Building Condos in Cabo during COVID

Mishan has been heavily involved in the local real estate market of Los Cabos for more than 7 years. He has developed and sold real estate with some of the larger developers throughout Mexico, and recently sat down to discuss his perspective over the last 8 months and how he has navigated the pandemic while continuing to work with his developer that is in the middle of building a six-floor, 60-unit condo project from the ground up.

Fletcher Wheaton: I know you've been in the process going through a development in Cabo in the middle of the pandemic. Can you shed some light on how you’ve handled the delays, permitting, and how things have changed in this new environment? How has this development progressed through COVID?

Mishan: I have been working closely with a developer from Guadalajara. The project is called Autentico Vertical. This is an experienced developer that knows what they are doing and has been a part of the system in Mexico for generations. Obviously, there are some small differences between Guadalajara and Los Cabos with regard to building close to the beach and being in the FONATUR zone and other various details, but the developer knows what he is doing. So, with that said, there have been some hurdles that we've been working through in regard to the pandemic. My perspective is more from the sales side. I’m marketing and advertising the building for the sale of 60 individual residences. This project has a large amenity set that sits on the rooftop overlooking lands end in Cabo San Lucas.

As far as the construction and development of the project, we really had to switch focus, as COVID has come and changed the timeline, the building process, and really put a lot of limitations on the developer. Unfortunately, we’ve certainly had to reduce the amount of labor that is on the job site. I would say that has been the biggest hurdle that the development has suffered. Mostly because this developer works fast and he works efficiently. Both of these elements are not easy to achieve when you have to reduce workforce.

Construction had to clear everybody that was working on the project in the beginning, back in April and May; it was required to remove all the workers and completely stop work. That made it hard on me because we still had clients that were interested in buying. But when U.S and Canadian buyers stopped seeing the construction, they began to get cold feet in moving forward with their purchases. Most people understood that the city had shut down, they closed movie theatres, and gyms and stopped all construction in Cabo. However, some of our clients stopped moving forward with buying their residences at Autentico. They wanted to wait until they saw evidence of construction again.

COVID significantly impacted the sales of the building and that's what people can see with their eyes. What they were not able to see were all the hurdles that we had to jump through to get construction back on for the project. In total, we had about five months of no construction, and that was because number one, we had to realign permits and licenses. The government and municipality required new permits so we could move forward in a COVID-friendly environment and that required bringing new inspectors to the property, new sanitation stations, etc. Within the construction, just a whole host of different elements had to be implemented and we had to register every single worker. On a construction site, when you have a hundred guys coming to site every day that can be complicated. Then we had issues where subcontractors bring in new employees, but all of these professionals had to be re-registered every day, so it puts strain on the project.

The good thing is we worked through it, we secured the proper permits, we had the inspections, and we made it work. I have great admiration for the construction team that they were able to pull it together as quickly as they did. Instead of focusing their efforts on the job they signed up to do, they had to switch focus and start pushing paperwork instead. It becomes an all hands on-deck scenario and people are asked to work on projects they are not used it. I really have a lot of appreciation for the crew and their ability to pull it all together.

As of today, we are almost back to normal. We're still not able to have the amount of workforce as we would like. And that's just part of the new normal during the pandemic. So, things have changed with everyone erring on the side of caution. The new regulations from the city allow us to only have so many workers on site every day. And this weighs heavily when I bring clients to do a property tour since we're only allowed to have so many people on the property at one time. We have to ask some of the construction workers to leave the site, just so that we can get the prospective buyers into the model to show them the community. There are a lot of different and new scenarios that we're working with. They create frustration in the process, but at the end of the day, we're getting the work done and we're moving forward with the project.

I would say that the whole process has certainly cost the developer time and money. I can't say an actual dollar amount, but it has certainly changed their pro forma numbers. There is a new line item that is going to be required. A whole new host of COVID-related expenses that was never a consideration prior to March. That changes the outlook of how they build and what is now available. They ordered materials that came from mainland and they got held up in shipment because the shipment lines fell flat and they had a hell of a hard time getting a lot of those products and raw materials from mainland. Those are just some of the smaller things that we're still dealing with. But the great part is, we've moved through it. We're successfully selling residences now. The building is fully under construction and on-track to deliver in March, 2021. COVID has delayed the project and made it a little more expensive to do business, but it won’t stop the development from becoming a huge success.

Autentico Vertical is a 60-unit, full-ownership condominium complex. It is located 500 meters from Medano Beach and provides new homeowners with a long list of community amenities and a concierge lifestyle.