United Dominion Realty Trust (NYSE:UDR) raised its full-year operating and earnings outlook after reporting third-quarter results at the high end of its prior guidance range, while highlighting the completion of a $2 billion joint venture with Apollo that the company said expands its access to capital and reduces leverage.
UDR reported third-quarter funds from operations as adjusted, or FFOA, of $0.65 per share, a $0.01 sequential increase that Chief Financial Officer Dave Bragg said was primarily driven by accretion from investment activity, including previous share repurchases, and lower general and administrative expenses.
The company raised its full-year 2026 FFOA guidance by $0.02 per share at the midpoint to $2.55. Its fourth-quarter FFOA outlook is $0.63 to $0.65 per share. Bragg said the Apollo transaction is expected to be accretive to 2027 FFOA but neutral to fourth-quarter results because of the timing of redeploying proceeds.
Same-store growth outlook increases
Chief Operating Officer Mike Lacy said third-quarter same-store revenue increased 1.8% year over year, supported by 2% blended lease-rate growth, approximately 7% growth in other income and occupancy in the mid-96% range. Delinquency was about 60 basis points, down 50 basis points from a year earlier.
Resident retention reached an all-time third-quarter high of 52%, up 370 basis points year over year. Lacy said fewer move-outs supported lease growth and occupancy while helping limit same-store expense growth to 2.2%.
UDR increased its full-year same-store revenue growth forecast to 1.4% to 1.8%, representing a 22.5-basis-point increase at the midpoint. It reduced the midpoint of its same-store expense-growth forecast by 35 basis points to 2.9%, with a new range of 2.7% to 3.1%. The resulting same-store net operating income growth outlook increased to 0.8% to 1.2%.
The company expects fourth-quarter blended lease-rate growth of 1.5% to 2%, consistent with the range it has produced in each quarter of 2026. Lacy said UDR shifted roughly 25% of fourth-quarter lease expirations a year ago into higher-demand leasing periods, helping support a stronger seasonal trend in the current year.
Management expects 2027 same-store revenue “earn-in” of 80 to 100 basis points, compared with no earn-in for 2026, although the company will provide formal 2027 guidance in February.
Coastal markets lead operating performance
Coastal markets delivered blended lease-rate growth of about 3% during the third quarter, compared with negative 1.5% in the Sunbelt, according to Lacy. San Francisco was the company’s strongest market, generating 9% same-store revenue growth, approximately 13% blended lease-rate growth and occupancy above 97%.
Orange County posted 3% blended lease-rate and same-store revenue growth. New York and Philadelphia produced weighted-average same-store revenue growth of about 5%, driven by 4.5% blended lease-rate growth and occupancy above 97%.
Within the Sunbelt, Dallas remained UDR’s strongest market and generated positive revenue growth. Austin, while still facing weak new lease-rate growth, was the company’s only Sunbelt market to post positive year-over-year NOI growth during the quarter. Lacy said Sunbelt occupancy was approximately 97% and that conditions had improved, though the region still had further to recover.
Apollo venture supplies equity capital and deleveraging proceeds
UDR closed its previously announced strategic partnership with Apollo, contributing 19 apartment communities with more than 7,000 homes to a new joint venture. The portfolio was valued at a 6% capitalization rate and consists of properties that are approximately 60% Sunbelt and 40% coastal.
In exchange for a two-thirds interest in the portfolio, UDR received $1.34 billion of equity capital and retained a one-third interest. The company will continue to operate and manage the properties and receive an asset-management fee. Bragg said that fee is about 1.3% of Apollo’s $1.34 billion equity contribution.
The contributed properties have an average age of 39 years, compared with 26 years for UDR’s wholly owned portfolio, and average monthly revenue per home of $2,058, compared with $2,772 for the wholly owned portfolio.
About one-third of the proceeds is being used for debt reduction. UDR opted not to refinance a $300 million unsecured note maturity in September that Bragg said would have priced at about 6%, and it paid down its line of credit to zero. The remaining proceeds are intended for wholly owned acquisitions and share repurchases.
Bragg said debt to EBITDA is expected to settle in the low-5x range after deployment of the Apollo proceeds, compared with the mid-5x range at the end of the third quarter.
UDR has the option, but not the obligation, to repurchase Apollo’s interest beginning in year five. Apollo’s target return is 7.0%, with 30-basis-point increases in years seven and nine that bring the maximum capped internal rate of return to 7.6%. Management said Apollo has no put rights, no right to convert its interest into UDR equity and no guaranteed minimum return.
Dispositions, DPE runoff and buybacks continue
UDR completed sales of two apartment communities and has a third under contract, for approximately $250 million of gross proceeds. The company expects wholly owned dispositions totaling about $700 million in 2026 at a mid-5% buyer capitalization rate.
Bragg said the assets selected for sale generally had elevated capital-expenditure needs, less expected rent growth under the company’s Orion analytics platform and limited remaining margin-expansion potential. The eight dispositions, including the property under contract, have an average vintage of 1981. Their capital expenditures represented 18% of revenue, compared with about 11% for the remaining portfolio.
Since quarter-end, UDR repurchased about 5.2 million shares for $185 million at an average price of $35.48 per share. Since September 2025, it has repurchased 16.7 million shares for about $603 million at an average price of $36.06 per share. Approximately 20.3 million shares remain authorized under the repurchase program.
The company also continued to reduce its debt and preferred equity, or DPE, portfolio through repayments and acquisitions of former DPE investments. UDR expects the DPE balance to be about $250 million at year-end and in the low-$200 million range during the first half of 2027.
About United Dominion Realty Trust (NYSE:UDR)
United Dominion Realty Trust, Inc (NYSE: UDR) is a real estate investment trust that owns, operates, acquires and develops multifamily apartment communities. The company generates revenue primarily by leasing apartments and related residential units to individuals and households.
UDR’s portfolio includes conventional apartment communities as well as residential properties with amenities and services designed to support renter convenience and engagement. Its operations encompass property management, resident services, renovations, development and strategic acquisitions.
Founded in 1972, UDR has grown into a multifamily housing owner and operator serving selected markets across the United States.
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