Family Office Elite Spring_16

CONSIDER THE UPKEEP
AND HIRE THE JET OR ISLAND
By Zeshan Ahmed
Many High net worth clients are subscribing to the
idea that it is more economical to rent, some of the
more high-profile billionaires are now renting rather
than purchasing Private Islands at a rate of $5000 to
$150000 per week.
This recent trend also affects other luxury categories
including exotic supercars, designer fashion, private
jets, diamond jewellery, private villas and private yachts.
This is a slow trend towards a sharing ecosystem that
has been the foundations of mainstream businesses
such as city bike schemes and peer to peer sharing
of goods and services. Ownership amongst this group
does not have the prestige it once commanded and
renting is shedding its déclassé image. Even among our
clients who could comfortably buy an island, renting
simply makes more sense for their requirements.
and homeowner association (HOA) fees.
One Client, a Spanish restaurateur, bought into an
Exclusive Resorts with his partner, in conversation, he
said” It is “like owning exquisite vacation homes all
over the world without having the responsibility or the
headaches that come with homeownership,” The hire
cost was £66,000 for 20 days over two years. Clients
are willing to pay a premium to rent places they want
for only for the time they want them. We also have a
client who owned a place in the Cayman Islands for the
last three years, but he got burdened with HOA fees,
hurricane insurance, maintenance upkeep, etc. Now he
goes to the Caymans for the month of February every
year. He pays significant rent for a penthouse at a Ritz-
Carlton community. But when the month is over, he
simply leaves and has no worries the rest of the year
and no carrying costs.
Our clients, as mentioned in other articles written by
us are finding more satisfaction, comfort and status
in experiences rather than material possessions; a
position that is supported by a 2015 survey on the
sharing economy by PriceWaterhouseCoopers High net
worth clients are also advised by their wealth advisers
of the ongoing costs of property that may have limited
use during the year. Generally, if you own a property,
you have to pay taxes, insurance, and manage the
property. There is a change in the market. They rent
and have fun for two weeks, and then they go and
maybe come back next year. While some of our clients
have owned yachts in the past and still do, the allure
of charter is that they have the freedom to choose any
charter destination, anywhere in the world, selecting
from a choice of different yachts. It’s a relationship
which is fully flexible and gives clients many more
options and in a very short timescale.
Here are six luxury categories in which we are observing
the wealthy are opting to rent.
Vacation Homes and Islands
Many HNW (High Net worth) clients choose to rent their
vacation homes instead of buying for a range of reasons,
including a desire to avoid burdens like maintenance
Then too, there are tax considerations. Another reason
not to own property can have to do with residency and
taxes. For someone who has citizenship in a country
where the tax system is based on residency — as it
is in mostly in Europe — it can make sense to rent to
avoid becoming a tax resident if an investor visa is not
required. For those afraid of commitment, renting adds
flexibility. You can enjoy one place, then move on.
Although the St. Barts real estate market is booming
right now, we see many of the uber-wealthy, including
celebrities, continuing to rent on the island. These
arrangements fit their globe-trotting lifestyle and
provides them with the flexibility needed for their busy
schedules.
Private Jets
While cheaper than buying, flying a chartered jet is still
a significant outlay short-term. Rates vary from £2,500
an hour to more than £12,000 an hour, depending on
the type of jet or helicopter, the miles travelled and
the number of passengers. Another popular product
from the aviation industry is the prepaid Jet card which
allows a certain amount of flight hours to be purchased
and used throughout the year and even split amongst
colleagues or family A Sky card, for instance, allows
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