Koll, Mexican Builder to Be Partners in Baja Golf Resort : Real estate: The joint venture will help the Newport Beach developer complete a $750-million Cabo del Sol complex.
The Koll Co., a giant Newport Beach developer, has taken on an even bigger Mexican partner with deep pockets for its $750-million golf resort at the tip of the Baja Peninsula.
The Cabo del Sol resort, which Koll began on its own several years ago, now will be built with financial help from the Mexican construction company Empresas ICA, Sociedad Controladora S.A. de C.V.
ICA also owns hotels in some of Mexico’s most popular resorts.
Koll said Monday that the deal is one of the largest joint ventures between Mexican and U.S. companies.
When finished, the resort will sprawl along two miles of beachfront on the Sea of Cortez near what was once a quiet fishing resort for wealthy Americans. But Koll evidently could use more financial muscle to complete a lot of expensive remaining construction.
Right now a golf course designed by Jack Nicklaus is nearly a year away from opening, and Koll says there will be two more courses. Also under construction through the property are several miles of four-lane road from the airport. The developer also plans to build a beach club, a tennis club and a shopping center.
Plans call for four hotels with a total of 2,000 rooms, plus 3,400 condominiums and houses.
“It sounds like financing it was not as easy as they originally anticipated,” said Gary T. Wescombe, an expert on resorts at the Newport Beach office of real estate consultants Kenneth Leventhal & Co..
Meanwhile, the market for resort land is soft.
For instance, Koll is trying to raise money for more construction at a smaller Baja resort called Palmilla, where it has already started selling lots to wealthy vacationers who want to build their own homes.
But with the recession and the high prices Koll is charging for lots--from $350,000 to $1.3 million for one right on the ocean--only a dozen have sold in the last year and a half.
“With an office building, you can do a marketing study that’ll tell you fairly precisely what the demand’s going to be and what you can charge for rents,” said Wescombe.
“But a resort is more nebulous, and generally more risky. It’s harder to project demand.”
In fact, Koll began the Cabo del Sol project with no intention of taking on partners, said Joseph Woodard, president of Koll International, the unit developing the resorts.
Koll still wasn’t seeking a financial partner, Woodard said, when ICA expressed interest in getting a piece of the resort.
“We didn’t go out and search for them,” Woodard said. “It’s part of their corporate position to expand more into real estate.”
The deal came together, Woodard said, after eight months of talks. Koll and ICA will wind up each owning half of the project.
Koll is still the managing partner and will do the developing; ICA will provide more financing.
Besides money, ICA brings to the deal a long history of construction experience and marketing expertise in Mexico, Woodard said.
Koll turned to resort development in earnest when its office building business went sour because of overbuilding. Now the resort-building business looks slow, too.
But the long-term prospects for both resorts seem pretty good, says an expert who has surveyed the Baja California market for Koll.
Baja, fairly close to the huge Southern California market, is quicker and cheaper to fly to than Hawaii. The tip of the peninsula has a moderate-sized airport where traffic has increased 18% a year.
“It’s a pretty good project, much to my surprise,” said Alfred J. Gobar, a Placentia-based real estate consultant with his own company, Alfred Gobar Associates Inc.
“People are building condos there now that are more expensive and not as nice as Palm Springs,” he said. “So when somebody like Koll comes in with a sophisticated housing product, there’s going to be a market for it.”
