UDR — Q3 2026 Financial Report Analysis

UDR, the Denver-based apartment landlord with about 60,600 homes across US cities, put out preliminary third-quarter 2026 results on October 21, almost two weeks early, alongside a $2.0 billion deal to sell a two-thirds stake in 19 of its communities to Apollo. FFO as Adjusted came in at $0.65 a share, the top of its guidance range and the same as a year ago. GAAP earnings per share jumped to $0.67 from $0.12, but nearly all of that is gains from selling buildings. The quarter shows the same pattern as Q2: the apartments UDR keeps are growing slowly, the company is getting smaller in dollar terms, and buybacks keep the per-share figures flat.

These are preliminary, unaudited figures. UDR says its 10-Q and the auditor's review are not complete and the numbers could still change. The release has no full income statement, no total revenue, no cash-flow statement, no AFFO and no regional breakdown. UDR plans to report final results on November 2, 2026, with a call on November 3.

Why net income is the wrong number to watch for a REIT

UDR is a REIT (real estate investment trust): a company that owns property, collects rent and must pay out most of its taxable income as dividends. GAAP accounting makes it deduct heavy depreciation every year, as if its buildings were wearing out on a fixed schedule. It also books a one-time gain whenever it sells a building for more than its depreciated book value. Both items move net income a lot without changing how much rent the buildings bring in.

So the industry uses FFO (funds from operations): net income with real estate depreciation added back and gains on property sales taken out. This quarter, that meant adding $161.6 million of real estate depreciation and removing $190.1 million of sale gains. FFOA (FFO as Adjusted) is UDR's own version. It also strips out one-off items such as legal costs, severance and storm damage, which makes it the figure management guides to.

Total revenue and operating margin are not in the preliminary release. For reference, the Q3 2025 10-Q reported total revenue of $431.9 million. NOI (net operating income) is rent minus the direct costs of running the buildings: property taxes, insurance, staff, utilities and repairs. "Same-store" covers buildings UDR owned and ran at stable occupancy in both periods, so the growth rate isn't distorted by buying or selling property. Blended lease rate growth is the average change in rent on new leases and renewals signed in the quarter, compared with what the same apartments rented for before.

What drove the quarter

Rent grew a little faster than costs in the buildings UDR is keeping. In the same-store pool excluding the Apollo communities (44,765 homes), revenue rose 1.8% to $359.3 million and expenses rose 2.2% to $115.5 million. NOI rose 1.6% to $243.8 million. Because costs grew faster than revenue, the NOI margin, the share of rent left after running the buildings, edged down to 67.9% from 68.0%. Occupancy averaged 96.5%, and new leases and renewals together were signed at 2.0% above prior rents.

Total NOI still fell. Across everything UDR consolidates, NOI dropped 1.9% to $286.6 million, and was down 1.1% from Q2's $289.8 million. The small same-store gain didn't make up for the NOI lost on buildings sold over the past year.

Busy quarter for buying and selling property. UDR:

• sold two communities, in Seattle and Nashville, with 412 homes for $183.0 million;
• put a 360-home Nashville community into its venture with LaSalle Investment Management and received about $103.2 million in cash (that venture is now about $958.3 million);
• took ownership of two communities, 483 homes in Inland Empire, CA and 286 in Portland, OR, when two loans and preferred-equity stakes it held in developers' projects were wound up. The buildings were valued at $354.4 million and UDR paid $235.0 million in extra cash;
• was repaid about $29.5 million on a preferred equity investment in Orlando.

The sale gains in that list are why GAAP EPS came in at $0.67 when UDR's own guidance had been $0.13–$0.15. The earlier range appears not to have included those sales.

The Apollo deal

Apollo-managed funds will put $1.34 billion of equity into a new joint venture that owns 19 UDR communities (7,059 homes, valued at about $2.0 billion), taking about two-thirds. UDR keeps one-third, keeps running the buildings for a fee and will still consolidate the venture in its accounts. UDR says the price implies a capitalization rate (a year of a property's NOI divided by its price, roughly the yield a buyer gets) of about 6.0%. That matches the release's own numbers: the pool's Q3 NOI of $29.3 million, annualized, is about 5.9% of $2.0 billion. The deal is expected to close on October 29, 2026. UDR says it will use the cash for "higher-growth assets," general corporate purposes and paying down debt, and that the deal will add to per-share earnings. It hasn't put a number on that yet, and 2026 guidance assumes no effect.

These are older, cheaper apartments than the rest of UDR's portfolio. They are 39 years old on average, with average revenue of $2,058 per home (the release doesn't say over what period; most likely monthly). For comparison, the Q2 10-Q put average monthly income per occupied home across the same-store portfolio at $2,642.

UDR also gets the option to buy Apollo's stake back, for a limited period starting five years after closing, at a price giving Apollo a fixed return of 7.00%–7.50%. If UDR uses the option, it pays Apollo more than the roughly 6% yield the buildings produce. It's an option, not an obligation, but the gap between those two rates is the real cost of this money.

What the headline numbers hide

The new same-store figures look better because the weakest buildings left the pool. The Apollo communities had the worst quarter in the portfolio: revenue fell 0.8%, expenses rose 6.4% and NOI fell 3.9%. Taking them out raises same-store NOI growth from 1.0% to 1.6%, blended lease growth from 1.7% to 2.0%, and year-to-date NOI growth from 0.5% to 0.8%. On the same basis as Q2, growth slowed: same-store NOI went from +1.4% in Q2 to +1.0% in Q3, and blended lease growth from 2.1% to 1.7%.

The guidance raise is smaller than it looks. UDR says it raised its full-year same-store NOI midpoint by 37.5 basis points (0.375 percentage points) to 1.0%. That compares the new pool without the Apollo buildings with an old guide that included them. Counting the Apollo buildings, the new midpoint is 0.75%, against 0.625% before, so the like-for-like raise is 12.5 basis points. Same-store revenue is similar: +7.5 basis points like for like (1.45% vs 1.375%), not +22.5. The expense midpoint really did fall, from 3.25% to 2.9%.

Per-share results depend on buybacks. FFOA in dollars fell 3.2% this quarter and 2.1% year to date ($664.5 million vs $678.9 million). The diluted share and unit count dropped to 346.0 million, from 356.9 million a year ago and 348.3 million in Q2. The release doesn't say how many shares were bought back in the quarter.

Net income without the gains went down. Taking out the $190.1 million of sale gains and the $3.2 million consolidation gain leaves about $21.6 million, compared with $39.2 million a year ago. The NOI reconciliation shows what moved. Income from unconsolidated ventures fell to $1.6 million from $14.0 million and total NOI fell $5.5 million. Interest expense ($48.6 million vs $50.6 million) and G&A ($20.6 million vs $22.7 million) both came down, and interest and other income rose to $8.1 million from $3.7 million, which offset part of the drop.

FFO vs FFOA: $10.5 million of excluded costs this quarter. These are legal and other costs ($5.5 million, versus $2.7 million a year ago), severance ($4.4 million) and casualty charges ($0.5 million). Year to date, legal and other costs are $19.1 million, nearly double last year's $9.8 million. Full-year guidance excludes about $0.06 a share of them, and that is why the FFO guide fell $0.02 at the midpoint while the FFOA guide rose $0.02. In the Q2 10-Q, these legal fees were tied to lawsuits alleging antitrust violations by RealPage, a rent-pricing software provider. They are real cash costs, even though FFOA leaves them out.

The dividend is covered, but we can't check cash flow yet. The dividend is $0.145 a month, or $0.435 a quarter. That is 67% of FFOA and 70% of FFO. The preliminary release has no AFFO (FFO minus the routine capital spending needed to maintain the buildings) and no operating cash flow, so we can't yet check cash coverage the way we did in Q2, when AFFO covered the dividend with a 78% payout.

Takeaway: The same-store figures look better mainly because UDR redefined the same-store pool. The 19 communities it is moving into the Apollo venture were its weakest, with NOI down 3.9%. Counting them, same-store NOI growth slowed to 1.0% from 1.4% in Q2, total NOI and FFOA in dollars kept shrinking, and buybacks held FFOA per share flat at $0.65. The Apollo money is what could change this. If UDR puts the cash into buildings that grow faster than the ones it is giving up, the strategy starts adding value. If most of it goes to debt and buybacks, UDR just keeps shrinking.

Did last time's read hold up?

Our Q2 report named three things to watch in Q3:

• Sunbelt new-lease rents (about -8% in Q2): the preliminary release has no regional or new-versus-renewal breakdown, so we can't check this yet. The overall blended rate slowed to 1.7% on the old basis, which doesn't point to a broad improvement.
• RealPage legal costs: "legal and other costs" were $5.5 million, less than the $8.4 million added back in Q2 but double the year-ago figure. Full-year guidance now excludes about $0.06 a share of them.
• The $252.5 million of pending sales: mostly done. Seattle and Nashville closed for $183.0 million, and the Washington, D.C. sale (about $68.5 million) is still under contract. The share count fell again, which suggests buybacks continued.

Our broader concern held up. Per-share results still aren't growing (FFOA was $0.65 in both years), and the business is still shrinking in dollars.

Guidance and outlook

*The updated same-store ranges leave out the 19 Apollo communities; the prior ranges included them.

Fourth-quarter guidance is $0.63–$0.65 for both FFO and FFOA per share, which brackets Q3's $0.65 FFOA and points to a flat finish to the year. The net income raise comes from about $1.10 a share of expected sale gains, not from better operations.

Our view: The tighter FFOA range at a higher midpoint is believable. Three quarters are done, at $1.90 a share, so the range now depends on only one quarter. The same-store targets ask more of the fourth quarter. Year to date, expenses are up 3.2% and NOI up 0.8%. Full-year guidance of 2.9% and 1.0% therefore requires slower cost growth and faster NOI growth than the year has shown so far. The bigger question for 2027 is the Apollo cash. UDR is giving up about 6% yields on older buildings, and the buy-back option is priced at 7%–7.5%. Whatever it buys next has to grow faster than what it sold to justify that, and the release doesn't yet say where the money goes. When the 10-Q and supplemental come out (expected November 2), watch:

• how the $1.34 billion is split between debt paydown, buybacks and new investments;
• whether Sunbelt new-lease rents have stopped falling;
• whether AFFO and operating cash flow still comfortably cover the $0.435 quarterly dividend.