Puerto Rico Trade and Export will review the rental rates of its commercial properties in a move to increase occupancy rates and boost rental income, the public corporation’s main source of revenue, this media outlet learned.
To this end, the agency has commissioned a marketing study from real estate appraisers Vallejo & Vallejo to assess the competitiveness of its rates in the current marketplace.
An inventory of 3.6 million square feet of space makes this public corporation a major landlord. And nearly 20 percent is presently underutilized.
The study is expected to be ready within the next two months, according to Puerto Rico Trade Executive Assistant Director Agnes Crespo-Quintana and Real Estate Division Senior Manager Myra Díaz-Borrero.
As the Puerto Rico government scrambles to address its serious fiscal woes, all public corporations have been pretty much told they need to sink or swim on their own instead of depending on funding from the central government.
In the case of Puerto Rico Trade, most of its revenues derive from the rental of commercial and warehouse spaces in the Free Trade Zone #61 that it operates in Guaynabo and spaces it owns in Ponce and Mayagüez.
Out of a $20 million budget for the current 2014 Fiscal Year, $14 million to $15 million is rental income. The target is to bring this revenue up to $18 million, the officials said.
They blamed the economy for the underutilization of the corporation’s property inventory, which is resulting in a loss of income.
The current vacancy rate is 19.29 percent.
In addition to reviewing its commercial rental rates, Puerto Rico Trade will also be visiting companies beyond San Juan to promote the advantages of operating in an FTZ.
Also known as a foreign-trade zone, an FTZ is an area considered outside the local or U.S. territory. Goods may be received, handled, manufactured or reconfigured for export without abiding local entry protocols or duty payments. Zones are usually organized around airports, seaports and national frontiers.
Financial and logistical advantages include: improved cash flow as duty payments can be deferred until the merchandise is introduced into the island, or waived if foreign goods are subsequently exported outside Puerto Rico; no duties on value-added manufacturing or assembly processes; no quota restrictions on merchandise; inventory tax exemption on all foreign or domestic merchandise stored in the zone for export; minor assembly of merchandise allowable; indefinite storage of goods.
Operations most suited to maximizing FTZ benefits include warehousing, testing, repairs, manufacturing, repackaging, salvage, and labeling.
(The other two free trade zones in Puerto Rico are FTZ #7 in Mayaguez, managed by the Puerto Rico Industrial Development Co., and FTZ #163 in Ponce, operated by Codezol, a Spanish acronym for Ponce Free Trade Zone Development Corp.)
In discussing the high vacancy level, Crespo said the economy has forced some companies operating in Guaynabo’s FTZ to consolidate operations into one facility rather than keep paying for more space.
She said that in recognition of the difficult economic environment faced by companies nowadays, Puerto Rico Trade is willing to work out “customized” deals taking into account a firm’s financial statements.
Companies, she said, “can come to us and say ‘we need X amount of space’ and we can work with them.”