DART has been one of the few companies in the Cayman Islands that was able to take a long-term view of its business. As a result, DART has not been as susceptible to short-term swings in the economy as many other businesses. We asked the DART Realty CEO Mark VanDevelde and Managing Director Jim Lammers how they view the economic and business situation in Cayman.
How would you assess the current state of the economy?
MV – Obviously, the economic climate during the past three years has been quite difficult. One critical factor is that credit is not as available as it was two or three years ago. With developers unable to obtain the leverage necessary to move forward with large projects, many of these projects will remain on hold.
Naturally this is affecting the local economy. With markets soft and credit tight, businesses are hesitant or simply not able to borrow the capital necessary to move forward with projects that would provide the economic growth and job creation much needed at this time.
What does that mean for business sentiment in the Cayman Islands?
MV – Our view for the Cayman Islands for the upcoming year is one of cautious optimism. We are starting to see a number of positive signs. At Camana Bay we have several new retail tenants set to open with new and exciting concepts in 2011 and our existing tenants are indicating very positive results. We have also been working with several large prospective corporate office clients who are showing a willingness to invest in new office accommodations. Our existing Terraces units remain 100 per cent leased and the early indications of demand for the first residential ownership opportunities at Camana Bay have been extraordinary. These are all very encouraging signs that we hope will translate into real economic growth in the new year.
JL – While we are bullish about Cayman in the long term, the economic climate of the past several years, in Cayman and worldwide, has been extremely tough, and will likely remain so in the near term. The private sector Cayman companies that succeed going forward, locally and globally, will be those that reduce costs wherever feasible and provide innovative products and solutions to their customers. That is our focus.
Like governments across the globe, the Cayman Islands Government faces the very difficult, but absolutely essential, task of reducing spending to levels that can be supported by revenue raising mechanisms that don’t cripple business. The current administration is addressing this challenge by, among other strategies, encouraging smart development that will put people to work, inject money into the local economy, and create residential, retail, commercial, recreational and entertainment offerings of lasting value.
MV – For all the difficulty, Cayman has managed to avoid a number of significant pitfalls this past year, including the introduction of several forms of direct taxation, while simultaneously obtaining greater flexibility in how we finance ourselves. Government’s support for diversifying our economy, specifically with the introduction of medical tourism, and their focus on the need for new inward investment is very encouraging.
How does the situation now compare to your outlook one year ago?
MV – We have made significant progress over this past year in completing the design work for the next phase of the Town of Camana Bay, and are now in a position to make decisions about when to implement each element and what the next steps will be. It’s an exciting time for us with our new array of residential and commercial offerings. But like all businesses here in Cayman, the state of the global economy is causing us at this point in time to take a slightly more cautious approach than we might have done in the recent past.
What issues were you concerned with in 2010?
JL – In this past year, much light has been shed on the many problems associated with the operation of the George Town landfill. In addition to being an 80-foot-tall, and growing, eyesore, visible to residents, visitors and cruise ship passengers alike, the unlined landfill continues to leach substances into the North Sound and odours to downwind residents. In addition to addressing these aesthetic and environmental problems, the successful capping and remediation of the landfill will allow it to be used for, among things, publicly accessible recreational purposes (e.g., soccer, cricket and baseball). And the establishment of a properly designed eco-park, which will allow for a combination of recycling, composting, landfilling and waste-to-energy incineration, in a much less densely populated area, will provide a modern, environmentally responsible platform for effective solid waste management.
How is the economic situation impacting your business?
MV – As I mentioned last year, we always anticipated there would be fluctuations in the economy throughout the development of Camana Bay. However, the introduction of significant increases in development fees and import duties during this past year has added additional pressure on our business model for future phases. This in turn is influencing our decisions on when and if to move forward with each phase of development of Camana Bay (such as the hotel we are planning, for example).
On the demand side, though, we are very pleased that the overall interest by residents and visitors alike. Commercial leasing activity, retail sales and traffic are all up over last year and we are very pleased with the feedback we are receiving regarding our designs for Camana Bay’s first residential ownership component.
JL – As I previously mentioned, a relentless focus on cost reduction is necessary to succeed to today’s business climate. The higher Cayman raises customs and stamp duties, and infrastructure and work permit fees, the less competitive it will be as a jurisdiction within which to establish and operate businesses.
What are your plans for next year?
MV – We believe that Camana Bay continues to develop into a community and national asset. The Town is attracting more and more people here to enjoy everything we have to offer, including new retail tenants and the incredible roster of community and seasonal events. For example, we had some 5,000 people at the Parade of Lights in December – up by more than 1,000 from last year’s event. This is tremendously positive and given what we have in the pipeline for 2011, the activity at Camana Bay will only continue to grow.
JL – While we did not open any new Camana Bay buildings in 2010, we made very positive progress in attracting new retailers and office tenants to the Town Centre, and by the close of 2011, we hope to be fully occupied. Of equal, if not greater, importance, we focused our efforts on designing our next major residential phase, which will consist of over 300 residences, and stretch from the Town Centre to the Cayman International School.
These apartments, condominiums, townhouses, and homes will provide local residents and visitors with a wide range of housing sizes and styles. Some of the residences will be for lease, and many will be for sale. The lease rates and sales prices are intended to make Camana Bay housing accessible to many on the island. While the economy remains sluggish, we are hoping to complete the infrastructural components needed for this phase, and begin home construction, this year. In addition, we very recently began construction of a 68,000 square foot Class A office building on the northwestern edge of the inner harbour and plan to have Mourant, our anchor tenant, and other companies, move in to their new space by the end of the year.
We are poised to go forward on yet another Town Centre office building, which has been sited and designed and is approximately 222,000 sq ft in size, when parking is included. Lastly, we continue to actively pursue the concept of opening a boutique hotel on the inner harbor. And, of course, Camana Bay will continue to serve as an attractive venue for small and large scale community events.
What is your outlook is for 2011?
MV – We see continued growth, not just for the Dart Group but for the country as a whole. For example between 2006 and 2009, we employed on average about 650 people in the construction of Camana Bay. With our planned development in 2011, we see this as an opportunity to generate much needed economic activity and more importantly a number of new jobs.
The development of Camana Bay’s second phase would include the direct investment of approximately US$80-$100 million per year during the next two years and the creation of several hundred new jobs. The total direct and indirect economic impact of Phase 2 is estimated to be in excess of $600 million and involves the creation of over 1000 jobs during the next 6 years. We are very excited about the components that make up our next phase are poised to begin construction as early as January 2011.
Future phases, from 2016–2030, would result in a total economic impact in excess of US$2 billion, as we will be focusing on attracting new office and retail tenants, a wide variety of residential offerings and continued expansion of our infrastructure and public spaces.
Are there any other initiatives that may benefit Cayman?
JL – As we mentioned in this publication last year, we continue to feel that greater accommodation of Sunday business trading will afford many benefits to the island, ranging from greater local employment to greater on-island spending (by residents and visitors alike), to increased government revenues to enhanced visitor experiences.
MV – We hope to be in a position to start soon on building our second phase of Camana Bay. We look forward to a working out of these challenging economic times into what we hope to be a much more prosperous year ahead.