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CARIBBEAN COMPARISONS - MARKET ANALYSIS
 

CARIBBEAN COMPARISONS - MARKET ANALYSIS

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This issue of our newsletter focuses on a comparison of Caribbean Islands around the Dominican Republic. Due to owner testimonials, it’s a bit longer than normal. I have spent a lot of time in ...

This issue of our newsletter focuses on a comparison of Caribbean Islands around the Dominican Republic. Due to owner testimonials, it’s a bit longer than normal. I have spent a lot of time in tropical locations in both the Pacific and Mediterranean, but my heart always brings me back to the Caribbean. It’s a special place for me because I love the water, weather, culture, and things to do. We all go through different phases in our lives, but there’s always time for the Caribbean Lifestyle. It’s not always about the bottom line! Although location, value and quality are important, it may not always be about that. Especially when comparing properties equal in location and quality. The decision to invest, then, may rely more on “what’s in fashion” than it does on economic or lifestyle conditions.
So is the Dominican Republic “In Fashion” now? Are people buying here because it’s in vogue? I don’t think so. Can that change? Yes!

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    CARIBBEAN COMPARISONS - MARKET ANALYSIS CARIBBEAN COMPARISONS - MARKET ANALYSIS Presentation Transcript

    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The luxury real estate industry is still showing an increase in sales globally. The market in the United States still shows continued signs of stabilization as prices continue to increase in many regions while listing inventories decline closer to more normalized levels. The international markets are still experiencing mixed results. Asian investors continue buying outside of their respective countries. The sales growth in the Bahamas and Bermuda continue. We are still waiting to see what will happen in the rest of the Caribbean and Latin America. Our focus in this newsletter is the Dominican Republic: what will happen both both this year and next? Caribbean Comparisons This issue of our newsletter focuses on a comparison of Caribbean Islands around the Dominican Republic. Due to owner testimonials, it’s a bit longer than normal. I have spent a lot of time in tropical locations in both the Pacific and Mediterranean, but my heart always brings me back to the Caribbean. It’s a special place for me because I love the water, weather, culture, and things to do. We all go through different phases in our lives, but there’s always time for the Caribbean Lifestyle. Best regards, William Holden Broker - Owner Cabarete Dominican Republic Sotheby’s International Realty Is the Dominican Republic Fashionable Right Now? It’s not always about the bottom line! Although location, value and quality are important, it may not always be about that. Especially when comparing properties equal in location and quality. The decision to invest, then, may rely more on “what’s in fashion” than it does on economic or lifestyle conditions. So is the Dominican Republic “In Fashion” now? Are people buying here because it’s in vogue? I don’t think so. Can that change? Yes! To find out reasons for this, we explored Caribbean islands around us that include the following: 1. 2. 3. 4. 5. The Bahamas Turks & Caicos Dominican Republic Puerto Rico St. Thomas Most of us agree that fashion is a fleeting thing. Sweaters and pants worn in school may not be in fashion now. The same applies to restaurants and bars: one week they may “in fashion” and the next week “out of fashion”. Sometimes people are just fickle. And at times, they may make decisions based on fashion rather than common sense. However, fashion may not always be correct in the long run. That’s why some people prefer classic because it seems to never go out of style. Believe it or not, I think Caribbean Islands may be subject to the same type of fashion seeking. If this is the case, it is in our best interest to discover what is currently driving fashion. At the same time, we should promote classic features of the Dominican Republic that enhance the Caribbean lifestyle and experience. If we do that, I think common sense will return and put the DR back into fashion. CDR-SIR Page 1
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bahamas Flights - As you can see from the chart, flights to The Bahamas are frequent and relatively inexpensive. For example, there are 36 daily flights from Miami at $285. Compare that to Puerto Plata in the Dominican Republic where there is only 1 flight a day at $674, (which is a problem we are trying to address). Land Area: 3,888 sq.mi. Language: English Population: 316,182 The Bahamas is one of the wealthiest Caribbean countries with an economy heavily dependent on tourism and offshore banking. Tourism together with tourismdriven construction and manufacturing accounts for approximately 60% of GDP and directly or indirectly employs half of the archipelago's labor force. Prior to 2006, a steady growth in tourism receipts and a boom in construction of new hotels, resorts, and residences led to solid GDP growth. Since then tourism receipts have begun to drop off. The global recession in 2009 took a sizeable toll on the Bahamas, resulting in a contraction in GDP and a widening budget deficit. The decline continued in 2010 as tourism from the US and sector investment lagged. Property Values Values for villas range from $2,000 to $8,000 per sq. meter with an average of $6,000 /m2. Ocean-front condos average $5,000 /m2. Vacant residential land ranges in price from $50,000 to $2 Million. Building costs are $3,000 to $3,500 per square meter. Bayroc - $1.1 Million ($5,392 /m2) Financial services constitute the second-most important sector of the Bahamian economy and, when combined with business services, account for about 36% of GDP. The financial sector, however, is currently smaller than it has been in the past because of the enactment of new and stricter financial regulations in 2000 that caused many international businesses to relocate elsewhere. Manufacturing and agriculture combined contribute approximately a tenth of GDP and show little growth, despite government incentives aimed at those sectors. Overall growth prospects in the short run rest heavily on the fortunes of the tourism sector. Source: Know Your Country This gated beachfront condominium has 3 bedrooms with 3-½ baths in 204 m2 (2,200 s.f.) of living space. It has spectacular ocean views, a wrap around balcony, and is only a few walking steps down to the white sandy beach. Amenities include two swimming pools, waterside gazebo, and tennis courts. Ocean Club - $5.9 Million ($6,351 /m2) This colonial style villa contains 6 bedrooms with 7-½ baths in 929 m2 (10,000 s.f.) of living space. It is situated in Ocean Club Estates, which features an 18hole Championship golf course designed by Tom Weiskopf, tennis courts and a private beach club on the world-famous Paradise Beach. Operating Costs Owner Fees generally range between $7 to $10 per square foot, per year. Thus, a 1,000 square foot unit (100 m2) would have an annual cost of $10,000 and a monthly fee of $833. By the same token, a 3,000 s.f. unit (300 m2) could have a monthly fee of $2,500 per month. This does not normally include insurance or electricity. CDR-SIR Page 2
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asian influences are seen in the raised wooden entrance and the outdoor walkways, as well as the beachfront gazebo facing the sunrise for yoga, reading, or meditation. Native coralina floors containing dramatic shell shaped fossils paired with local river stone inlays inspire you to relax and live in harmony with the sound of the ocean. Dominican Republic Land Area: 18,680 sq.mi. Language: Spanish Population: 10,088,598 The Dominican Republic is not a major regional financial center, despite having one of the largest economies in the Caribbean. It has long been viewed primarily as an exporter of sugar, coffee, and tobacco, but in recent years the service sector has overtaken agriculture as the economy's largest employer. This is due to growth in telecommunications, tourism, and free trade zones. The economy is highly dependent upon the United States, the destination for nearly 60% of exports. Remittances from the US amount to about a tenth of GDP, equivalent to almost half of exports and three-quarters of tourism receipts. Property Values Values for villas range from $1,500 to $5,000 per sq. meter with an average of $2,500 /m2. Ocean-front condos average $3,500 /m2. Vacant residential land ranges in price from $50,000 to $2 Million. Building costs are $1,000 to $1,200 per square meter. The country suffers from marked income inequality; the poorest half of the population receives less than one-fifth of GDP, while the richest 10% enjoys nearly 40% of GDP. High unemployment and underemployment remains an important long-term challenge. The Central AmericaDominican Republic Free Trade Agreement (CAFTA-DR) came into force in March 2007, boosting investment and exports and reducing losses to the Asian garment industry. The growth of the Dominican Republic's economy rebounded in 2010 from the global recession, and remains one of the fastest growing in the region. Harmony - $775,000 ($2,947 /m2) This beach-front condo is one of the most exclusive addresses in Cabarete. It has 3 bedrooms, 3 baths and contains 263 m2 (2831 s.f.) of living space. A spacious media room can be set up as a den or fourth bedroom. Each building has an elevator and only 2 residences per floor. Source: Know Your Country Flights - There is only one flight a day to Puerto Plata in the DR at a cost of $674 (which is a problem we are trying to address). For comparison, the multiple flights to Nassau are $285, and to St. Thomas (even greater distance) are $374. Similarly, the flight from New York to Puerto Plata (not on American) costs only $527. Moreover, the flight from NYC to San Juan is only $309. Villa Windsong - $3.6 Million ($4,235 /m2) This beach-front villa located in Sea Horse Ranch contains 6 bedrooms - 7 baths in 850 m2 (9,149 s.f.) of living space. A tropical masterpiece where the line between outdoor and indoor living disappears creating an ambiance of nature and enjoyment rarely available in residences anywhere around the world. Operating Costs Owner Fees generally range between $2 and $3 per square foot, per year. Thus, a 1,000 square foot unit (100 m2) would have an annual cost of $2,500 and a monthly fee of $208. By the same token, a 3,000 s.f. unit (300 m2) could have a monthly fee of $625 per month. This does not normally include insurance or electricity. CDR-SIR Page 3
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Turks & Caicos Land Area: 166 sq.mi. Language: English Population: 46,400 The Turks and Caicos are a British Overseas Territory consisting of the larger Caicos Islands and the smaller Turks Islands. The whole island group is geographically contiguous with the Bahamas, but they are politically separate. The economy is based on tourism, offshore financial services, and fishing. Most capital goods and food for domestic consumption are imported. The US is the leading source of tourists, accounting for more than three-quarters of the 175,000 visitors that arrived in 2004. Major sources of government revenue also include fees from offshore financial activities and customs receipts. Property Values Values for villas range from $2,000 to $11,000 per sq. meter with an average of $6,000 /m2. Ocean-front condos average $5,000 /m2. Vacant residential land ranges in price from $50,000 to $2 Million. Building costs are $3,000 to $3,500 per square meter. This gated beachfront condominium has 2 bedrooms with 2-½ baths in 177 m2 (1,909 s.f.) of living space. It enjoys stunning views of the beach and reef beyond from its preferred corner positioning, complete with sliding pocket doors. A bonus 2010 Jeep Wrangler in excellent condition is included in the price. The total population is about 46,000, and approximately 27,000 live on Providenciales in the Caicos Islands. There are world class hotels, spas, restaurants, and stretches of uncrowded beaches and vibrant coral reefs. Things to do include golf, diving, snorkeling, water sport, “flow-riding”, bird-watching, island tours, and Humpback Whale watching. The Windsong Resort is a truly refreshing boutique property, and the exclusive Turks and Caicos member of Preferred Boutique Hotels. It is situated on 435 feet of prime beach frontage on world-famous Grace Bay, and directly on the island’s best coral reef, A great number of tourists who visit the Turks and Caicos Islands are Canadian. Owing to this, some politicians in Canada and the Turks and Caicos have suggested some form of union between Canada and the British territory. Source: Know Your Country Flights - There are numerous moderately priced daily flights. As an example, there are 8 daily flights from Miami at an average fare of $496. Compare that to Puerto Plata in the Dominican Republic where there is only one (1) flight a day at a cost of $674 (which is a problem we are trying to address). Grace Bay - $1.1 Million ($6,186 /m2) Operating Costs Azure Villa - $6.0 Million ($10,772 /m2) This beach-front villa contains 5 bedrooms with 4-½ baths in 557 m2 (6,000 s.f.) of living space. From southern entrance to northern exit it is a seamless indoor / outdoor living experience. It has an 18 ft high, 37 ft wide fully retractable glass wall, and a 27 ft exposed beam vaulted ceiling. Owner Fees generally range between $10 to $15 per square foot, per year. Thus, a 1,000 square foot unit (100 m2) would have an annual cost of $15,000 and a monthly fee of $1,200. By the same token, a 3,000 s.f. unit (300 m2) could have a monthly fee of $3,600 per month. This does not normally include insurance or electricity. CDR-SIR Page 4
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Puerto Rico Land Area: 3,459 sq.mi. Language: English+Spanish Population: 3,998,905 The Commonwealth of Puerto Rico is a possession of the United States. It consists of Puerto Rico plus the adjacent islets of Vieques, Culebra, and Mona. Puerto Rico has a mountainous, tropical ecosystem with very little flat land and few mineral resources. Under the Commonwealth formula, residents of Puerto Rico lack voting representation in Congress and do not participate in presidential elections. As U.S. citizens, Puerto Ricans are subject to military service and most federal laws. Residents of the Commonwealth pay no federal income tax on locally generated earnings, but Puerto Rican government income-tax rates are set at a level that closely parallels federal-plus-state levies on the mainland. Property Values Values for villas range from $2,000 to $13,000 per sq. meter with an average of $6,000 /m2. Ocean-front condos average $5,000 /m2. Vacant residential land ranges in price from $50,000 to $2 Million. Building costs are $2,000 to $3,000 per square meter. Westward of Condado Beach is the newly developed, luxury high-rise district of WeCo. Each of the 4 luxury skyscrapers offers unique opportunity, representing the trend in lifestyle evolution for Puerto Rico in the 21st century. Built in 2007, Caribe Plaza offers 1 apartment per floor, private foyer from elevator access, leveled garage parking, doorman service and facilities management. Lofty, light filled and modern, this 14th floor unit has south western exposure, overlooking the San Juan lagoon, ocean and city skyline. Floor to ceiling windows highlight the living with extended overhang terrace, dining and den. Puerto Rico is a major hub of Caribbean commerce, finance, tourism, and communications. San Juan is one of the world's busiest cruise-ship ports, and Puerto Rico's standard of living continues to be among the highest in the Western Hemisphere. Its future political status, however, remains unclear. Source: Know Your Country Macleary - $5.0 Million ($12,919 /m2) Flights - There are numerous flights to San Juan from Miami at a cost of $266. Compare that to Puerto Plata in the DR where there is only one (1) flight a day at a cost of $674 (which is a problem we are trying to address). Also note that the 4 hour flight from New York to San Juan is only $309, which is twice the flying time and half the price of the flight from MIA to POP. Lofty in Weco - $2.1 Million ($5,775 /m2) This villa contains 6 bedrooms and 3-½ baths in 387 m2 (4,163 s.f.) of living space. A strikingly beautiful Condado Beach home, the property was designed by renowned architect Pedro Adolfo de Castro, whom has several works registered with the US National Registry of Historic Places. Operating Costs Owner Fees generally range between $10 to $15 per square foot, per year. Thus, a 1,000 square foot unit (100 m2) would have an annual cost of $15,000 and a monthly fee of $1,200. By the same token, a 3,000 s.f. unit (300 m2) could have a monthly fee of $3,600. This does not include insurance or electricity. CDR-SIR Page 5
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . St. Thomas This distinctive and unique home is the perfect option for a permanent residence or your island oasis holiday home. Conveniently located in a gated community on the east end of St. Thomas, "Sea Glass" is just minutes away from Red Hook restaurants, shops and access to world renowned fishing grounds and sailing in the BVI. Land Area: 3,459 sq.mi. Language: English Population: 3,998,905 St. Thomas is part of the U.S. Virgin Islands which also includes St. Croix and St. John. St. Thomas was chosen for this newsletter because it is the only island with an airport large enough to service commercial wide-body aircraft. The sailing crowd to the British Virgin Islands to the east generally comes from San Juan. Sailing to the BVI from the east side of St. Thomas is also possible. Tourism is the primary economic activity and accounts for 80% of GDP and employment. The islands host nearly 3 million visitors a year. The manufacturing sector consists of petroleum refining, rum distilling, textiles, electronics, pharmaceuticals, and watch assembly. One of the world's largest petroleum refineries is at St. Croix. Property Values Values for villas range from $2,000 to $9,200 per sq. meter with an average of $6,000 /m2. Ocean-front condos average $5,000 /m2. Vacant residential land ranges in price from $275,000 to $2 Million. Building costs are $2,500 to $3,500 per square meter. The agricultural sector is small, with most food being imported. International business and financial services are small but growing components of the economy. The islands are vulnerable to substantial damage from storms. The government is working to improve fiscal discipline, to support construction projects in the private sector, to expand tourist facilities, to reduce crime, and to protect the environment. Source: Know Your Country Flights - There are numerous flights to St. Thomas from Miami for a fare of $374. Compare that to Puerto Plata in the Dominican Republic where there is only one (1) flight per day at a cost of $674 (which is a problem we are trying to address). Also note that the flight from New York to St. Thomas is only $428, which is farther, but much less than the cost from MIA to POP on AA. Cabrite Point - $649,900 ($5,284 /m2) This gated beachfront condominium has 2 bedrooms with 2 baths in 123 m2 (1,320 s.f.) of living space. It is close to beaches, restaurants, all the activities of Red Hook. It offers amazing views of St. John and the BVI. Newly remodeled kitchen and baths, new oceanfront decks, beautifully furnished and ready for entertaining. Sea Glass - $2.75 Million ($8,160 /m2) This beach-front villa contains 4 bedrooms with 4 baths in 337 m2 (3,625 s.f.) of living space. This fully refurbished beachfront home on a large multi-level lot has the rare advantage of a private dock and private boat mooring on Cowpet Bay. Renovated in 2011 with custom kitchen, high end appliances, new flooring. Operating Costs Owner Fees generally range between $7 to $10 per square foot, per year. Thus, a 1,000 square foot unit (100 m2) would have an annual cost of $10,000 and a monthly fee of $1,200. By the same token, a 3,000 s.f. unit (300 m2) could have a monthly fee of $3,600. This does not normally include insurance or electricity. CDR-SIR Page 6
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market Comparisons - (Tax Comparisons in Appendix) After talks with various brokers in the islands above, I discovered they are experiencing record years and real estate sales in the hundreds of millions of dollars. Along with that, they are experiencing incredibly more “Requests for More Information” than we are here in the Dominican Republic. To be clear, their marketing techniques are very similar to the ones we use here in the Dominican Republic. So what’s up with that? What amazes me is the high construction cost, high buying cost per meter, and the high cost of ownership in the English speaking Caribbean Islands. However, it is offset by lower air fares and the higher frequency of flights these other islands experience. Moreover, their overall tax structure is more favorable than ours in the Dominican Republic. So is that the difference? Or could it be negative perceptions about the Dominican Republic? Why else would people pay higher prices and higher operating costs when there is a tropical paradise just to the south with a warm and gracious culture that welcomes visitors and new residents with open arms. Tourism Conversion Based on interviews, it seems that the ratio of visiting tourists who wind up buying property is greater in the English speaking Caribbean Islands. This may vary, however, among the different resort areas of the Dominican Republic. PUNTA CANA - Many people who go to Punta Cana seem to think it is an island in itself... and not part of any country. In reality, it is not just a resort, but also a city with an exquisite lifestyle. As such, there is a high ratio of vacationers who turn into buyers. The Dominican Republic has all types of lifestyles ranging from resorts like Punta Cana and Casa de Campo to more private and varied lifestyles on the north coast. Plus, it has cosmopolitan and medical features that other islands may not have. SAMANA PENINSULA - Las Terrenas has beautiful beaches, great cuisine, lifestyle, activities, and local island color. Samana includes the Bannister Hotel and Marina, and developments with both mountain views and ocean views throughout the area. Many visitors become buyers in this wonderful tropical paradise. In addition, one thing that makes Punta Cana unique is their control over the international airport and the corresponding landing fees. And, they are fully aware that over-aggressive taxes on airline tickets could affect tourism. So, although they’re the only game in town, they do keep in touch with reality and continue to enhance their tourism business. In turn, this has a higher ratio of tourists who turn into high-end buyers. CASA de CAMPO - There is a high conversion rate of visitors to buyers in this resort. For some reasons why this is true, please see the Casa de Campo article in “News of Note” at the end of this newsletter. CONCLUSIONS - The Dominican Republic does not currently seem to be the fashion “hot spot” everyone is seeking at this time. However, it has all the classic elements needed to be be the next hot spot. As for the future, the Dominicans are a very intelligent people, and they are smart enough to know if policies are “killing the goose laying the golden eggs”. Thus, I don’t think there will be any continuous downward trend in market conditions, which were caused initially by a flat world-wide market, then an ensuing sluggish recovery. That being said, I think the DR is simply a year or two behind the growth being seen in other parts of the world and Caribbean. But that’s just me. How about owners and residents who have their own perceptions? For these insights, please see “Owner Testimonials” following the “Perceptions vs. Reality” section on the next page. CABARETE - Cabarete is well known for its water sports. Both Sosua and Cabarete are well known for nightlife. However, the kiteboarders on the beach nor the party goers at night do not seem to be turning into buyers right now. And if they do, we do not currently see a lot of these visitors purchasing higher priced properties as they have done in the past. CDR-SIR Page 7
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Is Perception Reality? Many people might say not to mention negatives, but I think some of the issues below need to be addressed. This is especially true if the negatives are perception only and have nothing to do with reality. At the beginning of this newsletter, I talked of fashion and it’s importance in some decision making. For example, I met with an investor who said he would never buy in the Dominican Republic because it was part of Haiti. To me, that’s like saying I would never invest in the USA because it’s part of Mexico. My point is that this decision not to invest here is not well founded. Quite simply, even though we share the same huge island (continent if you will), I don’t think the Haiti relationship is an issue from either an investment or lifestyle perspective. In fact, I have a personal respect for the Haitian people. They are hard working, in many cases multi-lingual, and have a great sense of family unity. Yes, they have made some mistakes with their own country, but that does not directly affect the Dominican Republic. The border between the two countries is extremely mountainous, and when allowed to enter the DR with proper documentation, the Haitian people can be great participants in both industry and society. There are many alternatives in the Dominican Republic if you don’t speak English. If you are a tourist, there is no problem because all the quality resorts have English speaking staff. This may also be true if you are an investor and own in an exclusive gated community where much of the staff speaks English. If this is not the case, there are still options. For not much money on a monthly basis, you can hire a full-time driver, maid, nanny, or landscaper who speaks English and they can be your personal family guide. The Dominicans are a very warm and gracious culture and welcome international guests with open arms. And, learning the local culture is part of the wonderful memories that can be gained by spending time in the Dominican Republic. Of significant importance to foreign investors is the fact that the professional attorneys and accountants speak both English and Spanish. In fact, they may become some of your best friends, and in addition, help in introducing you into the local society and culture. Yes, there is some crime and violence in the Dominican Republic. However, the perception is much more than reality. Moreover, can you tell me where there is no crime and violence? Like any country, crime and violence tend to be higher in larger cities where poverty might be higher and education levels lower. For me, there are certain sections of Miami or New York that I would never visit. But I love New York City and lived there for many years. Talk about fashion… New York is the place to be. Is there crime and violence in New York? You bet! Does that mean you won’t go there? Maybe so, maybe not. That’s up to you. But if you don’t, you will miss out on an incredible experience. So what about the Dominican Republic? Is crime and violence an issue? For those of us who know the country, and both live and invest here, we would emphatically say “NO”. Again, it’s still all about common sense. There are some places, and certain times of the day, that you may not want to go. However, can you walk along the beach with your family, or walk alone on the beach with a loved one with a full moon and feel safe… yes! They Don’t Speak English This perception has some reality to it. However, some people do speak English, some don’t … so what! Does that mean you won’t go to Paris or Rome because they don’t speak English. The reality is that you may lose more than you gain if you act negatively on perceptions. A fact is that I came here over ten years ago and did not speak a word of Spanish. Now I own many properties, run a successful business, and am very active in the local communities. I have also made life-long friends. Crime and Violence Haciendas El Choco - Villa 20 This is also true in gated resort or residential communities with world class security staff and procedures where children can play and have fun all day long. Please see the owner testimonials on the following pages to get their views on the DR. CDR-SIR Page 8
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owner Testimonials All of the properties shown here can be viewed in more detail by going to http://sothebysrealty.com and selecting Dominican Republic. Various owner’s of our properties listed for sale were asked the following questions: 1. 2. 3. 4. Why and when did you decide to invest in the Dominican Republic? Why did you choose the community where your property is located? What other places were considered when you made your decision? Why are you interested in selling your property now? (Answers Below.) Golden Dolphin - $10 Million ($4,305 /m2) We invested in the Dominican Republic because we have a Paso Fino horse farm in Florida and the DR is the foundation country for the Paso Fino horse. We chose Cabrera on the north coast for a variety of reasons. First, this area has San Diego type weather all year long and offers some of the best real estate investment opportunities. The beaches are similar to Hawaii and are considered to be some of the best in the world. As a side interest, we also have the ability to be involved with baseball on a year round basis. La Mulata 3 - $14.9 Million ($2,295 /m2) We were like-minded individuals living in South Africa and wanted to build a self-supporting community for all of our residents. We viewed the Dominican Republic as a paradise where we could have our independence, but also access to culture and other necessities. The community now has 19 residential villas and 5 auxiliary buildings on 89,135 square meters (22 acres). We are now ready to return to Europe and build another community there. Proximity to Playa Grande was also important to us. It is considered by many to be among the top 5 golf courses in the world. The Armani Hotel (now under construction by the Armani Hotel Group) and another large investment group from New York, have recently made significant investments in the North Coast of the Dominican Republic thereby amplifying the real estate development opportunities in the area. I am interested in selling now because I have other investments that need attention (some of which are in other parts of the DR). Because of my love for this country, I will always remain connected to her. Sunrise Villa - $4.9 Million ($5,274 /m2) We originally looked in the northern Michigan area in the USA, and Jamaica in the Caribbean. In addition, we had been visiting the Dominican Republic for several years. To us, the DR seemed to be a good, safe place to invest. Title insurance was available, crime was non-existent in most areas, and the DR was very popular with American tourists. In the year 2000, we saw land for sale in Cabrera on the north coast of the Dominican Republic. We loved the beach, proximity to town, and the natural beauty of the development. In our opinion, this was the best area in the DR, so in 2001, we became one of the first buyers in this new community and got our favorite site What we have built up over the years is truly unique. However, after nearly 20 years visiting the DR, and 13 years as a villa owner in Orchid Bay, its time for us to move on to the next chapter of our lives. CDR-SIR Page 9
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owner Testimonials (cont.) My children are now grown and have moved to the same area where they were raised outside of Philadelphia and, most of all, they all have provided us with grandchildren now. We prefer to be the grandparents who live down the street as opposed to the ones in a far away land. Villa Castellamonte has served its purpose for my family and close friends so now it is time to move on. Windsong - $3.6 Million ($4,235 /m2) In 1992, after visiting Mexico, Venezuela, Aruba and Hawaii, we found a refreshing vibe in Cabarete. We felt that Dominicans actually liked Americans and the values we represent, so we thought that the DR would be a unique place to have a second home. Contributing factors included the large size of the country, its climate, natural resources, stable economic status and trading links to the USA. Castellamonte - $4.25 Million ($3,053 /m2) My decision to invest in the Dominican Republic was heavily weighted by emotion rather than finance. The people of the country are its most valuable asset, and therefore, it was the open, friendly people with their thousand-watt smiles that attracted me to invest here. The Caribbean is full of beaches and warm weather but the DR is the only place you can enjoy these unique social interactions. We wanted to live on the north coast because the weather is best there. Cabrera is unique in that you face due east (even though on the north coast) so you can enjoy the trade winds all year around. Also, we were seeking a destination that was as far from the overcrowded all-inclusive resorts that we could get. It also came down to location. In 3 hours from New York, I have my toes in the sand, a cool beer in my hand, and watching the crazy, loving Dominican people do whatever it is that they fancy at that time. Hacienda el Choco # 20 $3.75 Million ($2,018 /m2) I have businesses in various locations, but I like the Spanish culture. I lived in Cuba for several years and moved to the Dominican Republic in 1999. I owned a house in Sea Horse Ranch for a while, but because I love flowers and gardening, we needed more space. So, we moved to Haciendas el Choco and built a 20,000 square foot villa on 15,000 m2 of land (3.7 ac) and now have beautifully landscaped gardens and manicured lawns. Now, at 77 years of age, our villa is simplyt too large for 2 people. We still love the DR and plan on moving to a smaller beach-front location. After purchasing a home and becoming apart of the local community, I eventually met my wife on the beach. Over the past decade, we determined that the DR remains a great place to live, work and raise our two small children. We are joined by dozens of other American, Canadian and European families who share our commitment to providing our children with a balanced education in a safe environment. My wife and I have now lived our dream of designing and building our dream home and experiencing beachfront living. We raised our 19 year old son in the DR and he is off to college. We have two small children still at home and feel a smaller home would be a better fit for our family. CDR-SIR Page 10
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owner Testimonials (cont.) … the best views offered in Cap Cana and is close to the Marina and its numerous restaurants. We have our own private island beaches which are protected by the marina in and out canals. We are selling at this time because of partners who divorced and are no longer are interested in the partnership. We would consider bringing on additional partners because we believe Cap Cana, and Punta Palmera in particular, are poised for growth and appreciation. Sea Horse Ranch - $1.25 M ($2,599 /m2) Punta Palmera - $1.8 Million ($4,825 /m2) We started investing in the Dominican Republic in 2006 before the world-wide recession started in 2008. The reasons we invested, however, have not changed. The country continues to invest in it’s infrastructure to encourage foreign investment and facilitate tourism. It is a young democracy with potential for growth and the maturity of it’s economy. The DR is also a larger country than the other Caribbean islands and has diverse terrain that offers varied experiences and opportunities for exploration. We chose Cap Cana because of it modern infrastructure, beautiful beaches, and full-service marina. These aspects of our DR investment continue to be strong and remain the desirable features of this resort. We also love Punta Espada golf course which many call the best in the Caribbean. Our particular property, Punta Palmera, is located in one of the prime locations in the entire resort. It has some of … Villa Leeward - $995,000 ($1,653 /m2) I decided on Cabarete on the north coast of the DR because it has the best dinghy sailing venue in the world. It also has great weather year-round, including summers when the temperature go up five degrees. This is no issue because of daily cooling breezes. Good weather also promotes great golf, biking, water sports, and horseback riding. We love Haciendas el Choco because of the tennis courts, horse pastures, biking trails in El Choco National Park, and its privacy and tranquility. The daily breezes make the area at least three degrees cooler than the lower coastline. In 1994, we saw the DR as a large and fertile island country with a rich history and vibrant culture which differentiated it from other Caribbean islands where the only "industry" was tourism. We knew we would not be living full time in the DR, so the world class security in place like Sea Horse Ranch was a real selling point for us. We were drawn to the incredible water sports like windsurfing, kiteboarding and laser sailing. Cabarete actually hosts an Olympic laser sailing team that practices in these ideal conditions. The crescent shaped Cabarete Bay is protected by a reef that acts as a breaker to keep wave sizes down, but the east-west trade winds always brisk. We personally have enjoyed some of these sports and our children and their growing families always love to visit us for the recreation. So many of the things we do in the Dominican Republic just can’t be done in our home in the USA. The reason the we are selling our Sea Horse Ranch is that a family situation requires us to live in the US. CDR-SIR Page 11
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owner Testimonials (cont.) The Dominican Republic was also different because of its people. It is a very warm and gracious culture and they sincerely welcome us and make us feel at home. No matter where you go, you see smiley faces and laughter. Like anywhere else in the world, the larger cities may include people with their hands out and a possible scheme to take advantage of you. However, this is not the case in the local communities where people everywhere work hard and tend to their own families and responsibilities. All of the properties shown here can be viewed in more detail by going to http://sothebysrealty.com and selecting Dominican Republic. Harmony - $925,000 ($3,517 /m2) We originally fell in love with the Caribbean because we were sailors and sailed throughout the Virgin Islands, Leeward Islands, and the Grenadines. After spending so much time visiting there, we discovered something interesting: after about a week or so we started asking ourselves “is this all there is”? In other words, a secluded lagoon with white sand, aqua blue water and lush greenery was great when we first arrived… but it got old. We soon missed other cultural activities, community involvement and social life. Moreover, these outlying islands were difficult to get to and required extra “puddle jumper” flights to finally get to our destination. The DR, however, solved all that. In short, it’s not only a Caribbean island, but also a large country with non-stop jumbo jet flights, cities, mountains, world-class golf courses, and cultural centers -- all in addition to the white sandy beaches, private lagoons, and various other tropical paradises. Samana Bay - $790,000 ($2,200 /m2) Puerto Bahia - $875,000 ($2,500 /m2) We chose Puerto Bahia as the home for our catamaran sailboat. The waters of The Bahamas were too shallow and the winds too lite. The Virgin Islands were beautiful, but it was too crowded and difficult to fly back and forth to the USA. Puerto Bahia gave us the option of ocean sailing, but also the Bay of Samana which is like a large lake with ocean breezes and tons of private anchorages. The villa we own there is in the mountains above the marina and has spectacular views of the bay, but is just a few steps from the marina and hotel. After the downturn in Spain, I decided to invest in the Dominican Republic based on advice from my agent. My first investment was on the Samana Peninsula in 2005 where I bought 4 acres of land (16,000 m2). After evaluating most of the Samana Peninsula in detail, I chose this site near Punta Balandra because of location and whale watching features. I also felt that the road infrastructure was going to improve and a new international airport was coming. I bought another 80,000 m2 in 2006 next to my first purchase. As a developer, I am selling this villa to get ready to build the next one. CDR-SIR Page 12
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owner Testimonials (cont.) All of the properties shown here can be viewed in more detail by going to http://sothebysrealty.com and selecting Dominican Republic. views. In our opinion, the lower ocean front properties can be subject to salt air corrosion and also be at risk of becoming over crowded. At the upper levels, we are more secluded but with great views of both the ocean and mountains. Temperatures and breezes can also be more refreshing. I am now selling this villa because I am ready to build the next one. I’m selling now because I am in the process of expanding my business from Chicago to Arizona and California. Unfortunately, I don’t have the time to enjoy this wonderful place anymore. I still feel that the D.R has a lot to offer; for tourists or anyone who wants to retire or just spend time to get away and relax. So, right now is a great time for rental income and the outlook for the area seems to be strong. Panorama Village - $890,000 ($1,424 /m2) I was born in the Dominican Republic and our family started investing in real estate on the north coast of the Dominican Republic in 1989. I generally like land. Land is much cheaper to maintain and has a higher appreciation than buildings. My passion is also for construction. I enjoy creating beautiful spaces for people to enjoy, and in the process, creating some income for me along the way. Our first investments have grown through reinvestment in various other properties. Sometimes, we improve existing houses and hold them for resale. I have considered ocean front properties in the past, but I like to have some control of my surroundings. Therefore, we prefer developing more up in the hills with panoramic ocean Harmony - $775,000 ($2,947 /m2) I looked at Florida, the Caymans, Turks & Caicos, and many other Caribbean islands, but nothing could compare to what I could get for my dollar in the D.R. Moreover, I have traveled around a lot of places in the world and the Dominican Republic has the nicest people I have ever met. It was also a place I felt safe and could enjoy time with my family. Harmony Condominiums are right on the beach in Cabarete and represent quality of construction not even matched in the United States. I chose this site because it is in walking distance to everything. The crescent shaped bay is great for all water sports and the reef protecting the bay make it safe and fun. Casa Sea Dog - $495,000 ($2,134 /m2) I bought The Sea Dog Inn in 2000. I wanted my home to be on a small quaint town, away from the crowds and right on the ocean. I had been all over the island but Cabrera was the only place I considered buying a property. The area is very safe and I felt I could enjoy it with my family and feel secure. There is also a lot to do in the area such as waterfalls, beaches, golf and freshwater lakes and springs. I am selling the house because it is now too big for me. When I purchased it, I had two partners, but they have since moved on. CDR-SIR Page 13
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owner Testimonials (cont.) I am selling this penthouse because of changing family considerations. The children are grown and living elsewhere in the world, and we regrettably do not use the apartment as much. Bannister - $195,000 ($3,197 /m2) Pelican Beach - $575,000 ($2,246 /m2) My interest in the Dominican Republic started in 1982 and then in 1985 I acquired an 86,000 square meter property property in Cabarete. I chose this site because of its location on the beach and its proximity to the quaint and attractive village of Cabarete. My intention was to develop a vacation-ownership resort similar to the one I had developed in St.Maarten: Pelican Resort & Casino. The plan of developing this resort was abandoned, however, due to the changing world market and difficulty in obtaining financing for such a large project. I then sold off the property in parcels, and eventually a hotel, Harmony and Ocean One Condominiums were developed. On the last two parcels, I developed Pelican Beach Condominiums in 2007. I kept one of the penthouses for private use. In total, the project contains 16 apartments in one 3-storey building. Ocean One - $465,000 ($2,193 /m2) We purchased this property pre-construction and it has been a great rental property for us. It is second row from the beach and only seconds to the beach. We like it because being directly on the beach can be windy at times. Also, we like second-row because there is less salt air and corrosion on our appliances and fixtures. We are selling this property because we already have multiple properties on the north coast and would like to diversify and purchase something on the east coast, in either Casa de Campo or Punta Cana. We love the DR and its people. The people are part of our great experiences here. We purchased this condominium pre-construction, along with a boat slip in the marina and a mountain villa above. For years, we kept our 47’ catamaran sailboat in the marina, but just recently sold the boat. Therefore, we are selling both the condo and the boat slip, but keeping the mountain villa. We are selling because we are in the equestrian lifestyle now and would like to purchase a 15-acre ranch nearby. The Dominican Republic is such a beautiful place for ranches, horses, dressage, trail riding, cross-country eventing, and polo. We love the all year-round great riding conditions and hate it when we see horses to the north buried in snow. All of the properties shown here can be viewed in more detail by going to http://sothebysrealty.com and selecting Dominican Republic. CDR-SIR Page 14
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recent - “News of Note” Sosua & Cabarete in Top 10 Retirement List. Writing for USNews, Kathleen Peddicord includes Sosua/Cabarete, Dominican Republic in her list of top 10 beach places for retirement around the world. “Where the verdant green jungle hills slope into the crystal-blue waters off the north coast of the Dominican Republic rest the sand-fringed towns of Sosua and neighboring Cabarete. These are beachfront utopias. There are no high-rise towers, no big crowds and no worries. Life here is all about enjoying what mother nature has created in this world-class coastal spot,” she writes. She says that expat communities in the area are established and expanding and more planned developments are under way to cater to them. She says the range of options go from luxury planned communities with houses selling for US$800,000 to more affordable options prices in the US$130,000 lows. DR Gets 3% Tourism Growth in 2013. Santo Domingo.- Dominican Republic tourist arrivals in 2013 posted a 3% growth over 2012, while 2014 will be an “unprecedented” 5th consecutive year with even higher regional and global growth figures than the past two years. Tourism minister Francisco Javier García said the already operational cruise terminal at Maimon will boost Puerto Plata’s development as a tourism destination, with around 600,000 cruise ship visitors expected the first year. “This year will be historic for the country’s tourism, with Puerto Plata province’s long- awaited opening of Amber Cove, Maimon’s cruise terminal, this will mean this region’s final awakening, with the benefit of thousands of jobs that this terminal will create.” Punta Cana’s Airport Receives Top Rating. Punta Cana’s international airport handles more than 60% of all tourists traveling to the Dominican Republic by air. This year, during the January-October period, the airport terminal handled 63.4% of all arrivals, in comparison to 61.34% registered during 2012. The terminal has managed to reduce the turn-around time Condor flights to 1.5 hours, instead of the two hours it previously took to carry out the operation. In comparison with other airports, the time reduction has meant important savings for the airline. Other important points taken into consideration by the airline prior to determining the best international facilities where it operates: load factor (percentage of seats occupied), airport’s organization and efficiency, ramp services that facilitate passenger boarding, unloading of luggage, cleaning services, fuel supply, water and food, among others. New Flights to Puerto Rico from Puerto Plata & Samana. After Air Turks & Caicos recently unveiled its new name change to Inter-Caribbean Airways, the company announced its flights to and from San Juan, Puerto Rico, effective January 20, 2014. The new air service schedules connect San Juan with non-stop flights to Puerto Plata and to Samana in the Dominican Republic and additional flights from Puerto Plata to Providenciales, Turks and Caicos Islands. The company said that traveling from the Dominican Republic is now affordable and available to business and leisure travelers with the introduction of these new routes. DR’s East Region Beltway Now Complete. The Beltway completes the highway route from Santo Domingo to Punta Cana, and includes the Eastern Motorway and the Coral Highway. Public Works minister Gonzalo Castillo said the artery’s opening gets the country even closer to receive Medina’s proposed 10 million tourists per year. Casa de Campo Captures World Travel Awards. Casa de Campo, the number-one resort in the Caribbean with the finest golf in the region, had its international reputation validated at the recent 2013 World Travel Awards. At the awards’ Caribbean and North American Gala, Casa de Campo won the top award in 4 categories: • World’s Leading Golf Resort 2013 • Caribbean’s Leading Golf Resort 2013 • Dominican Republic’s Leading Golf Resort 2013 • Dominican Republic’s Leading Resort 2013 Casa de Campo also was nominated in the category of Caribbean’s Leading Resort and in the category of World’s Leading Sports Resort, a title it has won 10 times in the 12 years it has been awarded. Casa de Campo is known for The Sporting Life as it show cases world-caliber facilities and instructors from the equestrian, tennis, shooting and golf worlds. The World Travel Awards, which for 20 years have been recognized around the globe as the travel industry’s highest accolade, celebrate companies, organizations, and brands that “are pushing the boundaries of industry excellence in product and service.” DR 6th in Tourism and 14th in Trade. Madrid - Bloom Consulting announces the release of its Bloom Consulting Country Branding Ranking © 2013. The top 5 in tourism were the USA, Mexico, Canada, Argentina, and Brazil. The top 5 in trade was the USA, Canada, Brazil, Mexico, and Chili. The Cayman Islands is a new country to appear in the top 10 and the only country representing the Caribbean. CDR-SIR Page 15
    • William Holden, CCIM / Broker - Owner William F. Holden, CCIM - is the President and Founder of Cabarete Dominican Republic Sotheby's International Realty. His background is varied and brought him to where he is today. For 37 years, William was an airline captain. He started with Trans World Airlines (TWA) and spent later years as a captain for American Airlines. During those years as a pilot, he was also a real estate developer in Vail, Colorado, USA (1972 to 1986). During that time, he developed multi-family condominiums in a ski resort and golf course setting. In addition, he acted as general contractor, marketing director, sales manager and property manager for all properties he developed. From 1986 to 2001, William was an appraiser in St. Louis, Missouri, USA. He primarily did appraisals and investment analysis on shopping centers, office buildings, industrial office warehouses, and residential apartment properties. From 2001 to 2005, William had an asset management company and provided mortgage financing and investment advising as a registered investment adviser with a Series 7 securities license. He also specialized in allocating IRA/401k retirement funds to investment real estate. www.cabareteDRsothebysrealty.com Appendix Below TAX COMPARISONS Tax comparisons for the islands discussed below are set forth on the pages below. Plaza Ocean One, No. 3318 Calle Principal, Cabarete, Puerto Plata Republica Dominicana c. 829-962.6644 o. 809.571.0072 usa 314.266.3488
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “Taxes of Note” NOTE: a professional attorney or accountant should be used for tax status or information. Bahamas - offer offshore financial sector freedom from corporate income, personal income, capital gains, withholding, estate taxes, and inheritance. However, income received in the Bahamas may be subject to the taxes in the country of origin. There are tax information exchange agreements (TIEAs) between the Bahamas and other countries. The financial sector advantages are supported by a strong respect for privacy, flexible exchange controls, geographical location and continued record of political stability. Government Tax Revenue derived from following sources: • Import and export duties • Property tax • Motor vehicles • Gaming tax • Tourism tax • Stamp tax • Company fees - B$50 Registration - B$600 Stamp - B$1,000 Annual License • Bank and trust company fees • Insurance company fees • Other fees, including business licence fees * * License Fees are levied on businesses at varying percentage rates or amounts based on business classification and turnover. Source: Know Your Country The general IRC rate is 29% for tax or 1% of the company's total assets (after deducting depreciation) or 1.5% of the gross sales (after deducting discount and devolution). Companies will pay monthly advance taxes (1/12th) of the equivalent of the amount paid as taxes from the prior year and, at the end of the year, it should match the aforementioned 29% or 1% calculated taxes. When the taxes for the current year are calculated, the monthly payment is compensated in the following period. If monthly payment was below, then the corporation completes the payment. Tax payments for current year are based on the previous tax year's liability less any tax withheld at source. This amount is limited to the higher of the prior year tax (for those with turnover) paid in 12 instalments or one percent of total assets. Capital Gains Tax - The gain (or loss) is calculated on difference between the sale of assets proceeds and cost, which may be adjusted for inflation effects. Gains realized on disposal of shares by qualified holding companies are not subject to taxation. However, capital losses with sale of shares, as well as interest on loans to purchase shares, are not deductible for ISR purposes. Sales Tax (VAT) - The standard rate is 18% (except for some products sold in supermarkets where the rate of tax from January 2013 is 8%). Personal Taxes - Income Tax is payable by individuals on income obtained from employment, a business, independent profession, investment income, immovable property, capital gains, pensions, and betting and gambling profits. Resident and non-resident individuals are subject to income tax on Dominicansourced income only as follows: Source: Know Your Country Dominican Republic - Resident or branch corporations subject to Dominican Corporate income tax (ISR) on local income (only) or income generated by activities within country. Non-resident companies also pay ISR on income sourced in Dominican territories where there is an absence of a permanent business. The Resident Corporation in the Dominican Republic will withhold 29% of the payment for items including publicity, royalties, interest (10% from overseas banks), etc. Below 399,923.00 ……... 399,923.01 to 599,884.00 599,884.01 to 773,173.00 Over 833,171.01 ………. 0% (Approximately below US$10,000) 15% amount > RD$ 399,923.01 RD$29,994.00 + 20% on amount > RD$ 599,884.01 RD$76,652.00 + 25% on amount > RD$833,171.01 For Example: RD$833,171 is approximately US$19,837. So, based on an exchange rate of 42 pesos to the dollar, the personal tax would be US$1,825. And based on the above, the tax would be 25% on anything earned above approximately US$20,000. CDR-SIR Page A-1
    • > WINTER EDITION 2014 NEWS AND INFORMATION ON LIFESTYLES,AND THE REAL ESTATE MARKET FROM CABARETE DOMINICAN REPUBLIC SOTHEBY’S INTERNATIONAL REALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “Taxes of Note” (cont.) NOTE: a professional attorney or accountant should be used for tax status or information. Turks & Caicos - The Turks and Caicos Islands are a tax neutral jurisdiction. There are, therefore, no income or capital gains taxes. Corporations doing business in the Islands are not subject to any form of taxation on income or gains. The only direct taxes imposed on any person or corporation are customs excise duties on the importation of goods into the Islands and ad valorum stamp duties on the consideration passing on the sale of real estate. In addition to enjoying benefits of being incorporated in a tax neutral jurisdiction, an International Business Company (IBC/exempt company) is provided with a written guarantee by the Governor on incorporation, on behalf of the Government of the Islands, that the IBC will not be liable for a period of 20 years to pay any taxes that may be imposed in the future. Value Added Tax - The rate is 11% on all taxable supplies of goods and services. It is a tax on the supply of most goods and services in the Turks & Caicos islands (TCI) by VAT registered taxpayers. VAT also applies to most imported goods and certain imported services. Source: Know Your Country Puerto Rico - Corporations organised or created under the laws of the Commonwealth of Puerto Rico are subject to tax on their worldwide income determined on a net profits basis. Puerto Rico corporations are subject to tax on a graduated tax rate structure: • a flat tax of 20% on the ‘normal-tax net income’ • a ‘surtax’ on the ‘normal-tax net income’: - Less surtax credit which is generally $750,000 - 25% on taxable income from $750,001 to $2,500,000 - 30% on taxable income in excess of $250,000,000. All corporations (with some exceptions) are subject to an alternative minimum tax if it results in a tax liability greater than the regular tax liability. Value Added Tax - It is imposed at a rate of 5.5% at the state level and 1.5% at the municipal level. The sales and use tax generally applies to all retail sales including mail order, sale of tangible personal property or services, admission fees, storage, use or consumption in Puerto Rico. Personal Taxes - Non-resident individuals are only required to pay tax on income from Puerto Rico sources. The tax rates for non-resident individuals with income effectively connected with a trade or business in Puerto Rico are the same as those for resident individuals. The income tax rates for individuals range from 7% on the excess of $5,000 of net taxable income to 33% on net taxable income in excess of $60,000. Individuals with adjusted gross income in excess of $150,000 are subject to an alternative basic tax if the amount of such tax is higher than the individual's regular tax. Source: Know Your Country St. Thomas - Although the Virgin Islands is a separate taxing authority, the US Internal Revenue Code is adopted as the income tax code of the Virgin Islands. The effect of this scheme is to create a taxing structure for the US Virgin Islands "mirroring" the provisions of the US federal tax code. An important factor in Virgin Islands taxation is whether, on the last day of the tax year, you are a bona fide resident of the Virgin Islands. If you are a bona fide resident of the Virgin Islands on the last day of the tax year, you must file your tax return on Form 1040 with the Government of the Virgin Islands and pay the entire tax due to the Virgin Islands. You do not have to file with the IRS for any tax year in which you are a bona fide resident of the Virgin Islands on the last day of the year, provided you report and pay tax on your income from all sources to the Virgin Islands and identify the source(s) of the income on the return. Source: Know Your Country “Personal” or ” Corporate” ? A qualified tax attorney should be consulted for advice on type of ownership, i.e. individual or through a corporation. Generally speaking, if a corporation is used, a Dominican corporation should be formed to abide more closely to local and national laws. It is possible, however, for a foreign corporation to be a shareholder in the Dominican company. Although there are tax considerations to consider when making this decision, there are liability factors to be considered as well. CDR-SIR Page A-2