As the world struggles to return back to normal from the Covid19 pandemic, environmental concerns continues to loom as an area of great concern for world and the Caribbean region in particular. What strategies have institutional capital, developers, reinsurance companies and owners in the Caribbean pursued to protect their properties from climate-related risks? Do these resilience investments make business sense as a development objective? What has the capital market response been? And how have developers and property owners measured their success?
Speakers:
Jan Raes, ABN AMRO Global Sustainability Advisor
Esteban Biondi, ATM Associate Principal
Koen Waterstudio NL, Co-founder
Adam Greenfader, AG&T, Managing Partner
Topics to Include:
1. What is the capital doing about investing in resilient projects?
2. How are developers integrating resiliency practices into their projects?
3. The $ of Resiliency – Beyond the ULI Heitman Report
4. Aquatic Architecture: is it just a matter of Time?
INDIGO BAY–Two prominent real estate development firms have partnered with Cay Bay Development (CBD) NV, the master developer at Indigo Bay Development, to propose the development of a US $220 million luxury hotel resort and condos in St. Maarten. AG&T provided advisory services and a group of independent real estate brokers led by Adam Greenfader at Oceanfront International Group at Douglas Elliman coordinated the transaction.
The proposed high-end hotel development at Indigo Bay Development, is expected to feature certain luxury accommodations and five-star amenities, including 94 hotel rooms and suites, and 130 residential homes. Additionally, the proposed hotel development is expected to feature large water ponds and greenery areas in keeping with its eco-centric vision, as well as an extensive public parking area for public beach access to Indigo Bay.
“The timing for such a development could not have come at a more opportune time, as country St. Maarten is tasked with creating new and innovative strategies to counter the global economic crisis due to the pandemic,”.
In an economy whereby hospitality and tourism are at the centre of its recovery, it is expected that the development of a high-end branded hotel in St. Maarten would provide an enormous boost to this endeavour by enhancing several areas in tourism.
According to the release it can enhance St. Maarten’s global attractiveness as a prime tourist destination; increase hotel accommodation by approximately 20 per cent; increase the number of annual visitors to St. Maarten by 32,000 based on hotel occupancy of 65 per cent (double) and an average stay of five nights; and attract high value tourists who may choose St. Maarten as a vacation destination as opposed to accessing surrounding islands through its air and sea ports of entry, it was stated in the release.
The proposed world-class hotel development, once completed, will be managed by an internationally-recognised hotel brand, which will lend itself to greater global recognition, the release said. The projected marketed average daily rate (ADR) for hotel rooms at the proposed new hotel development is expected to be substantially higher than the current average daily rates on St. Maarten.
The CBD and the principals of the proposed hotel development seek to assure that the interest of the citizenry and of the environment are paramount to their endeavor. Six acres of the overall hotel site of about 18 acres is projected as a green zone, including the retention ponds that were originally constructed at Indigo Bay Development by CBD.
“The role of multilateral development banks (MDBs) in supporting the tourism sector in Latin America and the Caribbean”.
Conversation with with Rogerio Basso, Head of Tourism at IDB Invest and Adam Greenfader, Chair ULI Caribbean Council / Managing Partner AG&T.
* State of affairs of the tourism sector prior to COVID-19?
What makes this crisis different than prior ones?
What tourism players are doing to mitigate the impact of the pandemic?
Top three actions to better face this crisis?
Rogerio Basso leads all initiatives related to tourism in Latin America and the Caribbean for IDB Invest, the private sector arm of the Inter-American Development Bank Group. In his capacity as Head of Tourism, he is responsible for origination, investments and for executing IDB Invest’s tourism strategy in the region, offering a variety of financial instruments including debt, mezzanine and equity. Rogerio has executed numerous tourism transactions in the region spanning from hotels to conference centers.With over two decades of experience in banking, private equity, development, and strategy consulting within the hospitality and real estate sectors, Rogerio has held a variety of positions across top global firms, working across a variety of domestic and foreign markets, with a strong focus in Latin America. Prior to joining IDB Invest, he was CIO at Key International, a Miami-based real estate investment platform active across many industry sectors. He also served as EVP Acquisitions & Development for Terranum Hotels, an owner and operator of hotels across Latin America, sponsored by Colombia-based Santo Domingo Group and Sam Zell’s Equity International.
Rogerio holds a business degree from the College of William and Mary and a master’s degree from the School of Hotel Administration at Cornell University.
The repeal of Section 936 resulted in lost manufacturing jobs for the USA and a 15 year economic crisis for Puerto Rico.
As we sit today in the middle of a world pandemic, a few things seem certain. COVID 19 is a health crisis that has forever changed our relationship with globalism. It is time for a new understanding of how manufacturing keeps us all safe. This is especially true of the pharmaceutical industry. With shortages of basic supplies, medicines and protective gear, is it time to bring critical manufacturing back to the United States?
In this AG&T Thought Leadership conversation, we speak with economics professor Zadia Feliciano (see bio)of Queens College and explore the consequences for the USA and Puerto Rico of eliminating the manufacturing tax incentives – Section 936.
Unfortunately, the elimination of Section 936 helped push critical manufacturing AWAY from the USA. Critical manufacturing left Puerto Rico (USA) and sought cheaper markets in Mexico, Ireland, Latin America and China.
Moving Forward.
The Food and Drug Administration has for some time been expressing concern that the United States is too dependent on China within the medical supply chain. Puerto Rico has 49 FDA-approved pharmaceutical plants in place, and produces not just one quarter of all U.S. pharmaceutical exports, but also significant amount of medical devices.
Puerto Rico’s manufacturing industry is in need of support, but is also in a position to blossom, similar to other areas of the country that used to have a strong manufacturing base. In the area of pharmaceuticals, Puerto Rico has the advantage of an educated workforce and many people experienced in the industry. Puerto Rico produces 25% of the pharmaceuticals exported by the United States. This is more than any State. The Island has the cold chain logistics for pharmaceuticals in place. The learning curve would be lower for Puerto Rico than for many other U.S. regions. The time to act is now.
As we sit today in the middle of a world pandemic, a few things seem certain. The Corona Virus health crisis has forever changed our relationship with globalism and our new understanding how manufacturing keeps us all safe. This is especially true of the pharmaceutical industry. With shortages of basic supplies, medicines and protective gear, is it time to bring critical manufacturing back to the United States?
The answer seems to be a resounding, “how fast.” But how do we do this, now that most of our manufacturing has been shipped to foreign locations? The answer might be right here at home.
The island has three key elements that make it very attractive for manufacturing.
Puerto Rico has a vast network of exsisting mission ready manufacturing plants.
The manufacturing work force on island has decades of proven track record.
The universities (RUM in particular) develops top recruits for international firms in engineering, life science and technology
So what happened?
“Well, it was really a confluence of many events, some global and others local”, according to Mr. Fortuño. The North American Free Trade Agreement (NAFTA) created incentives for companies to move to Mexico and Canada. Countries like Ireland and China created elaborate tax and other incentives to attract business. Section 936 of the Tax code expired – which was a critical component of incentivizing manufacturing on the island. To learn more, read Why Puerto Rico Now.
Notwithstanding, Puerto Rico’s economic crisis, the island’s antiquated energy grid, and a wasteland of destruction caused by hurricanes in 2017, Puerto Rico is still in an ideal position to help USA quickly ramp up critical manufacturing production. In fact, the island today currently out preforms States like California, Indiana, North Carolina, and Pennsylvania.
Are there any Potential Roadblocks?
As part of the 2017 Tax Act, the new tax on Global Intangible Low-Taxed Income (GILTI) was proposed as a way to target profitable firms that are based abroad – known as controlled foreign corporations. For tax purposes, Puerto Rico is treated as a foreign jurisdiction and the 2017 Tax Act is bad news for companies doing business on the island. Patent-dependent sectors like pharmaceuticals and medical equipment and supplies account for nearly 35 percent of the total employment in manufacturing. Pharmaceutical companies alone employ approximately 90,000 Puerto Rico residents.
Where do we go from here?
Today there are several initiatives to help bring manufacturing back to the United States, Puerto Rico and other economically depressed areas. One such initiative is HR 6443, authored by Puerto Rico’s Resident Commissioner, Jenniffer González-Colón and sponsored by Donna Shalala (D-FL), Representatives Rob Bishop (R-UT), Darren Soto (D-FL), Ruben Gallego (D-AZ), and Peter King (R-NY).
PONCE, PUERTO RICO—Ponce Paradise—a 900-acre resort, healthcare village and marina located here—is giving guests all the conveniences and amenities of mixed-use, but with a twist.
Adam Greenfader, managing partner, AG&T, the development firm behind Ponce Paradise, said, “There is a trend in hospitality development for travelers searching for a destination that offers a wellness package or amenities.”
Conceptualized by LandDesign and Winstanley Architects & Planners along with AG&T, the teams consulted engineering and aquatic architecture professionals to make the vision a reality, bringing together a mixed-use development and a wellness destination.
“Economies of scale seem to indicate mixed-use projects will be getting larger. The live-work-play concept is really taking hold as more people want to be in the center of it all,” Greenfader said.
Ponce Hospital and Wellness City
Still in its early design and community involvement phase, Ponce Paradise will comprise a hotel and spa, wellness community, farm-to-table agricultural setup, a micro-grid, residential neighborhoods, a town square and a university medical center, with a total investment of approximately $1 billion.
Specifically, the 166-acre Wellness City will have research, university and care facilities, which will include a branded hospital, rehabilitation centers, outpatient, recovery rooms, assisted living facilities, nursing home, short-term residential units and condominiums. The wellness lagoon will have restaurants and retail, and a plaza will be home to a worship center, park and entertainment venue.
The development will not only promote health and wellness but sustainability as well. About 60% of the site is untouched and will remain in its natural state, according to the Puerto Rico Conservation Easement Law. Additionally, the developed area has acres of green space, waterways and parks.
“Wellness tourism has been estimated as a $563 billion industry in 2018,” Greenfader said. “Puerto Rico is ideally situated to capture a large part of this market due to its central location, airlift and cruise traffic, U.S. medical doctors and great infrastructure.
“There are many medical treatments that can be done in Puerto Rico for a fraction of the cost—and you get to enjoy an amazing Caribbean vacation experience,” he added.
There are, of course, some challenges. “Less than 7% of Puerto Rico’s GDP is tourism based. For a Caribbean island with great beaches, people and infrastructure, this in incredibly low. The city of Ponce, in particular, has a convention center, port and airport that are highly underutilized,” Greenfader said, highlighting the project’s necessity.
He said the first challenge is to get the Municipality of Ponce and the Fiscal Board controlled by the U.S. Congress to fully use its assets. The second challenge—which is common in any large mixed-use project—is to provide the right combination of uses.
“The last challenge is financing,” he said. “In Puerto Rico, there are $20 billion of Community Development Block Grants for Disaster Relief. We trust some of that will be allocated to critical projects such as Ponce Paradise.”
Following meetings with the municipality, major medical associations, cruise lines and community leaders—each with their own concerns—Greenfader is confident that they will be able to address each group while also honoring Ponce’s natural surroundings.
Master Plan for Wellness City and Hospital
“Our job as project sponsors is to balance the concerns of each group with the stewardship of the environment,” he said. “The project must make economic sense but also be a valuable contributor to the local region, protecting and enhancing natural assets.”
Greenfader said that as hospitality as a whole faces its own challenges, differentiators like mixed-use developments are gaining more momentum.
“Airbnb and other disruptors have proven that the market is changing and that guests are seeking new experiences. Budget allocations, the desire to be together in large groups and ease of booking a reservation are just a few reasons the hotel industry is adding more residential units,” he said.
According to Greenfader, residential space generates revenue that can assist with the financing capital stack, while also creating a rental pool of additional units for the high seasons.
Ponce Paradise plans to offer three residential options: single-family homes, smaller vacation rentals and affordable “shotgun-style” housing, all with their own facilities and security.
Its attention to health, however, is the real differentiator, with nature serving as both the basis for its design and Ponce Paradise’s mantra.
“Everyone realizes that wellness is holistic; we don’t just treat the physical but the whole mind, body and spirit,” Greenfader said. “Doctors know that a patient’s success rate is often a result of a positive mental attitude. A cold, sterile room doesn’t necessarily lend itself to great health. Great architecture, beautiful landscaping, water vistas, amazing smells, community, etc., can make the difference between success and failure in a person’s treatment.”
Wellness extends far beyond simple offerings here. “Doing yoga with goats may not prove to have ‘legs,’ but resort wellness has just begun to take off. The reasons are simple: Industrialized nations are getting older, people are living longer, and with two billion new tourists coming from India and China, there are many more potential people for this market niche,” he said. “Some experts say the wellness resort industry is expected to double within the next 20 years and become a $1-trillion industry.”
The sustainability factor is also attracting hoteliers, especially in an area that’s been struck by natural disasters.
“Developers are starting to realize that a weather-related crisis can have a devastating effect on operational risk,” he said. “If a hotel cannot withstand hurricane-force winds, floods and mold, then it will suffer huge downtimes and repairs. In fact, hotels may not ever come back online at all.”
Greenfader said that hotel buyers are now evaluating their portfolios for climate risk and realizing that initially spending 15-20% more in construction costs to make a project resilient and sustainable makes good business sense.
“Developers also realize that if they can stay open during a crisis, their occupancy will be 100% or more,” Greenfader said. “During a relief and rebuilding period, hotels host thousands of relief workers, insurance adjusters and other critical workers. It’s a win-win to be resilient and sustainable.”
This couldn’t be more clear than at the current time, when Puerto Rico is beginning to recover from a series of earthquakes, which Greenfader noted had hit the south particularly hard—especially structures built before 1990, when codes were updated to bolster construction for seismic activity.
“The earthquake reaffirms that a project like Ponce Paradise needs to build a resilient infrastructure into its master plan and be forward-looking in its design,” he said. HB
The ULI Roundtable on Climate Resilience in The Netherlands was held to discuss how hurricane destruction in the Caribbean (and specifically Puerto Rico, Sint Maarten in 2017 and the Bahamas in 2019), reveals an urgency to rethink urban resilience and regeneration in the Caribbean. The ULI Roundtable brought together Dutch planners, designers, architects, engineers, financial institutions, developers, and investors to discuss new solutions and share global best practice. Specific issues focused on the Dutch knowledge and leadership on climate mitigation across urban design, development and investment. The two speakers included:
Mr. Adam Greenfader, Chair of the ULI SE Florida/Caribbean Council – shared experiences and outcome advice from the ULI Advisory Services Panelists in the Municipality of Toa Baja, Puerto Rico after the catastrophic and deadly 2017 Hurricane Maria.
Mr. Henk Ovink, Dutch special envoy to the United Nations on Water, and flood expert shared insights into global climate change challenges and the Dutch resilience plans for both the Netherlands and Dutch Caribbean.
Congratulations to Hannah Greenfader, one of our past thought leaders on helping achieve the Hazon Seal of Sustainability! Your efforts are greatly appreciated and so needed in this time of great climatic change.
Hannah Greenfader is interned with the Miami- Dade County Office of Resilience researching sea-level rise strategies and creating content for educational programs about sustainability and resilience in Miami.
Today, Hannah is program associate at World Wildlife Fund which was was founded in 1961 and is the largest privately supported international conservation organization in the world. As program associate, I am responsible for supporting “America Is All In” which is the most expansive coalition of leaders ever assembled in support of climate action in the U.S.
AG&T is a real estate development and consulting company founded in 1998 with headquarters in Miami, Florida. Our track record spans over 55 real estate development projects in Puerto Rico, Sint Maarten, Costa Rica, Panama, Mexico, Dominican Republic, and various other Caribbean islands. Our thought leadership program includes mentoring students from the University of Miami Master of Real Estate Development program in finance, sales, and Caribbean development.
Big shout out to many of you who flew in from across the country and Puerto Rico to attend our third Caribbean roundtable in Miami. It was evident from the discussions and presentations, that the Caribbean region continues to offer a wealth of opportunities as well as challenges. Our theme at yesterday’s roundtable was centered around ULI efforts in resiliency and rebuilding.
The panel discussion started with a report by Mr. Tom Roth of Grass River Property on Puerto Rico. Tom travelled the island last year as part of the ULI Advisory Service Panel thanks in part to the the support of The Kresge Foundation and our local District Council. The ULI Advisory Services Panelists spent a week in the Municipality of Toa Baja, Puerto Rico, to provide expert advice on enhancing recovery efforts after the catastrophic and deadly 2017 Hurricane Maria. Tom Roth’s presentation during our roundtable highlighted some of the lessons in dealing with rebuilding, seizing the opportunity to build on higher ground, and the availability of Federal funds for rebuilding homes for Puerto Rican familes.
While at this moment it is still very dangerous to access Abacos, Bahamas, Gene Budler of DCK presented some real time images of his recent relief trip to Abacos. The images of the destruction are truly unbelievable with tons of waste, destroyed homes, and obliterated life infrastructure. As the relief cycle continues, we will be tracking the situation. There is a clear need for stronger, better planned, and more resilient construction. It is our hope to be able to help the Bahamas with some solutions to the massive rebuilding efforts. If you are interested in helping there are multiple organizations. One such group recommended by Gene is MedStar out of Houston, Texas.
As part of our on-going effort to increase our engage with the Caribbean, we are planning a Caribbean study cruise in 2020. The idea of the cruise is to bring together some of the top minds in resiliency for an comprehensive educational summit. In addition to the seminars, we plan on visiting several islands that have been affected by the recent hurricanes. If you are interested in helping organize the study cruise please reach out to either Max or myself. As a reminder, this roundtable is open to non-members as guest to start but is a benefit for ULI members. To join please visit: https://americas.uli.org/membership/join/ If you have any questions, please call 1-800-321-5011 or contact Max Helden.
We are looking to plan a December networking event for this group and then will schedule the next content-oriented roundtable for 2020.
Thank you all again for your participation and to our very kind sponsor Paramount Miami World Center for hosting the event and lunch. You can learn more about our ULI Caribbean Engagement at https://seflorida.uli.org/get-involved/caribbean-engagement/
