Why Miami's Billionaires Are Staying Put
by suzanne mcgee
No longer a resort stop on the way to or back from the rest of the world, Miami is becoming the go-to destination for the world’s wealth.
Miami as a millionaire’s playground? Been there, done that, got the tuxedo. That was the Miami of the 1930s through the 1950s, culminating in the years when Dean, Sammy, Frank, and the rest of the Rat Pack made Miami Beach clubs like Copa City and the iconic Fontainebleau hotel a part of their lives.
Fast-forward five decades and the wheel has come full circle. This time around, however, Miami—and Miami Beach, in particular—isn’t just appealing to plain-vanilla, single-digit millionaires; it’s an elite group of billionaires who have rediscovered the city. Instead of just dropping in once or twice a year for a few days to see what’s happening at Art Basel Miami Beach and catch up with friends, they’re looking about, liking what they see, and deciding to stick around for a bit longer. They fly into town in their private jets, using one of four South Florida private jet-landing airports, then book a suite at whatever happens to be the hotel of the moment, and perhaps drop $20,000 to rent a Lamborghini Aventador to drive around South Beach.
While in town, they realize that not only is the weather fabulous, the beach great, and the club scene exciting (none of this has been in doubt), but also that their favorite restaurants are now to be found in Miami, just as they are in New York (Wolfgang’s, Cipriani) or London (Zuma, Nobu). They can find the same stores that they do in Paris or Hong Kong as well as perhaps even some special items they can’t source elsewhere. Here in Miami, the cultural life is increasingly vibrant—a new symphony hall, a new art museum—and yet there’s a laid-back vibe that many other big cities simply can’t offer. So, why not buy a condo—or two or three? And art and furniture? And a car that’s always gassed up (or in the case of the many Teslas down here, charged up) and ready for you.
The ranks of the world’s ultrawealthy have decided to admit Miami to the list of their favorite cities, boosting it to number seven—ahead of Paris and Dubai—in this year’s annual survey by Knight Frank, a London real estate consulting firm, up from eighth place in 2013. (London and New York constantly jostle for first and second position; Miami is the only other US city to make this year’s list.) It’s the quality of life that this elite group really loves, ranking Miami fourth on that criterion. For them, it’s no longer enough merely to be birds of passage, as they are in so many other cities worldwide; they want to stick around.
The results can be seen most readily in the frenzy of ultra luxury waterfront condo construction activity. Consider, for instance, the 60-story Porsche Design Tower Miami in Sunny Isles Beach. Already 85 percent sold, the condos, whose price tags start at $6.1 million and range as high as $32.5 million, reportedly count some two dozen billionaires among the buyers. Those moving in will join the likes of Micky Arison, Norman Braman, Jorge Pérez, Edward Lampert, and a handful of other billionaires who have called Miami home for decades. As of 2013, there were approximately 24 billionaires living in South Florida (not including the many mysterious international billionaires who often go unnamed in megaresidential purchases).
For the ultrawealthy, the prices in the Porsche Tower could look downright modest compared to Manhattan, where iconic apartments like those at 15 Central Park West might start at the high end of that range. At the Porsche Design Tower, when the billionaires take residence in early 2016, they will get plunge pools and summer kitchens on their 15-foot-deep terraces, private wine lockers, an oceanfront ballroom, a car concierge, and yes, car elevators allowing them to park their actual Porsches (or Jaguars or Lamborghinis) in sky garages adjacent to their condos.
Single-and double-digit billionaires are lining up to sign on the dotted line to purchase these and other ultraluxury homes. Goldman Sachs Group CEO Lloyd Blankfein snapped up a Miami home for himself and his family at the $1 billion Faena Miami Beach. When he’s at the Rem Koolhaas–designed arts center, he’ll be able to swap Wall Street gossip with Leon Black, the billionaire founder of Apollo Global Management. Maybe Black will choose to hang his recently purchased $120 million pastel version of Edvard Munch’s The Scream on the walls of his new Miami home. “Miami has grown up,” says Richard LeFrak, a New York–based real estate developer with properties around the globe. “It was Grandma’s place to go for a vacation, and then it became a fun mecca for the really young crowd.”
Last year The Collection, a luxury car dealer in Miami, had its best year to date, with $428 million in sales.
Now, in contrast, LeFrak says, there’s something for everyone. “My wife is a composer; she loves the Frank Gehry–designed concert hall,” which opened in 2011 and is home to the New World Symphony. LeFrak’s name is intimately associated with the New York real estate scene—so much so that LeFrak City, a Queens apartment complex, is a city landmark. But that hasn’t stopped him from spending more and more time in Miami, a trend that began when he started working on the recapitalization of a troubled bank in 2009. Before long, he found himself as an investor in another financial institution and, as a result, owning a large inventory of unsold condos in Miami. “The world was yelling that this was a 20-year supply, a glut on the market, and we had real-time information that this was nonsense, that buyers were coming up from Latin America and literally inhaling them.”
LeFrak remains a die-hard New Yorker, but the amount of time he has spent in Miami has doubled, to about six weeks a year, and he now owns four condos in the city. He’s been spotted everywhere, from celebrating 1 Hotel & Homes (a coproduction with Barry Sternlicht, chairman of Starwood Capital Group) to dinner at Bâoli. Would he move here permanently? “I could,” he says, slowly. “A lot of my friends are thinking about Miami; they say it’s different than it was or than they thought. More and more, they’re willing to plant a stake in the ground.”
The more members of the affluent crowd who make the move, the more follow. That’s the kind of chain reaction that LeFrak and others say is spurring the current real estate boom. “People like to be around their peers,” says Don Peebles (net worth: $350 million), CEO of a privately held, multibillion-dollar portfolio of real estate investments and developments. “Increasingly, that happens in Miami.”
One of Peebles’s own real estate development partners is Steve Witkoff, CEO of The Witkoff Group, which has a portfolio of residential and industrial real estate. “Our offices are 10 blocks apart in Manhattan, but I see him more in Miami than I do there,” Peebles adds.
Indeed, wanting to hang around with fellow citizens of what journalist and author Robert Frank dubbed “Richistan” is one of the characteristics that distinguishes the world’s 1,600 or so billionaires and its slightly larger group of those able to boast of a net worth in the seven or eight figures. If you have a private jet and use it to hop from art fairs to business meetings to fashion shows, dropping in periodically at one of the four or five homes you may own worldwide, it’s tough to mingle with the hoi polloi. Only that tiny circle of peers really understands your world. And if a growing number of those peers are choosing to spend more of their time in Miami, shopping in the Design District or Bal Harbour (whose stores generate more in sales per square foot than any other mall in the world), then you want to be there too.
It also makes sense economically. Florida is the ultimate in tax-friendly states: no personal state income tax to pay and no state inheritance tax. “Not only is it a great place to live, it’s also a great place to die,” quips Miami Beach Mayor Philip Levine. And as long as you’re living, odds are you can do so more inexpensively—even at the ultraluxury end of the spectrum—than you could anywhere else on that Knight Frank list.
Art Fair #2, by Eric Fischl, 2013, Mary Boone Gallery.
Peebles, who built his fortune doing business in Washington, DC, rattles off the numbers. Buying a condo in a top New York building will cost you $5,000 per square foot; in an ultraluxury apartment, you’ll pay $13,000 per square foot. In Miami? Those figures are closer to $1,000 and $6,500, respectively. “It’s tough to pay more than that,” says Peebles. And in Miami, you get oceanfront views; in New York, if you want ocean, you have to venture out to the Hamptons, where lots on the waterfront start at $30 million for houses that most owners will only use a few months of the year. “A friend of mine paid $100 million for the lot alone—and then he had to build the house,” says Peebles, whose latest Miami venture, The Bath Club Estates—13 ultra luxury, customizable residences priced at $10 million to $55 million—are a bargain in comparison. He points out that in the same time it takes him to make the arduous weekend drive out to his Bridgehampton house from Manhattan, he can hop on his jet and travel all the way down to Miami.
While Peebles’s target audience is domestic, those bargains are equally compelling to buyers from Europe. Miami also offers a way for ultrawealthy citizens from Russia, China, and Latin America to hedge some of their bets on their still-emerging local economies. As Edgardo Defortuna pointed out, when he first moved to Miami from Buenos Aires three decades ago, it wasn’t just exciting, but safe—he could drive his sports car down the highway without worrying about kidnappers. And that global twist to the tale may mark the biggest change since the last time Miami was this hot, back in the aforementioned Rat Pack days. “If Brazil is booming and Venezuela collapses, Miami benefits,” says Mayor Levine. “If Venezuela suddenly explodes, and Brazil goes south, we’d benefit as wealthy Brazilians choose to come to Miami.”
All that movement is spilling over into consumption, especially during the height of the billionaire season: Art Basel Miami Beach in early December. That’s when the jewelry and watch stores at Bal Harbour, always flush with one-of-a-kind items, fly in their priciest and choicest offerings from elsewhere in the world to tempt buyers. And unsurprisingly, that’s when top-tier luxury buildings make their most subtle and most convincing pitches to those who come for the art and decide to stick around for the lifestyle. “We try to entertain them, to show them the possibilities,” says Defortuna, “because they’re coming more often, staying for weeks at a time, and they know that trying to get a hotel for Art Basel is almost impossible. They can buy without having to worry about it; they can make another base here, whether or not they ever decide to relocate.”
Another element that has helped make Miami so appealing to the ultrawealthy today is its diversity. As real estate prices soar, diversity can all too easily evaporate. “If this became a homogeneous society of wealthy people, it wouldn’t be very appealing,” says Mayor Levine, who is focused on improving public-transportation links, “workforce housing” initiatives, and developing subsidized office spaces lining a park near Miami Beach’s new convention center that entrepreneurs can rent inexpensively while they’re developing new business ideas.
However sunny the weather, the horizon isn’t without its clouds. There’s a hangover effect of the “Occupy” movement and the 2012 presidential election debate, in which the growing national wealth gap emerged as a topic of contention. With the Miami City Commission’s decision to give the green light to a $600 million project that would include berths for billionaires’ superyachts, Miami Herald columnist Fred Grimm vented his wrath, arguing that Miami seems to exist only to solve “rich guy travails” like trying to “parallel park a 150-foot yacht” as “we fawn, we grovel, we see to the whims of the super rich.”
That’s one argument. Another is that to the extent that these ultrawealthy individuals put down roots and invest in the community, what we’re witnessing today could just be the earliest stages of a far more dramatic and long-lasting transformation of Miami into another London or Hong Kong. “The Miami of 10 years ago doesn’t resemble what is here today,” argues LeFrak. “A decade from now, it will be radically different again.”
illustration by peter crowther; PHOTOGRAPHY COURTESY OF THE COLLECTION/MCLAREN USA (CAR); COURTESY OF THE ARTIST AND THE GALLERY (PAINTING)