UDR(UDR) - 2020 Q2 - Quarterly Report

Explanatory Note Corporate Structure This report combines the quarterly filings for UDR, Inc., a real estate investment trust (REIT), and its subsidiary, United Dominion Realty, L.P. (the Operating Partnership or OP) - UDR, Inc. is a REIT and the parent company of United Dominion Realty, L.P. (the Operating Partnership), through which it conducts most of its business[11][12] - As of June 30, 2020, UDR, Inc. owned 95.3% of the total outstanding OP Units in the Operating Partnership, giving it control over day-to-day operations[13] PART I — FINANCIAL INFORMATION Item 1. Consolidated Financial Statements This section presents the unaudited consolidated financial statements for both UDR, Inc. and its subsidiary, United Dominion Realty, L.P., for the period ended June 30, 2020 UDR, INC. Consolidated Financial Statements UDR, Inc.'s financial statements show total assets of $9.56 billion as of June 30, 2020, with total revenues of $628.7 million and net income attributable to common stockholders of $60.9 million for the six months ended June 30, 2020 UDR, Inc. Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | :--- | | Total Assets | $9,564,471 | $9,636,472 | | Total real estate owned, net | $8,403,115 | $8,470,748 | | Cash and cash equivalents | $833 | $8,106 | | Total Liabilities | $5,315,060 | $5,228,493 | | Secured debt, net | $1,112,870 | $1,149,441 | | Unsecured debt, net | $3,653,934 | $3,558,083 | | Total Equity | $3,414,945 | $3,389,314 | UDR, Inc. Consolidated Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | | Total Revenues | $307,256 | $628,737 | | Operating Income | $91,777 | $130,731 | | Net Income Attributable to Common Stockholders | $56,709 | $60,864 | | Diluted EPS | $0.19 | $0.21 | UDR, Inc. Consolidated Statement of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $317,015 | $286,421 | | Net cash used in investing activities | ($161,894) | ($805,993) | | Net cash provided by/(used in) financing activities | ($165,536) | $334,704 | UNITED DOMINION REALTY, L.P. Consolidated Financial Statements The Operating Partnership (UDR, L.P.) reported total assets of $2.34 billion as of June 30, 2020, generating rental income of $217.4 million and net income attributable to OP unitholders of $43.5 million for the six months ended June 30, 2020 United Dominion Realty, L.P. Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | :--- | | Total Assets | $2,338,924 | $2,398,745 | | Total real estate owned, net | $2,031,639 | $2,078,592 | | Total Liabilities | $1,054,467 | $1,032,859 | | Secured debt, net | $99,082 | $99,071 | | Notes payable due to the General Partner | $655,619 | $637,233 | | Total Capital | $1,284,457 | $1,365,886 | United Dominion Realty, L.P. Consolidated Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- |\n| Rental Income | $105,201 | $217,366 | | Operating Income | $28,692 | $62,557 | | Net Income Attributable to OP Unitholders | $19,373 | $43,491 | | Net Income per OP Unit | $0.10 | $0.24 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant impact of the COVID-19 pandemic, noting strong rent collections despite challenges, and analyzes liquidity, capital resources, and operational results for both UDR, Inc. and the Operating Partnership - The COVID-19 pandemic has adversely affected residents' ability to pay rent, leading to eviction moratoriums and rent assistance programs, resulting in the company reserving approximately $9.0 million for uncollectible lease receivables in Q2 2020[330][334] - Despite the pandemic, multifamily rent collections remained strong, with collections for billed monthly rents at 98.6% for April, 97.6% for May, and 96.2% for June as of July 24, 2020[335] - In May 2020, the company sold two operating communities in Washington for combined gross proceeds of $142.6 million, resulting in a total gain of $61.3 million[367][368][417] UDR, Inc. Same-Store Community Performance vs. Prior Year | Period | Same-Store NOI Change | Same-Store Rental Income Change | Same-Store Operating Expense Change | | :--- | :--- | :--- | :--- | | Q2 2020 | -4.5% | -2.2% | +3.6% | | H1 2020 | -0.9% | +0.2% | +3.2% | UDR, Inc. Key Non-GAAP Performance Metrics (per diluted share/unit) | Metric | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | FFO | $0.51 | $0.54 | $1.04 | $1.05 | | FFOA | $0.51 | $0.52 | $1.05 | $1.02 | | AFFO | $0.47 | $0.48 | $0.98 | $0.96 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk from its variable-rate debt and refinancing needs for fixed-rate debt, with no material changes in market risk since the 2019 Annual Report on Form 10-K - The company's primary market risk is interest rate changes affecting its variable-rate debt and maturing fixed-rate debt[483] - As of June 30, 2020, there were no material changes to the company's market risk profile compared to what was disclosed in the 2019 Form 10-K[484] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2020, the CEO and CFO concluded that the disclosure controls and procedures for both UDR, Inc. and the Operating Partnership are effective[487] - There were no changes during the quarter that materially affected, or are reasonably likely to materially affect, the internal control over financial reporting[488] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various routine legal claims and litigation, none of which are expected to have a material adverse effect on its financial position or results of operations - The company states that it is not involved in any legal proceedings that are expected to have a material adverse effect on its business or financial condition[491] Item 1A. Risk Factors This section details significant risks to the company's business, including the COVID-19 pandemic, geographic concentration, reliance on debt financing, and the potential failure to qualify as a REIT - The COVID-19 pandemic is a primary risk, potentially leading to decreased occupancy, lower rental rates, and increased rent delinquencies due to job losses and economic uncertainty[493][494] - The company has significant geographic concentration, with approximately 51.9% of its H1 2020 NOI generated from the Washington D.C., Orange County, San Francisco Bay Area, and Boston markets, making it vulnerable to adverse regional economic conditions[498] - Risks related to indebtedness include insufficient cash flow to service debt, refinancing risk, and the potential for rising interest rates to increase costs, with the phase-out of LIBOR also noted as a potential risk[559][562][563] - Failure to maintain REIT status would result in adverse tax consequences, including being subject to federal income tax at regular corporate rates and the inability to deduct dividends paid to stockholders[575][576] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2020, the company did not issue shares for OP Unit redemptions or repurchase shares under its public program, but did repurchase 72 shares from employees for tax obligations - No shares were repurchased under the company's 15 million share repurchase program during the three months ended June 30, 2020, leaving 14.4 million shares available for future repurchase[602] - A total of 72 shares were repurchased from employees at an average price of $37.78 per share to satisfy statutory tax obligations on vested restricted stock[603] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - None[604] Item 5. Other Information There is no other information to report for the period - None[606]