Teles’ Peter Hernandez on riding out downturns, spotting bubbles and staying zen

Peter Hernandez is president and founder of Teles Properties, where he oversees marketing, brokerage and recruitment.

He started his career in 1970 as an agent at his family’s firm, Hernandez Realty of Marina del Rey, and went on to work in management at Jon Douglas, which was bought by Coldwell Banker. There, he was named COO and managed 17 offices. He broke off from Coldwell to start Teles Properties in 2007.

Hernandez sat down with The Real Deal to talk about riding out market cycles, agent recruitment and how to deal with antagonists.

Where did you grow up?
I was born in Washington D.C. but moved to Pacific Palisades when I was 2. You can’t really call me an East Coaster. Most people call me a diehard Californian. I like to surf a lot. I live in Malibu on Point Dume. It’s the most beautiful place in the world to live.

How did you get into real estate?
When I was 18 and studying economics at UCLA, I got my real estate license because my dad and brother owned a company called Fernandez Realty in the Marina. I started selling real estate on the weekends.

Were you a quick study?
My first day on the job, this woman from Brentwood comes in asking if we have any rentals. She’d just gotten divorced. We went out and looked at rentals but she didn’t see anything she liked. As she’s walking out the door — I don’t even know where it came from — I just blurted out, “Have you ever thought of buying?” She leaned back in and said, “What do you have for sale?”

Did she buy?
I sold her a house on my first day on the job for $37,500. I thought, ‘This is great. I’m in.”

Wow. I wonder what $37,500 would buy today.
Today? Maybe a car.

What did you learn from working in the family business?
I worked with my dad and my brother for 13 years. I learned a lot about reputation and how you should protect your reputation above all else. When you’re born into the industry, it’s just second nature.

Did you never want to do anything else?
I was going to be a lawyer but every lawyer I knew wanted to be in real estate.

Did you have other jobs?
When I graduated from college, I bought a van and traveled around Europe, trying to stretch the $1,500 I’d saved for as long as possible by doing odd jobs. I was in Switzerland, Spain, Portugal. I worked on a vineyard picking grapes and in a kitchen in St. Moritz so that I could ski. I lived the perfect nomad life.

When did you launch Teles?
We opened in November of 2007. We were probably the first independent [brokerage] to break off at that time [Editor’s Note: Partners Trust and John Aaroe Group were founded two years later]. Now, we have 21 offices, with our 22nd opening in Pacific Palisades this November.

It must have been terrible to launch just as the recession took hold.
It was actually done by design. You want to open in a down market because that’s where the opportunities are. You also learn certain discipline about how to run a business. Was it a little bit worse than we thought it was going to get? Yes, of course. I don’t think we expected the run on the banks and we certainly didn’t expect it to be the “Great Recession.” But it was good timing for us because we were growing and building while everyone else was slashing and pulling back. It set us up for success.

How did you ride out the downturn?
The concept was that we didn’t want to hire new licensees. We hire only experienced agents, where we can put our resources into making them even more productive. New agents have about a 1 or 2 in 10 success rate. We realized early on that was a horrible return on investment.

How are you financed?
We have some friends and family, but we’re pretty self-funded. We built it through revenue and income, rather than through raising tons of money.

Was it scary breaking away from the big companies?
When you’re the first, it gives everyone else permission to do it. They see that you did it and were successful. We were the pioneers who crossed the Rockies first. We got a head start, too. We’re the only new independent to have a presence from Carmel to Coronado. Where most of the independents are tightly clustered in one area, we decided to cast a wider net and be a California firm. Our mantra around the company is #TelesDomination.

Now that you’re in management, do you ever miss being an agent?
I definitely miss the agent side and I do three or four deals a year just to keep in the mix. The agent side is fantastic. You’re meeting so many interesting people.

What’s been your favorite sale?
I sold to Chiat/Day, the Eames property on Abbot Kinney. I sold a wonderful house in Santa Monica Canyon designed by Frank Gehry. My favorite though was a good lesson.

How so?
It was one day when I was working for my dad’s firm and all my friends were calling me to leave early because the surf was amazing. My dad said, “If you leave before 5pm, don’t come back.” It was like 4.55 p.m., I was about to jump in my car and this guy came in and said, “I’m looking for oceanfronts, do you have anything for sale?” He ended up buying the house on the end of the peninsula that was owned by the Florsheim family for $229,000. It was my biggest sale at the time. Everyone was oohing and aahing.

How do you deal with antagonists?
I try to get very zen. As they get louder and louder, I get quieter and quieter.

How’s the market?
Today, the market still has real strong fundamentals. I expect that properties will appreciate next year, somewhere in the 2 to 6 percent range. I think the biggest character defect of the industry as a whole is that people don’t realize that rates will go up someday. Now is the time to buy and sell property.

So, no bubble?
Really we’re not that far beyond what the last peak was.There’s more legs in this market.