5,000 Baja foreigners - Benefit from a historic lease to purchase windfall

San Felipe, Baja California

Five thousand Rancho El Dorado lessees received an early Christmas gift from Pat Butler in San Felipe, Baja California's largest developer. The foreign retiree/vacationers would have lost their leases, and the homes thereon, in the year 2020 if not for Mr. Butler's ethics and generosity. A large percentage of these beautifully built straw bale homes are valued in six figures.

Mr. Butler bought the development rights and leases for El Dorado Ranch (San Felipe) from the National Pen Company. They had an agreement with the largest farming cooperative (sp. Ejido) in Baja California; it is also the nation's second largest ejido. This acquisition has made U.S. – Mexico investment history. Closing a deal with 214 ejido families to purchase an enormous property is a first for a U.S. developer. The land now belongs, and is duly registered, to Butler’s Mexican corporation, Ranchos Epoca de Oro.

El Dorado Ranch can now sell these lots and the remaining property to foreigners in the form of a living trust or mexicans. The Mexican constitution does not permit foreigners to own coastal land "fee simple". However, the bank trust provides all the benefits of ownership in exchange for a fiduciary fee of $350-500 per year. El Dorado properties are also insured by Stewart Title.

We received numerous calls and e mails from client lessees at Rancho El Dorado. Worried and confused by the change in their baja property investment status. The following were the concerns expressed.

1. I was promised a lease renewal at the end of the lease period at no cost,. Now they want to charge me.
2. They want me to pay them (El Dorado) the property taxes. Why can't I pay taxes directly to the government?
3. El Dorado is going to control the master bank trust, the paying of taxes, security-maintenance and services of the subdivision. What is to prevent them from charging me excessively for these services in the future?...
4. Why are we changing to a new 50 year lease? Why can't I continue with the 20 year lease at no annual charge?. Confusion regarding the trust – It is not a lease: 50 years and renewable in perpetuity. Property transfers to your heirs at the time of death.
5. El Dorado is rushing me to judgment. If I do not pay the $3,750 in November, my costs to establish a trust will rise to six thousand dollars.
   

Pat Butler has always been accessible to MEXICO MATTERS..and our inquiries were immediately responded to with copies of contracts for purchase of a bank trust.

To say we were more than happy to assure investors would be a gross understatement. Not only is the property legally ready for transfer of title, the costs to do so are half the average costs for establishing a bank trust. For $3,700 investors are converting a lease, terminating in seventeen years, to a secure property trust. El Dorado Ranch had the legal right to let the leases expire. In seventeen years, El Dorado would be the lucky new owners of thousands of luxury homes paid for by the lessees.

The cost increase for not signing the property transfer documents in November is understandable to our consulting group. Mobilizing and coordinating expensive legal talent for the transfer of title is a costly process. Transportation costs, hourly legal fees for fiduciaries and notarios plus administrative staff time doubles with each re-scheduling of property transfer signing dates. I

In answer to the concern about El Dorado controlling a master trust, the reason is simple and in the best interests of the investors. If all 5000 were to contract for individual trusts their costs would exceed six thousand dollars per property: engineering fees, legal fees, bank fees and foreign investment registries. As Mr. Butler expressed to us "There are not enough notarios (attorneys who are keepers of the public record) in Mexicali to process 5000 trusts in a reasonable time frame. It would take years to complete the transfers".

El Dorado will not deny an individual property owner from securing their own individual trust, they have that option. Aside from the additional time, trouble and costs there are no benefits to an individual trust. Under the master trust, a trust beneficiary may sell the property to another foreigner and a new trust is established for the buyer. The new trust will no longer be part of the existing master trust. If the buyer is a Mexican national the property will be registered directly to the Mexicano and the property trust of the seller dissolved. .

The concern that El; Dorado Ranch will raise homeowner fees and dues excessively is a risk homeowners have in any “gated community. The evidence indicates that Rancho El Dorado has not charged excessively to date; -why would that change? As for property taxes, El Dorado will demonstrate to property owners that these taxes have in fact been paid to the government. Property taxes are very low in Mexico and should not be a major burden to investors.

Frankly, we as foreign investment consultants, are quite amazed that Mr. Butler is being so generous in "rolling over" these leases without realizing some financial gain for El Dorado. The $3,700 costs are just that. Costs to pay the bank, the notario and government fees. The conversion to lease usually involves a significant payment to the owner lessor. In a similar situation, in Cabo San Lucas, lease to purchase is costing investors fifty to one hundred thousand dollars for the privilege.

We want to thank and congratulate Mr. Butler and El Dorado Ranch. They deserve the success they have achieved. As one, very happy, El Dorado resident explained it "Mr. Butler has made a heavy investment in infrastructure and services. It is a much more comfortable place to live as a result. Also important, resales around my home are proof that my property has doubled in value."

Most media reports about foreigners and Mexican real estate are horror stories. Foreign real estate investment in Mexico is still suffering from the fraud of Punta Banda where 200 families were evicted from their luxury beach homes in Ensenada. El Dorado is such a positive story that it will likely receive little or no media attention North of the border