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UDR Taps Debt Market With $350M Senior Notes, To Repay Debt

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UDR, Inc. (UDR - Free Report) has tapped the debt market with an offering of 1.900% senior unsecured medium-term notes due Mar 15, 2033.  The notes, with $350 million of aggregate principal amount, have been priced at 99.578% of the principal amount, plus accrued interest from Dec 14, 2020, and will yield 1.939% to maturity.

The interest will be paid semiannually on Mar 15 and Sep 15 and the first interest payment will be made on Mar 15, 2021. The offering is expected to close on Dec 14, 2020, subject to the compliance of customary closing norms.

Following the allocation of net proceeds to eligible green projects, the company intends to use part of the funds for the redemption of the remaining $183 million of 3.750% medium-term notes due July 2024.

The remaining amount will be used to repay other debt, including the outstanding $67.5 million of secured borrowings due in 2023, and outstanding balance under its commercial paper program and working capital credit facility, or to fund potential buyouts.

Its efforts to strengthen its near-term liquidity in these testing times and opportunistically tap the debt market amid the current low-interest-rate environment are strategic fits. Notably, the notes will be issued at 1.900%, which is lower than 3.750% interest rate of the notes that will be redeemed.

Moreover, addressing its near-term debt maturities will enhance UDR’s financial flexibility and extend average debt maturity term of debt. Further, since the notes, which will be repaid, carry higher interest rates compared to the newly-issued notes, this move will likely result in lower interest expenses.

However, the notes offering increase UDR’s long-term debt obligation.

Moreover, the company’s performance in the recent quarters reflects the adverse impact of the pandemic and related economic challenges, and unfavorable government regulations. Given the persistence of the pandemic and its adverse impact, low demand for apartments and impaired rent-paying capability of tenants will hurt rental rates and occupancy.

Moreover, due to its exposure to New York, San Francisco, and Boston markets, which have been more adversely impacted by the pandemic, UDR has witnessed significant decreases in rental income due to elevated rent concessions and lower occupancy.

Shares of this Zacks Rank #3 (Hold) company have rallied 2.2% over the past six months against the industry’s decline of 0.7%.

 


Stocks to Consider

Innovative Industrial Properties, Inc.’s (IIPR - Free Report) funds from operations (FFO) per share estimates for 2020 have been revised upward by 5.8% to $5.11 over the past month. The company carries a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Extra Space Storage Inc’s (EXR - Free Report) Zacks Consensus Estimate for 2020 FFO per share has moved up marginally to $5.02 over the past 30 days. The company currently carries a Zacks Rank of 2.

City Office REIT, Inc.’s (CIO - Free Report) Zacks Consensus Estimate for 2020 FFO per share has improved 2.6% to $1.17 in a month’s time. The company has a Zacks Rank of 2 at present.

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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