UDR, Inc. — 2020 Form 10-K Summary
Business context and reporting period
UDR is a U.S. multifamily REIT that owns, operates, develops and manages apartment communities. This annual report covers the fiscal year ended December 31, 2020; it is not a standalone fourth-quarter report. At year-end, UDR’s consolidated portfolio comprised 149 communities and 48,283 completed homes across 21 markets. UDR also held interests in 5,295 completed or planned homes through unconsolidated ventures and partnerships.
Financial results and key metrics
| Metric | 2020 | 2019 | Change or context |
|---|---|---|---|
| Total revenues | $1.241 billion | $1.152 billion | Up 7.7%, primarily from communities acquired in 2019 and 2020 |
| Net income attributable to common stockholders | $60.0 million; $0.20 diluted per share | $180.9 million; $0.63 diluted per share | Down substantially |
| Total property NOI | $853.7 million | $808.3 million | Up 5.6%; non-GAAP measure |
| Same-store NOI | $644.2 million | $684.4 million | Down 5.9%; same-store operating margin fell to 69.7% from 71.8% |
| Operating cash flow | $604.3 million | $630.7 million | Down $26.4 million |
| Investing cash flow | $(460.8) million | $(1.687) billion | Lower investment outflow, mainly from fewer acquisitions and higher sale proceeds |
| Financing cash flow | $(152.6) million | $880.4 million | Reflects debt repayments, distributions and lower net financing proceeds |
| Total debt, net | $4.977 billion | $4.708 billion | Up approximately $269 million |
At December 31, UDR reported $1.4 million of cash and cash equivalents and $22.8 million of restricted cash. Its $1.1 billion revolving credit facility was undrawn; the $75 million working-capital facility had $28.0 million outstanding, and commercial paper outstanding was $190 million. UDR reported $862.1 million of secured debt and $4.114 billion of unsecured debt. The weighted average interest rate on total debt was 2.91%, with an average 8.0 years to maturity. The company reported covenant compliance.
Common dividends declared were $1.44 per share, up 5.1% from 2019; cash dividends paid were $1.4225 per share. FFO per diluted share and unit was $1.85, FFO as adjusted was $2.04, and AFFO was $1.86; these are non-GAAP measures and should not be treated as substitutes for earnings or cash flow.
Material changes versus the prior comparable period
- Same-store NOI declined $40.2 million. Same-store rental income fell 3.0%, while operating expenses rose 4.2%. Drivers included higher receivable reserves, rent concessions, occupancy loss, repairs and maintenance, and real estate taxes.
- Same-store physical occupancy was 96.3%, down 0.5 percentage point; monthly income per occupied home declined 2.6% to $2,126. Rental rates increased 0.7%, partly offsetting weaker collections and concessions.
- Net income fell mainly because real estate depreciation and amortization increased $107.4 million, interest expense increased $31.8 million, and income from unconsolidated entities decreased $119.0 million. The latter comparison included significant 2019 joint-venture disposition gains.
- Total NOI rose despite same-store weakness, reflecting acquisitions and growth in non-mature communities. UDR acquired communities and interests during 2020 and recognized $119.3 million of gains on sales of three communities.
- Operating cash flow decreased, while cash used in investing fell markedly from 2019’s acquisition-heavy year. Capital expenditures excluding development were $165.8 million, up 5.0%; repair and maintenance expense increased 30.5% to $56.8 million.
Outlook, risks, contingencies and unusual items
- Management provided no specific 2021 earnings, rent-growth or occupancy guidance in the supplied filing text. It cautioned that 2021 revenue growth could be affected by COVID-19, occupancy declines, concessions, new supply and bad debt.
- COVID-19 effects included resident and tenant payment difficulties, eviction restrictions, rent concessions and lower occupancy, particularly in New York, San Francisco Bay Area and Boston. UDR recorded $18.4 million of rental-income reductions and $1.1 million of reductions to income from unconsolidated entities for receivable reserves. It also recorded a $3.1 million impairment on a non-core equity investment; no other COVID-related property impairment was recognized.
- As of January 31, 2021, UDR had collected 97.0%, 96.1% and 95.2% of billed multifamily rent for October, November and December, respectively. Management said leasing traffic improved in the fourth quarter year over year.
- UDR had five wholly owned developments totaling 1,378 homes, including 202 completed, with a total budget of $491.5 million and $247.9 million invested; expected completion dates ranged from Q1 2021 to Q2 2023. Remaining development commitments were approximately $243.6 million.
- Debt refinancing and early repayment produced $49.2 million of debt-extinguishment costs in 2020. UDR issued $950 million of senior unsecured notes, including a $350 million green bond, and used proceeds in part to repay or refinance debt. A further $300 million note offering was priced in February 2021.
- Five markets—Metropolitan D.C., Orange County, San Francisco Bay Area, Boston and New York—generated 58.7% of 2020 NOI, creating geographic concentration risk. Other disclosed risks include rent regulation and eviction laws, refinancing and interest-rate exposure, development execution, insurance and natural hazards, and joint-venture counterparty performance.
- Management said ordinary-course legal matters were not expected to have a material adverse effect, though ultimate liability could not be determined. The company reported no material off-balance-sheet arrangements and no impairment of real estate owned in 2020. Auditors issued unqualified opinions on UDR’s financial statements and internal controls; impairment assessment and acquisition accounting were identified as critical audit matters.
Important facts for investors to verify
- Whether same-store rent, concessions, bad debt and occupancy recover, especially in New York, San Francisco and Boston.
- Whether acquisition-driven total NOI growth translates into durable same-store growth and improved earnings, given higher depreciation and financing costs.
- Debt maturities, refinancing plans, liquidity access and the effects of interest rates; confirm the February 2021 note offering and subsequent use of proceeds.
- Development budgets, remaining funding needs, completion timing, lease-up performance and expected returns.
- How rent collection, eviction policies and tenant assistance evolve, and whether receivable reserves or impairments increase.
- Review non-GAAP NOI, FFO, FFOA and AFFO reconciliations and the distinction between UDR’s consolidated results and those of the Operating Partnership.