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TSD Loreto Partners Shutters the 155-room Inn at Loreto Bay and the Golf Course
 in Loreto, Baja California Sur, Mexio;  Mexico's Tourism Development Agency,
Fonatur Seeking Custody of Both Facilities

By Sandra Dibble, The San Diego Union-TribuneMcClatchy-Tribune Regional News

June18, 2009 - Like other tourist-oriented real estate projects on the Baja California peninsula, the planned 6,000-unit Loreto Bay development has struggled under daunting market conditions.

With fewer than 800 units sold, the Mexican development company TSD Loreto Partners this month announced the suspension of construction and operations. Last week, the golf course and 155-room hotel were shuttered. But yesterday, Mexico's tourism development agency, Fonatur, said it was asking for custody of both facilities so they could reopen while a buyer is sought for the project.

"The golf course is an important attraction in Loreto, and its loss would be a great blow, from which this tourist destination would not easily recover," Narciso Agundez, governor of Baja California Sur, said in a statement Sunday after meeting in Mexico City with Fonatur Director Miguel Gomez Montt.

Heavily marketed to U.S. and Canadian baby boomers, the Villages of Loreto Bay was launched in 2002 by an Arizona company as a series of environmentally friendly seaside communities. For Fonatur, Loreto Bay was to be the cornerstone of a major tourist destination planned since the 1970s in this picturesque desert community about 750 miles from San Diego.

Supporters of the Fonatur plan said it would bring much-needed development to Loreto, a town of 15,000 founded in 1697 as a Jesuit mission. For all its beauty and rich history, the town offered few economic opportunities to local residents, they said.

But critics said the region lacks the water resources for a proposal that they said would bring in up to 220,000 residents. What no one foresaw was the drastic drop in demand for vacation homes as the U.S. and Canadian economies suffered and credit grew tighter.

A 2005 study commissioned by the San Diego-based International Community Foundation stated that desalination is the only apparent option if Loreto were to grow beyond 30,000 people. But desalination, it warned, could potentially damage ecosystems in the Loreto Bay National Marine Park.

In a four-sentence announcement sent to Loreto Bay homeowners June 6, TSD Loreto Partners, whose major lender is Citigroup Property Investors, stated that "due to the challenging situation in the international real estate and financial markets, all operating and construction activities for Loreto Bay will be suspended."

Though several potential buyers have visited the project in recent months, the project "has been unable to secure a buyer or new investor," the statement said.

In the statement released Sunday, Agundez pledged support for Loreto Bay, saying "Loretanos are not alone in their effort to make Loreto develop through tourism."

Agundez announced that the Mexican airline Aeromexico next month will resume a San Diego-Loreto-Mexico City flight suspended in 2006, though Aeromexico did not confirm the flights yesterday.

Agundez said the suspension of operations at the project has led to the layoff of 400 workers. Because many are from mainland Mexico, that poses a potential "social problem" for the local community, said Ramon Romero Amador, the municipality's secretary general.

In a telephone interview, he said the government has secured funds to send workers back to their home communities.

Still, he added, "there is much optimism and hope, and we believe that this project will continue."

Pascal Pellegrino, president of Loreto's Hotel Association, said he supported the government's actions. The development, he said "needs to be sold soon, so that it doesn't remain as an unfinished project."

Pellegrino said Loreto needs growth, "but we must keep it on a human dimension. We want projects developed with the standards of conservation that are applied around the world."

Brian Durnian, a Napa Valley real estate agent, purchased a three-bedroom, two-bath adobe at Loreto Bay with his brother. With construction on the $400,000 property finished three years ago, Durnian said he was not worried.

Durnian said that like many buyers, he was drawn to the region because it offered a slower pace than Cabo San Lucas, at the peninsula's southern tip. "This is more planned growth. I love it down there."

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Sandra Dibble: (619) 293-1716; [email protected]

Sandra Dibble: (619) 293-1716;

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Copyright (c) 2009, The San Diego Union-Tribune

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