One of our regular commentator's (Viewpoint) posted the following as a comment to another post this week, but I felt it should be read by anyone interested in Panama Real estate. Most agree that the fate of the Trump Ocean Club will play a significant roll in what happens in the Panama real estate market. I have also posted a PDF of the presentation and discussion of the project produced by Newland.
Download Newland's Quarterly Conference Call _May 2009
From Viewpoint
TOCLUB released their financial and sales results through the period ending April 30, 2009 today and conducted a conference call to discuss those results that was accessible to fixed income analysts. Sales have been slowing and they are now projecting a slower pace of sales than prior periods because of the global economic conditions and their lack of the type of inventory that has been the most popular to date.
They have sold (as of April 30, 2009) 840 units out of the total of 1,054 projected unit sellout representing 79.7% of the units and 71.3% of the projected sellout revenues totaling $543.4 million. Sales through April 30, 2009 total $387.2 million with remaining unsold inventory of $156.2 million of which $31.2 million is commercial, $108.8 is residential condo, $13.7 is Hotel Condo and the remainder is $2.5 million private beach club memberships.
Out of a starting inventory's of; 635 residential units they have they have 165 unsold residential units; 369 Hotel Condos they have only 21 unsold Hotel Condos; 50 commercial units they have 28 unsold commercial units.
It appears that the Casino property might not be included in the commercial unit count nor in the projected sales that were presented. There have only been seven defaults that resulted in terminations of the contracts. Seven out of 840 contracts to date is not bad.
Restricted Cash on hand as of March 31, 2009 (to fund remaining construction work) was $132,732,288. Work haas progressed to Piso 26 at the current rate of one floor per week. They expect progress to increase to 1 1/2 floors per week (6 per month) after the building reaches the 35 floor to the 66 floor.
65% of the remaining contract payments due May 5, 2009 were received on time and the remaining 35% of purchasers requested 30 day extensions. After an account is 60 days delinquent (two 30 day extensions) the contract is terminated and the unit is returned to inventory to be resold.
There are a few other things I could add to that post regarding the debt reserve account currently having over 7 million of the required 10.450 million interest payment due next interest payment due November 15, 2009.
I now more fully understand why they offered the 20% discount to "selected" purchasers to raise cash. This action was only targeted to a small group of purchasers to raise enough money to fund the remaining funds necessary to fund the special bond reserve account through completion of the project. In the face of slowing sales the only source of funds to keep the reserve account in compliance with the requirements of the bond covenants is collection of these receivables or advances (loans) from the promoter who is on the hook to fund any increased costs of the project. They (the promoter) can make this discount (20%) revenue neutral only but buying their debt outside the structure of the project and not within the structure. They are only raising enough money to supplement the cash flow from the slower pace of sales which is used to fund overhead and the payments to the cash reserve account.
Tell me one other real estate promoter that makes complete financial disclosure where all funds are held by a third party ???? The numbers are there for the world to see and ask a question you get a straight answer. Listen to the playback of the conference call from yesterday. They fielded plenty of tough questions with full and complete disclosure.
This is the way projects are built in Colombia with a third party (fiduciary) holding all the funds releasing only the funds to pay construction. This is by far the cleanest project in Panama City. These guys are professional and know what they are doing. Would I buy a condo for $5,000 mt2 HELL NO but I would buy their bonds all day long and sleep at night.
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