UDR Inc. (UDR) reported adjusted fourth-quarter 2014 funds from operations (“FFO”) of 39 cents per share, which came in line with the Zacks Consensus Estimate. The bottom line, however, compared favorably with the year-ago figure of 35 cents.
Results of this residential real estate investment trust (“REIT”) were attributable to higher revenues and same-store net operating income (“NOI”) as well as portfolio restructuring activities. Also, the company provided guidance for 2015.
For 2014, UDR reported adjusted FFO of $1.52 per share, which missed the Zacks Consensus Estimate of $1.54. Nevertheless, it came above the prior-year figure of $1.39.
Inside the Headlines
Total revenue for the quarter improved 8.3% year over year to $209.5 million, exceeding the Zacks Consensus Estimate of $206 million.
Total revenue for the year increased 7.8% year over year to $818 million, beating the Zacks Consensus Estimate of $801 million.
Same-store revenues for the quarter increased 4.4% year over year, while same-store net expenses climbed 1.9%. Consequently, same-store NOI rose 5.1% from the year-ago quarter. Same-store physical occupancy inched up 50 basis points year over year to 96.7%.
During the quarter, UDR acquired a future development land site in Boston for $32 million. Also, the company raised its ownership interest in two joint ventures with MetLife, Inc. (MET) to 50%.
On the other hand, during the quarter, the company divested three communities in Long Beach, CA, Port Orchard, WA and Puyallup, WA for $91 million in total proceeds. In addition, the company divested 49% interest in 13th & Market, San Diego and 50% interest in 3033 Wilshire land parcel in Los Angeles to MetLife for $54 million and $8.3 million, respectively.
As of Dec 31, 2014, UDR had a development pipeline of recently completed and under-construction assets of $875 million. A new development project that kick started during the quarter was 3033 Wilshire, a 190-home community located in Los Angeles. The project is approximately valued at $107 million.
As of the same date, the company’s liquidity amounted to $763 million, through a combination of cash and undrawn capacity on its credit facilities, up from $755 million as of Sep 30, 2014. Further, the company had total debt of $3.6 billion, unchanged from the prior quarter.
2015 Guidance
For first-quarter 2015, UDR provided adjusted FFO per share guidance in the range of 38–40 cents. The Zacks Consensus Estimate is 40 cents.
For full-year 2015, the company provided adjusted FFO guidance within $1.58–$1.64. The Zacks Consensus Estimate of $1.63 lies within this range.
Our Viewpoint
We believe the performance of UDR’s operating portfolio will help it deliver better results going forward. Also, the ongoing portfolio restructuring and extensive construction activities position the company well in upscale markets, boding well for its future growth.
Currently, UDR carries a Zacks Rank #3 (Hold). We presently await the results of other residential REITs – Essex Property Trust Inc. (ESS) and Apartment Investment and Management Company (AIV) – which are scheduled to report on Feb 4 and Feb 5, respectively.
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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