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Mar. 5, 2014

Most Active Residential REITs

Be sure to tune in to our podcast dissecting the current state of the REIT sector, and what firms are doing to refine and expand their holdings.


Leaps and Bounds

By Mike Ratliff and Jack Kern

This month, MHN offers an index of the Most Active Residential REITs. We used this opportunity to examine the growth of these publicly traded firms and activity within the sector. While it is good to be a REIT due to tax benefits and the ability to raise capital, it isn’t necessarily easy. These companies are constantly looking to refresh and reposition their portfolios in accordance with market trends.

For the time period of Sept. 30, 2012, through Sept. 30, 2013, these REITs increased their net investment in real estate by 17 percent on average. The total increase in real estate assets was valued at roughly $14.9 billion. Compare that to just over $5 billion in last year’s index. That’s a lot of acquired units. In fact, the companies on this list own 804,367 units and enjoy an industry-wide occupancy rate of 93.8 percent.

The past year was certainly interesting as far as investment strategy goes. Top-tier urban markets saw prices far exceed their pre-recession highs, and certain firms began to look more heavily into secondary and tertiary markets. Value-add plays have grown in popularity due to the higher cap rates in Class B and C product and the ability to grow rents after upgrading kitchens, baths and floors.

A larger portion of the past year’s activity occurred early on, when AvalonBay and Equity Residential made national headlines with the acquisition of Archstone. The second half of the year saw two huge M&As. In October, Mid-America Apartment Communities Inc. (MAA) formed an $8.3 billion merger with Colonial Properties Trust that created a Sunbelt apartment powerhouse. Then, in December, Essex Property Trust agreed to buy competitor BRE Properties in a $4.3 billion deal that created the biggest apartment player on the West Coast. With deals like these, we are very excited for what 2014 brings to the residential REIT sector.