Cuba´s real estate, at the beat of Salsa!
Cuba is in fashion, there is no doubt. Large groups of tourists from Europe, South America and some from Mexico are arriving to Cuba. American visitors, traveling under one of 12 activities permitted by the Government of the United States are growing in number and frequency. Given that travel for tourism is still prohibited, most of the tours are organized as “people to people”, cultural or religious groups. Few are those who go (including me) for business or professional activities.
Taking advantage of the great void left by the United States in 1962, year in which the embargo was implemented, the door was left opened for investors from Spain, England, Germany, Switzerland, France, Mexico and several others, who have engaged in substantial ventures in Cuba, especially in tourism related real estate. Cuba, thanks to the efforts of easing the restrictions by President Obama, has changed enormously in recent years, making it possible for Americans and Cuban-Americans to travel and spend their money in Cuba.
There is no better formula for countries living under a none-democratic regime, on the way toa democracy, than to experience an open economy and the progress it brings. Charters and cruises from the USA are selling all their space without difficulty, regardless of the high cost of tourist packages and that everything that Americans spend in Cuba has to be paid in cash, without exception. Prices are in CUC (Cuban currency for tourists) whose exchange rate is almost on par with the Euro. If you bring dollars, you automatically lose around 15% at the exchange.
Its infrastructure is already exceeded
Even that the Cuban Government has spent significantly on infrastructure, water service in many areas is inefficient and internet service is terribly slow and unreliable. The Havana airport is working at capacity to process the tenths of thousands of tourists who daily go through this facility. During 2015, Cuba received more than 3.5 million tourists, according to the ONEI (National Office of Statistics and Information) representing a 17.4%growth. Under the relaxation of rules for travel to Cuba promoted by President Obama, it is not farfetched to expect that growth in the number of tourists may exceeds 25%, meaning that more than 4.3 million tourists from all over the world may travel to Cuba during 2016.
According to CUBANET, the relaxation of relations between Cuba and the United States has produced an impressive 36% increase in the number of visits by Americans to the island, including thousands flying to Cuba from third countries, such as Mexico, to avoid restrictions on tourism. The common denominator is that everyone wants to go to Cuba “before everything changes”. People see with nostalgia the time when Cuba was a sophisticated destination, before the Cuban revolution in 1959, equivalent to Las Vegas today.
The tourist boom from the United States is striking: in 2015 Cuba received 161,233 American tourists and more than 94,000 Americans have visited Cuba in the first four months of 2016, representing an increase of 93% over the same period in 2015, announced Cuba’s Tourism Minister Manuel Marrero during the International Tourism Fair of Havana. In addition, about 400,000 Cuban-Americans traveled to Cuba in 2015. This great tourism flow has put many pressures making evident the fragile hotel infrastructure of the island.
According to Minister Marrero, Carnival, the largest operator of cruise ships in the world, wants to expand its routes between Cuba and Miami for the 2016-2017 seasons, and Royal Caribbean, its main competitor, already asked the Cuban authorities permission to operate 72 voyages between Havana and Miami for the next season, between December 2016 and April 2017. In an historical event, for the first time in over half a century, American Airlines flew from Miami to Havana, on a commercial flight on November 28, and it is now offering regular flights between these two cities.
“The hotel room demand is now exceeding supply, but we are experiencing acceleratiNg investment in new hotels of very high standards” said Manuel Marrero. In Havana´s Historical Center, old buildings are being rebuilt, respecting its historical value and exquisite architecture from the 17th and 18th centuries, to convert them into luxury hotels, as it is the case of the Manzana de Gómez, developed by the Swiss chain Kempinski, the Packard Hotel, of the Spanish firm Iberostar, and the Prado y Malecón complex that will be operated by the French group Accor, who plan to build 22 new facilities on the island with 7,000 rooms by 2030. In addition to these projects, the Ministry of tourism (Mintur) has received 20 proposals from foreign companies for the creation of new 5 star hotels. Cranes and scaffolding can be found everywhere in Havana, as witnesses of its real estate business activity.
However, American tourists are used to pay with credit cards, to have access to ATMs, to have reliable internet service and to find appropriate public bathroom services while strolling throughout the city. Well, this is not happening today in Cuba. For comfort of the Mexicans, their credit and debit cards may work in Cuba, providing that the issuing bank does not have any American Bank’s participation.
The old Havana and Historical Center
The heart of Havana is in Old Havana and its historical center which houses a number of famous buildings, restaurants and bars, including La Bodeguita del Medio, Café Taverna, home to the Buena Vista Social Club now, El Floridita and Havana Club, among others. Old Havana dances to the beat of Salsa, Rumba and Chacha. Music in Cuba, including Jazz, is one of its most valuable attractions. Old Square (Plaza Vieja) and San Francisco de Asis square are of singular beauty, atmosphere and they have been superbly restored. To discover and immerse you in the exciting spirit Habanero, one must walk old Havana and interact with its inhabitants who are remarkably friendly. Do not pass the opportunity of enjoying a Mojito at the Bodeguita del Medio. I guarantee you have never tasted a better Mojito before.
Havana should be applauded for the safety that offers to its visitors. One feels safe at all times, walking or taking a taxi, even late at night. It is surprising to see that all motorists respect traffic signs and speed limits. Fines are applied, are very severe and with a point system that if accumulates, will cause a license suspension.
The Real Estate Market
The real estate market activity in Cuba, mainly related to the tourism sector, is experiencing a boom. The tourism sector, under the Golf Course segment, is one of the main destinations for the placement of foreign investment. Foreign Investment is regulated under 3 main modalities: 1. Joint venture, 2. International economic association contracts, and 3. Fully foreign-funded enterprises.
Miramar reminds me of Las Lomas in Mexico City, but with beaches and an incredible blue Caribbean Sea. It is the financial center of Havana and where most of the embassies are located, as well as several 5 star hotels. This is where the Miramar Trade Center is located, which is the only mixed-use (office and retail) building of Havana. The Trade complex has 6 buildings comprising 55,530 m2 (597,720 SF) of rentable area, hosting 150 companies. The ambitious master plan, when completed, will be composed of 18 buildings that will comprise more than 205,000 m2 of rentable area. The space is 100% occupied and its average lease rate is in the range of $36 to $40 USD per m2 per month ($40.13 to $44.60/SF/Year), with a tendency to increase. Contracts are US dollar based. In the Trade Center´s courtyard, one can admire and walk around 5 monumental iron sculptures of playful elephants; a creation of Cuban artist José Emilio Fuentes Fonseca (JEFF).
The development of the Miramar Trade Center is owed to the Cuban joint venture Real Estate Monte Barreto, S.A., comprised by a 51% ownership of the Cuban company CIMEX Real Estate and 49% by CEIBA Property Corp. Ltd., one of the most important foreign investors in Cuba´s Tourism Real Estate sector, which also participates in the Cuban mixed companies that own several hotels, including hotel Meliá Habana, Meliá Las Americas, a luxurious 5 star beach hotel located next to the famous Dupont House and the Varadero Golf course, Meliá Varadero, the Sol Palmeras, both also located in Varadero, and the Trinity Hotel, currently under construction, near the city of Trinidad, a UNESCO World Heritage site.
The market of houses for rent, per day or long-term, is priced based on the number of bedrooms and not by the rentable area. Its price level is determined by the number of bedrooms, amenities and location. Here are some examples:
Private luxury homes, in the area of Miramar, municipality of Playa, an excellent location, have a tourism rental rate of 35 to 50 CUC (equivalent of approximately €35 to €50, or $40 to $57.00 USD) per room, per day; or splendid apartments in Miramar or Vedado, for 30 to 35 CUC per room, per day. Apartments in the beautiful Havana Palace building, featuring 2 bedrooms + 2 baths, rent at 140 CUC daily or 70 CUC/Room. 5 star hotels in Havana, overlooking the sea, are in a range of $380.00 to $480.00 USD per night. In Varadero, rates are $300 to $480.00 per night.
Houses for rent long term, in the area of Miramar, with 4 bedrooms + 2 bathrooms, rent at 1,500 CUC per month. In the area of Vedado, adjacent to Miramar, houses with 2 bedrooms and 2 bathrooms overlooking the sea, rent in approximately 1,800 CUC/Month.
Homes for sale in this area are priced at €155,000 (€ 674.00/m2) for a residence of 4 bedrooms and 3 bathrooms; €750,000 (€ 938.00/m2) for a furnished home of 4 bedrooms and 4 baths with 800 m2 of construction, or a mansion of 9 bedrooms and 5 baths, with 540 m2 of construction, for €600,000, equivalent to $ 1,111.00/m2.
Apartments of 100 m2 (1,076 SF) in Miramar beach with 3 bedrooms and 3 bathrooms are sold at €250,000 (equivalent to € 2,500.00/m2).
EL BOLETIN, the “MLS” of la Havana
Cubans are very clever and use many means to sell or rent homes or apartments of lesser value. Several of the media used is quite heterodox. Although there are several sites on the internet where real estate sales or rentals are promoted, Cubans who want to sell or rent their property in the most direct and economical way, resort to publish a listing in the classifieds of the Habana Yunior’s BOLETIN, published by a remarkable entrepreneur, a Gestor (Agent) of real estate known as “Havana Yunior”, who every Saturday morning is present at the Paseo del Prado together with a large group of people promoting the sale and rental of real estate, taking new listings on the spot for the Bulletin. Several of the people converging at Paseo del Prado, are human billboards, pacing the grounds with hanging signs. Yunior, is without a doubt “The King of El Prado”, serving the Habaneros in the sale and rental of their houses and apartments.
Will Cuba continue to progress at fast pace without Fidel Castro?
Despite the barriers and challenges of the economic and commercial blockade imposed by the United States that Cuba has had to face for more than half a century, the real estate market in Cuba appears to be moving at the fast pace of a good Salsa, the kind that Cuba has made famous. The past year was characterized by being one in which Cuba underwent a relevant economic progress, enjoying the new rules for travel from the United States.
While writing this article, news that Cuba´s Commander in Chief, Fidel Castro has died, reached me. What will be the future of Cuba without Fidel and with President-elect Trump taking the USA mandate next January? If we are to believe on the campaign statements of Donald Trump in which he said that he “would reverse the agreement to which President Obama arrived to reopen diplomatic relations and to re-establish trade with Cuba”, unless the Cuban regime would comply with his demands, then, expectations are not good. But Trump changes his policies without much hesitation. This can be a very good test to see how President-elect Trump reacts, the level of understanding of Latin America affairs he may have, and the effectiveness he may achieve on this matter as the leader of the most powerful country in the world. Soon we will have the answers.
Article and Photography by: Oscar J. Franck Terraces, CRE, FRICS
IRV De Mexico, Inc.
© Oscar J. Franck Terrazas, December, 02 / 2016.