Paradise Lost: No Condos for Oasis Investors
Three billboards flanking the one-story wooden office building outside the Tamarindo Oasis Condominiums announce “Paradise Has a New Address.”
But it doesn’t look that way.
Behind the squat, vacant office-building with a placard reading “Development Sales Office,” five shells of incomplete buildings stand abandoned; scaffolding crawls up their exterior walls and paint peels from unfinished jobs. The paradise that was to be the Tamarindo Oasis looks more like a ghost town.
This was not what investors signed up for.
In 2006, Jacques Fostroy, a developer with Desarrolladora Habitacional de Guanacaste DHG, S.A., paired with Century 21 realtors in Tamarindo to begin selling units on the one-hectare plot in Tamarindo, a beach town in the northwest Guanacaste province. The plan was to construct a 78-unit residential condominium called the Tamarindo Oasis. The development, located on the main road from Huacas to Tamarindo, approximately 500 meters north of the AutoMercado supermarket, was to be funded by the Banco Nacional in two installments, a first one of $2.9 million and a second of $4 million.
Fostroy and Century 21, using Stewart Title as the escrow company, pooled together 39 international and local buyers interested in owning condos on the property. In April 2007, construction on Tamarindo Oasis broke ground.
Fifteen months later, it hit a snag.
According to Luís Alberto Núñez, the project’s general manager, in July 2008, Banco Nacional informed developers that the second $4 million part of the contracted loan wasn’t yet available. Núñez said that at the time, construction was progressing at “full speed.” With funds limited, Núñez and staff had to slow construction, and by December 2008, building was halted indefinitely.
“Imagine you are building a million dollar house,” Núñez told The Tico Times in an interview Thursday. “You give the builder $400,000 and the bank tells you they will fund the rest when necessary. The builder makes a room, a bathroom and a living room and then asks for the rest of the money. But when you ask the bank for the second part, they say ‘wait, not yet’ and tell you not to worry about it. You keep asking and they keep saying ‘relax, wait, don’t worry about it.’
In the mean time, the builder can’t continue building and you have a room, a bathroom and a living room, but no kitchen, no roof and no swimming pool.”
Also in December 2008, a moratorium was placed on construction in the Tamarindo area due to concern that development was infringing on Las Baulas National Marine Park, a protected reserve for leatherback turtle nesting in the area. Each development in Tamarindo had to wait to be cleared by the Constitutional Chamber of the Supreme Court (Sala IV) before resuming construction. Fostroy claims that the development is 1.5 kilometers from the boundaries set by the national park.
When they learned that construction had been stopped, buyers began searching for an explanation of their own.
“We were told not to worry and that the construction delay was no big deal. All construction in the area had stopped and we were just waiting for the court order for everything to start back up again,” said Jennifer Hurley, a lawyer from Buffalo, New York and one of the first investors who committed to the Tamarindo Oasis development. “A long time passed and I was starting to get nervous. We hadn’t heard anything from our contact at Century 21 and I couldn’t find contact information for (Fostroy) to ask about what was going on. At that point, I started digging around.”
What Hurley and the other Tamarindo Oasis investors soon discovered was that Banco Nacional had foreclosed on the property. According to Fostroy, Banco Nacional never notified him of the foreclosure. Due to the continued lack of compliance as outlined in the original contract, Fostroy opened a lawsuit against Banco Nacional.
“When the time arrived for Banco Nacional to provide the second part of the credit agreement, they began to delay, and to delay, and to delay,” said Andrea Hulbert, a lawyer for Zürcher Odio & Raven, Fostroy representative in the case. “Then the moment arrived when they said they weren’t going to give the second part of the credit. During this process, Banco Nacional continued to change the original conditions of the contract.”
According to Hulbert, the case against Banco Nacional is currently pending in the Supreme Court’s Civil and Administrative Law Branch (Sala I). At press time, Banco Nacional had not responded to repeated queries by The Tico Times.
In the midst of the current legal proceedings, buyers claim that contact with Fostroy has been erratic and an adequate explanation of the proceedings has yet to be provided. Most buyers have already committed up to 80 percent of their promised investment to the Stewart Title escrow account.
“I’ve invested about $35,000 and I’m sure there are people who have invested up to $80,000 or $90,000 into their unit,” said Tim Heffer, an investor based in the U.K. “If they’ve paid 75 percent of the purchasing price thus far, they are out quite a bit of money. There are certainly people that were harder hit than me but, $35,000 isn’t a nice amount of money to lose.”
Buyers’ confusion was compounded early this year when, on Jan. 18, investors received a letter from Stewart Title informing them that, in order to complete the project, each investor would have to accept a 25 percent increase in the negotiated purchase price of each unit. In the letter, the increase was described as a decision by Banco Nacional and the developer to find “a solution for the completion of the project.” The letter said that, if the price increase was accepted, the units would be completed.
The letter sparked outrage among investors, who lashed out at Stewart Title for the unannounced price increase. Two days later, Stewart Title responded, clarifying in a letter that the “developer and Banco Nacional” had decided on the amount for the project’s completion. Stewart Title’s letter went on to say that they that were merely fulfilling their duty as the escrow company and they had informed the bank and the developer of the buyers’ “negative response.”
In an e-mail to The Tico Times on Jan. 21, investor Joe Johnson wrote the following: “At this point we are given only two choices…a) we can kiss our 80 percent (approx $64,000 for a one-bedroom unit) goodbye, or b) agree to a 25 percent price increase and still not know what will happen down the line and potentially lose even more money. We are basically being blackmailed to accept the 25 percent price increase or risk losing our entire investment.
Obviously, given the history of Mr. Fostroy’s performance and lack of communication, most buyers are overwhelmingly skittish and do not want to put additional good money after potentially bad money.” Fostroy said that the 25 percent increase was the doing of Banco Nacional and that he was not involved in creating the proposal.
Due to the resistance of buyers, the 25 percent proposed increase has since been scrapped.
To date, Fostroy’s case against Banco Nacional is in court, which Hulbert says could take “one to two years” based on similar cases. In the meantime, buyers worry about the potential loss of their investment, construction staff is sitting on their hands, and a lone guard, José Alberto Vargas, roams the empty condo shells of Tamarindo Oasis, the apparent new address of paradise.
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