For AMLI Residential, 2004 marked a year of spring cleaning as the Chicago-based REIT tidied up its portfolio by adding a number of young Class A apartment communities. “We think that the market is mispricing the older stock, and we think it's a good time to sell the older [stock], and buy brand new,” says Gregory Mutz, chairman and CEO of AMLI, which ranked No. 27 on the list.

AMLI wasn't alone in its investment strategy. Many REITS took the same approach, positioning themselves to take advantage of improving rental demand and other economic fundamentals in 2005.

Archstone-Smith, ranked No. 6, continued its aggressive capital recycling strategy, upgrading and growing its holdings. Most notably, it acquired a $1.4 billion apartment portfolio from Oakwood Worldwide, a national provider of corporate housing. The transaction increases the multifamily REIT's presence in core Archstone markets such as Southern California, Boston, Chicago, Washington, D.C., and Seattle.

Other large companies repositioned themselves by purchasing an entire company. Two of the largest deals announced in 2004: Colonial Proper ties Tr ust's merger with Cornerstone Realty Income Trust, and Camden Property Trust's merger with Summit Properties.

The Camden-Summit merger created a combined company with a $5.8 billion market capitalization and a portfolio of nearly 69,000 units in 199 multifamily properties. The strategic acquisition also allowed Camden to expand into three markets that otherwise would have been extremely difficult to enter, says D. Keith Oden, Camden's president and COO. Summit's “three primary markets—South Florida, Atlanta, and Washington, D.C.—have been at the top of our list as far as where we need to be represented to fill out our strategy of being in the fastest-growing marketplaces from an employment growth standpoint,” Oden explains. The merger also helped Camden achieve single-digit NOI concentrations in all of its markets—a feat that would otherwise have taken four or five years to accomplish, adds Oden.

CLASS ACT: Under Gregory Mutz's leadership, AMLI Residential spent 2004 swapping B-grade properties for A and A-plus buildings–and will do more in 2005.
CLASS ACT: Under Gregory Mutz's leadership, AMLI Residential spent 2004 swapping B-grade properties for A and A-plus buildings–and will do more in 2005.

Some companies grew their portfolio by expanding into new niches, like military and affordable housing. Michaels Development Co., based in Marlton, N.J., landed two large HOPE VI awards and entered the military segment, boosting its unit count by more than 12 percent and more than doubling its revenue. “This is probably our biggest year since the early '80s,” says John J. O'Donnell, Michaels' CFO. “I look at [the success of] 2004 being repeated for the foreseeable future.”

The MFE Top 50 owners also took advantage of the profitable sellers' market in 2004, as prices for apartment buildings soared. Major REIT net sellers included No. 2 Equity and No. 3 AIMCO. Private company WMC Management Co. (now a part of The Milestone Group) also shed a significant number of assets, including a six-property portfolio in Texas with 1,532 units. “It was a great year to sell,” says Alison Malkhassian, managing director and chief investment officer of Walden Investment Partners (a spin-off of WMC Management). “It continues to amaze me in terms of what people are willing to pay and the cap rates that we are seeing on transactions.”