UDR, Inc. Q1 2010 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2010. UDR, Inc. is a self-administered Real Estate Investment Trust (REIT) that owns, acquires, renovates, develops, and manages apartment communities nationwide. As of the reporting date, the consolidated portfolio included 167 communities with 46,357 apartment homes across 10 states and the District of Columbia.
Key Financial Metrics
| Metric | Q1 2010 | Q1 2009 |
|---|---|---|
| Total Revenues | $154.9 million | $155.6 million |
| Net Loss (GAAP) | $(25.0) million | $(13.4) million |
| Net Loss Attributable to Common Stockholders | $(26.4) million | $(15.4) million |
| Loss Per Share (Basic & Diluted) | $(0.17) | $(0.11) |
| Funds from Operations (FFO) - Basic | $45.9 million | $54.1 million |
| FFO Per Share (Basic) | $0.28 | $0.36 |
| Net Cash Provided by Operating Activities | $41.5 million | $71.6 million |
| Total Debt (Secured + Unsecured) | $3.41 billion | $3.43 billion |
| Cash and Cash Equivalents | $19.9 million | $37.1 million |
Material Changes vs. Prior Period
- Net Loss Increase: The net loss attributable to common stockholders increased by approximately $11 million compared to Q1 2009. This was primarily driven by a decrease in Net Operating Income (NOI), an increase in depreciation expense due to recent acquisitions and development completions, and the absence of a $7.1 million gain on debt extinguishment recorded in Q1 2009.
- Revenue Decline: Total revenues decreased slightly ($0.7 million). Rental income increased marginally ($1.0 million), but this was offset by a significant decrease in non-property income ($1.7 million), largely due to lower interest income.
- NOI Decline: Same-community NOI decreased 4.4% ($4.1 million). This was driven by a 5.1% decrease in rental rates, partially offset by reduced vacancy loss and bad debt. Physical occupancy increased to 95.8%.
- Interest Expense: Interest expense increased by $6.2 million (20.1%) year-over-year, primarily because the prior year included a $7.1 million gain from debt repurchases which reduced the net interest expense for that period.
- Cash Flow: Net cash provided by operating activities decreased by $30.1 million, primarily due to changes in operating assets and liabilities.
Guidance, Outlook, and Risks
- Capital Markets: The company continues to access capital markets, issuing $150 million of 5.25% senior unsecured medium-term notes in February 2010 and selling approximately 4.4 million shares of common stock via an "At the Market" program for net proceeds of $73.3 million.
- Development: The development pipeline for wholly-owned communities totaled 1,575 homes with a budget of $261.5 million. The company anticipates completing these communities during 2010.
- Debt Maturities: Approximately $165.1 million of secured debt matures in the remainder of 2010. The company plans to repay this via credit facilities, new issuances, or extension rights.
- Risks: Key risks include unfavorable apartment market conditions affecting occupancy and rental rates, refinancing risk, potential damage from natural disasters, and the impact of disruptions in financial markets on the availability and cost of credit.
Investor Verification Checklist
- Debt Structure: Verify the weighted average interest rates on the $1.2 billion outstanding Fannie Mae credit facilities and the $121 million unsecured bank facility.
- Same-Community Performance: Confirm the drivers behind the 5.1% decrease in rental rates despite a 1.1% increase in physical occupancy.
- Development Pipeline: Review the budget vs. actual costs for the 1,575 homes in the development pipeline to assess potential cost overruns.
- Liquidity Position: Assess the adequacy of the $19.9 million cash balance relative to upcoming debt maturities and distribution requirements.
- FFO vs. GAAP: Analyze the reconciliation between the GAAP net loss and the positive FFO to understand the impact of non-cash depreciation charges.