UDR 10-K 12/31/2014
Section 1: 10-K (10-K)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
þ
o
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2014
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission file number 1-10524 (UDR, Inc.)
Commission file number 333-156002-01 (United Dominion Realty, L.P.)
UDR, Inc.
United Dominion Realty, L.P.
(Exact name of registrant as specified in its charter)
Maryland (UDR, Inc.)
Delaware (United Dominion Realty, L.P.)
(State or other jurisdiction of
incorporation or organization)
54-0857512
54-1776887
(I.R.S. Employer
Identification No.)
1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado 80129
(Address of principal executive offices) (zip code)
Registrant’s telephone number, including area code: (720) 283-6120
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value (UDR, Inc.)
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Securities registered pursuant to Section 12(g) of the Act: None
(Title of Class)
UDR, Inc.
United Dominion Realty, L.P.
Yes þ
Yes o
No o
No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
UDR, Inc.
Yes o
No þ
United Dominion Realty, L.P.
Yes o
No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
UDR, Inc.
United Dominion Realty, L.P.
Yes þ
Yes þ
No o
No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files).
UDR, Inc.
United Dominion Realty, L.P.
Yes þ
Yes þ
No o
No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
UDR, Inc.:
Large accelerated filer þ
United Dominion Realty, L.P.:
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
(Do not check if a smaller reporting
company)
Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
(Do not check if a smaller reporting
company)
UDR, Inc.
United Dominion Realty, L.P.
Yes o
Yes o
No þ
No þ
The aggregate market value of the shares of common stock of UDR, Inc. held by non-affiliates on June 30, 2014 was approximately $3.0 billion. This calculation excludes
shares of common stock held by the registrant’s officers and directors and each person known by the registrant to beneficially own more than 5% of the registrant’s outstanding
shares, as such persons may be deemed to be affiliates. This determination of affiliate status should not be deemed conclusive for any other purpose. As of February 19, 2015,
there were 258,765,713 shares of UDR, Inc.’s common stock outstanding.
There is no public trading market for the partnership units of United Dominion Realty, L.P. As a result, an aggregate market value of the partnership units of United
Dominion Realty, L.P. cannot be determined.
The information required by Part III of this Report, to the extent not set forth herein, is incorporated by reference from UDR, Inc.’s definitive proxy statement for the
2015 Annual Meeting of Stockholders.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits, Financial Statement Schedules
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EXPLANATORY NOTE
This Report combines the annual reports on Form 10-K for the fiscal year ended December 31, 2014 of UDR, Inc. a Maryland corporation, and United
Dominion Realty, L.P., a Delaware limited partnership, of which UDR, Inc. is the parent company and sole general partner. Unless the context otherwise requires,
all references in this Report to “we,” “us,” “our,” the “Company,” “UDR” or “UDR, Inc.” refer collectively to UDR, Inc., together with its consolidated
subsidiaries and joint ventures, including United Dominion Realty, L.P. Unless the context otherwise requires, the references in this Report to the “Operating
Partnership” or the “OP” refer to United Dominion Realty, L.P., together with its consolidated subsidiaries. “Common stock” refers to the common stock of UDR
and “stockholders” means the holders of shares of UDR’s common stock and preferred stock. The limited partnership interests of the Operating Partnership are
referred to as “OP Units” and the holders of the OP Units are referred to as “unitholders.” This combined Form 10-K is being filed separately by UDR and the
Operating Partnership.
There are a number of differences between the Company and the Operating Partnership, which are reflected in our disclosure in this Report. UDR is a real
estate investment trust (“REIT”), whose most significant asset is its ownership interest in the Operating Partnership. UDR also conducts business through other
subsidiaries, including its taxable REIT subsidiary (“TRS”) whose activities include development of land and land entitlement. UDR acts as the sole general
partner of the Operating Partnership, holds interests in subsidiaries and joint ventures, owns and operates properties, issues securities from time to time and
guarantees debt of certain of our subsidiaries. The Operating Partnership conducts the operations of a substantial portion of the business and is structured as a
partnership with no publicly traded equity securities. The Operating Partnership has guaranteed certain outstanding debt of UDR.
As of December 31, 2014, UDR owned 110,883 units (100%) of the general partnership interests of the Operating Partnership and 174,002,342 units (or
approximately 95.0%) of the limited partnership interests of the Operating Partnership. UDR conducts a substantial amount of its business and holds a
substantial amount of its assets through the Operating Partnership, and, by virtue of its ownership of the OP Units and being the Operating Partnership’s sole
general partner, UDR has the ability to control all of the day-to-day operations of the Operating Partnership. Separate financial statements and accompanying
notes, as well as separate discussions under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Market for
Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchasers of Equity Securities” and “Control and Procedures” are provided for each of
UDR and the Operating Partnership. In addition, certain disclosures in “Business” are separated by entity to the extent that the discussion relates to UDR’s
business outside of the Operating Partnership.
Forward-Looking Statements
PART I
This Annual 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. Such forward-looking statements include, without limitation, statements concerning property acquisitions and dispositions, development
activity and capital expenditures, capital raising activities, rent growth, occupancy, and rental expense growth. 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, unfavorable changes in the apartment market, changing economic conditions, the impact of inflation/deflation on rental rates and property
operating expenses, expectations concerning availability of capital and the stabilization of the capital markets, the impact of competition and competitive pricing,
acquisitions, developments and redevelopments not achieving anticipated results, delays in completing developments, redevelopments and lease-ups on
schedule, expectations on job growth, home affordability and demand/supply ratio for multifamily housing, expectations concerning development and
redevelopment activities, expectations on occupancy levels, expectations concerning the joint ventures with third parties, expectations that automation will help
grow net operating income, and expectations on annualized net operating income. 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 Annual 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. For a further discussion of these and other factors that could impact future results, performance or transactions, see “Item 1A. Risk Factors” elsewhere
in this Annual Report.
Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Annual 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.
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Item 1. BUSINESS
General
UDR is a self-administered real estate investment trust, or REIT, that owns, operates, acquires, renovates, develops, redevelops, and manages multifamily
apartment communities generally located in high barrier-to-entry markets located throughout the United States. The high barrier-to-entry markets are
characterized by limited land for new construction, difficult and lengthy entitlement processes, low single-family home affordability and strong employment
growth potential. At December 31, 2014, our consolidated real estate portfolio included 139 communities located in 20 markets, with a total of 39,851 completed
apartment homes, which are held through our subsidiaries, including the Operating Partnership, and consolidated joint ventures. In addition, we have an
ownership interest in 36 communities containing 10,055 apartment homes through unconsolidated joint ventures or partnerships. As of December 31, 2014, the
Company was developing one wholly-owned community with 369 apartment homes and three unconsolidated joint venture communities with 1,018 apartment
homes, none of which have been completed.
At December 31, 2014, the Operating Partnership’s consolidated real estate portfolio included 68 communities located in 17 markets, with a total of 20,814
completed apartment homes. The Operating Partnership owns, operates, acquires, renovates, develops, redevelops, and manages multifamily apartment
communities generally located in high barrier-to-entry markets located throughout the United States. During the year ended December 31, 2014, revenues of the
Operating Partnership represented approximately 52% of our total rental revenues.
UDR has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, which we refer to in this Report as the “Code.” To continue
to qualify as a REIT, we must continue to meet certain tests which, among other things, generally require that our assets consist primarily of real estate assets,
our income be derived primarily from real estate assets, and that we distribute at least 90% of our REIT taxable income (other than our net capital gains) to our
stockholders annually. As a REIT, we generally will not be subject to U.S. federal income taxes at the corporate level on our net income to the extent we
distribute such net income to our stockholders annually. In 2014, we declared total distributions of $1.04 per common share and paid dividends of $1.015 per
common share.
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
Dividends
Declared in
2014
Dividends Paid
in 2014
$
$
0.260
0.260
0.260
0.260
1.040
$
$
0.235
0.260
0.260
0.260
1.015
UDR was formed in 1972 as a Virginia corporation. In June 2003, we changed our state of incorporation from Virginia to Maryland. The Operating
Partnership is the successor-in-interest to United Dominion Realty, L.P., a limited partnership formed under the laws of Virginia, which commenced operations in
1995. The Operating Partnership was redomiciled in 2004 as a Delaware limited partnership. Our corporate offices are located at 1745 Shea Center Drive, Suite 200,
Highlands Ranch, Colorado and our telephone number is (720) 283-6120. Our website is www.udr.com. The information contained on our website, including any
information referred to in this Report as being available on our website, is not a part of or incorporated into this Report.
As of February 19, 2015, we had 1,523 full-time associates and 59 part-time associates, all of whom were employed by UDR.
Reporting Segments
We report in two segments: Same-Store Communities and Non-Mature Communities/Other.
Our Same-Store Communities segment includes those communities acquired, developed, and stabilized prior to January 1, 2013, and held as of
December 31, 2014. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan
to conduct substantial redevelopment activities, and the community is not classified as held for sale at year end. A community is considered to have stabilized
occupancy once it achieves 90% occupancy for at least three consecutive months.
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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. For
additional information regarding our operating segments, see Note 15, Reportable Segments, in the Notes to the UDR Consolidated Financial Statements
included in this Report and Note 12, Reportable Segments, in the Notes to the Operating Partnership’s Consolidated Financial Statements included in this
Report.
Business Objectives
Our principal business objective is to maximize the economic returns of our apartment communities to provide our stockholders with the greatest possible
total return and value. To achieve this objective, we intend to continue to pursue the following goals and strategies:
•
own and operate apartments in high barrier-to-entry markets, which are characterized by limited land for new construction, difficult and lengthy
entitlement processes, low single-family home affordability and strong employment growth potential, thus enhancing stability and predictability of
returns to our stockholders;
• manage real estate cycles by taking an opportunistic approach to buying, selling, renovating, redeveloping, and developing apartment communities;
•
empower site associates to manage our communities efficiently and effectively;
• measure and reward associates based on specific performance targets; and
• manage our capital structure to help enhance predictability of earnings and dividends.
2014 Highlights
•
In July 2014, the Company marked its 42nd year as a REIT and paid its 168th consecutive quarterly dividend in October. The Company’s annualized
declared 2014 dividend of $1.04 represented a 10.6% increase over the previous year.
• We achieved Same-Store revenue growth of 4.3% and Same-Store net operating income (“NOI”) growth of 5.2%.
• During the year ended December, 31, 2014, we invested approximately $251.5 million in wholly-owned development projects and $31.5 million in
redevelopment projects and major renovations, including completion of 980 development apartment homes and 401 redevelopment apartment homes in
primary markets.
• We expanded our relationship with the Metropolitan Life Insurance Company (“MetLife”):
• We increased our ownership interest in the remaining six operating communities in the UDR/MetLife I Joint Venture from 12% to 50%, and MetLife
and the Company contributed the communities to the UDR/MetLife II Joint Venture. We paid MetLife $82.5 million for the additional ownership
interests.
• We increased our ownership interest in four land sites in the UDR/MetLife I Joint Venture from approximately 3% to 50%. The remaining interest
continues to be held by our joint venture partner MetLife. We paid MetLife approximately $36.8 million for the additional ownership interests.
• We sold 50% of our interest in 3033 Wilshire and 49% of our interest in 13th and Market to MetLife for gross proceeds of approximately $62.5
million, resulting in the assets being held by unconsolidated joint ventures.
• We issued $300 million of 3.75%, 10-year senior unsecured medium-term notes in June. Net proceeds were used to pay down borrowings outstanding on
our unsecured revolving credit facility and for general corporate purposes.
• We completed five developments containing 1,396 homes for an estimated aggregate cost of $480.0 million.
• We acquired land parcels for future development located in Huntington Beach, California for $77.8 million and Boston, Massachusetts for $32.2 million.
• We acquired two communities located in Seattle, Washington and Kirkland, Washington with a total of 358 apartment homes for $45.5 million and $75.2
million, respectively.
• We recognized gains on the sale of real estate of $143.6 million, net of tax, which consisted of:
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•
•
the sale of nine communities with a total of 2,500 apartment homes, an adjacent parcel of land, and one operating property for gross proceeds of
$328.4 million, resulting in a gain, net of tax, of approximately $138.6 million; and
the sale of our 49% interest in a recently completed development for gross proceeds of $54.2 million, resulting in a gain, net of tax, of $7.2 million
and our 50% interest in a land parcel for gross proceeds of $8.3 million, resulting in a loss, net of tax, of $2.2 million.
• We sold common stock under our amended equity distribution agreement for net proceeds of approximately $99.8 million, which was primarily used to
fund the Company's Steele Creek participating loan investment.
Other than the following, there were no significant changes to the Operating Partnership’s business during 2014 (the above 2014 highlights relate to UDR
or other subsidiaries of UDR):
•
The Operating Partnership sold one operating community and an adjacent parcel of land in San Diego, California for gross proceeds of $48.7 million,
resulting in a gain of approximately $24.4 million and net proceeds of $47.9 million. The Operating Partnership also recorded gains of $39.2 million in
connection with UDR’s sale of two communities in Tampa, Florida and Los Angeles, California, which were previously deferred.
Refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for further information on the Company’s and the
Operating Partnership’s activities in 2014.
Our Strategies and Vision
Our vision is to be the innovative multifamily public REIT of choice. Our strategic priorities are:
1. Strengthen the Quality of Our Portfolio
2. Flexible/Strong Balance Sheet
3. Increase Cash Flow to Support Dividend Growth
4. A Great Place to Work and Live
Capital Allocation
Acquisitions and Dispositions
When evaluating potential acquisitions, we consider:
•
•
•
•
•
•
population growth, cost of alternative housing, overall potential for economic growth and the tax and regulatory environment of the community in
which the property is located;
geographic location, including proximity to jobs, entertainment, transportation, and our existing communities which can deliver significant
economies of scale;
construction quality, condition and design of the property;
current and projected cash flow of the property and the ability to increase cash flow;
potential for capital appreciation of the property;
ability to increase the value and profitability of the property through operations and redevelopment;
• whether it is located in a high barrier-to-entry market;
•
•
•
•
terms of resident leases, including the potential for rent increases;
occupancy and demand by residents for properties of a similar type in the vicinity;
prospects for liquidity through sale, financing, or refinancing of the property; and
competition from existing multifamily communities and the potential for the construction of new multifamily properties in the area.
We regularly monitor our assets to increase the quality and performance of our portfolio. Factors we consider in deciding whether to dispose of a property
include:
•
current market price for an asset compared to projected economics for that asset;
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•
•
potential increases in new construction in the market area;
areas with low job growth prospects;
• markets where we do not intend to establish a long-term concentration; and
•
operating efficiencies.
The following table summarizes our apartment community acquisitions and dispositions and our consolidated year-end ownership position for the past
five years (dollars in thousands):
Homes acquired
Homes disposed
Homes owned at December 31,
Total real estate owned, at cost
2014
358
2,500
39,851
8,383,259
$
$
2013
2012
2011
2010
—
914
41,250
8,207,977
$
633
6,507
41,571
8,055,828
$
3,161
4,488
47,343
8,074,471
$
1,374
149
48,553
6,881,347
The following table summarizes our apartment community acquisitions and dispositions and our year-end ownership position of the Operating Partnership
for the past five years (dollars in thousands):
Homes acquired
Homes disposed
Homes owned at December 31,
Total real estate owned, at cost
Development Activities
2014
—
264
20,814
4,238,770
$
$
2013
2012
2011
2010
—
914
20,746
4,188,480
$
—
1,314
21,660
4,182,920
$
1,833
2,024
23,160
4,205,298
$
—
—
23,351
3,706,184
Our objective in developing a community is to create value while improving the quality of our portfolio. Demographic trends, economic drivers, and how
multifamily fundamentals/valuations have trended over the long-term govern our review process on where to allocate development capital. At December 31,
2014, our development pipeline included one wholly-owned community located in Boston, Massachusetts with 369 homes and a budget of $217.7 million, in
which we have a carrying value of $177.6 million.
Redevelopment Activities
Our objective in redeveloping a community is twofold: we aim to meaningfully grow rental rates while also producing a higher yielding and more valuable
asset through asset quality improvement. During 2014, we continued to redevelop properties in primary markets where we concluded there was an opportunity
to add value. At December 31, 2014, the Company was redeveloping 708 apartment homes, 694 of which have been completed, at one wholly-owned community
with 739 apartment homes located in New York, New York. During the year ended December 31, 2014, we incurred $31.5 million in major renovations, which
include major structural changes and/or architectural revisions to existing buildings.
Joint Venture Activities
We have entered into, and may continue in the future to enter into, joint ventures (including limited liability companies or partnerships) through which we
would own an indirect economic interest of less than 100% of the community or communities owned directly by such joint ventures. Our decision to either hold
an apartment community in fee simple or have an indirect interest in the community through a joint venture is based on a variety of factors and considerations,
including: (i) the economic and tax terms required by the seller of land or a community; (ii) our desire to diversify our portfolio of communities by market,
submarket and product type; (iii) our desire at times to preserve our capital resources to maintain liquidity or balance sheet strength; and (iv) our projections, in
some circumstances, that we will achieve higher returns on our invested capital or reduce our risk if a joint venture vehicle is used. Each joint venture agreement
is individually negotiated, and our ability to operate and/or dispose of a community in our sole discretion may be limited to varying degrees depending on the
terms of the joint venture agreement.
The Operating Partnership is not a party to any of the joint venture activities described above.
Balance Sheet Management
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We maintain a capital structure that we believe allows us to proactively source potential investment opportunities in the marketplace. We have structured
our debt maturity schedule to be able to opportunistically access both secured and unsecured debt markets when appropriate.
Financing Activities
As part of our plan to finance our activities, we utilize proceeds from debt and equity offerings and refinancings to extend maturities, pay down existing
debt, fund development and redevelopment activities, and acquire apartment communities.
Operational Excellence, Cash Flow and Dividend Growth
Investment in new technologies continues to drive operating efficiencies in our business and help us to better meet the changing needs of our residents.
Since its launch in January 2009, our residents have been utilizing our web-based resident internet portal on our website. Our residents have the ability to
conduct business with us 24 hours a day, 7 days a week and complete online leasing applications and renewals throughout our portfolio.
We launched a new website at the end of 2014. This is the third major revision of UDR.com, and represents a complete rebuild of our on-line presence. It
was completed after several months of research with customer focus groups that told us what they wanted to see in an on-line shopping experience. The new
website features elements such as on-line appointment scheduling, enhanced neighborhood information, and comparison shopping tools, all of which are
available via any device the customer may choose. To date, we are exceeding our initial targets for the site by converting a higher than expected amount of traffic
to community visits.
As a result of transforming our operations through technology, residents’ satisfaction improved, and our operating teams have become more efficient.
Web-based technologies have also resulted in declining marketing and advertising costs, improved cash management, and better pricing management of our
available apartment homes.
Portfolio Improvement
We are focused on increasing our presence in markets with favorable job formation, high propensity to rent, low single-family home affordability, and a
favorable demand/supply ratio for multifamily housing. Portfolio investment decisions consider internal analyses and third-party research.
For the year ended December 31, 2014, approximately 65.0% of our same-store NOI was generated by communities located in our primary markets of:
Seattle, Washington; San Francisco Bay Area, California; Los Angeles, California; Orange County, California; Austin, Texas; Dallas, Texas; Boston,
Massachusetts; New York, New York; and Metropolitan D.C.
Operating Partnership Strategies and Vision
The Operating Partnership’s long-term strategic plan is to achieve greater operating efficiencies by investing in fewer, more concentrated markets and
enhance resident and associate service through technology. As a result, the Operating Partnership has sought to expand its interests in communities located in
New York, New York; San Francisco Bay Area, California; Boston, Massachusetts; and Metropolitan D.C. over the past years. Prospectively, we plan to
continue to channel new investments into those markets we believe will continue to provide the best investment returns. Markets will be targeted based upon
defined criteria including above average job growth, low single-family home affordability and limited new supply for multifamily housing, which are three key
drivers to strong rental growth.
Markets and Competitive Conditions
During the year ended December 31, 2014, 65.0% of our consolidated same-store NOI was generated from apartment homes located in our primary markets.
At December 31, 2014, the Company held 70.7% of its same-store carrying value of its real estate portfolio in our primary markets. During the year ended
December 31, 2014, 72.9% of the Operating Partnership’s same-store NOI was generated from apartment homes located in our primary markets. At December 31,
2014, the Operating Partnership held 76.1% of its same-store carrying value of its real estate portfolio in its primary markets. We believe that this diversification
increases investment opportunity and decreases the risk associated with cyclical local real estate markets and economies, thereby increasing the stability and
predictability of our earnings.
Competition for new residents is generally intense across all of our markets. Some competing communities offer features that our communities do not have.
Competing communities can use rental concessions or lower rents to obtain temporary competitive advantages. Also, some competing communities are larger or
newer than our communities. The competitive position of each community is different depending upon many factors including sub-market supply and demand.
In addition,
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other real estate investors compete with us to acquire existing properties, redevelop existing properties, and to develop new properties. These competitors
include insurance companies, pension and investment funds, public and private real estate companies, investment companies and other public and private
apartment REITs, some of which may have greater resources, or lower capital costs, than we do.
We believe that, in general, we are well-positioned to compete effectively for residents and investments. We believe our competitive advantages include:
•
•
•
•
•
a fully integrated organization with property management, development, redevelopment, acquisition, marketing, sales and financing expertise;
scalable operating and support systems, which include automated systems to meet the changing electronic needs of our residents and to effectively
focus on our Internet marketing efforts;
access to sources of capital;
geographic diversification with a presence in 20 markets across the country; and
significant presence in many of our major markets that allows us to be a local operating expert.
Moving forward, we will continue to optimize lease management, improve expense control, increase resident retention efforts and align employee incentive
plans with our bottom line performance. We believe this plan of operation, coupled with the portfolio’s strengths in targeting renters across a geographically
diverse platform, should position us for continued operational upside.
Communities
At December 31, 2014, our consolidated real estate portfolio included 139 communities with a total of 39,851 completed apartment homes, which included
the Operating Partnership’s consolidated real estate portfolio of 68 communities with a total of 20,814 completed apartment homes. The overall quality of our
portfolio enables us to raise rents and to attract residents with higher levels of disposable income who are more likely to absorb such rents.
At December 31, 2014, the Company was developing one wholly-owned community with 369 apartment homes, none of which have been completed. In
addition, at December 31, 2014, the Company had three communities with 825 apartment homes which were completed but not yet stabilized.
At December 31, 2014, the Company was redeveloping 708 apartment homes, 694 of which have been completed, at one wholly-owned community with 739
apartment homes.
Same-Store Community Comparison
We believe that one pertinent quantitative measurement of the performance of our portfolio is tracking the results of our same-store communities’ NOI,
which is total rental revenue, less rental expenses excluding property management and other operating expenses. Our same-store community population is
comprised of operating communities which we own and have stabilized occupancy, revenues and expenses as of the beginning of the prior year.
For the year ended December 31, 2014, our same-store NOI increased by $21.6 million or 5.2% compared to the prior year. Our same-store community
properties provided 79.2% of our total NOI for the year ended December 31, 2014. The increase in NOI for the 34,581 same-store apartment homes, or 86.8% of
our portfolio, was driven by an increase in rental rates, fee and reimbursement income, and increased occupancy, partially offset by an increase in real estate
taxes and insurance expenses.
For the year ended December 31, 2014, the Operating Partnership’s same-store NOI increased by $15.2 million or 6.1% compared to the prior year. Our
same-store community properties provided 88.1% of our total NOI for the year ended December 31, 2014. The increase in NOI for the 19,010 same-store apartment
homes, or 91.3% of the Operating Partnership’s portfolio, was driven by an increase in rental rates, fee and reimbursement income, and increased occupancy,
partially offset by an increase in operating expenses.
Revenue growth in 2015 may be impacted by adverse developments affecting the economy generally, reduced occupancy rates, increased rental
concessions, new supply, increased bad debt and other factors which may adversely impact our ability to increase rents.
Tax Matters
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UDR has elected to be taxed as a REIT under the Code. To continue to qualify as a REIT, UDR must continue to meet certain tests that, among other
things, generally require that our assets consist primarily of real estate assets, our income be derived primarily from real estate assets, and that we distribute at
least 90% of our REIT taxable income (other than net capital gains) to our stockholders annually. Provided we maintain our qualification as a REIT, we generally
will not be subject to U.S. federal income taxes at the corporate level on our net income to the extent such net income is distributed to our stockholders annually.
Even if we continue to qualify as a REIT, we will continue to be subject to certain federal, state and local taxes on our income and property.
We may utilize our taxable REIT subsidiary (“TRS”) to engage in activities that REITs may be prohibited from performing, including the provision of
management and other services to third parties and the conduct of certain nonqualifying real estate transactions. Our TRS generally is taxable as a regular
corporation, and therefore, subject to federal, state and local income taxes.
The Operating Partnership intends to qualify as a partnership for federal income tax purposes. As a partnership, the Operating Partnership generally is not
a taxable entity and does not incur federal income tax liability. However, any state or local revenue, excise or franchise taxes that result from the operating
activities of the Operating Partnership are incurred at the entity level.
Inflation
We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results through
wage pressures, property taxes, utilities and material costs, substantially all of our leases are for a term of 14 months or less, which generally enables us to
compensate for any inflationary effects by increasing rents on our apartment homes. Although an escalation in energy and food 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 year ended December 31,
2014.
Environmental Matters
Various environmental laws govern certain aspects of the ongoing operation of our communities. Such environmental laws include those regulating the
existence of asbestos-containing materials in buildings, management of surfaces with lead-based paint (and notices to residents about the lead-based paint), use
of active underground petroleum storage tanks, and waste-management activities. The failure to comply with such requirements could subject us to a
government enforcement action and/or claims for damages by a private party.
To date, compliance with federal, state and local environmental protection regulations has not had a material effect on our capital expenditures, earnings or
competitive position. We have a property management plan for hazardous materials. As part of the plan, Phase I environmental site investigations and reports
have been completed for each property we acquire. In addition, all proposed acquisitions are inspected prior to acquisition. The inspections are conducted by
qualified environmental consultants, and we review the issued report prior to the purchase or development of any property. Nevertheless, it is possible that the
environmental assessments will not reveal all environmental liabilities, or that some material environmental liabilities exist of which we are unaware. In some
cases, we have abandoned otherwise economically attractive acquisitions because the costs of removal or control of hazardous materials have been prohibitive
or we have been unwilling to accept the potential risks involved. We do not believe we will be required to engage in any large-scale abatement at any of our
properties. We believe that through professional environmental inspections and testing for asbestos, lead paint and other hazardous materials, coupled with a
relatively conservative posture toward accepting known environmental risk, we can minimize our exposure to potential liability associated with environmental
hazards.
Federal legislation requires owners and landlords of residential housing constructed prior to 1978 to disclose to potential residents or purchasers of the
communities any known lead paint hazards and imposes treble damages for failure to provide such notification. In addition, lead based paint in any of the
communities may result in lead poisoning in children residing in that community if chips or particles of such lead based paint are ingested, and we may be held
liable under state laws for any such injuries caused by ingestion of lead based paint by children living at the communities.
We are unaware of any environmental hazards at any of our properties that individually or in the aggregate may have a material adverse impact on our
operations or financial position. We have not been notified by any governmental authority, and we are not otherwise aware, of any material non-compliance,
liability, or claim relating to environmental liabilities in connection with any of our properties. We do not believe that the cost of continued compliance with
applicable environmental laws and regulations will have a material adverse effect on us or our financial condition or results of operations. Future environmental
laws, regulations, or ordinances, however, may require additional remediation of existing conditions that are not
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currently actionable. Also, if more stringent requirements are imposed on us in the future, the costs of compliance could have a material adverse effect on our
results of operations and our financial condition.
Insurance
We carry comprehensive general liability coverage on our communities, with limits of liability customary within the multi-family apartment industry to
insure against liability claims and related defense costs. We are also insured, with limits of liability customary within the multi-family apartment industry, against
the risk of direct physical damage in amounts necessary to reimburse us on a replacement cost basis for costs incurred to repair or rebuild each property,
including loss of rental income during the reconstruction period.
Available Information
Both UDR and the Operating Partnership file electronically with the Securities and Exchange Commission their respective annual reports on Form 10-K,
quarterly reports on Form 10-Q, and current reports on Form 8-K, pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. You may obtain a free
copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and amendments to those reports on the day of filing
with the SEC on our website at www.udr.com, or by sending an e-mail message to ir@udr.com.
Item 1A. RISK FACTORS
There are many factors that affect the business and the results of operations of the Company and the Operating Partnership, some of which are beyond
the control of the Company and the Operating Partnership. The following is a description of important factors that may cause the actual results of operations of
the Company and the Operating Partnership in future periods to differ materially from those currently expected or discussed in forward-looking statements set
forth in this Report relating to our financial results, operations and business prospects. 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.
Risks Related to Our Real Estate Investments and Our Operations
Unfavorable Apartment Market and Economic Conditions Could Adversely Affect Occupancy Levels, Rental Revenues and the Value of Our Real
Estate Assets. Unfavorable market conditions in the areas in which we operate and unfavorable economic conditions generally may significantly affect our
occupancy levels, our rental rates and collections, the value of the properties and our ability to strategically acquire or dispose of apartment communities on
economically favorable terms. Our ability to lease our properties at favorable rates is adversely affected by the increase in supply in the multifamily and other
rental markets and is dependent upon the overall level in the economy, which is adversely affected by, among other things, job losses and unemployment levels,
recession, personal debt levels, a downturn in the housing market, stock market volatility and uncertainty about the future. Some of our major expenses,
including mortgage payments, generally do not decline when related rents decline. We would expect that declines in our occupancy levels, rental revenues
and/or the values of our apartment communities would cause us to have less cash available to pay our indebtedness and to distribute to UDR’s stockholders,
which could adversely affect our financial condition and the market value of our securities. Factors that may affect our occupancy levels, our rental revenues,
and/or the value of our properties include the following, among others:
• downturns in the national, regional and local economic conditions, particularly increases in unemployment;
• declines in mortgage interest rates, making alternative housing more affordable;
• government or builder incentives which enable first time homebuyers to put little or no money down, making alternative housing options more
attractive;
• local real estate market conditions, including oversupply of, or reduced demand for, apartment homes;
• declines in the financial condition of our tenants, which may make it more difficult for us to collect rents from some tenants;
• changes in market rental rates;
• our ability to renew leases or re-lease space on favorable terms;
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• the timing and costs associated with property improvements, repairs or renovations;
• declines in household formation; and
• rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases in operating
costs.
We May Be Unable to Renew Leases or Relet Apartment Units as Leases Expire. When our residents decide to leave our apartments, whether because
they decide not to renew their leases or they leave prior to their lease expiration date, we may not be able to relet their apartment units. Even if the residents do
renew or we can relet the apartment units, the terms of renewal or reletting may be less favorable than current lease terms. If we are unable to promptly renew the
leases or relet the apartment units, or if the rental rates upon renewal or reletting are significantly lower than expected rates, then our results of operations and
financial condition may be adversely affected. If residents do not experience increases in their income, we may be unable to increase rent and/or delinquencies
may increase.
Substantial International, National and Local Government Spending and Increasing Deficits May Adversely Impact Our Business, Financial
Condition and Results of Operations. The values of, and the cash flows from, the properties we own are affected by developments in global, national and local
economies. As a result of the most recent recession and the significant government interventions, federal, state and local governments have incurred record
deficits and assumed or guaranteed liabilities of private financial institutions or other private entities. These increased budget deficits and the weakened
financial condition of federal, state and local governments may lead to reduced governmental spending, tax increases, public sector job losses, increased interest
rates, currency devaluations or other adverse economic events, which may directly or indirectly adversely affect our business, financial condition and results of
operations.
Risk of Inflation/Deflation. Substantial inflationary or deflationary pressures could have a negative effect on rental rates and property operating
expenses. The general risk of inflation is that interest on our debt and general and administrative expenses increase at a rate faster than increases in our rental
rates, which could adversely affect our results of operations, cash flow and ability to make distributions to UDR’s stockholders. The predominant effects of
deflation include high unemployment and credit contraction. Restricted lending practices could impact our ability to obtain financing or refinancing for our
properties.
We Are Subject to Certain Risks Associated with Selling Apartment Communities, Which Could Limit Our Operational and Financial Flexibility. We
periodically dispose of apartment communities that no longer meet our strategic objectives, but adverse market conditions may make it difficult to sell apartment
communities like the ones we own. We cannot predict whether we will be able to sell any property for the price or on the terms we set, or whether any price or
other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to
close the sale of a property. Furthermore, we may be required to expend funds to correct defects or to make improvements before a property can be sold. These
conditions may limit our ability to dispose of properties and to change our portfolio promptly in order to meet our strategic objectives, which may in turn have a
material adverse effect on our financial condition and the market value of our securities. We are also subject to the following risks in connection with sales of our
apartment communities:
• a significant portion of the proceeds from our overall property sales may be held by intermediaries in order for some sales to qualify as like-kind
exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended, or the “Code,” so that any related capital gain can be deferred for
federal income tax purposes. As a result, we may not have immediate access to all of the cash proceeds generated from our property sales; and
• federal tax laws limit our ability to profit on the sale of communities that we have owned for less than two years, and this limitation may prevent us from
selling communities when market conditions are favorable.
Competition Could Limit Our Ability to Lease Apartment Homes or Increase or Maintain Rents. Our apartment communities compete with numerous
housing alternatives in attracting residents, including other apartment communities, condominiums and single-family rental homes, as well as owner occupied
single-and multi-family homes. Competitive housing in a particular area could adversely affect our ability to lease apartment homes and increase or maintain
rents, which could materially adversely affect our results of operations and financial condition.
We May Not Realize the Anticipated Benefits of Past or Future Acquisitions, and the Failure to Integrate Acquired Communities and New Personnel
Successfully Could Create Inefficiencies. We have selectively acquired in the past, and if presented with attractive opportunities we intend to selectively
acquire in the future, apartment communities that meet our investment criteria. Our acquisition activities and their success are subject to the following risks:
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• we may be unable to obtain financing for acquisitions on favorable terms or at all;
• even if we are able to finance the acquisition, cash flow from the acquisition may be insufficient to meet our required principal and interest payments on
the acquisition;
• even if we enter into an acquisition agreement for an apartment community, we may be unable to complete the acquisition after incurring certain
acquisition-related costs;
• we may incur significant costs and divert management attention in connection with the evaluation and negotiation of potential acquisitions, including
potential acquisitions that we are subsequently unable to complete;
• when we acquire an apartment community, we may invest additional amounts in it with the intention of increasing profitability, and these additional
investments may not produce the anticipated improvements in profitability;
• the expected occupancy rates and rental rates may differ from actual results; and
• we may be unable to quickly and efficiently integrate acquired apartment communities and new personnel into our existing operations, and the failure to
successfully integrate such apartment communities or personnel will result in inefficiencies that could adversely affect our expected return on our
investments and our overall profitability.
Competition Could Adversely Affect Our Ability to Acquire Properties. In the past, other real estate investors, including insurance companies, pension
and investment funds, developer partnerships, investment companies and other public and private apartment REITs, have competed with us to acquire existing
properties and to develop new properties, and such competition in the future may make it more difficult for us to pursue attractive investment opportunities on
favorable terms, which could adversely affect our ability to grow or acquire properties profitably or with attractive returns.
Development and Construction Risks Could Impact Our Profitability. In the past we have selectively pursued the development and construction of
apartment communities, and we intend to do so in the future as appropriate opportunities arise. Development activities have been, and in the future may be,
conducted through wholly-owned affiliated companies or through joint ventures with unaffiliated parties. Our development and construction activities are
subject to the following risks:
• we may be unable to obtain construction financing for development activities under favorable terms, including but not limited to interest rates, maturity
dates and/or loan to value ratios, or at all which could cause us to delay or even abandon potential developments;
• we may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and
authorizations, which could result in increased development costs, could delay initial occupancy dates for all or a portion of a development community,
and could require us to abandon our activities entirely with respect to a project for which we are unable to obtain permits or authorizations;
• yields may be less than anticipated as a result of delays in completing projects, costs that exceed budget and/or higher than expected concessions for
lease up and lower rents than expected;
• if we are unable to find joint venture partners to help fund the development of a community or otherwise obtain acceptable financing for the
developments, our development capacity may be limited;
• we may abandon development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection
with exploring such opportunities;
• we may be unable to complete construction and lease-up of a community on schedule, or incur development or construction costs that exceed our
original estimates, and we may be unable to charge rents that would compensate for any increase in such costs;
• occupancy rates and rents at a newly developed community may fluctuate depending on a number of factors, including market and economic
conditions, preventing us from meeting our profitability goals for that community; and
• when we sell to third parties communities or properties that we developed or renovated, we may be subject to warranty or construction defect claims
that are uninsured or exceed the limits of our insurance.
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In some cases in the past, the costs of upgrading acquired communities exceeded our original estimates. We may experience similar cost increases in the
future. Our inability to charge rents that will be sufficient to offset the effects of any increases in these costs may impair our profitability.
Bankruptcy or Defaults of Our Counterparties Could Adversely Affect Our Performance. We have relationships with and, from time to time, we execute
transactions with or receive services from many counterparties, such as general contractors engaged in connection with our development activities. As a result,
bankruptcies or defaults by these counterparties could result in services not being provided, projects not being completed on time, or on budget, or at all, or
volatility in the financial markets and economic weakness could affect the counterparties’ ability to complete transactions with us as intended, both of which
could result in disruptions to our operations that may adversely affect our business and results of operations.
Property Ownership Through Joint Ventures May Limit Our Ability to Act Exclusively in Our Interest. We have in the past and may in the future
develop and/or acquire properties in joint ventures with other persons or entities when we believe circumstances warrant the use of such structures. We
currently have 15 active joint ventures and partnerships, excluding our participating loan investment, with a total equity investment of $655.5 million. We could
become engaged in a dispute with one or more of our joint venture partners which might affect our ability to operate a jointly-owned property. Moreover, joint
venture partners may have business, economic or other objectives that are inconsistent with our objectives, including objectives that relate to the appropriate
timing and terms of any sale or refinancing of a property. In some instances, joint venture partners may have competing interests in our markets that could create
conflicts of interest. Also, our joint venture partners might refuse to make capital contributions when due and we may be responsible to our partners for
indemnifiable losses. In general, we and our partners may each have the right to trigger a buy-sell arrangement, which could cause us to sell our interest, or
acquire our partners’ interest, at a time when we otherwise would not have initiated such a transaction and may result in the valuation of our interest in the joint
venture (if we are the seller) or of the other partner’s interest in the joint venture (if we are the buyer) at levels which may not be representative of the valuation
that would result from an arm’s length marketing process.
We are also subject to risk in cases where an institutional owner is our joint venture partner, including (i) a deadlock if we and our joint venture partner
are unable to agree upon certain major and other decisions, (ii) the limitation of our ability to liquidate our position in the joint venture without the consent of the
other joint venture partner, and (iii) the requirement to provide guarantees in favor of lenders with respect to the indebtedness of the joint venture.
We Could Incur Significant Insurance Costs and Some Potential Losses May Not Be Adequately Covered by Insurance. We have a comprehensive
insurance program covering our property and operating activities with limits of liability customary within the multi-family industry. We believe the policy
specifications and insured limits of these policies are adequate and appropriate. There are, however, certain types of extraordinary losses which may not be
adequately covered under our insurance program. In addition, we will sustain losses due to insurance deductibles, self-insured retention, uninsured claims or
casualties, or losses in excess of applicable coverage.
If an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a property, as well as the
anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations
related to the property. Material losses in excess of insurance proceeds may occur in the future. If one or more of our significant properties were to experience a
catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Such events could
adversely affect our cash flow and ability to make distributions to UDR’s stockholders.
As a result of our substantial real estate holdings, the cost of insuring our apartment communities is a significant component of expense. Insurance
premiums are subject to significant increases and fluctuations, which are generally outside of our control. We insure our properties with insurance companies
that we believe have a good rating at the time our policies are put into effect. The financial condition of one or more of our insurance companies that we hold
policies with may be negatively impacted, which could result in their inability to pay on future insurance claims. Their inability to pay future claims may have a
negative impact on our financial results. In addition, the failure of one or more insurance companies may increase the costs to renew our insurance policies or
increase the cost of insuring additional properties and recently developed or redeveloped properties.
Failure to Succeed in New Markets May Limit Our Growth. We have acquired in the past, and we may acquire in the future if appropriate opportunities
arise, apartment communities that are outside of our existing markets. Entering into new markets may expose us to a variety of risks, and we may not be able to
operate successfully in new markets. These risks include, among others:
• inability to accurately evaluate local apartment market conditions and local economies;
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• inability to hire and retain key personnel;
• lack of familiarity with local governmental and permitting procedures; and
• inability to achieve budgeted financial results.
Potential Liability for Environmental Contamination Could Result in Substantial Costs. Under various federal, state and local environmental laws, as a
current or former owner or operator of real estate, we could be required to investigate and remediate the effects of contamination of currently or formerly owned
real estate by hazardous or toxic substances, often regardless of our knowledge of or responsibility for the contamination and solely by virtue of our current or
former ownership or operation of the real estate. In addition, we could be held liable to a governmental authority or to third parties for property damage and for
investigation and clean-up costs incurred in connection with the contamination. These costs could be substantial, and in many cases environmental laws create
liens in favor of governmental authorities to secure their payment. The presence of such substances or a failure to properly remediate any resulting
contamination could materially and adversely affect our ability to borrow against, sell or rent an affected property.
In addition, our properties are subject to various federal, state and local environmental, health and safety laws, including laws governing the management
of wastes and underground and aboveground storage tanks. Noncompliance with these environmental, health and safety laws could subject us to liability.
Changes in laws could increase the potential costs of compliance with environmental laws, health and safety laws or increase liability for noncompliance. This
may result in significant unanticipated expenditures or may otherwise materially and adversely affect our operations.
As the owner or operator of real property, we may also incur liability based on various building conditions. For example, buildings and other structures on
properties that we currently own or operate or those we acquire or operate in the future contain, may contain, or may have contained, asbestos-containing
material, or ACM. Environmental, health and safety laws require that ACM be properly managed and maintained and may impose fines or penalties on owners,
operators or employers for non-compliance with those requirements.
These requirements include special precautions, such as removal, abatement or air monitoring, if ACM would be disturbed during maintenance,
renovation or demolition of a building, potentially resulting in substantial costs. In addition, we may be subject to liability for personal injury or property damage
sustained as a result of exposure to ACM or releases of ACM into the environment.
We cannot assure you that costs or liabilities incurred as a result of environmental issues will not affect our ability to make distributions to our
stockholders, or that such costs or liabilities will not have a material adverse effect on our financial condition and results of operations.
Our Properties May Contain or Develop Harmful Mold or Suffer from Other Indoor Air Quality Issues, Which Could Lead to Liability for Adverse
Health Effects or Property Damage or Cost for Remediation. When excessive moisture accumulates in buildings or on building materials, mold growth may
occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants.
Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants
such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants can be alleged to cause a variety of adverse health effects and symptoms,
including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to
undertake a costly remediation program to contain or remove the mold or other airborne contaminants or to increase ventilation, which could adversely affect our
results of operations and cash flow. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants or
others if property damage or personal injury occurs.
Compliance or Failure to Comply with the Americans with Disabilities Act of 1990 or Other Safety Regulations and Requirements Could Result in
Substantial Costs. The Americans with Disabilities Act generally requires that public buildings, including our properties, be made accessible to disabled
persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants. From time to time claims
may be asserted against us with respect to some of our properties under the Americans with Disabilities Act. If, under the Americans with Disabilities Act, we
are required to make substantial alterations and capital expenditures in one or more of our properties, including the removal of access barriers, it could adversely
affect our financial condition and results of operations.
Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to
comply with these requirements, we could incur fines or private damage awards. We do not
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know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that will
affect our cash flow and results of operations.
Compliance with or Changes in Real Estate Tax and Other Laws Could Adversely Affect Our Funds from Operations and Our Ability to Make
Distributions to Stockholders. Generally we do not directly pass through costs resulting from compliance with or changes in real estate tax laws to residential
property tenants. We also do not generally pass through increases in income, service or other taxes, to tenants under leases. These costs may adversely affect
net operating income and the ability to make distributions to stockholders. Similarly, compliance with or changes in (i) laws increasing the potential liability for
environmental conditions existing on properties or the restrictions on discharges or other conditions or (ii) rent control or rent stabilization laws or other laws
regulating housing, such as the Americans with Disabilities Act and the Fair Housing Amendments Act of 1988, may result in significant unanticipated
expenditures, which would adversely affect our funds from operations and the ability to make distributions to stockholders.
Risk of Damage from Catastrophic Weather and Natural Events and Potential Climate Change. Certain of our communities are located in areas that may
experience catastrophic weather and other natural events from time to time, including mudslides, fires, hurricanes, tornadoes, snow or ice storms, or other severe
inclement weather. These adverse weather and natural events could cause damage or losses that may be greater than insured levels. In the event of a loss in
excess of insured limits, we could lose our capital invested in the affected community, as well as anticipated future revenue from that community. We would also
continue to be obligated to repay any mortgage indebtedness or other obligations related to the community. Any such loss could materially and adversely affect
our business and our financial condition and results of operations.
To the extent that we experience any significant changes in the climate in areas where our communities are located, we may experience extreme weather
conditions and prolonged changes in precipitation and temperature, all of which could result in physical damage to, and/or a decrease in demand for, our
communities located in these areas. Should the impact of such climate change be material in nature, or occur for lengthy periods of time, our financial condition
and results of operations may be adversely affected.
Risk of Earthquake Damage. Some of our communities are located in the general vicinity of active earthquake faults. We cannot assure you that an
earthquake would not cause damage or losses greater than insured levels. In the event of a loss in excess of insured limits, we could lose our capital invested in
the affected community, as well as anticipated future revenue from that community. We would also continue to be obligated to repay any mortgage
indebtedness or other obligations related to the community. Any such loss could materially and adversely affect our business, financial condition and results of
operations. Insurance coverage for earthquakes can be costly due to limited industry capacity. As a result, we may experience shortages in desired coverage
levels if market conditions are such that insurance is not available or the cost of insurance makes it, in management’s view, economically impractical.
Risk of Accidental Death Due to Fire, Natural Disasters or Other Hazards. The accidental death of persons living in our communities due to fire, natural
disasters or other hazards could have a material adverse effect on our business and results of operations. Our insurance coverage may not cover all losses
associated with such events, and we may experience difficulty marketing communities where such any such events have occurred, which could have a material
adverse effect on our business and results of operations.
Actual or Threatened Terrorist Attacks May Have an Adverse Effect on Our Business and Operating Results and Could Decrease the Value of Our
Assets. Actual or threatened terrorist attacks and other acts of violence or war could have a material adverse effect on our business and operating results.
Attacks that directly impact one or more of our apartment communities could significantly affect our ability to operate those communities and thereby impair our
ability to achieve our expected results. Further, our insurance coverage may not cover all losses caused by a terrorist attack. In addition, the adverse effects that
such violent acts and threats of future attacks could have on the U.S. economy could similarly have a material adverse effect on our business and results of
operations.
Mezzanine Loan Assets Involve Greater Risks of Loss than Senior Loans Secured by Income-producing Properties. We may acquire mezzanine loans,
which take the form of subordinated loans secured by second mortgages on the underlying property or loans secured by a pledge of the ownership interests of
either the entity owning the property or a pledge of the ownership interests of the entity that owns the interest in the entity owning the property. Mezzanine
loans may involve a higher degree of risk than long-term senior mortgage lending secured by income-producing real property, because the loan may become
unsecured as a result of foreclosure by the senior lender and because it is in second position and there may not be adequate equity in the property. In the event
of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets
of the entity may not be sufficient to satisfy our mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a
borrower
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bankruptcy, our mezzanine loan will be satisfied only after the senior debt. As a result, we may not recover some of or all our initial expenditure. In addition,
mezzanine loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the property and increasing the risk of loss of
principal.
We May Experience a Decline in the Fair Value of Our Assets and Be Forced to Recognize Impairment Charges, Which Could Materially and
Adversely Impact Our Financial Condition, Liquidity and Results of Operations and the Market Price of UDR’s Common Stock. A decline in the fair value of
our assets may require us to recognize an impairment against such assets under generally accepted accounting principles as in effect in the United States
(“GAAP”), if we were to determine that, with respect to any assets in unrealized loss positions, we do not have the ability and intent to hold such assets to
maturity or for a period of time sufficient to allow for recovery to the amortized cost of such assets. If such a determination were to be made, we would recognize
unrealized losses through earnings and write down the amortized cost of such assets to a new cost basis, based on the fair value of such assets on the date they
are considered to be impaired. Such impairment charges reflect non-cash losses at the time of recognition; subsequent disposition or sale of such assets could
further affect our future losses or gains, as they are based on the difference between the sale price received and adjusted amortized cost of such assets at the
time of sale. If we are required to recognize asset impairment charges in the future, these charges could materially and adversely affect our financial condition,
liquidity, results of operations and the per share trading price of UDR’s common stock.
Any Material Weaknesses Identified in Our Internal Control Over Financial Reporting Could Have an Adverse Effect on UDR’s Stock Price.
Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting. If we identify one or more
material weaknesses in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports,
which in turn could have an adverse effect on UDR’s stock price.
Our Business and Operations Would Suffer in the Event of System Failures or Breaches in Data Security. Despite system redundancy, the
implementation of security measures and the existence of a disaster recovery plan for our internal information technology systems, our systems are vulnerable to
damages from any number of sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war, and
telecommunication failures. We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic
information and to manage or support a variety of our business processes, including financial transactions and keeping of records, which may include personal
identifying information of tenants and lease data. We rely on commercially available systems, software, tools and monitoring to provide security for processing,
transmitting and storing confidential tenant information, such as individually identifiable information relating to financial accounts. Although we take steps to
protect the security of the data maintained in our information systems, it is possible that our security measures will not be able to prevent the systems’ improper
functioning, or the improper disclosure of personally identifiable information, such as in the event of cyber attacks. Security breaches, including physical or
electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of
confidential information. Any failure to maintain proper function, security and availability of our information systems could interrupt our operations, damage our
reputation, subject us to liability claims or regulatory penalties and could materially and adversely affect us.
Our Success Depends on Our Senior Management. Our success depends upon the retention of our senior management, whose continued service is not
guaranteed. We may not be able to find qualified replacements for the individuals who make up our senior management if their services should no longer be
available to us. The loss of services of one or more members of our senior management team could have a material adverse effect on our business, financial
condition and results of operations.
We May be Adversely Affected by New Federal Laws and Regulations. The United States Administration and Congress have enacted, or called for
consideration of, proposals relating to a variety of issues, including with respect to health care, financial regulation reform, climate change, executive
compensation and others. We believe that these and other potential proposals could have varying degrees of impact on us ranging from minimal to material. At
this time, we are unable to predict with certainty what level of impact specific proposals could have on us.
Federal rulemaking and administrative efforts that may have an impact on us focus principally on the areas perceived as contributing to the global
financial crisis and the most recent economic recession. These initiatives have created a degree of uncertainty regarding the basic rules governing the real estate
industry and many other businesses that is unprecedented in the United States at least since the wave of lawmaking and regulatory reform that followed in the
wake of the Great Depression. The federal legislative response in this area culminated in the enactment on July 21, 2010 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (“Dodd-Frank Act”). Many of the provisions of the Dodd-Frank Act have extended implementation periods and delayed effective
dates and continue to require extensive rulemaking by regulatory authorities; thus, the impact on us may not be known for an extended period of time. The
Dodd-Frank Act, including future rules implementing its provisions and the interpretation of those rules, along with other legislative and regulatory proposals
that are
15
proposed or pending in the United States Congress, may limit our revenues, impose fees or taxes on us, and/or intensify the regulatory framework in which we
operate in ways that are not currently identifiable.
Changing laws, regulations and standards relating to corporate governance and public disclosure in particular, including certain provisions of the Dodd-
Frank Act and the rules and regulations promulgated thereunder, have created uncertainty for public companies like ours and could significantly increase the
costs and risks associated with accessing the U.S. public markets. Because we are committed to maintaining high standards of internal control over financial
reporting, corporate governance and public disclosure, our management team will need to devote significant time and financial resources to comply with these
evolving standards for public companies. We intend to continue to invest appropriate resources to comply with both existing and evolving standards, and this
investment has resulted and will likely continue to result in increased general and administrative expenses and a diversion of management time and attention
from revenue generating activities to compliance activities.
We May be Adversely Affected by New State and Local Laws and Regulations. We are subject to state and local laws, regulations and ordinances at
locations where we operate and to the rules and regulations of various local authorities regarding a wide variety of matters that could affect, directly or
indirectly, our operations. We cannot predict what matters might be considered in the future by these state and local authorities, nor can we judge what impact,
if any, the implementation of new legislation might have on our business.
Changes in U.S. Accounting Standards May Materially and Adversely Affect Our Reported Results of Operations. Accounting for public companies in
the United States is in accordance with GAAP, which is established by the Financial Accounting Standards Board (the “FASB”), an independent body whose
standards are recognized by the SEC as authoritative for publicly held companies. Uncertainties posed by various initiatives of accounting standard-setting by
the FASB and the SEC, which create and interpret applicable accounting standards for U.S. companies, may change the financial accounting and reporting
standards or their interpretation and application of these standards that govern the preparation of our financial statements. These changes could have a material
impact on our reported financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively,
resulting in potentially material restatements of prior period financial statements.
Risks Related to Our Indebtedness and Financings
Insufficient Cash Flow Could Affect Our Debt Financing and Create Refinancing Risk. We are subject to the risks normally associated with debt
financing, including the risk that our operating income and cash flow will be insufficient to make required payments of principal and interest, or could restrict our
borrowing capacity under our line of credit due to debt covenant restraints. Sufficient cash flow may not be available to make all required principal payments and
still satisfy UDR’s distribution requirements to maintain its status as a REIT for federal income tax purposes. In addition, the full limits of our line of credit may
not be available to us if our operating performance falls outside the constraints of our debt covenants. We are also likely to need to refinance substantially all of
our outstanding debt as it matures. We may not be able to refinance existing debt, or the terms of any refinancing may not be as favorable as the terms of the
existing debt, which could create pressures to sell assets or to issue additional equity when we would otherwise not choose to do so. In addition, our failure to
comply with our debt covenants could result in a requirement to repay our indebtedness prior to its maturity, which could have an adverse effect on our cash
flow, increase our financing costs and impact our ability to make distributions to UDR’s stockholders.
Failure to Generate Sufficient Revenue Could Impair Debt Service Payments and Distributions to Stockholders. If our apartment communities do not
generate sufficient net rental income to meet rental expenses, our ability to make required payments of interest and principal on our debt securities and to pay
distributions to UDR’s stockholders will be adversely affected. The following factors, among others, may affect the net rental income generated by our
apartment communities:
• the national and local economies;
• local real estate market conditions, such as an oversupply of apartment homes;
• tenants’ perceptions of the safety, convenience, and attractiveness of our communities and the neighborhoods where they are located;
• our ability to provide adequate management, maintenance and insurance;
• rental expenses, including real estate taxes and utilities;
• competition from other apartment communities;
16
• changes in interest rates and the availability of financing;
• changes in governmental regulations and the related costs of compliance; and
• changes in tax and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing.
Expenses associated with our investment in an apartment community, such as debt service, real estate taxes, insurance and maintenance costs, are
generally not reduced when circumstances cause a reduction in rental income from that community. If a community is mortgaged to secure payment of debt and
we are unable to make the mortgage payments, we could sustain a loss as a result of foreclosure on the community or the exercise of other remedies by the
mortgage holder.
Our Debt Level May Be Increased. Our current debt policy does not contain any limitations on the level of debt that we may incur, although our ability to
incur debt is limited by covenants in our bank and other credit agreements. We manage our debt to be in compliance with these debt covenants, but subject to
compliance with these covenants, we may increase the amount of our debt at any time without a concurrent improvement in our ability to service the additional
debt.
Financing May Not Be Available and Could Be Dilutive. Our ability to execute our business strategy depends on our access to an appropriate blend of
debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including common and preferred
equity. We and other companies in the real estate industry have experienced limited availability of financing from time to time. If we issue additional equity
securities to finance developments and acquisitions instead of incurring debt, the interests of our existing stockholders could be diluted.
Failure To Maintain Our Current Credit Ratings Could Adversely Affect Our Cost of Funds, Related Margins, Liquidity, and Access to Capital
Markets. Moody’s and Standard & Poor’s, the major debt rating agencies, routinely evaluate our debt and have given us ratings on our senior unsecured debt
and preferred stock. These ratings are based on a number of factors, which included their assessment of our financial strength, liquidity, capital structure, asset
quality, and sustainability of cash flow and earnings. Due to changes in these factors and market conditions, we may not be able to maintain our current credit
ratings, which could adversely affect our cost of funds and related margins, liquidity, and access to capital markets.
Disruptions in Financial Markets May Adversely Impact Availability and Cost of Credit and Have Other Adverse Effects on Us and the Market Price of
UDR’s Stock. Our ability to make scheduled payments or to refinance debt obligations will depend on our operating and financial performance, which in turn is
subject to prevailing economic conditions and to financial, business and other factors beyond our control. During the global financial crisis and the economic
recession that followed it, the United States stock and credit markets experienced significant price volatility, dislocations and liquidity disruptions, which caused
market prices of many stocks to fluctuate substantially and the spreads on debt financings to widen considerably. Those circumstances materially impacted
liquidity in the financial markets at times, making terms for certain financings less attractive, and in some cases resulted in the unavailability of financing. Any
future disruptions or uncertainty in the stock and credit markets may negatively impact our ability to refinance existing indebtedness and access additional
financing for acquisitions, development of our properties and other purposes at reasonable terms or at all, which may negatively affect our business and the
market price of UDR’s common stock. If we are not successful in refinancing our existing indebtedness when it becomes due, we may be forced to dispose of
properties on disadvantageous terms, which might adversely affect our ability to service other debt and to meet our other obligations. A prolonged downturn in
the financial markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our business plan
accordingly. These events also may make it more difficult or costly for us to raise capital through the issuance of UDR’s common or preferred stock.
A Change in U.S. Government Policy Regarding Fannie Mae or Freddie Mac Could Have a Material Adverse Impact on Our Business. Fannie Mae and
Freddie Mac are a major source of financing for secured multifamily rental real estate. We and other multifamily companies depend heavily on Fannie Mae and
Freddie Mac to finance growth by purchasing or guaranteeing apartment loans. In September 2008, the U.S. government assumed control of Fannie Mae and
Freddie Mac and placed both companies into a government conservatorship under the Federal Housing Finance Agency. The Administration and lawmakers
have proposed potential options for the future of mortgage finance in the U.S. that could involve the phase out of Fannie Mae and Freddie Mac. While we
believe Fannie Mae and Freddie Mac will continue to provide liquidity to our sector, should they discontinue doing so, have their mandates changed or reduced
or be disbanded or reorganized by the government, it would significantly reduce our access to debt capital and adversely affect our ability to finance or
refinance existing indebtedness at competitive rates and it may adversely affect our ability to sell assets. Uncertainty in the future activity and involvement of
Fannie Mae and Freddie Mac as a source of financing could negatively impact our ability to make acquisitions and make it more difficult or not possible for us to
sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of debt financing
or difficulties in obtaining debt financing.
17
The Soundness of Financial Institutions Could Adversely Affect Us. We have relationships with many financial institutions, including lenders under our
credit facilities, and, from time to time, we execute transactions with counterparties in the financial services industry. As a result, defaults by, or even rumors or
questions about, financial institutions or the financial services industry generally, could result in losses or defaults by these institutions. In the event that the
volatility of the financial markets adversely affects these financial institutions or counterparties, we or other parties to the transactions with us may be unable to
complete transactions as intended, which could adversely affect our business and results of operations.
Changing Interest Rates Could Increase Interest Costs and Adversely Affect Our Cash Flow and the Market Price of Our Securities. We currently have,
and expect to incur in the future, interest-bearing debt at rates that vary with market interest rates. As of December 31, 2014, UDR had approximately $579.7
million of variable rate indebtedness outstanding, which constitutes approximately 16.1% of total outstanding indebtedness as of such date. As of December 31,
2014, the Operating Partnership had approximately $219.8 million of variable rate indebtedness outstanding, which constitutes approximately 23.6% of total
outstanding indebtedness to third parties as of such date. An increase in interest rates would increase our interest expenses and increase the costs of
refinancing existing indebtedness and of issuing new debt. Accordingly, higher interest rates could adversely affect cash flow and our ability to service our debt
and to make distributions to security holders. The effect of prolonged interest rate increases could negatively impact our ability to make acquisitions and
develop properties. In addition, an increase in market interest rates may lead our security holders to demand a higher annual yield, which could adversely affect
the market price of UDR’s common and preferred stock and debt securities.
Interest Rate Hedging Contracts May Be Ineffective and May Result in Material Charges. From time to time when we anticipate issuing debt securities,
we may seek to limit our exposure to fluctuations in interest rates during the period prior to the pricing of the securities by entering into interest rate hedging
contracts. We may do this to increase the predictability of our financing costs. Also, from time to time we may rely on interest rate hedging contracts to limit our
exposure under variable rate debt to unfavorable changes in market interest rates. If the terms of new debt securities are not within the parameters of, or market
interest rates fall below that which we incur under a particular interest rate hedging contract, the contract is ineffective. Furthermore, the settlement of interest
rate hedging contracts has involved and may in the future involve material charges. In addition, our use of interest rate hedging arrangements may expose us to
additional risks, including a risk that a counterparty to a hedging arrangement may fail to honor its obligations. Developing an effective interest rate risk strategy
is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging activities
will have desired beneficial impact on our results of operations or financial condition. Termination of these hedging agreements typically involves costs, such as
transaction fees or breakage costs.
Risks Related to Tax Laws
We Would Incur Adverse Tax Consequences if UDR Failed to Qualify as a REIT. UDR has elected to be taxed as a REIT under the Code. Our qualification
as a REIT requires us to satisfy numerous requirements, some on an annual and quarterly basis, established under highly technical and complex Code provisions
for which there are only limited judicial or administrative interpretations, and involves the determination of various factual matters and circumstances not entirely
within our control. We intend that our current organization and method of operation enable us to continue to qualify as a REIT, but we may not so qualify or we
may not be able to remain so qualified in the future. In addition, U.S. federal income tax laws governing REITs and other corporations and the administrative
interpretations of those laws may be amended at any time, potentially with retroactive effect. Future legislation, new regulations, administrative interpretations or
court decisions could adversely affect our ability to qualify as a REIT or adversely affect UDR’s stockholders.
If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax (including any applicable alternative minimum tax) on our
taxable income at regular corporate rates, and would not be allowed to deduct dividends paid to UDR’s stockholders in computing our taxable income. Also,
unless the Internal Revenue Service granted us relief under certain statutory provisions, we could not re-elect REIT status until the fifth calendar year after the
year in which we first failed to qualify as a REIT. The additional tax liability from the failure to qualify as a REIT would reduce or eliminate the amount of cash
available for investment or distribution to UDR’s stockholders. This would likely have a significant adverse effect on the value of our securities and our ability
to raise additional capital. In addition, we would no longer be required to make distributions to UDR’s stockholders. Even if we continue to qualify as a REIT, we
will continue to be subject to certain federal, state and local taxes on our income and property.
Certain of our subsidiaries have also elected to be taxed as a REIT under the Code, and are therefore subject to the same risks in the event that they fail to
qualify as a REIT in any taxable year.
18
Dividends Paid By REITs Generally Do Not Qualify for Reduced Tax Rates. In general, the maximum U.S. federal income tax rate for dividends paid to
individual U.S. stockholders is 20%. Unlike dividends received from a corporation that is not a REIT, our distributions to individual stockholders generally are
not eligible for the reduced rates.
UDR May Conduct a Portion of Our Business Through Taxable REIT Subsidiaries, Which are Subject to Certain Tax Risks. We have established
several taxable REIT subsidiaries. Despite UDR’s qualification as a REIT, its taxable REIT subsidiaries must pay income tax on their taxable income. In addition,
we must comply with various tests to continue to qualify as a REIT for federal income tax purposes, and our income from and investments in our taxable REIT
subsidiaries generally do not constitute permissible income and investments for these tests. While we will attempt to ensure that our dealings with our taxable
REIT subsidiaries will not adversely affect our REIT qualification, we cannot provide assurance that we will successfully achieve that result. Furthermore, we
may be subject to a 100% penalty tax, we may jeopardize our ability to retain future gains on real property sales, or our taxable REIT subsidiaries may be denied
deductions, to the extent our dealings with our taxable REIT subsidiaries are not deemed to be arm’s length in nature or are otherwise not respected.
REIT Distribution Requirements Limit Our Available Cash. As a REIT, UDR is subject to annual distribution requirements, which limit the amount of
cash we retain for other business purposes, including amounts to fund our growth. We generally must distribute annually at least 90% of our net REIT taxable
income, excluding any net capital gain, in order for our distributed earnings not to be subject to corporate income tax. We intend to make distributions to UDR’s
stockholders to comply with the requirements of the Code. However, differences in timing between the recognition of taxable income and the actual receipt of
cash could require us to sell assets or borrow funds on a short-term or long-term basis to meet the 90% distribution requirement of the Code.
Certain Property Transfers May Generate Prohibited Transaction Income, Resulting in a Penalty Tax on Gain Attributable to the Transaction. From
time to time, we may transfer or otherwise dispose of some of our properties. Under the Code, any gain resulting from transfers of properties that we hold as
inventory or primarily for sale to customers in the ordinary course of business would be treated as income from a prohibited transaction and subject to a 100%
penalty tax. Since we acquire properties for investment purposes, we do not believe that our occasional transfers or disposals of property are prohibited
transactions. However, whether property is held for investment purposes is a question of fact that depends on all the facts and circumstances surrounding the
particular transaction. The Internal Revenue Service may contend that certain transfers or disposals of properties by us are prohibited transactions. If the
Internal Revenue Service were to argue successfully that a transfer or disposition of property constituted a prohibited transaction, then we would be required to
pay a 100% penalty tax on any gain allocable to us from the prohibited transaction and we may jeopardize our ability to retain future gains on real property sales.
In addition, income from a prohibited transaction might adversely affect UDR’s ability to satisfy the income tests for qualification as a REIT for federal income
tax purposes.
We Could Face Possible State and Local Tax Audits and Adverse Changes in State and Local Tax Laws. As discussed in the risk factors above,
because UDR is organized and qualifies as a REIT it is generally not subject to federal income taxes, but it is subject to certain state and local taxes. From time to
time, changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. A shortfall in tax revenues for states and
municipalities in which we own apartment communities may lead to an increase in the frequency and size of such changes. If such changes occur, we may be
required to pay additional state and local taxes. These increased tax costs could adversely affect our financial condition and the amount of cash available for the
payment of distributions to UDR’s stockholders. In the normal course of business, entities through which we own real estate may also become subject to tax
audits. If such entities become subject to state or local tax audits, the ultimate result of such audits could have an adverse effect on our financial condition.
The Operating Partnership Intends to Qualify as a Partnership, But Cannot Guarantee That It Will Qualify. The Operating Partnership intends to
qualify as a partnership for federal income tax purposes at any such time that the Operating Partnership admits additional limited partners other than UDR. If
classified as a partnership, the Operating Partnership generally will not be a taxable entity and will not incur federal income tax liability. However, the Operating
Partnership would be treated as a corporation for federal income tax purposes if it were a “publicly traded partnership,” unless at least 90% of the Operating
Partnership’s income was qualifying income as defined in the Code. A “publicly traded partnership” is a partnership whose partnership interests are traded on
an established securities market or are readily tradable on a secondary market (or the substantial equivalent thereof). Although the Operating Partnership’s
partnership units are not traded on an established securities market, because of the redemption right, the Operating Partnership’s units held by limited partners
could be viewed as readily tradable on a secondary market (or the substantial equivalent thereof), and the Operating Partnership may not qualify for one of the
“safe harbors” under the applicable tax regulations. Qualifying income for the 90% test generally includes passive income, such as real property rents, dividends
and interest. The income requirements applicable to REITs and the definition of qualifying income for purposes of this 90% test are similar in most respects. The
Operating Partnership may not meet this qualifying income test. If the Operating Partnership were to be taxed as a corporation, it would incur substantial tax
19
liabilities, and UDR would then fail to qualify as a REIT for tax purposes, unless it qualified for relief under certain statutory savings provisions, and our ability
to raise additional capital would be impaired.
Qualifying as a REIT Involves Highly Technical and Complex Provisions of the Code. Our qualification as a REIT involves the application of highly
technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could
jeopardize our REIT qualification. Moreover, new legislation, court decisions or administrative guidance, in each case possibly with retroactive effect, may make
it more difficult or impossible for us to qualify as a REIT. Our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational,
distribution, shareholder ownership and other requirements on a continuing basis. Our ability to satisfy the REIT income and asset tests depends upon our
analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination and for which we will not
obtain independent appraisals, and upon our ability to successfully manage the composition of our income and assets on an ongoing basis. In addition, our
ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence,
including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.
Risks Related to Our Organization and Ownership of UDR’s Stock
Changes in Market Conditions and Volatility of Stock Prices Could Adversely Affect the Market Price of UDR’s Common Stock. The stock markets,
including the New York Stock Exchange (“NYSE”), on which we list UDR’s common stock, have experienced significant price and volume fluctuations. As a
result, the market price of UDR’s common stock could be similarly volatile, and investors in UDR’s common stock may experience a decrease in the value of their
shares, including decreases unrelated to our operating performance or prospects. In addition to the risks listed in this “Risk Factors” section, a number of factors
could negatively affect the price per share of UDR’s common stock, including:
• general market and economic conditions;
• actual or anticipated variations in UDR’s quarterly operating results or dividends or UDR’s payment of dividends in shares of UDR’s stock;
• changes in our funds from operations or earnings estimates;
• difficulties or inability to access capital or extend or refinance existing debt;
• decreasing (or uncertainty in) real estate valuations;
• changes in market valuations of similar companies;
• publication of research reports about us or the real estate industry;
• the general reputation of real estate investment trusts and the attractiveness of their equity securities in comparison to other equity securities
(including securities issued by other real estate companies);
• general stock and bond market conditions, including changes in interest rates on fixed income securities, that may lead prospective purchasers of
UDR’s stock to demand a higher annual yield from future dividends;
• a change in analyst ratings;
• additions or departures of key management personnel;
• adverse market reaction to any additional debt we incur in the future;
• speculation in the press or investment community;
• terrorist activity which may adversely affect the markets in which UDR’s securities trade, possibly increasing market volatility and causing the further
erosion of business and consumer confidence and spending;
• failure to qualify as a REIT;
• strategic decisions by us or by our competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in
business strategy;
20
• failure to satisfy listing requirements of the NYSE;
• governmental regulatory action and changes in tax laws; and
• the issuance of additional shares of UDR’s common stock, or the perception that such sales might occur, including under UDR’s at-the-market equity
distribution program.
Many of the factors listed above are beyond our control. These factors may cause the market price of shares of UDR’s common stock to decline,
regardless of our financial condition, results of operations, business or our prospects.
We May Change the Dividend Policy for UDR’s Common Stock in the Future. The decision to declare and pay dividends on UDR’s common stock, as
well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our board of directors and will depend on our earnings,
funds from operations, liquidity, financial condition, capital requirements, contractual prohibitions or other limitations under our indebtedness, the annual
distribution requirements under the REIT provisions of the Code, state law and such other factors as our board of directors considers relevant. Any change in
our dividend policy could have a material adverse effect on the market price of UDR’s common stock.
Maryland Law May Limit the Ability of a Third Party to Acquire Control of Us, Which May Not be in UDR’s Stockholders’ Best Interests. Maryland
business statutes may limit the ability of a third party to acquire control of us. As a Maryland corporation, we are subject to various Maryland laws which may
have the effect of discouraging offers to acquire our Company and of increasing the difficulty of consummating any such offers, even if our acquisition would
be in UDR’s stockholders’ best interests. The Maryland General Corporation Law restricts mergers and other business combination transactions between us and
any person who acquires beneficial ownership of shares of UDR’s stock representing 10% or more of the voting power without our board of directors’ prior
approval. Any such business combination transaction could not be completed until five years after the person acquired such voting power, and generally only
with the approval of stockholders representing 80% of all votes entitled to be cast and 66 2/3 % of the votes entitled to be cast, excluding the interested
stockholder, or upon payment of a fair price. Maryland law also provides generally that a person who acquires shares of our equity stock that represents 10%
(and certain higher levels) of the voting power in electing directors will have no voting rights unless approved by a vote of two-thirds of the shares eligible to
vote.
Limitations on Share Ownership and Limitations on the Ability of UDR’s Stockholders to Effect a Change in Control of Our Company Restricts the
Transferability of UDR’s Stock and May Prevent Takeovers That are Beneficial to UDR’s Stockholders. One of the requirements for maintenance of our
qualification as a REIT for U.S. federal income tax purposes is that no more than 50% in value of our outstanding capital stock may be owned by five or fewer
individuals, including entities specified in the Code, during the last half of any taxable year. Our charter contains ownership and transfer restrictions relating to
UDR’s stock primarily to assist us in complying with this and other REIT ownership requirements; however, the restrictions may have the effect of preventing a
change of control, which does not threaten REIT status. These restrictions include a provision that generally limits ownership by any person of more than 9.9%
of the value of our outstanding equity stock, unless our board of directors exempts the person from such ownership limitation, provided that any such
exemption shall not allow the person to exceed 13% of the value of our outstanding equity stock. Absent such an exemption from our board of directors, the
transfer of UDR’s stock to any person in excess of the applicable ownership limit, or any transfer of shares of such stock in violation of the ownership
requirements of the Code for REITs, will be considered null and void, and the intended transferee of such stock will acquire no rights in such shares. These
provisions of our charter may have the effect of delaying, deferring or preventing someone from taking control of us, even though a change of control might
involve a premium price for UDR’s stockholders or might otherwise be in UDR’s stockholders’ best interests.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
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Item 2. PROPERTIES
At December 31, 2014, our consolidated apartment portfolio included 139 communities located in 20 markets, with a total of 39,851 completed apartment
homes.
As of December 31, 2014, we leased approximately 44,000 square feet of office space in Highlands Ranch, Colorado for our corporate headquarters. We
also leased an aggregate of approximately 9,000 square feet of office space in Dallas, Texas, Richmond, Virginia and Alexandria, Virginia.
In February 2015, the Company acquired the office building in Highlands Ranch, Colorado housing its corporate offices, as well as other leased office
space, for total consideration of approximately $24.0 million, which was comprised of assumed debt. The building consists of approximately 120,000 square feet,
of which UDR occupies approximately 44,000 square feet. All existing leases were assumed by the Company at the time of the acquisition.
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The tables below set forth a summary of real estate portfolio by geographic market of the Company and of the Operating Partnership at December 31, 2014.
SUMMARY OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT DECEMBER 31, 2014
UDR, INC.
Number of
Apartment
Communities
Number of
Apartment
Homes
Percentage of
Carrying
Value
Gross
Amount
(in
thousands)
Encumbrances
(in thousands)
Cost per
Home
Average
Physical
Occupancy
Average
Home Size
(in square
feet)
WEST REGION
San Francisco, CA
Orange County, CA
Seattle, WA
Los Angeles, CA
Monterey Peninsula, CA
Other Southern California
Portland, OR
MID-ATLANTIC REGION
Metropolitan D.C.
Baltimore, MD
Richmond, VA
Norfolk, VA
Other Mid-Atlantic
SOUTHEAST REGION
Tampa, FL
Orlando, FL
Nashville, TN
Other Florida
NORTHEAST REGION
New York, NY
Boston, MA
SOUTHWEST REGION
Dallas, TX
Austin, TX
Total Operating
Communities
Real Estate Under Development
(a)
Land
Other
Total Real Estate Owned
12
14
11
4
7
4
3
16
11
4
4
1
9
10
8
1
4
4
8
4
139
—
—
—
139
2,751
5,214
2,085
1,225
1,565
875
716
5,156
2,301
1,358
846
168
2,775
2,796
2,260
636
1,947
1,179
2,725
1,273
39,851
—
—
—
39,851
$
9.7 % $
14.3 %
6.9 %
5.3 %
1.9 %
1.7 %
0.9 %
14.4 %
3.7 %
1.7 %
0.6 %
0.2 %
3.3 %
2.8 %
2.3 %
0.9 %
815,153
1,202,995
575,008
440,329
161,633
141,660
73,811
1,211,295
309,894
139,538
54,077
12,971
275,355
238,375
191,393
81,316
66,310
193,873
58,457
100,335
—
46,471
35,141
$ 296,312
230,724
275,783
359,452
103,280
161,897
103,088
184,172
66,711
34,567
—
—
31,239
63,394
38,834
39,179
234,929
134,678
102,753
63,921
77,208
99,227
85,256
84,687
127,855
15.2 %
3.9 %
1,278,432
323,419
190,462
79,286
656,616
274,316
3.5 %
1.8 %
292,848
147,873
102,438
30,660
107,467
116,161
95.0 %
7,967,375
1,361,529
$ 199,929
2.1 %
2.1 %
0.8 %
177,632
171,253
66,999
100.0 % $ 8,383,259
$
—
—
—
1,361,529
94.6 %
89.2 %
85.6 %
95.2 %
95.8 %
96.1 %
97.6 %
90.7 %
96.6 %
96.5 %
94.6 %
95.4 %
96.6 %
96.7 %
97.5 %
96.5 %
95.0 %
96.3 %
97.2 %
97.1 %
94.1 %
836
804
849
967
728
928
918
834
957
1,018
1,023
1,002
955
961
933
1,130
740
1,097
846
913
887
(a) As of December 31, 2014, the Company was developing one wholly-owned community with 369 apartment homes, which has not been completed.
23
SUMMARY OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT DECEMBER 31, 2014
UNITED DOMINION REALTY, L.P.
Number of
Apartment
Communities
Number of
Apartment
Homes
Percentage of
Carrying
Value
Gross
Amount (in
thousands)
Encumbrances
(in thousands)
Cost per
Home
Average
Physical
Occupancy
Average
Home Size
(in square
feet)
WEST REGION
San Francisco, CA
Orange County, CA
Seattle, WA
Los Angeles, CA
Monterey Peninsula, CA
Other Southern California
Portland, OR
MID-ATLANTIC REGION
Metropolitan D.C.
Baltimore, MD
SOUTHEAST REGION
Tampa, FL
Nashville, TN
Other Florida
NORTHEAST REGION
New York, NY
Boston, MA
SOUTHWEST REGION
Dallas, TX
Austin, TX
Total Operating
Communities
Other
Total Real Estate Owned
Item 3. LEGAL PROCEEDINGS
9
9
5
2
7
3
3
8
5
3
6
1
2
2
2
1
68
—
68
2,185
3,899
932
344
1,565
635
716
2,710
994
1,154
1,612
636
1,001
833
1,348
250
20,814
—
20,814
$
13.2 % $
19.5 %
5.0 %
2.5 %
3.8 %
2.6 %
1.7 %
16.3 %
3.6 %
2.8 %
3.2 %
1.9 %
14.1 %
4.2 %
4.5 %
0.9 %
560,868
823,931
213,238
108,081
161,633
109,744
73,811
686,019
152,040
117,261
134,852
81,316
598,999
178,607
189,458
39,538
99.8 %
0.2 %
4,229,396
9,374
100.0 % $ 4,238,770
$
$ 256,690
211,319
228,796
314,189
103,280
172,825
103,088
253,144
152,958
101,613
83,655
127,855
598,401
214,414
140,547
158,152
$ 203,200
66,310
193,874
22,957
32,635
—
46,471
35,141
102,643
43,403
—
—
39,179
190,462
56,447
102,437
—
931,959
—
931,959
97.2 %
93.8 %
97.3 %
95.6 %
95.8 %
96.1 %
97.6 %
86.4 %
96.3 %
96.8 %
97.5 %
96.5 %
97.4 %
96.5 %
97.0 %
96.2 %
94.9 %
821
764
869
976
728
939
918
901
1,064
1,003
925
1,130
685
1,120
910
883
876
We are subject to various legal proceedings and claims arising in the ordinary course of business. We cannot determine the ultimate liability with respect
to such legal proceedings and claims at this time. We believe that such liability, to the extent not provided for through insurance or otherwise, will not have a
material adverse effect on our financial condition, results of operations or cash flow.
Item 4. MINE SAFETY DISCLOSURES
Not Applicable.
24
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
PART II
UDR, Inc.:
Common Stock
UDR, Inc.’s common stock has been listed on the New York Stock Exchange, or “NYSE”, under the symbol “UDR” since May 7, 1990. The following tables
set forth the quarterly high and low sale prices per common share reported on the NYSE for each quarter of the last two fiscal years. Distribution information for
common stock reflects distributions declared per share for each calendar quarter and paid at the end of the following month.
Quarter ended March 31,
Quarter ended June 30,
Quarter ended September 30,
Quarter ended December 31,
2014
2013
High
Low
$
$
$
$
26.63
28.64
30.30
31.74
$
$
$
$
23.27
25.28
27.18
27.27
$
$
$
$
Distributions
Declared
High
Low
Distributions
Declared
0.260
0.260
0.260
0.260
$
$
$
$
25.18
27.04
26.35
25.42
$
$
$
$
24.83
26.59
26.00
25.03
$
$
$
$
0.235
0.235
0.235
0.235
On February 19, 2015, the closing sale price of our common stock was $31.83 per share on the NYSE, and there were 4,306 holders of record of the
258,765,713 outstanding shares of our common stock.
We have determined that, for federal income tax purposes, approximately 68% of the distributions for 2014 represented ordinary income, 14% represented
qualified ordinary income, 10% represented long-term capital gain, and 8% represented unrecaptured section 1250 gain.
UDR pays regular quarterly distributions to holders of its common stock. Future distributions will be at the discretion of our Board of Directors and will
depend on our actual funds from operations, financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the
Code, and other factors.
Series E Preferred Stock
The Series E Cumulative Convertible Preferred Stock (“Series E”) has no stated par value and a liquidation preference of $16.61 per share. Subject to certain
adjustments and conditions, each share of the Series E is convertible at any time and from time to time at the holder’s option into 1.083 shares of our common
stock. The holders of the Series E are entitled to vote on an as-converted basis as a single class in combination with the holders of common stock at any meeting
of our stockholders for the election of directors or for any other purpose on which the holders of common stock are entitled to vote. The Series E has no stated
maturity and is not subject to any sinking fund or any mandatory redemption. In connection with a special dividend (declared on November 5, 2008), the
Company reserved for issuance upon conversion of the Series E additional shares of common stock to which a holder of the Series E would have received if the
holder had converted the Series E immediately prior to the record date for this special dividend.
Distributions declared on the Series E for the years ended December 31, 2014 and December 31, 2013 were $1.33 per share or $0.3322 per quarter. The
Series E is not listed on any exchange. At December 31, 2014, a total of 2,803,812 shares of the Series E were outstanding.
Series F Preferred Stock
We are authorized to issue up to 20,000,000 shares of our Series F Preferred Stock (“Series F”). The Series F may be purchased by holders of our Operating
Partnership Units, or OP Units, described below under “Operating Partnership Units,” at a purchase price of $0.0001 per share. OP Unitholders are entitled to
subscribe for and purchase one share of the Series F for each OP Unit held. As of December 31, 2014, a total of 2,464,183 shares of the Series F were outstanding
with an aggregate purchase value of $246. Holders of the Series F are entitled to one vote for each share of the Series F they hold, voting together with the
holders of our common stock, on each matter submitted to a vote of security holders at a meeting of our stockholders. The Series F does not entitle its holders to
any other rights, privileges or preferences.
Distribution Reinvestment and Stock Purchase Plan
25
We have a Distribution Reinvestment and Stock Purchase Plan under which holders of our common stock may elect to automatically reinvest their
distributions and make additional cash payments to acquire additional shares of our common stock. Stockholders who do not participate in the plan continue to
receive distributions as and when declared. As of February 19, 2015, there were approximately 2,289 participants in the plan.
United Dominion Realty, L.P.:
Operating Partnership Units
There is no established public trading market for United Dominion Realty, L.P.’s Operating Partnership Units. From time to time we issue shares of our
common stock in exchange for OP Units tendered to the Operating Partnership for redemption in accordance with the provisions of the Operating Partnership’s
limited partnership agreement. At December 31, 2014, there were 183,278,698 OP Units outstanding in the Operating Partnership, of which 174,113,225 OP Units or
95.0% were owned by UDR and 9,165,473 OP Units or 5.0% were owned by limited partners. Under the terms of the Operating Partnership’s limited partnership
agreement, the holders of OP Units have the right to require the Operating Partnership to redeem all or a portion of the OP Units held by the holder in exchange
for a cash payment based on the market value of our common stock at the time of redemption. However, the Operating Partnership’s obligation to pay the cash
amount is subject to the prior right of the Company to acquire such OP Units in exchange for either the cash amount or the number of shares of our common
stock equal to the number of OP Units being redeemed. During 2014, we issued a total of 153,451 shares of common stock upon redemption of OP Units.
On October 20, 2014, we issued 1,998 shares of our common stock upon redemption of OP Units. Because these shares of common stock were issued to
accredited investors in transactions not involving a public offering, the transaction is exempt from registration under the Securities Act of 1933 in accordance
with Section 4(a)(2) of the Securities Act.
We did not issue any other shares of our common stock upon redemption of OP Units during the three months ended December 31, 2014.
Purchases of Equity Securities
In February 2006, UDR’s Board of Directors authorized a 10,000,000 share repurchase program. In January 2008, UDR’s Board of Directors authorized a
new 15,000,000 share repurchase program. Under the two share repurchase programs, UDR may repurchase shares of our common stock in open market
purchases, block purchases, privately negotiated transactions or otherwise. As reflected in the table below, no shares of common stock were repurchased under
these programs during the quarter ended December 31, 2014.
Period
Beginning Balance
October 1, 2014 through October 31, 2014
November 1, 2014 through November 30, 2014
December 1, 2014 through December 31, 2014
Balance as of December 31, 2014
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs (a)
Average Price per
Share
$
$
22.00
—
—
—
22.00
9,967,490
—
—
—
9,967,490
15,032,510
15,032,510
15,032,510
15,032,510
15,032,510
Total Number of
Shares Purchased
9,967,490
—
—
—
9,967,490
(a) This number reflects the amount of shares that were available for purchase under our 10,000,000 share repurchase program authorized in February 2006
and our 15,000,000 share repurchase program authorized in January 2008.
During the three months ended December 31, 2014, certain of our employees surrendered shares of common stock owned by them to satisfy their statutory
minimum federal and state tax obligations associated with the vesting of restricted shares of common stock issued under our 1999 Long-Term Incentive Plan (the
“LTIP”). The following table summarizes all of these repurchases during the three months ended December 31, 2014.
26
Period
October 1, 2014 through October 31, 2014
November 1, 2014 through November 30, 2014
December 1, 2014 through December 31, 2014
Total
Total Number of
Shares
Purchased
Average Price
Paid per Share(a)
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs
—
—
107,113
107,113
$
$
—
—
30.82
30.82
N/A
N/A
N/A
N/A
N/A
N/A
(a) The price paid per share is based on the closing price of our common stock as of the date of the determination of the statutory minimum for federal
and state tax obligations.
27
Comparison of Five-year Cumulative Total Returns
The following graph compares the five-year cumulative total returns for UDR common stock with the comparable cumulative return of the NAREIT Equity
REIT Index, Standard & Poor’s 500 Stock Index, the NAREIT Equity Apartment Index and the MSCI US REIT Index. The graph assumes that $100 was invested
on December 31, 2009, in each of our common stock and the indices presented. Historical stock price performance is not necessarily indicative of future stock
price performance. The comparison assumes that all dividends are reinvested.
Index
UDR, Inc.
NAREIT Equity Apartment Index
US MSCI REITS
S&P 500
NAREIT Equity REIT Index
12/31/2009
100.00
100.00
100.00
100.00
100.00
12/31/2010
148.70
147.04
128.48
115.06
127.96
Period Ending
12/31/2011
163.91
169.23
139.65
117.49
138.57
12/31/2012
160.75
180.97
164.46
136.30
163.60
12/31/2013
163.92
169.76
168.52
180.44
167.63
12/31/2014
224.86
237.02
219.72
205.14
218.16
The performance graph and the related chart and text, are being furnished solely to accompany this Annual Report on Form 10-K pursuant to Item 201
(e) of Regulation S-K, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated
by reference into any filing of ours, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
28
Item 6. SELECTED FINANCIAL DATA
The following tables set forth selected consolidated financial and other information of UDR, Inc. and of the Operating Partnership as of and for each of the
years in the five-year period ended December 31, 2014. The table should be read in conjunction with each of UDR, Inc.’s and the Operating Partnership’s
respective consolidated financial statements and the notes thereto, and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations, included elsewhere in this Report.
$
$
$
$
$
$
$
OPERATING DATA:
Rental income
Income/(loss) from continuing operations
Income/(loss) from discontinued operations, net of tax
Net income/(loss)
Distributions to preferred stockholders
Net income/(loss) attributable to common stockholders
Common distributions declared
Income/(loss) per weighted average common share — basic:
Income/(loss) from continuing operations attributable to common
stockholders
Income/(loss) from discontinued operations attributable to common
stockholders
Net income/(loss) attributable to common stockholders
Income/(loss) per weighted average common share — diluted:
Income/(loss) from continuing operations attributable to common
stockholders
Income/(loss) from discontinued operations attributable to common
stockholders
Net income/(loss) attributable to common stockholders
Weighted average number of Common Shares outstanding — basic
Weighted average number of Common Shares outstanding — diluted
Weighted average number of Common Shares outstanding, OP Units
and Common Stock equivalents outstanding — diluted
Common distributions declared
Balance Sheet Data:
Real estate owned, at cost (a)
Accumulated depreciation (a)
Total real estate owned, net of accumulated depreciation (a)
Total assets
Secured debt (a)
Unsecured debt
Total debt
Total stockholders’ equity
Number of Common Shares outstanding
UDR, Inc.
Year Ended December 31,
(In thousands, except per share data
and apartment homes owned)
2014
2013
2012
2011
2010
$
805,002
16,260
10
159,842
3,724
150,610
263,503
$
746,484
2,340
43,942
46,282
3,724
41,088
235,721
$
704,701
(46,305)
266,608
220,303
6,010
203,376
215,654
$
613,689
(126,869)
147,454
20,585
9,311
10,537
165,590
503,097
(121,117)
14,529
(106,588)
9,488
(112,362)
126,086
0.60
$
—
0.60
$
0.59
$
—
0.59
$
$
$
251,528
253,445
265,728
1.04
8,383,259
2,434,772
5,948,487
6,846,534
1,361,529
2,221,576
3,583,105
2,735,097
255,115
29
(0.01) $
(0.22) $
(0.65) $
(0.77)
0.17
0.16
$
1.07
0.85
$
0.71
0.05
$
0.09
(0.68)
(0.01) $
(0.22) $
(0.65) $
(0.77)
0.17
0.16
$
1.07
0.85
$
0.71
0.05
$
$
$
249,969
249,969
263,926
0.94
8,207,977
2,208,794
5,999,183
6,807,722
1,442,077
2,081,626
3,523,703
2,811,648
250,750
$
$
$
$
238,851
238,851
252,659
0.88
8,055,828
1,924,682
6,131,146
6,859,103
1,430,135
1,979,198
3,409,333
2,992,916
250,139
201,294
201,294
214,086
0.80
8,074,471
1,831,727
6,242,744
6,692,254
1,891,553
2,026,817
3,918,370
2,314,050
219,650
0.09
(0.68)
165,857
165,857
176,900
0.73
6,881,347
1,638,326
5,243,021
5,500,597
1,963,670
1,603,834
3,567,504
1,606,343
182,496
UDR, Inc.
Year Ended December 31,
(In thousands, except per share data
and apartment homes owned)
2014
2013
2012
2011
2010
OPERATING DATA (continued):
Other Data (a)
Total consolidated apartment homes owned (at end of year) (a)
Weighted average number of consolidated apartment homes owned
during the year
39,851
40,644
41,250
41,392
41,571
42,747
47,343
48,531
48,553
47,571
Cash Flow Data:
Cash provided by/(used in) operating activities
Cash provided by/(used in) investing activities
Cash provided by/(used in) financing activities
Funds from Operations (b):
Funds from operations — basic
Funds from operations — diluted
$
$
$
392,360
(293,660)
(113,725)
$
339,902
(123,209)
(198,559)
$
327,187
(211,582)
(115,993)
$
251,411
(1,054,683)
806,289
214,180
(583,754)
373,075
$
411,702
415,426
$
376,778
380,502
$
350,628
354,532
$
269,856
273,580
189,045
192,771
(a) Includes amounts classified as Held for Sale, where applicable.
(b) Funds from operations, or FFO, is defined as net income (computed in accordance with generally accepted accounting principles, or “GAAP”), excluding
impairment write-downs of depreciable real estate or of investments in non-consolidated investees that are driven by measurable decreases in the fair
value of depreciable real estate held by the investee, gains (or losses) from sales of depreciable property, plus real estate depreciation and amortization,
and after adjustments for unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate
Investment Trust’s definition issued in April 2002. We consider FFO a useful metric for investors as we use FFO in evaluating property acquisitions and
our operating performance, and believe that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of
our 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.
Activities of our TRS include development and land entitlement. From time to time, we develop and subsequently sell a TRS property which
results in a short-term use of funds that produces a profit that differs from the traditional long-term investment in real estate for REITs. We believe that
the inclusion of these TRS gains in FFO is consistent with the standards established by NAREIT as the short-term investment is incidental to our main
business. TRS gains on sales, net of taxes, are defined as net sales proceeds less a tax provision and the gross investment basis of the asset before
accumulated depreciation.
See “Funds from Operations” in Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations for a
reconciliation of FFO and Net income/(loss) attributable to UDR, Inc.
30
United Dominion Realty, L.P.
Year Ended December 31,
(In thousands, except per OP unit data
and apartment homes owned)
OPERATING DATA:
Rental income
Income/(loss) from continuing operations
Income/(loss) from discontinued operations
Net income/(loss)
Net income/(loss) attributable to OP unitholders
Income/(loss) per weighted average OP Unit - basic and diluted:
Income/(loss) from continuing operations attributable to OP
unitholder
Income/(loss) from discontinued operations attributable to OP
unitholder
Net income/(loss) attributable to OP unitholders
Weighted average number of OP Units outstanding — basic and
diluted
Balance Sheet Data:
Real estate owned, at cost (a)
Accumulated depreciation (a)
Total real estate owned, net of accumulated depreciation (a)
$
$
$
Total assets
Secured debt (a)
Total liabilities
Total partners’ capital
Advances to/(from) General Partner
Number of OP units outstanding
Other Data:
2014
2013
2012
2011
2010
$
422,634
33,544
—
97,179
96,227
$
401,853
32,766
45,176
77,942
73,376
$
384,946
(13,309)
57,643
44,334
43,982
$
344,937
(40,744)
70,973
30,229
30,159
297,380
(30,937)
10,243
(20,694)
(20,735)
0.53
$
0.16
$
(0.07) $
(0.22) $
(0.18)
—
0.53
0.24
0.40
0.31
0.24
0.39
0.17
0.06
(0.12)
183,279
184,196
184,281
182,448
179,909
$
4,238,770
1,403,303
2,835,467
2,878,284
931,959
1,144,233
1,703,001
(13,624)
183,279
$
4,188,480
1,241,574
2,946,906
2,993,241
934,865
1,190,144
1,795,934
9,916
183,279
$
4,182,920
1,097,133
3,085,787
3,136,254
967,239
1,217,498
1,917,299
11,056
184,281
$
4,205,298
976,358
3,228,940
3,292,167
1,189,645
1,438,798
2,034,792
193,584
184,281
3,706,184
884,083
2,822,101
2,861,395
1,070,061
1,299,772
2,042,241
492,709
179,909
Total consolidated apartment homes owned (at end of year) (a)
20,814
20,746
21,660
23,160
23,351
Cash Flow Data:
Cash provided by/(used in) operating activities
$
Cash provided by/(used in) investing activities
Cash provided by/(used in) financing activities
$
208,032
(46,650)
(162,777)
$
208,346
(63,954)
(145,299)
$
201,095
4,273
(203,268)
$
156,071
(226,980)
70,693
146,604
(59,458)
(86,668)
(a) Includes amounts classified as Held for Sale, where applicable.
31
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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. Such forward-looking statements include, without limitation, statements concerning property acquisitions and dispositions, development
activity and capital expenditures, capital raising activities, rent growth, occupancy, and rental expense growth. 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, unfavorable changes in the apartment market, changing economic conditions, the impact of inflation/deflation on rental rates and property
operating expenses, expectations concerning availability of capital and the stabilization of the capital markets, the impact of competition and competitive pricing,
acquisitions, developments and redevelopments not achieving anticipated results, delays in completing developments, redevelopments and lease-ups on
schedule, expectations on job growth, home affordability and demand/supply ratio for multifamily housing, expectations concerning development and
redevelopment activities, expectations on occupancy levels, expectations concerning the joint ventures 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:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
general economic conditions;
unfavorable changes in apartment market and economic conditions that could adversely affect occupancy levels and rental rates;
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 extraordinary losses for which we may not have insurance or adequate reserves;
uninsured losses due to insurance deductibles, self-insurance retention, uninsured claims or casualties, or losses in excess of applicable coverage;
delays in completing developments and lease-ups on schedule;
our failure to succeed in new markets;
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;
32
•
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 and 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.
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 and the accompanying notes for the years ended December 31, 2014, 2013 and 2012 of each of UDR, Inc. and United
Domination Realty, L.P.
UDR, Inc.:
Business Overview
We are a self-administered real estate investment trust, or REIT, that owns, acquires, renovates, develops, and manages apartment communities. We were
formed in 1972 as a Virginia corporation. In June 2003, we changed our state of incorporation from Virginia to Maryland. Our subsidiaries include the Operating
Partnership. Unless the context otherwise requires, all references in this Report to “we,” “us,” “our,” “the Company,” or “UDR” refer collectively to UDR, Inc.,
its subsidiaries and its consolidated joint ventures.
At December 31, 2014, our consolidated real estate portfolio included 139 communities in 10 states plus the District of Columbia totaling 39,851 apartment
homes, and our total real estate portfolio, inclusive of our unconsolidated communities, included an additional 36 communities with 10,055 apartment homes.
At December 31, 2014, the Company was developing one wholly-owned community with 369 apartment homes and three unconsolidated joint venture
communities with 1,018 apartment homes, none of which have been completed. In addition, the Company was redeveloping 708 apartment homes, 694 of which
have been completed, at one wholly-owned community with 739 apartment homes.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to use
judgment in the application of accounting policies, including making estimates and assumptions. A critical accounting policy is one that is both important to our
financial condition and results of operations as well as involves some degree of uncertainty. Estimates are prepared based on management’s assessment after
considering all evidence available. Changes in estimates could affect our financial position or results of operations. Below is a discussion of the accounting
policies that we consider critical to understanding our financial condition or results of operations where there is uncertainty or where significant judgment is
required. A discussion of our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2,
Significant Accounting Policies, to the Notes to the UDR Consolidated Financial Statements included in this Report.
Cost Capitalization
In conformity with GAAP, 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.
33
In addition, we capitalize costs directly related to the predevelopment, development, and redevelopment of a capital project, which include, but are not
limited to, interest, real estate taxes, insurance, and allocated development and redevelopment overhead related to support costs for personnel working on the
capital projects. We use our professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. These
costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress and such costs are incremental
and identifiable to a specific activity to get the asset ready for its intended use. As each home in a capital project is completed and becomes available for lease-
up, the Company ceases capitalization on the related portion. The costs capitalized are reported on the Consolidated Balance Sheets as Total Real Estate
Owned, Net of Accumulated Depreciation. Amounts capitalized during the years ended December 31, 2014, 2013, and 2012 were $29.2 million, $40.5 million, and
$36.4 million, respectively.
Investment in Unconsolidated Joint Ventures
We may enter into various joint venture agreements and/or partnerships with unrelated third parties to hold or develop real estate assets. We must
determine for each of these ventures whether to consolidate the entity or account for our investment under the equity method of accounting. We determine
whether to consolidate a joint venture or partnership based on our rights and obligations under the venture agreement, applying the applicable accounting
guidance. The application of the rules in evaluating the accounting treatment for each joint venture or partnership is complex and requires substantial
management judgment. We evaluate our accounting for investments on a regular basis including when a significant change in the design of an entity occurs.
Throughout our financial statements, and in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we use the term
“joint venture” or “partnership” when referring to investments in entities in which we do not have a 100% ownership interest.
We continually evaluate our investments in unconsolidated joint ventures 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. These factors
include, but are not limited to, age of the venture, our intent and ability to retain our investment in the entity, the financial condition and long-term prospects of
the entity, and the relationships with the other joint venture partners and its lenders. The amount of loss recognized is the excess of the investment’s carrying
amount over its estimated fair value. If we believe that the decline in fair value is temporary, no impairment is recorded. The aforementioned factors are taken as a
whole by management in determining the valuation of our investment property. Should the actual results differ from management’s judgment, the valuation
could be negatively affected and may result in a negative impact to our Consolidated Financial Statements.
Impairment of Long-Lived Assets
We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book value of those assets. Our
cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding
periods. The net book value of impaired assets is reduced to fair market value. Our estimates of fair market value represent our best estimate based primarily
upon unobservable inputs (defined as Level 3 inputs in the fair value hierarchy) related to rental rates, operating costs, growth rates, discount rates,
capitalization rates, industry trends and reference to market rates and transactions.
Real Estate Investment Properties
We purchase real estate investment properties from time to time and record the fair value to various components, such as land, buildings, and intangibles
related to in-place leases, based on the fair value of each component. In making estimates of fair values for purposes of allocating purchase price, we utilize
various sources, including independent appraisals, our own analysis of recently acquired and existing comparable properties in our portfolio and other market
data. The fair value of buildings is determined as if the buildings were vacant upon acquisition and subsequently leased at market rental rates. As such, the
determination of fair value considers the present value of all cash flows expected to be generated from the property including an initial lease-up period. We
determine the fair value of in-place leases by assessing the net effective rent and remaining term of the lease relative to market terms for similar leases at
acquisition. In addition, we consider the cost of acquiring similar leases, the foregone rents associated with the lease-up period, and the carrying costs
associated with the lease-up period. The fair value of in-place leases is recorded and amortized as amortization expense over the remaining average contractual
lease period.
34
REIT Status
We are a Maryland corporation that has elected to be treated for federal income tax purposes as a REIT. A REIT is a legal entity that holds interests in real
estate and is required by the Code to meet a number of organizational and operational requirements, including a requirement that a REIT must distribute at least
90% of our REIT taxable income (other than our net capital gain) to our stockholders. If we were to fail to qualify as a REIT in any taxable year, we will be subject
to federal and state income taxes at the regular corporate rates and may not be able to qualify as a REIT for four years. Based on the net earnings reported for the
year ended December 31, 2014 in our Consolidated Statements of Operations, we would have incurred federal and state GAAP income taxes if we had failed to
qualify as a REIT.
Summary of Real Estate Portfolio by Geographic Market
The following table summarizes our market information by major geographic markets as of and for the year ended December 31, 2014.
Same-Store Communities
West Region
San Francisco, CA
Orange County, CA
Seattle, WA
Los Angeles, CA
Monterey Peninsula, CA
Other Southern California
Portland, OR
Mid-Atlantic Region
Metropolitan D.C.
Baltimore, MD
Richmond, VA
Norfolk, VA
Other Mid-Atlantic
Southeast Region
Tampa, FL
Orlando, FL
Nashville, TN
Other Florida
Northeast Region
New York, NY
Boston, MA
Southwest Region
Dallas, TX
Austin, TX
Total/Average Same-Store
Communities
Non Matures, Commercial Properties
& Other
Total Real Estate Held for Investment
Real Estate Under Development (b)
Total Real Estate Owned
Total Accumulated Depreciation
Total Real Estate Owned, Net of
Accumulated Depreciation
As of December 31, 2014
Year Ended December 31, 2014
Number of
Apartment
Communities
Number of
Apartment
Homes
Percentage
of Total
Carrying Value
Total
Carrying
Value (in
thousands)
Average
Physical
Occupancy
Monthly
Income
per Occupied
Home (a)
Net Operating
Income (in
thousands)
11
10
9
3
7
4
3
13
11
4
4
1
9
10
8
1
2
4
8
4
126
13
139
—
139
2,436
3,290
1,727
642
1,565
875
716
4,313
2,301
1,358
846
168
2,775
2,796
2,260
636
700
1,179
2,725
1,273
34,581
5,270
39,851
—
39,851
7.9% $
7.3%
5.4%
3.0%
1.9%
1.7%
0.9%
10.6%
3.7%
1.7%
0.6%
0.2%
3.3%
2.8%
2.3%
1.0%
5.0%
3.9%
3.5%
1.8%
666,210
612,309
449,375
253,448
161,635
141,656
73,811
893,677
309,894
139,538
54,076
12,972
275,354
238,375
191,393
81,316
423,130
323,420
292,847
147,873
97.2% $
95.5%
97.1%
95.3%
95.8%
96.1%
97.6%
97.1%
96.6%
96.5%
94.6%
95.4%
96.6%
96.7%
97.5%
96.5%
97.8%
96.3%
97.2%
97.1%
68.5%
5,742,309
96.7% $
29.4%
97.9%
2.1%
100.0%
2,463,318
8,205,627
177,632
8,383,259
(2,434,772)
$
5,948,487
35
2,804
1,752
1,732
2,409
1,216
1,550
1,195
1,818
1,462
1,220
1,047
1,021
1,126
1,045
1,053
1,362
3,711
2,225
1,130
1,274
1,573
$
60,730
47,990
24,812
12,159
15,326
10,938
6,971
62,261
27,431
14,309
6,520
1,241
23,276
22,839
18,922
6,491
23,280
21,617
22,657
11,068
440,838
115,580
556,418
(97)
$
556,321
(a) Monthly Income per Occupied Home represents total monthly revenues divided by the product of occupancy and the number of mature apartment
homes.
(b) As of December 31, 2014, the Company was developing one wholly-owned community with 369 apartment homes, which has not been 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 to January 1, 2013 and held as of
December 31, 2014. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan
to conduct substantial redevelopment activities, and the communities are not classified as held for sale at year end. 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.
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
unsecured revolving credit facility 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
repositioned our portfolio.
We expect to meet our short-term liquidity requirements generally through net cash provided by property operations and borrowings under our credit
agreements. 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 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 credit agreements 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 dispositions of properties.
We have a shelf registration statement filed with the Securities and Exchange Commission, or “SEC,” which provides for the issuance of an indeterminate
amount 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.
During 2014, the Company issued $300 million of 3.750% senior unsecured medium-term notes due July 1, 2024. Interest is payable semi-annually
beginning on January 1, 2015. The notes were priced at 99.652% of the principal amount at issuance. We used the net proceeds to pay down borrowings
outstanding on our $900 million unsecured credit facility and for general corporate purposes. The notes are fully and unconditionally guaranteed by the
Operating Partnership.
In April 2012, the Company entered into a new equity distribution agreement, which was amended in July 2014, under which the Company could offer and
sell up to 20 million shares of its common stock, from time to time, to or through its sales agents. During the year ended December 31, 2014, the Company sold
3,410,433 shares of common stock through this program for aggregate gross proceeds of approximately $102.1 million at a weighted average price per share of
$29.95. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $2.3 million,
were approximately $99.8 million, which was primarily used to fund the Company's Steele Creek participating loan investment. As of December 31, 2014, we had
16,518,567 shares of common stock available for sale under the April 2012 program.
Future Capital Needs
Future development and redevelopment expenditures may be funded through unsecured or secured credit facilities, 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
36
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 2015, we have approximately $196.6 million of secured debt maturing, inclusive of principal amortization, and $324.3 million of unsecured debt
maturing. In January 2015, we paid off $325.2 million of 5.25% medium-term notes due January 2015 with borrowings under the Company’s $900 million
unsecured revolving credit facility. We anticipate repaying the remaining debt with cash flow from our operations, proceeds from debt or equity offerings,
proceeds from the dispositions of properties, or from borrowings under our credit agreements.
Statements of Cash Flow
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 years ended
December 31, 2014, 2013, and 2012.
Operating Activities
For the year ended December 31, 2014, Net cash provided by/(used in) operating activities was $392.4 million compared to $339.9 million for 2013. The
increase in cash flow from operating activities was primarily due to improved income from continuing operations and changes in operating assets and liabilities.
For the year ended December 31, 2013, Net cash provided by/(used in) operating activities was $339.9 million compared to $327.2 million for 2012. The
increase in cash flow from operating activities is primarily due to improved income from continuing operations, partially offset by changes in operating assets
and operating liabilities.
Investing Activities
For the year ended December 31, 2014, Net cash provided by/(used in) investing activities was $(293.7) million compared to $(123.2) million for 2013. The
increase in cash used in investing activities is primarily related to increased acquisitions of real estate and investments in unconsolidated joint ventures, partially
offset by increased proceeds from sales of real estate, lower spend on development and redevelopment, and repayment of notes receivable.
For the year ended December 31, 2013, Net cash provided by/(used in) investing activities was $(123.2) million compared to $(211.6) million in 2012. The
change in investing activities was due to changes in the level of investment activities, which reflect our strategy as it relates to our investments in
unconsolidated joint ventures and partnerships, acquisitions, dispositions, capital expenditures, and development activities, all of which are discussed in further
detail throughout this Report.
Acquisitions
In 2014, the Company acquired a fully-entitled land parcel for future development located in Huntington Beach, California for $77.8 million, two
communities located in Seattle, Washington and Kirkland, Washington with a total of 358 apartment homes for $45.5 million and $75.2 million, respectively, and a
land parcel for future development located in Boston, Massachusetts for $32.2 million The four acquisitions during the year ended December 31, 2014 were
accomplished through tax-deferred exchanges under Section 1031 of the Internal Revenue Code.
The Company did not acquire any real estate assets in 2013. During 2012, the Company acquired the remaining 80% ownership interests in two apartment
communities (633 homes) located in Austin, Texas for $11.7 million from its joint venture partner. In addition, the Company also acquired two parcels of land for
development in San Francisco, California and Boston, Massachusetts for a total purchase price of $77.2 million.
Capital Expenditures
Total capital expenditures, which in aggregate include recurring capital expenditures and major renovations, of $90.1 million or $2,274 per stabilized home
were spent on all of our communities, excluding development and commercial properties, for the year ended December 31, 2014 as compared to $145.2 million or
$3,537 per stabilized home for the prior year.
The decrease in total capital expenditures was primarily due to a decrease in major renovations of 65.8% or $60.6 million. Major renovations of $31.5 million
or $796 per home were spent for the year ended December 31, 2014 as compared to $92.1 million or $2,244 per home for the prior year. The decrease is primarily
attributable to our 27 Seventy Five Mesa
37
Verde project in Orange County, which incurred a full year of major renovation costs in 2013. The renovation project was completed in the second quarter of
2014.
The following table outlines capital expenditures and repair and maintenance costs for all of our communities, excluding real estate under developments
and commercial properties, for the years ended December 31, 2014 and 2013 (dollars in thousands):
Year Ended December 31,
Per Home
Year Ended December 31,
2014
2013
% Change
2014
2013
% Change
Turnover capital expenditures
$
Asset preservation expenditures
Total recurring capital
expenditures
Revenue-enhancing improvements
Major renovations
Total capital expenditures
Repair and maintenance expense
Average stabilized home count (a)
$
$
12,160 $
31,761
43,921
14,647
31,547
90,115 $
31,288 $
39,637
11,850
30,857
42,707
10,364
92,141
145,212
32,692
41,052
2.6 % $
2.9 %
2.8 %
41.3 %
(65.8)%
(37.9)% $
(4.3)% $
$
307
801
1,108
370
796
2,274
789
$
$
288
752
1,040
253
2,244
3,537
796
6.6 %
6.5 %
6.5 %
46.2 %
(64.5)%
(35.7)%
(0.9)%
(a) Average number of homes is calculated based on the number of stabilized homes outstanding at the end of each
month.
This table reports amounts capitalized during the year. Actual capital spending is impacted by the net change in capital expenditure accruals.
We will continue to selectively add revenue 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. Recurring capital expenditures during 2015 are projected to be approximately $1,150 per home.
Real Estate Under Development and Redevelopment
At December 31, 2014, our development pipeline for one wholly-owned community totaled 369 homes with a budget of $217.7 million, in which we have a
carrying value of $177.6 million. The estimated completion date for this community is in the second quarter of 2015. During 2014, we incurred $251.5 million for
development costs, a decrease of $29.1 million from our 2013 level of $280.6 million.
38
The following wholly-owned projects were under development or recently completed as of December 31, 2014 (dollars in thousands):
Location
Number of
Apartment
Homes
Completed
Apartment
Homes
Cost to
Date
Budgeted
Cost
Estimated
Cost
Per Home
Expected
Completion
Date
Projects Under Construction:
Pier 4
Boston, MA
Completed Projects, Non-Stabilized:
DelRay Tower (a)
(b)
Beach & Ocean
(c)
Los Alisos
Alexandria, VA
Huntington Beach,
CA
Mission Viejo, CA
Total completed projects
Total Projects
369
332
173
320
825
1,194
(a) This project is held by the Operating Partnership.
(b) Formerly known as The Calvert.
(c) Formerly known as Beach Walk.
—
$
177,632
$
217,700
$
590
2Q2015
332
173
320
825
825
$
124,873
132,000
51,038
87,180
263,091
440,723
$
51,900
87,500
271,400
489,100
$
398
300
273
329
410
4Q2014
4Q2014
1Q2014
At December 31, 2014, the Company was redeveloping 708 apartment homes, 694 of which have been completed, at one wholly-owned community with 739
total apartment homes. During the year ended December 31, 2014, we incurred $31.5 million in major renovations, which include major structural changes and/or
architectural revisions to existing buildings, a decrease of $60.6 million from our 2013 level of $92.1 million. The estimated completion date for this community is
the second quarter of 2015.
At December 31, 2014, the following community was in redevelopment (dollars in thousands):
Number of
Apartment
Homes
Scheduled
Redevelopment
Homes
Completed
Apartment
Homes
Cost to
Date
Budgeted
Cost
739
708
694
$
83,778
$
98,000
$
Estimated
Cost
Per Home
138
Expected
Completion
Date
2Q2015
View 34 (a)
Location
New York, NY
(a) Formerly known as Rivergate.
Consolidated Joint Ventures
In December 2013, the Company consolidated its 95%/5% development joint ventures 13th and Market in San Diego, California and Domain College Park in
Metropolitan, D.C. The consolidation was due to the Company becoming the managing partner of each of the joint ventures pursuant to amendments to the LLC
Agreements. In connection with the amendments, our partner received equity distributions reducing its capital account balances to zero, the Company replaced
our partner as the managing partner, and our partner no longer has the ability to substantively participate in the decision-making process, with only protective
rights remaining. We accounted for the consolidations as asset acquisitions since the joint ventures were under development and not complete at the time of
consolidation resulting in no gain or loss upon consolidation and increasing our real estate owned by $129.4 million and our debt owed by $63.6 million. In
addition pursuant to the amendments, the Company paid a non-refundable deposit to our partner in January 2014 of $2.0 million for each joint venture, or $4.0
million in total, for the right to exercise options in 2014 to acquire our partner’s upside participation in the joint ventures. The non-refundable deposits were
applied towards the total purchase price of approximately $24.7 million when the Company acquired 100% of the interest in the joint ventures in November 2014.
In December 2014, the Company sold a 49% interest in 13th and Market to MetLife for $54.2 million, resulting in a gain, net of tax, of $7.2 million.
Additionally, the Company sold a 50% interest in a wholly owned land parcel to MetLife for $8.3 million, resulting in a loss, net of tax, of $2.2 million. As a result,
the Company no longer controls these two joint ventures and they were deconsolidated by the Company in December 2014.
39
Unconsolidated Joint Ventures and Partnerships
The Company recognizes earnings or losses from our investments in unconsolidated joint ventures and partnerships consisting of our proportionate share
of the net earnings or losses of the joint ventures and partnerships.
The following table summarizes the Company’s investment in and advances to unconsolidated joint ventures and partnerships, net which are accounted
for under the equity method of accounting as of December 31, 2014 and 2013 (dollars in thousands):
Joint Venture
Location of
Properties
Number of
Properties
2014
Number of
Apartment
Homes
Investment at
UDR’s Ownership
Interest
2014
2014
2013
2014
2013
Operating and development:
Various
UDR/MetLife I
(a)
UDR/MetLife II
(a)
Various
Other
UDR/MetLife
Joint Ventures
(a)
UDR/MetLife
Vitruvian Park®
(c)
UDR/KFH (d)
Various
Addison, TX
Washington,
D.C.
Texas (e)
Texas
4 land parcels
21 operating
communities
1 operating
community, 3
development
communities (b), 2
land parcels
3 operating
communities, 6 land
parcels
3 operating
communities
8 operating
communities
— $
13,306 $
47,497
15.7 %
4.5 %
4,642
431,277
327,926
50.0 %
50.0 %
1,282
134,939
36,313
50.6 %
35.8 %
1,394
80,302
79,318
50.0 %
50.0 %
660
21,596
25,919
30.0 %
30.0 %
3,359
(25,901 )
(23,591 )
20.0 %
20.0 %
Investment in and advances to unconsolidated joint
ventures, net, before participating loan investment
655,519
493,382
Location
Participating loan investment:
Steele Creek (f)
Denver, CO
Preferred Return
Years To
Maturity
Investment at
6.5%
2.8
2014
62,707
2013
2014
14,273 $2,350
Income From
Participating Loan
Investment For The Year
Ended
2013 2012
$156
$—
Total investment in and advances to unconsolidated joint
ventures, net
$ 718,226 $ 507,655
(a) In January 2012, the Company formed a joint venture with an unaffiliated third party to acquire 399 Fremont (land for future development) in San
Francisco, California, which is included in Other UDR/MetLife Joint Ventures in the table above. At closing, UDR owned a noncontrolling interest of
92.5% in the joint venture. The Company’s total investment was $55.5 million, which consisted of its initial investment of $37.3 million and an option
to exercise its right to acquire its partner’s 7.5% ownership interest in the joint venture. In October 2012, the Company exercised its option and paid
$13.5 million. In January 2013, the Company subsequently acquired its partner’s 7.5% ownership interest for $4.7 million. In December 2013, the
Company sold a 49% ownership interest to MetLife in the fully-entitled 399 Fremont land parcel for approximately $29.9 million. In conjunction with
the sale, the Company formed a new unconsolidated real estate joint venture with MetLife, UDR/MetLife 399 Fremont, to develop a $318 million, 447-
home, luxury high-rise tower on the site. Construction commenced in the first quarter 2014. As the Company recently acquired the 399 Fremont land
parcel, the sale price was equivalent to the cost basis resulting in no gain or loss on the transaction. Under the terms of the partnership, the Company
serves as the general partner with significant participating rights held by our partner, and has the ability to earn fees for development management,
property management, asset management, and financing transactions. The UDR/MetLife 399 Fremont Joint Venture is accounted for under the equity
method of accounting. Our initial investment was approximately $31.1 million.
40
In June 2013 and within UDR/MetLife I, the Company exchanged with MetLife its approximately 10% ownership interest in four operating
communities and paid MetLife an additional $15.6 million in cash for an increased ownership interest of approximately 35% in two high-rise operating
communities, bringing UDR's ownership interest in the two high-rise operating communities to 50% each. The two high-rise operating communities
are located in Denver, Colorado and San Diego, California and were subsequently contributed to UDR/MetLife II. The four operating communities in
which UDR exchanged its ownership interest are located in Washington D.C.; San Francisco, California; Dallas, Texas; and Charlotte, North Carolina.
UDR continues to fee manage these four operating communities.
In March 2014, the Company sold its minority ownership interests in two operating communities located in Los Angeles, California to
MetLife for cash proceeds of $3.0 million, which resulted in an immaterial gain. In April 2014, the Company increased its ownership interest in the
remaining six operating communities in the UDR/MetLife I Joint Venture from 12% to 50%, and MetLife and the Company contributed the
communities to the UDR/MetLife II Joint Venture. The Company paid MetLife $82.5 million for the additional ownership interests. The Company
continues to fee manage the operating communities that were contributed to the UDR/MetLife II Joint Venture as well as the two operating
communities in which it sold its minority ownership interests.
In July 2014, the Company increased the ownership interest in two land sites in UDR/Metlife I to 50.1% and formed individual asset joint
ventures, which are included in Other UDR/MetLife Joint Ventures in the table above. The remaining 49.9% continues to be held by our joint venture
partner MetLife. The Company paid MetLife approximately $21.5 million for the additional ownership interests.
In December 2014, the Company increased its ownership interest in one land site in the UDR/MetLife I Joint Venture to 50%. Additionally,
the Company increased its ownership interest in another land site to 50.1%, which MetLife and the Company contributed to a separate joint venture
and is included in Other UDR/MetLife Joint Ventures in the table above. The Company paid MetLife approximately $15.3 million for the additional
ownership interests. As of December 31, 2014, the remaining assets in the UDR/MetLife I Joint Venture were comprised of three potential
development land sites in which the Company has an average ownership interest of approximately 5% and one fully entitled land parcel in which the
Company owns 50%.
In December 2014, the Company sold a 49% interest in 13th and Market located in San Diego, California to MetLife for gross proceeds of
$54.2 million, resulting in a gain, net of tax, of $7.2 million and a 50% interest in 3033 Wilshire in Los Angeles, California, also to MetLife for gross
proceeds of $8.3 million, resulting in a loss, net of tax, of $2.2 million.
(b) The number of apartment homes for the communities under development presented in the table above is based on the projected number of total
homes. As of December 31, 2014, no apartment homes had been completed in Other UDR/MetLife Joint Ventures.
(c) In June 2013, the Company sold a 50% interest in five partnerships (the “UDR/MetLife Vitruvian Park® Partnerships”) to MetLife for approximately
$141.3 million. The transaction resulted in a gain of approximately $436,000 which the Company has deferred until the terms of the construction
completion guarantee have been met. Under the terms of the UDR/MetLife Vitruvian Park® Partnerships, the Company serves as the general partner
with significant participating rights held by our partner, and earns fees for property management, asset management, and financing transactions. The
UDR/MetLife Vitruvian Park® Partnerships are accounted for under the equity method of accounting. Our initial investment was approximately $80.2
million, which consisted of approximately $140.0 million (50% of our net book value of the real estate at the time of the transaction) reduced by our
share of the net proceeds received upon encumbering the assets of approximately $58.7 million and other operating adjustments.
At closing, a total of $118.3 million of secured debt was placed on the two operating communities and the community under development. The debt
on the two operating communities carries an interest rate of 4.0% with a term of ten years and the non-recourse construction loan on the community
under development carries an interest rate of LIBOR plus 175 basis points with a term of two years and two one-year extension options. The
Company has guaranteed the completion of the construction of the development. Proceeds from the construction loan will be used for completion of
construction of the development. Upon completion, at its 50% ownership, the Company's pro-rata share of the undepreciated book value of the
UDR/MetLife Vitruvian Park® Partnerships' real estate assets and outstanding debt will be approximately $145.0 million and $62.8 million, respectively.
41
(d) UDR is a partner with an unaffiliated third party, which formed a joint venture for the investment of up to $450 million in multifamily properties located
in key, high barrier to entry markets. The partners will contribute equity of $180 million of which the Company’s maximum equity will be 30% or $54
million when fully invested.
(e) In November 2007, UDR and an unaffiliated third party formed a joint venture to own and operate 10 communities located in Texas. UDR contributed
cash and property equal to 20% of the fair value of the joint venture. During the year ended December 31, 2012, the Company acquired the remaining
80% ownership interests in two communities in Austin, Texas for $11.7 million. The Company’s investment in the joint venture at December 31, 2014
and 2013 was net of deferred profits on the sale of depreciable properties to the joint venture of $23.9 million and $24.0 million, respectively.
In January 2015, the eight communities held by the Texas joint venture were sold, generating proceeds to UDR of $43.5 million. The Company
recorded promote and fee income of approximately $9.6 million and a gain of approximately $59.1 million (including $24.2 million of previously deferred
gains) in connection with the sale.
(f) In October 2013, the Company entered into a participating debt financing arrangement with a third party that is developing a $108 million, 218-home,
high-rise luxury community located adjacent to the Cherry Creek Mall in Denver, Colorado. Under the agreement, UDR will finance up to 85%, or
approximately $92.0 million, of the development cost at an interest rate of 6.5% per annum on the outstanding debt balance. In addition, the Company
has the option to purchase the community upon completion of construction and has a 50% participating interest in the profit upon the acquisition of
the community or sale to a third party. The Company accounts for the arrangement consistent with an investment in real estate under the equity
method of accounting.
As of December 31, 2014, and 2013, our participating loan investment was $62.7 million and $14.3 million, respectively, which was included in
Investment in and advances to unconsolidated joint ventures, net on the Consolidated Balance Sheets. We also recognized $2.4 million and $156,000
of income included in Income/(loss) from unconsolidated entities on the Consolidated Statements of Operations for the years ended December 31,
2014 and 2013, respectively.
Dispositions
During the year ended December 31, 2014, the Company recognized gains on the sale of real estate, net of tax, of $143.6 million. The Company sold nine
communities consisting of a total of 2,500 apartment homes, an adjacent parcel of land, and one operating property for gross proceeds of $328.4 million, resulting
in net proceeds of $324.4 million and a total gain, net of tax, of $138.6 million. The Company also sold 49% interest in a recently completed development for gross
proceeds of $54.2 million, resulting in a gain, net of tax, of $7.2 million, and 50% interest in a land parcel for gross proceeds of $8.3 million, resulting in a loss, net
of tax, of $2.2 million. A portion of the sale proceeds was designated for tax-deferred exchanges under Section 1031 of the Internal Revenue Code and was used
to fund acquisitions of real estate as discussed above.
In 2013, UDR sold two apartment communities in the Sacramento market, consisting of 914 apartment homes for gross proceeds of $81.1 million. UDR
recognized gains of $41.9 million, which are included in Income/(loss) from discontinued operations, net of tax on the UDR Consolidated Statements of
Operations. Proceeds were used primarily to fund development and redevelopment activity and reduce debt.
In 2012, UDR sold 21 apartment communities, which had 6,507 apartment homes for gross proceeds of $609.4 million. UDR recognized gains (before tax) of
$260.4 million, which are included in Income/(loss) from discontinued operations, net of tax on the UDR Consolidated Statements of Operations. Proceeds were
used primarily to fund development and redevelopment activity and reduce debt.
We plan to continue to pursue our strategy of exiting markets where long-term growth prospects are limited and redeploying capital to primary locations in
markets we believe will provide the best investment returns.
Financing Activities
For the years ended December 31, 2014, 2013 and 2012, Net cash provided by/(used in) financing activities was $(113.7) million, $(198.6) million and
($116.0) million, respectively.
The following significant financing activities occurred during the year ended December 31, 2014:
•
repaid $81.0 million of secured debt;
42
•
•
•
•
•
•
•
•
•
•
repaid $184.0 million of 5.13% unsecured medium-term notes due January 2014;
repaid $128.5 million of 5.50% unsecured medium-term notes due April 2014;
issued $300.0 million of 3.750% senior unsecured medium-term notes due July 2024;
sold 3,410,433 shares of common stock for aggregate net proceeds of approximately $99.8 million after deducting related expenses;
net borrowings of $152.5 million under the Company’s $900 million unsecured revolving credit facility; and
paid distributions of $256.1 million to our common stockholders.
The following significant financing activities occurred during the year ended December 31, 2013:
issued $300 million of 3.70% senior unsecured medium-term notes due October 2020;
repaid $46.6 million of secured debt. The $46.6 million of secured debt included $42.2 million of mortgage payments and the repayment of $4.4 million of
credit facilities;
repaid $122.5 million of 6.05% unsecured medium-term notes due June 2013; and
re-priced our $100 million and $250 million unsecured term notes from LIBOR plus 142.5 basis points to LIBOR plus 125 basis points, and extended the
maturity dates from January 2016 to June 2018.
Credit Facilities
As of December 31, 2014, we have secured credit facilities with Fannie Mae with an aggregate commitment of $834.3 million, all of which was outstanding.
The Fannie Mae credit facilities mature at various dates from May 2017 through July 2023, and bear interest at floating and fixed rates. The Company has $568.1
million of the funded balance fixed at a weighted average interest rate of 5.12% and the remaining balance of $266.2 million on these facilities had at a weighted
average variable rate of 1.60% at December 31, 2014.
As of December 31, 2014, the Company has a $900 million unsecured revolving credit facility that matures in December 2017. The credit facility has a six
month extension option and contains an accordion feature that allows us to increase the facility to $1.45 billion. Based on the Company’s current credit rating,
the credit facility carries an interest rate equal to LIBOR plus a spread of 100 basis points and a facility fee of 15 basis points. As of December 31, 2014, we had
$152.5 million of outstanding borrowings under the credit facility, leaving $747.5 million of unused capacity (excluding $1.9 million of letters of credit at
December 31, 2014).
The Fannie Mae credit facilities and the bank unsecured revolving credit facility are subject to customary financial covenants and limitations. As of
December 31, 2014, we were in compliance with all financial covenants under these credit facilities.
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. 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 $579.7 million in variable rate debt that is not
subject to interest rate swap contracts as of December 31, 2014. If market interest rates for variable rate debt increased by 100 basis points, our interest expense
would increase by $6.9 million based on the average balance outstanding during the year.
These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. These analysis do 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 13, Derivatives and Hedging Activities, in the Notes to Consolidated Financial Statements included in this Report for additional discussion of
derivate instruments.
43
Funds from Operations, Funds from Operations as Adjusted, and Adjusted Funds from Operations
Funds from Operations
Funds from operations (“FFO”) is defined as net income (computed in accordance with GAAP), excluding impairment write-downs of depreciable real
estate or of investments in non-consolidated investees that are driven by measurable decreases in the fair value of depreciable real estate held by the investee,
gains or losses from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for 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 is
comparable to FFO, diluted in the accompanying reconciliation. 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, OP
Units, unvested restricted stock, stock options, and the shares of Series E Cumulative Convertible Preferred Stock are dilutive; therefore, they are included in the
diluted share count.
Activities of our TRS include development and land entitlement. From time to time, we develop and subsequently sell a TRS property which results in a
short-term use of funds that produces a profit that differs from the traditional long-term investment in real estate for REITs. We believe that the inclusion of
these TRS gains in FFO is consistent with the standards established by NAREIT as the short-term investment is incidental to our main business. TRS gains on
sales, net of taxes, are defined as net sales proceeds less a tax provision and the gross investment basis of the asset before accumulated depreciation.
We consider FFO a useful metric for investors as we use FFO in evaluating property acquisitions and our operating performance, and believe that FFO
should be considered along with, but not as an alternative to, net income and cash flow as a measure of our 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 is defined as FFO excluding the impact of acquisition-related costs and other non-comparable items including, but not limited to,
prepayment costs/benefits associated with early debt retirement, gains on sales of marketable securities and TRS property, deferred tax valuation allowance
increases and decreases, casualty-related expenses and recoveries, severance costs and legal costs. Management believes that FFO as Adjusted 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.
FFO as Adjusted 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 attributable to UDR, Inc. is the most directly comparable GAAP financial measure to FFO as Adjusted. However, other
REITs may use different methodologies for calculating FFO as Adjusted or similar FFO measures and, accordingly, our FFO as Adjusted may not always be
comparable to FFO as Adjusted or similar FFO measures calculated by other REITs. FFO as Adjusted 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, or “AFFO”, is a non-GAAP financial measure that management uses as a supplemental measure of our performance. AFFO is defined as
FFO as Adjusted less recurring capital expenditures 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 FFO as Adjusted.
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 attributable to UDR, Inc. 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 (determined in accordance with GAAP) as an indication of financial
performance, or as an alternative to cash flows from operating activities (determined
44
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 UDR, Inc. to FFO, FFO as Adjusted, and AFFO for the years ended
December 31, 2014, 2013, and 2012 (dollars in thousands):
Year Ended December 31,
Net income/(loss) attributable to UDR, Inc.
Distributions to preferred stockholders
Real estate depreciation and amortization, including discontinued operations
Noncontrolling interests
Real estate depreciation and amortization on unconsolidated joint ventures
Net (gain)/loss on the sale of depreciable property, excluding TRS
Premium on preferred stock redemption or repurchases, net
Funds from operations (“FFO”), basic
Distribution to preferred stockholders — Series E (Convertible)
FFO, diluted
FFO per common share, basic
FFO per common share, diluted
Weighted average number of common shares and OP Units outstanding — basic
Weighted average number of common shares, OP Units, and common stock equivalents outstanding —
diluted
Impact of adjustments to FFO:
Acquisition-related costs/(fees), including joint ventures
Costs/(benefit) associated with debt extinguishment and tender offer
Redemption of preferred stock
(Gain)/loss on sale of land
Net gain on prepayment of note receivable
Tax benefit associated with the conversion of certain TRS entities into REITs
Gain on sale of TRS property/marketable securities
Severance costs and other restructuring expense
Reversal of deferred tax valuation allowance
Casualty-related (recoveries)/charges, net
FFO as Adjusted, diluted
FFO as Adjusted per common share, diluted
Recurring capital expenditures
AFFO
AFFO per common share, diluted
45
$
$
$
$
$
$
$
$
$
2014
154,334
$
$
(3,724)
358,154
5,508
42,133
(144,703)
—
411,702
3,724
415,426
1.58
1.56
260,775
$
$
$
2013
2012
$
44,812
(3,724)
341,490
1,470
33,180
(40,450)
—
376,778
3,724
380,502
1.45
1.44
259,306
$
$
$
212,177
(6,010)
350,400
8,126
32,531
(243,805)
(2,791)
350,628
3,724
354,352
1.41
1.40
248,262
265,728
263,926
252,659
$
442
192
—
1,056
(8,411)
(5,770)
—
—
—
541
(11,950) $
(254) $
178
—
—
—
—
(2,651)
—
—
(9,665)
(12,392) $
2,762
(277)
2,791
—
—
—
(7,749)
733
(21,530)
9,262
(14,008)
403,476
$
368,110
$
340,344
1.52
$
1.39
$
1.35
(43,921)
359,555
$
(42,707)
325,403
$
(42,249)
298,095
1.35
$
1.23
$
1.18
The following table is our reconciliation of FFO share information to weighted average common shares outstanding, basic and diluted, reflected on the
Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012 (shares in thousands):
Weighted average number of common shares and OP Units outstanding — basic
Weighted average number of OP Units outstanding
Weighted average number of common shares outstanding — basic per the Consolidated Statements of
Operations
Year Ended December 31,
2014
260,775
(9,247)
2013
2012
259,306
(9,337)
248,262
(9,411)
251,528
249,969
238,851
Weighted average number of common shares, OP Units, and common stock equivalents outstanding —
diluted
Weighted average number of OP Units outstanding
Weighted average incremental shares from assumed conversion of stock options
Weighted average incremental shares from unvested restricted stock
Weighted average number of Series E preferred shares outstanding
Weighted average number of common shares outstanding — diluted per the Consolidated Statements of
Operations
265,728
263,926
(9,247)
—
—
(3,036)
(9,337)
(1,169)
(415)
(3,036)
252,659
(9,411)
(1,213)
(148)
(3,036)
253,445
249,969
238,851
A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands):
Net cash provided by/(used in) operating activities
Net cash provided by/(used in) investing activities
Net cash provided by/(used in) financing activities
Results of Operations
Year Ended December 31,
2013
2012
2014
$
$
392,360
(293,660)
(113,725)
$
339,902
(123,209)
(198,559)
327,187
(211,582)
(115,993)
The following discussion explains the changes in results of operations that are presented in our Consolidated Statements of Operations for the years
ended December 31, 2014, 2013, and 2012, and includes the results of both continuing and discontinued operations for the periods presented.
Net Income/(Loss) Attributable to Common Stockholders
2014 -vs- 2013
Net income attributable to common stockholders was $150.6 million ($0.59 per diluted share) for the year ended December 31, 2014 as compared to net
income of $41.1 million ($0.16 per diluted share) for the prior year. The increase in net income attributable to common stockholders for the year ended
December 31, 2014 resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:
•
gains, net of tax, of $143.6 million on the sale of real estate during the year ended December 31, 2014. These gains consisted of:
•
•
the sale of nine communities with a total of 2,500 apartment homes, an adjacent parcel of land, and one operating property for gross proceeds of
$328.4 million, resulting in a gain, net of tax, of approximately $138.6 million; and
the sale of 49% interest in a recently completed development for gross proceeds of $54.2 million, resulting in a gain, net of tax, of $7.2 million and
50% interest in a land parcel for gross proceeds of $8.3 million, resulting in a loss, net of tax, of $2.2 million.
46
•
an increase in total property net operating income (“NOI”) primarily due to higher occupancy and higher revenue per occupied home, and NOI from the
homes placed in service related to development and redevelopment projects completed in 2014 and 2013, partially offset by the disposition of
communities in 2014 and 2013.
This was partially offset by:
•
•
an increase in depreciation and amortization expense primarily from the homes placed in service related to development and redevelopment projects
completed in 2014 and 2013, partially offset by a decrease from sold communities and fully depreciated assets; and
casualty-related recoveries in 2013 resulting from the effects of Hurricane Sandy on three of our New York City communities in 2012 (see Note 4, Real
Estate Owned, in the Notes to the UDR Consolidated Financial Statements for more details);
2013 -vs- 2012
Net income attributable to common stockholders was $41.1 million ($0.16 per diluted share) for the year ended December 31, 2013 as compared to net
income of $203.4 million ($0.85 per diluted share) for the prior year. The decrease in net income attributable to common stockholders for the year ended
December 31, 2013 resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:
•
a decrease in net gains of $218.5 million on the sale of depreciable property related to the disposition of two communities in 2013 as compared to 21
communities in 2012; and
•
a decrease of $23.0 million in tax benefit primarily due to the reversal of our tax valuation allowance during 2012.
This was partially offset by:
•
•
•
•
•
an increase in total property NOI primarily due to higher occupancy and higher revenue per occupied home partially offset by the disposition of 21
communities in 2012;
casualty-related recoveries in 2013 resulting from the effects of Hurricane Sandy on three of our New York, New York communities in 2012 (see Note 16,
Casualty-Related (Recoveries)/Charges, in the Notes to the UDR Consolidated Financial Statements included in this Report for more details);
a decrease in depreciation and amortization expense primarily from the disposition of assets in 2012 and intangible assets related to in place leases
acquired in 2011 and 2012 becoming fully amortized in 2012, which was partially offset by the depreciation from developed and redeveloped units placed
in service in 2012 and 2013;
a decrease in loss from unconsolidated entities primarily due to an $8.3 million gain ($5.3 million net of tax expense) on the sale of our 95% interest in the
Lodge at Stoughton; and
a decrease in interest expense due to lower average debt balances, lower average interest rates, and higher capitalized interest from development and
redevelopment activities.
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 2.75% of property revenue to cover the regional supervision and accounting costs
related to consolidated property operations and land rent.
Although the Company considers NOI a useful measure of a 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 to UDR, Inc. below.
47
The following table summarizes the operating performance of our total property NOI (which includes discontinued operations) for each of the periods
presented (dollars in thousands):
Same-Store Communities:
Same-store rental income
Same-store operating expense (c)
Same-store NOI
Non-Mature Communities/Other NOI:
Acquired communities NOI
Sold or held for sale communities NOI
Developed communities NOI
Redeveloped communities NOI
Commercial NOI and other
Total non-mature communities/other NOI
Year Ended December 31, (a)
Year Ended December 31, (b)
2014
2013
% Change
2013
2012
% Change
$
$
630,966
(190,128)
440,838
604,729
(185,512)
419,217
4.3 % $
2.5 %
5.2 %
613,733
$
(189,224)
424,509
584,999
(184,393)
400,606
4.9 %
2.6 %
6.0 %
17,788
14,108
26,492
45,578
11,517
115,483
14,997
28,662
4,920
36,229
10,016
94,824
18.6 %
(50.8)%
438.5 %
25.8 %
15.0 %
21.8 %
19,291
7,932
4,846
44,991
12,472
89,532
16,709
29,941
(334)
42,026
15,252
103,594
15.5 %
(73.5)%
(1,550.9)%
7.1 %
(18.2)%
(13.6)%
Total Property NOI
$
556,321
$
514,041
8.2 % $
514,041
$
504,200
2.0 %
(a)
(b)
(c)
Same-store consists of 34,581 apartment homes.
Same-store consists of 35,790 apartment homes.
Excludes depreciation, amortization, and property management expenses.
The following table is our reconciliation of total property NOI to Net income/(loss) attributable to UDR, Inc. as reflected, for both continuing and
discontinued operations, for the periods presented (dollars in thousands):
$
Total property NOI
Joint venture management and other fees
Property management
Other operating expenses
Real estate depreciation and amortization
General and administrative
Casualty-related recoveries/(charges), net
Other depreciation and amortization
Income/(loss) from unconsolidated entities
Interest expense
Interest and other income/(expense), net
Tax benefit/(provision), net
Gain/(loss) on sale of real estate owned, net of tax
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating
Partnership
Net (income)/loss attributable to noncontrolling interests
Net income/(loss) attributable to UDR, Inc.
$
48
Year Ended December 31,
2014
2013
2012
$
556,321
13,044
(22,142)
(8,271)
(358,154)
(47,800)
(541)
(5,775)
(7,006)
(130,454)
11,837
15,136
143,647
(5,511)
3
154,334
$
$
514,041
12,442
(20,780)
(7,136)
(341,490)
(42,238)
12,253
(6,741)
(415)
(126,083)
4,681
7,299
40,449
(1,530)
60
44,812
$
504,200
11,911
(20,465)
(5,718)
(350,401)
(43,792)
(8,495)
(4,105)
(8,579)
(138,792)
2,703
30,282
251,554
(7,986)
(140)
212,177
Same -Store Communities
2014 -vs- 2013
Our same-store community properties (those acquired, developed, and stabilized prior to January 1, 2013 and held on December 31, 2014) consisted of
34,581 apartment homes and provided 79.2% of our total NOI for the year ended December 31, 2014.
NOI for our same-store community properties increased 5.2% or $21.6 million for the year ended December 31, 2014 compared to 2013. The increase in
property NOI was attributable to a 4.3% or $26.2 million increase in property rental income, which was partially offset by a 2.5% or $4.6 million increase in
operating expenses. The increase in revenues was primarily driven by a 3.5% or $20.2 million increase in rental rates and a 4.9% or $2.2 million increase in
reimbursement and fee income. Physical occupancy increased 0.6% to 96.7% and total monthly income per occupied home increased by 3.8% to $1,573.
The increase in operating expenses was primarily driven by a 4.1% or $2.6 million increase in real estate tax caused by higher real estate valuations and a
15.5% or $1.3 million increase in insurance expense primarily caused by a higher volume of small claims.
As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income
divided by property rental income) increased to 69.9% for the year ended December 31, 2014 as compared to 69.3% for 2013.
2013 -vs- 2012
Our same-store community properties (those acquired, developed, and stabilized prior to January 1, 2012 and held on December 31, 2013) consisted of
35,790 apartment homes and provided 82.6% of our total NOI for the year ended December 31, 2013.
NOI for our same-store community properties increased 6.0% or $23.9 million for the year ended December 31, 2013 compared to 2012. The increase in
property NOI was attributable to a 4.9% or $28.7 million increase in property rental income, which was partially offset by a 2.6% or $4.8 million increase in
operating expenses. The increase in revenues was primarily driven by a 4.0% or $22.7 million increase in rental rates and a 7.7% or $3.6 million increase in
reimbursement and fee income. Physical occupancy increased 0.2% to 96.0% and total monthly income per occupied home increased by 4.7% to $1,488.
The increase in operating expenses was primarily driven by a 6.7% or $3.9 million increase in real estate tax and a 4.6% or $2.0 million increase in personnel
costs, which was partially offset by a 4.2% or $1.3 million decrease in repair and maintenance expense.
As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income
divided by property rental income) increased to 69.2% for the year ended December 31, 2013 as compared to 68.5% for 2012.
Non-Mature Communities/Other
2014 -vs- 2013
The remaining $115.5 million or 20.8% of our total NOI for the year ended December 31, 2014 was generated from our non-mature communities/other.
UDR’s non-mature communities/other consist of communities that do not meet the criteria to be included in same-store communities, which includes
communities developed or acquired, redevelopment properties, sold or held for sale properties, and non-apartment components of mixed use properties. NOI
from non-mature communities/other increased by 21.8% or $20.7 million for the year ended December 31, 2014 compared to 2013. The increase was primarily
driven by a increase in NOI of 438.5% or $21.6 million from development communities and 25.8% or $9.3 million from redevelopment communities completed in
2014 and 2013, which was partially offset by an decrease in NOI of 50.8% or $14.6 million from communities sold in 2014 and 2013.
2013 -vs- 2012
The remaining $89.5 million of our total NOI for the year ended December 31, 2013 was generated from our non-mature communities/other. NOI from non-
mature communities decreased by 13.6% or $14.1 million for the year ended December 31, 2013 compared to 2012. The decrease was primarily driven by a
decrease in NOI of 73.5% or $22.0 million from communities
49
sold in 2012, partially offset by an increase in NOI of 1,550.9% or $5.2 million from development communities completed in 2013 and 2012 and an increase in NOI
of 7.1% or $3.0 million from redeveloped communities completed in 2013 and 2012.
Real Estate Depreciation and Amortization
For the year ended December 31, 2014, real estate depreciation and amortization on both continuing and discontinued operations increased 4.9% or $16.7
million as compared to 2013. The increase in depreciation and amortization for the year ended December 31, 2014 was primarily due to homes delivered from our
development and redevelopment communities, partially offset by a decrease from sold communities and fully depreciated assets.
For the year ended December 31, 2013, real estate depreciation and amortization on both continuing and discontinued operations decreased 2.5% or $8.9
million as compared to 2012. The decrease in depreciation and amortization for the year ended December 31, 2013 was primarily from the disposition of assets in
2012 and intangible assets related to in place leases acquired in 2012 and 2011 becoming fully amortized in 2012. The decrease was partially offset by the
depreciation from developed and redeveloped units placed in service in 2013 and 2012.
General and Administrative
For the year ended December 31, 2014, general and administrative expense increased 13.2% or $5.6 million from 2013. The increase was primarily due to a $3.8
million increase in stock-based compensation expense under the long-term incentive plan and salary and benefit increases.
For the year ended December 31, 2013, general and administrative expense decreased 3.5% or $1.6 million from 2012. The decrease was primarily due to
acquisition costs incurred in 2012.
Interest Expense
For the year ended December 31, 2014, interest expense increased by 3.5% or $4.4 million as compared to 2013. The increase in interest expense was
primarily due lower capitalized interest from development and redevelopment activities.
For the year ended December 31, 2013, interest expense decreased 9.2% or $12.7 million as compared to 2012. The decrease in interest expense was
primarily due to lower debt balances and lower interest rates and higher capitalized interest from development and redevelopment activities.
Tax Benefit/(Provision), Net
Income taxes for our TRS are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rate is recognized in earnings in the period of the
enactment date.
The Company recognized a Tax benefit/(provision), net of $15.1 million, $7.3 million and $30.3 million for the years ended December 31, 2014, 2013 and
2012, respectively. The increase from 2013 to 2014 is primarily attributable to a one-time benefit of $5.8 million related to the conversion of certain taxable REIT
subsidiaries into REITs in 2014. The decrease from 2012 to 2013 was primarily attributable to the reversal of a $21.5 million net deferred tax asset valuation
allowance in 2012. Prior to 2012, our TRS had a history of losses and, as a result, had historically recognized a valuation allowance for net deferred tax assets.
Each quarter, the Company evaluates the need to retain all or a portion of the valuation allowance on its net deferred tax assets. In the first quarter of 2012, the
Company determined that it is more likely than not that the deferred tax assets, including any remaining net operating losses, will be realized. In making this
determination, the Company analyzed, among other things, its recent history of earnings, forecasts of future earnings from sales of depreciable property, and its
cumulative earnings for the last twelve quarters.
Casualty-Related (Recoveries)/Charges, Net
In October 2012, Hurricane Sandy hit the East Coast, affecting three of the Company’s operating communities (1,706 apartment homes) located in New York
City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Company has insurance policies that
provide coverage for property damage and business interruption, subject to applicable retention.
50
Based on the claims filed and management’s estimates, the Company recognized a $9.0 million impairment charge for the damaged assets’ net book value
and incurred $10.4 million of repair and cleanup costs during the year ended December 31, 2012. The impairment charge and the repair and cleanup costs incurred
were reduced as of December 31, 2012 by $14.5 million of estimated insurance recovery, and were classified in Casualty-related (recoveries)/charges, net on the
Consolidated Statements of Operations. During the year ended December 31, 2013, no material adjustments to the impairment charge and the repair and cleanup
costs incurred were recognized. With the exception of one of the properties that is under redevelopment at December 31, 2013, the rehabilitation of the remaining
two properties was substantially completed as of December 31, 2013 and was completed during 2014.
As of December 31, 2013, the Company had settled the Hurricane Sandy claims and received insurance proceeds in excess of the $14.5 million estimated
insurance recovery receivable related to the impairment charge and the repair and cleanup costs incurred. As a result, the Company recognized a Casualty-
related recovery of approximately $4.8 million and a casualty gain of approximately $654,000 for the year ended December 31, 2013. Both the recovery and
casualty gain were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.
Based on the claims filed and management’s estimates, the Company recognized $4.4 million of business interruption losses for the year ended December
31, 2012, of which $3.6 million were related to rent concession rebates provided to residents during the period the properties were uninhabitable and were
classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations, and $767,000 were related to rent that was not
contractually receivable and were classified as a reduction to Rental income on the Consolidated Statements of Operations. As noted below, the Company
recovered from the insurance carrier approximately $4.2 million of the $4.4 million of 2012 business interruption losses. The Company estimates that it incurred an
additional $3.4 million of business interruption losses for the year ended December 31, 2013. As noted below, the Company recovered from the insurance carrier
approximately $2.6 million of the $3.4 million of 2013 business interruption losses.
During the year ended December 31, 2013, the Company received approximately $6.8 million of insurance proceeds for recovery of business interruption
losses. Of the $6.8 million of insurance proceeds received in 2013, $4.2 million related to recovery of business interruption losses incurred in 2012 and the
remaining $2.6 million related to recovery of business interruption losses incurred in 2013. The $6.8 million of recovery was classified in Casualty-related
(recoveries)/charges, net on the Consolidated Statements of Operations as of December 31, 2013.
During the year ended December 31, 2014, the Company recorded $541,000 of casualty-related losses due to property damage incurred during an
earthquake and a storm in California, all of which are included in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.
Income/(Loss) from Unconsolidated Entities
For the years ended December 31, 2014, 2013 and 2012, we recognized losses from unconsolidated entities of $7.0 million, $415,000, and $8.6 million,
respectively. These losses relate to our investments in unconsolidated joint ventures and partnerships and are included in Income/(loss) from unconsolidated
entities on the UDR Consolidated Statements of Operations included in this Report. The increase in loss in 2014 as compared to 2013, as well as the decrease in
loss in 2013 as compared to 2012, was primarily due to an $8.3 million gain ($5.3 million net of tax expense) on the sale of our 95% interest in the Lodge at
Stoughton in 2013.
Interest and other income/(expense), net
For the years ended December 31, 2014, 2013 and 2012, we recognized Interest and other income/(expense), net of $11.9 million, $4.6 million, and $3.5
million, respectively. The increase in 2014 as compared to 2013 and 2012 was primarily attributable to the net gain of $8.4 million realized on the repayment of a
note receivable in 2014.
Gain/(Loss) on Sale of Real Estate Owned, Net of Tax
During the year ended December 31, 2014, the Company recognized gains on the sale of real estate, net of tax, of $143.6 million. The Company sold nine
communities consisting of a total of 2,500 apartment homes, an adjacent parcel of land, and one operating property for gross proceeds of $328.4 million, resulting
in net proceeds of $324.4 million and a total gain, net of tax, of $138.6 million. The Company also sold 49% interest in a recently completed development for gross
proceeds of $54.2 million, resulting in a gain, net of tax, of $7.2 million; and our 50% interest in a land parcel for gross proceeds of $8.3 million, resulting in a loss,
net of tax, of $2.2 million. A portion of the sale proceeds was designated for tax-deferred exchanges under Section 1031 of the Internal Revenue Code and was
used to fund acquisitions of real estate as discussed below.
51
Due to the Company’s adoption ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, effective
January 1, 2014, these gains, net of tax, are included in Gain/(loss) on sale of real estate owned, net of tax on the UDR Consolidated Statements of Operations.
See Note 2, Significant Accounting Policies, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional information.
For the years ended December 31, 2013 and 2012, we recognized gains (before tax) of $41.9 million, and $260.4 million, respectively. These gains are
included in Income/(loss) from discontinued operations, net of tax on the Consolidated Statements of Operations of UDR included in this Report. Changes in
the level of gains recognized from period to period reflect the changing level of our divestiture activity from period to period as well as the extent of gains related
to specific properties sold.
Inflation
We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results through
wage pressures, utilities and material costs, the majority of our leases are for a term of fourteen months or less, which generally enables us to compensate for any
inflationary effects by increasing rents on our apartment homes. Although an extreme escalation in energy and food 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 year ended December 31, 2014.
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.
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2014 (dollars in thousands):
Contractual Obligations
Long-term debt obligations
Interest on debt obligations (a)
Letters of credit
Unfunded commitments on:
Development projects (b)
Unconsolidated joint ventures (b) (c)
Redevelopment projects (b)
Participating loan investments (d)
Operating lease obligations:
Operating space
Ground leases (e)
2015
2016-2017
2018-2019
Thereafter
Total
Payments Due by Period
$
520,934
125,037
1,866
40,068
—
14,222
29,302
644,155
200,454
—
—
172,155
—
$
$
1,190,637
135,239
—
$
1,227,379
114,451
—
—
—
—
—
—
—
709
5,412
737,550
$
200
10,824
1,027,788
$
152
10,824
1,336,852
$
109
313,735
1,655,674
$
3,583,105
575,181
1,866
40,068
172,155
14,222
29,302
1,170
340,795
4,757,864
$
$
(a) Interest payments on variable rate debt instruments are based on each debt instrument’s respective year-end interest rate at December 31, 2014.
(b) Any unfunded costs at December 31, 2014 are shown in the year of estimated completion.
(c) Represents UDR’s contributed and remaining equity commitment in unconsolidated joint ventures.
(d) Represents UDR’s remaining participating loan commitment for Steele Creek.
(e) For purposes of our ground lease contracts, the Company uses the minimum lease payment, if stated in the agreement. For ground lease
agreements where there is a reset provision based on the communities appraised value or consumer price index but does not included a specified
minimum lease payment, the Company uses the current rent over the remainder of the lease term.
52
During 2014, we incurred gross interest costs of $150.7 million, of which $20.2 million was capitalized.
UNITED DOMINION REALTY, L.P.:
Business Overview
United Dominion Realty, L.P. (the “Operating Partnership” or “UDR, L.P.”) is a Delaware limited partnership formed in February 2004 and organized
pursuant to the provisions of the Delaware Revised Uniform Limited Partnership Act. The Operating Partnership is the successor-in-interest to United Dominion
Realty, L.P., a limited partnership formed under the laws of Virginia, which commenced operations on November 4, 1995. Our sole general partner is UDR, Inc., a
Maryland corporation (“UDR” or the “General Partner”), which conducts a substantial amount of its business and holds a substantial amount of its assets
through the Operating Partnership. At December 31, 2014, the Operating Partnership’s real estate portfolio included 68 communities located in nine states and
the District of Columbia with a total of 20,814 apartment homes.
As of December 31, 2014, UDR owned 110,883 units of our general limited partnership interests and 174,002,342 units of our limited partnership interests
(the “OP Units”), or approximately 95.0% of our outstanding OP Units. By virtue of its ownership of our OP Units and being our sole general partner, UDR has
the ability to control all of the day-to-day operations of the Operating Partnership. Unless otherwise indicated or unless the context requires otherwise, all
references in this section of this Report to the Operating Partnership or “we,” “us” or “our” refer to UDR, L.P. together with its consolidated subsidiaries. We
refer to our General Partner together with its consolidated subsidiaries (including us) and the General Partner’s consolidated joint ventures as “UDR” or the
“General Partner.”
UDR is a self-administered real estate investment trust, or REIT, that owns, acquires, renovates, develops, and manages apartment communities. The
General Partner was formed in 1972 as a Virginia corporation and changed its state of incorporation from Virginia to Maryland in September 2003. At
December 31, 2014, the General Partner’s consolidated real estate portfolio included 139 communities located in 10 states and the District of Columbia with a total
of 39,851 apartment homes. In addition, the General Partner had an ownership interest in 36 communities with 10,055 completed apartment homes through
unconsolidated operating communities.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to use
judgment in the application of accounting policies, including making estimates and assumptions. A critical accounting policy is one that is both important to our
financial condition and results of operations as well as involves some degree of uncertainty. Estimates are prepared based on management’s assessment after
considering all evidence available. Changes in estimates could affect our financial position or results of operations. Below is a discussion of the accounting
policies that we consider critical to understanding our financial condition or results of operations where there is uncertainty or where significant judgment is
required. A discussion of our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2,
Significant Accounting Policies, to the Notes to the Operating Partnership’s Consolidated Financial Statements included in this Report.
Cost Capitalization
In conformity with GAAP, 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.
In addition, we capitalize costs directly related to the predevelopment, development, and redevelopment of a capital project, which include, but are not
limited to, interest, real estate taxes, insurance, and allocated development and redevelopment overhead related to support costs for personnel working on the
capital projects. We use our professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. These
costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress and such costs are incremental
and identifiable to a specific activity to get the asset ready for its intended use. As each home in a capital project is completed and becomes available for lease-
up, the Operating Partnership ceases capitalization on the related portion. The costs capitalized are reported on the Consolidated Balance Sheets as Total real
estate owned, net of accumulated depreciation. Amounts capitalized during the years ended December 31, 2014, 2013, and 2012, were $4.9 million, $8.4 million,
and $5.8 million, respectively.
53
Impairment of Long-Lived Assets
We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book value of those assets. Our
cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding
periods. The net book value of impaired assets is reduced to fair market value. Our estimates of fair market value represent our best estimate based primarily
upon unobservable inputs related to rental rates, operating costs, growth rates, discount rates, capitalization rates, industry trends and reference to market rates
and transactions.
Real Estate Investment Properties
We purchase real estate investment properties from time to time and record the fair value to various components, such as land, buildings, and intangibles
related to in-place leases, based on the fair value of each component. In making estimates of fair values for purposes of allocating purchase price, we utilize
various sources, including independent appraisals, our own analysis of recently acquired and existing comparable properties in our portfolio and other market
data. The fair value of buildings is determined as if the buildings were vacant upon acquisition and subsequently leased at market rental rates. As such, the
determination of fair value considers the present value of all cash flows expected to be generated from the property including an initial lease-up period. We
determine the fair value of in-place leases by assessing the net effective rent and remaining term of the lease relative to market terms for similar leases at
acquisition. In addition, we consider the cost of acquiring similar leases, the foregone rents associated with the lease-up period, and the carrying costs
associated with the lease-up period. The fair value of in-place leases is recorded and amortized as amortization expense over the remaining average contractual
lease period.
54
Summary of Real Estate Portfolio by Geographic Market
The following table summarizes our market information by major geographic markets as of and for the year ended December 31, 2014.
Same-Store
Communities
West Region
San Francisco, CA
Orange County, CA
Seattle, WA
Los Angeles, CA
Monterey Peninsula, CA
Other Southern
California
Portland, OR
Mid-Atlantic Region
Metropolitan D.C.
Baltimore, MD
Southeast Region
Tampa, FL
Nashville, TN
Other Florida
Northeast Region
New York, NY
Boston, MA
Southwest Region
Dallas, TX
Austin, TX
Total/Average Same-
Store Communities
Non Matures,
Commercial Properties
& Other
Total Real Estate
Owned
Total Accumulated
Depreciation
Total Real Estate
Owned, Net of
Accumulated
Depreciation
As of December 31, 2014
Year Ended December 31, 2014
Number of
Apartment
Communities
Number of
Apartment
Homes
Percentage of
Total
Carrying Value
Total Carrying
Value (in
thousands)
Average
Physical
Occupancy
Monthly
Income
per Occupied
Home (a)
Net Operating
Income (in
thousands)
9
8
5
2
7
3
3
7
5
3
6
1
1
2
2
1
65
3
68
2,185
2,935
932
344
1,565
635
716
2,378
994
1,154
1,612
636
493
833
1,348
250
19,010
1,804
20,814
13.3% $
12.3%
5.0%
2.5%
3.8%
2.6%
1.7%
13.2%
3.6%
2.8%
3.2%
1.9%
6.3%
4.2%
4.5%
1.0%
560,828
522,264
213,135
108,080
161,635
109,741
73,811
561,052
152,041
117,260
134,852
81,316
268,662
178,607
189,458
39,538
96.4% $
94.8%
97.1%
94.4%
93.7%
94.9%
96.8%
96.4%
87.8%
96.3%
97.0%
95.4%
96.9%
96.3%
95.6%
96.2%
81.9%
3,472,280
95.4% $
18.1%
766,490
100%
4,238,770
(1,403,303)
$
2,835,467
$
2,671
1,721
1,540
2,179
1,243
1,658
1,204
1,909
1,558
1,192
1,029
1,378
3,528
1,855
1,410
1,653
1,713
52,012
42,097
11,989
5,646
15,325
8,349
6,970
35,342
11,297
10,336
12,988
6,491
16,193
12,737
14,020
2,801
264,593
35,720
$
300,313
(a) Monthly Income per Occupied Home represents total revenues divided by the product of occupancy and the number of mature apartment homes.
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 to January 1, 2013 and held as of
December 31, 2014. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan
to conduct substantial redevelopment activities, and the communities are not classified as held for sale at year end. 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.
55
Liquidity and Capital Resources
Liquidity is the ability to meet present and future financial obligations either through operating cash flows, the sale of properties, and the issuance of debt.
Both the coordination of asset and liability maturities and effective capital management are important to the maintenance of liquidity. The Operating
Partnership’s primary source of liquidity is cash flow from operations as determined by rental rates, occupancy levels, and operating expenses related to our
portfolio of apartment homes and borrowings allocated to us under the General Partner’s credit agreements. The General Partner will routinely use its unsecured
credit facility 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 repositioned our
portfolio.
We expect to meet our short-term liquidity requirements generally through net cash provided by operations and borrowings allocated to us under the
General Partner’s credit agreements. We expect to meet certain long-term liquidity requirements such as scheduled debt maturities and potential property
acquisitions through borrowings and the disposition of properties. We believe that our net cash provided by operations and borrowings will continue to be
adequate to meet both operating requirements and the payment of distributions. Likewise, the budgeted expenditures for improvements and renovations of
certain properties are expected to be funded from property operations, and borrowings allocated to us under the General Partner’s credit agreements.
Future Capital Needs
Future capital expenditures are expected to be funded with proceeds from the issuance of secured debt or unsecured debt, sales of properties, borrowings
allocated to us under our General Partner’s credit agreements, and to a lesser extent, from cash flows provided by operating activities.
As of December 31, 2014, the Operating Partnership had approximately $193.0 million of principal payments on secured debt maturing in 2015. We
anticipate that we will repay that debt with operating cash flows or proceeds from borrowings allocated to us under our General Partner’s credit agreements. The
repayment of debt will be recorded as an offset to the Advances (to)/from General Partner.
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 years ended
December 31, 2014, 2013, and 2012.
Operating Activities
For the year ended December 31, 2014, Net cash provided by/(used in) operating activities was $208.0 million compared to $208.3 million for 2013. The
increase in cash flow due to improved income from continuing operations was offset by changes in operating assets and liabilities.
For the year ended December 31, 2013, Net cash provided by/(used in) operating activities was $208.3 million compared to $201.1 million for 2012. The
increase in net cash flow from operating activities was primarily due to an increase in property net operating income from our apartment community portfolio and
changes in operating assets and operating liabilities.
Investing Activities
For the year ended December 31, 2014, Net cash provided by/(used in) investing activities was $(46.7) million compared to $(64.0) million for 2013. The
decrease in cash used in investing activities was primarily related to lower spend on development and redevelopment.
For the year ended December 31, 2013, Net cash provided by/(used in) investing activities was $(64.0) million compared to $4.3 million for 2012. Changes
in the level of investment activities from period to period reflect our strategy as it relates to acquisitions, dispositions, development, redevelopment, and capital
expenditures.
Disposition of Investments
During the year ended December 31, 2014 the Operating Partnership sold one community and an adjacent parcel of land in San Diego, California for gross
proceeds of $48.7 million, resulting in a $24.4 million gain and net proceeds of $47.9
56
million. The Operating Partnership also recorded gains of $39.2 million in connection with UDR’s sale of two communities in Tampa, Florida and Los Angeles,
California, which were previously deferred. The total gains of $63.6 million were included in Gain/(loss) on sale of real estate owned on the Consolidated
Statements of Operations.
In 2013, the Operating Partnership sold two apartment communities in the Sacramento market, consisting of 914 apartment homes for gross proceeds of
$81.1 million. The Operating Partnership recognized a gain of $41.5 million, which is included in Income/(loss) from discontinued operations on the Operating
Partnership’s Consolidated Statements of Operations. Proceeds were used primarily to fund development and redevelopment activity and reduce debt.
Also in 2013, the Operating Partnership distributed the development property Los Alisos to the General Partner as a capital distribution. Upon the
distribution of the property, the Operating Partnership redeemed 1,002,556 limited partnership units owned by UDR and affiliated entities and reduced its
receivable from the General Partner by $53.7 million, resulting in a net capital reduction of $77.0 million.
In 2012, the Operating Partnership sold four communities with 1,314 apartment homes for a gain of $51.1 million.
Financing Activities
For the year ended December 31, 2014, Net cash provided by/(used in) financing activities was $(162.8) million compared to $(145.3) million for 2013. The
increase in cash used in financing activities was primarily due to increased advances to the General Partner, partially offset by decreased payments on secured
debt and proceeds from the issuance of secured debt.
For the year ended December 31, 2013, Net cash provided by/(used in) financing activities was $(145.3) million compared to $(203.3) million for 2012. The
decrease in cash used in financing activities was primarily due to a decrease in payments on secured debt, a decrease in advances from the General Partner, and
a decrease in proceeds from the issuance of secured debt.
Credit Facilities
As of December 31, 2014, an aggregate commitment of $526.6 million of the General Partner's secured credit facilities with Fannie Mae was allocated to the
Operating Partnership based on the ownership of the assets securing the debt. The entire commitment was outstanding at December 31, 2014. The Fannie Mae
credit facilities mature at various dates from May 2017 through July 2023 and bear interest at floating and fixed rates. At December 31, 2014, $333.8 million of the
outstanding balance was fixed at a weighted average interest rate of 4.90% and the remaining balance of $192.8 million on these facilities had a weighted average
variable interest rate of 1.83%. During 2013, the General Partner reallocated an additional $13.7 million of the Fannie Mae credit facilities to the Operating
Partnership.
The Operating Partnership is a guarantor on the General Partner’s unsecured revolving credit facility, with an aggregate borrowing capacity of $900 million,
$250 million of term notes due June 2018, $100 million of term notes due June 2018, $300 million of medium-term notes due June 2018, $300 million of medium-term
notes due October 2020, $400 million of medium-term notes due January 2022, and $300 million of medium-term notes due July 2024. As of December 31, 2014,
there were $152.5 million outstanding borrowings under the unsecured credit facility. As of December 31, 2013, there was no outstanding balance under the
unsecured credit facility.
The credit facilities are subject to customary financial covenants and limitations.
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. 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 $219.8 million in variable rate debt that is not
subject to interest rate swap contracts as of December 31, 2014. If market interest rates for variable rate debt increased by 100 basis points, our interest expense
would increase by $2.2 million based on the balance at December 31, 2014.
These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. These analyses do 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
57
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 General Partner also utilizes derivative financial instruments allocated to the Operating Partnership to manage interest rate risk and generally
designates these financial instruments as cash flow hedges. See Note 8, Derivatives and Hedging Activity, in the Notes to the Operating Partnership’s
Consolidated Financial Statements included in this Report for additional discussion of derivative instruments.
Results of Operations
The following discussion explains the changes in results of operations that are presented in our Consolidated Statements of Operations for the years
ended December 31, 2014, 2013, and 2012, and includes the results of both continuing and discontinued operations for the periods presented.
Net Income(Loss) Attributable to OP Unitholders
2014 -vs- 2013
Net income/(loss) attributable to OP unitholders was $96.2 million ($0.53 per OP Unit) for the year ended December 31, 2014 as compared to $73.4 million
($0.40 per OP Unit) for the the prior year. The increase resulted primarily from the following items, all of which are discussed in further detail elsewhere within this
Report:
•
•
the Operating Partnership sold one community and an adjacent parcel of land in San Diego, California for gross proceeds of $48.7 million, resulting in a
$24.4 million gain and net proceeds of $47.9 million. The Operating Partnership also recorded gains of $39.2 million in connection with UDR’s sale of two
communities in Tampa, Florida and Los Angeles, California, which were previously deferred;
an increase in total property net operating income (“NOI”) primarily due to higher occupancy and higher revenue per occupied home, and NOI from the
homes placed in service related to development and redevelopment projects completed in 2014 and 2013, partially offset by the disposition of
communities in 2014 and 2013.
This was partially offset by:
•
casualty-related recoveries in 2013 resulting from the effects of Hurricane Sandy on two of our New York City communities in 2012 (see Note 13,
Casualty-Related (Recoveries)/Charges, in the Notes to the Operating Partnership’s Consolidated Financial Statements for more details).
2013 -vs- 2012
Net income/(loss) attributable to OP unitholders was $73.4 million ($0.40 per OP Unit) for the year ended December 31, 2013 as compared to $44.0 million
($0.24 per OP Unit) for the prior year. The increase resulted primarily from the following items, all of which are discussed in further detail elsewhere within this
Report:
•
•
•
•
an increase in total property NOI primarily due to higher occupancy and higher revenue per occupied home, partially offset by a decrease in NOI due to
the disposition of four communities in 2012;
a decrease in depreciation and amortization expense primarily from the disposition of assets in 2012, partially offset by the depreciation from developed
or redeveloped units placed in service in 2013 and 2012;
casualty-related recoveries in 2013 resulting from the effects of Hurricane Sandy on two of our New York, New York communities in 2012 (see Note 13,
Casualty-Related (Recoveries)/Charges, in the Notes to the Operating Partnership’s Consolidated Financial Statements included in this Report for
more details); and
a decrease in interest expense due to lower average debt balances, lower average interest rates, and higher capitalized interest from development and
redevelopment activities.
This was partially offset by:
•
a decrease in net gains of $9.6 million on the sale of depreciable properties related to the disposition of two communities in 2013 as compared to four
communities in 2012.
58
Apartment Community Operations
Our net income results primarily from NOI generated from the operation of our apartment communities. The Operating Partnership 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 2.75% of property revenue to cover regional supervision and accounting
costs related to consolidated property operations and land rent.
Although the Company considers NOI a useful measure of a 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 to OP unitholders below.
The following table summarizes the operating performance of our total portfolio (which includes discontinued operations) for the years ended
December 31, 2014, 2013, and 2012 (dollars in thousands):
Year Ended December 31, (a)
Year Ended December 31, (b)
2014
2013
% Change
2013
2012
% Change
Same-Store Communities:
Same-store rental income
Same-store operating expense (c)
Same-store NOI
Non-Mature Communities/Other NOI:
Acquired communities NOI
Sold communities NOI
Developed communities NOI
Redeveloped communities NOI
Commercial NOI and other
Total non-mature communities/other NOI
$
$
372,818
(108,225 )
264,593
355,585
(106,228 )
249,357
4.8 % $
1.9 %
6.1 %
$
344,525
(103,252 )
241,273
327,877
(99,944 )
227,933
16,417
11
(603 )
14,245
5,650
35,720
14,998
8,671
(17 )
10,084
4,442
38,178
9.5 %
(99.9 )%
3,447.1 %
41.3 %
27.2 %
(6.4 )%
14,997
5,581
(17 )
18,848
6,853
46,262
14,160
10,296
(2 )
20,093
9,058
53,605
5.1 %
3.3 %
5.9 %
5.9 %
(45.8 )%
750.0 %
(6.2 )%
(24.3 )%
(13.7 )%
Total Property NOI
$
300,313
$
287,535
4.4 % $
287,535
$
281,538
2.1 %
(a) Same-store consists of 19,010 apartment homes.
(b) Same-store consists of 18,616 apartment homes.
(c) Excludes depreciation, amortization, and property management expenses.
59
The following table is our reconciliation of total property NOI to Net income/(loss) attributable to OP unitholders as reflected, for both continuing and
discontinued operations, for the years ended December 31, 2014, 2013 and 2012 (dollars in thousands):
Year Ended December 31,
2014
2013
2012
Total property NOI
Property management
Other operating expenses
Real estate depreciation and amortization
General and administrative
Casualty-related recoveries/(charges), net
Interest expense
Gain/(loss) on sale of real estate owned
Net (income)/loss attributable to noncontrolling interests
Net income/(loss) attributable to OP unitholders
Same-Store Communities
2014 -vs- 2013
$
$
$
300,313
(11,622 )
(5,172 )
(179,176 )
(28,541 )
(541 )
(41,717 )
63,635
(952 )
96,227
$
$
287,535
(11,298 )
(5,728 )
(181,302 )
(24,808 )
8,083
(36,058 )
41,518
(4,566 )
73,376
$
281,538
(11,019 )
(5,272 )
(195,051 )
(26,204 )
(5,518 )
(45,234 )
51,094
(352 )
43,982
Our same-store community properties (those acquired, developed, and stabilized prior to January 1, 2013 and held on December 31, 2014) consisted of
19,010 apartment homes and provided 88.1% of our total NOI for the year ended December 31, 2014.
NOI for our same-store community properties increased 6.1% or $15.2 million for the year ended December 31, 2014 compared to 2013. The increase in
property NOI was primarily attributable to a 4.8% or $17.2 million increase in property rental income, which was partially offset by a 1.9% or $2.0 million increase
in operating expenses. The increase in revenues was primarily driven by a 3.7% or $12.8 million increase in rental rates and a 4.0% or $1.1 million increase in
reimbursement and fee income. Physical occupancy increased 0.2% to 95.4% and total monthly income per occupied home increased by 4.6% to $1,713 for the
year ended December 31, 2014 compared to 2013.
The increase in operating expenses was primarily driven by a 4.2% or $1.5 million increase in real estate tax caused by higher real estate valuations and a
18.7% or $810,000 increase in insurance expense primarily caused by a higher volume of small claims, which was partially offset by a 2.3% or $367,000 decrease in
repairs and maintenance costs.
As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income
divided by property rental income) increased to 71.0% for the year ended December 31, 2014 as compared to 70.0% for 2013.
2013 -vs- 2012
Our same-store community properties (those acquired, developed, and stabilized prior to January 1, 2012 and held on December 31, 2013) consisted of
18,616 apartment homes and provided 83.9% of our total NOI for the year ended December 31, 2013.
NOI for our same-store community properties increased 5.9% or $13.3 million for the year ended December 31, 2013 compared to 2012. The increase in
property NOI was primarily attributable to a 5.1% or $16.6 million increase in property rental income, which was partially offset by a 3.3% or $3.3 million increase
in operating expenses. The increase in revenues was primarily driven by a 4.3% or $13.7 million increase in rental rates and a 6.8% or $1.8 million increase in
reimbursement and fee income. Physical occupancy increased 0.2% to 95.8% and total monthly income per occupied home increased by 4.8% to $1,609 for the
year ended December 31, 2013 compared to 2012.
The increase in operating expenses was primarily driven by a 7.0% or $2.3 million increase in real estate tax and a 5.2% or $1.2 million increase in personnel
costs, which was partially offset by a 3.1% or $502,000 decrease in repairs and maintenance costs.
60
As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income
divided by property rental income) increased to 70.0% for the year ended December 31, 2013 as compared to 69.5% for 2012.
Non-Mature Communities/Other
2014 -vs- 2013
The remaining $35.7 million or 11.9% of our total NOI during the year ended December 31, 2014 was generated from our non-mature communities/other. The
Operating Partnership’s non-mature communities/other consist of communities that do not meet the criteria to be included in same-store communities, which
includes communities developed or acquired, redevelopment properties, sold properties, and non-apartment components of mixed use properties. NOI from non-
mature communities/other decreased 6.4% or $2.5 million for the year ended December 31, 2014 compared to 2013. The decrease was primarily driven by a
decrease in NOI of 99.9% or $8.7 million from properties sold during 2014 and 2013, which was partially offset by an increase in NOI of 27.2% or $1.2 million from
commercial/other properties, and an increase of 41.3% or $4.2 million from redevelopment properties.
2013 -vs- 2012
The remaining $46.3 million or 16.1% of our total NOI during the year ended December 31, 2013 was generated from our non-mature communities/other. The
Operating Partnership’s non-mature communities/other consist of communities that do not meet the criteria to be included in same-store communities, which
includes communities developed or acquired, redevelopment properties, sold properties, and non-apartment components of mixed use properties. NOI from non-
mature communities/other decreased 13.7% or $7.3 million for the year ended December 31, 2013 compared to 2012. The decrease was primarily driven by a
decrease in NOI of 45.8% or $4.7 million from properties sold during 2013 and 2012, a decrease in NOI of 24.3% or $2.2 million from commercial/other properties,
and a decrease of 6.2% or $1.2 million from redevelopment properties.
Real Estate Depreciation and Amortization
For the year ended December 31, 2014, real estate depreciation and amortization from continuing and discontinued operations decreased by 1.2% or $2.1
million as compared to 2013. The decrease in depreciation and amortization for the year ended December 31, 2014 was primarily from disposition of assets in 2014
and 2013, partially offset by the depreciation from developed and redeveloped units placed in service in 2014 and 2013.
For the year ended December 31, 2013, real estate depreciation and amortization from continuing and discontinued operations decreased by 7.0% or $13.7
million as compared to 2012. The decrease in depreciation and amortization for the year ended December 31, 2013 was primarily from the disposition of assets in
2012.
Casualty-Related Recoveries/(Charges), Net
In October 2012, Hurricane Sandy hit the East Coast, affecting two of the Operating Partnership’s operating communities (1,001 apartment homes) located
in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Operating Partnership
has insurance policies that provide coverage for property damage and business interruption, subject to applicable retention.
Based on the claims filed and management’s estimates, the Operating Partnership recognized a $7.1 million impairment charge for the damaged assets’ net
book value and incurred $7.0 million of repair and cleanup costs during the year ended December 31, 2012. The impairment charge and the repair and cleanup
costs incurred were reduced as of December 31, 2012 by $10.8 million of estimated insurance recovery, and were classified in Casualty-related
(recoveries)/charges, net on the Consolidated Statements of Operations. During the year ended December 31, 2013, no material adjustments to the impairment
charge and the repair and cleanup costs incurred were recognized. The rehabilitation of these two properties was substantially completed as of December 31,
2013.
As of December 31, 2013, the Operating Partnership had settled the Hurricane Sandy claims and received insurance proceeds in excess of the $10.8 million
estimated insurance recovery receivable related to the impairment charge and the repair and cleanup costs incurred. As a result, the Company recognized a
Casualty-related recovery of approximately $3.3 million and a casualty gain of approximately $582,000 for the year ended December 31, 2013. Both the recovery
and casualty gain were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.
61
Based on the claims filed and management’s estimates, the Operating Partnership recognized $2.2 million of business interruption losses for the year ended
December 31, 2012, of which $1.8 million were related to rent concession rebates provided to residents during the period the properties were uninhabitable and
were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations, and $400,000 were related to rent that was not
contractually receivable and were classified as a reduction to Rental income on the Consolidated Statements of Operations. The Company estimates that it
incurred an additional $2.1 million of business interruption losses for the year ended December 31, 2013. As noted, the Company settled the Hurricane Sandy
claims as of December 31, 2013.
During the year ended December 31, 2013, the Operating Partnership received approximately $4.2 million of insurance proceeds for recovery of business
interruption losses. Of the $4.2 million of insurance proceeds received during the year ended December 31, 2013, $2.1 million related to recovery of business
interruption losses incurred in 2012 and the remaining $2.1 million related to recovery of business interruption losses incurred in 2013. The $4.2 million of
recovery was included in Casualty-related (recoveries)/charges, net on the Operating Partnership’s Consolidated Statements of Operations.
During the year ended December 31, 2014, the Company recorded $541,000 of casualty-related losses due to property damage incurred during an
earthquake and a storm in California, all of which are included in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.
Interest Expense
For the year ended December 31, 2014, interest expense increased by 15.7% or $5.7 million as compared to 2013, which was primarily due to lower portion of
interest capitalized in 2014 as a result of completed developments, partially offset by a decrease in interest expense due to replacement of debt at lower rates.
For the year ended December 31, 2013, interest expense decreased by 20.3% or $9.2 million as compared to 2012, which was primarily due to lower portion
of interest capitalized in 2013 as a result of completed developments, partially offset by a decrease in interest expense due to replacement of debt at lower rates.
Gain/(Loss) on the Sale of Real Estate Owned
For the year ended December 31, 2014, the Operating Partnership sold one community and an adjacent parcel of land in San Diego, California for gross
proceeds of $48.7 million, resulting in a $24.4 million gain and net proceeds of $47.9 million. The Operating Partnership also recorded gains of $39.2 million in
connection with UDR’s sale of two communities in Tampa, Florida and Los Angeles, California, which were previously deferred.
Due to the Company’s adoption ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, effective
January 1, 2014, these gains were included in Gain/(loss) on sale of real estate owned on the Operating Partnership’s Consolidated Statements of Operations.
See Note 2, Significant Accounting Policies, in the Notes to the Operating Partnership’s Consolidated Financial Statements included in this Report for
additional information.
For the years ended December 31, 2013, and 2012, we recognized gains on sale of depreciable property of $41.5 million, and $51.1 million, respectively.
These gains are included in Income/(loss) from discontinued operations on the Operating Partnership’s Consolidated Statements of Operations included in this
Report. Changes in the level of gains recognized from period to period reflect the changing level of our divestiture activity from period to period as well as the
extent of gains related to specific properties sold.
Net (Income)/Loss Attributable to Noncontrolling Interests
For the year ended December 31, 2014, net income attributable to noncontrolling interests was $952,000 as compared to $4.6 million for 2013. The decrease
of $3.6 million was primarily due to the Operating Partnership correcting an error in the General Partner’s ownership interest in one of the consolidated
subsidiaries resulting in a cumulative adjustment recorded in 2013 of $3.3 million. Management believes the impact of the cumulative adjustment in 2013 is
immaterial to the financial statements taken as a whole.
Inflation
We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results through
wage pressures, utilities and material costs, substantially all of our leases are for a term of one year or less, which generally enables us to compensate for any
inflationary effects by increasing rents on our apartment
62
homes. Although an extreme escalation in energy and food 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 year ended December 31, 2014.
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.
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2014 (dollars in thousands):
Contractual Obligations
2015
2016-2017
2018-2019
Thereafter
Total
Long-term debt obligations
Interest on debt obligations (a)
Operating lease obligations — ground leases (b)
$
$
193,003
40,906
5,308
239,217
$
$
154,455
49,287
10,616
214,358
$
$
384,992
33,497
10,616
429,105
$
$
199,509
11,132
313,648
524,289
$
$
931,959
134,822
340,188
1,406,969
Payments Due by Period
(a) Interest payments on variable rate debt instruments are based on each debt instrument’s respective year-end interest rate at December 31, 2014.
(b) For purposes of our ground lease contracts, the Operating Partnership uses the minimum lease payment, if stated in the agreement. For ground lease
agreements where there is a reset provision based on the communities appraised value or consumer price index but does not include a specified minimum
lease payment, the Operating Partnership uses the current rent over the remainder of the lease term.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item is included in and incorporated by reference from Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations of this Report.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and related financial information required to be filed are attached to this Report. Reference is made to page F-1 of
this Report for the Index to Consolidated Financial Statements and Schedules of UDR, Inc. and United Dominion Realty, L.P.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The disclosure controls and procedures of the Company and the Operating Partnership are designed with the objective of ensuring that information
required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.
It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can
be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. As a result, our
disclosure controls and procedures are designed to provide reasonable assurance that such disclosure controls and procedures will meet their objectives.
63
As of December 31, 2014, we carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial
Officer of the Company, which is the sole General Partner of the Operating Partnership, of the effectiveness of the design and operation of the disclosure
controls and procedures of the Company and the Operating Partnership. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer of the
Company concluded that the disclosure controls and procedures of the Company and the Operating Partnership are effective at the reasonable assurance level
described above.
Management’s Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-
15(f) under the Securities Exchange Act of 1934 for the Company and the Operating Partnership. Under the supervision and with the participation of the
management, the Chief Executive Officer and Chief Financial Officer of the Company, which is the sole General Partner of the Operating Partnership, conducted
an evaluation of the effectiveness of the internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued
by the Committee of Sponsoring Organizations (2013 Framework) (COSO). Based on such evaluation, management concluded that the Company’s and the
Operating Partnership’s internal control over financial reporting was effective as of December 31, 2014.
Ernst & Young LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this Report, has
audited UDR, Inc.’s internal control over financial reporting as of December 31, 2014. The report of Ernst & Young LLP, which expresses an unqualified opinion
on UDR, Inc.’s internal control over financial reporting as of December 31, 2014, is included under the heading “Report of Independent Registered Public
Accounting Firm” of UDR, Inc. contained in this Report. Further, an attestation report of the registered public accounting firm of United Dominion Realty, L.P.
will not be required as long as United Dominion Realty, L.P. is a non-accelerated filer.
Changes in Internal Control Over Financial Reporting
There have not been any changes in either the Company’s or the Operating Partnership’s internal control over financial reporting (as such term is defined
in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the fourth fiscal quarter to which this Report relates that materially affected, or
are reasonably likely to materially affect, the internal control over financial reporting of either the Company or the Operating Partnership.
Item 9B. OTHER INFORMATION
None.
64
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The information required by this item is incorporated by reference to the information set forth under the headings “Proposal No. 1 - Election of Directors,”
“Corporate Governance Matters,” “Audit Committee Report,” “Corporate Governance Matters-Board Leadership Structure and Committees-Audit Committee
Financial Expert,” “Corporate Governance Matters-Identification and Selection of Nominees for Directors,” “Corporate Governance Matters-Board of Directors
and Committee Meetings,” “Executive Officers” and “Other Matters - Section 16(a) Beneficial Ownership Reporting Compliance” in UDR, Inc.’s definitive proxy
statement (our “definitive proxy statement”) for its 2015 Annual Meeting of Stockholders. UDR is the sole general partner of the Operating Partnership.
We have a code of ethics for senior financial officers that applies to our principal executive officer, all members of our finance staff, including the principal
financial officer, the principal accounting officer, the treasurer and the controller, our director of investor relations, our corporate secretary, and all other
Company officers. We also have a code of business conduct and ethics that applies to all of our employees. Information regarding our codes is available on our
website, www.udr.com, and is incorporated by reference to the information set forth under the heading “Corporate Governance Matters” in our definitive proxy
statement for UDR’s 2015 Annual Meeting of Stockholders. We intend to satisfy the disclosure requirements under Item 10 of Form 8-K regarding an amendment
to, or a waiver from, a provision of our codes by posting such amendment or waiver on our website.
Item 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the information set forth under the headings “Security Ownership of Certain
Beneficial Owners and Management,” “Corporate Governance Matters-Board Leadership Structure and Committees-Compensation Committee Interlocks and
Insider Participation,” “Executive Compensation,” “Compensation of Directors” and “Compensation Committee Report” in the definitive proxy statement for
UDR’s 2015 Annual Meeting of Stockholders. UDR is the sole general partner of the Operating Partnership.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference to the information set forth under the headings “Security Ownership of Certain
Beneficial Owners and Management,” “Executive Compensation” and “Executive Compensation - Equity Compensation Plan Information” in the definitive proxy
statement for UDR’s 2015 Annual Meeting of Stockholders. UDR is the sole general partner of the Operating Partnership.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to the information set forth under the heading “Security Ownership of Certain Beneficial
Owners and Management,” “Corporate Governance Matters-Corporate Governance Overview,” “Corporate Governance Matters-Director Independence,”
“Corporate Governance Matters-Board Leadership Structure and Committees-Independence of the Audit, Compensation and Governance Committees,” and
“Executive Compensation” in the definitive proxy statement for UDR’s 2015 Annual Meeting of Stockholders. UDR is the sole general partner of the Operating
Partnership. Information regarding related party transactions between UDR and the Operating Partnership is presented in Note 6, Related Party Transactions, of
the Consolidated Financial Statements of United Dominion Realty, L.P. referenced in Part IV, Item 15(a) of this Report.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference to the information set forth under the headings “Audit Matters-Audit Fees” and “Audit
Matters-Pre-Approval Policies and Procedures” in the definitive proxy statement for UDR’s 2015 Annual Meeting of Stockholders. UDR is the sole general
partner of the Operating Partnership.
65
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Report:
PART IV
1. Financial Statements. See Index to Consolidated Financial Statements and Schedules of UDR, Inc. and United Dominion Realty, L.P. on page F-1
of this Report.
2. Financial Statement Schedules. See Index to Consolidated Financial Statements and Schedules of UDR, Inc. and United Dominion Realty, L.P. on
page S-1 of this Report. All other schedules are omitted because they are not required, are inapplicable, or the required information is included in the financial
statements or notes thereto.
3. Exhibits. The exhibits filed with this Report are set forth in the Exhibit Index.
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date:
February 24, 2015
UDR, Inc.
By: /s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President (Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below on February 24, 2015 by the following persons on behalf
of the registrant and in the capacities indicated.
/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer, President, and Director (Principal Executive
Officer)
/s/ Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and Chief Financial Officer (Principal Financial
Officer)
/s/ Mark A. Schumacher
Mark A. Schumacher
Senior Vice President and Chief Accounting Officer (Principal
Accounting Officer)
/s/ James D. Klingbeil
James D. Klingbeil
Chairman of the Board
/s/ Lynne B. Sagalyn
Lynne B. Sagalyn
Vice Chair of the Board
/s/ Katherine A. Cattanach
Katherine A. Cattanach
Director
/s/ Eric J. Foss
Eric J. Foss
Director
/s/ Robert P. Freeman
Robert P. Freeman
Director
/s/ Jon A. Grove
Jon A. Grove
Director
/s/ Robert A. McNamara
Robert A. McNamara
Director
/s/ Mark R. Patterson
Mark R. Patterson
Director
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date:
February 24, 2015
UNITED DOMINION REALTY, L.P.
By: UDR, Inc., its sole general partner
By: /s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President (Principal
Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below on February 24, 2015 by the following persons on behalf
of the registrant and in the capacities indicated.
/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer, President, and
Director of the General Partner (Principal Executive Officer)
/s/ Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and Chief Financial
Officer of the General Partner (Principal Financial Officer)
/s/ Mark A. Schumacher
Mark A. Schumacher
Senior Vice President and Chief Accounting
Officer of the General Partner (Principal Accounting Officer)
/s/ James D. Klingbeil
James D. Klingbeil
Chairman of the Board of the General Partner
/s/ Lynne B. Sagalyn
Lynne B. Sagalyn
Vice Chair of the Board of the General Partner
/s/ Katherine A. Cattanach
Katherine A. Cattanach
Director of the General Partner
/s/ Eric J. Foss
Eric J. Foss
Director of the General Partner
/s/ Robert P. Freeman
Robert P. Freeman
Director of the General Partner
/s/ Jon A. Grove
Jon A. Grove
Director of the General Partner
/s/ Robert A. McNamara
Robert A. McNamara
Director of the General Partner
/s/ Mark R. Patterson
Mark R. Patterson
Director of the General Partner
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
UDR, INC.:
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2014 and 2013
Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012
Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2014, 2013, and 2012
Consolidated Statements of Changes in Equity for the years ended December 31, 2014, 2013, and 2012
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012
Notes to Consolidated Financial Statements
UNITED DOMINION REALTY, L.P.:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2014 and 2013
Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012
Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2014, 2013, and 2012
Consolidated Statements of Changes in Capital for the years ended December 31, 2014, 2013, and 2012
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012
Notes to Consolidated Financial Statements
SCHEDULES FILED AS PART OF THIS REPORT
UDR, INC.:
Schedule III- Summary of Real Estate Owned
UNITED DOMINION REALTY, L.P.:
Schedule III- Summary of Real Estate Owned
PAGE
F - 2
F - 4
F - 5
F - 7
F - 8
F - 10
F - 12
F - 51
F - 52
F - 53
F - 54
F - 55
F - 56
F - 57
S - 1
S - 6
All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule,
or because the information required is included in the consolidated financial statements and notes thereto.
The Board of Directors and Stockholders of UDR, Inc.
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of UDR, Inc. (the “Company”) as of December 31, 2014 and 2013, and the related
consolidated statements of operations, comprehensive income/(loss), changes in equity, and cash flows for each of the three years in the period ended
December 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of UDR, Inc. at
December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2014,
in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), UDR, Inc.'s internal control
over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 Framework) and our report dated February 24, 2015 expressed an unqualified opinion thereon.
As discussed in Notes 2 and 3 to the consolidated financial statements, the Company changed its reporting of discontinued operations as a result of the
adoption of the amendments to the FASB Accounting Standards Codification resulting from Accounting Standards Update No. 2014-08, “Presentation of
Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of
Components of an Entity”.
/s/ Ernst & Young LLP
Denver, Colorado
February 24, 2015
F - 2
The Board of Directors and Stockholders of UDR, Inc.
Report of Independent Registered Public Accounting Firm
We have audited UDR, Inc.'s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). UDR, Inc.'s management is
responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting included in the accompanying Management's Report on Internal Control over Financial Reporting included in Item 9A. Our responsibility is to express
an opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our opinion, UDR, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO
criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance
sheets of UDR, Inc. as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income/(loss), changes in equity,
and cash flows for each of the three years in the period ended December 31, 2014 and our report dated February 24, 2015, expressed an unqualified opinion
thereon.
/s/ Ernst & Young LLP
Denver, Colorado
February 24, 2015
F - 3
UDR, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
December 31,
2014
December 31,
2013
Real estate owned:
Real estate held for investment
Less: accumulated depreciation
ASSETS
Real estate held for investment, net
Real estate under development (net of accumulated depreciation of $0 and $1,411, respectively)
Real estate sold or held for disposition (net of accumulated depreciation of $0 and $6,568, respectively)
Total real estate owned, net of accumulated depreciation
Cash and cash equivalents
Restricted cash
Deferred financing costs, net
Notes receivable, net
Investment in and advances to unconsolidated joint ventures, net
Other assets
Total assets
Liabilities:
LIABILITIES AND EQUITY
Secured debt
Unsecured debt
Real estate taxes payable
Accrued interest payable
Security deposits and prepaid rent
Distributions payable
Accounts payable, accrued expenses, and other liabilities
Total liabilities
Commitments and contingencies (Note 14)
Redeemable noncontrolling interests in the Operating Partnership
Equity:
Preferred stock, no par value; 50,000,000 shares authorized:
8.00% Series E Cumulative Convertible; 2,803,812 shares issued and outstanding at December 31, 2014 and
2013
Common stock, $0.01 par value; 350,000,000 shares authorized; 255,114,603 and 250,749,665 shares issued and
outstanding at December 31, 2014 and 2013, respectively
Additional paid-in capital
Distributions in excess of net income
Accumulated other comprehensive income/(loss), net
Total stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
See accompanying notes to consolidated financial statements.
F - 4
$
$
$
$
$
8,205,627
(2,434,772 )
5,770,855
177,632
—
5,948,487
15,224
22,340
22,686
14,369
718,226
105,202
6,846,534
$
$
1,361,529
2,221,576
15,978
34,215
34,064
69,460
91,282
3,828,104
7,723,844
(2,200,815 )
5,523,029
466,002
10,152
5,999,183
30,249
22,796
26,924
83,033
507,655
137,882
6,807,722
1,442,077
2,081,626
13,847
32,279
27,203
61,907
118,682
3,777,621
282,480
217,597
46,571
46,571
2,551
4,223,747
(1,528,917 )
(8,855 )
2,735,097
853
2,735,950
6,846,534
$
2,507
4,109,765
(1,342,070 )
(5,125 )
2,811,648
856
2,812,504
6,807,722
UDR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
2014
2013
2012
$
$
805,002
13,044
818,046
$
746,484
12,442
758,926
REVENUES:
Rental income
Joint venture management and other fees
Total revenues
OPERATING EXPENSES:
Property operating and maintenance
Real estate taxes and insurance
Property management
Other operating expenses
Real estate depreciation and amortization
General and administrative
Casualty-related (recoveries)/charges, net
Other depreciation and amortization
Total operating expenses
Operating income
Income/(loss) from unconsolidated entities
Interest expense
Interest and other income/(expense), net
Income/(loss) before income taxes, discontinued operations and gain/(loss) on sale of
real estate owned
Tax benefit/(provision), net
Income/(loss) from continuing operations
Income/(loss) from discontinued operations, net of tax
Income/(loss) before gain/(loss) on sale of real estate owned
Gain/(loss) on sale of real estate owned, net of tax
Net income/(loss)
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating
Partnership
Net (income)/loss attributable to noncontrolling interests
Net income/(loss) attributable to UDR, Inc.
Distributions to preferred stockholders — Series E (Convertible)
Distributions to preferred stockholders — Series G
Premium on preferred stock redemption or repurchases, net
Net income/(loss) attributable to common stockholders
Income/(loss) per weighted average common share — basic:
Income/(loss) from continuing operations attributable to common stockholders
Income/(loss) from discontinued operations attributable to common stockholders
Net income/(loss) attributable to common stockholders
$
$
$
F - 5
704,701
11,911
716,612
139,784
86,154
19,378
5,718
341,926
43,792
8,495
4,105
649,352
67,260
(8,579 )
(138,792 )
3,524
(76,587 )
30,282
(46,305 )
266,608
220,303
—
220,303
(7,986 )
(140 )
212,177
(3,724 )
(2,286 )
(2,791 )
203,376
(0.22 )
1.07
0.85
149,428
99,175
22,138
8,271
358,154
47,800
541
5,775
691,282
126,764
(7,006 )
(130,454 )
11,858
1,162
15,098
16,260
10
16,270
143,572
159,842
(5,511 )
3
154,334
(3,724 )
—
—
150,610
$
0.60
—
0.60
$
$
144,319
93,765
20,528
7,136
339,532
42,238
(12,253 )
6,741
642,006
116,920
(415 )
(126,083 )
4,619
(4,959 )
7,299
2,340
43,942
46,282
—
46,282
(1,530 )
60
44,812
(3,724 )
—
—
41,088
$
(0.01 ) $
0.17
0.16
$
UDR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Income/(loss) per weighted average common share — diluted:
Income/(loss) from continuing operations attributable to common stockholders
Income/(loss) from discontinued operations attributable to common stockholders
Net income/(loss) attributable to common stockholders
$
$
Weighted average number of common shares outstanding — basic
Weighted average number of common shares outstanding — diluted
Year Ended December 31,
2014
2013
2012
0.59
—
0.59
$
$
251,528
253,445
(0.01) $
0.17
0.16
$
249,969
249,969
(0.22)
1.07
0.85
238,851
238,851
See accompanying notes to consolidated financial statements.
F - 6
UDR, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(In thousands)
Net income/(loss)
Other comprehensive income/(loss), including portion attributable to noncontrolling
interests:
Other comprehensive income/(loss) - derivative instruments:
Unrealized holding gain/(loss)
(Gain)/loss reclassified into earnings from other comprehensive income/(loss)
Other comprehensive income/(loss), including portion attributable to
noncontrolling interests
Comprehensive income/(loss)
Comprehensive (income)/loss attributable to noncontrolling interests
Comprehensive income/(loss) attributable to UDR, Inc.
$
150,606
$
See accompanying notes to consolidated financial statements.
F - 7
Year Ended December 31,
2014
2013
2012
$
159,842
$
46,282
$
220,303
(8,695)
4,834
(3,861)
155,981
(5,375)
(469)
6,851
6,382
52,664
(1,720)
50,944
$
(4,924)
7,649
2,725
223,028
(8,206)
214,822
UDR, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share and per share data)
Balance at December 31, 2011
Net income/(loss) attributable to UDR,
Inc.
Net income/(loss) attributable to
noncontrolling interests
Other comprehensive income/(loss)
Issuance/(forfeiture) of common and
restricted shares, net
Issuance of common shares through public
offering
Redemption of 3,264,362 shares of 6.75%
Series G Cumulative Redeemable Shares
Adjustment for conversion of
noncontrolling interest of unitholders in
the Operating Partnership
Acquisition of noncontrolling interests
Increase in noncontrolling interests from
business combination, net
Common stock distributions declared
($0.88 per share)
Preferred stock distributions declared-
Series E ($1.3288 per share)
Preferred stock distributions declared-
Series G ($0.5671875 per share)
Adjustment to reflect redemption value of
redeemable noncontrolling interests
Balance at December 31, 2012
Net income/(loss) attributable to UDR,
Inc.
Net income/(loss) attributable to
noncontrolling interests
Other comprehensive income/(loss)
Issuance/(forfeiture) of common and
restricted shares, net
Adjustment for conversion of
noncontrolling interest of unitholders in
the. Operating Partnership
Common stock distributions declared
($0.94 per share)
Preferred stock distributions declared-
Series E ($1.3288 per share)
Adjustment to reflect redemption value of
redeemable noncontrolling interests
Preferred Stock
Common Stock
Shares
Amount
Shares
6,068,174
$
128,180
219,650,225
Amount
$
2,197
Paid-in
Capital
$ 3,340,470
Distributions in
Excess of Net
Income
Accumulated Other
Comprehensive
Income/(Loss), net
Noncontrolling
Interests
Total
$
(1,142,895) $
(13,902) $
4,734
$ 2,318,784
—
—
—
—
—
—
—
—
—
—
—
—
—
(22,224)
30,490,969
(3,264,362)
(81,609)
—
—
—
—
—
—
—
—
—
—
—
—
—
20,438
—
—
—
—
—
—
—
—
—
305
—
(1)
—
—
—
—
—
—
—
—
(742)
755,833
2,791
530
—
—
—
—
—
212,177
—
—
—
—
(2,791)
—
—
—
(215,654)
(3,724)
(2,286)
—
—
2,645
—
—
—
—
—
—
—
—
—
—
2,803,812
—
46,571
—
250,139,408
—
2,501
—
4,098,882
11,392
(1,143,781)
—
(11,257)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
533,966
76,291
—
—
—
—
—
—
5
1
—
—
—
F - 8
—
—
—
9,067
1,816
—
—
—
44,812
—
—
—
—
(235,721)
(3,724)
(3,656)
—
—
6,132
—
—
—
—
—
—
140
—
—
—
—
212,177
140
2,645
(742)
756,138
(81,609)
—
(4,871)
529
(4,871)
913
913
—
—
—
—
916
—
(60)
—
—
—
—
—
—
(215,654)
(3,724)
(2,286)
11,392
2,993,832
44,812
(60)
6,132
9,072
1,817
(235,721)
(3,724)
(3,656)
UDR, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
(In thousands, expect share and per share data)
Distributions in
Excess of Net
Income
(1,342,070 )
Accumulated Other
Comprehensive
Income/(Loss), net
Balance at December 31, 2013
2,803,812
46,571
250,749,665
2,507
4,109,765
Preferred Stock
Common Stock
Shares
Amount
Shares
Amount
Paid-in
Capital
Net income/(loss) attributable to UDR,
Inc.
Net income/(loss) attributable to
noncontrolling interests
Other comprehensive income/(loss)
Issuance/(forfeiture) of common and
restricted shares, net
Issuance of common shares through public
offering
Adjustment for conversion of
noncontrolling interest of unitholders in
Operating Partnership
Common stock distributions declared
($1.04 per share)
Preferred stock distributions declared-
Series E ($1.3288 per share)
Adjustment to reflect redemption value of
redeemable noncontrolling interests
Balance at December 31, 2014
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
801,054
3,410,433
153,451
—
—
—
—
—
8
34
2
—
—
—
—
—
9,797
99,815
4,370
—
—
—
2,803,812
$
—
46,571
—
255,114,603
$
—
2,551
—
$ 4,223,747
154,334
—
—
—
—
—
(263,503 )
(3,724 )
(73,954 )
$
(1,528,917 ) $
Noncontrolling
Interests
Total
856
2,812,504
—
154,334
(3 )
—
—
—
—
—
—
(3 )
(3,730 )
9,805
99,849
4,372
(263,503 )
(3,724 )
(5,125 )
—
—
(3,730 )
—
—
—
—
—
—
(8,855 ) $
—
853
(73,954 )
$ 2,735,950
See accompanying notes to consolidated financial statements.
F - 9
UDR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except for share data)
Operating Activities
Net income/(loss)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Year Ended December 31,
2013
2012
2014
$
159,842
$
46,282
$
220,303
Depreciation and amortization
Gain/(loss) on sale of real estate owned, net of tax
Impairment loss, net of tax
Tax benefit/(provision), net
Loss from unconsolidated entities
Casualty-related (recoveries)/charges, net
Other
Changes in operating assets and liabilities:
(Increase)/decrease in operating assets
Increase/(decrease) in operating liabilities
Net cash provided by/(used in) operating activities
Investing Activities
Acquisition of real estate assets (net of liabilities assumed) and initial capital expenditures
Proceeds from sales of real estate investments, net
Development of real estate assets
Capital expenditures and other major improvements — real estate assets, net of escrow
reimbursement
Capital expenditures — non-real estate assets
Investment in unconsolidated joint ventures
Distributions received from unconsolidated joint ventures
(Issuance)/repayment of notes receivable
Net cash provided by/(used in) investing activities
Financing Activities
Payments on secured debt
Proceeds from the issuance of secured debt
Payments on unsecured debt
Proceeds from the issuance of unsecured debt
Net proceeds/(repayment) of revolving bank debt
Proceeds from the issuance of common shares through public offering, net
Payments for the repurchase of Series G preferred stock, net
Distributions paid to redeemable noncontrolling interests
Acquisition of nonredeemable noncontrolling interests
Distributions paid to preferred stockholders
Distributions paid to common stockholders
Other
Net cash provided by/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$
F - 10
363,929
(143,647 )
—
(15,136 )
7,006
541
26,517
(1,074 )
(5,618 )
392,360
(228,810 )
383,886
(251,493 )
(96,679 )
(5,497 )
(222,930 )
59,199
68,664
(293,660 )
(80,961 )
5,502
(312,500 )
298,956
152,500
99,849
—
(9,929 )
—
(3,724 )
(256,100 )
(7,318 )
(113,725 )
(15,025 )
30,249
15,224
$
348,231
(41,919 )
1,470
(7,299 )
415
(270 )
24,826
(15,135 )
(16,699 )
339,902
—
250,043
(280,603 )
(153,676 )
(7,639 )
(43,291 )
130,984
(19,027 )
(123,209 )
(46,564 )
—
(122,500 )
299,943
(76,000 )
—
—
(9,348 )
—
(3,724 )
(231,822 )
(8,544 )
(198,559 )
18,134
12,115
30,249
$
354,505
(251,554 )
—
(30,282 )
8,579
8,495
26,009
12,647
(21,515 )
327,187
(108,215 )
593,167
(246,923 )
(144,877 )
(7,947 )
(283,369 )
50,580
(63,998 )
(211,582 )
(491,885 )
250
(100,000 )
396,400
(345,000 )
756,138
(81,609 )
(9,033 )
(4,871 )
(6,954 )
(207,470 )
(21,959 )
(115,993 )
(388 )
12,503
12,115
UDR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands, except for share data)
Supplemental Information:
Year Ended December 31,
2014
2013
2012
Interest paid during the period, net of amounts capitalized
$
131,815
$
127,877
$
133,133
Non-cash transactions:
Real estate acquired in asset exchange or upon consolidation of joint ventures
Transfer of real estate owned to investment in and advances to unconsolidated ventures
Secured debt assumed in the acquisitions of properties, including asset exchange and
consolidation of joint ventures
Fair market value adjustment of secured debt assumed in acquisitions of properties, including
asset exchange
Development costs and capital expenditures incurred but not yet paid
Contribution of purchase deposit made in 2011 to unconsolidated joint venture
Conversion of operating partnership noncontrolling interests to common stock (153,451 shares in
2014, 76,291 shares in 2013; and 20,438 shares in 2012)
—
54,938
—
—
34,746
—
4,372
129,437
175,951
63,595
—
37,220
—
1,817
—
—
34,412
2,617
24,551
80,397
529
See accompanying notes to consolidated financial statements.
F - 11
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014
1. CONSOLIDATION AND BASIS OF PRESENTATION
Organization and Formation
UDR, Inc. (“UDR,” the “Company,” “we,” or “our”) is a self-administered real estate investment trust, or REIT, that owns, operates, acquires, renovates,
develops, redevelops, and manages apartment communities generally in high barrier-to-entry markets located in the United States. The high barrier-to-entry
markets are characterized by limited land for new construction, difficult and lengthy entitlement process, expensive single-family home prices and significant
employment growth potential. At December 31, 2014, our consolidated apartment portfolio consisted of 139 consolidated communities located in 20 markets
consisting of 39,851 apartment homes. In addition, the Company has an ownership interest in 10,055 apartment homes through unconsolidated joint ventures.
Basis of Presentation
The accompanying consolidated financial statements of UDR include its wholly-owned and/or controlled subsidiaries (see the “Consolidated Joint
Ventures” section of Note 5, Joint Ventures and Partnerships, for further discussion). All significant intercompany accounts and transactions have been
eliminated in consolidation. Certain previously reported amounts have been reclassified to conform to the current financial statement presentation.
The accompanying consolidated financial statements include the accounts of UDR and its subsidiaries, including United Dominion Realty, L.P. (the
“Operating Partnership” or the “OP”). As of December 31, 2014 and 2013, there were 183,278,698 units in the Operating Partnership outstanding, of which
174,113,225 or 95.0% and 173,959,774 or 94.9%, respectively, were owned by UDR and 9,165,473 or 5.0% and 9,318,924 or 5.1%, respectively, were owned by
limited partners. The consolidated financial statements of UDR include the noncontrolling interests of the unitholders in the Operating Partnership.
The Company evaluated subsequent events through the date its financial statements were issued. No significant recognized or non-recognized
subsequent events were noted other than those mentioned in Note 5, Joint Ventures and Partnerships, and Note 8, Stockholders’ Equity.
2. SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Pronouncements
In April 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Reporting
Discontinued Operations and Disclosures of Disposals of Components of an Entity, which incorporates a requirement that a disposition represent a strategic
shift in an entity’s operations into the definition of a discontinued operation. In accordance with the ASU, a discontinued operation represents (1) a component
of an entity or group of components that has been disposed of or is classified as held for sale in a single transaction and represents a strategic shift that has or
will have a major effect on an entity’s financial results, or (2) an acquired business that is classified as held for sale on the date of acquisition. A strategic shift
could include a disposal of (1) a separate major line of business, (2) a separate major geographic area of operations, (3) a major equity method investment, or (4)
other major parts of an entity. The standard requires prospective application and will be effective for interim and annual periods beginning on or after December
15, 2014, with early adoption permitted. The early adoption provision excludes components of an entity that were sold or classified as held for sale prior to the
adoption of the standard.
The Company elected to early adopt this standard effective January 1, 2014, which had a significant impact on the Company’s consolidated financial
statements as further discussed in Note 3, Discontinued Operations. Subsequent to the Company’s adoption of ASU 2014-08, the sale of real estate that does
not meet the definition of a discontinued operation under the standard is included in Gain/(loss) on sale of real estate owned, net of tax on the Consolidated
Statements of Operations.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The standard provides companies with a single model for use in
accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue
guidance. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard specifically
excludes lease contracts. The ASU allows for the use of either the full or modified retrospective transition method, and the standard will be effective for the
Company on January 1, 2017; early adoption is not permitted. The Company has not yet selected a transition method and we
F - 12
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.
Real Estate
Real estate assets held for investment are carried at historical cost and consist of land, buildings and improvements, furniture, fixtures and equipment and
other costs incurred during their development, acquisition and redevelopment.
Expenditures for ordinary repair and maintenance costs are charged to expense as incurred. Expenditures for improvements, renovations, and replacements
related to the acquisition and/or improvement of real estate assets are capitalized and depreciated over their estimated useful lives if the expenditures qualify as a
betterment or the life of the related asset will be substantially extended beyond the original life expectancy.
UDR purchases real estate investment properties and records the tangible and identifiable intangible assets and liabilities acquired based on their
estimated fair value. The primary, although not only, identifiable intangible asset associated with our portfolio is the value of existing lease agreements. When
recording the acquisition of a community, we first assign fair value to the estimated intangible value of the existing lease agreements and then to the estimated
value of the land, building and fixtures assuming the community is vacant. The Company estimates the intangible value of the lease agreements by determining
the lost revenue associated with a hypothetical lease-up. Depreciation on the building is based on the expected useful life of the asset and the in-place leases are
amortized over their remaining average contractual life. Property acquisition costs are expensed as incurred.
Quarterly or when changes in circumstances warrant, UDR will assess our real estate properties for indicators of impairment. In determining whether the
Company has indicators of impairment in our real estate assets, we assess whether the long-lived asset’s carrying value exceeds the community’s undiscounted
future cash flows, which is representative of projected net operating income (“NOI”) plus the residual value of the community. Our future cash flow estimates are
based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. If such
indicators of impairment are present and the carrying value exceeds the undiscounted cash flows of the community, an impairment loss is recognized equal to the
excess of the carrying amount of the asset over its estimated fair value. Our estimates of fair market value represent our best estimate based primarily upon
unobservable inputs related to rental rates, operating costs, growth rates, discount rates, capitalization rates, industry trends and reference to market rates and
transactions.
For long-lived assets to be disposed of, impairment losses are recognized when the fair value of the asset less estimated cost to sell is less than the
carrying value of the asset. Properties classified as real estate held for sale generally represent properties that are actively marketed or contracted for sale with
the closing expected to occur within the next twelve months. Real estate held for sale is carried at the lower of cost, net of accumulated depreciation, or fair value,
less the cost to sell, determined on an asset-by-asset basis. Expenditures for ordinary repair and maintenance costs on held for sale properties are charged to
expense as incurred. Expenditures for improvements, renovations, and replacements related to held for sale properties are capitalized at cost. Depreciation is not
recorded on real estate held for sale.
Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets which are 35 to 55 years for buildings, 10 to 35 years
for major improvements, and 3 to 10 years for furniture, fixtures, equipment, and other assets.
Predevelopment, development, and redevelopment projects and related costs are capitalized and reported on the Consolidated Balance Sheets as Total
real estate owned, net of accumulated depreciation. The Company capitalizes costs directly related to the predevelopment, development, and redevelopment of
a capital project, which include, but are not limited to, interest, real estate taxes, insurance, and allocated development and redevelopment overhead related to
support costs for personnel working on the capital projects. We use our professional judgment in determining whether such costs meet the criteria for
capitalization or must be expensed as incurred. These costs are capitalized only during the period in which activities necessary to ready an asset for its intended
use are in progress and such costs are incremental and identifiable to a specific activity to get the asset ready for its intended use. These costs, excluding the
direct costs of development and redevelopment and capitalized interest, for the years ended December 31, 2014, 2013, and 2012 were $9.0 million, $11.1 million
and $10.0 million, respectively. During the years ended December 31, 2014, 2013, and 2012, total interest capitalized was $20.2 million, $29.4 million, and $26.4
million, respectively. As each home in a capital project is completed and becomes available for lease-up, the Company ceases capitalization on the related portion
and depreciation commences over the estimated useful life.
F - 13
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand deposits with financial institutions and short-term, highly liquid investments. We consider all
highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The majority of the Company’s cash and cash
equivalents are held at major commercial banks.
Restricted Cash
Restricted cash consists of escrow deposits held by lenders for real estate taxes, insurance and replacement reserves, and security deposits.
Revenue and Real Estate Sales Gain Recognition
Rental income related to leases is recognized on an accrual basis when due from residents and tenants in accordance with GAAP. Rental payments are
generally due on a monthly basis and recognized when earned. The Company recognizes interest income, management and other fees and incentives when
earned, and the amounts are fixed and determinable.
For sale transactions meeting the requirements for full accrual profit recognition, we remove the related assets and liabilities from our Consolidated Balance
Sheets and record the gain or loss in the period the transaction closes. For sale transactions that do not meet the full accrual sale criteria due to our continuing
involvement, we evaluate the nature of the continuing involvement and account for the transaction under an alternate method of accounting. Unless certain
limited criteria are met, non-monetary transactions, including property exchanges, are accounted for at fair value.
Sales to entities in which we retain or otherwise own an interest are accounted for as partial sales. If all other requirements for recognizing profit under the
full accrual method have been satisfied and no other forms of continuing involvement are present, we recognize profit proportionate to the outside interest in the
buyer and defer the gain on the interest we retain. The Company recognizes any deferred gain when the property is sold to a third party. In transactions
accounted for by us as partial sales, we determine if the buyer of the majority equity interest in the venture was provided a preference as to cash flows in either
an operating or a capital waterfall. If a cash flow preference has been provided, we recognize profit only to the extent that proceeds from the sale of the majority
equity interest exceed costs related to the entire property.
Notes Receivable
The following table summarizes our notes receivable, net as of December 31, 2014 and 2013 (dollars in thousands):
Interest rate at December
31, 2014
December 31,
2014
December 31,
2013
Balance Outstanding
Note due June 2014 (a)
Note due February 2017 (b)
Note due July 2017 (c)
Note due June 2022 (net of discount of $0 and $247,
respectively) (d)
Total notes receivable, net
10.00 %
8.00 %
$
$
— $
11,869
2,500
—
14,369 $
40,800
14,580
1,400
26,253
83,033
(a) In the fourth quarter of 2013, in conjunction with the sale of its 95% interest in the Lodge at Stoughton, one of its unconsolidated joint ventures, the
Company provided the buyer with a $40.8 million loan secured by the property at LIBOR plus a spread of 350 basis points with two three-month
extension options at increased rates and a financing fee. In June 2014, the note was paid in full.
(b) The Company has a secured note receivable with an unaffiliated third party with an aggregate commitment of $11.9 million, which bears an interest rate
of 10.00% per annum. During the year ended December 31, 2014, the Company loaned an additional $1.2 million and received a payment of $3.9 million in
the fourth quarter under this note. Interest payments are due monthly. The note matures at the earliest of the following: (a) the closing of any private or
public capital raising in the amount of $5.0 million or greater; (b) an acquisition; (c) acceleration in the event of default; or (d) the fifth anniversary of the
date of the note (February 2017).
F - 14
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
(c) The Company has a secured note receivable with an unaffiliated third party with an aggregate commitment of $2.5 million, which bears an interest rate of
8.00% per annum. During the year ended December 31, 2014, the Company loaned an additional $1.1 million under the note. Interest payments are due
monthly. The note matures at the earliest of the following: (a) the closing of any private or public capital raising in the amount of $5.0 million or greater;
(b) an acquisition; (c) acceleration in the event of default; or (d) the fifth anniversary of the date of the note (July 2017).
(d) In 2012, the Company purchased a "B" Note secured by a first mortgage on a class A community in West Los Angeles. The $26.5 million loan was
purchased at a yield of 7.25% and bore a coupon rate of 7.00%. Interest payments are due monthly and the note is due June 2022. The discount is
amortized using the effective interest method. In July 2014, the Company received proceeds of $36.0 million from the repayment of this note, resulting in
a net gain of approximately $8.4 million, which is included in Interest and other income/(expense), net on the Consolidated Statements of Operations.
During the years ended December 31, 2014, 2013 and 2012, the Company recognized $3.4 million, $4.1 million and $2.7 million, respectively, of interest
income from these notes receivable, of which $0, $765,000 and $281,000, respectively, were related party interest income. Interest income is included in Interest
and other income/(expense), net on the Consolidated Statements of Operations.
Investment in Joint Ventures and Partnerships
We use the equity method to account for investments in joint ventures and partnerships that qualify as variable interest entities where we are not the
primary beneficiary and entities that we do not control or where we do not own a majority of the economic interest but have the ability to exercise significant
influence over the operating and financial policies of the investee. Throughout these financial statements we use the term “joint venture” or “partnership” when
referring to investments in entities in which we do not have a 100% ownership interest. The Company also uses the equity method when we function as the
managing partner and our venture partner has substantive participating rights or where we can be replaced by our venture partner as managing partner without
cause. For a joint venture or partnership accounted for under the equity method, our share of net earnings or losses is reflected as income/loss when
earned/incurred and distributions are credited against our investment in the joint venture or partnership as received.
In determining whether a joint venture or partnership is a variable interest entity, the Company considers: the form of our ownership interest and legal
structure; the size of our investment; the financing structure of the entity, including necessity of subordinated debt; estimates of future cash flows; ours and our
partner’s ability to participate in the decision making related to acquisitions, disposition, budgeting and financing of the entity; obligation to absorb losses and
preferential returns; nature of our partner’s primary operations; and the degree, if any, of disproportionality between the economic and voting interests of the
entity. As of December 31, 2014, the Company did not determine any of our joint ventures or partnerships to be variable interest entities.
We evaluate our investments in unconsolidated joint ventures for events or changes in circumstances that indicate 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. These factors include, but are not
limited to, age of the venture, our intent and ability to retain our investment in the entity, the financial condition and long-term prospects of the entity, the fair
value of the property of the joint venture, and the relationships with the other joint venture partners and its lenders. The amount of loss recognized is the excess
of the investment’s carrying amount over its estimated fair value. If we believe that the decline in fair value is temporary, no impairment is recorded. The
aforementioned factors are taken into consideration as a whole by management in determining the valuation of our equity method investments. Should the actual
results differ from management’s judgment, the valuation could be negatively affected and may result in a negative impact to our Consolidated Financial
Statements.
Derivative Financial Instruments
The Company utilizes derivative financial instruments to manage interest rate risk and generally designates these financial instruments as cash flow
hedges. Derivative financial instruments are recorded on our Consolidated Balance Sheets as either an asset or liability and measured quarterly at their fair value.
The changes in fair value for cash flow hedges that are deemed effective are reflected in other comprehensive income/(loss) and for non-designated derivative
financial instruments in earnings. The ineffective component of cash flow hedges, if any, is recorded in earnings.
F - 15
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Redeemable Noncontrolling Interests in the Operating Partnership
Interests in the Operating Partnership held by limited partners are represented by Operating Partnership units (“OP Units”). The income is allocated to
holders of OP Units based upon net income available to common stockholders and the weighted average number of OP Units outstanding to total common
shares plus OP Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to noncontrolling interests in
accordance with the terms of the partnership agreement.
Limited partners have the right to require the Operating Partnership to redeem all or a portion of the OP Units held by the limited partner at a redemption
price equal to and in the form of the Cash Amount as defined in the Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the
“Operating Partnership Agreement”), provided that such OP Units have been outstanding for at least one year. UDR, as the general partner of the Operating
Partnership may, in its sole discretion, purchase the OP Units by paying to the limited partner either the Cash Amount or the REIT Share Amount (generally one
share of Common Stock of the Company for each OP Unit), as defined in the Operating Partnership Agreement. Accordingly, the Company records the OP Units
outside of permanent equity and reports the OP Units at their redemption value using the Company’s stock price at each balance sheet date.
Income Taxes
Due to the structure of the Company as a REIT and the nature of the operations for the operating properties, no provision for federal income taxes has
been provided for at UDR. Historically, the Company has generally incurred only state and local excise and franchise taxes. UDR has elected for certain
consolidated subsidiaries to be treated as taxable REIT subsidiaries (“TRS”), primarily those engaged in development activities.
Income taxes for our TRS are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rate is recognized in earnings in the period of the
enactment date. The Company’s deferred tax assets are generally the result of differing depreciable lives on capitalized assets and timing of expense recognition
for certain accrued liabilities. As of December 31, 2014 and 2013, UDR’s net deferred tax asset of $7.0 million, which had no valuation allowance, and $32.3 million,
net of a valuation allowance of $1.3 million, respectively, was included in Other assets on the Consolidated Balance Sheets.
Prior to 2012, our TRS had a history of losses and, as a result, historically recognized a valuation allowance for net deferred tax assets. Each quarter, the
Company evaluates the need to retain all or a portion of the valuation allowance on its net deferred tax assets. In 2012, the Company determined that it was more
likely than not that the deferred tax assets, including any remaining net operating loss carry forward, would be realized. In making this determination, the
Company analyzed, among other things, its recent history of earnings from sales of depreciable property, forecasts of future earnings and its cumulative
earnings for the last twelve quarters. The reversal of the valuation allowance resulted in an income tax benefit of $44.4 million during the year ended
December 31, 2012, $21.5 million of which is reported in continuing operations and included within Tax benefit/(provision), net in the Consolidated Statements
of Operations, and $22.9 million of which is included within Income/(loss) from discontinued operations, net of tax in the Consolidated Statements of
Operations.
GAAP defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. GAAP also provides guidance on derecognition, classification, interest and penalties, accounting for interim periods,
disclosure and transition.
The Company recognizes its tax positions and evaluates them using a two-step process. First, UDR determines whether a tax position is more likely than
not (greater than 50 percent probability) to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the
technical merits of the position. The Company will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized
upon ultimate settlement.
UDR had no material unrecognized tax benefit, accrued interest or penalties at December 31, 2014. UDR and its subsidiaries are subject to federal income
tax as well as income tax of various state and local jurisdictions. The tax years 2010 through 2013 remain open to examination by tax jurisdictions to which we are
subject. When applicable, UDR recognizes interest and/or penalties related to uncertain tax positions in income tax expense.
F - 16
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Discontinued Operations
Prior to the adoption of ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the results of
operations for those properties sold during the year or classified as held for sale at the end of the current year are classified as discontinued operations in the
current and prior periods. Further, to meet the discontinued operations criteria, the Company will not have any significant continuing involvement in the
ownership or operation of the property after the sale or disposition. Once a property is classified as held for sale, depreciation is no longer recorded. However, if
the Company determines that the property no longer meets the criteria for held for sale, the Company will recapture any unrecorded depreciation on the property.
The assets and liabilities, if any, of properties classified as held for sale are presented separately on the Consolidated Balance Sheets at the lower of their
carrying amount or their estimated fair value less the costs to sell the assets. (See Note 3, Discontinued Operations and Assets Held for Sale, for further
discussion).
Stock-Based Employee Compensation Plans
The Company measures the cost of employee services received in exchange for an award of an equity instrument based on the award’s fair value on the
grant date and recognizes the cost over the period during which the employee is required to provide service in exchange for the award, which is generally the
vesting period. The fair value for stock options issued by the Company is calculated utilizing the Black-Scholes-Merton formula. For performance based awards,
the Company remeasures the fair value each balance sheet date with adjustments made on a cumulative basis until the award is settled and the final
compensation is known. The fair value for market based awards issued by the Company is calculated utilizing a Monte Carlo simulation. For further discussion,
see Note 9, Employee Benefit Plans.
Advertising Costs
All advertising costs are expensed as incurred and reported on the Consolidated Statements of Operations within the line item General and
administrative. During the years ended December 31, 2014, 2013, and 2012, total advertising expense was $6.0 million, $5.7 million, and $6.2 million, respectively.
Cost of Raising Capital
Costs incurred in connection with the issuance of equity securities are deducted from stockholders’ equity. Costs incurred in connection with the
issuance or renewal of debt are recorded based on the terms of the debt issuance or renewal. Accordingly, if the terms of the renewed or modified debt
instrument are deemed to be substantially different (i.e. a 10 percent or greater difference in the cash flows between instruments), all unamortized financing costs
associated with the extinguished debt are charged to earnings in the current period and certain costs of new debt issuances are capitalized and amortized over
the term of the debt. When the cash flows are not substantially different, the lender costs associated with the renewal or modification are capitalized and
amortized into interest expense over the remaining term of the related debt instrument and other related costs are expensed. The balance of any unamortized
financing costs associated with retired debt is expensed upon retirement. Deferred financing costs for new debt instruments include fees and costs incurred by
the Company to obtain financing. Deferred financing costs are generally amortized on a straight-line basis, which approximates the effective interest method,
over a period not to exceed the term of the related debt.
Preferred Share Redemption and Repurchases
During the year ended December 31, 2012, the Company completed the redemption of all outstanding shares of its 6.75% Series G Cumulative Redeemable
Preferred Stock. A total of 3,264,362 shares of the Series G Preferred Stock was redeemed at a redemption price of $25 per share in cash, plus accrued and unpaid
dividends to the redemption date for a total cost of $82.1 million.
When redeeming or repurchasing preferred stock, the Company recognizes share issuance costs as a charge to the preferred stock on a pro rata basis to
the total costs incurred for the preferred stock as well as any premium or discount on the redemption or repurchase. In connection with the redemption of the
Series G Preferred Stock, the Company recognized a (decrease)/increase in net income/(loss) attributable to common stockholders of $(2.8) million for the year
ended December 31, 2012, which is reported in Premium on preferred stock redemption or repurchases, net on the Consolidated Statements of Operations.
Comprehensive Income/(Loss)
F - 17
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Comprehensive income/(loss), which is defined as the change in equity during each period from transactions and other events and circumstances from
nonowner sources, including all changes in equity during a period except for those resulting from investments by or distributions to stockholders, is displayed
in the accompanying Consolidated Statements of Comprehensive Income/(Loss). For the years ended December 31, 2014, 2013, and 2012, the Company's other
comprehensive income/(loss) consisted of the gain/(loss) (effective portion) on derivative instruments that are designated as and qualify as cash flow hedges,
(gain)/loss on derivative instruments and marketable securities reclassified from other comprehensive income/(loss) into earnings, and the allocation of other
comprehensive income/(loss) to redeemable noncontrolling interests. The (gain)/loss on derivative instruments reclassified from other comprehensive income/
(loss) is included in interest expense in the accompanying Consolidated Statements of Operations. See Note 13, Derivatives and Hedging Activity, for further
discussion. The (gain)/loss on marketable securities reclassified from other comprehensive income/(loss) is included in Interest and other income/(expense), net
on the Consolidated Statements of Operations. The allocation of other comprehensive income/(loss) to redeemable noncontrolling interests during the years
ended December 31, 2014, 2013, and 2012 was $(133,000), $250,000, and $80,000, respectively.
Use of Estimates
The preparation of these financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the financial statements and the amounts of revenues and expenses
during the reporting periods. Actual amounts realized or paid could differ from those estimates.
Market Concentration Risk
The Company is subject to increased exposure from economic and other competitive factors specific to markets where the Company holds a significant
percentage of the carrying value of its real estate portfolio. At December 31, 2014, the Company held greater than 10% of the carrying value of its real estate
portfolio in the Orange County, California; Metropolitan D.C.; and New York, New York markets.
3. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
Effective January 1, 2014, UDR prospectively adopted ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components
of an Entity, for all communities not previously sold or classified as held for sale. The standard had a material impact on the Company’s consolidated financial
statements. As a result of adopting the ASU, during the year ended December 31, 2014, gains, net of tax, of $142.5 million from disposition of real estate,
excluding a $1.1 million gain related to the sale of land, are included in Gain/(loss) on sale of real estate owned, net of tax on the Consolidated Statements of
Operations rather than in Income/(loss) from discontinued operations, net of tax on the Consolidated Statements of Operations.
Prior to the prospective adoption of ASU 2014-08, FASB Accounting Standards Codification ("ASC") Subtopic 205-20 required, among other things, that
the primary assets and liabilities and the results of operations of UDR’s real properties that have been sold or are held for disposition, be classified as
discontinued operations and segregated in UDR’s Consolidated Statements of Operations and Consolidated Balance Sheets. Consequently, the primary assets
and liabilities and the net operating results of those properties sold or classified as held for disposition prior to January 1, 2014 are accounted for as
discontinued operations for all periods presented. This presentation does not have an impact on net income available to common stockholders; it only results in
the reclassification of the operating results within the Consolidated Statements of Operations for the periods ended December 31, 2014, 2013, and 2012.
During 2014, the Company sold one operating property that was classified as held for disposition prior to the adoption of ASU 2014-08 and, therefore, met
the requirements to be reported as a discontinued operation. The sale of this property resulted in an immaterial gain, net of tax, of $75,000. The gain, net of tax,
and operating results of the property for the years ended December 31, 2014, 2013, and 2012, are included in Income/(loss) from discontinued operations, net of
tax on the Consolidated Statements of Operations.
During the year ended December 31, 2013, the Company sold two communities in the Sacramento market with 914 apartment homes for gross proceeds of
$81.1 million. During the year ended December 31, 2012, the Company sold 21 communities with 6,507 apartment homes for gross proceeds of $609.4 million.
F - 18
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
During the years ended December 31, 2014, 2013, and 2012, UDR recognized net gain/(loss) on the sale of depreciable properties, before tax of $75,000,
$41.9 million, and $260.4 million, respectively, which are included in Income/(Loss) from Discontinued Operations, Net of Tax on the Consolidated Statements of
Operations.
The following is a summary of Income/(loss) from discontinued operations, net of tax for the years ended December 31, 2014, 2013, and 2012 (dollars in
thousands):
Rental income
Rental expenses
Property management
Real estate depreciation
Interest and other (income)/expense, net
Income/(loss) attributable to disposed properties and assets held for sale
Net gain/(loss) on the sale of depreciable property
Impairment charges
Income tax benefit/(expense)
Income/(loss) from discontinued operations, net of tax
Income/(loss) from discontinued operations attributable to UDR, Inc.
4. REAL ESTATE OWNED
$
$
$
Year Ended December 31,
2014
2013
2012
$
147
225
4
—
21
(103)
75
—
38
10
$
$
9,152
3,511
252
1,958
(62)
3,493
41,919
(2,355)
885
43,942
$
39,543
14,106
1,087
8,475
821
15,054
260,404
—
(8,850)
266,608
10
$
42,364
$
256,533
Real estate assets owned by the Company consist of income producing operating properties, properties under development, land held for future
development, and sold or held for sale properties. As of December 31, 2014, the Company owned and consolidated 139 communities in 10 states plus the District
of Columbia totaling 39,851 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of December 31, 2014
and 2013 (dollars in thousands):
Land and land improvements
Depreciable property — held and used:
December 31, 2014 December 31, 2013
1,847,127
$
$
1,980,221
Building, improvements, and furniture, fixtures and equipment
6,225,406
5,876,717
Under development:
Land
Building, improvements, and furniture, fixtures and equipment
Real estate held for disposition:
Land
Building, improvements, and furniture, fixtures and equipment
Real estate owned
Accumulated depreciation
Real estate owned, net
24,584
153,048
—
—
8,383,259
(2,434,772)
5,948,487
$
110,769
356,644
10,751
5,969
8,207,977
(2,208,794)
5,999,183
$
During the year ended December 31, 2014, the Company sold nine communities consisting of a total of 2,500 apartment homes, an adjacent parcel of land,
and one operating property for gross proceeds of $328.4 million, resulting in net proceeds of $324.4 million and a total gain, net of tax, of $138.6 million. A portion
of the sale proceeds was designated for tax-deferred exchanges under Section 1031 of the Internal Revenue Code and was used to fund acquisitions of real
estate as discussed below.
F - 19
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
In December 2014, the Company sold a 49% interest in 13th and Market and a 50% interest in 3033 Wilshire to MetLife for approximately $54.2 million and
$8.3 million, respectively, and recognized, net of tax, a gain of $7.2 million and a loss of $2.2 million, respectively. Subsequent to the sale, the two communities are
accounted for under the equity method of accounting and are included in Investment in and advances to unconsolidated joint ventures, net on the
Consolidated Balance Sheets. See further discussion of this transaction in Note 5, Joint Ventures and Partnerships. The activity of the two communities prior to
sale is classified as a component of continuing operations on the Consolidated Statements of Operations.
In 2014, the Company acquired a fully-entitled land parcel for future development located in Huntington Beach, California for $77.8 million, two
communities, located in Seattle, Washington and Kirkland, Washington, with a total of 358 apartment homes for $45.5 million and $75.2 million, respectively, a
land parcel for future development located in Boston, Massachusetts for $32.2 million. The four acquisitions during the year ended December 31, 2014 were
accomplished through tax-deferred exchanges under Section 1031 of the Internal Revenue Code.
In June 2013, the Company sold a 50% interest in five partnerships (the “UDR/MetLife Vitruvian Park® Partnerships”) to MetLife for approximately $141.3
million, before transaction costs of $936,000. The properties held by the UDR/MetLife Vitruvian Park® Partnerships are located in Addison, Texas and consist of
two operating communities with 739 apartment homes, one recently completed development community in lease-up with 391 apartment homes, and 28.4 acres of
developable land parcels. The transaction resulted in a gain of approximately $436,000 which the Company has deferred until the terms of the construction
completion guarantee have been met. The UDR/MetLife Vitruvian Park® Partnerships are accounted for under the equity method of accounting and are included
in Investment In and Advances To Unconsolidated Joint Ventures, Net on the Consolidated Balance Sheets. See further discussion of this transaction in Note 5,
Joint Ventures and Partnerships.
The operations of the UDR/MetLife Vitruvian Park® Partnerships' assets, prior to the sale of a 50% interest, have been classified as a component of
continuing operations on the Consolidated Statements of Operations, as UDR has continuing involvement over the duration of the partnership.
In December 2013, the Company sold a 49% interest to MetLife in the Company’s fully-entitled 399 Fremont land parcel located in San Francisco, California
for approximately $29.9 million. In conjunction with the sale, the Company formed a new unconsolidated joint venture, UDR/MetLife 399 Fremont, to develop a
$318 million, 447-home, luxury high-rise tower on the site. As the Company recently acquired the 399 Fremont land parcel, the sale price was equivalent to the
cost basis resulting in no gain or loss on the transaction. For more information on this transaction see Note 5, Joint Ventures and Partnerships.
In December 2013, the Company became the managing partner of two joint ventures resulting in consolidation of both and increasing the real estate owned
by $129.4 million. See Note 5, Joint Ventures and Partnerships, for further details.
The Company incurred $373,000, $59,000 and $2.3 million of acquisition-related costs during the years ended December 31, 2014, 2013, and 2012,
respectively. These expenses are reported within the line item General and Administrative on the Consolidated Statements of Operations.
In February 2015, the Company acquired an office building in Highlands Ranch, Colorado, for total consideration of approximately $24.0 million, which was
comprised of assumed debt. The Company’s corporate offices, as well as other leased office space, are located in the acquired building. The building consists of
approximately 120,000 square feet, of which UDR occupies approximately 44,000 square feet. All existing leases were assumed by the Company at the time of the
acquisition.
5. JOINT VENTURES AND PARTNERSHIPS
UDR has entered into joint ventures and partnerships with unrelated third parties to acquire real estate assets that are either consolidated and included in
Real Estate Owned on the Consolidated Balance Sheets or are accounted for under the equity method of accounting, and are included in Investment in and
Advances to Unconsolidated Joint Ventures, Net on the Consolidated Balance Sheets. The Company consolidates the entities that we control as well as any
variable interest entity where we are the primary beneficiary. In addition, the Company consolidates any joint venture or partnership in which we are the general
partner or managing partner and the third party does not have the ability to substantively participate in the decision-making process nor the ability to remove us
as general partner or managing partner without cause.
F - 20
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
UDR’s joint ventures and partnerships are funded with a combination of debt and equity. Our losses are limited to our investment and except as noted
below, the Company does not guarantee any debt, capital payout or other obligations associated with our joint ventures and partnerships.
Consolidated Joint Ventures
In December 2013, the Company consolidated its 95%/5% development joint ventures 13th and Market in San Diego, California and Domain College Park in
Metropolitan, D.C. The consolidation was due to the Company becoming the managing partner of each of the joint ventures pursuant to amendments to the LLC
Agreements. In connection with the amendments, our partner received equity distributions reducing its capital account balances to zero, the Company replaced
our partner as the managing partner, and our partner no longer has the ability to substantively participate in the decision-making process, with only protective
rights remaining. We accounted for the consolidations as asset acquisitions since the joint ventures were under development and not complete at the time of
consolidation resulting in no gain or loss upon consolidation and increasing our real estate owned by $129.4 million and our debt owed by $63.6 million. In
addition pursuant to the amendments, the Company paid a non-refundable deposit to our partner in January 2014 of $2.0 million for each joint venture, or $4.0
million in total, for the right to exercise options in 2014 to acquire our partner’s upside participation in the joint ventures. The non-refundable deposits were
applied towards the total purchase price of approximately $24.7 million when the Company acquired 100% of the interest in the joint ventures in November 2014.
In December 2014, the Company sold a 49% interest in 13th and Market to MetLife for $54.2 million, resulting in a gain, net of tax, of $7.2 million.
Additionally, the Company sold a 50% interest in a wholly owned land parcel to MetLife for $8.3 million, resulting in a loss, net of tax, of $2.2 million. As a result,
the Company no longer controls these two joint ventures and they were deconsolidated by the Company in December 2014.
Unconsolidated Joint Ventures and Partnerships
The Company recognizes earnings or losses from our investments in unconsolidated joint ventures and partnerships consisting of our proportionate share
of the net earnings or losses of the joint ventures and partnerships. In addition, we may earn fees for providing management services to the unconsolidated joint
ventures and partnerships.
F - 21
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
The following table summarizes the Company’s investment in and advances to unconsolidated joint ventures and partnerships, net, which are accounted
for under the equity method of accounting as of December 31, 2014 and 2013 (dollars in thousands):
Joint Venture
Location of
Properties
Number of
Properties
2014
Number of
Apartment
Homes
Investment at
UDR’s Ownership
Interest
2014
2014
2013
2014
2013
Operating and development:
Various
UDR/MetLife I
(a)
UDR/MetLife II
(a)
Various
Other
UDR/MetLife
Joint Ventures
(a)
UDR/MetLife
Vitruvian Park®
(c)
UDR/KFH (d)
Various
Addison, TX
Washington,
D.C.
Texas (e)
Texas
4 land parcels
21 operating
communities
1 operating
community, 3
development
communities (b), 2
land parcels
3 operating
communities, 6 land
parcels
3 operating
communities
8 operating
communities
— $
13,306 $
47,497
15.7%
4.5%
4,642
431,277
327,926
50.0%
50.0%
1,282
134,939
36,313
50.6%
35.8%
1,394
80,302
79,318
50.0%
50.0%
660
21,596
25,919
30.0%
30.0%
3,359
(25,901)
(23,591)
20.0%
20.0%
Investment in and advances to unconsolidated joint
ventures, net, before participating loan investment
655,519
493,382
Location
Preferred Return
Years To
Maturity
Investment at
Participating loan investment:
Denver, CO
Steele Creek (f)
6.5%
2.8
2014
62,707
2014
2013
14,273 $2,350
Income From
Participating Loan
Investment For The Year
Ended
2013 2012
$156
$—
Total investment in and advances to unconsolidated joint
ventures, net
$ 718,226 $ 507,655
(a) In January 2012, the Company formed a joint venture with an unaffiliated third party to acquire 399 Fremont (land for future development) in San
Francisco, California, which is included in Other UDR/MetLife Joint Ventures in the table above. At closing, UDR owned a noncontrolling interest of
92.5% in the joint venture. The Company’s total investment was $55.5 million, which consisted of its initial investment of $37.3 million and an option
to exercise its right to acquire its partner’s 7.5% ownership interest in the joint venture. In October 2012, the Company exercised its option and paid
$13.5 million. In January 2013, the Company subsequently acquired its partner’s 7.5% ownership interest for $4.7 million. In December 2013, the
Company sold a 49% ownership interest to MetLife in the fully-entitled 399 Fremont land parcel for approximately $29.9 million. In conjunction with
the sale, the Company formed a new unconsolidated real estate joint venture with MetLife, UDR/MetLife 399 Fremont, to develop a $318 million, 447-
home, luxury high-rise tower on the site. Construction commenced in the first quarter 2014. As the Company recently acquired the 399 Fremont land
parcel, the sale price was equivalent to the cost basis resulting in no gain or loss on the transaction. Under the terms of the partnership, the Company
serves as the general partner with significant participating rights held by our partner, and has the ability to earn fees for development management,
property management, asset management, and financing transactions. The UDR/MetLife 399 Fremont Joint Venture is accounted for under the equity
method of accounting. Our initial investment was approximately $31.1 million.
F - 22
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
In June 2013 and within UDR/MetLife I, the Company exchanged with MetLife its approximately 10% ownership interest in four operating
communities and paid MetLife an additional $15.6 million in cash for an increased ownership interest of approximately 35% in two high-rise operating
communities, bringing UDR's ownership interest in the two high-rise operating communities to 50% each. The two high-rise operating communities
are located in Denver, Colorado and San Diego, California and were subsequently contributed to UDR/MetLife II. The four operating communities in
which UDR exchanged its ownership interest are located in Washington D.C.; San Francisco, California; Dallas, Texas; and Charlotte, North Carolina.
UDR continues to fee manage these four operating communities.
In March 2014, the Company sold its minority ownership interests in two operating communities located in Los Angeles, California to
MetLife for cash proceeds of $3.0 million, which resulted in an immaterial gain. In April 2014, the Company increased its ownership interest in the
remaining six operating communities in the UDR/MetLife I Joint Venture from 12% to 50%, and MetLife and the Company contributed the
communities to the UDR/MetLife II Joint Venture. The Company paid MetLife $82.5 million for the additional ownership interests. The Company
continues to fee manage the operating communities that were contributed to the UDR/MetLife II Joint Venture as well as the two operating
communities in which it sold its minority ownership interests.
In July 2014, the Company increased the ownership interest in two land sites in UDR/Metlife I to 50.1% and formed individual asset joint
ventures, which are included in Other UDR/MetLife Joint Ventures in the table above. The remaining 49.9% continues to be held by our joint venture
partner MetLife. The Company paid MetLife approximately $21.5 million for the additional ownership interests.
In December 2014, the Company increased its ownership interest in one land site in the UDR/MetLife I Joint Venture to 50%. Additionally,
the Company increased its ownership interest in another land site to 50.1%, which MetLife and the Company contributed to a separate joint venture
and is included in Other UDR/MetLife Joint Ventures in the table above. The Company paid MetLife approximately $15.3 million for the additional
ownership interests. As of December 31, 2014, the remaining assets in the UDR/MetLife I Joint Venture were comprised of three potential
development land sites in which the Company has an average ownership interest of approximately 5% and one fully entitled land parcel in which the
Company owns 50%.
In December 2014, the Company sold a 49% interest in 13th and Market located in San Diego, California to MetLife for gross proceeds of
$54.2 million, resulting in a gain, net of tax, of $7.2 million and a 50% interest in 3033 Wilshire in Los Angeles, California, also to MetLife for gross
proceeds of $8.3 million, resulting in a loss, net of tax, of $2.2 million.
(b) The number of apartment homes for the communities under development presented in the table above is based on the projected number of total
homes. As of December 31, 2014, no apartment homes had been completed in Other UDR/MetLife Development Joint Ventures.
(c) In June 2013, the Company sold a 50% interest in five partnerships (the “UDR/MetLife Vitruvian Park® Partnerships”) to MetLife for approximately
$141.3 million. The transaction resulted in a gain of approximately $436,000 which the Company has deferred until the terms of the construction
completion guarantee have been met. Under the terms of the UDR/MetLife Vitruvian Park® Partnerships, the Company serves as the general partner
with significant participating rights held by our partner, and earns fees for property management, asset management, and financing transactions. The
UDR/MetLife Vitruvian Park® Partnerships are accounted for under the equity method of accounting. Our initial investment was approximately $80.2
million, which consisted of approximately $140.0 million (50% of our net book value of the real estate at the time of the transaction) reduced by our
share of the net proceeds received upon encumbering the assets of approximately $58.7 million and other operating adjustments.
At closing, a total of $118.3 million of secured debt was placed on the two operating communities and the community under development. The debt
on the two operating communities carries an interest rate of 4.0% with a term of ten years and the non-recourse construction loan on the community
under development carries an interest rate of LIBOR plus 175 basis points with a term of two years and two one-year extension options. The
Company has guaranteed the completion of the construction of the development. Proceeds from the construction loan will be used for completion of
construction of the development. Upon completion, at its 50% ownership, the Company's pro-rata share of the undepreciated book value of the
UDR/MetLife Vitruvian Park® Partnerships' real estate assets and outstanding debt will be approximately $145.0 million and $62.8 million, respectively.
F - 23
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
(d) UDR is a partner with an unaffiliated third party, which formed a joint venture for the investment of up to $450 million in multifamily properties located
in key, high barrier to entry markets. The partners will contribute equity of $180 million of which the Company’s maximum equity will be 30% or $54
million when fully invested.
(e) In November 2007, UDR and an unaffiliated third party formed a joint venture to own and operate 10 communities located in Texas. UDR contributed
cash and property equal to 20% of the fair value of the joint venture. During the year ended December 31, 2012, the Company acquired the remaining
80% ownership interests in two communities in Austin, Texas for $11.7 million. The Company’s investment in the joint venture at December 31, 2014
and 2013 was net of deferred profits on the sale of depreciable properties to the joint venture of $23.9 million and $24.0 million, respectively.
In January 2015, the eight communities held by the Texas joint venture were sold, generating net proceeds to UDR of $43.5 million. The Company
recorded promote and fee income of $9.6 million and a gain of $59.1 million (including $24.2 million of previously deferred gains) in connection with
the sale.
(f) In October 2013, the Company entered into a participating debt financing arrangement with a third party that is developing a $108 million, 218-home,
high-rise luxury community located adjacent to the Cherry Creek Mall in Denver, Colorado. Under the agreement, UDR will finance up to 85%, or
approximately $92.0 million, of the development cost at an interest rate of 6.5% per annum on the outstanding debt balance. In addition, the Company
has the option to purchase the community upon completion of construction and has a 50% participating interest in the profit upon the acquisition of
the community or sale to a third party. The Company accounts for the arrangement consistent with an investment in real estate under the equity
method of accounting.
As of December 31, 2014, and 2013, our participating loan investment was $62.7 million and $14.3 million, respectively, which was included in
Investment in and advances to unconsolidated joint ventures, net on the Consolidated Balance Sheets. We also recognized $2.4 million and $156,000
of income included in Income/(loss) from unconsolidated entities on the Consolidated Statements of Operations for the years ended December 31,
2014 and 2013, respectively.
As of December 31, 2014 and 2013, the Company had deferred fees and deferred profit from the sale of properties to joint ventures or partnerships of $24.7
million and $25.4 million, respectively, which will be recognized through earnings over the weighted average life of the related properties, upon the disposition of
the properties to a third party, or upon completion of certain development obligations.
The Company recognized $11.3 million, $11.2 million, and $11.8 million of management fees during the years ended December 31, 2014, 2013, and 2012,
respectively, for our management of the joint ventures and partnerships. The management fees are included in Joint venture management and other fees on the
Consolidated Statements of Operations.
The Company may, in the future, make additional capital contributions to certain of our joint ventures and partnerships should additional capital
contributions be necessary to fund acquisitions or operations.
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 decrease in the value of its other investments in unconsolidated joint ventures or partnerships during the
years ended December 31, 2014, 2013, and 2012.
Combined summary financial information relating to all of the unconsolidated joint ventures and partnerships operations (not just our proportionate
share), is presented below for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands):
F - 24
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
As of and For the Year Ended
December 31, 2014
Condensed Statements of Operations:
Total revenues
Property operating expenses
Real estate depreciation and amortization
Operating income/(loss)
Interest expense
Other income/(expense)
Gain/(loss) on sale of real estate
Income/(loss) from discontinued operations
UDR/MetLife
I
UDR/MetLife
II
UDR/MetLife
Vitruvian
Park®
Texas
UDR/KFH
Other joint
ventures
Total
$
$
727
618
2,130
(2,021 )
—
—
—
(31,802 )
$
152,047
52,150
41,504
58,393
(48,493 )
—
—
—
9,900
$
19,376
10,711
7,380
1,285
(4,131 )
—
—
—
(2,846 ) $
$
—
—
—
—
—
—
—
(4,229 )
(4,229 ) $
$
19,724
7,498
14,426
(2,200 )
(5,873 )
—
—
—
(8,073 ) $
$
1,579
1,122
3,959
(3,502 )
(94 )
—
—
—
(3,596 ) $
193,453
72,099
69,399
51,955
(58,591 )
—
—
(36,031 )
(42,667 )
Net income/(loss)
$
(33,823 ) $
$
UDR recorded income (loss) from unconsolidated
entities
$
(2,955 ) $
2,814
$
(4,068 ) $
(772 ) $
(2,601 ) $
576
$
(7,006 )
$
Condensed Balance Sheets:
Total real estate, net
Assets held for sale
Cash and cash equivalents
Other assets
Total assets
Amount due/(from) to UDR
Third party debt
Liabilities held for sale
Accounts payable and accrued liabilities
Total liabilities
Total equity
$
UDR’s investment in unconsolidated joint ventures $
$
89,482
1,978
1,983
(146 )
$ 1,986,237
—
15,245
19,589
2,021,071
93,297
107
—
5,110
749
5,966
87,331
13,306
(444 )
1,147,109
—
17,573
1,164,238
856,833
431,277
F - 25
$
$
$
$
278,600
—
6,570
3,933
289,103
1,960
123,649
—
6,766
132,375
156,728
80,302
$
$
$
—
214,218
—
—
214,218
—
—
224,596
—
224,596
(10,378 ) $
(25,901 ) $
$ 235,623
—
2,507
1,128
239,258
531
165,209
—
1,396
167,136
72,122
21,596
$ 351,861
—
6,239
4,203
362,303
843
68,510
—
17,851
87,204
$ 275,099
$ 197,646
$
$
$
2,941,803
216,196
32,544
28,707
3,219,250
2,997
1,504,477
229,706
44,335
1,781,515
1,437,735
718,226
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
As of and For the Year Ended
December 31, 2013
Condensed Statements of Operations:
Total revenues
Property operating expenses
Real estate depreciation and amortization
Operating income/(loss)
Interest expense
Other income/(expense)
Income/(loss) from discontinued operations
Net income/(loss)
UDR recorded income/(loss) from
unconsolidated entities
Condensed Balance Sheets:
Total real estate, net
Assets held for sale
Cash and cash equivalents
Other assets
Total assets
Amount due to UDR
Third party debt
Liabilities held for sale
Accounts payable and accrued liabilities
Total liabilities
Total equity
UDR’s investment in unconsolidated joint
ventures
For the Year Ended December 31, 2012
Condensed Statements of Operations:
Total revenues
Property operating expenses
Real estate depreciation and amortization
Operating income/(loss)
Interest expense
Other income/(expense)
Income/(loss) from discontinued operations
Net income/(loss)
UDR recorded income/(loss) from
unconsolidated entities
UDR/MetLife
I
UDR/MetLife
II
UDR/MetLife
Vitruvian
Park®
Texas
UDR/KFH
Other joint
ventures
Total
$
$
$
$
$
$
$
691
621
115
(45)
—
—
(22,388)
(22,433) $
$
109,926
33,809
30,122
45,995
(37,055)
1
—
8,941
$
$
7,680
4,633
3,830
(783)
(1,886)
—
—
(2,669) $
$
—
—
—
—
—
—
(9,584)
(9,584) $
$
19,221
7,035
14,199
(2,013)
(5,872)
—
—
(7,885) $
$
5,324
3,292
3,564
(1,532)
(913)
—
—
(2,445) $
142,842
49,390
51,830
41,622
(45,726)
1
(31,972)
(36,075)
(4,675) $
4,471
$
(2,851) $
(1,218) $
(2,366) $
6,224
$
(415)
90,971
753,427
305
4,782
849,485
4,520
—
346,810
89
351,419
498,066
$ 1,476,588
—
16,454
16,666
1,509,708
2,275
877,799
—
14,508
894,582
615,126
$
$
$
283,878
—
3,498
1,578
288,954
1,352
120,999
—
7,152
129,503
159,451
$
$
—
231,981
—
—
231,981
—
—
230,393
—
230,393
1,588
$
$
249,097
—
2,289
1,474
252,860
420
165,209
—
1,234
166,863
85,997
$
$
65,133
—
—
83
65,216
1,136
—
—
2,813
3,949
61,267
$
$
2,165,667
985,408
22,546
24,583
3,198,204
9,703
1,164,007
577,203
25,796
1,776,709
1,421,495
47,497
$
327,926
$
79,318
$
(23,591) $
25,919
$
50,586
$
507,655
UDR/MetLife
I
UDR/MetLife
II
UDR/MetLife
Vitruvian
Park®
Texas
UDR/KFH
Other joint
ventures
Total
$
$
$
632
252
124
256
—
—
8,609
8,865
$
$
$
87,386
25,737
32,553
29,096
(29,170)
(9)
—
(83) $
—
—
—
—
—
—
—
—
$
$
$
—
—
—
—
—
—
(1,040)
(1,040) $
$
18,670
6,831
16,546
(4,707)
(5,890)
—
—
(10,597) $
$
2,724
1,368
1,897
(541)
(561)
—
—
(1,102) $
109,412
34,188
51,120
24,104
(35,621)
(9)
7,569
(3,957)
(1,750) $
15
$
—
$
(2,399) $
(3,221) $
(1,224) $
(8,579)
F - 26
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
6. SECURED AND UNSECURED DEBT
The following is a summary of our secured and unsecured debt at December 31, 2014 and 2013 (dollars in thousands):
Principal Outstanding
For the Year Ended December 31, 2014
December 31,
2014
2013
Weighted
Average
Interest Rate
Weighted
Average
Years to
Maturity
Number of
Communities
Encumbered
6
22
28
1
2
7
10
38
Secured Debt:
Fixed Rate Debt
Mortgage notes payable (a)
Fannie Mae credit facilities (b)
Total fixed rate secured debt
Variable Rate Debt
Mortgage notes payable
Tax-exempt secured notes payable (c)
Fannie Mae credit facilities (b)
Total variable rate secured debt
Total Secured Debt
Unsecured Debt:
Commercial Banks
Borrowings outstanding under an unsecured credit facility
due December 2017 (d) (h)
Senior Unsecured Notes
5.13% Medium-Term Notes due January 2014 (e)
5.50% Medium-Term Notes due April 2014 (net of discount
of $20) (e)
5.25% Medium-Term Notes due January 2015 (net of
discounts of $6 and $134, respectively) (f)
5.25% Medium-Term Notes due January 2016
4.25% Medium-Term Notes due June 2018 (net of discounts
of $1,465 and $1,893, respectively) (h)
2.17% Term Notes due June 2018 (h)
1.53% Term Notes due June 2018 (h)
1.31% Term Notes due June 2018 (h)
3.70% Medium-Term Notes due October 2020 (net of
discounts of $46 and $54, respectively) (h)
4.63% Medium-Term Notes due January 2022 (net of
discounts of $2,523 and $2,882, respectively) (h)
3.75% Medium-Term Notes due July 2024 (net of discount
of $990) (g) (h)
8.50% Debentures due September 2024
Other
Total Unsecured Debt
Total Debt
$
$
401,210
568,086
969,296
445,706
626,667
1,072,373
31,337
94,700
266,196
392,233
1,361,529
63,595
94,700
211,409
369,704
1,442,077
5.46 %
5.12 %
5.26 %
1.94 %
0.83 %
1.60 %
1.44 %
4.16 %
152,500
—
1.09 %
—
—
325,169
83,260
298,535
215,000
100,000
35,000
184,000
128,480
325,041
83,260
298,107
250,000
65,000
35,000
299,954
299,946
397,477
397,118
299,010
15,644
27
2,221,576
$ 3,583,105
$
—
15,644
30
2,081,626
3,523,703
F - 27
— %
— %
5.25 %
5.25 %
4.25 %
2.17 %
1.53 %
1.31 %
3.70 %
4.63 %
3.75 %
8.50 %
N/A
3.81 %
3.94 %
1.6
4.0
3.0
2.1
8.2
5.2
5.7
3.8
2.9
—
—
—
1.0
3.4
3.4
3.4
3.4
5.8
7.0
9.5
9.7
N/A
4.6
4.3
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Our secured debt instruments generally feature either monthly interest and principal or monthly interest-only payments with balloon payments due at
maturity. For purposes of classification of the above table, variable rate debt with a derivative financial instrument designated as a cash flow hedge is deemed as
fixed rate debt due to the Company having effectively established a fixed interest rate for the underlying debt instrument. As of December 31, 2014, secured debt
encumbered $2.2 billion or 26.6% of UDR’s total real estate owned based upon gross book value ($6.2 billion or 73.4% of UDR’s real estate owned based on
gross book value is unencumbered).
(a) At December 31, 2014, fixed rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various
dates from December 2015 through May 2019 and carry interest rates ranging from 3.43% to 5.94%.
The Company will from time to time acquire properties subject to fixed rate debt instruments. In those situations, management will record the secured
debt at its estimated fair value and amortize any difference between the fair value and par to interest expense over the life of the underlying debt
instrument. During the years ended December 31, 2014, 2013, and 2012, the Company had $5.1 million, $5.1 million, and $4.9 million, respectively, of
amortization expense on the fair market adjustment of debt assumed in acquisition of properties, which was included in Interest expense on the
Consolidated Statements of Operations. The unamortized fair market adjustment was a net premium of $6.7 million and $11.8 million at December 31,
2014 and 2013, respectively.
(b) UDR has three secured credit facilities with Fannie Mae with an aggregate commitment of $834.3 million at December 31, 2014. The Fannie Mae credit
facilities are for terms of seven to ten years (maturing at various dates from May 2017 through July 2023) and bear interest at floating and fixed rates.
At December 31, 2014, we have $568.1 million of the outstanding balance is fixed at a weighted average interest rate of 5.12% and the remaining
balance of $266.2 million on these facilities is currently at a weighted average variable interest rate of 1.60%.
Further information related to these credit facilities is as follows (dollars in thousands):
Borrowings outstanding
Weighted average borrowings during the period ended
Maximum daily borrowings during the period ended
Weighted average interest rate during the period ended
Weighted average interest rate at the end of the period
December 31, 2014
December 31,
2013
$
$
834,282
835,873
837,564
4.1 %
4.0 %
838,076
839,597
841,494
4.2 %
4.1 %
(c) The variable rate mortgage notes payable that secure tax-exempt housing bond issues mature on August 2019 and March 2032. Interest on these
notes is payable in monthly installments. The variable mortgage notes have interest rates of 0.78% and 0.93%, respectively, as of December 31, 2014.
(d) The Company has a $900 million unsecured revolving credit facility with a maturity date to December 2017, a six month extension option, and an
accordion feature that allows the Company to increase the facility to $1.45 billion. Based on the Company's current credit rating, the credit facility
carries an interest rate equal to LIBOR plus a spread of 100 basis points and a facility fee of 15 basis points. As of December 31, 2014, the Company
had a balance of $152.5 million outstanding under the revolving credit facility.
F - 28
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
The following is a summary of short-term bank borrowings under UDR’s bank credit facility at December 31, 2014 and 2013 (dollars in thousands):
Total revolving credit facility
Borrowings outstanding at end of period (1)
Weighted average daily borrowings during the period ended
Maximum daily borrowings during the period ended
Weighted average interest rate during the period ended
Interest rate at end of the period
$
December 31, 2014
900,000
152,500
291,761
625,000
$
December 31, 2013
900,000
—
169,844
372,000
1.2 %
1.1 %
1.2 %
1.3 %
(1) Excludes $1.9 million and $2.2 million of letters of credit at December 31, 2014 and 2013, respectively.
(e) Paid off at maturity with borrowings under the Company’s $900 million unsecured revolving credit facility.
(f) In January 2015, we paid off $325.2 million of 5.25% medium-term notes due January 2015 with borrowings under the Company’s $900 million
unsecured revolving credit facility.
(g) In June 2014, the Company issued $300 million of 3.750% senior unsecured medium-term notes due July 1, 2024. Interest is payable semi-annually
beginning on January 1, 2015. These notes were issued at 99.652% of the principal amount and had a discount of $1.0 million at December 31, 2014.
The Company used the net proceeds to pay down borrowings outstanding on our $900 million unsecured credit facility and for general corporate
purposes.
(h) The Operating Partnership is a guarantor at December 31, 2014 and 2013.
The aggregate maturities, including amortizing principal payments of secured debt, of total debt for the next five years subsequent to December 31, 2014 are
as follows (dollars in thousands):
Year
Secured Fixed Rate
Debt
Secured Variable Rate
Debt
2015
2016
2017
2018
2019
Thereafter
Total
$
$
196,648
135,167
177,774
120,969
248,738
90,000
969,296
$
$
—
31,337
65,000
104,787
67,700
123,409
392,233
$
Total Secured Debt
196,648
166,504
242,774
225,756
316,438
213,409
1,361,529
$
Total Unsecured Debt
(a)
Total Debt
$
$
324,286
82,377
152,500
648,443
—
1,013,970
2,221,576
$
$
520,934
248,881
395,274
874,199
316,438
1,227,379
3,583,105
(a) With the exception of the 1.31% Term Notes due June 2018 and revolving credit facility which carry a variable interest rate, all unsecured debt carries
fixed interest rates.
We were in compliance with the covenants of our debt instruments at December 31, 2014.
F - 29
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
7. INCOME/(LOSS) PER SHARE
The following table sets forth the computation of basic and diluted income/(loss) per share for the periods presented (dollars and shares in thousands,
except per share data):
Numerator for income/(loss) per share:
Income/(loss) from continuing operations
Gain/(loss) on sale of real estate owned, net of tax
(Income)/loss from continuing operations attributable to redeemable noncontrolling interests in
the Operating Partnership
(Income)/loss from continuing operations attributable to noncontrolling interests
$
Income/(loss) from continuing operations attributable to UDR, Inc.
Distributions to preferred stockholders - Series E (Convertible)
Distributions to preferred stockholders - Series G
Premium on preferred stock redemption or repurchases, net
Income/(loss) from continuing operations attributable to common stockholders
Income/(loss) from discontinued operations, net of tax
(Income)/loss from discontinued operations attributable to redeemable noncontrolling interests
in the Operating Partnership
Income/(loss) from discontinued operations attributable to common stockholders
Net income/(loss) attributable to common stockholders
Denominator for income/(loss) per share - basic and diluted:
Weighted average common shares outstanding
Non-vested restricted stock awards
Denominator for income/(loss) per share - basic
Incremental shares issuable from assumed conversion of:
Stock options and unvested resticted stock
Denominator for income/(loss) per share - diluted
Income/(loss) per weighted average common share - basic:
Income/(loss) from continuing operations attributable to common stockholders
Income/(loss) from discontinued operations attributable to common stockholders
Net income/(loss) attributable to common stockholders
Income/(loss) per weighted average common share - diluted:
Income/(loss) from continuing operations attributable to common stockholders
Income/(loss) from discontinued operations attributable to common stockholders
Net income/(loss) attributable to common stockholders
F - 30
$
$
$
$
$
$
$
$
Year Ended December 31,
2014
2013
2012
$
16,260
143,572
(5,511 )
3
154,324
(3,724 )
—
—
150,600
$
$
2,340
—
48
60
2,448
(3,724 )
—
—
(1,276 ) $
(46,305 )
—
2,089
(140 )
(44,356 )
(3,724 )
(2,286 )
(2,791 )
(53,157 )
10
$
43,942
$
266,608
—
10
$
(1,578 )
42,364
$
(10,075 )
256,533
150,610
$
41,088
$
203,376
252,707
(1,179 )
251,528
1,917
253,445
250,684
(715 )
249,969
—
249,969
0.60
—
0.60
$
$
0.59
—
0.59
$
$
(0.01 ) $
0.17
0.16
$
(0.01 ) $
0.17
0.16
$
239,482
(631 )
238,851
—
238,851
(0.22 )
1.07
0.85
(0.22 )
1.07
0.85
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Basic income/(loss) per common share is computed based upon the weighted average number of common shares outstanding. Diluted income/(loss) per
share is computed based upon the common shares issuable from the assumed conversion of the OP Units, convertible preferred stock, stock options, and
restricted stock. Only those instruments having a dilutive impact on our basic income/(loss) per share are included in diluted income/(loss) per share during the
periods.
During the years ended December 31, 2013 and 2012, the effect of the conversion of the OP Units, convertible preferred stock, stock options and restricted
stock is not dilutive, and is therefore not included in the above calculations as the Company reported a loss from continuing operations attributable to common
stockholders.
The following table sets forth the additional shares of common stock outstanding by equity instrument if converted to common stock for each of the years
ended December 31, 2014, 2013, and 2012 (shares in thousands):
OP Units
Preferred Stock
Stock options and unvested restricted stock
8. STOCKHOLDERS’ EQUITY
Year Ended December 31,
2014
2013
2012
9,247
3,036
1,917
9,337
3,036
1,584
9,411
3,036
1,361
UDR has an effective registration statement that allows the Company to sell an undetermined number of debt and equity securities as defined in the
prospectus. The Company has the ability to issue 350,000,000 shares of common stock and 50,000,000 shares of preferred shares as of December 31, 2014.
The company has an equity distribution agreement which allows it from time to time, through its sales agents, to offer and sell up to 20,000,000 shares of
its common stock. Sales of such shares will be made by means of ordinary brokers’ transactions on the NYSE at market prices. As of December 31, 2014,
16,518,567 shares were available for sale under the continuous equity program.
During the year ended December 31, 2014, the Company entered into the following equity transactions for our common stock:
•
Sold 3,410,433 shares of common stock through the Company’s equity distribution agreement at a weighted average price per share of $29.95, for
aggregate gross proceeds of approximately $102.1 million;
Issued 860,811 shares of common stock through the Company’s 1999 Long-Term Incentive Plan (the “LTIP”), net of forfeitures of 12,199; and
•
• Converted 153,451 OP Units into Company common stock.
In 2015, through February 24, 2015, we sold 3,432,936 shares of common stock through the Company’s equity distribution agreement at a weighted average
price per share of $32.28, for aggregate gross proceeds of approximately $110.8 million.
Distributions are subject to the approval of the Board of Directors and are dependent upon our strategy, financial condition and operating results. UDR’s
common distributions for the years ended December 31, 2014, 2013, and 2012 totaled $1.04, $0.94, and $0.88 per share, respectively. For taxable years ending on
or before December 31, 2014, the Internal Revenue Service (“IRS”) allowed REITs to distribute up to 90% of total distributions in common shares with the
residual distributed in cash as a means of enhancing liquidity.
Preferred Stock
The Series E Cumulative Convertible Preferred Stock (“Series E”) has no stated par value and a liquidation preference of $16.61 per share. Subject to certain
adjustments and conditions, each share of the Series E is convertible at any time and from time to time at the holder’s option into one share of our common stock
prior to a “Special Dividend” declared in 2008 (1.083 shares after the Special Dividend). The holders of the Series E are entitled to vote on an as-converted basis
as a single class in combination with the holders of common stock at any meeting of our stockholders for the election of directors or for any other
F - 31
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
purpose on which the holders of common stock are entitled to vote. The Series E has no stated maturity and is not subject to any sinking fund or any mandatory
redemption.
Distributions declared on the Series E for the years ended December 31, 2014, 2013, and 2012 were $1.33 per share. The Series E is not listed on any
exchange. At December 31, 2014 and 2013, a total of 2,803,812 shares of the Series E were outstanding.
UDR is authorized to issue up to 20,000,000 shares of the Series F Preferred Stock (“Series F”). The Series F may be purchased by holders of UDR’s
operating partnership units, or OP Units, at a purchase price of $0.0001 per share. OP Unitholders are entitled to subscribe for and purchase one share of UDR’s
Series F for each OP Unit held. At December 31, 2014 and 2013, a total of 2,464,183 shares of the Series F were outstanding with an aggregate purchase value of
$246. Holders of the Series F are entitled to one vote for each share of the Series F they hold, voting together with the holders of our common stock, on each
matter submitted to a vote of security holders at a meeting of our stockholders. The Series F does not entitle its holders to any other rights, privileges or
preferences.
In May 2007, UDR issued 5,400,000 shares of the 6.75% Series G Cumulative Redeemable Preferred Stock (“Series G”). On May 31, 2012, the Company
completed the redemption of all outstanding shares of its Series G. A total of 3,264,362 shares of the Series G was redeemed at a redemption price of $25 per share
in cash, plus accrued and unpaid dividends to the redemption date for a total cost of $82.1 million. As a result of this redemption, the write off of additional paid
in capital of $2.8 million related to the issuance of the Series G is recognized as a decrease to our net income/(loss) attributable to common stockholders.
Distributions declared on the Series G for the years ended December 31, 2014, 2013, and 2012 were $0.00, $0.00 and $0.57 per share, respectively. At
December 31, 2014 and 2013, there were no shares of the Series G outstanding.
Distribution Reinvestment and Stock Purchase Plan
UDR’s Distribution Reinvestment and Stock Purchase Plan (the “Stock Purchase Plan”) allows common and preferred stockholders the opportunity to
purchase, through the reinvestment of cash dividends, additional shares of UDR’s common stock. From inception through December 31, 2008, shareholders
have elected to utilize the Stock Purchase Plan to reinvest their distribution for the equivalent of 9,957,233 shares of Company common stock. Shares in the
amount of 10,963,730 were reserved for issuance under the Stock Purchase Plan as of December 31, 2014. During the year ended December 31, 2014, UDR
acquired all shares issued through the open market.
9. EMPLOYEE BENEFIT PLANS
In May 2001, the stockholders of UDR approved the long term incentive plan (“LTIP”), which supersedes the 1985 Stock Option Plan. The LTIP authorizes
the granting of awards which may take the form of options to purchase shares of common stock, stock appreciation rights, restricted stock, dividend
equivalents, other stock-based awards, and any other right or interest relating to common stock or cash incentive awards to Company directors, employees and
outside trustees to promote the success of the Company by linking individual’s compensation via grants of share based payment. During the year ended
December 31, 2014, the stockholders of UDR voted to amend and restate the LTIP to increase the number of shares reserved from 16,000,000 shares to 19,000,000
shares on an unadjusted basis for issuance upon the grant or exercise of awards under the LTIP. As of December 31, 2014, there were 10,067,371 common shares
available for issuance under the LTIP.
The LTIP contains change of control provisions allowing for the immediate vesting of an award upon certain events such as a merger where UDR is not
the surviving entity. Upon the death or disability of an award recipient all outstanding instruments will vest and all restrictions will lapse. Unless otherwise
specified in the agreement, upon the retirement of an award recipient, all outstanding instruments will vest and all restrictions will lapse. The LTIP specifies that
in the event of a capital transaction, which includes but is not limited to stock dividends, stock splits, extraordinary cash dividends and spin-offs, the number of
shares available for grant in totality or to a single individual is to be adjusted proportionately. The LTIP specifies that when a capital transaction occurs that
would dilute the holder of the stock award, prior grants are to be adjusted such that the recipient is no worse as a result of the capital transaction.
A summary of UDR’s stock option and restricted stock activities during the year ended December 31, 2014 is as follows:
F - 32
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Option Outstanding
Option Exercisable
Restricted Stock
Number of
Options
$
2,430,127
—
(164,285 )
—
—
2,265,842
$
Weighted
Average
Exercise
Price
12.63
—
10.06
—
—
12.82
Weighted
Average
Exercise
Price
Number
of shares
Weighted
Average Fair
Value Per
Restricted
Stock
12.63
—
10.06
—
—
12.82
$
758,745
873,010
—
(619,578 )
(12,199 )
999,978
$
23.89
23.14
—
22.70
23.74
23.98
Number of
Options
$
2,430,127
—
(164,285 )
—
—
2,265,842
$
Balance, December 31, 2013
Granted
Exercised
Vested
Forfeited
Balance, December 31, 2014
As of December 31, 2014, the Company had issued 4,517,514 shares of restricted stock under the LTIP.
Stock Option Plan
UDR has granted stock options to our employees, subject to certain conditions. Each stock option is exercisable into one common share.
There is no remaining compensation cost related to unvested stock options as of December 31, 2014.
During the year ended December 31, 2014, stock options with a fair value of $4.8 million were exercised.
The weighted average remaining contractual life on all options outstanding as of December 31, 2014 is 3.4 years. 1,830,672 of share options had exercise
prices at $10.06; 404,291 of share options had exercise prices at $24.38; and 30,879 of share options had exercise prices at $25.10.
During the years ended December 31, 2014, 2013, and 2012, respectively, we recognized $0.0, $0.0, and $95,000 of net compensation expense related to
outstanding stock options.
Restricted Stock Awards
Restricted stock awards are granted to Company employees, officers, and directors. The restricted stock awards are valued based upon the closing sales
price of UDR common stock on the date of grant. Compensation expense is recorded under the straight-line method over the vesting period, which is generally
three to four years. Restricted stock awards earn dividends payable in cash. Some of the restricted stock grants are based on the Company’s performance and
are subject to adjustment during the initial one year performance period. For the years ended December 31, 2014, 2013, and 2012, we recognized $4.2 million, $3.6
million, and $3.7 million of compensation expense related to the amortization of restricted stock awards, respectively. The total remaining compensation cost on
unvested restricted stock awards was $2.5 million and had a weighted average remaining contractual life of 1.1 years as of December 31, 2014.
Long-Term Incentive Compensation
In February 2014, certain officers of the Company were awarded a restricted stock grant under the 2014 Long-Term Incentive Program (“2014 LTI”). Fifty
percent of the 2014 LTI award is based upon FFO as Adjusted and fifty percent is based on Total Shareholder Return (“TSR”) as measured relative to
comparable apartment REITs. The actual amount that vests was determined in February 2015 based upon the actual achievement of the metrics. Each award
vests pro rata over three years commencing with the establishment of the award and continuing for two years following determination of the amount of the
award at the end of the annual performance period. The portion of the restricted stock grant based upon FFO as Adjusted was valued based upon the closing
sales price of UDR common stock on the date of grant. The portion of the restricted stock grant based upon TSR was valued at $21.15 per share on the grant
date as determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation using a volatility factor of 23.8%.
F - 33
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
In February 2013, certain officers of the Company were awarded a restricted stock grant under the 2013 Long-Term Incentive Program (“2013 LTI”). Fifty
percent of the 2013 LTI award is based upon FFO and fifty percent is based on Total Shareholder Return (“TSR”) as measured relative to comparable apartment
REITs. The actual amount that vests was determined in February 2014 based upon the actual achievement of the metrics. Each award vests pro rata over three
years commencing with the establishment of the award and continuing for two years following determination of the amount of the award at the end of the annual
performance period. The portion of the restricted stock grant based upon FFO was valued based upon the closing sales price of UDR common stock on the date
of grant. The portion of the restricted stock grant based upon TSR was valued at $21.97 per share on the grant date as determined by a lattice-binomial option-
pricing model based on a Monte Carlo simulation using a volatility factor of 15.8%.
Compensation expense is recorded under the accelerated method over the vesting period for the 2014 LTI and 2013 LTI. For the year ended December 31,
2014 and 2013, we recognized $9.8 million and $5.9 million, respectively, of compensation expense related to the amortization of the awards. The total remaining
compensation cost on unvested 2014 LTI and 2013 LTI awards was $5.8 million and had a weighted average remaining contractual life of 1.8 years as of
December 31, 2014.
During 2010, certain officers of the Company were awarded a restricted stock grant under the 2010-2012 Long-Term Incentive Program (“2010-2012 LTI”).
The actual amount of the awards that vested in 2012 was determined based upon the Company’s achievement of the specified performance metrics during the
three-year performance period. The grants were valued on the grant date based upon the market price of UDR common stock on the date of grant. Compensation
expense was recorded pro rata over the three-year performance period. For the year ended December 31, 2012, we recognized $4.9 million of compensation
expense related to the amortization of the awards.
Profit Sharing Plan
Our profit sharing plan (the “Plan”) is a defined contribution plan covering all eligible full-time employees. Under the Plan, UDR makes discretionary profit
sharing and matching contributions to the Plan as determined by the Compensation Committee of the Board of Directors. Aggregate provisions for
contributions, both matching and discretionary, which are included in UDR’s Consolidated Statements of Operations for the years ended December 31, 2014,
2013, and 2012, was $854,000, $919,000, and $631,000, respectively.
10. INCOME TAXES
For 2014, 2013, and 2012, UDR believes that we have complied with the REIT requirements specified in the Code. As such, the REIT would generally not be
subject to federal income taxes.
For income tax purposes, distributions paid to common stockholders may consist of ordinary income, qualified dividends, capital gains, unrecaptured
section 1250 gains, return of capital, or a combination thereof. Distributions that exceed our current and accumulated earnings and profits constitute a return of
capital rather than taxable income and reduce the stockholder’s basis in their common shares. To the extent that a distribution exceeds both current and
accumulated earnings and profits and the stockholder’s basis in the common shares, it generally will be treated as a gain from the sale or exchange of that
stockholder’s common shares. Taxable distributions paid per common share were taxable as follows for the years ended December 31, 2014, 2013, and 2012:
Ordinary income
Qualified ordinary income
Long-term capital gain
Unrecaptured section 1250 gain
Total
Year Ended December 31,
2014
2013
2012
$
$
0.695
0.139
0.105
0.076
1.015
$
$
0.744
—
0.114
0.067
0.925
$
$
0.174
—
0.186
0.515
0.875
F - 34
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
We have a TRS that is subject to federal and state income taxes. A TRS is a C-corporation which has not elected REIT status and as such is subject to
United States federal and state income tax. The components of the provision for income taxes are as follows for the years ended December 31, 2014, 2013, and
2012 (dollars in thousands):
Year Ended December 31,
2014
2013
2012
Income tax (benefit)/expense
Current
Federal
State
Total current
Deferred
Federal
State
Total deferred
Total income tax (benefit)/expense
Classification of income tax (benefit)/expense
Continuing operations
Gain/(loss) on sale of real estate owned
Discontinued operations
$
$
$
$
147
550
697
20,138
5,159
25,297
25,994
(1,030 ) $
846
(184 )
(6,907 )
(1,190 )
(8,097 )
$
(8,281 ) $
(15,098 ) $
41,087
5
(7,299 ) $
—
(982 )
1,961
1,463
3,424
(21,479 )
(3,021 )
(24,500 )
(21,076 )
(30,717 )
—
9,641
Deferred income taxes are provided for the change in temporary differences between the basis of certain assets and liabilities for financial reporting
purposes and income tax reporting purposes. The expected future tax rates are based upon enacted tax laws. The components of our TRS deferred tax assets and
liabilities are as follows for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands):
Deferred tax assets:
Federal and state tax attributes
Book/tax depreciation
Construction capitalization differences
Investment in partnerships
Debt and interest deductions
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Construction capitalization differences
Investment in partnerships
Other
Total deferred tax liabilities
Net deferred tax asset
Year Ended December 31,
2014
2013
2012
$
$
$
—
6,692
75
—
—
401
7,168
—
7,168
—
—
(192 )
(192 )
6,976
$
$
13,069
19,354
—
—
10,311
—
42,734
(1,310 )
41,424
(3,766 )
(5,080 )
(305 )
(9,151 )
32,273
$
1,464
12,345
6,635
3,112
—
2,009
25,565
(1,390 )
24,175
—
—
—
—
24,175
F - 35
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Income tax benefit/(expense), net differed from the amounts computed by applying the U.S. statutory rate of 35% to pretax income/(loss) for the years
ended December 31, 2014, 2013, and 2012 as follows (dollars in thousands):
Year Ended December 31,
2014
2013
2012
Income tax (benefit)/expense
U.S. federal income tax (benefit)/expense
State income tax provision
Other items
Conversion of certain TRS entities to REITs
Valuation allowance
Total income tax (benefit)/expense
$
$
$
28,819
2,678
(137 )
(5,770 )
404
25,994
$
(8,493 ) $
46
246
—
(80 )
(8,281 ) $
21,853
2,497
(1,682 )
—
(43,744 )
(21,076 )
As of December 31, 2014, the Company, through our TRS, had federal net operating loss carryovers (“NOL”) of $19.5 million expiring in 2032 through 2033.
As of December 31, 2014, the TRS had state NOLs of approximately $57.8 million expiring in 2020 through 2031. Prior to the conversion adjustment, as of
December 31, 2014, the Company had a valuation allowance of $1.7 million against its state NOL. During the year ended December 31, 2014, the Company had a
net change of $400,000 in the valuation allowance. These attributes are still available to the new REITs, but are carried at a zero effective tax rate.
For the year ended December 31, 2014, the Tax benefit/(provision), net increased $7.8 million as compared to 2013. The increase was primarily a result of
the Company recognizing a one-time tax benefit of $5.8 million in 2014 related to the conversion of certain taxable REIT subsidiary entities into REITs.
Additionally, Gain/(loss) on sale of real estate owned, net of tax included approximately $41.1 million of tax.
GAAP defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. The financial statements reflect expected future tax consequences of income tax positions presuming the taxing authorities’
full knowledge of the tax position and all relevant facts, but without considering time values. GAAP also provides guidance on derecognition, classification,
interest and penalties, accounting for interim periods, disclosure and transition.
The Company evaluates our tax position using a two-step process. First, we determine whether a tax position is more likely than not (greater than 50
percent probability) to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the
position. The Company will then determine the amount of benefit to recognize and record the amount of the benefit that is more likely than not to be realized
upon ultimate settlement. When applicable, UDR recognizes interest and/or penalties related to uncertain tax positions in income tax expense. As of
December 31, 2014 and 2013, UDR has no material unrecognized income tax benefits/(provisions).
The Company files income tax returns in federal and various state and local jurisdictions. With few exceptions, the Company is no longer subject to
federal, state and local income tax examination by tax authorities for years prior to 2010. The tax years 2010 through 2013 remain open to examination by the major
taxing jurisdictions to which the Company is subject.
11. NONCONTROLLING INTERESTS
Redeemable Noncontrolling Interests in the Operating Partnership
Interests in the Operating Partnership held by limited partners are represented by OP Units. The income is allocated to holders of OP Units based upon net
income attributable to common stockholders and the weighted average number of OP Units outstanding to total common shares plus OP Units outstanding
during the period. Capital contributions, distributions, and profits and losses are allocated to noncontrolling interests in accordance with the terms of the
individual partnership agreements.
Limited partners have the right to require the Operating Partnership to redeem all or a portion of the OP Units held by the limited partner at a redemption
price equal to and in the form of the Cash Amount as defined in the Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the
“Operating Partnership Agreement”), provided that such OP Units have been outstanding for at least one year. UDR, as the general partner of the Operating
Partnership may, in its sole
F - 36
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
discretion, purchase the OP Units by paying to the limited partner either the Cash Amount or the REIT Share Amount (generally one share of common stock of
the Company for each OP Unit), as defined in the Operating Partnership Agreement. Accordingly, the Company records the OP Units outside of permanent
equity and reports the OP Units at their redemption value using the Company’s stock price at each balance sheet date.
The following table sets forth redeemable noncontrolling interests in the Operating Partnership for the years ended December 31, 2014 and 2013 (dollars in
thousands):
Year Ended December 31,
2014
2013
Redeemable noncontrolling interests in the Operating Partnership, beginning of year
$
Mark-to-market adjustment to redeemable noncontrolling interests in the Operating Partnership
Conversion of OP Units to Common Stock
Net income/(loss) attributable to redeemable noncontrolling interests in the Operating Partnership
Distributions to redeemable noncontrolling interests in the Operating Partnership
Allocation of other comprehensive income/(loss)
$
217,597
73,954
(4,372 )
5,511
(10,077 )
(133 )
Redeemable noncontrolling interests in the Operating Partnership, end of year
$
282,480
$
223,418
3,656
(1,817 )
1,530
(9,440 )
250
217,597
The following sets forth net income/(loss) attributable to common stockholders and transfers from redeemable noncontrolling interests in the Operating
Partnership for the following periods (dollars in thousands):
Net income/(loss) attributable to common stockholders
Conversion of OP units to UDR Common Stock
Change in equity from net income/(loss) attributable to common stockholders and
conversion of OP units to UDR Common Stock
Noncontrolling Interests
Year Ended December 31,
2014
2013
2012
$
$
$
150,610
4,372
154,982
$
$
41,088
1,817
42,905
$
203,376
529
203,905
Noncontrolling interests represent interests of unrelated partners in certain consolidated affiliates, and is presented as part of equity in the Consolidated
Balance Sheets since these interests are not redeemable. During the years ended December 31, 2014, 2013, and 2012, net (income)/loss attributable to
noncontrolling interests was $3,000, $60,000, and $(140,000), respectively.
During the year ended December 31, 2012, the Company acquired all of the noncontrolling interests in two consolidated affiliates for $4.9 million, one of
which owns a 434 apartment home community for $4.0 million and the other is a development project for $900,000. See the “Consolidated Joint Ventures” section
of Note 5, Unconsolidated Joint Ventures and Partnerships, for additional information on the consolidated development joint venture.
12. FAIR VALUE OF DERIVATIVES AND FINANCIAL INSTRUMENTS
Fair value is based on the price that would be received to sell an asset or the exit price that would be paid to transfer a liability in an orderly transaction
between market participants at the measurement date. A three-level valuation hierarchy prioritizes observable and unobservable inputs used to measure fair
value. The fair value hierarchy consists of three broad levels, which are described below:
•
•
Level 1 — Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
Level 2 — Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted
prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with
observable market data.
F - 37
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
•
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.
This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The estimated fair values of the Company’s financial instruments either recorded or disclosed on a recurring basis as of December 31, 2014 and 2013 are
summarized as follows (dollars in thousands):
Description:
Notes receivable (a)
Derivatives - Interest rate contracts (b)
Total assets
Derivatives - Interest rate contracts (b)
Secured debt instruments - fixed rate: (c)
Mortgage notes payable
Fannie Mae credit facilities
Secured debt instruments- variable rate: (c)
Mortgage notes payable
Tax-exempt secured notes payable
Fannie Mae credit facilities
Unsecured debt instruments (c):
Commercial banks
Senior unsecured notes
Total liabilities
Redeemable noncontrolling interests in the
Operating Partnership (d)
Fair Value at December 31, 2014, Using
Total Carrying
Amount in
Statement of
Financial Position
at December 31,
2014
Fair Value
Estimate at
December 31,
2014
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
$
$
$
$
14,369
88
14,457
$
$
14,808
88
14,896
$
$
—
—
—
$
$
—
88
88
$
$
14,808
—
14,808
10,368
$
10,368
$
—
$
10,368
$
—
401,210
568,086
31,337
94,700
266,196
415,663
606,623
31,337
94,700
266,196
152,500
2,069,076
3,593,473
$
152,500
2,144,125
3,721,512
$
—
—
—
—
—
—
—
—
—
—
—
—
—
415,663
606,623
31,337
94,700
266,196
—
—
10,368
$
152,500
2,144,125
3,711,144
$
282,480
$
282,480
$
—
$
282,480
$
—
F - 38
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Fair Value at December 31, 2013, Using
Total Carrying
Amount in
Statement of
Financial Position
at December 31,
2013
Fair Value
Estimate at
December 31,
2013
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities (Level
1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Description:
Notes receivable (a)
Total assets
Derivatives- Interest rate contracts (b)
Secured debt instruments- fixed rate: (c)
Mortgage notes payable
Fannie Mae credit facilities
Secured debt instruments- variable rate: (c)
Mortgage notes payable
Tax-exempt secured notes payable
Fannie Mae credit facilities
Unsecured debt instruments: (c)
Senior unsecured notes
Total liabilities
Redeemable noncontrolling interests in the
Operating Partnership (d)
$
$
$
$
$
(a) See Note 2, Significant Accounting Policies.
(b) See Note 13, Derivatives and Hedging Activity.
(c) See Note 6, Secured Debt and Unsecured Debt.
(d) See Note 11, Noncontrolling Interests.
83,033
83,033
$
$
83,833
83,833
$
$
4,965
$
4,965
$
—
—
$
$
—
$
—
—
$
4,965
$
445,706
626,667
63,595
94,700
211,409
466,375
661,094
63,595
94,700
211,409
2,081,626
3,528,668
$
2,149,003
3,651,141
$
—
—
—
—
—
—
—
—
—
—
—
—
$
—
4,965
$
2,149,003
3,646,176
217,597
$
217,597
$
—
$
217,597
$
—
83,833
83,833
—
466,375
661,094
63,595
94,700
211,409
There were no transfers into or out of each of the levels of the fair value hierarchy.
Financial Instruments Carried at Fair Value
The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or
payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future
interest rates (forward curves) derived from observable market interest rate curves. The fair values of interest rate options are determined using the market
standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The
variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market
interest rate curves and volatilities.
The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s
nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has
considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit
valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by
itself and its counterparties. However, as of December 31, 2014 and 2013, the Company has assessed the significance of the impact of the credit valuation
adjustments on the overall valuation
F - 39
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the
Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. In conjunction with the FASB’s fair
value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject
to master netting agreements on a net basis by counterparty portfolio.
Redeemable noncontrolling interests in the Operating Partnership have a redemption feature and are marked to their redemption value. The redemption
value is based on the fair value of the Company’s common stock at the redemption date, and therefore, is calculated based on the fair value of the Company’s
common stock at the balance sheet date. Since the valuation is based on observable inputs such as quoted prices for similar instruments in active markets,
redeemable noncontrolling interests in the Operating Partnership are classified as Level 2.
Financial Instruments Not Carried at Fair Value
At December 31, 2014, the fair values of cash and cash equivalents, restricted cash, accounts receivable, prepaids, real estate taxes payable, accrued
interest payable, security deposits and prepaid rent, distributions payable and accounts payable approximated their carrying values because of the short term
nature of these instruments. The estimated fair values of other financial instruments were determined by the Company using available market information and
appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts the Company would realize on the disposition of the financial instruments. The use of different
market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts.
We estimate the fair value of our notes receivable and debt instruments by discounting the remaining cash flows of the debt instrument at a discount rate
equal to the replacement market credit spread plus the corresponding treasury yields. Factors considered in determining a replacement market credit spread
include general market conditions, borrower specific credit spreads, time remaining to maturity, loan-to-value ratios and collateral quality, where applicable (Level
3).
We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book value of those assets. Our
cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding
periods. The net book value of impaired assets is reduced to fair value. Our estimates of fair value represent our best estimate based upon Level 3 inputs such as
industry trends and reference to market rates and transactions.
We consider various factors to determine if a decrease in the value of our investment in and advances to unconsolidated joint ventures, net is other-than-
temporary. These factors include, but are not limited to, age of the venture, our intent and ability to retain our investment in the entity, the financial condition
and long-term prospects of the entity, and the relationships with the other joint venture partners and its lenders. Based on the significance of the unobservable
inputs, we classify these fair value measurements within Level 3 of the valuation hierarchy. The Company did not incur any other-than-temporary decrease in the
value of its investments in unconsolidated joint ventures during the years ended December 31, 2014, 2013, and 2012.
After determining an other-than-temporary decrease in the value of an equity method investment has occurred, we estimate the fair value of our
investment by estimating the proceeds we would receive upon a hypothetical liquidation of the investment at the date of measurement. Inputs reflect
management’s best estimate of what market participants would use in pricing the investment giving consideration to the terms of the joint venture agreement
and the estimated discounted future cash flows to be generated from the underlying joint venture assets. The inputs and assumptions utilized to estimate the
future cash flows of the underlying assets are based upon the Company’s evaluation of the economy, market trends, operating results, and other factors,
including judgments regarding costs to complete any construction activities, lease up and occupancy rates, rental rates, inflation rates, capitalization rates
utilized to estimate the projected cash flows at the disposition, and discount rates.
13. DERIVATIVES AND HEDGING ACTIVITY
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its
exposures to a wide variety of business and operational risks through management of its core
F - 40
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and
duration of its debt funding and through the use of derivative financial instruments. Specifically, the Company may enter into derivative financial instruments to
manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are
determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the
Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.
To accomplish this objective, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps
designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over
the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable-
rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up front premium.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated other
comprehensive income/(loss), net in the Consolidated Balance Sheets and is subsequently reclassified into earnings in the period that the hedged forecasted
transaction affects earnings. During the years ended December 31, 2014, 2013, and 2012, such derivatives were used to hedge the variable cash flows associated
with existing variable-rate debt and forecasted issuances of fixed-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized
directly in earnings. During the year ended December 31, 2014 the Company recorded a gain of approximately $3,000 from ineffectiveness in earnings attributable
to a timing mismatch between the derivative and the hedged item. During the years ended December 31, 2013, and 2012, the Company recorded less than $1,000
of loss from ineffectiveness in earnings attributable to reset date and index mismatches between the derivative and the hedged item, and interest rate swaps with
a fair value other than zero at inception of the hedging relationship.
Amounts reported in Accumulated other comprehensive income/(loss), net in the Consolidated Balance Sheets relate to derivatives that will be
reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Through December 31, 2015, the Company estimates that an
additional $5.0 million will be reclassified as an increase to interest expense.
As of December 31, 2014, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate
risk (dollars in thousands):
Interest Rate Derivative
Interest rate swaps
Interest rate caps
Number of
Instruments
14
3
$
$
Notional
365,000
243,079
Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified
risks but do not meet the strict hedge accounting requirements of GAAP. Changes in the fair value of derivatives not designated in hedging relationships are
recorded directly in earnings and resulted in a gain/(loss) of $(4,000), $271,000, and $290,000 for the years ended December 31, 2014, 2013, and 2012, respectively.
As of December 31, 2014, the Company had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships
(dollars in thousands):
Product
Interest rate caps
Number of
Instruments
Notional
1
$
96,409
F - 41
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance
Sheets as of December 31, 2014 and 2013 (dollars in thousands):
Derivatives designated as hedging instruments:
Interest rate products
Derivatives not designated as hedging instruments:
Interest rate products
$
$
Asset Derivatives
(included in Other assets)
Fair Value at:
Liability Derivatives
(included in Other liabilities)
Fair Value at:
December 31,
2014
December 31,
2013
December 31,
2014
December 31,
2013
86
$
—
$
10,368
$
4,965
2
$
—
$
—
$
—
Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statements of Operations
The tables below present the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations for the years ended
December 31, 2014, 2013, and 2012 (dollars in thousands):
Unrealized holding gain/
(loss) Recognized in OCI
(Effective Portion)
Year ended December 31,
Gain/(Loss) Reclassified from
Accumulated OCI into
Interest expense
(Effective Portion)
Gain/(Loss) Recognized in Interest
expense
(Ineffective Portion and Amount
Excluded from Effectiveness Testing)
Year ended December 31,
Year ended December 31,
2014
2013
2012
2014
2013
2012
2014
2013
2012
Derivatives in Cash Flow
Hedging Relationships
Interest rate products
$
(8,695) $
(469) $
(4,924) $
(4,834) $
(6,851) $
(7,649) $
3
$
—
$
—
Gain/(Loss) Recognized in
Interest and other income/(expense), net
Year ended December 31,
Derivatives Not Designated as Hedging Instruments
2014
2013
2012
Interest rate products
Credit-risk-related Contingent Features
$
(4) $
271
$
290
The Company has agreements with some of its derivative counterparties that contain a provision where (1) if the Company defaults on any of its
indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in
default on its derivative obligations; or (2) the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is
accelerated by the lender due to the Company’s default on the indebtedness.
Certain of the Company’s agreements with its derivative counterparties contain provisions where if there is a change in the Company’s financial condition
that materially changes the Company’s creditworthiness in an adverse manner, the Company may be required to fully collateralize its obligations under the
derivative instrument. At December 31, 2014 and 2013, no cash collateral was posted or required to be posted by the Company or by a counterparty.
The Company also has an agreement with a derivative counterparty that incorporates the loan and financial covenant provisions of the Company’s
indebtedness with a lender affiliate of the derivative counterparty. Failure to comply with these covenant provisions would result in the Company being in
default on any derivative instrument obligations covered by the agreement.
F - 42
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
The Company has certain agreements with some of its derivative counterparties that contain a provision where, in the event of default by the Company or
the counterparty, the right of setoff may be exercised. Any amount payable to one party by the other party may be reduced by its setoff against any amounts
payable by the other party. Events that give rise to default by either party may include, but are not limited to, the failure to pay or deliver payment under the
derivative contract, the failure to comply with or perform under the derivative agreement, bankruptcy, a merger without assumption of the derivative agreement,
or in a merger, a surviving entity's creditworthiness is materially weaker than the original party to the derivative agreement.
As of December 31, 2014, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for
nonperformance risk, related to these agreements was $10.6 million. If the Company had breached any of these provisions at December 31, 2014, it would have
been required to settle its obligations under the agreements at their termination value of $10.6 million.
The Company has elected not to offset derivative positions in the consolidated financial statements. The tables below present the effect on its financial
position had the Company made the election to offset its derivative positions as of December 31, 2014 and December 31, 2013 (dollars in thousands):
Offsetting of Derivative Assets
Gross Amounts of
Recognized
Assets
December 31, 2014
$
88
Gross Amounts
Offset in the
Consolidated
Balance Sheets
—
$
$
Net Amounts of Assets
Presented in the
Consolidated Balance
Sheets (a)
Gross Amounts Not Offset in the
Consolidated Balance Sheets
Financial
Instruments
Cash Collateral
Received
88
$
(27) $
—
$
December 31, 2013
$
—
$
—
$
—
$
—
$
—
$
Net Amount
61
—
(a) Amounts reconcile to the aggregate fair value of derivative assets in the “Tabular Disclosure of Fair Values of Derivative Instruments on the Balance
Sheet” located in this footnote.
Offsetting of Derivative Liabilities
Gross Amounts of
Recognized
Liabilities
December 31, 2014
$
10,368
$
Gross Amounts
Offset in the
Consolidated
Balance Sheets
—
Net Amounts of
Liabilities Presented in
the Consolidated Balance
Sheets (a)
Gross Amounts Not Offset in the
Consolidated Balance Sheets
Financial
Instruments
Cash Collateral
Posted
Net Amount
$
10,368
$
(27) $
—
$
10,341
December 31, 2013
$
4,965
$
—
$
4,965
$
—
$
—
$
4,965
(a) Amounts reconcile to the aggregate fair value of derivative liabilities in the “Tabular Disclosure of Fair Values of Derivative Instruments on the Balance
Sheet” located in this footnote.
F - 43
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
14. COMMITMENTS AND CONTINGENCIES
Commitments
Real Estate Under Development
The following summarizes the Company’s real estate commitments at December 31, 2014 (dollars in thousands):
Wholly-owned — under development
Wholly-owned — redevelopment
Joint ventures:
Unconsolidated joint ventures
Participating loan investments
Total
Number of
Properties
Costs Incurred
to Date (a)
Expected Costs
to Complete
(unaudited)
Average
Ownership
Stake
1
1
3
1
$
$
177,632 (b)
83,778 (b)
$
225,013
62,707
549,130
(d)
$
40,068
14,222
172,155
29,302
255,747
(c)
(e)
100%
100%
Various
0%
(a) Represents 100% of project costs incurred to date.
(b) Costs incurred to date include $14.7 million and $1.8 million of accrued fixed assets for development and redevelopment, respectively.
(c) Represents UDR’s contributed and remaining equity commitment in unconsolidated joint ventures.
(d) Represents the participating loan balance funded as of December 31, 2014.
(e) Represents UDR’s remaining participating loan commitment for Steele Creek.
Ground and Other Leases
UDR owns six communities which are subject to ground leases expiring between 2019 and 2103. In addition, UDR is a lessee to various operating leases
related to office space rented by the Company with expiration dates through 2016. Future minimum lease payments as of December 31, 2014 are as follows
(dollars in thousands):
Thereafter
Total
Ground
Leases (a)
Office Space
2015 $
2016
2017
2018
2019
$
5,412
5,412
5,412
5,412
5,412
313,735
340,795
$
$
709
124
76
76
76
109
1,170
(a) For purposes of our ground lease contracts, the Company uses the minimum lease payment, if stated in the agreement. For ground lease
agreements where there is a reset provision based on the communities appraised value or consumer price index but does not include a specified
minimum lease payment, the Company uses the current rent over the remainder of the lease term.
UDR incurred $5.4 million, $5.2 million, $5.1 million of ground rent expense for the years ended December 31, 2014, 2013, and 2012, respectively. These
costs are reported within the line item Other Operating Expenses on the Consolidated Statements of Operations. The Company incurred $1.3 million, $1.3 million,
$1.1 million of rent expense related to office space for the years ended December 31, 2014, 2013, and 2012, respectively. These costs are included in General and
Administrative on the Consolidated Statements of Operations. In February 2015, the Company acquired the office building in Highlands
F - 44
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Ranch, Colorado, which housed its corporate offices it had previously leased. See Note 4, Real Estate Owned, for additional details.
Contingencies
Litigation and Legal Matters
The Company is subject to various legal proceedings and claims arising in the ordinary course of business. The Company cannot determine the ultimate
liability with respect to such legal proceedings and claims at this time. The Company believes that such liability, to the extent not provided for through insurance
or otherwise, will not have a material adverse effect on our financial condition, results of operations or cash flow.
15. REPORTABLE SEGMENTS
GAAP guidance requires that segment disclosures present the measure(s) used by the chief operating decision maker to decide how to allocate resources
and for purposes of assessing such segments’ performance. UDR’s chief operating decision maker is comprised of several members of its executive management
team who use several generally accepted industry financial measures to assess the performance of the business for our reportable operating segments.
UDR owns and operates multifamily apartment communities that generate rental and other property related income through the leasing of apartment homes
to a diverse base of tenants. The primary financial measures for UDR’s apartment communities are rental income and NOI. Rental income represents gross market
rent less adjustments for concessions, vacancy loss and bad debt. NOI is defined as rental income less direct property rental expenses. 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 2.75% of property revenue to cover the regional supervision and accounting costs related to consolidated property operations, and land
rent. UDR’s chief operating decision maker utilizes NOI as the key measure of segment profit or loss.
UDR’s two reportable segments are Same-Store Communities and Non-Mature Communities/Other:
•
Same-Store Communities represent those communities acquired, developed, and stabilized prior to January 1, 2013 and held as of December 31, 2014. A
comparison of operating results from the prior year is meaningful as these communities were owned and had stabilized occupancy and operating
expenses as of the beginning of the prior year, there is no plan to conduct substantial redevelopment activities, and the community is not 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.
• Non-Mature Communities/Other represent 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.
Management evaluates the performance of each of our apartment communities on a Same-Store Community and Non-Mature Community/Other basis, as
well as individually and geographically. This is consistent with the aggregation criteria under GAAP as each of our apartment communities generally has similar
economic characteristics, facilities, services, and tenants. Therefore, the Company’s reportable segments have been aggregated by geography in a manner
identical to that which is provided to the chief operating decision maker.
All revenues are from external customers and no single tenant or related group of tenants contributed 10% or more of UDR’s total revenues during the
years ended December 31, 2014, 2013, and 2012.
F - 45
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
The following table details rental income and NOI from continuing and discontinued operations for UDR’s reportable segments for the years ended
December 31, 2014, 2013, and 2012, and reconciles NOI to Net income/(loss) attributable to UDR, Inc. in the Consolidated Statements of Operations (dollars in
thousands):
Reportable apartment home segment rental income
Same-Store Communities
West Region
Mid-Atlantic Region
Southeast Region
Northeast Region
Southwest Region
Non-Mature Communities/Other
Total segment and consolidated rental income
Reportable apartment home segment NOI
Same-Store Communities
West Region
Mid-Atlantic Region
Southeast Region
Northeast Region
Southwest Region
Non-Mature Communities/Other
Total segment and consolidated NOI
Reconciling items:
Joint venture management and other fees
Property management
Other operating expenses
Real estate depreciation and amortization
General and administrative
Casualty-related recoveries/(charges), net
Other depreciation and amortization
Income/(loss) from unconsolidated entities
Interest expense
Interest and other income/(expense), net
Tax benefit/(provision), net
Gain/(loss) on sale of real estate owned, net of tax
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating
Partnership
Net (income)/loss attributable to noncontrolling interests
Net income/(loss) attributable to UDR, Inc.
F - 46
Year Ended December 31,
2014
2013
2012
$
$
$
$
$
$
245,803
161,566
107,991
60,796
54,810
174,183
805,149
178,926
111,762
71,528
44,897
33,725
115,483
556,321
13,044
(22,142)
(8,271)
(358,154)
(47,800)
(541)
(5,775)
(7,006)
(130,454)
11,837
15,136
143,647
$
$
$
231,156
160,208
102,988
58,075
52,302
150,907
755,636
166,033
111,643
67,264
42,350
31,927
94,824
514,041
12,442
(20,780)
(7,136)
(341,490)
(42,238)
12,253
(6,741)
(415)
(126,083)
4,681
7,299
40,449
(5,511)
3
154,334
$
$
(1,530)
60
44,812
$
218,268
155,777
97,699
54,461
46,800
171,239
744,244
154,205
108,490
63,122
39,377
27,878
111,128
504,200
11,911
(20,465)
(5,718)
(350,401)
(43,792)
(8,495)
(4,105)
(8,579)
(138,792)
2,703
30,282
251,554
(7,986)
(140)
212,177
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
The following table details the assets of UDR’s reportable segments as of December 31, 2014 and 2013 (dollars in thousands):
Reportable apartment home segment assets:
Same-Store communities:
West Region
Mid-Atlantic Region
Southeast Region
Northeast Region
Southwest Region
Non-mature Communities/Other
Total segment assets
Accumulated depreciation
Total segment assets — net book value
Reconciling items:
Cash and cash equivalents
Restricted cash
Deferred financing costs, net
Notes receivable, net
Investment in and advances to unconsolidated joint ventures, net
Other assets
Total consolidated assets
December 31,
2014
December 31,
2013
$
$
$
2,358,444
1,410,156
786,438
746,550
440,721
2,640,950
8,383,259
(2,434,772)
5,948,487
15,224
22,340
22,686
14,369
718,226
105,202
6,846,534
$
2,337,980
1,395,772
785,134
738,805
434,875
2,515,411
8,207,977
(2,208,794)
5,999,183
30,249
22,796
26,924
83,033
507,655
137,882
6,807,722
Capital expenditures related to our Same-Store Communities totaled $55.3 million, $47.5 million, and $46.4 million for the years ended December 31, 2014,
2013, and 2012, respectively. Capital expenditures related to our Non-Mature Communities/Other totaled $8.1 million, $8.3 million, and $8.7 million for the years
ended December 31, 2014, 2013, and 2012, respectively.
Markets included in the above geographic segments are as follows:
i.
ii.
iii.
iv.
v.
West Region — Orange County, San Francisco, Seattle, Monterey Peninsula, Los Angeles, Other Southern California, and Portland
Mid-Atlantic Region — Metropolitan D.C., Baltimore, Richmond, Norfolk, and Other Mid-Atlantic
Southeast Region — Tampa, Orlando, Nashville, and Other Florida
Northeast Region — New York and Boston
Southwest Region — Dallas and Austin
16. CASUALTY-RELATED (RECOVERIES)/CHARGES
In October 2012, Hurricane Sandy hit the East Coast, affecting three of the Company’s operating communities (1,706 apartment homes) located in New York
City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Company has insurance policies that
provide coverage for property damage and business interruption, subject to applicable retention.
Based on the claims filed and management’s estimates, the Company recognized a $9.0 million impairment charge for the damaged assets’ net book value
and incurred $10.4 million of repair and cleanup costs during the year ended December 31, 2012. The impairment charge and the repair and cleanup costs incurred
were reduced as of December 31, 2012 by $14.5 million of estimated insurance recovery, and were classified in Casualty-related (recoveries)/charges, net on the
Consolidated
F - 47
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Statements of Operations. During the year ended December 31, 2013, no material adjustments to the impairment charge and the repair and cleanup costs incurred
were recognized. With the exception of one of the properties that is under redevelopment at December 31, 2013, the rehabilitation of the remaining two properties
was substantially completed as of December 31, 2013 and was completed during 2014.
As of December 31, 2013, the Company had settled the Hurricane Sandy claims and received insurance proceeds in excess of the $14.5 million estimated
insurance recovery receivable related to the impairment charge and the repair and cleanup costs incurred. As a result, the Company recognized a Casualty-
related recovery of approximately $4.8 million and a casualty gain of approximately $654,000 for the year ended December 31, 2013. Both the recovery and
casualty gain were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.
Based on the claims filed and management’s estimates, the Company recognized $4.4 million of business interruption losses for the year ended December
31, 2012, of which $3.6 million were related to rent concession rebates provided to residents during the period the properties were uninhabitable and were
classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations, and $767,000 were related to rent that was not
contractually receivable and were classified as a reduction to Rental income on the Consolidated Statements of Operations. As noted below, the Company
recovered from the insurance carrier approximately $4.2 million of the $4.4 million of 2012 business interruption losses. The Company estimates that it incurred an
additional $3.4 million of business interruption losses for the year ended December 31, 2013. As noted below, the Company recovered from the insurance carrier
approximately $2.6 million of the $3.4 million of 2013 business interruption losses.
During the year ended December 31, 2013, the Company received approximately $6.8 million of insurance proceeds for recovery of business interruption
losses. Of the $6.8 million of insurance proceeds received in 2013, $4.2 million related to recovery of business interruption losses incurred in 2012 and the
remaining $2.6 million related to recovery of business interruption losses incurred in 2013. The $6.8 million of recovery was classified in Casualty-related
(recoveries)/charges, net on the Consolidated Statements of Operations as of December 31, 2013.
During the year ended December 31, 2014, the Company recorded $541,000 of casualty-related losses due to property damage incurred during an
earthquake and a storm in California, all of which are included in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.
F - 48
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
17. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA
Selected consolidated quarterly financial data for the three and twelve months ended December 31, 2014 and 2013 is summarized in the table below (dollars
in thousands, except per share amounts):
2014
Rental income (a)
Income/(loss) from continuing operations
Income/(loss) from discontinued operations, net of tax
Net income/(loss) attributable to common stockholders
Income/(loss) attributable to common stockholders per
weighted average common share (b):
Basic and diluted
Weighted average number of shares outstanding
Basic
Diluted
2013
Rental income (a)
Income/(loss) from continuing operations
Income/(loss) from discontinued operations, net of tax
Net income/(loss) attributable to common stockholders
Income/(loss) attributable to common stockholders per
weighted average common share (b):
Basic and diluted
Weighted average number of shares outstanding
Basic
Diluted
$
$
$
$
March 31,
June 30,
September 30,
December 31,
Three Months Ended
194,352
$
(5,195)
(87)
17,430
$
200,959
4,359
18
29,076
$
203,587
10,611
79
39,618
206,104
6,485
—
64,486
0.07
$
0.12
$
0.16
$
0.25
250,177
251,822
250,255
252,191
251,655
253,732
181,961
$
(1,162)
853
(1,199)
$
186,285
4,525
829
4,261
$
187,917
2,351
884
2,257
253,983
256,000
190,321
(3,374)
41,376
35,769
(0.00) $
0.02
$
0.01
$
0.14
249,917
249,917
249,985
251,406
249,985
251,454
249,987
249,987
(a) Represents rental income from continuing operations, excluding amounts classified as discontinued operations.
(b) Quarterly income/(loss) per share amounts may not total to the annual amounts.
F - 49
[This page is intentionally left blank.]
The Partners
United Dominion Realty, L.P.
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of United Dominion Realty, L.P. (the “Partnership”) as of December 31, 2014 and 2013,
and the related consolidated statements of operations, comprehensive income/(loss), changes in capital, and cash flows for each of the three years in the period
ended December 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are
the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not
engaged to perform an audit of the Partnership's internal control over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of United Dominion
Realty, L.P. at December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended
December 31, 2014, in conformity with U. S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects the information set forth therein.
As discussed in Notes 2 and 3 to the consolidated financial statements, the Partnership changed its reporting of discontinued operations as a result of the
adoption of the amendments to the FASB Accounting Standards Codification resulting from Accounting Standards Update No. 2014-08, “Presentation of
Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of
Components of an Entity”.
/s/ Ernst & Young LLP
Denver, Colorado
February 24, 2015
F - 51
UNITED DOMINION REALTY, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for unit data)
ASSETS
December 31, 2014 December 31, 2013
Real estate owned:
Real estate held for investment
Less: accumulated depreciation
Real estate held for investment, net
Real estate under development (net of accumulated depreciation of $0)
Total real estate owned, net of accumulated depreciation
Cash and cash equivalents
Restricted cash
Deferred financing costs, net
Other assets
Total assets
LIABILITIES AND CAPITAL
Liabilities:
Secured debt
Notes payable due to General Partner
Real estate taxes payable
Accrued interest payable
Security deposits and prepaid rent
Distributions payable
Deferred gains on the sale of depreciable property
Accounts payable, accrued expenses, and other liabilities
Total liabilities
Commitments and contingencies (Note 11)
Capital:
Partners’ capital:
General partner: 110,883 OP Units outstanding at December 31, 2014 and 2013
Limited partners: 183,167,815 OP Units outstanding at December 31, 2014 and 2013
Accumulated other comprehensive loss
Total partners’ capital
Advances (to)/from General Partner
Noncontrolling interests
Total capital
Total liabilities and capital
See accompanying notes to the consolidated financial statements.
F - 52
$
$
$
$
$
4,238,770
(1,403,303)
2,835,467
—
2,835,467
502
13,811
4,475
24,029
2,878,284
$
$
931,959
88,696
7,061
3,284
18,387
47,788
24,622
22,436
1,144,233
4,108,417
(1,241,574)
2,866,843
80,063
2,946,906
1,897
13,526
5,848
25,064
2,993,241
934,865
88,696
6,228
3,323
14,172
43,253
63,838
35,769
1,190,144
1,105
1,702,971
(1,075)
1,703,001
13,624
17,426
1,734,051
2,878,284
$
1,163
1,797,836
(3,065)
1,795,934
(9,916)
17,079
1,803,097
2,993,241
UNITED DOMINION REALTY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
REVENUES:
Rental income
OPERATING EXPENSES:
Property operating and maintenance
Real estate taxes and insurance
Property management
Other operating expenses
Real estate depreciation and amortization
General and administrative
Casualty-related (recoveries)/charges, net
Total operating expenses
Operating income
Interest expense
Interest expense on note payable due to General Partner
Income/(loss) from continuing operations
Income/(loss) from discontinued operations
Income/(loss) before gain/(loss) on sale of real estate owned
Gain/(loss) on sale of real estate owned
Net income/(loss)
Net (income)/loss attributable to noncontrolling interests
Net income/(loss) attributable to OP unitholders
Income/(loss) per weighted average OP Unit - basic and diluted:
Income/(loss) from continuing operations attributable to OP unitholders
Income/(loss) from discontinued operations attributable to OP unitholders
Net income/(loss) attributable to OP unitholders
Year Ended December 31,
2014
2013
2012
$
422,634
$
401,853
$
384,946
75,211
47,110
11,622
5,172
179,176
28,541
541
347,373
75,261
37,114
4,603
33,544
—
33,544
63,635
97,179
$
$
$
(952)
96,227
$
0.53
—
0.53
$
$
75,019
45,139
11,051
5,728
179,367
24,808
(8,083)
333,029
72,843
40,866
10,587
5,272
191,731
26,204
5,518
353,021
68,824
31,925
34,989
1,069
32,766
45,176
77,942
—
77,942
(4,566)
73,376
$
0.16
0.24
0.40
$
$
43,277
1,957
(13,309)
57,643
44,334
—
44,334
(352)
43,982
(0.07)
0.31
0.24
Weighted average OP Units outstanding - basic and diluted
183,279
184,196
184,281
See accompanying notes to the consolidated financial statements.
F - 53
UNITED DOMINION REALTY, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(In thousands)
Net income/(loss)
Other comprehensive income/(loss), including portion attributable to noncontrolling
interests:
Other comprehensive income/(loss) - derivative instruments:
Unrealized holding gain/(loss)
(Gain)/loss reclassified into earnings from other comprehensive income/(loss)
Other comprehensive income/(loss), including portion attributable to
noncontrolling interests
Comprehensive income/(loss)
Comprehensive (income)/loss attributable to noncontrolling interests
Comprehensive income/(loss) attributable to OP unitholders
$
Year Ended December 31,
2014
2013
2012
$
97,179
$
77,942
$
44,334
(285)
2,275
1,990
99,169
(952)
98,217
$
(348)
2,652
2,304
80,246
(4,566)
75,680
$
(1,898)
3,431
1,533
45,867
(352)
45,515
See accompanying notes to consolidated financial statements.
F - 54
UNITED DOMINION REALTY, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
(In thousands)
General
Partner
Accumulated Other
Comprehensive
Income/(Loss), net
Total Partners’
Capital
Balance at December 31, 2011
$
Distributions
OP Unit redemptions for common shares
of UDR
OP Unit redemptions for cash
Adjustment to reflect limited partners’
capital at redemption value
Net income/(loss)
Other comprehensive income/(loss)
Net change in advances (to)/from General
Partner
Balance at December 31, 2012
Distributions
OP Unit redemptions for common shares
of UDR
Distribution of community to UDR
Adjustment to reflect limited partners’
capital at redemption value
Net income/(loss)
Other comprehensive income/(loss)
Net change in advances (to)/from General
Partner
Balance at December 31, 2013
Distributions
OP Unit redemptions for common shares
of UDR
Adjustment to reflect limited partners’
capital at redemption value
Net income/(loss)
Other comprehensive income/(loss)
Net change in advances (to)/from General
Partner
Balance at December 31, 2014
$
UDR, Inc.
Limited Partner
$
1,803,926
(153,846)
$
Class A
Limited
Partner
$
43,967
(2,328)
—
—
Limited
Partners
192,508
(6,738)
(529)
(133)
(596)
(5,166)
529
133
5,762
41,523
—
1,293
$
(96)
—
—
—
26
—
1,820
—
—
181,762
(7,118)
(1,817)
—
852
3,016
—
—
176,695
(7,789)
(4,371)
60,020
3,938
—
613
—
—
41,656
(2,324)
—
—
702
868
—
—
40,902
(2,328)
—
14,493
920
—
—
53,987
—
1,698,027
(164,170)
—
1,223
(104)
1,817
(23,329)
(1,554)
69,448
—
—
—
—
44
—
—
1,580,239
(180,917)
—
1,163
(116)
4,371
(74,513)
91,311
—
—
—
58
—
Advances
(to)/from
General
Partner
(193,584) $
—
—
—
—
—
—
182,528
(11,056)
—
—
(53,712)
—
—
—
54,852
(9,916)
—
—
—
—
—
Noncontrolling
Interests
12,161
—
—
—
—
352
—
—
12,513
—
—
—
—
4,566
—
—
17,079
—
—
—
952
—
Total
$
1,853,369
(163,008)
—
—
—
44,334
1,533
182,528
1,918,756
(173,716)
—
(77,041)
—
77,942
2,304
54,852
1,803,097
(191,150)
—
—
97,179
1,990
(6,902) $
—
—
—
—
—
1,533
—
(5,369)
—
—
—
—
—
2,304
—
(3,065)
—
—
—
—
1,990
$
2,034,792
(163,008)
—
—
—
43,982
1,533
—
1,917,299
(173,716)
—
(23,329)
—
73,376
2,304
—
1,795,934
(191,150)
—
—
96,227
1,990
—
228,493
$
—
1,420,491
$
$
—
1,105
$
—
(1,075) $
—
1,703,001
$
23,540
13,624
$
(605)
17,426
$
22,935
1,734,051
See accompanying notes to the consolidated financial statements.
F - 55
UNITED DOMINION REALTY, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Operating Activities
Net income/(loss)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Depreciation and amortization
Net gain on the sale of depreciable property
Casualty-related (recoveries)/charges, net
Other
Changes in operating assets and liabilities:
(Increase)/decrease in operating assets
Increase/(decrease) in operating liabilities
Net cash provided by/(used in) operating activities
Investing Activities
Proceeds from sales of real estate investments, net
Development of real estate assets
Capital expenditures and other major improvements — real estate assets, net of escrow
reimbursement
Net cash provided by/(used in) investing activities
Financing Activities
Advances (to)/from General Partner, net
Proceeds from the issuance of secured debt
Payments on secured debt
Distributions paid to partnership unitholders
Payments of financing costs
Net cash provided by/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental Information:
Interest paid during the period, net of amounts capitalized
Non-cash transactions:
Real estate distributed to the General Partner
OP Units redeemed by General Partner in partial consideration for real estate distributed
Reallocation of credit facilities debt from General Partner
Development costs and capital expenditures incurred but not yet paid
Year Ended December 31,
2014
2013
2012
$
97,179
$
77,942
$
44,334
179,176
(63,635)
541
1,956
(1,756)
(5,429)
208,032
47,922
(47,220)
(47,352)
(46,650)
(153,751)
5,909
(4,995)
(9,929)
(11)
(162,777)
(1,395)
1,897
502
$
181,302
(41,518)
(270)
2,097
(11,685)
478
208,346
79,437
(66,407)
(76,984)
(63,954)
(92,537)
—
(42,237)
(9,348)
(1,177)
(145,299)
(907)
2,804
1,897
$
195,051
(51,094)
5,518
3,624
(1,543)
5,205
201,095
113,175
(36,804)
(72,098)
4,273
29,391
26,054
(249,680)
(9,033)
—
(203,268)
2,100
704
2,804
44,629
$
42,506
$
48,545
—
—
—
7,254
74,586
23,329
13,682
6,371
—
—
—
7,440
$
$
See accompanying notes to the consolidated financial statements.
F - 56
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014
1. CONSOLIDATION AND BASIS OF PRESENTATION
United Dominion Realty, L.P. (“UDR, L.P.,” the “Operating Partnership,” “we” or “our”) is a Delaware limited partnership that owns, acquires, renovates,
redevelops, manages, and disposes of multifamily apartment communities generally located in high barrier to entry markets located in the United States. The high
barrier to entry markets are characterized by limited land for new construction, difficult and lengthy entitlement process, expensive single-family home prices and
significant employment growth potential. UDR, L.P. is a subsidiary of UDR, Inc. (“UDR” or the “General Partner”), a self-administered real estate investment
trust, or REIT, through which UDR conducts a significant portion of its business. During the years ended December 31, 2014, 2013, and 2012, rental revenues of
the Operating Partnership represented 52%, 54%, 54%, respectively, of the General Partner’s consolidated rental revenues (including those classified within
discontinued operations). At December 31, 2014, the Operating Partnership’s apartment portfolio consisted of 68 communities located in 17 markets consisting of
20,814 apartment homes.
Interests in UDR, L.P. are represented by operating partnership units (“OP Units”). The Operating Partnership’s net income is allocated to the partners,
which is initially based on their respective distributions made during the year and secondly, their percentage interests. Distributions are made in accordance with
the terms of the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. (the “Operating Partnership Agreement”), on a per
unit basis that is generally equal to the dividend per share on UDR’s common stock, which is publicly traded on the New York Stock Exchange (“NYSE”) under
the ticker symbol “UDR.”
As of December 31, 2014, there were 183,278,698 OP Units outstanding, of which 174,113,225 or 95.0% were owned by UDR and affiliated entities and
9,165,473 or 5.0% were owned by non-affiliated limited partners. There were 183,278,698 OP Units in the Operating Partnership outstanding as of December 31,
2013, of which 173,959,774 or 94.9% were owned by UDR and affiliated entities and 9,318,924 or 5.1% were owned by non-affiliated limited partners.
As sole general partner of the Operating Partnership, UDR owned 110,883 general partnership interest units or 0.06% of the total OP Units outstanding as
of December 31, 2014 and 2013. At December 31, 2014 and 2013, there were 183,167,815 OP Units outstanding, of which 1,873,332 were Class A Limited
Partnership OP Units. UDR owned 174,002,342 or 95.0% and 173,848,891 or 94.9% at December 31, 2014 and 2013, respectively. The remaining 9,165,473 or 5.0%
and 9,318,924 or 5.1% OP Units outstanding of limited partnership interest were held by non-affiliated partners at December 31, 2014 and 2013, respectively, of
which 1,751,671 were Class A Limited Partnership units. See Note 9, Capital Structure.
The Operating Partnership evaluated subsequent events through the date its financial statements were issued. No recognized or non-recognized
subsequent events were noted.
2. SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Pronouncements
In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which
incorporates a requirement that a disposition represent a strategic shift in an entity’s operations into the definition of a discontinued operation. In accordance
with the ASU, a discontinued operation represents (1) a component of an entity or group of components that has been disposed of or is classified as held for
sale in a single transaction and represents a strategic shift that has or will have a major effect on an entity’s financial results, or (2) an acquired business that is
classified as held for sale on the date of acquisition. A strategic shift could include a disposal of (1) a separate major line of business, (2) a separate major
geographic area of operations, (3) a major equity method investment, or (4) other major parts of an entity. The standard requires prospective application and will
be effective for interim and annual periods beginning on or after December 15, 2014, with early adoption permitted. The early adoption provision excludes
components of an entity that were sold or classified as held for sale prior to the adoption of the standard.
The Operating Partnership elected to early adopt this standard effective January 1, 2014, which had a significant impact on the Operating Partnership’s
consolidated financial statements as further discussed in Note 3, Discontinued Operations. Subsequent to the Operating Partnership’s adoption of ASU 2014-
08, the sale of real estate that does not meet the definition of a discontinued operation under the standard is included in Gain/(loss) on sale of real estate
owned, net of tax on the Consolidated Statements of Operations.
F - 57
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The standard provides companies with a single model for use in
accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue
guidance. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard specifically
excludes lease contracts. The ASU allows for the use of either the full or modified retrospective transition method, and the standard will be effective for the
Operating Partnership on January 1, 2017; early adoption is not permitted. The Operating Partnership has not yet selected a transition method and we are
currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.
Real Estate
Real estate assets held for investment are carried at historical cost and consist of land, buildings and improvements, furniture, fixtures and equipment and
other costs incurred during their development, acquisition and redevelopment.
Expenditures for ordinary repair and maintenance costs are charged to expense as incurred. Expenditures for improvements, renovations, and replacements
related to the acquisition and/or improvement of real estate assets are capitalized and depreciated over their estimated useful lives if the expenditures qualify as a
betterment or the life of the related asset will be substantially extended beyond the original life expectancy.
The Operating Partnership purchases real estate investment properties and records the tangible and identifiable intangible assets and liabilities acquired
based on their estimated fair value. The primary, although not only, identifiable intangible asset associated with our portfolio is the value of existing lease
agreements. When recording the acquisition of a community, we first assign fair value to the estimated intangible value of the existing lease agreements and then
to the estimated value of the land, building and fixtures assuming the community is vacant. The Operating Partnership estimates the intangible value of the lease
agreements by determining the lost revenue associated with a hypothetical lease-up. Depreciation on the building is based on the expected useful life of the
asset and the in-place leases are amortized over their remaining average contractual life. Property acquisition costs are expensed as incurred.
Quarterly or when changes in circumstances warrant, the Operating Partnership will assess our real estate properties for indicators of impairment. In
determining whether the Operating Partnership has indicators of impairment in our real estate assets, we assess whether the long-lived asset’s carrying value
exceeds the community’s undiscounted future cash flows, which is representative of projected net operating income (“NOI”) plus the residual value of the
community. Our future cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and
our estimated holding periods. If such indicators of impairment are present and the carrying value exceeds the undiscounted cash flows of the community, an
impairment loss is recognized equal to the excess of the carrying amount of the asset over its estimated fair value. Our estimates of fair market value represent
our best estimate based primarily upon unobservable inputs related to rental rates, operating costs, growth rates, discount rates and capitalization rates, industry
trends and reference to market rates and transactions.
For long-lived assets to be disposed of, impairment losses are recognized when the fair value of the asset less estimated cost to sell is less than the
carrying value of the asset. Properties classified as real estate held for sale generally represent properties that are actively marketed or contracted for sale with
the closing expected to occur within the next twelve months. Real estate held for sale is carried at the lower of cost, net of accumulated depreciation, or fair value,
less the cost to sell, determined on an asset-by-asset basis. Expenditures for ordinary repair and maintenance costs on held for sale properties are charged to
expense as incurred. Expenditures for improvements, renovations, and replacements related to held for sale properties are capitalized at cost. Depreciation is not
recorded on real estate held for sale.
Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets which are 35 to 55 years for buildings, 10 to 35 years
for major improvements, and 3 to 10 years for furniture, fixtures, equipment, and other assets.
Predevelopment, development, and redevelopment projects and related costs are capitalized and reported on the Consolidated Balance Sheets as Total
real estate owned, net of accumulated depreciation. The Operating Partnership capitalizes costs directly related to the predevelopment, development, and
redevelopment of a capital project, which include, but are not limited to, interest, real estate taxes, insurance, and allocated development and redevelopment
overhead related to support costs for personnel working on the capital projects. We use our professional judgment in determining whether such costs meet the
criteria for capitalization or must be expensed as incurred. These costs are capitalized only during the period in which activities
F - 58
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
necessary to ready an asset for its intended use are in progress and such costs are incremental and identifiable to a specific activity to get the asset ready for its
intended use. These costs, excluding the direct costs of development and redevelopment and capitalized interest, for the years ended December 31, 2014, 2013,
and 2012 were $2.0 million, $2.5 million, and $2.1 million, respectively. During the years ended December 31, 2014, 2013, and 2012, total interest capitalized was
$2.9 million, $5.9 million, $3.7 million, respectively. As each home in a capital project is completed and becomes available for lease-up, the Operating Partnership
ceases capitalization on the related portion and depreciation commences over the estimated useful life.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand deposits with financial institutions and short-term, highly liquid investments. We consider all
highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The majority of the Operating Partnership’s cash and
cash equivalents are held at major commercial banks.
Restricted Cash
Restricted cash consists of escrow deposits held by lenders for real estate taxes, insurance and replacement reserves, and security deposits.
Revenue and Real Estate Sales Gain Recognition
Rental income related to leases is recognized on an accrual basis when due from residents and tenants in accordance with GAAP. Rental payments are
generally due on a monthly basis and recognized when earned. The Operating Partnership recognizes interest income, management and other fees and
incentives when earned, fixed and determinable.
For sale transactions meeting the requirements for full accrual profit recognition, we remove the related assets and liabilities from our Consolidated Balance
Sheets and record the gain or loss in the period the transaction closes. For sale transactions that do not meet the full accrual sale criteria due to our continuing
involvement, we evaluate the nature of the continuing involvement and account for the transaction under an alternate method of accounting. Unless certain
limited criteria are met, non-monetary transactions, including property exchanges, are accounted for at fair value.
Sales to entities in which we or our General Partner retain or otherwise own an interest are accounted for as partial sales. If all other requirements for
recognizing profit under the full accrual method have been satisfied and no other forms of continuing involvement are present, we recognize profit proportionate
to the outside interest in the buyer and defer the gain on the interest we or our General Partner retain. The Operating Partnership recognizes any deferred gain
when the property is sold to a third party. In transactions accounted by us as partial sales, we determine if the buyer of the majority equity interest in the venture
was provided a preference as to cash flows in either an operating or a capital waterfall. If a cash flow preference has been provided, we recognize profit only to
the extent that proceeds from the sale of the majority equity interest exceed costs related to the entire property.
Derivative Financial Instruments
The General Partner utilizes derivative financial instruments to manage interest rate risk and generally designates these financial instruments as cash flow
hedges. Derivative financial instruments associated with the Operating Partnership’s allocation of the General Partner’s debt are recorded on our Consolidated
Balance Sheets as either an asset or liability and measured quarterly at their fair value. The changes in fair value for the General Partner’s cash flow hedges
allocated to the Operating Partnership that are deemed effective are reflected in other comprehensive income and for non-designated derivative financial
instruments in earnings. The ineffective component of cash flow hedges, if any, is recorded in earnings.
Noncontrolling Interests
The noncontrolling interests represent the General Partner’s interests in certain consolidated subsidiaries and are presented in the capital section of the
Consolidated Balance Sheets since these interests are not convertible or redeemable into any other ownership interests of the Operating Partnership.
During the year ended December 31, 2013, the Operating Partnership corrected an error in the General Partner’s ownership interest in one of the
consolidated subsidiaries. The correction increased the General Partner’s ownership interest resulting in a cumulative adjustment increasing Net (income)/loss
attributable to noncontrolling interests by $3.3 million on the Consolidated Statements of Operations with a corresponding increase to Noncontrolling
interests on the Consolidated Balance
F - 59
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Sheets. Management believes the impact of the cumulative adjustment in 2013 is immaterial to the financial statements taken as a whole.
Income Taxes
The taxable income or loss of the Operating Partnership is reported on the tax returns of the partners. Accordingly, no provision has been made in the
accompanying financial statements for federal or state income taxes on income that is passed through to the partners. However, any state or local revenue,
excise or franchise taxes that result from the operating activities of the Operating Partnership are recorded at the entity level. The Operating Partnership’s tax
returns are subject to examination by federal and state taxing authorities. Net income for financial reporting purposes differs from the net income for income tax
reporting purposes primarily due to temporary differences, principally real estate depreciation and the tax deferral of certain gains on property sales. The
differences in depreciation result from differences in the book and tax basis of certain real estate assets and the differences in the methods of depreciation and
lives of the real estate assets.
The Operating Partnership follows the accounting guidance within GAAP, with respect to how uncertain tax positions should be recognized, measured,
presented, and disclosed in the financial statements. The guidance requires the accounting and disclosure of tax positions taken or expected to be taken in the
course of preparing the Operating Partnership’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the
applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year.
Management of the Operating Partnership is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which
include federal and certain states. The Operating Partnership has no examinations in progress and none are expected at this time.
Management of the Operating Partnership has reviewed all open tax years (2010 through 2013) and major jurisdictions, and concluded there is no tax
liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns.
Discontinued Operations
Under GAAP, the results of operations for those properties sold during the year or classified as held for sale at the end of the current year are classified as
discontinued operations in the current and prior periods. Further, to meet the discontinued operations criteria, the Operating Partnership or related parties will
not have any significant continuing involvement in the ownership or operation of the property after the sale or disposition. Once a property is classified as held
for sale, depreciation is no longer recorded. However, if the Operating Partnership determines that the property no longer meets the criteria for held for sale, the
Operating Partnership will recapture any unrecorded depreciation on the property. The assets and liabilities, if any, of properties classified as held for sale are
presented separately on the Consolidated Balance Sheets at lower of their carrying amount or their estimated fair value less the costs to sell the assets. (See
Note 3, Discontinued Operations and Assets Held for Sale, for further discussion).
Allocation of General and Administrative Expenses
The Operating Partnership is charged directly for general and administrative expenses it incurs. The Operating Partnership is also charged with other
general and administrative expenses that have been allocated by the General Partner to each of its subsidiaries, including the Operating Partnership, based on
each subsidiary’s pro-rata portion of UDR’s total apartment homes. (See Note 6, Related Party Transactions.)
Advertising Costs
All advertising costs are expensed as incurred and reported on the Consolidated Statements of Operations within the line item General and
administrative. During the years ended December 31, 2014, 2013, and 2012, total advertising expense from continuing and discontinued operations was $2.5
million, $2.5 million, and $2.4 million, respectively.
Comprehensive Income/(Loss)
Comprehensive income/(loss), which is defined as the change in capital during each period from transactions and other events and circumstances from
nonowner sources, including all changes in capital during a period except for those resulting from investments by or distributions to partners, is displayed in the
accompanying Consolidated Statements of Comprehensive Income/(Loss). For the years ended December 31, 2014, 2013, and 2012, the Operating Partnership’s
other comprehensive
F - 60
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
income/(loss) consisted of the gain/(loss) (effective portion) on derivative instruments that are designated as and qualify as cash flow hedges and (gain)/loss
reclassified from other comprehensive income/(loss) into earnings. The (gain)/loss reclassified from other comprehensive income/(loss) is included in Interest
expense on the Consolidated Statements of Operations. See Note 8, Derivatives and Hedging Activity, for further discussion.
Use of Estimates
The preparation of these financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the financial statements and the amounts of revenues and expenses
during the reporting periods. Actual amounts realized or paid could differ from those estimates.
Market Concentration Risk
The Operating Partnership is subject to increased exposure from economic and other competitive factors specific to those markets where it holds a
significant percentage of the carrying value of its real estate portfolio at December 31, 2014, the Operating Partnership held greater than 10% of the carrying
value of its real estate portfolio in the Orange County, California; San Francisco, California; Metropolitan D.C.; and New York, New York markets.
3. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
Effective January 1, 2014, UDR, L.P. prospectively adopted ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of
Components of an Entity, for all communities not previously sold or classified as held for sale. The standard had a material impact on the Operating
Partnership’s consolidated financial statements. As a result of adopting the ASU, during the year ended December 31, 2014, gains, net of tax, of $62.5 million
from disposition of real estate, excluding a $1.1 million gain related to the sale of land, are included in Gain/(loss) on sale of real estate owned, net of tax on the
Consolidated Statements of Operations rather than in Income/(loss) from discontinued operations, net of tax on the Consolidated Statements of Operations.
Prior to the prospective adoption of ASU 2014-08, FASB Accounting Standards Codification ("ASC") Subtopic 205-20 required, among other things, that
the primary assets and liabilities and the results of operations of the Operating Partnership’s real properties that have been sold or are held for disposition, be
classified as discontinued operations and segregated in UDR, L.P.’s Consolidated Statements of Operations and Consolidated Balance Sheets. Consequently,
the primary assets and liabilities and the net operating results of those properties sold or classified as held for disposition prior to January 1, 2014 are accounted
for as discontinued operations for all periods presented. This presentation does not have an impact on net income available to common stockholders; it only
results in the reclassification of the operating results within the Consolidated Statements of Operations for the periods ended December 31, 2014, 2013, and 2012.
During the year ended December 31, 2013, the Operating Partnership sold two communities in the Sacramento market with 914 apartment homes for gross
proceeds of $81.1 million. During the year ended December 31, 2012, the Operating Partnership sold four communities with 1,314 apartment homes. At
December 31, 2014 and 2013, the Operating Partnership had no communities that met the criteria to be classified as held for sale and included in Income/(loss)
from discontinued operations on the Consolidated Statements of Operations.
During the years ended December 31, 2014, 2013, and 2012, the Operating Partnership recognized net gain/(loss) on the sale of depreciable properties of $0,
$41.5 million, and $51.1 million, respectively, in Income/(loss) from discontinued operations on the Consolidated Statements of Operations.
F - 61
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
The following is a summary of income from discontinued operations for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands):
Rental income
Rental expenses
Property management
Real estate depreciation
Income/(loss) attributable to disposed properties
Net gain/(loss) on the sale of depreciable properties
Income/(loss) from discontinued operations
4. REAL ESTATE OWNED
Year Ended December 31,
2014
2013
2012
—
—
—
—
—
—
—
$
$
8,989
3,149
247
1,935
3,658
41,518
45,176
$
$
15,745
5,444
432
3,320
6,549
51,094
57,643
$
$
Real estate assets owned by the Operating Partnership consists of income producing operating properties, properties under development, land held for
future development, and sold or held for sale properties. At December 31, 2014, the Operating Partnership owned and consolidated 68 communities in nine states
plus the District of Columbia totaling 20,814 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of
December 31, 2014 and 2013 (dollars in thousands):
Land
Depreciable property — held and used:
December 31, 2014 December 31, 2013
1,004,447
1,008,014
$
$
Buildings, improvements, and furniture, fixtures and equipment
3,230,756
3,103,970
Under development:
Land
Construction in progress
Real estate owned
Accumulated depreciation
Real estate owned, net
—
—
4,238,770
(1,403,303 )
2,835,467
$
9,447
70,616
4,188,480
(1,241,574 )
2,946,906
$
The Operating Partnership had no acquisitions during the years ended December 31, 2014, 2013 and 2012.
During the year ended December 31, 2014, the Operating Partnership sold one community and an adjacent parcel of land in San Diego, California for gross
proceeds of $48.7 million, resulting in a $24.4 million gain and net proceeds of $47.9 million. The Operating Partnership also recorded a gain of $39.2 million in
connection with the sale of two communities, one in Tampa, Florida and one in Los Angeles, California, which was previously deferred. The total gains of $63.6
million were included in Gain/(loss) on sale of real estate owned on the Consolidated Statements of Operations.
In November 2013, the Operating Partnership distributed the development property Los Alisos to the General Partner. See Note 6, Related Party
Transactions, for more details.
F - 62
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
5. DEBT
Our secured debt instruments generally feature either monthly interest and principal or monthly interest-only payments with balloon payments due at
maturity. For purposes of classification in the following table, variable rate debt with a derivative financial instrument designated as a cash flow hedge is deemed
as fixed rate debt due to the Operating Partnership having effectively established the fixed interest rate for the underlying debt instrument. Secured debt consists
of the following as of December 31, 2014 and 2013 (dollars in thousands):
Fixed Rate Debt
Mortgage notes payable
Fannie Mae credit facilities
Total fixed rate secured debt
Variable Rate Debt
Tax-exempt secured note payable
Fannie Mae credit facilities
Total variable rate secured debt
Total secured debt
Principal Outstanding
For the Year Ended December 31, 2014
December 31,
2014
2013
Weighted Average
Interest Rate
Weighted Average
Years to Maturity
Number of
Communities
Encumbered
$
$
378,371
333,828
712,199
27,000
192,760
219,760
931,959
$
$
386,803
379,003
765,806
27,000
142,059
169,059
934,865
5.47 %
4.90 %
5.20 %
0.93 %
1.83 %
1.72 %
4.38 %
1.6
4.6
3.0
17.2
6.0
7.4
4.0
5
10
15
1
5
6
21
As of December 31, 2014, an aggregate commitment of $526.6 million of the General Partner's secured credit facilities with Fannie Mae was allocated to the
Operating Partnership based on the ownership of the assets securing the debt. The entire commitment was outstanding at December 31, 2014. The Fannie Mae
credit facilities mature at various dates from May 2017 through July 2023 and bear interest at floating and fixed rates. At December 31, 2014, $333.8 million of the
outstanding balance was fixed at a weighted average interest rate of 4.90% and the remaining balance of $192.8 million on these facilities had a weighted average
variable interest rate of 1.83%. During 2013, the General Partner reallocated an additional $13.7 million of the Fannie Mae credit facilities to the Operating
Partnership. The following is information related to the credit facilities allocated to the Operating Partnership (dollars in thousands):
Borrowings outstanding
Weighted average borrowings during the period ended
Maximum daily borrowings during the period ended
Weighted average interest rate during the period ended
Interest rate at the end of the period
$
December 31, 2014
526,588
527,592
528,659
$
December 31, 2013
521,062
522,007
523,187
4.1 %
4.0 %
4.2 %
4.1 %
The Operating Partnership may from time to time acquire properties subject to fixed rate debt instruments. In those situations, management will record the
secured debt at its estimated fair value and amortize any difference between the fair value and par to interest expense over the life of the underlying debt
instrument. The unamortized fair value adjustment of the fixed rate debt instruments on the Operating Partnership’s properties was a net premium of $6.2 million
and $10.0 million at December 31, 2014 and 2013, respectively.
Fixed Rate Debt
Mortgage notes payable. Fixed rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates
from December 2015 through May 2019 and carry interest rates ranging from 3.43% to 5.94%.
F - 63
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Secured credit facilities. At December 31, 2014, the General Partner had borrowings against its fixed rate facilities of $568.1 million, of which $333.8 million
was allocated to the Operating Partnership based on the ownership of the assets securing the debt. As of December 31, 2014, the fixed rate Fannie Mae credit
facilities allocated to the Operating Partnership had a weighted average fixed interest rate of 4.90%.
Variable Rate Debt
Tax-exempt secured note payable. The variable rate mortgage note payable that secures tax-exempt housing bond issues matures in March 2032. Interest
on this note is payable in monthly installments. The mortgage note payable has an interest rate of 0.93% as of December 31, 2014.
Secured credit facilities. At December 31, 2014, the General Partner had borrowings against its variable rate facilities of $266.2 million, of which $192.8
million was allocated to the Operating Partnership based on the ownership of the assets securing the debt. As of December 31, 2014, the variable rate borrowings
under the Fannie Mae credit facilities allocated to the Operating Partnership had a weighted average floating interest rate of 1.83%.
The aggregate maturities of the Operating Partnership’s secured debt due during each of the next five calendar years subsequent to December 31, 2014 are
as follows (dollars in thousands):
Fixed
Variable
Mortgage
Notes Payable
Secured Credit
Facilities
Tax-Exempt
Secured Notes
Payable
Secured Credit
Facilities
Total
$
$
192,637
130,951
913
968
52,902
—
378,371
$
$
366
385
15,640
111,052
123,096
83,289
333,828
$
$
—
—
—
—
—
27,000
27,000
$
$
—
—
6,566
96,974
—
89,220
192,760
$
$
193,003
131,336
23,119
208,994
175,998
199,509
931,959
2015
2016
2017
2018
2019
Thereafter
Total
Guarantor on Unsecured Debt
The Operating Partnership is a guarantor on the General Partner’s unsecured revolving credit facility, with an aggregate borrowing capacity of $900 million,
$250 million of term notes due June 2018, $100 million of term notes due June 2018, $300 million of medium-term notes due June 2018, $300 million of medium-term
notes due October 2020, $400 million of medium-term notes due January 2022, and $300 million of medium-term notes due July 2024. As of December 31, 2014,
there were $152.5 million outstanding borrowings under the unsecured credit facility. As of December 31, 2013, there was no outstanding balance under the
unsecured credit facility.
6. RELATED PARTY TRANSACTIONS
Advances (To)/From the General Partner
The Operating Partnership participates in the General Partner’s central cash management program, wherein all the Operating Partnership’s cash receipts are
remitted to the General Partner and all cash disbursements are funded by the General Partner. In addition, other miscellaneous costs such as administrative
expenses are incurred by the General Partner on behalf of the Operating Partnership. As a result of these various transactions between the Operating Partnership
and the General Partner, the Operating Partnership had net advances (to)/from the General Partner of $13.6 million and $(9.9) million at December 31, 2014 and
2013, respectively, which is reflected as an increase/(reduction) of capital on the Consolidated Balance Sheets.
Allocation of General and Administrative Expenses
The General Partner provides various general and administrative and other overhead services for the Operating Partnership including legal assistance,
acquisitions analysis, marketing and advertising, and allocates these expenses to the Operating Partnership first on the basis of direct usage when identifiable,
with the remainder allocated based on its pro-rata
F - 64
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
portion of UDR’s total apartment homes. During the years ended December 31, 2014, 2013, and 2012, the general and administrative expenses allocated to the
Operating Partnership by UDR were $27.4 million, $23.5 million, and $25.2 million, respectively, and are included in General and administrative on the
Consolidated Statements of Operations. In the opinion of management, this method of allocation reflects the level of services received by the Operating
Partnership from the General Partner.
During the years ended December 31, 2014, 2013, and 2012, the Operating Partnership incurred $12.7 million, $12.3 million, and $11.9 million, respectively, of
related party management fees related to a management agreement entered into in 2011 with wholly-owned subsidiaries of our TRS. (See further discussion in
paragraph below.) These related party management fees are initially recorded within the line item General and administrative on the Consolidated Statements of
Operations, and a portion related to management fees charged by the TRS of the General Partner is reclassified to Property management on the Consolidated
Statements of Operations. (See further discussion below.)
Management Fee
In 2011, the Operating Partnership entered into a management agreement with wholly-owned subsidiaries of our TRS. Under the management agreement,
the Operating Partnership is charged a management fee equal to 2.75% of gross rental revenues, which is reported in Property management on the Consolidated
Statements of Operations.
Guaranties by the General Partner
The Operating Partnership provided a “bottom dollar” guaranty to certain limited partners as part of their original contribution to the Operating
Partnership. The guaranty protects the tax basis of the underlying contribution and is reflected on the OP unitholder’s Schedule K-1 tax form. The guaranty was
made in the form of a note payable issued by the Operating Partnership to the General Partner at an annual interest rate of 5.18% for the years ended
December 31, 2014 and 2013, respectively. On December 31, 2013, the note was renewed at an annual interest rate of 5.18%. Interest payments are made monthly
and the renewed note is due December 31, 2023. At December 31, 2014 and 2013, the note payable due to the General Partner was $83.2 million, respectively.
In 2011, the Operating Partnership also provided a “bottom dollar” guaranty in conjunction with 1,802,239 OP Units issued in partial consideration to the
seller for the acquisition of an operating community. The guaranty was made in the form of a note payable issued by the Operating Partnership to the General
Partner at an annual interest rate of 5.34%. Interest payments are due monthly and the note matures on August 31, 2021. At December 31, 2014 and 2013, the note
payable due to the General Partner was $5.5 million.
In November 2013, the Operating Partnership distributed the development property Los Alisos to the General Partner as a capital distribution. Upon the
distribution of the property, the Operating Partnership redeemed 1,002,556 limited partnership units owned by UDR and affiliated entities and reduced its
receivable from the General Partner by $53.7 million, resulting in a net capital reduction of $77.0 million.
7. FAIR VALUE OF DERIVATIVES AND FINANCIAL INSTRUMENTS
Fair value is based on the price that would be received to sell an asset or the exit price that would be paid to transfer a liability in an orderly transaction
between market participants at the measurement date. A three-level valuation hierarchy prioritizes observable and unobservable inputs used to measure fair
value. The fair value hierarchy consists of three broad levels, which are described below:
•
•
•
Level 1 — Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
Level 2 — Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted
prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with
observable market data.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.
This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
F - 65
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
The estimated fair values of the Operating Partnership’s financial instruments either recorded or disclosed on a recurring basis as of December 31, 2014
and 2013 are summarized as follows (dollars in thousands):
Total Carrying
Amount in
Statement of
Financial Position
at
Fair Value Estimate
at
December 31, 2014 December 31, 2014
Fair Value at December 31, 2014, Using
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Description:
Derivatives- Interest rate contracts (a)
Total assets
Derivatives - Interest rate contracts (a)
Secured debt instruments - fixed rate: (b)
Mortgage notes payable
Fannie Mae credit facilities
Secured debt instruments - variable rate: (b)
Tax-exempt secured notes payable
Fannie Mae credit facilities
Total liabilities
$
$
$
$
39
39
$
$
39
39
$
$
—
—
$
$
39
39
$
$
918
$
918
$
—
$
918
$
378,371
333,828
27,000
192,760
932,877
$
391,835
355,470
27,000
192,760
967,983
$
—
—
—
—
—
$
—
—
—
—
918
$
—
—
—
391,835
355,470
27,000
192,760
967,065
Total Carrying
Amount in
Statement of
Financial Position
at
Fair Value Estimate
at
December 31, 2013 December 31, 2013
Fair Value at December 31, 2013, Using
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Description:
Derivatives- Interest rate contracts (a)
Secured debt instruments - fixed rate: (b)
Mortgage notes payable
Fannie Mae credit facilities
Secured debt instruments - variable rate: (b)
Tax-exempt secured notes payable
Fannie Mae credit facilities
Total liabilities
$
$
(a) See Note 8, Derivatives and Hedging Activity.
(b) See Note 5, Debt.
2,731
$
2,731
$
—
$
2,731
$
—
386,803
379,003
27,000
142,059
937,596
$
403,695
394,239
27,000
142,059
969,724
$
—
—
—
—
—
$
—
—
—
—
2,731
$
403,695
394,239
27,000
142,059
966,993
There were no transfers into or out of each of the levels of the fair value hierarchy.
F - 66
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Financial Instruments Carried at Fair Value
The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or
payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future
interest rates (forward curves) derived from observable market interest rate curves. The fair values of interest rate options are determined using the market
standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The
variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market
interest rate curves and volatilities.
The Operating Partnership incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective
counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk,
the Operating Partnership has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts,
and guarantees.
Although the Operating Partnership has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value
hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the
likelihood of default by itself and its counterparties. However, as of December 31, 2014 and December 31, 2013, the Operating Partnership has assessed the
significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation
adjustments are not significant to the overall valuation of its derivatives. As a result, the Operating Partnership has determined that its derivative valuations in
their entirety are classified in Level 2 of the fair value hierarchy. In conjunction with the FASB’s fair value measurement guidance, the Operating Partnership
made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis
by counterparty portfolio.
Financial Instruments Not Carried at Fair Value
At December 31, 2014, the fair values of cash and cash equivalents, restricted cash, accounts receivable, prepaids, real estate taxes payable, accrued
interest payable, security deposits and prepaid rent, distributions payable and accounts payable approximated their carrying values because of the short term
nature of these instruments. The estimated fair values of other financial instruments were determined by the Operating Partnership using available market
information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values.
Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Operating Partnership would realize on the disposition of the
financial instruments. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts.
The General Partner estimates the fair value of our debt instruments by discounting the remaining cash flows of the debt instrument at a discount rate
equal to the replacement market credit spread plus the corresponding treasury yields. Factors considered in determining a replacement market credit spread
include general market conditions, borrower specific credit spreads, time remaining to maturity, loan-to-value ratios and collateral quality (Level 3).
The Operating Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets
might be impaired and the undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book
value of those assets. Cash flow estimates are based upon historical results adjusted to reflect management’s best estimate of future market and operating
conditions and our estimated holding periods. The net book value of impaired assets is reduced to fair value. The General Partner’s estimates of fair value
represent management’s estimates based upon Level 3 inputs such as industry trends and reference to market rates and transactions.
8. DERIVATIVES AND HEDGING ACTIVITY
Risk Management Objective of Using Derivatives
The Operating Partnership is exposed to certain risks arising from both its business operations and economic conditions. The General Partner principally
manages its exposures to a wide variety of business and operational risks through management of its core business activities. The General Partner manages
economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and through the use
of derivative financial
F - 67
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
instruments. Specifically, the General Partner enters into derivative financial instruments to manage exposures that arise from business activities that result in the
receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The General Partner’s and the Operating
Partnership’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the General Partner’s known or expected
cash payments principally related to the General Partner’s borrowings.
Cash Flow Hedges of Interest Rate Risk
The General Partner’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate
movements. To accomplish this objective, the General Partner primarily uses interest rate swaps and caps as part of its interest rate risk management strategy.
Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the General Partner making
fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges
involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up front premium.
A portion of the General Partner’s interest rate derivatives have been allocated to the Operating Partnership based on the General Partner’s underlying
debt instruments allocated to the Operating Partnership. (See Note 5, Debt.)
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated other
comprehensive loss in the Consolidated Balance Sheets, and is subsequently reclassified into earnings in the period that the hedged forecasted transaction
affects earnings. During the years ended December 31, 2014, 2013, and 2012, such derivatives were used to hedge the variable cash flows associated with
existing variable-rate debt and forecasted issuances of fixed-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly
in earnings. During the years ended December 31, 2014, 2013, and 2012, the Operating Partnership recorded less than $1,000 of ineffectiveness in earnings
attributable to reset date and index mismatches between the derivative and the hedged item.
Amounts reported in Accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made
on the General Partner’s variable-rate debt that is allocated to the Operating Partnership. During the next twelve months through December 31, 2015, we estimate
that an additional $946,000 will be reclassified as an increase to interest expense.
As of December 31, 2014, the Operating Partnership had the following outstanding interest rate derivatives designated as cash flow hedges of interest rate
risk (dollars in thousands):
Interest Rate Derivative
Interest rate swaps
Interest rate caps
Number of
Instruments
1
2
Notional
$
$
46,272
166,341
Derivatives not designated as hedges are not speculative and are used to manage the Operating Partnership’s exposure to interest rate movements and
other identified risks but do not meet the strict hedge accounting requirements of GAAP. Changes in the fair value of derivatives not designated in hedging
relationships are recorded directly in earnings and resulted in losses of $3,000, $9,000, and $9,000 for the years ended December 31, 2014, 2013, and 2012,
respectively.
As of December 31, 2014, we had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships (dollars in
thousands):
Product
Interest rate caps
Number of
Instruments
Notional
1
$
89,220
F - 68
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the fair value of the Operating Partnership’s derivative financial instruments as well as their classification on the Consolidated
Balance Sheets as of December 31, 2014 and 2013 (dollars in thousands):
Derivatives designated as hedging instruments:
Interest rate products
Derivatives not designated as hedging instruments:
Interest rate products
$
$
Asset Derivatives
(included in Other assets)
Fair Value at:
Liability Derivatives
(Included in Other liabilities)
Fair Value at:
December 31,
2014
December 31,
2013
December 31,
2014
December 31,
2013
37
$
—
$
918
$
2,731
2
$
—
$
—
$
—
Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statements of Operations
The tables below present the effect of the derivative financial instruments on the Consolidated Statements of Operations for the years ended December 31,
2014, 2013, and 2012 (dollars in thousands):
Unrealized holding gain/(loss) Recognized in OCI
(Effective Portion)
Gain/(Loss) Reclassified from Accumulated OCI into
Interest expense
(Effective Portion)
Derivatives in Cash Flow Hedging
Relationships
Year ended December 31,
Year ended December 31,
2014
2013
2012
2014
2013
2012
Interest rate products
$
(285 ) $
(348 )
$(1,898)
$
(2,275 ) $
(2,652 ) $
(3,431 )
Derivatives Not Designated as Hedging Instruments
Interest rate products
Credit-risk-related Contingent Features
Gain/(Loss) Recognized in
Interest and other income/(expense), net
Year ended December 31,
2014
2013
2012
$
(3 ) $
(9 ) $
(9 )
The General Partner has agreements with some of its derivative counterparties that contain a provision where (1) if the General Partner defaults on any of
its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the General Partner could also be declared
in default on its derivative obligations; or (2) the General Partner could be declared in default on its derivative obligations if repayment of the underlying
indebtedness is accelerated by the lender due to the General Partner’s default on the indebtedness.
Certain of the General Partner’s agreements with its derivative counterparties contain provisions where if there is a change in the General Partner’s
financial condition that materially changes the General Partner’s creditworthiness in an adverse manner, the General Partner may be required to fully collateralize
its obligations under the derivative instrument. At December 31, 2014 and 2013, no cash collateral was posted or required to be posted by the General Partner or
by a counterparty.
The General Partner also has an agreement with a derivative counterparty that incorporates the loan and financial covenant provisions of the General
Partner’s indebtedness with a lender affiliate of the derivative counterparty. Failure to
F - 69
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
comply with these covenant provisions would result in the General Partner being in default on any derivative instrument obligations covered by the agreement.
As of December 31, 2014, the fair value of derivatives in a net liability position that were allocated to the Operating Partnership, which includes accrued
interest but excludes any adjustment for nonperformance risk, related to these agreements was $969,000. If the General Partner had breached any of these
provisions at December 31, 2014, it would have been required to settle its obligations under the agreements at their termination value of $969,000.
The General Partner has elected not to offset derivative positions in the consolidated financial statements. The table below presents the effect on the
Operating Partnership's financial position had the General Partner made the election to offset its derivative positions as of December 31, 2014 and December 31,
2013:
Offsetting of Derivative Assets
Gross Amounts of
Recognized Assets
Gross Amounts
Offset in the
Consolidated
Balance Sheets
—
Gross Amounts Not Offset in the
Consolidated Balance Sheets
Net Amounts of Assets
Presented in the
Consolidated Balance
Sheets (a)
Financial
Instruments
Cash Collateral
Received
Net Amount
December 31, 2014
$
39
$
$
39
$
—
$
—
$
December 31, 2013
$
—
$
—
$
—
$
—
$
—
$
(a) Amounts reconcile to the aggregate fair value of derivative assets in the “Tabular Disclosure of Fair Values of Derivative Instruments on the Balance
Sheet” located in this footnote.
Offsetting of Derivative Liabilities
Gross Amounts Not Offset in the
Consolidated Balance Sheets
Gross Amounts of
Recognized
Liabilities
December 31, 2014
$
918
Gross Amounts
Offset in the
Consolidated
Balance Sheets
—
$
Net Amounts of
Liabilities Presented in
the Consolidated Balance
Sheets (b)
Financial
Instruments
Cash Collateral
Posted
Net Amount
$
918
$
—
$
—
$
918
December 31, 2013
$
2,731
$
—
$
2,731
$
—
$
—
$
2,731
(b) Amounts reconcile to the aggregate fair value of derivative liabilities in the “Tabular Disclosure of Fair Values of Derivative Instruments on the Balance
Sheet” located in this footnote.
9. CAPITAL STRUCTURE
General Partnership Units
The General Partner has complete discretion to manage and control the operations and business of the Operating Partnership, which includes but is not
limited to the acquisition and disposition of real property, construction of buildings and making capital improvements, and the borrowing of funds from outside
lenders or UDR and its subsidiaries to finance such activities. The General Partner can generally authorize, issue, sell, redeem or purchase any OP Unit or
securities of the Operating Partnership without the approval of the limited partners. The General Partner can also approve, with regard to the issuances of OP
Units, the class or one or more series of classes, with designations, preferences, participating, optional or other
F - 70
39
—
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
special rights, powers and duties including rights, powers and duties senior to limited partnership interests without approval of any limited partners except
holders of Class A Limited Partnership Units. There were 110,883 General Partnership units outstanding at December 31, 2014 and 2013, all of which were held by
UDR.
Limited Partnership Units
At December 31, 2014 and 2013, there were 183,167,815 limited partnership units outstanding, of which 1,873,332 were Class A Limited Partnership Units.
UDR owned 174,002,342 limited partnership units or 95.0% and 173,848,891 limited partnership units or 94.9% at December 31, 2014 and 2013, respectively. The
remaining 9,165,473 or 5.0% and 9,318,924 or 5.1% OP Units outstanding were held by non-affiliated partners at December 31, 2014 and 2013, respectively, of
which 1,751,671 were Class A Limited Partnership Units.
Subject to the terms of the Operating Partnership Agreement, the limited partners have the right to require the Operating Partnership to redeem all or a
portion of the OP Units held by the limited partner at a redemption price equal to and in the form of the Cash Amount (as defined in the Operating Partnership
Agreement), provided that such OP Units have been outstanding for at least one year. UDR, as general partner of the Operating Partnership, may, in its sole
discretion, purchase the OP Units by paying to the limited partner either the Cash Amount or the REIT Share Amount (generally one share of common stock of
UDR for each OP Unit), as defined in the Operating Partnership Agreement.
The non-affiliated limited partners’ capital is adjusted to redemption value at the end of each reporting period with the corresponding offset against UDR’s
limited partner capital account based on the redemption rights noted above. The aggregate value upon redemption of the then-outstanding OP Units held by
limited partners was $282.5 million and $217.6 million as of December 31, 2014 and December 31, 2013, respectively, based on the value of UDR’s common stock
at each period end. A limited partner has no right to receive any distributions from the Operating Partnership on or after the date of redemption of its OP Units.
Class A Limited Partnership Units
Class A Limited Partnership Units have a cumulative, annual, non-compounded preferred return, which is equal to 8% based on a value of $16.61 per Class
A Limited Partnership Unit.
Holders of the Class A Limited Partnership Units exclusively possess certain voting rights. The Operating Partnership may not do the following without
approval of the holders of the Class A Limited Partnership Units: (i) increase the authorized or issued amount of Class A Limited Partnership Units, (ii) reclassify
any other partnership interest into Class A Limited Partnership Units, (iii) create, authorize or issue any obligations or security convertible into or the right to
purchase any Class of Limited Partnership units, without the approval of the holders of the Class A Limited Partnership Units, (iv) enter into a merger or
acquisition, or (v) amend or modify the Agreement of Limited Partnership of the Operating Partnership in a manner that adversely affects the relative rights,
preferences or privileges of the Class A Limited Partnership Units.
F - 71
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
The following table shows OP Units outstanding and OP Unit activity as of and for the years ended December 31, 2014, 2013, and 2012:
Ending balance at December 31, 2011
OP redemptions for cash
OP redemptions for UDR stock
Ending balance at December 31, 2012
OP Units redeemed for the distribution of real estate to the
General partner (a)
OP redemptions for UDR stock
Ending balance at December 31, 2013
OP redemptions for UDR stock
Ending balance at December 31, 2014
Class A Limited
Partner
Limited
Partners
Limited
Partner
General
Partner
UDR, Inc.
1,751,671
—
—
1,751,671
—
—
1,751,671
—
1,751,671
7,669,632
(5,646 )
(20,438 )
7,643,548
—
(76,295 )
7,567,253
(153,451 )
7,413,802
174,749,068
5,646
20,438
174,775,152
(1,002,556 )
76,295
173,848,891
153,451
174,002,342
110,883
—
—
110,883
—
—
110,883
—
110,883
Total
184,281,254
—
—
184,281,254
(1,002,556 )
—
183,278,698
—
183,278,698
(a) In November 2013, the Operating Partnership distributed the development property Los Alisos to the General Partner as a capital distribution. Upon
the distribution of the property, the Operating Partnership redeemed 1,002,556 limited partnership units owned by UDR and affiliated entities, resulting
in a capital reduction of $23.3 million.
Allocation of Profits and Losses
Profit of the Operating Partnership is allocated in the following order: (i) to the General Partner and the Limited Partners in proportion to and up to the
amount of cash distributions made during the year, and (ii) to the General Partner and Limited Partners in accordance with their percentage interests. Losses and
depreciation and amortization expenses, non-recourse liabilities are allocated to the General Partner and Limited Partners in accordance with their percentage
interests. Losses allocated to the Limited Partners are capped to the extent that such an allocation would not cause a deficit in the Limited Partners capital
account. Such losses are, therefore, allocated to the General Partner. If any Partner’s capital balance were to fall into a deficit any income and gains are allocated
to each Partner sufficient to eliminate its negative capital balance.
10. INCOME/(LOSS) PER OPERATING PARTNERSHIP UNIT
Basic income/(loss) per OP Unit is computed by dividing net income/(loss) attributable to general and limited partner unitholders by the weighted average
number of general and limited partner units (including redeemable OP Units) outstanding during the year. Diluted income/(loss) per OP Unit reflects the potential
dilution that could occur if securities or other contracts to issue OP Units were exercised or converted into OP Units or resulted in the issuance of OP Units and
then shared in the income/(loss) of the Operating Partnership. For the years ended December 31, 2014, 2013, and 2012, there were no dilutive instruments, and
therefore, diluted income/(loss) per OP Unit and basic income/(loss) per OP Unit are the same. See Note 9, Capital Structure, for further discussion on
redemption rights of OP Units.
F - 72
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
The following table sets forth the computation of basic and diluted income/(loss) per OP Unit for the periods presented (dollars in thousands, except per
OP Unit data):
Year Ended December 31,
2014
2013
2012
Numerator for income/(loss) per OP Unit — basic and diluted:
Income/(loss) from continuing operations
Gain/(loss) on sale of real estate owned
(Income)/loss from continuing operations attributable to noncontrolling interests
Income/(loss) from continuing operations attributable to OP unitholders
Income/(loss) from discontinued operations
(Income)/loss from discontinued operations attributable to noncontrolling interests
Income/(loss) from discontinued operations attributable to OP unitholders
Net income/(loss)
Net (income)/loss attributable to noncontrolling interests
Net income/(loss) attributable to OP unitholders
Denominator for income/(loss) per OP Unit — basic and diluted:
Weighted average OP Units outstanding — basic and diluted
Income/(loss) per weighted average OP Unit — basic and diluted:
Income/(loss) from continuing operations attributable to OP unitholders
Income/(loss) from discontinued operations attributable to OP unitholders
Net income/(loss) attributable to OP unitholders
11. COMMITMENTS AND CONTINGENCIES
Commitments
Ground Leases
$
$
$
$
$
$
$
$
$
33,544
63,635
(952)
96,227
$
$
32,766
—
(4,114)
28,652
$
—
—
—
$
$
45,176
$
(452)
44,724
$
97,179
$
(952)
96,227
$
$
77,942
(4,566)
73,376
$
(13,309)
—
(100)
(13,409)
57,643
(252)
57,391
44,334
(352)
43,982
183,279
184,196
184,281
0.53
—
0.53
$
$
0.16
0.24
0.40
$
$
(0.07)
0.31
0.24
The Operating Partnership owns five communities, which are subject to ground leases expiring between 2019 and 2103. Future minimum lease payments as
of December 31, 2014 are $5.3 million for each of the years ending December 31, 2014 to 2018, and a total of $313.6 million for years thereafter. For purposes of our
ground lease contracts, the Operating Partnership uses the minimum lease payment, if stated in the agreement. For ground lease agreements where there is a
reset provision based on the communities appraised value or consumer price index but does not include a specified minimum lease payment, the Operating
Partnership uses the current rent over the remainder of the lease term.
The Operating Partnership incurred $5.3 million, $5.1 million, and $5.0 million of ground rent expense for the years ended December 31, 2014, 2013, and 2012,
respectively.
Contingencies
Litigation and Legal Matters
The Operating Partnership is subject to various legal proceedings and claims arising in the ordinary course of business. The Operating Partnership cannot
determine the ultimate liability with respect to such legal proceedings and claims at this time.
F - 73
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
The General Partner believes that such liability, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on the
Operating Partnership’s financial condition, results of operations or cash flow.
12. REPORTABLE SEGMENTS
GAAP guidance requires that segment disclosures present the measure(s) used by the chief operating decision maker to decide how to allocate resources
and for purposes of assessing such segments’ performance. The Operating Partnership has the same chief operating decision maker as that of its parent, the
General Partner. The chief operating decision maker consists of several members of UDR’s executive management team who use several generally accepted
industry financial measures to assess the performance of the business for our reportable operating segments.
The Operating Partnership owns and operates multifamily apartment communities throughout the United States that generate rental and other property
related income through the leasing of apartment homes to a diverse base of tenants. The primary financial measures of the Operating Partnership’s apartment
communities are rental income and NOI, and are included in the chief operating decision maker’s assessment of UDR’s performance on a consolidated basis.
Rental income represents gross market rent less adjustments for concessions, vacancy loss and bad debt. NOI is defined as total revenues less direct property
operating expenses. 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 2.75% of property revenue to cover the regional supervision and accounting costs related to
consolidated property operations and land rent. The chief operating decision maker of the General Partner utilizes NOI as the key measure of segment profit or
loss.
The Operating Partnership’s two reportable segments are Same-Store Communities and Non-Mature/Other communities:
• Same-Store Communities represent those communities acquired, developed, and stabilized prior to January 1, 2013 and held as of December 31, 2014. A
comparison of operating results from the prior year is meaningful as these communities were owned and had stabilized occupancy and operating
expenses as of the beginning of the prior year, there is no plan to conduct substantial redevelopment activities, and the communities are not 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.
• Non-Mature Communities/Other represent 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.
Management of the General Partner evaluates the performance of each of the Operating Partnership's apartment communities on a Same-Store Community
and Non-Mature Community/Other basis, as well as individually and geographically. This is consistent with the aggregation criteria under GAAP as each of our
apartment communities generally has similar economic characteristics, facilities, services, and tenants. Therefore, the Operating Partnership’s reportable
segments have been aggregated by geography in a manner identical to that which is provided to the chief operating decision maker.
All revenues are from external customers and no single tenant or related group of tenants contributed 10% or more of the Operating Partnership’s total
revenues during the years ended December 31, 2014, 2013, and 2012.
F - 74
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
The following table details rental income and NOI from continuing and discontinued operations for the Operating Partnership’s reportable segments for
the years ended December 31, 2014, 2013, and 2012, and reconciles NOI to Net income/(loss) attributable to OP unitholders in the Consolidated Statements of
Operations (dollars in thousands):
Year Ended December 31,
2014
2013
2012
Reportable apartment home segment rental income
Same-Store Communities
West Region
Mid-Atlantic Region
Northeast Region
Southeast Region
Southwest Region
Non-Mature Communities/Other
Total segment and consolidated rental income
Reportable apartment home segment NOI
Same-Store Communities
West Region
Mid-Atlantic Region
Northeast Region
Southeast Region
Southwest Region
Non-Mature Communities/Other
Total segment and consolidated NOI
Reconciling items:
Property management
Other operating expenses
Real estate depreciation and amortization
General and administrative
Casualty-related recoveries/(charges), net
Interest expense
Gain/(loss) on sale of real estate owned, net of tax
Net income/(loss) attributable to noncontrolling interests
Net income/(loss) attributable to OP unitholders
$
$
$
$
$
$
194,105
68,822
38,087
45,224
26,580
49,816
422,634
142,388
46,639
28,930
29,815
16,821
35,720
300,313
(11,622)
(5,172)
(179,176)
(28,541)
(541)
(41,717)
63,635
(952)
$
96,227
$
F - 75
$
$
$
181,935
68,205
36,623
43,208
25,614
55,257
410,842
131,276
46,770
27,149
28,105
16,057
38,178
287,535
(11,298)
(5,728)
(181,302)
(24,808)
8,083
(36,058)
41,518
(4,566)
73,376
$
172,096
66,487
34,579
40,771
23,980
62,778
400,691
122,477
45,801
25,653
26,510
14,738
46,359
281,538
(11,019)
(5,272)
(195,051)
(26,204)
(5,518)
(45,234)
51,094
(352)
43,982
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
The following table details the assets of the Operating Partnership’s reportable segments as of December 31, 2014 and 2013 (dollars in thousands):
Reportable apartment home segment assets
Same-Store Communities
West Region
Mid-Atlantic Region
Northeast Region
Southeast Region
Southwest Region
Non-Mature Communities/Other
Total segment assets
Accumulated depreciation
Total segment assets - net book value
Reconciling items:
Cash and cash equivalents
Restricted cash
Deferred financing costs, net
Other assets
Total consolidated assets
December 31,
2014
December 31, 2013
$
$
$
1,749,494
713,093
447,269
333,428
228,996
766,490
4,238,770
(1,403,303)
2,835,467
502
13,811
4,475
24,029
2,878,284
$
1,733,144
706,447
443,483
328,150
226,252
751,004
4,188,480
(1,241,574)
2,946,906
1,897
13,526
5,848
25,064
2,993,241
Capital expenditures related to the Operating Partnership’s Same-Store Communities totaled $32.8 million and $25.8 million for the years ended
December 31, 2014 and 2013, respectively. Capital expenditures related to the Operating Partnership’s Non-Mature Communities/Other totaled $1.0 million and
$2.0 million for the years ended December 31, 2014 and 2013, respectively.
Markets included in the above geographic segments are as follows:
i.
ii.
West Region — Orange County, San Francisco, Monterey Peninsula, Los Angeles, Seattle, Inland Empire, Portland, and San Diego
Mid-Atlantic Region — Metropolitan, D.C. and Baltimore
iii.
Northeast Region — New York and Boston
iv.
Southeast Region — Nashville, Tampa, and Other Florida
v.
Southwest Region — Dallas
13. CASUALTY-RELATED (RECOVERIES)/CHARGES
In October 2012, Hurricane Sandy hit the East Coast, affecting two of the Operating Partnership’s operating communities (1,001 apartment homes) located
in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Operating Partnership
has insurance policies that provide coverage for property damage and business interruption, subject to applicable retention.
Based on the claims filed and management’s estimates, the Operating Partnership recognized a $7.1 million impairment charge for the damaged assets’ net
book value and incurred $7.0 million of repair and cleanup costs during the year ended December 31, 2012. The impairment charge and the repair and cleanup
costs incurred were reduced as of December 31, 2012 by $10.8 million of estimated insurance recovery, and were classified in Casualty-related
(recoveries)/charges, net on the Consolidated Statements of Operations. During the year ended December 31, 2013, no material adjustments to the impairment
F - 76
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 2014
charge and the repair and cleanup costs incurred were recognized. The rehabilitation of these two properties was substantially completed as of December 31,
2013.
As of December 31, 2013, the Operating Partnership had settled the Hurricane Sandy claims and received insurance proceeds in excess of the $10.8 million
estimated insurance recovery receivable related to the impairment charge and the repair and cleanup costs incurred. As a result, the Operating Partnership
recognized a Casualty-related recovery of approximately $3.3 million and a casualty gain of approximately $582,000 for the year ended December 31, 2013. Both
the recovery and casualty gain were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.
Based on the claims filed and management’s estimates, the Operating Partnership recognized $2.2 million of business interruption losses for the year ended
December 31, 2012, of which $1.8 million were related to rent concession rebates provided to residents during the period the properties were uninhabitable and
were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations, and $400,000 were related to rent that was not
contractually receivable and were classified as a reduction to Rental income on the Consolidated Statements of Operations. The Operating Partnership estimates
that it incurred an additional $2.1 million of business interruption losses for the year ended December 31, 2013. As noted, the Operating Partnership settled the
Hurricane Sandy claims as of December 31, 2013.
During the year ended December 31, 2013, the Operating Partnership received approximately $4.2 million of insurance proceeds for recovery of business
interruption losses. Of the $4.2 million of insurance proceeds received during the year ended December 31, 2013, $2.1 million related to recovery of business
interruption losses incurred in 2012 and the remaining $2.1 million related to recovery of business interruption losses incurred in 2013. The $4.2 million of
recovery was included in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.
During the year ended December 31, 2014, the Operating Partnership recorded $541,000 of casualty-related losses due to property damage incurred during
an earthquake and a storm in California, all of which are included in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.
14. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA
Selected consolidated quarterly financial data for the years ended December 31, 2014 and 2013 is summarized in the table blow (dollars in thousands,
except per share amounts):
2014
Rental income (a)
Income/(loss) from continuing operations
Income/(loss) attributable to OP unitholders
Income/(loss) attributable to OP unitholders per weighted average
OP Unit — basic and diluted (b)
2013
Rental income (a)
Income/(loss) from continuing operations
Income/(loss) from discontinued operations
Income/(loss) attributable to OP unitholders
Income/(loss) attributable to OP unitholders per weighted average
OP Unit — basic and diluted (b)
$
$
$
$
March 31,
June 30,
September 30,
December 31,
Three Months Ended
$
102,370
6,411
30,533
$
104,842
8,319
24,426
$
107,444
8,875
8,637
107,978
9,939
32,631
0.17
$
0.13
$
0.05
$
0.18
$
97,770
6,870
905
7,729
$
100,421
9,339
882
10,154
$
101,558
10,069
982
11,011
102,104
6,488
42,407
44,482
0.04
$
0.06
$
0.06
$
0.24
(a) Represents rental income from continuing operations, excluding amounts classified as discontinued operations.
(b) Quarterly income/(loss) per OP Unit amounts may not total to the annual amounts.
F - 77
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UDR, INC.
SCHEDULE III — REAL ESTATE OWNED
DECEMBER 31, 2014
(In thousands)
Initial Costs
Gross Amount at Which Carried at
Close of Period
Encumbrances
Land and
Land
Improvements
Buildings
and
Improvements
Total Initial
Acquisition
Costs
Costs of Improvements
Capitalized
Subsequent
to Acquisition Costs
Land and
Land
Improvements
Buildings &
Buildings
Improvements
Total
Carrying
Value
Accumulated
Depreciation
Date of
Construction(a)
Date
Acquired
WEST REGION
Harbor at Mesa
Verde
$
50,358
$
20,476
$
28,538
$
49,014
$
12,949
$
21,058
$
40,905
$
61,963
$
27 Seventy Five
Mesa Verde
Pacific Shores
Huntington Vista
Missions at Back
Bay
Coronado at
Newport — North
Huntington Villas
Vista Del Rey
Foxborough
Coronado South
1818 Platinum
Triangle
Beach & Ocean
The Residences at
Bella Terra
Los Alisos at
Mission Viejo
ORANGE COUNTY,
CA
2000 Post Street
Birch Creek
Highlands Of
Marin
Marina Playa
River Terrace
CitySouth
Bay Terrace
Highlands of Marin
Phase II
Edgewater
Almaden Lake
Village
388 Beale
Channel @ Mission
Bay
2000 Post III
SAN FRANCISCO,
CA
Rosebeach
Tierra Del Rey
The Westerly
Jefferson at
Marina del Rey
LOS ANGELES, CA
Crowne Pointe
Hilltop
The Hawthorne
The Kennedy
Hearthstone at
Merrill Creek
Island Square
Borgata
elements too
989elements
Lightbox
Waterscape
SEATTLE, WA
30,660
34,112
27,972
—
—
50,771
—
—
—
—
—
—
—
193,873
—
—
—
—
39,310
—
—
—
—
27,000
—
—
—
66,310
—
32,635
67,700
—
100,335
—
—
35,500
—
22,957
—
—
—
—
—
—
58,457
99,329
7,345
8,055
229
62,516
61,535
10,670
12,071
58,785
16,663
12,878
25,000
17,298
412,850
9,861
4,365
5,996
6,224
22,161
14,031
8,545
5,353
30,657
594
14,253
23,625
1,756
147,421
8,414
39,586
48,182
55,651
151,833
2,486
2,174
6,474
6,179
6,848
21,284
6,379
27,468
8,541
6,449
9,693
103,975
110,644
22,624
22,486
14,129
46,082
18,017
7,080
6,187
50,067
51,905
—
—
—
377,759
44,578
16,696
24,868
23,916
40,137
30,537
14,458
18,559
83,872
42,515
74,104
—
7,753
421,993
17,449
36,679
102,364
—
156,492
6,437
7,408
30,226
22,307
30,922
89,389
24,569
72,036
45,990
38,884
65,176
433,344
209,973
29,969
30,541
14,358
108,598
79,552
17,750
18,258
108,852
68,568
12,878
25,000
17,298
790,609
54,439
21,061
30,864
30,140
62,298
44,568
23,003
23,912
114,529
43,109
88,357
23,625
9,509
569,414
25,863
76,265
150,546
55,651
308,325
8,923
9,582
36,700
28,486
37,770
110,673
30,948
99,504
54,531
45,333
74,869
537,319
91,693
9,150
7,637
2,133
24,693
7,132
2,062
2,749
17,875
470
38,160
125,801
69,882
412,386
8,965
6,544
25,720
9,482
3,315
35,190
4,571
11,059
3,261
4,838
4,511
125,275
3,008
245,739
2,945
3,008
36,334
89,717
132,004
5,074
3,722
3,187
1,742
3,180
4,086
722
14,258
1,592
55
50
37,668
112,333
7,759
8,438
10,802
66,756
62,223
10,830
12,366
59,277
16,693
13,007
25,080
16,386
443,008
10,241
5,068
7,127
6,908
22,359
16,261
11,424
5,753
30,687
741
14,276
23,657
3,291
157,793
8,584
39,647
50,662
61,262
160,155
2,822
2,668
6,575
6,242
6,984
21,413
6,404
30,100
8,552
6,449
9,693
107,902
189,333
31,360
29,740
5,689
66,535
24,461
8,982
8,641
67,450
52,345
38,031
125,721
70,794
759,987
53,163
22,537
49,457
32,714
43,254
63,497
16,150
29,218
87,103
47,206
78,592
125,243
9,226
657,360
20,224
39,626
136,218
84,106
280,174
11,175
10,636
33,312
23,986
33,966
93,346
25,287
83,662
47,571
38,939
65,226
467,106
301,666
39,119
38,178
16,491
133,291
86,684
19,812
21,007
126,727
69,038
51,038
150,801
87,180
1,202,995
63,404
27,605
56,584
39,622
65,613
79,758
27,574
34,971
117,790
47,947
92,868
148,900
12,517
815,153
28,808
79,273
186,880
145,368
440,329
13,997
13,304
39,887
30,228
40,950
114,759
31,691
113,762
56,123
45,388
74,919
575,008
26,242
72,689
19,665
18,655
3,994
41,982
16,061
5,769
5,119
40,783
13,682
347
11,032
4,449
280,469
24,289
12,889
26,904
18,351
23,857
30,810
8,710
13,438
34,141
18,420
16,399
7,463
5,535
241,206
11,880
16,561
35,540
27,682
91,663
7,069
6,431
18,512
12,640
13,370
34,577
11,013
33,927
13,663
854
1,028
153,084
2003
Jun-03
1972/2013
2003
1970
1969
2000
1972
1969
1969
2000
2009
2014
2013
2014
1987
1968
2010
1971
2005
2012
1962
2010
2007
1999
1999
2014
2006
1970
1999
2013
2008
1987
1985
2003
2005
2000
2007
2001
2010
2006
2014
2014
Oct-04
Jun-03
Jun-03
Dec-03
Oct-04
Sep-04
Sep-04
Sep-04
Mar-05
Aug-10
Aug-11
Oct-11
Jun-04
Dec-98
Dec-98
Dec-98
Dec-98
Aug-05
Nov-05
Oct-05
Oct-07
Mar-08
Jul-08
Apr-11
Sep-10
Dec-98
Sep-04
Dec-07
Sep-10
Sep-07
Dec-98
Dec-98
Jul-05
Nov-05
May-08
Jul-08
May-07
Feb-10
Dec-09
Aug-14
Sep-14
Boronda Manor
Garden Court
—
—
1,946
888
8,982
4,188
10,928
5,076
9,398
5,304
S - 1
3,169
1,552
17,136
8,828
20,305
10,380
8,611
4,603
1979
1973
Dec-98
Dec-98
UDR, INC.
SCHEDULE III — REAL ESTATE OWNED - (Continued)
DECEMBER 31, 2014
(In thousands)
Initial Costs
Gross Amount at Which Carried at
Close of Period
Land and
Land
Improvements
Buildings
and
Improvements
Total Initial
Acquisition
Costs
Costs of Improvements
Capitalized
Subsequent
to Acquisition Costs
Land and
Land
Improvements
Buildings &
Buildings
Improvements
Total
Carrying
Value
Accumulated
Depreciation
Date of
Construction(a)
3,039
1,304
6,388
2,044
1,329
16,938
13,557
5,810
6,517
5,135
31,019
3,273
2,916
6,014
12,203
876,239
3,311
2,366
11,238
6,418
5,612
297
1,139
13,753
14,357
1,137
32,815
21,606
5,710
13,290
31,393
7,300
12,883
5,115
23,854
8,028
5,334
68,384
3,645
23,450
10,718
12,789
50,602
9,134
16,995
14,870
40,999
1,549,573
13,283
8,387
18,790
13,411
20,086
12,786
49,657
36,059
51,577
103,676
107,051
66,765
97,941
—
—
—
171,742
599,469
1,565
2,361
2,920
903
2,666
4,145
4,408
4,653
1,620
11,750
4,669
41,660
7,007
9,384
9,099
4,669
10,109
17,150
24,692
23,952
6,791
45,590
40,630
199,073
15,922
6,419
30,242
10,072
6,663
85,322
17,202
29,260
17,235
17,924
81,621
12,407
19,911
20,884
53,202
2,425,812
16,594
10,753
30,028
19,829
25,698
13,083
50,796
49,812
65,934
104,813
139,866
88,371
103,651
13,290
31,393
7,300
771,211
8,572
11,745
12,019
5,572
12,775
21,295
29,100
28,605
8,411
57,340
45,299
240,733
14,266
5,872
25,703
9,582
6,207
76,332
53,385
2,656
2,181
1,817
60,039
6,517
8,174
5,918
20,609
984,777
6,738
6,207
9,111
20,350
8,108
111,790
15,246
17,071
3,173
5,604
10,812
1,770
2,407
69,526
94,301
57,935
5,274
2,139
9,848
3,269
2,154
24,914
10,152
46,097
16,385
10,716
30,188
12,291
55,945
19,654
12,870
27,405
134,228
161,633
23,066
6,100
6,763
5,326
41,255
3,839
3,210
6,364
13,413
950,931
3,823
2,865
11,640
7,493
6,012
9,447
36,028
14,650
14,373
1,373
33,105
21,632
5,721
25,399
31,394
7,306
47,521
25,816
12,653
14,415
100,405
15,085
24,875
20,438
60,398
2,459,658
19,509
14,095
27,499
32,686
27,794
115,426
30,014
52,233
54,669
109,044
117,573
68,509
100,337
57,417
94,300
57,929
70,587
31,916
19,416
19,741
141,660
18,924
28,085
26,802
73,811
3,410,589
23,332
16,960
39,139
40,179
33,806
124,873
66,042
66,883
69,042
110,417
150,678
90,141
106,058
82,816
125,694
65,235
13,065
5,264
23,292
8,761
5,276
68,872
31,638
16,798
7,330
8,442
64,208
9,653
16,127
13,604
39,384
938,886
13,634
9,879
18,907
21,571
19,540
2,382
19,530
32,364
24,673
44,942
45,360
26,624
20,042
20,799
11,374
4,247
440,149
232,261
979,034
1,211,295
335,868
4,199
6,515
23,075
3,941
4,581
5,089
6,766
7,731
1,250
5,433
581
69,161
1,808
2,952
5,306
1,277
2,985
4,577
4,726
5,209
1,646
12,018
4,678
47,182
10,963
15,308
29,788
8,236
14,371
21,807
31,140
31,127
8,015
50,755
41,202
262,712
12,771
18,260
35,094
9,513
17,356
26,384
35,866
36,336
9,661
62,773
45,880
309,894
8,117
11,890
22,140
5,965
10,818
14,882
19,763
20,296
5,090
21,218
10,343
150,522
1974
1977
1986
1979
1975
Date
Acquired
Dec-98
Dec-98
Dec-98
Dec-98
Dec-98
2006
Oct-02
2001
1966
1965
1989
1989
1985
1990
1987
1938
2008
1988
2014
1971
2008
2004
2007
1972
Nov-02
Oct-04
Oct-04
Dec-98
Sep-04
Sep-04
Jun-96
Feb-96
May-02
Apr-02
Aug-02
Jan-08
Dec-03
Sep-05
Mar-07
Dec-07
Mar-08
2006/2007
Mar-08
2009
2010
2013
2014
1983
1984
2008
1990
1989
1990
1988
1992
1997
2003
2009
Jun-11
Mar-07
Sep-07
Jun-11
Dec-92
Dec-92
Jul-94
May-95
Dec-99
Nov-02
Mar-04
Mar-04
Mar-04
Mar-08
Aug-10
Cambridge Court
Laurel Tree
The Pointe At
Harden Ranch
The Pointe At
Northridge
The Pointe At
Westlake
MONTEREY
PENINSULA, CA
Verano at Rancho
Cucamonga Town
Square
Windemere at
Sycamore
Highland
Villas at Carlsbad
Ocean Villas
OTHER SOUTHERN,
CA
Tualatin Heights
Andover Park
Hunt Club
PORTLAND, OR
TOTAL WEST REGION
MID-ATLANTIC REGION
Dominion Middle
Ridge
Dominion Lake
Ridge
Presidential
Greens
The Whitmore
Ridgewood
DelRay Tower
Waterside Towers
Wellington Place
at Olde Town
Andover House
Sullivan Place
Circle Towers
Delancey at
Shirlington
View 14
Signal Hill
Capitol View on
14th
Domain College
Park
METROPOLITAN,
D.C.
Dominion Kings
Place
Dominion At Eden
Brook
Ellicott Grove
Dominion Constant
Freindship
Lakeside Mill
Tamar Meadow
Calvert’s Walk
Arborview
Apartments
Liriope
Apartments
20 Lambourne
Domain Brewers
Hill
BALTIMORE, MD
Encumbrances
—
—
—
—
—
—
46,471
—
—
—
46,471
—
16,818
18,323
35,141
500,587
29,820
20,372
—
—
—
—
—
32,037
—
—
70,606
—
—
—
—
31,337
184,172
14,525
—
—
8,783
12,569
—
—
—
—
30,834
—
66,711
Dominion English
Hills
Gayton Pointe
Townhomes
Waterside At
Ironbridge
Carriage Homes at
Wyndham
—
—
—
—
1,979
826
1,844
474
11,524
5,148
13,239
30,997
13,503
5,974
15,083
31,471
8,224
29,434
7,335
7,560
S - 2
2,873
3,420
2,299
3,801
18,854
31,988
20,119
35,230
21,727
35,408
22,418
39,031
11,134
25,999
13,123
23,205
1969/1976
Dec-91
2007
1987
1998
Sep-95
Sep-97
Nov-03
UDR, INC.
SCHEDULE III — REAL ESTATE OWNED - (Continued)
DECEMBER 31, 2014
(In thousands)
Initial Costs
Gross Amount at Which Carried at
Close of Period
Encumbrances
Land and
Land
Improvements
Buildings
and
Improvements
Total Initial
Acquisition
Costs
Costs of Improvements
Capitalized
Subsequent
to Acquisition Costs
Land and
Land
Improvements
Buildings &
Buildings
Improvements
Total
Carrying
Value
Accumulated
Depreciation
Date of
Construction(a)
Date
Acquired
34,567
34,567
—
—
—
—
—
—
—
—
5,123
155
1,824
617
1,089
3,685
710
710
—
60,908
5,317
4,107
3,400
8,582
21,406
6,118
6,118
—
66,031
5,472
5,931
4,017
9,671
25,091
6,828
6,828
20,954
73,507
6,374
6,369
10,120
6,123
28,986
6,143
6,143
1,975
14,368
659
2,337
1,205
1,594
5,795
1,043
1,043
18,979
125,170
11,187
9,963
12,932
14,200
48,282
11,928
11,928
20,954
139,538
11,846
12,300
14,137
15,794
54,077
12,971
12,971
2007
Dec-91
1970
Apr-88
1966
Aug-96
1972/1974
Mar-80
1987
Dec-97
1988
May-95
18,906
92,367
9,145
7,634
12,126
9,290
38,195
8,541
8,541
285,450
222,920
886,974
1,109,894
617,946
300,649
1,427,126
1,727,775
625,493
—
—
18,526
—
12,713
—
—
—
—
31,239
—
—
—
—
18,064
21,942
—
—
23,388
—
63,394
—
—
—
—
—
16,677
22,157
—
38,834
39,179
39,179
172,646
—
22,839
56,447
2,176
1,780
1,395
2,893
1,791
2,242
7,702
10,869
6,611
37,459
1,846
2,895
1,533
757
1,653
2,804
2,185
1,282
3,872
6,692
25,519
1,148
1,469
2,117
708
766
1,460
3,182
4,583
15,433
15,968
15,968
94,379
5,591
6,039
20,778
4,710
2,458
10,647
9,254
7,166
7,553
23,150
36,858
37,663
139,459
4,155
6,456
11,076
6,608
9,042
12,349
8,639
6,498
17,538
12,860
95,221
5,867
11,584
—
5,461
7,714
16,015
24,674
16,293
87,608
56,401
56,401
378,689
91,027
34,869
88,096
6,886
4,238
12,042
12,147
8,957
9,795
30,852
47,727
44,274
176,918
6,001
9,351
12,609
7,365
10,695
15,153
10,824
7,780
21,410
19,552
120,740
7,015
13,053
2,117
6,169
8,480
17,475
27,856
20,876
103,041
72,369
72,369
473,068
96,618
40,908
108,874
8,513
17,167
8,972
10,416
8,655
6,846
14,657
7,384
15,827
98,437
8,052
21,457
20,241
15,549
8,911
10,494
9,569
6,722
4,049
12,591
117,635
8,636
9,761
33,846
4,500
4,357
4,934
6,276
16,042
88,352
8,947
8,947
3,236
3,346
2,329
4,277
2,613
2,734
9,211
11,408
15,120
54,274
2,681
5,470
3,450
2,018
2,522
4,020
2,841
1,705
4,179
7,220
36,106
1,762
2,139
4,462
1,143
1,258
1,946
3,508
5,643
21,861
16,536
16,536
313,371
128,777
6,048
1,238
3,034
5,631
6,102
19,309
12,163
18,059
18,685
18,286
14,999
13,907
36,298
43,703
44,981
221,081
11,372
25,338
29,400
20,896
17,084
21,627
17,552
12,797
21,280
24,923
202,269
13,889
20,675
31,501
9,526
11,579
20,463
30,624
31,275
169,532
64,780
64,780
657,662
97,035
36,044
92,599
15,399
21,405
21,014
22,563
17,612
16,641
45,509
55,111
60,101
275,355
14,053
30,808
32,850
22,914
19,606
25,647
20,393
14,502
25,459
32,143
238,375
15,651
22,814
35,963
10,669
12,837
22,409
34,132
36,918
191,393
81,316
81,316
786,439
102,666
42,146
111,908
10,443
16,232
13,790
13,550
10,681
8,998
25,585
27,162
19,020
145,461
9,077
22,904
24,329
16,423
12,624
14,273
11,184
8,546
12,963
18,328
150,651
10,830
13,482
20,064
6,641
7,704
11,461
19,951
20,471
110,604
38,317
38,317
445,033
23,767
9,052
20,102
1972
2007
1986
2004
1985
1988
Dec-92
Sep-93
Mar-94
Dec-96
Jun-97
Dec-98
1988/1989
Jun-03
2001
2009
2004
2008
2007
2007
2006
2004
2006
2004
2000
2007
1977
1989
1999
1986
1986
1998
1998
2008
Dec-04
Jul-09
Feb-96
Mar-93
Apr-94
Jun-94
Oct-94
Oct-96
Jul-97
Oct-97
May-98
Aug-06
Nov-95
Dec-95
Dec-95
Mar-96
Mar-97
Jan-99
Jun-04
May-06
1999/2001
Dec-04
1887/1990
2007
2006
Sep-10
Sep-10
Apr-11
Legacy at
Mayland
RICHMOND, VA
Eastwind
Dominion
Waterside At
Lynnhaven
Heather Lake
Dominion
Yorkshire Downs
NORFOLK, VA
Greens At
Schumaker Pond
OTHER MID-
ATLANTIC
TOTAL MID-ATLANTIC
REGION
SOUTHEAST REGION
Summit West
The Breyley
Lakewood Place
Bay Meadow
Cambridge Woods
Sugar Mill Creek
Inlet Bay
MacAlpine Place
The Vintage Lofts
at West End
TAMPA, FL
Seabrook
The Canopy
Apartment Villas
Altamira Place
Regatta Shore
Alafaya Woods
Los Altos
Lotus Landing
Seville On The
Green
Ashton @
Waterford
Arbors at Lee
Vista
ORLANDO, FL
Legacy Hill
Hickory Run
Carrington Hills
Brookridge
Breckenridge
Colonnade
The Preserve at
Brentwood
Polo Park
NASHVILLE, TN
The Reserve and
Park at Riverbridge
OTHER FLORIDA
TOTAL SOUTHEAST
REGION
NORTHEAST REGION
Garrison Square
Ridge at Blue Hills
Inwood West
14 North
BOSTON, MA
—
79,286
10,961
43,369
51,175
265,167
62,136
308,536
4,563
14,883
S - 3
10,999
42,041
55,700
281,378
66,699
323,419
12,750
65,671
2005
Apr-11
UDR, INC.
SCHEDULE III — REAL ESTATE OWNED - (Continued)
DECEMBER 31, 2014
(In thousands)
Initial Costs
Gross Amount at Which Carried at
Close of Period
Encumbrances
Land and
Land
Improvements
Buildings
and
Improvements
Total Initial
Acquisition
Costs
Costs of Improvements
Capitalized
Subsequent
to Acquisition Costs
Land and
Land
Improvements
Buildings &
Buildings
Improvements
190,462
—
—
—
190,462
269,748
30,023
72,415
—
—
—
—
—
—
102,438
—
30,661
—
—
30,661
133,099
41,432
36,399
114,410
57,637
249,878
293,247
24,036
16,882
2,132
7,903
10,440
6,688
13,221
2,151
83,453
3,151
4,034
5,084
4,148
16,417
99,870
218,983
107,154
324,920
266,255
917,312
260,415
143,553
439,330
323,892
1,167,190
1,182,479
1,475,726
32,951
100,102
5,367
554
634
3,354
2,507
8,168
153,637
14,269
55,256
17,646
16,869
104,040
257,677
56,987
116,984
7,499
8,457
11,074
10,042
15,728
10,319
237,090
17,420
59,290
22,730
21,017
120,457
357,547
8,396
10,915
85,635
6,296
111,242
126,125
8,162
7,325
1,631
1,897
1,917
1,289
2,398
31,139
55,758
22,118
2,608
1,625
1,065
27,416
83,174
41,481
36,399
115,024
57,736
250,640
292,681
24,311
17,280
6,936
8,159
10,841
8,350
14,948
5,989
96,814
4,807
4,200
5,115
4,159
18,281
115,095
227,330
118,069
409,941
272,452
1,027,792
Total
Carrying
Value
268,811
154,468
524,965
330,188
1,278,432
1,309,170
1,601,851
40,838
107,029
2,194
2,195
2,150
2,981
3,178
35,469
196,034
34,731
57,698
19,240
17,923
129,592
325,626
65,149
124,309
9,130
10,354
12,991
11,331
18,126
41,458
292,848
39,538
61,898
24,355
22,082
147,873
440,721
Accumulated
Depreciation
Date of
Construction(a)
2005
2001
Date
Acquired
Apr-11
Aug-11
1985/2013
Jul-11
2008
Aug-11
2007
6/7/2005
1979
1970
1975
1977
1978
2008
2010
2007
2000
2004
Aug-06
Mar-08
Mar-07
May-07
May-07
Apr-07
May-07
Mar-98
Mar-02
Aug-08
Apr-12
Apr-12
42,678
20,910
72,318
54,973
190,879
256,550
21,663
44,321
1,842
1,366
1,836
2,231
2,618
24,269
100,146
20,260
21,988
3,687
3,370
49,305
149,451
1,361,530
1,586,655
4,255,392
5,842,047
2,125,393
1,788,133
6,179,242
7,967,375
2,415,413
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
24,584
24,584
884
4,325
78,085
32,938
9,963
6,773
11,862
144,830
1,624
1,407
4,943
24,377
32,351
—
—
32,351
—
—
—
1,360
—
—
788
527
93
2,768
—
4,498
7,093
7,517
19,108
—
—
19,108
24,584
24,584
884
5,685
78,085
32,938
10,751
7,300
11,955
147,598
1,624
5,905
12,036
31,894
51,459
—
—
51,459
153,048
153,048
4,734
7,965
7,962
283
1,642
880
189
23,655
—
1,516
9,537
306
11,359
4,181
4,181
15,540
24,584
24,584
804
11,244
78,085
32,938
9,963
6,773
12,084
151,891
1,104
1,380
7,793
29,920
40,197
—
—
40,197
153,048
153,048
4,814
2,406
7,962
283
2,430
1,407
60
19,362
520
6,041
13,780
2,280
22,621
4,181
4,181
26,802
177,632
177,632
5,618
13,650
86,047
33,221
12,393
8,180
12,144
171,253
1,624
7,421
21,573
32,200
62,818
4,181
4,181
66,999
—
—
614
2,023
—
—
788
527
263
4,215
553
2,232
11,676
636
15,097
47
47
15,144
$
1,361,530
$
1,788,420
$
4,277,268
$
6,065,688
$
2,317,636
$
2,004,805
$
6,378,454
$
8,383,259
$
2,434,772
10 Hanover Square
21 Chelsea
View 34
95 Wall Street
NEW YORK, NY
TOTAL NORTHEAST
REGION
SOUTHWEST REGION
THIRTY377
Legacy Village
Garden Oaks
Glenwood
Talisker of Addison
Springhaven
Clipper Pointe
Highlands of
Preston
DALLAS, TX
Barton Creek
Landing
Residences at the
Domain
Red Stone Ranch
Lakeline Villas
AUSTIN, TX
TOTAL SOUTHWEST
REGION
TOTAL OPERATING
COMMUNITIES
REAL ESTATE UNDER
DEVELOPMENT
Pier 4
TOTAL REAL ESTATE
UNDER DEVELOPMENT
LAND
7 Harcourt
Vitruvian
Pacific City
Graybar
3032 Wilshire
2919 Wilshire
Waterside
TOTAL LAND
COMMERCIAL
Hanover Village
Circle Towers
Office Bldg
Brookhaven
Shopping Center
Bellevue Plaza
retail
TOTAL COMMERCIAL
Other (b)
TOTAL CORPORATE
TOTAL COMMERCIAL
& CORPORATE
TOTAL REAL ESTATE
OWNED
(a) Date of construction or date of last major renovation.
(b) Includes unallocated accruals and capital expenditures.
The aggregate cost for federal income tax purposes was approximately $7.7 billion at December 31, 2014.
The estimated depreciable lives for all buildings in the latest Consolidated Statements of Operations are 35 to 55 years.
S - 4
UDR, INC.
SCHEDULE III — REAL ESTATE OWNED - (Continued)
DECEMBER 31, 2014
(In thousands)
3-YEAR ROLLFORWARD OF REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION
The following is a reconciliation of the carrying amount of total real estate owned at December 31, (in thousands):
Balance at beginning of the year
Real estate acquired
Capital expenditures and development
Real estate sold
Real estate contributed to joint ventures
Consolidation of joint venture assets
Retirement of fully depreciated assets
Impairment of assets, including casualty-related impairments
Real estate acquired through JV consolidation
Balance at end of the year
$
2014
8,207,977
231,225
326,461
(269,681)
(112,344)
—
—
(379)
—
8,383,259
$
$
$
The following is a reconciliation of total accumulated depreciation for real estate owned at December 31, (in thousands):
Balance at beginning of the year
Depreciation expense for the year
Accumulated depreciation on sales
Accumulated depreciation on real estate contributed to joint ventures
Accumulated depreciation on assets of consolidated joint ventures
Accumulated depreciation on retirements of fully depreciated assets
Write off of accumulated depreciation on casualty-related impaired assets
Balance at end of year
S - 5
$
$
2014
2,208,794
356,673
(126,151)
(4,228)
—
—
(316)
$
2,434,772
$
$
2013
8,055,828
—
452,057
(70,687)
(356,303)
129,437
—
(2,355)
—
8,207,977
$
$
2013
1,924,682
339,326
(34,794)
(20,662)
1,374
(1,132)
—
2,208,794
$
2012
8,074,471
141,648
422,480
(559,154)
—
—
(13,945)
(9,672)
—
8,055,828
2012
1,831,727
340,800
(233,207)
—
—
(13,945)
(693)
1,924,682
UNITED DOMINION REALTY, L.P.
SCHEDULE III — REAL ESTATE OWNED
DECEMBER 31, 2014
(In thousands)
Initial Costs
Gross Amount at Which Carried at
Close of Period
Encumbrances
Land and Land
Improvements
Building and
Improvements
Total Initial Acquisition
Costs
Cost of Improvements
Capitalized Subsequent
to Acquisition Costs
Land and Land
Improvements
Buildings & Buildings
Improvements
Total Carrying Value
Accumulated
Depreciation
Date of Construction
(a)
Date Acquired
WEST REGION
Harbor at Mesa
Verde
27 Seventy Five
Mesa Verde
Pacific Shores
Huntington Vista
Missions at Back Bay
Coronado at Newport
— North
Huntington Villas
Vista Del Rey
Coronado South
ORANGE COUNTY,
CA
2000 Post Street
Birch Creek
Highlands Of Marin
Marina Playa
River Terrace
CitySouth
Bay Terrace
Highlands of Marin
Phase II
Edgewater
Almaden Lake
Village
SAN FRANCISCO,
CA
Rosebeach
Tierra Del Rey
LOS ANGELES, CA
Crowne Pointe
Hilltop
The Kennedy
Hearthstone at
Merrill Creek
Island Square
SEATTLE, WA
Boronda Manor
Garden Court
Cambridge Court
Laurel Tree
The Pointe At
Harden Ranch
The Pointe At
Northridge
The Pointe At
Westlake
MONTEREY
PENINSULA, CA
Verano at Rancho
Cucamonga Town
Square
Villas at Carlsbad
Ocean Villas
OTHER SOUTHERN,
CA
Tualatin Heights
Andover Park
Hunt Club
PORTLAND, OR
$
50,358
$
20,476
$
28,538
$
49,014
$
12,949
$
21,058
$
40,905
$
61,963
$
30,660
34,112
27,972
—
—
50,771
—
—
193,873
—
—
—
—
39,310
—
—
—
—
27,000
66,310
—
32,635
32,635
—
—
—
22,957
—
22,957
—
—
—
—
—
—
—
—
46,471
—
—
46,471
—
16,818
18,323
35,141
99,329
7,345
8,055
229
62,516
61,535
10,670
58,785
328,940
9,861
4,365
5,996
6,224
22,161
14,031
8,545
5,353
30,657
594
107,787
8,414
39,586
48,000
2,486
2,174
6,179
6,848
21,284
38,971
1,946
888
3,039
1,304
6,388
2,044
1,329
16,938
13,557
6,517
5,135
25,209
3,273
2,916
6,014
12,203
110,644
22,624
22,486
14,129
46,082
18,017
7,080
50,067
319,667
44,578
16,696
24,868
23,916
40,137
30,537
14,458
18,559
83,872
42,515
340,136
17,449
36,679
54,128
6,437
7,408
22,307
30,922
89,389
156,463
8,982
4,188
12,883
5,115
23,854
8,028
5,334
68,384
3,645
10,718
12,789
27,152
9,134
16,995
14,870
40,999
209,973
29,969
30,541
14,358
108,598
79,552
17,750
108,852
648,607
54,439
21,061
30,864
30,140
62,298
44,568
23,003
23,912
114,529
43,109
447,923
25,863
76,265
102,128
8,923
9,582
28,486
37,770
110,673
195,434
10,928
5,076
15,922
6,419
30,242
10,072
6,663
85,322
17,202
17,235
17,924
52,361
12,407
19,911
20,884
53,202
91,693
9,150
7,637
2,133
24,693
7,132
2,062
17,875
175,324
8,965
6,544
25,720
9,482
3,315
35,190
4,571
11,059
3,261
4,838
112,945
2,945
3,008
5,953
5,074
3,722
1,742
3,180
4,086
17,804
9,377
5,304
14,266
5,872
25,703
9,582
6,207
76,311
53,385
2,181
1,817
57,383
6,517
8,174
5,918
20,609
112,333
7,759
8,438
10,802
66,756
62,223
10,830
59,277
359,476
10,241
5,068
7,127
6,908
22,359
16,261
11,424
5,753
30,687
741
116,569
8,584
39,647
48,231
2,822
2,668
6,242
6,984
21,413
40,129
3,169
1,552
5,274
2,139
9,848
3,269
2,154
189,333
31,360
29,740
5,689
66,535
24,461
8,982
67,450
464,455
53,163
22,537
49,457
32,714
43,254
63,497
16,150
29,218
87,103
47,206
444,299
20,224
39,626
59,850
11,175
10,636
23,986
33,966
93,346
173,109
17,136
8,828
24,914
10,152
46,097
16,385
10,716
301,666
39,119
38,178
16,491
133,291
86,684
19,812
126,727
823,931
63,404
27,605
56,584
39,622
65,613
79,758
27,574
34,971
117,790
47,947
560,868
28,808
79,273
108,081
13,997
13,304
30,228
40,950
114,759
213,238
20,305
10,380
30,188
12,291
55,945
19,654
12,870
27,405
134,228
161,633
23,066
6,763
5,326
35,155
3,839
3,210
6,364
13,413
47,521
12,653
14,415
74,589
15,085
24,875
20,438
60,398
70,587
19,416
19,741
109,744
18,924
28,085
26,802
73,811
26,242
72,689
19,665
18,655
3,994
41,982
16,061
5,769
40,783
245,840
24,289
12,889
26,904
18,351
23,857
30,810
8,710
13,438
34,141
18,420
211,809
11,880
16,561
28,441
7,069
6,431
12,640
13,370
34,577
74,087
8,611
4,603
13,065
5,264
23,292
8,761
5,276
68,872
31,638
7,330
8,442
47,410
9,653
16,127
13,604
39,384
2003
Jun-03
1972/2013
2003
1970
1969
2000
1972
1969
2000
1987
1968
2010
1971
2005
2012
1962
2010
2007
1999
1970
1999
1987
1985
2005
2000
2007
1979
1973
1974
1977
1986
1979
1975
2006
1966
1965
1989
1989
1985
Oct-04
Jun-03
Jun-03
Dec-03
Oct-04
Sep-04
Sep-04
Mar-05
Dec-98
Dec-98
Dec-98
Dec-98
Aug-05
Nov-05
Oct-05
Oct-07
Mar-08
Jul-08
Sep-04
Dec-07
Dec-98
Dec-98
Nov-05
May-08
Jul-08
Dec-98
Dec-98
Dec-98
Dec-98
Dec-98
Dec-98
Dec-98
Oct-02
Oct-04
Oct-04
Dec-98
Sep-04
Sep-04
TOTAL WEST REGION
397,387
578,048
1,006,929
1,584,977
466,329
640,378
1,410,928
2,051,306
715,843
S - 6
UNITED DOMINION REALTY, L.P.
SCHEDULE III — REAL ESTATE OWNED - (Continued)
DECEMBER 31, 2014
(In thousands)
Initial Costs
Gross Amount at Which Carried at
Close of Period
Encumbrances
Land and Land
Improvements
Building and
Improvements
Total Initial Acquisition
Costs
Cost of Improvements
Capitalized Subsequent
to Acquisition Costs
Land and Land
Improvements
Buildings & Buildings
Improvements
Total Carrying Value
Accumulated
Depreciation
Date of Construction
(a)
Date Acquired
—
—
—
32,037
—
—
70,606
—
102,643
12,569
—
—
—
30,834
43,403
146,046
—
—
—
—
—
—
—
—
—
—
—
39,179
39,179
39,179
56,447
—
56,447
190,462
—
190,462
246,909
30,023
72,415
102,438
—
—
102,438
931,959
6,418
5,612
297
13,753
14,357
1,137
32,815
21,606
95,995
2,666
4,145
4,408
1,620
11,750
24,589
120,584
2,242
7,702
10,869
20,813
1,148
1,469
2,117
708
766
4,583
10,791
15,968
15,968
47,572
20,778
10,961
31,739
41,432
57,637
99,069
130,808
24,036
16,882
40,918
3,151
3,151
44,069
13,411
20,086
12,786
36,059
51,577
103,676
107,051
66,765
411,411
10,109
17,150
24,692
6,791
45,590
104,332
515,743
7,553
23,150
36,858
67,561
5,867
11,584
—
5,461
7,714
16,293
46,919
56,401
56,401
19,829
25,698
13,083
49,812
65,934
104,813
139,866
88,371
507,406
12,775
21,295
29,100
8,411
57,340
128,921
636,327
9,795
30,852
47,727
88,374
7,015
13,053
2,117
6,169
8,480
20,876
57,710
72,369
72,369
20,350
8,108
111,790
17,071
3,108
5,604
10,812
1,770
178,613
4,581
5,089
6,766
1,250
5,433
23,119
201,732
6,846
14,657
7,384
28,887
8,636
9,761
33,846
4,500
4,357
16,042
77,142
8,947
8,947
170,881
218,453
114,976
88,096
51,175
139,271
218,983
266,255
485,238
624,509
32,951
100,102
133,053
14,269
14,269
147,322
108,874
62,136
171,010
260,415
323,892
584,307
755,317
56,987
116,984
173,971
17,420
17,420
191,391
3,034
4,563
7,597
8,396
6,296
14,692
22,289
8,162
7,325
15,487
22,118
22,118
37,605
7,493
6,012
9,447
14,650
14,373
1,373
33,105
21,632
108,085
2,985
4,577
4,726
1,646
12,018
25,952
134,037
2,734
9,211
11,408
23,353
1,762
2,139
4,462
1,143
1,258
5,643
16,407
16,536
16,536
56,296
19,309
10,999
30,308
41,481
57,736
99,217
129,525
24,311
17,280
41,591
4,807
4,807
46,398
32,686
27,794
115,426
52,233
54,669
109,044
117,573
68,509
577,934
14,371
21,807
31,140
8,015
50,755
126,088
704,022
13,907
36,298
43,703
93,908
13,889
20,675
31,501
9,526
11,579
31,275
118,445
64,780
64,780
277,133
92,599
55,700
148,299
227,330
272,452
499,782
648,081
40,838
107,029
147,867
34,731
34,731
182,598
40,179
33,806
124,873
66,883
69,042
110,417
150,678
90,141
686,019
17,356
26,384
35,866
9,661
62,773
152,040
838,059
16,641
45,509
55,111
117,261
15,651
22,814
35,963
10,669
12,837
36,918
134,852
81,316
81,316
333,429
111,908
66,699
178,607
268,811
330,188
598,999
777,606
65,149
124,309
189,458
39,538
39,538
228,996
2008
1988
2014
2008
2004
2007
1972
Apr-02
Aug-02
Jan-08
Sep-05
Mar-07
Dec-07
Mar-08
2006/2007
Mar-08
1989
1990
1988
1997
2003
Dec-99
Nov-02
Mar-04
Mar-04
Mar-08
1988
Dec-98
1988/1989
Jun-03
2001
Dec-04
1977
1989
1999
1986
1986
2008
Nov-95
Dec-95
Dec-95
Mar-96
Mar-97
May-06
1999/2001
Dec-04
2006
2005
2005
2008
Apr-11
Apr-11
Apr-11
Aug-11
2007
6/7/2005
Aug-06
Mar-08
2010
Mar-02
21,571
19,540
2,382
32,364
24,673
44,942
45,360
26,624
217,456
10,818
14,882
19,763
5,090
21,218
71,771
289,227
8,998
25,585
27,162
61,745
10,830
13,482
20,064
6,641
7,704
20,471
79,192
38,317
38,317
179,254
20,102
12,750
32,852
42,678
54,973
97,651
130,503
21,663
44,321
65,984
20,260
20,260
86,244
921,081
2,465,384
3,386,465
842,931
1,006,634
3,222,762
4,229,396
1,401,071
—
1,407
4,498
5,905
1,516
1,380
6,041
7,421
2,232
MID-ATLANTIC REGION
The Whitmore
Ridgewood
DelRey Tower
Wellington Place at
Olde Town
Andover House
Sullivan Place
Circle Towers
Delancey at
Shirlington
METROPOLITAN
D.C.
Lakeside Mill
Tamar Meadow
Calvert’s Walk
Liriope Apartments
20 Lambourne
BALTIMORE, MD
TOTAL MID-ATLANTIC
REGION
SOUTHEAST REGION
Sugar Mill Creek
Inlet Bay
MacAlpine Place
TAMPA, FL
Legacy Hill
Hickory Run
Carrington Hills
Brookridge
Breckenridge
Polo Park
NASHVILLE, TN
The Reserve and
Park at Riverbridge
OTHER FLORIDA
TOTAL SOUTHEAST
REGION
NORTHEAST REGION
Inwood West
14 North
BOSTON, MA
10 Hanover Square
95 Wall Street
NEW YORK, NY
TOTAL NORTHEAST
REGION
SOUTHWEST REGION
THIRTY377
Legacy Village
DALLAS, TX
Barton Creek Landing
AUSTIN, TX
TOTAL SOUTHWEST
REGION
TOTAL OPERATING
COMMUNITIES
COMMERCIAL
Circle Towers
Office Bldg
TOTAL
COMMERCIAL
Other (b)
TOTAL CORPORATE
TOTAL COMMERCIAL &
CORPORATE
TOTAL REAL
ESTATE OWNED
—
—
—
—
1,407
—
—
1,407
4,498
—
—
4,498
5,905
—
—
5,905
1,516
1,953
1,953
3,469
1,380
—
—
1,380
6,041
1,953
1,953
7,994
7,421
1,953
1,953
9,374
2,232
—
—
2,232
$
931,959
$
922,488
$
2,469,882
$
3,392,370
$
846,400
$
1,008,014
$
3,230,756
$
4,238,770
$
1,403,303
S - 7
UNITED DOMINION REALTY, L.P.
SCHEDULE III — REAL ESTATE OWNED - (Continued)
DECEMBER 31, 2014
(In thousands)
(a) Date of construction or date of last major renovation.
(b) Includes unallocated accruals and capital expenditures.
The aggregate cost for federal income tax purpose was approximately $3.6 billion at December 31, 2011.
The estimated depreciable lives for all buildings in the latest Consolidated Statements of Operations are 35 to 55 years.
S - 8
UNITED DOMINION REALTY, L.P.
SCHEDULE III — REAL ESTATE OWNED - (Continued)
DECEMBER 31, 2014
(In thousands)
3-YEAR ROLLFORWARD OF REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION
The following is a reconciliation of the carrying amount of total real estate owned at December 31, (in thousands):
Balance at beginning of the year
Capital expenditures and development
Real estate sold
Real estate transferred to the General Partner
Retirement of fully depreciated asset
Casualty-related impairment of assets
Balance at end of year
$
2014
4,188,480
91,682
(41,013)
$
—
—
(379)
$
4,238,770
$
The following is a reconciliation of total accumulated depreciation for real estate owned at December 31, (in thousands):
Balance at beginning of the year
Depreciation expense for the year
Accumulated depreciation on sales
Accumulated depreciation on retirements of fully depreciated asset
Accumulated depreciation on property transferred to the General Partner
Write off of accumulated depreciation on casualty-related impaired assets
Balance at end of year
$
2014
1,241,574
178,719
(16,674)
$
—
—
(316)
$
1,403,303
$
S - 9
$
2013
4,182,920
151,002
(70,687)
(74,755)
—
—
4,188,480
$
$
2013
1,097,133
179,404
(34,794)
—
(169)
—
1,241,574
$
2012
4,205,298
115,355
(116,166)
—
(13,945)
(7,622)
4,182,920
2012
976,358
189,362
(54,085)
(13,945)
—
(557)
1,097,133
EXHIBIT INDEX
The exhibits listed below are filed as part of this Report. References under the caption “Location” to exhibits or other filings indicate that the exhibit or
other filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that the exhibit referred to is incorporated by reference.
Management contracts and compensatory plans or arrangements filed as exhibits to this Report are identified by an asterisk. The Commission file number for
UDR, Inc.’s Exchange Act filings referenced below is 1-10524. The Commission file number for United Dominion Realty, L.P.’s Exchange Act filings is 333-
156002-01.
Exhibit
2.01
2.02
2.03
2.04
Description
Location
Partnership Interest Purchase and Exchange Agreement dated as of
September 10, 1998, by and between UDR, Inc., United Dominion Realty, L.P.,
American Apartment Communities Operating Partnership, L.P., AAC
Management LLC, Schnitzer Investment Corp., Fox Point Ltd. and James D.
Klingbeil including as an exhibit thereto the proposed form of the Third
Amended and Restated Limited Partnership Agreement of United Dominion
Realty, L.P.
Agreement of Purchase and Sale dated as of August 13, 2004, by and
between United Dominion Realty, L.P., a Delaware limited partnership, as
Buyer, and Essex The Crest, L.P., a California limited partnership, Essex El
Encanto Apartments, L.P., a California limited partnership, Essex Hunt Club
Apartments, L.P., a California limited partnership, and the other signatories
named as Sellers therein.
First Amendment to Agreement of Purchase and Sale dated as of
September 29, 2004, by and between United Dominion Realty, L.P., a Delaware
limited partnership, as Buyer, and Essex The Crest, L.P., a California limited
partnership, Essex El Encanto Apartments, L.P., a California limited
partnership, Essex Hunt Club Apartments, L.P., a California limited
partnership, and the other signatories named as Sellers therein.
Second Amendment to Agreement of Purchase and Sale dated as of October
26, 2004, by and between United Dominion Realty, L.P., a Delaware limited
partnership, as Buyer, and Essex The Crest, L.P., a California limited
partnership, Essex El Encanto Apartments, L.P., a California limited
partnership, Essex Hunt Club Apartments, L.P., a California limited
partnership, and the other signatories named as Sellers therein.
Exhibit 2(d) to UDR, Inc.’s Form S-3 Registration Statement
(Registration No. 333-64281) filed with the Commission on
September 25, 1998.
Exhibit 2.1 to UDR, Inc.’s Current Report on Form 8-K dated
September 28, 2004 and filed with the Commission on
September 29, 2004.
Exhibit 2.2 to UDR, Inc.’s Current Report on Form 8-K dated
September 29, 2004 and filed with the Commission on October 5,
2004.
Exhibit 2.3 to UDR, Inc.’s Current Report on Form 8-K/A dated
September 29, 2004 and filed with the Commission on
November 1, 2004.
Exhibit
2.05
Description
Location
Agreement of Purchase and Sale dated as of January 23, 2008, by and
between UDR, Inc., United Dominion Realty, L.P., UDR Texas Properties LLC,
UDR Western Residential, Inc., UDR South Carolina Trust, UDR Ohio
Properties, LLC, UDR of Tennessee, L.P., UDR of NC, Limited Partnership,
Heritage Communities L.P., Governour’s Square of Columbus Co.,
Fountainhead Apartments Limited Partnership, AAC Vancouver I, L.P., AAC
Funding Partnership III, AAC Funding Partnership II and DRA Fund VI LLC.
Exhibit 2.1 to UDR, Inc.’s Current Report on Form 8-K dated
January 23, 2008 and filed with the Commission on January 29,
2008.
2.06
First Amendment to Agreement of Purchase and Sale dated as of February
14, 2008, by and between UDR, Inc., United Dominion Realty, L.P., UDR
Texas Properties LLC, UDR Western Residential, Inc., UDR South Carolina
Trust, UDR Ohio Properties, LLC, UDR of Tennessee, L.P., UDR of NC,
Limited Partnership, Heritage Communities L.P., Governour’s Square of
Columbus Co., Fountainhead Apartments Limited Partnership, AAC
Vancouver I, L.P., AAC Funding Partnership III, AAC Funding Partnership II
and DRA Fund VI LLC.
Exhibit 2.2 to UDR, Inc.’s Current Report on Form 8-K/A dated
March 3, 2008 and filed with the Commission on May 2, 2008.
3.01
Articles of Restatement of UDR, Inc.
Exhibit 3.09 to UDR, Inc.’s Current Report on Form 8-K dated
July 27, 2005 and filed with the Commission on August 1, 2005.
3.02
Articles of Amendment to the Articles of Restatement of UDR, Inc. dated and
filed with the State Department of Assessments and Taxation of the State of
Maryland on March 14, 2007.
Exhibit 3.2 to UDR, Inc.’s Current Report on Form 8-K dated
March 14, 2007 and filed with the Commission on March 15,
2007.
3.03
Articles of Amendment to the Articles of Restatement of UDR, Inc. dated and
filed with the State Department of Assessments and Taxation of the State of
Maryland on August 30, 2011.
Exhibit 3.1 to UDR, Inc.’s Current Report on Form 8-K dated and
filed with the Commission on September 1, 2011.
3.04
Articles Supplementary relating to UDR, Inc.’s 6.75% Series G Cumulative
Redeemable Preferred Stock dated and filed with the State Department of
Assessments and Taxation of the State of Maryland on May 30, 2007.
Exhibit 3.4 to UDR, Inc.’s Form 8-A Registration Statement dated
and filed with the Commission on May 30, 2007.
3.05
Amended and Restated Bylaws of UDR, Inc. (as amended through May 12,
2011).
Exhibit 3.1 to UDR, Inc.’s Current Report on Form 8-K dated
May 12, 2011 and filed with the Commission on May 13, 2011.
3.06
Certificate of Limited Partnership of United Dominion Realty, L.P. dated as of
February 19, 2004.
Exhibit 3.4 to United Dominion Realty, L.P.’s Post-Effective
Amendment No. 1 to Registration Statement on Form S-3 dated
and filed with the Commission on October 15, 2010.
Exhibit
Description
Location
3.07
Amended and Restated Agreement of Limited Partnership of United
Dominion Realty, L.P. dated as of February 23, 2004.
Exhibit 10.23 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2003.
3.08
First Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P. dated as of June 24, 2005.
Exhibit 10.06 to UDR, Inc.’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2005.
3.09
Second Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P. dated as of February 23, 2006.
Exhibit 10.6 to UDR, Inc.’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2006.
3.10
Third Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P. dated as of February 2, 2007.
Exhibit 99.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2009.
3.11
Fourth Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P. dated as of December 27, 2007.
Exhibit 10.25 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2007.
3.12
Fifth Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P. dated as of March 7, 2008.
Exhibit 10.53 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2008.
3.13
Sixth Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P. dated as of December 9, 2008.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated
December 9, 2008 and filed with the Commission on December 10,
2008.
3.14
Seventh Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P., dated as of March 13, 2009.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated
March 18, 2009 and filed with the Commission on March 19, 2009.
3.15
Eighth Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P., dated as of November 17, 2010.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated and
filed with the Commission on November 18, 2010.
4.01
Form of UDR, Inc. Common Stock Certificate.
Exhibit 4.1 to UDR, Inc.’s Current Report on Form 8-K dated
March 14, 2007 and filed with the Commission on March 15, 2007.
4.02
Senior Indenture dated as of November 1, 1995, by and between UDR, Inc.
and First Union National Bank of Virginia, N.A., as trustee.
Exhibit 4(ii)(h)(1) to UDR, Inc.’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996.
4.03
Supplemental Indenture dated as of June 11, 2003, by and between UDR, Inc.
and Wachovia Bank, National Association, as trustee.
Exhibit 4.03 to UDR, Inc.’s Current Report on Form 8-K dated
June 17, 2004 and filed with the Commission on June 18, 2004.
4.04
Subordinated Indenture dated as of August 1, 1994 by and between UDR,
Inc. and Crestar Bank, as trustee.
Exhibit 4(i)(m) to UDR, Inc.’s Form S-3 Registration Statement
(Registration No. 33-64725) filed with the Commission on
November 15, 1995.
Exhibit
Description
Location
4.05
Form UDR, Inc. of Senior Debt Security.
4.06
Form of UDR, Inc. Subordinated Debt Security.
Exhibit 4(i)(n) to UDR, Inc.’s Form S-3 Registration Statement
(Registration No. 33-64725) filed with the Commission on
November 15, 1995.
Exhibit 4(i)(p) to UDR, Inc.’s Form S-3 Registration Statement
(Registration No. 33-55159) filed with the Commission on
August 19, 1994.
4.07
Form of UDR, Inc. Fixed Rate Medium-Term Note, Series A.
Exhibit 4.01 to UDR, Inc.’s Current Report on Form 8-K dated
March 20, 2007 and filed with the Commission on March 22, 2007.
4.08
Form of UDR, Inc. Floating Rate Medium-Term Note, Series A.
Exhibit 4.02 to UDR, Inc.’s Current Report on Form 8-K dated
March 20, 2007 and filed with the Commission on March 22, 2007.
4.09
UDR, Inc. 5.13% Medium-Term Notes due January 2014, issued October 3,
2003, January 15, 2004 and March 18, 2004
Exhibit 4.2 to UDR, Inc.’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2003, and Exhibits 4.1 and 4.2 to
UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2004.
4.10
UDR, Inc. 5.25% Medium-Term Note due January 2015, issued November 1,
2004.
Exhibit 4.21 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2004.
4.11
UDR, Inc. 5.25% Medium-Term Note due January 2015, issued February 14,
2005.
Exhibit 4.22 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2004.
4.12
4.13
UDR, Inc. 5.25% Medium-Term Note due January 2015, issued March 8, 2005.
Exhibit 4.23 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2004.
UDR, Inc. 5.25% Medium-Term Note due January 2015, issued May 3, 2005.
Exhibit 4.3 to UDR, Inc.’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005.
4.14
UDR, Inc. 5.25% Medium-Term Note due January 2016, issued September 7,
2005.
Exhibit 4.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2005.
4.15
UDR, Inc. 5.50% Medium-Term Note, Series A due April 2014, issued March
27, 2007.
Exhibit 4.5 to UDR, Inc.’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2007.
4.16
UDR, Inc. 4.25% Medium-Term Note, Series A due June 2018, issued May 23,
2011.
Exhibit 4.16 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2013.
4.17
UDR, Inc. 4.625% Medium-Term Note, Series A due January 2022, issued
January 10, 2012.
Exhibit 4.17 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2013.
Exhibit
Description
Location
4.18
UDR, Inc. 3.70% Medium-Term Note, Series A due October 2020, issued
September 26, 2013.
Exhibit 4.18 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2013.
4.19
Indenture dated as of April 1, 1994, by and between UDR, Inc. and
Nationsbank of Virginia, N.A., as trustee.
Exhibit 4(ii)(f)(1) to UDR, Inc.’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 1994.
4.20
Supplemental Indenture dated as of August 20, 2009, by and between UDR,
Inc. and U.S. Bank National Association, as trustee, to UDR, Inc.’s Indenture
dated as of April 1, 1994.
Exhibit 4.1 to UDR, Inc.’s Current Report on Form 8-K dated
August 20, 2009 and filed with the Commission on August 21,
2009.
4.21
Guaranty of United Dominion Realty, L.P. with respect to UDR, Inc.’s
Indenture dated as of November 1, 1995.
Exhibit 99.1 to UDR, Inc.’s Current Report on Form 8-K dated and
filed with the Commission on September 30, 2010.
4.22
Guaranty of United Dominion Realty, L.P. with respect to UDR, Inc.’s
Indenture dated as of October 12, 2006.
Exhibit 99.2 to UDR, Inc.’s Current Report on Form 8-K dated and
filed with the Commission on September 30, 2010.
4.23
First Supplemental Indenture among UDR, Inc., United Dominion Realty, L.P.
and U.S. Bank National Association, as Trustee, dated as of May 3, 2011,
relating to UDR, Inc.’s Medium-Term Notes, Series A, due Nine Months or
More from Date of Issue.
Exhibit 4.1 to UDR, Inc.’s Current Report on Form 8-K filed with
the Commission on May 4, 2011.
4.24
UDR, Inc. 3.75% Medium-Term Note, Series A due October 2024, issued June
26, 2014.
Exhibit 4.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2014.
10.01*
UDR, Inc. 1999 Long-Term Incentive Plan (as amended and restated February
6, 2014).
Exhibit 10.1 to UDR, Inc.'s Current Report on Form 8-K filed with
the Commission on May 28, 2014.
10.02*
Form of UDR, Inc. Restricted Stock Award Agreement under the 1999 Long-
Term Incentive Plan.
Exhibit 10.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2013.
10.03*
Form of UDR, Inc. Restricted Stock Award Agreement for awards outside of
the 1999 Long-Term Incentive Plan.
Exhibit 99.3 to UDR, Inc.’s Current Report on Form 8-K dated
March 19, 2007 and filed with the Commission on March 19, 2007.
10.04*
Form of UDR, Inc. Notice of Performance Contingent Restricted Stock Award.
Exhibit 10.2 to UDR, Inc.’s Current Report on Form 8-K dated
May 2, 2006 and filed with the Commission on May 8, 2006.
10.05*
Description of UDR, Inc. Shareholder Value Plan.
Exhibit 10(x) to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 1999.
10.06*
Description of UDR, Inc. Executive Deferral Plan.
Exhibit 10(xi) to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 1999.
Exhibit
Description
Location
10.07*
Form of UDR, Inc. Indemnification Agreement.
Exhibit 10.3 to UDR, Inc.’s Current Report on Form 8-K dated May 2,
2006 and filed with the Commission on May 8, 2006.
10.08
Amended and Restated Master Credit Facility Agreement dated as of June
24, 2002 by and between UDR, Inc. and Green Park Financial Limited
Partnership, as amended through February 14, 2007.
Exhibit 10.41 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2006.
10.09
Limited Liability Company Agreement of UDR Texas Ventures LLC, a
Delaware limited liability company, dated as of November 5, 2007.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated
November 5, 2007 and filed with the Commission on November 9,
2007.
10.10*
Letter Agreement dated as of February 18, 2008, by and between UDR, Inc.
and Warren L. Troupe.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated
February 22, 2008 and filed with the Commission on February 27,
2008.
10.11*
Termination of Letter Agreement dated as of February 18, 2008 by and
between UDR, Inc. and Warren L. Troupe, dated as of February 7, 2013
and effective as of December 31, 2012.
Exhibit 10.44 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2012.
10.12*
Indemnification Agreement dated as of March 3, 2008, by and between
UDR, Inc. and Warren L. Troupe.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated
February 22, 2008 and filed with the Commission on February 27,
2008.
10.13*
Letter Agreement, dated December 12, 2012, by and between UDR, Inc.
and Thomas M. Herzog.
Exhibit 10.43 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2012.
10.14
Subordination Agreement dated as of April 16, 1998, by and between
UDR, Inc. and United Dominion Realty, L.P.
Exhibit 10(vi)(a) to UDR, Inc.’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998.
10.15
Term Loan Agreement dated as of December 14, 2009, by and among UDR,
Inc., Regions Capital Markets, PNC Capital Markets LLC, Regions Bank,
PNC Bank, National Association, U.S. Bank National Association and the
other signatories thereto.
Exhibit 99.1 to UDR, Inc.’s Current Report on Form 8-K dated
December 14, 2009 and filed with the Commission on December 17,
2009.
10.16
Amendment to the UDR, Inc. $250 Million Term Loan Agreement.
Exhibit 10.2 to UDR, Inc.’s Current Report on Form 8-K dated June 6,
2013 and filed with the Commission on June 10, 2013.
10.17
Amendment to the UDR, Inc. $100 Million Term Loan Agreement.
Exhibit 10.3 to UDR, Inc.’s Current Report on Form 8-K dated June 6,
2013 and filed with the Commission on June 10, 2013.
10.18
Underwriting Agreement among UDR, Inc., Merrill Lynch, Pierce, Fenner
& Smith Incorporated and J.P. Morgan Securities LLC, as Representatives
of the several underwriters, dated June 4, 2012.
Exhibit 1.1 to UDR, Inc.’s Current Report on Form 8-K dated and
filed with the Commission on June 4, 2012.
Exhibit
10.19
10.20
10.21
Description
Location
ATM Equity OfferingSM Sales Agreement among UDR, Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Credit
Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and Morgan Stanley
& Co. LLC, dated April 4, 2012.
Exhibit 1.1 to UDR, Inc.’s Current Report on Form 8-K dated
April 4, 2012 and filed with the SEC on April 5, 2012.
Third Amended and Restated Distribution Agreement among UDR, Inc.,
United Dominion Realty, L.P., as Guarantor, Citigroup Global Markets Inc.,
Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated and
Wells Fargo Securities, LLC, as Agents, dated September 1, 2011, with respect
to the issue and sale by UDR, Inc. of its Medium-Term Notes, Series A Due
Nine Months or More From Date of Issue.
Credit Agreement dated as of October 25, 2011 (the “Credit Agreement”) by
and among UDR, Inc., as Borrower, The Financial Institutions party Hereto
and Their Assignees under Section 12.5, as Lenders, Wells Fargo Bank,
National Association, as Administrative Agent, Wells Fargo Securities, LLC
and J.P. Morgan Securities LLC, as Joint Lead Arrangers and Joint Lead
Bookrunners, JPMorgan Chase Bank, N.A., as Syndication Agent, and Bank
of America, N.A., PNC Bank, National Association and US Bank National
Association, as Documentation Agents.
Exhibit 1.2 to UDR, Inc.’s Current Report on Form 8-K dated and
filed with the Commission on September 1, 2011.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated and
filed with the Commission on October 26, 2011.
10.22
First Amendment to the Credit Agreement, dated as of March 1, 2013.
Exhibit 10.22 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2013.
10.23
Second Amendment to the Credit Agreement, dated as of June 6, 2013.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated
June 6, 2013 and filed with the Commission on June 10, 2013.
10.24
Amendment to the UDR, Inc. Term Loan Agreement.
Exhibit 10.24 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2013.
10.25
Aircraft Time Sharing Agreement dated as of December 15, 2011, by and
between UDR, Inc. and Thomas W. Toomey.
Exhibit 10.42 to UDR, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2011.
10.26
Aircraft Time Sharing Agreement dated as of December 15, 2011, by and
between UDR, Inc. and Warren L. Troupe.
Exhibit 10.2 to UDR, Inc.’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2012.
10.27
Amendment No.1, dated July 29, 2014, to the ATM Equity OfferingSM Sales
Agreement among UDR, Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Citigroup Global Markets Inc., Credit Suisse Securities (USA)
LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, dated April
4, 2012.
Exhibit 1.1 to UDR, Inc.’s Current Report on Form 8-K filed with
the Commission on July 31, 2014.
Exhibit
10.28
Description
Location
Amendment No. 1, dated July 29, 2014, to the Third Amended and Restated
Distribution Agreement among UDR, Inc., United Dominion Realty, L.P., as
Guarantor, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., J.P.
Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated and Wells Fargo Securities, LLC, as
Agents, dated September 1, 2011, with respect to the issue and sale by UDR,
Inc. of its Medium-Term Notes, Series A Due Nine Months or More From
Date of Issue.
Exhibit 1.2 to UDR, Inc.’s Current Report on Form 8-K filed with
the Commission on July 31, 2014.
12.1
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends of UDR, Inc.
Filed herewith.
12.2
Computation of Ratio of Earnings to Fixed Charges of United Dominion
Realty, L.P.
Filed herewith.
21 Subsidiaries of UDR, Inc. and United Dominion Realty, L.P.
Filed herewith.
23.1 Consent of Independent Registered Public Accounting Firm for UDR, Inc.
Filed herewith.
23.2
Consent of Independent Registered Public Accounting Firm for United
Dominion Realty, L.P.
Filed herewith.
31.1 Rule 13a-14(a) Certification of the Chief Executive Officer of UDR, Inc.
Filed herewith.
31.2 Rule 13a-14(a) Certification of the Chief Financial Officer of UDR, Inc.
Filed herewith.
31.3
Rule 13a-14(a) Certification of the Chief Executive Officer of United Dominion
Realty, L.P.
Filed herewith.
31.4
Rule 13a-14(a) Certification of the Chief Financial Officer of United Dominion
Realty, L.P.
Filed herewith.
32.1 Section 1350 Certification of the Chief Executive Officer of UDR, Inc.
Filed herewith.
32.2 Section 1350 Certification of the Chief Financial Officer of UDR, Inc.
Filed herewith.
32.3
Section 1350 Certification of the Chief Executive Officer of United Dominion
Realty, L.P.
Filed herewith.
32.4
Section 1350 Certification of the Chief Financial Officer of United Dominion
Realty, L.P.
Filed herewith.
Exhibit
101
Description
Location
Filed herewith.
XBRL (Extensible Business Reporting Language). The following materials
from this Annual Report on Form 10-K for the period ended December 31,
2014, formatted in XBRL: (i) consolidated balance sheets of UDR, Inc., (ii)
consolidated statements of operations of UDR, Inc., (iii) consolidated
statements of comprehensive income/(loss) of UDR, Inc., (iv) consolidated
statements of changes in equity of UDR, Inc., (v) consolidated statements of
cash flows of UDR, Inc., (vi) notes to consolidated financial statements of
UDR, Inc., (vii) consolidated balance sheets of United Dominion Realty, L.P.,
(viii) consolidated statements of operations of United Dominion Realty, L.P.,
(ix) consolidated statements of comprehensive income/(loss) of United
Dominion Realty, L.P.; (x) consolidated statements of changes in capital of
United Dominion Realty, L.P., (xi) consolidated statements of cash flows of
United Dominion Realty, L.P., (xi) notes to consolidated financial statements
of United Dominion Realty, L.P.
* Management Contract or Compensatory Plan or Arrangement
(Back To Top)
Section 2: EX-12.1 (EXHIBIT 12.1)
EXHIBIT 12.1
UDR, Inc.
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
(Dollars in thousands)
2014
2013
2012
2011
2010
Year Ended December 31,
Earnings:
Income/(loss) from continuing operations
Add (from continuing operations):
Interest on indebtedness (a)
Portion of rents representative of the interest factor
Amortization of capitalized interest
Total earnings
Fixed charges and preferred stock dividends (from continuing
operations):
Interest on indebtedness (a)
Interest capitalized
Portion of rents representative of the interest factor
Fixed charges
$
16,260
130,262
2,224
3,711
152,457
130,262
20,249
2,224
152,735
$
$
$
$
$
$
$
2,340
$
(46,305)
$
(126,869)
$
(121,117)
125,905
2,163
3,374
133,782
125,905
29,384
2,163
157,452
139,069
2,073
2,883
97,720
139,069
26,368
2,073
167,510
$
$
$
151,764
2,039
2,187
29,121
151,764
12,979
2,039
166,782
$
$
$
142,254
1,969
1,962
25,068
142,254
12,505
1,969
156,728
$
$
$
Add:
Preferred stock dividends
Premium/(discount) on preferred stock redemption or
repurchase, net
Combined fixed charges and preferred stock dividends
$
$
3,724
—
156,459
$
$
3,724
—
161,176
$
$
6,010
2,791
176,311
$
$
9,311
175
176,268
$
$
9,488
(25)
166,191
Ratio of earnings to fixed charges
Ratio of earnings to combined fixed charges and preferred
stock dividends
—
(b)
—
(c)
— (b)
— (c)
—
(b)
—
(c)
— (b)
— (c)
—
(b)
—
(c)
(a) Includes interest expense of consolidated subsidiaries, amortization of deferred loan costs, realized losses related to hedging activities and amortization of
premiums and discounts related to indebtedness.
(b) The ratio was less than 1:1 for the years ended December 31, 2014, 2013, 2012, 2011, and 2010 as earnings were inadequate to cover fixed charges by
deficiencies of approximately $0.3 million, $23.7 million, $69.8 million, $137.7 million, and $131.7 million, respectively.
(c) The ratio was less than 1:1 for the years ended December 31, 2014, 2013, 2012, 2011, and 2010 as earnings were inadequate to cover combined fixed
charges and preferred stock dividends by deficiencies of approximately $4.0 million, $27.4 million, $78.6 million, $147.1 million and $141.1 million,
respectively.
(Back To Top)
Section 3: EX-12.2 (EXHIBIT 12.2)
EXHIBIT 12.2
United Dominion Realty, L.P.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
Earnings:
Income/(loss) from continuing operations
Add from continuing operations:
Interest on indebtedness (a)
Portion of rents representative of the interest factor
Amortization of capitalized interest
Total earnings
Fixed charges from continuing operations:
Interest on indebtedness (a)
Interest capitalized
Portion of rents representative of the interest factor
Fixed charges
2014
2013
2012
2011
2010
Year Ended December 31,
$
33,544
$
32,766
$
(13,309)
$
(40,744)
$
(30,937)
41,717
1,751
725
77,737
41,717
2,890
1,751
46,358
$
$
$
36,058
1,705
580
71,109
36,058
5,870
1,705
43,633
$
$
$
45,234
1,665
398
33,988
45,234
3,679
1,665
50,578
$
$
$
52,817
1,627
291
13,991
52,817
1,752
1,627
56,196
$
$
$
49,140
1,564
258
20,025
49,140
1,340
1,564
52,044
$
$
$
Ratio of earnings to fixed charges
1.68
1.63
—
(b)
— (b)
—
(b)
(a) Includes interest expense of consolidated subsidiaries, amortization of deferred loan costs, realized losses related to hedging activities and amortization of
premiums and discounts related to indebtedness.
(b) The ratio was less than 1:1 for the years ended December 31, 2012, 2011, and 2010 as earnings were inadequate to cover fixed charges by deficiencies of
approximately $16.6 million, $42.2 million, and $32.0 million, respectively.
(Back To Top)
Section 4: EX-21 (EXHIBIT 21)
The Company has the following subsidiaries. Joint Venture entities are shown with an asterisk. United Dominion Realty, L.P. is a limited partnership with
outside limited partners holding minimal percentage interests. The Company owns general and
limited partnership interests in United Dominion Realty, L.P. constituting approximately 95% of the aggregate partnership
interest. Entities marked with double asterisks are those entities in which United Dominion Realty, L.P. is either a member or a
partner. All other entities are wholly-owned.
EXHIBIT 21
Subsidiary
1001 Properties, LLC*
101 Colorado High-Rise, LP*
101 Colorado Master Condominium Association, Inc.*
1020 Tower, GP LLC*
1020 Tower, LP*
13th And Market Properties LLC*
1745 LLC
20 Lambourne LLC
24 Hundred Properties LLC*
2000 Post Owners Association
399 Fremont LLC*
6104 Hollywood, LLC*
AAC Funding II, Inc.
AAC Funding III LLC**
AAC Funding IV LLC**
AAC Funding IV, Inc.
AAC Funding Partnership II**
AAC Seattle I, Inc.
AAC/FSC Crown Pointe Investors, LLC
AAC/FSC Hilltop Investors, LLC
AAC/FSC Seattle Properties, LLC**
Acoma High-Rise, LP*
Andover House LLC
Andover Member 1 LLC
Andover Member 2 LLC
Apartments on Chestnut Limited Partnership*
Ashton at Dublin Station, LLC*
Ashwood Commons, L.L.C.
Ashwood Commons North LLC
ASR Investments Corporation
Bella Terra Villas LLC
Bellevue Plaza Development LLC
Block R Master Condominium Association, Inc*
CMP-1, LLC
Calvert’s Walk LLC
Cambridge Woods LLC
Cedar Street High-Rise, L.P.*
Circle Towers LLC**
State of Incorporation or Organization
Delaware
Delaware
Texas
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
California
Delaware
Delaware
Delaware
Washington
Washington
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Washington
Washington
Maryland
Delaware
Delaware
Texas
Delaware
Delaware
Delaware
Delaware
Delaware
Subsidiary
Coastal Monterey Properties LLC**
College Park Holding LLC
Columbus Square 775 LLC*
Columbus Square 795 LLC*
Columbus Square 801 LLC*
Columbus Square 805 LLC*
Columbus Square 808 LLC*
Consolidated-Hampton, LLC
Coronado South Apartments, L.P**
DCO 2400 14th Street LLC
DCO 2919 Wilshire LLC
DCO 3032 Wilshire LLC
DCO 3033 Wilshire LLC*
DCO Addison at Brookhaven LP
DCO Arbors at Lee Vista LLC
DCO Beach Walk LLC
DCO Borgata LLC
DCO Brookhaven Center LP
DCO Caroline Development LLC
DCO Clipper Pointe LP
DCO College Park LLC
DCO/CWP 2919 Wilshire LLC*
DCO/CWP 3032 Wilshire LLC*
DCO Fiori LLC
DCO Garden Oaks LP
DCO Glenwood Apartments LP
DCO Highlands LLC
DCO Market LLC
DCO Mission Bay LP
DCO Option 2 LLC
DCO Pacific City LLC
DCO Pine Avenue LP
DCO Realty, Inc.
DCO Realty LP LLC
DCO Savoye LLC
DCO Savoye 2 LLC
DCO Springhaven LP
DCO Talisker LP
Domain Mountain View LLC
Dominion Constant Friendship LLC
Dominion Eden Brook LLC
Dominion Kings Place LLC
Domus SPE General Partner, LLC*
State of Incorporation or Organization
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Maryland
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Subsidiary
Domus SPE General Partner, LLC*
Eastern Residential, Inc.
Easton Partners I, LP*
FMP Member, Inc.
Fiori LLC*
Foxborough Lodge Limited Partnership*
Garrison Harcourt Square LLC
Governour’s Square of Columbus Co. Ltd**
HPI 2161 Sutter LP
HPI Option 2 LLC
Hanover Square SPE LLC**
Harding Park LP LLC
Hawthorne Apartments LLC
Heritage Communities LLC
Icon Tower, LP*
Inlet Bay at Gateway, LLC
Inwood Development LLC**
Jamestown of St. Matthews Limited Partnership**
Jefferson at Marina del Rey, L.P.
K/UDR Venture LLC*
Kelvin and Jamboree Properties, LLC*
Kelvin and Jamboree LLC
L.A. Southpark High Rise, LP*
La Jolla Wilshire, LLC*
Lakeside Mill LLC
Lenox Farms Limited Partnership*
Lightbox LLC
Lincoln TC II, L.P.
LJW LLC
Lodge at Ames Pond Limited Partnership*
Lofts at Charles River Landing, LLC*
LPC Millenia Place Apartments LLC
MacAlpine Place Apartment Partners, Ltd**
Management Company Services, Inc.
Ninety Five Wall Street LLC**
Northbay Properties II, L.P**
Olive Way High-Rise LP*
Pacific Los Alisos LLC
Parker’s Landing Condominiums LLC
Parker’s Landing Townhomes LLC
Pier 4 LLC
Polo Park Apartments LLC**
Portico Properties, LLC*
State of Incorporation or Organization
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Ohio
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Ohio
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Florida
Delaware
Delaware
California
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Subsidiary
RE3, Inc.
Rancho Cucamonga Town Square Owners Association*
Savoye LLC*
Saveoye 2 LLC*
Strata Properties, LLC*
Tennessee Colonnade LLC**
THC/UDR Domain College Park LLC
The Commons of Columbia, Inc.
The Domain Condominium Association, Inc.*
Thomas Circle Properties LLC*
Town Square Commons, LLC
Towson Holdings, LLC*
Towson Promenade, LLC*
Trilon Townhouses, LLC
TSTW LLC
UDR 10 Hanover LLC**
UDR 1818 Platinum LLC
UDR Altamira Place LLC
UDR Arborview Associates LLC
UDR Aspen Creek, LLC
UDR California GP, LLC**
UDR California GP II, LLC
UDR California Properties, LLC
UDR Calvert, LLC**
UDR Calvert’s Walk Associates Limited Partnership
UDR Calverts Walk GP, LLC
UDR Carlsbad Apartments, L.P**
UDR Carriage Homes, LLC
UDR Chelsea LLC
UDR Crane Brook LLC**
UDR Developers, Inc.
UDR Domain Brewers Hill LLC
UDR EAS LLC
UDR Foxglove Associates L.L.C**
UDR Garrison Square LLC
UDR Harbor Greens, L.P**
UDR Holdings, LLC**
UDR Huntington Vista, L.P**
UDR Inwood LLC**
UDR, Inc.
UDR/K Venture Member LLC
UDR Lakeline Villas LLC
UDR Lakeside Mill, LLC**
UDR Legacy at Mayland LLC
State of Incorporation or Organization
Delaware
California
Delaware
Delaware
Delaware
Delaware
Delaware
Virginia
Texas
Delaware
District of Columbia
Delaware
Delaware
District of Columbia
Delaware
Delaware
Delaware
Delaware
Delaware
Virginia
Delaware
Delaware
Virginia
Delaware
Maryland
Delaware
Delaware
Delaware
Delaware
Delaware
Virginia
Delaware
Delaware
Maryland
Delaware
Delaware
Virginia
Delaware
Delaware
Maryland
Delaware
Delaware
Virginia
Delaware
Subsidiary
UDR Lincoln at Towne Square LLC*
UDR Lincoln at Towne Square II LLC*
UDR Marina Pointe LLC
UDR Maryland Properties, LLC**
UDR/MetLife G.P. LLC*
UDR/MetLife GP II LLC*
UDR/MetLife Master Limited Partnership*
UDR/MetLife Master Limited Partnership II*
UDR/ML Venture LLC
UDR/ML Venture 2 LLC
UDR Midlands Acquisition, LLC**
UDR Newport Beach North, L.P**
UDR Ocean Villa Apartments, L.P**
UDR of Tennessee, L.P**
UDR Okeeheelee LLC*
UDR Pinebrook, L.P**
UDR Presidential Greens, L.L.C.
UDR Rancho Cucamonga, L.P.
UDR Red Stone Ranch LLC
UDR Ridgewood (II) Garden, LLC**
UDR Ridge at Blue Hills LLC
UDR River Terrace LLC
UDR Rivergate LLC
UDR Stone Canyon LLC*
UDR Texas Properties LLC
UDR Texas Ventures LLC*
UDR The Bradford LLC*
UDR The Cliffs LLC*
UDR The Legend at Park Ten LLC*
UDR The Mandolin LLC*
UDR The Meridian LLC*
UDR Towers By The Bay LLC
UDR TX Fund LLC
UDR Villa Venetia Apartments, L.P**
UDR Virginia Properties, LLC
UDR Wellington Place LLC
UDR Windjammer, L.P.**
UDR Woodland Apartments II, L.P.
UDR Woodland GP, LLC
UDRLP EAS LLC**
UDRT of Delaware 4 LLC**
United Dominion Realty, L.P.
View 14 Investments LLC
VPDEV 1 LLC*
State of Incorporation or Organization
Delaware
Delaware
Delaware
Virginia
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Virginia
Delaware
Delaware
Delaware
Delaware
Delaware
Virginia
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Virginia
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Subsidiary
VPDEV 2 LLC*
Washington Vue, LP*
Waterscape Village LLC
Waterside Towers, L.L.C.
WCH LLC
West El Camino Real, LLC*
Western Residential, Inc.
Wilshire Crescent Heights, LLC*
Windemere at Sycamore Highlands, LLC
Winterland San Francisco Partners**
(Back To Top)
Section 5: EX-23.1 (EXHIBIT 23.1)
State of Incorporation or Organization
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Virginia
Delaware
Delaware
California
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements of UDR, Inc. and in the related Prospectuses of our reports dated
February 24, 2015, with respect to the consolidated financial statements and schedule of UDR, Inc., and the effectiveness of internal control over financial
reporting of UDR, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2014:
EXHIBIT 23.1
Registration
Statement Number
Description
Form S-3, pertaining to the registration of 11,000,000 shares of Common Stock, including rights to purchase Series C Junior
Participating Redeemable Preferred Stock, issuable under the Company’s Dividend Reinvestment and Stock Purchase Plan.
Form S-3, Shelf Registration Statement, pertaining to the registration of an indeterminate amount of Common Stock, Preferred
Stock, Depositary Shares, Debt Securities, Guarantees of Debt Securities, Warrants, Subscription Rights, Purchase Contracts and
Purchase Units.
Form S-3, pertaining to the registration of 3,882,187 shares of Common Stock.
Form S-3, pertaining to the registration of 2,569,606 shares of Common Stock.
Form S-3, pertaining to the registration of 1,802,239 shares of Common Stock.
Form S-8, pertaining to the Company’s 1999 Long-Term Incentive Plan.
Form S-8, pertaining to the Company’s 1999 Long-Term Incentive Plan.
Form S-8, pertaining to the Company’s 1999 Long-Term Incentive Plan.
/s/ Ernst & Young LLP
333-129743
333-197710
333-167270
333-180553
333-183510
333-160180
333-201192
333-75897
Denver, Colorado
February 24, 2015
(Back To Top)
Section 6: EX-23.2 (EXHIBIT 23.2)
Consent of Independent Registered Public Accounting Firm
EXHIBIT 23.2
We consent to the incorporation by reference in the following Registration Statements of UDR, Inc. and related Prospectuses of our report dated
February 24, 2015, with respect to the consolidated financial statements and schedule of United Dominion Realty, L.P., included in this Annual Report (Form
10-K) for the year ended December 31, 2014:
Registration
Statement Number
Description
Form S-3, pertaining to the registration of 11,000,000 shares of Common Stock, including rights to purchase Series C Junior
Participating Redeemable Preferred Stock, issuable under the Company’s Dividend Reinvestment and Stock Purchase Plan.
Form S-3, Shelf Registration Statement, pertaining to the registration of an indeterminate amount of Common Stock, Preferred
Stock, Depositary Shares, Debt Securities, Guarantees of Debt Securities, Warrants, Subscription Rights, Purchase
Contracts and Purchase Units.
Form S-3, pertaining to the registration of 3,882,187 shares of Common Stock
Form S-3, pertaining to the registration of 2,569,606 shares of Common Stock.
Form S-3, pertaining to the registration of 1,802,239 shares of Common Stock.
Form S-8, pertaining to the Company’s 1999 Long-Term Incentive Plan.
Form S-8, pertaining to the Company’s 1999 Long-Term Incentive Plan.
Form S-8, pertaining to the Company’s 1999 Long-Term Incentive Plan.
/s/ Ernst & Young LLP
333-129743
333-197710
333-167270
333-180553
333-183510
333-160180
333-201192
333-75897
Denver, Colorado
February 24, 2015
(Back To Top)
Section 7: EX-31.1 (EXHIBIT 31.1)
I, Thomas W. Toomey, certify that:
1. I have reviewed this Annual Report on Form 10-K of UDR, Inc.;
CERTIFICATION
EXHIBIT 31.1
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this Report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
(d) Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date: February 24, 2015
/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President
(Principal Executive Officer)
(Back To Top)
Section 8: EX-31.2 (EXHIBIT 31.2)
I, Thomas M. Herzog, certify that:
1. I have reviewed this Annual Report on Form 10-K of UDR, Inc.;
CERTIFICATION
EXHIBIT 31.2
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this Report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report, based on such evaluation; and
(d) Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date:
February 24, 2015
/s/ Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and Chief Financial Officer (Principal
Financial Officer)
(Back To Top)
Section 9: EX-31.3 (EXHIBIT 31.3)
I, Thomas W. Toomey, certify that:
1. I have reviewed this Annual Report on Form 10-K of United Dominion Realty, L.P.;
CERTIFICATION
EXHIBIT 31.3
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this Report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
(d) Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date:
February 24, 2015
/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President of UDR, Inc. (Principal
Executive Officer),
general partner of United Dominion Realty, L.P.
(Back To Top)
Section 10: EX-31.4 (EXHIBIT 31.4)
I, Thomas M. Herzog, certify that:
1. I have reviewed this Annual Report on Form 10-K of United Dominion Realty, L.P.;
CERTIFICATION
EXHIBIT 31.4
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this Report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report, based on such evaluation; and
(d) Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: February 24, 2015
/s/ Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and Chief Financial Officer of UDR, Inc.
(Principal Financial Officer),
general partner of United Dominion Realty, L.P.
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Section 11: EX-32.1 (EXHIBIT 32.1)
CERTIFICATION
EXHIBIT 32.1
In connection with the periodic report of UDR, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2014, as filed with the Securities and
Exchange Commission (the “Report”), I, Thomas W. Toomey, Chief Executive Officer and President of the Company, hereby certify as of the date hereof, solely
for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the
dates and for the periods indicated.
Date: February 24, 2015
/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President (Principal Executive
Officer)
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Section 12: EX-32.2 (EXHIBIT 32.2)
CERTIFICATION
EXHIBIT 32.2
In connection with the periodic report of UDR, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2014, as filed with the Securities and
Exchange Commission (the “Report”), I, Thomas M. Herzog, Senior Vice President and Chief Financial Officer of the Company, hereby certify as of the date
hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the
dates and for the periods indicated.
Date: February 24, 2015
/s/ Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and Chief Financial Officer (Principal
Financial Officer)
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Section 13: EX-32.3 (EXHIBIT 32.3)
EXHIBIT 32.3
CERTIFICATION
In connection with the periodic report of United Dominion Realty, L.P. (the “Operating Partnership”) on Form 10-K for the year ended December 31, 2014, as
filed with the Securities and Exchange Commission (the “Report”), I, Thomas W. Toomey, Chief Executive Officer and President of UDR, Inc., the general partner
of the Operating Partnership, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the
best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating
Partnership at the dates and for the periods indicated.
Date:
February 24, 2015
/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President of UDR, Inc. (Principal
Executive Officer),
general partner of United Dominion Realty, L.P.
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Section 14: EX-32.4 (EXHIBIT 32.4)
CERTIFICATION
EXHIBIT 32.4
In connection with the periodic report of United Dominion Realty, L.P. (the “Operating Partnership”) on Form 10-K for the year ended December 31, 2014, as
filed with the Securities and Exchange Commission (the “Report”), I, Tomas M. Herzog, Senior Vice President and Chief Financial Officer of UDR, Inc., the
general partner of the Operating Partnership, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States
Code, that to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership
at the dates and for the periods indicated.
Date: February 24, 2015
/s/ Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and Chief Financial Officer of UDR, Inc.
(Principal Financial Officer),
general partner of United Dominion Realty, L.P.
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