Jeff Hermanson | Crain's Denver

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Jeff Hermanson

Background:  

Larimer Associates is a real estate company based in Denver, with a portfolio including retail, offices, parking garages and restaurant spaces. Larimer Associates was a key player in some of Denver’s most iconic development projects, including Larimer Square and Union Station. Jeff Hermanson founded Larimer Associates in 1987.

The Mistake:

I didn’t insulate myself from market forces.

I was 30 years old when I made my first million dollars, in real estate in Crested Butte, Colorado. I thought I was the smartest guy in the universe. But two years later, I had lost it. Not only was every penny gone, but I was in debt, dealing with bankruptcy and foreclosure actions.

The real estate market was very, very heated at the time – this was in the late 1970s. I was able to tie up a bunch of valuable property with little down payment.

In one of these deals, I negotiated to buy a parcel at the base of ski area for $1.6 million. I convinced the seller to agree to a lot of wild terms, like an absurdly long close. I tied the property up, and I didn’t have to pay for it for a whole year.

That gave me a lot of free time to wait for the market to continue its rapid appreciation. Within a couple years or so, I sold one of the parcels of this assembly, and that’s how I made that first million.

But, that’s when the market turned. I had reinvested the profit into other endeavors and when the market turned, I was wiped out.

I was 30 years old when I made my first million dollars. ... But two years later, I had lost it.

The Lesson:

It was so fortunate that I had that experience so early. It taught me so many things. One was the reality of markets and how they run in cycles. Another was leverage, how it can be a great friend in an up-market and a real enemy in a down-cycle. It was a truly humbling experience.

I could have been more conservative, thought more about market cycles, been less aggressive on the investment side.

When people talk about taking chips off the table, they mean staying in cash rather than redeploying in their core endeavor, which for me is real estate.

After I was wiped out, I was constantly reinventing myself. I got into excavation, different types of real estate, and restaurants, but I was inherently more conservative after that first setback.

It took me almost 10 years to get back to that million-dollar plateau.

Photo courtesy of Larimer Associates.

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