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| Feature |
Southern Exposure
Michelle Seaton
01/01/2008
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Over the course of 30 years, Hal Wright has
developed more than 300 hotel properties at locations across the United States.
For the last nine years, however, he and his partners have concentrated on
building and selling oceanfront homes in Costa Rica. "Where else can you build a
beautiful palace on the beach for a six-figure price tag?" he says. "Our
customers want drop-dead gorgeous views in an unspoiled environment—monkeys in trees and no Wal-Mart."
Millions of these people are out there, Wright says.
 | PUNTA MITA, Mexico, near Puerto Vallarta, was a largely
abandoned tract of land 15 years ago. Now, development is underway that will result in some 800 high-end residential units and three luxury
hotels. |
Clearly, other developers agree with him. A land rush is
underway along the western coastline of Mexico and down into Central America,
including Panama and Costa Rica, and even to the Dominican Republic over in the
Caribbean. Top real estate entrepreneurs such as Wright, Donald Trump and
Miami’s Jorge Perez are buying up choice tracts of oceanfront land. Developers
are building resorts and luxury homes using the cheap local labor—or reselling
their property at a significant markup. As the real estate market in the
United States implodes, development along beaches in Latin America is fueling a
boom that may make investors millions. What’s more, those who are already in on
the action believe there is plenty of room for others to jump onto the
bandwagon. "This real estate boom will last for at least another decade," Wright says.
Many people—retirees, young vacationers, affluent families
looking for multigenerational vacation homes—are ready to flee the tempestuous
U.S. housing market and settle down part time in a place with ready access to
the beach, temperate weather and maids who will work for a few dollars a day.
Building costs for the beach homes these buyers want are minuscule compared to
those for oceanfront houses in the United States. Wright says that in the more
than 100 units of luxury housing he has built in Costa Rica, construction costs
have run roughly $100 per square foot; similar projects in Florida today would
cost a minimum of $250. This is in part because labor south of the border is so
cheap; contractors can hire workers for much lower pay. Total expenditures,
including land, run less than $200 per square foot, Wright says, but the units,
when complete, sell for more than $300 per square foot.
TOP VIEW
As
the U.S. real estate market implodes,
developers and investors turn to Latin America, where inexpensive beachfront
property and cheap labor are fueling a land rush. Those buying choice tracts of
land are building resorts, luxury houses and high-end condominiums to sell to
Americans looking for vacation and second homes. While many expect this boom to
last at least another decade, individuals should carefully consider the
political climate of the host country and the specific location of a property
before deciding to invest. |
"It’s more than a 30 percent return on investment," points out Wright, who believes that because of strong demand, prices will eventually rise
to $500 per square foot or more.
First Come, First Served
As an example of the kind of development springing up in Latin
America, consider Punta Mita, Mexico, a small peninsula a few miles north of
Puerto Vallarta. Just 15 years ago, this was a largely abandoned tract of land.
Densely overgrown with vegetation, the peninsula’s 1,500 acres of low hills held
value only to the few dozen squatter families who had cleared space for their
homes and small farms.
Still, Punta Mita featured pristine ocean views and nine miles
of undeveloped beachfront. The family that held title to the land sold the
entire parcel for an undisclosed sum in the early 1990s to DINE, one of Mexico’s
leading builders of luxury housing. DINE spent $150 million to clear vegetation,
build roads and bring in utilities; then it parceled out several choice lots, on
which the company built impressive oceanfront villas. It also invited Four
Seasons to build a resort on the site. In 1999, the Four Seasons at Punta Mita
opened with fewer than 100 rooms, quickly reaching more than 80 percent average
annual occupancy.
That same year, DINE offered 20 lots of oceanfront land, called
Ranchos Estates, that varied from 1 to 1.5 acres. The prices started at $1
million each, cash only, but the lots sold quickly—almost instantly—with many
buyers snapping up more than one lot.
The developers are only too thrilled to recount stories about
people who bet early and won big. As the development’s allure grew, the Four
Seasons added more rooms, including beachside villas that rent for $9,000 a
night in high season.
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