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 Puerto Vallarta Real Estate | April 2008 
The Condo Boom Moves On to Latin America
 Matthew Haggman - MiamiHerald.com
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| | Edgardo Defortuna, condo developer and head of residential real estate brokerage, is looking to invest in building condos on the Pacific coast of Mexico. (DONNA E. Natale Planas/Herald) | | |
What to do when you have a network of real-estate brokers selling new condominiums, but few new condos to sell?
Edgardo Defortuna, who has made millions selling South Florida condos, hopes one answer is found on the Pacific shores of Mexico.
Defortuna, who heads Fortune International, last year agreed to start selling condo units built by Miami's Related Group in Puerto Vallarta. It's part of a plan that he and Related CEO Jorge Perez hope will ultimately include more than a half dozen projects across Latin America and the Caribbean - and provide a fruitful market until South Florida's formerly hot housing industry recovers from its cold snap.
At a time when starts for residential projects are slowing to a trickle from West Palm Beach to Homestead, those who sell new housing like DeFortuna's Brickell Avenue company are having to strike out for new markets.
They are following different trails. International Sales Group in Aventura started marketing a project in New Orleans last year, attempting to take advantage of a lack of housing after Katrina. Prodigy Network in Miami moved its headquarters to New York City to better focus on its projects there, while also pushing units in places like Mexico and Panama.
Latin America has emerged as a place of opportunity during the U.S. downturn. A recent report by consultancy Ernst & Young cited the region for its steady economic growth yet relative affordability when compared to the United States and Europe.
"The overall fundamentals are positive," said Rogerio Basso, an E&Y analyst covering real estate and hospitality in Latin America. "Those investors who have the appetite to take moderate risks and identify joint venture partnerships with local players should be able to observe higher yields than in the U.S. today."
For Defortuna and Perez, both of whom spent their childhoods in Latin America, the push into the region is being done with a distinctly Miami flavor.
THE MIAMI CONNECTION
Take the Vallarta project. Its name, Icon Vallarta, echoes the Icon South Beach condo and the Icon Brickell hotel and condo project under construction. Its architect is Bernardo Fort-Brescia of Miami's Arquitectonica. Not only are the developer and the brokerage company from Miami, but so are many of the salespeople in Mexico.
Already, Defortuna said, he has sent eight Miami real estate brokers south of the border. He expects that number could eventually be between 40 and 50, depending on the number of projects launched by Related Group.
"I expect the brokers will eventually be back here in Miami," said Defortuna, whose company at one point during the boom was selling units at 28 South Florida condo projects.
"But the reality is that some brokers got used to an income level that would be hard to maintain in this sort of market. There won't be much for them to do in the next couple years."
Michelle Minagorri, who has a home in Coconut Grove, picked up and moved to Puerto Vallarta to start selling condos last fall. During the South Florida housing boom she sold units at Jade Ocean and Jade Beach in Sunny Isles Beach, and Mint and Ivy along the Miami River. But then things went quiet, and Mexico came calling.
"The market in Miami the past couple years has been unbelievable, an unsurpassed market," said Minagorri, who grew up in South Florida. "But Miami's market is taking a breather and I thought this was a good opportunity."
The transition has been smooth, she said. "Someone from the Midwest moving to Mexico might feel a little more culture shock, but not coming from Miami," she said.
SELLING OUT
The market, too, has proved good so far. The first 133-unit tower at Icon Vallarta is sold out and nearly all of the units are sold in the second 133-unit tower, she said. Sales are underway for the 75-unit third tower.
Half the buyers are coming from Mexico. The biggest U.S. feeder state is California. Canadians, particularly from western cities like Vancouver, and Europeans are also drawn to lower prices for beachfront property than in the United States, she said. A large one-bedroom beachfront condo - say, 1,300 square feet - can be had from the high $200,000s to low $300,000s.
Mexico also hasn't experienced a giant dose of new construction like South Florida or Southern California. It's that pent-up demand coupled with competitive pricing that Defortuna and Perez hope to capitalize on. Defortuna said direct access by airplane to the Latin American and Caribbean destinations is a key factor as well.
In Mexico alone, projects are also planned in Zihuatanejo, Acapulco and Cabo Riviera. Other sites include Cartagena, Colombia; Buenos Aires; Punta del Este, Uruguay; the Bahamas; and Panama City, Panama.
To be sure, some places like Panama City have seen vast new development in recent years - and already been inundated with South Florida builders and brokers. Defortuna acknowledged a discomfort with that Central American city, questioning the depths of its market. But he said Related Group's Perez has secured a well-located site to build on there and thinks it can work.
Yet such questions are not stopping brokers thirsting for new product to sell as South Florida's latest housing boom winds down. Indeed, Defortuna also operates as a developer and is himself finishing several South Florida projects and two in Argentina where he grew up.
"I have someone coming into my office daily saying, don't forget me for the next project [in Latin America and Caribbean]," he said. "For the young and aggressive, it's a great opportunity. It's a good place to be for the moment."
mhaggman(at)MiamiHerald.com |
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