UDR(UDR) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - UDR's third quarter FFO as adjusted per share was $0.62, achieving the midpoint of previously provided guidance, with flat sequential results typical between the second and third quarters [50] - The updated full year 2024 FFOA per share guidance range is$ 2.47 to $2.49, reflecting positive year-over-year growth despite high supply and elevated interest rates [51][52] - Year-to-date same-store revenue and NOI growth for Q3 were 1.2% and 0.8%, respectively, driven by a 1.8% blended lease rate growth [20][21] Business Line Data and Key Metrics Changes - Same-store revenue growth guidance for 2024 was raised to a midpoint of 2.2% from 2.0%, driven by improved blended lease rate growth expectations [41] - Other income growth was approximately 5% in Q3, driven by continued innovation and value-add services [23][33] - Year-over-year same-store expense growth was 2% in Q3, better than expectations due to favorable real estate taxes and insurance savings [23] Market Data and Key Metrics Changes - Demand for apartments remains strong, with over 450,000 newly delivered apartment homes absorbed nationally in the first nine months of the year, approximately 50% above the long-term average [13] - The East Coast showed the most strength with blended lease rate growth of approximately 2% and same-store revenue growth of about 2.5% [36] - Sunbelt markets lagged behind coastal markets, with year-to-date revenue growth largely in line with expectations, but occupancy was at 96.1% with negative 1.5% same-store revenue growth [39] Company Strategy and Development Direction - UDR focuses on three growth drivers: innovation, customer experience, and maintaining an investment-grade balance sheet with substantial liquidity [9][12] - The company is exploring various forms of external growth, including joint venture acquisitions and OP unit transactions [12] - UDR aims to enhance customer experience to improve retention and lower turnover costs, which is expected to drive future margin expansion [10][11] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about long-term growth prospects for the multifamily industry despite macro volatility and interest rate uncertainties [18] - The company expects same-store revenue and NOI growth to accelerate in Q4 due to more moderate prior year comparisons [34] - Management highlighted that the pace of new supply is slowing, which bodes well for rent growth in the coming years [14] Other Important Information - UDR published its sixth annual ESG report, showcasing its commitment to environmental, social, and governance goals [16] - The company has more than$ 1 billion of liquidity as of September 30, with a proactive approach to managing its balance sheet [57][58] Q&A Session Summary Question: Thoughts on other income growth for 2025 - Management anticipates that other income growth will be similar to 2024, with initiatives like WiFi rollout expected to double their contribution to NOI next year [62][63] Question: Stability in Sunbelt markets - Management indicated that Sunbelt markets are showing signs of improvement, with occupancy trending higher and blended lease rate growth stabilizing [74] Question: Impact of turnover on expense growth - A 1% swing in turnover could significantly impact expense growth, with improved retention translating to lower repair and maintenance costs [75][79] Question: Expectations for rent growth in Sunbelt markets - Management expects rent growth to stabilize in the Sunbelt by mid-next year, with potential for pricing power to return in the second half of the year [82][109]