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UDR Q4 FFO Meets Estimates, Revenues & Occupancy Decline

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Zacks Equity Research
·4 min read
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UDR Inc. UDR reported fourth-quarter 2020 funds from operations (FFO) as adjusted per share of 49 cents, meeting the Zacks Consensus Estimate. However, the figure is lower than the prior year’s 54 cents.

Results reflect the adverse impacts of the coronavirus pandemic and its resultant economic challenges, especially in the urban markets. In fact, with New York, San Francisco and Boston accounting for 24.6% of UDR’s fourth-quarter 2020 combined Same-Store net operating income (NOI), delayed re-openings of the cities resulted in higher concessionary activity and physical occupancy erosions.

Fourth-quarter revenues from rental income dipped 0.5% year over year to $301.2 million. Moreover, the top line missed the Zacks Consensus Estimate of $306.3 million.

For 2020, UDR reported FFO as adjusted per share of $2.04, down 2% from the prior year’s $2.08 and also lagged the Zacks Consensus Estimate of $2.05. Total revenues of $1.2 billion were up 8.6% year on year.

As of Jan 31, 2021, cash revenues collected for the fourth quarter of 2020 and the first month of the current year were 96.1% and 93.2%, respectively, of total billed revenues.

Further, weighted average occupancy in January 2021 improved 30 basis points (bps) to 96.4% while effective blended lease rate witnessed 0.1% growth in January against a 0.3% decline noted in the fourth quarter of 2020.

Per management, “2021 has started with signs of stability, including occupancy above 96 percent, higher levels of traffic, and concessions starting to ease. However, increased and extended regulatory actions, the timing and efficacy of widespread vaccinations, and the unknown cadence of the full reopening of the nation’s economy continue to pose risks to our business”.

Inside the Headlines

During the reported quarter, combined same-store revenues decreased 5.9% year over year. Same-store expenses flared up 4.8%. Consequently, same-store NOI with concessions reported on a cash basis, declined 10.1%.

The residential REIT’s weighted average combined same-store physical occupancy contracted 60 bps year over year to 96.1%. Fourth-quarter annualized-rate of turnover expanded 120 bps year over year to 41.1%.

UDR continues to implement its Next Generation Operating Platform strategy. This restricted 2020 combined same-store controllable expense growth to 0.2% year over year.

Portfolio Activity

During the December quarter, the company acquired Andover Place at Cross Creek — a 672-home community in Tampa, FL — for $122.5 million.

The company’s development pipeline aggregated $491.5 million at the end of the reported quarter and 50% of these costs were incurred during the period. The active pipeline includes five development communities for 1,378 homes.

At the end of the fourth quarter, the company’s Developer Capital Program investment including accrued return totaled $429 million. The weighted average return rate is 8.3% while the weighted average expected remaining term is 2.4 years.

Balance Sheet Activity

As of Dec 31, 2020, UDR had $958.4 million of liquidity through a combination of cash and undrawn capacity under its credit facilities. Additionally, its total debt was $5 billion as of the same date.

UDR ended the fourth quarter with fixed-rate debt representing 94.4% of its total debt, a weighted average interest rate of 2.91% and weighted average years to maturity of 8 years.

Guidance

The company provided outlook for first-quarter 2021. It expects FFO as adjusted per share of 46-48 cents. The Zacks Consensus Estimate for the same is pegged at 49 cents, above the projected range.

Further, it projects 2021 FFO as adjusted per share of $1.88-$2. The Zacks Consensus Estimate for the same stands at $1.99. Moreover, for the ongoing year, it anticipates same-store cash revenues in the range of -2.5% to 0.5% while the same-store NOI is expected to be -4-0% on a year-over-year basis.

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

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. Price, Consensus and EPS Surprise

United Dominion Realty Trust, Inc. price-consensus-eps-surprise-chart | 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 SBA Communications Corporation SBAC, PS Business Parks, Inc. PSB and Extra Space Storage EXR that are slated to report fourth-quarter results on Feb 22.

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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