UDR Inc. (UDR) has been continuously enhancing the overall quality of its portfolio by acquiring, developing and redeveloping properties in core operating markets and divesting its non-core assets. Also, the company continues to focus on its strategic priorities such as disciplined capital allocation, strong balance sheet position as well as cash flow enhancement to support dividend growth and operational efficiency.
In July, UDR reported second-quarter 2014 funds from operations (FFO) as adjusted of 39 cents per share, which exceeded the Zacks Consensus Estimate by a whisker and the year-ago quarter figure by 4 cents. The favorable results at this apartment real estate investment trust (REIT) were attributable to higher revenues, same-store net operating income and notable portfolio restructuring activity.
Going forward, we expect UDR to ride on the growth trajectory by leveraging on the improving U.S. apartment market fundamentals. Consequently, it intends to spend $100–$150 million for acquisitions; $425–$475 million in developments and redevelopments; and dispose assets in the $350–$450 million range in 2014.
However, a huge construction pipeline increases operational risks. Additionally, stiff competition from other housing alternatives and continued weakness in the Mid-Atlantic market, especially Metro DC, remain our concerns. Also, anticipated rise in interest rates remains a concern.
Over the last 60 days, the Zacks Consensus Estimate for FFO per share for 2014 moved north by 2 cents to $1.53. For 2015 it remained stable at $1.62.
For detailed insight into UDR, you can refer to our updated research report, which was issued on Sep 30, 2014.
Investors interested in the REIT industry may also look at the recently issued updated research reports on Public Storage (PSA), Liberty Property Trust (LPT) and Ventas Inc. (VTR).
Note: Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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