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sustainable micro-cities in Latin America with Miraval Holdings
96 Plays1 year ago
Welcome to episode 064 of the Green Healthy Places podcast in which we discuss the themes of wellbeing and sustainability in real estate and hospitality.
I’m your host Matt Morley and in this episode I’m talking to Gregorio Esteban, Founder of Miraval Holdings, a sustainable real estate developer committed to delivering high-quality, housing solutions for the Latin American market.
As you’ll see, they are also big on Environmental, Social and Governance issues, known as ESG, with a particular emphasis on the social angle, given that they have five projects currently in Colombia, each at different stages of planning, construction and delivery.
Colombia has an acute housing shortage, so Miraval aim to help plug that gap with sustainable middle-class housing.
- GUEST: Gregorio Esteban / https://www.miraval.com.co/
- HOST: Matt Morley / https://biofilico.com/
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Transcript
Introduction to Gregorio Esteban and Miraval Holdings
00:00:11
Speaker
Welcome to episode 64 of the Green Healthy Places podcast, in which we discuss the themes of wellbeing and sustainability in real estate and hospitality. I'm your host, Matt Morley. And in this episode, I'm talking to Gregorio Esteban, founder of Miraval Holdings, a sustainable real estate developer committed to delivering high quality housing solutions for the Latin America.
00:00:36
Speaker
As you'll see, they're also big on environmental, social and governance issues, known as ESG, with a particular emphasis on the social angle, so the S in ESG.
Tackling Colombia's Housing Shortage with Green Solutions
00:00:47
Speaker
given that they have five projects currently underway in Colombia, each one at slightly different stages of planning, construction and delivery. But crucially, Colombia has an acute housing shortage. So Miraval set out to help plug that gap with middle class housing that is premium, but also green and healthy. I'll let Gregorio fill you in on the rest of their fascinating story and the idiosyncrasies of
00:01:14
Speaker
doing what they do in a market like Colombia, and as we'll see, additional latin markets such as Panama and Costa Rica. So here is Gregorio Esteban.
00:01:29
Speaker
All right. Let's do this.
Vertical Integration in Real Estate Development
00:01:31
Speaker
Let's focus first on your Villa Nela project, if we may. Perhaps you could describe that development to us and talk us through how you've adopted what you described as a vertical integration strategy. And I understand that that includes everything from infrastructure through to commercial real estate components, although essentially it is a residential real estate development. So let's start with that.
00:01:58
Speaker
Yes, the vertical integration comes by really as a need because when you are developing the type of the master planet, when you're trying to develop the type of projects that we are doing in Latin America, you have to face that there is no infrastructure usually ready to serve all the
00:02:26
Speaker
buildings, houses, et cetera. So the first challenge that we face when we wanted to start our project was the lack of infrastructure. So we saw that as an opportunity. Then we started planning every single thing from scratch, like urbanization have to be in a way also hold all the water system
00:02:53
Speaker
could work because there was no any water system around. Every single thing related to infrastructure should be developed and constructed and built. So the vertical integration came just by as a normal thing. We have to turn ourselves from just a pure developer to a master planet developer by need. So basically just that. I mean, it was a question of need. If we don't do it that way,
00:03:22
Speaker
Could it be made it? So just that. Well, you certainly make it sound almost easy. But of course, it's not. And it's a huge amount of extra work and expense. But also, I guess that's where the opportunity lies.
Strategic Location of Villa Nela Project
00:03:39
Speaker
So essentially, you've created or are in the process of creating a microcity there on the Caribbean coast of Colombia.
00:03:47
Speaker
It's a strategic location. You're a short distance from the main city of Cartagena, the Indias, and various other places of interest, right? And, you know, basically you built an environment that's combining urban amenities with all the necessary transport connections and services rolled into this natural tranquil setting for a residential product. So there is a lot going on there.
00:04:14
Speaker
Arguably, I think one of the greatest challenges, but again, that's the opportunity, isn't it, doing what you do. So you've then sought out ways to perhaps corroborate your stance or to add additional gravitas to your stance on sustainability there.
Achieving Global Green Building Standards
00:04:34
Speaker
I know that you went for the Edge Sustainability Certification, so really sort of a green building, green real estate development,
00:04:43
Speaker
certification process, why did you align with them of any of the available options? And then as a sort of second part to that story, how did you end up with a B Corps process on your reporting standards? So again, really going for the world class benchmark in terms of how you report on your own sustainability standards as a group
00:05:10
Speaker
All right, from the very beginning, we were very conscious that if we want to progress on the developments that we are doing in Latin America, we should be a different type of company or we should portray ourselves as a different type of company because the S component is very important. B Corp is helping us
00:05:39
Speaker
to be perceived as that first and second it's obligating us to behave in a certain manner which is aligned with the reality of the region basically just that and the certifications that we are having in place or we are pursuing as well you know for our developments
00:06:03
Speaker
are pretty much aligned with the question of excellence or the let's call it the E of the ESG framework that we want to be aligned with. So having this kind of certificates just gives everyone the peace of mind that we are doing what we say that we are doing. I think there's a really valuable lesson in that from the real estate development perspective
00:06:33
Speaker
aligning with global standards, both at the corporate level and at the building level, essentially give you peace of mind. It's not always about
00:06:45
Speaker
reinventing the wheel or necessarily creating your own sustainability standards or trying to sidestep certain issues. If you're all in on green buildings, healthy buildings, creating healthy and green communities as you clearly are, then it makes total sense to commit both at the corporate brand level and at building level. And I think what you
00:07:10
Speaker
what you pull out there with your response was also something to do with how urgent the need is, particularly in Latin America. Not to the exclusion of other regions, because you could say, arguably, Western Europe, where I am. We're doing even more damage, in a sense, but it's probably more a case of a different type of damage in this society to the damage being done over there.
00:07:40
Speaker
I can completely see how the genius of these global standards, in a sense, is that they are applicable for slightly different reasons and with slightly different priorities in very different parts of the world. But in the end, it's all one planet, isn't it? That's the key here. And to do our bit as a developer, the key
00:08:06
Speaker
concept is to rely on the established standards and effectively stand on the shoulder of giants who've done the work, whether it's the well-building standard or EDGE or LEED or any of the others, to leverage the work that has been done and use that as guidance
00:08:29
Speaker
and as reassurance both internally for yourselves and externally for your buyers or for outside investors or anybody else looking on. I think that's a really valuable piece of insight from the inside looking out.
00:08:45
Speaker
We mentioned, I just mentioned buyers there.
Targeting the Aspirational Middle-Class Market
00:08:48
Speaker
So how would you describe the target market that you're after in Columbia for these sort of nature focused and sustainable residential communities? What type of demographic profile is typically most attracted to this kind of
00:09:03
Speaker
ESG-led positioning in Colombia and indeed around the region in Latin America. Are there any particular sustainability features, for example, that stand out as being particularly marketable or attractive for your target audience over there? You can probably tell what I'm trying to get at is whether there's any
00:09:25
Speaker
differences between the key purchase drivers in different regions of the world, even if the positioning of the project itself is essentially around health and wellbeing. So it'd be great to hear your thoughts on that. Well, as there is a structural deficit of housing, here is not so easy to respond. Usually,
00:09:54
Speaker
younger customers are usually more attracted to anything related to sustainability, just for generational alignment with the message. But we are targeting mainly middle class. That aspirational middle class, that is his second home, obviously his first home, you know, young people that's just getting married and wants to raise kids in a better environment, in a better
00:10:24
Speaker
place. But our target is pretty much middle class. And it's not a question of who is more interested in wealth or everybody's interested in sustainability, but not everyone or everybody can afford it. So at the end, we're just in that mid range because we don't do social housing. And we also we're not doing, you know,
00:10:52
Speaker
high profile or luxury properties even though you know the quality of the properties that we are delivering is very high so you know it should be the right set is to be middle class yeah I think that makes complete sense you've got this emerging middle class
00:11:10
Speaker
who have to some extent grown up with just this unbelievable natural context. I mean, anyone who spent any time in Colombia, the wealth of natural beauty there is just so impressive. And although the cities can be very dense and urban, you don't have to go far to connect with some of the most stunning natural landscapes that I've ever seen. And so that must be on some level part of
00:11:39
Speaker
natural of the local culture and so yeah it makes sense that a young 30 to 40 something middle class family looking for a premium lifestyle residential community are also interested in integrating an element of sustainability and in your case you know a considerable amount of sustainability planning that's gone into it. I think it also you know counter
00:12:06
Speaker
counters the previous suggestions or over the last decade or so, you know, there have been claims that perhaps sustainability is more for the upper end of the market, sort of more luxury offices or high-end offices, big budgets because it costs more. And there's always that conversation with clients around, you know, how much more expensive is it just because it's going to be sustainable or, you know, going to be geared specifically for health and wellbeing.
00:12:33
Speaker
your living proof that this can now be delivered in certain contexts in latin america for a mid-tier audience so obviously premium but without needing to go into the upper segment of the market where obviously you can judge more but also you then leave a lot more people out of the target market so allow me to push you if i may just on that topic of the
00:13:03
Speaker
cultural differences between Europe and Latin America when it comes to, let's call it real estate ESG, but essentially we're talking about green healthy principles with a social equity angle as well.
Prioritizing Social Themes in Development
00:13:18
Speaker
So you spent time both in the UK, in Switzerland and in Latin America. How do you see
00:13:29
Speaker
there being differences and equally similarities between the way these concepts are adopted and implemented in a local context. Is there anything in particular that is of acute urgency in the locations that you're developing in, in Latin America, for example? I don't know, provision of wastewater management or reliable power supplies, for example, that perhaps we might not consider as a first priority
00:13:58
Speaker
for a project here in Western Europe, but in certain locations that you're exposed to can be especially important, or is that being completely naive of me? I'll be very honest, it would be really interesting to hear your insider perspective on that one. Well, it's a completely different environment where you have to apply all the ESG parameters. In Europe, pretty much people, which is adapting and
00:14:27
Speaker
transforming certain ways of working, materials, et cetera. In Latin America, you have to adapt every single thing from zero. I mean, as far as I say, there is a lack of housing and there is a structural deficit. Not everyone, not all the developers are really aligned with this ESG framework of working because first of all, families and buyers
00:14:57
Speaker
once a house. If half the top of that, if you have the add-on of sustainability, it's okay as far as it's not more expensive. In the moment that it's more expensive, customers, buyers are going to look for a cheaper option. So it's something that goes in the shoulders of the developer. So we have to be very creative how to do this in the proper way and it's not really affecting the price at the end.
00:15:25
Speaker
Okay, so essentially it's about keeping the price point where it is or where it needs to be for your particular market, whatever the price per square meter might be.
00:15:39
Speaker
and not charging a premium for the sustainability, but using it as a USP, a unique selling point, a point of differentiation that creates standout in what I have no doubt is an increasingly crowded marketplace. You're ultimately trying to attract and win the attention of these potential buyers, and it's a strong narrative, a strong story for you to tell, but you have to
00:16:04
Speaker
make the numbers work and that means pushing it down onto the architects, the engineers, the sustainability consultants on your team and insisting that it doesn't impact the upfront capex too exponentially so that you're not putting yourself in a difficult position with the calculations on profitability and what have you. And how have you been able to integrate
00:16:34
Speaker
ESG strategy into these green micro city developments so far then trying then to distinguish between a green building sustainability piece and then an ESG piece. So environmental, social and governance, the far larger spectrum. What else are you aiming for?
00:16:53
Speaker
What are you looking to add to that list from an ESG perspective in the coming years? Perhaps something that's been impossible to achieve so far, but that may become possible in the coming years as you see it. So just be interesting to understand what you've achieved thus far and what remains to be achieved that you feel is within reach, but hasn't been possible up to now, but for a number of reasons. It'll be interesting to hear those reasons if you're open to sharing that with us.
00:17:23
Speaker
We've done that applying certain internal policies, allied with general concepts of ESG, but we cannot be 100% in compliance as a European company, construction company for obvious reasons. We have certain metrics that we have there too, like our general, the carbon footprint, et cetera, et cetera, and some others more related.
00:17:48
Speaker
to the S of the ESG framework that have to be with the social impact that we can be a part of in the place where we are making our developments. At the end, what we're doing is doing some kind of symmetry. It's not just the 33% each letter. It's probably more 70% the S of the social
00:18:14
Speaker
and the 15 and 15 more of the governance, which is a must, you know, we're a European company with a Latin American subsidiaries. And the E, the environment goes last, not because we want it, it's because we have first to deliver a proper solution for a house, just to have the customer really being aware that the E is very important on that. So we're just applied our own asymmetry in this model.
00:18:44
Speaker
Well, I appreciate that's a very honest answer that, yeah, ultimately you end up having to focus primarily on social themes within the overall context of sustainability because that's primarily where the priority is in Latin America.
00:19:03
Speaker
you can create a lot of impact with a few key initiatives on the environmental piece so it may not necessarily take up as much time perhaps as your social initiatives but you can
00:19:17
Speaker
do a lot of good, positive change in the world with a few key measures primarily around energy use, water consumption and waste management, for example.
Innovations in Modular Construction
00:19:28
Speaker
So if we can move on, I wondered what opportunities you might see for modular construction techniques to disrupt the real estate industry in Latin America. I've looked at it in the past for a project
00:19:42
Speaker
where there's a strong argument around modular construction that is all off-site, delivered to the site, pretty much ready to go, plug and play. You've got a lot less waste and you can really strip back a lot of the slack in the system around construction that can drastically increase your own
00:20:07
Speaker
sustainability credentials and equate to cost-saving measures as well, although obviously it comes with its own caveats around needing to ensure that the quality stays the same of the ultimate residential experience that you deliver. But you clearly know far more about that than I, so I'd really like to hear your thoughts then on modular construction in Latin America and how you see that playing a role in your business in the future.
00:20:37
Speaker
Well, I think it's a huge opportunity. The fact that modular construction makes everything easier, faster, and probably cheaper to have all the facts that can make it a winning proposal. Also, labor skills is something that still have to be very much improved in the region. So having this type of construction techniques can help a lot.
00:21:06
Speaker
Really. Well, I wasn't expecting that on skilled labor shortage, but of course it makes sense when I imagine myself being out there and trying to find, for example, skilled outstands, what have you in out of town locations. Yeah, I can see that that would be a challenge. And so how interesting the modular construction that
00:21:32
Speaker
many developers come out for other reasons, frankly, provides that additional advantage for you. And I think makes total sense because the technology has just advanced so much over recent years now that you're able to deliver the premium quality, even if considerable chunks of the residences themselves are built or constructed off-site and then shipped in.
Future Expansion Plans in Latin America
00:22:00
Speaker
Final question then, if I may, what plans would you have for other countries we've spoken about? Colombia, but I know you've been looking at Panama and Costa Rica as well. So what opportunity do you see for your developments there and how much do these
00:22:18
Speaker
Three countries, Panama, Costa Rica, and Colombia differ in their real estate industries. You presumably are able to see how you may need to adapt your product offering going into each one of these. Or do you feel that there is essentially a shared value system with your particular biodemographic and psychographics that is common to all three of the countries in the same region?
00:22:51
Speaker
Well, yes, we're right now in the moment of expanding to nearby countries like Panama, Jose, Costa Rica, Ecuador, Chile. We have seen huge potential in all the region for our model. Every country have difference, but also common points.
00:23:14
Speaker
One of those is the structural deficit, which makes probably easier the fact that people need houses and need proper houses, not just quantity, but also quality. But we would say that probably Panama and Costa Rica, people are more aware of this sustainability factor, just because
00:23:45
Speaker
each country have its own pace economically and culturally. But in the case of Colombia, the lack of housing is so huge that probably sustainability is not the main driver for a buyer to buy. So that would be the short summary of it.
00:24:04
Speaker
OK, awesome. Well, listen, thank you so much. It's been a really interesting conversation, quite unusual, in a sense, because we've been able to get into this kind of cross-cultural debate and take a little step out from my comfortable world of European real estate or UK real estate and look at Latin America for a change. So I really encourage anyone who's interested in finding out more to check out miraval.com.co will include
00:24:33
Speaker
all your social media links and the website links in the show notes.