UDR, Inc.UDRNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $63.46 per share(market-calibrated)

+69.4%

Upside to Fair Value

Current

$37.46

Pure Model

$70.00

Fair Value

$63.46

Bull Case

$90.20

Bear Case

$54.26

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: $70.00.

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 ~$198M 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 $617M (28.12% margin).

→

Moderate revenue growth

Analyst consensus projects 1.02% revenue growth, fading to 2.50% by Year 10. Revenue reaches $2.2B (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 $1.4B 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)66.67%

Debt Weight (D/V)33.33%

WACC Calculation

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

WACC = (66.67% × 7.61%) + (33.33% × 2.27%)

= 5.83%

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	$1.9B	$1.9B	$2.0B	$2.2B
EBIT	$420M	$449M	$469M	$536M	$617M
Tax	$21M	$22M	$23M	$27M	$31M
NOPAT	$399M	$427M	$445M	$509M	$586M
+ Depreciation	$680M	$728M	$760M	$800M	$863M
- Capex	$199M	$176M	$145M	$112M	$55M
- Δ NWC	$5M	$20M	$15M	$16M	$16M
Free Cash Flow	$874M	$959M	$1.0B	$1.2B	$1.4B
Discount Factor	0.945	0.844	0.753	0.673	0.568
Present Value	$826M	$809M	$787M	$795M	$782M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.4B

Terminal Growth Rate2.50%

WACC5.83%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$42.5B

PV of Terminal Value$24.1B

Exit Multiple Method

Year 10 EBITDA$1.5B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$32.6B

PV of Terminal Value$18.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$8.0B

PV of Terminal Value$24.1B

Enterprise Value$32.1B

(-) Net Debt$6.2B

Equity Value$25.9B

Shares Outstanding330M

Price per Share$78.50

Exit Multiple Method

PV of Projected FCFs$8.0B

PV of Terminal Value$18.5B

Enterprise Value$26.5B

(-) Net Debt$6.2B

Equity Value$20.3B

Shares Outstanding330M

Price per Share$61.51

Pure Model Fair Value

$70.00

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%
3.83%	$104.58	$113.20	$107.90	$102.86	$98.05
4.83%	$77.33	$84.58	$94.94	$102.86	$98.05
5.83%	$61.30	$65.09	$70.00	$76.66	$86.17
6.83%	$50.36	$52.59	$55.35	$58.82	$63.34
7.83%	$42.19	$43.63	$45.33	$47.39	$49.92

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

$54.26

44.9% vs current

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

Base Case

$70.00

86.9% vs current

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

Bull Case

$90.20

140.8% 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 Growth1.02%

Year 3 Revenue Growth3.66%

Year 5 Revenue Growth2.70%

Year 7 Revenue Growth2.62%

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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