Mr. Arturo Madero President of LEMA Developers

ARTURO MADERO President & Managing Director, San Geronimo Caribe Project, Inc

Mr. Madero, thanks so much for receiving us. We know you are a very busy man. We would like to start this interview knowing a little bit of your background. How did you become the President of Lema Developers?
I arrived to Puerto Rico 14 years ago. I am originally from Colombia. I have been always related to the construction, central banking and cement industry. I started working in Puerto Rico mainly with housing development projects. In 1992, I founded Lema Developers & Associates. During the last 10 years, the company has experienced and amazing growth. In the past, we have built over 1,200 residential units all over Puerto Rico. Today, we have several projects under construction, which add up to more than 1,000 residential units. Without a doubt, the project that I really put my heart and soul in its development is Paseo Caribe. This is a 200 million dollars project. Let me share with you how this project was conceived.

I met one of the Vice-Presidents of Hilton International that knew I was working in the Real Estate development business. He offered me the opportunity to do something with a piece of property located next to the Caribe Hilton Hotel that was acquired by Hilton International. Anyone would love to develop a project in such a beautiful place. I accepted the offer, and I have been working on this project for the last four years. Since this development is located at the entrance of San Juan, it has to be a prominent and attractive project. The first thing we did was to create our teamwork. We looked for the best architecture firms in Puerto Rico and in mainland U.S. One of the firms is in charge of the condo-hotel (88 villas in total that can be divided into 264 new hotel rooms. They are located around the Caribe Hilton and will be managed by the hotel like high quality units). Another attribute of this project is a luxury condominium that will be located on the West Side of the project. This condo will bring a new concept never seen before in Puerto Rico. 46 luxury units compose it and it is located over a 7-floor parking building. This project is almost sold out. Another element of the project is what we call the Entertainment Center. This center will have stores, movie theatres, restaurants and a great plaza open to the sea for recreation purposes. The last element of this project is a parking building for 1,500 cars. In addition, we are building Paseo San Jeronimo, which is a path that goes from Ponce De Leon Avenue to the fort. We want to give a better access to the fort either by foot or car. We hope to finish the whole project by the end of 2004 or the first semester of 2005. This project will generate important economic activity for Puerto Rico. It will be the source for 3,500 new employees (direct/indirect). We believe this project would be a destination point either for local residents or for tourists. Moreover, this project will help to create some awareness to the new convention center that is under construction.

This has been the most important project I have been involved with. It's been a difficult one, but I feel very satisfied to be part of it.

Could we have more information about the Hilton Villas…
There are 88 villas, each one made of 3 hotel keys. That means 264 hotel rooms. Mainly local residents buy those villas. The owners have several benefits, like tax credits. The owner has the obligation to allow the Caribe Hilton to manage the villas for 10 years. Each of the 10 years, the owner can stay for a period of 30-days (at the owner's choice). They also can stay up to 60 days if there is any availability. This is a way to introduce tourist projects because the hotel will not make any investments, and the investor enjoys several benefits. However, the fact that the owner will rent the villa to the hotel will create certain kind of return to recover the initial investment cost.

What is the price of the villas?
It's around $800,000.

Regarding the condo, you were saying that it is almost sold?
Yes it is. It has been very successfully marketed and very well accepted by buyers.

Tell us a little about the mall and recreational facilities.

It will have about 40 to 50 stores including movie theatres. We cannot give information about our tenants, but we will have local and U.S. mainland companies. It will be a high-end mall with top brands and exclusive boutiques.

Who will manage the mall?
The mall will be managed by a professional property management company and in the future we might sell part or the entire center. We are open to any possibilities.

This is a very important project, not only for San Juan but also for Puerto Rico, but what other projects is LEMA currently developing?
We have several projects under construction, mainly housing. We have another project in the Condado Area called Carrion Court that is a 19-floor building of luxury apartments. In mid-range housing projects, we have a complex of 288 in the Bayamon area. We have another project that could be considered tourist oriented, made of approximately 300 villas, like second homes. It is located in Rio Grande, close to Westin Rio Mar. The owners of these villas could use the hotel facilities besides it has a great location. Basically, our duties as developers are to coordinate and control the projects. We use subcontractors for almost every area of the development process. 22 employees compose Lema Developers. We believe that Puerto Rico has a lot of opportunities; there is a commitment from the government to make our economy stronger. To develop a project like Paseo Caribe you need a total commitment between the government and the private sector.

It is not very common to see in other countries that relationship between the government and the private sector. Do you think there is room for improvement in that relationship?
Sure there is. First of all, they must encourage legislation to improve the economic development and make permits final, in order to shorten the development process and to improve invertors' confidence.

Once Paseo Caribe is finished, do you think there is something left to be done by yourself?
My idea is to keep working within the construction field. I will continue working with housing projects. I don't know if I will have the time to do this kind of projects in the future. However, I will support anyone who does it. These types of projects take about 10 years from its initial conception. It is a very long process. However, it is worth it, because Puerto Rico has a lot of opportunities and resources to offer great things to the world. It has everything that is needed to compete with other countries. Tourism resources had not been exploited fully yet. Tourism is only 7% of our economy. People generally think that Puerto Rico is all about tourism, when really the other industries are the main components of our economy.

Are there many tourists from the states buying houses in Puerto Rico?
There is some but not enough. That is a subject to be explored and promoted.

It sounds kind of strange because hotel rates and tourist traffic are kind of high, especially in San Juan. So we are talking of a market that attracts a high purchasing power. It could be a good market to exploit.
Tourism in Puerto Rico is very expensive. The government is making huge efforts to enlarge its offers and attract other markets by creating more affordable hotels. There is a strong competition with Cuba, and Dominican Republic. For example, Dominican Republic with fewer resources than Puerto Rico has about 60,000 rooms. Puerto Rico only counts with 13,000 rooms. Basically, the tourism flow comes from United States. As I mentioned before, Puerto Rico has a lot of possibilities to become a more attractive destination. Puerto Rico, compared with other countries, has the advantage of the excellent relationship that has with United States.

Mr. Madero thanks so much for your time and comments.