While some of Miami’s biggest condo developers have pumped the breaks, Habitat Group is moving full speed ahead with its Smart Brickell condo and lining up property for more projects.
Santiago Vanegas, CEO of the Miami-based developer, isn’t deterred by what some people are calling a market slowdown. This trained economist pays close attention to retail and market trends, and he believes Smart Brickell will be among the first projects delivered as the Miami condo market rebounds.
“We want to be the beginning wave of the next cycle,” Vanegas said. “We have alternative product, something different for the market.”
Habitat Group has become one of the most active developers in west Brickell and east Little Havana with four projects in the pipeline, and a fifth development site it owns. For Vanegas, it was truly a story of building from the ground up.
Vanegas studied economics in his native Colombia for five years and worked as an economist there before moving to Miami in 1998. Two years later, he landed a job with Edgardo Defortuna’s Fortune International Group, one of the largest condo brokers and developers in Miami. By 2005, Vanegas decided to step out on his own and form Habitat Group.
“I was very successful at Fortune and had a very good salary, but every night when I went to sleep I felt I could do a little bit more,” Vanegas said. “I felt I could make more projects on my own.”
He saw the new Miami 21 zoning code would greatly increase the density in West Brickell, so he decided to assemble property there, but first he needed to pool together some money. Vanegas said his biggest investors are the Roa family, which has agriculture and price farming interests in Colombia, and the Codovez family, which owns shrimp farms in Ecuador. He also personally invests in Habitat Group’s real estate funds.
For its first fund between 2005 and 2010, Habitat Group assembled about five acres in West Brickell. That was before the development of Brickell City Centre, so much of the activity in the neighborhood was centered around Brickell Avenue.
“Everybody wants to have the best location, and Brickell Avenue is just one of them,” Vanegas said. “Then you have the whole Brickell area. It’s a hospitality neighborhood.”
The company’s first project was Habitat One, which was originally conceived as a condo but quickly converted into a 25-unit rental in 2008. Vanegas realized the zoning allowed for short-term rentals, so he added furnishing to each unit and started operating Habitat One like a hotel via listings on vacation rental site HomeAway.
Habitat One’s income increased from $300,000 per year as apartments to $1 million per year in the first year as a vacation rental, he said. The building is now called Habitat Residences. Later, the company built a second phase with 55 units.
By 2012, Habitat Group sold much of its remaining property in west Brickell. Other developers have built projects such as Le Parc, Casa Brickell and the Atton Brickell Miami hotel on those properties, while Vanegas reinvested the proceeds in other deals.
Habitat Group acquired seven apartment buildings and two hotels in east Little Havana, the Jefferson Hotel and the Historic Miami River Hotel. All of them were renovated and later sold for a profit, Vanegas said.
“We started seeing the potential that Little Havana has,” Vanegas said. “Today, Calle Ocho is cool and full of tourists.”
For its third fund, Habitat Group has its biggest sellout target yet at $250 million, Vanegas said. It’s returned to the neighborhoods where it’s already experienced success.
Located at 229 to 243 S.W. 9th St., Smart Brickell is slated for three towers. The first two towers would each have 50 condos and 50 hotel rooms, while the third tower would have 70 condos and 50 hotel rooms. There would also be 30,000 square feet of retail.
Vanegas said the first tower is 100 percent pre-sold and should break ground in the first quarter. He recently launched sales on the second tower, asking $300,000 to $600,000 for units ranging from 558 to 1,117 square feet. The average price is around $600 per square foot.
While Habitat Group is marketing its condos, major Miami developers such as the Related Group and Melo Group are wrapping up their current condo projects and haven’t started sales for new ones. There’s been a slowdown in new condo sales for several years that has discouraged many developers from launching projects. The few condo projects that have started sales recently are targeting the luxury market, such as Aston Martin Residences and Una Residences.
Ron Shuffield, president and CEO of EWM Realty International in South Florida, said that new condos proposed in Miami’s urban core are facing tough competition from resales with lower pricing. The building boom has resulted in many recently-completed condos being placed on the market by investors. As a result, Miami-Dade County has an 11-month supply of condos priced under $1 million, based on the current sales pace, Shuffield said.
Despite these challenges, Smart Brickell’s strategy of targeting investors at price points that make renting out the units feasible should ultimately succeed because of the rapidly-growing population in Miami, Shuffield said.
“We feel the market and we are trying to do this anti-cycle,” Vanegas said. “The last condo project of this cycle, Brickell Flatrion, will deliver next year. That is the only new supply for 2019, then the supply on Brickell will stop. If you want to have product ready for 2021, you have to start construction today.”
Vanegas hopes Smart Brickell will open at a time when it will have less competition from newly-completed condos. He designed the units as smaller and more efficient, with furnishings included, to make them more attractive to investors who plan to rent them.
Technology is a main focus at Smart Brickell, as the condos will include a Nest smart thermostat control, Lifx smart lighting controls, Alexa by Amazon and an iPad with each unit containing a special app for the building.
To give condo investors more options to make money, Smart Brickell will allow them to use their units as short-term rentals up to 24 times per year, or they could lease the condo back to the developer for a fixed rent. Habitat Group would then include those leased condos in its hotel pool.
The developer doesn’t plan to retain a national brand or a hospitality management company for the hotel. Habitat Group will manage the Smart Brickell hotel itself, Vanegas said. In fact, the 15-person company has established a hotel management division and it’s open to managing hotels for other property owners, he added.
Habitat Group’s other projects are:
East River Living, a 34-unit apartment building under construction at 39 N.W. 7th Ave. in Little Havana.
Millux, a 114-room hotel planed at 239 S.W. 12th Street in west Brickell. Vanegas said the name denotes a luxurious experience for millennials. It will be full of decorations that will inspire “Instagram moments,” he said.
A mixed-use project with 108 condos, 60 hotel rooms, and 12,000 square feet of retail in the early planning stages at 143 S.W. 9th Street in west Brickell.
The company also owns a vacant lot at 36 N.W. 7th Ave. in Little Havana. Vanegas said he plans 50 apartments there.
“We want to find a way to keep these assets and give Habitat the opportunity to operate those properties in the future,” Vanegas said.