The 10th annual NMHC 50 saw the biggest gains coming from the largest companies, while 10 companies made their debut appearances among the nation's 50 largest apartment owners.
The Leaders Apartment Investment & Management Co., "AIMCO" to the industry, pushed to the top of the ownership ranking through its blockbuster acquisition of most of the holdings of Insignia Financial, No. 2 in last year's rankings. This one deal added approximately 122,000 apartments to AIMCO's ownership portfolio. AIMCO added another 15,000 apartments through its acquisition of Ambassador Apartments earlier in the year. These two transactions in 1998, together with its almost-as-large acquisition of NHP's partnership interests during 1997, helped propel AIMCO's holdings to 233,329 apartments as of January 1, 1999, from 23,765 units just two years earlier.
AIMCO's 89% increase in holdings during 1998 bumped Equity Residential Properties Trust (EQR) out of the No. 1 spot, despite Equity Residential's own double-digit growth, which in most years would have been the headline story.
Equity's acquisition of Merry Land & Investment Co. (No. 27 on last year's NMHC 50), combined with purchases of smaller portfolios and individual properties, contributed to EQR's second straight year of adding more than 50,000 apartments. Related Capital expanded its portfolio 9% to retain the No. 3 position, the 10th straight year the Related organization has been the nation's third or fourth largest owner of apartments. United Dominion Realty Trust moved up two places to #5, boosted by its acquisitions during the year from American Apartment Communities and ASR Investment Corp.
Most of the other owners among the top 10 are familiar names, and each increased its holdings during the past year. The top 10 list sports two new numbers. Archstone Communities, No. 7, was formed through a merger of Security Pacific Realty Trust and Security Capital Atlantic Inc., No. 15 and No. 36 respectively on the 1998 NMHC 50 ranking of owners. In addition, Goldman Sachs' Whitehall Real Estate moved up two spots to No. 9.
The Newcomers This year 10 firms are newcomers to the NMHC 50 list of apartment owners, up from six first-timers last year. Mergers brought two new companies to the top half of the rankings. Archstone and AvalonBay both were formed through a merger of two sizable REITs. As mentioned above, Archstone is the product of a merger of Security Capital Atlantic and Security Capital Pacific.
Archstone's holdings this year could be compared to the combined holdings last year of these two firms, which totaled 65,755 apartments. AvalonBay traces its lineage to Avalon Properties (No. 40 last year) and Bay Apartment Communities, which together owned 35,997 apartments at the beginning of 1998. Gables Residential Trust, yet another REIT, moved well above the entry threshold, in part through its acquisition of approximately 4,000 south Florida apartments from Trammell Crow Residential. Lazard Freres Real Estate Investors, with growing interests in both conventional apartments and seniors housing, moved into the middle of the NMHC 50, as did Alliance Holdings. Also welcomed to the list are Simpson Housing Limited Partnership and Chicago-based TVO Real Estate Services, both of which moved above the entry threshold this year. Three more REITs round out the list of newcomers, each having added at least 2,000 apartments to its portfolio in the past year: BRE Properties, Associated Estates Realty Corp., and AMLI Residential Properties. Lastly, while not a newcomer, Columbia Housing is the new name of the Arcand portfolio from the 1998 NMHC 50, which was soldduring the year.
REITs in the Rankings Publicly traded real estate investment trusts were the biggest gainers in this year's rankings, as they had been last year. In addition to the AIMCO and Equity Residential giants at the top, no fewer than 15 other publicly traded REITs are counted among this year's NMHC 50 owners. Bigger on average than the typical NMHC 50 owner, these 17 REITs combined own 984,668 apartments, 42% of all the apartments held by the top 50 firms. A year earlier, REITs in the NMHC 50 owned only 632,051 apartments, which represented just 30% of last year's total NMHC 50 portfolio.
In addition to the companies mentioned elsewhere, Associated Estates grew through its acquisition of MIG Realty Advisors, Camden Property Trust gained about 15,000 apartments in its merger with Oasis Residential, and Home Properties added over 12,000 apartments as it diversified from its New York base into the Mid-Atlantic and Midwest states.
Consolidation in apartment ownership has not been accompanied by a net reduction in the number of REITs in the NMHC 50. The number of public REITs among the nation's 50 biggest apartment owners increased to 17 this year, up three from 1998. New entrants Gables, BRE, Associated Estates, and AMLI more than offset the reduction in numbers from the several REIT mergers. In addition, Lexford Residential Trust is new to the REIT list, having converted to REIT status during 1998, but appeared in last year's NMHC 50 as Lexford Inc., in the No. 23 spot.
A few accounting points are relevant in discussing the REITs in the NMHC 50. First, REITs' apartment holdings are especially potent, because the typical REIT is full owner of the properties, whereas other formats often involve divvying up of ownership interests among multiple investors. Second, the REIT numbers in the NMHC 50 do not include private REITs that are established within larger business entities, nor do the REIT counts include publicly traded companies in the NMHC 50 that have not elected the REIT tax status.
Third, to allow comparisons with the portfolios of non-REIT owners, NMHC 50 ranks by number of apartments, which gives a different ranking for the apartment REITs than would the market capitalization of those firms. Finally, the REIT numbers, as well as those for other companies, are inclusive only of deals that closed by January 1, 1999.
Rising Stars REITs once again dominate this year's listing of the rising stars of the NMHC 50 of apartment ownership. Among companies listed in both 1998 and 1999, REITs took all five top positions in portfolio growth, and Allegis Realty Investors and tax credit specialist WNC & Associates were the only non-REITs among the five firms making the biggest gain in the rankings.
Industry Growth Profiles The ownership portfolio of the NMHC 50 posted record growth during 1998. The total number of apartments owned increased by 238,433, or 11%, easily the biggest gain in both percent and absolute number, in the 10-year history of the NMHC 50. The gains were concentrated at the top of the rankings, as the 10 largest firms grew by a combined 19%.
AIMCO, this year's No. 1, had 68% more apartments than the No. 1 last year. This year it took nearly 20,000 apartments to break into the NMHC 50, up 5% from the 1998 threshold.
Although REITs made the biggest moves in this year's NMHC 50, they were not the only firms to grow during 1998. Of the 35 non-REITs on last year's list of the top 50 owners, 24 reported larger portfolios this year.
Apartment Ownership Concentration The largest apartment companies continued to increase their share of the entire apartment market. The top 10 firms have an ownership interest in 6.6% of the national stock of rental apartments in structures with at least five apartments, which NMHC estimates totaled 16.7 million apartments as of January 1, 1999. The top 25 firms hold 10.3% of the stock, and the full NMHC 50 account for 13.9% of the nation's rental apartments. All of these shares are up approximately a full percentage point in just the past year.
The past two years have seen acceleration in consolidation, with the growth of REIT holdings accounting for the bulk of the expansion of the nation's largest apartment portfolios. But apartment ownership remains diffuse when compared to concentration in most industries in the United States.