Facilitating high quality inward investment
Analysts predict that, driven by globalisation and population growth, the global asset management industry will grow from $65trn to in excess of $100trn within the next five years. At the same time, emerging markets are witnessing significant growth in wealth and wealth creators, driving the demand for sophisticated investment support across the globe.
This rise in cross-border trade flows is of real significance for the UK property market, which is frequently viewed as a stable and strong investment amongst overseas investors, whilst this sort of investment requires precisely the kind of alternative fund structuring and servicing expertise that specialist international finance centres (IFCs) like Jersey can provide.
Against this backdrop, Jersey’s funds industry has continued to perform extremely well. The figures as at June 2015 show that the net asset value (NAV) of regulated funds administered in Jersey currently stands at around £219bn, the third highest level since 2009 and 9% higher than in June 2014.
In particular, real estate funds specifically grew around 16% over the twelve months, with around £34 billion of real estate assets around the world now serviced in Jersey.
Current activity certainly suggests that Jersey remains a popular choice for real estate funds targeting the UK and European property markets.
For funds targeting these markets, due to its straightforward structuring process and an administration network that understands the core financing and accounting requirements, together with its continued access to investors through private placement routes under the EU Alternative Investment Fund Managers Directive (AIFMD), Jersey is a good option.
Whilst Jersey has earned a strong reputation as a centre for real estate fund structuring globally, it has cemented its position as the go-to destination for property investment into London.
This pivotal role as a conduit for investor capital into the UK was highlighted in the 2013 ‘Jersey’s Value to Britain’ report, which found £1 in every £20 of money invested by foreign individuals and companies in assets located in Britain reached the UK via Jersey.
In particular, real estate investment projects in the City involving Jersey are on the rise. A number of major property structures have been routed through Jersey recently, stretching from Battersea Power Station to The Shard, to Shoreditch and chunks of Canary Wharf. Other recent transactions of note involving Jersey include:
• law firm Mourant Ozannes advising Greystar Real Estate Partners on the £600 million acquisition of a portfolio of London student accommodation properties, known as 'Nido', from Round Hill Capital
• law firm Walkers acting with Whitmill Trust on the launch of Catalyst Capital LLP's second value-add real estate fund, which has raised Euro 150m for the fund’s first close and will invest in the office and retail sectors throughout the UK, as well as France, Belgium, Germany and Poland
Shifts in wealth around the world are continuing to mean that private and institutional investors in markets stretching from the US to the Middle East to Asia are seeking efficient means of deploying investment capital into UK real estate.
Investors in the Middle East, for example, are now allocating over a quarter of their investments to property (World Wealth Report 2014), whilst Asian money continues to favour the London property market. With a Double Taxation Agreement between Jersey and Hong Kong having come into force in 2013, and a wealth of Islamic Finance experience, Jersey is proving an attractive conduit for these key property investor markets targeting UK real estate.
Jersey’s success is built on being subject to more certain economic, political and regulatory conditions than other fund domiciles specialising in alternative fund servicing and is rooted in its focus on high-end real estate funds business reliant on stability, reliability, flexibility and user-friendliness.
Jersey’s high standards of regulation and commitment to transparency stand it in particularly good stead.
Due to its approach to capturing beneficial ownership information, ability to cooperate with foreign authorities and commitment to information exchange, Jersey is well positioned as a centre for high quality inward real estate investment into the UK, with a system in place to detect and mitigate questionable activity that is far stronger than any other jurisdiction.
It is for that reason that the jurisdiction has been endorsed by bodies including the OECD, World Bank and IMF and why it was ranked as the number one jurisdiction in the academic ‘Global Shell Games’ (2012) report.
In fact, Jersey is a well-trodden path for high-end global real estate structuring. By providing protection for investors, efficient cross-border investment pooling, robust regulation and tax neutrality, Jersey remains a key centre for UK inward investment and well placed to act as a conduit for channelling high quality capital into the UK commercial and residential property markets.
This article was first published in Property Week, October 2015