Following the signing of Rodri from Atletico Madrid, Manchester City boss Pep Guardiola was unable to offer the 21-year-old guaranteed playing time, meaning the decision was made to send him to Aston Villa.
Smith has now revealed what the Spaniard told him after Luiz completed his move from the Citizens.
"He's Pep's loss and my gain. I met Pep at the League Managers' meeting and he spoke to me then, he was very disappointed they couldn't get that work permit," he told BirminghamLive.
"Pep said, 'You've got a really good lad there'. There is no better endorsement for the boy."