The Cornell Baker Program in Real Estate had the pleasure of welcoming Ben Bernstein, Co-Founder and Principal of RedSky Capital and RedSky Management, to campus as our first Distinguished Speaker of 2017. Ben graciously shared some of the lessons that he’s learned since launching RedSky with fellow Cornell alum Benjamin Stokes (CALS ’06) after graduating in 2006. The foundation of Ben Bernstein’s success is his ability to identify high-potential markets to invest in. While still a student at Cornell, Ben had the epiphany that “safe, desirable, cool New York” had to expand outwards, because going up was only going to be more expensive. Ben drove through the areas surrounding Manhattan and recognized that Brooklyn had a vibe similar to that of Manhattan a decade earlier. The borough had vibrant architecture, a robust parks system, and subway access to Manhattan. Ben made a very big bet on Brooklyn and it paid off tremendously: today, RedSky is one of the largest landlords in the borough.
WYNWOOD AND DESIGN DISTRICT NEIGHBORHOODS, MIAMI, FL
Following their success in Brooklyn, RedSky’s portfolio grew to include properties in Miami’s Wynwood and Design District neighborhoods, as well as West Palm Beach. Ben shared that the firm’s growth to Florida was organic. RedSky had a strong positive relationship with their retail vendors in Brooklyn, and many of these vendors were expanding to Wynwood. After having multiple tenants ask if RedSky had a presence in Wynwood due to similarities between the area and Williamsburg, Ben explored the neighborhood during a coincidental trip to Florida. He recognized the opportunity, as Wynwood had many of the same elements and characteristics that Brooklyn did a decade earlier. RedSky took the opportunity to replicate their success, this time being well-equipped with capital up-front. RedSky has been called “the ace assembler” by The Real Deal.
SUCCESSFUL PARCEL ASSEMBLAGE
Ben spoke to some of his experience working on large parcel assemblages in Brooklyn. In such a tight market as New York, RedSky had to be careful to contain sensitive information relating to their assemblages until the firm had all of its required parcels in place. Ben employed the common tactic of using blocker corporations and PO box addresses to distance the company from parcel acquisitions. He shared that three attributes are critical for a successful assemblage: patience, tenacity, and the right capital partner. These three elements tie together, as assemblages often occur over a multi-year period and will result in many closed doors along the way. The capital partners involved must be willing to accept the long-term nature of the approach, and should therefore be evaluating the opportunity based on multiples rather than IRR. Ben also noted that the first buy is critical. It must be purchased at a low basis, in case you’re left overpaying for other parcels, and with enough of a scale that it is developable independently, in case none of the adjacent parcels come into play.
ADVICE FOR STUDENTS
Ben left the students in the Baker Program with two final pieces of advice. The first was to not be afraid of failure. From Ben’s perspective, it’s natural to be uncomfortable with failure, but it’s important that we’re not paralyzed by the fear of it. From his experience, “life will give you endless opportunities, and the sun will rise tomorrow.” Freeing oneself from that fear and being able to objectively analyze risk is critical for success as an entrepreneur. The second piece advice was to learn the language of the industry – though it would be hard to go through the Baker Program without doing so. We will not know everything as we graduate and start our careers, but sounding smart by speaking the language is a great way to start.