August 13, 2010
Real Estate Insider: 3 Tips for Buying Commercial Real Estate
Real Estate mogul R. Donahue Peebles, owner of Miami-based Peebles Corp. spoke with Black Enterprise about his most recent venture, a majority ownership in The Mardis Gras Hotel & Casino, a 320-room hotel and casino located across the street from theÂ Las Vegas Convention Center. He plans to develop the property, along with 14 acres of land he owns nearby, and unveil it as the Las Palmas Resort and Casino when the market recovers.Â The $2 billion development will be a full-scale convention center resort and casino featuring both a three-, four-, and five-star hotel which will be flagged and branded by Best Western.
Currently, commercial real estate in the U.S. is stagnant and treading water, but there are still many opportunities that investors can take advantage of, says Peebles. Here are three things he saysÂ to consider before venturing into commercial real estate:
The geographic market. “Obviously we look at what the national outlook is, but when we make a specific decision on what we are going to invest in, we look at location in a strategic sense,â€ says Peebles (No. 32 on the BLACK ENTERPRISE Industrial Service List). “We don’t look to buy in the best location. We look strategically at where it is right now and what it can be.â€ For example, Peebles points to the Paradise Road corridor off of the main strip of hotels in Las Vegas. It only housed the Hard Rock Hotel 10 to 15 years ago, but now it has been and continues to be transformed, says Peebles.
How it fits into your portfolio. “As an investor … we’re looking to get a good return in comparison to what we can earn placing our money in the financial markets or leaving it in the bank, or getting CDs and the like,â€ says Peebles. Peebles likes to buy properties that have inflation income potential and the potential for that income to grow as the market recovers. Because, ultimately, where you make big dollars is in redevelopment and a long term upside, he says.
Initial return on equity and revenue. “We’re looking for potential revenue to grow in the marketplace as it recovers. For the future upside/future development is why the strategic nature of location is important. “When that market recovers, then you have the opportunity to either develop it like we are,â€ says Peebles. “or if you’re an investor, sell it to a developer.â€ Since you are selling as a development parcel it will have greater value.
For more information about R. Donahue Peebles and commercial real estate: