The Man Who Taught Kison Patel to See M&A Opportunities

24:49Because$1 ,500 at the time, at five franc a dollar, was 7 ,500 franc. It was an enormous amount of money. The first month, we made$60 ,000. Wow. I said, this is incredible. That same month, I decided I'm going to open another store. One month in business. I said, I'm going to open another store. Businesses every day growing,$1 ,700. Saturdays, we used to make$3 ,500. This is the El Dorado. When we think about America, the French people, they said, the El Dorado meaning we are mining gold here. I have to go back to the landlord. The landlord had the restaurant called Le Perroquet in the building, in the third floor.

25:39And he had a clause with the restaurant that he cannot rent to another restaurant. And my landlord, he was a lawyer and an extremely bright guy, extremely smart guy. I am sitting with him and he tell my brother, I can't rent him the space because I cannot put any sitting in. I cannot have another restaurant with sitting in the building. I said, that's not an issue. I have a solution for that. I'm just going to put some high table. We call them counters in France. And people, they come in, they have their coffee. They are doing standing. There is no sitting. He looked at my brother. He said, is he all the time like this?

26:18He have to find a solution to anything. He said, I cannot tell you who is my brother. You're going to discover him yourself. At the end of the discussion with Mr. Stockler, he said, I want$4 ,500. $500, no sitting in the space. And if I have anybody complain, they have to fix the problem or I'll throw him out. Done, I said. We have no more to talk. Prepare the lease. I said, you have a lawyer? I said, you will be my lawyer. Tell my brother, I said, he will be my lawyer. He seemed decent enough that he's not going to screw me. Translate it. He said, my brother, he said, he want you to be his lawyer.

26:55He think you're decent enough that you're not going to screw him. He said, he looked at you as a good Jewish man and you're helping another one of yours. And he turned out to be a pleasure of man. He passed away. There is an anecdote, I have to mention it. His son took over. His son was a loud mouth. It was a very, how I call it, he was confident. He had that confidence that made him arrogant. Some confident people, they are very arrogant. While his father was alive, I had an interaction with him, and he raised his voice in their office. They had an office, and he had an office with his father.

27:38He raised his voice, and I raised my voice. And my brother was late in. I said, raise your voice. Say it loud like this guy. He doesn't think that he's going to run us over. And the father came in. I have this heated discussion with his son. He said, what's wrong with you? I said, where I come from, dogs, they don't make cats. And cats, they don't make dogs. Your father is a gentleman. Why can't you be like him? And the two, they asked, he said, what are you saying? And my brother translated in English. They start laughing. He said, I told you. The father tell his son, he said, I told you, he is an interesting character.

28:19And he became one of my dearest friends, the father and the son. In our discussion, I said to him, to the son and the father, I would like an option to buy the building. They look at each other. He said, we had to question ourselves if we rent you the place. I said, so what do you have to lose? Giving me an option shouldn't be difficult for you. And he said, well, how much this option should be? I said, ask him how many square meter he have. He said, here is square feet. He had 72 ,000 square feet. I said, hold on, that's 7 ,200 square meter. I'll offer him$10 million. I'll buy the building at$10 million at the end of my lease.

29:01They look at each other and they can say, they are thinking, where is this crazy guy came from? I said, I went in the lease. I went to have my option to buy the building. And at the end of 10 years, I bought the building and I paid$10 million.

29:15Kison Patel:After 10 years, probably even worth more than that. The building, when I rehabbed it and I turned it into the Walton residence, appraised for$22 million. And all my sadness, I gave it back to the mortgage company. I owed them$15 million. It was appraised for$22 million. And I walked away with some settlement. They gave me some money to walk away. Because my concept, today that building is a money-making machine. But for me, when I started, I made it into a residence. I had this vision of this residence, a hotel, basically. It's a higher number. We had the services of a hotel, but a hotel room with three bedrooms.

29:59Kison Patel:Long-term stay. Long-term stay. The vision was incredible.

30:08Kison Patel:The certifications are why you sign up. The platform is why you never leave. Everything lives on deal pilot. And it's not a video library. You get all of our content, including the stuff we've never put out publicly, extended cuts, extra courses, the good material that never hit the feed, and the artifacts. This is the part I'd pay for alone. Tons of templates and tools across the whole library, the framework for every stage of the deal. You don't just learn it. you leave with the thing you need to go do it. Here's my favorite part. You can search all of it with AI. Want everything we know about Earnouts?

30:48Kison Patel:Ask and it pulls from 400 interviews in seconds. You can even build your own course on any topic on demand. It's an on-demand advisor. You get answers, but the answers come with the receipts. You see where it came from. You see who said it. This isn't a chatbot making things up. The best practitioners on earth on call. Mascience.com

31:18Kison Patel:I remember this building. The units were high end. I turned it into a very high end. I made the furniture. I went to Italy. I bought certain models that I shipped to China. And I went to China. I made them in China and I brought them to Chicago. It was a project of really love. And that project was so dear to me. Like every project I did in my life. Everything that I did in my life, I did it passionately. I never did anything that, from the bakeries to anything that I started here in the United States, I put my heart in it. I never cut corners. The best of the best. Did you end up making the 50?

32:00Kison Patel:How many bakeries did you end up making? I did two of them. I went to Michigan Avenue. I was paying at the time, I believe. $12 ,000 a month in rent. When I went to see Lester Melman and I said, I would like to open a bakery here. He said, how can you make the rent? We went$12 ,000. I said, what's the big deal? And the honest truth, I really have no idea. I had, I was just, I had the guts. I had that feeling that I can do it. I did not do any market research, market studies. I said, I am on the Champs -Élysées of Michigan Avenue. How can I go wrong? My accountant was Laventhal and Horvath, big accounting firm.

32:42All their customers, they do millions and millions of dollars. I met this gentleman, Marvin Siegel. He said, we don't take clients like... I said, why? He said, because we just do big volume. I said, I'm going to be a client who does big volume. Why don't you take me? He said, I have partners. I said, talk to your partners. Have a meeting. I come talk to you guys, all of you. He come back to me the same day. He said, my partners, he said, we're going to give him a shot. I said, I'm renting this store on Michigan Avenue. I want you to represent me. Michigan Avenue, he said. Do you think they will give you the store?

33:20I said, of course they will give me the store. He made me an appointment with the owner of the hotel who bought at that time, I don't remember what was the name of the hotel, but it was a thousand room hotel, 505 North Michigan.

33:33Kison Patel:What is that, by Intercontinental now? Intercontinental, yeah, Intercontinental Hotel. One mistake I made, the biggest mistake in my life. When he rent me that space, I did not ask him for an option to buy the hotel. It came to cross my mind, but I said, they're going to brew me with a cannon to get me out of here. They rented me the store. They didn't give me really any tenant improvement. I went and I built a duplicate of the store that I had on Walton Street. I opened February 22nd, 1983. February is very cold in Chicago. The day, I believe it was like 60 degrees. The first day I did$3 ,000 with 70 cents items.

34:17We don't sell high ticket items. The most expensive item was$3. We sold soup, salad, and sandwiches. The store the first year did$2 million. Wow. We literally were printing money. The first month that I was at 505 North Michigan, I said, I need to have a commissary to make my product. And I said, I need to be less than one mile radius. I took one mile. I looked at the map. I took my mile radius. That's in my field. I know. I understand those things. Construction and that type of things, that's something that I have a good grasp of that. I took my car. I had this Mercedes 280 SL that I sent from France.

35:01I sent two cars. I had two Mercedes. The 280 SL, what came first and after the other one, it was a 500 SE. I took one mile radius and I drove to see how far one mile. And I end up around Lake Street and Carpenter. Lake Street and Carpenter at the time was a very bad neighborhood. And I found this building, which was 44 ,000 square feet. I took that building. I built the size of semi. I took the measurement of semi, and I built a truckload in life. When half the truckload was a freezer and the truckload was a cooler, and I opened a bakery, commercial bakery. The little equipment I have, it was like we were lost in this bakery.

35:53But I had this vision that I need this commissary where I can manufacture for 10, 15 stores. I had this vision that we were doing an incredible business between the two stores, I think. We're talking about probably$3.5 million in revenues, which was a lot of money. Yeah, especially in the 80s. With the food costs we have, we had 17 or 18 % food costs. We had soup, salad, and sandwiches, and the bakery goods. and we were printing money. I decided to open this commissary and when I took that building, it was in very bad shape and I rehabbed that building and I made it look great. I said, this is the business where I need to be.

36:40I can take all these buildings around here and I can turn them into something. My brother, he said, you're in the biggest garbage on the planet. I said, explain me something. I said, I wish you knew Leal in Paris when they were Leal. There was a dump. I said, I am in Leal here in Fulton Market. There is Fulton Market, Randolph Market. This is all the wholesale places. I said, this is going to be the hottest neighborhood in the planet. I said, I hope you live long enough and I live long enough and you can see it. Not by market research. that not it's just a vision I'm comparing what I saw in Paris and I am trying to think Chicago would be the same way and actually it happened

37:31Kison Patel:that's the whole West Loop so you this is when you shifted focus you went from bakery and then I realized there's a bigger opportunity with the real estate correct biggest opportunity in real estate so I bought this building with a lawn from the seller and I did the rehab with the cash flow that I was having from the bakeries. And I put a loan on it. I don't know if I bought it for$210 ,000. And when I finished with it, I was able to borrow a million dollars on that building. That's when you learned how real estate finance works. That's how I learned how real estate finance works. And that's when Fulton Markets started becoming very in.

38:08I go and try to buy other properties in Fulton Markets. I went to the corner of Fulton and Racine, and there was a meatpacking and meat processing. I went to see this guy, Walter Nimzura. I said, I would like to buy your building. And he said, how much do you offer me? He said, how much do you want? He said, my building is not for sale. I said, I can offer you$700 ,000 for your building. He said, do you know what you're doing? I don't know. He said, maybe. He said, you got nothing to lose. I said, I want to buy your business and the building. I said, I'll give you$100 ,000 for your business. I take over right away.

38:43And I take over the building. He gave me six months. I said, by the way, I want you to stay working here for six months. Like this, I'm not going to dilapidate your business. We're going to run the business that belong to me. We agree on the amount that I'm going to pay you. If at the end of six months, I refinance and I pay you off, you go your way and I go my way. If I can make it, I'll give you back your keys. I said, I'm never taking your keys because you're going to be working here and coming every day to work. And we agree on the salary. We agreed on everything. I went into a bank called Atna Bank.

39:18They were on Lincoln Boulevard. I went to them and I said, I would like to borrow$1 million. Because I owe, I said, I owe money and I'm going to put money for the tenant and prove. They gave me the$1 million. I paid him off. After three months, we were in business. And it started with$300 ,000, rehabbing the building from the top coming down. The business is still open, but it was open maybe for another 90 days. I turned it into condominiums. I turned it into condominiums. I turned it into 27 condominiums. The cheapest condominiums, the biggest mistake I made, I sold for$450. And the highest, I sold it for$1.8 million.

40:01It was the top floor, a penthouse. I gave half to my brother. And me, I kept the other half plus half a floor above that I created. I sold mine because I needed the money and I needed to reduce my debt. And that's the story of the Fulton Market. My brother still lived there. And we owned the ground floor. The ground floor, my brother opened a restaurant called Pasta Veneta. And I still have an office on Fulton Market.

40:30Kison Patel:Luxury condos. Yeah. Very nicely done. I remember taking a look at the building. Very nicely done, yes. I copied all the characteristics from the building. I built an addition to the building with the same brick color. Remember, you told me about this when first time you applied for a loan, they didn't say yes. You got like a no. Yeah, they told me no. And I went to the bank and I said, give me the reason why you are turning me down. He said, why? I said, you want me to be honest or you want me to give you some bullshit story? He said, honest. I said, I want to know why you turned me down, because I'm going to go to another banker and everything that you didn't like, I'm going to make it look better.

41:12Anything that I didn't tell you that I'm going to do, what should I have told you for you to approve me? What do you need to see in my financial statement for you to approve me? He said, it's going to be a long discussion. I said, I have all the time. So the guy basically gave me the secret of what I should have done to get that loan. I said, thank you. I went to another bank and everything that he told me that I should have said, I said it to the other bank. And I ended up getting$3 million for to rehab that building. And for me, now I am at the time in my life, I'm 32 years old and the bank is giving me$3 million.

41:53$3 million at that time, time five. That's 15 million French francs. That's being super rich. I said, it's growing trees in the United States. I feel so easy. And people, they used to tell me, do you regret anything in the United States? I said, yes. I regret that I come 15 years ago and I stayed in New York because I discovered New York with my bakery product. If I opened the bakery cafe in New York, I would have done 50 times better. This is hindsight 30 years later until today. I do real estate, but I miss that cash register. Yes. I miss that cash flow. And we were doing a big number in cash flow.

42:40And I said to myself, why I don't go to New York today? Why I don't go to New York and open this French bakery cafe? To this day, I have that void in me that tell me, why don't you go do it? And I don't know.

42:55Kison Patel:What happened to cafes? I went to the real estate business. And my brother, I said, you run this food operation. My brother, the bakery business was a very challenging business because you work day and you work night. Day, you have the stores. Night, you have the production. When I started, I was working 20 hours a day. During the day, I was trying to run the business and also learn the business. I can't say run the business because I knew nothing about the business. I was learning the business and correcting errors, basically. I go to the business and the only thing I do, I look at what is not right.

43:35And I put it, I take an author and I start asking people, how do you do this? How do you do this? I listened to them and they asked me, do you have this problem? I said, no, I don't have this problem. I just want to know if the problem comes, I get ready for it. I didn't admit that I had a problem. If you admit you have problems, you're weak. So I always dealt from strength.

43:58Kison Patel:You're learning from other people's experience. I asked him the question. I said, how do you handle this? There was a gentleman. He had this restaurant bar nightclub called Le Roulet on Oak Street. He was in New York. He was very successful in New York. He wasn't doing well. And this place was owned by Chuck Fager and Barbara Eden. They are the one they build it on Oak Street. And I wanted to buy it. I never told him that I would like to buy his place. He spoke French. And we sit down like all the owners of restaurants. They spend a lot of time talking and working. And I was asking him many questions to learn about his business.

44:38And I end up buying his business because we had the same accountant, Sam Namias, the accountant. And I told Sam, I said, make me make this deal. Because he was really the one running the business here.

44:51Kison Patel:You bought the nightclub. Yes. You bought a nightclub. I bought a nightclub, yes. I bought a nightclub. I bought a restaurant. I changed the restaurant. There was a chain of restaurant in Paris called Hippopotamus. they were basically specializing in meat. So there is one thing that I didn't know, that here in the United States is the only country where if they make one product, they can make a trainload of products. And that product is the same one, same consistency. The French word is homogen. It's basically if you come today and you take one product, you come back six months later, you can find the same product.

45:31From where I come from, I didn't have that education. There is some artistry that we have in the food and in the bakery and so many things. People, they are always creating a new one. But here in the United States, I found out, do two or three things and that's all you need to do. You don't have to go make 50 things. You reduce your inventory. You improve your production. You improve your product. It's much smarter. Over there, it's like the French, they said, oh, petit bonheur, la chance. You put a lot of luck in it. Hopefully, it will work.

46:10Kison Patel:Now you've done quite a few businesses. You've got a lot of real estate property. I did a few projects in real estate. I think in the West Loop, too. It's like in the Chicago area. I don't know how many, because you had the commercial buildings. You had residential buildings. I really, today, my memory, I really honestly can't remember all the projects that I did. There's a lot of projects because I was busy working with you on a lot of projects. There was a Shiller Street, which is, I know well Shiller Street because I saw a sign. Somebody told me about it, that property eventually will be for sale.

46:44And I imagine it went, as soon as I saw it, I said, I make three townhomes here. I'm going to live in one and I sell the other. And I did it for one purpose. I said, my townhomes should be ready, should be free. I just want to have a home that belonged to me with no mortgage. And my brother, I said, do you want to be partner with me? I put you on the lawn with me. He said, no, I don't want real estate. Because he was living in one of those apartments. And the mortgage was very high when we bought. And at the end, I said, my friend, I need your part for the mortgage. He said, I'm sorry, the real estate is not for me.

47:20I don't want to be part of real estate. I said, then pay me the rent. Just pay me the rent. I'll swim on my own. He was paying me the rent. I went and I did the plans. I prepared the plans. Start looking for the money. You know, I'm more fluent in English. I'm learning little by little. I went to a bank. They lend me the money for to build three thousand. I told my brother, my friend, you have to move. And at the time, I was doing another project on Grand Avenue with this young guy that I met. He was working for me, Andrew Hirschhoff, and he became my partner. It was my go-getters for deals. And that was his assets.

48:00And we did a couple of deals before that. We built the two six-unit apartments. We did very well. We sold them. And we started this building on Grand Avenue. And I was almost done when I asked my brother to move out from Schiller. And he bought a unit, basically bought a unit at my cost on Grand Avenue. And the three homes I rehabbed, I started the rehab and all of them, I borrowed the money. I had the work. I had the money to do the work. And I sold one unit for a million aid. I sold the second one for$2 million. And I kept the third one. So my brother one day said, so how did you do in there?

48:42I have a free home and I made a million dollars. He said, how much are you going to give me? I said, why will I give you anything? You didn't want to be a part of real estate. should I give you something? I'm your brother. Sounds like my younger brother. We settled that and I was doing several projects at the same time. You did a lot.

49:04Kison Patel:I got a fortunate opportunity to work with you on the Felix Hotel, the Hotel Wacker. Yes. It was a fun project. That's another deal that it was beyond belief. I think 14 and sold it for 24. Yeah. You held it for not even one year. Not even one year. And then for$14 million, I remember. And I went to this bank. I have this youngest son of a friend of mine. His name is Jonathan Sobag. He's a lawyer in France. I said, why don't you come visit me? I need you. I said, you need to come. So I took him with me to see the people that were selling the water. I said, I have a fund in France. And this is my lawyer, basically.

49:44And he's going to buy this hotel under his name. I would like to enter into contract with you. I said, I don't know if I gave them$100 ,000 or$150 ,000. I said, give me the contract and he's going to get me the financing. There was not a valid word for that. But he's the one who is buying it. So he put it, Jonathan Sobag. And he said, why are you doing this? I said, let me explain to you. When we left, I said, you're going to sell it to me today. Sell it to you? Yes. I said, you're going to sell it to me for$24 million. How is that possible? I said, because this hotel, when I am done with it, it will be worth$50 million.

50:22How? I said, there are certain things I know and certain things I don't know. I said, this is going to be a five-star hotel. In a five-star hotel, each key sells for so many dollars. And I have enough keys here that I am going to make, I said, low side$10 million, high side$25 million. I said, I would like to leave to see that. I bought the Walker Hotel.

50:46Kison Patel:Remember, it was an SRO. They had a single room occupancy. It was all drug addicts. Yeah, it was a dump. Yeah, a total dump. I had that girl working for me. They put her to be the desk over there. The people here, they are so bad. I said, we're going to clean it little by little. And each time a room emptied, I have to keep it like that. I didn't want to. I was emptying the hotel. To empty property like that is very, very challenging. And I had no plans. I had a big mortgage. And I had other money coming left and right. And I was managing. I never defaulted on that mortgage. And Robin Trehan and Yuki-san brought that guy from, what was the company he bought?

51:29The hotel group.

51:30Kison Patel:Oh, Oxford. Oxford. Brought me the Oxford group. And I remember Robin asking me, how much do you want? I said, if they don't have a tree in front of it, I'm not interested. What do you mean? He said tree. A tree in front of it. Can it be$3 million? I would like you to guess the number that I want. They brought me that buyer for$24 million. At the closing table, I left with a check of$10 million. I said, this is America. That's the first half of my conversation with Jerry Sedici. The next episode is the part that changed how I do deals. Jerry builds trust with a stranger fast. He pushes the other side to name a price first.

52:14Kison Patel:and by the end, he's talking through how to buy something the owner never intended to sell. That's next.

52:31Kison Patel:Thank you for taking the time to explore the world of M &A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M &A function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email, Kisan, K-I-S-O-N, at mascience.com. Or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter.

53:16Kison Patel:Again, that's mascience.com. Here's to the deal.

53:30Kison Patel:views and opinions expressed on mna science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual this podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions