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Don Peebles – Opportunities in Times of Crisis

One of my favorite quotes from John F. Kennedy was his reference to the Chinese word for crisis, and how it was composed of two characters, one representing danger and the other

opportunity. Today scholars question the linguistic accuracy of that reference, but the notion is still a fascinating one to me—that, in times of danger, great opportunities abound.

When asked how I have been able to create a personal fortune of $400 million from nothing, and how I have taken my company from basically nothing to a portfolio of $4 billion in projects, that notion—of success snatched from the jaws of setback—figures prominently in the answer.

One of my greatest periods of business growth came in the late 1980s and early 1990s, when the country was falling into a real estate recession triggered by a wave of overbuilding and S&L collapses. At the time I had a real estate tax appeals business in Washington, D.C. (I was born there, by the way, the year Kennedy took office) and our job was to get taxes lowered for properties that were tumbling in value.

So, at a time when real estate investors everywhere were suffering from plummeting prices, I had a strong cash flow, and I used that cash flow to invest in office buildings, commercial buildings, vacant land and other troubled properties in Washington, D.C., that had been seized by the federal RTC (Resolution Trust Corp.). I ended up buying a dozen commercial properties for a fraction of their true value, because it was a time of crisis and uncertainty, and made a fortune selling these properties when the market came back.

Now, you can argue that winning big in real estate is really a matter of going against the herd. When everyone else is selling, that’s the time to buy, and when everyone else is buying, that’s the time to sell. But I really think there is more to it than that, because in good times and bad, there are fortunes to be made if you are willing to act resolutely when all around you are wavering.

If you read my book The Peebles Principles—and I hope you will—you will see that in each deal there lie elements of uncertainty, difficulty, even fear, and that if you remain cool and collected such adversity can often prove to be a boon. When I was developing the Royal Palm Hotel in Miami Beach, for example, we were faced with a tough lawsuit that could have cost my partner, Intercontinental Hotels, $12 million. Rather than face that liability, they sold their interest to me, leaving me with the exposure. We were able to favorably settle the lawsuit, however, and because of those dark clouds I ended up owning 75 percent of the hotel. An apparent reversal blossomed into a substantial win.

I can give you scores of other examples, but the lesson I have learned is that in any given business activity, there are going to be events that occur that appear to be setbacks. In such situations you must uncover the opportunity that is created by the setback. A deal may have taken way longer that expected, for example, and your partners want out. That may look like a terrible negative, but later, when the project succeeds, that buyout may turn out to be the best thing that could have happened. And so forth.

Today we are again in a time of great uncertainty. And, as a consequence, we are in a time of great opportunity. Among other things, I am in the midst of a billion-dollar development deal in Las Vegas, a distressed city in terms of real estate from which most investors are fleeing. I am also looking at mixed-use projects in New York, South Florida and Washington, D.C., all areas with markets in crisis—and where opportunities consequently abound.

My next book—The Peebles Path to Real Estate Wealth—looks at the present markets, and how to take advantage of them. That book will be released in September, and I hope you’ll read that one as well. In the meantime, here’s to the dark clouds, and to the silver linings they bring. I firmly believe that each set back is an opportunity in disguise!

- Don