Jersey’s AA+ Credit Rating Reaffirmed

November 26th, 2014 by

Jersey Finance has welcomed the Standard & Poor’s (S&P) international credit rating announcement for Jersey, one of the best that the credit ratings service awards.

Standard & Poor’s Rating Services has affirmed its initial credit rating of ‘AA+ / A-1+ long and short-term sovereign credit rating with a stable outlook’ including its highest level ‘short-term rating of A-1+’.  In its report, S&P stated: ‘Jersey has mature political and institutional settings, transparent economic decision-making and high fiscal flexibility.’

Geoff Cook, CEO Jersey Finance Limited, commented:

‘We know the importance that international investors attach to the political and economic stability of the jurisdiction when they consider their asset management strategies, so it is extremely valuable to the finance industry that Jersey has retained such a strong and positive assessment from the credit rating agency once more.  It will be particularly helpful when highlighting the industry’s strengths in the competitive overseas markets where Jersey is stepping up its presence.”

The credit rating was first assigned in November 2013 and the rating process is repeated annually with an update every six months.

First published by Jersey Finance Limited, November 2014

Tenant covenant reviews: a timely reminder

October 24th, 2014 by

The UK property market is booming: rents are rising, yields are improving and interest rates have been held at 0.5% for a record five years – what could go wrong? Well, we have been here before and historically there has been a property ‘correction’ every eight to ten years. Good quality tenants are a protection against voids and can help preserve asset values.

With a recent change in legislation covering a landlord’s right and ability to recover arrears of rent, Moore Stephens’ Tenant Covenant Review team believes that now is the right time for landlords and managing agents to review tenants’ covenants and make sure that tenants will be able to continue to meet all rent obligations, particularly given the increasing likelihood of an increase in interest rates.

A landlord’s ancient right of distress to recover arrears of rent was abolished on 6 April 2014. In its place, is a new statutory regime for Commercial Rent Arrears Recovery (CRAR).

Key aspects of CRAR

  • Lease must be in writing.
  • Commercial premises only.
  • Rent only (plus VAT and interest).
  • Must give seven clear days’ notice in writing before entering premises to seize goods.
  • Exercised by Enforcement Agent.
  • Notice to sub-tenant to redirect rent takes effect 14 days after service.

Miles Needham of Moore Stephens’ Corporate Advisory Services team comments: “Whilst a landlord will always want to avoid the situation where a tenant is in arrears of rent, the change in legislation has arguably weakened the power of the landlord to threaten distress or to act quickly to seize goods to recover arrears of rent.”

The change in legislation has brought the position of the landlord more in line with other creditors. It is therefore more important that ever for a landlord to understand the current and future ability of a tenant to pay rents and, where possible, to take security.

How Moore Stephens can help
Moore Stephens’ Tenant Covenant Review team is a multi-disciplined team, drawing expertise from the Real Estate Specialist Sector group, Corporate Advisory Services, Tax and Corporate Finance teams.

The team regularly undertakes desktop reviews of proposed tenants in support of a new lease or of existing tenants in support of an asset purchase.

We also undertake more complex assignments to assist landlords and managing agents in fully understanding the financial health of a tenant when faced with a request for a rent reduction, or other material change in the lease, or when a tenant is in financial distress and faces the threat of insolvency. The Tenant Covenant Review team are able to quickly assess the tenant’s situation and provide a recommendation to the landlord or managing agent.

First published by Moore Stephens London, October 2014

VAT on residential construction projects – What a relief!

October 24th, 2014 by

There are many ways of reducing VAT costs for residential construction projects, yet the reliefs available are frequently overlooked or misunderstood. The 0% or 5% VAT rates can apply to construction/conversion/renovation services and building materials in a wide range of circumstances, resulting in very substantial savings. It may also be possible to reclaim VAT that has been incurred using one of the mechanisms made available by HM Revenue & Customs.

As well as benefiting the end customer, the VAT reliefs available can give businesses a commercial advantage when tendering for residential construction projects, as competitors will often be unaware of the rules and quote at the 20% rate of VAT.

First published by Moore Stephens London, October 2014

Jersey claims Investment Week best fund administration centre award

October 2nd, 2014 by

For the second consecutive year, Jersey has been named ‘Best Fund Administration Centre’ in the awards of leading investment management publication, Investment Week.

Jersey, which was once again shortlisted alongside Luxembourg and Dublin, was announced the winner at a dinner ceremony in London on 23rd September, following Investment Week’s two-day Fund Management Summit.

The awards are designed to recognise those service providers and jurisdictions who can demonstrate the knowledge, drive and expertise to provide solutions for the fund management industry in a seamless, efficient and innovative way. Winners were selected through a combination of online voting and by a panel of independent judges.

Commenting on Jersey winning the award, Deborah Benn, chair of the judging panel, said:

“The judges felt the passion and commitment to fund services clearly shone through in Jersey’s submission. In particular, the judges felt that Jersey demonstrated leadership in its aims to become a key jurisdiction for alternative investment funds. Messages and intentions on industry issues need to be transparent and explicit, which Jersey does extremely well.”

Geoff Cook, CEO, Jersey Finance Limited, said:

“For Jersey’s fund administration services to be recognised not only by a leading and long established investment publication like Investment Week but also against some heavyweight EU competition for the second year in a row is naturally extremely welcome for our funds industry, which continues to perform strongly. The market has reacted well to Jersey’s approach to international regulation, whilst fund creation volumes and net asset values are growing. This, backed up by this latest accolade, which was awarded at a ceremony attended by London’s leading investment professionals including many of the UK’s major fund service providers, is extremely encouraging for our funds industry.”

Ben Robins, Chairman of the Jersey Funds Association, added:

“At a time when unprecedented regulatory change is causing fund promoters to re-assess fund domiciles, this award serves as a timely reminder of perhaps the most important factor they should consider – will your fund and its investors receive the consistently high levels of service they demand? This award is an excellent reflection of the long-standing quality, depth and experience of Jersey’s fund administrators and it’s notable that a significant number of service providers with a presence in Jersey are recognised in other categories in these awards too.”

First published by Jersey Finance Limited, September 2014

Funds value passes £200 billion mark during stable quarter

September 15th, 2014 by

The latest figures for all sectors of Jersey’s finance industry show stability and signs of new growth, led by the funds sector where the value of funds business passed through the £200 billion mark for the first time since June last year.

The statistics highlight that the net asset value of funds increased by £5.1 billion in the second quarter of 2014 to just over £200 billion, with the increase most notable in real estate funds which shows growth of nearly 20% during the quarter. Although bank deposits fell slightly, they remain stable and Geoff Cook, chief executive, Jersey Finance Limited, described the picture overall as showing ‘clear signs of recovery.’

The latest statistics, collated and prepared by the Jersey Financial Services Commission, are for the three month period ending 30th June, 2014. Headline figures include:

  • The total value of banking deposits held in Jersey decreased by £0.3bn from £139.2bn to £138.9bn during the second quarter of 2014.
  • The net asset value of funds under administration increased by £5.1bn from £195.3bn to £200.4bn during Q2 2014.  The total number of regulated collective investment funds decreased by 54 from 1,337 to 1,283 over the same period.
  • Consent was granted in respect of 27 COBO only Private Placement funds since inception with a reported total NAV of £593m.
  • The total number of unregulated funds increased by 3 from 199 to 202 during the second quarter.
  • The value of total funds under investment management decreased slightly by £0.4bn from £22.2bn to £21.8bn during the second quarter of 2014.
  • The total number of live companies increased by 506 to 33,207 at the end of Q2 2014.

Geoff Cook, Chief Executive, Jersey Finance, commented:

“The latest statistics show another quarter of stability in the performance of the finance industry.  The increase in funds business is due to the general improvement in market conditions, specifically in property fund valuations. The increase also takes into account a number of new fund launches established in the last few quarters reporting for the first time, while the reduction in the number of regulated funds relates to relinquished certificates for funds which have become inactive. The small decrease in bank deposits is mainly due to the significant strengthening of sterling, which decreased the sterling value of foreign denominated deposits by around £2.2 billion.”

He added:

“It was encouraging to see an increase in the number of Jersey companies, now the highest number of company incorporations since 2008 and with the recent introduction of innovations to our companies law on the statute, Jersey is an even more attractive proposition for investment structuring, asset holding and a wide variety of other purposes. The strength of the industry continues to be in its diversity and it is very encouraging to see clear signs of recovery across a range of sectors.”

First published by Jersey Finance Limited, September 2014.

Jersey – the place for real estate investment funds

September 4th, 2014 by

Jersey has long been seen as a key centre for developing real estate investment options. The island’s fund industry has evolved over the last 30 years as a major centre for global investors looking to establish tax efficient real estate funds which would enable them to move into property markets, particularly in the UK and Europe.

Using offshore investment vehicles can have many benefits for investors. Tax transparency, particularly in a well-regulated jurisdiction such as Jersey, flexible regulatory environment, and increased liquidity being several of the key points. Depending on where funds invest there can also be advantages such as, when investing into the UK, the way stamp duty is applied, along with capital gains and inheritance taxes.

While investors use Jersey as a base for investment vehicles for various asset classes, UK and continental European real estate investment is the biggest overall contributor to assets under management in the island.

There are several reasons for the growth of the real estate funds industry. As outlined above there are specific advantages to using an international finance centre for holding an investment structure. However what makes Jersey stand out is not just the tax efficiency but the expertise of the professional community in the island. Lawyers, accountants, bankers and fund administrators are all well experienced in this field and can provide the advice, skills and knowledge promoters and investors need to move their funds forward. It is no coincidence that where this expertise is located ‘under one roof’ investors are flocking to the island to utilise those skills to their benefit. With three decades experience of real estate funds Jersey’s finance industry is well placed to provide an excellent service to both promoters and investors.

Where this experience really tells is in reacting to new legislation, restrictions and regulations. Practitioners in Jersey have a proven track record in managing complex and specialised structures through regulatory change; they have prospered where other jurisdictions have struggled to come to terms with changes and updates. Recent updates and reaction to issues such as Basel III and AIFMD, plus disclosure agreements such as FATCA show that the island’s financial sector retains a nimbleness that serves it well.

What does a real estate investment look like?

Investments funds domiciled in Jersey can be structured as open or closed-ended vehicles and corporate structures such as companies, limited partnerships, unit trusts, protected cell companies and incorporated cell companies can be utilised. The Jersey Financial Services Commission oversees and regulates various different fund categories including Very Private Structures, Private Placement Funds / COBO only funds, Expert Funds, Listed funds Unclassified Funds and recognised Funds to suit the different requirements of investors and promoters.

With so much experience on the island in the form of advisors and financial services professionals promoters and investors can be reassured that they will be recommended the most appropriate structure. These might vary between straightforward company structures or a complex fund defined by institutional investors.

What are the tax efficiencies available?

In the majority of cases it is possible to transfer UK based property in a Jersey domiciled structure without paying stamp duty. By using a Jersey company to hold the real estate, an investor can arrange for shares in the company to be transferred rather than buying or selling a property outright. Stamp duty land tax does not apply to transfers of interests in structures holding UK property. Properties held via a Jersey structure are also not subject to capital gains or inheritance tax in the UK.

In addition to this benefit, holding a property within a Jersey structure means that investors can apply for the UK’s non-resident landlord scheme. This is relevant where the property is held for commercial purposes as a rental investment and takes advantage of the double tax treaty between the UK and Jersey to optimise the tax treatment of the company.

Further tax benefits can be gained by looking at income tax. A limited partnership will generally be deemed to be transparent for UK tax purposes. Therefore any income or capital gains are viewed as directly attributable to the partners. They are therefore taxable against their own tax position.

What about taxes in Jersey?

Jersey’s corporate tax environment is very favourable. Structures established and administered in the island, whether they are a company (open-ended or closed-ended), a unit trust or a limited partnership, are exempt from taxation in Jersey. Withholding tax is also not imposed on dividends or payments made by the company.

Jersey’s tax system does not include provisions for stamp duty, inheritance tax or capital gains tax, nor corporation tax nor VAT. Investment vehicles established in the island have therefore a limited tax footprint here, leaving them free to manage their overseas tax affairs in the most efficient way possible.

Why Jersey?

The combination of tax transparency, tax efficiency and a well-stocked pool of financial services practitioners make Jersey an excellent jurisdiction for the establishment of real estate investment funds. The island’s flexible regulatory regime, particularly with regard to fast-track establishment of companies is also a real benefit to investors in the real estate space and this is a key part of the island’s continuing position as a leading real estate centre.

First published by the Jersey Evening Post, September 2014

Expo Real 2014

September 1st, 2014 by

We will be in Munich again this year from 6th – 8th October 2014, attending Expo Real – the International Trade Fair for Commercial Property and Investment.

We would welcome the opportunity to meet with you or one of your colleagues.

Please contact us if you would like to arrange a meeting or visit us at the event – Hall A1, stand 521.

Auch in diesem Jahr werden wir wieder an der EXPO REAL, Internationale Fachmesse für Gewerbeimmobilien und Investitionen, vom 6. – 8. Oktober 2014 in München teilnehmen.

Bitte vereinbaren Sie einen Termin mit uns oder besuchen Sie einfach unseren Stand Nr. 521 in der Halle A1.

Wir freuen uns auf die Gelegenheit, Sie oder einen Ihrer Kollegen dort zu begrüßen.

Jersey Companies Registry wins award for innovation

August 1st, 2014 by

The Jersey Companies Registry, which is part of the Jersey Financial Services Commission, has won a leading international award for its recently introduced Security Interests Register.

Jersey was presented with the award for “outstanding achievement in secured transaction registry innovation” by The International Association of Commercial Administrators, the leading global forum for international registries.

Julian Lamb, Director of the Jersey Companies Registry, received the award while attending an IACA conference in Milwaukee, United States in his capacity as Deputy Chairman of IACA’s international section.  Jersey was one of 15 international registry systems, including those in Australia, New Zealand, the United Kingdom and states of the US, to be considered and one of only six to receive an award.

The Security Interests Register was launched in January 2014 and is a fully online register of security interests that was developed by the officials at the Jersey Companies Registry following extensive consultation with the finance industry.  There was also considerable collaboration with other international registries during the planning and development of the new register, which makes available a public register of security interests in Jersey for the first time.

Mr Lamb said: “The award is especially welcome because it is given by our peers within the regulatory industry worldwide and highlights that Jersey remains at the forefront of regulatory developments in financial services.  We are ahead of most other jurisdictions, with the scope and features of our online Security Interests Register, which also makes financing statements accessible to the public. It has been well received by the industry in its first few months and resonates well with the increasing global drive for greater transparency in financial services.”

IACA is a North American association whose membership comprises the official business registries of the US, Canada and other international jurisdictions.  It is the only registry forum which sets standards and shares system innovations with regard to secure transactions.

It is the second time in recent years that IACA has recognised developments at the Commission.  In 2012, the Jersey Companies Registry was given a Merit Award jointly with the equivalent registry in Germany, for a pilot project designed to improve the electronic transfer of publically available data between registries.

Strong uptake in Jersey private placement regime in run up to end of AIFMD transition

July 2nd, 2014 by

With less than one month to go until the transitional phase of the EU Alternative Investment Fund Managers Directive (AIFMD) comes to an end, Jersey is seeing a strong take-up in its private placement route into Europe.

Figures from the Jersey Financial Services Commission (JFSC) show that more than 70% of the 52 funds registered so far this year in Jersey have been approved to market into the EU under the AIFMD through Jersey’s private placement regime.

In addition, according to the JFSC, a total of 43 funds have so far been registered to market into the EU whilst 38 fund service providers have also been approved to conduct AIFMD related business under the regime.

Recently it was reported that the AIFMD has not been fully transposed by a third of EU Member States, whilst at the end of the third quarter of the year it was reported that more than half of UK alternative fund managers had not applied for AIFMD authorisation.

Jersey’s framework under the AIFMD means that there are options to gain regulatory approval to market into Europe ranging from a same day turnaround to up to ten working days, depending on the type of fund being registered. The application fee for a fund or a fund services business to be registered with the JFSC to privately place into Europe under the AIFMD is £1,000, with exceptions for Certified Funds or Recognized Funds and fund services businesses registered under Article 2(10) of the Financial Services Jersey Law or Recognized Fund Functionaries, which are not required to pay an AIF application fee.

At Jersey Finance’s Annual London Funds Conference this year, 33% of attendees indicated that they anticipated particular growth in real estate this year whilst 27% said they saw most potential in private equity. This picture is manifesting itself in Jersey with the uptake of European-focused funds including a number of landmark funds, such as the largest ever real estate fund to be listed on the London Stock Exchange (the Kennedy Wilson Europe Real Estate fund, which raised around £1 billion and will target investments in European real estate linked assets).

Jersey law firms and service providers have also reported registering funds targeting assets such as Scandinavian medium size firms, commercial property in the UK and Europe, cleantech and energy.

Geoff Cook, CEO of Jersey Finance, said:

“Even at this late stage, managers are still cautious about the AIFMD and its impact on their operations and cost-base, and these figures from the JFSC provide evidence that Jersey’s private placement route is being warmly received by the market as an attractive flexible, robust and cost-effective option. Given Jersey’s specialist expertise in fund governance, we expect this trend to continue as those managers marketing into Europe look to avail themselves of Jersey’s attractive private placement option beyond 22 July.

We are also seeing a rise in the number of managers considering establishing a presence here. There are more than 300 registered resident directors in Jersey who are able to take on actual portfolio management and risk supervision duties and 1,400 regulated funds, which means that on average each director is overseeing less than five funds, so demonstrating substance for a Jersey manager is extremely straight forward.”

First published by Jersey Finance Limited, 27 June 2014

Vote of confidence in Jersey’s finance industry with the popularity of its debt bond issue

June 20th, 2014 by

Jersey Finance has described the States of Jersey £250m debt bond issue as a positive endorsement from the investment markets. The bond issue, which has closed successfully, was two and a half times over-subscribed.

Geoff Cook, CEO, Jersey Finance Limited, said:

“Given that the coupon rate of 3.75% compares favourably with other larger and more regular bond issues, and the considerable interest that has been shown from investors, the bond issue is a significant vote of confidence from the market in the long term future of the jurisdiction and its finance industry, the main source of Government revenues.”

“Of course with the inflation outlook subdued, and the continuing prospect of historic low interest rates, demand for quality bond issues is high. That said, getting a bond issue away at near big league sovereign rates is a fantastic achievement for a small jurisdiction, and testament to the underlying strength of public finances, and the strong fiscal and net asset position of Jersey as a jurisdiction.”

The pricing represents one of the lowest new issue spreads ever achieved for a long dated, non UK guaranteed sterling transaction. Geoff added:

“It’s evident that investors were willing to lend on a long-term basis based on the strength of Jersey’s financial management and ability to repay. They were impressed by Jersey’s ability to manage difficult global economic circumstances and by the financial reserves the Island has built up.”

“Factors such as Jersey having no annual fiscal deficit and no short term debt, and an ability to run balanced budgets will have also been taken into account in the popularity of the issuance.”

He added that the success of the issue was a unique achievement for a jurisdiction the size of Jersey and had reinforced many of the strengths of the Island that also play a part in attracting financial services business including its enduring economic and political stability, sound public finances and the quality and robustness of its regulatory regime.

First published by Jersey Finance Limited, Wednesday 11 June 2014.