This week, a gargantuan leak of 11.5 million records detailing the offshore tax havens and myriad forms of corruption perpetuated by the world’s most powerful people hit the web.
Known as the Panama Papers, it has taken a team of almost 400 journalists and 100 news organizations to sift through the morass. One of those partners, the Miami Herald, has uncovered documents showing how condos are used to launder dirty money, fueling a boom in luxury real estate and transforming the socioeconomic face of the city.
“Money from people linked to wrongdoing abroad is helping to power the gleaming condo towers rising on South Florida’s waterfront and pushing home prices far beyond what most locals can afford,” writes the Herald‘s Nicholas Nehamas.
Miami has been home to one of the fastest, priciest luxury condo booms in the country–and buyers are twice as likely to pay cash than anywhere else in the country, according to the paper. Within the huge leak, Nehamas uncovered the details of how international buyers set up shell companies to purchase high-end luxury condos like the St. Regis in Bal Harbour, Nine at Mary Brickell Village, Eden House, and others.
He points to the St. Regis in Bal Harbour, designed by Yabu Pushelberg and featured in Architectural Digest a few years ago, as a prime example. A Brazilian politician named Paulo Octávio Alves Pereira–who was ousted from his position for corruption–secretly paid almost $3 million in cash for a condo in the development in 2011.
Nehamas exposes the circuitous route that money took: First, he says, Pereira’s lawyer enlisted the Panama company Mossack Fonseca to create a shell company in the British Virgin Islands. That company then created another company in Miami to actually buy the condo. The system allowed Pereira to stay anonymous and reap financial benefits from the deal.
And that’s just one of the examples that the investigation uncovered. It’s a fascinating look at the financial side of the real estate bubble that is transforming Miami–and it’s easy to imagine how similar networks of shell companies and international investors have similarly fueled the luxury architecture boom in other cities. But while the exposure might hurt the market, it could also have some hidden benefits. The Miami New Times explains:
…[U]nless you’re a high-end developer or a realtor with your fingers in the luxury market, this could end up being good news. Ordinary buyers and renters are increasingly feeling priced out in South Florida. One reason: the flood of foreign cash that has inflated an unsustainable bubble.
In other words, if the market takes a dive, it could redound to the benefit of locals who can no longer afford to live in Miami. You can read the Herald‘s full story here.