(Bloomberg) -- As it stands now, the small city of Fajardo is a nature-rich oasis just 30 miles east of San Juan on Puerto Rico’s coast, with marine reserves and a bioluminescent bay. It’s also home to some 30,000 locals, a gateway to El Yunque National Forest and a hub for Puerto Rico’s wealthiest denizens, though usually they’re just passing through on their way to somewhere else.
In 2027, when developer Carter Redd realizes part of a vision for a master planned community and tourism enterprise there called Moncayo, he hopes these deep-pocketed passersby will have reason to stay. The project he’s building will sprawl across a 1,100-acre parcel of forested coastline in eastern Puerto Rico and will include 400 residences—all $3 million and up—and a splashy Auberge Resort. It could be the Palm Beach of Puerto Rico, a lush new home (or second home) for the global rich that has everything a jet-setter could want all in one place.
“Most Fridays and weekends, it’s people leaving the city [San Juan], coming east to get on their boats and go to Culebra, Vieques and beyond,” says Redd of the location’s current status.
Redd, who is president of the Moncayo Development Project at Juniper Capital, says his plans comprise “the most significant development that has happened here [in eastern Puerto Rico] in a very, very long time,” adding that the Puerto Rican government has earmarked it for its importance and helped expedite its permitting as a result. He stops short, however, of confirming whether his budget will set a local record, outdoing the $1.4 billion that was required to build Dorado Beach Resort or the $2 billion community currently being built by the Reubens Brothers near San Juan.
Moncayo is certainly the most ambitious endeavor for this economically battered corner of Puerto Rico, which has a long history of failed projects. At this site alone, other developers had a $230 million plan to build a Four Seasons resort that ultimately dead-ended some time before Redd’s team purchased it in 2022; more than $100 million in foreign debt from that project was converted into equity during the acquisition, and Redd says that represents just a fraction of what Juniper Capital has put into it since.
The project begins major construction in November, with a golf course and farm already underway.
A Master Plan for the One Percent
Moncayo’s site, as Redd describes it, is flat at the enclave’s entrance and morphs into lush hilltops and tapering cliffs. Below them is an azure-colored coastline and tranquil bay with a golden quarter-mile beach. Video footage touts the sweeping views of El Yunque National Forest to the west, the Caribbean sea to the east and Vieques and Culebra in the distance.
Redd has the credentials to realize such a sweeping plan. Before joining Juniper Capital, he worked with billionaire Michael Dell’s private family investment management firm MSD Partners LP in its hospitality practice—though Dell is not involved in this project—as well as developing Baker’s Bay Golf & Ocean Club in the Bahamas. The latter is an instructive template for Moncayo: It similarly encompasses a residences, resort and marina, minus the organic farm, private school and clinic.
And Juniper Capital, too, has a track record for repositioning and redeveloping hotels when others haven’t succeeded. In 2019 it rebranded Hotel Nyack in upstate New York after a previous project went into bankruptcy; in 2018 it turned the 1,500-room Hard Rock hotel in Las Vegas into a Virgin property for Richard Branson; and it restructured debt to turn an ailing Trump Hotel in Toronto into a thriving St. Regis.
The first thing to be completed will be a 100-acre organic farm, already staffed and expecting its first round of crops—mangoes, papaya, pineapple, plantains, avocados, eggplant, tomatoes and lettuce—by 2025. It will produce sufficient crops, Redd says, to supply local residents beyond Moncayo’s perimeter and will include a community-facing learning center to encourage farming on this agriculturally challenging side of the island.
An 18-hole championship golf course designed by Mackenzie & Ebert with an accompanying members’ club, currently under construction, will follow in 2026. Tennis, pickleball, paddle courts and a spa are all part of the plan. The 68-room hotel will come next, along with the first residences, in 2027.
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Rounding out the currently outlined project is the Village, a town center featuring retail shops and restaurants, offices, an accredited international K-12 charter school and a concierge medical clinic dedicated to the enclave’s residents. Timing on all that is still undefined; already, there’s talk about adding an on-site adventure park after the rest has been completed.
“People are coming to Puerto Rico to live,” says Redd, explaining the fulsome list of resident services. Including the school, he says, helps the project capitalize on a growing migration trend of younger, wealthy mainland families rather than mainly retirees. The Reuben Brothers’ project, Esencia, announced in May, similarly includes plans for a school.
Puerto Rico Mega Developments
Moncayo is the latest among the thousands of projects and individuals that have tapped into the sweeping tax incentives of Puerto Rico’s Act 60, enacted in 2012. For eligible tourism-related projects, it includes 40% of eligible investments in tax credits; exemptions from construction and sales tax; and waived taxes on dividends, interest and capital gains. Exclusive gated communities for the rich have emerged on the island as a result—the most notable example being Dorado Beach, on the island’s north shore, in 2012.
Scrutiny on these multimillion-dollar enclaves has intensified over the years for producing scant trickle-down economic benefits for Puerto Ricans. A report released in May by the Puerto Rico Department of Economic Development and Commerce analyzed the performance of the island’s incentive programs. Relying on 2022 data, it reveals that 173 entities received $333 million in tax benefits, based on their tourism investments. By contrast, the return on those investments was just 3.2%, concluding that the substantial allocation of local government funds to help stimulate tourism did not pay off as much for the island’s economy, signaling an inefficient use of public monies.
The report also reveals that the hospitality industry paid salaries below the island’s average despite record tourist arrivals and record room tax collection in 2022, which indicate a strengthening economy.
This eastern corner of Puerto Rico, however, remains one of the island’s most economically challenged. In 2004, the closure of the US navy base at Roosevelt Roads took away more than 1,000 civilian jobs and the $300 million a year it pumped into the local economy. The area has never fully rebounded, despite offering some of the island’s best natural attractions.
“We’re very clear on the potential positive impacts this community can have, broadly,” says Redd, when asked how Moncayo will create opportunities for Puerto Ricans living outside the exclusive enclave.
Leveraging Sustainability
Moncayo is being built on the site of Cayo Largo, a failed planned development project and golf course that was to include the Four Seasons hotel at one point. It sat unfinished over more than two decades since it was first announced, facing permitting issues due to pauses because of natural disasters and a pandemic, and sinking an estimated $230 million in public and private funds, as reported in the local news outlet El Nuevo Día.
“This is a fully entitled project. Knowing and respecting the process is why we haven’t really bumped into any trouble from permitting,” says Redd. “We’re also benefiting from the fact that the government has designated this as a priority project for Puerto Rico.”
Redd says Juniper Capital’s turnaround plans aim to be “the model for sustainable development for Puerto Rico,” with construction limited to just 20% of the 2,000 residences he holds permission to build. “That’s what we feel our buyer profile is looking for,” he says. “They want more opportunities to connect with nature, community and neighbors.”
The 95-acre golf course, he says will use paspalum grass, a drought-tolerant species that can be irrigated with brackish water (pumped from stormwater catchment systems) and saves on freshwater usage, as well as reducing the need for pesticides and herbicides. The strategy has been used successfully on courses from the Canary Islands to Hawaii.
In addition to the organic farm—which will include farmers markets for the local community, as well as the learning center—a 50-acre solar farm will partially power the resort. The residences will abide by rigid design guidelines with respect to water efficiency, Redd says, and he’s currently figuring out a way to use a form of solar powered battery system.
His team, based in San Juan, has also welcomed the local environmental nonprofit organization Para La Naturaleza to the site, which includes a more than 2,000-tree nursery inherited from the prior project. “We have a mandate to grow trees every year,” says Redd. “They’ve given us some seeds; we have a good relationship with them.
“We’re surrounded by nature, and we feel that’s really our special sauce,” he continues, citing a network of hiking trails that will maneuver through the onsite mangrove forests; other infrastructure will be built with golf carts or bikes in mind.
Questions about sustainability—both from a community impact perspective and an environmental one—are particularly important considering Moncayo’s location at the foothills of El Yunque and where a bevy of protected marine areas include the Laguna Grande bioluminescent bay and myriad coral reefs and mangroves.
Keenan Adams, the US Forest Service supervisor who oversees the nearby El Yunque, says he wasn’t aware of the project coming to the area but welcomes longer-staying tourists. “The community wants people to stay in the east region, but we want it in a way that is sustainable,” he says, expressing concern over construction-related sedimentation that could harm corals and mangroves and erode a natural barrier for floods.
While Redd says he shares these ecological concerns, he’s unable to point toward solutions outside of the golf course design. The developer mentions his team is forming and initially funding a nonprofit, Moncayo Foundation, that will look “to find ways to bridge the gaps” and connect property owners with locals and make sure the voices of Fajardo locals are heard.
“We want to be members of the community broadly,” he stresses.
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