DENVER–(BUSINESS WIRE)–UDR, Inc. (the “Company”) (NYSE: UDR), announced today its first quarter 2024 results. Net Income, Funds from Operations (“FFO”), FFO as Adjusted (“FFOA”), and Adjusted FFO (“AFFO”) per diluted share for the quarter ended March 31, 2024 are detailed below.
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Quarter Ended March 31 |
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Metric |
1Q 2024 Actual |
1Q 2024 Guidance |
1Q 2023 Actual |
$ Change vs. Prior Year Period |
% Change vs. Prior Year Period |
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|
Net Income per diluted share |
$0.13 |
$0.13 to $0.15 |
$0.09 |
$0.04 |
44% |
|
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FFO per diluted share |
$0.60 |
$0.60 to $0.62 |
$0.59 |
$0.01 |
2% |
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FFOA per diluted share |
$0.61 |
$0.60 to $0.62 |
$0.60 |
$0.01 |
2% |
|
|
AFFO per diluted share |
$0.56 |
$0.56 to $0.58 |
$0.57 |
$(0.01) |
(2)% |
|
- Same-Store (“SS”) results, with concessions reflected on a straight-line basis, for the first quarter 2024 versus the first quarter 2023 and the fourth quarter 2023 are summarized below.
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SS Growth / (Decline) |
Year-Over-Year (“YOY”): 1Q 2024 vs. 1Q 2023 |
Sequential: 1Q 2024 vs. 4Q 2023 |
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Revenue |
3.1% |
0.4% |
|
Expense |
7.5%(1) |
4.9% |
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Net Operating Income (“NOI”) |
1.2%(1) |
(1.6)% |
|
(1) |
In 1Q 2023, the Company recorded a $3.7 million refundable payroll tax credit related to the Employee Retention Credit program. Excluding this benefit, YOY SS Expense and NOI growth would have been 4.0 percent and 2.7 percent, respectively. |
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During the first quarter, the Company,
- Sold Crescent Falls Church, a 214-home apartment community in Metropolitan Washington, D.C., for gross proceeds of $100.0 million.
- Completed development at Villas at Fiori, a $53.5 million, 85-home townhome community developed in the Addison submarket of Dallas, TX.
- Subsequent to quarter-end, the joint venture affiliated with the Company’s Developer Capital Program investment in 1300 Fairmount, a 478-home apartment community in Philadelphia, PA, refinanced the expiring senior construction loan with a new loan that matures in April 2026. The joint venture’s ability to refinance the senior construction loan results in UDR continuing to accrue a return on its investment, thereby adding $0.02 of FFOA per diluted share to prior full-year 2024 expectations.
“We have started the year with improving leasing conditions, largely due to employment growth that has exceeded expectations and led to near-record high absorption. Our first quarter results, including 3.1 percent same-store revenue growth over the prior year period, demonstrate the strength of our strategy and the value of our operating platform,” said Tom Toomey, UDR’s Chairman and CEO. “UDR’s operating and capital markets acumen as well as our innovative culture position us well for continued success.”
Outlook(1)
As shown in the table below, the Company has established the following guidance ranges for the second quarter of 2024 and has updated its previously provided full-year 2024 guidance ranges for FFOA per diluted share and AFFO per diluted share.
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2Q 2024 Outlook |
1Q 2024 Actual |
Updated Full-Year 2024 Outlook |
Prior Full-Year 2024 Outlook |
Full-Year 2024 Midpoint (Change) |
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Net Income per diluted share |
$0.13 to $0.15 |
$0.13 |
$0.33 to $0.45 |
$0.33 to $0.45 |
$0.39 (unch) |
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FFO per diluted share |
$0.60 to $0.62 |
$0.60 |
$2.36 to $2.48 |
$2.36 to $2.48 |
$2.42 (unch) |
|
|
FFOA per diluted share |
$0.60 to $0.62 |
$0.61 |
$2.38 to $2.50 |
$2.36 to $2.48 |
$2.44 (+$0.02) |
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AFFO per diluted share |
$0.53 to $0.55 |
$0.56 |
$2.12 to $2.24 |
$2.10 to $2.22 |
$2.18 (+$0.02) |
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YOY Growth: concessions reflected on a straight-line basis: |
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SS Revenue |
N/A |
3.1% |
0.00% to 3.00% |
0.00% to 3.00% |
1.50% (unch) |
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SS Expense |
N/A |
7.5% |
4.25% to 6.25% |
4.25% to 6.25% |
5.25% (unch) |
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SS NOI |
N/A |
1.2% |
(1.75)% to 1.75% |
(1.75)% to 1.75% |
0.00% (unch) |
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(1) |
Additional assumptions for the Company’s second quarter and full-year 2024 outlook can be found on Attachment 13 of the Company’s related quarterly Supplemental Financial Information (“Supplement”). A reconciliation of GAAP Net Income per share to FFO per share, FFOA per share, and AFFO per share can be found on Attachment 14(D) of the Company’s related quarterly Supplement. Non-GAAP financial measures and other terms, as used in this earnings release, are defined and further explained on Attachments 14(A) through 14(D), “Definitions and Reconciliations,” of the Company’s related quarterly Supplement. |
First Quarter 2024 and April 2024 Results
In the first quarter, total revenue increased by $14.1 million YOY, or 3.5 percent, to $413.6 million. This increase was primarily attributable to growth in revenue from Same-Store communities and growth from past accretive external investments.
“Monthly sequential improvement across key revenue metrics of occupancy, concessions granted, effective lease rate growth, and resident turnover led to first quarter same-store results slightly ahead of our expectations,” said Mike Lacy, UDR’s Senior Vice President of Operations. “As we begin the second quarter, occupancy remains high and we continue to achieve new lease rate growth momentum. While much of this year’s leasing activity remains ahead of us, I am optimistic about our operating trajectory and the incremental income we deliver from our initiatives, the relative value we offer versus other forms of housing, and the resiliency of our consumer, all of which should help us manage through elevated supply deliveries.”
Summary of Fourth Quarter 2023, First Quarter 2024, and April 2024 Residential Operating Trends(1)
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As of April 29, 2024 |
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Same-Store Metric |
4Q 2023 |
1Q 2024 |
Apr 2024 |
|
Weighted Average Physical Occupancy |
96.9% |
97.1% |
96.8% to 97.0% |
|
Effective Blended Lease Rate Growth(2) |
(0.5)% |
0.8% |
1.9% to 2.1% |
|
Effective New Lease Rate Growth |
(5.1)% |
(2.5)% |
(0.1)% to 0.1% |
|
Effective Renewal Lease Rate Growth |
4.2% |
3.8% |
3.5% to 3.7% |
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Average Concession Granted (in Weeks) on New Leases |
1.3 |
0.9 |
0.8 |
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(1) |
Metrics are as of April 29, 2024 for the Company’s same-store residential portfolio and are subject to change. |
|
(2) |
The Company defines Effective Blended Lease Rate Growth as the combined proportional growth as a result of (a) Effective New Lease Rate Growth and (b) Effective Renewal Lease Rate Growth. Management considers Effective Blended Lease Rate Growth a useful metric for investors as it assesses combined proportional market-level new and in-place demand trends. Please refer to the “Definitions and Reconciliations” section of the Company’s related quarterly Supplement for additional details. |
In the tables below, the Company has presented YOY and sequential Same-Store results by region, with concessions accounted for on a straight-line basis.
Summary of Same-Store Results in First Quarter 2024 versus First Quarter 2023
|
Region |
Revenue Growth / (Decline) |
Expense Growth / (Decline) |
NOI Growth / (Decline) |
% of Same-Store Portfolio(1) |
Physical Occupancy(2) |
YOY Change in Occupancy |
|
West |
3.1% |
8.9% |
1.2% |
31.5% |
97.1% |
0.8% |
|
Mid-Atlantic |
4.4% |
9.0% |
2.4% |
20.8% |
97.3% |
0.7% |
|
Northeast |
4.1% |
10.5% |
0.7% |
18.2% |
97.3% |
0.1% |
|
Southeast |
2.2% |
3.8% |
1.4% |
14.3% |
96.9% |
0.8% |
|
Southwest |
0.2% |
(0.8)% |
0.8% |
8.8% |
96.7% |
0.1% |
|
Other Markets |
2.9% |
11.7% |
(0.4)% |
6.4% |
97.2% |
0.2% |
|
Total |
3.1% |
7.5% |
1.2% |
100.0% |
97.1% |
0.6% |
|
(1) |
Based on 1Q 2024 Same-Store NOI. For definitions of terms, please refer to the “Definitions and Reconciliations” section of the Company’s related quarterly Supplement. |
|
(2) |
Weighted average Same-Store physical occupancy for the quarter. |
Summary of Same-Store Results in First Quarter 2024 versus Fourth Quarter 2023
|
Region |
Revenue Growth / (Decline) |
Expense Growth / (Decline) |
NOI Growth / (Decline) |
% of Same-Store Portfolio(1) |
Physical Occupancy(2) |
Sequential Change in Occupancy |
|
West |
0.9% |
3.7% |
0.0% |
31.5% |
97.1% |
0.5% |
|
Mid-Atlantic |
0.6% |
4.6% |
(1.1)% |
20.8% |
97.3% |
0.1% |
|
Northeast |
0.0% |
8.3% |
(4.2)% |
18.2% |
97.3% |
0.2% |
|
Southeast |
0.1% |
5.2% |
(2.2)% |
14.3% |
96.9% |
0.0% |
|
Southwest |
(0.6)% |
2.9% |
(2.5)% |
8.8% |
96.7% |
(0.3)% |
|
Other Markets |
0.0% |
1.7% |
(0.7)% |
6.4% |
97.2% |
0.3% |
|
Total |
0.4% |
4.9% |
(1.6)% |
100.0% |
97.1% |
0.2% |
| (1) |
Based on 1Q 2024 Same-Store NOI. For definitions of terms, please refer to the “Definitions and Reconciliations” section of the Company’s related quarterly Supplement. |
|
(2) |
Weighted average Same-Store physical occupancy for the quarter. |
Transactional Activity
During the quarter, the Company sold Crescent Falls Church, a 214-home apartment community with approximately 6,400 square feet of retail space in Metropolitan Washington, D.C., for gross proceeds of $100.0 million. At the time of sale, the 14-year-old community had a weighted average monthly revenue per occupied home of $3,385 and physical occupancy of 97.9 percent.
Development Activity
During the quarter, the Company completed development at Villas at Fiori, a $53.5 million, 85-home townhome community developed in the Addison submarket of Dallas, TX. At the end of the first quarter, the Company’s development pipeline included one 330-home apartment community in Tampa, FL, at a total budgeted cost of $134.0 million, of which 94 percent has been funded, with only $7.8 million remaining to fund.
Developer Capital Program (“DCP”) Portfolio Activity
Subsequent to quarter-end, the joint venture affiliated with the Company’s investment in 1300 Fairmount, a 478-home apartment community in Philadelphia, PA, refinanced the senior construction loan with a new loan that matures in April 2026 and includes an additional one-year extension option, subject to certain conditions.
At the end of the first quarter, the Company had fully funded its $476.6 million of commitments under its DCP platform. These investments carry a contractual weighted average return rate of 10.0 percent and have a weighted average remaining term of 2.7 years.
Capital Markets and Balance Sheet Activity
“Robust liquidity and minimal committed forward funding obligations position UDR well to opportunistically utilize our investment grade balance sheet to accretively deploy capital and enhance stakeholder returns,” said Joe Fisher, UDR’s President and Chief Financial Officer.
The Company’s total indebtedness as of March 31, 2024 was $5.8 billion with only $291.2 million, or 5.1 percent of total consolidated debt, maturing through 2025, including principal amortization and excluding amounts on the Company’s commercial paper program and working capital credit facility. As of March 31, 2024, the Company had $960 million in liquidity through a combination of cash and undrawn capacity on its credit facilities. Please see Attachment 13 of the Company’s related quarterly Supplement for additional details on projected capital sources and uses.
In the table below, the Company has presented select balance sheet metrics for the quarter ended March 31, 2024 and the comparable prior year period.
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Quarter Ended March 31 |
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Balance Sheet Metric |
1Q 2024 |
1Q 2023 |
Change |
|
Weighted Average Interest Rate |
3.38% |
3.25% |
0.13% |
|
Weighted Average Years to Maturity(1) |
5.4 |
6.3 |
(0.9) |
|
Consolidated Fixed Charge Coverage Ratio |
4.8x |
5.2x |
(0.4)x |
|
Consolidated Debt as a percentage of Total Assets |
32.7% |
33.0% |
(0.3)% |
|
Consolidated Net Debt-to-EBITDAre(2) |
5.7x |
5.7x |
0.0x |
| (1) |
If the Company’s commercial paper balance was refinanced using its line of credit, the weighted average years to maturity would have been 5.5 years without extensions and 5.6 years with extensions for 1Q 2024 and 6.5 years without extensions and 6.6 years with extensions for 1Q 2023. |
|
(2) |
Defined as EBITDAre – adjusted for non-recurring items. A reconciliation of GAAP Net Income per share to EBITDAre – adjusted for non-recurring items and GAAP Total Debt to Net Debt can be found on Attachment 4(C) of the Company’s related quarterly Supplement. |
Senior Management
As previously announced, effective July 31, 2024, Harry Alcock will retire from the role of Senior Vice President and Chief Investment Officer, at which time he will transition to a consulting role with a focus on transactions. H. Andrew Cantor, UDR’s Senior Vice President – Acquisitions and Dispositions, will continue to oversee the Company’s transactions platform, as he has for the last 12 years of his more than 14-year tenure with UDR. Bob McCullough, UDR’s Senior Vice President – Development, will continue to oversee the Company’s development platform, as he has during his 11-year tenure with UDR.
Dividend
As previously announced, the Company’s Board of Directors declared a regular quarterly dividend on its common stock for the first quarter 2024 in the amount of $0.425 per share, a 1.2 percent increase over the comparable period in 2023. The dividend was paid in cash on April 30, 2024 to UDR common shareholders of record as of April 10, 2024. The first quarter 2024 dividend represented the 206th consecutive quarterly dividend paid by the Company on its common stock.
Supplemental Financial Information
The Company offers Supplemental Financial Information that provides details on the financial position and operating results of the Company, which is available on the Investor Relations section of the Company’s website at ir.udr.com.
Attachment 14(A)
Definitions and Reconciliations
March 31, 2024
(Unaudited)
Acquired Communities: The Company defines Acquired Communities as those communities acquired by the Company, other than development and redevelopment activity, that did not achieve stabilization as of the most recent quarter.
Adjusted Funds from Operations («AFFO») attributable to common stockholders and unitholders: The Company defines AFFO as FFO as Adjusted attributable to common stockholders and unitholders less recurring capital expenditures on consolidated communities that are necessary to help preserve the value of and maintain functionality at our communities.
Management considers AFFO a useful supplemental performance metric for investors as it is more indicative of the Company’s operational performance than FFO or FFO as Adjusted. AFFO is not intended to represent cash flow or liquidity for the period, and is only intended to provide an additional measure of our operating performance. The Company believes that net income/(loss) attributable to common stockholders is the most directly comparable GAAP financial measure to AFFO. Management believes that AFFO is a widely recognized measure of the operations of REITs, and presenting AFFO enables investors to assess our performance in comparison to other REITs. However, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not always be comparable to AFFO calculated by other REITs. AFFO should not be considered as an alternative to net income/(loss) (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. A reconciliation from net income/(loss) attributable to common stockholders to AFFO is provided on Attachment 2.
Consolidated Fixed Charge Coverage Ratio – adjusted for non-recurring items: The Company defines Consolidated Fixed Charge Coverage Ratio – adjusted for non-recurring items as Consolidated Interest Coverage Ratio – adjusted for non-recurring items divided by total consolidated interest, excluding the impact of costs associated with debt extinguishment, plus preferred dividends.
Management considers Consolidated Fixed Charge Coverage Ratio – adjusted for non-recurring items a useful metric for investors as it provides ratings agencies, investors and lenders with a widely-used measure of the Company’s ability to service its consolidated debt obligations as well as compare leverage against that of its peer REITs. A reconciliation of the components that comprise Consolidated Fixed Charge Coverage Ratio – adjusted for non-recurring items is provided on Attachment 4(C) of the Company’s quarterly supplemental disclosure.
Consolidated Interest Coverage Ratio – adjusted for non-recurring items: The Company defines Consolidated Interest Coverage Ratio – adjusted for non-recurring items as Consolidated EBITDAre – adjusted for non-recurring items divided by total consolidated interest, excluding the impact of costs associated with debt extinguishment.
Management considers Consolidated Interest Coverage Ratio – adjusted for non-recurring items a useful metric for investors as it provides ratings agencies, investors and lenders with a widely-used measure of the Company’s ability to service its consolidated debt obligations as well as compare leverage against that of its peer REITs. A reconciliation of the components that comprise Consolidated Interest Coverage Ratio – adjusted for non-recurring items is provided on Attachment 4(C) of the Company’s quarterly supplemental disclosure.
Consolidated Net Debt-to-EBITDAre – adjusted for non-recurring items: The Company defines Consolidated Net Debt-to-EBITDAre – adjusted for non-recurring items as total consolidated debt net of cash and cash equivalents divided by annualized Consolidated EBITDAre – adjusted for non-recurring items. Consolidated EBITDAre – adjusted for non-recurring items is defined as EBITDAre excluding the impact of income/(loss) from unconsolidated entities, adjustments to reflect the Company’s share of EBITDAre of unconsolidated joint ventures and other non-recurring items including, but not limited to casualty-related charges/(recoveries), net of wholly owned communities.
Management considers Consolidated Net Debt-to-EBITDAre – adjusted for non-recurring items a useful metric for investors as it provides ratings agencies, investors and lenders with a widely-used measure of the Company’s ability to service its consolidated debt obligations as well as compare leverage against that of its peer REITs. A reconciliation between net income/(loss) and Consolidated EBITDAre – adjusted for non-recurring items is provided on Attachment 4(C) of the Company’s quarterly supplemental disclosure.
Controllable Expenses: The Company refers to property operating and maintenance expenses as Controllable Expenses.
Controllable Operating Margin: The Company defines Controllable Operating Margin as (i) rental income less Controllable Expenses (ii) divided by rental income. Management considers Controllable Operating Margin a useful metric as it provides investors with an indicator of the Company’s ability to limit the growth of expenses that are within the control of the Company.
Development Communities: The Company defines Development Communities as those communities recently developed or under development by the Company, that are currently majority owned by the Company and have not achieved stabilization as of the most recent quarter.
Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre): The Company defines EBITDAre as net income/(loss) (computed in accordance with GAAP), plus interest expense, including costs associated with debt extinguishment, plus real estate depreciation and amortization, plus other depreciation and amortization, plus (minus) income tax provision/(benefit), net, (minus) plus net gain/(loss) on the sale of depreciable real estate owned, plus impairment write-downs of depreciable real estate, plus the adjustments to reflect the Company’s share of EBITDAre of unconsolidated joint ventures. The Company computes EBITDAre in accordance with standards established by the National Association of Real Estate Investment Trusts, or Nareit, which may not be comparable to EBITDAre reported by other REITs that do not compute EBITDAre in accordance with the Nareit definition, or that interpret the Nareit definition differently than the Company does. The White Paper on EBITDAre was approved by the Board of Governors of Nareit in September 2017.
Management considers EBITDAre a useful metric for investors as it provides an additional indicator of the Company’s ability to incur and service debt, and enables investors to assess our performance against that of its peer REITs. EBITDAre should be considered along with, but not as an alternative to, net income and cash flow as a measure of the Company’s activities in accordance with GAAP. EBITDAre does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of funds available to fund our cash needs. A reconciliation between net income/(loss) and EBITDAre is provided on Attachment 4(C) of the Company’s quarterly supplemental disclosure.
Effective Blended Lease Rate Growth: The Company defines Effective Blended Lease Rate Growth as the combined proportional growth as a result of Effective New Lease Rate Growth and Effective Renewal Lease Rate Growth. Management considers Effective Blended Lease Rate Growth a useful metric for investors as it assesses combined proportional market-level, new and in-place demand trends.
Effective New Lease Rate Growth: The Company defines Effective New Lease Rate Growth as the increase in gross potential rent realized less concessions on a straight-line basis for the new lease term (current effective rent) versus prior resident effective rent for the prior lease term on new leases commenced during the current quarter. Management considers Effective New Lease Rate Growth a useful metric for investors as it assesses market-level new demand trends.
Effective Renewal Lease Rate Growth: The Company defines Effective Renewal Lease Rate Growth as the increase in gross potential rent realized less concessions on a straight-line basis for the new lease term (current effective rent) versus prior effective rent for the prior lease term on renewed leases commenced during the current quarter. Management considers Effective Renewal Lease Rate Growth a useful metric for investors as it assesses market-level, in-place demand trends.
Estimated Quarter of Completion: The Company defines Estimated Quarter of Completion of a development or redevelopment project as the date on which construction is expected to be completed, but it does not represent the date of stabilization.
Attachment 14(B)
Definitions and Reconciliations
March 31, 2024
(Unaudited)
Funds from Operations as Adjusted («FFO as Adjusted») attributable to common stockholders and unitholders: The Company defines FFO as Adjusted attributable to common stockholders and unitholders as FFO excluding the impact of other non-comparable items including, but not limited to, acquisition-related costs, prepayment costs/benefits associated with early debt retirement, impairment write-downs or gains and losses on sales of real estate or other assets incidental to the main business of the Company and income taxes directly associated with those gains and losses, casualty-related expenses and recoveries, severance costs and legal and other costs.
Management believes that FFO as Adjusted is useful supplemental information regarding our operating performance as it provides a consistent comparison of our operating performance across time periods and allows investors to more easily compare our operating results with other REITs. FFO as Adjusted is not intended to represent cash flow or liquidity for the period, and is only intended to provide an additional measure of our operating performance. The Company believes that net income/(loss) attributable to common stockholders is the most directly comparable GAAP financial measure to FFO as Adjusted. However, other REITs may use different methodologies for calculating FFO as Adjusted or similar FFO measures and, accordingly, our FFO as Adjusted may not always be comparable to FFO as Adjusted or similar FFO measures calculated by other REITs.
Contacts
Trent Trujillo
Email: ttrujillo@udr.com
