Together they discuss investment opportunities in Puerto Rico. In this interview, Adam and Robbie discuss why the island is ready for great growth. They also explain why the island’s economy may provide insulation from some of the global economic issues causing the recession. Below are some excerpts from the book. Coming soon and launching in September 2022.
In every crisis, there is an opportunity.
Today, we find ourselves recovering from a worldwide pandemic. Supply line challenges caused by COVID 19 has made the production, distribution, and storage of critical supplies a top national priority. Puerto Rico, with over 70 years of critical manufacturing experience, is in an ideal position to lead the fight against COVID 19 for the United States. In the midst of all these challenges, there are silver linings.
Today, Puerto Rico is about to receive the largest allocation of Federal relief funds in U.S. History.
In what is being called Operation Bootstrap 2.0., Puerto Rico will receive over 80 billion dollars. This includes money to construct homes, critical infrastructure, renewable energy, and other vital projects.
In addition to relief funds, Puerto Rico and the Internal Revenue Service have created a series of tax incentives. Their goal is to bring in new businesses and people to the island. Act 20/22 (now Act 60) had the unintended consequence of attracting a new breed of entrepreneurs – blockchain and crypto investors. Suddenly, Puerto Rico finds itself leading a technological revolution with thousands of people bringing new ideas, connections, and capital to the island.
Join us for the Puerto Rico Investing Mastermind with Adam Greenfader of AG&T from July 25th – July 28 in Condado, San Juan to explore the rich investing opportunities in this tropical US Territory, Puerto Rico.
An island that is offering amazing tax incentives to investors willing to catch the vision of this tropical island.
What you will learn:
The island empowers entrepreneurs with a spectrum of assets, including smart tax incentives, a highly skilled bilingual workforce, and U.S. legal & financial frameworks.
98% of Puerto Rico is opportunity zones, including many of its beach properties
Find out who is migrating to the island and why!
Real estate investing is one of the greatest vehicles to build wealth, but it doesn’t make sense in every market. Some locations provide incredible returns, while others make it almost impossible to make a profit. Click here for more information.
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
San Juan- “The Future of Tourism and Hospitality: Increasing Capacity and Competing in a New Caribbean Market”, will be the main topic to be discussed by a panel of experts on the subject, each one representing a sector in the ever-changing world of tourism and hospitality.
The chairman of the board of the PRBA, Eng. Emilio Colón- Zavala, stated that: “Through this panel, the Puerto Rico Builders Association (PRBA) will provide the space for a wide and varied discussion, which will cover the new trends in the Modern Tourism industry, as well as the importance of efficiently positioning Puerto Rico as a competitive destination in the Caribbean. Tourism with less than 7% of the islands GDP, is slated to become one of the pillars of our economic development and it is urgent to incorporate into our offer all new trends that continue to develop and evolve in the Hospitality Industry”.
The panel moderated by Adam Greenfader, Managing Partner of AG&T, will have the participation of:
Carla Campos- Executive Director, Puerto Rico Tourism Company
Pablo Maturana- Managing Director Development South America & The Caribbean, Hilton International
Rachel DeLevis- Policy Associate, AirBnB
Federico Stubbe- President, PRISA Group
Federico Sánchez- President and CEO, Grupo Interlink
Eric Berman- Chief Investment Officer, Lifeafar
This panel will be held on October 30, as part of the Forty-Sixth Annual Convention of the Puerto Rico Builders Association: “A Challenge to Build the Future”, which will take place at the Puerto Rico Convention Center on October 29 and 30.
About the PRBA
The Puerto Rico Builders Association is a private, non-profit organization. Established in 1951, its main purpose is to represent leading developers and investors of housing, commercial, office, industrial and tourism projects. The Association also represents investors, suppliers, banks professionals and companies associated with development and construction in Puerto Rico. Its main objective is to promote and lead the planned, safe and sustainable development in order to serve as the island’s economic engine, in collaboration with Puerto Rico’s public and private sector.
Puerto Rico was already struggling from decades of fiscal mismanagement and had just declared bankruptcy over its $123B debt when it was hit by two hurricanes in September 2017 — only to run into a botched disaster response. The way some see it, though, rock bottom is behind Puerto Rico, and the island is in the early stages of an upswing. “Puerto Rico is setting an incredible pace for economic recovery,” said Brad Dean, CEO of Discover Puerto Rico, a destination marketing organization that promotes the commonwealth. “Airport arrivals are exceeding pre-Hurricane Maria levels, as are lodging revenues. Given the quick rebound, reinvestment in hotel product and tremendous potential for the island’s tourism industry, this is Puerto Rico’s time. From an investor’s perspective, there’s never been a better time to invest in the island’s tourism industry.”
Buildings and infrastructure are still being repaired and upgraded, and the government has instituted a full slate of tax incentives to lure investors, said AG&T Managing Partner Adam Greenfader, who advises clients from his base in Miami. “You can still acquire assets for 50 cents on the dollar,” he said. “Beachfront land in Puerto Rico today can still be acquired at $30K an acre.” Dean and Greenfader will be panelists at Bisnow’s Caribbean Hospitality & Tourism Summit Aug. 1. Puerto Rico’s economic spiral goes back decades. After World War II, it gave big tax breaks to manufacturers, and to cover for revenue shortfalls, issued more bonds than it could repay. In turn, it implemented austerity measures that did little except drive the population away. Its problems were exacerbated by that fact that it has no voting power in Congress.
Greenfader outlined some key developments toward a turnaround. Puerto Rico’s cash-strapped government has tried to lure investors with laws like Acts 20 and 22, passed in 2012 and designed so that people who move to the island pay little or no federal income tax, even on passive investments. Greenfader said this has attracted 250 to 500 families per year, including big names such as billionaire John Paulson. Other incentives include one that lets people with tourism-related projects get back 40% or 50% of their acquisition costs.
Puerto Rico’s massive government debt is currently being sorted out by a federal oversight board. “The major bonds, COFINA and GO, have been renegotiated and the bondholders have been put into payment plans,” Greenfader said. Since the 2017 hurricanes, federal disaster aid — including $1.4B authorized in June — has trickled in. Hotels damaged in the storms were forced to remodel or rebuild and are now offering better products at higher rates. Many are incorporating solar and microgrids to be resilient for the future. The storms raised the profile of Puerto Rico — one study found that prior to them hitting, about half of Americans hadn’t known the commonwealth was part of the U.S. Airport arrivals and tourism revenue have already set records this year. On top of this, Puerto Rico is the beneficiary of community development block grant funding, and 97% of the entire commonwealth — much of it beachfront — has been designated a qualified opportunity zone. “Puerto Rico never had a 1031 exchange, so from a tax perspective, it’s the first time it’s getting capital gains money,” Greenfader said.
Lifeafar Investments Chief Financial Officer Cole Shephard, who will also be a panelist at the Bisnow event, said his Colombia-based company is already taking advantage of Puerto Rico’s investment climate, raising $16M in an opportunity fund to reposition a 61-room hotel. Shephard said Lifeafar, which started by offering real estate services to expats in Medellín, was drawn by the tax incentives and that the opportunity zone designation was a bonus. He is now doing due diligence on additional properties. “I see the sophisticated money chasing metro San Juan,” he said, suggesting that there is a lot of opportunity for small to mid-market projects outside of the city. Not everything in Puerto Rico is rosy.
As the government has scrambled to generate revenue, sales tax was raised to 11.5%, pensions have been cut, college tuition increased and some 300 public schools closed. Critics have complained that wealthy investors have been protected while ordinary Puerto Ricans suffer. “The locals have had to carry the brunt of these austerity measures,” Greenfader acknowledged. “I’d understand completely, if I see a guy who’s a hedge fund manager with $500M earnings pay hardly any taxes, versus the regular guy paying 35% taxes who’s a salaried worker at Bacardi,” Shepherd said. But Shepherd added that conversations with Puerto Rican officials convinced him they have carefully calculated the tradeoff and found that luring private investment now will help island residents long-term, even though it may take years for the effects to be obvious.
Greenfader suggested that boosting tourism is a winning solution for both investors and residents. Because Puerto Rico since the Kennedy era has been focused on manufacturing, its tourism industry was relatively neglected. The industry now accounts for less than 7% of Puerto Rico’s gross domestic product. In other Caribbean islands, that number is typically between 30% and 80%. Dean’s destination marketing organization, Discover Puerto Rico, was established last year to actively promote tourism. Bisnow’s Aug. 1 Caribbean Hospitality & Tourism Summit will also include Puerto Rico Tourism Co. Executive Director Carla Campos, Hilton VP for Development Juan Corvinos Solans, Puerto Rico Builders Association President Ing. Emilio Colón Zavala and more.
On May 8th, the ULI CARIBBEAN ROUNDTABLE celebrated its second ROUNDTABLE meeting of the year. The turnout at Wework in Brickell City Centre was large and enthusiasm for the region palpable. Present at the event were industry leaders in finance, debt lending, construction, architecture, affordable housing, hotels and green building.
Big shout out to the Kresge Foundation (https://kresge.org) and all who participated in the Toa Baja Puerto Rico Resiliency Panel. The panel was but another example of the capacity of ULI to bring real solutions to real world problems.
Special thanks to our two speakers at the ULI CARIBBEAN ROUNDTABLE -Mr. Rogerio Basso, Head of Tourism at IDB Invest and Mr. Andrew Dicky – Executive VP JLL Hospitality. Financing projects in the Caribbean brings its own set of challenges and opportunities. It was great to look under the proverbial “hood” and examine how capital approaches Caribean hospitality lending.
Save the Date –On August 1, 2019, The Puerto Rico Builders Association will be hosting its 3rdAnnual Bisnow Caribbean Hospitality Investment Summit in Miami. If you are interested in Speaking/Sponsoring there are a few spots available please reach out to Jorge Montilla email@example.com more details.
Last April 9th U.S. Department of Housing and Urban Development’s Deputy Secretary, Pamela Hughes Patenaude, along with Congresswoman and Resident Commissioner, Jenniffer González- Colón, met with the Puerto Rico Builder’s Association’s (PRBA) leadership along with the Mortgage Bankers Association (MBA), Puerto Rico Chapter, the Puerto Rico Bankers Association, and Puerto Rico Real Estate Landlord Association.
During the meeting the group spoke about the status of Puerto Rico’s recovery and reconstruction process after hurricanes Irma and María made landfall last September. Among other topics, Hughes Patenaude made a significant announcement of $18.4 billion to be granted by HUD to support long-term disaster recovery for Puerto Rico. It is hoped that this grant will help rebuild communities impacted by past disasters and protect them from major disasters in the future.
The funds are to be provided through the Community Development Block Grant Disaster Recovery Program (CDBG-DR), which grants support to a variety of disaster recovery activities including housing redevelopment and rebuilding, business assistance, economic revitalization, and infrastructure repair.