Apartment REITs Prepare for Future

As apartment REITs enjoy solid fundamentals and growing demand, CEOs are taking steps to capitalize on the sector's momentum.

Denver-based Aimco (NYSE: AIV) has been active in the capital markets. On June 26 the company completed a public equity offering of more than 11 million shares of its common stock that netted $295.3 million. The proceeds were used to finance the redemption of preferred stock. Aimco made a similar move in June when the company raised net proceeds of more than $300 million in equity offering, which was also used to finance the repurchase of preferred stock.

Terry Considine, the company's chairman and CEO, said that activity has been driven by the desire to have the "absolute lowest levels of leverage."

"In today's fragile economy, it seems more prudent to operate with lower levels of leverage than we had in the past," He said

The interest in apartment properties since the recession has also created a tough environment for multifamily REITs to find high-quality assets at affordable prices in key locations, according to Considine. Instead, REITs such as Aimco are putting an emphasis on the redevelopment of their existing properties.

"We have not been active acquirers," he said. "We have been able to spend our capital dollars on redevelopment, which has a higher margin."

Equity Residential (NYSE: EQR) has been focusing its efforts on planning for a possible resurgence in the housing market. In a video interview with REIT.com during REITWeek 2012: NAREIT's Investor Forum, David Neithercut, president and CEO of Equity Residential, said he's anticipating that markets where the cost of single-family housing is low will be more affected by the resurgence of the housing market.

"We've been selling assets in those markets," he said. The company has instead turned its attention markets with high barriers to entry and more expensive single family housing.

Home Properties Inc.'s (NYSE: HME) acquisition activity has increased over the past two years. Since July 2011, the company has purchased nearly $600 million on acquiring apartment communities. However, CEO Ed Pettinella also said his company is finding it difficult in the current environment to find for high-quality assets available in prime markets.

One way that Home Properties is looking to boost performance is through its technology. In March, the firm launched a mobile app designed to make the rental process easier. The mobile-optimized website enables users to obtain real-time information on available rentals, map directions to properties and access other information to suit their needs during an apartment search.

"Technology is moving so fast, and we're trying to stay up with it," Pettinella said in an interview with REIT.com during REITWeek 2012. He noted that roughly 20 percent of the company's online business is originating through the app, approximately double the rate of 2011.