UDR Prices $400M Senior Medium-Term Notes, To Repay Debt

UDR, Inc. UDR priced a public offering of 2.100% senior unsecured notes, with an aggregate principal amount of $400 million at 99.894% of par value plus any accrued interest from Jul 21, 2020.  

The debt obligations will mature on Aug 1, 2032, and will offer yield to maturity of 2.110%. Conditional on the satisfaction of certain closing norms, the notes offering is anticipated to close on Jul 21, 2020.

The intermediate-term notes will accrue semiannual interest on Feb 1 and Aug 1, with the first interest payment scheduled on Feb 1, 2021.

The company intends to use part of the net proceeds to manage its other intermediate debt maturities. In fact, capital raised will be used to funds the previously-announced redemption of its 3.750% medium-term notes due 2024, with an aggregate principal amount of $300 million.

Remaining proceeds will be utilized to repay other outstanding indebtedness, including part of the company’s secured debt due 2023, to pursue potential acquisitions or for other general corporate needs.

Amid the continuing unprecedented times, when business operations and rent collections remain uncertain, liquidity has become a focal point within the REIT industry. Hence, with the unsecured debt market being open with significant demand, many companies have procured debt capital to refinance near-term loans and boost liquidity.

Hence, UDR’s efforts to strengthen its liquidity in these testing times and tap the debt market amid a low interest-rate environment are strategic fits.

Moreover, the company continues to focus on its priorities such as disciplined capital allocation, maintaining an investment-grade balance sheet, and cash flow enhancement to support operational efficiency and dividend growth. This places it well to sail through these uncertain times.

However, the coronavirus pandemic has been wreaking havoc, affecting the demand for rental apartments in the prime leasing season. Moreover, amid this situation, the rent-paying capability of tenants is likely to get maimed. Amid this, UDR witnessed lower collections across its B quality communities.Furthermore, amid a slowdown in demand, concession activity is likely to be high despite a decline in new apartment deliveries. This is likely to impact the company’s top-line growth in the near term.

Shares of this Zacks Rank #3 (Hold) company have lost 21.2% over the past year compared with the industry’s decline of 19.2%.


Stocks to Consider

Sun Communities Inc.’s SUI funds from operations (“FFO”) per share estimates for the ongoing year have been unchanged at $4.99 over the past 30 days. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Armada Hoffler Properties, Inc.’s AHH FFO per share estimates for 2020 have been revised marginally upward to $1.10 over the past month. It currently carries a Zacks Rank of 2.

Preferred Apartment Communities, Inc.’s APTS Zacks Consensus Estimate for 2020 FFO per share has been unchanged at $1.04 over the past month. The company currently carries a Zacks Rank of 2.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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