Baron Adds UDR as Apartment REIT Outlook Improves

Baron Capital increased its exposure to UDR and two other apartment landlords in the second quarter, betting that multifamily fundamentals are starting to improve. UDR made up 3.3% of Baron Real Estate Income Strategy assets at quarter-end, according to the firm’s letter.

Baron also added to Equity Residential (EQR) and Essex Property Trust (ESS). It said apartment demand and supply trends, including a favorable supply outlook through 2027, could support growth over the next several years.

The shift follows a cautious stance in 2025, when job losses, young adults doubling up or staying with family, and a wave of new apartments weighed on the outlook. Baron now points to the high cost of buying a home, low renter moves into homeownership, and leases that reset rents annually.

UDR’s second-quarter figures offer some support for that view. The company reported 96.6% average occupancy and same-store revenue growth of 1.8% from a year earlier. Net operating income, or property revenue after operating costs, rose 1.4%.

Leasing strength also led UDR to raise its 2026 outlook. It lifted its adjusted funds from operations forecast to $2.49 to $2.57 per share, from $2.47 to $2.57. Funds from operations is a common measure of cash generated by a REIT.

But the recovery is not broad-based yet. Same-store net operating income fell 2.0% in UDR’s Southeast region and 2.2% in the Southwest, while it increased 3.7% in the West and 3.4% in the Northeast.

That uneven performance is central to the investment case: UDR’s national results depend on markets with different supply and rent trends. Investors will watch future leasing updates for evidence that stronger occupancy and rent growth can persist as new apartment deliveries ease. Baron’s letter says it sees early improvement, not a completed recovery.