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R.
Donahue Peebles
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“The book is really a
book for aspiring entrepreneurs to get the basic
principles of how to do business in the real world,”
Peebles told the SunPost. “People already
established in business will also get something; this
book will give them 25 years of experience.”
Peebles is in the
midst of a multi-city book tour with a May 16 stop at
Books & Books in Coral Gables. Whether you’re interested
in learning his entrepreneurial strategies, or are
simply curious to know all the details of his
negotiations with politicians and headline-making
business people, the book is a page-turner.
Each chapter ends with
a bulleted list of Peebles Ground Rules like:
“Use the media rather that running from it” and “Be
prepared to litigate to enforce your rights.” A couple
of headlines in the Miami Herald last week show
he’s following his own advice. Peebles is suing to
regain management control of the Royal Palm Hotel, 1545
Collins Ave., which he sold to developer Robert Falor
for a record $128 million in 2004.
Citing “gross
negligence” on Falor’s part in running the Royal Palm,
Peebles filed suit against him in Miami-Dade Court April
25. Peebles wants a judge to put his company in charge
of managing the Royal Palm.
Falor had run into a
cash crunch as the Royal Palm deal was nearing
completion. To ensure that it would close, Peebles
loaned Falor $8.5 million in exchange for keeping
ownership of 12.5 percent of the hotel. Peebles writes
in his book that the deal also included 12.5 percent of
the profits from condo-hotel sales, and hotel profits.
Through a
representative, Peebles said he was could not comment on
the continuing suit. However, in a recent interview with
the SunPost, he said he was concerned about
Falor’s trouble, and was surprised Falor was losing
money in a strong hotel market.
Falor, known for his
failing condo-hotel projects with Nicky Hilton,
originally talked about converting a portion of the
Royal Palm’s 417 rooms into condo-hotel units, but
changed his mind.
“We underwrote the
deal as a pure hotel and said if this crazy market
continues we’ll go the hotel-condo route,” Falor said.
“But with the cool-down in the condo and housing
markets, and the heat-up of the hotel market, we stayed
as a hotel.”
Valuation experts
agree that the condo-hotel market in Miami is no longer
the cash magnet it was in the last few years.
“Hotel capital is more
readily available than it was two or three years ago,
and residential real estate is no longer outperforming
the stock market,” said Andrew Cohan, a hotel and resort
valuation consultant with Miami firm HVS International.
Nonetheless, Falor’s
decision not to convert the Royal Palm into a
condo-hotel hasn’t kept it out of the red. Peebles’ suit
uses for ammunition the Royal Palm’s 2006 loss of $12
million despite record revenues in South Beach’s hotel
industry. It also missed a loan payment in July, and
failed to pay off its $109 million mortgage when it
matured in March.
Falor said those
numbers are misleading.
“The financial
statement Peebles was referring to is an accrual
statement,” Falor said. “The difference in a cash
statement is day and night. The hotel is doing very well
and continues to do very well.”
Falor said that he’s
not even running the hotel anymore. In March management
was shifted to Guy Mitchell, a majority owner [of the
Royal Palm] with upwards of $25 million invested in the
hotel. He also said that without Mitchell’s money to
close the Royal Palm deal, Peebles also would have lost
big.
“If Mitchell Companies
hadn’t come up and funded the thing like he did, Don and
I would have been screwed. Don should be kissing Guy’s
and my ass for saving him. Don didn’t write an $8.5
million check, he just left some of his profits in. So
for him to pull these shenanigans now, he’s got no
conscience. He’s just crazy.”
Friday, Judge Gill
Freeman asked both sides to sit down and try to work out
an agreement. They were due back in court this morning, May 10. Undisputed is that Falor’s Breakwater and
Edison hotels, once slated to become the Nicky-O, are in
bankruptcy and for sale. Both are located on Ocean
Drive.
“Theres’s a
confidentiality agreement so I can’t really talk about
it,” Falor told the SunPost. “Nicky [Hilton] is
wonderful, but her manager is a very, very difficult
person to work with.”
*********
The Peebles Principles
is broken into 10 chapters that detail behind-the-scenes
moves involving colorful politicians, like Washington,
D.C., Mayor Marion Barry, who helped Peebles win
development deals and become the country’s largest
African American developer.
One of Peebles’ tips
is to know what motivates the players with whom you’re
negotiating. Peebles said he wrote the book to help
others achieve their dreams.
“When I went into
business there really weren’t many candid books on how
to create wealth from the ground up,” Peebles said. “The
book is about how to create wealth without being born
with a silver spoon.”
An only child raised
by a single mother in a middle-class environment in
Washington, D.C., Peebles was exposed to politics from
an early age. He worked as a page on Capitol Hill for
Congressman John Conyers Jr. and learned that aligning
yourself with the right powerful people was the way
big-development deals are done. In 1982 he helped
crack-smoking Mayor Barry raise money for his
re-election campaign, and in exchange was placed on
D.C.’s Tax Appeals Board. After that he was on his way.
At 26, he writes, his first deal made him a
multimillionaire.
But even for someone
who came up in D.C. during the Barry years, Miami Beach
proved a politically challenging landscape to negotiate.
Chapter 5, entitled
“The Royal Palm: Never Say Die,” begins the book’s South
Florida connection, and has the potential to make waves
among Miami Beach’s movers and shakers. “South Beach in
the mid-1990s was a wild west for developers. There were
opportunities everywhere and a mad rush to grab them,”
writes Peebles in the subhead to the chapter. Peebles
and his wife Katrina were in Miami Beach for the New
Year’s Eve 1995 holiday, when Don came across an article
in the Miami Herald Neighbors section about the
Shorecrest Hotel being for sale. An accompanying piece
mentioned that the city of Miami Beach was offering
special development incentives for a black-owned company
to develop the adjacent Royal Palm Hotel. It was part of
a peace offering to settle the black tourism boycott.
Backed by leaders such as H.T. Smith of the Black
Lawyers Association of Dade County and Robert B. Ingram,
then mayor of Opa-locka, the 1,000-day boycott was
estimated to have cost the region $50 million. It
stemmed from a 1990 visit by recently freed Nelson
Mandela in which he gave an anti-apartheid speech at the
Miami Beach Convention Center. Before Mandela arrived,
five of South Florida’s Cuban-American mayors, including
then-Miami Mayor Xavier Suarez, signed a declaration
criticizing Mandela for not denouncing human rights
violations by Fidel Castro’s Cuba. The black community
saw it as a major snub.
To end the boycott,
the city of Miami Beach would give to the
black-controlled firm that won the bid to renovate the
Royal Palm, $10 million in public financing and the
oceanfront location. Seven groups vied for the Royal
Palm project, with big name players like the
Ritz-Carlton, Hyatt, Wyndham and Marriott in the mix.
Peebles writes about
how he purchased the contiguous Shorecrest, at the time
a fleabag hotel inhabited by prostitutes and drug
addicts, and used it as leverage to win the Royal Palm.
He details how he built a troop of lawyers from Holland
& Knight and architects from Arquitectonica as well as
financiers to create a proposal to the city. Even with
such a dream team, the acquisition wouldn’t be easy.
“This was Miami Beach,
the wild, wild, west of Florida real estate, where no
one was watching — except a guy named Arthur Courshon,”
writes Peebles.
Courshon, at the time,
was the chairman of Jefferson National Bank, which had
owned the Royal Palm before the city, and he had been on
the selection committee that had awarded the Tisch
family, as opposed to the Hyatt Corporation, a contract
to invest millions of property tax dollars into a
convention hotel — the Loews Hotel. Peebles claimed that
politics had been involved, and that Courshon wanted to
make good with Hyatt by awarding them the Royal Palm.
Unfortunately Courshon’s side of the story went to the
grave with him in January. Peebles’ land use attorney
hired lobbyist Michael Milberg to help navigate the
political landscape. Milberg had been general manager of
the Royal Palm and was City Commissioner Neisen Kasdin’s
campaign manager.
In the end it was a
calculated public relations barrage that tipped the
final commission vote in Peebles’ favor. Randy Hilliard,
a political consultant and self-proclaimed “prince of
darkness” who at the time was retained by the Wyndham
team, discovered that Eugene Jackson, head of the Hyatt
team, had defaulted on a housing project loan and had an
outstanding judgment against him. It was covered on the
front page of the Miami Daily Business Review.
Other financial problems also eroded Jackson’s
credibility. Peebles then reached out to then-Miami
Herald Publisher David Lawrence, and the
paper wrote an editorial favoring Peebles the day before
the vote. Peebles also went to the Miami Design
Preservation League and they recommended his proposed
architectural design over that of the Hyatt team. All
these factors proved too strong even for Courshon and
then-Mayor Seymour Gelber’s influence. Kasdin helped
push the vote in Peebles’ favor. Later, during the Bath
Club deal, Peebles and Kasdin’s friendship ended in a
bitter political skirmish. The gritty details are in the
book.
Peebles offers bold
anecdotes of his interactions with the players circling
the project. No one is spared, not even heavyweight
Craig Robins of Dacra Development.
“I remember going to
meet with Craig in his South Beach offices. He struck me
as a little bit offbeat: He was very artsy looking, with
tight and colorful clothes, the opposite of what you’d
think of as a developer,” writes Peebles. “He also came
across as very arrogant; this was the city where he grew
up and where his dad was a successful businessman. He
told me flat out that as a newcomer I didn’t stand a
chance of beating him, period.”
Robins had his PR
person e-mail the SunPost the same response he
gave the Miami Herald’s Joan Fleischman for her
April 18 column.
“Don was probably hurt
by the fact that I didn’t have any interest in doing
business with him,” Robins wrote. “I like him socially.
And I’m happy that he and my brother had a successful
business relationship.”
Peebles and Robins’
brother, Scott Robins, would go on to build the Lincoln.
Located on the corner of Michigan Avenue and 17th
Street, it’s the parking garage and office building that
houses Lucky Strike bowling lanes. The details of the
deal are in the book.
During this period
Peebles also became the first black member of the Bath
Club. Founded in 1927 by Carl Fisher, the club
originally had “gentiles only” rules and blacks weren’t
permitted on the property.
By the late ‘90s the
club had fallen on the financial rocks, and Peebles saw
it as a great opportunity to make both money and a
statement.
“I knew what a heck of
a symbol it would be for me, an African American, to buy
it,” Peebles writes in Chapter 7. “It would mean a great
deal of publicity, and that could only increase my
visibility and clout in the local real estate business.”
At the time of the
deal the Miami Beach commission consisted of Susan
Gottlieb, Marty Shapiro, Nancy Liebman, Jose Smith,
David Dermer, this-year mayoral candidate Simon Cruz,
and former Mayor Neisen Kasdin. Peebles writes about how
he courted them to get the zoning changed so he could
build a high-rise on the property. At the Bath
Club’s request, the commission had voted to down-zone
the property from RM-3 to RM-1, decreasing the value of
the property and thus lowering its taxes. The vote to
change the zoning back increased the zoning only to
RM-2, which allowed for the current high-rise, but is
less dense than would have been allowed if it had gone
back to RM-3.
The zoning change
occurred over two readings, the first in September and
the second on Nov. 17, 1999. After trying unsuccessfully to
have the vote deferred at the first reading, Kasdin
voted against the change. Peebles writes that he was
shocked.
“He [Kasdin] had
decided, in the end, to use his vote to show up Shapiro
and Dermer, the two anti-development commissioners. The
record would show that while they were voting for a
rezoning that would allow denser development, Kasdin was
voting against it.
But Kasdin said he had
already told Peebles he couldn’t back the vote until
Peebles worked out issues the surrounding community had
with the idea of an ocean-view-blocking high-rise. At
that point Peebles decided to financially back Kasdin’s
mayoral race opponent, Shapiro. He also told the public
Kasdin had voted against the project because he’d
refused to back Kasdin’s campaign. The fallout between
Peebles and Kasdin led to state attorney investigations
of both men, which in the end fizzled out due to lack of
witness cooperation.
What Peebles leaves
out of his book is that it was the second vote that
sealed the deal, and on that one Kasdin voted in favor
of the zoning change. But that yes vote came after he
beat Shapiro in both the Nov. 2, 1999, regular election
for mayor, and the Nov. 9 runoff.
Kasdin, a partnering
attorney with Akerman Senterfitt, denied via telephone
Tuesday that the election had anything to do with his
change of vote on second reading.
“There was a 15-foot
beach access which was created in guarantee [on second
reading],” Kasdin said. “It was the beach access, though
I will admit I find it a bit ironic that the people
against development voted in favor of it.”
Peebles’ success in
changing the zoning meant the property value instantly
increased by more than $30 million, and Peebles, through
redevelopment, went on to resurrect the Bath Club into
one of the most luxurious clubs and residences in Miami
Beach.
There’s a lot more in
The Peebles Principles. An entire book
could probably be written from the points of view of all
the players Peebles mentions, and who disagree with his
take on history.
Kasdin, for one,
thinks Peebles may have been motivated by more than just
a charitable desire to pass on business strategies when
he wrote this book.
“He’s trying to revise
history, I guess,” Kasdin said.
So what does the
future hold? Peebles said he’s no longer investing in
residential real estate in Miami-Dade County, but is
looking for hotel and community redevelopment projects.
He said he thinks demand has peaked and the days of
seeing 25 and 30 percent annual appreciation have ended.
“I wouldn’t be in a
rush to build in Miami or a super rush to build in Miami
Beach,” Peebles said.
Want to know more
about The Peebles Principles? Try asking Don
yourself. He’ll be signing The Peebles Principles
on Wednesday, May 16, at 8 p.m. at Books & Books, 265
Aragon Ave., Coral Gables. The store’s number is
305-442-4408.
