Cuban Real Estate Opportunities

Jeff Siegel

Written By Jeff Siegel

Posted November 7, 2011

The mojitos are especially sweet and the black beans are seasoned perfectly.

This is what I’m greeted with every time I visit my good friend Dalia in Miami.

Although she makes her living as a high school math teacher, Dalia is an excellent cook. She learned the art of Cuban cuisine from her mother, who, along with her father, immigrated from Cuba to the United States in the 1970s.

Her father — a computer engineer — worked tirelessly for decades to provide a good life for his family.

Today, his reward consists of two very happy and successful children, a loving wife, and a solid retirement that allows him to spend his days sipping Cuban coffee and talking politics.

He’s a proud man who truly values his U.S. citizenship, something he worked very hard to earn.

And you’ll never meet anyone who truly appreciates the gift of home ownership more than this guy…

The house he lives in today is the same house he bought in 1988.

He tells me, “Jeff, it was a rundown shack. Cockroaches, dirty water, holes in the roof. Now look. I fixed everything. I built this garage, I built these bathrooms, I planted these key lime trees. I could never have this in Cuba.”

Since the early days of the Cuban Revolution, sales, trades, or gift transactions have been subject to government approval.

And if you were looking to buy or sell a home, you couldn’t set the price or move in or out whenever you wanted.

But on November 10, that’s all going to change…

A Weekend Getaway in Havana

On November 10, the Cuban government will officially allow the free trade of property.

This is a huge deal that will not only give Cuban citizens the opportunity to become homeowners, but it will also allow for what could potentially be one of the greatest real estate opportunities of the century.cuba1

While the new law will only allow the free trade of property for permanent residents, some believe this could open the door for less strict enforcement in areas that would attract foreign investors with deep pockets…

Foreign developers have already been given approval from the Cuban government to open luxury golf resorts. There are currently four such projects underway worth more than $1.5 billion.

That’s a lot of pesos for a government in need of some serious revenue.

And while it is uncommon for U.S. citizens to vacation in Cuba, tourist arrivals in Cuba are actually increasing: In 2010, 2.53 million tourists visited Cuba. That’s a 10.6 percent increase over 2009, with most of these travelers coming in from Canada, Italy, and the UK.

The opportunity for growth is there.

And foreign investors who have an “in” with the Castro brothers could make a fortune.

For the average retail investor? Well, that’s another kettle of fish…

¿Un Oportunidad?

Investing in Cuba has always been incredibly risky — and for good reason. But some have been more than happy to take on that risk.

One way to gain exposure to Cuba is through the Herzfeld Caribbean Basin Fund (CUBA), which seeks to benefit from economic developments in the Caribbean Basin.

Although the Caribbean Basin includes more than just Cuba, this particular fund has often been referred to as the opportunity to profit from the end of communism in Cuba.

Its top three holdings are Seaboard (AMEX: SEB), Coca-Cola Femsa (NYSE: KOF), and Copa (NYSE: CPA).

Not surprisingly, the stock has had a nice ride over the past month, running from $5.40 in early October to $6.97 just last week.

I’m sure some sold on the recent news, and I certainly wouldn’t go chasing this thing on a big run…

But if the Cuban government continues to implement these kinds of changes, certainly the Herzfeld Caribbean Basin Fund could benefit.

Of course, any new changes in Cuba could be short-lived. So while the opportunity to invest in Cuba can be tempting, it remains very risky.

Although if this new property law does pan out for the good people of Cuba — and for those who wish to invest in some very undervalued property assets, then we may dip our toes into these unfamiliar waters.

To a new way of life and a new generation of wealth…

Jeff Siegel Signature 

Jeff Siegel
Editor, Energy and Capital

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