Season 8 of the No Cap podcast continues with Fernando De Leon, founder and CEO of Leon Capital Group.
Fernando’s story is one of the more remarkable in real estate. He grew up in Matamoros, Mexico, facing extreme hardship. Then, he built a fortune Forbes estimates at more than $3B.
Today, Leon Capital is one of the more entrepreneurial investment platforms across real estate and private equity. In this episode, Fernando, Jack and Alex first discuss his early start, Texas land deals and the 2008 crash. Then, they move into capital flows, data centers and how he thinks about risk. Along the way, Fernando explains how early hardship, timing and discipline shaped his investment approach.
Conversation Highlights
Alex: How did you get into real estate and entrepreneurship?
Fernando De Leon: The first entrepreneurial gig I had was in real estate. I grew up on the US-Mexico border, between South Texas and Northern Mexico. I started as a translator when I was about 13. My cousin was a lawyer, and he would have me translate for clients in Mexico.
Alex: How did that lead to your first real estate deal?
Fernando: My cousin called me about a businessman who got arrested in Mexico. He was a real estate developer building factories in Matamoros during NAFTA. After I helped him, he asked what he owed me. I told him I didn’t want money. I wanted an internship.
Jack: You were 15 years old doing cross-border entitlements?
Fernando: Yeah. We got a few deals done. On one deal, I traded my fees for equity if I could get the entitlements done. He had been working on it for five years. We got it done, and I ended up owning about 3% or 4% of the building.
Jack: How does a 15-year-old know to ask for equity?
Fernando: That 15-year-old had been really poor his whole life and smelled something around the corner. My dad passed away when I was 12, and my family was in dire straits. I was the only one born in the US, so I had this tremendous obligation. I was the guy with the golden ticket.
That early equity stake eventually paid off while Fernando was at Harvard.
Fernando: I was about 20 when those buildings sold. I made a little bit more than $1M. I was at Harvard on an academic scholarship, and I remember telling the financial aid guy I didn’t think I should take the money anymore. He told me I had earned it academically.
Alex: What did Harvard change for you?
Fernando: Harvard changed my head. I studied evolutionary biology and thought I wanted to be an academic. Meanwhile, growing up on the border showed me how systems collide. As a result, I started thinking about behavior, organizations, incentives and performance.
After Goldman, Fernando moved back to Dallas and started optioning land.
Fernando: I would tie up land, work through zoning and sell the contract to a homebuilder. If I tied it up for $1M and the builder paid $2M, I took the spread with no capital out. From 2003 to 2008, I was doing 20 to 30 deals a year.
Jack: What did you see before the 2008 crash?
Fernando: In one subdivision, a builder went from taking down four or five lots a month to 40. Then, I started seeing 550 FICO scores getting approved. As a result, the lies started snowballing. Mortgage brokers, homebuilders, lenders and buyers all started telling little lies. Eventually, I told myself, “I don’t want to lie to myself.”
Alex: What happened after the crash?
Fernando: After that, lenders started calling me on deals I knew well. At that point, I was buying them at 15 or 20 cents on what I thought the reset value was. As a result, some of those deals became 20 to 30 MOICs. In turn, that created the capital base that allowed us to do things outside real estate.
The conversation moved to AI and data centers.
Jack: What are your thoughts on AI’s impact on real estate?
Fernando: My first concern is data centers. A $500M data center might be $450M of digital infrastructure and $50M of real estate. Hyperscalers are signing leases with kickouts. You may own a giant BlackBerry five years from now. If you use foreign capital, fine. If you use teachers’ retirement money, I have a problem with that.
Alex: What worries you about AI more broadly?
Fernando: I think there will be massive job displacement. For example, in one business, AI helped us move from 12 employees per location to eight. As a result, that changed the cost structure. If the American labor force has around 205M to 210M people, I think 20M to 30M workers could get displaced.
Jack: What advice would you give younger people today?
Fernando: Be skeptical and learn how to think for yourself. If you believe everything you see online, you will have a hard time adapting to the real world. You have to create value in whatever contribution you make. Adapt, pivot and find your place in the world.
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