Good morning. My name is Nicholas Prouty, and I am the Managing Partner of Putnam Bridge an investment firm located in Santurce. I appreciate the invitation to speak today and share some thoughts with regard to the role technology will play in the economic turn-around of Puerto Rico. However before beginning, let me first address the recent ratings downgrade by Standard & Poor’s. My fundamental belief in Puerto Rico remains absolutely unchanged – Puerto Rico is in the process of a great reinvention and the smart money knows it and that money will soon make its way into your hands.
So where is the money? Are these people here? Are more on the way? The answers are an unqualified yes.
Did you know for example that nearly every luxury rental building in San Juan has a waiting list? That houses out in Dorado at the Ritz Reserve are sold out?
Did you know that you can’t even get a room for the weekend at the St. Regis in Bahia Beach because those rooms are being used by families wanting to spend the weekend there to look at home sites?
Did you know that several times a week my phone rings and on the other end are potential Act 20/22 candidates wanting to learn more about moving to Puerto Rico?
In those calls, I speak of the virtues of life here in Puerto Rico, the quality of the educational system, the kindness of people and the cultural richness, I recommend they come down and visit, walk around the museums, listen to a concert and have a coffee at Hacienda San Pedro.
I tell them that there is a lot of misinformation about Puerto Rico particularly when it comes to crime – that no, there are no shootouts on Ashford Avenue – that they need to stop watching re-runs of Scarface.
I answer personal questions such as where my daughter goes school – has she been accepted by the other children? Is my wife happy, does she have friends? I answer the questions honestly and in as much detail as I feel fit given the fact that I have never even met the person on the end of the phone.
I take these calls because I think every resident as a responsibility right now to do everything they can to help Puerto Rico navigate this difficult period.
I speak publicly about Puerto Rico as a great investment environment – I give speeches and grant interviews on a regular basis. Some have suggested my enthusiasm for Puerto Rico is for selfish business purposes – my response is the always the same, every investment decision I have made here has been predicated on local community absorption. I support Puerto Rico because I love Puerto Rico.
I have offered to build a park in Santurce because I believe it is my duty to take some of the profits we have made at Ciudadela and put them right back into the community.
Am I a socialist? No, I am an old style capitalist who believes in long term greed – I don’t need to take every dollar off the table – I always leave some for others – thus creating the good will that will allow me to pick the fruit of my labor for years to come.
Business does not have to be a zero sum game – “I win” does not need to mean anymore that “you lose”.
In this environment, I have met many interesting people. Over Christmas, hundreds of young Puerto Rican millennials now living in places like New York and Boston gathered at a Compromitidos event at the Conservatorio – many told of their overwhelming desire to come back home.
They have plenty reasons to return and mark my words – many will – the reinvention of Puerto Rico is well underway and I am honored to stand before its’ leaders today and be a part of it.
The reinvention would not be possible without a population willing to tighten its belt and make sacrifices. The Governor deserves a lot more credit than he has frankly received for cutting the deficit, increasing tax collections and reaching meaningful pension reform with the teachers union – all without having to fire anyone. Whether you are Red, Blue, Green or whatever it is time to put down the arms and stand shoulder to shoulder with your brothers and sisters.
As evidence of the growing faith in the economy of Puerto Rico, major firms, including my own have made multiple nine figure investments here within the last 18 months – John Paulson is buying up half of Condado – get on a plane now and business class is filled with representatives from Blackstone, Goldman, DE Shaw, and every private equity firm I know – what is really interesting is that these people are not from the restructuring departments but they are from the asset acquisition departments.
Right now Puerto Rico is doing everything it can to make outside capital feel welcome and the governor’s economic development team will basically give you their cell phone numbers and are ready on a24/7 basis to help cut through the red tape. That same helpful attitude must not be limited to people like me – it must be available to everyone in this room.
They are in the business of business and they want companies to succeed. David Bernier and Alberto Baco are perfect examples – everytime I see either of them they asks me the same question – what can I do to help you?
There has never been a better time to acquire irreplaceable, landmark assets at these types of prices. My fellow investors share a strong conviction that beachfront property located in a country with an American flag in the courtroom and a Wallgreens on the corner is a good bet, couple that with a government bending over backwards to attract business while enacting generational reforms and you have the recipe for a comeback. New York had its economic challenges in the 1970s, but how many of us wouldn’t kill to go back in time and buy some of those apartments that are now trading at double digit multiples?
Puerto Rico’s tax policy to attract new residents, including the targeting of high net worth investors, is certainly generating a lot of interest and why wouldn’t it? It is actually possible for someone to live in San Juan, send their kids to a great school, spend weekends at the beach and pay significantly less tax then in New York or Connecticut.
Each time Puerto Rico is successful in attracting high profile companies or individuals, momentum builds, thereby securing further investment in Puerto Rico.
Given its size with a population of less than 4 million, attracting a few dozen companies or investors desirous of living here will be meaningful to the economy.
Conventional wisdom is often wrong and I remember listening to a banking analyst in 2009 explain to me that the Miami condo market would take 40 years to recover. I guess he was off by 36 years, by the way that same guy now works for one of the rating agencies.
Let’s me tell you a quick story about the role of technology in my business.
When we first started performing due diligence on Ciudadela we did what everybody does in these types of situations – we brought in our engineering teams and combed through every inch of the place, machines were brought in to look through the concrete for fissures, Otis was brought in to turn on elevators – air handling units that had not been tested in years were turned back on.
A week later, the final report came in and it exceeded my own hopes – Ciudadela from a structural standpoint was as well built a building as any in the Northeast.
That information allowed us to go to the next level – we could now gather market data – were there were enough end buyers for our apartments – we needed to know how many apartments had sold in the San Juan metro area in the previous 24 months – was there a trend with regard to apartment sizes and locations – did people like to live in new buildings or old ones?
Data that should have been easily available from a multiple listing services – but data that would determine if the project were a “go” or “no go.” But there was a major problem
San Juan did not and continues not to have a multiple listing service – how could I have not known that fact?
Time was ticking and the secured lender, as well as the debtor and the US Bankruptcy Court all wanted to know one thing – was I was going to pull the trigger.
You know, from the moment I saw Ciudadela, I fell in love with her – it was a visceral reaction and I knew that Ciudadela was one of those transactions that could alter my life and perspective but with an initial investment of around $100 million dollars I had to know if others would share my view and want to live here.
So what did we do? We rolled up our sleeves, went to the office of land records and pulled every single sale of a residential property from 2010 through the summer of 2012. There was no neatly organized data that we could import and dump into comma separated value spreadsheets – just raw data points on printed paper!
This was no joke – we actually had to individually enter every data point. Square footage, type of building…single family residence or apartment, number of bedrooms and bathrooms, balconies, real estate taxes, days and market Further diligence was needed to determine the age of buildings, location, etc. – over 500,000 data points of vital information. I had enormous maps of San Juan created and strewn around my offices in Greenwich. To this day when I drive around San Juan with my wife and she comments “it is amazing how good your sense of direction is, I just smile to myself and remember that period.
We then worked to narrow our selection criteria.
Houses were removed, apartments located in buildings constructed before the year 2000 were taken out, as were certain locations that we didn’t think was our demographic.
Once the tolerances were set, the data was instantly organized and it became clear that although the housing market was soft our instincts on Ciudadela were right on the money – people would move into new apartments in San Juan but only if the price was right.
Within an hour, the decision was made – we were about to invest a lot of money, at a time of uncertainty, in a place that I was only just beginning to understand. It has been one of the greatest business decisions I have made and I would not be here to talk about it were it not for technology.
And Puerto Rico has all the potential to become a technological powerhouse.
We have a rich intellectual tradition that serves as a point of reflection that must be preserved, fueled, and considered, not only from the desks of Fortaleza but also to Placemaking strategies at Seriously Creative.
The professional track record of Puerto Ricans easily demonstrate that human capital is the Island’s most important asset.
As leaders we must recognize that the accomplishments of the past serve to remind us of our unlimited potential.
Look the works of Arturo Alfonso Schomburg in favor of racial equality and Puerto Rican heritage…What about Dr. Antonia Novello, a pediatrician who served as the 14th Surgeon General of the United States; Supreme Court Justice Sonia Sotomayor.
Ample proof of how far Puerto Ricans have come. Other examples abound; including Rafael Bras, Provost for Georgia Tech; Dr. Juan Rivero, a scientist and zoologist who discovered over a hundred animal species and was a major force behind the zoo in Mayagüez.
These people have taught us that high aspirations are achievable but that they only happen as a result of hard work, perseverance, and a singular focus.
Other Puerto Ricans are known for their inventiveness such as Ileana Sánchez, who invented a book for the blind that brings together art and braille; William G. Pagán, IBM Master Inventor, and Registered Patent Agent; Jorge Negrón, who invented a hydro-electric wave-energy conversion system; Jorge Vélez, who holds various patents in the field of Medical Technology; Ronald Rivera, who invented an inexpensive ceramic water filter used to treat gray water in impoverished communities; Ángel Rivero Méndez who is credited with inventing Kola Champagne.
All these men and women were born right here in Puerto Rico but sadly many of them do not live on the Island.
I wonder what is being done to recognize them, to bring them back to teach high school science for a week. I think we are missing a great opportunity to inspire future generations by not letting them know how proud we are of their accomplishments.
I believe, it is safe to say that Puerto Rico can effectively leverage off that strong intellectual tradition, provided it is recognized and celebrated, just as we celebrate the Island’s artists and athletes.
True, not many of these folks come from the IT industry, but, most certainly, IT was used to channel intellectual power, harness efforts, design, test, validate, manufacture, and market their inventions.
True, not many of these men and women wrote code, go tohackathons, but there are common characteristics such as origin, cultural understanding, and an Island perspective that is unique.
You are part of a new breed of leaders and entrepreneurs involved in the re-invention of Puerto Rico.
We should empower people like Giancarlo González, who is proposing open data in government – you know when S&P downgraded us earlier in the week they cited a lack of transparency at the GDB as an example of one of the problems – technology in this case has the capability to not only lower the borrowing costs of millions of Puerto Ricans but it will also remove the pernicious veil of favoritism and shine a bright light that will lead to meritocracy – don’t ever forget that this your government, it is your taxes that pay for it – they work for you, not the other way around.
Let’s not forget about Albith Delgado, who returned to Puerto Rico from Korea to teach gaming at a local university. Likewise, I would be remiss not to must acknowledge the achievements of Nagnoi; or Clasificadosonline and Gustazos, companies that are redefining marketing in Puerto Rico; or Piloto 151 and Biercade, who are actively supporting the rising class of the IT entrepreneur.
Let us not stop there, consider small businesses on the rise, such as AntRocket, Pixel Logic, Digital Tree, YastaPR, Sparkative, Noticel, and 80Grados, What about big business like ENDI?
Puerto Rico’s most valuable resource for economic development does not lie in her beaches, casinos, and golf clubs, but in her people and sadly that resource has been the island’s greatest export.
It is the Puerto Rican professional that largely explains the decision of Hewlett Packard to engage in research in Aguadilla or Microsoft’s to have manufacturing operations in Humacao.
Such an incredible human resource wouldn’t be possible without Puerto Rico’s strong educational tradition because it is that tradition that fuels the intellectual production of our human capital.
Puerto Rico was host to one of the first universities in the New World and today higher education institutions in Puerto Rico compete head to head with many other globally recognized universities, the UPR System, Universidad Polytechnic, and Sagrado Corazon – these are some of our Commonwealth’s greatest assets – assets that should be prized and protected the way a lioness treats her cubs.
Just to remind you, as of 2003, 70 out of the 115 Hispanics working at NASA’s r in Maryland, were Puerto Ricans or of Puerto Rican descent. 70 out of 115 Hispanics – that stat blows my mind.
Beyond aerospace technology, other fields are being developed, such as Design, Architecture, and Fashion at the Catholic University in Ponce; communications, social entrepreneurship, and nonprofit management in Sagrado Corazón; and gaming and development in Universidad del Turabo, among others.
There should be no equivocation that Puerto Rico has the capacity and the track record to reinvent itself, and overcome the current economic and social challenges it faces.
With respect to IT, since arriving in Puerto Rico, I have witnessed an increasing level of activity to generate awareness in networking, collaboration, and business development.
Last years’ Tech Summit was proof of the Island’s high caliber potential, and it was even mentioned at the end of the Summit’s hackathon by Evan Henshaw’s, the co-founder of Twitter. And how great was it to see that the hackers were not just guys.
It was also inspiring to see Puerto Rico’s talent working voluntarily to create solutions to existing needs, using government data. That day should be a benchmark in the Island’s history of technology.
So with all this is in place, we must ask ourselves if there is an ecosystem to support it?
Puerto Rico has a robust infrastructure made up of ISP’s, and data centers. We have the capacity to offer next-generation network infrastructure with advanced optical networking platform capabilities that will enable dedicated Internet access, co-location services, and managed services that can be sold in PR, the Caribbean and the US.
Two internet exchange points already exist that will continue to improve efficiency and quality in communications allowing for better value generation and business activity based on cloud computing infrastructure.
Internet penetration has maintained a positive pace at a respectful 40%, and I was really glad to see wireless penetration at 3.1 million subscribers.
I also recognize the notable efforts directed at promoting access, supporting educational and community institutions, and the development of local Wi-Fi. By the way look at what the City of Chatanooga is doing right now – they are becoming a world class city by making sure they have the fastest internet of any city – shouldn’t we be doing the same? Let’s start with Avenida Ponce de Leon – the open conduit is there – just ask Karen Larson.
In Santurce, there are organizations that feed this ecosystem with their work and add value to that infrastructure by generating awareness and educating people on the benefits of IT.
There is a vibrant momentum and young professionals are the driving force – couple that with incubation efforts led by the Founders Institute, The Film Industry Cluster, Startups of Puerto Rico, INTECO, INTENOR and the re-organization of the PR Science and Technology Research Trust.
There are also less formal initiatives like Puerto Rico Data Meet Up, IT Cluster, HackPR, and BetaBeer that empower local IT entrepreneurship. Other, more mature organizations have recognized the importance of technology and have added working groups in their organizations to address development.
All this entrepreneurial support should be inserted into the global market, and I wonder how does this activity relate to Puerto Rico’s export capacity?
Puerto Rican businesses or Puerto Rican led businesses are doing serious work offshore. For example, AVANT Technologies in Caguas exports surveillance security and their Chile operation is larger than their local operation.
Consider KyteLabs, three guys that are launching a Bluetooth low-energy device to control house appliances though mobile technology. Furthermore, look at how participation in Puerto Rico’s Tech Summit enabled the creation of over thirty applications. Or look at the developers behind Cardboard and Blimp, who bootstrapped their projects and continuously demonstrate their resilience and capacity to innovate, search and reapply.
All this activity clearly demonstrates Puerto Rico’s capacity to export – we have the makings to become a creative and technological hub for the Caribbean and Latin America.
So if we have a track record, talented human capital, good infrastructure, organizations that support the eco-system, the ability to generate awareness and educate, why hasn’t it happened yet for Puerto Rico? Why is it so hard?
One of the reasons I support this event is to put that topic on the table and work in a collective manner to find answers.
As an outsider, now turned resident, I have a different vantage point. I find myself in a constant learning process based largely on observing the Puerto Rican reality and contrasting it with my own experiences.
I’d like to share some of that with you so you may better understand how I envision Putnam’s participation in Puerto Rico beyond our core business.
If we all agree that human capital is the Island’s most important asset, I would like for all of us to agree that Puerto Rico’s human capital is highly creative.
When I looked at the life and work of Puerto Ricans in the creative economy, I saw great promise – consider Salvador Vass-sigh-oh and what he did with PVC injection technology; or at what Angel Ramos did in media by creating WKAQ radio, El Mundo Newpaper, and Telemundo. Did you know that the new Coors can that changes color when the beer is cold enough to drink was created right here by Lab787?
Coming from New York, I certainly knew about the successes of JLo and Marc Anthony, but I was surprised at the number of artists and the recognition that Puerto Rican have gained on a global basis.
Artists like Calle 13, El Gran Combo, and Ricky Martin. I would also like to say that my prayers are with Draco as he battles round 2 of cancer.
Benicio del Toro and Miguel Ferrer have won Oscars for their acting, while Rita Moreno just received a lifetime achievement award from the Screen Actors Guild. This year alone Puerto Rico came back from Cannes with 12 awards and, Jaime Rosado, was named the first Puerto Rican jury member in Cannes. This is the creative economy.
I can tell you that we will turnCiudadela into a focal point of the creative class in Puerto Rico.
Ciudadela is located across from the Puerto Rico Bridge Initiative, we are neighbors toGustazos and Noticel in what has been coined as the Digital Corridor of Santurce.
But also, and very importantly, we are also surrounded by four theaters, various digital studios, two bookstores, two museums, and a bunch of places to eat, drink, chat, listen to music, dance, and work.
I believe there is a lot of synergy between the people that work and do business in Santurce and the lifestyle we want to offer our residents, and if I can tell you anything this morning it is that we will do whatever it takes to support you. You have my word.
Our vision for Puerto del Rey is that rather than seeing it as a place of departure, like an airport terminal, people should see Puerto del Rey as destination in itself on account of its restaurants, accommodations, amenities, and the lifestyle of its community. We believe that both are places where people go and experience Puerto Rico at its very finest.
You have all heard that Knowledge ispower and as such I commend the CIO for the policy where all agencies are expected to develop APIs for better transparency and data integration – open data will help the government to be more knowledgeable of what it does and how it does it. That, in turn, will help address issues and enable the decisions to improve our quality of life.
For example, we may improve efficiency of utilities, reduce tax evasion, improve the efficiency of permitting business on the Island, and curb corruption, in the same manner, I believe that the orchestration of Puerto Rico’s creative potential will yield positive returns and position the Island as a creative and technological hub for Latin America.
I guess the question is: what do we do now?
You have already started to walk in the direction of recovery by bringing the resources of Code for America to enable open data management in Puerto Rico.
The diaspora can be tapped as a market, and many within the entrepreneurial diaspora can be lured back to the Island to generate value and spur business activity.
The vision that Puerto Rico is different from what the media makes it out to be must take hold and investors like myself believe in the opportunities and the renaissance of Puerto Rico.
I believe alternative energy presents great opportunities in Puerto Rico. Aside from the positive impact on the environment, reducing energy costs in Puerto Rico is a pre-requisite for our success. You simply cannot have capital formation when electrical costs are 29 cents a kilowatt hour – particularly in an environment where disposable incomes are too low.
I am a believer in Puerto Rico. Puerto Rico has human capital, tradition, track record, infrastructure, innovation capacity, civil society leadership, and export capacity. It seems that Puerto Rico has everything it takes to positively tackle its current dilemmas, and I believe it will, or I wouldn’t be here today.
What impedes a meeting of the minds? What stands in the way of the kind of dialogue that leads to collaboration?
How badly do we want to succeed? Why don’t we see more students leaving college with hungry dreams of entrepreneurship?
How do Puerto Ricans see themselves in relation to their potential? These questions have no easy answers but they must be addressed.
To that effect, someone tried to explain to me the coat of arms of Puerto Rico, which has a lamb sitting on a bible, as opposed to example, Mexico’s whose coat of arms is an eagle standing on a cactus with a snake in its mouth.
Symbols have great value and should never be overlooked as they are windows into a country’s culture – in this case, “docility” versus “courageousness”.
I am not a psychologist, nor do I wish to enter that kind of discussion. However, I think that symbols are created, and so are traditions.
We have looked at men and women of extraordinary creativity and resolute determination that have led the Island in the past. We need to develop modern symbols.
We must learn to interrogate our practices instead of questioning our talents, capacities, or motives.
We need to be able to address those questions from the vantage point of the collective…humbly and honestly.
As Puerto Ricans, what is our core hope? How do we address inequality, poverty, and unemployment? How do we create the conditions to ensure that every student, every professional, every public servant works to give us their best effort?
Look past political affiliations and work towards the improvement of Puerto Rico, anything else should be a distant second place.
I know this is easier said than done, however, it is critical that Puerto Ricans join forces towards economic prosperity.
Being blinded by political affiliation divides the population at a moment when it needs to work together.
Embrace change. A new entrepreneurial culture is needed, one with more social awareness.
Don’t buy into the media frenzy—it is not as bad as you might think.
Don’t be afraid to take risks—rewards only come to those who are unafraid.
And Work hard, and work smart—it has been my experience that the harder I work the luckier I get.
Thank you very much – I am humbled to have stood before such an important group of people.
Richard M. Colombik, JD, CPA, is an award-winning attorney and CPA with a doctorate in jurisprudence with distinction and was formerly on the tax staff of one of the world’s wealthiest families.
Mr. Colombik has also been a tax manager at a Big Four accounting firm, the State Bar’s liaison to the Internal Revenue Service (IRS), vice president of the American Association of Attorney-CPAs, and vice chairman of the American Bar Association’s Tax Section of the General Practice Council, as well as the past chair of the Illinois State Bar Association’s Federal Tax Committee. Mr. Colombik has also served on the liaison committee to the Washington, DC, National Office of the IRS. Mr. Colombik is also a member of the Asset Protection Committee, American Bar Association, and a member of its captive insurance subcommittee.
Mr. Colombik has appeared on numerous television shows, hosted a weekly radio show on tax and business planning, and authored more than 100 articles on income taxation, asset protection planning, IRS defense, and estate planning. He has also instructed more than 100 seminars to professional groups, business groups, bar associations, CPA societies, and insurance groups. This is in addition to authoring a published work on business entity structures offered by the Illinois Institute of Continuing Legal Education, as well as writing a chapter for The Estate Planning Short Course and Asset Protection Planning.