UDR, Inc. (UDR) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Strong First Half Performance: Exceeded initial expectations due to solid fundamentals and core operating strategies, driving strong same-store and earnings growth.
• Positive Employment and Income Growth: Year-to-date employment growth and household income growth have remained robust, supporting strong demand for housing.
• Record Apartment Absorption: More than 250,000 newly delivered apartment homes were absorbed nationally during the first half of the year, a near two-decade record.
• Affordability of Renting: Renting an apartment is significantly more affordable than owning a single-family home in the markets where UDR operates.
• ESG Leadership Recognition: UDR was named a 2024 Top Workplace winner in the real estate industry, reflecting its engaging employee experience and innovative culture.

Pessimistic Highlights

• Slowing Employment Growth Rate: Cognizant of the slowing growth rate in recent employment data, which may affect pricing in the face of still elevated new supply through the rest of 2024.

Company Outlook

• Raised Full Year Guidance: UDR raised its full-year FFOA per share guidance for the second time this year and increased its same-store growth expectations.
• Cautious Due to Macroeconomic Volatility: While encouraged by the resiliency of demand indicators, UDR remains cautious due to potential macroeconomic volatility and elevated supply deliveries in the back half of 2024.

Q & A Highlights

• Q: Can you talk a bit more about what you saw in June and July in your coastal markets versus the Sunbelt? (Eric Wolfe, Citigroup)

  A: We saw a deceleration in blends from May to July across all regions, with the Sunbelt being a little bit weaker. Renewals have been stronger in the Sunbelt, and we're pushing around 4%, 4.5% in July. Occupancy has stabilized into August. (Mike Lacy)

• Q: Based on your guidance for the full year, it seems like you're guiding around 0.9% for the back half of the year. Is that more of a conservative placeholder? (Eric Wolfe, Citigroup)

  A: We approached the back half assumptions alone, with the implied number for the last five months being only about 60 basis points in blended lease rate growth. We factored in some conservatism on that front. (Joe Fisher)

• Q: We had a question around the guidance increase for DCP funding from 0 to $15 million. Can we expect more on this front in the back half of the year? (Steve Sakwa, Evercore ISI)

  A: That $15 million is the net of a couple of items, including a $35 million investment in a recap portfolio in Portland and a payback on Vernon. We don't have much coming up on the maturity front, but we're looking to deploy capital if it takes place ahead of time. (Joe Fisher)

• Q: I wanted to hit back on the July, more specifically, new lease rate growth trends. (Austin Wurschmidt, KeyBanc Capital Markets)

  A: In July, new lease rate growth was slightly negative on average, with the East Coast showing the most strength. Based on current trends, we expect East Coast leadership to persist through at least the remainder of the third quarter. (Mike Lacy)

• Q: Mike, I just wanted to follow up on some comments you made in one of your answers to a question. It sounds like you feel more confident on pushing rate because of your platform initiatives related to data on the customers. (Josh Dennerlein, Bank of America)

  A: Yes, we've been able to push our rents and renewals higher through 3Q, which is helping to offset new lease growth. Our strategy around getting more aggressive was really stemming off of our customer experience project. (Mike Lacy)