So much for Miami's first $100 million sale.
The South Beach mansion, once owned by Italian fashion designer Gianni Versace was sold at auction for $41.5 million to VM South Beach, the property's mortgage holder, by Fisher Auction Co.
The price marks a sharp fall for a house that got widespread media attention and listed last year for $125 million.
Although the price was later cut to $75 million, many expected the house-called Casa Casuarina-to become the most expensive ever sold in Miami, beating the current record price of $47 million. However, that ultimately did not happen.
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When the 19,000-square-foot estate on Ocean Drive was home to Versace, he entertained Madonna, Princess Diana and others at the house. In 1997, he was shot and killed on the mansion's front steps.
The property has a mosaic-tiled, 24-karat gold-lined pool, an elaborate courtyard and 10 bedrooms and 11 baths. It was marketed by the "Jills"-the Miami real-estate duo of Jill Eber and Jill Hertzberg-and was featured on NBC's "Today" show and other shows.
The current owner, telecom entrepreneur Peter Loftin, purchased the property in 2000 for $19 million. He placed the property into Chapter 11 bankruptcy this year after a financial dispute with the mortgage holder, VM South Beach. VM's principals include the Nakash family and the Gindi family, both of New York.
While some may see the sale as a sign that the white-hot Miami market is cooling, many luxury real-estate brokers say Casa Casuarina had unique problems. The property is in the middle of Ocean Drive, which is often mobbed with visitors, tourists and partygoers. Wealthy buyers looking for a family home in Miami would constantly be assaulted by the noise and crowds, brokers said.
"It's really not practical as a single family residence," said Jorge Uribe, senior vice president of One Sotheby's International in Miami. "I don't know any clients who would want to live there even as a second or third house."
As a business, the site also has drawbacks. While the property could be turned into a hotel, it only has 10 rooms-hardly enough to make enough revenue to justify a big acquisition price, some say.
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Many have also talked about making it a members club, like the nearby Casa Tua or Soho House. But Casa Casuarina is much smaller than Soho House and would have trouble squeezing in enough members to make it profitable, Uribe said.
"The real value would be if you could tear it down and build a tower," he said. "But I don't think that would be allowed under preservation."
It's unclear what plans the new owner has for the property.
-By CNBC's Robert Frank. Follow him on Twitter @robtfrank.
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