UDR Inc. (UDR Quick QuoteUDR - Free Report) reported first-quarter 2023 funds from operations as adjusted (FFOA) per share of 60 cents, missing the Zacks Consensus Estimate by a whisker.

Revenues from rental income of $398.3 million, too, lagged the Zacks Consensus Estimate of $404.5 million.

Quarterly results reflect lower-than-anticipated revenues. A fall in occupancy and higher same-store expenses act as dampeners. Nonetheless, UDR benefited from a rise in blended lease rates and past accretive external growth investments. It also reaffirmed its 2023 outlook.

On a year-over-year basis, FFOA per share and revenues from rental income climbed 9.1% and 11.8%, respectively.

Per Tom Toomey, UDR’s chairman and CEO, “We are optimistic on the growth trajectory and resiliency of our business moving forward and continue to focus on what we can control: disciplined capital allocation to opportunistically create shareholder value, new and innovative initiatives to drive further margin expansion, and an investment-grade balance sheet with well-laddered maturities and plentiful liquidity.”

Inside the Headlines

In the reported quarter, same-store revenues (with concessions reported on a cash basis) increased 8.2% year over year. Same-store expenses were up 5.1%. Consequently, the same-store net operating income (NOI), with concessions reported on a cash basis, improved 9.5%.

UDR registered blended lease rate growth of 3.5% during the quarter.

The company recorded a residential bad debt reserve of $6.1 million in first-quarter 2023, down $2.6 million from fourth-quarter 2022. The figure was inclusive of $0.5 million related to its share from unconsolidated joint ventures.

The residential REIT’s weighted average same-store physical occupancy decreased 50 basis points year over year to 96.6%. Our estimate for the same was pegged at 96.7%.

Portfolio Activity

In the first quarter, UDR completed the construction of The MO, a $145 million, 300-home apartment community in Washington, DC. In addition, it achieved stabilization on two development communities — Vitruvian West Phase 3 in Dallas, TX, and The George Apartments in Philadelphia, PA.

UDR’s development pipeline totaled $187.5 million at the end of the reported quarter and was 41% funded. The active pipeline includes two communities for 415 homes.

At the end of the quarter, the company’s redevelopment pipeline of 1,623 homes aggregated $88.6 million and was 35% funded. This includes densification projects featuring the addition of 30 new apartment homes in one community.

The company’s Developer Capital Program investment aggregated $479.7 million with a weighted average return rate of 9.7% and a weighted average estimated remaining term of 3.5 years at the end of first-quarter 2023.

Balance Sheet Activity

As of Mar 31, 2023, UDR had $957.4 million of liquidity through a combination of cash and undrawn capacity on its credit facilities.

The total debt was $5.6 billion as of the same date, with no remaining consolidated maturities until 2024. In addition, net debt-to-EBITDAre declined to 5.7X in the first quarter from the year-ago quarter’s 6.4X.

UDR ended the first quarter with a weighted average interest rate of 3.25% and weighted average years to maturity of 6.3 years.

2023 Guidance

The company provided second-quarter 2023 outlook and reaffirmed its full-year guidance.

It expects second-quarter 2023 FFOA per share in the range of 60-62 cents. The Zacks Consensus Estimate for the same is pegged at 63 cents currently.

For the full year, FFOA per share was maintained in the range of $2.45-$2.53. The Zacks Consensus Estimate for the same is presently pegged at 2.50 cents, which lies within the guided range.

The company projects 5.5-7.5% year-over-year growth in same-store cash revenues and 6-8.5% growth in same-store NOI growth for 2023, remaining unchanged from its earlier projections.

Currently, UDR carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Residential REITs

Mid-America Apartment Communities, Inc. (MAA Quick QuoteMAA - Free Report) , commonly referred to as MAA, reported first-quarter 2023 core FFO per share of $2.28, surpassing the Zacks Consensus Estimate of $2.25. Moreover, the reported figure climbed 15.7% year over year.

This residential REIT’s quarterly results were driven by an increase in the average effective rent per unit for the same-store portfolio. MAA also raised its outlook for 2023 core FFO per share.

AvalonBay Communities, Inc. (AVB Quick QuoteAVB - Free Report) reported first-quarter 2023 core FFO per share of $2.57, beating the Zacks Consensus Estimate of $2.54 and our estimate of $2.51. Moreover, the figure climbed 13.7% from the prior-year quarter’s tally.

The quarterly results reflect a year-over-year increase in same-store residential rental revenues driven by solid lease rate growth. The same-store average rental revenue per occupied home and occupancy improved sequentially. AVB also raised its core FFO per share outlook for 2023.

Equity Residential’s (EQR Quick QuoteEQR - Free Report) first-quarter 2023 normalized FFO per share of 87 cents increased 13% year over year but narrowly missed the Zacks Consensus Estimate of 88 cents.

Results reflected continued healthy demand and lower-than-anticipated bad debt. EQR also noted that it experienced better payment and move-out activity related to delinquent residents than assumed in its February 2023 guidance.

However, higher expenses due to repair and maintenance work resulting from severe California rain storms, coupled with increased property-related legal and administrative expenditures, acted as a dampener. Also, there was a contraction in physical occupancy.

Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.