Fred Sands, whose name once was posted on for-sale signs on houses all over Los Angeles' affluent Westside, quit selling homes more than a decade ago. But he has quietly built another real estate empire.
The striving son of a New York cabby and small-business man, Sands built the largest independent residential real estate brokerage in California with 65 offices and 4,000 employees. Fred Sands Realtors and affiliated companies generated $9.4 billion a year in sales when he sold it in late 2000.
Coldwell Banker paid nine figures — more than $100 million — for the company. Sands mostly disappeared from public view, but he didn't stop working.
Sands has built a portfolio of shopping centers, and he also heads a private investment fund in Los Angeles called Vintage Capital Group. The fund has put money into helping finance mid-size companies such as drug-testing technology firm eScreen Inc. in Kansas.
Sands is 75 and lives in Bel-Air with his wife, Carla, and daughter Alexandra. He is president of the Los Angeles Museum of Contemporary Art board of trustees. In a wide-ranging interview, Sands talked about his new passion: shopping malls — how he finds them and why he buys them.
Did you think about taking a permanent vacation after selling Fred Sands Realtors?
I never considered retiring. I've had friends retire, and nobody wants to go to lunch with them. I like to be active. I like the action, and I can't see myself retiring.
Your Los Angeles company, Vintage Real Estate, bought 1 million square feet of shopping centers in the last 12 months and is on track to buy 2.5 million more square feet in the first quarter of 2014. After spending three decades in housing, why are you attracted to malls now?
If you fix up a house it adds value. It's the same way with shopping centers. A remodel improves its looks, and if you have the right contacts, you can get the right tenants and get a better cash flow. Better anchor tenants attract better small shops that can pay more rent.
Aren't there too many malls already? We've seen a lot of empty storefronts since the recession hit, yet you're buying more malls to renovate.
The real estate market is a series of micro-markets. Certain areas are overbuilt, and you've got to be very careful. We turn down 50 malls for every one we do. If we can't make it a winner, we don't want to buy it.
Vintage Real Estate has malls in several states. How do you learn enough about local markets to know which ones to buy?
You ask questions. When you think you are the smartest person in the room, that's when you are going to go broke. If you talk to people, they will tell you.
We walk around the mall, walk around the town. We talk to the mayor, the chief of police, the fire department. You can find out a lot of things. In Texas, once the chief of police said, "Do you have a gun?" I said no. He told me, "You would be the only one without one." We didn't go in there.
We looked at a mall in Massachusetts with an empty big-box space where a Circuit City had been. We did research and found out that there was demand for a Burlington Coat Factory. So we bought the mall and put in Burlington Coat Factory.
In central Washington we went to a restaurant and told people we're buying the mall. We found out that customers were driving out of town to Seattle to buy
What type of tenants do you prefer?
We are very credit-oriented. We look for tenants who have liquidity and can pay the bills.
Do you ever take tenants that don't have an established brand?
We'll take a chance on a lesser-known if they have something very good, like a small grass-fed hamburger chain we saw that has a line out front. We are going to arrange to put them in several of our malls.
Can you tell us the name of the company?
Not yet. We're going through their financials now.
Aren't you concerned that the Internet will make malls unprofitable? It's so easy to order goods online now.
If a lady is going to a party and wants to buy new shoes, she wants to try them on. There is something nice about touching and feeling.
The answer to the Internet is clicks and bricks. Nordstrom, for instance, has dual distribution methods. And if they deliver something you don't like, you can take it back to a store.
Have malls also become more social? In the early days of indoor shopping centers, many mall owners avoided putting in public benches on the theory that people who are sitting are not shopping and buying.
Malls are an all-American social experience now, the town square. People are gregarious creatures and use malls to socialize. Pre-teens meet friends there. Adults have a drink.
So you're not opposed to seating?
In 2003, we bought a shopping center in Albuquerque. We put in music, put in benches and automatically people stayed. The population is getting older and they want to sit down. When they get hungry, they get something to eat.