UDR, Inc. (the “Company”) (NYSE: UDR), announced today its third
quarter 2023 results. Net Income, Funds from Operations (“FFO”),
FFO as Adjusted (“FFOA”), and Adjusted FFO (“AFFO”) per diluted
share for the quarter ended September 30, 2023 are detailed
below.
Quarter Ended September
30
Metric
3Q 2023 Actual
3Q 2023 Guidance
3Q 2022 Actual
$ Change vs. Prior Year
Period
% Change vs. Prior Year
Period
Net Income per diluted share
$0.10
$0.13 to $0.15
$0.07
$0.03
43%
FFO per diluted share
$0.61
$0.62 to $0.64
$0.57
$0.04
7%
FFOA per diluted share
$0.63
$0.62 to $0.64
$0.60
$0.03
5%
AFFO per diluted share
$0.55
$0.56 to $0.58
$0.54
$0.01
2%
- Same-Store (“SS”) results for the third quarter 2023 versus the
third quarter 2022 and the second quarter 2023 are summarized
below.
Concessions reflected on a
straight-line basis:
Concessions reflected on a
cash basis:
SS Growth / (Decline)
Year-Over-Year (“YOY”): 3Q
2023 vs. 3Q 2022
Sequential:
3Q 2023 vs.
2Q 2023
YOY:
3Q 2023 vs. 3Q 2022
Sequential:
3Q 2023 vs.
2Q 2023
Revenue
5.3%
2.3%
5.0%
2.0%
Expense
3.4%
3.9%
3.4%
3.9%
Net Operating Income (“NOI”)
6.1%
1.6%
5.7%
1.2%
- During the third quarter,
- As previously announced, the Company acquired a six community
portfolio in Texas (four in Dallas and two in Austin) totaling
1,753 apartment homes and valued at approximately $402.2
million.
- As previously announced, the Company repurchased 0.6 million
shares of its common stock at a weighted average price per share of
$40.13 for total consideration of approximately $25.0 million.
- The Company achieved stabilized occupancy at 5421 at Dublin
Station, a $126.9 million, 220-home apartment community developed
in the Dublin submarket of the San Francisco Bay Area.
- Subsequent to quarter end, the Company published its fifth
annual ESG report and concurrently announced that it earned the
Regional Sector Leader designation from GRESB.
“Our third quarter FFOA per diluted share met the guidance we
provided in July, as the nation’s employment situation remained
resilient and relative affordability versus other forms of housing
continued to favor apartments,” said Tom Toomey, UDR’s Chairman and
CEO. “Recent operating trends across the industry have been softer
than typical due to all-time high levels of new supply, leading us
to lower our expectation for FFOA per diluted share during the
fourth quarter to a midpoint of $0.63 versus the $0.65 that was
implied by our prior full-year 2023 guidance. Nevertheless, we
believe UDR is well positioned due to our diversified portfolio,
investment grade balance sheet, and unique operating initiatives
that will differentiate our growth profile moving forward.”
Outlook(1)
As shown in the table below, the Company has established
guidance ranges for the fourth quarter 2023 and has updated its
prior full-year 2023 Net Income per share, FFO per share, FFOA per
share, AFFO per share, and same-store growth guidance ranges.
4Q 2023 Outlook
3Q 2023
Actual
Prior Full-Year 2023
Outlook
Updated Full-Year 2023
Outlook
Full-Year 2023 Midpoint
(change)
Net Income per diluted share
$0.08 to $0.10
$0.10
$1.35 to $1.39
$1.32 to $1.34
$1.33 (-$0.04)
FFO per diluted share
$0.62 to $0.64
$0.61
$2.48 to $2.52
$2.45 to $2.47
$2.46 (-$0.04)
FFOA per diluted share
$0.62 to $0.64
$0.63
$2.47 to $2.51
$2.46 to $2.48
$2.47 (-$0.02)
AFFO per diluted share
$0.56 to $0.58
$0.55
$2.24 to $2.28
$2.23 to $2.25
$2.24 (-$0.02)
YOY Growth: concessions
reflected on a straight-line
basis:
SS Revenue
N/A
5.3%
6.25% to 7.25%
5.75% to 6.25%
6.00% (-0.75%)
SS Expense
N/A
3.4%
4.0% to 5.5%
4.50% to 5.00%
4.75% (unch)
SS NOI
N/A
6.1%
6.75% to 8.25%
6.50% to 7.00%
6.75% (-0.75%)
YOY Growth: concessions
reflected on a cash basis:
SS Revenue
N/A
5.0%
6.0% to 7.0%
5.40% to 5.90%
5.65% (-0.85%)
SS NOI
N/A
5.7%
6.5% to 8.0%
6.00% to 6.50%
6.25% (-1.00%)
(1)
Additional assumptions for the Company’s
fourth quarter and full-year 2023 outlook can be found on
Attachment 14 of the Company’s related quarterly Supplemental
Financial Information (“Supplement”). A reconciliation of FFO per
share, FFOA per share, and AFFO per share to GAAP Net Income per
share can be found on Attachment 15(D) of the Company’s related
quarterly Supplement. Non-GAAP financial measures and other terms,
as used in this earnings release, are defined and further explained
on Attachments 15(A) through 15(D), “Definitions and
Reconciliations,” of the Company’s related quarterly
Supplement.
Third Quarter 2023 Results and Fourth
Quarter 2023 Expectations
In the third quarter, total revenue increased by $18.8 million
YOY, or 4.8 percent, to $410.1 million. This increase was primarily
attributable to growth in revenue from Same-Store communities and
past accretive external growth investments.
“Continued strength in renewal lease rate growth, occupancy,
incremental income from our innovative operating initiatives, and
positive rent collection trends enabled us to achieve 2.3 percent
sequential same-store revenue growth on a straight-line basis in
the third quarter,” said Mike Lacy, UDR’s Senior Vice President of
Operations. “Resident financial health remains resilient but
elevated new apartment supply is resulting in less robust pricing
power than we had previously expected for the latter part of the
third quarter and into the fourth quarter. As a result, we
anticipate that effective lease rate growth for the fourth quarter
will be below historical norms and our prior expectations, with
October to-date blended lease rate growth approximating 1
percent.”
In the tables below, the Company has presented YOY, sequential,
and year-to-date (“YTD”) Same-Store results by region, with
concessions accounted for on both cash and straight-line bases.
Summary of Same-Store Results in Third Quarter 2023 versus
Third Quarter 2022
Region
Revenue Growth /
(Decline)
Expense
Growth / (Decline)
NOI Growth / (Decline)
% of Same-Store
Portfolio(1)
Physical Occupancy(2)
YOY Change in
Occupancy
West
3.9%
4.4%
3.7%
30.9%
96.7%
0.2%
Mid-Atlantic
4.8%
4.6%
4.9%
21.0%
96.9%
0.2%
Northeast
6.9%
5.1%
7.9%
18.2%
96.7%
(0.3)%
Southeast
6.0%
3.1%
7.3%
14.2%
96.4%
(0.1)%
Southwest
3.2%
(5.6)%
8.9%
9.0%
96.8%
0.1%
Other Markets
5.0%
8.0%
3.8%
6.7%
96.6%
(0.2)%
Total (Cash)
5.0%
3.4%
5.7%
100.0%
96.7%
0.0%
Total (Straight-Line)
5.3%
3.4%
6.1%
-
-
-
(1)
Based on 3Q 2023 Same-Store NOI. For
definitions of terms, please refer to the “Definitions and
Reconciliations” section of the Company’s related quarterly
Supplement.
(2)
Weighted average Same-Store physical
occupancy for the quarter.
Summary of Same-Store Results in Third Quarter 2023 versus
Second Quarter 2023
Region
Revenue Growth /
(Decline)
Expense
Growth / (Decline)
NOI Growth / (Decline)
% of Same-Store
Portfolio(1)
Physical Occupancy(2)
Sequential Change in
Occupancy
West
2.4%
2.9%
2.2%
30.9%
96.7%
0.3%
Mid-Atlantic
2.4%
3.2%
2.1%
21.0%
96.9%
0.0%
Northeast
2.6%
7.3%
0.3%
18.2%
96.7%
(0.4)%
Southeast
0.7%
1.7%
0.2%
14.2%
96.4%
0.1%
Southwest
1.1%
0.3%
1.6%
9.0%
96.8%
0.5%
Other Markets
1.3%
11.0%
(2.3)%
6.7%
96.6%
0.0%
Total (Cash)
2.0%
3.9%
1.2%
100.0%
96.7%
0.1%
Total (Straight-Line)
2.3%
3.9%
1.6%
-
-
-
(1)
Based on 3Q 2023 Same-Store NOI. For
definitions of terms, please refer to the “Definitions and
Reconciliations” section of the Company’s related quarterly
Supplement.
(2)
Weighted average Same-Store physical
occupancy for the quarter.
Summary of Same-Store Results YTD 2023 versus YTD
2022
Region
Revenue Growth /
(Decline)
Expense
Growth / (Decline)
NOI Growth / (Decline)
% of Same-Store
Portfolio(1)
Physical Occupancy(2)
YOY Change in
Occupancy
West
5.0%
5.4%
4.8%
31.2%
96.5%
(0.1)%
Mid-Atlantic
5.7%
5.1%
5.9%
21.2%
96.8%
(0.2)%
Northeast
8.5%
5.8%
10.0%
17.4%
97.0%
(0.3)%
Southeast
9.5%
6.7%
10.8%
14.3%
96.2%
(0.7)%
Southwest
6.9%
2.9%
9.4%
9.0%
96.6%
(0.5)%
Other Markets
5.9%
4.7%
6.4%
6.9%
96.7%
(0.2)%
Total (Cash)
6.7%
5.2%
7.3%
100.0%
96.6%
(0.3)%
Total (Straight-Line)
7.4%
5.2%
8.4%
-
-
-
(1)
Based on YTD 2023 Same-Store NOI. For
definitions of terms, please refer to the “Definitions and
Reconciliations” section of the Company’s related quarterly
Supplement.
(2)
Weighted average Same-Store physical
occupancy for the quarter.
Transactional Activity
As previously announced, during the quarter, the Company
acquired a portfolio of six communities in Texas totaling 1,753
apartment homes in exchange for $172.8 million of UDR Operating
Partnership Units issued at $47.50 per unit, $20.0 million in cash,
and the assumption of $209.4 million of below market debt at a
weighted average coupon rate of 3.8 percent with a weighted average
of 6.3 years to maturity.
The transaction is expected to be cash flow neutral in year one
and accretive in year two as operating initiatives are implemented.
The transaction is expected to be dilutive to FFOA per share in
2023 due to negative non-cash debt mark-to-market adjustments
related to the significantly below-market-rate debt being
assumed.
Development Activity and Other
Projects
During the quarter, the Company achieved stabilized occupancy at
5421 at Dublin Station, a $126.9 million, 220-home apartment
community the Company developed in the Dublin submarket of the San
Francisco Bay Area.
At the end of the third quarter, the Company’s development
pipeline totaled $187.5 million and was 74 percent funded, with
only $48.4 million remaining to fund. The Company’s active
development pipeline includes two communities, one each in the
Addison submarket of Dallas, TX, and Tampa, FL, for a combined 415
apartment homes.
At the end of the third quarter, the Company’s redevelopment
pipeline of 2,313 apartment homes totaled $105.0 million and was 34
percent funded.
Developer Capital Program (“DCP”)
Portfolio
At the end of the third quarter, the Company’s commitments under
its DCP platform totaled $520.9 million with a contractual weighted
average return rate of 9.9 percent and a weighted average estimated
remaining term of 2.9 years.
Capital Markets and Balance Sheet
Activity
“With minimal committed forward funding obligations, strong next
3-year liquidity, and our ability to source capital through joint
venture and OP unit transactions, we can utilize our investment
grade balance sheet and continue to opportunistically grow the
Company to enhance stakeholder returns,” said Joe Fisher, UDR’s
President and Chief Financial Officer.
During the quarter, the Company repurchased 0.6 million shares
of its common stock at a weighted average price per share of $40.13
for total consideration of approximately $25.0 million.
The Company’s total indebtedness as of September 30, 2023 was
$5.8 billion with no remaining consolidated maturities until 3Q
2024, excluding principal amortization and amounts on the Company’s
commercial paper program. As of September 30, 2023, the Company had
$970.0 million of liquidity through a combination of cash and
undrawn capacity on its credit facilities. Please see Attachment 14
of the Company’s related quarterly Supplement for additional
details on projected capital sources and uses.
In the table below, the Company has presented select balance
sheet metrics for the quarter ended September 30, 2023 and the
comparable prior year period.
Quarter Ended September
30
Balance Sheet Metric
3Q 2023
3Q 2022
Change
Weighted Average Interest
Rate
3.37%
3.06%
0.31%
Weighted Average Years to
Maturity(1)
5.9
6.7
(0.8)
Consolidated Fixed Charge
Coverage Ratio
5.2x
5.3x
(0.1)x
Consolidated Debt as a percentage
of Total Assets
32.8%
33.7%
(0.9)%
Consolidated Net
Debt-to-EBITDAre
5.7x
6.0x
(0.3)x
(1)
If the Company’s commercial paper balance
was refinanced using its line of credit, the weighted average years
to maturity would have been 6.0 years without extensions and 6.1
years with extensions for 3Q 2023 and 7.0 years without extensions
and 7.1 years with extensions for 3Q 2022.
ESG
Subsequent to quarter end, the Company published its fifth
annual ESG report, which detailed the Company’s ongoing
best-in-class commitment to engaging in socially responsible ESG
activities including establishing science-based emissions reduction
targets that should contribute to a lower-carbon future.
Concurrently, the Company announced that it earned the Regional
Sector Leader designation from GRESB resulting from the Company’s
2023 GRESB survey score of 87. In addition, the Company’s GRESB
Public Disclosure rating is “A”, the fifth consecutive year UDR has
achieved such a distinction.
Dividend
As previously announced, the Company’s Board of Directors
declared a regular quarterly dividend on its common stock for the
third quarter 2023 in the amount of $0.42 per share. The dividend
will be paid in cash on October 31, 2023 to UDR common shareholders
of record as of October 10, 2023. The third quarter 2023 dividend
will represent the 204th consecutive quarterly dividend paid by the
Company on its common stock.
Supplemental Information
The Company offers Supplemental Financial Information that
provides details on the financial position and operating results of
the Company which is available on the Company's website at
ir.udr.com.
Attachment 15(A)
Definitions and Reconciliations
September 30, 2023 (Unaudited)
Acquired Communities: The Company defines Acquired
Communities as those communities acquired by the Company, other
than development and redevelopment activity, that did not achieve
stabilization as of the most recent quarter.
Adjusted Funds from Operations ("AFFO") attributable to
common stockholders and unitholders: The Company defines AFFO
as FFO as Adjusted attributable to common stockholders and
unitholders less recurring capital expenditures on consolidated
communities that are necessary to help preserve the value of and
maintain functionality at our communities.
Management considers AFFO a useful supplemental performance
metric for investors as it is more indicative of the Company's
operational performance than FFO or FFO as Adjusted. AFFO is not
intended to represent cash flow or liquidity for the period, and is
only intended to provide an additional measure of our operating
performance. The Company believes that net income/(loss)
attributable to common stockholders is the most directly comparable
GAAP financial measure to AFFO. Management believes that AFFO is a
widely recognized measure of the operations of REITs, and
presenting AFFO enables investors to assess our performance in
comparison to other REITs. However, other REITs may use different
methodologies for calculating AFFO and, accordingly, our AFFO may
not always be comparable to AFFO calculated by other REITs. AFFO
should not be considered as an alternative to net income/(loss)
(determined in accordance with GAAP) as an indication of financial
performance, or as an alternative to cash flow from operating
activities (determined in accordance with GAAP) as a measure of our
liquidity, nor is it indicative of funds available to fund our cash
needs, including our ability to make distributions. A
reconciliation from net income/(loss) attributable to common
stockholders to AFFO is provided on Attachment 2.
Consolidated Fixed Charge Coverage Ratio - adjusted for
non-recurring items: The Company defines Consolidated Fixed
Charge Coverage Ratio - adjusted for non-recurring items as
Consolidated Interest Coverage Ratio - adjusted for non-recurring
items divided by total consolidated interest, excluding the impact
of costs associated with debt extinguishment, plus preferred
dividends.
Management considers Consolidated Fixed Charge Coverage Ratio -
adjusted for non-recurring items a useful metric for investors as
it provides ratings agencies, investors and lenders with a
widely-used measure of the Company’s ability to service its
consolidated debt obligations as well as compare leverage against
that of its peer REITs. A reconciliation of the components that
comprise Consolidated Fixed Charge Coverage Ratio - adjusted for
non-recurring items is provided on Attachment 4(C) of the Company's
quarterly supplemental disclosure.
Consolidated Interest Coverage Ratio - adjusted for
non-recurring items: The Company defines Consolidated Interest
Coverage Ratio - adjusted for non-recurring items as Consolidated
EBITDAre – adjusted for non-recurring items divided by total
consolidated interest, excluding the impact of costs associated
with debt extinguishment.
Management considers Consolidated Interest Coverage Ratio -
adjusted for non-recurring items a useful metric for investors as
it provides ratings agencies, investors and lenders with a
widely-used measure of the Company’s ability to service its
consolidated debt obligations as well as compare leverage against
that of its peer REITs. A reconciliation of the components that
comprise Consolidated Interest Coverage Ratio - adjusted for
non-recurring items is provided on Attachment 4(C) of the Company's
quarterly supplemental disclosure.
Consolidated Net Debt-to-EBITDAre - adjusted for
non-recurring items: The Company defines Consolidated Net
Debt-to-EBITDAre - adjusted for non-recurring items as total
consolidated debt net of cash and cash equivalents divided by
annualized Consolidated EBITDAre - adjusted for non-recurring
items. Consolidated EBITDAre - adjusted for non-recurring items is
defined as EBITDAre excluding the impact of income/(loss) from
unconsolidated entities, adjustments to reflect the Company’s share
of EBITDAre of unconsolidated joint ventures and other
non-recurring items including, but not limited to casualty-related
charges/(recoveries), net of wholly owned communities.
Management considers Consolidated Net Debt-to-EBITDAre -
adjusted for non-recurring items a useful metric for investors as
it provides ratings agencies, investors and lenders with a
widely-used measure of the Company’s ability to service its
consolidated debt obligations as well as compare leverage against
that of its peer REITs. A reconciliation between net income/(loss)
and Consolidated EBITDAre - adjusted for non-recurring items is
provided on Attachment 4(C) of the Company's quarterly supplemental
disclosure.
Controllable Expenses: The Company refers to property
operating and maintenance expenses as Controllable Expenses.
Controllable Operating Margin: The Company defines
Controllable Operating Margin as (i) rental income less
Controllable Expenses (ii) divided by rental income. Management
considers Controllable Operating Margin a useful metric as it
provides investors with an indicator of the Company’s ability to
limit the growth of expenses that are within the control of the
Company.
Development Communities: The Company defines Development
Communities as those communities recently developed or under
development by the Company, that are currently majority owned by
the Company and have not achieved stabilization as of the most
recent quarter.
Earnings Before Interest, Taxes, Depreciation and
Amortization for Real Estate (EBITDAre): The Company defines
EBITDAre as net income/(loss) (computed in accordance with GAAP),
plus interest expense, including costs associated with debt
extinguishment, plus real estate depreciation and amortization,
plus other depreciation and amortization, plus (minus) income tax
provision/(benefit), net, (minus) plus net gain/(loss) on the sale
of depreciable real estate owned, plus impairment write-downs of
depreciable real estate, plus the adjustments to reflect the
Company’s share of EBITDAre of unconsolidated joint ventures. The
Company computes EBITDAre in accordance with standards established
by the National Association of Real Estate Investment Trusts, or
Nareit, which may not be comparable to EBITDAre reported by other
REITs that do not compute EBITDAre in accordance with the Nareit
definition, or that interpret the Nareit definition differently
than the Company does. The White Paper on EBITDAre was approved by
the Board of Governors of Nareit in September 2017.
Management considers EBITDAre a useful metric for investors as
it provides an additional indicator of the Company’s ability to
incur and service debt, and enables investors to assess our
performance against that of its peer REITs. EBITDAre should be
considered along with, but not as an alternative to, net income and
cash flow as a measure of the Company’s activities in accordance
with GAAP. EBITDAre does not represent cash generated from
operating activities in accordance with GAAP and is not necessarily
indicative of funds available to fund our cash needs. A
reconciliation between net income/(loss) and EBITDAre is provided
on Attachment 4(C) of the Company's quarterly supplemental
disclosure.
Effective Blended Lease Rate Growth: The Company defines
Effective Blended Lease Rate Growth as the combined proportional
growth as a result of Effective New Lease Rate Growth and Effective
Renewal Lease Rate Growth. Management considers Effective Blended
Lease Rate Growth a useful metric for investors as it assesses
combined proportional market-level, new and in-place demand
trends.
Effective New Lease Rate Growth: The Company defines
Effective New Lease Rate Growth as the increase in gross potential
rent realized less concessions for the new lease term (current
effective rent) versus prior resident effective rent for the prior
lease term on new leases commenced during the current quarter.
Management considers Effective New Lease Rate Growth a useful
metric for investors as it assesses market-level new demand
trends.
Effective Renewal Lease Rate Growth: The Company defines
Effective Renewal Lease Rate Growth as the increase in gross
potential rent realized less concessions for the new lease term
(current effective rent) versus prior effective rent for the prior
lease term on renewed leases commenced during the current
quarter.
Management considers Effective Renewal Lease Rate Growth a
useful metric for investors as it assesses market-level, in-place
demand trends.
Estimated Quarter of Completion: The Company defines
Estimated Quarter of Completion of a development or redevelopment
project as the date on which construction is expected to be
completed, but it does not represent the date of stabilization.
Attachment 15(B)
Definitions and Reconciliations
September 30, 2023 (Unaudited)
Funds from Operations as Adjusted ("FFO as Adjusted")
attributable to common stockholders and unitholders: The
Company defines FFO as Adjusted attributable to common stockholders
and unitholders as FFO excluding the impact of other non-comparable
items including, but not limited to, acquisition-related costs,
prepayment costs/benefits associated with early debt retirement,
impairment write-downs or gains and losses on sales of real estate
or other assets incidental to the main business of the Company and
income taxes directly associated with those gains and losses,
casualty-related expenses and recoveries, severance costs and legal
and other costs.
Management believes that FFO as Adjusted is useful supplemental
information regarding our operating performance as it provides a
consistent comparison of our operating performance across time
periods and allows investors to more easily compare our operating
results with other REITs. FFO as Adjusted is not intended to
represent cash flow or liquidity for the period, and is only
intended to provide an additional measure of our operating
performance. The Company believes that net income/(loss)
attributable to common stockholders is the most directly comparable
GAAP financial measure to FFO as Adjusted. However, other REITs may
use different methodologies for calculating FFO as Adjusted or
similar FFO measures and, accordingly, our FFO as Adjusted may not
always be comparable to FFO as Adjusted or similar FFO measures
calculated by other REITs. FFO as Adjusted should not be considered
as an alternative to net income (determined in accordance with
GAAP) as an indication of financial performance, or as an
alternative to cash flow from operating activities (determined in
accordance with GAAP) as a measure of our liquidity. A
reconciliation from net income attributable to common stockholders
to FFO as Adjusted is provided on Attachment 2.
Funds from Operations ("FFO") attributable to common
stockholders and unitholders: The Company defines FFO
attributable to common stockholders and unitholders as net
income/(loss) attributable to common stockholders (computed in
accordance with GAAP), excluding impairment write-downs of
depreciable real estate related to the main business of the Company
or of investments in non-consolidated investees that are directly
attributable to decreases in the fair value of depreciable real
estate held by the investee, gains and losses from sales of
depreciable real estate related to the main business of the Company
and income taxes directly associated with those gains and losses,
plus real estate depreciation and amortization, and after
adjustments for noncontrolling interests, and the Company’s share
of unconsolidated partnerships and joint ventures. This definition
conforms with the National Association of Real Estate Investment
Trust's definition issued in April 2002 and restated in November
2018. In the computation of diluted FFO, if OP Units, DownREIT
Units, unvested restricted stock, unvested LTIP Units, stock
options, and the shares of Series E Cumulative Convertible
Preferred Stock are dilutive, they are included in the diluted
share count.
Management considers FFO a useful metric for investors as the
Company uses FFO in evaluating property acquisitions and its
operating performance and believes that FFO should be considered
along with, but not as an alternative to, net income and cash flow
as a measure of the Company's activities in accordance with GAAP.
FFO does not represent cash generated from operating activities in
accordance with GAAP and is not necessarily indicative of funds
available to fund our cash needs. A reconciliation from net
income/(loss) attributable to common stockholders to FFO is
provided on Attachment 2.
Held For Disposition Communities: The Company defines
Held for Disposition Communities as those communities that were
held for sale as of the end of the most recent quarter.
Joint Venture Reconciliation at UDR's weighted average ownership
interest: In thousands
3Q 2023
YTD 2023 Income/(loss) from unconsolidated entities
$
5,508
$
24,912
Management fee
744
1,969
Interest expense
4,178
12,327
Depreciation
12,606
27,671
General and administrative
236
357
Developer Capital Program (excludes loans)
(8,193
)
(29,996
)
Other (income)/expense
(35
)
123
Realized (gain)/loss on real estate technology investments, net of
tax
466
1,186
Unrealized (gain)/loss on real estate technology investments, net
of tax
(881
)
(1,720
)
Total Joint Venture NOI at UDR's Ownership Interest
$
14,629
$
36,829
Net Operating Income (“NOI”): The Company defines NOI as
rental income less direct property rental expenses. Rental income
represents gross market rent and other revenues less adjustments
for concessions, vacancy loss and bad debt. Rental expenses include
real estate taxes, insurance, personnel, utilities, repairs and
maintenance, administrative and marketing. Excluded from NOI is
property management expense, which is calculated as 3.25% of
property revenue, and land rent. Property management expense covers
costs directly related to consolidated property operations,
inclusive of corporate management, regional supervision, accounting
and other costs.
Management considers NOI a useful metric for investors as it is
a more meaningful representation of a community’s continuing
operating performance than net income as it is prior to
corporate-level expense allocations, general and administrative
costs, capital structure and depreciation and amortization and is a
widely used input, along with capitalization rates, in the
determination of real estate valuations. A reconciliation from net
income/(loss) attributable to UDR, Inc. to NOI is provided
below.
In thousands
3Q 2023
2Q 2023
1Q 2023
4Q 2022
3Q 2022
Net income/(loss) attributable to UDR, Inc.
$
32,858
$
347,545
$
30,964
$
44,530
$
23,605
Property management
13,271
13,101
12,945
12,949
12,675
Other operating expenses
4,611
4,259
3,032
4,008
3,746
Real estate depreciation and amortization
167,551
168,925
169,300
167,241
166,781
Interest expense
44,664
45,113
43,742
43,247
39,905
Casualty-related charges/(recoveries), net
(1,928
)
1,134
4,156
8,523
901
General and administrative
15,159
16,452
17,480
16,811
15,840
Tax provision/(benefit), net
428
1,351
234
(683
)
377
(Income)/loss from unconsolidated entities
(5,508
)
(9,697
)
(9,707
)
(761
)
(10,003
)
Interest income and other (income)/expense, net
3,069
(10,447
)
(1,010
)
(1
)
7,495
Joint venture management and other fees
(1,772
)
(1,450
)
(1,242
)
(1,244
)
(1,274
)
Other depreciation and amortization
3,692
3,681
3,649
4,823
3,430
(Gain)/loss on sale of real estate owned
-
(325,884
)
(1
)
(25,494
)
-
Net income/(loss) attributable to noncontrolling interests
2,561
22,638
1,961
2,937
1,540
Total consolidated NOI
$
278,656
$
276,721
$
275,503
$
276,886
$
265,018
Attachment 15(C)
Definitions and Reconciliations
September 30, 2023 (Unaudited)
NOI Enhancing Capital Expenditures ("Cap Ex"): The
Company defines NOI Enhancing Capital Expenditures as expenditures
that result in increased income generation or decreased expense
growth over time.
Management considers NOI Enhancing Capital Expenditures a useful
metric for investors as it quantifies the amount of capital
expenditures that are expected to grow, not just maintain, revenues
or to decrease expenses.
Non-Mature Communities: The Company defines Non-Mature
Communities as those communities that have not met the criteria to
be included in same-store communities.
Non-Residential / Other: The Company defines
Non-Residential / Other as non-apartment components of mixed-use
properties, land held, properties being prepared for redevelopment
and properties where a material change in home count has
occurred.
Other Markets: The Company defines Other Markets as the
accumulation of individual markets where it operates less than
1,000 Same-Store homes. Management considers Other Markets a useful
metric as the operating results for the individual markets are not
representative of the fundamentals for those markets as a
whole.
Physical Occupancy: The Company defines Physical
Occupancy as the number of occupied homes divided by the total
homes available at a community.
QTD Same-Store Communities: The Company defines QTD
Same-Store Communities as those communities Stabilized for five
full consecutive quarters. These communities were owned and had
stabilized operating expenses as of the beginning of the quarter in
the prior year, were not in process of any substantial
redevelopment activities, and were not held for disposition.
Recurring Capital Expenditures: The Company defines
Recurring Capital Expenditures as expenditures that are necessary
to help preserve the value of and maintain functionality at its
communities.
Redevelopment Communities: The Company generally defines
Redevelopment Communities as those communities where substantial
redevelopment is in progress. Based upon the level of material
impact the redevelopment has on the community (operations,
occupancy levels, and future rental rates), the community may or
may not maintain Stabilization. As such, for each redevelopment,
the Company assesses whether the community remains in
Same-Store.
Same-Store Revenue with Concessions on a Cash Basis:
Same-Store Revenue with Concessions on a Cash Basis is considered
by the Company to be a supplemental measure to rental income on a
straight-line basis which allows investors to evaluate the impact
of both current and historical concessions and to more readily
enable comparisons to revenue as reported by its peer REITs. In
addition, Same-Store Revenue with Concessions on a Cash Basis
allows an investor to understand the historical trends in cash
concessions.
A reconciliation between Same-Store Revenue with Concessions on
a Cash Basis to Same-Store Revenue on a straight-line basis
(inclusive of the impact to Same-Store NOI) is provided below:
3Q 23
3Q 22
3Q 23
2Q 23
YTD 23
YTD 22
Revenue (Cash basis)
$
385,551
$
367,346
$
385,551
$
377,950
$
1,126,834
$
1,056,486
Concessions granted/(amortized), net
776
(351
)
776
(209
)
609
(7,207
)
Revenue (Straight-line basis)
$
386,327
$
366,995
$
386,327
$
377,741
$
1,127,443
$
1,049,279
% change - Same-Store Revenue with Concessions on a Cash
basis:
5.0
%
2.0
%
6.7
%
% change - Same-Store Revenue with Concessions on a
Straight-line basis:
5.3
%
2.3
%
7.4
%
% change - Same-Store NOI with Concessions on a Cash
basis:
5.7
%
1.2
%
7.3
%
% change - Same-Store NOI with Concessions on a Straight-line
basis:
6.1
%
1.6
%
8.4
%
Sold Communities: The Company defines Sold Communities as
those communities that were disposed of prior to the end of the
most recent quarter.
Stabilization/Stabilized: The Company defines
Stabilization/Stabilized as when a community’s occupancy reaches
90% or above for at least three consecutive months.
Stabilized, Non-Mature Communities: The Company defines
Stabilized, Non-Mature Communities as those communities that have
reached Stabilization but are not yet in the same-store
portfolio.
Total Revenue per Occupied Home: The Company defines
Total Revenue per Occupied Home as rental and other revenues with
concessions reported on a Cash Basis, divided by the product of
occupancy and the number of apartment homes. A reconciliation
between Same-Store Revenue with Concessions on a Cash Basis to
Same-Store Revenue on a straight-line basis is provided above.
Management considers Total Revenue per Occupied Home a useful
metric for investors as it serves as a proxy for portfolio quality,
both geographic and physical.
TRS: The Company’s taxable REIT subsidiaries (“TRS”)
focus on making investments and providing services that are
otherwise not allowed to be made or provided by a REIT.
YTD Same-Store Communities: The Company defines YTD
Same-Store Communities as those communities Stabilized for two full
consecutive calendar years. These communities were owned and had
stabilized operating expenses as of the beginning of the prior
year, were not in process of any substantial redevelopment
activities, and were not held for disposition.
Conference Call and Webcast
Information
UDR will host a webcast and conference call at 12:00 p.m.
Eastern Time on October 27, 2023, to discuss third quarter results
as well as high-level views for 2023. The webcast will be available
on UDR's website at ir.udr.com. To listen to a live broadcast,
access the site at least 15 minutes prior to the scheduled start
time in order to register, download and install any necessary audio
software. To participate in the teleconference dial 877-423-9813
for domestic and 201-689-8573 for international. A passcode is not
necessary.
Given a high volume of conference calls occurring during this
time of year, delays are anticipated when connecting to the live
call. As a result, stakeholders and interested parties are
encouraged to utilize the Company’s webcast link for its earnings
results discussion.
A replay of the conference call will be available through
November 27, 2023, by dialing 844-512-2921 for domestic and
412-317-6671 for international and entering the confirmation
number, 13741777, when prompted for the passcode. A replay of the
call will also be available on UDR's website at ir.udr.com.
Full Text of the Earnings Report and
Supplemental Data
The full text of the earnings report and related quarterly
Supplement will be available on the Company’s website at
ir.udr.com.
Forward-Looking
Statements
Certain statements made in this press release may constitute
“forward-looking statements.” Words such as “expects,” “intends,”
“believes,” “anticipates,” “plans,” “likely,” “will,” “seeks,”
“estimates” and variations of such words and similar expressions
are intended to identify such forward-looking statements.
Forward-looking statements, by their nature, involve estimates,
projections, goals, forecasts and assumptions and are subject to
risks and uncertainties that could cause actual results or outcomes
to differ materially from those expressed in a forward-looking
statement, due to a number of factors, which include, but are not
limited to, general market and economic conditions, unfavorable
changes in the apartment market and economic conditions that could
adversely affect occupancy levels and rental rates, the impact of
inflation/deflation on rental rates and property operating
expenses, the availability of capital and the stability of the
capital markets, rising interest rates, the impact of competition
and competitive pricing, acquisitions, developments and
redevelopments not achieving anticipated results, delays in
completing developments, redevelopments and lease-ups on schedule
or at expected rent and occupancy levels, changes in job growth,
home affordability and demand/supply ratio for multifamily housing,
development and construction risks that may impact profitability,
risks that joint ventures with third parties and DCP investments do
not perform as expected, the failure of automation or technology to
help grow net operating income, and other risk factors discussed in
documents filed by the Company with the SEC from time to time,
including the Company's Annual Report on Form 10-K and the
Company's Quarterly Reports on Form 10-Q. Actual results may differ
materially from those described in the forward-looking statements.
These forward-looking statements and such risks, uncertainties and
other factors speak only as of the date of this press release, and
the Company expressly disclaims any obligation or undertaking to
update or revise any forward-looking statement contained herein, to
reflect any change in the Company's expectations with regard
thereto, or any other change in events, conditions or circumstances
on which any such statement is based, except to the extent
otherwise required under the U.S. securities laws.
About UDR, Inc.
UDR, Inc. (NYSE: UDR), an S&P 500 company, is a leading
multifamily real estate investment trust with a demonstrated
performance history of delivering superior and dependable returns
by successfully managing, buying, selling, developing and
redeveloping attractive real estate communities in targeted U.S.
markets. As of September 30, 2023, UDR owned or had an ownership
position in 60,177 apartment homes including 415 homes under
development. For over 51 years, UDR has delivered long-term value
to shareholders, the best standard of service to Residents and the
highest quality experience for Associates.
Attachment 1
Consolidated Statements of Operations (Unaudited)
(1) Three Months Ended Nine Months Ended
September 30, September 30, In thousands, except
per share amounts
2023
2022
2023
2022
REVENUES: Rental income (2)
$
408,359
$
390,023
$
1,209,764
$
1,113,952
Joint venture management and other fees
1,772
1,274
4,464
3,778
Total revenues
410,131
391,297
1,214,228
1,117,730
OPERATING EXPENSES: Property operating and
maintenance
71,599
66,769
205,294
185,658
Real estate taxes and insurance
58,104
58,236
173,590
164,788
Property management
13,271
12,675
39,317
36,203
Other operating expenses
4,611
3,746
11,902
13,485
Real estate depreciation and amortization
167,551
166,781
505,776
497,987
General and administrative
15,159
15,840
49,091
47,333
Casualty-related charges/(recoveries), net
(1,928
)
901
3,362
1,210
Other depreciation and amortization
3,692
3,430
11,022
9,521
Total operating expenses
332,059
328,378
999,354
956,185
Gain/(loss) on sale of real estate owned
-
-
325,885
-
Operating income
78,072
62,919
540,759
161,545
Income/(loss) from unconsolidated entities (2)
5,508
10,003
24,912
4,186
Interest expense
(44,664
)
(39,905
)
(133,519
)
(112,653
)
Interest income and other income/(expense), net
(3,069
)
(7,495
)
8,388
(6,934
)
Income/(loss) before income taxes
35,847
25,522
440,540
46,144
Tax (provision)/benefit, net
(428
)
(377
)
(2,013
)
(1,032
)
Net Income/(loss)
35,419
25,145
438,527
45,112
Net (income)/loss attributable to redeemable noncontrolling
interests in the OP and DownREIT Partnership
(2,554
)
(1,533
)
(27,137
)
(2,684
)
Net (income)/loss attributable to noncontrolling interests
(7
)
(7
)
(23
)
(34
)
Net income/(loss) attributable to UDR, Inc.
32,858
23,605
411,367
42,394
Distributions to preferred stockholders - Series E (Convertible)
(1,221
)
(1,106
)
(3,626
)
(3,307
)
Net income/(loss) attributable to common stockholders
$
31,637
$
22,499
$
407,741
$
39,087
Income/(loss) per weighted average common share -
basic:
$
0.10
$
0.07
$
1.24
$
0.12
Income/(loss) per weighted average common share - diluted:
$
0.10
$
0.07
$
1.24
$
0.12
Common distributions declared per share
$
0.42
$
0.38
$
1.26
$
1.14
Weighted average number of common shares outstanding - basic
328,760
324,701
328,835
320,378
Weighted average number of common shares outstanding - diluted
329,201
325,686
329,283
321,629
(1) See Attachment 15 for definitions and other terms. (2)
As of September 30, 2023, UDR's residential accounts receivable
balance, net of its reserve, was $9.2 million, including its share
from unconsolidated joint ventures. The unreserved amount is based
on probability of collection.
Attachment 2
Funds From Operations
(Unaudited) (1)
Three Months Ended
Nine Months Ended
September 30,
September 30,
In thousands, except per share and unit amounts
2023
2022
2023
2022
Net income/(loss) attributable to common stockholders
$
31,637
$
22,499
$
407,741
$
39,087
Real estate depreciation and amortization
167,551
166,781
505,776
497,987
Noncontrolling interests
2,561
1,540
27,160
2,718
Real estate depreciation and amortization on unconsolidated joint
ventures
13,149
7,457
29,329
22,570
Net gain on the sale of depreciable real estate owned, net of tax
-
-
(324,770
)
-
Funds from operations ("FFO") attributable to common
stockholders and unitholders, basic
$
214,898
$
198,277
$
645,236
$
562,362
Distributions to preferred stockholders - Series E
(Convertible) (2)
1,221
1,106
3,626
3,307
FFO attributable to common stockholders and unitholders,
diluted
$
216,119
$
199,383
$
648,862
$
565,669
FFO per weighted average common share and unit, basic
$
0.61
$
0.57
$
1.84
$
1.64
FFO per weighted average common share and unit, diluted
$
0.61
$
0.57
$
1.83
$
1.63
Weighted average number of common shares and OP/DownREIT
Units outstanding, basic
351,271
346,175
350,534
341,892
Weighted average number of common shares, OP/DownREIT Units, and
common stock equivalents outstanding, diluted
354,620
350,078
353,890
346,061
Impact of adjustments to FFO: Variable upside
participation on DCP, net
$
-
$
-
$
(204
)
$
(10,622
)
Legal and other
364
10
(894
)
1,493
Realized (gain)/loss on real estate technology investments, net of
tax
520
376
1,372
(7,748
)
Unrealized (gain)/loss on real estate technology investments, net
of tax
7,411
9,589
(1,551
)
45,896
Casualty-related charges/(recoveries), net
(1,928
)
901
3,362
1,210
Total impact of adjustments to FFO
$
6,367
$
10,876
$
2,085
$
30,229
FFO as Adjusted attributable to common stockholders and
unitholders, diluted
$
222,486
$
210,259
$
650,947
$
595,898
FFO as Adjusted per weighted average common share and
unit, diluted
$
0.63
$
0.60
$
1.84
$
1.72
Recurring capital expenditures
(27,139
)
(20,383
)
(60,784
)
(50,598
)
AFFO attributable to common stockholders and unitholders,
diluted
$
195,347
$
189,876
$
590,163
$
545,300
AFFO per weighted average common share and unit,
diluted
$
0.55
$
0.54
$
1.67
$
1.58
(1) See Attachment 15 for definitions and other terms. (2)
Series E cumulative convertible preferred shares are dilutive for
purposes of calculating FFO per share for the three and nine months
ended September 30, 2023 and September 30, 2022. Consequently,
distributions to Series E cumulative convertible preferred
stockholders are added to FFO and the weighted average number of
Series E cumulative convertible preferred shares are included in
the denominator when calculating FFO per common share and unit,
diluted.
Attachment 3
Consolidated Balance Sheets (Unaudited) (1)
September 30,
December 31,
In thousands, except share and per share amounts
2023
2022
ASSETS Real estate owned: Real estate
held for investment
$
15,779,481
$
15,365,928
Less: accumulated depreciation
(6,117,312
)
(5,762,205
)
Real estate held for investment, net
9,662,169
9,603,723
Real estate under development (net of accumulated
depreciation of $0 and $296)
139,143
189,809
Real estate held for disposition (net of accumulated
depreciation of $0 and $0)
-
14,039
Total real estate owned, net of accumulated depreciation
9,801,312
9,807,571
Cash and cash equivalents
1,624
1,193
Restricted cash
30,831
29,001
Notes receivable, net
209,297
54,707
Investment in and advances to unconsolidated joint ventures, net
963,927
754,446
Operating lease right-of-use assets
191,499
194,081
Other assets
221,572
197,471
Total assets
$
11,420,062
$
11,038,470
LIABILITIES AND EQUITY Liabilities: Secured
debt
$
1,238,240
$
1,052,281
Unsecured debt
4,514,582
4,435,022
Operating lease liabilities
186,701
189,238
Real estate taxes payable
68,900
37,681
Accrued interest payable
27,071
46,671
Security deposits and prepaid rent
50,571
51,999
Distributions payable
149,615
134,213
Accounts payable, accrued expenses, and other liabilities
125,979
153,220
Total liabilities
6,361,659
6,100,325
Redeemable noncontrolling interests in the OP and DownREIT
Partnership
907,269
839,850
Equity: Preferred stock, no par value; 50,000,000 shares
authorized at September 30, 2023 and December 31, 2022: 2,686,308
shares of 8.00% Series E Cumulative Convertible issued and
outstanding (2,686,308 shares at December 31, 2022)
44,614
44,614
11,891,530 shares of Series F outstanding (12,100,514 shares at
December 31, 2022)
1
1
Common stock, $0.01 par value; 450,000,000 shares authorized at
September 30, 2023 and December 31, 2022: 328,904,161 shares issued
and outstanding (328,993,088 shares at December 31, 2022)
3,289
3,290
Additional paid-in capital
7,487,515
7,493,423
Distributions in excess of net income
(3,392,855
)
(3,451,587
)
Accumulated other comprehensive income/(loss), net
8,360
8,344
Total stockholders' equity
4,150,924
4,098,085
Noncontrolling interests
210
210
Total equity
4,151,134
4,098,295
Total liabilities and equity
$
11,420,062
$
11,038,470
(1) See Attachment 15 for definitions and other terms.
Attachment 4(C)
Selected Financial Information (Dollars in
Thousands) (Unaudited) (1) Quarter Ended
Coverage Ratios September 30, 2023 Net
income/(loss)
$
35,419
Adjustments: Interest expense, including debt extinguishment
and other associated costs
44,664
Real estate depreciation and amortization
167,551
Other depreciation and amortization
3,692
Tax provision/(benefit), net
428
Adjustments to reflect the Company's share of EBITDAre of
unconsolidated joint ventures
17,327
EBITDAre
$
269,081
Casualty-related charges/(recoveries), net
(1,928
)
Legal and other costs
364
Unrealized (gain)/loss on real estate technology investments
8,292
Realized (gain)/loss on real estate technology investments
54
(Income)/loss from unconsolidated entities
(5,508
)
Adjustments to reflect the Company's share of EBITDAre of
unconsolidated joint ventures
(17,327
)
Management fee expense on unconsolidated joint ventures
(744
)
Consolidated EBITDAre - adjusted for non-recurring items
$
252,284
Annualized consolidated EBITDAre - adjusted for
non-recurring items
$
1,009,136
Interest expense, including debt extinguishment and other
associated costs
44,664
Capitalized interest expense
2,629
Total interest
$
47,293
Preferred dividends
$
1,221
Total debt
$
5,752,822
Cash
(1,624
)
Net debt
$
5,751,198
Consolidated Interest Coverage Ratio - adjusted for
non-recurring items 5.3x Consolidated Fixed
Charge Coverage Ratio - adjusted for non-recurring items
5.2x Consolidated Net Debt-to-EBITDAre - adjusted
for non-recurring items 5.7x Debt
Covenant Overview Unsecured Line of Credit Covenants
(2) Required Actual Compliance
Maximum Leverage Ratio ≤60.0%
31.0% (2)
Yes Minimum Fixed Charge Coverage Ratio ≥1.5x
5.1x
Yes Maximum Secured Debt Ratio ≤40.0%
9.9%
Yes Minimum Unencumbered Pool Leverage Ratio ≥150.0%
385.0%
Yes
Senior Unsecured Note Covenants (3) Required
Actual
Compliance
Debt as a percentage of Total Assets ≤65.0%
32.9% (3)
Yes Consolidated Income Available for Debt Service to Annual
Service Charge ≥1.5x
5.6x
Yes Secured Debt as a percentage of Total Assets ≤40.0%
7.1%
Yes Total Unencumbered Assets to Unsecured Debt ≥150.0%
319.3%
Yes
Securities Ratings Debt Outlook
Commercial Paper Moody's Investors Service Baa1
Stable P-2 S&P Global Ratings BBB+ Stable A-2
Gross % of Number of 3Q 2023 NOI
(1) Carrying Value Total Gross Asset
Summary Homes ($000s) % of NOI
($000s) Carrying Value Unencumbered assets
46,321
$
243,522
87.4
%
$
13,791,559
86.6
%
Encumbered assets
9,276
35,134
12.6
%
2,127,065
13.4
%
55,597
$
278,656
100.0
%
$
15,918,624
100.0
%
(1) See Attachment 15 for definitions and other terms. (2)
As defined in our credit agreement dated September 15, 2021, as
amended. (3) As defined in our indenture dated November 1, 1995 as
amended, supplemented or modified from time to time.
Attachment
15(D) Definitions and Reconciliations
September 30, 2023 (Unaudited) All guidance is
based on current expectations of future economic conditions and the
judgment of the Company's management team. The following reconciles
from GAAP Net income/(loss) per share for full-year 2023 and fourth
quarter of 2023 to forecasted FFO, FFO as Adjusted and AFFO per
share and unit:
Full-Year 2023 Low High
Forecasted net income per diluted share
$
1.32
$
1.34
Conversion from GAAP share count
(0.02
)
(0.02
)
Net gain on the sale of depreciable real estate owned
(0.93
)
(0.93
)
Depreciation
2.00
2.00
Noncontrolling interests
0.07
0.07
Preferred dividends
0.01
0.01
Forecasted FFO per diluted share and unit
$
2.45
$
2.47
Legal and other costs
-
-
Casualty-related charges/(recoveries)
0.01
0.01
Realized/unrealized (gain)/loss on real estate technology
investments
-
-
Forecasted FFO as Adjusted per diluted share and unit
$
2.46
$
2.48
Recurring capital expenditures
(0.23
)
(0.23
)
Forecasted AFFO per diluted share and unit
$
2.23
$
2.25
4Q 2023
Low High Forecasted net income per diluted share
$
0.08
$
0.10
Conversion from GAAP share count
(0.01
)
(0.01
)
Depreciation
0.55
0.55
Noncontrolling interests
-
-
Preferred dividends
-
-
Forecasted FFO per diluted share and unit
$
0.62
$
0.64
Legal and other costs
-
-
Casualty-related charges/(recoveries)
-
-
Realized/unrealized (gain)/loss on real estate technology
investments
-
-
Forecasted FFO as Adjusted per diluted share and unit
$
0.62
$
0.64
Recurring capital expenditures
(0.06
)
(0.06
)
Forecasted AFFO per diluted share and unit
$
0.56
$
0.58
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231025376017/en/
Trent Trujillo Email: ttrujillo@udr.com
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