They did not want to duplicate the high rises of Cancun nor create similar housing and transportation challenges found in Los Cabos.

Members of FONATUR, Mexico’s tourist development agency, had done all of the heavy lifting for the country’s next major destination area, targeted just south of 300-year-old Loreto, a friendly, charming town on the Sea of Cortez and the original capital of “the Californias.” Roads were in, water was on the way…but how do you limit the region to an alternative of small Mexican villages rather erecting more huge concrete condo structures?

FONATUR approached Victoria, British Columbia’s, Trust for Sustainable Development (TSD), a company with a track record of planning and delivering projects with positive social and ecological impacts. The “sustainability” philosophy is an approach to development that improves livability while preserving natural resources and ecosystems.

For example, TSD was the primary force behind Shoal Point, a former Chevron bulk oil plant fronting on Victoria’s Fisherman’s Wharf. The former “brownfield” site is now a $110 million landmark residential and commercial development with 161 residential units and 50,000 square feet of commercial space dedicated primarily to marine-oriented and technology-based businesses. Shoal Point is an energy-efficient development with a blend of older architectural style and state-of-the-art materials and technology.

David Butterfield, president and founder TSD, has taken many of those ideas to The Villages of Loreto Bay, a $2 billion, 8,000-acre planned community five miles south of Loreto that eventually will include 5,000 homes on three miles of coastline. The project will harvest more potable water than it consumes, create more energy than it uses, and enhance the habitat it occupies.

“What we’re looking at creating are a series of walkable seaside villages,” said Butterfield, who is focusing on second-home and retirement buyers in Canada and the United States.

Loreto Bay, 700 miles south of San Diego and 300 miles north of Cabo San Lucas, will have two 18-hole golf courses, boutique hotels, restaurants, shops, and a sport fishing center and marina. Its infrastructure – including streets, sidewalks, water and wastewater systems, and telephone lines – will be installed and maintained by FONATUR for at least 25 years. The agreement includes 350 home sites already fully serviced by utilities and streets.

The first of nine residential stages, with homes priced between $200,000 and $1 million, opened in November. Neighborhoods are limited in size so that a majority of the population is within a five-minute walking distance of the planned village center.

James Grogan, an Arizona attorney and developer who is also chair of the Arizona Tourism and Sports Authority, is president and president and CEO of Loreto Bay Co., TSD’s operations arm in Loreto. Grogan said one of the keys to the development has been the ability of foreign citizens to hold title to Mexican property.

“Loreto Bay offers title insurance for every property it sells,” Grogan said. “This assures the marketability of your title and gives you no-fault recourse in the event of problems. The carrier shoulders the potential risks and indemnifies against losses or damages arising from title defects. That can’t be said of all real estate in Mexico.”

As discussed in my last column, The Mexican Constitution prohibits direct ownership of real estate by foreigners in what has come to be known as the “restricted zone.” The restricted zone encompasses all land located within 62 miles of any Mexican border and within 31 miles of any Mexican coastline. However, in order to permit foreign investment in these areas, the Mexican government created a special trust, known as the “fideicomiso” in 1972. Since foreigners are not able to enter directly into contracts to buy coastal real estate, they must have a bank act on their behalf – similar to a trust established to hold property for minors.

The bank, as trustee, buys the property for the foreign buyer, and then has a fiduciary obligation to follow instructions given by the buyer. The buyer retains and enjoys all the rights of ownership while the bank holds title to the property. The buyer is entitled to use, enjoy and even sell the property held in trust, at its market value, to any eligible purchaser. The trust lasts 50 years and is perpetually renewable.

Loreto Bay, with the help of FONATUR, obtained a master trust on the entire 8,000-acre property. The plan calls for 5,000 of those acres to remain as a nature preserve and include the expansion of an estuary.

Sounds like an attractive alternative to high rises in the sun.

Tom Kelly, former real estate editor for The Seattle Times, is a syndicated columnist and talk show host. He can be reached at


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