From Real Estate to Healthcare: Building Enduring Businesses - Fernando De Leon - Founder & CEO - Leon Capital Group

We have made every single mistake you can imagine in many of these businesses. Capital structure, on timing, on leadership, on the wrong market. I wouldn't do it any other way because concentrated bets have yielded these extraordinary returns. I wouldn't do it any other way. So over time, I think most of the bad decisions have centered around business development people in our businesses that if you give them capital to go do deals, they will go do deals. And so throttling that back that and creating better protocols for not letting people go do deals in the wrong time, that's probably the single biggest mistake that I've made across, you know, 15 different industries. And so if I could go back, that's the one thing I would tweak. Welcome back to the distribution by Juniper Square, where I sit down to leaders across private markets. I'm your host Brandon Zedlov. On today's episode, I sit down with Fernando de Leon, founder and CEO of Leon Capital Group, a private holding company that owns and operates businesses across healthcare insurance, financial services and real estate. During our conversation, we discuss how great investors adapt and evolve across cycles, why understanding incentives and human behavior is critical to building successful organizations, and how AI and automation are going to reshape operating businesses and investment firms over the next decade. This episode is great for anyone interested in building businesses, capital allocation, private markets investing, entrepreneurship or how technology is changing the way that companies operate and scale. Let's get into it. Fernando, welcome to the show. Brandon, thanks for having me. I'm really excited for our conversation today. But as you know, I like to start every conversation by asking my guests to introduce themselves in their organization for our listeners who might not know you and your company. So could you take a second and introduce yourself, please? Sure. So I'm Fernando de Leon. I founded Leon Capital Group about 20 years ago. And today it's essentially a private holding company with about a dozen operating subsidiaries, different businesses, primarily in healthcare, in insurance, financial services and real estate. And it's been my life's work to build this organization with about 7,000 employees scattered around the United States and Europe. Excellent. Well, I've had the privilege of getting to know you and a little bit about your story and I'm excited to share it today. I think we should just go all the way back to, you know, the beginning. I'm always curious to know how people get into the business of, you know, investing, asset management, investment management. And, you know, one of the things that always stands out is did you grow up in a family where, you know, this was part of the ordinary conversation. So tell me a little bit about your youth and where did you grow up and kind of what was your journey into building the holding company and Leon Capital? Sure. Yeah, I think, you know, generally speaking, I grew up in a family that was probably analytically focused on not on investment specifically, but on kind of thinking about society and politics and business. I grew up in a really interesting part of the world that is the border of South Texas and Northern Mexico. So I grew up living in Mexico in Northern Mexico and a town called Madamoros. And I lived there, but I was fortunate enough to be an American citizen. So I was born in the United States. I was the only one in my family that was born out of the six siblings that was born and educated in the US. So I was incredibly lucky, right? I had this like golden ticket that allowed me to have a very different journey than than anybody else in my family. And I lived in Mexico and I commuted daily to school in Texas. So, you know, picture a five-year-old kid in kindergarten waking up in one country and then in the morning crossing a sort of a geopolitical barrier and going to another country every morning from five years old to about 18 years old. And that I think what it did was it created for lack of a better term. It trained my mental algorithm in sort of contrasting to systems of government, to societies, to business environments and human behavior within the confines of either place. And I spent, you know, subconsciously or consciously dissecting why people were a certain way, why they behaved a certain way under the system in Texas and the system in Mexico. And I developed sort of early on an interest in behavior in why people acting the way they do within that system. So I think that was probably the most formative thing about growing up in that particular place as a pretty good student. I mean, I had some advantages because I spoke both languages. One of the earliest formative things was being a student that had learned English a little bit later in life and then getting focused on the spelling bee. The spelling bee was this sort of, you know, really important thing for me because it gave me an entree into words which were concepts and they were compressions of thought and culture. And so by being in the spelling bee at a pretty young age from kind of nine years old to 13 years old, those four years were really formative. It was, you know, my ability to kind of travel through words. And by by being in both both countries simultaneously, I developed a real passion for sort of understanding words and concepts and culture. And I competed in the local school spelling bee. Then I went to the city spelling bee and I I won there. Then I won in the in the regional spelling bee. So I represented South Texas in the national spelling bee for several years. And I was, you know, pretty adamant and focused on on that. So those were sort of formative things. For a while there, I actually went to school in the morning in Texas and in the evening in Mexico. And I went to school at a at a small agrarian school. So it was a school that was for kids that worked on farms during the during the day. And then they went to school at night. So I went to night school in Mexico simultaneously with my with my upbringing in school in Texas. And so that those were the variables in my life at that time. The spelling bee words, trading my algorithm across to societies, you know, for 13 years in my life. How does one study to be a spelling bee champion? Like what is this is this repetition? Are you in the dictionary going from A to Z looking at every word? What what was the process? Well, you know, first there was, you know, speaking to languages gave me a little bit of an advantage because I had Latin roots and Greek roots in Spanish. So decoding words through their origin, their etymology was pretty helpful. And then it was just discipline. As you say, it was, you know, three hours a day going through the dictionary and understanding every word. I would record these words and then challenge myself. I would record them on a recorder and then challenge myself to spell them. So that was one part. But when I won the first time in South Texas and I went to the national spelling bee, the school district actually sort of saw something in me and decided to get me two coaches. One was a linguist and one was a word etymologist. So that so then after a while I had, you know, sort of a staff, a team. I was, you know, 10 or 11 years old and I had a team of people that were coaching me and helping me with with root origins. And so that and and also the ability to to spend time, right, to spend hours every day and really be really dedicated to that to that craft. That was pretty important. That's fun. Do you still put your hand up and will you challenge somebody in a spelling bee today? Or is that a thing of the past? Well, León Capil's actually the official sponsor of the North Texas spelling bee. So we sponsor across 32 counties in in North Texas. We sponsor it and our winner in the North Texas spelling bee, which tells you a lot about the demographics of North Texas. The winner has come, the national winner has come from from Dallas, the Dallas area for the last three years. So we're very, very focused on the guy who who won is actually kind of the goat of all time, the best spell or we've ever seen and it'll it probably a century. Wow. Incredible. Wow. No idea. Very interesting. So it's interesting. I mean, you know, we were talking I live in San Diego. So I'm familiar with this idea of kind of the the the the border and you know, going back and forth. I guess you as a young boy, as you were kind of commuting back and forth every day and immersed in two cultures, like what was your, you know, what was your goal? Where did, you know, you were obviously interested in humans and the way that decisions were made and behavior is and you talked a little bit about that. But did you, did you come from a business family? Did you think that you were going to go on to start and lead, you know, businesses or what, what, what was in your head at that time? Well, look, I mean, to be perfectly candid, I don't think there was any sort of specific strategy. I was a kid, but I think what it was, we grew up in very, very modest environment. So in the Mexico side where I lived, we were poor. I mean, we grew up very limited resources and, and it was challenging. You know, there had been a lot of, you know, volatility in the family. And so my job was really just to say, I have this American life. I'm an, I'm an American citizen and I need to make the most of it, right? The rest of my siblings don't have this extraordinary opportunity. America is this extraordinary place for, for people with grit and resilience. And I'm going to be one of those people. I didn't know what I was going to do, but I just knew that I had to take advantage of everything that this great country offered. And so I didn't, I didn't have a specific agenda, but I knew that I owed it to my family to go make the most of this great opportunity. Interesting. And so from there, you graduated high school, it sounds like in the US, what came next? Well, I think before I, before I graduated high school, one thing that I think was was business-related and it's extremely formative and sort of put me on a certain path in business was that around 15 years old, 14, 15 years old, I became a translator or American developers, real estate developers. When I was 15 and you and I are about the same age, but the North American Free Trade Agreement had been recently ratified. And so there were American companies building capacity, manufacturing capacity in Northern Mexico. And these developers would come and they needed sort of a guide, a Sherpa to help them navigate the ecosystem there. And I was a translator, I spoke both languages and I could relate to these developers and I ended up having a few clients when I was a freshman in high school and I helped them, basically as a project manager and translator and I helped them navigate the entitlement process. The most difficult part of it was for them to get job permits, labor permits. So dealing with the unions was a big deal. I had a certain relationships that allowed me and my family that allowed me to help these developers find, get entitlements first and then get permits for them to employ the local workforce. So as I started doing that as a project manager, I think I was 15 or 16 when I first translated my ability to co-develop or to project manage these deals and turned it into equity. And so my very first ownership stake in a real estate deal was at about 15 or 16 years old and it became sort of a life view, a perspective of owning assets directly as an equity holder. So that started a pretty young age. Well, so I have to ask, did somebody give you this idea that you should take equity versus perhaps ask for some sort of a salary or cash compensation? How did you, it sounds like it was very fortuitous, but I don't know many 15-year-olds who would say, hey, give me equity, not cash. Let me compound this investment. Nobody told me. I just intuitively felt like I needed to capitalize on this. This developer was based in Providence, Rhode Island. I had added a lot of value. That project was stuck for about two years, maybe a little less, but it was stuck. And so I had added a lot of value and I was sort of, I don't know what you would call it, but I was sort of very aggressive about it. I didn't assertive about it. I didn't feel like I felt like I should own a part of it because I had failed something out of nothing that otherwise wouldn't happen without my involvement. So there was a certain, you know, assertiveness or whatever you would call it, but I felt it. I felt it was fair. So how long did that go on for? And then I know that you ended up at Harvard. So what was the journey from, you know, the translator for the developer at the border to, you know, deciding to go, or earning the opportunity to go to one of the country's most elite academic institutions? Yeah. So as a real estate project manager, I worked at a developer's office for those four years of high school. So I was going to school in the morning after school. I'd project manage. I was working with civil engineers. I was running draws with banks. I was managing projects kind of, you know, pretty intently. You know, I got a real experience there in real estate development. I was a pretty good student in high school. So, you know, I spent, you know, pretty diligent amount of time working on my grades in high school and SATs and all of that. And so, yeah, I got an opportunity, a full scholarship to go to Harvard and I took it, you know. As a kid, you hear these brands, right? You're pretty susceptible to brands like Harvard. Today, I'm not susceptible at all to any brands, but I'm a 47 year old man now. At the time as a kid, you hear these things and you, you're taken by it. So, so yeah, as a 17 year old kid, I had never much traveled outside of my little town and I ended up in Cambridge, Massachusetts. I got there and I was, you know, pretty excited about learning. I think what I was particularly excited about was all the things that I thought I knew, finding sort of academic support for my, you know, kind of half baked theories of, of human kind. And so I spent a lot of time studying evolutionary biology, the behavioral finance, things like that that were the basis of my academic work at Harvard. But yeah, I was really sort of interested in going there and figuring out if any of the things that I thought I knew had any, any value. You mentioned evolutionary biology and I know one of the things that you focused on was primate behavior in a chimpanzee lab. And, you know, you warned me that, you know, we might spend the balance of the conversation on this topic. So, you know, without without going too deep, kind of why was that so interesting to you? And I guess, you know, how did that experience and form, you know, the rest of your life post-college as an entrepreneur? Yeah, and it did. I think my life's work's been about organizing businesses and organizing people on a cause. And that's been my career building various companies over the last 20 years plus. The work that I did in college, you know, granted I was young, but these were very formative instructions. And I spent time at in college working with primates on basically the idea of hierarchy and social structure in primates, the way they engage socially and around economic goods or social goods. And there's a certain amount of altruism amongst them. And so decoding why organizations sort of barter for goods, how they impose sanctions on each other in terms of moving primates, you know, in this case chimpanzees and macaque monkeys, how they sort of move people out of the flow or the deal flow, sort of speak. So we had, you know, things like fruits, like oranges and apples and grapes. We had coins and we had sort of social hierarchy that were the currencies and how they traded amongst themselves to have more or less hierarchy within the group. If somebody didn't respect the value of, you know, a quarter of an orange for two grapes or half an orange for half an apple and these systems of value, if they didn't respect them, they were ostracized or if they were able to sort of create market making functions, they elevated their stature within the group. And so all of these things sort of mirrored a lot of the things that we see, you know, commonly in business. And so they were, these ideas were sort of the foundation for thinking about behavior, how to create incentives in organizations, how to promote people and values inside any company that we were building. So yeah, some of these early lessons became sort of the backdrop of every single thing that we did across healthcare or insurance or real estate development or anything like that. That's fascinating. We're only 15 minutes into our conversation, but you already won the award out of 130 shows. You're the first one that studied chimpanzees. And I think you're the first spelling bee champion as well. Although we did have one guest. I was I was a champion in South Texas, but not in the national spelling. We just run her up. Yeah, I think we have one one guest, Johan Mosley, he studied lemur. So maybe to maybe there's some parallels. So you're at Harvard and you're exploring this kind of evolutionary biology, looking back obviously it helped inform a lot about how you organize people in the hierarchy, of how business works. But what came after Harvard? So you graduated and what was next? Yeah, well, I would say those early years, I mean, that you know, I was 21 years old. I was in the brand collecting business. So everybody was sort of vying for the three or four spots. The Goldman Sachs was going to give to graduating seniors. And I was a competitive guy. I really wanted to get one of those spots. So I ended up getting a job at Goldman Sachs. I went to New York, which was a fascinating experience for all those people that go to New York and take one of those jobs after college. I think it's very, it's a good idea. I say that to young people go and spend some time in New York and live in a big city like that. But I was at Goldman. I did, I was sort of a generalist working on a bunch of different kinds of deals. And I wasn't particularly, this was around 9/11. So I graduated 2001 from college. I went to New York and it was 9/11. It was extremely impactful for everybody on Wall Street. So I had a hard time, you know, sort of living in New York after that. And I didn't really think that investment banking would be my, you know, my sort of career. I wanted to go back and the taste I had gotten for real estate development when I was in high school. That had become, you know, the thing that I wanted to go back and do. So I left New York. Actually, I didn't leave. I was I was fired. I was fired from Goldman for not being a very good employee. And at the time I thought that was a bad thing, but ultimately it was a great break that I got in life. And so I got fired. I decided I didn't want to go back home to South Texas because it was too small a city But I wanted to go back I wanted to go back to Texas So I I landed in in Dallas and in 2003 and I got to work sort of tying up real estate You know finding pieces of land or sites that I could rezone and I had gone through entitlements before I'm and I kind of knew the process and so I'd have an option on a piece of land for 90 or 120 days and in that time worked to rezone it and If I could get a rezone and you know, I had to tie it up for a million bucks I could flip it to I could assign my contract to the home builder and then the home builder would pay me the the market value at that time And I would keep the spread so I created sort of an options trading Business because I didn't have any capital I didn't have a lot of money so I decided that I would try that and that worked out pretty well And then I made a little bit of money so I used that to actually take title to land and start building subdivisions And I built a bunch of them and I had a nice portfolio around 2007 I got approached by a home builder. I had a number of subdivisions going on I had some partnerships with other developers on some other ones And so I had quite a bit of of land holdings and lot developed develop lot holdings And this home builder had you know, interest in buying all of them So they they bought most of my stake in it I had a turnout that didn't really hit in 2008 But I got bought out of all of it all of those subdivisions and projects And I had capital for once in my life. I had had money. I had capital and you know 2008 hit and it was Pretty amazing to have a little bit of capital to have nothing on your balance sheet and to be ready and to know The value of what those positions were those lot those develop lot positions were Because I had underwritten them sometimes I had built them and to see those sort of out there in the ether with the banks And with the life insurance companies was a pretty exciting time. So 2008 to 2012 I sort of went all in about 150 times in a row I put my chips into the middle of the table a bunch of times And what were you going all in on were you buying back the same properties that you had just sold or kind of some similar version Was it still real estate at the time? Yeah, it was all real estate. You know What I had seen in 2007 and part of the reason I had wanted to sell was we had a subdivision Where we were doing lot takedowns with the builders And we had we were selling you know on 150 lots of division We could sell about four lots a month right? So that was about 50 lots a year and we could sell out of it in about a hundred in about three years That was that was the natural cadence Well, we saw in 2007 Where mortgages were getting originated at a very high clip Was that we saw subdivision where that subdivision that was selling four lots a month Went to sell you know 25 or 30 lots in a month And so instead of taking us three years It would take us you know three months to sell out of a subdivision And when we a lot of times I put those lots into ventures with home builders And and because I saw the files of the buyers of the the home buyers I could tell they were you know, 550 575 FICO scores And it didn't make a lot of sense for them to be able to to buy a 300,000-bar house So that sort of opened my eyes and so I had seen like why the problem existed So 2008 to 12 I knew what problems needed to be removed out of these projects So we can go back and buy them so we bought a lot and you know some of them were not residential Some of them were you know, we I remember buying a pool of loans from a bank in the Gulf States in Alabama. I remember buying a pool of loans from a bank a regional bank You know, it was about 10 loans and one of them was a loan to Costco I mean, I'm sorry a ground lease to Costco and we had paid you know a million bucks for the loan And the rent from Costco on that ground lease that we now owned was about a million bucks So we and it was you know cats and dogs in that in that portfolio You had some terrible ones some good ones and then some great ones and and so you had to work out of everything And we did a lot of that stuff so it's fascinating times So if I have my dates correct 2007 is when you start a leon capital group We can talk about the journey, but I think it might be easier if we kind of fast forward to today Because I think it's a very different enterprise or holding company today than it was in 2007 So maybe you know, you gave some statistics kind of headline stats when we kicked off the conversation But maybe frame up Leon capital group today kind of how you think about the company What it is that you are and then what what do you do where do you invest and we can kind of unpack some of some of the different angles there Sure, it's hard to put us in a box because it's a holding company that has a series of companies operating companies That we built and that we own and that we will may own forever or or cash flow forever Then there are businesses where we are stewards of capital There are strategies that we that we manage as as a as an asset manager And so that combination is a little bit different But we own about a dozen companies that are our companies They're not part of a private equity fund or anything They're owned by the holding company and they operate for instance in healthcare We own five companies We own the largest operator of medspa's in the country Health advanced medisthenics that's a business that employ several thousand you know about 2500 people We're the largest buyer of pharmaceuticals like Botox or wagovi and we are a medspa that sees you know hundreds of thousands of customers every year Across about 120 locations in in the US We own a a mental health business called Turnwell That is also one of the largest outpatient psychiatry businesses in the country We provide services for the correctional system for the Department of War for veterans for universities for hospital systems And we own a number of clinics around the country We built that company from the very very ground up as a as a green field And those two companies that we built from the ground up are now two of the largest in the respective categories We've owned businesses and own businesses in in veterinary care in dental In pediatric dental we own an ophthalmology business or cardiology business etc So those are healthcare companies that we have built from the ground up That are sort of leaders in every one of their categories Then we own an insurance agency business that does property and casualty and benefits And and we own a sizable reinsurance business where we reinsure life and annuities business assets on behalf of carriers And then we own a distribution sales business in the annuity sales business So those are the kinds of companies and insurance and healthcare that we own We also have a healthcare lending business So our folks go implement a technology in a dental clinic And if you want to pay for braces for your children You can get a loan from from us that business is called patient capital It originates point of sale loans We learned that business because we needed that business in our healthcare clinic So we built a financing source for our customers And then now we provide those financing solutions to other clinics that we have nothing to do with That we don't know but we provide them in clinic Or we do it in the furniture business and jewelry business, things like that So we have a point of sale financing business called patient capital And so those are some of the businesses that we own But there's 12 operating companies that we have built and that we operate And we have every single business is run by a management team And those are people that have been with us for a long time building these companies Some of them have built a. there's a gentleman for instance Chris Scales Who built, helped us build a pediatric dental business And after we we solve that company he now runs the med spa business And so a lot of times we have sort of CEOs and CFOs that are doing a second or third tour of duty But that is our business where we own these operating companies directly Then there are businesses like in real estate where for 17 out of our 20 year history We were really either opportunistic buyers of loans and things like that And special situations investors And then we were developers mostly investing off of our balance sheet And developing a multi-family and industrial retail storage We were developers most of the time we sort of observed the cycle Sold built and sold real estate opportunistically And today those businesses have largely transitioned to become asset management businesses Where we're investing our capital alongside investors in the real estate asset management business And then one other thing that we do in the asset management business Is that we often take stakes in GPs Whether those are real estate GPs or wealth managers or credit managers Or any kind of financial service asset manager We take stakes in those investments And we've been doing that for the better part of 15 years When you think about taking stakes in investors You mentioned you've been doing it for a long time It's a big trend now I've had a lot of conversations with others that have a similar model Is that you're taking stakes in the manager in the independent of, you know, are you seeding them and then taking a stake because you're helping to create the economics? Are you taking a stake because you believe in the business of asset management, investment management and the way that it can grow organically? Kind of like what is your thesis around around the state of seeding? Yeah, both. I mean, some of these have been organic kind of green fields where people came out of a company and needed, you know, working capital to build a platform and needed to co-invest capital. And so we were often the GP co-invest capital or the working capital to build the business that, you know, we've done many deals like that. And then we've also staked bot, sort of positions in going concerns that have, you know, $10 billion of assets under management and we've taken stakes in them. And sometimes we come in and we help some of those managers scale with technology or, for instance, in the wealth management space, we have a number of investments in the wealth management space, sometimes their multi-family offices that manage multiple families capital or RIAs. And we will take a 25 or 30% stake in the business. Our AI team will come in and support them and kind of revamp being their cost structure and their compliance and cyber. And so we'll do things like that to support the growth of RIA or NASA manager. So we've done both sort of green field and then established businesses that we can support the growth in various ways. So it's a big portfolio. It's across a lot of different verticals. Help me understand the connection and, you know, we probably don't have enough time to, you know, go through every detail. But in my mind is 2007, you're selling a portfolio of land that you would kind of built and banked off balance sheet for home builders, very kind of logical pathway from your entrepreneurial days as a translator on the board or doing entitlement through Harvard to that stage. And then you might also be one of the first guests to talk about the opportunity that the global financial crisis created because of where you stood. And then all of a sudden fast forward 20 years, you've got this really diverse portfolio of both building organically as well as acquiring other assets. How did this all kind of like come together where they're big kind of milestones where you move from one asset class to another, you move from being a builder to a buyer like help me understand kind of the sequencing. Yeah, I mean, look, the sequencing has really just been one thing. It's been constant adaptation and constant pivoting to find opportunities around our ecosystem. So what does that mean? And we went into, for instance, I bought a I owned a warehouse in Dallas, you know, 18 years ago, that had in it a lab diagnostics business that did cholesterol tests and did cardiovascular tests. My tenant went in a bankruptcy. And I had a warehouse with a mortgage and that tenant, so I had a warehouse that was $30 million. And this business that was my tenant went in a bankruptcy and the sale of that business was about a $6 million sale. So I could step in and buy the business and recover my tenant and then control my tenant to save the $20 million warehouse. And so I just had to do it, right? It was kind of a must. When we stepped in and bought that lab business, we worked really hard at fixing the problems that it had and we did. And so we took that business and we turned it into a 10 or 12 million dollar EBITDA business that we sold at, you know, 15 or 16 times earnings and we made money, but it came out of a real state transaction. We used to, we bought a, we had a shopping center with a tenant that was a vet clinic called Citivet. And we saw their top line because they reported sales in that little retail strip. We saw that their revenue was about $5 million in boarding revenue. And that boarding revenue, dog boarding primarily, animal boarding, that barbed boarding revenue was, you know, a couple hundred kennels that had had a capex cost of, you know, $200,000 of finish out and it generated about $5 million a top line. And we had one person operating those kennels. And so we had very limited operating expenses and we had a per night cost of about $60 per animal per night across the street. There was a hospital, I'm sorry, a hotel that was a building that had traded for about $400,000 a key on about 100 keys. I traded for $40 million and had about $6 million a top line and about $1 million of EAT of NOI and had about 80 employees to run that hotel. So we saw a hotel that was a $40 million investment. We saw a vet clinic, dog boarding facility is doing $5 million a top line and and three and a half million dollars of EBITDA doing, you know, 150% more than the hotel that had cost $40 million to build. So, so why did we invest in the vet business was because we saw those relative economics and it made a lot of sense to me. So when I bought that business, I deployed my my retail development team and I said, guys, we've got three locations and I want to get to 50 in two years. So find me all the sites with these demographics and unless you're built to suit. So when I built the building, I could sell lease back it and use the the profits from the sale of the real estate to grow the operation. And so we turned that into one of the most valuable vet businesses in the United States. There's something but you're wired differently, right? Because I think, I know a lot of real estate developers, a lot of your friends are in this business. They've been on the show and not everybody would think about, you know, oh, well, the way to save this deal that's gone upside down is to acquire the tenant and operate them better and then scale them. I mean, this might be a ridiculous philosophical question. But like, what is it that motivates you to take it to that next level? Because I know a lot of people would just be like, okay, we're going to write that asset off as a loss and we're going to move on and the next one will be better. And Rensen repeat and over time, hopefully you have more wins and losses. And that's the way it goes as a real estate developer. But that's not the path that you chose for yourself. Well, I mean, I think it starts with one fundamental assumption that is different about what you just said. In most of the cases, that warehouse, in most of the cases, that warehouse was a syndicated equity position, which means that there were multiple investors. In my case, it was 100% of my money. And there was no way that I was going to lose my money on that deal. So come hell or high water, I was going to fix it. So the first thing I had to do was to find a CEO for that lab business that was an expert. And what could I do? I could say, Hey, you know, you could go work for private equity. You could go work for many other groups, but I will pay you and I will reward you with ownership in this in this lab business if you help me turn around. And so that person created a team of a bunch of killers and we did turn it around. Now I had the pressure of the of owning 100% of that warehouse and I had the pressure of owning 100% of that lab business. But I also have the advantage that I could cut a deal with that CEO the way I wanted. I had no constraints. I had no limitations to what I could do to solve the problem. So there was a huge accountability and ability to distribute rewards to incentivize people around this to help me solve the problem. And so I could do that. And so yes, I think in your analysis, you know, why are you why did you do it? Well, it's because I owned 100% of it. And the mortgage was with a bank that I knew and that the guy at the bank, I had a relationship with him and I wasn't going to let anybody down. So some of it was survival. Some of it was the alignment of my interest relative to those two, the prop code and the op code, the business and the property. And then part of it was the ability to understand how to design incentives to build a team that would, you know, run through a wall to fix the business. So you built these operating businesses, but then you mentioned at some point, you know, you started taking on third party capital and being a fiduciary steward of other families or other individual or institutions capital. What was that transition? And you know, why why did you go from being, you know, you just talked about some of the benefits of having it be your own capital to now managing other people's money. Yeah. Yeah, well, a couple of things. I think we can dive deep on this because you're a good person to bounce some of my my ideas off of in this respect. First of all, in every single investment vehicle that we have sponsored, we are always the largest investor. So today, you know, across about two billion dollars of investment offerings, we are about 45% of the capital, me personally, right? So, so that that's in real estate. The real estate offerings are are what we have raised capital for. Primarily, the investors are family offices and wealth management firms that represent investors. And so our ability to engage with family offices is relatively easy and with wealth managers because there's so much alignment between my my co-invested anywhere from 30 to 45% in any given vehicle. So we have a lot of alignment. So the idea of like it still ours is very much there, right? Secondly, why I why we transition to a model and real estate that captured third party capital one was because we needed to reward the leaders of each one of the divisions in industrial, multifamily and healthcare real estate. We needed to incentivize them and reward them with carry and promote. And so if it was just my capital, I couldn't, I didn't generate any carry. I needed to generate rewards for the management team in each one of these divisions. Number one. The real estate industry has gone from an industry where we could find openings in opportunistically and they were very inefficient markets. What I have observed over the last 10 years is that the real estate markets have become hyper efficient. There has been a supply chain of capital that flows through pension funds for one case, RIAs, wealth managers, international investors, family offices, all going through large asset managers and then downstream to operators and then local investors. And all of that capital has made the real estate, commercial real estate markets hyper efficient. So for us, you know, I've generated over 20 years a 35% return on equity across our investments. So this is a cager that we value very much and in order to do that, we need to find very inefficient markets, which are very, very difficult to find. Frankly, we've helped create the efficiency in the real estate business because we created data businesses like CREXI that now disseminate information to retail investors and institutional investors. And so as I observed that happening in real estate, I realized, okay, real estate will become more of a utility business for us. So we could invest in power generation or bonds or fixed income or we could assume that real estate will become sort of a high teens return for us over the next 20 years. And so in my observation, as these markets became hyper efficient, I had to pivot so that we could generate outsized value and then modify our expectations from being a pure 100% balance sheet investor to being 45% of the capital in any given investment. So across all of these investments, I mean, I am sure the highs have been very high and I have to believe that at some point there's been lows or mistakes. I mean, as you look back at, you know, your last 20 years of building businesses and investing in assets, you know, what then of what is one mistake or what's kind of one seminal moment, something you didn't, you know, with the benefit of hindsight, you would have done differently, something that you got wrong. Like what's a lesson that you've learned through this entrepreneurial journey? Well, I think we have had, we have made every single mistake you can imagine in all in many of these businesses. One consists every single thing on capital structure, on timing, on leadership, on the wrong market. Oh my God. I mean, I've had so many disappointments in the things we've done. But I have, you know, cried myself to sleep on, on like misses for certain investments. There have been some businesses, for instance, in healthcare, we often would acquire practices. And often when you acquire practice, you know, you underwrite a certain amount of revenue, certain amount of EBITDA, and the seller of that practice was supposed to be the steward and the champion of that, you know, healthcare clinic may, you know, check out a year after you give them a check. And then you no longer have an advocate and those healthcare practices decline and revenue. So we've done dozens of bad judgments in investing with people like that that are no longer our partners because they cash out and they take that money and sail off into the sunset. But I've been smarter. I would have designed a capital structure with, you know, more force, with more earnouts, with more control. And I made many, many mistakes like that that have cost me, you know, nine figures of my own capital and a lot of capital destruction. And so throttling that back that and creating better protocols for not letting people go, you know, go do deals in the wrong time. That's probably the single biggest mistake that I've made across, you know, 15 different industries. Show me an incentive. I'll show you an outcome, right? I think it's pretty, seems so easy to say, but obviously, you know, the reality is a little bit more nuanced. That's a Charlie Munger quote. And I give you an idea of how much, how much I respected Charlie Vager. My dog, his name is Charlie Munger. I love that. But before we talk about what gets you excited and what the future looks like across these businesses, do you have a soft spot for one of them? I mean, I totally appreciate you. You can't put somebody in a box. Are you an asset manager? Are you an investment manager? Are you family office? You're a holding company. You know, what are you? I realize that's hard. And now you're investing across so many different industries. And what do you, you know, if you had to do just one thing and one thing only, is there a vertical that you would, you would focus on that you just have a soft spot for? Are you think it's an incredible business? Well, I think the most important business for us is the insurance business. And it plays to our strengths as risk managers and quantitatively focused concern. So we are good at it. And that's the most pivotal part of our organization. And that compounds capital at a rate that allows us to do our job forever. So that is the most sort of relevant and foundational part of our business holding enterprise. The business that I think is most interesting to me as a person, as a human being, is the mental health business. In that business, I built that business because I was passionate about what was happening to the human brain over a long period of time. So when I studied evolutionary biology in college, you know, we thought of the evolution of the human condition over about a three and a half to four million year time span. So we saw the size of the human brain grow dramatically in that time frame. We saw cognitive ability, you know, skyrocket for almost APN. We saw just development cognitively of the species. And so I see that trajectory and I put it in a frame today. And we have this Cambrian explosion of human cognitive ability that is just fascinating to me. And so as we're building that business to be around researchers and psychiatrists and psychologists and people that understand human behavior and sadness, happiness across a very, very varied part of our population. Like I said, some of the work we do with the prison, the correctional system with veterans of war, with the Department of War, that work is fascinating to me. And so I find it very interesting. And I think the reason we built such a valuable business there is because the people around to be that are building that business are genuinely interested in decoding the human brain. What's one thing that surprised you the most about what is happening with evolution in the human brain as you see it through the lens of the mental health business, maybe something that, you know, the listeners may not know or may not appreciate about kind of where we are today as a society. Yeah, I mean, I think when we think about what is happening to this human brain in the last 40 years, the sheer number of stimuli that go through your eyes into your neurology. So the sheer number of things that you're seeing and processing in terms of textures and colors and video and there's an infinite number of stimuli going through the eyes into the brain. That wasn't the case for the last three and a half million years of human evolution. And just, you know, what was all the things that we see, it's a massive, massive impact to the brain and how it rewires and wires itself, how it adapts to that is fascinating. And very difficult to contextualize the orders of magnitude of more stimuli that it is processing today versus 40, 400, 4000 or 4 million years ago is just difficult to quantify. And so we are, you know, adapting real time. That's one thing. The second thing is obviously, and it sounds cliche to even mention it, but how we have created this parallel brain structure through AI that is thinking alongside us, those two things are really sort of impossible to quantify and fascinating. So as we begin to wrap up here, you know, across your purchase an interesting one. And as you look out into the next 12, 18, 24 months and we're recording this in April of 2026, kind of what are the trends? What are the themes? Like where do you see the greatest opportunity as you look at, you know, kind of the leon capital portfolio over the near to medium term? Yeah, I think, you know, across all of our businesses, the one thing that is consistent is that we've developed a technology team for the healthcare portfolio. We've developed a. a technology team or the real estate businesses and for the financial services businesses that we own directly and then for the stakes that we have in other businesses that we don't control in financial services. All of those businesses, we are going into them insistently and trying to do two things. One is to automate workflows so that we need less people. So that is both a function of improving margins and reducing costs. That is the only way that we're going to be competitive and then also becoming a lot faster to service our clients in anything that we do, whether that's mental health or med spa or insurance. In the insurance business, it used to take us about 5,000 man hours to produce a certificate of insurance. Now through technology, through AI and automated workflows, we can produce that in seconds. So all of the involvement of humans to produce a certificate of insurance, we can do that much faster. Our labor optimization, for instance, in our med spa business, we have been able to optimize labor at the clinic where if we had few appointments, if we had four appointments at one hour instead of having 12 employees at clinic, we should have six. The ability to optimize that through payroll software, through appointment scheduling software, was limited. Now through Clawed and AI, we're able to develop AI agents that can do that work to schedule appointments, to schedule the people that go to clinic, our employees. And so we see 12, 13, 14% reduction in costs across the labor pool, which is usually about a third of our cost structure in a business like the med spa business. So we can take technology in every one of these things and insurance in med spa and mental health and real estate and optimize costs and improve our ability to protect our business. So the only thing I'm doing right now, 100% of what I'm doing right now, is making our businesses AI proof over the next couple of years. And with 7,000 employees, I think that's what you said at the outset. I mean, that's the significant uplift at 13, 14% efficiency gain. Yeah, I don't think all the businesses will see that kind of impact. Some of these are multi-site businesses where they're heavy labor in professional services and wealth management and insurance. We have a lot less people as a percentage of revenue. So I don't think we'll get that lift across the board, but we will become better managers with technology. Is there one business that you would like to be in that you're not in today or one business that you're in today that you hope you're not in 18 to 24 months from now? I'll give you the choice of how you want to answer that. I'm not going to answer the last one because the people that work at that business will get scared. We're constantly observing businesses that interest us demographically and for instance, right now we have a partnership with one of the largest annuity sales businesses in the country. And they sell the annuity sales business about a $400 billion market. These folks sell about $8 billion of annuities annually. And we are partnering with them. And as you see the demographics of the United States, gray, the annuity sales business is a fascinating business. It's a financial instrument and I don't think there's ways to AI, the financial instrument where people are buying protection for the future retirement. And so I think some of these businesses we find a hard time seeing how AI could disrupt them. Certainly supply chains and sales and friction and costs can be taken out of it. But fundamentally, you know, 60 million seniors retiring or in retirement already, they're going to continue to buy annuities and financial instruments for their retirement. So we're betting heavy in that business. Separately, I would say we have partners in the venture capital space that are investing in early stage and growth businesses. That is always an interesting place for us to be talking to folks to see early changes in AI. And so we're always investing with managers as a passive investor in early AI technologies. And then the other thing is our CREXI business, you know, it's a business that we founded 10 years ago. We're constantly investing more capital in it. We have 4.5 million commercial real estate participants going into the CREXI site every month. So it's a business that we're very, very proud of and we're going to continue to invest a lot of capital in AI and in the market making functions at CREXI. Excellent. Well, I think that's an appropriate place to wrap up. There's certainly a lot of opportunity on the horizon. And as always, Fernando, I enjoy our conversation. So thank you so much for joining me. And I'm looking forward to the next time we get to chat. You got it, my friend. Thank you for having me. I really appreciate it. Thanks for listening to the latest episode of the distribution by Juniper Square. If you like today's podcast, please share it with a colleague or a friend. And don't forget to subscribe and rate the distribution on Apple podcasts, Spotify, or wherever you listen to podcasts. You can connect with me on LinkedIn by going to www.linkedin.com/in/becedloff or you can find me on Twitter @becedloff. You can also find a video recording of this conversation on demand at JuniperSquare.com/the-distribution. Until next time.