How to create a fortune from scratch: tales and tactics from an entrepreneur's life of winning deals.
In this excerpt from Chapter 5: The Royal Palm: Never Say Die, Peebles recounts how he spotted an opportunity to develop the Royal Palm Hotel in Miami and his ultimately being awarded the deal by the city. The underlying lesson is his fifth principle, "Be a bulldog on details."
I remember sitting in the living room of our apartment on New Year's Eve 1995, reading the Sunday Miami Herald. They had something called "The Neighbors Section," and the cover story was titled "South Beach: Real Estate on Fire." The cover of the section showed a broker standing in front of the Shorecrest Hotel with a big "For Sale" sign. Inside there was a companion article about the Shorecrest, sort of a case study. It said how the owner had paid $900,000 for it a few years before and how it was now on the market for $3.9 million. Wow. They also noted that it was right next door to the Royal Palm Hotel, a property that had been set aside for African American ownership. Wow again. I had never heard of a minority program where they specified the race; in Washington, D.C., it would have been any minority. African American only? I wondered, how many African American developers were there? Not many. And how many were reading the Miami Herald right then? Very few, I imagined.
I would later find out how this unique situation developed. Several years earlier Nelson Mandela had been snubbed by the city of Miami, refused an official visit because he was perceived to be a communist--an inflammatory issue among Cuban voters in South Florida. The upshot was a black tourism boycott of Greater Miami, which turned out to be so painful that the city of Miami Beach established a $10 million fund to create a hotel development opportunity for a black developer. It was their olive branch, their peace offering.
At that point I was still in the dark as to the cause, but I saw what could be a good opportunity. The Royal Palm had already been purchased by the city for the black hotel development project, and the Shorecrest was right next door. I knew from my experience in D.C. that if you want to build anything, you've got to assemble property. People are spoiled in South Florida, where there are vacant lots that are buildable all on their own. To build a sizable structure in downtown Washington, you've got to buy three, four, or five different properties and deal with difficult property owners in the process. So I set up an appointment to see the Shorecrest and got a copy of the request for a proposal (RFP) on the Royal Palm Hotel project.
When I went to inspect the Shorecrest, I noticed that both the Royal Palm and Shorecrest sites were skinny, so slender that in order to make an efficient property you would have to buy them both. Clearly, I needed to buy the Shorecrest. The area was still run down, but the future was unmistakable for anyone with a little vision.
Still, vision was necessary because the Shorecrest was really run down. It was like a welfare hotel; there were actually chickens running through the lobby. There were prostitutes living in the hotel, and when I went to the roof deck they were there, sunbathing in the nude. It was a mess, but it was on the ocean, and I decided to buy it. I got back into my car and called my wife, Katrina. I was on the speakerphone, looking in the rearview mirror, and I saw a small spot on my forehead. I told Katrina that I must have gotten bitten. But when I touched the spot it jumped. "My god," I said to Katrina. "I've literally been in a fleabag hotel."
Months later the three developers selected as finalists went before the city commission. We each had a room in the convention center, and we got to have them a couple of hours early to prepare. We decorated ours, putting video screens up and bringing in our sound people so we could play Motown music in the background. We wanted to create the Motown vibe.
The commissioners started coming in, and they seemed to like it. Then Mayor Seymour Gelber came in and he didn't like it, at all. I remember thinking how, as a man in his late 70s, he was a little out of touch. He sat down and I could tell he was mad at me.
"Turn the music off," he barked. "Turn it off!"
So we turned it off, and then I got up and made my presentation. I thought it was a great one, even with the mayor furious. After the selection committee had ranked us No. 2 of the three finalists, I'd spent another $200,000 on the effort, not only on a final lobbying and PR campaign, but on constructing a scale model of the buildings in record time. The model was sitting there, sparkling in the spotlights, while we played a video of the project. The video was terrific, with a Motown soundtrack and a computer illustration of what the two buildings would look like together with other yet-to-be-built buildings along either side. It ended with the song "Ain't No Mountain High Enough." Just spectacular.
When we finished, the mayor ignored normal protocol--which was to allow the commissioners to ask their questions first--and launched right into me.
"I have a question for you, Mr. Peebles," said Mayor Gelber.
"Sure, Mr. Mayor," I said.
"Are you going to ... will you ... give us the Shorecrest property?"
"Pardon me, Mr. Mayor?"
"If you are not selected, will you give us the Shorecrest property?"
"Well," I said, "hopefully I will be selected. But if not, I intend to build on the Shorecrest property regardless. My bid to the city was only for what you own, the Royal Palm. I gave you information on the Shorecrest property in our RFP, but for informational purposes only. We submitted for the Royal Palm ... "
"If you are not selected, will you give us the Shorecrest property?" the mayor repeated, raising his voice.
"Mr. Mayor, I am only submitting for the Royal Palm, which is what you own. In the Shorecrest I'm going to do a hotel condo, whether you guys select us or not."
"So," he said, "you're not going to give us this property? You would hold up the African American hotel deal for that?"
"I look at it differently. Hopefully you'll select me, and you'll have both properties done by one developer. If not, you'll have two African American-owned hotels, the one I do at the Shorecrest and whoever you pick for the Royal Palm." "You're holding the sword of Damocles over our head!" he yelled. "Mr. Mayor, you've got this all wrong. You should look at this from a different perspective. You've got a qualified African-American-owned team, financially qualified, that wants to build your hotel so badly they went out and did something you guys couldn't do. They bought the adjoining property and have invested hundreds of thousands of dollars doing it. That should be an example of my desire to really build this hotel for you."
"No, you're holding the sword of Damocles to our head. You better give us the Shorecrest or else!"
"Mr. Mayor," I said. "This is America, and I have the right to own property. I own this property and we plan to develop it."
"You're going to ruin this hotel for our city!" he screamed and stormed out.
The mayor had lost his cool completely. People in the audience, including those from the Miami Herald and various community organizations, were shocked. I made it a point to remain calm and polite, and the louder the mayor spoke, the softer and more gentle I had become. I learned long before that you should never get emotional when conducting negotiations. The vice mayor then took the podium, offered an apology, and presided over the rest of the proceedings. The vote was scheduled for a public hearing a couple of weeks later.
The day before the final vote, I received a couple of frantic calls. My office was calling me, my wife was calling me, and my lawyer's office was calling me, all to let me know that Eugene Jackson, a competing developer, was trying to reach me. He must know he's beaten, I thought. I dialed the number they had left me.
"Oh yes, Mr. Peebles, Mr. Jackson wants to speak to you right away." Jackson was in his car, on his cell, when they connected the call.
"I wanted to tell you that you've been a worthy opponent, you've done a good job here," he told me. "And after I win tomorrow, hopefully we can sit down and work out a deal for the Shorecrest. And you're welcome to be on my team. There's room for everybody if you want to come on and join my team and bet with us."
"Hey, thanks, Gene, for the call," I said, thinking to myself, what an arrogant SOB. "And by the way," I said, "if I should get lucky, if by some strange coincidence or happenstance I should win, you're welcome to be on my team as well."
"Yeah, yeah, yeah, OK, we'll hook up tomorrow, after the vote. Let's hook up and see if we can't work out a deal on the Shorecrest. "OK."
I remember telling Katrina that this guy didn't know what was actually happening; he was completely out of touch. And I realized at that moment a hugely important principle: The reason Jackson would lose, with everything going for him, was that he had entirely delegated the project. He had let his "Miami people" handle everything, including wooing the city commissioners. When we presented to the Miami Design Preservation League, for example, he didn't show up, and I remember pointing that out to them.
"There is only one developer here, giving you the respect to come here personally," I told them. "And that's me."
And I did that time and time again, when I would meet with community groups. I'd tell them that development is a business with problems that come up. Who's going to be here to solve them? I'm here right now, I would say. Has anybody else come to you to ask for your support, other than through a subordinate? I was there, while they delegated.
This is a hugely important business lesson. There are certain things so important that you cannot delegate them. In a competitive environment, when you're trying to get something from somebody, you've got to ask personally. That's why you see the president of the United States going all over the country, to small towns, asking people for their vote. And that's why I beat Jackson. He had lost even before the vote, and he didn't know it.
The Peebles Principles
1 Control the deal.
When going into any major deal you need absolute control over some key element, Never negotiate a deal unless you are essential to it.
2 Make your money going in.
The best risk to take in any deal is the early risk, when you can get in for the least.
3 Being lucky means being ready.
Opportunities come to everyone, but the winner is the one prepared to take advantage of them when they arrive.
4 If the key doesn't work, change the lock.
If you have failed with one approach in a deal, look at the elements and be flexible enough to change.
5 Be a bulldog on details.
Never underestimate the importance of dealing with key details yourself, especially final details. Personally attend to key people whose support is essential.
6 Listen to your first instinct.
If your gut tells you a deal is too risky, or that your partner seems untrustworthy, pay attention.
7 Respond quickly to attacks.
If someone is attacking you, take them on immediately, even if the fight is costly. That will save you all kinds of trouble later on.
8 Get inside the other head.
Understand what the other parties want takes creative thinking, but ultimately it's your key to successful negotiations.
9 Be the last man standing.
Don't fall victim to deal fatigue.
10 Turn vinegar into wine.
Don't despair when problems arise: they frequently create opportunities.
11 Use the power of good partnerships.
Good partners can profoundly amplify your power.
12 Seeing value is everything.
The entrepreneur sees value that others miss.
Excerpted with permission of the publisher, John Wiley & Sons Inc., from The Peebles Principles: Tales and Tactics from an Entrepreneur's Life of Winning Deals, Succeeding in Business, and Creating a Fortune from Scratch by Boy Donahue Peebles. Copyright [c] 2007 by Boy Donahue Peebles.
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|Title Annotation:||BOOK EXCERPT|
|Author:||Peebles, R. Donahue|
|Date:||Jul 1, 2007|
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