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Meanwhile Peebles quickly learned doing business with Miami Beach government is a lot tougher than doing business in Marion Barry's D.C. He now had to negotiate with committees made up of private citizens, government bureaucrats, and local politicians to push a deal through. Thus, he realized he had to appease several interests to further his own. "To survive here, you have to be a good wind checker, because you never know when and where the political winds will shift," Don observed.
A good example is when he won the rights to the Royal Palm deal in 1996. The first thing he did was hire Michael Milberg, a Beach real estate consultant with close ties to former Mayor Neisen Kasdin. Milberg is Kasdin's best friend, and was his campaign manager during his two successful mayoral runs in 1997 and 1999. (Kasdin was a commissioner from 1991 to 1996.) Milberg, who later partnered with Peebles on a one-time city public parking garage deal, had also represented the previous owners of the Royal Palm when it was originally sold to the city. The city commission, with Kasdin leading the charge, picked Peebles by a 4-to-3 vote over the aforesaid team led by Eugene Jackson and the Hyatt Corporation, even though a selection committee appointed by then-City Manager José Garcia Pedrosa had voted for Jackson's group as more qualified:
"Don presented the best bid, the highest minimum lease payments to the city, he had control of Shorecrest and had the best-thought-out proposal," said Kasdin, who had a bitter falling-out with Peebles later in 1999. "That is why I voted for him and advocated on his behalf after he won the bid."
His political astuteness notwithstanding, Peebles did offer the city $490,000 a year in lease payments plus twenty percent of the hotel's gross revenues over $11 million upon its opening. Peebles was also shrewd enough to obtain an option to buy the Shorecrest, the Royal Palm's neighbor, to enhance his bid. The city, as part of the deal, paid $5.5 million for the land beneath the Royal Palm property and $4.5 million for the land under the Shorecrest site on Don's behalf. Peebles signed a 99-year lease that requires him to pay back the city's ten-million-dollar loan in 25 years. After that, he assumes total ownership.
Now Don thought the worst was behind him. But what transpired next would become "one of the most hysterically ridiculous cluster-fucks in Miami Beach," opined Michael Sasser, the former SunPost editor: "Anyone who enters into a business relationship with Miami Beach is going to get a bad deal." After months of tense talks with the city's chief negotiator, former banker and local attorney Arthur Courshon -- a member of the old Jewish/WASP establishment who clearly didn't like him -- Peebles encountered problems that would plague the Royal Palm from 1997 through 2002, when the work was completed. Peebles blames the ornery Courshon, who chaired the selection committee and was vociferous in his support of Jackson's team, and city officials for prolonging negotiations and concealing information that would have indicated structural defects and soil contamination -- which led to the $15.8 million in cost overruns. Peebles claimed city officials never allowed him to inspect the project site before finalizing the deal. Furthermore, Peebles believed Courshon was unlikely to deal him a fair hand. Not only did Courshon back Jackson, he later went to work for the cable mogul's Miami law firm, Zack & Kosnitzky, after Courshon and his partners sold their Jefferson Bank to Colonial Bank of Alabama. Tellingly, Jefferson also held the mortgage note on the Royal Palm before it was sold to the city. So Don bit the bullet and didn't press for a thorough inspection of the premises. "It was a risk I had to take in order to move forward," Peebles laments now.
In earlier interviews with the Miami Herald and Daily Business Review, Courshon countered that Peebles had ample opportunity to inspect, but never bothered to do so. Today he doesn't want to talk about the subject: "I'm tired of Don Peebles," the retired banker told New Times.
However, Peebles insists the city misled him with a 1994 engineering report that stated the Royal Palm only needed about $725,000 in interior repair work, when in fact decades of saltwater corrosion had effectively destroyed its interior. The damage was so severe, it turned out, city inspectors in 1997 -- after Peebles took control -- actually condemned the property!
In any case, after a lengthy battle with the city's Historic Preservation Board, Peebles won the right to demolish the old hotel by erecting an exact replica in its place. This of course caused him to miss his initial grand opening in 1998, delaying it until May 2002, at an additional cost of $15.8 million. The city proffered a settlement in 1999, offering to defer as much as $3.8 million in payments during the first ten years of Peebles's 99-year lease with Miami Beach, though he is required to pay back the $10 million in 25 years.
But Peebles turned it down because he would have ended up paying the city an additional $4.5 to $8 million, due to accrued interest.
While the city looks culpable in the Royal Palm/Shorecrest affair, Don did fail at other attempts to form public-private partnerships in New Orleans, San Francisco, and Broward County. In New Orleans, Don couldn't reach an agreement with the city's aviation board to build a $55 million hotel at the airport in 1997. He came up empty in San Francisco, too, losing a bid in 1997 to build a condo/hotel on the corner of Mission and Third streets on the old Jack London waterfront. In Broward, Don never reached agreement with the County Commission to build and operate a black-owned convention center hotel in Fort Lauderdale, despite four years of haggling. He was initially brought in as a financial backer of National Baptist Convention USA, a Lauderdale-based nonprofit group that was supposed to build the hotel in 1997. But Peebles took over the entire project; the commission refused to do business with the nonprofit after it was discovered that former County Commissioner Sylvia Poitier had provided the group with a loan.