When you visit one of Mexico’s principal vacation resorts, or its popular colonial cities, you’ll probably witness a property development or two in the process of being built. This article explains how these real estate projects are conceived and the effort that’s required to turn a developer’s vision into reality.
Jeffrey Peters lives full-time in Mexico with his wife Cici, and together they’ve been working to cultivate business here for over three decades. “We provide the know-who and the know-how to investors that want to successfully complete development projects,” he says. His firm, the US-Mexican Development Corporation with headquarters in New York City, serves as business adviser, finder of equity capital, and it also develops property projects in Mexico. Their first-hand experience has given them clear insights into how the property business works here.
Property developers are the engine room of any real estate project: from the commercial concept to finding land, getting buy-in locally, to breaking earth and laying the last floor-tile, marketing the project to potential buyers, and managing the finances and investment process—it’s the property developer that drives the wheels of each project.
A property development concept can range from a small planned residential community to a large combined commercial and residential development featuring homes, shops, healthcare and leisure facilities. Choosing the right location and getting local people on-board with the idea is crucial. “We undertake very detailed research to ensure the location is absolutely right,” says Peters, “and we also make sure the local community is fully appraised about the plan, and approving of it.” And with good reason: the amount of money required to deliver a significant property development is substantial—from US$6 million for a smaller project, to US$200 million or more for larger efforts.
Once an appropriate site is identified and the local community has approved the idea, the property developer will seek out the equity and debt capital needed to finance the project. Feasibility studies, a Master Plan, as well as marketing and sales plans are drawn-up and presented to potential investors as part of the arrangements to secure the project’s finances.
Jeffrey Peters explains that investors can provide equity, debt, and land in exchange for a percentage of ownership in the project, “and they can expect to get their money back in four-to-five years—and double their money in eight years, based on our financial projections for our first community in Puerto Vallarta that has US$80 million in sales.” We asked Peters how much an individual investor needs to bring to the table to participate in a development project, “realistically, at least US$2 million in cash, or if putting forward land as equity, at least 2 – 8 hectares (5 – 20 acres),” he said.
The project he refers to in Vallarta is a planned retirement community, conceived and built to provide accommodations appointed to standards foreign retirees expect, accompanied by the amenities and services they need (including on-site healthcare, with English-speaking medical staff), all conveniently situated nearby. With the baby boomer generation now retiring in earnest, some Americans and Canadians are looking south—to warmer climates and with more affordable living costs to make their fixed retirement incomes stretch further.
The venture into retirement communities demonstrated to Peters the enormous demand and potential that exists in this market segment—to the extent that his firm now has ambitious plans for an additional seven retirement communities across Mexico, situated near beach-side locations and in some colonial mountain cities for those who prefer more temperate climates. Peters has branded his firm’s retirement communities as La Casa de Mañana—A New World Community. “It’s based on the concept of a higher quality of life, at a lower cost of living” and remarks how property taxes, food, healthcare, transport, and domestic services are a fraction of the cost of those in the US and Canada.
Typically, people seeking full-time retirement in Mexico will sell their home abroad and invest some of that equity in their Mexican home, using the residual capital and their pension to fund daily living and healthcare expenses. As essential living costs are lower in Mexico, any cash lump-sum retirees have as well as their pension income can stretch further—an important consideration to account for as we live longer lives.
Jeffrey Peters is passionate about the La Casa de Mañana—A New World Community concept, and is raising funds this year to get the second community funded, having completed the first one in Vallarta. “While it’s possible an Equity Fund could step-in to fund all seven communities, we prefer working with wealthy individual investors in the USA, Canada, and Mexico to fund separate community projects.”
Property development projects continue to unfold briskly across Mexico—indeed, places like Mazatlan, Puerto Vallarta, and the Riviera Maya are some of the areas where serious developers are building homes, resort hotels, shopping centers and healthcare facilities—in part, or exclusively, to service the growing market of foreign retirees as well as a growing band of middle-class Mexicans who are seeking retirement living options in Mexico.
If you’re interested in learning more about how you could participate in a property development investment in Mexico, you can contact Jeffrey Peters through his company’s website: www.us-mdc.com