a-looking-ahead

Costa Vallarta, the amazing coastline that stretches from Barra de Navidad to San Blas, ranges in ecological diversity from lush tropical forest to arid farmland, encompassing pristine beaches, large estuaries teeming with life and rugged cliffs where the foothills of the Sierra Madre meet the sea, interspersed with delightful coves and bays. In the middle of this coastline lies Banderas Bay, home to popular Puerto Vallarta and a few small seaside towns. But outside the bay, especially to the south, the area remains as it has for years—rather remote, hard to reach, and largely untouched by man and his seemingly endless desire to tame what is wild and natural. Yet, development is inevitable. What’s questionable is the form it will take and the effect it will have on the region and the people who live there.

This article discusses Costa Vallarta and the plans and players involved in its future. As Puerto Vallarta has evolved from a quaint, seaside fishing village (as it is so often portrayed) into a city and service center for Costa communities, it has forced people looking for what Vallarta once was outward along its coastline. This is about the players who are looking ahead, making the plans that will provide real estate opportunities when the market recuperates, hopefully with a product that will protect the region from irresponsible development.

When considering real estate in Costa Vallarta, whether from a developer, realtor or buyer/seller point of view, it’s easy to get caught up in the “here and now” and be overwhelmed by the recent downturn in the market. For many real estate developers, sales have slowed considerably and, concentrating on staying afloat while the market adjusts and begins its recovery, they are now placing cash flow and survival strategies ahead of development strategies — at least for the short term.

However, the large mega-developments involve long-term planning, 10- to 20-year windows, requiring significant investments in time and money when the market may be most difficult. Many projects today have 20-year sell-out projections, longer than most real estate cycles, which means the developer has to forecast and plan to weather both the ups and the downs, the good and the bad of these cycles.

Where “timing is everything” for many developments, it also involves being bold when others are phasing down — or shutting down — and establishing plans for the next wave of market opportunity while also taking into consideration future downturns that may occur during the long-term selling phase of a mega-development. Developing looks easy and like a wonderful business on the upside. It’s the downside, in the troughs — an inescapable part of the business — that separates the serious and seasoned from the lightweight. And it’s the former that are now busy creating plans for Costa Vallarta’s future.

Sections of Costa Vallarta

South of Puerto Vallarta and still within the state of Jalisco, running from the southern tip of Banderas Bay (Cabo Corientes) down to Barra de Navidad, is Costalegre, a spectacular coast that has seen little development, for the most part—just a few towns and secluded, high-end boutique hotels. To the north of Puerto Vallarta, across the Ameca River, is Nayarit and the region commonly referred to as Riviera Nayarit. It’s a different state, with different rules regarding real estate development.

There are approximately 100 km of coastline between the two points of Banderas Bay, with development actually taking place within only 55 km, as most of the south shore of the bay is not accessible by road and most of it is “ejido,” or indigenous, land. Riviera Nayarit’s northern coastline (not including the portion inside Banderas Bay) is similar in length (100 km), stretching from Punta de Mita to San Blas. The coastline varies from steep cliffs with dense jungle to beautiful beaches and oceanside plains. In comparison, Costalegre encompasses approximately double that, with nearly 200 km of coastline, from Cabo Corientes to Barra de Navidad. There are portions of it, however, that are not conducive to development. About 50 km consist mostly of estuaries and flat, arid land mostly used for farming. Another 40 km are privately owned, with owners who have little or no intention of selling or developing, at least not anytime soon. This makes Costalegre’s developable land bank similar in size to Riviera Nayarit.

With much of Puerto Vallarta and Banderas Bay fully developed (except for the extreme south shore), any new growth will take place outside the shores of the bay, within Riviera Nayarit and Costalegre. Obtaining information about Riviera Nayarit is relatively easy, as there are many existing projects and numerous real estate agencies with well-informed realtors, plus the slated projects are farther advanced than many to the south in Costalegre.

Finding out about Costalegre is another matter. The principal players and landowners in the region keep information to themselves, partly to protect their privacy and also to inhibit development. There are few real estate companies working in the region, except for a few “coyotes” — independent sales people who live in the region and often do not even have an office. They work as intermediaries, putting people who own land and may be interested in selling together with those interested in buying. Their forte is that they have information others have difficulty finding. Making your way around this region is nearly impossible without a “coyote” or the services of one of the few companies that specialize in the region.

Costalegre

Costalegre is very much like a private club that few are privy to. That’s the principal reason it has remained as it is for so long. There are about eight very large landowners who are quite content for things to remain as they are. These landowners have established for themselves urban plans that involve very low-density development, protecting the ecology and natural environment. Most recently, many of their self-imposed regulations have been adopted by the local municipalities (which, actually, are more like large counties) and are now part of their “Plan de Desarollo,” or Ordinance Plan.

As the government works on infrastructure and better access, real estate development is underway — at differing stages — by a few “players” in the region. There are six to eight major players with parcels of around 1000 hectares along Costalegre. (To put that in perspective, Punta Mita, probably the most well-known mega-development in Costa Vallarta, consists of only 600 hectares.) These owners dominate the region and have considerable influence regarding the region’s development. A number of them have created a businessmen’s association for the region (Asociacion de Empresarios de Costalegre) to work with the government to improve regional infrastructure and assure that there are strong, enforceable rules in place regarding development. There also are probably another 10 smaller players with 200 to 500 hectares, interspersed with ejidatario communities along this whole coastline.

With these plans in place and the land, still mostly ejido, in the process of being regularized, change is taking place. Large tracts of land are becoming available, and a few large investment groups are establishing master development proposals involving small boutique hotels and low-density homes, home sites and condominium opportunities with common amenities such as golf and marinas — but more are just providing the natural environment with its estuaries, rolling sand dunes and incredible beaches just as they are.

But it takes time. Just converting the land from ejido to deeded title can take years. It means working closely with the ejidatarios, having them sign through the complicated processes so that land can be titled and they can benefit from it.

Costalegre is, for the most part, a long-term investment. This is still a place of large-tract parcel sales, which tend to be long-term commitments. There is little or no flipping taking place here, as occurred in Vallarta and especially Riviera Nayarit. That has been the case for years and it still is — the client profile for this coastline is definitely a long-term investor. There are a few new players who want to see growth, but fortunately share the same common vision (for the most part) of low-density, high-value real estate development. And now the Jalisco state government has been motivated, envious of all the attention Riviera Nayarit has received, to get more involved and provide much needed infrastructure.

Costalegre Infrastructure

The two closest airports are in Puerto Vallarta and Manzanillo (with limited international connections), meaning that a two-plus-hour drive is still needed to reach much of Costalegre. The government has committed to a number of projects — the first being the construction of an international airport. The first step is currently underway and should be finished sometime this year. However, that’s just the runway, which will be fine for private jets, but any further development, such as an airport facility, will have to wait until there is more demand for flights into this region. This means there needs to be a supply of hotel rooms and real estate projects — but more on that shortly.

The second project involves improving the existing highway system. The first step will involve widening the stretch of highway from Boca de Tomatlan to El Tuito, the most difficult part of the whole Costalegre highway as it winds south of Vallarta through the mountains to the coastal plains. Work will begin in 2010 and will take a few years, but it will cut at least a half hour of driving time to principal destinations in Costalegre when finished. The second step involves improving and widening the highway from La Huerta to Melaque, which will give faster access from Guadalajara, Mexico’s second largest city, cutting access time to about three or three and a half hours for most destinations in Costalegre. Two other highway projects involve the roads to Cabo Corrientes and Tehuamixtle out of El Tuito, improving the existing roads that wind through the mountains to the coastline, which will not be easy to do or inexpensive. Work has begun on the road to Tehua, with roughly 14 of the 42 km now paved.

Another part of this road improvement program involves building a “macro-libramiento,” town bypass, or “periferico” for Puerto Vallarta. Work begun last year can be seen behind Vallarta, but work stopped recently. It’s an ambitious and expensive project that would provide another route — a faster route — around the city, allowing people from the airport or the north to bypass Vallarta if their destination is Costalegre. Once built, this could cut access time to Costalegre by half, including time saved with the completion of the Boca-Tuito amplification project.

Costalegre Developments

There are a number of projects either currently active or with ambitious plans to enter the market sometime in the near future. But there are three that could be classified as mega-developments and would have the biggest impact on this coastline. There are other land parcels as large or larger, but since they do not have plans for development — at least, not at this time — we’ll focus on those that do: Careyes, Chala and Cabo Corrales

Careyes is probably the most well known development on the coastline, attracting the rich and famous for years. Careyes is the vision of the father and son team of Gian Franco and Giorgio Brignone. About 40 spectacular cliff- and hillside homes, some of the most impressive in Mexico, can be found here. For years its elite visitors have stayed in these homes, or “casitas,” or at the El Careyes boutique hotel. Development has been slow, but purposeful. The result is one of the most coveted coastlines in the world. Eight new homes are in development, located on the high hillside above the bay of Careyes, called Casitas de Constelacion. Every home comes with its own star named after it! They have also just completed Plaza de los Caballeros del Sol in a nearby village, which is multi-functional, serving as a civic and cultural center, movie theater and more, improving the community for both residents and visitors to the region.

Careyes is not what you really would call a mega-development (although it certainly is large enough to be one). But it is significant because of the impact the Brignones have had in Costalegre in providing leadership in the region and assuring it remains low-density with high-value real estate, as well as their strong involvement and support of the regional communities.

To the north of Careyes, just past Las Alamandas, lies what is currently referred to as Chala — a project by Rasaland Development consisting of 1200 hectares with more than 8 km of beachfront. The master plan consists of five hotel sites, an 18-hole golf course and a variety or residential opportunities. Nearly completely surrounded by water, Chala is an amazing piece of property, with ocean to the west, an estuary to the east and north (with just a narrow stretch of sand separating the estuary and ocean) and a second estuary to the south. With 20 km around its perimeter, nearly 18 are waterfront. Chala is expected to go actively online sometime in 2012.

Rasaland Development brings to Costalegre a model of development that seems to fit well with the other players on the coast and bodes well for future developers. The development is based on three principles: to protect and preserve the environment, to improve the well-being of the existing community and, of course, to provide a return on investment for the investors. The second is an interesting one, which Rasaland has already begun to implement as they have gone through the ejido-to-deeded-property process. They plan to improve the town and infrastructure and, most importantly, to provide badly needed jobs by providing education and training so residents in this area will have first opportunity at employment.

However, at Cabo Corrientes, the southerly most point of Banderas Bay, a large development called Cabo Corrales, involving approximately 1000 hectares, has been regularized and is being marketed in 100- to 200-hectare parcels. The purchase, regularization and development process was undertaken by a New York investment fund in collaboration with La Punta Realty. It took them over two and a half years to work through the regularization process, just recently receiving title. Access to Cabo Corrales is currently difficult. There are two roads leading to the coast from El Tuito, the one to Tehuamixtle in better condition. From Tehua there’s a road that winds northwest along the coast, first to the small town of Aquiles Serdan and then to the beach of Aquiles Serdan where this development is situated.

Riviera Nayarit

Riviera Nayarit has an advantage over Costalegre because it’s closer to the Puerto Vallarta international airport and the large, cosmopolitan city of Guadalajara. It has also proven to be more pro-development, especially with current Governor Ney Gonzalez. The highway that passes along this coastline is not adequate for any new development, already at capacity from just serving the local communities and traffic heading to Vallarta from Guadalajara and the Bajio region. Improvements have been promised for many years, most recently by both the federal and state governments, which announced plans to improve and widen the current highway, improve sewage treatment for the region and build a new airport near Las Varas.

Riviera Nayarit Developments

There are a number of fine mega-developments in Riviera Nayarit (Punta Mita, for instance). It has proven to be a wonderful model for other developments and has raised the bar to a high standard with low-density and high-value real estate development. Again, there are numerous developments on this coastline (see map), but we will focus on three developments that would have the most impact on Riviera Nayarit in the near future: Nahui, Punta Raza and La Mandarina.

Nahui is a 2100-acre development on the north shore of Banderas Bay, just west of La Cruz de Huanacaxtle and encompassing the beach of Destiladeras. Developed by C&C Capital, a Guadalajara-based real estate development company, the property has over 4.5 km of oceanfront and more than 243 meters of elevation change. The highway to Punta Mita, at least the stretch from La Cruz to the hotel Paladium, will ultimately be relocated behind this property, freeing up valuable coastal land.

Phase I will include sites for hotel and timeshare development along the beach at Destiladeras, with small boutique hotel sites and homes to be built on the hillside behind, overlooking the bay. A village on the beach at the property’s western edge (modeled after Playa del Carmen’s famous Fifth Avenue) will provide a publicly accessible retail, dining and entertainment center and plaza that will be the hub not just for Nahui but also for the region. Phase II will be a gated ocean- and golf-oriented property overlooking the Pacific, anchored by a luxury hotel along with seaside estates, hillside villas and residential estates. Eventually, 400 to 450 residential units will be included in the project. It all will be built around an 18-hole golf course, beach club, tennis center and spa.

The other project by C&C Capital, Punta Raza lies just south of Guayabitos, about an hour north of Vallarta’s airport. Punta Raza encompasses nearly 300 hectares, with nearly 3 km of beach in a single strip and 3.24 km of rocky ocean frontage dotted with pocket beaches and private coves. It will feature up to seven luxury hotels, anchored by a 400-room Grand Hyatt Hotel and a 200-room Park Hyatt hotel with 60 Park Hyatt residences. Punta Raza will eventually accommodate up to 1000 oceanfront and ocean-view single-family detached home sites and condominium units and will feature a private residents-only club. A deep-water, 250-slip marina and adjacent village and commercial area are also planned.

The third mega-project, being developed by Rasaland Development (the group developing Chala in Costalegre), is La Mandarina. Situated just south of Punta Raza in an area locally referred to as El Monteon, La Mandarina will consist of 300 hectares with 5 km of beachfront, including three private beaches. When built out, the development will consist of two five-star hotels, an 18-hole golf course and numerous residential options. Rasaland has the unique position of being developers in both Riviera Nayarit and Costalegre. The developments, as far as what each will offer, are actually quite similar, with hotel sites, golf and both home and condominium residential opportunities.

The tourism development arm of the Mexican government, Fonatur, has three projects planned for the region: in Litibu, just north of Punta Mita; and in La Peñita and El Capomo, just north of Guayabitos. Litibu exists, with the infrastructure in place, but further development has slowed or stopped completely because of the downturn in the economy, and La Peñita and El Capomo are on hold at the current time.

So, as we concern ourselves about the state of the real estate market today, others — who have weathered similar cycles before — are investing, preparing for what they believe to be inevitable: a return to a strong demand for tourism real estate in Mexico, especially in Costa Vallarta. Let’s hope they’re right!

Note: This is not intended to be an all-encompassing review of everything that is currently developing in Costa Vallarta. There isn’t enough room to cover it all in this magazine; however, we do plan to continue to update this article online. You’ll be able to find it at www.vallartarealestate.wordpress.com. We also plan to expand the article so that it can include information about other developments in the region.