UDR, Inc. Q3 FY2024 earnings call

Growth Drivers - Innovation: Value-add initiatives have consistently grown in the high single-digit range, adding 50 or more basis points annually to same-store revenue growth. - Customer Experience: The customer experience project uses data from daily touch points to enhance the living experience, improving retention and lowering turnover costs. - Capital-Light Mode: Maintains an investment-grade balance sheet with substantial liquidity, positioned to take advantage of growth opportunities. ### Regional Trends - East Coast was the strongest region in Q3 with healthy demand and low new supply. - West Coast performed better than expected year-to-date, supported by return to office mandates and low new supply. - Sunbelt markets lagged coastal markets, with pricing stability expected in some markets by mid-2025 and later in others. ### Financial Results - Third quarter year-over-year same-store revenue and NOI growth were 1.2% and 0.8% respectively. - October blended lease rate growth was roughly flat, with like-term growth around positive 1%. - Resident turnover was nearly 200 basis points below prior year and over 600 basis points better than 10-year average.

The company's segments showed varying performances. The East Coast, comprising approximately 40% of NOI, had a third quarter weighted average occupancy of 96.5%, nearly 4% blended lease rate growth, and approximately 2.5% year-over-year same-store revenue growth. The West Coast, making up around 35% of NOI, had a 96.3% occupancy, slightly higher than 2% blended lease rate growth, and approximately 2% same-store revenue growth. The Sunbelt, constituting roughly 25% of NOI, had a 96.1% occupancy, negative 2% blended lease rate growth, and negative 1.5% year-over-year same-store revenue growth.

Full Year 2024 - Raised full year FFOA per share guidance to $2.47 to $2.49. - Fourth quarter FFOA per share guidance $0.62 to $0.64. ### Same-Store Growth - Raised same-store revenue growth midpoint to 2.2% from 2.0%, driven by blended lease rate growth, occupancy, bad debt, and innovation. - Lowered same-store expense growth midpoint to 4.4% due to constrained insurance, repair and maintenance, and real estate tax growth.

• Macro volatility, election uncertainty, and Fed's interest rate path. - Supply/demand imbalances in Sunbelt markets. - Regulatory restrictions on bad debt collection affecting credit quality of residents.

Q: How do you think other income growth will be in 2025 compared to 2024?

A: Mike Lacy said other income growth was ~5% in 3Q, and he anticipates it to be in the 70% range next year, with initiatives like WiFi rollout contributing. Joe Fisher added customer experience and fraud prevention have material impacts but are more dispersed.

Q: How do we think about the debt and preferred equity book in 2025?

A: Joe Fisher said they'll likely maintain or fluctuate the balance, with opportunities in operating recap and redeploying within the DPE program.

Q: When do you expect pricing power to return in Sunbelt markets?

A: Mike Lacy said it looks like it's stabilizing, with supply-demand aspects in balance, and job growth being a variable, but expecting stabilization by mid-2025 in some markets.

Q: What's the outlook on bad debt improvement going forward?

A: Joe Fisher said there was a benefit in 2024, with proactive screening expected to continue, but unlikely to return to long-term average due to regulatory restrictions.

Q: Thoughts on stock buybacks and capital allocation?

A: Joe Fisher said stock buybacks aren't on the menu at current prices, focusing on joint venture acquisitions, recycling within the DPE program, and OP unit transactions.