There has been a lot of buzz about the movement of wealth to Florida from states with income taxes because of the elimination of the deduction for state and local taxes (SALT) in the Tax Cuts and Jobs Act of 1987. There is no question it has accelerated the movement of people from states with income taxes, like New York, Illinois and California, to Florida and other low-tax states, a trend underway for many years for those pursuing balmy weather and a better quality of life.
Many of these transplants are high and ultra-high net worth individuals. In the past, much of this wealth moved to the Palm Beach and Naples areas. Today, cosmopolitan Miami is attracting a large number of these wealthy transplants, along with a wave of global wealth.
Forbes Magazine ranked Miami as No. 6 in the world of favorite cities for the super-rich, behind only London, New York, Hong Kong, Paris and Singapore. Where are these people moving when they come to the Miami area?
They are concentrating in an arc from Coconut Grove, hugging the coastal communities, encompassing Key Biscayne, Fisher Island, Miami Beach, Surfside, Bal Harbour, Bay Harbor, Indian Creek and Sunny Isles, and extending to Aventura. The markers of this are indelible; condominiums and homes in these neighborhoods have sold at record prices to both domestic and foreign ultra-high net worth individuals.
Notable among these are Faena House in Mid-Beach where billionaire Ken Griffin paid $60,000,000 for the penthouse and an adjacent unit. Brown, Harris, Stevens published a list of the 100 most expensive condominium sales in the Miami area from 2014 through the second quarter of 2019, ranging in price from $9,500,000 to $60,000,000. All but two were in the coastal communities.
Characteristics of this archipelago of wealth include the following:
▪ They like to buy in the same buildings and neighborhoods where their friends and peers are buying. For instance, the Surf Club Four Seasons is likely home, or second home, to more billionaires than any building in Florida. The same with Ritz Carlton Residences in Key Biscayne, Apogee in South Pointe, Acqualina in Sunny Isles Beach, etc. Forbes has described Indian Creek Road as the wealthiest street in America.
▪ As many move here permanently, they like to office near their residences; Barry Sternlicht, who lives on North Bay Road, is moving the headquarters of Starwood Capital, to new offices he is building on Collins Avenue across from the 1 Hotel. Carl Icahn recently announced he is moving his headquarters from New York to Sunny Isles Beach, close to his Indian Creek home. In addition to close, they want urban, but laid-back and cool, so areas like Coconut Grove, South Beach, Wynwood and the Design District attract them. Most are not going to downtown or traditional office districts.
▪ The dirty little secret is that lifestyle, as much or more than taxes, is why the rich are moving here, and the neighborhoods they want to live in have the amenities they are looking for. Those amenities include marinas and waterfront access for their yachts, the ocean, and exclusive private clubs for golf and other activities.
▪ Different countries choose different neighborhoods. Coconut Grove, South Pointe, Mid Beach, Surfside, Bal Harbour and Bay Harbor Islands trend toward U.S. citizens, Canadians and Europeans. Key Biscayne and Aventura are more South American, and Sunny Isles Beach is South American and Russian.
Most Miamians are not aware of the staggering amount of wealth that is moving here and where it is locating. Although there will be ups and downs, expect this trend to continue for many years as global gateway cities continue to grow in importance.
Neisen O. Kasdin, a land-use and zoning lawyer, is managing partner of Akerman’s Miami office. A former mayor of Miami Beach, he is vice chair of the board of directors for the Miami Downtown Development Authority. He can be reached at neisen.kasdin@akerman