Tesla is joining the S&P 500. Here’s the company that’s getting booted.

With Tesla joining the S&P 500 on December 21st, 2020...let’s take a look at the company it’s booting out: Aimco.

December 14, 2020

On December 21st, Tesla will join the S&P 500 index.

At a valuation of $570B+, it’ll be the largest company to ever join the index, and global fund managers are preparing for the huge day.

But when one company joins, another has to go. That company is Apartment Investment and Management Company (Aimco) — and this is its story.

A politician turns real estate magnate

In 1987, a Harvard law grad (and later Colorado state senator) named Terry Considine acquired a majority stake in the largest fee-operated apartment management company in Denver.

Later, Considine formed Aimco — a real estate investment trust (REIT) — and took it public in 1994.

As of end 2019, Aimco operated 124 apartment complexes with ~33k apartments that brought in $900m+ across major markets including Atlanta, SF, Boston, Denver, and New York.

But it’s taken a beating this year

During the pandemic, many municipalities where Aimco operates have put mandatory rent abatements or freezes into effect; consequently, the REIT’s stock has fallen >30% and is now valued at $6.3B.

Why’s Aimco getting the boot, though?

The REIT is actually separating into 2 entities: 1) its apartment holdings and; 2) a development business.

More generally, it’s one of the smallest market cap stocks in the S&P 500, which means Considine is probably looking at fellow index member Xerox (market cap = $4.5B) and wondering, “Yo, WTF?”

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