Puerto Peñasco Post

Mexico Expo This Saturday in San Diego

For those of you in Southern California, a good way to learn more about what all Mexico has to offer in the way of travel, real estate opportunities and places to live and/or retire is to attend the Mexico Expo in San Diego this weekend.  It includes a variety of exhibitors and also free seminars on various topics related to Mexico tourism, travel and real estate.

The Expo is at the San Diego Events Center (Scottish Rite Events Center) in Mission Valley and is open to the public on Saturday, March 1, 2008 from 10:30 AM until 5:00 PM.   Admission is $3 and includes access to all exhibits and seminars.  Directions can be found here and here.

More information on the event can be found at the Expo website here.  A majority of the exhibitors focus on the Baja market, but I'm sure there will be plenty of representation from Puerto Peñasco there as well.

Chicago Tribune Picks Up Puerto Peñasco Travel Article

I noticed the Chicago Tribune (which is jointly owned along with the Los Angeles Times by Tribune Co.) also picked up the Puerto Peñasco (Rocky Point) travel article that ran in the LA Times last week.  It is here and here. 

Good to see my (former) fellow Chicagoans get a chance to read about a much warmer place (Chicago is expecting their 35th measurable snowfall of the winter overnight and lows in the 20's).

Mexican Judicial Reform Advances

An important step in Mexican judicial reform happened yesterday as Mexican lawmakers agreed to a proposed amendment to Mexico's constitution that would do several things to improve their judicial system and move it further toward an American-style system.  The amendment still will need to be approved by 17 of Mexico's 31 states before being ratified, but has strong support from all political parties and President Calderon.

There are several key portions of the amendment (as reported by the Associated Press).  The first is that judges will now be able to hear oral arguments in public from lawyers, instead of relying solely on written arguments.  One of the major hang-ups with the Mexican judicial system is that trials currently take place behind closed doors and take a very long time due to the burdensome system of presenting all arguments in writing.  Oral arguments will speed up the process, thus helping with the large backlog of proceedings many courts have.  And allowing them to be open to the public will provide additional transparency that will limit corruption. [Note that Mexico does not have jury trials - judges decide everything.]

Another important provisions is that Mexicans will now have an assumption of innocence until proven guilty (something most Americans take for granted).

Finally, a more minor, but important, provision is that qualified public defenders will now replace "advocates" (who are often poorly trained and lack law degrees) during trials.

These reforms are being hailed as the most comprehensive judicial reforms in over a century in Mexico and should improve the Mexican court system over time.  Other provisions in the amendment are meant to help Mexico deal with criminals and drug gangs - by toughening some of their laws and procedures.  It should also be noted that in order to get the amendment through the Mexican Congress, a provision allowing warrantless searches of homes in exigent circumstances was stripped from the amendment.  Human rights groups had strongly objected to these provisions.

The AP article on the amendment can be read here.  A more comprehensive article written by the New York Times can be read here.

Las Conchas Resorts Infrastructure & Desalination

I promised last week to provide some additional details about the infrastructure systems that have been completed by a group of developers in the Las Conchas area [Disclaimer: My development group is part of this effort]...

In late 2006, a group of developers owning land in the area directly behind the legacy Las Conchas area (on the north side of Las Conchas Boulevard as you enter the guard gate) formed an infrastructure association to privately fund installation of offsite infrastructure to supply utilities to these undeveloped sites.  The group goes by the name Unión Desarrolladores Turísticos de Puerto Peñasco (UDTPP)

The UDTPP worked over the last year to privately fund, build and install a 1500 residential unit capacity desalination system to provide freshwater to member developer's land, a sewage treatment plant that features an environmentally-friendly gray water return for landscape irrigation, all electrical installations to each parcel of property and roadway improvements - including paving the entrance to Las Conchas.  The first phase of these efforts concluded in late 2007 when the systems all came online.  They are now being utilized by both Corona del Sol and Marbella (which have delivered their first phases of condominiums) and will be soon utilized by Lindavista (which is expected to deliver their first units in the coming months).  Several other parcels of land running along this strip bordering Las Conchas Boulevard also will utilize these infrastructure facilities over the coming months and years. 

Agustin Cortes, who owns most of the land in the area, was instrumental in founding the UDTPP and has contributed additional funds to an effort to beautify the main entrance off of Fremont Boulevard leading into Las Conchas (including paving a boulevard and other aesthetic touches).  Mr. Cortes has also established a conceptual master plan for the land he owns in the area, which will be named "Las Conchas Resorts."  Las Conchas Resorts is anticipated to eventually include additional residential areas, a golf course, shopping and other commercial areas, hotels and entertainment options.  Visitors to Puerto Peñasco (Rocky Point) in 2008 will start to see part of a marketing campaign promoting "Las Conchas Resorts" when they visit.

A particularly important point about these efforts is that by installing these infrastructure systems privately, the UDTPP has taken proactive measures to ensure that its members - and the eventual residents of their developments - have long-term assured access to some of the resources that are becoming more scarce as Puerto Peñasco grows - particularly fresh water.  This alleviates some of the burden on the city to provide this support to developers.   I have provided a few pictures of the infrastructure facilities below.

[Note: I have been asked several times about these efforts in relation to the Las Conchas Homeowner's Association desalination efforts and I should make clear that they are entirely separate systems.  The Las Conchas HOA is in the process of contracting for and building their own desalination facility to supply their member homes, as you can read here.]

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Los Angeles Times Article about Puerto Peñasco (Rocky Point)

The article appearing in the travel section yesterday of the Los Angeles Times can be found here.  It is sort of unfortunate the writer didn't have the chance to visit during April or May (two of the nicest weather months in Puerto Peñasco), but it seems to be a fair - albeit it very broad - overview of where the town is today and where it seems to be going. It starts off by offering the following:

Once, it was enough to be Arizona's beach, a nice wide patch of below-the-border shoreline where college kids could camp out and drink too much.

But now, it wants to be more than a parent's nightmare. In less than a decade, more than three-dozen condo towers have risen in this town's Sandy Beach area, surrounded by ever-widening waves of upscale vacation homes. It looks like a cellphone commercial by Samuel Beckett, all these rectangles of steel and glitz erupting at the edge of the barren, sandpaper-flat desert.

A short pictorial from the LA Times can be found by clicking here.

And, finally, the LA Times' tips for traveling to Puerto Peñasco can be found here.  (Although, as with most large newspaper travel articles, their tips are very general and miss a lot of what the town has to offer.)

It's good to see some positive press being generated by the public relations efforts being undertaken by several of the groups in Puerto Peñasco. 

Taking the Salt Out of Las Conchas in Puerto Peñasco (Rocky Point)

There was a short article [Registration Required] in the Arizona Daily Star today about the Las Conchas Homeowner's Association signing a contract with Aguamex to build a desalination facility in Las Conchas to supply water to the nearly 600 homes currently in the area.  This has to come as a relief to many, as the water situation there has been tenuous for the last year.  And I know it has taken several years of effort for the HOA to get to this point (I won't even attempt to rehash the history of trying to bring desalination to Las Conchas on here).  So congratulations to Las Conchas and hopefully desalinated water will be flowing for the area by the end of the year.

In the meantime, the Union de Desarrolladores Turisticos de Puerto Peñasco (UDTPP), the infrastructure authority formed by the developers building condos in the newly designated "Las Conchas Resorts" area, has just completed a large desalination plant directly behind Las Conchas.  This desalination facility has the capacity to supply over 1,500 residential units and in the near term will be utilized by Corona del Sol, Marbella and Lindavista.  So, apparently, there will soon be two separate desalination facilities in the Las Conchas area.

I will write more about the UDTPP and its newly completed infrastructure this week for those who are interested.

A couple of quotes from the article are after the jump...

Virtual Real Estate in Puerto Peñasco (Rocky Point)

I read an interesting article yesterday posted on Mexidata written by Brian Flock, a realtor in Baja California.  He notes the misconception about excess real estate inventory on the market in Baja California and how much of this inventory (particularly condominiums) is only "virtual." 

His point is that when asking whether Baja California is overbuilt with excess inventory, the answer is a qualified "No" if you take into account that much of this excess "inventory" is in fact not yet built.  It is in the form of proposed (i.e. virtual) condos or vacation housing that may be for sale but hasn't yet come out of the ground.  He contrasts this phenomenon of "virtual" inventory with actual inventory that exists in places like Miami today - where already-built condominiums sit empty and for sale.  In places like Baja California and Puerto Peñasco (Rocky Point), this "virtual" inventory can easily be retired, simply by the developer deciding to postpone or not carry through on a project (and returning any deposits to pre-construction buyers).

This topic is certainly germane to Puerto Peñasco, where much of the excess inventory in the market is actually only in the form of proposed condominiums.  New projects with hundreds of condos have been anounced in Puerto Peñasco over the last year and sales offices have opened everywhere.  What is key to remember is that these sales offices don't necessarily signify inventory that must be sold.  They can just as easily have unsuccessful sales efforts and decide not to proceed or to postpone their project.  In fact, this is what is happening today as the Puerto Peñasco market goes through a correction.  Several larger sales operations for new condominium developments have shuttered their doors in recent months while waiting for the U.S. feeder markets to regain their legs. 

One of the reasons (that Mr. Flock correctly cites in his article) that this virtual inventory exists and is figured into the Mexican real estate markets is that in Mexico over the last several years, developers haven't had to jump through the usual hoops to get a condominium development out of the ground and completed.  Many of the larger condominium developments in Puerto Peñasco built in the last 10 years have been financed solely with deposits from pre-sales of condominiums.  So in the past, everything that has been proposed and begun sales efforts has been counted as inventory on the market. 

Now that the market has tightened, developers are being forced to obtain construction loans to build a project.  And obtaining a construction loan in these days of tight credit markets requires a developer to prove they have the wherewithal to get a project sold and built (with the major hurdle these days being getting a significant number of pre-sales).  So in reality, Puerto Peñasco condominium inventory today should include only condominium developments that have their full construction financing and are being built. 

All of this is very healthy for the Puerto Peñasco real estate market and will allow it to recover quicker and in a stronger position than a market with a lot of already built - but empty - homes or condos.  Builders unable to get construction financing for recently introduced Puerto Peñasco projects will sit on the sidelines until better times - thus instantly reducing the amount of "virtual" inventory for sale in the market.  And buyers will gravitate to projects that are properly financed and are getting built - reducing actual inventory on the market.  Effectively, rational buyers will move any sales deposits they have in projects that don't appear that they will get built to projects that are actually getting built - consolidating sales in a smaller number of projects.  (That being said, if you have a deposit down with a development, check with the developer about their plans for financing and timeline for moving forward before hastily trying to get your deposit back.  You most likely have signed a contract that makes your deposit non-refundable unless the project will definitely not get built.)

This gravitation by buyers to the projects that are getting built will also naturally protect them by ensuring that their initial down payments are going towards projects that will be completed and delivered.

As the actual inventory begins to clear out of the market faster, other projects waiting in the wings will start to be re-introduced and a more reasonable and sustainable pace of development in Puerto Peñasco will ensue, assisted by the new commercial developments in town, the new international airport, coastal highway and other infrastructure improvements.  Puerto Peñasco has a bright future and elimination of some of this "virtual" condominium inventory today will help the town move into a period of sustained development.   

I encourage everyone to read Mr. Flock's article as he states his case much more eloquently than I - and makes a good argument for buyers purchasing now while deals are good (with which I agree).  When reading his article, simply substitute Puerto Peñasco for Baja California (yes, our ocean is warmer, our real estate prices are lower and our shrimp is much tastier).  It can be read here.

Puerto Peñasco (Rocky Point) Infrastructure Improvements

Defrente has a good article this week about anticipated investment in infrastructure in Puerto Peñasco (Rocky Point) during 2008.  The highlight of the article is that Mayor Renteria has apparently secured Federal funding of just over $9 million USD to continue paving streets in town.  It is anticipated that by the end of 2008, up to 40% of the streets will be paved - a major improvement over the estimated 10-20% now paved.  Sidewalks will also continue to be installed.  Paving, along with the other measures mentioned in the article, will improve both the aesthetics of the city for tourists and livability for the local population.  I especially think the pavement will cut down on much of the dust pollution that exists in the town (and clings to everything everywhere).

There is also mention of the aesthetic improvements that are to be made to the facades of buildings in the Old Port area to give it a more uniform and inviting look for tourists.  This project was being discussed about eight months ago in the developers association meetings, but I wasn't sure it was still in the works.  It appears to still be in the plans.  If it is undertaken, expect the Old Port to be spruced up significantly over the next couple of years to create a more inviting central shopping and commercial destination for tourists.

The full article can be read here.

Life Improving for Mexican Citizens

A good article in the Arizona Republic today highlighting the changing economic situation in Mexico for many Mexican citizens.  It highlights job creation, a stable economy, the emerging middle class and the booming real estate market.  The article can be read here.

Puerto Penasco (Rocky Point) 2008 Real Estate Assessment (UPDATED)

It has been awhile since I have posted as things have been pretty quiet in Puerto Peñasco (Rocky Point) this winter so far.  Raul O'Farrill from OTP Trust and O'Farrill & Associates wrote an assessments of the Puerto Peñasco real estate market for 2008 in the January Rocky Point Real Estate Guide and I finally had the time to scan the article in and post it here.  It is well written and has some interesting observations about the market going forward.  I agree with him that it is definitely a buyer's market at this time and frankly is a good time for condo buyers to step into the market.  Once the second phase of real estate growth begins in earnest in Puerto Peñasco, it is hard to tell when the next true buyer's market will be - particularly considering that beachfront/view real estate in developing Mexican resort destinations has a tendency to become very valuable (see Cabo).

One potential driver of the second phase of growth I have spoke about in past posts that Raul did not mention is health care.  I regularly hear of efforts to bring U.S. level health care to Puerto Peñasco this coming year (as always - we will see if these efforts materialize).  These facilities when built are expected to be able to accept U.S. insurance and medicare.  The obvious effect of this will be a retirement boom in Puerto Peñasco.  Combining first-class health care facilities with beaches, golf, mild weather, international flights and of course great margaritas is a recipe for a strong baby boomer retirement market in the coming years.

I have posted the full article after the jump.  Click below to read (and please excuse any typos I made)...

Update:  I have received several comments/questions about this posting - particularly the part about health care and insurance.  I'll admit to not having a lot of insider information about this issue.  But I have been told of several groups that have been looking at Puerto Peñasco as an ideal place to locate health care facilities.  Their main hurdle of course is figuring out a way to accept U.S. health insurance and potentially medicare.  To clarify what I said above, from what I have been told medicare is a much larger hurdle to jump because of the facilities being located outside the U.S. (in other words, no one hold their breath on this getting approved). 

I do know that there are facilities in other parts of Mexico that have already figured out how to accept U.S. health insurance however.  During a recent visit to Mazatlan, I spoke to several people who indicated that one of the major hospitals in Mazatlan (Sharp Hospital) formed a partnership with a San Diego hospital and can therefore accept U.S. health insurance for services provided in Mexico.  I'm not sure the difficulty of forming these partnerships or the regulatory hoops that must be jumped through to get this done, but it is a potential way that future Peñasco health care facilities may process U.S. insurance.

Because of the health insurance issue, I would expect that the first medical facilities catering to Americans located in Peñasco will offer only elective surgeries that are not covered by insurance.  There is obviously a big market in the Phoenix metro for cosmetic surgery and providers would be able to provide lower cost procedures in Mexico.  One can imagine having an elective surgery and then spending a week recovering in a seaside villa before you go home to face friends and family.

Once the U.S. health insurance (and potentially medicare) issue is figured out, expect to see more U.S. level health care facilities enter Peñasco, catering to the retiring baby boomer generation.