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    UDR
    Earnings call· Jun 2026(Q2 FY26)

    UDR Q2 FY26 earnings call UDR

    Jul 28, 2026 Source

    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

    5

    • 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

    3

    • 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

    9
    CategoryTargetConfidence
    Full-year 2026 Same-Store Revenue Growth
    0.75% to 2%
    high materiality
    High
    Full-year 2026 Same-Store Expense Growth
    3.25%
    medium materiality
    High
    Full-year 2026 Same-Store NOI Growth
    Increased by 50 basis points
    high materiality
    High
    Full-year 2026 FFOA per share
    $2.53
    high materiality
    High
    Q3 FFOA per share
    $0.63 to $0.65
    medium materiality
    High
    Second Half 2026 Blended Lease Rate Growth
    1.5% to 2%
    medium materiality
    High
    Occupancy
    mid-96% range
    medium materiality
    High
    Innovation Income Growth
    mid-single-digit growth
    low materiality
    High
    Debt and Preferred Equity Portfolio Balance
    $250 million to $300 million
    high materiality
    High

    Segment performance

    11
    SegmentRevenueYoYQoQMargin
    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%
    		————

    Operational metrics

    44
    FFOA per share
    $0.64Achieved high end of guidance, exceeded consensus
    Q2 FY26

    Increased $0.02 per share versus Q1, primarily driven by higher NOI.

    Same-store revenue growth
    1.8%YoY
    Q2 FY26

    Exceeded outlook.

    Blended lease rate growth
    2.1%50 bps acceleration vs Q1
    Q2 FY26

    Exceeded the high end of the 1.5% to 2% range.

    Innovation income growth
    mid-single-digit
    Q2 FY26

    Continued to bolster results.

    Occupancy
    mid-96%
    Q2 FY26

    Remained healthy.

    Delinquency contribution to revenue growth
    60
    Q2 FY26

    Reflective of focus on attracting and retaining high-quality residents.

    Resident retention
    60%140 bps better YoY
    Q2 FY26

    Marked an all-time seasonal high, supported occupancy and improved bad debt.

    Same-store expense growth
    2.6%
    Q2 FY26

    Constrained, demonstrating value created by customer experience and platform scalability.

    Apartment homes managed per associate
    43
    Q2 FY26

    Industry-leading efficiency.

    Associate turnover rate
    19%
    Q2 FY26

    Substantially better than the industry norm, reflecting engaging employee experience.

    Share repurchase program expansion
    30 million
    Q2 FY26

    Expanded program to approximately 30 million shares.

    Shares repurchased in Q2
    5.5 million
    Q2 FY26

    Part of taking advantage of public versus private market arbitrage.

    Total shares repurchased since Sep 2025
    11.5 million
    Since Sep 2025

    Total repurchase activity since September 2025.

    Debt and preferred equity portfolio balance
    $380 million
    End Q2 FY26

    Balance at the end of the second quarter.

    DPE dilution impact
    $0.01 per share
    Ongoing

    Initial dilution for each $100 million not redeployed into the DPE business.

    DPE book size (average)
    $300 million to $350 millionvs $550 million last year
    FY26 average

    Average balance for 2026, down from $550 million last year.

    DPE book size (per share)
    $0.10
    FY26

    Size of the DPE book for 2026 on a per share basis.

    Liquidity
    Nearly $1 billion
    Q2 FY26

    Highly liquid balance sheet, fully capable of funding capital needs.

    Turnover rate (historical)
    50%-51%
    2010-2019

    Typical turnover rate historically.

    Turnover rate (last year)
    38%-39%
    FY25

    Hovered around this rate last year.

    Turnover rate (current trend)
    37%-38%150-200 bps better than expected
    FY26 trending

    Currently trending better than expected for the year.

    Turnover rate vs peers
    400-500
    Last couple of years

    UDR is outpacing peers in turnover reduction.

    Migration patterns (leaving MSA)
    19%Down from 23% last year
    Q2 FY26

    Fewer people leaving the MSA.

    Migration patterns (move-ins)
    26%vs 27% last year
    Q2 FY26

    Consistent with prior year.

    Residents per home
    1.8
    Q2 FY26

    No doubling up observed.

    Rent-to-income ratios
    21%
    Q2 FY26

    Low across the portfolio.

    Cancels and denials
    35%-37%vs >40% prior year
    Q2 FY26

    Lower than a year prior, indicating stickier applications.

    Renewal offers sent
    5%-5.5%
    Q3 FY26

    Expected range for Q3.

    Renewal negotiation
    100
    Q3 FY26

    Negotiating around this amount.

    Achieved renewal rate (expected)
    ~4%
    Q3 FY26

    Expected for the third quarter.

    Sunbelt new lease growth
    -7% to -7.5%
    Q2 FY26

    New lease growth in the Sunbelt region during Q2.

    Sunbelt new lease growth (month-to-date)
    -5.5% to -6%
    July FY26

    Month-to-date trend for July, showing improvement from Q2.

    Average deposits
    $760Up 20% from $640
    Q2 FY26

    Increased due to improved processes.

    Credit screening score
    730Up 20 points from 700
    Q2 FY26

    Improved due to enhanced credit screening.

    Collections
    99%-99.1%
    H2 FY26 expected

    Expected for the back half of the year, consistent and better than expected.

    Corporate housing leases
    500-600
    Q2 FY26

    Relatively small book of business, spread across coastal markets.

    Corporate housing as % of homes
    1%-2%
    Q2 FY26

    Small portion of total homes.

    San Francisco office leasing
    6.4 million
    YTD FY26

    On pace to reach a 30-year high.

    New York office leasing
    9.5 million
    Q1 FY26

    Strongest quarterly total since 2019.

    New York wage growth
    5%-6%
    Q2 FY26

    Supporting demand and renewals in Manhattan.

    Boston out-migration reduction
    8%-10%
    Q2 FY26

    Out-migration is down, contributing to positive momentum.

    Austin out-migration reduction
    8%-10%
    Q2 FY26

    Out-migration is down, contributing to positive momentum.

    San Francisco out-migration reduction
    5%YoY
    Q2 FY26

    Out-migration is down, contributing to positive momentum.

    DPE yield vs alternative investments
    400
    Ongoing

    Alternative investments like acquisitions or redevelopment have an approximately 400 basis points lower initial yield than DPE, but offer long-term growth.

    Industry KPIs

    9
    MetricValueDetails
    Turnover rate37%-38%%
    Occupancy rateMid-96%%
    Blended rent change2.1%%
    New supply backdrop—
    Renewal rent change4%%
    New lease rent changeFlat%
    Same store revenue growth1.8%%
    Development starts lease up—
    Bad debt uncollectible revenue60bps

    Deals & partnerships

    3
    Multiple buyersSale 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 sellersAcquisition 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 PartnersJoint 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

    2
    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 Developmentunderway

    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

    4
    Sunbelt supply pressuresQ2 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 dilutionNext 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 demandQ2 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 growthQ2 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

    5

    Sunbelt Blended Lease Rate Growth

    Next quarter
    CurrentNegative 2% in Q2 FY26, improving to -1.5% in July
    TargetContinued 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%.

    Q&A highlights

    5

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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%.

    03

    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.

    04

    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.

    05

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.