Welcome to the first column by veteran real estate reporter Alexei Barrionuevo, whose analyses on housing trends, real estate deals, and major business moves will appear weekly, right here on Curbed.
The future of high-end luxury living in Miami Beach doesn't mean a 50th-floor penthouse. Instead, big-ticket buyers are being wooed into condo towers less than 20 stories tall. Photo by Alexei Barrionuevo for Curbed.
Almost two decades ago, big-name developers, including Donald J. Trump, worried that height restrictions would limit the possibilities for high-end condos in Miami Beach. Trump famously lobbied city officials, in the mid-1990s, to build a 100-story hotel-casino with residences in what is now the South of Fifth neighborhood. Residents revolted, the city imposed height restrictions in the late 1990s, and developers had to rethink their grandiose condo fantasies.
Lately, while the sky may literally not be the limit for condos here, prices for luxury offerings don't seem to lack helium. The building limitations have breathed life into a different kind of Miami Beach condo movement: Call it the Boutique Boom.
Tall towers like the Continuum, the Apogee, and the Setai are yesterday's news. More modestly sized projects like Norman Foster's Faena House, Ian Schrager's Edition, and One Ocean are breaking sales records and waging war with starchitects, art installations, and obscene amenities. That Miami Beach code now restricts waterfront residences to 200 feet and those inland to 75 feet, seems to matter less and less.
The reason everyone wants in on this. Photo by Alexei Barrionuevo for Curbed.
None of this is an accident, of course. Developers and their sales teams have orchestrated the current buzz by laser-targeting high-net worth individuals to create virtual New York-style co-ops.
"The building restrictions themselves have caused this incredible market to evolve," said Mark Zilbert, president of Brown Harris Stevens Zilbert. "The buildings that are going to be in demand are these smaller buildings that are very unique."
New York developers, flush from successes in the high-end Manhattan market, increasingly have Miami Beach in their sights. They seem to be following the playbook that made condo buildings like 15 Central Park West and One57 dens for the clubby elite.
In the latest example, Michael Stern, founder of JDS Development Group in New York, is developing a new luxury condo in South Beach with Howard Lorber's New Valley Realty. They commissioned Jean Nouvel, the French architect, to design the 18-story project, which will face Biscayne Bay and have a private boat dock, Oren Alexander, a broker with Douglas Elliman, confirmed to Curbed.
The setting for JDS Development Group and New Valley Realty's impending development designed by Jean Nouvel. Photo by Alexei Barrionuevo for Curbed.
The developers have bought almost all the land in a dead end street facing Biscayne Bay. Photo by Alexei Barrionuevo for Curbed.
Alexander, who handled sales for Faena House, was at the center of a strategic marketing effort there that targeted "friends and family" from the super-elite of New York's finance and art worlds, including Lloyd Blankfein, chief executive of Goldman Sachs, and gallerist Larry Gagosian.
Zilbert recalled with awe how exclusive the process seemed at the time. "Initially, you couldn't get information about" Faena House. "They had to invite you to learn about it." But just enough VIP buzz seemed to leak out. "We would get reports: Ted Danson just left the sales center there," Zilbert said. "It was kind of like this paparazzi thing." One common denominator, Alexander said, was the buyers were all "very significant" contemporary art collectors. "You just need to identify who those people are and crack that code," he said.
Douglas Elliman never paid for any print advertising for Faena House, Alexander said. Yet, he boasted, the project's "conversion ratio" of buyers versus visits "was among the highest ratios I have ever seen."
When it debuts, Faena House will break virtually all the condo sales records on Miami Beach. The penthouse will reportedly sell for a record $60 million—$10 million over asking—making it the most expensive home ever sold in Miami-Dade County.
Faena proved that building restrictions, in the end, "fell in line with where luxury was going" for the super-elite. "Real luxury is limited, it is exclusivity," Alexander said.
The Elliman agent is employing the same friends and family approach to his latest sales effort, 87 Park, a 68-unit project on 16 floors designed by Renzo Piano. It will open a sales office in the next two weeks. Interested buyers have already reserved about one-third of the residences, he said. One bedrooms will start at $1.6 million and four-bedrooms at $10 million, with some ocean-facing corner units going for more than $3,500-a-square-foot.
Zilbert cautioned that targeted marketing of the boutique condo projects could be inching a little too close to Fair Housing laws. Alexander shrugged off that suggestion. "You are not denying anyone to walk into the sales office," he said. "Are you specifically targeting certain people? Yes. But that is not discriminatory, it is strategic."
Of course, not all developers are buying into the hype that shorter is better. Russell Galbut, managing principal of Crescent Heights and a Miami Beach resident, said taller buildings with a smaller footprint contribute less to flooding than shorter, squatter buildings. With sea level rise more and more a reality in Miami Beach, that should matter, he said. "We have to get something done here," he said. "We are drowning."
In 2014, Galbut tried to lobby the city to let him build a 50-story tower in a section of South Beach zoned for a maximum of 15 stories. It is one of the last large assemblages of South Beach land. As part of the same project, he proposed creating a public park to help alleviate sporadic flooding. In an email last year, Philip Levine, the mayor of Miami Beach, smacked down "Stormwater Park," accusing Galbut of proposing a high-end development "under the guise of flood prevention and combating sea level rise."
After the mayor's rejection, Galbut went ahead with his previously approved project: 445 rental apartments with 60,000-square-feet of retail space in five, seven and 10-story buildings. He said he expects to complete them around mid-2017.
In the Boutique Boom era, Faena House is proving something else: Neighborhoods alone no longer rule the day. If you build the right building you can create your own super-elite country club. Stern and Lorber hope to prove that with the Jean Nouvel project off West Avenue.
The bay-facing neighborhood does not have the cache of South of Fifth, the quiet enclave ringed by the towering condo towers of the pre-restrictions era. Lately, workers have ripped apart swaths of Alton Road and West Avenue to install massive pumps under the streets to push rising flood waters out to the bay. For a few months in 2014 a knee-deep moat sometimes formed in front of the neighborhood Walgreen's.
Nevertheless, with water-facing lots in scarce supply, the Miami Beach market is waking up to the appeal of spectacular bay views, which many local residents quietly prefer to ocean views. That would help explain Stern's summer buying spree in Miami Beach. In May and June, an affiliate working with JDS spent $42 million for 13 properties spread over 1.4 acres. Most were rundown one and two-story dwellings.
One owner, at 1335 Monad Terrace, has held out. Public records list the owner as "1335 Monad Terrace LLC," with Stefania Scaffidi as the registered agent. She bought her two-bedroom, one bath home, built in 1940, for $500,000 in 2010. Now she wants $10 million for the 3,500-square-foot site, said Kevin Torres, a superintendent with Plaza Construction, who was overseeing the demolition of the homes in mid-October. That would top the $9.8 million that the JDS affiliate paid for the 1365 Monad Terrace, which is the same lot size.
When I went by last week looking for Scaffidi, I found the home dark and shrouded with massive shrubbery. A lonely looking cat hung around the front stoop. A no trespassing sign greeted visitors: "Violators will be shot. Survivors will be shot again."
None of this seems to faze Stern and his team. Torres said the local project manager working for JDS has been talking to Nouvel, the architect, about "designing around" Scaffidi's home. If it comes to that, one could suppose the savvy marketers will create an art installation to camouflage the odd gap the home would create. It could only make Monad Terrace more "boutique."