NO COMPANY ENJOYED A MORE DYNAMIC YEAR in 2001 than New York-based Related Capital Co., according to the National Multi Housing Council's (NMHC) annual ranking of the largest apartment owners. At the beginning of this year, the company and its affiliates held an ownership interest in 246,918 apartment units, a whopping increase of more than 53% from the same period one year earlier. No other apartment owner's portfolio grew by more units. Related placed second overall on the NMHC's 2002 ranking of the largest apartment owners.
According to statistics provided by the company, the overwhelming portion of that growth — just more than 85% of the apartment units — stems from the purchase of New York-based PW Funding by CharterMac (AMEX: CHC), a publicly traded, direct mortgage lender that Related Capital manages.
There is more growth to come. Stuart Boesky, senior managing director of Related Capital, estimates that the company will add approximately 30,000 units in calendar year 2002.
Founded in 1972, Related Capital focuses on the production of affordable housing units by providing equity and debt financing to multifamily developers. According to the company, it has financed the construction and rehabilitation of more than 90,000 affordable housing apartment units in 44 states and Puerto Rico. In 2001, the company raised $490 million in equity and originated $317 million in debt.
In the company's complex corporate structure, Related also manages CharterMac and American Mortgage Acceptance Co. (AMEX: AMC), a REIT. CharterMac, which has a market capitalization of $737 million, focuses on investing in tax-exempt bonds for the development and acquisition of affordable multifamily properties, while American Mortgage, which has a market capitalization of $53 million, concentrates on taxable financings for market-rate apartment units.
On June 19, CharterMac's stock price closed at $17.70, down from a 52-week high of $17.91. The stock's 52-week low was $14.60. As for American Mortgage, the company's stock price closed at $13.97 on June 19, down from a 52-week high of $15.50. The stock's 52-week low was $10.93.
Approximately 70% of the units in which Related Capital and its affiliates have an ownership interest are affordable units, defined as apartments reserved for households making no more than 80% of the area median income, according to Alan Hirmes, senior managing director of Related Capital, who adds that the majority of the units acquired through the PW Funding transaction were market-rate.
One of the appeals of investing in affordable apartments is the supply and demand situation, Boesky says. A recent Congress-mandated report by the Millennial Housing Commission stated that 13.4 million renter households are spending more than 30% of their income on housing, the federal government's definition of unaffordable housing.
By contrast, only about 100,000 new affordable units are produced each year through various federal and state initiatives, according to Boesky. Couple that with the fact that almost as many older affordable apartments are being converted to market-rate properties each year or are deemed functionally obsolete, and there is a healthy demand for affordable properties, he adds.
“What you really have in this country right now is large demand, an undersupply and no positive momentum toward satisfying that demand because as fast as new affordable units are being built, older affordable units are being taken off the rent roll,” Boesky says.
In one of its more recent noteworthy affordable deals, Related Capital and its affiliates provided $29 million in debt and equity financing to Dallas-based Southwest Housing Development Co. for the construction of three affordable housing complexes in Texas and Colorado. The communities will total 464 units.
National Multi Housing Council (NMHC) Top 25 Apartment Owners
The following list is a condensed version of the apartment owners portion of the 2002 NMHC 50, an annual ranking of the 50 largest U.S. apartment owners and the 50 largest U.S. apartment managers published in NREI's March issue. The companies below are ranked according to the number of apartment units in which they had an ownership interest as of Jan. 1, 2002.
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Apartment Investment and Management Company
Headquarters: Denver, CO
CEO: Terry Considine
Apartments With Ownership Interest: 251,201 -
Related Capital Company
Headquarters: New York, NY
CEO: Marc D. Schnitzer
Apartments With Ownership 246,918 -
Equity Residential Properties Trust
Headquarters: Chicago, IL
CEO: Douglas Crocker, II
Apartments With Ownership Interest: 226,314 -
Lend Lease Real Estate Investments
Headquarters: Atlanta, GA
CEO: Fred N. Pratt, Jr.
Apartments With Ownership Interest: 129,962 -
Boston Capital
Headquarters: Boston, MA
CEO: John P. Manning
Apartments With Ownership Interest: 110,000 -
SunAmerica Affordable Housing Partners, Inc.
Headquarters: Los Angeles, CA
CEO: Michael L. Fowler
Apartments With Ownership Interest: 107,000 -
Archstone-Smith
Headquarters: Englewood, CO
CEO: R. Scot Sellers
Apartments With Ownership Interest: 99,000 -
United Dominion Realty Trust, Inc.
Headquarters: Richmond, VA
CEO: Thomas W. Toomey
Apartments With Ownership Interest: 77,567 -
Whitehall Funds
Headquarters: New York, NY
CEO: Daniel Neidich
Apartments With Ownership Interest: 76,000 -
Lefrak Organization, Inc.
Headquarters: Rego Park, NY
CEO: Samuel J. LeFrak
Apartments With Ownership Interest: 71,000 -
Sentinel Real Estate Corporation
Headquarters: New York, NY
CEO: John H. Streicker
Apartments With Ownership Interest: 62,737 -
Casden Properties, Inc.
Headquarters: Beverly Hills, CA
CEO: Alan I. Casden
Apartments With Ownership Interest: 59,510 -
GE Capital Real Estate
Headquarters: Stamford, CT
CEO: Michael Pralle
Apartments With Ownership Interest: 54,726 -
Alliance Holdings, L.L.C.
Headquarters: Chicago, IL
CEO: Andrew W. Schor
Apartments With Ownership Interest: 52,691 -
Camden Property Trust
Headquarters: Houston, TX
CEO: Richard J. Campo
Apartments With Ownership Interest: 51,345 -
Edward Rose Building Enterprises
Headquarters: Farmington Hills, MI
CEO: Sheldon Rose
Apartments With Ownership Interest: 48,078 -
Home Properties
Headquarters: Rochester, NY
CEO: Norman Leenhouts/Nelson Leenhouts
Apartments With Ownership Interest: 48,066 -
Lincoln Property Company
Headquarters: Dallas, TX
CEO: J. Timothy Byrne
Apartments With Ownership Interest: 47,691 -
Key Global Capital
Headquarters: Cleveland, OH
CEO: Edward Chu
Apartments With Ownership Interest: 45,797 -
Richman Group Capital Corporation
Headquarters: Greenwich, CT
CEO: Richard P. Richman
Apartments With Ownership Interest: 42,526 -
AvalonBay Communities, Inc.
Headquarters: Alexandria, VA
CEO: Bryce Blair
Apartments With Ownership Interest: 41,212 -
Walden
Headquarters: Dallas, TX
CEO: John B. Bartling
Apartments With Ownership Interest: 40,297 -
Wachovia Securities Tax Credit Investments
Headquarters: Charlotte, NC
CEO: Ken Thompson
Apartments With Ownership Interest: 37,254 -
Milstein Properties
Headquarters: New York, NY
CEO: Howard P. Milstein
Apartments With Ownership Interest: 37,000 -
Fairfield Residential, L.L.C.
Headquarters: San Diego, CA
CEO: Christopher E. Hashioka
Apartments With Ownership Interest: 36,500
