Los Angeles Times

The developer that reaped billions, went bankrupt and left slums across Mexico

MEXICO CITY - Investors were told they could earn huge returns while helping solve housing shortages on a global scale. Critical financial players were on board, committing billions to the company. But then it turned south.

Sam Zell was looking for opportunities, and he found a winner in Mexico.

The government was working with developers to build massive housing complexes for poor and working-class families outside every major city. With billions in government funds flowing into the housing market, builders stood to reap a bonanza.

Zell, a Chicago real estate billionaire, spotted a prospect in 2002 in the northern state of Sinaloa - a small construction company called Homex owned by four brothers of the De Nicolas family.

The brothers possessed the ambition. Zell, through his Equity International Investment Fund I, provided a boost of capital: $32 million.

Over the next six years, Homex went from building 5,000 homes a year to building 57,000. It joined the ranks of North America's largest home builders, broke ground on projects in Brazil and opened offices in Egypt and India.

The Homex story tugged at both the wallet and the heartstrings: Investors could earn big returns while helping solve global housing shortages. The World Bank, Wall Street investment banks, university endowments, foundations and U.S. pension funds invested billions in the company.

Homex's valuation, $100 million when it went public in 2004, soared to $3 billion. Company executives went to the New York Stock Exchange to ring the closing bell, chanting "Homex! Homex! Homex!" The De Nicolas brothers traveled the world as ambassadors for Mexican entrepreneurship.

The big returns, however, masked the flaws that eventually gutted Mexico's ambitious effort to house the masses. The developments were riddled with infrastructure and construction defects, and residents abandoned them by the thousands, helping trigger the collapse of the housing industry.

In 2014, six years after Zell's fund sold off its shares, Homex fell into bankruptcy. This year, the U.S. Securities

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