UDR's CEO Discusses Q3 2011 - Earnings Call Transcript

UDR, Inc. ( UDR)

Q3 2011 Earnings Call

October 31, 2011 11:00 am ET

Executives

Chris Van Ens – Vice President Investor Relations

Thomas W. Toomey – President, Chief Executive Officer & Director

Jerry A. Davis – Senior Vice President Operations

Warren L. Troupe – Senior Executive Vice President

Harry G. Alcock – Senior Vice President – Asset Management

Matthew T. Akin – Senior Vice President – Acquisitions & Dispositions

Analysts

Anthony Pallone – JP Morgan

Eric Wolfe – Citi

[Swaroop Yalla – Morgan Stanley]

Jana Galan – Bank of America Merrill Lynch

Rob Stevenson – Macquarie Capital

Derek Bower – UBS

Karin Ford – KeyBanc Capital Markets

Dave Bragg – Zelman & Associates

Alex Goldfarb – Sandler O’Neill

Stephen C. Swett – Morgan Keegan

Michael Salinsky – RBC Capital Markets

Robert W. Baird – Paula Poskon

[Handal St. Jewws – KBW]

Presentation

Operator

Welcome to UDR’s third quarter 2011 conference call. At this time all participants are in a listen only mode. Following the presentation there will be a question and answer session. (Operator Instructions). As a reminder, this call is being recorded today, October 31, 2011. I would now like to turn the call over to Chris Van Ens, Vice President of Investor Relations.

Chris Van Ens

Thank you for joining us for UDR’s third quarter financial results conference call. Our third quarter press release and supplemental disclosure package were distributed earlier today and posted to our website www.UDR.com. In the supplement we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg. G requirements.

I would like to note that statements made during this call which are not historical may constitute forward-looking statements. Although we believe the expectations reflected in these forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met. The discussion of risks and risk factors are detailed in this morning’s press release and included in our filings with the SEC. We do not undertake a duty to update any forward-looking statements.

When we get to the question and answer portion we ask that you be respectful of everyone’s time and limit your questions and follow up. Management will be available after the call for your questions that did not get answered on the call. I will now turn the call over to our President and CEO, Tom Toomey.

Thomas W. Toomey

Welcome to UDR’s third quarter conference call. On the call with me today are David Messenger, Chief Financial Officer and Jerry Davis, Senior Vice President of Operations who will discuss our results as well as senior officers Warren Troupe, Harry Alcock, and Matt Akin who will be available to answer questions during the Q&A portion of the call.

My comments will primarily focus on two topics: first, quarterly results and the overall state of UDR’s business now and moving into next year; and second, our expansion efforts over the past year, how our investments have performed, and what is in store moving forward. Following my comments David will discuss our financial results and Jerry will provide commentary on operations.

First, UDR’s business remains strong. The company generated robust same store revenue and net operating income growth of 5% and 7% respectively in the third quarter translating into 14% year-over-year increase in core FFO per share. While we are in a challenging and volatile macro environment, the effects on our business have been mitigated by the combination of declining home ownership rates, a multigenerational low in new supply, low turnover, and solid job growth amongst younger aged cohorts.

Late in the third quarter we saw a typical seasonal slowing in rental rate growth but as of yet have little evidence that this is anything but industry wide seasonality consistent with my many years in the business. We continue to push new leases and renewal rates with little effect on occupancy. The year-to-date rent growth we have realized in 2011 has provided us with initial visibility into revenue growth into early portions of 2012. Jerry will provide an overview of how our core markets are performing in his prepared remarks.

Second, we have grown and improved our overall portfolio within the last 12 months through a combination of acquisitions, developments, redevelopment and dispositions totaling a net investment of $2.7 billion. These strategic actions have resulted in our average portfolio rent for our wholly owned community increasing to $1,320 per home at the end of the third quarter. This is up from $1,150 per home in the second quarter 2010, or a 15% growth. And, the corridor between Boston and Washington DC, now comprises 36% of our net operating income while the west coast comprises 38% of our NOI.

First let’s discuss and focus and focus on the acquisitions. Our 2010 and 2011 acquisitions have targeted urban markets with favorable job formation in the renter cohort, low single home affordability and advantage multifamily supply and demand dynamics such as Manhattan, Boston, Washington DC, San Francisco, and southern California. Integrating these high quality assets into our portfolio has been a top priority. I am pleased to report that Jerry and his team have made great progress driving operating efficiencies at these assets and thereby creating significant value.

Before moving on to development and redevelopment, I’d like to say a couple of words on $1.2 billion of acquisitions we’ve completed in Manhattan during 2011. We are very encouraged by the improvement in operations and the rent increases we have achieved thus far in Manhattan. While we are just beginning our redevelopment efforts, I’m excited about the initial outperformance versus our pro forma expectations for the project and our entire portfolio there. Jerry will speak in more detail on the success we are achieving during his prepared remarks.

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