DENVER–(BUSINESS WIRE)–UDR, Inc. (the “Company”) (NYSE: UDR), announced today its first quarter 2023 results. Net Income, Funds from Operations (“FFO”), FFO as Adjusted (“FFOA”), and Adjusted FFO (“AFFO”) per diluted share for the quarter ended March 31, 2023 are detailed below.
|
|
Quarter Ended March 31 |
|||||||||||
|
Metric |
1Q 2023 |
1Q 2023 |
1Q 2022 |
$ Change vs. |
% Change vs. |
|||||||
|
Net Income per diluted share |
$ |
0.09 |
$0.10 to $0.12 |
$ |
0.04 |
$ |
0.05 |
125 |
% |
|||
|
FFO per diluted share |
$ |
0.59 |
$0.59 to $0.61 |
$ |
0.54 |
$ |
0.05 |
9 |
% |
|||
|
FFOA per diluted share |
$ |
0.60 |
$0.59 to $0.61 |
$ |
0.55 |
$ |
0.05 |
9 |
% |
|||
|
AFFO per diluted share |
$ |
0.57 |
$0.56 to $0.58 |
$ |
0.51 |
$ |
0.06 |
12 |
% |
|||
- Same-Store (“SS”) results for the first quarter 2023 versus the first quarter 2022 and the fourth quarter 2022 are summarized below.
|
|
Concessions reflected on a straight-line basis: |
Concessions reflected on a cash basis: |
||||||
|
SS Growth / (Decline) |
Year-Over-Year |
Sequential: |
YOY: |
Sequential: |
||||
|
Revenue |
9.6 |
% |
(0.3 |
)% |
8.2 |
% |
0.0 |
% |
|
Expense |
5.1 |
% |
0.4 |
% |
5.1 |
% |
0.4 |
% |
|
Net Operating Income (“NOI”) |
11.7 |
% |
(0.6 |
)% |
9.5 |
% |
(0.2 |
)% |
-
During the first quarter, the Company:
- Completed construction of The MO, a $145.0 million, 300-home apartment community in Washington, D.C.
- Achieved stabilization on two development communities; Vitruvian West Phase 3, a $74.0 million, 405-home apartment community in Dallas, TX; and The George Apartments, a $68.0 million, 200-home apartment community in Philadelphia, PA.
“Our first quarter results, including 9 percent FFOA per share growth and nearly 12 percent same-store NOI growth over the prior year period, demonstrate the strength of our strategy and platform,” said Tom Toomey, UDR’s Chairman and CEO. “We are optimistic on the growth trajectory and resiliency of our business moving forward and continue to focus on what we can control: disciplined capital allocation to opportunistically create shareholder value, new and innovative initiatives to drive further margin expansion, and an investment-grade balance sheet with well-laddered maturities and plentiful liquidity.”
Outlook
For the full-year 2023, the Company has reaffirmed its prior FFOA per share, AFFO per share, and same-store growth guidance ranges. For the second quarter 2023, the Company has established the following guidance ranges(1):
|
|
2Q 2023 |
1Q 2023 |
Full-Year 2023 |
Full-Year 2023 |
||||
|
Net Income per diluted share |
$0.11 to $0.13 |
$ |
0.09 |
|
$0.47 to $0.55 |
$ |
0.51 |
|
|
FFO per diluted share |
$0.60 to $0.62 |
$ |
0.59 |
|
$2.44 to $2.52 |
$ |
2.48 |
|
|
FFOA per diluted share |
$0.60 to $0.62 |
$ |
0.60 |
|
$2.45 to $2.53 |
$ |
2.49 |
|
|
AFFO per diluted share |
$0.54 to $0.56 |
$ |
0.57 |
|
$2.22 to $2.30 |
$ |
2.26 |
|
|
YOY Growth: concessions reflected on a straight-line basis: |
||||||||
|
SS Revenue |
N/A |
|
9.6 |
% |
5.75% to 7.75% |
|
6.75 |
% |
|
SS Expense |
N/A |
|
5.1 |
% |
4.0% to 5.5% |
|
4.75 |
% |
|
SS NOI |
N/A |
|
11.7 |
% |
6.25% to 8.75% |
|
7.50 |
% |
|
YOY Growth: concessions reflected on a cash basis: |
||||||||
|
SS Revenue |
N/A |
|
8.2 |
% |
5.5% to 7.5% |
|
6.50 |
% |
|
SS NOI |
N/A |
|
9.5 |
% |
6.0% to 8.5% |
|
7.25 |
% |
|
(1) |
Additional assumptions for the Company’s second quarter and full-year 2023 outlook can be found on Attachment 13 of the Company’s related quarterly Supplemental Financial Information (“Supplement”). A reconciliation of FFO per share, FFOA per share, and AFFO per share to GAAP Net Income 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 2023 Operating Results
In the first quarter, total revenue increased by $42.3 million YOY, or 11.8 percent, to $399.5 million. This increase was primarily attributable to growth in revenue from Same-Store communities and past accretive external growth investments.
“Stable demand for UDR apartment homes enabled us to achieve 3.5% blended lease rate growth during the first quarter, which was in-line with our expectations,” said Mike Lacy, UDR’s Senior Vice President of Operations. “Resident rent-to-income levels across our portfolio remain in-line with historical norms, and the relative affordability of apartments versus single family housing is as favorable as it has been at nearly any point over the past 20 years.”
For the first quarter 2023, the Company recorded a residential bad debt reserve of $6.1 million, including $0.5 million for the Company’s share from unconsolidated joint ventures, a decrease of $2.6 million versus the Company’s bad debt reserve as of the end of the fourth quarter 2022. This compares to a quarter-end accounts receivable balance of $16.9 million, a decrease of $3.7 million versus the Company’s accounts receivable balance as of the end of the fourth quarter 2022.
In the tables below, the Company has presented YOY and sequential Same-Store results by region, with concessions accounted for on both cash and straight-line bases.
Summary of Same-Store Results in First Quarter 2023 versus First Quarter 2022
|
Region |
Revenue |
Expense |
NOI |
% of Same-Store |
Physical |
YOY Change in |
||||||
|
West |
6.5 |
% |
2.1 |
% |
8.0 |
% |
32.1 |
% |
96.4 |
% |
(0.6 |
)% |
|
Mid-Atlantic |
6.3 |
% |
2.8 |
% |
7.9 |
% |
21.2 |
% |
96.6 |
% |
(0.5 |
)% |
|
Northeast |
8.8 |
% |
4.3 |
% |
11.3 |
% |
17.5 |
% |
97.1 |
% |
(0.3 |
)% |
|
Southeast |
12.8 |
% |
9.8 |
% |
14.3 |
% |
13.8 |
% |
96.1 |
% |
(1.1 |
)% |
|
Southwest |
10.6 |
% |
12.3 |
% |
9.6 |
% |
8.6 |
% |
96.6 |
% |
(0.5 |
)% |
|
Other Markets |
6.7 |
% |
3.0 |
% |
8.2 |
% |
6.8 |
% |
97.0 |
% |
0.0 |
% |
|
Total (Cash) |
8.2 |
% |
5.1 |
% |
9.5 |
% |
100.0 |
% |
96.6 |
% |
(0.5 |
)% |
|
Total (Straight-Line) |
9.6 |
% |
5.1 |
% |
11.7 |
% |
– |
|
– |
|
– |
|
|
(1) |
Based on 1Q 2023 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 2023 versus Fourth Quarter 2022
|
Region |
Revenue |
Expense |
NOI |
% of Same-Store |
Physical |
Sequential |
||||||
|
West |
0.2 |
% |
(4.6 |
)% |
1.8 |
% |
32.1 |
% |
96.4 |
% |
(0.1 |
)% |
|
Mid-Atlantic |
0.4 |
% |
(0.6 |
)% |
0.8 |
% |
21.2 |
% |
96.6 |
% |
(0.3 |
)% |
|
Northeast |
0.1 |
% |
5.0 |
% |
(2.3 |
)% |
17.5 |
% |
97.1 |
% |
0.0 |
% |
|
Southeast |
(0.3 |
)% |
3.1 |
% |
(1.7 |
)% |
13.8 |
% |
96.1 |
% |
(0.5 |
)% |
|
Southwest |
(0.7 |
)% |
5.7 |
% |
(4.2 |
)% |
8.6 |
% |
96.6 |
% |
(0.2 |
)% |
|
Other Markets |
(1.3 |
)% |
(6.6 |
)% |
0.8 |
% |
6.8 |
% |
97.0 |
% |
0.4 |
% |
|
Total (Cash) |
0.0 |
% |
0.4 |
% |
(0.2 |
)% |
100.0 |
% |
96.6 |
% |
(0.1 |
)% |
|
Total (Straight-Line) |
(0.3 |
)% |
0.4 |
% |
(0.6 |
)% |
– |
|
– |
|
– |
|
|
(1) |
Based on 1Q 2023 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. |
Development Activity and Other Projects
During the first quarter, the Company completed construction of The MO, a $145.0 million, 300-home apartment community in Washington, D.C. Additionally, the Company achieved stabilization on two development communities; Vitruvian West Phase 3, a $74.0 million, 405-home apartment community in Dallas, TX; and The George Apartments, a $68.0 million, 200-home apartment community in Philadelphia, PA.
At the end of the first quarter, the Company’s development pipeline totaled $187.5 million and was 41 percent funded. The Company’s active development pipeline includes two communities, one each in the Addison submarket of Dallas, TX, and Tampa, FL, for a combined total of 415 apartment homes.
At the end of the first quarter, the Company’s redevelopment pipeline of 1,623 apartment homes, which includes a densification project that features the addition of 30 new apartment homes at one community, totaled $88.6 million and was 35 percent funded.
Developer Capital Program (“DCP”) Portfolio
At the end of the first quarter, the Company’s commitments under its DCP platform totaled $479.7 million with a weighted average return rate of 9.7 percent and a weighted average estimated remaining term of 3.5 years.
Capital Markets and Balance Sheet Activity
“Our balance sheet remains in excellent shape with net Debt-to-EBITDAre at 5.7x and below pre-COVID levels, minimal committed forward funding obligations, strong next 3-year liquidity, and only 2 percent of total debt scheduled to mature through 2024, after excluding amounts on our commercial paper program,” said Joe Fisher, UDR’s President and Chief Financial Officer.
The Company’s total indebtedness as of March 31, 2023 was $5.6 billion with no remaining consolidated maturities until 2024, excluding principal amortization and amounts on the Company’s commercial paper program. As of March 31, 2023, the Company had $957.4 million of 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, 2023 and the comparable prior year period.
|
|
Quarter Ended March 31 |
|||||
|
Balance Sheet Metric |
1Q 2023 |
|
1Q 2022 |
|
Change |
|
|
Weighted Average Interest Rate |
3.25 |
% |
2.80 |
% |
0.45 |
% |
|
Weighted Average Years to Maturity(1) |
6.3 |
|
7.4 |
|
(1.1 |
) |
|
Consolidated Fixed Charge Coverage Ratio |
5.2 |
x |
5.3 |
x |
(0.1 |
)x |
|
Consolidated Debt as a percentage of Total Assets |
33.0 |
% |
34.3 |
% |
(1.3 |
)% |
|
Consolidated Net Debt-to-EBITDAre |
5.7 |
x |
6.4 |
x |
(0.7 |
)x |
|
(1) |
If the Company’s commercial paper balance was refinanced using its line of credit, the weighted average years to maturity would have been 6.5 years without extensions and 6.6 years with extensions for 1Q 2023 and 7.6 years with and without extensions for 1Q 2022. |
ESG
As previously announced, during the quarter, the Company was named to Newsweek’s annual list of America’s Most Responsible Companies for the second consecutive year. Additionally, the Company was named to the list of America’s Most JUST Companies by JUST Capital for the fifth consecutive year. These distinctions reflect the Company’s comprehensive ESG program, innovative and adaptive culture, and commitment to corporate responsibility.
Dividend
As previously announced, the Company’s Board of Directors declared a regular quarterly dividend on its common stock for the first quarter 2023 in the amount of $0.42 per share, a 10.5 percent increase over the comparable period in 2022. The dividend will be paid in cash on May 1, 2023 to UDR common shareholders of record as of April 10, 2023. The first quarter 2023 dividend will represent the 202nd consecutive quarterly dividend paid by the Company on its common stock.
Supplemental 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 Company’s website at ir.udr.com.
Attachment 14(A)
UDR, Inc.
Definitions and Reconciliations
March 31, 2023
(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 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 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)
UDR, Inc.
Definitions and Reconciliations
March 31, 2023
(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. FFO as Adjusted should not be considered as an alternative to net income (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. A reconciliation from net income attributable to common stockholders to FFO as Adjusted is provided on Attachment 2.
Funds from Operations (“FFO”) attributable to common stockholders and unitholders: The Company defines FFO attributable to common stockholders and unitholders as net income/(loss) attributable to common stockholders (computed in accordance with GAAP), excluding impairment write-downs of depreciable real estate related to the main business of the Company or of investments in non-consolidated investees that are directly attributable to decreases in the fair value of depreciable real estate held by the investee, gains and losses from sales of depreciable real estate related to the main business of the Company and income taxes directly associated with those gains and losses, plus real estate depreciation and amortization, and after adjustments for noncontrolling interests, and the Company’s share of unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust’s definition issued in April 2002 and restated in November 2018. In the computation of diluted FFO, if OP Units, DownREIT Units, unvested restricted stock, unvested LTIP Units, stock options, and the shares of Series E Cumulative Convertible Preferred Stock are dilutive, they are included in the diluted share count.
Management considers FFO a useful metric for investors as the Company uses FFO in evaluating property acquisitions and its operating performance and believes that FFO 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. FFO 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.
Contacts
Trent Trujillo
Email: [email protected]
