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UDR Beats Q4 FFO & Revenue Estimates, Provides 2019 View

Zacks Equity Research

UDR Inc.’s UDR fourth-quarter 2018 funds from operations as adjusted (FFOA) per share of 50 cents surpassed the Zacks Consensus Estimate by a whisker. The figure came in higher than the prior-year tally of 48 cents.

Revenues from rental income in the reported quarter climbed 5.8% year over year to $264.7 million. Further, the top-line figure beat the Zacks Consensus Estimate of $263.3 million.

In addition, total revenues advanced 5.8% year over year. This upside primarily stemmed from growth in revenues from operating and lease-up communities.

For full-year 2018, FFOA per share came in at $1.96, up 4.8% year over year. It also topped the Zacks Consensus Estimate of $1.94. This was backed by a 5.1% increase in revenues from rental income to $1 billion.

Inside the Headlines

During the quarter under review, same-store revenues increased 3.7% year over year. However, same-store expenses flared up 4.4%. Consequently, same-store net operating income (NOI) improved 3.4% year over year. This residential REIT’s weighted average same-store physical occupancy expanded 10 basis points (bps) year over year to 96.8%. The fourth-quarter annualized-rate of turnover shrunk 130 bps from the prior-year period to 40.3%.

During the quarter, UDR closed the previously-announced sale of its 604-home community — Circle Towers — in Fairfax County, VA, for $160 million.

At the end of the fourth quarter, UDR’s development pipeline aggregated $779 million at its pro-rata ownership interest, out of which, 99% has already been funded.

As of Dec 31, 2018, the company had around $1.3 billion available from a combination of cash and undrawn capacity on its credit facilities. Additionally, its total debt was $3.5 billion as of the same date.

Portfolio Activity

At the end of the reported quarter, the company’s Developer Capital Program investment, including accrued return, totaled $248.5 million.

Guidance

The company provided estimates for first-quarter 2019 and full-year 2019. For first-quarter 2019, UDR projects FFOA per share to be in the 48-50 cents range. The Zacks Consensus Estimate for the same is pinned at 50 cents.

The FFOA per share for 2019 is expected in the band of $2.03-$2.07. The Zacks Consensus Estimate for the same is $2.05. Moreover, the company anticipates same-store NOI to be up 3.25-4.25% for the current year.

Our Viewpoint

UDR’s high-quality properties located in some affluent regions of the United States have ensured steady rental income generation for the company. In fact, it witnessed a rise in net operating income on the back of higher operating income and gains on the sale of real estate.

However, the company has been plagued with escalating deliveries in a number of its markets. This remains a concern as elevated levels of supply curtail landlords’ ability to demand higher rents and also increase concessional activities. Also, escalating development costs are expected to dent returns for the company’s development pipeline in the near term.

United Dominion Realty Trust, Inc. Price, Consensus and EPS Surprise

United Dominion Realty Trust, Inc. Price, Consensus and EPS Surprise | United Dominion Realty Trust, Inc. Quote

Currently, UDR has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Mid-America Apartment Communities, Inc. MAA reported fourth-quarter 2018 FFO of $1.55 per share, in line with the Zacks Consensus Estimate. The bottom line came in higher than the prior-year quarter figure of $1.50.

Alexandria Real Estate Equities, Inc. ARE reported fourth-quarter 2018 adjusted FFO of $1.68 per share, missing the Zacks Consensus Estimate by a whisker.

Boston Properties Inc.’s BXP fourth-quarter 2018 FFO per share of $1.59 also missed the Zacks Consensus Estimate of $1.68. The figure, however, came in 7% higher than the prior-year tally.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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