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Why Miami Is Becoming the 'Russian Riviera'

Tuesday, 20 Nov 2012 | 9:58 AM ET
Source: The Jills

On a recent afternoon, Miami real-estate agent Jill Eber is taking a Russian millionaire on a mansion-shopping trip.

"This is the Versace Room," Eber says, walking into a vast living room of blue velvet sofas and gold French Imperial lamps. "It really makes a statement."

The mansion, "Castello del Sole," sits on an exclusive island on Miami Beach and has eight bedrooms, nine baths and a three-story foyer with fresco ceilings. The grounds include two yacht docks, a tennis court, guest villas, a five-car garage and a lagoon-style pool with over 100,000 gallons of water.

The asking price: $37 million.

"I like it," says the Russian buyer, sliding on her Gucci shades as she admires the water views. "It's a maybe."

Russian millionaires are an increasingly common sight inside the giant homes for sale along the Miami coast. While Latin Americans – especially Brazilians – are fueling much of the recovery in the broader Miami real-estate market, it's the rich Russians who are dominating the market for mega-mansions. They're spending hundreds of millions of dollars on waterfront palaces and launching the next big land grab by the world's super-rich. (Read more: France's Rich Tax Makes for Mansion Bargains)

The most expensive home ever sold in Miami was purchased this summer by a Russian. The 30,000 square-foot home on Indian Creek Island went for $47 million in August to an anonymous Russian buyer.

A home on Star Island sold recently for $25 million to Russian vokda king Roustam Tariko. The $20 million sale of an entire floor of the St. Regis Bal Harbour went to a millionaire from Ukraine.

Russians spent more than $12 billion on overseas real estate last year, with more than $1 billion of that coming to the United States, according to the National Association of Realtors. While the exact numbers for Florida aren't known, the state ranked first in the nation for its ratio of foreign sales, with more than one in four homes sold to overseas buyers.

"When it comes to the big properties, I would say the Russians are first," said Eber, who together with her partner Jilll Hertzberg sold the Indian Creek property and several of the other highest profile deals. Their agency, called "The Jills," has sold more than $340 million worth of property this year – already far ahead of 2011.

Miami's ocean breezes, nightlife and cultural scene appeal to many of the world's rich, especially from nearby Latin America. Latin Americans accounted for 70 percent of the international homebuyers in the Miami area, according to the Florida Realtors.

"Miami is one of the most beautiful locations in the world to have a first, second, third, or fourth home," Eber said. "I think a lot of people right now put their dollars into hard assets, and real estate here, I think, compares well to everywhere else in the world."

"It's still lower than Manhattan, Monte Carlo, the south of France, everywhere," said Eber. "It's also a worldwide destination. South Beach is wonderful, everyone loves to come here."

Yet rich Russians have a particular attraction to the largest Miami mansions and condos. The weather is a welcome escape from Moscow winters. Russian millionaires and billionaires are also obsessed with security and protection, which they can easily find in Miami's large collection of gated communities, private islands with private police forces and protected condo towers.

"The Russians are paranoid about security," said Jorge Uribe, of Sotheby's International Realty in Miami. "They can have a lot of security here." (Read more: Crane Mishap Could Be a Gift for Luxury Tower)

Source: The Jills Coldwell Banker

Buying a mansion or condo in Miami also requires limited disclosure – a big plus for Russians who are loathe to give information about their finances and business backgrounds.

"In Miami, they usually just check for two things," Uribe said. "Do they have the funds? And are they a criminal? If they have the money and are not a criminal, they can buy. That's really it."

To better reach the rich Russian buyers, some super-brokers in Miami are opening business offices in Russia and studying the dos and don'ts of Russian culture. Broker say, for instance, that the Russian buyers don't like using local lawyers or banks, so they find attorneys or lenders that are more friendly to less intrusive Russian business practices.

Uribe says he is even forming a joint venture with a Russian commercial realtor to feed him business. He's also translating his web site into Russian.

"This is going to be a significant market for Miami," he said. "We're seeing the first pioneers now. But these buyers will show their friends, then it will become a status thing in Russia and they will start coming in bigger waves."

It remains to be seen whether a Russian will buy Miami's biggest prize: the former Versace mansion, which is now on the market for $125 million. Since the property is located right on the South Beach strip, it may not appeal to privacy-concious Russians.

Still, the property – also listed with "The Jills" – is likely to set a new Miami sales record if it sells.

"We have had inquiries are from all over the world," said Eber. "And I think it's going to be sold to someone who truly wants to own a trophy property."

-By CNBC's Robert Frank
Follow Robert Frank on Twitter:
@robtfrank

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  • A reporter and editor, Robert Frank is a leading authority on the American wealthy for CNBC.