Getting an Apartment Fix
Rental renovation company Ardizzone Enterprises boldly crosses into the ownership realm with its $82M purchase of 5 sites
By Lori Darvas - Star Correspondent
When Tony Ardizzone dove into the rental real estate market, he caused an $82 million splash.
Indianapolis-based Ardizzone Enterprises recently closed on its $82 million purchase of five local apartment communities, totaling nearly 1,900 units, from their Colorado-based owner. It's the first multifamily housing acquisition by the apartment-renovation company formed nearly 50 years ago.
"We've been trying to break into (the rental real estate market) for the last year and a half," Ardizzone said. "We've seen the benefit that our company has given to apartment operators, and we knew we were a big part in it."
Ardizzone's new portfolio includes Bent Tree (616 units) and Reflections (582 units) on the Northwestside, Brookwood (404 units) and Winchester Village (96 units) on the far Southside, and Cheswick Village (187 units)) on the far Eastside.
The timing was right for Ardizzone to take the plunge.
Early 2008 was an ideal time to get into the multifamily rental market, said Steve LaMotte Jr., senior vice president of the multihousing group at CB Richard Ellis, a local community real estate company. The multihousing market was down from 1999 to 2005 when potential tenants gravitated to home ownership, but every year since then has been better, he said, as home foreclosures have risen and the overall housing market declined.
Data from CB Richard Ellis show occupancy rates for multifamily housing are at 94.6 percent for the second quarter of 2008, up from 93.2 percent in the first quarter. And an increase in multifamily occupancy is expected for four more quarters.
"With the economy and financial market shaping up as it was in January... the apartment industry was the best real estate investment to get into," Ardizzone said. "Unfortunately, people were losing their homes and needed somewhere to live."
Still Ardizzone insists, the acquisition was less about the financials and more about years of hard work and trust built from his work for the sellers, Apartment Investment & Management Co., or AIMCO, of Denver.
And it's the story of two determined guys who pulled off a deal no one thought they could.
"This is not a financial thing," he said. "That is the furthest thing from the story. The story is that all these people were united, and we pushed forward as a team."
The Ardizzone story began in 1959 when Harry Ardizzone, Tony's father, formed a business to do residential painting and remodeling. Harry retired in 2000, but, by then, the company had begun focusing more on apartment renovations.
Oxford Development, which eventually was acquired by AIMCO, was the company's first major apartment client more than 20 years ago. In the past five years, Ardizzone Enterprises had performed about $25 million worth of work on AIMCO properties, including the five complexes it just purchased.
Even so, AIMCO officials were surprised when Ardizzone expressed a desire to buy the local portfolio. Ardizzone admits that he and his senior executive vice president, Andy Wood, were met with skepticism. After all, they had never owned apartments.
"When Tony told me that he wanted to buy those AIMCO properties, I thought he was biting off a huge chunk there that might have been too much," said Chuck Viale, who then was regional vice president for AIMCO's Indianapolis operating center. "But he stayed with it. He was dogged and persistent."
Thus began nearly six months of negotiations, and many 15-hour days, as Ardizzone and Wood tried to persuade the parties involved they were serious.
They weren't the only players in the game. Tikijian Associates, which was marketing the properties, had received 10 offers for the portfolio.
"They picked up a big bat, and they hit the ball," said LaMotte, of CB Richard Ellis, who knew about the deal but was not involved. "I can't think of another instance where a group that didn't already have exposure in real estate jumped in this way."
A number of factors tipped the scales in Ardizzone's favor.
Market conditions were favorable. Also, Lincoln Property Cos., a Dallas-based rental property management company and Ardizzone client, committed to manage the communities if the deal went through. Ardizzone secured the financing, including $17 million in its own cash. And last, Ardizzone was familiar with the properties.
Ardizzone had other motivations besides wanting to make a profitable deal. He sought to save jobs for the people on AIMCO's payroll who were worried about being out of work once the properties changed hands.
Ardizzone's chief motivation, however, hit closer to home.
At 47, he was nearing the day he could retire and live the good life. He had a profitable business and didn't need the apartment communities for himself. Instead, Ardizzone said, he wanted to seal this deal for his children - a son Tony, 15 and daughter, Casey, 13 - as well as his brother Mike's children, 22-year old Michael and 16 year-old Taylor.
The parties closed on the deal July 31, bringing the five apartment communities under the ownership of Ardizzone Enterprises to handle real estate transactions - which Ardizzone and Wood intend to keep pursuing.
"The biggest reason is being able to give my children the opportunity I never had," Ardizzone said. "I have only carried out what my father started and family grew."