Cuba Real Estate Development Projects
The Company and its joint venture, Bellavista Resorts SA has registered surface rights and development rights. Complete architectural, engineering and concept design plans have been approved by the Cuban authorities and all three phases of this project will be built concurrently. Specifications and project information have been compiled in order to begin a Request for Proposal process to select a general contractor.
The Company is also studying alternatives to underground parking and is working on detailed design components of the project and establishing a proactive value engineering analysis. Under the development agreement reached with the Cuban government, the Company through its subsidiary Wilton Properties Inc. has to match in costs the value of the land contributed by the Cuban Government of $10,350,000, after which costs on the project will be split 50-50.
The Company is continuing discussions with the Cuban authorities and officials in charge of tourism and foreign investment regarding the approval of certain feasibility studies submitted to the Cuban government and clarifying the recent announcements from the Cuban government allowing the construction and sale of residential real estate associated with resort and golf projects. The Company is awaiting the formal approval from the Cuban authorities on the preliminary master plan and development program for Jibacoa. The specific joint venture for this property has been created and the Company is renewing its development rights and is proceeding towards the registration of its surface rights in light of the new 99-year residential leases recently announced by the Cuban government.
In September 2009, the Company received the authorization from the Cuban Government on the preliminary master plan and renewed development rights and to proceed with the land development process on 260,000 m2 of beachfront property and in December 2009, the Company received site approval. We have commenced program design for an eco-resort of approximately 400 rooms and the Company is currently engaged in economic feasibility studies. The Company is proceeding with the creation of a specific joint venture for this property and the registration of its surface rights.
Risks and Uncertainties
Country Risk
Taken from same Management Discussion paper, “The Company’s financial position and its development projects may be affected by political or economic instability. These risks include exposure to fluctuations in currency exchange rates and high rates of inflation. While the Cuban Government is currently seeking to encourage foreign investment by removing certain restrictions on foreign investments and permitting foreign entities to repatriate profits from Cuba, there can be no assurance that this trend will continue.
Operations may be affected by varying degrees by such factors as government regulations with respect to price controls, income taxes, expropriation of property, environment legislation, land use, water use and land claims of Cuban nationals. The effect of these factors cannot be accurately predicted.
The Company is also dependent on the Cuban economy, which itself is highly dependent on external factors such as commodity pricing of oil and nickel, and the state of the world tourism market.”
My comment - Is Cuba somewhat to blame here? Of course. There have many news story in 2010 about the Cuban government reviewing and/or approving a variety of new Cuban golf course and vacation resorts complemented by Cuban villas and real estate “for sale”, none have broken ground yet. Trying to develop golf resorts in a Communist country with a centrally controlled economy is certainly like pushing a rock up hill. Leisure Canada should know this and not over-hype their development status. They are a publicly traded corporation with a responsibility to their shareholders.
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