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Trump Ocean Club: The State of the Market (Part 2)

(Trump Ocean Club is Panama City’s most distinctive landmark and a bellwether of the real estate market. In the first part of his series on the Trump, Punta Pacifica Realty’sManaging Director Jeff Barton explored “The Good, the Bad and the Ugly” of the project’s history and development. In his latest installment, Jeff examines the 2014 state of the market for Trump Ocean Club sales and rentals.)

The Trump Ocean Club is the best-known project in Panama real estate, which went through a turbulent roller-coaster ride in the the last decade. And when property industry analysts examine the state of the Panama City real estate market, they usually start with the Trump, the city’s best known property.

Sales on the Trump started in 2006 at the height of the market and when sales dried up and prices slid, the Trump became the poster child for the downtown. Many buyers chose not to complete their purchase, as prices slid. By 2013, the year after the Trump was completed, Panama was slowly starting to earn back investor interest, but activity remained low in the Trump, with many apartments empty, despite the draw of the Trump name.

During the first few months of 2014, real estate prices in Panama City continued to decline from their 2009 peak, actually falling below 2006 levels. But sales picked up through the course of the year, as investors started to see the opportunity in Panama’s economic growth. The market also benefitted from a steady flow of Venezuelan end users, choosing Panama as a safe haven from the turmoil of their home country.

As investor interest in Panama revived, the Trump Ocean Club was always one of the first topics of conversation. Many real estate shoppers had read the negative articles about the Trump and its problems in the wake of the economic downturn. Although it has been a bumpy ride, all residences have now been delivered to the original purchasers of Trump Ocean Club and in most cases those apartments are successfully generating rental income.

According to research by Punta Pacifica Realty, the residences are 80 percent occupied, primarily by tenants willing to pay rents much higher than other buildings, in order to enjoy the Trump lifestyle. The Trump Collection hotel is also performing well, despite a glut of hotel rooms in the market, notching both the highest occupancy recorded in the city at 67.3 percent and the highest average daily rate (ADR) of $169, according to STR Global’s Sept. 2014 report.

In fact, according to data compiled by Punta Pacifica Realty, approximately 15 new apartments are being occupied each month. This demand is causing an upward trend for sales prices, which had mostly plateaued between the last quarter of 2013 and the first half of 2014.

But different apartments within the Trump perform differently. For example, one-bedroom residences have moved from an average $3,050 per square meter in 2013 to $3,500 per square meter in March, 2015. Although these prices are far from the inflated 2009 market, when apartments fetched $5,000 per square meter, it still shows a healthy upward trend.

The number of sales has also increased, with developer Newland Properties reporting sales of about $6 million per month which has now brought them about the 90% sold level.

So what’s the bigger trend? Panama tends to follow the movements of the Miami real estate trend, usually with a 24-month delay. Miami’s most recent boom period of 2003 to 2006 was followed by a crash, when prices dropped as much as 50 percent, eventually bottoming out in 2011. Panama followed a similar pattern about 24 months later. When Miami prices peaked in 2006, investors looked for better value in the Panama market–which was just then getting hot.

Panama City appears to be following the same pattern now, with Miami real estate prices appreciating as much as 25 percent over the past 18 months. Investors are starting to arrive in Panama again to find competitive prices with better upside and lower carrying costs than the Miami market.  According to a recent New York Times article, “Of the 22,000 condos created in downtown Miami during the boom years, only about 600 remain unsold,” which also is leading investors to explore Panama as an alternative.

Although there is no crystal ball, the future for Trump Ocean Club looks bright for buyers who can time their purchases and know how to access the unpublished deals. Panama City is a tricky market with no widely used Multiple Listings Service, and therefore many of the apartments for sale and rent are never formally published.

Trump was the most expensive residential tower ever built in Latin America, and it is unlikely that there will be anything similarly attempted for the next decade. Expect prices to continue to trend upward during the second quarter of 2015, with the recent delivery of important resort amenities such as the opening of the 60,000-square-foot Sun International Casino, the largest in the region.

For those that have decided to enter the investment ring of Trump Ocean Club it is important to know that prices of equally sized condos often representing price swings of more than $100,000 depending on location and motivation of seller.  Accordingly it takes a careful, analytical approach and on the ground connections to find the best deals.
Next in the Series: What to be aware of when analyzing a potential investment in the Trump Ocean Club

Read: Trump Ocean: The Good, the Bad and Ugly (Part 1)

Jeff Barton is the Managing Director of Punta Pacifica Realty, the leading sales and property management company in the exclusive waterfront skyscraper neighborhood of Punta Pacifica.  Jeff can be contacted at jeff@puntapacificarealty.com

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