PUERTO RICO Trends and Developments Contributed by: Juan Ramón Cancio-Ortiz and Cristina M García-Hall, Cancio Covas & Santiago LLP
struction, housing rehabilitation and public building upgrades. Infrastructure modernisation is particularly important for Puerto Rico’s energy system, which experiences recurring reliability challenges. In line with global trends, the energy sector is also a significant driver of economic and M&A activity in the construction sector in Puerto Rico. The ongoing restructuring of PREPA, combined with efforts to modernise the island’s elec - trical grid, has created a complex ecosystem of trans - actions involving public-private partnerships, asset transfers, and operational concessions in both trans - mission and distribution. Currently, PREPA-owned energy generation assets are operated by Genera PR LLC, and its energy distribution and transmission assets are operated by LUMA Energy, LLC, a consor - tium of United States and Canada stakeholders. Infrastructure investment in this sector is particularly critical given the historical fragility of Puerto Rico’s power grid. Large-scale initiatives to upgrade substa - tions, modernise transmission networks and improve grid resilience are underway, supported by both fed - eral funding and private capital participation. These projects frequently involve hybrid transaction struc - tures that combine elements of traditional M&A with project finance and concession-based arrangements. Within this context, and given its geographic posi - tion and climate, Puerto Rico has become a centre for high-output solar energy projects that sell energy to Genera PR and for companies that provide both commercial and residential solar energy systems that lower energy costs and provide the ultimate users with energy source redundancy and the capacity to store energy for emergency situations, such as blackouts, which have become more frequent after the almost complete destruction of the island’s power grid by the 2017 hurricanes Irma and María. While no specific or reliable public data concerning this sector is currently available, it is estimated that Puerto Rico is the third- largest state consumer in the United States of solar panels, batteries and related products. Real estate and hospitality Although not immune from the impacts of the Com - monwealth financial crisis, Puerto Rico’s real estate
sector has successfully weathered the storm and continues to be a significant source of revenue and employment on the island. After undergoing its own restructuring due to the financial crisis of 2008, Puerto Rico’s real estate sector has stabilised and continues to produce income and healthy gains for its partici - pants. Puerto Rico per square foot mall sales continue to outperform continental US sales. The concentration of malls per 100,000 inhabitants is also significantly higher in Puerto Rico. This has led to new commercial real estate groups acquiring mall properties in Puerto Rico. As commercial, industrial and manufacturing activity have risen, so too has the need for warehouse space and manufacturing plant facilities. PRIDCO, a govern - ment agency that was the original promoter of Puerto Rico’s industrial development, owns thousands of properties which require updating for current indus - trial needs and which may come up for sale from time to time. New high-end residential projects have also continued to develop in certain sectors of the greater San Juan metropolitan area, with multimillion-dollar prices not uncommon in this sector. These projects, primarily directed towards wealthy individuals who have been attracted to Puerto Rico as a result of its attractive tax incentives programmes, are also causing an increase in real estate prices in other sectors. The historical deficit in Puerto Rico low-income and middle-income housing also presents opportunities for investors with longer-term investment horizons. Hospitality transactions remain an important com - ponent of Puerto Rico’s broader M&A environment. Investor interest in the island has been supported by the island’s tax incentives, growth in tourism, and increased demand for the development of residential and mixed-use projects. Transactions in this sector often involve portfolio acquisitions, joint ventures and development partnerships rather than single-asset purchases. Institutional investors and private equity funds have shown particular interest in hospitality assets and luxury residential developments, espe - cially in high-demand coastal markets. Recent invest - ments involving high-profile global brands include: the development of Mandarin Oriental’s first property in
1073 CHAMBERS.COM
Powered by FlippingBook