Friday, May 20, 2011
Dear Reader,
Warren Buffet is the world’s richest and most successful investor. He searches out businesses with what he describes as “economic moats”. That’s something special or unique that insulates them (and their margins) from the ravages of competition. Examples of such a moat might be a brand like Coca Cola…or the scale, cost base and buying power of a Wal-Mart…or other protections like a patent or monopoly. These moats make it difficult for competitors…and keep sales and margins strong.
On my beat of scouting for undervalued real estate I look for opportunities with similar protections. Nothing undermines real estate appreciation potential like a flood of supply. That’s why we look for a moat that will prevent a flood of supply of similar units to ours. And a very special attribute that’s difficult to find elsewhere.
Let me explain by way of an example.
Tulum is located at the southern edge of Mexico’s Riviera Maya. The best beaches in Mexico are here. This is an area rich in nature and culture. The Tao project is close to Tulum and within the upscale Gran Bahia Principe resort. The appreciation potential of the Tao project is strong…in part of because of its “moat” type attributes.
Firstly, the white sand beaches are Mexico’s finest. You just can’t replicate that.
Secondly, the infrastructure is already in. $100 million has been invested to date to get the resort looking the way it does today. Front loading an investment of $100m is a huge barrier to entry. Even if/when someone is willing to invest this much money it takes time to get the project off the ground when you figure the complexities of planning, permitting and infrastructure.
Thirdly, Tulum can’t sprawl south along the coast. The protected Sian Ka’an biosphere now covers more than two million acres. That limits the amount of land available for residential and resort development.
Finally, once developed the concept and amenities at Tao will add a unique dimension. Ground has broken on The Tao Center. This will be the focal point of the community. The focus is on health and wellness. You will be able to stretch or do yoga on glass platforms looking down to ancient caverns. You can stay fit in the gym or by swimming in the lap pools that will weave their way through this complex. In the evenings, you can learn salsa and the traditions of the ancient Maya with your friends and neighbors.
Creating this type of community isn’t easy. You don’t just plant a “for sale” sign on your land and start selling lots. You need a place of outstanding natural beauty and prime cultural importance. You need the people to design and deliver the experience. You need First World infrastructure to get you there and keep you connected. Developer Benjamin Beja has assembled an all-star team to pull it off.
Tao is a project with competitive advantages and a clear head start in an area where a government plan calls for the increase of tourism numbers from three million to eleven million by 2025.
Ronan McMahon
P.S. If you’d like to see why the Tao community is so special, you can join the Tao team on a chill weekend this July 14th-17th. You’ll stay at the five-star Gran Bahia resort, check out Tulum and some of the area’s stunning Caribbean beaches, and get a feel for this place…for only $180. Spaces are limited, so reserve your spot today.
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Posted Under:
mexico, appreciation potential, caribbean
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