UDR (UDR) Q1 FY26 earnings call: guidance and Q&A

Will occupancy be driven higher in H2, or have full-year targets been adjusted? What's the strategy for the next 3-6 months?

Management typically allows occupancy to dip slightly in Q2/Q3 due to higher demand, focusing on rent growth, then inches it up by 10-20 bps in Q4.

“The way we typically do it is we let occupancy come down in the second and third quarter when we have more demand, more traffic coming through the door. And so we get a bit more aggressive on our rents at that period of time. And typically, what you can expect from us, especially what you're saying with the fourth quarter, drive it up a little bit higher.”

asked by Eric Wolfe · answered by Michael Lacy

Can you provide April trends and highlight any standout markets, especially regarding acceleration/deceleration?

April trends continued Q1 strength, with blended lease rate growth in the 1.6% range. Coastal markets (75% of NOI) accelerated to 2.1% blends in April, while Sunbelt markets retreated slightly to -2.5% in April. Renewal offers are 5%-5.5% through July.

“Specific to April, I'll tell you, more importantly, the second quarter, the strength experienced during the first quarter has continued in that 1.6% range and we are still on track with that 1.5% to 2% blend that we expect in the first half of this a few observations on data is, I'd say, number one, our coastal regions, which make up about 75% of our NOI, continue to experience the highest growth, about 20.1% blends in April, which is an acceleration from 2.8% during the first quarter.”

asked by James Feldman · answered by Michael Lacy

What is the outlook for future DPE payoffs, given some happened sooner than expected?

DPE book is declining due to successful repayments, opportunities to gain control of assets (like Portland), and the market being more competitive. The company prioritizes stock buybacks due to attractive valuation. DPE balance is expected to be around $300 million by year-end from high $300 million range in Q1.

“So directionally for you, if I was going to help you out with your modeling here, looking at the DPE balance in the high $300 million range at the end of the first quarter, I'd point you towards $300 million or so at the end of the year.”

asked by Steve Sakwa · answered by David Bragg

Is the monthly dividend a 'gimmick' to attract retail shareholders, and would a larger company attract a different shareholder base?

The monthly dividend is part of a broader strategy to diversify capital sources and attract high net worth/family office investors who value frequent cash distributions. It leverages UDR's 53-year dividend track record and the apartment industry's relatability. While size can lead to re-indexing, the focus is on accretive growth and excellence in operations/capital allocation, not just size.

“I'm really excited about the monthly dividend. Why? Because this is a topic that came up on our radar almost 2 years ago when we were looking at diversifying our capital sources and that includes diversifying our shareholder base, that would end up being drawn to our stock.”

asked by John Kim · answered by Tom Toomey

Is there an 'efficient frontier' for turnover, and could too low turnover (e.g., 29%) hinder new lease rate growth?

Low turnover with rent increases generates more cash flow than high turnover. High-quality residents over longer periods are preferred. The company aims to improve the quality of its rent roll. Turnover has decreased significantly (800 bps better than peer average since 2023), and there's still opportunity for improvement and driving renewal growth.

“what it turns out to be is high-quality residents over longer periods of time generate more cash flow than a high-turn resetting the market, et cetera. So if you're in the cash flow business, you actually want low turnover taking rent increases.”

asked by Richard Anderson · answered by Tom Toomey

What's driving the softening in Sunbelt lease rate growth in April, is it temporary, and is it broad-based or specific?

The moderation is seen as a 'blip,' primarily in Florida and Nashville, due to market rents not moving up as expected. This led to more negotiation on renewals. Management expects market rents to recover in the summer as supply is absorbed.

“Right now, I would tell you, it's a little bit more specific to, say, Florida than it is in Texas. As well as even Nashville saw a little bit of a downtick, if you will. I think some of that has to do with market rents just not moving up as much as we would have expected over the last, call it, 30 to 45 days.”

asked by Austin Wurschmidt · answered by Michael Lacy

Can you share the cap rate range for the 4 dispositions and the effective cap rate for the Portland asset?

Disposed assets (average 38 years old, inferior rent growth outlook, above-average CapEx) sold at market cap rates in the mid-5% range. The Portland acquisition is expected to achieve a stabilized yield in the high 5% range after operational improvements.

“Pricing came in within a few percentage points of our expectations, market cap rate in the mid-5% range. Then as we think about Portland and the opportunity that we're excited about there, characterize that yield today is around a lot of work for Mike and team to do to get in and stabilize it and work his magic from an operational perspective will get us to a stabilized yield in the high 5% range.”

asked by John Pawlowski · answered by David Bragg