Local investors confident about the future of Kerzner International Bahamas may be salivating for a piece of the property fund that swapped debt for equity to take an ownership stake in the iconic company.
They likely won't be able to, though. Brookfield's Real Estate Finance Fund I (BREF I), a private equity real estate fund, is currently not listed.  But if your interest was piqued as Brookfield transitioned a junior debt position into a major equity stake, BREF II, another real estate fund by Brookfield, and real estate investment funds on the whole may be on the radar now.
CFAL's senior vice president, Kevin Burrows, told Guardian Business local investors in non-Bahamian Dollar (BSD) denominated property funds would have to start the process like any other acquisition of non-BSD securities - going through the Central Bank of The Bahamas for investment dollars at a 12.5 percent premium.  But that happens after the decision to invest in an international property fund is made, and that process has some specific considerations.
"In examining a real estate fund like that, it's a bit more complex than buying an international stock," Burrows said in an interview yesterday.
There are two levels to consider, Burrows saying the skill level of the asset manager was one factor, while the content of the property portfolio - its diversification and other risk factors - was another.
In the case of Brookfield, with over $150 billion in assets under management (AUM), the turn of events for Kerzner International may give some indication of the company's management savvy.
"Obviously, it seemed to have a fairly junior position [in the Kerzner debt structure], with a lot of senior debt above it.  But they were able to convert that junior position into an equity ownership stake at the Atlantis and the One And Only.
"I'm sure these guys, when they went into the initial loan structure had a plan "B", so if something went wrong they would get control of the property - which ultimately they did."
The second factor to consider is the property portfolio itself.  Investors would look to see how diversified it is.  If the properties are clustered geographically, single events could impact the entire portfolio.  That risk exists if they are clustered in the same or a few sectors as well.  If all the properties were hotels, for example, the global tourism industry would impact on the portfolio.
Within the vehicle that is used to hold the property , its debt structure, and potential debt structure, should be examined too.  Taking BREF II as an example, capitalized at $727 million, it can leverage up to 2 times with a lending capacity of over $1.5 billion.
For the lay-investor, it may all seem complex.  Considering the premium to buy investment dollars, international property funds may be waves out in an ocean that many will never get to surf in.
Still, the principles behind analyzing property funds hold, and there are a number of Bahamian alternatives.  Locally, investors may be able to peer into management expertise better, and will have a better understanding of the mix of properties in the portfolio.
Geographical diversification may not be so easy to get around, however, so investors will often find their fortunes tied to the real estate markets here.

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