In a July 24, 2008 post, Mexico Law Blog questioned the viability of the ambitious 6,000-unit Loreto Bay tourist development project called Loreto Bay, located on around 8,000 acres adjacent to the hamlet of Loreto on the east coast of the Baja peninsula.  Although the project, particularly its goal of self-sustainability, is impressive, its timing is unfortunate.

The San Diego Times has reported that the project developer, TSD Loreto Partners, S. En C. por A. (”TSD“), has sold fewer than 800 units and suspended construction and operations.  The report also said that Fonatur, Mexico’s tourism development agency, was asking for “custody” of the project so that it could reopen a golf course and a hotel while TSD searches for a buyer.  The principal lender for the project is Citigroup Property Investors.  Whether TSD has breached its loan covenants is unknown, but highly probable. 

StarkSilverCreek.com reports that TSD is subject to a lawsuit in Arizona, in which Baja Developments, LLC, a New York limited liability company, alleges breach by TSD of a services agreement and seeks damages in excess of $7,000,000.  According to a detailed article about the Loreto Bay project in the Phoenix Business Journal, Baja Developments, LLC was a company formed by The Trust For Sustainable Development (note the “TSD” initials), a Canadian non-profit, federally chartered land and community development corporation, that arranged financing for the Loreto Bay project.  

Based on the above-referenced lawsuit, TSD appears to have been legally structured as a S. En C. por A., which is a limited partnership represented by shares (sociedad en comandita por acciones).  The use of this type of Mexican entity is extremely unusual and an odd choice of entity for the developer of a significant real estate project because the S. En C. por A. imposes joint and several liability on its active partners (socios comanditados) for the debts and obligations of the company.  See Article 207 of the General Corporations Law of Mexico (Ley General de Sociedades Mercantiles). 

Most businesses in Mexico, whether destined for real estate development or otherwise, are structured as S. de R.L. de C.V.s (sociedad de responsabilidad limitada), S.A. de C.V.s (sociedad anonima de capital variable), or S.A.P.I.s (sociedad anonima promotora de inversion) because the shareholders of such entities are generally liable only for the amount of their capital contributions to the entity.

Carlos Slim’s industrial conglomerate, Grupo Carso, S.A. de C.V. (MXK: GCARSOA1), plans to spin off its real estate assets into a new company that would trade on the Mexican stock market, according to a Reuters report.  The company would likely include Carso’s mall construction operations, the report said.

Carso, which recently announced a US$800 million multi-use real estate project near Mexico City, has industrial, retail, infrastructure and construction businesses.

Carlos Slim’s conglomerate Grupo Carso announced that it will invest US$800 million in the construction of a multi-use real estate complex in the Irrigacion neighborhood located in northwest Mexico City to be named Plaza Carso, which will include retail and office space, residential apartments, and a contemporary art museum and movie theatre, according to a Sentido Comun report.

The shopping center, which will offer 45,000 square meters of retail space, will be housed in an old General Tire plant and include as anchor tenants Sears, Sanborns, Mixup and Banco Inbursa.  Three separate towers will house 430 residential apartments and a separate corporate office building will hold office space.  Museo Soumaya will run the musuem, which will hold the magnificent Jumex Collection of contemporary art.  The real estate complext is expected to be completed in 2010.

An interesting piece of Quintana Roo island property has been put on the market for US$5,000,000. 

The island, called Cayo Culebra (Snake Key), appears to be privately owned by one Maria Vasquez Rubio, and consists of approximately 89 acres (36 hectares) of island land in the beautiful Mayan Riviera.  The catch is that the only human use of the property permitted is scientific ecological research; the construction of permanent structures is prohibited.

The listing agent is the LandRod Law Firm and Real Estate Office (in Mexico, a law firm is permitted to act as a real estate brokerage and a law firm notwithstanding the potential conflicts), which also has several other nice looking coastal properties listed for sale.

Starwood Hotels & Resorts (NYSE: HOT) announced on November 7, 2008 the debut of its St. Regis brand in Latin America with the opening of the St. Regis Punta Mita Resort, a joint venture between Starwood Hotels & Resorts and Ideurban Consultores, which constructed the project, according to a company press release. 

The resort is located in Bahia de Banderas, in the Riviera Nayarit, just north of Puerto Vallarta.

The land on which the resort is located is owned by Grupo 1818, S.A. de C.V., a company owned by a group of undisclosed Mexican real estate investors.

Mexican real estate development company Consorcio Ara, S.A.B. de C.V. (MXK: ARA) has commenced work on a major real estate development project called Citara on land located north of Mexico City in Huehuetoca, state of Mexico, according to a Mexbiznews.com report.  The report said that the project was expected to include 26,000 housing units, 25 schools (kindergarten through secondary school), green spaces, and commercial and industrial facilities.

Consorcio Ara warned on October 22, 2008 that it did not expect revenue growth in in 2008 compared with the previous year because of choppy markets and delay in new residential construction.

Mexican billionaire Carlos Slim Helu’s real estate holding company, Inmobiliaria Carso, S.A. de C.V., has acquired a 7.64% stake in Edmond, Oklahoma-based Bronco Drilling Company, Inc. (NASDAQ: BRNC), which has a contract to drill three wells for Pemex, according to an October 22, 2008 Schedule 13G SEC filing by Bronco.

All of the outstanding voting shares of Inmobiliaria Carso are controlled by a Mexican trust, the beneficiaries of which are Carlos Slim Helu and family members Carlos Slim Domit, Marco Antonio Slim Domit, Patrick Slim Domit, Maria Soumaya Slim Domit, Vanessa Paola Slim Domit and Johanna Monique Slim Domit. 

Inmobiliaria Carso purchased 2.2 million shares of Bronco on October 15, 2008 for approximately US$15 million, based on the company’s share price at the time of acquisition.

Grupo Aeroportuario del Sureste (Asur), S.A.B. de C.V. (NYSE: ASR) has acquired approximately 321 acres of land in Huatulco Bay, Oaxaca state, for approximately US$21.6 million, according to a report in Business News Americas (BNA).

Asur acquired the land on October 20, 2008 from Mexico’s National Trust for Tourism Development (FONATUR).  The Mexican government has sought to make Huatulco a new pacific coast tourist hub.

The terms of the acquisition require Asur to build 1,300 hotel rooms on the property over a four-year period, the BNA report said.

The ripple effects of the credit crisis in the United States appear to have reached Cancun’s time-share real estate market, where the monthly cancellation rate on time-share purchase contracts increased to 8% in October 2008, which is 4% to 6% over the average monthly cancellation rate, according to a report in today’s El Financiero. 

Miriam Cortez, executive director of the Association of Vacation Clubs (Asociacion de Clubes Vacacionales - Acluvac), who was interviewed in the report, said that for the first time in many years the outlook for new time-share sales looks bleak.

Hilton Hotels Corp. announced plans to build 60 hotels in Mexico over the next five years as part of its plan to quadruple its presence in Latin America and the Caribbean, according to a report in today’s El Financiero. 

Hilton currently owns 19 hotels in Mexico, which operate under various brands, including the Hampton Inn and Homewood Suites marques. 

Hilton was acquired by Blackstone Group in October 2007 for approximately US$26 million.