UDR

Overall Industry & Company Fundamentals

• Apartment industry fundamentals are favorable in 2026, with employment growth exceeding consensus expectations, renting remaining more affordable than homeownership, and new apartment supply continuing to abate
• UDR differentiates itself through data-driven capabilities, continuous innovation and disciplined execution
• UDR was named a top workplace winner in real estate for the third consecutive year, with an associate turnover rate of 19% (well below the industry norm of 34%)

Capital Allocation Strategy Updates

• UDR made the strategic decision to let its debt and preferred equity (DPE) book run off over the coming years, as the firm identifies higher long-term growth opportunities in core apartment operations rather than lending
• UDR follows a data-driven, risk-adjusted return framework for capital allocation (visualized via an internal heat map and the Orion analytics platform) to select assets for disposition; during Q2, the firm sold assets and used proceeds to repurchase UDR shares at a sizable discount to net asset value (NAV), arbitraging the gap between public and private market pricing
• UDR began distributing its first monthly dividend in Q2 2026, a shift designed to diversify the investor base by appealing to investors that prioritize frequent cash flow distributions, which has received positive early feedback

Operating Performance Highlights

• Q2 2026 operating results exceeded management expectations, driven by strong lease growth, high retention, and improved cost controls
• Innovation/other income continues to deliver mid-single-digit year-over-year growth, supporting overall results; improved delinquency contributed 60 bps to revenue, reflecting a focus on attracting and retaining high-quality residents
• UDR achieved industry-leading operating efficiency of 43 apartment homes managed per associate, demonstrating platform scalability
• Early Q3 2026 results are tracking similarly to strong Q2 performance, with the 2026 spring/summer leasing season proving longer than originally expected
• UDR's customer experience initiatives have driven sustained, material reductions in turnover: annual turnover is currently tracking at 37-38% (down from a historical 50-51% pre-2020 and 38-39% in 2025), 400-500 bps lower than peer averages, and further reductions are expected

• UDR raised full-year 2026 same-store revenue growth guidance by 12.5 bps at the midpoint, to a new range of 0.75% to 2%; the increase is driven by stronger-than-expected first half blended lease rate growth
• Full-year 2026 same-store expense guidance midpoint was improved by 50 bps to 3.25%, driven by constrained growth in repairs and maintenance, real estate taxes, and insurance
• The combined revenue and expense improvements led to a 50 bps increase in full-year 2026 same-store NOI growth guidance
• Full-year 2026 FFOA per share guidance was raised by 1 cent at the midpoint to $2.53
• Third quarter 2026 FFOA per share guidance is set at a range of 63 cents to 65 cents, with a 64 cent midpoint
• UDR expects the size of its DPE portfolio to decline from $380 million at the end of Q2 2026 to $250 to $300 million by the end of 2026
• UDR expects occupancy to remain in the mid-96% range for the full year, with innovation income continuing to deliver mid-single-digit growth, and blended lease rate growth of 1.5% to 2% in the second half of 2026
• Any second half blended lease growth that exceeds expectations will mostly accrue to 2027 results, as most 2026 leasing activity is already complete

UDR operates a single core apartment operating segment, with performance split between two geographic regions: 1) Coastal Markets: Contribute 75% of UDR's net operating income (NOI). In Q2 2026, this region delivered an average blended lease rate growth of 3.8% year-over-year. Standout markets include San Francisco, which achieved ~13% blended lease rate growth and high 97% occupancy; Orange County delivered over 3% blended lease rate growth; New York and Philadelphia posted mid-single-digit blended lease rate growth and 97% occupancy each. 2) Sun Belt Markets: Contribute 25% of UDR's NOI. In Q2 2026, this region posted a blended lease rate decline of negative 2% year-over-year, with July 2026 month-to-date trends showing modest improvement to negative 1.5%. Dallas is UDR's strongest Sun Belt market with 97% occupancy and blended lease rates around negative 1%; Austin has the best momentum in blended lease growth with 97% occupancy; Florida has 97% occupancy and blended leases around negative 1.5% (improved from negative 2.5% to negative 3% in Q1); Nashville has 95.5% occupancy and blended leases between negative 2% and negative 3%. Company-wide overall metrics: Year-over-year same-store revenue growth of 1.8%; blended lease rate growth of 2.1% (accelerated 50 bps from Q1 2026); occupancy remained in the mid-96% range; resident retention hit an all-time seasonal high of 60% (140 bps better than prior year); same-store expense growth was constrained to 2.6%; Q2 2026 FFOA per share was 64 cents, hitting the high end of prior guidance and exceeding consensus analyst expectations.

• Sun Belt markets continue to face near-term pricing pressure from elevated new supply, leading to negative blended lease rate growth, though performance has improved modestly in July 2026
• The wind-down of the DPE portfolio will cause near-term FFOA dilution: approximately 1 cent per share of dilution for each $100 million not redeployed into the DPE business, as new core apartment investments have an approximate 400 bps lower initial yield than capped DPE returns; this dilution impact is expected to narrow over time as core investments grow
• D.C. metro area performance is weaker than other coastal markets due to softness in federal employment, with occupancy slightly below 95% overall
• Nashville and some other Sun Belt markets still face ongoing supply pressure that suppresses near-term rent growth
• Market competition for DPE investments has become saturated, with competitors willing to accept lower risk-adjusted returns that make the segment unattractive for UDR

Q: How does UDR and its board evaluate potential large strategic transactions, such as market consolidation? / A: Management declined to comment on specific merger speculation. They stated the board and management always evaluate all available strategic options, weigh UDR's ability to execute any transaction, and are currently focused on executing UDR's existing strategy of operational excellence, disciplined capital allocation, and maintaining strong access to capital, which management believes has strong potential to deliver shareholder value. (211 characters)

Q: How has UDR's high resident retention changed the operating cycle and long-term industry outlook, and how should we contextualize current conditions versus historical seasons? / A: UDR has deliberately shifted from a transactional leasing approach to a focus on customer lifetime value, using data to improve resident engagement, which has cut annual turnover from a historical 50-51% to 37-38% currently, 400-500 bps below peer averages. Management notes the broader industry outlook is supported by 50-year record high recent supply that is now abating, a stable economy, and ongoing homeownership unaffordability, creating a solid long-term runway for rental demand, with UDR well-positioned via its data capabilities to drive cash flow growth. (389 characters)

Q: What is the timing and impact of the DPE portfolio wind-down, and how does asset take-out versus par repayment change the dilution math? / A: The DPE book has shrunk from a $725 million peak in Q1 2025 to $380 million at the end of Q2 2026. The 2026 dilution from the reduction has already been incorporated into UDR's full-year 2026 guidance. Remaining DPE maturities are staggered evenly between 2027 and 2031. Near-term dilution mitigates over time, as core operational investments deliver growing earnings over time, unlike the capped fixed returns of the DPE business. (298 characters)

Q: Why are you winding down the DPE program, even though it allows you to acquire properties at attractive terms after development? / A: The DPE program functioned well for 13 years when there was limited competition for these investments. In recent years, the market has become flooded with competing capital willing to accept lower risk-adjusted returns that do not meet UDR's requirements. Management chose to reallocate capital to core apartment investments that deliver higher long-term growth and better risk-adjusted returns, aligned with UDR's identity as an apartment operator rather than a lender. (287 characters)

Q: What is the current relative attractiveness of share repurchases versus other capital uses at today's UDR share price? / A: UDR has already completed $420 million in share repurchases since September 2025 at an average price that represents a ~20% discount to NAV, the largest buyback program in UDR's history during a public-private valuation dislocation. While UDR does not provide explicit forward guidance on buyback activity, repurchases remain a prominent option in UDR's capital allocation framework as valuations allow. (231 characters)