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Cap Cana dream villas left to rot

posted on: Feb 25 2012 10:24 by The Reporter. Viewed 3232 times.

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The jewel in the crown of real-estate in the Dominican Republic, Cap Cana, with expensive luxury villas, World Class golf courses designed by Jack Nicklaus, and a marina for the jet set to moor their yachts; is not all it was hyped up to be, say disillusioned investors.

Just a few years ago, when real-estate mogul, Donald Trump was selling multimillion dollars lots on his high-end Farallon Estates development in Cap Cana, many private investors were buying into the dream and investing in what appeared to be a sure-fire win, backed by famous names, large banks and a massive media blitz.

For at least one, and probably many more investors though, the promised dream has turned into a nightmare. Early in 2007, Alan Sutherland purchased a luxury bungalow villa in Green Village Residences, an upmarket development within the Cap Cana project. At US$ 800,000, the villa was not cheap, but the planned infrastructure, including the largest deep-water marina in the Caribbean, golf courses and various large private homes under construction promised a worthwhile investment opportunity.

Alan paid for the villa in full upfront in return for a hefty 14% discount, and duly wired the funds to Stewart Title in the US on the understanding that the funds would be held in escrow and a draw against escrow be made as the villa was completed. It appeared he had nothing to lose, as the developer's contract also stipulated stiff financial penalties for the developer if the villa was not completed by the due date, October 2007.

When October passed, and the villa was nowhere near completed, Alan was assured that although the developer was slightly behind schedule, everything would be completed soon and meanwhile he and the other buyers would be able to collect on the developer's late penalty fees.

Months went by and progress on Alan's and other villas ground to a halt. He and other concerned investors badgered the developer for feedback on what was happening.

The developer responded saying they were doing their best to move the Green Village project along and they were committed to paying all penalty dollars (late fees).

But then with no warning, they canceled the owner’s credit program, and along with it all the late penalty dollars that had accrued. The penalty payment contract it seems would no longer be honored, as the developer was now too far behind!

So Alan turned to Stewart Title who would have by now around 50% of his money still in escrow. After all, his villa and many others in the same project were only 50% completed, and the developer was clearly in breach of contract. Sadly, Alan says that Stewart Title told him that all monies in escrow relating the Green Village project had already been released to the Cap Cana developers and they assumed no responsibility for their actions as it was completed per the Purchase and Sales Agreement and Escrow Agreement.

It is now 2012, more than 4 years after Alan's villa was supposed to have been completed. Alan's $800,000 is now well and truly gone, and in return he has a half-finished, deteriorating carcass of a villa which he cannot use. Alan says a recent site survey showed that well over 100 similar villas (price range 400k – 800k) were now just being left to rot in the sun and rain. The entire Green Village project is overgrown with vegetation resembling a jungle. He says just a select few of the villas have been completed, but there are no signs of occupancy, and no evidence of ongoing work.

Cap Cana say they do intend to finish the villas, but won't give any indication when. They have offered to exchange the villa for an alternative undeveloped lot; which Alan says is worth a fraction of what he has paid for the villa.

A casual glance at local realtors websites show that many are still marketing pre-construction villas in the same Green Village development, that now appear to have little chance of ever being completed.

Alan says that more than 80 private investors are now asking Cap Cana management to either refund their money or finish their villas as they initially contracted to do. Whether that will ever happen is becoming less and less likely as each year passes by.

Cap Cana have publically admitted they have financial problems and defaulted on a bridge loan. Investors though are wondering exactly what happened to the millions of dollars they collectively paid the Cap Cana developers.

It seems that in the Dominican Republic, a written contract is as solid as a snowman under the heat of the Caribbean sun.

References

Cap Cana's press release on finances: http://www.capcana.com/site/index.php/en/2011/466-cap-cana-announces-it-will-miss-coupon-payment-on-its-10-senior-secured-notes-due-2016

Alan’s blog: http://golfcapcana.wordpress.com/my-green-village-dream-is-now-a-nightmare/

Stewart Title Escrow Services: http://www.stewart.com


3 related news articles

Cap Cana says its operations are normally: Nov 12 2011

Hyatt signs agreement with Cap Cana: Mar 16 2011

US$400 million tourist project at Cap Cana: Mar 27 2010

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