Is Laundered Money Fueling Miami's Condo Boom?
Five years after the South Florida real estate market collapsed, Miami is once again going nuts for condos. Developers are putting up 35 buildings as you read this, and another 83 are waiting in the wings, according to a report in today's Wall Street Journal. The city also ranks third in the nation for permits issued for multi-family developments (New York and San Francisco rank first and second, respectively).
With its million-dollar starting prices and emphasis on pre-construction sales, this boom may feel like déjà vu, but today's Miami developers are demanding that buyers put down at least 50 percent before closing. That's a lot of up-front money, and the Journal says it's coming from "foreign investors who typically pay cash." The story doesn't tell us much more about exactly who all these foreign investors are, which is probably because one of the most persistent yet difficult-to-prove stories about Miami right now is that its condo-building renaissance is fueled by international criminals laundering money.
Back in August, Brian Bandell of the South Florida Business Journal attempted to prove that this is exactly what's happening. In the course of his investigation, he found that 90 percent of Miami condo buyers in 2012 were non-Americans, 73 percent of condo resales were cash transactions, and many of these deals were held by limited liability companies, the sort that protect owners in the case of actions against the condo. Bandell writes that LLCs "create an easy way to launder money." An LLC is set up to receive dirty money from an overseas bank, and the LLC buys the condo. Oftentimes the name of the LLC appears as the owner, rather than any actual human being.
Bandell built his case around a Spanish drug lord named Alvaro Lopez Tardon. Arrested in Miami in 2011, Tardon is accused of laundering roughly $26 million in cocaine proceeds by buying exotic cars and Miami condos. But of course, non-criminal wealthy people from around the world are fond of avoiding paying taxes, too. In Miami, these types of condo buyers range from Eastern Europeans who got rich off privatization after communism fell, to former power brokers from Latin America who looted their countries' coffers and sunk the money in Miami real estate.
It's difficult to ascertain just how many condos are bought with stolen or otherwise illegal cash—obviously some, and maybe even most of the deals, are legit—but "Why Miami?" is an easier question to answer. It's beautiful, fun, and corrupt.
Top image: The Miami skyline. REUTERS/Carlos Barria