Thirty-five years ago, young American newlyweds Harry and Arlene Cohen walked hand-in-hand through the fine white sand of Cabbage Beach during a romantic, all-inclusive honeymoon trip to The Bahamas. Today, a lifetime later, the couple has just moved into their own custom-built, multimillion-dollar dream home overlooking the very same sand dunes and turquoise surf. Their exquisite, seven-bedroom beachfront retreat in the prestigious Ocean Club Estates on Paradise Island represents a generation’s worth of accomplishment in business by the entrepreneur and his wife–the archetype of today’s wealthy boomers seeking sanctuary in a second home.

“I’m a baby boomer who’s enjoying the best of life,” says 57-year-old Harry Cohen, who made his fortune through a retail jewellery business, developing commercial real estate in the US and continuing to invest in diversified companies. “My father retired when he was 50, but he never travelled much. He sat behind a desk all his life. He didn’t know how to enjoy himself. That generation was a little different.”

For the Cohens, whose main residence is in Lexington, KY, time spent at their island second home is all about enjoying the good life. There are cocktail parties with neighbours, dining at the recently opened Nobu and other fine restaurants, poker nights with the guys every couple of weeks, tennis matches at the One&Only Ocean Club and the excitement of the gaming tables at Atlantis casino, where Harry Cohen has gambled side-by-side with the likes of basketball star Michael Jordan. And, of course, their most treasured time is often spent sitting on their second-floor balcony, soothed by the hypnotic view of an impossibly blue-green ocean vista.

To steal a car commercial’s punchline: this is not your father’s retirement lifestyle.

Whether it’s to find an idyllic place to enjoy an active retirement or to make a long-term investment in a vacation property, high-net-worth buyers from North America, Latin America and Europe have been snapping up second homes in The Bahamas. From the high-end Ocean Club Estates and Ocean Club Residences and Marina, near the action at Atlantis, to planned communities on Grand Bahama, to tranquil Out Island retreats on Eleuthera, Abaco and the Exumas, The Bahamas stands out from other destinations in the region for its sheer variety of lifestyle and real estate choices.

As the first wave of the North American baby boom generation turns 60 this year, the Bahamian real estate market is seeing a parallel influx of buyers who want a second home as an investment and to continue an active and social lifestyle in semi-retirement.

Fountain of youth
According to Mario Carey, a Nassau-based real estate agent with Bahamas Realty, who specializes in selling homes and lots on Paradise Island and New Providence in such gated communities as Lyford Cay, Ocean Club, Bayroc, Sandyport and Old Fort Bay, most of his clients in their late 50s or early 60s “like living here because they feel young. If they go to Florida, they say they’re just another face. They’re young and rich and athletic in Florida, but stuck in a retirement-type of environment. When they come down here there’s a lot of youth, so they’re socializing with a diverse group of people.”

In bygone days, many international buyers looking at offshore real estate may have primarily sought to establish a base in a tax haven. Today, local real estate experts suggest their clients are mainly attracted by an exotic island destination that has a stable government, good economic fundamentals, market growth and direct travel connections to major North American and European centres.

“The retirement or second home buyer that I’ve come in contact with is not primarily tax motivated,” Carey says. “In fact, US citizens [taxed on their world-wide income wherever they reside] really don’t have any tax advantage to being here. A lot of what draws them here is ease of travel, currency issues, language issues, being able to take a direct flight, being able to clear US customs right here. Ultimately, they’re looking for an investment. And they’re looking for appreciation and usage.”

At Ocean Club, there’s plenty of opportunity for both. An entry-level home will set you back about $4 million and a condo commands $2 million, but includes such perks as the use of facilities at One&Only Ocean Club resort and Atlantis. Says Carey: “The appreciation in the condo values have increased by about $300,000 from when they started, and they’re not even built yet. Penthouses that were selling for $5 million are selling for just over $6 million. A canal lot over at Ocean Club that a year ago sold for $1.5 million is now selling for $2.2 million-$700,000 in one year is big.”

John Christie, vice-president of H G Christie Ltd, The Bahamas’ oldest real estate company with extensive property listings, says that compared to South Florida, where property values have experienced double-digit increases for several years running, vacation homes in The Bahamas are a bargain. Most new purchasers are from the US, he says, including many Floridians who are snapping up beach and canal properties for as little as half the price of similar properties in their home state. Christie’s firm is even seeing a number of buyers in their 20s and 30s entering the market.

While the ultra-high-net-worth investors gravitate to luxury enclaves such as Ocean Club Estates, Lyford Cay, Old Fort Bay and the planned Ritz-Carlton branded hotel and residential community on secluded Rose Island, those of moderate means can still find something affordable.

“You can still get a hilltop view lot in some places [in the Out Islands] for $40,000 or $50,000 to build a home,” notes Christie. “In Nassau, they might be looking at a $500,000 condo in Sandyport Marina Village, which they can use as a vacation home and rent it out the rest of the time.”

Familiar turf
The profile of the typical foreign real estate investor is someone who has already spent some time in the islands, whether for work or pleasure, says David Johnstone, a partner in the Nassau-based law firm Lennox Paton.

His firm has helped a number of developers with the master planning of new mixed-use resort, residential and vacation ownership communities on several Bahamian islands. These include the Four Seasons Resort Great Exuma at Emerald Bay, the recently announced $4.9-billion Ginn project at West End, Grand Bahama, the Bimini Bay project as well as the French Leave Resort and Cotton Bay Estates & Villas on Eleuthera, all with a second-home component to their plans.

That kind of established leisure connection is certainly the case for the Cohens, who’ve enjoyed a long-term love affair with The Bahamas and vacationed here for decades.

“I was 22 years old when we got married,” Harry Cohen says. “I was just starting out in business.

“We went to the travel agency and asked for packages, and they said, ‘Paradise Island’ and I said, ‘that’s it’.” One of his father’s few trips included a visit to what was then Huntington Hartford’s Ocean Club resort a few years earlier and he told his son: “Harry, it’s the most beautiful thing I’ve ever seen.”

“So my wife and I came down here and fell in love with it. We fell in love with the people. We took a walk down this beach. We stood right about there where that grass is. And I said to her: ‘you know, I’d love to build a house here one of these days.’ You know, how you say something and it’s just a pipe dream? I didn’t have two nickels to rub together at the time.”

More than 30 years, and a few million nickels, later, Cohen wasted no time when plans were announced to develop the east end of Paradise Island into Ocean Club Estates, spearheaded by Atlantis developer Sol Kerzner.

“The minute they announced it, I got on a plane and I came here that day. The realtor showed me the lots, and I said ‘that’s where I want to be’.” He put a deposit down and bought the lot for $1.7 million to build their dream home. It was partly modelled after a friend’s estate in the Carolinas and built by Nassau-based Caribbean Construction Management Services (CCMS) Inc.

A banking connection
The Bahamas’ longtime status as an international financial centre and leader in the private banking and trust industry is another attraction for investors from abroad. Pascal Hammerer, for instance, is an international banker but has also become accustomed to playing tour guide to prospective homebuyers from Europe and around the world. The Nassau-based assistant CEO of UBS (Bahamas) Ltd says his office gets at least two inquiries a month from clients in the UBS global private-banking network who are considering buying real estate in The Bahamas. Hammerer shows them around, introduces them to local business professionals and real estate experts, and demonstrates that this can be an ideal base from which to live and work.

“The boom in The Bahamas as far as real estate is concerned has just started recently,” Hammerer says. “You saw these waves approaching in the baby boom generation, but people were just not ready to come yet. Now, they have money set aside and are searching for a place to semi-retire or a place where they can continue to work in a nice environment.”

What often tips the scale towards The Bahamas, he says, is its more developed domestic economy, unique geography and accessible location that offers island seclusion–but not at the expense of staying connected to the world.

“I can take my boat out on a Sunday morning from Nassau and go down to the Exumas and spend the day alone in crystal waters surrounded by a family of stingrays. I’m back home by 5pm, clean the boat, take a shower, get my carry-on luggage ready and can be on the 9pm British Airways flight to London. Or if I’m going to New York, I can be on the 7pm flight and be in my bed in downtown Manhattan before 11pm for business meetings the next day,” Hammerer explains.

“There’s no point coming here just to save taxes. You could go to Guernsey to save taxes. What we talk about is the life here,” he says.

Protecting your assets
Even if tax considerations are no longer the number one reason to invest, there are important estate planning and wealth management advantages open to the global investor who buys property in The Bahamas–particularly if there’s an intent to pass the home down to future generations.

Owen Bethel, president and managing director of The Montaque Group, a Nassau-based investment and financial services advisory firm, says many of his clients in their fifties and sixties are structuring ownership of second homes to be part of an enduring family legacy.

“When you have significant wealth, you look for how to invest in something that will continue to grow but be outside of the realm of litigation, of mischievous claims against it from a home jurisdiction, so it can be passed on,” he explains.

“People certainly have to be aware of the tax implications from their home jurisdiction if they are ever going to sell that property,” Bethel says. “And if they are planning to pass it on upon death, there could be issues of gift taxes [from their home jurisdictions].” That’s where estate-planning tools such as trusts, foundations and international business companies (IBCs) can come into play with a real estate asset, he says.

“You may find there are trusts brought in to play. The properties are owned by trusts, which then are allowed to move the assets for different beneficial owners without the requirement of reporting assets to different tax authorities outside of The Bahamas. And that’s a valuable structure, in that there doesn’t have to be the concern of what the tax implications are going to be back and forth. They just simply leave it there in place, and it benefits generations.”

The ideal estate-planning structure for offshore home ownership is best determined by home country tax advisors, who may opt to choose from a full array of financial services products available in The Bahamas.

“For those who simply just want an asset offshore and don’t have all the issues others might face in terms of tax authorities, divorce, family issues and that type of thing, they may just purchase a piece of property possibly held within an IBC. “It’s a very simple process in that regard,” Bethel explains. “At the other extreme, there might be a trust registered in some other jurisdiction which might own a Bahamian IBC, which then owns the property. We are seeing more of that from the European markets and from Channel Islands, for example.”

Says Lennox Paton’s Johnstone: “Most of these issues are tax or estate planning questions that we defer to the home jurisdiction’s counsel. But the important point is that we have all of the vehicles available for people coming in.” In most cases, he says, property can be insured against liability issues, so there may be no need at all to spend money on an IBC or other ownership structure situations.

Time to enjoy life
From his own observation, Montaque’s Bethel says the North American baby boomers he advises–and those in the same age group from Europe and Latin America–seem to be approaching retirement with a plan to play as hard as they’ve worked.

“What I probably see more of is the thinking of this generation in terms of how they deal with the monies they’ve earned and inherited,” says the 60-year-old Bethel, who founded his company a dozen years ago. “There’s almost a spiritual enlightenment coming along in that sense. They’re saying: ‘We’ve worked hard for what we’ve got. We’ve probably ignored our family and spirituality in achieving that, and now we’re trying to accomplish those things. Let’s appreciate what we have’.”

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Buying into The Bahamas
While there is no tax imposed by The Bahamas on income or capital gains, Bahamians and foreigners who buy real property must pay stamp duty (equivalent to a transfer tax, and set at 10 per cent on property worth $250,000 or more) and an annual property tax.

Payment: Due on or before the last day of the year, an owner may choose to pay the tax in quarterly instalments to the Public Treasury, in either Bahamian or US dollars, with a 10 per cent surcharge imposed if tax is not paid by the due date.

Rates: The first $250,000 of the market value of an owner-occupied property is exempt from property tax, .75 per cent is levied on value of more than $250,000 up to $500,000, and 1 per cent tallied on value in excess of $500,000.

Undeveloped land: Many new developments impose a time limit for building on vacant lots; however vacant land owned by non-Bahamians is subject to a $30 tax on the first $3,000 of market value, 1 per cent on value between $3,000 and $100,000, and 1.5 per cent is levied on value of $100,000 or more.

Freeport exemption: The free-trade zone established in Freeport/Lucaya on Grand Bahama Island exempts property owners there from real property tax until 2015.

For more resources on investing in The Bahamas, see the Ministry of Financial Services and Investments website at www.investbahamas.org and The Bahamas Investor online at www.thebahamasinvestor.com