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A portfolio of sun, sand and sea

The challenge Find a strategy that combines the demographic wave with migration to sunnier climes The call Invest in businesses in the Caribbean that cater to greying North American baby boomers


Michael Lee-Chin had his aha! moment for his new Caribbean investment play two years ago when he was in North Carolina to raise money for a private equity fund.

In a meeting with state treasurer Richard Moore, Mr. Lee-Chin, founder of mutual fund company AIC Ltd., learned how the southern U.S. coasts had become saturated with condos and hotels.

He realized that the Caribbean could benefit from aging North American baby boomers looking further south for sunny places to spend time as they begin to retire.

He had already made a fortune in the fund business beginning in the 1980s by catering to the investing needs of the huge demographic group born in the years after the Second World War. Now they presented another opportunity, just as he was looking for ways to diversify his business.

More recently, he has been busy investing in the islands in telecommunications, real estate, health care and financial services firms to cater to boomers - this time a demographic play in a region rather than in the wealth management industry.

"The natural spillover will be to the Caribbean," the 56-year-old Jamaican-born businessman predicted in an interview at his sprawling head office in Burlington, Ont.

"There will be 78 million [aging boomers] in the United States alone.... A large percentage of them will be looking for warmth and coastline for retirement."

The vehicle for his expansion is his privately owned Portland Holdings Inc., which owns AIC.

The allure of the Caribbean, he said, is that it is largely English speaking, a dollar-denominated region, and a "friendly third border" to the United States after Canada and Mexico.

He sees Royal Bank of Canada's $2.2-billion deal to buy bank RBTT Financial Holdings Ltd., based in Trinidad and Tobago, as confirmation of his belief that the region is poised for growth.

In addition to his personal investments, he has already raised $300-million for his AIC Caribbean private equity fund. The money includes an $80-million loan from the Overseas Private Investment Corp., a U.S. government agency, and investments from the European Investment Bank and U.S. pension funds.

His latest strategy has emerged since he made his first major Caribbean investment in 2002, when he saw an opportunity and bought 75 per cent of struggling National Commercial Bank Jamaica Ltd. (NCB).

"Wealth is created when you find a company or a region that is relatively inefficient, and you make it efficient," Mr. Lee-Chin said.

NCB made an after-tax profit of $6-million (U.S.) in 2001, but that will approach $100-million for the fiscal 2007 ended in September, said Mr. Lee-Chin, who is bank chairman.

His bank competes against Bank of Nova Scotia's Jamaican subsidiary, and jumped ahead as the country's largest bank in total assets just before Scotiabank bought brokerage firm Dehring, Bunting and Golding last December. "On pure banking, we've surpassed Scotiabank," he boasted.

Using dividends from the bank, he continued his spending spree in financial services this year with the $12-million (U.S.) deal to buy 80 per cent of United General Insurance Co., Jamaica's largest auto insurer.

In 2005, he partnered with Atlantic Canada seafood magnate John Risley in the telecommunications industry by investing in Barbados-based Columbus International Ltd.

Columbus has interests in cable-TV networks in Trinidad and Tobago, Jamaica and the Bahamas, and controls the ARCOS fibre-optic network connecting the United States, Mexico, Central America and the Caribbean.

"When you go to the Atlantis Resort in the Bahamas and turn the television on, it's us," Mr. Lee-Chin said. "You plug in a computer to get on the Internet, that's us."

He has snapped up 700 acres of waterfront property near the Jamaican tourist hot spots of Ocho Rios and Montego Bay for future condos and hotels. And he is renovating the luxury Trident Villas & Hotel in Port Antonio - a community that was once home to swashbuckling Hollywood legend Errol Flynn.

The country's high crime rate doesn't faze him, particularly because a new government took power in September, promising to clean up the streets. "There is a fresh wind of confidence blowing over Jamaica," he said.

Anticipating a demand for medical services by aging boomers, he bought Medical Associates Hospital in Jamaica and is close to another deal. With North Americans heading to India and Thailand for hip-and-knee replacements and eye surgery because it is cheaper with little wait time, he wants to offer those services in the Caribbean.

Mr. Lee-Chin will make other Caribbean investments even if they don't fit into the baby boomer theme. For instance, he owns a stake in media firm CVM Communications Group, which owns two television stations in Jamaica, as well as a radio station and two newspapers geared to youth.

Despite diversifying, the core of his assets still stem from the three pillars of the Canadian financial services industry these days - wealth management, banking and insurance.

With wealth management covered by AIC, and banking by NCB, he recently sold his Berkshire-TWC Financial Group Inc. - his mutual fund and securities dealership - to Manulife Financial Corp. for mainly stock to get more exposure to insurance. "I am one of the top 25 largest shareholders in Manulife," he said.

Even though AIC's total assets have plunged to $8.4-billion (Canadian) from a peak of nearly $15-billion because of redemptions, he insisted that his fund company is not up for sale.

The Caribbean foray will also put some eggs in another basket for Mr. Lee-Chin.

He stubbornly clings to his belief that AIC's investment philosophy - buying good businesses and holding them for the long term - is the best way to "create wealth" even though it falls out of favour during periods like the tech bubble in the late 1990s and the current commodities boom.

He refuses to join his fund rivals in providing different investment styles to retain assets. "We are not a marketing company," he sniffed. "As far as I am concerned, it's not the right thing to do."

He has the luxury of being able to stick to his guns. "If I were a public company, I would have been fired for saying we'd rather ride the assets down because of principles," Mr. Lee-Chin said. "Because AIC is privately owned, we can take the volatility of assets."

Michael Lee-Chin

Titles: Chairman of privately owned Portland Holdings Inc., which owns AIC Ltd., and chairman of publicly traded National Commercial Bank Jamaica Ltd.

Born: Port Antonio, Jamaica

Education: Civil engineering degree from McMaster University

Philanthropy: $30-million toward Royal Ontario Museum expansion known as Michael-Lee Chin Crystal

Current reading: The Pirate's Daughter, a novel by Margaret Cezair-Thompson set in Jamaica in the 1940s.

Favourite reggae musician and song: Bob Marley's One Love

Favourite Caribbean vacation spot: St. Barts

Hobbies: Photography and working out (cycling, running, weight-lifting). He has long been a fitness fanatic, and met AIC's CEO and chief investment officer Jonathan Wellum at a gym in 1990.

Mentors: "My business mentor is Warren Buffett. My life's mentor is my mother, Hyacinth Gloria Chen."

Best decision: Borrowed $500,000 in 1983 to buy shares in fund giant Mackenzie Financial Corp. After the stock appreciated to $3.5-million by 1987, he used it as collateral for a loan to buy AIC Ltd. for $200,000.

Worst decision: Investing in a pork-processing business near Barrie, Ont., and losing $1.5-million in 1989. "The moral of that story is to invest in things you understand."

Shirley Won

© 2007 The Globe and Mail. All rights reserved.

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