Beating Whitey II

Around and around on the MIAB/black-owned hotel deal

On April 30 it looked like Ebony and Ivory had finally gotten it together. Miami Beach commissioners okayed an agreement that effectively ended hotel developer R. Donahue Peebles's seven-year-old business dispute with the city. Peebles has always contended that Miami Beach officials bear some of the responsibility for the $15.8 million in delays and construction cost overruns that bedeviled his city-subsidized project, the Royal Palm Crowne Plaza Resort on Collins Avenue.

For those of you who don't remember, Peebles was selected by the city in 1996 to develop the first black-owned and operated convention center hotel in America. (The idea, Miami Beach's version of affirmative action, was concocted in 1993 by Miami and Miami Beach elected officials and local black activists as part of a plan to end a three-year national tourism boycott of Miami-Dade County: Give us our own Stephen Muss! And we'll get back on the bus!The whole thing started because of a conservative Cuban-inspired snubbing of Nelson Mandela, who, on being sprung from apartheid stir in South Africa, had had the temerity to be photographed chummily with Fidel Castro: 'Okay,' America's leading blacks figuratively told Miami-Dade: 'You dis our secular saint, you do without our gold!')

But Peebles's project was plagued with problems from the beginning. The Royal Palm Hotel, one of two buildings that make up the Royal Crowne Plaza Resort, was condemned shortly after Peebles gained control in 1997. He had to tear it down and build an exact replica in its place. This led to the $15.8 million in additional costs and delayed the hotel's construction for years. And led Peebles to withhold lease payments for the buildings, and lots of angry trash talk.

Last year Peebles finally opened the doors, and began negotiations with the city on a new deal. Last month it looked like he was finally going to get what he wanted: Miami Beach's permission to sell the 150 rooms in the Shorecrest (the other Art Deco building in the project) as time-share condos. In return, he promised to pay back the city a ten-million-dollar loan, used to purchase the land beneath the two hotels, within five years of the sale of the first condo. And he promised to pay an eight percent interest rate. Peebles would still own and operate the resort's other building, the 272-room Royal Palm, as a convention hotel. In addition, he'd relent and kick in $597,956 of the more than $900,000 in lease payments he'd been withholding during the long dispute.

Peebles was so sure it was a done deal, he didn't even show up at the April 30 city commission meeting, as he usually has over the past seven years. Even mild-mannered City Manager Jorge Gonzalez was giving the city's negotiating team, which included Commissioner Simon Cruz and cagey City Attorney Murray Dubbin, gratuitous attaboys! for reaching a deal that made both Don and MIAB happy. Then the bottom fell out. Commissioners Saul Gross and Richard Steinberg added a couple of amendments that would give Peebles the bullets to shoot the deal down. So now Whitey and Don are back to square one. Only this time, Peebles's gloves are off.

On May 15 Peebles sent a scathing letter to Miami Beach Mayor David Dermer, calling the whole deal off. Peebles blasted Gross and Steinberg for adding, among other things, the requirement that he get the leaders of the tourism boycott (namely, law partners and black activists H.T. Smith and Marilyn Holifield) to bless his new deal. "Don wanted us to essentially waive the requirement that the Shorecrest be owned by an African American," Gross reasons. "We wanted to make sure the black community was okay with that. Really, I looked at it as a courtesy to the folks involved in the boycott." Peebles was also irked that the commissioners demanded that Union Planters Bank, which provided Peebles with construction financing, sign off on the new agreement. In addition the commissioners objected to Peebles's request for a codicil to extend the time frame within which he can sue the city for damages! "First of all, they want me to use my goodwill in the black community to validate this deal," Peebles groused during a recent phone interview, "as a way to make it appear that the city has been fair and equitable during this entire process. I can't do that! I don't believe Miami Beach has evertreated me fairly!"

Peebles's letter to Dermer reads like a Rev. Al Sharpton sermon on Miami Beach's racial inequities. It's a three-page missive outlining Don's rationale that he is being held to a much different standard than white developers are: "I entered into the discussions with the city as a businessperson to resolve a business issue, not as a person of color attempting to resolve racial inequality issues," Peebles fumes. Preach on, brother.

But wait a minute. As recently as November of last year, Peebles said publicly that he would have no problem getting the black community to support a new deal. Peebles, who is known to switch positions as often as South Beach hotels switch towels, boasted he could even get Smith and Holifield to attend a commission meeting to show their support.

Gross and Steinberg expressed shock and bewilderment after reading Peebles's letter. "I'm a little surprised," said Gross. "I have no problem with the deal. He's been telling us all along that he can take care of the boycott leaders. It was always a condition and he didn't object before."

Steinberg adds that Peebles is more unhappy with the two other requirements he and Gross insisted be added to the settlement. "If he really wants to resolve our issues then why would he demand that the city extend the time he can file a lawsuit against us?" Steinberg asks incredulously. Peebles's anger at his request to obtain the blessing of African-American boycott leaders is just "smoke and mirrors," Steinberg says, adding that Peebles may be trying to conceal the fact he doesn't have a bank commitment to guarantee the city's ten-million-dollar-loan repayment.

Now, Gross says, he's willing to remove the condition that Peebles obtain the support of the boycott leaders, but it won't matter. "I don't think Peebles had any intention of accepting what was negotiated," Gross surmises. "I think he's looking for a better financial deal."

Via telephone, Peebles's "anger" rises as he defends his position. "I didn't bring race into the equation," Peebles says. "They did! To me, that's disrespectful. Have they ever asked a Jewish businessman to get the blessing of the Jewish community before he closes a deal with the city?"

As he's wont to do, Peebles throws out the disparity between his deal and the $60 million in incentives the Tisch family (they only have to pay back $30 million) received from the city to build the Loews Miami Beach Hotel next door to the Royal Palm, on Collins between Fifteenth and Sixteenth streets. He points out that the Miami Beach commissioners who approved his original deal with the city didn't ask him to get the black community's blessing in 1996. "So why should I do it now?" Furthermore, he adds, he spent the past year negotiating with city representatives, including Cruz, who was the commission's appointee in the matter. "The agreement we came up with did not include the things Gross and Steinberg decided to arbitrarily add!"

Cruz reluctantly agreed: "We did everything we could to create a fair deal," he says exasperatedly. "The reality is that the Royal Palm Hotel is still going to be owned by an African American. We are still living within the spirit of the original agreement, so I didn't think it was necessary to get the approval from the black leaders."

If Peebles doesn't want to go to the boycott leaders, then the commission will, counters Gross. "If he doesn't feel comfortable doing it, then we can pick up the phone and talk to H.T. Smith ourselves," Gross says. "I don't think it's a big deal to go to the boycott leaders and say: 'It is in everyone's best interest to let Don sell the Shorecrest.'"

Of course, Peebles's interests have changed. He no longer wants to sell the Shorecrest as condos, preferring to keep it part of the resort because the condo market has become oversaturated in the past eighteen months. Peebles will ask Mayor Dermer, whom the commissioners want to finally "iron things out," to give him 99 years to pay off the city instead of 25. He also wants to slash his annual rent payments from $490,000 to $250,000. Basically, Peebles says, he wants the same treatment the Tisch family received from the city. The Loews got 99 years to pay off its $30 million debt. "It's either that or turn back the clock and give me a sound building," Peebles says sarcastically.

The whole episode makes one wonder if Peebles and some Miami Beach commissioners are masochists. Can they actually enjoy keeping their beef alive? After all, neither side loses by dragging out the conflict. The city can bide its time until Peebles decides to file a lawsuit where the burden will fall on the developer to prove the city knowingly sold him a bill of goods (i.e. the structurally unsafe Royal Palm building). Meanwhile Peebles can continue to withhold his lease payments to the city, daring MIAB officials to sue him for defaulting on the agreement. What city commissioner wants to read a newspaper headline that says: Miami Beach Sues Black Developer? "None of them," says a city hall lobbyist who insisted on anonymity.

Peebles scoffs at that theory. "I'm a businessman," he says. "I want to put this behind me. I signed an agreement. But that agreement can't keep changing once it gets to the commission for approval."

Besides, he says, he is going to start making his lease payments next month regardless of the current situation. "That, you can count on," he says.

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