An original Russian version of this article was published in Kommersant, October 2014.
By Fiona Le Poidevin, Chief Executive of Guernsey Finance
Russians based all around the world have long used Guernsey structures to acquire and hold international residential and commercial
property. The Island has a huge amount of experience in providing real estate acquisition structures for individuals and corporates.
Feedback tells us that individuals and corporates are looking to place assets in reputable jurisdictions that are well regulated,
conveniently located and have service providers with relevant experience and knowledge. European, particularly London, real estate is
currently attractive to international investors, including Russians.
Situated between the UK and France, Guernsey has a locational advantage and this explains why anyone exploring real estate prospects
in the UK, the European continent or beyond would consider Guernsey’s real estate holding structures – which primarily utilise
companies, limited partnerships and unit trusts – the Guernsey Property Unit Trust (GPUT) – with private trusts and limited liability
partnerships also available. It is also possible to utilise a Guernsey incorporated Real Estate Investment Trust (REIT).
The pertinent things to consider
The issue of direct ownership of real estate assets, wherever they might be located, exposes many foreign clients to potential tax
issues, for example, property taxes, stamp duty and inheritance tax. Therefore, it is strongly recommended that anyone considering
acquiring real estate particularly in foreign jurisdictions gives serious consideration to robust acquisition and holding arrangements, to
avoid unforeseen tax implications.
International clients need to be able to place assets in structures and jurisdictions that are legally robust and tax efficient. Guernsey’s
financial services industry prides itself on offering a full range of top tier services to meet requirements of clients all around the world.
Many jurisdictions may well offer tax-efficiency but should be carefully considered to ensure they can withstand legal scrutiny, for
example, creditors calling on a trust. Guernsey trust and corporate structures are legally robust and hence have been used for over 50
years. In addition, the quality of service providers should be considered at length, and not just cost alone. Guernsey’s finance industry,
which has been established for over 50 years, has international banks as well as wealth managers available to meet debt and financing
needs associated with purchasing real estate.
Real estate investment funds
With more than 20 years of experience in property funds, Guernsey is a well-known domicile for investment funds established to
acquire significant real estate portfolios. Private and limited partner investors are familiar with investing in Guernsey property funds.
A key advantage is Guernsey’s flexible company law in particular with regard to distributions, which is based on a straightforward
solvency test. Furthermore, Guernsey incorporated property structures can be used to speedily access international stock exchanges,
notably the London Stock Exchange (LSE). Examples include Raven Russia (Russian warehousing) and F&C Commercial Property Trust
Limited (UK commercial property).
Other notable fund managers which have established Guernsey real estate funds include: AXA, CBRE, ING Real Estate, M&G, Schroders and Starwood.
Guernsey has also seen investment fund structures being utilised for financing and refinancing arrangements connected with property and distressed debt on real estate. For example, US real estate group Starwood Capital established the Guernsey-domiciled closed-ended investment fund, Starwood European Real Estate Finance Limited with the purpose to originate, execute and service a diversified portfolio of commercial real estate debt investments in liquid markets (office, retail, logistics, light industrial, hospitality and residential) in the UK and Continental Europe.
Starwood European Real Estate Finance
LSE listing date: December 2012
Market cap: £751 million (August 2014)
Guernsey trust and corporate structures are widely used to acquire property and there are a number of benefits of doing so, including preserving confidentiality and reducing exposure to tax. A wealth of expertise has been accumulated over many years and Guernsey providers also have long standing relationships with surveyors, developers, estate agents, interior designers and lawyers to assist clients in sourcing and developing properties.
Fiona Le Poidevin is the Chief Executive of Guernsey Finance – the promotional agency for the Island’s finance industry.