The NMHC 50 ranks apartment owners by the number of apartments in which they hold an ownership interest. For the majority of companies in the listing, this is the only measure of size that is both consistent and generally available.
For publicly traded REITs, however, another metric is readily available: total market capitalization. As with other publicly traded companies, size can be estimated by the stock market's valuation of the company's equity and the book value of its debt. All of the REITs in the NMHC 50 are apartment specialists, and the majority of their assets are apartments; hence their market capitalization is a useful and consistent measure of the market's valuation of the companies' apartment business.
The table below lists the publicly traded REITs in the NMHC 50 ownership list in order of size by the units measure. The next two columns show both their total market capitalization, and their ranking by that standard.
There are several notable differences in the rankings. AIMCO, which holds the top position in the NMHC 50, has an ownership interest in almost 18% more apartments than does Equity Residential Properties Trust. Measuring by total market valuation, however, Equity Residential is larger by more than 66%. The other REITs whose market value rank is higher than their NMHC 50 rank are: Charles E. Smith Residential Realty, BRE Properties, AvalonBay, Post Properties, Archstone Communities, and Gables Residential Trust.
The differences between the two rankings have several explanations. The most important difference has to do with partial ownership of apartments. In addition to being the sole owner of thousands of apartments, some REITs have partial ownership interest in others, typically through involvement in a partnership (as either the general partner or a limited partner).
While this ownership interest may be as small as 1%, the apartments enter the count as if they were owned exclusively by the REIT. The valuation measure, by contrast, effectively adjusts for the extent of ownership. Notably, AIMCO has full ownership of only approximately 25% of its apartments and an ownership interest of less than half for approximately 42% of its holdings.
Other reasons for differences between the rankings include: (1) differences in apartment value among companies based on apartment quality or geography; (2) differences in the investor assessments of the quality and stability of current income as well as the growth prospects for the company; and (3) differences in portfolio holdings of assets other than apartments, including both “hard” assets and the valuation of contracts for “third party management” of apartments owned by others.