UDR, Inc. annual report, FY2023

UDR, Inc. — 2023 Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2023. This filing reports full-year results, not standalone fourth-quarter results. UDR is a U.S. multifamily REIT; at year-end it owned 168 consolidated communities with 55,550 completed homes across 21 markets, plus interests in 10,045 homes through unconsolidated ventures and partnerships.

Financial performance and key metrics

Metric20232022
Total revenue$1.628 billion$1.517 billion
Net income attributable to common stockholders$439.5 million; $1.34 diluted per share$82.5 million; $0.26 diluted per share
Total property NOI$1.115 billion, up 7.1%$1.040 billion
Same-Store rental income$1.491 billion, up 5.6%$1.411 billion
Same-Store NOI$1.038 billion, up 6.0%$978.9 million
Net cash from operating activities$832.7 million$820.1 million
Net cash used in investing activities$289.1 million$929.5 million
Net cash from/(used in) financing activities$(538.9) million$111.2 million
  • Common-stockholder net income rose sharply, primarily because of $351.2 million in real estate disposition gains, compared with $25.5 million in 2022. The 2023 amount includes a $325.9 million gain on contributing four communities to a joint venture and a $25.3 million gain on a property sale.
  • Same-Store operating margin was 69.6%, versus 69.3% in 2022. Same-Store physical occupancy averaged 96.7%, down 0.1 percentage point; monthly income per occupied home rose 5.7% to about $2,501.
  • FFO per diluted share and unit was $2.45; FFO as adjusted was $2.47 and AFFO was $2.21. These are non-GAAP supplemental measures and should not be treated as GAAP earnings or cash available for distribution.
  • Total assets were $11.37 billion and total liabilities were $6.42 billion at year-end. Net real estate carrying value was $9.76 billion.
  • Debt, net of financing costs and other adjustments, was $5.80 billion: $1.28 billion secured and $4.52 billion unsecured. Weighted-average interest rate was 3.40%, with 5.6 years weighted-average maturity. Approximately 86% of real estate by gross book value was unencumbered.
  • Cash and cash equivalents were $2.9 million, with $31.9 million of restricted cash. Available facilities included $1.3 billion undrawn under the revolving credit facility, excluding letters of credit, and $70.4 million under the working-capital facility. Commercial paper outstanding was $408.1 million at a 5.7% year-end rate.
  • Common dividends declared were $1.68 per share, up 10.5% from 2022; $1.64 per share was paid during 2023. The company paid $539.9 million of common-stockholder distributions.

Material changes versus 2022

  • Revenue increased 7.3%, primarily from rent growth, acquisitions, and completed developments, partly offset by dispositions. Same-Store NOI growth was 6.0%, versus 4.9% in 2022.
  • Interest expense increased to $180.9 million from $155.9 million, mainly due to higher average rates and higher debt balances. Total debt, net, rose from $5.49 billion to $5.80 billion.
  • Capital expenditures excluding development increased 29.8% to $303.7 million, including higher major renovations and NOI-enhancing improvements.
  • Cash used in investing declined to $289.1 million from $929.5 million, largely reflecting fewer acquisitions, higher real estate sale proceeds, and lower development and joint-venture investment spending.
  • In 2023 UDR acquired six Texas communities for approximately $354.6 million, contributed four communities to a new venture for cash proceeds of about $247.9 million, and sold a Hillsboro, Oregon community for $78.6 million.

Outlook, risks, and unusual items

  • Management provided no specific numerical 2024 earnings, rent-growth, or occupancy guidance in the supplied filing text. It cautioned that 2024 revenue growth could be affected by recessionary conditions, lower occupancy, concessions, new supply, bad debt, and other factors.
  • UDR expected to meet near-term liquidity needs through property operating cash flow, credit facilities, and commercial paper; longer-term needs may be funded through operations, secured or unsecured borrowing, securities issuance, and property dispositions. The company reported compliance with debt covenants.
  • 2024 scheduled debt maturities were approximately $521.3 million, including $97.6 million secured and $423.7 million unsecured. UDR said it anticipated funding these with operations, financing, asset-sale proceeds, or credit facilities.
  • Two wholly owned developments totaling 415 homes were under way at year-end, with a $187.5 million budget and $160.4 million invested; completion was estimated for the second quarter of 2024.
  • Key risks include concentration in major markets (73.3% of 2023 NOI came from eight markets), rent regulation and tenant-protection laws, new multifamily supply, inflation and operating costs, higher interest rates and refinancing, development execution, insurance and severe-weather losses, and counterparty or joint-venture risks.
  • UDR disclosed a consolidated class action and a District of Columbia lawsuit involving RealPage, a vendor. The company said it could not determine ultimate liability for legal matters, but did not expect ordinary-course claims, net of insurance or other provisions, to materially affect results.
  • Other notable items include a $24.3 million loss on consolidating a preferred-equity investment, and gains and losses tied to SmartRent and other technology investments. No impairment of real estate or other-than-temporary impairment of unconsolidated investments was recorded in 2023.
  • UDR reported effective disclosure controls and internal control over financial reporting; Ernst & Young issued unqualified opinions on the financial statements and internal controls.

Important facts for investors to verify

  • How much of the 2023 earnings increase reflects recurring operations versus the $351.2 million disposition gains and investment-related items; compare GAAP earnings with FFO, FFOA, and AFFO.
  • Whether Same-Store rent growth can continue amid concessions, bad debt, new supply, and expense growth, particularly in UDR’s concentrated markets.
  • The refinancing and funding plan for the $521.3 million of 2024 maturities, and subsequent debt balances, borrowing costs, and facility availability.
  • Whether the two developments meet the stated completion timing and budget, and whether lease-up achieves expected rent and occupancy levels.
  • Developments in the RealPage litigation, preferred-equity and mezzanine investments, and the collectability and repayment timing of notes receivable, which rose to $228.8 million.
  • Future dividend coverage and sustainability, considering operating cash flow, recurring capital needs, debt service, and REIT distribution requirements.