What happens when a developer goes head-to-head with California’s most powerful cities, unions, and politicians?
In this episode of The Group CRE, Taylor Avakian sits down with Leo Pustilnikov — one of the most controversial and influential developers in California’s housing landscape. Leo has become a central figure in the statewide housing reform battle, pushing projects forward using tools like the Builder’s Remedy, SB 9, SB 35, Density Bonus Law, and other pro-housing policies that force cities to comply with state law.
Leo breaks down the political fights behind the scenes, how cities illegally block projects, what developers must understand about CEQA and entitlement strategy, and why California’s housing shortage is by design. This episode dives deep into corruption, NIMBY power, union pressure, lawsuits, and the future of LA housing — straight from someone who has been in the center of it.
You’ll learn:
- Why California cities block housing and how state law overrides them
- How the Builder’s Remedy actually works (and why it’s so powerful)
- The truth behind local corruption, CEQA abuse, and political retaliation
- Why small and mid-sized developers abandon California
- How Leo navigates union pressure, lawsuits, and city pushback
- What it will take for California to ever meet housing demand
- How to survive entitlement warfare and regulatory resistance
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Builder's Remedy will reopen or technically has already reopened in Roondo. No one knows this yet. So, you're the first. So, you're going to be able to build it. Now, everyone else that owns properties in Roondo can start submitting projects compliant with AB1893. Because they've been gaming the system for 20 plus years, they've been able to stop housing time and again and again. You can only try to run out the clock so many times before the clock gets you. I I don't think there's anyone that has sued cities more than I have. I think today we're filing a lawsuit against Santa Monica trying to buy a tower. Also, we'll see if I get
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Now, let's jump back into it. Welcome to the podcast. My name is Taylor Vian and I'm here with my esteemed guest Leo Ponikov and I practice that many times. Leo, thank you for being here.
Yes. And and you started getting in these real deal articles because of something called builder's remedy. Can you tell me about the story of the of the power plant and the water plant? How did that water plant? Power plant.
It's actually funny. Um I saw a property by the water on um Catalina and it was like a block from the water and the basis was great. So I'm like I don't know anything about Red Roondo but I'll go check it out. And I went to see it. I was like this amazing like it's so beautiful. It's so clean. I walk down Torrance and there's this whole pier waterfront. I look it up. There's like a waterfront project that CenterCal is doing. like this place on it's on up and up and I look what else on the market and it's um the power plant and it was listed with uh Lori and Kevin. I had done deals with both Lori and Kevin including one that like Kevin when he first met me he he interviewed me and he's like oh well we have this complex uh
deal uh where's your money from? I'm like you know I'm religious. I pray it always somehow shows up. He didn't like the answer. Went with Calsters. I got a call a year later. Hey, uh remember that property you offered on?
I'm like, yeah, closed three days later and uh three days. Yeah, it was a funky deal. It's it was 9,300 Wilshshire. Um so it was a option to a fee. Then then I bought the leaseold from Hudson. Then I collapsed it, sold it to Invesco and then uh Invesco. Yeah, I think Invesco Lincoln and Invesco had some sort of partnership and uh then the lender sold it to some other people recently. Got it.
So at the time I was like, "Oh, it's too much work. I want to enjoy my life." And then like a year later I was thinking about it. It was still on the market because that thing was marketed for years because they didn't know are they going to keep running?
Um, and uh, I figured, you know, I think I'm ready. I wasn't ready. No one's ready for that. And Roondo is just such a messy environment. And at one point, I had uh, acquired the a portion of the pier, the waterfront, which was stunning. During CO, me, my wife, and my oldest son would go there and just like eat cuz we had a vacant restaurant on the water with Visa PV. It was just like, you know, during CO, you were afraid of going anywhere. So, it made sense. It was like our private playground. Um, so, uh, yeah, Roondo has had its ups and downs and then I've been involved in that for like seven years. I think I've been involved in that project for longer than almost any other project I own. And there a few that I've owned for over a decade. But yeah, that one has
been uh, long. But the and you're you're you're going to be the first to know this. There was a recent court ruling in uh Roondo that the state um approved their housing element in error and in violation of the law and so builder's remedy will reopen or technically has already reopened in redundo. No one knows this yet. Um so you're the first wow because they had a severely deficient housing element. the state just wanted to be done with them because they're a miserable city. And um the ruling should be out by November 3rd, I think. Um but the tenative was very clear that they're in the wrong and it it was supported by a number of cases that have been ruled
on including in the state supreme court. So it's well I think it was like Martinez v. Clovis or Clo, you know, Clovis, one of the two. Um but it because what they essentially did is they tried gaming the system by saying you know all these sites that are industrial or shopping centers they could be redeveloped as 100% very low income. But they don't have to be. There's no minimum requirement cuz if if you told an owner, hey, you have a beautiful shopping center, but if you ever try to redevelop it, it has to be 500 low-inccome units and nothing else. You'd be like, what the [bleep] Yeah.
But here they're like, "No, no, it could be that. It could be something else. The law in order to qualify is you have to mandate half of it be what you're saying it will be." Mhm. And uh they didn't. And so the judge was or the judges because it was an appeals court case um have determined that Roondo was in the wrong and so it invalidated the vast majority of their lower income uh requirements. So you're going to be able to build it? Well, no. I was already vested on my projects. I'm saying now everyone else that owns properties in Roondo can start submitting projects compliant with AB1893 and a lot of them are now going to be helped with AB130. So Roondo in 5 10 years will be a very different city than you see it today.
What? Because these people just choose not to work with people that are trying to help them. So what did you think that's done to the values of the properties? How much increase in value did Well, right now nothing because no one knows about it. Well, yeah, then this will come out in about 10 weeks.
So, we got 10 weeks of time. You got 10 weeks of time cuz like I was looking like, well, now that they're not compliant, everyone could submit. And yeah, that that that's the funny thing is people think, oh, well, now that I could build more, my property value goes up. They don't realize like the scenario in Santa Monica where they upzone the hell out of the city and property values got crushed. Like Neil used to be able to sell his entitled units for like 300 a door and Lincoln bought some of those. I think they wrote them down to under 100. Wow. So there there's been a significant shift in values and it's supply and demand. Uh for sure.
Well, they they if you actually look at their their own housing element, they tell you that the amount of housing in the coastal zone over the last four decades has decreased. There are less single family homes today than there were um 40 years ago.
It's a very empty city. I mean, they sued the state over so you know there there was a because there's low turnout in a lot of these cities, the state created a bill. I think it was SB415 that said you have to have on cycle elections. Meaning if we have a presidential election, you have to have your election at the same time so that there's greater turnout cuz obviously an election like uh Trump Harris is going to have a lot more people voting than an election 3 months later. Yeah. So Roondo sued the state and they lost originally, but they won on appeal that uh charter cities are exempt. So whereas we had a massive election in November, Mhm. they had an election in March. If you look turnout of one versus the other, so because they've been gaming the system for 20 plus
years, they've been able to stop housing time and again and again. Well, now with the new laws in place through the state legislature and Governor Nuome, they're going to come to realize you can only try to run out the clock so many times before the clock gets you. And so, uh, that's a big one. Then I have like seven lawsuits in Roondo. I'm suing them as a takings for the mishmash of zoning that they've created or zoning land use that they've created uh on the site. um won a case against them on that in uh
in August also. It goes to the actual trial I think is now in January. Okay. Um and then there's the Beverly Hills Lyndon one also August. So I was out of town for all these. I was out of the country but like you know three wins is three wins. I'll take them. Go. Um
I mean, we bought it with a carryback and then we got into a dispute as to what the carryback was because it was a function of whether or not they get extended because they were supposed to they're supposed to shut down in 17, then 18, then 19, then 20, then I helped them get an extension until 23. So, it was based on how long they operate. The carryback had different interest rates, and then there was a dispute whether or not they got extended. So, that's hopefully going to get resolved very soon. Um but yeah and here we are. What was the total purchase price on that? It was that you can disclose. It was enough. Okay. It it it was more than I would have liked to pay, but it was a reasonable enough number that I could live with it.
The current plan is well the current plan is proposed as like just shy of 200 units with some commercial and mixuse. Um and people like oh my god that's so much that's so much the irony is no one realizes I based it off the heart of the city which was approved in 2001 for the site. So what happened is when AS purchased the site from SE, they entered into anou with the city where they were going to upgrade and reduce the site and redevelop it. And thatou resulted in the heart of the city which a specific plan for the waterfront. Um, and they had a fully approved EIR, an ER that they even relied on, I think 9 years later for measure D or measure G or
Uh, environmental impact report. Got it. Um, so they had uh they had a fully vested one and then the city council fearing an appeal revoked the heart of the city and it died in 2001 and that was the guy that fought it back then was the mayor who recently passed away and his best friend that helped him is the current mayor. Wow. So it's been a 24 year journey to land in the same place. Um that is crazy.
part? I lived uh like east of um uh that main street right there. Not the nice part of North Roondo. Uh I lived in a house when I moved here. Yeah. I moved from Sacramento and I moved into a That's the 916 area code. Yeah, that's Yeah, exactly. The two It was a duplex. Front house, back house. In the back house, there were 10 people living there. They [clears throat] each rented a room and they were all adults. So I moved in 21 years old. There's like 45 year olds and 60 year olds and it was just weird, right? I was paying 800 bucks a month.
I would I I shipped the mattress there, the ones that come in like a box, put on the floor, didn't have anything. I didn't have closets. Literally, my clothes were like on the ground. But it was it it was I look back and reminisce.
So I lived there for a year and then moved in with a couple buddies of Matthews. But it was I love I love that area. I really do like the South Bay. I think it's slept on in terms of people in LA. like they don't they go to the Manhattan Beach for the beach but they don't understand what it's like to
live there. I'm very fond. Yeah. Well, it's become very popular. I know a lot of people that like from Culver City that move there and after the Palisades fires it be again for Manhattan Beach or Mosa Beach. Roondo is sort of like the I mean people still move there. They moved to South Roondo as opposed to North Roondo. And it it's funny cuz like Roondo doesn't have that pizzazz of the other cities, but it's because you have Manhattan Beach, which a few blocks from the beach, Hermosa Beach, that's a few blocks from beach, and Roondo Beach that has South Roondo a few blocks from the beach, and then you have all of North Roondo behind Manhattan Beach and um and Hermosa Beach. And that's like what people like they don't know that it's really it's almost like two cities. Yeah.
And the way that the south redundo has done it is they've pushed all development to north redondo. Got it. All compliance, everything. So whenever they need something done, they're like that goes in north redondo. Ah, and that's how they've gotten away with it for so long. And uh well, it won't last that
That is so exciting. Um I want to I want to walk back to how you started in the business because I don't know if I know the full story. I know we met at Third Street, one of your your buildings that you have in Santa Monica, but can you like walk me through the beginning? Like what was the first how did you get into this business? What was the that first deal that you did?
It was a fluke. It was uh I bought a condo for my grandparents cuz they were getting older and my parents wanted them to be closer to them and my grandparents didn't want to live there. I'm like, what do I do? So, I sold it. Like, I bought it. I renovated it and I sold it. I made some money and I thought the market was crazy and this was uh like high school to college and ironically I bought them a unit in the same building uh 6 years later which is where they both lived till they passed. Wow. Um so I guess I was early at the time. And then like after college, I uh I worked for the city of LA and I met a real estate investor and we became very close and we ultimately did a number of deals together and
And what does the current portfolio look like? I can't even tell you. It It changes. It It changes. It grows. I mean, it's quite a few properties. Like, give me a range like 30, 40, 50.
The vast majority is multif family. There is some commercial retail. Um industrial industrial has become a larger portion of the portfolio the last uh two years.
Um it's just where the opportunities are. It's industrial was slowing down. So there are opportunities to buy portfolios at good basis. Um, spin off a few assets, keep the rest. Um, let's see. Yeah. So, there's that.
How do you think about Well, today you can't sell anything where there's a transfer tax. So, Santa Monica, Los Angeles, no more sales. I used to I used to probably sell 10 buildings a year in LA for many years and now since ULA I don't think I've sold one. Wow. Like I even have a few that I'd love to sell. So like now anything I buy in LA I can't sell. I'm sorry. Yeah. Um and I have I have three seven in LA that close in the next two weeks. Um, so including an office building that you asked me about earlier, a retail building that's going to be big news. It's small, but it's sentimental.
Um, so you still believe in Los Angeles, clearly. And I love LA. This has been home to me for 35 years. It's a wonderful place. One of the reasons I I bought Skid Row was because when I was a kid, LA was a great place. Mhm. And lately, especially since CO, I still can't quite tell what it is since CO, but since CO, it's gotten worse. And I've had kids since CO and I feel bad for them. And I want to make this a place that it was when when I was growing up. Mhm. So, I'm hopeful that that there'll be an opportunity with that. And a lot of that goes through helping people because the people on the streets it's that the way we have been helping people has not been effective and efficient. And like I'm working on a pilot with a university right now that we're calling
tenatively housing in minutes not months where we're going to get people off the streets and housed literally in minutes. Wow. Um because the process is currently literally months like between you get matched and then you go through the application process and then it goes to hacka. So lassa matches you then it goes through the hacka process then you have to find the people cuz they're they're unhoused if the encampments cleared how do you find them if the service provider isn't uh dealing with them regularly?
make sure that the people um are housed quickly when they want to be housed and and treated. So the the university we're working with like their street medicine team to hopefully come to create a solution where they're they're being treated while they're housed and it'll be a savings to the taxpayers because they're not going to ERS and whatnot. They're they're not we're catching things before they get bad. Um which was the basis of another program the county did uh 12 years ago which I actually did was the first one to opt into. So, like you know the flexible housing subsidy program that they do through Brilliant Corners. Y So I did the first lease with them when they came out when it was West Bay Housing. Um I flew up to Sac to San Francisco, toured their properties and it was a chance encounter with someone at the county.
Um, so I I I've been a believer in this and for many years and now with technology and AI, we're able to hopefully track it and and show that we're able to help people, bring them indoors, um, and save taxpayers money doing it.
It was just it was just like whoa. Cuz I think the basis he bought those, it was like 10,000 a door. like something that just didn't seem I don't know the details of it. So, can you explain to me that Skidro housing transaction and why you ended up buying that?
You you realize I mean you you you do mostly multif family, correct? In multif family, you're buying at uh at some sort of marker whether it's NOI, cap rate, whatever. Yes. The properties don't operate at a zero, they operate at a negative. So, the fact that I paid a dollar means I overpaid. Interesting. But I do believe that over the long term I could figure out a way to stop the bleed. I haven't figured that out yet, but I am hopeful. Um, and I think I could help people. So, the the Skidro transaction was not really a way to make money, but a way to solve a problem. I like solving problems. So, when you ask me like, "What do I buy?" I I own all the property types. Not because I know anything about any of these property types. I like puzzles. So to me, these are puzzles.
Like in Beverly Hills, every commercial property I've ever owned, I've bought the building and the fee separate. Merged them, sold them. So I've merged three buildings in Beverly Hills working on a
You've bought the building and the fee separate. So in Beverly, you've heard of lease holds? Yes. So in Beverly Hills, there's a disproportionate number of lease holds to like ground leases. Yeah, like a ground lease. So there's probably there's 10 to 15 ground leases in Beverly Hills. I think I know I could probably tell you all of them. Um so of them, if they're 15, I've already done 20% of them. Wow. Um and I'm working on hopefully two more, three more. Um, so, so yeah, it's wherever the opportunity finds itself and how you could uh make it
work. So, expl but explain to me the structure of that leaseold. So, you would go buy the building, right, which someone owns the ground lease on, and then you go buy the ground lease, rights or vice
Simple. Yeah. That was what 9,300 was. Got it. Even more complicated cuz there I bought it was elderly gentleman who needed money for healthcare whose son literally sued him saying I don't want a dollar of my inheritance going to prolonging your life. Um which is why the messy thing with the um with other buyer. Um, so, uh, yeah, there I bought the option to the fee, then I bought the lease hold, then I bought the fee.
So, how why would someone sell you the ground lease if cuz typically the ground lease holder has all the leverage for the most part, right? Because they own that and when that leaseold expires like in New York City, technically the language typically says they get the building back. It reverts back, right? So, why would they sell you why would a fee owner sell me a building?
I mean, generally because you're buying it at such a number that it makes sense. Like if if you're getting a 1% return for the next 40 years, what do you care what it's going to be worth in 40 years? M um so often times you're not buying it based on a cap rate and if you are you're paying a very low cap rate. Yeah. Um so that's why people
Got it. And so you knew or I mean that's what Safehole is safeold started off the REIT started off with this idea of separating these assets. So, they buy the land, give you a 99-year lease with escalation, CPI, whatnot. And it's become a big model. I think they opened what, 5 years ago. They've done billions of I'm not even familiar with Safe Hold. You know, now they recently merged with a triple net um during the market the interest rate rise. They merged with uh triple net reat, but safeold came up was the first REIT that was doing that. I think Beverly Hills property in the BH property group might be too. Okay. But there it's like people are now doing the reverse of what I did cuz they want that the the reversion at the end of
the term and they're okay with the lower yield but they're able to get a better yield. So like the Safeold's model was you have operators that make money on the cash flow on operations. We just want fixed yield and we'll take a lower yield cuz back then rates were low. Um, but yeah, if you look up Safeold, that was the I think it was like Jay Sugarman was the CEO. I haven't tracked it in since the merger,
but I'm surprised that cuz I was familiar with I didn't even know ground leases were a thing and and I didn't know you could do them anywhere besides New
York City cuz I I'd only ever I know you can do them. The only issue you have the only difference between LA and New York is in New York you could do them for a term of longer than 100 years. In California we have the law of perpetuity. So, anything over 99 years and like 11 months and whatever days is uh
don't it's harder to finance like it's harder to finance the leaseold improvements in New York. It's more common and more typical and so lenders are more familiar with it because it's so uncommon here. The financing is a lot more difficult. You're not like I I believe that in I believe in all cases the the separation reduces the total value. Got it. People do it for liquidity, for capital, for whatever it is cuz you're able to get money out totally. You're still able to save your cash flow, but you're able to pull out a ton of money. Um so yeah. Interesting. [clears throat] Okay.
Got it. So, it's going to be you're they're going to try to get this across the whole city. Santa Monica, the whole region. And I'm opening two uh two interimm housing sites in Santa Monica later this month. Um so yeah, all
across you think very creatively. I think I think when I first met you that was something that um was inspiring to me is that and and I had Fred Leeds on here previously and he thinks the same way. He's looking at properties and opportunities or deals as there's so many different angles of how you can look at the property. What's the land value? What's the actual asset value? How if you separate them or if you combine them, right? You're thinking very creatively. Have you always been someone who's trying to find a unique angle or find some alpha in these stuff? Like is that your thesis of investing?
It it's funny because I this this this ties into builder's remedy which is this happened yesterday. Um so I did the first builder's remedy projects in the state and that was and [clears throat] that was in part because I had spoken to an attorney who mentioned something um and then in part cuz I read things differently than other people maybe cuz I'm a foreigner whatever it is. So, like with builder's remedy, I did the first builder's remedy. Then I'm like, wait, what if I do a hotel through builder's remedy and then my attorney and I argued about it and we're like, okay, let's try it. So, we did it. We have the first hotel approved under builder's remedy or hotel uh apartments. Um, we're doing that with Lynen, which is hotel apartments. state legislation that is likely to pass next week because there's a deal
I don't know. I like there there was an email last week that I got and I have a CEO that runs um runs my affordable arm and he's an attorney and I have a consultant and they both read an email one way and I read it a different way and I replied to the state saying, "Hey, well, it's this, that, and other." because I had a different opinion of what was being what what came across. It was the same language. It's not like it was any sort of law. It was just I got a different message out of it. So, for whatever reason, I look at things differently.
No. Yeah, that's against the cities. I I don't think there's anyone that has sued cities more than I have. I think today we're filing a lawsuit against Santa Monica. Yeah. Um, I love it.
Yeah. So, okay. So, you did Roondo, Santa Monica, now Beverly Hills. I had some other people uh who were working on some Builder's Remedy stuff in Beverly Hills. Can you tell me about that those projects? Like what's why did you see opportunity and and I guess what opportunity do you see with Builder's Remedy? What's the plan with those projects?
My other Beverly Hills Builder Remedies. Yes. And it was just um you know when bought 9200 Wilshshire they asked him like he paid an outlandish number. Everyone that had ever invested or set foot in Beverly Hills knew he was going to fail when he did it. When he did it he was like look at how many units get entitled in Beverly Hills. So when I submitted my first project it was just Lynon. And I said, "Look, work with me and uh I'll help you become compliant cuz I happen to understand the housing element law fairly well and that's it." And they refused to work with me. So, I submitted more. And then other people started noticing that like, "Oh, if he's doing it, maybe we should do it." And so, like, everyone started like uh jumping on the bandwagon. And then people even started resubmitting their projects, adding hotels because
they're like, "Oh, Leo's doing it. We should try it, too." Um, and that's why there's push back. And so now Beverly Hills lost its case. It could appeal, which would be very interesting because, you know, to appeal they have to post the bond. And the bond, they can't like uh pledge collateral. They actually have to post the cash and it would be an incredibly large bond. So if they post the bond, they might go broke. Um, so it'd be fun to see if they appeal. Um, it'd be it'd be funny to see if they appeal. Um, but I I don't I mean, who knows? With them, you never know. It's a affluent city. They think the law doesn't apply to them. It does. If they do appeal, I'll probably work on invalidating their housing element. And then all your friends could submit builder's remedies and we'll see another City of
and Beverly Hills. Well, entitled is a loaded word cuz Beverly Hills didn't acknowledge that they're that they have to. But I have about 400 units, give or take. Wow.
Something super small. Yeah, it sounds about right, man. So, but that by the way, that's that would be like units built, not net new units. Got it. So, yeah, I don't think there's like 20 net new units being built in Beverly Hills. Interesting.
So, yeah. So, you're you're shaking things up. It's um I'm curious. So, you walking back to the condo project, right? Did you have a separate business where you're able to use the cash to then go and buy these deals or how did you get your first
money for for um my the condo for my grand? Yeah. So, I don't know if you remember, but back then they were giving loans to anyone. So, I mean, I know I was young at the time, so you were probably like, you were in high school. You said it was senior year high school. So, this would have been 03. So, you would have been very young. Yes. Um, so, um, my parents got a loan. I I put the down payment down, remodeled it, so it didn't require much money, but you know, when you sell it with high leverage, you do okay. Yes. And then I at one I started really investing again in like 09 10 and then on a larger scale 11 12. Um but no, I wish I had a business.
That was actually so my idea growing up was like, oh, you you you have a business that has cash flow and then you invest it in real estate because it's safe returns. And somehow it worked out that real estate is a greater multiplier um of returns than any business I could ever figure out. So it just worked out that way.
And and because I hear the opposite a lot of times. And I hear what you said previously is people use it as a a safe haven, a diversification of assets. Explain to me what you mean. It's a better
multiple and you're able to make great returns on the real estate if you buy right and you sell fortunately. I mean, look, we we had a market the last three years with high rates that have has been difficult, but until then, from 2011 to 2022, you literally couldn't lose. You didn't have to be a genius or smart. You were just lucky by being lucky. Mhm. Um or by being there, by having a pulse. You didn't need anything. No. Um and then things started to shake. it got a lot harder. And I think this has been harder on most real estate professionals than anything else because the rapid rise in rates. A lot of people are using variable rates. Um, and you see the shakeout with apartment deals. You have apartments selling for numbers that
they haven't sold for in decades. Um, you have offices selling for numbers that they literally haven't sold for this century. Yeah. Like the the pricing on office downtown I would venture to say is lower today than it was in the 90s. Jeez. Which is saying a lot. But then again, downtown goes through its booms and busts. And this isn't the first time it's gone through boom and bust. But I am a believer in LA and I think LA will uh shake things
out. I believe you. I'm I'm long LA. Clearly you are too. You're investing your time, energy, effort. Um and you believe in the city and you're diversifying. You said you're buying into some industrial buildings. Obviously, you're doing a lot of different projects. Where does most How do you manage all these projects? How do you manage your time or nowhere to focus on very poorly?
If you look at my phone, I probably have about 400 unread emails. All week I've been just trying to get to under 200. Um, I don't think that's realistic this month. Then we have the Jewish holidays coming up. So I'll be I'll probably get to like I I'll probably stabilize at like 300 on red for the next month or two, but by year end with the holidays, I'll get back to like a hundred.
Jeez. Are you a deal guy? Like do you do you think your superpower is going and finding and structuring these deals or what do you think makes you unique versus the people you compete with?
I'm just a deal junkie. I I think that's my addiction. Like I don't gamble. My only gambling is real estate. And that and Coca-Cola. I'm addicted to two things. Real estate and Coca-Cola or I guess any sort of soda. Yeah. Okay. Um cuz I don't like Coke that much. Um yeah. So that that Yeah. I I I I look at things slightly differently, I guess, and that's that's been my thing from the beginning.
So, do you remember a unique structure or unique deal that was like a catalyst for you that catapulted you into, oh, wow, this is this is a big win for me. Do you remember your first big win?
Not really. There there have been a few good ones. Um, what's the best deal you've done? I guess 9,300 is a great deal. A week after we bought the fee, we sold it for 20 million more. We were into it for maybe five million. So, it was good.
Yeah, we bought the option um which we had to buy cash. That was like 3 million bucks. Okay. Then we bought the lease hold which was and we we then we financed it. So I think we got it with like another 2 million down. We got a loan for the rest and then a few months later we we actually renegotiated the option. Yeah, I think we may have terminated the option cuz we renegotiated the the price to buy the fee for a discount. So, we ended up getting a discount that was greater than
our option price after the option payment we've made, which was already fully baked into the loan. So, we essentially, it didn't cost us anything extra, and we already had a buyer to buy the building after we merged it. Wow.
So, so you already knew who you were going to sell it to at a predetermined price, I assume. And so, you said, "Okay, here's what we have to play with. here's how we're going to negotiate this opportunity, right?
And it was a year later cuz it was one we were buying the cuz we had to I think we had to do we have we had until I think the end date may have been No, cuz the lease ended in 32 maybe. I don't remember I don't remember the years anymore. We had a few more years on the option, but we were able to exercise it early. And by exercising it early, we were able we were able to get a discount that was greater than the option payment we made. So, I think we we terminated the option, just bought it and sold it. Wow. So, and then we've done a few of those. So, like where where Chipriani is now, Hills, that was our building. We we bought what was then Doma. Uh we brought in Mo that was there. Um when their lease was up, we sold it.
So the products that you're working on right now, you have a couple that are closing and this will come out after those. What are what's what do you what are the deals you're working on right now? What's the When is this coming out?
Exactly. No way. Yeah, I know. The pantry. Pantry. That's going to be announced on Thursday. Wow. Epic. Don't tell anyone until Thursday. The union will kill me. I'm bringing back theite here.
So, it was union operated. Unite here. The hotel workers. Uhhuh. They operated that restaurant for decades on bringing back all employees that have worked there for decades. Wow. Which is ironic because they're also the ones that sponsored SV 838, the killed hotels within village remedy.
them. Yeah. So, we'll we'll see. I'll yell at them later. Okay. Um, and then there's Pack Mutual, which is um a nice building. Yeah. And the irony is in 2012 when I started investing in downtown, it sold for like 60 million before it went through like a $50 million rehab and sold for 200 plus. And now we're buying it for less than it sold for in 2012. Um jeez. So there's clearly stress out there. What are you going to do with it?
like what is your business plan for these kind of how do you think about do you do you have your business plan before you're even putting an offer in are
you how are you looking at yeah if I don't have a way of making the project work I'm not looking to buy the project I'm not putting in blank offers thinking I'll figure it out I have to have an idea for the project before I go in so that one is going to be also unique I'm going Uh, I'm going to You'll see. Okay. You'll you could have me here in 2 years and be like, "Okay, I see what he's doing." Um, yeah. So, I I have something planned for that cuz normal office is hard. Um, but it's a beautiful building. Like, if if we were building it today, that building would cost every bit of 200 plus million to build and we could buy it for a fraction. Jeez. Um, and it's got decent cash flow. It's got great upside.
So, it's beautiful building. Um, I'm trying to buy another I'm trying to buy a tower also. We'll see if I get it. Um, I mean, it's hard with downtown is uh
the the realization that we don't need as much space as we did before. Um, and the cost of TI's improvements have gone up so much that it's if well the rents have gone down and coupled with tenant improvement costs going up if the if the building's worth the same, then it has to come out of the value of the building. if you have to improve the building. Um, and improvement costs have skyrocketed. I mean, on multif family doing a unit turns doubled. Everything's gotten more expensive. So, and we also don't know how much more expensive it'll get with tariffs. Like copper, how's that going to look? Steel. Like, we'll see. Workers. I had a I had a building I was painting in West Hollywood and my partner called me and he's like, "Uh, yeah, we we need painters."
I'm like, "What do you mean we need painters? Oh, they went to Home Depot to pick up paint. They were picked up. We lost two painters. Wow. And I I was shocked because it was hollow. I'm like, there's no way Ice is going into West Hollywood. Yeah. But so now like we have like at every project we work on, I don't have employees go to Home Depot. Everything gets delivered. I can't afford to lose people. Wow. Um that's crazy. That's not being talked about enough, I don't think. Yeah, that's that that's the missing piece. Like when when they went to downtown, I was like, "Okay, downtown makes sense in the in the garment trade, which never made sense to me." Yeah. And the flower mart, there's a lot of like illicit activity. They And there was that big bust a few years ago that caught up a few people. Yeah.
So that part made sense. But when you start getting people that are hardworking people, you start to wonder like is there a plan or are we just trying to make it painful for everyone so that everyone's miserable? Yeah. Um so like yeah, nannies are afraid to come. I have my house in the palisades which is well the weeds in the palisades and I can't get a gardener. They're all afraid to go. They're like, "Oh, we don't know. There's this, there's a tick up. I'm like, no one's going to see you. Just mow the lawn, call it a day. And it's tough.
Do you um what do you think about the Palisades and Altadena and and those? Cuz that seems like I don't want to say an opportunity, but clearly there's a lot of a lot a lot that's happened there. Like, are you looking into that stuff at all?
I look I love the Palisades. There's nothing like the Palisades. I plan on moving back to the Palisades. When I lived in the Palisades, I felt like an idiot for buying the house cuz I could have squatted there. I didn't have keys to my house. My house was never locked. I did not. From the day I moved in to the day I moved out, I did not have keys to the front door. I have no idea how to lock it. It was great. In Hancock Park, where I live, I've been broken into three times. No way. Yeah. Like there's a difference. So for me, there's nothing like the Palisades. And one of the one of the beauties of the Palestades was this multi-generational thing where like you had people in their 90s, people in their 70s, people are in their 50s, people in their 20s,
and unfortunately I think we'll lose a lot of that cuz a lot of the older people are now coming back. You're going to have younger families hopefully moving in. Um, but it'll take time. Altadena, I don't know as well. Um, but I don't I don't look at it as an opportunity of distress. I just think it's it's an unfortunate thing cuz that was my community. That was my home. Totally. Um how long do you think it's going to take? Too long. Really? Um yeah, it's
Is that realistic? Yeah, but the problem is you have thousands of owners, each one in their own situation. some older people that had a reverse mortgage, some people that don't get enough insurance proceeds to rebuild. So like the problem is you have a thousand different situations. You don't have one person going there, hey, I need my plans approved. I'm ready to build. And then the idea of building someone that's not in building, it's a miserable pro. Someone that's inbuilding, it's a miserable process. And someone that's a novice to like, what am I doing?
lot like there there's a area Sunset Mesa which is actually unincorporated city of LA. Mhm. And um there's a internationally known architecture firm that that was like I want to do something for LA. We'll we'll do like a master plan because that was actually built as a master plan. Everyone had their protected views. Ah. Um, and I knew the president of the HOA and then I got uh I had my lobbyist reach out to KB Home and another local builder and they're like, "Yeah, if we have like a certain number, we'll build it for them." Like we want to rebuild LA. Yes. And I connected the three of them. And like that's it. Like you have an architect that'll do it. You like worldrenowned architect. You have a national home builder will want to do it that'll probably be cheaper than anyone else. So, you have design you'll
home builder that you can't beat the pricing of on scale. And Sunset Mesa is probably like 400 homes, 500 homes. The HOA couldn't get themselves on board. Forget about the other owners. So, like it it becomes problematic. It's so when you say like how long I don't know you have to you have a neighbor another neighbor when are they going to figure out and then who wants to live in their house while the houses on both sides are being built or their dirt lots with weeds. So the sequencing is going to be unfortunately problematic. Um so we got a long time to figure this out.
What do you think the biggest opportunity is in Los Angeles? Doesn't have to be any asset class, any type of building location. Like, where do you see the biggest opportunity the next 5, 10 years?
If I knew, I'd be betting on it. I have no idea. Like, LA has its pockets. Everyone has a area that they focus on or that they do well in. And a lot of areas are depressed. Like, downtown is rough. Santa Monica is rough. Um, I mean, we'll see. A lot of it depends on the political leadership. Crime, getting that under control, that's been a problem that we've had. Uh, homelessness has been a problem. So, we'll see. Like, everyone was blaming um, what was his name? Oh, Garson. Yeah. Yeah. And now we have Hawkman. And it's better, but it's incrementally better. like there is no magic uh pill that we could take and we're back to where we
I think we need to be more serious about the mental health problem and the drug problem that that has uh that has taken shape. And if you look at like a lot of people in San complain about the needle exchange in Reed Park and it's like oh the needle exchange that's the problem that's the problem. Needle change has been there for 20 years. The problem's only been there for the last five. Mhm. So it's clearly not the needle exchange.
It's the drugs. They've changed. We have these synthetic drugs, the fentinol, all this. And it it messes with your mind. When I was a kid, I used to see the newspaper, this is your brain, this is your brain on drugs, and they'd have like an egg. And it was a little bit of an exaggeration back then. That's actually the case now. Mhm. And the problem is once you have it, you need to treat it. And what we're what we do is we're like, "Oh, we we try to say everything's the same. So what you need is what I need, but you and I need different things." Um, and so I think getting to that realization and like the county's getting serious about it, the state's getting serious about it. There was a wonderful LA Times article like two months ago about like homelessness in
LA and there's a section about how um like everyone blames uh Reagan for defunding the um the mental health hospitals and what what actually happened is we had institutions and we're talking about like multiund institutions that had abuses and But back then, modern medicine was like a labbotomy. And that that also gives you like you think about that, you're like, okay, well, if 60 years ago, 70 years ago, a labbotomy was modern medicine. I'm going to the doctor today.
Yeah. Um, so there's that, but then they were closed in order to to open up like community clinics. So there was always this idea of having the mental health provided for. And what we did is we're like, "Oh, no. We don't have the budget for it now. So, we're not going to open up the clinics and the psychiatry and whatever." And we have that remnant that like grew and then during CO just exploded. And so, certain people need higher levels of help. And that's actually in Santa Monica, I'm opening two facilities that are going to have that. And I'm working on an entire continuum of housing that tries to help people from the time that they're unhoused to the time that they could hopefully live independently and fully unsubsidized and hold down a job. And the idea is to like help with workforce training.
So, one of the things that I I'm trying to find opportunities for my residents to have workforce training and have marketable skills, open up cafes, and they could be store clerks and baristas and things like that. Mhm. So, um you're trying to do multiple things to
help because I think landlords have been vilified for a very long time. It's it feels like it's landlords versus tenants and I don't think that that's what
Um, and it feels like we need to get back to we're all trying to provide housing. We're all trying to make people better. We're all trying to come together as a
community. Yeah. But part of it is that landlords in some cases were a little egregious and they would evict illegally. They would and as a result there's this response that now we provide free eviction defense. So like in Skid Row I have uh when when I bought it I essentially bought it from the city. The city was the steward of these properties and the city only processed evictions if they were serious issues. Like the city didn't want to be known as someone kicking people out. Yeah. So I inherited one of these evictions during their transition. I get a call from my attorney. this conviction started by the receiver um and the city's paying for his defense and it's a jury trial and because of
the staff transition I might lose and I should really sell with the guy and I should pay him 10 20 grand on top of the legal that I owe on top of everything else and this is a tenant that's cutting smoke alarms damaging the building and the city's like hey your your fire panel's in trouble I'm like yeah it's the tenant you started evicting like what do you want like well we want you fix the fire ground. I'm like, I can't. The tenant keeps breaking it. Like, yeah, I have a tenant. I have no rights as a landlord over my tenant. My tenant has every right. And so, like, one of the things I'm trying to work on is like getting the care courts to be more involved in helping with that. Cuz if someone's in permanent support of housing or a provider in permanent support
of housing, they're not getting rid of a tenant to get a higher rent. Their rents are capped. I'm not getting a penny more. I have unitturn costs. I have downtime costs. I want all my tenants to be there and be happy. Um, as opposed to a market rate landlord who has a $600 tenant, they buy him out or they do something and then they get three grand. And because of people that were overzealous in that, that's why we have all these things. So, you say it's like not landlord tenant. There there is a fight and there is a dichotomy in it because you have had bad actors. I mean, I'm sure we both know people that have acted for sure not the way they should. Yeah. Yeah.
And it puts a big stain over everyone, right? One bad apple makes everyone look bad. Are are those deals do they make sense from an investor perspective because of the way that the uh private and the public are coming together for like subsidized housing?
It's been almost a year and it's uh not even close really. But I'm hopeful. That's the goal, right? The goal is to at least break even. My goal is my my my premise was I'll break even within a year. I'm very close to break even. Um and I still have tons of vacancy is just getting through the occupancy part. Like getting through getting units cleaned and then like the access I have so many access points. These buildings were all built with one elevator and they're like, "Well, why is the elevator down?" Well, I don't know.
They didn't build them with two elevators. Like in a normal building, you have two elevators, one goes down, you have the other one, you fix it. So, they're um they're issues.
Labor love. If uh Leo, if you were starting over, 20 years old, 21 years old, right? You uh just graduated, you love real estate, you want to go rule the world or or you do really well for yourself and provide for your family. What would you be looking at? How would you think about it? What would you be doing or telling that 21-year-old how are they going to be Leo?
And honestly, I'd probably say like start in brokerage, get to meet people, get to understand what they're doing, how they're doing it, and then do it. Most of what I know is from seeing other people do it or reading about it. Fortunately, there's great articles about everyone that's done it. So, even if there's a person you've interviewed, I don't know, I've probably read about them and I have a sense of what they do.
I don't know if I'm I don't know if I'm ever staying ahead and if you look at my emails, I'm staying behind. Um but I mean I I like I like news. I'm uh I like learning about I get I don't know a bunch of emails every morning that gives me like oh this is happening in LA. This is happening in New York. this is the economy and uh from there I see and then I have a
bunch of lists like I'll get an email about all the housing stuff and all affordable housing stuff all the state level stuff and they're great articles that you could just like you know there's studies and yeah so what um before we wrap
up last thing I appreciate you coming on I think you got a lot of fun interesting stuff that's happening. I think you are willing to take on uh brain damage that other people are not because you have the wherewithal, the fortitude and you see opportunities where others don't. So I think that's very very impressive and um I like to to learn from people like you because every time I get in a room with someone who thinks differently, there's one nugget or something that I can pick up. So, I'm I want to commend you for that and and and I'm excited to see these products that are going to be built. Roondo is going to be incredible. I'm very excited for that. Beverly Hills is going to be incredible. So, I'm um hopefully one of these days we'll be able to do some deals
I wish I would have. That's one deal where like I wish I would have bought that cuz it was so it was such a good opportunity. But you live and you learn. You take lessons from this. Um I want to thank you very much for being here,