IRR Viewpoint
Caribbean Market Update
First Quarter, 2014
By James V. Andrews MAI, FRICS
Integra Realty Resources - Caribb...
Caribbean Market Update – Q1, 2014
Caribbean Market Update
First Quarter, 2014
By James V. Andrews, MAI, FRICS
Overview
Th...
Caribbean Market Update – Q1, 2014
Destination 2012 Arrivals % Chg YTD 2013 Arrivals % Chg Months
Dominican Republic 4,562...
Caribbean Market Update – Q1, 2014
In terms of regional travel, Seaborne Airlines, which was previously a small carrier fo...
Caribbean Market Update – Q1, 2014
equates to a 21.5% increase in rooms “under contract”, compared with same figures for M...
Caribbean Market Update – Q1, 2014
Sales volume in the Cayman Islands for the fourth quarter declined moderately (8.2%) fo...
Caribbean Market Update – Q1, 2014
Number Volume JMD Exchange
Rate Used
Volume USD % Chg Number Volume KYD Volume USD % Ch...
Caribbean Market Update – Q1, 2014
Source: Coldwell Banker Cayman Islands Realty / CIREBA
Note: Includes closed transactio...
Caribbean Market Update – Q1, 2014
 The Cayman Islands Health City medical tourism project has officially opened. Additio...
Caribbean Market Update – Q1, 2014
offshore financial centres. Other commercial real estate (and general domestic) markets...
Integra Realty Resources, Inc.
Corporate Profile
With corporate headquarters in New York City, Integra Realty Resources (I...
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Caribbean Market Update First Quarter 2014 IRR Viewpoint

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Caribbean Market Update First Quarter 2014 IRR Viewpoint
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Caribbean Market Update First Quarter 2014 IRR Viewpoint

  1. 1. IRR Viewpoint Caribbean Market Update First Quarter, 2014 By James V. Andrews MAI, FRICS Integra Realty Resources - Caribbean
  2. 2. Caribbean Market Update – Q1, 2014 Caribbean Market Update First Quarter, 2014 By James V. Andrews, MAI, FRICS Overview There appears to be improving demand for external investment into the Caribbean both from its major source markets and through local and regional investment channels. Reports indicate that there is an increase in new hotel resort projects being planned, as well as interest in investment real estate in certain Caribbean markets. These signs of economic improvement are not evident in every market throughout the Caribbean region, but come on the heels of improvement in certain sectors such as that evidenced by tourism statistics and the profitability of hotels and resorts. Regional Tourism The Caribbean Tourism Association is reporting that stay-over arrivals continued to rise modestly for the reporting markets for January 2014 over the same period last year. Overall, the CTO reports that the greater region saw an estimated 25.1 million stop-over tourists in 2013, up 1.8% from 2012. We have specifically analyzed the top 14 markets in terms of stayover arrivals; those markets averaging growth of 2.55% from 2012. The growth experienced in 2013 is considered modest compared with that of the prior year which was 4.19% average for those same markets. By far, the highest growth in arrivals for this period was seen in Haiti (which just began reporting to CTO in 2012); followed by The Cayman Islands, Aruba and Curacao. Contrary to prior years, the Dominican Republic is no longer experiencing the fastest growth in arrivals, but still holds the title of the biggest tourism market. The CTO is projecting 2014 growth of between 2% and 3% for the greater region.
  3. 3. Caribbean Market Update – Q1, 2014 Destination 2012 Arrivals % Chg YTD 2013 Arrivals % Chg Months Dominican Republic 4,562,606 5.90% 4,689,770 2.80% Jan-Dec Cuba 2,838,169 4.50% 2,850,135 0.40% Jan-Dec Jamaica 1,986,084 1.80% 2,008,409 1.10% Jan-Dec Puerto Rico 1,569,472 8.40% 1,440,098 0.80% Jan-Nov Bahamas 1,419,275 5.40% 1,363,487 -4.10% Jan-Dec Aruba 903,934 4.00% 979,256 8.30% Jan-Dec US Virgin Islands 737,651 8.60% 702,963 -4.70% Jan-Dec Barbados 536,303 -5.50% 508,520 -5.20% Jan-Dec Martinique 487,359 -1.80% 489,706 0.30% Jan-Dec Sint Maarten 456,720 7.60% 467,259 2.30% Jan-Dec Curacao 419,621 7.50% 440,044 4.90% Jan-Dec Haiti 349,198 419,736 20.20% Jan-Dec (Prelim.) BVI 351,404 4.00% 355,677 1.20% Jan-Dec Cayman Islands 321,650 4.10% 345,387 7.40% Jan-Dec Average Increase 4.19% 2.55% CARIBBEAN STAYOVER ARRIVALS - LEADERS Source: Caribbean Tourism Organization Source: Caribbean Tourisim Association (All 26 reporting countries only) Airlift This quarter saw some interesting developments in terms of airlift to the region. Southwest Airlines announced in February a trio of new Caribbean destinations which represent the first international flights for the company. The airline will begin flying to Aruba, Nassau and Jamaica this summer out of the US cities Orlando, Baltimore/Washington and Atlanta.
  4. 4. Caribbean Market Update – Q1, 2014 In terms of regional travel, Seaborne Airlines, which was previously a small carrier focusing on inter- island USVI travel, is undergoing a major expansion including a move of its headquarters to San Juan, Puerto Rico. This expansion follows an investment by the Puerto Rican Government Development Bank for a 20% stake in the parent company of Seaborne, and calls for at least ten new routes out of San Juan. So far the company has begun new service to St. Kitts and Nevis, La Romana and Punta Cana. Hotel Performance Smith Travel Research (STR) reports that hotel performance statistics for the first quarter of 2014 indicated a continuation of growth in rates in the Caribbean; while occupancy remains fairly flat. Average Daily Rates (ADR) grew by a stellar 7.3% in Q1 over the same period last year, while occupancy was up a modest 0.4%, leading to Revenue per Available Room (RevPar) growth of 7.9%. Statistic Q1 2014 % Change Prior Yr Hotels 1,887 Hotel Rooms 225,493 1.0% Occupancy 76.17% 0.4% Average Daily Rate $240.24 7.3% RevPar $183.25 7.9% QUARTERLY HOTEL STATISTICS - CARIBBEAN - 2014 Source: Smith Travel Research Source: Smith Travel Research (STR) STR reports 162 hotels totaling 26,647 rooms in the “in-contract” stage (“formerly active pipeline”), in the Caribbean and Mexico region, according to the March 2014 STR Construction Pipeline Report. This
  5. 5. Caribbean Market Update – Q1, 2014 equates to a 21.5% increase in rooms “under contract”, compared with same figures for March 2013; and an 11.7% increase in rooms under construction. STR has re-defined the Pipeline reporting standard; with the total rooms under contract now including rooms in the In Construction, Final Planning and Planning stages but do not include rooms in the Unconfirmed stage. In the Caribbean, the largest supply growth is reported for Haiti (+49.2%) if these hotels all come to fruition. Other countries reporting significant planned supply growth include The Bahamas (+21.6% with 2,990 rooms); Turks and Caicos (+18.4% with 545 rooms); St. Kitts/Nevis (+15.5% with 245 rooms); Dominica (+14% with 90 rooms); and Anguilla (+11.4% with 80 rooms). Supply growth in the Bahamas is dominated by the 2,200-room, $3.5 billion mega resort Baha Mar (scheduled to open December, 2014). Real Estate Each quarter we analyze some of the domestic real estate markets by comparing sales volume in Jamaica and the Cayman Islands; which are two very different economies. Jamaica is much more populous, has a much lower GDP per capita, and is not as reliant on financial services and other non- tourism related industries. The Cayman Islands has a much higher currency valuation and benefits from one of the largest financial services sectors in the region. Fourth quarter sales volume in Jamaica indicated a sharp decline from both the prior quarter and from the same period last year; though it should be noted that Q4 2012 represented a 29% growth over the previous year. Real estate transactions in Jamaica had been consistently growing in volume since the middle of 2012. The first quarter of 2014, however, continued the downward trend with a 26.1% decline when adjusted for currency valuation. Note that the value of the Jamaican Dollar continues its downward trend, which has an impact on the value of property in that country. Source: National Land Agency, National Bank of Jamaica
  6. 6. Caribbean Market Update – Q1, 2014 Sales volume in the Cayman Islands for the fourth quarter declined moderately (8.2%) following a flat third quarter and unusually high volume in the second quarter, predominantly due to the $175 million sale of the Ritz Carlton resort. Sales volume rebounded nicely in the first quarter of 2014 with an increase of 14.1% over the same period last year. It should be noted that the trend in sales volume in Cayman is relatively erratic given the size and nuances of the market. Source: Cayman Islands Department of Lands and Survey (www.caymanlandinfo.ky)
  7. 7. Caribbean Market Update – Q1, 2014 Number Volume JMD Exchange Rate Used Volume USD % Chg Number Volume KYD Volume USD % Chg 8,084 J$49,083,053,762 86.08 $570,202,762 14.5% 1,708 $632,088,625 $758,506,350 105.7% Q1 2012 2,005 J$13,542,643,248 86.98 $155,642,011 16.7% 425 $116,645,391 $139,974,469 -53.5% Q2 2012 2,023 J$13,694,537,133 87.85 $155,864,215 12.0% 400 $101,555,824 $121,866,989 -29.6% Q3 2012 2,102 J$13,486,081,935 89.62 $150,437,660 -2.6% 475 $101,526,522 $121,831,826 -29.5% Q4 2012 2,410 J$16,918,800,653 91.58 $184,651,176 28.9% 396 $98,377,177 $118,052,612 5.9% Total 2012 8,540 J$57,642,062,969 88.99 $647,736,408 13.6% 1,696 $101,526,522 $501,725,897 -33.9% Q1 2013 2,110 J$18,279,755,674 95.62 $191,662,349 23.1% 433 $94,162,587 $112,995,104 -19.3% Q2 2013 2,401 J$17,391,229,306 99.83 $174,254,485 11.8% 415 $251,494,835 $301,793,802 147.6% Q3 2013 2528 J$18,082,699,163 102.11 $177,140,621 17.8% 380 $102,869,169 $123,443,003 1.3% Q4 2013 2079 J$13,746,344,716 105.47 $130,433,110 -29.4% 341 $90,293,570 $108,352,284 -8.2% Total 2013 9,118 J$67,500,028,859 $673,490,565 4.0% 1,569 $204,395,691 $646,584,193 28.9% Q1 2014 2208 J$15,297,871,722 108.01 $141,718,727 -26.1% 397 $107,414,189 $128,897,027 14.1% 1 2 QUARTERLY PROPERTY TRANSFERS Jamaica Cayman Islands Period 2012 For Jamaica, assumed average quarterly conversion rate according to Bank of Jamaica For Cayman, used statutory conversion rate of KYD$1.00 = USD$1.20 Source: Cayman Islands Land Registry, Jamaica National Land Agency 2013 2011 2014 One of Cayman’s most dynamic real estate markets is the Condominium sector on Seven Mile Beach. According to Coldwell Banker Cayman Islands Realty, closed (MLS) sales of condominiums above $1 million rose 62.8% in volume in the first quarter of 2014 over the same period last year (US$17.26 million versus $10.6 million). The price per square foot for these units is relatively flat at US$781. The year 2013 indicated growth in volume in this sector but with a slight decline in price per square foot.
  8. 8. Caribbean Market Update – Q1, 2014 Source: Coldwell Banker Cayman Islands Realty / CIREBA Note: Includes closed transactions at $1.0 million and above only Indicators for the real estate markets in other jurisdictions are highlighted following:  Turks and Caicos Islands: Sothebys International Realty reports a continuing (strong) rebound from last year, with Q1 2014 sales volume of luxury condominiums up 82% from the same period in 2013 (from $9.7mm to $17.8mm). The average price for luxury condos, generally located on Grace Bay Beach in Providenciales, rose 21% to $848K. Single family homes rose a staggering 279% in volume ($6.63mm to $25.2mm) with a 150% increase in price (to $1.57mm). Continued growth is projected for the rest of 2014.  U.S. Virgin Islands: The local MLS system reports 253 transactions representing sales volume of $61.9 million for the year to date through April; up from 195 transactions (+30%) and volume of $36.5 million for the same period last year (+70%). Notable Developments and News  One notable new project recently announced in Cayman appears to be set to commence construction following an agreement with the Government to complete a road project known as the East-West Arterial. This (reported) $360 million commercial, tourism and residential community covering 600 acres is planned for construction to commence in East End within a few months. The development known as “Ironwood” is to include a Town Centre with boutique shops, conveniences including a grocery store and entertainment; a sports training complex; an Arnold Palmer Signature championship 18-hole golf course and a vacation resort. The golf course is said to be Arnold Palmer’s first Caribbean Signature course. The developers agreed to finance construction of this road to the development from George Town, which was a contingency upon this project going forward.
  9. 9. Caribbean Market Update – Q1, 2014  The Cayman Islands Health City medical tourism project has officially opened. Additional planned development surrounding this 105-bed hospital includes a Marriott branded boutique hotel as well as various commercial and support services.  The University of the Virgin Islands has announced plans to develop a medical school on St. Thomas, which will be operated in collaboration between the hospitals on St. Thomas and St. Croix.  An agreement has reportedly been reached between the North Texas EB-5 Regional Center and the Omega Puerto Rico Regional Center to raise EB-5 funds for a new commercial project known as the Port of Mandahl Caribbean Conference Resort in St. Thomas, USVI. These EB-5 regional centers will join forces with the developers of the project, Mandahl Bay Holdings, to introduce the project to the EB-5 marketplace. When completed, the development will include two full-service hotels, a golf course, a state of the art conference center, retail and commercial space, and high-end residential units. The EB-5 Pilot Program allows for foreign nationals investing in certain high unemployment areas with new businesses that create jobs. Investors may choose a vehicle known as a "Regional Center" which is a 3rd party-managed investment vehicle that assumes the responsibility of creating the requisite jobs. Regional Centers may charge an administration fee for managing the investor's investment.  The developers of the Sailrock project on South Caicos in the Turks and Caicos Islands have broken ground on the next phase of this development. The Great House at Sailrock will ultimately include 66 “ridge-top” one and two-bedroom suites, along with 14 beach villas and 9 Sound Villas. This is the latest phase of this project which is located on an 800-acre peninsula on the island.  According to data from the Government Development Bank of Puerto Rico, Puerto Rico’s economy fell by 3.8 percent in the last fiscal year. This index is based on a metric called the Economic Activity Index, which measures general economic activity in the country. The Economic Activity Index was 127.1 in February, a 2.4 percent reduction compared to February 2013, although that was the lowest year-over year reduction since May 2013. In January, the EAI fell by 3.4 percent compared to January 2013.  The Government of the Bahamas is reportedly in advanced negotiations to bring a Four Seasons branded hotel to the stalled Cotton Bay project on South Eleuthera. The current rendition of Cotton Bay contains 2,200 acres of land and plans for a mixed use resort with golf course. This project stalled after mostly completing its first phase of villa development and common area amenities. There are reportedly two other hotels in the overall development plan. Conclusion Tourism in the region continues its growth trend based on hotel statistics, visitor arrivals statistics, and reports of consumer spending. Certain real estate markets are showing evidence of improvement; specifically in the luxury property sectors. The domestic and commercial real estate markets continue to be relatively flat, with some increases in demand for office space in Grand Cayman and other
  10. 10. Caribbean Market Update – Q1, 2014 offshore financial centres. Other commercial real estate (and general domestic) markets continue to struggle, such as Puerto Rico and St. Croix, due to general economic conditions. James V. Andrews MAI, FRICS Managing Director Integra Realty Resources – Caribbean Direct: (345 946-2000 ext. 2 Mobile: (345) 516-4508 Fax: (345) 946-2001 Email: jandrews@irr.com Website: www.irr.com/caribbean Main Office P.O. Box 11905 Grand Cayman, KY1-1010 Cayman Islands Virgin Islands Office 6500 Red Hook Plaza Suite 206 St. Thomas, VI 00802 Bahamas Office P. O. Box N-9251 Nassau, Bahamas
  11. 11. Integra Realty Resources, Inc. Corporate Profile With corporate headquarters in New York City, Integra Realty Resources (IRR) is the largest independent commercial real estate valuation and counseling firm in North America, with 66 offices in 34 states and more than 200 Members of the Appraisal Institute (MAI) who are among its more than 900 employees across the United States and the Caribbean. IRR combines the intimate market knowledge of well-established local valuation and counseling experts with the powerful resources and capabilities of a national company. IRR offers its clients integrated technology, national data and information systems, and standardized valuation models and report formats for ease of review and analysis. An MAI- designated senior managing director runs each of IRR’s offices; the directors on average have 25 years of commercial real estate experience in their local markets. Founded in 1999, the IRR specializes in real estate appraisals, feasibility and market studies, expert testimony, and related property consulting services. Many of the nation’s largest and most prestigious financial institutions, developers, corporations, law firms, and government agencies are among its clients. For more information, visit www.irr.com or blog.irr.com. A listing of IRR’s local offices and their Senior Managing Directors follows: ATLANTA, GA - Sherry L. Watkins., MAI, FRICS AUSTIN, TX - Randy A. Williams, MAI, SR/WA, FRICS BALTIMORE, MD - G. Edward Kerr, MAI, MRICS BIRMINGHAM, AL - Rusty Rich, MAI, MRICS BOISE, ID - Bradford T. Knipe, MAI, ARA, CCIM, CRE, FRICS BOSTON, MA - David L. Cary, Jr., MAI, MRICS CHARLESTON, SC - Cleveland “Bud” Wright, Jr., MAI CHARLOTTE, NC - Fitzhugh L. Stout, MAI, CRE, FRICS CHICAGO, IL - Eric L. Enloe, MAI, FRICS CINCINNATI, OH - Gary S. Wright, MAI, FRICS, SRA CLEVELAND, OH - Douglas P. Sloan, MAI COLUMBIA, SC - Michael B. Dodds, MAI, CCIM COLUMBUS, OH - Bruce A. Daubner, MAI, FRICS DALLAS, TX - Mark R. Lamb, MAI, CPA, FRICS DAYTON, OH - Gary S. Wright, MAI, FRICS, SRA DENVER, CO - Brad A. Weiman, MAI, FRICS DETROIT, MI - Anthony Sanna, MAI, CRE, FRICS FORT WORTH, TX - Gregory B. Cook, SR/WA GREENSBORO, NC - Nancy Tritt, MAI, SRA, FRICS GREENVILLE, SC - Michael B. Dodds, MAI, CCIM HARTFORD, CT - Mark F. Bates, MAI, CRE, FRICS HOUSTON, TX - David R. Dominy, MAI, CRE, FRICS INDIANAPOLIS, IN - Michael C. Lady, MAI, SRA, CCIM, FRICS JACKSON, MS - J. Walter Allen, MAI, FRICS JACKSONVILLE, FL - Robert Crenshaw, MAI, FRICS KANSAS CITY, MO/KS - Kenneth Jaggers, MAI, FRICS LAS VEGAS, NV - Charles E. Jack IV, MAI LOS ANGELES, CA - John G. Ellis, MAI, CRE, FRICS LOS ANGELES, CA - Matthew J. Swanson, MAI LOUISVILLE, KY - Stacey Nicholas, MAI, MRICS MEMPHIS, TN - J. Walter Allen, MAI, FRICS MIAMI/PALM BEACH, FL - Scott M. Powell, MAI, FRICS MIAMI/PALM BEACH, FL- Anthony M. Graziano, MAI, CRE, FRICS MINNEAPOLIS, MN - Michael F. Amundson, MAI, CCIM, FRICS NAPLES, FL - Carlton J. Lloyd, MAI, FRICS NASHVILLE, TN - R. Paul Perutelli, MAI, SRA, FRICS NEW JERSEY COASTAL - Halvor J. Egeland, MAI NEW JERSEY NORTHERN - Barry J. Krauser, MAI, CRE, FRICS NEW YORK, NY - Raymond T. Cirz, MAI, CRE, FRICS ORANGE COUNTY, CA - Larry D. Webb, MAI, FRICS ORLANDO, FL - Christopher Starkey, MAI, MRICS PHILADELPHIA, PA - Joseph D. Pasquarella, MAI, CRE, FRICS PHOENIX, AZ - Walter ‘Tres’ Winius III, MAI, FRICS PITTSBURGH, PA - Paul D. Griffith, MAI, CRE, FRICS PORTLAND, OR - Brian A. Glanville, MAI, CRE, FRICS PROVIDENCE, RI - Gerard H. McDonough, MAI, FRICS RALEIGH, NC - Chris R. Morris, MAI, FRICS RICHMOND, VA - Kenneth L. Brown, MAI, CCIM, FRICS SACRAMENTO, CA - Scott Beebe, MAI, FRICS ST. LOUIS, MO - P. Ryan McDonald, MAI, FRICS SALT LAKE CITY, UT - Darrin W. Liddell, MAI, CCIM, FRICS SAN ANTONIO, TX - Martyn C. Glen, MAI, CRE, FRICS SAN DIEGO, CA - Jeff A. Greenwald, MAI, SRA, FRICS SAN FRANCISCO, CA - Jan Kleczewski, MAI, FRICS SARASOTA, FL - Carlton J. Lloyd, MAI, FRICS SAVANNAH, GA - J. Carl Schultz, Jr., MAI, FRICS, CRE, SRA SEATTLE, WA - Allen N. Safer, MAI, MRICS SYRACUSE, NY - William J. Kimball, MAI, FRICS TAMPA, FL - Bradford L. Johnson, MAI, MRICS TULSA, OK - Robert E. Gray, MAI, FRICS WASHINGTON, DC - Patrick C. Kerr, MAI, SRA, FRICS WILMINGTON, DE - Douglas L. Nickel, MAI, FRICS CARIBBEAN/CAYMAN ISLANDS - James Andrews, MAI, FRICS Corporate Office 1133 Avenue of the Americas, 27th Floor, New York, New York 10036 Telephone: (212) 255-7858; Fax: (646) 424-1869; E-mail info@irr.com Website: www.irr.com

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