Art Dealer Larry Gagosian Buys Faena House Unit for $13M

By Sunny Isles Real Estate Expert on May 5th, 2016

Faena Condos For Sale

If you’re remotely familiar with Miami Beach real estate, Faena House needs no introduction. The luxurious condo complex is one of the nicest in the city. The closest thing you can get to an objective ruling on this happened in September of last year when a penthouse went for $60 million, a new Miami record. While the previous record for a condo in Miami-Dade County was $3,342 per square foot, this transaction beat it handily with $4,794. See all available Faena condos for sale HERE.

Therefore, to learn that art dealer Larry Gagosian recently purchased a condo in the building for $12.995 million is suddenly a lot easier to believe. Still, let’s take a look at the details.

Gagosian

For those who aren’t familiar with the man, Larry Gagosian is an Armenian American art dealer and collector. He owns the Gagosian Gallery art galleries which enjoy an international presence. You can find them here in the U.S., but also in Paris, London, Athens, Rome, Hong Kong and Geneva.

The Unit

Gagosian will be laying his head down in unit PH-C of the 18-story Faena House according to Miami-Dade County records. The unit—one of 42 in the entire building—has four bedrooms and six-and-a-half bathrooms.

It’s 4,730 square feet, so Gagosian dropped roughly $2,747 per square foot. He also got a beautiful terrace to take in the view. That’s another 1,516 square feet.

Other Occupants

The new resident will be in good company. As we mentioned above, the building is notable for having the most expensive unit—per square foot—in the entire county, which is saying a lot.
Ken Griffin, a hedge fund manager and billionaire, is the owner of that unit. Still, with an annual salary that’s believed to be about $1.7 billion, the amount actually wasn’t that much (you can bet he owns other properties too).

In fact, Griffin shocked people a second time when he put the penthouse—and another unit in the building he owned—right back on the market. He paid $60 million for both and then listed them for $73 million.

Other extremely wealthy neighbors Gagosian will be seeing in the lobby include British billionaire, industrialist and philanthropist Alex Blavatnik. Lloyd Blankfein, the Chairman and CEO of Goldman Sachs lives there too.

Craig Effron—another hedge fund manager—is also a resident, as well as Mark Rachesky, Chuck Khubani and Jose Fanjul Jr.

If you’re feeling left out, don’t worry. The developer, Alan Faena, has plans to build three more oceanfront towers packed with luxurious condos just like the ones Larry Gagosian bought. Right now, the address for the initial one is 3315 Collins Avenue if you want to get an idea about what $13 million can purchase.

Whether or not Gagosian actually stays in Faena House or if he’s simply another investor will take some time to find out. However, if Griffin’s confidence is anything to go by, the luxurious tower may represent a real money-making opportunity. Worst case scenario, you have a beautiful home in one of the most sought-after buildings in one of the most sought-after markets in the entire world.

Tips to Avoid the All-new LLC Disclosure Law

By Sunny Isles Real Estate Expert on April 15th, 2016

Miami Beach condos for sale

Thanks to the new federal disclosure requirements, which go into full effect in March, Manhattan and Miami luxury real estate (click here to view site) buyers are going to be thrust into the spotlight.

No longer is anonymity the name of the game, with this new requirement, these high-end buyers are going to have the shield of a limited liability corporation taken away. While this will not result in the complete end of anonymous buyers, it is going to limit their “hiding” quite a bit.

This new requirement is an effort that has been put forth to try and uncover any illicit funds that are being laundered through luxury real estate in New York and Miami. According to the U.S. Treasury, cash purchases made in Manhattan and Miami through shell companies are going to be tracked and will apply to deals that are $3 million and more in New York and $1 million and more in Miami. This means that title insurance companies will be required to disclose the identity of the buyer to the government regulators.

Some strategies that buyers can use to help overcome these new requirements can be found here. While they are not ideal for everyone, they can provide some effective steps in avoiding this new tracking requirement.

Utilize a Straw Buyer

Buyers can set up a “nominee agreement,” with their chauffeur, where the chauffeur is being named the owner of the LLC that is purchasing the upscale condo. Once complete, the buyer is able to purchase the LLC, rather than the condo, from the chauffer. This means the transaction is not on the books.

Set Up a Non-LLC, Partnership or Trust

While each member of an LLC has to be identified, there are other legal entities that only have to disclose an owner that holds over 25 percent of total ownership. If the shell company has 100 shares that are divided equally among 10 different people, they are able to remain anonymous.

Purchase Via Wire Transfer

The government regulators are only tracking buyers who are paying by certified bank check or cash. If you pay with a wire transfer, all this can be avoided. However, there are some tight banking regulations that will require the customer be identified, as part of the “Know Your Customer” requirement.

Opt Out of the Title Insurance

There is really no comparison to a $1 million lawsuit when you have just purchased a multi-million dollar condo. While this is a rare occurrence, buyers can opt out of the title insurance completely.

Wait about Six Months

This new requirement will be effective starting March 1st and will expire on August 27th. If you are really nervous, just wait six months to make the purchase.

Buy Commercial

While this may seem obvious, the fact is, the current order only applies to the residential purchases made in Manhattan and Miami. All commercial purchases have been excluded, which means that buyers are able to purchase properties for investment while retaining a relative amount of anonymity.

For more information on luxury condos in Miami Beach for sale please contact One Sotheby’s International Realty office at (305) 336-0457.

The Real Estate Cycle in Miami for 2016

By Sunny Isles Real Estate Expert on April 5th, 2016

Miami Beach condos for sale

Even though there is quite a bit of confidence among developers in Miami that the real estate market will not face much of a downturn during 2016, there are some experts who are still cautioning that the sales are going to continue to fall. This may result in some type of mild recession when December rolls around.

Prices are likely going to continue to go up – (see Miami Beach prices for condos for sale) and appreciate during the first portion of the year; however, at a rate that is much lower than usual. During the last portion of the fiscal year, the prices will likely flatten, due to an increase in inventory, as well as a slower demand from the buyers in Miami.

The Selling Trends in Miami

According to Ugo Colombo, the CEO of the CMC Group, when condo sales begin to move slower, it is a sign of a real estate market that is healthy. He also stated that this means that the market is able to level off at rates that make the progression sustainable. There is no realistic way to continue to sell 100 units each month. Currently, a healthy balance is present in the market regarding supply and demand.

Since the middle portion of 2014, the increase of foreign buyers helped to impact the condo boom. This began directly after the recession in 2008 but has now has begun to taper off because of the reduced value of foreign currency compared to the value of the U.S. dollar. However, Colombo stated that the real estate market in South Florida has gotten so diverse that it is able to successfully weather the economic issues in countries where a number of developers cull their buyers.

Foreign Investments Increasing

There are a number of people from the Middle East, Asia and Europe who are interested in buying who are new to the area, having never made a purchase in the past. The Brickell Flatiron condo project is also beginning to experience more steady sales from buyers that hail from the Caribbean, Mexico, Colombia and even domestic markets, such as New York.

The Melo Group’s Carlos Melo, which has currently developed condo and apartment projects in the Edgewater area, as well as the Arts & Entertainment District stated that there will be a consolidation seen in the South Florida real estate market for 2016.

Is an Overextension in the SoFla Condo Market Coming?

The most recent statistics that are available have indicated that the condo market in South Florida is starting to see the struggle associated with overextension. According to the report from the Association of Miami Realtors, there was a total of 14,770 condo transactions throughout November, which was down from the 17,142 that were seen in the same period the previous year.

With the sales slowing down, the total number of condo buildings that are planned or being constructed has continued to increase. There are plenty of condo towers being built currently and a number that are still in the planning and proposal phase, which means that they are likely to be developed and completed in the next few years.

Home Sales in Miami Breaking Records for 5th Year in a Row

By Sunny Isles Real Estate Expert on March 28th, 2016

Miami Beach homes for sale

Before December, the area of Miami was on track to break the all-time home sales record with almost 13,000 homes sold. For the past five years, the Miami-Dade area has put up a home sales record that it continues to beat, year after year.

When you take a look at the sales figures that were posted in November, there is no question that this area is on track to do it, yet again.

In the previous month alone (November) the Miami-Dade area saw a total of 907 single family homes sold – see website for recent Miami home sales. This brings the total for the year to an impressive 12,857 – just through the month of November.

Setting New Records

The record for the 2014 calendar year was 13,521, which means that it will not be impossible to reach and overcome. This actually equated to 21 homes sold each day, or one home per hour for the entire month of December.

This impressive sale momentum is not going to end anytime soon, either. This trend is expected to continue moving strong well into 2016, with more developments being offered and more homes coming available.

Also, the median sales price for the single family homes in the Miami-Dade area were $274,900 back in November, which was up a total of 12.2 percent from the previous year. For the condos, the prices increased by to an average cost of $203,000, which represents a seven percent increase when compared to the same period in the previous year.

Declines in some Real Estate Sectors

Even though they are nearing the record, the residential market for the Miami-Dade County is still seeing some declines. For example, the sales that were posted for November by the Miami Association of Realtors was down by 6.7 percent when compared to the year over year numbers for the single family homes in the area. However, the number of new listings being sold is still going up. In fact, the total number of new listed single family dwellings that were listed during November was up by 3.5 percent to 1,785 from the previous year’s listings from November of 1,725.

The Thriving Condo Market

However, there is another side. The condo market in Miami-Dade has sped up in the previous months and the sales are going up with more units available than ever before. The sales for the current condos for the month of November increased by 1.9 percent from last year and jumped from just 1,077 total closings to a total of 1,097 closings this year.

There is no question that the number of new listings for condos in the Miami-Dade area is going to continue to increase. There are at least 11 projects in the planning or construction phases, which equates to almost 4,000 new units, coming in the next five to 10 years. While the increase in condos from the previous month was only 12.2 percent, this is a trend that is going to continue for the foreseeable future. While these condos are coming in quickly, they are also highly sought after, which is helping to strengthen the economy.

Wealthy Brazilians Flocking to Miami Real Estate but Local Economy not Benefiting

By Sunny Isles Real Estate Expert on March 20th, 2016

South Beach real estate

There are many wealthy Brazilians that are attempting to escape an unstable economy at home by investing in an area they deem as safe: South Florida.

Many other people are doing this, as well, including the French, Turks, Venezuelans, Mexicans, Colombians and Argentinians – virtually anyone who has a bit of money to shelter are taking a direct flight to Miami.

The influx of cash has worked to drive the latest change in the ever-evolving transformation of Miami. No longer a 19th-century rail stop, but instead, a retiree and tourist hub that is also considered a haven for Cuban refugees and a harbor for global investors, the Miami lifestyle has changed drastically. The fact is, there is no skyline in the US that has experienced a more dramatic change due to foreign investment in the past 10 years than Miami. What was once empty, worn-down lots are now filled with swanky retail shops and Miami luxury condo towers. Developers have no expectations that this high demand will end anytime soon.

The Problem for Miami Residents

However, the Miami people as a whole have not really benefited from all this glitz and the influx of money. Since the area is catering to wealthy investors from all over the world, they often jet off, which means there are a number of highly visible investments but not the broader income gains that would benefit the majority of residents.

The fact is, wages have actually fallen for workers in Miami in the previous year. The unemployment rate is over the national average. The Miami area has the largest number of renters in the country who have devoted more than 30 percent of their total pay for housing, which is a level that the government sees as “burdensome.” According to data from the census bureau, high rents are a burden to 66 percent of tenants in Miami, compared to 52 percent around the nation.

The benefits of this income are not being seen in the local economy. Due to the higher rent costs, local businesses are being impacted and the number of opportunities to offer year-round housing for workers is being minimized. Instead of staying, they are moving out.

While it is easy to access and considered a glamorous locale, Miami real estate is offering an asset that is appreciating during a time when other types of investments have been reduced or turned volatile.

The Growing Construction Projects

There are no less than 126 residential towers that are planned for construction in the South Florida area. One of the signs that indicate the influx of wealth from around the world is that most foreign purchases are being funded with cash, rather than debt.

In the previous year, people from around the world spent $6.1 million in real estate in Miami, which accounts for 36 percent of the total investments in real estate in Miami.

Miami is also an appealing destination for investors from around the world due to the lower tax rate that is present. While this is leading to more development, the local economy has yet to see the benefit, which could prove troublesome in the near future.

CLICK HERE to check out Miami Beach real estate properties for sale

South Florida Real Estate Trends: What to Watch for in 2016

By Sunny Isles Real Estate Expert on February 2nd, 2016

Miami real estate for sale

In virtually all industries, January is the time to look into the future and make a prediction regarding what the next 12 months has in store. This allows businesses and industry leaders to take the right steps so they can capitalize on the trends that are anticipated.

If you are interested in the South Florida real estate market (view website here), then the trends to watch for in 2016 that are highlighted here.

The Rental Market will Start to Stall

After the 2007 crash of the condo market in South Florida, one of the main benefits that residents saw was cheap rental rates. This was the result of easy financing and overbuilding. At that point in time, owners of new construction were converting condos and slashing lease prices to help and attract tenants, which would generate more revenue. When the units were inhabited, the economy began to stabilize.

This also resulted in landlords increasing prices at an aggressive pace to get back some of the money that was lost. The higher rental rates that are now seen in South Florida have resulted in quite a bit of new construction in 2015 and this is a trend that is going to continue for, at least, the next three years. With more rental units available, it will likely mean lower costs for rent in the near future unless the economy in South Florida adds an industry that will result in higher paying jobs.

Increase in Real Estate Commissions

Due to the supply of resale and preconstruction condos in Miami being high, developers are at a point where they need and want to sell the planned and existing units. The last element that most are willing to revise is the price. Watch for commissions in the real estate market to increase in 2016 thanks to an early attempt to sell the units prior to having to reduce prices.

Cancellation of Proposed Projects

Since the current real estate cycle started in 2011, the plans for almost 20 new condo towers in South Florida, which hold over 2,800 units have been changed. These are projects that were revised for a number of different reasons, which range from the changing market conditions to the developers being able to flip the land to get a big return.

Chances are there are going to be more proposed projects that will pivot if they do not meet the pre-sale requirements.

Financing for Mortgages is Increasing

The current real estate cycle in South Florida has mainly benefited because of the cash investors that are coming in from out of town and buying up the property with the intention of renting them out to the local residents who are unable to purchase due to financial limitations.

The main question that needs to be answered is whether or not 2016 is going to be a time of transition to a period of slower growth for the real estate market in South Florida.

December saw Impressive Home Price Growth for Miami & South Florida Real Estate

By Sunny Isles Real Estate Expert on January 28th, 2016

Miami real estate for sale

While the residential real estate market in South Florida is experiencing a slight battle with the global economic crisis, this has not put a damper on housing prices in the region. These prices are steadily appreciating and there is no end in sight for this upward trend.

The prices for Miami and South Florida homes grew by 8.1 percent year over year in November. This data was gathered from a report published by S&P/Case Shiller.

In Palm Beach County, the median price for pre-existing single-family homes hit $305,000, which was an 11 percent increase from the previous year, even more than the average of 8.1 percent. However, there were several other areas that saw this kind of growth, as well. Broward County had a median home price that was also $305,000, which represents a seven percent increase from the prior year. This was the first time that either of these county’s crossed the threshold of $300,000 since over the summer.

Faster Growth in SoFla

This means that the tri-county area saw a faster pace of price growth than almost all of the remainder of the United States. In fact, the only areas that were ahead of South Florida were Dallas, Texas at 9.4 percent, Seattle, Washington at 9.7 percent, Denver, Colorado at 10.9 percent, San Francisco at 11 percent and Portland, Oregon at 11.1 percent.

It is not the entire economy that is suffering. In fact, the consumer portion, which includes automobile sales and housing, was actually quite strong in the previous year. In fact, this improved economy has provided homebuyers with the confidence necessary to actually enter into the market; however, there are some who have been less than overjoyed with the options available, specifically in the range of $150,000 to $400,000 homes. Thanks to strong sales in the past few years, a large number of listings have been depleted all throughout the region. The current owners are still unable or unwilling to test the market, with some not understanding what they could actually get for their home currently.

Economic Struggles in Miami

However, other parts of the economy are not doing quite as well. For example, businesses in the energy and oil sectors have begun to suffer from the significant drop in oil costs over the past 18 months. The strong buying power of the U.S. dollar is also resulting in slower exports. Unfortunately, the housing market is not big enough to help and offset these weak areas.

In December, the national housing market also saw a number of similar gains. In fact, prices increased by 5.3 percent year over year, which accelerated quite a bit from the 5.1 percent jump seen in October.

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Lions Gate, Domino Sugar, and Goldman Sachs Big Wigs Purchase in Faena House

By Sunny Isles Real Estate Expert on December 21st, 2015

Faena Condo Miami Beach

Faena House, the first of four ultra-luxury condo towers being constructed on Collins Avenue in Miami Beach, represents the ultimate in extravagant living. With its modernized lines and amenities like a state-of-the-art fitness room, multiple pools, beach club, and children’s playroom, it’s no wonder the project has attracted prominent buyers like Lions Gate Entertainment chairman Mark Rachesky.

Rachesky, who also heads MHR Fund Management – a $6 billion investment company – closed on his brand new pad in September, for the tidy sum of $13.5 million. Unit 11-BD now belongs to the entertainment mogul, according to public deed records. Earlier this year Rachesky sold a fifth of his holdings in Lions Gate for a reported $320 million, bringing his stake in the company from 36% to 28%.

An Elite Group

Rachesky joins an impressive group in his purchase at Faena. The chairman and CEO of Goldman Sachs, a global multi-billion dollar investment firm, has also bought into the luxury condo tower. Lloyd Blankfein, along with wife Laura, purchased unit 8-A for $9.5 million. Blankfein became CEO of Goldman Sachs in 2006, after joining the company in the early ‘90’s. According to Bloomberg the investment kingpin is now worth over $1 billion. Blankfein is rumored to have been one of the first buyers in the Faena project.

Yet another unit in the exclusive building solid to Jose F. Fanjul, Jr., manager of Sobe 8-C LLC. The Fanjul brothers, owners of Fanjul Corp., play a major role in the American sugar industry; subsidiaries of the company include Domino Sugar, Florida Crystals, Redpath Sugar, and the California and Hawaiian Sugar Company. Florida Crystals itself has become involved in development, breaking ground last year on a 395-unit project in Delray Beach called Atlantic commons.

The Finer Things

Faena House has been drawing much attention in the real estate world of late, particularly when the $60 million penthouse sold earlier this fall. The 12,000+ sq. ft. residence, which features nearly 10,000 sq. ft. of outdoor space (complete with rooftop infinity pool) was purchased by Citadel CEO Kenneth Griffin.

The rest of the building, while not quite as over the top as the penthouse, still offers the luxuriant beachfront living that is becoming all the rage as Miami developers continue to build up high-end condo inventory in SoFla. Every unit has a wraparound terrace that the developers call an “alero”, floor-to-ceiling windows, marble flooring, Miele appliances, and an automated touchpad that operates the thermostats, lights, motorized shades, and more.

This first completed complex is just the beginning. The developers, a Delaware company led by Alan Faena and Len Blavatnik, now turn their attentions to the construction of Faena Hotel Residence, Faena Versailles Contemporary, and Faena Versailles Classic (see website here). The hotel will feature 13 penthouse residence units, while the Versailles buildings will house 41 and 22 condo units, respectively.
Questions have been raised about whether the projects can attract enough upscale buyers to support such extravagant developments. Considering Faena House was sold out before it even opened, the complex’s future looks pretty bright.

How Miami’s Economy Has Become Dependent on Brazil

By Sunny Isles Real Estate Expert on December 6th, 2015

Miami real estate Brazil

There are more than 44,000 Brazilians living in Miami, not including tourists. Brazilian buying power has increased over the last several years, giving a boost to Miami’s economy. Real estate plays a pivotal role as 11% of all international deals are with Brazilians. They are also known to spend more on average per property according to NAR research.

Miami-Brazil Connection

South Florida by the Numbers is a column that reports real estate statistics in Miami (see Miami real estate website here). This column reported on the “Miami-Brazil Connection” and its future in light of Brazil’s economic downturn.

Here are a few of those statistics:

• Brazil is ranked number one for searching for real estate online in South Florida. In the last 18 months, Brazil has topped the list for all but three months. Brazilians spend the most on South Florida properties, averaging $495,000, compared to other international buyers.

• Brazil’s currency is dropping in the exchange rate. According to the Miami Harold, investors may begin to look elsewhere for properties that are less expensive. Brazil’s currency, the real, has dropped by 30% since last year. The Dow Jones is estimating that Brazil’s gross domestic product will decrease by 1.01% in 2015.

• There is an amazing amount of millionaires coming out of Brazil each week. Twenty-two new millionaires each week and many are finding homes and opportunities in Miami. It was only five years ago that Miami was in the real estate crisis and Brazil’s economy was beginning to grow. In 2015, Brazilians account for most of the cash purchases made in real estate in Miami.

• Giraffas Brazilian Grill has ten franchises in Florida with a goal to bring 150 stores across the nation by 2020. This fast growing company is helping to boost the economy in Miami. Giraffas has given Re/Max Advance Realty the exclusive power to handle lease negotiations, site selections, and market studies, among other tasks crucial to opening franchises during a dramatic growth period.

• The New York-based company, HFZ Capital Group, purchased the Shore Club for $175.3 million. Plans to reopen the hotel and residences are underway. The opening is set for the end of 2017 under the new name Fasano Hotel and Residences. This will be the first hotel opened in the United States by this brand as they currently own and operate four hotels and fifteen restaurants.

Brazil’s Economic Future

Brazil’s economic upturn helped to rebuild Miami after the real estate crisis. However, experts worry that Brazil’s upcoming economic troubles may fall over onto Miami like a domino effect. As President Dilma Rouseff faces impeachment and the economy falls into a recession, the unemployment rate skyrockets in Brazil.

The Miami Harold reports that in the first nine months of 2015, as many as 657,761 people lost their jobs. Even worse, it is forecasted that 1.5 million more Brazilians will lose their jobs in the remainder of 2015.

Miami Home Sales Break Records over the Summer

By Sunny Isles Real Estate Expert on November 24th, 2015

Miami homes for sale

This past June was a record breaker for home sales in Miami. 1,390 single-family homes were sold. This was a record-breaking month as the highest month totaled 1,310 in June 2005. The month of July 2015 closed almost as many with 1,354 homes sold.

This is exciting news in the market as the prices for these homes have continued to rise year-over-year. Currently the price for a single-family home in Miami is up 8.6% and up 2.6% for condos. A single-family home that may have sold before for $255,950 is now $278,000. Condos that sold for $190,000 will now sell for $195,000.

Miami condos this summer also saw an increase in sales growing 4.8% year-over-year. 1,471 condos sold in July compared to last year’s number of 1,403.

This rise in home sales is thought to be from the city’s improving job market and low mortgage rates. Christopher Zoller, the 2015 Residential President of Miami Association of Realtors, refers to Miami as being “a global city with the second largest financial hub in the country.”

Mortgage Loans

The interest rate is down for a 30-year fixed rate mortgage. In July 2014, the rate was 4.13%. In July 2015, it had dropped to 4.05%.

The Miami Association of Realtors had this to say about mortgage loans in Miami in a recent report, “Despite the rise in sales, access to mortgage loans for existing condominium buyers remains limited. The lack of Federal Housing Administration loans for a large number of existing Miami condominium buildings is preventing further market strengthening.”

“Of the 8,523 condominium buildings in Miami-Dade and Broward Counties, only 29 are approved for FHA loans, according to statistics released earlier this year from the Florida Department of Business and Professional Regulation and FHA.” The statement goes on to report that only 0.0034% of local condos are approved for FHA loans. The U.S. average is 30%.

More Affordable Condos

Although the prices have seen increase year-over-year when compared to condominiums in global cities, Miami’s condos are quite affordable. A Miami condo which sells for $149,900 is comparable to condos in London ($960,840), Hong Kong ($776,280), and New York ($1.6 million).

The homes tend to sell near asking price. The Miami Association of Realtors reports that the average amount of days on market is only 41, compared to 43 in July 2014. The original list price received was 95.6%. As for condominiums, the days on market remained at 59, the same as July 2014 and the average list price received was 93.8%.

Cash Buyers

Cash purchases accounted for 48.2% of total home sales in July 2015. The national average is 23% in comparison. Miami’s number of high cash purchases is due to the fact the city attracts international buyers that tend to purchase properties in cash, according to the report.

The outlook for the housing market continues to be bright as increases in home sales continue despite the lack of FHA and price increases.