Market Overview

UDR Announces UDR/MetLife Investment Management Joint Venture Transaction Valued at $1.76 Billion and Increases Select Full-Year Earnings Guidance Ranges

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UDR, Inc. (the "Company") (NYSE: UDR), a leading multifamily real estate investment trust, announced today that it has entered into an agreement with MetLife Investment Management to:

  • Acquire the approximately 50 percent interest not previously owned in 10 UDR/MetLife Investment Management Joint Venture operating communities, one community under development and four accretive development land sites, valued at $1.1 billion, or $557 million at UDR's share, and,
  • Sell its approximately 50 percent ownership interest in five UDR/MetLife Investment Management Joint Venture communities valued at $645 million, or $323 million at UDR's share, to MetLife Investment Management.

After accounting for the assumption of in-place debt totaling $540 million at fair-market value ("FMV"), the Company's net cash outflow to complete the swap is expected to be approximately $105 million. The transaction is expected to close during the fourth quarter, subject to customary closing conditions and closing price adjustments.

As a result of the transaction and the Company's recent unsecured debt issuance and prepayment activity, the Company has increased select full-year 2019 guidance ranges as follows:

  • Net income per share by $0.36 at the midpoint to $0.74 to $0.77 from $0.38 to $0.41.
  • Funds From Operations as Adjusted ("FFOA") per share by $0.01 at the midpoint to $2.06 to $2.09 from $2.05 to $2.08.

Additional updates to full-year and third quarter 2019 earnings guidance ranges are presented on page three of this press release.

"We are pleased to be acquiring these high-quality communities while also simplifying the UDR/MetLife Investment Management Joint Venture structure and increasing select 2019 earnings guidance ranges," said Tom Toomey, UDR's Chairman and Chief Executive Officer. "The acquired communities are primarily located in markets targeted for expansion, are immediately accretive to our earnings, have operational upside and improve the diversification of our portfolio. Following the transaction, we look forward to continuing to partner with MetLife Investment Management on the remaining properties in the joint venture relationship."

Robert Merck, global head of real estate at MetLife Investment Management, said: "This transaction will drive significant long-term benefits for both UDR and MetLife Investment Management, and further underscores the strong partnership between our respective organizations."

Transaction Details

Economic details of the transaction are presented in the table below(1). The difference in the acquired equity interest of $287 million and the disposed equity interest of $182 million equates to UDR's cash outlay of approximately $105 million.

Community

Homes

 

100% FMV

Value

($M)

 

100% FMV

Debt

($M)

 

FMV Debt

Rate

 

Equity at

UDR

Share ($M)

 

Est. Year-1

NOI Yield

Acquisitions (10 operating communities, 1 community under development and development land sites)

10 Communities Total/W. Avg.

3,321

 

$1,061

 

$540

 

3.2%

 

$260

 

Low-5%

Development Total/W. Avg.

N/A

 

53

 

N/A

 

N/A

 

$27

 

N/A

Total

3,321

 

$1,114

 

$540

 

 

 

$287

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dispositions (5 operating communities)

5 Communities Total/W. Avg.

1,001

 

$645

 

$282

 

3.2%

 

$182

 

High-4%

(1) Data as of August 9, 2019.

Transactional benefits include:

  • Estimated to be $0.00 to $0.01 accretive to 2020 net income per share and $0.01 to $0.02 accretive to 2020 FFOA per share, inclusive of FMV debt adjustments.
  • Replaces lower-multiple management fee income with higher-multiple real estate income at an attractive price while also minimizing cash needs.
  • 100 percent ownership provides operational upside (i.e., overlaying UDR's Next Generation Operating Platform, full initiative implementation) and capital improvement opportunities.
  • Provides the potential for strong future development value creation via the four acquired Vitruvian Park development land sites.
  • Including the previously announced liquidation of the UDR/KFH Joint Venture, this transaction will further simplify UDR's structure and halve the Company's pro-rata joint venture net operating income ("NOI") contribution to approximately 5 percent of UDR's total NOI versus a previous 10 percent based on the Company's second quarter results published in its second quarter 2019 supplemental package.
  • The Company's assumption of debt associated with the transaction maintains a well-laddered maturity profile and extends duration.

"In addition to the numerous economic benefits of this transaction, the ownership interest swap increases our exposure to markets identified by our Portfolio Strategy work for further expansion and less near-term new supply risk while also maintaining our portfolio diversification as it relates to market mix, location within markets and asset quality," said Jerry Davis, UDR's President and Chief Operating Officer. "It is a win-win for UDR and MetLife Investment Management."

Acquisition/Disposition community details are presented in the table below(1). Highlights include:

Community

Location

 

Homes

 

Type

 

Urban /

Suburban

 

Rev. per

Occ. Home

 

Occup.

 

Age

(Yrs)

Acquisitions (10 operating communities)

Strata

San Diego

163

High-Rise

Urban

$3,676

94.3%

9

Crescent Falls Church

Wash. D.C.

214

Mid-Rise

Suburban

3,164

96.7%

9

Charles River Landing

Boston

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