Pre-Purchase Guidance

Typical Pre-Development Planning in the Caribbean

What often happens when someone arrives to a tropical island paradise

1. Let’s say you arrive in a small independent (semi-third world) island nation that has a completely different legal and banking system from your own. Perhaps it has a poorly regulated construction industry, an under-trained workforce, struggling public infrastructure, and virtually no natural resources. The land is abounding with unspoilt and deserted landscapes, precisely because nobody has ever been able to successfully develop  and operate anything in that location prior to your arrival

2. You drink three Pina Coladas in a hammock under the tropical sunshine. You fall in love with the welcoming, good-natured people and the stunning views.

3. You make friends with the local guy sitting next to you at the poolside bar. He happens to have a real estate license, a contractor’s license, a charter fishing boat, a car rental company, and was also recently the local mayor, but is now the current local mayor’s cousin

4. As luck would have it, you find out about 10 acres of waterfront front property next door that is going for dirt cheap (relative to back home) and decide to lay financial claim to that great big beautiful slice of paradise before anyone else can get their hands on it

5. You call an architect and start designing your dream development, while convincing everyone that if you build it, they will come

6. Send your new local contractor buddy a pile of cash and trust that he is getting it all done in your absence

Vs

PanCaribbean Consulting Group Recommendations

A Feasibility Study verifies if the project is technically and financially viable, ideally before you are totally committed to buying the real estate that you wish to develop. A Feasibility Study (High Level Risk Analysis) should include, but not be limited to:

• Defining Project Objectives: The first step of every project is to clearly define the project's objectives. This includes the type of development, the budget and scale of the project, the financial (ROI) expectations, and timelines. A clear vision helps guide all subsequent steps. 

  • Is this simply a humble family vacation home and you need a reliable construction budget and timeline outlined before buying the land? This is one of the basic objectives of a feasibility study.

  • Is this a 500-room luxury resort and the private equity shareholders require a comprehensive risk analysis and a clear path to profitability within a scientifically formulated and multi-faceted business plan? See our fees and services page for the different options.

  The next things to consider are:

• A Market Study is essential to understand existing demand and supply.

  • Demand Analysis: evaluating the demand for the type of development planned in the target area. Do you think you know what the market wants, or do you know what the market thinks it really wants?

  • Supply Analysis: examining similar existing or ongoing projects in the region. Are you adding a super high-end niche hotel to a market already saturated with super high-end niche hotels?

  • Macro Trend Analysis: identifying market trends that may influence the project (prices, consumer preferences, etc.)

• Site selection The choice of a site is crucial for the success of a project and this aspect should be deeply scrutinized prior to any real estate purchase. Many extremely important issues are often overlooked until it’s too late to get a deposit refunded. Yes, it looks like paradise on a calm sunny day, but you must take into consideration:

  • Accessibility Evaluation: examining the proximity to transport, infrastructure, and support services. Is there reliable city power and water? Is the city power the right phase and voltage for a commercial operation (or a house with 9 bedrooms and 2 swimming pools)? How many commercial airline flights arrive at the local airport each week? Is the local runway long enough to handle private jets? Where will construction workers live and eat? Where and how are you going to get building materials to the site?

  • Geography and Topography: analysing the physical characteristics of the land and any geotechnical constraints, such as sand versus limestone substrate, which may cause a massive difference to the cost of your building’s foundations.

  • Environmental

    • Preliminary impact studies to evaluate natural hazards to the project and by the project: land clearing protocols, protected flora and fauna, sanitary waste systems, storm water runoff, and erosion control.

    • It is critical to research historical hurricane surge data (which varies from location to location) (in conjunction with insurance underwriters) to assist with establishing intelligent building elevations for the design and engineering team. We can not tell you how badly this aspect can go off the rails when “assumptions” are made.

    • Maritime concerns such as seasonal wind and wave action, small boating hazards (reefs) and deep-water access for larger vessels if necessary.

•  Planning and Design should be limited to conceptual-level design development prior to the final purchase of the real estate. Conceptual level plans can be used for government negotiation and the pre-approvals process, as well as business plan development, environmental considerations, and high-level risk analysis (budget).

•  Government / Regulations include familiarity with local planning rules, zoning, and permitting processes. Assisting foreign design consultants with local means and methods. Negotiating any government concessions ahead of the game. Evaluating any risk of regulations changing over the course of the project (election time).

• Local Stakeholders may be engaged (authorities, businesses, and residents) to gather feedback and support for the project. Identifying local resource partners (hardware stores, local tradesmen of note, delivery services, grocery stores, and a local bank to disburse funds and pay bills).

•  Business Plan Preparation is essential to attract investors and secure funding, and is also very prudent even if investors and funding are not necessary.

  • Project Presentation: objectives, site description, development plan.

  • Financial Analysis: revenue and expense projections, profitability analyses. Evaluating any macro-risks to financing (such as war or a global pandemic).

  • Financing Plan: strategy for raising funds, personal contributions, bank loans, and investors. 

Conclusion: A thorough pre-purchase analysis is essential to ensure the success of a real estate project, especially if it is set in an unfamiliar environment. Whether it be a humble family vacation home or a thousand-room hotel. By following these steps, developers can identify opportunities, assess risks, and develop solid plans to maximize efficiencies and minimize surprises along the way. A well-prepared project is a project with a better chance of success.

Beyond planning a project, assessing, and purchasing a property, we are happy to help with the traditional process of mobilizing and building the development.

To learn more about our services or find out how we can help you realize your development goals with 100% clarity and confidence, reach out to us.