Puerto Rico Elects to be # 51?

The current territorial status received 1.3% (6,820) votes, independence 1.5% (7,773) votes, and 97% (502,375) votes for Statehood, according to the State Election Commission.

vote art

This is the first time in Puerto Rico history that a Statehood referendum receives such an overwhelming majority of voters. 

 “The votes are what dictate what the steps to follow will be; in this case, a strong majority determined that we would reject the colony and favor statehood,” governor Ricardo Rosello said.

This process of petitioning Statehood will be effected under the “Tennessee Plan” whereby the governor will designate seven members to go to Congress and request Puerto Rico to become the 51st State.  

According to Resident Commissioner Jennifer González, the June 11, 2017 turn-out of 23% of registered voters (516,968) is in line with several states that were the last to achieved admission. 

  • Arizona – In 1911, a participation of 15,489 voters of a population of 217,000, for a 7% electoral participation.
  • Hawaii  – In 1940, 35% electoral participation.
  • Alaska – In 1946,  a participation of 16,375 voters of a population of 75,000, for a 21% electoral participation.  

 

 

 

 

Puerto Rico Has Higher Overall ADR and Occupancy than the Caribbean Market.

The Caribbean has seen five consecutive years of growth in occupancy, ADR, and RevPAR. The U.S. remains the largest feeder market.

A-Boutique hotel-01

 

It appears that even with the Puerto Rican debt crisis well underway, tourism has not been negatively impacted. This no doubt results from the economic strength of the mainland and its status as the primary source of Puerto Rico’s visitors.

The next charts display historical data for Puerto Rico and the overall Caribbean hotel market from 2010 to 2015, the most recent annual data available. General trends in occupancy, ADR, and RevPAR can be observed from these comparisons.

The past recession impacted the Caribbean and Puerto Rico to a significant degree. Declines were visible through 2010, but the market has seen strong gains since.

According to STR and CBRE Report, Puerto Rico followed this trend, with ADR growth fueling RevPAR gains in 2013, negating a slight decline in occupancy.

Microsoft Word - occupancy PR.doc
Puerto Rico Vs. Caribbean RevPAR Trends

 

Conversely, Puerto Rico’s RevPAR gain in 2014 was driven by occupancy. It is important to note that Puerto Rico generally has higher overall ADR and occupancy than the Caribbean market average.

 

PUERTO RICO PUSHING FOR HANDS OFF REDEVELOPMENT

As Puerto Rico continues to work around the $70B public debt crisis that threatens its economy, the commonwealth’s governor, Ricardo Rossello Nevares, and another key economic development official are pushing for private development that could help tip the economic scales. Gov. Ricardo Rossello said the island nation is pushing public-private partnerships to help various redevelopments in the country that will ultimately lead to job creation. With the economic crisis, Puerto Rico’s unemployment rate topped 12% as of January.

“Open for business means we are going to foster economic growth and private investment,” said Manuel Laboy, secretary of economic development and commerce of Puerto Rico, during a Bisnow event focused on Latin American investment and development last week in Miami. “It means that the government needs to be out of the way.” Laboy said the government has targeted to grow tourism from being 7% of the total economy to 15% within five years. “That means that we’ll need more hotels. That means that we’ll need more facilities,” he said.

Neighborhood

Coco Beach Residences

Jay Smith, president of nFusion Consultancy, already is a believer in the Puerto Rico recovery story. His firm specializes in “broken” projects for a value-add play. “Those opportunities in the United States are virtually gone,” Smith said. “They are very thin.” The firm invested in Coco Beach, a 1000-acre oceanfront project that holds a 36-hole golf course that hosts the PGA tour. Smith told Bisnow in a previous interview that nFusion is marketing a development plan for a hotel and up to 1,000 homes as well as a small town center for a mixed-use community. “Ultimately, we’ll sell it or partner with a developer, most likely from the United States,” he said.

Because of the bond crisis, Smith said real estate values have bottomed out and are ripe for investing. That is helped by Puerto Rico having a seamless regulatory environment, much of which is run by U.S. government entities. “It’s a very similar and, seems to me, much less risky environment,” he said.

 

Puerto Rico China Investment Summit

Over the past decade, China has become an increasingly integral source of aid and foreign direct investment (FDI) for Latin America and the Caribbean. Rising levels of FDI and trade over time reflect deepening relationships between China and the Caribbean. 

 

On March 1 to March 13, 2017, a large group of business owners and senior executives from China and top regional and local stakeholders from Puerto Rico were brought together in San Juan, Puerto Rico. “It was an honor to present two of the most exciting resort projects in Puerto Rico; Royal Isabela Resort and Coco Beach Golf and Residences”, noted Adam Greenfader.

During the China-Puerto Rico Investment Forum held at the Convention Center, investors had questions not only about business opportunities but also about costs, incentives and the opportunity of being able to launch their products in the U.S. market. At a time when federal funds from Washington, D.C., are being limited and the island has been cut off from the markets, Puerto Rico’s economic development will depend heavily on its ability to attract foreign investment, Putnam Bridge CEO Nicholas Prouty explained while noting Puerto Rico’s numerous benefits as a U.S. jurisdiction.

 

Photos Below: Adam Greenfader with Governor Ricardo Rosselló, Li, and Luguang Yang Carter

Puerto Rico Opens For Business

 

 

 

 

 

The Puerto Rico Builders Association and top Puerto Rican government officials present, “Puerto Rico is Open For Business” at recent ULI event in Miami. Pictured from left to right – Adam Greenfader– Principal AG &T, Ricardo Alvarez – President of Álvarez-Díaz & Villalón| President of the ACPR, Manuel Laboy – Secretary of the Puerto Rico Department of Economic Development and Commerce Denisse Flores – Director of BDO Puerto Rico, Daniel Acosta – Daniel Acosta: Senior Vice PresidentMcCormack, Baron, Salazar Inc., José Izquierdo – Executive Director of the Puerto Rico Tourism Company. #PuertoRico#UrbanLand Institute#PuertoRicoOpenForBusiness

In an afternoon lunch session almost half of the audience had either been to PR or was doing business on the island. The message from the speakers was clear. The time is now. After almost a decade of crisis, consensus is clear, “the bottom has been hit”, and now the island is in a position to grow due to three key elements:

  1. The approval of the US Congress’ Fiscal Committee
  2. Ricardo Rosello’s local government’s clear and present focus on growing the economy
  3. Some very lucrative tax incentives like law 20/22  that has drawn over 1,000 investors

 

 

 

Puerto Rico Tourism Optimistic in 2017

SAN JUAN – Citing a 96% reduction in the number of new Zika cases since the peak in October, the Puerto Rico Tourism Co. (PRTC) is optimistic heading into 2017. The PRTC launched an educational outreach program in February to dissipate “the fears and communicate the real facts” about Zika, its newest press release reads. Collaborating with the Puerto Rico Hotel & Tourism Association (PRHTA) as well as Meet Puerto Rico, the PRTC presented it “Facts not Fear,” campaign. “Communicating the reality that Zika was not growing nearly as rapidly as the CDC had projected, the PRTC worked to change the Zika conversation, and emphasize the reality that reported cases are a fraction of what was projected. Cases are now at about 1 percent of Puerto Rico’s 3.5 million population versus forecasts that 25% of Puerto Ricans would eventually have the virus by the end of the year,” according to the Tourism Co.’s statement. “The dramatic decrease in the number of Zika cases in Puerto Rico is a testament to our integrated aggressive program to inform and disseminate the facts and allay the fears. The PRTC worked incredibly hard with the industry and health officials to communicate accurate and precise messages about Zika to the public,” Ingrid Rivera Rocafort, executive director of the PRTC, says in the published statement. “Ultimately, our team has been successful in not only educating our residents but protecting our visitors and our critical tourism industry.” Tourism annually contributes nearly $4 billion to Puerto Rico’s economy and was the first industry to come out of the island’s five-year recession, the public corporation explains in its release. “Since the start of Zika, total hotel registrations from Jan.-Sept. in 2016 are 1.6% above 2015 and 10 million passengers are expected to be welcomed by Puerto Rico airports by the end of 2016,” it reads.

Broadway star Chita Rivera, TV host Maía Celeste, baseball stars Carlos Correa and Iván Rodríguez, and Olympic gold medalist Mónica Puig also helped spread the word about how travelers can experience Puerto Rico worry-free. Medical influencers as well delivered the PRTC’s message. These included the late epidemiologist Dr. D.A. Henderson, scholar at the UPMC Center for Health Security in Baltimore, Maryland; Dr. Jason James, chief of obstetrics and gynecology at Baptist Hospital in Miami; and Dr. Joseph Rosado, a primary care and emergency care physician in Orange City, FL. In addition, the World Health Organization declared in November that the Zika virus was no longer considered an international public health emergency, the PRTC adds in its release. “Our collaborative efforts to date in 2016 have been effective in allaying fears, controlling Zika and the data backs it up,” notes Clarisa Jimenez, president and CEO of the PRHTA, assures in the written statement. “It is imperative that we keep our foot on the gas pedal and aggressively continue Tourism Co.:

A Fiscal Plan Towards Economic Recovery

Old San Juan

 

On October 14, the Commonwealth of Puerto Rico submitted its Fiscal plan. Here is my summary: 

Only with a change in federal policy and a change in the trajectory of the island’s economy toward real growth, will there be money for  debt service – while not jeopardizing the Commonwealth’s ability to provide essential services. 

 

  • U..S. citizens living in Puerto Rico must receive the same level of healthcare funding as citizens living in the 50 statesThe Commonwealth Can Achieve Efficiency Gains by Consolidating Overlapping Agencies and by Further Centralizing Procurement to Capture Cost Savings
  • Complete large-scale strategic projects to improve accesses and competitiveness including the Northwest Corridor (PR-22 highway from Hatillo to Aguadilla), the redevelopment of Roosevelts Roads, and the Caguas Commuter Rail
  • Position Puerto Rico as one of the premiere travel destinations of the world for local, domestic and foreign travelers by supporting the financing of 9 hotel construction projects currently on hold
  • Attract economic development, private investment, and tourism by expanding the Port of the Americas value added zone, improving the Aguadilla airport, and expanding the Panamericano docks to attract Quantum-like mega cruise ships.

 

 

Click here to see the Commonwealth of Puerto Rico Fiscal Plan : https://issuu.com/adamgreenfader/docs/fiscal_plan_v_final

Follow the Money: Paulson Compares Puerto Rico Today to Miami in the 1980s

Hedge fund billionaire John Paulson has been buying a lot of sand lately — specifically, Puerto Rican sand. Despite Puerto Rico’s massive debt crisis, Paulson sees big profits ahead. He has plowed “quite a bit” — an estimated $1.5 billion — of his personal wealth into buying hotels, a resort and office buildings on the island. Paulson compares Puerto Rico today to Miami in the 1980s.”It’s similar to that period in Miami’s history,” Paulson said Thursday at the Puerto Rico Investment Summit. “There was a lot of real estate on the beach, lots of abandoned buildings and vacant lots. That was definitely the best time to buy [in Miami].”

Below are some selected articles: 

http://caribbeanbusiness.com/paulson-buys-harbour-lakes-in-palmas-del-mar/

Paulson & Co. Inc., a New York-based investment firm, has acquired Harbour Lakes in the Palmas del Mar resort community located in the municipality of Humacao, Puerto Rico, the firm announced Thursday. The acquisition consists of 149 condominium units offered for sale, from 1,637 square feet (sq. ft.) to 2,045 sq. ft., 3 bedrooms, 2.5 bathrooms.

http://money.cnn.com/2016/02/12/investing/puerto-rico-john-paulson/

Despite Puerto Rico’s massive debt crisis, Paulson sees big profits ahead. He has plowed “quite a bit” — an estimated $1.5 billion — of his personal wealth into buying hotels, a resort and office buildings on the island. Paulson compares Puerto Rico today to Miami in the 1980s. “It’s similar to that period in Miami’s history,” Paulson said Thursday at the Puerto Rico Investment Summit. “There was a lot of real estate on the beach, lots of abandoned buildings and vacant lots. That was definitely the best time to buy [in Miami].” 

The hedge-fund manager said he’s still considering moving to the Caribbean island from New York after flirting with the idea in 2013. Beautiful weather, real-estate opportunities and tax breaks have resulted in Paulson buying luxury hotels and a 326,000 square-foot (30,286 square-meter) office building in San Juan’s financial district, he said during the 2016 Puerto Rico Investment Summit in San Juan on Thursday. He plans to expand his St. Regis Bahia Beach Resort and develop new condominiums in the Condado neighborhood of San Juan. He already owns a home and an apartment on the island.

http://www.bloomberg.com/news/articles/2016-02-11/john-paulson-says-he-s-still-considering-move-to-puerto-rico-ikiv6c1w

“I came here because I think they’ve hit bottom,” said Tennenbaum, 80, who manages assets of over $6 billion and moved to the island two months ago on Paulson’s urging. “In a democracy, it takes a crisis for change to take place.”Tennenbaum plans to form a corporation under Puerto Rico’s Act 20, which gives businesses that move to the island a 4 percent corporate tax rate and exemptions on dividends and property taxes. He also plans to create a merchant bank. On Thursday, the island received a lift from one of its biggest cheerleaders, John A. Paulson, the billionaire hedge fund manager, who is investing $20 million for the San Juan Beach Hotel.

http://www.nytimes.com/2014/09/07/realestate/puerto-rico-luring-buyers-with-tax-breaks.html

And it is true that Puerto Rico is a bargain. At the St. Regis Bahia Beach, for example, arguably some of the most expensive real estate in Puerto Rico, condos with oceanfront views are priced at around $600 a square foot; in Miami, a similar unit would cost around $2,000 a square foot.Over the last 10 months, the St. Regis Bahia Beach sold nine condos, priced at $800,000 to $1.6 million, all to American buyers, according to Paulson & Company. The resort is also constructing six oceanfront villas, priced at $10 million to $12 million; two have already sold.

http://www.nytimes.com/2015/07/24/business/dealbook/john-paulsons-hedge-fund-to-buy-another-puerto-rico-hotel.html?_r=0

Paulson & Company, Mr. Paulson’s $20 billion hedge fund, has agreed to renovate the San Juan Beach Hotel and turn it into an “ultraluxury boutique hotel” over the next few months, the Puerto Rico Department of Commerce and Economic Development said. Mr. Paulson has been buying real estate on the island for years. He is building a home there and has acquired some of the island’s most exclusive hotels, including the Condado Vanderbilt Hotel, La Concha Renaissance Hotel and Tower, and the St. Regis Bahia Beach Resort.

http://www.wsj.com/articles/some-investors-bet-on-puerto-rico-hotels-1438092464

Some Investors Bet on Puerto Rico Hotels. Fund manager John Paulson boosts his stakes; Blackstone cuts back. Puerto Rico’s worsening debt crisis only seems to whet the appetite of a small but devoted group of distressed investors.

http://www.bloomberg.com/news/articles/2014-06-26/paulson-s-puerto-rico-paradise-lures-rich-fleeing-taxes

Paulson is betting that millionaires will come in droves. In his presentation, in which he forecast that Puerto Rico would become “the Singapore of the Caribbean,” he said he plans to develop residential and office properties to go beyond the current high-end offerings. Since the first homes were built in 2007 by BBP Partners (BBP) – a joint venture between two of Puerto Rico’s leading real estate developers, Interlink Group and Muñoz Holdings – more than $125 million worth of residences have been sold at the resort and the $150 million St. Regis Bahia Beach Resort opened in 2010. Paulson is acquiring a majority interest in Bahia Beach through a comprehensive recapitalization. The firm has roughly $18 billion under management and has offices in New York, London and Hong Kong.

http://www.reuters.com/article/usa-puertorico-paulson-idUSL2N0QL20Q20140815

U.S. hedge fund Paulson & Co is upping its bet in Puerto Rico real estate with the purchase of an office building in San Juan’s financial district from American International Group Inc .The 326,000 square-foot building is the latest real estate purchase for the $23 billion hedge fund on the Caribbean island where Paulson & Co is betting on an economic turnaround. He owns 8.6% of Banco Popular, the island’s largest bank.

$100 Million in Foreign Investment In Puerto Rico Stimulated By EB-5 Program

The Four Seasons EB-5 project in Cayo Largo raises over $100 million dollars in EB-5 financing principally from China & Brazil.

The Commonwealth of Puerto Rico Regional Center Corporation received its United States Citizenship and Immigration Services (USCIS) designation on December 22, 2014. As of August 3, 2015, USCIS had approved 7 of these Regional Centers are based in Puerto Rico:

  1. Caribbean USA Economic Development Regional Center
  2. Iconic Caribbean EB-5, LLC
  3. Omega Puerto Rico Regional Center, LLC
  4. Puerto Rico Provident Regional Center, LLC
  5. Reside in America Puerto Rico, LLC
  6. Caribbean Regional Center, LLC
  7. Commonwealth of Puerto Rico Regional Center Corp

The EB 5 program allows foreign investors to “buy” residency in the United States and ultimately apply for full U.S. citizenship. The investment requirement is typically US $1,000,000 per foreign investor. Under the USCIS rules, the Economic Development Administration of the Commonwealth of Puerto Rico has been designated a high unemployment area. This means that a foreign investor interested in making a qualifying investment in Puerto Rico may apply to have Puerto Rico as the geographical area thus lower the amount of capital required to $500,000.

It is also worth noting that an immigrant investor that becomes a United States citizen upon naturalization in Puerto Rico after residing in Puerto Rico for the required time period will be treated as nonresident aliens for United States estate and gift tax purposes. Consequently, such investor will enjoy the Puerto Rico income tax exemptions granted by Act. No. 22 on his or her investment income; and will not be subject to United States estate or gift tax, unless he invests in property located in the United States.

This combination of EB-5 plus Act 20/22 Tax Incentives is starting to see some significant interest particularly from Chinese investors.

Contact us to learn more.

Puerto Rico offers the most robust development tax incentives in all Caribbean

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.