Opportunity for Hospitality Boom Outside of US Territories: Metrospaces Focuses on Emerging Markets
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Metrospaces, Inc. (MSPC) is a boutique real estate development company, a product of the alliance of Metrospaces shareholders, along with an elite group of real estate professionals and entrepreneurs located around the world. Founding shareholders have extensive careers in real estate financing worldwide, and have funded projects both in the Americas and across Europe valued in excess of US $350Million. For the better part of a year, the company has been developing projects in South America mainly Venezuela and Argentina. These projects not only focus on high end residential developments but also host several projects focused on luxury and business class hotels & resorts.
Most recently the company has been focused on development of its Orinoco Oil Belt Hotel in Pariaguan, Venezuela. Since the acquisition of the lot of land in the city of Pariaguan, the company has hired the prestigious architect Roberto Armas to design and finalize planning on the hotel. Mr. Armas is one of the most prestigious architects in Venezuela, particularly as far as hotel designing is concerned. We are extremely excited about this project since the initial planning design indicates that Company will win planning approval for a 120-room 4 star hotel.
Additionally, PDVSA (the state owned oil company), along with some of the major oil companies such as Chevron, British Petroleum, Total, Lukoil and many others, are investing $200 billion in exploration and production in the area. Metrospace will have only the second 4-star flagged hotel in the area. Once opened, the company states that it will expect to charge an average nightly rate of $150-$180 and have occupancy rates of at least 85-90% and a proposed EBITDA margin to be at least 35-40% in this project.
…Keep in mind that this is only one project that the company is working on and there are six in addition to this that are being developed or near completion. This is the update as of the last company letter to shareholders:
Chacabuco 1353: The project is near full completion. As a whole, the project is over 95% executed. Sales started very strong having sold 4 apartment units in the 3rd quarter of 2013. The company began taking in sales deposit according to executed Sales Option Agreements. Sales price was $90,000 for each unit, and they were all sold to a single investor group. Company has been collecting on this sale and has been able to use it to fund new projects.
La Tour 320: Construction is now about 20% executed, and structure is about 55% executed. The project has kept a very strong pace in the construction phase, and management is expecting to finish the project within 12-13 months. Although MSPC has not started sales, it feels very encouraged as it receives nearly 4-5 calls a week from perspective buyers looking for prices and time of delivery. The Company stands firm on its forecast to sell these units for at least $3,500 per square meter, particularly since it has seen the market move to the $3,800 per square foot range in the last few weeks. Metrospaces will not be making any pre-sales on this project, as it has full funding for completion and will wait until the end of the project to be able to realize higher pricing on the units. The Company expects delivery of these units 1Q ’15.
La Tour 450: This project is currently in planning stages. However, MSPC has suffered slight delays in this stage, mainly due to an extended Christmas break in government agencies, and also due to governor elections.
Caiman Beach Hotel and Spa: Management is finalizing documentation, legal and tax structure. However, this has caused a delay in final closing.
Tulasi Mandir Hotel and Spa: The Company has recently executed an LOI to acquire up to 60% of this project. This is a 28 unit ultra-luxury hotel and villa project located in Coche Island, Venezuela. It is a high-end hotel and spa, aimed at more discerning clients. It will attend an unserved high-end market in Coche Island. Merospaces expects to charge $280-$350 per night, and have occupation rates above 70%. The project is currently about 15% executed with full permits in place. However, permits need to be renewed, which could take about 4 months to complete. The company will be closing on the acquisition in the next 45 days, and will fund it, likely with internal cash flow. The company fully expects to be able to obtain a hotel construction loan from a national bank to finish the project.
Other Projects: The Company will continue to make a strong focus on building a chain of hotels, aimed at niche markets. In particular, we are exploring the possibility of acquiring a working vineyard in Mendoza, Argentina to build a 28-room ultra-luxury hotel, villa and winery. Additionally, we are looking at the possible acquisition of a 100% interest in another lot in the Orinoco Oil Belt region, since demand is expect to exceed the capacity of 50 hotels in the area MSPC is currently operating in.
Target Markets of Venezuela and Argentina are reporting increased economic growth
Venezuela and Argentina rank in the top 5 South American Countries based on the overall GDP and both of which have realized increased growth. Regarding Argentina, its economy also realized year-over-year growth (8.3 percent). The Argentine National Institute of Statistics and Census (INDEC) said in a report that the industrial sector increased 8.4 percent in the three months from April to June, while the services sector grew 8.8 percent. Furthermore, private consumption jumped 9.2 percent during the quarter and public consumption increased 8.6 percent. According to official budget estimates, the Argentine economy is expected to expand 4.4 percent , higher than the previous 1.9 percent.
According to The Wall St. Journal, Venezuela’s economy gathered pace in the second quarter, expanding 2.6% compared to the same period the year prior. This was thanks to a turnaround in manufacturing and to higher oil output as well as increased growth in gross domestic product during the period from April-June.
Opportunity in “The Golden Mile”
Two of the 3 listed projects above are located in Venezuela, specifically in Caracas. Noted in a New York Times article as “the costliest city in Latin America”, the Caracas region has what is called the Golden Mile; a zone that contains the sectors of highest land prices in Venezuela and one of the most expensive of Latin America. Metrospaces’ LaTour 320 and LaTour350 are both located in Los Naranjos de Las Mercedes which immediately borders “The Golden Mile”. Home to 5 stars hotels, shopping centers, and headquarters of national governmental institutions, the location of the MSPC developments could be very appealing to home buyers.
Notwithstanding the company’s growth potential in the South American regions for business travelers or high end condo buyers, the current trading level has opened up doors for subpenny players to take notice as well. Over the past few months, Metrospaces has pulled back significantly from around 0.0015 to the current .0002 mark and potentially make this appealing to those looking for “bottom plays”.
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