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High-end mortgage biz

Foreign investors turn attention to The Bahamas' real estate market as demand propels values

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The Bahamas Investor Magazine
January 4, 2007
January 4, 2007
Sandra Lightbourn

As Florida’s real estate market has begun to cool, a growing number of savvy investors are awakening to the investment potential of The Bahamas. There is a rising demand from second-home buyers seeking their own piece of beachfront land; the future for property investment across the various islands looks extremely bright.

But why are wealthy property buyers and investors interested in The Bahamas as opposed to other Caribbean region countries? A stable political and economic environment is an obvious advantage. However, its growing popularity can also be attributed to a concerted branding campaign undertaken by the government in recent years, as well as increased international exposure from the movie industry. Grand Bahama and Exuma were used as backdrops for the blockbuster Pirates of the Caribbean movie trilogy.

Moreover, following several advertisement campaigns promoting The Bahamas’ Family Islands, residential property development on a number of key islands has picked up briskly. “Out Island fever” is gripping The Bahamas—and how can it not? With 700 islands and cays, the archipelago offers diverse features for a diverse market—from private islands and quaint hideaways with fewer than 500 residents to the opposite end of the spectrum—condominiums in the midst of trendy mega-casino/entertainment resorts. And the list goes on.

Investor profiles
Most high-end residential property investors in The Bahamas are American. However, there is growing investor interest from other parts of the world including Canada, the UK and Europe. The age and vocations of investors vary and include celebrities, owners of major corporations and young professionals.

Their reasons for buying are also diverse; some are looking for an investment while others are seeking a second, vacation or retirement home. One thing is certain: the majority of foreign property buyers are high-net-worth individuals who place an emphasis on quality and above-average levels of service.

Mortgage options
Due to the currency exchange control regulations in place in The Bahamas, bank loans such as residential mortgages are either granted in Bahamian or US dollars. Mortgages in US dollars can be made available to non-resident foreigners as well as those holding some form of residency rights (such as a temporary resident on a work permit).

Offshore banks in The Bahamas offering US-dollar loans typically base the rate on the London Interbank Offered Rate (LIBOR). This is a variable rate and can be based on a one-month, three-month or one-year basis. Some banks do, however, offer fixed rates while some base the rate on prime.

Besides offering mortgages on completed homes and equity financing, most banks also provide construction loans. The term of mortgages can vary from 15 to 25 years with the “loan to value” (LTV) usually calculated against the net purchase price of the property in question or the appraised value (whichever is lower), although this excludes all closing costs. Notably, different banks tend to finance different areas of The Bahamas.

The process
It is usual for offshore banks offering US-dollar loans to have a list of approved appraisers and attorneys. Real estate agents are regulated by statute and must be licensed members of The Bahamas Real Estate Association (BREA) to act as realtors—although there are some franchise arrangements done with foreign realtors.

Most banks will require an appraisal of the property for the mortgage appli-cation. In addition to providing proof of income, the potential borrower is asked to provide references, a certified copy of a valid passport, or some form of accept-able identification and verification of permanent address. Once an application has been approved, a lawyer will be instructed to prepare the mortgage documentation and apply for the appropriate regulatory approvals (eg, from The Central Bank of The Bahamas).

All non-Bahamians acquiring a home or land in The Bahamas to be used for a single-family dwelling, as well as permanent residents, have to register their purchases with the Investments Board. Buyers should be aware that they are responsible for the following transactional costs:
• legal fees of 2.5 per cent of the sale price;
• bank mortgage processing fee of 1 per cent of the loan amount;
• a government stamp duty of 1 per cent of the loan amount and
• government stamp duty (based on sale price) on the property conveyance, usually split between buyer and seller.

Furthermore, foreign investors should be aware that land purchases in The Bahamas can take time, as lawyers have to complete title searches and seek necessary approvals.

Something for everyone
The following is a list of the latest high-profile residential developments and ongoing projects under way in The Bahamas (it should be noted that this list is by no means exhaustive):

Ocean Club Estates, Paradise Island, developed by Kerzner International, comprises a total of 120 single-family residential lots, which are located on the golf course, canal or waterfront. In the centre is the world-class Tom Weiskopf 18-hole golf course. Residences start at $4 million with a home on Cabbage Beach recently placed on the market for $15 million.

Ocean Club Residences, Paradise Island, also developed by Kerzner International, is a four-unit 88-residence condominium complex with expansive balconies overlooking the marina. The dock slips can accommodate yachts up to 120 ft in length. Final construction is scheduled for March 2007.

Turnberry Residences at Atlantis is part of Atlantis Phase III, which is expected to cost just over $1 billion. The Residences is a five-star, 22-storey, 495-unit condo hotel. Units will range in size from 519 to 1,718 sq ft, with prices ranging from $700,000 to $3.4 million.

February Point Resort Estates, Great Exuma, is situated on a private 80-acre peninsula overlooking the Exumas. It is an upscale resort community in which numerous wealthy individuals own second homes. Surrounding real estate is in high demand, it being one of the yachting meccas of the world. Great Exuma was voted one of the Top 10 Hot International Destinations for 2004 by The Washington Post. With the Four Seasons Resort at Emerald Bay just 20 minutes away from the development, it makes for a valuable real estate investment.

Chub Cay Club, Berry Islands, is a world-class resort that’s poised to raise the bar yet again. Members of the Chub Cay Club have the opportunity to purchase a residence and a boat slip. The development is under way for the construction of 57 Bahamian-style villas. Pricing for two-, three-, four- and five-bedroom villas ranges from $1,031,250 to $2,750,000. In addition, 96 slips are slated to expand to 200 slips with state-of-the-art floating concrete docks. The marina will accommodate yachts of up to 175 ft together with a 20,000-sq-ft clubhouse.

The Ritz-Carlton Rose Island is expected to open in 2009, along with a sheltered marina to dock luxury boats and yachts. The 230-acre site will provide a collection of more than 400 dwellings in the scenic setting. The guest rooms and suites will average 550 sq ft and feature large balconies. Other planned amenities include a swimming pool, lavish spa, gourmet restaurant and intimate meeting space.

Bimini Bay Resort and Casino is situated on the northern end of North Bimini. The development will have 1,590 residential units spread over 700 acres, 500 marina berths and five miles of beaches. Phase I comprises 320 residential units, 150 marina berths, assorted retail stores and several restaurants. Subsequent development phases will include the 18-hole Robert Trent Jones Golf Course and residential villas. The Conrad Bimini Bay Resort and Casino will be completed in 2008. Conrad Hotels is the luxury brand of the Hilton family and will operate and manage the luxury 250-room hotel.

Winding Bay, Abaco, is one of Peter de Savary’s creations and features a Scottish-style tropical links championship golf course, European-style spa, tennis courts and riding stables. Membership costs $75,000. Cottages start at $1.75 million and home sites start at $875,000.

Cotton Bay Estates & Villas, Eleuthera, is currently under construction and will consist of a 73-room boutique hotel based on a villa concept, large estate homes, a clubhouse and marina. The hotel will be operated as a Starwood Luxury Collection Resort. The villas will be individually owned and a part of the hotel inventory for a minimum of nine months. The estate homes start at $600,000 and the villas start at $1.2 million.

Ginn sur Mer, Grand Bahama, is an immense master-planned development comprising 4,900 condo-hotel units and 1,890 home sites, two oceanfront golf courses, a grand canal, clubhouse, marina, a 55,000-sq-ft casino and two water parks. Ginn is currently accepting reservations for home sites (land only) starting at $400,000. The condo-hotel units will be released in early 2007.

Bio
Sandra J Lightbourn
Sandra J Lightbourn is International Business Development Manager at Ansbacher (Bahamas) Limited. Miss Lightbourn is responsible for the development, marketing and promotion of all types of lending including residential mortgages to non-Bahamian private individuals and corporations interested in purchasing property in The Bahamas. She is a qualified Bahamian lawyer and notary public who, prior to joining Ansbacher, worked at Graham Thompson & Co for over five years specializing in property law. Miss Lightbourn also has a Bachelor of Arts degree in Business Administration and Marketing from Texas Lutheran College. Miss Lightbourn was called to the English Bar (Lincolns Inn) in 1997 and admitted to the Bahamas Bar in 1997.

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