Victor Sozio Made a Leap Few in Commercial Real Estate Have Made

There is a phrase, popularized in the military during the Second Gulf War, known as “embrace the suck,” which is a crude way of saying that when things get bad, you need to just deal with it.

Victor Sozio, 42, one of the founding partners at commercial real estate services and advisory company Ariel Property Advisors, saw combat in Iraq during his time in the Marines, where he rose to the rank of corporal.

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“Embrace the suck” has stuck with Sozio throughout his 20 years in commercial real estate, serving him well in an industry that has seen favor and fire in equal measure.

“The way the markets have turned in the past five to seven years, we’re presented with challenges and obstacles we can’t foresee all along the way,” Sozio told Commercial Observer from the scenic conference room at Ariel’s Midtown Manhattan office. “Our business is a roller coaster business. A certain level of calm pragmatism has served me immensely.”

While Ariel brokers properties across the asset classes, their speciality has been affordable housing, which Sozio said is more than 75 percent of his inventory.

The company is currently marketing almost 3,500 affordable units across 14 projects, including an 11-building portfolio totaling 345 units and a 26-story tower with 400 units. Both projects are in the Bronx and include an Article XI tax benefit for new construction or rehabilitation of affordable housing.

For Sozio, the roots of his path to multifamily were planted early on.

“A good friend’s father owned some small commercial properties — multifamily and retail — along Yonkers Avenue,” said Sozio, who grew up in the Bronx before his family moved to Westchester when he was 15.

“Toward the end of high school, he would pay us to do odd jobs around his properties: painting, sanding, fixing things. He was trying to help us out,” Sozio said.

This was his first taste of commercial real estate, and he saw the profession’s appeal.

But a turn in that direction would come later. After high school, Sozio “started to go astray.” He was hanging out on the street, not doing much besides finding himself in fights and “getting into trouble,” and realized he needed a motivator in his life.

So in 2000 he enlisted in the Marine Corps Reserves.

“When I reflect on it now, I think I needed to push my comfort zone,” said Sozio. “I wanted a challenge for myself both physically and mentally, and I needed something to instill discipline and structure.”

Military service gave Sozio a broader view of the world that he’s thankful for today, along with personal insight into the horrors of war that provided him with essential perspective.

“Seeing the effects of war makes you extremely grateful for what you have,” said Sozio. “It also makes you realize that you’re not this indestructible person you thought you were. And, more than anything else, it helps in building emotional resilience and a calloused mind.”

Sozio, who has two sons, 9 and 11, with Melissa, his wife of 14 years, takes care to impart those lessons to his boys whenever he can.

“When I talk to my kids about some of the best things they can work on for the long term, we talk about resilience — being able to roll with the punches and get back up after you fall down,” said Sozio. “To me, that’s one of the most critical things.”

Sozio attended Marist University and Manhattan University, deploying to Iraq amid his studies and graduating from Manhattan with a bachelor’s in marketing. Then, finally putting his interest in multifamily real estate to use, he began an internship at the old Massey Knakal in 2005, becoming a full-time employee the following year.

There, he bonded with Massey Knakal partner Shimon Shkury, an Israel native who had served in that country’s military. The two frequently shared perspectives about the importance of the type of resilience they each developed while serving, and how it was imperative to success in their current profession.

“Shimon and I talk about it all the time,” said Sozio. “In this business, you must be able to adapt and overcome, to embrace the challenges that are necessary to achieve an objective. We’ve seen in this industry that losses can pile up very quickly. Being able to embrace the suck in order to achieve something is extremely important.”

Given their success, the pair have clearly embraced this well. Since Ariel’s founding, according to the company, Sozio and Shkury have arranged the sale of over 350 affordable buildings consisting of 18,000 units, totaling more than 17.6 million square feet, and valued at more than $3.4 billion.

For his part, Shkury, who served in the Israel Defense Forces from 1989 to 1994, found that Sozio’s time in the Marines gave him superior mental and emotional tools for navigating the ever-challenging CRE terrain.

“The military forces you to collaborate with people, and that’s one item that is super important for successful people — you want to get along with people and collaborate really well,” said Shkury. “Alignment on a mission is another thing that you can see in Vic, especially when he works for a client. There’s a very clear alignment with our client.”

At Massey Knakal, one of Sozio’s first deals was for an $8.5 million affordable housing portfolio on Manhattan’s 115th Street that was owned by The Arker Companies. The properties had a regulatory agreement attached, which Sozio was then little familiar with. Asking around the office, he found that few others knew much about such agreements, either.

“This was the time where there wasn’t as much due diligence done as there is now,” said Sozio. “Things were moving very quickly. You would get offers based on multiples, and people weren’t as much into the details.”

Sozio quickly realized the firm had no in-house expert on affordable housing, and decided to step into the role.

“I just started reading every line of the regulatory agreement and researching it online,” said Sozio. “I saw an opportunity to become an expert in this space where there were not many that I knew of. It was something I had a passion for. The opportunity to become an expert in this while serving a social utility, and doing what we set out to do within the investment sales market, was extremely attractive to me.”

Sozio and Shkury, along with Massey Knakal co-workers Michael Tortorici and Ivan Petrovic, comprised a team that worked the northern Manhattan market, with Sozio especially focused on multifamily and development site sales in central Harlem.

Seeking to become a top-producing team, the four created their own systems.

“This was before all these CRM products came out,” said Sozio, referring to customer relations management software. “We were compiling data and putting out research reports before it was a regular thing like it is now. In a way, we were working as our own microcosm within that company.”

Sozio noted that this level of organization and commitment helped them prosper through the early days of the Great Recession.

“Part of it,” said Sozio, “is because we had good relationships, a good workforce and good housing product. We started to really build a presence in the affordable housing space.”

After a few years, the deal environment began to blossom again, and the team members took an increasing interest in going out on their own. In January 2011, the four of them left Massey Knakal to form Ariel Property Advisors.

Sozio’s main charge during Ariel’s early days was bringing in new business.

“My sole focus at the time was to generate business, which is my strength,” he said. “I like to go out and originate, and it was critical. We talked about, ‘Let’s really try to get as much business as possible as soon as possible, even if it’s a little bit overpriced.’ Because, in our business, business breeds more business.”

Continuing to build his and Ariel’s expertise in affordable housing, Sozio noted that an eye for detail is essential when navigating the sector’s complexities.

“This is a nuanced space where one regulatory agreement is going to be different than the next,” said Sozio. “There are similar components to many and a lot of parallels, but they are different. So you need to get into the details, because, if you don’t, you can end up with a landmine and blow up the deal. It requires more diligence than the typical transaction.”

This diligence is one key factor in making Sozio such a valuable resource for Ariel’s clients.

“He really studies the affordable space,” said Rick Gropper, founding principal at Camber Property Group, who has done approximately 10 deals with Sozio at Ariel. “He takes the time to understand the financing programs, how they work, and the mechanics of some of the really complicated regulatory structures that we use. He understands it so that he can help advise both buyers and sellers in order to get to a closing.”

Sozio notes that affordable housing deals are more fragile than other transactions, requiring a depth of patience beyond what’s required in typical commercial real estate deals. They also require an ever-evolving knowledge of the latest shifts in affordable housing policy.

“Affordable housing properties take a long time to close,” said Sozio. “You often need multiple layers of consents, so you have to be mindful of that when you’re structuring a contract in order to give yourself the best chance of actually getting to the finish line. And, even when you are, sometimes policy changes that are out of your control can potentially blow up the deal.”

While Sozio emphasized the wide breadth of Ariel’s transactions, he noted that he works on a lot of project-based Section 8, the HUD 236 preservation program, Mitchell-Lama and Low-Income Housing Tax Credit (LIHTC) properties within his affordable housing inventory.

“We have a lot of inventory for Mitchell-Lama throughout not only the city, but upstate New York. We have an eye to grow into that space,” said Sozio. “And we do a lot of LIHTC, both when it’s expired or not expired. A lot of times we would sell it when they’re out of their initial compliance period. But through the years we’ve developed a pretty specialized expertise, even having the ability to sell the GP [general partner] position if it’s within its first 10-year credit period. That’s not something that a lot of our competitors can do.”

Sozio noted that some of Ariel’s larger deals have helped the company position itself as experts in the affordable housing space.

“We sold 1,600 units of GP positions, really six GP positions, for Martin Dunn back in 2022, and a 2,000-unit portfolio for PRC Group, which was predominantly project-based Section 8 and two LIHTC deals that were also GP positions,” said Sozio, who noted that these were both New York City deals.

As for the types of clients Ariel generally works with, Sozio said that categorizing different types of buyers depends on the types of properties they’re dealing with.

“There’s definitely been an emergence of what we call conventional buyers — private high-net-worth buyers, family office buyers that will buy expiring buildings that are near the end of their initial compliance period, or project-based Section 8, financing it conventionally versus with subsidies or tax-exempt bonds,” he said. “There are also affordable housing operators that have been around forever and look to leverage public subsidies in order to build a capital stack. And we also have mission-
driven firms, for-profit groups that will look to deploy equity or operators in the space.”

Given the burst of regulations that have sprung up over the past decade, Sozio notes that deals are significantly harder to complete today than in years and decades past.

“Everything takes a lot longer because there’s a lot more due diligence that needs to be completed, because buyers are more concerned about making a mistake in this type of environment,” said Sozio. “In order for a buyer and their investors to feel comfortable that they’re not stepping into a situation that can deteriorate very quickly, they do a tremendous amount of due diligence today, especially on bigger deals. This means that contract negotiations take a long time, and, within that time, a lot of things can happen that can affect a deal. So a lot more work goes into getting the same amount done. Back in the day, we would be able to get contracts signed in a few weeks. Now, the norm in a good-case scenario is probably 30 to 60 days.”

Between regulations and economic conditions, Sozio sees the current affordable housing sector as a stressful space for all participants.

“I think the rent-stabilized space has a lot to work through in the next two or three years. It’s an extremely pressured market,” said Sozio. “I think that a lot of owners will tell you that they would sell in a heartbeat. I don’t think there’s any shortage of rent-stabilized owners that would walk away from their equity, but many are not able to sell because they have leverage that exceeds the value of the property, or violations that have mounted up and put them into alternative enforcement programs. So there are many open-minded and willing sellers. There’s just not as often that path to a transaction.”

While much of Ariel’s business has been based in New York City, the company is making a notable push farther upstate, including current deals on a senior housing building in Middletown and on a tower in Albany.

“We’re excited about our growth potential there,” said Sozio. “That’s something we’ve been looking at in the past six months.”

This push into wider territory will be assisted by a partnership the company announced last spring with Global Real Estate Advisors (GREA), a nationwide network of independent real estate investment services companies. The partnership will provide Ariel greater access to clients around the country.

“We’re helping to build out that national affordable housing platform,” said Sozio. “That’s exciting, because it brings another capability we haven’t explored. Having people on the ground in these different states gives us the confidence to say, ‘There’s a big portfolio in Idaho or Texas,’ and we can service them.”

Ariel, which also transacts on boutique office and retail as well as selling notes and engaging its research department for portfolio evaluations, is currently up to 62 full-time employees, with 42 in New York and 20 in a European office in Serbia. The company recently named two more partners, both from in-house, Paul McCormick and Sean R. Kelly, bringing the total to six.

To Sozio, the ascension of two additional partners is a sign of growth and evolution for the firm, and one more reason for optimism about Ariel’s future.

“We’re at an inflection point in our company where we’ve really systematized the different components of the business, but also with a mind on giving everybody a career progression,” said Sozio. “We’re starting to see people progress. We originally had four partners, now we have six, and we want more. … Part of what we hope is our appeal to new talent is that we’re not some huge organization where we get bogged down in minutiae and processes. We offer somebody an opportunity to come in, produce for years, and then ultimately have a seat at the table. That’s really gratifying, because it feels like we’re all in the trenches together.”