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Welcome to episode number 89 of the rent Roll, your podcast on all things rental housing, apartments, Singapore rentals and Build to Rent on the road this week coming from Omaha, the College World Series happening right now. Great event and also very underrated city in my opinion. Omaha is a great place to visit and now head into New Orleans where I hope to see many of you there at the National Apartment Association's annual shindig apartmentalize. So today we're going to dive deep into one of the big apartment rates, udr. We're going to talk about the fascinating history of company that started as Old Dominion based in Richmond, Virginia in the 1970s and its growth to becoming an S&P 500 company. And then later will be joined by UDR's chief financial officer Dave Bragg. And a lot of things to talk about with Dave right now and a lot of things I'm excited to pick his brain on. Obviously, the announced merger between Avalon Bay and Equity Residential to who of UDR's peers slash competitors, the weak stock prices we've seen across the REIT sector relative to net asset values and all the implications that that has on the market with assets trading below the net asset value and the rebound of Hartman fundamentals obviously coming out of that high supply period. What's UDR seeing right now? And also we'll talk about UDR's tech focused or tech forward operations which in some, you know, that includes some apartment properties that operate without any on site leasing staff and yet they still report strong leasing and high retention rates. So lots to cover there. And then we also have some breaking news this week. We finally have a deal on the road to Housing Act. This is that big housing package that also includes some new regulations around build, torrent and single family rentals. We'll get into that. But the House and the Senate have come together on a compromise and we're going to break that down in today's in the news segment. All right, before we dive in, let's give a big shout out to our sponsors. First and foremost, a big thank you to jpi, a leading apartment developer with a state of purpose to transform building, enhance communities and improve lives. Check them out@jpi.com JPI is the cutting edge, edge of some really exciting innovations in apartment development and construction. Finding ways to build oftentimes quicker and and and and more efficiently. Also big shout out to Madeira Residential. Check them out@madeira residential.com and also big thank you to Funnel the AI and CRM platform you can find@funnelleleasing.com that of course, funnel the sponsor of our interview segment. Okay, so as always, kick it off with the section we call. Here's a chart. Instead of a chart, we got a timeline. We're going to do the brief history of UDR ahead of our conversation with UDR CFO Dave Bragg later today because interesting story. And we'll hit the highlights now. Before I do, just a quick reminder. This is for informational purposes only. This is not investment advice whatsoever, but stuff I find interesting. So let's start with the timeline here. Some of you may know this, but UDR is the oldest continually operating apartment REIT dates back to its founding in 1972, when it was known as Old Dominion, Old Dominion Real Estate Investment Trust that became when it went public in 1978, I should say it was a regional operator based in Richmond, Virginia, investing in class B and C apartment buildings, and not just apartments, but also other commercial real estate classes as well. And it looked little like the UDR of today, which is based in the Denver area now. And now we're focused on the A and B market, newer construction, institutional quality. And of course, UDR has also been an active developer over the years as well. So anyway, Congress started the REIT structure back in, I believe it was 1960. And old Dominium gets going in the 1970s, goes public in 1978. And this was way before the REIT heyday of the 1990s. And that's when we saw a lot of the big names go public like AIMCO and Equity residential, Camden and etc. So UDR was first, but back then under a different name. And it doesn't become UDR as until 1984 when Old Dominion Real Estate Investment Trust acquires Realty Industries Inc. Which was another Richmond company, for a whopping $60 million. And together they became United Dominion Realty Trust, which later gets shortened to the acronym udr. But even after that acquisition, UDR was just a small regional operator out of Richmond. They had fewer than 4,000 apartment units spread across Virginia, as well as in Charlotte, North Carolina. And as I mentioned earlier, it wasn't just apartments, but I believe UDR also owned shopping malls, office buildings, some industrial. And, and I saw one article from this period that said UDR's mantra at the time was to find properties that were, quote, under leased, under managed, under maintained, buy them at a discount and make them profitable. And so, you know, that's what we now call value add. And that's and UDR was certainly an early player in the value add apartment market. Okay, so let's fast forward to the early 1990s. Lots of changes for UDR as well as many other REITs that took off around the same period. And why is that? Well, many of you know, that was back when we had numerous headwinds to the commercial real estate market. We had the SNL crisis, the RTC period, which was a resolution Trust corporation. We talked about that a few times in this podcast over the last couple of years. That's when the federal government was selling off distressed apartments, other assets from the SNL crisis. And then you also had a lot of other owners looking for exits for various reasons given the challenging financial markets at the time. So reportedly back then, UDR was in pretty good financial shape and saw this disruption as an opportunity to narrow their focus to just apartments and to be an aggressive buyer of apartments. And obviously the REIT structure helped with that as well, which is why we saw some IPOs at the time too. And they also moved up market targeting higher quality institutional apartments for the first time. And so after 20 years, almost 20 years, I should say, as a smaller BC operator in Virginia, they're now in hyper growth mode here. In the 1990s, they're expanding across the Southeast and the Mid Atlantic. And by 1996, that's when they made their first big move that put them more on the national radar. They buy Southwest Property Trust, which is another REIT. They had 44 apartment properties and more than 14,000 units. And that brought UDR westward into Texas for the first time. And they just kept expanding west. In 1998, they bought another REIT, ASR, which had 7,500 units across Arizona, New Mexico, Texas, and also up into the Pacific Northwest and Washington State. That same year, they acquired American apartment communities, which had 14,000 units scattered across California, the Pacific Northwest, the Midwest and Florida. So coast to coast. And by this point, by the end of 1998, they had almost 87,000 total apartment units, making them a sizable player on the national apartment rankings. Number five on the NMHC top owners list at the time, which I believe was where they peaked in terms of unit count in 1998. And then after that, like many of its RE peers, UDR kind of cools the jets. They start pruning down the portfolio. They sold out about 15,000 units over the next few years as they tried to prune down to the portfolio they really wanted to be. We saw others like EQR and AIMCO do similar things at that time. And owning is, you know, the industry really started to shift from let's, hey, let's own as much as we can in every market we could possibly be in to shifting more into certain types of assets in certain markets. And then in 2001, that was another big year for UDR, kind of pushing it into its modern era. They hire Tom Toomey, which of course back then, you know, he was just know Tom Toomey, the CEO and CFO of a UDR competitor, amco. He worked under the, the great Terry Considine, who we had in this podcast a couple of months ago. And of course Tom would later become a legend of its own, of his own name obviously, just like Terry. But at the time, you know, aimco is based in Denver and Tom was in Denver. And then UDR relocates his executive management and operations team from Richmond to Denver. And they didn't officially move the headquarters by the way, until 2008, but for all intents and purposes they're really operating out of Denver at this point. Also in the 2000s, United United Dominion Realty rebrands as simply its acronym UDR. It pruned its focus to larger high growth markets as well as the big coastal markets. And they continued pruning assets that didn't fit that focus. Big transaction in 2008, selling off more than 25,000 units to DRA Advisors and Bell Partners for $1.7 billion. And they use those proceeds to pay down debt and focus the company more on its targeted footprint and more closely resembling what we see from UDR today. And then in more recent years, UDR has really focused heavily in technology on data next gen operations, centralizing staff, using smart home tech and even operating apartment properties with no leasing staff on site. And if anybody who follows UDR listens to earnings calls and reads their transcripts, you know, they talk a lot about this. And I'm going to get Dave's to to upon about this as well. But really, you know, how much, you know, really kind of taking the buzz language into practical speak in terms of the impact that really has. So I could talk to Dave about that, but I want to talk about UDR's technology push over the years and, and I do that just because it's become such a big part of their identity. And I want to start with this absolute gem from 2008. I just have to share it. I saw this on UDR's old press releases from October 2008 and it says UDR Inc. Launches website on MySpace. So that's so great. I mean man, have times changed? You know, I assume many of you of course should remember MySpace, which was basically the original social media platform pre Facebook. But I want to read some of this just for the nostalgia factor here. It says UDR Inc. Today announced that it has launched the multifamily apartment home industry's first website on MySpace the a leading social networking site. The company launched the site, located@MySpace.com rental apartments to extend its marketing reach to millions of new prospects and to generate incremental apartment search traffic for its communities. Social networking sites are used by millions of people on a daily basis. In fact, MySpace recently reported 117 million unique visitors for the month of June alone. In a recent report from Market tools indicates that 70% of adults in the United States access social media. 47% of those surveyed report that social media sites have a direct impact on purchasing decisions. So there you go. It's kind of a little bit of a blast from the past. And by the way, if you go to MySpace.com rentalapartments today it'll say page not found. But you know, and also on this by the way, UDR said they're expanding other social media sites such as Digg, Twitter and Facebook. And anyway, that's pretty good. But kudos to UDR and some of their peers who adopted some of these early technology trends and then importantly pivoted and adapted as the trends evolved. And you know, we could joke about MySpace and I'm actually serious about this because this was part of a much larger effort that really did pay off for udr. So let me read from an article From MFV in 2010 multifamily executive and they did a deep dive on this with UDR and it was really interesting, kind of going back in time a little bit. And this is 2010 and it says UDR has spent the bulk of the recession looking inward, particularly towards creating an industry leading technology platform of web based services tailored for deployment over the iPhone and other handheld mobile devices. And again, this is 2010, we're talking about this. And then they quote the CEO of another REIT at the time, Home Properties and he said of udr, quote, they are technology czars. The industry is waiting to see what they build next so everyone else can go out and build it too. What a nice compliment from your competitor. Right? And then there's a great quote from the great Tom Toomey where he says this, where he talks about this push to be on the bleeding edge of technology innovation and he says, I don't see these projects as having much risk. I look at the future. And I say inevitably, I think these things are going to happen. So why not start working on that today? How much money does it cost me and what do I have to do to get there? Instead of chasing customers, I'm trying to get a little bit ahead of them. So obviously love that idea, not just chasing customers, but getting ahead of them. And obviously that's a little bit of the Apple playbook as well. Of course. So it just goes to show how UDR has been on the front edge of technology and tech enabled operations for a long time. And when you're out there on the front edge, you're going to have some, some misses that don't stick, things like the MySpace page, but you're also going to score some real hits as well. And that's driven some of these operational advantages and cost advantages for UDR that we'll talk about more in a bit. And I, and just one last kind of this is too. And you know, I'm going to ask Dave how much more this can be extended. But you know, I think it's, I hear a lot of the industry kind of poo poo the idea that you can operate without staff on site for some properties. But you know, UDR is doing that and again they're doing that without impacting occupancy. They still, at least from what they're reporting is still good leasing demand and really impressively great retention numbers. They've been improving. And so we'll see how much further that can go. Again, we'll get Dave's take on that. All right, so now let's talk about before we move on. Lastly, let's talk about the UDR of today. We got about 60,000 units for UDR spread across 22 markets from Washington State, Oregon, California, Colorado, Texas, Florida, Tennessee, the greater D.C. area, Pennsylvania, New York and Massachusetts. And so they've got Coastal and Sun Belt alike. And, and by the way, they had that mix prior to their peers like Equity and Avalon Bay jumping back into the Sun Belt some years back. UDR did not completely sell out of the region entirely like the others did, even as they built up more concentration on the coast. All right, so there you go, the brief history of UDR Again, informational purposes only. But if I miss anything critical, if I got something wrong, please let me know. I hate getting things wrong. So hopefully I got it. All right. But again, we'll talk more UDR in today's conversation with Dave Bragg. Okay, next up, it's time for rental housing trivia. And today's trivia is presented by authentication. If you're an owner, asset manager or developer running multifamily. Here's the truth about leasing in 2026. A couple of ILS accounts and cross fingers won't get you to stabilization. The properties that are winning are running a tight ship across paid search and social retargeting, email and SMS nurture, all coordinated with one accountable team. Authentic built that system. They call it Demandador and it's one platform, one partner, one monthly number that scales to your velocity targets and pod. Listeners get 50% off setup fees for a limited time. Head to auth ff.comd2d to see how it works. Okay, so today's trivia question is I talked about Tom Toomey. He became CEO of UDR in 2001. That makes him the longest tenured apartment REIT CEO now that the great Rick Campo of Camden has stepped aside into the Executive Chairman role. But who was the CEO of UDR prior to Tom? And that might be a tough question to folks newer in the industry, but this guy is a legend of the multifamily business himself. So we'll give you that answer in a bit. But next it's time for in the News. In the News, this is when we talk about headlines impacting rental housing. We got two big ones for you today. This segment is sponsored by Telecloud. If increasing noi is a priority, your telecom contracts may be one of the easiest opportunities in your portfolio. Telecloud helps multifamily asset managers consolidate Internet voice and dial tone across properties. The average cost reduction is 40%, and it's often higher than that. To make it easy, they'll start with a telecom audit, a free telecom audit to show you exactly where savings exist before you make the move. So learn more@telecloud multisite.com okay, so the big headline of the week. We have a deal. The US Senate and House have finally reached a compromise on the Road to Housing act. With votes forthcoming, the Republican Democratic leaders about the House and the Senate as it relates to housing topics have united together on a package that appears likely to sail through both chambers of Congress and get signed into law by the President. So again, I want to make this quick comment. I've made this comment many times before, it's worth saying this again, which is housing. One of the things I love about it. One of the things I love about housing. It's such a unique space in that it's not Democrats versus Republicans. And even in this case, the debates between the House and the Senate were not Democrats versus Republicans. It was House versus Senate. And more specifically around the single family rental stuff, it's been more conspiracy theorists versus pragmatists. And that's been kind of the give and take that kind of goes with this. That's all throughout housing we see this debate is not red versus blue. It's conspiracy theorists versus pragmatists. And we see some of that reflected in this bill, even if it's better than the original Senate version. So that's my high level take. I'll just say this again. I mentioned this before when the House version came out, which is this, that, you know, is it better than some of the early flavors of this legislation? Absolutely. But that doesn't make it good. There's many aspects of this bill that aren't exactly ideal, but also some very positive things as it relates to kind of broader housing supply and production. So we'll do a deeper dive on the road to Housing act in a future episode, maybe as soon as next week, and work on getting a special guest for that episode who I think you'll appreciate hearing from. But let me give you a quick breakdown of what this, this, this compromise bill does. And, and first let me say this. The, the final version, or we think is final, it as it relates to the single family rental and build to rent provisions, it exactly mirrors the House version, not the Senate version. And so meaning, like it's not as, as crazy as the Senate version, which basically completely nuked the build to rent market. And so first thing to know about this, this compromise bill is that number one, it protects most build to rent construction. Okay. The original Senate version had a for sale provision. If you build, you have to sell it. That, that, that provision was removed by the House. And so anything new construction build to rent is pretty much carved out and there's some edge case exceptions. I'll get into that later in the newsletter, in the future podcast and whatnot. But for the most part, build to Rent is exempted from the, from, from the expansion limits. But the, the heart of this stuff on SFR is really focused on targeting investors with 350 plus homes. And by the way, that does include build to rent homes. You could add more build to rent homes. You could, you can build and buy new construction, especially from fellow larger firms. But it really more specifically impacts scattered site acquisitions. Now that being said, there are many exceptions to this and again, this follows the House version of this bill. So on the one hand, this bill gives some false hope to the conspiracy theorists who think that banning investors is going to somehow help individual homebuyers with bad credit scores and no cash for down payment, having to pay 1,000 plus additional dollars a month. Like magically we're going to solve their problems, make more houses available to them. Well, hate to tell you this but there are bigger roadblocks for, for, for these renters to become home buyers today. But regardless that's what people wanted. That's that polls well so that's what's here not about solutions so much as it about popular popular about what, what people want to see in here. And that's what, that's what made the final version. Now again there are some exceptions made to this ban on investors buying homes. Investors homes buying more. That includes major renovations if you spend 15% of the purchase price on repairs. For, for homes that fail building codes. There's also an exception for homes that are purchased and are rented out using a pathway to homeownership program which includes things like rent reporting to credit bureaus and financial assistance for renters who are going to buy homes. So again those exceptions are important but I think a lot of people are celebrating that. But also just bear in mind I think the really big takeaway from the SFR provisions of this bill is that it creates a massive new federal bureaucracy over the SFR market. And this is the part that often gets overlooked but it is a big deal. The legislation essentially gives the federal government policing powers over what have always been local housing issues with now regulators can fine SFR owners the three times the purchase price of the home or a million dollars, whichever is greater. So for example, I think the real kind of quagmire here is for, for investors is that the, the purchase exceptions, they're pretty open ended and so you can have an overzealous federal regulator depending on you know, who, who's in charge of that time and they could become an expensive headache for SFR owners if there's some gray areas that, that different sides interpret differently. So and also the legislation creates a contact center for HUD specifically I'm sorry contact center within HUD specifically for renters and homes owned by large investors. 350 plus homes. And HUD must vet and respond to those complaints. So that's a, that's a whole thing. And by the way, I bet you most of those calls won't even be from renters in 350 plus unit portfolios. It's probably going to be mostly renters and smaller portfolios who are griping because that's 97% of the market, that's 97% of the single family rental market is going to be subinstitute. It's not actually for true 350 plus. It's probably going to be more like low 90%, but still it's going to be a huge share of the market that technically doesn't have access to this call center. But that's going to create a lot of confusion inevitably and there's some reporting requirements whatnot as well. Now, on the positive side, the bill does do a number of things that increase housing production. It's not like it was one of these kind of hard talk about sound like it's like, hey, it does this one thing. It's a lot of little things that hopefully add up to a lot of positive. So incentivize cities to build more housing. It reforms federal environmental laws that have been blocking housing. It removes several barriers for building manufactured homes and also incentivizes more of it. That was a big priority for Senator Tim Scott. It promotes rehabilitation of existing homes. It boosts various affordable housing programs. It makes it easier for banks to lend for housing construction and development. It speeds up reconstruction of homes after a natural disaster. And it incentivize and streamlines adaptive reuse projects which are oftentimes just, you know, office residential conversions, really any commercial building that's being repurposed into housing. So there are some real positives to this, even if it was unfortunately hijacked by the conspiracy theorists on the SFR side. So anyway, more to come on that more in the newsletter and a future podcast. But there's the quick breakdown. Okay, one more headline for you. This one comes from Bloomberg. It says US housing starts dropped to the weakest pace since 2020. Okay, so again, some of you know my take on this by now. It's just more garbage data from the census. And if you really follow the census data on month family starts as your cue for what's happening, then you got to feel like a ping pong ball because these headlines just ping back and forth violently. And again, I've said this before, but every month Bloomberg writes an article about the census releasing their start numbers. And someone's always pinging me saying did you see these numbers? And they're getting hit up by their investors worried about this or that. Again, here's the deal. The census is just catching up with the reality census. They they missed the peak and multifamily starts in the prior cycle. They start playing some catch up and it's a lot and a lot of this is because of their lag methodology. They're just sampling a small share of permit holders saying hey, did you start? And so there's a lag relative to the private data collectors that are trying to track properties at least as best they can from plan to start to completed. So this headline saying the census is dropping starts or census data showing a drop off in starts, really no surprise. It's just catch up. Real life starts peaked in 2023, plunged in 24 and 25, and they've been really plateauing since then. All right, let's get back to today's trivia presented by Authentic. The question was, who was the CEO of UDR prior to Tom Toomey? The answer is John McCann. John headed up UDR for 27 years and I read somewhere he was actually employee number two starting in 1974 and helped navigate UDR through its many chapters from IPO as a small regional operator to eventually growing EDR into the at one point the fifth largest department owner in the US by the late 1990s. And John was also the NAREIT chair in 1993 and 1994. He retired in 2001 when Tom Toomey took over. And John passed away in 2018 at the age of 73. But it obviously left a great legacy in multif family. Next up, it's time for today's interview sponsored by Funnel, the CRM and Agentic AI platform trusted by four of the six major REITs whose AI recently beat three major competitors. Across six independent third party conducted blind studies, nearly three in four renters preferred funnels AI sorry, preferred funnels, chat AI and two and three chose their voice AI according to these study results. So visit funnelle leasing.com to see it in action and try it yourself. Okay, today's guest, I've told you this a bunch of times already. It's Dave Bragg, the CEO of udr. You know, he's the guy who's got an interesting take because he started his career as an analyst tracking the REITs from Wall street and now he's the CFO of one of the major REITs. So we're going to talk all things UDR, stock buybacks, new development, tech, operations, and obviously we'll try to get, we'll try to pin them down for a take on the Avalon Bay EQR merger as well. So let's jump in. All right, welcome to the interview portion of today's podcast and I am absolutely honored to welcome in the CFO of udr, Dave Bragg. So Dave, thank you so much for being here.
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B
Jay, thank you so much for having us. I'm a longtime listener to this terrific podcast, and you do just a great service to our industry, so we appreciate the opportunity.
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A
Oh, thank you. I appreciate that, Dave, and appreciate making time for this. So, before we get into all the. Obviously a lot of hot topics of today, but love just gets. Know audience. Get. Get to know you a little bit. How did you first get into multifamily?
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B
Well, in two words, I'd summarize it as good luck, but I will tell you the story, which is, after school, I moved up to New York City. I was interested generally in the market and investments. And in 2005, I applied to an equity research analyst role at Merrill lynch. And the posting did not specify what sector specifically it was in. So I got a call to come in for an interview, and it was for the RE research team. So I enthusiastically accepted the interview, and then I went straight to look up what a REIT was, and I went through the process, and I was fortunate to be offered an opportunity by Steve Sacwa, who's still an analyst in this space. And he became a mentor to me, and I worked with him for many years. And so that proved to be a pivotal moment in my career and in my life. And I soon grew to appreciate a number of things. The tangibility of real estate, the beauty of the REIT vehicle, and just generally housing, in that you have an opportunity by working in housing investments, you have an opportunity as a landlord to provide a necessity to tenants and deliver good returns to investors.
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A
Yeah, absolutely. So then you obviously spent a lot of years as an analyst, and that's how you and I first got to know each other a little bit. Tell us how you made the jump from being an analyst to now being a CFO for one of the big apartment REITs.
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B
Well, my research career took me on a few stops, including from New York out to California. And I was fortunate to join green street in 2013 to lead the residential business. And along the way, I learned a lot from observing and interacting with dozens of REIT management teams in multifamily and many other sectors. And I also learned that Green street had a successful history of developing talent, some of which moved over to executive roles at private and public real estate companies. And as I saw that, I began to think about the prospects of moving out. To me, like a bit of an announcer booth, where we would opine on what was happening in real estate investing and getting down onto the field to work with the team, raising and allocating Capital and running the company. And so through a conversation actually with Dallas Tanner of Invitation Homes, I was fortunately connected to Roots Management Group, which is a tied to the original predecessor company of Invitation Homes. They started out in manufactured housing, and that's what Roots does. And in 2022, I joined Roots in Dallas, Texas, to lead the investment and finance teams. And that was a tremendous learning experience. I did learn that leading the company is much more complex and nuanced on the inside than it might appear to me as an analyst. And you make decisions that have to consider a balance between employees and tenants and investors. And last year, as I was at Roots, an opportunity with UDR arose. And UDR is a company that I had known since 2005, and I had known Tom Toomey, our CEO, and many other people here. And I came to learn more about the opportunity and realized that it could allow me to utilize my skills and experience both as a REIT analyst and as CFO of Roots. And I was fortunate to join a terrific team and really embrace the opportunities in front of us. And at udr, we're focused on three primary pillars of value creation, which hopefully we'll touch on more. That's operational excellence, capital allocation, and access to capital. And all of that is underpinned by our culture of innovation and a big focus on data.
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A
All right, so, Dave, let's get to the hot topic of today. And I know you can only say so much about this. I'm obligated to ask anyway, because I'm sure everybody wants to know how much you're getting pinged by investors these days about the Avalon Bay Equity residential merger and its potential impact on the REIT market. And really, anything you're able to say about this news in general?
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B
Well, it's a fascinating deal, Jay. And these are two prestigious companies that have built strong reputations for themselves. We are just off of the NAREIT conference in New York in which we met with dozens of investors and analysts. And it's safe to say that it was topical from a wide variety of angles, and there was a range of reactions to it. Our reaction at UDR is that we're focused on making sure that UDR is pursuing excellence and achieving it in all facets of the game. And we believe that it is achievable at our current size. I say that because scale is so topical as relates to this news. And an example you might agree, Jay, that a measure of operating excellence is the operating margin. And we're proud to point out that our margins are generally above that of peers, some of which are already larger than us in most shared markets. So we will continue on our journey to be excellent at operations, capital allocation and access to capital.
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A
Yeah, that's a great point I'm sure. Obviously others are probably disagree a little bit with the idea that more units automatically equals your scale equals automatically better margins. So some good points there. And then more broadly, Dave, obviously a lot of the we've seen consolidation and some exits among smaller REITs and a lot of this traces to REIT values versus net asset value. And on the last earnings call you talked about how these discounts to nav tend to be fleeting. And so it makes for an attractive window to sell some assets, use the proceeds to buy back stock. And that makes sense. But I'm curious to ask you how do you best balance this short term opportunity for buybacks with a long term value creation? In expanding the portfolio,
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B
it's something that's near and dear to our heart in that we have an arbitrage opportunity that presents itself at times both in terms of the stock trading at a discount to the underlying value of assets or trading at a premium. And the more that we take advantage of that opportunity, which does prove to be fleeting, the more value we can create. So we what we have seen lately, although in the past couple of weeks it has dissipated a bit, is a significant disconnect between the underlying value of the apartment REIT portfolios and the stocks. And that allows us to sell assets for 100 cents on the dollar on Main street and buy back the stock for 80 cents on the dollar on Wall Street. And that creates an initial arbitrage opportunity. And we've done that in scale of late with over $300 million of each, both dispositions and buybacks. And we will continue to execute on that as long as the opportunity presents itself, although we do believe it will be fleeting. As we do that, we're also creating long term value through our disposition process. We have a data driven and collaborative approach led by UDR's capital committee that looks at a number of criteria. As we examine the whole portfolio we look at many factors, but three that I would point out would be the CapEx requirements going forward, the operating upside or lack thereof according to our local operations teams and the signal from our proprietary data tool which we recently named Orion, in that it helps us hunt for opportunities. And when we combine the input from these three factors we're able to identify assets from the current portfolio that have below average long term cash flow growth prospects. So when you sell those assets and then you buy back the rest of the portfolio. You're not just benefiting from that initial arbitrage, you're enhancing the long term growth prospects of the enterprise. And acquisitions have been relatively rare for us. But when we do see an acquisition opportunity, we look at those three factors as well and try to also enhance the growth prospects that way in that what we bring on should fit better in terms of that cash flow growth than the existing portfolio. So that's an opportunity that we've had. We'll take advantage of it as it lasts. And as the stocks go back to NAV or around there, then it allows for more of an asset recycling opportunity. And as the stocks trade above nav, that could allow for growth.
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A
Yeah, that makes sense. So is there a, I mean just a quick follow up question on that is, I mean obviously everything now is worth more in the private market and the public market. So is there a, you know, is there a point at which it doesn't make sense to do anymore or is just the number of assets that kind of filter through Orion, is it still kind of a manageable ish number where you still obviously keep a large portfolio?
- [37:11]
B
Absolutely. Within our broader portfolio, which by the way is 20 markets, 60,000 units, it's a sizable portfolio which allows for this opportunity set to continue regardless of where the stock is. So as long as the stock is at say a 20% discount to NAV, which it has been spent some time there over the last nine months, we can sell assets and buy back stock as it's around nav. There's still an opportunity to adjust the portfolio and redeploy perhaps into acquisitions.
- [37:50]
A
And a lot of the, some of the valuation issues come from just, it's been a tough leasing environment these past few years given the high supply that we've seen in the market and some other factors. But what we're seeing from both some of the public reporting and from the Q1 calls as well as out of the private sector and some of the data we've seen is that the spring has brought about some moderate improvement in leasing and pricing. And I know you obviously can't talk about Q2 yet, but just broadly speaking, you look at the data from different places, what's being reported out there and what you're seeing. How do you think fundamentals are playing out versus expectations so far this leasing season?
- [38:28]
B
Well, the year is progressing in line with our initial expectations. And what we said is that we expect blended rate growth, which is the blend of renewals and new move ins to be in the 1 and a half to 2% range over the course of the year. That was the case in the first quarter. What we have shared in terms of second quarter to date is that remains the case. Importantly, as it relates to our guidance, we're expecting that in the second half of the year. That's what underpins our guidance. So if there is something that there would be an acceleration in the second half of the year, that might happen. If it does. If it does, it would provide for an upside opportunity relative to our guidance. So that is occurring as it relates to blends. The that's just one part of the total revenue growth picture and we are focused on that big picture. So the other components would be occupancy. Our occupancy remains in the 96.5% to 97% range, which is generally above the apartment REIT average. And we also provide services and amenities to our tenants that they value and that they pay for. So we have other income growth growing generally in a mid to high single digit range. As it relates to markets, it certainly remains the case that San Francisco and New York remain strongest. But we're seeing some interesting signs of improvement in various other markets. Notably for us would be Philadelphia and Orange County, California. And then looking forward, we're encouraged by the facts at hand as it relates to supply, which is that there will be a decline in new deliveries in the second half of this year and throughout 2027. And we and others are watching for signs that job growth will accelerate. And as that happens, that combination of accelerating job growth and decline in supply should allow for improvement in terms of rent growth and revenue growth.
- [40:33]
A
Yeah, absolutely. Hopefully that continues. And speaking of some of the data trends, obviously I'm a data nerd. We're both data nerds here. So I want to ask you about data, and you guys talk a lot about data, particularly the data that comes from technology. I think the stat you all use a lot is more than a million daily data elements that help understand leasing and resident satisfaction and using the data to centralize a lot of leasing functions. And obviously those who followed udr, they know that UDR has been on the front edge of this centralization trend, even to the point of properties without leasing agents at all on site and still seeing really good retention numbers. So I'm curious to ask, I'm sure you get this question a lot, but how much more room is there to gain additional operational efficiencies? And how close are we to fully optimizing the leasing model?
- [41:21]
B
We appreciate that question Jay because one of the things I long admired about UDR from the outside was the focus on operational excellence. And then I arrived and was able to see it on the inside. And Mike Lacy, our COO and team are just really terrific in terms of their ability to set a plan, remain agile and adjust that plan as market conditions warrant and then execute on that new plan. And that's what we saw, especially through the fall of last year, was a little bit choppy and we're really pleased with where we came out. And that is increasingly aided by that data effort that you mentioned. Our attitude is that we're never done improving operations. There is constant improvement opportunity in all aspects of operations, whether it's things that are tough to measure in terms of delighting the customer, although we do measure that in number of ways or easy to measure. One metric would be turnover, which you referenced. Since the team implemented its customer experience project in 2023, which really heightened that focus on the customer in a data driven way, our turnover has declined by about 900 basis points to below 40%. So lowest turnover in the sector. We'll see where it goes from here. If it continues to decline, which it actually has so far in 2026, that that's helpful as it relates to expense savings. And as we see residents stay with us longer, we continue to have success with them on the renewal front. To the extent that turnover ultimately increases, that might not necessarily be a bad thing for the apartment sector either. I recall the middle of the 2000s when turnover was in the 55 to 60% range and 20% of departing residents were moving out to buy homes. Today, by the way, that's only 5%. But there was terrific job growth and revenue growth for apartments was in the mid single digit range. So we're focused on improving and there are a variety of ways to measure that. But some of the metrics could go as they go in different directions. That might not necessarily mean that revenue growth is not going in the direction that we want it to go.
- [43:52]
A
Yeah, no, that's a great point. I think all the time, like you're alluding to, which is sometimes people focus too much on one stat as opposed to the bottom line, which is what really matters. Dave, you talked a little bit about this earlier. Some of the strength we've seen in the coastal markets, particularly New York and San Francisco, and, and obviously UDR is one of the few REITs that has a pretty sizable presence in both the Sun Belt and the coastal markets. And, and we've all seen the advantages and disadvantages of each play out over the cycle since COVID the increased regulatory challenges, some of the coastal markets, the Sun Belt supply challenges. So I'm curious to ask, obviously it's a big topic across the REIT world right now. What's the ideal mix going forward for udr and what are the odds you want to add some new markets into that mix as well?
- [44:38]
B
Well, as I arrived at udr, what I thought was there must be an optimal mix out there. Maybe we have it, maybe we don't. What's the right exposure to this specific market and that one? What I learned upon joining the team and digging into the Orion platform is that the optimal portfolio is actually comprised of the best assets and less so of a focus on the markets, less so of a focus on urban versus suburban. We have the ability to look across millions and millions of apartment units and find assets that offer upside in terms of rent growth. So we're fortunate that we have a broad base to work with. We have the 20 markets, we have the coastal and Sun Belt exposure, and so that allows us to refine the portfolio. We talked about dispositions a little bit earlier, but also allows us to go looking for assets in a variety of markets. At times, the market that we're looking in might be out of favor. I'll give you a couple examples. Last fall we picked up an acquisition south of D.C. and that market at the time was a bit out of favor due to doge. The government shutdown was in process, so we found ourselves a little bit of a lighter auction tent to compete in. And we're able to pick up an asset at an attractive valuation and really confidently underwrite outsized growth due to the signal from the tool, but also due to the fact that we happen to own the asset across the street and it was run by a strong team. So our approach is less so this specific market mix, although we're mindful of market exposure and potential risk and much more. So what's the right mix of assets to own?
- [46:41]
A
So. So, Dave, you've mentioned Orion a few times, and so I'd like to ask you. You've seen a lot of models in your day, obviously. So I'm just curious, like, what makes Orion so special in helping UDR identify assets that are going to be outperforming?
- [46:54]
B
Well, first of all, it's something that the team has been working on for a number of years, and it hit an inflection point over the past year in which we've added resources, we've added to the data mix, which is Proprietary data of our own and external data that we've been able to blend together and back test extensively so as to allow ourselves to see the future for rent growth on a relative basis. Now, if you can see the future for rent growth, you can also determine which assets are mispriced today because there's a consensus underwriting and then there's our underwriting which may be above or below that. So this tool is very deep in terms of the amount of data that is integrated. It's also very broad in that it covers all of our markets plus about a dozen more, so as to allow us to keep an eye on potential opportunities in the future.
- [47:57]
A
So is it just trying to find markets that it may be, I'm sorry, properties maybe underpriced relative to peers and how you could bring your operational expertise to bring it closer, or is it. I'm sure there's more than to it than that, but is that part of the strategy?
- [48:13]
B
There's a twofold approach and you're right, Jay, the focus is on the assets. The Orion tool really looks at the rent growth potential for an asset. Less so with a focus on UDR operating it, but more so where should the rents be for this asset. And then we apply our operating perspective on top of it, which contemplates things such as other income potential which tends to be outsized for us or occupancy upside or expense control. So it's a multi pronged approach that allows us to see the potential of an asset.
- [48:52]
A
Yeah, very interesting. So let's talk about another investment topic and that's being development and obviously udr. You guys have talked a lot about new development, the value potentially building into a lower supplied environment in 27, 28 and beyond. But you've not been quite as active of late in development as others like Avalon Bay and maa. So how do you think about development right now and what indicators or drivers would make development more attractive to start ramping up?
- [49:21]
B
Well, UDR is a capable developer. We do have a track record over time of developing a variety of asset types in a variety of markets. You're right, we're not doing a lot right now, although we do have some development underway. Generally speaking, we're in favor of supply. We believe it's the solution for concerns regarding housing affordability and we will do our part to contribute to it. The fact that we're doing a bit less in terms of development at this time just speaks to the risk adjusted return relative to the opportunity set that we see to utilize capital and what has been most appealing to us of late has been the stock buyback which we spoke about earlier. We recognize that that will prove to be a fleeting opportunity and as that goes away, we will refocus our efforts around acquisitions, redevelopment, capex opportunities, investing in our operating platform and some development.
- [50:32]
A
And is there any particular market signal that would trigger more development, in particular over even acquisitions?
- [50:39]
B
Sure. On a risk adjusted return basis we'd look for the appropriate relationship in terms of that stabilized development yield relative to the cap rate. And at this time, particularly with costs increasing along with inflation, we're not seeing it pencil for us on a broad based basis.
- [51:02]
A
So do you think we'll get there anytime soon or you think that's more we have to see some cost compressions first?
- [51:10]
B
I think for us it will be a function of the asset level underwriting. So cost can have a broad influence across multifamily development opportunities. But we'll also be focusing on the numerator. And the numerator is what's the NOI potential. And we're open minded that we will find some opportunities, perhaps with the help of Orion. To the extent that we were to start developments anytime soon, I think what fits best for us would be a project that would be more or less an expansion of an existing asset. So if we're operating an asset, we're very comfortable with the market with the team on the ground, have a very strong understanding of where rents could be, and we happen to have some excess land nearby. That's what it best defines our strike zone at this time.
- [52:04]
A
Yeah, no, I think that's a good point. It's all very site specific and I think that speaks to just the broader challenge getting development going for everybody right now across public and private. Private. Which also speaks to why we're probably going to be in a relatively moderate to low supply environment for these next few years because it's hard to get deals to pencil out. Let me ask you another topic I know is near and dear to your heart on this last earnings call for the Q1 calls you announced monthly dividends for UDR stock investors, which, correct me if I'm wrong, I think it's a first in the apartment REIT world and obviously traditionally quarterly. So I'm not sure based on some of the reaction that some of your old peers on the analyst side really appreciated this strategy, but it does seem interesting and aligns more with some of the non traded REITs and privately held investment groups. So what just I'd love for you to share to some of the advantages of the monthly dividends for both UDR as well as your investors?
- [52:59]
B
Sure. First of all, you go back to the top three things that UDR is focused on. Operations, capital allocation and access to capital. And this would fit under that third group. The team had been studying it for some time. You're right. UDR is the first apartment REIT to move in this direction. We think it makes a lot of sense given the relatability of the apartment business model. You can think through the process of a tenant paying rent, enjoying the community, the community being serviced by the leasing staff and repair and maintenance team. And then after that there's some cash that is available for distribution to investors. And all that can happen on a, on a monthly basis. The REIT model is one that offers so much to investors in terms of transparency, liquidity and a lack of fees. And we think that UDR's track record as it relates to dividends is also appealing to investors. Over the span of our 50 plus years, we've paid about $9 billion in dividends. It has been a track record of growth and stability and a current dividend yield in the mid 4% range, which is significantly higher than for example the S&P 500. And our research led us to understand that as the baby boomer demographic ages, there's a desire for income, there's a desire to have that income coming in on a monthly basis. So the opportunity here is to appeal to that retail or high net worth crowd that we'd love to have as investors in UDR and we'd expect that they'd be long term investors. So we are making a broad based campaign around this. The monthly dividend is just one aspect. We've had the opportunity to redefine our investor relations website. We enjoy opportunities to get the word out like this and through traditional media and social media and a number of meetings with brokerage networks as well. And we've enjoyed a favorable reception to this and we are going to stick to it. And over time our thought is that we can expand the shareholder base to the benefit of all shareholders.
- [55:30]
A
Yeah, that's great. Well, I'll be interesting to see how that plays out. Well, Dave, I want to ask you one more question and I always like to get people who know the space really well and obviously you've had a lot of different roles in the rental housing space and rental housing, I argue, I think it's one of the most misunderstood topics in the United States and so of the many myths out there about rental housing, about renters or about REITs that are floating out there today. What is your favorite myth to debunk?
- [56:00]
B
Well, I'll give you two, Jay, and one of them is near and dear to your heart. And you are a really excellent spokesperson for the industry on this front, which is the solution for housing affordability is more new supply as opposed to rent control. And the more that we can work together as an industry and get the word out there, but also participate in that, the better off the industry is and the better off, very importantly, residents are. So that at times appears to be a myth. And I appreciate that you back up your point of view with data, and that's very helpful. And then the second One specific to REITs would be that volatility is an opportunity, not a threat. And we spoke about the opportunity that it presents. Udr based on the cost of capital, it allows for different arbitrage activities. And for investors, it's an opportunity, too. One, at this time has an opportunity to buy into the apartment sector at a discount to the underlying value of the assets. And over time, the relationship between public and private market valuations is pretty much at par. So that's something that the REIT industry offers and at times could be misunderstood.
- [57:25]
A
Yeah, great point, Dave, and I agree with you. So, Dave, thank you again for your time today. Appreciate you carving out some time here to talk UDR and the apartment world. Best of luck as you finish out Q2, and thanks again for the time.
- [57:40]
B
Thank you, Jay. We appreciate it.
- [58:01]
A
And that's a wrap on episode number 89 of the rent Roll Roll. Big thanks to Dave for being our guest today. Thank you to jpi, Madera Funnel, Authentic Telecloud, and a big shout out to my friends at Apartment Life as well. And thank you to all of you for spending part of your day with us. We'll see you next time.