The paragraph introduces UDR's third-quarter 2024 earnings call. The operator begins by welcoming participants and introducing the host, Trent Trujillo, Vice President of Investor Relations. Trent provides an overview of the materials distributed prior to the call and outlines the forward-looking statements disclaimer. He invites participants to be concise with their questions during the Q&A session. The call is then handed over to Tom Toomey, UDR's Chairman and CEO, who introduces the key presenters, including President and CFO Joe Fisher, and SVP of Operations Mike Lacey, with additional senior officers available for questions.

The company's year-to-date performance has surpassed expectations, leading to an increase in their full-year financial guidance. This success is attributed to innovative operating strategies, value-add initiatives, customer experience projects, and maintaining a strong financial position. They focus on three growth drivers: innovation that adds long-term value, leveraging feedback from associates and residents to enhance customer satisfaction and retention, and maintaining a robust balance sheet to capitalize on external growth opportunities such as joint ventures and acquisitions.

The paragraph highlights positive trends in the apartment rental industry, such as strong demand, slowed new supply, and increased affordability compared to owning homes. These factors have driven higher absorption rates and stable pricing, promising future rent growth. The text also emphasizes UDR's leadership in environmental, social, and governance (ESG) efforts, crediting the sustainability team for advancing their long-term strategy, which contributes to the company's resilience and ability to thrive in various economic conditions.

The paragraph highlights the company's commitment to creating an innovative and collaborative workplace, emphasizing optimism about long-term growth despite macroeconomic uncertainties. The focus will remain on enhancing culture and empowering employees. Mike Lacy then discusses Q3 performance, noting better-than-expected year-over-year same-store revenue and NOI growth, driven by blended lease rate growth and reduced resident turnover. Despite slightly lower occupancy rates due to strategic credit quality measures, the company achieved favorable lease rate growth, supporting improved full-year guidance.

In September, increased occupancy rates were achieved through healthy traffic and leasing volumes, along with higher revenue retention, ending the quarter at 96.5%. Other income grew by approximately 5% due to innovation and value-added services. Year-over-year same-store expenses grew by 2% in the third quarter, surpassing expectations due to favorable real estate taxes, insurance savings, and reduced repair costs from improved resident retention. In October, core operating trends remained stable, with October blended lease rate growth flat and effective new lease rate growth stable at around negative 5%. Renewal lease rate growth was in the mid-4% range, led by a 2% growth on the East Coast. The East Coast is expected to lead in lease rate growth through early 2025. Resident retention is strong, marking the 18th consecutive month of improved turnover year-over-year.

The paragraph highlights the affordability advantage of apartments over homes, emphasizing that the average monthly cost of a home is nearly $5,600 compared to $2,600 for an apartment at UDR, resulting in significant annual savings. Despite high resident move-out rates for home buying, UDR's improved customer experience has enhanced resident retention by 200 basis points. This improvement is expected to lead to better pricing, higher occupancy, and financial benefits, with the potential to capture $10 to $25 million in incremental NOI by 2025. Current occupancy has increased to an average of 96.6% in October, with traffic and availability trends suggesting stability through 2024. Additionally, other income is rising in the mid- to high single-digit range, making up about 11% of total revenue.

The paragraph discusses the positive trajectory of the company's income initiatives, particularly the building-wide WiFi rollout, which enhances same-store revenue growth and resident satisfaction. It highlights regional performance, noting that the East Coast, comprising 40% of NOI, was the strongest in the third quarter with 96.5% occupancy and 2.5% revenue growth. Northern Virginia bolstered Washington, D.C.’s performance. The West Coast, contributing 35% of NOI, exceeded expectations with 96.3% occupancy and 2% revenue growth, driven by office mandates and improvements in Seattle and San Francisco. Limited new supply is expected to positively affect supply-demand dynamics.

The paragraph discusses the performance of the Sunbelt markets, which make up about 25% of the company's Net Operating Income (NOI), noting that these markets have underperformed compared to coastal markets. The Sunbelt's third-quarter occupancy was 96.1%, with a decline in both lease rate growth and year-over-year same-store revenue growth. Florida showed relative strength in lease rates, while Texas was negatively impacted by new supply. Despite robust job growth and high absorption of new supply in the Sunbelt, pricing power has weakened due to concessions. The company anticipates pricing stability in some markets by mid-2025, with others, like Nashville and Austin, stabilizing later. Based on 2023 results, the company has raised its 2024 same-store growth guidance, increasing the midpoint for revenue growth to 2.2% from 2.0%, driven by an expected improvement in blended lease rates and occupancy.

The paragraph discusses various financial improvements and forecasts for a company. It highlights a 5 basis point increase in yearly revenue from innovation and initiatives, a reduction in same-store expense growth to 4.4%, and a projected mid-3% range for the full year's same-store growth, influenced by a previous onetime employee retention credit. The outlook for 2025 indicates a same-store revenue earn-in of 60 to 70 basis points, aligning with 2024 but below historical norms. The company will provide comprehensive 2025 guidance in February, covering key financial aspects. The paragraph also emphasizes the company's ability to adjust strategies for revenue and NOI growth while acknowledging the efforts of associates, especially in Tampa and Orlando during recent hurricanes.

The paragraph discusses a company's financial performance and outlook, with Joe Fisher explaining the third quarter results, updates on full year guidance, and capital market activities. The third quarter's FFO as adjusted per share was $0.62, meeting the company's guidance midpoint. Despite challenging comparisons and high supply, the FFOA per share guidance for 2024 was raised to $2.47-$2.49, indicating positive growth. The fourth quarter guidance suggests slight improvement driven by factors like same-store NOI growth and lower interest expenses. Additionally, the company updated its Debt and Preferred Equity Program, focusing on stabilized operating assets.

The paragraph outlines several financial activities and positioning of a company. They made a $35 million preferred equity investment in Portland at a 10.75% return with reduced risk and significant cash flow. In New York, they received a $17 million paydown and adjusted their return rate from 13% to 11% due to lower risk. A $31 million senior loan was originated in Santa Monica to replace a construction loan maturing in 2025, although an $8 million noncash impairment loss was recorded. The company maintains a strong balance sheet with over $1 billion in liquidity and limited debt maturing through 2026, ensuring reduced refinancing risks.

The company has successfully managed its balance sheet, leading to a strong three-year liquidity outlook and the lowest interest rates in its sector at 3.4%. Its leverage metrics are solid, with debt to enterprise value at 28% and net debt-to-EBITDAre at 5.6x, both improved from pre-COVID levels. The company remains strategic in its capital deployment for long-term growth. During a Q&A session, Jamie Feldman from Wells Fargo questions future growth expectations. Mike Lacy responds that despite a slight dip in the 3Q growth rate, they anticipate returning to an 8% growth range due to successful initiatives like the WiFi rollout, with similar expectations for next year.

The paragraph discusses financial expectations and strategic initiatives of a company. The company anticipates doubling its $5 million NOI from a particular initiative in 2024 by the following year. There are several key initiatives, like enhancing customer experience and fraud prevention, that have significant financial impacts but might not clearly show in other income. These initiatives aim to improve retention, occupancy, pricing power, and reduce costs. Regarding their debt and preferred equity, the company expects to approximately maintain their balance through 2025, though fluctuations may occur. Opportunities for improvement continue to be evaluated, focusing mainly on the operating recapitalization side.

In the paragraph, Mike Lacy discusses trends and expectations in certain markets, particularly the Sunbelt regions. He notes that their blends, a combination of growth factors, have surpassed expectations for the year, with occupancy rates in the high 96% range. The company anticipated higher blends in the first half of the year, aligning with expectations in the latter half, and reports a year-to-date blended growth of about 1.6%. According to Lacy, they expect overall growth to align with an annual projection of around 1.4%, indicating stable or flat blends through the fourth quarter.

In the paragraph, the speaker discusses the impact of transitioning short-term leases to long-term leases, noting that such changes affected their lease blends by about 100 basis points in October. However, the impact is expected to decrease to around 50 basis points in November and December. Occupancy rates have increased in the Sunbelt region compared to coastal markets, with the current rate nearing 96.8%. Additionally, the speaker addresses turnover trends and the influence on expense growth, anticipating continued improvements through a customer experience project. They view this initiative as having significant potential for further gains.

The paragraph discusses a company's significant data collection efforts, capturing about 800 million data elements over seven to eight years and adding 1 million daily, aiding in customer retention and financial gains. The firm has reduced move-outs by 1,800 over the past year, translating to $9 million in net operating income (NOI) and anticipates a sustainable 5% to 10% competitive advantage valued at $15 million to $30 million. Their focus on customer experience has improved performance by 600 basis points compared to historical averages and by 70 basis points over competitors in recent years. Additionally, the company's repair and maintenance growth has been lower than expected, showcasing effective management strategies.

The paragraph discusses the potential impact of market equilibrium in cities such as Orlando, Tampa, and Dallas by the middle of next year. Eric Wolfe from Citi inquires if this means rent growth will return to a more normal level, like 3%, and whether seasonal trends will stabilize. Mike Lacy explains that they are currently determining budgets for the next year using a top-down and bottom-up approach, considering supply and demand factors. They foresee supply impacts in the Sunbelt affecting the first half of the year and aim for a 2% to 3% rent growth as the year progresses, with improvement possible in the second half due to easier comparisons. Tom Toomey adds that they have a good understanding of the supply and its pricing.

The paragraph discusses the current state of job growth, which has been strong in 2024, though there is uncertainty about 2025. The overall market is stable, according to Mike. Eric Wolfe inquires about the anticipated improvements in bad debt for the year, aiming for around 1.4%. Joe Fisher explains that due to proactive measures like improved screening for income and ID verification, bad debt has improved to just over 1% this year. These measures are expected to continue helping next year. They do not expect to return to long-term average bad debt levels of 40 to 50 basis points because of persistent issues with existing bad actors, not an increase in their number.

The paragraph discusses the impact of short-term leases on a company's operations. Mike Lacy explains that short-term leases have been slightly higher than usual, influenced by recent job and demand dynamics, particularly in coastal markets where there has been job growth and an influx of interns. This trend is less pronounced in the Sunbelt region. Josh Dennerlein questions if these short-term leases affect the customer experience, to which Lacy acknowledges they increase turnover but emphasizes that the focus remains on profitability, with an example being their short-term furnish program.

The paragraph involves a discussion about a company's capital allocation strategy, particularly focusing on short-term lease profitability and stock buybacks. The speaker notes that short-term leases, while only a small portion of total units, are profitable and carefully managed to avoid overexposure. Addressing a question about capital deployment, particularly regarding stock buybacks, another representative explains that while the company has previously found success with buybacks, current stock prices do not make this an attractive option. Instead, the company is focused on a "capital-light" strategy, recycling assets within their DPE program, despite feeling that their stock is undervalued relative to asset sales pricing in the private market.

The paragraph discusses the company's strategic focus areas and challenges in their joint venture acquisitions and creative financial transactions. It highlights two main areas of focus: joint venture acquisitions and creative OP unit transactions. The company is actively engaging with a joint venture partner to pursue opportunities, hoping to gain traction by 2025. They also aim to capitalize on under-managed properties by incorporating them into their operational platform. Although there are creative financial transaction opportunities, like OP unit deals, they are challenging and have long lead times. Despite removing acquisitions from their immediate guidance, the company indicates that there is no shortage of opportunities and considers exploring partnerships with additional partners.

The paragraph discusses a company's current partnership and investment strategy. The company is not seeking new partners because their current partner aligns well with their operational and financial goals, and has a strong capital base. They are undergoing a review process, which happens every five years, but expect to resume normal operations soon. Regarding their investment approach, the company has transitioned to focusing on stabilized assets rather than new developments, as current market conditions make new projects less financially viable. This strategy ensures steady returns and aligns with shareholder interests.

In the paragraph, Rich Anderson and Joe Fisher discuss differing opinions among industry peers regarding the timing of the Sunbelt's recovery, specifically in cities like Dallas, Nashville, and Austin, which have been affected by high supply levels. Fisher explains that their analysis suggests a return to equilibrium by the middle of next year (2Q or 3Q), with the expectation of pricing power returning at that time. He notes that renewal rates have been strong but acknowledges an anticipated decrease in supply, from 4-5% of stock to around 2.5-3%, which, while still above long-term averages, indicates a positive trend towards recovery.

The paragraph discusses the anticipated improvement in pricing power for the second half of the next year, highlighting the role of factors like jobs, wages, and household formation. It mentions that the increase in pricing power will gradually influence rent and same-store revenue growth, with signs expected by mid-second half. Mike Lacy adds that compared to peers, their success in the Sunbelt regions, where initiatives have driven 12% to 13% growth in other income, has surpassed the average of 5% to 6%. This success enhances relative performance and is expected to continue. Following this, John Kim from BMO Capital Markets questions the correlation between the improvement in blended lease growth rates and earn-in expectations, noting a smaller increase than expected, prompting him to inquire about the reasoning behind this disparity.

In the discussion, Mike Lacy compares their company's earnings and growth percentages from the previous and current year, noting similar trajectories with about 1.5% to 1.6% growth on a nine-month trailing basis. He highlights rent fluctuations, stating a $26 average rent change doesn't significantly impact overall earnings. John Kim asks about new lease rate declines, specifically in October, where a 5% decrease is notable. Lacy mentions regional performances, emphasizing the East Coast's relative stability, while the West Coast and Sunbelt regions have seen decreased growth in lease rates, with particular struggles in the Sunbelt region.

The paragraph discusses regional occupancy and its positive impact on income growth, noting an increase from 5% to 8% in other income. Specifically, coastal regions faced pressure on new lease growth due to the transition from short-term to long-term leases, influenced by seasonal factors like interns and summer residents. Although generally not focused on, this transition impacted coastal markets significantly, especially in October. The text then shifts to an operator's question about rental growth variability and whether recent trends align with pre-COVID norms. The response highlights that supply issues, particularly in the Sunbelt, are causing these fluctuations and have been anticipated as ongoing challenges.

The paragraph discusses the current state of the real estate market, focusing on the supply and demand dynamics impacting leasing and rent growth. During a period of high supply, UDR markets have seen impressive absorption rates, particularly in new developments in Tampa, where leasing is occurring at a rate three times higher than usual. Nationally, both supply and absorption rates are at 30- to 40-year highs, with new developments leasing about 15 to 20 units per month. This strong absorption has led to better than expected rent growth and a reduced need for concessions, supported by factors like job availability and relative affordability.

The paragraph discusses the challenges in the housing market due to rising single-family home prices and mortgage rates since 2019, which have increased by about 50%. In contrast, multifamily rents have only increased in line with income growth, maintaining the rent-to-income ratio. This has highlighted the affordability issues with single-family housing. It then transitions to a discussion led by Adam Kramer, questioning Joe Fisher about the feasibility of new developments in this climate. Joe indicates that while they have projects ready to start, the yields haven't yet justified the costs due to the volatile interest rate environment, though they are getting closer to starting these projects.

The paragraph discusses the company's focus on redevelopment over new development, as it provides quicker returns. Joe Fisher mentions the company is investing around $75 million this year and possibly the same or more in 2025 on various redevelopment projects, including light renovations and significant asset repositioning, aiming to enhance the Net Operating Income (NOI) and improve the product for consumers. Adam Kramer questions if redevelopment is a capital allocation priority, to which Fisher confirms, indicating that while redevelopment is a core part of their strategy, they are also exploring joint venture acquisitions and other opportunities. The operator then introduces Alexander Goldfarb from Piper Sandler for the next question.

The paragraph discusses a strategic decision regarding a real estate project in Long Island City. Initially a raw land project in 2019, construction was completed in 2022, with stabilization expected in early 2024. Their partner, who invested $42 million, recapitalized the deal, reducing accrued liabilities by $10 million. Andrew Cantor explains that about 70% of the coupon is paid currently, with a loan-to-value (LTV) in the mid-60% range, and their investment is below $500,000 per unit. The company chose to lower the return rate because the project's risk has decreased since development, and they see it as a valuable reinvestment opportunity, not a distressed deal.

The paragraph discusses a financial decision where the speakers, Andrew Cantor and Joe Fisher, decided to keep a $50 million investment with a known partner rather than pulling it out to seek new opportunities, due to a change in the risk profile and market conditions. The investment's interest rate decreased from 13% during development to 11% in a stabilized deal, influenced by fresh equity infusions and paydowns, which lowered their last dollar risk. Additionally, Alexander Goldfarb inquires about the nature of short-term leases, asking if there was anything unusual about them this year or if it was a routine aspect impacting rent trends. Mike Lacy responds that it involved both usual trends and specific explanations regarding rent behavior.

The paragraph discusses the efforts to provide transparency in reporting rental income, noting a significant increase (20% to 30%) in fee income from short-term furnished rentals due to more interns and temporary leases. Tom Toomey adds context by highlighting an unusual influx of supply and the loss of short-term rentals, suggesting that current conditions appear exaggerated compared to long-term trends. John Pawlowski from Green Street then inquires about volatile expense categories, specifically personnel and repair and maintenance costs, which have fluctuated over the years due to factors like the pandemic. Mike Lacy responds, affirming that the situation is stabilizing and improving.

The paragraph discusses changes in personnel and repair and maintenance (R&M) costs, with personnel expenses rising due to the end of a CARES refund and performance-based pay, particularly in relation to strong revenue performance compared to peers. The company anticipates reduced turnover, noting a significant consecutive monthly decline in turnover rates. Looking ahead, the expectation is for these costs to stabilize or diminish. John Pawlowski inquires about the potential impact of repairing heavily damaged units post-evictions on future R&M expenses. Mike Lacy responds that the situation has normalized to pre-COVID levels, with no significant impact expected on future R&M costs.

In the paragraph, Alexander Kalmus questions the potential timeline for the return of rent growth spreads to pre-COVID averages, considering the impact of new supply on pricing. Mike Lacy responds by highlighting that during the transitional fourth and first quarters, there is typically a gap between new lease and renewal spreads. He expresses relief that turnover rates are currently 600 basis points better than historical averages, indicating low move-outs due to rent increases. Lacy believes in maintaining a 4% to 4.5% increase in growth due to positive turnover rates and successful customer experience initiatives. Linda Tsai then asks about upfront costs related to reducing customer turnover, to which Lacy replies that the current costs are minimal and are managed using individual resident data dashboards.

The paragraph discusses a proactive approach to addressing issues experienced by residents, emphasizing the importance of understanding individual experiences and using data to make smarter resource allocations. The company reaches out to residents to resolve issues quickly, sometimes offering small concessions or gift cards as a form of compensation. They acknowledge that solutions are not one-size-fits-all, as resident needs differ. The goal is to enhance resident satisfaction and reduce turnover by identifying areas where resources can be better utilized, ultimately aiming to transform the way business is conducted.

The paragraph highlights a company's strategic efforts to reduce turnover from historically 50% to 40% or lower, aiming to improve its margin, pricing power, cost structure, and capital expenditure. The speaker, Tom Toomey, Chairman and CEO of UDR, expresses optimism about the early positive results and long-term benefits for shareholders. The call concludes with a mention of future events, including the NAREIT conference in November, and appreciation for the participants' time and interest.

This summary was generated with AI and may contain some inaccuracies.