NAI Global, the premier managed network of commercial real estate firms and one of the largest real estate services providers worldwide, announces its expansion of coverage into the Commonwealth of Puerto Rico, with the addition of NAI Puerto Rico.

Headquartered in San Juan, NAI Puerto Rico is a full-service commercial firm offering a complete range of real estate services including tenant representation, marketing research, location consulting, project management, lease renewals/restructures and acquisitions/dispositions

NAI Puerto Rico was founded by Hector J. Aponte SIOR, an industry veteran with over 15 years of experience in the commercial real estate industry. Hector has completed a wide array of major real estate transactions in Puerto Rico, for private and government clients such as Bayer, Sanofi, Publicis, ConAgra Foods, WPP, CSA Group, Marsh & McLennan, Starbucks Coffee, U.S. Army, IRS, and the EPA.

“By joining NAI, we are expanding our capabilities and resources to many international markets; this will definitely boost our services and will keep us on top,” said NAI Business Director, Mr. Hector J. Aponte. “NAI gives us new technology, tools, shared resources, marketing, and access to over 350 offices worldwide, which will enable us to develop new opportunities for clients looking for extensive representation or international resources.”

“This is a key market for us, especially for our corporate and investor clients seeking to take advantage of the commonwealth’s attractive tax policies,” said NAI Global President, Jeffrey Finn. “With Hector and his team at NAI Puerto Rico, we now have some of the best real estate experts in that region to serve our clients. I am excited about our new partnership and look forward to working together in the coming months and years.”

NAI Global is among the largest commercial real estate services organizations in the world, comprising 5,000+ professionals in 55 countries in more than 350 offices. NAI advisors such as NAI Puerto Rico work in tandem with its global management team to ensure clients strategically optimize their real estate assets. NAI offices complete over $45 billion in combined transactions annually and manage over 300 million square feet of commercial space.

NAI Puerto Rico is located at Ponce de Leon Avenue #1072, San Juan 00928

About NAI Global

NAI Global’s extensive services include corporate real estate services, brokerage and leasing, property and facilities management, real estate investment and capital market services, due diligence, global supply chain consulting and related advisory services. To learn more, visit www.naiglobal.com. Follow us on Twitter (@NAIGlobal) and Facebook.

However, it is not without issues to overcome – especially the lack of infrastructure and easy access to markets. For the past couple of decades these areas were not accessible due to the violence and therefore there was no opportunity to build a comprehensive road network. Nevertheless, “Where there’s a will there’s a way” seems to be Colombia’s motto.

A sad comment in the article is that most or at least many of the original individual landowners will not return to work their land; they are too scared from the previous presence of the FARC and the atrocities they committed. They will sell it and most will be purchased by large agro-industrial concerns.

Once the strong investment and activity really kicks in and foreign agro-industrial firms begin to acquire large swathes of land, it will be interesting to see how Colombia reacts to growing foreign land ownership. Will it move to promote jingoistic counter-actions as Brazil and Argentina have? These latter two countries have and are enacting laws to limit foreign ownership of agricultural land. I bet on the side of rational Colombian behavior.

 Across the region the strong growth projections with the subsequent healthy GDP and real estate absorption figures that were highlighted during the first nine months of the year continued through to year end. A Latin American and Caribbean growth rate for 2010 projected at the outset to be 4.3% turned out to be higher at 5.2%. However, for Latin America it was higher than that; unfortunately the percentage was brought down a little by the Caribbean’s slower activity. In South America the growth was 6.6%, bolstered largely by countries such as Brazil, Argentina, Uruguay, Chile and Paraguay. Throughout the region Peru led the economic growth in 2010 with 9.8%, followed by Paraguay at 9.7%, Uruguay with 9%, Peru with 8.6% and Argentina with 8.4%. Brazil grew 7.7% and Chile registered an increase of 5.3%. All these countries, and Colombia, Panama and Mexico, surpassed the projections set for them throughout the year.

 For 2011, the projected economic growth in the region is 4.2% as a result of a less optimistic stage for the international economy. However, prior to 2010 the projections were targeted at a lower level due to the same global economic sluggishness, so it will be interesting to see the figures after 2011. In the Caribbean the overall growth at year-end was registered at about 2.4% (again, that pesky lack of tourists, yet slowly recovering, is holding that percentage down), with some island nations recording negative rates. For the CARICOM countries (Barbados, Jamaica, Guyana, Trinidad and Tobago, Antigua and Barbuda, Bahamas, Belize, Dominica, Grenada, Haiti, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, and Suriname) the growth rate hovers around zero. A bright spot in this sub-region is the Dominican Republic, which experienced, according to government projections, growth above 7% in 2010. Unfortunately for Puerto Rico, it stays mired in the recession that has plagued it for several years. Most economists and residents believe that one year after the USA economy is operating on all cylinders, only then will the Enchanted Isle start its recovery.

In Latin America demand is strong largely in all sectors, except for tourism; it is slowly recovering in many countries. Generally the business hotel market in primary and secondary markets is seeing great interest and land acquisition is on the upswing by the more, as well as the less, recognizable brands. Interest in resort development across the region is patchy. Countries like Brazil, Panama, Colombia and Uruguay are seeing renewed strong interest due to their vibrant economies and strong economic base. Other countries such as Costa Rica, El Salvador and the Caribbean countries have yet to adequately catch this investment wave. Both second home sales and development in these latter countries and Mexico is yet to recover.

Demand across the other major commercial asset classes–office, industrial and retail – continued healthy through year-end and especially so in the retail sector. The growing consumer market kept pushing this sector to new highs in sales and development in all product types whether they were shopping malls, regional centres or high street locations. The office sector experienced healthy growth and demand. Sale and lease rates are beginning to feel upward pressure in some markets, but they have not yet begun to rise noticeably. The only notable exception to this observation is the São Paulo and Rio de Janeiro markets, which have had climbing lease rates in local currency and US$ for the last three years. The driving demand, due to the concentrated economic growth in those markets, and conjointly caused by the coming Olympics and World Cup are the prime drivers. The only notable possible exception to the observation of generally increasing lease rates across the region is that of Panama; within the next 12 to 18 months we may see a softening of prices, as currently there are 357,300 m2 of Class A space under construction, an amount greater than the total current inventory of all Class A in Panama City.

Although construction continues healthy, inventory cannot keep pace with demand. As noted in previous reports, supply still tends to lag demand in most cities–Rio de Janeiro and São Paulo stand out as prime examples–even though office construction activity is reaching new highs in some markets. As might be expected, the two largest countries and most active economies in the region, Mexico and Brazil, experienced the highest levels of development. Mexico City and São Paulo have a combined 2.7 million m2 under construction, while Rio de Janeiro has 420,000 m2 under construction. It is still too early to tell if the high construction in the latter two cities will help to alleviate the pressure on the swiftly rising prices. The vacancy average in the region is 7% with Rio de Janeiro having the lowest vacancy at .5% in spite of its tremendous construction activity.

Although vacancy overall in the region has increased approximately 4%, this is a healthy sign as developers are now trying to catch up to demand and this should help to restrain lease rates from increasing too much and too quickly. São Paulo and Rio de Janeiro captured the top spots as the most expensive office markets with Full Service Gross calculated rents achieving US$85 per m2. The industrial sector across the region is also experiencing much the same genre of activity as the office market, except that the industrial market is receiving even greater demand and the vacancies tend to be lower. Some might mention that there is a good supply of industrial product that is vacant; however, that is not Class A product designed and constructed to meet 21st Century requirements.

Development of industrial product is indeed growing, but it is still not enough in quantity and certainly is not enough in quality. Other than Mexico, this characteristic is prevalent throughout Latin America. Brazil is, perhaps, the local market most in need of Class A quality industrial product due to its high economic growth and lack of qualified developers. In other areas of the region, it is simply a question of a lack of experienced developers that can respond to the need of multi-national companies. Subsequently, many firms are forced to obtain Build to-Suit projects with their own capital and energies. However, this has helped to stimulate somewhat the Sale/Leaseback market, mostly benefiting local investors.

Real estate investment continued to increase and not just from domestic sources as was the case over the last year. Several international capital sources have now started to research and invest in the region, but mostly in existing product with little interest in Greenfield projects. The local markets are now beginning to get their due attention as safe, stable and capable of providing higher returns. (As mentioned in the past, it is important to comment that historically in the region financing was not easily available and very expensive – this is still the case. Therefore, real estate projects were and are developed on a mostly cash basis. This means that a tremendous amount of capital is being generated in-country to feed these numerous projects; a testament to the growing industries and economies.) Cap rates have not experienced any pressure to decline, with the exception of Brazil. It is difficult in the current climate to determine a stable range of cap rates since there is still no broad range of activity. They are mostly determined by “urgent” sales that are few and tend to higher and the ROR that local landlords are willing to accept (these tend to lower) before they will sell. There is a slight disconnect between the international investors’ cap rate sweet spot and that of the local landlords. Once the world markets are again stabilized, we should see that spread decrease and cap rates for investment grade product quality will drop to the 8% to 8.5% range where landlords are willing to sell.

NAI Global’s 2011 Global Property Prices & Trends report provides key demographic highlights along with current rental rates and investment yields for 140 global markets.  The report provides prime net rental rates, investment yields and rental rate comparisons by property type for Office, Retail and Industrial properties. 

The 2011 NAI Global International Property Guide provides insight into key local business customs and practices for 60 countries around the world.  The International Property Guide details acquisition and tenant costs, tariffs and landlord and tenant responsibilities by region and country. The publication is especially useful for corporate executives and investors that have an occasional need in an unfamiliar country as well as those negotiating simultaneous deals across multiple international markets.

 Both reports are available for free download on http://naiglobal.com/GlobalPubs/Default.aspx.  Headquartered in Princeton, New Jersey, NAI Global manages a network of 350 offices and 5,000 professionals in 55 countries across the globe.

With my respects to the author, these are neither signs of rising LatAm clout nor are they indications that the region’s governments are prepared to get actively involved in the world’s problems, unless those problems are directly domestic.

 For examples to support his premise, the author notes President Chavez’ self-designated role as arbiter for non-aligned, Third World wacko demagogues as a sign that Latin America has grown out of its old shoes. If anything, it is a reflection of President (cum all powerful ruler) Chavez’ expanding ego and his desire to impose his totalitarian will, rather than share a democratic state’s wish to better the world with their assistance. Additionally, the same could be said of ex-President Lula, but without all my loaded adjectives. These two people’s actions are not examples of a region slowly stepping out of their shell. They are representative of two egos wishing to impose their personas on the world. Chavez ego is undeniable. Without presenting examples ad infinitum, let’s use the most recent one. During the Tsunami reporting this last Saturday, while almost all Venezuela anxiously wanted to see what was occurring to those poor Japanese, Chavez made it a point to appear on television for several hours with one of his mandatory cadenas (all other programming on the boob tube is pre-empted while the Great Oz gives an appearance and pontificates.) El Caudillo cannot be upstaged! As for Brazil, now that Lula is gone, its sometimes awkward political presence on the world stage over the last six years seems to be an anomaly.  It is highly likely that President Roussef will neither be as aggressive nor play as visible a role on the world political stage as Lula did. She will be very pleased, Thank You, to focus on helping the country’s multitudinous poor rather than participating in ego aggrandizement.

 As for Latin America being so important on the world stage so that “even” China takes notice, it’s all about the money and brokering influence. Latin America, with few exceptions, is not married to any country. They just want to get along and get ahead. President Hu knows that and will carry his carpet bag where he can. As for the significance of President Obama’s visit to Latin America, he ignored the region and the pending free trade agreements for the first half of his presidency. This is nothing more than a chance to get a few more stamps on a passport and enjoy a series of nifty little photo opps so that he can boost his ratings at home. No doubt some work will be done to attend to lingering trade issues, but little noteworthy will come of his Magical Mystery LatAm Tour.

As for the growing presence of Latin America on the world stage, it is primarily due to the region’s growing economic and political stability that now allows for the exploitation of natural resources without fear of government intervention (respect for property rights) or random attacks from free-wheeling Marxist rebels.

 The fact is that much of Latin America is indeed “born again”; born with a healthy respect for its new constitutional tradition. And it certainly does feel much more autonomous economically and politically than in the past. However, the region is taking baby steps, albeit firm ones, in its new democratic nappies. Nevertheless, I have full confidence that for the majority of the Latin American countries their democratic institutions are firmly rooted and its peoples are on an epic Civics 101 learning curve. Others, unfortunately, like Venezuela, Nicaragua and Bolivia are replacing the firm soil with quicksand.

 He furthered that the limitation exists because Section 1031(h)(1), which was added to the I.R.C. in 1989,  states that “Real property located in the United States and real property located outside the United States are not property of a like kind.”  The issue is that when the term “United States” is used in a geographical sense, it is limited to the States individually and the District of Columbia. Therefore, any real estate located in Puerto Rico would not qualify as property of a like kind for purposes of Section 1031. This amazed me. After 18 years in Latin America and the Caribbean and having worked numerous assignments in Puerto Rico this is the first I had heard that.

 Well, then, I half-stated, half-asked, that means there are no 1031 possibilities in the other US Caribbean territories? Again my esteemed counselor had a surprising riposte for me. “Not so. Your client can acquire real property, under Section 1031 (h)(1) of the IRC, in the US Virgin Islands and even far off in the Pacific, in Guam, if he wants to.” This seemed confusingly bizarre to me until he explained further that …”due to special rules that exist under Sections 932 and 935, the United States Virgin Islands and Guam are treated as part of the United States. Thus, due to these special rules an exchange by a person of real property located in the United States for real property located in any one of these other possessions may qualify under Section 1031, provided other certain conditions are met. ” The trick is that the IRS specifically mandated that these last two territories do indeed fall under the auspices of the 1031 exchange regime. However, for whatever reason (whether by choice or lack of US territorial knowledge) they forgot good ol’ Puerto Rico. One would think that with the numerous Puerto Ricans residing stateside that sufficient demand for 1031 exchanges would be created so that the island would be added as an additional “exception.” Additionally, it certainly is not so far away as Guam.

 The difference in treatment between Puerto Rico and these other possessions raises the interesting question as to whether the I.R.C. should be amended to provide for a more fair treatment. But in the meantime, our client will have to lay “cash on the barrelhead” if he wishes to buy real property there.

Based in Santo Domingo, NAI Dominicana is a new commercial real estate firm formed by Andres Perez, CRS, GRI. Perez has been involved in commercial and residential real estate sales, financing and the capital market in Florida since 1984, where he specialized in foreclosure sales and procedures. He has been active in real estate in the Dominican Republic and throughout Latin America and the Caribbean region since 2004, and has trained more than 250 realtors during his career.

NAI Dominicana is a full-service firm providing comprehensive real estate services for corporate and investor clients, including leasing, sales, tenant representation, investment services, valuation, disposition, development analysis and due diligence. 

“We are pleased to add NAI Dominicana to our strong base of coverage in the Caribbean region,” stated David Berger, NAI Global Managing Director for Latin America & the Caribbean. “Andy is an experienced international operator. His market insight and extensive local relationships will be very valuable to our multinational clients with interests in the Dominican Republic.”

“Aligning NAI Dominicana with NAI Global connects us to the world’s most prestigious commercial real estate network, and gives our professionals a powerful platform to transact international business,” stated Perez, founder and principal of NAI Dominicana.  NAI is the first global real estate brand in the Dominican Republic, and NAI Dominicana is the only real estate firm in the Dominican Republic that can claim such international reach. 

NAI Dominicana is located at Paseo de los Locutores, Plaza de las Americas II, Local
Y 11A Piantini, Santo Domingo. For more information, visit www.naidominicana.com. Headquartered in Princeton, New Jersey, NAI Global manages a network of 5,000 professionals and 350 offices in 55 countries. NAI firms complete over $45 billion in transactions in a typical year, and manage more than 300 million square feet of commercial space worldwide.

NAI Global announced today it is expanding its coverage in Latin America with the signing of NAI Colombia Correa. Based in Bogota, Colombia, the firm serves clients with interests across Central America.

NAI Colombia Correa’s team of commercial real estate experts brings more than 30 years of experience and relationships across Colombia to the NAI Global network. The firm offers office, retail and industrial brokerage services, tenant and buyer representation, resorts and hospitality services, retail consulting and investment services to corporate space users and investors.

“NAI Colombia Correa has a strong presence in Colombia and is poised to grow at this crucial juncture in their country’s economic growth,” said NAI Global President & CEO Jeffrey M. Finn. “We are excited to work with a team with their impressive local reputation and expertise in brokerage and resort/hospitality services.”

“There are great business opportunities ahead of us in Colombia as multinational companies begin to notice our emerging market, coupled with an improving economy,” said Juan Camilo Correa, Business Director of NAI Colombia Correa. “As part of the NAI Global network, NAI Colombia Correa is ready to take our local expertise and international connections to the next level.”

NAI Colombia Correa is located at Calle 93B No. 17-62 in Bogota. Headquartered in Princeton, New Jersey, NAI Global manages a network of 350 offices and 5,000 professionals in 55 countries across the globe.

The World Economic Outlook forecast for some of larger economies in the region are: Peru at 8.3%; Chile at 5%; Mexico with 5% and Colombia with 4.7%. Among the sub-regions: South America as a whole is projected to grow by 6.3% (those Mercosur countries and Brazil in particular help to push that figure up); Central America is expected to have 3.1% growth and the Caribbean increase is marked for 2.4% (that pesky lack of tourists, yet slowly recovering, is holding that percentage down), with some island nations recording negative rates. For the CARICOM countries (Barbados, Jamaica, Guyana, Trinidad and Tobago, Antigua and Barbuda, Bahamas, Belize, Dominica, Grenada, Haiti, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines,  Suriname, Trinidad and Tobago – thank you Wikipedia), the growth rate will be around zero in 2010, rising to 2% in 2011. If the Caribbean situation is of greater interest to you, the IMF’s Mr. Terrier, senior advisor in the Fund’s Western Hemisphere Department said, “The lack of growth in the Caribbean reflects the negative impact of the world crisis further exacerbated by declines in remittances and tourism.” An interesting piece of information that the report goes on to share is that “…a 10% increase in tourist arrivals per capita can increase (a country’s) growth by 0.2%.”

Of course, as mentioned in previous blog articles, Venezuela is the sole country that is bucking the trend. It will have an anticipated economic contraction of 1.3%. The report also projected that the average inflation of the region in 2010 would be 6.1% which is up slightly from 6% last year. Venezuela helps to push this up a notch or two due to its 30%+ inflation levels, as does Argentina with 10.8% inflation. Inflation in 2011 is projected to decline to about 5.8%.

-David Berger

Based in Miami, David Berger is Managing Director for Latin America & The Caribbean region at NAI Global.

These responses astonished me for two reasons. First, it seems to me that the inverse of the results would be more applicable (that 41% would have a fear of general street crime and that 72% would fear crime at night). And secondly, that there is such a high number of people who are anxious about becoming a statistic. I have been to Panama many times for extended stays and I have never felt unsafe there. In fact, I have never seen any situation that would have made me feel at risk and neither do I get around with a chauffeured driver. I walk quite a bit both to meetings and during my free time and I even run in the streets at night. Additionally, my friends, colleagues and business contacts there have never even uttered a word about any concern for personal safety (oops, that may reflect their true feelings about me!). Further, many houses are not fenced in as in many other Latin American and Caribbean countries. Perhaps as a non-resident ignorance is bliss, but before venturing out I ask what the public safety situation is and I pay attention to the responses.

Regarding the Nuevo Herald’s article, I checked with my good friends at the Panama American Chamber of Commerce and they informed me that rates of street crime are actually quite low and that they do not view crime as a serious issue in Panama. Their quote to me about this subject is, “The American Chamber of Commerce and Industry of Panama notes that while crime—especially petty crime—is increasing, crime in general and violent crime in particular are low: considerably below levels in the U.S. and Canada. In Panama last year there were 6.2 crimes per 1,000 population (the U.S. rate was 80 per 1,000 and Canada’s was 75 per 1,000). Assaults ran at .9 per 1,000 population (the U.S. rate was 7.6 per thousand; 7.1 in Canada). As with any city, there are areas that one should not venture into at night and a few that are not great in the daytime either for non-residents. But in general, Panama is a safe country to visit and a delightful place to live.”  Given this “testimony” from the Panamcham, why is there a difference between perception and reality?

From my experience in Latin America and the Caribbean, the contrariety may be due to “relativity.” In the past, the sense of encroaching criminality was much less in many cities of the region. However, due to the growing urbanization and economic development over the last few years there has been a modest increase in small crime and/or the new urban development seems less friendly and more threatening. I witnessed this very phenomenon when travelling in Santiago, Chile three years ago. Several Chileans expressed their distress to me that now they had to lock their front doors at night, that before they never had to do that (unless an angry wife wanted to keep her carousing husband at bay at 3 a.m.!). For me, having to lock the doors is not so significant; but, to them it is a shockingly disagreeable shift in behavior and a sure indication of societal decay. As chance would have it, one of those same mornings while waiting at the hotel restaurant for a Chilean client (a people almost Swiss in their punctuality) I noticed the country’s early news report. Tragedy of all tragedies, the top News Alert was that during the previous night a thief had broken in to a small business and stolen 20 video cameras. It was treated with the same U.S. sense of urgency and importance as if someone had returned home to find a family member dead on the living room floor. Before I could mention to the waitress that the story was perhaps not as significant as the reporters were presenting it, she expressed horror that something like this should have happened…what has happening to Chile’s fine sense of civic responsibility. At the time I was slightly bemused by their innocence. Later, I realized sadly how those of us from first tier industrialized countries had allowed our expectations for public safety to drop so low.

-David Berger

Based in Miami, David Berger is Managing Director for Latin America & The Caribbean region at NAI Global.