← Educational Alpha
Educational Alpha
S3: Conversation with Fernando De Leon, Founder and CEO, Leon Capital Group
00:37:49
Loading summary
Transcript47 lines
- [00:05]
Bill Kelly
Welcome to Educational Alpha. I'm Bill Kelly, your host, bringing you on the ground conversations with business leaders, educators and industry colleagues from around the globe. Educational Alpha is sponsored by iCapital, the financial technology company with a mission to power the world's alternative investment marketplace. Part innovator, part educator and part navigator of the alternatives industry, iCapital offers intuitive, scalable digital solutions that have transformed how private market and hedge fund investments are bought and sold. With iCapital, financial advisors, wealth managers and asset managers around the world now have access to everything they need to deliver the return and diversification potential of alternatives to high net worth investors. To learn more, visit icapital.com in this.
- [01:01]
Narrator
Episode, Bill welcomes Fernando De Leon, founder founder of Lyon Capital Group, to explore the intricacies of private capital, real estate investments and long term wealth creation. Fernando shares his unique upbringing along the US Mexico border and how it shaped his approach to business and investment strategy. He discusses his early career at Goldman Sachs, his transition into entrepreneurship and how he successfully navigated the financial crisis to build a diversified multi sector investment firm. The conversation highlights Leon Capital's evolution from special situations investing to an operator led model spanning real estate, healthcare and financial services. Fernando offers insights into his approach to patient capital, the role of alternative investments and the importance of adapting to market inefficiencies. He also discusses the firm's recent expansion into fund management via iCapital, as well as the role of technology and data analytics in shaping investment decisions. The episode concludes with a deep dive into Leon Capital's scholarship program, emphasizing the importance of investing in future generations and staying connected to evolving trends in business and technology.
- [02:07]
Bill Kelly
Fernando De Leon, welcome to Educational Alpha.
- [02:10]
Fernando De Leon
Thank you Bill. Thanks for having me.
- [02:12]
Bill Kelly
I'm looking forward to this conversation on many different fronts, but when I talk about private capital, usually in the same sentence, I talk about patient capital as well and I think that's a model that you live and breathe. But before we get there, and maybe slightly by introduction as well, you and I have not met but you were kind enough to speak, I think on one of our platforms in Texas. Maybe we've got this old series around the world and it's always good to get a local flavor, even though your business is probably more global, but your emphasis has been in Texas. I'm going to get into some of the things that you do there, but before we get there, maybe a bit on your background to set the table for the listeners.
- [02:49]
Fernando De Leon
My background was, I think mostly impacted by the fact that I grew up along a border between the United States And Mexico. I grew up in South Texas and I interacted with two operating systems, for lack of a better term. And those two operating systems are very, very divergent. They contrast each other quite a bit. And so when I studied those inherently growing up, I learned how to become a social systems engineer, where we built companies and we built organizations around operating systems. And that was the most formative part of my upbringing, straddling the culture, the ideas between the United States and Mexico in that southern border. I think that was quite influential. And it also informed my judgment on how extraordinary the American system of governance is in terms of capital formation, the supply chain of capital, the way it moves, the way it impacts a lot of different industries. And I learned how to find those opportunities and position ourselves to build businesses around these divergent operating systems that I was witness to.
- [03:54]
Bill Kelly
Maybe a couple observations there. I think one, straddling those two southern borders then, and maybe even more so now requires resilience and well done there. And you've built quite an incredible business. But you did have some stops along the way. You didn't come out of university and form Leon Capital Group. As I said to you in the green room, I don't look at a lot of the podcasts, but I did see you spent a stint at Goldman Sachs and you did not exactly get the gold watch treatment walking out the door. And some of that is formative as well. So where were you before you launched what I think was initially a family office?
- [04:27]
Fernando De Leon
I went to college. I went to Harvard as an undergrad. That was pretty impactful. As well as a kid from South Texas that ended up in Cambridge, Massachusetts, the People's Republic of Cambridge, Massachusetts. I had a very interesting time there and I learned a lot. Studied some passion projects in biology and in government, in economics and things that created a philosophical foundation for how I thought the world worked. Then I went to Goldman Sachs. Goldman was this extraordinary place, is an extraordinary place. And there's incredibly talented people that go and perform at a very high level there. And so I got to be around some pretty great people. New York, this was right around 9 11, and I really wanted to come back to Texas. So after 911 I came back to Texas and started gradually building a business. So I started Leon Capital when I was about 25, 26 years old.
- [05:24]
Bill Kelly
So what year was that after the GFC?
- [05:26]
Fernando De Leon
Well, no, this was a few years before the GFC. This was about three years, four years.
- [05:30]
Bill Kelly
Before the GFC and both then and maybe less so now. And we'll get into the more recent Iteration of Leon Capital. But back then, was it just your own capital? Was it for all intents and purposes a single family office?
- [05:42]
Fernando De Leon
You know, when you start with very little, I had very little savings. I think you've engineer ways to create value. And one of the first things I used to do was to control land, to find partnerships with landowners and to solve real estate development technical questions for them in terms of land usage, zoning, civil engineering challenges, things like that, that had physical limitations, constraints that I could solve with work. And so I did a lot of that early on with limited amount of capital and created options trading around land positions that I could improve the value of. And that created a small capital base. And that continued to compound over time. When the GFC hit, I had about 30 land positions and sites and I was fortunate enough or prescient enough to sell most of those positions before 2008. So it was a good time for me to have some liquidity, some capital. And so from 2009-13, with my capital and a few other people that understood the moment we jumped into the market and did a lot of all in bets, I would put all the capital in into the center of the table, all the chips into the center of the table over and over again for about 300 times for the next six years. So quite a bit.
- [07:05]
Bill Kelly
So the evolution pre and post GFC there must have been, I'm guessing, an aha moment. Or maybe it's just an evolution of your strategy, Fernando, in that if you're dealing with problem assets like real estate or land that needs to have some tlc, it is a transaction more than a long term holding because the goal is to figure out what the problem is, fix it and sell it. And that seems to be what you did. And you get out completely at the gfc, but then coming out the other side, based on what you just said, you seem to then have moved toward less troubled assets and more assets where you saw tremendous upside potential. And the thought is you're going to hold these for the long term, not to fix them up and sell them, but because you felt that they were very good businesses. And that doesn't mean you should hold every asset forever. But this seems to be maybe the beginning of the patient capital phase of lay on capital.
- [07:55]
Fernando De Leon
Yeah, look, I mean, I think 2009 of 14 were very seminal years. They were the years that we created a substantial capital base. Those deals, those were transactions, those were trades. We were buying loans that were collateralized by real estate. So we were a special situations investor for those four or five years where we were turnaround specialists and we fixed things and we develop a competency. Doing that is adding value that way. What evolved from there were a number of different things. One was those were all real estate driven strategies in special sits investing where we were buying distressed assets. But then we evolved into various real estate operating divisions that focus on what today is an industrial and logistics business in the United States and Europe, a rental housing multifamily housing business that operates in the Sun Belt, and a healthcare real estate business that owns everything from hospital system real estate to clinics in and around hospital systems and medical office buildings. And so those three real estate strategies became our core focus and they were institutionalized and became self sufficient operating business units that today are run by an excellent group of CEOs that run those businesses for us. And most of those have historically been balance sheet developers and balance sheet investors where we use our capital to build the projects we do. And they're pretty sizable. And they're complex industries too. Logistics and housing rental housing are very, very complex industries. If I look at the housing business, we have a very complicated supply chain with labor, building materials, dozens of subcontractors in various trades, permitting in various jurisdictions around the country, Phoenix to Dallas and Austin and many, many cities that we operate in. It's very difficult to get permitting and zoning and to develop housing. It's not a warehouse where you can build the same Tesla over and over again. We got to replicate our factory in different cities across the country every time we build a new project. So these are complex industries and we have been operators and not capital allocators. We have operated these businesses intently, which.
- [10:10]
Bill Kelly
I think if you have the capacity to do, that's the name of the game. And something at the beginning of what you just said coming out of the GFC was the closest thing to a fat pitch for an investor that we'll probably ever see in a lifetime. And I don't think it took genius to get into the market. Although I think a lot of people, after a 50 plus percent drawdown, the public equity markets, a lot of people sat on the side, but you smartly got out and then smartly got right back in again as a liquidity provider in special sits, which is just an awesome way to compound capital.
- [10:38]
Fernando De Leon
I was lucky, Bill, by the way, because I was in a place in the market, the entry level residential for sale market. That's what I did before the gfc. So I was building lots for home builders and selling them to home builders who were then selling those homes to subprime borrowers. And so I had a front row seat at what was happening in subprime. For instance, I saw one community where we sold lots to a home builder and we sold out of 200 lots. We sold 180 of them in one weekend. And when I looked at the files of the buyers, they were all subprime buyers. So I had very unique data at the time to understand what was happening in the mortgage markets.
- [11:18]
Bill Kelly
Yeah. Which is a great insight to have. And I wish more people had seen what you saw because a lot of people did lose a lot of capital. But anyway, that aside, as I think about this next phase for your organization and maybe going back the period post the gfc, who are your co investors? Does Leon Capital have co investors? Are you going in external with co investors into some of these investments?
- [11:41]
Fernando De Leon
So Today we operate 12 different operating companies. So three in real estate, six in health care, and three in financial services. These are 12 operating companies that are not owned by a fund or anything. They are owned by the holding company, which is a family office. And so the holding company owns and operates these businesses. And those businesses, they all have different capital structures. So for instance, the real estate business, those operating companies, if they're developing a project, they will go to build a warehouse or an apartment complex. Every project will have a different capital structure. And our healthcare operating companies, we have physicians that are partners and shareholders. We have various constituencies in and around those operating companies that have various ownerships. We own a majority of these businesses and we control them. And we've invested a great sum of capital to build them and to operate them so they don't exist inside a fund. But yeah, there are co investors that join us, and some of them are family offices, some of them are physicians that believe in that particular company's operating principles and opportunity.
- [12:51]
Bill Kelly
For argument's sake, just say that XYZ sovereign wealth fund or ABC Public Pension plan were listening to this and they say, fernando, when you bring out fund X plus one, I want in. It doesn't sound like it's that kind of model.
- [13:04]
Fernando De Leon
Well, we have not historically been in the fund management business. Up until this past year, through iCapital, we have begun to distribute our first investment vehicle. So we've invested in over 600 real estate transactions as a principal investor off our balance sheet. But for the first time, we've opened up our investment opportunities to third parties. So now we do have dedicated investment vehicles that are distributed through iCapital. And so we have one for industrial, one for multifamily. Rental housing, one for healthcare, real estate, we have others in private credit, et cetera. But this is a new evolution of the firm to begin to allow third party RIAs and other investors into our investment vehicles for the first time.
- [13:50]
Bill Kelly
And just a note of disclosure, and I mentioned this to you before we started, iCapital is the sole sponsor of this platform. We know Lawrence and his team quite well. So just to get that out there in the audio, but if I think about then my question and your response, it seems like you've sort of, I don't know if this is a fair word, Fernando, bypassed the traditional institutional space and move toward wealth, where I think the cash flow is anyway. So this is much more of a thought about giving the wealth investor access as opposed to the typical institutional investor.
- [14:20]
Fernando De Leon
I think one of the things that I was surprised about and I kicked myself for not doing it earlier was when we started talking to RIAs, the networking effects of the value that was kind of a two way street was they had great clients that were business owners that were potential investment opportunities for us. They knew people that were potential recruits for some of our operating companies. So human capital, financial capital, deal flow, these things opened up on a two way basis. And we also began to find ways to co invest alongside RIAs. And so we became pretty synergistic with the RIA community. And it's been a great ride for the last year that we've been doing this. We've created a number of partnerships that I'm really proud of and like I said, I wish I had done it earlier.
- [15:07]
Bill Kelly
Does this at all shift the underlying profile of how you define patient capital? And I say that from the standpoint, if it's just Fernando, you can make the rules. If it's a single family office and they knock on the door and you say, hey, my favorite holding period like Buffett is forever. And I'm not making any commitment as to when you can get your capital back. But the wealth side has a different approach. And I see a lot of these assets being rolled out in interval funds, which I totally get. But this constant liquidity window, that Bill has to be answered. So how do you factor that into a patient capital model?
- [15:40]
Fernando De Leon
First of all, I mean, I think in most of the funds that we've sponsored, we are the largest co investor. So we're the largest investor in every one of our funds by a lot. Most of the funds that we've sponsor today, we have about a third of the capital invested in it. Some a little bit more, some a little Bit less. But we try to be about a third or 30% of the capital in any one of these funds. So we are very committed and aligned. And I don't think that there are a lot of funds out there that can say that, that an individual shares in the pain and in the gain as much as we do. So we think that's a very big differentiating factor. Number two is I think we are value creators. And so I think in the things that we do, for instance in our logistics business or rental housing business, when we develop assets, we see the comparable markets trading an asset at $100 and our ability to manufacture that asset gives us an advantage to be able to manufacture it at $80, where the market pricing at the moment is $100. So we find that that margin gives us a lot of flexibility to come in and out of markets. You can't really do that if you're in the fixed income market. But if you're in the real estate in the private markets, you can manufacture that kind of cost basis advantage and then pass that on to yourself as an investor and to your partners there. So that gives us a great deal of versatility in coming in and out of positions because we're adding so much value. I wish I was investing in 1960 where the markets were really inefficient, but today the only way to get that cost basis advantage is to do all of the hard work that we do on the ground in the real estate business to find land, to create entitlements and zoning and permitting and to control the entire supply chain so that we can have an advantage over other investors are not willing to do all of that work. So we're sort of a one stop shop for value creation and it gives us a way to exit on a much more flexible basis.
- [17:39]
Bill Kelly
You just gave me a fat pitch, Fernando, because I've said several times on this platform the word inefficiency in most things in life, it's not a good word in investing. That is what alpha is. And the more efficient the market becomes, the more difficult it is to find the alpha. And I think about real estate, which you just mentioned, there's a lot of data available, a lot of alternative data available. This big theme commercially about back to the office or not. And we talked before we came on about some of the demographic pushes in the residential side as well. So what is your analysis of the real estate market when you approach and what is your edge? Because you clearly have one, because you've been very successful as an investor and holding for the long term covers a multitude of sins, too. If I have to be out in five to seven years might not be the right exit point. But how do you think about the analysis of, broadly speaking, real estate under some of those themes today?
- [18:33]
Fernando De Leon
I'll start with this. We've compounded capital in the family office at a pretty exceptional rate of return in the mid-30s. And so our ability to take our capital and reinvest it year over year since inception has been pretty impressive. It's almost a 35% return for the better part of 16 years. And so I would put our track record up against a lot of others, and I'm very proud of that. But the way we do that is that we have to find a way to adapt to markets through the onslaught of technology, and we have to do it constantly. As business builders, I have to live in this moment where I say, hey, I'm dealing with all of these operating issues in every one of our strategies. And I've got these great people around us that are adapting and pivoting constantly to solve these problems. And while we're doing that and getting punched in the stomach and dealing with all these problems, we have to be optimistic about what the future is and how to position ourselves to where the puck is going and be really hopeful and optimistic just so that when we get there, we have to adapt again and pivot one more time with whatever is happening at that moment with technology and the changes in those markets. So our story is really a story of consistently constantly adapting and pivoting our business model from one thing to another, because technology is this tsunami that makes everything obsolete very quickly. And so if you're not prepared to make that adaptation, every three or four years, you're going to get chewed up and spit out. So that's the DNA of our businesses, is to consistently find opportunities by pivoting. That's difficult to do because you have this need to protect what you've already done. But I think part of the challenge is constantly moving forward to find where opportunities are going to be. And so how do we do that? We root out inefficiencies in every one of our businesses. We control costs maniacally. We do that as direct owners. When you have that much capital invested, you operate a little different than a traditional fund that invests 1 or 2%. You go in there and you're not paying for things that you shouldn't be paying. And that, I think, a little bit comes from my background as a person that grew up in pretty humble environment. I learned to be really efficient with resources that we communicate to every one of our companies. And a lot of folks don't like that. And we need people that will control costs. We also sell a lot of our byproducts. We build businesses around businesses like ours. For instance, in real estate, insurance has been a very difficult cost to control. So we built our own insurance company to broker it, to finance it, to reinsure it, and to create captive structures around it. We have had to sell our own byproducts or go in and disrupt parts of our chain that are trying to remove our margins. So we've done a lot of that. And then the other thing that we do is we invest a lot in talent. And as an individual owner and leader of a holding company, we can afford to reward people that join us and we can afford to reward them very handsomely without any bureaucracy.
- [21:48]
Bill Kelly
You mentioned three specialties, real estate, healthcare and finance and 12 companies. So it is a bit focused because with the investment model you always have agency risk. And the further you go geographically or by region or sector, the harder it is to control that agency risk. But it sounds like you've got a very good handle on it. Maybe first and foremost at the governance window.
- [22:11]
Fernando De Leon
Well, look, every one of our businesses is operated by experts and we have people that are very aligned and very vested in the success of each one of those business units. And then inside those companies there's complexity in terms of operating nuance in every one of those industries and every one of the market leaders in every geography. They specialize in certain geographies in real estate or in our operating subsidiaries in healthcare, every partner at every dental practice or med spa practice, every one of them has serious knowledge about their customers and about their geographies. We run a semi autonomous model where people are empowered to do well and to own part of the business alongside us. And I think that alignment is what drives results.
- [22:56]
Bill Kelly
And maybe somewhat of a related question. We're long now more than ever geopolitical risk around the world and difficult to model. And I'm not just talking about the U.S. this is true. There's flare ups everywhere in the world. We thought we had peace in Israel and maybe that's off the table as of this morning too. So the list goes on and on. How do you think about that as an investment thesis? Do you worry about geopolitical risk because it does affect emerging markets, it affects commodity prices, it affects rates potentially. Is that something that you think about and model?
- [23:29]
Fernando De Leon
Yeah, of course. I mean I think about it a lot. However, I would tell you that all of the geopolitical risk throws into relief how investable this country is. So it is far and away the most stable rule of law, the most stable democracy, the place where your assets are actually owned by the people that invest in them. So that framework, with a backdrop of geopolitical risk, it only highlights how extraordinary the United States is as a place to receive capital. And I think if you look at the direct foreign investment that came to the United States in 2023 and 2024, I think the United States received about two thirds of all international capital flows. So this place, as long as it's flowing with talent, which it is, and as long as it's flowing with investable ideas, which nobody else has the way we do, and as long as it's flowing with all of that capital to back those people and those ideas, you're going to have an extraordinary set of circumstances that are going to compound capital here better than anywhere in the world. So, yeah, I understand the geopolitical risk, but I think it's extraordinary that in a place like the United States, the banking sector is extremely vigorous and other countries have good banking systems, but our venture system, the amount of capital that flows into nascent ideas that spur economic development, there's just nothing else like it anywhere in the world.
- [24:54]
Bill Kelly
I agree with all that. And maybe as a quick aside, we could just touch upon this briefly. I look at this recent presidential election, and I'm not leading it to a political question at all, but neither party focused on the size of the national debt and the size of the deficit. And when you have a natural debt that's probably 1,130%, 125% of GDP, I worry about that. I just don't think it's sustainable. I think there's investment risk attached to that. Maybe it's not going to come home to roost in the next market cycle. But do you think about that not as a citizen, but as an investor, is that something people should be giving more thought to?
- [25:31]
Fernando De Leon
So you're going to hate my answer, Bill, but here's how I break that down. The United states has about $200 trillion of household wealth, I.e. cash, securities, home equity, all of the assets that this nation owns. And we have about at 130% of GDP, I think you're looking at $32 trillion more or less of a deficit of that. From what I can tell, only about a quarter of that, 7 to 8 trillion of that is owed to foreign nationals. So foreign countries mostly Japan, a little bit of China, a lot of Germany, a lot of Japan and some in the Middle East. So we have about 7 to 8 trillion of that 31, 32 of government debt, that is to foreign nationals and foreign governments, which is definitively a complex theme and something that we need to address. There's another half of that 75% is basically government intercompany debt. So those are reserve questions and liabilities on the balance sheet of this government that are between their agencies. And there's about another third of that that is owed to American citizens. So your fixed income portfolio, My fixed income portfolio, we owe those treasury obligations to American citizens. So you have about $8 trillion that is owed to external parties. You have about basically 12 trillion that is intercompany debt or inter government debt and then another 12 to 15 trillion dollars of liabilities owed to Americans. So my question is really, I understand if we said, hey, we have to clear this out, we would clear the ledger on the balance sheet and then we would pay back all this debt to Americans and then what would they do with it? They would turn around and buy Amazon corporate bonds and then that would finance growth to those companies and then those companies would issue dividends and it would go back to America. So I think the problem is that 7 to 8 trillion dollars of liabilities owed to other governments. But I don't think that it's an existential question. Here's what I think Americans are responding to. What they're responding to is they're not saying what they really are upset about. What we're all upset about is not how big it is, it's how we spent it. What we're saying is, what I don't like is where that money went. I think it's inefficient. I think the government has been lax. I think it's over administrative and I think it's imposed an undue burden on Americans ability to create economic prosperity for themselves. So I think we're upset about where the money went, not about the quantum of that debt in relation to our productivity, which is extraordinary.
- [28:15]
Bill Kelly
I do like the answer a lot, Fernando, despite what you might have thought, and maybe just a couple of things, probably just to underscore some of your points, we are spending more on debt service than national defense. That's not a great stat, but maybe some of that can be right sized as we get through this next phase. Who knows? But I think rates are going to have a lot of upward pressure because we've got more to finance and we do have a retirement crisis and we do have a health care crisis. And I've been very, very fortunate where I spend most of my career on the buy side of asset management, which is a good wealth building position to be in. But I just turned 65 a couple of weeks ago, applied for Medicare for the very first time and I'm eligible to start taking down Social Security. And if that is my only safety net, which it is for most Americans, it's not necessarily a perfect outcome. And I've been fortunate through savings and 401k plans, but a lot of people don't even have a savings account for retirement. So there are going to be some maybe bigger thornier issues we have to save some dry powder for. But I take your point and we're not going to solve it so we can move on for that.
- [29:17]
Fernando De Leon
By the way, part of the debt service on our own treasury obligations has gone back to Americans that have also used it to prop up consumer spending. So it's all a circular reference in many respects.
- [29:29]
Bill Kelly
Yeah, I rolled my 401k at Kaya into my self directed IRA and I put into Treasuries because it's got a decent yield. Maybe I'll move it into one of your funds at a later date.
- [29:39]
Fernando De Leon
Welcome aboard, Bill.
- [29:41]
Bill Kelly
All right, appreciate that. So Fernando, just a couple things as we move toward wrap up. Maybe one big question I want to ask you about the scholarship program which has a lot of things about it that I like as well. So an old adage going back to your early days in Goldman Sachs. My earlier career, signal versus noise. And that's always been the dilemma for an analyst. What do I react to? There is so much old data out there today and it is a lot of noise. It's measured in zettabytes, which is a byte with 28 zeros after it. And most of it was a consequence of this smartphone. So before 2010 it didn't exist. How do you think about approaching all of this alt data? Because you can't ignore it. It's an important investment thesis for investing in real estate. As an example, how do you separate signal from noise? And how are you using alt data for all of your businesses? And maybe to make the question a little bit more compounded, if I look at these three verticals you're focused on, I would on the one hand say Fernando, what about artificial intelligence? But I think your answer is it's embedded in the other three. So there you go, turn it to you.
- [30:46]
Fernando De Leon
Yeah, look, we have so much data across our financial services Healthcare. We see millions of American customers in our real estate business, in our data business, in our healthcare and financial services vertical. So we are constantly interacting with Americans, providing them goods and services. And so we can track, we have for instance, a consumer lending platform that interacts with thousands of Americans every year on a healthcare consumer lending business. And we can track default rates and where consumers are struggling or where they're not. And so we have that kind of real time data across our residents. For instance, we saw in our housing units, we would survey our residents in housing, where do they spend their money? And one of the things that we found a long time ago was that one of the highest ranking areas of spend for residents in apartment building, believe it or not, after housing and shelter, food, transportation, was gaming. So we saw games as a big part of the American public's spend. And so we invested in some early stage gaming companies that have proven pretty prescient investments for us. So we see a lot of data. We interact with customers, millions of Americans every year through our businesses and we gather that data and we try to make judgments about where the market is and where it's going. I'm particularly proud of a business that we built called Crexi in the real estate data business. We built that business over the last eight years. And it's funny, people ask me why we built it and I was thinking about the office building business and I said I don't like office buildings because they consume too much capex and the cash flows are never there. So I said what's the opposite of an office building? And I realized it was data. So we built a company called Crexi that looks a lot like Zillow for commercial real estate. And so we have about 4 million people that come on our site and we provide them leasing comps, leasing data, sales data as a listing service. We also have an auction platform and then we also have a listing service where people are able to distinguish their property, much like the MLS system in residential. And so we've gathered terabytes and zettabytes of data and great did in order to conform basically models that we can then repackage and provide to our customers. But all of that data gives us tremendous insight into real estate investing, the efficiency of those markets and how they've evolved over the last 15 years. We've been developers of these assets, we've been capital allocators, and now we're data analysts of all of this information that we've gathered over over the better part of 20 years.
- [33:31]
Bill Kelly
Well done. And Great way to embrace disruption rather than run from it. In conclusion, Fernando, I'm going to throw you a fat pitch with all the guests. I take a quick look at their background and website and sometimes maybe the less important things that some people might consider less important or what captures my attention. I saw the scholarship program on your website and I think it's a reminder that no matter how big, how successful we are, there's a generation coming up behind us. So could you tell me a little bit about that? I like the headline. I just curious about the news story.
- [34:01]
Fernando De Leon
Yeah. By the way, I agree with you. Embracing new generations. It's funny, I had several of my nephews and nieces this weekend at my house. They come over on Sunday nights for family gatherings and I stay close to them. They're all 20 to 26 years old, 27 years old, and we talk about AI. We have this little competition to figure out who could figure out what images were AI generated. And we did this competition and they have an incredible eye to figure out what's true and not true online. And they've developed that instinct. And I only say that because as an investor, if I'm not connected to young people, understanding where trend lines are going and where they are, it's harder to be an investor in an ever evolving landscape. So our scholarship program has allowed me to interact with young people that are going to schools and making a name for themselves and building a career. And so we find about 20 students every year in the state of Texas that we can support with anything. Most of the time it's for college tuition, but sometimes people tell me, hey, I want to be a chef and I want to build a restaurant or they want to go do research and study something in biology or anthropology. And people want to pursue certain passions and we want to be supportive of people that have those kinds of great life pursuits. And some of that is a two way street. They bring so much value into my life, my family's life, and then all of our operating subsidiaries in the various sectors we invest. These people end up bringing value there. They sometimes intern with us, sometimes it's a business network that we have that we can help them in their career. But it's all very positive networking effect.
- [35:42]
Bill Kelly
Thank you for that. And I think of the many investments you've made at Lay On Capital, this one I can guarantee you is going to have the highest return over the long term because that is very patient capital. Somebody who's in their 20s has a 40, 50 year career, maybe 60, 70 years of life. In front of them. So I think it's great. And it also ties back to something you said earlier, Fernando, that the pace of change in the 40 plus years I've been in this industry, this last maybe five plus years and looking forward is extraordinary, unlike anything I've ever seen. And oftentimes the future and what's defining value is coming from the gamification of these young kids. They don't go into banks, they don't know how to write a check. So they're kind of off the tradfi grid. And for us to say, well, those are crazy kids. This is our future. And I think you're right. Get them around that dinner table on Sunday because while they may not be as smart as you and I in some degree, they're a hell of a lot smarter in others. And they're defining value going forward. So I think the merger of that resting post on a Sunday with the scholarship I think is a great way of looking at value into the future.
- [36:48]
Fernando De Leon
I appreciate it. And you're right, they are defining value. Subsequent generations define value. So you can oppose it or you can manufacture products and services to build businesses around that preference because they will define value whether we like it or not.
- [37:03]
Bill Kelly
Yeah. And not only define it, that's my exit strategy. What I own today, they're my buyer, so I got to make sure I have merchandise they want.
- [37:11]
Fernando De Leon
That's right. That is correct.
- [37:13]
Bill Kelly
So, Fernando, thanks for a great conversation. Hopefully the next time I'm down in Texas, we'll be able to meet in person. But appreciate your time, your insights, and all you've done for our industry.
- [37:24]
Fernando De Leon
I enjoyed it very much, Bill. Thank you for having me and I look forward to seeing you very soon.
- [37:29]
Bill Kelly
Thank you for listening to Educational Alpha. I'm your host, Bill Kelly. Learn more about the CHAYA association and subscribe to the show at kaya. Org. That's C A I A Org. See you next time.