If the flames that forge successful, resilient enterprises are the fires of adversity and contention, one can call R. Donahue Peebles a master blacksmith of entrepreneurialism. The CEO of Peebles Corp. (No. 79 on the BE Industrial/Service companies list with $51.4 million in revenues) understands that his company's business plan must be malleable and able to adapt with the times. His team has the skills to land the right deal, the fortitude to fend off rivals, and the moxie to ensure the company remains viable no matter the business environment. When Black Enterprise named Peebles Corp. company of the year in 2004, a bit of the real estate company's success had to do with the acquisition of the 417-unit Royal Palm Resort in Miami Beach, Florida–the first black-owned and developed luxury resort in the U.S. Since then Peebles Corp. sold the property for $128 million, and unloaded several of its other properties near the height of the market and is now buying up land at bargain prices to develop when the market turns and lending institutions loosen their purse strings–the opportunity within the crisis. Peebles says his company was spared from the brunt of the real estate slump and managed to sell the lion's share of its properties before the market tanked; thanks to a combination of luck and knowing to strike when the iron was hot. Although his strategy reduced revenues dramatically–gross sales fell roughly 79%–the company has cash and relatively low debt levels, putting Peebles in position that's coveted by many of his competitors. Peebles certainly is no stranger to the ups and downs and economic curveballs that come with being an entrepreneur. This February, the Miami Dade County Circuit Court ruled in Peebles' favor in a lawsuit against the new owners of the Royal Palm and allowed him to reassume management of the South Beach hotel that helped him rise to prominence. He also helped raise funds for Barack Obama's presidential campaign while successfully managing his real estate company through one of the most severe downturns the housing and hotel markets have ever seen. He has also significantly raised his profile on such networks as CNBC and CNN as an expert on spotting real estate opportunities. And this year received the Reginald F. Lewis Entrepreneur of the Year Award. SETBACK IN THE BIG APPLE It hasn't all been golden, however. In March, Peebles learned that a project his firm was involved in to transform New York City's Aqueduct Racetrack into an entertainment destination was potentially put in jeopardy when the lead partner, Delaware North, failed to come up with the $370 million needed to get the $575 million project rolling. Delaware North, a Buffalo, New York-based operator of racetrack/casinos (or racinos) was selected by New York Gov. David Paterson to develop the project. However, the tightened credit market prompted Delaware North to request a restructuring of their agreement and delay a portion of the up-front payment. The state, however, declined the offer. In August, the partnership with Delaware North dissolved, Peebles partnered with MGM Mirage and submitted a revised bid anchored by a $250 million commitment from Harbinger Capital Partners, a New York City-based investment firm to operate the Aqueduct. TALK ABOUT TIMING Right now, Peebles is sitting tight. With the dismal state of the real estate market and with tourism down, this isn't a good time to develop the upscale resorts and residences that have propelled the company's revenue growth. Peebles is currently sitting on nearly $300 million in nondeveloped property, having unloaded most of the company's income-producing properties and pocketing the profits. Among them is 14 acres in Las Vegas that was acquired at about $5 million an acre. "At the peak of the market [the property] was worth almost $20 million an acre. So even in today's depressed market where it's closer to $10 million an acre, we're still way ahead of the game,†Peebles says. "We're getting everything ready so that as the market starts coming back, we'll be poised to immediately begin construction.†The sell-off strategy began in 2005 when the company sold the Royal Palm. Development of the property had been awarded to Peebles' firm after the city included a minority participation clause in the development plan as a concession to the black community that had launched a tourism boycott, several years earlier, lead by prominent local attorneys H.T. Smith and Marilyn Holifield. The community was aggrieved by the actions of Miami city officials who they believe snubbed then-South African president Nelson Mandela when he visited the city because the former political prisoner made positive remarks about then-Cuban president Fidel Castro. That year, Peebles completed The Residences at the Bath Club, a 117-unit, 20-story luxury high-rise on 5.5 acres of beachfront property with six seaside villas, a project that netted the firm $90 million. In addition to the Royal Palm, Peebles Corp. sold its last remaining office building in South Florida for $74 million. As the market was peaking in California in 2006, Peebles Corp. sold its office building in San Francisco for $31.25 million and then bought the Las Vegas property. "Around 2004—2005, we just could not find projects in Miami to develop. It was such a competitive market and land values and construction costs had gone up significantly,†Peebles recalls. Even without the sub-prime fiasco, the real estate boom had to end sometime–and Peebles knew it. Management analyzed the South Florida market, where the company had several holdings, and saw that Florida residents income were rising at 3% to 4% from 2002—2005 while housing prices were appreciating at a rate closer to 30% to 40% a year. "It was getting to the point where the average family could not afford to buy an average home. That was unsustainable,†Peebles says. While Peebles attributes the timing of the sell-off partially to luck, timing the market is a common trait of successful developers. "You hear all these policymakers make comments like ‘No one could have foreseen this' and I'd argue with that a little bit,†says Michael Larson, a real estate analyst at Weiss Research in Jupiter, Florida. "There are some smart folks out there who were ready and did see the writing on the walls and took the right steps to prepare themselves for that and those are the ones that are going to be in the catbird seat now. This downturn is creating a lot of bargains.†For now, Peebles is positioning his firm for the eventual real estate bounce back, focusing his investment efforts in Florida, Nevada, the Washington, D.C. metro area, and New York City. The company is also shifting its business model to de-emphasize development in light of the depressed market and its capital intensive nature. Instead, Peebles plans to buy on the cheap and hold it until the market turns. "I've always said that we're in the real estate business. We invest when the market's conducive for investment, we develop when the market is conducive to developing, and we examine when the market is in flux.†ROYAL PALM REDUX Like most business, real estate is full of twists and turns and if you look at them as opportunities, they can be. But the real estate business isn't always a precise science and all too often things fall apart and litigation ensues. When Peebles Corp. sold the Royal Palm to an investment group led by Guy Mitchell and Robert Falor (representatives would only comment off the record), the company retained a 27.5% stake that was later reduced to 12.5%. At the time of the sale, the South Beach real estate scene was hotter than Miami sand in the summertime. But as the market cooled, things soured. A condominium component of the hotel never materialized and as the downturn began, occupancy declined and debt mounted. Making matters worse, court documents indicate that Mitchell pulled almost $4 million out of the hotel and transferred it into an offshore account controlled by a family trust. In an effort to recoup money loaned to senior investor Mitchell, Carbon Capital II Inc., an affiliate of global investment firm BlackRock, sued to take over the hotel. Peebles Development included a clause in the sale agreement in which the company would be able to re-assume management of the property should the hotel fail to meet certain objectives. In February, Miami Dade County Circuit Judge Gill S. Freeman granted Peebles control. Peebles described the scenario as poor management. "It continued and last summer, we asked the court down here to make a change of management and appoint us the manager that owns the hotel,†says Peebles. "That litigation kind of stalled and in February the court removed the managing partner and replaced them with us.†Peebles says he will either look to restructure the hotel's debt or to make renovation investments and possibly sell the beleaguered property again. CARIBBEAN BOUND? The million-dollar question these days is when the real estate market will turn around. While it's hard to nail down a particular quarter; most agree it won't be this year. "I don't see the market turning around [for] another 12 to 15 months. That's just the state of the economy,†says Andy Ingraham, president of the National Association of Black Hotel Owner, Operators & Developers. "I hope that some of the programs the administration does will help but until we begin to relax the credit market–particularly with consumers–you're going to see a decrease in occupancy.†But in the meantime, the author of The Peebles Principles and The Peebles Path to Real Estate Wealth is looking for the next deal. One of them is an $800 million project in the Caribbean. "We're working on a deal in St. Croix for a 440-acre site on the ocean that will be gaming, conference/convention center, golf, hotel, residential,†he says. Peebles adds the caveat: "We have to see where the financial markets are but we see that as a tremendous investment and opportunity.†This article originally appeared in the November 2009 issue of Black Enterprise magazine.