In a bid to enhance its liquidity, UDR, Inc. (UDR - Analyst Report) , a real estate investment trust (REIT), has recently announced its decision to offer 19 million shares. The company also decided to grant the underwriters a 30-day option to purchase up to an additional 2,850,000 shares to cover the over-allotment options.
UDR intends to use the net proceeds generated from the offering to repay approximately $364 million of its 3.3% secured debt due 2012 - 2014, to redeem all of its outstanding 6.75% Series G Preferred Stock for $81.6 million, to repay a portion of the debt currently outstanding under its unsecured credit facility and the balance remaining for working capital and general corporate purposes.
UDR reported first quarter 2012 FFO (funds from operations) of $83.5 million or 35 cents per share compared with $56.8 million or 30 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.
As of March 31, 2012, UDR had a total debt of $3.9 billion and a fixed charge coverage ratio of 2.6x. UDR ended the quarter with 79% fixed-rated debt at a total blended interest rate of 4.2% and a weighted average debt maturity of 4.8 years.
At the end of the quarter, the company had a liquidity of $954 million through a combination of cash and available capacity under its credit facility.
UDR is among the best-positioned 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-versus-own spread still remains high. As of March 31, 2012, the company owned 60,211 apartment homes, including 2,972 homes under development.
UDR currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We have a long-term Neutral recommendation on the stock. One of its competitors, Equity Residential (EQR - Analyst Report) also carries a Zacks #3 Rank.