With so many developers migrating to Latin American real estate opportunities, could realtors be too far behind? Douglas Elliman Florida, an international real estate brokerage firm based in Miami, is the latest local brokerage to ink a deal to sell condos south of the border.
Developer North Star International selected Douglas Elliman as the exclusive sales and marketing firm for its Playas Macao Resort and Residences in the Punta Cana region of the Dominican Republic. Set in the eastern shores of Punta Cana, Playas Macao will include 44 villas, a boutique hotel with 32 bungalow-style rooms and 298 condominiums; all located in a private area of the region. Prices range from the low $200s to high $500s.
Douglas Elliman Florida’s Christian Kawas will serve as director of sales for Playas Macao Resort and Residences. The Real Deal caught up with Kawas to discuss the opportunities and challenges in the Dominican Republic.
Is developing in Latin America a bona-fide trend? How many South Florida developers are doing it?
Yes, it is a bona fide trend. Developers from all over the United States are looking at overseas markets, particularly key Latin American and Caribbean countries such as Mexico and the Dominican Republic, at the moment. Punta Cana in the Dominican Republic alone has investors from all over the U.S. Northstar Development, Trump, Westin are only some of the names that are currently invested in the Dominican Republic.
Other examples of developments in Latin America and the Caribbean include The Related Group’s Icon Vallarta in Puerto Vallarta, Mexico. Spain’s Grupo Mall with its Campeche Playa Golf Marina and Spa Resort in Campeche, Mexico, the Mandarin Oriental/O Property Collection in Turks & Caicos, as well as Nikki Beach Hotels & Resorts in Roatan, Honduras.
Do you think there will be a lot more of this trend to come?
Yes. Developers are waiting for the markets to recover domestically before they start any new projects. Currently land prices are coming down to levels that might make sense for developers to invest in, but the rest of the elements are not there yet. For example, gas and constructions prices are still high for most developers; therefore they are looking for opportunities overseas.
Where are the greatest opportunities, as you see them?
One of the greatest opportunities lies in the Dominican Republic. The country’s political stability mixed with low land and construction costs makes it ideal for U.S developers. In addition, developers are taking advantage of some of the best beaches in the world, top of the line golf – the PGA tour now has a stop in Punta Cana – and excellent infrastructure and amenities. At the same time, buyers do not have to pay property taxes, a big attraction for investors. In addition, the cost of living in the Dominican Republic is a lot lower than in the United States and most other Latin American countries, appealing greatly to Baby Boomers who are currently flocking these markets.
What are the risks you accepted before deciding to take on this project?
First and foremost, you have to accept that you are entering a market that isn’t your own. With that said, you need to do the research to understand the ins and outs of the market and the investment risks of each particular country. A country might have pristine beaches, but their infrastructure might be wrought with problems. When investing in Latin American countries, you run the risk of currency devaluation such as what occurred in Mexico and more recently in Argentina, or the risk of political instability like Cuba, Venezuela and Nicaragua. The Dominican Republic does not pose these risks: the government in the Dominican Republic headed by President Leonel Fernandez just entered its second term and it has been very beneficial to foreign investment in the country.
What are the biggest challenges to developing in the Dominican that you’ve discovered?
As in every business, you need to make sure you have trustworthy partners. It can be challenging in the Dominican Republic to find top of the line construction companies, architecture firms, mortgage lenders and law firms; there are many companies that supply mediocre services and products. If you want to be successful in the Dominican Republic, a good and trustworthy partnership is the key. That is the biggest challenge and the key to success: finding partners with a strong knowledge and high level of professionalism.
How do the numbers pencil out doing development in South Florida right now versus heading south etc.?
We unfortunately cannot comment on exact profit margins as compared to South Florida. We can, though, give you a perspective from the buyer standpoint – for $350 square foot, a buyer in the region of Punta Cana can get top luxury amenities, construction and beachfront. For a local luxury South Florida product you would need from $650 to several thousand dollars a square foot.