Tuesday - Baird has raised the price target for UDR, Inc. (NYSE: UDR) shares to $42 from the previous $39 while maintaining an Outperform rating. The adjustment follows UDR's first quarter performance, which surpassed expectations, and an observed acceleration in blended rent growth, particularly in coastal markets.
The company's significant presence in the Washington D.C. area, which contributes approximately 15% of UDR's net operating income (NOI), is experiencing a 4-5% increase in blended rent growth in the early second quarter.
UDR's turnover has decreased by 400 basis points, contributing to the faster pace of blended rent growth, aided by a considerable difference between renewal and new lease rates, which stood at 630 basis points in the first quarter.
The loss to lease is currently estimated at around 2-2.5%, and the discrepancy between renewal and new lease growth is anticipated to narrow to 300-400 basis points. UDR is reportedly becoming more assertive with renewals to address this gap.
On the acquisitions front, UDR is actively pursuing properties in partnership with LaSalle. This strategy is part of UDR's broader investment approach, which recently saw progress with the developer of 1300 Fairmont securing a loan, allowing UDR to continue accruing income on its investment in the Developer Capital Program (DCP).
Despite three other DCP investments, totaling $50 million, being closely monitored due to their debt yields of around 6-7%, which are slightly below the high-single-digit yields of other DCP investments, the secured loan for 1300 Fairmont stands out as a significant development for the company.
InvestingPro Insights
Following Baird's price target increase for UDR, Inc., a deeper look into the company's financial health through InvestingPro's real-time data reveals a robust picture of its market performance. With a solid market capitalization of $14.09 billion, UDR showcases stability in the real estate sector. The company's P/E ratio stands at 28.25, reflecting investor confidence in its earnings potential, although this expands to 91.93 when adjusted for the last twelve months as of Q1 2024, indicating high future growth expectations relative to earnings.
Investors may also be interested in UDR's dividend yield, which is currently at 4.36%, a compelling figure for income-focused portfolios. Moreover, the company has demonstrated consistent revenue growth, with a 3.98% increase over the last twelve months as of Q1 2024. This underpins the positive outlook presented by Baird, as UDR's financials align with the momentum seen in its operational performance, particularly in key markets like Washington D.C.
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