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The $30M Miami Penthouse: Oceana Developer Costantini Doesn't See A Real Estate Bubble

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This article is more than 9 years old.

It was a bold move for Argentine developer Eduardo Costantini to, after having made a huge bet through two mega-projects in Miami, drop an estimated $14 million on commissioning two massive pieces by Jeff Koons.  Oceana Bal Harbour, his latest project, will house two works by the world’s most expensive living artist; these will be collectively owned by the glass tower’s residents.  Such opulence, one could argue, is a sign of irrational exuberance.  Costantini, though, brushes off the criticism.

“The art we’re buying, the intention isn’t to help us sell the units,” Costantini told Forbes in a recent visit to New York, “what we are selling is a certain lifestyle, and the art is supposed to appeal to your sensibilities.”  Costantini knows what he’s talking about: not only is he a major collector, he’s also the founder of MALBA in Buenos Aires, which houses one of the largest collections of 20th-century Latin American art, including works by the likes of Diego Rivera, Frida Kahlo, and Fernando Botero.

Through Consultatio, the development company he controls, Costantini is doubling down on Miami.  The recently completed Oceana Key Biscayne has already brought in $650 million in sales, with 90% of the units sold in less than a year.

Its sister project, Oceana Bal Harbour, is slated to be completed by 2016.  Consultatio spent a reported $220 million in 2012 to buy the land that formerly housed the Bal Harbour Beach Club, and last year secured a $332 million loan from HSBC, a record for a residential project since the 2008 recession, Costantini explained.  They’ve already sold close to 50% of the 240 units, which have a starting price of about $2 million, meaning they are selling for an average of about $1,900 per square foot.  The 19,321 square foot penthouse includes a private gym, sauna, and massage room, along with 9,950 square feet of outdoor living space, including an outdoor infinity pool.  Asking price: about $30 million, or something you’d usually see in New York, not Miami.

Costantini, like other developers in global cities, sees opportunity as the ultra-wealthy seek to park their cash in hard assets.  “The market is very segmented, so from the point of view of supply, developers have to make a choice.  When it comes to demand, we increasingly see an international group of individuals that are putting their cash in watches, cars, art, and real estate.”  The developer points out that it’s not only Russian, Chinese, Arab, and Latin American buyers they are courting, even though there’s many of those, there’s also a rising number of U.S. buyers.  “All of these people converge on the same places, about 10 or 12 cities worldwide including New York, London, Shanghai, Dubai, Geneva, and others.”

Over the past few years, Miami has experienced an important boom in construction, fueled by international buyers.  The last S&P/Case-Shiller index, the most widely-followed home price index, puts Miami’s price appreciation over the 12 months to July at 11%, the highest of any city except Las Vegas, which grew 12.8% in the same time.  According to Reuters, Florida leads the nation for foreign buyers in the first quarter of the year, sucking up nearly a fourth of the $92.2 billion in nationwide sales.  Fears of a bubble are supported by figures like the 175 towers, or more than 27,000 units, that have been proposed in Miami since mid-2011, compared to the 22,000 in the buildup to the housing crash.

The major difference, though, is that developers are asking for a large sum in cash, in some cases as high as 50% upfront.  “I don’t see a bubble,” Costantini told Forbes, “but I do see anemic growth in developed nations.”  Yet, it’s this exact situation that plays in his favor: high net-worth individuals are facing “extremely low interest rates, which means they’re not seeing the returns they expect [on their investments].”  That may be why some of them are willing to spend $30 million on a penthouse in Miami.

Or maybe it’s for the Koonses.