Sunday, January 20, 2008

Trump Tower goes public

Some foreigners prefer to give out a check to some unknown developer who claims to own several miles of beachfront without conducting any due diligence but at the same time find the Panama Stock Exchange or BVP (Bolsa de Valores de Panama) to be too risky - go figure! The BVP lists Panama companies which have been around for decades, with the added benefit that they have to submit quarterly reports to the public and report material facts (even if founding majority shareholders dislike the added openness of being listed). This is the exception to the general rule of ice-cold secretive Panama corporations which have given bad fame to the country.
Unlike tourism and reforestation incentives which require to go through miles of red-tape to have their tax-free status approved, dividends and return from securities listed in the BVP are free of Panama tax.

Shares of holding companies of Pribanco, Banistmo, Continental, Cemento Panama and others were listed at prices around $20 for years and eventually their holders received tender offers for US$40 or more, which gave profits to those willing to hold on to their positions. Not much volatility to profit from, but at least gains are free from Panama taxes.
Now Newland International Properties, Corp. (Trump Ocean Club) (BVP: NEWL) has issued US$220m in 9.5% Secured Notes Due 2014 with BVP. Newland is controlled by Ocean Point Development Corp., a Panama-based holding company whose majority shareholder is investor Roger Khafif. Newland also has Bogota-based Arias Serna y Saravia SA, a Colombian real estate developer, and Espacios Urbanos SA as partners.
The prospectus and other relevant information for NEWL and other publicly-held companies in Panama can be downloaded from the Bolsa website.

Newland International Properties Corp.Bienes Raíces
Ver descripción de la empresa Ver información bursátil Ver hechos, noticias, informes de actualidad, otros

Fitch rated the notes as a BB+, pointing out that credit's strengths for this issuance include:

--Presales amounting to 65% of total expected units have already been recorded. Purchasers pay 30% of the sale price at signing with the remaining 70% due in full upon delivery of the unit.

--The development of Trump Ocean Club will be the singular focus of Newland and strict covenants are in place prohibiting dividends or cash releases to the developer. The incurrence of additional debt will also be limited. All cash collections and payments for operating expenses and construction, as well as debt service, will be highly regulated by the priority of payments waterfall clearly defined in the indenture.

--A portion of bond proceeds will serve to fund a construction escrow account sized to cover the remainder of all remaining construction costs. Draws from this Trustee controlled account can only occur after the independent engineer provides certification that all work has been completed according to plan and that costs are within budget. In addition, draws from the account must be backed by 125% in eligible receivables arising from the sale of units.

Development projects of this scope do contain various risks. Construction risk represents one of the main risks in addition to the liquidity concerns that could arise if sales velocity decreases. Sales at Trump Ocean Club also are correlated to global real estate markets. Proceeds from the $220,000,000 issuance will be used to fund a construction escrow account, fund a six-month debt service reserve account, and repay existing debt. Final maturity of the notes is seven years with a three and a half year interest only period and semiannual payments.

Fitch Rates Newland International Properties' (Trump Ocean Club) Senior Secured Notes 'BB'
Newland, Builder of Trump Panama Resort, to Offer Dollar Bonds By Guillermo Parra-Bernal
Issuer website


Banco Internacional de Investimentos said...

Yes, people prefer to invest in real estate than to trust in exchanges in emerging countries. But this will change in the short time. The investments from offshore banks will show this. Banco Internacional de Investimentos.

Anonymous said...

December 17, 2008 01:02 PM CHICAGO--(BUSINESS WIRE)--Fitch Ratings has downgraded the rating on Newland International Properties, Corp.'s $220 million senior secured notes to 'B+' from 'BB'. The action is a result of the significant deterioration in global real estate markets and an increase in liquidity risks associated with the timely payment of principal and interest on the notes.

In conjunction with the repricing seen generally in all asset classes, real estate prices have fallen considerably in most global markets. Although to date, Trump Ocean Club (TOC) pricing has remained stable and some sales have continued, price declines within the Panama City submarket or at the project could lead to higher than expected default rates for existing buyers. Units are purchased at TOC utilizing a 30% down-payment scheme with the remaining 70% of the purchase-price due upon the delivery of the unit. To the extent units were purchased as investment properties or as second homes, the incentive to pay the outstanding balance of a purchase agreement could decline if global real estate values continue to be pressured. Noteworthy in this scenario, purchasers would forfeit all down payments to Newland. Price volatility could also curtail expectations of future sales.

The constraints in capital markets are expected to increase the difficulty of securing financing for real estate assets. Generally, real estate demand is affected by a lack of access to mortgage financing for prospective buyers. This risk is exacerbated by the target market of the project, which focuses on foreign buyers that do not intend to make the TOC their primary residence.

Given the downward trend in the real estate industry, a slowdown in sales at the TOC is not unexpected. Between August 2008 and October 2008 TOC experienced a significant decrease in project absorption rates. This sales pace has affected the cash position of Newland and heightened liquidity risks associated with timely payment on the notes.

Anonymous said...

Is there some protecion de consumir in Panama my friend should need that . She was trapped (GIVEN WRONG INFORMATION ABOUT RESALE)by ISG .

Mypanamalawyer said...

Anonymous: Consumer protection depends on whether the purchase was to live in the residence or resale. Check
However, they cannot contact your friend without an email address.