Caribbean Capital in 2024: Notes from a Closed-Door Roundtable
December 2023 — As 2024 approached, AG&T convened a closed-door roundtable of the capital sources most active in Caribbean real estate. The purpose: to establish a working thesis on where Caribbean debt and equity markets were heading in the year ahead, as the U.S. Federal Reserve completed one of the most aggressive monetary tightening cycles in modern history.
Names of individual participants were withheld under Chatham House rules. Firms in attendance included CBRE Capital Markets Group, Sion Capital, Greystone, Glide Capital, Regions Bank, Crowdstreet, Citigroup, Ocean Bank, GG Capital Group, Driftwood Capital, Harbour Capital Partners, EnCapital, Ranger Alternative Management, Optimum Bank, and Mullen Capital.
The consensus from the room shaped much of AG&T’s capital markets thinking for the year that followed.
Historic Monetary Tightening — and Its Uneven Impact
The Federal Reserve’s 2023 tightening campaign successfully cooled U.S. growth, which slowed from 4.9% in Q3 to 2.1% in Q4. While that deceleration was expected to dampen inflation, the effects on Caribbean capital markets were more nuanced.
Deals were still getting done — but the price of capital had shifted materially.
The New Cost of Caribbean Capital
Typical Caribbean hotel construction loans entering 2024 carried terms unimaginable two years earlier:
- Interest rates: ~11.5%
- Loan-to-cost: 55%
- Full recourse and personal guarantees increasingly standard
- Completion guarantees and performance bonds routinely required
One participant summarized the sponsor requirement bluntly:
“We are looking for every single type of guarantee possible today.”
The message was clear: sponsors without proven Caribbean track records — and without the balance sheet to backstop guarantees — would find 2024 difficult.
The End of Land Lift
Lenders had also become disciplined on how they underwrote land value.
Where developers had historically been able to claim “land lift” — the appreciation of a site during entitlement or design — the roundtable agreed that most lenders were now underwriting only the original cash basis of the land, offering no credit for interim value creation.
For sponsors, this meant equity contributions were materially higher than a comparable deal would have required in 2021 or 2022.
Condo-Hotel Presales as Risk Mitigant
On the hospitality side, condo-hotel structures were increasingly attractive to lenders — but only when supported by meaningful presales.
Presale requirements discussed: 35%–65% of the total project, depending on brand strength, sponsor reputation, and market.
Beyond validating demand, presales reduce total capital requirements and de-risk the equity stack. For lenders, they became one of the few reliable signals that a Caribbean hospitality project had genuine market acceptance before financing was committed.
Syndication and the Bifurcated Capital Stack
As individual lenders reduced exposure per transaction, syndication returned as a dominant structuring tool.
One roundtable participant described a recent transaction: a $200 million Caribbean hospitality construction loanstructured as two instruments — a debt facility for the hotel component and a separate instrument for the condo-hotel component. Each was syndicated across multiple institutions.
This “bifurcated stack” model — dividing risk by asset type, use, and lender appetite — has since become standard practice for the region’s larger transactions.
Mission-Driven Markets: Where Capital Was Still Flowing
Even as broad Caribbean lending slowed, the roundtable identified four markets where capital appetite remained aggressive.
1. Mexico — Nearshoring at Scale
Mexico’s northern industrial corridor was drawing extraordinary capital as multinational manufacturers — Tesla among the most visible — sought proximity to U.S. supply chains. Chinese capital was a significant participant.
“There is 10x the amount of capital for every opportunity in Northern Mexico today.”
2. Guyana — The Fastest-Growing Economy in the World
Guyana’s oil-driven economic boom had created acute hospitality supply shortages. In Georgetown, established assets like the Marriott were achieving ADRs above $450 per night — extraordinary for the market.
The roundtable’s caution: whether those rates would hold once new supply began delivering.
3. Costa Rica — Lifestyle, But Where Are the Shovel-Ready Projects?
Costa Rica’s “blue economy” positioning and lifestyle appeal continued attracting capital interest. The challenge cited: identifying genuinely shovel-ready projects with the entitlements, permits, and sponsor sophistication institutional capital required.
4. Puerto Rico — The Safest, Most Lucrative Caribbean Hospitality Market
Multiple participants pointed to Puerto Rico as the region’s most compelling hospitality investment opportunity:
- Tourism GDP at ~6.75% — dramatically undersupplied relative to Caribbean peers
- Act 74 tourism tax incentives offering up to 40% tax credits
- U.S. jurisdiction, U.S. legal system, U.S. dollar
As one major hotel investor summarized:
“In Puerto Rico, you get a 40% tax credit that you can sell — there is no other place in the Caribbean that gives you that kind of IRR boost.”
Structural Headwinds: Basel III and the Wall of Maturities
Beyond cyclical dynamics, two structural forces were reshaping Caribbean capital availability.
Basel III capital regulations were forcing traditional banks to hold higher reserves — reducing lending capacity across the board. Combined with post-2023 fear from regional U.S. bank failures, the effect was a meaningful contraction in the traditional Caribbean lender base.
Simultaneously, an estimated $1 trillion in U.S. commercial paper was expected to mature within 12–24 months. Refinancing that debt at meaningfully higher rates threatened to strain sponsor balance sheets across the market.
One banker who had recently underwritten his portfolio observed:
“I am not sure how many projects will be able to come to the table with more equity.”
Where Capital Would Fill the Gap
With traditional Caribbean lenders retreating, the roundtable’s consensus was that new sources of capital would fill the gap:
- Family offices — increasingly deploying direct into Caribbean hospitality and infrastructure
- Private debt funds — providing flexible, higher-cost capital
- Fintech and alternative capital platforms — increasingly relevant for structured transactions
- International equity from Latin America and Europe — particularly for luxury hospitality and branded residences
This pattern — traditional lenders retrenching, alternative capital advancing — has since defined much of the Caribbean’s 2024 and 2025 transaction landscape.
AG&T’s Perspective
The 2024 roundtable reflected AG&T’s core conviction: Caribbean capital markets do not react to macro cycles the same way as U.S. or European markets do.
They are smaller. They are less liquid. Traditional lenders are fewer. But the region also offers structural advantages — tax incentives, U.S. jurisdictional benefits in Puerto Rico, high-growth macro stories in markets like Guyana, and increasingly sophisticated institutional partners — that create asymmetric opportunities when the traditional capital environment tightens.
For allocators and developers who understand these dynamics, cycles of contraction are often when the strongest Caribbean opportunities emerge.
Two years on, many of the roundtable’s predictions have played out: private capital has expanded its Caribbean footprint, syndication has become standard practice, Puerto Rico has continued attracting institutional flows, and Guyana’s hospitality market has continued its rapid maturation.
The most sophisticated capital in the region continues to look forward — not to the next Fed decision, but to the next generation of Caribbean projects.
This piece was originally published on LinkedIn in December 2023. It has been updated for AG&T’s Insights library and reflects a moment of institutional consensus that has continued to shape Caribbean capital markets in the years since.
AG&T is a Caribbean real estate capital advisor founded in 1998. Principal-led, AG&T has been involved in over 55 development projects across Puerto Rico, Sint Maarten, Costa Rica, the Dominican Republic, and other Caribbean markets — connecting institutional capital with regional opportunity. Contact us to discuss Caribbean capital markets, hospitality transactions, and development financing.