It has only been recently, fully 4 months after the storm, that power and telephone service has been restored to many areas of Seven Mile Beach. Why, you may ask, were so many people unaware of the seriousness of the storm and the damage caused? We believe that someone in Government made a policy decision to minimize the damage reports to ensure that no loss of tourism or financial industry business would result. It is a bit of a catch 22. The media is only interested in playing up tragedies to boost circulation and no amount of incredible recovery stories will ever make the news once the devastation stories have run their course. On the other hand who is going to offer help to a country which does not admit it is having problems? It was a tough call but you know what? “SPIN”, when all is said and done, is just the politically correct description of a lie. And I’m afraid we just can’t condone that regardless of the reason.

In the aftermath, incredibly there were few deaths and we had wonderful stories of people helping each other, sharing what little they had with their neighbour. Mixed with those however were break-ins and looting, crimes not normally characteristic of Cayman.

Thousands are still sharing rental premises and vehicles as their cars were ruined by salt water and their homes will take 6 months or more to rebuild. Hotel rooms are in short supply and rental condos on the beach are even more scarce. Car rental companies are short of cars with hundreds destroyed and others being rented by locals who have lost theirs.

Airline schedules are minimal for most airlines except Cayman Airways making trips to and from Cayman difficult. Shipping materials or cars in is difficult as the current schedules cannot come close to handling the volume and when a shipment does arrive it is often stuck at the Port facility, which is hopelessly clogged and disorganized.

Many of the islands trees are horizontal instead of vertical and with the dry season upon us greening will be scarce until summer. Not a pretty picture, is it? But, the beaches are in great shape and the lack of flights have kept Tourists numbers down with the exception of cruise ships, which are once again pouring in. In previous weekly 2004 reports we advised visitors to wait until after new years to visit and that was good advice. As for a Spring visit, if you don’t mind fewer restaurants to choose from, and you can find accommodations, visiting Cayman now would work for those looking to escape and find us at a quieter pace than you have seen in past years; and the Caymanian people are as warm and friendly as they have ever been.

What does all this mean to the Real Estate Markets? Well let’s see:

Residential
A substantial number of the islands homes and condos were damaged. This reduced the previously small number of properties on the market. The owners of those damaged properties have now rented alternate accommodations while theirs are repaired. This has taken more of the available properties off the market.

As a result, even in the current circumstances where Cayman will limp through its high season, even now, properties which are undamaged or readily repairable are attracting rents and selling prices which are 20% higher than pre Ivan levels. The law of supply and demand once again rules the day as it always does in a healthy market place. The rent gouging which has been the subject of government legislation is in fact being caused by the intense competition for accommodation between the accounting and law firms rather than by unscrupulous landlords.

But the Real Estate Market is more complicated than that. While there are no lack of potential buyers for distressed properties, it is nearly impossible to sell any. The problem is that the sellers still don’t have insurance claims settled so they don’t yet know how low they can sell the damaged property on an “as is” basis. It is very frustrating to have cash buyers and willing sellers but no final numbers to facilitate a sale.

For the properties with mortgages the sales process is even more difficult. Appraisers are reluctant to put a value on properties to allow mortgage ratios to be set. We realtors, although also struggling with values, at least have the benefit of knowing at what levels offers are coming in which allows us to have a better handle on where values are right now. Regardless of what definition the Land Registry would like to use, market price is simply what someone will pay for a property under the prevailing circumstances - and always will be.

So the sellers who controlled the marketplace prior to Ivan, still set the pace after Ivan. The only exception to that rule is likely to be with damaged properties under $150,000. The owners of these properties which are mainly mortgaged will have to somehow balance mortgage payments, rental accommodation, insufficient insurance settlements and possibly lower income from work during a slower high season. That combination is a recipe for disaster and we will likely see a fair number of those properties coming on the market via the banks.

The Ritz has about 18 units left for sale out of 96 and has a new owners opening planned for July. Waters Edge has started construction as has the Caribbean Club which is not as far advanced. Sales were strong prior to Ivan and we expect that trend to continue but perhaps not at the same pace. The opening of the Meridian has been postponed until later this year to repair damaged units. There are still units for sale in these gorgeous properties and with the beach itself virtually untouched, now is a good time to take a look at new construction again. The timing of the completion of these projects should dovetail nicely with the completion of the bulk of Cayman’s reconstruction.

Several other projects are new candidates for redevelopment due to storm damage but no deals have been finalized. It is surprising how many owners in severely damaged complexes are opting to repair instead of redevelop. However, the Beachcomber owners have decided to redevelop their 200 ft. parcel with a 7 storey structure. Call us for details. Plans for The Renaissance, which will be developed on the old Tarquynn Manor site are now finalized and prices range from US$1.7M to US$2.6M for 2,000 – 3,600 sq. ft. units. Contact us for details. There have been a number of direct owner to owner sales in some of the condo complexes. From what we have seen thus far it is our feeling that the sellers in those transactions have left quite a bit of money on the table by selling quickly with no advice. While the speed of a sale certainly has a value in any transaction we have customers waiting to purchase whose approach is that they are looking for an opportunity not necessarily a bargain. An approach like that generally means higher sales prices. This is a complicated market right now – all the more reason to get good advice
.

Commercial
Uglands’ Citrus Grove building built by McAlpine came through the storm with flying colours. Its category 5 hurricane rating proved valid and we expect to see more buildings with similar specs built in the future. In fact throughout the market areas we expect more properties on pilings or higher foundations as well as storm shutters or impact resistant glass to become the norm for future construction in Cayman.

We have 4 parties actively interested in the Chrissie Tomlinson Hospital. By the time this reaches you we hope to have consummated a deal which will allow the hospital to stay open as a private medical specialties facility. We think that would be the best result for all concerned.

Hotels
We mentioned the Ritz above. The Hyatt Beach Suites are now open and the Britannia Golf Course has been open for walking rounds due to the hard work of pro Greg Downer. Conversely the Links at Safehaven will not be open again until after Easter. The Marriott and Westin Hotels are open, as is the Courtyard Marriott (formerly the new Holiday Inn) up past the Public Beach.

Raw Land
Theoretically raw land values should not be affected by Ivan. And good properties which can be built to hurricane resistant standard in protected areas are in demand. Once building prices begin to ease in a year or two we expect quite a few new homes coming online. (We also expect the old ones to be hurricane proofed as best they can in the meantime). As a result raw land prices may not fall much even with the lack of demand from visitors right now.

Construction
With the roads now all repaired, the island is a buzz of re-construction. Many people are not just rebuilding what was damaged but are taking the opportunity to make improvements on their properties. This aspect of our economy will flourish and be a source of growth for us in the months ahead.

Sister Islands
For once the Sister Islands received less damage than Grand Cayman. In fact it was mainly only lost docks over there. Little Cayman would be a good choice for a winter vacation this year as they have their full compliment of rooms and services not to mention fantastic diving and world class relaxation. Wes Dangerfield has some great land parcels available as well as beachfront condominiums at The Club and The Conch Club. He also has listed the finest oceanfront home on Little Cayman. Wes can be reached at 345-948-1083 in his Little Cayman Office.

Kudos
The extent of the recovery which has already occurred is amazing. Many businesses are now able to function and most residences have power and water if not telephone. Those people who were here for the storm and have hung in here and worked hard over the last 4 months to get their lives and business back together deserve a lot of credit. In the utilities department CUC and both Water Companies led the way and the cellular phone companies (AT&T, Cable and Wireless and Digicel) are still being relied upon for most telephone service in the absence of land lines. We also must give credit to all the local banks especially Butterfield and CNB. Although the long lines in the hot sun were not fun, they were open quickly and all banks suspended mortgage payments from the hurricane until January 1, 2005 and that helped a lot of people. Major kudos to Cayman Airways for stepping up to the plate and hitting a home run during our difficult times and also continuing to do so now. They have done a stellar job

Special
As the weeks drag on the Insurance Companies are not endearing themselves to Cayman. Three of the islands biggest have had their ratings placed under review by the AM Best rating agency. After presenting recapitalization plans Island Heritage has retained it’s A-rating; Cayman General has been downgraded and British Caymanian remains under review. Meanwhile, many, many claims are still not settled. While premium payments were required on time, sadly we are not experiencing the same response with regard to payouts. Some companies have resorted to the “rotating adjustors” technique to try to wear the policy holder down. Other policy holders have had to ask for another adjustor as a response to unprofessional aggressive behaviour, a reluctance to actually investigate the damage, or a complete lack of knowledge about local costs. What is getting lost in all this is that insurance is a service business. When the dust settles we suspect the companies which are giving these customers so much grief will end up losing them. If our company did business in this manner we would soon be out of business. We realize these are unusual circumstances, but that does not absolve the insurance companies of their responsibility to get the job they have contracted to do done properly and in a timely manner and to treat their customers with respect. It would be far better in the long run for the insurance companies to simply take their medicine and pay their claims in a professional manner so that they are able to retain their customers for future years rather than ruining their reputations and driving away further business. And if the Insurance Companies attempt to recoup all their losses immediately by raising rates to ridiculous levels, we would not be surprised to see many more people, in this affluent territory which does not have a history of major storms, deciding to self insure, or find alternative cover outside the territory.

Forecast
So where do we go from here and where does the market go? Up to now we have been searching for unavailable properties for serious buyers, and we have had to be amateur contractors and adjusters trying to provide estimates for anxious sellers which they haven’t been able to get from any other source. But none of this has led to many sales. Now that we are into February and more and more of the insurance claims are being settled, we will see owners being able to make hard decisions about selling or rebuilding. There is a market waiting for these properties so as they become available we are getting busier and busier. At what price level will those sales be? Well, that depends on the supply and demand in each level of the market. One thing we do not expect, is a lot of fire sales with the possible exception of low level properties. So, for the winter, the forecast is for partly cloudy skies with clearing expected in a few months.