Why We Built HUB.8 in Ciudad del Este

Hey guys, Mikkel here,

Since sending out the HUB.8 investor update last week, Fernando has been receiving a steady flow of inquiries from people who are either new to our community or missed the original launch. 

So, he asked me to put together this special edition of Paraguay Potential to bring everyone up to speed.

Allow me to do exactly that.

We are just weeks away from breaking ground on a major new commercial office tower in Ciudad del Este, Paraguay’s second-largest city and one of the most important trade centres in South America.

All of the necessary permits are now in place, the land has been prepared, and we expect to break ground within the next few weeks.

During the permitting process, we also made important improvements that allowed us to add a couple of extra floors, bringing HUB.8 to a total of 23 floors.

The thesis behind HUB.8 begins with Ciudad del Este itself.

Ciudad del Este sits directly on Paraguay’s border with Brazil and forms part of what’s known as “The Triple Frontier” with Brazil and Argentina. For decades, the city’s economy was largely formed by cross-border trade. It is no longer “just” that. 

Industry is expanding, logistics operations are becoming more sophisticated, infrastructure is improving, and all of that growth is creating a larger, more professional commercial economy in the city.

Office occupancy across Ciudad del Este is already above 90%; some of the better-known commercial buildings are effectively completely occupied, and much of the existing inventory is at least a decade old and lacks the modern amenities that businesses are increasingly demanding.

That was the gap Fernando and I saw:

• Growing city (population of CDE has grown 8x in the past 40 years).
  

• Expanding trade, logistics and industry.
  

• More sophisticated businesses entering the market
  

• Above 90% office occupancy.
  

• Modern commercial inventory is nonexistent

HUB.8 will provide the modern commercial space currently missing and in high demand from independent professionals, growing Paraguayan companies, and larger international businesses expanding their operations in the region. 

HUB.8 is positioned to become the premier business centre in Ciudad del Este, with amenities you would expect from a modern commercial development, including dedicated co-working areas, high-tech conference facilities, dining options, leisure and wellness areas, networking spaces, and a rooftop sky lounge overlooking the city.

The value of those amenities is pretty straightforward: they make HUB.8 a better place to operate a business, which helps attract better tenants and, equally importantly, gives those tenants fewer reasons to leave.

As an investor, that's extremely important to me.

I want sticky, long-term tenants who sign longer leases, invest in their offices and treat HUB.8 as their long-term base of operations in Ciudad del Este.

Fernando already owns commercial office properties in Ciudad del Este and manages commercial tenants across the city, so he has a strong sense of what businesses and operators want. 

When you combine that firsthand demand with an office market that is already more than 90% occupied, I think we have strong reason to be bullish on the rental side of this investment.

Fernando and his team will handle the entire management side for us, including tenant placement, contracts, rent collection, reporting and financial compliance. In other words, we can own income-producing commercial real estate in Paraguay without taking on all of the day-to-day responsibilities that normally come with being a landlord.

At more than 80 metres tall, HUB.8 is going to have an enormous physical presence over the city and establish a new benchmark for premium commercial office space.

As Ciudad del Este continues developing, I expect HUB.8 to become one of the commercial anchors around which more business activity, professional services and investment will gather.

As the surrounding area develops and HUB.8 establishes itself as one of the city's premier commercial buildings, I believe that should support both the underlying market value and the eventual resale value of our units. 

At the same time, increasing demand for space inside a desirable commercial building should support healthy rental rates, meaning the same forces driving the value of the underlying real estate can also strengthen the income-producing side of the investment.

We conservatively project annual rental yields in the 8% to 10% range once HUB.8 is operational.

At the same time, we’ll own commercial real estate in a rapidly growing city where demand is increasing, and quality supply remains extremely limited, giving the underlying value of our units plenty of room to appreciate alongside that growth.

Obviously, neither future appreciation nor rental yields are guaranteed, but that's the combination I’m investing for: cash flow from a severely undersupplied commercial market alongside the potential for long-term capital appreciation as Ciudad del Este continues developing around us.

When I originally introduced HUB.8, I told our community we could potentially see around 30% to 40% appreciation within 18 months.

I said that almost exactly one year ago. Today, we are on track to potentially surpass my original prediction.  

Before I wrap this up, let me restate why I brought this project to our community in the first place and why I personally invested a little over 1.3 million USD to secure an entire floor for myself in the project:

• A growing city positioned at one of South America's most important cross-border trade centres.
  
  An investor-friendly financing structure that allows capital to be deployed progressively throughout construction rather than all at once.
  

• Expanding trade, logistics, industry and professional activity.
  

• An existing office market with occupancy above 90%.
  

• A shortage of modern commercial inventory, particularly smaller-footprint professional offices.
  

• A building loaded with amenities designed to attract sticky, long-term business tenants.
  

• An experienced local partner who already owns commercial properties, manages tenants and has businesses eager to move into HUB.8.
  

• The potential to own inside what I believe will become an anchor commercial development of Ciudad del Este's emerging skyline (with full-service tenant management)
  

• Projected annual rental yields of 8% to 10%, alongside the potential for longer-term appreciation of the underlying real estate.

If you missed HUB.8 the first time around and want to see what Fernando currently has available inside this project, email him directly at [email protected].

Smaller-footprint offices are currently available starting in the low $50,000s, and those of you who want to secure a much larger position are welcome to discuss that with Fernando as well.

You do not need to deploy all of the capital upfront - the purchase price is spread throughout the construction period: 

• 30% due at groundbreaking.
  

• Quarterly payments of 5%.
  

• Remaining 30% due upon delivery (Q4 2029).

We're only a few weeks away from putting shovels in the ground. I will keep you posted with frequent updates as construction progresses.

[email protected] for Fernando.

Speak soon,
Mikkel


PS. With groundbreaking now only a few weeks away, we’re getting close to the point where contracts will need to be signed, and your first 30% payment is due. Fernando has already been reaching out to many of you over the past week. If you haven’t heard from him yet, keep an eye on your inbox over the coming week. 

PPS. I was literally about to hit send on this newsletter when Fernando messaged me to say the new hospital being built in Ciudad del Este will be 200 metres from our building. That is fantastic news for us - think about the ecosystem that develops around a major hospital: medical supply companies, specialists, healthcare service providers and all sorts of related businesses that need professional office space nearby. Signs and signals, my friends, signs and signals.