UDR Earnings Call NUGGETS: Turnover Details, Portfolio Performance

On Monday, UDR Inc (NYSE:UDR) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Turnover Details

Jana Galan – Bank of America-Merrill Lynch: I wanted to get a little bit more detail on the turnover and if you are seeing any changes based on reasons for move out or maybe elevated turnover in geographies versus others?

Jerry A. Davis – SVP, Property Operations: This is Jerry. We are seeing reasons for turnout. We’re pretty consistent with what they have been. Move outs to home purchase is up about 100 basis points from where it’s been at about 13% and the markets you are really seeing that in for the most part are the locations like Austin, Nashville, Richmond, the Inland Empire and one surprising one where we are seeing an increased move out to home purchases in Boston. Most of our West Coast markets, with the exception of San Diego, are still seeing move out to home purchase under 10%. So, West Coast affordability is still difficult for most of our renters. And when you look at move outs to rent increase, it’s been growing each of the last probably five quarters and today it stands at about 8%. One area that we have seen a slight reduction year-over-year in move out reasons is money issues, which is skips evictions, lost jobs things like that, markets where we’re seeing an increase in front over to the first six months predominantly in the West Coast markets where we’ve had quite a bit of pricing power. So, we’ve been increasing people over the last two to three years and those happen to be the markets where three years ago our peak to trough rents dropped the most, so your B renter was able to move into an A property or your C renter was able to move into a B and now we’ve escalated rents to a level where they have gone back to where that was before.

Jana Galan – Bank of America-Merrill Lynch: I believe in your prepared remarks you said you expected to continue to increase in the back half of the year. Do you mean higher than this kind of 58% level or is it just the year-over-year turnover that’s increased?

Jerry A. Davis – SVP, Property Operations: No, I think year-over-year turnover for the year is probably going to be three to four basis points over what it was last year, which will put us in that probably 55% to 56% for the year. Third quarter historically is our highest turnover quarter. So it usually gets north of 60 on an annualized basis, but then it comes down significantly as you get into the fourth quarter.

Portfolio Performance

Karin Ford – KeyBanc Capital Markets: I wanted to ask Tom about a comment in your press release where you said most of the heavy lifting on delivering and repositioning are behind us. Can you just talk about where you see UDR when you say most, what type of percentage that means for each one of those activities where we are today?

Thomas W. Toomey – President and CEO: With respect to the portfolio when we look at it, we start with its $12 billion enterprise today and our portfolio in the Southeast, which is somewhere around 12%, 15% of the enterprise is a portfolio that’s performing very well. Strong NOI growth this recent quarter and we expect that to continue over time, but it probably doesn’t fit the long long-term aspect of where we like to be, which is basically from DC to Boston and the West Coast. So as a result, we view it as a warehouse piece of capital that over time if opportunities are found, developments are completed, we’ll look at the pricing that we can achieve in that portfolio and then redeployed the capital into there. So we are looking at it as relatively a static $12 billion enterprise and asking ourselves, when do we and how do we move out of those markets? We feel no rush, in fact the performance and where it looks like we’ll probably hang on to them for some extended period of time, but it’s a directional aspect and I would not probably see us be an active seller of those anytime soon. Jerry or Harry, would you add anymore to that?

Jerry A. Davis – SVP, Property Operations: Well the market started talking about the South Eastern markets and we are talking about three major cities that are Nashville, Tampa, Orlando, I think they had same store NOI growth of about 9%, interest rates are low there continue to be investor interest, so to the extend we do decided to sell those markets in the future, we expect there to be very liquid markets. There are a couple of markets that we would expect to probably sell in the short-term, we are done for the year given for a variety of reasons, but as we look into the relatively near-term, there are couple of markets that we probably look to exit that might be to $200 million to $400 million in total.

Karin Ford – KeyBanc Capital Markets: Just on the delivering front as well, following the equity deal and the portfolio sales, where do you think you are versus your plan today?

Thomas W. Toomey – President and CEO: I think we are in line with our peer group and our intent is to stay in line with the peer group and any activity undertaken in the future will be to continue to be in line with the peers. So I don’t think you’ll see us make dramatic moves one way or another the natural growth of the cash flow of the enterprise will help in addition as we refinance maturing debt will help, but we are comfortable continuing to be in line with the peer group.