Back in the Game
Native Son Peebles Returns With Dreams to Reshape D.C.

By Anita Huslin
Washington Post Staff Writer
Monday, March 31, 2008

R. Donahue Peebles has built a small empire of luxury hotels and estates in Florida, from Miami to Key West. In Las Vegas, he plans to launch construction this year on a $2.5 billion high-rise condominium and hotel complex. Just south of San Francisco, he recently bought 90 acres of oceanfront property where he envisions an ultra-chic resort community.

But at the moment he's particularly excited by projects he hopes to do in and around his native Washington.

Quietly, Peebles has been working to amass a tract of dilapidated properties in the District that he hopes to redevelop into affordable housing, storefronts and offices. He won't say where exactly, to avoid heating up prices. In Prince George's County, he is talking with developers and officials about building parking garages, office buildings and small retail space around Metro stations. Next week, he will make a presentation to the District about a small hotel he wants to build in the Mount Vernon neighborhood.

If these are less flashy than the deals that propelled Peebles into a rarified economic stratosphere -- he built a company that now boasts a $4 billion real estate portfolio and more than $400 million in sales -- they're also the kinds of projects that he hopes will put him back on the map in the city where it all started for him.

"I'm coming to Washington with a fresh set of eyes," said Peebles, who recently bought a $6 million Tudor-style mansion in Cleveland Park and is talking with friends about hosting political fundraising events there. That's one of the strategies that helped him make a name for himself as a D.C. developer, and one he'll undoubtedly employ to ease back into local real estate. "People like change, but the rest of the country changes more so. Having worked now in other places, I can see what it's missing."

How the District opens its arms to its native son remains to be seen. Much has changed since he left a decade ago, after a real estate leasing deal advanced by his political patron, then-Mayor Marion Barry, blew up.

Today, a new kind of administration is in power in the District, one that talks about putting independence before political loyalties in development decisions. A new baseball team and stadium have come to town, and mega-developments in the suburbs, like National Harbor, have become showpieces for the region.

But with the collapse of the subprime mortgage market and instability on Wall Street, real estate has slowed considerably. Builders are abandoning new projects, and retail developments already in the pipeline are struggling to find tenants.

Which makes it curious to hear a guy -- even with a portfolio like Peebles has -- ride into town on a spending spree, looking for local projects to invest in.

Peebles has done it before. Just look at his last big deal in the District: a $55 million building on North Capitol and G streets. It was 1994 and the nation's real estate market had collapsed, the country was in recession and banks were not writing commercial real estate loans. In his 2007 book, "The Peebles Principles," he explains how the deal was brought to him by another developer and a corporate partner who leveraged their money to fund the project.

Another chapter, which describes his creation of the Washington Marriott, is titled "No Money Down" and suggests "whenever possible use other people's money."

Peebles says he is in the process of raising a $300 million real estate investment fund that would bankroll other developers' projects. On a recent visit to town, Peebles stopped by the K Street office of his longtime bank, BB&T, for a visit with his banker. After a few minutes of chitchat and a 10-minute summary of his plans, he left with a verbal commitment for a $15 million line of credit. Once he secures a sufficient amount from investors, banker Diana Nickerson told him, Peebles could use the credit line as a bridge loan for projects until the fund gets underway.

Across the country, Peebles is forging ahead where other ambitious developments have stumbled and collapsed under the credit crisis. In Las Vegas, where he plans to build the country's first six-star hotel and ultra-luxury condos, Deutsche Bank was threatening to begin foreclosure proceedings on another developer's $3.9 billion Cosmopolitan Resort Casino. In Northern California, Wachovia recently began calling in $61 million in loans to a prominent contractor who fell behind in loan payments for a posh golf course community. In Fort Lauderdale and Miami, about 10,000 new condo units are set to go on the market on top of an already-languishing inventory.

Last year, Peebles said he would stop investing in South Florida. But he believes Las Vegas and San Francisco remain promising markets.

D.C. developer Douglas Jemal described the 48-year-old Peebles as "a guy that certainly could exist in a bad environment very, very well. He's a fighter. He knows his business. He started from nothing."

Peebles's wife, Katrina, met him on a busy street in Georgetown 18 years ago. They started talking, dated and were engaged within a year.

Early on, she knew she was signing up for a no-holds-barred partnership. They spent part of their honeymoon in Montana putting together a bid to buy the old Riggs bank building on Ninth and F streets NW. They won the building, after significant behind-the-scenes lobbying that required calls to an appointee in the Clinton administration. (The couple's political fundraisers -- which included several for Bill Clinton -- didn't hurt.)

Ultimately, Peebles's relationship with Barry failed to prove quite as fruitful. As a young aspiring real estate appraiser, Peebles had endeared himself to Barry by holding a key fundraiser to help the mayor pay off his campaign debt. Peebles won an appointment to the influential D.C. board of tax appeals and later the chairmanship. But a D.C. governing panel at the time, called the control board, declared enough when Barry tried to steer two lease contracts worth $48 million to Peebles.

Peebles learned that he lost the bid when he heard it on the television. Disgusted by the politics, Peebles took his family to Miami for a vacation. While there, Peebles saw a request for proposals for a high-end hotel project. He and Katrina wrote their bid on the way back to the District. When he won the project, they moved to Miami.

For the next 10 years, he built his empire, reaching out to acquire land in other cities. Part of his strategy is to distribute his projects among markets to spread risk.

The conservatism that made dealmaking in Washington so difficult is one that Peebles now hopes to capitalize on. Next week, he plans to make a presentation on a new luxury hotel that he wants to build on a lot he bought at Fifth and Eye streets NW.

There will be a subterranean nightclub, so as not to disturb the neighbors at 555 Massachusetts Ave. On the first floor will be a high-end, glass-walled restaurant named after Peebles's wife. A coffee shop will serve guests and the community.

"D.C. is ready for something a little more chic, a little more sophisticated," Peebles said.

Over the weekend, Peebles had planned to take his wife and son, Donahue III, who turns 14 this week, and daughter, Chloe, 5, to the Caribbean for a brief vacation. But then a D.C. friend told him about a possible development opportunity in the U.S. Virgin Islands.

"Who knows, we may swing down to St. Croix," Peebles said last week. "You have to look for the opportunities."