UDR Inc. (UDR) Meets Q1 FFO Estimates, Beats On Revenues

Residential REIT, UDR Inc. (NYSE:UDR) reported funds from operations (“FFO”) as adjusted per share of 45 cents for first-quarter 2017, matching the Zacks Consensus Estimate. The figure also came higher than the prior-year quarter tally of 43 cents.

Total revenue improved 3.8% year over year to $243.8 million. Additionally, it exceeded the Zacks Consensus Estimate of $241.8 million. Growth in revenue from same-store and stabilized, non-mature communities attributed to this increase.

In addition, the company reaffirmed its full-year 2017 FFO as adjusted per share and same-store guidance ranges.

Inside the Headlines

During the quarter, same-store revenues increased 4.6% year over year, while same-store expense climbed 3.8%. Consequently, same-store NOI rose 4.9% year over year. The company’s same-store physical occupancy expanded 50 basis points (bps) year over year to 96.8%. The first-quarter annualized rate of turnover contracted 100 bps year over year to 40.8%.

At the end of the first quarter, UDR’s development pipeline aggregated $1.1 billion. This included $279.3 million of completed, non-stabilized projects and $850.6 million of under-construction developments.

As of Mar 31, 2017, the company had around $920 million available, through a combination of cash and undrawn capacity on its credit facilities. Further, the company’s total debt was $3.5 billion as of the same date.

Notably, during the quarter, the company established a $500.0 million unsecured commercial paper program in the U.S. At the end of the quarter, $220.0 million of commercial paper was outstanding on the program at a weighted average rate of 1.24%.

Portfolio Activity

During the quarter, the UDR/MetLife joint venture accomplished the construction on Residences on Jamboree, a 381-home community situated in Irvine, CA, with an estimated cost to construct of $125.0 million at 100%. The company also exercised its fixed-price purchase option to acquire CityLine, a 244-home West Coast Development joint-venture community in suburban Seattle. UDR’s total investment in CityLine amounted to $86.5 million.

Further, the company strengthened its West Coast Development joint-venture relationship through a $15.5 million investment in CityLine II. It is a 155-home development community situated near the recently purchased CityLine in suburban Seattle.

On the other hand, during the quarter, the company sold Hanover Village, a wholly owned parcel of land positioned in Mechanicsville, VA, for total proceeds of $3.5 million.

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Guidance

For second-quarter 2017, UDR projects FFO as adjusted per share in the 45–47 cents range. The Zacks Consensus Estimate of 46 cents lies within this range.

For full-year 2017, the company projects FFO as adjusted per share in the range of $1.83–$1.87. The Zacks Consensus Estimate of $1.84 also lies within this range. Moreover, the company anticipates same-store revenue to climb 3.0–4.0%, expenses to increase 2.5–3.5% and same-store NOI growth of 3.25–4.25% for the year.

Our Viewpoint

With a superior portfolio in the targeted U.S. markets and disciplined capital allocation, UDR is well poised for growth. Moreover, focus on enhancing portfolio through expansion in core markets and sale of non-core ones should support momentum. However, elevated deliveries in a number of its markets remain a concern. Additionally, rate hike adds to the company’s woes.

Currently, UDR has a Zacks Rank #3 (Hold). You can see Zacks Investment Research

Written By: Zacks Investment Research