UDR Q4 FFO In Line With Expectations, Revenues Increase

Residential REIT, UDR Inc. (NYSE:UDR) reported funds from operations (FFO) as adjusted per share of 48 cents for fourth-quarter 2017, matching the Zacks Consensus Estimate. The figure also came higher than the prior-year quarter tally of 46 cents.

For full-year 2017, FFO as adjusted per share came in at $1.87 per share, up 4.5% from the 2016 figure. Also, it surpassed full-year Zacks Consensus Estimate for FFO of $1.86.

Total revenues for the quarter rose 4.1% year over year to $252.9 million. Further, the top line came above the Zacks Consensus Estimate of $251.4 million. For full-year 2017, revenues came in at $995.8 million, up 3.7% from the year-ago figure. It also surpassed the full-year Zacks Consensus Estimate of $988.1 million. Growth in revenues for the quarter and the year was due to the rise in revenue from same-store communities and stabilized, non-mature communities.

Inside the Headlines

During the quarter, same-store revenues increased 3.1% year over year while same-store expenses increased 2.9%. Consequently, same-store net operating income (NOI) rose 3.1% year over year. However, the company’s same-store physical occupancy remained flat at 96.8%. The fourth-quarter annualized-rate of turnover contracted 40 basis points from the prior-year period to 41.2%.

At the end of the fourth quarter, UDR’s development pipeline aggregated $864.5 million at its pro-rata ownership interest. This included $54 million of completed, non-stabilized projects and $810.5 million of under-construction developments.

As of Dec 31, 2017, the company had around $855.3 million available from a combination of cash and undrawn capacity on its credit facilities. Further, the company’s total debt was $3.7 billion as of the same date.

Portfolio Activity

At the end of the fourth quarter, the company’s Developer Capital Program investment, including accrued return, totaled $158.9 million.

Guidance

For first-quarter 2018, UDR projects FFO as adjusted per share in the 46-48 cents range. The Zacks Consensus Estimate of 48 cents lies within this guidance.

For full-year 2018, the company projects FFO as adjusted per share of $1.91-$1.95. However, the Zacks Consensus Estimate of $1.96 does not lie within this range. Moreover, the company anticipates same-store revenues, expenses and same-store NOI to remain in the range of 2.5-3.5% for the year.

Our Viewpoint

UDR’s portfolio with superior product-mix, located in the targeted U.S. markets, is likely to drive long-term growth in rental income. Further, increasing demand for apartments and the company’s concentration on enhancing portfolio via expansion in core markets and sale of non-core ones is expected to support momentum.

However, the company continues to deal with an elevated level of apartment supply in a number of its markets. Moreover, any rise in interest rates remains a concern for the company.

United Dominion Realty Trust, Inc. Price, Consensus and EPS Surprise

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 other REITs like Taubman Centers, Inc. (NYSE:TCO) , Regency Centers Corporation (NYSE:REG) and HCP Inc. (NYSE:HCP) . Taubman Centers and Regency Centers are scheduled to release results on Feb 8, while HCP is slated to report its numbers on Feb 13.

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

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