Give and take is necessary

A rendition of the enhanced West Bay Road Public Beach with the Governors Way Road relocated and a new four–or–five star hotel incorporating the site of the former Courtyard Marriott Hotel.
A rendition of the enhanced West Bay Road Public Beach with the Governors Way Road relocated and a new four–or–five star hotel incorporating the site of the former Courtyard Marriott Hotel.

Our mid year market report has just recently been published. If you haven’t seen it (go to the data is mixed but on the positive side. We had a relatively good Winter Season for the first time in several years. The number of house sales was up an impressive 42 per cent YTD which we feel was largely a result of the prices of detached homes having fallen to attractive levels. Condo sales numbers were also up YTD a more modest 6 per cent, but that is a relatively good showing considering previous activity.

Land sales volume on the other hand was down 41 per cent YTD, which would indicate either the local appetite for land has been satisfied for the moment, or that the market does not feel the pricing has come down enough to stimulate a further appetite. The difficulty of financing raw land in Cayman has probably also played a part. However, a local land developer told me recently that the market was there for lots, but the sellers wanted too much for the large tracts to make it feasible to buy, subdivide, service and sell them. So, as usual, the answer is that it all comes down to pricing. Reluctance to sell land in Cayman is not something new. Since land holding is a no maintenance investment, people tend to hold on to it for as long as they can.

Our forecast for market direction is largely dependent on the commencement of the Shetty Hospital and some of the Dart initiatives later this year. If those happen, and we think they will, the spin-off income will provide a needed boost to the local economy and will keep things from getting too grim in Cayman. If they don’t happen, we will be at the mercy of the deteriorating US and world economy and that is very scary. The US is in danger of a severe depression, which is being exacerbated by Obama’s overspending and the declining dollar. Their economy will likely worsen at least until the November 2012 elections determine that country’s future course.

Meanwhile, Europe is also a mess. Reports from the Spanish property market are dreadful. Unemployment is over 20 per cent, (youth unemployment at 40 per cent) and 1.3 million homes are on the market which will take about 10 years to absorb at current absorption levels. European governments, also feeling the revenue squeeze, are raising taxes which further reduces the money available for private purchases. With these types of economic conditions around us, local investment is absolutely crucial if we are to continue to weather this storm in Cayman.

Doing deals with Dart has been a political football in Cayman. With the historical mistrust of anything big in Cayman, which is understandable due to our small size, this should not be surprising. And yet all the Dart Group has done is purchase properties that were offered to them for sale and developed those properties to a much higher standard than Cayman requires or is used to. Certainly, they have made good investments, and as in all depressed markets those with cash are able to negotiate excellent prices and terms. But this is no more than just good business – which has always been considered a virtue in Cayman. What is surprising is how little credit the Dart Group is given for the excellence of their developments, their willingness to work with government in problem solving, and their interest in being good corporate citizens.

Now granted, doing business with the rich and/or powerful can be a double-edged sword. Ensuring the ledger remains balanced in the long run is often difficult under those circumstances. But people like these enable business to get done which otherwise would not, and so working with them is an absolute necessity, if we expect the prosperity levels reached in Cayman to be continued.

The current “Dart Deal” was detailed in Alan Markoff’s excellent front page Compass Article (16 June, 2011), and again in our latest Market Report. In that report I sought to remind the reader about the necessity of there being both “give and take” to get any deal done. That means government had to give something to get something. The remediation of Mt. Trashmore, which has been a source of embarrassment here for a number of years, as well as a health hazard, will be a major accomplishment, as will the by-pass extension to West Bay which will lead to the closing of some Northern sections of West Bay Rd.

This road closing is not particularly popular with locals. And yet when the road disappears along the Public Beach all the land from the beach to the bypass will become part of that beach allowing a lot more people to use it. There will also be another public beach established by Dart farther North. In addition, the Planning Department will continue to require beach access alongside virtually any future development. All of us, campers included, do need to recognise the importance of private property rights. In essence, what makes land in Cayman valuable for all of us, is that it can be bought and used by individuals for their own purpose, within the law.

Most of what Dart will receive in the deal is in the form of duty and tourist tax concessions on properties Dart has agreed to either build or renovate. In other words they will have to spend more significant sums before they ever realise any of those savings. Yes, the Dart Group, like all other “big boys” is going to try to ensure their investments bear fruit. But they are obviously in it for the long haul, and their developments can be a source of long-term pride for us all. I think it would be both wise and fair to give credit where credit is due.