Grand Cayman Glitz
Published: April 2009
By David Samuels
Will the Cayman Islands—where offshore banking is a way of life and hedge funds prosper—succeed as a newly minted luxury-resort destination?<em>David Samuels</em> examines its unique, expat culture and discovers the answer is, Why not?
Mike Byrne arrived in the Cayman Islands 48 hours ago from Manhattan. Now, dazed but happy in a ratty white T-shirt and a pair of brown cargo pants, he nurses a beer and looks out over the blue Caribbean Sea, while pinkish blond children play on the wooden deck of the Sunset House bar under the watchful eyes of mommies in sundresses and halter tops and daddies in shirtsleeves, their suit jackets slung casually over neighboring chairs.
"I spent a week here in November. I didn’t expect this island to be as modern as it is," Byrne says, still trying to make sense of the contradictions of the strange new world he will inhabit for the next two years: a high-pressure financial capital like Zurich or London, but conveniently located on a small island in the middle of the Caribbean. A junior trader for a hedge fund called RBC, Byrne is renting an apartment on Seven Mile Beach for $4,200 a month. "I got my cable modem hooked up within fifteen minutes," he says.
The Cayman Islands (not "the Caymans," a misnomer that locals blame on John Grisham, the novelist who is also blamed for giving the place its reputation for money-laundering) are a golden sandbox for everyone from financial-industry professionals to scuba divers. In addition to being the jurisdiction of record for approximately 80 percent of the world’s hedge funds—1,752 new ones were registered here in 2005 alone—Grand Cayman, or Cayman, is also a leading center for banks and trusts and the captive-insurance market, and for global deal makers who use the island as a tax-free haven for arcane transactions. The smaller islands of Little Cayman and Cayman Brac are of interest chiefly to divers.
An offshore financial center dreamed up by a small band of visionary lawyers and accountants who arrived on Cayman’s beaches almost 40 years ago, the island today has 42,000 legal residents—half of whom are not Caymanian. There is no crime to speak of on the island, and a negative unemployment rate, which means that even hedge-fund managers leave their doors unlocked and every native-born Caymanian is guaranteed a job. The fact that more than half the island’s residents are short-term employees, accountants and other financial professionals who sign on for two-year stints on the beach, only adds to the island’s otherworldly, utilitarian shimmer. Modest houses on Sticky Toffee Lane and Uncle Bob Road sell for upward of a million dollars.
The paradoxical reality of life in the world’s fifth- largest financial center is still something of a secret—at least to the majority of the one million passengers who disembark every year from the giant cruise ships in George Town Harbour, and whose vision of the island is limited to a few square blocks of faded colonial buildings, duty-free jewelry stores, and T-shirt shops.
Yet the very same qualities that have transformed an obscure island into the Switzerland of the Caribbean—ultramodern infrastructure, zero crime, great sailing and diving, and tens of thousands of well-heeled young businessmen and -women—also make Grand Cayman an alluring site for luxury hotel development. Four Seasons and Mandarin Oriental are in various stages of acquiring properties on the island; Ritz-Carlton has already opened a 365-room beachfront hotel, with views of the cruise ships in the harbor, along with year-round-condo purchase plans, Jean-Michel Cousteau–branded nature tours, Nick Bollettieri tennis pros, a La Prairie spa, and chef Eric Ripert’s new fish restaurant, Blue.
Over drinks, Jean Cohen, general manager of the Ritz-Carlton, Grand Cayman, waxes optimistic about her hotel’s offerings. "Go out to Rum Point, to the Botanical Gardens or Stingray City. We have marine biologists on-site. We can take you kayaking through the mangroves," she says. Cayman’s high-end tourist business is growing fast: within six weeks of opening, occupancy rates at the Ritz-Carlton were above 80 percent.
When I ask Cohen why the big luxury-hotel chains seem to have agreed on Cayman as the next destination in the Caribbean, she answers in a single word.
"Convenience," she says, adding, "It’s a very safe country. It’s clean; you’re not bothered by poverty; the water is beautiful; it’s an hour from Miami."
Sitting at the bar at the Sunset House, Jeremy, a rail-thin, tanned, handsome banker in a pink oxford shirt, happily shares observations about life on the island. Young lawyers usually come out from England, Australia, New Zealand, or South Africa for a seven-year stay, he explains. Accountants come here for a year or two from England and Canada to escape cold winters and audit the hedge-fund books. There are four direct flights a week to and from London on British Airways. On weekends and holidays, young industry players race their yachts, experiment with evermore elaborate varieties of waterskiing and parasailing, and compete to see who can charter a plane to the wildest offshore destination and make it back by the time the markets reopen on Monday morning.
After reminiscing about weekends in Havana and flights on dilapidated old Russian cargo carriers, Jeremy comes back around to the true pulse-pounding excitement of living in Cayman, which for him has less to do with complex water sports or exotic getaways than it has with exotic financial instruments and complex financial transactions.
"A Cayman vehicle is clearly not a plain-vanilla activity," Jeremy says, his eyes lighting up in a way that appears to have nothing to do with his consumption of vodka on the Sunset House deck. He is happy to explain: "A guy in India goes into a joint venture with a guy in Russia to buy a power plant in China. So when they fall out with each other, I’m the guy in the middle with a Russian client, traveling back and forth between Moscow and Bombay."
The question of whether the Cayman Islands can continue to generate the million-dollar paychecks that keep talented professionals moving to a sandbar in the middle of the ocean—with some of the best diving in the world nearby—rests on the able shoulders of perhaps three dozen men, including Jimmy Bergstrom, a lawyer. "If you don’t set up your hedge fund in Cayman, the investors will get nervous," Bergstrom says in a posh English public-school accent, sitting at his desk near the window of his office in George Town. His father arrived on the island from Wisconsin in 1960, built a 14-room honeymoon resort, and sent his son, Jimmy, away to school in the U.K.
The island’s latest wave of prosperity is the product of the 1993 Mutual Funds Law, "the first proper investment-funds law in any of the offshore jurisdictions," Bergstrom says proudly. With a few simple but powerful precedents to draw on, teams of professional experts meet and draw up new laws, which are reviewed by government experts and approved by the legislature.
"There is the English Companies Act, the Partnership Act, and the Limited Partnership Act," Bergstrom says. "And that’s basically it." As a result of its tailor-made legal structure, the Cayman Islands have become the domicile of record for more than seven thousand of the world’s eight thousand–plus hedge funds. "Last year we did more than 400 hedge funds at this firm alone," Bergstrom says with an easy smile.
Richard Smith, the head of civil aviation on Grand Cayman, grew up in North Side, where the roads were unpaved. "It would take an hour and a half to get to school. It wasn’t until 1970 or 1971 that we got electricity," he remembers. Most of his friends left school to go to sea, as generations of Caymanians had done before them, and were gone for years at a stretch. The pristine white-sand beaches that first attracted pioneering bankers and lawyers like Bill Walker, who came to Cayman in the late 1960’s, were of little interest to island residents.
"Nobody wanted to live on the beach," Smith says with a smile. "You had sand flies. The salt air would kill you. It was the happiest day of my life when we moved inland. We were just tired of the salt. It consumed everything."
A soft-spoken, well-dressed man in his late forties, Smith works in a spare, windowless office decorated with slick color posters of expensive private jets, more of which are registered on this small island than on nearly any other offshore location. (Cayman is also a leader for the flagging of large yachts, none of which can dock in the shallow harbor.) He handles 40 to 45 flights a day, half of them civil and half commercial, bringing in approximately 480,000 arrivals per annum. Another million people arrive on cruise ships, disembarking for a fee of $10 per head. When he first joined the island’s air-traffic control, in 1976, his headquarters was a zinc-walled shack, where he supervised a total of three flights a day, from Miami and Costa Rica.
At the laid-back Owen Roberts International Airport, Marcus Cumber runs charters and services private planes that arrive on the island. He’s the 36-year-old heir to one of Cayman’s oldest names (his grandfather was governor-general of the island, which remains a possession of the British crown and a dependent territory), if not necessarily to one of its biggest fortunes.
Servicing the planes gives Cumber a good idea of how the island is changing, who visits here, and why. "I’m seeing more and more G-5’s and the new Citation 10, which is the fastest civilian plane in the world," Cumber says, gesturing out at the sunbaked tarmac, where a shiny new Gulfstream is being worked on by one of his crews. The most popular destinations for charters, he says, are Havana and Jamaica, where restless locals can find things that they can’t find on Cayman. "The biggest complaint is golf," he says. The island’s 18-hole course has been closed since Hurricane Ivan; it’s scheduled to reopen this winter.
Whereas Cayman once attracted only lawyers and accountants, he says, today the island also draws some of their vacationing clients, who might have landed here for an obligatory board meeting and found that they liked the place. When Cumber declines to drop any of the names of his clients, I ask him about the Microsoft billionaire I noticed on a chart back in his office.
"Paul Allen, he’s one of our better customers," Cumber says with a grin. "Flies over on the helicopter from his yacht, which is currently parked off-shore, and has dinner on the island." Allen is scheduled to arrive in an hour. Another occasional client is the DEA, coming in on the trail of drug runners, who have been known to use Cayman as a transshipment point between South America and Miami.
On my way back from the airport, on Seven Mile Road, I find more evidence of Cayman’s cosmopolitan spirit: a rush-hour traffic jam that would not be out of place in New York or London. I am late to meet two women who work at a big-name investment bank. Both are blonde and wear lipstick and could easily star in a Caymanian version of Sex and the City. Jill is a native. Her friend Mel is an accountant who, like half the accountants on the island, came here from Canada.
"Moving here was great, because everyone was in the same boat," Mel remembers. "Nobody had their immediate family, so everyone was friendly. And I was doubling what I was making, and that’s before the tax advantages." In general, the rule for off-islanders is to make the most of their time here by working hard and playing hard and staying single, and then cashing in their savings and experience back home for a house and car, a better job, and perhaps a higher caliber of spouse than they might have rated before they left home—although these days, Mel says, more and more people are showing up on the island with spouses in tow.
Both Jill and Mel agree that accountants are the most likely to leave Cayman after their initial two years are up. Lawyers are the most likely to settle here for good. Deciding to stay means getting a residency permit, which means holding down a job deemed essential to the business of the island and owning property. Mel bought a house and got married last year.
"Conversations are about where we’ve bought land, where we’re going to buy land, what we’ve built, what we’re going to be building," she says cheerfully. "It might be boring, but it beats talking to some arrogant Credit Suisse trader who keeps forgetting your name."
Despite its allure as a world-class destination for hedge-fund managers and an ever-changing population of some 25,000 ambitious and sun-crazed young lawyers, bankers, accountants, number-crunchers, compliance officers, fund administrators, and other servants of the global financial system, Cayman is still a small-town Caribbean island, with all the pleasures and evils of any other small town. At lunchtime, especially on the weekends, Caymanians can be heard yearning after the boutiques of Miami—or succumbing to the temptations of Marl Road. " ’Marl Road’ is our term for gossip," explains Cayman news anchorwoman Cindy Arie, a stunning blonde with a goofy sense of humor who also appears in advertisements for the island’s water company. "It’s the local term for the fill that you use to fix a pothole," she explains. "People drink, have affairs, and practice water sports, especially on Sunday, when you can’t work."
Both of Arie’s parents are native Caymanians, which doesn’t make life as a single girl on the island any easier, even if the men are rich and available. "The men here feel like they’re on top of the world. They’re away from their families and they’re making lots of money," she sighs, picking at her Caesar salad. "It’s like a constant midlife crisis. It’s not easy."
In his pink shirt, gold bracelet, gold chain, and bald head, Desmond Seales is a local legend, an editor and investigative journalist whose latest project is Caribbean Net News. Among the achievements of his checkered and highly enterprising career, he sold company kits, including seals, and started the Nor’wester, one of many publications that have at one time or another fallen under his sway. In addition to his publishing ventures, Seales started the Tape Club, the island’s first video-rental business, and claims to have brought television to Cayman. He arrived on the island in 1968, when there were only 9,000 residents here, after getting booted out of the Bahamas and spending some time in Miami.
Over the years, he says, he has developed a grudging admiration for the pioneers who built a tiny Caribbean island into a financial powerhouse. "Bill Walker came here with his one little briefcase, one white shirt," he says. "He took advantage of an opportunity."
As Cayman got richer, Seales says, the easy social and occasionally romantic mixing that initially went on between the lawyers and bankers and Caymanians was replaced by a series of hermetically sealed enclosures built to serve financial-industry professionals, who corrupted the island’s politicians while keeping poor immigrants from other Caribbean countries out.
"What are you going to create here?A country for lawyers and bankers?" Seales asks, his voice rising in editorial outrage. "This is becoming like one of the Gulf States in the Middle East, where you have fifteen thousand citizens and a million servants."
Almost 40 years after the Cayman financial industry was born, Seales sees the same families still in power—and a history of local political influence being brought to bear on development projects. The financial industry may be free of pressure from island interests, but corruption in real estate is endemic, he says; that’s how the Caymanians get their piece of the pie.
As the rewards in the travel sector increase, he predicts, so will the level of corruption and self-dealing on the island. "Downtown looks like crap," he says, pointing out that a politically connected family owns the lucrative contract to bring cruise-ship trade to the island, and is unlikely to give up that privilege anytime soon. When I ask him whether Cayman will succeed as a luxury resort, however, he nods. Then, in a lilting Caribbean accent accompanied by a wicked smile, he echoes what the Ritz-Carlton’s Jean Cohen said to me on the deck of the Sunset House.
"A woman told me a long time ago why she liked Cayman," he says, laughing. "She said, ’It’s just like the brochure.’ "
I catch a glimpse of Cayman’s possible future at Blue, Eric Ripert’s first restaurant for Ritz-Carlton: Las Vegas–style event dining with Michelin-quality food served in glitzy surroundings at eye-popping prices. Beautiful women in Pucci dresses circulate past the sailing prints on the walls. Wicker fans turn overhead and waiters carry trays laden with Ripert’s famous appetizer: thick layers of yellowfin tuna and foie gras on a toasted baguette. Main courses include perfectly cooked wahoo in a trendy coconut-curry foam and crisp-skinned red snapper with baby cockles. It would all taste even better sold from a shack on the beach.
Karin Patrick, a friendly, middle-aged woman, is here with a group of her fellow salespeople from the Northwestern Mutual Financial Network; every year, the company’s top producers get to choose where they want to go for their corporate-sponsored trip. "We’re trying to figure out how to come back next year," Patrick says.
On the moonlit beach outside the resort, couples spoon in the sand and look out at the cruise ships in the harbor. Tonight they will recline on the Ritz-Carlton’s incredibly comfortable beds, while billions of dollars in assets rest somewhere nearby in the electronic ether with a Cayman Islands IP address. Perhaps tomorrow they will enjoy the hotel spa, or go diving in the clear Caribbean water off Cayman Brac, or fly to Montego Bay for a round of golf. If there is something faintly ludicrous about Cayman becoming the next St.-Tropez, it would be wrong to doubt the power of this remarkable island to reinvent itself, and get richer still.
When to Go
Temperatures range from the mid 70’s to the mid 80’s year-round. To avoid the high season’s crowds and prices, travel mid-April through early December. (Hurricane season is June through November.)
Grand Cayman is an hour by air from Miami. American, Delta, Continental, and Cayman Airways all offer nonstop flights.
Where to Stay
Ritz-Carlton, Grand Cayman
Seven Mile Beach; 800/241-3333 or 345/943-9000; www.ritzcarlton.com; doubles from $245.
Sunset House Hotel
Oceanfront hotel on the southwestern tip of the island, with great diving and even better drinks. Grab a seat at My Bar and watch the tropical sun go down.
390 South Church St., George Town; 877/854-3232 or 345/ 949-7111; doubles from $200.
Where to Eat
Ritz-Carlton, Seven Mile Beach; 345/943-9000; dinner for two $190.
Casual restaurant overlooking Morgan’s Harbour, specializing in simply prepared fresh seafood. Try their signature sticky toffee pudding for dessert.
West Bay; 345/949-3948; dinner for two $90.
Irish pub serving cottage pie, bangers and mash, and full breakfast all day. Queen’s Court Plaza, Seven Mile Beach; 345/949-5189; dinner for two $30.
The indoor-outdoor restaurant at the Sunset House also serves meals at My Bar, for guests who like dining seaside under a thatched roof. Try the coconut shrimp with fruit chutney.
390 South Church St., George Town; 345/949-7111; dinner for two $70.
What to Do
Cayman Island Turtle Farm
See thousands of turtles on Boatswain’s Beach.
West Bay; 345/949-3893; www.turtle.ky.
Where to Dive
Grand Cayman offers world-class diving. If you aren’t certified, opt for a resort course (they run from $80 to $150) or simply don snorkel gear to enjoy the undersea views. In Stingray City, divers and snorkelers can feed the giant creatures; the North Wall is another favorite, with spectacular coral, marine life, and visibility. More-experienced divers shouldn’t miss Trinity Caves, where the canyons start at 50 feet deep.
Eden Rock Diving Center
Shore dives around Eden Rock and Devil’s Grotto.
Red Sail Sports
Guided tours with this outfit depart from many of the major hotels along Seven Mile Beach and Rum Point.
The Sunset House has diving at its doorstep, and runs shore and boat excursions to all parts of the island.