Fresh Eyes on Manhattan
Jotham Sederstrom Nov. 8, 2011, 9:27 a.m.
A political activist who during his youth worked under Reps. Charles Rangel and John Conyers, Peebles Corp. chief executive and chair of Peebles Corp. Don Peebles has risen to become one of the 10 wealthiest black entrepreneurs in the country and among the nation’s most successful real estate developers, with projects in Washington, D.C., Las Vegas and Miami, among other markets. The college dropout, 51, spoke with The Commercial Observer about his recent shift to New York City’s commercial market, the deals that lie ahead on the Lower East Side, and his racial-barrier-busting real estate moves in Miami.
The Commercial Observer: You dropped out of college but have since established yourself as one of the most successful real estate developers in the country—albeit lesser known here in the New York City market. How did you initially get into commercial real estate?
Mr. Peebles: I attended Rutgers University with the expectation of going into medicine. I was going to emulate my uncle, who was kind of a role model for me and an inspiration for me. But after my first year, I realized that medicine really wasn’t where I wanted to go. It was a bit more confining and I was more entrepreneurial, and my mother had been in the real estate business. She’d been head of a real estate brokerage company in Detroit.
New York is in your sights. How long have you been aiming to develop here in the city?
I moved my family here this September so that we can establish a New York presence, and we have every intention of developing projects here. My kids got enrolled in school here, and—remember—we have a home in Bridgehampton, N.Y., which I’ve had for seven years. And for 20 years I’ve been coming out to the Hamptons for the summer.
What kind of real estate are you eyeing in New York?
I come to New York with knowledge and experience from around the country, but I have a fresh set of eyes looking at Manhattan. So I want to do some things that are similar to what we’ve done in other places, like building a super luxury condo with a high level of services and large units. That’s been done on the Upper West Side, but maybe doing it downtown, like in Tribeca and Soho, would give it a totally different perspective.
You’ve developed office buildings across the country, but from listening to you now, it doesn’t sound like your heart is in the office building market here in Manhattan.
We’ve developed Class-A offices in Miami and Washington, D.C., and D.C. I think is the best commercial office market in the country. But if the right opportunity came up to develop an office building in Manhattan, that would be something we’d look at. But I don’t see that as the opportunity on the horizon right now. The economy is too weak.
So what are you looking at if not office buildings?
I see residential and hospitality—those are two areas we want to be focusing on. I like the Lower East Side for hotels. We’re doing due diligence on two deals right now. We’re actively in the marketplace looking at deals. But, look, we’re not going to be out here trying to go into auction processes. We’re trying to identify opportunities where we can deal directly with owners, and bring them value and bring ourselves value.
Tell me about the hotel projects you’re spearheading on the Lower East Side?
We’re close to one deal right now and I think, because it would be a conversion and renovation, the due diligence would need to be a bit more thorough, but the target would be for late 2013. It wouldn’t be a typical branded hotel. It would be one with a bit more edge to it. One of the markets I believe is underserved right now is the Asian market, in terms of having more boutique trendy hotels that can be marketed to Asian visitors.
In your thinking, how do you expect to market a New York City hotel to Asian visitors?
Language, some element of design and then also some type of amenities—like having a restaurant targeting that marketplace and offering various services that would attract that customer base and being able to have a business center that keeps the hours of Shanghai.
In 2008, your company originally had the winning bid for Aqueduct. What happened?
Our team initially won the rights to Aqueduct. We teamed up with Delaware North and we were awarded the rights to Aqueduct, and that was in 2008 and [David] Paterson had just taken over as governor. The state took a long time to make the award initially and by the time they did the credit markets froze and so we wanted to modify our payments. We’d bid about $3 million dollars as a licensing fee and we wanted to break it up into three payments, the initial one being $125 million. But the state wouldn’t do it, and so ultimately they redid it. It got very controversial to the point that Steve Wynn walked, and we walked. The result was unfortunate because it was awarded to a Malaysian firm, so not only was there no New York ownership, there wasn’t even domestic ownership. But we like gaming and we’ll be looking at other gaming opportunities in New York.
Has it been difficult to break into the New York market?
The New York market is not a closed market because it’s an exceptionally efficient market so deals are widely marketed. The challenge is not making a selection from a picked-over product. So basically the more established developers who have been in the marketplace for a long time, they tend to get the first crack at the deals. So our challenge has been to look at and identify development opportunities that are not widely circulated.
You’ve made waves in Miami, specifically with a hospitality project in South Beach that you developed into the second largest hotel in the region, as well as the purchase of an exclusive social club in Miami. Can you tell me about the latter transaction?
That was the Bath Club—the Residences at the Bath Club on Millionaire’s Row. It’s the oldest social club in the southeast U.S. and it had been a restricted club. It didn’t allow African American members or Jewish members. I became the first African American member, and then I bought it two years later.
That must have been satisfying.
Yes, it was. And now the president of the club is Jewish. It’s an example of how Miami was evolving because if you looked to get into Florida 15 years ago it was still a Southern state and Miami was still a Southern community so it had some of those elements that you’d find in the Deep South. But what I liked about the Bath Club is that it was among the most special sites in all of Miami Beach—five and a half acres on the ocean—and it had great symbolism, so it gave me an opportunity to develop a transformational project. We did basically about the equivalent of 15 Central Park West—but in Miami.
Was it a solid real estate investment, or was the impetus behind the deal the symbolism?
It was a great investment, but the cherry on top was that symbolism.