Real Estate News

These Little Havana residents want out — so they’re selling their condos for $5.2 million

The view from Luz Pabon’s fourth-floor condo in Little Havana isn’t what it used to be.

When the 72 year-old Colombian native bought her two-bedroom unit at Habana Condos at 424 SW Seventh Street for $55,000 in 2002, she could watch the Fourth of July fireworks at Bayfront Park from her balcony.

Today, the fireworks are blocked by the canyon of towers that have sprouted up and down the Brickell corridor over the last 15 years. And even that view will be completely obstructed next year when construction is completed on the 11-story office/storage complex that is being built next door.

“Little Havana used to be a quiet neighborhood where you could walk down Eighth Street from Home Depot calmly,” the sprightly Pabon says in rapid-fire Spanish.. “Now there’s traffic all the time and cars are clogging the streets. It’s too commercial. What has happened here is a catastrophe. This is no longer for us. We’re tired of it.”

The plight of the residents of Habana Condos — a 16-unit building built in 1973 where the owners must be 55 or older — is increasingly common in Miami-Dade. The scarcity of land has led developers and investors to push into residential areas such as Little Havana, Allapattah and Little Haiti. In the process, neighborhood economies and the quality of life for working-class residents are tanking.

With gentrification often comes ruinous traffic, noise and construction. And many of the residents living in the affected areas don’t have the financial means to relocate.

But Pabon, who is the president of the Habana Condos association, has an escape plan. She and 12 other of the 16 condo owners in the building — some of whom paid as little as $25,500 for their units — have contracted a broker to help them sell the property at an asking price of $5.2 million.

Luz Pabon, a resident of Habana Condos at 424 SW Seventh Street, stands on the balcony of her home, which overlooks Brickell and a massive construction site. Jose A. Iglesias

That would work out to an average of $325,000 per unit — enough for Pabon and fellow owners to pay off their existing mortgages and find new, quieter places to live. If the building sells, the three holdouts will also get their cut.

The sale of the building — known as condo termination — is the only way out of a dire situation for people like Pabon, who still owes $35,000 on her unit. She receives a monthly social security check of $447 and earns a little extra cash cleaning apartments and altering clothes.

Still, she struggles to make her monthly $379 mortgage payment and the condo’s $180 maintenance fee. Relatives pitch in to help pay for utilities.

Pabon’s neighbors share similar stories. Gustavo Tejeda, 80, shares a two-bedroom unit in the building with his half-brother Aldo Lopez. The two men, who grew up in Cuba, want to move closer to their remaining relatives, who live in Westchester and Doral. But they’re tied down by ill health and a $152,000 balance on a reverse mortgage they took out on their Habana Condos unit, which Lopez bought in 1973 for $25,500.

“Our cousins have always wanted us to live closer to them, and we want to leave,” said Tejeda, who is recovering from bladder cancer surgery. “The traffic is horrible. I’ve stopped going out at night because I don’t feel safe. And I was standing on my balcony last night and I saw two kids at the gas station having sex with their clothes on! This area has changed a lot.”

A way out

By enlisting a broker to sell their building, the owners of the Habana Condos are taking a proactive approach to Florida’s condo termination statute. The law was enacted in 2007 to allow owners of condos in deteriorating buildings on desirable locations to cash in on the value of the land. Owners could sell as a group provided at least 90 percent of them agreed.

After the 2008 recession, real estate values plummeted and developers took advantage of the law to buy out desperate owners stuck with overvalued condos, then turned the buildings into rentals. Some condo owners who wanted to stay were outvoted by their out-of-town neighbors, who didn’t use the units as a primary residence, and were compelled to sell.

In June 2017, Gov. Rick Scott signed Senate Bill 1520 into law. Now, at least 95 percent of owners must agree to sell.

“The whole idea behind the new bill was to protect people who were in occupancy so developers couldn’t force them to do these terminations,” said Martin A. Schwartz, a partner at Bilzin Sumberg who specializes in condo laws. “Now we’re back to what the original statute envisioned: To give owners a way to get out of a project that has seen its better days and unlock the value of the property.”

Most condo terminations target buildings located on waterfront property, which has become exceedingly scarce. In March, developer OKO Group paid $48 million to buy out all 61 units in an 11-story condo building at 175 SE 25th Road that was built in 1971. In its place will rise a 47-story luxury tower, Una Residences, that will feature panoramic views of Biscayne Bay to the north, east and south.

Growing interest

Although Little Havana is landlocked, with none of the valuable waterfront that developers look for, major investments in the neighborhood continue to grow. Last week, the New York-based Gateway Realty LLC paid $5.6 million for a portfolio of 57 rental apartments spread out over five contiguous buildings at 2127, 2128, 2136 and 2248 SW Fifth Street and 2135 SW Sixth Street — just a mile west from Habana Condos.

These two apartment buildings at 2128 and 2136 SW Fifth Street in Little Havana are part of a portfolio that was sold to a New York-based investor for $5.6 million.

Carlos Villanueva, district sales manager for Keyes Real Estate, handled the transaction. He said the buyer is treating the purchase as a long-term investment. — which means current tenants will remain in their homes for the foreseeable future.

“The density and impact of development in the [downtown] business district is spilling over to Little Havana,” Villanueva said. “The cost of land acquisition here is much less expensive than in Brickell, which is in the double-digit millions. Part of the interest in Little Havana is its proximity to downtown Miami and its plentiful workforce housing, which makes it extremely desirable. Out of every 10 calls I got about this property, eight of them were from out-of-town investors.”

Norman Smith Becerra, the broker associate with Weichert Realtors Best Beach Real Estate who is representing Habana Condos, said he arrived at the asking price of $5.2 million by factoring in the sale of the 31,500 square-foot lot at 420 SW Seventh St., which is adjacent to the condo building. The property was bought in 2015 for $8 million by Megacenter US, a subsidiary of the Chilean company Red Megacentro. The company has started construction on Megacenter Brickell, an 11-story mixed-use facility that will combine office, storage and retail spaces.

“The Habana Condos lot is 15,000 square feet, which is half the size of the Megacenter lot,” Becerra said. “So that’s $4 million. Then you include the existing condo building, which is 13,500 square feet. You don’t have to build something new, so that lowers construction costs.”

Realtor associate Norman Smith Becerra has been hired by the owners of Habana Condos in the hopes of selling the property to investors. Jose A. Iglesias

Becerra previously helped the 101 owners of the former Atlantic Princess Condominium at 3120 Collins Avenue in Miami Beach sell their building to the London-based Patron Capital investment group in 2015 for $26 million. That building reopened in October as an upscale hostel — the first U.S. location for the European brand Generator.

Because the Habana Condo sits on the same parcel of land as Megacenter Brickell, the property’s zoning has changed to allow for a variety of usages for the building, including a hotel or bed and breakfast. Becerra is petitioning the City of Miami to upzone the parcel, so a developer could add more floors to the building.

Instead of listing the property on the open market, Becerra is approaching investors searching for real estate that is projected to appreciate. If recent transactions around the area are any indication — a Shell gas station just a block away at 401 SW Eighth Street sold in 2013 for $15 million — the timing for the Habana Condos sale could be spot-on.

“What these residents are doing is proactive,” said Andrew Frey, founder of the real estate development firm Tecela, which has overseen several residential projects in Little Havana. “Rather than wait until there’s no residual value left to the building and they would only get paid for the land, they’re using the value left in the building to get paid more. That’s a good strategic approach and a way for these legacy owners to get paid for having made a small investment in the neighborhood years ago.”

Megacenter Brickell-Borges architects 01.jpg
Architectural rendering of Megacenter Brickell, the 11-story mixed-use project that will combine office, storage and retail spaces at 420 SW Seventh Street. BORGES ARCHITECTS

Miami, Florida, November 20, 2018 - The owners of Habana Condos, 424 SW Seventh Street in Little Havana, have joined forces and hired a realtor in the hopes of selling the property to developers. Jose A. Iglesias