• Use a Digital Platform to Present Your Story Compellingly & Transparently
• Create a Secure Data Room with NDA, Watermarks, and Download Controls
• Gauge Investor Interest with Organized Activity Reporting & Private Messaging
• Automate Interactions & Notifications to Streamline Hand-offs Between Parties
Us: sales@trellisplatform.com Or Visit: www.trellisplatform.com
ADAM GREENFADER AG&T
In every crisis, there is an opportunity. Today, we are navigating the aftermath of the global COVID-19 pandemic, escalating geopolitical conflicts, and the increasing devastation caused by the ongoing climate crisis. Supply chain disruptions have highlighted the vulnerability of global markets, pushing nations to prioritize the domestic production of essential goods, including pharmaceuticals and medical supplies. As countries implement stricter trade policies, tariffs, and border controls, the world is shifting toward a new era of isolation and economic self-reliance.
At the same time, environmental challenges continue to remind us that no region can address these crises alone, and cooperation is more critical than ever. Wildfires in California, flooding in North Carolina, unprecedented heat waves in Europe, and intensifying hurricanes in the Caribbean are stark warnings of the urgent need for collective action. While some nations are retreating inward, the reality is that global challenges require global economic solutions.
In this complex landscape, Puerto Rico stands at a
pivotal crossroads. With over 70 years of leadership in pharmaceutical and critical manufacturing, Puerto Rico is uniquely positioned to strengthen the United States’ supply chain resilience. Its strategic location, highly skilled workforce, and robust industrial infrastructure make it an indispensable asset in ensuring national economic security.
Puerto Rico holds a unique and challenging distinction, it is on the front lines of the climate crisis. As hurricanes grow stronger, coastlines erode, and temperatures rise, the island faces the urgent need for climate adaptation and resilience. Puerto Rico’s struggle is not just its own; it is a preview of what many coastal regions around the world are already starting to experience.
This dual role, as both a manufacturing powerhouse and a climate crisis leader, positions Puerto Rico as a vital case study for the future. By investing in sustainable industries, resilient infrastructure, and disaster preparedness, the island has the potential to serve as a model for how communities around the world can
thrive in the face of global uncertainty.
But before that can be done, Puerto Rico will need to pull itself out from its current economic challenges. Economic reconstruction is not easy, and, in the case of Puerto Rico, it calls for abandoning old approaches and cultural biases that have persisted since 1898. Puerto Rico’s economic development is not simply putting things back as it was before; or by replacing previously inadequate infrastructure or existing systems, but by making profound restructuring of existing ones.
Those who do not learn from the past are doomed to repeat it.
Since the beginning, U.S. Congress has employed a two-pronged approach to the island’s economic growth: encourage Puerto Rico to borrow heavily to perform critical government functions and create lucrative tax incentives to motivate U.S. companies to move to the island. Triple tax-exempt bonds were first introduced in 1917. The bonds were used to finance the island’s economy. Companies were also provided lucrative tax incentives to industrialize Puerto Rico. For a long while,
it worked extraordinarily well. By the 1960s, The New York Times called Puerto Rico “one of the most spectacular economic achievements of the post-war era.” Puerto Rico prospered for thirty years. It had one of the highest per capita incomes and became one of the world’s top pharmaceutical production hubs (it still is today).
Globalism and the end of the cold war however revealed cracks in Puerto Rico’s economic policy. U.S. companies, searching for even cheaper labor and raw materials, were going farther across the planet. Ease of credit and tax incentives ultimately deflected attention from the fact that Puerto Rico did not have fundamental economic revenues models in place. Real estate taxes, land use planning and zoning for instance, were ineffective to generate sufficient revenue to fund its own budget internally.
Lucrative tax incentives like Section 936, also could not hide structural economic deficits; high unemployment, a large informal economy, and people emigrating to the U.S. mainland to find better paying jobs. When
the Section 936 incentive expired, Puerto Rico went into debt. Adding real injury to insult, two category five hurricanes and multiple deadly earthquakes slammed Puerto Rico, causing more than 100 billion dollars of damage and the loss of over 4,700 lives. Then in 2020, the Covid 19 pandemic brought massive quarantines and huge reductions in tourism and other industries.
Amidst these challenges, there are rays of hope. Puerto Rico formally exited bankruptcy on March 15, 2022, after completing the largest public debt restructuring in U.S. history. This milestone followed a federal judge’s approval of the debt adjustment plan on January 18, 2022, which set the stage for the territory to begin its financial recovery. The restructuring process, initiated in 2017 under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), will address approximately $70 billion in debt and $50 billion in pension obligations.
As the island is recovering, it has now regained access to capital markets. Its banks are extremely well capitalized according to the Tier 1 Capital Ratio which is used to determine a bank’s financial health and ability to absorb potential losses. When comparing Puerto Rican banks with the top-tier U.S. banks: Puerto Rican institutions are leading the way
• Popular, had a Tier 1 Capital Ratio of 16.08%. Revenues were $2,941 billion, up 5.71%, and net income was $612,800, up 13.50%.
• FirstBank ranks first with an impressive Tier 1 Capital Ratio of 16.30%. Revenues were $938,201 million, up 0.93%, and net income was $298,724, down 1.35%.
• Oriental, also outperforming some of the largest U.S. banks, secures the seventh position at 14.26%. Revenues were $709,621 million, up 3.93%, and net income was $198,170, up 8.96%.
Puerto Rican bank’s ability to outperform U.S. banking powerhouses in Tier 1 Capital Ratios signals resilience and significant growth potential, making them attractive to domestic and international investors, inspiring confidence and solidifying their role as piv-
otal components of the island’s economic stability and growth.
Notwithstanding overall stability in Puerto Rico’s banking sector, commercial lending remains significantly below pre-pandemic levels. Banks continue to prioritize real estate lending and liquidity management, limiting financing options for businesses. Policymakers and financial institutions must work together to create incentives encouraging business lending, particularly for SMEs. Commercial lending remains stagnant despite economic recovery efforts. Compared to 2014 levels, commercial lending has declined by 34.7%, suggesting that banks remain risk-averse in lending to businesses.
With Puerto Rico’s economy at a pivotal moment, revitalizing commercial credit availability will be critical to driving long-term economic growth. According to Birling Capital Advisors’ Francisco Rodriguez-Castro, “Expanding banking competition will increase capital availability, enhance credit offerings, and support the island’s economic transformation.”
While the traditional banking has waned, Puerto Rico’s alternative capital ecosystem is filling the vacuum and is experiencing significant growth with International Banking Entities (IBE) and International Financial Entities (IFE). The IFE Act (Act 273) was created to modernize Puerto Rico’s financial sector and attract a wider range of financial services companies beyond traditional banking. The primary goal of this legislation is to attract U.S. and foreign investors to Puerto Rico by authorizing entities to engage in specific banking and financial activities, primarily with non-residents.
While IBEs were primarily focused on offshore banking, IFEs allow investment banking, asset management, fintech, and other financial innovations. As a result, many IBEs are transitioning to IFE status to take advantage of broader services and more attractive tax incentives. As of 2020, Puerto Rico’s financial services sector included 27 International Banking Entities (IBEs) managing $59.3 billion in assets. The International Financial Entities Act provides significant tax incentives to encourage the establishment and operation of these entities in Puerto Rico. Benefits include a fixed 4% income tax rate on net income, full property and municipal license tax exemptions, and favorable tax
treatment for shareholders on distributions.
Puerto Rico’s insurance market is notably diverse, encompassing 47 domestic insurers, 33 international insurers, and 271 foreign insurers. International insurers in Puerto Rico are companies established under the International Insurance Center, offering services primarily to clients outside the island. These insurers benefit from Puerto Rico’s favorable tax incentives and regulatory environment. Notable international insurers include AIG Insurance Company-Puerto Rico, MAPFRE Life Insurance Company, Chubb Insurance Company of Puerto Rico and Pan American Life Insurance Company of Puerto Rico.
The island hosts over 1,247 private companies within its startup ecosystem, spanning various sectors. This includes 96 new fintech startups in Puerto Rico, including notable companies like Zenus Bank, EVERTEC, FV Bank, Ready Player DAO, and Olé Life. Of these, 27 startups have secured funding, with 8 reaching Series A or beyond. This expansion highlights Puerto Rico’s emergence as a burgeoning hub for fintech innovation and entrepreneurship.
Fueling the growth of both traditional and alternative financial sectors, Puerto Rico has been granted the largest allocation of federal relief funds in U.S. history. Dubbed “Operation Bootstrap 2.0,” the island has already received over $35 billion to rebuild homes, develop critical infrastructure, implement renewable energy solutions, and fund other essential projects. This unprecedented federal investment is a crucial opportunity for Puerto Rico to rise from the ashes and emerge more resilient and self-sustaining.
In addition to relief funds, the Puerto Rican government and the U.S. Internal Revenue Service have in-
troduced a series of tax incentives to attract businesses and individuals to Puerto Rico. Among these, Act 60 (previously Acts 20 and 22) offers significant tax advantages, including an exemption from almost all U.S. federal income taxes for United States citizens! These incentives have resulted in a massive influx of high-net-worth individuals and pioneering entrepreneurs. With thousands of new residents bringing innovative ideas, global connections, and significant capital, Puerto Rico is experiencing a rapid transformation. As the island navigates this unprecedented growth, the challenge is ensuring these investments result in long-term benefits for all island residents, not just individual beneficiaries.
Financial support from the United States Government, however, is not limitless. The urgency to implement new strategies has never been greater. Rebuilding Puerto Rico for the long term requires a forward-thinking approach that moves beyond temporary relief and toward lasting economic independence. In my latest book, “Why Puerto Rico Now,” I explore Puerto Rico’s historical economic landscape to uncover valuable lessons from the past. More importantly, I present forward-thinking strategies and innovative solutions for the future. By examining key industries, emerging technologies, and transformative opportunities, “Why Puerto Rico Now” is an out-of-the-box blueprint for economic self-sufficiency, innovation, and adaptability.
Whether you’re an entrepreneur, investor, policymaker, community leader, or just someone who wants to come back home, Puerto Rico invites you to play a pivotal role in the island’s future. This is your chance to not just witness change, but to actively shape Puerto Rico’s future. The window of opportunity is wide open, and the time to act is now.
Adam Greenfader Chairman AG&T
AG&T is a premier real estate development and advisory firm headquartered in Miami, Florida. Under his leadership, AG&T has specialized in creating exceptional hospitality, residential, and resort developments throughout the Caribbean and Central America.
ERIC BERMAN
Vivant Capital
Alternative investments have long provided institutional and high-net-worth investors ways to diversify their portfolios beyond traditional equities and fixed-income assets. Real estate, historically a core component of alternative investments, is undergoing a transformation. As office spaces struggle with remote work adoption and retail properties continue to be challenged by e-commerce disruption, hospitality investments, particularly in leisure-driven markets, are proving resilient.
In Puerto Rico and across the Caribbean, the hospitality sector has emerged as one of the strongest-performing real estate asset classes, driven by strong travel demand, supply constraints, and government-backed incentives. This shift presents an opportunity for investors seeking exposure to real estate while mitigating some risks associated with other asset classes.
While office and retail properties have suffered declining demand, the hospitality sector has rebounded strongly, particularly in upper-upscale and luxury segments, along with lifestyle-oriented boutique hotels. According to recent data from STR (2024), global RevPAR (Revenue per Available Room) has increased significantly, driven by robust growth in high-end and leisure-oriented hotels. Puerto Rico, in particular, has experienced notable performance improvements, with increases in ADR (Average Daily Rate) and occupancy levels surpassing pre-pandemic benchmarks.
Unlike traditional real estate assets, hotels offer greater flexibility in navigating economic fluctuations due to their adaptable business models. This adaptability contrasts with office and retail properties, which often have fixed lease structures that can become liabilities during downturns.
Puerto Rico and the broader Caribbean region benefit from a stable tourism base largely fueled by U.S. travelers. As a U.S. territory, Puerto Rico removes common travel barriers, such as passport requirements and currency exchange issues, making it highly attractive for domestic travelers seeking convenient, premium experiences. This reliable tourism stream provides investors with predictable, more recession-resistant revenues, especially in the luxury segement.
Moreover, Puerto Rico offers unique advantages through government-backed initiatives such as tourism tax credits and investment incentives, significantly reducing traditional equity risk. These incentives create a compelling case for hospitality investors compared to other Caribbean destinations.
Current hospitality investment strategies increasingly reflect evolving market dynamics and changing investor objectives. High-end hospitality segments, such as upper-upscale and luxury hotels, as well as lifestyle-oriented boutique properties, are particularly attractive to investors due to their long-term appreciation potential and resilient demand profiles. Investors are actively shifting their capital towards these segments, given their capacity to deliver superior returns through value appreciation and strategic repositioning.
As hospitality markets mature, investors are progressively adopting value-add and opportunistic investment strategies, targeting properties that offer significant upside through renovation, rebranding, operational improvements, or strategic repositioning. Such strategies have demonstrated the ability to deliver outsized returns compared to core or stabilized assets, which typically yield lower but more predictable returns.
Historically, private investors and specialized real estate funds have dominated hospitality investments. Recently, institutional investors such as pension funds and sovereign wealth funds are increasing their allocations to this sector. Global hotel transaction volumes continue to rise, with significant investor interest concentrated in upper-upscale, luxury, and lifestyle-oriented segments due to their resilience, strong market fundamentals, and potential for attractive returns.
Institutional investors appreciate hospitality’s ability to diversify portfolio risk while maintaining operational flexibility, enabling efficient management of economic fluctuations through proactive investment management and targeted market strategies.
Profit margins in hospitality vary significantly by segment. Limited-service and select-service hotels generally offer higher operating profit margins due to reduced labor requirements and minimal overhead from limited food and beverage operations. Conversely, upper-upscale, luxury, and lifestyle-oriented hotels typ-
ically incur higher operational costs due to extensive amenities and enhanced service standards, resulting in comparatively lower margin percentages.
However, these premium segments generate substantially higher absolute revenues, provide greater potential for long-term capital appreciation, and attract investors focused on both income generation and asset value growth. Consequently, despite lower margin percentages, upper-upscale, luxury, and lifestyle-oriented properties frequently deliver higher overall returns, particularly in prime leisure markets like Puerto Rico.
Puerto Rico’s robust incentive programs play a crucial role in making hospitality investments financially attractive. The island’s Tourism Tax Credit Program significantly mitigates development risks by offering substantial tax credits against eligible development costs which typically result in earlier liquidity events, accelerated depreciation schedules, and various tax exemptions on property, municipal taxes, and imported construction materials.
Additionally, Puerto Rico’s Act 60 provides further incentives to hospitality businesses, enhancing investor returns and facilitating entry into the market.
Hospitality investments currently offer distinct ad-
vantages within capital markets compared to other real estate asset classes. The flexibility inherent in hotel investments allows for responsive management of market fluctuations, thereby optimizing returns and mitigating risks. In economic downturns or periods of inflation, hospitality assets provide unique advantages due to their adaptable operating models and resilience.
Moreover, hospitality assets increasingly attract sophisticated investors through strategies such as acquiring distressed properties, debt acquisitions, and value-add repositioning. Distressed asset acquisitions and opportunistic investments offer investors significant upside potential through targeted improvements, operational enhancements, and strategic market repositioning. These value-add strategies are particularly compelling in today’s market environment, where hospitality assets can be acquired at attractive valuations with strong future growth potential.
As traditional real estate sectors face ongoing challenges, hospitality investments stand out as resilient and increasingly attractive alternatives. Puerto Rico, specifically, presents investors with compelling opportunities due to strong demand fundamentals, attractive government incentives, and its unique positioning in high-end and experiential travel markets. Investors who recognize and act upon these strategic opportunities, particularly through value-add and opportunistic approaches, will likely achieve significant returns, solidifying hospitality’s role as a critical component of alternative investment portfolios.
Eric Berman Managing Partner Vivant Capital
Vivant Capital is a private equity and asset management firm focused on alternative investments, namely hospitality and commercial real estate, in Latin America and the Caribbean.
Vivant provides the opportunity for individual accredited investors, family offices, and private funds to invest in hospitality real estate projects with a stable value proposition and a high potential for appreciation.
BERISFORD GREY
Sygnus
How was Sygnus formed, and what was the initial objective behind launching the company?
Sygnus was founded with a clear mission: to redefine access to capital in the Caribbean by pioneering alternative investments. Traditional financial institutions often have more rigid structures that limit businesses’ ability to access the capital they need for growth. Sygnus was formed to bridge this gap, providing flexible and crative
financing solutions tailored to the unique needs of companies across various industries.
From the outset, our goal has been to accelerate business expansion and economic development across the region by deploying private capital where it can have the greatest impact. As a firm, we are committed to unlocking value for both businesses and investors, offering a diversified range of alternative investment opportunities that drive growth.
Sygnus has built a reputation as a leader in alternative investments in the Caribbean. What is your vision for transforming the region through alternative investments?
At Sygnus, our vision is to drive the velocity of economic growth using creative financial solutions in the Caribbean and Latin America, creating a more dynamic, resilient, and opportunity-rich financial ecosystem. We see private credit, private equity, real estate finance and impact investing as game-changers for businesses that are often overlooked.
By providing customized financial solutions, we empower businesses to scale faster, create jobs, and drive innovation, leading to a ripple effect of economic transformation. At the same time, we offer investors risk-adjusted returns, helping them diversify their portfolios beyond traditional asset classes.
Ultimately, we want to position the Caribbean as a thriving investment hub, proving that this region is not just a market for consumption and tourism but a center for global capital flow and entrepreneurial success.
What are the biggest gaps in the Caribbean financial markets that Sygnus is addressing for both investors and business partners, and how do you see the alternatives sector evolving over the next decade?
One of the biggest gaps in the Caribbean financial market is the limited access to flexible, growth-focused capital for businesses. Many companies, especially in sectors such as real estate, infrastructure, and manufacturing, require tailored financing solutions that are often inaccessible due to regulatory constraints or risk aversion at traditional institutions. Sygnus fills this gap by offering customized alternative financing solutions, helping businesses expand, innovate, and become more competitive globally.
For investors, the challenge has been a lack of diversified investment options beyond traditional equity markets and government bonds. Sygnus provides investors with access to private credit, real estate, private equity,
and impact investments creating new opportunities for wealth creation.
Over the next decade, we see the alternative investment sector in the Caribbean evolving into a mainstream pillar of the financial industry. As more investors look beyond traditional asset classes and more businesses seek alternative financing, the demand for non-traditional capital solutions will continue to grow. Private credit, private equity, and other alternative investments will play an increasingly significant role in portfolio construction and asset allocation while also driving regional economic development. As these investments expand, they will create new sources of alpha in manufacturing, energy, distribution, and infrastructure, ultimately attracting greater participation from international investors.
What unique investment opportunities exist in the Caribbean that global investors might be overlooking?
Many global investors still see the Caribbean primarily as a tourism destination, but the reality is that the region offers diverse and lucrative investment opportunities across multiple sectors. Beyond hospitality, we see strong potential in logistics, renewable energy, manufacturing, infrastructure development, and technology-driven enterprises. The region’s expanding trade networks and digital transformation initiatives are also opening new avenues for investment that remain largely untapped.
What role does alternative investments play in supporting economic resilience and business growth in the Caribbean?
Alternative investments are a critical driver of economic resilience in the Caribbean, particularly as businesses navigate challenges such as limited access to traditional financing, economic volatility, and climate-related risks. By offering flexible capital solutions, we empower companies to scale, innovate, and withstand external shocks
more effectively.
In 2024, Sygnus took a major step toward strengthening the region’s resilience by launching the Caribbean Community Resilience Fund (CCRF) in collaboration with the CARCIOM Development Fund. This fund is specifically designed to mobilize private capital for climate adaptation and sustainable economic growth, addressing urgent challenges such as infrastructure development and renewable energy investments. Through CCRF, we are channeling capital into projects that generate financial returns while also creating long-term economic stability for Caribbean nations.
By investing in private credit, real estate finance, private equity, and impact-driven initiatives, Sygnus is helping to future-proof Caribbean businesses, ensuring they have the resources to adapt, expand, and thrive in an increasingly complex global environment. Alternative investments are no longer just an option—they are a strategic necessity for long-term growth and economic resilience in the region.
How do you assess risk in Caribbean markets, and what strategies does Sygnus use to mitigate these risks for investors?
Sygnus employs a rigorous risk assessment process, leveraging deep expertise in deal structuring across industries. We mitigate risks through robust documentation, strategic partnerships with reputable specialists, and proactive credit monitoring to protect portfolio capital. Our structured approach ensures well-managed, high-quality investment opportunities, giving investors’ confidence in the Caribbean market.
Sygnus has expanded its presence across Jamaica, Puerto Rico, and the wider Caribbean. What’s next in terms of market expansion and growth strategy?
Sygnus has always been strategic in its expansion, ensuring that we enter markets where we can drive significant impact for businesses and investors. Having successful-
ly built a strong presence in Jamaica, Puerto Rico, and the wider Caribbean, our next phase of growth involves deepening our footprint in key regional markets.
Puerto Rico has served as a critical gateway for our expansion into Latin America and the broader U.S. market. As we continue to scale, we are actively exploring opportunities to establish a stronger presence in the region, allowing us to connect Caribbean investment opportunities with global capital markets more seamlessly. This move will also enhance our ability to provide cross-border financing solutions, supporting businesses with operations across multiple jurisdictions.
What would you say to institutional investors and family offices looking to diversify their portfolios with alternative investments in the Caribbean?
I would say that now is the time to act. The Caribbean is undergoing significant economic transformation, and alternative investments provide an excellent avenue for uncorrelated returns and exposure to high-growth sectors. Sygnus offers investors a proven track record, deep market expertise, and a commitment to delivering long-term value.
What advice do you have for investors looking to navigate the Caribbean’s alternative investment landscape successfully?
First, work with the right partners—local expertise is key to navigating the nuances of each market. Second, think long-term—alternative investments require patience, but the rewards are substantial. Third, embrace diversification—the Caribbean offers opportunities beyond tourism, and spreading investments across sectors can enhance returns while managing risk.
At Sygnus, we’re committed to helping investors tap into the full potential of the Caribbean’s alternative investment space, and we welcome those who are ready to explore the opportunities ahead.
COLTON WANDKE, CAIA DECA & PR INNOVATION FUND
Many involved with science-driven innovation understand the challenge of balancing Research & Development (R&D) investment with capital efficiency. The need for non-dilutive funding is at an all-time high. Venture markets are more selective. Capital efficiency is critical. Puerto Rico presents an opportunity that few are taking full advantage of, despite the fact that its R&D tax credit program is one of the most attractive in the world.
In Puerto Rico, eligible companies can recover up to 50% of their R&D costs in the form of transferable tax credits. Unlike most tax incentives that can only be utilized to reduce a company’s tax burden, Puerto Rico’s credits can be monetized, turning R&D expenditures into non-dilutive capital. With a well-established secondary market for these credits, businesses can sell them to investors looking to optimize
their tax liability, typically receiving $0.90+ per dollar.
This is not a theoretical advantage. In the last twelve months, the Puerto Rico Innovation Fund has invested over $27 million leveraging R&D tax credits as collateral, demonstrating how these credits function to create a unique asset class. However, while the financial opportunity is clear, execution is not simple. Investors and companies that fail to structure their claims correctly and maintain proper compliance leave millions on the table.
Puerto Rico is not just an incentives market. It is a strategic financial ecosystem for innovators and investors who understand how to navigate its regulatory and capital landscape.
Puerto Rico’s R&D tax credit program is designed to support local entrepreneurs and attract innovation-driven businesses by subsidizing R&D expenditures. The credits are granted annually and can be used, sold or transferred. This creates a unique advantage for companies looking to maximize cash flow and investors seeking tax-efficient capital allocation.
To qualify, R&D activities must meet strict criteria:
• Scientific and Technical Uncertainty: The project must address a problem that cannot be resolved by an expert without systematic experimentation.
• Experimental Process: The work must follow the scientific method, requiring hypothesis development, testing, and iteration.
• Commercial Application: The outcome should result in a new or improved product, process, or technology of commercial value.
These requirements align with global R&D credit frameworks, yet many companies misunderstand the qualification process. Mistakes in classification can lead to denied claims, lower credit valuations, and ultimately, lost capital.
R&D in specialized sectors such as deep technology, life sciences, and data-intensive industries demand highly specialized talent, robust intellectual property protections, and infrastructure that facilitates translational research into commercial applications. Puerto Rico offers an investment ecosystem that meets these requirements while simultaneously providing a tax-advantaged structure that enhances capital efficiency.
The island has long been a center for biopharmaceutical manufacturing, medical device innovation, and advanced process engineering. More than $53 billion in pharmaceuticals are exported from Puerto Rico annually, with six of the world’s top ten biologics produced on the island. Companies operating here benefit from federal regulatory alignment, strong intellectual property protections under U.S. law, and access to a highly skilled STEM workforce at a lower operational cost than mainland U.S. hubs.
What distinguishes Puerto Rico is its unique opportunity at the intersection of scientific innovation, financial incentives, and regulatory advantages. Companies conducting R&D on the island remain within the U.S. jurisdiction for FDA compliance, NIH collaboration, and federal research grants while simultaneously benefiting from a low fixed corporate tax rate and monetizable R&D credits that convert directly into deployable capital. This allows firms to stretch their research budgets further while retaining the ability to scale manufacturing and commercialization within the same tax-optimized jurisdiction.
For capital allocators seeking to partially de-risk investments into R&D-intensive companies, Puerto Rico is not just a location. It is a platform for sophisticated capital deployment, tax optimization, and high-value research commercialization.
Accessing Puerto Rico’s R&D tax credit program is not automatic. It requires careful planning, structuring, regulatory compliance, and financial optimization. Missteps in project eligibility, expense allocations, or
documentation can lead to missed opportunities. Many businesses attempt to navigate this process alone and fail to capture the full value of available incentives.
The approval process involves:
• Technical Validation: Ensuring that R&D activities align with regulatory definitions and meet eligibility thresholds.
• Financial Documentation: Preparing the supporting financial analysis and submitting an Agreed Upon Procedures (AUP) report by a licensed CPA in Puerto Rico.
• Regulatory Compliance: Securing approval from the Department of Economic Development and Commerce (DDEC) and the Puerto Rico Treasury Department.
Puerto Rico is one of the most overlooked jurisdictions in the alternative investment landscape. It provides non-dilutive capital for R&D-intensive companies and tax-advantaged opportunities for investors.
For investors focused on science-driven businesses, Puerto Rico should be seen as more than just an incentives market. It is a platform for capital efficiency, tax optimization, and strategic growth. Those who recognize the opportunity now will be ahead of the market.
Co-Founder & Partner
DECA | Partner - PR Innovation Fund
DECA - Pioneering Strategic Investment Analysis, Non-Dilutive Capital Structuring, and Low-Cost Specialized Financing Programs for Puerto Rico’s Dynamic Market
JULIA WHIPPO
Moneyball.ai
For decades, individual investors looking to put capital into private markets have faced a fundamental challenge: access. Venture firms and institutional players enjoy a constant stream of inbound opportunities, but individual investors—especially those who prefer to remain anonymous—often get left out of the game. And even for those who do see deal flow, it’s often a barrage of irrelevant pitches, making it exhausting to separate the wheat from the chaff. Now, thanks to AI, the old playbook of networking, industry events, and relying on a “who you know” approach is no longer needed to play. Hyper-targeted deal flow has arrived, and it’s turning private investing into a highly efficient, personalized experience.
Let’s talk about the mess. Right now, the private investment landscape is drowning in noise. Fund managers and VCs get plenty of inbound deal flow, but much of it is irrelevant or underwhelming, with cold inbound falling into the in-house black hole.
Individual investors, on the other hand, face thee opposite problem. They don’t get bombarded with deals, but that’s not because they don’t want access—it’s because they don’t have time to sift through the noise. They aren’t attending networking events, they don’t want to plaster their email across startup databases, and most importantly, they don’t want to be known as “an active investor” unless they’re prepared to field an endless wave of inbound whatever.
Enter AI. Instead of relying on who you know, the market is shifting toward who you should know. AI-driven platforms now quietly factor in your investment preferences to surface only the most relevant opportunities for you. You can sit back while the system delivers precision-matched deals without you needing to lift a finger—or, critically, without you having to expose yourself to an avalanche of irrelevant pitches. The
result? The quality of deal flow skyrockets while the effort required to maintain it plummets.
For years, institutional investors have had an edge in private markets. On average, institutional investors allocate about 27% of their assets to private investments, taking advantage of their historical outperformance over public markets. Meanwhile, individual investors have remained largely on the sidelines, with just 6% of their capital in private markets. That gap isn’t just a difference in strategy—it’s a missed opportunity.
Why haven’t individual investors participated more? Historically, the barriers have been steep. Private market access required extensive networks, deep diligence capabilities, and, frankly, a lot of time. But AI is eliminating these friction points. Instead of spending months sourcing deals or fund managers and vetting them manually, you can now leverage AI-powered platforms that bring the best opportunities directly to you, pre-vetted and tailored to what you care about. The traditional gatekeeping of private markets is eroding,
and individual investors are finally getting a fair shot at the kind of returns that institutions have enjoyed for decades.
Beyond efficiency, AI is also unlocking a new era of value-driven investing. Investors today are increasingly seeking opportunities that align with their personal interests and long-term objectives. Until now, the structure of private markets has made this difficult— most investors could only invest in what was available within their network or through their fund’s sourcing channels. How many things do you want to invest in that are important to you, and you’re just waiting for that deal to come across your desk?
AI is bringing the magic to you, allowing you to align your capital with your priorities. Whether it’s sustainable agriculture, impact-driven startups, climate tech, local businesses or alternative asset classes, you can now discover and invest in opportunities that reflect what you care about most.
For years, private investing has been dictated by availability, not preference. You’ve had to choose from what is presented to you. With AI, investing is shifting toward a personalized, values-driven approach, where your capital is allocated based on alignment rather than convenience.
Private investing has always been a relationship-driven game. You meet the right people, you see the right deals. AI is supercharging the game. Here’s a controversial take for you: traditional networking is limited. Think about it—you can only maintain so many relationships and keep track of so many deals. AI, on the other hand, can network with hundreds of thousands of people simultaneously, analyzing patterns, aligning interests, and surfacing the most relevant opportunities in real time.
By including AI in your investment network, you’re essentially expanding your own reach by 1,000x (or more). The deals you see aren’t just coming from your
direct contacts; they’re sourced from a vast, intelligently curated ecosystem that extends far beyond what any human network could ever achieve. This means higher-quality, better-matched opportunities without the heavy lifting of constant outreach, meetings, and events.
The best part? AI does this all while keeping you in control. Rather than being bombarded with every possible deal in a given sector, AI learns from investor behavior, preferences, and past decisions to ensure that every opportunity presented is not just relevant, but highly targeted. The power of human intuition, combined with the scale and efficiency of AI, is creating an entirely new paradigm for private investing.
AI is revolutionizing private investing across multiple dimensions. Beyond just deal sourcing, AI is now being used to streamline due diligence, provide deeper analytics, optimize fund operations, and enhance relationship management for fund managers and beyond. Investors can assess risk more accurately, detect red flags in pitches, and even predict founder resilience based on behavioral data.
Fund managers are leveraging AI to improve their relationships with LPs, ensuring more transparency and engagement. AI is also transforming how investors work with portfolio companies—helping them track performance metrics in real time, offering strategic guidance, and even identifying potential partnerships or acquisition targets. Check out our friends at DataDrivenVC.io if you’re curious about how VCs are using AI and data to reshape their funds.
For individual investors, AI is leveling the playing field. Instead of spending years building networks or relying on warm introductions, AI allows them to access high-quality deals that match their specific investment thesis. Investors who once had limited access to private markets due to time constraints or lack of connections can now leverage AI-driven platforms to efficiently discover, vet, and track investment opportunities in a way that was previously impossible. This means more informed decisions, reduced risk, and the ability to participate in private markets with a sophistication once reserved for institutional investors.
For founders, this shift means capital is finding them faster. Instead of spending months fundraising, AI-powered matchmaking is connecting them with the right investors more efficiently—saving time and energy while increasing the likelihood of strong investor-founder alignment.
More importantly, capital finding the right founders means that a founder’s ability to network no longer dictates which projects live or die. Founders can quickly gauge broader investor interest in their deal and, if the demand is there, rapidly connect with the right investors. This efficiency allows them to shift their focus away from constant fundraising and back to what truly matters—building their business, solving customer problems, and making the world a better place.
With AI eliminating many of the traditional barriers to funding, the next generation of world-changing companies will be determined by their merit, not just their connections.
The rise of AI-powered investing is doing more than just improving deal flow—it’s unlocking a whole new era of value-driven investing. Instead of being constrained by geographic location, old-school networks, or industry cliques, investors can now put their capital to work in ways that truly reflect their interests and values. Whether it’s impact investing, niche industries, or emerging markets, AI ensures that every investor—no matter how big or small—can align their capital with what matters most to them.
More importantly, this shift is helping investors escape the correlation trap. Public markets have become increasingly synchronized, making diversification harder to achieve. Private markets, historically uncorrelated with traditional asset classes, offer a powerful hedge—one that AI is making easier than ever to access.
The bottom line? The future of private capital isn’t just about more deals—it’s about smarter deals. In-
vestors who embrace AI will gain a level of precision and efficiency that was previously only available to the biggest institutions. Those who don’t? Well, they might just find themselves stuck in the old-world game of endless networking, hoping for a lucky break.
The era of network-dependent investing is ending. The next decade belongs to investors who embrace intelligence over exclusivity, precision over volume, and hyper-targeted deal flow over outdated sourcing models.
The best deals will no longer go to those with the best connections. They will go to those with the best intelligence.
Julia Whippo CEO Moneyball.ai
Moneyball.ai is redefining early-stage private investing with AI-powered deal sourcing, intelligent company-capital matchmaking, and hyper-personalized dealflow. Our platform eliminates inefficiencies, ensuring investors receive only the highest-relevance, values-aligned opportunities before the market catches on.
To join the AI-driven movement reshaping venture investing, visit Moneyball.ai.
Moneyball uses technology and psychology to find the perfect match. Hyper-relevant deal flow, right to your inbox.
Sign up at
JAMES CONNOR Sygnus Capital Puerto Rico
Today’s increased volatility in the stock and bond markets serves as a painful reminder to many that it is prudent to always have part of one’s wealth allocated to alternative investments with a low correlation to publicly traded stocks and bonds. Private credit as an asset class is one of the pillars of the alternative investments’ spectrum, providing investors increased diversification and capital, and yield stability that is uncorrelated to the daily ups or
downs of the publicly traded markets. Not surprisingly, over the last few years private credit has emerged as a compelling alternative increasingly sought by the most discerning institutional and high net worth investors, while it’s accessible to most accredited investors.
Private credit involves fund managers and nonbank financial institutions providing loans or leases
directly to businesses, as an alternative to the conventional channels including banks and credit unions. This asset class has experienced significant growth, expanding from approximately $1.5 trillion in 2022 to an anticipated $2.8 trillion by 2028 (InvestmentNews). This surge is driven by a combination of borrowers seeking alternative and competing sources of credit access and, as stated above, investors’ increased determination to allocate capital to private credit funds as a means of diversifying the portfolios under their stewardship.
While private credit investment values are not totally disconnected from price swings in publicly traded equity and bond markets, they are far less influenced by it, providing a substantial buffer against the expectations of economic contractions which are quickly, and at times severely, reflected in stock and bond prices. During periods of public market volatility, private credit has demonstrated resilience, maintaining stable returns due to its structure and the bespoke nature of its lending agreements.
Furthermore, private credit has proven resilient in the face of economic downturns. The ability to navigate volatile market conditions and provide capital where traditional funding has lessened, brings to focus private credit as a stabilizing force in the financial sector. The agility of alternative lenders, coupled with a focus on risk management, positions them as strategic partners in supporting economic growth and development. This resilience is a key reason why astute investors are increasingly diversifying their portfolios to include private credit instruments.
In recent years, private credit has showcased robust performance, even as public markets faced turbulence. According to Preqin’s 2024 Global Private Debt Report, private debt performance is expected to be stronger than in the past, with an internal rate of return forecasted to rise to an average of 9.81% from 2022 to 2028 (InvestmentNews). This stability underscores private credit’s potential as a reliable income source, even
when traditional assets underperform.
A key differentiator of private credit is its capacity to make credit accessible with distinctive agility and flexibility resulting in a high-value experience for borrowers and in strong relationships that beget additional future mutual investment opportunities. Private credit lenders recognize that their principal competitive advantage is to reliably enable borrowers to fund business growth plans, and that is achieved by developing a deep understanding of their needs, industry dynamics, and long-term potential, which allows for customized capital-access solutions.
Borrowers benefit significantly from this direct relationship. Instead of navigating a slow-moving and highly regulated borrowing environment, businesses working with private credit sources benefit from a more responsive financing experience. While private credit interest rates may be higher at times, that cost is offset by the value realized from speedier and tailored access to capital, and financing solutions that align with their specific needs.
Private credit plays a crucial role in financing an ample range of businesses, situations and opportunities that are either chronically, cyclically or temporarily underserved or out-of-favor. Often but not exclusively the financing will enable the acquisition or generation of an essential asset such as real estate, equipment, accounts receivable, inventory, proprietary data, among other, of small-middle to multinational corporations. The direct, relationship-driven approach of private credit managers fosters economic expansion by ensuring businesses receive the capital they need to scale operations, hire more employees, and invest in innovation.
Sygnus Capital Puerto Rico has embraced this relationship-driven approach to private credit, successfully deploying nearly $100 million in 2024 across key sectors such as healthcare, hospitality, telecommunica-
tions, and real estate. By offering flexible and strategic capital solutions, Sygnus has empowered businesses to expand operations, create jobs, and contribute to Puerto Rico’s long-term economic resilience.
Sygnus plays a catalytic role by providing the credit-capital that propels medical infrastructure projects that ensure broader access to quality healthcare services; investments in boutique hotels and premium hospitality projects that are fueling tourism growth, while funding companies that are strengthening Puerto Rico’s digital infrastructure. Additionally, it has provided credit access for multiple real estate development projects that are contributing to housing expansion, accessibility and urban development.
This direct engagement with businesses has positioned Sygnus as a key partner in economic transformation, helping enterprises overcome financial barriers and drive long-term growth. The Sygnus team is on a mission to accelerate the development of Puerto Rico’s emerging private credit sector, ensuring that more businesses have access to credit, and ultimately unleashing board economic growth and prosperity.
While private credit presents attractive features, investors should carefully assess several factors when considering private credit opportunities. One key aspect is illiquidity, as these investments typically involve longer lock-up periods compared to publicly traded assets. Additionally, private credit deals can be complex, requiring thorough due diligence due to their bespoke nature. While private credit is generally less correlated with public markets, it is not entirely insulated from economic downturns, which may affect borrowers’ ability to meet their repayment obligations.
As businesses seek nimble and customized financing solutions, and investors explore avenues beyond traditional markets, private credit is set to play an increasingly integral role in shaping the future of finance. Its ability to offer flexible capital, navigate economic volatility, and foster direct borrower-lender relationships makes it a key player in driving economic growth
and financial resilience.
The rapid expansion of private credit signals a broader shift in how capital flows in the modern economy. Investors are recognizing the long-term potential of this asset class, while businesses are turning to private lenders to fuel expansion and innovation.
It’s an exciting journey, and staying informed is the key to unlocking the full potential of this transformative force in the world of investments.
Sygnus is a leading alternative investment firm in the Caribbean and Latin America, committed to accelerating economic growth across the region, using innovative and creative financing solutions. Alternative forms of investment such as Private Credit, Real Estate Finance and Private Equity are utilized to satisfy the unmet demands for innovative investment opportunities, unlocking capital for growing companies, and plays a critical role in economic development.
With a dynamic and interconnected ecosystem across all business units, Sygnus is defined by a purpose-driven team that delivers unrivalled regional expertise, all underpinned by a robust foundation of corporate due diligence and internal governance.
CHARLES FISHER Gulp Data
For decades, investors have diversified their portfolios beyond stocks and bonds by exploring alternative assets like real estate, private equity, commodities, and intellectual property. These assets offer unique benefits such as lower correlation with traditional markets, long-term appreciation, and opportunities for revenue generation. But in today’s digital economy, a new asset class is emerging—one that is reshaping business strategy, mergers and acquisitions (M&A) transactions, and enterprise valuations: data.
Much like real estate or intellectual property, data has both intrinsic and extrinsic value. It can be bought, sold, licensed, and leveraged for competitive advantage. Yet, many companies and investors fail to recognize data’s potential as an asset class in its own right. Those who do are unlocking new revenue streams and driving higher valuations.
In this article, we will explore why data is a viable
alternative investment asset class, how it compares to traditional assets, and what businesses and investors can do to capitalize on its financial potential.
To be considered an asset class, an investment must have distinct characteristics that set it apart from other assets while also offering financial returns. Data meets these criteria in several ways:
1. Scarcity and Uniqueness
Scarcity drives value in many traditional asset classes. The price of real estate, for instance, is influenced by location, supply, and demand. Similarly, some datasets are more valuable than others based on exclusivity and relevance. Proprietary customer insights, supply chain intelligence, or industry-specific benchmarks can be in-
valuable to the right buyer.
For example, Tesla’s autonomous vehicle data is a unique and irreplaceable asset. The company has collected millions of miles of driving data that competitors, including traditional automakers, do not have. This dataset is not only rare but also critical for the development of self-driving technology. As a result, Tesla’s data alone has substantial strategic value, making it a key differentiator in the automotive and AI markets.
2. Revenue-Generating Potential
Data isn’t just valuable—it can generate revenue in multiple ways, much like intellectual property or rental income from real estate. Companies can monetize data through:
• Licensing and Data-as-a-Service (DaaS): Selling or renting datasets to partners or other businesses.
• Subscription Models: Charging for access to real-time analytics, financial insights, or consumer trends.
• Enhancing Existing Products: Using data to create AI-driven enhancements or improve user experiences.
• Cross-Industry Applications: Leveraging data assets in new markets beyond their core business. For example, Bloomberg generates billions in revenue annually by selling financial data subscriptions to investors. Similarly, companies like Experian and Equifax monetize consumer credit data by selling reports to lenders and businesses. These models prove that data can be a sustainable revenue stream, making it an appealing alternative investment asset.
3. Value Appreciation Over Time
Unlike physical assets, which can degrade, well-maintained data assets tend to appreciate in value over time. This is especially true in sectors such as artificial intelligence (AI) and machine learning, where historical data is crucial for training better models.
Consider medical data: A company that collects and structures healthcare records today may find that its data becomes more valuable as AI-powered diagnostics
improve. Similarly, consumer behavior data collected over several years can be more predictive and, therefore, more valuable to advertisers and retailers.
The appreciation of data is also fueled by increasing regulatory scrutiny. As privacy laws like GDPR and CCPA evolve, compliant, well-structured datasets become even more desirable since they can be used without legal risk.
Unlike real estate or commodities, which require ongoing maintenance or consumption, data has low marginal costs and can be monetized repeatedly.
A single dataset can fuel multiple revenue streams across different industries. For example, ride-sharing companies like Uber and Lyft generate valuable urban mobility data. This data can be used internally to optimize routes, but it can also be sold to city planners, real estate developers, and transportation agencies without depleting its core value.
This scalability makes data a particularly attractive alternative investment, as it does not suffer from the same diminishing returns as physical assets.
Historically, one of the biggest challenges for data as an asset class has been its lack of liquidity—companies had data, but no clear marketplace to sell it. However, this is rapidly changing.
New platforms are emerging to facilitate data exchanges and transactions. For instance:
• Snowflake’s Data Marketplace allows businesses to share and monetize datasets in a secure environment.
• Dawex and other data exchanges are creating structured marketplaces where companies can buy and sell data legally and transparently.
• Blockchain-based data markets are developing to enable secure and trackable data transactions, reducing concerns around misuse and duplication.
As data markets continue to evolve, liquidity will improve, making data a more tradable and investable asset class.
To better understand data’s role as an investment, let’s compare it to other alternative assets:
Asset Class Characteristics
Real Estate Tangible, appreciates over time, location-dependent
Rent, resale
Medium Market downturns, maintenance costs
Private Equity Long-term growth potential, illiquid Capital gains, dividends Low Business risk, long exit timelines
Intellectual Property Unique, legal protections, scalable Licensing, royalties
Data Unique, scalable, reusable Licensing, analytics, AI training
As seen above, data shares characteristics with intellectual property while offering better scalability. Unlike real estate or private equity, data can generate revenue with minimal ongoing costs, making it an efficient asset class.
1. Valuing Data as a Formal Asset
Most companies still treat data as an operational byproduct rather than a balance sheet asset. Businesses that formally value their data can unlock new financing opportunities, justify higher valuations in M&A deals, and attract data-savvy investors. Key steps in data valuation include:
• Cataloging and structuring data assets to assess their completeness and usability.
• Applying financial valuation models, similar to how intellectual property is valued.
• Integrating data valuation into financial reports to demonstrate its impact on business growth.
Medium Enforcement challenges, limited lifespan
Increasing Compliance risks, data obsolescence
2. Direct Monetization Strategies
• Companies can treat data as a revenue-generating asset by:
• Creating Data-as-a-Service (DaaS) models and selling real-time insights.
• Enhancing products and services by leveraging data-driven features.
• Building strategic partnerships with firms that can benefit from proprietary datasets.
3. Investing in Data-Focused Companies
Institutional investors, private equity firms, and venture capitalists should assess data maturity when evaluating potential investments. Companies that have structured, compliant, and monetizable datasets command higher valuations and offer better long-term returns.
4. Using Data as Collateral for Financing
Forward-thinking lenders are beginning to use data-backed lending, where proprietary datasets serve as collateral for loans. Data copies can be held in the lender’s possession during the term of the loan, speeding the recovery process in the event of a default. Currently, senior secured lenders technically have their borrower’s
data as part of their overall collateral package. They’re just unaware of the value of that data vs other assets and how to monetize it in the event of a default.
We are witnessing a fundamental shift in how businesses and investors perceive data. In the past, it was treated as exhaust—now, it’s recognized as an economic engine. The next generation of investors will treat data as they do real estate, private equity, or gold—an asset class
that can be valued, traded, and leveraged for strategic advantage.
• Standardized data valuation frameworks will emerge, making it easier for companies to recognize data’s financial impact.
• New data marketplaces will increase liquidity and transparency in data transactions.
• Institutional investors will incorporate data into their portfolios as a long-term asset.
At Gulp Data, we help businesses realize the true potential of their data through structured valuation, monetization strategies, and compliance guidance. Whether you’re looking to raise capital, enhance M&A valuations, or develop new revenue streams, our expertise ensures you make the most of your data assets.
Contact Gulp Data today to explore the value of your data assets.
Charles Fisher Co-Founder Gulp Data
Sygnus Capital Puerto Rico
The impending retirement of Baby Boomer business owners is triggering one of the most profound economic transitions in modern history. Over the next decade, thousands of small and medium-sized businesses (SMBs) will change ownership, creating a once-in-a-generation opportunity for investors, private equity firms, and corporate acquirers.
This shift will drive industry consolidation, operational modernization, and business model transformation across various sectors. Many of these companies, built over decades by hardworking entrepreneurs, now face the challenge of leadership succession—an issue exacerbated by the fact that most business owners lack a formal exit plan. Without a clear strategy for transition, these businesses risk financial instability, distressed sales, or outright closures, negatively impacting employees, suppliers, and local economies.
For investors and strategic buyers, this transition presents a fertile ground for acquisitions. Businesses with strong customer bases, recurring revenue, and untapped growth potential can be acquired at attractive valuations, often at lower multiples than larger, more sophisticated firms. However, capitalizing on this opportunity requires a disciplined approach to due diligence, leadership succession planning, and post-acquisition integration.
This article explores the realistic scale of this economic shift, the industries most impacted, and the strategic considerations for investors looking to capitalize on the Baby Boomer succession wave.
According to data from the US Census and the Small Business Administration, it is estimated that around 40% of the 147,000 U.S. companies generating
between $10 million and $300 million in revenue are owned and managed by Baby Boomers, signaling a major wave of ownership transitions. This middle-market segment is much larger than the 6,000 big private firms and fewer than 4,000 public companies in the U.S., creating strong investment opportunities. While smaller businesses may face operational and technological challenges, they typically sell at lower prices and carry less debt, making them attractive to investors seeking value-driven acquisitions.
Several industries are particularly affected by the Baby Boomer succession wave, offering compelling opportunities for investors seeking value creation through consolidation and modernization. Manufacturing firms, often still operating under outdated processes, present opportunities for efficiency improvements and technological upgrades. Many of these businesses have long-standing relationships with suppliers and clients but lack the technological infrastructure to scale in an increasingly digital world. Investors who can implement lean manufacturing techniques and integrate supply chain efficiencies stand to gain significantly.
Healthcare services, including independent dental and veterinary practices, are seeing heightened acquisition interest as demographic trends drive demand for professionalized care. The shift toward corporate-backed healthcare networks is creating consolidation opportunities, where smaller independent providers can be integrated into larger, more streamlined operations. Given the recession-proof nature of healthcare services, investors are increasingly targeting this sector for long-term stability and growth.
Skilled-trade businesses in construction and contracting are facing leadership gaps, opening the door for investors to implement scalable management structures. With infrastructure spending on the rise, demand for these services remains strong, yet many firms lack succession plans. Investors who can professionalize these businesses through strategic management and process optimization can create high-value enterprises with long-term growth potential.
There are also multiple opportunities for other sectors, such as Business Services and Retail Operations. Across all these sectors, ownership transitions are creating a fragmented market ripe for strategic investment. By consolidating multiple businesses within an industry, investors can drive efficiency improvements, expand market share, and build enterprises that are more resilient to economic fluctuations.
To capitalize on ownership transitions, investors should target businesses with stable revenues, strong customer bases, and minimal founder dependence. Companies lacking digital infrastructure may require modernization but often present attractive valuations.
Leadership continuity is key to successful acquisitions. Without a clear succession plan, operational instability can reduce value. Investors can mitigate risks by implementing retention incentives, hiring experienced leaders, and establishing governance structures.
Post-acquisition, integrating operations unlocks value. Standardizing financial reporting, adopting modern technology, and optimizing supply chains drive efficiency and profitability. Digital transformation, including CRM and automated accounting, enhances decision-making and competitiveness.
By professionalizing operations and embracing sustainability, investors can create long-term value while appealing to socially conscious consumers and regulatory trends.
When acquiring a family-owned business, the focus is often on the seller’s exit; however, buyers and investors must also have a clear, well-defined exit strategy of their own. This is particularly crucial for financial investors and other buyers who aim to optimize the business, enhance value multiples, and position it for resale. A strategic divestment plan—whether through a sale to a larger industry player, resale to a private equity firm, or an initial public offering (IPO)—is essential for maximizing investment returns. Investors who can execute a clear exit strategy are better positioned to capture value and capitalize on evolving industry trends, ensuring
long-term success.
Strategic sales to larger industry players offer an attractive exit option, particularly for businesses that have undergone successful turnarounds and now possess a competitive edge. Larger corporations looking to expand their market share are willing to pay premiums for well-run businesses with strong financials and scalable operations.
Reselling to private equity firms offers a lucrative exit strategy, though it typically yields lower valuation multiples compared to strategic buyers. While a PE fund may be willing and able to pay a premium for a well-run business with strong scalability potential, these buyers tend to place less emphasis on synergies and focus primarily on maximizing returns for their own investors.
However, as private equity firms build portfolios of businesses within a sector, they often seek to sell these entities to larger investment funds or institutional buyers at a premium. By prioritizing operational improvements and revenue growth, investors can enhance a company’s valuation and achieve more favorable exit outcomes.
For businesses that have scaled significantly, an initial public offering (IPO) can provide an attractive exit strategy, offering liquidity and capital infusion for further expansion. While the IPO is a less common route, and requires rigorous financial structuring and regulatory compliance, it can yield significant returns for investors who have built strong, resilient enterprises.
The retirement of Baby Boomer business owners represents more than just a change in leadership—it is an economic transformation that will reshape industries, redefine market competition, and create compelling investment opportunities. Investors who recognize the scale of this shift and position themselves strategically will emerge as market leaders, driving industry consolidation, operational efficiency, and long-term value creation.
However, success in this landscape requires more than just capital deployment. Investors must navigate leadership succession challenges, modernize operations,
and implement structured post-acquisition integration strategies to unlock the full potential of these businesses. Those who can provide stability, innovation, and scalable growth strategies will not only generate strong financial returns but also ensure the continued success of companies that form the backbone of the economy.
The businesses of today are the investment platforms of tomorrow—and those who act decisively will define the next era of growth, profitability, and economic development.
Sygnus is a leading alternative investment firm in the Caribbean and Latin America, committed to accelerating economic growth across the region, using innovative and creative financing solutions. Alternative forms of investment such as Private Credit, Real Estate Finance and Private Equity are utilized to satisfy the unmet demands for innovative investment opportunities, unlocking capital for growing companies, and plays a critical role in economic development.
With a dynamic and interconnected ecosystem across all business units, Sygnus is defined by a purpose-driven team that delivers unrivalled regional expertise, all underpinned by a robust foundation of corporate due diligence and internal governance.
Jesús Daniel Mattei Vice President Sygnus Capital Puerto Rico
Bitcoin mining, traditionally viewed as a pure play on cryptocurrency, has matured into a capital-intensive, highly competitive industry. However, a fresh narrative is emerging: the same energy contracts and infrastructure underpinning profitable Bitcoin mining operations are fast becoming prized assets in the booming data center market. As a result, even major technology companies are now courting Bitcoin miners – not for their cryptocurrency, but for access to their energy infrastructure. As demand for cloud and AI computing soars and data centers consume an ever-increasing percentage of total available energy, Bitcoin miners now find themselves uniquely positioned at the intersection of blockchain and traditional data infrastructure.1 This convergence offers institutional investors a hybrid opportunity that combines the growth potential of digital assets with the stability of critical infrastructure.
By design, Bitcoin mining can be highly profitable,
but it is also deeply capital-intensive. Success requires deploying tens or hundreds of millions of dollars into specialized hardware (ASIC servers) and building facilities capable of drawing enormous electrical power. Electricity costs are the single largest operating expense for miners, often determining whether a mining farm runs at a profit or loss. To secure operational stability, miners strategically lock in low-cost power through long-term contracts, direct investments in power generation, or by situating operations in energy-rich regions.
Traditionally, low-cost power can be challenging for miners to secure. Oftentimes, the cheapest energy sources are located in geographies that are either politically unstable or have environmental issues, like an unfavorable climate or are located in very rural areas. In the last several years, Bitcoin miners found an opportunity to tap into cheap power by going into rural markets in the U.S. that have large, available power infrastructure but have been largely underutilized since the offshoring movement of manufacturing occurred since post WWII. Miners have secured favorable deals with local utilities as they often serve as a grid stabilizer, briefly curtailing operations when there is peak demand and consuming vast quantities of power on the off
peaks. These miners have developed sites on cheap land that are now starting to get some interest from technology companies as excess power in the U.S. has quickly run out due to the demand from data centers.2
While the margins in Bitcoin mining are very favorable if one has access to cheap power, not all miners are alike in their business model. Some keep and hold all the Bitcoin they mine, while taking on debt or raising funds to further expansion/site operations. Others sell their Bitcoin and cash it up to provide a de-risked way to enjoy the large margins of mining. Once expenses and fees are taken out, some fund managers return a dividend as well to investors that can be tax advantaged and can offset other passive income.
Bitcoin miners also increasingly act like savvy energy traders. Many participate in grid-balancing programs – selling unused power back to the grid or throttling down during peak demand in exchange for payments or credits. In August 2023, Riot Platforms – one of the largest U.S. miners – earned an unprecedented $31.7 million in energy credits by voluntarily shutting down during a Texas heatwave. Remarkably, this payout exceeded the value of the Bitcoin Riot mined that month, showcasing how well-structured power deals can bolster a miner’s bottom line.3 In essence, robust energy arrangements – whether through favorable rates, on-site generation, or grid service programs – serve as valuable assets that backstop the mining revenue. They ensure consistent uptime and low costs - which can even become profit centers in their own right.
Bitcoin mining facilities bear a strong resemblance to conventional data centers: rows of servers, heavy-duty cooling systems, and high-capacity power feeds. The infrastructure miners build to run specialized hardware 24/7 can often be repurposed for other computing workloads. As AI and cloud providers race to add capacity (often constrained by lengthy power grid upgrade timelines), Bitcoin miners hold a critical advantage: they already operate large-scale, power-provisioned sites with substantial cooling and electrical infrastructure in place.
Bitcoin mining farms are essentially specialized data centers focused on running ASIC servers at scale. The significant capital invested in their power and cooling infrastructure can be redirected to support other high-performance computing tasks. In other words, every megawatt of power and square foot of space dedicated to Bitcoin can potentially double as capacity for other computing services.
Several forward-thinking miners have started diversifying into traditional data center services. Their aim is to earn revenue by hosting third-party servers or cloud computing workloads alongside Bitcoin mining. Hut 8, for example, received a $150 million investment in mid-2024 to expand into AI-focused data centers. Similarly, Australia’s Iris Energy now runs AI servers inside its Bitcoin mining facilities seamlessly. Even Core Scientific in the U.S. – once purely a crypto miner – has signed a deal to host 200 MW of AI hardware for the startup CoreWeave, a contract expected to generate nearly $4 billion to Core Scientific’s bottom line.4 These cases underscore a compelling synergy: a mining farm’s power and cooling capacity can serve double duty in the data center arena, allowing the company to earn new revenue without abandoning its core business.
One strategy for bitcoin mining firms is to expand into offering commercial data center services. The financial appeal is evident: clients in the AI/cloud sector are willing to pay a premium for access to ready-made power capacity. One public miner recently noted that AI infrastructure offers a “reliable income stream… uncorrelated to bitcoin prices” – meaning a diversified miner can enjoy steady hosting income even during crypto downturns.
Naturally, branching into data centers comes with challenges: it requires additional expertise, facility upgrades, and sometimes significant hardware outlays. Many miners are mitigating this through strategic partnerships – the miner provides the power and real estate while an AI/cloud firm supplies the servers and operational know-how. In this hosting model (similar to
arrangements where miners host other investors’ ASIC machines), the Bitcoin miner simply leases out capacity without needing to run the new workloads itself. For those with sufficient scale, another route is constructing a dedicated data center unit or site, which can potentially boost valuations since data center businesses often command higher earnings multiples.
Another path is to sell or lease infrastructure assets outright. In today’s market, hyperscalers and cloud giants are eagerly hunting for ready-to-go data center sites, so miners with large power-connected facilities have seen interest from such buyers. Some have secured significant one-time gains by selling entire sites to tech. This approach lets a mining firm immediately unlock the value of its infrastructure, providing liquidity that can be used to pay down debt, reinvest in core operations, or even exit the industry if desired.
Each choice comes with trade-offs. Selling secures up-front capital but forfeits future recurring income from those assets, whereas expanding means taking on the complexity of a new business line. The optimal path depends on a miner’s financial position and long-term vision – some may even choose a hybrid strategy (for instance, selling one facility to fund the conversion of another into a data center). What’s clear is that the market now recognizes mining infrastructure and energy deals as valuable assets in their own right, whether kept for diversification or sold for profit.
The broader backdrop to these strategies is a macro-level surge in demand for computing power. Data centers in the U.S. could consume roughly 9% of all national electricity by 2030, more than double current levels. This surge is fueling a boom in data center construction and investment; capital is pouring into data center real estate and infrastructure projects to ride this wave.
Bitcoin miners now present an increasingly attractive hybrid investment. They combine elements of a high-growth tech venture (tied to cryptocurrency) and a utility-like infrastructure business (via their energy and data center assets). Such companies can offer uncorrelated income streams – revenue from hosting contracts, for instance, flows in regardless of Bitcoin’s price. At the same time, in a crypto bull market, their mining operations can deliver outsized profits on top of those stable revenues. This combination provides downside protection without limiting the upside. Importantly, the physical assets on their balance sheets (land, power infrastructure, cooling systems) offer a margin of safety. Even in a severe crypto downturn, these hard assets retain value and can be repurposed or sold to recover capital.
As these firms pivot into the data center arena, they could attract new types of investors and even become acquisition targets for infrastructure funds or technology companies looking to accelerate their data center expansion. In turn, the market may start to value these hybrid firms more like data center operators than as pure crypto plays.
1. Focus on Energy Assets: When analyzing Bitcoin mining companies, pay close attention to their energy contracts, power capacity, and infrastructure resilience. These factors not only drive mining profitability but also represent real assets that can be leased or sold into the high-demand data center market, providing a floor value to the investment.
2. Geography is important: Oftentimes the cheapest power is located in politically unstable areas. While these sites may be good locations for Bitcoin mining, they are often poor locations for data centers and may turn away potential customers/ acquirers.
3. Look for Diversification Moves: Miners integrating with the traditional data center industry – via hosting deals, AI partnerships, or infrastructure sales – may offer a more attractive risk-reward profile. Such moves can yield more stable income streams that complement volatile mining revenues.
4. Hybrid Growth Story: The strongest candidates in this sector present a hybrid growth story: participation in the upside of Bitcoin prices and network growth, plus exposure to the secular growth of cloud and AI computing. This dual exposure acts as a hedge; even if crypto markets underperform, the data center side can deliver returns (and vice versa). Investors should view advanced Bitcoin miners less as “crypto stocks” and more as next-generation digital infrastructure companies.
For years, critics argued that Bitcoin’s massive energy footprint was a liability for miners. Now, that very trait is becoming their greatest strength. By backstopping operations with highly desirable data center assets, miners are turning a former vulnerability into a strategic advantage. Investors who embrace this nuanced view may find opportunities in companies that others undervalue as “just miners.” Bitcoin miners-turned-hybrid operators are positioned to benefit from both the continued rise of decentralized finance and the insatiable growth of AI and cloud computing.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the views or opinions of Chicago Atlantic
1McKinsey & Co: AI power: Expanding data center capacity to meet growing demand
2Data Center Dynamics: A blueprint for rural data center growth
3CNBC: Texas paid bitcoin miner Riot $31.7 million to shut down during heat wave in August
4Core Scientific: Core Scientific to Provide Approximately 200 MW of Infrastructure to Host CoreWeave’s High-Performance Computing Services, Capturing Significant AI Compute Opportunity
Dan Walsh Director, Capital Formation Chicago Atlantic
STEVEN BOUGHNER Global Strategies Group
The U.S. Virgin Islands—comprising St. Thomas, St. John, and St. Croix—has long been a coveted destination for travelers seeking pristine beaches, crystal-clear waters, and a relaxed island atmosphere. For generations, the islands have drawn visitors from the U.S. mainland, attracted by the ease of travel to an American territory, where no passport is required, and the natural beauty that rivals any tropical paradise in the world. Yet today, the USVI offers more than just an alluring vacation experience. For hotel developers and investors, the territory represents one of the most compelling hospitality investment opportunities in the Caribbean.
A convergence of economic, demographic, and policy trends has created a window of opportunity that is unique in its scope and potential. From a booming post-pandemic travel rebound to ambitious government incentives, the conditions for profitable, sustainable, and culturally attuned hotel development have never been better in the USVI. This moment is particularly appealing for developers who understand that the islands are no longer just seasonal retreats, but destinations capable of supporting year-round hospitality ventures across multiple segments—from luxury resorts and boutique properties to eco-conscious accommodations.
One of the key factors driving this development opportunity is the robust recovery and expansion of the USVI’s tourism sector. As the global travel industry recovers from the disruptions caused by COVID-19, the USVI has emerged as one of the Caribbean’s most resilient markets. According to data from the USVI Department of Tourism, air and cruise arrivals in 2023 surpassed pre-pandemic levels, fueled by demand from U.S. travelers who increasingly seek tropical destinations that are close to home and easy to navigate. The USVI’s status as a U.S. territory eliminated many of the pandemic-related barriers that slowed travel to other Caribbean nations, giving the islands a competitive advantage that persists today.
Hotel performance metrics reflect this strong demand. According to STR, the USVI’s average hotel occupancy rate in 2023 hovered around 68%, with upscale and luxury properties achieving even higher figures during peak travel months. The length of stays also increased, with more travelers opting for extended
vacations, blending work and leisure in flexible remote work arrangements. The islands’ natural beauty, combined with reliable infrastructure and U.S.-standard healthcare and safety regulations, has made the USVI a particularly attractive option for this new wave of longstay visitors.
Yet, as demand has surged, supply has struggled to keep pace. Much of the existing hotel inventory in the USVI dates back to the 1960s and 70s, with only piecemeal renovations over the decades. While these properties maintain nostalgic appeal, many fall short of contemporary traveler expectations. Guests increasingly seek sustainability-focused hotels, immersive cultural programming, and modern amenities—areas where much of the USVI’s existing hotel stock lags. This supply-demand imbalance creates fertile ground for new development, especially for developers who can deliver innovative properties tailored to evolving traveler preferences.
The USVI government has embraced this opportunity, positioning hospitality investment as a central pillar of its long-term economic development strategy. The Hotel Development Act (HDA) is a cornerstone of this effort, offering qualifying projects the ability to capture a portion of the hotel occupancy taxes they generate and reinvest those funds directly into their development. In essence, the HDA allows new hotels to help finance their own construction or renovation using the tax revenue they generate, significantly improving the economics of new projects in a high-cost island environment. This is similar to Tax Increment Financing (TIF) structures uses the hotel occupancy tax to repay the debt instead of property taxes – which is highly accretive to projected cashflows.
The USVI’s Economic Development Commission (EDC) complements the HDA by offering extensive tax incentives to qualifying businesses, including hotel developers and operators. These incentives can include reductions in corporate income tax, property tax, and excise taxes on imported materials—critical savings in a market where nearly every construction input must be shipped in from off-island. Together, the HDA and EDC create one of the Caribbean’s most attractive incentive environments for hospitality development, effectively lowering the barriers to entry for experienced
developers willing to navigate the complexities of island development.
This supportive policy environment has already borne fruit. On St. Thomas, the long-awaited redevelopment of Frenchman’s Reef has redefined the island’s luxury hospitality landscape. Reopened under the Westin and Autograph Collection flags, the project represents a bold bet on St. Thomas’ ability to support high-end, dual-branded properties that cater to both traditional resort guests and experience-seeking travelers. The successful reopening of Frenchman’s Reef not
only underscores investor confidence in the market, but also demonstrates the type of innovative, experience-driven development that today’s travelers demand.
Critical to the success of hotel development across the islands is the ongoing modernization of the USVI’s airports. St. Thomas’ Cyril E. King Airport, the busiest airport in the territory, is undergoing a comprehensive expansion and renovation program designed to enhance both capacity and visitor experience. The project, which includes expanded terminal facilities, upgraded baggage handling systems, and new retail and dining op-
tions, will improve passenger flow and create a modern gateway befitting the island’s luxury positioning. Just as importantly, the expansion will allow the airport to accommodate larger aircraft and additional direct flights from key U.S. markets, improving airlift and opening new opportunities for hotels to attract a broader visitor base.
On St. Croix, a similarly ambitious effort is underway at Henry E. Rohlsen Airport, where a planned terminal expansion will significantly enhance passenger capacity and streamline customs processing. Historically underserved by direct airlift compared to St. Thomas, St. Croix stands to benefit immensely from these improvements, which will make the island more accessible to both leisure travelers and group business. Improved air access is a critical enabler for hotel development, ensuring that new properties can tap into strong and diverse demand channels.
Nowhere is the case for hotel development stronger than on St. Croix, the largest and most historically underdeveloped of the three islands. For much of the 20th century, St. Croix’s economy was anchored not by tourism, but by heavy industry. The island was home to the massive Hovensa oil refinery, one of the largest in the world, as well as rum distilleries and light manufacturing facilities. This industrial focus left little room for large-scale tourism development, even as St. Thomas and St. John built reputations as luxury destinations.
That began to change after the closure of Hovensa in 2012, which left St. Croix with both economic challenges and newfound opportunities. Large tracts of land once dedicated to industrial use became available
for redevelopment, and attention gradually shifted to the island’s remarkable natural beauty and rich cultural heritage. At 84 square miles, St. Croix is not only the largest island in the territory, but also the most geographically diverse. Its rainforest-covered hills, fertile plains, and pristine beaches offer diverse settings for hotel development, from beachfront resorts to wellness retreats tucked into the hills.
Unlike St. Thomas, where steep terrain and dense development limit new opportunities, St. Croix offers developers flexibility and creative freedom. It also offers something increasingly rare in the Caribbean: an authentic, under-the-radar destination rich with historical character, local culture, and unspoiled landscapes. From the historic streets of Christiansted to the vibrant cultural traditions rooted in the island’s Afro-Caribbean heritage, St. Croix offers developers an unparalleled opportunity to create properties that tell a story and deliver experiences travelers can’t find anywhere else.
As airlift expands and the government continues to prioritize tourism investment, St. Croix is poised to become the USVI’s next great hospitality frontier. For developers who embrace the island’s character, respect its environment, and invest in its people, the rewards will extend beyond financial returns. They will play a role in shaping the future identity of the USVI, transforming St. Croix from a well-kept secret into a flagship destination for modern travelers.
The opportunity is here, and the time is now. Those who act today will lead the next chapter of Caribbean hospitality in one of its most beautiful, authentic, and welcoming destinations.
Steven Boughner Founder & President Global Strategies Group
Global Strategies Group is a commercial real estate developer currently developing a $400M+ pipeline of hospitality projects in the Caribbean.
MICHAEL STENDLER O’Brien Investment Group
In 1983, Richard Dennis and Bill Eckhardt started the Turtle Experiment. Simply put, it was a rulesbased trading system, and their experiment was to see if they could teach anyone to trade using their system (and if one is willing not to deviate from the rules especially during times of market stress). In essence:
• Use entry rules (like a 40-day moving average / trend breakout to establish a position) to catch a potential long-term trend.
• Every position has a loss limit (stops in the market).
• The strategy is long term trend following, so, no need to be glued to the minute-to-minute moves of the underlying market.
• Follow the rules 100% of the time Financial and commodity futures were the nature instrument of choice given their cash efficiency, liquid-
ity, and easy and low-cost direct access to the currency and commodity markets.
The other benefit of a managed futures strategy is market diversification. The O’Brien Investment Group Quantitative Global Macro Futures Program trades in 76 different markets. That includes the global stock indices, global bond markets and currencies. But it also trades in several dozen commodity markets that have their own unique supply and demand drivers. Cocoa and Coffee are examples over the last 12 months of that.
At the same time, the introduction of lower cost computers spawned a new breed of traders with an understanding of the markets and a strong foundation of coding quantitative rules-based models using strategies like Turtle Trading. The managed futures asset class managed by professional Commodity Trading Advisors (CTA) was born.
When October 1987 rolled around, managed futures was still a niche strategy unknown to 99.9% of investors. As the stock market crashed, there was chatter about managers making money on October 19, 1987. Over the next 15 years, CTAs like AHL and John Henry generated attractive long term returns and AUM growth. BUT, the downside of trend following is the lumpy returns stream which kept managed futures, as an asset class, visible but still a niche.
As the financial crisis hit in 2008, managed futures were not only positive, but in many cases, produced outsized returns. That coined the phrase “crisis alpha” when describing trend followers. Today, there are dozens and dozens of mutual funds and ETFs that are basic long-term trend following. I am confident that if we experience another 1987 or 2008, these funds will again generate crisis alpha. Financial Advisors as well as individual investors should have managed futures as a hedge in their toolbox that also include:
1. Long duration US Treasury Bonds
2. S&P 500 Puts or VIX calls
3. Collars on individual stock holdings
4. Diversification (Keeping in mind, during times of stress, correlation of many markets goes to 1)
5. Managed Futures
What hasn’t changed over the last 40 years is that successful Commodity Trading Advisors still need a deep understanding of the financial and commodity fu-
tures markets and a research driven focus on quantitative models.
O’Brien Investments Group was founded in 2016. It is owned by the Chicago based O’Brien family, which has over 100 years of futures trading experience with their ownership of RJ O’Brien. John O’Brien, Jr. (CEO of O’Brien Investment Group) is the 4th generation of O’Briens continuing the family legacy. The family also bought a firm called Clarke Capital Management in 2007 which had people and quantitative trading systems in place that were successful going back to the early 1990’s.
Even today, O’Brien Investment Group uses many of the time-tested short-term, medium term and longterm breakout models in our Flagship program. However, the goal was to be research focused. What that means is not only to continue to trade time-tested trend based systems, but add new research driven models to not only generate alpha but to also smooth our the return stream.
Five years ago, we embarked on adding multi-time, multi-class frame machine learning models to the over flagship Quantitative Global macro program. Deep Machine Learning / AI Models are now possible with the computing power to perform 100,000+ calculations of historical data for predicting the movement of a market for the next 1 week, 2 weeks, 4 weeks, 8 weeks etc.
What we have found is AI / machine models can generate alpha and equally important, returns that are non-correlated to legacy trend following and non-correlated to traditional stock and bond markets.
Michael Stendler Managing Director, Investment Committee Member O’Brien Investment Group
RYAN CARTER
Puerto Green
Commodities have long served as foundational components of sophisticated portfolio construction, providing both diversification benefits and inflation hedging capabilities. Within this established asset class, recycled commodities have undergone a remarkable maturation over the past decade, driven by technological advancements that have dramatically increased output uniformity and quality consistency—the very characteristics that define true commodities. What makes these materials particularly intriguing to alternative investors is their demonstrated beta divergence from traditional commodity indexes, with correlation coefficients frequently below 0.3, offering genuine diversification in portfolios increasingly prone to synchronized movements.
Conventional wisdom has long held that recycling operations are inherently unprofitable or economically unviable—a persistent myth that obscures the significant transformation occurring in this sector. The reality is markedly different: increasingly integrated value chains and process optimization have substantially limited margin erosion, while technological innovations have enabled the production of near-virgin quality out-
puts. These recycled materials, by virtue of their sustainable origin, now command significant premiums in the marketplace, creating a distinctive investment opportunity with characteristics unlike traditional commodity markets.
The recycled commodities market has undergone a fundamental transformation over the past decade. What was once primarily driven by cost-saving motivations has evolved into a premium market segment with its own distinct pricing dynamics. This evolution represents a significant departure from historical patterns where recycled materials typically traded at discounts to their virgin counterparts.
The market is witnessing an unprecedented inversion of the traditional pricing model. Over the last several years, recycled polymers, in particular, have proven the sustained ability to command substantial premiums
over their virgin counterparts—often exceeding 3040% for certain grades and applications.
This pricing inversion stems from a fundamental structural imbalance between rapidly growing demand and constrained supply. Major consumer brands across sectors have made ambitious commitments to incorporate recycled content into their products and packaging. Companies like Coca-Cola, Unilever, and Procter & Gamble, further pressured by major retailers such as Walmart, have pledged to use between 25% and 100% recycled content in their packaging in the years ahead. Similarly, automotive manufacturers, industrial product companies, and even fashion brands have established aggressive recycled content targets.
However, investment in technology required to produce high-quality recycled materials suitable as circular feedstocks for the same consumer packaging applications from which they are derived remains limited. ‘Downcycling’ persists as the industry status quo: the bottle you recycle today is far more likely to become a plastic pipe or polyester carpet than another bottle. This creates a market asymmetry: consumers willingly pay premiums for products in packaging marketed as containing recycled content—content that is increasingly mandated by retailers and state governments—while construction companies purchasing drainage pipes have no similar willingness to pay a premium.
This fundamental supply-demand mismatch has created persistent price premiums that show no signs of abating in the near term. More importantly for investors, it has established a derivatives market that operates with significant independence from underlying virgin commodity prices, while also offering substantial secondary return opportunities through monetizable environmental attributes like carbon credits—creating a “double dividend” for sophisticated investors who can navigate both markets simultaneously.
Unlike traditional commodity markets with established exchanges, standardized contracts, and high transparency, the recycled commodities market remains relatively opaque and illiquid. These characteristics, while challenging for casual participants, presents sub-
stantial opportunities for sophisticated investors and traders with specialized knowledge and networks to leverage information asymmetries for significant margin capture.
In virgin commodity markets, established trading patterns and players have resulted in a predictable market principally driven by the provision of credit in which margins have been compressed to mere basis points. By contrast, the recycled materials market offers spreads unseen in traditional commodities trading—reliably in the double digits for those who understand the space and can source or develop tailored, value-added supply chain solutions for brand owners and converters.
Furthermore, owing to the relative immaturity and somewhat inherent opacity and inefficiency of the recycled commodities industry, advancements in machine learning and artificial intelligence present a particularly potent edge for traders with access to, or the ability to harvest, proprietary data points. These markets offer extremely fertile ground for predictive analytics developed from models that might, for example, correlate regional recycled raw material bale indexes with various leading indicators, including broader commodity prices, foreign exchange rates, freight indexes, and even consumer packaged goods production schedules, to identify trading opportunities.
Finally, the illiquidity of these markets both amplifies return potential and serves as a barrier to entry. For investment funds with suitable time horizons and risk tolerances, this illiquidity premium can be a significant driver of potential returns.
Like virgin commodities, the recycled commodities market operates on a truly global scale, creating opportunities for geographic arbitrage that can further enhance returns. Different regions have varying regulatory frameworks, collection infrastructures, and technological capabilities, leading to significant price differentials for similar materials across markets.
European markets, driven by aggressive regulatory targets and consumer awareness, typically command the highest premiums for recycled content. The European Union’s Circular Economy Action Plan and Single-Use
Plastics Directive have established binding targets for recycled content incorporation, creating strong demand signals. By contrast, developing economies often have abundant waste resources but limited local “demand premium” for high-grade recyclates. For traders who can navigate international logistics and regulatory requirements, significant geographic arbitrage represents compelling opportunities.
The global nature of this market also provides natural hedging against regional economic cycles. Economic slowdowns in one region may reduce virgin material production and pricing, but recycled content demand often remains stable due to regulatory mandates and brand commitments that persist regardless of economic conditions.
The evolving landscape of international trade policies provides yet another dimension of opportunity as dynamic tariff situations increasingly favor recycled materials in ways that create structural advantages over virgin imports. A notable example is the PET (#1) market, where significant anti-dumping duties on virgin material imports have created preferential economics for domestically recycled PET. These trade barriers effectively shield recycled material producers from international price competition, creating pricing power that further enhances margins.
Perhaps the most significant development in this market has been the technological revolution that has occurred over the past decade. Advanced sorting, cleaning, and processing technologies have dramatically improved the quality of recycled materials, allowing them to compete directly with virgin alternatives in increasingly demanding applications including food-contact uses (“bottle-to-bottle”).
The quality differential that historically justified price discounts for recycled materials has effectively disappeared in many categories. What remains is the sustainability premium that brands are willing to pay to meet their environmental commitments and consumer expectations.
This quality revolution has created tiered markets within the recycled commodities space. Food-grade re-
cycled PET, for example, consistently commands premiums of 30% over virgin PET, while standard-grade recycled PET may trade at parity or slight premiums. Understanding these quality gradients and their corresponding price dynamics is a critical factor driving potential alpha generation.
For investors seeking exposure to this emerging alternative asset class, several approaches offer varying risk-return profiles and liquidity characteristics.
Some commodity trading houses have begun developing specialized desks focused on recycled materials. These operations leverage existing logistics networks and client relationships while building the specialized expertise required to navigate these unique markets. For qualified investors, allocations to these trading strategies can provide relatively direct exposure to the opportunity.
Industry reports indicate that specialized recycled materials trading desks are generating returns that exceed traditional commodities operations by a factor of three or more. The combination of structural price premiums and market inefficiencies creates a compelling value proposition for market participants.
Another approach involves investment in the physical infrastructure that enables this market. Processing facilities, advanced sorting technologies, and specialized logistics assets represent tangible investments that can generate both operating cash flows and potential valuation upside as the sector matures.
Private equity and infrastructure funds have begun allocating capital to this space, typically focusing on companies with proprietary technologies or strategic assets, particularly assured sources of feedstock for recycling. One such example is the Puerto Green recycling complex being developed in Puerto Rico, expected to be the largest vertically integrated recycling facility in the Americas owing to the historic lack of investment on the island and abundance of commodity-rich waste
supply.
The increasing prospect of tariffs on imported virgin materials has also significantly enhanced the investment case for domestic recycling infrastructure. Major retailers such as Walmart have instituted “Made in USA” initiatives that prioritize domestically sourced materials, creating preferential market access for local recycled content providers. This confluence of trade policy and corporate sustainability commitments effectively creates a “tariff shelter” for infrastructure investments in recycling capacity, providing both margin protection and volume security that strengthens risk-adjusted returns. As near-shoring and supply chain resilience remain strategic priorities, this domestic advantage appears durable for the foreseeable future.
For investors seeking more liquid exposure, a growing universe of public companies provides indirect access to the recycled commodities trend. These range from pure-play recycling technology companies to established petrochemical producers pivoting toward recycled content, often through the acquisition of recycling companies.
Despite its compelling attributes, the recycled commodities market carries distinct risk factors that investors should carefully evaluate.
Regulatory risk remains significant, as government policies substantially influence market dynamics. While current regulatory trends strongly favor increased recycled content, policy changes could affect market balances. Conversely, strengthening regulations could further enhance the value proposition by mandating higher recycled content percentages.
Market maturation itself represents a consideration for early entrants. As transparency increases and more participants enter the space, the information asymmetries and illiquidity premiums that drive current returns may gradually erode. However, industry observers suggest this process will unfold over many years, leaving a substantial window for alpha generation.
The market appears to be in the early stages of a multi-decade transition. The inefficiencies observable today will likely persist for years, if not decades, even as the overall sector grows and matures.
The recycled commodities market offers a compelling proposition for investors seeking truly alternative returns. Its fundamental characteristics—structural supply-demand imbalance, market opacity, global arbitrage opportunities, and technological evolution— create a unique environment for generating alpha uncorrelated with traditional asset classes.
While the prices of virgin commodities are vulnerable to macroeconomic cycles, geopolitical disruptions, and energy price fluctuations, recycled commodity premiums exhibit remarkable stability due to regulatory mandates and brand commitments. This decoupling naturally diversifies portfolios exposed to traditional economic cycles and creates secondary, complementary return opportunities in adjacent fields such as carbon credit trading.
For sophisticated investors willing to develop specialized expertise or partner with established operators in the space, recycled commodities represent a frontier alternative asset class with substantial return potential. As environmental imperatives increasingly shape global commerce, the financial opportunities emerging from the circular economy may prove as significant as the environmental benefits they enable.
As with any emerging investment category, early movers with sophisticated understanding of market dynamics stand to capture the most substantial returns. In a world where genuine alternative returns become increasingly elusive, the recycled commodities market offers a rare combination of financial opportunity aligned with positive environmental impact—a compelling proposition for forward-thinking investors seeking both financial and environmental sustainability.
Ryan Carter is the founder of Rocket International, a Puerto Rico International Trading Company (ITC), and the CEO of Puerto Green, a large-scale vertically integrated recycling complex under development in Puerto Rico expected to be the largest and most technologically advanced operation of its kind in the Americas.
3,000,000
Tons of waste generated in Puerto Rico each year
Approximate presence of commodities in these waste streams
<5%
Recycling rate throughout the island 5O%
Total estimated reprocessed commodity value landfilled in Puerto Rico each year
Puerto Green’s proven mechanical extraction processes recover valuable plastics, metals, and fibers before they enter the landfill and renew them to commodity-grade materials capable of commanding maximum market value.
Our vertically integrated, consolidated approach captures the full recycling value chain and reintroduces virgin-quality polymers to the local economy and global commodities markets in which demand greatly exceeds supply.
Source-assured, cost-stable operations provide a unique and competitive edge decoupled from broader commodities markets.
Join us in creating the future of circular commodity supply chains through our innovative high-yield, high-return approach to sustainability.
inquiries@puerto.green
Ryan Carter CEO Puerto Green
Puerto Green is revolutionizing waste management by transforming environmental challenges into economic opportunities. We are building the largest vertically integrated recycling center in the Americas to realize maximum value from recovered commodities.
Our proven approach, previously executed by our experienced team, is analogous to mining in which advanced European mechanical recycling technologies are used to recover metals, plastics, and paper from unsorted waste that is diverted just prior to entering the landfill.
On-site, downstream integrated processing further converts plastics to effectively virgin-quality polymers for reintroduction into local or global commodities markets -- often at a substantial premium.
Puerto Green’s closed-loop, highly scalable model establishes a true circular economy in Puerto Rico, setting the benchmark for the future of sustainable commodity supply chains worldwide.
Silver Regulatory Associates
The crypto industry is at a crossroads. For years, crypto/digital asset managers have navigated an unpredictable regulatory minefield, with the SEC employing a “Regulation by Enforcement” approach that relied heavily on enforcement actions rather than clear guidance. But change is here. Under the new administration, the SEC is taking a markedly different approach—one that shifts away from regulation by enforcement and toward meaningful collaboration and clarity. The goal? To bring transparency and coherence to the crypto/digital asset industry and create a regulatory framework that fosters innovation while protecting retail investors from fraud and harm. Understanding this shift is critical for industry leaders who want to stay compliant while positioning themselves for future growth.
Previously, the SEC’s stance on crypto and digital assets fell under a “Regulation by Enforcement” approach, which was characterized by stringent and broad sweeping enforcement actions against crypto and digital asset industry participants that created uncertainty
about compliance expectations due to a lack of clarity about the guidelines safeguarding the space. Former SEC Chair, Gary Gensler, led a regulatory regime that relied heavily on enforcement to define crypto and digital asset compliance, often bringing lawsuits against crypto and digital asset firms rather than setting explicit guidelines. The current administration, however, appears to be easing away from this enforcement-centric model in an effort, it seems, to provide some level of clarity about crypto and digital assets being considered securities.
Several notable actions have reinforced this new direction:
1. The Creation of a Crypto Task Force: Led by Commissioner Hester Peirce, the establishment of this task force is a clear signal that the new leadership at the SEC is focused on developing a clear regulatory framework for crypto and digital assets. The Crypto Task Force aims to provide clarity on the application of federal securities laws to the crypto asset market and recommend practical policy measures that foster innovation while protecting investors. The move illustrates an intent to
engage with market participants rather than regulate through harsh and public litigations, which can have significant implications for the companies involved and often result in steep fines against digital asset firms and/or crypto managers.
2. Dismissal of Enforcement Actions: One of the most significant indicators of this shift is the SEC’s decision to drop multiple enforcement cases against crypto firms such as Coinbase, Uniswap, Robinhood and Kraken. These dismissals suggest the agency is reevaluating its prior stance on enforcement-driven regulation and is instead prioritizing clearer rulemaking.
3. Clarification on Security Status: The SEC recently clarified that meme coins are generally not considered securities, likening them to unregulated collectibles rather than financial instruments. They also announced an upcoming series of roundtables, which will be hosted by the Crypto Task Force, to engage with the public to further refine how other crypto assets should be classified and provide a workable regulatory framework for the industry. These developments are providing much-needed guidance to market participants and underscores
the administration’s goal of setting clearer parameters for digital assets.
While adopting a more industry-friendly approach, the SEC maintains a strong focus on protecting retail investors. The agency has consistently expressed concerns over bad actors exploiting individual investors in the crypto space, and this remains a core enforcement priority.
Silver notes the following key actions by the SEC over the past several months that underscore this development:
1. Establishment of the Cyber and Emerging Technologies Unit: The formation of the Cyber and Emerging Technologies Unit within the SEC is a direct response to the growing risks in the digital asset market. This unit is tasked with investigating fraud and misconduct that disproportionately impact retail investors. Unlike the previous administration’s approach, which broadly targeted crypto firms, this unit’s focus is narrower, going after clear instances of harm rather than imposing sweeping
restrictions on all market participants.
2. Enforcement Actions Against Retail Fraud: Despite the reduced reliance on enforcement actions against major crypto firms, the SEC remains active in pursuing fraud cases, particularly those affecting retail investors. Recent enforcement actions of note include:
• One Oak Capital Management: Charged with breaching fiduciary duty and failing to disclose critical information to investors.
• Never Alone Capital: Accused of fraudulent misrepresentation in managing client funds.
• Justinas Butkus: A case involving the fraudulent sale of interests in mutual funds that did not exist to retail investors.
Another key theme in the SEC’s evolving approach is the creation of a more business-friendly regulatory environment. We have seen several recent developments that support this change:
1. Extensions and Exemptions on Regulatory Filings: The SEC has granted extensions and exemptions on certain regulatory filing requirements, including Form PF, Form 13F-2 and Form SHO. These changes reflect a regulatory shift that aims to ease the compliance burden on fund managers and crypto and digital asset firms while ensuring appropriate oversight.
2. Pullback on Mandatory Climate Disclosures: The SEC has also paused its defense of the mandatory climate-related disclosures rule, which would require public companies to disclose certain climate-related business risks and information in their public filings. This has been a controversial regulation among industry participants, with critics arguing that the rule is outside the SEC’s statutory authority and that existing SEC regulations already require disclosure of material business risks, including those related to climate. This move indicates that the agency is reevaluating its priorities and focusing regulatory resources where they are most needed.
The evolving regulatory landscape presents both opportunities and responsibilities for crypto and digital asset firms and fund managers:
• Engagement Opportunities: In Commissioner Hester Pierce’s statement regarding the formation of the Crypto Task Force, crypto and digital asset industry participants were invited to engage with the Task Force to help shape a more predictable crypto and digital asset regulatory environment. With the SEC signaling a willingness to work with industry participants, firms now have the chance to engage with regulators to help shape forthcoming policies.
• Continued Vigilance: Although enforcement has been dialed back, compliance obligations remain very much in place. Therefore, firms must maintain robust compliance programs, as future regulatory reversals could lead to renewed scrutiny. Furthermore, remember, the examination period for private fund managers, including crypto managers or managers that employ a digital asset strategy, can be three years, therefore if a reversal were to occur back to the period of the original construction, the examination will be much more challenging and onerous.
• Adaptation to New Guidelines: As clearer rules emerge, crypto and digital asset managers must be prepared to adapt their operations accordingly to remain competitive and compliant. Be sure to work closely with your Chief Compliance Officer or your third-party compliance consultant to ensure that your compliance program is buttoned up and erring on the side of caution.
The pending confirmation of Paul Atkins as SEC Chair will be a pivotal moment for the regulatory landscape. His views on crypto regulation align with the
principles of market-driven oversight, reducing unnecessary enforcement while ensuring that investor protection measures remain intact. If confirmed, Atkins’ leadership is expected to reinforce the current trend toward rule-based guidance rather than enforcement crackdowns.
Moreover, President Trump’s recent Executive Order directing agencies to review existing regulations may also have significant implications for the SEC. Under this directive, agencies must assess whether current rules align with their original legislative mandates. This could lead to the rescinding or revision of certain SEC regulations that were viewed as regulatory overreach.
The transition from an enforcement-heavy approach to one of clarity and collaboration marks a pivotal moment for the crypto and digital asset industry.
Crypto and digital asset firms should not interpret this as deregulation. Instead, this is a recalibration toward a more structured regulatory framework that fosters industry growth while maintaining investor protection.
For crypto firms and private fund managers that employ a digital asset strategy, the key takeaway is clear: stay the course. Maintain compliance, work in lockstep with regulatory compliance experts in order stay abreast of key developments as they occur and prepare for more defined regulatory guidelines in the near future. The market remains governed by existing securities laws and firms must continue to operate within these boundaries even as new rules take shape.
While things continue to change at a rapid pace and there is much uncertainty in the air still, this significant shift in the SEC’s approach to regulating crypto and digital assets presents a unique opportunity for industry participants to help create a framework that balances innovation and investor protection—a necessary step for the sustainable growth of crypto and digital assets in the financial ecosystem.
Silver prepares investment firms for success under regulator examination and investor due diligence. We combine multifaceted industry expertise and innovation savvy to align firm processes with regulator and investor expectations without creating unmanageable complexity. Silver’s customized guidance of private equity, venture capital, hedge fund and crypto/digital asset firms reflects each client’s size, strategy and culture.
Our stringent, yet practical, approach reflects Silver’s roots in regulatory compliance rigor and investment firm business realities. We calibrate best practices with business considerations to find sustainable approaches for each client. Silver gets to know a client quickly and becomes an extension of their team. We take on ownership and the heavy-lifting, carrying out the routine and most time-consuming tasks.
Fizza Khan CEO
Director
ALEJANDRA JIMENEZ
Project Makers
Social impact investing, which seeks to generate both financial returns and positive social outcomes, has gained significant traction globally and within the United States over the past few decades. This investment approach aligns capital with initiatives that address pressing social and environmental challenges, offering investors an opportunity to contribute to societal well-being while achieving financial gains. In Puerto Rico, the potential for social impact investments is particularly compelling, given the island’s unique socio-economic landscape and the transformative work of organizations like Project Makers.
The roots of socially responsible investing in the United States trace back to the 18th century, with religious groups avoiding investments in industries contrary to their ethical beliefs, such as slavery and alcohol. This foundational ethos evolved over time, leading to the modern concept of impact investing, which intentionally seeks measurable positive societal outcomes and benefits alongside financial returns.
The growth trajectory of impact investing has been remarkable. According to the US SIF Foundation’s 2018 report, sustainable, responsible, and impact investing assets reached $12 trillion, accounting for 26% of all professionally managed assets in the United States. More recently, a 2020 global analysis by Morningstar indicated that assets in sustainable funds reached nearly $1.7 trillion, with net flows into U.S. sustainable funds surpassing $51 billion. This trend reflects a growing recognition among investors that integrating environmental, social, and governance (ESG) factors can mitigate risks and identify opportunities for superior long-term returns.
Performance data supports the viability of impact investments. A study by PGIM Real Estate indicated that impact investors targeting market-rate returns overwhelmingly reported performance in line with or exceeding expectations. Studies have shown that ESG-focused institutional investments are projected to grow by 84% to $33.9 trillion by 2026, making up 21.5% of assets under management. This evidence chal-
lenges the misconception that social impact comes at the expense of financial performance, demonstrating that investors can achieve competitive returns while contributing to societal good.
Puerto Rico presents a unique and compelling landscape for social impact investments. The island has faced numerous challenges, including economic downturns, natural disasters, and infrastructure deficits. However, these challenges also unveil opportunities for investments that can drive substantial social and economic benefits. Investing in Puerto Rico’s underserved communities can catalyze economic mobility, reduce poverty, and promote sustainability. The island’s rich cultural heritage, strategic location, and resilient population provide a fertile ground for innovative social enterprises that address local needs while offering scalable solutions applicable elsewhere.
At the forefront of fostering social impact in Puerto Rico is Project Makers, a non-profit organization dedicated to empowering entrepreneurs from disadvantaged communities. Our mission is to reduce poverty by providing comprehensive support to individuals aiming to establish, formalize, or expand their businesses, thereby promoting economic mobility and community sustainability.
Since our inception in 2021, Project Makers has made significant strides:
• Entrepreneurial Support: We have impacted over 500 entrepreneurs across 56 municipalities, with 67% being low- to moderate-income individuals and 75% women.
• Accelerate Program: Launched in 2022, our Accelerate program is Puerto Rico’s first accelerator focused exclusively on social impact enterprises. It assists entrepreneurs in scaling their businesses while amplifying their social impact, aiming to eradicate poverty and enhance the island’s sustain-
ability.
• Oasis Project: We are part of the Oasis Hub project, a $43 million, 112,000-square-foot mixeduse development. This initiative includes a K-12 school, health clinic, workforce training center, and an entrepreneurship incubator and business services, addressing multiple community needs simultaneously.
• Innovative Tools: In collaboration with Happy Mind, we introduced the “Agenda para Emprendedores,” a tool designed to support entrepreneurs at various development stages, strengthening Puerto Rico’s entrepreneurial ecosystem.
The evidence is clear: social impact investments can yield competitive financial returns while driving meaningful societal change. Puerto Rico stands at a pivotal moment where such investments can transform challenges into opportunities, fostering economic resilience and community empowerment. Project Makers invites investors, philanthropists, and stakeholders to
join us in our mission to cultivate and invest in Puerto Rican entrepreneurs. By supporting Project Makers, you are not only investing in individual businesses but also contributing to a broader movement towards economic equity and sustainability on the island. Your contribution can take various forms:
• Financial Donations: Monetary support enables us to expand our programs, reach more entrepreneurs, and amplify our impact.
• Partnerships: Collaborate with us to develop new initiatives, share expertise, or provide resources that align with our mission.
• Mentorship: Offer your time and knowledge to guide emerging entrepreneurs, helping them navigate challenges and seize opportunities.
With the right support, entrepreneurs from disadvantaged communities can drive economic growth, reduce poverty, and enhance sustainability. We call upon investors and partners to join us in this transformative journey. Together, we can create a thriving, equitable, and sustainable future for Puerto Rico. To donate or learn more about partnership opportunities, please visit our website at www.projectmakerspr.org.
Alejandra Jimenez Chief Operating Officer Project Makers
Project Makers is a non-profit organization that provides education, resources, technical assistance, and mentoring to young people and adults in disadvantaged communities who want to establish, formalize, or grow their business. Our mission is to reduce poverty by providing comprehensive support to entrepreneurs to scale their impact by promoting economic mobility in Puerto Rico and sustainability in our communities. Since 2021, we have impacted more than 500 entrepreneurs in 52 municipalities, where 63% are low- to moderate-income individuals and 75% are women.
Organization that provides education, resources, technical assistance and support to young people and adults in disadvantaged communities who want to establish, formalize or grow their business.
Reduce poverty by providing comprehensive support to entrepreneurs to scale their impact by promoting economic mobility in Puerto Rico and sustainability in our communities.
An immersive educational and mentoring journey designed to nurture and transform your innovative ideas into viable business plans.
Dedicated mentoring and support services aimed at driving the sustainable growth and development of established businesses and taking them to new levels of success.
After grad program focused on accelerating the growth trajectory and amplifying the social contributions of companies profoundly.
Our first retail product that complements our support to entrepreneurs, offering strategic planning and organization
A bazaar experience designed for our Alumni, held in different locations with a lot of foot traffic. During this event, our graduates have the opportunity to exhibit their products and services and participate in entrepreneurship workshops with the community. It is a great opportunity to connect our entrepreneurs with new and existing clients. Stay tuned to our social media channels to support the next Maker's Market.
Our signature event where we bring together the entrepreneurial ecosystem of Puerto Rico to connect with future collaborators and publicize the efforts we carry out to positively impact entrepreneurs.
STEPHEN INGLIS, CFA
Financial Analysts’ Society of Puerto Rico &
DICKRAN GUERGUERIAN
Minimise USA LLC / Philanthropist
Our first inclination for our mountain retreat in Puerto Rico, was to buy a coffee hacienda. In January 2017, my partner Thanh and I, left New York for Puerto Rico in search of a farm. Through a listing on Sotheby’s, we found Hacienda Las Nubes in Adjuntas. A 6-acre coffee plantation growing single-origin coffee.
Following weeks of due diligence on Hacienda Las Nubes and the specialty coffee market it was apparent that growing coffee in Puerto Rico was not economical-
ly viable and that government policies propping up the coffee industry were not sustainable.
Continuing on our quest to acquire a farm, we ended up buying a mixed-use farm in Las Marias from an elderly farmer without a succession plan, who was anxious to retire. This was our realization of how to buy off-market farmland.
We named our starter farm Finca La Luna and began learning about farming and in particular about propagating cacao. Hurricane Maria came a few months
later in September 2017. The devastation was immense flatting all of our coffee trees, but to our surprise, the mango and cacao trees stood up to the severe hurricane. On the cacao trees, the winds blew off the flowers setting production back six months. But the resilience of cacao trees to hurricanes allows production to resume. This being an important consideration in the selection of what crops to plant.
Puerto Rico’s agricultural sector has been in a seventy-year secular decline. In spite of having fertile land, and government incentives, 75% of the island’s farmland remains underutilized. While cultural issues are often sited for the Puerto Rican’s distain for farming and the jibaro way of life, it is economics that has made farming in Puerto Rico a non-starter. The average size of a producing farm in Puerto Rico is fifty-acres. After the land reform of the 1930’s laws were put in place to limit corporate ownership of farms to 500 acres to prevent corporate consolidation. Thus, Puerto Rico farms are for the most part small holders without economies of scale.
At La Luna, apart from the focus on planting cacao, we grow plantains, bananas, tangerines, breadfruit,
mangos, coconuts, passion fruit, and coffee. Of all these crops, the only crop with a functioning market is plantains. While there are buyers for coffee, and plenty of government incentives, finding coffee pickers is nearly impossible, and as a result, at La Luna, like so many other small coffee farms, our coffee doesn’t get picked and now those trees just provide ornamental shade for the young cacao trees. This decision not to harvest coffee in the aggregate has resulted in a shortage of coffee for the local market thereby requiring the importation of cheaper semi-roasted beans from Mexico and The Dominican Republic further undermining the local growers.
In spite of legislation stemming from Puerto Rico’s Act 60, Chapter 8: Incentives for Agro-Industries that provides numerous tax exemptions and rebates, farming continues to be a challenge primarily due to labor shortages and low value crops. The incentives, however, have allowed farmers, and especially coffee farmers, to maintain their farm infrastructure. It is estimated that there are 60,000 acres of abandoned or otherwise neglected coffee farms in Puerto Rico. Much of this is a result of the lingering effects of Hurricane Maria, and apart
from the few specialty growers, virtually all these coffee plantations are for sale at distressed prices.
In the world of alternative and uncorrelated investments, the proposition presented in this article is the case for acquiring distressed coffee farms and converting to cacao. The investment thesis for buying Puerto Rico farmland is predicated on i) plenty of cheap fertile land with existing road and water infrastructures, ii) a super profitable crop like cacao, and iii) a market for the crop. First and foremost, there are thousands of acres of abandoned or under-utilized farmland that can be purchased from $600 to $2500 per acre depending on usability. Land too steep for planting is pricing as low as $600/acre and raw flatter land easily planted is around the $2500/acre price range.
Secondly, cacao as an alternative to coffee is promoted in U.S. Department of Agriculture reports indicating that Puerto Rico’s climate mirrors some of the best cacao-growing regions in the Caribbean. The time to maturity for cacao trees has yields beginning after 3–5 years, with peak production at 7 years, which can continue for over fifty years. The U.S. fine chocolate industry is worth $27 billion, creating demand for single-origin, high-quality cacao. The USDA sites a yield potential of 1,000 pounds of dry cacao beans per acres, with premium prices ranging from $3.50 to $10 per pound. However, the USDA has not recognized that over the past ten years Hacienda Jeanmarie has developed a super strain of cacao trees (JM-03) capable of producing as much as 3,000 pounds of beans per acre, which are currently selling at $10 per pound or $20,000 per ton. Thus, a mature cacao forest of JM-03 trees can
generate $30,000 per acre.
The pro forma 200-acre cacao forest presented here is from an actual project to convert a coffee farm in the Lares area. For this project, a conservative long-term price of $11,000 per ton is assumed with an aggressive yield of 1.75 tons of beans per acre after seven years. The recurring $3,850,000 revenue with a $3,000,000 operating profit netting out the 80 acres of plantains. Valuing the 200-acre cacao operation in 2032 can be made using a cap rate just as you would with a commercial income property. This is especially appropriate for cacao given the long-term profit horizon, whereas coffee, avocados, and citrus trees typically don’t produce more than twenty years. Using a cap rate of 5% would value the 260-acre cacao farm at $60,000,000 while a 15% cap rate would value the farm at $20,000,000. Determining what the cap rate would be after the seven year investment horizon would be a function of: i) strength in pricing and the global demand for fine flavored cacao, ii) supply of high quality cacao, impacted by disease as in West Africa, or import restrictions into the Euro-zone for beans with cadmium and other heavy metals, iii) the ability to bring in guest workers on A-2 Visas, iv) general interest rate levels to finance the operations, and v) the availability of fertile land. Puerto Rico is a small island and the ability to purchase land at current prices will not last long.
Since the purchase of La Luna in 2017 we have acquired several other large farms and have been implementing the conversion to cacao. The bottleneck to planting the millions of cacao trees to achieve a billion-dollar cacao industry in Puerto Rico is the supply
of the JM-03 trees with outstanding genetics. To solve this supply constraint a mega-nursery, Cuerdas Verde Cacao Nurseries, has been established in Mayaguez capable of shipping 50,000 trees per month.
As is the case with most alternative investments, liquidity is an important consideration. Currently, it is the absolute lack of liquidity that has the price of farmland so low. We have seen beautiful farms that have been on the market for years. An important factor to be aware of when buying farmland from a retiring farmer without a succession plan, is to close while the seller is still alive. As is often the case, once the property is being sold as an estate sale in probate, you then have to deal with all the heirs who have to agree on terms and pricing, another reason why properties remain unsold.
The liquidity thesis for cacao farms, is that once a farm is established and is in production with cash-flow, the secondary market will emerge. Standardization is also a factor. By planting the same JM-03 genetics trees, using our established best practices for propagation techniques, the pricing becomes standardized in relation to the prevailing cap rate for commercial real estate in Puerto Rico. As well, larger farms, 100 acres
plus can be subdivided and resold through syndications. These are still early days in the development of the fine flavored cacao industry in Puerto Rico where all the critical components are in alignment. Lots of excellent, fertile, low-cost land, an 8% CAGR in global demand for fine flavored cacao, and access to the finest cacao genetics for yields in excess of 1.5 tons per acre. Apart from the cacao play, Puerto Rico farmland is not an attractive investment.
To learn more about investment opportunities in PR cacao please visit https://www.cbx.market/
USDA Rural Development Puerto Rico Fact Sheet - Investment and Economic Impact
URL: https://www.rd.usda.gov/media/file/download/usdardpuertoricofactsheet-07-2024.pdf
Farming Economics & Investment Feasibility
Puerto Rico Specialty Coffee Industry Analysis (USDA Reports on Coffee Production)
URL: https://www.nass.usda.gov/Statistics_by_State/Puerto_Rico/index.php University of Puerto Rico – Coffee Industry Recovery & Economic Feasibility Studies
URL: https://upr.edu/agricultural-research/ Cacao Farming in Puerto Rico – Economic Viability
USDA Report on Cacao Production Feasibility in Puerto Rico
URL: https://www.usda.gov/topics/farming/cocoa-and-chocolate
The Financial Analysts’ Society of Puerto Rico is a San Juan based society for financial professionals to network and attend presentations on topical financial matters. The Society’s mission statement is “Altruism for Ethics and the Advancement of Financial Analysis” and to this end hosts the CFA Ethics Challenge for universities in Puerto Rico. Please visit https://www.faspr.org/ to learn more.
Stephen Inglis Co-Founder FASPR - Financial Analysts’ Society of Puerto Rico
Dickran Guerguerian Chief Financial Officer Minimise USA LLC / Philanthropist
