illustration by Peter

Billionaire
Beach
by suzanne mcgee | illustration by Peter Crowther
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.
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Sept Étoiles
sapphire and
diamond
necklace, Van
Cleef & Arpels
(price on
request).
One-ofa-kind
jewelry
is specifically flown
in during Art Basel
to be showcased and
sold to the most
exclusive shoppers.
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M
iami 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 privatejet-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 ultraluxury
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.
S
ingle- 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.”
Miami will soon be home to
50 deep-water slips capable
of accommodating mega-yachts
over 400 feet long.
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N
$428 million in sales.
ow, 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
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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,
PHOTOGRAPHY COURTESY OF THE COLLECTION/MCLAREN USA (CAR); OPPOSITE PAGE: COURTESY OF THE ARTIST AND THE GALLERY (PAINTING)
Last year The Collection,
a luxury car dealer in Miami,
had its best year to date, with
Art Fair #2, by
Eric Fischl,
2013, Mary
Boone Gallery.
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.
P
eebles, 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
Galleries
displayed a record
$3
billion
worth of art at 2013’s
Art Basel Miami Beach.
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This past year Net Jets
arranged around
200 flights to bring
more than 800 guests
to Art Basel.
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.
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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.”
A
nother 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
Betting on Miami
More and more hedge funds and financial firms are
setting up shop in South Florida.
M
Despite not being built
yet, The Faena House is
100% sold out.
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.” OD
anhattan has Hedge Fund Alley—a stretch of 57th
Street that scores of financial wizards call home. Can
Miami replicate this success story by convincing a
critical mass of hedge fund managers to relocate to Florida,
forming a kind of “Hedge Fund Bayou”?
It is certainly trying, and the current wave of billionaires
taking up residence in the city include a pioneering group of
hedge fund managers. Some are dipping their toe in the
water, buying a second home in Miami, say, or opening a
second office in the city. Owl Creek Asset Management, for
instance, may still have its main office on Fifth Avenue, but its
founder, Jeffrey Altman, has bought a home in Miami Beach,
says the city’s mayor, Philip Levine.
Others are making a bigger commitment. Everest Capital,
accustomed to doing business in markets that others look on
more warily—its major investments are in emerging and
so-called frontier markets, such as China, Brazil, and Saudi
Arabia—has shifted its US headquarters to Miami. Eddie
Lampert, of ESL Investments, has moved both his personal
and business headquarters to Miami. Lampert himself
dropped about $38 million for an Indian Creek Village
mansion, and the official fund headquarters is now in Bay
Harbor Islands. Mark Spitznagel of Universa Investments
packed up his things from sunny Santa Monica for the sun of
Miami, and plans to have 25 employees here. It was a financial
move so important to the state of Florida that Governor Rick
Scott announced the move.
Now that financial markets have become so computerdriven, it doesn’t much matter where the person placing
trades resides, as long as the computer infrastructure
connecting him (and the vast majority of the time it’s still a
“him”) to the exchange on which the trades take place is fast
and efficient. In the case of ESL, many back-office employees
still work at the firm’s former offices in Greenwich,
Connecticut; other hedge fund managers have simply
persuaded their key employees to relocate. Mutual funds and
private-equity firms, such as Fairholme Capital Management
and HIG Capital, are already up and running here in Miami.
The sell for all of these companies, besides the weather, of
course, is the tax advantage. With the popular pressure
building to reclassify investment gains as ordinary income
rather than capital gains—a move that would put a big dent
in their personal net worth—anything that might help the
hedge fund managers cut their tax liabilities is usually more
than welcome. As DDA Chairman and Miami City
Commissioner Marc Sarnoff recently proclaimed, “Financial
firms can access the same technology, the same high-quality
office space, and the same cosmopolitan lifestyle in Miami
without paying sky-high income taxes.”
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