Transactions, Development Fell Precipitously in 2009, NMHC Rankings Reveal
Apartment development and transaction volume levels both took a huge dive from previous year’s levels in 2009 due to the Great Recession,
Washington, D.C.—Apartment development and transaction volume levels both took a huge dive from previous year’s levels in 2009 due to the Great Recession, according to the National Multi-Housing Council’s (NMHC) annual ranking of the 50 largest apartment owners and 50 largest apartment managers.
Only $14 billion in properties changed hand last year, which is an 86 percent drop from the $101 billion worth of deals in 2007, and a sharp drop-off from the $38 billion level of 2009, says Mark Obrinsky, chief economist for the NMHC. Development also was extremely subdued, at 97,000 units, the lowest level of the post World War II-era. By way of comparison, yearly apartment development in the early 1990’s, another troubled time in the industry, averaged about 133,000 units per year.
The five largest apartment owners in the country are: Boston Capital (162,777 units); Sun America Affordable Housing Partners, Inc. (147,087 units); Equity Residential (136,843 units); AIMCO (133,200 units) and PNC Tax Credit Capital (128,727 units).
Net sales among the top 50 owners greatly outpaced net acquisitions: sellers shed 98,919 apartments, while acquirers added 34,203. The four largest apartment owners all reduced their portfolios.
An owner may sell a property for a variety of reasons, perhaps acquiring a property as a value-add proposition, and now will sell it because he believes he has improved it as much as possible, Obrinsky said. Also, some large owners, such as Archstone, are developers, and may want to replace older properties in their portfolio with newer ones.
Six of the largest apartment owners are affordable housing providers: Boston Capital (No. 1), SunAmerica Affordable Housing Partners, Inc. (No. 2), PNC Tax Credit Capital (No. 5); National Equity Fund (No.6) Enterprise Community Investment (No. 7) and The Richman Group Affordable Housing Corp. (No.8)
While not sure he has pinpointed the reason for this, Obrinsky called affordable housing a “steady as she goes business,” which is aided by the Low Income Housing Tax Credit program.
Total apartment holdings by REITS continued to fall. There are 10 REITS among the top 50 owners, one less than last year, and down from a peak of 14 in 2005.
Obrinsky says that may change. Whereas REITs were at a competitive disadvantage 3 to 5 years ago to private buyers who would typically buy properties with 70 to 80 percent leverage, the conservative lending environment of today means a lot of those private buyers have been forced to the sidelines.
Obrinsky said transactions may pick up this year. “We’ve been hearing for a while that there is a lot of equity capital waiting on the sidelines,” he said. However, that capital has been waiting to buy distressed properties, which, for the most part, have not come to market. Many investors may finally decide that this year is a good time to buy, Obrinsky says.
The survey also ranked the five largest apartment managers in the country. They are: Pinnacle Family of Companies (183,877 units); Riverstone Residential Group (178,431 units); Greystar Real Estate Partners, LLC (153,819 units); Equity Residential Units (136,843 units); and Lincoln Property Co. (132,881 units).
