The President of the Baja Developers Association, Gabriel Robles, has been sued by two American investors who collectively loaned Robles $720,000. Robles and his company, Baja Resort Advisors, have defaulted on the loans and the investors question whether Robles intended to repay them at all. Robles said that the original loan agreement, which called for a 30% interest rate, was usurious. The Puerto Nuevo development project in question is encountering financial problems and there may be other affected investors and condominium buyers. The details of the lawsuit are available online at www.bajaresortadvisor.com (with no “s” at the end of “advisor”). Aside from the specific lawsuit, the case also sheds light on the types of business practices that are common in Baja among underfinanced developers who do not have a proven track record.
Gabriel Robles is the President of the Baja Developer’s Association (ADETUR), a Baja developers group. When the group was first founded a few years ago, the members were Robles as President, Hugo Torres as Vice President, and a few other like minded friends. Many independent developers in Baja did not join the group for several years, probably because Torres has a poor reputation and Robles had no track record at all.in five years, Robles has never successfully constructed a development in Baja, a light resume for the President of a developer’s association. But, Robles has proven adept at publicity and promotion. Robles has succeeded in portraying himself as a local real estate leader, and frequently appears in interviews with the US press. Robles does not necessarily have a wide following in the real estate community, but he maintains this image via the Torres-owned newspapers and the foreign press. Although his overall credibility was never particularly strong, he has a known history of involvement in fraudulent projects and previous scandals. However, since he is the President of the Baja Developer’s Association, the public will conclude that his practices are those of the Association. The organization’s image already suffers from a perceived affiliation with Hugo Torres, who is one of the worst developers in Baja.
Robles’ company, Baja Resort Advisors, was promoting a development project in Puerto Nuevo. Financing for the project was to come from private investors, who would lend a total of $2.7 million dollars. That this was a risky investment to begin with should have been clear, but American investors rarely notice red flags. First, Robles had no provable track record, even though he claimed to have personally developed Cancun and to have participated in 180 Mexican developments. The investors should have asked why Robles did not therefore obtain ordinary construction financing through a bank, at a regular interest rate.instead, the company offered a high 30% rate of return, on a private loan offering aimed at Americans.investors should have heeded the warning in the Baja Resort Advisors investment offering: “this is not a securities offering, and it is not regulated by any government authority in the US or Mexico”. Most importantly, the investors should have realized that the business model of obtaining millions of dollars in private financing for a Baja real estate development has rarely been implemented successfully.
The project was probably never really viable, and it was not difficult to foresee that it would likely encounter problems. Kevin Young, one of the investors that sued Robles, invested $150,000. The due date for the note came and went, and Young alleges that Robles refused to repay it. Robles argued that the 30% interest rate was usury, even though his company had originally offered that percentage in the investment proposal. After one of Robles’ advisors also did not get paid, the advisor turned over a number of confidential emails to Young. The emails show discussions between Robles and the advisor about strategies to avoid repaying the note or the interest. “I am not paying him 185 or 180, I will spend 50 not to pay him a thing” wrote Robles. Other comments in the emails show a cavalier attitude toward debt repayment.
After the allegations emerged, Robles circulated a statement saying that Young made a usurious loan, and that Young falsified the promissory note. Robles also claimed that Young was committing a crime because of the similar names of the parties’ websites, www.bajaresortadvisors.com (with “s”, which belongs to Robles), and www.bajaresortadvisor.com (without “s”, belonging to Young). It is believed that other investors may come forward in the future. Robles lost a civil lawsuit against by for fraud and the judgment is public record in the San Diego County Superior Court.
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