UDR

UDR said it was passing on any inflation costs to residents and emphasized it it was aggressively raising rents

UDR’s CEO: “. We like most every business are feeling the impact of inflation across our expense structure. Thus far, we have been able to pass these costs on to our residents in relatively short order”“Tom Toomey – Chairman and Chief Executive Officer: That said, we are fully aware of growing concerns over where the macro environment is trending and the challenges our business could face moving forward. Two areas to highlight include: first, elevated inflation. We like most every business are feeling the impact of inflation across our expense structure. Thus far, we have been able to pass these costs on to our residents in relatively short order given our standard 12-month lease structure.” (UDR, Inc. Q3 2022 Earnings Call, 10/27/2022)

UDR’s CEO said the company was continuing “to push rental rate growth” admitted it resulted in higher turnover.“Tom Toomey – Chairman and Chief Executive Officer: Specific to the third quarter, a portion of our elevated expense growth was anticipated as we continue to push rental rate growth, which resulted in higher turnover and elevated repair and maintenance cost. However, building a better 2023 rent roll at the expense of short-term cost pressures is the value of creating trade for a 70% margin business like ours.” (UDR, Inc. Q3 2022 Earnings Call, 10/27/2022)

A UDR executive told analysts it was achieving higher than historical average rent increases, resulting in record earnings. “Mike Lacy – Senior Vice President, Operations: Key components of these results and our demand drivers included: first, year-over-year effective blended lease rate growth remained firmly above historical norms at 13.1%. We traded a nominal amount of occupancy to achieve this rental rate growth, but also improved our 2023 rent roll and locked in more of our approximately 5% 2023 earning. This will be the highest earned in our history by at least 200 basis points. Second, our in-place residents are increasingly paying rent on time. Collection rates improved sequentially in the third quarter and the number of long-term delinquent residents in our portfolio continued to decline, which reduced our bad debt reserve and accounts receivable balances. Third, portfolio-wide rent-to-income ratios remain consistent with history in the low 20% range.” (UDR, Inc. Q3 2022 Earnings Call, 10/27/2022)

 UDR’s CEO said the company was “ trying to roll the rent roll up as strong as possible for ‘23.” “Tom Toomey – Chairman and Chief Executive Officer: Brad, this is Tom. I would emphasize the tie a couple of things together. I mean, Mike has done a fabulous job with respect to capturing the market rent that’s there. And you can see it in our numbers on a sequential basis with 4% – almost 5% revenue growth; second, nomination in the occupancy. So it was just trying to roll the rent roll up as strong as possible for ‘23. And when you walk into ‘23 and say, 5% already booked, we feel like we’re in a really good, strong position into that ‘23 window of no issues with the resident choosing the capital markets, yes.” (UDR, Inc. Q3 2022 Earnings Call, 10/27/2022)

A UDR executive agreed with an analysts assessment that the company was “pushing pretty hard on rent increases”

A Wall Street Analyst noted “you’re still pushing pretty hard on rent increases” and asked if that would continue.  “Steve Sakwa, Analuyst: Thanks. Hi, good morning. I guess maybe I wanted to start with Mike on just operations. And it sounds like you’re still pushing pretty hard on rent increases and occupancy has been very strong. And just trying to get your thoughts on kind of some of the looming dark clouds and potential slowdown and reduction in job growth? I guess how do you think about a potential pivot? And what are the sort of early warning signs you’d be looking to take your foot off the gas on rent increases and focus more on occupancy?” (UDR, Inc. Q3 2022 Earnings Call, 10/27/2022)

UDR responded “You’re right. We’ve been focused on this for a while now.” “Mike Lacy – Senior Vice President, Operations: Hey, Steve, that’s a great question. You’re right. We’ve been focused on this for a while now. in 2Q, 3Q really driving our too. As we move forward, we’re going to see a little bit more of the team increase going on that 9% to 10% range through December at this point. They feel like they are sticking. We’re not seeing a lot of negotiations at this point. The leverage will be on the market rent side, and we will see where that shakes out. So to your point on kind of those warning signs, I said in my prepared remarks, we see a lot of green lights still today. The one thing we’re watching that’s outside of that is just the cancel and denials. We have seen that increase a little bit. And that’s one of those warning signs that we will watch closely. But again, we’re seeing occupancy in that 96.5% to 97% range. So we feel comfortable about pushing right now. And we think that we have more tailwinds as we go into next year with that.” (UDR, Inc. Q3 2022 Earnings Call, 10/27/2022)

UDR said rising mortgage rates meant renting was still cheaper compared to owning a home

A UDR Executive noted that “due to rising mortgage rates, renting an apartment is approximately 50% less expensive than owning a home versus 35% less expensive pre-COVID.”“Mike Lacy – Senior Vice President, Operations: Employment and wage growth remains strong and we have seen no evidence to-date of residents choosing to double up. Fourth, traffic and applications remain above typical seasonal level, allowing us to continue to push rate growth. Fifth, concessions are de minimis across our portfolio, with exceptions being 1 to 2 weeks on average in specific submarkets of San Francisco, Washington, D.C. and Boston. And last, due to rising mortgage rates, renting an apartment is approximately 50% less expensive than owning a home versus 35% less expensive pre-COVID. During the third quarter, only 7% of residents that moved out did so to purchase a home. This is the lowest level we have seen and is 35% lower compared to a year ago” (UDR, Inc. Q3 2022 Earnings Call, 10/27/2022)

UDR told analysts that 75% of their behind rent tenants were now in the eviction process

UDR Said 75% of their behind rent tenants were now in the eviction process. “Joe Fisher – President and Chief Financial Officer: Yes. Hi Haendel. I will start and reverse on that one. So, we do expect improvement over time going from the mid-98% plus or minus collected on billed revenue. I can’t say necessarily is that going to occur next year. I think on the margin, it should because we are having success and whittling down those long-term delinquents. So, we have got a pretty active process on that of that excess kind of long-term delinquent we have today and say 75% of them are somewhere in the eviction process although eviction processes instead of being perhaps a 30 days to 60 days, in some cases, are more like four months to six months. And so we think we will continue to whittle that down and collections should improve and hopefully become more of a tailwind.” (UDR, Inc. Q3 2022 Earnings Call, 10/27/2022)