Trump building $3500 m2 will it hold ?

Kent Davis on the Trump Panama Hotel and Residences

Friday, July 01 2011 @ 06:07 PM COT
Contributed by: Don Winner
Views: 114
By Kent Davis for – The Trump Panama Hotel and Residences will be open on July 6th, and the Ocean Club Baylofts are already starting to receive their first residents. It’s an exciting time for the project, and all signs point to a successful “grand opening” next week! Here’s what we know: At $4.08/meter on the residence side, the monthly fees are significantly higher than any other building in Panama. Residents will receive free cable, free internet, free phone service, and free water which takes a bit of the “sting” out of paying nearly twice as much as what other owners in panama are paying. To our clients in places like Miami and Las Vegas, who are probably paying three times that amount now, it’s a bargain. And the 20 year property tax exoneration has been approved, meaning 0 property taxes for 20 years.
Beach Club on Isla Viveros is in construction. The Trump Panama catamaran will be running daily nonstops from Panama City to the beach club, and the fare will be free to residents and hotel guests, the costs of which are included in the monthly maintenance. Beach club memberships are a one time fee and will be due once the club is ready. Club memberships are the following: 3 bedroom units: $18,000 2 bedroom units: $14,000 1 bedroom unts: $10,000 Condo hotel: $15,000.

Rental demand is still strong in the City as multinationals continue to relocate from countries like Venezuela, Canada, and Mexico. Passage of the FTA with the US will have a long term positive impact as well.

Hotel Occupancy year round is still averaging 70% plus in Panama City

Here’s what we don’t know: Sustainability of the Trump nightly rate. Published nightly rates range between $280 – $315/night, but that’s the rack rate and does not include any discounts. For the short term, I think they’ll have no problem keeping the hotel booked at around $275.00 for the next 12-16 months. They will see increased competition from large operators like Hilton and Hard Rock, both of whom will have fully operating hotels in 2012 and rates may come down a bit.

The Trump Organization has yet to release their full list of management fees. We know the HOA (CAM charges) will be $4.08/meter on the residential side, but we haven’t seen anything for hotel unit owners.

Trump still does not have a casino operator, so don’t expect the Casino to be up and running until the 4th quarter of this year at the very earliest

We are being told the beach club is going to be ready by December, so plan on January/February of 2012. Good news is, it doesn’t take very long to build what they have planned out there

What percentage of the units will come back on the market? So far, only 39 units have actually defaulted. The rest of the units have been snatched up by investors. The building is over 90% sold out as of June 1st 2011, but I tend to believe that the developer is sitting on as many as 100 additional units that they have not released yet. Typically, buildings start to be sold prior to the commencement of construction, which is called “off plan” or “pre-construction” sales here in Panama. As the project approaches completion, the prices go up or down depending on the market conditions. In the case of Trump, which was sold pre-boom, prices have steadily increased. What has happened in Trump Ocean Club and what happens in every single project in Panama is the following: prices in the building always experience a temporary dip just before the building is delivered from sellers who cannot close. Six months after delivery, word gets out about the building and prices either climb steeply (as was the case with rentals and resales in the Ocean Sky building), or prices drop because of poor quality and too many sellers.

I have personally toured the Trump project as recently as last week and can tell you that ZERO quality concerns are going to bring this building’s values down. They have put in some of the best material money can by, and the finish-quality of the work exceeds the best buildings in Panama.

My Predictions: I think we will continue to see fantastic deals over the next six to eight weeks as the final round of sellers unload and defaults are flushed out of the system. By the end of the year, I I expect resale values to stabilize right around $3,500 per square meter. I also think the hotel will have a banner year this first year, as Trump has very little competition. By nature, the hotel product does not normally experience aggressive appreciation, HOWEVER, I think that a new round of investors will enter the market once current owners can provide 6+ months of solid financial data. Anything hotel rooms purchased for less than $250,000 will show positive ROI and be very easy to resell.

I expect rental absorption to be slow at first, as new tenants are hesitant to move into a building who’s amenity list is only partially complete. However, by January 2012 I expect Trump to lead the rental market in Punta Pacifica, with furnished per square meter rental rates coming in at right around $25/m.

All the Best, Kent Davis, Skype: kentpd22, kent@pa

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