Invest Puerto Rico CEO Admits Real Estate Shortage Clogs Manufacturing Pipeline
Says Promotional Entity Will Work with Incoming Pierluisi Administration to Solve Problem
SAN JUAN – Invest Puerto Rico CEO Rodrick Miller acknowledged that a major obstacle to attracting pharmaceutical and medical devices operations to the island is the shortage of real estate, but the head of the commonwealth’s private investment promotion agency (IPA) assured that the entity is working on the problem.
PRMA President Carlos M. Rodríguez told Caribbean Business earlier this month that Puerto Rico has not been able to capitalize on efforts in Washington, driven by the Covid-19 pandemic, to bring back operations of U.S. companies that currently produce critical medical products in such countries as India and China. The industry chief attributed this, in part, to a shortage of readily usable facilities, particularly industrial properties owned by the Puerto Rico Industrial Development Co. (Pridco).
Rodríguez said that the best Pridco facilities have already been leased out, while other properties abandoned by pharmaceutical plants are unusable because they have not had proper maintenance for years, calling this a “big” obstacle to manufacturing investments on the island.
When asked about Rodríguez’s comments during a recent roundtable on Invest Puerto Rico’s achievements this year, Miller acknowledged the problem, stressing that a key factor affecting overseas manufacturing companies’ decision to establish operations locally is the availability of real estate.
“Two things companies really harp on in terms of trying to figure out, from the pharmaceutical perspective, where to relocate is talent and real estate,” he told Caribbean Business. “[Regarding] talent, we can answer the questions they need to have answered. Real estate is trickier; you are talking about a lot of huge investments in property, plant and equipment for pharmaceutical real estate projects. And the reality is that for many of the projects that Pridco has, the cost of maintenance is exorbitant… There are a variety of reasons that make maintenance very difficult. The idea that there are facilities that have fallen into disrepair is not incorrect.”
Miller said that the nonprofit entity he presides, which in 2018 took over the promotional and marketing tasks of the Puerto Rico Economic Development & Commerce Department (DDEC), has been working together with outgoing Economic Development Secretary Manuel Laboy to address the issue, adding that he has also discussed the problem with DDEC Secretary-designate Manuel Cidre.
“We will be able to work through it. We are really working on not only refining the list of [Pridco properties], but [also] trying to figure out how we actually work with the private sector, whether it is developers or others, [on] what sorts of investments are needed to get those properties to where they are most marketable. There are a few we have been able to market, but we can absolutely use more,” Miller said.
Michael Bay, Invest Puerto Rico’s chief business development officer, said during the roundtable that the entity is working with the private sector to identify warehouse and manufacturing facilities that have fallen into disrepair and ease investments for their “adaptive reuse.”
“We are giving developers a line to purchase those buildings on a speculative basis, without prospects, so we have a portfolio or an inventory of buildings we can put companies in,” Bay said, adding that Invest Puerto Rico is promoting new facility technology involving pods — Current Good Manufacturing Practice (CGMP) clean rooms in shipping containers.
“Rather than building a brand-new Roche or GSK [pharmaceutical] facilities, we are actually working with companies that are going to take over warehouse buildings and manufacturing facilities and order pods…,” he continued. “When you ship 10 of them together, which are designed to link together, within three weeks they can be certified by the FDA [U.S. Food and Drug Administration].”
Miller acknowledged that beyond real estate, the other obstacle to attracting investments is “the challenge of the bureaucracy and the ease of not just permitting, but of getting decrees.” He said that he is pushing for the government to reduce the time that takes to certify manufacturing sites and buildings from three years to less than a year and a half.
The Invest Puerto Rico CEO said he has met with Gov.-elect Pedro Pierluisi, who he noted “reaffirmed his commitment to the work of economic development.”
“We will have to work closely with the Pierluisi administration around identifying the sorts of kinks in the system, and the ways to push beyond those,” he said, acknowledging that the ongoing Covid-19 pandemic has hobbled the entity’s promotional efforts due to the limited ability to travel to other markets and meet face-to-face with company executives.
While Miller acknowledged that that Invest Puerto Rico “is like a toothless tiger because our mandate is promotion,” the entity has “shifted the story on the narrative side from one of crisis to resilience and opportunity.” He said that the entity has identified 50 companies with a total of nearly $750 million capital expenditures that could be prospective investors in Puerto Rico. Twenty of these companies are in the biosciences sector and involve $549 million in capital expenditures, while another nine companies are in advanced manufacturing, with $65 million in capital expenditures.
Other sectors include agriculture, food and beverage manufacturing; information communication technology; energy; and aerospace, avionics and defense. Still, during fiscal year 2020, which ended June 30, Invest Puerto Rico’s efforts led to commitments involving $59 million in capital investments and 3,500 jobs. Miller said that the average wage of the committed jobs is $51,000, well above the island’s median household income of about $20,000.
“We don’t control a lot of these processes; what we bring is a perspective that is informed by working directly with the companies. Our team has a century of experience in economic development,” he said. “What encourages me across the board is the ability, when there is a high priority project, that there is an ability to come together, of the industry association and the government, and know how to get things over the finish line. I am very optimistic that things are going to work out.”
Despite the disappointing results of the reshoring efforts this year, Miller said that several projects will be announced “in the next three to six months.”
“We have got commitments but there is a process of making sure we are able to reach an agreement as it relates to discretionary incentives, whether they can find real estate, and those sorts of things,” he said, declining to name companies. “But we have received commitments that are pretty well-defined, and those will be coming down the pipe in the following months.”
Still, while Puerto Rico has been promoted as a solution for the pharma supply chain challenges, Invest Puerto Rico has also seen the pandemic as an opportunity to highlight the island as an “optimum remote work location.”
“We are going to continue to target service sectors to highlight Puerto Rico’s competitive assets. We are going to continue to focus on [information technology], software, financial services, etc.,” he said. “We have places on the website where people who are interested in remote work can sign up. Social media impressions of 2.5 million and over 160 million in earned media impressions – that’s pretty exciting.”
Miller said that Invest Puerto Rico has also set up a transshipment committee to promote the benefits of the U.S. Department of Transportation-granted two-year waiver exempting island from the air cabotage law. The waiver will allow foreign air carriers to expand certain cargo and passenger transfer services at three international airports on the island.
“This is not only a big deal because it tremendously decreases the cost of passengers or cargo transshipment through Puerto Rico, but also because we are not in the same market place as a lot of other places in the United States,” he said. “We can compete with Latin American markets such as Panama, Florida and others in the Caribbean on the transshipment side.”
He said Puerto Rico has “an opportunity” in getting the attention of pharmaceutical companies that seek to speed up the global distribution of Covid-19 vaccines by shipping them on airplanes.