Q&A with Bobby Julien, CEO of The Kolter Group
by Boardroom Brief on October 08, 2010
1) The Kolter Group, LLC is a private investment firm which has accrued over 9 billion dollars of real estate transactions across multiple geographies and asset classes throughout all stages of development and investment cycles since its inception in 1993. As the Firm’s CEO and chief strategist, you transformed the Kolter Group’s portfolio from a mulit-industry selection of businesses into a firm focused exclusively on real estate development, investment and construction. The recession has forced survival of the fittest across industries. Can you discuss how you have adjusted your investment strategy in light of the downturn in the real estate market in Florida?
The downturn was dramatically worse than we ever dreamed of in terms of the depth of the recession and the duration and we’re still not out of it yet. The real estate business is still very, very slow. And although it hasn’t been pleasant, you can still make money. In terms of survival, one of the things we did as a company was to not crawl under a rock. There are ways to make deals and to make both long term and short term income. We have closed approximately 40 transactions since March of 2007, and many of them have already been liquidated and/or flipped, which creates cash flow for us to more than just survive, but actually make some money in the downturn which has been really nice. We have actually expanded throughout the Southeast and now how offices in Sarasota, Tampa, Orlando, Atlanta, Destin, Raleigh and Charlotte and we’ve been buying deals in all these different markets.
2) A forward thinking real estate developer, you were primarily responsible for leading Kolter’s move into the state of Florida, where the firm has since realized investments of close to $3 billion in real estate development as well as the acquisition of additional residential development with expected values in excess of $5 billion. Florida, with its beautiful weather and exceptional lifestyle, has inspired extraordinary periods of growth in the real estate industry where deals that defied conventional wisdom, here have made sense economically. Can you take us back a few years and discuss your investment growth strategy during the boom time era when Kolter first arrived in the sunshine state in the 1990’s?
In terms of boom-time strategy, we always say “we don’t want to soar with the eagles just to flop with the dodo birds.” This basically means we are aggressive, but not overly aggressive and it is this sensibility which has helped us survive the downturn. In the best of times real estate is a cyclical business and if you stretch yourself too far or too fast, no matter how much capital you have, eventually it will turn on you. During the boom, as a company, we sold, because we recognized the market was becoming heady. We sold more assets than we actually purchased and we built up liquidity, not knowing when, but knowing we were going to take a hit. Today, we continue to employ this boom-time strategy of taking on leverage, but not too much.
3) As Kolter balances aggressive growth with a more controlled trajectory, you have learned what it takes and the risk involved in making deals. What lessons learned can you share with us as we continue to weather the recession and recovery?
One of the biggest lessons learned and one of the places where we made the most number of mistakes is that we bought a few deals too early. When things went down in 2006/2007, we thought we were looking at the bottom. But the financial crisis in 2008/2009 was something we were not anticipating to that extent and the residential and commercial markets took a big hit. We made some deals in 2007/2008 that will not fare all that well. So one lesson is don’t jump in and buy too early, because you can still stand to lose money even if you are buying on .50 on the dollar. Many have learned this lesson. Another difficult lesson learned is that in the downturn people like to hang on to deals. You have to know when to cut your losses. It’s also very difficult to accept that you may have to make tough choices regarding staff. Our company in Florida went from over 300 people to just over 100. That’s a dramatic difference and it’s heart wrenching because you work with these people. But if you want to survive, you have to operate lean.
4) As you suggested, there are still deals to be made. In fact, your condo developer line, Kolter Tower, is launching what you believe to be the first new condo project in the state of Florida. Can you tell us more about the project?
We have bought a fresh piece of property right on the ocean in between Ocean Ridge and Gulf Stream. I’ve asked everybody and nobody knows of another condo project being developed at this time and it’s the first new condo in this area to be built in literally over 30 years. It’s called 4001 North Ocean and it’s a 34-unit project overlooking the ocean. A foreclosure we bought from Bank of America, it would have been $1,000 a square foot but we’re launching it at $550 per foot and it’s actually a nicer product. To get the sales prices in the 1.5 to 2 million range, we’re designing 3,000 foot units, all brand new with high ceilings and all the top-of-the line amenities. We’re very optimistic about our assessment and this new project.
5) This summer you and your colleagues instituted an interesting grass roots research campaign, traveling around the entire country to meet with just about every single CEO of every national publicly traded home builder and had long meetings with them to gather a broader perspective on the real estate market. Since Florida is one of your biggest markets, can you give us a breakdown market by market? Are you seeing any real differences ranging from the Panhandle south to Miami?
The Panhandle was the first market to take a hit, literally, by hurricanes in 2004 but they were starting to come back strong, like Water Color, one St. Joe’s big projects, until the oil spill. And though from an environmental standpoint, there are still issues to address, it clearly hasn’t affected the beaches and business is starting to pick up. Moving south, Tampa-Clearwater and Jacksonville are price markets, not vacation markets, so they are still quite stressed. Markets in Naples and Orlando are still very soft. However, Sarasota is quite strong and has probably weathered better than any other market I can think of. South of Sarasota it gets quite challenging, all the way down frankly to the Ft. Myers area which is a price driven, tough market. I’m very optimistic about the condo market in Miami-Dade. I would have thought it would have gotten dramatically worst than is has but the amount of international investment that is going on and the amount of absorption is just incredible. It’s a very, very strong market right now at totally reset prices, but the prices only came down to $200/foot versus how far they were projected. I don’t know when you might see the next condo being launched in Miami, but it will probably be in 2012. So there is reason for optimism as markets show signs of strengthening.
6) When you’re not leading the Kolter Homebuilder division, your spending time with your wife, a doctor who practices in the area, and your three children ages 4, 2 and a brand new baby. Both from Canada, what is it about our state that motivated you to move to Florida?
My wife and I decided we wanted to move to Florida and raise a family here when we first got married and we have never looked back. We love the lifestyle, the weather and despite some really difficult economic times, we really, really love living here. It’s a great quality of life.
More about Bobby Julien, Chief Executive Officer
Bobby Julien is the CEO of The Kolter Group and has been with the firm since 1993. Bobby is responsible for the firm’s strategy as well as for support of the portfolio company leaders in the development of their strategies.
Since joining the firm, Bobby transformed The Kolter Group’s portfolio from a multi-industry selection of businesses into a firm focused exclusively on real estate development, investment and construction. Bobby has led the firm’s move into Florida, has realized investments of almost $3 billion of residential development to date, and has acquired additional residential developments with expected value in excess of $5 billion. He has also realized the majority of the firm’s investment in its principally self-developed and self-managed commercial portfolio, which consisted of 6 million square feet of office space and nearly 1,800 multifamily units and is expected to acheive total proceeds in excess of $1 billion.
Bobby attended McGill University, where he studied business.