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.â€
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.â€
This article originally appeared in the November 2009 issue of Black Enterprise magazine.