This Real Estate Strategy Pays 50%+ Returns Using Land, Business Equity, and Vertical Integration

Thomas Heshion (00:00)
Everybody, everybody has doubt right away. You can’t, I start my, when I speak it, when I speak at a real estate conventions, I start out with how many believe you cannot make 50 % a year on your real estate and everybody raises their hand. And I’m saying, I agree with you. I agree with you. You can’t on real estate, but you can, if you own the real estate and you get 50 % of the revenue of the company.

Michelle Tack (00:03)
Hi folks, thanks for joining our podcast session today from investorfuel.com. I am your ⁓ podcast host and I’m glad to be with you. I’ve got someone I’m really

to have with us today. It is Tom Heshion who has some unique skills that I think you’ll love hearing about specifically in acquiring land.

and being able to ⁓ make some fairly exorbitant returns on that. Tom, glad to see you’re here ⁓ and ready. I think our listeners are really gonna get something away from how you’re approaching the land acquisitions and funding and the type of folks that you are interested in attracting. So let’s dive in. So first off, for many who, yeah, absolutely, thank you. So first off,

Thomas Heshion (01:46)
Sure. Sure, thanks. Thanks for having me. Thanks

for having me.

Michelle Tack (01:53)
Yeah, yeah, absolutely. So first off, for people who may not be familiar with your role, give us the short version. What’s your main focus these days?

Thomas Heshion (02:02)
So I have a family office and we’re invested in ⁓ four different areas, but one of those is real estate. And we’re focusing mainly on the real estate right now.

Michelle Tack (02:16)
Can you talk a little bit about the real estate in more detail ⁓ in terms of what type of real estate and why that real estate as well as market you’re operating in?

Thomas Heshion (02:29)
Okay, so through all of my past, which we’ll get into later, I concentrated on high multiples. And the difference in what we’re doing compared to what normal real estate investments are doing is that we not only charge rent,

you know our our our investors not only receive rent but they are they receive fifty percent of the business that’s in the buildings or a i should say on the property because it because we do out things outside properties outside commercial we do agriculture so when you receive fifty percent ownership of the business it equates to a forty or fifty percent return per year by comparison to ten to twenty in regular real estate

Michelle Tack (03:25)
And that’s really, as you know, Tom, incredibly unique, right? I mean, those multiples, anybody would salivate over. What caught my attention was really that metric that you’re talking about, that 50%, because when I read about you, I thought, how does he do it? How does he get that 44 % or 50 % of their rent?

Thomas Heshion (03:43)
Yeah. Everybody, everybody thinks.

Yeah.

Everybody, everybody has doubt right away. You can’t, I start my, when I speak it, when I speak at a real estate conventions, I start out with how many believe you cannot make 50 % a year on your real estate and everybody raises their hand. And I’m saying, I agree with you. I agree with you. You can’t on real estate, but you can, if you own the real estate and you get 50 % of the revenue of the company.

Michelle Tack (03:49)
Bye!

That’s right.

It’s just, it’s so unique and that’s one why we love to have the fact that you’re here. That’s not obviously easy in this ⁓ climate, but can you talk about how you’re keeping the machine running smoothly? Like how you’re doing that in a process? Because often, you know, no matter how great we are at real estate, ⁓ you know, keeping focused and running the ship is, ⁓ you know, can be challenging.

Thomas Heshion (04:36)
That’s a great question and the answer is we limit our growth. We limit our growth to only four new locations a year. ⁓ that’s, you know, I have a cousin that opens 20, well, when he worked for Panera Bread, he opened 28 locations a year. I don’t know how you do that. ⁓ Four is within our wheelhouse. So we limit it to four locations per year.

Michelle Tack (04:42)
Aha.

That makes sense. That’s very focused. if you look at, I’m an ex professional athlete. played tennis for a living for a few years. So I realized I wasn’t good enough to make the money they make now. having a single, you know, being intentional, being in the moment and having focused for any business or any professional athlete or anyone that is trying to reach excellence obviously is super important. ⁓

But life isn’t perfect, right? Sometimes things go sideways ⁓ as an operator. Do you mind ⁓ maybe show, Sherry, one of those moments how it started to go sideways, but you were able to pivot fairly quickly.

Thomas Heshion (06:34)
Yeah. So, uh, I actually wrote the business plan in 1989 and you couldn’t do it. Um, ever since prohibition, I’m sorry to say the mafia had a lot laws established that said you have to sell it to a distributor. And so the distributor sells it to the, to the liquor store or the, or the bar. And not only that they own the trucking company. So not only did you have to sell it to them on paper.

But they had to actually truck it from your location to the distributor and then back out to the, and that’s the way the law has been for a hundred years, ⁓ nearly a hundred years. and so finally, so I parked the idea. So finally in 2005, 15 years after I wrote this going vertical plan, ⁓ did, did I see a lawsuit where, where winemakers sued the state?

And they said, this is restriction of trade. You can’t do this. And they changed the law. But the judge said, I can only help you with our state. If you want to go across state line, you got to sue the federal government. And nobody’s done it in 20 years. And that’s good for us. So in our model, we grow our grapes, whether they’re in California or Arizona, and we harvest them and we drive them in an air conditioned truck to the state where we want to distribute it.

Michelle Tack (07:35)
Mm-hmm.

Thomas Heshion (08:03)
So when we ferment it, it becomes alcohol in that state. So now we can self-distribute it and we can open our own tasting rooms and be completely vertical. And when you’re completely vertical, you average $44 of bottle retail at about $30 net, triple net. And that’s the way you make 100 times what Gallo does per bottle, right?

Michelle Tack (08:09)
That’s awesome.

Thomas Heshion (08:31)
And so with a much smaller operation, we make large amounts of money and it equates to $90,000 to $120,000 per acre.

Michelle Tack (08:45)
That’s crazy, right? I mean, you’re breaking a paradigm.

Thomas Heshion (08:47)
Well, no,

it’s not crazy. Go talk to anybody in California. They’re all doing it when they sell it over their counter. But California still, they, so after Gallo got done buying 95%, not Gallo, should, I use them because they were the big, the first big one, but Constellation brands, the publicly traded and privately held companies bought, the top 20 bought 95 % of all the 600,000 acres in California.

So they could control, they saw this coming when the first lawsuit happened 20 years ago. And during that 20 year period, they bought them all up. So now in California, they don’t even want the last 5 % because they’re all little vineyards. They don’t even want them. And those guys are stranded. know, they’re, they’re stuck right now. And those are the ones that are getting ripped out. So as the market fell, there’s a, if you read between the lines, like you were saying, the New York Times reported.

premium brands actually went up 15 % in price. So premium brands are making, have not had any downfall in the market. It’s the cheaper brands that have. And we think that’s because the younger markets not drinking as

Michelle Tack (09:47)
Mm-hmm.

Thomas Heshion (10:40)
liquor. And so if you concentrate on the premium brands, opening these wine tasting rooms that are tastefully decorated and

and you average $44 a bottle. Now you have, now you have a piece of property that has a brand that has a proven return. in, years, in year seven, unlike any other, you can, there isn’t an apartment building or a house rental property that you can sell and get 30 times earnings, but vineyards bring 30 times earnings like a publicly traded company.

Michelle Tack (11:01)
Yes.

Yes, I mean it.

It’s crazy. You and I had a share before for the guests on this podcast because we both have been in high tech at one point. the enormity of the percentages are just unlike any other that you’re talking about here in real estate. And at the end of the day, this is, what I think is unique about you is that you’ve taken the model and pushed it, pushed it up.

thought outside the box. ⁓ And I think the folks on this podcast will really take advantage of that. Rather than just dabbling in real estate, that doesn’t really provide you a long-term pathway. It’s like anything else, getting in, developing a plan. love that when we had done the preparation for this, that’s first thing you talked about was a plan. ⁓ And so what are, and for folks,

folks that are looking at different things, always like to understand, to learn from you, what is the next real goal that you have in the next year or in the next 30 to 60, 90 days?

Thomas Heshion (12:30)
So we ⁓ tried to make it attractive to the market. the minimum, we broke it down because of zoning, you can’t get lots any smaller than 10 acres, right? For zoning purposes. So what we did was we set up an LLC for each 10 acres. And you can buy one-tenth of an LLC for 80 grand, right? So it’s 80 grand an acre.

Michelle Tack (12:36)
Mm-hmm.

Mm-hmm.

wow.

Thomas Heshion (13:00)
That returns 90,000 to 120,000 a year. But you, the, problem with us is that investors don’t want to wait four years for their first return. Yeah. You got a planet. You got to wait 36. Yeah. You got to wait till you’re the third year. You get a third of a crop. So you don’t get a full crop until a year five and they don’t want to wait. So that’s probably our biggest obstacle is people don’t want to wait, even though.

Michelle Tack (13:14)
understandable.

Thomas Heshion (13:28)
We’re telling, we’re showing them, right? We have wine tasting rooms, we have financials to prove that the national average is $44 in the wine tasting room, which nets about $30 after cost of sale and cost of goods. And, um, but even though that they know that they can make a huge return from year five on, they don’t want to wait. That’s probably our biggest obstacle.

Michelle Tack (13:31)
Mm-hmm.

Mm-hmm.

Yep. what are the needs that you have is to change the mindset a bit, And certainly we foster those relationships who these type of conversations. In terms of one last thing I’d like to explore because we always talk about a network, but simply, and we have, as you know, at Investor Fuel,

several hundred members and that share ideas, et cetera. But I wanted to know, ⁓ you know, what does your network look like? Do you have an intentional network? Can you talk about that a little bit of your business, a business network that you work with?

Thomas Heshion (14:40)
Are you talking about the other people involved in the company?

Michelle Tack (14:44)
Yeah, other people that are involved in the company, also outside people that maybe you’re looking to leverage. You had mentioned to me personally that you’re going into Europe, other networks, you know, maybe in real estate that you’re leveraging, what have you.

Thomas Heshion (15:42)
so w we believe w we believe that we are the best investment in real estate available in the United States right now or Europe. So there’s nothing else that return that, the simplicity of the model is simply, you don’t only get rent, you get rent plus 50 % of the net of the company. But that includes, that includes the equity.

Michelle Tack (15:52)
Mm-hmm. Mm-hmm.

Shoot.

Thomas Heshion (16:09)
And in a vineyard, if, if the, publicly traded companies are the ones that will buy us or the large, large family owned ones are the ones that will buy us. They’re trading at 30 times earnings and they pay 20 to 25 times earnings. Right? So when you have a vineyard, this netting $90,000 an acre and brings 20 times earnings, it’s going to bring a million eight an acre.

Michelle Tack (16:37)
Mm-hmm. Mm-hmm.

Thomas Heshion (16:37)
And we’re selling

those for 80,000 an acre to our investors. Right. So, and they get, they get a 50 % split with us. So they’re 50 % of the sale price is 900,000 on an 80 grand investment. So that’s the key is, is the exit in year seven that nobody else, nobody’s selling this condos don’t sell for that high of a multiple.

Michelle Tack (16:41)
Mm-hmm.

Mm-hmm.

Thomas Heshion (17:06)
Vineyards do that’s why I’m saying that if I share in the upside with the investors Will will bring them will they’ll come rolling into us. So we only just started selling these We sold our first one three months ago. We sold one a month. We have three of them sold right now We have somebody talking about buying 20 at once but but Yeah, yeah, and so a 16 million dollar investment from one from one entity

Michelle Tack (17:08)
Mm-hmm.

Yup.

Wow, that’s great.

Thomas Heshion (17:36)
⁓ but, ⁓ but we wanted to, we wanted to make it where everybody could play when we’re hoping that we get more real estate people, because we’re going to build a timeshare home. So our members and our owners all get to come use the vacation home. Right. So yeah. Yeah. I mean, so you have fun with your investment too. And we’re doing the same thing with the chalet and in Europe. So if we buy the one and we’re.

Michelle Tack (17:53)
that’s a great idea. That’s a great idea.

Thomas Heshion (18:03)
buy, we’re negotiating on one in Italy right now and, and one in France. So if we divide those up, then they get to use the company jet and that all comes, they not only own a fraction of the jet. the club has different levels. You can get in and just buy two bottles of wine a month or a case a month. You can buy one acre. You can buy six of the tens so that you are in control of the LLC and you decide when it sells.

Michelle Tack (18:14)
Bye.

Thomas Heshion (18:33)
Or you can buy all 10 and not have any partners and you can buy those in the United States or you can buy them in Europe, either one you want. So, ⁓ it’s, ⁓ and then it advances to a turboprop plane in the club here in the United States that seats nine. It’s a Pilatus, you know, nine seater plane. ⁓ so you take four couples with you and, know, and go and, and go enjoy the vineyard.

Michelle Tack (18:36)
That’s great.

Thomas Heshion (19:01)
And or if it’s going to do the one in Europe, we’ll have a dip. have a jet for that one. So these club levels have,

Michelle Tack (19:07)
That’s fantastic.

For the audience, this is what we do for folks and we will continue to get other operators owners on our podcast. So happy to have you subscribe if you haven’t yet, again, investorfuel.com. Thanks, Tom. Appreciate all the ⁓ information. It was fantastic. Bye bye.