I would like to ask why you are here, but if you are on this webpage reading this opinion piece, you are interested in investing in St. Maarten.
As with any investment anywhere else in the world, there are a number of elements you have to look at when assessing a potential investment in St. Maarten and these are:
- Return On Investment (ROI)
- Cash Flow
In this article, let me talk about Risk.
If you are aware of an investment opportunity or deal on St. Maarten, I would definitely recommend you first come to St. Maarten to see the project firsthand. You can reserve a flight to St. Maarten on AirStMaarten. Click here to book online.
When you are on St. Maarten, the key is to identify the areas that could cause problems and be of potential risk to your investment. In the majority of investment opportunities the potential for problems are:
A. The credibility of the sponsor of the investment deal. I would recommend hiring a local firm to do a background check on the sponsor and the investment opportunity.
B. Is the investment opportunity an existing project or is the sponsor looking to start from scratch? Starting from scratch means that you can help structure the deal to fit your investment profile. Else the structure of an existing investment project has to fit your profile and your needs. Is it a business, a real estate deal or a property development project? And what kind of investment vehicle or entity is being used to structure the investment?
If you are dealing with an existing project that is already productive and generating revenues, then there is historical data you can look at. Again, I would recommend hiring a local firm to do the necessary due diligence for you.
C. You have to be able to determine if the assumptions regarding the investment projections presented are reasonable and viable. Personally, I like to look at the cash flow projections.
D. Next, depending on the type of investment opportunity you are looking at, you have to access the operational or maintenance side of the project. Is there management in place? If it is an existing project, you will have to review the investment opportunity in terms of feasibility, production, output and operational costs. You will have to identify any opportunities to enhance production or to identify risks associated with the management or operating company. One area I like to look at, is to know if they are properly capitalized.
One recent example was brought to my attention by a client who contacted me with the urgent need to find a new place to rent. He was subleasing the previous place of business and the lessee he was subleasing from was collecting the rent monies from him but not paying the landlord the rent money owed. He was evicted. So you got to know if they have enough cash in the bank to pay their bills. Or in this case, pay the landlord.
E. Finally, if you are investing in a project under development by a developer, you have to assess whether they have the ability to live up to their obligations and deliver on their promises. This can be resolved contractually by identifying the risk potentials and making agreements to opt-out clauses. There are a number of unfinished development projects on St. Maarten and that is not good for the island’s investment reputation. But in general the investment climate on St. Maarten is just as great as the weather with sea, sun and sand to enjoy all year round.
How can Anykey Services N.V. help you?
If you are considering an investment opportunity or deal, we do the following for you:
Assess the project
Do due diligence
Help structure the deal(*)
Assist with the closing
This is a very brief outline, but it gives you a sense of the way we try to help you mitigate the risks when considering investing or doing business in St. Maarten. That being said, investment opportunities, deals or businesses you may get involved in St. Maarten may provide above average returns and that means that the return is higher than, say Government bonds, therefore, inherently the risk is higher.
Rule of thumb, don’t invest money you can’t afford to loose.
This article is based on information taken from the upcoming book “Living, Working & Doing Business In St. Maarten” by Terrance Rey.
(*) There are a number of tax-exempt business structures and private foundations on St. Maarten you can use as an investment vehicle.
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