Hot Markets Bring Dynamic Change to the Apartment Sector

April 4, 2006
National Multi Housing Council’s annual ranking of top 50 apartment firms is revealing

Improving market fundamentals and record-level sales of apartment properties led to several shake-ups in the National Multi Housing Council’s (NMHC) 17th annual ranking of the top 50 apartment owners and top 50 apartment managers.

Without a doubt, the biggest story in the apartment sector in 2005 was the frenzied pace of property sales. Thanks to improving market fundamentals, strong demographics favoring apartments in the years ahead, and continued demand by condo converters, not only was the volume of apartment property sales 70-percent higher than the record-level set in 2004, but it was greater than the previous 2 years combined - and each of those was a record at the time! In all, $86 billion in assets changed hands.

Apartment firms responded to the market with different strategies; some took advantage of the rising prices to pare down their portfolios, while others jumped into the bidding wars and expanded their portfolios.

“The stunning growth in the pace of apartment transactions has changed the apartment sector landscape quickly,” says NMHC President Doug Bibby. “All the trading pushed some new firms into the top of the 2006 NMHC 50 owners and propelled others significantly higher in rank.”  (A change in the definition of “ownership” employed by the survey caused some firms counted as owners in the past to be dropped from the rankings, including the former No. 1 owner, CharterMac.)

Top Owners and Rising Stars
Apartment Investment and Management Co. (AIMCO) reclaims the title as the nation’s largest apartment owner, a position it held from 1999 until 2002. AIMCO’s return to the top spot is also notable because the firm led all firms in net dispositions for the second year in a row, with almost 23,000.

Equity Residential returns to the No. 2 spot. (Interestingly, the firms switch places on the NMHC 50 Managers list, with Equity Residential taking the top spot.)  A firm had to own at least 20,641 apartments to make the NMHC 50 rankings, down slightly from last year’s 21,560 threshold.

This year’s top rising star was
Wachovia, No. 9 on the top owners list, after adding almost 25,000 apartments to its holdings during 2005. Its net increase exceeds the total holdings of all but 37 of the nation’s apartment owners.  Boston Capital (No. 4) was the second-largest net gainer, adding more than 17,000 units. 

Apartment Industry Concentration
Long used to measure concentration in the apartment sector, the 2006 NMHC 50 ownership rankings show an increasing number of medium and large firms rather than the emergence of a few giants.  Overall, the apartment industry remains a good deal less concentrated than many other industries. The 10 largest owners have just under 1.3 million units - a substantial amount, but only 7.7 percent of the estimated 16.5 million apartments nationally. The 50 largest owners account for just 16.1 percent of the nation’s apartment stock.

REITS in the Rankings
“Despite the market-beating returns earned by apartment REITs in the last 6 years, private investors clearly believe that the public markets continue to undervalue apartment real estate,” says Mark Obrinsky, NMHC’s vice president of research and chief economist. “Thus, private investors have been willing to pay a premium to acquire these REITs.”

As a result, the real estate investment trust (REIT) landscape has changed considerably in the past 18 months as a number of REITs have been bought by, or merged with, both public and private firms. They include Gables Residential, Summit Property, Cornerstone Realty Income Trust, AMLI Residential Properties, and Town and Country.

Even so, the number of apartment REITs on the NMHC 50 owners list fell by just one from last year to 13, while the total number of units owned by apartment REITs fell only 1 percent to 922,741 units. The REIT share of the total apartment stock continued its downward trend, falling slightly to 5.6 percent (from 5.7 percent last year). This is the lowest share since 2000, when REITs controlled 6.4 percent of the nation’s apartment stock.

The record level of property sales brought six new firms into the ownership rankings. At No. 18, Colonial Properties Trust was the largest, thanks to its merger with former NMHC 50 owner Cornerstone Realty Income Trust. Other newcomers include: Westdale Asset Management (No. 37); Prudential Real Estate Investors (No. 41); Madison Apartment Group (No. 44); Milestone Management (No. 46); and Investors Management Real Estate Group (No. 49).

Rankings of Apartment Managers
Equity Residential’s management portfolio of 197,774 units pushed it into the No. 1 manager’s spot for the first time, edging long-time leader AIMCO into the No. 2 position.

Interestingly, although the NMHC 50 owners have 10.9-percent more apartments than the top 50 managers do, the largest owner is 18.2-percent bigger than the largest manager, and the median owner has 17.1-percent more apartments than the median manager; nonetheless, management firms needed 9-percent more apartments to make the management rankings than owners. In fact, the smallest firm on the management list has more apartments in its portfolio than nine of the firms on the ownership list.

The biggest portfolio increase in 2005 was recorded by
Greystar Real Estate Partners (No. 7), which added 16,471 units under management. Camden Property Trust (No. 8) followed with 13,285 additional units.

The biggest mover in the rankings was
Alliance Residential, rising 10 slots to the No. 26 slot. Capstone was the second-biggest mover, rising nine slots. In just 2 years, the firm has gone from No. 45 to No. 18.

Concentration in the apartment management industry fell for the third consecutive year. The 2006 Management NMHC 50 operate 14.5 percent of the nation’s apartments, the smallest share in 7 years. The peak was reached in 2002-2003, when they managed 15.3 percent.

To ensure that the 2006 NMHC 50 is as complete and accurate as possible, NMHC staff gathered names of apartment owners and managers from a wide range of sources. A senior officer from each firm was contacted for the information included in the rankings, which are for property owned or managed as of Jan. 1, 2006.  Although membership in the National Multi Housing Council is not required for inclusion in the survey, 87 percent of the firms appearing in this year’s rankings are NMHC members.

To be considered an owner, a firm must have an equity stake in an apartment property or be a general partner with effective responsibility and decision-making over the investment property owned by the partnership. The NMHC 50 does not distinguish between partial and full ownership.

The NMHC 50 tallies rental apartments, including rental housing for seniors.  Condominiums and cooperatives are excluded, as are hotel rooms, nursing homes, hospital rooms, and mobile homes. Pension fund advisory firms are listed only if they have direct ownership interests (as opposed to interests as fiduciaries) or serve directly as property managers. While this survey represents NMHC’s best effort to include all eligible companies, it is possible that some eligible companies have been left out inadvertently.

The 2006 rankings and a complete analysis of the results are available at ( or by calling the NMHC at (202) 974-2354. 

This information was reprinted with permission from the Washington, D.C.-based National Multi Housing Council, a national association representing the interests of the larger and most prominent apartment firms in the United States. NMHC's members are the principal officers of firms engaged in all aspects of the apartment industry, including owners, developers, managers, and financiers. Nearly one-third of Americans rent their housing, and almost one in five Americans lives in an apartment. For more information, contact the NMHC at (202) 974-2300, e-mail the council at ([email protected]), or visit NMHC's website at (

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