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UDR Reports In Line

Zacks Equity Research

UDR, Inc. (UDR), a real estate investment trust (:REIT), reported third quarter 2012 FFO (funds from operations) of $86.5 million or 33 cents per share, compared with 73.0 million or 32 cents in the year-earlier quarter. Reported FFO per share was in line with the Zacks Consensus Estimate.

Total revenues during the quarter were $181.8 million compared with $163.9 million in the prior-year quarter.

Same-store occupancy remained relatively high at 95.8% during the quarter. Same-store revenues and net operating income increased 5.5% and 6.4% respectively, during the reported quarter compared to the year-ago quarter, to levels of $146.9 million and $99.1 million respectively.

During the reported quarter, UDR started construction on its Beach Walk development in Huntington Beach, California. Before construction, the company acquired the remaining 10% stake in Beach Walk from its former joint venture partner.

The community consists of 173 homes and has an estimated cost of $50.7 million. Additionally, the company acquired a land parcel in Santa Monica, California for $10.3 million through a joint venture.

Subsequent to the end of the quarter, UDR exchanged its ownership stake in four operating communities and two land parcels in the UDR-MetLife I joint venture, (along with $10 million in cash), with an increase in its stake in the A-quality operating community - The Olivian.

At closing, the company will own 50% of The Olivian, which will be a part of the UDR/MetLife II joint venture. The four operating communities and two land parcels for which UDR entered into arrangements to exchange have a combined debt of $134.7 million with a weighted average interest rate of 3.5% and a term of 7 years. The Olivian's debt stood at $63.4 million with an interest of 4.5% and a term of 7 years

At the end of the quarter, the company’s liquidity amounted to $1.1 billion through a combination of cash and undrawn capacity on its credit facilities. This amount is likely to meet UDR’s immediate capital needs for debt maturities, development and redevelopment activities.

As of September 30, 2012, UDR had total debt of $3.3 billion and a fixed charge coverage ratio of 2.9x. UDR ended the quarter with 89% fixed-rated debt at a total blended interest rate of 4.5% and a weighted average debt maturity of 4.8 years.

UDR currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We maintain our long-term Neutral recommendation on the stock. One of its competitors, Equity Residential (EQR) also currently retains a Zacks #2 Rank.

Note: Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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