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Cuba opens door to foreign-owned upscale condos, but nitty-gritty awaits

Robin Conners believes foreigners will soon be able to buy and sell luxury golf course and marina condos in Cuba, much like they do in Naples, Fla., Cancún or Panama.

"The Cubans are making sure they're competitive in the Caribbean and with Mexico," says Conners, CEO of Vancouver-based Leisure Canada, when asked about what he expects soon-to-be-published real estate regulations in Cuba to be. "Cuban authorities have been very cognizant of consumer protection. They want to make sure their process and safeguards meet international standards. They're very aware how systems work both in the U.S. and Europe, and I am confident that they will meet North American standards."

Conners knows what he is talking about. A former vice president for Jacksonville-based mega­developer St. Joe Co., the Canadian-born real estate executive spends a lot of time on the island interacting with Cuban officials.

Conners' company, which has had tourism-related development projects on its drawing boards for more than a decade — and little to show for it — is poised to reap the benefits of a major turn of events in Cuba.

On Aug. 26, in an effort to move its tourism upscale by promoting construction of golf courses and marinas, the Cuban Council of State published a framework law that grants 99-year leases on state land to foreign developers to build tourism-related projects.

That's great news for the half-dozen or so foreign developers that have lined up golf and condo projects. Banks treat a 99-year lease as the equivalent of outright ownership. Cuba's previous practice of granting 50-year leases, plus possible extensions, did not fall into that category.

"I think this action is very significant simply because it happened," says Antonio Zamora, a Miami lawyer who has researched foreign real estate investment in Cuba for more than 10 years. "It signals that the Raúl government is moving to open up the economy toward the Vietnam model. Fidel and his group are not opposed or cannot stop the moves."

A body of regulations surrounding the foreign-owned condo communities the government wants to see built has yet to be published. No one has said yet how quickly foreign owners might be allowed to sell, whether they will be allowed to own more than one property, and whether, or how, owners will be able to lease their properties. And there is no information yet about what kind of taxes and fees the government will charge.

Also, Cuba has yet to announce whether it will relax sticky regulations on how long foreigners are allowed to stay in the country, and under what conditions foreign part-time residents will be allowed to bring, sell or re-export personal property such as appliances, furniture and automobiles.

Vietnam, for that matter, makes it near-impossible for absentee landlords to rent. Also foreign buyers aren't allowed to own more than one piece of property at a time, and they can't sell before 12 months from date of purchase. In China, only foreigners who have worked or studied in the country for more than one year can buy homes or apartments.

Conners, though, is optimistic.

"The Cubans are a lot more sophisticated than the world gives them credit for," he says. "They do their homework, and they do their homework again."

Finally, the probably most controversial issue in Cuba is the potentially large influx of Cuban-American property buyers. Because of U.S. restrictions, Cuban-Americans cannot legally buy property in Cuba, but observers expect wealthy Cubans living abroad to be the largest potential group of buyers.

Says Zamora, the Cuban-American lawyer: "Real estate sales, golf and marinas can't work well without Americans. Perhaps there is also a role for Cuban-Americans in this effort."

The process will start without Americans. The Cuban tourism minister announced in August that the government would begin negotiations in January with foreign investors over 16 golf projects. They hail from Britain, Spain, Canada and Vietnam. Four of them — including Leisure Canada's Jibacoa development — already identified a Cuban partner and obtained ministerial approval.

However, the last — and currently highest — hurdle that developers must overcome is the current business climate in the United States and Europe, where banks aren't exactly eager to lend.

According to Conners, Canadian banks are reluctant to get into Cuban real estate, but their Spanish peers are "active."

As a cautious foreign banker in Havana said when asked whether any financial institution could lend to golf course builders or condo buyers: "It's not inconceivable.

"It all depends on the guarantees and pricing," he added.

• • •

I was too optimistic in my last column regarding the possibility of the U.S. Congress passing a law that would lift the travel ban.

HR 4645 is mired in House committees, and Democratic leaders haven't moved a finger to get the popular bipartisan bill to a floor vote. Meanwhile, Obama administration officials have hinted that the president will use his executive powers to allow more cultural and educational travel. While that's nice, it also takes the pressure off Nancy Pelosi and Harry Reid to do something about the travel ban.

One new aspect about President Barack Obama's expected travel relief package is the expansion of the number of airports allowed to host direct Cuba charter flights. This looks like a big deal for Tampa. However, unless some local entrepreneur finds a lucrative niche, the larger Miami-based operators will likely take over, since there are only small licensed travel agencies in the Tampa Bay area.

Johannes Werner is editor of Cuba Standard, a Web site featuring real-time news about the Cuban economy and business. He can be reached at johanneswerner@ cubastandard.com.

Cuba opens door to foreign-owned upscale condos, but nitty-gritty awaits 09/11/10 [Last modified: Friday, September 10, 2010 8:07pm]
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