UDR(UDR) - 2019 Q4 - Annual Report

Part I Item 1. Business UDR, Inc. is a REIT owning and operating 148 multifamily apartment communities, focusing on strategic growth and operational excellence - UDR is a REIT specializing in multifamily apartment communities, with 148 communities and 47,010 apartment homes as of year-end 2019[24] - The company operates in two segments: Same-Store Communities and Non-Mature Communities/Other[29][31] 2019 Dividend Summary | Quarter | Declared per Share | Paid per Share | | :--- | :--- | :--- | | First | $0.3425 | $0.3225 | | Second | $0.3425 | $0.3425 | | Third | $0.3425 | $0.3425 | | Fourth | $0.3425 | $0.3425 | | Total | $1.3700 | $1.3500 | - Key 2019 highlights include a 10.1% increase in total revenues, 4.0% Same-Store NOI growth, acquisition of eight communities for $911.9 million, and three new development projects[33] - In 2019, the company issued $1.1 billion in senior unsecured notes and raised over $662 million from common stock offerings[39] UDR, Inc. 5-Year Acquisition & Disposition Summary | Year | Homes Acquired | Homes Disposed | Homes Owned (Year-End) | | :--- | :--- | :--- | :--- | | 2019 | 7,079 | — | 47,010 | | 2018 | — | 868 | 39,931 | | 2017 | 462 | 218 | 39,998 | | 2016 | 508 | 1,782 | 39,454 | | 2015 | 3,246 | 2,735 | 40,728 | Item 1A. Risk Factors The company faces significant risks related to real estate operations, indebtedness, tax compliance for REIT status, and corporate organization, including geographic concentration and interest rate fluctuations - Significant geographic concentration risk exists, with 52.7% of 2019 NOI from four major metropolitan areas[81] - Operational risks include challenges in renewing leases or re-letting units on favorable terms, impacting rental revenues[84] - Development and construction activities pose risks including financing difficulties, delays, cost overruns, and failure to achieve target occupancy or rental rates[92][94] - Financial risks include insufficient cash flow for debt service, refinancing challenges, and exposure to changing interest rates, particularly with the LIBOR transition[142][146][147] - A primary tax risk is the potential failure to qualify as a REIT, leading to corporate income tax and loss of dividend deductions[157][158] - Charter provisions limit individual stock ownership to 9.9% to maintain REIT status, which may also prevent a change of control[180] Item 1B. Unresolved Staff Comments The company has no unresolved comments from the Securities and Exchange Commission staff - No unresolved staff comments were reported[181] Item 2. Properties As of December 31, 2019, UDR's consolidated portfolio included 148 apartment communities with 47,010 homes, with detailed breakdowns provided for both UDR and its Operating Partnership UDR, Inc. Real Estate Portfolio Summary (as of Dec 31, 2019) | Metric | Value | | :--- | :--- | | Total Communities | 148 | | Total Apartment Homes | 47,010 | | Total Real Estate Owned (at cost) | $12.60 billion | | Average Physical Occupancy | 96.4% | United Dominion Realty, L.P. Real Estate Portfolio Summary (as of Dec 31, 2019) | Metric | Value | | :--- | :--- | | Total Communities | 52 | | Total Apartment Homes | 16,434 | | Total Real Estate Owned (at cost) | $3.88 billion | | Average Physical Occupancy | 96.7% | Item 3. Legal Proceedings The company is involved in ordinary course legal proceedings, with no expected material impact on financial condition or results - Any liability from ordinary course legal proceedings is not expected to materially affect the company's financial condition or results[189] Item 4. Mine Safety Disclosures This section is not applicable to the company's operations - This item is not applicable to the company[190] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities UDR's common stock trades on the NYSE, with details on common and preferred stock, OP Units, 2019 distribution tax classification, and share repurchase program activity - UDR's common stock trades on the NYSE under symbol "UDR", with 294,631,463 shares outstanding as of February 17, 2020[192] - For tax purposes, 73% of 2019 distributions were classified as ordinary income[193] - No public trading market exists for Operating Partnership (OP) Units, with UDR and affiliates owning 95.7% of 184.1 million outstanding units as of December 31, 2019[201] Share Repurchase Program Activity (Q4 2019) | Period | Shares Purchased | Average Price Paid | Shares Remaining for Purchase | | :--- | :--- | :--- | :--- | | Oct 2019 | — | — | 14,439,000 | | Nov 2019 | — | — | 14,439,000 | | Dec 2019 | — | — | 14,439,000 | Item 6. Selected Financial Data This section provides five-year selected consolidated financial data for UDR, Inc. and its Operating Partnership, highlighting key income, balance sheet, and cash flow metrics through 2019 UDR, Inc. Selected Financial Data (2018-2019) | Metric (in thousands, except per share) | 2019 | 2018 | | :--- | :--- | :--- | | Operating Data | | | | Rental income | $1,138,138 | $1,035,105 | | Net income attributable to common stockholders | $180,861 | $199,238 | | Diluted EPS | $0.63 | $0.74 | | Balance Sheet Data | | | | Total assets | $9,636,472 | $7,711,728 | | Total liabilities | $5,228,493 | $3,816,211 | | Cash Flow Data | | | | Cash from operating activities | $630,704 | $560,676 | United Dominion Realty, L.P. Selected Financial Data (2018-2019) | Metric (in thousands, except per unit) | 2019 | 2018 | | :--- | :--- | :--- | | Operating Data | | | | Rental income | $441,773 | $431,920 | | Net income | $103,995 | $231,485 | | Diluted EPS | $0.56 | $1.25 | | Balance Sheet Data | | | | Total assets | $2,398,745 | $2,304,590 | | Total liabilities | $1,032,859 | $818,701 | | Cash Flow Data | | | | Cash from operating activities | $255,093 | $255,668 | Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management provides a detailed analysis of 2019 financial condition and operational results for UDR, Inc. and its Operating Partnership, covering income, NOI, capital markets activities, and segment performance UDR, Inc. MD&A UDR's 2019 net income decreased due to lower property sale gains, despite strong operational performance with 10.4% total property NOI growth and significant capital market activities - Net income attributable to common stockholders decreased from $199.2 million in 2018 to $180.9 million in 2019, primarily due to lower gains on real estate sales[318] Property NOI Performance (2018 vs 2019) | Category (in thousands) | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Same-Store NOI | $690,443 | $663,762 | 4.0% | | Non-Mature Communities/Other NOI | $117,860 | $68,353 | 72.4% | | Total Property NOI | $808,303 | $732,115 | 10.4% | - Same-Store NOI grew 4.0%, driven by a 3.6% increase in rental income from higher rates and other income, with stable physical occupancy at 96.9%[328] - Cash used in investing activities significantly increased to $1.7 billion in 2019 from $113.5 million in 2018, primarily due to property acquisitions[263] - The company issued $1.1 billion in senior unsecured notes, using proceeds to repay $700.0 million of higher-rate notes[250][251][256] FFO, FFOA, and AFFO Per Diluted Share | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | FFO per share | $2.03 | $1.93 | $1.83 | | FFOA per share | $2.08 | $1.96 | $1.87 | | AFFO per share | $1.92 | $1.80 | $1.72 | United Dominion Realty, L.P. MD&A The Operating Partnership's 2019 net income decreased due to fewer property sales, despite 1.8% total property NOI growth and its role as guarantor for UDR, Inc.'s unsecured debt - Net income attributable to OP unitholders decreased to $102.2 million in 2019 from $229.8 million in 2018, primarily due to the absence of real estate sale gains[393] Operating Partnership Property NOI Performance (2018 vs 2019) | Category (in thousands) | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Same-Store NOI | $300,158 | $289,832 | 3.6% | | Non-Mature Communities/Other NOI | $22,848 | $27,548 | (17.1)% | | Total Property NOI | $323,006 | $317,380 | 1.8% | - Same-Store NOI increased 3.6%, driven by a 3.5% rise in property rental income from higher rates and other income[401][402] - The Operating Partnership guarantees UDR, Inc.'s $1.1 billion revolving credit facility, $500 million commercial paper program, $350 million term loan, and all outstanding medium-term notes[385][854] Item 7A. Quantitative and Qualitative Disclosures about Market Risk This section incorporates market risk disclosures from Item 7, primarily focusing on interest rate risk, where a 100 basis point increase would raise annual interest expense by approximately $3.5 million - The company faces interest rate risk; a 100 basis point increase would raise annual interest expense by approximately $3.5 million on its $378.6 million variable rate debt as of December 31, 2019[314] - Derivative financial instruments, including interest rate swaps and caps, are used to manage interest rate risk, typically designated as cash flow hedges[316] Item 8. Financial Statements and Supplementary Data This item refers to the full consolidated financial statements and supplementary data for UDR, Inc. and United Dominion Realty, L.P., starting on page F-1 - Consolidated financial statements and related schedules for UDR, Inc. and United Dominion Realty, L.P. are attached, with an index on page F-1[417] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting principles, financial disclosure, or auditing scope - No changes in or disagreements with accountants were reported[418] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019, with an unqualified audit opinion from Ernst & Young LLP - The CEO and CFO concluded that disclosure controls and procedures were effective as of December 31, 2019[422] - Management concluded internal control over financial reporting was effective, with Ernst & Young LLP issuing an unqualified audit opinion on UDR, Inc.'s controls[423][424] - No material changes to internal control over financial reporting occurred during the fourth fiscal quarter[425] Item 9B. Other Information The company reports no other information for this item - No other information was reported for this item[426] Part III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2020 proxy statement - Information is incorporated by reference from the company's definitive proxy statement for the 2020 Annual Meeting of Stockholders[429] Item 11. Executive Compensation Information on executive and director compensation is incorporated by reference from the 2020 proxy statement - Information is incorporated by reference from the company's definitive proxy statement for the 2020 Annual Meeting of Stockholders[431] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and equity compensation plans is incorporated by reference from the 2020 proxy statement - Information is incorporated by reference from the company's definitive proxy statement for the 2020 Annual Meeting of Stockholders[432] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2020 proxy statement - Information is incorporated by reference from the company's definitive proxy statement for the 2020 Annual Meeting of Stockholders[433] Item 14. Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the 2020 proxy statement - Information is incorporated by reference from the company's definitive proxy statement for the 2020 Annual Meeting of Stockholders[434] Part IV Item 15. Exhibits, Financial Statement Schedules This section lists all documents filed as part of the Form 10-K, including an index to consolidated financial statements, schedules, and exhibits - This item provides an index to the Financial Statements (page F-1), Financial Statement Schedules (page S-1), and all Exhibits filed with the report[437][438] Item 16. Form 10-K Summary The company has not provided a summary in this optional section of the Form 10-K - No summary has been provided in this optional section[457]