AIMCO’s (AIV) portfolio includes garden-style, mid-rise, and high-rise apartment communities located in 23 states and Washington, D.C. The company’s geographic allocation strategy focuses on the largest coastal and job growth markets in the United States, which are grouped according to the West and East areas into which AIMCO’s property operations are also organized. The main aim of the geographic coverage strategy is to maintain diversification while moving to a higher average price point.
East is the biggest market
In terms of the number of apartment homes, East is AIMCO’s largest region, comprising 46.4% of the total apartment homes. This is followed by the West region with 38.7% and other markets with 14.9%.
In the West region, Los Angeles is the largest market with a share of 10% of the total apartment homes. This is followed by Chicago at 7.5% and San Diego at 5.6%. AIMCO expects Los Angeles to outperform in 2016, helping to offset slower growth in the Mid-Atlantic region. Allocation to Coastal California is expected to increase to ~33% in the coming years as redevelopment activities pick up.
In the East region, Maryland is the largest market with 15.1% of the total apartment homes. This is followed by Boston at 9.6% and Philadelphia at 8.2%. Other markets comprised 14.9% of the total apartment homes in 2014. The company avoids concentration risk by maintaining an allocation to the Midwest, the Sunbelt, and Southeast Florida.
The distribution of properties in the attractive coastal markets of the United States reflects AIMCO’s (AIV) geographic diversification strategy to take advantage of the growth in prime regional markets. Other major players in the apartment REIT space are Equity Residential (EQR), Essex Property Trust (ESS), and AvalonBay (AVB). They follow the same portfolio diversification strategy. The SPDR Dow Jones REIT ETF (RWR) invests 1.0% of its portfolio in AIMCO.
We’ll discuss AIMCO’s target customers in the next part of this series.