UDR INC. The following discussion should be read in conjunction with the consolidated financial statements appearing elsewhere herein and is based primarily on the consolidated financial statements for the three months endedMarch 31, 2021
and 2020, ofUDR, Inc. Forward-Looking Statements This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such forward-looking statements include, without limitation, statements concerning property acquisitions and dispositions, development activity and capital expenditures, capital raising activities, rent growth, occupancy, rental expense growth and expected or potential impacts of the novel coronavirus disease ("COVID-19") pandemic. Words such as "expects," "anticipates," "intends," "plans," "likely," "will," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Such factors include, among other things, the impact of the COVID-19 pandemic and measures intended to prevent its spread or address its effects, unfavorable changes in the apartment market, changing economic conditions, the impact of inflation/deflation on rental rates and property operating expenses, expectations concerning the availability of capital and the stability of the capital markets, the impact of competition and competitive pricing, acquisitions, developments and redevelopments not achieving anticipated results, delays in completing developments and redevelopments, delays in completing lease-ups on schedule or at expected rent and occupancy levels, expectations on job growth, home affordability and demand/supply ratio for multifamily housing, expectations concerning development and redevelopment activities, expectations on occupancy levels and rental rates, expectations concerning joint ventures and partnerships with third parties, expectations that automation will help grow net operating income, and expectations on annualized net operating income.
The following factors, among others, could cause our future results to differ materially from those expressed in the forward-looking statements:
? the impact of the COVID-19 pandemic and measures intended to prevent its spread
or address its effects;
? general economic conditions;
unfavorable changes in apartment market and economic conditions that could
? adversely affect occupancy levels and rental rates, including as a result of
COVID-19;
? the failure of acquisitions to achieve anticipated results;
? possible difficulty in selling apartment communities;
? competitive factors that may limit our ability to lease apartment homes or
increase or maintain rents;
? insufficient cash flow that could affect our debt financing and create
refinancing risk;
? failure to generate sufficient revenue, which could impair our debt service
payments and distributions to stockholders;
? development and construction risks that may impact our profitability;
? potential damage from natural disasters, including hurricanes and other
weather-related events, which could result in substantial costs to us;
? risks from climate change that impacts our properties or operations;
? risks from extraordinary losses for which we may not have insurance or adequate
reserves;
risks from cybersecurity breaches of our information technology systems and the
? information technology systems of our third party vendors and other third
parties;
? uninsured losses due to insurance deductibles, self-insurance retention,
uninsured claims or casualties, or losses in excess of applicable coverage;
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? delays in completing developments and lease-ups on schedule;
? our failure to succeed in new markets;
risks that third parties
? projects in which we have an interest, including mezzanine borrowers, joint
venture partners or other investors, do not perform as expected;
? changing interest rates, which could increase interest costs and affect the
market price of our securities;
? potential liability for environmental contamination, which could result in
substantial costs to us;
? the imposition of federal taxes if we fail to qualify as a REIT under the Code
in any taxable year;
our internal control over financial reporting may not be considered effective
? which could result in a loss of investor confidence in our financial reports,
and in turn have an adverse effect on our stock price; and
? changes in real estate laws, tax laws, rent control or stabilization laws or
other laws affecting our business.
A discussion of these and other factors affecting our business and prospects is set forth in Part II, Item 1A. Risk Factors. We encourage investors to review these risk factors. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.
COVID-19 Update
OnMarch 11, 2020 , theWorld Health Organization declared COVID-19 a pandemic, and onMarch 13, 2020 ,the United States declared a national emergency with respect to COVID-19. The pandemic has led governments and other authorities around the world, including federal, state and local authorities inthe United States , to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place or similar orders. While vaccines have been developed and are being administered, it is unclear when or if the vaccine may allow a return to pre-pandemic activity levels. While operations in certain areas have been allowed to fully or partially re-open, many areas have experienced new closures or restrictions subsequent to re-opening and no assurance can be given that such closures or restrictions will not continue to occur. Our headquarters, all of our properties and our corporate offices are located in areas that are or have been subject to shelter-in-place orders and restrictions on the types of businesses that may continue to operate or the manner in which they may operate, for example restrictions on capacity. These orders and restrictions and other impacts of the COVID-19 pandemic have adversely affected, and could continue to adversely affect, the ability of our residents and retail and commercial tenants to pay their rent. It is still uncertain how various legislation or orders adopted by the federal government and state and local governments, or those that may be modified or enacted in the future, may continue to impact, the ability of our residents and retail and commercial tenants to pay their rent. The governmental actions intended to prevent the spread of COVID-19 have also caused us to reduce staffing at certain of our locations, and have impacted, and may continue to impact, our ability to conduct our business in the ordinary course. Further, the federal government and a number of the states, counties and municipalities in which we operate have adopted, and may extend, eviction moratoriums, either directly or indirectly (such as through direction to law enforcement or courts not to serve notices or take actions related to eviction), which have negatively impacted, and may continue to negatively impact, our ability to enforce our legal and contractual rights and our ability to remove residents or retail and commercial tenantswho are not paying their rent and our ability to rent their units or other space to new residents or retail and commercial tenants, respectively. In addition, certain jurisdictions have restricted our ability to charge certain fees, including fees for late payment of rent. We have received, and continue to receive, more requests from our residents and retail and commercial tenants for assistance with respect to paying rent than we have historically received. In response, we have instituted a number of initiatives to assist residents and other tenants, including rent deferrals, payment plans, and waiving late payment fees when appropriate. In addition, we have seen an increase in tenant rent
concessions
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compared to prior year periods, as discussed further below. In particular, the urban core markets ofNew York, NY ,San Francisco Bay Area , CA, andBoston, MA have been more adversely impacted by the COVID-19 pandemic in comparison to our other markets, resulting in larger decreases in rental income from elevated rent concessions and lower occupancy in those markets. We also have experienced an increase in resident move-outs and turnover on an annualized basis. Recently, the federal government has allocated funds to rent relief programs run by state and local authorities. Certain of such programs have not yet been finalized or are not currently operating and funds are not currently available under such programs. In addition, some of such programs require, and programs in the future may require, the forgiveness of a portion of the past due rent in order to participate or may only provide funds to pay a portion of the past due rent. It is uncertain how such programs will impact our business. With respect to leasing activities, leasing traffic and visits by potential residents increased during the quarter endedMarch 31, 2021 as compared to the same quarter in 2020. Our percentage of leases entered into with a prospective tenant also increased period over period. During the three months endedMarch 31, 2021 , the Company performed an analysis in accordance with the ASC 842, Leases, guidance to assess the collectibility of its operating lease receivables in light of the COVID-19 pandemic. This analysis included an assessment of collectibility of current and future rents and whether those lease payments were no longer probable of collection. In accordance with the leases guidance, if lease payments are no longer deemed to be probable over the life of the lease contract, we recognize revenue only when cash is received, and all existing contractual operating lease receivables and straight-line
lease receivables are reserved. As a result of its analysis, the Company reserved approximately$4.7 million of multifamily tenant lease receivables and approximately$0.8 million of retail tenant lease receivables for its wholly-owned communities and communities held by joint ventures for the three months endedMarch 31, 2021 . In aggregate, the reserve is reflected as a$5.1 million reduction to Rental income and a$0.4 million reduction to Income/(loss) from unconsolidated entities on the Consolidated Statements of Operations for the three months endedMarch 31, 2021 . The impact to deferred leasing commissions was not material for the three months endedMarch 31, 2021 .
The Company did not recognize any other adjustments to the carrying amounts of assets or asset impairment charges due to the COVID-19 pandemic for the three months endedMarch 31, 2021 . As ofApril 25, 2021 we had collected 96.5%, 96.1% and 95.4% of billed monthly rents for our multifamily residents for January, February and March, respectively. April cash rents received have increased when compared to those for January, February and March at corresponding times of prior months. Over the last several years, we have worked to consistently strengthen our balance sheet and improve our liquidity profile, which we believe positions us well to weather the current economic and market challenges. The extent of the COVID-19 pandemic's effect on our operational and financial performance, however, will depend on future developments, including the duration and intensity of the pandemic, the timing and effectiveness of COVID-19 vaccines and the duration of government measures to mitigate the pandemic, all of which are uncertain and difficult to predict. Given this uncertainty, we cannot predict the effect on future periods, but the adverse impact on our future financial condition, results of operations, and cash flows could be material.
Business Overview
We are a self-administered real estate investment trust, or REIT, that owns, operates, acquires, renovates, develops, redevelops, disposes of, and manages multifamily apartment communities. We were formed in 1972 as aVirginia corporation. InJune 2003 , we changed our state of incorporation fromVirginia toMaryland . Our subsidiaries include theOperating Partnership and theDownREIT Partnership . Unless the context otherwise requires, all references in this Report to "we," "us," "our," "the Company," or "UDR" refer collectively toUDR, Inc. , its subsidiaries and its consolidated joint ventures. AtMarch 31, 2021 , our consolidated real estate portfolio included 150 communities in 13 states plus theDistrict of Columbia totaling 48,363 apartment homes. In addition, we have an ownership interest in 5,827 completed or to-be-completed apartment homes through unconsolidated joint ventures or partnerships, including 2,990 apartment homes owned by entities in which we hold preferred equity investments.The Same-Store Community apartment home population for the three months endedMarch 31, 2021 , was 45,403. 42
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The following table summarizes our market information by major geographic
markets as of and for the three months ended
Three Months Ended
March 31, 2021 March 31, 2021
Percentage Total Monthly
Number of Number of of Total Carrying Average Income per
Apartment Apartment Carrying Value (in Physical OccupiedSame-Store Communities Communities Homes Value thousands) Occupancy Home (a)West Region Orange County, CA 11 4,950 11.5 %$ 1,502,497 97.1 % $ 2,463 San Francisco, CA 11 2,751 6.8 % 886,445 92.8 % 3,088 Seattle, WA 14 2,725 7.3 % 952,279 96.3 % 2,323 Monterey Peninsula, CA 7 1,565 1.4 % 185,733 96.4 % 1,928 Los Angeles, CA 4 1,225 3.5 % 464,179 95.0 % 2,547
Other Southern California 3 817 1.6
% 212,016 98.5 % 2,295 Portland, OR 2 476 0.4 % 52,278 98.0 % 1,622Mid-Atlantic Region Metropolitan D.C. 22 8,003 16.9 % 2,209,954 95.9 % 2,090 Baltimore, MD 5 1,597 2.6 % 339,524 98.4 % 1,624 Richmond, VA 4 1,359 1.2 % 154,461 98.5 % 1,453 Northeast Region Boston, MA 10 4,139 11.8 % 1,543,261 95.9 % 2,624 New York, NY 5 1,825 9.6 % 1,253,401 94.6 % 3,834 Philadelphia, PA 1 313 0.8 % 107,788 94.8 % 2,258 Southeast Region Tampa, FL 9 2,908 3.2 % 422,441 97.4 % 1,585 Orlando, FL 9 2,500 1.8 % 241,144 96.8 % 1,426 Nashville, TN 8 2,260 1.7 % 224,826 97.7 % 1,386 Other Florida 1 636 0.7 % 90,157 97.4 % 1,684 Southwest Region Dallas, TX 11 3,864 4.4 % 579,865 96.7 % 1,480 Austin, TX 4 1,272 1.3 % 171,791 97.3 % 1,533 Denver, CO 1 218 1.1 % 145,072 93.8 % 2,934 Total/Average Same-Store Communities 142 45,403 89.6 % 11,739,112 96.4 % $ 2,116 Non-Mature,Commercial Properties & Other 8 2,960 8.5 % 1,113,588 Total Real Estate Held for Investment 150 48,363 98.1 % 12,852,700
Real Estate Under Development (b) - - 1.9 % 243,200 Total Real Estate Owned 150 48,363 100.0 % 13,095,900 Total Accumulated Depreciation
(4,730,021)
Total Real Estate Owned, Net of Accumulated Depreciation
Monthly Income per Occupied Home represents total monthly revenues divided by (a) the average physical number of occupied apartment homes in our Same-Store
portfolio.
As of
completed.
We report in two segments: Same-Store Communities and Non-Mature Communities/Other.
Our Same-Store Communities segment represents those communities acquired, developed, and stabilized prior toJanuary 1, 2020 and held as ofMarch 31, 2021 . These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior period, there is no plan to conduct substantial redevelopment activities, and the communities are not classified as held for disposition within the current year. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months. Our Non-Mature Communities/Other segment represents those communities that do not meet the criteria to be included in Same-Store Communities, including, but not limited to, recently acquired, developed and redeveloped communities, and the non-apartment components of mixed use properties. 43
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Liquidity and Capital Resources
Liquidity is the ability to meet present and future financial obligations either through operating cash flows, sales of properties, borrowings under our credit agreements, and/or the issuance of debt and/or equity securities. Our primary source of liquidity is our cash flow from operations, as determined by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment homes, and borrowings under our credit agreements. We routinely use our working capital credit facility, our unsecured revolving credit facility and issuances of commercial paper to temporarily fund certain investing and financing activities prior to arranging for longer-term financing or the issuance of equity or debt securities. During the past several years, proceeds from the sale of real estate have been used for both investing and financing activities as we continue to execute on maintaining a diversified portfolio. We expect to meet our short-term liquidity requirements generally through net cash provided by property operations and borrowings under our credit agreements and our unsecured commercial paper program. We expect to meet certain long-term liquidity requirements such as scheduled debt maturities, the repayment of financing on development activities, and potential property acquisitions, through net cash provided by property operations, secured and unsecured borrowings, the issuance of debt or equity securities, and/or the disposition of properties. We believe that our net cash provided by property operations and borrowings under our credit agreements and our unsecured commercial paper program will continue to be adequate to meet both operating requirements and the payment of dividends by the Company in accordance with REIT requirements. Likewise, the budgeted expenditures for improvements and renovations of certain properties are expected to be funded from property operations, borrowings under credit agreements, the issuance of debt or equity securities, and/or dispositions of properties. We have a shelf registration statement filed with theSecurities and Exchange Commission , or "SEC ," which provides for the issuance of common stock, preferred stock, depositary shares, debt securities, guarantees of debt securities, warrants, subscription rights, purchase contracts and units to facilitate future financing activities in the public capital markets. Access to capital markets is dependent on market conditions at the time of issuance. InJuly 2017 , the Company entered into an ATM sales agreement under which the Company may offer and sell up to 20.0 million shares of its common stock, from time to time, to or through its sales agents and may enter into separate forward sales agreements to or through its forward purchasers. Upon entering into the ATM sales agreement, the Company simultaneously terminated the sales agreement for its prior at-the-market equity offering program, which was entered into inApril 2017 , which replaced the prior at-the-market equity offering program entered into inApril 2012 . During the three months endedMarch 31, 2021 , the Company did not sell any shares of common stock through its ATM program, other than the forward sales described below. As ofMarch 31, 2021 , we had 9.6 million shares of common stock available for future issuance under the ATM program, including an aggregate of 2.3 million shares subject to the forward sales agreements described below. During the three months endedMarch 31, 2021 , the Company entered into forward sales agreements under its ATM program for a total of 2.3 million shares of common stock at a weighted average initial forward price per share of$43.85 . The actual forward price per share to be received by the Company upon settlement will be determined on the applicable settlement date based on adjustments made to the initial forward price to reflect the then-current federal funds rate and the amount of dividends paid to holders of UDR common stock over the term of the forward sales agreement. As ofMarch 31, 2021 , no shares under the forward sales agreements have been settled. The final dates by which shares sold under the forward sales agreements must be settled range betweenFebruary 23, 2022 andMarch 15, 2022 . InFebruary 2021 , the Company issued$300.0 million of 2.10% senior unsecured medium-term notes dueJune 15, 2033 . The notes were priced at 99.592% of the principal amount of the notes. The Company used the net proceeds to redeem its$300.0 million 4.00% senior unsecured medium-term notes dueOctober 2025 (the "2025 Notes") (plus the make-whole amount and accrued and unpaid interest). The combined prepayment and make-whole amounts for the purchase of the 2025 Notes totaled approximately$40.8 million . InMarch 2021 , the Company entered into forward sale agreements to sell 7.0 million shares of its common stock at an initial forward price per share of$43.51 . The actual forward price per share to be received by the Company upon settlement will be determined on the applicable settlement date based on adjustments made to the initial forward price to reflect the then-current federal funds rate and the amount of dividends paid to holders of UDR common stock over the term of the forward sales agreements. As ofMarch 31, 2021 , no shares under the forward sale agreements have been settled. The final date by which shares sold under the forward sale agreements must be settled isMarch 29, 2022 . 44 Table of Contents Future Capital Needs Future development and redevelopment expenditures may be funded through unsecured or secured credit facilities, unsecured commercial paper, proceeds from the issuance of equity or debt securities, sales of properties, joint ventures, and, to a lesser extent, from cash flows provided by property operations. Acquisition activity in strategic markets may be funded through joint ventures, by the reinvestment of proceeds from the sale of properties, through the issuance of equity or debt securities, the issuance of operating partnership units and the assumption or placement of secured and/or unsecured debt. During the remainder of 2021, we have approximately$0.8 million of secured debt maturing, inclusive of principal amortization, and$210.0 million of unsecured debt maturing, comprised solely of unsecured commercial paper. We anticipate repaying the remaining debt with cash flow from our operations, proceeds from debt or equity offerings, proceeds from dispositions of properties, or from borrowings under our credit agreements and our unsecured commercial paper program. InApril 2021 , the entire$210.0 million of outstanding unsecured commercial paper as ofMarch 31, 2021 was repaid at maturity with additional proceeds of unsecured commercial paper with maturity dates inMay 2021 and proceeds under the Working Capital Credit Facility. As ofApril 25, 2021 , we had no borrowings outstanding under the Revolving Credit Facility, leaving$1.1 billion of unused capacity (excluding$2.3 million of letters of credit), and we had$26.3 million outstanding under the Working Capital Credit Facility, leaving$48.7 million of unused capacity.
Guarantor Subsidiary Summarized Financial Information
UDR has certain outstanding debt securities that are guaranteed byUnited Dominion Realty, L.P. (the "Operating Partnership"). With respect to this debt, as further outlined below, theOperating Partnership fully and unconditionally guarantees payment of any principal, premium and interest in full to the holders thereof.The Operating Partnership is a subsidiary of UDR, through which UDR conducts a significant portion of its business and holds a substantial amount of its assets. UDR also conducts business through other subsidiaries, including its taxable REIT subsidiaries. In addition to its ownership interest in theOperating Partnership , UDR holds interests in subsidiaries and joint ventures, owns and operates properties, issues securities from time to time and guarantees debt of certain of its subsidiaries. UDR, as the sole general partner of theOperating Partnership , owns 100 percent of theOperating Partnership's general partnership interests and approximately 95 percent of its limited partnership interests and, by virtue thereof, has the ability to control all of the day-to-day operations of theOperating Partnership . UDR has concluded that it is the primary beneficiary of, and therefore consolidates, theOperating Partnership .The Operating Partnership is the subsidiary guarantor of certain of our registered debt securities, including the$300 million of medium-term notes dueSeptember 2026 ,$300 million of medium-term notes dueJuly 2027 ,$300 million of medium-term notes dueJanuary 2028 ,$300 million of medium-term notes dueJanuary 2029 ,$600 million of medium-term notes dueJanuary 2030 ,$400 million of medium-term notes dueAugust 2031 ,$400 million of medium-term notes dueAugust 2032 ,$350 million of medium-term notes dueMarch 2033 ,$300 million of medium-term notes due inJune 2033 and$300 million of medium-term notes dueNovember 2034 .The Operating Partnership fully and unconditionally guarantees payment of any principal, premium and interest in full to the holders of the notes described above. The guarantee forms part of the indenture under which the notes were issued. If, for any reason, we do not make any required payment in respect of the notes when due, theOperating Partnership will cause the payment to be made to, or to the order of, the applicable paying agent on behalf of the trustee. Holders of the notes may enforce their rights under the guarantee directly against theOperating Partnership without first making a demand or taking action against UDR or any other person or entity.The Operating Partnership may, without the consent of the holders of the notes, assume all of our rights and obligations under the notes and, upon such assumption, we will be released from our liabilities under the indenture and the notes. The notes are UDR's unsecured general obligations and rank equally with all of UDR's other unsecured and unsubordinated indebtedness outstanding from time to time. As a result, our payment of amounts due on the notes is subordinated to all of our existing and future secured obligations to the extent of the value of the collateral pledged toward any such secured obligation. Our payment of amounts due on the notes also is effectively subordinated to all liabilities, whether secured or unsecured, of any of our non-guarantor subsidiaries because, in the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding with respect to such subsidiaries, we, as an equity holder of such subsidiaries, would not receive distributions from such subsidiaries until claims of any creditors of such subsidiaries are satisfied. 45 Table of Contents InMarch 2020 , theSEC adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify disclosure requirements related to certain registered securities. The rule was effective for the Company onJanuary 4, 2021 . As a result of the amendments to Rule 3-10 of Regulation S-X, subsidiary guarantors of obligations issued by the parent are no longer required to provide separate financial statements subject to certain criteria. Such criteria include, among other things, that the parent company is an issuer or co-issuer of the debt, the consolidated financial statements of the parent company have been filed and the subsidiary guarantor is consolidated into those financial statements, and the guaranteed security is debt or debt-like. If the applicable criteria are met, the parent company is able to utilize alternative disclosures described in Rule 13-01 of Regulation S-X, which include summarized financial information of the subsidiary guarantor. We evaluated the criteria and determined that we are eligible for the exceptions, which allow us to provide alternative disclosures for theOperating Partnership .
As a result of the amendments, the
The following tables present the summarized financial information for theOperating Partnership as ofMarch 31, 2021 andDecember 31, 2020 , and for the three months endedMarch 31, 2021 and 2020. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis (dollars in thousands): March 31, December 31, 2021 2020 Total real estate, net$ 2,122,311 $ 2,151,714 Cash and cash equivalents 15 26 Operating lease right-of-use assets 201,551 202,438 Other assets 99,271 103,389 Total assets$ 2,423,148 $ 2,457,567 Secured debt, net$ 99,115 $ 99,104 Notes payable to UDR (a) 817,901 810,700 Operating lease liabilities 196,338 197,135 Other liabilities 107,768 102,196 Total liabilities 1,221,122 1,209,135 Total capital$ 1,202,026 $ 1,248,432 Three Months Ended March 31, 2021 2020 Total revenue$ 105,536 $ 112,165 Property operating expenses (44,803) (43,000) Real estate depreciation and amortization (40,223) (35,300) Operating income/(loss) 20,510 33,865 Interest expense (a) (8,075) (7,464) Other income/(loss) 3,727 (1,761) Net income/(loss)$ 16,162 $ 24,640
All
2021 and
(a) of interest expense on notes payable to UDR for the three months ended March
31, 2021 and 2020, respectively, eliminate upon consolidation of the UDR's
consolidated financial statements.
Critical Accounting Policies and Estimates and New Accounting Pronouncements
Our critical accounting policies are those having the most impact on the
reporting of our financial condition and results and those requiring significant
judgments and estimates. These policies include those related to (1) capital
expenditures, (2) impairment of long-lived assets, (3) real estate investment
properties, and (4) revenue recognition.
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Our critical accounting policies are described in more detail in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in UDR's Annual Report on Form 10-K, filed with theSEC onFebruary 18, 2021 . There have been no significant changes in our critical accounting policies from those reported in our Form 10-K filed with theSEC onFebruary 18, 2021 . With respect to these critical accounting policies, we believe that the application of judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented.
Statements of Cash Flows
The following discussion explains the changes in Net cash provided by/(used in) operating activities, Net cash provided by/(used in) investing activities, and Net cash provided by/(used in) financing activities that are presented in our Consolidated Statements of Cash Flows for the three months endedMarch 31 ,
2021 and 2020. Operating Activities For the three months endedMarch 31, 2021 , our Net cash provided by/(used in) operating activities was$123.6 million , compared to$135.5 million for the comparable period in 2020. The decrease in cash flow from operating activities was primarily due to a decrease in net operating income, primarily driven by lower rental rates and an increase in rent concessions and occupancy loss, partially offset by changes in operating assets and liabilities.
Investing Activities
For the three months endedMarch 31, 2021 , Net cash provided by/(used in) investing activities was$41.0 million , compared to($214.0) million for the comparable period in 2020. The decrease in cash used in investing activities was primarily due to the decrease in acquisitions made during the current period, an increase in proceeds from sales of real estate investments in the current period and an increase in distributions received from unconsolidated joint ventures, partially offset by an increase in investments in unconsolidated joint ventures.
Acquisitions
InJanuary 2021 , the Company acquired a 300 apartment home operating community located inFranklin, Massachusetts for approximately$77.4 million . In connection with the acquisition, the Company assumed an above-market mortgage note payable secured by the community with an outstanding balance of approximately$51.8 million . The Company increased its real estate assets owned by approximately$82.0 million , recorded$2.0 million of in-place lease intangibles, and recorded a$6.6 million debt premium in connection with the above-market debt assumed. Dispositions
In
Capital Expenditures
We capitalize those expenditures that materially enhance the value of an existing asset or substantially extend the useful life of an existing asset. Expenditures necessary to maintain an existing property in ordinary operating condition are expensed as incurred. For the three months endedMarch 31, 2021 , total capital expenditures of$25.2 million , or$524 per stabilized home, which in aggregate include recurring capital expenditures and major renovations, were spent across our portfolio, excluding development, as compared to$32.2 million , or$677 per stabilized home, for the comparable period in 2020. 47
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The decrease in total capital expenditures was primarily due to:
an decrease of 44.3%, or
? major structural changes and/or architectural revisions to existing buildings;
and
a decrease of 83.3%, or
? period in 2020 for our operations platform, which includes smart home
installations in certain of our properties.
This was partially offset by:
? an increase of 18.8%, or
kitchen and bath remodels and upgrades to common areas; and
? an increase of 5.9%, or
include asset preservation and turnover related expenditures.
The following table outlines capital expenditures and repair and maintenance costs for all of our communities, excluding real estate under development, for the three months endedMarch 31, 2021 and 2020 (dollars in thousands except Per Home amounts): Per Home Three Months Ended March 31, Three Months Ended March 31, 2021 2020 % Change 2021 2020 % Change
Turnover capital expenditures$ 2,933 $ 2,491 17.7 %$ 61 $ 52 17.3 % Asset preservation expenditures 6,821 6,718 1.5 % 142 141 0.7 %
Total recurring capital expenditures 9,754 9,209 5.9 % 203 193
5.2 %
NOI enhancing improvements (a) 9,093 7,651 18.8% 189 161 17.4 % Major renovations (b) 5,434 9,752 (44.3) % 113 205 (44.9) % Operations platform 934 5,601 (83.3) % 19 118 (83.6) %
Total capital expenditures (c)
(22.5) %
Repair and maintenance expense $ 15,521 $ 12,925 20.1 % $ 323 $ 272 18.8 %
Average home count (d) 48,124 47,579 1.1 %
(a) NOI enhancing improvements are expenditures that result in increased income
generation or decreased expense growth.
(b) Major renovations include major structural changes and/or architectural
revisions to existing buildings.
Total capital expenditures includes amounts capitalized during the year. Cash (c) paid for capital expenditures is impacted by the net change in related
accruals.
(d) Average number of homes is calculated based on the number of homes
outstanding at the end of each month.
We intend to continue to selectively add NOI enhancing improvements, which we believe will provide a return on investment in excess of our cost of capital. Our objective in redeveloping a community is twofold: we aim to meaningfully grow rental rates while also achieving cap rate compression through asset quality improvement.
AtMarch 31, 2021 , our development pipeline consisted of five wholly-owned communities totaling 1,417 apartment homes, none of which have been completed, with a budget of$501.5 million , in which we have a gross carrying value of$243.2 million . The remaining homes are estimated to be completed between the first quarter of 2022 and the second quarter of 2023.
At
The Company recognizes income or losses from our investments in unconsolidated
joint ventures and partnerships consisting of our proportionate share of the net
income or losses of the joint ventures and partnerships. In addition, we may
earn fees for providing management services to the communities held by the
unconsolidated joint ventures and partnerships.
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The Company's Investment in and advances to unconsolidated joint ventures and partnerships, net, are accounted for under the equity method of accounting. For the three months endedMarch 31, 2021 :
we made investments totaling
? ventures, including contributions of
investments under our Developer Capital Program, which each earn preferred
returns of 9.0%;
? our proportionate share of the net income/(loss) of the joint ventures and
partnerships was
? we received distributions of
operating cash flows and
We evaluate our investments in unconsolidated joint ventures and partnerships when events or changes in circumstances indicate that there may be an other-than-temporary decline in value. We consider various factors to determine if a decrease in the value of the investment is other-than-temporary. The Company did not recognize any other-than-temporary impairments in the value of its investments in unconsolidated joint ventures or partnerships during the three months endedMarch 31, 2021 and 2020.
Financing Activities
For the three months endedMarch 31, 2021 , our Net cash provided by/(used in) financing activities was($154.2) million , compared to$68.2 million for the comparable period of 2020.
The following significant financing activities occurred during the three months
ended
? issuance of
2033, for net proceeds of approximately
? repayment of
2025;
? net proceeds of
? payment of
? payment of prepayment and extinguishment costs of
prepayment of debt.
Credit Facilities and Commercial Paper Program
The Company has a$1.1 billion unsecured revolving credit facility and a$350.0 million unsecured term loan. The Credit Agreement for these facilities allows the total commitments under the Revolving Credit Facility and the total borrowings under the Term Loan to be increased to an aggregate maximum amount of up to$2.0 billion , subject to certain conditions, including obtaining commitments from one or more lenders. The Revolving Credit Facility has a scheduled maturity date ofJanuary 31, 2023 , with two six-month extension options, subject to certain conditions. The Term Loan has a scheduled maturity date ofSeptember 30, 2023 . Based on the Company's current credit rating, the Revolving Credit Facility has an interest rate equal to LIBOR plus a margin of 82.5 basis points and a facility fee of 15 basis points, and the Term Loan has an interest rate equal to LIBOR plus a margin of 90 basis points. Depending on the Company's credit rating, the margin under the Revolving Credit Facility ranges from 75 to 145 basis points, the facility fee ranges from 10 to 30 basis points, and the margin under the Term Loan ranges from 80 to 165 basis points.
As of
We have a working capital credit facility, which provides for a$75 million unsecured revolving credit facility (the "Working Capital Credit Facility") with a scheduled maturity date ofJanuary 14, 2022 . Based on the Company's current credit rating, the Working Capital Credit Facility has an interest rate equal to LIBOR plus a margin of 82.5 basis points. Depending on the Company's credit rating, the margin ranges from 75 to 145 basis points. 49
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As of
The bank revolving credit facilities and the term loan are subject to customary financial covenants and limitations, all of which we were in compliance with atMarch 31, 2021 . We have an unsecured commercial paper program. Under the terms of the program, we may issue unsecured commercial paper up to a maximum aggregate amount outstanding of$500 million . The notes are sold under customary terms inthe United States commercial paper market and rank pari passu with all of our other unsecured indebtedness. The notes are fully and unconditionally guaranteed by theOperating Partnership . As ofMarch 31, 2021 , we had issued$210.0 million of commercial paper, for one month terms, at a weighted average annualized rate of 0.30%, leaving$290.0 million of unused capacity. InApril 2021 , the entire$210.0 million of outstanding unsecured commercial paper as ofMarch 31, 2021 was repaid at maturity with additional proceeds of unsecured commercial paper with maturity dates inMay 2021 and proceeds under the Working Capital Credit Facility. Interest Rate Risk We are exposed to interest rate risk associated with variable rate notes payable and maturing debt that has to be refinanced. We do not hold financial instruments for trading or other speculative purposes, but rather issue these financial instruments to finance our portfolio of real estate assets and operations. Interest rate sensitivity is the relationship between changes in market interest rates and the fair value of market rate sensitive assets and liabilities. Our earnings are affected as changes in short-term interest rates impact our cost of variable rate debt and maturing fixed rate debt. We had$289.8 million in variable rate debt that is not subject to interest rate swap contracts as ofMarch 31, 2021 . If market interest rates for variable rate debt increased by 100 basis points, our interest expense for the three months endedMarch 31, 2021 would increase by$0.7 million based on the average balance outstanding during the period. These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. This analysis does not consider the effects of the adjusted level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no change in our financial structure. The Company also utilizes derivative financial instruments to manage interest rate risk and generally designates these financial instruments as cash flow hedges. See Note 11, Derivatives and Hedging Activities, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional discussion of derivative instruments. A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands): Three Months Ended March 31, 2021 2020 Net cash provided by/(used in) operating activities$ 123,605 $ 135,456 Net cash provided by/(used in) investing activities 41,039 (214,044) Net cash provided by/(used in) financing activities (154,215) 68,226 Results of Operations
The following discussion explains the changes in results of operations that are
presented in our Consolidated Statements of Operations for the three months
ended
Net Income/(Loss) Attributable to Common Stockholders
Net income/(loss) attributable to common stockholders was$2.0 million ($0.01 per diluted share) for the three months endedMarch 31, 2021 , as compared to$4.2 million ($0.01 per diluted share) for the comparable period in the prior year. The 50 Table of Contents
minor decrease resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:
a decrease in total property NOI of
? rates, an increase in rent concessions and occupancy loss, and an approximately
compared to 2020; and
an increase in interest expense of
? from extinguishment cost from the prepayment of debt during the three months
ended
2020.
This was partially offset by:
gain of
?
to no gains recognized on the sale of real estate during the three months ended
? a decrease in depreciation expense of
depreciated assets in 2021 and 2020.
Apartment Community Operations
Our net income results are primarily from NOI generated from the operation of our apartment communities. The Company defines NOI, which is a non-GAAP financial measure, as rental income less direct property rental expenses. Rental income represents gross market rent less adjustments for concessions, vacancy loss and bad debt. Rental expenses include real estate taxes, insurance, personnel, utilities, repairs and maintenance, administrative and marketing. Excluded from NOI is property management expense, which is calculated as 3.0% of property revenue, and land rent. Property management expense covers costs directly related to consolidated property operations, inclusive of corporate management, regional supervision, accounting and other costs. Management considers NOI a useful metric for investors as it is a more meaningful representation of a community's continuing operating performance than net income as it is prior to corporate-level expense allocations, general and administrative costs, capital structure and depreciation and amortization. Although the Company considers NOI a useful measure of operating performance, NOI should not be considered an alternative to net income or net cash flow from operating activities as determined in accordance with GAAP. NOI excludes several income and expense categories as detailed in the reconciliation of NOI to Net income/(loss) attributable toUDR, Inc. below. 51
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The following table summarizes the operating performance of our total property NOI for each of the periods presented (dollars in thousands):
Three Months Ended
March 31, (a)
2021 2020 % Change
Same-Store Communities:
Same-Store rental income $ 277,820 $ 296,882 (6.4) %Same-Store operating expense (b) (88,079) (85,231) 3.3 % Same-Store NOI 189,741 211,651
(10.4) %
Non-Mature Communities/Other NOI: Stabilized, non-mature communities NOI (c) 7,529 6,321
19.1 %
Acquired communities NOI 651 - - %
Development communities NOI 385 (40) NM *Non-residential/other NOI (d) 2,129 2,671 (20.3) % Sold and held for disposition communities NOI 623 4,862 (87.2) % Total Non-Mature Communities/Other NOI 11,317 13,814
(18.1) % Total property NOI$ 201,058 $ 225,465 (10.8) % * Not meaningful
(a) Same-Store consists of 45,403 apartment homes.
(b) Excludes depreciation, amortization, and property management expenses.
Represents non-mature communities that have achieved 90% occupancy for three (c) consecutive months but do not meet the criteria to be included in Same-Store
Communities.
(d) Primarily non-residential revenue and expense and straight-line adjustment
for concessions.
The following table is our reconciliation of Net income/(loss) attributable toUDR, Inc. to total property NOI for each of the periods presented (dollars
in
thousands):
March 31,
2021 2020Net income/(loss) attributable to UDR, Inc.$ 3,104 $ 5,221 Joint venture management and other fees (1,615)
(1,388) Property management 8,995 9,203 Other operating expenses 4,435 4,966
Real estate depreciation and amortization 144,088
155,476
General and administrative 12,736
14,978
Casualty-related charges/(recoveries), net 5,577
1,251
Other depreciation and amortization 2,601
2,025
(Gain)/loss on sale of real estate owned (50,829)
-
(Income)/loss from unconsolidated entities (4,922)
(3,367)
Interest expense 78,156
39,317
Interest income and other (income)/expense, net (2,057)
(2,700)
Tax provision/(benefit), net 619
164
Net income/(loss) attributable to redeemable noncontrolling
interests in the
154 313
Net income/(loss) attributable to noncontrolling interests 16
6
Total property NOI $ 201,058 $ 225,465
Same-Store Communities
Our Same-Store Community properties, those acquired, developed, and stabilized
prior to January 1, 2020 and held on March 31, 2021 consisted of 45,403
apartment homes and provided 94.4% of our total NOI for the three months ended
March 31, 2021 .
52
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NOI for our Same-Store Community properties decreased 10.4%, or $21.9 million ,
for the three months ended March 31, 2021 compared to the same period in 2020.
The decrease in property NOI was attributable to a 6.4%, or $19.1 million ,
decrease in property rental income and a 3.3%, or $2.8 million , increase in
operating expenses. The decrease in property rental income was primarily driven
by a 2.8%, or $7.7 million , decrease in rental rates, a $4.5 million increase in
our reserve on multifamily tenant lease receivables, an increase of $3.7 million
in rent concessions, an increase of $2.0 million in occupancy loss and 0.9%, or
$0.3 million , decrease in reimbursement and ancillary and fee income. Physical
occupancy decreased by 0.4% to 96.4% and total monthly income per occupied home
decreased 6.0% to $2,116 .
The increase in operating expenses was primarily driven by a 17.5%, or $2.2
million , increase in repair and maintenance expense due to the increased use of
third party vendors, a 2.7%, or $1.0 million , increase in real estate taxes,
which was primarily due to higher assessed valuations, and a 28.2%, or $1.0
million , increase in insurance expense due to increased claims, partially offset
by a 9.9%, or $1.5 million , decrease in personnel expense as a result of fewer
employees.
The operating margin (property net operating income divided by property rental
income) was 68.3% and 71.3% for the three months ended March 31, 2021 and 2020,
respectively.
Non-Mature Communities/Other
UDR's Non-Mature Communities/Other represent those communities that do not meet the criteria to be included in Same-Store Communities, which include communities recently developed or acquired, redevelopment properties, sold or held for disposition properties, and non-apartment components of mixed use properties. The remaining 5.6%, or$11.3 million , of our total NOI during the three months endedMarch 31, 2021 was generated from our Non-Mature Communities/Other. NOI from Non-Mature Communities/Other decreased by 18.1%, or$2.5 million , for the three months endedMarch 31, 2021 as compared to the same period in 2020. The decrease was primarily attributable to a$4.2 million decrease in sold and held for disposition communities, partially offset by an$1.2 million increase in stabilized, non-mature communities NOI due to operating communities acquired in 2021 and 2020, and a$0.7 million increase in acquired communities.
Real estate depreciation and amortization
For the three months ended
Gain/(Loss) on sale of real estate owned
During the three months endedMarch 31, 2021 , the Company recognized a gain of$50.8 million from the sale of an operating community located inAnaheim, California . During the three months endedMarch 31, 2020 , the Company did not recognize any gains on the sale of real estate.
Interest expense
For the three months endedMarch 31, 2021 and 2020, the Company recognized interest expense of$78.2 million and$39.3 million , respectively. The increase in 2021 as compared to 2020 was primarily due to$42.0 million from extinguishment cost from the prepayment of debt during the three months endedMarch 31, 2021 as compared to zero for the three months endedMarch 31, 2020 .
Inflation
We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results of operations as a result of wage pressures and increases in utilities and material costs, the majority of our apartment leases have initial terms of 12 months or less, which generally enables us to compensate for any inflationary effects by increasing rental rates on our apartment homes. Although an extreme escalation in costs could have a negative impact on our residents and their ability to absorb rent increases, we do not believe this has had a material impact on our results for the three months endedMarch 31, 2021 . 53
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material.
Funds from Operations, Funds from Operations as Adjusted, and Adjusted Funds from Operations
Funds from Operations
Funds from operations ("FFO") attributable to common stockholders and
unitholders is defined as Net income/(loss) attributable to common stockholders
(computed in accordance with GAAP), excluding impairment write-downs of
depreciable real estate related to the main business of the Company or of
investments in non-consolidated investees that are directly attributable to
decreases in the fair value of depreciable real estate held by the investee,
gains and losses from sales of depreciable real estate related to the main
business of the Company and income taxes directly associated with those gains
and losses, plus real estate depreciation and amortization, and after
adjustments for noncontrolling interests, and the Company's share of
unconsolidated partnerships and joint ventures. This definition conforms with
the National Association of Real Estate Investment Trust's ("Nareit") definition
issued in April 2002 and restated in November 2018 . Historical cost accounting
for real estate assets in accordance with GAAP implicitly assumes that the value
of real estate assets diminishes predictably over time. Since real estate values
instead have historically risen or fallen with market conditions, many industry
investors and analysts have considered the presentation of operating results for
real estate companies that use historical cost accounting to be insufficient by
themselves. Thus, Nareit created FFO as a supplemental measure of a REIT's
operating performance. In the computation of diluted FFO, if OP Units, DownREIT
Units, unvested restricted stock, unvested LTIP Units, stock options, and the
shares of Series E Cumulative Convertible Preferred Stock are dilutive, they are
included in the diluted share count.
Management considers FFO a useful metric for investors as the Company uses FFO
in evaluating property acquisitions and its operating performance, and believes
that FFO should be considered along with, but not as an alternative to, net
income and cash flow as a measure of the Company's activities in accordance with
GAAP. FFO does not represent cash generated from operating activities in
accordance with GAAP and is not necessarily indicative of funds available to
fund our cash needs.
Funds from Operations as Adjusted
FFO as Adjusted ("FFOA") attributable to common stockholders and unitholders is
defined as FFO excluding the impact of non-comparable items including, but not
limited to, acquisition-related costs, prepayment costs/benefits associated with
early debt retirement, impairment write-downs or gains and losses on sales of
real estate or other assets incidental to the main business of the Company and
income taxes directly associated with those gains and losses, casualty-related
expenses and recoveries, severance costs and legal and other costs.
Management believes that FFOA is useful supplemental information regarding our
operating performance as it provides a consistent comparison of our operating
performance across time periods and allows investors to more easily compare our
operating results with other REITs. FFOA is not intended to represent cash flow
or liquidity for the period, and is only intended to provide an additional
measure of our operating performance. We believe that Net income/(loss)
attributable to common stockholders is the most directly comparable GAAP
financial measure to FFOA. However, other REITs may use different methodologies
for calculating FFOA or similar FFO measures and, accordingly, our FFOA may not
always be comparable to FFOA or similar FFO measures calculated by other REITs.
FFOA should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indication of financial performance, or as an
alternative to cash flows from operating activities (determined in accordance
with GAAP) as a measure of our liquidity.
Adjusted Funds from Operations
Adjusted FFO ("AFFO") attributable to common stockholders and unitholders is
defined as FFOA less recurring capital expenditures on consolidated communities
that are necessary to help preserve the value of and maintain functionality at
our communities. Therefore, management considers AFFO a useful supplemental
performance metric for investors as it is more indicative of the Company's
operational performance than FFO or FFOA.
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AFFO is not intended to represent cash flow or liquidity for the period, and is only intended to provide an additional measure of our operating performance. We believe that Net income/(loss) attributable to common stockholders is the most directly comparable GAAP financial measure to AFFO. Management believes that AFFO is a widely recognized measure of the operations of REITs, and presenting AFFO will enable investors to assess our performance in comparison to other REITs. However, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not always be comparable to AFFO calculated by other REITs. AFFO should not be considered as an alternative to net income/(loss) (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.
The following table outlines our reconciliation of Net income/(loss)
attributable to common stockholders to FFO, FFOA, and AFFO for the three months
ended
Three Months Ended
March 31,
2021 2020
Net income/(loss) attributable to common stockholders
144,088 155,476
Noncontrolling interests 170
319
Real estate depreciation and amortization on unconsolidated joint ventures 8,205
8,816
Net gain on the sale of unconsolidated depreciable property (2,460)
-
Net gain on the sale of depreciable real estate owned, net of tax (50,778)
-
FFO attributable to common stockholders and unitholders, basic$ 101,273 $ 168,766 Distributions to preferred stockholders - Series E (Convertible) 1,056
1,066
FFO attributable to common stockholders and unitholders, diluted$ 102,329 $ 169,832 Income/(loss) per weighted average common share, diluted$ 0.01 $ 0.01 FFO per weighted average common share and unit, basic$ 0.32 $ 0.53 FFO per weighted average common share and unit, diluted$ 0.32 $ 0.53 Weighted average number of common shares and OP/DownREIT Units outstanding - basic 318,935
316,685
Weighted average number of common shares, OP/DownREIT Units, and common stock equivalents outstanding - diluted 322,342
320,399
Impact of adjustments to FFO: Debt extinguishment and other associated costs$ 41,950 $ - Debt extinguishment and other associated costs on unconsolidated joint ventures 1,682
-
Legal and other costs 629
758
Realized/unrealized (gain)/loss on unconsolidated real estate technology investments, net of tax
(1,428) 32
Severance costs and other restructuring expense 468
1,642
Casualty-related charges/(recoveries), net 5,577
1,399
Casualty-related charges/(recoveries) on unconsolidated joint ventures, net -
31
$ 48,878 $ 3,862 FFOA attributable to common stockholders and unitholders, diluted$ 151,207
FFOA per weighted average common share and unit, diluted
Recurring capital expenditures (9,754)
(9,209)
AFFO attributable to common stockholders and unitholders, diluted$ 141,453
AFFO per weighted average common share and unit, diluted
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The following table is our reconciliation of FFO share information to weighted
average common shares outstanding, basic and diluted, reflected on the UDR
Consolidated Statements of Operations for the three months ended March 31, 2021
and 2020 (shares in thousands):
Three Months Ended
March 31,
2021 2020Weighted average number of common shares and OP/DownREIT Units outstanding - basic
318,935 316,685
Weighted average number of OP/DownREIT Units outstanding (22,398) (22,228) Weighted average number of common shares outstanding - basic per the Consolidated Statements of Operations
296,537 294,457
Weighted average number of common shares, OP/DownREIT Units, and common stock equivalents outstanding - diluted
322,342 320,399
Weighted average number of OP/DownREIT Units outstanding (22,398) (22,228) Weighted average number of Series E Cumulative Convertible Preferred shares outstanding
(2,918) (3,011)
Weighted average number of common shares outstanding - diluted per the Consolidated Statements of Operations
297,026 295,160
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