Equity Residential was founded in 1969. However, unofficially, the company got its start in the early 1960s when Sam Zell and Robert Lurie, both attending the University of Michigan, proposed to their landlord that they would manage and maintain the building in exchange for free rent. The landlord accepted the offer, and Lurie and Zell, who is now Chairman of Equity Residential, were off and running. Under the mantle of a growing office and residential real estate empire named Equity Group Investments, Zell and Lurie snapped up apartment properties.

The apartment portfolio, later named Equity Residential, was spun off in an initial public offering in 1993. By that time, the company was by far the largest publicly traded owner and operator of multifamily residential properties in the United States, with 69 properties, consisting of 21,725 apartment units in 19 states. Meteoric growth followed afterwards, with the REIT growing to $2.0 billion in revenues and assets of $12.3 billion by the end of 2000, up from revenues of $112 million and assets of $535 million in 1993.

Yet by 2000, executives at Equity Residential found the company too spread out, with holdings in approximately 50 markets. It set about concentrating the portfolio more in markets that were supply constrained with high-end housing, and markets that tend to offer above average job growth.

Since then, it has sold $10 billion in assets, typically in smaller, second-tier-markets. Meanwhile, it has reinvested those proceeds in assets in 20 core markets, cities that have high barriers-to-entry, higher than average job growth, larger renter populations, attractive quality of life and high single-family home costs.

"We were an extremely diversified company," Neithercut says. "We found ourselves with assets in nearly every market across the country. As we stepped back and looked at what we thought would provide us the higher total return going forward, we felt that we should be in more supply-constrained markets. While diversification continues to be a part of our story, we don’t need to be in 50 markets to provide our investors with effective diversification."

The company is still making deals to reposition the portfolio. Equity Residential last year sold 73 properties, representing 21,600 apartments, for an aggregate sale price of $1.9 billion at an average capitalization rate of 5.6 percent. Many of the properties were in North Carolina and Texas, states where it is reducing exposure.

"We believe the assets we have owned and the ones we have acquired over the last few years have retained significantly more value than the assets we have sold over that same time period," Neithercut says. "Additionally, the operating performance of the assets we have acquired over the past few years has significantly outperformed the core portfolio."