GI321: Commercial Real Estate Development with Luis Belmonte

GI321: Commercial Real Estate Development with Luis Belmonte

Luis Belmonte (Louie BelMawnTee) is a highly experienced real estate developer with a career spanning over 57 years and is a founding partner of Seven Hills Properties. Previously, he was a founder of AMB Property Corporation, where he oversaw the $250 million annual development program and managed 50 million square feet of assets. Before joining AMB, he was a partner with Lincoln Property Company, responsible for industrial development projects in Northern California. Over 16 years, he developed 18 million square feet of industrial buildings. Before that, he spent three years on active duty with the U.S. Navy.

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Transcript:

Charles (00:00):
Welcome to another episode of the Global Investors Podcast; I’m your host, Charles Carillo. Today, we have Luis Belmonte (Louie BelMawnTee). He is a highly experienced real estate developer with a career spanning over 57 years and is a founding partner of Seven Hills Properties. Previously, he was a founder of AMB Property Corporation, where he oversaw the $250 million annual development program and managed 50 million square feet of assets. Before joining AMB, he was a partner with Lincoln Property Company, responsible for industrial development projects in Northern California. Over 16 years, he developed 18 million square feet of industrial buildings. Before that, he spent three years on active duty with the U.S. Navy. Thank you so much for being on the show!

Luis (00:45):
Glad to be here.

Charles (00:46):
So give us a little background on yourself a little bit per personally and professionally prior to getting involved with with real estate investing.

Luis (00:54):
Well, my father was in the business part-time. He had a dairy farm outside Yarrington, Nevada in 1929. And the bank closed and foreclosed on his loan and wiped out his savings. And subsequent to that, he made a living for a while, breaking wild horses which is a hard way to make a living. And then he went back to school at the University of Reno university of Nevada Reno. Worked his way through school as a bootlegger. And when he got out, he got a job with the Department of Agriculture, because having been wiped out by the Depression, he was interested in a regular paycheck. And he worked there until the day he died. But he was, he al he was entrepreneurial. He always had a sideline, feeding cattle, feeding chickens, turkeys and rent houses. And my parents divorced when I was five, and I went to live with my father when I was 16.

Luis (01:50):
And I became a ill paid ranch hand property manager. And I prepared the income taxes ’cause that that board him. So he kept his records in a pay board box and handed me the box at tax time. So I was somewhat familiar with, with real estate. And when he passed on prematurely of cancer my stepmother inherited most of the assets. And I, I ended up with a few thousand dollars and a duplex in Corning, California. And I had been in graduate school. My idea was to get a PhD and be a professor, which thank God I didn’t do, ’cause there’s not enough work to go around too many people in graduate school. And so I was faced with the prospect of getting drafted joining the service or going back to graduate school.

Luis (02:43):
And I decided to join the Navy, but I needed to sell the duplex. So I sold it to a woman broker in Corning, California. And there were very few women in the business in those days, but she was triple tough. And $8,000, $800 down. And I packed the paper which I subsequently used as a down payment for three units in San Francisco after I got out of the Navy. But anyway, that was my first real estate deal in 1964. And after I got out of Vietnam in 67, at the end of the year I got a corporate job and I rented a flat in San Francisco with a high school friend of mine. And it turned out he was upside down in a real estate deal. And he’d, he’d met some fool in a bar who said, well, San Francisco’s gentrifying.

Luis (03:37):
Everybody moved to the suburbs in the fifties and sixties, but some of ’em are moving back. And, and so I, I found a pair of flats in the Richmond District of San Francisco. We can buy cheap. And you put up the money and I’ll put up the work and we’ll make big books. And my my flatmate used some of his inheritance to make a down payment on the building. But very little work was going on, and he was afraid he was gonna lose his money. So I said, well, I don’t much like my job, so if you pay me $3 an hour, I will strap on my tool belt and we’ll get this job done. And which I did, and eventually I bought out his bar partner and we started a little business doing rehabs.

Luis (04:21):
And we did a, a couple of little apartment deals, made some money, and then we made a bad decision. We bought a house out of an estate. And it was a, it was a house in the Richmond District of San Francisco. We paid $28,000 for a 10% down and the estate packed a two year note, and we proceeded to create a masterpiece. We thought we were, we were real, we were decorators and we refinished five rooms of hardwood floors, which is really hard if you don’t know how to operate a floor sander. We put in a new kitchen and I built cabinets with a skill saw which is not the ideal way to do it. And we added a, a bathroom big deck. I rehabbed all the double hung windows. There were about 30 double hung windows.

Luis (05:14):
And when I finished, they were the best looking, best operating double hung windows in all of San Francisco. And then we went to sell a property ’cause our loan was running out, and the, the market was in the toilet. Interest rates were 9.5%. We had over remodeled the building. It was a $50,000 neighborhood, and we needed $53,000 to make any money. And we, we had not figured out the exit correctly. We didn’t know how to refinance and pay off the, the estate. We didn’t have the staying power to operate it as a rental. We were we were against the wall. So we sold it eventually and barely made wages. And that taught me a lesson. Stay at the shallow end of the gene pool focus on exit strategy prepare for a bad market set yourself up to exist through a a a, a bad market.

Luis (06:15):
Take advantage of a bad market. Taught me a whole bunch of lessons. I have several scars on my body as a result of that deal. And about that time I got married and there was some pressure for regular income. My wife got pregnant, which is the way we used to do it in the old days. I realized that’s, that’s antique, but you know, that’s the way we did it. And so I started looking for another job and the outfit that offered me the most money was the DHO Meyer Company. A international developer of warehouse buildings based in New York City. And so I took that job, and I did not know a warehouse from a house of ill repute, but I figure well, you know, for $23,000 a year, which was big money in those days, I could learn.

Luis (07:04):
And and I spent the next 35 years in the warehouse business. I built all over Northern California. And then when I moved to a MB now Prologis, I built all around the United States in Mexico, Singapore, Japan you know I, I was the warehouse king. And in then in about 20 years ago when I was 64, it was decided that I was too old to be an international road warrior, and I agreed with that. So I’ve retired from corporate life and, and started seven Hills property with a friend of mine. And we’ve been doing that for 20 years now. And we have low income housing and neighborhood retail and one little industrial deal that we’ve

Charles (07:55):
Done. Okay. How do you think over the last 15, 20 years kind of the investing landscape in commercial properties has kind of changed? How’s that? How’s that gone? Well,

Luis (08:05):
The first thing that happened is the invention of the computer which allowed us to do IRR and sensitivity analysis. So when I was first in business and all along early in my career, I bought little apartment buildings and worked nights and weekends to fix ’em up and raised the rent. And my criterion was I put 10% down and get the seller to carry a second. And I had a broker who had a deal with an SNL to guarantee the first. And so so my deal was I, I needed enough cash flow after I got my fix up done to accumulate money to buy the next deal. So that was my IRR. Now, once the computer came along, we were able to do song and dance and projections and, and an IRR calculation is all dependent upon two things, which are wags wild guesses.

Luis (09:01):
That’s the growth rate and the exit cap. And those are both complete guesses, but if you turn the dials, you can justify near anything. So everything compressed. And in my early days, it was all about spendable, how much money ended up in my hand after everything was said and done. And, and now deals are much tighter. And, and the other thing that’s happened is that prior to 1986 tax law developers own things and sold tax benefits in order to raise equity. After 1986, the institutions took over and owned everything. And now there’s a ton of private equity money in, in, in the business. Tons of private equity money and private equity is not investing its own money. They’re investing somebody else’s money and they’re writing checks with other people’s money, and they get paid to do deals and magically enough they do deals. So it’s a whole lot harder to make a margin when you got somebody on a computer turning dials and you got people writing checks with other people’s money.

Charles (10:08):
Yeah, yeah. No, that’s completely true. And one thing you mentioned about the cap rate exit, exit cap rate, if, if you see, if anybody, you know, as a listener, they, like, they see a model if you like, just adjust that just, I mean, you’re talking basis points. The amount of your return is, I mean, it’s a, it’s amazing. It’s amazing. You, you can just change it and go, you know, it’s gonna be, you know what I mean, 0.2 different or 0.3 different, and it, it, you’re like, oh, wow, that’s a whole different, you know what I mean? It’s a whole different return.

Luis (10:37):
Here’s the envelope calculation. And I’ve done, when I, when I got on the institutional side of the business, I was exposed to whole lot of this. I mean, I was the street dog out solving problems in building buildings, but I sat on the investment committee and read more investment committee memos than any human being should. And, and the, the, the, the trick is this, after all is said and done on the average deal, if you’re going in cap rate is a seven, you’re going out cap rate is an eight. Your, your IRR is eight, you know, that’s, so you got a hundred basis points for exit IRR being above your entry IRR. So you start out, you know, you do the big calculation and you say, okay, well I’m gonna enter at a seven and get out at a 10. No, because you’ve got a hundred basis points of, of exit cap and you’ve got a hundred basis points of turnover costs. So if you enter at a seven, you’re gonna exit at an eight. And, and that makes it real simple. Yeah.

Charles (11:38):
Yeah. That that’s, it’s kind of a, a very simple back of the napping kind of math type of situation where it’s going through and doing a like a, a large spreadsheet of putting in all these numbers and trying to work out every sip.

Luis (11:51):
And when I do a deal we do both, we do, we do the napkin and we do the the IRR, and if the two don’t match, something’s wrong. You, you better start over and start figuring, because the napkin and the calc ought to be very close to each other. Yeah.

Charles (12:07):
My dad was a apartment investor I remember in the eighties, and I would go with him, I was very young, and we’d go to diners and see what I considered old school investors, and they’d be sitting at the diners, that’s where their office was. And my dad would talk to him about buying properties, all this kind of stuff like this. And they literally would be doing the math on a napkin and you know, figuring out exactly from the new taxes, water, the whole thing, getting down to what their cash flow would be. And I remember, you know, my dad didn’t know what an IRR was until a few years ago, so it’s one of those things he ran the whole business on that. Yeah.

Luis (12:38):
You know IRR is IRR is a, a digestive problem in my view, <laugh>.

Charles (12:48):
So tell us a little bit about the different kind of I was reading something before when I was preparing for this episode, and you, you had one thing where you were talking about the difference between really geographic constraints and flat spots. And this is something I’ve never really heard too much, but when I read into it a little bit, it made sense. Can you explain a little bit about how you, what you conceive of these two?

Luis (13:07):
It’s all about supply and demand. So, you know, when when, when I started in the business, you know, I bought Victorian flats two and three unit buildings. My rents were $125 a month. And now those same units, if they’re, if I get ’em outside of rent control, are $4,000. So, you know, and it’s the same bricks and sticks. So how did that happen? Well, it happened for two reasons. Number one, there’s the ocean, the bay, the mountains there’s a limited geography. If you’re in San Francisco or the island of Manhattan, there’re just, there’s some water out there, or there’s steep hills. And the infrastructure on hills is expensive, and the environmentalists come after you. So you, but in San Francisco, you’ve got two things. You’ve got geographic constraints and political constraints. So a flat spot is like Denver, Atlanta, Dallas, Houston you got, I mean, you get on a ladder, you can see the next state it’s flat the regulatory climate is easy.

Luis (14:11):
And, and when I was working for a and b, we did an analysis of rents in Dallas. And inflation adjusted warehouse rents never went up because as soon as they started to go up, everybody started building. And every little suburb was throwing tax incentives at people, and the supply came streaming on. So in, in my days you know, I was a seller in the thirties and a buyer in the 20. So if the building was 20 some dollars a square foot, then you bought it. If, if, if, if, if the market got to $30 a foot, you sold it because sure somebody would come along and build more buildings and, and, and the rent would never really go up, inflation adjusted. So a flat spot is someplace where it’s easy to build geographically and politically. And the, and the key value add element is in the politically constrained markets.

Luis (15:05):
When things go in the toilet, the regulatory climate gets easier. So if you have the horsepower and, and cash in the bank, you can go get your entitlements during recessions and then build in a rising market. And that’s the way to make money in supply constrained markets. And, and believe me, what I was in, I had, I, I foreclosed on a building in Houston in the 1980s, and they were actually knocking apartment complexes down because the supply constraint was so bad. And my basis in the deal after I foreclosed was $9,000 a unit, and I still couldn’t make money. Wow.

Charles (15:43):
Geez. So let’s kind of figuring out different markets, and now when we’re getting into really specific properties that we’re purchasing and rehabbing, I mean, can you give us some like essential aspects regarding due diligence and underwriting that an investors need to take into commercial or take into consideration with with commercial properties?

Luis (16:02):
So, number one, you gotta get the risk reward ratio, right? And this is the most important thing. So if you are buying a net lease investment at Maine and Maine with a long-term lease and a credit worthy tenant and inflation adjustments in the rent and, you know, maybe a five or 6% return is appropriate because it’s very little work, it’s very little risk. If you’re getting something above treasury bills and you got some appreciation possibility, or at least inflation protection you know, you’re fine. If, on the other hand, you’re buying a pool hall in the desert the D doubles is a meth lab, you better get a 20 return because you’re gonna have to buy a pistol or hire a bodyguard to collect rent, and they might bust the meth lab. So you need to get all of your hard cash back as rapidly as possible, and you’re gonna sweat bullets getting your rent.

Luis (17:02):
And, and so the, the, the, the higher the risk, the higher the reward needs to be. So the first underwriting is getting the risk reward ratio, correct. If you’re gonna do a brain damage deal, get brain damage returns. The second thing is destructive testing, test everything, bore holes in things, check the soil check all the regulatory restraints, get all talk to local brokers. If you’ve got any local owner or developer contacts, quiz them. Walk the neighborhood, learn as much about the property as possible, and then add 25 or 30% to your rehab budget. Because, you know, once you open the wall, something’s there that you didn’t find. And, and I remember one wonderful deal, my partner and I built 30 drugstore for Walgreens and, and the, the and, and it was a cookie cutter deal, so you could pretty much predict what it was gonna cost you to build the building.

Luis (18:05):
The problem was in the, in the site. And so things could go wrong. It’s al always site prep that, that, that where things jump out at you when you’re building new buildings. So my partner was up on site and I called him up and I said how are things going with the utility trenches? And he said, I, now, I now know why they call this rocky point. And so, you know, then out comes the dynamite and the, and the, and the tarp and the tires and all that stuff. So, you know, a little change order coming at you. So, and, and I, I, I redeveloped pier one in San Francisco as office space for a and B’s headquarters, and we’re driving piles to add earthquake stability to the pier at 48 inch hollow piles going down through the bay mud to sand.

Luis (18:53):
And, and, and the fourth pile kept going and and just kept going. And I said to the sub, you know, what happens now? And he said, we let it rest overnight. Well, I had $600,000 worth of piles bought, and I’m thinking, God, where, where do we stop here? ’cause You gotta keep extending the piles. And, and I had a sleepless night, and I got up the next day and I went to see him and he said, well, we hit the, we hit the sand. But you, you, I mean, you just never know what’s going on. So you, you always have to have flexibility in your rehab budget, and you have to discover as much as you possibly can in advance. And once you’re doing it year after year, you get a good nose for where the problems are gonna come, where the regulatory problems are gonna come, what what your soils problems might be.

Luis (19:44):
You, you, you start developing something. But at one point I hired a, a, a very high powered woman from an institution to be one of my, my partner slash project managers. And we had some awful wall thing come up and she said, you know, we need to develop a checklist so we can go through every conceivable problem and make sure we got it taken care of. And I said as soon as you figure out what to put on the list, you let me know. Because every time I do a deal, something comes up that I hadn’t thought about, you know, like Indian burial grounds or, or, or something that, that didn’t occur to me or has never occurred before. So that’s how it is.

Charles (20:23):
Yeah, it’s, that’s a lot of great information. Thank you so much for sharing it. When you’re looking at deals and I mean, when, like, not a development deal, it is a little different, but if you’re buying a deal and already built, you’re gonna do a rehab on it, whatever it might be. And when do you go back and during that due diligence you know, go back and retrade, you know, renegotiate with the seller? Well,

Luis (21:41):
Yeah, that’s one of the reasons you do all the, and you never let the seller’s inspections cloud your judgment at all. Do your own. And when I’m a seller, I do all the inspections in advance and present you as a buyer with a package with a bow tied on it for two reasons. Number one, hoping you won’t do your own inspections. And number two, having a negotiating tool. If you come at me with a, with a inspection, with a defect in it, I say, you know, my expert says this. Your expert says that, as opposed to, oh, what am I gonna do now? So you know, the, the, the, the trick is you want to go through every possible thing you can. And if there are defects there, then you go back and retrade and say, okay, it’s gonna cost me X dollars. And you present an estimate to fix this problem that you didn’t disclose, you fraudulent bleep, and, and you know, we need to talk here. And and usually you can get the cost of, of fixing whatever it is that you found. Right?

Charles (22:42):
Yeah. Makes perfect sense. Over all your, I mean, over all these years of being in, in real estate and all the different asset classes you worked on and being successful, I mean, how important is it really to focus in business and real estate to be successful?

Luis (22:56):
Well I believe that focus is important, but keeping an open mind is more important. So if you do cookie cutter deals, you end up with no profit margin because that’s what everybody else is doing. You need to keep your mind open to, you know, a fresh way of doing this, a fresh way of financing it, a fresh way of rehabbing it find some entitlement thing, tweak where you can get a permit to add a garage or build more space or something o otherwise you’re not gonna make any decent margins in value add deals. So and so you, you gotta have some inductive thinking going on and you know, I am not particularly creative, but, but, but I’m good at copying stuff. So I look at real estate all the time ’cause it’s my passion and I look for ideas that other people did and, and and I think that’s a good idea.

Luis (24:02):
And then, you know, I go take a picture of it and I say to the architect, make it look like that but, you know, I’m always up for a better way to get things done so that you can get some margin. And so when, when my partner and I are building drug stores for Walgreens, it’s an absolute cookie cutter deal. You know, you, you, you, you build it, you sell it you pay off the construction loan and you got what’s left over. That’s your spendable. So how is it that, that I increased the spendable? Well, what we did was we took on deals that were politically difficult that other developers couldn’t pull off that Walgreens didn’t want a horse with themselves because they didn’t want to get their brains beat out in front of a planning commission or city council.

Luis (24:48):
And, and we figured out how to entitle deals that other people couldn’t get entitled. And on those deals, Walgreens was willing to pay higher rent and, and in, in locations you could get a better cap rate. So we improved the spread by being political experts, and we would go into a new jurisdiction and we would look around where, where, where was the juice, who was connected? Was it an engineering firm? Was it a law firm? Was it a guy that used to be the mayor that runs a consulting group where, where’s the grease in this system? And, and how do we get a permit where other people couldn’t get a permit? So that’s the value we were bringing to the table that allowed us to make margins. Yeah,

Charles (25:33):
I was interviewing a commercial investor a few months back and I remember him saying that when they go into a new market, how they’ve been successful is they bring local people on and get them involved in their joint venture, whatever it might be, partnership or however it’s structured. So now you’re getting the, like you were saying, political juice from, from local people that are gonna have more than you coming in as an outsider. And you’re gonna be, like you said, you know, you’re gonna be able to provide more value and you’re gonna be compensated for that value. ’cause You’ve really done something, a niche that maybe other developers in that area or other investors just they don’t have the ability of doing that.

Luis (26:07):
So, so here’s another example. I’m, I’m working for a and b and we’re investing money for institutions, university endowments, pension funds, things like that. And and, and we started doing development deals. And then we did a roll up and, and the investors gave us all our property in return for our stock when we went public. And so then we’re ramping up the development program all over the United States. And my job is not doing deals, it’s picking developers. So I go to Atlanta or Dallas or wherever, and I look around the landscape, drive and walk and talk, and I figure out who the best, best developer in town is. And in, in that era, in the nineties, nobody had any money. We had money, they didn’t we had a balance sheet, they didn’t. So I’d go to a developer and say, okay, bring me a deal.

Luis (26:56):
I’ll put up the money. And they’d bring in a deal and show me their numbers, and I’d walk and talk and see if I liked it. And then I’d say, okay if you build it on budget, you get a 2% fee. If you lease it on budget, you get another 2% fee. If you want to put some money in the deal, you get a bigger piece. But at the end of the deal, we sell it on paper at a prearranged cap rate or at an appraised value of an appraiser that I pick. And you get your 20% or 30% of the profit, and we own the deal. And if you don’t perform on budget, you get out of the job shack and I get in and you’re shoved out of the deal and, and you, you’ve risked your work, but you, you get nothing.

Luis (27:39):
And, and so because I was able to operate a deal myself, I was not afraid to shove the developer out. So most institutional deals is a developer and money and, and they’re sleeping together with different dreams because the institution is incapable of taking over the deal. So I went around to the biggest markets in the United States, picking developers, establishing a relationship with developers, being easy to deal with and say, okay, all you have to do is bring me the right deal and invest your time to get it built. And if you do that, you can have part of the value you create. And then we own the asset.

Charles (28:18):
When you were you know, all over the world putting up warehouses what was, I mean, what were some interesting kind of tidbits of business that you’ve done when you did it internationally? How you know, how business was done that differed from here in the United States that maybe you liked or maybe you didn’t like, or,

Luis (28:34):
Oh, it’s, boy, you go into a foreign market. It’s, it’s a whole different world. So I go to Mexico to do deals and, and there’s no utilities. You gotta put in your own storm drain all the way to the river. You gotta, you gotta bring in your own electricity. There’s no destructive testing. And, and, and, and, and there’s no title companies. So we’re doing the first deal. And I said to the, you know, the partners that I’d selected after much fiddling around and a actually, my, my edge was my project manager in Mexico spoke Spanish, but we never told anybody that. So I’m down there bumbling around in English in my four words of Spanish, and the Mexicans are talking to each other and they think that, that, you know, I don’t understand what they’re saying and I don’t, but, but the guy standing next to me does.

Luis (29:23):
But we never mentioned that. And he really helped me get to the right partners. And they didn’t know squat about the warehouse business, but they knew Mexico and they had juice in Mexico, which was what was important to me. ’cause I know how to build buildings, I just dunno how to deal with Mexico. So we do the first big deal and we’re gonna build an 800,000 foot building. And, and so I said to, you know, everybody involved. How do I know I own the land? Where’s the title report? Well, we don’t have a title company. Well, it turned out that the, the, the guy who was selling us the land had bought out any hedo. And Hedo was something that was established in Mexico after the revolution where the peasants got 11 acres of land, but they didn’t own it. And they could pass the rights on to the number one son, but in order to convey the property, everybody in the hido had to agree.

Luis (30:15):
And, and there was a whole trail of paperwork that was required to perfect the sale. So I said, I hired a Mexican law firm and I said, go to the public records and show me that I own the land if I pay for it. Well, there was a pay board box with almost nothing in it. So we had to recreate the sale process from scratch at great cost to prove to me that I own the dirt I was about to pay for. So, and, and, and then we start building the building and there’s no disruptive testing. So, you know, in order to get the concrete tested, I gotta put in my own testing lab in order to do soils test, I gotta hire my own soils engineer and, and, and test the land. So, you know, there’s nothing about the process. And all of this is, is a surprise, but I had enough margin that it didn’t make any difference.

Luis (31:07):
I could afford those things ’cause I was slicing a fat hog on the deal. So the surprises were acceptable. In the grand scheme of things in Japan, you can’t bid a job. So I asked, I, I said, we’re, how are we biding this? Oh no, we don’t bid it. Well, why don’t we bid it? Because you can put it out to five contractors and they’ll have a meeting and decide who the winning bidder’s gonna be. And oh, <laugh>, oh, I said, and we’re doing a hundred million dollar deal. Am I frightened? You bet your. I’m frightened. So I hired a very high powered consultant to give me an estimate of the cost of the deal so I could compare that to the, to the bid. I got to make sure I wasn’t getting ripped off. But again, I had a very fat deal. So I had some room. But the flip side of the coin is there’s no change orders in Japan. So when the contractor gives you a bid, he will build it for that come hell or high water. So, you know, yes, things are different in different places. Yeah.

Charles (32:04):
Geez, that’s quite some experiences that you’ve had there. It’s like you’re in Japan, it’s like you’re almost dealing with one of your stories about the, like the mafia in, in New York and stuff like that, where they, they’re giving the jobs to here, to here, to

Luis (32:16):
There. I got the ultimate story for you. So in, in Japan you buy land from, I think it’s recruit, I forgot the name of the company because the entitlement process, the whole structure of zoning in Japan was set up by refugees from the Roosevelt administration. And, and the zoning is, you know, leather, steel I mean, and, and it’s there forever. And in order to change that, it’s, it’s, it’s just complete brain damage. So recruit does all of that, and there’s a lot of palms grease, but what they present you with an overpriced piece of land that is truly entitled. So that’s what you’re paying for. So I’m building the first deal a first building’s by Narita airport, the international airport, and things are going really well. So I go to recruit and I say, well, you know, how about the adjoining parcel there? If, you know, once I get filled up here, I’d like to build some more. And they said, well, the adjoining parcel is a, a cabbage farm, and it’s owned by a widow, but we have assigned one of our vice presidents to marry the widow and then we’ll start working on the entitlements. And I thought, God, I’ve had some terrible corporate jobs, but I’ve never had to marry the widow. And so, you know, yes, things are different in Japan.

Charles (33:27):
<Laugh>, I think that one of the themes though is that when you’ve gone into a new area, you’ve had a great team, a local team, it seems like one of the best ones you could find that assist you with the deal. And that made it smoother, I guess you would say, than it could have been. Well,

Luis (33:40):
Yeah, and, and the fact is, every time you do a new product type or a new market, you’re gonna pay a stupid tax. You can lower the stupid tax by hiring a local partner or involving local experts in the deal. So I never went anywhere that I’m unfamiliar with, without finding somebody local that I can partner up with who I will generously compensate if the deal is successful. So, and, and I want everybody involved in the success. So there, there’s a, a pay schedule for everybody involved that involves giving you a little bit now and a whole lot more later if we’re successful. But if you lie to me or you screw it up or you can’t execute, you ain’t going to make no more. Yeah,

Charles (34:27):
No. Perfect. So Louise, we’re getting into the last couple of questions. I just want to know Ken, what important lessons have you learned that have transformed you either professionally or personally over your lifetime?

Luis (34:37):
Well, the, the continue learning, there’s, there’s something, there’s always something new out there you can learn from watching what other people do. Just it’s a lifelong learning experience. The business has changed so much over my lifetime. The technology just has changed so much. And I’m, I’m, I, I don’t wanna be on the cutting edge, but I wanna watch people on the cutting edge. And once the kinks are worked out, I want to keep adapting to everything I, I can think of that’s, that’s coming along because the markets are changing. The financing is changing. The technology is changing and, and, and the politics are changing. And it’s just day to day figuring out where things are and attempting to look around the corner and say, what’s gonna come and how do I get myself positioned? So, because I have so much experience five years ago I said to my, my partner you know, these interest rates can’t last.

Luis (35:40):
They cannot last. They’re the inflation adjusted interest rates are near zero. This is nonsense. It won’t go on. I remember when the prime rate was 20, I remember buying treasury bills with some money I had at 11 and a quarter. You know, this won’t go on forever. So we refinanced everything in our system for as far out as we could get at a fixed rate. So when interest rates went up, we have zero interest rate problem right now because we have no loans that are rolling over because of the experience I had. And I, and I’m able to think this through and see around the corner and, and say there’s a good chance that if we do this now, we’ll be a whole lot happier later. Perfect.

Charles (36:23):
So Louis, thank you so much for coming on. How can our listeners learn more about you your books and your business? Okay,

Luis (36:28):
Well I have written four books that, that I recommend to real estate investors real estate 1 0 1 street dog, MBA street dog manager and street dog negotiator, all available on Amazon, paperback or Kindle. They’re cheap. After Amazon scrape, I make virtually no money, so I’m not in it for the money, I’m in it to share ideas ’cause I love to share ideas. Perfect.

Charles (36:56):
Okay, well thank you so much. And if people want to connect with you at your firm, how would they do that?

Luis (37:00):
L belmont@sevenhp.com, the number seven seven HP stands for Seven Hills Properties. Perfect.

Charles (37:08):
I will put the, all that information into the show notes. Louis, thank you so much for coming on today. It’s been, thank you so much for sharing all of your experience and looking forward to connecting with you here again in the near future.

Luis (37:19):
Good. Great to be with you. Have a great day.

Charles (37:22):
Thank you.

 

Links and Contact Information Mentioned In The Episode:

About Luis Belmonte

Luis A. Belmonte is a highly experienced real estate developer with a career spanning over 57 years. As a principal at Seven Hills Properties, he specializes in retail, multifamily, and industrial developments across California, Oregon, and Nevada. Previously, Luis was a founding partner and Executive Vice President at AMB Property Corporation (now Prologis), where he led major projects globally, including in the U.S., Mexico, Japan, and Singapore.

Throughout his career, Luis has gained invaluable insights from his experiences—both mistakes and successes—which he now shares through writing and podcast appearances. His focus is on guiding others in the industry by providing practical lessons in real estate investment and development.

Luis is also a U.S. Navy veteran and holds a degree from the University of Santa Clara. He has authored books including Real Estate 101, Street Dog MBA, Street Dog Negotiator, and Street Dog Manager, offering real-world advice and strategies for thriving in the complex world of real estate.

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