Puerto Rico’s tax incentives package offers hotel developers a competitive advantage over other destinations. The “Tourism Development Act of Puerto Rico” – Act No. 74 of 2010 depicts the parameters of such benefits. The benefits under this law will remain valid for a period of 10 years from the starting date of the eligible tourism-related project, and the business operation will be entitled to a 10 year extension.

“Tourism Development Act of Puerto Rico” – Act No. 74 of 2010 facilitates the establishment of tourism projects on the island. Following are details of requirements, eligibility and benefits under this Act.

To request benefits under this act, the business must engage in tourism-related activities using:

New facilities Existing facilities that have not been in use for three or more years Existing facilities where substantial renovations or expansion will take place The following business activities qualify as tourism-related activities:

Ownership or administration of:

Hotels, condo-hotels, timeshares/vacation clubs, hostels, guesthouses, excluding the operation of casinos
Theme parks, golf courses, marinas for tourism purposes, port facilities in areas that promote tourism activities Natural Resources as a source of entertainment value

Other entertainment or recreational tourism-related facilities
A business operation dedicated to renting or leasing to an exempt business dedicated to tourism-related activitiesBenefits under this law will remain valid for a period of 10 years from the starting date of the eligible tourism-related project, and the business operation will be entitled to a 10-year extension:

Tax credit of 10% of the total project cost, or 50% of cash from investors

(whichever is lowest)
100% exemption on municipal construction excise tax
100% exemption on taxes on imported goods and sales tax
100% exemption on municipal licenses
90% exemption on income tax
90% exemption on property tax

Attracting capital investment for ambitious tourism projects, particularly in highly competitive markets, requires appropriate economic incentives. This Act, known as the “Tourism Incentives for the Economic Development of Municipalities Act” – Act No. 118 of 2010 shall be a key tool in the economic development of tourism in Puerto Rico, with an emphasis on developing tourism projects in the municipalities that are most in need and in places that offer new opportunities to develop economic activity. The Act intends to facilitate the development of world-class resorts in strategic locations.

The main criteria for eligibility under this act include:

Being a world-class hotel with at least a 4-star rating
Planning for diverse commercial and recreational establishments
Other tourist attractions and facilities typical of 4-star hotels, including casinos
The project must be developed exclusively with private capital
This act will grant a rebate on net income tax payment rates from tourist facilities gambling operations according to the following scale:

Investment of $500 MM – fixed tax rate of 25%
Investment of $750 MM – fixed tax rate of 15%
Investment of $1.0 B – fixed tax rate of 10%
Investment of $1.25 B – fixed tax rate of 8%
Contact us to learn all about hospitality and hotel development incentives.

5 minutes from San Juan International Airport and
major hospitals

6.5 acre site with additional 25 acre natural reserve

129 Apartments: Studio Suites, 1 and 2 Bedroom Suites

Great revenue potential

Lucrative Tax Benefits

Development and management team in place

Seeking JV partner

BY ANDREA LÓPEZ CRUZADO AT MANSION GLOBAL

With more storms forecast for Puerto Rico’s tumultuous economy, one spot on the island is still sunny. Dorado has seen a 15% increase in the median asking price of its properties from 2013 through February 2016.

In fact, this luxury destination on the northern coast of the U.S. commonwealth is the only city in Puerto Rico (of the island’s 13 largest) where asking prices have increased in the last three years, according to an analysis by Point2 Homes, a real estate search portal.

Point2 Homes analyzed price activity in cities with a population of over 13,000, including San Juan, Carolina, Ponce and Fajardo. In all but Dorado, prices went down from 2013 through 2016. Ponce suffered the biggest dip, at 35%; Guaynabo, another northern location popular with high-end buyers, saw the smallest drop, at 3%.

Puerto Rico is grappling with a 10-year recession and $70 billion in debt that is crippling growth. According to the Pew Hispanic Center, more Puerto Ricans are moving to the U.S. mainland than in any period since the Great Migration after World War II.

Still, the luxury real estate market continues to flourish.

Last year, Christie’s International Real Estate identified Puerto Rico as one of seven key real estate markets for “investment, exclusivity and getaways.” Sales of $1 million-plus properties— which represent 10% of the market—grew by 105% from 2013 to 2014, according to their 2015 “Luxury Defined” report.

The company attributes Puerto Rico’s flourishing prime property market to its status as a tax haven. Four years ago, significant property and corporate income tax exemptions were enacted to attract new residents.

“Residence in Puerto Rico means a shield from most federal income taxes, and prominent investors have been catching on rapidly since the law was passed in 2012,” the report noted.

For Leticia Brunet González of Trillion Realty Group, a San Juan-based Christie’s affiliate, Dorado owes its fortunes to the lifestyle it offers: beach, golf and tennis facilities, restaurants and spas, as well as security.“Those buying there are buying a lifestyle,” she said.

An early believer in Dorado was U.S. businessman and conservationist Laurance Rockefeller, who in the late 1950s built a hotel here that quickly became popular with A-listers including Joe DiMaggio, Ava Gardner, Gerald Ford and John F. Kennedy. Today, a Ritz-Carlton Reserve sits on the former Rockefeller estate. The hotel includes three 18-hole golf courses and the historic Rockefeller Nature Trail, an open-air sanctuary.

According to Brunet González, Dorado attracts a mix of families and business people. Foreign buyers come mostly from the U.S. and include several tech entrepreneurs said to be taking advantage of the affordable luxury prices (and tax incentives). While asking prices in Dorado went up in the last three years, they are still 13% lower than in 2010, according to Point2 Homes’ data. Luxury properties are available for as little as $2 million.

New York times, March 16, 2016.

By ROXANA POPESCU

MARKET OVERVIEW

Real estate agents in Puerto Rico said the island’s economic crisis has led people to move away, creating bargains for buyers willing to make compromises on location. For prime properties near the water, however, where demand is enhanced by tax incentives created for wealthy foreign buyers, prices are stable or even rising.

The fact that many professionals are leaving the island looking for better jobs in the U.S. and some of the local wealthiest people have been impacted negatively by losses in local investments in bonds creates some interesting opportunities to purchase luxury properties.

Prices across the island have fallen by as much as 50 percent for the nonluxury market, as well as for high-end properties that are not on the beach.

“In actuality, it is the best time to buy here”, quotes a local broker.

Beachfront luxury homes have been spared from the fall, agents said. The supply of top-quality properties is limited, but demand is strong because of the tax incentives initiated in 2012. A law named Act 22, designed to entice investors and high-net-worth individuals to move to Puerto Rico, with incentives including tax exemptions, has resulted in almost 600 people moving to the island since 2012, said José Joaquín Villamil, an economist and chairman and chief executive of Estudios Técnicos, an economic consulting firm in San Juan, citing government figures.

“The real estate market is in shock,” Mr. Villamil said. “Obviously, one would expect it. What’s kept the high end of the market going is the Law 22.”

Prices of luxury homes near the water have remained stable, or in some cases increased, since 2012. Prices per square foot range from $400 to $600, and with few exceptions, properties tend to close at about 15 percent below asking, she said.

WHO BUYS IN PUERTO RICO

Most luxury home buyers come from the United States mainland, agents said.

BUYING BASICS

United States citizens can buy property without restriction in Puerto Rico, which is a United States commonwealth. Transactions are handled by notaries, who are also licensed lawyers in Puerto Rico. That notary is typically chosen by the buyer, and the seller pays a notarial tariff.

Puerto Rico’s closing fees, including a stamp duty and the notarial tariff, are on a sliding scale. As an example, for a $1 million home costs would total around $10,600. Of that, the buyer would pay around $6,000.

Reuters – Reporting by Hilary Russ; Editing by David Gregorio 

Trump International Golf Course in Puerto Rico was sold to OHorizons Global LLC for $2 million cash and the assumption of contracts, bankruptcy filings showed.

Officially called the Coco Beach Golf & Country Club S.E., the Rio Grande property is one of 17 Trump-branded golf resorts managed by The Trump Organization worldwide.

But Trump himself is neither the owner nor developer of the club, Eric Trump, Donald Trump’s son and executive vice president of The Trump Organization, said in a statement.

The golf club’s developer and owner, construction company Empresas Diaz, licensed the Trump name for the club and has been in default for many months on its obligations to Trump, due to its “financial constraints and a difficult business climate in Puerto Rico,” he said.

The Puerto Rico golf club’s bankruptcy filing listed $9.2 million of assets, including two 18-hole golf courses, a club house, and reserve funds, and $78 million of liabilities.

The Puerto Rico Tourist, Educational, Medical and Environmental Control Facilities Financing Authority issued $26.4 million of tourism revenue bonds in 2011 on behalf of the club, according to securities filings.

For information about other golf courses and residential projects for sale in the Caribbean Adam Greenfader.