Apartment firms responded to a challenging year with different strategies that created few shake-ups in the NMHC 50, the Washington, D.C.-based National Multi Housing Council’s (NMHC) annual ranking of the top 50 apartment owners and top 50 apartment managers.
To sell or not to sell? That was the question for apartment firms in 2004 as prices for apartment buildings soared, aided by condominium converters willing to pay a premium for buildings. Should they take advantage of the seller’s market and pare their portfolios or should they hold on to their properties, and even buy more, to take advantage of improving rental demand and future revenue gains?
There was no single right answer according to the NMHC 50, as each of these choices had adherents among big owners. Some large firms were net sellers, such as No. 2, AIMCO, which sold 22,000 units; and No. 3, Equity Residential, which disposed of 7,000 units. Others were active buyers, such as Morgan Stanley, which increased its portfolio by 87 percent with 46,473 additional units.
Despite record levels of property sales, however, the overall turnover in the NMHC 50 was relatively subdued. There were just four new firms added to the NMHC 50 owners list, and nine of the top 10 were in the top 10 last year as well. On the NMHC 50 managers list, there were six newcomers, and the top 12 firms in this year’s rankings were all in the top 12 last year.
“This year’s rankings show the degree to which the apartment industry is maturing and stable,” said NMHC’s Chief Economist Mark Obrinsky. “In the late 1990s, the industry was on a dramatic growth trajectory as real estate investment trusts (REITs) emerged and began amassing relatively large portfolios. Growth in those years averaged 9 to 11 percent. For the last several years, however, that growth has slowed to approximately 3 or 4 percent and private firms have been the growth leaders.”
“The industry has clearly evolved from a deal-making one to one based on long-term growth and professional management,” said Doug Bibby, NMHC president. “This can be seen not only in the NMHC 50 rankings but also in the customer-centric management philosophy at the larger firms and the number of executives coming into these firms from other industries. These are clearly professional enterprises focused on the long-term growth potential of a professionally managed real estate portfolio.”
Highlights of this year's survey follow:
Additional Apartment Ownership Findings
- A firm had to own at least 21,560 apartments to make the NMHC 50 rankings, up slightly from last year’s 20,600 threshold.
- The top five apartment owners are: New York’s CharterMac (324,711 units); Denver’s Apartment Investment and Management Co. (255,608 units); Chicago’s Equity Residential (200,149 units); Baltimore’s MMA Financial (181,501 units); and Los Angeles’s SunAmerica Affordable Housing Partners (136,539 units).
- Nine of the top 10 were in the top 10 last year. Morgan Stanley was the only new entrant, coming in at No. 7 after increasing its holdings by 87 percent. Morgan Stanley had the biggest portfolio increase, adding 46,473 units. In fact, the number of units it acquired in 2004 is greater than the holdings of all but the top 18 firms in the NMHC 50.
- As of Jan. 1, 2005, the top 50 apartment owners held 2.96 million apartments, or 18 percent of the nation’s estimated 16.4 million apartments. This is up 2.9-percent over last year.
- REITs were net sellers of apartments for the second year in a row as historically low interest rates advantaged private, leveraged buyers. They now own 31 percent of the total NMHC 50 apartments, down from their peak of 35 percent in 2003, and the lowest level since 1998.
- There were only four new firms added to the NMHC 50 owners this year: Enterprise Social Investment Corp. (No. 11), Related Cos. (No. 36), BlackRock Realty (No. 37), and Northwestern Investment Management (No. 46).
Additional Apartment Management Findings
- A firm had to manage at least 23,457 apartments to make the NMHC 50 rankings, little changed from last year.
- There was little shake-up in the top managers slots, as AIMCO retained its No. 1 ranking for the seventh year in a row. Equity Residential and Seattle’s American Management Services (dba Pinnacle) retained their No. 2 and No. 3 slots, respectively.
- There were several large portfolio gainers among the NMHC 50 managers, however. Two firms – Wachovia and WinnCompanies – added more than 10,000 units to their management portfolios, while two more – FPI Management and Capstone Real Estate Services – added more than 8,000 units.
- Apartment management remains less concentrated than apartment ownership. The NMHC 50 managers now manage approximately 15 percent (2.45 million apartments) of the nation’s 16.4 million apartments.
- Six new firms joined the NMHC 50 for managers this year: RAM Partners (No. 35), Drucker and Falk (No. 38), Related Management (No. 39), Cornerstone Realty Income Trust (No. 40), and Edgewood Management (No. 48).
This information was reprinted with permission from the Washington, D.C.-based National Multi Housing Council (NMHC), 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 on NMHC, call (202) 974-2300, e-mail the Council at (email@example.com), or visit NMHC's web site at (www.nmhc.org). A complete analysis of the NMHC 50 is available on the NMHC website at (www.nmhc.org/Top50/ListYears.cfm) or by calling (202) 974-2354.