APARTMENT MANAGERS

Many of the nation's largest apartment owners self-manage their properties and therefore also appear on the NMHC 50 of apartment managers. But other firms specialize in property management and provide this service to apartment owners, including some of those in the NMHC 50 owners list.

The Leaders
AIMCO maintains its dominance in this year's ranking of the nation's largest apartment managers. In addition to managing most of its owned portfolio, AIMCO manages many apartments for other owners, and these "third party" arrangements boosted the number of apartments managed by more than 100,000 above its ownership count. Solidly in the No. 2 position is Equity Residential Properties Trust, which does less third-party management but manages almost all of the apartments it owns. Lincoln Property Co. and Pinnacle Realty Management Co., each with approximately 100,000 apartments managed, retained their No. 3 and No. 4 rankings. The remaining companies in the top 10 are all returnees with the exception of No. 9, Trammell Crow Residential, which moved up from No. 15 by adding approximately 7,000 units to its management portfolio during 1999.

Top  Ten Apartment
Management Firms 

The Newcomers
Six companies are new to this year's NMHC 50 of apartment managers. Three -- Lend Lease, JPI and Cornerstone -- also are new to the ownership NMHC 50. In addition, Legacy Partners nearly doubled its management portfolio to premier in the No. 26 position among the nation's largest apartment managers, as did No. 38, National Partnership Investments Corp. BH Management Services moved into No. 47 on the strength of its 10-state management portfolio totaling 20,000 apartments.

In addition to the newcomers, two returnees are listed under new names this year. Whitehall Street Real Estate Funds reports the management operations listed last year for its affiliate Archon Management Services. A similar substitution occurs with FowlerShore & Flanagan, represented last year by Trust Property Management.

Rising Stars of Management
In addition to the companies that also made big moves up in the ownership NMHC 50, firms making notable gains on the NMHC 50 management list are AIMCO and Greystar Management Services.

Apartment Management Growth and Concentration
The total number of apartments managed by the nation's 50 largest apartment managers increased 4% during 1999. The growth was broad based and nearly equal in the top and bottom parts of the NMHC 50 ranks. The threshold for entry into the management NMHC 50 rose 5% from 18,544 apartments in 1999 to 19,465 apartments in 2000. As with the owners' NMHC 50, the management listings suggest continued gradual consolidation in apartment management. The top 10 companies now manage 6.7% of the nation's apartments (that is, rental units in structures with at least five units), up from 6.6% last year. The full NMHC 50 manage 13.6% of the nation's apartments, matching last year's percentage. 

Note:  Beginning in 1999, management totals exclude management of condominiums and cooperative housing communities.

SPECIALISTS

Thirty-five companies appear on both the owners' NMHC 50 and the managers' NMHC 50. Consequently, on each list there are 15 companies that appear on that list only. Many of the firms appearing on just one of the lists both own and manage apartment properties, but they specialize in either one or the other. The specialists include some of the biggest companies on the two lists. Among apartment owners, Related Capital and Boston Capital have long been near the top of the NMHC 50, even though Related uses other companies to manage many of its properties and Boston Capital contracts out all of its property management. Similarly, on the managers' NMHC 50, Pinnacle Realty Management is No. 4 again this year, managing nearly 100,000 apartments, while Pinnacle's ownership interests fall just below the threshold for the ownership NMHC 50. 

Some firms that appear on both the ownership and management NMHC 50 lists are more prominent in one ranking than the other. Companies whose ownership and management portfolios differ by more than 25,000 apartments are Lend Lease, Whitehall Street Real Estate Funds, LeFrak Organization, Lincoln Property Co. and Trammell Crow Residential. And AIMCO, while No. 1 in both lists, manages 121,928 more apartments than it owns and truly dominates the management rankings.
 

SIZING THE APARTMENT REITs
The NMHC 50 ranks apartment owners by the number of apartments in which they hold an ownership interest. For the majority of companies in the listing, this is the only consistent and generally available measure of size.

For publicly traded REITs, however, another metric is available: total capitalization. The size of REITS, like other publicly traded companies, can be approximated by adding the market valuation of the company's equity and the book value of its debt. Because all of the REITs in the NMHC 50 are apartment specialists, the majority of their assets are apartments owned by the company.

The table below lists the publicly traded REITs in the NMHC 50 in order of size by the units measure. Also shown is the rank by total capitalization. There are some notable differences in the rankings. At the top, although AIMCO has an ownership interest in 5% more apartments than does Equity Residential, by the total capitalization measure EQR is nearly twice the size of AIMCO. Other REITs that rank considerably higher by market valuation than by number of units include AvalonBay, Post Properties, Charles E. Smith Residential and BRE Properties. The differences between the two rankings have several explanations. Perhaps the most important is partial ownership of apartments. In addition to being the sole owner of thousands of apartments, some REITs have partial ownership interest in others, typically through involvement in a partnership as either the general partner or a limited partner. While this ownership interest may be as small as 1%, the apartments enter the count as if they were owned exclusively by the REIT. The valuation measure, by contrast, effectively adjusts for the extent of ownership. Notably, AIMCO has full ownership of only approximately 25% of its apartments and an ownership interest of less than half for approximately 60% of its holdings. Other reasons for differences between the rankings include: (1) differences in the average value of apartments owned by the company due to geography or apartment quality; (2) differences in the holdings of non-apartment assets, both "hard" assets and the valuation of contracts for "third party management" of apartments owned by others; and (3) differences in the equity market's assessment of the current income and growth prospects for the company.