The "Grave Dancer" is also the lord of the rents. Sam Zell (whose unofficial nickname springs from his buying and turning around moribund properties) is at the head of the conga line at Equity Residential, one of the largest apartment owners in the US by sales and units. A real estate investment trust (REIT), the company wholly owns some 400 garden-style, high-rise, and mid-rise multifamily communities with nearly 120,000 units in large metropolitan areas. Equity Residential also owns two military housing complexes and partially owns about two dozen other apartment properties totaling around an additional 10,000 units. Its properties are spread across 15 states and Washington, DC.
Equity Residential focuses on growth regions throughout the US that have higher-than-average single-family home prices, employment growth, and high standards of living. Key markets include Boston, New York, San Francisco, Seattle, South Florida, and Southern California -- areas with high demand and a scarcity of developable land. The REIT has several properties under development.
As the economy began showing signs of life in 2009, Equity Residential ramped up its acquisition activity, acquiring more than $1 billion worth of properties in its core markets. The company bought 21 properties in 2011, though it continues to divest noncore assets in markets like New England (except Boston), North Carolina, Phoenix, Texas, and Portland, Oregon.
In 2011 Equity Residential arranged to acquire more than a quarter of privately held apartment property owner Archstone from Barclays and Bank of America. However, Lehman Brothers Holdings blocked Equity Residential from acquiring the stake and acquired Archstone outright. Equity Residential received $150 million in break up and termination fees.
Competition for quality multifamily apartments is fierce. The upturn in economic conditions and strong demand for rental housing has led to higher occupancy rates, retention rates, and rents. An increase in rental rates was the primary driver for revenue growth in 2011. Companies are able to charge more for rent as supply is sparse. Apartment supply is limited as few new developments were constructed during the recession.
Looking ahead, Equity Residential is banking on the coming-of-age "Echo Boom" generation -- the children of Baby Boomers -- for whom it believes homeownership is no longer an integral part of the American dream. Echo Boomers typically are more likely to rent than own a home and be renters for longer than previous generations. Members of this generation also value the ability to walk to work, restaurants, coffee shops, public transportation, and parks. Multifamily housing often caters to those needs.