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UDR Q3 FFO In Line With Estimates, Revenues Increase Y/Y

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Zacks Equity Research
·5 min read
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UDR Inc. UDR reported third-quarter 2020 funds from operations (FFO) as adjusted per share of 50 cents, meeting the Zacks Consensus Estimate. However, the figure comes in lower than the prior year’s 52 cents.

Results reflect the adverse impacts of the coronavirus pandemic and related economic challenges, and governments’ actions and regulations on the company’s business. Moreover, transitory issues in three key markets — New York, San Francisco and Boston — hindered performance.

Third-quarter revenues from rental income climbed 5% year over year to nearly $310 million. Moreover, the revenue figure outpaced the Zacks Consensus Estimate of $305.2 million. This year-over-year upside reflects growth in revenues from acquisition communities and acquired and stabilized, non-mature properties.

Revenues recognized for the third quarter were 98.7% of total billed revenues and cash revenues collected were 96.8%. Moreover, the company noted that October cash revenues received as a percentage of billed revenues are consistent with the prior months.
Further, weighted average occupancy in the September-end quarter was 95.5% compared with the year-ago period’s 96.7%, while effective blended lease rate declined 0.6% from the prior-year quarter’s growth of 3.5%.

Inside the Headlines

During the reported quarter, combined same-store revenues decreased 5.9% year over year. Same-store expenses flared up 4.2%. Consequently, same-store net operating income (NOI), with concessions reported on a cash basis, declined 10%. Notably, the company’s third-quarter combined same-store bad debt reserve aggregated $3.4 million.

The residential REIT’s weighted average combined same-store physical occupancy contracted 50 basis points (bps) year over year to 96.3%. Third-quarter annualized-rate of turnover expanded 160 bps to 65.4%.

UDR continues to implement its Next Generation Operating Platform strategy. This facilitated a year-to-date decline in combined same-store controllable expenses of 0.4%.

Portfolio Activity

During the September-end quarter, the company acquired Village at Valley Forge — a development site in the King of Prussia submarket of Philadelphia — for $16.2 million.

The company’s development pipeline aggregated $423.5 million at the end of the reported quarter and 47% of these costs were incurred. The active pipeline includes four development communities (one each in Addison, TX; Denver, CO; Washington, D.C.; and Dublin, CA) for 1,178 homes. 

At the end of the third quarter, the company’s Developer Capital Program investment, including accrued return, totaled $473.2 million. The weighted average return rate is 8.6%, while the weighted average expected remaining term is 2.5 years.

Balance Sheet Activity

During the reported quarter, UDR repurchased around 597,500 common shares for a total consideration of $19.8 million.

As of Sep 30, 2020, UDR had $923.8 million of liquidity through a combination of cash and undrawn capacity on its credit facilities along with roughly $102 million of incremental capital sources from potential settlement of forward equity sales agreements. Additionally, its total debt was $4.9 billion as of the same date.

Notably, during the reported quarter, the company refinanced its only remaining 2020 maturity, a $79.3-million, 4.35% fixed-rate loan, with a $160.9-million, 2.62% fixed rate secured loan due in 2031.

UDR ended the third quarter with fixed-rate debt representing 93.7% of its total debt, a weighted average interest rate of 3.01% and weighted average years to maturity of 7.6 years.

Guidance

The company provided outlook for the fourth quarter. It expects FFO as adjusted per share of 48-50 cents. The Zacks Consensus Estimate for the same is pinned at 50 cents.

Moreover, it anticipates same-store revenues decline of 5-6% from the year-ago reported figure, while same-store NOI decline is expected to be 8.5-10% year over year.

The company currently carries a Zacks Rank #4 (Sell).

United Dominion Realty Trust, Inc. Price and EPS Surprise

 

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

United Dominion Realty Trust, Inc. price-eps-surprise | United Dominion Realty Trust, Inc. Quote

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 Lexington Realty Trust LXP, National Storage Affiliates Trust NSA and Ventas, Inc. VTR. While Lexington Realty and National Storage Affiliates are slated to report third-quarter earnings on Nov 5, Ventas will release results on Nov 6.

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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