UDR, Inc. Q3 FY2025 earnings call

• Customer experience project: Operating teams have executed innovation, leveraging daily touch points to enhance resident retention, which boosts top-line revenue, mitigates expense growth, and drives margin expansion.
• Data-driven capital allocation: Sophisticated tools screen investment attractiveness across over 7 million apartment homes nationwide. Recently executed an acquisition with attractive rent growth and operational upside. Leveraging analytics for NOI-enhancing and redevelopment CapEx.
• Acquisition: Entered into an agreement to acquire a 406-apartment home community in Northern Virginia for $147 million, adjacent to an existing UDR property for efficiencies.
• Corporate responsibility: Released seventh annual corporate responsibility report, recognized as a top workplace winner in real estate for consecutive years.
• Board update: Welcomed Rick Clark to the Board, bringing real estate investment and capital markets experience.

UDR's segments include Coastal markets (≈40% of NOI), West Coast (≈35% of NOI), and Sunbelt (≈25% of NOI). Third quarter year-over-year same-store revenue growth for Coastal was ~4%, with third quarter weighted average occupancy of 96.7% and blended lease rate growth of 2%. The West Coast had third quarter weighted average occupancy of 96.7% and blended lease rate growth of 3%, with year-to-date same-store revenue growth of 3% close to the high end of expectations. The Sunbelt markets had third quarter weighted average occupancy of 96.5% and blended lease rate growth of approximately negative 3%, with year-to-date same-store revenue growth slightly negative, lagging the low end of expectations.

• Full year 2025 FFOA per share guidance revised to $2.53 to $2.55 per share, with a midpoint of $2.54, a $0.02 per share or ~1% improvement from prior guidance.
• Fourth quarter FFOA per share guidance range is $0.63 to $0.65.
• Same-store revenue growth midpoint for 2025 adjusted to 2.4% from 2.5% previously, with occupancy, other income, and bad debt outperforming. Expense growth midpoint enhanced by 25 basis points to 2.75%. Reaffirmed same-store NOI growth midpoint of 2.25%.
• 2026 same-store revenue earn-in expected to be approximately flat, compared to historical average of ~150 basis points and 2025 earn-in of 60 basis points.

• Deceleration in rent growth due to economic uncertainty, including employment uncertainty, slower household formation, lower consumer confidence, and high levels of recent supply completion.
• Potential impact of government shutdown in D.C. on the local economy and the acquisition in Northern Virginia, though expected to be temporary.

Q: Walk through how you're going to the assumption for a flat earn-in for '26 just based off of the rent growth that you've achieved year-to-date and then also what's assumed in the fourth quarter guide?

A: Michael Lacy and Tom Toomey provided color on cautious customers, occupancy-first strategy, and regional differences in earn-in expectations, noting coastal markets, West Coast, and Sunbelt have different earn-in outlooks.

Q: Help explain what's driving so much variability within renewal rate growth quarter-on-quarter for you guys compared to your peers? And any specific things impacting that? And should we expect this to more normalize going forward?

A: Michael Lacy stated it's due to headwinds like consumer sentiment, jobs, immigration policy, and supply in Sunbelt, with focus on occupancy-first approach and expecting short-term weakness.

Q: Question on the capital allocation priorities. Recently, you've been doing a little bit of everything between the acquisitions, share buybacks and debt and PE investments. Can you maybe speak to where you're seeing kind of more compelling opportunities as you look forward?

A: David Bragg mentioned capital allocation is collaborative and data-driven, with priorities including investing in operations platform, NOI-enhancing CapEx, redevelopment, and share buybacks as a compelling opportunity.