Relaxing in Miami Beach on New Year's Eve 1995, Peebles read a newspaper story about the Shorecrest, a struggling Art Deco hotel next to a rundown parcel that the city of Miami Beach had earmarked for a black-owned convention center hotel. That day, Peebles called his broker. By week's end, Peebles had made an offer on the Shorecrest and met with Miami Beach's city manager about bidding on the hotel deal. Lightning speed? You bet. "Real estate's not like a great cabernet. It doesn't get better with time," Peebles says.
The 37-year-old Peebles hopes to grow the Miami Beach project into a small hotel empire just as quickly. He says he wants 20 hotels built or in development around the U.S. in five years. Eight of those, he guesses, will be in Florida, perhaps Hollywood, Tampa, Orlando and Jacksonville. Peebles has yet to break ground on any current project, and some of those who know him say big plans and broken promises are par for his course.
But Peebles figures he can make his ambitious plan work. One important asset is his alliance with Crowne Plaza Hotels & Resorts, the upscale brand of the company that owns Holiday Inn. Crowne Plaza got a new CEO last spring and now looks to expand into major U.S. markets, including Miami, Fort Lauderdale and Orlando. The hotel company is Peebles' partner in the South Beach deal and will likely take a similar role in Fort Lauderdale. "Our interests are parallel," Peebles says. "I need equity to continue a rapid expansion and they need product."
Probably his biggest assets, though, are race and political smarts. Being black gives him a leg up on competitors for government contracts since governments typically award extra points for minority participation. For example, a contract Peebles won to build a hotel at New Orleans International Airport required 35% minority equity. The contract fell through last month after Crowne Plaza opted not to
participate.
Peebles got his entre into the political arena when D.C. Mayor Marion Barry, a friend since childhood, appointed him to the city's powerful property tax appeals board in 1983. A year later, Barry made him chairman (Peebles was just 24). Peebles later turned his insider's knowledge of the tax appeals process into a lucrative consulting business -- lobbying his former colleagues for tax reductions for clients. The switcheroo sparked an internal investigation (which found no wrongdoing) and angered civic activists, who accused Peebles of exploiting the system at taxpayers' expense. It also made Peebles rich enough to afford a 10,000-square-foot mansion, where he and his wife, Katrina, hosted glamorous fundraisers for a slew of political candidates, including Bill Clinton. "Business and politics complement each other," Peebles says.
No apologies
Along the way, Peebles built a side career as commercial real estate developer. His specialty, leasing to the government. Peebles tells this story about his very first deal: While chairing the appeals board, he learned through his real estate grapevine that another developer was offering to lease space to the city at $22 a square foot. But the developer didn't yet own the space, in fact, he was haggling with the property owner over the sale price. Enter Peebles: "I had my broker arrange a meeting with the seller. I said, 'I think the city will certainly do this lease with me. I'll pay you your price ($900,000) but I need six months. I got a couple of investors, and I wrote a letter to the city offering to lease the space for $18.75."
Needless to say, Peebles got the lease deal and the property; the other developer didn't know what had hit him. Peebles, typically, makes no apologies. "I couldn't understand why he was arguing over $150,000 when it was a $9 million project. I've learned, if you've got to count pennies, you shouldn't do the deal."
Such tales make it easy to see why Peebles is both admired and despised. Indeed, like most dealmakers who've gotten rich off other people's money, Peebles has a fair number of detractors. In addition to real estate interests in D.C. that he values at $16 million, Peebles and his companies left behind some 30 lawsuits and a gaggle of critics who question his abilities and character. In one notable court case last June, U.S. marshals seized an old bank building Peebles was hoping to lease to the government, after he failed to pay an architect's bill that was 2 years old. According to Peebles, the architect racked up fees on work that wasn't authorized. The bill eventually got paid, and a D.C. construction company, with Peebles, is now converting the building into a Marriott Courtyard hotel.
Many in the district won't say much about Peebles at all. "What's the upside?" says developer Peter N.G. Schwartz, who hired Peebles to lobby the D.C. government to lease a building Schwartz owned. A lease never materialized, but when Schwartz later sold the building to the government, Peebles sued, demanding a $3.6 million commission. (The judge threw out the suit because, as it turned out, Peebles didn't have a broker's license.) Says Schwartz: "He's charming. He's a good talker. He says all the right things. He's very charming. Did I already say that?"
Much of the bad vibe around Peebles can be traced back to his relationship with Barry, whom Peebles met when he was 14 through his mother, an appraiser who also had served on the district's tax appeals board. The two became close, but Barry's reputation for political cronyism and his 1990 drug-use conviction ultimately made the relationship a liability, with Peebles -- not surprisingly -- suffering some bad press of his own. For example, testimony at Barry's trial revealed that Barry used one of Peebles' homes for late-night drug fests when Peebles wasn't there. And once re-elected, Barry supported a controversial deal to move 720 city workers into buildings Peebles controlled, a deal Peebles claimed saved the city $50 million over a competing offer. The Washington Post saw it differently, calling it Barry's "personal version of AFDC -- Aid to Friends, Developers and Cronies."
The controversy over that lease deal, Peebles says, spurred him to leave D.C. "Nobody would believe he didn't try to get that deal to me. I realized that if I can't win when I'm $50 million better (than the competitor), I'm in tough shape. It was as a vacation from that whole deal I came down here. Now I say (to Barry), 'Thanks for screwing me.' If he didn't screw me, I wouldn't be doing business down here."
An imposing 6'4" man who favors dark suits and ties, Peebles has impressed Miami locals with his persistence and savvy. When pitching his Miami Beach hotel project, Peebles hired the best-connected law firms, joined the right clubs and showed up at important social functions. Then, when the city ranked him second choice, Peebles fought back hard, wooing local preservationists and spending another $150,000 to jazz up his presentation. Says Miami Beach Commissioner Nancy Liebman, "In the beginning, I thought he was just a very smooth operator, another person from another city trying to make a fast profit. Anybody can fool me, but now I believe he's truly dedicated to doing this project."
But Peebles also has plenty of skeptics who fear he's building nothing more than a house of cards. Negotiating the lease with Miami Beach for the convention center hotel took months longer than expected, says the city's chief negotiator, Arthur Courshon. Choosing his words carefully, Courshon explains why: "Many of the promises Peebles made in his presentation, when I sought verification, I didn't get verification."
For one, Peebles told Miami Beach commissioners that he controlled the Shorecrest, the hotel he bid on while on vacation. He did have a contract, but never closed the deal (Peebles blames the sellers for upping the sales price at the last minute). Now that Peebles has integrated the Shorecrest into the convention center hotel project, the city is stuck condemning the property, a lengthy and potentially expensive process that is certain to delay construction.
For another, today's deal is vastly different from the one Peebles proposed almost two years ago. Originally, the project was to be 100% black-owned. Peebles' partners included Motown Record Co. Chairman Clarence Avant and D.C. businessmen Jeffrey Thompson and Cecile Barker. But Avant dropped out, and Peebles, Thompson and Barker are suing each other. (Crowne Plaza is the new equity partner.)
Here to stay
In fact, the day Miami Beach commissioners approved Peebles' final lease agreement, Oct. 21, Peebles found himself defending a just-filed lawsuit by Barker alleging that Peebles was mixing partnership money with his own companies' funds, had refused Barker access to records, and had misspent partnership money on a race horse and a lavish birthday party at his waterfront Bay Harbor Islands home. Peebles denies the first two claims. As for the horse, Sir Irish's Secret, Peebles says Barker knew about and approved the expense. As for the party, Peebles says he reimbursed the $10,000 to the partnership shortly after the event. Peebles says Barker's lawsuit was filed in retaliation for litigation he initiated against Barker and Thompson last summer over their alleged failure to meet their capital obligations. Also, he accuses, the timing of the lawsuit was calculated to disrupt the deal at a very important juncture. "It was a cheap shot," he says.
The Fort Lauderdale deal, too, has had its share of problems, not all of his making. Peebles was brought into the project in early 1997 by the National Baptist Convention U.S.A., which had won the right to build the county's convention center hotel but then couldn't finance the deal. But Broward commissioners last summer demanded Peebles get rid of the church group amid financial scandals involving the group's president, Rev. Henry Lyons. Peebles agreed, but then was forced to replace the $2.5 million the National Baptist Convention had committed to the project. He did in November, with funds borrowed from the local carpenters union.
Then in December, Peebles had to overcome criticism from the Greater Fort Lauderdale Lodging and Hospitality Association over his option to purchase the convention center land from Broward County. Commissioners approved the $61.5 million deal December 22 after Peebles gave up the option in exchange for a longer lease.
None of the turbulence has mitigated Peebles' resolve to be a major player in the real estate business. "I've undergone a great deal of scrutiny and come up clean," he says. "I'm in business for the long run, and I want to build a national hotel company. I'm here to stay.