The New Wealthy

The New Wealthy

By Mark Ellwood, Plum Magazine

Miami Leads The Country In A Return To The Good Life

It’s undeniable:  Miami means money.  It takes deep pockets and a thirst for attention to win the bottle wars in this town: In the South Beach clubs, just one jeroboam of Perrier-Jouet’s Fleur de Champagne Rose can cost $15,250 (the sparklers are thrown in for free).  Where else but at Prime One Twelve would purists shell out $30 an ounce for a Japanese-bred Kobe steak?  The Setai stakes its claim as America’s most luxurious hotel by offering South Beach’s priciest penthouse suite: $28,000 for one night.  And even those who have spent just a little time here feel the need to indulge: Chris Bosh powered forward in his new gig with the Miami Heat by dropping $12.5 million on a 12,000-square-foot North Bay Road hideout.

McKinsey & Co.’s Lisa Sun is one of the consulting firm’s most highly regarded luxury gurus, and she says there’s no better place to understand what five-star living really means than in Miami, a home for old and new money alike, whether from the U.S. or overseas.  “I describe it as a melting pot of different types of wealth coming together, all of whom have a desire for luxury,” Sun says.  But though the platinum-plated lifestyle today might be a pricey as ever , there has been a distinct shift in tone since the economic meltdown two years ago: Flash is out, true wealth is in.

“I’d call the mood today one of responsible, rather than conspicuous, consumption,” Sun continues.  “People are thinking, The things I buy must have longevity or a story behind them in the way they’re made or why – a uniqueness that makes me feel justified in spending.”  Translation: It’s ok to be seen splashing out as long as it’s on the right things and for the right reasons.  But who are these New Wealthy, and how have they changed in the last two or three years in Miami?

One major, and welcome, shift is the drive towards value at any price point.  In the Magic City, it’s in real estate where this is most evident.  The New Wealthy here still won’t blanch at a $20 million price tag: They’ll just want to know exactly why a penthouse is worth that much.  “No one is an emotional buyer in this marketplace.  Everyone is interested in value,” says Michael Valdes, one of Sotheby’s key players in the real estate market in Miami.  “There was a lot of emotion back in the heyday.  People would come in and fall in love with these houses, but that has completely changed,” agrees EWM’s Nelson Gonzalez.  A few years ago, he recalls selling a North Bay Road house to Billy Joel on spec.  “We canceled the next three appointments, and he bought it then and there,” Gonzalez says.

He points out that such casual splurging is rare now: “Emotion used to be 90 percent of the decision, but now it’s flipped, and it’s probably only 25 percent.  The rest is numbers, comparables and ‘What did the neighbors sell for?’”  In many ways, it’s a welcome change – less hot air or hype and more hard investment.  But this new, smarter mindset doesn’t hinder major transactions.  Gonzalez was part of the team behind the recent $16 million sale of 88 La Gorce Circle, the highest local purchase since the seismic economic shifts.  It sold because it adhered to luxury’s new rules.  “There was a lot of value in that purchase,” Gonzalez says.  “There was more than 260 feet of waterfront and a 45,000-square-foot lot.”

Like an art collector might research provenance on a must-have piece, home buyers in the new luxury landscape are reading up to become real-estate connoisseurs – and still making compromises in the process.  “The oversupply of information has turned people into very, very sophisticated buyers,” notes Michael Valdes, citing a client he worked with recently whose exact specs included a wine cellar.  “We had a penthouse on the market for $16 million, and someone came in to do a lease option for $60,000 a month,” he says.  “What was important to them, since they are very avid wine collectors and enthusiasts, was that it had a 5,000 – bottle wine cellar.  It was the deciding factor, even though it had one less bedroom than they were looking for.”

Of course, in Miami, the other industry where luxury’s new rules are most evident is hospitality.   When it comes to good life in 2011, it’s all about flexibility and a more casual approach, rather than a one-size-fits-all, platinum-priced experience.  It’s an echo of McKinsey’s emphasis on unique, rather than simply expensive, experiences.  The recently opened JW Marriott Marquis downtown has a Daniel Boulud-branded in-house restaurant – but it’s the more casual db Bistro Moderne rather than an uptight, time-intensive fine dining spot.  When iconic restaurateur Shareef Malnik made over The Forge, he tweaked his set-up in a similar way, offering small plates for grazing alongside full means and installing high-tech, self-serve wine-dispensing machines with 80 different varieties, available in as small as one-ounce servings.

Malnik’s casual approach wasn’t about turning tables fast, but rather emphasizing how accessible his restaurant really is.  “Our table dining times have increased, because we want people to feel comfortable,” Malnik says.  “Let’s not get the last dollar today, but create demand that will last a long time.”  Malnik even believes that one symptom of the less bling-driven market is that his restaurant is buzzier throughout the week.  “The New Wealthy don’t need to be there on the weekend,” he continues.  “They’re preferring the nights that aren’t so spectacular and conspicuous.”

Prime One Twelve’s Myles Chefetz agrees; his business has boomed despite the downturn.  “The rich are more cautious with real estate, but there’s no devaluation in good,” Chefetz explains.  “They may have lost some money on the stock market, but they still eat out.”  Nonetheless, he has seen how splurge-like excess has been reined-in.  “People don’t act as flamboyantly as they used to, and that’s good,” Chefetz stresses.  “Two or three years ago, I had two guys come in for lunch and spend $20,000, including three $5,000 of wine.  But this year, the same guys came in and bought one bottle.”

And in South Beach’s signature industry, nightlife, luxury has shifted too.  It has returned to its service-driven roots, again emphasizing a good experience over a grand bar tab.  Velvet-rope burn is just so, well, 2000s.  “We’re in the business of trying to satisfy the customer,” says nightlife veteran Eric Milon.  “And we’re appreciative of the fact that they do come out and are willing to spend money on the table.  We would not enforce certain rules that we had before, for example.”

Dave Grutman of LIV agrees.  He welcomes the higher expectations he sees from the more sophisticated, wealthy customers who are now a mainstay.  “Clubs have to be upping their game when clients are spending money again,” he says.  “You can’t open your doors and put some local bumpkin DJ on, and your service had better be right up to par.  All these people have gone to Vegas or Saint-Tropez and gotten great service, so the operation here can’t be like the old days.”   It’s the same sense of in-the-know connoisseurship that’s ribboned through the real-estate market today.

The new mood among the New Wealthy is due to not only the global economic shift but also the arrival of some fresh figureheads who’ve shown Miamians a new way of thinking – specifically Bosh and LeBron James.  Both are regularly cites as icons by the luxury industry here.  “Chris Bosh is such a down-to-earth, intelligent, wise decision maker.  He’s a great role model for the New Wealthy,” Malnik says.  The basketball star, whose home on North Bay Road is a few doors away from the lot where Alex Rodriguez plans to build a manse, was reportedly a low-key, well-informed buyer, like so many of Miami’s New Wealthy.

The city’s obsession with professional sports is part of the reason its luxury landscape has been reshaped.  “What insulates this area from the recession is the concentration here of professional celebrity athletes,” Chefetz adds.  “They’re not feeling a recession in the NFL or the NBA.  They have contracts worth $150 million and make $4 to $10 million a year.”  And nowhere is a better symbol of how sports now steers the luxury market than Club LIV at Sun Life Stadium, home of the Dolphins, which includes an 800-person strong VIP section, complete with club banquettes and bucket seats.

But it’s Malnik who best sums up the mood of the New Wealthy in Miami: generous but smart with money, keen to enjoy themselves on their own terms, and looking for products or experiences that are customized and unique.  “In my industry, people used to dictate to the consumer what their experience was going to be and much it was going to cost,” he says.  “It was the tail wagging the dog.  Now the dog will wag the tail.  In the 1990s, it was about excess – now it’s all about access.”  Lessons From The Front Lines Of Luxury (click to watch the video)