UDR, Inc. 10-Q Filing Summary
Business Context and Reporting Period
Company: UDR, Inc. (Self-administered REIT owning, acquiring, renovating, developing, and managing apartment communities nationwide).
Reporting Period: Quarterly period ended September 30, 2008.
Portfolio Status: As of September 30, 2008, the portfolio consisted of 159 communities with 44,223 apartment homes. The company is actively repositioning its portfolio by disposing of non-core assets and acquiring properties in strategic markets (Southern/Northern California, Florida, Metro DC).
Key Financial Metrics (Nine Months Ended Sept 30, 2008)
| Metric | 2008 (9 Months) | 2007 (9 Months) |
|---|---|---|
| Total Revenues | $437.7 million | $388.7 million |
| Net Income | $717.8 million | $117.4 million |
| Net Income Available to Common Stockholders | $711.5 million | $104.4 million |
| Diluted EPS (Common) | $5.53 | $0.78 |
| Funds from Operations (FFO) - Diluted | $156.3 million | $192.8 million |
| Net Cash Provided by Operating Activities | $135.4 million | $195.1 million |
| Net Cash Provided by Investing Activities | $412.8 million | ($28.2) million |
| Net Cash Used in Financing Activities | ($548.6) million | ($166.7) million |
| Total Debt (Secured + Unsecured) | $3.35 billion | $3.28 billion |
| Cash and Cash Equivalents | $2.9 million | $3.2 million |
Material Changes vs. Prior Period
- Dispositions and Gains: The significant increase in Net Income ($717.8M vs $117.4M) is primarily driven by a $787.1 million after-tax gain on the sale of 86 communities, one commercial property, and land. In 2007, gains on sales were $124.5 million.
- Operating Performance: Property Net Operating Income (NOI) decreased 16.5% to $296.9 million due to the reduced portfolio size from dispositions. However, Same Community NOI increased 5.3% due to rent growth and reduced vacancy.
- Debt Management: The company reduced total debt by repaying $75.5 million of secured debt and $560.4 million of unsecured debt. Interest expense decreased 15.5% year-over-year, aided by an $8.9 million gain on debt extinguishment.
- Capital Deployment: Acquisitions totaled $996.3 million for 13 communities (4,558 homes). Capital expenditures decreased 22.2% to $101.1 million, reflecting the smaller portfolio.
Guidance, Outlook, and Risks
- Outlook: Management expects to meet short-term liquidity needs through operating cash flows and credit facilities. Long-term needs will be met via long-term borrowings, dispositions, and equity/debt issuance. A special dividend is anticipated before year-end due to disposition proceeds.
- Subsequent Event: On October 7, 2008, UDR issued 8.0 million shares of common stock at $24.25 per share, raising approximately $185.3 million in net proceeds.
- Risks:
- Market Conditions: Unfavorable apartment market conditions and economic downturns could impact occupancy and rental rates.
- Financing: Tightening credit markets and volatility in financial institutions could impact refinancing availability and costs.
- Development: Risks related to construction costs, delays, and lease-up performance for new developments.
- Insurance: Potential for uninsured losses from catastrophic weather events (hurricanes, earthquakes).
Investor Verification Checklist
- Disposition Proceeds: Verify the timing and utilization of the $1.7 billion in gross proceeds from the sale of 86 communities, specifically the $200 million note receivable received.
- Debt Maturities: Review the schedule of debt maturities, noting $1.6 million of secured and $29.1 million of unsecured debt maturing in the remainder of 2008.
- Development Pipeline: Assess the $184.1 million in expected costs to complete real estate under development and joint ventures.
- FFO vs. Net Income: Note the divergence between high Net Income (driven by one-time gains) and lower FFO ($156.3M), which better reflects ongoing operational performance.
- Share Repurchases: Confirm the status of the 15 million share repurchase program; 5.99 million shares were repurchased in the first nine months of 2008.