UDR Announces Fourth Quarter and Full-Year 2018 Results and 2019 Guidance

DENVER–(BUSINESS WIRE)–UDR, Inc. (the “Company”) Fourth Quarter 2018 Highlights:

Net income per share was $0.30, Funds from Operations (“FFO”) per
share was $0.49, FFO as Adjusted (“FFOA”) per share was $0.50, and
Adjusted Funds from Operations (“AFFO”) per share was $0.46.
Net income attributable to common stockholders was $81.2 million as
compared to $68.4 million in the prior year period. The increase was
driven by higher operating income and gains on the sale of real estate.
Year-over-year (“YOY”) same-store (“SS”) revenue, expense and net
operating income (“NOI”) growth rates were 3.7, 4.4, and 3.4 percent,
respectively.
The Company’s $779.0 million pro-rata share of development projects in
lease-up continued to realize strong demand, ending the fourth quarter
at a weighted average 85.5 percent leased.
Previously announced fourth quarter highlights include:
- Sold Circle Towers, a 604-home community in Fairfax County, VA,
  for $160.0 million.
- Issued $300.0 million of 10-year unsecured debt at an effective
  rate of 4.27 percent and 7.15 million common shares, at a net
  price of $41.98, for proceeds of approximately $300.0 million.

Subsequent to Quarter-End Highlights:

Acquired partner’s joint venture interests in Parallel, a 386-home
community in Anaheim, CA, and CityLine II, a 155-home community in
suburban Seattle, WA, for a total cash outlay of $131.7 million.
Under contract to purchase Leonard Pointe, a 188-home community in
Brooklyn, NY, for $132.3 million.
Purchased 500 Penn Street NE, a development site in Washington, D.C.,
for $27.2 million, and 1590 Grove Street, a development site in
Denver, CO, for $13.7 million.
Realized approximately $6.5 million, net of estimated taxes, on the
settlement of a $5.6 million note receivable to a multifamily
technology company, resulting in an IRR of approximately 55 percent.
Named Jerry A. Davis President, in addition to his responsibilities as
Chief Operating Officer.

Full-Year 2018 Highlights:

Net income per share was $0.74, FFO per share was $1.93, FFOA per
share was $1.96, and AFFO per share was $1.80.
Net income attributable to common stockholders was $199.2 million as
compared to $117.9 million in the prior year period. The increase was
driven by higher operating income and gains on the sale of real estate.
YOY SS revenue, expense and NOI growth rates were 3.5, 3.6, and 3.4
percent, respectively.
Increased the Company’s declared dividend by 4.0 percent YOY to $1.29
per share.
Completed construction of two wholly-owned and two UDR/MetLife JV
developments comprising 1,634 homes with a total cost to construct of
$808.5 million at the Company’s ownership interest.
Expanded the Developer Capital Program (“DCP”) through committed
investments totaling $93.1 million in four communities, comprising
1,087 homes, and at a weighted average yield of 10.4 percent.
Repurchased approximately 593,000 common shares at an average price of
$33.69 for approximately $20.0 million.
Named Thomas W. Toomey Chairman of the Board, in addition to his
responsibilities as Chief Executive Officer.


	Q4 2018			Q4 2017			FY 2018			FY 2017
Net income per common share, diluted	$	0.30		$	0.25		$	0.74		$	0.44
Conversion from GAAP share count		(0.028	)		(0.024	)		(0.069	)		(0.041	)
Net gain on the sale of depreciable real estate owned, incl. JVs		(0.221	)		(0.209	)		(0.459	)		(0.260	)
Cumulative effect of change in accounting principle		–			–			(0.007	)		–
Depreciation and amortization, incl. JVs		0.411			0.416			1.653			1.642
Noncontrolling interests and preferred dividends		0.028			0.024			0.075			0.050
FFO per common share and unit, diluted	$	0.49		$	0.46		$	1.93		$	1.83
Cost/(benefit) associated with debt extinguishment and other, incl. JVs		0.010			0.011			0.012			0.031
Acquisition-related costs/(fees)		–			0.000			–			0.001
Net gain on the sale of non-depreciable real estate owned		–			–			–			(0.005	)
Legal and other costs		0.001			–			0.005			–
Severance costs and other restructuring expense		0.000			0.002			0.000			0.002
Casualty-related charges/(recoveries), incl. JVs, net		(0.001	)		0.002			0.008			0.012
FFOA per common share and unit, diluted	$	0.50		$	0.48		$	1.96		$	1.87
Recurring capital expenditures		(0.042	)		(0.054	)		(0.158	)		(0.155	)
AFFO per common share and unit, diluted	$	0.46		$	0.42		$	1.80		$	1.72

A reconciliation of FFO, FFOA and AFFO to GAAP Net income
attributable to common stockholders can be found on Attachment 2 of the
Company’s fourth quarter Supplemental Financial Information.

Operations

In the fourth quarter, total revenue increased by $14.8 million
year-over-year, or 5.8 percent, to $267.7 million. This increase was
primarily attributable to growth in revenue from operating and lease-up
communities.

In the fourth quarter, same-store NOI increased 3.4 percent
year-over-year, driven by same-store revenue growth of 3.7 percent and
same-store expense growth of 4.4 percent. Weighted average same-store
physical occupancy increased by 10 basis points year-over-year to 96.8
percent. The fourth quarter annualized rate of turnover was 40.3
percent, representing a 130 basis point decrease year-over-year.

Summary of Same-Store Results Fourth Quarter 2018 versus Fourth Quarter 2017
Region	Revenue Growth		Expense Growth		NOI Growth		% of Same-Store Portfolio⁽¹⁾		Same–Store Occupancy⁽²⁾		Number of Same-Store Homes⁽³⁾
West	4.0	%	5.4	%	3.5	%	44.7	%	96.4	%	13,942
Mid-Atlantic	3.5	%	3.6	%	3.5	%	22.7	%	97.3	%	9,876
Northeast	3.0	%	4.9	%	2.1	%	15.6	%	97.6	%	3,493
Southeast	4.8	%	3.1	%	5.5	%	12.4	%	96.5	%	7,683
Southwest	2.3	%	4.0	%	1.1	%	4.6	%	97.0	%	3,313
Total	3.7	%	4.4	%	3.4	%	100.0	%	96.8	%	38,307

⁽¹⁾		^{Based on Q4 2018 SS NOI.}
⁽²⁾		^{Weighted average same-store physical occupancy for the quarter.}
⁽³⁾		^{During the fourth quarter, 38,307 apartment homes were classified as same-store. The Company defines QTD SS Communities as those communities stabilized for five full consecutive quarters. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the quarter in the prior year, were not in process of any substantial redevelopment activities, and were not held for disposition.}

In the fourth quarter, sequential same-store NOI increased by 1.1
percent, driven by same-store revenue growth of 0.1 percent and a
decrease in same-store expenses of 2.3 percent. Weighted average
same-store physical occupancy decreased by 10 basis points sequentially
to 96.8 percent.

For the twelve months ended December 31, 2018, total revenue increased
by $51.1 million year-over-year, or 5.1 percent, to $1.05 billion. This
increase was primarily attributable to growth in revenue from operating
and lease-up communities.

For the twelve months ended December 31, 2018, same-store NOI increased
3.4 percent year-over-year, driven by same-store revenue growth of 3.5
percent and same-store expense growth of 3.6 percent. Weighted average
same-store physical occupancy increased by 20 basis points
year-over-year to 96.9 percent. The year-to-date annualized rate of
turnover was 49.3 percent, representing a 110 basis point decrease
year-over-year.

Summary of Same-Store Results Full-Year 2018 versus Full-Year 2017
Region	Revenue Growth		Expense Growth		NOI Growth/ (Decline)		% of Same-Store Portfolio⁽¹⁾		Same–Store Occupancy⁽²⁾		Number of Same-Store Homes⁽³⁾
West	4.3	%	1.9	%	5.0	%	44.8	%	96.5	%	13,698
Mid-Atlantic	2.9	%	4.3	%	2.4	%	22.9	%	97.4	%	9,876
Northeast	1.5	%	6.1	%	(0.4	)%	15.7	%	97.3	%	3,493
Southeast	5.0	%	3.6	%	5.6	%	12.7	%	96.8	%	7,683
Southwest	1.7	%	4.6	%	(0.2	)%	3.9	%	96.9	%	2,923
Total	3.5	%	3.6	%	3.4	%	100.0	%	96.9	%	37,673

⁽¹⁾		^{Based on YTD 2018 SS NOI.}
⁽²⁾		^{Weighted average same-store physical occupancy for YTD 2018.}
⁽³⁾		^{For the twelve months ended December 31, 2018, 37,673 apartment homes were classified as same-store. The Company defines YTD SS Communities as those communities stabilized for two full consecutive calendar years. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, were not in process of any substantial redevelopment activities, and were not held for disposition.}

Development Activity

At the end of the fourth quarter, the Company’s development pipeline
totaled $779.0 million at its pro-rata ownership interest, and was 99
percent funded. All of the Company’s development communities were in
lease-up as of the end of the fourth quarter with weighted average
leased and occupied percentages of 85.5 and 84.5 percent, respectively.
The development pipeline is currently expected to produce a weighted
average spread between stabilized yields and current market cap rates of
150 to 200 basis points.

DCP Activity

At the end of the fourth quarter, the Company’s DCP investment,
including accrued return, totaled $248.5 million.

During the quarter, the Company completed construction of The Arbory, a
276-home community located in Hillsboro, OR. The Company’s ownership
interest and initial investment in the community is 49.0 percent and
$16.1 million.

Subsequent to quarter end, the Company exercised its fixed price options
and acquired the 51.0 percent approximate interests it did not own in
Parallel, a 386-home community completed in 2018 and located in the
Platinum Triangle submarket of Anaheim, CA, and CityLine II, a 155-home
community completed in 2018 and located in suburban Seattle, WA, from
its West Coast Development JV for $45.9 million, net of its accrued
preferred return. In addition, the Company paid-off $85.8 million of
related construction financing, resulting in a total cash outlay of
$131.7 million and a blended all-in investment in the two communities of
$183.9 million. At the time of acquisition, average revenue per occupied
home was $2,045 at Parallel and $2,083 at CityLine II.

Wholly-Owned Transactional Activity

As previously announced, during the fourth quarter, the Company sold
Circle Towers, a 46 year-old, 604-home community located in Fairfax
County, VA, for $160.0 million or $264,900 per home. At the time of
sale, the community had a weighted average monthly revenue per occupied
home of $2,092.

Subsequent to quarter end, the Company,

Entered into a contract to purchase Leonard Pointe, a 4 year-old,
188-home community located in the Williamsburg neighborhood of
Brooklyn, NY, for $132.3 million or $703,700 per home. The community
is well-amenitized, highly walkable and offers easy access to
Manhattan via the L-line and Long Island City via the G-line and has a
weighted average monthly revenue per occupied home of $3,515. The
transaction is expected to close in the first quarter, subject to
customary closing conditions.
Acquired 500 Penn Street NE, a development site located in the Union
Market district of Washington, D.C., for $27.2 million.
Acquired 1590 Grove Street, a development site located in the Sloan’s
Lake submarket of Denver, CO, for $13.7 million after originally
entering into a contract to purchase the site during the first quarter
of 2018.

Capital Markets and Balance Sheet Activity

As previously announced, during the fourth quarter, the Company issued,

$300.0 million of 10-year unsecured debt at an effective rate of 4.27
percent. Proceeds were used to prepay $195.8 million of 5.28 percent
secured debt originally scheduled to mature in October and December
2019 and for general corporate purposes.
7.15 million common shares, at a net price of $41.98, for proceeds of
approximately $300.0 million. Proceeds are earmarked for asset
acquisitions and for general corporate purposes.

During the fourth quarter, the UDR/MetLife Joint Venture refinanced the
construction loan associated with Vision on Wilshire into a $71.4
million secured 10-year fixed-rate loan at a rate of 4.16 percent.

At December 31, 2018, the Company had approximately $1.3 billion in
availability, through a combination of cash and undrawn capacity, on its
credit facilities.

The Company’s total indebtedness at December 31, 2018 was $3.5 billion.
The Company ended the quarter with fixed-rate debt representing 93.5
percent of its total debt, a total blended interest rate of 3.7 percent
and a weighted average maturity of 5.8 years. The Company’s consolidated
leverage was 31.2 percent versus 33.2 percent a year ago, its
consolidated net-debt-to-EBITDAre was 5.0x versus 5.8x a year ago and
its consolidated fixed charge coverage ratio was 4.6x versus 4.4x a year
ago.

Senior Management

Subsequent to quarter end, the Company announced that Jerry A. Davis was
appointed President, in addition to his responsibilities as Chief
Operating Officer.

Dividend

As previously announced, the Company’s Board of Directors declared a
regular quarterly dividend on its common stock for the fourth quarter of
2018 in the amount of $0.3225 per share. The dividend was paid in cash
on January 31, 2019 to UDR common stock shareholders of record as of
January 10, 2019. The fourth quarter 2018 dividend represented the 185^th
consecutive quarterly dividend paid by the Company on its common stock.

In conjunction with this release, the Company’s Board of Directors
approved a 2019 annualized dividend per share of $1.37, a 6.2 percent
increase over 2018.

Outlook

For the first quarter of 2019, the Company has established the
following earnings guidance ranges:

Net income per share					$0.09 to $0.11
FFO per share					$0.50 to $0.52
FFOA per share					$0.48 to $0.50
AFFO per share					$0.46 to $0.48

For the full-year 2019, the Company has established the following
earnings guidance ranges:

Net income per share					$0.38 to $0.42
FFO per share					$2.05 to $2.09
FFOA per share					$2.03 to $2.07
AFFO per share					$1.87 to $1.91

Full-Year 2018 FFOA per share as compared to full-year 2019 FFOA per
share guidance at the midpoint:

The difference between the Company’s full-year 2018 FFOA of $1.96 per
share and the $2.05 per share midpoint of its full-year 2019 FFOA
guidance range is primarily due to:

A positive impact of approximately $0.08 from same-store, stabilized
JVs and commercial operations;
A positive impact of approximately $0.05 from development, DCP and
other transactional activity;
A negative impact of approximately $0.01 from higher G&A;
A negative impact of approximately $0.01 from the recent equity
issuance; and
A negative impact of approximately $0.02 from higher incremental
financing costs inclusive of higher LIBOR expectations.

For the full-year 2019, the Company has established the
following same-store growth and occupancy guidance ranges:

Revenue growth					3.00% to 4.00%
Expense growth					2.75% to 3.75%
Net operating income growth					3.25% to 4.25%
Physical Occupancy					96.8% to 97.0%

Additional assumptions for the Company’s first quarter and full-year
2019 guidance can be found on Attachment 15 of the Company’s fourth
quarter Supplemental Financial Information. A reconciliation of FFO per
share, FFO as Adjusted per share and AFFO per share to GAAP Net income
per share can be found on Attachment 16(D) of the Company’s fourth
quarter Supplemental Financial Information. Non-GAAP financial measures
and other terms, as used in this earnings release, are defined and
further explained on Attachments 16(A) through 16(D), “Definitions and
Reconciliations,” of the Company’s fourth quarter Supplemental Financial
Information.

Supplemental Information

The Company offers Supplemental Financial Information that provides
details on the financial position and operating results of the Company
which is available on the Company’s website at ir.udr.com.

Conference Call and Webcast Information

UDR will host a webcast and conference call at 1:00 p.m. Eastern Time on
February 13, 2019 to discuss fourth quarter and full-year results,
recent events, 2019 guidance and management’s views on the economy and
the apartment industry. The webcast will be available on UDR’s website
at ir.udr.com.
To listen to a live broadcast, access the site at least 15 minutes prior
to the scheduled start time in order to register, download and install
any necessary audio software.

To participate in the teleconference dial 877-705-6003 for domestic and
201-493-6725 for international. A passcode is not necessary.

A replay of the conference call will be available through March 13,
2019, by dialing 844-512-2921 for domestic and 412-317-6671 for
international and entering the confirmation number, 13686346, when
prompted for the passcode.

A replay of the call will be available for 30 days on UDR’s website at ir.udr.com.

Full Text of the Earnings Report and
Supplemental Data

The full text of the earnings report and Supplemental Financial
Information will be available on the Company’s website at ir.udr.com.

Attachment 16(B)

UDR, Inc.
Definitions
and Reconciliations
December 31, 2018
(Unaudited)

Funds from Operations as Adjusted (“FFO as Adjusted”) attributable to
common stockholders and unitholders: The Company defines FFO as
Adjusted attributable to common stockholders and unitholders as FFO
excluding the impact of acquisition-related costs and other
non-comparable items including, but not limited to, prepayment
costs/benefits associated with early debt retirement, gains or losses on
sales of non-depreciable property and marketable securities, deferred
tax valuation allowance increases and decreases, casualty-related
expenses and recoveries, severance costs and legal costs.

Management believes that FFO as Adjusted is useful supplemental
information regarding our operating performance as it provides a
consistent comparison of our operating performance across time periods
and allows investors to more easily compare our operating results with
other REITs. FFO as Adjusted is not intended to represent cash flow or
liquidity for the period, and is only intended to provide an additional
measure of our operating performance. The Company believes that net
income/(loss) attributable to common stockholders is the most directly
comparable GAAP financial measure to FFO as Adjusted. However, other
REITs may use different methodologies for calculating FFO as Adjusted or
similar FFO measures and, accordingly, our FFO as Adjusted may not
always be comparable to FFO as Adjusted or similar FFO measures
calculated by other REITs. FFO as Adjusted should not be considered as
an alternative to net income (determined in accordance with GAAP) as an
indication of financial performance, or as an alternative to cash flows
from operating activities (determined in accordance with GAAP) as a
measure of our liquidity. A reconciliation from net income attributable
to common stockholders to FFO as Adjusted is provided on Attachment 2.

Funds from Operations (“FFO”) attributable to common stockholders and
unitholders: The Company defines FFO attributable to common
stockholders and unitholders as net income/(loss) attributable to common
stockholders (computed in accordance with GAAP), excluding impairment
write-downs of depreciable real estate or of investments in
non-consolidated investees that are driven by measurable decreases in
the fair value of depreciable real estate held by the investee, gains or
losses from sales of depreciable property, plus real estate depreciation
and amortization, and after adjustments for noncontrolling interests,
unconsolidated partnerships and joint ventures. This definition conforms
with the National Association of Real Estate Investment Trust’s
definition issued in April 2002. In the computation of diluted FFO, if
OP Units, DownREIT Units, unvested restricted stock, unvested LTIP
units, stock options, and the shares of Series E Cumulative Convertible
Preferred Stock are dilutive, they are included in the diluted share
count.

Management considers FFO a useful metric for investors as the Company
uses FFO in evaluating property acquisitions and its operating
performance and believes that FFO should be considered along with, but
not as an alternative to, net income and cash flow as a measure of the
Company’s activities in accordance with GAAP. FFO does not represent
cash generated from operating activities in accordance with GAAP and is
not necessarily indicative of funds available to fund our cash needs. A
reconciliation from net income/(loss) attributable to common
stockholders to FFO is provided on Attachment 2.

Held For Disposition Communities: The Company defines Held for
Disposition Communities as those communities that were held for sale as
of the end of the most recent quarter.

Joint Venture Reconciliation at UDR’s weighted average ownership
interest:

In thousands

4Q 2018

YTD 2018

Income/(loss) from unconsolidated entities

(5,055

)

Management fee

1,235

4,891

Interest expense

10,686

40,503

Depreciation

16,040

61,871

General and administrative

130

536

West Coast Development JV Preferred Return – Attachment 12(B)

(951

)

(4,078

)

Developer Capital Program – Other (excludes Alameda Point Block 11)

(3,614

)

(9,713

)

Other (income)/expense

740

1,468

Total Joint Venture NOI at UDR’s Ownership Interest

24,302

90,423

Net Operating Income (“NOI”): The Company defines NOI as rental
income less direct property rental expenses. Rental income represents
gross market rent and other revenues less adjustments for concessions,
vacancy loss and bad debt. Rental expenses include real estate taxes,
insurance, personnel, utilities, repairs and maintenance, administrative
and marketing. Excluded from NOI is property management expense which is
calculated as 2.75% of property revenue to cover the regional
supervision and accounting costs related to consolidated property
operations, and land rent.

Management considers NOI a useful metric for investors as it is a more
meaningful representation of a community’s continuing operating
performance than net income as it is prior to corporate-level expense
allocations, general and administrative costs, capital structure and
depreciation and amortization and is a widely used input, along with
capitalization rates, in the determination of real estate valuations. A
reconciliation from net income attributable to UDR, Inc. to NOI is
provided below.

In thousands	4Q 2018			3Q 2018			2Q 2018			1Q 2018			4Q 2017
Net income/(loss) attributable to UDR, Inc.	$	82,139		$	18,610		$	20,601		$	81,756		$	69,280
Property management		7,280			7,240			7,057			6,888			6,878
Other operating expenses		3,952			3,314			2,825			2,009			3,050
Real estate depreciation and amortization		106,469			107,881			106,520			108,136			109,401
Interest expense		38,226			34,401			31,598			29,943			34,211
Casualty-related charges/(recoveries), net		(243	)		678			746			940			586
General and administrative		10,955			11,896			12,373			11,759			11,590
Tax provision/(benefit), net		70			158			233			227			(1,065	)
(Income)/loss from unconsolidated entities		(36	)		1,382			2,032			1,677			(19,666	)
Interest income and other (income)/expense, net		(1,660	)		(1,188	)		(1,128	)		(2,759	)		(548	)
Joint venture management and other fees		(2,935	)		(2,888	)		(3,109	)		(2,822	)		(2,764	)
Other depreciation and amortization		1,616			1,682			1,684			1,691			1,648
(Gain)/loss on sale of real estate owned, net of tax		(65,897	)		–			–			(70,300	)		(41,272	)
Net income/(loss) attributable to noncontrolling interests		7,476			1,648			1,843			7,469			6,347
Total consolidated NOI	$	187,412		$	184,814		$	183,275		$	176,614		$	177,676

Forward Looking Statements

Certain statements made in this press release may constitute
“forward-looking statements.” Words such as “expects,” “intends,”
“believes,” “anticipates,” “plans,” “likely,” “will,” “seeks,”
“estimates” and variations of such words and similar expressions are
intended to identify such forward-looking statements.

Contacts

UDR, Inc.
Chris Van Ens, 720-348-7762

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