DENVER–(BUSINESS WIRE)–UDR, Inc. (the “Company”) (NYSE: UDR) announced today its second quarter 2022 results. Net Income, Funds from Operations (“FFO”), FFO as Adjusted (“FFOA”), and Adjusted FFO (“AFFO”) per diluted share for the quarter ended June 30, 2022 are detailed below.
Quarter Ended June 30
Metric
2Q 2022
Actual
2Q 2022
Guidance
2Q 2021
Actual
$ Change vs.
Prior Year Period
% Change vs.
Prior Year Period
Net Income per diluted share
$0.01
$0.04 to $0.06
$0.04
$(0.03
)
(75
)%
FFO per diluted share
$0.52
$0.55 to $0.57
$0.52
$0.00
0
%
FFOA per diluted share
$0.57
$0.55 to $0.57
$0.49
$0.08
16
%
AFFO per diluted share
$0.52
$0.50 to $0.52
$0.44
$0.08
18
%
Same-Store (“SS”) results for the second quarter 2022 versus the second quarter 2021 and the first quarter 2022 are summarized below.
Concessions reflected on a cash basis:
Concessions reflected on a straight-line basis:
SS Growth / (Decline)
Year-Over-Year
(“YOY”): 2Q 2022
vs. 2Q 2021
Sequential:
2Q 2022 vs.
1Q 2022
Year-Over-Year
(“YOY”): 2Q 2022
vs. 2Q 2021
Sequential:
2Q 2022 vs.
1Q 2022
Revenue
11.4
%
2.3
%
11.2
%
3.0
%
Expense
4.2
%
(0.1
)%
4.2
%
(0.1
)%
Net Operating Income (“NOI”)
14.7
%
3.3
%
14.4
%
4.4
%
The Company’s effective blended lease rate growth for the second quarter 2022 was 17.4 percent, an acceleration of 330 basis points compared to the first quarter 2022.
As previously announced, during the quarter, the Company acquired one community for $207.5 million, three land sites for future development for an aggregate purchase price of $135.2 million, and committed a total of $100.3 million to three Developer Capital Program (“DCP”) investments. Subsequent to quarter-end, the Company fully funded $102.0 million in a DCP investment in a portfolio of stabilized communities.
During the quarter, the Company settled approximately 6.5 million shares of common stock under its previously-announced forward equity sales agreements at a weighted average net price per share, after adjustments, of $53.98 for proceeds of approximately $351.0 million, leaving $282.1 million of forward equity agreements at an average price per share of approximately $57.57 yet to be settled.
As previously announced, during the quarter, the Company committed to invest $10.0 million into the RET Ventures ESG Fund to identify in-home and property-wide real estate technologies that are intended to help UDR, its residents, and others address climate change by reducing our collective carbon footprint. In addition, subsequent to quarter-end, the Company appointed Patsy Doerr to Senior Vice President – Chief ESG and People Officer. These actions further support UDR’s best-in-class commitment to engaging in socially responsible ESG activities.
“Our second quarter earnings results met the high end of our expectations provided in April due to our differentiated approach to maximizing rental rate growth and continued accretion from our well-timed 2021 acquisitions and recent DCP investments,” said Tom Toomey, UDR’s Chairman and CEO. “Supported by stronger-than-anticipated pricing power and value-creating operating innovations we continue to implement, we raised full-year 2022 guidance expectations for the second time this year and currently project our 2023 same-store revenue growth earn-in to be 5 percent.”
Outlook
For the third quarter 2022, the Company has established the following earnings guidance ranges and the Company has increased its previously provided full-year 2022 Same-Store and certain earnings guidance ranges(1):
3Q 2022
Outlook
2Q 2022
Actual
Updated
Full-Year 2022
Outlook
Prior
Full-Year 2022
Outlook
Change to 2022
Guidance, at
Midpoint
Net Income/(Loss) per diluted share
$0.06 to $0.08
$0.01
$0.19 to $0.23
$0.24 to $0.30
$(0.06
)
FFO per diluted share
$0.58 to $0.60
$0.52
$2.23 to $2.27
$2.24 to $2.30
$(0.02
)
FFOA per diluted share
$0.58 to $0.60
$0.57
$2.29 to $2.33
$2.25 to $2.31
$0.03
AFFO per diluted share
$0.53 to $0.55
$0.52
$2.09 to $2.13
$2.05 to $2.11
$0.03
YOY Growth/(Decline): concessions reflected on a cash basis:
SS Revenue
N/A
11.4
%
10.0% to 11.0%
8.5% to 10.0%
1.25
%
SS Expense
N/A
4.2
%
3.5% to 4.5%
3.0% to 4.0%
0.50
%
SS NOI
N/A
14.7
%
12.5% to 14.0%
10.75% to 12.75%
1.50
%
YOY Growth/(Decline): concessions reflected on a straight-line basis:
SS Revenue
N/A
11.2
%
10.5% to 11.5%
9.0% to 10.5%
1.25
%
SS NOI
N/A
14.4
%
13.25% to 14.75%
11.5% to 13.5%
1.50
%
(1)
Additional assumptions for the Company’s third quarter and 2022 outlook can be found on Attachment 14 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 15(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 15(A) through 15(D), “Definitions and Reconciliations,” of the Company’s related quarterly Supplement.
Second Quarter 2022 Operating Results
In the second quarter, total revenue increased by $57.8 million YOY, or 18.6 percent, to $369.2 million. This increase was primarily attributable to growth in revenue from Same-Store communities and past accretive external growth investments. The second quarter annualized rate of resident turnover increased by 270 basis points versus the prior year period to 50.1 percent.
“Blended lease rate growth continued to accelerate to 17.4 percent in the second quarter and remains in the mid-to-high teens in July,” said Mike Lacy, UDR’s Senior Vice President of Operations. “High occupancy, low resident turnover, improving collection trends, and relative affordability compared to other forms of housing continue to support strong demand for multifamily residences and above-trend sequential same-store growth.”
Since the second quarter 2020 (or the first full quarter in which results were impacted by the COVID-19 pandemic), the Company has consistently achieved total cash revenue collections as a percentage of billed revenue in the 98.0%-98.5% range and expects collections to remain within this range throughout 2022. For the second quarter 2022, the Company recorded a residential bad debt reserve of $12.8 million, including $0.5 million for the Company’s share from unconsolidated joint ventures. This compares to a quarter-end accounts receivable balance of $22.8 million, a decrease of $1.6 million versus the Company’s quarter end accounts receivable balance as of the end of the first quarter 2022.
In the table below, the Company has presented YOY Same-Store results by region, with concessions accounted for on both cash and straight-line bases.
Summary of Same-Store Results in Second Quarter 2022 versus Second Quarter 2021
Region
Revenue
Growth /
(Decline)
Expense
Growth /
(Decline)
NOI
Growth /
(Decline)
% of Same-Store
Portfolio(1)
Physical
Occupancy(2)
YOY Change in
Occupancy
West
12.6
%
1.3
%
16.7
%
34.7
%
96.7
%
(0.2
)%
Mid-Atlantic
6.3
%
4.1
%
7.3
%
20.8
%
97.4
%
0.3
%
Northeast
11.8
%
3.7
%
16.6
%
18.6
%
97.2
%
0.5
%
Southeast
15.6
%
8.8
%
18.9
%
13.2
%
97.0
%
(0.7
)%
Southwest
11.4
%
6.5
%
14.5
%
6.9
%
97.3
%
0.2
%
Other Markets
12.9
%
5.6
%
15.9
%
5.8
%
97.2
%
(0.6
)%
Total (Cash)
11.4
%
4.2
%
14.7
%
100
%
97.1
%
0.0
%
Total (Straight-Line)
11.2
%
4.2
%
14.4
%
–
–
–
(1)
Based on 2Q 2022 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.
In the table below, the Company has presented sequential Same-Store results by region, with concessions accounted for on both cash and straight-line bases.
Summary of Same-Store Results in Second Quarter 2022 versus First Quarter 2022
Region
Revenue
Growth /
(Decline)
Expense
Growth /
(Decline)
NOI
Growth /
(Decline)
% of Same-Store
Portfolio(1)
Physical
Occupancy(2)
Sequential
Change in
Occupancy
West
2.0
%
(2.0
)%
3.3
%
34.7
%
96.7
%
(0.5
)%
Mid-Atlantic
2.1
%
0.6
%
2.8
%
20.8
%
97.4
%
0.1
%
Northeast
1.0
%
(3.4
)%
3.4
%
18.6
%
97.2
%
(0.2
)%
Southeast
4.7
%
3.4
%
5.3
%
13.2
%
97.0
%
(0.3
)%
Southwest
3.0
%
4.4
%
2.2
%
6.9
%
97.3
%
0.0
%
Other Markets
2.7
%
4.7
%
2.0
%
5.8
%
97.2
%
0.0
%
Total (Cash)
2.3
%
(0.1
)%
3.3
%
100
%
97.1
%
(0.2
)%
Total (Straight-Line)
3.0
%
(0.1
)%
4.4
%
–
–
–
(1)
Based on 2Q 2022 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.
For the six months ended June 30, 2022, total revenue increased by $113.6 million YOY, or 18.5 percent, to $726.4 million. This increase was primarily attributable to growth in revenue from acquired and Same-Store communities. The full-year rate of turnover decreased by 120 basis points versus the prior year period to 42.3 percent.
In the table below, the Company has presented year-to-date (“YTD”) Same-Store results by region, with concessions accounted for on cash and straight-line bases, for the six months ended June 30, 2022.
Summary of Same-Store Results YTD 2022 versus YTD 2021
Region
Revenue
Growth /
(Decline)
Expense
Growth /
(Decline)
NOI
Growth /
(Decline)
% of Same-Store
Portfolio(1)
Physical
Occupancy(2)
YTD YOY Change
in Occupancy
West
12.2
%
2.5
%
15.8
%
34.9
%
96.9
%
0.5
%
Mid-Atlantic
6.7
%
4.7
%
7.6
%
21.0
%
97.4
%
0.7
%
Northeast
11.2
%
2.9
%
16.3
%
18.1
%
97.3
%
1.3
%
Southeast
14.8
%
7.5
%
18.5
%
13.1
%
97.2
%
(0.2
)%
Southwest
11.3
%
5.6
%
14.9
%
7.0
%
97.3
%
0.3
%
Other Markets
13.1
%
4.9
%
16.6
%
5.9
%
97.2
%
(0.2
)%
Total (Cash)
11.1
%
4.2
%
14.4
%
100
%
97.2
%
0.5
%
Total (Straight-Line)
10.5
%
4.2
%
13.5
%
–
–
–
(1)
Based on YTD 2022 Same-Store NOI. For definitions of terms, please refer to the “Definitions and Reconciliations” section of the Company’s related quarterly Supplemental Financial Information.
(2)
Weightedaverage Same-Store physical occupancy for YTD 2022.
Transactional Activity
The table below summarizes the Company’s transactional activity completed during the quarter.
Community / Property
Location (MSA)
Purchase
Price
($ millions)
Homes
Avg. Monthly
Revenue per
Occupied Home(1)
Physical
Occupancy(1)
Acquisitions
Bradlee Danvers
Boston, MA
$207.5
433
$2,670
98.4
%
(1)
Average Monthly Revenue per Occupied Home and Physical Occupancy are weighted averages for the quarter ended June 30, 2022.
This property is located proximate to wholly owned UDR communities, which the Company expects should drive additional operating efficiencies through its Next Generation Operating Platform and other operating initiatives.
Development Activity and Other Projects
During the second quarter, the Company continued to deliver apartment homes at Cirrus (Denver, CO), The George Apartments (King of Prussia, PA), and Vitruvian West Phase 3 (Addison, TX), all of which continue their successful lease-ups.
At the end of the second quarter, the Company’s development pipeline totaled $599.5 million and was 66.9 percent funded. The Company’s active development pipeline includes six communities, one each in Dublin, CA; King of Prussia, PA; Washington, D.C.; and Tampa, FL; and two communities in Addison, TX, for a combined total of 1,540 homes.
The table below summarizes the Company’s land acquisitions for future development completed during the quarter.
Land Site
Location (MSA)
Purchase Price
($ millions)
488 Riverwalk
Fort Lauderdale, FL
$16.0
3001 Iowa Avenue(1)
Riverside, CA
$29.0
2727 Turtle Creek (includes 3 phases)
Dallas, TX
$90.2
Total
$135.2
(1) Acquisition of 3001 Iowa Avenue included two operating retail parcels with a real estate basis of $15.5 million.
At the end of the second quarter, the Company’s pipeline of densification projects, which features the addition of 45 new apartment homes at two communities, totaled $26.0 million and was 53.1 percent funded.
DCP Activity
During the quarter, the Company committed to invest $100.3 million in three DCP projects, as summarized below.
Community / Type
Location (MSA)
Commitment
($ millions)
Homes
Return Rate
Investment Type
Heirloom / Recapitalization
Portland, OR
$16.2
286
8.25
%
Preferred Equity
Menifee / New Development
Menifee, CA
$24.4
237
11.0%(1)
Secured Loan
Riverside / New Development
Riverside, CA
$59.7
482
11.0%(1)
Secured Loan
Total / Weighted Average
$100.3
1,005
10.6
%
(1)
In addition to an 11.0 percent return rate, the Company received an origination fee equal to 1 percent of the loan amount. The fee was fully earned at closing, is payable upon disbursement of the loan amount, and will be recognized in earnings over the life of the investment.
Subsequent to quarter-end, the Company committed to invest, and fully funded, $102.0 million at a return rate of 8.0 percent to a DCP investment in a portfolio of 14 stabilized communities valued at approximately $900 million as part of a recapitalization.
At the end of the second quarter, the Company’s investments under its DCP platform, including accrued return, totaled $384.4 million with a weighted average return rate of 10.0 percent, and a weighted average estimated remaining term of 3.2 years.
Capital Markets and Balance Sheet Activity
“We continued to create value for shareholders through approximately $550.0 million of external growth activity, primarily funded by the settlement of attractively-priced forward equity agreements,” said Joe Fisher, UDR’s President and Chief Financial Officer. “Our balance sheet remains in a strong position due to available liquidity totaling $1.3 billion, and no meaningful debt maturities until 2024. In addition, we continue to improve our leverage metrics: second quarter net debt-to-EBITDAre of 6.2x declined more than a full turn versus a year ago, and we expect year-end net debt-to-EBITDAre and fixed charge coverage will both further improve to the mid-5x range by year-end.”
During the quarter, the Company settled approximately 6.5 million shares of common stock under its previously-announced forward equity sales agreements at a weighted average net share price, after adjustments, of $53.98 for proceeds of approximately $351.0 million.
As of June 30, 2022, the Company had $1.3 billion of liquidity through a combination of cash, undrawn capacity on its credit facilities and estimated proceeds of approximately $282.1 million from the potential future settlement of approximately 4.9 million shares subject to previously-announced forward equity sale agreements (at an initial forward price per share of approximately $57.57, which is subject to adjustment at settlement to reflect the average federal funds rate and the amount of dividends paid to holders of UDR common stock over the term of the applicable forward equity sale agreements). The final date by which shares sold under these forward sale agreements must be settled is March 30, 2023. Please see Attachment 14 of the Company’s related quarterly Supplement for additional details on projected capital sources and uses.
The Company’s total indebtedness as of June 30, 2022 was $5.5 billion with no remaining consolidated maturities until 2024, excluding principal amortization and amounts on the Company’s commercial paper program. In the table below, the Company has presented select balance sheet metrics for the quarter ended June 30, 2022 and the comparable prior year period.
Quarter Ended June 30
Balance Sheet Metric
2Q 2022
2Q 2021
Change
Weighted Average Interest Rate
2.85%
2.71%
0.14%
Weighted Average Years to Maturity(1)
7.1
7.5
(0.4)
Consolidated Fixed Charge Coverage Ratio
5.4x
4.8x
0.6x
Consolidated Debt as a percentage of Total Assets
33.6%
36.9%
(3.3)%
Consolidated Net-Debt-to-EBITDAre
6.2x
7.4x
(1.2)x
(1)
If the Company’s commercial paper balance was refinanced using its line of credit, the weighted average years to maturity would be 7.3 years without extensions and 7.4 years with extensions for 2Q 2022 and 7.7 years without extensions and 7.8 years with extensions for 2Q 2021.
ESG
As previously announced, during the quarter, the Company committed to invest $10.0 million into the RET Ventures ESG Fund, which serves to identify in-home and property-wide real estate technologies that are intended to help UDR, its residents, and others address climate change by reducing our collective carbon footprint. In addition, the Company is actively engaging with the Science Based Targets initiative to establish how it can contribute to a lower-carbon future. These actions further support UDR’s residential sector-leading GRESB score and best-in-class commitment to engaging in socially responsible ESG activities.
Senior Management
As previously announced, during the quarter and subsequent to quarter-end the Company,
Appointed Joe Fisher to President in addition to his responsibilities as CFO. In this role, Mr. Fisher, who has served as Senior Vice President and CFO since January 2017, has taken on additional oversight in the areas of Company-wide innovation, information technology, and human capital.
Appointed Patsy Doerr to Senior Vice President – Chief ESG and People Officer. Ms. Doerr is an expert and thought leader in the field of corporate social responsibility, diversity and inclusion, and sustainability and will help further accelerate the Company’s best-in-class ESG efforts.
Dividend
As previously announced, the Company’s Board of Directors declared a regular quarterly dividend on its common stock for the second quarter 2022 in the amount of $0.38 per share. The dividend will be paid in cash on August 1, 2022 to UDR common shareholders of record as of July 11, 2022. The second quarter 2022 dividend will represent the 199th consecutive quarterly dividend paid by the Company on its common stock.
Attachment 15(A)
UDR, Inc.
Definitions and Reconciliations
June 30, 2022
(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 lending partners 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 lending partners 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 lending partners 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
Contacts
Trent Trujillo
Email: ttrujillo@udr.com