) second-quarter 2013 funds from operations (FFO) as adjusted of
35 cents per share came above the Zacks Consensus Estimate by a
penny and the year-ago quarter figure by 2 cents.
The result at this real estate investment trust (REIT) was
attributable to higher revenues, same-store physical occupancy
level and strong portfolio restructuring activity. The reported
FFO was 37 cents per share, up from 33 cents in the prior-year
Total revenue during the quarter was $191.8 million, up 6.5%
year over year and exceeding the Zacks Consensus Estimate of $189
million as well.
Behind the Headlines
During the quarter, same-store revenues increased 5.2% year
over year, while same-store expenses upped 1.6% year over year.
Consequently, same-store net operating income (NOI) rose 6.8%
over the same period. Same-store physical occupancy nudged up 20
basis points to 96.1%, compared with the prior-year quarter.
Developments & Redevelopments
During the reported quarter, UDR spent $133.1 million to
complete its $1.3 billion development and redevelopment pipeline.
Overall, the company financed 66% of its active pipeline in the
said quarter. Going forward, the company intends to fund 39%, 41%
and 20% of its active pipeline in 2013, 2014 and 2015,
Moreover, UDR concluded the redevelopment of a 583-home
project - The Westerly on Lincoln - worth $36.1 million in
California. Additionally, the company finished the redevelopment
of 219 homes at 2 communities - Rivergate (706 homes) and 27
Seventy Five Mesa Verde (964 homes) - for a total cost of $33.6
Thus, UDR successfully completed the redevelopment of 644
homes, excluding The Westerly on Lincoln, which represents 39% of
the company's 1,670 homes under refurbishment at the end of the
Extension of Ties with MetLife
UDR extended its ties with MetLife by forming an additional
50/50 partnership with the latter. This joint venture (JV)
includes operating communities and developable land parcels at
UDR's Vitruvian Park master plan development situated in Addison,
As part of the JV's formation, net proceeds of $199.9 million
were received by UDR. Moreover, the expansion of its UDR/MetLife
II JV was made through a swap of ownership interests in certain
UDR/MetLife I JV communities, over and above a net cash payment
of $15.6 million to MetLife.
As of Jun 30, 2013, UDR's liquidity amounted to $769 million
through a combination of cash and undrawn capacity on its credit
facilities, compared with $826 million in the last quarter.
Further, the company had total debt of $3.4 billion, compared
with $3.5 billion as of Mar 31, 2013.
Its net debt-to-EBITDA was 6.9x at quarter-end versus 6.3x a
year ago. UDR ended the quarter with 83% fixed-rated debt at a
total blended interest rate of 4.2% and a weighted average debt
maturity of 4.7 years.
During the quarter, UDR amended and re-priced the revolving
credit facility worth $900 million and term loans worth $350
million. In addition, UDR refinanced the Fannie Mae credit
facility of $186 million, during the quarter. These moves enabled
the company to reduce its borrowing costs and extend the debt
maturity of these facilities.
2013 Outlook Revised
For full-year 2013, UDR increased the guidance for FFO as
adjusted to $1.36-$1.40 per share from $1.33-$1.39 forecasted
earlier. This was based on an uptick in the lower end of the same
store revenue outlook, which is now projected to grow in the
range of 4.50%-5.00%, compared with the prior outlook of
In addition, UDR provided guidance for the third quarter of
2013. The company projects FFO as adjusted to range between 33-35
cents per share.
UDR paid second-quarter 2013 cash dividend of 23.5 cents per
share on its common stock on Jul 31, 2013 to shareholders of
record as of Jul 10. This marked the 163
consecutive quarter dividend payment by UDR.
UDR's second-quarter impressive results reflected gains from
same store NOI and physical occupancy increases. Moreover, the
ongoing extensive development and redevelopment positions the
company well in upscale markets and provides notable growth
prospects. Furthermore, restructuring of credit revolvers boosts
its liquidity position.
Nonetheless, the company has a significant development and
redevelopment pipeline, which increases operational risks in the
current credit-constrained market and may undermine its growth
potential to some extent.
UDR currently carries a Zacks Rank #3 (Hold). Other REITs that
are performing better include
The Macerich Company
CBRE Group, Inc
Equity One Inc.
). All these stocks have 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
CBRE GROUP INC (CBG): Free Stock Analysis
EQUITY ONE INC (EQY): Free Stock Analysis
MACERICH CO (MAC): Free Stock Analysis Report
UDR INC (UDR): Free Stock Analysis Report
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