Tuesday, August 31, 2010

Cuba extends lease limits for foreign investors

Posted on Tuesday, 08.31.10
Cuba extends lease limits for foreign investors
Cuba has virtually doubled how long foreign investors can lease state
lands, with an eye to developing 16 golf resorts for tourists.

Hoping to lure in golf-playing tourists to Cuba -- and eventually even
U.S. golfers -- the government will allow foreign investors to lease
state lands for 99 years instead of the previous limit of 50 years.

The extension is expected to make Cuba a more attractive place for
foreign developers who already have detailed plans for at least four
golf resorts with seven courses -- including a $1 billion project.

Some foreign investors have been reluctant to commit to the projects
because the 50-year limit was too short and risky, said Antonio Zamora,
a Miami lawyer who researches Cuban real estate issues.

``I think most of them will be OK with the 99-year leases, although
others have told me they will not do it'' unless they can have full
ownership rights to the properties, Zamora added.

Cuba's communist government has kept tight controls on foreign
investments, but a withering economic crisis is forcing it to seek new
financing abroad and expand its tourism industry, one of its sources of

The Official Gazette last week published Decree Law 273, signed by Raúl
Castro on July 19, allowing 99-year leases on properties for foreign
investors though the government continues to own the land. The previous
limit set in 1987 was 50 years, though renewals were allowed.

Still unclear are many issues such as the right to sell or inherit the
properties built on the leased state lands.

The Cuban government owns the overwhelming majority of the land on the
island, though some Cubans who owned small properties before the Castro
revolution in 1959 have been allowed to keep them.

But the decision by Castro, who also has been allowing small but growing
doses of private enterprise by Cubans in hopes of improving the economy,
could give a quick boost to tourism development plans.

The U.S. Congress is considering legislation that would lift the ban on
tourism travel to Cuba, and the Obama administration is expected to
allow a growing number of educational and cultural trips to the island.

Tourism Minister Manuel Marrero announced in August that the government
had approved the creation of 16 golf resorts, ringed by thousands of
condos and villas to be sold only to foreigners. Cuba has only one
18-hole course and one nine-hole course, while the Dominican Republic
has two dozen.

Foreign developers are already well along on proposals for four golf
resorts on Cuba's north coast, including the estimated $1 billion La
Altura mega-project in Bahia Honda west of Havana.

The project, proposed by British and Spanish developers, calls for three
golf courses surrounded by about 3,000 housing units and a marina with
200 slips, according to documents obtained by El Nuevo Herald.

Another group that includes some Native Americans from Canada is
proposing two golf courses with about 2,000 housing units in the
Guardalavaca beach area in eastern Holguín province.

In the Varadero beach resort 100 miles east of Havana, British groups
are proposing one development with a single golf course and about 900
housing units, with some villas costing up to $1 million.

The Bellomonte project on Guanabo beach, just east of Havana, calls for
about 800 units ringing one golf course, plus a small marina.

Cuba recorded 2.4 million foreign tourists last year, a slight increase
over 2008, although revenues have been falling as the Euro and British
pound lost value and the growing number of visiting Cuban exiles chose
to stay with relatives.

The government first allowed foreigners to invest in an estimated 17
luxury condominium developments in Havana in 1995, but then-President
Fidel Castro later halted the building program amid several complaints.

Contracts for the developments in effect allowed third parties to profit
improperly, and made no provisions for companion agreements to develop
housing for Cubans, who face a crushing housing shortage.

The four new golf resorts where the planning is most advanced would all
be located in remote locations.


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