Don of a New Era: Don Peebles’ Push for Inclusivity in CRE
Don Peebles doesn’t care.
The 60-year-old chairman and CEO of The Peebles Corporation told Commercial Observer that wealth “liberates you.” It’s why he pulls no punches when it comes to openly and aggressively advocating for a more equitable commercial real estate sector for minorities. In today’s social climate, he said now is not the time for minorities to celebrate small victories, rather they should use the opportunity presented to come together and “accelerate …actually put the foot on the gas.”
In June last year, the veteran investor, developer and author, who oversees a multi-billion dollar real estate portfolio, announced that he had launched a $500 million fund to support minority developers in major cities in which Peebles has a footprint — Los Angeles, New York, Miami and Philadelphia, among others. He said investment interest really didn’t pick up until after George Floyd’s murder and the subsequent protests across the country.
Alongside his real estate career, Peebles has logged a history of public service, having been on President Barack Obama’s National Finance Committee and previously holding the title of chairman of the Congressional Black Caucus Foundation, among other roles, such as his brief stint on the board of governors for the Real Estate Board of New York. He’s also an Ambassador to the University of Southern California and serves on the Business Roundtable for Miami Mayor Carlos Gimenez.
Peebles chatted with CO finance editor Cathy Cunningham about some of his most recent projects, the economic hurdles that stand in the way of minorities in the U.S. and what the commercial real estate sector can do to become more inclusive for women and people of color. He served as the keynote speaker for the publication’s 2nd Annual LA Spring Financing CRE Forum, a virtual event that was held on June 11.
Commercial Observer: What’s your take on the L.A. real estate market today?
Don Peebles: Los Angeles, along with the state of California, provides an exceptional quality of life. It’s also a very entrepreneurial environment. While it’s very well known for the entertainment industry, it has a very wide spectrum of industry, including finance, real estate and so on, so it’s got a consistent demand generator. However, Los Angeles was developed on a spread-out basis, so you have this sprawl. The biggest challenge that Angelenos complain about every day is traffic. They have a very weak public transportation system and a very large, spread out population, so people can spend an hour in their car to go five miles. What I’ve seen as a trend —and what our company is focused on — is the urbanization of Los Angeles, and you’re seeing that in Downtown L.A., where there’s a significant urban redevelopment [going on]. We’re focused on projects in the Downtown L.A. area to get people out of their cars so they can live and work in the same environment.
Your Angel’s Landing project in Downtown LA is nearly 2 million square feet, and due to come online in 2028?
Yes, it is. We’re really trying to beat the Olympics and be there for that, which L.A. is hosting. Initially, our plan was to build the tallest building in the western United States. It’ll be two towers: one, a very tall tower at 450 to 500 feet and then a 1,000-foot tower next to it, both with hospitality and residential and one with high-end luxury rentals and the taller tower with luxury condos. We shortened the taller tower to about 900 feet and we’re on top of the Pershing Square subway station, one of the few public transportation systems in L.A.. We’re in the heart of the business district, and the reason we call it Angel’s Landing is on that site is a trolley called Angel’s Flight, a historic trolley that just goes up a hill. It’s a tourist attraction and a part of California Plaza. We see this as an opportunity to take Downtown L.A. to the next level of luxury and a mixed-use lifestyle, which doesn’t exist in [there]. If you want to draw a New York City comparison, it’s similar to Time Warner Center. We’re going to have a large amount of entertainment-type retail space as well, and the two hotels will generate activity; we still see a tremendous demand for hospitality in Downtown L.A. as we rebound.
Tell us about the $500 million investment platform you launched, geared towards minority and women developers.
About a year ago, we were approached by the state of California to consider doing an emerging developers fund. I wish I’d thought of it myself. But we were approached by the incoming Treasurer [and her team] at that time. We met with her and then began to do research. As a developer myself, a minority developer, I understood that access to capital was very challenging. My mother was also in the real estate business and I saw her challenges. For 36 years, every development project that we’ve ever [had] has utilized our [own] capital for pre-development, aside from our first project. So I know that one of the biggest challenges women and minorities face when trying to compete in our industry is access to capital, and that’s why you see so few women and minority developers. I thought it was a good idea to solve that and figure out how to scale it up. After doing our research and putting together a business plan and structure, we decided to pursue a fund that would focused on the eight markets that are company is active in and structure it more like a venture capital fund, where we are investing and helping the developers building infrastructure and utilize our platform and our relationships to help them grow their businesses more effectively.
And that was before this social protesting on racial disparity. What the current circumstances have proven to us is that this is a serious issue that is affecting the nation and needs to be addressed. We hope to lead in that space to provide access to capital to talented entrepreneurs, because after all, talent is dispersed equally, it’s just that opportunity and economic opportunity [aren’t].
Can you talk about the platform’s investor base?
It includes global and national banks, public pension systems and global investment banking firms. We are approaching some university endowments as well. The size of this fund is $500 million, which is a lot of money, but we’ve had projects that are that amount or larger and raising this fund has been much more difficult than financing one of those projects. So even though the risk is broadly diversified as opposed to concentrated in one project, and [it’s] in markets that everyone knows and the statistics show have been severely underserved, it has still been a challenge raising this capital, which [points to] the challenges that minority and women entrepreneurs confront. And while the industry and our capitalistic system says and promises women and minorities that this is a fair and equitable system; it really isn’t. As a result of these protest[s], we’ve now been reengaged by several investors who actually said ‘no,’ who now want to consider making investments. I think it’s a good environment for this.
It’s no secret that real estate is an overwhelmingly white, male industry. How can we improve and promote diversity as an industry?
Well, I think the industry as a whole ought to think about survival. I remember when I first started doing business in New York in 2011, I was on the board of governors for REBNY in 2012 for a year or two and I remember telling the former CEO of REBNY and some of the board members that the business model that they had was not sustainable. What I meant by that is that New York City is a city comprising a population that’s 53 percent female and 67 percent minority. That group of people is not going to sit by idly and just never get a fair shake at opportunities; you’re not going to be able to keep this concentration of opportunity.
I told them that I thought REBNY should have led [the way] on affordable housing, on economic inclusion for women and minorities, and in terms of an expansion of affordable and workforce housing. And otherwise, regulations would be imposed upon them to create that and they would lose their power base within the state and local governments. And, they were kind of dismissive of that. If the industry wants to survive and prosper, it’s going to have to make the opportunities be reflective of the population’s demographics. I think women and minorities need to work together and they need to say that this is not acceptable anymore, that the access to capital can’t go to the same people all the time. The irony is that the money being invested in real estate, especially the equity side, is public pension fund money or union pension fund money. The contributors to those pension systems have significant women and minority contributors and workers. We at least should get a fair shot at our own money.
That means that we have to be mindful of that and we can’t be afraid to challenge the system. I think the challenge, also, is that the system can co-opt people, because if you have a job or you have a position or you’re getting some opportunity, all that is better than nothing. And you can’t afford to alienate people, because then you lose opportunity. That’s one of the reasons why I’m doing it. One of the things that wealth does is it liberates you, so I don’t care. If people don’t want to do a deal with me in New York City, there are 49 other states, plus the District of Columbia. So, I’m willing to stand up because I think I should. People who are protesting now, they’re risking their lives, their freedom and their health to protest against the injustice. So, the least that I can do, sitting here in my library in Miami, is to challenge the system that I know isn’t making it fair.
You talked about your discussions with REBNY almost 10 years ago. Have you seen any improvement in our industry since then from a diversity standpoint?
If you look at the multi-generational wealth and players within the real estate industry in New York, for example, I think that they are out of touch with where the country is so they are going to be very slow to change. If left to their own devices, they’re going to take baby steps. They’ll do some type of internship program for a small group of people or they’ll ask their workers to hire some minority workers or women, but they’re not going to take the giant steps unless it’s imposed on them. Now, they’ve been slapped across the face a few times, so maybe that wakes them up. I think Los Angeles [and the state of California] has a much more positive outlook. It’s a very diverse state. It’s a progressive state. There, you don’t see that same incestuous types of relationship within the industry, so the industry is constantly regenerating itself. It’s the same thing in Miami, it regenerates itself and there’s not really this legacy of multi-generational developers or property owners who were born on third base and to be there is just to be a walk to home plate. I think that you’ll see greater opportunity out West and South, in terms of being able to make rapid advancement. I think New York is in for a tough time. And I think that the public is going to [continue to make demands] or there’s going to continue to be this civil unrest.
How do we turn recent conversations and collective awareness into action?
There’s the old tagline from Nike: “Just Do It.” At the end of the day, the industry — the financial services industry and the real estate industry — needs to invest in women and minorities and they need to do that while imposing the same standards that they do on white men. Let’s just think about what our development community looks like in New York City. You have fathers suing sons, sons suing fathers, messy divorces, people who have pled guilty to criminal conduct, people who give their properties back to lenders. All those descriptions I just gave you is the tip of the iceberg, but they all continue to get to do business. If you’re a woman or a minority, you better bat .900 to 1.000, because if you’re not perfect or close to it, they’re going to pick apart your track record and they’re going to pick apart your career and they’re going to look for reasons not to do deals, as opposed to looking at reasons to do deals. I think the industry and the people in power have to change how they see us. Also, I think there needs to be a seismic shift in terms of who is in power, from the political spectrum to the business sector, and it’s got to be decisive action. Otherwise, New York is going to become almost unlivable if it doesn’t change.
Do you see, in the foreseeable future, a more equitable environment in this country?
I think that in some places, yes. In places where there’s a progressive, aggressive leadership style — Los Angeles has a good shot at it because Eric Garcetti and Gavin Newsom are younger, more progressive, take-no-prisoner change agents — you’ll see dramatic change. You’ll see dramatic change in Illinois and Chicago. In New York, you’ve got this tug of war — the wealth disparity is greater in New York City than anywhere else in the country and among one of the greatest disparities in the world — between the masses of people and a smaller, shrinking group of people trying to control and hold onto their wealth and they’re not going to give it up quickly. It’s going to take a couple more seismic activities, like these protests, to bring about real, lasting change. And that will come with who the Mayor of New York City is. A political environment a month ago, versus today , in terms of who can become mayor, has changed dramatically.
How do we improve minorities’ access to capital?
One of the things I’m concerned about right now — as an African American, I’m very sensitive to this — is racial justice, but we’ve got to get women now, beyond ‘Me Too,’ to economic justice. Just like African Americans, it’s not enough to say, ‘Okay, don’t let the police kill black men anymore and let’s not mass incarcerate black men.’ That standard is low; everybody should have a right to live. What Black Lives Matter is focusing on is black dreams, black aspirations, black ambitions, black opportunity and that all matters and it’s the same thing with women. Women should be able to go into the workforce and be able to work and have opportunity without being harassed or attacked based on their gender; that’s a basic right. So now that we’ve raised that as an issue, what needs to happen with women, is their ambitions matter too, their goals and dreams, they matter. We’ve got to shift this discussion to that. Collectively, if we can figure out how to join forces, then we can become more effective and powerful to bring about a much more effective, aggressive and lasting change.
Any words of wisdom before we sign off?
While there’s a lot to be concerned about, we’re at a time of great opportunity, an opportunity to be transformative. We have to seize this moment to take advantage of the great opportunity that presented itself to us. While it seems chaotic, and it seems somewhat depressing and discouraging, we’re really in an environment of great opportunity and we’ve got to step up and push further so that we can give more momentum to this movement of change to put these discriminatory practices that women and minorities confront in the rearview mirror. Now’s the time to accelerate, not to put the brakes on or to coast, but to actually put the foot on the gas. If we do that and work together, we will transform our country and make it into a more perfect nation.