UDR, Inc. — Form 10-K Summary
Business context and reporting period
UDR is a U.S. multifamily REIT that owns, operates, develops and invests in apartment communities. This annual report covers the fiscal year ended December 31, 2022; the supplied filing text does not provide a clear standalone fourth-quarter income statement or results, despite the requested “2022 Q4” period.
At year-end, UDR’s consolidated portfolio comprised 165 communities and 54,999 completed homes across 21 markets. It also had interests in 9,099 homes through unconsolidated ventures and partnerships. Three wholly owned communities, totaling 715 homes, were in development; 161 homes were completed.
Financial and operating performance
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $1.517 billion | $1.291 billion |
| Net income attributable to common stockholders | $82.5 million; $0.26 diluted EPS | $145.8 million; $0.48 diluted EPS |
| Total property NOI | $1.040 billion | $867.1 million |
| Same-Store revenue growth | 11.1% | Not directly comparable in the supplied table |
| Same-Store NOI growth | 13.5% | 0.5% versus 2020 |
| Same-Store physical occupancy | 97.0% | 97.0% |
| Cash from operating activities | $820.1 million | $664.0 million |
| Cash used in investing activities | $929.5 million | $1.272 billion |
| Cash from financing activities | $111.2 million | $612.5 million |
Same-Store NOI margin was 69.8%, up from 68.3%. Same-Store rental income increased 11.1%, driven mainly by 9.2% higher rental rates, reduced concessions and higher ancillary income; operating expenses rose 5.7%. Total revenue increased 17.6% year over year. Net income attributable to UDR, Inc. was $86.9 million, compared with $150.0 million in 2021; the lower common-stockholder result also reflects preferred distributions.
FFO per diluted share and unit, a non-GAAP measure, was $2.20 versus $2.02; FFO as adjusted was $2.33 versus $2.01, and AFFO was $2.11 versus $1.82. These supplemental measures are not substitutes for GAAP income or operating cash flow.
Balance sheet, debt and liquidity
At December 31, 2022, total debt, net was $5.487 billion, including $1.052 billion secured and $4.435 billion unsecured. Weighted-average interest rate was 3.17%, with 6.7 years weighted-average years to maturity. Approximately 89% of real estate owned by gross book value was unencumbered. Cash and cash equivalents were $1.2 million; restricted cash was $29.0 million.
UDR had a $1.3 billion revolving credit facility with no year-end borrowings, a $350 million term loan, and a $75 million working-capital facility with $28.0 million drawn. It also had $300 million of commercial paper outstanding at a 4.7% year-end rate. Management reported compliance with debt covenants and expected operating cash flow and available borrowing capacity to meet obligations and REIT distribution requirements. Approximately $301 million of debt obligations were due in 2023, including $300 million of commercial paper.
UDR declared $1.52 per common share in 2022, a 4.8% increase from 2021, and paid $1.5025 per share during the year. It issued 11.4 million shares through forward sales for approximately $629.6 million net proceeds and repurchased 1.2 million shares for approximately $49.0 million.
Material changes and unusual items
- Common-stockholder net income fell to $82.5 million from $145.8 million. The filing attributes the decline primarily to lower real estate sale gains ($25.5 million in 2022 versus $136.1 million in 2021), higher depreciation, and lower investment income and other income related largely to SmartRent valuation losses.
- These pressures were partly offset by $173.3 million higher total property NOI and lower interest expense, primarily because 2021 included debt-extinguishment costs.
- UDR acquired a 433-home community in Danvers, Massachusetts, for approximately $207.5 million and acquired development land in Florida, Texas and California. It sold a 90-home Orange County community for $41.5 million, recognizing a $25.5 million gain.
- Capital expenditures, excluding development, increased 52.7% to $234.0 million. Development spending was $198.0 million. UDR reported no impairment charges on real estate properties in 2022.
- Unconsolidated-entity income declined to $4.9 million from $65.6 million, with the SmartRent-related investment loss a principal driver. UDR recorded $52.7 million of unrealized losses on real estate technology investments in its FFO-adjustment reconciliation.
- In September 2022, UDR consolidated the 1532 Harrison venture after a loan default and purchase of its senior construction loan; it took title to the property in February 2023.
Outlook, management commentary and risks
The filing does not provide a numerical 2023 earnings or rent-growth forecast. Management said 2023 revenue growth could be affected by recessionary conditions, lower occupancy, concessions, new supply, bad debt and other factors. Three development communities were expected to complete between Q1 2023 and Q2 2024. Management’s liquidity outlook relies on property operations, credit facilities, commercial paper, capital markets and potential property dispositions.
Key risks include inflation and rising rates (UDR had $530 million of variable-rate debt not covered by swaps; a 100-basis-point increase was estimated to raise interest expense by $5.9 million based on average balances), refinancing and capital-market access, market and geographic concentration, apartment supply and rent competition, rent-control and tenant-protection laws, development costs and delays, partner or borrower performance, natural disasters and uninsured losses, cybersecurity, and maintaining REIT qualification. About 72.4% of 2022 NOI came from eight named markets, making local economic or regulatory shocks potentially significant.
Management stated that inflation raised vendor, utility, repair and maintenance costs, but did not have a material impact on 2022 results; short lease terms generally permit rents to reset. COVID-19 effects had generally diminished, though future effects remained uncertain. Ordinary-course legal proceedings were disclosed; management did not expect unprovided exposure to materially adversely affect financial condition, results or cash flows. The independent auditor gave unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Review the full audited statements and notes, especially the reconciliation between GAAP net income, FFO, FFO as adjusted and AFFO.
- Assess whether Same-Store rent growth and 97.0% occupancy can persist as new supply, concessions and affordability pressures evolve.
- Monitor SmartRent and other technology-investment valuations and their effect on reported earnings and adjusted measures.
- Confirm refinancing plans and costs for 2023 maturities, commercial paper and other variable-rate exposure; compare actual credit-facility availability with reported capacity.
- Track development budgets, completion timing, lease-up and remaining commitments, as well as any further actions concerning 1532 Harrison.
- Evaluate market concentration, rent regulation, insurance availability and exposure to severe weather or other uninsured losses.