Adam Greenfader, Managing partner of AG&T (7 minute video) speaks on new opportunities in Puerto Rico. Learning this video about the the island’s history and how you can learn from the past to generate real value and long term economic growth. The video includes new information about tax incentives, the tourism tax incentive, Act 20/22, and other tax credits for real estate development. Contact us for more information and to learn about Why Puerto Rico Now
70 years ago, when the Puerto Rico Builders Association was formed, the United States was on the brink of entering the World War II. December 7, 1941, would be considered a day that would “live in infamy”. Thousands of Puerto Ricans as American citizens fought in the War and would return home as victors to an island on the precipice of great economic growth. Thanks in large part to Operation Bootstrap, o “Manos a La Obra”, the Puerto Rico Builder’s Association has played a vital role in shaping the island’s long term economic development. The Puerto Rico Builders Association (formerly known as the Homebuilders Association) was formed in a critical period of time when the island was undergoing a massive transformation from an agricultural society into a leading manufacturing hub.
Puerto Rico would see historic growth for more than three decades and the Puerto Rico Builders Association would play a leading role in shaping the island’s zoning regulations, environmental protections, financing, and building codes (often referred to as a Miami’s building code on steroids). Puerto Rico benefited greatly from these concerted efforts by the Puerto Rico Builder Association with one of the highest homeownership rates in the Western world at 68%. Puerto Rico is also the second largest public housing jurisdiction in the United States second only to New York City.
In 2015, The Puerto Rico Builders Association, under the leadership of then PR Builders president, Ricardo Alvarez Diaz Villalon joined forces with the Urban Land Institute Southeast Florida/Caribbean District Council. ULI founded around the same time as the PR Builders Association, is one of the oldest and largest networks of real estate and land use experts in the world. ULI’s mission is to shape the future of the building industry and create thriving and sustainable communities around the globe. Shortly thereafter, Puerto Rico was devastated with two back-to-back category five hurricanes.
Hurricanes Irma and Maria destroyed most of the island’s electrical infrastructure and informal housing stock at a cost estimated over 100 billion dollars. ULI together with the Puerto Rico Builders Association created a task force to study the effects of the storms and how to build back better. Under then ULI president Greg West, the Puerto Rico Builders Association and ULI convened national panel of experts and created a specific action plan for the municipality of Toa Baja.
The Puerto Rico Builders Association and ULI have since held multiple meetings and conference throughout the years in both Puerto Rico and Miami to explore new areas of synergy and improvements to the island’s build environment. ULI’s current president, Scott McLaren was recently quoted, “we strongly value our long standing partnership with your organization and admire the leaders who go above and beyond, especially when faced with such tremendous obstacles.”
Come celebrate 70 with the Puerto Rico Builders Association Puerto Rico on October 27-29 in San Juan. https://constructorespr.com/convencion-2021/
It had been almost 12 months since my last visit to Puerto Rico. Thanks to the COVID lockdown expectations were low. The last time I visited, more than 2 years after hurricanes Irma and Maria, the devastation was still overwhelming. Streets were lined with garbage, electrical lines in disrepair, and thousands of homes had roofs covered in blue tarps. This combined with more than ten years of economic recession made has made Puerto Rico extremely pessimistic. As I landed in Luis Munoz Marin Airport, I was thinking, “Would the ensuing earthquakes and COVID pandemic ravage the economy even more…”
I travelled the entire island from coast to coast – 100 x 35 miles, in a two week period. I drove from San Juan to Aguadilla, Mayaguez, Ponce, Humacao, Fajardo, and Ocean Park. The roads were in good condition, the street lights working, and many buildings newly painted. Notwithstanding the COVID crisis, the economy was bustling. Most palpable was the positive attitude and feeling of the people. I spoke with many colleagues and friends and was told that much of the hurricane insurance had circulated through the economy. The 8-12 billion in Federal relief from CDBG-DR is expected by early 2021. Homemade signs seeking construction workers can be seen throughout the island that read, “Se Solicita Carpinteros y Albanilles”.
While the tourists were clearly absent ‘en mass’, a handful of new boutique hotels, especially in San Juan, have been recently delivered between 2019-2020. Much of this new hotel activity is due in part to the Tourism Tax Incentive. The tax incentive provides up to 40% of the total project’s cost back to sponsors…incredibly, some of it can be used for funding as part of the initial capital stack. While this is not common anywhere in the world, Puerto Rico’s is not a typical Caribbean destination. The total economic activity (GDP) in Puerto Rico is less than 7% for all tourism related activities. This includes, hotels, trades, conventions, excursions, etc.. This is an astonishing low number for an island that is surrounded by warm water, beautiful beaches, and lush landscapes. Read more about why Puerto Rico is like this at: https://agandt.com/contact-why-puerto-rico-now/
These tax incentives combined with a team of dedicated individuals in the Destination Marketing Organization (DMO) – Discover Puerto Rico and other Public Private Partnerships (Invest Puerto Rico) is helping to make Puerto Rico a thriving tourism destination. The island currently boats some of the top hotels in the Caribbean with ADR’s over $1,500 per night. Much of this demand is generated by the Act 20/22 (now Act 60). For the last five years, hundreds of high net worth US individuals have moved to Puerto Rico to take advantage of zero Federal capital gains. Act 60 has resulted in over 500 families and hundreds of new business moving to Puerto Rico. There seems to be no end in sight for these new Americans living in Puerto Rico.
This week Puerto Rico also inaugurated for the first time in over 20 years, the same political party. The PNP or US Statehood party won the election with a mandate for political stability, reduced corruption, and closer ties with the United States. While the island’s economic crisis is far from over, the COVID pandemic has put Puerto Rico back in the spotlight for its manufacturing proficiency. The island of Puerto Rico is one of the world’s leading pharmaceutical destinations – producing more than the top 5 US States combined. As thousands of jobs come back to the USA-Puerto Rico, invariably many will end up where the cost of labor is 15% less expensive, and there is a 60 year culture of robust manufacturing.
While we at AG&T do not have the proverbial ‘crystal ball’ on the island’s long term economic growth, things feel like they are on the right track and we will have more clarity with the resolution to the island’s bond crisis, the electrical authority privatization (AEE), and the completion of the responsibilities of The Fiscal Oversight and Managemnt Board for Puerto Rico.
The panelists :
The ULI Webinar has an incredible array of information crammed into 90 minutes and it gives a great snapshot for the many initiatives being introduced and planned to help the Puerto Rican economy and create more quality jobs. If I had to some it up in three words, Mo is back. Mo of course being momentum.
Each of the speakers brought a different perspective. Congresswoman Gonzalez Colon noted her primary mission is the reconstruction of the Island and to shephard the many supporting bills recently introduced in the US Congress. Former Governor Luis Fortuno brought an informed Wash DC think tank perspective, Adam Greenfader is one of Puerto Rico´s most passionate advocates, Andy Carlson of JLL (Jones Lang LaSalle) brings experienced commercial insights from the world´s second largest public brokerage firm, Dr Deusch stated his case for the reasons he brought his Swiss/German manufacturing business to Puerto Rico because of a need for precision and reliability, while Noel Zamot has a finger on the ethical pulse of developing new business in Puerto Rico.
The conversations were upbeat and positive. For instance, Congresswoman Colon made a presentation on MMEDS which was introduced last month to Congress under the bill H.R. 7527. This bill provides tax incentives and tax credits for companies creating manufacturing plants and jobs in economically distressed areas in the US and its territories. The criteria for distressed is even stricter than the recent Opportunity Zone legislation passed in late 2017. When the Congresswoman showed the MMEDS qualifying maps there were smaller areas in very non desirable locations in the US whereas Puerto Rico literally had a much larger proportional area in some desirable locations. And she stated very clearly that MMEDS is one of the very few legislative items that is drawing bi-partisan support from both sides of the aisle.
The entire panel then weighed in on the competitive advantages that Puerto Rico has when competing with the mainland U.S. including much lower labor costs by as much as 60% lower in some cases, an experienced manufacturing labor force going back 100 years, the University of Puerto Rico at Mayaguez which is a top 10% engineering school for the entire U.S. and which is very much geared to provide the engineering and chemistry talent to support Puerto Rico´s manufacturing base. That even today five of the top ten selling drugs internationally are produced in Puerto Rico and 12 of the top 20 pharmaceutical companies have plants in Puerto Rico. Luis Fortuno noted that Puerto Rico had more than $40 billion USD in pharmaceutical exports in 2019 but has the capacity to increase this substantially. The panel noted that some closed down plants are almost in turnkey conditions should manufacturers wish to return or expand capacity. It would not take much. Maybe a recession of the Jones Act, or at least an exemption for an extended period of time, might be the necessary catalyst. There are some interesting new developments on this front as was evidenced last week by Hawaii noting that 85% of their informed populace is all for rescinding the Jones Act as it costs that Island 1.2 billion USD in additional transportation and cost of goods fees.
Progress is being made on seeking some type of exemption under the taxing provisions of GILTI as it adds a 10%+ tax on profits for CFCs (controlled foreign corporations) which unfortunately applies to the US territories since the do not fall under the IRC (Internal Revenue Code). On May 1, 2020, Congresswoman Stacey E. Plasket, representing the US Virgin Islands, filed Bill HR 6648 – the Territorial Economic Recovery Act, that if becomes law, it will exclude our territories from much or all of the GILTI taxation, under certain provisions.
On April 3, 2020, Congresswoman Jennifer González, resident Commissioner for Puerto Rico, introduced Bill HR 6643, the Securing National Supply Chain Act of 2020, to provide various tax credits to Economically Distressed Zones, including a tax credit on the amount of wages paid by an employer to employees in such a zone. The proposal has some overlap with HR 7527 noted above.
President Trump’s Special Representative for Puerto Rico’s Disaster Recovery, Rear Admiral Peter Brown, lead two delegations to Puerto Rico in August 2020, the last visit being last week. I am told the trip was very successful as a big priority was to visit and understand the many advantages of pharmaceutical manufacturing in Puerto Rico. AG&T is committed to bringing our network top information and access to our industry’s leaders.
Speakers | Nicholas Hecker, Executive Managing Director Sculptor Capital Management | Moderator: Adam Greenfader, Chair ULI Caribbean Roundtable, AG&T.
Francisco Luis, Partner at Kevane Grant Thornton and Adam Greenfader, Caribbean Chair / AG&T discuss “ Bringing back manufacturing to USA – Puerto Rico. “
In this in-depth conversation about Tax Policy and Incentives, Mr. Luis discusses the GILTI and BEAT provisions of the 2017 Tax Code and some of the implications of the House Resolution 6448; otherwise known as ” The Territorial Economic Recovery Act.
Other topics include, ‘Opportunity Zone incentives’ and the ‘Tourism Tax Credit’ as part of the recently passed Act 60.
Francisco Luis has over twenty-nine years’ experience in public accounting, including the “Big Four” and private consulting practice.
He engages in the design and development of tax planning and consulting strategies. This includes tax services in the area of mergers and acquisitions, business reorganizations, partnership transactions, tax incentives and exemptions, individual and corporate tax issues, personal financial matters, and others. Moreover, since the designation of Puerto Rico as an Opportunity Zone, Francisco has been actively participating as guest speaker on several conferences and activities lecturing about this new incentives regime.
His experience includes participation in multiple international and global business transformation engagements, including post-acquisition implementation and executing strategies focused on reducing global effective tax rates, mostly interplaying with the Puerto Rico tax incentives. Francisco has significant experience assisting clients before the Internal Revenue Service and the Puerto Rico Treasury Department, among others. He also possesses extensive tax compliance experience.
The Covid 19 pandemic has brought worldwide tourism to a standstill. In this ULI Caribbean Conversation, we speak with Brad Dean, CEO of Puerto Rico’s Destination Marketing Organization (DMO). Brad shares some insights about what some of the top private and public minds in the industry are thinking, planning, and prepping for travel 2.0.
” I think this down time gives the travel and tourism industry our George Bailey moment. “We have all seen that without travel it’s pretty ugly….there is a lot greater value to travel than most of us ever realized..travel lifts spirits, it connects people, it leads to progress, exclaimed Brad Dean.”[/vc_column_text][/vc_column][/vc_row]
Join Manuel Laboy, Secretary of Economic Development of Puerto Rico and Adam Greenfader, ULI Caribbean Chair as they discuss “ Bringing Back Manufacturing to USA – Puerto Rico. “
In this in-depth conversation, Mr. Laboy discusses the current opportunities in pharmaceutical manufacturing, Puerto Rico’s history in Life Science, inventory, infrastructure, and potential pitfalls. Other topics include, Puerto Rico Tax incentives, HR # 6443, Opportunity Zones, Public Private Partnerships, and the recently enacted regulations allowing foreign cargo to Puerto Rico; “ a game changer”, according to Manuel Laboy.
Manuel A. Laboy Rivera is the Secretary of the Department of Economic Development and Commerce (DEDC) in Puerto Rico and Executive Director of the Puerto Rico Industrial Development Company (PRIDCO) with the mission to attract new investment, promote the creation of new jobs and strengthening of small and medium enterprises. He is also responsible for the formulation and strategic implementation of the Puerto Rico economic development plan, including competitiveness-related reform, infrastructure projects and the innovation of technology agenda. Mr. Laboy is a licensed professional engineer with 19 years of experience in various industries and sectors, including manufacturing, chemical production, life sciences (pharmaceutical, biotechnology and medical devices), construction, public utilities, export services, renewable energy, infrastructure, technology and project management.
Manuel Laboy has a Bachelor’s Degree in Chemical Engineering from the University of Puerto Rico-Mayagüez Campus, a Master’s in Business Administration from the University of Turabo in Puerto Rico. He is also a member of the College of Engineers and Surveyors of Puerto Rico, and holds a Certified Safety Professional certification from the Board of Certified Safety Professionals.
To learn more contact Adam Greenfader Managing Partner of AG&T, a real estate development and advisory services company.
Speakers | Rogerio Basso, IDB Invest | Moderator: Adam Greenfader, Chair ULI Caribbean Roundtable, AG&T.
