- The following Op-Ed was submitted to BermudaReal.com today, April 30, 2020 for publication by Craig Christensen…
An opportunity to attract new investment to Bermuda from ultra-wealthy individuals lies agonisingly close to the Island’s grasp and is a market that could, in time, rival reinsurance as our most important industry as opposed to a tourism model.
Family offices are not new, and some already exist on a small scale in Bermuda, but we are convinced that a family office model, based at Caroline Bay, in place of a condo hotel will provide the impetus to significantly grow a new industry to the benefit of all Bermudians.
What are single family offices (SFO’s)?
SFOs are basically administrative investment firms that manage things like investment portfolios, insurance, tax and charitable donations for multi-millionaires over $100m through to billionaires, who have found that it is more effective and economic to employ their own teams rather than pay massive fees to private banks or other financial firms.
As opposed to multi-family offices, single-family office serve just one very affluent family, but still employ a multitude of people looking after a range of services in-house that include not only wealth management but also needs like personal security, yacht hire, private jets and general lifestyle needs.
How to measure the social and economic impact
The social and economic impact created from bringing together a large congregation of single-family offices in Bermuda is simply enormous. Indeed, the ripple effect – ‘the continuing or spreading of results from an event or action’ – and the wider impact for Bermuda takes a moment to digest.
There will be increased charitable donations, new opportunities for Bermuda’s youth, more jobs, more Government revenue, more inward investment, empty office space rented, increased disposable income for Bermudians to spend in the bars and restaurants, the buying of cars or spending on retail – everything needed right now to make Bermuda a better place socially and economically.
The key here is that SFO’s employ teams of highly skilled, well-paid professionals, year-round, not seasonally, who will draw on the local community for work. Instead of just ‘jobs’, opportunities will open up for Bermudians to have a variety of well paid ‘careers’ where six and seven figure renumeration packages will be possible in various fields. Bermudians can be found at the top of many international insurance companies and over time, a similar result would be achieved in the single-family office industry.
What would that mean for society?
Crucially, with the addition of SFOs as an industry, hundreds of fund managers, investment firms and other services providers will come as a result, meaning there will be even more opportunity for Bermudians, helping some of those who have left the Island in search of better opportunities overseas to return home.
SFO’s invest heavily in training and education of their key assets: people. Our children would be sponsored and encouraged to go overseas, obtain further education with the prospect of returning to quality roles along with commensurate compensation packages, helping to greatly improve their quality of life and, with more disposable income available, the quality of lives and opportunities for others in our community also improves.
Like us, individuals behind SFOs need good doctors, nurses and other health providers along with all the other services the Island offers. They also embrace the social vision and become part of the community, contributing to its enhancement. Just look at the Green family as an example, to appreciate how their investments into the Hamilton Princess, the old HSBC building and other projects have breathed life into the community.
Those behind family offices understand their role and are used to playing their part. They get the quid-pro-quo. When they come to Bermuda, they will contribute to a new Sovereign Wealth Fund, a Development Fund and Foundations which will contribute millions of dollars annually directly into the wider community.
What is our model?
In our submission to Government, we would introduce 20 new SFOs this year and 60 in the first two years, building to a goal of around 300 over the next ten years. By making Caroline Bay an economic zone it confines the initiative to one part of Bermuda while the whole Island benefits from the economic stimulus of the construction of homes, the opening of offices and the employment of people with ongoing commitments to remain.
Some of the families will have $15bn and others $150m. We have a 10-year plan to attract SFOs from all around the world and we already have our first three buyers. Our plan which was created by Tom Lawrence, has evolved via consultation with 10 billionaires and their advisors – who have visited Bermuda and met with Government. 3 have committed to buy and the others are interested, subject to legislation. We now have a strong pipeline of others with an experienced team and new ownership ready to execute the plan.
Plus, we have finance in place to take over the loans purchased by Government plus $250m drawable in phases to complete construction. In addition to Government getting back their funds they will receive tens of millions this year in sale tax fees.
We have a new model, new finance, new management and new ownership. It’s not just the vision. It’s the relationships, experience and track record of creating clubs and communities having served them before which the family office model at Caroline Bay builds. Tom Lawrence has lived in Bermuda for 15 years and brings vital commodities to the table. Tom already serves hundreds of these families though his clubs.
He has sold them real estate and memberships before and has a reputation among the family office community. He believes he is able to get them to invest in Bermuda. He has demonstrated his ability to execute to Government and has everything in place to pull the trigger.
Governments Position on SFOs
We are not alone in recognising the benefits of family offices. Finance Minister, Curtis Dickinson, acknowledged how important this sector could be in creating jobs for Bermudians. His last Budget signalled that legislation around family offices would be forthcoming. The Minister was quoted as saying that the ‘development of a family office product is an expansion of wealth management sectors in Bermuda, thus demonstrating Bermuda’s commitment to these sectors and to the Government’s diversification mandate’.
Without Caroline Bay, how will Bermuda attract more family offices? Governments have been trying for years with little to no success. Placing promotional stands in conferences in an attempt to connect or influence the families behind their offices doesn’t work. These events are attended by their staff – the UHNW individuals are not present. You need to have relationships with their principles and their peers.
What is Governments Position on Caroline Bay
The Government turned down our proposal, along with an offer to buy back their loans at full value in March this year. Government now control one small part, a subsidiary of Caroline Bay – George’s Bay Ltd which is just 36 land locked acres of the 196-acre estate. Caroline Bay still own and control the rest. We suspect a long legal dispute lies ahead before either side could progress. If the time in lockdown has taught us anything, the world won’t look the same when we come out, so a rethink is required, especially given the scale of the anticipated post Covid recession that will affect the island. It’s not the time to invest in tourism and hotels. We believe we should be working together – a private-public-partnership that creates an immediate economic stimulus forges a win-win scenario which is a far better option for everyone.