Greetings, and welcome to UDR's First Quarter 2024 Earnings Call. As a reminder, this conference is being recorded.

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 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 on the call today.

Thank you, Trent, and welcome to UDR's First Quarter 2024 Conference Call. Presenting on the call with me today are President and Chief Financial Officer, Joe Fisher; and Senior Vice President of Operations, Mike Lacy; Senior Officers, Andrew Cantor; and Chris Van Ens will also be available during the Q&A at the end of the call. 2024 is off to a very solid start due to a better fundamental backdrop than initially expected and the operating strategies we continue to employ to outgrow competitors in our markets. Positive fundamental drivers for the industry include: first, year-to-date employment creation of approximately 800,000 jobs has already exceeded initial full year economist consensus growth expectations. Second, more than 100,000 newly delivered apartment homes were absorbed during the first quarter—the strongest first quarter in over two decades. Adding to that, total housing deliveries remained stable and development starts continue to decline. This 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—a cycle-best level of relative affordability. These trends, combined with the operating tactics we utilize, have led to positive momentum across all key operating metrics. This includes more robust traffic, higher leasing activity, lower turnover, lower concessions, higher occupancy, and better pricing power than originally expected. In all, I would characterize this as green sprouts. Mike will provide additional details in his remarks. However, as we have only completed the first four months of the year, we remain wary of the volatile and elevated interest rate environment and the effect it may have on pricing and concessions of lease-up communities, given the heightened new supply the industry faces in 2024. We feel good about 2024 thus far, but we would like to see more evidence of continued operating momentum as we progress through a peak leasing season before revisiting our full-year guidance. Big picture, I remain optimistic about the long-term growth prospects of the multifamily industry and UDR's unique competitive advantages that should enhance that growth. We have a strong culture, a talented team with a robust track record of performance, and we continue to invest in our associates and embrace technology to create value for all of UDR's stakeholders. Finally, I'd like to take a moment to celebrate the upcoming retirement of Senior Vice President and Chief Investment Officer, Harry Alcock, who will soon be transitioning to a consulting role with a focus on sourcing transactions. Harry and I have worked together for approximately 30 years, and he has been a trusted partner through all of it. He helped UDR grow to be the thriving $20 billion enterprise we are today while also grooming our next wave of talented investment and development professionals. Harry, thank you for all you have done, and we all look forward to working with you in your new role. With that, I will turn the call over to Mike.

Thanks, Tom. Today, I'll cover the following topics: our first quarter same-store results, early second quarter 2024 trends, and how they factor into our full-year 2024 same-store growth guidance, an update on our various innovation initiatives, and expectations for operating trends across our regions. To begin, first quarter year-over-year same-store revenue and NOI growth of 3.1% and 1.2%, respectively, and 0.4% sequential same-store revenue growth were slightly above our expectations. These results were driven by: first, 0.8% blended lease rate growth, which resulted from nearly 4% renewal rate growth and new lease rate growth of negative 2.5%. New lease rate growth improved by 260 basis points versus fourth quarter results as concessions decreased by approximately half a week on average. Second, 35% annualized resident turnover was 400 basis points better than the prior year. The 630 basis point delta between new and renewal rate growth, when combined with higher retention, led to a favorable outcome. And third, occupancy remained strong at 97.1%, supported by healthy traffic and leasing volume. New York, Washington, D.C., San Francisco, and Seattle, which collectively constitute 36% of our same-store pool for standouts, averaged nearly 98% during the quarter. Shifting to expenses, year-over-year same-store expense growth of 7.5% in the first quarter was in line with our expectations and inflated by a tough comp against the one-time $3.7 million payroll tax credit we recorded and disclosed in the first quarter of 2023. After excluding this credit, our year-over-year same-store expense growth would have been a more reasonable 4%. Moving on, strong core operating trends have continued into the second quarter, and every key revenue metric is exceeding our expectations through the first four months of the year. First, blended lease rate growth continued to accelerate from approximately 1% in March to roughly 2% in April, with concessions stabilizing at lower levels than the fourth quarter of 2023. All regions have demonstrated sequential blended lease rate growth improvement versus March, with our West Coast and mid-Atlantic regions showing the most strength at approximately 3.5%. Based on current trends, we expect May blended lease rate growth to demonstrate further sequential improvement. Second, resident retention continues to compare well against historical norms. Due in part to our customer experience project, which I will touch on later, April retention is 400 basis points above prior year levels, representing the 12th consecutive month our year-over-year turnover has improved. Third, occupancy is holding firm in the high 96% range. Strong demand from continued job and wage growth has allowed us to simultaneously operate with high occupancy and push rental rates while maintaining rent income levels in the low 20% range. And fourth, other income continued to grow at approximately 10% in April, similar to what we achieved in the first quarter. As a reminder, other income constitutes roughly 10% of our total revenue. We remain pleased with the trajectory of our other income initiatives such as the rollout and penetration of building-wide WiFi, which contributes significantly to incremental same-store revenue growth. Looking ahead, we reaffirmed our full-year 2024 same-store growth guidance in conjunction with our release. We are encouraged by the strength of macroeconomic indicators, such as year-to-date job growth and wage growth and the effect those demand drivers have had on our key performance indicators thus far. But we remain somewhat cautious given the volatile and elevated interest rate environment combined with peak supply deliveries yet to come. Turning to regional trends, our coastal results have been above our expectations, while Sunbelt markets are in line and trending better. More specifically, the East Coast, which comprises approximately 40% of our NOI, was our strongest region in the first quarter. Boston, Washington, D.C., and New York all performed well with weighted average occupancy of 97.5%. Blended lease rate growth was nearly 2.5%, and same-store revenue growth was 4.25%, which is slightly above the high end of our full-year expectations for the region. We expect this regional strength to continue. The West Coast, which comprises approximately 35% of our NOI, has performed better than expected. At the beginning of the year, we anticipated San Francisco and Seattle would lag our West Coast markets. While revenue growth results in the first quarter show this to be true on an absolute basis, both markets saw new lease rate growth improve by nearly 900 basis points compared to our fourth quarter results. The momentum in these markets has exceeded our expectations due to various employers more strictly enforcing return-to-office mandates as well as increased office leasing activity from technology and AI companies. Lastly, our Sunbelt markets, which comprise roughly 25% of our NOI, continue to lag our coastal markets due to elevated levels of new supply but have performed in line with our expectations. Better job growth in these markets appears to be bolstering demand and absorption. And similar to other regions, we have seen Sunbelt concessions stabilize. Sequential blended lease rate growth accelerates and retention improves. We remain cautious on the Sunbelt in the near term but have been pleasantly surprised by its recent trajectory. These regional dynamics reinforce the value of a diversified portfolio across markets and price points that allow us to pivot our short- and long-term operating strategies to maximize revenue and NOI growth. Moving on, we continue to make progress on various innovation projects that will benefit same-store growth in 2024 and beyond. One example of this is our customer experience project. We have consistently outperformed the public and private markets on NOI and margins over time due to our focus on our leading operating platform and innovative culture, which has historically driven all aspects of income growth, operating efficiencies, and contained our cost structure. We are now turning to the next phase of our platform, which focuses on customer experience and retention. Through our proprietary data hub and the millions of data points we have accumulated over the last seven years, we have found that 50% of resident turnover is controllable. In that, those residents with positive experiences and scores were retained at a rate 20% higher than those with bad experiences. Knowing this, we see an opportunity to improve retention by 5% to 10% versus the industry average of 50%, resulting in a $15 million to $30 million incremental NOI opportunity. To capture this upside, we now track and score every interaction with our residents. This has allowed us to make a transformational shift in the way we do business, moving from being transactional in nature to a focus on the lifetime value of our customer. We are equipping our UDR team members with tools, training, and the ability to prevent or rectify bad customer experiences, which we believe over the coming two to three years will materially improve the rental experience and our relative turnover. This should positively impact pricing, occupancy, other income, expenses, and margin as well. My thanks go out to the UDR associates nationwide; they remain committed to delivering on our strategic priorities. You rightfully deserve credit for embracing our innovative culture and improving how we conduct our business. I will now turn over the call to Joe.

Thank you, Mike. The topics I will cover today include our first quarter results and our updated full-year guidance, a summary of recent transactions and capital markets activity, and a balance sheet and liquidity update. Our first quarter FFO as adjusted per share of $0.61 achieved the midpoint of our previously provided guidance and was supported by same-store revenue and NOI growth that was slightly above our expectations. The modest sequential FFOA decline was driven by an approximately $0.015 decrease from same-store NOI, primarily due to higher expenses attributable to seasonal patterns and approximately $0.005 decrease from higher interest expense and general administrative costs. Looking ahead, our second quarter FFOA per share guidance range is $0.60 to $0.62, with a $0.61 midpoint flat compared to the first quarter due to nominal expected changes across NOI, interest expense, and G&A. Year-to-date, operating results are trending above our initial expectations. But with macro uncertainty and peak leasing season ahead of us, we have reaffirmed our full-year 2024 same-store growth guidance ranges and plan to revisit them in the future. However, we did increase our full-year FFOA per share guidance range by $0.02 due to the joint venture successfully refinancing its senior construction loan at our DCP investment in Philadelphia with no additional investment from UDR. Having addressed this risk, there are no remaining DCP senior loan maturities until 2025. In addition to the Philadelphia investment, there remain three additional DCP investments totaling approximately $50 million on our watch list with no material changes since the fourth quarter. Beyond this, our remaining $440 million of DCP investments are performing well as they were primarily 2021 and 2022 vintage developments, which have not encountered material construction cost overruns or delays and are performing in line with, or above, pro forma expectations on rents. Next, a transactions and capital markets update. First, in alignment with our capital-light strategy, we made no acquisitions, new DCP investments, or development starts during the first quarter. We remain active in evaluating potential acquisitions through our joint venture with LaSalle and are optimistic about the ability to complete additional accretive deals in the coming quarters. Second, during the quarter, we completed construction of a $54 million, 85-unit townhome community in Dallas, Texas. This community adds density to our existing Addison portfolio while offering residents a complementary living option. Our current development pipeline consists of just one community in Tampa, Florida, totaling 330 homes at a budgeted cost of $134 million, with 94% of this cost already incurred, thereby limiting our forward funding commitments. And third, during the quarter, we completed the previously disclosed sale of Crescent Falls Church, a 214-home apartment community in the Washington, D.C. area at a mid-5% buyer's cap rate for proceeds of approximately $100 million. Finally, our investment-grade balance sheet remains liquid and fully capable of funding our capital needs. Some highlights include: first, we have nearly $1 billion of liquidity as of March 31. Second, we have only $113 million of consolidated debt or approximately 0.6% of enterprise value scheduled to mature through the end of the year and only 11% of total consolidated debt scheduled to mature through 2026, thereby reducing future refinancing risk. Our proactive approach to manage on 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 30% at quarter end, while net debt-to-EBITDAre was 5.7x, which is approximately a half-turn better than pre-COVID levels. 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?

Your first question comes from Nick Joseph with Citi.

Maybe just starting on the same-store revenue. Obviously, the first quarter was a bit better than what you expected, but hoping you could actually quantify kind of what your expectations were versus the 3.1% that you put up?

Nick, it's Mike. I'll take the first crack at it. What we're looking at, and as a reminder, we had 70 basis points of blends for the year. And I would tell you, our blends right now in the first quarter are running about 20 basis points higher to start the year. But April and May trend even higher, I'd say, about 100 basis points higher than what we had in our original business plan going into the year. So to quantify that, if we were able to sustain that 1%, that equals about $8 million, and for us on our revenue line, that's about 50 basis points. So again, it's early in the season right now. We want to see how the next 30, 60 days play out, but right now, we feel really good about where we're trending.

That's helpful. And how about on the occupancy and the other income side relative to initial expectations?

Occupancy in the first quarter was about 10 to 20 basis points higher than we expected. And over the last 30 days or so, we brought that down. So we're running right around 96.9% today. Expectations are that we'll continue to see that probably migrate down maybe 10 or 20 basis points as we continue to push our blends a little bit higher. So overall, I'd say occupancy is pretty much on target through the first four months or so. Other income, though, great. I mean, I'll tell you, we were 10% above last year to start the year. April is trending in the same direction. That's probably 200 to 300 basis points higher than we originally thought. And a lot of that has to do with the success from the teams, and it's really driving these initiatives home. So right now, other income feels really strong. And a lot of this just points back to our strategy, and we've talked about this over the last couple of months. It's about starting the year with high occupancy, starting to push our blends, and testing the waters as we have demand, and it's all starting to play out for us today.

That's helpful. And then you touched on the prepared remarks about the benefits of the low turnover that continues to drive higher retention. When you look at the renewals you've sent out for May and June, I guess. First of all, where are those renewals going out? And then is there anything from a take perspective or a negotiating perspective that gives you any indications that turnover won't continue to stay low or even trend lower from here?

Mike, again, good question, Nick. Right now, we're sending out renewals for around 3.8% through June. And then in July, we just sent out about 4.5% growth. So we are getting a little bit more aggressive on renewals, but at the same time, we're really pushing our market rents. So we're trying to compress the new and renewals. And I think what you saw from us in the first quarter was about a 600 basis point difference between new and renewal. My expectations are that this is going to come down to around 300 to 400 basis points as we move throughout the second quarter. And that's really setting us up to drive total blends, which is equating to total revenue growth a little bit ahead of our expectations.

Next question, Austin Wurschmidt with KeyBanc Capital Markets.

Mike, you mentioned the leasing trends in May and the improvement in lease rate growth compared to April. You discussed how things have evolved from the first quarter into April relative to expectations. Which markets are really contributing to that improvement in May? Additionally, where are you becoming more aggressive in terms of renewal rate growth? Do you think you can maintain high retention or occupancy while also pushing harder?

Yes. Great question, Austin. We are seeing more strength based on our own expectations coming into the year really out of the West Coast. Right now, we've talked a little bit about what we've experienced in Seattle and San Francisco. And we're starting to see the same thing coming out of the East Coast, New York is really picking up as demand picks up. So a lot of strength coming out of our coastal markets, and that's where we're seeing, on an absolute basis, the highest rents. And I'll tell you, the one that's benefiting the price as of late and thankfully, it's 15% of our NOI is D.C. It's really starting to come on strong, starting to see blends at that plus 4% to 5% growth. A lot of that has to do with getting more aggressive, to your point, on renewal, seeing that they're very sticky, and it's allowing us to drive our market ramp-up as well and it’s translating into positive new lease growth. So overall, the Coast feels very strong. But in addition to that, the Sunbelt's hanging in there. What I'm experiencing today is momentum on a month-over-month basis, seeing positive trends coming out of those parts of the country as well. So overall, things feel very positive there.

I wanted to follow up and explore further the positive outlook in the Sunbelt. Do you believe that the toughest times are behind you in that region, and could improved job growth and easier comparisons in the latter half of the year lead to ongoing acceleration? What are your updated views on the outlook for the rest of the year?

Yes, Austin. That's been getting a lot of questions on the Sunbelt. So maybe let me step back a second and give you a little bit more color. And as a reminder to the group, that's about 25% of our NOI. And to your point, we know supply is a certainty. And it's in front of us. Peak deliveries are still right around the corner, but at the same time, it's during peak demand. So that's a positive, and we're seeing stronger job growth as well as demand is a little bit stronger. A lot of that has to do with record absorption. So overall, while it feels good, we're cautiously optimistic just given that supply is still coming. But just to give you a little more color on what we're seeing on the ground, first and foremost, are the concessions. I would point out that in Texas today, we're seeing 1.5 weeks. In Florida, it's about half a week of concession on our portfolio, which is a pretty significant improvement over the last six months and lower than what we're seeing from some of the comps in those areas. In addition to that, occupancy in the Sunbelt, we're running around 96.5% to 96.7% today. So still very healthy occupancy. And again, we're seeing blends improving on a month-over-month basis. Just to give you a couple of stats: in April, we were negative 1.5% in the Sunbelt for blends, that compares to negative 2.2% during the first quarter. And I'd tell you, May is shaping up to be even better. So overall, blends continue to improve. But where I'm most excited is our other income. We've been driving home some of our initiatives in the Sunbelt, I think specifically the bulk Internet rollout that's really taking hold. It's allowing us to drive our other income above 10% in that part of the country, and it's allowing us to drive our total revenue. So again, cautiously optimistic given that peak supply is in front of us. But it's a much better position knowing that demand is also coming at the same time.

And then can you just clarify, did you guys underwrite 5% other income growth for the year?

We were between 5% to 7% growth on our other income line. And again, we're holding around 10% today. So that's a 200 to 300 basis points improvement from what we originally expected.

Next question is Steve Sakwa with Evercore ISI.

Mike, I appreciate all the comments on some of the trends by market. I'm just curious in the Sunbelt, given that we've got heavy deliveries coming over the next four quarters. Is it your expectation that the better trends continue? Or has this maybe been either a little bit of low in supply or maybe stronger demand? And like, I guess, how are you thinking about those concession trends maybe over the next several quarters?

Yes, Steve, we still think that peak supply is going to hit us here in the next couple of quarters. So we're going to continue to watch that, lean into the things that we control. And again, that's where we're hitting our other income and driving our results against the peers on a relative basis. But we do expect that we're going to continue to take the headwind just given supplies in front of us for the next six to twelve months in that market.

Steve, this is Toomey. Just to add some more color, and I think we had it in our prepared remarks. The record absorption in the first quarter was high for two decades. The jobs number, I think, has surprised us all through the balance of the year. If that continues, the Sunbelt has a pretty good path, if you will, and absorb it. I'm not sure betting on the jobs market going into an election cycle is a very strong bet on that piece of equation. Second, we're still a little low from last September, October when we saw interest rates spike and we saw a developer's panic and go to a heavy concession template in that supply type market setting. I think it would be prudent for us to just play it through and see how it falls. I wouldn't get overly optimistic or pessimistic. It's just easier for us to say we're going to play it month by month and see what the traction is with respect to new and renewals. But right now, after four months, we're headed into the summer and feel better than we expected.

Okay. And then maybe one for Joe. Just as you think about maybe any opportunities for capital deployment. I know you probably don't like where your stock is trading, but how are you thinking about any kind of investment opportunities, whether it's DCP or land purchases for future developments? Like just kind of where are the recurrent opportunities? Where is the opportunity set today?

Yes. Steve. So I'd say number one, our balance sheet remains in a phenomenal position. So liquidity-wise, maturities, sources and uses all look to be in a really good position. So we're able to kind of sit back and be in this capital environment and wait to pivot to offense. I'd say opportunity-wise, the transaction market was finding footing there in terms of agreement on where cap rates were and buyers and sellers were coming together. Obviously, this recent surge in rates creates a little bit more of an unknown in that environment. And so we're kind of sitting back trying to see where valuation starts to settle out here a little bit. But where we probably try to target today are two different areas. One is on the JV acquisition side. The joint venture that we put together with LaSalle last year, we’d, of course, like to continue to deploy with them as we did in the fourth quarter. So we’re trying to find deals in our existing markets, deals down the street, and then get the additional upside from the fee stream that comes off of that. So continue to show them a lot of transactions to help to get some things done here in the coming quarters with them. The other area is within the DCP pipeline. While we're not seeing much on traditional DCP given that we're not seeing a lot of new starts and activity there, we are seeing a little bit more on the recap opportunity side. And so as we look ahead to potential paydowns or payoffs that may come out of that DCP pipeline in the next 12 months, we're starting to evaluate some opportunities for redeployment to put some capital out there on that front. On the development side, you mentioned that we've got a really good land pipeline right now with a lot of deals that are shovel ready. That team has just continued to work out costs and monitor the market and wait to see where we get on some of those yields before we start some of those. But we've got a really good opportunity to hit that hard as well once the market comes into our favor.

The next question, Josh Dennerlein with Bank of America.

Just wanted to hit on some of the expenses. I was looking at Attachment 8. There's a couple of markets where you had some pretty big jumps year-over-year like Seattle, Boston, Monterey Peninsula. Anything going on in those markets that we should be aware of on the expense side?

Yes. Josh, I would say, first and foremost, you have to remember the CARES Act, we're anniversarying off of that. So as a whole, that had about, call it, 350 basis points growth rate. If we didn't have that, we would have been at 4% overall. Specific to some of these markets, Seattle, as an example, we had taxes go up about 9%. So that drove a little bit more growth there. A place like Monterey Peninsula, utilities were up 7%. So you have some of these other factors that are in play in addition to what we're anniversarying off of, given the CARES Act. So that's driving some of the higher growth, if you will.

Just to add to that, because we did get a couple of questions overnight on the expense number. I think we did a great job of telegraphing what was going on there with the CARES Act comp in 1Q. And I think a lot of notes noted that, but that was in line to slightly better than we had expected. So that 7.5% overall expense growth number was definitely not a surprise to us. As it relates to the range for the rest of the year, we definitely see the path to see that year-over-year number come down here for the next three quarters. When you look at the initiatives around that, be it additional automation of leasing, more no-staff properties, some of the stuff we're doing with sweet spot maintenance, and some of the purchasing, we still have a lot of initiatives out there to keep that expense number controlled as we have in the past. So I would not let 1Q scare you in terms of is that going to be a recurring issue for us.

Okay. I appreciate that. And then back on other income, just kind of curious what's driving the outperformance in the other income line? You mentioned the building-wide WiFi. Is that like people can sign up any time? Or I kind of thought is that like lease renewal or when there's a new lease signed? So any color there would be great.

Yes. So let me give you a little bit more color just again — the other income does make up over 10% of our total revenue. On our stack, we're looking at about, call it, $40 million, and one-third of that growth came from the rollout of our bulk Internet. We did see about $1 million benefit during the quarter compared to about $100,000 last year. So the majority of it is coming from rolling out that initiative. In addition to that, I'd tell you, the team is doing a really good job just driving some of our other initiatives as it relates to running out common area spaces or adding parking in terms of more assigned spots there. We're pushing up some of our short-term furnished rentals and then will continue to lean into some of the package lockers. So you put all that together and you're looking at about a 10% increase on a year-over-year basis. And again, April and May look like they're tracking the same.

Next question, Jamie Feldman with Wells Fargo.

I was hoping you could talk a little bit more about how Class A versus B is performing across the markets, across your portfolio?

Sure. I'll take that. So B outperformed our A's on a blended basis at the portfolio level by about 50 basis points. So what we saw was 1% growth versus 0.5%. I'll tell you, the Sunbelt deviated from the recent trends we talked about last year, where B's were underperforming A's across the board. This does suggest that the supply dynamics are impacting A's more than B's across the Sunbelt, which is more in line with traditional supply dynamics. So overall, it feels like it's normal and steady state today, and these are doing a little bit better.

Okay. And then you talked broadly about the Sunbelt, but can you just get a little bit more granular on the trends? You mentioned Texas, but is Dallas different from Austin and then even Florida, Tampa, Orlando, and then Nashville, which, of course, it's not Florida. But can you just talk more granularly about those markets? Or are they all pretty much doing exactly what you said in your broader Sunbelt comments?

I may give you a little bit more color on the makeup of those regions and what we're seeing today. I think first and foremost, starting with Florida. Florida makes up about 10% of our NOI, and it's really split between Tampa and Orlando. Let’s say, Tampa, we have about 20% urban, 80% suburban portfolio. We're seeing concessions around 0.3 weeks today. Occupancy is running in that mid-96% range. Orlando is very similar. So we're seeing about 0.3% weeks concession. Occupancy is a little bit higher at 96.9%. Blends are still slightly negative, but they continue to improve. Florida feels like it's on track with our original expectations for the year, specific to Texas, similar in the sense that Texas is about 10% of our NOI, but the majority of this is coming out of Dallas. Dallas is 8% of our NOI market, where 15% urban, 85% suburban. We are seeing elevated concessions around 1.5 weeks today, but that has improved from 2.5 weeks about 60 days ago. We're able to run occupancy in that mid-96% range. Overall, pretty decent numbers coming out of Dallas. Austin is probably one of the weaker-performing markets today for us. This is only 2% of our NOI. It’s a relatively small market, seeing concessions in that 2-week range, which is probably the highest in our entire portfolio, and that's where we're facing the majority of our supply. But we're still running 96.7% occupancy. You can see in here, volumes are still negative, but they are improving. Overall, cautiously optimistic on a lot of these Sunbelt markets. But today, they're performing at expectations.

Next question is Anthony Paolone with JPMorgan.

Maybe, Mike, for you — I mean you talked about how high the retention is and just the strength of the renewal rates. And so I'm just wondering, like is there a loss-to-lease in your portfolio still? Or as we look over the course of the year, does — do you think this flips to like a gain-to-lease, or how should we think about that and that divergence between new and renewal spreads?

Yes. Tony, what we're seeing today is a loss to lease right around, call it, 2% to 2.5%. Typically, that grows as you go through the demand period over the next three to six months, and then it starts to trail off towards the end of the year. But right now, our loss-to-lease is hovering right around that 2% to 2.5% range today. And I must say, I'm really excited about what the team has done with the customer experience project. I gave a lot of high-level information in my prepared remarks, but I think it's important just to dive into some of the things that we're doing. First and foremost, our intention was to capture millions of data points. By that, I mean, we captured every voicemail, text message, email, surveys, service requests, every personal interaction. On secondary to that was to develop these proprietary resident community-specific dashboards that chronologically align interactions. I think that's the keyword. It's putting these in order so our teams know exactly what's happening at any given time. Finally, taking all this information and scoring each experience to gauge real-time sentiment to orchestrate a better leading experience has been huge for us. While it doesn't go unnoticed that people aren't moving out to buy homes as much as they were say last year or the year before, this is a big dial mover for us, and something that our teams are really leaning into.

One, just one other thing too, in terms of kind of that momentum and that loss to lease question, I think probably one of the things we're most excited about on a year-to-date basis, when you look at the combination of our gross rents and that concessionary number coming down since the start of the year, we're actually up plus or minus 3% on effective rents on a year-to-date basis, which through the first 120 days is a really good result relative to historical averages. Obviously, that's being led by East and West Coast doing a little bit better. Even in the Sunbelt as Mike talked about, we're seeing market rents move higher there. When you worry about that gain to lease, the fact that market rents continue to move higher at the same time that we're pushing our blends both on renewal and new base is higher, we feel pretty good about that trajectory in terms of as a forward indicator.

Okay. That's helpful. And then just the other one, can you comment on what bad debts were in 1Q and whether you expect any improvement from here for the rest of the year?

Yes. So when we put together guidance, we had assumed a flat year-over-year number from '23 to '24 for bad debts. Most of that really is due to the fact that we think we did a really good job of assessing the accounts receivable balances historically and knowing kind of what we are going to receive over time. I'd say that's continued to play out. The good thing is, from a trend perspective, we are seeing some of those long-term delinquents, but a number of them as well as our average balances, have actually been coming down a little bit as we've seen some of those eviction moratoriums come off, and we’re seeing the courts open up. We're seeing end-of-month and subsequent to month-end collections, continue to improve and be some of the strongest that we've seen throughout COVID. The trends right now look pretty good. I'd say, we're probably a little bit ahead from a bad debt perspective. I think when we revisit guidance in the future, we'll iron out that number and talk about it a little bit more. But we are really excited about the potential perhaps this year, but definitely going into the future. The actions we're taking and the opportunity that it creates, we've talked about the kind of 1.5% bad debt that we're running at. That's about $25 million a year. When you factor in all the other costs from vacancy, turn costs, legal spots, CapEx, that's another $25 million right there. So it's kind of a $50 million total opportunity. I'd say the actions on the front door being taken today, be it the ID and income verification and utilizing some of those AI-based tools, adjusting some of our processes and oversight, and just getting more eyes on that area, and then raising some of the thresholds around deposit requirements, income verification requirements, credit scores. We're pretty excited about what that has the potential to do as we move forward into the back half of this year and into next year. We hope that that's another leg up in terms of that collection percentage and some of the delinquency stats as we move into the back half. But I think by the middle of the year this year, we'll hopefully have a little bit more visibility to speak to some of that.

Next question, Michael Goldsmith with UBS.

This is Amy with Michael. San Francisco and Seattle get a lot of attention, but the UDR portfolio has some significant exposure to Orange County and Monterey within the West Coast markets as well. So I was hoping that you could touch on the supply-demand trends in those markets.

Yes, let me provide some insight on those markets, starting with Seattle and San Francisco, as they often attract a lot of inquiries. Firstly, they are performing better than we initially expected, largely due to factors unique to our portfolio. In Seattle, for instance, our locations are not in the downtown area, which means we are not facing the same supply pressures as others. We are situated more in Bellevue and the suburbs. The return to office by Amazon has significantly boosted demand, and the recent opening of the light rail has improved access for people commuting to Redmond. This development has enabled some Microsoft employees to live in urban areas with convenient access to the suburbs. Currently, rental blends in Seattle are around 4.5%, and occupancy rates are about 97%. The limited supply in that market has been beneficial. In San Francisco, we have a mix of urban and suburban properties; we operate in SoMa and the Peninsula. We are seeing a notable reduction in concessions, now averaging about one week, down from two to three weeks recently. This trend is largely tied to the return to office. Additionally, we are witnessing improvements in the city and a rebound in AI and biotech jobs, which is increasing demand there, while supply remains limited. Both regions are allowing us to drive our rental blends into Q2, with blends around the 4% to 4.5% range. Regarding Orange County, which accounts for 11% of our NOI and is primarily suburban, we're observing more growth in Newport Beach compared to Huntington Beach and Irvine due to a bit more supply causing pressure in those areas. Overall, Orange County is performing as anticipated and is in a good place today.

Great. And then a quick question on the other income. Improving turnover is certainly positive both for the revenue and expense side. But I'm hoping that you can provide some examples of what sort of experiences you're seeing that you think you can do better on from a resident experience side? Like is this, people complaining about loud trash removal or their neighbors or how do you think that you can do better on these items?

That's a really good question. You might be surprised to learn that although rent increases are a factor, they're not even among the top five out of the 15 factors we're considering. Through our analysis of millions of data points, we've found that the main issues relate to trash, pet waste, noise, and the move-in experience. It's essential to ensure that these aspects are flawless. Many of these items are within our control, which is why we're prioritizing them. The team is very focused on addressing these areas. We believe that if we make adjustments in these areas, we can positively influence outcomes, and we're already observing some changes. There's still a lot to learn, probably another one to two years, and we will continue to implement training. We'll keep testing, and we'll push this initiative further throughout this year and into next year.

Next question, Nicholas Yulico with Scotiabank.

I guess first question, Mike, sorry if I missed this, but — did you give the new lease rate growth, how that's looking in April for the Northeast? Could you also just explain why that number was a little bit weaker than some other markets in the portfolio in the first quarter?

So we did not provide that, but I'm trying to look through some of my notes here quickly. What I would tell you is new lease growth continues to improve. When you think about what we just put out there as a whole, on our blends being roughly around, call it, 2% in April. Our new lease growth is roughly flat. As we move throughout May, expectations are that's going to turn positive. What we're seeing across the board, whether it's the Northeast or even the West and Southwest regions, we're seeing improvement there. A lot of that has to do with pushing our retention up, holding our renewals at a pretty steady rate and trying to find a happy medium on those blends between new and renewal. We're going to continue to test the water as well as we can and see where it takes us. Overall, what we're seeing is positive momentum pretty much across the board.

Okay. Second question is maybe for Tom or Joe, in terms of — it seems like you have the policy of not revising same-store guidance in the first quarter. I know you talked about still wanting to see the leasing season in the spring play out, and there are some reasons to be cautious in some instances, but you are, it sounds like you are trending above the guidance. So I guess I'm just wondering what is the reason at this point to have that policy since a lot of your peers do adjust in the first quarter. In fact, I'd say much of the broader REIT market is willing to adjust guidance in the first quarter. If you could just remind us sort of why you feel strongly about that policy? Or if this is just an instance of situation on the ground. There's still a reason for caution, Sunbelt supply, whatever it is driving that decision.

Yes, Nick, it's Joe. I'd say as it relates to the broader REIT market, we don't pay a lot of attention to their policies, but I'd just remind everybody, by and large, the broader REIT market is a longer lease duration sector. So maybe a little bit less exposed to the volatility of supply or macros that comes quarter-to-quarter. As we look at ours, we've traditionally had that policy with the exception of during COVID when we saw meaningful outperformance to start the year back in '22. So we traditionally said we're only 120 days in the year. We've got a lot of the leasing season left. We've got a lot of actions that we can take from a capital markets activity perspective, a lot of opportunity to innovate and drive performance, but also a lot of opportunities for supply to creep up on us or macro to creep up on us. We typically like to stay conservative, see how the market comes to us, focus on what we can control. As we have that news to deliver, we deliver the good news throughout the year and try not to get out of our SKUs. Last year, as Tom mentioned, we were surprised by the reaction from some of the developers on the concession side to higher rates and some of the new supply coming on. That surprised us in September, October, and November, and we had to reduce guidance. By no means is that something we want to repeat this year at any point in the future. As it relates to the range, we think the range is still good. If we were well outside the range, then I think we'd have to give it a good thought. But as Mike said, we're trending better, ahead does not mean we're exceeding the high end of the range at this point in time based on our internal forecast.

Next question, John Kim with BMO Capital Markets.

I don't think anyone's asked it yet, so I'll give it a shot. Your Attachment 8(E), you no longer provide the market detail on new and renewal spreads. I was just wondering why you decreased that disclosure. I found it very helpful in the past.

John. That's part of our annual review that we do with the disclosure committee. They go through and look at best practices throughout the broader REIT space, but also adjust within the multifamily peer group. When we looked at what others did around disclosure and the blends, we found that some do regional, some just do portfolio, but we're definitely an outlier with the level of detail that we provided on 20 different markets. When we looked at that and the fact that some of these markets may only have 1,000 units in them, when you look at L.A. or Monterey Peninsula, at Richmond and Austin, those are three or four assets. A lot of investors and analysts utilize us as a read-through to some of the other portfolios that are out there, be it Coastal or Sunbelt. To the extent that you only have 1,000 units in the market, you can get more volatility off of a couple of assets. It’s probably not fair for a REIT to do, carry on to others. So we felt that regional, still provided everybody across those six or so regions, the amount of detail that they needed to understand what was going on within our portfolio and potentially regionally for other portfolios. We did want to remove the detail on individual markets, which Mike can still speak to, but I just wanted to pull it back a little bit.

Okay. Got it. Joe, you also mentioned on the DCP, the watch list remains at $50 million over three investments. It didn't move despite the favorable resolution of 1,300 Fairmount. Can I ask what investment got added to the watch list and what's the likelihood of consolidating when these assets are among these three investments?

Yes. I'd say it's no change to the watch list. There's a total of four assets on that watch list. It's that Philadelphia DCP that we just went through the successful refinancing for, plus the three others that were still in their last quarter. So four in total totaling $150 million. While we are very pleased with the 1,300 Fairmount transaction to see that refi get done, with no additional investment required from us or the equity partner, that buys two years plus a one-year extension to focus on operations there. Get the NOI trajectory up, get into a potential of a different capital markets environment and work through a lot of the supply that's in that submarket right now. So it's kind of a live to fight another day situation. So far, we’re really pleased with the leasing trends in the last 30 to 60 days. We're seeing that occupancy number starting to pick up from the high 70s into the mid-80s. The three others are roughly $50 million across three investments. No change there; it's just simply that the NOI yields or the debt yields on those are in the 6% to 7% range. We'd like to see those in the high-single digits as the rest of our portfolio is. Those four deals have the confluence of the three major risks that are out there. They had delays or cost overruns due to COVID because they are older vintages. They had challenging submarkets, which pushed down rents and the cash flow stream. With this and the rising interest rates, those are the assets that we’re keeping on the watch list. The rest of the portfolio consists of newer vintages from 2021 and 2022 with no significant risk.

Next question, Adam Kramer with Morgan Stanley.

Just wanted to ask maybe a little bit more of a high level, maybe theoretical conceptual question. You talked a little bit about the kind of robust job growth we've had so far this year, and I think it's something to certainly focus on when it comes to apartment demand. Maybe just walk us through, is there any kind of — I don't know if it's a rule of thumb or a way that you guys think about for x number of new jobs created. How many apartment renters are created or what that does in terms of quantifying apartment demand for you?

Yes, it's good because we kind of took a look at that as we step back. If you remember, when we put together our initial guidance, we put together our top-down perspective as well as the bottom-up budgeting process that we always do. Our assumptions were built on multiple factors, including GDP, wages, and job growth, all being low-single digits based off consensus. We had a decline in homeownership rate and then the higher supply number that we knew and expected. The general rule of thumb is that for the two biggest drivers of that number, wages and jobs, about 1% in combination relates to about a 1% increase in rents. The only changes to our forecast at this point are coming from the macro perspective. Supply, homeownership, GDP, all trending as we expected. It's really been jobs and wages that are coming in about 1% or so better. That percent better would translate into potentially 1% better rents over this year. If that holds, that's the consensus, but it can change. That's a lot of why you're seeing some of the performance that Mike talked about coming in better than we expected. It's been a much better backdrop in terms of the demand environment to date.

Great. That's really helpful. Maybe just one a little bit more on the ground, if you will. You talked about it a little bit earlier, but just, I think you guys were really kind of present and clear with the narrative last fall post-Labor Day. It's kind of what happened with the 10-year at that time and kind of what that meant for concession usage on the ground. Maybe taking about the 10-year is today, maybe not quite where it peaked out, but certainly could be higher than it has been in the last number of months. Maybe just walk us through, are you seeing kind of elevated level of concessions again, are you seeing developers maybe change their behavior given where the 10-year is relative to 2, 3, 4 months ago?

Adam, I'll kick it off and kick it over to Joe. I'll tell you what we're seeing on the ground, and as you can see it in our numbers, concessions have been coming down. This is due in large part to the fact that a lot of these deliveries are coming at a time where you also have demand picking up. That’s the big difference between what we experienced back in Q3 of last year. You had a lot of deliveries at a time when demand was starting to go the other way. There’s still more supply to come, so we're, again, cautiously optimistic of where this is headed. But from what we can see on the ground today, concessions have come down a little better.

This is Toomey. I'd probably just add a little bit more to it. In the developer's mindset, he's looking to add this rollover loan in what terms you can get in proceeds. In last year’s third quarter, we faced falling rates, slow traffic, 50 basis point spike in your refi, and your proceeds came off anywhere from 10% to 20%. The developer gets squeezed from every angle, and you just drop rates to try to fill up to get some level of cash flow because what’s probably your most stressful point isn’t necessarily the rate. It’s the proceeds number. On a debt service coverage ratio, that squeeze means your check to rebalance your loan, if it’s $100 million and it went from $10 million to $20 million, you don’t have extra $20 million in your pocket. You hit the panic button and try to respond that way. Can that happen again? Unlikely, but it can. We want to be prudent and see how that emerges. Anyone that can figure where the 10-year Treasury is headed, please call me, because it's a lot easier than buying lottery tickets.

Next question, Alexander Goldfarb with Piper Sandler.

Two questions. First, just looking at New York with the recent rent law changes. One, do you see any DCP opportunities for you to help finance third-party office to residential conversions? And then two, with the new laws, do you see any buildings where they're pre-2009 or you don't see a sightline to exceeding the luxury rents to escape good cause that you would look to prune?

Alex, this is Andrew. I'll answer the first question and then hand it over to Chris for the second. Regarding DCP opportunities, we are always willing to consider any transactions available in the market. So far, we haven't encountered anything, but we assess each opportunity on its own merits. If it's the right deal, we will proceed. Currently, we are not working on anything, but that does not limit our possibilities.

Yes, Alex, it's Chris. Before I dive into New York rent control, let me first step back and talk to the big picture a little bit more on the regulatory side. Many of our state legislative sessions have convened for the year while we continue to see bill signings and others that impact our business at the margin. This was the second year in a row where major legislation, like extremely restricted rent control, could negatively impact our business in a significant way, was largely defeated in most of the areas we operate. Obviously, a good trend for the industry, trend we hope continues in the year ahead. Regarding New York rent control, you talked about pre-2009 buildings; it seems like it will be business as usual for us right now. We've lived with similar restrictions in California and Oregon for a number of years now, and we’ve continued to generate good growth and good returns in those areas. We don't see it being much different moving forward in New York. Only in very rare years, I would say, is market rent growth likely to be above CPI plus 5 or a cap of 10. There's always the risk of a slippery slope, right? The CPI plus 5 becoming more restrictive over time. It's something we will continue to monitor. We've had concerns when 1482 was passed in California, and those concerns have not manifested today. All in all, including New York, we feel relatively okay about the regulatory environment right now.

Okay. And then the second question is, you guys have spoken about a pretty strong operating environment echoing your peers. It's interesting because on the office front, there's still a sense of corporates outside of maybe Midtown Manhattan being hesitant to lease or to take space. What are your property managers seeing that is driving the demand? Is it really just a lot of small businesses hiring, and there's a disconnect? Or are they seeing a lot of corporate jobs that are coming in to rent — employees renting apartments, and therefore, that's you guys indicating a sign that the corporates are going to return in a growth mode? I just want to understand the disconnect between what the apartments and you guys are saying about healthier-than-expected demand versus some of the comments from other REIT sectors.

Alex, it's Mike. Funny enough, I spent last week with our teams out there in New York and asked them that same question. A lot of this comes back to lifestyle. They're still saying that people are coming back to the market. They just want to live in Manhattan. They want to feel the experience of being there. Expectations are that they've somewhat plateaued in terms of people returning to the office, but there's still room for that to continue to grow. If and when that happens, that will only help demand even more. We're continuing to see occupancy of almost 98%, and our blends are back up in that 4% range. Very strong demand in that market. We expect that to continue throughout the summer months just given the fact that there's not a lot of supply to speak to in the city. You definitely have more in, call it, Brooklyn and Long Island City, places like that. As long as they don't pull to 2- to 3-month concessions, that's not going to pull people out of the city. We feel really good about New York today.

Right. But Mike, across all markets that you guys are in, you're seeing a similar dynamic. It's just people wanting to live in the different markets, not necessarily meaningful job growth? I'm just trying to understand the difference.

Yes, Alex, I think that's a fair point. I don't think every market is created equal. I think as an example, I talked a little bit about San Francisco earlier. That market is still getting cleaned up. Once they clean that up a little bit more, people will want to live down there, and it will be a similar dynamic to what we're facing in a place like New York. Every market is created a little bit different. Overall, I'd say those sentiments are the same across the board.

I'd say too, Alex, just as it relates to the demand. We talked about jobs and wages both coming in ahead of expectations. The consensus is well over 1 million jobs at this point in time. While we focus a lot on the multifamily supply picture as we should, keep in mind that the lion's share housing is on the single-family side, which has seen minimal increase on a year-over-year supply basis at around 1.1 million units. You’re also seeing from an existing supply perspective, really no homes being sold, back to kind of GSE lows. You enter an environment where what's available for all those jobs that are being created and, therefore, new households that are being created. When you have the relative affordability component in multifamily where we are 60% less expensive than a single-family home, you can put an extra $35,000 a year in your pocket versus buying a home. That's pretty compelling. You're seeing renter shift gain more than their fair share of that demand that's been put out there into the market right now. That's a big driver of what we're seeing.

Next question, Linda Tsai with Jefferies.

In terms of April retention improving 400 basis points from a year ago, is this consistent across your portfolio? Or are there regional differences?

It's pretty consistent. Again, what we're seeing is a lot of these actions that are put in place from what we're doing with the customer experience project. Relatively consistent across the board. The only difference I would tell you is in a place like the Sunbelt. Historically, what we would have experienced is about 20% of our move-outs were leaving to buy a home. Today, that's closer to 10%. Significantly fewer people moving out to buy homes in places where it was historically more affordable. Other than that, a lot of this has to do with the actions that we're putting in place through our innovation.

And then in terms of automation, as you move forward, does it ever become apparent that automation is being relied upon too soon that efficacy falls short and impact service levels and then you have to recalibrate and move people back into seats? If so, how do you monitor and correct that?

Yes, Linda, that's a fair point. That's something we've experienced as we transition from Platform 1.0, where the intention was to go to that self-service model, and we reduced our headcount by about 40%. We have found that there are cases where you have to add bodies back that will drive value in the long term. We've been going through that over probably the last 12 months or so. We're still trying to find opportunities where we can run what we call the unmanned sites. Today, we're around 20% of the portfolio. We are adding back from the customer service type positions in the field to make sure that we're acting on all these items that we mentioned earlier as it relates to how you change that trajectory and retention. There are cases where you can find opportunities to drive value, and sometimes if you have to add bodies back.

Next question is with Baird.

Have your views changed for the Sunbelt and the timing to absorb all of the new supply, given the strong absorption trends you've been seeing?

I don't think, as we kind of look through it, obviously, we go through the peak delivery cycle here over the next couple of quarters. Q2 and Q3 is kind of your peak, but it's not a dramatic drop-off. It's going to take a while to work through the lease-up of those deliveries. Even into 2025, when you look at overall deliveries coming that year, it's going to be a pretty normal year relative to long-term averages with the Coast actually coming in a little bit lower as they start to see it drop off a little quicker in terms of new starts and permits activity. The Sunbelt still stays a little elevated as you go into '25. Late '25 is when you really get the benefit of that drop-off that we saw in Q4 '23, with a significant reduction in new starts and permits causing a decline in supply. Next year is probably still a little elevated in the Sunbelt, but it has the potential to be a pretty strong year given the lack of housing available.

I would like to turn the floor over to Tom Toomey for closing remarks.

Thank you, operator, and thanks to all of you for your interest and support of UDR. We look forward to seeing many of you at the Wells Fargo conference next week and NAREIT in June. With that, we'll close this today. We're always available to take your follow-up calls. Take care.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.