UDR Announces Fourth Quarter and Full-year 2019 Results and 2020 Guidance
UDR, Inc. (the “Company”) Fourth Quarter 2019 Highlights:
Net income per share was $0.33, Funds from Operations (“FFO”) per share was $0.46, FFO as Adjusted (“FFOA”) per share was $0.54, and Adjusted FFO (“AFFO”) per share was $0.48. Net income attributable to common stockholders was $96.9 million as compared to $81.2 million in the prior year period. The increase was primarily due to net operating income (“NOI”) growth and higher gains on the sale of unconsolidated investments. Year-over-year (“YOY”) same-store (“SS”) revenue, expense and NOI growth was 3.3 percent, 1.3 percent and 4.1 percent, respectively. The Company’s operating margin (property NOI divided by property rental income) was 71.1 percent as compared to 70.8 percent in the prior year period. The continued implementation of the Company’s Next Generation Operating Platform drove SS controllable operating margin expansion of 60 basis points YOY to 84.8 percent, and reduced SS controllable expenses by 0.6 percent YOY. Simplified the Company’s structure by closing a previously announced $1.8 billion transaction to halve the size of the UDR/MetLife Joint Venture in an accretive manner. Invested $115.0 million in Brio, a 259-home Developer Capital Program community in Bellevue, WA. Subsequent to quarter end, the Company acquired The Slade at Channelside, a 294-home community in Tampa, FL, for $85.2 million and closed on the acquisition of The Arbory, a 276-home Developer Capital Program community in suburban Portland, OR, pursuant to its option and for a cash outlay of $53.9 million.Full-Year 2019 Highlights:
Net income per share was $0.63, FFO per share was $2.03, FFOA per share was $2.08, and AFFO per share was $1.92. Net income attributable to common stockholders was $180.9 million as compared to $199.2 million in the prior year period. The decrease was primarily due to lower gains on the sale of real estate. YOY SS revenue, expense and NOI growth was 3.6 percent, 2.5 percent and 4.0 percent, respectively. The Company’s operating margin (property NOI divided by property rental income) was 71.0 percent as compared to 70.7 percent in the prior year period. The Company’s Next Generation Operating Platform drove controllable operating margin expansion of 50 basis points YOY to 84.6 percent, and limited SS controllable expense growth to 0.9 percent YOY. Installed SmartHome technology in 30,370 homes, or 60 percent of total homes, as of year-end. Accretively grew the Company through $1.8 billion of acquisitions with significant operating/investment upside in markets targeted for expansion. Simplified the Company’s structure by winding down the UDR/Kuwait Finance House (“KFH”) JV and halving the size of the UDR/MetLife JV in an accretive manner. Funded accretive external growth with premium valued equity by issuing approximately 15.8 million common shares at a weighted average net price of $45.85 for proceeds of $725.6 million. Issued $1.1 billion of long-duration unsecured debt (including a $300.0 million “green bond”) at a weighted average 3.2 percent interest rate, and prepaid $700.0 million of unsecured debt at a weighted average 4.2 percent interest rate.“2019 was an active and very successful year for UDR and our investors. We accretively grew the Company through $1.8 billion of well-timed acquisitions, realized efficiencies and controllable margin expansion from implementing the initial phases of our Next Generation Operating Platform, advanced our predictive analytics platform which we use for market selection, simplified our structure by winding down the KFH JV and halving our relationship with MetLife, and actively de-risked our balance sheet in an accretive manner. 2020 has started off well. We expect it will be another great year for UDR and our investors,” said Tom Toomey, UDR’s Chairman and CEO.
Q4 2019
Q4 2018
FY 2019
FY 2018
Net income per common share, diluted
$0.33
$0.30
$0.63
$0.74
Conversion from GAAP share count
(0.026)
(0.028)
(0.052)
(0.069)
Net gain on the sale of depreciable real estate owned, incl. JVs
(0.360)
(0.221)
(0.402)
(0.459)
Cumulative effect of change in accounting principle
-
-
-
(0.007)
Depreciation and amortization, including JVs
0.489
0.411
1.793
1.653
Noncontrolling interests and preferred dividends
0.026
0.028
0.060
0.075
FFO per common share and unit, diluted
$0.46
$0.49
$2.03
$1.93
Cost associated with debt extinguishment and other
0.073
0.010
0.095
0.012
Promoted interest on settlement of note receivable, net of tax
-
-
(0.021)
-
Legal and other costs
-
0.001
0.012
0.005
Net gain on the sale of non-depreciable real estate owned
-
-
(0.017)
-
Unrealized (gain)/loss on unconsolidated investments, net of tax
0.000
-
(0.011)
-
Joint venture development success fee
-
-
(0.012)
-
Severance costs and other restructuring expense
0.000
0.000
0.001
0.000
Casualty-related charges/(recoveries), including JVs, net
0.005
(0.001)
0.001
0.008
FFOA per common share and unit, diluted
$0.54
$0.50
$2.08
$1.96
Recurring capital expenditures
(0.057)
(0.042)
(0.164)
(0.158)
AFFO per common share and unit, diluted
$0.48
$0.46
$1.92
$1.80
A reconciliation of FFO, FFOA and AFFO to GAAP Net income attributable to common stockholders can be found on Attachment 2 of the Company’s fourth quarter Supplemental Financial Information.
Operations
In the fourth quarter, total revenue increased by $37.2 million year-over-year, or 13.9 percent, to $304.8 million. This increase was primarily attributable to growth in revenue from operating and acquisition communities.
In the fourth quarter, same-store NOI increased 4.1 percent year-over-year, driven by same-store revenue growth of 3.3 percent and same-store expense growth of 1.3 percent. Weighted average same-store physical occupancy increased by 10 basis points to 96.9 percent versus the prior year period. The fourth quarter annualized rate of turnover decreased by 60 basis points to 40.2 percent versus the prior year period.
Region
Revenue
Growth
Expense
Growth/ (Decline)
NOI
Growth/
(Decline)
% of
Same‑Store
Portfolio(1)
Same-Store
Occupancy(2)
Number of
Same-Store
Homes(3)
West
4.2%
(0.1)%
5.5%
46.3%
96.6%
13,942
Mid-Atlantic
3.0%
1.7%
3.5%
23.1%
97.3%
9,877
Southeast
3.2%
2.6%
3.5%
12.6%
96.9%
7,683
Northeast
1.3%
9.7%
(2.5)%
11.8%
96.9%
2,840
Southwest
3.1%
(8.7)%
10.9%
6.2%
96.8%
3,835
Total
3.3%
1.3%
4.1%
100.0%
96.9%
38,177
(1)
Based on Q4 2019 SS NOI.
(2)
Weighted average same-store occupancy for the quarter.
(3)
During the fourth quarter, 38,177 apartment homes were classified as same-store. The Company defines QTD SS Communities as those communities stabilized for five full consecutive quarters. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the quarter in the prior year, were not in process of any substantial redevelopment activities, and were not held for disposition.
In the fourth quarter, sequential same-store NOI increased by 1.1 percent, driven by a same-store revenue decrease of 0.3 percent and a same-store expense decrease of 3.7 percent. Weighted average same-store physical occupancy remained at 96.9 percent sequentially.
For the twelve months ended December 31, 2019, total revenue increased by $105.3 million year-over-year, or 10.1 percent, to $1.2 billion. This increase was primarily attributable to growth in revenue from operating and acquisition communities.
For the twelve months ended December 31, 2019, same-store NOI increased 4.0 percent year-over-year, driven by same-store revenue growth of 3.6 percent and same-store expense growth of 2.5 percent. Weighted average same-store physical occupancy remained at 96.9 percent versus the prior year period. The full-year rate of turnover decreased by 20 basis points year-over-year to 49.6 percent.
Summary of Same-Store Results Full-Year 2019 versus Full-Year 2018
Region
Revenue Growth
Expense
Growth/
(Decline)
NOI Growth/
(Decline)
% of Same‑Store
Portfolio(1)
Same-Store
Occupancy(2)
Number of Same-Store Homes(3)
West
4.4%
2.2%
5.1%
46.6%
96.6%
13,942
Mid-Atlantic
3.2%
1.5%
3.9%
23.1%
97.4%
9,877
Southeast
3.7%
3.4%
3.8%
12.9%
96.8%
7,683
Northeast
2.1%
7.4%
(0.3)%
12.1%
97.0%
2,840
Southwest
2.7%
(2.1)%
6.0%
5.3%
97.0%
3,617
Total
3.6%
2.5%
4.0%
100.0%
96.9%
37,959
(1)
Based on FY 2019 NOI.
(2)
Weighted average same-store physical occupancy for FY 2019.
(3)
For the twelve months ended December 31, 2019, 37,959 apartment homes were classified as same-store. The Company defines YTD SS Communities as those communities stabilized for two full consecutive calendar years. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, were not in process of any substantial redevelopment activities, and were not held for disposition.
Wholly Owned Transactional Activity
Subsequent to quarter end, the Company acquired The Slade at Channelside, a 294-home community in Tampa, FL, for $85.2 million or $290,000 per home. At the time of the acquisition, the community had average monthly revenue per occupied home of $1,898, occupancy of 92 percent and was 11 years old.
Joint Venture Transactional Activity
During the quarter, the Company closed on a previously announced $1.8 billion transaction with MetLife, whereby the Company acquired the approximately 50 percent interest not previously owned in 10 UDR/MetLife JV operating communities, one community under development and four development land sites, valued at $1.1 billion, or $564.2 million at UDR’s share; and sold its approximately 50 percent ownership interest in five UDR/MetLife JV communities valued at $645.8 million, or $322.9 million at UDR’s share, to MetLife. See the press release entitled “UDR Announces UDR/MetLife Investment Management Joint Venture Transaction Valued at $1.76 Billion and Increases Select Full-Year Earnings Guidance Ranges”, which can be found at ir.udr.com, for further details.
Development Activity
At the end of the fourth quarter, the Company’s development pipeline totaled $278.5 million and was 25 percent funded. The development pipeline is currently expected to produce a weighted average spread between stabilized yields and current market cap rates of 150 to 200 basis points.
During the quarter, the Company commenced the construction of Dublin, a 220-home community in Dublin, CA. Dublin has a total budgeted cost of $117.0 million, or $531,800 per home, and is expected to be completed during the second quarter of 2022.
Developer Capital Program (“DCP”) Activity
At the end of the fourth quarter, the Company’s DCP investments, including accrued return, totaled $405.3 million.
During the quarter, the Company invested $115.0 million into Brio, a 259-home community in lease-up in Bellevue, WA, at a 4.75% interest rate through a secured note. The Company has a $170.0 million fixed price purchase option to acquire the community in 2021.
Subsequent to quarter end, the Company closed on the acquisition of the Arbory pursuant to its option, acquiring the approximately 51 percent interest it did not own from its West Coast Development Joint Venture. The Arbory is a 276-home community completed in 2018 in suburban Portland, OR. The cash outlay for the acquisition totaled $53.9 million, including the payoff of debt, and the Company’s blended all-in investment in the community was $72.3 million. At the time of acquisition, average monthly revenue per occupied home was $1,545 and occupancy was 94 percent.
Capital Markets and Balance Sheet Activity
During the fourth quarter, the Company,
Settled all 1.3 million common shares sold under its previously announced forward sales agreement at a forward price per share of $47.41 for net proceeds of $63.5 million. Uses of proceeds include external growth opportunities and general corporate purposes. Issued $400.0 million of unsecured debt at a weighted average effective interest rate of 3.1 percent with a weighted average years to maturity of 13.9 years. $300.0 million of this debt qualified as a “green bond” and represented the Company’s first use of this ESG-friendly product. Prepaid $400.0 million of 4.6 percent unsecured debt. The make-whole amount totaled approximately $22.0 million.At December 31, 2019, the Company had approximately $866.5 million of liquidity through a combination of cash and undrawn capacity on its credit facilities.
The Company’s total indebtedness as of December 31, 2019 was $4.7 billion. The Company ended the quarter with fixed‑rate debt representing 92.0 percent of its total debt, a total blended interest rate of 3.43 percent and a weighted average years to maturity of 7.1 years. The Company’s consolidated leverage was 34.2 percent versus 31.2 percent a year ago, its consolidated net‑debt-to-EBITDAre was 6.1x versus 5.0x a year ago and its consolidated fixed charge coverage ratio was 4.9x versus 4.6x a year ago.
Senior Management
Subsequent to quarter end, the Company announced that Warren L. Troupe, Senior Executive Vice President, will transition to the role of Senior Advisor to the Office of the Chairman effective April 1, 2020. In conjunction with the transition, Mr. Troupe has agreed to a consulting agreement with the Company running through December 2022 and renewable by either party thereafter. In this role, Mr. Troupe will continue to assist with the Company’s transactional, risk management, legal and capital markets activities, as well as provide expertise pertaining to special projects for the Chairman.
Dividend
As previously announced, the Company’s Board of Directors declared a regular quarterly dividend on its common stock for the fourth quarter of 2019 in the amount of $0.3425 per share. The dividend was paid in cash on January 31, 2020 to UDR common stock shareholders of record as of January 10, 2020. The fourth quarter 2019 dividend represented the 189th consecutive quarterly dividend paid by the Company on its common stock.
In conjunction with this release, the Company’s Board of Directors has announced a 2020 annualized dividend per share of $1.44, a 5.1 percent increase over 2019.
Outlook
For the first quarter of 2020, the Company has established the following earnings guidance ranges:
Net income per share
$0.01 to $0.03
FFO per share
$0.52 to $0.54
FFOA per share
$0.53 to $0.55
AFFO per share
$0.50 to $0.52
For the full-year 2020, the Company has established the following earnings guidance ranges:
Net income per share
$0.12 to $0.16
FFO per share
$2.17 to $2.21
FFOA per share
$2.18 to $2.22
AFFO per share
$2.01 to $2.05
Full-Year 2019 FFOA per share as compared to full-year 2020 FFOA per share guidance at the midpoint:
The difference between the Company’s full-year 2019 FFOA of $2.08 per share and the $2.20 per share midpoint of its full-year 2020 FFOA guidance range is primarily due to:
A positive impact of approximately $0.07 from same-store, stabilized JVs and commercial operations; A positive impact of approximately $0.05 from transactional activity, DCP, development, redevelopment; A positive impact of approximately $0.03 from lower financing costs; Flat year-over-year G&A; and, A negative impact of approximately $0.03 from a variety of other corporate items including ground lease resets and the amortization of certain NextGen Operating Platform investments.For the full-year 2020, the Company has established the following same-store growth and occupancy guidance ranges:
Revenue growth
2.70% to 3.70%
Expense growth
2.20% to 3.00%
Net operating income growth
2.90% to 3.90%
Physical occupancy
96.9% to 97.1%
Additional assumptions for the Company’s first quarter and full-year 2020 guidance can be found on Attachment 15 of the Company’s fourth quarter Supplemental Financial Information. A reconciliation of FFO per share, FFOA per share and AFFO per share to GAAP Net income per share can be found on Attachment 16(D) of the Company’s fourth quarter Supplemental Financial Information. Non-GAAP financial measures and other terms, as used in this earnings release, are defined and further explained on Attachments 16(A) through 16(D), “Definitions and Reconciliations,” of the Company’s fourth quarter Supplemental Financial Information.
Supplemental Information
The Company offers Supplemental Financial Information that provides details on the financial position and operating results of the Company which is available on the Company's website at ir.udr.com.
Conference Call and Webcast Information
UDR will host a webcast and conference call at 1:00 p.m. Eastern Time on February 12, 2020 to discuss fourth quarter and full-year 2019 results as well as guidance and high-level views for 2020.
The webcast will be available on UDR's website at ir.udr.com. To listen to a live broadcast, access the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software.
To participate in the teleconference dial 877-705-6003 for domestic and 201-493-6725 for international. A passcode is not necessary.
A replay of the conference call will be available through March 12, 2020, by dialing 844-512-2921 for domestic and 412-317-6671 for international and entering the confirmation number, 13697880, when prompted for the passcode.
A replay of the call will also be available for 30 days on UDR's website at ir.udr.com.
Full Text of the Earnings Report and Supplemental Data
The full text of the earnings report and Supplemental Financial Information will be available on the Company’s website at ir.udr.com.
Attachment 16 (A)
Attachment 16 (B)
$ 118,486
$ 137,873
Management fee
958
4,749
Interest expense
7,984
38,892
Depreciation
12,454
57,954
General and administrative
112
477
West Coast Development JV Preferred Return - Attachment 12(B)
(35
)
(520
)
Developer Capital Program - Other (excludes Alameda Point Block 11 and Brio)(5,994
)
(20,020
)
Other (income)/expense76
(12
)
Unrealized (gain)/loss on unconsolidated investments101
(4,569
)
NOI related to sold properties(6,632
)
(40,498
)
(Gain)/loss on sales(114,897
)
(125,407
)
Total Joint Venture NOI at UDR's Ownership Interest$ 12,613
$ 48,919
Net Operating Income (“NOI”): The Company defines NOI as rental income less direct property rental expenses. Rental income represents gross market rent and other revenues less adjustments for concessions, vacancy loss and bad debt. Rental expenses include real estate taxes, insurance, personnel, utilities, repairs and maintenance, administrative and marketing. Excluded from NOI is property management expense which is calculated as 2.875% of property revenue to cover the regional supervision and accounting costs related to consolidated property operations, and land rent. Management considers NOI a useful metric for investors as it is a more meaningful representation of a community’s continuing operating performance than net income as it is prior to corporate-level expense allocations, general and administrative costs, capital structure and depreciation and amortization and is a widely used input, along with capitalization rates, in the determination of real estate valuations. A reconciliation from net income attributable to UDR, Inc. to NOI is provided below. In thousands 4Q 2019 3Q 2019 2Q 2019 1Q 2019 4Q 2018 Net income/(loss) attributable to UDR, Inc.
$ 97,959
$ 27,204
$ 35,619
$ 24,503
$ 82,139
Property management
8,703
8,309
8,006
7,703
7,280
Other operating expenses
2,800
2,751
2,735
5,646
3,952
Real estate depreciation and amortization
143,464
127,391
117,934
112,468
106,469
Interest expense
60,435
42,523
34,417
33,542
38,226
Casualty-related charges/(recoveries), net
1,316
(1,088
)
246
-
(243
)
General and administrative14,531
12,197
12,338
12,467
10,955
Tax provision/(benefit), net
2
1,499
125
2,212
70
(Income)/loss from unconsolidated entities
(118,486
)
(12,713
)
(6,625
)
(49
)
(36
)
Interest income and other (income)/expense, net(2,406
)
(1,875
)
(1,310
)
(9,813
)
(1,660
)
Joint venture management and other fees(2,073
)
(6,386
)
(2,845
)
(2,751
)
(2,935
)
Other depreciation and amortization1,713
1,619
1,678
1,656
1,616
(Gain)/loss on sale of real estate owned
-
-
(5,282
)
-
(65,897
)
Net income/(loss) attributable to noncontrolling interests7,278
2,218
2,699
2,099
7,476
Total consolidated NOI
$ 215,236
$ 203,649
$ 199,735
$ 189,683
$ 187,412
Attachment 16 (C)
Forward-Looking Statements
Certain statements made in this press release may constitute “forward-looking statements.” Words such as “expects,” “intends,” “believes,” “anticipates,” “plans,” “likely,” “will,” “seeks,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward‑looking statements. Such factors include, among other things, unfavorable changes in the apartment market, changing economic conditions, the impact of inflation/deflation on rental rates and property operating expenses, expectations concerning the availability of capital and the stability of the capital markets, the impact of competition and competitive pricing, acquisitions, developments and redevelopments not achieving anticipated results, delays in completing developments and redevelopments, delays in completing lease-ups on schedule or at expected rent and occupancy levels, expectations on job growth, home affordability and demand/supply ratio for multifamily housing, expectations concerning development and redevelopment activities, expectations on occupancy levels and rental rates, expectations concerning joint ventures and partnerships with third parties, expectations that automation will help grow net operating income, expectations on annualized net operating income and other risk factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time, including the Company's Annual Report on Form 10-K and the Company's Quarterly Reports on Form 10-Q. Actual results may differ materially from those described in the forward-looking statements. These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this press release, and the Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in the Company's expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required under the U.S. securities laws.
About UDR, Inc.
UDR, Inc. (NYSE: UDR), an S&P 500 company, is a leading multifamily real estate investment trust with a demonstrated performance history of delivering superior and dependable returns by successfully managing, buying, selling, developing and redeveloping attractive real estate properties in targeted U.S. markets. As of December 31, 2019, UDR owned or had an ownership position in 51,294 apartment homes including 878 homes under development. For over 47 years, UDR has delivered long-term value to shareholders, the best standard of service to residents and the highest quality experience for associates.
Attachment 1UDR, Inc. Consolidated Statements of Operations (Unaudited) (1) Three Months Ended Twelve Months Ended December 31, December 31, In thousands, except per share amounts
2019
2018
2019
2018
REVENUES: Rental income$ 302,745
$ 264,732
$ 1,138,138
$ 1,035,105
Joint venture management and other fees (2)
2,073
2,935
14,055
11,754
Total revenues
304,818
267,667
1,152,193
1,046,859
OPERATING EXPENSES: Property operating and maintenance
47,245
42,949
178,947
169,078
Real estate taxes and insurance
40,264
34,371
150,888
133,912
Property management
8,703
7,280
32,721
28,465
Other operating expenses
2,800
3,952
13,932
12,100
Real estate depreciation and amortization
143,464
106,469
501,257
429,006
General and administrative
14,531
10,955
51,533
46,983
Casualty-related charges/(recoveries), net
1,316
(243
)
474
2,121
Other depreciation and amortization
1,713
1,616
6,666
6,673
Total operating expenses
260,036
207,349
936,418
828,338
Gain/(loss) on sale of real estate owned
-
65,897
5,282
136,197
Operating income
44,782
126,215
221,057
354,718
Income/(loss) from unconsolidated entities (3) (4)
118,486
36
137,873
(5,055
)
Interest expense(37,124
)
(35,334
)
(141,323
)
(130,869
)
Cost associated with debt extinguishment and other(23,311
)
(2,892
)
(29,594
)
(3,299
)
Total interest expense(60,435
)
(38,226
)
(170,917
)
(134,168
)
Interest income and other income/(expense), net (5)2,406
1,660
15,404
6,735
Income/(loss) before income taxes
105,239
89,685
203,417
222,230
Tax (provision)/benefit, net (3) (5)
(2
)
(70
)
(3,838
)
(688
)
Net Income/(loss)105,237
89,615
199,579
221,542
Net (income)/loss attributable to redeemable noncontrolling interests in the OP and DownREIT Partnership (6)
(7,235
)
(7,396
)
(14,426
)
(18,215
)
Net (income)/loss attributable to noncontrolling interests(43
)
(80
)
(188
)
(221
)
Net income/(loss) attributable to UDR, Inc.97,959
82,139
184,965
203,106
Distributions to preferred stockholders - Series E (Convertible)
(1,031
)
(971
)
(4,104
)
(3,868
)
Net income/(loss) attributable to common stockholders$ 96,928
$ 81,168
$ 180,861
$ 199,238
Income/(loss) per weighted average common share - basic:
$0.33
$0.30
$0.63
$0.74
Income/(loss) per weighted average common share - diluted:
$0.33
$0.30
$0.63
$0.74
Common distributions declared per share
$0.3425
$0.3225
$1.37
$1.29
Weighted average number of common shares outstanding - basic
293,107
270,107
285,247
268,179
Weighted average number of common shares outstanding - diluted
294,073
270,755
286,015
269,483
(1) See Attachment 16 for definitions and other terms. (2) During the twelve months ended December 31, 2019, UDR earned a development success fee of approximately $3.8 million as a result of meeting specific return thresholds. (3) During the twelve months ended December 31, 2019, UDR recorded net unrealized gains on unconsolidated technology investments, net of tax, of approximately $3.3 million. The estimated tax provision on the net unrealized gains for the twelve months ended December 31, 2019, was approximately $1.3 million. (4) In August 2019, UDR announced that it had entered into an agreement with MetLife to acquire the approximately 50% ownership interest not previously owned in 10 UDR/MetLife operating communities with 3,327 homes, one development community and four land parcels valued at $1.1 billion, or $564 million at UDR’s share, and to sell its approximately 50% ownership interest in five UDR/MetLife operating communities with 1,001 homes, valued at $646 million, or $323 million at UDR’s share, to MetLife. The transaction closed during the fourth quarter of 2019. UDR recognized gains of $114.9 million on the disposition of the five UDR/MetLife JV operating communities. (5) During the twelve months ended December 31, 2019, UDR earned a promoted interest of $8.5 million on the payment of a promissory note receivable from a multifamily technology company. The estimated tax provision on the payment was approximately $2.0 million. (6) Due to the quarterly calculation of noncontrolling interests, the sum of the quarterly amounts will not equal the annual totals. Attachment 2
UDR, Inc. Funds From Operations (Unaudited) (1) Three Months Ended Twelve Months Ended December 31, December 31, In thousands, except per share and unit amounts
2019
2018
2019
2018
Net income/(loss) attributable to common stockholders$ 96,928
$ 81,168
$ 180,861
$ 199,238
Real estate depreciation and amortization
143,464
106,469
501,257
429,006
Noncontrolling interests
7,278
7,476
14,614
18,436
Real estate depreciation and amortization on unconsolidated joint ventures
12,454
16,040
57,954
61,871
Cumulative effect of change in accounting principle
-
-
-
(2,100
)
Net gain on the sale of unconsolidated depreciable property (2)(114,897
)
-
(125,407
)
-
Net gain on the sale of depreciable real estate owned
-
(65,897
)
-
(136,197
)
Funds from operations ("FFO") attributable to common stockholders and unitholders, basic$ 145,227
$ 145,256
$ 629,279
$ 570,254
Distributions to preferred stockholders - Series E (Convertible) (3)
1,031
971
4,104
3,868
FFO attributable to common stockholders and unitholders, diluted
$ 146,258
$ 146,227
$ 633,383
$ 574,122
FFO per weighted average common share and unit, basic
$ 0.46
$ 0.49
$ 2.04
$ 1.95
FFO per weighted average common share and unit, diluted
$ 0.46
$ 0.49
$ 2.03
$ 1.93
Weighted average number of common shares and OP/DownREIT Units outstanding - basic
315,004
294,661
308,020
292,727
Weighted average number of common shares, OP/DownREIT Units, and common stock equivalents outstanding - diluted
318,981
298,321
311,799
297,042
Impact of adjustments to FFO: Cost associated with debt extinguishment and other
$ 23,311
$ 2,994
$ 29,594
$ 3,476
Promoted interest on settlement of note receivable, net of tax (2)
-
-
(6,482
)
-
Legal and other costs (4)
-
434
3,660
1,622
Net gain on the sale of non-depreciable real estate owned
-
-
(5,282
)
-
Unrealized (gain)/loss on unconsolidated investments, net of tax (2)
73
-
(3,300
)
-
Joint venture development success fee (2)
-
-
(3,750
)
-
Severance costs and other restructuring expense
116
114
390
114
Casualty-related charges/(recoveries), net
1,463
(191
)
636
2,364
Casualty-related charges/(recoveries) on unconsolidated joint ventures, net
50
-
(374
)
-
$ 25,013
$ 3,351
$ 15,092
$ 7,576
FFO as Adjusted attributable to common stockholders and unitholders, diluted
$ 171,271
$ 149,578
$ 648,475
$ 581,698
FFO as Adjusted per weighted average common share and unit, diluted
$ 0.54
$ 0.50
$ 2.08
$ 1.96
Recurring capital expenditures
(18,101
)
(12,516
)
(51,246
)
(46,915
)
AFFO attributable to common stockholders and unitholders, diluted$ 153,170
$ 137,062
$ 597,229
$ 534,783
AFFO per weighted average common share and unit, diluted
$ 0.48
$ 0.46
$ 1.92
$ 1.80
(1) See Attachment 16 for definitions and other terms. (2) See footnotes 2, 3, 4 and 5 on Attachment 1. (3) Series E preferred shares are dilutive for purposes of calculating FFO per share for the three and twelve months ended December 31, 2019 and December 31, 2018. Consequently, distributions to Series E preferred stockholders are added to FFO and the weighted average number of shares are included in the denominator when calculating FFO per common share and unit, diluted. (4) During 1Q19, UDR adopted ASU No. 2016-02, Leases (codified as ASC 842), which changed how UDR recognizes costs incurred to obtain resident and retail leases. Prior to adoption, UDR deferred and amortized over the lease term certain direct leasing costs. Under the updated standard, only those direct costs that are incremental to the arrangement may be deferred and any direct costs to negotiate or arrange a lease that would have been incurred regardless of whether the lease was obtained (“non-incremental costs”) shall be expensed as incurred. The standard also provided a practical expedient whereby an entity need not reassess direct costs for any pre-existing leases upon adoption. As such, the adoption of the standard resulted in UDR expensing any new non-incremental costs as incurred and continuing to amortize the pre-existing non-incremental costs deferred upon adoption over the remaining lease terms. The impact for the twelve months ended December 31, 2019 for the amortization expense related to the pre-existing non-incremental costs was $1.1 million, which is backed out for FFO as Adjusted in Legal and other costs. Attachment 3
UDR, Inc. Consolidated Balance Sheets (Unaudited) (1) December 31, December 31, In thousands, except share and per share amounts
2019
2018
ASSETS Real estate owned: Real estate held for investment$ 12,532,324
$ 10,196,159
Less: accumulated depreciation
(4,131,330
)
(3,654,160
)
Real estate held for investment, net8,400,994
6,541,999
Real estate under development (net of accumulated depreciation of $23 and $0)
69,754
-
Total real estate owned, net of accumulated depreciation
8,470,748
6,541,999
Cash and cash equivalents
8,106
185,216
Restricted cash
25,185
23,675
Notes receivable, net
153,650
42,259
Investment in and advances to unconsolidated joint ventures, net
588,262
780,869
Operating lease right-of-use assets (2)
204,225
-
Other assets
186,296
137,710
Total assets
$ 9,636,472
$ 7,711,728
LIABILITIES AND EQUITY Liabilities: Secured debt
$ 1,149,441
$ 601,227
Unsecured debt
3,558,083
2,946,560
Operating lease liabilities (2)
198,558
-
Real estate taxes payable
29,445
20,608
Accrued interest payable
45,199
38,747
Security deposits and prepaid rent
48,353
35,060
Distributions payable
109,382
97,666
Accounts payable, accrued expenses, and other liabilities
90,032
76,343
Total liabilities
5,228,493
3,816,211
Redeemable noncontrolling interests in the OP and DownREIT Partnership
1,018,665
972,740
Equity: Preferred stock, no par value; 50,000,000 shares authorized 2,780,994 shares of 8.00% Series E Cumulative Convertible issued and outstanding (2,780,994 shares at December 31, 2018)
46,200
46,200
14,691,274 shares of Series F outstanding (15,802,393 shares at December 31, 2018)
1
1
Common stock, $0.01 par value; 350,000,000 shares authorized 294,588,305 shares issued and outstanding (275,545,900 shares at December 31, 2018)
2,946
2,755
Additional paid-in capital
5,781,975
4,920,732
Distributions in excess of net income
(2,462,132
)
(2,063,996
)
Accumulated other comprehensive income/(loss), net(10,448
)
(67
)
Total stockholders' equity3,358,542
2,905,625
Noncontrolling interests
30,772
17,152
Total equity
3,389,314
2,922,777
Total liabilities and equity
$ 9,636,472
$ 7,711,728
(1) See Attachment 16 for definitions and other terms. (2) During 1Q19, UDR adopted ASU No. 2016-02, Leases (codified as ASC 842). The updated standard required lessees to recognize a lease liability and a right-of-use asset for all leases on their balance sheets (with certain exceptions provided by the standard). The standard also provided a transition option that permitted entities to not recast the comparative periods presented when transitioning to the standard. Given that UDR elected the transition option, there are no comparable balances as of December 31, 2018. Attachment 4(C)
UDR, Inc. Selected Financial Information (Dollars in Thousands) (Unaudited) (1) Quarter Ended Coverage Ratios December 31, 2019 Net income/(loss)
$ 105,237
Adjustments: Interest expense, including costs associated with debt extinguishment
60,435
Real estate depreciation and amortization
143,464
Other depreciation and amortization
1,713
Tax provision/(benefit), net
2
Adjustments to reflect the Company's share of EBITDAre of unconsolidated joint ventures
(94,459
)
EBITDAre$ 216,392
Casualty-related charges/(recoveries), net
1,463
Casualty-related charges/(recoveries) on unconsolidated joint ventures, net
50
Unrealized (gain)/loss on unconsolidated investments
73
Severance costs and other restructuring expense
116
(Income)/loss from unconsolidated entities
(118,486
)
Adjustments to reflect the Company's share of EBITDAre of unconsolidated joint ventures94,459
Management fee expense on unconsolidated joint ventures
(958
)
Consolidated EBITDAre - adjusted for non-recurring items$ 193,109
Annualized consolidated EBITDAre - adjusted for non-recurring items
$ 772,436
Interest expense, including costs associated with debt extinguishment
60,435
Capitalized interest expense
1,388
Total interest
$ 61,823
Cost associated with debt extinguishment
(23,311
)
Total interest - adjusted for non-recurring items$ 38,512
Preferred dividends
$ 1,031
Total debt
$ 4,707,524
Cash
(8,106
)
Net debt$ 4,699,418
Consolidated Interest Coverage Ratio - adjusted for non-recurring items 5.0x Consolidated Fixed Charge Coverage Ratio - adjusted for non-recurring items 4.9x Consolidated Net Debt-to-EBITDAre - adjusted for non-recurring items 6.1x Debt Covenant Overview Unsecured Line of Credit Covenants (2) Required Actual Compliance Maximum Leverage Ratio
≤60.0%
33.0% (2)
Yes
Minimum Fixed Charge Coverage Ratio≥1.5x
4.2x
Yes
Maximum Secured Debt Ratio≤40.0%
10.9%
Yes
Minimum Unencumbered Pool Leverage Ratio≥150.0%
353.8%
Yes
Senior Unsecured Note Covenants (3)
Required
Actual
Compliance
Debt as a percentage of Total Assets
≤65.0%
34.3% (3)
Yes
Consolidated Income Available for Debt Service to Annual Service Charge≥1.5x
5.3x
Yes
Secured Debt as a percentage of Total Assets≤40.0%
8.4%
Yes
Total Unencumbered Assets to Unsecured Debt≥150.0%
310.2%
Yes
Securities Ratings
Debt
Outlook
Commercial Paper
Moody's Investors Service
Baa1
Stable
P-2
S&P Global RatingsBBB+
Stable
A-2
Gross % of Number of 4Q 2019 NOI (1) Carrying Value Total Gross Asset Summary Homes ($000s) % of NOI ($000s) Carrying Value Unencumbered assets38,947
$ 188,374
87.5
%
$ 10,483,210
83.2
%
Encumbered assets8,063
26,862
12.5
%
2,118,891
16.8
%
47,010
$ 215,236
100.0
%
$ 12,602,101
100.0
%
(1) See Attachment 16 for definitions and other terms. (2) As defined in our credit agreement dated September 27, 2018. (3) As defined in our indenture dated November 1, 1995 as amended, supplemented or modified from time to time. Attachment 16(D)UDR, Inc. Definitions and Reconciliations December 31, 2019 (Unaudited) All guidance is based on current expectations of future economic conditions and the judgment of the Company's management team. The following reconciles from GAAP Net income/(loss) per share for full year 2020 and first quarter of 2020 to forecasted FFO, FFO as Adjusted and AFFO per share and unit: Full-Year 2020 Low High Forecasted net income per diluted share
$ 0.12
$ 0.16
Conversion from GAAP share count
(0.01
)
(0.01
)
Depreciation2.05
2.05
Noncontrolling interests
0.01
0.01
Preferred dividends
-
-
Forecasted FFO per diluted share and unit
$ 2.17
$ 2.21
Legal and other costs
-
-
Severance costs and other restructuring expense
0.01
0.01
Casualty-related charges/(recoveries)
-
-
Unrealized gain on unconsolidated investments, net of tax
-
-
Forecasted FFO as Adjusted per diluted share and unit
$ 2.18
$ 2.22
Recurring capital expenditures
(0.17
)
(0.17
)
Forecasted AFFO per diluted share and unit$ 2.01
$ 2.05
1Q 2020 Low High Forecasted net income per diluted share
$ 0.01
$ 0.03
Conversion from GAAP share count
-
-
Depreciation
0.51
0.51
Noncontrolling interests
-
-
Preferred dividends
-
-
Forecasted FFO per diluted share and unit
$ 0.52
$ 0.54
Legal and other costs
-
-
Severance costs and other restructuring expense
0.01
0.01
Casualty-related charges/(recoveries)
-
-
Unrealized gain on unconsolidated investments, net of tax
-
-
Forecasted FFO as Adjusted per diluted share and unit
$ 0.53
$ 0.55
Recurring capital expenditures
(0.03
)
(0.03
)
Forecasted AFFO per diluted share and unit$ 0.50
$ 0.52
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