Caribbean Property & Investment Review — June 2015

Publication Date: 3 June 2015  |  Coverage Period: 3 May – 2 June 2015

Morning Briefing

• MAJOR BREAKING: ExxonMobil announced on 20 May 2015 the discovery of a world-class oil accumulation at the Liza-1 well offshore Guyana — the largest oil find in the Western Hemisphere in decades, with initial estimates pointing to billions of recoverable barrels in the Stabroek Block.
• The Atlantic hurricane season officially opened on 1 June 2015, with NOAA forecasting a near-normal season of 6–11 named storms; Caribbean property and insurance markets are reviewing risk positions as the season commences.
• Jamaica’s tourism arrivals for April 2015 rose 8.2 percent year-on-year, the strongest monthly gain since 2012, with stopover arrivals at Sangster International Airport in Montego Bay breaking monthly records.
• Trinidad & Tobago’s government announced a supplementary budget adjustment in May, trimming capital expenditure by TT$2.4 billion in response to lower-than-projected energy revenues, with infrastructure and housing programmes among those affected.
• The Dominican Republic welcomed its 5 millionth tourist of 2015 in late May, two months ahead of the pace of the previous year, reinforcing the island’s status as the Caribbean’s highest-volume destination.
• Barbados’s Parliament passed amendments to the Special Development Areas Act in May, expanding the range of projects eligible for enhanced investor incentives and targeting heritage property restoration alongside new resort development.

GUYANA LIZA DISCOVERY: The Caribbean’s Economic Revolution

On 20 May 2015, ExxonMobil made an announcement that reverberated far beyond Guyana’s borders and into every investment office, development boardroom, and property market across the Caribbean. The Liza-1 exploration well, drilled in approximately 1,743 metres of water on the Stabroek Block offshore Guyana, had confirmed a world-class oil discovery. The Liza field, as it would come to be known, represented the largest oil find in the Western Hemisphere in decades — a deep-water, high-quality, light crude accumulation of extraordinary scale that instantly repositioned Guyana on the global energy investment map.

The initial assessment of recoverable resources, while still subject to further appraisal drilling, pointed to a potentially transformative volume. Industry analysts who had been tracking the Stabroek Block’s geological characteristics were not entirely surprised — the basin had long been considered prospective — but the scale of the Liza confirmation exceeded even optimistic projections. ExxonMobil’s vice president of exploration acknowledged that the discovery was a significant milestone, not only for the company and its partners Hess Corporation and CNOOC but for Guyana as a nation.

For Guyana itself, the implications of the Liza discovery are almost incalculable. A country of fewer than 800,000 people, historically reliant on sugar, bauxite, and rice for its export earnings, now stands on the threshold of a resource-driven economic transformation that could — if managed well — lift per capita incomes to levels comparable to the more prosperous Caribbean nations within a generation. The government of President Donald Ramotar moved swiftly to reassure international investors of Guyana’s commitment to a transparent and equitable revenue-sharing framework, aware that the country’s institutional capacity will be tested by the demands of managing a major oil economy.

The property market implications for Georgetown, Guyana’s capital, are immediate and significant. Within days of the ExxonMobil announcement, local real estate agents reported a surge in enquiries from both regional and international investors seeking to establish positions in the Georgetown commercial and residential markets. Commercial property — particularly office accommodation capable of housing the international energy company workforce that a major production operation would require — is the most acutely undersupplied asset class. Georgetown’s existing Grade-A office stock is minimal, and the incoming wave of ExxonMobil, Hess, and CNOOC employees, contractors, and service company personnel will create demand that the current market cannot come close to meeting.

For residential property, the dynamics are equally compelling. The senior expatriate staff that international energy companies deploy to frontier operations command housing allowances that far exceed local market rates, driving premium residential valuations rapidly upward. In comparable oil discovery scenarios — Ghana’s Jubilee Field, Uganda’s Albertine Graben, Mozambique’s gas finds — the pattern has been consistent: a rapid escalation in premium residential values in the capital city within two to three years of a major discovery announcement, followed by a broader ripple effect through the residential market as domestic incomes begin to rise.

The Caribbean region as a whole stands to benefit from Guyana’s emergence as a major oil producer, though the timeline to first production will extend across several years. Regional service companies — engineering, logistics, catering, marine services — are already positioning to capture contracts from the Stabroek Block development. Trinidad & Tobago, with its mature energy sector infrastructure and skilled technical workforce, is particularly well-placed to serve as a regional hub for Guyana-related energy services, a dynamic that could partially offset the headwinds from lower global oil prices that T&T’s own production faces.

Hurricane Season Opens: Caribbean Property Risk Considerations

The 2015 Atlantic hurricane season officially commenced on 1 June, and while NOAA’s initial forecast of a near-normal season offers some reassurance, the Caribbean property market is acutely aware that even a single major storm striking a densely developed tourism or residential area can cause damage running into the billions of dollars. The 2015 season enters with sea surface temperatures in the Atlantic and Gulf of Mexico that are broadly conducive to tropical storm formation, though other atmospheric factors including wind shear patterns are expected to moderate activity relative to the most active historical seasons.

For Caribbean property investors, the hurricane season is an annual reminder of the importance of insurance adequacy, building code compliance, and geographic diversification. The market for Caribbean property insurance has hardened over recent years, with reinsurance costs rising in response to the losses sustained during the active hurricane seasons of 2004 and 2005. Investors holding uninsured or underinsured assets in high-risk coastal zones face a risk profile that prudent portfolio management requires them to address. The emergence of parametric insurance products — which pay out based on meteorological measurements rather than individual loss assessments — is offering Caribbean property owners a more responsive and transparent risk management tool.

Jamaica: Record Tourism and the Short-Term Rental Opportunity

Jamaica’s April tourism figures — up 8.2 percent year-on-year — confirm that the island is experiencing one of its strongest tourism growth cycles in recent memory. Sangster International Airport in Montego Bay, the gateway for the majority of stopover visitors, is operating at record capacity, and the tourism authority has flagged that demand for quality accommodation is outpacing supply in certain segments of the market. This supply-demand imbalance is the fundamental driver of short-term rental yield expansion, and property investors who have positioned in well-located villa and apartment assets in the main tourism corridors — Montego Bay, Negril, Ocho Rios — are benefiting directly.

The growth of platform-based short-term rental markets in Jamaica mirrors the global trend, with Airbnb in particular reporting strong growth in listed properties and booking volumes on the island. For the formal property investment market, the platform economy has two important implications: first, it has expanded the pool of viable investment properties by enabling smaller, individually owned apartments to generate competitive rental returns; and second, it has created a new benchmark for rental yield expectations that is influencing buyer price calculations across the market.

Caribbean Leaders This Month

Guyana — World-Class Oil Discovery: ExxonMobil’s 20 May announcement of the Liza field discovery on the Stabroek Block was the defining Caribbean economic event of 2015 to date — and possibly of the decade. Georgetown’s property market has been immediately activated, and the long-term implications for regional economic integration and investment flows are profound.

Jamaica — Tourism Growth Leadership: An 8.2 percent year-on-year increase in April arrivals placed Jamaica at the top of the Caribbean tourism performance table for the month, with Montego Bay’s airport operating at record throughput and short-term rental yields rising in the main visitor corridors.

Dominican Republic — Five Million Tourists: Reaching 5 million tourists by late May, two months ahead of the prior year’s pace, confirmed the DR’s position as the Caribbean’s highest-volume tourism destination and underpinned continued resort-residential development momentum.

Barbados — Investment Incentive Reform: The amendment of the Special Development Areas Act to expand eligible project categories signalled a meaningful policy evolution, opening incentive access to heritage property restoration and broadening the range of investment propositions that can benefit from enhanced tax treatment.

Trinidad & Tobago — Energy Services Opportunity: Despite its own fiscal adjustment, T&T’s energy sector is well-positioned to capture a significant share of the service contracts and technical expertise required for the development of Guyana’s Liza field, potentially creating a regional energy services hub dynamic centred on Port of Spain and Point Lisas.

Cayman Islands — Financial Services Nexus: The Cayman Islands financial services sector anticipated increased structuring activity related to Guyana oil investment vehicles, with several leading law firms and fund administrators reporting early enquiries from energy sector investors seeking appropriate jurisdictional structures.

St Kitts & Nevis — CBI Record Quarter: St Kitts & Nevis reported its strongest ever Q2 Citizenship by Investment programme intake, driven by sustained demand from Middle Eastern and Asian investors attracted by the programme’s combination of competitive pricing and well-developed resort property options.

Overall Performer — Guyana: There is no contest this month. The ExxonMobil Liza discovery has propelled Guyana from the periphery of Caribbean investment consciousness to its very centre. For property investors willing to engage with frontier market conditions, the window of early-mover advantage in Georgetown’s commercial and premium residential markets is opening. It will not remain open indefinitely.

Looking Ahead

The Caribbean investment community will spend the coming months absorbing the full implications of the Liza discovery. ExxonMobil and its partners will move to appraisal drilling to refine the resource estimate, and the Guyanese government will face the complex task of developing a governance framework adequate to managing oil revenues equitably and productively. Regional development banks — including the IDB and the Caribbean Development Bank — have signalled interest in supporting Guyana’s institutional capacity building, recognising that the country’s success in managing its resource wealth will have ramifications across the Caribbean.

On hurricane season, the first two weeks of June will provide an early read on the season’s character. Historically, early June activity can indicate whether an active season is developing ahead of the statistical peak in August and September. Caribbean property investors are advised to use the early-season period to review insurance coverage, assess building vulnerability, and ensure that emergency and evacuation protocols are current. The cost of preparation is invariably a fraction of the cost of under-preparation in the event of a major storm.

Jamaica’s summer tourism peak will test whether the strong Q1 and April data translates into sustained occupancy and rental yield performance through the traditionally slower summer months. The island’s growing direct airlift from the US — particularly from secondary markets beyond New York and Miami — should support demand through June and July, and the short-term rental platform data will provide a real-time window into the market’s performance that traditional hotel occupancy statistics cannot match.

The Caribbean Property & Investment Review is published monthly and provides analysis of real estate, economic, and investment developments across the Caribbean region. This edition covers the period 3 May to 2 June 2015. All market data reflects conditions prevailing during the stated coverage period.

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