(Bloomberg) — When Fernando De Leon realized that a dog boarding facility was charging almost as much as his $30 million hotel for humans, he saw an opportunity.
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CityVet, then one of the Dallas developer’s tenants, built an expanded guest house space for a few hundred thousand dollars—about the same as it cost De Leon to develop a hotel room. In 2014, he offered to help expand the company with his capital and real estate expertise. By the time he exited his stake in 2022, CityVet had grown from five to 25 locations.
The investment piqued his interest in wellness in general, and his 100-person Leon Capital group now manages a portfolio of businesses ranging from pediatric dentistry to cardiology to med spas, generating more than $800 million in annual revenue and making up the bulk of his $1.6 billion fortune, first valued by the Bloomberg Billionaires Index.
De Leon, 45, invests his own capital alongside medical professionals, building out administrative, technology, staffing and supply chain services to networks of practices. He says what he does is different from private equity, which has poured money into health care for the past decade in an effort to boost efficiency and increase profits.
“The private equity playbook involves overpaying for established businesses, using excessive leverage and then rapidly cutting costs to turn a business around within a prescribed timeline,” De Leon said in an interview from South Padre Island, Texas. “We build businesses from the ground up, we have no investors, we have no timeline for sale or ownership.”
De Leon, speaking just hours before a SpaceX rocket launch he planned to attend, said one of his most interesting investments is Turnwell, a mental health network he founded to treat rising anxiety and depression.
He has also invested in startups such as Crexi, a real estate technology service that was valued at $500 million in a 2022 funding round. De Leon said he expects the company to go public in the coming years with a multibillion-dollar valuation.
Being a billionaire is a far cry from De Leon’s upbringing in Matamoros, Mexico, where he grew up with five older siblings. Unlike them, he was born across the border in Brownsville, Texas, which allowed him to become a U.S. citizen and attend schools there.
Learning English landed him a translation job after the signing of the North American Free Trade Agreement, when American developers were looking for real estate across the border.
Napkin offer
One of those developers was going to build a warehouse but didn’t have a work permit. De Leon, whose family has lived in Matamoras for generations, said he used a connection with the head of the local union to get a note on a napkin promising him the work permit. De Leon traded the napkin for a 10 percent stake in the project, and by age 18 he had earned enough to lift his family out of poverty, he said.
He received a scholarship to Harvard University and joined Goldman Sachs Group Inc. in New York in 2001 as an investment banking associate. But after receiving a poor internal review, he began developing real estate in Dallas.
That business has changed over the past two decades, with private equity and sovereign wealth funds crowding out smaller investors like himself, De Leon said. He now avoids bidding on most established properties because he can’t compete on the cost of capital. Instead, he gets creative with his offers.
He recently completed Soltra Kierland, a 202-unit luxury residential project in Scottsdale, Arizona. While he didn’t offer the highest price for what was previously a commercial building, he was confident enough in his financing, connections in the area and understanding of the market to make an offer that waived zoning requirements.
“Housing production is incredibly complex if it’s done right,” he says. But if you have the ability to “take a $10 million piece of land and build a $100 million housing complex on it, the Blackstones, the Starwoods of the world, are going to reward us very handsomely for that.”
Not all of his bets paid off. His investment in crypto firm Core Scientific Inc. reaped huge paper profits after the company went public in a SPAC merger in 2021 at a valuation of $4.3 billion. But about a year later, amid plummeting crypto prices, it filed for bankruptcy.
“It’s hard to see when you’re in a euphoric bubble,” De Leon said. “Luckily my bets were a lot smaller when those situations happened.”
He says he bets more when he understands companies better, such as a 2013 investment with Ross Perot Jr.’s Hillwood in European logistics when the continent was still reeling from the financial and sovereign debt crisis. He staked about a third of his net worth on the bet.
De Leon is now in the early stages of setting up his own logistics company in Mexico, to take advantage of the demand from the nearshoring trend.
“Mexico is an incredibly young country with a lot of available employment and a fairly stable government,” he said. “It’s important to us now and in the future.”
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