UDR, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless stated otherwise. UDR is a multifamily REIT. At quarter-end, it owned and consolidated 150 communities with 48,363 apartment homes across 13 states and Washington, D.C.
Financial performance and condition
| Metric | Q1 2021 | Q1 2020 / prior date |
|---|---|---|
| Total revenue | $301.4 million | $321.5 million |
| Net income attributable to UDR | $3.1 million | $5.2 million |
| Net income attributable to common stockholders | $2.0 million; $0.01 per diluted share | $4.2 million; $0.01 per diluted share |
| Same-store NOI | $189.7 million; down 10.4% | $211.7 million |
| Total property NOI | $201.1 million; down 10.8% | $225.5 million |
| Same-store operating margin | 68.3% | 71.3% |
| Net cash from operating activities | $123.6 million | $135.5 million |
| Net cash from investing activities | $41.0 million | $(214.0) million |
| Net cash from financing activities | $(154.2) million | $68.2 million |
| Total debt, net | $5.04 billion | $4.98 billion at Dec. 31, 2020 |
| Cash, cash equivalents and restricted cash | $34.6 million | $24.2 million at year-end |
At March 31, secured debt was $919.2 million and unsecured debt was $4.12 billion; weighted-average debt interest rate was 2.84%, with 8.2 years weighted-average maturity. Only $1.2 million was unrestricted cash and cash equivalents; the remainder of reported cash and restricted cash was restricted. UDR had no Revolving Credit Facility borrowings and $1.1 billion of unused capacity, plus $57.2 million of unused capacity on its $75 million working-capital facility. It was in compliance with debt covenants.
FFO per diluted share and unit was $0.32 versus $0.53; FFO as adjusted was $0.47 versus $0.54, and AFFO was $0.44 versus $0.51. These are non-GAAP supplemental measures, not substitutes for GAAP earnings or cash flow.
Material changes and notable transactions
- Rental income fell 6.3% to $299.8 million. Same-store rental income declined 6.4%, reflecting lower rental rates, increased concessions, occupancy loss and a $5.1 million reduction in rental income for tenant receivable reserves.
- Same-store physical occupancy was 96.4%, down 0.4 percentage points; monthly income per occupied home declined 6.0% to $2,116. Same-store operating expenses rose 3.3%.
- Q1 GAAP results included a $50.8 million gain on the February sale of a 386-home Anaheim community for gross proceeds of $156 million. UDR also incurred $42.0 million of debt extinguishment costs, driving interest expense to $78.2 million from $39.3 million.
- UDR issued $300 million of 2.10% notes due 2033 and used the proceeds to redeem $300 million of 4.00% notes due 2025. The redemption generated approximately $40.8 million in prepayment and make-whole costs.
- Q1 acquisitions included a 300-home Massachusetts community for approximately $77.4 million. After quarter-end, UDR acquired a 636-home Texas community for approximately $110 million and contracted to acquire a 945-home Texas community for approximately $167 million, subject to closing conditions.
- UDR entered forward sale agreements for 2.3 million shares at an initial weighted-average price of $43.85 and, separately, 7.0 million shares at an initial price of $43.51. None had settled by March 31; settlement could result in share issuance and dilution.
Outlook, commentary and risks
The filing provides no numerical earnings or operating guidance. Management said operating cash flow and available credit and commercial-paper capacity were expected to meet operating needs and REIT distribution requirements, while longer-term needs could be funded with operating cash, borrowing, debt or equity issuance, or property dispositions. Management cautioned that Q1 results are not necessarily indicative of full-year results.
COVID-19 remained a material uncertainty, especially through rent collection, concessions, eviction restrictions and market conditions. UDR reported collecting 96.5%, 96.1% and 95.4% of billed multifamily rents for January, February and March, respectively, as of April 25. The company reserved approximately $4.7 million of multifamily and $0.8 million of retail tenant receivables; the consolidated income-statement effect was a $5.1 million reduction in rental income and $0.4 million reduction in income from unconsolidated entities. Management warned future impacts could be material, but recorded no other COVID-related asset adjustments or impairment charges in Q1.
Other disclosed risks include concentrated exposure to major markets (about 57.5% of Q1 NOI came from Metropolitan D.C., Orange County, Boston, the San Francisco Bay Area and New York), rent and occupancy pressure, rent-control and eviction laws, development and acquisition execution, joint-venture and preferred-equity exposure, refinancing and interest-rate risk, natural disasters, climate, cybersecurity, and maintaining REIT status. UDR had $210 million of commercial paper outstanding at quarter-end; it was repaid at maturity in April using new commercial paper and working-capital facility proceeds. Routine litigation was not expected by management to have a material adverse effect.
Important facts for investors to verify
- Whether rent collections, occupancy, concessions and rental-rate trends—particularly in New York, the San Francisco Bay Area and Boston—improve after quarter-end.
- The sustainability of NOI and adjusted FFO after excluding the property-sale gain and debt-extinguishment costs, and the effect of ongoing operating-cost increases.
- Liquidity and refinancing exposure, including the commercial-paper rollover, near-term maturities, credit-facility availability and covenant compliance.
- Closing terms, funding needs and expected returns for announced acquisitions, development projects and joint-venture or preferred-equity investments.
- Potential dilution and final proceeds from the 9.3 million shares covered by unsettled forward sale agreements.