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UDR, Inc. (UDR - Analyst Report), a leading multi-family real estate investment trust (REIT), reported fourth quarter 2011 FFO (funds from operations) of $80.2 million or 35 cents per share compared with $53.4 million or 28 cents in the year-earlier quarter. Funds 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.
The reported FFO per share marginally beat the Zacks Consensus Estimate by a penny. Excluding non-recurring items, FFO for the reported quarter was 34 cents per share. Total revenues during the quarter were $188.0 million compared with $152.4 million in the prior-year quarter.
For full-year 2011, UDR reported FFO of $1.28 per share compared with $1.09 in the previous year. Total revenues for fiscal 2011 were $691.3 million compared with $574.1 million in 2010.
Same-store occupancy remained relatively high at 95.1% during the quarter. Same-store revenues and net operating income increased 5.3% and 7.7% respectively, during the reported quarter compared to the year-ago quarter. Same-store expenses increased 0.5% during fourth quarter 2011, primarily due to higher utility and real estate taxes.
For full year 2011, same-store occupancy was 95.5%, while same-store revenues and net operating income increased 4.1% and 5.6% respectively, compared to 2010. Same-store expenses increased 1.4% during 2011.
During fourth quarter 2011, UDR acquired land for ‘Village at Bella Terra’ development project in Huntington Beach, California. The apartment community, scheduled to be completed in second quarter 2013, includes 467 homes at a projected cost $150 million. The company also acquired land adjacent to its ‘Vitruvian Park’ development project in Addison, Texas, for $4.7 million and a land parcel adjacent to its ‘Garrison Square’ community in the Boston metro area for $4.6 million.
In addition, UDR acquired ‘1301 Thomas Circle’ – a 292-unit luxury apartment community in Washington, D.C., through its joint venture with Kuwait Finance House, an Islamic Sharia-compliant bank. The purchase price of $154 million was funded through a 5-year $90.0 million interest-only loan from Fannie Mae, a 70% equity contribution from Kuwait Finance House to the tune of $44.8 million, and a 30% equity contribution by UDR totaling $19.2 million. During the reported quarter, UDR sold 9 communities totaling 2,331 units for $275.4 million, bringing its tally for full year 2011 to $593.9 million.
During fourth quarter 2011, UDR issued 630,000 shares under its “At the Market” equity offering at a gross price of $24.67 each, generating proceeds of approximately $15.5 million. Bulk of the proceeds was utilized to fund recent acquisitions. For full year 2011, UDR raised a total of $989 million of equity from a combination of “At the Market” equity offering, a secondary offering completed in July and the issuance of operating partnership units.
During the reported quarter, UDR entered into a new four-year $900 million unsecured revolving credit facility, replacing its prior $600 million facility. The new facility includes a one-year extension option and contains an accordion feature that allows the company to increase the borrowing capacity to $1.35 billion. At year-end 2011, the company had a liquidity of $738.7 million through a combination of cash and available capacity under its credit facility.
As of December 31, 2011, UDR had a total debt of $3.9 billion and a fixed charge coverage ratio of 2.6x. UDR ended the quarter with 73% fixed-rated debt at a total blended interest rate of 4.0% and a weighted average debt maturity of 4.4 years.
With superior quarterly and fiscal 2011 results, UDR expects fiscal 2012 FFO in the range of $1.37 - $1.43 per share.
We maintain our Neutral recommendation on UDR, which currently retains a Zacks #3 Rank that translates into a short-term Hold rating. We also have a Neutral rating and a Zacks #3 Rank for Equity Residential (EQR - Analyst Report), one of the competitors of UDR.