Interview with Jean Paul De Meillac , CEO, Terra Caribbean

24 Feb Interview with Jean Paul De Meillac , CEO, Terra Caribbean

Can you provide an overview of Terra Caribbean’s key services, including the breakdown between residential and commercial offerings?

Terra Caribbean is a regional firm operating in Barbados, St. Lucia, Grenada and Trinidad. It originated from Ernst & Young (EY); when the Enron conflict of interest laws were enacted in 2000 and EY divested its service lines. My partner in Barbados acquired EY real estate Services, rebranding it as Terra Caribbean and franchising it across the islands. I oversee Terra Trinidad, where we focus on corporate clients, particularly expats in the oil and gas industry. While Barbados caters to a global market with services like short-term villa rentals, we primarily provide brokerage services, including rentals, sales, valuations and advisory.

Trinidad’s real estate sector is largely unregulated, which can lead to inconsistency. We stand out by leveraging data-driven insights to offer informed decision-making, embodying our tagline: “We know Trinidad.” Our clients include major corporations like BP, Shell and EOG. We also work extensively with private individuals, but due to our history, we handle significant corporate transactions. One notable project involved Kimberly Clarke and Alcoa, who operated a bauxite transshipment facility near Chaguaramas. This facility used to receive bauxite from Suriname via small boats, transferring it to larger vessels for shipment to other islands. However, it has since transitioned to support the oil and gas industry and no longer operates as originally intended.

How do Terra Caribbean’s advisory services, like valuations and brokerage, compare to its buying and selling activities?

We maintain a strict separation between our valuation and brokerage services to avoid conflicts of interest. Our team consists of valuers certified by the Royal Institute of Chartered Surveyors, ensuring they are fully qualified to advise banks on lending and buyers on property purchases. I oversee a team of 15 agents covering Trinidad and Tobago, where Trinidad’s population is 1.2 million and Tobago has around 200,000. The logistics can be challenging, especially traveling between the two islands.

I served on the board of the Association of Real Estate Agents for three years, advocating for local legislation to regulate the industry and improve education and compliance standards. In Tobago, the alien landholding license requirement complicates property purchases for foreigners, as the process is ineffective, leading to few licenses being granted. Many foreign property owners struggle to liquidate their assets, particularly due to currency exchange issues. We have observed significant capital flight, with many clients selling properties and moving their investments abroad, driven by concerns over the declining oil and gas industry.

Previously, high-end properties in areas like Westmoorings attracted expats, who would pay $4,000 to $5,000 monthly in rent. However, with the downturn, there is now an excess of high-end residential properties, leading to a softening of prices — by as much as 30% in some segments.

Fortunately, the commercial office market remains stable, as we haven’t seen new developments in about a decade. Terra Caribbean estimates over a million square feet of A and B class office space exists in Trinidad, with the government adding another million. Pre-COVID, the oil and gas industry was already experiencing a downturn, leading to rising vacancy rates and more negotiable landlords. When COVID hit, vacancy rates surged and prices dropped significantly. Despite no new construction, we are now seeing some absorption of vacant space. Local businesses are downsizing while upgrading their offices, moving from older buildings in Port of Spain to newer, more affordable ones. This trend has contributed to a slight decrease in vacancy rates, which is encouraging.

Trinidad has substantial wealth, with liquid banks and low interest rates, making it a favorable environment for real estate investment. However, many investors choose to move their money abroad and are unlikely to bring it back. Projects like Renaissance faced major construction delays and cost overruns, resulting in many buyers withdrawing. It took years to reach about 70% occupancy. Similarly, One Woodbrook Place has struggled due to escalating prices and slow sales, with some units still owned by the developer. High-end buildings around the Savannah are also facing challenges, as developers did not heed market advice and catered only to their contemporaries.

You have called for reassessing stamp-duty thresholds set 75 years ago, which no longer reflect current costs. Where should the new limits be and how is the current duty holding back the market and how could more realistic rates unlock it?

Currently, the stamp-duty, a one-time conveyance fee based on outdated legislation, is also problematic. It features tiered payments: no tax for properties up to $125,000, three percent for those between $125,000 and $155,000 and it increases to 7.5 percent for properties over $258,000. With inflation, these tiers need updating. Trinidad and Tobago faces a housing crisis and past government efforts haven’t been effective. Instead of relying solely on government initiatives, empowering private enterprise to build affordable housing (up to $295,000) is crucial. While the recent stamp-duty exemption for properties under $295,000 is a step forward, more exemptions are necessary. Reducing stamp duty allows buyers to invest in construction materials, stimulating the economy. Revisiting these tax structures will ultimately benefit everyone.

The government is trying to reintroduce a property tax and has reduced the rate from three percent to two percent. What feedback are you getting from clients about this and how are the valuations progressing?

In 2009, the government made the questionable decision to abolish the local property tax and now they are struggling to reintroduce it. For the past two years, I have been working with our local Chamber of Commerce to provide input for the annual budget and we have highlighted the need for a property tax. I support reintroducing it; there is no reason it shouldn’t exist.

The government is currently focusing on residential properties, assessing them based on a percentage of their annual rental value. The problem is that valuers are visiting houses and estimating rental values without entering the properties, often relying on outdated data from when expats were renting homes for $4,000 to $5,000. This has led to inflated valuations that leave homeowners incredulous; many are suggesting the government rent their properties at those assessed values if that’s what they are worth. The main challenges lie in getting the public service to accurately assess properties and calculate the annual rental value. Initial objections focused on the assessments themselves and there has been further pushback against the tax percentage. In a mature real estate market, rental income dictates property values, but that’s not the case here. While the methodology for tax assessment isn’t inherently flawed, the implementation has been poor. With elections approaching in February, the government seems to be backpedaling to avoid upsetting voters.

Trinidad is a business island while Tobago is more tourist oriented. How does your portfolio and the market differ between the two?

Tobago faces significant challenges, starting with the air and sea bridges. All goods for Tobago arrive in Trinidad before being shipped, leading to increased costs. The Tobago House of Assembly (THA) receives a substantial portion of Trinidad’s budget and employs many Tobagonians, but like Trinidad, Tobago suffers from “Dutch disease” due to dependence on oil and gas revenues. Tourism has significantly declined over the past few decades. While Trinidadians visit Tobago during Easter, Carnival and Christmas, foreign tourism and investment are minimal. During COVID, staycations led to a brief uptick in property sales as people rediscovered the island. However, this trend has since faded, making it difficult to sell property in Tobago. Many foreign owners are stuck, as repatriating funds can be challenging.

On a positive note, an international airport is under construction, with plans for direct flights from Miami. If we can reopen flights from the UK and Miami, it could boost tourism significantly. Trinidad boasts beautiful people, rich culture and amazing food, presenting great opportunities for food tourism. The HADCO Group has successfully promoted eco-tourism in locations like Asa Wright and Grande Riviere, where visitors can witness leatherback turtles nesting. I have a friend who operates a tarpon fishing charter, attracting anglers from around the world to Chaguaramas, known for its big game fishery. Diplomats and expats should explore these attractions, Tobago has the oldest natural forest reserve in the Western Hemisphere in Trinidad the Gulf of Paria, the largest natural harbor in the region. Trinidad has immense potential and its unique flora and fauna distinguish it from places like Barbados and St. Lucia.

Trinidad and Tobago is the Caribbean’s unexplored, green emerald featuring lush rainforests, vibrant green waters and remarkable flora and fauna  Its unique food and culture are unparalleled and its people are warmer than the Caribbean sun.