Back to top

Analyst Blog

UDR Inc. (UDR - Analyst Report), a leading multifamily real estate investment trust (REIT), has recently completed the sale of 15 unencumbered apartment communities totaling 4,931 units for gross proceeds of $477 million.

The asset sale is part of the long-term strategy of the company to exit the Phoenix, Arizona; Jacksonville, Florida; and Fredericksburg, Virginia markets. The divesture of the non-core assets is also expected to fully fund the $500 million development and redevelopment expenditures likely to be incurred by UDR in 2012.

UDR is among the best-positioned multifamily apartment REITs in the U.S., with the majority of its portfolio located in California, Florida and on the Atlantic Coast. These are areas where housing costs have soared in the past few years, and despite the drop in home values, the rent vs. ownership spread remains high. The housing meltdown will continue to help apartment REITs like UDR and we expect this sector to remain comparatively stable in the coming quarters as well.

Furthermore, UDR has a geographic diversification that increases investment opportunity and decreases the risk associated with cyclical local real estate markets and economies. It thereby works to increase the stability and predictability of the earnings.

UDR has also continuously upgraded the overall quality of its portfolio by selling smaller market, older properties and replacing them with newer assets in better long-term markets. This provides an upside potential for the company. As of March 31, 2012, the company owned 60,211 apartment homes, including 2,972 homes under development.

We maintain our Neutral recommendation on UDR for the long term, which currently has a Zacks #3 Rank that translates into a short-term Hold rating. We also have a long-term Neutral recommendation and a Zacks #2 Rank (short-term Buy rating) for Apartment Investment & Management Co. (AIV - Analyst Report), one of the competitors of UDR.

Please login to Zacks.com or register to post a comment.