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UDR Guides High, Extends MetLife Ties - Analyst Blog

By: Zacks.com
Posted: 6/27/2013 6:31:00 PM
Referenced Stocks: CBG;MAC;SIR;UDR

One of the leading multifamily real estate investment trust (REIT) companies - UDR Inc. ( UDR ) - has raised its outlook for 2013 and extended its ties with MetLife.

The New Guidance

In particular, the company increased the guidance for funds from operations (FFO) per share as adjusted to $1.36 to $1.40 from $1.33 to $1.39. This is based on an uptick in the lower-end of the same store revenue outlook, which is now forecasted to grow in the range of 4.50% - 5.00%, compared with the prior outlook of 4.00% - 5.00%.

Hence, the company expects same store net operating income to register growth of 5.25% to 6.00%, up from the prior guidance of 4.25% - 6.00%.

MetLife Ties

Moreover, UDR has extended its ties with MetLife by forming an additional 50/50 partnerships with the latter. This joint venture includes operating communities and developable land parcels at UDR's Vitruvian Park master plan development situated in Addison, Texas.

As part of the formation of the joint venture, net proceeds of $199.9 million were received by UDR. Moreover, the expansion of its UDR/MetLife II Joint Venture was made through a swap of ownership interests in certain UDR/MetLife I Joint Venture communities, over and above a net cash payment of $15.6 million to MetLife.

The Rationale

The outlook was raised as solid fundamentals in a number of UDR's markets are facilitating better-than-expected same-store and non same-store operating trends. In addition, the company expects the combined partnerships and swap deals to be accretive to some extent to its FFO per share.  

Our Take

A guidance raise at UDR is encouraging as it increases shareholders' confidence in the stock. Moreover, the company's ongoing extensive development and redevelopment activity to strengthen its presence in the upscale markets provide 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.

UDR currently carries a Zacks Rank #3 (Hold). Other REITs that are performing better and deserve a look include - Select Income REIT ( SIR ), CBRE Group, Inc. ( CBG ) and The Macerich Company ( MAC ). All these stocks carry a Zacks Rank #2 (Buy).

Note: Funds 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.



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