Enhancing the industrial development of Puerto Rico is an important step towards the island’s path to economic growth and stability. In that process, the Puerto Rico Industrial Development Company (PRIDCO) is key to provide a first-class portfolio of industrial properties to make the island more competitive and attract greater investments.
PRIDCO owns a large inventory of industrial properties, serving a variety of industries mostly manufacturing with 1,520 units and 766 undeveloped lots throughout Puerto Rico, but decades of underinvestment have affected its capacity to maintain the portfolio to high quality standards. This situation has led to the deterioration of its properties and high vacancy rates.
Improving the current property conditions and strategically enhancing PRIDCO’s future performance contributes to the ascension of the business environment in Puerto Rico and critical for successful fulfillment of the needs of the portfolio’s current and future tenants. A third-party asset manager could institutionalize best practices in PRIDCO that may result in improved performance of the agency’s portfolio. A study recently commissioned by the Financial Oversight and Management Board concluded that a third-party management approach for PRIDCO could help the public corporation to be more efficiently managed, innovative, and better positioned to serve the needs of its existing and future tenants. It can also result in optimized operational capabilities, reduce cost exposure, increase revenue, and reduce delinquency. This study was conducted to evaluate PRIDCO’s operating model moving forward, keeping the corporation’s existing organizational structure in mind while also understanding potential benefits associated with the inclusion of third parties to streamline and optimize the operations of the portfolio. Under this type of operational model, responsibilities associated with the operation, management, improvement, and maintenance of the portfolio will be partially transferred to an experienced third- party manager who will apply their own proprietary tools and systems, leading to enhanced operational performance.
The third-party manager will also maximize financial and operational outcomes at PRIDCO, driving value that will benefit the Commonwealth in the short and long-term. According to the study, the third-party management approach is estimated to increase the net cashflows of PRIDCO by $20 – $50 million over a five-year period depending upon the terms and conditions of the newly initiated operating agreement.
Likewise, PRIDCO would be capable of accelerating capital expenditures spending that are critical for a well-developed portfolio. Over at least the past three fiscal years, PRIDCO has faced challenges as it worked to spend the money allocated for capital expenditures. A third-party manager could accelerate the process for repairs and restoration to PRIDCO’s facilities, making the portfolio of buildings and land an even stronger vehicle for economic development.
Based on the findings of the study, PRIDCO recently started a Request for Proposal (RFP) process to parties interested in joining these efforts, which should result in an effective strategy dedicated to the growth of the business environment in Puerto Rico.
