United Dominion Realty Trust Q2 Earnings Call Highlights

Key Points

• UDR raised its 2026 outlook after second-quarter FFOA reached $0.64 per share, at the high end of guidance and above consensus. The company increased its full-year FFOA midpoint to $2.53 per share and lifted same-store NOI growth expectations through stronger rent growth and lower expense projections.
• Coastal markets drove operating performance: blended lease-rate growth averaged 3.8% in coastal markets versus negative 2% in the Sun Belt, while resident retention reached a seasonal record 60%. Early third-quarter trends remained favorable, with occupancy in the mid-96% range and improving Sun Belt pricing.
• UDR is selling approximately $650 million of assets in 2026 and using proceeds partly for share repurchases, including $200 million of buybacks in the second quarter. The company also plans to wind down its debt and preferred equity portfolio, which fell to $380 million, while redeploying capital into developments and other investments.

United Dominion Realty Trust NYSE: UDR raised its full-year outlook after reporting second-quarter results that exceeded its expectations, supported by stronger apartment operating trends, higher retention and expense controls.

Chairman, President and CEO Tom Toomey said apartment fundamentals have been favorable in 2026, citing employment growth that exceeded consensus expectations, relative affordability of renting versus homeownership and an easing in new apartment supply. He said the company’s operating execution and capital allocation decisions contributed to the stronger-than-expected quarter.

UDR reported funds from operations as adjusted, or FFOA, of $0.64 per share for the second quarter, reaching the high end of its guidance range and exceeding consensus, according to CFO Dave Bragg. The result was $0.02 per share above the first quarter, primarily because of higher net operating income.

The company raised its full-year 2026 FFOA guidance midpoint by $0.01 per share to $2.53. Its third-quarter FFOA guidance range is $0.63 to $0.65 per share, with a midpoint of $0.64.

Operating performance and revised outlook

Same-store revenue increased 1.8% year over year during the quarter. COO Mike Lacy said results were driven by 2.1% blended lease-rate growth, mid-single-digit growth in innovation income, occupancy in the mid-96% range and a 60-basis-point benefit from improved delinquency.

Blended lease-rate growth accelerated by 50 basis points from the first quarter and surpassed UDR’s prior expectation of 1.5% to 2%. Resident retention reached 60%, an all-time seasonal high and 140 basis points above the prior year, according to Lacy. Same-store expenses rose 2.6%, while the company reported an efficiency level of 43 apartment homes managed per associate.

UDR increased the midpoint of its full-year same-store revenue growth outlook by 12.5 basis points, setting a revised range of 0.75% to 2%. The higher midpoint was entirely attributable to blended lease-rate growth, Lacy said. The company continues to expect second-half blended lease-rate growth of 1.5% to 2%, occupancy in the mid-96% range and mid-single-digit innovation-income growth.

The company also reduced the midpoint of its same-store expense growth forecast by 50 basis points to 3.25%, citing lower expected growth in repairs and maintenance, real estate taxes and insurance. Together, the changes lifted same-store net operating income growth guidance by 50 basis points.

Lacy said early third-quarter trends resembled the second quarter. In July, occupancy remained in the mid-96% range and blended lease growth was at the upper end of UDR’s 1.5% to 2% second-half range. The company was sending renewal offers of roughly 5% to 5.5% and expects achieved renewal increases of about 4% in the third quarter.

Coastal markets lead results

UDR’s coastal markets generated average blended lease-rate growth of 3.8% in the second quarter, compared with negative 2% blends in the Sun Belt. The coastal portfolio accounts for approximately 75% of UDR’s net operating income, according to Lacy.

San Francisco was the company’s strongest market, with approximately 13% blended lease-rate growth and occupancy in the high-97% range. Orange County posted blended growth above 3%, while New York and Philadelphia recorded mid-single-digit blended growth with occupancy in the mid-97% range.

Dallas remained UDR’s strongest Sun Belt market, while Austin showed improving lease-rate momentum and 97% occupancy. In July, Sun Belt blended rates had improved to roughly negative 1.5% from negative 2% in the second quarter, Lacy said. New lease growth in the region improved to about negative 5.5% to negative 6% in July from approximately negative 7% to negative 7.5% in the second quarter.

Management also pointed to slower outmigration as a demand support. Lacy said outmigration declined by roughly 8% to 10% in Boston and Austin and by 5% in San Francisco compared with the prior year.

In Washington, D.C., which represents about 15% of UDR’s NOI, Lacy said market demand has been somewhat weaker due to federal employment trends. However, UDR’s portfolio occupancy was about 96.5% to 97%, above the broader market level, while blended rates were roughly negative 1% to negative 2%.

Dispositions, repurchases and development

Bragg said UDR used a wide gap between its public-market valuation and private-market apartment pricing to sell assets and repurchase shares. The company completed the sale of one apartment community and is under contract to sell three more. The four transactions are expected to generate approximately $295 million of gross proceeds.

Including those sales, UDR expects 2026 dispositions of about $650 million at an average buyer capitalization rate in the mid-5% range. The company selected the assets based on rent-growth outlook, capital expenditure requirements and potential operating upside relative to the retained portfolio.

During the second quarter, UDR repurchased approximately 5.5 million shares for $200 million at an average price of $36.49 per share. Since September 2025, the company has bought back 11.5 million shares for approximately $420 million, or an average of $36.34 per share.

UDR also began construction on a 385-unit second-phase development in Northern Virginia adjacent to an existing company community. Separately, its 3099 Iowa development in Riverside, California, was two quarters ahead of schedule for initial occupancy and 5% under budget. UDR expects both projects to produce stabilized yields in the mid-6% range.

Debt and preferred equity portfolio to run off

UDR said it will allow its debt and preferred equity, or DPE, portfolio to run off over the next several years and does not plan to reenter the business. Toomey said the company is “an industry leader operator, not a lender,” and management believes its operating platform and data tools can identify investments with greater long-term upside.

The DPE balance declined from a peak of roughly $725 million in the first quarter of 2025 to $380 million at the end of the second quarter of 2026. UDR expects the balance to decline to approximately $250 million to $300 million by year-end through repayments, asset takeovers and capital allocation toward other uses.

Bragg said redeploying capital from DPE investments into alternatives such as acquisitions or redevelopment could carry yields about 400 basis points below DPE initially. He estimated that each $100 million not redeployed in DPE could create approximately $0.01 per-share initial dilution, although the company expects that effect to narrow over time as alternative investments grow earnings.

UDR ended the period with nearly $1 billion of liquidity, Bragg said. The company also plans to distribute its first monthly dividend later in the week, following its previously announced shift from a quarterly payment schedule.

About United Dominion Realty Trust (NYSE:UDR)

United Dominion Realty Trust NYSE: UDR is a publicly traded real estate investment trust specializing in the ownership, management, acquisition, development and redevelopment of multifamily apartment communities. The company's core focus is on Class A and Class A–plus residential properties, offering a diverse portfolio designed to meet the evolving needs of renters. UDR employs a full-service management platform to oversee daily operations, property maintenance, leasing, and resident services, ensuring consistency and quality across its holdings.

UDR's business activities encompass ground-up development, strategic property redevelopment, and selective acquisitions.

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