UDR, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2020; comparative periods are the corresponding 2019 periods. UDR is a multifamily REIT. At quarter-end it owned and consolidated 148 communities with 47,371 apartment homes in 13 states and Washington, D.C.
Key financial metrics
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Total revenue | $307.3m | $281.3m | $628.7m | $552.0m |
| Net income attributable to UDR common stockholders | $56.7m | $34.6m | $60.9m | $58.1m |
| Diluted earnings per share | $0.19 | $0.12 | $0.21 | $0.21 |
| Total property NOI | $212.3m | $199.7m | $437.7m | $389.4m |
| Same-store NOI | $170.5m | $178.5m | $339.9m | $342.9m |
| Interest expense | $38.6m | $34.4m | $77.9m | $68.0m |
- Q2 same-store NOI fell 4.5%, while total property NOI rose 6.3%, reflecting substantial growth in non-mature communities. Same-store physical occupancy was 96.3%, down 0.6 percentage points; same-store operating margin was 70.5%, versus 72.1%.
- For the six months, net cash from operating activities was $317.0m (up from $286.4m); investing cash outflow was $161.9m (versus $806.0m); financing cash outflow was $165.5m (versus $334.7m of inflow). Investing outflow was lower mainly because acquisitions were lower than in 2019.
- At June 30, total assets were $9.56b and total debt, net, was $4.77b, with a 3.24% weighted average interest rate and seven-year weighted average maturity. Secured debt was $1.11b and unsecured debt $3.65b. Cash and cash equivalents were $0.8m; restricted cash was $22.0m.
- UDR had $1.1b available under its revolving credit facility and $57.8m unused under its working-capital facility at June 30. Commercial paper outstanding was $185m. The company reported compliance with debt covenants.
- UDR declared common distributions of $0.36 per share for Q2. Six-month cash distributions paid to common stockholders were $207.1m.
Material changes and unusual items
- Q2 and six-month common-stockholder earnings included $61.3m of gains from two Washington-area community sales, compared with $5.3m from a land sale in the comparable 2019 periods. The gains materially lifted reported earnings; six-month diluted EPS remained $0.21.
- COVID-19 collectibility analysis led to reserves of approximately $5.5m for multifamily and $3.5m for retail tenant receivables, including straight-line rent receivables. UDR recorded an $8.5m reduction to rental income and a $0.5m reduction to income from unconsolidated entities. No COVID-related asset impairment charges were recorded for the six months.
- Rental income growth was partly offset by higher property expenses, depreciation and interest expense. Depreciation and amortization increased to $155.1m for Q2 and $310.5m for the six months, primarily due to acquired communities. Higher average debt balances drove increased interest expense.
- During July, UDR issued $400m of 2.10% notes due 2032, repurchased $116.9m of its 2024 notes, and planned to prepay $245.8m of secured debt due 2023. Related prepayment and make-whole amounts were approximately $24m. UDR also extended its working-capital facility maturity to January 2022.
- Acquisitions included a 294-home Tampa community and the purchase of the remaining interest in a 276-home Oregon community. UDR was developing three wholly owned communities, with a $278.5m total budget and expected completion dates from Q1 2021 through Q2 2022.
Outlook, risks and contingencies
- The filing provides no quantified earnings or operating guidance. Management said the duration, spread and severity of COVID-19 and government responses make future effects uncertain and that adverse impacts on financial condition, results and cash flows could be material.
- As of July 24, UDR reported collecting 98.6%, 97.6% and 96.2% of billed multifamily rent for April, May and June, respectively. Management cited increased requests for rent assistance, rent deferrals and payment plans, eviction moratoriums, reduced leasing inquiries, and lower resident move-outs.
- Principal risks include rent collection and occupancy pressure, eviction restrictions, rent-control and tenant-protection laws, retail tenant weakness, concentrated exposure to major markets, development and construction costs, refinancing and capital-market access, interest rates, and joint-venture and counterparty risks. Legal proceedings arise in the ordinary course; management did not expect them to have a material adverse effect. No material off-balance-sheet arrangements were reported.
- Management stated that disclosure controls and procedures were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- How rent collections, delinquencies, concessions and receivable reserves developed after the July 24 collection update, including exposure to eviction moratoriums.
- Underlying same-store trends by market: Q2 same-store NOI declined 4.5% as revenue fell and operating expenses rose; confirm whether occupancy, rents and expenses stabilized or worsened.
- The sustainability of reported earnings and cash available for distributions excluding the $61.3m property-sale gains, and the effect of elevated depreciation and interest costs.
- Execution and final cost of the July debt transactions, the use of proceeds, upcoming maturities, and continued access to commercial paper and credit facilities.
- Development commitments, delivery schedules and lease-up assumptions, as well as the performance and collectibility of joint-venture and developer-capital investments.