Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. -Mark Twain
Tuesday, May 5, 2009
Beach Buzz: Los Corales Project Forging Ahead
-by La Huerita
Back when the feeding frenzy of luxury condo development was in full swing in Puerto Penasco, a company named BBB Developments Mexico joined the fray by purchasing 3.9 acres of prime beachfront land in the Mirador section of town near Manny's Beach Club. They drew up plans for a 20-story 298 unit high-rise hotel/condo beach resort called "Los Corales", complete with on-site shopping, 3 cantinas, a full service restaurant with room service, workout center, spa, waterpark, full time security, underground parking, and "much more".
BBB got far enough along to begin "pre-construction reservations" (a euphemism for "pre-sales") for the condos and to break ground on the project. In April 2008 they partnered up with Omega Commercial Finance Corp., primarily to facilitate financing. By then the real estate market was already going sideways in the USA and taking the economy with it. As a result, the real estate market in Puerto Penasco dried up, too. Several development projects in Puerto Penasco screeched to a halt, sales swirled into the toilet, prices on condos began to drop. We all know that story, don't we?
Well, much to the chagrin of those who do not want to see high rise development in the Mirador (see Walking the Mirador), Los Corales is one project that didn't die. The developer claims the project is currently 30% sold out with all purchasers going to contract and fully executing their obligations. And therein lies a tale.
When the project failed to meet its original construction deadlines, people who had put deposits on condos began to ask for their money back. They didn't get it, even though their contracts stated they were entitled to refunds if certain conditions were not met.
The company essentially used a "Force Majeure" clause in the contract to deny such refunds and hold people to their contracts. Generally that clause is believed to refer to "Acts of God", such as earthquakes, hurricanes and such, but in fact it can cover much more. These clauses excuse a party from liability if some unforeseen event beyond the control of that party prevents it from performing its obligations under the contract. It is important to remember that force majeure clauses are intended to excuse a party only if the failure to perform could not be avoided by the exercise of due care by that party.
In this case the company cited the collapse of the real estate market and the economy as unforeseen circumstances that met the criteria. Buyers are crying foul. You can get a brief idea about buyers' feelings about it by clicking here.
I don't know the circumstances of those buyers. Perhaps they find they are no longer able to afford such an expensive purchase; perhaps they balk at being tied to a price that is now way over market value; perhaps it's a combination of things. But they are not necessarily the happy campers Omega Finance leads its shareholders to believe.
Meanwhile, Los Corales kept plugging along. In February, 2009 Omega announced a 100% buyout of the project, saying that the acquisition by Omega would be the best alternative to accelerate the project under current market conditions. The press release also mentioned that because the units are strategically being sold at 20-30% below current market value, Omega anticipates that most units will be sold by the conclusion of this year.
Considering the listed prices of many of those units on the Los Corales website, I have to wonder who is going to buy them? I also wonder if Omega is negotiating with the original purchasers of condos to reduce the contracted price by a similar percentage?
At any rate, BBB/Omega is to be commended at least for not just folding their tents and walking off with investors' money. They continue to forge ahead with the project and appear to have every intention of completing it. They have received pledges for financing from KSI Capital and BBVA Bancomer Bank and recently announced the completion of Phase I of the project.
Phase I included obtaining all permits, engineering, testing, land preparation and deconstruction of the property. To date, approximately $4.6 million has been spent on all overhead expenditures, marketing, permitting, insurance and legal expenses associated with Phase one's completion.
Phase II shall include underground construction, support structures, a desalination plant, water treatment facility, sewer treatment facility and parking.
So does that mean construction will resume soon? We'll have to wait and see. But while we wait I would suggest that Omega make some changes to their press releases and promotional materials for Los Corales.
1.) Stop presenting the project as having private beachfront. All beaches in Mexico are BY LAW public beaches, with ownership belonging to the Mexican people. You cannot legally restrict public access to any beach.
2.) Stop saying that Puerto Penasco is in the same geographic location as Los Cabos. Unless by "geographic location" they mean "Mexico" or being part of the vast Sonoran Desert, this is a foolish statement. Los Cabos is a thousand miles away on the other side of the Sea of Cortez.
3.) Do a remake of their new 'media presentation' at http://www.smallcapvoice.com/ocfn/los-corales/ The narrator has mispronounced "Puerto Penasco"...
4.) Put dates on the construction photos on the Los Corales website...
To see Omega Finance's most recent press releases about Los Corales, click here.
As always, your comments are welcome!
About Beach Buzz: Not necessarily the news, this is a place for information, opinion, speculation, gossip, tips and other good stuff about Rocky Point, and Mexico in general. If you have something you'd like to share, I'd like to hear from you!
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