Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 7, 2012

 

 

UDR, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   1-10524   54-0857512

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

1745 Shea Center Drive, Suite 200,

Highlands Ranch, Colorado

  80129
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (720) 283-6120

Not Applicable

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 8.01. Other Events.

The financial results and related information of UDR, Inc. (the “Company” or “UDR”) for the quarter and full year ended December 31, 2011 are as follows:

Overview

The Company generated Funds from Operations (FFO) of $80.2 million or $0.35 per diluted share for the quarter ended December 31, 2011, as compared to $53.4 million or $0.28 per diluted share in the fourth quarter of 2010. Excluding all one-time items, the Company’s fourth quarter 2011 FFO-Core would have been $0.34 per diluted share. See the reconciliation below for further detail.

For the twelve-months ended December 31, 2011, UDR generated FFO of $1.28 per diluted share as compared to $1.09 per diluted share for the twelve-months ended December 31, 2010. Excluding all one-time items, the Company’s 2011 FFO-Core would have been $1.28 per diluted share. See the reconciliation below for further detail.

 

     Q4 2011     Q4 2010     YTD 2011     YTD 2010  

FFO- Core per diluted share

   $ 0.34      $ 0.28      $ 1.28      $ 1.13   

Acquisition-related costs

     (0.006     (0.001     (0.028     (0.016

JV financing and acquisition fee

     0.004        0.005        0.011        0.006   

Restructuring charges

     (0.001     (0.035     (0.006     (0.038

Storm-related expenses

     —          —          —          (0.004

Costs associated with debt extinguishment

     (0.002     —          (0.021     (0.007

Gain on sale of assets/marketable securities

     0.014        —          0.046        —     

Other

     —          0.025        —          0.027   

FFO- Reported per diluted share

   $ 0.35      $ 0.28      $ 1.28      $ 1.09   
  

 

 

   

 

 

   

 

 

   

 

 

 

A reconciliation of FFO to GAAP Net Income can be found below under the heading “Other Information.”

Operations

Same-store net operating income increased 7.7 percent year-over-year for the fourth quarter 2011 while same-store revenue increased 5.3 percent over the same period. Same-store physical occupancy decreased 40 basis points to 95.1 percent as compared to the prior year period. Same-store expenses increased 0.5 percent driven by an increase in utilities costs and real estate taxes. The rate of turnover increased to an annualized rate of 50 percent from 47 percent in the fourth quarter of 2010.

Summary Same-Store Results Fourth Quarter 2011 versus Fourth Quarter 2010

 

Region

   Revenue Growth/
Decline
    Expense
Growth/
Decline
    NOI Growth/
Decline
    % of Same-Store
Portfolio1
    Same-Store
Occupancy2
    Number of
Same-Store
Homes3
 

Western

     6.1     -2.1     10.1     38.0     94.6     11,801   

Mid-Atlantic

     4.6     1.5     5.9     30.4     95.8     10,130   

Southeastern

     4.6     3.6     5.2     23.3     94.9     12,272   

Southwestern

     6.2     -0.8     11.4     8.3     95.1     4,477   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     5.3     0.5     7.7     100.0     95.1     38,680   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1 

Based on QTD 2011 NOI.

2 

Average same-store occupancy for the quarter.

3 

During the fourth quarter, 38,680 apartment homes, or approximately 82 percent of 47,343 total apartment homes, were classified as same-store. The Company defines same-store as all multifamily communities owned and stabilized for at least one year as of the beginning of the most recent quarter.

 

1


Sequentially, the Company’s same-store NOI increased by 2.3 percent driven by increased revenues of 0.2 percent and a 3.9 percent decrease in same-store expenses during the fourth quarter of 2011.

For the twelve-months ended December 31, 2011, the Company’s same-store revenue increased 4.1 percent as compared to the prior year while expenses increased 1.4 percent, resulting in a same-store NOI increase of 5.6 percent as compared to the prior year period. Year-over-year occupancy decreased by 20 basis points to 95.5 percent.

Summary Same-Store Results YTD 2011 versus YTD 2010

 

Region

   Revenue Growth/
Decline
    Expense
Growth/
Decline
    NOI Growth/
Decline
    % of Same-Store
Portfolio1
    Same-Store
Occupancy2
    Number of
Same-Store
Homes3
 

Western

     4.5     0.1     6.6     37.5     95.0     11,361   

Mid-Atlantic

     4.2     1.6     5.5     31.0     96.2     10,130   

Southeastern

     3.4     3.0     3.7     23.0     95.2     11,901   

Southwestern

     4.3     0.8     6.8     8.5     95.7     4,477   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     4.1     1.4     5.6     100.0     95.5     37,869   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1 

Based on YTD NOI.

2 

Average same-store occupancy for YTD 2011.

3 

During 2011, 37,869 apartment homes, or approximately 80 percent of 47,343 total apartment homes, were classified as same-store. The Company defines same-store as all multifamily communities owned and stabilized for at least one year as of the beginning of the most recent year.

Technology Platform

Improving the Company’s operational efficiency, while increasing resident satisfaction, are the compelling factors for our continued investment in technology. The Company’s technology platform has gained acceptance and recognition from our residents as shown by the following utilization rates:

 

Established Technology Initiatives:

   December 2011     December 2010  

Resident payments received via ACH

     77     79

Service requests entered through MyUDR.com

     79     79

Move-ins initiated via an internet source

     57     62

Renewals completed electronically

     86     81

Development and Redevelopment Activity

As previously announced during the fourth quarter of 2011, the Company acquired land for its Village at Bella Terra development project in Huntington Beach, CA. The newly started community is projected to include 467 homes, cost $150 million and be completed in the second quarter of 2013.

In addition, the Company acquired a land parcel adjacent to its Vitruvian ParkSM development in Addison, TX for $4.7 million and a land parcel adjacent to its Garrison Square community in the Boston metro area for $4.6 million.

Joint Venture Investment Activity

As previously announced on December 21, 2011, the Company and its joint venture partner Kuwait Finance House (“KFH”) acquired 1301 Thomas Circle in Washington, D.C. for $153.8 million. The 292-home apartment community is located in the Logan Circle neighborhood near the 14th Street Corridor, is within minutes of the Mt. Vernon Square and McPherson Metro Stations and is near the Company’s wholly-owned Andover House community. The 10-story community was completed in 2006, is well-amenitized, has a 256-space parking garage and had an average monthly income per occupied home of $2,740 at the time of acquisition.

 

2


Following the purchase of 1301 Thomas Circle, there remained approximately $169 million of investment capacity under the terms of the joint venture agreement.

Disposition Activity

During the fourth quarter of 2011, the Company sold nine communities containing 2,331 homes for $275.4 million in total gross proceeds, bringing full-year 2011 asset dispositions to $593.9 million. At the time of the fourth quarter dispositions, total income per occupied home for the communities sold averaged $1,065 per month. The fourth quarter dispositions were located in a variety of markets including the Eastern Shore of Maryland, Raleigh, the East Bay area of San Francisco, the Inland Empire, San Diego, Houston and San Antonio.

Capital Markets Activity

During the fourth quarter of 2011, the Company completed a number of debt related activities aimed at managing its near term maturities and capital costs.

As previously announced, on October 25, 2011, the Company entered into a new $900 million unsecured revolving credit facility, replacing its prior $600 million facility. The new facility has an initial term of four years, includes a one-year extension option and contains an accordion feature that allows the Company to increase the facility to $1.35 billion.

Based on the Company’s credit ratings at the time of closing, the credit facility carried an interest rate equal to LIBOR plus a spread of 122.5 basis points and a facility fee of 22.5 basis points.

Coinciding with the closing of the new revolving credit facility, the Company amended and re-priced its $250 million unsecured term loan due in January 2016. The term loan was re-priced to LIBOR plus 142.5 basis points from LIBOR plus 200 basis points and its underlying covenants were aligned with those of UDR’s new revolving credit facility.

In addition, the Company prepaid a $100.0 million secured mortgage at par in November. The mortgage had an interest rate of 6.78 percent and was originally due in May of 2012.

In the fourth quarter of 2011, the Company raised $15.5 million of equity through the sale of approximately 630 thousand shares at a weighted average net price of $24.67 per share under its “At the Market” equity offering program. In 2011, the Company raised a total of $989 million of equity from a combination of “At the Market” proceeds, a secondary offering completed in July and the issuance of operating partnership units.

Balance Sheet

At December 31, 2011, UDR had $738.7 million in availability through a combination of cash and undrawn capacity on its credit facilities. Potential sources of additional capital include the Company’s $5.0 billion of unencumbered assets (on a historical non-depreciated cost basis), 7.4 million shares available for issuance under its “At the Market” equity offering program in addition to $400 to $600 million in expected dispositions in 2012.

UDR’s total indebtedness at December 31, 2011 was $3.9 billion. The Company ended the fourth quarter with fixed-rate debt representing 73 percent of its total debt, a total blended interest rate of 4.0 percent and a weighted average maturity of 4.4 years. UDR’s fixed charge coverage ratio (adjusted for non-recurring items) was 2.6 times at year-end 2011 versus 2.3 times a year ago.

Post Quarter Activity

Joint Venture Investment Activity

On January 12, 2012, UDR formed a second real estate joint venture with MetLife (UDR/MetLife II) wherein each party owns a 50 percent interest in a $1.3 billion portfolio of 12 operating communities containing 2,528 apartment homes.

The 12 operating communities in the joint venture include seven communities from the Company’s first real estate joint venture with MetLife (UDR/MetLife I) formed on November 8, 2010, while the remaining five communities were newly acquired by UDR/MetLife II. The newly acquired communities, collectively known as Columbus Square, are recently developed, high-rise apartment buildings located on the Upper West Side of Manhattan and were purchased for $630 million.

 

3


With the closing of UDR/MetLife II, the original joint venture between the parties, UDR/MetLife I, now comprises 19 operating communities containing 3,930 homes as well as 10 vacant land parcels. Historical cost of the venture is $1.8 billion and the Company’s weighted average ownership interest in the UDR/MetLife I operating communities is now 12.6 percent and 4.0 percent for the land parcels in the venture.

Capital Markets Activity

On January 5, 2012, the Company priced a ten-year, $400 million offering of 4.625 percent senior unsecured notes under its existing shelf registration. The notes will mature on January 10, 2022. A portion of this offering was used to repay $100 million of 5 percent unsecured debt originally due in January 2012.

In addition, the Company prepaid a $30.6 million mortgage at par in January 2012 that was secured by its 21 Chelsea community in Manhattan.

In January 2012, the Company raised $29.1 million of equity through the sale of approximately 1.2 million shares at a weighted average net price of $24.68 per share under its “At the Market” equity offering program.

 

4


Statement of Operations Information

UDR

Consolidated Statements of Operations

(Unaudited)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 

In thousands, except per share amounts

   2011     2010     2011     2010  

Rental income

   $ 187,999      $ 152,396      $ 691,263      $ 574,084   

Rental expenses:

        

Real estate taxes and insurance

     22,776        18,376        84,007        70,762   

Personnel

     15,076        13,445        56,617        51,696   

Utilities

     10,248        7,946        37,405        31,564   

Repair and maintenance

     9,843        8,571        37,155        32,386   

Administrative and marketing

     4,227        3,964        15,411        14,643   

Property management

     5,169        4,191        19,009        15,788   

Other operating expenses

     1,580        1,465        5,990        5,773   
     68,919        57,958        255,594        222,612   

Non-property income:

        

Loss from unconsolidated entities

     (2,092     (1,447     (6,352     (4,204

Gain on sale of investments

     1,396        4,725        7,069        4,725   

Interest and other income (1) 

     3,406        2,049        10,353        7,777   
  

 

 

   

 

 

   

 

 

   

 

 

 
     2,710        5,327        11,070        8,298   

Other expenses:

        

Real estate depreciation and amortization

     97,975        74,842        356,011        275,615   

Interest

     39,030        35,432        151,144        140,869   

Amortization of convertible debt premium

     —          776        1,077        1,204   

Other debt charges (2) 

     550        83        4,602        3,530   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest

     39,580        36,291        156,823        145,603   

Acquisition-related costs

     57        186        4,828        2,865   

Severance charges

     317        6,803        1,342        6,803   

General and administrative

     5,747        10,597        35,440        39,845   

Other depreciation and amortization

     919        1,088        3,931        4,843   
     144,595        129,807        558,375        475,574   

Loss from continuing operations

     (22,805     (30,042     (111,636     (115,804

Income from discontinued operations

     70,923        725        132,221        9,216   
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated net income/(loss)

     48,118        (29,317     20,585        (106,588

Net (income)/loss attributable to non-controlling interests

     (1,620     861        (562     3,689   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss) attributable to UDR, Inc.

     46,498        (28,456     20,023        (102,899

Distributions to preferred stockholders — Series E (Convertible)

     (931     (932     (3,724     (3,726

Distributions to preferred stockholders — Series G

     (1,377     (1,437     (5,587     (5,762

(Premium)/discount on preferred stock repurchases, net

     —          —          (175     25   

Net income/(loss) attributable to common stockholders

   $ 44,190      $ (30,825   $ 10,537      $ (112,362
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings/(loss) per weighted average common share — basic and diluted:

        

Loss from continuing operations available to common stockholders

   $ (0.12   $ (0.17   $ (0.60   $ (0.73

Income from discontinued operations

   $ 0.33      $ 0.00      $ 0.66      $ 0.06   

Net Income/(loss) attributable to common stockholders

   $ 0.20      $ (0.17   $ 0.05      $ (0.68

Common distributions declared per share

   $ 0.2150      $ 0.185      $ 0.800      $ 0.730   

Weighted average number of common shares outstanding — basic and diluted

     217,823        180,743        201,294        165,857   

 

(1) Includes $3.2 million and $1.7 million of management fees from joint ventures during the three months ended December 31, 2011 and 2010 and $9.6 million and $3.2 million during the twelve months ended December 31, 2011 and 2010.
(2) Write-off of deferred financing costs on early debt extinguishment, including $0 and $599 write-off of convertible debt premium for the three and twelve months ended December 31, 2010.

 

5


Other Information

UDR

Funds From Operations

(Unaudited)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 

In thousands, except per share amounts

   2011     2010     2011     2010  

Net income/(loss) attributable to UDR, Inc.

   $ 46,498      $ (28,456   $ 20,023      $ (102,899

Distributions to preferred stockholders

     (2,308     (2,369     (9,311     (9,488

Real estate depreciation and amortization, including discontinued operations

     98,513        81,922        370,343        303,446   

Non-controlling interests

     1,620        (861     562        (3,689

Real estate depreciation and amortization on unconsolidated joint ventures

     2,983        2,323        11,631        5,698   

Net gain on the sale of depreciable property in discontinued operations, excluding RE3

     (68,045     (49     (123,217     (4,048

(Premium)/discount on preferred stock repurchases, net

     —          —          (175     25   

Funds from operations (“FFO”) — basic

   $ 79,261      $ 52,510      $ 269,856      $ 189,045   
  

 

 

   

 

 

   

 

 

   

 

 

 

Distribution to preferred stockholders — Series E (Convertible)

     931        932        3,724        3,726   

Funds from operations — diluted

   $ 80,192      $ 53,442      $ 273,580      $ 192,771   
  

 

 

   

 

 

   

 

 

   

 

 

 

FFO per common share — basic

   $ 0.35      $ 0.28      $ 1.29      $ 1.10   
  

 

 

   

 

 

   

 

 

   

 

 

 

FFO per common share — diluted

   $ 0.35      $ 0.28      $ 1.28      $ 1.09   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of common shares and OP Units outstanding — basic

     227,248        186,041        208,896        171,569   

Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted

     232,405        191,651        214,086        176,900   

FFO is defined as net income (computed in accordance with GAAP), excluding impairment write-downs of depreciable real estate or of investments in non-consolidated investees that are driven by measurable decreases in the fair value of depreciable real estate held by the investee, gains (or losses) from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust’s definition issued in April 2002. UDR considers FFO in evaluating property acquisitions and its operating performance and believes that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of UDR’s activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs.

RE3 gain on sales, net of taxes, is defined as net sales proceeds less a tax provision and the gross investment basis of the asset before accumulated depreciation. We consider FFO with RE3 gain on sales, net of taxes, to be a meaningful supplemental measure of performance because the short-term use of funds produce profits which differ from the traditional long-term investment in real estate for REITs.

 

6


Balance Sheet Information

UDR

Consolidated Balance Sheets

 

In thousands, except share and per share amounts

   December 31,
2011
    December 31,
2010
 
     (unaudited)     (audited)  

ASSETS

    

Real estate owned:

    

Real estate held for investment

   $ 7,825,725      $ 6,198,667   

Less: accumulated depreciation

     (1,831,157     (1,505,626
  

 

 

   

 

 

 
     5,994,568        4,693,041   

Real estate under development

    

(net of accumulated depreciation of $570 and $0)

     248,176        97,912   

Real estate held for disposition

    

(net of accumulated depreciation of $0 and $132,700)

     —          452,068   
  

 

 

   

 

 

 

Total real estate owned, net of accumulated depreciation

     6,242,744        5,243,021   

Cash and cash equivalents

     12,503        9,486   

Marketable securities

     —          3,866   

Restricted cash

     24,634        15,447   

Deferred financing costs, net

     30,068        27,267   

Notes receivable

     —          7,800   

Investment in unconsolidated joint ventures

     213,040        148,057   

Other assets

     198,365        74,596   
  

 

 

   

 

 

 

Total assets

   $ 6,721,354      $ 5,529,540   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Secured debt

   $ 1,891,553      $ 1,808,746   

Secured debt — real estate held for disposition

     —          154,924   

Unsecured debt

     2,026,817        1,603,834   

Real estate taxes payable

     13,397        14,585   

Accrued interest payable

     23,208        20,889   

Security deposits and prepaid rent

     35,516        26,046   

Distributions payable

     51,019        36,561   

Deferred fees and gains on the sale of depreciable property

     29,100        28,943   

Accounts payable, accrued expenses, and other liabilities

     95,485        105,925   

Total liabilities

     4,166,095        3,800,453   

Redeemable non-controlling interests in operating partnership

     236,475        119,057   

Stockholders’ equity

    

Preferred stock, no par value; 50,000,000 shares authorized

    

2,803,812 shares of 8.00% Series E Cumulative Convertible issued and outstanding (2,803,812 shares at December 31, 2010)

     46,571        46,571   

3,264,362 shares of 6.75% Series G Cumulative Redeemable issued and outstanding (3,405,562 shares at December 31, 2010)

     81,609        85,139   

Common stock, $0.01 par value; 250,000,000 shares authorized

    

219,650,225 shares issued and outstanding (182,496,330 shares at December 31, 2010)

     2,197        1,825   

Additional paid-in capital

     3,340,470        2,450,141   

Distributions in excess of net income

     (1,142,895     (973,864

Accumulated other comprehensive loss, net

     (13,902     (3,469
  

 

 

   

 

 

 

Total stockholders’ equity

     2,314,050        1,606,343   

Non-controlling interest

     4,734        3,687   

Total equity

     2,318,784        1,610,030   

Total liabilities and stockholders’ equity

   $ 6,721,354      $ 5,529,540   
  

 

 

   

 

 

 

 

7


Forward Looking Statements

Certain statements made in this report may constitute “forward-looking statements.” Words such as “expects,” “intends,” “believes,” “anticipates,” “plans,” “likely,” “will,” “seeks,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in a forward-looking statement, due to a number of factors, which include, but are not limited to, unfavorable changes in the apartment market, changing economic conditions, the impact of inflation/deflation on rental rates and property operating expenses, expectations concerning availability of capital and the stabilization of the capital markets, the impact of competition and competitive pricing, acquisitions, developments and redevelopments not achieving anticipated results, delays in completing developments, redevelopments and lease-ups on schedule, expectations on job growth, home affordability and demand/supply ratio for multifamily housing, expectations concerning development and redevelopment activities, expectations on occupancy levels, expectations concerning the Vitruvian Park SM development, expectations concerning the joint ventures with KFH and MetLife, expectations that automation will help grow net operating income, expectations on annualized net operating income and other risk factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time, including the Company’s Annual Report on Form 10-K and the Company’s Quarterly Reports on Form 10-Q. Actual results may differ materially from those described in the forward-looking statements. These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this press release, and the Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in the Company’s expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required under the U.S. securities laws.

 

8


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  UDR, INC.
Date: February 7, 2012   By:  

/s/ David L. Messenger

  Name: David L. Messenger
  Title: Senior Vice President and Chief Financial Officer

 

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