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UDR's Q2 FFOA as Expected, Revenues Outpace Estimates, NOI Up

Zacks Equity Research

UDR Inc.’s UDR second-quarter 2019 funds from operations as adjusted (FFOA) per share of 52 cents came in line with the Zacks Consensus Estimate. The figure comes in higher than the prior-year quarter reported tally of 49 cents.

Total revenues in the quarter climbed approximately 8.4% year over year to $281.3 million. Further, the figure surpassed the Zacks Consensus Estimate of $274.9 million.

Results reflect year-over-year growth in same-store net operating income (NOI). Nonetheless, weighted average same-store physical occupancy remained flat, year on year.

Inside the Headlines

During the second quarter, same-store revenues increased 3.7% year over year. However, same-store expenses flared up 2.3%. Consequently, same-store NOI improved 4.2% year over year. This residential REIT’s weighted average same-store physical occupancy remained flat, year over year, but expanded 10 basis points (bps) sequentially to 96.9%. The second-quarter annualized-rate of turnover advanced 100 bps from the prior-year period to 54.8%.

During the reported quarter, UDR acquired four apartment communities consisting of 1,251 homes. The company shelled out $327.7 million, for these purchases.

At the end of the quarter, UDR’s development pipeline aggregated $32 million at its pro-rata ownership interest, out of which, 26% has already been funded.

As of Jun 30, 2019, the company had around $750.6 million of liquidity through a combination of cash and undrawn capacity on its credit facilities. This figure is prior to an unsecured debt of $300 million issued in June but settled subsequent to the end of the quarter. Additionally, its total debt was $3.87 billion as of the same date.

Portfolio Activity

At the end of the June-end quarter, the company’s Developer Capital Program (DCP) investment, including accrued return, totaled $243.5 million.

Guidance

The company has issued estimates for third-quarter 2019. For the current quarter, UDR projects FFOA per share to be in the 51-53 cents range. The Zacks Consensus Estimate for the same is pinned at 52 cents.

Further, the company now forecasts FFOA per share of $2.05-$2.08 for 2019, up 1.5 cents at the mid-point from the previous outlook of $2.03-$2.07. The Zacks Consensus Estimate for the same is $2.06. Moreover, the company anticipates same-store NOI growth of 3.75-4.5% for the ongoing year.

Bottom Line

Subsequent to the quarter end, the company entered into a contract to acquire SuOne William — a 185-home community — located in Englewood, NJ, for $83.6 million. The community had occupancy of 99% when the contract was executed. The transaction is expected to close in the current quarter.

Additionally, the company issued nearly 2.2 million shares for proceeds of $99.4 million under its at-the-market program. Proceeds will be used to fund the company’s acquisitions. We believe such disciplined capital allocation will augur well for UDR’s growth.

Moreover, the company’s strategy to implement its Next Generation Operating Platform during the April-June quarter expanded its same-store operating margins.

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

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

Performance of Other REITs

Cousins Properties Incorporated CUZ reported second-quarter FFO per share (before TIER transaction costs) of 71 cents, missing the Zacks Consensus Estimate by a whisker. Nonetheless, the figure came in higher than the prior-year quarter’s reported tally of 60 cents.

SL Green Realty Corp. SLG delivered second-quarter 2019 FFO of $1.82 per share, surpassing the Zacks Consensus Estimate of $1.73. The tally includes promote income from the sale of 521 Fifth Avenue of $3.4 million or 4 cents per share. Results also compared favorably with the year-ago quarter’s tally of $1.69.

Crown Castle International Corp. CCI posted second-quarter adjusted AFFO per share of $1.48, up from the prior-year figure of $1.31. Further, the reported figure outpaced the Zacks Consensus Estimate of $1.43.

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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