This REIT Focus is on UDR, Inc. ("UDR"), a publicly traded REIT that acquires, renovates, develops and manages primarily apartment properties and other commercial assets and owns or had ownership interests in 54,195 apartment homes including 2,887 apartment homes under construction. UDR's communities are located in CA, VA, NY, MA, FL, TN, MD and D.C. UDR owns a 100% general partner interest and a 94.9% limited partnership interest in its UpReit general partnership, United Dominion Realty, L.P.
As of 3/31/13, the average occupancy and monthly rent of its apartment portfolio was 95.5% and $1,448, respectively. UDR was originally formed in 1972 and is currently a Maryland Corporation. UDR is traded on the NYSE, is based in Highlands Ranch, CO. and is rated BBB by Standard & Poor's.
UDR has 250.5 million common shares outstanding and a market capitalization of approximately $6.51 billion. UDR has a well regarded and experienced management team that includes James D. Klingbeil, Chairman of the Board, Thomas W. Toomey, President and Chief Executive Officer, who joined the company in 2001 and Thomas M. Herzog, SVP and CFO.
Select financial data for UDR as of the 3/31/13 10Q and for the period 1/1-3/31/13 is as follows (in millions where applicable):
|Real Estate Assets, Gross||$8,181|
|Secured and Unsecured Debt||$3,499|
|Net Income Per Share||($0)|
|Cash Flow from Operations||$67|
|Unsecured Credit Facility ($900 with $170 used)||$730|
|Gross Real Estate Assets||43%|
|Dividend and Yield ($.94/sh.)||3.6%|
|First Quarter Revenue Per Above Annualized||$748|
|Less: Operating Expenses Annualized (excluding depreciation, amortization & interest expense, plus G&A expenses and other income)||$288|
|Annualized Net Operating Income 2013||$460|
|Projected Inflation Rate at 3.5%||x103.5%|
|Projected Forward NOI for Next Year||$476|
|Projected Cap Rate||6.5%|
|Projected Value of Real Estate Assets||$7,323|
|Add: Net Operating Working Capital||21|
|Add: Investment in Unconsolidated Joint Ventures (at book value)||491|
|Total Projected Asset Value||$7,835|
|Less: Total Debt Per Above||(3,499)|
|Projected Net Asset Value||$4,336|
|Shares Outstanding 264.2M (250.5M common stock shares, 3M Series E convertible preferred shares, 9.4M partnership units and 1.3M option shares )|
|Projected NAV Per Share||$16|
|Closing Market Price Per Share on 7/15/13||$25|
The gross real estate assets, debt, net income and funds from operations for the years 2009 through Q1 2013 are shown in the table below:
|Gross Real Estate Assets||$6,311||$6,748||$7,848||$8,054||$8,181|
|Funds From Operations||$184||$193||$273||$333||$92|
As shown above, our net asset value per share for UDR is $16 per share versus a market price of $25 per share. Current average cap rates for apartment properties per CBRE are in the 5% to 8% range, depending on the location and quality of the property. We have used a cap rate of 6.5% due to UDR's portfolio being primarily Class A properties and located in high barrier to entry (CA, MA and DC) and higher economic growth (TX and FL) markets.
UDR's strengths include; average leverage, experienced management team, diversified portfolio and high occupancy at 96%. Weaknesses include; low dividend yield of 3.6% and high stock price.
We do not recommend the purchase of this stock at the current price of $25/sh. and would only be a buyer at a significant discount to the current price. UDR is a well managed REIT; however, the stock is trading at a cap rate of approximately 4.9%, which we consider well below market cap rates for apartment properties.
A five year price chart of UDR is shown below:
REIT Focus Investment Summary
A summary of our 2013 REIT Focus reviews and investment recommendations is shown below:
|Date||REIT||Market Price Per Share at Analysis Date||REIT Focus Projected Price Per Share||Current Market Price Per Share-7/15/13||Stock Recommendation at VOM Issue|
|January 15, 2013||Camden Property Trust (NYSE:CPT)||$69||$40||$72||Do Not Buy|
|February 15, 2013||Hudson Pacific Properties (NYSE:HPP)||$22||$10||$21||Do Not Buy|
|March 15, 2013||CBL & Associates Properties, Inc. (NYSE:CBL)||$23||$20||$23||Buy|
|April 15, 2013||Essex Property Trust, Inc. (NYSE:ESS)||$155||$101||$165||Do Not Buy|
|May 15, 2013||Commonwealth REIT (NYSE:CWH)||$20||$22||$23||Buy|
|June 15, 2013||Douglas Emmett, Inc. (NYSE:DEI)||$25||$14||$25||Do Not Buy|
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.