Bozzuto Group is making a $1 billion play for distressed apartment assets at what its chief executive calls the "paradox point" of the multifamily market. In a CNBC interview, president and CEO Toby Bozzuto said the firm has partnered with Invesco to acquire struggling East Coast properties and reposition them through renovations and operational upgrades.
Bozzuto said the market's recent oversupply—fueled by strong demographic demand, historically low interest rates and attractive construction costs—has created a rare scenario where existing buildings can be purchased for less than the cost to build new ones, sometimes by as much as 10% to 20%.
"If you invest in a building today, you're buying it below the cost to build," he said, adding that buying now also provides "speed to market," avoiding regulatory delays tied to new construction.
While excess supply has weighed on the sector, Bozzuto expects the imbalance to resolve within the next year or so. "Whereas there is current oversupply, oversupply will be absorbed," he said, projecting that the process will wrap up by 2026 or early 2027.
Investing now, he added, positions buyers "ahead of the curve" as development pipelines slow.
The partnership with Invesco will focus on value-add assets primarily along the East Coast, potentially as far west as Chicago. Bozzuto described these as properties that are "either undermanaged or haven't been renovated, or there's something that can be done better with these assets."
His firm's management and construction arms will take over operations and renovations once acquisitions close. "Over time, rents will grow, so will the value the renter is getting," he said.
According to CNBC, Bozzuto Group is the ninth-largest multifamily manager in the U.S., with nearly 130,000 units under management across 21 states. The company also has more than 62,000 homes and apartments and $4 billion in development projects slated to begin within the next three years.
Greg Kraus, managing director and head of U.S. transactions at Invesco Real Estate, said in prepared remarks that "this venture is anticipated to capitalize on recovering market fundamentals focusing on assets possessing multiple value creation levers."
The partnership's first acquisition is Enders Place, a 220-apartment community in Orlando.
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