Taylor Avakian
Fred, how many buildings do you currently have in Los Angeles?
August 27, 2025 · 1 hr 23 min
I Started With $500, Now I Own Half of Compton (Here’s How)
With Fred Leeds — Real Estate Investor & Operator
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What this conversation gets into
What does it take to grow from flipping cars in college to owning over 5,000 apartments and 2 million square feet of retail?
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Episode show notes
What does it take to grow from flipping cars in college to owning over 5,000 apartments and 2 million square feet of retail? In this episode of No Vacancy, Taylor Avakian interviews Fred Leeds, a legendary real estate investor and operator. Fred shares his one-of-a-kind journey — from his first duplex purchase to cold-calling strategies, creative financing, and transformative inner-city projects. Along the way, he reveals the mindset and work ethic that turned opportunities into generational wealth. You’ll learn: - How Fred leveraged cold-calling to find and close deals - Why inner-city Los Angeles became a cornerstone of his portfolio - Stories of creative negotiations and community partnerships - Lessons on resilience, risk-taking, and thinking outside the box - The mindset shifts that turn hard work into long-term success Whether you’re an investor, operator, or someone chasing their first deal, Fred’s story delivers timeless strategies and inspiration. CONNECT WITH ME: EMAIL: taylor@thegroupcre.com WEBSITE: www.thegroupcre.com Subscribe and Stay Ahead! Stay informed and empowered in the multifamily real estate market. Subscribe to the channel for exclusive insights, rental updates, and expert analyses on the Los Angeles market. 🔔 Don’t miss out on the latest trends and tips to maximize your property's potential: https://www.youtube.com/c/TaylorAvakian 📈 Connect with me: Website: https://www.thegroupcre.com/ Email: taylor@thegroupcre.com X: https://x.com/TAYVAY_ LinkedIn: https://www.linkedin.com/in/tayloravakian/ #NoVacancyPodcast #FredLeeds #RealEstateInvesting #ColdCalling #PropertyManagement #RetailRealEstate #TaylorAvakian #ApartmentInvestor #CRE #RealEstatePodcast
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Episode transcript
This 13,743-word transcript is matched to English (Original) automatic captions. Timestamps seek the episode player to the matching passage.
0:00–10:00
Fred Leeds
Maybe 300 properties comprising about 5,000 apartments, approximately 2 million square ft of retail. I find the harder I work, the luckier I become.
Taylor Avakian
I still cold call.
Fred Leeds
No. Yes, I do.
Taylor Avakian
What do you want to do with this property going forward?
Fred Leeds
Now I've given you information that you may or may not have. I like the inner city. I like value. You know, they made a movie a couple years back about getting out of Compton. I got in in high school. I started buying and selling and flipping cars. Bought a 65 Mustang. I bought it for 500 bucks and I drove it for a year and I turned around sold it for 1,200 and
Taylor Avakian
it ruined my life. Welcome to the podcast. My name is Taylor Vian and I'm here with my esteemed guest Fred Leeds.
Fred Leeds
Fred, thank you for being here. Thank you, Taylor, for the invitation. I'm I'm honored to be here and uh I I hope when we're done with this podcast you say, "Well, I didn't waste an hour."
Taylor Avakian
I don't think anyone's going to be saying that after this. Okay, Fred, how many buildings do you currently have in Los Angeles or do you own and what is the total breakdown of what those buildings are?
Fred Leeds
uh maybe 300 properties comprising about 5,000 apartments and um approximately 2 million square feet of retail and that's um in Southern California um Arizona
Taylor Avakian
and small project in New York. Small project in New York.
Fred Leeds
Okay.
Taylor Avakian
And why those markets in particular?
Fred Leeds
Uh great question. New York was a Ccorp with a zero basis that I bought into for peanuts on the bar. Taylor, do you know what that expression means? Peanuts on a bar.
Taylor Avakian
How much are the peanuts on a bar?
Fred Leeds
Free. That's right. So, I bought into zero basis stock at a very low price. A property that was mismanaged a block of real estate in Queens Cross Bay Boulevard and Liberty Avenue, which is John Gotti's neighborhood. I earned my bones there.
Taylor Avakian
And I'll have to explain what that means.
Fred Leeds
Yeah.
Taylor Avakian
Can you exp Okay. Can you explain that in further detail?
Fred Leeds
Yeah. Um it's it's poor white and Italian. Okay. And um it's a neighborhood that people don't lock their doors because if you commit a crime there, you disappear. Got it. And it's Queens and it's where the subway comes up out of the ground from Manhattan. It's one of the burrows of Manhattan. One of the five burrows. And um I have retail and apartments there. And I was getting these $100 tickets. Someone would drop a uh cigarette butt or a napkin on the sidewalk and they ticket the property owner. And I was getting five or six of them a week. And I'd call the council office. I want to meet with a councilman and they wouldn't meet with me. And I kept getting these tickets.
Taylor Avakian
What do What do I do? Do I take a full-time employee to watch people drive?
Fred Leeds
And it's a five-pointed intersection. It looks like Time Square. So, I get this offer from uh AT&T for a corporate store, but across the street, it's a third generation young Italian manu who has a family and he has a Verizon wireless franchise. So, I fly out, this is six years ago, the dead of winter. I got my trench coat on and I walk in to the Verizon wireless store and he this guy looks up at me, says, "Hello, Mr. Leads." I have no idea how he knew my name. Uhhuh. And I went over to his counter and I pull out of my trench coat a lease from AT&T and I put it on his counter and I said, "What happens if
Fred Leeds
I sign this lease and the tears start going running down his face?" He says, "It puts me out of business." So I pull out a pen and I write rejected on the lease. I leave it on his counter and I walk out. in the last six years doesn't snow on my sidewalk. I've had no tickets. I have had no graffiti. In the fall, the leaves don't even fall in front of my property. Oh my gosh. And that's how I earned my
Taylor Avakian
bones.
Fred Leeds
How did you Okay.
Taylor Avakian
Can you That's usually burning your bones means you've killed somebody.
Fred Leeds
Yeah. Yeah. Yeah. But that's that's incredible. But I I recognized who the neighborhood belongs to. Yeah. I might own the property. I might own the block. Yeah. But it's not my hood.
Taylor Avakian
Can you explain how you bought the property with zero money?
Fred Leeds
Wasn't zero money. Okay. Um it was a mismanaged property. Um and the um management company was taking some of the rents. Mhm. And um there were sandwich leases. OTB was a tenant. Off track betting.
Taylor Avakian
Italians made a billion a year on it. And this is a retail site. Sorry.
Fred Leeds
This is a retail retail and apartments. Got it. Mixed use. So the hard corner was OTB offtrack betting between two racecourses. Um and a very busy intersection and so um OTB was sold to the state of New York and within 10 years they bankrupted it. Wow. How do you bankrupt the vig 10%.
Taylor Avakian
You're the house.
Fred Leeds
You're the house.
Taylor Avakian
How do you go broke on that?
Fred Leeds
That's crazy. So the state of New York unionized. They moved corporate office to Park Avenue. Then they opened up all their new locations in A and B sites. That's not where the volume was. And um within 10 years they went bust. Wow. My tenant there now is Popeye's and they do great business. So how did you get the building? Um right place, right time. You know, I I find the harder I work, the luckier I become. Interesting how it works. Yeah. You you got to get up early and work late. I only work half a day. Yeah. from 8 to 8. So, um, you know, there there's no solution to success without putting the time
Taylor Avakian
in. Do you still work half the day?
Fred Leeds
I still cold call. No. Yes, I do. Who are you cold calling?
Taylor Avakian
And I know how to cold call.
Fred Leeds
I believe that. And when someone called cold cold calls me, if they don't know what
Taylor Avakian
they're doing, they lose me within 15 seconds.
Fred Leeds
Give me Okay, give me the cold call script. Okay. Um, Taylor, it's Fred Leads. Uh, I own a property adjacent to yours. Um, I notice you, uh, you have some downspouts that, um, are knocked off the roof drains and, uh, when it rains, the water going down the side of your building is going to give you mold problem. Uh, you're either going to fix that or maybe you would like to broke or sell the property and maybe sell it to me. What What do you want to do with this property going forward? Now, I've given you information that you may or may not have known. I've given you an opportunity to fix a problem before it becomes a bigger problem. And you know, I've seen the property. Mhm. Uh someone who calls me up and says, "Mr. Leads, what are your parameters on your future acquisitions?" Click.
Fred Leeds
That's 50% of the time. Uhhuh.
Taylor Avakian
People don't know what they're doing.
Fred Leeds
Uhhuh.
Taylor Avakian
If you were to call coal call yourself, right?
Fred Leeds
If I I'd be in trouble.
Taylor Avakian
I'd be offended, what would get you to have a conversation with someone? Something similar to what I just said. Similar to that.
Fred Leeds
Yeah. Value. If you're not giving me value in that first 10 seconds, Yeah.
Taylor Avakian
you lose me.
Fred Leeds
Yeah.
Taylor Avakian
What What else besides the actual property itself would be valuable to you as an owner of where you're at?
Fred Leeds
Well, you're not going to talk to me about uh cap rates, uh the direction of the marketplace. I don't need to have that conversation. I'm a buyer. I'm really not a seller. Uh Mr. Leeds, um I own the property next to yours. I'm willing to pay above market for your property. All right, you got my attention. Yeah. I bought uh 18 months ago a Pep Boys in San Diego in Mission Hills. Mhm. And I paid a market rate cap around a five cap, but it was a ground lease and the rent was probably uh 25% of market. And the family that owned it had owned it for 30 some odd years, twins. They died in their 90s and the kids were liquidating. So I bought the property. But there was a investor who owned a couple hundred thousand square
Fred Leeds
feet surrounding this property. Mhm. and he called me up and he was angry at me.
Taylor Avakian
How did you get that property?
Fred Leeds
I've been after it for a few decades.
Taylor Avakian
How did you do it?
Fred Leeds
I said, 'Well, what's important is I did it. I said, if you've been after it and you didn't get it, make me an offer. So, he's right now a million bucks over what I paid for it.
Taylor Avakian
And I'm still pushing them. It's called leverage right there. Well, how badly do you want it?
Fred Leeds
Yeah. Yeah. Yeah.
Taylor Avakian
that I mean shoot you um clearly your experiences over your career has allowed you to have a level of understanding of business as a whole that not a lot of people get to understand.
Fred Leeds
You know, Taylor, I'm blessed. And I'll tell you why. I love what I do. Yeah. Love the interaction. I love retail. I love apartments. I deal with crips and bloods and trellos and gangbangers. But I deal with amazing people. I deal with people like Maxine Waters. boy, I you know, I I actually have a crush on her. Yeah. She's bright. She's capable. She gets it. She comes from a different direction. So, she walked into my office five, six years ago, and my offices are on Cshaw Boulevard, Martin Luther King in LA. In LA, in South Central. Let me ask you, Taylor, but I want the truth. Have you ever been south of the 10 freeway before
Taylor Avakian
walking properties?
Fred Leeds
Yes. Okay. Yes. You'd be shocked how many people have
10:00–20:00
Fred Leeds
never been south of the 10 freeway. Yeah. Right. In the inner city. Mhm. I like the inner city. I like value. You know, they made a movie a couple years back about getting out of Compton. I got in cuz that's where the value is. I found value. I bought 101 units. This guy wanted uh he wanted $10 million. 100,000 a unit. And
Taylor Avakian
what year is this?
Fred Leeds
This is maybe 10 or 11 years ago. Okay. Wanted 100,000 a unit. Uh 101 units. I offered them six million bucks. He said, 'Well, it's not what I want. I said, 'Well, I I know it's not what you want, but here's my deal. It's all cash as is, no warranties, no reps, and I'm not a tire kicker, and I'm not going to waste your time, but that's what the propertyy's worth to me. So, will you pay more? I said, no, but I'll pay less. He says, "And you're not a tire kicker?" I said, "No, I'm not a tire kicker, and frankly, I'll buy it without without contingencies other than title." and uh and really you're not going to waste my time? I said, 'N no, I'm not going to waste your time. He But it's not what I want. I said, 'But what you want is to sell the property.'
Fred Leeds
He says, 'Yes. I said, 'Well, that's what I'm offering you. And this was direct.
Taylor Avakian
Direct. You cold call them?
Fred Leeds
Yes. Wow. You know what he said to me? It's yours. Oh my gosh. So, I buy the property and after the close, he says, "Have lunch with me." I said, 'Only if I get to buy.' So, we sit down and we have lunch. He says, 'You didn't give me what I wanted, but you gave me what I wanted.' He said, ' It was much less than I thought I'd ever sell it for. He said to me, I have a brain tumor and I'm in remission and I can't handle the management. My family can't do it. The property has some gang activity, some minor shootings from time to time and some problems and the police and some drug activity and a little prostitution. I said, "I'm aware of all that." Said, "I went by the property and I I know how to deal with it.
Fred Leeds
I feel comfortable and I thank you for giving me the opportunity. What else do you have that you would like to sell me?" He says, "Well, I don't want to sell you anything else." He says, "Because I'm in remission." He says, ' And I hope never to call you again, but if you do get a call from me, it's going to be because I'm not in remission anymore. So, a few years went by and I got a call from him. He says, "Do you still have interest in my other properties?" He said, "I got 14 other buildings." I said, "Yes, I'll make you an offer for all of them." And I did. I made him an offer for all of them. He said, "It's not what I want, but it's what I need." Wow. He said to me, "I'm being sued by the city uh for non-conforming apartments.
Fred Leeds
I have some mold litigation. I have some other lawsuits at the properties. I have some vacancies. I have some deferred maintenance. I have some I said, I understand." And I said, "My offer will make me responsible for the litigation, make me responsible for the mold issues, make me responsible for the u deferred maintenance of the property and whatever the issues are with the retail tenants and the apartments and the SRO's. Do you know what an SRO is?" I do. Single room occupancy bathroom down the hallway. Bring your own toilet paper and a kitchen. One kitchen for everyone to use per floor. Yep. And it sure is a lot nicer than a park bench. And I have people that live 30, 40 years in an SRO. Wow. So they could figure that out a hundred years ago in Los Angeles, but today they want to build for a million a unit.
Fred Leeds
That I can't figure out how the economics work without bankrupting the city and the state. But maybe that's why we have a bankrupt city and
Taylor Avakian
state.
Fred Leeds
Yeah.
Taylor Avakian
And we'll we'll definitely get into that. But that's that's incredible. You clearly understand
Fred Leeds
people. bought the portfolio and um and it was a phenomenal opportunity. Phenomenal. Yeah. So, I like the inner city. I like um to find properties that are mismanaged,
Taylor Avakian
to find properties that I can add value. How well do you do on the portfolio?
Fred Leeds
Still own it. I took one building at Central and 32nd. and I knocked it down and I built a warehouse uh warehouse shoe store WSS, my fifth location with them. Oh, you know when you build retail or when you rent retail, if the tenant, if the retailer gets a bad result, next time you have a location, they don't respond. They don't return your call. But if you give them a locations and volume and successful stores, they call you back and say, "Mr. Leadeds, what else do you have?" Mhm. It was uh 1998, 1999. I was reminiscing about my best friend in college who had passed away. His name was Suho Cho. Su-ho in college freshman year said to me, "My father number one taxpayer in all of Korea, my mother number
Fred Leeds
five. His family owned Korean Airlines." Wow. And Hanzhen, which was a trading company. and um their corporate offices at the time were on Wilshire and Burlington near downtown. Mhm. And Suo um transferred from Pepperdine in Malibu to USC and when I got married he was in my wedding party and we were very close. sophomore year of college, he met a very attractive redhead and married her. Bought a house on Ring Road and play a Del Rey. And uh I'd go to his home for dinner and we'd sit down at the dining room table and all a sudden the window would rattle and then the table would rattle and he'd look at me, he'd say, "Dc10." And 10 minutes later the window would rattle, the table would rattle, he'd say 747. Of course, it was his family's DCT10.
Fred Leeds
It was family 747. To him, it was music.
Taylor Avakian
Korean Airlines.
Fred Leeds
Wow. Wow. To me it was like why would anyone in their right mind live here? So he was married a couple years maybe one year when his father found out about the wedding. Called him back to soul said I give you two choices. First choice anull the marriage come back to soul I will arrange for you to have a wife. Su said but father I I love this girl that's why I married her.
Taylor Avakian
What second choice?
Fred Leeds
Father looked at him and said, "Good luck." Very sad. Casula really liked her a lot. Loved her. After the marriage was enulled, he moved back to Seoul, married the daughter of the largest hotel chain in South Korea, had three daughters and killed himself. And as a parent, and I have a lot of kids, um, you learn how hard you can push your children. Mhm. And when you push too hard, it's not a good result. Mhm. Su-ho was just pushed too far. Wow. So, I was reminiscing about my buddy Suho and I was on Wilshire in Burlington and I noticed next to their corporate office homeless encampments, a very depressed part of Los Angeles, but the most densely populated area of Los Angeles, west of the
Fred Leeds
Mississippi. So from that driveby, I bought 8 acres adjacent and I paid 14 million for the dirt. And I used to get stopped by the police while I was there, miss, you know, what what are you doing here? Are you here for for cocaine, for crack, for for prostitution?
Taylor Avakian
What what are you here for?
Fred Leeds
It was it was uh not easy. Geez. And that was 1997, 1998. I'm doing this assemblage. two square blocks. And um so I would tell the police, I'm I'm in real estate. I'm an investor and I'm here trying to create job opportunities and opportunities for myself. So we we bought the um 8 acres, paid 14 million for the dirt, which today is worth 140 million chicken [bleep] to chicken salad. And um my first lease was with Home Base and while under construction for 140,000 square ft, they went broke. So um I have a construction loan. Uh I bet the farm on this deal. Mhm.
Taylor Avakian
What am I going to do?
Fred Leeds
So I cut a deal with Kmart. They flew out. 18 bucks a square foot, 20-year lease, 10% bumps every 5 years. They came out, these three guys, met them uh at the Hilton by the airport. Mhm. The guy took a pen, crossed out 20 bucks, wrote $12 a square foot, flat 20 years. My broker at the time looked at me and said, "Sign it, Fred. You're not going to do any better." So, my partner in the deal, David Oedd of Blessed Memory, passed away a couple years ago. And uh and and that by itself is another story. I'll share with you. Um he says, "Fred, what do you want to do?" I said, "Well, let's go outside and talk about it." I said, "Gentlemen, we we'll we'll be back." And we went outside and David says, "So, what are we going to do?"
Fred Leeds
I said, "Let's talk about it in my car." So, uh we walk over, we sit in the car, and I turn on the ignition, I put it in drive, and we start driving. I said, "Fuck them." [Laughter] So, while in the car heading back to our office, I get a hold of Home Depot, Greg George. Uhhuh. Big guy, played football for USC. Great man.
20:00–30:00
Fred Leeds
Great, great man. He says, "Fred, I've turned you down four times. Why do you keep calling me?" I said, "Because I know it's the perfect site for Home Depot." He says, "Well, how do you know that?" I said, "Well, I operate a lot of apartment buildings. All my handymen live within a couple blocks of the site. I said, 'It will be one of your top grossing stores in the chain. He says, 'You, you're really convinced on that.' I said, 'How convinced were you when you played football at USC? He says, okay, you got me. So, they signed a lease subject to the demands of the city of Los Angeles, who came back at me. He said, "You need a subterranean garage for additional parking because it'll be crowded." I said, "Okay." I went back to Home Depot. I said, "It's $4 million to build this additional garage.
Fred Leeds
I'll put up two and you're going to put up a two million. Give me a check." And they did. So, we built a little over 300,000 square feet. Home Depot, Food for Less, Ryade, McDonald's, um other retail tenants, including a Panda Express. Wow. One of their top three in their whole chain. Geez. And that's how um when I spoke to Andy. Yeah. the guy who owns all of the Panda Expresses. You told him that. Yeah. And so, uh, he asked me for additional locations. Um, but we we built this project. Um, the, uh, councilman at the time was Michael Hernandez. I said, "Michael, how many premium coffee houses do you have in the first district?" He said, "None. You don't have one Starbucks?" He says, "None." So, Magic Johnson uh Urban uh
Fred Leeds
u uh coffee houses it was called uh Urban Starbucks. The only franch only franchisee in the history of Starbucks. He opened up his first store in my center. Wow. And it was one of the highest grossing Starbucks in the whole chain. In fact, the numbers were so high that Starbucks bought back from Magic Johnson his his franchise. Oh my gosh. And uh but Magic Johnson, not only is he a great man, but his business acumen is
Taylor Avakian
incredible.
Fred Leeds
Yeah. Clearly, he's built very very very special guy. And and he he turned me down a few years ago. I said, "Magic, our country needs leadership. Be our president." He says, "Shut up, Fred.
Taylor Avakian
Yo, can you can you walk me through how you started in this because clearly I mean 5,000 units, 2 million square feet. Like it's incredible. How did it begin? What was the what was the initial I know in college I believe you
Fred Leeds
started Taylor. Um let me say this. I'm not a member of the Lucky Sperm Club. Okay. My mother's a retired school teacher. My parents got divorced when when I was five. I'm one of four kids. I had a wombmate, my twin sister. In fact, when we were three years old, someone asked her why I was born first. I'm 5 minutes older. She said, 'Because I let him. Um, my mother was president of the Women's Liberation Chapter of Los Angeles. I learned equality at an early age. My sister had to play little league with me. I had to take ballet with her, and that wasn't so easy. I can still point, but it's not very pretty. Um, in high school, my mother sat my twin sister and I down and said, "I can only afford to send one of you to college. Fred, go get a job.
Fred Leeds
I said, "Mom, I think I can pay my own way." She says, "Well, then go to college." In high school, I started buying and selling and flipping cars. I started out when I was 14. I bought a 1965 Mustang. Paid $500 for it.
Taylor Avakian
I was a um How'd you get 500 bucks?
Fred Leeds
I was a bus boy in Westwood at a restaurant. Lied about my age. And uh I got a a a job as a bus boy. I saved up 500 bucks and I bought a 65 Mustang and uh I bought it for 500 bucks and I drove it for a year and I turned around sold it for 1,200 and it ruined my life. Here I am. So I started flipping cars. I bought a 58 XK150 Jaguar and um I've had a couple hundred Jaguars uh XK140s, 150s, Eype Roadster series 1, two, and three. I broke cars down to four variables. Interior, exterior, price, and mechanics. Three out of four, you make money. The less you have to do, the better off you are. The faster you can move the car, the higher internal rate of return. I've had opportunities with cars I wish I I never sold them.
Fred Leeds
Uh Porsches 356 A's and B's and C's, the Speedsters 55 to 57. cars that I bought for $3,500, $3,000, $2,500 that today are $500,000. Um, I was offered a 1967 um 275 GTB longnose wheelbase Ferrari that wasn't running 5,000 bucks. Today, that car is 2.5 million. Oh my gosh. So, um there are lessons to be learned about hard assets and buying um depreciating assets that appreciate. And that's a key. I love planes. I love jets, but I don't want to buy a depreciating asset that depreciates. Real estate. So, there's a reason why I like real estate. It's real.
Fred Leeds
Yeah. And um I remember um pet rocks. At least you got a rock with Bitcoin. You don't even get a rock.
Taylor Avakian
So I take it you're not a fan of cryptocurrency.
Fred Leeds
I don't understand cryptocurrency. It's not that I'm not a fan. I don't understand it. Got it. What I don't understand I stay away from. Yeah. You got to do what you know. I have a lot of people say, "Let me make you rich." I am rich. Well, let me make you richer. Well, if I want to be richer, I'll just buy more buildings. That's what I know. When you get out of your area of expertise, you get hammered. Yeah. I want to give you an example of that. There was a guy named Carl Carter going back half a century. Started a company called a a restaurant chain called Carl's Carl's Jr. He did very well with it. Made a lot of money. He lived in Orange County. and a developer came along and said, 'You know, I'd like to bring you in as a partner.
Fred Leeds
You don't have to come up with any money. All you have to do is collateralize your stock. And by collateralizing your stock, I'll borrow against your stock and we'll build these housing developments. Ultimately, what happened was the housing developments went bad. He lost his stock and he lost the control of his own company. Stick to what you know. Yeah. When you go out of your area of expertise, you get
Taylor Avakian
hammered. So when did you start building your expertise in apartments? How did you start the real estate growth?
Fred Leeds
Back to flipping cars. Okay. Uh when I went from Pepperdine to USC, I joined a fraternity house.
Taylor Avakian
Why did I join a fraternity house?
Fred Leeds
They had a big parking lot and they had pledges. And the pledges would polish my cars that were in the parking lot. Free labor. Uhhuh. I gave a percentage of the profits to the fraternity house. It was the best of all worlds. Wow. I studied biochemistry and for math the limits and the functions and the differentials. It was time for me to work my mind to see what was there and to see if I could analyze and with that analysis could I move that analysis into a direction even if it's not medicine if it isn't inorganic or organic chemistry or or biochemistry what can I do with my mind and could I create a spread and with the automobiles I could do that I was making so much money flipping
Fred Leeds
cars that not only was I able to pay for my education, I had excess funds. So, I bought a little duplex my sophomore year of college.
Taylor Avakian
How much?
Fred Leeds
$120,000. I took the first trusted subject to because it was a loan and I didn't qualify for a loan because I didn't know what a tax return was.
Taylor Avakian
All my flipping at the time was for cash. Do you know what's so funny? Okay. Subject two is like a very hot thing now. Yes, it is.
Fred Leeds
And you were doing this back in the 70s. I was doing that in the 70s. You had the Tucker versus Lassen and the Wellenamp decisions. Uh whether it was a state chartered uh savings loan or federally charted would determine whether or not you could take a loan subject to or whether or not you could not take a loan subject to. And if the bank found out they could call the loan and then what do you do? Do you pay it off if you have the money or do you lose the property? Well, uh, when you're young, you have a lot of time and very little money. When you get old like me, you have a lot of money but much less time. Mhm. So, you need to utilize your time differently. So, back then, I I bought this duplex with a peekaboo ocean view in Capistrano Beach.
Taylor Avakian
What was my first lesson?
Fred Leeds
I had to drive an hour and a half down there to fix a toilet. Not a good utilization of my time. But I bought it for 120,000 many years later. I did a 1031 exchange, 350,000 uh into a 12 unit building and three houses in Hollywood, which I still own that today is probably worth 4 million. Wow. and uh on 3/4 of an acre across the street from a park. The three houses were crackous and the park was the Long Pre Park. Prostitution, drugs, was a mess. And I'm thinking, how am I going to clean up this property? How am I going
30:00–40:00
Fred Leeds
to do it? So, I called up the Department of Parks and Recreation and I expressed to them um what was going on at the park and I had a solution for their problem. We needed to turn on the sprinkler system from 6:00 p.m. to 2:00 a.m. and they were willing to do that. And I evicted the crackouses, turned the property around, and I own it to this day. They're beautiful homes. They rent for lots of money. The park now has a fence around it, but there are no more drug issues. Wow. It's because we turn the sprinklers on at night.
Taylor Avakian
Feel like they should do that to MacArthur Park.
Fred Leeds
Well, you know, we we can talk about MacArthur Park because um Michael Hernandez was the councilman at the time when I was building the Wilshire Union Center and the city of Los Angeles came along and started a condemnation proceeding on my property. They were going to take it from me and they wanted to build a high school there. So I went to Councilman Hernandez and I said, "Michael, this center is going to generate 600 really good paying jobs. Food for less, Union, Home Depot, great paying jobs." I said, ' And we're sensitive enough to build the first day labor center in the country so that the day laborers that are waiting to work for at the time 10 bucks an hour will not get extorted by MS13 or the 18th Street gangs.
Fred Leeds
They'll have a place where they can learn English. They'll have bathrooms for dignity. They'll have a place to go when it's raining. They'll have a place where they can organize and people can hire them from from the day labor center. I said, 'I need your help. I need your support. U, these jobs are important in this community. They can build a high school somewhere else, maybe a block away on Wilshire. Here's some property. Here are the owners. They can condemn that property out and not take mine. I hired an attorney who specialized in condemnation proceedings and um and he helped me fight back the city and we prevailed and they went elsewhere. In fact, they condemned out um the other property. Wow. Um and uh we finished our project which we own to this day and
Taylor Avakian
operate.
Fred Leeds
Geez.
Taylor Avakian
So clearly relationships are super important for you. I want to talk about um I from my understanding and you can clarify this right because I know your brother owns Benny.
Fred Leeds
Yeah.
Taylor Avakian
Ben Ben Leadeds.
Fred Leeds
Yes.
Taylor Avakian
Uh owns if just as much if not similar properties. Did you guys buy together or was that what's the story with your brother and he you guys both own a lot of real estate?
Fred Leeds
We're we're competitive. Uhhuh. Um and um you know what? I want to go on the record. I am really proud of my brother. Yeah, love my brother. We didn't talk for a few decades because we were so competitive. And he was the number one agent over at John Douglas in the investment division there. And I was the number one agent at Fred's Hands in the investment division. I was there from 1978 to 86 out of a thousand agents. I was number one or number two in sales. And I took my commissions. This is I'm I'm I'm I'm jumping the shark here. Yeah. Uh, I was flipping cars. Junior year, I bought the real estate reference guide for $2.95 on a Friday. On a Monday, I took the exam, passed, went to Fred Sand, said, "Give me a job." He says, "What what's your history?
Fred Leeds
What do you know about real estate?" I said, "I can spell it." I said, "But I'm willing to work harder than anyone else in your company." And um, I will show you the numbers. Give me the opportunity. And so I was there six months. The manager of the investment division at the time, his name was Yehuda Saraf, brought me into his his office. He says, "Fred, you're fired. You have no ability. This is not a a a career for you. You should be a school teacher." And I said, "You know, Yehuda, um, interest rates have been moving." I said, I had no clients. I didn't know what I was doing. I still really don't know what I'm doing. I said, 'But I do have the ability. I said, 'I want you to give me more time. Give me another month. I think I have some things that'll come together.
Fred Leeds
So, there's a closet in the back. It's large enough for you and a couple other guests. You can stay there another 30 days. And then during those 30 days, I start closing deals. And uh the rest is history. But I believed enough in myself. Sometimes you need the opportunity. You need to put in the time. And um it was um 1980. So this started 1978. I went to work July of 78 for Fred Sands. 1980 I I I was beginning to have pretty good income from commission dollars. I didn't spend my commission dollars on new cars, new clothes, new trips, vacations. It didn't go up my nose. I didn't go for expensive restaurants. Um, I saved my shekels, my money, and um, and I knew a neighborhood I wanted to live in.
Fred Leeds
I wanted to buy a house between San Viceni and Montana and between 26th Street and Wilshire. And I knocked on every door, every door in that neighborhood. On weekends, I would knock on every door. And I found a guy between Alton Margarita who was 54 years of age and he wanted to rent his house out for I think $900 and I offered him 1,500. It was three bedrooms, two baths, 1,616 square feet, built in the 1920s. Guy's name was Ed Driver and his father was CW Driver Construction Company. And that driver had this house 1980. He was 54 years of age. And he wanted to rent it out. And I said, 'Look, I said, I'm going to offer you 1,500, but I want
Fred Leeds
a three-year lease. I want to acrew half the rent toward the down payment. I want you to carry back 80% of the purchase price for 10 years at 10%. And those are my terms. And our acquisition price, we're going to determine today, 280,000. As you think about this, I want you to call your accountant if you have any interest and find out what the tax benefits are once you turn 55, which of course we will execute this agreement. And I don't buy the property until you're at least 55 years of age. Even though it was a three-year option, I wouldn't exercise that option for the first year. So, he says, "I'll call you back tomorrow." He accepted my terms. I moved into the house three years later. I executed the option, bought the house for 280,000. Had my mother and my stepfather come
Fred Leeds
for the first time to see this house. As my stepfather would call it, a halipy, he was um a physician, the most kind man I've ever known, brilliant. And uh in um during crystal knocked um he was from Austria from Vienna. Uh he was hung and left for dead by the Nazis. They hung him his whole family and he survived because a rope broke and um he got to America got to America with his best friend Maximillian Hoffman. I want you to look up that man. Okay. Maximillian Hoffman who received a percentage of off of every BMW sold in the northern hemisphere. One of the greatest car guys the world has ever known. I want you to look up because my oldest son, his name is Maxillion.
Fred Leeds
Yeah. After Maxmillian Hoffman. So you So I exercise the option on this house. I buy this house and my mother and my stepfather come to see the house and my stepfather says to my mother, "How could anyone in their right mind pay $280,000 for this halupki, 1616 square ft, but it was a 50x150 lot um standard for the era." And my mother said, "So what did you pay for your first house?" And he thought about it. He said, "$28,000." And my mother, who's so smart, said, "And what did your father pay for his first house?" And he thought about it and he
Fred Leeds
said, "$2,800." So Taylor, would my son have to pay 2.8 million for that house? No. Yes. More. Well, now more. Yeah. And his son? Yeah. Would he have to pay $28 million for that house? I hope not. The answer is yes. And that's why I'm in real estate. We don't think in terms of generations or the time value of money. Mhm. But it's real. Mhm. It's not Bitcoin and it's not stocks. Yeah. It's real.
Taylor Avakian
and that's why I'm in real estate. So, you think differently because at that time you creatively figured out a structure that would work for that guy. How do you start thinking in these creative ways to make things happen? What was your
Fred Leeds
No, you're asking me the right questions. I'm going to skip because that's what my mind does. I'm a little disjointed. That's okay. I'm going to skip to a lecture that was given by Michael Milin. Okay. This was at the Milin um Institute and he has his his uh one week
Taylor Avakian
every year.
Fred Leeds
Yeah. It was like the last week or two weeks ago. That's right. And
40:00–50:00
Fred Leeds
I I highly recommend if you can go go. Yeah. And it's about economics and business. It's about medicine. It's about education. I've been blessed to know Michael Milin and his wife Lori. And I can say this most sincerely. If I had half his IQ, I would be brilliant. Okay. He's so off the chart. Yeah. So brilliant. I don't know anyone who's done more for our world than Michael Milin. Wow. Um when it comes to medicine, junk bonds. Yeah. And education. I I could go on and on and on about this guy's brilliance. And I could tell you some great stories about him. Yeah. One in particular I'm going to tell you. I one day asked him, "What are you investing in, Michael?" He said, "I just bought a couple thousand units in uh in I think it was Hamburg, someplace in Germany." I said, "Why did you do that?"
Fred Leeds
He said, "Well," he said, "I I think there'll be appreciation." He said, "But in addition, I like the mark more than the dollar." So, he was thinking in two different planes. Wow. Two. Wow. His mind works. Yeah. In two planes, not one. Crazy. Most people can't even think in one plane. That's And so, not only did he make money on the mark, he made money on the on the apartments. It turned out great for him. And I I I thought about how he would look at an opportunity and think outside of the box. So if if if you're just following the herd, you'll be slaughtered with the rest of the herd. But if you're ahead of the herd and you're looking at direction, hopefully you're going to go where you're not going to get slaughtered. You're going to go where the opportunity is. You have to be there first.
Fred Leeds
You have to find that opportunity. You have to see what other people don't see. Our money is made between hindsight and foresight. Anyone can say, "If I had only bought this or if I had only bought that,
Taylor Avakian
well, I bought it." How do you cultivate that mindset of thinking outside the box? How do you train that?
Fred Leeds
Well, there there are a lot of people that think outside of the box, and some of them are right, and some of them are dead bang wrong. Um, I I went to a party at Mitch Jul's house, started Canyon Partners with Josh Freriedman, and this was uh 17 18 years ago. And I met this guy from South Africa, 6'3, 6'4. Told me he was a rocket scientist. Told me he was starting a car company. I told him he was full of [bleep] Uh, we drank scotch together for the evening. And when we were done, he gave me a hug. I gave him a hug back and I said goodbye a lot. And a couple years go by, three, four years go by and I'm at the Milkin Conference and I meet this guy Kimell Musk and I said, you know, I said, I got a story for you.
Fred Leeds
He came back to my home for dinner and I said, you know, Kimble, I'm giving you a ride in a vehicle your brother built and and I'm watching I'm watching uh these rockets go into space. I said, 'I told your brother he was full of [bleep] And and I I said, I don't know if I've ever been more wrong in my whole life. I said, he told me he was a rocket scientist and he told me he was starting a car company. I I just didn't believe him. I said, I should have bought a stock. Holy [bleep] I said, you never know who you're talking to. You never know what dreams come true. Yeah. Now, Kimble and Elon Musk started PayPal. uh you meet people in your life, some of them can be on the spectrum, some of them can really be on the spectrum.
Fred Leeds
You know, you you look at opportunity differently and and you look at values differently. And you ever have a 35 millimeter camera? Yeah. You ever hear of something called parallax error? No. Parallax error is a difference between what you see in the viewfinder and what you get on the film. Parallax error. Got it. In psychology, we have parallax error, too. I might consider myself a really great guy and a nice guy, but the world might consider me an [bleep] So, that's parallax error. If I consider myself an [bleep] and the rest of the world thinks I'm an [bleep] well, at least there's similarity in the way I perceive myself and the way other
Taylor Avakian
people perceive me.
Fred Leeds
Self-awareness there. Yeah. Yeah.
Taylor Avakian
That's kind of important. What What is What's an example of when you thought outside of the box? I mean, clearly that house purchase is one, but what's another big example of where you had to get creative with making something happen and it worked out in your benefit?
Fred Leeds
1978, I meet David Ovette, an architect from Israel, and he had a listing. He had a property. He had a property that he wanted to sell.
Taylor Avakian
And you were cold calling him?
Fred Leeds
I was cold calling. Okay. Back then he had the LA Times. People would put for sale by owner. Yeah. He also had the recycler for cheap people that wanted free advertising. I think he had a little tiny ad in the recycler which I bought on a Thursday. Yeah. Looking to buy cars to flip. I used to buy the Sunday LA Times on Saturday and buy the cars on Saturday, not Sunday because I'd get the paper early and make the first calls early and have the first opportunity. And I'd show up and say, "You want I I had a couple hundred dots and 240Z 7172. Those were the best years. And I' I'd show up and say, "Look, I'm a student. I'm young. I got 2,000. I know you want 2500, three grand, but this is all I'm willing to pay. I said, "Anybody sign the ownership certificate?
Fred Leeds
You can move it right now. Here's the cash." A lot of people would say, "Take it." 3 days later, it'd be back in the paper. And I'd sell it for 2900. I make my money onto something else. And I was running a lot of cars. But back to David Oedd. Um he wanted to sell this building at 1337 Santa Monica Mall, Third Street Prominade, and it had um a five and dime on the ground floor and had a law group on the second and third floors. He wanted a market rate cap. And I said, "You know what, David? I think I can sell this property for you. Give me an opportunity." He says, "Yeah, but you really haven't been around very long. You really don't know what you're doing." I said, "I'm going to be the best broker you've ever seen. give me an opportunity.
Fred Leeds
He says, well, he says, you're not shy. Go ahead. Here's the listing, six months. Sell it. And uh he had a partner, EAL Treybot. Um brilliant guy. Um and they gave me this listing. I marketed the property and I called up other owners. And finally there was an agent over at CBRE who had a client. His name was Enus Ciffsy. We called him jokingly Enus the penis. And Enus Enus was from Turkey. And he had scars up and down both of his arms from his times in a Turkish prison. And he was married to this woman who I think was one of the wealthiest families from Turkey. Wow. And he wanted to buy the building. and he was represented by CBRE and um he invited
Fred Leeds
me uh to uh his boat in the Mediterranean and I really appreciated the uh opportunity to go. I didn't go. I said, "Thank you. We'll do more business. You're represented by CBRE that I don't want there to be a conflict. Uh but but life is long." And I did go to some in Beverly Hills. He showed me his hand grenade collection with the uzies on the wall and he was really a character and and fun. Really a fun guy. Yeah. And uh but the uzies and the scars on his arms. I'm thinking, you know, uh I'm glad he likes me. Yeah. Um so he buys this building and again CBRE represented his interest. I represented David Oette and EAL and uh 30 days later he he calls me up and
Fred Leeds
he said uh you misrepresented the property. The five and dime is now not paying rent. The law group is not paying the rent. Uh you you you really need to tell me uh why you you did this to me. And I said Enus, I didn't represent you. CBRE represented you. I said, I represented David Oedd and Egal Treybotch and didn't I do a great job? He says, "Oh." He says, he says, "I I I got a problem and now you have a problem. I'm going to give you a listing. Clean this up for me." And I said, "Okay." So, um, I complete the eviction on the ground floor tenant. I complete the eviction on the law group. You ever evict a law firm? No. Yeah. Well, that was my first And uh I have this empty building and
Fred Leeds
I bring him an offer to lease part of the second floor from um Tom Hayden who was very liberal, married to Jane Fonda at the time. And um I bring this offer, he was a councilman to lease the ground, the part of the second floor. And and and Enis says, "Why why would I give this communist my my space?
Taylor Avakian
Why would I I rent to this guy in my building?
Fred Leeds
I said, he says, "Let me explain it to you. Your building's worth a lot less than what what you bought it for. Put him in. If you're lucky, it'll get bombed." He was laughing so hard he signed the lease.
50:00–1:00:00
Fred Leeds
Then I moved in an abortion clinic, free legal aid. I move in I moved in a group of psychologists. I filled up the whole building and someone came along, bought the property. He was almost made whole. Wow. We had a a great relationship from that experience. Jeez. Great relationship from him. A few years later, we had an earthquake and the building fell down and then it was rebuilt. Um, and Walt Disney uh became the tenant for the whole property. So, the third street prominade became very valuable. Yeah. And at one point the rents were $20 a foot a month. I mean it was very valuable. Today it's less than five and it's 50% the whole street third street 50% empty. They just passed uh last week I saw that open containers.
Fred Leeds
Yep.
Taylor Avakian
Why not heroin and needles?
Fred Leeds
They should hand that out too. Three years ago I was having lunch on the third street prominant. I got up, went to the bathroom, came back. There was a homeless person finishing my lunch. I called over the waiter. I said, "Give him dessert. Here's my credit card." And uh have I been back? No. No. No. They can't control the homelessness. You You think you're going to get 10 or 15 or 20 bucks per month in rent when the homeless have taken over the crime, the drugs, the other issues?
Taylor Avakian
It's a nightmare. How do we fix Santa Monica?
Fred Leeds
Well, that's you know, you know, how long do you want to talk for? Um I know you have opinions on money has wheels. Opportunity has wheels and if you create the problems and the roadblocks, the money goes
Taylor Avakian
elsewhere.
Fred Leeds
Well, it seems like California is doing a lot of that. I'm I'm in Escar right now in my 13th shopping center in the state of Arizona. I have five apartment buildings there. Money has wheels. Mhm. You make life too difficult. You You think you going to build housing for a million a unit to rent out for 400, 500 a month? the name plaintiff on a lawsuit against the city of Los Angeles, against the trash companies. The city of Los Angeles broke the um pickup of trash uh commercial pickup into 11 zones, handing seven of them to waste management. Now, the first thing that happened to me as a property owners, my trash fees went up 400%. So, you sell apartment buildings. We have the highest trash costs, you know, maybe in the country.
Fred Leeds
Um, and the only thing worse is probably DWP because we have the highest water bills in the country. What does DWP and um waste management have in common? Monopoly. They are both monopolistic. um the uh 11 zones, seven of which are waste management, and I'll use the word kick back to the city council, 25 million a year, unrestricted funds. I don't even know how much DWP kicks back. Unrestricted funds. So, as a name plaintiff, we lost our rounds in the lower court. We appealed to the state supreme court. We were then remanded back to the lower court. and um through settlement negotiations which I turned down.
Fred Leeds
I'm not willing to settle for billion dollars with the monies going back to the apartment house owners with the rates staying where they are and without having a choice what trash company I can go to. Yeah. So, um I know it would be a windfall for my council. I'm sorry uh council for being so difficult, but but we want there to be a fair traded opportunity for trash. Yeah. Now, on the apartment building side, which you deal with every day, you're going to cap me at 4% or 3% a year on increases, but no cap on DWP, which bumps us 40% this year. Yeah. No cap on insurance. All the insurance companies are leaving. But if you can get insurance, you're talking about 50 to 100% increase with carveouts for like habitability and lead and mold and other carveouts. Um, if you're going to talk about other costs associated with
Fred Leeds
operating affordable housing, that's what I do. I operate affordable housing. How do you how am I going to operate affordable housing when you make it unaffordable for me to operate my affordable housing? Yet the city council members can't figure out that as they squeeze the life out of the property owners and values continue to drop because there's no net operating income and during co you don't allow us to collect rent for three years. So that cost me 7 million.
Taylor Avakian
Do you think I'm not going to take my money and go out of state?
Fred Leeds
Yeah. You think you're going to motivate me for building ADUs and other affordable housing in the state?
Taylor Avakian
No. So, okay, then let's play let's play a little game. If you were starting from zero, right, $0, you're 21 years old, or I guess you could be in in high school, whatever you want to say, or 61. Or 61. You're starting from zero. Zero real estate, but you have your brain, right? Where are you investing? What are you doing to build up what you currently have today?
Fred Leeds
Taylor, that's that's a very important great question. Great question. Thank you. Yes, I'm still a buyer in Los Angeles. Yes, I'm still a buyer in Compton, the inner city. I'm still a buyer in Beverly Hills. I built the CVS at Wilshin Delini. They're my tenon. I just renewed with them for another 20 years. I like CVS. I like Raid a little bit less, but it doesn't matter anymore, does it? Why am I still a buyer where there's less opportunity? I'm a situational opportunist. Now, what does that mean? Give me a situation. Give me a reason to buy. But now the reason and the opportunity the opportunity costs are different. So you take away my opportunity value and all a sudden the property drops. You take away my ability to operate clean, decent, affordable housing
Fred Leeds
and all of a sudden the value of that asset goes down. You pass something like ULA which is a ridiculous tax and now all of a sudden people can't sell or won't sell and you have without mentioning names Karen Bass and others that say look it's only 5% or 10%. But it isn't because if it's a million dollar asset or $5 million asset and you're putting 20 or 25% down, all a sudden that 5% on that 20% or that 5% on the 25% is a substantial amount of your investment that you lose from day one. It's a tax that is against business and against opportunity and it is a tax that brings business down and brings investors elsewhere. It is regressive and it is dangerous
Fred Leeds
and it's a bad example of what council members should not do if they care about this
Taylor Avakian
city. So what would you do?
Fred Leeds
You're starting from zero. I start lowering the prices of what I'm willing to pay because now these properties have less less opportunity for future investment. Doesn't mean I'm not willing to buy. Yeah.
Taylor Avakian
It means I'm paying less now. So if if you were me, right? Let's say I'm I'm 29 years old. I want to become Fred Leads in 40 years. Principal. You say focus on a niche area. Focus on a specific asset type. How do I get the skills? What what what are you telling me in terms of the steps I need to take?
Fred Leeds
Taylor, get up at 4:25 a.m. Get out of your house by 4:45. Be at the gym at 5:00. 5:15. Hit the streets with your buddies. Argue about politics. Wake up the neighborhood. Make friends. Bring them in as partners. syndicate deals, find value added opportunity. I raised more money at Equinox, which used to be called Sports Club, than anybody, including Michael Tala, who used to say to me, "Fred, you're making more money than I am." And and I own the place. So, um, you know, what would I do? Yeah, there's opportunity. Keep your eyes open. Yeah. Look for deals. Um, I bought on Sunset and Vine, um, a place that, uh, repaired tires and, um, I signed a long-term lease with Ron Rash, Rash Pollster, um,
Fred Leeds
who inherited a business called, uh, Free Free Freestyle Camera, and it was right as the internet was coming in. And we built this magnificent building, which he could not occupy. Mhm. And he was my partner on the on the development deal. So, I had to find a tenant real fast. My construction loan was coming due, which was near $6 million, and my tenant wasn't moving in. And now you got a problem, a big problem. Mhm. So, I get a uh offer from this business called Amoeba Records.
Taylor Avakian
Ever go to Amoeba Records?
Fred Leeds
I Yeah, I have. I built that building. Really? to Sunset and Vine. I get I get a uh a call from from this broker and um cuz I had signs up that said available. They said they they don't want to lease it. They want to buy it.
Taylor Avakian
Would you sell it?
Fred Leeds
I said, "Yes, I would consider selling." So, they brought me an offer for six million. And now I can get out and I don't lose my financial statement on a construction loan that's come due. So I give him a counter offer. My partner says, "Fred, give, you know,
1:00:00–1:10:00
Fred Leeds
let the property go. Take it. You deal with a problem with your partner, you know, uh, with with Ron Rash. You you you deal with a construction that's coming due and everything's resolved." I said, "Okay." Okay. So, I gave him a count on offer 9 million. I don't work for nothing. And uh we put so much rebar in that building that the load factor was better than a freeway overpass.
Taylor Avakian
And what did you need for Amoeba Records?
Fred Leeds
You needed load factor because the floors had to handle a tremendous amount of weight. Those vinyl records are very heavy. So, I thought we we have this specialized building. Where are they going to go? So they they uh they reached me and said, 'Look, we'll we'll take that offer, that 9 million. Let's open the escrow. I said, 'W wait a minute, that that's 9 million net. So they came back to me. They said, "All right, 9 million net." So we open up the escrow and get ready to close and I asked for a pre-closing statement and and I I called up the escro company. I said, "That was 9 million net." I said, "Those escrow fees, the seller isn't paying, the buyer pays. those title fees, the buyer pays. That's 9 million net. So, I got nine million net and we did an IRS 1031 exchange.
Fred Leeds
You're familiar with that? You see, it's not just making the money, it's keeping the money. Yeah. I don't build houses. I don't build condos because of construction defect litigation, which runs 10 years. I I don't want to be part of a lawyer's relief fund. And I deal with lawyers every day. and and and it's part of doing business in California. It's not see you later, it's sue you later, and often it is, but the tax ramifications is as as can be as ugly or uglier than the ramifications of litigation with construction defect litigation. So, I stay away from and there are plenty of people that want to build these houses and condos. I don't. I stay away from it. Got it. Um, and I ended up doing a IRS 1031 exchange into the Hornberg Jaguar repair facility on Olympic and Sentinella for 9 and a quarter million.
Taylor Avakian
How'd you find it?
Fred Leeds
Uh, one one of the most brilliant agents and brokers, Blake Mkin, CBRE, had the listing. Um, it had one year remaining on the lease. He was having a hard time finding a buyer for it. And the tenant repaired Jaguars. Now, Taylor Mhm. go to Mercedes on a Monday morning at 6:30 a.m. and the cars are lining up to go in. Mhm. But they're driving in. Mhm. Go to Jaguar 6:30 in the morning on a Monday and the Jaguars are lining up, but they're being flatbed in. You want a a a car company that will always need repairs. We're talking about Jaguar, Range Rover. And and they used to use uh Lucas electrical, right? All their wiring Lucas electrical.
Fred Leeds
The the Germans during World War II decided not to bomb the Lucas factory, they decided Lucas was on their side. Uh the reason why the English drink warm beer is Lucas refrigeration. Jeez. So I made this offer and they accepted. I bought this property, 60,000 square feet on 106,000 square feet of land. It's the last property in the city of Santa Monica. From the sidewalk going east is LA City, corner of Olympic and Sentinella. Sentinella actually tease into this property. And um a year later, um the Hornberg family sold out to Penragon plc, which has 300 auto dealerships in Europe, publicly traded. They fly this guy out, Malcolm Bailey, sits down with me. We have lunch. He says, "We want to renew the lease. What do you want for rent?" We're currently paying 50,000.
Taylor Avakian
What do you want for rent?
Fred Leeds
But before you tell me that, Fred, what's your favorite car in the world? It's my favorite car. I don't Aston Martin Vanquish asks. It's what James Bond drives. So, would you like one? I said, "Malcolm, I drive a Cadillac. There's no conflict of interest. Let's talk about the lease.
Taylor Avakian
If I want one, I'll buy one. Yeah, exactly.
Fred Leeds
Let's talk about the He said, "What do you want?" I said, "I want $100,000 a month." He said, "We won't pay it." I said, "We'll still be good friends." So, he signs a lease uh half a mile away for the uh on Stewart. It there was a ballpoint pen building um and subject to the demands of the city of Santa Monica. Now, if you know Santa Monica, they don't want auto repair. They want production facilities. They want high-tech. They want writers and directors. They they want the kind of businesses that are um brain related, not um back related. and they sent by their inspectors and they inspected the property and Pen Dragon hires a contractor and the bid comes in at back then. Comes back in. This is in the early 2000s.
Fred Leeds
Comes back in at 7 million. So Malcolm calls me up. He says, "I'm flying out, Fred. I need to talk to you." Flies out from from London. Says, "Fred, would you be willing to step up that rent over a period of time?" I said, "Sure, Malcolm." So over a period of time then it became a h 100,000. Wow. We were collecting 100,000 a month and after 10 years he flies back out. He says, "Okay, what do you want?" He knew what I knew. Mhm. The barriers of moving the business is so extreme that I had a captive audience. The people that looked at this asset couldn't figure that out. Mhm. Maybe I was lucky enough from flipping cars to know how important that repair facility was.
Fred Leeds
Jeez. Today they're paying 170,000 a month. But what's interesting about that deal is the dirt at 106,000 square ft at 600 bucks a foot or more is worth north of 70 million. I paid 9 and a4 million for it. The value is in the dirt because I can build six or seven or 800 units and it backs up to the metro rail which has value and for the city of Santa Monica, they get the revenue. The traffic goes to the city of Los Angeles. So, it's a win-win location. Wow. Um I've elected to renew. I have a single tenant and um if you assign a capitalization rate versus looking at the value of the dirt uh again the value is in that $70 million range.
Fred Leeds
So I've done okay with it. Jeez. Back to I'd rather be lucky than smart. You know an idiot can throw throw a stone where a genius can't find
Taylor Avakian
it.
Fred Leeds
Yeah.
Taylor Avakian
you uh you are very very much like you find opportunities where other people miss it. And I want to bring that up to brokerage selfishly because I'm going to I'm going to be a little selfish here because you were very you clearly did very well as a broker. If you had to become again the number one broker in the city of Los Angeles, how would you structure your day? What would it look like? How would you become that number one person?
Fred Leeds
Taylor, I'm going to make that question a little bit different. Please. Um, I'm gonna I'm gonna I'm gonna respond by saying you could drop me off in any city in the country, and I will learn what that city produces, what the city stands for, what the politics are in that city, uh, the demographics, uh, whether the city's growing or shrinking, what the opportunities are, whether I want to go long or short. You know, when the stock market drops, not everyone loses money. If you're shorting the stock market and it goes down, you're making money. You just have to bet on the right side of the equation. And I'm going to work harder than anyone. I'm going to know every building. You could say green building, white fence. I'll give you the address, the debt, when they bought it, um, and you know what the highest
Fred Leeds
and best use is. You know, many years ago, I got a call from a broker from San Francisco. Broker said, "My aunt has owned this property in Compton for 60 years. She wants a market rate cap deal, million bucks. It's on a laundrom. There's a fast food on the corner. And there's a Head Start school here. And here's the income stream. Market recap deals a million bucks.
Taylor Avakian
would you have any interest in buying it?
Fred Leeds
I said, you know, let me call you back this afternoon. Hung up, got on my broom, uh went out to Compton, looked at the property, went back to my office, called up the agent and said, "Um, if you can give me an executed deposit receipt and escrow instructions today, I'll give you a million50,000 for it." 50,000 over and above what you're asking. It's got to be today. He says, "I can do that. My aunt's available. We can open up the escrow and uh we'll do it." And so I bought the property, but it was on $3 million worth of dirt. So he he analyzed the asset on an income stream. Mhm. He didn't take into consideration it was on many acres. M so often you find people that think that they understand the value and you
Fred Leeds
think
1:10:00–1:20:00
Fred Leeds
otherwise doesn't make you right doesn't make them wrong but in this instant I was
Taylor Avakian
right. How do you study? How do you educate ed educate yourself to be a master of your craft?
Fred Leeds
Well, we we'll go back by saying common sense is not common. Okay. There are two sayings I really believe in Taylor. Okay. I'm going to share them with you. Okay. Number one, the meek shall inherit the earth, but not the oil rights. And number two, all men are created equal, some more equal than others. You have the ability to play tennis. I can't play that like you can. You're taller than I am. You have longer arms. You have a better reach. You're more athletic. You're younger than I am. You know, if I compete with you, I'm in trouble. Yeah. But I recognize that. So, if I compete with you, I'm going to make you use the other arm Uhhuh. and handicap you and tie your legs together and probably still lose. So, I want four games out of six. Yeah. Um and that's why they're horse
Fred Leeds
races. So, I I'm going to look for an opportunity where I can compete. And um you got to have the ability to understand value. How do you understand value when so many people don't? Well, there are three ways to determine value of the income approach, the cost approach, and the market approach. That's real estate 101.
Taylor Avakian
How many people can't figure out which which approach to take?
Fred Leeds
My house looks just like your house. Your house sold for X three months ago. Therefore, what's my house worth? X. Yes. But but there are other variables as well. Except for my house is on twice the land area and your house is closer to the street, more noise. So, you know, there are variables that you have to take into consideration. I I can't tell you nine out of 10 appraisals I look at are wrong. Mhm. So, so you got to understand also the direction of the market.
Taylor Avakian
Are interest rates moving up? Are interest rates moving down?
Fred Leeds
Well, when interest rates move up, prices usually move down. You have net operating income. It only goes so far. I look at new construction today, it's a loser.
Taylor Avakian
Why?
Fred Leeds
New construction, in order to break even, you got to get five bucks a square foot. So 600 foot one-bedroom apartment in Hollywood, right? New construction, you got to get $3,000 a month to qualify 3 to 4x 9,000 to 12,000 adjusted income, right? Mhm. So, you got to make over 100,000 a year to live in Hollywood in onebedroom apartment.
Taylor Avakian
Are you going to step over needles and human feces? Does that sound like something you want to spend $3,000 a month for?
Fred Leeds
No. I go out to Bullhead City, Arizona. If you're flipping hamburgers, you're making 14 bucks an hour. Here it's 20. Yeah. But 14 bucks an hour, roughly $30,000 a year flipping burgers. You can rent a one-bedroom apartment for $700 a month. And guess what? You can afford to flip burgers and have a life, but the numbers don't work in Los Angeles. And if you want to be an employer in Los Angeles, where will your employees live? So, so you you you want to think not only uh the microeconomics of a transaction, but what are the macroeconomics? H how how do you see future growth when most people can't afford to live in an apartment? Mhm. I I went to a conference in Santa Monica given by the city of Santa
Fred Leeds
Monica uh and the city manager was there and uh some of the rent control members were there and they had a nonprofit um housing developer who was there but they had no one from private enterprise there sitting on this panel And um when they were done with the panel and asked for questions, not many people raised their hand. My hand went up just like um I'm going to tell you Michael Milin story shortly. Okay. My hand went up. I said to the city manager, I said, "Uh, I understand your claim to fame is you put that hoop on the middle of the park bench so
Fred Leeds
um homeless can't sleep on the park bench." He says, "Yes and yes, I I did that. I have I have the the patent for that." So, I also understand you make, you know, $350,000 a year as a city manager. He says, "Well," he says, "That's public information." So, so here's my question. Where should the homeless sleep? I was escorted out of the room. Um, wow. So, you know, you you have to sometimes you have to uh temper uh your thought process so that you don't look like the wacko you really are. Tell me the Michael Milkin story. This is really important. Okay. Okay. I want you really to dive into this. Okay.
Fred Leeds
Right. So, Michael Milin was lecturing at the Milin Institute a few years back and uh he uh was lecturing for uh someone who was at the at the conference. It was JP Morgan Chase. It was a nice evening. He spoke and when he was done asked for questions and of course my hand went up. I said, "Hello, Michael." and says, "Hello, friend." I said, "Michael, I want to ask you a a question that that it's going to take some insight from you and should be very important for this group to hear." So, okay. So, I want to talk to you about my favorite cartoons. I want to talk to you about the Jetsons, which was 1950. He says, "Stop."
Fred Leeds
He says, "I made a mistake, Fred. Hannah Barbara, I owned the company. I should have never sold it." I said, 'I I understand. I said, 'Michel, that's not my question. I said, Michael, here's my question. Hannah Barbara, 1950, they projected what the world would be like in the year 2050, 100 years into the future. He says, "Okay." I said, "And they projected that the work week would be three hours a day, three days a week." This is in the Jetsons. Go home, watch the Jetsons. ninehour work week. I said, "So my question is, is that our future?" Well, he turned it around on me. He says, "Fred, could you be happy working nine hours a week?" I said, "Mike, I can't be happy working only nine hours a day." So, but now I want you to think about that, Taylor.
Fred Leeds
Yeah. What is our future with AI, with many of the jobs that you're most familiar with today that will be lost?
Taylor Avakian
What about who will you rent to?
Fred Leeds
Does our country owe you a living? Does it owe you housing? Does it owe you money? Does it owe you medical care? Where are we going with this? Because if you bet wrong, no matter how brilliant you are in real estate, you're out of business. You need to figure out what others will get wrong. Mac. Okay, Mac, a cab driver, Las Vegas, gets a $5 tip. He starts gambling. Goes into a casino, starts gambling with that five bucks. And all a sudden, he's up over 10,000. And as he's walking away from that table, there's a voice in his head that says, "There's more of that where it came from." He goes back to that table. He continues to gamble, loses it
Fred Leeds
all. And as he's walking out of the casino, he comes across another fellow cab driver and says, "Hey, Mac, how did you do?" And Mac says, "I lost five bucks." So I propose this to my accountant. I'm the only Jewish guy I know who's a Catholic accountant. I said, "Steve, how much did Mac lose? Did he lose five bucks or did he lose over 10,000?" Steve is so so bright. I love Steve. May May he rest in peace. He passed away a couple years ago. He says,"Fred, you want to talk about realized versus unrealized gains and losses?" I said, 'N no.
Taylor Avakian
How much did Mac lose?
Fred Leeds
He says, 'I know where we're going with this in your sick mind. He lost over 10,000, but but a lot of people would disagree with you." I said, "And the people that would disagree with me are building those billion-dollar hotels room at a time." I said, "Yeah, he lost over 10,000. That money was his. He didn't have to give it back. Realized versus unrealized, those chips were his. That money was his. Taylor, you buy a building for a million and it's worth 10 million, it goes back to a million.
Taylor Avakian
How how good do you feel?
Fred Leeds
Terrible. Terrible. Right. You buy a stock, you want that stock to go up. Mhm. And if it doesn't go up, I don't know. It's not kumbaya. I just feel stupid. Right. Mhm. 1973 before your parents were born. Pepperdine University, I applied for basic educational opportunity grants and federally insured student loans to pay for my tuition in addition to the money I was making flipping cars. They'd give me 10,000 bucks to pay my tuition. I don't pay it. I take the money and I buy Chuck Barers Productions stock.
Taylor Avakian
Why did I buy it?
Fred Leeds
because they just came out with a gong show and I thought it was hysterical and they're
1:20:00–1:30:00
Fred Leeds
publicly traded. I think this stock is going to go up so I don't pay my tuition. I buy stock in Chuck Barers Productions, the newlywed game, the the the the uh dating game and and the Gong Show. It was hysterical. It was funny. I thought this is great. The stock triples. I I sell the stock and I pay my tuition. I paid my tuition. I held on to it as long as I could without getting thrown out of school. I just thought that the the risk was worth the reward. I was so sure of myself it was I could have bet wrong, but here I I I guess I was lucky enough to to to bet right. You're going to make these decisions. You work hard. The most valuable commodity you have is not money. It's your time. When you're young, you have plenty of time and no money.
Fred Leeds
We said this earlier. When you're old, you have plenty of money in no time. You need to utilize your time effectively. Effectively. And I'll say this, I got plenty of time to sleep when I'm dead. And someone like Michael Milin, the guy doesn't sleep. If you get a call from him at 4:00 in the morning, he's already been up five hours. He's unbelievable. Geez. Unbelievable. When you see people that are effective in what they do, their minds just the gears continue to turn. They find the deals. They find the opportunity. You will find the opportunity. What a weird question I asked you.
Taylor Avakian
Have you ever been south of the 10 freeway before?
Fred Leeds
You grow up in LA.
Taylor Avakian
What do you mean you've never been south of the 10 freeway? Ever been to Compton?
Fred Leeds
Yeah. Been to Compton? I have. I have. You'd be shocked how many people from Compton have never seen the Pacific Ocean.
Taylor Avakian
How about that?
Fred Leeds
Yeah.
Taylor Avakian
never seen the Pacific Ocean. I want to we're before we wrap up last question because this is something that I think you have a very unique perspective on being who you are and the people that you know of all of your relationships, all the very smart people, all of the people who are brilliant, understand what's going on, they're looking to the future. What is something that most people don't have access to or information that they wouldn't know that you know or that those smart people are telling them to prepare them for the next 5, 10, 15 years?
Fred Leeds
Phenomenal question and I know how I'm going to answer it. The most important relationship will be your spouse. Love your spouse. Be honorable to your spouse. Work with your spouse. Build together with your spouse. Make your world with your spouse. No one should be more important than your spouse. Respect your spouse. Love the relationship. There's no greener pasture. When you build a life, work on that relationship every day. Someone who's not honorable to their spouse, why would they be honorable to me as a partner? Time and time again, I've seen that. You want to do well, start at
Taylor Avakian
home. Wow, Fred, thank you very much.
Fred Leeds
This was incredible. Honored. Honored to be here and uh and hopefully maybe one day you'll invite me
Taylor Avakian
back. I think that will have to be the case.
Fred Leeds
Thank you.
Taylor Avakian
Thank you, Fred.
Fred Leeds
Appreciate it.