Loreto: Summary of conditions as of July 2011

Investing in Loreto

Loreto, in mid 2011 appears to be poised for serious growth, after a history of mistakes, false starts and disappointed hopes.  Loreto was one of several sites originally selected by Fonatur for development. 

Other original focal points included Los Cabos and Cancun, both of which have grown exponentially over the last 20 years.   A number of changes and initiatives are under way supporting the idea that Loreto’s time has come.  We have been monitoring Loreto for several years, and the combination of the activity described below plus renewed governmental commitment (both national and state) to encouraging of development in Loreto, convinced us to move from Los Cabos to Loreto in 2011 to establish our own brokerage.

The municipality of Loreto extends north and south of the city, and into theSierra de la Giganta mountains to the west….

The municipality of Loreto extends north and south of the city, and into the Sierra de la Giganta mountains to the west.  At its core is the historic city of Loreto itself, which dates to 1697 and was the first of all of the Missions on the west coast.  On the east are Loreto Bay, which enjoys environmental protection under Mexican law and is a wonderland for those interested in power and sail boating, fishing, snorkeling, diving, kite and sail boarding, and other water-related sports, and the rest of the Sea of Cortez.  ..

The mountains to the west offer an equal variety of experiences including packing (on foot or with horses and mules), hiking, and visiting other early missions including the architectural treasure of San Javier.

The Villages at Loreto Bay, a planned development about 5 miles south of the town of Loreto, featuring an extremely dense, inner-city core, with a golf course and a stated intent to be “eco-friendly”, was started by Canadian developers (TSD) in 2005.  The development sold extremely well initially, with between 800 and 900 sales (the master plan was for 5000 to 6000 single family homes).   TSD mismanaged the project, borrowed heavily from CitiBank, and then finally lost control of it to Citi.   Citi continued with construction for a period of time, but stopped construction in 2008 when the US financial crisis threatened the bank.   Since then, a very strong homeowners’ association has emerged, and separate private initiatives have resulted in more building, and at this point a total of about 550 of the homes have been completed, with more under construction.  In 2010, most of the remaining Citi/TSD assets were sold, to Homex, one of Mexico’s largest home builders.   Homex is now pouring money and manpower into building out the project, working with the homeowners’ association to complete infrastructure, and finishing construction for buyers who want to proceed on their original contracts.  Homex is also moving forward with additional construction under the name Las Villas de Mexico (the same name as their successful luxury project in San Jose del Cabo).  That project’s form is a more traditional one, with separate houses being offered on individual lots, with much lower density than the original core of the project.

In a separate new initiative, the Villas Group (an entity not related to Homex), which owns three very successful timeshare/hotel/condo projects at Cabo San Lucas, and others on the mainland, has just opened the first 60 rooms of a new 180-room timeshare resort hotel, Villa del Palmar Loreto, about half an hour south of Loreto.   Together with the renewed activity at Loreto Bay this is steadily increasing the flow of tourists through the Loreto airport. Villas Group had earlier finished and opened a smaller hotel in the city of Loreto itself, used as a site for time share presentations and acting as a feeder for the Palmar timeshare hotel.   Villas Group owns virtually the entire mile-long cove at Ensenada Blanca, and plans three more large installations (hotel, condominium, etc.), plus an array of single-family lots within their very large master planned development.

Carlos Slim and associates and a major Spanish developer have over the past two to three years reputedly made major investments in the area, along the shore to the north of Loreto but still within reach of the international airport.

Transport:    In 2010, Alaska Airlines resumed daily service to and from Los Angeles.   They reduced the schedule to four flights weekly for the summer, but are expected to return to daily flights in the fall.   Also, Aereocalafia has just confirmed its purchase of a 30-place twin turbine aircraft with which it will provide service out of Los Cabos International Airport to Loreto to Tijuana. Finally, it has been reported that WestJet, a Canadian carrier with established service into Los Cabos, plans to start direct service from Calgary to Loreto later in 2011.

Marketing:      The Los Cabos real estate association (AMPI Los Cabos) in early 2011 expanded its offer of service to include Loreto and La Paz as well as Los Cabos, in effect knitting together the real estate community for the entire state of Baja California Sur, and providing a powerful tool for agents and developers in Loreto to expose their offered product through a mature MLS system.  The major brokerages in Loreto have all expressed their intent to join and participate.

In a recent review of existing listings in Loreto on the several agencies’ websites, we found that most residential listings fit within the $350K to $750K bracket, with a significant number much higher, and a few in the $200K range, with most clustered around the $500K level. There are virtually no high quality condominiums being offered, however, and although there are locations available and on the market within the town itself, there is not a single significant well-planned project such as Ventanas in being. Our interaction with prospective buyers during our almost six months of presence in Loreto has been thwarted repeatedly by the lack of quality inventory.

Our firm has current listings of several parcels, of varying sizes, and knows of a number of others that would be suitable for a new project designed to fit the need for quality product at the city of Loreto itself.  These include:

Costa Loreto, 86 hectareas located on the north edge of the city, with over 500 meters of beachfront, already serviced by CFE, TelMex, and municipal water and wastewater treatment.  This parcel’s owner, a Mexican corporation, also possesses a concession for construction of a marina of roughly 250 slips within the project.  Adjacent parcels are also known to be available, if a large project area is desired.

Villa Julieta, a beachfront parcel of 1.2 hectareas, originally part of Costa Loreto and available with it.  This parcel is the closest part of Costa Loreto to the town, has one luxury residence in place (also on the market), and has been planned for an additional 5 to 6 luxury homes, some of them beachfront, plus 30 to 45 high quality condominiums in a carefully planned beachfront mini-community.

Parcel of 4250 square meters of undeveloped land at the core of the Loreto Malecon, corner of Hidalgo and Lopez Mateos.   Adjacent are two other parcels, also available for purchase.   The three parcels combined total over 9000 square meters and the location has all municipal and other public services.  This would be suitable for a large condominium, “condo-tel,” or hotel project.

We have relationships with some individuals and groups who have other offerings, both in Loreto and in other areas including the Pacific shore near Magdalena Bay, Bahia Concepcion on the Sea of Cortez, and Mulege, but these latter are all more remote.