Felipe Calderon

The Wall Street-backed developer that reaped billions, went bankrupt and left slums across Mexico

Sam Zell was looking for opportunities, and he found a winner in Mexico.

The government was working with developers to build massive housing complexes for poor and working-class families outside every major city. With billions in government funds flowing into the housing market, builders stood to reap a bonanza.

Zell, a Chicago real estate billionaire, spotted a prospect in 2002 in the northern state of Sinaloa — a small construction company called Homex owned by four brothers of the De Nicolas family.

The brothers possessed the ambition. Zell, through his Equity International Investment Fund I, provided a boost of capital: $32 million.

Over the next six years,...

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