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UDR Q2 FFO In Line with Expectations, Revenues Increase

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Residential REIT, UDR Inc. (UDR - Free Report) reported funds from operations (FFO) as adjusted per share of 47 cents for second-quarter 2017, matching the Zacks Consensus Estimate. The figure also came higher than the prior-year quarter tally of 45 cents.

Total revenue improved 3.8% year over year to $248 million. Additionally, it exceeded the Zacks Consensus Estimate of $246 million. Growth in revenues from same-store and stabilized, non-mature communities backed the increase.

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

United Dominion Realty Trust, Inc. Price, Consensus and EPS Surprise

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share.

Inside the Headlines

During the quarter, same-store revenues increased 3.9% year over year while same-store expenses climbed 3.1%. Consequently, same-store net operating income rose 4.2% year over year. The company’s same-store physical occupancy expanded 40 basis points (bps) year over year to 96.8%. The second-quarter annualized rate of turnover contracted 180 bps year over year to 54.7%.

At the end of the second quarter, UDR’s development pipeline aggregated $967.2 million. This included $166.2 million of completed, non-stabilized projects and $801 million of under-construction developments.

As of Jun 30, 2017, the company had around $896.4 million available from a combination of cash and undrawn capacity on its credit facilities. Further, the company’s total debt was $3.6 billion as of the same date.

Notably, during the quarter, the company issued $300 million of 10-year unsecured debt at a 3.5% coupon. The proceeds from it were used to prepay about $177 million of higher-cost debt originally scheduled to mature in 2018.

Portfolio Activity

During the quarter, the UDR/MetLife joint venture completed the construction of Verve Mountain View, a 155-home community situated in Mountain View, CA, with an estimated cost to construction of $99.0 million at 100%.

Further, the company strengthened its Developer Capital Program through a $16.1 million investment in Amberglen. It is a 276-home development community situated in Portland, OR. Also, it provided funding commitments totaling $63.2 million for two development communities located in San Francisco and Washington, D.C.


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

For full-year 2017, the company projects FFO as adjusted per share of $1.84–$1.88. The Zacks Consensus Estimate of $1.86 also lies within this range. Moreover, the company anticipates same-store revenues to climb 3.25–4.00%, expenses to increase 2.50–3.50% and same-store NOI growth of 3.50–4.25% 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 should support its momentum. However, elevated deliveries in a number of its markets remain a concern. Additionally, rate hikes add to the company’s woes.

Currently, UDR has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In addition, the stock has gained 7.4% year to date, outperforming the 6.5% growth of the industry it belongs to.

We now look forward to the earnings releases of the other residential REITs – Camden Property Trust (CPT - Free Report) , Essex Property Trust Inc. (ESS - Free Report) and Apartment Investment and Management Company (AIV - Free Report) – which are also scheduled to report second-quarter results this week.

Note: FFO, 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.

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