Panama Investor Blog

And the good news is.....Florida is seen as a bargain for some

This article about how Florida is starting to look more attractive to foreign buyers because of dropping  housing prices reminds me of what happened in Argentina over the past five years. We have an apartment in Buenos Aires, so I have first hand knowledge of what took place. When their currency fell from one peso to the dollar to three to a dollar, the country went into turmoil, but it also became a bargain. Initially prices fell on apartments in the city by about 30% if you could find a buyer. Within 6 months, tourists started flocking to Argentina because it was "cheap" to enjoy for holiday. Dinners and hotels that used to be some of the most expensive in the world were now a bargain. The planes were full and tourism volume grew dramatically year after year. Then investors started buying apartments to rent them out to the flocking hoards and within a few years the prices were above their pre-currency crash levels. Most of this new boom is driven by Americans who went their on holiday and decided this would be a great place to invest and maybe live in the future. I have a friend in Buenos Aires who manages our apartment and about 150 others and he is doing great. Each year just gets bigger and better. The point is, the reason their boom began was because it was seen as cheap, just like Florida may be appearing to foreign buyers today. Panama's boom began for very much the same reasons but many developers here believe that Americans are all rich and will buy anything.
Read the article about low priced Florida real estate here....

Trump Ocean Club International breaks ground

I received an email from my friend/developer Roger Khakfif this morning to let me know the status of his project, The Trump Ocean Club International. I believe this project has been the most instrumental in putting Panama City on the map in the eyes of the world. More people in the U.S. know about Panama through this Trump and Rogers efforts than all the others combined. When Trump speaks the world takes notice.

Although Roger and I don't share the same vision of what the future holds for Panama City's construction boom, I would say if any project has the chance for success,  it would be this one. It has the name, location and capital behind it to set a new standard for Panama. In any case, I hope I am wrong about a future bust for the city and that the Trump Ocean Club International is just one of many projects that will turn this little republic into the model of a dynamic and futuristic city for Latin America.

From Roger;
I would like to take this opportunity to inform you that the construction of TRUMP OCEAN CLUB INTERNATIONAL HOTEL AND TOWER HAS BEGUN 2 WEEKS MID May and hopefully will be ready  36 months from now. Final statistics are as follows:

  2.8 million sq. ft. (260,000 sq. mtrs. So far Trump’s biggest building project), 69 Floors, total projected cost 404 million dollars .

Major components = Trump Int’l Hotel, Trump Int’l Casino, Trump Int’l Marina, Trump Wellness Center, Beach Club (Contadora Island) Boutiques and  Restaurants.

As Condos Rise in South Florida, Nervous Investors Try to Flee

This story about speculators  in Miami walking away from their down payment is the same one that will be told in Panama within 12-24 months, I believe. It has happened in Vegas, Phoenix and Washington to name a few cities, so why won't it happen Panama? The speculators  in Panama are mostly from North America and Latin America, just as in Miami. If you believe the hype, it is because Panama City is better than all those cities and this frenzy is driven by real buyers who plan to live in them. From what I have seen this is true for only 10-15% of the sales.  What is selling well right now in Panama, just as in Miami, are finished properties available NOW and properties where the cost/rental value ratio is justifiable.
There is a shortage of these types of properties. Most developers would rather sell the luxury, high priced apartments where they get a bigger down payment. To the flipper this looks attractive because he believes he can sell before having to come up with the final payment and the profit is bigger on the luxury apartment. With actual building costs at about $1000-$1200 a meter and sales at $3000-4000 a meter, the 25-30% down will cover the cost of construction even if the speculators walk. With numbers like these, the developer/promoters won't get hurt, but most of the speculators will. Few people have much sympathy for the speculators anyway so maybe this is just the natural order of things. In any case, when all 20,000 hit the market over the next few years, we will probably see a bust here too. I just hope the international perception of speculation and a Panama bust stays in the city and does not spread to the countryside where the market is being driven by real buyers looking for a place in the sun.

This is a must read from the  New York Times.

Developers/promoters get grace period for law violation

Many promoters and developer have been offering their projects before getting permits because they can find out if anyone is really interested before they pull the trigger on design and permitting among other costs. With the feeding frenzy going on in the city, many have gone so far as to take deposits on apartments before  approvals have been given to build them. Some of these "developers/promoters may not even plan to build a project at all which is why the government modified the law to increase the fines.
In the past, this was not such a big deal because the market was not so hot and the only buyers were Panamanians.  It would be rare indeed for an owner of a property to not get permits to do pretty much as he wished, even if the zoning needed some tweaking. Being a small country, the locals new who were real developers and who were not so no one could really get hurt. But now all the buyers are coming from somewhere else and the government is concerned that the scam articsts will put a black eye on the country at a time when it is seeing such a construction boom. How things have changed in just a short time. With the teeth put into the new law requiring preliminary permits to be issued, at least there is some protection for the property buyer. Although this part of the law sounds like a great thing, there are several provisions in the law that in practice, will be a nightmare for developers and add additional expense to the buyers. Why?

Miami developers and promoters move into Panama

This story from the Miami Magazine gives us some interesting insight into the workings of the market in Panama city. It is being driven by liquidity and right now there is a lot of excess money out there which always lead to excess development.

Excerpt; Some developers that have built condos in Miami have exported their expertise abroad. Several of the same companies that put up condo towers on Brickell Avenue, Biscayne Boulevard and Collins Avenue are betting on such foreign locations as Panama City, Panama; Puerto Vallarta, Mexico; and Nassau, the Bahamas – to name a few. Condo developments outside the competitive Miami market can turn into regrettable gambles, of course. But seasoned developers have found enough financing to place some bets abroad. “There’s so much money out there, there is excess capital,” said real estate consultant
Mike Cannon, managing director of the Miami office of New York-based Integra Realty "

Download exporting_expertise.pdf

The Shahani's announce a new residential project

In April of 2005 I had my first look at a project being built along the Pacific coast about an hour from Panama City. I was in a helicopter with another developer and I remember him saying to me that the Shahani brothers were crazy for spending so much money on earth moving for the project. I thought how ingenious to take advantage of the view. They were making stair steps large enough for homes along the ocean front and the big machines were like ants on an anthill for months on end. After all, they owned all of the equipment and back then thnigs were kind of slow for the heavy equipment business. How times have changed. Now, a little over two years have passed, and oceanfront homes that could have been purchased in presale for under $300k are well over $600k. A golf course is nearly complete and many other amenities are well under way. With the Panama boom, the Shahani brothers are doing great and they always have more projects in the pipeline. Whenever I meet with Victor he always has a half dozen other deals in the works to tell me about. Go to this link to see the project as it is today.

Now the Shahani brothers have just announced another project to go along with their successful Vista Mar beach resort. This one named, Las Brisas at Vista Mar. Building on land near their existing project is a great way for the developer to take advantage of the tremendous investment he has made into the golf course, club house and other infrastructure. Congratulations to Victor, Rolando and Michele for helping to make Panama's beach areas so popular!
Read about this new project here...

Panama City can't survive without rural support

This very interesting article came to my computer this morning and the truth of it really makes me think. For the first time in human history, more of humanity live in urban areas rather than rural. Even though most of the resources needed for life, such as fresh water, food and energy come from rural areas, most of the benefits of life are in the cities. For example, In the province of Chiriqui where we live in Panama, they produce an abundance of fruits, vegetables, meat and dairy product, the majority of which are shipped to the city for consumption. Most of the hydro power generated in the country also comes from this province and most is used in the city. Yet the province receives little back for thier taxes and social benefits compared to that supplied in the city. As this article points out, Urban areas are completely dependent on rural areas and yet, the rural areas have a much lower quality of life according to the study. Of course we firmly believe that our quality of life in Boquete far exceeds that of the city, but the city has had little or nothing to do with making it that way.

Excerpt; “As long as cities exist, they will need rural resources – including the rural people and communities that help provide urban necessities,” he said. “Clean air, water, food, fiber, forest products and minerals all have their sources in rural areas. Cities cannot stand alone; rural natural resources can. Cities must depend on rural resources.”

New building height limits set

There starting to wise up in the city and set some much needed height limits on buildings in certain areas. Here is a brief article about it. Machine English translation with Spanish.

Panama, Wednesday 23 of May of 2007

Víctor D. Torres vdagoberto@prensa.com

The conservation of buildings in the area of Bella Vista and Andres Bello park in Via Argentina, as well as the situation created by the project Pacific Point in Punta Pacifica, by the lack of green areas, was some aspects debated yesterday by the extended board of directors of the Panamanian Camera of the Construction (CAPAC), and the minister of housing, Balbina Herrera. The MIVI communicated to the members of CAPAC that in around Bella Vista and Andres Bello park, 18 lots exist where projects will be developed and those that already have been approved will be respected, nevertheless, only the construction of buildings with a peakaltitude of 69 meters will be allowed (20 stories high)

"The projects that are next to the park will have to create green areas", said Jose Batista, director of Urban Development of MIVI. Furthermore, the parking that are nearby the park must not have blind walls, but hanging walls with vents and bases for plants. In the district of Bella Vista 85 buildings have been identified as historical monuments, that must be protected. To be declared officially as such, the Executive will present a law project before the National Assembly.

Walter Medrano, president of CAPAC, was in agreement with declaring some of those buildings as historical patrimony, but he affirmed that others are too old for recovering them. The project Pacific Point, that was built without considering the green area, still being analyzed by a named commission to study the committed errors. "the position of the ministry is to look for the balance between the development and the quality of life of the citizens", concluded minister Herrera.

Fines for developers set at 1% of project value

It took over a year but the regulations for law 6 regarding master planned developments came out this week.  The first major change I see is that the fines, that were originally said to be $100k, are now set at 1% of the projects value. I am having the complete 7 page regulations translated and they should be up on this blog by weeks end. Here is a press release from the local papers.

English Machine translation with original Spanish following
Panama, Saturday 19 of May of 2007

Fines for Developers

Mario Muñoz andresm@prensa.com

The companies that announce land sales or urbanizations that do not have the approval of the first draft-master plan, will face fines equivalent to 1% of the value of works. The norm is in effect as of yesterday (May 16). This type of city-planning infractions is including in decree no. 23 of the 16 of May of 2007, that regulates the so called Law of Urbanism (Law 6 of February 1st, 2006) and that was published on Friday in Official Newspaper- Public Gazette. The sanctions will be applied to those who celebrate contracts of transaction without counting on the approval of the first master plan of the respective plans. Also the presentation of "false" information to the Urbanist Authority will be sanctioned with the same amount, which will cancelled the first draft and will order its demolition, in case the work is built.

Nicaragua Re-Establishes North Korea Ties

Seems as though Ortega has some past debts that he must repay. You can always judge a man by the company he keeps and no matter how they spin this leopard changing his spots, Ortega is still red all the way through. A psychological profile of the now "five amigos" would yield some interesting results.

Hugo Chavez-President "Dictator"Venezuela
Mahmoud Ahmadinejad-Muslim Extremist Iranian President
Kim Jong II-Lunatic "Leader" of North Korea
Fidel Castro-"President" dictator of Cuba
Daniel Ortega-New President of Nicaragua

With friends like this, you are the enemy.

From Newsmax.com
MANAGUA, Nicaragua -- The leftist administration of Nicaraguan President Daniel Ortega has re-established formal diplomatic relations with North Korea and rejected criticism of the Asian country's nuclear weapons program, the government said Thursday.