R Donahue Peebles was the first African-American to own a luxury hotel, the Royal Palm in South Beach. He's the owner of The Peebles Corporation, the country's largest African-American real estate company. Its $4-billion portfolio covers luxury hotels, high-rise residential projects and Class A commercial properties, both completed and under way, in Washington, DC, New York, San Francisco, Las Vegas, Miami Beach and the Florida Keys. Peebles has published two books, “The Peebles Principles” and “The Peebles Path to Real Estate Wealth.” The DC native, who came to prominence in the administration of former Washington Mayor Marion Barry, was last profiled in a 1998 Lodging Hospitality cover story, “Colorblind Capitalism.”

Q
The global economy is in turmoil. How has the state of the credit market affected your ability to develop and acquire projects? When do you think the markets will improve?

A
The tightening of the credit markets has made it very challenging to get even the most economically viable projects financed. Even developers trying to develop office buildings leased to the federal government are having problems. If they can't get financed for a building that's leased to the federal government — with essentially no risk to income — that tells you the credit markets are indiscriminately tight. No deals are getting financed, or very, very few. We saw the values on the residential side becoming inflated and we felt there was a lot of risk on the residential condo side in major markets like South Florida and the Bay Area in California.

In Las Vegas, we didn't think they'd have the opportunity to get a big run-up on the condo side. They had that big run-up on residential houses; the big growth was in number of hotel rooms. Vegas went to high-rise development because it had such massive development around the perimeter, plus Vegas is a no-state-income-tax environment so wealthy people wanted to establish residency there. The luxury condo market there is down big-time, but we think it's getting close to the bottom and there's not as much inventory on the condo side as, say, in Miami.

We're being very selective in where we deploy our efforts because our time is a valuable commodity and we have to be prudent in how we utilize it, on projects that have a high probability of closure.

Q
You have ambitious, mixed-use hotel projects slated for Pacifica, CA and Las Vegas. Are you done with hotel-only projects?

A
Not necessarily, but primarily our focus will be mixed-use and transit-oriented development. We're going to look to develop at metro stops and transportation centers. One of the biggest issues confronting the economy is the high price of oil. Every one-cent increase in the price of gas at the pump takes $4 million out of the economy daily and a 10-cent decrease puts $40 million back. Americans are paying much more for the consumption of fuel. So are municipalities, so is the federal government.

We think the wave of the future for new development is mixed-use projects that include hospitality, office, residential and retail, all within one facility. That keeps people out of their cars. They can live closer to work and that allows for better use and control of consumption on the fuel side. We're putting together some opportunities now.

We're targeting a handful of cities: the Washington, DC metro area; the New York metro area, in the city as well; South Florida; the Bay Area of California. We have an interest in Atlanta and think we can deploy the concept in Las Vegas.

Q
Are condo-hotels dead? If so, what's the next wave of lodging?

A
I think the condo hotel in its current form is very difficult. I don't think there's a strong market for them. The new form of lodging is a combination hotel, condo and fractional. I think fractional development is going to continue to grow because it combines hotel and residential.

Q
Lodging has just begun to feel the downturn. Which segments will be hit hardest and in what sequence?

A
I think extended-stay will be first. I think it's oversupplied and very price-sensitive and will have to compete with a lot of vacant residential condos. Then I would say the segment that relies on drive traffic and secondary — not major urban — markets will get hurt. I also think convention hotels in secondary markets will get hurt. I believe major world-class destinations, such as New York City, will be somewhat insulated across the segments, with luxury leading the way. Washington, DC will continue to hold up well, with prime-located properties across all segments. I think Miami Beach will do well, and the Bay Area of San Francisco. Las Vegas will continue to stabilize.