A High-End Gamble

Embarking on a $3 billion luxury real estate project in the Dominican Republic might seem overly ambitious or even foolhardy at a time when Caribbean countries are still feeling the aftershocks of the precipitous drop in tourism following the September 11 terrorist attacks in the US. Countries around the world over are trying to ward off recession. But Ricardo Hazoury, president of CapCana, a Dominican Republic real-estate developer, has broken ground on a project that he hopes will transform the country from a mid-market tourist destination to a luxurious winter residence for the world’s affluent.

The property, located on the eastern tip of the Dominican Republic near Punta Cana, spans 30,000 acres, including 5.3 miles of oceanfront property and 200-foot bluffs. CapCana is set to be a year-round resort destination featuring the Caribbean’s largest marina, three Jack Nicklaus signature golf courses, several upscale boutiques and full-service hotels, luxury residences, condominiums, beach clubs, health spas and casinos.

CapCana is not just any real estate company. Its president is one of the Dominican Republic’s most seasoned and successful businessmen. Ricardo Hazoury is president of Aerodom, the highly successful airport management company, and vice president of the board of construction and development company Grupo del Caribe, which has built 5,000 hotel rooms in the last five years. Hazoury is confident that the CapCana resort will attract investments worth $3 billion from individual investors and real estate companies over the next 15 years. CapCana itself plans to invest $600 million developing the site and hopes to finance part of it with $120 million in project finance. It has already attracted $72 million from more than 53 founding members since it broke ground in May. Hazoury says CapCana should attract wealthy business people, who can afford to spend part of the year working away from the office and not just retirees who winter in Florida or Costa Rica.

Hazoury expects more than half of the buyers to come from the US and Europe. He dismisses talk of recession-sensitive investors in the US. “There is no upscale Caribbean resort like this on the east coast of the United States. The West Coast has Cabo San Lucas in Mexico but there is no Caribbean destination like this on the East Coast.” The closest thing to it is Ocean Reef in Key Largo, Florida or Punta del Este in Uruguay, neither of which offer the sun-soaked beaches or warm waters of Punta Cana year-round, he says.

But CapCana is targeting potential homeowners, not vacationers. “This is not a hotel-driven complex,” says Hazoury. Although the compete will include hotel rooms, the bulk of the development will be geared towards people seeking semi-permanent and permanent luxury residences, apartments and townhouses. He is convinced that wealthy Americans are spending more time at their second homes and cites the Colorado ski-resort of Vail as an example. “Vail was created as a tourism destination and now 60% to 65% of its visitors are permanent or semi-permanent habitants. However, it was not created with residential [properties] in mind.”