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�THE�

PEEBLESPRINCIPLESTales and Tactics from an Entrepreneur’s

Life of Winning Deals, Succeeding

in Business, and Creating

a Fortune from Scratch

R. Donahue Peebleswith J. P. Faber

John Wiley & Sons, Inc.

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�THE�

PEEBLESPRINCIPLES

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�THE�

PEEBLESPRINCIPLESTales and Tactics from an Entrepreneur’s

Life of Winning Deals, Succeeding

in Business, and Creating

a Fortune from Scratch

R. Donahue Peebleswith J. P. Faber

John Wiley & Sons, Inc.

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Copyright © 2007 by R. Donahue Peebles. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.

Wiley Bicentennial Logo: Richard J. Pacifico

No part of this publication may be reproduced, stored in a retrieval system, or transmittedin any form or by any means, electronic, mechanical, photocopying, recording, scanning,or otherwise, except as permitted under Section 107 or 108 of the 1976 United StatesCopyright Act, without either the prior written permission of the Publisher, or authorizationthrough payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc.,222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online athttp://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used theirbest efforts in preparing this book, they make no representations or warranties with respectto the accuracy or completeness of the contents of this book and specifically disclaim anyimplied warranties of merchantability or fitness for a particular purpose. No warranty maybe created or extended by sales representatives or written sales materials. The advice andstrategies contained herein may not be suitable for your situation. You should consult witha professional where appropriate. Neither the publisher nor author shall be liable for anyloss of profit or any other commercial damages, including but not limited to special,incidental, consequential, or other damages.

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Library of Congress Cataloging-in-Publication Data:

Peebles, R. Donahue, 1960–The Peebles principles : tales and tactics from an entrepreneur’s life of

winning deals, succeeding in business, and creating a fortune from scratch/ R. Donahue Peebles, with J.P. Faber.

p. cm.—(Wiley trading series)“Published simultaneously in Canada.”ISBN 978-0-470-09930-8 (cloth)1. Peebles, R. Donahue, 1960– 2. Businesspeople—United

States—Biography. 3. Real estate developers—United States—Biography.I. Faber, J. P. (James Paris), 1954– II. Title.HC102.5.P384A3 2007658.4'21—dc22

2006103102

Printed in the United States of America.

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www.wiley.com

�Contents�

Prologue vii

1 From Ground Zero: The First Deal 1

2 The Washington Marriott: No Money Down 29

3 North Capitol and G Streets: Carpe Diem 45

4 The Barry Stigma: Time for a Change 55

5 The Royal Palm: Never Say Die 65

6 San Francisco: A Bridge Too Far 99

7 The Bath Club: Give Them What They Want 113

8 Perseverance: The Saga of Royal Palm 135

9 The Lincoln Road Project: The Power of Allies 159

10 San Francisco Redux: Diamond in the Rough 171

Appendix: The Importance of Politics 193

Index 201

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�Prologue �

Iwas not born with a silver spoon in my mouth. I camefrom what most people would describe as a middle-classhome, an only child in a one-parent household. But by thetime I was twenty-seven I was a multimillionaire, and by thetime I was forty-five I was worth more than a quarter of abillion dollars.

This book is the story of how I created that wealth, be-ginning with nothing. It is also a book about how to getrich, following the principles I learned over more than twodecades of building my personal fortune. It is the break-down of the deals that created that fortune and how I wonthose deals. It is a handbook of tales and tactics for atwenty-first-century entrepreneur.

Perhaps not everybody wants to get rich, but I wouldsay that this particular desire is somewhere close to the coreof the American dream. I know that I wanted to be richwhen I was young. I wanted to achieve a financial stabilitythat would free me from the worries over money that I ex-perienced growing up. I wanted to leave that field of gravityforever.

My dream came true with my first big deal, when I wastwenty-seven, which turned me into a multimillionaire. Ihave since consummated deals that dwarf my first win, but Ihave never had that same feeling.

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I remember that day vividly, when I signed a letter of in-tent with the city of Washington, D.C., to develop an officebuilding on Martin Luther King Avenue. The bricks andmortar were still to come, but that document meant I wouldown half of a multimillion-dollar project and would be re-ceiving a mid-six-figure income annually for decades tocome.

When I returned to my apartment, at about eight o’clock,a group of my friends were there. To celebrate, my girl-friend had gotten a cake from the Watergate Bakery, a whitechocolate mousse cake, and a few bottles of champagne. Itwas a moment worthy of celebration, a breakthrough mo-ment, the biggest event of my business career to date. Itmeant that my financial future was set from that momenton. I could quit right there if I wanted to; making half a mil-lion a year was more than I’d ever envisioned as a kid,when I was a teenager living with my mother and helpingher make ends meet.

That night, lying in bed, I thought about it all. I thoughtback to how I was so impressed in high school when Ilearned that Walt Frazier was making $300,000 a year play-ing basketball. I’d wished that one day I could do that, andhere I was, on my way to making more than that. It was justsuch a sense of relief. I was done. I didn’t have to do an-other thing except make sure the construction company ac-tually built the building. What a great moment.

It was more than just the money too. In that moment Iwas vindicated: The road that I had taken—to quit collegeafter one year, to forgo the pursuit of a medical career in fa-vor of real estate—had proven to be the correct one. Therisks had paid off. As I lay in bed I even calculated howmany years I would have been in medical school, followed

P R O L O G U E

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by an internship and residency. At that point I would havebeen in my first year of internship, struggling financially.Now, with one deal, I was going to make more money eachyear than top doctors.

It was a bigger moment for me, perhaps, than someonefrom another background. I did not come from poverty orignorance, but neither did I come from affluence, the kindthat allows children to enjoy a sense of indifference aboutmoney. My mother and I had been on our own since sheand my father divorced when I was five years old. Althoughmy father was gainfully employed as a government clerkand auto mechanic, he never supported us. My mother didthat, through a variety of jobs in the industry that I wouldend up choosing: real estate. She worked variously as a sec-retary, a broker, and a midlevel executive at Fannie Mae.We lived mostly in and around Washington, D.C., with acouple of years in Detroit, and our fortunes went up anddown as her career changed. We did very well in Detroit,for example, when she had her own real estate brokerage.Later, when we moved back to Washington, she was a sec-retary again, and again we had to worry about money.

My point is that from the age of thirteen on I was awareof our financial limitations, about being able to afford thenecessities of rent, groceries, and school clothes, and fromthat age on I wanted to make sure I could avoid thosesame worries when I became an adult. Fortunately, mymother was a very bright woman. Both she and the othermembers of my extended family—especially my grandfa-ther, a hotel doorman who sent four of his five daughtersto college—believed there were no limitations to what Icould achieve in life. They gave me a great sense of self-confidence and ambition, and did the sorts of things, like

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my mother teaching me to play chess when I was in gram-mar school, that pay off so handsomely in later years.

This book is not an autobiography, however, except tothe extent that such information helps readers understandthat I entered the economic jungle with no resources be-yond my native smarts, a decent education, and a goodfamily background. This book is rather about the methodol-ogy of creating success and wealth and an explication ofthose methods.

I know I have had my fair share of good fortune, and Iam thankful for it. But I believe the principles that guidedme are principles that can help anyone to achieve success. Idon’t believe you need to be born with any special advan-tages, or any special instincts, other than a basic amount ofintelligence and a drive to succeed.

I have written this book to share my principles withthose who also aspire to make something of their lives inthis land of opportunity called America. I do a lot of publicspeaking, and what I try above all to convey is the idea thatthe number-one challenge of the entrepreneur is belief. Ifyou believe in yourself, and believe that anything is possi-ble, then the road to success is wide open.

What follows in this book are the deals that took mefrom a wage earner to a world shaker, from a single man ina tiny apartment to a happily married man with a lovingfamily and a substantial fortune. I learned something fromeach one of the deals I describe, as I hope you will. Whilethe profession I chose was real estate, I believe that thesame principles apply to any entrepreneurial endeavor.

Many people will say you have to be lucky to get rich,and I agree. But understand that luck, as a dear friend and

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mentor once told me, is “where opportunity and prepara-tion merge.” This is the kind of luck required to be a suc-cessful entrepreneur. My hope is that this book will giveyou the principles you need to prepare for the opportunitiesthat will undoubtedly cross your path.

Good luck to you all. May the next big deal be yours.

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From Ground Zero:The First Deal

The basics for success in any business are threefold:Learn the industry, get into the mix of it, and go forwardfull of confidence. But that only takes you as far as thefirst deal. What you need after that is something very im-portant, and it’s not money. You won’t have any money,anyway. Not if you started like I did, with nothing.

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My first big deal made me a multimillionaire.Before that, my net worth was similar to that of mostpeople: what I could generate in wages by providing serv-ices. But I never took my eyes off the prize, and it only tookme a little more than half of my twenties to achieve my goalof becoming a multimillionaire before the age of 30.

I started in my chosen profession of real estate by be-coming a residential appraiser and then a residential salesagent. I was nineteen when I started. The fact that it wasreal estate is not important. What is important is that, re-gardless of the business you’re in, you have to learn it. Andthe best way to learn it is to get into the mix. I learned thebusiness from ground zero, in the trenches.

There are lots of ways to get into the real estate busi-ness. One way to learn is like Barron Channer, a young manwho now works for me, who got his MBA from Wharton.He started as an intern with us, a bright young college kid,

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and got his foot in the door that way. That’s one way tolearn the business, through formal education.

I didn’t have the educational background, and I alsowanted to start at an early age and to get into the businesson the ground floor. I didn’t get to work in a nice environ-ment like the one we’re providing for Barron. Instead Iwent to work doing home appraisals for my mother, whowas a real estate professional, and then for another ap-praisal firm. For the most part we did housing appraisals forHUD-insured loans and VA-insured loans. The VA—the U.S.Department of Veterans Affairs—was more middle class;HUD—the U.S. Department of Housing and Urban Devel-opment—was lower income. We would go into these areasthat were rough, really rough.

That was in Washington, D.C., and it’s where I learnedthe business. Today I have projects in lots of other placesaround the country, including Miami, San Francisco, Detroit,and Las Vegas, but it was in Washington—where I still ownbuildings—that I honed my skills. It was in Washington, too,where I learned the art of politics.

I was actually born in Washington, D.C., in 1960, theyear that President John F. Kennedy took office. My mommoved us to Detroit for five years when I was eight, butwhen I was thirteen we went back to Washington. I livedthere from that point on, except when I went to RutgersUniversity in New Jersey for a little less than a year in 1978.

In Washington I got my first taste of politics and learnedhow the political process works, up close and in person.Thanks to my mother’s early understanding of the importanceof developing political access and her skills of persuasion, Ibecame a Congressional Page when I was sixteen. I spent myeleventh and twelfth grades on Capitol Hill, attending the U.S.

From Ground Zero: The First Deal

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Capitol Page School on the top floor of the imposing Libraryof Congress building across the street from the U.S. Capitol. Itwas quite an experience.

My mom got me my job as a page through CongressmanJohn Conyers Jr., a Democratic member of Congress whoseFourteenth Michigan District included about half of down-town Detroit, where we had lived. I had met him when Iwas a little kid. In fact, Conyers did not have sufficient sen-iority at the time to appoint me, so he called in a favor froma more senior member of Congress, Representative GusHawkins. Hawkins was the first African American to repre-sent the State of California in Congress. He was a major civilrights leader and the co-author of the Humphrey-HawkinsFull Employment Act. I worked as his page for six months.

After that I wasn’t about to leave Capitol Hill. Thesense of power and excitement was just too much for meto return to ordinary teenage life. Fortunately, while Iworked as a page, I developed a friendship with anotherCalifornia member of Congress, Representative Ron Del-lums. He was a very cool congressman, a tall, well-dressed, and charismatic social activist. Ron is now themayor of Oakland, California, and I am proud to say that Ihelped him raise funds used to run his successful cam-paign in 2006. I extended my stay on the Hill by anotherthree months as his intern. I closed out my senior year asa paid staff aide in Conyers’s office.

The time I spent in the halls of Congress was an educa-tion in the power of relationships and how they make poli-tics work. I got to come across people like Tip O’Neill, thenSpeaker of the House, and Jim Wright, the House MajorityLeader, and the flamboyant Charlie Rangel of New York. Ialso saw Marion Barry in those halls a few times, especially

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when I worked for Ron Dellums, who was Barry’s goodfriend. Though I didn’t know it then, this acquaintancewould help me later on.

First, however, I had to learn my trade. After myabortive first year as a premed student at Rutgers, where Ipromptly ran out of both interest and money, I came hometo learn the property appraisal business from my mother. Inthose days you didn’t need a license; it was much less regu-lated than today. All you needed was experience, workingas an apprentice to another appraiser—though you couldtake classes at American University or the University ofMaryland, or with the American Institute of Real Estate Ap-praisers or the National Association of Independent Fee Ap-praisers, which sponsored courses at local universities. Itook the courses, but I mostly learned through my motherand a guy named Charlie Merkle.

The appraisal business is a great one if you want steadyincome. Anyone who refinances or applies for a new mort-gage has to have an appraisal done. My mother and Charlieappraised housing for Fannie Mae, the massive governmentsponsored mortgage corporation, and HUD and similar or-ganizations as well as for local and national banks. If youwere on an approved list of appraisers, you would get as-signments on a rotating basis, for a set fee. At the time Ithink it was $90 for HUD appraisals and $150 for FannieMae assignments. I acted as a sort of subcontractor; I didthe work, and they would review and sign off on the ap-praisals. I did jobs for my mother for $30 each and thenlater for Charlie at $60 each, so you can see why I was ea-ger to work for Charlie. I found him through an ad in thepaper, and it turned out I had seen him when I was goingto the HUD offices, dropping off appraisals for my mother.


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After a couple of years of doing this, I was ready to startmy own appraisal company. I had served my time as an ap-prentice, learning the business and taking courses along theway. I had also become a real estate sales agent. But now Iwanted to make more money and achieve the financial free-dom that comes with it. The problem was that in order tolaunch as an independent appraiser, you needed to be ap-proved by HUD. To get that approval, you needed connec-tions and clout. Since this was Washington, those kinds ofconnections had to be political. I was going to have to getinvolved in politics and to make myself known in the com-munity. And this is just what I began to do.

The year was now 1982. Mayor Barry was running forreelection, and I saw this as my opportunity. I would get in-volved by helping him get reelected.

Barry was in for a tough race, or so it seemed. He hadbeen mayor for four years and was running for a secondterm against Patricia Harris, ironically enough a former sec-retary of HUD under President Jimmy Carter.

There was a big contrast between the two of them.Harris was perceived as a polished, articulate, and well-educated person, whereas Barry was seen as a rough guyfrom the streets. A lot of business leaders thought Harriswould win the race, and people were climbing over eachother to support her. But I thought Barry would win, be-cause I felt the residents of Washington were more con-cerned with who was going to make their streets safe, gettheir trash picked up, and make sure they had decentschools and the like. Barry came across as better suited todeal with the drudgery of municipal politics, plus his ef-forts to rebuild downtown and the inner city were winninghim lots of points among the voters. It’s hard to see it now,


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but back then he had the image of a mayor who couldmake the city work.

I started getting involved in Barry’s campaign by organ-izing events for him. My big day came when I held a “Meetthe Mayor” event in the party room of my apartment build-ing. The gathering was for residents of the area aroundConnecticut Avenue and Van Ness Street in Ward 3, a pre-dominantly white district that was among the most affluentin the city. We served refreshments, drinks and so forth, anda few hundred people showed up for the opportunity tomeet and talk with the mayor—including the heads of somelocal community and condo organizations, which thrilledme. Barry and his wife came, and I gave a speech introduc-ing him. It cost all of about $1,000, and I got a couple ofother people to cosponsor it with me.

As I mentioned, I had met Barry before as a teenagepage, but this was when I began to develop a real relation-ship with him. The meet-and-greet event was a success, andI wanted to follow up on it. I knew from my Capitol Hilldays that repetition and familiarity were extremely impor-tant in building political relationships but that fundraisingwas the best way to be taken seriously. Of course, fundrais-ing was a tough task for me at the time, because I didn’tknow a lot of people who had money. Then I came up witha great idea.

Washington isn’t like most other places in the UnitedStates, where you are prohibited from spending more onyour campaign than you collect. In Washington you are al-lowed to deficit spend on your campaign, and Barry wasdoing just that. He would have bills to pay. I also knew thatmany of the city’s major businesspeople were supportingPatricia Harris. But since I believed that Barry would win, I


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felt these same people would later flock to redeem them-selves with the mayor.

Convinced of this, I scheduled a fundraising event forBarry a couple of days after the Democratic primary. Thiswas the contest with Harris, and since the city was about 90percent Democratic, winning it was the equivalent of win-ning the race. So I targeted everyone who had given $250 ormore to the Harris campaign and invited them to a postpri-mary, $500-a-head breakfast at the Capitol Hilton just northof the White House. We did our mailing and then Barry wonoverwhelmingly; in fact, he beat Harris nearly four to one!

A couple of days later the fundraiser took place, and justas I thought, all the people who had supported Harrisshowed up in droves. It was standing room only; we had tobring in extra chairs and tables. I think we raised about$100,000 for Barry that morning.

This put me on the mayor’s radar in a big way. When hespoke to the packed room, he thanked me for organizingthe event, and right then I began to develop a relationshipwith his campaign staff—the very people who would runthe D.C. government after the election. These were the peo-ple who could help me get on the HUD approved list so Icould start my own firm, and I let them know about my am-bitions in real estate.

Sure enough, a few weeks after the election, I got a callfrom a member of Barry’s staff. She said there was an open-ing on the city’s Real Estate Commission; would I be inter-ested? Of course I would be, I told her, and she said that I’dget a call from a person named Betty King, who ran theboard’s office. She called and I sent her my résumé.

A few days later Betty King called back to say there wasa problem: I was not qualified to serve on the Real Estate


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Commission, since the post required a broker’s license, andI only had a sales license. Instead, she thought I’d be morequalified to serve on the property tax appeal board, that infact it would be perfect for me. There was only one smallhitch: When she checked, they had just filled the only va-cancies available, and the names had already been sent upto the mayor’s office for his approval and signature. I askedwhen there would be another opening; she said in abouttwo years.

I hung up and thought, I don’t have two years to wait.So I called the deputy mayor for economic development, aguy named Ivanhoe Donaldson. I had gotten to know himas the mayor’s former campaign chief, and now he was oneof Barry’s top advisors, a very powerful man in local gov-ernment and politics—in fact, second to only the mayor. Ihad also met Ivanhoe when I as a teenager, at a politicalevent hosted by my mother. I told him about the tax appealboard, that it was something I’d like to do and was qualifiedfor, and that I’d like his help in getting appointed. He saidhe’d look into it and follow up, and that’s just what he did. Igot a call a couple of days later, again from Betty King, say-ing that she had some very good news: She was so im-pressed with me that she’d convinced the mayor to put meon the tax appeal board. My name was going to be sent tothe city council for confirmation in the next day or two.

That’s how I got on the property tax appeal board. Itwas a very prestigious position for me. It literally meant thatI was qualified to review all the assessed properties inWashington, D.C., and it began to put me into the mix, in-teracting with major real estate players in the city.

More important, it helped me start my firm. I could nowupdate my résumé to show HUD that I was on the property


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tax appeal board. Since I was qualified to review all of theproperties in the city of Washington, D.C., for tax purposes,why wouldn’t I be qualified to appraise some of the low-in-come housing there, too? I still had to call one of my friendsfrom page school who was now a special assistant to Repre-sentative Dellums, whom I’d worked for as an intern. Withmy new appointment in hand, I got him to write a letter inthe congressman’s name and then follow it up with calls tothe area director for HUD. The director agreed to meet withme, and after a few interviews and conversations, she finallyput me on the list.

Now that I was on the HUD list as an approved ap-praiser, I was guaranteed a minimum level of work. Anylender making a HUD-insured loan has to use an ap-praiser from that list, and as I mentioned, HUD makes theassignments on a rotating basis. It also gave me an officialstatus that allowed private banks and financial institutionsto use me as an appraiser. I felt like a made man. I was onmy way.

This all occurred in 1983. Barry had won the electionand was sworn into office in January. During the spring ofthat year that I was appointed to the board, and shortly af-terward I got on the HUD appraiser list. I was twenty-two,turning twenty-three. I quit working for Charlie Merkleand I started working for myself, initially out of my home.It was a thrill; I was beginning to generate a dependablesource of income.

I did more than just produce a steady income, however.I was aggressive and ambitious, I worked hard at my newbusiness, and I put every penny back into it. Initially, HUDtried me out with a few assignments and then increased myvolume. I got more and more jobs because I was quick and


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