UDR, Inc.UDRNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $61.75 per share(market-calibrated)

+63.6%

Upside to Fair Value

Current

$37.75

Pure Model

$68.10

Fair Value

$61.75

Bull Case

$87.21

Bear Case

$53.10

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $68.10.

What's Driving This Ratingfor UDR

↓

CapEx normalizing toward maintenance

Historical CapEx is 11.52% of revenue (heavy investment phase). Model fades this to 2.50% by Year 10, freeing up ~$193M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 24.27% — below the sector mature average of 30.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $602M (28.12% margin).

→

Moderate revenue growth

Analyst consensus projects 0.86% revenue growth, fading to 2.50% by Year 10. Revenue reaches $2.1B (vs $1.7B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 93.12% indicates efficient cash generation. FCF reaches $1.3B by Year 10 (62.81% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.69

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)7.61%

Cost of Debt

Pre-tax Cost of Debt2.39%

Tax Rate5.00%

After-tax Cost of Debt2.27%

Equity Weight (E/V)66.84%

Debt Weight (D/V)33.16%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (66.84% × 7.61%) + (33.16% × 2.27%)

= 5.84%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$1.7B	$1.8B	$1.9B	$2.0B	$2.1B
EBIT	$419M	$448M	$469M	$527M	$602M
Tax	$21M	$22M	$23M	$26M	$30M
NOPAT	$398M	$425M	$445M	$501M	$572M
+ Depreciation	$679M	$726M	$760M	$787M	$842M
- Capex	$199M	$176M	$145M	$110M	$54M
- Δ NWC	$4M	$19M	$8M	$11M	$16M
Free Cash Flow	$874M	$957M	$1.1B	$1.2B	$1.3B
Discount Factor	0.945	0.843	0.753	0.672	0.567
Present Value	$826M	$807M	$792M	$784M	$763M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.3B

Terminal Growth Rate2.50%

WACC5.84%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$41.3B

PV of Terminal Value$23.4B

Exit Multiple Method

Year 10 EBITDA$1.4B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$31.8B

PV of Terminal Value$18.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$7.9B

PV of Terminal Value$23.4B

Enterprise Value$31.3B

(-) Net Debt$6.2B

Equity Value$25.2B

Shares Outstanding330M

Price per Share$76.28

Exit Multiple Method

PV of Projected FCFs$7.9B

PV of Terminal Value$18.0B

Enterprise Value$25.9B

(-) Net Debt$6.2B

Equity Value$19.8B

Shares Outstanding330M

Price per Share$59.92

Pure Model Fair Value

$68.10

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
3.84%	$101.70	$110.44	$105.27	$100.34	$95.63
4.84%	$75.24	$82.27	$92.30	$100.34	$95.63
5.84%	$59.66	$63.33	$68.10	$74.55	$83.76
6.84%	$48.99	$51.16	$53.84	$57.21	$61.60
7.84%	$41.03	$42.42	$44.08	$46.08	$48.54

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$53.10

40.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.86

Base Case

$68.10

80.4% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.69

Bull Case

$87.21

131.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.59

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Real Estate Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth0.86%

Year 3 Revenue Growth3.50%

Year 5 Revenue Growth1.45%

Year 7 Revenue Growth1.87%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin24.27%

Terminal EBIT Margin30.00%

Tax Rate5.00%

Historical Capex / Rev11.52%

Terminal Capex / Rev2.50%

NWC / Revenue30.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 22x EV/EBITDA (Real Estate sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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