Requested an update on current renewal notices and new lease growth trends for July, August, and September, referencing prior NAREIT comments.

Mike Lacey stated that current trends for July and August resemble recent months, with occupancy in the mid-96s and blends at the top end of the 1.5%-2% range. Renewal offers are still 5%-5.5%, negotiating around 100 bps, expecting ~4% achieved renewals for Q3. New lease growth is expected to be flat through September, which is more elongated than originally thought. “What I'm seeing today is occupancy in the mid-96s, a sustained level of blends currently at the top end of our second half range, and as a reminder, that's 1.5% to 2%, and we're seeing continued progress on lower turnover, better cost controls as we move forward.”

Asked for context on the current high retention rates, how the cycle compares to historic seasonality, and the outlook for 2027 and beyond given industry changes.

Mike Lacey explained UDR's turnover is significantly lower (37%-38% trending for FY26) than historical (50%-51%) and peers (400-500 bps better), driven by customer experience and data. Dave Bragg noted historically, higher turnover with strong job growth could lead to mid-single-digit revenue growth. Tom Toomey added that abating supply, a stable economy, and UDR's data-driven tools position the company well for a solid rental market runway and better 2027. “My characterization would be along the following: one, 50-year record high supply, a good, stable economy, competing product, not affordable. I mean the runway for the housing rental market looks very solid.”

Inquired about the cumulative annual FFO impact of the DPE wind-down, the timing of maturities, and whether taking back assets versus redemptions changes the math.

David Bragg clarified the DPE book shrunk from $725 million to $380 million, with a target of $250 million-$300 million by year-end 2026. He confirmed the $0.01 dilution per share for each $100 million not redeployed into DPE, noting it's contemplated in 2026 guidance. Maturities are staggered from 2027 through 2031, and the near-term impact mitigates over time as new investments grow. “So we've contemplated that already in our guidance for 2026, the path from $380 million at the end of the second quarter to the range of $250 million to $300 million. that's in guidance.”

UDR

UDR (UDR) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Real Estate· Jul 28, 2026

Source: earnings call transcript

Executive summary

UDR Q2 FY26 — Strong Coastal Market Performance and Raised Full-Year Guidance

UDR delivered strong Q2 FY26 results, exceeding expectations and leading to raised full-year guidance, driven by robust performance in coastal markets and effective data-driven operational strategies. The company is strategically winding down its Debt and Preferred Equity business to focus on investments with higher growth potential, while also appealing to a broader investor base through its new monthly dividend. Favorable industry fundamentals, including abating new supply and strong employment, are expected to support continued growth.

Highlights

Q2 same-store revenue growth of 1.8% exceeded expectations.
Blended lease rate growth accelerated by 50 basis points to 2.1% compared to Q1.
Resident retention reached an all-time seasonal high of 60%, 140 basis points better than prior year.
Coastal markets delivered strong blended lease rate growth of 3.8% on average.
Associate turnover rate was 19%, substantially better than the industry norm of 34%.

Concerns

Sunbelt markets experienced negative 2% blended lease rate growth in Q2.
The strategic wind-down of the Debt and Preferred Equity (DPE) portfolio is expected to result in initial dilution of $0.01 per share for each $100 million not redeployed into DPE.
Demand in the Washington D.C. MSA was weaker, with occupancy dropping to approximately 95% due to federal employment trends.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 Same-Store Revenue Growth	0.75% to 2% high materiality	FY26	High
Full-year 2026 Same-Store Expense Growth	3.25% medium materiality	FY26	High
Full-year 2026 Same-Store NOI Growth	Increased by 50 basis points high materiality	FY26	High
Full-year 2026 FFOA per share	$2.53 high materiality	FY26	High
Q3 FFOA per share	$0.63 to $0.65 medium materiality	Q3 · FY26	High
Second Half 2026 Blended Lease Rate Growth	1.5% to 2% medium materiality	H2 FY26	High
Occupancy	mid-96% range medium materiality	Rest of year · FY26	High
Innovation Income Growth	mid-single-digit growth low materiality	Rest of year · FY26	High
Debt and Preferred Equity Portfolio Balance	$250 million to $300 million high materiality	Year-end · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Coastal Markets (average) Represent 75% of UDR's NOI. Blended lease rate growth: 3.8%	—	—	—	—
San Francisco Strongest market in the portfolio, driven by little supply, return to office, revitalized shopping/dining, and low rent-to-income ratios. Office leasing on pace for 30-year high, tourism strengthening. Blended lease rate growth: ~13%Occupancy: High 97%	—	Strongest revenue growth	—	—
Orange County Delivered attractive results. Blended lease rate growth: >3%	—	—	—	—
New York Manhattan producing the highest growth, supported by tech sector, 5%-6% wage growth, and strong office leasing volume (9.5M sq ft in Q1 FY26). Blended lease rate growth: Mid-single-digitOccupancy: Mid-97%	—	—	—	—
Philadelphia Center City Philadelphia deal showing ~8% growth vs. market's ~4%. Blended lease rate growth: Mid-single-digitOccupancy: Mid-97%	—	—	—	—
Sunbelt Markets (average) Represent 25% of UDR's NOI. July month-to-date showing improvement to -1.5% from -2%. Blended lease rate growth: Negative 2%	—	—	—	—
Dallas Strongest Sunbelt market, experiencing pressure from supply but with strong demand drivers like Public Storage, Samsung, and AT&T headquarters moves. Occupancy: 97%Blends: Plus or minus negative 1%	—	—	—	—
Austin Showing best momentum in blended lease rate growth. Blended lease rate growth: Best momentumOccupancy: 97%	—	—	—	—
Florida (Orlando & Tampa) Experiencing momentum, with occupancy up from 96% in Q1. Blends improved from -2.5% to -3% in Q1. Occupancy: 97%Blends: Around negative 1.5%	—	—	—	—
Nashville Relatively small market (2.5% of NOI). Occupancy impacted by down units. Still seeing supply pressure, but major employers (Amazon, Oracle, Nissan stadium) are expanding presence, driving future demand. Occupancy: 95.5%Blends: Negative 2% to negative 3%	—	—	—	—
Washington D.C. MSA Demand weaker due to federal employment. D.C. proper (14th Street corridor) outperforming suburban assets, supported by biotech and national security sectors. UDR's portfolio occupancy is 96.5%-97% against market average. Occupancy: ~95%Blends: Negative 1% to negative 2%	—	—	—	—

Deals & partnerships

Multiple buyers Sale of apartment communities $295 million

Completed the sale of 1 apartment community and are under contract to sell 3 more. Assets selected based on inferior outlook for rent growth, CapEx requirements, and operational upside compared to retained portfolio.

Multiple sellers Acquisition of apartment communities

Opportunistically acquired 2 communities in Portland and 1 in Los Angeles through the debt and preferred equity program. These properties screened well on investment criteria including rent growth signal, CapEx, and operating upside potential.

Carmel Partners Joint venture for Columbus Square Assemblage in New York

Formed a new joint venture with Carmel Partners, who acquired MetLife's 50% interest in the Columbus Square Assemblage. UDR remains the operator of Columbus Square. The mezzanine loan sits as a second lien behind a first lien, with equity as the third layer. Expected to turn units on rehab units on term.

Capital programs

Northern Virginia Development (Phase II) underway

Start: Q2 FY26

Benefit:385 apartment homes

Commenced development on a 385-apartment-home community in Northern Virginia. This is a Phase II development located adjacent to an existing UDR apartment community which enhances efficiencies. Expected stabilized yield of mid-6%.

399 Iowa, Riverside, California Development underway

Ground-up development that is 2 quarters ahead of schedule for initial occupancy and 5% under budget. Expected stabilized yield of mid-6%.

Risks & headwinds

Sunbelt supply pressures Q2 FY26, ongoing

Negative 2% blended lease rate growth in Q2 FY26

Mitigation:Seeing some momentum in July with new lease growth improving; strong demand drivers in markets like Dallas and Nashville expected to help once supply pressures abate.

DPE wind-down dilution Next several years (2027-2031)

$0.01 per share initial dilution for each $100 million not redeployed into DPE

Mitigation:Impact mitigates over time as capital is redeployed into alternative investments (acquisitions, redevelopment) that offer long-term growth, despite lower initial yields.

Washington D.C. MSA weaker demand Q2 FY26, ongoing

Occupancy dropping to ~95%, blends -1% to -2%

Mitigation:UDR's portfolio in D.C. is performing relatively well (96.5%-97% occupancy) against the market average, with D.C. proper outperforming suburban assets due to biotech and national security sectors.

San Francisco expense growth Q2 FY26

12% increase on a same-store basis

Mitigation:This was mainly due to a specific property maturing and a successful prior-year tax appeal, not indicative of elevated general market expenses.

What to watch in Q3 FY26

Sunbelt Blended Lease Rate Growth

Next quarter

Current Negative 2% in Q2 FY26, improving to -1.5% in July

Target Continued momentum towards positive growth

Why it matters

Indicates recovery from supply pressures in key Sunbelt markets and overall portfolio performance.

Right now, I'd tell you month-to-date in July, it's a little bit better. So I'm seeing a little bit more momentum there. I'm seeing around 1%, call it, negative 1.5% versus that negative 2%.

Find out whether UDR delivers this. Inve re-checks your case every morning.

Q&A highlights

Asked about UDR's process for evaluating strategic options, specifically in light of recent speculation regarding AVD and EQR, and how this aligns with future business changes.

Tom Toomey declined to comment on market speculation but affirmed the Board and management's focus on UDR's strategy of operational excellence, capital allocation, and access to capital, emphasizing acting in shareholders' best interest.

“I'm not going to respond to the speculation, okay? What I am going to focus on and what the Board and management team is on our strategy and acting in the best interest of our shareholders.”

asked by Eric Wolfe · answered by Tom Toomey

2 min read 5 chapters

Detailed narrative

Strategic Capital Allocation and DPE Wind-down

UDR employs a data-driven approach to capital allocation, utilizing a 'heat map' to assess risk-adjusted returns. This strategy led to selling assets and repurchasing shares when the stock traded at a wide discount to private market values, enhancing long-term cash flow per share growth.

The company has made a strategic decision to wind down its Debt and Preferred Equity (DPE) business over the next several years, as returns are capped and alternative investments offer superior risk-adjusted returns and growth potential. The DPE portfolio has already shrunk from a peak of $725 million to $380 million at Q2 end, with an expected further reduction to $250 million-$300 million by year-end 2026.

Monthly Dividend Initiative and Corporate Stewardship

UDR distributed its first monthly dividend in Q2 FY26, a move aimed at diversifying its investor base by appealing to those who value frequent cash flow distributions. This initiative has received positive feedback from new capital channels. The company also continues to be recognized for its corporate stewardship, named a top workplace in real estate for the third consecutive year.

This is supported by an associate turnover rate of only 19%, significantly better than the industry norm of 34%.

Favorable Market Fundamentals and Supply Abatement

The apartment industry is benefiting from favorable fundamentals in 2026, including employment growth exceeding consensus expectations, housing affordability favoring renting over homeownership, and a continued abatement of new supply. This backdrop, combined with UDR's operational execution, contributed to better-than-expected Q2 results and a positive outlook for the remainder of 2026 and potentially 2027, as the impact of past supply pressures diminishes.

Coastal Markets Outperform Sunbelt

UDR's coastal markets, representing 75% of its Net Operating Income (NOI), led performance in Q2 with an average blended lease rate growth of 3.8%. San Francisco was a standout with approximately 13% blended lease rate growth and high 97% occupancy, while New York and Philadelphia also showed mid-single-digit growth.

In contrast, Sunbelt markets, comprising 25% of NOI, experienced negative 2% blended lease rate growth in Q2, though July trends indicate some momentum with new lease growth improving to -5.5% to -6% from -7% to -7.5% in Q2.

Demand Drivers and Resident Retention

Demand is supported by several factors, including a decrease in out-migration from key MSAs (e.g., Boston, Austin, San Francisco), stable residents per home at 1.8, and low rent-to-income ratios of 21%. UDR's focus on customer experience has driven resident retention to an all-time seasonal high of 60% and reduced turnover to 37%-38%, significantly better than peers.

Improved processes, such as enhanced credit screening (average score 730, up 20 points) and higher average deposits ($760, up 20%), have also led to lower cancels and denials (35%-37% vs. over 40% prior year) and better collections.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.