We last full reviewed Molino de Agua in January 2007 and published an update in August 2007.
A number of developments have considerably reduced the risk inherent in this project.
This project, at the mouth of the Cuale River, in Old Town Vallarta, continues to benefit from a AAA location. Physical infrastructure including roads, commerical stores, and the expanded boardwalk have already been completed. The beach location is AAA.
Berry Developments, out of the US, began construction ahead of time. The project is about 50% complete, and the first units should be delivered by December 2008, about 6 months ahead of schedule.
Berry has greatly reduced environmental risk by not building below grade. Parking and storage is inside, at ground level. This type of structure greatly reduces the risk of water damage, reduces operational risk and provides excellent views from units as low as the residences on the 3rd and 4th floor. The Cuale River has also been tested under tropical storm conditions and there should be no risk to Molino de Agua.
The developer has led the market in adjusting prices due to a weakened market. Price reductions of 15-18% were implemented. A 3-bedroom unit on the 1st residential floor, has been repriced from $605M to $505M.
Berry Developments is requiring a 35% deposit and will not finance the deposit. However, Berry is allowing the 65% balance to be paid at closing.
A formal rental program has not been established. However, due to the excellent location of the project, rental income opportunities will be well above average for the Puerto Vallarta market.
Maintenance fees are estimated to be $500-$600 per month for a 3 bedroom unit.
We are of the opinion that based on location, building schedule, pricing, financing and rental income producing opportunities, this project will outperform the market both for price appreciation and income.
Recommendation*: Hold for existing owners and/or buy (except for penthouse units)
*Recommendations are general in nature only and will be impacted by an investor's specific circumstances.
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