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Money & Wealth w/ A-Rod · The Breakfast Club

0:00
Speaker 1: Welcome the Money in Wealth with John Hob Bryant, a
0:03
Speaker 1: production of the Black Effect Podcast Network and iHeartRadio. This
0:15
Speaker 1: is John Hope Bryant and this is Money and Wealth,
0:19
Speaker 1: and I'm honored to be here with a new friend,
0:23
Speaker 1: Alex Rodriguez. Men he would know him as a Rod.
0:28
Speaker 1: Let me give you the part that's easy for all
0:32
Speaker 1: the baseball fans. You may or may not know that
0:36
Speaker 1: he came from the Dominican Republic. His family were immigrants.
0:42
Speaker 1: Victor Rodriguez's father and Lord is Nellie Nevado Mellow. I
0:49
Speaker 1: hope I said that right his mother. They came from Well,
0:53
Speaker 1: he came. It was born in nineteen seventy five in
0:56
Speaker 1: Washington Heights section of Manhattan and came to this country
1:01
Speaker 1: with a dream. He was raised alongside his siblings Joe
1:05
Speaker 1: and Susie, and achieved incredible things in his professional career
1:12
Speaker 1: that started, as you know, playing twenty two seasons in
1:16
Speaker 1: Major League Baseball. That's the Seattle Mariners, the Texas Rangers,
1:22
Speaker 1: the New York Yankees, and of course later as chairman
1:27
Speaker 1: CEO of a Rod. But we're going to get into
1:30
Speaker 1: that because it actually wasn't later. It was actually almost
1:34
Speaker 1: right away. But I'm getting ahead of myself. And he
1:41
Speaker 1: has been passionate about business and sports and community. And
1:48
Speaker 1: I will say, from my own perspective, I would say
1:52
Speaker 1: the maximization and unleashing of untapped human potential at scale.
1:57
Speaker 1: We'll talk about a little bit about that about with
1:59
Speaker 1: regard to how he treats his employees. Alex and I
2:03
Speaker 1: spent some time in the community a few months ago
2:07
Speaker 1: here in Atlanta at Clark Atlanta University. He showed up
2:13
Speaker 1: very simply for no compensation, because he was asked to.
2:19
Speaker 1: And so this is an important conversation about things that
2:24
Speaker 1: matter most at a time where everything matters. And I'm
2:30
Speaker 1: honored to be with my new friend Alex Rodriguez John.
2:33
Speaker 2: Great to be here, man. We've been looking forward to
2:35
Speaker 2: doing this together.
2:37
Speaker 1: We have. We have, And the story of your sports
2:42
Speaker 1: success is a topic of obvious legend. And I don't
2:46
Speaker 1: know if you get tired of talking about it or not,
2:51
Speaker 1: but I want to talk about your sports success from
2:53
Speaker 1: a different window, a different vantage point. I want to understand.
3:00
Speaker 1: Was this always about you aspiring to do more? My
3:06
Speaker 1: guess is initially you were passionate, absolutely passionate about baseball,
3:10
Speaker 1: that was when you were in the Dominican Republic. That
3:13
Speaker 1: was something that you obsessed on, Is that right?
3:16
Speaker 2: Yeah? Look, ever since you know, I was born in
3:18
Speaker 2: New York. I was born in the shadows of Yeshiba
3:20
Speaker 2: University right around one eighty third, nineteen seventy five, very
3:24
Speaker 2: close to Yankee Stadium. My father owned a shoe store
3:28
Speaker 2: in our apartment. And very much like my father, ever
3:32
Speaker 2: since I was ten years old, I've always wanted to
3:35
Speaker 2: be a baseball player and a businessman, and I was
3:38
Speaker 2: fairly good with numbers. My father was too, and I
3:42
Speaker 2: had a passion for it, and ever since I was
3:44
Speaker 2: a rookie and I got drafted in nineteen ninety three
3:47
Speaker 2: by the Seattle Mariners with the one pick overall in
3:50
Speaker 2: the first round, I was thinking about life after baseball
3:54
Speaker 2: because I've seen enough examples of players that have gone
3:57
Speaker 2: like me, from rags to riches back to rags, and
4:01
Speaker 2: I didn't want to be an addition to that, you know,
4:04
Speaker 2: unfortunate number or statistic. So that was my passion early on,
4:09
Speaker 2: was to have a path to have a good life
4:11
Speaker 2: post baseball.
4:13
Speaker 1: You were inspired by that balance initially from your day,
4:16
Speaker 1: Is that right? Yep? Yeah, and mom is where you
4:20
Speaker 1: got the self esteem. She poured the love in you
4:23
Speaker 1: and said, you can do anything.
4:25
Speaker 2: Is that right? Yeah? You know. My father he passed
4:28
Speaker 2: some years ago, and he left us when he was ten.
4:32
Speaker 2: And I never saw in those ten years my father
4:34
Speaker 2: raise his voice once. Even though he was an alcoholic.
4:36
Speaker 2: He would drink twenty twenty four beer cans a day,
4:42
Speaker 2: Budweiser I'll never forget, and two packs of cigarettes a day.
4:45
Speaker 2: So my mind is a ten year old John. I
4:47
Speaker 2: thought my father's going to be dead by the age
4:49
Speaker 2: of thirty. There's no way that anyone can live this
4:52
Speaker 2: type of lifestyle. But never saw him drunk, even though
4:55
Speaker 2: I'm sure he was. But he was an acting alcoholic
4:57
Speaker 2: and very functional. And amount of cigarettes he was smoking
5:01
Speaker 2: my house was like intoxicating. But my mother. I got
5:05
Speaker 2: my toughness and my grit and my work ethic from her.
5:09
Speaker 2: She worked at General Mortars for over twenty years and
5:13
Speaker 2: then when dad left, she had to pivot. Once we
5:16
Speaker 2: arrived in Miami at the age of nine, and I
5:19
Speaker 2: joined the Boys and Girls Club. She was a secretary
5:22
Speaker 2: of the morning and surf table at night, and I
5:24
Speaker 2: remember her coming home after twelve hours of working around midnight,
5:29
Speaker 2: sometimes eleven o'clock at night, and I would just be
5:32
Speaker 2: watching finishing, watching the Mets game, watching Kinner's corner, and
5:36
Speaker 2: I would give her a big hug, and I would
5:39
Speaker 2: take her pouch where she had her tip money, and
5:42
Speaker 2: I would start counting that money. And you know, on
5:45
Speaker 2: Thursdays and Mondays, Tuesdays it was thirty two twenty eight
5:50
Speaker 2: dollars twenty nine thirty. But Friday and Saturdays with the
5:53
Speaker 2: big ticket nights, and she would come home sometimes with
5:55
Speaker 2: fifty eight fifty nine sixty bucks. I said, boy, we're
5:58
Speaker 2: richer than Warren Buffet. We made it big. But then John,
6:02
Speaker 2: she did something interesting. She would then take that pouch
6:05
Speaker 2: and put that money out and put it in an
6:07
Speaker 2: envelope yep. And then she would say, son, help me
6:10
Speaker 2: pick up the mattress. And I remember, like an eleven
6:13
Speaker 2: year old boy, like everyone's yesterday, she would take that
6:16
Speaker 2: envelope and put it right under that mattress. And I said, Mom,
6:19
Speaker 2: but wait a minute, there's banks all around our neighborhood.
6:21
Speaker 2: Why don't you go put the money there? And being
6:23
Speaker 2: an immigrant mother and not trusting banks, she goes, Son,
6:26
Speaker 2: we don't trust banks, we trust cash, and we trust
6:29
Speaker 2: our mattress. So that was the start for me where
6:32
Speaker 2: I said, financial literacy is going to unlock my future
6:36
Speaker 2: and hopefully get me out of this neighborhood.
6:38
Speaker 1: You and I have a lot in common. The more
6:40
Speaker 1: I hear about your story, the more we relate to mine.
6:42
Speaker 1: My mom told me she loved me every day in
6:44
Speaker 1: my life, just like your mother told you. She worked
6:47
Speaker 1: as a seamstress. My dad was a business owner and
6:50
Speaker 1: had issues. He had other problems, was an alcohol but
6:54
Speaker 1: had other challenges that but deubled him. I could relate,
6:57
Speaker 1: and I'm very proud of how you have how you
7:01
Speaker 1: circumnavigated that entire situation and found always that sweet spot
7:07
Speaker 1: of what was most important. And so now I'm going
7:10
Speaker 1: to pivot back to something I said earlier, which is, yes,
7:15
Speaker 1: you're passionate about baseball. Killed it for twenty two seasons,
7:19
Speaker 1: became a legend in baseball. I'm sure lived your dream
7:25
Speaker 1: made everybody proud, both in New York and in the
7:28
Speaker 1: Dominican Republic, maybe even all of Latin America. But you're
7:32
Speaker 1: dreaming also parallel about business, and I understand it your
7:37
Speaker 1: first at the time, you're the largest contract of anybody
7:40
Speaker 1: who signed a baseball contract. There was over two hundred
7:43
Speaker 1: million dollars at the time. As I understand it, your
7:46
Speaker 1: first call was to Warren Buffett.
7:50
Speaker 2: Yeah, but you know, one hundred percent right with one edition.
7:55
Speaker 2: Pre setting that big deal, I didn't have a lot
7:57
Speaker 2: of capital. I was just a young kid that I
7:59
Speaker 2: entered the big leagues at eighteen, and somewhere on twenty
8:02
Speaker 2: one or twenty two. Before I got paid, I made
8:05
Speaker 2: my first investment and that was a duplex and that
8:08
Speaker 2: duplex was about two hundred and fifty thousand dollars right
8:11
Speaker 2: around Miami Arena, right there on fis Gain and I
8:16
Speaker 2: had a forty eight thousand dollars down payment and that
8:18
Speaker 2: was the start of basically what is now called a
8:20
Speaker 2: Rod Corp. And once I got my contract with the
8:24
Speaker 2: Texas Rangers, I was naive enough to think, well, if
8:30
Speaker 2: Warren Buffett, who ensured my contract, and that got back
8:35
Speaker 2: to me, I said, well, now we're partners, so let
8:37
Speaker 2: me call him and make sure that I'm going to
8:39
Speaker 2: let him know his money is safe with me because
8:40
Speaker 2: I don't plan on getting injured. And of course I
8:43
Speaker 2: send an email. I thought I would never get an
8:45
Speaker 2: email back, and he sure responded about you an hour
8:49
Speaker 2: later and I said, if you're ever available, will love
8:52
Speaker 2: down to come down to Omaha and have lunch with you.
8:55
Speaker 2: And he said, how's October And I said, well, we're
8:58
Speaker 2: not going to the playoffs, I'm totally free. And that
9:00
Speaker 2: started a series of about five to seven years of
9:03
Speaker 2: me going there every year postseason one to make sure
9:07
Speaker 2: that the insurance money was good because I was looking
9:09
Speaker 2: healthy and good. And second he became a mentor where
9:12
Speaker 2: he would basically look at all my businesses and give
9:15
Speaker 2: me great advice.
9:16
Speaker 1: He ensured your contract through one of the businesses that
9:20
Speaker 1: he has.
9:21
Speaker 2: Is that right, yeah? Or I mean he probably did
9:24
Speaker 2: it from his balance sheet, right. It was he was
9:27
Speaker 2: trying to get the We were trying to share the
9:29
Speaker 2: last third of it of a ten year contract because
9:32
Speaker 2: it was such a new thing of a contract that long.
9:36
Speaker 2: There wasn't any precedent, right, So we got the first
9:40
Speaker 2: seven years insured, but the last three were having a
9:43
Speaker 2: hard time because it was hard to forecast that far out.
9:47
Speaker 2: But one basically said, yeah, if you sent me this check,
9:49
Speaker 2: I'm sure the last three years and that was the
9:52
Speaker 2: end of it. And thank goodness, we cement to the deal.
9:54
Speaker 1: So I don't think, and I don't want to presume
9:56
Speaker 1: or assume, Alice, that the audience understood what we just said.
10:02
Speaker 1: They just see you playing baseball, They see their favorite
10:06
Speaker 1: athletes just doing what they do, and they just assume
10:09
Speaker 1: that the check, you know, is coming in the mail,
10:11
Speaker 1: and like they get the check to their employer. Now
10:14
Speaker 1: you just unpacked the whole other situation, as they say
10:17
Speaker 1: in my neighborhood, where a contract is underwritten for insurance.
10:24
Speaker 1: Can you explain that just a little bit before we
10:27
Speaker 1: go first.
10:27
Speaker 2: Sure. Essentially, John, let's just say that, you know, I
10:31
Speaker 2: give you a one hundred million dollar contract and it's
10:33
Speaker 2: ten years, and it's ten million dollars a year. Right,
10:36
Speaker 2: it's one hundred I'm going to have to go ensure
10:39
Speaker 2: that contract, meaning that if in year three John breaks
10:44
Speaker 2: his knee injures himself, well he can no longer play
10:48
Speaker 2: for the rest of his career. I'm still, as the
10:51
Speaker 2: owner on the hook for seventy million dollars. I have
10:55
Speaker 2: an insurance policy that, let's just say I paid two
11:00
Speaker 2: million dollars for that premium, would essentially take care of
11:05
Speaker 2: the seventy million dollars and now I'm off the hook.
11:09
Speaker 2: John has paid his balance of seventy million dollars and
11:13
Speaker 2: the insurance takes it on the chin. But in most cases,
11:17
Speaker 2: John is going to remain healthy and that two million
11:19
Speaker 2: dollars premium basically goes to the wayside on my end.
11:23
Speaker 2: But you and I can sleep at night because the
11:25
Speaker 2: contract is insured and the insurance wins in this case.
11:29
Speaker 1: So before I ask you the question about who paid
11:31
Speaker 1: the premium, there's an interesting take on it, whether you
11:34
Speaker 1: as a contractor or the owner of the team. But
11:38
Speaker 1: for the audience, what do you just describe? Think about
11:41
Speaker 1: an insurance premium for your house. Think about an insurance
11:44
Speaker 1: premium for a life insurance policy are your card. That
11:49
Speaker 1: premium is a small fraction of the value of the insurer.
11:54
Speaker 1: They hope that they you never call them with a claim.
11:58
Speaker 1: And this is how people not all claims. Is how
12:01
Speaker 1: the insurance company makes a profit. And you want the
12:03
Speaker 1: insurance company to make a profit in this that's way
12:06
Speaker 1: capitalism works. And there's too many claims. Of course, they
12:10
Speaker 1: could go out of business. Uh So, in this particular case,
12:13
Speaker 1: there was a premium. Alex Is, the corporation this is
12:16
Speaker 1: this is this is separate from a rod This is
12:18
Speaker 1: Alex Rodriguez, the professional athlete, has got a two hundred
12:23
Speaker 1: million dollars contract, and he is the product and is
12:27
Speaker 1: a premium for the underwriting of insurance for that contract.
12:32
Speaker 1: Now else who paid? But I hope not getting into
12:35
Speaker 1: your business. Now, let me put it another way. Was
12:38
Speaker 1: this sponsored by the owners of the team?
12:42
Speaker 2: Yeah, so it is the responsibility of the owner to
12:46
Speaker 2: ensure the contract because obviously, as I just explained, if
12:50
Speaker 2: you have one hundred million dollar contract and things go
12:53
Speaker 2: the wrong way and you get injured, I, as the owner,
12:56
Speaker 2: don't want to be on the hook for that seventy
12:57
Speaker 2: million dollars because John's not available to play. So the
13:01
Speaker 2: owner in this case. In this case it was Tom
13:03
Speaker 2: Hiks who was the owner of the Texas Rangers. He
13:06
Speaker 2: wires the money to warm buffet.
13:08
Speaker 1: Right. The reason I asked the question is, you know
13:11
Speaker 1: you could, as entrepreneurial as you are in your mind
13:14
Speaker 1: if the owner said, look, I'm going to do five
13:17
Speaker 1: years of this or three or five years of this contract,
13:19
Speaker 1: I'm not going to ensure ten years of it. I'm
13:21
Speaker 1: thinking the entrepreneurial Alex and I know would say, well,
13:24
Speaker 1: let me go to Lloyd's of London. Let me go
13:25
Speaker 1: someplace and see if I get the back end insured myself.
13:28
Speaker 1: I'll write the premium check and there's a small price
13:33
Speaker 1: to pay to know I've got the guarantee of all
13:37
Speaker 1: the money. So there's a number of ways to cut this.
13:39
Speaker 1: But in this particular case, they felt so strongly about you,
13:43
Speaker 1: and of course you were such a wonderful negotiating position
13:46
Speaker 1: that you got the entire contract he is guaranteed. Is
13:48
Speaker 1: that right?
13:49
Speaker 2: Yeah, you're spot on, John, So let me add to that.
13:52
Speaker 2: So a lot of times and I did this exactly
13:55
Speaker 2: what you just described, that the team is trying to
13:58
Speaker 2: ensure that contract for protection of a downside event of
14:03
Speaker 2: an injury the player, me or you. In this case,
14:07
Speaker 2: you can go to Lloyd's of London and say, look,
14:09
Speaker 2: if I'm supposed to be playing for fifteen years, but
14:11
Speaker 2: I get hurt and I'm only allowed to play for
14:13
Speaker 2: five years, then Lloyd's of London will give you an
14:16
Speaker 2: additional check to John. Now, assuming that you play those
14:20
Speaker 2: ten years injury free, the John insurance that you paid
14:23
Speaker 2: to Lloyds to London that goes away. You lost that money,
14:27
Speaker 2: but you made the hundred and the team is very
14:31
Speaker 2: happy to lose two million because John played incredibly well.
14:35
Speaker 2: So double ways of insurance and by the way, you
14:38
Speaker 2: can also ensure your house a couple different ways than
14:41
Speaker 2: just one.
14:42
Speaker 1: And for those we unpack everything on this podcast. We
14:45
Speaker 1: make things simple so you understand it. But nobody ever
14:48
Speaker 1: talked to you financial literacy like Alex mother and my
14:52
Speaker 1: mother taught me in the beggar of my classroom. So
14:55
Speaker 1: we want to there's no silly questions. There's nothing that
14:57
Speaker 1: is that is off limits. By the way, doctor King
15:12
Speaker 1: in the middle of the civil rights movement try to
15:14
Speaker 1: get his life insurance and try to get a million
15:17
Speaker 1: dollars of insurance for his family. And Andrew Young pastor
15:20
Speaker 1: Andrew Young as we know now and him went to London,
15:22
Speaker 1: literally going to London. It ran around. No one would
15:26
Speaker 1: insure him Alex. They thought he was just too much
15:29
Speaker 1: of a risk, and he was only you know, he
15:30
Speaker 1: was thirty something years old. They just figured, you know,
15:33
Speaker 1: the chance of something happened to you is extremely high.
15:36
Speaker 1: He's a guy about to get the Nobel Peace Price.
15:38
Speaker 1: They finally got one of the million dollars they finally
15:40
Speaker 1: got one hundred thousand dollars. Premium was very high because
15:44
Speaker 1: the perception of risk was very high. Just because you're
15:46
Speaker 1: on the front page of the newspaper doesn't mean that
15:49
Speaker 1: you automatically get a yes to your answer. But underneath
15:52
Speaker 1: a lot of these things are insurance policies, and older
15:57
Speaker 1: you get the most expensive that policy gets. If you're
15:59
Speaker 1: getting a life insurance policy, it's very cheap to get
16:02
Speaker 1: one at twenty thirty years old. Try to get into
16:04
Speaker 1: life insurance policy at seventy years old for your life,
16:07
Speaker 1: the premium is going to be astronomical. And you can't
16:09
Speaker 1: be mad at the companies. If you want to distribute
16:11
Speaker 1: money like a socialist, you got a first collected like
16:13
Speaker 1: a capitalist. So we want companies to find a way
16:17
Speaker 1: reasonably to make a profit so they can afford to
16:19
Speaker 1: get back and reinvest and take care of their employees.
16:21
Speaker 1: And on the topic of taking care of his employees,
16:25
Speaker 1: I want to gut into that in a minute, but
16:27
Speaker 1: I want to commend you also, Alex. I don't know
16:29
Speaker 1: that if anybody set this to you in this way,
16:32
Speaker 1: but my sense is that you're the only or the
16:35
Speaker 1: first Latino billionaire entrepreneur from professional sports in America. I
16:41
Speaker 1: don't think there's anybody else who has that Moniker. First
16:45
Speaker 1: of all, I don't know another Latino a billionaire in America.
16:47
Speaker 1: I'm sure they exist, but one that came from sports
16:51
Speaker 1: to business. There's no question in my mind that you
16:55
Speaker 1: check that box. And I think you just got into
16:57
Speaker 1: the billionaires club late lash year. So assuming I'm correct
17:02
Speaker 1: of all that, on all that, congratulations.
17:04
Speaker 2: Well thank you John. And you know what, again, I
17:07
Speaker 2: started from literally like ground zero. I'll never forget John,
17:11
Speaker 2: And I think I told you this when we had dinner.
17:13
Speaker 2: You know, I was twelve years old, and you know,
17:15
Speaker 2: Dad had left a couple of years ago, and we
17:18
Speaker 2: were at Publics, a supermarket down in Miami, and I'm
17:20
Speaker 2: with my mom on one of the rare nights that
17:23
Speaker 2: she didn't work. It was probably like a Sunday night
17:25
Speaker 2: or something. And as we're trying to pay for the bill,
17:27
Speaker 2: the bill might have been like seventy five bucks or something.
17:30
Speaker 2: We had like a couple of cars of food and
17:31
Speaker 2: cereal and all of that, and as she's kind of
17:34
Speaker 2: shuffling through her purse, some funny money comes out and
17:37
Speaker 2: I said, Mom, that money's read, well, it looked like
17:40
Speaker 2: monopoly money. What is that? And she was very embarrassed
17:42
Speaker 2: and ashamed and kind of looked down, and she goes, well,
17:45
Speaker 2: you know, the government's given us some help. And my
17:48
Speaker 2: heart stopped. You know, even as a twelve year old,
17:51
Speaker 2: my instincts were too, very very protective of my mother.
17:55
Speaker 2: And to be where I am today, play for almost
17:59
Speaker 2: twenty five years and be very fortunate to be part
18:02
Speaker 2: of an ownership group. You also have to commend, you know,
18:06
Speaker 2: Adam Silver in the NBA that he's opened up the
18:10
Speaker 2: floodgates to have folks like you and I sit at
18:13
Speaker 2: the very top of the chain as governors. It's extraordinary.
18:17
Speaker 2: And I know that Adam and the NBA has great
18:20
Speaker 2: ambitions to continue to promote diversity and more folks like us,
18:25
Speaker 2: people of color to the owners group.
18:29
Speaker 1: No doubt. And I'm an owner of part of Centennial Yards,
18:33
Speaker 1: which is right across from State Farm Arena, as a
18:36
Speaker 1: partner with Tony Wrestler who owns Atlanta Hawks, and Tony
18:40
Speaker 1: is a big who accommodations definitely, the Adam Silver who's
18:44
Speaker 1: a part of financial literacy for all, Tony is a
18:47
Speaker 1: big booster that civil rights. Modern civil rights is in
18:49
Speaker 1: the suites, not the streets, and the color is green.
18:53
Speaker 1: It's about education, access the capital, low cost capital, an
18:57
Speaker 1: opportunity for all. It's Michael mill And would say, this
19:00
Speaker 1: is where we I think we originally where we physically
19:03
Speaker 1: met our friend Michael. Intelligence is equally distributed, but opportunity
19:08
Speaker 1: is not. And so we are at these tables and
19:11
Speaker 1: we should not take it for granted. And thank you
19:13
Speaker 1: for doing this podcast to help to spread the message
19:17
Speaker 1: of unpacking the memo. We unpacked a little bit about
19:19
Speaker 1: insurance and about how you underwrite a long term professional contract.
19:23
Speaker 1: I'm sure the audience didn't know that we're going to
19:26
Speaker 1: get into it. Well, here's another get. There is no
19:29
Speaker 1: billionaire who came from professional sports or entertainment who's a
19:34
Speaker 1: person of color, who didn't go over the bridge of business,
19:39
Speaker 1: particularly corporate. I'll say that again. There is no professional
19:42
Speaker 1: athlete that you're listening that you're thinking about right now.
19:45
Speaker 1: Our entertainer, think jay Z, think whoever you like who
19:50
Speaker 1: went from performing, playing whatever into the boardroom and became
19:56
Speaker 1: a billionaire without coming into corporate. So this is a
20:01
Speaker 1: pathway that everybody needs to understand. We've got to go
20:06
Speaker 1: from the streets to the suites, from protesting to prosperity,
20:10
Speaker 1: and there needs to be a business plan for that.
20:13
Speaker 1: So your obsession, your dual obsession with being smart at
20:18
Speaker 1: the baseball diamond, then smart as a diamond in your brain,
20:22
Speaker 1: and then getting into real estate, which was a really
20:25
Speaker 1: smart move, biggest business in the world. What was your
20:29
Speaker 1: motivation there? And then treating your employees your second biggest
20:32
Speaker 1: asset the right way is I understand it. You make
20:35
Speaker 1: employees shareholders in your dream as well, because nobody washes
20:40
Speaker 1: rental cars. What's your mindset there? And I'm now getting
20:44
Speaker 1: into the most valuable thing we have, Alex. It's not
20:46
Speaker 1: the money, it's not the assets, it's not the real estate.
20:50
Speaker 1: It's our mindset and our relationship capital. The way we
20:54
Speaker 1: treated each other, way you and I treated each other
20:56
Speaker 1: when we first met set the stage for everything. I
21:00
Speaker 1: asked you to come to Atlanta originally your office set.
21:04
Speaker 1: You didn't have time, and you didn't and I said
21:07
Speaker 1: this was for the people. Now, only one would know
21:09
Speaker 1: this unless I said this is for the people. This
21:13
Speaker 1: is no commercial there's no commercial anything in this. And
21:16
Speaker 1: you just said, yes, I'll do it. And you came
21:19
Speaker 1: here at your own expense and spent several days with us,
21:22
Speaker 1: pouring into the people. And I think that's going to
21:24
Speaker 1: pay dividends, not only in Heaven, it's gonna pay dividends
21:27
Speaker 1: here because whatever it goes around comes around. But that's mindset,
21:30
Speaker 1: that's character, that's integrity, that's how you treat people, treat
21:35
Speaker 1: them how you want to be treated, and that carries
21:38
Speaker 1: over how you treat your employees. Talk to me about
21:40
Speaker 1: your mindset to win and why you think it's important
21:44
Speaker 1: to bring others with you.
21:46
Speaker 2: Yeah, great question. And we had a phenomenal time and
21:49
Speaker 2: boy was at an impactful day when we were at
21:52
Speaker 2: that university and talking about some of the history around
21:56
Speaker 2: some of the Black college and the history of of
22:00
Speaker 2: what has done for so many people. And very proud
22:02
Speaker 2: to be there and thank you for that invite. Look, John,
22:05
Speaker 2: the way I look at this is like financial freedom
22:08
Speaker 2: comes from two things. It comes from knowledge and the
22:11
Speaker 2: power of knowledge, and equity and ownership. And it's kind
22:17
Speaker 2: of what the rich that poor dad teaches, Right. I
22:21
Speaker 2: get excited when I get to invest into equity, and
22:24
Speaker 2: I think most people get scared. And the truth is
22:27
Speaker 2: if you're scared and you don't know, it's probably better
22:29
Speaker 2: to have fear right rather than than jump in and
22:31
Speaker 2: do something that's wrong with well, not the right leadership
22:33
Speaker 2: group around you. I've often said that the three things
22:38
Speaker 2: that could take a man down or people down in
22:42
Speaker 2: the world of business are the three l's, liquor, ladies,
22:49
Speaker 2: and leverage. So you got to watch those things. But
22:54
Speaker 2: to me, John, it's really about simplicity and sticking to
22:58
Speaker 2: your circle of confidence, which I learned this over two
23:01
Speaker 2: decades ago from Warren Buffett. And the reason why I
23:05
Speaker 2: started with multifamily apartments and a small little duplex is
23:09
Speaker 2: because I understood it because we were never We never
23:12
Speaker 2: had enough money to buy anything. So I remember as
23:16
Speaker 2: a ten twelve year old boy, I went down to
23:18
Speaker 2: my knees and I said, Dear God, if I can
23:21
Speaker 2: ever trade places with the landlord. And about a decade
23:25
Speaker 2: later I had an opportunity to be a landlord, even
23:28
Speaker 2: though it was a small landlord of two apartments a
23:30
Speaker 2: little duplex. I bought that, and all I was really
23:34
Speaker 2: doing was I knew that at some point my ability
23:37
Speaker 2: to make money from the Yankees was going to come down.
23:40
Speaker 2: But if I had assets that would hedge my bet,
23:44
Speaker 2: and as my earning power came down, my assets would appreciate.
23:48
Speaker 2: Now I knew that I didn't need a lot of
23:51
Speaker 2: cash flow, so I was able. My strategy was simple,
23:55
Speaker 2: If I can play for ten more years and I
23:57
Speaker 2: buy one asset per year, appreciate in value and in
24:02
Speaker 2: cash flow. By the time I was done, those ten
24:06
Speaker 2: assets would be my insurance policy for never going broke.
24:11
Speaker 2: And that was it. It was nothing from Einstein. It
24:14
Speaker 2: was nothing. I'm not that smart, but you try to
24:17
Speaker 2: be clever and try to be smart and work as
24:20
Speaker 2: hard as you can with your competitive advantage. And I
24:23
Speaker 2: thought that was mine.
24:26
Speaker 1: So audience, you just heard and Alice says, I I
24:29
Speaker 1: know this about me. We exactly the same philosophy. I
24:33
Speaker 1: had this nonprofit it was draining me dry, not really,
24:37
Speaker 1: not literally, but I mean it was nonprofits are hungry.
24:40
Speaker 1: And Alice, by the way, volunteers at the Boys and
24:42
Speaker 1: Girls Club as well, and mentors. And I didn't want
24:46
Speaker 1: to go beg in anybody. I wanted to be my
24:48
Speaker 1: own resource. And so I went and start buying single
24:53
Speaker 1: family residential homes and he started buying multifamily homes and
24:58
Speaker 1: we are both together two of the artist people of
25:00
Speaker 1: color who own both. I think as an afric American
25:05
Speaker 1: close to seven hundred single families, and he's got an
25:08
Speaker 1: incredible portfolio of like mostly multifamily Why because you make
25:12
Speaker 1: money during the day, you build wealth in your sleep.
25:16
Speaker 1: The contract that Alex got, that was the grease on
25:19
Speaker 1: the gears. You can get rich, but you can also
25:22
Speaker 1: go broke because the cash flow stops and you go broke,
25:25
Speaker 1: but your expenses have not. Please listen now what he
25:28
Speaker 1: said he said to you said it very eloquently. The
25:31
Speaker 1: cash flows coming in, your expenses are now rising the
25:35
Speaker 1: mediate standard of living. Your cash flow of the contract's
25:39
Speaker 1: going to end because seventy percent of all those in
25:42
Speaker 1: professional sports, unfortunately will file bankruptcy within five years. You've
25:46
Speaker 1: got to have something to augment that. And he did
25:48
Speaker 1: that through capital gains and capital asset well, capital appreciation
25:53
Speaker 1: of capital assets asset accumulation through real estate, which gave
25:57
Speaker 1: him both appreciating assets and income that replaced the income
26:03
Speaker 1: he has as a player. They get that, right, Alex.
26:06
Speaker 2: That's exactly right. And even to simplify it and just
26:10
Speaker 2: make it even more simple, because I know this is
26:11
Speaker 2: what the mission of this podcast is is to educate
26:14
Speaker 2: and inspire and to teach people how to have a
26:17
Speaker 2: better life. If he or she is listening right now
26:22
Speaker 2: and you know that you're making one hundred thousand a year,
26:25
Speaker 2: but that's going to stop in ten years, then you
26:28
Speaker 2: better start hustling today for what's gonna happen in year eleven. So,
26:32
Speaker 2: in very simple terms, if that is your life, that
26:34
Speaker 2: is the life of an athlete, just add a couple
26:36
Speaker 2: of zeros to it. But nevertheless, you have a partner,
26:40
Speaker 2: and if you're in La or New York, that partner
26:42
Speaker 2: is going to take sixty percent of it between taxes,
26:45
Speaker 2: agents and managers and john People ask me is all
26:49
Speaker 2: the time, how in the world does an athlete make
26:53
Speaker 2: over one hundred million dollars and, like you mentioned so eloquently,
26:57
Speaker 2: can go bankrupt. Well, let me give you an example.
27:01
Speaker 2: If athlete name Chris makes one hundred million dollars a year,
27:06
Speaker 2: one hundred million dollars in their career, and they're playing
27:09
Speaker 2: for the Yankees, or they're playing for the Lakers, or
27:11
Speaker 2: they're playing for the Dodgers, fifty five percent goes to
27:15
Speaker 2: the government. So now you're down to forty five million,
27:18
Speaker 2: ten percent goes to your manager. Now you're down to
27:20
Speaker 2: thirty five million, five percent to your agent. Now you're
27:22
Speaker 2: inside thirty million dollars. You haven't about a house, you
27:26
Speaker 2: haven't bought a car yet, and you haven't even been
27:29
Speaker 2: divorced for the first time.
27:31
Speaker 1: Well paid alimony for all those kids.
27:33
Speaker 2: All of that, So it goes quickly. It goes quickly.
27:37
Speaker 1: So what we're saying to you audience is anybody can
27:40
Speaker 1: be an Alex or John financially. Just take away a
27:44
Speaker 1: couple of the zeros. Start simple. He made it. He
27:48
Speaker 1: had an income that allowed him to provide for his
27:50
Speaker 1: lifestyle and make an investment. I want you to have
27:53
Speaker 1: a good income. Think about a house in the hood,
27:56
Speaker 1: the worst house in the best block, by it, rebit
28:00
Speaker 1: or a duplex, buy it, rehabit, rent it. I would
28:05
Speaker 1: say hold it, Alex may say sell it. I don't.
28:07
Speaker 1: But you know everybody's economics are different. Do that two
28:10
Speaker 1: or three times and you create a generational wealth and
28:14
Speaker 1: Alex it's just as Alex has paid it, poured into
28:16
Speaker 1: his own community and doubling and invested back in with
28:20
Speaker 1: his employees. Still want to hear that story? I want
28:23
Speaker 1: you to think about hiring local talent from the community.
28:25
Speaker 1: Is plumbers, electrician lighting, roofing, landscaping, painting. Now you're creating
28:30
Speaker 1: local jobs, reinvesting. That's your philanthropy. Magic Johnson is one
28:35
Speaker 1: of your mentors that helped you to navigate what you've done.
28:41
Speaker 1: Really good guy. What was the influence on you to
28:44
Speaker 1: double down on this and go large? And again, I
28:48
Speaker 1: want you to touch very specifically about how you're helping
28:51
Speaker 1: your employees that I really was touched by how you're
28:53
Speaker 1: doing that just not what you're doing because you back them,
28:55
Speaker 1: you backstop them. And before we finish, I really want
28:58
Speaker 1: to get into when you hit your head against the wall,
29:01
Speaker 1: when you stubbed your toe, it's all has not been
29:04
Speaker 1: a bed of roses, like because you had to take
29:07
Speaker 1: no for vitamins. Everybody's not just saying yesterday because you're
29:09
Speaker 1: Alexe Rodriguez, Like, hey man, you're a baseball player. Go
29:12
Speaker 1: go ad over there. You know you had to you
29:15
Speaker 1: had to earn your CD at the table.
29:17
Speaker 2: Yeah, yeah, great, great question. So, first of all, Magic
29:19
Speaker 2: Johnson was my my my kind of my beacon of inspiration.
29:23
Speaker 2: I mean, he gave me an opportunity to say he
29:27
Speaker 2: gave me a role model. And Magic. Johnthan is such
29:31
Speaker 2: an incredible person. You know, he's he's one of the
29:33
Speaker 2: greatest basketball players of all time, one of the goats, right,
29:37
Speaker 2: five time world champion, MVPs, you know, a gazillion dollar smile.
29:41
Speaker 2: But when you meet Magic, he's even more inspirational. And
29:45
Speaker 2: he's such a good man that he sat down with
29:47
Speaker 2: me for three hours and basically gave me a roadmap.
29:51
Speaker 2: And I had nine pages of notes. And I said, Magic,
29:54
Speaker 2: we were supposed to meet years later for thirty minutes.
29:57
Speaker 2: Why did you give me three hours and cancel dinner
29:59
Speaker 2: with Cookie? He said, you know what, because you're one
30:01
Speaker 2: of the first athletes, if not the only one that
30:03
Speaker 2: came with a notebook. You came on time, you were
30:06
Speaker 2: asking good questions, and you had like ten pages of notes.
30:10
Speaker 2: And I thought that was interesting. But because he's a
30:12
Speaker 2: man of color, I saw a path and an inspiration
30:15
Speaker 2: of someone who could be a Hall of fame basketball
30:18
Speaker 2: player and then be a hall of fame businessman in
30:21
Speaker 2: the boardroom. So that was a pathway. When you look
30:24
Speaker 2: at a Rod Corp. We have over five hundred employees.
30:27
Speaker 2: We call them team members. Eighty five percent of those
30:29
Speaker 2: are minorities, men of color, black skin, brown skin, women.
30:34
Speaker 2: And I was inspired by my mother because my mother
30:38
Speaker 2: never had an opportunity to invest with Warren Buffett or
30:41
Speaker 2: Blackstone or KKR Goldman Sachs and JP Moorean wouldn't even
30:46
Speaker 2: take her calls. So as I think about our investment,
30:49
Speaker 2: if we make an investment of ten million dollars into
30:51
Speaker 2: a company, every person on my team has an opportunity
30:56
Speaker 2: even if it's two thousand dollars to invest with me
31:00
Speaker 2: pro rata, with me side by side, right and my value,
31:03
Speaker 2: no promote, no fees, because I want everybody on my
31:07
Speaker 2: team to have a path to have in a better life.
31:10
Speaker 2: And the way you have a better life, as we
31:11
Speaker 2: talked about, is by having more assets and less liabilities.
31:15
Speaker 2: A liability is a car, an asset is a house
31:18
Speaker 2: is a multifamily is part of a business that generates
31:22
Speaker 2: cash flow. Another way of saying it, john for your audience,
31:25
Speaker 2: is what is the difference between a liability and an asset.
31:29
Speaker 2: Liability takes money out of your pocket every month like
31:32
Speaker 2: your home, and an asset puts money in your pocket
31:36
Speaker 2: every month like a multifamily. Apartment. Okay, So it always
31:41
Speaker 2: bothered me that only the rich people, at least it
31:44
Speaker 2: felt from my prism when I was really young, had
31:47
Speaker 2: the opportunity to invest with the Warren Buffetts like. And
31:51
Speaker 2: today my mission is to work on financial literacy for
31:54
Speaker 2: my community and secondly to give people an olive branch
31:58
Speaker 2: and an opportunity to invest. Side side.
32:00
Speaker 1: That's right, even.
32:01
Speaker 2: If it's two thousand dollars. That never made any sense
32:04
Speaker 2: to me that only rich people get to invest in assets.
32:07
Speaker 2: How about the poor people? Okay? That was me. That's
32:09
Speaker 2: my mom, right, So that's one. And if you don't
32:12
Speaker 2: have the money, John, what I'll do is as an example,
32:15
Speaker 2: and I did this with one of our team members.
32:17
Speaker 2: They didn't have the money. It took fifty thousand dollars.
32:20
Speaker 2: I fronted the fifty for them. Yeah, became five hundred thousand.
32:25
Speaker 2: They paid back my fifty with an eight percent coupon,
32:28
Speaker 2: and then they kept about four hundred thousand dollars profit
32:31
Speaker 2: and they put down zero. So now the next investment,
32:34
Speaker 2: they're putting down two hundred thousand and have two hundred
32:37
Speaker 2: in the bank. And that brings a lot of joy
32:39
Speaker 2: to me as a leader of my company.
32:51
Speaker 1: My friends have told me, Alex, to slow yourself down,
32:55
Speaker 1: stop talking so loud, long and fast, and explain this
32:59
Speaker 1: to me. You mentioned word coupon. You mentioned the word promote.
33:04
Speaker 1: Can you get so promote is something that Alex and
33:06
Speaker 1: I love. Think about a license anyway, explain to them
33:12
Speaker 1: in your words promote and coupon all we love both
33:16
Speaker 1: of those phrases. But watch explain that, Alix in your word.
33:18
Speaker 2: So if I lend John, my friend here, one hundred
33:21
Speaker 2: thousand dollars and he pays me eight percent, I'm so
33:25
Speaker 2: glad you said that, John, because all these fancy terms
33:27
Speaker 2: and accurate, they're just there to confuse people, right, our
33:30
Speaker 2: people in our community. So that's a great question. We
33:33
Speaker 2: take it for granted sometimes because that's the way you
33:34
Speaker 2: and I talk when we're in your office or my office.
33:37
Speaker 2: So I lend John one hundred thousand dollars, he pays
33:40
Speaker 2: me eight percent. So essentially he's paying me eight thousand
33:43
Speaker 2: dollars a year on that hundred right, And that's called
33:46
Speaker 2: the coupon. Right, And if that coupon is out for
33:50
Speaker 2: three years, eight thousand times three, he owes me twenty
33:53
Speaker 2: four thousand dollars. Essentially, right now, if John and I
33:59
Speaker 2: are partners and we buy a business for one hundred
34:04
Speaker 2: thousand dollars and five years later we sell that business
34:08
Speaker 2: for a million one, essentially there's a million dollars of profit.
34:14
Speaker 2: And because John and I are the code GPS on
34:17
Speaker 2: that million dollars of profit, once they get their money
34:20
Speaker 2: back our investors plus an eight percent coupon or return,
34:25
Speaker 2: then there's about plus or minus a million dollars of profit,
34:29
Speaker 2: which twenty percent of that goes to John and I.
34:32
Speaker 2: And that's two hundred thousand dollars that John and I
34:35
Speaker 2: get for putting the deal together, underwriting it, managing it,
34:39
Speaker 2: sourcing it, and essentially bringing value to it. So John
34:42
Speaker 2: and I walk away with two hundred thousand dollars. So
34:45
Speaker 2: our partners are super happy because they got them a
34:48
Speaker 2: ten X, and John and I are happy because we
34:50
Speaker 2: were able to promote a great deal and then we're
34:52
Speaker 2: off to the next one.
34:53
Speaker 1: So you might have been thinking about it. People might
34:55
Speaker 1: be hearing like a concert promoter, right, I guess you
34:59
Speaker 1: know can generally get your hands around it. But it's
35:03
Speaker 1: a deal promoters, it's an investment promoter. So the promote
35:07
Speaker 1: is the percentage of the profit that the developer gets
35:14
Speaker 1: by bringing the deal to market successfully, and they value
35:18
Speaker 1: added on top of the cost and agreed coupon. He
35:23
Speaker 1: said it much better than I I did.
35:26
Speaker 2: Te let me add one, thanks for our listeners and
35:29
Speaker 2: our viewers listening in. John and I only make that
35:34
Speaker 2: promote if we make money for investors. He very very important.
35:39
Speaker 2: We have complete alignment. If that's a donut and we
35:43
Speaker 2: don't make any money, John and I are out. We
35:45
Speaker 2: don't make any money. We only make money once the
35:49
Speaker 2: investor gets their money back plus an eight percent coupon
35:54
Speaker 2: right return on their investment. Then after that waterfall, which
35:58
Speaker 2: is called the waterfall, once we do all of that
36:00
Speaker 2: at and we have a million dollars left in profits,
36:04
Speaker 2: then John and I split that eighty twenty eighty goes
36:07
Speaker 2: to the investor and that twenty percent goes to John
36:10
Speaker 2: and I as code general partners.
36:12
Speaker 1: The first time I might mention the word waterfall to me,
36:14
Speaker 1: I was actually looking for where we're going on vacation, like,
36:19
Speaker 1: what's the waterfall? So for the listeners, the waterfall is
36:22
Speaker 1: the way in which the transaction breaks out. How's that
36:25
Speaker 1: dollar split up? What's the waterfall, who gets the well,
36:28
Speaker 1: who gets what first right? And what's the priority of
36:33
Speaker 1: the distribution I'm playing, I'm saying this in plain English.
36:37
Speaker 1: That's what we call a financial waterfall. I want you
36:40
Speaker 1: guys to become an experts and all this stuff so
36:42
Speaker 1: no one can uh. As Malcolm Mick said, we've been
36:45
Speaker 1: bamboozo We've been tricked, We've been fooled. I don't wantybody
36:47
Speaker 1: to fool you anymore. I want you to be financially literate,
36:50
Speaker 1: because it's not what you're not dumb and you're not stupid.
36:52
Speaker 1: It's what you don't know that you don't know that
36:54
Speaker 1: is killing you. But you think you know because no
36:56
Speaker 1: one ever taught you.
36:57
Speaker 2: I agree with that, and I think sometimes he's acronym.
36:59
Speaker 2: Sometimes are made to keep our people out of the
37:03
Speaker 2: room and keep them not smart, and really our listeners
37:06
Speaker 2: are very, very smart. We just have to have better
37:09
Speaker 2: teachers that are willing to teach and bring people along
37:11
Speaker 2: like you and I are trying to do. But we
37:13
Speaker 2: do have a lot of resistance because I do feel
37:16
Speaker 2: there's a lot of people that are trying to keep
37:18
Speaker 2: the people down, and I think you're really doing God's
37:22
Speaker 2: work and helping educate people and teach people. And there's
37:25
Speaker 2: no greater gift than teaching someone how to fish versus
37:30
Speaker 2: just giving them a fish.
37:32
Speaker 1: Financial literacy is the civil rights issue of this generation
37:35
Speaker 1: in my opinion. When you know better, you do better.
37:38
Speaker 1: We don't have much time left in this incredible podcast
37:42
Speaker 1: we've had together. This has been rich. I do want
37:44
Speaker 1: to cover a couple more things before we exit here.
37:49
Speaker 1: As you were talking about the waterfall and the coupon
37:51
Speaker 1: and all that, don't get a chance off enough to
37:55
Speaker 1: thank people who got helped to get us here. Magic
37:58
Speaker 1: Johnson would talk about all the people he'd leave a game,
38:01
Speaker 1: a basketball game and ask for the people would send
38:04
Speaker 1: those front benches for their cards, and he goes visit
38:06
Speaker 1: with them and use his credibility to get in their
38:08
Speaker 1: offices and just listen, right, And a lot of those
38:11
Speaker 1: guys end up doing deals with And basically you've just
38:13
Speaker 1: said the same thing. You're giving Warren Buffett some credit.
38:16
Speaker 1: Thanks for saying that. I woult to give Tony Wrestler
38:20
Speaker 1: two hundreds, which is man in the world, credit for
38:23
Speaker 1: doing a deal with me, and I own you know,
38:26
Speaker 1: at the end of that deal, all of the company.
38:28
Speaker 1: He just wanted a coupon. He just wanted a seven
38:30
Speaker 1: percent return on his money. Him and Michael Arraghetty. Everything
38:34
Speaker 1: else paying other than paying my debt, debt and preferred equity,
38:39
Speaker 1: I owned the rest, and we shouldn't. We should all
38:43
Speaker 1: be grateful and gracious about spreading the credit when we
38:48
Speaker 1: actually succeed. Is there somebody that you want to mention
38:53
Speaker 1: that helps you get here? Alex? And also, I didn't
38:57
Speaker 1: want to end with this, you know, rainbows after ms.
39:00
Speaker 1: The mistakes you made is something you kicked yourself about.
39:04
Speaker 1: Why did I do this stupid thing? Something you're not
39:07
Speaker 1: you know, that's a lesson now for the audience.
39:10
Speaker 2: Yeah, So I'll keep it to finances and mistakes that
39:14
Speaker 2: I've made there because we don't have enough documentary all
39:20
Speaker 2: my mistakes. So I'm gonna try to keep this tight.
39:23
Speaker 2: My good friend Grant Harrell once gave me great advice.
39:27
Speaker 2: He always talk about the five bes and he said,
39:30
Speaker 2: be brief, brother, be brief. So I'm going to take
39:32
Speaker 2: Grant's advice on that. So, first of all, I shout
39:35
Speaker 2: out to Tony Wrestler, who's my partner at the NBA.
39:38
Speaker 2: He's one of the coolest people that I've met, but
39:41
Speaker 2: also very generous, and he is someone that really believes
39:46
Speaker 2: in bringing people, all people in the room with him
39:50
Speaker 2: and give him an opportunity, as you will eloquently just
39:54
Speaker 2: described in your partnership with Tony and his partner and
39:57
Speaker 2: your other partner. As far as mistakes, I'll I go
40:00
Speaker 2: to two thousand and eight, because it was a really,
40:02
Speaker 2: really tough time with the financial meltdown. I bought a
40:07
Speaker 2: piece of property, five hundred units right around George Steinbern
40:11
Speaker 2: a field in Tampa where we held sprint training. And
40:14
Speaker 2: my thesis was it it's good enough for George Steinburn
40:16
Speaker 2: and the Yankees, it's got to be good for my apartments.
40:19
Speaker 2: So I basically bought five hundred units for about sixty
40:22
Speaker 2: thousand per door. Okay, I had twenty thousand of equity
40:27
Speaker 2: per door, and I had the loan for forty thousand.
40:31
Speaker 2: What happened was from a Monday to a Thursday when
40:34
Speaker 2: everything went upside down and we had the financial crisis
40:37
Speaker 2: in eight oh nine, my properties, my units were now
40:40
Speaker 2: worth thirty eight thousand, but I owed forty thousand. So
40:45
Speaker 2: basically that's what they call you're underwater, right, And unfortunately
40:49
Speaker 2: I was young and not experienced, and I had what
40:52
Speaker 2: is called the PG, which PG stands for personal guarantee.
40:56
Speaker 2: Oh yes, which if you're listening and you don't really
41:00
Speaker 2: remember anything else, John and I said, please remember this part.
41:04
Speaker 2: Never sign personal guarantees it unless it's your home. Now.
41:12
Speaker 2: I was fortunate enough to have some liquidity, and I negotiated.
41:16
Speaker 1: Everybody means cash cash.
41:19
Speaker 2: I was fortunate to have to have cash, and I
41:22
Speaker 2: was able to negotiate with the banks a very clever
41:25
Speaker 2: deal in which they had like a fifty million dollar
41:28
Speaker 2: write down in exchange for a four million dollar check.
41:33
Speaker 2: And then we said to the bank, look, you're not
41:35
Speaker 2: in the business of managing these assets, meaning multifamily apartments,
41:40
Speaker 2: we are, so why don't we give you a four
41:43
Speaker 2: million dollar check. You write down fifty million dollars. Immediately
41:47
Speaker 2: from losing two hundred thousand dollars a year in that portfolio,
41:51
Speaker 2: we started making two hundred thousand dollars a year because
41:54
Speaker 2: we owed less and we put more equity in. And
41:57
Speaker 2: then we said to the bank, when we sell and
42:00
Speaker 2: the next five years will give you another fifteen percent
42:02
Speaker 2: of the ups Wow. Eventually, right, thinking outside the box.
42:06
Speaker 1: John.
42:07
Speaker 2: Wow, the bank became a promoter on our deal. Yeah,
42:11
Speaker 2: that was what we call a win win win alignment structure,
42:17
Speaker 2: and we sold it for a big number. We gave
42:20
Speaker 2: the bank another few million dollars on the ups and
42:24
Speaker 2: to this day that's still my bank. And we did
42:28
Speaker 2: the right thing at the toughest time, and people and
42:31
Speaker 2: partners will never ever forget that because that builds your
42:34
Speaker 2: reputation in the business community.
42:36
Speaker 1: I'm so glad that you added that, Alex, because that
42:39
Speaker 1: is probably one of the best lessons anybody's going to
42:42
Speaker 1: get from this. There's something called non recourse debt. We
42:45
Speaker 1: don't have time to get into it now. It's the
42:48
Speaker 1: best kind of it's the most appropriate type of debt
42:50
Speaker 1: for the type of large scale transactions that Alex and
42:53
Speaker 1: I did. Either personal residence. It's nothing wrong with a
42:56
Speaker 1: personal guarantee. You know, I have a personal guarantee in
42:58
Speaker 1: our home, right, that's right. But you when you're doing
43:00
Speaker 1: business deals, should try to let the assets speak for themselves.
43:04
Speaker 1: But what he did structurally was brilliant. And when you're
43:08
Speaker 1: being run out of town, get in front of the
43:10
Speaker 1: crowd and make like a parade and I had followed him.
43:15
Speaker 1: I sort of knew. I thought I knew where he
43:17
Speaker 1: was going. But that last piece was very creative. He
43:19
Speaker 1: turned his banker into a venture capitalist, into a joint
43:22
Speaker 1: venture partner. It was really quite quite clever. And you
43:26
Speaker 1: turn a negative cash flow into a positive cash flow
43:30
Speaker 1: overnight through structure. Listen, everybody, there's a crisis coming in
43:34
Speaker 1: some parts of the economy. Commercial real estate. It's got
43:37
Speaker 1: a trillion dollars of refinancing they gotta do. In the
43:41
Speaker 1: next year or two. There may be properties that become available.
43:45
Speaker 1: Real estate has never gone down the history of the world,
43:47
Speaker 1: I mean in America rather over time. Think about some
43:51
Speaker 1: of this. It's not a problem, but as Alis just said,
43:54
Speaker 1: in your neighborhood, maybe some of this is an opportunity
43:58
Speaker 1: for you to reposit that asset, help the bank, the lender,
44:03
Speaker 1: help yourself, help your community, and create a little generational wealth. Alex,
44:08
Speaker 1: you are walking generational wealth. You're a walking in tech gritty.
44:13
Speaker 1: You're a good guy. And you know, we're all angels
44:17
Speaker 1: with dirty faces. You know, a saint is a centerlar
44:19
Speaker 1: got up. So none of us are perfect. But I
44:22
Speaker 1: like your imperfection. I like the way you roll and
44:25
Speaker 1: I appreciate you coming on this podcast and being so transparent. Charlemagne, myself,
44:31
Speaker 1: all of the friends of this podcast, thank you for
44:34
Speaker 1: just being you.
44:35
Speaker 2: John, thank you very much for having me. I consider
44:37
Speaker 2: your dear friend, and we're going to do a lot
44:39
Speaker 2: of great things together for the community and maybe even
44:41
Speaker 2: in business. But just one last message for your great audience,
44:44
Speaker 2: and again I want to just say how important it
44:47
Speaker 2: is that they know that they are smart, they are capable,
44:51
Speaker 2: they are enough. We just got to do a better
44:53
Speaker 2: job us as leaders to educate them and bring them along.
44:57
Speaker 2: And don't forget that. Remember this, remember this. A champion
45:04
Speaker 2: is a loser that tried one more time. Hmm. Don't
45:08
Speaker 2: give up and just keep on trying. You can do this.
45:12
Speaker 2: And John and I believe in you.
45:14
Speaker 1: Yeah, Alex believes in you. That's why he's pouring into
45:17
Speaker 1: you because he sees you in himself. He sees you
45:22
Speaker 1: as the little boy, the young person who is trying struggling.
45:26
Speaker 1: He sees his mother in the single parent households. He
45:29
Speaker 1: sees the young black men trying to make it as
45:32
Speaker 1: a parent, he sees his father there. He can relate
45:35
Speaker 1: to you because he was you, So go out there
45:38
Speaker 1: and kill it and then help somebody come up behind you.
45:41
Speaker 1: This is John O'Brien. This is Money and Wealth, and
45:43
Speaker 1: this is my man, Hey Rod.
45:46
Speaker 2: John, my man, Thank you so much for having me.
46:02
Speaker 1: Money and Wealth with John O'Brien is a production of
46:05
Speaker 1: the Black Effect Podcast Network. For more podcasts from the
46:08
Speaker 1: Black Effect Podcast Network, visit the iHeartRadio app, Apple Podcasts,
46:13
Speaker 1: or wherever you listen to your favorite shows.