A few blocks west of posh Brickell Avenue, developers are transforming Miami's traditional Cuban quarter, Little Havana, into an oasis for workforce housing. The neighborhood offers land for a relative bargain, and developers can pass on the savings to workers seeking affordable housing. The quarter's central location, west of downtown and a short drive from major employers, is a big draw for buyers.
“There is a tremendous need for workforce-style condominiums in Little Havana,” according to Jack McCabe, CEO of McCabe Research & Consulting in Deerfield Beach, Fla.
Ten to 15 workforce projects are underway or have been recently finished in the neighborhood, says Michael Wohl, founding partner of Miami-based Pinnacle Housing Group. Wohl also is chairman of the Southeast Florida working group of the Urban Land Institute's Terwilliger Center for Workforce Housing.
Among the developers in the Hispanic neighborhood are Beverly Hills-based Canyon-Johnson Urban Funds, led by Earvin “Magic” Johnson; South Florida-based B Developments, and Urbanice Modern Life Developers, a joint venture between Atlanta-based Wood Partners and South Florida builder ARKS LLC.
The lower land prices and hefty returns have helped make Little Havana a magnet for developers. They can expect returns on their investments of 15% to 20%, says Jay Jacobson, director at Wood Partners, one of the country's largest apartment developers. On market- rate units, returns are likely to be at least 20%, Jacobson says.
But with the condos priced from $190,000 to more than $300,000 — too expensive for many salaried workers in Miami-Dade County — whether most new units will sell remains to be seen. County-wide, new sales contracts for residential condos dropped 30% to 40% from year-end 2005 to year-end 2006. Most condos under construction were sold a year or two ago, says Bruno Picasso, director of market research at Integra Realty Resources/South Florida, a commercial real estate appraisal firm.
The number of condo units planned, proposed or being built in the county by late 2006 was still higher, at 93,000 units, than the 88,000 at the late stages of 2005, according to Integra.
Urbanice is building three low-rise, workforce condo projects in Little Havana: El Colonial, Aqua Briza and Puerto Nuevo, with a total of 182 units.
Wood and its partner began demolition using their own funds, but LaSalle Bank in Chicago will provide construction financing later on, says Jacobson. Prices at Urbanice's three workforce projects range from $190,000 to $320,000 for 750 sq. ft. to 1,100 sq. ft. units.
The three developments, at six or seven stories high, are smaller than Jacobson's previous projects. “Usually our developments have 250 to 300 units compared with 45 to 90 units [at the Little Havana projects],” he says. “The bigger the building, the more expensive, and we want to sell cheap units.”
Land prices in Little Havana — where run-down bungalows co-exist with modern, mid-rise rentals and condominiums — have skyrocketed. Seven years ago when Pinnacle bought 1.5 acres for its Rayos Del Sol development, land cost the company $3,000 per unit, Wohl says.
Today, land can cost at least $30,000 per unit, he adds, and to build affordable housing, developers partner with non-profit organizations. Still, land prices in Little Havana remain far lower than on Brickell Avenue or downtown, says Jacobson.
Meanwhile, land costs in Miami-Dade County dipped by 15% over a 12-month period starting in late 2005, reports Integra, due to the luxury condo bust.