UDR Inc.
(
UDR
), a real estate investment trust (REIT), reported fourth quarter
2012 FFO (funds from operations), excluding non-recurring items,
of 35 cents per share, 2 cents ahead of the Zacks Consensus
Estimate of 33 cents and a cent above the prior-year quarter
figure. The quarterly results benefited from increased rental
income and higher occupancy level.
For full year 2012, the company's FFO, excluding non-recurring
items, came in at $1.35 per share, a cent ahead of the Zacks
Consensus Estimate of $1.34 and 7 cents above the year-ago figure
of $1.28.
UDR's reported FFO stood at $80.7 million or 31 cents per share,
compared with 79.3 million or 35 cents in the year-earlier
quarter. For full year 2012, reported FFO was $329.1 million or
$1.32 per share, ahead of $269.9 million or $1.28 recorded a year
ago.
Total revenue during the quarter stood at $182.4 million, up 6.9%
from $170.7 million in the prior-year quarter. However, it fell
short of the Zacks Consensus Estimate of $185 million. For full
year 2012, the company generated total revenue of $713.9 million,
representing an increase of 14.6% from a year ago. Yet, it missed
the Zacks Consensus Estimate of $743 million.
Quarter in Detail
Same-store revenue increased 5.7% year over year in the reported
quarter, while same-store net operating income escalated 7.3%
over the same time frame. Same-store physical occupancy moved up
60 basis points to 95.8% as compared to the prior-year period.
Notable Portfolio Activities
UDR started construction of its Pier 4 development in the South
Boston Seaport area of downtown Boston, Mass. The company
estimates total construction cost of $218 million for this
project that will comprise 369 homes and 11,000 square feet of
retail space. It is slated to be completed in the second quarter
of 2015. Notably, before the construction, the company acquired
the remaining 2% ownership interest in Pier 4 from its former
joint venture partner.
On Oct 29, 2012, UDR exchanged its ownership stake in 4 operating
communities and 2 land parcels in the UDR-MetLife I joint
venture, (along with $10 million in cash), with an increase in
its stake in the A-quality operating community - The Olivian. The
company now owns 50% of The Olivian that is part of the
UDR/MetLife II joint venture. UDR continues to fee manage the 4
operating communities it exchanged.
The 4 operating communities and 2 land parcels for which UDR
entered into arrangements to exchange have a combined debt of
$134.7 million with a weighted average interest rate of 3.5% and
a 7 year term. The Olivian's debt stood at $63.4 million with an
interest of 4.5% and a term of 7 years.
Liquidity
As of Dec 31, 2012, UDR's liquidity amounted to $913 million
through a combination of cash and undrawn capacity on its credit
facilities. As of that date, the company had total debt of $3.4
billion.
Its net debt-to-EBITDA, adjusted for non-recurring items, was
7.0x at year-end 2012 versus 8.6x a year ago. UDR ended the
quarter with 87% fixed-rated debt at a total blended interest
rate of 4.4% and a weighted average debt maturity of 4.5 years.
2013 Outlook
For full year 2013, UDR currently expects FFO, excluding
non-recurring items, to range between $1.33 - $1.39 per share,
based on revenue growth of 4% to 5%, net operating income of
4.25% to 6.00% and physical occupancy of 95.5%.
For first quarter 2013, UDR projects FFO, excluding non-recurring
items, to range between 31 cents - 33 cents per share.
Change of Management
During the quarter, UDR appointed Tom Herzog as the new Chief
Financial Officer (CFO) and Senior Vice President of the company.
He took over the reins effective Jan 1, 2013. Herzog previously
held top executive posts at many industry giants.
Prior to joining UDR, he served a real estate investment private
company called Amstar as CFO. He also served as CFO for 4 years
at
Apartment Investment & Management Co.
(
AIV
), popularly known as Aimco. Herzog's REIT experience also
includes two years as CFO at
HCP Inc.
(
HCP
) - a hybrid REIT firm.
Dividend Update
UDR paid a fourth quarter 2012 cash dividend of 22 cents per
share on its common stock. The dividend was paid on Jan 31, 2013
to shareholders of record as of Jan 10. Notably, this represented
the company's dividend payment on its common stock for 161
straight quarters.
Our Take
We remain encouraged with UDR's improved results in the fourth
quarter. The company has a strong portfolio of apartment
properties in prime business locations in the U.S., and operates
across multiple markets that mitigate geographical risks.
Furthermore, UDR is repositioning its portfolio to focus on
markets that have better job and rent growth prospects. Recent
development and joint venture activities are expected to further
position the company well for future growth. It has automated
most of its businesses and has introduced electronic renewal
initiatives, enabling its customers to renew their leases online.
Yet, the company has a significant development 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 #3 (Hold). Another stock in
the same REIT industry -
BRE Properties Inc.
(
BRE
) also has the same Zacks rank.
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.
APARTMENT INVT (AIV): Free Stock Analysis
Report
BRE PROPERTIES (BRE): Free Stock Analysis
Report
HCP INC (HCP): Free Stock Analysis Report
UDR INC (UDR): Free Stock Analysis Report
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