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Clear policy needed on property ownership

All change: the outside of The Dog House on Front Street (File photograph by Akil Simmons)

The Government’s fulsome welcome of the announcement by the Brookfield property group to build a Bermuda headquarters on Front Street is understandable at first glance.

But it is accompanied by a feeling of cognitive dissonance. Is this the same government that talks about “Two Bermudas” and the need to protect Bermudians’ birthright?

Brookfield is a global investment giant with $800 billion in assets under management, the owner of some of the world’s most iconic buildings and a heavy investor in infrastructure, energy, private equity and insurance.

In that sense, its purchase of 91 Front Street is an endorsement of Bermuda.

Brookfield does not invest in countries in which it does not have confidence, even if this real estate development is relatively small by its standards. Its reinsurance arm has just agreed to buy Bermudian-based insurer Argo for $1.1 billion, which will dwarf this real estate development.

The purchase of property for commercial office space by non-Bermudian businesses is not new, either, but it is relatively rare. What are now Chubb and Axa XL bought the old Bermudiana Hotel site and built their headquarters there. HSBC still owns a shrinking but sizeable chunk of Hamilton after its purchase of the Bank of Bermuda. Hotels were always an exception to Bermudian ownership rules.

Nonetheless, Brookfield is a slightly different case. Although it has operated exempted companies in Bermuda for some time, these were small and its expansion into the Bermuda insurance sector is recent. That does not mean it is not welcome, but it does not have a legacy of commitment to Bermuda that other international property owners had.

That in turn means that if Brookfield is to be used as a precedent, most Hamilton commercial property is now up for grabs. That may be welcome — Bermuda needs investment and in this case, the investment is not speculative; Brookfield will be its own tenant for the most part.

But Bermudians, who have been traditionally jealous to preserve their piece of the rock, should approach this with care. Once gone, it is unlikely to return to local ownership and, frankly, Bermuda’s recent experience of overseas ownership is not stellar.

It is difficult to believe that local shareholders and directors would have allowed the recent pollution by Belco to continue as long as it has. The hollowing-out of the Bank of Bermuda has not been a particularly happy experience.

The Government has been quick to criticise foreign ownership, and nowhere has this been more evident than at the airport, which in fact is not owned by an overseas company.

But awareness of hypocrisy is not the Progressive Labour Party’s strong suit; it has loudly bewailed payments of subsidies to the airport while quietly announcing subsidies to the hospital, which must pay $40 million a year to its public-private partner.

Similarly, Bermudian residential property owners face restrictions on property ownership that commercial property owners do not. That seems illogical.

If, as David Burt, the Premier said, few “things signify economic growth better than new construction projects and the creation of new jobs for Bermudians”, then why not extend development to the residential sector, which given the likelihood that working from home will grow, would appear to be where the best construction opportunities are?

Bermuda has been on the horns of a dilemma for more than a decade now. It has experienced sclerotic growth, exacerbated by the pandemic, and needs to stimulate the economy.

But one of the obvious ways of increasing growth leads to the surrender of its own land and assets. The era of Bermuda being able to have protectionism and high growth is over, but it has shown a certain schizophrenia about the future.

It may be that Mr Burt and the Government have thought all of this through. But if that’s the case, it needs to tell the public what the new rules are.

If, and this appears to be more likely given the nature of this announcement, the Brookfield offer seemed too good to pass up, then the community generally needs to decide what it wants as a general rule. These decisions should not be made piecemeal. There should be a clear and transparent policy.

As ever in economics and politics, there is no obvious good answer and it would be easy to look at only the downside. But a policy discussion and decision based on facts, and without politics, is needed — and needed now.

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Published March 28, 2023 at 8:00 am (Updated March 28, 2023 at 6:53 am)

Clear policy needed on property ownership

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