investment Advice. He can be contacted at dan.peterson@cibcfcib.com for more information on financing the purchase of a property in the Cayman Islands.

To learn about luxury real estate properties for sale on Grand Cayman, contact us.

“The information and examples above are intended as general information only and not intended to be relied and acted upon by the reader. Readers are strongly advised to seek individual professional legal, tax, banking and other professional advice before entering into any financial arrangements.”

About the author

Sue Nickason has been VP Marketing and Sales at Dart Real Estate since May 2017. Originally from Canada, Sue has worked in luxury residential-resort development in the Caribbean for over a decade. Sue and her team are committed to promoting the unique value proposition of the Cayman Islands to those seeking to establish a personal and/or corporate presence here. They serve as trusted advisors and offer exceptional service, timely market information and a warm “Caymankind” welcome. Sue earned a BA (Honours) from Mount Allison University, an MBA (Distinction) from University of Guelph and has completed studies/earned certificates in journalism, economic development, adult education, customer service, revenue management, and protocol. Sue is a member of the Christie’s International Real Estate Master’s Circle and an Angel in the 100 Women in Finance network.