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UDR Q1 FFO In Line With Expectations, Revenues Increase

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UDR Inc. UDR reported funds from operations (FFO) as adjusted per share of 47 cents for first-quarter 2018, in line with the Zacks Consensus Estimate. The figure was higher than the prior-year quarter tally of 45 cents.

Total revenues in the reported quarter rose 3.9% year over year to $253.3 million. Further, the top line came marginally above the Zacks Consensus Estimate of $253 million. Growth in revenues for the first quarter were due to the rise in revenues from same-store communities, stabilized, non-mature and development communities.

Inside the Headlines

During the quarter, same-store revenues increased 3% year over year while same-store expenses increased 3.6%. Consequently, same-store net operating income (NOI) rose 2.7% year over year. This residential REIT’s same-store physical occupancy grew 30 basis point (bps) to 96.9%. The first-quarter annualized-rate of turnover contracted 120 basis points from the prior-year period to 40%.

At the end of the first quarter, UDR’s development pipeline aggregated $810.5 million at its pro-rata ownership interest. Out of which, 91% has already been funded.

As of Mar 31, 2018, the company had around $843.4 million available from a combination of cash and undrawn capacity on its credit facilities. Further, its total debt was $3.7 billion as of the same date.

During the reported quarter, the company repurchased 593,000 shares at an average price of $33.69, totaling approximately $20 million.

Portfolio Activity

At the end of the first quarter, the company’s Developer Capital Program investment, including accrued return, totaled $159.3 million.

Guidance

For second-quarter 2018, UDR projects FFO as adjusted per share to be 47-49 cents range. The Zacks Consensus Estimate of 49 cents lies at the higher end of this guidance.

For full-year 2018, the company reaffirmed its estimates. The FFO as adjusted per share remains at $1.91-$1.95. The Zacks Consensus Estimate of $1.93 lies within this range. Moreover, the company anticipates same-store revenues, expenses and same-store NOI to remain in the range of 2.5-3.5% for the year.

Our Viewpoint

UDR’s portfolio, located in the targeted U.S. markets, has a superior product-mix. Further, the company’s focus on enhancing the portfolio through expansion in core markets and the sale of non-core ones is likely to support long-term growth. Also, during the quarter, UDR declared a 4% increase in annualized common dividend for 2018.

However, the company continues to deal with an elevated level of apartment supply in a number of its markets. This is likely to limit the landlord’s ability to demand higher rents while increasing concessional activities. Moreover, any rise in interest rates remains a concern for the company.

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

 

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Currently, UDR has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Alexandria Real Estate Equities, Inc. ARE, Regency Centers Corporation REG and Welltower Inc. WELL. Alexandria and Regency Centers are scheduled to release results on Apr 30, while Welltower is slated to report numbers on May 1.

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

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