Chapter 9 Opportunity Is Where You Find It

Don Peebles is a big man with ambitions and a track record of achievements to match his stature. He set out to be a millionaire by the time he was 30 and beat his own goal by three years. He took his talents to Florida and helped reinvent the spirit as well as the look of Miami Beach. The Peebles Corporation, the country’s largest African American real estate development company, with a multibillion-dollar national portfolio, is comprised of office buildings, hotels, residential developments, and mixed-use complexes in cities across the country—all notable, as Peebles intended, for “something more than bricks and mortar.” In real estate parlance, they are Class A properties.

Get ready, New York. Don Peebles has arrived, he is primed to capitalize on what he sees as the city’s “unique creativity and ingenuity,” and he is eager to do business.

He does not come unprepared or unconnected. A long-time summer resident of the fabled Hamptons on Long Island, Peebles has widespread relationships among the business and political movers and shakers who can help make things happen in New York or any other market. He is himself a player in national and local philanthropic efforts and has been a formidable political fundraiser for the likes of Presidents Clinton and Obama, to name just two.

But this is a man who grew up with, as he says, no sense of “limitations or impediments” to what he could achieve, and New York, as the biggest stage of all, offers even more room in which Don Peebles can stretch his dreams and test his mettle.

No Limitations

His is not a rags-to-riches story. The riches did eventually materialize, but Peebles never knew rags. His parents divorced when he was five, leaving his working mother to raise him. His father, a U.S. government file clerk who also worked as an auto mechanic on weekends, was unable to meaningfully contribute financially to his upbringing aside from monthly child support payments and inclusion on his government-provided medical plan; nevertheless, raw poverty was not his experience. His mother, however, most certainly struggled to make ends meet. From observing his parents’ experience, he learned a great deal about how tough it is to make a living and how dispiriting economic insecurity can be. Peebles watched his mother labor as a secretary during the day while attending night school in pursuit of a real estate license. After they moved to Detroit to be closer to family, he witnessed her success in real estate but unfortunately it was not long lived for when they relocated back to Washington, D.C., she would again struggle for work. The ups and the downs were not lost on him.

Both parents were intelligent and, according to Peebles, “entrepreneurial.” They worked very hard, but their efforts alone were not quite enough for the kind of reach-as-far-as-you-can wealth Peebles knew was out there, waiting to be seized and enjoyed. He understood that a mother’s sole responsibility to raise and support a child was a very limiting factor in terms of the risk one can assume in an attempt to shoot for the stars. At the age of 17, he vowed to himself that without these constraints, he would seek and obtain the financial means that would guarantee that everything was possible, with no more struggle, no more worry. The opportunity was out there, somewhere, the only question in his mind being not if, but how.

There was never any question in his mind that he could do so. He was brought up to believe there were no boundaries or impediments to advancement, and he saw that reality demonstrated around him. His grandfather had always told him, “In America, there are no limitations on what you can do.” How this belief lodged itself in an African American man born and raised in the segregated South, who worked his entire life as a doorman at a Sheraton hotel¹ in Washington, remains unexplained. But it is also true that this doorman managed to send four of his five daughters to college, and he lived to see all of them become either professionals or the wives of professionals.

Peebles himself, born in 1960, was a boy during the height of civil rights activism and came of age at the start of an era of almost galloping opportunity. Politically active from boyhood, son of a politically engaged mother, Don Peebles at 16 became a U.S. Capitol page, then an intern for California Congressman Ron Dellums and a staff aide to Michigan’s John Conyers. If role models were needed, he had before him on the floor of the House of Representatives a cadre of African American men of great stature flexing their substantial political muscle, not just to ensure this new era of opportunity but to be heard on all the questions of the day. And there were a significant number of important issues back then, including the aftermath of the Vietnam War and the signing of the Nuclear Non-Proliferation Treaty. This was heady stuff and “it raised the bar,” Peebles says of the experience now. And it taught young Don about “the power of relationships and how they make politics work”—an essential education for the future. He would prove to be an excellent student.

In fact, this education, “up close and personal,” as Peebles says, in power and the way the world works was so comprehensive and profound that he left college after one year as a pre-med student at Rutgers. He came home to D.C. and in effect apprenticed himself to his mother, who by this time was running a small real estate appraisal business. In those days, Peebles recalls, the appraisal business was loosely regulated, and apprenticeship was a standard way to gain the needed expertise, which Peebles did, eventually going solo. He had also begun selling real estate in 1979 after becoming a licensed agent. So in a sense, the pieces were all in place for him to turbocharge a career toward his goal of becoming a millionaire by the age of 30—except for one essential piece of the package: politics.

Unlike the appraisal business, real estate investing was a highly regulated industry. It is also, as Don Peebles has pointed out to more than one interviewer, a “regional business . . . driven primarily by regional economics and regional land-use guidelines.”² For these reasons, doing the business right requires frequent interaction with agencies of government and the people who can get things done in those agencies. That’s politics, and that was where Don Peebles knew he needed to go next.

The year was 1982. After a first term highlighted by significant achievements in efficient governance but diminished by a rising crime rate and some mini-scandals in his administration, Washington Mayor Marion Barry was running for reelection and faced three challengers in the primary. The establishment choice was Patricia Harris, a sophisticated, urbane lawyer and public servant with impeccable credentials—most recently, as a member of Jimmy Carter’s cabinet.

Peebles didn’t know Mayor Barry particularly well prior to the campaign, but as his involvement grew they built a warm relationship. In addition to believing Barry was the right person for the job, Peebles saw an opportunity to immerse himself in local politics, an association that could help his real estate business. He threw his lot in with Barry, organizing and sponsoring fundraising events as he built a friendship with the candidate. But he showed his inherent political savvy with the fundraiser breakfast he scheduled for two days after the primary–a brilliant tactical move for an experienced politician, but all the more impressive for a 22-year-old new on the scene. As Peebles had sensed would happen, Barry won the primary in a landslide with 59 percent of the vote, and as Peebles also surmised, that meant that one-time Harris supporters in the business community would be chomping at the bit to get to the Barry breakfast and mend fences with the city administration. That’s exactly what transpired. The $500-a-plate breakfast was standing room only, and it was Don Peebles who introduced Candidate Barry to the packed house of business and community leaders.

The payoff came quickly. Peebles was appointed to the city’s property tax appeal board, which hears appeals from commercial property owners disputing their annual tax assessments, and he became chairman a year later. He implemented a series of reforms that vastly improved the way the board worked, thereby simultaneously polishing the image of the man at the top, Mayor Barry, as Peebles had intended.³ At the same time, he continued his appraisal work, having formed his own appraisal business in 1983. No question: the connections Peebles made through this work and the insight into real estate helped ensure him a steady flow of clients and an ever more lucrative payday. He may have left college after only one year, but he was certainly a great student of the real estate business and of politics.

He was doing well in both when, in 1986, a real estate broker came to him with a possible deal—a project to develop a new commercial building in Anacostia, an historic but neglected section of D.C. where no new commercial properties had been built in decades. The bid-offer discrepancy between buyer and seller was substantial—$750,000 offered against $900,000 asked—when the broker approached Peebles, hoping he would rescue the deal and his commission. Peebles saw opportunity and decided it was time to become a principal rather than continue to be just a facilitator; he met the seller’s price. It was not a bid made in haste by someone seeking to own his first significant property; despite his age, Don Peebles was already a seasoned veteran when it came to understanding property values. And it turned out that he had properly assessed the potential for the property, being reasonably certain that the government had an appetite for office space in an area that cried out for redevelopment, an initiative Mayor Barry certainly backed and for which he has justifiably received substantial credit.

By the time the transaction closed, Peebles had made believers out of others who would provide the necessary capital, mitigating his risk and leaving him with 50 percent ownership. His contribution to the partnership was ultimately limited to finding the opportunity, raising the financing, and crafting the transaction. Today, he still has his ownership interest in the property, in which the government continues as a tenant, providing Peebles with a nice annuity each year in the form of rent.

So that first deal, development of a Class A office building at 2100 Martin Luther King Avenue, SE, laid the groundwork for where Peebles is today. It encapsulated the formula that would be his signature for future deals: the seller’s price, as long as it is fair and reasonable; his terms; other people’s money. It was in this deal that he also confirmed his ability to play politics and the importance of doing so. It was here he learned that, in his words, “The most important thing in a deal is finding the deal. You can get anybody to execute, but doing the deal is what’s special.” Putting it all together, the Anacostia development would provide the framework for all the deals Peebles would do going forward—find and assess the opportunity, assemble the financing, work through the difficulties that had kept other developers at bay, and bring the project to profitable completion.

On paper, Peebles was now a multimillionaire, a few weeks after he celebrated his twenty-seventh birthday. Perhaps even more important than the wealth he had accumulated was the repeatable process that he could now apply to future transactions. He has shown that he possesses the most important qualities for achieving his goals—the vision to discern an opportunity that others with more experience had failed to see, and the can-do attitude to get it done. He had seen, through the eyes of his family, that barriers are self-constructed and thus either did not exist in practical terms or could be overcome with determination and a plan. Over the next three years, he acquired more properties, opened a tax assessment appeals business, paid off his debts, and bought a million-dollar house on Embassy Row. At the age of 29, he was, in his words, “at a different level.”

The level would keep rising. As Peebles sought more projects and better ways to navigate the intersection of real estate and politics, he stepped up his game. He made friendships on a national level, and in 1992 he was with Bill Clinton in Arkansas on election night, and is currently a financial supporter of Barack Obama. He has also provided advice to President Obama’s administration.

Finding the Deal

Don Peebles strives to be involved in what he calls “transformational projects.” He is an unabashed capitalist who is in business to make as much money as possible, and his first consideration on any project is the potential profit. But having achieved a significant amount of success and stature, both in real estate and as an extremely wealthy, well-connected businessman, not just any project will garner his interest. “I want to be engaged,” he says. “I am attracted to signature projects, projects that are intriguing and that will have some symbolism beyond bricks and mortar.” He articulates that through The Peebles Corporation. Its portfolio embodies his vision; he is, as he says, “the architect of the marketing of this vision.” So only those projects that resonate with Peebles are likely to make it into the portfolio.

It is why every project is a fresh start and why he always feels like an entrepreneur. As opposed to the kind of business in which an individual can succeed by having one good idea and repeating it over and over for years, or the kind of business an individual perhaps has inherited and is simply trying to preserve by not rocking any boats, real estate development as Don Peebles practices it means building a new business with every project.

And that, of course, is why he wants a project to have meaning beyond dollars and cents. Whatever it is, it is going to require risk, time, and effort, and if Peebles is going to commit to all of that, he wants to feel engaged. So he prefers that a project either be socially transforming or that it be of exceptional architectural or design quality—or, preferably, that it be both. And, of course, each project becomes an advertisement for the next one—for zoning boards in other cities to regard with admiration, hoping to replicate that success within their borders; for potential investors to marvel at the cash that is thrown off and increases in value; and for sellers who want to get a deal done with someone who can execute.

Peebles spent several more years combining politics and business in D.C. He remained close to Mayor Barry—at least until Barry backed out of a deal Peebles had been counting on.⁴ Eventually though, he felt he had done what he wanted to do in his hometown; he knew the players, knew the business landscape, knew the politics. Washington, the world’s largest political stage, had become too small for Peebles in terms of new projects to find and develop; he felt hobbled in his desire to spread his efforts in a new direction. It was time for a change. He and his wife, Katrina, and their then infant son, had vacationed in Miami in 1995 and had liked the place. But more than just kicking back and enjoying the warmer southern climate and the renaissance of South Beach, Peebles saw opportunity. It certainly makes sense that a person who achieves millionaire status in his mid-twenties from a standing start, three years ahead of his own aggressive schedule, would always be looking for what is next. Über-successful people don’t suffer much downtime, and Peebles is no exception. He put good leisure time to work, taking a tour of Miami beachfront real estate and noting what the papers had to say about development projects. This seemingly inconsequential decision would shape the next decade and a half of his professional life, providing the signature projects that would add substantially to his net worth and reputation. It would also shape his business and family life, since he decided to move both to Miami Beach.

On the Beach

Peebles’s first win in Florida—indeed, the property that intrigued him when he first heard about it during the vacation with his family—was the Royal Palm Hotel project, as politically complex as a project could be, set against a background of ethnic and racial divisions and south Florida’s unpleasant racial history. The city of Miami Beach owned the old hotel, which, although dilapidated, had been certified by the city’s engineers as structurally sound, and it had been set aside for an African American developer. The set-aside was part of the price for ending the African American tourism boycott of the city that had followed the city’s snub of Nelson Mandela. That snub had been in response to the large Cuban-American population’s anger over Mandela’s positive remarks about then-Cuban President Fidel Castro. In a city that had been segregated until the 1960s, and whose disparate ethnic populations lived warily together, such stitched-together agreements were a way of life—or at least of politics.

What Peebles learned about the Royal Palm was actually from a Miami Herald article not so much about the old hotel as about the soaring value of its neighbor, the Shorecrest Motel. Peebles then presciently purchased the Shorecrest, and when the city officially put the Royal Palm up for development, it did so on the condition that the Shorecrest also be developed. The bidding process was long, drawn out, and almost surely loaded in favor of the major hotel chains that had partnered with African Americans to meet the set-aside requirement. Peebles wanted in, but if he won he had no interest in being the face for someone else’s deals, which would have been an easier but less fulfilling and less lucrative path. He was every bit as good a developer as anyone else, and he wanted it to be his own project.

Peebles dove into Miami politics and into the Miami public opinion arena to make his case. Control of the Shorecrest effectively washed out his risk; he could sell the property at a handsome profit and walk away if he did not win the bid. It was a good insurance policy, since the Shorecrest was a necessary component to any development deal. Although it did not show in the fierce competition for the property, some developers were wary of bidding on the Royal Palm since potential buyers were not permitted to inspect the property, which is normally the custom. The city did not care about established practice, so the Royal Palm was being offered in “as is” condition. But winning the bid was what Peebles was there for. Especially because it marked his foray into south Florida, he wanted to send a clear message that he was not going away and that he could deliver. He wanted the African American community to understand that, and he wanted the city fathers of Miami Beach to understand it. In time, they did, and he won the bid and took possession of the Royal Palm.

Of course, the building was not, as he had been assured, structurally sound; in fact, it was eventually condemned and had to be demolished. Historic preservation issues then came to the fore. It all added to the cost of the project, expenses he did not anticipate, and the financial pressure mounted. The schedule slipped. Peebles weathered it all. From the marriage of business and politics, it is probably safe to say, the resulting progeny is often aggravation, the kind of aggravation that people think should make you want to flee the contest. Not Peebles. He understands that this is all part of the business. The new Royal Palm Hotel opened in 2002 in the heart of South Beach—a beachhead, so to speak, for Pebbles future wins.

In fact, over the course of those 13 years while based in Miami, plus two additional years commuting from Washington, Peebles undertook some of his most significant and best-known projects. He also refined the process that has become his signature as much as any of the buildings he develops.

The Peebles Way to a Win

The process starts with an assessment of how much can be earned if the project is done well, and how well the project has to do to achieve that dollar figure. Armed with that assessment, Peebles can quantify the risk he might have to take so that he can mitigate the downside. He is, he says, a “calculated risk-taker, not a big risk-taker.”

To that end, he does not eschew leverage. “If you’re creating wealth, leverage is your best friend,” says Peebles—that is, “nonrecourse leverage. Leverage with recourse is what gets people into trouble.”

To make the reward/risk assessment, Peebles first identifies the market segment that may be attracted to the particular project. After he understands who they are, he finds out their current and projected economic conditions. The next step is determining what type of project he needs to build in order to win that clientele, who may be competing against him for the same customers, and how he stacks up against them. “I need a very significant competitive advantage” to undertake a project,” says Peebles. “If not, I pass on it.”

In Miami, most of the development during the 1990s was, like the Royal Palm, in South Beach, but as that decade drew to a close, Peebles had his eye on a property closer to North Beach. It was the once venerable, now down-at-the-heels Bath Club on Millionaires Row, founded in 1926 as a private WASP enclave to which neither Jews nor African Americans were admitted. Peebles became its first African American member in 1996 and took ownership of the property in 1999, the same year the Bath Club had elected its first Jewish President. This confluence of events was likely not in the plans of the founding WASPs.

He saw his Bath Club as a residence tower with sufficient acreage for some special amenities. But he knew he was aiming at a very high-end market segment, the kind of people, he judged, who were attracted to Fisher Island, the barrier island three miles off the Florida mainland that is said to have the highest per capita income of any location in the United States. Fisher is home to people who prize and can afford a distinctive level of privacy, plus open space, top-of-the-line amenities, and low density that engenders a kind of tribal collegiality. Peebles’s intention was to offer all that without the ferry ride.

Using himself as the measure of the client, Peebles asked himself what he would want in a vacation apartment. The answer was that he would want the same things he can find at home: significant square footage and an absolute sense of privacy—attributes hard to come by in Miami Beach apartment buildings. His vision, therefore, was for the residences of the Bath Club to offer potential buyers two significant advantages that other developments could not provide: a very substantial unit size combined with a large amount of space to create a gated and private enclave (tribal collegiality plus amenities). Add in his high-quality, signature architecture and the project was as can’t-miss as a real estate project can be.

But the risk was significant. A referendum had just passed freezing all zoning and thus significantly limiting the possibilities for redevelopment of the property.⁵ However, with this issue hanging over the already beleaguered owners, they now had an even greater motivation to sell as quickly as possible. Motivated sellers are a developer’s best friend, but this was not a straightforward situation where a buyer could just swoop in and know that his downside was protected by a fire sale price since the zoning changes added a significant element of risk to the purchase. But if Peebles wanted in, this would be his best opportunity and he would have to put his money at risk without delay, not knowing with certainty that he could build the project he envisioned. Being risk conscious, if not risk averse, he obviously wanted to mitigate his potential downside—and he wanted to know ahead of time that it could be mitigated. He rolled up his sleeves and worked with his team of lawyers to find a solution. Their joint efforts yielded a legal loophole that could make it possible for the city commissioners to effect a change in zoning category. This essentially meant the project would hinge upon a political solution, a playing field Peebles knew well, one on which he was comfortable and in which he had experienced significant success. He went to work. His worst-case scenario, as he saw it, was that he could sell the property and not develop it himself; best case, if he could obtain the zoning change, was to “build a signature building and have it on my track record.” He sought out meetings with each of the commissioners who held the decision power to transition Peebles’s plans into reality—his first foray into luxury residential development. Don Peebles understands what motivates politicians to do what is sometimes anathema to them, to make a relatively quick decision for the right reasons. He persuaded five of the seven commissioners to back him, convincing them that a high-end residential property was in the best interests of the community. At this point, knowing the outcome and having mitigated the risk, he put up the cash and took control of the site.

The Bath Club tower became precisely the success he had envisaged. See more on Peebles’s successes in Table 9.1.

This is the process Don Peebles has brought with him to New York. In his eyes, New York City is “the greatest real estate market in the world” and “capitalism at its best.” He intends to build transformational projects here too. Just as the Royal Palm “helped bring Miami back,” as he says, just as his first project in Anacostia helped reinvigorate a neighborhood in Washington, Peebles is looking for “more than dollars and cents” in the Big Apple. It is the place, he says, where “you get rewarded more for success,” which is why Don Peebles came to New York in the first place.

Certainly, succeeding in New York City will not be easy, but his projects are never easy, as he has seen in his deals elsewhere. New York, however, attracts more capital from more diverse sponsors than almost any other city in the world. Like Peebles, these sponsors all want to claim a place in the world’s most famous skyline, starting with the scions of the families who have been pillars of the real estate establishment in Manhattan for decades. Peebles counters their dominance by reminding a listener that the recent projects in perhaps the world’s most valuable real estate market have come from those new to town and not from the stalwarts. He does acknowledge, however, that the competitive landscape may be tougher in New York, but again, that is what happens when the opportunities are more plentiful and significant and the rewards more bountiful. Hard work is expected and patience required; Peebles is capable of both. And he is quick to point out that he is not as anxious to place his mark on New York City as he is to enter into a profitable transaction.

It is probably safe to say that Don Peebles’s biggest win is still ahead of him, and it will likely be in the world’s most coveted neighborhood, a huge Broadway-caliber hit on the planet’s biggest stage, where critical acclaim is judged by impact and profits.

The Takeaway

How does Don Peebles’s way of succeeding in real estate inform the individual investor in the stock market? In fact, the Peebles way offers a blueprint for success that can be adapted to any business venture or, by extension, to any investment. It is about finding your way to the nexus of an opportunity you can leverage, dimensioning your role in the opportunity, and then limiting your risk. That pretty much sums up what Don Peebles has done, again and again, to achieve his multi-hundred-million-dollar fortune. In real estate, it is true, you can limit your risk through the participation of partners, and this may be neither possible nor desirable in building an individual stock portfolio. But the principle is what counts, and the principle of limiting your risk shows up time and again in this book precisely because it is so essential to winning big in investing.

How do you find your way to the nexus of an opportunity you can leverage? Peebles did it by keeping his eyes open. As someone brought up to see no boundaries to his own potential, he was inherently well prepared to see no boundaries to financial opportunities either. He was never limited by what others couldn’t imagine; in fact, you can argue that his career owes its start to someone else’s lack of vision, to the $150,000 someone else didn’t want to spend in a dilapidated neighborhood like Anacostia. The Miami properties, both the Royal Palm Hotel and the Bath Club, were also projects that intimidated others, but Peebles saw a way to make them workable and turned both into opportunities to earn significant return. It is as a good a lesson for the stock market as for the real estate market: Be aware of the possibilities, and don’t dismiss any potential investment out of hand just because it doesn’t fit the conventional wisdom; in fact, that may be a tip to take a closer look at it.

Once you’ve identified an opportunity, what then? The Peebles template offers important guidance here too: Define the dimension of your own role in the opportunity—your purpose and your participation. To what extent should you—and can you afford to—take part in this opportunity? By this I don’t just mean how much money you invest, but also, how much time and effort you are willing to put into tracking and monitoring the investment, how long you are going to give it to realize the returns you seek, and what is the place you want the investment to take in your portfolio of assets. Peebles was ruthlessly realistic from the start about what he could and could not bring to a project, and he knew the worth of both. Similarly, in assessing a potential investment, it is important to judge it in relation to yourself—where it fits in your investing scheme and how you are going to manage it. But perhaps most critical is being honest with yourself in assessing what you know that the consensus doesn’t because that will drive appreciation.

The Peebles blueprint limits the risk in an investment. In Peebles’s case, he typically took half ownership of a project in compensation for the skills he brought to the table—namely: uncovering the opportunity, crafting the vision, selling it to others, and then executing as promised—essential and valuable skills, but still not everything needed to bring the project to profitable completion. Still, for Peebles, the downside was limited to his time, relatively small expenditures, and his reputation. The short term for this is “risk management,” and it works when investing in the stock market as well as when undertaking a development project. Know what you can afford to lose and how much it will cost—your downside—and measure it against what you can realistically hope to gain. The reward should always be much greater then the risk.

So let’s summarize the Don Peebles takeaway into a few principles that can guide your investments:

1. The point of entry into an investment should be dictated by the opportunity and the total expenditure, not by a perception of value at that point in time. In the Anacostia investment, one potential buyer walked away from the deal because he deemed the price too high. Clearly, that was a mistake. In terms of stocks, don’t be put off by where the equity is trading at the time; the price may seem high but if, after performing research on the company, you can determine that the fundamentals are going to improve, then maybe the current trading price represents a bargain. Rarely should an investment opportunity be judged by how much it has returned for someone else but rather by how much upside is left for new money. Put another way, it is not where a stock has come from but where it is going to that should drive an investment decision.

2. Don’t stop looking at a stock because the consensus rating by Wall Street analysts is a Sell or Hold rather than a Buy. Non-consensus thinking can lead to a Big Win! Peebles did his own work on the Bath Club and it ultimately provided a great return. It took a lot of effort, but that is what smart investing requires. Do your own work, read what you can, research as much as you can. And, very important, do not ignore the negative view; understand the basis for the opposition in order to independently assess the investment case for the stock. Analysts tend to have a herd mentality, and going against the herd—thinking independently—can be financially rewarding. Conversely, I have made money on short positions in stocks that were universally loved by the Street where expectations were set unattainably high.

3. If you do decide to go against the consensus, do not do it because you want to show them. Remember, Peebles had no ego about what he did when it came to profitability. Go against the herd because you see opportunity. The glory and satisfaction will come with the win, not as a stepping-stone to it.

4. Be honest with yourself. Peebles also had no ego when assessing his own value; he was persistent in being brutally honest about his ability to impact a project. In terms of a stock, you must believe that you have an insight that others do not have into the fundamental reason for being involved. In other words, if all you know is what everyone else knows, chances are that it is a very crowded trade. That limits your upside either because there is no marginal buyer to drive the price higher, or because consensus is so widespread on the value proposition (read: the case for buying it) that losses can be significant should the story not play out according to expectations. The price will collapse as everyone seeks to sell at the same time. But if you believe the base case is X-plus instead of just X, that is likely a good enough reason to be involved, provided you have a strong, substantiated basis for your differentiated view. However, do not ever disregard the added risk of a crowded story.

5. Political connections do not come into play much for an investor in stocks, but relationships with people who are involved in sectors of the economy where you choose to invest do matter. Peebles was very well connected within Washington and was clued into the government’s need for more office space. It was an insight he came to honestly and straightforwardly from being involved in the real estate market and being politically connected. Similarly, it was because he was a known entity among the brokerage community in D.C. that the broker came to him with the opportunity, and it was his knowledge of the market that gave him the confidence to meet the seller’s price. As a stock investor, you should constantly chat with people who may be involved in an industry where you seek to invest. If you believe that a particular retailer represents a good stock investment, drop into the store and ask the salespeople and manager how business is. See if you can find out what they hear about the business from other managers in the company. Speak to employees in stores that compete for the same customer. This is grass-roots research, and importantly, not inside information.

6. While Peebles limited his immediate financial risk by bringing in outside investors, his reputation was at stake; had it been tarnished, that could have limited his ability to drive future transactions. Managing your risk by limiting the downside is critical to being able both to continue to invest in the market and to recoup any losses through future investments. In other words, don’t invest what you can’t afford to lose.

7. Looking at the Peebles way from the other side of the transaction, the takeaway is that allocating a portion of your investment account to a qualified money manager can be a successful strategy. Peebles started out with individual investors as his partners, eventually moving on to where he is today, with large institutional investors as the primary funding source in his transactions. The investors who have entrusted Peebles with their funds have apparently done very well. He knows that every deal can either be his last, if it fails miserably, or another opportunity to build upon his reputation. And, much like a hedge fund manager, he does not make money unless his investors profit, since his future is tied to the success of the project.

8. Make the investment your own. Do not listen to others tell you when to buy, sell, add, or decrease. It is okay to seek out advice, in fact, you should, but ultimately, as Peebles did in Miami, you have to own the investment and the decision process around it.

These principles of investing apply to all asset classes. Adhering to them can be hard work, but hard work and discipline are the primary pillars upon which Don Peebles’s success rests. And they are the key lessons of the Don Peebles story.

1. The Sheraton has been converted into a Marriott. Peebles currently owns the Courtyard by Marriott Convention Center in Washington, D.C.

2. The Peebles Interview with Steve Forbes, Forbes.com, Intelligent Investing Briefing Book, November 14, 2008.

3. At times, Mayor Barry’s image needed all the polishing it could get, since he and members of his administration were plagued by allegations of cocaine use and of corruption against his first wife and his close aides, including one who pleaded guilty. He had his bright spots as well, with a well-received bond offering, the city’s first, a place on the podium at the Democratic National Convention where he introduced Jesse Jackson as a candidate, and numerous social and development projects. Barry would ultimately serve four terms as Mayor, the last one after serving a six-month jail term for drug possession. Nonetheless, the Washington Post endorsed him for his first three terms and he won by a landslide in each election.

5. Zoning boards typically have broad powers to establish the parameters for land use. In this particular situation, the zoning board decreed that the current property could not be used for anything other than its current use as a hotel. This meant that a developer could not erect a residential property on the site.

Complete
The Residences at the Bath Club	Miami Beach
The Royal Palm Hotel South Beach	Miami Beach
Courtyard by Marriott Convention Center	Washington, D.C.
The Lincoln	Miami Beach
10 G Street, N.E.	Washington, D.C.
2100 Martin Luther King, Jr. Ave, S.E.	Washington, D.C.
Planned
Las Palmas Hotel & Residences	Las Vegas
This Project is to be a luxury resort hotel and condominium Project located on 13 acres at 3550 Paradise Boulevard in Las Vegas. Phase one of the development will consist of approximately 1 million square feet of hotel development and 130,000 SF of net sellable condominium units.
The hotel is anticipated to include approximately 100,000 SF of meeting/conference space, 10,000 SF of retail, several themed restaurants, one 3-meal restaurant, several bar/lounge areas, indoor and outdoor swimming pools, 35,000 SF luxury spa, and other amenities.