How do you see the real estate cycle in emerging international markets such as the Dominican Republic, Mexico or Panama, where the middle class and tourism are growing?
The real estate market in these Caribbean countries, in the coastal areas, is going through a very interesting moment. The population pyramid in the USA is at a time when a large number of retirements are expected. This, together with the fact that prices on the coasts of the USA are very high compared to the Caribbean markets and the capacity and speed of supply generation in these markets, create a very interesting imbalance between supply and demand. There is much more demand in the market than product, which guarantees great absorption of the product.
The particular case of the Dominican Republic is even more pronounced. In addition to this effect, there is a strong demand from Dominicans who emigrated and now, with greater purchasing power, make real estate investments in their country. We observe absorption capacity of the real estate product in all price ranges, there are numerous foreign investment projects that promote the area, provide business models, technology and breadth of sales channels. This entire process generates many jobs and an increase in wealth, which in turn favors the sale of first homes.
How does Clerhp differentiate itself from other small caps in the real estate or industrial sector to investors?
CLERHP is a company with many years of history and managed by a highly experienced team. CLERHP is right now the best option in the market to have listed exposure to the Dominican Republic market. In this market, CLERHP has a very large land pool, for the construction of 20,000 homes, its own construction capacity that reduces the risk of increased construction costs and has demonstrated great sales capacity.
In addition, CLERHP carries out construction work for other companies in the sector and has an excellent strategic positioning in the Punta Cana area. The ability to generate net profit for the shareholder is very notable in CLERHP compared to other companies because, with its business model, it extracts all the possible value from the real estate product, with very high margins when obtained throughout the value chain.
What investor relations strategies are you implementing to improve communication with the market and reinforce the company’s visibility?
In the last period, the company has been very focused on promoting the Larimar City & Resort brand and giving it visibility since it is where the income is obtained. Many potential investors have not yet associated CLERHP and Larimar so we are now working on giving visibility to the CLERHP brand along with the Larimar City & Resort brand. We have also incorporated a new Corporate and Investor Relations Director based in Madrid into the company, we have opened commercial offices in Malaga and we are in the process of opening a new office in Madrid where investor service services will be located as well as commercial offices for Larimar City & Resort.
On the other hand, given that through the sales channel contact is achieved with many real estate investors, they are also made aware of the possibility of investing in listed shares. The share base has multiplied by 6 in the last two years, making the company’s free float very notable.
Since Larimar is developed in the Dominican Republic, how do you manage the risks of exchange rate, inflation or local regulatory framework?
The project is completely dollarized, both income and costs are in dollars. On the other hand, the sales volume in Europe is important, exceeding 20% of total sales. This allows us to close a percentage of sales in euros to cover the percentage of costs in that currency. The cost, therefore, of maintaining the controlled exchange rate is very low.
We do not hedge the change with respect to the balance sheet and, since the company is quoted in euros, the valuation as such may be affected by the evolution of the euro/dollar exchange rate. It is not an issue that worries us too much given that the stronger the euro, the easier it is for the European market to sell, and the stronger the dollar, the greater the value of the assets, without affecting the ability to sell to the American market. It is a good balance to have sales and purchases quite globalized.
What is the positive net cash flow forecast and from what phase do you expect Larimar to begin generating recurring operating returns?
From the moment we begin to deliver the first homes, the cash generation from income is greater than the investments made and the net cash generation is increasing until reaching “flow at cruising speed.” In 2026 we hope to begin home deliveries and in 2027 reach that cruising speed that should be maintained for about 10 years until the project is completed.
In turn, as Larimar City & resort comes into operation, the company will begin to generate income from services, rentals and supplies within the project, which will consolidate a recurring cash flow that will provide great value to the company.
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