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Local developer Jim Aiello has known boom and bust

Wednesday, November 03, 1999

By Dan Fitzpatrick, Post-Gazette Staff Writer

It is hard for Jim Aiello to stay quiet. In the 1980s, the Pittsburgh developer of Cherrington Corporate Center drove around town in a fire-engine-red Ferrari, dined in expensive restaurants and vacationed at The Post Ranch Inn, an exclusive cliffside California resort known for welcoming new guests with a glass of wine.

 
  Jim Aiello at the Wal-Mart Supercenter that he is developing in North Versailles. In the background is the Loews Cineplex, which will have 20 screens and 4,400 seats. (Tony Tye, Post-Gazette)

Aiello's net worth was close to $20 million. Westinghouse Credit, then the finance arm of Westinghouse Electric Corp., was a big-pocketed partner and lender.

As loudly as Aiello built his fortune, though, he lost it.

Westinghouse Credit, which helped Aiello build a shopping center in Scott and an office park in Moon, collapsed under an avalanche of bad loans. Demand for new real estate slowed. Lenders pulled back. Kmart, a key Aiello tenant, toyed with bankruptcy.

Aiello had no choice but to unload his properties, sell his Ferrari and disappear from the real estate industry altogether.

"It was an unbelievable disaster," Aiello said. "I walked out of the 1980s and early 1990s with zero assets and a lot of debt."

Half a decade later, Aiello is back. His return to real estate started quietly, with a string of Wal-Mart stores and a development company backed by his 83-year-old father, Ross Aiello.

But Aiello is itching to take some risks again.

"He is unwavering," said Gary Sheffler, a Moon engineer and former partner. "He wants to do deals and he wants to do them on a large scale."

In North Huntingdon, for example, Aiello is planning a $150 million to $200 million development project that may include 1 million square feet of retail, a medical complex, offices, homes and warehouses. Aiello has more than 400 acres under option near Route 30. To move the project beyond blueprints, though, Aiello needs to rezone the land and convince the Turnpike Commission to relocate the Pennsylvania Turnpike's Irwin interchange.

"I would marvel at him if he gets it done," said Dave Stevenson, a senior vice president with CB Richard Ellis/Pittsburgh who worked with Aiello in the 1980s.

Farther north on Route 30, Aiello is finishing work on a North Versailles retail complex that includes a $25 million Wal-Mart Supercenter and a new, 20-screen Loews Cineplex.

Closer to Pittsburgh, Aiello is assisting with the controversial redevelopment of the old East Hills Shopping Center at Frankstown Road and Robinson Boulevard. Penn Hills church group Petra Ministries purchased the blighted center last summer, and it tapped Aiello to find new retail, office and light industrial tenants. Aiello is working with The First City Co.'s Dick Zappala, an old development partner.

"He is a driven person," said Pennsylvania Commercial Real Estate's Jon Harrigan, who also worked with Aiello in the 1980s. "He eats, sleeps, drinks, thinks about nothing but work."

Only six years ago, Aiello faced ruin.

For that, he blames the impatience of Westinghouse, which took a $975 million charge in 1991 to cover a wave of bad loans made during an aggressive period of real estate lending, the first in a series of charge-offs that ultimately totaled $5.8 billion. With little cash left, Westinghouse officials asked the finance unit to liquidate its troubled properties.

Two projects on that list were Aiello's 230-acre Cherrington Corporate Center and The Bourse Shops at Virginia Manor, a set of upscale shops in Scott that Aiello hoped would emulate Walnut Street in Shadyside. The Bourse was a disaster from the start, plagued by construction delays, low occupancy and small marketing budgets.

"It was just a real comedy of errors," said Jackie Thomas, who moved her wedding-wear store to the center in 1989. She moved out four years later.

Cherrington, though, was more successful. The concept was unusual for its time, mixing hotels, office buildings and a nine-hole golf course. Aiello could not find a bank to finance the project, so he turned to Bill Powe, head of Westinghouse's finance unit. Over time, Powe and Westinghouse would pour more than $50 million into the project and take 75 percent of the ownership. Many of the buildings went up without tenants, built on a speculative basis.

When the real estate market turned sour, Westinghouse stopped work on the park, Powe said. Meanwhile, the costs of maintaining roads, sewers and the golf course mounted. Aiello wanted Westinghouse to refinance his loans and stretch out the terms. But Westinghouse would not go for the idea, and Aiello could not find any other lending partners to fill the void.

Attorneys told Aiello to file for bankruptcy and sue Westinghouse.

"Jim struggled with that one," Powe said. "If he had wanted to be a Jesse James, he would have done that and held out for a settlement."

But, "he didn't do it."

Instead, Aiello and Westinghouse cut a deal. Aiello let Westinghouse take 100 percent ownership of Cherrington and a North Carolina shopping center. In return, he was relieved of any obligations at The Bourse Shops, where Aiello's partnership defaulted on $13.3 million in principal and interest owed to Westinghouse.

"That was a $14 million mistake," Aiello said.

Cutting a deal with Westinghouse allowed Aiello to avoid bankruptcy. But it did not solve all of his problems. Few developers suffered from the collapse of the real estate industry as Aiello did. After he cut his ties with Westinghouse, a slew of creditors took him to court.

Aiello sold his red Ferrari and he sold a home in Dormont to his parents. "The bullets where flying everywhere," he said.

Westinghouse did not fare well either. It sold Cherrington for $13 million and The Bourse Shops for $2 million, absorbing a combined loss of $49 million.

Cherrington sold again this year for $32 million.

If Westinghouse had been more patient, "I would be sitting on my yacht in the Caribbean," Aiello said.

Instead, Aiello sits today in a cluttered office smelling strongly of cologne and perfume. He is 60 years old. His hair, once black, is now gray.

Papers are everywhere. Wrinkled blueprints are tacked to the walls. The office, on the second floor of a Strip District soup warehouse, is owned by his father, who controls several properties in the Strip.

Because of his history, Aiello knew he would have problems with new lenders. So his father, Ross, backed Aiello's new venture, JRA Development Group. Aiello's son, Jim Jr., left a job at the accounting and consulting concern, Arthur Andersen, to help his father.

Two years later, JRA has completed $68 million in new construction, including Wal-Marts in Mercer and Venango counties. He currently is looking at three to four more Wal-Mart projects. He also has options on 65 acres in Buffalo and 100 acres in Canada, and he is working on an option for 100 acres in Uniontown.

In one sense, Aiello is returning to what he knows well.

A former investment banker, Aiello got his start in the real estate business by building Kmart stores with government-backed obligation bonds. When beginning his first development company in the 1970s, he used an American Express card to rent a one-room office Downtown. His partners were Zappala, the developer, and Donald Rea. Together, they did hundreds of single-store deals for Kmart.

Aiello is doing the same kind of work today, but with Wal-Mart instead of Kmart. "We are back in the groove," Aiello said. "The whole trick is to fill the pipeline with things that will get built."

Some of Aiello's ideas, however, haven't made it out of the office.

In the 1980s, he drew up plans for a 26-story office and condominium tower Downtown, at Ross Street and Fourth Avenue. It was never built.

During the same period, he talked about building a 1 million square foot office park along Interstate 79, called Rosslyn Pointe Corporate Center. It never got out of the dirt.

Aiello told a newspaper reporter about his plans for a U.S.-style shopping center in the northern Italian town of Santa Maria a Monte. That never happened.

And a few years ago, he tried to convince the Pittsburgh Penguins to let him develop a retail and entertainment around the Civic Arena. Also, no go.

Because of his ambition, Aiello has always liked taking on projects beyond his means. As a result, Aiello's partnerships were never that profitable, said Sheffler, the former partner.

"We really had to give away most of the project to investors or to equity partners," Sheffler said.

Aiello was "giving away the ship, more or less."

As it turns out, though, Aiello was right about Cherrington and about The Bourse, now called Scott Towne Center.

Both projects are nearly full today.

"I lost my net worth," Aiello said. "But I don't think I lost my reputation."



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