May 2024: Other Income is now ~10% of UDR’s total revenue

Welcome! To help other Operators glean insights, focusing specifically on the opportunities from Other Income Growth and Operational Strategies + Technology, we (Amenify) monitor earnings calls and publish summaries from the transcripts.

The below highlights the rapidly increasing and demonstrable success of:

1. Other Income

2. Leveraging technology

3. Centralization

Thank you,

Everett Lynn — CEO, Amenfy

Disclaimer: The content provided in this blog is for informational purposes only and should not be construed as financial advice. I am not a licensed financial advisor, and the information shared here is based on personal analysis and interpretation. Please consult with a professional financial advisor before making any investment decisions.

Source of Transcript: https://seekingalpha.com/article/4688273-udr-inc-udr-q1-2024-earnings-call-transcript

Other Income Summary

• Significant Increase in Other Income: UDR reported a 10% year-over-year increase in other income for the first quarter, exceeding initial expectations of 5-7% growth. Other income constitutes approximately 10% of UDR’s total revenue.

• Bulk Internet Rollout: One of the primary drivers of this growth is the successful rollout of building-wide Wi-Fi. This initiative alone contributed $1 million in additional income during the quarter, compared to just $100,000 in the same period last year.

• Additional Revenue Streams: UDR has also capitalized on other income opportunities, such as renting out common area spaces, adding more designated parking spots, enhancing short-term furnished rental offerings, and increasing the use of package lockers. These efforts have collectively bolstered other income and are expected to continue contributing to revenue growth throughout the year.

• Future Outlook: The strong performance in other income categories demonstrates UDR's ability to innovate and diversify its revenue streams. With continued focus on these initiatives, the company expects sustained growth in other income, further strengthening its financial performance.

Operational Strategies and Technology

• Customer Experience Project: UDR has implemented a comprehensive customer experience project aimed at improving resident retention and satisfaction. The project utilizes a proprietary data hub that tracks and scores every interaction with residents, from service requests to personal interactions. This data-driven approach allows UDR to chronologically align interactions and provide real-time sentiment analysis, enabling proactive measures to improve the resident experience.

• Automation and Innovation: UDR continues to lead the industry with its innovative culture and advanced operating platform. Automation has played a significant role in driving efficiency and reducing headcount by 40% in some areas. The company is now focusing on enhancing customer service by adding back positions where needed to ensure high levels of service and satisfaction.

• Proactive Maintenance and Leasing Strategies: UDR's operational strategies also include proactive maintenance programs and streamlined leasing processes. These initiatives have resulted in higher occupancy rates, reduced turnover, and increased leasing activity, contributing to overall positive performance.

GENERAL SUMMARY

Performance Overview:

• UDR started 2024 strong with better-than-expected fundamental performance.

• Key metrics showed positive momentum, including increased traffic, higher leasing activity, lower turnover, reduced concessions, higher occupancy, and better pricing power.

• First quarter same-store revenue grew by 3.1% year-over-year, and NOI increased by 1.2%.

• April trends show continued improvement in blended lease rate growth, lower turnover, stable occupancy, and strong other income growth.

Drivers of Performance:

1. Employment Growth: Year-to-date job creation of approximately 800,000 jobs, exceeding initial expectations.

2. Apartment Absorption: Over 100,000 newly delivered apartment homes were absorbed in Q1, the highest in over two decades.

3. Affordability: Renting remains significantly more affordable than homeownership in UDR’s markets, driving demand for apartments.

4. Operational Strategies: Effective operating tactics, including the customer experience project, have improved retention and reduced turnover.

Future Forecast:

• UDR reaffirms its full-year 2024 same-store growth guidance but remains cautious due to the volatile interest rate environment and expected peak supply deliveries.

• The company is optimistic about long-term growth prospects driven by macroeconomic factors and internal operational efficiencies.

Drivers of Future Performance:

1. Continued Job and Wage Growth: Strong macroeconomic indicators support sustained demand for apartments.

2. Technological and Operational Innovations: Initiatives like the customer experience project and automation are expected to drive further growth and efficiency.

3. Balanced Portfolio: Diversified exposure across markets helps mitigate regional risks and capitalize on varying market dynamics.

Management's Opinion:

• UDR is positioned well for long-term growth with a strong culture, talented team, and a focus on innovation.

• The company remains vigilant about market conditions and is prepared to adapt strategies to maintain its competitive edge.

• Leadership transitions, such as the upcoming retirement of Senior Vice President Harry Alcock, are managed smoothly to ensure continuity and leverage experienced talent in new roles.

Analyst Q&A Highlights:

1. Same-Store Revenue and Occupancy: Better-than-expected performance driven by higher blended lease rates and robust other income growth.

2. Regional Performance: Coastal markets, particularly New York, Washington, D.C., San Francisco, and Seattle, performed exceptionally well.

3. Sunbelt Markets: Although facing supply pressures, demand remains strong, with improving occupancy and lease rates.

4. Expense Management: Q1 expenses were inflated due to tough comparisons with the prior year but are expected to moderate for the rest of the year.

5. Other Income Growth: Driven by initiatives like building-wide Wi-Fi, rental of common area spaces, and short-term furnished rentals.