UDR Meets Earnings, Revs Up - Analyst Blog
01 May 2013 - 6:12PM
Zacks
UDR Inc. (UDR) – a
real estate investment trust (REIT) – reported first-quarter 2013
FFO (funds from operations), excluding non-recurring items, of 34
cents per share. The result came in line with both the Zacks
Consensus Estimate as well as the year-ago quarter figure.
Although, higher revenues aided the quarterly results, flat
physical occupancy level acted as a dampener.
UDR’s reported FFO stood at $92.1
million or 35 cents per share, compared with $83.5 million or 35
cents per share in the year-earlier quarter.
Total revenue during the quarter
stood at $187.2 million, up 6.8% from $175.2 million in the
prior-year quarter. In addition, it surpassed the Zacks Consensus
Estimate of $186 million.
Behind the Headlines
Number
Same-store revenues increased 5.4%
year over year in the reported quarter, while same-store net
operating income (NOI) escalated 6.3% over the same period.
Same-store physical occupancy remained flat at 95.5% compared with
the prior-year quarter.
Notable Portfolio
Activities
During the quarter under review,
UDR completed the development of a 255-home community (60% occupied
at the end of first quarter) – Capitol View on 14th –
for $126 million, located in the U-Street corridor of Washington,
D.C.
In addition, the company also
concluded the redevelopment of 247 homes for $19.5 million. Thus,
UDR successfully completed the redevelopment of 849 homes,
representing 38% of the company’s 2,253 homes under refurbishment
at the end of the first quarter of 2013.
Moreover, UDR spent $109 million
during the quarter to complete its $1.2 billion development and
redevelopment pipeline. Overall, UDR has financed 52% of its active
pipeline during the quarter. Going forward, the company intends to
fund 43%, 38% and 18% of its active pipeline in 2013, 2014 and
2015, respectively.
Liquidity
As of Mar 31, 2013, UDR’s liquidity
amounted to $826 million through a combination of cash and undrawn
capacity on its credit facilities. Further, the company had total
debt of $3.5 billion as of Mar 31, 2013.
Its net debt-to-EBITDA was 7.3x at
quarter-end versus 8.1x a year ago. UDR ended the quarter with 84%
fixed-rated debt at a total blended interest rate of 4.3% and a
weighted average debt maturity of 4.2 years.
2013 Outlook
Reiterated
For full year 2013, UDR reaffirmed
its FFO, excluding non-recurring items, in the range of $1.33–$1.39
per share, based on revenue growth of 4% to 5%, NOI of 4.25% to
6.00% and physical occupancy of 95.5%.
In addition, UDR provided guidance
for the second quarter of 2013. The company projects FFO, excluding
non-recurring items, to range between 33–35 cents per share.
Dividend
Update
UDR paid first-quarter 2013 cash
dividend of 23.5 cents per share on its common stock, up 6.8% over
the prior dividend of 22 cents. The dividend was paid on Apr 30,
2013 to shareholders of record as of Apr 9. This marked the
162nd quarter of the company’s dividend payment on
common stock.
Our Take
UDR’s decent quarterly result
reflected the gain from rental income and same store NOI increases,
but flat year over year occupancy level hurt the growth. However,
the company’s ongoing extensive development and redevelopment
activity to strengthen its presence in the upscale markets provides
notable growth prospects. Furthermore, UDR is focusing on
allocating its capital actively and improving cash flow to support
dividend growth. Such efforts are expected to fortify its
balance sheet and enhance shareholder returns going forward.
Nonetheless, the company has a
significant development and redevelopment pipeline, which increases
operational risks in the current credit-constrained market and
undermines its growth potential to some extent.
UDR currently retains a Zacks Rank
#4 (Sell). Other REITs that are performing better than UDR include
– DDR Corp. (DDR), Acadia Realty
Trust (AKR) and Equity One Inc. (EQY).
All these stocks carry a Zacks Rank #2 (Buy).
Note: Fund 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.
ACADIA RLTY TR (AKR): Free Stock Analysis Report
DDR CORP (DDR): Free Stock Analysis Report
EQUITY ONE INC (EQY): Free Stock Analysis Report
UDR INC (UDR): Free Stock Analysis Report
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