potentially put in jeopardy when the lead partner, Delaware North, failed to come up with the $370 million needed to get the $575 million project rolling. Delaware North, a Buffalo, New York-based operator of racetrack/casinos (or racinos) was selected by New York Gov. David Paterson to develop the project. However, the tightened credit market prompted Delaware North to request a restructuring of their agreement and delay a portion of the up-front payment. The state, however, declined the offer.
In August, the partnership with Delaware North dissolved, Peebles partnered with MGM Mirage and submitted a revised bid anchored by a $250 million commitment from Harbinger Capital Partners, a New York City-based investment firm to operate the Aqueduct.
TALK ABOUT TIMING
Right now, Peebles is sitting tight. With the dismal state of the real estate market and with tourism down, this isn’t a good time to develop the upscale resorts and residences that have propelled the company’s revenue growth. Peebles is currently sitting on nearly $300 million in nondeveloped property, having unloaded most of the company’s income-producing properties and pocketing the profits. Among them is 14 acres in Las Vegas that was acquired at about $5 million an acre. “At the peak of the market [the property] was worth almost $20 million an acre. So even in today’s depressed market where it’s closer to $10 million an acre, we’re still way ahead of the game,” Peebles says. “We’re getting everything ready so that as the market starts coming back, we’ll be poised to immediately begin construction.”
The sell-off strategy began in 2005 when the company sold the Royal Palm. Development of the property had been awarded to Peebles’ firm after the city included a minority participation clause in the development plan as a concession to the black community that had launched a tourism boycott, several years earlier, lead by prominent local attorneys H.T. Smith and Marilyn Holifield. The community was aggrieved by the actions of Miami city officials who they believe snubbed then-South African president Nelson Mandela when he visited the city because the former political prisoner made positive remarks about then-Cuban president Fidel Castro. That year, Peebles completed The Residences at the Bath Club, a 117-unit, 20-story luxury high-rise on 5.5 acres of beachfront property with six seaside villas, a project that netted the firm $90 million.
In addition to the Royal Palm, Peebles Corp. sold its last remaining office building in South Florida for $74 million. As the market was peaking in California in 2006, Peebles Corp. sold its office