In $52 million deal, Florida firm snaps up 18 Sioux Falls apartment complexes
A Florida real estate and property management company has made a major play into the Sioux Falls multi-family housing market.
Miami-based Tzadik Management says it has closed a $52 million deal to buy 18 apartment complexes located across Sioux Falls from four sellers. The apartment complexes include 721 total apartments.
Tzadik CEO Adam Hendry said his company has been searching the country for overlooked markets where housing values aren’t overheated. He found what he was looking for in Sioux Falls – a low-tax, business-friendly climate with low unemployment, a surging population and a lack of rental supply, he said.
“This market is fundamentally sound,” he said. “This checked all the boxes.”
The largest part of the deal was four apartment complexes from Murray Properties, including the Eagle’s Nest, Eastview, Lake Park and Arnold’s Park complexes, totaling 326 apartments. A deal with Ron’s Property Management included seven complexes, and Rensberger properties included six complexes totaling 143 units, most notably the Sycamore Courts complex. A final seller sold River Run apartment complex to Tzadik.
Tzadik currently owns about 4,000 apartment units in Florida. The company picked up additional apartment complexes in Georgia and Texas earlier this year.
“We’re open-minded,” Hendry said. “We’re very opportunistic.”
Tzadik is also looking at possible deals in Rapid City and other cities in the area, Hendry said. He hopes to turn his Sioux Falls operations into a regional hub for his properties. Hendry said it’s the largest multi-family deal he’s aware of in Sioux Falls and the first of its size featuring a company from Florida.
Residents of Tzadik’s Sioux Falls properties should be prepared for some rent increases. Hendry said many of the properties have rents that lag behind the market, and he intends to match it more closely, gradually raising rents over the next three years.
He touted his company’s management of the properties, the professionalism of its local administrative and maintenance staff, and its use of online portals to pay rent and make maintenance requests.
He said he’s already moved a property manager to Sioux Falls to work on the transition. Welcome signs are posted on many apartment building doors.
He committed Tzadik to spend a $5 million on upgrades and renovations to the properties to deal with deferred maintenance, landscaping and general improvements, he said.
“From a cash outlay, it’s very substantial,” he said.
Hendry and a friend started the company in Florida in 2007, on the brink of the Great Recession. When the housing market began to collapse, Tzadik started snapping up receivership status to acquire properties that could be resold. Tzadik eventually evolved into a company that owned and managed multi-family properties.
Hendry said he aims to stay ahead of an overheated housing market in Florida by diversifying out elsewhere in the U.S. Hendry said his company uses pricing and lease-term models that regularly account for supply and demand – something he didn’t see a lot of multi-family housing owners using in the Sioux Falls market.
But the local market is a “hidden gem,” he said. And he’s been working to acquire apartments in the city full-time since April.
“It’s been a wild ride,” he said.