From the Original Article posted on Commercial Observer
Formed as an entrepreneurial case study by then-recent MBA graduate Alex Redfearn in July 2014, Delray Beach, FL-based Redfearn Capital approaches its tenth anniversary year with 55 acquisitions totaling over 4 million square feet under its belt, for a value of over $600 million. Redfearn’s current goal is to reach $1B AUM within three years and given its progressive inroads into the industrial market in the southeast, the achievement of that goal is clearly in view. Partner Insights spoke to Alex Redfearn about the company’s lean early years, its subsequent successes, and the exciting path ahead.
Alex Redfearn: Redfearn Capital is a private equity real estate company. We buy and manage our own properties in-house, primarily focusing on industrial real estate from 25,000-300,000 square feet throughout the southeast, with a concentration in Florida. We have two focuses at Redfearn Capital. TPG Angelo Gordon is our institutional capital partner on the larger deal side – we’ve acquired 21 properties together. They’ve committed over $100 million of equity to Redfearn focused on industrial properties primarily in FL and also throughout the Southeast.
For smaller and medium-sized transactions, we partner with high-net-worth individuals and family offices investing across different asset classes. I invest in every deal we acquire so we are completely aligned with our partners.
Why is industrial your focus?
We bought our first industrial building in 2017 because of the rise in e-commerce and online shopping. That was one part of it. The second was that retail and office seemed to be more management intensive from our experience. We could scale faster with a number of different deals in industrial and we could manage our own properties in-house given the simplicity of industrial leases. They also happened to be the asset class with the lowest basis, which helped in the early years.
How did you gain market share in Florida given the competition for Florida industrial?
That is a question we get asked a lot from different investors and peers. This goes back to our company culture, which is highly focused on execution and certainty of close. We have built a reputation for moving quickly, closing deals and protecting our relationships. Even when we were smaller, we recognized early on that burning a bridge in this business is something that lasts forever. We see that too often, where people get greedy and take advantage of a broker or tenant. Reputation and track record impacts the path of our business. We’ve always been very focused on being good people and, most importantly, loyal to our best relationships.
You have no familial history in real estate. Talk about how you got Redfearn Capital off the ground.
After graduating college in 2011, I worked for a transportation company in Boca Raton owned by a family friend. When they were sold, everyone at the company was gifted stock, but the new company also relocated everybody to Jacksonville, and I didn’t want to move there at 22. After talking to my parents, I decided to go back to school at the University of Miami, where I got my MBA. My dad and sister attended UM, so it was always a dream of mine to attend college there. While at Miami, the idea for Redfearn Capital evolved out of a case study.
The first deal at Redfearn Capital was a mixed-use shopping center which closed in January 2015. The second deal was with Craig Menin, a well-known developer in South Florida. We bought a $77 million shopping center from him in Port St. Lucie with a capital partner out of New Jersey. So, within the first two years of starting the company, we did a $19 million deal and a $77 million deal. I didn’t have any meaningful money to invest in these deals, so I ended up rolling my acquisition fee as my investment. But I was officially “in business.”
Talk about some of the challenges you faced in those early days of building the business, and how you overcame them.
The biggest challenge was raising money because I had no track record or family history in real estate. We did four deals in the first three years, and it was hard to convince people to invest in a start-up real estate company. But I kept pushing forward and building my network. We got to a critical mass by year four. By that point, we had closed another two deals, and I could finally pay myself a moderate salary.
Back then, any downtime I had I allocated for face-to-face meetings – getting to know people on a personal level. There weren’t many relaxing weekends back then. Most of the time I was networking or studying real estate to teach myself the business. Private Equity real estate is heavily relationship focused. I learned that at an early age. That helped me form a lot of the broker relationships I have today. Those relationships helped Redfearn Capital grow, and many of the brokers ended up becoming close family friends over the last 10 years.
Talk about some of the biggest deals you’ve done.
One deal that really shaped the business happened in 2021. We acquired a seven-building portfolio for $63 million which had deals across the entire state of Florida, including in Jacksonville, Orlando, Lakeland, Tampa, and Palmetto. We closed it in 55 days off-market, and we were immediately injected into all these major markets in Florida. That gave us the ability to widen our net and expand in those markets.
During the Covid era, we also bought a mixed-use building, high street retail and office, in West Palm Beach off Clematis for $17.9 million. Everyone thought we were crazy because it seemed like a high price per foot at the time, but we had a vision for where rents were going, and we were ultimately able to create a lot of value investing in our downtown market as the rental rates continue to rise.
This has been a challenging year for commercial real estate and the economy. How have these difficulties affected your pursuit of new deals and the continued growth of the company?
We closed 11 deals in 2022 and 15 in 2021. This year, we’ll have closed eight deals. So there have definitely been headwinds – the bigger, more institutional deals were harder to pursue given the tightening of the credit markets. But we were able to do smaller deals, and in scale, acquiring eight assets in the southeast. Some were on the smaller side, but we still pursued deals where we saw significant value. On the equity side, there’s still an appetite for opportunistic mid-teen-return IRR deals. So that’s what we focused on, and that’s what we’ve been able to acquire this year. In a down year, being able to acquire eight new properties was still exciting for our team.
Can you tell us about the Redfearn Capital team?
We have a very talented group of people on the Redfearn Capital team that are patient and passionate about commercial real estate. We don’t miss many Florida industrial opportunities given our network. We acquire deals to make a return for our investors – we don’t buy for the sake of buying. If the value isn’t there, we won’t pursue the opportunity just to make a fee. We’re in this for the long term and our track record speaks for itself. We like to win.
We also have some amazing mentors including Steve Green, founder of SL Green Realty (NYSE: SLG). Steve has been an integral part of my life, and has been influential in my growth and development as a leader and operator.
Our legal team, Kapp Morrison LLP, has also been an amazing partner for us given the fast-paced nature of our business. There are always new leases and deals to work on which can be time sensitive.
As they say, it takes a village, and in our case that is certainly true!
Talk about what you’re working on right now, and your goals for 2024.
Our goal over the next two years is to get to $1 billion AUM. This scale would allow us to add to our talented team and build on our strong company culture.
Right now, we’re at around $600 million AUM, and the goal is to continue to acquire assets in our target markets. We’d like to buy a few portfolio deals to scale ourselves toward that billion dollar goal, and there are a few deals we’re looking at now. For one, we’re looking at rolling out a platform focusing on small bay warehouses in South Florida, as opposed to traditional manufacturing distribution product, and we’re looking at doing those with an institutional partner. We like the idea of being able to acquire all aspects of industrial, both small bay and distribution, as we know that asset class best.
What are your goals for Redfearn Capital five years down the line and beyond?
We’d like to focus on ground-up development and continuing to build a talented team that will positively evolve the culture of Redfearn Capital – very entrepreneurial, fast-paced, and defined by quick decision making. I think it’s critical to keep pushing our goal posts, and to try to make the company as big as we can while staying true to the investment process that has helped us find so much success to date.
