Major property projects in Costa Rica put on hold as credit crunch bites
The global credit crunch is affecting the emerging property market in Costa Rica with a number of development projects being put on hold.
Many large hotel projects in Costa Rica are financed by US banks. These include the Mandarin Oriental, Hyatt, Saint Regis, Regent and Punta Cacique. All of their construction currently hangs in the balance, depending on market recuperation and bank stability.
Construction on the high profile $800 million Cacique development on the northern Pacific Coast spearheaded by AOL founder Steve Case was due to start next year. But the project, which includes two boutique hotels, a spa, an array of high-end home sites and a tennis facility designed by Andre Agassi and Steffi Graf, is unlikely to start until 2010 at the earliest.
It is also a blow for Agassi and Graf whose forays into real estate are now floundering. Earlier this year they pulled out of a luxury hotel resort in Idaho which is experiencing financial difficulties.
'In the current environment, we do not consider it prudent to start construction,' said Jorge Cornick, spokesman for the Cacique project. 'But as soon as the market goes back to normal, the project will proceed, as planned,' he added.
A St Regis Hotel planned for the central coast and a Regent Hotel development in Guanacaste, not far from Cacique, are also in limbo due to financing concerns.
'We are pausing for the moment, giving us a chance to investigate further how the situation with the capital markets might play out,' said Regent hotel developer Blaine Kirchert.
The St Regis project was being financed by collapsed US bank Lehman Brothers. 'The decision to put the St. Regis project on hold is due to two main reasons, the increase in construction costs and the uncertainty of the international real estate market,' said Grupo Genesis marketing manager, Gabriela Tijerino.
Another Lehman Group-financed hotel project, Manzanillo's Mandarin Oriental Hotel Group, also finds itself on shaky ground, since its sponsor bank recently filed for bankruptcy. Because of financial worries and instability, the entire project may be postponed or even cancelled.
There are also concerns about who will use these projects when they are finished. Americans make up the largest groups of holiday visitors to the country and there are fears they will not book as many trips due to the credit crisis.