Caribbean Property & Investment Review — Edition 124, April 2016

Publication Date: 3 April 2016  |  Coverage Period: 3 March – 2 April 2016

Morning Briefing

• BREAKING: The Panama Papers — 11.5 million leaked documents from Panamanian law firm Mossack Fonseca — are being published today, 3 April 2016, by the International Consortium of Investigative Journalists (ICIJ) and over 100 global media partners. The leak implicates tens of thousands of offshore companies, with the British Virgin Islands home to more than 113,000 of the entities in the dataset. The implications for Caribbean offshore property holding structures are potentially far-reaching.
• Andrew Holness and the Jamaica Labour Party won Jamaica’s 3 March 2016 general election by a historic margin of just one seat, making Holness the new Prime Minister. The JLP’s narrow victory sets the stage for a period of cautious policy implementation against the backdrop of the IMF programme commitment.
• Oil prices have recovered modestly from their January lows, with WTI trading in the $35–40 range through March, providing a tentative improvement in fiscal conditions for Trinidad & Tobago — though well below the levels at which the national budget was formulated.
• Jamaica’s new Holness administration has signalled early commitment to fiscal responsibility and to accelerating private sector investment, with the Minister of Finance indicating continuity with the IMF Extended Fund Facility programme.
• The Caribbean tourism high season is progressing strongly, with Jamaica, Barbados, and the Dominican Republic all reporting year-on-year arrivals growth through March, supporting hospitality property valuations.
• Guyana’s National Oil Company, GGMC, has announced the completion of additional seismic survey work over the Stabroek Block, as ExxonMobil and partners advance their appraisal of the giant Liza discovery toward a final investment decision.

Panama Papers: Breaking News and Caribbean Implications

The news breaking as this edition goes to press could reshape the global conversation about offshore financial centres — and the Caribbean sits at the centre of that conversation. The International Consortium of Investigative Journalists today begins publishing the Panama Papers, an unprecedented dataset of 11.5 million internal documents from Mossack Fonseca, a Panamanian law firm that has for decades served as a key facilitator of offshore company formation across jurisdictions worldwide. The British Virgin Islands — a British Overseas Territory in the eastern Caribbean — has the single largest exposure in the dataset, with more than 113,000 companies registered in the BVI appearing in the leaked records. The Cayman Islands and Turks & Caicos Islands also appear prominently.

For Caribbean property investors and developers, the full implications of the Panama Papers will take weeks and months to fully absorb. But the immediate concern is transparency: the dataset is expected to reveal extensive use of BVI and Cayman-incorporated holding companies to hold real estate assets in jurisdictions ranging from London to Miami to the Caribbean itself. For owners of Caribbean property held through offshore structures — a very common arrangement among international buyers — the question of what information is in the Mossack Fonseca records, and whether it will be matched against property registries and beneficial ownership declarations, will be the source of significant anxiety in the coming days.

Beyond the immediate legal exposure of individual names in the dataset, the Panama Papers threaten a more structural impact on Caribbean offshore financial centres: a renewed push by the OECD, the EU, and the G20 for beneficial ownership registries, automatic exchange of tax information, and tighter Know Your Customer standards for company formation agents. The BVI Financial Services Commission had already been moving toward greater compliance with FATCA and CRS requirements. But the political pressure generated by a scandal of this magnitude — implicating heads of state, billionaires, and major corporations worldwide — will almost certainly accelerate the timeline for further regulation.

For Caribbean Citizenship by Investment programmes — which use offshore-eligible property purchases as one qualifying investment channel — the Panama Papers add a new layer of scrutiny to due diligence requirements. Governments operating CBI programmes in St Kitts & Nevis, Antigua & Barbuda, Dominica, Grenada, and St Lucia will be watching the global reaction carefully. Any suggestion that CBI-linked real estate transactions involve opaque ownership structures could trigger demands for enhanced transparency that, while ultimately beneficial for the long-term legitimacy of these programmes, may create short-term friction in the application pipeline.

Jamaica Under Holness: Property Market Implications of the JLP Victory

The Jamaica Labour Party’s victory on 3 March 2016 — by a margin of 32 seats to 31 seats in the House of Representatives — was one of the narrowest in Jamaican political history, and the new Holness administration’s razor-thin parliamentary majority will constrain its legislative room for manoeuvre. Nevertheless, the JLP’s economic platform carries specific property and investment market implications that deserve attention. The new government has historically been associated with private sector-led development, foreign investment attraction, and Special Economic Zone policy, and early ministerial appointments signal an intent to move quickly on the Business Facilitation agenda.

The National Housing Trust — Jamaica’s largest mortgage institution — is expected to receive early attention from the new administration. The JLP’s manifesto included commitments to expanding NHT access, particularly for lower-income contributors who have historically struggled to qualify for mortgage products within the Trust’s standard parameters. If implemented, this could materially expand the pool of first-time buyers in Kingston’s suburban expansion zones and in secondary cities like Portmore, Mandeville, and Montego Bay. The NHT’s ability to sustain concessional lending while managing its own balance sheet will be a key variable to watch through 2016.

On the commercial and tourism property side, the new government’s commitment to the Caymanas Economic Zone and the Kingston Waterfront development programme signals continued momentum for two of Jamaica’s most significant near-term infrastructure investment stories. International developers and hotel groups with Jamaica interests will be seeking early engagement with the new Ministry of Tourism and the Jamaica Promotions Corporation (JAMPRO) to understand how the change of government affects project approval timelines and incentive structures. The early signals are encouraging: continuity of the IMF programme and a pro-investment rhetoric suggest the North Coast tourism corridor pipeline will not lose momentum.

High Season Strong: Tourism Property Performance Through March

Across the Caribbean, the 2015–16 tourism high season has delivered on its early promise. Jamaica’s stopover arrivals through February 2016 were running approximately 8% ahead of the same period in 2015, a performance that reflects both the strong US consumer environment and the success of the Jamaica Tourist Board’s aggressive marketing campaigns in North America and the UK. Hotel average daily rates on the north coast — a direct input into tourism property valuations — were holding or improving year-on-year in most categories. The Dominican Republic similarly reported strong February numbers, and Easter booking data from Barbados suggested the April school holiday period would be one of the best in several years.

The broader implication for property investors is that the Caribbean tourism economy is delivering on its fundamentals even as the global macroeconomic environment remains uncertain. Hotel investment yields across the region’s primary markets reflect this: cap rates for premium beachfront hotel assets in Jamaica, the DR, and Barbados have compressed modestly over the past 18 months, reflecting improved revenue performance and continued appetite from institutional hotel investors for Caribbean exposure. For branded residence developers — whose project economics are tightly linked to hotel operating performance in co-located lodging facilities — this is positive news.

Caribbean Leaders This Month

Jamaica post-election market — The election of Andrew Holness and the JLP on 3 March triggered a modest uptick in property enquiry volumes on the north coast and in the Kingston commercial sector, as buyers who had deferred decisions during the campaign period re-engaged. Developer confidence in the tourism corridor appears well-sustained.

British Virgin Islands offshore sector — The BVI’s financial services community entered April facing significant uncertainty as the Panama Papers broke today, with the jurisdiction’s 113,000-plus company exposure in the dataset generating intense international media and regulatory scrutiny. The coming weeks will test the BVI’s regulatory response and its ability to distinguish legitimate corporate structures from those associated with wrongdoing.

Dominican Republic Cap Cana and Punta Cana — Strong March arrivals and robust Easter pre-bookings confirmed the DR’s continued dominance as the Caribbean’s highest-volume tourism destination, supporting developer confidence in the east coast resort residential pipeline. Several major branded residence projects reported accelerating pre-sales.

Guyana Georgetown executive rentals — ExxonMobil’s ongoing Stabroek Block appraisal programme continued to generate sustained demand for Georgetown’s premium rental stock, with corporate-standard three- and four-bedroom properties in Bel Air Park consistently achieving full occupancy at rates well above the city-wide average.

Barbados high season — The west coast platinum corridor closed out the high season with above-average occupancy performance, and several luxury villa owners reported record rental revenues for the January–March period, driven by a combination of direct-booking growth and platform-channel demand.

St Kitts & Nevis CBI — The SKN Citizenship by Investment Programme maintained a healthy application pipeline through the coverage period, with qualifying real estate purchases at Christophe Harbour providing steady construction-phase revenue to the development and its investors.

Cayman Islands luxury residential — Seven Mile Beach condominiums continued to trade at strong values, underpinned by the jurisdiction’s perennial combination of tax neutrality, political stability, world-class infrastructure, and proximity to US markets. The Panama Papers generated background regulatory noise but had not visibly suppressed transaction enquiries as of early April.

Overall regional performer: Jamaica earns this month’s top position on the strength of political resolution and the tourism sector’s continued momentum. The election of a new government, combined with an IMF-endorsed fiscal framework and a buoyant high season, positions Jamaica’s property market for a constructive second quarter.

Looking Ahead: April and the Panama Papers Fallout

The weeks ahead will be dominated by the unfolding Panama Papers story. As media partners in more than 80 countries begin publishing their jurisdiction-specific investigations, the political and regulatory fallout will intensify. For Caribbean offshore financial centres, the key question is whether governments in the BVI, Cayman Islands, and TCI respond proactively with enhanced transparency measures — beneficial ownership registries, improved corporate governance standards, and accelerated cooperation with international information-exchange frameworks — or whether they attempt to defend existing opacity arrangements that are now clearly untenable in the post-Panama Papers environment.

For property investors using offshore structures in Caribbean jurisdictions, the immediate practical advice is to engage qualified legal counsel to review the compliance status of existing holding arrangements. The regulatory direction of travel — toward greater transparency and beneficial ownership disclosure — has been clear for several years. The Panama Papers dramatically accelerate the political timeline. Structures that were previously in a grey zone of de facto tolerance are likely to face formal regulatory scrutiny over a much shorter horizon than previously anticipated.

On the tourism front, the coming month will see the conclusion of the Caribbean high season, with Easter arrivals providing the final major demand event before the shoulder season begins in May. Early indications suggest a strong Easter period across Jamaica, Barbados, and the DR. That strong finish to the high season will set a positive baseline for tourism property valuations entering the investment conversations of the second half of 2016.

The Caribbean Property & Investment Review is published monthly. Edition 124 covers the period 3 March to 2 April 2016. The Panama Papers were first published on 3 April 2016, as this edition went to press. All market data reflects information available at the time of publication. This publication does not constitute investment advice.