As investors continue to seek alternative investment assets that provide long-term capital growth and stable income yields, no market has proved as attractive as the global real estate market, which currently offers some of the best value in the developed world, supported by an increasingly positive economic outlook.
For the last several years, investment strategies from across the Asia Pacific region have been shaped by a number of external forces that continue to drive capital toward particular types of asset classes and geographies. On the one hand, as bond rates sink ever lower, real estate becomes increasingly attractive as a means to deliver returns that fixed-income markets can no longer provide, driving up prices of core assets and creating intense competition in what is now a crowded field. On the other, fund managers with a mandate to deliver a certain level of return are being forced into uncharted waters as they seek out yield.
In terms of capital flows, Asia has seen a continuation of the huge outbound movements of cash that began in earnest about three years ago. Some of this is dispatched to other countries in the Asia Pacific region (in particular Australia), but most of it is finding its way to the West, especially the United States. Large amounts also continue to migrate to London in spite of Brexit.
Despite the challenges in the global economy, US, Australian, UK and European real estate has proved to be a safe haven for many Asian investors and continues to perform strongly. In particular, real estate assets in the major cities (London, Paris, Berlin, New York, Sydney etc.) remain highly sought after properties providing stable rental returns and affording a degree of protection against inflation. This, combined with the relative strength of the US Dollar against other currencies, makes it opportune for US Dollar investors to diversify their portfolios to include UK and/or European real estate.
When acquiring and holding property, doing so through offshore real estate investment vehicles can provide real, tangible benefits. As such, large (and increasing) numbers of funds and holding vehicles are now being used by international investors for property transactions.
The holding structures available in most offshore jurisdictions include property unit trusts, companies and limited partnerships, all of which can be established as investment funds. In addition, private trusts and various types of partnership can be used.
Well-regulated offshore locations such as the Crown Dependencies have long been jurisdictions of choice for fund managers looking to establish fund vehicles to facilitate collective investment schemes for the acquisition of real estate. Many ‘clubs’ and ‘syndicates’ of investors have used offshore registered vehicles to invest in commercial real estate portfolios. The various private fund regimes available in most offshore jurisdictions, including the Cayman Islands, Guernsey and Jersey, lend themselves well to this requirement of overseas investors.
So what are the key benefits of investing indirectly through offshore vehicles?
If you’d like to discuss the benefits of using offshore real estate investment vehicles in more depth, or discover how offshore structuring could work for you or your clients, please don’t hesitate to contact me:
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