Pacific Coast Development Project Dreams Grand
GRAN PACIFICA – For someone whose life’s work has been kept on hold for more than two years by the Nicaraguan government, Michael Cobb of Slippery Rock, Pennsylvania, remains surprisingly good natured and easy going.
Then again, he considers what he’s doing to be God’s work. And that’s not usually something that comes without trial and tribulation.
“This is a mission from God; failure is not an option,” said Cobb, co-founder and president of Gran Pacifica, the largest tourism development project in Nicaragua. “This project will change the way that Americans think of Nicaragua. And once that happens, jobs are going to start flying in, there will be a greater transfer of technology, and sustainable jobs will be created in one of the poorest countries in the hemisphere. This country will be set to rock and roll.”
Cobb, a 41-year old businessman and founder of Belize’s first private mortgage bank, is not being trite or disingenuous. He says he found God several years ago and now is compelled to work for the common good of humankind.
“I think God wants me to make the world a better place, and I think Gran Pacifica makes the world a better place. At least this part of the world,” Cobb said.
Gran Pacífica – a $55 million development that will include a 200-lot colonial style city, a 250-room five-star hotel, and an 18-hole golf course – is as big and ambitious as its name might suggest. Located just an hour’s drive southwest of the capital, in the department of Managua, the project aspires to be the most grandiose on Nicaragua’s Pacific coast.
Unlike many of the other 20-plus development projects farther to the south, Gran Pacifica is already structured like a big company, with 220 mostly U.S. shareholders and a board of directors that meets four times a year.
“So many development companies aren’t really companies, they are one-man shows, the rugged individual or the pioneer who buys up coastal land, divides it and sells it off. We are different,” said Cobb, who’s been living in Nicaragua with his wife and two young daughters for the last three years.
Another important element that soon will distinguish Gran Pacifica from the other projects is a pending agreement they have with a major U.S. hotel chain to manage the hotel once it’s built. Although Cobb says he’s not allowed to trade on the hotel’s name, the chain’s identity is no secret.
“What I can say is that in May of 2002 a Marriott executive visited Nicaragua and spoke at a conference of investors,” Cobb said with a smile.
Though Gran Pacifica plans to be bigger and bolder than any other coastal development in Nicaragua, the company insists it will be filling an emerging hole in the market.
Gran Pacifica recently hired international consulting group Ernst & Young to conduct an extensive market research for the company. Cobb says the consultants traveled throughout Central American conducting surveys and gathering data and came back with some conservative, yet very positive conclusions for Gran Pacifica: they are expected to turn a $110 million annual profit from the first year on, and worst-case scenario is that they will break even if they run at 38% occupancy.
Surprisingly, Cobb says, the research also revealed that half of the hotel guests are expected to be wealthy Central American tourists who are willing to pay $100-plus a night for a five-star beach hotel room. Another significant percentage is expected to be convention groups from the United States.
Cobb is certain that the hotel-operating chain will not back out of the agreement; like in the movie Field of Dreams, it’s a case of “if you build it, they will come,” he says.
To ensure this, Gran Pacifica is paying the hotel chain almost $1 million in consulting fees to make sure the hotel is built to the company’s specifications, plus another $1.25 million fee to cover the first five years of management costs. Once the hotel is up and running, the chain would take a 10% cut of the profits in exchange for running the hotel, handling the marketing and reservations, and putting its name on the front of the building.
By luring the hotel chain into the fold, Gran Pacifica had to agree to not exceed a 25% debt – a stipulation that has resulted in a $30-million-plus pickle for the development company.
When Gran Pacifica first considered Nicaragua, there were financial incentives in place to help the company raise the capital they need to build the project. But shortly after committing to Nicaragua in 2002, the incentives were reversed and Gran Pacifica had the rug pulled out from underneath them.
Since then, Nicaragua has been on the verge of passing a substitute financial incentive law – known as the Tourism Investment Bond (BID) Law, which would allow qualifying companies to finance up to 70% of development through the sale of private bonds, which are considered non-traditional debt (NT, Nov. 12, 2004; Feb. 4, July 22; Aug. 12; Oct. 7; Dec. 23, 2005).
The BID initiative has been sitting in the National Assembly for more than a year, waiting to become law. That’s now expected to happen next month. Again. Few are more anxious of that moment to happen than Cobb.
Cobb says that a year after the law is passed and the regulatory terms of the bond mechanism are established, Gran Pacifica will have raised enough money to start construction on the hotel.
Undeterred by congressional feet-dragging, Gran Pacifica recently decided to skip ahead to phase two of its project: construction of a colonial-style city modeled after Granada and León, only on the beach, with an 18-hole golf course and all the modern amenities.
Kent and Denise Payne from Oklahoma City bought a lot at Gran Pacifica on their fourth day in the country last year, and were the first to start construction on Jan. 13.
“It’s cheaper for us to build here than in a bean market like Oklahoma,” said Kent Payne.
“And this isn’t Oklahoma, this is paradise,” his wife adds.
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