- Elme, Aimco, and Centerspace are reevaluating their futures, with Elme and Aimco pursuing liquidation and asset sales amid challenging public market conditions and weakened rent growth.
- A sluggish job market and record apartment deliveries are weighing on demand, leading to negative rent growth and softening occupancy, particularly impacting smaller REITs.
- Private capital is stepping in as buyer demand shifts, with hedge funds and alternative managers capitalizing on yield spreads and public-to-private arbitrage opportunities.
- Multifamily starts and construction activity are cooling, but not quickly enough to fully offset pressure on landlords in oversupplied markets.
Smaller Players Tap Out
According to Bisnow, as rent growth trends into the red, smaller multifamily real estate investment trusts (REITs) are folding under the weight of a supply-heavy market and weakened earnings outlooks.
Elme Communities and Aimco have opted for liquidation. They believe winding down and returning capital to shareholders offers more value than staying public. Centerspace is undergoing a strategic review and may follow a similar path. A sale or merger is being considered as part of the review.
Elme recently agreed to sell two-thirds of its portfolio to Cortland for $1.6B. The rest of its assets are now up for grabs. Aimco is asking shareholders to approve a full wind-down. The company concluded its remaining $1.3B portfolio could not sustain public‑market performance.
“These were bought by private capital,” said Piper Sandler’s Alexander Goldfarb. “Six months ago, the typical buyer was a big institutional firm. That’s changed.”
Rent Growth Turns Negative
According to Newmark, nationwide effective rent growth slipped to -0.1% in Q3—below the long-term average of 2.7%—as net absorption slowed sharply. While renewals remain relatively steady, landlords are struggling to fill units with new leases in an uneven economic environment.
New apartment deliveries reached historic levels last year, compounding the pressure on rents. Net absorption totaled under 42,500 units in Q3, compared to an average of 145,000 units over the previous five quarters.
“Jobs are tepid, and you’re not really getting a lot of new rents,” Goldfarb noted.
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Public Market Struggles Fuel Private Exits
With share prices depressed and access to growth capital limited, small-cap REITs are becoming attractive acquisition targets for private investors chasing yield. Alternative asset managers and hedge funds—many with lower cost of capital—are emerging as key buyers, a shift that’s been playing out across capital markets in recent activity.
JPMorgan’s Anthony Paolone noted that Elme’s board chose liquidation over a continued public listing due to ongoing capital and operating constraints.
Green Street echoed this in a research note, stating that all three REITs lacked the scale or operational advantage to achieve a viable cost of capital in today’s market.
Housing Market Crosswinds
Rising home sales and declining mortgage rates are luring some renters into the ownership market. The national average mortgage rate fell to 6.19% in October, down from 6.54% a year prior, contributing to back-to-back months of home sale growth.
Meanwhile, the apartment construction pipeline is slowing. Multifamily starts have fallen 43% over the past two years. Total units under construction are also down by half. This could eventually tighten supply. But the slowdown isn’t happening fast enough to ease near-term rent pressure.
What’s Next
While large REITs like UDR and MAA are weathering the downturn, they are also reporting flat or negative new lease growth. These firms are revising earnings guidance in response to market conditions. Analysts believe larger landlords are less likely to liquidate like their smaller peers. However, if valuations stay low, activist pressure or privatization could still emerge.
“Multifamily is still a very desirable asset class,” Goldfarb emphasized. “But right now, the environment just isn’t favorable for smaller public players.”
Expect continued consolidation and selective exits as REITs contend with rising expenses, softening demand, and limited growth avenues in the public markets.
