Joint Venture


Spec Homes
Given the excellent appreciation in the market for real estate assets, and specifically Pedregal based real estate assets, we have made joint venture opportunities available to private investors in the form of spec homes. With an average increase of values of up to 17% per year over the past 6 years in Pedregal de Cabo San Lucas, and up to 26.7% in Pedregal de La Paz over the last two years, developers and investors are harvesting the awards.

Model
The Pedregal Joint Venture Model is built on the idea that Pedregal is the property equity investor, sharing in the development risk by investing as equity the property on which the home is built. The capital equity investor, many times a Pedregal home owner, generally leads in designing and building the home. Although at times Pedregal may reserve some say in the design and contractor of choice, these decisions reside largely with this investor.

In order to ensure the highest returns on product cost, the property is marketed by Pedregal's Account Executives, market specialists in our realty segment. This usually occurs during the later stages of construction, before the FF&E's (Furnishing s, Finishes and Equipment) go in but after all major construction has occurred, the property price is paid to Pedregal and the capital equity investor receives the balance.

Historical Returns
Property value analyses we conducted in 2008 have shown Gross Internal Rates of Return of an average 17% for properties in Pedregal de Cabo San Lucas and an average of 21% in Pedregal de La Paz.

Critical Path
Identify Disposable Capital Equity. This initial process is nothing more than seeing if the entire project pencils to the capital equity investor's satisfaction. How much disposable capital equity is available for the construction process determines the size and location of the property selection. This will maximize the construction and yield a higher return based on lower product costs.

Pedregal has a great deal of available data pertaining to past market performance which provides background for conceptualization of the market potential.

Choosing a Property
Once both parties have agreed that the project is viable, and a product price range has been established, we will know into what price range the property falls. The piece of property is then selected which fits into the conceptual model based on the desired product cost.

Choosing a Legal Structure
Depending on the needs of the capital equity investor, the project can be placed in a personal trust. A promissory contract is established which defines the role of each party in the project so expectations are set for the participation of all involved.

Choosing an Architect
Choosing from Pedregal's preferred architect selection usually comes down to personal style. The designers we recommend are in good standing with our Homeowners Association Architectural Review Committee which ensures a speedy internal and external review process.

Choosing a Builder
Given that a majority of the architects we recommend are also builders and general contractors, choosing a builder tends to be a very straightforward process. If the equity investor decides to be the builder, Pedregal usually recommends a local liaison who can translate the Mexican building process, and identify and source materials.

Marketing the Property
Pedregal will list the property at 10% listing commission and aggressively market it to ensure a short time on market. Pedregal will begin preparing to show the property from the moment the transaction is inked. It has been our experience that a sale will occur in the later stages of rough construction but we will begin showing the proposed project once a conceptual architectural design has been attained.

Master Planned Co-Development
Similar to the Spec Home co-development model, Pedregal will look to invest property, its market experience and development expertise in a joint venture project which looks to cohesively co-develop a section of Pedregal.


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