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Operator: Greetings, and welcome to UDR’s First Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Vice President of Investor Relations, Trent Trujillo. Thank you. Mr. Trujillo, you may begin.

Trent Trujillo: Thank you, and welcome to UDR’s quarterly financial results conference call. Our press release and supplemental disclosure package were distributed yesterday afternoon and posted to the Investor Relations section of our website, ir.udr.com. In the supplement, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. Statements made during this call, which are not historical, may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met. A discussion of risks and risk factors are detailed in our press release and included in our filings with the SEC.

We do not undertake a duty to update any forward-looking statements. When we get to the question-and-answer portion, we ask that you be respectful of everyone’s time and limit your questions to one plus a follow-up. Management will be available after the call for your questions that did not get answered during the Q&A session today. I will now turn the call over to UDR’s Chairman and CEO, Tom Toomey.

Tom Toomey: Thank you, Trent, and welcome to UDR’s first quarter 2025 conference call. Presenting on the call with me today are President, Chief Financial Officer and Chief Investment Officer, Joe Fisher; and Chief Operating Officer, Mike Lacy. Senior Officers, Andrew Cantor; and Chris Van Ens will also be available during the Q&A portion of the call. 2025 is off to a very solid start. Our first quarter same-store revenue, expense and NOI growth exceeded initial expectations due to a healthy fundamental backdrop, combined with operating strategies we employ to create value. These trends have led to positive momentum across most key operating metrics, including lower resident turnover, higher occupancy, lower concessions and improving pricing power.

We feel good about 2025 thus far, but we have only completed the first four months of the year. Accordingly, and is customary for UDR at this time of year, we have reaffirmed our full year 2025 guidance and we’ll reassess as we progress through peak leasing season. Irrespective of how the macroeconomic and geopolitical environment may unfold, we remain strategically focused on three drivers of growth that differentiate us from peers and that we control. First, innovation. We are not only leaders in idea generation, but more importantly in execution. This is evident in the results from our value-add initiatives, which have consistently grown in high single-digit range and added 50 or more basis points annually to our same-store NOI growth.

We continue to innovate and expect to drive incremental growth for many years to come. Mike will provide additional details in his remarks in this area. Second, we listen to our associates and residents and use that feedback to influence our operating tactics and long-term strategy. One excellent example of this is UDR’s customer experience project. We have an ability to orchestrate an enhanced UDR living experience through more than 1 million daily touch points with our existing and prospective residents, which helps improve the retention and lower cost to drive margin expansion and cash flow growth. To enable this, we have equipped our associates with actionable data and more responsibilities, which led to higher levels of engagement on their part, more career growth opportunities as well and higher social retention.

This, in part, led to UDR being recognized by USA Today as a Top 2025 Top Workplace, which builds on UDR’s rich history as a leader in corporate stewardship. And third, we continue to execute on various forms of capital deployment to drive future accretion, including development, debt and preferred equity deployment and joint venture acquisitions. This activity is supported by our investment-grade balance sheet with substantial liquidity that can fully fund our capital needs in 2025 and beyond. This positions us well to take advantage of growth opportunities as they arise, which Joe will expand upon in his remarks. There are also a variety of positive short-term and long-term fundamental drivers of our industry. These include: first, demand is strong, and the chronic undersupply of housing in the United States suggest this will persist.

Based upon third-party data, nearly 140,000 apartment homes were absorbed during the first quarter, which is a three-decade high for the first three months of the year. Demand is outpacing supply across many markets, which bodes well for occupancy and pricing into the future. Second, the pace of new supply is slowing. 2024 multifamily completions marked a 50-year high, but starts continue to decline due to the cost and availability of capital. A future supply pipeline that is below historical averages bodes well for rent growth in the years ahead. And third, renting an apartment is on average 60% more affordable than owning a single-family home in the markets where we operate, the best level of relative affordability in two decades. So from a big picture perspective, volatility, macro uncertainty and their effects on interest rates in the economy and the employment market are all out of our control.

However, I and the team remain optimistic about the long-term growth prospects for the multifamily industry and UDR’s unique competitive advantages that should enhance that growth. We will continue to focus on what we do control, including our dynamic and innovative culture to create value for UDR’s residents and stakeholders. Finally, I’d like to take a moment to recognize Jim Klingbeil, who has decided not to seek reelection to our board. Jim has been a valued voice in the boardroom that has brought a wealth of knowledge and experience. He has helped drive UDR’s transformation into a highly respected blue chip company that we are today. Jim, I thank you for all your contributions to UDR, the real estate industry, and you leave the board in good hands.

With that, I’ll turn the call over to Mike.

Mike Lacy: Thanks Tom. Today I’ll cover the following topics: our first quarter same-store results; early second quarter 2025 trends, including an update on our various innovation initiatives and how this factors into our full year 2025 same-store growth guidance; and expectations for operating trends across our regions. To begin first quarter year-over-year same-store revenue and NOI growth of 2.6% and 2.8% respectively were better than expected and driven by: first, 0.9% blended lease rate growth, it was driven by renewal rate growth of 4.5% and new lease rate growth of approximately negative 3%. Our blends accelerated sequentially by 140 basis points, which is twice as much as our historical, sequential acceleration between the fourth quarter and first quarter.

Second, 32% annualized resident turnover was more than 300 basis points below the prior year period and nearly 700 basis points better than our first quarter average over the last 10 years. This has enabled us to maintain healthy renewal rate pricing and led to more favorable blended lease rate growth. Third occupancy averaged 97.2%, which is higher than our historical first quarter average and 40 basis points higher sequentially versus the fourth quarter. This strategic decision to build occupancy during the seasonally slower leasing period helped to drive revenue and NOI outperformance to start the year and positions us well as we enter our traditional leasing season. And fourth, our other income growth from rentable items was 10%, driven by our continued innovation along with the delivery of value added services to our residents.

Shifting to expenses, year-over-year same-store expense growth of only 2.3% in the first quarter came in better than expectations. These positive results were driven by favorable real estate taxes, insurance savings and constrained repair and maintenance expenses due to our improved resident retention. Moving on, core operating trends have remained resilient in April and key metrics have largely followed typical seasonality. First, blended lease rate growth has continued to improve sequentially. If this trend holds through June, our first half 2025 blends would be towards the high end of the 1.4% to 1.8% range I spoke about on our last earnings call in February. We feel confident in the trajectory of rental rate growth as renewal rate growth has held steady in the mid 4% range and new lease rate growth has improved sequentially since the start of the year.

Second, occupancy remains strong and in the high 96% range today. Traffic is similar to historical norms at this time of year and our 30-day availability is approximately 4% which supports our expectation of occupancy remaining in the mid to high 96% range for the rest of 2025. Third, resident retention continues to compare well against historical norms and April represents the 24th consecutive month our year-over-year turnover has improved. Our full year guidance assumes resident turnover will be 100 basis points below that of 2024. Year-to-date we have exceeded this expectation by 200 basis points, which translates to approximately $7 million of higher cash flow if we maintain this outperformance for the rest of the year. Continued enhancements in how we measure, map and orchestrate the customer experience have increased the probability of renewal and we expect this to drive further year-over-year improvement in turnover and margin expansion in years ahead.

And fourth, other income from rentable items, which constitutes roughly 11% of our total revenue, continues to grow in the high single-digit to low double-digit range. We remain pleased with the trajectory of our initiatives and property enhancements such as the further rollout of building Wi-Fi, further penetration of package lockers and less fraud loss which collectively contribute to incremental same-store revenue growth and improve the customer experience. When considering these factors, our same-store results are trending above the midpoint of our guidance expectations. However, we are cognizant of potential volatility that could affect the macroeconomic environment and pricing of our apartment homes. Accordingly, we will remain focused on executing our strategy and will provide an update to our same-store growth guidance during our next earnings call after we have additional visibility on demand trends.

Turning to regional results, our coastal markets are exceeding our expectations while our Sunbelt markets have performed largely in line. More specifically, the east coast, which compromises approximately 40% of our NOI, was our strongest region in the first quarter. Washington D.C. was our best performing market overall and Boston results were above our expectations. First quarter weighted average occupancy for the East Coast was an astonishing 97.5%. Blended lease rate growth was 2.5%. And our year-over-year same-store revenue growth was approximately 4.5%, which is slightly above the high end of our full year expectation for the region. With healthy demand and relatively low proximate new supply completions, we expect this regional strength to continue.

The West Coast which comprises approximately 35% of our NOI, has performed better than expected year-to-date. First quarter weighted average occupancy for the West Coast was 97.2%; blended lease rate growth led all regions at nearly 3% and year-over-year same-store revenue growth was nearly 3%, which is close to the high end of our full year expectations for the region. We continue to see positive momentum across Seattle and the San Francisco Bay Area due to return to office mandates, increased office leasing activity and quality of life improvements. Annual new supply completions remained low at 1% to 1.5% of existing stock on average across our West Coast markets, which we expect will lead to a favorable supply/demand dynamic in the coming quarters.

Lastly, our Sunbelt markets, which comprise roughly 25% of our NOI, continue to lag our coastal markets on an absolute basis due to elevated levels of new supply. Positively, this supply has been met with demand and strong absorption. First quarter weighted average occupancy for the Sunbelt was 97.1%. Blended lease rate growth was negative 2.5%, and year-over-year same-store revenue growth was slightly positive, which is in line with our original expectations for the region. Among our Sunbelt markets, Tampa and Orlando are performing the best. To conclude, we delivered strong first quarter 2025 results. Same-store revenue, expense and NOI growth were all better than expectations and near the high end of their respective full year guidance ranges.

The near-term operating environment presents some uncertainties, but we have a track record of successfully navigating through bouts of volatility. Our diversified portfolio dedicated associates and continued innovation enable us to tactically adjust our operating strategy to maximize revenue and NOI growth, while we further expand our operating margin over time. I thank our teams for their ability to deliver operating excellence and improve how the industry conducts business. I will now turn over the call to Joe.

Joe Fisher: Thank you, Mike. The topics I will cover today include our first quarter results, a summary of recent transactions and capital markets activity and a balance sheet and liquidity update. Our first quarter FFO as adjusted per share, up $0.61, achieved the midpoint of our previously provided guidance and was supported by same-store growth that exceeded our expectations. The modest sequential FFOA per share decline occurred as expected and was driven by the following: a $0.01 decrease from same-store NOI, primarily due to higher sequential expenses attributable to normal seasonal trends, a $0.005 decrease from G&A which is also due to seasonality and the timing of associate compensation increases and a $0.005 decrease from lower debt and preferred equity investment balances and accruals.

Looking ahead, our second quarter FFOA per share guidance range is $0.61 to $0.63. The $0.62 midpoint represents a $0.01 or 1.5% sequential increase and is driven by same-store NOI growth and additional lease-up NOI from recently developed communities. Next, a transactions and capital markets update. First, during the quarter, we completed the previously announced sales of two apartment communities in the New York Metro area for aggregate gross proceeds of $211.5 million. Second, we commenced development of 3099 Iowa, a 300-home apartment community in Riverside, California with an expected total development cost of approximately $134 million and an expected yield of 6%. We continue to evaluate additional development starts for late 2025 and early 2026.

Third, we increased our investment in 1300 Fairmount, a 478-home apartment community in Philadelphia by acquiring the senior loan from the lender for $114.5 million. This action brings UDR’s total investment in the property to $183.2 million. And by acquiring the senior loan, UDR has more control over the investment and the future performance of the community. And fourth, subsequent to quarter-end, we fully funded a $13 million preferred equity investment at a 12% rate of return on a stabilized apartment community located in the San Francisco Metro Area as part of a recapitalization. Positive property level cash flow allows for approximately two-thirds of our contractual return to be paid current in cash. Finally, our investment-grade balance sheet remains liquid and fully capable of funding our capital needs.

Some highlights include: first, we have more than $1 billion of liquidity as of March 31. Second, we have only $535 million or 9% of total consolidated debt and approximately 2.5% of enterprise value scheduled to mature through 2026 – thereby reducing refinancing risk. Our proactive approach to managing our balance sheet has resulted in the best three-year liquidity outlook in the sector, and the lowest weighted average interest rate amongst the multifamily peer group at 3.4%. And third, our leverage metrics remain strong. Debt-to-enterprise value was just 27% at quarter-end, while net debt-to-EBITDAre was 5.7x. In all, our balance sheet and liquidity remain in excellent shape. We remain opportunistic in our capital deployment, and we continue to utilize a variety of capital allocation competitive advantages to drive long-term accretion.

With that, I will open it up for Q&A. Operator?

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Eric Wolfe from Citibank. Please go ahead.

Nick Joseph: Thanks. It’s Nick Joseph here with Eric. Just wondering if you can talk about your confidence in the ability to see rent trends pick up in the second half relative to the first half as implied with guidance, just given the macro uncertainty and what you are seeing – or what we’re seeing with the consumer?

Joe Fisher: Yes. Hey Nick, maybe I’ll kick it off. I guess, I would start first with the macro environment in terms of some of the tailwinds that we’ve talked about in the past. So as I talked about, supply is down about 20% year-over-year from 2024 to 2025 and that really continues to decelerate from 1Q all the way through 4Q. So we continue to see pressure from that front continuing to decline, so concessionary environment remains stable. We’re seeing good pricing power in terms of the ability to push up rents, still seeing good traffic. So everything we see today looks good. That forward trend with supply coming down looks good. And then you have the relative affordability component combined with still pretty strong demand out there in terms of still seeing job growth, still seeing wage growth.

So I’d say the macro backdrop was volatile and somewhat fluid. From what we can see today, we still think we have a good avenue towards that number on a go-forward basis. I think the other thing we’ve kind of talked about is, if you looked at the blended lease rate growth to date, and Mike can kind of get into it. But relative to where we need to be for a full year, it implies only about 3% blended lease rate growth for the rest of this year relative to the mid-2s that we’re putting up in April. And so we only need to see acceleration versus April of about 50 basis points or $12 per unit, and if we don’t see that the downside risk is relatively minimal at roughly 20 bps to same-store revenue on a full year basis. So we feel pretty good about the risk related to the guidance as well.

Mike Lacy: Yes. Maybe if I could just add a couple of points here. I think it’s important to talk a little bit about what we’re seeing in April. And I’ll tell you, the trends are strong across the Board. I think our strategy to drive occupancy up during the shoulder quarters really set us up for leasing season and you can see it playing out. But I’d remind the audience that we’re really focused on total revenue, not just blends, so we’re looking at how we leverage our occupancy, how we’re driving our other income initiatives. And in total, our revenue continues to look favorable against the group. But a couple of things I’d point out in April. We just finished the month. Occupancy was nearly 97% and our blends were in that mid-2% range.

So we are on track to deliver what we expected during the first half of the year. And to Joe’s point, when we get into the back half, we typically have blends of around 4% just from historical trends, we’re only saying 3% today. So we still feel comfortable about what we’ve put out there in the back half of the year.

Nick Joseph: Thanks. That’s very helpful. And then just on the senior loan you bought on the Philadelphia asset. To the extent that you end up owning and consolidating that, what would the initial cap rate be? And then where do you think it could stabilize at?

Joe Fisher: Yes, fair question. So just a little recap there. I think everybody remembers back in fourth quarter, we took a reserve and moved our pref equity investment on to a non-accrual status. So in 1Q as the senior loan went into default, we chose to purchase that senior loan of $414 million. We did not actually recognize any income related to that. We kept it on non-accrual status. We did have to have the drag, of course, from funding that investment. So that held back our 1Q result a little bit. But as we move into 2Q, we expect that we’re going to be able to consolidate that asset and take control of that investment and get our operational team in there. And so that’s kind of the sequence of it. When you look at the yield on our basis of roughly $183 million, on a forward basis, we’re probably going to be about a 4% now that factors in some upside from getting our operational team in there, continue to see occupancy move forward, which is kind of in the mid-85s side today.

So we need to see occupancy pick up. It’s a really challenged submarket. But we do think we’ll be in mid-4s in year one, and then we’ll have a path to get up to around 5% on our basis. Over the next couple of years, as we get some ops initiatives in there and see that submarket stabilize.

Nick Joseph: Thank you.

Operator: Thank you. The next question comes from the line of Michael Goldsmith from UBS. Please go ahead.

Ami Probandt: Hi, this is Ami on for Michael. I’m curious, as you roll out the bulk Wi-Fi, does that at all impact your ability to push on renewal rents. So if a tenant is seeing a rent increase plus an add-on are they more likely to try to negotiate or maybe said another way, as we lapse the bulk Wi-Fi rollout, could you see more pricing power on renewals?

Mike Lacy: Yes. Maybe a couple of things. Just to set the stage with our Wi-Fi rollout just to give you an idea of where we’re at. We have rolled out about 30,000 homes at this point. We do have another 10,000 to go this year. I would tell you, we do monitor new lease growth, renewal growth, where we’re at with our occupancy. And I could – I would tell you that, that 4.5% that we’re achieving today is right in line with the peer average. So we don’t feel like we’re giving up anything there. And in fact, we’re seeing more of an acceleration on our blends as we go into April today. And so the rollout is going well, and we do not believe that it’s impacting our rents in any way.

Tom Toomey: Ami, this is Toomey. I might add a little bit. One, I mean we all realized high speed is, in essence, not an option anymore. It is a necessity. Second, given our bulk purchase of it, we have an expanded margin over the rest of the industry with respect to, we own a little bit of the action of the company. We buy in bulk in the markup. So it’s – we’ve got better margins on that aspect of it accordingly and I think better service at it. But Joe, you were going to add some.

Joe Fisher: Yes. I was just going to say, Ami, it’s not all that different from a lot of our initiatives that we have out there in terms of we’re trying to find win-wins for the customer and for ourselves. And so the win or the value proposition here for the customer on Wi-Fi is that, it is fully set up day one. So you’re not having to call your cable company, your Wi-Fi company, have them put the equipment in and come get it installed. You also have building wide or property-wide Wi-Fi. So if you want to walk down to the pool, walk to the gym, walk to the business center, you’re going to have it everywhere throughout the community, not just in your unit. And from a price perspective, we do look at all the pricing options and competitor options, make sure we price commensurately with the market.

So we’re giving them better value, similar speed, similar price, so really good reception on that front. And that’s what we found we’ve been able to do in a lot of the other initiatives, whether it’s parking or package lockers and many of the others that Mike’s talked about in the past.

Ami Probandt: Got it. Thanks. I wish my building would do that. And then just a quick one on the San Francisco recap. What got you comfortable with that deal just given some of the trouble that we’ve seen with some of these other DPE deals?

Joe Fisher: Yes, good question. Probably first stepping back and just thinking about a couple of those troubled investments that we had within the DPE portfolio. I think you really have to rewind back to the vintage that many of these were done at. These were post-COVID type of investments that we’ve done started when we were running into delays from a construction schedule perspective, you had material delays in a number of them that led to cost overruns generally. In addition, the ones we’ve really had the trouble with have been more urban oriented. And so some of these urban areas, as we’ve talked about in the past, just have not come back to the same degree that the rest of the portfolio has. So whether that’s a couple of the troubled assets we had in San Francisco or the one in Philadelphia that we’ve talked about.

I think there are some issues that historically existed that no longer exist today as we think about the go-forward environment. So as we looked at the San Francisco recap deal, you’ve seen us do more and more of these from an exposure standpoint or derisking of the DPE portfolio perspective, trying to do more recaps on operating assets. Where you know the rents, you know the income statement, you know the markets and know how it’s going to perform. So we’ve had less and less development exposure over time. This deal is another one of those recaps where we had a chance to come in to an operating asset that last dollar LTV is kind of in the mid-70s starting kind of in the low 60s. And from a cash pay perspective, about 70% of our income is actually being paid on a current basis.

And so that helps derisk the cash flow and the accrual as well. So we feel really strongly about the investment that we made here.

Ami Probandt: Thank you.

Operator: Thank you. The next question comes from the line of Austin Wurschmidt from KeyBanc Capital Markets. Please go ahead.

Austin Wurschmidt: Mike, I just want to hit back on some of the acceleration in blends you’ve discussed and really which markets you’re seeing the most acceleration month-to-month. And just curious if you’ve seen any of the markets, I guess, hit a speed bump as you get into April and some of the higher expiration months.

Mike Lacy: It’s a great question, Austin. And from what we’re seeing today, it’s almost across the board, we’ve seen a little bit of a pickup from what we saw in the first quarter. So again, we were around 0.9%. And right around the mid-2s today. And I would tell you that the most acceleration I saw in the last probably 30 to 45 days is probably in the Sunbelt just in terms of what we’re seeing in Texas and Florida, we’re starting from a really low point in Austin, but we did see an acceleration of about 500 basis points there. So that gives us a little bit of comfort. But in addition to that, I’ll tell you, D.C. continues to do well. We get a lot of questions about that market. I think we’re around 3.5% plans in 1Q.

And we were right around 4% during April. So that market’s picked up. Boston continues to do well for us on the East Coast. That’s a market we expect to be a little bit slower to start the year, just given a little bit more elevated supply. But that one’s actually held up really well, too. And then I’d tell you on the West Coast, San Francisco and Seattle continue to do well. I wanted to say San Francisco is around 4% blends, pretty consistent with what we’ve seen over the last 90 days. But Seattle has taken off a little bit more, and that market is running around 4.5% blends compared to right around 2%, 2.5% in 1Q. So a little bit of strength in all of our regions today. And we feel good about the trajectory.

Austin Wurschmidt: It seems pretty upbeat, but I guess when you look across the three primary regions, despite tracking ahead here to for, I mean, anything you’re doing from an operating strategy perspective to maybe derisk the back half of the year in any way you can?

Mike Lacy: A couple of things we’re looking at. And obviously, we’ve already sent out renewals through, call it, June at this point, we’re starting to price July and August. Our expectation is we’re going to send out between 4.5% to 5%. And if we have to negotiate a little bit more, we will. But we do feel like we have some momentum on our side. I’m starting to see new lease growth get a little bit better. In fact, it was flat in April, which is a big difference from that negative 3% I talked about in 1Q. And so that gives us a little bit of momentum allows us to try to drive our renewals up you’ll continue to see us, and we talk about this every year, drive our occupancy down a little bit as we go into that high demand period during the second and third quarter.

It allows us to push our rates a little bit more and start to set up the back half of this year. So all in all, you’ll continue to see us drive our rents where we have the opportunities. It’s not a blanket across the entire portfolio. Every market is a little bit different, but we are going to get a little bit more aggressive as it relates to pricing.

Austin Wurschmidt: Very helpful. Thanks for the time.

Operator: Thank you. The next question comes from the line of Jamie Feldman from Wells Fargo. Please go ahead.

Cooper Clark: Hey, thank you for taking the question. This is Cooper Clark on for Jamie. Joe, just wondering if you could talk about the yields you see right now across development, wholly owned acquisitions and JV acquisitions to your LaSalle JV and how the conversations are picking up with LaSalle, whether you’re underwriting more deals versus this time last year?

Joe Fisher: Yes. Thanks for that. I’d say, from the joint venture perspective, we are actually showing and underwriting significantly more deals with our partner there at LaSalle. I think we mentioned in the past, their capital partner had really been kind of on hold last year as they sat back and reassessed their overall global mates given their exposures and movements in the yen. So we really got the greenlight early this year to start showing them deals and moving ahead. I do think that by the time we get on this call in July, we’ll probably be able to talk about a deal that we’ve been underwriting and pursuing. And hopefully, we’ll have it closed by then. So I think there’ll be more to talk about by the time we get out to July.

And I get four cap rates broadly, you are still seeing quite a bit of price discovery. I mean if you look at volumes closed just in the first quarter and even going here into April, we’re only slightly below where we’re at pre-COVID. And so while volumes are down materially from kind of the 2021, 2022, 2023 period, we are still seeing good price discovery. I’d say, if you’re kind of a main and main asset, newer vintage, good fundamental trends, you’re pricing well into the 4s, so kind of in that mid-4s type of range. If you’re a little bit more off the beaten path, a little bit older quality, less of a fundamental story, maybe facing some near-term supply yes, you can price up into the 5s. So there is some dispersion in the cap rates that you’re able to underwrite.

Obviously, the levered buyer has not been there as much. So some of those B-quality assets still aren’t pricing as well as they were in the past. But that gives you a range of the cap rates. If you think about the development side that you asked about, you’re really still seeing the market try to underwrite up into the low to mid-6s for new opportunities. I’d say as it relates to our development pipeline, we started a deal out in Riverside in first quarter. We’re underwriting that to about a 6% yield. And so we’re trying to do a couple things with our land pipeline. One is go out there and get that activated. We do have a larger non-income producing asset there with our land pipeline. We’d like to see that get activated. And two, when you look at the starts going forward, we do have a couple others ready beyond the Riverside deal, one in Northern Virginia, one in Dallas that we think probably later this year, early next year will be started.

So we’re working on a lot within the pipeline. But we’re not necessarily looking for new land acquisitions at this time.

Cooper Clark: Great. Thanks. And then I guess kind of just following-up on that. In the past you talked about being in more of a capital light mode with the development start this quarter more to come and then some of the LaSalle activity. Does this represent a shift into more of an opportunistic approach and is the likely funding here just going to be through capital recycling and dispositions?

Joe Fisher: Yep. I think I could probably repeat your question and give it as an answer. We are much more in the capital balanced or opportunistic mode at this point in time. So with DPE continuing to deploy there as we get payoffs over time, which we’ve had number of payoffs in the last part of last year and trying to forecast out what we may get in the future. So we’ll be recycling capital there. We think timing makes sense on the development side to activate that land. We continue to see supply come down this year, but also starts are down materially down into that kind of 250,000, 300,000 units per year nationally. And so as we lease up into that environment here in a couple of years, we think development starts make sense today.

And then on the JV side, I think we’ve been pretty open. We do want to continue to grow that joint venture platform. We’ve got five deals under our belt with them. Hopefully we’ll have another one to speak to in the next 90 days and multiple thereafter. And so, we’re trying to be opportunistic, figure out where we can create value on the offensive side. And on the sourcing side it really is going to be disposition. So working that through our asset management committee and understanding which assets maybe are a little bit more full from a yield perspective, from a margin perspective, from a initiatives perspective and kind of been tapped out on that front. Maybe they have some capital issues that we don’t feel comfortable addressing or maybe we just don’t like the market or micro market or kind of asset location.

So we’re trying to be pretty thoughtful on that front with recycling capital.

Operator: Thank you. The next question comes from the line of Jana Galan from Bank of America. Please go ahead.

Jana Galan: Thank you. Hi everyone. Question for Mike. Appreciate you running through the improving blends from first quarter – to first quarter from fourth quarter by market, and then the only market though that’s breaking the trend is the Southwest region. So I was curious if you could kind of talk about expectations for Dallas and Austin. And if you think this quarter could potentially be the trough for new leases.

Mike Lacy: Yes. Similar to what we’ve talked about in the past, we believe that Florida is probably more of a trough and they’re actually starting to see a more positive momentum. And so for me, if I had to rank them, it definitely would go Tampa first seeing an inflection point, seeing positive blends in that market, followed by Orlando as a close second, seeing more momentum there. So could see positive new lease growth in that market sooner than say Texas or Nashville. Our expectation is Nashville maybe end of the year, maybe beginning of next year you start to see some positive momentum on blends followed by Austin as probably the laggard of the group today. And again, just remind the audience that that’s only a 1.5% NOI market for us.

So relatively small, but that market does have a lot of supply that it’s going to have to work through. And our expectations are it’s going to be the end of this year into next year before we start to see that positive momentum, if you will.

Jana Galan: Thank you.

Operator: Thank you. The next question comes from the line of John Kim from BMO Capital Markets. Please go ahead.

John Kim: Thank you. I also want to go back to the reiteration of your blended for the first half of the year upper half of 1.4% to 1.8%. I guess with renewals remaining in the mid-4s, I think that implies back of envelope new lease growth of 1.5% to 2% positive in the second quarter and that’d be a turnaround from what you’ve even achieved in April. So I just wanted to make sure that math is correct. I don’t have all the numbers behind me.

Tom Toomey: John, I mentioned in my prepared remarks if we can capture this 2.5%-ish that we’re seeing in April through the rest of the second quarter that puts us on the top end of that 1.4%, 1.8% that we said at the beginning of the year that we needed in the first half. We feel like we’re right on track there. And so as it relates to the back half of the year, we don’t expect to see much of a difference in the third quarter. It’s just going to depend by market, by region. But again, as we started the year, we’re right on track.

John Kim: Yes, I was going to focus on the new lease growth rate just turning positive in second quarter.

Tom Toomey: That’s playing out as we expected to. So our expectations were that we’d be right around flat new lease growth as we turn the corner into leasing season. And I’m happy to say that’s exactly how it’s playing out. Renewals again, staying in that 4.5% range. We may start to move that and push that envelope a little bit as we go into 3Q. But right now new lease growth feels good at that flat and ideally it’ll continue to move up as we progress through the leasing season.

John Kim: Okay. And the value add services on innovation, I think the last update was $15 million incremental this year. Are you still on track to deliver that or could there be upside to that figure?

Joe Fisher: Yes. John, hey, it’s Joe. We are still on track from other income perspective. So contribution coming from that, we continue to see high single digits kind of double digit type of growth on the other income light on them. So still seeing good success on that front. Mike and I went through some of the Wi-Fi earlier, still pushing parking, still pushing package lockers and a lot of the other initiatives that we have going there. And then obviously on the customer experience side, which really hits all line items from top line revenue occupancy to other income turnover expense to capital, still seeing really good success there. I think everybody saw, we were down about 300 basis points year-over-year on turnover. So having record low turnover here to start the year, which is doing a little bit better than expected. And so I’d say, everything remains on track from an initiative perspective.

John Kim: Great. Thank you.

Operator: Thank you. The next question comes from the line of Rich Anderson from Wedbush Securities. Please go ahead.

Rich Anderson: Hey thanks. So good morning there. So on the topic of turnover, this has been a recurring theme for you and for others over the past several years of declining. And I’m wondering besides the fact that you’re awesome operators, blah, blah, blah and keep people – encourage people to stay. What is happening outside of that, that’s encouraging turnover? Is 32% that you’re porting today obviously a good number, but at what point has become too low where you start to lose an opportunity to capture some rent upside. So I’m curious where we might go from here from a turnover perspective or 0%? Is turnover 0% the best, I don’t know. You tell me.

Mike Lacy: Hey Rich, it’s a really good question, and feel free to jump in if you guys have anything. I think for us, the way we look at it, and we’ve really gone back and I’d tell you from 2012 to 2019, our average turnover was just over 50%. And so we’ve made a lot of progress on this initiative over the last few years. In fact, last year, we were around 43% expectations, as I mentioned, earlier in the year is, we’re trying to get another 1% better. We’re on track to be about 3% better, and I don’t think I mentioned it, but in April, we were about 4% better on a year-over-year basis. So it continues to look really good. But to your point, I think for us, it’s more of a transformational shift away from that transactional focus, and we are more focused on that lifetime value of the rest [ph].

So understanding who’s been with us the longest? Who’s paying more rent than others? What kind of interactions that we have with these individuals? And just trying to change that trajectory, if you will. And so the teams I mean at this point, they’ve got the tools. They’ve got the training, the resources. They know how to electrify these bad experiences, if you will, and it’s leading to a positive impact across turnover, pricing, occupancy, other income expenses and ultimately are margin. So we’re leaning into it. It’s playing out and we’re excited about what’s to come – I think for this year we’ve mentioned it in the past, but we are looking to allocate more capital to try to solve those problems that we’ve identified that are recurring and across properties if you will, and that issues have moved in.

It’s callback tickets, it’s backlog of issues across the property. We’re solving those things, and we’re seeing it play out in our numbers. And in addition to that, I’m happy to say, we’re about halfway through rolling out funnel, our new CRM. We’ve got half the markets done. We expect to be done by the end of May with that. We believe that that’s going to make us more efficient as it relates to working with our residents as well. So we think there’s more to come here, and we’re excited about what the future has in store.

Tom Toomey: Rich, this is Toomey. A couple of points of emphasis, and I’ll make sure to pass it on to the rest of the operating team that they’re really good at blah, blah, blah. But in all seriousness. So you have to think about – we set out to change how the industry does the business, and it shows up in a lot of different metrics. And I know that people isolate on blends or they isolate on turnover, it really just comes down to total revenue performance, okay? And for us, you’ve heard us talk about a number of initiatives over the year from bad debt. We look like we’ve bent the curve there and it’s closing in back to pre-pandemic levels at 1%. That’s a heck of a lot of work to ensure we get high-quality people in the door.

Mike talked about how we do tours differently, how we service differently, how we have fewer days available to rent. I mean every day that we do not have someone renting an apartment, it has lost revenue to us. So keeping people in longer, we run at a higher occupancy, we have more revenue out of that apartment community home than anyone else, and we’re always still trying to find ways to do it. So I think just focusing on the turnover, yes, it’s historically low at $32 million we’d still like to see it go down, but not at the sacrifice of total revenue. And so yes, we do, in essence, move our pricing dynamically to ensure we’re building a total revenue picture that is optimal. Sorry about that Rich.

Rich Anderson: I don’t mean to trivialize the extraordinary operating. I just wanted to get to my question.

Tom Toomey: It’s inspirational for them.

Rich Anderson: So the second question for me is, I did check your work and you have a history or tradition of not adjusting guidance in the first quarter, at least going back a few years. But I’m wondering, based on what you’re seeing today, had it not been for Liberation Day and all the disruptions that potentially could come from a consumer recession standpoint. Would you be – were you toying with raising guidance this time, if not for that noise? Or were you never really there? And the whole tariff issue really had no interplay into your decision to not raise guidance this time. Thanks.

Joe Fisher: Rich, I’d say, number one, precedent and our cost has really never been to raise guidance after the first quarter, which I think is generally commensurate with what we see out of the sector. Number two, the – we really do focus in on, it’s how we finish now how we start. And so while we are very, very excited about the start to the year, and I think all the commentary that you heard today, we are very excited we are trending ahead. There’s still a lot of unknowns. There’s still a lot of work to do. And so we didn’t really talk about it much. We’re feeling really great about the start of the year, and I think we’ll give you – hopefully, a really good update when we get out to July and 2Q.

Rich Anderson: Okay. Good enough for me. Thanks, Joe, thanks everyone.

Joe Fisher: Thank you.

Operator: Thank you. The next question comes from the line of Haendel St. Juste from Mizuho. Please go ahead.

Haendel St. Juste: Yes, I’m here. You think I’ve done this before, right? So first question I had for you was just on the overall mezz lending conversation, the environment. I’m just curious kind of what level of inbound? I’m assuming there are more that you’re seeing these days as some folks grapple with rates being a bit higher, maybe macro uncertainty. So I guess I’m curious overall, the level of inbounds you’re getting relative is that increasing? And perhaps if your appetite could be changing and that could be a source of capital deployment upside this year?

Andrew Cantor: Hey Haendel. This is Andrew. Thanks for your question. What I would say is that the number of inbound development deals is definitely declining from where it was historically there’s by far less of those type of deals coming in. And as Joe mentioned, those are about the deals we’re focused on. On the other hand, deals where we can go in and recap operating assets, that is increasing from where it’s been historically. But I wouldn’t tell you it’s at the same levels of incoming calls or incoming prospects that we’ve had historically. It’s still below that historical average.

Haendel St. Juste: Got it. Okay. And then one just quickly, I haven’t heard any updates recently on the CFO search, but perhaps maybe an update there on that if we can expect an announcement time mid-year, by the fall, just curious on where things stand? Thanks.

Tom Toomey: Haendel, we’re not focused on the time frame. What I would update since the February call, we’ve had a very robust response. We have a very, very deep pool of candidates and we’re now starting the face-to-face interviews. So I feel very optimistic about the position of Joe you relieved when we take one of the C-suite off of him. But, yes, we feel really good about it. And for us, it’s finding the right fit for the team and the future and our strategy. So we feel really good about the position.

Haendel St. Juste: Thanks, guys.

Operator: Thank you. The next question comes from the line of Alexander Goldfarb from Piper Sandler. Please go ahead.

Alexander Goldfarb: Hey, good morning out there and thank you. So two questions for you. First, Andrew, on the transaction market, I’ve heard different things. Some folks have said that deals have gone sort of quiet just because of the disruption. Others out there have said no deals are still active as long as interest rates are low. So just sort of curious what you guys are seeing overall in the transaction market and how buyers and sellers look at the disruption versus the 10-year that’s still relatively attractive?

Andrew Cantor: Yes. Hey Alex, it’s Andrew. As you said, there’s different feedback in the market on that today. And I think it’s very market specific and also very asset specific. Overall, I would say that most buyers who are buying today, so those who are executing are focused more on 2026 and 2027 after the current wave of supply has been delivered, but looking at those operating fundamentals rather than the current interest rate volatility. And then I’d say the other thing that we’re hearing a lot about is basis, right? What is the basis on buying this asset at and how does that compare to replacement cost? So those that believe in those two things, a, looking beyond the current interest rate and, b, looking at basis, those are the ones that are buying. And those people are still very active.

Alexander Goldfarb: Okay. And then the second question is the Riverside development. I guess not since BRE was around we hear much about Inland Empire. But just sort of curious your thoughts on executing a development out there versus investing that capital in an infill market or in a market that may have better cost dynamics. I understand that you’ve owned the land for a while. Presumably, you looked at trying to sell it, maybe you did, maybe you didn’t. But just trying to understand putting money out in Riverside versus elsewhere.

Joe Fisher: Yes. We – so like you mentioned, we’ve been involved with this project. I think going back to 2019 is when we first started working with what was then our partner on the project that we bought out over time. So we’ve had it for a while. We’ve been monitoring it as we’ve come through kind of some of the disruption in the last couple of years. We’ve been a little bit more pencils down on development, haven’t had much in the way it starts, as we went through all the available parcels that we have and continue to evaluate options on all of those. This was the first one that popped up that hit our yield thresholds and that we felt most confident in the ability to move forward near term. So I think I mentioned earlier, about a 6% return.

And so the ability to get that type of return brand-new asset. It’s in a good market. It’s in a good location between Downtown Riverside and close to the campus there. So we think we’ve got a good location. It’s going to be a good basis on that deal. And so we move forward on that one. And I think we’ll have another couple of starts that we’ll have later this year that we’ll be able to move forward on.

Alexander Goldfarb: Thank you.

Tom Toomey: Thank you, Alex.

Operator: Thank you. The next question comes from the line of Adam Kramer from Morgan Stanley. Please go ahead.

Adam Kramer: Hey guys, thanks for the time. Just wanted to ask about Washington, D.C. fundamentals. It’s an important market for you guys, like it is for some of the peers. So I know kind of seems like everything is still kind of performing well there, but obviously, headlines and news a little bit more negative. So just wondering what you’re seeing kind of latest real time on the ground there. And maybe in particular on the return to office trends, what are you seeing there? And if you could kind of describe what inning we may be in on the kind of return to office tailwind for demand? I think that would be helpful, too.

Mike Lacy: Sure. Adam, I’ll kick it off. Maybe I’ll start with a few points here. D.C. is about 15% of our NOI, and we are 40% urban, 60% suburban. We had a great quarter. Team did a really good job. We had 4.9% revenue growth. Occupancy was 97.7%, and I think I mentioned earlier, our blends were 3.5% during the quarter. And in April, we actually increase that to about 4%. So that looks good. Occupancy today is still above 97%, feels pretty good on some of the main blocking and tackling stats, if you will. That being said, we do watch a lot of different leading indicators just to make sure that the market still feels healthy. Some of those include canceled denials, notices, gifts, our vacant days are trending, traffic, concessions.

I’d tell you, for the most part, they still look really good from a year-over-year standpoint within that MSA as well as how it compares to the rest of our portfolio. So D.C. is one that’s been strong to start the year, one that we’re watching very closely and again we will pivot as necessary as we kind of go through the year like we do with all of our properties in all of our markets. And so right now, it feels good. In terms of innings and return to the office, we are seeing a little bit more of that. I think that’s definitely helped us out to some degree to allow us to drive those blends of around 4% today, allowing us to keep our occupancy above 97%. And right now, concessions across that MSA are right around one to one-and-a-half weeks.

So return to office is definitely helping out to help mitigate anything we’re seeing on job loss, things of that nature. So right now, D.C. is still strong.

Joe Fisher: I think maybe just two other stats that we were talking about previously was on that return to office piece, you are seeing ridership on public transit, up double-digits relative to where we were recently. And so you’re seeing clearly that start to develop on the ground in terms of the actual metrics. The other thing that everybody pretty worked up was jobless claims activity back in kind of February and March in D.C. you’ve actually seen that come right back down to a pretty normalized level, i.e., a pre-dose type of level. And so we’re not seeing continued elevation in jobless claims activity the last 30-plus days. So that wave is potentially behind us.

Adam Kramer: Great. Thanks for the time.

Operator: Thank you. The next question comes from the line of Julien Blouin from Goldman Sachs. Please go ahead.

Julien Blouin: Yes. Thank you for taking my question. Just wondering what your latest thoughts are on the Boston market. It sounds like it’s been one of your markets that have outperformed your initial expectations. But I guess, like incrementally from here, how do you think about the risks from university and research funding freezes and cuts the headlines that continue to be out there about biotech softness? Just any details you can give us?

Mike Lacy: Sure. Good question. For us, I think it’s always good to bring that market. This is a relatively large one for us, so 11.3% of our NOI, 30% urban and 70% suburban. I’ll tell you, it has started better than we thought. The leading markets or submarkets in Boston today starts with North Shore followed by the South Shore and then a little bit more weakness downtown. Our expectations, and you can see in some of the supply numbers the North Shore should start to see a little bit more supply as we maneuver through the year. And so while it started off very strong, we do expect that this one will slow down a little bit throughout the year. That being said, really happy with that 4.6% revenue growth we had in the first quarter. and it feels good today. So we’re going to continue to lean in and drive our rents ideally run in that 97% range, and today, concessions are relatively flat to maybe half a week. So Boston is good.

Joe Fisher: I do think, too, Julien, just as you look at all that biotech noise or life science noise, when you look at composition of employment within the MSA, it’s only about 3% or 4% of total employment within the MSA. In addition, when you look at the supply side, while Boston is a little bit elevated this year, Boston is one of the better forward markets from a supply perspective when you look at permitting activity. So we think we’re going into a forward environment where you have less supply, you still have relative affordability very much in rentership favor. And while there’s a lot of note in headlines around life science, it is a smaller component of a pretty diversified and high income and high educated job base there.

Julien Blouin: Okay. Great. Thank you. And then maybe from your vantage point, having a more even balance of coastal and Sunbelt exposure, if the macro were to deteriorate from here and we were to head into a downturn, I guess, which of your regions between East Coast, West Coast and Sunbelt would be most resilient this time around, you think?

Joe Fisher: Yes. I think it depends a little bit on the driver of that demand fallout. So where does that come from? Because we’ve seen the GFC, more the finance oriented as well as the mortgage-oriented industries take a hit, which had an impact on New York of course, plus a lot of Sunbelt markets in Southern California. We’ve seen the tech wreck having a Nortel [ph] focus. And so I think it depends a little bit on where the demand destruction in that environment could come from. I think the good thing is as we go into a lower supply environment and lower affordability, you still have an outsized capture for rentership. But if you look at historical volatility, our markets like D.C., Boston, Richmond, Baltimore, Philly, traditionally less volatile markets.

Same as we get into the Sunbelt with kind of the Orlando’s and Dallas is being a little bit less volatile. And then normally have a little bit less volatility in Southern California relative to Northern California. I mean you can look a little bit of that as a proxy and I think that’s why we love our diversified portfolio. We’re balanced no matter what the cause of that recession may be, I think will be relatively insulated versus peers.

Julien Blouin: Okay. Great. Thank you.

Operator: Thank you. The next question comes from the line of Ann Chan from Green Street. Please go ahead.

Ann Chan: Hey. Thanks for your time. Just jump back over to the first quarter results, can you discuss whether there were any unusual sequential drag from fee income or bad debt or other initiatives in the first quarter that should normalize later in the year?

Joe Fisher: Really nothing from an operational perspective is a pretty clean quarter when it comes to same-store NOI. I think the two things that from an FFOA level held us back a little bit. One was just some timing on G&A, which we expect to normalize as we go through the rest of the year. So, we still feel good about guidance level for G&A. It’s just a little bit elevated for a couple of reasons there in the first quarter. And then the other piece mentioned earlier, the buyout of 1,300 Fairmount loan, that DPE senior loan that we purchased, we did not accrue during the quarter related to that, but we did have the funding cost related to the buyout. So those two things were somewhat timing oriented that normalize going forward and help us on a sequential pickup FFOA wise into 2Q and 3Q.

Ann Chan: Great. Thanks. And on that Fairmount loan, could you share were just the debt service coverage stand today for that investment as well as the total loan to value on the property.

Joe Fisher: Yes. So since we took a reserve back in the fourth quarter, we reserved down to $183 million, which is what we felt third-party appraiser felt was the appropriate value for that asset at this time. And so that effectively took our position to 100% levered since we took a reserve. The debt service coverage is kind of irrelevant now because we have it on nonaccrual status. What I can tell you is that if you look at a roughly 4% forward return on $183 million, you’re looking at kind of $6 million to $7 million of forward NOI. And then more upside from there as we get it from kind of mid-80s occupied, up into a higher number on a forward basis, plus get some initiatives in place. So, I think that’s more the number to focus on is the NOI contribution going forward, which would be roughly $5 million [ph] to $2 million a quarter.

Ann Chan: Got it. Thank you.

Operator: Thank you. The next question comes from the line of Alex Kim from Zelman & Associates. Please go ahead.

Alex Kim: Hey guys. Thanks for taking my question. A lot of good ground covered in this call, but just wanted to go back to something that Ann mentioned on bad debt. It seems like it trended in line and mentioned earlier in the call that it’s trending towards that pre-COVID average still. Just curious on kind of the AI screening program for bad debt. Has that resulted in any incremental improvement that you’ve seen thus far? Is that Anything, I guess, related to that program would be helpful.

Mike Lacy: Yes, I’ll take that. I think there’s a few things there. It’s not just the ID verification, but it’s also proof of income. So, we’ve rolled out pretty much across the board at this point – We’re seeing it help with our bad debt, obviously lower write-offs. But maybe a few other things I’d point to is when we think about the people coming to the door and we’re looking at credit scores, co-signers, even the average deposits, we’re seeing better results, if you will. So as it relates to average deposits, our deposits are up 17% on those individuals that are coming through the door. And so, if they become a riskier tenant, we do have more money in the bank. And then as far as co-signers, they’re up around 1%.

So about 10% of our applications have a cosigner and our credit scores are up 20 points. So we’re around 730 versus right around 710 previously. Overall, it’s starting to pay dividends. And again, we’ve rolled it out across the portfolio, and we expect it to continue to work well for us as we maneuver through the leasing season, if you will.

Joe Fisher: And Alex, this is Joe. Just a little bit on the results from an AR and bad debt perspective in the quarter plus go-forward potential. So, you’ll see on Attachment 3. We do have our net bad debt reserve continuing to decline. And so, we’re seeing a good trend on that front. We’re seeing AR continue to come down. We’re also seeing fewer of the large balance long-term delinquents. So we’re having more success trying to get individuals out a little bit sooner. We still have a lot of delays in terms of court processes and affection time lines, but on the margin, getting a little bit better on that front. And then that trend of pre-COVID, we’re right now, plus or minus 100 basis points of net bad debt expense pre-COVID probably 40 or 50 basis points.

So, we still think there’s a huge opportunity here as we roll out some of these AI platforms from a screening perspective that Mike talked about. That incremental 50 bps is worth plus or minus another $9 million on top line, but then all the other implications to expenses and term costs, occupancy, et cetera, is another probably $9 million. So just to get back to pre-COVID you still have another $15 million to $20 million of bottom-line cash flow opportunity. So, we are laser focused on making sure we get those rollouts done, making sure we get the right residents into our communities.

Alex Kim: Got it. That’s helpful, right. Those kind of tangential effects are something that I feel like a lot of people are missing as well. Okay. No, that’s all for me. Thanks for taking the time.

Joe Fisher: Thank you, Alex.

Mike Lacy: Thanks.

Operator: Thank you. Ladies and gentlemen, as there are no further questions, I will now hand the conference over to Tom Toomey, Chairman and CEO of UDR for his closing comments. Please go ahead.

Tom Toomey: Thank you, operator, and thank you for all of you for your time, interest and support of UDR. We look forward to seeing you in many of the upcoming events. And so with that, take care.

Operator: Thank you. Ladies and gentlemen, the conference of UDR, Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.