Caribbean Exchange: Invest in Property and Get Citizenship - WSJ
lending still tight in the Caribbean, several island nations are
embracing an unorthodox method of financing resort and villa projects:
selling citizenship.
The Caribbean vacation-home market has seen
an uneven recovery from the downturn. Sales volumes and prices for
existing homes are rising in larger markets and those with direct
flights to the U.S. But new construction of resorts and for-sale villas
remains hobbled, especially in smaller nations eschewed by most
conventional lenders.
One solution for islands such as St. Kitts,
Nevis, Grenada and Antigua has been to grant citizenship to qualified
investors who agree to spend several hundred thousand dollars buying
home lots or investing in hotel projects there.
The infusions help the islands get tourist destinations constructed. The investors, for their part, receive Caribbean passports.
The
programs are a draw for investors from countries such as China who
often need multiple forms of identification, such as a visa in addition
to their home-country passport, to travel to certain parts of the world.
Obtaining a Caribbean passport allows them to travel visa-free in many
cases.
What's more, some participants can end up paying lower
taxes as Caribbean-nation citizens than as citizens of their home
country, though to get the break they might need to spend a certain
amount of time each year in the Caribbean nation in question.
The
growing popularity of citizenship-by-investment programs underscores the
difficulty of obtaining conventional financing in the Caribbean. Many
smaller nations struggle with fickle tourism demand and limited airline
access, and all must contend with the damage inflicted by tropical
storms. Lenders have been especially leery of the Caribbean in recent
years after several high-profile resort projects ran out of financing
during the downturn and still languish half-built today.
Harbour resort sell many of the project's first 100 home sites. Christophe Harbour Development
St. Kitts, the developers of the 2,500-acre Christophe Harbour resort
community have used the government's citizenship-by-investment program
to sell many of the project's first 100 home sites in the past two years
and to finance construction of a Park Hyatt luxury hotel there.
St.
Kitts sets the minimum property price for investors gaining citizenship
through the program at $400,000. Lot prices at Christophe Harbour range
from $500,000 to $6 million. St. Kitts and sister island Nevis are home
to 55,000 people.
"It isn't easy to find buyers, especially in
the economy we've had" since the downturn, said Thomas Liepman, director
of sales for Christophe Harbour, a joint venture of Kiawah Partners of
Charleston, S.C., and a St. Kitts quasi-government agency. "But
citizenship has driven a recession-proof demand to this tiny island."
Grenada,
an island of 106,000 residents, started its citizenship-by-investment
program last year to help finance the expansion of its 22-villa Mount
Cinnamon Resort and Beach Club. The project's developer, British
hotelier Peter de Savary, aims to build another 80 villas on the site by
soliciting foreigners seeking Grenadian citizenship. He is doing the
same at a mixed-use project elsewhere in Grenada called Port Louis,
which includes a yacht marina, shops and, eventually, villas.
Some
developments are able to sell some lots to Americans who don't want or
need dual citizenship. But Americans alone aren't enough to finance most
projects. Instead, many projects gain most of their investments from
people who routinely encounter travel restrictions and obstacles due to
their country of origin.
"They're marketing to people who are
Russian, Middle Eastern or Chinese," said James Andrews, senior managing
director of Integra Realty Resources Inc., a valuation and consulting
firm specializing in the region's resort and hotel properties. "They get
a [Caribbean] passport, and they don't even have to live there."
Lucia, Barbados, Bermuda and other islands, fretting that they will
fall behind in tourism development, are studying whether to offer their
own citizenship-by-investment programs.
The Caribbean programs are
similar to those used elsewhere, but provide faster access to
citizenship. In Europe, qualified applicants can gain visas from Spain,
Portugal or Latvia by buying property in those countries. France,
Singapore and the U.S. grant visas to qualified applicants who invest in
companies or projects that create a minimum number of jobs over a set
period.
One big drawback of the programs is the potential for
fraud. Authorities are concerned that without strict oversight, the
programs can be used by money launderers and other criminals for
unfettered travel.
In May, the U.S. Treasury Department sent banks
a warning letter that foreign investors, namely Iranian nationals, were
"abusing" St. Kitts' citizenship-by-investment program for "illicit
financial activity," according to the letters. St. Kitts suspended
Iranians from its program in 2013, but the U.S. alleges Iranians
continue to get St. Kitts passports.
government to provide citizenship to qualified applicants who invest at
least $400,000 apiece in the resort community. Christophe Harbour Development
response, the prime minister of St. Kitts and Nevis has said in public
forums this year that he has instructed his administration to improve
the program's vetting of applicants.
St. Kitts and other Caribbean
nations run the risk that if their vetting of applicants is lax, other
countries will start placing greater restrictions on travelers using
Caribbean nations' passports.
"That could devalue the citizenship
of the issuing country" and undermine its tourism-development program,
said Madeleine Sumption, a research director at Migration Policy
Institute, a Washington, D.C., think tank.
Write to Kris Hudson at kris.hudson@wsj.com
Read the article online at the Wall Street Journal: Caribbean Exchange: Invest in Property and Get Citizenship - WSJ
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