Tomas Sulichin, President of the Commercial Division of RelatedISG Realty, sits down with us to share expert insights on current market conditions in Florida. A Miami native, he has a decade-long career in the competitive South Florida CRE market, and, today, he details its explosive growth for the past few years and how it is leveling out due to market corrections. He explains why they are still optimistic about the long-term prospects and also discusses strategies to succeed in the development space in South Florida.
[00:01] – [12:00] The Growth of Florida’s Real Estate market
- Tomas on achieving great success at 35
- He introduces Related Group and ISG
- With their diverse portfolio, they have a holistic view of the market
- South Florida is seeing a record number of relocations to the region
- Data gathering is critical, especially because there’s a lot of speculation and pessimism
- Why Tomas is remaining bullish on the market
[12:01] – [16:18] Development Risks and Opportunities
- Development is high risk but has high return potential if done correctly
- Opportunities for development are available in certain asset classes, such as multifamily and industrial
- It’s important to be creative and strategic to stay competitive
[16:19] – [19:19] Closing Segment
- Tomas’ hope for the future
- Reach out to Tomas!
- Links Below
- Final Words
Tweetable Quotes
“I think that we were at a point with the most liquidity that the world has ever seen.” – Tomas Sulichin
“If you look at the national news, I wouldn’t get out of bed ’cause everything seems negative. Then you actually look at the record, we track the sales, we track the volume and it’s positive.” – Tomas Sulichin
“When you’re in a competitive market, you really have to try to get creative and reposition an asset.” – Tomas Sulichin
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Connect with Tomas at tomas@relatedisg.com and follow him on Instagram.
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Want to read the full show notes of the episode? Check it out below:
[00:00:00] Tomas Sulichin: Well, when you say development itself, I’m thinking of ground-up development, which is basically buying raw land and either entitlement or whether it’s entitled and building a building. To do that, that’s something that’s easy to say that you do. It’s very difficult to do it well.
[00:00:27] Sam Wilson: Tomas is the President of the Commercial Division for Related ISG. He leads the commercial team’s expansion in South Florida, leveraged by the firm’s established strength in the residential market and development. Tomas, welcome to the show.
[00:00:39] Tomas Sulichin: Thank you. Great pleasure to be here, Sam.
[00:00:41] Sam Wilson: Hey man. The pleasure’s mine. There are three questions I ask every guest who comes on the show: in 90 seconds or less, can you tell me where did you start? Where are you now? And how did you get there?
[00:00:50] Tomas Sulichin: So I started from a real estate household. So this is something that I’ve been around my whole life. Basically, it’s a passion of mine. I see myself going into this well into my older years. I started, I mean, as as anybody else, I mean, from the bottom, basically very basic parts of the job. And I was able to really find a passion for it and I believe, scale myself up. I’m 35 years old, so I think I’ve done exceedingly well for myself at this age. It’s still far from where I want to be in the next five or 10 years. But you have to be happy, but not complacent.
[00:01:23] Sam Wilson: Far from where you want to be. We’ll circle back really on that question. Can you tell me what does your company do precisely if possible?
[00:01:34] Tomas Sulichin: Sure. Even though it’s a simple question, it’s a little bit of elaborate answer for my side.
[00:01:38] Sam Wilson: By all means, we have time, so carry on.
[00:01:41] Tomas Sulichin: Okay. Perfect. So we have two companies, one being Related Group, which is the largest development company in the state of Florida for the past, basically 42 years. We’ve done everything from ultra-luxury condominium projects latest ones being Armani. We recently launched Baccarat Towers in Brickell at a price point of around $1,300 a square foot, all the way to affordable housing. We recently completed Liberty Square, which is 2200 units, subsidized housing, and also mixed-use projects. So we do sometimes retail components, sometimes the office component just to better serve the community. The other side of the company is ISG, which International Sales Group, which specializes in the sales of these ultra projects or these large scale projects. Myself, personally, I lead the commercial division on the broker side. So I represent everything from buyers that are looking to purchase land to develop or existing assets, repositioning assets, and I get involved depending on what the client’s needs are. I could get involved in raising equity, taking a part of the deal, or simply being a broker depending on what their needs are.
[00:02:48] Sam Wilson: Got it. That’s really intriguing. I mean, there’s a lot of moving pieces in all of that and I bet it gives you kind of holistic view of the market. Would you say that’s fair?
[00:02:58] Tomas Sulichin: It does. ’cause it gives us a view. I mean myself, my day-to-day really is focused on the commercial sector, but I think commercial and residential really go hand in hand. If you have a strong residential market, I think that you’re going to see commercial real estate also do exceedingly well and vice versa. If there’s not a lot of companies that are relocating companies that are expanding, retail’s not working good, you’re usually going to be followed by a softer residential market. So being that our company has a very strong footprint in South Florida. Even though my sector is kind of niche, I get to see basically everything that’s going on and it’s important. I mean, to have, I think knowledge is power. So the more knowledge you have, I mean, the better you’re going to.
[00:03:39] Sam Wilson: Do you see any warning signs? Do you see any caution flags going out saying, Hey, I guess, do you see anything in the market right now that people are taking unnecessary risk that maybe they could offset?
[00:03:50] Tomas Sulichin: Yes. I mean, if you turn on the news, I think that you’re going to see a pretty grim picture of what’s going on right now. You have a 9.1 inflation rate, which is the highest, I don’t know. I mean, since, I don’t know, The Great Depression.
[00:04:02] Sam Wilson: Early eighties.
[00:04:02] Tomas Sulichin: The seventies, since, the nation well before I was around. So it is a little bit concerning overall when we really do focus and, I mean, South Florida, fueled by international buyers, by buyers from a lot of different states from the Northeast New York, New Jersey, Connecticut from the west coast. And you have a record number of companies relocating over here and permanent residences relocating over here. So when we look at the local market, that’s really my day-to-day job. I really do not see any warning signs. I mean, you’re seeing, we’re tracking sales year after year, every year we produce something that’s called the Miami Report. So we do, we’re very big in data gathering. And when you look at the sales, you look at the volumes and you look at what’s going on, it’s really a positive picture. When you look at people’s opinions or when you look at interest rates and declining, that is something that is somewhat concerning and something that you have to take into consideration when negotiating deals, especially cap rate deals or deals that are going to be on a cash flow. But it’s a reality of the world that we live in that you always have to adapt.
[00:05:03] Sam Wilson: Right. Yeah, absolutely. And you guys are focused strictly in the Florida market, is that correct?
[00:05:08] Tomas Sulichin: Correct. So we’re mainly based out of South Florida, which would be Palm Beach, Broward, and Dade county. But we do also real estate, I mean, we have projects right now going on in Naples, which would be the West Coast of Florida, in Sarasota, in Jacksonville, that’s a great market, Tampa, Orlando, and Tallahassee. So we do have a footprint throughout Florida, but I wouldn’t say that the same strength of the company is going to be in Miami as in Jacksonville or in Sarasota.
[00:05:35] Sam Wilson: Right. Right. Have you seen any softening and I know Florida right now it is just, I mean, it’s growing like wildfire, so maybe this isn’t a fair question for you, but maybe it is a fair question because, you know, everybody’s always said that real estate is local. There is no national real estate market. like that because, you know, again, you listen to the news, you listen to any other talking head and in the end it’s going to be like, oh no, the bottom’s going to go out and the sky’s falling at the same time. But for you, you guys are just seeing an incredible boom, but is there any softening in your market or is there any changing investor preferences that you’ve noticed here in the last 12 months? You’d say, Hey, that’s something we, that should be discussed.
[00:06:11] Tomas Sulichin: Well, I mean, interest rates and commercial real estate really go hand in hand. So that’s something that we were coming off of historically low interest rates. I mean, we were able to get loans at 3%, sub 3%, bridge loans at 4%, 5%, 6%. Right now, I mean, you’re seeing that we’ve gone up over 150 basis points, the announcement right now that they’re going to go up maybe another 75 basis points. So that’s something that’s definitely taken into consideration and certain deals that we’re trading at historically low cap rates. We were buying, or I was seeing clients by class C multifamily add four caps or four sub caps. And. That is something that you simply can do unless you’re getting a very, very low interest rate. I mean, most of the time these transactions are going to be heavily leveraged because that’s the only way how to make sense out of it. Your cash and cash return is good, even though the overall return, as you would see on paper, doesn’t seem so good. But right now, being that the reality is that interest rates have jumped up, we do have to make adjustments. Overall, again, I’m very bullish on the market. We’re still tracking an enormous amount of deals. We’re still, our phone is really ringing off the hook. The way that I analyze real estate at this point and I think anybody does is pre-COVID, post-COVID. Post-COVID, we saw Miami basically go through an accelerated growth up to the term that is almost non-sustainable. I mean, you can’t have a regular market grow 30%, 40% year after year. So at certain point, you have to a little bit plateau. It has to even out, things have to fall back to normal and have growth, and it’s steady big growth, but not to a level that residential rent goes from $3,000 to $6,000 or $5,500. That’s not normal. So I’m actually happy to see certain corrections within the market. And then also certain properties that I think were very extremely overpriced that they’re now they’re getting a little bit of a price adjustment not because the market is necessarily an overall correction, just because a property that should have been $10 million, they were advertising it or trying to sell it at $13 million because of the combination of being fueled by South American investors, Northeast investors, and extremely low interest rates. So right now, I mean, we’re seeing some changes, but again, overall, the picture seems very positive in our view.
[00:08:33] Sam Wilson: Right. Yeah. I mean, just to recap that, we’ve seen explosive growth and what you’re seeing is not necessarily a downturn, but just a normalization where maybe the trajectory is not straight up into the right like it has been. It might be, you know, flattening out and that’s okay.
[00:08:48] Tomas Sulichin: I mean, it’s almost necessary. I wouldn’t even say that it’s okay. It’s almost necessary for a market to be sustainable.
[00:08:53] Sam Wilson: Right. I mean, we’ve printed so much money. The number is astounding that we flooded the economy with where is that extra capital going in my assessment? I would’ve said over the last two years, it’s had a flight to assets, which is why asset prices have been, you know, skyrocketed there’s been cash available. Valuations have skyrocketed. So as that starts to normalize, is that capital all been absorbed into the market? And I know I’m asking a kind of a broad question. Has it been absorbed into the market or is it something where it’s just patiently waiting for opportunity?
[00:09:24] Tomas Sulichin: So I think that we were at a point with the most liquidity that the world has ever seen and not only, I mean, if we look outside of real estate. I mean, you look at luxury goods and LVMH did the record year of sales in. 2021. I mean, you see a Rolex price that retails at 34,000 being sold for 150,000. You see a car that again, the MSRP is 80,000 being sold for double. So we saw just overall the effects of 10 trillion being printed, cryptocurrency going skyrocketing and stock skyrocketing, and everybody was really liquid. I think right now you’re seeing a little bit of the pullback from that ’cause I mean you’re seeing corrections throughout different markets, but again, I think that the investment grade of people that really buy commercial real estate is very different profile than somebody that’s buying Bitcoin or somebody that’s buying a Rolex watch. So you have to separate that and you can’t kind of pull everything together. I see the memes, which I laugh. I’m a big social media guy. And then I was seeing the memes going like, stock market with the grim reaper, luxury goods with the grim reaper, and then followed by the real estate, like knocking on the next door. I really don’t think that that’s something that’s going to happen because you can’t just pull everything together the same way that you said, Sam, that if you look at the national news, I wouldn’t get out of bed ’cause I mean, everything seems negative. Then you actually look and we look at a record, we track the sales, we track the volume and it’s positive. So there has to be certain corrections and there’s going to be some aftermath of $10 trillion being printed. That’s the reality. And we’re seeing inflation, we’re seeing the feds fighting that with rising interest rates. But the reality is in the market, at least in the market that I’m in, that I’m an expert in, that we’re experts in, we see a very positive picture. You see companies like Citadel relocating a thousand employees that was announced a couple of weeks ago, one of the biggest funds in the United States, Ken Griffin. So you see things like that happening month after month, which before it it was nonexistent in South Florida. We just didn’t have that level of buyer, that level of company basing itself out of here. And we have companies now like BlackRock or Microsoft leasing in Brickell one after another.
[00:11:36] Sam Wilson: Right. That’s wild. And until that excess capital is fully priced into the market, I just don’t, I mean, maybe I’m crazy, maybe I’m wrong. I just don’t see asset prices declining.
[00:11:47] Tomas Sulichin: I would agree with you.
[00:11:48] Sam Wilson: Yeah. And that’s going to take a long time to get 10 trillion kind of fully absorbed into the market and have the market accurately priced. Now, according to how much how much money is out there chasing yield. So that’s really interesting. Let’s talk about development and development potential risk and opportunity. What do you see on that front right now? If someone were to get into development, what do you see as the low-hanging fruit in development today?
[00:12:15] Tomas Sulichin: Well, when you say development itself, I’m thinking of ground-up development, which is basically buying raw land and either entitlement or whether it’s entitled and building a building. To do that, you really, I mean, that’s something that’s easy to say that you do. It’s very difficult to do it well. So anybody could call themselves a developer and I’ve seen a lot of people buy lands, spend years trying to build something, and really get little to no return afterwards. And I’ve seen companies, I’m not even thinking about our own company, I mean, countless companies or individual do and execute that very successfully. But that takes a lot of market knowledge. It takes a big team in place, whether it’s from architects to city expediters, to the right construction companies. So while development is the highest return, it’s the highest risk because I mean, you have to do the most in order to get it versus trying to buy let’s say an existing multifamily and reposition it or not necessarily reposition it, but do a value add deal, try to increase the rents, clean it up, maybe put some partitions, turn one-bedrooms into two bedrooms. So as anything in life, the higher the risk, the higher the return. The reality is that when you’re developing ground up again, I think that you have to be very knowledgeable. My first, when we started the podcast, I mean, when I said, I’m a long way to where I want to be, I mean, my long-term expectation is to really develop deals myself, be called a developer. I could technically maybe put that in my business card, but I don’t think I’m there yet. So that’s how much I respect the industry and how much I respect the people that really do that well.
[00:13:43] Sam Wilson: Do you see opportunity right now? I mean, is there an asset class in particular, you said man, or a type of asset, you said this is something that’s missing in the market at large, that people should be focusing on you know, that maybe again would be just ripe for or just full of opportunity, you got anything on that front?
[00:14:01] Tomas Sulichin: Sure. So I think, I mean, the opportunities were really, you have to put work into the building. There’s certain asset classes that obviously outperform others. Multifamily was one of the strongest one, followed by industrial, which we saw huge need for logistics. I mean, at least in South Florida, we have an average price point on industrial at $200 a square foot for sales versus the national average, which is 134. So it’s a very big difference of, of what’s going on over here. The reality is that, but to create value, I think that you can be looking for what we call for coupon clipper deals, meaning that everything’s already done, they renovated the building, or all you have to do is maybe put a little bit of paint on the facade. That’s not the reality of the market, at least in a market like South Florida which is extremely competitive. And when you’re in a competitive market, you really have to try to get creative and reposition an asset. A good example is last year I purchased a building, which historically was a warehouse. Then for the past, maybe 15 or 20 years, it was utilized as a church and it was being sold as a church. When we looked at it, we saw the location, which was a very strategic location next to a major highway, very close to some big points in South Florida within the Miami market. And I walked the building and I looked at it and I said, Hey, this is an industrial property. I mean, right now, I mean, they have altar and they have all these different things, but we could really turn this back into an industrial property and get substantially higher rents and higher value for the property. And we basically did that. It was a long process. I mean, it’s a year process. It’s not that something that you say like, oh, in two months, I’m going to change this up and then have it fully running.
[00:15:38] Tomas Sulichin: So we really give ourselves a 12 to 18-month window to do something like that. But that’s really how you create value to try to see an asset that maybe somebody’s overlooking and then create the value reposition. When you’re aiming for the sectors that are doing exceedingly well, again, you’re going to be, people are, most of the time sellers are going to be asking top dollars. So if multifamily is trading very good, because everybody needs housing or industrial, there’s no vacancy you’re going to be paying higher money for those. So sometimes even looking at the assets that haven’t performed as well, sometimes also creates additional value, whether it’s hotel or whether it’s retail.
[00:16:16] Sam Wilson: I love it. Absolutely love it. Let’s circle back to the beginning of our conversation where you said you’re far from where you want to be. Let’s personally find out from you what you want the future to look like and how you intend on getting there.
[00:16:30] Tomas Sulichin: So again, real estate is something that I see myself working a long time in really into, I don’t ever see myself retiring, maybe just switching positions or sitting at the different side of the table, but it’s something that I foresee myself and even my children working into. Myself, I’ve been in sales for quite a long time, basically every job, I’ve never had a job that was salary based ever since I was 17 years old, my first job was at a mattress store for a few months, and that’s when I started kind of learning sales and kind of progressed from there. So I liked sales job at the same time I really would love to see myself in the next 5 or 10 years switching more into a development position and being able, maybe it’s an egotistical thing, but I would love to drive by building and look at it 20-story, 50-story, whatever it is and say, I put that there. I mean, that’s going to be there well after I’m gone. So, when I say a long way from where I want to be, again, I’m in the sector I want to be. And in the business I want to be. But again, I think I, there’s still a lot of room to grow and especially in a market like Miami, where you have people like Gil Dezer or Jorge Perez and these mega multibillionaires. So I always am happy of what I achieved. But I’m not a person that’s ever complacent, so I’m never going to sit back and say, oh, I got a good commission. So now I don’t have to show up at work tomorrow, or I don’t have to show up at work for the next few months. I mean, you get a commission, you wake up the next day and go right back at it again to make sure it keeps happening.
[00:17:57] Sam Wilson: I love it. I love it. Tomas, thank you for taking the time to come on the show today. You’ve certainly given us lots of good things to think about both from a macro market perspective and also in the Florida markets there. And just how it is that you, how you guys are taking down deals, how you guys are brokering risk you see in the marketplace. It’s, yeah, it’s certainly been a great conversation. I’ve really enjoyed it. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?
[00:18:23] Tomas Sulichin: So I would say it’s either by email or even through Instagram. So, my email is going to be Tomas, T O M A S @relatedisg.com or my Instagram is @the_sulichin, which is very easy to pronounce and spell, but it’s S U L I C H I N. So either one of those, I always look at my messages or my emails.
[00:18:47] Sam Wilson: Wonderful. Tomas. Thank you for coming on the show today. Certainly appreciated
[00:18:51] Tomas Sulichin: Sam. It was a pleasure to be here at any time. Thank you.
