‘Bermuda is struggling to attract the super-rich’ — Wall Street Journal
The Wall Street Journal (WSJ) is reporting that Bermuda is struggling to attract the super rich — individuals such as Ross Perot and Michael Bloomberg — the demographic who have been the foundation of the island's economic success
Headlined “Bermuda's Search for New Wealth — Long a paradise for billionaires such as Ross Perot and Michael Bloomberg, can the quiet island of Bermuda attract the stupendously rich of today?” The story, written by Jose de Cordoba, describes stagnation in the high level real estate market. He looks at one of Bermuda's few contemporary homes boasting a disco and other amenities including a private beach as one multimillion executive property that has sat on the market for a year.
He writes: “ ‘This is a unique property,” says Penny MacIntyre, a slim, no-nonsense realtor who delights in showing off the reflecting pools and waterfalls that the architect has incorporated into the house's design. Most Bermuda high-end properties are a reflection of the island itself — proud, conservative stone mansions painted in deep reds, dark yellows, browns and blues. They are built in what is known as the Bermuda vernacular style and boast distinctive wooden window shutters, tapered chimneys and white roofs that collect rainwater for the flowers in the lush gardens that fill the island. Not Aquamarina. One of a handful of futuristic styled houses in Bermuda, Aquamarina, says MacIntyre, is “very modern and forward thinking.”
He reported: “More than 50 of these homes were sold between 2007 and 2011, including the proudly named Castle Point ($21.5 million) and the slightly more modest Tradewinds ($11.5 million). Last year, there were 34 properties on the market that the island's quirky and restrictive system allowed foreigners to buy. Of these, just one went into contract, in what was one of Bermuda's worst real-estate years on record. And things have only started to pick up this year.”
Quoting owner Jon Paradine, the reporter writes that he is: “ ... a native Bermudian who is now living half way around the world, (and) says, sure, the island needs to “improve its product” and up its entertainment value. But get him talking about the days he spent there, the stunning views of the turquoise blue waters, the magnificently fresh salty air, and talk of change fades. Suddenly, it is hard to imagine how any of it — the dull shopping on Front Street, the MIA limos — really matters. As far as Paradine is concerned, his home would go for $50 million, easy, in Singapore, but you'll never find it there either. “The beach in Aquamarina is the most beautiful beach I've ever seen,” says Paradine. “I miss the natural beauty of Bermuda.”
Mr de Cordoba writes that: “ ... after decades of reigning as a supreme destination for some of the world's elite, Bermuda is having a tough time competing for the patronage of the stupendously rich, creating a classic tug of war over old and new money. The island, an easy two or three-hour jet jaunt from the US coastline, still attracts such billionaires as Ross Perot and Michael Bloomberg, who maintain homes here. But government officials and business leaders say they are worried that the mores of high-end tourism are changing, along with the wealthy themselves, and that this magical archipelago must now fight to follow the money.”
The WSJ reporter stated “ ... the geography of money is changing — and at an unaccustomed velocity. According to an annual survey of global wealth by Boston Consulting Group, private wealth in the “new world,” primarily the Asia Pacific region, jumped around 12 percent last year alone, or more than double the rate of growth in the “old world,” including North America and Western Europe.
“This new breed of nouveau riche tends to favour a lifestyle of supernova toys, with private elevators hauling sports cars into their living rooms and bar drinks costing thousands of dollars each. They like their homes to be modern, their nightlife late and their clothes as shiny as their jewellery. All of which has very little to do with sleepy Bermuda, whose nightlife shuts down at the stroke of 10 during the week and whose hotels haven't quite caught up with the concept of in-room infinity pools or 24-hour butler service.”
He said Bermuda is “ ... a place steeped in conservative traditions. Change does not come easy.”
“ ... In this setting, the rich seem to get lost amid a population that could care less about them and local papers that ignore their comings and goings. “Bermuda is very unassuming,” says Neal Churchill, a private banker with Butterfield Bank (UK) Ltd., who lived here for three years and was back for a visit from Monaco. “You can mingle with wealthy people and not know it.” Pink from the sun as he sips a cup of tea at a hotel pool, Churchill says homes are the only status symbol here. “There is no showing off here,” he says. “There are no flashy cars, no super yachts in the harbour.” Drinking a rum punch on the terrace of the Mid Ocean Club, Nir Sadeh, chairman of the club's membership committee who also heads private banking at Butterfield, concurs. “It's not flashy,” he says. “You have people walking down the street in shorts who are worth billions.”
“The problem is this happens to be the polar opposite of what today's new generation of global wealth wants. The 30-year-old Russian billionaire zigzagging around city streets in his new Lamborghini. The Chinese “whale” gambler giddy from another run of luck at the Baccarat tables in Macau. Bermuda doesn't expect, or want, to attract all of this kind of wealth. But its government officials are staring down some awful declines in the country's second-largest industry, tourism, that reflect Bermuda's staleness.
“At its peak in 1980, Bermuda welcomed some 500,000 plane-arriving tourists a year, and counted on some 12,000 hotel beds, says Shawn Crockwell, the island's Minister of Tourism. Last year, the island received about half that number by air, and had only 2,500 hotel beds to offer them. About 60 percent of last year's tourists were low-spending visitors who arrived on the island on cruise ships. The remaining 40 percent arrive by air, a figure that continues to decline. “We need to reverse that ratio,” says Crockwell.”
Reporting the Island's $1.4 billion debt load, he said: “In response, the newly installed government, run by the One Bermuda Alliance party, thinks one solution is to send more positive signals to the international money elite, the people and firms who create the jobs and the lifestyle that spurs a stale economy. “I didn't think the business community was feeling the love,” says Bermuda's new premier, Craig Cannonier.”
The WSJ reporter added: “Certainly, Bermudians will agree that the island, wrapped tightly in protectionism and red tape, has tended to irradiate a certain feeling of unfriendliness toward non-islanders. With just 69,000 souls jammed into its 21 square miles, the island has long feared that foreigners would push locals aside. So the country has done everything from setting time limits on how long non-residents could live here (six years) to at one point banning Bermudians from selling any real estate to outsiders. In an interview, Cannonier, a bearlike US-educated gas-station owner, says he is trying to put his foot down on a lot of this, quickly ending the residency limits. Members of his cabinet say it was a big move. “You would find that even if a top executive had term limits waived, there were term limits imposed on the nanny,” says Michael Fahy, Bermuda's minister of home affairs. “If you are saying your nanny has to leave, then why stay?”
“The rich are also getting a break on real estate now. Since 1926, Bermuda has imposed restrictions on purchases of land by non-Bermudians. Eventually, non-Bermudians were allowed to purchase only the most expensive of houses — those that have an annual rental value in the six-figure range. Today, that works out to homes worth about $3.5 million and up. What's more, foreigners had to pay a 25 percent license fee on home buys, which can drive even a billionaire a little batty. The high-rental rule remains, but Cannonier has temporarily cut the tax on real-estate sales to eight percent of the purchase price, which then increases to 12.5 percent after 18 months. For now, a $4 million home no longer requires an extra $1 million, which MacIntyre, the realtor, says is “a very welcome change of pace.”
“But even government boosters say moves like these can only go so far in creating the kind of full-service playground the rich can so easily find elsewhere now. The island, for example, likes to boast that it has more golf per square mile than anywhere in the world. That's fine, except that today's rich — fitter and more active — want other options for high-end recreation, including celebrity trainers and yoga instructors working out of space-age gyms. In the Caribbean, it is possible to find a host of new private-jet airports, compared with Bermuda's one commercial facility. And once upon a time, it was charming that the country limited residents to one puny car per household, a policy dating back to when Mark Twain and Woodrow Wilson teamed up to help get motor vehicles banned for decades. But it is not exactly comfortable for today's stretch-limo crowd, which has to make do with the island's sparse supply of Mercedes-Benzes, which are available to rent by the hour.
“From a corporate standpoint — and the island is keenly aware of how many wealthy executives encamp here when business flourishes — Bermuda doesn't even rate as an especially great tax haven. Sure it lacks taxes, but its conservative ethos requires a far more careful company-registration process than many newer and hotter resort countries have. Feeling the heat, the government two years ago extended the date that companies have before their tax-exempt status expires. Officials in Bermuda also argue that their island country maintains a programme for registering offshore companies that is respected around the world. Still, the number of tax-exempt companies in Bermuda has hovered around 12,000 over the past 15 years. In the Cayman Islands, by comparison, the number has nearly doubled in 10 years to more than 75,000.”
The WSJ reporter asked: “How far into the fast lane will the island go to up its new-rich appeal, or will it just disappear someday off the high-end radar, like so many ships in the Bermuda Triangle?”
“For some, the country's best step may be just to concoct yet one more Bermuda miracle: a middle ground, way out here in the middle of the Atlantic Ocean, where East meets West, where new money finds enough razzle dazzle but old money can still enjoy the very anonymity and British DNA they have so long cherished.”