Two
years ago, Jay Jacobson took over the South Florida operations for
national apartment builder Wood Partners. But when he surveyed
development opportunities, he didn't choose Fort Lauderdale's coastline
or the cachet of South Beach.
He went to Miami's Little Havana.
Over
the past year, the Marietta, Ga.-based builder has plunked down more
than $12 million for four swaths of land in the poor, working-class
neighborhood home to a large Cuban exile population. At a time when
many developers are retrenching amid a tough housing market,
privately-held Wood Partners has instead launched sales for three
condos and plans on a fourth soon. It's locked up financing from its
lender, LaSalle Bank in Chicago, to build each one -- and they're all
in Little Havana.
With the broader housing market in decline, Little Havana is now becoming a first choice for bigger developers.
While
the housing boom of 2001 to 2005 sparked change in the neighborhood
that includes the Orange Bowl and Calle Ocho, it was never a place most
leading developers looked to first. In many ways, it served as a
proving ground for new and smaller builders seeking lower-priced land
and a place without larger builders.
That's changing.
''We
plan to break ground on the first three [condos] in the next 60 to 75
days and [the] fourth will go up in three months,'' said Jacobson, a
principal with Wood Partners, which operates in 22 markets and is
ranked by Builder Magazine as the country's third biggest condo and
rental apartment builder.
Last year Canyon-Johnson Urban Funds, a
Los Angeles-based real estate investment fund, decided to invest in the
biggest project ever proposed for the neighborhood. The fund,
co-chaired by former NBA star Earvin ''Magic'' Johnson, has investments
sprinkled across the country. It took a majority stake in Morrison, a
19-story two-tower building on West Flagler Street with condos, offices
and stores.
''We believe in Miami, we believe in Little Havana,''
said Johnson, who heads the fund with financier Bobby Turner.
Canyon-Johnson is partnering with mFm Construction, a Miami-based
company that has focused on Little Havana; it has five condo projects
under construction there currently. Groundbreaking for Morrison is
scheduled for later this year.
Little Havana continues to get
attention when many residential projects are being shelved because of
several factors: a belief that there is a market for low- and
middle-income housing, cheaper land prices, a central location, and an
immigrant population that often likes to stay close to home.
Despite
worries about the overall housing market slowdown and an oversupply of
homes for sale, the likes of Wood Partners, mFm and Canyon-Johnson are
betting the lower and middle markets remain underserved. Jacobson at
Wood Partners thinks he can find buyers able and willing to spend
between $190,000 and $250,000 for a condo. To do that, Little Havana's
relatively cheaper land costs give a leg up.
PROXIMITY
South
Florida's traffic woes are also prompting people to live closer to
work. Again, Little Havana checks that box. The neighborhood is located
just west of downtown Miami's office towers and the Port of Miami. To
the north is the hospital district anchored by Jackson Medical Center.
Brickell Avenue, Coconut Grove and Coral Gables loop from east to west
along the southern flank of the neighborhood.
''We are close to
everything here,'' said mFm principal Eli Dreszer, standing atop a
nearly finished 10-story condo on Southwest First Street recently. ``We
have major employment centers nearby.''
But perhaps most
important is the fact that Little Havana is an immigrant community
where the younger generation often wants to live nearby. Yet,
homeownership is low. In the 2000 census Little Havana had a
homeownership rate of just 9 percent.
Builders are wagering they
can turn many of those renters into owners -- particularly because
there is a desire to live near other family members. If good,
attainably-priced housing can be offered in close proximity, then
people will buy and stay, the thinking goes.
''It makes a lot of
sense,'' said Oscar Rodriguez of Related Group, which profited with
luxury towers during the boom but is increasingly trying to build
middle-market and lowerincome projects, though it doesn't have one in
Little Havana. ``It's a close-knit family atmosphere there. I've long
felt that Little Havana has great potential for workforce housing.''
Still,
there are plenty of challenges. For one, the lots are often divided
into small parcels. That means builders must haggle with several
different landowners rather than striking a deal with just one.
The
area also remains poor, making it ever harder to get prices low enough
to meet budgets. Crime plagued the neighborhood for years, which makes
some outside buyers skittish about moving in.
''Eight years ago
you couldn't walk through the streets without a bad experience,'' said
Miami Commissioner Joe Sanchez, who represents Little Havana. ``Now the
neighborhoods have been cleaned up.''
IMBALANCE
But
there are issues with the cleaning-up as well. Some of the development
is out of scale with adjacent buildings, such as a 10-story condo going
up next to a single-story house. At issue is what Little Havana should
be: a neighborhood with large towers or low-rise condos and
single-family homes.
It is enough of a worry that Sanchez thinks
development there needs a breather. ''I want to slow down in approving
new projects before Miami 21,'' said Sanchez, referring to the city's
plan to rezone.
But not builders like Wood Partners. The company is partnering with Miami builder ARKS LLC in Little Havana.
''If
you look at a place with a large immigrant population, large household
formation and high propensity to own it led me straight to Little
Havana,'' Jacobson said. ``You put those three factors together and it
leads you to an area that has a built-in market no matter what the
broader market is.''
