On Thursday, UDR (NYSE:UDR) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
UDR reported strategic asset sales and share repurchases aiming to capitalize on the gap between public and private market valuations.
The company announced a transition to monthly dividends, making it the first residential REIT to do so, aiming to attract high net worth investors.
First quarter results were in line with expectations, with occupancy at 97% and same-store revenue growth of 90 basis points.
Strong performance was noted in San Francisco and New York markets, with significant lease rate growth and high occupancy.
Full-year 2026 guidance remains unchanged with anticipated blended lease rate growth of 1.5% to 2%.
Full Transcript
OPERATOR
Focus on taking advantage of the rare and likely fleeting opportunity to arbitrage a sizable gap in public and private market valuations. A data driven and collaborative process led us to the decision to sell four assets. Proceeds were utilized to repurchase our shares and acquire an asset we gained access to through our debt and preferred equity program. Dave will further discuss our capital allocation activities in his remarks. Staying on the topic, we continually evaluate opportunities to diversify our sources of capital. Our thoughtful and thorough research focused on investors of the future pointed to an opportunity to expand our reach to grow a segment of capital, namely high net worth investors, bank, family, office and institutional products who collectively value frequent cash distributions. As a result, yesterday we announced the transition to a monthly dividend. UDR is the first residential REIT to do so. The stability and growth of the apartment industry coupled with UDR's operating and capital allocation acumen has led to 53 straight years of dividends totaling nearly $9 billion. We expect the relatability and transparency of the apartment industry and our robust track record to appeal to these investors who value frequent cash distributions. Stepping back, we feel good about 2026 thus far, but we have only completed the first four months of the year. Accordingly, we are maintaining our full year 2026 same store and earnings guidance which we'll reassess next quarter. From a big picture perspective, I remain optimistic about the long term growth prospects of udr. The fundamental outlook for the apartment industry is encouraging with resilient demand, a shrinking future multifamily supply pipeline and attractive relative affordability apartments versus other forms of housing, our culture, strategy and proven team position UDR well to take advantage of these fundamental strengths. Finally, I'd like to take a moment to recognize Katie Kapnaugh and Diane Moorefield who have decided not to seek reelection to our board. Katie and Diane have been respected voices in our boardroom and we are thankful for their stewardship and contribution to UDR With that, I'll turn the call over to Mike.
Mike (Chief Operating Officer)
Thanks Dom. Today I'll cover our first quarter, same store results and recent operating trends as well as strategic positioning. 2026 is unfolding as we anticipated and first quarter results were in line with our expectations. We leveraged real time data to focus on total revenue and cash flow growth. In particular, we strategically started the year in a position of operating strength with occupancy of 97% which enabled us to tactically adjust our revenue drivers to deliver year over year. Same store revenue growth of positive 90 basis points specific to the quarter, blended lease rate growth of 1.6% occupancy in the mid 96% range and mid single digit innovation income growth all came in as expected. Results were bolstered by resident retention that was 300 basis points higher than the prior year. This enabled us to achieve renewal rate growth of 5.2% which was 70 basis points higher than a year ago and nearly twice as high as the fourth quarter of 2025. This strength is representative of our focus on attracting high quality residents who value the UDR living experience. Rent income levels of our new residents are stronger than the long term average, which suggests an encouraging outlook for renewal growth going forward. Shifting to Expenses Same store expense growth of 4.4% was elevated due to the impact of winter storms across our portfolio. If normalizing for the approximately $1.4 million of incremental expenses from items such as snow removal and higher utility costs, our same store expense growth would have been approximately 100 basis points better or just below the midpoint of our full year expense Guidance range As we start the second quarter, our revenue drivers are trending as anticipated. We continue to expect blended lease rate growth for the second quarter will be between 1.5% and 2% with occupancy in the mid 96% range. Our regional leaders in the first quarter continue to perform well thus far in the second quarter. On the West Coast, San Francisco is a standout market with the strongest revenue growth across our portfolio driven by blended lease rate growth of approximately 10% and occupancy in the high 97% range. The east coast market of New York is also delivering strong revenue growth with blended lease rate growth of approximately 7% and occupancy above 98%. Dallas continues to show best momentum among our Sunbelt markets, occupancy is approaching 97% and blended lease rate growth is now positive after improving by 570 basis points since the fourth quarter. In all cases, we have enhanced revenue growth due to our innovation income which includes services and amenities desired by our residents and such as community wide WI fi and package lockers. A glimpse at our dashboard's forward indicators reveal continued strength in San Francisco and New York as well as positive momentum in Philadelphia and Southern California, particularly Orange County. Our overweight exposure to these markets uniquely position us to capture upside should these trends continue. The operations team continues to impress me with their data driven approach to set strategies while remaining agile to adjust as market conditions warrant. Two current examples are top of mind. First, having managed our lease cadence to place a higher percentage of expirations in the second and third quarter of 2026, we are well positioned for the spring and summer. Second, our customer experience project continues to result in sector high resident retention which is tracking ahead of plan thus far in 2026. This allows for operating expense savings due to lower turnover, higher revenue growth thanks to a blended lease rate growth more heavily weighted towards renewals which combined results in better cash flow. We will continue to leverage real time data as we focus on total revenue and cash flow growth. As a reminder, Our full year 2026 guidance assumes first half blended lease rate growth will be the same as the second half at 1.5 to 2%. Said differently, we do not need blended lease rate growth to accelerate throughout the year in order to achieve our revenue growth guidance. To conclude, we delivered first quarter results that were largely in line with expectations and the second quarter is progressing according to plan. We continue to innovate, improve resident satisfaction and therefore retention which collectively improves our operating margin. I thank our teams across the country for your hard work, acting with purpose and creating a highly valuable UDR living experience for our residents. I will now turn over the call to Dave.
Dave (Chief Financial Officer)
Thank you Mike. The topics I will cover today include our first quarter results and second quarter guidance, recent transactions and capital markets activity and a balance sheet and liquidity Updates to begin first quarter FFO as adjusted per share of $0.62 achieved the midpoint of our guidance range. The two penny sequential FFOA per share decline versus the fourth quarter of 2025 was driven by the following A three penny decrease in Net Operating Income primarily due to higher higher sequential expenses attributable to both normal seasonal trends as well as the impact of unusual weather that Mike discussed. This was partially offset by a one penny benefit from lower corporate expenses and General and Administrative and due to timing, capital markets and transaction activity was neutral to earnings in the quarter as the benefit from share repurchases was offset by by a lower debt and preferred equity investment balance. Looking ahead, our second quarter FFOA per share guidance range is $0.62 to $0.64. The 63 cent midpoint represents an approximately 2% sequential increase that is driven by higher sequential Net Operating Income and accretion from share repurchases funded by dispositions. Next on transactions, our capital allocation heat map continues to guide our strategy. We then apply a data driven and collaborative process to drive our execution. A key theme lately is the public versus private market arbitrage opportunity presented by an unusually wide disconnect in apartment asset pricing. This allows us to sell lower growth assets for 100 cents on the dollar on Main street and buy back our shares which represent a superior growth portfolio for 75 to 80 cents on the dollar on Wall Street. Thus far in 2026, we have executed the following transactional and capital markets activity. First, we completed the sales of 4 apartment communities located in Baltimore, Denver, Seattle and Tampa for gross proceeds of $362 million. Our approach to selecting assets for disposition is not centered around trimming exposure to specific markets or urban and suburban locales. Rather, we study asset level characteristics such as the outlook for rent growth per our proprietary analytical tools, capex requirements and potential operational upside. This group of disposition assets screens inferior on these metrics relative to our retained portfolio. Therefore, utilizing proceeds from these asset sales is accretive on day one, but increasingly so in the future due to the expected differential in forward cash flow growth between the sold properties in our in place portfolio. Second, we received proceeds of approximately $139 million from the successful and full repayment of two debt and preferred equity investments. Third, we repurchased $150 million of shares bringing total repurchase activity since September to to $268 million. Fourth, our debt and preferred equity program allowed us to gain access to two communities in Portland, Oregon through the same partner. The first is a 232 apartment home community acquired in April. The second acquisition will follow in the coming months. The assessment of these opportunities is similar to the disposition process described earlier. Our proprietary analytics tool suggests outsized rent growth for the market in these assets in the coming years. Their capex needs are low and the operating upside potential on the UDR platform is high. Another benefit is that our exposure to the Portland market is scaled to a more efficient level. We anticipate a high 5% stabilized yield on these communities, consistent with the expectations that we laid out on our last earnings call. The size of our debt and preferred equity portfolio has declined due to successful repayments, the opportunity to gain control of the Portland assets, and our view that share repurchases offer superior risk adjusted returns versus new debt and preferred equity deployment. As a final note on investment activity, thanks to the excellent work of our development team, I'm pleased to share that our ground up development community in Riverside, California known as 3099 Iowa is progressing ahead of schedule. We now expect initial occupancy to occur in the fourth quarter of 2026, which is earlier than our initial expectation of the first quarter of 2027. The project is also coming in under original budget. Overall, our Updated full year 2026 Capital sources and uses guidance reflects the activity we have completed year to date. We have additional disposition assets in the market and we remain disciplined sellers. We will update you on incremental dispositions and uses of that capital as the year progresses. Finally, our investment grade balance sheet remains highly liquid and fully capable of funding our capital needs. We have more than $1 billion of liquidity in all. It has been a highly productive start to 2026. We continue to execute on our strategic priorities with an emphasis on data driven decisions that drive long term cash flow per share accretion. With that, we will open it up to Q and A operator.
OPERATOR
We will now be conducting a question and answer session. We ask that you please limit yourself to one question. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Eric Wolf with Citibank.
Eric Wolf (Equity Analyst)
Please proceed with your question. Hey, thanks for taking my question. In terms of occupancy, I think you said that you expect mid 96% range in the second quarter, I guess. Would you expect to drive that higher in the back half of the year? Or have you adjusted your full year occupancy targets a bit based on market conditions? Just curious what the strategy looks like for the next three to six months.
Mike (Chief Operating Officer)
Hey Eric, it's Mike. Yeah, the way we typically do it is we let occupancy come down in the second and third quarter when we have more demand, more traffic coming through the door. And so we get a bit more aggressive on our rents at that period of time. And typically what you can expect from us, especially what you're saying with the fourth quarter, drive it up a little bit higher. So if we're running call it 96.5right now, we expect to continue to do that through about July, August time frame and then we may inch it up just a little bit, but maybe 10 or 20basis points. Nothing necessarily significant.
OPERATOR
Our next question is from Jamie Feldman with Wells Fargo.
Jamie Feldman (Equity Analyst)
Please proceed with your question. Great. Thank you for taking the question. I'm sorry if I missed it. Did you guys talk about April trends so far? And if not, can you talk about your new renewal and blended rate growth and any markets that stand out in terms of acceleration, deceleration or versus your outlook?
Mike (Chief Operating Officer)
Yeah, Jamie, great question. There's a few of them there. So let me back up a little bit because I do think it's important to give kind of the whole picture here as it relates to blends though. What I would tell you is we are incredibly happy with the start to the year. The fact that we were able to push our blends about 370 basis points up from the fourth quarter to 1.6%,, very positive trend there and I'm happy to report that it is the highest growth across the peer group on both a relative and an absolute basis. Also point out, given our diversified portfolio, this is notable specific to April, I'll tell you more importantly the second quarter, the strength experienced during the first quarter has continued in that 1.6%, range and we are still on track with that 1.5 to 2% blend that we expect in the first half of this year. A few observations on data is I'd say number one, our coastal regions, which make up about 75% of our NOI, continue to experience the highest growth, about 3.1% blends in April, which is an acceleration from 2.8%, during the first quarter. Specific to the Sunbelt, those markets experienced the greatest positive momentum from 4Q to 1Q. But we have seen some of those markets retreat slightly over the past 30 days, going from about negative 1.5%, in the first quarter to negative 2.5% in April. All in all, what I would say is we feel good about how we started the year. Our strategy and focus on total revenue and cash flow is playing out as expected and we're really diving into the lifetime value of our resident continuing to drive low turnover and higher renewal growth. Specific to the question that you had regarding what we're sending out and what renewals look like, I would tell you again, just to reiterate, our first quarter was almost double what we achieved in the fourth quarter at 5.2%, a very healthy number through July. At this point we're still sending out between five to five and a half percent on renewals and my expectation is we're going to sign within 100bps of that. So all in all we're going to continue to lean into our customer experience project, drive down turnover even further, as well as try to test the market on both new lease growth and renewal growth.
OPERATOR
Our next question is from Steve Saqua with Evercore isi.
Steve Saqua (Equity Analyst)
Please proceed with your question. Yeah, thanks. Good morning. Could you maybe just talk about the debt and preferred book and you know what maybe future payoffs look like? I think maybe some of these happened a little bit sooner.
Dave (Chief Financial Officer)
Just trying to think through the cadence of that and what could or may not happen maybe over the course of 26, 27, 28. Thanks.
OPERATOR
Hey Steve, it's Dave. Thanks for the question. So on the DPE book, as you know, this is a business that we've been in for more than a decade. It's one of several ways that we deploy capital and it was established to allow us to utilize our expertise to earn income and or gain access to assets that we like. This quarter we're pleased to report, including today, that there are two assets in Portland that we're excited about gaining access to. That's a market that has moved up on the leaderboard internally from a predictive analytics tool perspective and with the loans coming due with one operator relationship in that market. We looked at these and we considered the following criteria. Operational upside and Mike and team are excited about the meat on the bone there, the rent growth outlook through our proprietary tool and relatively low capex given the fact that they're new assets. This allows us to scale up in that market as it relates to the book going forward. That's one of the ways that it is on the decline this year, which is what we expressed last quarter. We have the Portland opportunity, we have successful paybacks that we reported for the first quarter. And then lastly, the other consideration is that the market is frankly just more competitive and we have remained disciplined in our underwriting. And when we think about the heat map and the uses of capital, we gravitate towards the stock given the fact that it's temporarily and unusually attractively valued. So directionally for you, if I was going to help you out with your modeling here, looking at the DPE balance in the high $300 million range at the end of the first quarter, I'd point you towards $300 million or so at the end of the year.
Jana Galen (Equity Analyst)
Our next question is from Jana Galen with Bank of America. Please proceed with your question. Thank you and congrats on the strong start to the year. Mike, I was wondering if you could share any trends you're seeing this spring between A versus B properties or urban versus suburban and then maybe bigger picture. Is this not the right way we should think about the portfolio given kind of this new, not new, but this micro market focus and analytics that your team has developed.
Mike (Chief Operating Officer)
No, it's a great question. Definitely one way that we look at it, but it's sometimes hard to explain just given the footprint we have. I think it's easier to talk about some of the regions and then dive into some of the markets and what we're experiencing there. So maybe to back up just a little bit what we're seeing today, and it's not going to surprise you, is the west coast continuing to do better than, say, the east coast followed by the Sunbelt? I'd tell you all of them are on track. Maybe a few markets doing a little bit better than we expected, as I mentioned in the prepared remarks, specifically San Francisco, New York and Dallas for us. But as it relates to just kind of a B urban suburban, it does vary by market. I tell you, for us, San Francisco is a good example where urban A is doing better because you have more supply that's impacting us as you move down the peninsula. But all in all, that entire MSA is doing well. And then you have a place like Boston as an example, we're seeing a little bit more of an impact downtown urban A and less of an impact at our suburban B assets. So it's a little bit market by market specific on the AB urban suburban piece of the equation. But again, we do have winners in each of our regions today, and we're off to a pretty good start.
OPERATOR
Our next question is from Adam Kramer with Morgan Stanley.
Adam Kramer (Equity Analyst)
Please proceed with your question. Thanks for the time, guys. Just wondering here recognizing the dispositions that were done so far this year, I think for assets, just sort of wondering. We've heard from some of your peers about risk of shrinking the enterprise too much from dispositions. Wondering how you guys think about that, if that's the right framework, if it's more market specific, if there's other drivers of how you think about how many assets you can sell and I guess sort of in what period and what period of time, presumably to generate proceeds to use for the buybacks that you've talked about.
Dave (Chief Financial Officer)
Adam, this is Dave. I'll go ahead and start off with the answer here. So first of all, our disposition effort is centered around the playbook that has been in place since September. This is a point in time where there's an unusually wide disconnect between public and private market valuations. I've had the opportunity to follow the space over many years and have seen this a few times before. And my experience is that they prove to be fleeting. And so we are excited about the opportunity to recognize that sell assets and then buy back stock in a manner that is accretive, while also improving the quality of the portfolio. So we can speak more about the dispositions that occurred in the quarter. But your question is more so around the go forward. What I would tell you is that the playbook will remain the same. As long as the stock is as attractively valued as it is, we have more assets on the market and we will remain disciplined sellers and utilize proceeds where we can to continue to buy back the stock.
OPERATOR
Our next question is from Michael Goldsmith with ubs.
Michael Goldsmith
Please proceed with your question. Hi. Thanks. This is Amy. I'm with Michael. Could you quantify approximately how much impact the portfolio lease realignment strategy may have on same store revenue as we move forward? And I assume we wouldn't see any impact on blends, but let me know if you'd expect any impact there as well.
Mike (Chief Operating Officer)
Yeah, I think for us, what you could see where I would point to and I mentioned it and when I covered the April answer, the fact that we had blends of 1.6%, with a diversified portfolio, which was the highest amongst the peer group, I think that points to the strength. And so when we came out of fourth quarter just to back up a little bit and talk strategy, our intention was to drive occupancy in that 97 to 972 range with the intention of driving our rent higher for us. I can't speak specifically for Everybody else, but every 1% of blends that we're able to achieve, that's about $7 million to the bottom line over the course of 12 months. And so we think that we have a good start on the peers in the first quarter. And our intention is to continue to find those opportunities, it's a property by property and sometimes unit by unit level basis to find those opportunities to drive our blends going forward. And so our expectations right now we're on track, but more to come and I think we'll know a lot more when we get together at nareit.
OPERATOR
Our next question is from Julian Bluein with Goldman Sachs.
Julian Bluein (Equity Analyst)
Please proceed with your question. Yeah, thank you. Thank you for taking my question. I'm just wondering, is there any competitive disadvantage to you if consolidation among large peers occurs, occurs in some of your markets and suddenly there being a player with greater scale, sort of give them sort of a data advantage in terms of informing their decisions in those markets? Is that piece meaningful at all? And I guess separately, do you worry at all about a transaction potentially attracting regulatory or political scrutiny right now?
Toomey
You know, Julian, this is Toomey. I'll take a couple parts of that question and ask the group to weigh in as needed with respect to the regulatory environment on potential transactions. M&A. I won't comment. I can't speculate where the government is or where the government's going. And frankly if you can get that crystal ball bud, we can do really well in life. But I don't have that one. With respect to kind of the industry, I'd say this. It's a very fragmented industry. There have been dominant players. I've been at it over 35 years and there have been dominant players. And yet everyone finds their space and their way to create value. I tend to think that we have uncovered ours over the years and it's not requiring size to grow or create, if you will. I mean, we kind of look at it and say excellence is the important thing to all successful companies and size is sometimes an advantage, sometimes not. And excellence, particularly in operations, in capital allocation and innovation. And so I think we're focused on that path. Having large dominating companies in some other spaces has worked, but they generally ultimately relate to do they control the customer? In the case of, you look, Simon Mall company, they have a very good stranglehold on malls across the globe and are able to influence the customer or prologis where they have been able to influence logistics across the globe. The apartment industry is awful fragmented for that and I don't see that as being an achievable element where any of us are going to be able to control the customer segmentation, slash traffic, etc. Etc. So I would always welcome input how we can get better. We'll keep focusing on that, but I think you have a sense of where our head is.
OPERATOR
Our next question is from John Kim with BMO Capital Markets.
John Kim (Equity Analyst)
Please proceed with your question. I was going to ask that last question, but maybe I'll tie that into something else. But if you were a bigger company, would that attract a different shareholder base? And I wanted to tie that into the monthly dividend. You know, from our perspective, it looks like a way to attract retail shareholders. Maybe a bit of a gimmick. I'm sure that's not the way that you look at it, but maybe if you could just comment on your decision to go to monthly dividend route.
Toomey
Yeah, John, this is Toomey again. I'll ask Team weigh in. I'm really excited about the monthly dividend. Why? Because this is a topic that came up on our radar almost two years ago when we were looking at diversifying our capital sources. And that includes diversifying our shareholder base that would end up being drawn to our stock. And really what it really kicked into was how much is tied up in high net worth families, family office business. And also as we started talking more and more with Wall street and large capital allocators, they were coming together with products and bring to the market. A monthly dividend became a selling point. And so for us, we see it as kind of shareholder of the future expansion opportunity. People are looking at what is the stream durability and record of your delivery of that cash flow. And monthly is winning out over quarterly, over annually. So that was an important element in the decision. And then it was as we got farther into the research, looking at the depth of it. What was striking to me was our Track record of 53 years and nearly $9 billion in dividends paid out. So we have the record, we have the business model that furnishes that cash flow. I think everybody knows what the apartment industry is like across America and can relate to it. So it seems heck, let's give it a try. And I'm looking forward to the receptiveness of it. We think it'll be very positive and that's why we've done it. And I think it's a net. Net positive for us.
Dave (Chief Financial Officer)
I would just add. This is. Dave, I want to just add one angle here. The monthly dividend switch is part of a broader push on our behalf to appeal to retail shareholders. And what they'll see from us over time is a multifaceted game plan around that with a lot of outreach, adjustments to our marketing, et cetera. And we're committed to sticking to that. So this is one maneuver that gets their attention. But you, and especially those retail investors will see more from us over time, and we're optimistic. The apartment business is very relatable to that cohort. It's something that resonates with them in terms of the cash flow of the residents through us and then out to shareholders. So we look forward to. To seeing this play out.
Toomey
John, was there another part to your question?
John Kim (Equity Analyst)
Yeah, I mean, if you have a large multifamily company that's doubling in size, does that attract a different shareholder base? Just given Tommy alluded to prologis, I think you might have mentioned Mall Tower as well, or Simon. There's other large companies that may attract more general equity investors, and I'm wondering if that's something that's entered your mindset at all.
Toomey
My guess is looking at it over time, certainly you get re indexed and you get a larger aspect of that. I think that's a net positive. Do you get other investors? I think active money is still trying to beat the index, and so they're going to move their money around to where they think the greatest growth and opportunities are. It's hard to grow a battleship as much as it is a light cruiser,. So I think it just plays out where there's enough capital out there. If you're doing a good job, you'll find match it up and you'll grow your company accretively. And I think that's the critical element that we all have to continue to focus on is growing accretively is critical, not size.
OPERATOR
Our next question is from Rich Anderson with Kantor Fitzgerald.
Rich Anderson
Please proceed with your question. Thanks. Good morning. By the way, the Anderson family office is thrilled with the monthly dividend. The question I have is on turnover. And when I started covering this space, annual turnover was 65, 70%. You guys are at 29% as of the first quarter. And I probably asked a question like I'm asking again, maybe differently, but is there an efficient frontier to the point where you could just have too low of turnover and maybe people are just not moving? And that might help explain not just for udr, but generally why you're having such a tough time sort of digging out of the hole of negative new lease rate growth. So I'm just curious if you think there's any sort of logic behind this idea that maybe turnover has just gotten too low and you're not at the efficient frontier from a rent growth perspective. So any comment on that, if you could.
Tom Toomey (Chairman and CEO)
Yeah, Rich. And I'm glad to hear the Rich Anderson family office is eager about udr. Here's a couple things to think about and what I'd characterize is you're right, turnover used to be a high number and you were looking at your business from the number of days occupied, who was paying rent, et cetera, et cetera. I think with the new data sets that we're seeing and when we start looking at our rent roll, what it turns out to be is high quality residents over longer periods of time generate more cash flow than a high turn, resetting the market, et cetera. So if you're in the cash flow business, you actually want low turnover, taking rent increases. And then you ask yourself, what is the impact on your long term business? Well, you're going to have greater cash flow in our business right now. 60,000 apartment homes. The truth is, annually we only need to find 20,000 residents that are new. And I know everyone's focused on new rate. The question really is, what's the capture rate of your renewals and what's the durability of that cash flow? And so now we're starting to endeavor into how do we move the quality of our Rent roll up. Because ultimately real estate is valued by virtue of what's the underlying quality of cash flow and the leasee of that and can we make a better quality rental available? So I kind of covered a lot of different points there. Maybe Mike can clean me up a little bit.
Mike (Chief Operating Officer)
Yeah, a few points I would add. I think first and foremost, what's interesting you mentioned it, the way we think about it is called 2012, 2019 turnover average about 51%. And so we've reduced that by about 1200 basis points. And really since we started getting into the customer experience project back in 2023, we've been able to improve turnover by about 800 basis points, which turns out to be about 400 basis points better than the peer average. So we've made a lot of strides. I can tell you. We're still learning a ton every day. And what's interesting, when we went into the year, our expectation around turnover was it was probably going to be roughly flat on a year over year basis. Turns out we're about 300 basis points better on a year over year basis. And where we've been leaning into as of late, and you can see it in our renewal growth is where can we start pivoting and trying to drive that number as well. And so happy to report that 5.2% growth in the first quarter is very strong. So overall, we've come a long ways, we're still learning, we still think there's opportunity on this front. And to Tom's point, there's a whole other iteration that's to come, and that's around how we think about pricing, how we think about marketing, and how we truly drive that cash flow even higher.
Tom Toomey (Chairman and CEO)
Mike, thanks for helping me.
OPERATOR
Our next question is from Alexander Goldfarb with Piper Sandler.
Alexander Goldfarb (Equity Analyst)
Please proceed with your question. Hey, good morning out there, Tom. Certainly appreciate the focus and emphasis on the dividend. It's a big part of total return. But as you think about going after the retail crowd or the high net worth crowd, a few things come to mind. One is it seems like a lot of these private REITs or other similar products have higher dividend yields. They go after maybe more, I don't want to say lower quality, but sort of more generic assets that have higher current income. The other is sales load, you know, commissions that private REITs pay. Clearly you're not doing that. So how do you think about getting your dividend? You know, apartment REITs tend to be pretty, you know, pretty low dividend yields. How do you think about getting that competitive and also competing. You guys aren't paying commission. So how do you sort of think about breaking into that high net worth and that whole distribution channel that the private REITs and those other structured products seem to enjoy to themselves?
Dave (Chief Financial Officer)
Alex, it's Dave, great topic. Something that we've discussed internally extensively as we worked on this project. And Tom did say it's something that the team has been working on for some time and put a lot of thought into. Really it's an opportunity for us in the broader REIT space to educate the marketplace on the virtues of REIT investing. And I thought that you covered it well, Alex. It's about the total return. The dividend yield is a part of that. And unfortunately, in some of these other products, sizable fees can eat into that. So it's an opportunity in front of us and we already have a nice schedule of appearances and conversations set up that will put us well on our way towards executing on that. We know that there's other products out there that are marketed in certain ways, but. But we believe that the numbers speak for themselves and we look forward to educating that cohort on it.
Tom Toomey (Chairman and CEO)
Alex, this is Toomey. I'd just add you're right with respect to the fee and yield trade off. But One aspect that REITs have is liquidity and transparency, which a lot of these other products, when we've talked with investors, they're like waiting on the appraisal. They don't know when their window can open or close. Here you have a security that underlies it, that every day you understand what it's worth. It has liquidity, size and scope and you have transparency.
OPERATOR
Our next question is from Austin Worschmidt with Keybanc Capital Markets.
Austin Worschmidt (Equity Analyst)
Please proceed with your question. Thanks, Mike. I wanted to revisit your commentary around the Sunbelt lease rate growth moderating in April and was hoping you could provide some additional detail as to what's driving that softening. And if you think it's something temporary or seeing it persist into May and June. And was it also specific to any one or two markets or broad based.
Mike (Chief Operating Officer)
Yes, great question, Austin. I think for us, I mean, what we're experiencing right now is, I think, more of a blip, if you will, because we do still expect that we could see more of an inflection in the Sunbelt this year at some point. And that's built into how we looked at our guidance for the year. Right now, I would tell you it's a little bit more specific to say Florida than it is in Texas, as well as even Nashville, saw a little bit of a downtick, if you will. I think some of it has to do with market rents just not moving up as much as we would have expected over the last call, 30 to 45 days. And with that, you do have to negotiate a little bit more on your renewals. And so we were pretty aggressive with our renewals, as you could see with what we signed. I think we had to retreat a little bit in some of those Sunbelt markets. But my expectation is we're going to continue to work through the supply down there and we could see market rents start to move back up throughout the summer, and that could help us continue to try to drive those markets as we go forward.
OPERATOR
Our next question is from Handel Saint Just with Mizuho Securities.
Handel Saint Juste
Please proceed with your question. Hi, this is Mike on with Tandel at Mizuho. Our question is how does UDR assess the risk to their Boston portfolio from the Massachusetts proposed statewide rent control measure on the ballot this upcoming November? And can you just remind us, is UDR spending additional advocacy costs within the guide? And what cap rate unlevered IRR would a Boston apartment trade at today?
Chris
This is Chris. I can take the initial ones. You know, I don't think we're ready to handicap the risk yet. We're still very early in the process. As you probably know, we're actively engaged with local owner groups, including some of our large public peers, larger trade group partners, to oppose the measure in Boston right now. You know, and with regards to how that is proceeding, we'll provide updates as appropriate moving forward. There's just not really a great update to provide right now. Fundraising is happening. We have contributed. I can let Dave talk to that, or I'm happy to talk to the contribution part as well. That's probably in the neighborhood right now of around half a million dollars that we've given to the initiative. Most likely we will go higher over the next couple of quarters. I will stress, though, that this is nothing compared to what was spent in California on the ballot initiatives. Massachusetts, obviously a much smaller market. So we feel that from a cost perspective, from a funding perspective, it will be a relatively smaller fraction than what we saw in California as far as pricing. I can touch on that, sure. So it's hard to generalize across the market. But what I would tell you is this uncertainty has had an impact. We've seen less transaction volume. That makes it harder to decide for exactly where cap rates are. But our experience is directionally this uncertainty at this point in time has had an adverse impact on price.
Tom Toomey (Chairman and CEO)
This is Toomey, I just might add. It's one thing for us because we've talked and said is it a buying opportunity given the market's frozen? And I think you have to be careful about that. But I think with our team and our insight with respect to how this is progressing, I wouldn't take it off the map. It screens well some of the markets and our analytics on a long term basis and it might be a good albatross window, but we'll keep looking at it.
OPERATOR
If you'd like to ask a question, please press Star one on your telephone keypad. Our next question is from Alex Kim with Zelman and Associates.
Alex Kim
Please proceed with your question. Hey guys, thanks for taking my question. Wanted to focus a little bit on San Francisco, which you've highlighted as a standout market given some of the growing debate around AI, CapEx sustainability, tech headcount plateauing and some federal deregulatory risk to tech market dynamics. Just curious if there's a kind of read through that you've seen in terms of the recent macro noise in your leasing velocity or traffic and what's your stress case look like for the market?
Mike (Chief Operating Officer)
I guess this is Mike. I'll start if anybody else wants to jump in. I tell you right now what we're seeing is just continued strength. And I think when you talk about AI and the jobs and everything that could happen there, I think you have to think of a few other points. And so for us in San Francisco, what I'm looking at and how I think about the market is very low supply, not only today but also into the future. So we have that backdrop. We do see the return to office that's in effect right now. We're seeing more migration, people coming closer to the work. And so places like Soma and downtown definitely seen their fair share of traffic today. And that AI growth is more specific in that downtown Soma area as well. So we continue to see a lot of momentum, not only just on the traffic side but also on our market rents, which leads to renewal growth as well. In addition, that city is vibrant. We're seeing bars and restaurants start to open back up. We're seeing more retail return to that city and at the end of the day we have low rent to income ratios. And so there's a multitude of things that are playing as a positive in San Francisco. So our expectation is we're going to continue to see strength in that market for the foreseeable future.
OPERATOR
Our next question is from Mason Gail With Baird.
Mason Gail (Equity Analyst)
Please proceed with your question. Thanks for taking my question. Could you talk about how you are viewing potential development opportunities today and if you would look to start development on some of your land parcels in the near term.
Dave (Chief Financial Officer)
Hey, Mason, this is Dave. Thanks for the question. And as we noted in the opening, we're really pleased with the progress on the asset that we do have under development as it relates to the go forward. When we look at our land bank, we have a couple of existing sites that do fit comfortably in our strike zone and I'll describe that. First, they're adjacent to existing operating assets. So they're essentially expansions in sub markets that we do know well. Second, they're stick, bill or podium. And third, the incremental returns. The returns on incremental capital deployed through our lens would be above 6% if activated. So there is an opportunity to potentially activate these and deliver into a less competitive supply environment in 27 and 28. And if you were to see movement from us on that front, that's what would describe it.
OPERATOR
Our next question is from John Blowski with Green Street.
John Blowski
Please proceed with your question. Hey, thanks for the time. I apologize if this has been asked. I joined the call late. Dave, could you share the cap rate range of cap rates on the four dispositions in the quarter as well as the, I guess the effective cap rate on the Portland, Oregon asset you consolidated?
Dave (Chief Financial Officer)
Hey, John. Yeah. Thank you for the question. As it relates to the assets that we sold, four assets, I want to tell you a little bit about them because it puts it in perspective. Average age, 38 years, rent below the portfolio average. But that's not highly important. What's more important is that through our lens, the outlook for rent growth is inferior to the retained port portfolio and certainly the capex needs are above average. So when we talk about these criteria for acquisitions and dispositions, this group of assets checks those boxes. We saw a pretty deep and competitive bidding pools for these assets. Pricing came in within a few percentage points of our expectations. Market cap rate in the mid 5% range. Then, as we think about Portland and the opportunity that we're excited about there, characterize that yield today as around a 5. A lot of work for Mike and team to get in and stabilize it and work his magic from an operational perspective will get us to a stabilized yield in the high 5% range.
OPERATOR
Our next question is from Brad Heffern with rbc.
Brad Heffern (Equity Analyst)
Please proceed with your question. Yeah, everybody, thanks. Another question on Portland. You obviously mentioned it's moved up your ranking list and taking on A couple assets there at the same time. It is kind of a smaller market. It doesn't have a ton of exposure for the public REITs. And I think part of that is just it's been a relatively challenging regulatory environment at times. So I'm just wondering if you can talk about maybe the positive aspect that you see and how that balances out with. With the negative.
Chris
Brad, this is Chris. And you know, maybe I'll start and then I'll throw it over to Lacy if he wants to say anything as well. You know, start, you know, and at a high level, you know, Portland does look right now like one of our better markets from a demand supply perspective. I would tell you 2026 job forecasts for the market have doubled since the beginning of the year. Wage growth acceleration is actually the best within our market footprint right now. On the supply side, similar to what Mike talked about in San Francisco, you know, deliveries are way down. 2026 deliveries are only supposed to be about 0.7% of stock. Similar in 2027. Both of those are well below what we saw in 2024, 2025. And importantly, you know, most of those deliveries are concentrated away from these two assets. But as you alluded to, our analytics obviously dig much deeper than the high level. And for these assets, our platform likes Portland as a market. It thinks it's on the upswing as we look across our broad set of variables. More importantly, for the assets themselves, it generally likes the demographics, it likes the psychographics, it likes the asset level characteristics, the micro location, new supply outlooks, all that kind of stuff for both of those assets. And obviously, when you combine all those things, you know, per our analytics, that should translate into outsized rent and cash flow growth moving forward beyond or instead of what Mike can also put on top of it. And I'll let him talk about some of that. Yeah, thanks, Chris. I'll tell you how I think about the market as well as the opportunity we see at these sites. First, while it is a relatively small market for us, the team has always performed well here. I'll give you an example. The occupancy today is above 97%, and we're seeing blends in that 2 to 3% range. We view this opportunity to provide more scale. It does effectively double the size of the market for us. And so when we think about these properties, specifically, we think we can drive that controllable operating margin between, call it 3 to 400bps over the next 12 to 18 months, just through staffing efficiencies. Vendor consolidation and other income opportunities. So we're looking forward to getting our hands on them.
Mike (Chief Operating Officer)
Our last question comes from Omato Acousana with Deutsche Bank.
OPERATOR
Please proceed with your question.
Omato Acousana (Equity Analyst)
Yes, good afternoon. I just wanted to go back to the regulatory front. You did discuss Boston, but just kind of curious in terms of some of
Chris
the other headlines out there. You know, Senator Warren kind of asking a whole bunch of the residential REITs to kind of divulge more information about their business operations, some of the stuff President Trump is trying to do to improve housing affordability. The news from Washington, D.C. the other day about Ma being sued to kind of provide more insight into their rent structures and junk fees. I guess when you guys just kind of think collectively from a regulatory perspective, are there kind of any real concerns that some of that stuff could impact how the business is run going forward, or does it just kind of feel like a lot of noise and it should be business as usual at the end of the day? Hey, this is Chris. I'll jump in and then let anyone else add as they want. You know, I think it's honestly too early to talk about how some of those bigger picture pushes at the federal level might affect operations. I can tell you once again, the things that, you know, we're focused on right now are really tenant friendly initiatives or policy changes. We already spoke about Massachusetts, but, you know, for us in particular, we're also looking at Salinas, California, we're looking at New York City. We're looking at, you know, more recently, D.C. proper. Obviously, if any of those measures go through, they would have a tangible direct impact potentially to our assets in those areas. Once again, we formed ownership groups. We've contributed funds along with our peer partners. We're working with larger trade groups to defeat those measures. And I would tell you the positive for UDR is that we have a very in depth governmental affairs team that monitors the federal level, the state level and the local level. And they keep all of our capital and operations teams apprised of any changes that should occur, whether the positive or the negative. And that's what we go off of and we're able to handicap what we think is going to happen going forward. So that's what we're looking at right now.
Tom Toomey (Chairman and CEO)
Taylor, this is Toomey. I'd just add this. I'm proud of the industry pulling itself together and educating politicians on what good housing policy looks like. I think we want a thriving America, a thriving housing marketplace. And there are ways to get there without just pandering and stopping development or stopping rent growth, capital makes better homes and capital is not going to arrive at the space if it feels threatened. And I think politicians get that. And as we've educated them more and more we see more of how do we work together to create thriving communities and that's more of it. So we're not just in this for a fight, we're in this to make a better place for all of us to prosper. And we've found ways to do that. And education is a great piece where it starts and then building coalitions around that. And we think as voters start to see more and more of the facts laid out, they'll understand that they want to live in a thriving community and what it takes to build that together so it's not being ignored. It just takes a long time to bend the curve, if you will.
OPERATOR
This now concludes our question and answer session. I would like to turn the floor back over to Tom Toomey for closing comments.
Tom Toomey (Chairman and CEO)
First, let me thank all of you for your time and interest and support of udr. I thought it was very productive call today and always welcome your insight follow up questions and the team's always available for that. With that, what I'd say we look forward to seeing you at many of the upcoming industry events over the next couple months and with that, finally take care of.
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