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UDR's Q2 FFO In Line With Estimates, Revenues Beat, View Up

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UDR Inc. (UDR - Free Report) reported second-quarter 2022 funds from operations (FFO) as adjusted per share of 57 cents, in line with the Zacks Consensus Estimate. The figure is 16.3% higher than the prior-year quarter’s 49 cents.

An increase in revenues from rental income fueled the quarter’s top-line growth. Robust operating trends and strong pricing power were major contributing factors.

Rental revenues climbed nearly 19% year over year to $367.7 million. The top line surpassed the Zacks Consensus Estimate of $366.2 million.

Since the second quarter of 2020, UDR has consistently collected total cash revenues in the range of 98-98.5% of the total billed revenues. It expects collections to remain within this range throughout 2022.

Per Mike Lacy, UDR’s senior vice president of operations, “High occupancy, low resident turnover, improving collection trends, and relative affordability compared to other forms of housing continue to support strong demand for multifamily residences and above-trend sequential same-store growth.”

Inside the Headlines

In the repored quarter, same-store revenues (with concessions reported on a cash basis) increased 11.4% year over year. Same-store expenses were up 4.2%. Consequently, the same-store net operating income, with concessions reported on a cash basis, improved 14.7%.

UDR registered blended lease rate growth of 17.4% during the second quarter, marking a sequential rise of 330 basis points (bps).

The residential REIT’s weighted average same-store physical occupancy decreased 20 bps sequentially to 97.1%. The second-quarter annualized rate of resident turnover improved 270 bps year over year to 50.1%.

Portfolio Activity

During the reported quarter, UDR acquired one community for $207.5 million and three land sites for future development for a total purchase price of $135.2 million.

UDR’s development pipeline aggregated $599.5 million at the end of the reported quarter and was 66.9% funded. The active pipeline includes six communities for 1,540 homes.

At the end of the quarter, the company’s pipeline of densification projects, including the addition of 45 new apartment homes in two communities, aggregated $26 million and was 53.1% funded.

The company’s Developer Capital Program investment, including accrued return, totaled $384.4 million with a weighted average return rate of 10% and a weighted average estimated remaining term of 3.2 years at the end of second-quarter 2022.

Balance Sheet Activity

As of Jun 30, 2022, UDR had $1.3 billion of liquidity through a combination of cash, undrawn capacity under its credit facilities and estimated proceeds of nearly $282.1 million from the potential future settlement of approximately 4.9 million shares from its previously announced forward equity sale agreements. The remaining shares to be sold under the forward sale agreement must be settled by Mar 30, 2023.

The total debt was $5.5 billion as of the same date, with no remaining consolidated maturities until 2024. In addition, net debt-to-EBITDAre declined to 6.2X in the second quarter from the year ago’s 7.4X.

UDR ended the reported quarter with a weighted average interest rate of 2.85% and weighted average years to maturity of 7.1 years.

2022 Guidance Up

The company raised the outlook for full-year 2022.

It expects third-quarter 2022 FFO as adjusted per share in the range 58-60 cents. The Zacks Consensus Estimate for the same is pegged at 58 cents.

For 2022, FFO as adjusted per share is expected to be in the range of $2.29-$2.33, revised upward from $2.25-$2.31. The Zacks Consensus Estimate for the same is pegged at $2.30.

For 2022, the company projects 10-11% year-over-year growth in same-store cash revenues, up from the prior range of 8.5-10%, whereas same-store NOI growth is estimated to be 12.5-14%, up from 10.75-12.75%.

Currently, UDR carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

SL Green Realty (SLG - Free Report) reported second-quarter 2022 FFO per share of $1.87, beating the Zacks Consensus Estimate of $1.69. The reported FFO per share compared favorably with the year-ago quarter’s $1.60.

SLG first-quarter performance was driven by year-over-year growth in the bottom line and healthy leasing activity.

Crown Castle International Corp.’s (CCI - Free Report) second-quarter 2022 adjusted funds from operations (AFFO) per share were $1.80. The Zacks Consensus Estimate for the same was pegged at $1.79. Net revenues of $1.73 billion exceeded the Zacks Consensus Estimate of $1.71 billion.

Growth in site-rental revenues due to elevated tower space demand aided the top-line performance. CCI also raised the outlook for adjusted EBITDA for 2022.

Alexandria Real Estate Equities, Inc. (ARE - Free Report) reported second-quarter 2022 adjusted FFO per share of $2.10, surpassing the Zacks Consensus Estimate of $2.06. The reported FFO per share also compared favorably with the year-ago quarter’s $1.93.

Alexandria witnessed continued healthy leasing activity and rental rate growth during the quarter.

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.