Q & A with developer Don Peebles

Miami /
Mar.March 30, 2009 01:26 PM

Don Peebles doesn’t declare victory and stay home. The chief executive of the Peebles Corp., headquartered in Miami, wants to expand his empire around the country. 

Peebles, a former Washington, D.C., developer who in February made headlines for his bruising legal fight to regain control of the Royal Palm Hotel, also keeps an eye on what’s now his home base. He said he’s now looking for investment opportunities amid the rubble of South Florida’s real estate market, and plans to participate in government bailout investment programs as well.

The Real Deal caught up with him when he was on the go between meetings recently to discuss his views about the South Florida market and his plans there.

What’s your outlook for residential real estate in South Florida?

The single-family home market is close to a bottom, though it probably has another 10 percent to drop through the end of the year. 

We had a good February. But it would have been better if not for the job losses in South Florida that have limited the impact of low mortgage rates and a significant decline in prices.

As inventories decline, job losses end and the economy stabilizes, the single-family home market will bottom out.

What about condos?

They still have a ways to go. I wouldn’t be surprised to see prices drop 30 percent more. While single-family homes sales are driven by primary residents, a significant portion of condo buyers are investors and vacation home buyers. 

Until the market bottoms out more, we won’t see investors. And given the economic turmoil, especially in New York, there won’t be a strong market for vacationers. I don’t think we’ll see a stabilization of that sector until sometime next year.

What’s your view on commercial real estate?

Hospitality is in big trouble. Hotel occupancy rates are lower than after 9/11, even with a significant decline in room rates. I don’t see light at the end of the tunnel until there is more corporate-conference travel and more leisure travel.

As for office buildings, several thousand square feet are coming onto a market that needs to absorb 300,000 square feet or so already. There will be a significant increase in vacancies.

What are you looking to do in South Florida now?

We don’t envision developing any projects there in the next couple years. We would look to buy existing assets in premier vacant sites, where we are buying at a significant discount, making it economical to hold the property three to five years before developing it.

We’ll also look at projects that have been developed, but not completed. We can bring in development expertise to finish them. 

Finally, we’ll look at existing assets that are distressed on the borrower or credit side.

Are you on the prowl for anything outside real estate?

We do see an opportunity to buy a Florida-based bank with impaired assets that we can work through and provide credit to credit worthy borrowers.

There are banks we’re looking at now.

We’re also looking at professional firms like consultants and contracting businesses that can be built into national firms and can benefit from our investment in their infrastructure. 

We’re also looking to partner with a private equity firm to buy “toxic assets” from banks under the Obama administration’s program. Many of these assets aren’t toxic. 

But the main focus will be real estate?

Real estate is our primary business. We can bring our real estate experience to other investment opportunities. 

South Florida will be an environment where there are buying opportunities. In real estate, you make your money when you buy and realize your profit when you sell. We pride ourselves on buying assets well.

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