UDR Inc. (NYSE:UDR) reported third-quarter 2016 funds from operations (“FFO”) as adjusted per share of 45 cents, in line with the Zacks Consensus Estimate. The figure was higher than the prior-year quarter tally of 42 cents.
The improvement was driven by growth in same-store revenue and net operating income (“NOI”). The company has narrowed its guidance for 2016.
Total revenue for this residential real estate investment trust (“REIT”) improved 10% year over year to $243.3 million. The figure also exceeded the Zacks Consensus Estimate of $242 million.
Inside the Headlines
During the quarter, same-store revenues increased 5.3% year over year; while same-store expense climbed 2.5%. Consequently, same-store NOI rose 6.4% year over year; whereas same-store physical occupancy expanded 10 basis points (bps) year over year to 96.8%. Moreover, the annualized rate of turnover went up 10 bps year over year to 64.8%.
At the end of the third quarter, UDR’s pro-rata share of its development pipeline aggregated $1.1 billion. This included $163 million completed, non-stabilized project and $937 million of under-construction developments.
As of Sep 30, 2016, the company had $931 million available, through a combination of cash and undrawn capacity on its credit facilities. Further, the company’s total debt was $3.5 billion as of that date.
Guidance 2016
UDR has narrowed its FFO per share guidance for 2016. The company expects FFO per share in the range of $1.77–$1.80 against $1.76–$1.80 guided earlier. The Zacks Consensus Estimate for FFO per share is currently pegged at $1.78. Also, the company has reaffirmed the guidance range for revenue growth at 5.5–6%, expenses at 3–3.5% and 6.5–7%, for the full year.
For fourth-quarter 2016, UDR projects FFO per share in the 44–46 cents range. The Zacks Consensus Estimate for the fourth quarter is currently pegged at 46 cents.
Portfolio Activity
Notably, during and subsequent to the quarter, the company simplified its joint venture relationship with MetLife (NYSE:MET) with the help of a number of strategic deals. Also, the company placed $284.6 million of apartment communities in Baltimore, MD and Dallas, TX under contract for disposition with an expected closure in the fourth quarter.
Our Viewpoint
With a superior portfolio in targeted U.S. markets and disciplined capital allocation, UDR is well poised to grow. Moreover, focus on enhancing portfolio through expansion in core markets and sale of non-core ones should support momentum. However, elevated deliveries in some of its markets remain a concern.
Currently UDR has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
We now look forward to the earnings releases of the other residential REITs – Camden Property Trust (NYSE:CPT) , Essex Property Trust Inc. (NYSE:ESS) and Apartment Investment and Management Company (NYSE:AIV) – which are scheduled to report their third quarter results on Oct 27.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, 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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