With the RANKING of several tax credit syndication firms, the makeup of the Top 50 Owners list has a decidedly different twist in 2011. Four of the five largest owners are affordable housing firms; only one REIT—Chicago-based Equity Residential (No. 5)—made the top five.
Buy/sell activity continued to drive movement on the list, albeit at a much reduced pace from previous years—sales were lackluster in the first three quarters of 2010. Despite this, Woodland Hills, Calif.–based Alliant Capital (No. 11)—rose two spots from last year after buying 5,724 units in 2010. And El Paso, Texas–based Hunt Cos. rose to the No. 12 spot after picking up 18,201 units last year. Among the biggest buyers and sellers were the REITs—Equity was the largest buyer in terms of dollar volume, though it was a net seller in terms of number of units.
Overall, the Top 50 Owners are looking different these days. Affordable housing syndicators claimed a big share of the ownership list, causing REITs to drop in the rankings, even as their portfolio size grew thanks to a wealth of dry powder with which to make acquisitions in 2010. Private firms, meanwhile, were a mixed bag. A number leveraged capital to make opportunistic buys (some in hard-hit markets), while others saw rising valuations and found 2010 to be a much better time to seal and tighten their balance sheets.
REITs Take a Dive
As a result of the addition to the list of tax credit syndicators, publicly traded REITs fell further down the Top 50 list. Consider that Houston-based Camden Property Trust picked up 1,756 units, but its rank fell five spots to No. 17.
Granted, REITs acquire in different ways. Of the units Camden acquired, 1,070 were three joint-venture properties where it bought out its partner and went from 30 percent to 99.9 percent ownership. It also bought properties in Houston, Atlanta, and Corpus Christi, Texas. "All were attractive opportunities but in different ways," says Kim Callahan, vice president of investor relations for the company. "Atlanta was a project built as a condo but then turned rental, and we picked it up mid–lease-up and finished construction on it. In Corpus, there weren’t many bidders, but we have a presence there and the cap rate was attractive."
Minor upticks in unit counts defined the other REITs, as well, though overall ranks dropped. Highlands Ranch, Colo.–based UDR grabbed 1,374 units, but it moved from No. 17 last year to No. 20 this year; Memphis-based MAA similarly grabbed 2,700 units while not selling any last year, and landed at No. 24; Rochester, N.Y.–based Home Properties bought 2,614 units, allowing it to hold its No. 31 spot; and Palo Alto, Calif.–based Essex Property Trust sold no units while buying 2,381, pushing it from No. 46 to No. 43 on the list.
"The REIT platform has created a group of companies that arguably have more access to capital, greater access to lower-cost debt, and great execution capabilities such that these public platforms are proving their ability to be opportunistic during periods when you need to be opportunistic," says Eric Bolton, CEO of MAA.
However, the number of REITs on the
Top 50 Owners list is down—overall, there are only nine publicly traded REITs ranked this year, as mergers in REITland caused smaller companies such as BRE Properties and Associated Estates Realty to drop off.
Private Companies Step Up
But the real giants this year seem to be the private companies—particularly in the affordable space. Boston-based Boston Capital held fast to its No. 1 spot, adding 4,445 units in 2010, bringing its total units owned to 158,947. And they weren’t alone. Boston-based Berkshire Property Advisors added 3,917 units, taking it from No. 44 last year to No. 41 this year; and Los Angeles–based JRK Property Holdings nabbed 2,400 units while selling none, though like the REITs, it still fell two spots, to the No. 27 ranking.
"We saw opportunities where developers were selling out of positions where they had floating-rate construction loans," says Robert Lee, president of JRK Investors (JRK Property Holdings’ investment division).
Similarly, Dallas-based Westdale Real Estate Investment & Management gained 960 units but dropped a spot from last year to No. 38 this year. Westdale focused on making plays in cities that had struggled through the recession. "Despite the economic malaise that still lingers in many markets, we bought in Atlanta and Orlando," says Jeffrey Smith, director of business development and strategic marketing at Westdale. "We believe in long-term recoveries of both of those cities."
Still, despite the slight shifts here and there as companies buy or sell a few thousand units, earth-shattering moves haven’t really happened in several years. In fact, even the seeming newcomers to the list are, in some cases, reincarnations of former firms—Centerline Capital Group
(No. 4) is a descendant of CharterMac, while Boston Financial Investment Management (No. 3) rose from formerly top-ranked MMA Financial.
Scot Sellers, CEO of Englewood, Colo.–based Archstone (No. 13), wonders whether the trends of this year will continue into next. "It will be interesting to see if there is any public-to-public merger activity in the apartment space, considering the merger between two very well-regarded companies in the industrial space—AMB and Prologis," he says. "Although it makes logical sense, there are always ‘social’ reasons that make it challenging to put together."
If such a merger occurs, it will finally cause a shake-up in the Top 50 Owners list.