Executive Summary / Key Takeaways

• UDR, a seasoned multifamily REIT, delivered strong financial performance in Q3 and the first nine months of 2025, exceeding guidance expectations, driven by robust Same-Store NOI growth and strategic capital allocation.
• The company's "Customer Experience Project" and AI-driven screening technologies are significant differentiators, leading to industry-leading resident retention, reduced turnover, and enhanced operational efficiencies that directly boost cash flow and expand operating margins.
• UDR maintains a formidable balance sheet with over $1 billion in liquidity and low debt maturities, enabling opportunistic capital deployment across development, preferred equity, and strategic acquisitions, including recent share repurchases.
• Despite a broad deceleration in industry rent growth and market-specific supply pressures, UDR's "occupancy-first" strategy and data-driven approach position it to maximize total revenue and capitalize on long-term favorable housing fundamentals.
• The company's 2025 full-year FFOA per share guidance was raised to $2.53-$2.55, with Same-Store NOI growth reaffirmed at 2.25%, reflecting confidence in its operational execution and strategic initiatives.

A Legacy of Value Creation in Multifamily Real Estate

UDR, Inc., established in 1972, has evolved into a prominent multifamily real estate investment trust, strategically owning, operating, acquiring, renovating, developing, and managing apartment communities across key U.S. markets. With a consolidated portfolio of 168 communities and 55,808 apartment homes as of September 30, 2025, complemented by interests in 11,193 homes through joint ventures, UDR's enduring presence has shaped its current position and strategic responses to dynamic market conditions. The company's long-term vision is anchored in delivering superior and dependable returns by focusing on operational excellence and strategic capital deployment.

The broader multifamily industry currently faces a nuanced landscape. While a structural undersupply of housing persists in the United States, and the affordability of renting an apartment relative to homeownership is near an all-time high, the industry has experienced a broad deceleration in rent growth. Many markets contend with employment uncertainty, slower household formation, lower consumer confidence, and elevated levels of new supply. However, the pipeline for future supply has materially decreased, with 2024 multifamily completions marking a 50-year high but starts declining significantly, boding well for rent growth in late 2025 and beyond. UDR's strategy is designed to thrive within this environment, leveraging its diversified portfolio and operational acumen.

Technological Edge: The Innovation Engine Driving Performance

At the heart of UDR's competitive strategy is its deep commitment to technological differentiation and innovation, which acts as a powerful engine for operational efficiency and value creation. The company views technology spend not merely as an expense, but as an "offensive capability" to anticipate market shifts and optimize performance.

UDR's "Customer Experience Project" exemplifies this approach, leveraging millions of daily touch points with existing and prospective residents to "measure, map and orchestrate a superior UDR living experience." This data-driven strategy has yielded tangible, quantifiable benefits, leading to industry-leading improvements in resident retention, which in turn enhances top-line revenue, mitigates expense growth, and drives margin expansion. Since the first quarter of 2023, UDR has achieved a remarkable 600 basis point reduction in annualized resident turnover, a testament to the project's effectiveness. This focus on resident lifetime value is further supported by a proactive communication strategy, with approximately 30,000 additional touch points this year aimed at being proactive rather than reactive.

Further enhancing its operational moat, UDR has implemented AI-based detection measures, process improvements, and credit threshold reviews for resident screening since mid-2024. These initiatives have resulted in more favorable bad debt trends, with average deposits for riskier tenants increasing by 17%, co-signers up by 1%, and average credit scores rising by 20 points to approximately 730. This translates directly into higher cash flow by reducing write-offs and ensuring higher quality residents.

The company is also actively rolling out property-wide Wi-Fi, with approximately 30,000 homes already equipped and another 10,000 planned for 2025. This initiative, alongside the further penetration of package lockers, contributes to incremental same-store revenue growth and improves the customer experience without negatively impacting renewal rents. UDR is also transitioning to Funnel as its new CRM, expected to be completed by the end of May 2025. This move aims to enhance efficiency, streamline communication with prospects and residents, and further support the customer experience project.

Beyond its core operations, UDR maintains a strategic commitment of over $150 million to PropTech funds and investments. These investments have generated a 20%+ IRR on closed deals, demonstrating their financial viability. More importantly, they provide UDR with early access to new technologies that can lift operating margins, increase other income, constrain expenses, and ultimately drive cash flow. UDR's ownership of its vast operational data is a critical competitive advantage, allowing it to mine trends, anticipate customer needs, and dynamically price its products more effectively than competitors.

Financial Performance: A Reflection of Strategic Execution

UDR's financial performance in 2025 underscores the effectiveness of its data-driven strategies and operational focus. For the three months ended September 30, 2025, net income attributable to UDR, Inc. surged to $40.41 million, a substantial increase from $22.60 million in the comparable 2024 period. This growth was primarily fueled by a $15.90 million increase in income from unconsolidated entities, benefiting from the absence of impairment losses, higher unrealized gains on technology investments, and increased NOI from joint ventures and preferred equity investments. Total property NOI also saw a healthy $7.70 million increase, complemented by a $4.40 million decrease in real estate depreciation. These gains were partially offset by a $3.00 million increase in other depreciation and amortization, mainly due to $3.30 million in software transition-related costs, and a $2.40 million decrease in net interest income due to lower notes receivable balances.

The nine-month period ending September 30, 2025, further illustrates this positive trajectory, with net income attributable to UDR, Inc. rising to $154.80 million from $94.63 million in 2024. Key drivers included $47.90 million in gains from real estate sales, a $19.80 million increase in total property NOI, and a $20.10 million decrease in real estate depreciation. Income from unconsolidated entities also increased by $12.20 million, benefiting from the absence of impairment losses and higher NOI from joint ventures. These positive factors were partially offset by an $8.40 million rise in other depreciation and amortization, primarily due to $9.30 million in software transition costs, and a $4.80 million decrease in net interest income.

UDR's Same-Store Communities, comprising 96.80% of total NOI in Q3 2025, demonstrated robust operational health. NOI grew by 2.30% for the three months ended September 30, 2025, driven by a 2.60% increase in property rental income. This rental income growth was attributed to a 1.10% increase in rental rates, an 8.50% increase in reimbursement and other income, and a 10.10% decrease in vacancy loss. Weighted average physical occupancy for Same-Store Communities increased by 0.30% to 96.60%, with monthly income per occupied home rising 2.20% to $2,605. While operating expenses increased by 3.10% (driven by real estate taxes, administration/marketing, and utilities), the operating margin remained strong at 68.20%. For the nine months, Same-Store NOI increased by 2.50%, with occupancy at 96.90% and monthly income per occupied home at $2,576.

The Non-Mature Communities/Other segment, representing growth opportunities, saw its NOI increase by 15.50% in Q3 2025, primarily from newly stabilized development communities and a recent acquisition, partially offset by dispositions.

Disciplined Capital Allocation and Robust Liquidity

UDR's financial strength is underpinned by a highly liquid and strategically managed balance sheet. The company's primary liquidity sources include robust operating cash flows, proceeds from property sales, and access to credit facilities and unsecured commercial paper.

As of September 30, 2025, UDR boasted over $1 billion in liquidity. Its leverage metrics remain strong, with debt to enterprise value at just 30% and net debt to EBITDA at 5.5x, squarely within its target range. This proactive approach has resulted in the best three-year liquidity outlook in the sector and the lowest weighted average interest rate among multifamily peers at 3.4%.

Capital allocation is a data-driven and collaborative process, focused on maintaining leverage neutrality and enhancing long-term cash flow growth. Primary capital sources include Debt and Preferred Equity (DPE) paybacks, contributions to joint ventures, and dispositions of assets with lower future return potential. Redeployment priorities include investments in the operations platform, NOI-enhancing capital expenditures, redevelopment, and opportunistic share buybacks. In Q3 2025, UDR repurchased approximately 0.70 million common shares for $25 million, with an additional 0.30 million shares for $10 million in October 2025, executed at an average 20% discount to consensus NAV and an approximate 7% FFO yield.

The DPE program has seen a strategic pivot towards recapitalizations of operating assets, emphasizing high current pay, lower loan-to-value (LTV), and known cash flows. The company has largely de-risked this book of business, particularly after moving the 1300 Fairmount investment in Philadelphia to non-accrual status and taking a reserve. This strategic move, followed by the acquisition of the developer's equity interest in May 2025, allowed UDR to consolidate the property (now Broadridge) and recognize approximately $4 million in previously unaccrued interest, while improving its occupancy from ~83% to 97% leased.

Development activities continue selectively, with the commencement of 3099 Iowa, a 300-home community in Riverside, California, in Q1 2025, targeting a 6% yield on its $134 million budget. UDR is evaluating 4-5 additional development starts for late 2025 and early 2026, targeting high 5% to 6% yields on legacy land. The company is also actively pursuing joint venture acquisitions, with the LaSalle JV having over $500 million in incremental buying power. A recent agreement to acquire a 406-apartment home community in Northern Virginia for $147 million, adjacent to an existing UDR property, is expected to drive operational efficiencies and will be funded by dispositions, utilizing a reverse 1031 exchange to preserve tax capacity for buyback activity.

Outlook and Growth Trajectory

UDR's full-year 2025 FFOA per share guidance was raised to $2.53-$2.55, with the $2.54 midpoint representing a 1% improvement. The fourth quarter 2025 FFOA per share guidance is set at $0.63-$0.65. Full-year 2025 Same-Store revenue growth guidance was adjusted to a 2.4% midpoint, while Same-Store expense growth midpoint was enhanced to 2.75%, resulting in a reaffirmed Same-Store NOI growth guidance midpoint of 2.25%.

The outlook is underpinned by several key assumptions. The 2025 rental forecast of 2% is informed by resilient economic growth, job and wage growth, and a continued decline in homeownership rates. Supply pressures are expected to abate in the second half of 2025, with multifamily deliveries trending downwards. While the 2026 Same-Store revenue earn-in is forecasted to be approximately flat, this reflects current market conditions, particularly in the Sunbelt, which is expected to face new supply deliveries of approximately 4% of existing inventory in 2025 (twice that of coastal markets). However, Sunbelt supply is down by nearly one-third compared to 2024, which is expected to enhance pricing power. Coastal markets are expected to continue outperforming, with the East Coast forecasting 40-70 basis points of earn-in and the West Coast 50-80 basis points, while the Sunbelt anticipates -120 to -150 basis points.

UDR's innovation and operating initiatives are projected to add approximately 65 basis points to 2025 Same-Store revenue growth, equating to $10-$15 million. Resident turnover is expected to be 100 basis points below 2024 levels, translating to approximately $3.5 million in higher cash flow.

Competitive Positioning and Risks

UDR operates in a highly competitive multifamily REIT landscape, directly contending with peers such as Equity Residential (EQR), AvalonBay Communities (AVB), Essex Property Trust (ESS), and Camden Property Trust (CPT). UDR's diversified portfolio, operational acumen, and data-driven approach provide a strong competitive footing. Qualitatively, UDR's long history of successful transactions and redevelopment expertise offer strategic adaptability, potentially allowing for more resilient portfolios during market fluctuations compared to some rivals. While competitors like EQR and AVB may lead in sheer scale or specific technological integrations, UDR's focus on total revenue growth, encompassing occupancy, other income, and bad debt initiatives, has enabled it to achieve competitive or superior overall revenue performance on a head-to-head basis in its markets. UDR's strong brand and network effects foster customer loyalty, leading to high occupancy and stable rental income, which helps counter the scale advantages of larger competitors.

Despite its strengths, UDR faces several risks. The company is a defendant in consolidated antitrust lawsuits related to its use of revenue management software, which could result in significant monetary damages or injunctive relief, though no liability has been recorded as of September 30, 2025. Geographic concentration, with 73.30% of NOI from eight major markets, exposes UDR to adverse regional economic or regulatory conditions. Inflationary pressures could increase operating expenses faster than rent increases, impacting profitability. Cybersecurity breaches remain a persistent threat, with UDR having experienced past incidents and expecting more in the future. The company is also exposed to interest rate risk from its variable rate debt, with a 100 basis point increase potentially raising interest expense by $4.40 million for the nine months ended September 30, 2025. Furthermore, the adoption of, or changes to, rent control and stabilization laws in its markets, such as those enacted in Montgomery County, MD, New York, Salinas, CA, and Washington state, could adversely affect its ability to raise rents and impact property values.

Conclusion

UDR, Inc. stands as a resilient and strategically agile multifamily REIT, leveraging its deep operational expertise and pioneering technological advancements to drive long-term shareholder value. The company's "occupancy-first" strategy, underpinned by its innovative Customer Experience Project and AI-driven resident screening, has demonstrably improved resident retention and optimized revenue generation, even amidst a decelerating industry rent growth environment. This commitment to data-driven decision-making, from operational tactics to capital allocation, provides a distinct competitive edge against its peers.

With a robust balance sheet, ample liquidity, and a disciplined approach to capital deployment across development, preferred equity, and strategic acquisitions, UDR is well-positioned to capitalize on opportunities while mitigating risks. The company's proactive management of its DPE portfolio and its focus on high-yield development projects on legacy land highlight its ability to generate accretive growth. While macroeconomic uncertainties and regulatory challenges persist, UDR's proven track record, technological leadership, and strategic flexibility underscore a compelling investment thesis, offering investors a stable and growth-oriented exposure to the multifamily sector.