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Section 1: 10K (10K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
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 110524 (UDR, Inc.)
Commission file number 33315600201 (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)
540857512
541776887
(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) 2836120
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
Securities registered pursuant to Section 12(g) of the Act: None
(Title of Class)
Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.
UDR, Inc.
United Dominion Realty, L.P.
Yes
Yes
No
No
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.
United Dominion Realty, L.P.
Yes
Yes
No
No
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
Yes
No
No
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 ST (§ 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
Yes
No
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK 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 10K or any
amendment to this Form 10K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b2 of the Exchange Act. (Check one):
UDR, Inc.:
Large accelerated filer
Accelerated filer
Nonaccelerated filer
Smaller reporting
company
(Do not check if a smaller
reporting company)
United Dominion
Realty, L.P.:
Large accelerated
filer
Accelerated filer
Nonaccelerated filer
Smaller reporting
company
(Do not check if a smaller reporting
company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act).
UDR, Inc.
United Dominion Realty, L.P.
Yes
Yes
No
No
The aggregate market value of the shares of common stock of UDR, Inc. held by nonaffiliates on June 30, 2016 was approximately $3.3 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 17, 2017, there were 267,370,704 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.
DOCUMENTS INCORPORATED BY REFERENCE
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 2017 Annual Meeting of Stockholders.
This Annual Report on Form 10K includes financial statements required under Rule 309 of Regulation SX for UDR Lighthouse DownREIT
L.P.
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
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10
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24
25
25
26
30
34
64
64
64
64
65
66
66
66
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
Item 16. Form 10K Summary
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EXPLANATORY NOTE
This Report combines the annual reports on Form 10K for the fiscal year ended December 31, 2016 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. and UDR Lighthouse DownREIT L.P. (the “DownREIT Partnership”), both Delaware limited
partnerships of which UDR is the sole general partner. 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 and the DownREIT Partnership are referred to as “OP Units” and
“DownREIT Units” respectively, and the holders of the OP Units and DownREIT Units are referred to as “unitholders.” This
combined Form 10K 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”). 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, 2016, UDR owned 110,883 units (100%) of the general partnership interests of the Operating
Partnership and 174,119,201 units (or approximately 95.1%) 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 daytoday 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.
ForwardLooking Statements
PART I
This Report contains forwardlooking statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such forwardlooking 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 forwardlooking
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 stability 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 leaseups 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 and rental rates, 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 the 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 weatherrelated 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, selfinsurance retention, uninsured claims or casualties, or losses in excess
of applicable coverage;
• delays in completing developments and leaseups 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;
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• the imposition of federal taxes if we fail to qualify as a REIT under the Code in any taxable year;
• our internal controls 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 I, Item 1A. Risk Factors. We
encourage investors to review these risk factors.
Although we believe that the assumptions underlying the forwardlooking 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 forwardlooking 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.
Forwardlooking 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 forwardlooking 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 selfadministered real estate investment trust, or REIT, that owns, operates, acquires, renovates, develops,
redevelops, disposes of and manages multifamily apartment communities generally located in high barriertoentry markets
throughout the United States. The high barriertoentry markets are characterized by limited land for new construction, difficult and
lengthy entitlement processes, low singlefamily home affordability and strong employment growth potential. At December 31,
2016, our consolidated real estate portfolio included 127 communities located in 18 markets, with a total of 39,454 completed
apartment homes, which are held directly or through our subsidiaries, including the Operating Partnership and the DownREIT
Partnership, and consolidated joint ventures. In addition, we have an ownership interest in 27 communities
containing 6,849 apartment homes through unconsolidated joint ventures or partnerships. As of December 31, 2016, the Company
was developing two whollyowned communities with 1,101 apartment homes, none of which have been completed, and four
unconsolidated joint venture communities with 1,069 apartment homes, 99 of which have been completed.
At December 31, 2016, the Operating Partnership’s consolidated real estate portfolio included 54 communities located
in 14 markets, with a total of 16,698 completed apartment homes. The Operating Partnership owns, operates, acquires, renovates,
develops, redevelops, and manages multifamily apartment communities generally located in high barriertoentry markets located
throughout the United States. During the year ended December 31, 2016, revenues of the Operating Partnership represented
approximately 43% 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 2016, we declared total distributions of $1.18 per common share and paid dividends
of $1.1625 per common share.
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
Dividends
Declared in
2016
Dividends
Paid in
2016
$
0.2950 $
0.2950
0.2950
0.2950
$
1.1800 $
0.2775
0.2950
0.2950
0.2950
1.1625
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 successorininterest 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) 2836120. 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 17, 2017, we had 1,550 fulltime associates and 37 parttime associates, all of whom were employed by UDR.
Reporting Segments
We report in two segments: SameStore Communities and NonMature Communities/Other.
Our SameStore Communities segment includes those communities acquired, developed, and stabilized prior to January 1,
2015, and held as of December 31, 2016. 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 disposition 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 NonMature Communities/Other segment represents those communities that do not meet the criteria to be included
in SameStore 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 16, Reportable
Segments, in the Notes to the UDR Consolidated Financial Statements included in this Report and Note 11, 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 barriertoentry markets, which are characterized by limited land for new
construction, difficult and lengthy entitlement processes, low singlefamily 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 liquidity, earnings and dividends.
2016 Highlights
•
In July 2016, the Company marked its 44th year as a REIT and, in October 2016, paid its 176th consecutive quarterly
dividend. The Company’s annualized declared 2016 dividend of $1.18 represented a 6.3% increase over the previous
year.
• We achieved SameStore revenue growth of 5.7% and SameStore net operating income (“NOI”) growth of 6.5%.
• We completed two developments held by unconsolidated joint ventures in San Francisco, CA and Los Angeles, CA with
a total of 637 apartment homes.
• We completed four developments held by the West Coast Development Joint Venture located in Seattle, WA, Los
Angeles, CA and Anaheim, CA with a total of 1,147 apartment homes.
• We completed three redevelopment projects in Bellevue, WA, Newport Beach, CA and San Francisco, CA.
• As of December 31, 2016, we were developing two whollyowned communities and four communities held by
unconsolidated joint ventures and redeveloping three whollyowned communities.
• We acquired a community in Redmond, WA with 177 apartment homes, increased our ownership
from 50% to 100% in two operating communities located in Bellevue, WA with a total of 331 apartment homes and
increased our ownership interest in two parcels of land located in Dublin, CA and Los Angeles, CA for a total of
approximately $207.3 million, including the assumption of an incremental $37.9 million of secured debt. A portion of
these acquisitions was funded with taxdeferred likekind exchanges under Section 1031 of the Internal Revenue Code of
1986 (“Section 1031 exchanges”).
• We recognized gains on the sale of real estate of $210.9 million from the sale of seven communities in Baltimore, MD
and one community in Dallas, TX with a total of 1,782 apartment homes, a retail center in Bellevue, WA and two parcels
of land in Santa Monica, CA. A portion of the sale proceeds was designated for taxdeferred Section 1031 exchanges for
certain acquisitions in 2016.
•
•
In March 2016, we issued 5,000,000 shares of common stock through a public offering for net proceeds of
approximately $173.2 million.
In August 2016, we issued $300 million of 2.95%, 10year senior unsecured mediumterm notes.
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 2016.
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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 Diversified Portfolio
2. Flexible/Strong Balance Sheet
3. Increase Cash Flow to Support Dividend Growth through Operating Excellence
4. A Great Place to Work and Live
Quality of Our Diversified Portfolio
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 thirdparty research.
Acquisitions and Dispositions
When evaluating potential acquisitions, we consider:
• whether it is located in a high barriertoentry market;
•
•
•
•
•
•
•
•
•
•
•
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;
the ability of the property’s projected cash flows to exceed our cost of capital;
potential for capital appreciation of the property;
ability to increase the value and profitability of the property through operations and redevelopment;
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;
potential increases in new construction in the market area;
areas with low job growth prospects;
• markets where we do not intend to establish a longterm concentration; and
•
operating efficiencies.
The following table summarizes our apartment community acquisitions and dispositions and our consolidated yearend
ownership position for the past five years (dollars in thousands):
Homes acquired
Homes disposed
2016
2015
2014
2013
2012
508
1,782
3,246
2,735
358
2,500
—
914
633
6,507
Homes owned at December 31,
39,454
40,728
39,851
41,250
41,571
Total real estate owned, at cost
$ 9,615,753 $ 9,190,276 $ 8,383,259 $ 8,207,977 $ 8,055,828
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The following table summarizes our apartment community acquisitions and dispositions and our yearend ownership
position of the Operating Partnership for the past five years (dollars in thousands):
2016
2015
2014
2013
2012
Homes acquired
Homes disposed
—
276
421
4,256 (a)
—
264
—
914
Homes owned at December 31,
16,698
16,974
20,814
20,746
—
1,314
21,660
Total real estate owned, at cost
$ 3,674,704 $ 3,630,905
$ 4,238,770 $ 4,188,480 $ 4,182,920
(a) Includes 3,107 homes deconsolidated in 2015 upon contribution of communities by the Operating Partnership to the
DownREIT Partnership.
Development Activities
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 longterm govern our review process on
where to allocate development capital. At December 31, 2016, our development pipeline included two whollyowned communities
located in Huntington Beach, California and Boston, Massachusetts with 1,101 homes and a budget of $708.5 million, in which we
have a carrying value of $342.3 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 2016, we continued to redevelop properties in
primary markets where we concluded there was an opportunity to add value. At December 31, 2016, the Company was
redeveloping 425 apartment homes, 351 of which have been completed, at three whollyowned communities located in San
Francisco, California, Austin, Texas, and Dallas, Texas. During the year ended December 31, 2016, we incurred $21.3 million in
major renovations, which include major structural changes and/or architectural revisions to existing buildings.
Joint Venture and Partnership 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.
Balance Sheet Management
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. 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 using our webbased resident internet portal.
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As a result of transforming our operations through technology, residents’ satisfaction improved, and our operating teams
have become more efficient. Webbased technologies have also resulted in declining marketing and advertising costs, improved cash
management, and better pricing management of our available apartment homes.
Operating Partnership Strategies and Vision
The Operating Partnership’s longterm 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, household income, low singlefamily home affordability and limited new supply for
multifamily housing, which are key drivers to strong rental growth.
Competitive Conditions
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 submarket supply and demand. In addition, 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 wellpositioned 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 18 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, 2016, our consolidated real estate portfolio included 127 communities with a total of 39,454 completed
apartment homes, which included the Operating Partnership’s consolidated real estate portfolio of 54 communities with a total
of 16,698 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, 2016, the Company was developing two whollyowned communities with 1,101 apartment homes, none of
which have been completed. The communities being developed are not part of the Operating Partnership’s real estate portfolio.
At December 31, 2016, the Company was redeveloping 425 apartment homes, 351 of which have been completed, at three
whollyowned communities. One of these communities under redevelopment is held by the Operating Partnership.
SameStore Community Comparison
We believe that one pertinent quantitative measurement of the performance of our portfolio is tracking the results of
our SameStore Communities’ NOI, which is total rental revenue, less rental and other operating expenses excluding property
7
management. Our SameStore 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, 2016, our SameStore NOI increased by $31.4 million compared to the prior year.
Our SameStore Community properties provided 76.9% of our total NOI for the year ended December 31, 2016. The increase in NOI
for the 31,930 SameStore apartment homes, or 80.9% of our portfolio, was driven by an increase in rental rates and fee and
reimbursement income, partially offset by an increase in real estate taxes.
For the year ended December 31, 2016, the Operating Partnership’s SameStore NOI increased by $15.8 million compared to
the prior year. The Operating Partnership’s SameStore Community properties provided 79.9% of its total NOI for the year
ended December 31, 2016. The increase in NOI for the 14,001 SameStore apartment homes, or 83.8% of the Operating Partnership’s
portfolio, was driven by an increase in rental rates and a decrease in operating expenses.
Revenue growth in 2017 may be impacted by adverse developments affecting the general economy, 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
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, the majority of our apartment leases have terms
of 12 months or less, which generally enables us to compensate for any inflationary effects by increasing rents on our apartment
homes. Although an escalation in costs could have a negative impact on our residents and their ability to absorb rent increases, we do
not believe this has had a material impact on our results for the year ended December 31, 2016.
Environmental Matters
Various environmental laws govern certain aspects of the ongoing operation of our communities. Such environmental laws
include those regulating the existence of asbestoscontaining materials in buildings, management of surfaces with leadbased paint
(and notices to residents about the leadbased paint), use of active underground petroleum storage tanks, and wastemanagement
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
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involved. We do not believe we will be required to engage in any largescale 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 noncompliance, 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 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 10K, quarterly reports on Form 10Q, and current reports on Form 8K, 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 10K, quarterly reports on Form 10
Q, and current reports on Form 8K, and amendments to those reports on the day of filing with the SEC on our website
at www.udr.com, or by sending an email message to ir@udr.com.
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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 forwardlooking statements set forth in this Report relating to our financial
results, operations and business prospects. Forwardlooking 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 forwardlooking 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 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 global, national, regional and local economic conditions, particularly increases in unemployment;
declines in mortgage interest rates, making alternative housing more affordable;
government or builder incentives with respect to home ownership, 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 release space on favorable terms;
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, or the Terms of Renewals or New Leases
May Be Less Favorable Than Current Leases. 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.
Furthermore, because the majority of our apartment leases have terms of 12 months or less, our rental revenues are impacted by
declines in market rents more quickly than if our leases were for longer 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.
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We Face Certain Risks Related to Our Retail and Commercial Space. Certain of our properties include retail or commercial
space that we lease to third parties. The long term nature of our retail and commercial leases (generally five to ten years with market
based renewal options) and the characteristics of many of our tenants (generally small and/or local businesses) may subject us to
certain risks. The longer term leases could result in below market lease rates over time if we do not accurately judge the potential
increases in market rental rates. We may not be able to lease new space for rents that are consistent with our projections or for market
rates. Also, when leases for our retail or commercial space expire, the space may not be relet or the terms of reletting, including the
cost of allowances and concessions to tenants, may be less favorable than the prior lease terms. Our properties compete with other
properties with retail or commercial space. The presence of competitive alternatives may affect our ability to lease space and the level
of rents we can obtain. If our retail or commercial tenants experience financial distress or bankruptcy, they may fail to comply with
their contractual obligations, seek concessions in order to continue operations or cease their operations, which could adversely
impact our results of operations and financial condition.
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.
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, among others:
•
•
a significant portion of the proceeds from our overall property sales may be held by intermediaries in order for some sales
to qualify as likekind 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 singlefamily rental homes, as well as owner occupied single and multifamily 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, among others:
• 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 debt used to finance the acquisition;
even if we enter into an acquisition agreement for an apartment community, we may not complete the acquisition for a
variety of reasons after incurring certain acquisitionrelated 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;
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• 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 whollyowned affiliated companies or through joint
ventures with unaffiliated parties. Our development and construction activities are subject to the following risks, among others:
• 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, landuse, 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 leaseup 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.
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.
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Property Ownership Through Partnerships and 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 partnerships and joint ventures with other persons or
entities when we believe circumstances warrant the use of such structures. We currently have 16 active joint ventures and
partnerships, including our participating loan investment and preferred equity investment, with a total equity investment of $827.0
million. We could become engaged in a dispute with one or more of our partners which might affect our ability to operate a jointly
owned property. Moreover, our 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, our
partners may have competing interests in our markets that could create conflicts of interest. Also, our 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 buysell 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
partnership or joint venture (if we are the seller) or of the other partner’s interest in the partnership or 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 partner, including (i) a deadlock if we and our partner
are unable to agree upon certain major and other decisions, (ii) the limitation of our ability to liquidate our position in the partnership
or joint venture without the consent of the other partner, and (iii) the requirement to provide guarantees in favor of lenders with
respect to the indebtedness of the joint venture.
We may not be permitted to dispose of certain properties or pay down the indebtedness associated with those properties
when we might otherwise desire to do so without incurring additional costs. In connection with certain property acquisitions, we
have agreed with the sellers that we will not dispose of the acquired properties or reduce the mortgage indebtedness on such
properties for significant periods of time unless we pay certain of the resulting tax costs of the sellers, and we may enter into similar
agreements in connection with future property acquisitions. These agreements could result in us retaining properties that we would
otherwise sell or not paying down or refinancing indebtedness that we would otherwise pay down or refinance. However, subject to
certain conditions, we retain the right to substitute other property or debt to meet these obligations to the sellers.
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
multifamily 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, selfinsured retention, uninsured claims or casualties, or losses in excess of
applicable coverage.
If an uninsured loss or a loss in excess of insured limits occurs, 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.
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;
inability to hire and retain key personnel;
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•
•
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 cleanup 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, asbestoscontaining 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 noncompliance 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 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.
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Compliance with or Changes in Real Estate Tax and Other Laws and Regulations Could Adversely Affect Our Funds from
Operations and Our Ability to Make Distributions to Stockholders. We are subject to federal, 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. 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 and regulations 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, 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 may 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 Incomeproducing 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 longterm
senior mortgage lending secured by incomeproducing 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 bankruptcy, our mezzanine loan will be satisfied only after
the senior debt. As a result, we may not recover some of or all our
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initial expenditure. In addition, mezzanine loans may have higher loantovalue ratios than conventional mortgage loans, resulting in
less equity in the property and increasing the risk of loss of principal.
Risk Related to Preferred Equity Investments. In the future we may make preferred equity investments in corporations,
limited partnerships, limited liability companies or other entities that have been formed for the purpose of acquiring, developing or
managing real property. With preferred equity investments, our interest in a particular entity will be less than a majority of the
outstanding voting interests of that entity. Generally, we will not have the ability to control the daily operations of the entity, and we
will not have the ability to select or remove a majority of the members of the board of directors, managers, general partner or partners
or similar governing body of the entity or otherwise control its operations. Although we would seek to maintain sufficient influence
over the entity to achieve our objectives, the owner of the majority of the voting interests may have interests that differ from ours and
may be in a position to take actions without our consent or that are inconsistent with our interests. Further, if the owner of the
majority of the voting interests were to fail to invest capital in the entity, we may have to invest additional capital to protect our
investment. The owner of the majority of the voting interests may fail to develop or operate the real property in the manner intended
and as a result the entity may not be able to redeem our investment or pay the return expected to us in a timely manner if at all. In
addition, we may not be able to dispose of our investment in the entity in a timely manner or at the price at which we would want to
divest. In the event that such an entity fails to meet expectations or becomes insolvent, we may lose our entire investment in the
entity.
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 noncash 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 SarbanesOxley 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 and systems maintained by third party vendors 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 and networks and systems maintained and
controlled by third party vendors, 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, and generally require third party vendors to take steps, to protect the security of the data maintained in our
and their information systems, it is possible that our or their 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 breakins, 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 or third party vendors’ information systems could interrupt our operations, damage our reputation, subject us to liability claims
or regulatory penalties and could materially and adversely affect us.
Social Media Presents Risks. The use of social media could cause us to suffer brand damage or unintended information
disclosure. Negative posts or communications about us on a social networking website could damage our reputation. Further,
employees or others may disclose nonpublic information regarding us or our business or otherwise make negative comments
regarding us on social networking or other websites, which could adversely affect our business and results of operations. As social
media evolves we will be presented with new and risks and challenges.
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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.
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 standardsetting 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
and we may not be able to access the commercial paper market 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 financial condition, 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:
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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;
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 multifamily
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.
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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, interestbearing debt, including commercial paper, at rates that vary
with market interest rates. As of December 31, 2016, UDR had approximately $432.0 million of variable rate indebtedness
outstanding, which constitutes approximately 12.7% of total outstanding indebtedness as of such date. As of December 31, 2016, the
Operating Partnership had approximately $190.6 million of variable rate indebtedness outstanding, which constitutes
approximately 43.8% of total outstanding indebtedness to third parties as of such date. In addition, borrowings under our commercial
paper program bear interest at variable rates. An increase in interest rates would increase our interest expenses and increase the costs
of refinancing existing indebtedness and of issuing new debt, including commercial paper. 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.
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, construction loans and other forms of secured debt,
commercial paper and other forms of 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, including due to regulatory
changes directly or indirectly affecting financing markets, for example the changes in terms on construction loans brought about by
the Basel III capital requirements and the associated “High Volatility Commercial Real Estate” designation, which has adversely
impacted the availability of loans, including construction loans and the interest rate thereon. Restricted lending practices could
impact our ability to obtain financing or refinancing for our properties. 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 routinely evaluate our debt and have given us ratings on our senior
unsecured debt, commercial paper program 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, including our ability to access the commercial
paper market.
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 on, or to refinance, our 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, such as the commercial paper market. 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 or Support Regarding Fannie Mae or Freddie Mac Could Have a Material Adverse
Impact on Our Business. While in recent years we have decreased our borrowing from Fannie Mae and Freddie Mac, Fannie Mae and
Freddie Mac are a major source of financing to participants in the multifamily housing market including potential purchasers of our
properties. Potential options for the future of agency mortgage financing in the U.S. have been suggested, including options that
could involve a reduction in the amount of financing Fannie Mae and Freddie Mac are able to
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provide, limitations on the loans that the agencies may make, which may not include loans secured by properties like our properties,
or 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, or if there is reduced government support for multifamily housing generally, it may adversely affect interest rates, capital
availability, development of multifamily communities and the value of multifamily residential real estate and, as a result, may
adversely affect our business and results of operations.
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.
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 the
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 reelect 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 REITs under the Code, and are therefore subject to the same risks
in the event that any such subsidiary fails to qualify as a REIT in any taxable year.
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
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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 shortterm or longterm 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.
Changes to the U.S. Federal Income Tax Laws, including the Enactment of Certain Proposed Tax Reform Measures, Could
Have an Adverse Impact on Our Business and Financial Results. Changes to the U.S. federal income tax laws are proposed
regularly. Legislative and regulatory changes may be more likely in the 115th Congress because the Presidency and such Congress
will be controlled by the same political party and significant reform of the Code has been described publicly as a legislative priority.
Additionally, the REIT rules are constantly under review by persons involved in the legislative process and by the Internal Revenue
Service and the U.S. Treasury Department, which may result in revisions to regulations and interpretations in addition to statutory
changes. If enacted, certain such changes could have an adverse impact on our business and financial results. For example, certain
proposals set forth in President Trump’s administration and House Republican tax plans could reduce the relative competitive
advantage of operating as a REIT unless accompanied by responsive changes to the REIT rules. These proposals include: the
lowering of income tax rates on individuals and corporations, which could ease the burden of double taxation on corporate dividends
and make the single level of taxation on REIT distributions relatively less attractive; allowing the expensing of capital expenditures,
which could result in the bunching of taxable income and required distributions for REITs; and further limiting or eliminating the
deductibility of interest expense, which could disrupt the real estate market and could increase the amount of REIT taxable income
that must be distributed as dividends to shareholders.
We cannot predict whether, when or to what extent new U.S. federal tax laws, regulations, interpretations or rulings will be
issued, nor is the longterm impact of proposed tax reforms on the real estate investment industry or REITs clear. Prospective
investors are urged to consult their tax advisors regarding the effect of potential changes to the U.S. federal tax laws on an investment
in our shares.
We May Be Adversely Affected by Changes in State and Local Tax Laws and May Become Subject to Tax Audits from Time to
Time. 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, we or our affiliates (including
entities through which we own real estate) may also become subject to federal, state or local tax audits. If we (or such entities)
become subject to federal, state or local tax audits, the ultimate result of such audits could have an adverse effect on our financial
condition.
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The Operating Partnership and the DownREIT Partnership Intend to Qualify as Partnerships, But Cannot Guarantee That
They Will Qualify. The Operating Partnership and the DownREIT Partnership intend to qualify as partnerships for federal income tax
purposes, and intend to take that position for all income tax reporting purposes. If classified as partnerships, the Operating Partnership
and the DownREIT Partnership generally will not be taxable entities and will not incur federal income tax liability. However, the
Operating Partnership and the DownREIT Partnership would be treated as corporations for federal income tax purposes if they were
“publicly traded partnerships,” unless at least 90% of their 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 neither the Operating Partnership’s nor the DownREIT
Partnership’s partnership units are traded on an established securities market, because of the redemption rights of their limited
partners, the Operating Partnership’s and DownREIT 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 and the DownREIT 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 and the DownREIT
Partnership may not meet this qualifying income test. If the Operating Partnership or the DownREIT Partnership were to be taxed as a
corporation, they would incur substantial tax 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:
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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);
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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, spinoffs, joint ventures, strategic
investments or changes in business strategy;
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 atthemarket 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 twothirds 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
22
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.
23
Item 2. PROPERTIES
At December 31, 2016, our consolidated apartment portfolio included 127 communities located in 18 markets, with a total
of 39,454 completed apartment homes.
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, 2016.
SUMMARY OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT DECEMBER 31, 2016
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
Orange County,
CA
San Francisco,
CA
Seattle, WA
Los Angeles,
CA
Monterey
Peninsula, CA
Other Southern
California
Portland, OR
MID
ATLANTIC
REGION
Metropolitan
D.C.
Richmond, VA
Baltimore, MD
NORTHEAST
REGION
New York, NY
Boston, MA
SOUTHEAST
REGION
Orlando, FL
Nashville, TN
Tampa, FL
Other Florida
SOUTHWEST
REGION
Dallas, TX
Austin, TX
Total
Operating
Communities
Real Estate
Under
Development (a)
Land
Held for
Disposition
Other
Total Real
12
11
14
4
7
3
2
22
4
3
4
5
9
8
7
1
7
4
4,814
2,751
2,593
1,225
1,565
756
476
12.1% $ 1,159,595 $
177,005 $ 240,880
8.8%
9.1%
850,605
876,934
65,495
79,577
309,198
338,193
4.6%
446,465
110,778
364,461
1.8%
169,005
—
107,990
1.3%
0.5%
124,891
47,559
55,263
—
165,200
99,914
95.4%
95.8%
95.9%
95.3%
96.7%
95.8%
97.1%
837
830
902
967
728
934
903
8,402
1,358
720
22.3%
1.5%
1.6%
2,142,013
143,773
149,249
272,919
33,850
—
254,941
105,871
207,290
96.4%
96.6%
96.9%
908
1,018
993
1,945
1,548
13.6%
5.8%
1,301,167
560,593
—
78,350
668,980
362,140
97.3%
96.3%
742
1,042
2,500
2,260
2,287
636
2,345
1,273
2.3%
2.1%
2.6%
0.8%
216,647
201,468
245,242
83,404
—
64,971
12,450
39,787
86,659
89,144
107,233
131,140
96.8%
97.6%
96.7%
96.4%
946
933
982
1,130
2.7%
1.6%
263,352
158,009
107,734
36,299
112,304
124,123
96.6%
94.6%
862
913
900
127
39,454
95.1%
9,139,971
1,134,478 $ 231,661
96.3%
—
—
—
—
127
—
—
—
39,454
3.6%
0.7%
—%
0.6%
342,282
72,429
1,624
59,447
100.0% $ 9,615,753 $
—
—
—
—
1,134,478
Estate Owned
(a) As of December 31, 2016, the Company was developing two whollyowned communities with 1,101 apartment
homes, none of which have been completed.
24
SUMMARY OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT DECEMBER 31, 2016
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
3,499
2,185
932
21.1% $ 776,770 $
177,005 $ 221,998
16.0%
6.0%
588,883
219,445
65,493
—
269,512
235,456
344
3.0%
110,435
43,078
321,029
1,565
4.6%
169,006
—
107,990
516
476
2.5%
1.3%
92,297
47,559
55,262
—
178,876
99,914
2,068
15.1%
554,630
31,374
268,196
540
2.8%
102,303
—
189,450
95.2%
96.7%
96.6%
95.6%
96.7%
95.5%
97.1%
96.5%
96.7%
Average
Home
Size
(in
square
feet)
806
817
874
976
728
951
903
898
968
996
387
16.5%
1.9%
605,682
69,808
—
—
608,113
180,382
97.3%
96.7%
690
1,069
1,612
942
636
3.8%
2.8%
2.3%
141,452
103,872
83,405
23,550
—
39,787
87,749
110,269
131,140
97.6%
96.9%
96.4%
925
1,043
1,130
54
16,698
99.7%
3,665,547
435,549 $ 219,205
96.3%
868
—
—
—
54
—
—
—
—%
—%
0.3%
—
—
9,157
—
—
—
16,698
100.0% $ 3,674,704 $
435,549
7
9
5
2
7
2
2
6
2
2
1
6
2
1
WEST
REGION
Orange
County, CA
San Francisco,
CA
Seattle, WA
Los Angeles,
CA
Monterey
Peninsula, CA
Other
Southern
California
Portland, OR
MID
ATLANTIC
REGION
Metropolitan
D.C.
Baltimore,
MD
NORTHEAST
REGION
New York,
NY
Boston, MA
SOUTHEAST
REGION
Nashville, TN
Tampa, FL
Other Florida
Total
Operating
Communities
Real Estate
Under
Development
Land
Other
Total Real
Estate Owned
Item 3. LEGAL PROCEEDINGS
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.
25
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 (“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.
2016
2015
High
Low
Distributions
Declared
High
Low
Distributions
Declared
Quarter ended March 31, $
38.53 $
33.15 $
0.2950 $
35.22 $
31.31 $
38.56 $
33.42 $
0.2950 $
34.17 $
31.62 $
0.2775
0.2775
Quarter ended June 30,
Quarter ended
September 30,
Quarter ended December
31,
$
$
$
37.63 $
34.20 $
0.2950 $
35.67 $
31.14 $
0.2775
36.48 $
33.11 $
0.2950 $
37.89 $
33.77 $
0.2775
On February 17, 2017, the closing sale price of our common stock was $35.59 per share on the NYSE, and there were 3,982
holders of record of the 267,370,704 outstanding shares of our common stock.
We have determined that, for federal income tax purposes, approximately 61% of the distributions for 2016 represented
ordinary income, 27% represented longterm capital gain, and 12% 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, 2016 and 2015 were $1.33 per share or $0.3322 per
quarter. The Series E is not listed on any exchange. At December 31, 2016, a total of 2,796,903 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. In connection with the acquisition of properties from Home OP and the formation of the DownREIT Partnership in
October 2015, we issued 13,988,313 Series F shares at $0.0001 per share to former limited partners of the Home OP, which had the
right to subscribe for one share of Series F for each DownREIT Unit issued in connection with the acquisitions.
As of December 31, 2016, a total of 16,196,889 shares of the Series F were outstanding. 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
26
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
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 17, 2017,
there were approximately 2,159 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, 2016, there
were 183,278,698 OP Units outstanding in the Operating Partnership, of which 174,230,084 OP Units or 95.1% were owned by
UDR and affiliated entities and 9,048,614 OP Units or 4.9% were owned by nonaffiliated 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 2016, we issued a total of 4,685 shares of common stock upon redemption of OP Units.
Purchases of Equity Securities
In February 2006, UDR’s Board of Directors authorized a 10 million share repurchase program. In January 2008, UDR’s
Board of Directors authorized a new 15 million 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, 2016.
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)
Total
Number of
Shares
Purchased
Average Price
per Share
9,967,490 $
22.00
9,967,490 15,032,510
—
—
—
—
—
—
— 15,032,510
— 15,032,510
— 15,032,510
Period
Beginning Balance
October 1, 2016 through October 31, 2016
November 1, 2016 through November 30,
2016
December 1, 2016 through December 31,
2016
Balance as of December 31, 2016
9,967,490 $
22.00
9,967,490 15,032,510
(a) This number reflects the amount of shares that were available for purchase under our 10 million share repurchase program
authorized in February 2006 and our 15 million share repurchase program authorized in January 2008.
During the three months ended December 31, 2016, 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 LongTerm Incentive Plan (the “LTIP”). The following table summarizes all of these repurchases during
the three months ended December 31, 2016.
27
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
— $
—
—
—
60,372
36.48
60,372 $
36.48
N/A
N/A
N/A
N/A
N/A
N/A
Period
October 1,
2016 through
October 31,
2016
November 1,
2016 through
November 30,
2016
December 1,
2016 through
December 31,
2016
Total
(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.
28
Comparison of Fiveyear Cumulative Total Returns
The following graph compares the fiveyear 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, 2011, 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
Period Ending
12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016
100.00
98.07
100.00
137.18
172.80
173.26
100.00
100.00
100.00
106.93
117.77
116.00
100.31
120.68
153.57
140.06
157.34
174.60
163.10
161.30
177.01
167.76
175.17
198.18
100.00
118.06
120.97
157.43
162.46
176.30
The performance graph and the related chart and text, are being furnished solely to accompany this Annual Report on Form
10K pursuant to Item 201(e) of Regulation SK, 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.
29
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 fiveyear period ended December 31, 2016. 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.
UDR, Inc.
Year Ended December 31,
(In thousands, except per share data
and apartment homes owned)
OPERATING DATA:
Rental income
2016
2015
2014
2013
2012
$
948,461 $
871,928 $
805,002 $ 746,484 $ 704,701
Income/(loss) from continuing operations
109,529
105,482
16,260
2,340
(46,305)
Income/(loss) from discontinued operations,
net of tax
Net income/(loss)
—
—
10
320,380
357,159
159,842
Distributions to preferred stockholders
3,717
3,722
3,724
43,942
46,282
3,724
266,608
220,303
6,010
Net income/(loss) attributable to common
stockholders
289,001
336,661
150,610
41,088
203,376
Common stock distributions declared
315,102
289,500
263,503
235,721
215,654
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/DownREIT
Units and Common Stock equivalents
outstanding — diluted
Common stock distributions declared per
share
Balance Sheet Data:
Real estate owned, at cost (a)
Accumulated depreciation (a)
Total real estate owned, net of accumulated
depreciation (a)
$
$
$
$
1.09 $
1.30 $
0.60 $
(0.01) $
(0.22)
—
—
—
0.17
1.07
1.09 $
1.30 $
0.60 $
0.16 $
0.85
1.08 $
1.29 $
0.59 $
(0.01) $
(0.22)
—
—
—
0.17
1.07
1.08 $
1.29 $
0.59 $
0.16 $
0.85
265,386
258,669
251,528
249,969
238,851
267,311
263,752
253,445
249,969
238,851
295,469
276,699
265,728
263,926
252,659
$
1.18 $
1.11 $
1.04 $
0.94 $
0.88
$ 9,615,753 $ 9,190,276 $ 8,383,259 $8,207,977 $8,055,828
2,923,625
2,646,874
2,434,772 2,208,794 1,924,682
6,692,128
6,543,402
5,948,487 5,999,183 6,131,146
Total assets
Secured debt, net (a)
Unsecured debt, net
Total debt, net
7,679,584
7,663,844
6,828,728 6,787,342 6,839,637
1,130,858
1,376,945
1,354,321 1,432,186 1,420,028
2,270,620
2,193,850
2,210,978 2,071,137 1,969,839
3,401,478
3,570,795
3,565,299 3,503,323 3,389,867
Total stockholders’ equity
$ 3,093,110 $ 2,899,755 $ 2,735,097 $2,811,648 $2,992,916
Number of Common Shares outstanding
267,259
261,845
255,115
250,750
250,139
30
UDR, Inc.
Year Ended December 31,
(In thousands, except per share data
and apartment homes owned)
2016
2015
2014
2013
2012
OPERATING DATA (continued):
Other Data (a)
Total consolidated apartment homes owned
(at end of year)
Weighted average number of consolidated
apartment homes owned during the year
Cash Flow Data:
Cash provided by/(used in) operating
activities (c)
Cash provided by/(used in) investing
activities (c)
Cash provided by/(used in) financing
activities
Funds from Operations (b):
Funds from operations attributable to
common stockholders and unitholders —
basic
Funds from operations attributable to
common stockholders and unitholders —
diluted
39,454
40,728
39,851
41,250
41,571
40,543
39,501
40,644
41,392
42,747
$
536,929 $
458,627 $
397,303 $
344,373 $
327,187
(112,277)
(265,461)
(298,603)
(127,680)
(211,582)
(429,282)
(201,648)
(113,725)
(198,559)
(115,993)
$
527,096 $
455,565 $
411,702 $
376,778 $
350,628
530,813
459,287
415,426
380,502
354,532
(a) Includes amounts classified as Held for Disposition, where applicable.
(b) Funds from operations (“FFO”) is defined as net income attributable to common stockholders (computed in accordance
with GAAP), excluding impairment writedowns of depreciable real estate or of investments in nonconsolidated
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
noncontrolling interests, unconsolidated partnerships and joint ventures. This definition conforms with the National
Association of Real Estate Investment Trust’s (“NAREIT”) definition issued in April 2002. 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 FFO, diluted, if OP Units, DownREIT Units, unvested restricted
stock, stock options, and the shares of Series E Cumulative Convertible Preferred Stock are dilutive, they are included in
the diluted share count.
Activities of our taxable REIT subsidiaries (“TRS”) include development and land entitlement. From time to
time, we develop and subsequently sell a TRS property which results in a shortterm use of funds that produces a profit
that differs from the traditional longterm 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 shortterm 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.
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 common stockholders.
(c) The Company elected to early adopt Financial Accounting Standards Board ("FASB") Accounting Standards Update
("ASU") ASU 201615, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash
Payments in 2016. See Note 2, Significant Accounting Policies, in the Notes to the UDR, Inc. Consolidated Financial
Statements included in this Report for a complete description of the ASU and its impact.
31
Upon adopting the ASU, the Company elected to classify distributions received from equity method investees using the
cumulative earnings approach. As a result, the following retrospective changes were made to the above table:
Cash provided by/(used in)
operating activities as previously
reported
Return on investment in
unconsolidated joint ventures
Cash provided by/(used in)
operating activities as reported
above
Cash provided by/(used in)
investing activities as previously
reported
Return on investment in
unconsolidated joint ventures
Cash provided by/(used in)
investing activities as reported
above
2015
2014
2013
2012
$ 431,615 $ 392,360 $ 339,902 $ 327,187
27,012
4,943
4,471
—
$ 458,627 $ 397,303 $ 344,373 $ 327,187
$(238,449) $(293,660) $(123,209) $(211,582)
(27,012)
(4,943)
(4,471)
—
$(265,461) $(298,603) $(127,680) $(211,582)
32
United Dominion Realty, L.P.
Year Ended December 31,
(In thousands, except per OP unit data
and apartment homes owned)
OPERATING DATA:
Rental income
2016
2015
2014
2013
2012
$
404,415 $
440,408 $
422,634 $
401,853 $
384,946
Income/(loss) from continuing operations
46,082
56,940
33,544
Income/(loss) from discontinued operations
—
—
—
Net income/(loss)
79,262
215,063
97,179
32,766
45,176
77,942
(13,309)
57,643
44,334
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 $
77,818
213,301
96,227
73,376
43,982
0.42 $
1.16 $
0.53 $
0.16 $
(0.07)
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:
—
—
—
0.24
$
0.42 $
1.16 $
0.53 $
0.40 $
0.31
0.24
183,279
183,279
183,279
184,196
184,281
Real estate owned, at cost (a)
$ 3,674,704 $ 3,630,950 $ 4,238,770 $ 4,188,480 $ 4,182,920
Accumulated depreciation (a)
Total real estate owned, net of
accumulated depreciation (a)
Total assets
Secured debt, net (a)
Total liabilities
Total partners’ capital
1,408,815
1,281,258
1,403,303
1,241,574
1,097,133
2,265,889
2,349,647
2,835,467
2,946,906
3,085,787
2,415,535
2,554,808
2,873,809
2,987,393
3,130,182
433,974
475,964
927,484
929,017
961,167
797,036
833,478
1,139,758
1,184,296
1,211,426
1,578,202
1,713,412
1,703,001
1,795,934
1,917,299
Advances to/(from) the General Partner $
(19,659) $
11,270 $
(13,624) $
9,916 $
11,056
Number of OP units outstanding
183,279
183,279
183,279
183,279
184,281
Other Data:
Total consolidated apartment homes
owned (at end of year) (a)
Cash Flow Data:
Cash provided by/(used in) operating
activities
Cash provided by/(used in) investing
activities
Cash provided by/(used in) financing
activities
16,698
16,974
20,814
20,746
21,660
$
228,682 $
226,765 $
208,032 $
208,346 $
201,095
(9,546)
23,583
(46,650)
(63,954)
4,273
(221,483)
(247,747)
(162,777)
(145,299)
(203,268)
(a) Includes amounts classified as Held for Disposition, where applicable.
33
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ForwardLooking Statements
This Report contains forwardlooking statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such forwardlooking 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 forwardlooking
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 stability 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 leaseups 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 and rental rates, 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 the 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 weatherrelated 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, selfinsurance retention, uninsured claims or casualties, or losses in excess
of applicable coverage;
delays in completing developments and leaseups 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;
34
•
•
our internal controls 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 I, Item 1A. Risk Factors. We
encourage investors to review these risk factors.
Although we believe that the assumptions underlying the forwardlooking 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 forwardlooking 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.
Forwardlooking 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 forwardlooking 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,
2016, 2015 and 2014 of each of UDR, Inc. and United Domination Realty, L.P.
UDR, Inc.:
Business Overview
We are a selfadministered 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 and the DownREIT 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, 2016, our consolidated real estate portfolio included 127 communities in 10 states plus the District of
Columbia totaling 39,454 apartment homes, and our total real estate portfolio, inclusive of our unconsolidated communities,
included an additional 27 communities with 6,849 apartment homes.
At December 31, 2016, the Company was developing two whollyowned communities with 1,101 apartment homes, none of
which have been completed, and four unconsolidated joint venture communities with 1,069 apartment homes, 99 of which have been
completed. In addition, the Company was redeveloping 425 apartment homes, 351 of which have been completed, at three wholly
owned communities with 888 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.
35
In addition to construction costs, 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 leaseup, 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, 2016, 2015, and 2014 were $24.4 million, $22.4 million, and $29.2 million, respectively.
Investment in Unconsolidated Entities
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 otherthantemporary decline in value. We consider various factors to determine if a decrease in the value of the
investment is otherthantemporary. 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 longterm 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 LongLived Assets
We record impairment losses on longlived 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 inplace 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 leaseup period. We
determine the fair value of inplace 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
leaseup period, and the carrying costs associated with the leaseup period. The fair value of inplace leases is recorded and amortized
as amortization expense over the remaining average contractual lease period.
36
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, 2016 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, 2016.
As of December 31, 2016
Year Ended December 31, 2016
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)
10
9
9
4
7
3
2
15
4
3
4
4
9
8
7
1
6
3
3,194
2,230
1,852
1,225
1,565
756
476
4,824
1,358
720
1,945
1,179
2,500
2,260
2,287
636
2,040
883
8.5% $
6.6%
5.2%
4.6%
824,724
635,831
504,425
446,466
1.8%
169,006
1.3%
0.5%
124,888
47,560
11.5%
1.5%
1.6%
1,109,620
143,773
149,249
13.5%
3.5%
1,299,996
334,992
2.3%
2.1%
2.6%
0.9%
216,647
201,468
245,242
83,404
2.0%
0.9%
194,486
88,774
96.0% $
96.3%
96.7%
95.3%
2,231 $
3,313
2,023
2,629
96.7%
95.8%
97.1%
97.0%
96.6%
96.9%
97.3%
96.5%
96.8%
97.6%
96.7%
96.4%
96.9%
96.8%
1,512
1,737
1,476
1,958
1,270
1,690
4,249
2,476
1,188
1,197
1,290
1,483
1,158
1,347
63,485
64,331
31,248
26,541
20,405
11,018
6,112
74,635
14,640
10,100
68,177
24,906
23,999
22,712
22,599
7,049
17,522
8,078
108
31,930
70.9%
6,820,551
96.7% $
1,958
517,557
19
127
—
—
127
7,524
39,454
25.5%
2,451,296
96.4%
9,271,847
—
3.6%
342,282
—
39,454
—%
100.0%
1,624
9,615,753
(2,923,625)
155,974
673,531
(436)
(10)
$
673,085
SameStore Communities
West Region
Orange County, CA
San Francisco, CA
Seattle, WA
Los Angeles, CA
Monterey Peninsula,
CA
Other Southern
California
Portland, OR
MidAtlantic Region
Metropolitan D.C.
Richmond, VA
Baltimore, MD
Northeast Region
New York, NY
Boston, MA
Southeast Region
Orlando, FL
Nashville, TN
Tampa, FL
Other Florida
Southwest Region
Dallas, TX
Austin, TX
Total/Average SameStore
Communities
NonMature, Commercial
Properties & Other
Total Real Estate Held for
Investment
Real Estate Under
Development (b)
Real Estate Held for
Disposition (c)
Total Real Estate Owned
Total Accumulated
Depreciation
Total Real Estate Owned,
Net of Accumulated
Depreciation
$ 6,692,128
(a) Monthly Income per Occupied Home represents total monthly revenues divided by the average physical number of
occupied apartment homes in our SameStore portfolio.
37
(b) As of December 31, 2016, the Company was developing two whollyowned communities with 1,101 apartment
homes, none of which have been completed.
(c) The Company had one parcel of land located in Richmond, VA that met the criteria to be classified as held for disposition
at December 31, 2016.
We report in two segments: SameStore Communities and NonMature Communities/Other.
Our SameStore Communities segment represents those communities acquired, developed, and stabilized prior to January 1,
2015 and held as of December 31, 2016. 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 disposition at year end. A community is considered to have stabilized occupancy once it achieves 90%
occupancy for at least three consecutive months.
Our NonMature Communities/Other segment represents those communities that do not meet the criteria to be included
in SameStore 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 longerterm 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 shortterm liquidity requirements generally through net cash provided by property operations and
borrowings under our credit agreements. We expect to meet certain longterm 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/or dispositions of properties.
We have a shelf registration statement filed with the Securities and Exchange Commission, or “SEC,” which provides for the
issuance of common stock, preferred stock, depositary shares, debt securities, guarantees of debt securities, warrants, subscription
rights, purchase contracts and units to facilitate future financing activities in the public capital markets. Access to capital markets is
dependent on market conditions at the time of issuance.
On August 23, 2016, the Company issued $300 million of 2.95% senior unsecured mediumterm notes due September 1,
2026. Interest is payable semiannually beginning on March 1, 2017. The Company used the net proceeds to prepay secured debt due
in May 2017, pay down a portion of the borrowings outstanding on its $1.1 billion unsecured credit facility and for general corporate
purposes. The notes are fully and unconditionally guaranteed by the Operating Partnership.
On March 4, 2016, the Company sold 5,000,000 shares of its common stock for aggregate gross proceeds of approximately
$173.7 million at a price per share of $34.73. Aggregate net proceeds from the sale, after deducting the underwriting discount and
offeringrelated expenses, were approximately $173.2 million, which were used for working capital and general corporate purposes.
In April 2012, the Company entered into an equity distribution agreement, which was amended in July 2014, under which
the Company may 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, 2016, the Company did not sell any shares of common stock through this program. As of December 31,
2016, we had 13.1 million shares of common stock available for future issuance under the April 2012 program.
38
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 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 2017, we have approximately $51.0 million of secured debt maturing, inclusive of principal amortization,
and no unsecured debt maturing. We anticipate repaying the 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, 2016, 2015, and 2014.
We elected to early adopt Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") ASU
201615, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments in 2016. See Note
2, Significant Accounting Policies, in the Notes to the UDR, Inc. Consolidated Financial Statements included in this Report for a
complete description of the ASU and its impact.
Upon adopting the ASU, we elected to classify distributions received from equity method investees using the cumulative
earnings approach. As a result, the following retrospective changes were made:
Net cash provided by/(used in) operating activities as previously
reported
Return on investment in unconsolidated joint ventures
2015
2014
$
431,615 $
392,360
27,012
4,943
Net cash provided by/(used in) operating activities as reported herein $
458,627 $
397,303
Net cash provided by/(used in) investing activities as previously reported $
(238,449) $
(293,660)
Return on investment in unconsolidated joint ventures
(27,012)
(4,943)
Net cash provided by/(used in) investing activities as reported herein $
(265,461) $
(298,603)
Operating Activities
For the year ended December 31, 2016, Net cash provided by/(used in) operating activities was $536.9 million compared
to $458.6 million for 2015. The increase in cash flow from operating activities was primarily due to improved net operating income,
primarily driven by revenue growth at communities, and an increase in cash from return on investment in unconsolidated joint
ventures, partially offset by changes in operating assets and liabilities.
For the year ended December 31, 2015, Net cash provided by/(used in) operating activities was $458.6 million compared
to $397.3 million for 2014. The increase in cash flow from operating activities was primarily due to improved net operating income,
primarily driven by revenue growth at communities, and an increase in cash from return on investment in unconsolidated joint
ventures.
Investing Activities
For the year ended December 31, 2016, Net cash provided by/(used in) investing activities was $(112.3) million compared
to $(265.5) million for 2015. The decrease in cash used in investing activities was primarily related to decreased acquisitions of real
estate, a decrease in cash used for investments in unconsolidated joint ventures, an increase in distributions received from
unconsolidated joint ventures and decreased capital expenditures and major renovations, partially offset by increased spend on
consolidated development projects and a decrease in proceeds received from the sale of real estate assets.
For the year ended December 31, 2015, Net cash provided by/(used in) investing activities was $(265.5) million compared
to $(298.6) million for 2014. The decrease in cash used in investing activities is primarily related to decreased spend
39
on consolidated development projects, partially offset by increased acquisitions of real estate, increased capital expenditures and
major renovations, decreased distributions received from unconsolidated joint ventures and issuances of notes receivable.
Acquisitions
In November 2016, the Company acquired an operating community in Redmond, Washington with177 apartment homes for
approximately $70.5 million, which was funded with taxdeferred Section 1031 exchanges.
In October 2016, the Company increased its ownership from 50% to 100% in two operating communities located in
Bellevue, Washington with a total of 331 apartment homes for approximately $70.3 million in cash, which was funded with tax
deferred Section 1031 exchanges, and the assumption of an incremental $37.9 million of secured debt with a weighted average
interest rate of 3.67%. As a result, the Company consolidated the operating communities. The Company had previously accounted for
its 50% ownership interest as an unconsolidated joint venture. We accounted for the consolidation as a business combination
resulting in a gain on consolidation of approximately $36.4 million.
In August 2016, the Company increased its ownership interest from 5% to 100% in a parcel of land in Dublin, California for
a purchase price of approximately $8.5 million. As a result, the Company consolidated the parcel of land. UDR had previously
accounted for its 5% interest in the parcel of land as an unconsolidated joint venture. We accounted for the consolidation as an asset
acquisition resulting in no gain or loss upon consolidation and increased our real estate owned by $8.9 million.
In June 2016, the Company increased its ownership interest from 50% to 100% in a parcel of land in Los Angeles, California
for a purchase price of approximately $20.1 million. As a result, the Company consolidated the parcel of land. UDR had previously
accounted for its 50% interest in the parcel of land as an unconsolidated joint venture. We accounted for the consolidation as an asset
acquisition resulting in no gain or loss upon consolidation and increased our real estate owned by $31.1 million. Subsequent to the
acquisition, the Company entered into a triplenet operating ground lease for the parcel of land at market terms with a thirdparty
developer. The lessee plans to construct a multifamily community on the parcel of land. The ground lease provides the ground lessee
with options to buy the fee interest in the parcel of land. The lease term is 49 years plus two 25year extension options, does not
transfer ownership to the lessee, and does not include a bargain purchase option.
In October 2015, the Company completed the acquisition of six Washington, D.C. area properties from Home Properties,
L.P., a New York limited partnership (“Home OP”), for $900.6 million, which was comprised of $564.8 million of DownREIT Units
in the newly formed DownREIT Partnership issued at $35 per unit (a total of 16.1 million units), the assumption of $89.3 million of
debt, $221.0 million of reverse Section 1031 exchanges, and $25.5 million of cash. In addition, the Company issued
approximately 14.0 million shares of its Series F Preferred Stock to former limited partners of Home OP, which had the right to
subscribe for one share of Series F Preferred Stock for each DownREIT Unit issued in connection with the acquisitions.
Of the six properties acquired from Home OP, four were acquired through the DownREIT Partnership, one was acquired by
the Company through a reverse Section 1031 exchange and one was acquired by the Operating Partnership through a reverse Section
1031 exchange.
In February 2015, the Company acquired an office building in Highlands Ranch, Colorado, for 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 office building. The building consists of approximately 120,000 square feet. All existing leases
were assumed by the Company at the time of the acquisition.
In 2014, the Company acquired a fullyentitled 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 taxdeferred Section 1031
exchanges.
Dispositions
In November 2016, the Company sold seven operating communities with a total of 1,402 apartment homes in Baltimore,
Maryland and an operating community with 380 apartment homes in Dallas, Texas for gross proceeds of $284.6 million, resulting in
net proceeds of $280.5 million and a gain, net of tax, of $200.5 million. A portion of the proceeds was designated for taxdeferred
Section 1031 exchanges.
40
In May 2016, the Company sold a retail center in Bellevue, Washington for gross proceeds of $45.4 million, resulting in net
proceeds of $44.1 million and a gain, net of tax, of $7.3 million. A portion of the proceeds was designated for taxdeferred Section
1031 exchanges.
In March 2016, the Company sold its 95% ownership interest in two parcels of land in Santa Monica, California for gross
proceeds of $24.0 million, resulting in net proceeds of $22.0 million and a gain, net of tax, of $3.1 million.
During the year ended December 31, 2015, the Company sold 12 communities with a total of 2,735 apartment homes for
gross proceeds of $408.7 million, resulting in net proceeds of $387.7 million and a gain of $251.7 million. A portion of the sale
proceeds was designated for taxdeferred Section 1031 exchanges for a 2014 acquisition and the October 2015 acquisitions.
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, a parcel of land, and one operating
property for gross proceeds of $328.4 million, resulting in net proceeds of $324.4 million and a gain, net of tax, of $138.6 million.
The Company also sold a 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 taxdeferred Section 1031 exchanges and was used to fund certain
acquisitions of real estate.
We plan to continue to pursue our strategy of exiting markets where longterm growth prospects are limited and redeploying
capital to primary locations in markets we believe will provide the best investment returns.
Capital Expenditures
We capitalize those expenditures that materially enhance the value of an existing asset or substantially extend the useful life
of an existing asset. Expenditures necessary to maintain an existing property in ordinary operating condition are expensed as
incurred.
For the year ended December 31, 2016, total capital expenditures of $112.9 million or $2,786 per stabilized home, which in
aggregate include recurring capital expenditures and major renovations, were spent on all of our communities, excluding
development and commercial properties, as compared to $111.3 million or $2,818 per stabilized home for the prior year.
The increase in total capital expenditures was primarily due to:
•
an increase of 34.7% or $11.4 million in revenueenhancing improvements, such as kitchen and bath remodels and
upgrades to common areas.
This increase was partially offset by:
•
a decrease in major renovations of 35.3% or $11.6 million, primarily due to lower redevelopment spend.
41
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, 2016 and 2015 (dollars in thousands):
Year Ended December 31,
Year Ended December 31,
2016
2015
% Change
2016
2015
% Change
Per Home
$
12,532 $
12,108
3.5 % $
309 $
307
0.7 %
34,725
33,359
4.1 %
856
845
1.3 %
47,257
45,467
3.9 %
1,166
1,151
1.3 %
44,414
32,979
34.7 %
1,095
835
31.1 %
21,274
32,877
(35.3)%
525
832
(36.9)%
$ 112,945 $ 111,323
1.5 % $
2,786 $
2,818
(1.1)%
$
33,859 $
31,636
7.0 % $
835 $
801
4.2 %
Turnover capital
expenditures
Asset preservation
expenditures
Total recurring
capital
expenditures
Revenueenhancing
improvements
Major renovations
(a)
Total capital
expenditures
Repair and
maintenance
expense
Average home count
(b)
40,543
39,501
(a) Major renovations include major structural changes and/or architectural revisions to existing buildings.
(b) Average number of homes is calculated based on the number of homes outstanding at the end of each month.
The above table reports amounts capitalized during the year. Actual capital spending is impacted by the net change in
capital expenditure accruals.
We intend to continue to selectively add revenueenhancing 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.
Consolidated Real Estate Under Development and Redevelopment
At December 31, 2016, our development pipeline of two whollyowned communities totaled 1,101 homes, none of which
have been completed, with a budget of $708.5 million, in which we have a carrying value of $342.3 million. The communities are
estimated to be completed during the first quarter of 2018 and the first quarter of 2019. During 2016, we incurred $178.3 million for
development costs, an increase of $75.1 million from our 2015 level of $103.2 million.
The following whollyowned projects were under development as of December 31, 2016 (dollars in thousands):
Number of
Apartment
Homes
Completed
Apartment
Homes
Cost to
Date
Budgeted
Cost
Estimated
Cost
Per Home
Expected
Completion
Date
Location
The
Residences
at Pacific
City
345
Harrison
Street
Total
Huntington
Beach, CA
Boston,
MA
516
— $234,275 $ 342,000 $
663
1Q2018
585
1,101
— 108,007
366,500
626
1Q2019
— $342,282 $ 708,500 $
644
At December 31, 2016, the Company was redeveloping 425 apartment homes, 351 of which have been completed, at three
whollyowned communities.
During the year ended December 31, 2016, we incurred $21.3 million in major renovations, which include major structural
changes and/or architectural revisions to existing buildings, a decrease of $11.6 million from our 2015 level of $32.9 million. The
estimated completion dates for these communities are the first quarter of 2017 and the first quarter of 2018.
42
At December 31, 2016, the following communities were in redevelopment (dollars in thousands):
Location
San
Francisco,
CA
Austin,
TX
Dallas,
TX
Edgewater
Residences
at the
Domain
Thirty377
Total
Number of
Apartment
Homes
Scheduled
Redevelopment
Homes
Completed
Apartment
Homes
Cost to
Date
Budgeted
Cost
Estimated
Cost
Per Home
Expected
Completion
Date
193
58
58 $ 6,289 $ 7,000 $
36 1Q2017
390
305
888
311
274
6,159
8,500
22 1Q2017
56
425
2,211
19
351 $14,659 $25,000 $
9,500
31 1Q2018
28
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.
The Company’s investment in and advances to unconsolidated joint ventures and partnerships, net, are accounted for under
the equity method of accounting. For the year ended December 31, 2016:
•
•
•
our proportionate share of the net income/(loss) of the joint ventures and partnerships was $52.2 million;
our investment in unconsolidated joint ventures decreased by $80.6 million due to the acquisition of 100% interest in
properties previously held as unconsolidated entities, partially offset by capital contributions; and
we received distributions of $123.7 million, of which $57.6 million were operating cash flows and $66.1 million were
investing cash flows.
We evaluate our investments in unconsolidated joint ventures and partnerships when events or changes in circumstances
indicate that there may be an otherthantemporary decline in value. We consider various factors to determine if a decrease in the
value of the investment is otherthantemporary. The Company did not recognize any otherthantemporary decreases in the value of
its investments in unconsolidated joint ventures or partnerships during the year ended December 31, 2016 and 2015.
Financing Activities
For the years ended December 31, 2016, 2015 and 2014, Net cash provided by/(used in) financing activities was $(429.3)
million, $201.6 million and $(113.7) million, respectively.
The following significant financing activities occurred during the year ended December 31, 2016:
•
•
•
•
•
•
•
issued $300 million of 2.95% senior unsecured mediumterm notes due September 1, 2026;
repaid $375.3 million of secured debt and $11.8 million of unsecured debt;
repaid $83.3 million of 5.25% unsecured mediumterm notes due January 2016;
issued $50.0 million of secured debt;
repaid $128.7 million under the Company’s unsecured revolving credit facility, net of borrowings;
sold 5,000,000 shares of common stock for aggregate net proceeds of approximately $173.2 million at a price per share of
$34.73; and
paid distributions of $308.9 million to our common stockholders.
The following significant financing activities occurred during the year ended December 31, 2015:
•
•
•
repaid $194.0 million of secured debt;
repaid $325.2 million of 5.25% unsecured mediumterm notes due January 2015;
entered into a $350.0 million senior unsecured term loan facility due January 2021, which replaced the Company’s $250
million term loan and $100 million term loan that were scheduled to mature in June 2018;
43
•
•
•
•
•
entered into a new $1.1 billion revolving credit facility with a maturity date in January 2020, exclusive of options to
extend, which replaced the prior $900 million revolving credit facility that was scheduled to mature in December 2017;
issued $300.0 million of 4.00% senior unsecured mediumterm notes due October 1, 2025;
sold 6,339,636 shares of common stock for aggregate net proceeds of approximately $210.0 million after deducting
related expenses;
net repayments of $2.5 million under the Company’s $1.1 billion unsecured revolving credit facility; and
paid distributions of $283.2 million to our common stockholders.
The following significant financing activities occurred during the year ended December 31, 2014:
•
•
•
•
•
•
•
repaid $81.0 million of secured debt;
repaid $184.0 million of 5.13% unsecured mediumterm notes due January 2014;
repaid $128.5 million of 5.50% unsecured mediumterm notes due April 2014;
issued $300.0 million of 3.750% senior unsecured mediumterm 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 prior $900 million unsecured revolving credit facility; and
paid distributions of $256.1 million to our common stockholders.
Credit Facilities
We had three secured credit facilities with Fannie Mae with an aggregate commitment of $636.8 million, all of which was
outstanding as of December 31, 2016. 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, 2016, $355.8 million of the outstanding balance was fixed and had a
weighted average interest rate of 5.06% and the remaining balance of $280.9 million had a weighted average variable rate of 2.13%.
The Company prepaid a portion of the secured credit facility due in May 2017 with a portion of the proceeds from the notes offering
in August 2016.
The Company has a $1.1 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”) and a $350.0
million senior unsecured term loan facility (the “Term Loan Facility”). The credit agreement for these facilities allows the total
commitments under the Revolving Credit Facility and the total borrowings under the Term Loan Facility to be increased to an
aggregate maximum amount of up to $2.0 billion, subject to certain conditions, including obtaining commitments from any one or
more lenders. The Revolving Credit Facility has a scheduled maturity date of January 31, 2020, with two sixmonth extension
options, subject to certain conditions. The Term Loan Facility has a scheduled maturity date of January 29, 2021.
Based on the Company’s current credit rating, the Revolving Credit Facility has an interest rate equal to LIBOR plus a
margin of 90 basis points and a facility fee of 15 basis points, and the Term Loan Facility has an interest rate equal to LIBOR plus a
margin of 95 basis points. Depending on the Company’s credit rating, the margin under the Revolving Credit Facility ranges
from 85 to 155 basis points, the facility fee ranges from 12.5 to 30 basis points, and the margin under the Term Loan Facility ranges
from 90 to 175 basis points.
As of December 31, 2016, we had no outstanding borrowings under the Revolving Credit Facility, leaving $1.1 billion of
unused capacity (excluding $2.9 million of letters of credit at December 31, 2016), and $350.0 million of outstanding borrowings
under the Term Loan Facility.
We have a working capital credit facility, which provides for a $75 million unsecured revolving credit facility (the
“Working Capital Credit Facility”) with a scheduled maturity date of January 1, 2019. Based on the Company’s current credit rating,
the Working Capital Credit Facility has an interest rate equal to LIBOR plus a margin of 90 basis points. Depending on the
Company’s credit rating, the margin ranges from 85 to 155 basis points.
As of December 31, 2016, we had $21.4 million of outstanding borrowings under the Working Capital Credit Facility,
leaving $53.7 million of unused capacity.
44
In July 2016, we amended the working capital credit facility to increase the maximum borrowing capacity from $30
million to $75 million. The scheduled maturity date and interest rate were unchanged by the amendment.
The Fannie Mae credit facilities and the bank unsecured revolving credit facilities are subject to customary financial
covenants and limitations. As of December 31, 2016, we were in compliance with all financial covenants under these credit facilities.
On January 23, 2017, we entered into an unsecured commercial paper note program. Under the terms of the program, we may
issue unsecured commercial paper notes up to a maximum aggregate amount outstanding of $500 million. The notes are sold under
customary terms in the United States commercial paper note market and rank pari passu with all of our other unsecured senior
indebtedness. The notes are fully and unconditionally guaranteed by the Operating Partnership. The Company intends to use the
commercial paper program as an alternative funding source for amounts that would have otherwise been outstanding on the revolving
credit facility and intends to manage the use of the commercial paper program so that the maximum combined amount outstanding
under the commercial paper program and the revolving credit facility will not exceed the maximum borrowings permitted under the
credit facility of $1.1 billion. As of February 17, 2017, we had issued $120.0 million of commercial paper notes, for one month terms,
at a weighted average annualized rate of 1.16%.
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 shortterm interest rates impact our cost of
variable rate debt and maturing fixed rate debt. We had $432.0 million in variable rate debt that is not subject to interest rate swap
contracts as of December 31, 2016. If market interest rates for variable rate debt increased by 100 basis points, our interest expense
would increase by $6.5 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 14, Derivatives and Hedging Activities, in the Notes to the UDR Consolidated
Financial Statements included in this Report for additional discussion of derivate instruments.
A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands):
Net cash provided by/(used in) operating activities
$ 536,929 $ 458,627 $ 397,303
Net cash provided by/(used in) investing activities
(112,277)
(265,461)
(298,603)
Net cash provided by/(used in) financing activities
(429,282)
(201,648)
(113,725)
Year Ended December 31,
2016
2015
2014
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, 2016, 2015 and 2014.
Net Income/(Loss) Attributable to Common Stockholders
2016 vs 2015
Net income attributable to common stockholders was $289.0 million ($1.08 per diluted share) for the year
ended December 31, 2016 as compared to net income of $336.7 million ($1.29 per diluted share) for the prior year. The decrease in
net income attributable to common stockholders for the year ended December 31, 2016 resulted primarily from the following items,
all of which are discussed in further detail elsewhere within this Report:
45
•
•
•
•
gains, net of tax, of $210.9 million on the sale of eight operating communities with a total of 1,782 apartment homes, a
retail center and the Company’s 95% interest in two land parcels during the year ended December 31, 2016, compared to
gains, net of tax, of $251.7 million on the sale of 12 operating communities with a total of 2,735 apartment homes during
the year ended December 31, 2015;
an increase in depreciation expense of $45.0 million due to homes delivered from our development and redevelopment
communities and communities acquired in 2016 and 2015, partially offset by a decrease from sold communities and fully
depreciated assets;
a decrease in joint venture management and other fees of $11.3 million primarily due to the promote and fee income of
$10.0 million recognized in connection with the sale of the Texas Joint Venture in 2015; and
a decrease in income from unconsolidated entities of $10.1 million primarily due to the sale of three operating
communities by the UDR/MetLife II joint venture, which resulted in gains of $47.7 million for the Company, and a
casualty gain of $3.8 million, as a result of insurance proceeds related to a September 2015 event received during the year
ended December 31, 2016, as compared to the sale of the eight communities held by the Texas Joint Venture, which
resulted in a gain of $59.4 million, during the year ended December 31, 2015.
This was partially offset by:
•
an increase in total property NOI of $59.2 million primarily due to higher revenue per occupied home, NOI from the
homes placed in service related to development and redevelopment projects completed in 2016 and 2015 and
communities acquired in 2016 and 2015, partially offset by a decrease from sold communities.
2015 vs 2014
Net income attributable to common stockholders was $336.7 million ($1.29 per diluted share) for the year ended
December 31, 2015 as compared to net income of $150.6 million ($0.59 per diluted share) for the prior year. The increase in net
income attributable to common stockholders for the year ended December 31, 2015 resulted primarily from the following items, all of
which are discussed in further detail elsewhere within this Report:
•
•
•
gains, net of tax, of $251.7 million on the sale of 12 operating communities with a total of 2,735 apartment homes during
the year ended December 31, 2015, compared to gains, net of tax, of $143.6 million during the year ended December 31,
2014;
income from unconsolidated entities of $62.3 million, which includes a gain of $59.4 million (including $24.2 million of
previously deferred gains) in connection with the sale of the eight communities held by the Texas joint venture; and
an increase in total property NOI of $57.5 million primarily due to higher occupancy and higher revenue per occupied
home, NOI from the homes placed in service related to development and redevelopment projects completed in 2015 and
2014 and communities acquired in 2015 and 2014, partially offset by a decrease from sold communities.
This was partially offset by:
•
a decrease in Interest income and other income/(expense), net of $10.3 million primarily due to a net gain of $8.4 million
on the early settlement of a note receivable in July 2014.
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 nonGAAP 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 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
46
several income and expense categories as detailed in the reconciliation of NOI to Net income/(loss) attributable to UDR, Inc. below.
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):
Year Ended December
31, (a)
Year Ended December
31, (b)
2016
2015
% Change
2015
2014
% Change
SameStore Communities:
SameStore rental income $ 725,414 $ 686,589
5.7 % $ 660,142 $ 625,037
5.6 %
SameStore operating
expense (c)
(207,857)
(200,473)
3.7 %
(191,010)
(185,379)
SameStore NOI
517,557
486,116
6.5 %
469,132
439,658
3.0 %
6.7 %
NonMature
Communities/Other NOI:
Acquired communities
NOI
Sold or held for
disposition communities
NOI
Development
communities NOI
Redevelopment
communities NOI
Commercial NOI and
other
Total NonMature
Communities/Other NOI
54,101
13,144
311.6 %
16,247
1,370
1,085.9 %
16,444
41,152
(60.0)%
21,292
40,380
(47.3)%
20,749
9,214
125.2 %
29,677
10,947
171.1 %
47,763
48,145
(0.8)%
60,558
52,450
15.5 %
16,471
16,098
2.3 %
16,963
11,516
47.3 %
155,528
127,753
21.7 %
144,737
116,663
24.1 %
Total property NOI
$ 673,085 $ 613,869
9.6 % $ 613,869 $ 556,321
10.3 %
(a) SameStore consists of 31,930 apartment homes.
(b) SameStore consists of 33,063 apartment homes.
(c) Excludes depreciation, amortization, and property management expenses.
The following table is our reconciliation of Net income/(loss) attributable to UDR, Inc. to total property NOI as reflected, for
both continuing and discontinued operations, for the periods presented (dollars in thousands):
Net income/(loss) attributable to UDR, Inc.
$
292,718 $
340,383 $
154,334
Year Ended December 31,
2016
2015
2014
Joint venture management and other fees
Property management
Other operating expenses
Real estate depreciation and amortization
General and administrative
Casualtyrelated charges/(recoveries), net
Other depreciation and amortization
(Income)/loss from unconsolidated entities
Interest expense
(11,400)
26,083
7,649
(22,710)
23,978
9,708
(13,044)
22,142
8,271
419,615
374,598
358,154
49,761
59,690
47,800
732
6,023
2,335
6,679
(52,234)
(62,329)
541
5,775
7,006
123,031
121,875
130,454
Interest income and other (income)/expense, net
Tax (benefit)/provision, net
(1,930)
(3,774)
(1,551)
(3,886)
(11,837)
(15,136)
(Gain)/loss on sale of real estate owned, net of tax
(210,851)
(251,677)
(143,647)
Net income/(loss) attributable to redeemable
noncontrolling interests in the Operating Partnership
and DownREIT Partnership
Net income/(loss) attributable to noncontrolling
interests
Total property NOI
27,282
16,773
5,511
380
3
(3)
$
673,085 $
613,869 $
556,321
47
SameStore Communities
2016 vs 2015
Our SameStore Community properties (those acquired, developed, and stabilized prior to January 1, 2015 and held
on December 31, 2016) consisted of 31,930 apartment homes and provided 76.9% of our total NOI for the year ended December 31,
2016.
NOI for our SameStore Community properties increased 6.5% or $31.4 million for the year endedDecember 31, 2016 as
compared to 2015. The increase in property NOI was primarily attributable to a 5.7% or $38.8 million increase in property rental
income, which was partially offset by a 3.7% or $7.4 million increase in operating expenses. The increase in property income was
primarily driven by a 5.5% or $35.9 million increase in rental rates and a 6.5% or $3.6 million increase in reimbursement and fee
income. Physical occupancy was unchanged at 96.7% and total monthly income per occupied home increased by 5.6% to $1,958.
The increase in operating expenses was primarily driven by a 9.2% or $6.5 million increase in real estate taxes, which was
primarily due to higher assessed valuations and lower appeal refunds.
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 71.3% for the year ended December 31, 2016 as
compared to 70.8% for 2015.
2015 vs 2014
Our SameStore Community properties (those acquired, developed, and stabilized prior to January 1, 2014 and held on
December 31, 2015) consisted of 33,063 apartment homes and provided 76.4% of our total NOI for the year ended December 31,
2015.
NOI for our SameStore Community properties increased $29.5 million or 6.7% for the year ended December 31, 2015
compared to 2014. The increase in property NOI was attributable to a 5.6% or $35.1 million increase in property rental income,
which was partially offset by a 3.0% or $5.6 million increase in operating expenses. The increase in property income was primarily
driven by a 5.1% or $30.4 million increase in rental rates and a 6.5% or $2.9 million increase in reimbursement and fee income.
Physical occupancy was unchanged at 96.7% and total monthly income per occupied home increased by 5.5% to $1,721.
The increase in operating expenses was primarily driven by a 2.9% or $1.8 million increase in real estate taxes, a 4.9% or
$1.5 million increase in utilities expense, and a 3.1% or $1.4 million increase in personnel 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 71.1% for the year ended December 31, 2015 as
compared to 70.3% for 2014.
NonMature Communities/Other
UDR’s NonMature Communities/Other represent those communities that do not meet the criteria to be included in Same
Store Communities, which include communities recently developed or acquired, redevelopment properties, sold or held for
disposition properties, and nonapartment components of mixed use properties.
2016 vs 2015
The remaining $155.5 million or 23.1% of our total NOI for the year ended December 31, 2016 was generated from our Non
Mature Communities/Other. NOI from NonMature Communities/Other increased by 21.7% or $27.8 million for the year
ended December 31, 2016 compared to 2015. The increase was primarily driven by an increase in NOI of $41.0 million from acquired
communities and an increase of $11.2 million from developed and redeveloped communities completed in 2016 and 2015, which
was partially offset by a decrease in NOI of $24.7 million from communities sold or held for disposition in 2016 and 2015.
2015 vs 2014
The remaining $144.7 million or 23.6% of our total NOI for the year ended December 31, 2015 was generated from our Non
Mature Communities/Other. NOI from NonMature Communities/Other increased by 24.1% or $28.1 million for the
48
year ended December 31, 2015 compared to 2014. The increase was primarily driven by an increase in NOI of $26.8 million from
developed and redeveloped communities completed in 2015 and 2014 and $14.9 million from acquired communities, which was
partially offset by a decrease in NOI of $19.1 million from communities sold or held for disposition in 2015 and 2014.
Joint Venture Management and Other Fees
For the years ended December 31, 2016, 2015 and 2014, we recognized income from joint venture management and other
fees of $11.4 million, $22.7 million, and $13.0 million, respectively. The decreased income in 2016 as compared to 2015 and
increased income in 2015 as compared to 2014 was attributable to the promote and fee income of $10.0 million recognized in
connection with the sale of the Texas Joint Venture in 2015.
Real Estate Depreciation and Amortization
For the year ended December 31, 2016, real estate depreciation and amortization increased 12.0% or $45.0 million as
compared to 2015. The increase was primarily due to homes delivered from our development and redevelopment communities and
communities acquired in 2016 and 2015, partially offset by a decrease from sold communities and fully depreciated assets.
For the year ended December 31, 2015, real estate depreciation and amortization increased 4.6% or $16.4 million as
compared to 2014. The increase was primarily due to homes delivered from our development and redevelopment communities and
communities acquired in 2015 and 2014, partially offset by a decrease from sold communities and fully depreciated assets.
General and Administrative
For the year ended December 31, 2016, general and administrative expense decreased 16.6% or $9.9 million from 2015. The
decrease was primarily due to a decrease in bonus expense and stockbased compensation expense for awards under the longterm
incentive plan of $6.2 million, primarily due to the departure of our prior Chief Financial Officer in 2016 and outperformance in
2015, a decrease in longterm incentive plan transition costs of $2.6 million and a decrease in acquisition costs of $1.9 million, which
was partially offset by an increase in salaries and benefits.
For the year ended December 31, 2015, general and administrative expense increased 24.9% or $11.9 million from 2014. The
increase was primarily due to a $5.0 million increase in bonus expense, a $4.6 million increase in stockbased compensation expense
for awards under the longterm incentive plan, of which $3.5 million was due to the transition from a oneyear to a threeyear
performance period, a $1.8 million increase in acquisitionrelated costs, and an increase in salaries and benefits.
Income/(Loss) from Unconsolidated Entities
For the years ended December 31, 2016, 2015 and 2014, we recognized income/(loss) from unconsolidated entities of $52.2
million, $62.3 million, and $(7.0) million, respectively. The decrease in income in 2016 as compared to 2015 of $10.1 million was
primarily due to the sale of three operating communities by the UDR/MetLife II joint venture, which resulted in gains of $47.7
million for the Company, and a casualty gain of $3.8 million as a result of insurance proceeds related to a September 2015 event
received during the year ended December 31, 2016, as compared to the sale of the eight communities held by the Texas Joint Venture,
which resulted in a gain of $59.4 million, during the year ended December 31, 2015. The increase in income in 2015 as compared to
2014 was primarily due to the sale of the eight communities held by the Texas Joint Venture.
Interest Expense
For the years ended December 31, 2016, 2015 and 2014, we recognized interest expense of $123.0 million, $121.9
million and $130.5 million, respectively. The decrease in 2015 as compared to 2014 of 6.6% or $8.6 million was primarily due to the
repayment of the $325.2 million medium term notes in January 2015 and the replacement of debt at lower rates.
Interest Income and Other Income/(Expense), Net
For the years ended December 31, 2016, 2015 and 2014, Interest income and other income/(expense), net was $1.9
million, $1.6 million and $11.9 million, respectively. The decrease in 2015 as compared to 2014 of $10.3 million was primarily
attributable to the net gain of $8.4 million realized on the repayment of a note receivable in 2014.
49
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 $3.8 million, $3.9 million and $15.1 million for the years
ended December 31, 2016, 2015 and 2014, respectively.
The decrease for 2016 as compared to 2015 was primarily attributable to a onetime tax benefit of $2.4 million related to the
conversion of certain taxable REIT subsidiary entities into REITs in 2016, offset by an increase in NOI of properties in the TRS.
The decrease for 2015 as compared to 2014 was primarily attributable to a onetime tax benefit of $5.8 million related to the
conversion of certain taxable REIT subsidiary entities into REITs in 2014 and the resulting zero effective tax rate being applied to its
2015 income.
Gain/(Loss) on Sale of Real Estate Owned, Net of Tax
During the year ended December 31, 2016, the Company sold eight operating communities with a total of 1,782 apartment
homes, a retail center, and its 95% interest in two land parcels, resulting in a gain, net of tax, of $210.9 million.
During the year ended December 31, 2015, the Company sold 12 operating communities with a total of 2,735 apartment
homes, resulting in a gain, net of tax, of $251.7 million.
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 operating communities consisting of a total of 2,500 apartment homes, a parcel of land, and one
operating property for a gain, net of tax, of $138.6 million. The Company also sold a 49% interest in a recently completed
development, resulting in a gain, net of tax, of $7.2 million, and our 50% interest in a land parcel, resulting in a loss, net of tax, of
$2.2 million.
Noncontrolling Interest
For the years ended December 31, 2016, 2015 and 2014, we recognized net income attributable to redeemable
noncontrolling interests in the Operating Partnership and the DownREIT Partnership of $27.3 million, $16.8 million, and $5.5
million, respectively. The increase in 2016 as compared to 2015 is primarily attributable to the number of partnership units held by
thirdparty noncontrolling interest holders as a result of the formation of the DownREIT Partnership in October 2015. The increase in
2015 as compared to 2014 is primarily attributable to an increase in the number of partnership units held by thirdparty
noncontrolling interest holders as a result of the formation of the DownREIT Partnership as well as increased net income of the
Operating Partnership.
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 apartment leases have terms of 12 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 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, 2016.
OffBalance Sheet Arrangements
We do not have any offbalance 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.
50
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2016 (dollars in thousands):
Contractual Obligations
2017
20182019 20202021 Thereafter
Total
Longterm debt obligations
$
51,001 $ 851,051 $ 849,193 $ 1,659,055 $ 3,410,300
Interest on debt obligations (a)
126,068
219,292
150,511
159,394
655,265
Payments Due by Period
Letters of credit
Unfunded commitments on:
Development projects (b)
Unconsolidated joint ventures
(b) (c)
Redevelopment projects (b)
Operating lease obligations:
Operating space
Ground leases (d)
2,851
—
—
366,218
14,155
64,240
3,052
7,289
—
—
—
—
—
2,851
—
366,218
—
—
78,395
10,341
179
152
108
—
439
5,548
11,096
11,096
334,604
362,344
$ 202,854 $ 1,519,338 $ 1,010,908 $ 2,153,053 $ 4,886,153
(a) Interest payments on variable rate debt instruments are based on each debt instrument’s respective yearend interest rate
at December 31, 2016.
(b) Any unfunded costs at December 31, 2016 are shown in the year of estimated completion.
(c) Represents UDR’s proportionate share of expected remaining costs to complete the developments.
(d) 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.
During 2016, we incurred gross interest costs of $139.5 million, of which $16.5 million was capitalized.
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 attributable to common stockholders (computed in accordance with
GAAP), excluding impairment writedowns of depreciable real estate or of investments in nonconsolidated 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 noncontrolling interests, unconsolidated
partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust’s
(“NAREIT”) definition issued in April 2002. 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 FFO, diluted, if OP Units, DownREIT Units, unvested restricted
stock, stock options, and the shares of Series E Cumulative Convertible Preferred Stock are dilutive, they are included in the diluted
share count.
Activities of our taxable REIT subsidiaries (“TRS”) include development and land entitlement. From time to time, we
develop and subsequently sell a TRS property which results in a shortterm use of funds that produces a profit that differs from the
traditional longterm 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 shortterm 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.
51
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 acquisitionrelated costs and other noncomparable 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, casualtyrelated 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/(loss) attributable to common stockholders 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 (“AFFO”) is a nonGAAP financial measure that management uses as a supplemental measure of our
performance. AFFO is defined as FFO as Adjusted less recurring capital expenditures on consolidated communities that are necessary
to help preserve the value of and maintain functionality at our communities. Therefore, management considers AFFO a useful
supplemental performance metric for investors as it is more indicative of the Company’s operational performance than FFO or 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/(loss) attributable to common stockholders is the most directly
comparable GAAP financial measure to AFFO. Management believes that AFFO is a widely recognized measure of the operations of
REITs, and presenting AFFO will enable investors to assess our performance in comparison to other REITs. However, other REITs
may use different methodologies for calculating AFFO and, accordingly, our AFFO may not always be comparable to AFFO
calculated by other REITs. AFFO should not be considered as an alternative to net income (determined in accordance with GAAP) as
an indication of financial performance, or as an alternative to cash flows from operating activities (determined in accordance with
GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make
distributions.
52
The following table outlines our reconciliation of Net income/(loss) attributable to common stockholders to FFO, FFO as
Adjusted, and AFFO for the years ended December 31, 2016, 2015, and 2014 (dollars in thousands):
Year Ended December 31,
2016
2015
2014
Net income/(loss) attributable to common stockholders
$ 289,001 $ 336,661 $ 150,610
Real estate depreciation and amortization, including
discontinued operations
Noncontrolling interests
419,615
374,598
358,154
27,662
16,776
5,508
Real estate depreciation and amortization on unconsolidated
joint ventures
47,832
38,652
42,133
Net gain on the sale of unconsolidated depreciable property
(47,848)
(59,445)
—
Net gain on the sale of depreciable real estate owned
(209,166)
(251,677)
(144,703)
Funds from operations (“FFO”) attributable to common
stockholders and unitholders, basic
$ 527,096 $ 455,565 $ 411,702
Distribution to preferred stockholders — Series E (Convertible)
3,717
3,722
3,724
FFO attributable to common stockholders and unitholders,
diluted
Income/(loss) per weighted average common share diluted
FFO per common share and unit, basic
FFO per common share and unit, diluted
$ 530,813 $ 459,287 $ 415,426
$
$
$
1.08 $
1.81 $
1.80 $
1.29 $
1.68 $
1.66 $
0.59
1.58
1.56
Weighted average number of common shares and OP/DownREIT
Units outstanding — basic
Weighted average number of common shares, OP/DownREIT
Units, and common stock equivalents outstanding — diluted
290,516
271,616
260,775
295,469
276,699
265,728
Impact of adjustments to FFO:
Acquisitionrelated costs/(fees)
$
213 $
2,126 $
373
Acquisitionrelated costs/(fees) on unconsolidated joint
ventures
—
1,460
Costs/(benefit) associated with debt extinguishment and other
1,729
—
Texas joint venture promote and disposition fee income
Longterm incentive plan transition costs
—
(10,005)
898
3,537
Net (gain)/loss on the sale of nondepreciable real estate owned
(1,685)
Net gain on prepayment of note receivable
Legal claims, net of tax
Net loss on sale of unconsolidated land
Severance costs and other restructuring expense
Tax benefit associated with the conversion of certain TRS
entities into REITs
Casualtyrelated (recoveries)/charges, net
Casualtyrelated (recoveries)/charges on unconsolidated joint
ventures, net
69
192
—
—
1,056
(8,411)
—
—
—
(480)
1,016
871
—
—
705
—
—
(2,436)
—
(5,770)
732
2,335
541
(3,752)
2,474
—
$
(2,894) $
2,632 $ (11,950)
FFO as Adjusted attributable to common stockholders and
unitholders, diluted
$ 527,919 $ 461,919 $ 403,476
FFO as Adjusted per common share and unit, diluted
$
1.79 $
1.67 $
1.52
Recurring capital expenditures
(47,257)
(45,467)
(43,921)
AFFO attributable to common stockholders and unitholders
$ 480,662 $ 416,452 $ 359,555
AFFO per common share and unit, diluted
$
1.63 $
1.51 $
1.35
53
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, 2016, 2015, and 2014 (shares
in thousands):
Weighted average number of common shares and OP/DownREIT Units
outstanding — basic
290,516 271,616 260,775
Weighted average number of OP/DownREIT Units outstanding
(25,130)
(12,947)
(9,247)
Weighted average number of common shares outstanding — basic per
the Consolidated Statements of Operations
265,386 258,669 251,528
Year Ended December 31,
2016
2015
2014
Weighted average number of common shares, OP/DownREIT Units,
and common stock equivalents outstanding — diluted
295,469 276,699 265,728
Weighted average number of OP/DownREIT Units outstanding
(25,130)
(12,947)
(9,247)
Weighted average number of Series E preferred shares outstanding
(3,028)
—
(3,036)
Weighted average number of common shares outstanding — diluted per
the Consolidated Statements of Operations
267,311 263,752 253,445
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 successorininterest 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, 2016, the Operating Partnership’s real estate portfolio included 54 communities located
in eight states and the District of Columbia with a total of 16,698 apartment homes.
As of December 31, 2016, UDR owned 110,883 units of our general limited partnership interests and 174,119,201 units of
our limited partnership interests (the “OP Units”), or approximately 95.1% 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 daytoday 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 selfadministered 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, 2016, the General Partner’s consolidated real estate portfolio
included 127 communities located in 10 states and the District of Columbia with a total of 39,454 apartment homes. In addition, the
General Partner had an ownership interest in 27 communities with 6,849 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.
54
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 to construction costs, 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 leaseup, 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, 2016, 2015, and 2014, were $0.8 million, $0.9 million, and $4.9 million,
respectively.
Investment in Unconsolidated Entities
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 otherthantemporary decline in value. We consider various factors to determine if a decrease in the value of the
investment is otherthantemporary. 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 longterm 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 LongLived Assets
We record impairment losses on longlived 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 inplace 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 leaseup period. We
determine the fair value of inplace 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
55
acquiring similar leases, the foregone rents associated with the leaseup period, and the carrying costs associated with the leaseup
period. The fair value of inplace leases is recorded and amortized as amortization expense over the remaining average contractual
lease period.
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, 2016.
As of December 31, 2016
Year Ended December 31, 2016
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)
SameStore
Communities
West Region
Orange County,
CA
San Francisco,
CA
Seattle, WA
Los Angeles, CA
Monterey
Peninsula, CA
Other Southern
California
Portland, OR
MidAtlantic
Region
Metropolitan
D.C.
Baltimore, MD
Northeast Region
New York, NY
Boston, MA
Southeast Region
Nashville, TN
Tampa, FL
Other Florida
Total/Average
SameStore
Communities
NonMature,
Commercial
Properties &
Other
Total Real Estate
Owned
Total
Accumulated
Depreciation
Total Real Estate
Owned, Net of
Accumulated
Depreciation
6
7
5
2
7
2
2
4
2
2
1
6
2
1
2,052
1,688
932
344
1,565
516
476
1,315
540
996
387
1,612
942
636
13.4% $
493,749
96.0% $
2,165 $
38,929
10.6%
6.0%
3.0%
4.6%
2.5%
1.3%
389,374
219,342
110,435
169,006
92,297
47,559
7.8%
2.8%
286,590
102,303
16.5%
1.9%
605,120
69,808
3.8%
2.8%
2.3%
141,452
103,872
83,405
96.2%
96.6%
95.6%
96.7%
95.5%
97.1%
96.9%
96.7%
97.3%
96.7%
97.6%
96.9%
96.4%
2,873
1,817
2,470
1,511
1,846
1,476
1,929
1,513
3,835
1,883
1,171
1,350
1,483
43,450
14,147
6,824
20,406
7,917
6,111
19,915
6,610
34,708
5,996
15,677
9,793
7,049
49
14,001
79.3%
2,914,312
96.6% $
1,989
237,532
5
54
2,697
20.7%
760,392
16,698
100%
3,674,704
59,589
$
297,121
(1,408,815)
$ 2,265,889
(a) Monthly Income per Occupied Home represents total monthly revenues divided by the product of occupancy and the
number of mature apartment homes.
We report in two segments: SameStore Communities and NonMature Communities/Other.
Our SameStore Communities segment represents those communities acquired, developed, and stabilized prior to January 1,
2015 and held as of December 31, 2016. 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 at year end. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three
consecutive months.
Our NonMature Communities/Other segment represents those communities that do not meet the criteria to be included
in SameStore Communities, including, but not limited to, recently acquired, developed and redeveloped communities, and the non
apartment components of mixed use properties.
56
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 longerterm 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 shortterm 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 longterm 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, 2016, the Operating Partnership does not have any secured debt maturing in 2017.
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, 2016, 2015, and 2014.
Operating Activities
For the year ended December 31, 2016, Net cash provided by/(used in) operating activities was $228.7 million compared
to $226.8 million for 2015. The increase in cash flow from operating activities was primarily due to improved operating income,
primarily driven by revenue growth at communities.
For the year ended December 31, 2015, Net cash provided by/(used in) operating activities was $226.8 million compared
to $208.0 million for 2014. The increase in cash flow from operating activities was primarily due to improved operating income,
primarily driven by revenue growth at communities.
Investing Activities
For the year ended December 31, 2016, Net cash provided by/(used in) investing activities was $(9.5) million compared
to $23.6 million for 2015. The decrease in cash provided by investing activities was primarily due to a decrease in proceeds from
dispositions, partially offset by increased distributions received from unconsolidated entities and acquisitions of real estate assets in
2015.
For the year ended December 31, 2015, Net cash provided by/(used in) investing activities was $23.6 million compared
to $(46.7) million for 2014. The increase in cash provided by investing activities was primarily related to an increase in proceeds from
dispositions and decreased spend on development projects, partially offset by the acquisition of a real estate asset in 2015.
Acquisitions
The Operating Partnership did not have any acquisitions during the year ended December 31, 2016.
In October 2015, the Operating Partnership acquired one community in Alexandria, Virginia with 421 apartment homes for a
purchase price of $142.0 million.
57
Dispositions
During the year ended December 31, 2016, the Operating Partnership sold two operating communities in the Baltimore,
Maryland market with a total of 276 apartment homes for gross proceeds of $45.3 million, resulting in net proceeds of $44.6
million and a gain, net of tax, of $33.2 million.
In connection with the formation of the DownREIT Partnership in October 2015, the Operating Partnership contributed
seven operating communities to the DownREIT Partnership. The Operating Partnership recorded its contribution to the DownREIT
Partnership at book value and consequently deferred a gain of $296.4 million. As a result of the contribution, the Operating
Partnership gave up its controlling interest and deconsolidated the seven operating communities. The Operating Partnership
accounts for its investment in the DownREIT Partnership under the equity method of accounting.
During the year ended December 31, 2015, the Operating Partnership sold five communities with a total of 1,149 apartment
homes for gross proceeds of $250.9 million, resulting in net proceeds of $232.4 million and a gain, net of tax, of $133.5 million. A
portion of the sale proceeds was designated for taxdeferred Section 1031 exchanges for one of the October 2015 acquisitions from
Home OP. Additionally, the Operating Partnership recognized a gain of $24.6 million, which was previously deferred, in connection
with the sale of the communities held by the Texas joint venture.
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 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.
Financing Activities
For the year ended December 31, 2016, Net cash provided by/(used in) financing activities was $(221.5) million compared
to $(247.7) million for 2015. The decrease in cash used in financing activities was primarily due to a decrease in advances to the
General Partner and a decrease in payoffs of secured debt, partially offset by a decrease in proceeds from the issuance of secured debt.
For the year ended December 31, 2015, Net cash provided by/(used in) financing activities was $(247.7) million compared
to $(162.8) million for 2014. The increase in cash used in financing activities was primarily due to an increase in advances to the
General Partner.
Credit Facilities
As of December 31, 2016, an aggregate commitment of $408.5 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, 2016. The portions of the Fannie Mae credit facilities allocated to the Operating
Partnership mature at various dates from December 2018 through July 2023 and bear interest at floating and fixed rates.
At December 31, 2016, $244.9 million of the outstanding balance was fixed at a weighted average interest rate of 5.05% and the
remaining balance of $163.6 million on these facilities had a weighted average variable interest rate of 2.32%.
The Operating Partnership is a guarantor on the General Partner’s unsecured revolving credit facility with an aggregate
borrowing capacity of $1.1 billion, $300 million of mediumterm notes due June 2018, $300 million of mediumterm notes
due October 2020, a $350 million term loan facility due January 2021, $400 million of mediumterm notes due January 2022, $300
million of mediumterm notes due July 2024, $300 million of mediumterm notes due October 2025 and $300 million of medium
term notes due September 2026. As of December 31, 2016 and 2015, the outstanding balance under the unsecured revolving credit
facility was $0.0 and $150.0 million, respectively.
The credit facilities are subject to customary financial covenants and limitations.
58
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 shortterm interest rates impact our cost of
variable rate debt and maturing fixed rate debt. We had $190.6 million in variable rate debt that is not subject to interest rate swap
contracts as of December 31, 2016. If market interest rates for variable rate debt increased by 100 basis points, our interest expense
would increase by $1.9 million based on the balance at December 31, 2016.
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 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.
A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands):
Year Ended December 31,
2016
2015
2014
Net cash provided by/(used in) operating activities
$ 228,682 $ 226,765 $ 208,032
Net cash provided by/(used in) investing activities
(9,546)
23,583
(46,650)
Net cash provided by/(used in) financing activities
(221,483)
(247,747)
(162,777)
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, 2016, 2015, and 2014.
Net Income(Loss) Attributable to OP Unitholders
2016 vs 2015
Net income/(loss) attributable to OP unitholders was $77.8 million ($0.42 per diluted OP Unit) for the year
ended December 31, 2016 as compared to $213.3 million ($1.16 per diluted OP Unit) for the prior year. The decrease in net income
attributable to OP unitholders resulted primarily from the following items, which are discussed in further detail elsewhere within this
Report:
•
•
•
during the year ended the December 31, 2016, the Operating Partnership sold two operating communities in Baltimore,
Maryland with a total of 276 apartment homes, resulting in a gain of $33.2 million, as compared to a gain on the sale of
real estate owned of $158.1 million during the year ended December 31, 2015;
losses from unconsolidated entities of $37.4 million for the year ended December 31, 2016, as compared to $4.7
million for the prior year, as a result of the formation of the DownREIT Partnership in the fourth quarter of 2015; and
a decrease in total property NOI of $20.5 million primarily due to fewer consolidated apartment homes as a result of the
deconsolidation of communities contributed to the DownREIT Partnership during 2015.
This was partially offset by:
•
a decrease in real estate depreciation and amortization expense of $22.7 million primarily due to the deconsolidation of
communities contributed to the DownREIT Partnership in the fourth quarter of 2015;
59
•
•
a decrease in interest expense of $10.3 million primarily due to the deconsolidation of debt balances related to
communities contributed to the DownREIT Partnership; and
a decrease in general and administrative expense of $8.2 million due to lower expense allocations by the General Partner,
primarily due to a decrease in its bonus expense and stockbased compensation expense for awards under its longterm
incentive plan, primarily due to the departure of its prior Chief Financial Officer in 2016, and outperformance in 2015.
2015 vs 2014
Net income/(loss) attributable to OP unitholders was $213.3 million ($1.16 per diluted OP Unit) for the year ended
December 31, 2015 as compared to $96.2 million ($0.53 per diluted OP Unit) for the the prior year. The increase in net income
attributable to OP unitholders resulted primarily from the following items, which are discussed in further detail elsewhere within this
Report:
•
•
the Operating Partnership sold five communities with a total of 1,149 apartment homes, resulting in a gain of $133.5
million. Additionally, the Operating Partnership recognized a gain of $24.6 million, which was previously deferred, in
connection with the sale of the communities held by the Texas joint venture;
in connection with the formation of the DownREIT Partnership, the Operating Partnership contributed seven operating
communities to the DownREIT Partnership. The Operating Partnership recorded its contribution to the DownREIT
Partnership at book value and consequently deferred a gain of $296.4 million. As a result of the contribution, the
Operating Partnership gave up its controlling interest and deconsolidated the seven operating communities. The
Operating Partnership accounts for its investment in the DownREIT Partnership under the equity method of accounting;
and
•
an increase in total property NOI of $17.3 million 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 2015 and 2014.
This was partially offset by:
•
a $4.7 million loss from unconsolidated entities related to the DownREIT Partnership that was formed in 2015.
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 nonGAAP 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 are property
management costs, which are the Operating Partnership’s allocable share of costs incurred by the General Partner for shared services
of corporate level property management employees and related support functions and costs.
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.
60
The following table summarizes the operating performance of our total portfolio for the years ended December 31,
2016, 2015, and 2014 (dollars in thousands):
Year Ended December
31, (a)
Year Ended December
31, (b)
2016
2015
% Change
2015
2014
% Change
$ 322,968 $ 303,190
6.5 % $ 360,404 $ 353,686
1.9 %
SameStore Communities:
SameStore rental
income
SameStore operating
expense (c)
SameStore NOI
237,532
221,752
7.1 %
260,009
251,775
(85,436)
(81,438)
4.9 %
(100,395)
(101,911)
(1.5)%
3.3 %
NonMature
Communities/Other NOI:
Acquired communities
NOI
7,216
1,604
349.9 %
1,604
—
N/A
Sold communities NOI
2,600
46,574
(94.4)%
12,225
13,750
(11.1)%
Developed communities
NOI
Redeveloped
communities NOI
Commercial NOI and
other
Total NonMature
Communities/Other NOI
5,191
2,787
38,753
38,035
5,829
6,845
(86.3)%
2,787
(603)
(562.2)%
1.9 %
34,127
29,742
14.7 %
(14.8)%
6,845
5,649
21.2 %
59,589
95,845
(37.8)%
57,588
48,538
18.6 %
Total property NOI
$ 297,121 $ 317,597
(6.4)% $ 317,597 $ 300,313
5.8 %
(a) SameStore consists of 14,001 apartment homes.
(b) SameStore consists of 14,760 apartment homes.
(c) Excludes depreciation, amortization, and property management expenses.
The following table is our reconciliation of Net income/(loss) attributable to OP unitholders to total property NOI for the
years ended December 31, 2016, 2015 and 2014 (dollars in thousands):
Year Ended December 31,
2016
2015
2014
Net income/(loss) attributable to OP unitholders
$
77,818 $
213,301 $
Property management
Other operating expenses
Real estate depreciation and amortization
General and administrative
Casualtyrelated charges/(recoveries), net
(Income)/loss from unconsolidated entities
Interest expense
11,122
6,059
12,111
5,923
147,074
169,784
18,808
27,016
484
37,425
30,067
843
4,659
40,321
(Gain)/loss on sale of real estate owned
(33,180)
(158,123)
96,227
11,622
5,172
179,176
28,541
541
—
41,717
(63,635)
Net income/(loss) attributable to noncontrolling
interests
Total property NOI
1,444
1,762
952
$
297,121 $
317,597 $
300,313
SameStore Communities
2016 vs 2015
Our SameStore Community properties (those acquired, developed, and stabilized prior to January 1, 2015 and held as
of December 31, 2016) consisted of 14,001 apartment homes and provided 79.9% of our total NOI for the year ended December 31,
2016.
NOI for our SameStore Community properties increased 7.1% or $15.8 million for the year ended December 31,
2016 compared to 2015. The increase in property NOI was primarily attributable to a 6.5% or $19.8 million increase in property
61
rental income, which was partial offset by a 4.9% or $4.0 million increase in operating expenses. The increase in revenues was
primarily driven by a 6.6% or $19.0 million increase in rental rates. Physical occupancy decreased 0.2% to 96.6% and total income
per occupied home increased 6.6% to $1,989 for the year ended December 31, 2016 compared to 2015.
The increase in property operating expenses was primarily driven by a 10.4% or $2.6 million increase in real estate taxes,
which was primarily due to higher assessed valuations and lower appeal refunds.
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 73.5% for the year ended December 31, 2016 as
compared to 73.1% for 2015.
2015 vs 2014
Our SameStore Community properties (those acquired, developed, and stabilized prior to January 1, 2014 and held as of
December 31, 2015) consisted of 14,760 apartment homes and provided 81.9% of our total NOI for the year ended December 31,
2015.
NOI for our SameStore Community properties increased 3.3% or $8.2 million for the year ended December 31, 2015
compared to 2014. The increase in property NOI was primarily attributable to a 1.9% or $6.7 million increase in property rental
income and a 1.5% or $1.5 million decrease in operating expenses. The increase in revenues was primarily driven by a 1.5% or $5.2
million increase in rental rates and a 1.9% or $0.5 million increase in reimbursement and fee income. Physical occupancy increased
1.5% to 96.8% and total income per occupied home increased 1.7% to $2,103 for the year ended December 31, 2015 compared to
2014.
The decrease in property operating expenses was primarily driven by a 5.1% or $0.8 million decrease in repair and
maintenance expense and a 1.4% or $0.5 million decrease in real estate taxes.
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 72.1% for the year ended December 31, 2015 as
compared to 71.2% for 2014.
NonMature Communities/Other
The Operating Partnership’s NonMature Communities/Other represent those communities that do not meet the criteria to be
included in SameStore Communities, including, but not limited to, recently developed, acquired or redeveloped communities, sold
communities and the nonapartment components of mixed use properties.
2016 vs 2015
The remaining $59.6 million or 20.1% of our total NOI during the year ended December 31, 2016 was generated from
our NonMature Communities/Other. NOI from NonMature Communities/Other decreased 37.8% or $36.3 million for the year
ended December 31, 2016 compared to 2015. The decrease was primarily driven by a decrease in NOI of $44.0 million from sold
communities, which was partially offset by an increase in NOI of $5.6 million from acquired communities and an increase in NOI of
$2.4 million from developed communities.
2015 vs 2014
The remaining $57.6 million or 18.1% of our total NOI during the year ended December 31, 2015 was generated from
our NonMature Communities/Other. NOI from NonMature Communities/Other increased 18.6% or $9.1 million for the year ended
December 31, 2015 compared to 2014. The increase was primarily driven by an increase in NOI of $4.4 million from redeveloped
communities and an increase in NOI of $3.4 million from developed communities.
Real Estate Depreciation and Amortization
For the year ended December 31, 2016, real estate depreciation and amortization decreased by 13.4% or $22.7 million as
compared to 2015. The decrease was primarily due to the deconsolidation of communities contributed to the DownREIT Partnership
in October 2015, partially offset by homes delivered from our development and redevelopment properties.
For the year ended December 31, 2015, real estate depreciation and amortization decreased by 5.2% or $9.4 million as
compared to 2014. The decrease was primarily due to sold communities and fully depreciated assets partially offset by homes
delivered from our development and redevelopment communities.
62
General and Administrative
For the year ended December 31, 2016, general and administrative expense decreased by 30.4% or $8.2 million as compared
to 2015. The decrease was due to lower general and administrative expense allocations by the General Partner, primarily due to a
decrease in its bonus expense and stockbased compensation expense for awards under its longterm incentive plan, primarily due to
the departure of its prior Chief Financial Officer in 2016, and outperformance in 2015, as well as lower allocations due to the
deconsolidation of communities contributed to the DownREIT Partnership in October 2015.
Income/(Loss) in Unconsolidated Entities
For the year ended December 31, 2016 and 2015, income/(loss) from unconsolidated entities of $(37.4) million and $(4.7)
million, respectively, was attributable to the Operating Partnership's ownership interest in the DownREIT Partnership, which was
formed in October 2015. The change was primarily attributable to depreciation expense for a full year in 2016.
Interest Expense
For the year ended December 31, 2016, interest expense decreased by 25.4% or $10.3 million as compared to 2015, which
was primarily due to lower loan balances as a result of seven communities, and their related debt, being deconsolidated in October
2015 in connection with the formation of the DownREIT Partnership.
Gain/(Loss) on the Sale of Real Estate Owned
During the year ended December 31, 2016, the Operating Partnership sold two operating communities in Baltimore,
Maryland with a total of 276 apartment homes, resulting in a gain of $33.2 million.
During the year ended December 31, 2015, the Operating Partnership sold five communities with a total of 1,149 apartment
homes, resulting in a gain of $133.5 million. A portion of the sale proceeds was designated for a Section 1031 exchange for one of the
October 2015 acquisitions from Home OP. Additionally, the Operating Partnership recognized a gain of $24.6 million, which was
previously deferred, in connection with the sale of the communities held by the Texas joint venture.
In connection with the formation of the DownREIT Partnership in October 2015, the Operating Partnership contributed
seven operating communities to the DownREIT Partnership. The Operating Partnership recorded its contribution to the DownREIT
Partnership at book value and consequently deferred a gain of $296.4 million. As a result of the contribution, the Operating
Partnership gave up its controlling interest and deconsolidated the seven operating communities. The Operating Partnership accounts
for its investment in the DownREIT Partnership under the equity method of accounting.
For the year ended December 31, 2014, the Operating Partnership sold one community and an adjacent parcel of land in San
Diego, California, resulting in a $24.4 million gain. 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.
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 apartment leases have terms of 12 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 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, 2016.
OffBalance Sheet Arrangements
We do not have any offbalance 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.
63
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2016 (dollars in thousands):
Contractual Obligations
2017
20182019 20202021 Thereafter
Total
Longterm debt obligations
$
—
278,403
62,836
94,310 $ 435,549
Interest on debt obligations (a)
16,529
26,454
5,359
6,227
54,569
Payments Due by Period
Operating lease obligations — ground
leases (b)
5,548
11,096
9,091
311,547
337,282
$
22,077 $ 315,953 $
77,286 $ 412,084 $ 827,400
(a) Interest payments on variable rate debt instruments are based on each debt instrument’s respective yearend interest rate
at December 31, 2016.
(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 F1 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.
As of December 31, 2016, 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.
64
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 13a15(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, 2016.
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, 2016. The report of Ernst
& Young LLP, which expresses an unqualified opinion on UDR, Inc.’s internal control over financial reporting as of December 31,
2016, 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 nonaccelerated 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 13a15(f) and 15d15(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
Other Agreements with Executive Officers. In November 2016, we entered into separate aircraft timeshare agreements with
Mr. Toomey and Mr. Troupe. Under each of the aircraft timeshare agreements, we have agreed to lease an aircraft, including crew and
flight services, to each of Mr. Toomey and Mr. Troupe for personal flights from time to time upon their request. Mr. Toomey and
Mr. Troupe will each pay us a lease fee as may be set by the board from time to time for the flight expenses that may be charged under
applicable regulations. We will invoice Mr. Toomey and Mr. Troupe on the last day of the month in which any respective flight
occurs. Each aircraft timeshare agreement will remain in effect until terminated by either party, upon ten days’ prior written notice.
Each agreement automatically terminates upon the date either Mr. Toomey or Mr. Troupe, respectively, is no longer employed by the
Company.
65
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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 MattersBoard
Leadership Structure and CommitteesAudit Committee Financial Expert,” “Corporate Governance MattersIdentification and
Selection of Nominees for Directors,” “Corporate Governance MattersBoard of Directors and Committee Meetings,” “Executive
Officers” and “Other MattersSection 16(a) Beneficial Ownership Reporting Compliance” in UDR, Inc.’s definitive proxy statement
(our “definitive proxy statement”) for its 2017 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 2017 Annual Meeting of Stockholders. We intend to satisfy the disclosure requirements under Item 10 of Form 8K 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 MattersBoard Leadership Structure and
CommitteesCompensation Committee Interlocks and Insider Participation,” “Executive Compensation,” “Compensation of
Directors” and “Compensation Committee Report” in the definitive proxy statement for UDR’s 2017 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 CompensationEquity
Compensation Plan Information” in the definitive proxy statement for UDR’s 2017 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 MattersCorporate Governance Overview,”
“Corporate Governance MattersDirector Independence,” “Corporate Governance MattersBoard Leadership Structure and
CommitteesIndependence of the Audit, Compensation and Governance Committees,” and “Executive Compensation” in the
definitive proxy statement for UDR’s 2017 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
MattersAudit Fees” and “Audit MattersPreApproval Policies and Procedures” in the definitive proxy statement for
UDR’s 2017 Annual Meeting of Stockholders. UDR is the sole general partner of the Operating Partnership.
66
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 F1 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 S1 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, including the financial statements required
under Rule 309 of Regulation SX for UDR Lighthouse DownREIT L.P.
Item 16. FORM 10K SUMMARY
None.
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 21, 2017
By: /s/ Thomas W. Toomey
UDR, Inc.
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 21,
2017 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/ Katherine A. Cattanach
Katherine A. Cattanach
Director
/s/ Joseph D. Fisher
Joseph D. Fisher
Senior Vice President and Chief Financial
Officer (Principal Financial Officer)
/s/ Shawn G. Johnston
Shawn G. Johnston
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/ Mary Ann King
Mary Ann King
Director
/s/ Robert P. Freeman
Robert P. Freeman
Director
/s/ Jon A. Grove
Jon A. Grove
Director
/s/ Clint D. McDonnough
Clint D. McDonnough
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 21, 2017
By: /s/ Thomas W. Toomey
UNITED DOMINION REALTY, L.P.
By: UDR, Inc., its sole general partner
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 21,
2017 by the following persons on behalf of the registrant and in the capacities indicated.
/s/ Thomas W. Toomey
Thomas W. Toomey
/s/ Katherine A. Cattanach
Katherine A. Cattanach
Chief Executive Officer, President, and
Director of the General Partner
Director of the General Partner (Principal
Executive Officer)
/s/ Joseph D. Fisher
Joseph D. Fisher
Senior Vice President and Chief Financial
Officer
of the General Partner (Principal Financial
Officer)
/s/ Mary Ann King
Mary Ann King
Director of the General Partner
/s/ Shawn G. Johnston
Shawn G. Johnston
/s/ Robert P. Freeman
Robert P. Freeman
Vice President and Chief Accounting Officer
Director of the General Partner
of the General Partner (Principal Accounting
Officer)
/s/ James D. Klingbeil
James D. Klingbeil
/s/ Jon A. Grove
Jon A. Grove
Chairman of the Board of the General Partner
Director of the General Partner
/s/ Lynne B. Sagalyn
Lynne B. Sagalyn
/s/ Clint D. McDonnough
Clint D. McDonnough
Vice Chair of the Board of the General Partner
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
PAGE
UDR, INC.:
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2016 and 2015
Consolidated Statements of Operations for the years ended December 31, 2016, 2015,
and 2014
Consolidated Statements of Comprehensive Income/(Loss) for the years ended December
31, 2016, 2015, and 2014
Consolidated Statements of Changes in Equity for the years ended December 31, 2016,
2015, and 2014
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015,
and 2014
Notes to Consolidated Financial Statements
UNITED DOMINION REALTY, L.P.:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2016 and 2015
Consolidated Statements of Operations for the years ended December 31, 2016, 2015,
and 2014
Consolidated Statements of Comprehensive Income/(Loss) for the years ended December
31, 2016, 2015, and 2014
Consolidated Statements of Changes in Capital for the years ended December 31, 2016,
2015, and 2014
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015,
and 2014
Notes to Consolidated Financial Statements
SCHEDULES FILED AS PART OF THIS REPORT
UDR, INC.:
F 2
F 4
F 5
F 6
F 7
F 9
F 11
F 53
F 54
F 55
F 56
F 57
F 58
F 59
Schedule III Summary of Real Estate Owned
UNITED DOMINION REALTY, L.P.:
Schedule III Summary of Real Estate Owned
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, 2016
and 2015, 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, 2016. 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, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 2016, 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 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. 201408, “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”. Also, as discussed in Note 2 to the
consolidated financial statements, the Company changed its presentation of distributions received from unconsolidated joint ventures
in the consolidated statements of cash flows as a result of the adoption of the amendments to the FASB Accounting Standards
Codification resulting from Accounting Standards Update No. 201615 “Statement of Cash Flows (Topic 230), Classification of
Certain Cash Receipts and Cash Payments”.
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, 2016, 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 21, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Denver, Colorado
February 21, 2017
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, 2016, based on criteria established
in Internal ControlIntegrated 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, 2016, 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, 2016 and 2015, 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, 2016 and our report dated February 21, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Denver, Colorado
February 21, 2017
F 3
UDR, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
ASSETS
Real estate owned:
Real estate held for investment
Less: accumulated depreciation
Real estate held for investment, net
December 31,
2016
December 31,
2015
$
9,271,847 $
9,053,599
(2,923,072)
(2,646,044)
6,348,775
6,407,555
Real estate under development (net of accumulated depreciation of $0
and $0, respectively)
Real estate held for disposition (net of accumulated depreciation of
$553 and $830, respectively)
342,282
124,072
1,071
11,775
Total real estate owned, net of accumulated depreciation
6,692,128
6,543,402
Cash and cash equivalents
Restricted cash
Notes receivable, net
Investment in and advances to unconsolidated joint ventures, net
Other assets
Total assets
LIABILITIES AND EQUITY
Liabilities:
Secured debt, net
Unsecured debt, net
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 15)
2,112
19,994
19,790
827,025
118,535
6,742
20,798
16,694
938,906
137,302
$
7,679,584 $
7,663,844
$
1,130,858 $
1,376,945
2,270,620
2,193,850
17,388
29,257
34,238
86,936
103,835
18,786
29,162
36,330
80,368
81,356
3,673,132
3,816,797
Redeemable noncontrolling interests in the Operating Partnership and
DownREIT Partnership
909,482
946,436
Equity:
Preferred stock, no par value; 50,000,000 shares authorized:
8.00% Series E Cumulative Convertible; 2,796,903 shares issued
and outstanding at December 31, 2016 and December 31, 2015
Series F; 16,196,889 and 16,452,496 shares issued and outstanding
at December 31, 2016 and December 31, 2015, respectively
Common stock, $0.01 par value; 350,000,000 shares authorized:
267,259,469 and 261,844,521 shares issued and outstanding at
December 31, 2016 and December 31, 2015, respectively
Additional paidin capital
Distributions in excess of net income
Accumulated other comprehensive income/(loss), net
46,457
46,457
1
1
2,673
2,618
4,635,413
4,447,816
(1,585,825)
(1,584,459)
(5,609)
(12,678)
Total stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
3,093,110
2,899,755
3,860
856
3,096,970
2,900,611
$
7,679,584 $
7,663,844
See accompanying notes to consolidated financial statements.
F 4
UDR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
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
Casualtyrelated charges/(recoveries), net
Other depreciation and amortization
Total operating expenses
Operating income
Income/(loss) from unconsolidated entities
Year Ended December 31,
2016
2015
2014
$
948,461 $
871,928 $
805,002
11,400
22,710
959,861
894,638
13,044
818,046
159,947
115,429
26,083
7,649
155,096
102,963
23,978
9,708
419,615
374,598
49,761
59,690
732
6,023
785,239
174,622
52,234
2,335
6,679
735,047
159,591
62,329
149,428
99,175
22,138
8,271
358,154
47,800
541
5,775
691,282
126,764
(7,006)
Interest expense
(123,031)
(121,875)
(130,454)
Interest income and other income/(expense), net
1,930
1,551
11,858
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
105,755
101,596
3,774
3,886
109,529
105,482
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 and
DownREIT Partnership
109,529
210,851
320,380
105,482
251,677
357,159
(27,282)
(16,773)
(5,511)
Net (income)/loss attributable to noncontrolling interests
(380)
(3)
3
Net income/(loss) attributable to UDR, Inc.
292,718
340,383
154,334
Distributions to preferred stockholders — Series E
(Convertible)
(3,717)
(3,722)
(3,724)
Net income/(loss) attributable to common stockholders
$
289,001 $
336,661 $
150,610
Income/(loss) per weighted average common share:
Basic
Diluted
$
$
1.09 $
1.08 $
1.30 $
1.29 $
0.60
0.59
Weighted average number of common shares outstanding:
Basic
Diluted
265,386
267,311
258,669
263,752
251,528
253,445
1,162
15,098
16,260
10
16,270
143,572
159,842
See accompanying notes to consolidated financial statements.
F 5
UDR, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(In thousands)
Net income/(loss)
$
320,380 $
357,159 $
159,842
Year Ended December 31,
2016
2015
2014
Other comprehensive income/(loss), including portion
attributable to noncontrolling interests:
Other comprehensive income/(loss) derivative
instruments:
Unrealized holding gain/(loss)
3,514
(6,393)
(8,695)
(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
3,657
2,262
4,834
7,171
(4,131)
(3,861)
327,551
353,028
155,981
(27,764)
(16,468)
(5,375)
Comprehensive income/(loss) attributable to UDR, Inc.
$
299,787 $
336,560 $
150,606
See accompanying notes to consolidated financial statements.
F 6
UDR, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share and per share data)
Preferred
Stock
Common
Stock
Paidin
Capital
Distributions
in Excess of
Net Income
Accumulated
Other
Comprehensive
Income/(Loss),
net
Noncontrolling
Interests
Total
$ 46,571 $
2,507 $ 4,109,765 $ (1,342,070) $
(5,125) $
856 $ 2,812,504
—
—
—
154,334
—
—
—
—
—
—
—
8
9,797
—
34
99,815
—
—
—
—
—
2
4,370
—
—
—
—
(263,503)
—
—
—
(3,724)
—
—
—
(73,954)
—
—
(3,730)
—
—
—
—
—
—
—
154,334
(3)
—
—
(3)
(3,730)
9,805
—
99,849
—
4,372
—
(263,503)
—
(3,724)
—
(73,954)
46,571
2,551
4,223,747
(1,528,917)
(8,855)
853
2,735,950
—
—
—
340,383
—
—
—
—
—
—
—
3
10,191
—
63
209,948
(114)
1
—
—
114
—
—
—
—
—
—
—
—
1
3,816
—
—
—
—
(289,500)
—
—
—
(3,722)
—
—
—
(102,703)
—
—
(3,823)
—
—
—
—
—
—
—
—
—
340,383
3
—
3
(3,823)
—
10,194
—
210,011
—
—
—
1
—
3,817
—
(289,500)
—
(3,722)
—
(102,703)
Balance at December 31,
2013
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 the
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
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
Conversion of Series E
Cumulative Convertible
Shares
Issuance of Series F
Preferred Stock
Adjustment for
conversion of
noncontrolling interest
of unitholders in the
Operating Partnership
Common stock
distributions declared
($1.11 per share)
Preferred stock
distributions declared
Series E ($1.3288 per
share)
Adjustment to reflect
redemption value of
redeemable
noncontrolling interests
F 7
UDR, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
(In thousands, expect share and per share data)
Preferred
Stock
Common
Stock
Paidin
Capital
Distributions
in Excess of
Net Income
Accumulated
Other
Comprehensive
Income/(Loss),
net
Noncontrolling
Interests
Total
$ 46,458 $
2,618 $ 4,447,816 $ (1,584,459) $
(12,678) $
856 $ 2,900,611
—
—
—
292,718
—
—
—
—
—
—
—
292,718
322
322
—
—
—
—
—
(1,155)
(1,155)
—
—
—
—
—
—
—
—
—
—
2
4,973
—
50
173,161
—
—
—
—
—
—
3
9,463
—
—
—
—
(315,102)
—
—
—
(3,717)
—
—
—
24,735
—
—
7,069
—
—
—
—
—
—
102
3,735
—
—
102
3,735
7,069
4,975
—
173,211
—
9,466
—
(315,102)
—
(3,717)
—
24,735
$ 46,458 $
2,673 $ 4,635,413 $ (1,585,825) $
(5,609) $
3,860 $ 3,096,970
See accompanying notes to consolidated financial statements.
F 8
Balance at December 31,
2015
Net income/(loss)
attributable to UDR,
Inc.
Net income/(loss)
attributable to
noncontrolling interests
Disposition of
noncontrolling interest
of consolidated real
estate
Contribution of
noncontrolling interests
in consolidated real
estate
Long Term Incentive
Plan Unit grants
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 the
Operating Partnership
and DownREIT
Partnership
Common stock
distributions declared
($1.18 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,
2016
UDR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except for share data)
Operating Activities
Net income/(loss)
Year Ended December 31,
2016
2015
2014
$ 320,380 $ 357,159 $ 159,842
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Depreciation and amortization
425,638
381,277
363,929
(Gain)/loss on sale of real estate owned, net of tax
(210,851)
(251,677)
(143,647)
Tax (benefit)/provision, net
(3,774)
(3,886)
(15,136)
(Income)/loss from unconsolidated entities
(52,234)
(62,329)
Return on investment in unconsolidated joint ventures
Amortization of sharebased compensation
Other
Changes in operating assets and liabilities:
(Increase)/decrease in operating assets
Increase/(decrease) in operating liabilities
57,578
13,398
11,861
27,012
18,017
6,612
7,006
4,943
13,954
13,104
(12,983)
(12,084)
(3,968)
(9,590)
(1,074)
(5,618)
Net cash provided by/(used in) operating activities
536,929
458,627
397,303
Investing Activities
Acquisition of real estate assets (net of liabilities assumed)
and initial capital expenditures
(163,015)
(244,769)
(228,810)
Proceeds from sales of real estate investments, net
302,354
387,650
383,886
Development of real estate assets
(178,279)
(103,205)
(251,493)
Capital expenditures and other major improvements — real
estate assets, net of escrow reimbursement
Capital expenditures — nonreal estate assets
Investment in unconsolidated joint ventures
Distributions received from unconsolidated joint ventures
(Issuance)/repayment of notes receivable
(91,852)
(113,400)
(96,679)
(4,439)
(4,049)
(5,497)
(40,162)
(217,642)
(222,930)
66,116
(3,000)
32,279
(2,325)
54,256
68,664
Net cash provided by/(used in) investing activities
(112,277)
(265,461)
(298,603)
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
(375,308)
(193,958)
(80,961)
50,000
127,600
5,502
(95,053)
(325,540)
(312,500)
300,000
299,310
(128,650)
(2,500)
298,956
152,500
Proceeds from the issuance of common shares through public
offering, net
173,211
210,011
99,849
Distributions paid to redeemable noncontrolling interests
(29,688)
(10,654)
Distributions paid to preferred stockholders
(3,717)
(3,722)
(9,929)
(3,724)
Distributions paid to common stockholders
(308,923)
(283,168)
(256,100)
Other
(11,154)
(19,027)
(7,318)
Net cash provided by/(used in) financing activities
(429,282)
(201,648)
(113,725)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
(4,630)
6,742
(8,482)
(15,025)
15,224
30,249
Cash and cash equivalents, end of year
$
2,112 $
6,742 $
15,224
F 9
UDR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands, except for share data)
Supplemental Information:
Interest paid during the period, net of amounts capitalized
$ 124,635 $ 130,240 $ 131,815
Cash paid/(refunds received) for income taxes
693
(1,014)
1,345
Year Ended December 31,
2016
2015
2014
Noncash transactions:
Transfer of investment in and advances to unconsolidated
joint ventures to real estate owned
$
80,583 $
— $
54,938
Secured debt assumed in the consolidation of
unconsolidated joint ventures
Fair value adjustment of secured debt assumed in the
consolidation of unconsolidated joint ventures
Acquisition of communities in exchange for DownREIT
units and assumption of debt
Acquisition of real estate
Fair value adjustment of debt acquired as part of
acquisition of real estate
Development costs and capital expenditures incurred but
not yet paid
Conversion of Operating Partnership and DownREIT
Partnership noncontrolling interests to common stock
(260,292 shares in 2016; 112,174 shares in 2015; and
153,451 shares in 2014)
Dividends declared but not yet paid
75,796
4,228
—
—
—
—
660,832
24,067
—
1,363
—
—
—
—
—
46,285
20,375
34,746
9,466
3,817
86,936
80,368
4,372
69,460
See accompanying notes to consolidated financial statements.
F 10
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016
1. CONSOLIDATION AND BASIS OF PRESENTATION
Organization and Formation
UDR, Inc. (“UDR,” the “Company,” “we,” or “our”) is a selfadministered real estate investment trust, or REIT, that owns,
operates, acquires, renovates, develops, redevelops, and manages apartment communities generally in high barriertoentry markets
located in the United States. The high barriertoentry markets are characterized by limited land for new construction, difficult and
lengthy entitlement process, expensive singlefamily home prices and significant employment growth potential. At December 31,
2016, our consolidated apartment portfolio consisted of 127 consolidated communities located in 18 markets consisting
of 39,454 apartment homes. In addition, the Company has an ownership interest in 6,849 apartment homes through unconsolidated
joint ventures.
Basis of Presentation
The accompanying consolidated financial statements of UDR include its whollyowned and/or controlled subsidiaries (see
the “Consolidated Joint Ventures” section of Note 6, 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”) and UDR Lighthouse DownREIT L.P. (the “DownREIT
Partnership”). As of December 31, 2016 and 2015, there were 183,278,698 units in the Operating Partnership (“OP Units”)
outstanding, of which 174,230,084 or 95.1% and 174,225,399 or 95.1%, respectively, were owned by UDR
and 9,048,614 or 4.9% and 9,053,299 or 4.9%, respectively, were owned by outside limited partners. As of December 31,
2016 and 2015, there were 32,367,380 units in the DownREIT Partnership (“DownREIT Units”) outstanding, of
which 16,485,014 or 50.9% and 16,229,407 or 50.1%, respectively, were owned by UDR (of which, 13,470,651 or 41.6% were held
by the Operating Partnership) and 15,882,366 or 49.1% and 16,137,973 or 49.9%, respectively, were owned by outside limited
partners. The consolidated financial statements of UDR include the noncontrolling interests of the unitholders in the Operating
Partnership and DownREIT Partnership.
The Company evaluated subsequent events through the date its financial statements were issued. No significant recognized
or nonrecognized subsequent events were noted other than those in Note 4, Real Estate Owned, Note 6, Joint Ventures and
Partnerships and Note 7, Secured and Unsecured Debt, Net.
2. SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Pronouncements
In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017
01, Business Combinations (Topic 805), Clarifying the Definition of a Business. The ASU changes the definition of a business to
assist entities with evaluating whether a set of transferred assets is a business. As a result, the accounting for acquisitions of real estate
could be impacted. The updated standard will be effective for the Company on January 1, 2018; early adoption is permitted. The
ASU will be applied prospectively to any transactions occurring within the period of adoption. The Company expects that the
updated standard will result in fewer acquisitions of real estate meeting the definition of a business and fewer acquisitionrelated
costs being expensed in the period incurred.
In November 2016, the FASB issued ASU 201618, Statement of Cash Flows (Topic 230), Restricted Cash. The ASU
addresses the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. The updated standard will
be effective for the Company on January 1, 2018 and must be applied retrospectively to all periods presented; early adoption is
permitted. The Company does not expect the updated standard to have a material impact on the consolidated financial statements and
related disclosures.
In August 2016, the FASB issued ASU 201615, Statement of Cash Flows (Topic 230), Classification of Certain Cash
Receipts and Cash Payments. The ASU addresses specific cash flow items with the objective of reducing existing diversity in
practice, including the treatment of distributions received from equity method investees. The updated standard will be effective for
the Company on January 1, 2018 and must be applied retrospectively to all periods presented; early adoption is permitted.
F 11
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
The Company elected to early adopt ASU 201615 in 2016 and elected to classify distributions received from equity method
investees using the cumulative earnings approach. As a result, for the years ended December 31, 2015 and 2014, the following
amounts classified under the adopted ASU as returns on investment in unconsolidated joint ventures were reclassified on the
Consolidated Statements of Cash Flow (in thousands):
Return on investment in unconsolidated joint ventures as previously
presented
$
Return on investment in unconsolidated joint ventures
Return on investment in unconsolidated joint ventures as
presented herein
Distributions received from unconsolidated joint ventures as
previously presented
Return on investment in unconsolidated joint ventures
Distributions received from unconsolidated joint ventures as
presented herein
$
$
$
Year Ended December 31,
2015
2014
— $
27,012
27,012 $
—
4,943
4,943
59,291 $
(27,012)
59,199
(4,943)
32,279 $
54,256
In June 2016, the FASB issued ASU 201613, Financial InstrumentsCredit Losses (Topic 326), Measurement of Credit
Losses on Financial Instruments. The standard requires entities to estimate a lifetime expected credit loss for most financial assets,
including trade and other receivables, heldtomaturity debt securities, loans and other financial instruments, and to present the net
amount of the financial instrument expected to be collected. The updated standard will be effective for the Company on January 1,
2020; early adoption is permitted on January 1, 2019. The Company is currently evaluating the effect that the updated standard will
have on the consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU 201609, CompensationStock Compensation (Topic 718), Improvements to
Employee ShareBased Payment Accounting. The ASU aims to simplify the accounting for sharebased payments by amending the
accounting for forfeitures, statutory tax withholding requirements, classification in the statements of cash flow and income taxes. The
updated standard was effective for the Company on January 1, 2017, at which time the Company prospectively began accounting for
forfeitures as incurred and began applying the updated rules for statutory withholdings. The adoption did not have a material impact
on the consolidated financial statements and related disclosures.
In February 2016, the FASB issued ASU No. 201602, Leases. The standard amends the existing lease accounting guidance
and requires lessees to recognize a lease liability and a rightofuse asset for all leases (except for shortterm leases that have a
duration of one year or less) on their balance sheets. Lessees will continue to recognize lease expense in a manner similar to current
accounting. For lessors, accounting for leases under the new guidance is substantially the same as in prior periods, but eliminates
current real estatespecific provisions and changes the treatment of initial direct costs. Entities are required to use a modified
retrospective approach for leases that exist or are entered into after the beginning of the earliest comparable period presented, with an
option to elect certain transition relief. Full retrospective application is prohibited. The standard will be effective for the Company on
January 1, 2019, with early adoption permitted. While the Company is currently evaluating the effect that the updated standard will
have on our consolidated financial statements and related disclosures, we expect to recognize rightofuse assets and related lease
liabilities on our consolidated balance sheets related to ground leases on any communities where we are the lessee.
In February 2015, the FASB issued ASU 201502, Amendments to the Consolidation Analysis, which makes changes to both
the variable interest model and the voting model of consolidation. Under ASU 201502, companies will need to reevaluate whether
an entity meets the criteria to be considered a variable interest entity (“VIE”) or whether the consolidation of an entity should be
assessed under the voting model. The new standard specifically eliminates the presumption in the current voting model that a general
partner controls a limited partnership or similar entity unless that presumption can be overcome. The new standard was effective for
the Company beginning on January 1, 2016. The adoption of the new standard did not result in the consolidation of entities not
previously consolidated or the deconsolidation of any entities previously consolidated. Upon adopting the new standard, the
Operating Partnership and DownREIT Partnership became VIEs as the limited partners of these entities lack substantive kickout
rights and substantive participating rights. The Company is the primary beneficiary of, and continues to consolidate, the entities
determined to be VIEs.
In May 2014, the FASB issued ASU No. 201409, 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 will replace most existing
revenue recognition guidance in U.S. GAAP when it becomes effective, including industryspecific revenue guidance. The standard
specifically excludes lease contracts. The ASU allows for the use of either the full or modified retrospective
F 12
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
transition method and will be effective for the Company on January 1, 2018, at which time the Company expects to adopt the
updated standard using the modified retrospective approach. However, as the majority of the Company’s revenue is from rental
income related to leases, the Company does not expect the ASU to have a material impact on the 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 leaseup. Depreciation on the building is based on the expected useful life of the asset and the
inplace 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 longlived 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 longlived 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 disposition 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 disposition is carried at the lower of cost, net of accumulated depreciation, or fair value, less the cost to sell, determined on an
assetbyasset basis. Expenditures for ordinary repair and maintenance costs on held for disposition properties are charged to expense
as incurred. Expenditures for improvements, renovations, and replacements related to held for disposition properties are capitalized at
cost. Depreciation is not recorded on real estate held for disposition.
Depreciation is computed on a straightline 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, 2016, 2015, and 2014 were $7.9 million, $6.3 million and $9.0 million, respectively. During the years
ended December 31, 2016, 2015, and 2014, total interest capitalized was $16.5 million,
F 13
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
$16.1 million, and $20.2 million, respectively. As each home in a capital project is completed and becomes available for leaseup, the
Company 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 shortterm, 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, nonmonetary
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, 2016 and 2015 (dollars in thousands):
Note due February 2020 (a)
Note due July 2017 (b)
Note due October 2020 (c)
Note due April 2021 (d)
Total notes receivable, net
Interest rate at
Balance Outstanding
December 31,
2016
December 31,
2016
December 31,
2015
10.00% $
12,994 $
12,994
8.00%
8.00%
10.00%
2,500
1,296
3,000
2,500
1,200
—
$
19,790 $
16,694
(a) The Company has a secured note receivable with an unaffiliated third party with an aggregate commitment of $13.0
million. 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 eighth anniversary of the date of the note (February 2020).
In March 2016, the terms of this secured note receivable were amended to extend the maturity from the fifth
anniversary of the date of the note (February 2017) to the eighth anniversary of the date of the note (February 2020).
F 14
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(b) The Company has a secured note receivable with an unaffiliated third party with an aggregate commitment of $2.5
million. 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).
(c) The Company has a secured note receivable with an unaffiliated third party with an aggregate commitment of $2.0
million. Interest payments are due when the loan matures. The note matures at the earliest of the following: (a) the closing
of any private or public capital raising in the amount of $10.0 million or greater; (b) an acquisition; (c) acceleration in the
event of default; or (d) the fifth anniversary of the date of the note (October 2020).
(d) In April 2016, the Company entered into a secured note receivable with an unaffiliated third party with an aggregate
commitment of $15.0 million. During the year ended December 31, 2016, the Company loaned $3.0 million. 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 $25.0 million or greater; (b) an acquisition; (c) acceleration in the event of default; or (d) the fifth
anniversary of the date of the note (April 2021).
During the years ended December 31, 2016, 2015, and 2014, the Company recognized $1.8 million, $1.5 million and $3.4
million, respectively, of interest income from notes receivable, none of which was related party interest income. Interest income is
included in Interest income 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 other 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, 2016, 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 otherthantemporary decline in value. We consider various factors to determine if a decrease in the value of the investment is
otherthantemporary. 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 longterm 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 nondesignated 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, 2016
Redeemable Noncontrolling Interests in the Operating Partnership and DownREIT Partnership
Interests in the Operating Partnership and the DownREIT Partnership held by limited partners are represented by OP Units
and DownREIT Units, respectively. The income is allocated to holders of OP Units/DownREIT Units based upon net income
available to common stockholders and the weighted average number of OP Units/DownREIT Units outstanding to total common
shares plus OP Units/DownREIT 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 agreements of the Operating Partnership and the
DownREIT Partnership.
Limited partners of the Operating Partnership and the DownREIT Partnership have the right to require such partnership to
redeem all or a portion of the OP Units/DownREIT Units held by the limited partner at a redemption price equal to and in the form of
the Cash Amount (as defined in the partnership agreement of the Operating Partnership or the DownREIT Partnership, as applicable),
provided that such OP Units/DownREIT Units have been outstanding for at least one year. UDR, as the general partner of the
Operating Partnership and the DownREIT Partnership may, in its sole discretion, purchase the OP Units/DownREIT 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/DownREIT Unit), as defined in the partnership agreement of the Operating Partnership or the DownREIT Partnership,
as applicable. 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”).
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, 2016 and 2015, UDR’s net deferred tax asset was $0.6 million and $11.8 million, respectively.
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 twostep 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, 2016. UDR and its subsidiaries
are subject to federal income tax as well as income tax of various state and local jurisdictions. The tax
years 2013 through 2015 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 Tax benefit/(provision), net on the Consolidated Statements
of Operations.
Principles of Consolidation
The Company accounts for subsidiary partnerships, joint ventures and other similar entities in which it holds an ownership
interest in accordance with the amended consolidation guidance. The Company first evaluates whether each entity is a VIE. Under
the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb
losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting
F 16
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest.
Discontinued Operations
In accordance with GAAP, 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.
We record sales of real estate that do not meet the definition of a discontinued operation in Gain/(loss) on sale of real estate
owned, net of tax on the Consolidated Statements of Operations.
StockBased 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 BlackScholesMerton 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 10, Employee Benefit Plans.
Advertising Costs
All advertising costs are expensed as incurred and reported on the Consolidated Statements of Operations within the line
item Property operating and maintenance. During the years ended December 31, 2016, 2015, and 2014, total advertising expense
was $6.4 million, $6.4 million, and $6.0 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 straightline basis,
which approximates the effective interest method, over a period not to exceed the term of the related debt.
Comprehensive Income/(Loss)
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, 2016, 2015, and 2014, 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 reclassified from other comprehensive income/(loss) into earnings, and the allocation of other comprehensive
income/(loss) to noncontrolling interests. The (gain)/loss on derivative instruments reclassified from other comprehensive
income/(loss) is included in Interest expense on the Consolidated Statements of Operations. See Note 14, Derivatives and Hedging
Activity, for further discussion. The allocation of other comprehensive income/(loss) to redeemable noncontrolling interests during
the years ended December 31, 2016, 2015, and 2014 was $0.1 million, $(0.3) million, and $(0.1) million, respectively.
Use of Estimates
F 17
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
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, 2016, 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. 201408, Reporting Discontinued Operations and
Disclosures of Disposals of Components of an Entity, for all communities not previously sold or classified as held for disposition.
The standard had a material impact on the Company’s consolidated financial statements. As a result of adopting the ASU, during the
years ended December 31, 2016, 2015 and 2014, gains, net of tax, of $210.9 million, $251.7 million and $142.5 million (excluding
a $1.1 million gain related to the sale of land) respectively, 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 201408, FASB Accounting Standards Codification ("ASC") Subtopic 20520
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 period ended December 31, 2014.
During 2014, the Company sold one operating property that was classified as held for disposition prior to the adoption of
ASU 201408 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 less than $0.1 million. The gain, net of tax, and operating results of the property for the year ended
December 31, 2014 are included in Income/(loss) from discontinued operations, net of tax on the Consolidated Statements of
Operations.
F 18
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
The following is a summary of Income/(loss) from discontinued operations, net of tax for the years ended December 31,
2016, 2015, and 2014 (dollars in thousands):
Rental income
Rental expenses
Property management
Real estate depreciation
Interest income and other (income)/expense, net
Income/(loss) attributable to disposed properties and assets held
for disposition
Net gain/(loss) on the sale of depreciable property
Impairment charges
Income tax benefit/(provision)
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,
2016
2015
2014
$
— $
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
— $
— $
— $
— $
147
225
4
—
21
(103)
75
—
38
10
10
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 disposition properties. As of December 31, 2016, the Company owned and
consolidated 127 communities in 10 states plus the District of Columbia totaling 39,454 apartment homes. The following table
summarizes the carrying amounts for our real estate owned (at cost) as of December 31, 2016 and 2015 (dollars in thousands):
Land
Depreciable property — held and used:
Land improvements
December 31,
2016
December 31,
2015
$
1,801,576 $
1,833,156
178,701
173,821
Building, improvements, and furniture, fixtures and equipment
7,291,570
7,046,622
Under development:
Land and land improvements
Building, improvements, and furniture, fixtures and equipment
Real estate held for disposition:
Land and land improvements
Building, improvements, and furniture, fixtures and equipment
Real estate owned
Accumulated depreciation
Real estate owned, net
Acquisitions
111,028
231,254
1,104
520
78,085
45,987
9,963
2,642
9,615,753
9,190,276
(2,923,625)
(2,646,874)
$
6,692,128 $
6,543,402
In November 2016, the Company acquired an operating community in Redmond, Washington with177 apartment homes for
approximately $70.5 million, which was funded with taxdeferred likekind exchanges under Section 1031 of the Internal Revenue
Code of 1986 (“Section 1031 exchanges”).
In October 2016, the Company increased its ownership from 50% to 100% in two operating communities located in
Bellevue, Washington with a total of 331 apartment homes for approximately $70.3 million in cash, which was funded with tax
deferred Section 1031 exchanges and the assumption of an incremental $37.9 million of secured debt with a weighted average
interest rate of 3.67%. As a result, the Company consolidated the operating communities. The Company had previously
F 19
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
accounted for its 50% ownership interest as an unconsolidated joint venture (see Note 6, Joint Ventures and Partnerships). We
accounted for the acquisition as a business combination resulting in a gain on consolidation of approximately $36.4 million. As a
result of the consolidation, the Company increased its real estate owned by $215.0 million and secured debt by $80.0 million.
In August 2016, the Company increased its ownership interest from 5% to 100% in a parcel of land in Dublin, California for
a purchase price of approximately $8.5 million. As a result, the Company consolidated the parcel of land. UDR had previously
accounted for its 5% interest in the parcel of land as an unconsolidated joint venture (see Note 6, Joint Ventures and Partnerships).
We accounted for the consolidation as an asset acquisition resulting in no gain or loss upon consolidation and increased our real
estate owned by $8.9 million.
In June 2016, the Company increased its ownership interest from 50% to 100% in a parcel of land in Los Angeles, California
for a purchase price of approximately $20.1 million. As a result, the Company consolidated the parcel of land. UDR had previously
accounted for its 50% interest in the parcel of land as an unconsolidated joint venture (see Note 6, Joint Ventures and Partnerships).
We accounted for the consolidation as an asset acquisition resulting in no gain or loss upon consolidation and increased our real
estate owned by $31.1 million. Subsequent to the acquisition, the Company entered into a triplenet operating ground lease for the
parcel of land at market terms with a thirdparty developer. The lessee plans to construct a multifamily community on the parcel of
land. The ground lease provides the ground lessee with options to buy the fee interest in the parcel of land. The lease term is 49 years
plus two 25year extension options, does not transfer ownership to the lessee, and does not include a bargain purchase option.
In October 2015, the Company completed the acquisition of six Washington, D.C. area properties from Home Properties,
L.P., a New York limited partnership (“Home OP”), for a contractual purchase price of $900.6 million, which was comprised
of $564.8 million of newly issued DownREIT Units in the newly formed DownREIT Partnership issued at $35 per unit (a total
of 16.1 million units), the assumption of $89.3 million of debt, $221.0 million of reverse taxdeferred Section 1031 exchanges,
and $25.5 million of cash. In addition, the Company issued approximately 14.0 million shares of its Series F Preferred Stock to former
limited partners of Home OP, which had the right to subscribe for one share of Series F Preferred Stock for each DownREIT Unit
issued in connection with the acquisitions.
In February 2015, the Company acquired an office building in Highlands Ranch, Colorado, for 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. All existing leases were
assumed by the Company at the time of the acquisition.
On January 25, 2017, the Company exercised its fixed price option to purchase the joint venture partner’s ownership interest
and therefore increased its ownership interest from 49% to 100% in an operating community located in Seattle, Washington
with 244 apartment homes for a cash purchase price of approximately $66.0 million. As a result, as of January 25, 2017, the Company
consolidated the operating community. As of December 31, 2106, the Company accounted for its 49% interest as a preferred equity
investment in an unconsolidated joint venture (see Note 6, Joint Ventures and Partnerships).
The Company incurred $0.2 million, $2.1 million and $0.4 million of acquisitionrelated costs during the years
ended December 31, 2016, 2015, and 2014, respectively. These expenses are reported within the line item General and
administrative on the Consolidated Statements of Operations.
Dispositions
In November 2016, the Company sold seven operating communities with a total 1,402 apartment homes in Baltimore,
Maryland and an operating community with 380 apartment homes in Dallas, Texas for gross proceeds of $284.6 million, resulting in
net proceeds of $280.5 million and a gain, net of tax, of $200.5 million. A portion of the proceeds was designated for taxdeferred
Section 1031 exchanges that was used for certain 2016 acquisitions.
F 20
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
In May 2016, the Company sold a retail center in Bellevue, Washington for gross proceeds of $45.4 million, resulting in net
proceeds of $44.1 million and a gain, net of tax, of $7.3 million. A portion of the proceeds was designated for taxdeferred Section
1031 exchanges.
In March 2016, the Company sold its 95% ownership interest in two parcels of land in Santa Monica, California for gross
proceeds of $24.0 million, resulting in net proceeds of $22.0 million and a gain, net of tax, of $3.1 million.
During the year ended December 31, 2015, the Company sold 12 operating communities with a total of 2,735 apartment
homes for gross proceeds of $408.7 million, resulting in net proceeds of $387.7 million and a gain of $251.7 million. A portion of the
sale proceeds was designated for taxdeferred Section 1031 exchanges for a 2014 acquisition and the October 2015 acquisitions.
5. VARIABLE INTEREST ENTITIES
As of January 1, 2016, the Company adopted ASU 201502. See discussion in Note 2, Significant Accounting Policies for
further details. As a result of the adoption, the Operating Partnership and DownREIT Partnership were determined to be VIEs. As the
Company was determined to be the primary beneficiary, we will continue to consolidate these entities.
The Company has determined that the Operating Partnership and DownREIT Partnership are VIEs as the limited partners
lack substantive kickout rights and substantive participating rights. The Company has concluded that it is the primary beneficiary of,
and therefore continues to consolidate, the Operating Partnership and DownREIT Partnership based on its role as the manager of the
communities and its direct ownership interests, including all general partner interests. The Company's role as community manager
and its equity interests give us the power to direct the activities that most significantly impact the economic performance and the
obligation to absorb potentially significant losses or the right to receive potentially significant benefits of the Operating Partnership
and DownREIT Partnership.
See the consolidated financial statements of the Operating Partnership presented within this Report and Note
4, Unconsolidated Entities, to the Operating Partnership's consolidated financial statements for the results of operations of the
Operating Partnership and DownREIT Partnership, respectively.
6. 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 decisionmaking process nor the ability to
remove us as general partner or managing partner without cause.
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.
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, 2016
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, 2016 and 2015 (dollars in
thousands):
Joint Venture
Location of
Properties
Operating and development:
UDR/MetLife I
(a)
UDR/MetLife
II (c)
Los
Angeles,
CA
Various
Other
UDR/MetLife
Development
Joint Ventures
(d)
Various
Number of
Properties
Number of
Apartment
Homes
Investment at
UDR’s Ownership Interest
December 31,
2016
December 31,
2016
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
150
$
25,209 $
15,894
50.0%
17.2%
4,059
311,282
425,230
50.0%
50.0%
1,437
160,979
171,659
50.6%
50.6%
1
development
community
(b)
18 operating
communities
1 operating
community;
4
development
communities
(b)
3 operating
communities;
1
development
community
(b);
UDR/MetLife
Vitruvian
Park®
UDR/KFH
Addison,
TX
5 land
parcels
Washington,
D.C.
3 operating
communities
1,513
72,414
73,469
50.0%
50.0%
660
12,835
17,211
30.0%
30.0%
Investment in and advances to unconsolidated
joint ventures, net, before participating loan
investment and preferred equity investment
$ 582,719 $
703,463
Location
Rate
Participating loan investment:
Investment at
Years To
Maturity
December 31,
2016
December 31,
2015
Income from investments for
the years ending December
31,
2016
2015
2014
Steele Creek
Denver, CO
6.5%
0.6
$
94,003 $
90,747 $ 6,213
$
5,453 $ 2,350
Preferred equity investment:
West Coast
Development
Joint Venture
(e)
Various
6.5% (e)
N/A
150,303
144,696 $ 4,561
$
3,692 $ —
Total investment in and advances to unconsolidated joint
$ 827,025 $ 938,906
ventures, net
(a)
In August 2016, the Company increased its ownership interest from 5% to 100% in a parcel of land in Dublin,
California for a purchase price of approximately $8.5 million. As a result, the Company consolidated the parcel of land
and it is no longer accounted for as an unconsolidated joint venture (see Note 4, Real Estate Owned). The parcel of land
was previously held in the UDR/MetLife I joint venture.
F 22
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
In August 2016, the Company sold its 3% and 6% interests in two parcels of land located in
Los Angeles, California and Bellevue, Washington, respectively, to MetLife for a sales price of approximately $3.0
million, resulting in a loss on sale to the Company of approximately $0.9 million. The parcels of land were previously
held in the UDR/MetLife I joint venture and are no longer accounted for as unconsolidated joint ventures.
(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, 2016, 736 apartment homes had been completed in Other
UDR/MetLife Development Joint Ventures, and no apartment homes had been completed in UDR/MetLife I or in
UDR/MetLife Vitruvian Park®.
(c)
In September 2015, the 717 Olympic community, which is owned by the UDR/MetLife II joint venture, experienced
extensive water damage due to a ruptured water pipe. For the years ended December 31, 2016 and 2015, the Company
recorded casualtyrelated charges/(recoveries) of $(3.8) million and $2.5 million, respectively, its proportionate share of
the total charges/(recoveries) recognized.
In September 2016, the UDR/MetLife II joint venture sold an operating community located in
Dallas, Texas with 252 apartment homes for a sales price of approximately $74.7 million, resulting in a gain of
approximately $11.3 million for the Company.
In October 2016, the Company increased its ownership from 50% to 100% in two operating
communities located in Bellevue, Washington with a total of 331 apartment homes for a cash purchase price of
approximately $70.3 million in cash and the assumption of an incremental $37.9 million of secured debt with a
weighted average interest rate of 3.67%. As a result, the Company consolidated the operating communities and they are
no longer accounted for as unconsolidated joint ventures (see Note 4, Real Estate Owned). The operating communities
were previously held in the UDR/MetLife II joint venture.
(d) In June 2016, the Company increased its ownership interest from 50% to 100% in a parcel of land in Los Angeles,
California for a purchase price of approximately $20.1 million. As a result, the Company consolidated the parcel of land
and it is no longer accounted for as an unconsolidated joint venture (see Note 4, Real Estate Owned). The parcel of land
was previously held in Other/UDR MetLife Development Joint Ventures.
(e) As of December 31, 2016, construction was completed on four of the five communities held by the West Coast
Development Joint Venture and two of the five communities had achieved stabilization, which, for purposes of the joint
venture, is defined as when a community reaches 80% occupancy for 90 consecutive days. Upon stabilization, income
and expense are shared based on each partner's ownership percentage and the Company no longer receives
a 6.5% preferred return on its investment in the stabilized community. The remaining three communities have not
achieved stabilization and the Company continues to receive a 6.5% preferred return on its investment in those
communities.
The Company will serve as property manager and be paid a management fee during the lease
up phase and subsequent operation of each of the communities. The joint venture partner is the general partner of the
joint venture and the developer of the communities.
The Company has a fixed price option to acquire the remaining interest in each community
beginning one year after completion. If the options are exercised for all five communities, the Company’s total purchase
price will be $597.4 million. In the event the Company does not exercise its options to purchase at
least two communities, the joint venture partner will be entitled to earn a contingent disposition fee equal
to 6.5% return on its implied equity in the communities not acquired. The joint venture partner is providing certain
guaranties and there are construction loans on all five communities. Once completed, the five communities will
contain 1,533 homes.
The Company has concluded it does not control the joint venture and accounts for it under the
equity method of accounting. The Company's recorded equity investment in the West Coast Development Joint Venture
at December 31, 2016 and 2015 of $150.3 million and $144.7 million, respectively, is inclusive of outside basis costs
and our accrued but unpaid preferred return. During the the year ended December 31, 2016, the Company earned a
preferred return of $4.6 million. During the year ended December 31, 2015, the Company earned a preferred return
of $5.2 million, offset by its share of the West Coast Development Joint Venture transaction expenses of $1.5 million.
F 23
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
On January 25, 2017, the Company exercised its fixed price option to purchase the joint
venture partner’s ownership interest and therefore increased its ownership interest from 49% to 100% in an operating
community located in Seattle, Washington with 244 apartment homes for a cash purchase price of approximately $66.0
million. As a result, as of January 25, 2017, the Company consolidated the operating community and it is no longer
accounted for as an unconsolidated joint venture (see Note 4, Real Estate Owned). The operating community was one of
the five communities held by the West Coast Development Joint Venture as of December 31, 2016.
As of December 31, 2016 and 2015, the Company had deferred fees and deferred profit of $9.5 million and $6.8 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 of management fees during each of the years ended December 31, 2016, 2015,
and 2014, 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 development, 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 otherthantemporary decline in value. We consider various factors to determine if a decrease in the
value of the investment is otherthantemporary. The Company did not recognize any otherthantemporary decrease in the value of
its other investments in unconsolidated joint ventures or partnerships during the years ended December 31, 2016, 2015, and 2014.
F 24
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
Condensed summary financial information relating to the unconsolidated joint ventures’ and partnerships’ operations (not
just our proportionate share), is presented below for the years ended December 31, 2016, 2015, and 2014 (dollars in thousands):
UDR/MetLife
I
UDR/MetLife
II
Other
UDR/MetLife
Development
Joint
Ventures
UDR/MetLife
Vitruvian
Park®
UDR/KFH
Total
As of and For the
Year Ended
December 31, 2016
Condensed
Statements of
Operations:
Total revenues
$
278 $
169,175 $
18,090 $
22,916 $ 19,997 $ 230,456
Property operating
expenses
Real estate
depreciation and
amortization
Operating
income/(loss)
Interest expense
Gain/(loss) on the
sale of real estate
Net
income/(loss)
UDR income/(loss)
from unconsolidated
entities
$
$
Condensed Balance
Sheets:
552
52,322
11,655
11,730
7,828
84,087
52
46,135
16,353
6,835
14,444
83,819
(326)
—
70,718
(51,173)
(9,918)
(6,164)
4,351
(5,095)
(2,275)
(5,369)
62,550
(67,801)
(375)
34,201
—
—
—
33,826
(701) $
53,746 $
(16,082) $
(744) $
(7,644) $
28,575
(461) $
56,895 $
1,696 $
(3,603) $
(2,293) $
52,234
Total real estate, net
$
50,656 $
1,672,842 $
698,694 $
270,770 $ 208,105 $2,901,067
Cash and cash
equivalents
Other assets
Total assets
Amount due
to/(from) UDR
1,940
1,641
13,272
11,370
8,991
2,744
7,012
2,266
1,288
1,026
32,503
19,047
54,237
1,697,484
710,429
280,048
210,419 2,952,617
155
(4,711)
3,082
1,566
429
521
Third party debt, net
—
1,128,379
375,597
124,716
165,687 1,794,379
Accounts payable
and accrued
liabilities
5,211
19,996
32,484
7,303
1,397
66,391
Total liabilities
5,366
1,143,664
411,163
133,585
167,513 1,861,291
Total equity
$
48,871 $
553,820 $
299,266 $
146,463 $ 42,906 $1,091,326
UDR’s investment
in and advances to
unconsolidated joint
ventures, net
$
25,208 $
311,282 $
405,286 $
72,414 $ 12,835 $ 827,025
F 25
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
UDR/MetLife
I
UDR/MetLife
II
Other
UDR/MetLife
Development
Joint
Ventures
UDR/MetLife
Vitruvian
Park®
UDR/KFH Texas
Total
As of and For the
Year Ended
December 31, 2015
Condensed
Statements of
Operations:
Total revenues
$
541 $
170,062 $
7,634 $
22,139 $ 19,338 $
— $ 219,714
Property
operating
expenses
Real estate
depreciation and
amortization
Operating
income/(loss)
Interest expense
Income/(loss)
from
discontinued
operations
Net
income/(loss) $
906
63,516
3,826
11,519
7,733
—
87,500
818
46,616
6,897
6,639
14,522
(1,183)
—
59,930
(52,037)
(3,089)
(2,566)
3,981
(4,848)
(2,917)
(5,539)
—
—
—
75,492
56,722
(64,990)
(20)
—
—
—
— 184,138
184,118
(1,203) $
7,893 $
(5,655) $
(867) $
(8,456) $184,138 $ 175,850
UDR
income/(loss)
from
unconsolidated
entities
Condensed
Balance Sheets:
Total real estate,
net
Cash and cash
equivalents
Other assets
$
(513) $
3,578 $
6,088 $
(3,711) $
(2,537) $ 59,424 $
62,329
$
92,915 $
1,942,630 $
604,611 $
273,897 $ 221,704 $
— $3,135,757
1,202
174
20,767
24,914
5,996
1,921
7,185
2,317
1,320
565
10
—
36,480
29,891
Total assets
94,291
1,988,311
612,528
283,399
223,589
10 3,202,128
Amount due
to/(from) UDR
Third party debt,
net
Accounts
payable and
accrued
liabilities
Total
liabilities
$
$
Total equity
UDR’s
investment in
and advances to
2
—
5,929
908
427
—
7,266
—
1,122,662
201,114
126,388
164,299
— 1,614,463
395
24,244
62,267
7,137
1,480
—
95,523
397
1,146,906
269,310
134,433
166,206
— 1,717,252
93,894 $
841,405 $
343,218 $
148,966 $ 57,383 $
10 $1,484,876
15,894 $
425,230 $
407,102 $
73,469 $
17,211 $
— $ 938,906
unconsolidated
joint ventures,
net
For the Year
Ended December
31, 2014
Condensed
Statements of
Operations:
UDR/MetLife
I
UDR/MetLife
II
Other
UDR/MetLife
Development
Joint
Ventures
UDR/MetLife
Vitruvian
Park®
UDR/KFH Texas
Total
Total revenues
$
727
$
152,047 $
1,579 $
19,376
$ 19,724 $ — $193,453
Property
operating
expenses
Real estate
depreciation and
amortization
Operating
income/(loss)
Interest expense
Income/(loss)
from
discontinued
operations
Net
income/(loss) $
618
52,150
1,122
10,711
7,498
—
72,099
2,130
41,504
3,959
7,380
14,426
—
69,399
(2,021)
—
58,393
(48,493)
(3,502)
(94)
1,285
(4,131)
(2,200)
(5,873)
—
—
51,955
(58,591)
(31,802)
—
—
—
—
(4,229)
(36,031)
(33,823) $
9,900 $
(3,596) $
(2,846) $
(8,073) $(4,229) $ (42,667)
UDR
income/(loss)
from
unconsolidated
entities
$
(2,955) $
2,814 $
576 $
(4,068) $
(2,601) $ (772) $ (7,006)
F 26
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
7. SECURED AND UNSECURED DEBT, NET
The following is a summary of our secured and unsecured debt at December 31, 2016 and 2015 (dollars in thousands):
Principal Outstanding For the Year Ended December 31, 2016
December 31,
2016
2015
Weighted
Average
Interest
Rate
Weighted
Average
Years to
Maturity
Number of
Communities
Encumbered
Secured Debt:
Fixed Rate Debt
Mortgage notes payable (a)
$ 402,996 $ 442,617
Fannie Mae credit facilities (b)
Deferred financing costs
355,836
514,462
(2,681)
(4,278)
4.04%
5.06%
6.3
2.8
Total fixed rate secured debt, net
756,151
952,801
4.53%
4.7
Variable Rate Debt
Mortgage notes payable (c)
Taxexempt secured notes payable (d)
Fannie Mae credit facilities (b)
Deferred financing costs
—
94,700
31,337
94,700
280,946
299,378
(939)
(1,271)
Total variable rate secured debt, net
374,707
424,144
Total Secured Debt, net
1,130,858 1,376,945
—%
1.39%
2.13%
1.95%
3.66%
—
6.2
3.2
4.0
4.4
7
10
17
—
2
7
9
26
Unsecured Debt:
Variable Rate Debt
Borrowings outstanding under unsecured
credit facilities due January 2020 (e) (j)
Borrowings outstanding under unsecured
working capital credit facility due January
2019 (f)
Term Loan Facility due January 2021 (e)
(j)
Fixed Rate Debt
5.25% MediumTerm Notes due
January 2016 (g)
6.21% MediumTerm Notes due July
2016 (g)
4.25% MediumTerm Notes due
June 2018 (net of discounts of $608 and
$1,037, respectively) (j)
3.70% MediumTerm Notes due October
2020 (net of discounts of $30 and $38,
respectively) (j)
2.23% Term Loan Facility due January
2021 (e) (j)
4.63% MediumTerm Notes due January
2022 (net of discounts of $1,805 and
$2,164, respectively) (j)
3.75% MediumTerm Notes due July
2024 (net of discounts of $782 and $886,
respectively) (j)
—
150,000
1.37%
3.1
21,350
—
1.67%
2.0
35,000
35,000
1.56%
4.1
—
83,260
—%
—
—
12,091
—%
—
299,392
298,963
4.25%
1.4
299,970
299,962
3.70%
3.8
315,000
315,000
2.23%
4.1
398,195
397,836
4.63%
5.0
299,218
299,114
3.75%
7.5
8.50% Debentures due September 2024
15,644
15,644
8.50%
7.7
4.00% MediumTerm Notes due October
2025 (net of discount of $602 and $671,
respectively) (h) (j)
2.95% MediumTerm Notes due
September 2026 (i) (j)
Other
Deferred financing costs
Total Unsecured Debt, net
Total Debt, net
299,398
299,329
4.00%
8.8
300,000
21
—
24
(12,568)
(12,373)
2.95%
9.7
2,270,620 2,193,850
$3,401,478 $3,570,795
3.73%
3.79%
5.7
5.3
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.
F 27
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
Our secured debt instruments generally feature either monthly interest and principal or monthly interestonly payments with
balloon payments due at maturity. As of December 31, 2016, secured debt encumbered $2.1 billion or 21.5% of UDR’s total real
estate owned based upon gross book value ($7.5 billion or 78.5% of UDR’s real estate owned based on gross book value is
unencumbered).
(a) At December 31, 2016, fixed rate mortgage notes payable are generally due in monthly installments of principal and
interest and mature at various dates from May 2019 through November 2026 and carry interest rates ranging from 3.15% to 5.86%.
On November 1, 2016, the Company entered into a $25.0 million fixed rate mortgage note due November 5, 2026 with an
interest rate of 3.15%. Interest is payable monthly.
On June 1, 2016, the Company entered into a $25.0 million fixed rate mortgage note due June 5, 2026 with an interest rate
of 3.35%. Interest is payable monthly.
The Company will from time to time acquire properties subject to fixed rate debt instruments. In those situations, the
Company records the debt at its estimated fair value and amortizes any difference between the fair value and par value to interest
expense over the life of the underlying debt instrument. In October 2016, the Company assumed debt with a fair market value
of $80.0 million, inclusive of a $4.2 million fair market value adjustment, as part of our acquisition of two operating communities in
Bellevue, Washington, as described in Note 4, Real Estate Owned.
During the years ended December 31, 2016, 2015, and 2014, the Company had $2.9 million, $5.3 million, and $5.1 million,
respectively, of amortization on the fair market adjustment of debt assumed in the 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 $11.2 million and $10.0 million at December 31, 2016 and 2015, respectively.
(b) UDR has three secured credit facilities with Fannie Mae with an aggregate commitment of $636.8
million at December 31, 2016. 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, 2016, $355.8 million of the outstanding balance was fixed and had a weighted
average interest rate of 5.06% and the remaining balance of $280.9 million had a weighted average variable interest rate of 2.13%.
The Company prepaid a portion of the secured credit facility due in May 2017 with a portion of the proceeds from the notes offering
in August 2016, as described in (i) below.
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,
2016
December 31,
2015
$
636,782
$
813,840
737,802
813,544
3.9%
3.8%
822,521
834,003
4.0%
3.9%
(c) In July 2016, the Company paid off the $31.3 million variable rate mortgage note payable with borrowings under its $1.1
billion unsecured revolving credit facility.
(d) The variable rate mortgage notes payable that secure taxexempt housing bond issues mature on August 2019 and March
2032. Interest on these notes is payable in monthly installments. The variable rate mortgage notes have interest rates ranging
from 1.33% to 1.42% as of December 31, 2016.
(e) The Company has a $1.1 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”) and
a $350.0 million senior unsecured term loan facility (the “Term Loan Facility”). The credit agreement for these facilities (the "Credit
Agreement") allows the total commitments under the Revolving Credit Facility and the total borrowings under the Term Loan
Facility to be increased to an aggregate maximum amount of up to $2.0 billion, subject to certain conditions, including obtaining
commitments from any one or more lenders. The Revolving Credit Facility has a scheduled maturity date
F 28
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
of January 31, 2020, with two sixmonth extension options, subject to certain conditions. The Term Loan Facility has a scheduled
maturity date of January 29, 2021.
Based on the Company’s current credit rating, the Revolving Credit Facility has an interest rate equal to LIBOR plus a
margin of 90 basis points and a facility fee of 15 basis points, and the Term Loan Facility has an interest rate equal to LIBOR plus a
margin of 95 basis points. Depending on the Company’s credit rating, the margin under the Revolving Credit Facility ranges
from 85 to 155 basis points, the facility fee ranges from 12.5 to 30 basis points, and the margin under the Term Loan Facility ranges
from 90 to 175 basis points.
The Credit Agreement contains customary representations and warranties and financial and other affirmative and negative
covenants. The Credit Agreement also includes customary events of default, in certain cases subject to customary periods to cure. The
occurrence of an event of default, following the applicable cure period, would permit the lenders to, among other things, declare the
unpaid principal, accrued and unpaid interest and all other amounts payable under the Credit Agreement to be immediately due and
payable.
The following is a summary of shortterm bank borrowings under UDR’s revolving credit facility at December 31,
2016 and 2015 (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,
2016
December 31,
2015
$ 1,100,000
$ 1,100,000
—
161,505
340,000
1.4%
—%
150,000
353,647
541,500
1.1%
1.2%
(1) Excludes $2.9 million and $2.3 million of letters of credit at December 31, 2016 and 2015, respectively.
(f) The Company has a working capital credit facility, which provides for a $75 million unsecured revolving credit facility
(the “Working Capital Credit Facility”) with a scheduled maturity date of January 1, 2019. Based on the Company’s current credit
rating, the Working Capital Credit Facility has an interest rate equal to LIBOR plus a margin of 90 basis points. Depending on the
Company’s credit rating, the margin ranges from 85 to 155 basis points.
In July 2016, the Company amended the working capital credit facility to increase the maximum borrowing capacity
from $30 million to $75 million. The scheduled maturity date and interest rate were unchanged by the amendment.
The following is a summary of shortterm bank borrowings under UDR’s working capital credit facility at December 31,
2016 and December 31, 2015 (dollars in thousands):
Total revolving credit facility
Borrowings outstanding at end of period
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,
2016
December 31,
2015
$
75,000
$
30,000
21,350
21,936
69,633
1.4%
1.7%
—
—
—
—%
—%
(g) Paid off at maturity with borrowings under the Company’s $1.1 billion unsecured revolving credit facility.
(h) The Company previously entered into forward starting interest rate swaps to hedge against interest rate risk on $200
million of this debt. The allin weighted average interest rate, inclusive of the impact of these interest rate swaps, was 4.55%.
F 29
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(i) On August 23, 2016, the Company issued $300 million of 2.95% senior unsecured mediumterm notes due September 1,
2026. Interest is payable semiannually beginning on March 1, 2017. The notes were priced at 100% of the principal amount at
issuance. The Company used the net proceeds to prepay secured debt due in May 2017, pay down a portion of the borrowings
outstanding on its $1.1 billion unsecured credit facility and for general corporate purposes.
(j) The Operating Partnership is a guarantor of the debt.
The aggregate maturities, including amortizing principal payments of secured and unsecured debt, of total debt for the next
ten years subsequent to December 31, 2016 are as follows (dollars in thousands):
Year
Total Fixed
Secured Debt
Total Variable
Secured Debt
Total Secured
Debt
Total
Unsecured
Debt
Total Debt
$
4,433 $
46,568 $
51,001 $
— $
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Thereafter
Subtotal
Noncash (a)
74,637
249,395
198,076
1,117
1,157
41,245
—
127,600
50,000
137,969
67,700
—
—
—
212,606
317,095
198,076
1,117
1,157
96,409
137,654
—
—
—
—
127,600
50,000
27,000
300,000
21,350
300,000
350,000
400,000
—
315,644
300,000
300,000
—
—
27,000
747,660
8,491
375,646
1,123,306
2,286,994
3,410,300
(939)
7,552
(16,374)
(8,822)
51,001
512,606
338,445
498,076
351,117
401,157
137,654
315,644
427,600
350,000
27,000
Total
$
756,151 $
374,707 $
1,130,858 $
2,270,620 $
3,401,478
(a) Includes the unamortized balance of fair market value adjustments, premiums/discounts, deferred hedge gains, and
deferred financing costs. For the years ended December 31, 2016 and 2015, the Company amortized $4.5
million and $7.0 million, respectively, of deferred financing costs into Interest expense.
We were in compliance with the covenants of our debt instruments at December 31, 2016.
On January 23, 2017, the Company entered into an unsecured commercial paper note program. Under the terms of the
program, the Company may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding of $500
million. The notes are sold under customary terms in the United States commercial paper note market and rank pari passu with all of
the Company’s other unsecured senior indebtedness. The notes are fully and unconditionally guaranteed by the Operating
Partnership. The Company intends to use the commercial paper program as an alternative funding source for amounts that would have
otherwise been outstanding on the revolving credit facility and intends to manage the use of the commercial paper program so that
the maximum combined amount outstanding under the commercial paper program and the revolving credit facility will not exceed
the maximum borrowings permitted under the credit facility of $1.1 billion. As of February 17, 2017, the Company had issued $120.0
million of commercial paper notes, for one month terms, at a weighted average annualized rate of 1.16%.
F 30
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
8. 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):
Year Ended December 31,
2016
2015
2014
Numerator for income/(loss) per share:
Income/(loss) from continuing operations
$ 109,529 $ 105,482 $
16,260
Gain/(loss) on sale of real estate owned, net of tax
210,851
251,677
143,572
(Income)/loss from continuing operations attributable to
redeemable noncontrolling interests in the Operating
Partnership and DownREIT 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)
Income/(loss) from continuing operations attributable to
common stockholders basic
Dilutive distributions to preferred stockholders Series E
(Convertible)
Income/(loss) from continuing operations attributable to
common stockholders diluted
(27,282)
(16,773)
(5,511)
(380)
(3)
3
292,718
340,383
154,324
(3,717)
(3,722)
(3,724)
289,001
336,661
150,600
—
3,722
—
$ 289,001 $ 340,383 $ 150,600
Income/(loss) from discontinued operations, net of tax
(Income)/loss from discontinued operations attributable to
redeemable noncontrolling interests in the Operating
Partnership and DownREIT Partnership
Income/(loss) from discontinued operations attributable to
common stockholders
$
$
— $
— $
—
—
— $
— $
10
—
10
Net income/(loss) attributable to common stockholders
$ 289,001 $ 336,661 $ 150,610
Denominator for income/(loss) per share basic and diluted:
Weighted average common shares outstanding
266,211
259,873
252,707
Nonvested restricted stock awards
(825)
(1,204)
(1,179)
Denominator for income/(loss) per share basic
265,386
258,669
251,528
Incremental shares issuable from assumed conversion of
dilutive preferred stock, stock options, unvested LTIP Units
and unvested restricted stock
1,925
5,083
1,917
Denominator for income/(loss) per share diluted
267,311
263,752
253,445
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
$
1.09 $
1.30 $
0.60
—
—
—
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
1.09 $
1.30 $
0.60
1.08 $
1.29 $
0.59
—
—
1.08 $
1.29 $
—
0.59
$
$
$
F 31
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
Basic income/(loss) per common share is computed based upon the weighted average number of common shares outstanding.
Diluted income/(loss) per common share is computed based upon the weighted average number of common shares outstanding plus
the common shares issuable from the assumed conversion of the OP Units and DownREIT Units, convertible preferred stock, stock
options, unvested longterm incentive plan units (“LTIP Units”) and unvested 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.
For the year ended December 31, 2016, the Company’s stock options and unvested restricted stock were dilutive. The effect
of the conversion of the OP Units, DownREIT Units, LTIP Units and the Company’s Series E preferred stock was not dilutive, and
therefore not included in the above calculations.
For the year ended December 31, 2015, the Company’s Series E preferred stock, stock options and unvested restricted stock
were dilutive. The effect of the conversion of the OP Units and DownREIT Units was not dilutive, and therefore not included in the
above calculations.
For the year ended December 31, 2014, the Company’s stock options and unvested restricted stock were dilutive for
purposes of calculating income/(loss) per share. The effect of the conversion of the OP Units and the Company’s Series E preferred
stock were not dilutive, and therefore not included in the above calculations.
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, 2016, 2015, and 2014 (shares in thousands):
OP/DownREIT Units
Preferred Stock
Stock options, unvested LTIP Units and unvested restricted stock
Year Ended December 31,
2016
2015
2014
25,130
12,947
3,028
1,925
3,032
2,051
9,247
3,036
1,917
F 32
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
9. STOCKHOLDERS’ EQUITY
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, 2016.
The following table presents the changes in the Company’s issued and outstanding shares of common and preferred stock for
the years ended December 31, 2016, 2015 and 2014:
Common
Stock
Preferred Stock
Series E
Series F
Balance at December 31, 2013
250,749,665
2,803,812
2,464,183
Issuance/(forfeiture) of common and restricted shares,
net
Issuance of common shares through public offering
Adjustment for conversion of noncontrolling interest of
unitholders in the Operating Partnership
801,054
3,410,433
153,451
—
—
—
—
—
—
Balance at December 31, 2014
255,114,603
2,803,812
2,464,183
Issuance/(forfeiture) of common and restricted shares,
net
Issuance of common shares through public offering
Adjustment for conversion of noncontrolling interest of
unitholders in the Operating Partnership
Conversion of Series E Cumulative Convertible shares
Issuance of Series F shares
Balance at December 31, 2015
Issuance/(forfeiture) of common and restricted shares,
net
Issuance of common shares through public offering
Adjustment for conversion of noncontrolling interest of
unitholders in the Operating Partnership
Adjustment for conversion of noncontrolling interest of
unitholders in the DownREIT Partnership
Forfeiture of Series F shares
Balance at December 31, 2016
Common Stock
270,628
6,339,636
112,174
7,480
—
—
—
—
(6,909)
—
—
—
—
—
13,988,313
261,844,521
2,796,903
16,452,496
154,656
5,000,000
4,685
255,607
—
—
—
—
—
—
—
—
—
—
(255,607)
267,259,469
2,796,903
16,196,889
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, 2016, 13,078,931 shares were available for sale under the continuous equity program.
During the year ended December 31, 2016, the Company entered into the following equity transactions for our common
stock:
• Sold 5,000,000 shares of common stock through a public offering at a weighted average price per share of $34.73, for
aggregate gross proceeds of approximately $173.7 million.
Issued 447,744 shares of common stock through the Company’s 1999 LongTerm Incentive Plan (the “LTIP”);
•
• Converted 4,685 OP Units into Company common stock; and
• Converted 255,607 DownREIT Units into Company common stock, resulting in the forfeiture of the same number of
Series F Preferred Shares.
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, 2016, 2015, and 2014 totaled $1.18, $1.11,
and $1.04 per share, respectively.
F 33
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
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 asconverted 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.
Distributions declared on the Series E for the years ended December 31, 2016, 2015, and 2014 were $1.33 per share. The
Series E is not listed on any exchange. At December 31, 2016 and 2015, a total of 2,796,903 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 OP Units and DownREIT Units, at a purchase price of $0.0001 per share. OP/DownREIT Unitholders are
entitled to subscribe for and purchase one share of UDR’s Series F for each OP/DownREIT Unit held. In connection with the
acquisition of the six properties from Home OP and the formation of the DownREIT Partnership in October 2015, the Company
issued 13,988,313 Series F shares to former limited partners of the Home OP, which had the right to subscribe for one share of Series F
for each DownREIT Unit issued in connection with the acquisitions. During the year ended December 31, 2016, 255,607 of the
Series F shares were forfeited upon the conversion of DownREIT Units into Company common stock. There were no conversions
during the year ended December 31, 2015.
At December 31, 2016 and 2015, a total of 16,196,889 and 16,452,496 shares, respectively, of the Series F were outstanding
with an aggregate purchase value of $1,620 and $1,645, respectively. 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 dividends or any other rights, privileges or preferences.
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, 2016. During the year ended December 31, 2016, UDR acquired all shares issued
through the open market.
10. 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 stockbased 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, 2015, the LTIP was amended to set forth the terms of new classes of partnership
interests in the Operating Partnership designated as LTIP Units. LTIP Units are designed to qualify as “profits interests” in the
Operating Partnership for federal income tax purposes, meaning that initially they are not economically equivalent in value to a share
of our common stock, but over time can increase in value to oneforone parity with common stock by operation of special tax rules
applicable to profits interests. Until and unless such parity is reached, the value that an executive will realize for a given number of
vested LTIP units is less than the value of an equal number of shares of our common stock.
As of December 31, 2016, 19,000,000 shares were reserved on an unadjusted basis for issuance upon the grant or exercise of
awards under the LTIP. As of December 31, 2016, there were 9,192,402 common shares available for issuance under the LTIP.
F 34
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
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. 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 spinoffs, 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, 2016 is as follows:
Option Outstanding Option Exercisable
Restricted Stock
Weighted
Average
Exercise
Price
Weighted
Average
Exercise
Price
Number of
Options
Number of
Options
Number
of shares
Weighted
Average
Fair
Value Per
Restricted
Stock
Balance, December 31, 2015 2,234,963 $
12.65 2,234,963 $
12.65
800,376 $
Granted
Exercised
Vested
Forfeited
—
—
—
—
—
—
—
—
—
—
—
—
—
—
447,744
—
—
(492,776)
—
(109,377)
Balance, December 31, 2016 2,234,963 $
12.65 2,234,963 $
12.65
645,967 $
30.40
35.54
—
28.29
32.51
35.12
As of December 31, 2016, the Company had issued 5,640,619 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, 2016.
During the year ended December 31, 2016, no stock options were exercised.
The weighted average remaining contractual life on all options outstanding as of December 31, 2016 is 1.9
years. 1,830,672 of share options had exercise prices at $10.06 and 404,291 of share options had exercise prices at $24.38.
During the years ended December 31, 2016, 2015, and 2014, respectively, we did not recognize any 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, 2016, 2015, and 2014, we recognized $3.4 million, $3.2 million, and $4.2
million of compensation expense, net of capitalization, related to the amortization of restricted stock awards, respectively. The total
remaining compensation cost on unvested restricted stock awards was $3.7 million and had a weighted average remaining
contractual life of 1.8 years as of December 31, 2016.
LongTerm Incentive Compensation
In January 2016, certain officers of the Company were awarded either a restricted stock grant or an LTIP Unit grant, or a
combination of both, under the 2016 LongTerm Incentive Program (“2016 LTI”). For both restricted stock grants and LTIP
F 35
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
Unit grants, onethird of the 2016 LTI award is based upon FFO as Adjusted over a oneyear period and will vest fifty percent on the
oneyear anniversary and fifty percent on the twoyear anniversary of the end of the performance period. The remaining twothirds of
the 2016 LTI award is based on Total Shareholder Return (“TSR”) as measured relative to comparable apartment REITs over a three
year period and will vest 100% at the end of the threeyear 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 or $36.97 per share.
Because LTIP Units are granted at the maximum potential payout and there is uncertainty associated with an LTIP Unit reaching
parity with the value of a share of UDR common stock, the portion of the LTIP Unit grant based upon FFO as Adjusted was valued
at $16.64 per unit on the grant date, inclusive of a 10% discount. The portion of the restricted stock grant based upon TSR was valued
at $41.22 per share on the grant date as determined by a latticebinomial optionpricing model based on a Monte Carlo simulation
using a volatility factor of 21.8%. The portion of the LTIP Unit grant based upon TSR was valued at $19.15 per unit on the grant date
as determined by a latticebinomial optionpricing model based on a Monte Carlo simulation using a volatility factor of 21.8%.
In January 2015, certain officers of the Company were awarded a restricted stock grant under the 2015 LongTerm Incentive
Program (“2015 LTI”). Onethird of the 2015 LTI award is based upon FFO as Adjusted over a oneyear period and will vest fifty
percent on the oneyear anniversary and fifty percent on the twoyear anniversary of the end of the performance period. The remaining
twothirds of the 2015 LTI award is based on Total Shareholder Return (“TSR”) as measured relative to comparable apartment REITs
over a threeyear period and will vest 100% at the end of the threeyear 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 $34.14 per share on the grant date as determined by a latticebinomial
optionpricing model based on a Monte Carlo simulation using a volatility factor of 16.5%.
In December 2014, when the LTI program was changed from a oneyear to a threeyear performance period, a onetime
transition (“Transition LTI”) award opportunity was approved commencing in 2015. Onethird of the Transition LTI award is based
upon FFO as Adjusted over a oneyear period and will vest at the end of the performance period. The remaining twothirds of the
Transition LTI award is based on TSR as measured relative to comparable apartment REITs over a twoyear period and will
vest 100% at the end of the twoyear 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 $33.68 per share on the grant date as determined by a latticebinomial optionpricing model based on a
Monte Carlo simulation using a volatility factor of 16.6%. The intent of the transition award is to ensure consistent reward
opportunity during the phasein period of the threeyear awards under the 2015 LTI plan.
In February 2014, certain officers of the Company were awarded a restricted stock grant under the 2014 LongTerm Incentive
Program (“2014 LTI”). Fifty percent of the 2014 LTI award is based upon FFO as Adjusted and fifty percent is based on 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 latticebinomial optionpricing model based on a Monte Carlo simulation using a volatility factor of 23.8%.
Compensation expense is recorded under the accelerated method over the vesting period for the 2014 LTI.
In February 2013, certain officers of the Company were awarded a restricted stock grant under the 2013 LongTerm Incentive
Program (“2013 LTI”). Fifty percent of the 2013 LTI award is based upon FFO and fifty percent is based on 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 latticebinomial 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 2013 LTI.
F 36
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
For the years ended December 31, 2016, 2015, and 2014, we recognized $10.0 million, $14.8 million and $9.8 million,
respectively, of compensation expense, net of capitalization, related to the amortization of the awards. The total remaining
compensation cost on unvested LTI awards was $6.5 million and had a weighted average remaining contractual life of 1.1 years as
of December 31, 2016.
Profit Sharing Plan
Our profit sharing plan (the “Plan”) is a defined contribution plan covering all eligible fulltime 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, 2016, 2015, and 2014, was $1.3 million, $1.1 million,
and $0.9 million, respectively.
11. INCOME TAXES
For 2016, 2015, and 2014, 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, 2016, 2015, and 2014:
Ordinary income
Qualified ordinary income
Longterm capital gain
Unrecaptured section 1250 gain
Total
Year Ended December 31,
2016
2015
2014
$
0.708 $
0.595 $
—
0.309
0.145
—
0.329
0.168
$
1.162 $
1.092 $
0.695
0.139
0.105
0.076
1.015
F 37
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
We have a TRS that is subject to federal and state income taxes. A TRS is a Ccorporation 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, 2016, 2015, and 2014 (dollars in thousands):
Income tax (benefit)/provision
Current
Federal
State
Total current
Deferred
Federal
State
Total deferred
Total income tax (benefit)/provision
Classification of income tax (benefit)/provision:
Continuing operations
Gain/(loss) on sale of real estate owned
Discontinued operations
Year Ended December 31,
2016
2015
2014
$
69 $
29 $
372
441
871
900
147
550
697
9,814
1,319
(4,173)
20,138
(613)
5,159
11,133
(4,786)
25,297
11,574 $
(3,886) $
25,994
(3,774) $
(3,886) $ (15,098)
15,348
—
—
—
41,087
5
$
$
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, 2016, 2015,
and 2014 (dollars in thousands):
Deferred tax assets:
Federal and state tax attributes
Book/tax depreciation
Construction capitalization differences
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Other
Total deferred tax liabilities
Net deferred tax asset
Year Ended December 31,
2016
2015
2014
$
536 $
2,227 $
—
—
—
190
726
(6)
9,016
6,692
—
707
75
401
11,950
7,168
(81)
—
720
11,869
7,168
(92)
(92)
(107)
(107)
(192)
(192)
$
628 $
11,762 $
6,976
F 38
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
Income tax benefit/(provision), 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, 2016, 2015, and 2014 as follows (dollars in thousands):
Year Ended December 31,
2016
2015
2014
Income tax (benefit)/provision
U.S. federal income tax (benefit)/provision
$
12,577 $
(4,383) $
28,819
State income tax provision
Other items
Conversion of certain TRS entities to REITs
Valuation allowance
1,370
134
(2,436)
(71)
442
(26)
—
81
2,678
(137)
(5,770)
404
Total income tax (benefit)/provision
$
11,574 $
(3,886) $
25,994
As of December 31, 2016, the Company had federal net operating loss carryovers (“NOL”) of $22.2 million expiring
in 2032 through 2035 and state NOLs of $68.6 million expiring in 2020 through 2032. A portion of these attributes are still available
to the subsidiary REITs, but are carried at a zero effective tax rate.
For the year ended December 31, 2016, Tax benefit/(provision), net decreased $0.1 million as compared to 2015. The
decrease was primarily attributable to a onetime tax benefit of $2.4 million in 2016 related to the conversion of certain taxable REIT
subsidiary entities into REITs, offset by an increase in the NOI of properties in the TRS. Additionally, Gain/(loss) on sale of real
estate owned, net of tax included approximately $15.3 million of tax provision.
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 twostep 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 Tax benefit/(provision), net. As of December 31,
2016 and 2015, 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 2012. The tax
years 2013 through 2015 remain open to examination by the major taxing jurisdictions to which the Company is subject.
12. NONCONTROLLING INTERESTS
Redeemable Noncontrolling Interests in the Operating Partnership and DownREIT Partnership
Interests in the Operating Partnership and the DownREIT Partnership held by limited partners are represented by OP Units
and DownREIT Units, respectively. The income is allocated to holders of OP Units/DownREIT Units based upon net income
attributable to common stockholders and the weighted average number of OP Units/DownREIT Units outstanding to total common
shares plus OP Units/DownREIT 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 agreements of the Operating Partnership and the
DownREIT Partnership.
Limited partners of the Operating Partnership and the DownREIT Partnership have the right to require such partnership to
redeem all or a portion of the OP Units/DownREIT Units held by the limited partner at a redemption price equal to and in the form of
the Cash Amount (as defined in the partnership agreement of the Operating Partnership or the DownREIT Partnership, as applicable),
provided that such OP Units/DownREIT Units have been outstanding for at least one year, subject to certain exceptions. UDR, as the
general partner of the Operating Partnership and the DownREIT Partnership may, in its sole discretion, purchase the OP
Units/DownREIT Units by paying to the limited partner either the Cash Amount or the REIT Share
F 39
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
Amount (generally one share of Common Stock of the Company for each OP Unit/DownREIT Unit), as defined in the partnership
agreement of the Operating Partnership or the DownREIT Partnership, as applicable. Accordingly, the Company records the OP
Units/DownREIT Units outside of permanent equity and reports the OP Units/DownREIT 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 and DownREIT Partnership
for the years ended December 31, 2016 and 2015 (dollars in thousands):
Year Ended December 31,
2016
2015
Redeemable noncontrolling interests in the Operating Partnership and
DownREIT Partnership, beginning of year
$
946,436 $
282,480
Marktomarket adjustment to redeemable noncontrolling interests in the
Operating Partnership and DownREIT Partnership
DownREIT Units issued for real estate, net
Conversion of OP Units/DownREIT Units to Common Stock
Net income/(loss) attributable to redeemable noncontrolling interests in
the Operating Partnership and DownREIT Partnership
Distributions to redeemable noncontrolling interests in the Operating
Partnership and DownREIT Partnership
Allocation of other comprehensive income/(loss)
(24,735)
—
102,703
563,836
(9,526)
(3,817)
27,282
16,773
(30,077)
(15,231)
102
(308)
Redeemable noncontrolling interests in the Operating Partnership and
DownREIT Partnership, end of year
$
909,482 $
946,436
The following sets forth net income/(loss) attributable to common stockholders and transfers from redeemable
noncontrolling interests in the Operating Partnership and DownREIT Partnership for the following periods (dollars in thousands):
Year Ended December 31,
2016
2015
2014
Net income/(loss) attributable to common stockholders
$
289,001 $
336,661 $
150,610
Conversion of OP Units/DownREIT Units to UDR
Common Stock
Change in equity from net income/(loss) attributable to
common stockholders and conversion of OP units and
DownREIT Units to UDR Common Stock
9,526
3,817
4,372
$
298,527 $
340,478 $
154,982
Noncontrolling Interests
Noncontrolling interests represent interests of unrelated partners and unvested LTIP Units 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, 2016, 2015, and 2014, Net (income)/loss attributable to noncontrolling interests was $(0.4) million, less
than $(0.1) million, and less than $0.1 million, respectively.
The Company grants LTIP Units to certain employees and nonemployee directors. The LTIP Units represent an ownership
interest in the Operating Partnership and have vesting terms of between one and three years, specific to the individual grants.
Noncontrolling interests related to longterm incentive plan units represent the unvested LTIP Units of these employees and
nonemployee directors in the Operating Partnership. The net income/(loss) allocated to the LTIP Units is included in Net
(income)/loss attributable to noncontrolling interests on the Consolidated Statements of Operations.
F 40
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
13. 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 threelevel 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.
The estimated fair values of the Company’s financial instruments either recorded or disclosed on a recurring basis as
of December 31, 2016 and 2015 are summarized as follows (dollars in thousands):
Fair Value at December 31, 2016, Using
Total
Carrying
Amount in
Statement of
Financial
Position at
December 31,
2016
Fair Value
Estimate at
December
31, 2016
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)
Derivatives Interest rate
contracts (b)
Total assets
Derivatives Interest rate
contracts (b)
Secured debt instruments
fixed rate: (c)
$
$
$
19,790 $
19,645 $
— $
— $
19,645
4,360
4,360
—
4,360
—
24,150 $
24,005 $
— $
4,360 $
19,645
413 $
413 $
— $
413 $
—
Mortgage notes payable
402,996
396,045
Fannie Mae credit
facilities
Secured debt instruments
variable rate: (c)
Taxexempt secured notes
payable
Fannie Mae credit
facilities
Unsecured debt instruments
(c):
355,836
365,693
94,700
94,700
280,946
280,946
Unsecured credit facilities
21,350
21,350
Senior unsecured notes
2,261,838
2,304,492
Total liabilities
—
—
—
—
—
—
—
396,045
—
365,693
—
94,700
—
280,946
—
—
21,350
2,304,492
$
3,418,079
$ 3,463,639
$
— $
413
$
3,463,226
Redeemable noncontrolling
interests in the Operating
Partnership and DownREIT
Partnership (d)
$
909,482 $
909,482 $
— $ 909,482 $
—
F 41
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
Fair Value at December 31, 2015, Using
Total
Carrying
Amount in
Statement of
Financial
Position at
December 31,
2015
Fair Value
Estimate at
December
31, 2015
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)
Derivatives Interest rate
contracts (b)
Total assets
Derivatives Interest rate
contracts (b)
Secured debt instruments
fixed rate: (c)
$
$
$
16,694 $
16,938 $
— $
— $
16,938
13
13
16,707 $
16,951 $
—
— $
13
13 $
—
16,938
2,112 $
2,112 $
— $
2,112 $
—
Mortgage notes payable
442,617
448,019
Fannie Mae credit facilities
514,462
539,050
Secured debt instruments
variable rate: (c)
Mortgage notes payable
31,337
31,337
Taxexempt secured notes
payable
94,700
94,700
Fannie Mae credit facilities
299,378
299,378
Unsecured debt instruments:
(c)
Unsecured credit facilities
150,000
150,000
Senior unsecured notes
2,056,223
2,108,687
—
—
—
—
—
—
—
—
—
—
—
—
448,019
539,050
31,337
94,700
299,378
—
—
150,000
2,108,687
Total liabilities
$
3,590,829 $ 3,673,283 $
— $
2,112 $
3,671,171
Redeemable noncontrolling
interests in the Operating
Partnership and DownREIT
Partnership (d)
$
946,436 $
946,436 $
— $ 946,436 $
—
(a) See Note 2, Significant Accounting Policies.
(b) See Note 14, Derivatives and Hedging Activity.
(c) See Note 7, Secured Debt and Unsecured Debt, Net.
(d) See Note 12, Noncontrolling Interests.
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.
F 42
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
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, 2016 and 2015, the
Company 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 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 and DownREIT 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 and DownREIT Partnership are classified as Level 2.
Financial Instruments Not Carried at Fair Value
At December 31, 2016, 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, loantovalue ratios and collateral quality, where applicable (Level 3).
We record impairment losses on longlived 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 otherthantemporary. 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 longterm 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 otherthantemporary decrease in the value of its
investments in unconsolidated joint ventures during the years ended December 31, 2016, 2015, and 2014.
After determining an otherthantemporary 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.
F 43
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
14. 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 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 variablerate
amounts from a counterparty in exchange for the Company making fixedrate 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 variablerate
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, 2016, 2015,
and 2014, such derivatives were used to hedge the variable cash flows associated with existing variablerate debt and forecasted
issuances of fixedrate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.
During the year ended December 31, 2016, the Company recorded no ineffectiveness to earnings. During the year
ended December 31, 2015, the Company recognized a loss of less than $0.1 million reclassified from Accumulated OCI to Interest
expense due to the dedesignation of a cash flow hedge and recorded no other ineffectiveness to earnings. During the year ended
December 31, 2014, the Company recorded a gain of less than $0.1 million of ineffectiveness in earnings attributable to a timing
difference between the derivative and the hedged item.
Amounts reported in Accumulated other comprehensive income/(loss), net in the Consolidated Balance Sheets related to
derivatives that will be reclassified to interest expense as interest payments are made on the Company’s variablerate debt. Through
December 31, 2017, the Company estimates that an additional $1.7 million will be reclassified as an increase to interest expense.
As of December 31, 2016, the Company had the following outstanding interest rate derivatives that were designated as cash
flow hedges of interest rate risk (dollars in thousands):
Product
Interest rate swaps (a)
Interest rate caps
Number of
Instruments Notional
3
2
$ 315,000
$ 203,166
(a) The three interest rate swaps noted in the table above mature in January and April 2017. During 2016, the Company
entered into four forward starting interest rate swaps, with an aggregate notional amount of $315.0 million, which mature
in January 2020 and are effective in January and April 2017 upon the expiration of the three swaps that existed as of
December 31, 2016.
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 loss of less than $0.1 million for
the years ended December 31, 2016, 2015, and 2014.
F 44
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
As of December 31, 2016, 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
3
$
133,107
Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheets
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, 2016 and 2015 (dollars in thousands):
Asset Derivatives
(included in Other assets)
Liability Derivatives
(included in Other liabilities)
Fair Value at:
Fair Value at:
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
Derivatives designated as hedging
instruments:
Interest rate products
Derivatives not designated as hedging
instruments:
Interest rate products
$
$
4,359 $
9 $
413 $
2,112
1 $
4 $
— $
—
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, 2016, 2015, and 2014 (dollars in thousands):
Unrealized holding
gain/(loss) Recognized in
OCI
(Effective Portion)
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,
Year ended December 31,
2016 2015
2014
2016
2015
2014
2016 2015 2014
$ 3,514 $(6,393) $(8,695) $(3,657) $(2,251) $(4,834) $ — $
(11) $
3
Derivatives in
Cash Flow
Hedging
Relationships
Interest rate
products
Gain/(Loss) Recognized in
Interest income and other income/(expense),
net
Year ended December 31,
Derivatives Not Designated as Hedging Instruments
2016
2015
2014
Interest rate products
$
(3) $
(23)
(4)
Creditriskrelated Contingent Features
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
F 45
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
Company may be required to fully collateralize its obligations under the derivative instrument. At December 31,
2016 and 2015, 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.
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 agreement, 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, 2016, 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 $3.8 million. If the Company had breached any of
these provisions at December 31, 2016, it may have been required to settle its obligations under the agreements at their termination
value of $3.8 million.
Tabular Disclosure of Offsetting Derivatives
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,
2016 and December 31, 2015 (dollars in thousands):
Offsetting of Derivative Assets
Gross
Amounts of
Recognized
Assets
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
Net
Amount
December 31,
2016
$
December 31,
2015
$
4,360 $
— $
4,360 $
(221) $
— $
4,139
13 $
— $
13 $
— $
— $
13
(a) Amounts reconcile to the aggregate fair value of derivative assets in the “Tabular Disclosure of Fair Values of Derivative
Instruments on the Consolidated Balance Sheets” located in this footnote.
Offsetting of Derivative Liabilities
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
Gross
Amounts of
Recognized
Liabilities
Net
Amount
December 31,
2016
$
413 $
— $
413 $
(221) $
— $
192
December 31,
$
2,112 $
— $
2,112 $
— $
— $
2,112
2015
(a) Amounts reconcile to the aggregate fair value of derivative liabilities in the “Tabular Disclosure of Fair Values of
Derivative Instruments on the Consolidated Balance Sheets” located in this footnote.
F 46
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
15. COMMITMENTS AND CONTINGENCIES
Commitments
Real Estate Under Development
The following summarizes the Company’s real estate commitments at December 31, 2016 (dollars in thousands):
Number of
Properties
Costs
Incurred
to Date (a)
Expected
Costs
to Complete
(unaudited)
Average
Ownership
Stake
Whollyowned — under development
Whollyowned — redevelopment
Joint ventures:
Unconsolidated joint ventures
Participating loan investments
Preferred equity investments
Total
2
3
6
1
1
$ 342,282 (b) $
366,218
14,659 (b)
10,341
697,484
78,395 (c)
94,003 (d)
26,529 (e)
—
—
$1,174,957
$
454,954
100%
100%
50%
0%
48%
(a) Represents 100% of project costs incurred as of December 31, 2016.
(b) Costs incurred as of December 31, 2016 include $23.3 million and $1.5 million of accrued fixed assets for development
and redevelopment, respectively.
(c) Represents UDR’s proportionate share of expected remaining costs to complete the developments.
(d) Represents the participating loan balance funded as of December 31, 2016.
(e) Represents UDR’s investment in the West Coast Development Joint Venture for the properties under development as
of December 31, 2016.
Ground and Other Leases
UDR owns five communities which are subject to ground leases expiring between 2044 and 2103, including extension
options. In addition, UDR is a lessee to various operating leases related to office space rented by the Company with expiration
dates through 2021. Future minimum lease payments as of December 31, 2016 are as follows (dollars in thousands):
2017
2018
2019
2020
2021
Thereafter
Total
Ground
Leases (a)
Office Space
$
$
5,548 $
5,548
5,548
5,548
5,548
334,604
362,344 $
179
76
76
76
32
—
439
(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 $5.5 million, $5.5 million, and $5.4 million of ground rent expense for the years ended December 31,
2016, 2015, and 2014, respectively. These costs are reported within the line item Other Operating Expenses on the Consolidated
Statements of Operations. The Company incurred $0.3 million, $0.3 million, and $1.3 million of rent expense
F 47
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
related to office space for the years ended December 31, 2016, 2015, and 2014, 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 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.
16. 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 SameStore Communities and NonMature Communities/Other:
•
SameStore Communities represent those communities acquired, developed, and stabilized prior to January 1, 2015 and
held as of December 31, 2016. 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.
• NonMature Communities/Other represent those communities that do not meet the criteria to be included in SameStore
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 SameStore Community and NonMature
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, 2016, 2015, and 2014.
F 48
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
The following table details rental income and NOI from continuing and discontinued operations for UDR’s reportable
segments for the years ended December 31, 2016, 2015, and 2014, 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
SameStore Communities
West Region
MidAtlantic Region
Northeast Region
Southeast Region
Southwest Region
NonMature Communities/Other
Year Ended December 31,
2016
2015
2014
$ 298,469 $ 278,602 $ 246,764
144,069
140,423
136,786
130,285
124,478
115,981
111,318
103,920
41,273
39,166
98,060
37,139
223,047
185,339
170,419
Total segment and consolidated rental income
$ 948,461 $ 871,928 $ 805,149
Reportable apartment home segment NOI
SameStore Communities
West Region
MidAtlantic Region
Northeast Region
Southeast Region
Southwest Region
NonMature 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
Casualtyrelated recoveries/(charges), net
Other depreciation and amortization
Income/(loss) from unconsolidated entities
Interest expense
Interest income and other income/(expense), net
Tax benefit/(provision), net
$ 223,140 $ 207,137 $ 177,299
99,375
93,083
76,359
25,600
95,713
89,039
69,820
24,407
94,188
82,110
65,053
22,830
155,528
127,753
114,841
673,085
613,869
556,321
11,400
22,710
13,044
(26,083)
(23,978)
(22,142)
(7,649)
(9,708)
(8,271)
(419,615)
(374,598)
(358,154)
(49,761)
(59,690)
(47,800)
(732)
(6,023)
52,234
(2,335)
(6,679)
62,329
(541)
(5,775)
(7,006)
(123,031)
(121,875)
(130,454)
1,930
3,774
1,551
3,886
11,837
15,136
Gain/(loss) on sale of real estate owned, net of tax
210,851
251,677
143,647
Net (income)/loss attributable to redeemable noncontrolling
interests in the Operating Partnership and DownREIT
Partnership
(27,282)
(16,773)
(5,511)
Net (income)/loss attributable to noncontrolling interests
(380)
(3)
3
Net income/(loss) attributable to UDR, Inc.
$ 292,718 $ 340,383 $ 154,334
F 49
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
The following table details the assets of UDR’s reportable segments as of December 31, 2016 and 2015 (dollars in
thousands):
Reportable apartment home segment assets:
SameStore Communities:
West Region
MidAtlantic Region
Northeast Region
Southeast Region
Southwest Region
NonMature Communities/Other
Total segment assets
Accumulated depreciation
Total segment assets — net book value
Reconciling items:
Cash and cash equivalents
Restricted cash
Notes receivable, net
Investment in and advances to unconsolidated joint ventures, net
Other assets
Total consolidated assets
December 31,
2016
December 31,
2015
$
2,752,900 $
2,721,184
1,402,642
1,381,916
1,634,988
1,621,555
746,761
283,260
730,060
276,306
2,795,202
2,459,255
9,615,753
9,190,276
(2,923,625)
(2,646,874)
6,692,128
6,543,402
2,112
19,994
19,790
827,025
118,535
6,742
20,798
16,694
938,906
137,302
$
7,679,584 $
7,663,844
Capital expenditures related to our SameStore Communities totaled $84.8 million, $67.1 million, and $47.7 million for the
years ended December 31, 2016, 2015, and 2014, respectively. Capital expenditures related to our NonMature
Communities/Other totaled $11.5 million, $18.1 million, and $15.7 million for the years ended December 31, 2016, 2015, and 2014,
respectively.
Markets included in the above geographic segments are as follows:
i. West Region — Orange County, San Francisco, Seattle, Los Angeles, Monterey Peninsula, Other Southern California and
Portland
ii. MidAtlantic Region — Metropolitan D.C., Richmond and Baltimore
iii. Northeast Region — New York and Boston
iv. Southeast Region — Orlando, Nashville, Tampa and Other Florida
v. Southwest Region — Dallas and Austin
F 50
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
17. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA
Selected consolidated quarterly financial data for the years ended December 31, 2016 and 2015 is summarized in the table
below (dollars in thousands, except per share amounts):
Three Months Ended
March 31,
June 30,
September
30,
December 31,
$
231,957 $
236,168 $
240,255 $
240,081
8,534
12,249
29,466
59,280
9,464
17,017
26,027
236,687
2016
Rental income
Income/(loss) from continuing
operations
Net income/(loss) attributable to
common stockholders (a)
Income/(loss) attributable to common
stockholders per weighted average
common share (a):
Basic
Diluted
$
$
0.04 $
0.04 $
0.06 $
0.06 $
0.10 $
0.10 $
0.89
0.88
Weighted average number of common
shares outstanding:
Basic
Diluted
262,456
264,285
266,268
268,174
266,301
268,305
266,498
271,551
2015
Rental income
$
207,047 $
212,764 $
217,765 $
234,352
Income/(loss) from continuing
operations
Net income/(loss) attributable to
common stockholders (a)
Income/(loss) attributable to common
stockholders per weighted average
common share (a):
76,417
10,842
13,695
4,528
72,891
85,924
12,361
161,270
Basic
Diluted
$
$
0.28 $
0.28 $
0.33 $
0.33 $
0.05 $
0.05 $
0.62
0.61
Weighted average number of common
shares outstanding:
Basic
Diluted
256,834
258,662
257,849
262,806
259,114
261,207
260,830
266,108
(a) Due to the quarterly prorata calculation of noncontrolling interest and rounding, the sum of the quarterly per share and/or
dollar amounts may not equal the annual totals.
F 51
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Report of Independent Registered Public Accounting Firm
The Partners
United Dominion Realty, L.P.
We have audited the accompanying consolidated balance sheets of United Dominion Realty, L.P. (the “Partnership”) as of
December 31, 2016 and 2015, 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, 2016. 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, 2016 and 2015, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31, 2016, 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.
/s/ Ernst & Young LLP
Denver, Colorado
February 21, 2017
F 53
UNITED DOMINION REALTY, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for unit data)
December 31,
2016
December 31,
2015
$
3,674,704 $ 3,630,905
(1,408,815)
(1,281,258)
2,265,889
2,349,647
756
11,694
112,867
24,329
3,103
11,344
166,186
24,528
$
2,415,535 $ 2,554,808
$
433,974 $
475,964
273,334
273,334
2,104
1,410
14,593
54,192
17,429
2,775
1,550
15,929
50,962
12,964
797,036
833,478
ASSETS
Real estate owned:
Real estate held for investment
Less: accumulated depreciation
Total real estate owned, net of accumulated depreciation
Cash and cash equivalents
Restricted cash
Investment in unconsolidated entities
Other assets
Total assets
LIABILITIES AND CAPITAL
Liabilities:
Secured debt, net
Notes payable due to the General Partner
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 10)
Capital:
Partners’ capital:
General partner:
110,883 OP Units outstanding at December 31, 2016 and
December 31, 2015
1,026
1,110
Limited partners:
183,167,815 OP Units outstanding at December 31, 2016 and
December 31, 2015
Accumulated other comprehensive income/(loss), net
Total partners’ capital
Advances (to)/from the General Partner
Noncontrolling interests
Total capital
Total liabilities and capital
1,577,289
1,712,415
(113)
(113)
1,578,202
1,713,412
19,659
20,638
(11,270)
19,188
1,618,499
1,721,330
$
2,415,535 $ 2,554,808
See accompanying notes to the consolidated financial statements.
F 54
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
Year Ended December 31,
2016
2015
2014
$
404,415 $
440,408 $
422,634
65,562
41,732
11,122
6,059
75,373
47,438
12,111
5,923
75,211
47,110
11,622
5,172
Real estate depreciation and amortization
147,074
169,784
179,176
General and administrative
Casualtyrelated charges/(recoveries), net
Total operating expenses
18,808
27,016
28,541
484
843
541
290,841
338,488
347,373
Operating income
113,574
101,920
75,261
Income/(loss) from unconsolidated entities
Interest expense
Interest expense on note payable due to the General Partner
Income/(loss) from continuing operations
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
Net income/(loss) per weighted average OP Unit basic and
diluted:
(37,425)
(17,855)
(12,212)
46,082
33,180
79,262
(1,444)
(4,659)
(35,274)
(5,047)
56,940
158,123
215,063
(1,762)
—
(37,114)
(4,603)
33,544
63,635
97,179
(952)
77,818 $
213,301 $
96,227
0.42 $
1.16 $
0.53
$
$
Weighted average OP Units outstanding basic and diluted
183,279
183,279
183,279
See accompanying notes to the consolidated financial statements.
F 55
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
Year Ended December 31,
2016
2015
2014
$
79,262 $
215,063 $
97,179
(4)
12
(82)
(285)
1,044
2,275
8
79,270
962
216,025
1,990
99,169
(1,444)
(1,762)
(952)
Comprehensive income/(loss) attributable to OP unitholders $
77,826 $
214,263 $
98,217
See accompanying notes to consolidated financial statements.
F 56
UNITED DOMINION REALTY, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
(In thousands)
Limited
Partners
and LTIP
Units
Class A
Limited
Partner
UDR, Inc.
Limited
Partner
General
Partner
Accumulated
Other
Comprehensive
Income/(Loss),
net
Advances
(to)/from
the
General
Partner
Total
Partners’
Capital
Noncontrolling
Interests
Total
$40,902 $176,695 $1,580,239 $ 1,163 $
(3,065) $1,795,934 $
(9,916) $
17,079 $1,803,097
920
(2,328)
3,938
(7,789)
91,311
(180,917)
58
(116)
—
—
96,227
(191,150)
—
—
952
—
97,179
(191,150)
—
(4,371)
4,371
—
—
—
—
—
14,493
60,020
(74,513)
—
—
—
—
—
—
—
1,990
1,990
—
—
—
—
—
—
1,990
—
—
—
—
—
—
23,540
(605)
22,935
53,987 228,493 1,420,491
1,105
(1,075) 1,703,001
13,624
17,426 1,734,051
2,201
(2,328)
8,515
(8,138)
202,456
(193,262)
129
(124)
—
—
213,301
(203,852)
—
—
1,762
—
215,063
(203,852)
—
(3,816)
3,816
—
—
—
—
—
10,549
43,427
(53,976)
—
—
—
—
—
—
—
—
—
—
—
962
962
—
—
962
—
—
—
—
—
—
(24,894)
—
(24,894)
64,409 268,481 1,379,525
1,110
(113) 1,713,412
(11,270)
19,188 1,721,330
743
(2,328)
3,099
(8,831)
73,928
(205,472)
48
(132)
—
—
77,818
(216,763)
—
—
1,444
—
79,262
(216,763)
—
(175)
175
—
—
—
—
—
1,077
3,619
(4,696)
—
—
—
—
3,735
—
—
—
3,735
—
—
—
—
—
—
3,735
—
—
—
—
—
—
—
6
6
Balance at
December 31,
2013
Net
income/(loss)
Distributions
OP Unit
redemptions
for common
shares of UDR
Adjustment to
reflect limited
partners’
capital at
redemption
value
Other
comprehensive
income/(loss)
Net change in
advances
(to)/from the
General
Partner
Balance at
December 31,
2014
Net
income/(loss)
Distributions
OP Unit
redemptions
for common
shares of UDR
Adjustment to
reflect limited
partners’
capital at
redemption
value
Unrealized
gain on
derivative
financial
investments
Net change in
advances
(to)/from the
General
Partner
Balance at
December 31,
2015
Net
income/(loss)
Distributions
OP Unit
redemptions
for common
shares of UDR
Adjustment to
reflect limited
partners’
capital at
redemption
value
LongTerm
Incentive Plan
Unit grants
Unrealized
gain on
derivative
financial
investments
Net change in
advances
(to)/from the
General
Partner
Balance at
December 31,
2016
—
—
—
—
—
—
30,929
—
30,929
$63,901 $269,928 $1,243,460 $ 1,026 $
(113) $1,578,202 $ 19,659 $
20,638 $1,618,499
See accompanying notes to the consolidated financial statements.
F 57
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/(used in) operating activities:
Depreciation and amortization
(Gain)/loss on sale of real estate owned
(Income)/loss from unconsolidated entities
Other
Changes in operating assets and liabilities:
(Increase)/decrease in operating assets
Increase/(decrease) in operating liabilities
Year Ended December 31,
2016
2015
2014
$
79,262 $ 215,063 $
97,179
147,074
169,784
179,176
(33,180)
(158,123)
(63,635)
37,425
1,769
4,659
606
—
2,497
(3,510)
385
(158)
(5,609)
(1,756)
(5,429)
Net cash provided by/(used in) operating activities
228,682
226,765
208,032
Investing Activities
Acquisition of real estate assets
—
(141,424)
—
Proceeds from sales of real estate investments, net
44,553
232,728
47,922
Development of real estate assets
—
(6,280)
(47,220)
Capital expenditures and other major improvements — real
estate assets, net of escrow reimbursement
(69,993)
(61,441)
(47,352)
Distributions received from unconsolidated entities
15,894
—
—
Net cash provided by/(used in) investing activities
(9,546)
23,583
(46,650)
Financing Activities
Advances (to)/from the General Partner, net
(180,391)
(232,764)
(153,751)
Proceeds from the issuance of secured debt
Payments on secured debt
Distributions paid to partnership unitholders
Payments of financing costs
—
184,638
(30,322)
(189,244)
(10,770)
(10,367)
—
(10)
5,909
(4,995)
(9,929)
(11)
Net cash provided by/(used in) financing activities
(221,483)
(247,747)
(162,777)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
(2,347)
3,103
2,601
502
Cash and cash equivalents, end of year
$
756 $
3,103 $
(1,395)
1,897
502
Supplemental Information:
Interest paid during the period, net of amounts capitalized
$
22,922 $
44,881 $
44,629
Noncash transactions:
Noncash transactions associated with contribution to DownREIT
Partnership:
Real estate owned, net of accumulated depreciation
Investment in DownREIT Partnership
Secured debt, net
—
—
—
405,116
174,822
228,390
Reallocation of credit facilities debt from the General
Partner
12,292
17,557
—
—
—
—
Development costs and capital expenditures incurred but
5,098
3,118
7,254
not yet paid
LTIP Unit grants
Dividends declared but not yet paid
3,735
—
—
54,192
50,962
47,788
See accompanying notes to the consolidated financial statements.
F 58
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016
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 singlefamily home prices and significant employment growth
potential. UDR, L.P. is a subsidiary of UDR, Inc. (“UDR” or the “General Partner”), a selfadministered real estate investment trust, or
REIT, through which UDR conducts a significant portion of its business. During the years ended December 31, 2016, 2015,
and 2014, rental revenues of the Operating Partnership represented 43%, 51%, and 52%, respectively, of the General Partner’s
consolidated rental revenues. At December 31, 2016, the Operating Partnership’s apartment portfolio consisted of 54 communities
located in 14 markets consisting of 16,698 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, 2016, there were 183,278,698 OP Units outstanding, of which 174,230,084 or 95.1% were owned by
UDR and affiliated entities and 9,048,614 or 4.9% were owned by nonaffiliated limited partners. There were 183,278,698 OP Units
outstanding as of December 31, 2015, of which 174,225,399 or 95.1% were owned by UDR and affiliated entities
and 9,053,299 or 4.9% were owned by nonaffiliated limited partners.
As sole general partner of the Operating Partnership, UDR owned all 110,883 general partner OP units or 0.1% of the total
OP Units outstanding as of December 31, 2016 and 2015. At December 31, 2016 and 2015, there were 183,167,815 limited partner
OP Units outstanding, of which 1,873,332 were Class A Limited Partnership Units. Of the limited partner OP Units outstanding,
UDR owned 174,119,201 or 95.1% and 174,114,516 or 95.1% at December 31, 2016 and 2015, respectively. The
remaining 9,048,614 or 4.9% and 9,053,299 or 4.9% of the limited partner OP Units outstanding were held by nonaffiliated partners
at December 31, 2016 and 2015, 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 nonrecognized subsequent events were noted.
2. SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Pronouncements
In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017
01, Business Combinations (Topic 805), Clarifying the Definition of a Business. The ASU changes the definition of a business to
assist entities with evaluating whether a set of transfered assets is a business. As a result, the accounting for acquisitions of real estate
could be impacted. The updated standard will be effective for the Operating Partnership on January 1, 2018; early adoption is
permitted. The ASU will be applied prospectively to any transactions occurring within the period of adoption. The Operating
Partnership expects that the updated standard will result in fewer acquisitions of real estate meeting the definition of a business and
fewer acquisitionrelated costs being expensed in the period incurred.
In November 2016, the FASB issued ASU 201618, Statement of Cash Flows (Topic 230), Restricted Cash. The ASU
addresses the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. The updated standard will
be effective for the Operating Partnership on January 1, 2018 and must be applied retrospectively to all periods presented; early
adoption is permitted. The Operating Partnership does not expect the updated standard to have a material impact on the consolidated
financial statements and related disclosures.
In August 2016, the FASB issued ASU 201615, Statement of Cash Flows (Topic 230), Classification of Certain Cash
Receipts and Cash Payments. The ASU addresses specific cash flow items with the objective of reducing existing diversity in
practice, including the treatment of distributions received from equity method investees. The updated standard will be effective
F 59
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
for the Operating Partnership on January 1, 2018 and must be applied retrospectively to all periods presented; early adoption is
permitted. The Operating Partnership elected to early adopt ASU 201615 in 2016. The adoption did not have an impact on the
Operating Partnership’s consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU 201613, Financial InstrumentsCredit Losses (Topic 326), Measurement of Credit
Losses on Financial Instruments. The standard requires entities to estimate a lifetime expected credit loss for most financial assets,
including trade and other receivables, heldtomaturity debt securities, loans and other financial instruments, and to present the net
amount of the financial instrument expected to be collected. The updated standard will be effective for the Operating Partnership on
January 1, 2020; early adoption is permitted on January 1, 2019. The Operating Partnership is currently evaluating the effect that the
updated standard will have on the consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU 201609, CompensationStock Compensation (Topic 718), Improvements to
Employee ShareBased Payment Accounting. The ASU aims to simplify the accounting for sharebased payments by amending the
accounting for forfeitures, statutory tax withholding requirements, classification in the statements of cash flow and income taxes. The
updated standard will be effective for the Operating Partnership on January 1, 2017, with early adoption permitted. The update
requires a prospective, retrospective or modified retrospective approach, depending on the type of amendment. The Operating
Partnership does not expect the updated standard to have a material impact on the consolidated financial statements and related
disclosures.
In February 2016, the FASB issued ASU No. 201602, Leases. The standard amends the existing lease accounting guidance
and requires lessees to recognize a lease liability and a rightofuse asset for all leases (except for shortterm leases that have a
duration of one year or less) on their balance sheets. Lessees will continue to recognize lease expense in a manner similar to current
accounting. For lessors, accounting for leases under the new guidance is substantially the same as in prior periods, but eliminates
current real estatespecific provisions and changes the treatment of initial direct costs. Entities are required to use a modified
retrospective approach for leases that exist or are entered into after the beginning of the earliest comparable period presented, with an
option to elect certain transition relief. Full retrospective application is prohibited. The standard will be effective for the Operating
Partnership on January 1, 2019, with early adoption permitted. While the Operating Partnership is currently evaluating the effect that
the updated standard will have on our consolidated financial statements and related disclosures, we expect to recognize rightofuse
assets and related lease liabilities on our consolidated balance sheets related to ground leases on any communities where we are the
lessee.
In February 2015, the FASB issued ASU 201502, Amendments to the Consolidation Analysis, which makes changes to both
the variable interest model and the voting model of consolidation. Under ASU 201502, companies will need to reevaluate whether
an entity meets the criteria to be considered a variable interest entity (“VIE”) or whether the consolidation of an entity should be
assessed under the voting model. The new standard specifically eliminates the presumption in the current voting model that a general
partner controls a limited partnership or similar entity unless that presumption can be overcome. The new standard was effective for
the Operating Partnership beginning on January 1, 2016. The adoption of the new standard did not result in the consolidation of
entities not previously consolidated or the deconsolidation of any entities previously consolidated. Upon adopting the new standard,
UDR Lighthouse DownREIT L.P. (the “DownREIT Partnership”) became a VIE as the limited partners lack substantive kickout
rights and substantive participating rights. The Operating Partnership is not the primary beneficiary of the DownREIT Partnership
and will continue to account for its interest as an equity method investment.
In May 2014, the FASB issued ASU No. 201409, 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 will replace most existing
revenue recognition guidance in U.S. GAAP when it becomes effective, including industryspecific revenue guidance. The standard
specifically excludes lease contracts. The ASU allows for the use of either the full or modified retrospective transition method and
will be effective for the Operating Partnership on January 1, 2018, at which time the Operating Partnership expects to adopt the
updated standard using the modified retrospective approach. However, as the majority of the Operating Partnership’s revenue is from
rental income related to leases, the Operating Partnership does not expect the ASU to have a material impact on the 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.
F 60
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
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 leaseup. Depreciation on the building is based on the
expected useful life of the asset and the inplace 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 longlived 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 longlived 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 disposition 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 disposition is carried at the lower of cost, net of accumulated depreciation, or fair value, less the cost to sell, determined on an
assetbyasset basis. Expenditures for ordinary repair and maintenance costs on held for disposition properties are charged to expense
as incurred. Expenditures for improvements, renovations, and replacements related to held for disposition properties are capitalized at
cost. Depreciation is not recorded on real estate held for disposition.
Depreciation is computed on a straightline 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 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, 2016, 2015, and 2014 were $0.6 million, $0.7 million, and $2.0 million, respectively. During the years
ended December 31, 2016, 2015, and 2014, total interest capitalized was $0.2 million, $0.2 million, and $2.9 million, respectively.
As each home in a capital project is completed and becomes available for leaseup, 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 shortterm, 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.
F 61
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
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, 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, nonmonetary
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/(loss) and for nondesignated 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.
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 evaluates 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 “morelikelythannot” of being
sustained by the applicable tax authority. Tax positions not deemed to meet the morelikelythannot 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.
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
Management of the Operating Partnership has reviewed all open tax years (2013 through 2015) of tax 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
In accordance with GAAP, 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.
We record sales of real estate that do not meet the definition of a discontinued operation in Gain/(loss) on sale of real estate
owned on the Consolidated Statements of Operations.
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 reasonably anticipated benefits to the parties. (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 Property operating and maintenance. During the years ended December 31, 2016, 2015, and 2014, total advertising expense
from continuing and discontinued operations was $2.2 million, $2.4 million, and $2.5 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 unitholders, is displayed in the accompanying Consolidated Statements of Comprehensive
Income/(Loss). For the years ended December 31, 2016, 2015, and 2014, the Operating Partnership’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 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, 2016, 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.
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
3. REAL ESTATE OWNED
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 disposition properties. At December 31, 2016, the Operating
Partnership owned and consolidated 54 communities in eight states plus the District of Columbia totaling 16,698 apartment homes.
The following table summarizes the carrying amounts for our real estate owned (at cost) as of December 31, 2016 and 2015 (dollars
in thousands):
Land
Depreciable property — held and used:
December 31,
2016
December 31,
2015
$
836,644 $
833,300
Buildings, improvements, and furniture, fixtures and equipment
2,838,060
2,797,605
Real estate owned
Accumulated depreciation
Real estate owned, net
Acquisitions
3,674,704
3,630,905
(1,408,815)
(1,281,258)
$
2,265,889 $ 2,349,647
The Operating Partnership did not have any acquisitions during the year ended December 31, 2016.
In October 2015, the Operating Partnership acquired one community in Alexandria, Virginia with 421 apartment homes for a
purchase price of $142.0 million, which was funded with reverse taxdeferred likekind exchanges under Section 1031 of the Internal
Revenue Code of 1986 (“Section 1031 exchanges”). The Operating Partnership performed a valuation analysis of the fair market
value of the assets and liabilities of the acquired community as of the acquisition date.
Dispositions
During the year ended December 31, 2016, the Operating Partnership sold two operating communities in Baltimore,
Maryland with a total of 276 apartment homes for gross proceeds of $45.3 million, resulting in net proceeds of $44.6 million and a
gain, net of tax, of $33.2 million.
In connection with the formation of the DownREIT Partnership in October 2015, the Operating Partnership
contributed seven operating communities to the DownREIT Partnership. The Operating Partnership recorded its contribution to the
DownREIT Partnership at book value and consequently deferred a gain of $296.4 million. As a result of the contribution, the
Operating Partnership gave up its controlling interest and deconsolidated the seven operating communities. The Operating
Partnership accounts for its investment in the DownREIT Partnership under the equity method of accounting as described in Note
4, Unconsolidated Entities.
During the year ended December 31, 2015, the Operating Partnership sold five operating communities with a total
of 1,149 apartment homes for gross proceeds of $250.9 million, resulting in net proceeds of $232.4 million and a gain of $133.5
million. A portion of the sale proceeds was designated for taxdeferred Section 1031 exchanges for the October 2015 acquisition
described above. Additionally, the Operating Partnership recognized a gain of $24.6 million, which was previously deferred, in
connection with the sale of the communities held by the Texas joint venture in January 2015.
4. UNCONSOLIDATED ENTITIES
In October 2015, in connection with the acquisition of four properties from Home Properties, L.P., UDR, Inc., as the sole
general partner and a limited partner, and the Operating Partnership, as limited partner, entered into the Agreement of Limited
Partnership (the “Partnership Agreement”) of the DownREIT Partnership. As of December 31, 2016, UDR, Inc. and the Operating
Partnership owned approximately 9.3% and 41.6%, respectively, of the DownREIT Units, which they received in exchange for their
contribution of properties to the DownREIT Partnership and cash of $25.5 million.
As the sole general partner of the DownREIT Partnership, UDR, Inc. has full, complete and exclusive discretion to manage
and control the business of the DownREIT Partnership and to make all decisions affecting the business and assets of the DownREIT
Partnership, subject to certain protective limitations set forth in the Partnership Agreement. The limited partners
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
have no power to remove UDR, Inc. as the general partner of the DownREIT Partnership. The DownREIT Partnership is structured to
make distributions in respect of DownREIT Units that will be equivalent to the distributions made to holders of UDR, Inc.’s common
stock. Subject to certain terms and conditions set forth in the Partnership Agreement, limited partners in the DownREIT Partnership
(other than UDR, Inc. and its affiliates) have the right, commencing one year after the date of issuance, to tender their DownREIT
Units for redemption for cash or, at UDR Inc.’s election, for shares of its common stock on a oneforone basis (subject to the anti
dilution adjustments provided in the Partnership Agreement).
The DownREIT Partnership is accounted for by the Operating Partnership under the equity method of accounting and is
included in Investment in unconsolidated entities on the Consolidated Balance Sheets. The communities that were contributed to the
DownREIT Partnership by the Operating Partnership were deconsolidated by the Operating Partnership upon contribution. See Note
3, Real Estate Owned, for the impact of the deconsolidation on the Consolidated Balance Sheets.
The Operating Partnership recognizes earnings or losses from its investments in unconsolidated entities consisting of our
proportionate share of the net earnings or losses of the partnership in accordance with the Partnership Agreement.
As of December 31, 2016, the DownREIT Partnership owned 13 communities with 6,261 apartment homes. The Operating
Partnership’s investment in the DownREIT Partnership was $112.9 million and $166.2 million as of December 31, 2016 and 2015,
respectively.
Financial statements required under Rule 309 of Regulation SX for the DownREIT Partnership are included as Exhibit 99.1
to this report.
5. DEBT, NET
Our secured debt instruments generally feature either monthly interest and principal or monthly interestonly 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,
2016 and 2015 (dollars in thousands):
Principal Outstanding
For the Year Ended December 31, 2016
December 31,
2016
2015
Weighted
Average
Interest Rate
Weighted
Average
Years to
Maturity
Number of
Communities
Encumbered
Fixed Rate Debt
Mortgage notes payable
$
— $
30,132
—%
Fannie Mae credit
facilities
244,912
250,828
5.05%
—
2.8
Deferred financing costs
(1,070)
(1,627)
Total fixed rate secured
debt, net
Variable Rate Debt
Taxexempt secured note
payable
Fannie Mae credit
facilities
243,842
279,333
5.05%
2.8
27,000
27,000
1.33%
15.2
163,637
170,203
2.32%
3.8
Deferred financing costs
(505)
(572)
Total variable rate
secured debt, net
190,132
196,631
Total secured debt, net
$
433,974 $
475,964
2.18%
3.94%
5.4
4.0
—
7
7
1
3
4
11
As of December 31, 2016, an aggregate commitment of $408.5 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, 2016. The portions of the Fannie Mae credit facilities allocated to the Operating
Partnership mature at various dates from December 2018 through July 2023 and bear interest at floating and fixed rates.
At December 31, 2016, $244.9 million of the outstanding balance was fixed and had a weighted average interest rate of 5.05% and
the remaining balance of $163.6 million on these facilities had a weighted average variable interest rate of 2.32%. The
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
following information relates to the credit facilities allocated to the Operating Partnership (dollars in thousands):
December 31,
2016
December 31,
2015
Borrowings outstanding
$
408,549
$
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
414,759
421,001
3.9%
4.0%
421,031
425,522
431,462
3.8%
3.8%
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 Operating Partnership did not have any unamortized fair
value adjustments associated with the fixed rate debt instruments on the Operating Partnership’s properties.
Fixed Rate Debt
At December 31, 2016, the General Partner had borrowings against its fixed rate facilities of $355.8 million, of
which $244.9 million was allocated to the Operating Partnership based on the ownership of the assets securing the debt. As
of December 31, 2016, the fixed rate Fannie Mae credit facilities allocated to the Operating Partnership had a weighted average fixed
interest rate of 5.05%.
Variable Rate Debt
Taxexempt secured note payable. The variable rate mortgage note payable that secures taxexempt 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 1.33% as of December 31, 2016.
Secured credit facilities. At December 31, 2016, the General Partner had borrowings against its variable rate facilities
of $280.9 million, of which $163.6 million was allocated to the Operating Partnership based on the ownership of the assets securing
the debt. As of December 31, 2016, the variable rate borrowings under the Fannie Mae credit facilities allocated to the Operating
Partnership had a weighted average floating interest rate of 2.32%.
F 66
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
The aggregate maturities of the Operating Partnership’s secured debt due during each of the next ten calendar years
subsequent to December 31, 2016 are as follows (dollars in thousands):
Fixed
Variable
Secured Credit
Facilities
TaxExempt
Secured Notes
Payable
Secured Credit
Facilities
Total
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Thereafter
Subtotal
Noncash (a)
Total
$
— $
— $
48,872
133,204
62,836
—
—
—
—
—
—
—
244,912
(1,070)
—
—
—
—
—
—
—
—
—
27,000
27,000
(86)
— $
96,327
—
—
—
—
—
145,199
133,204
62,836
—
—
67,310
67,310
—
—
—
—
163,637
(419)
—
—
—
27,000
435,549
(1,575)
433,974
$
243,842 $
26,914 $
163,218 $
(a) Includes the unamortized balance of fair market value adjustments, premiums/discounts, deferred hedge gains, and
deferred financing costs. For the years ended December 31, 2016 and 2015, the Operating Partnership amortized $0.6
million and $1.3 million, respectively, of deferred financing costs into Interest expense.
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 $1.1 billion, $300 million of mediumterm notes due June 2018, $300 million of mediumterm notes
due October 2020, a $350 million term loan facility due January 2021, $400 million of mediumterm notes due January 2022, $300
million of mediumterm notes due July 2024, $300 million of mediumterm notes due October 2025 and $300 million of medium
term notes due September 2026. As of December 31, 2016 and 2015, the outstanding balance under the unsecured revolving credit
facility was $0.0 and $150.0 million, respectively.
On January 23, 2017, the General Partner entered into an unsecured commercial paper note program. Under the terms of the
program, the General Partner may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding of $500
million. The notes are fully and unconditionally guaranteed by the Operating Partnership. As of February 17, 2017, the Company had
issued $120.0 million of commercial paper notes, for one month terms, at a weighted average annualized rate of 1.16%.
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 $19.7 million and $(11.3) million at December 31, 2016 and 2015,
respectively, which is reflected as increases/(decreases) of capital on the Consolidated Balance Sheets.
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
Allocation of General and Administrative Expenses
The General Partner shares various general and administrative costs, employees and other overhead costs with the Operating
Partnership including legal assistance, acquisitions analysis, marketing, human resources, IT, accounting, rent, supplies and
advertising, and allocates these costs to the Operating Partnership first on the basis of direct usage when identifiable, with the
remainder allocated based on the reasonably anticipated benefits to the parties. During the years ended December 31, 2016, 2015,
and 2014, the general and administrative expenses allocated to the Operating Partnership by UDR were $15.4 million, $21.0 million,
and $27.4 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, 2016 and 2015, the Operating Partnership reimbursed the General Partner $14.5
million and $17.7 million, respectively, for shared services related to corporate level property management costs incurred by the
General Partner. In lieu of these shared cost reimbursements, during 2014, the Operating Partnership incurred $12.7 million of related
party management fees to whollyowned subsidiaries of UDR’s taxable REIT subsidiary (“TRS”). These shared cost reimbursements
and 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 costs is reclassified to Property management on the Consolidated
Statements of Operations. (See further discussion below.)
Shared Services/Management Fee
During the years ended December 31, 2016 and 2015, the Operating Partnership began to selfmanage its own properties and
entered into an InterCompany Employee and Cost Sharing Agreement with the General Partner. This agreement provides for
reimbursements to the General Partner for the Operating Partnership’s allocable share of costs incurred by the General Partner for (a)
shared services of corporate level property management employees and related support functions and costs, and (b) general and
administrative costs. As discussed above, the reimbursement for shared services is classified in Property management on the
Consolidated Statements of Operations. In 2011 through 2014, the Operating Partnership was a party to a management agreement
with whollyowned subsidiaries of UDR’s TRS. Under the management agreement, the Operating Partnership was charged a
management fee equal to 2.75% of gross rental revenues, which is classified in Property management on the Consolidated Statements
of Operations.
Notes Payable to the General Partner
As of both December 31, 2016 and 2015, the Operating Partnership had $273.3 million of unsecured notes payable to the
General Partner at annual interest rates between 4.12% and 5.34%. Certain limited partners of the Operating Partnership have
provided guarantees or reimbursement agreements related to these notes payable. The guarantees were provided by the limited
partners in conjunction with their contribution of properties to the Operating Partnership. The notes mature on August 31,
2021, December 31, 2023 and April 1, 2026, and interest payments are made monthly. The Operating Partnership recognized interest
expense on the notes payable of $12.2 million, $5.0 million and $4.6 million for the years ended December 31, 2016, 2015,
and 2014, respectively.
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 threelevel 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.
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
The estimated fair values of the Operating Partnership’s financial instruments either recorded or disclosed on a recurring
basis as of December 31, 2016 and 2015 are summarized as follows (dollars in thousands):
Fair Value at December 31, 2016, Using
Total Carrying
Amount in
Statement of
Financial
Position at
December 31,
2016
Fair Value
Estimate at
December 31,
2016
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
$
$
1 $
1 $
1 $
1 $
— $
— $
1 $
1 $
—
—
Secured debt instruments
fixed rate: (b)
Fannie Mae credit
facilities
Secured debt instruments
variable rate: (b)
Taxexempt secured
notes payable
Fannie Mae credit
facilities
$
244,912 $
251,664 $
— $
— $
251,664
27,000
27,000
—
—
27,000
Total liabilities
$
435,549 $
442,301 $
163,637
163,637
—
— $
—
— $
163,637
442,301
Fair Value at December 31, 2015, Using
Total Carrying
Amount in
Statement of
Financial
Position at
December 31,
2015
Fair Value
Estimate at
December 31,
2015
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
$
$
Secured debt instruments
fixed rate: (b)
8 $
8 $
8 $
8 $
— $
— $
8 $
8 $
—
—
Mortgage notes payable $
30,132 $
30,308 $
Fannie Mae credit
250,828
263,070
— $
—
— $
—
30,308
263,070
facilities
Secured debt instruments
variable rate: (b)
Taxexempt secured
notes payable
Fannie Mae credit
facilities
27,000
27,000
—
—
27,000
170,203
170,203
—
— $
—
— $
170,203
490,581
Total liabilities
$
478,163 $
490,581 $
(a) See Note 8, Derivatives and Hedging Activity.
(b) See Note 5, Debt, Net.
There were no transfers into or out of each of the levels of the fair value hierarchy.
F 69
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
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 General Partner, on behalf of 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 General Partner, on behalf of 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, 2016 and December 31, 2015, 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, 2016, 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, loantovalue ratios and collateral quality (Level 3).
The Operating Partnership records impairment losses on longlived 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
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
credit risk primarily by managing the amount, sources, and duration of its debt funding and through the use of derivative financial
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 fixedrate 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
variablerate 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 has been allocated to the Operating Partnership based on the
General Partner’s underlying debt instruments allocated to the Operating Partnership. (See Note 5, Debt, Net.)
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, 2016, 2015,
and 2014, such derivatives were used to hedge the variable cash flows associated with existing variablerate debt. The ineffective
portion of the change in fair value of the derivatives is recognized directly in earnings. During the year ended December 31, 2016, the
Operating Partnership recorded no gain or loss from ineffectiveness. During the year ended December 31, 2015, the Operating
Partnership recognized a loss of less than $0.1 million reclassified from Accumulated other comprehensive income/(loss),
net to Interest expense due to the dedesignation of a cash flow hedge and recorded no other ineffectiveness to earnings. During the
year ended December 31, 2014, the Operating Partnership recorded no gain or loss from ineffectiveness.
Amounts reported in Accumulated other comprehensive income/(loss), net related to derivatives will be reclassified to
interest expense as interest payments are made on the General Partner’s variablerate debt that is allocated to the Operating
Partnership. Through December 31, 2017, we estimate that less than $0.1 million will be reclassified as an increase to interest
expense.
As of December 31, 2016, the Operating Partnership had the following outstanding interest rate derivatives designated as
cash flow hedges of interest rate risk (dollars in thousands):
Product
Interest rate caps
Number of
Instruments Notional
1
$
96,327
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 an adjustment to
earnings of less than $0.1 million for the years ended December 31, 2016, 2015, and 2014.
As of December 31, 2016, 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
3
$
98,932
F 71
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheets
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, 2016 and 2015 (dollars in thousands):
Asset Derivatives
(included in Other assets)
Liability Derivatives
(Included in Other liabilities)
Fair Value at:
Fair Value at:
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
Derivatives designated as hedging
instruments:
Interest rate products
Derivatives not designated as hedging
instruments:
Interest rate products
$
$
— $
4 $
— $
1 $
4 $
— $
—
—
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, 2016, 2015, and 2014 (dollars in thousands):
Unrealized holding
gain/(loss) Recognized in
OCI
(Effective Portion)
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,
Year ended December 31,
2016 2015 2014 2016 2015
2014
2016 2015 2014
$
(4) $
(82) $(285) $
(12) $(1,044) $(2,275) $ — $
(11) $ —
Derivatives in
Cash Flow
Hedging
Relationships
Interest rate
products
Gain/(Loss) Recognized in
Interest income and other
income/(expense), net
Year ended December 31,
Derivatives Not Designated as Hedging Instruments
2016
2015
2014
Interest rate products
$
(3) $
(23) $
(3)
Creditriskrelated Contingent Features
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,
2016 and 2015, 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 comply with these
covenant provisions would result in the General Partner being in default on any derivative instrument obligations covered by the
agreement.
F 72
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
The General Partner has certain agreements with some of its derivative counterparties that contain a provision where in the
event of default by the General Partner 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 agreement, 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, 2016, 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 zero.
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, 2016 and December 31, 2015:
Offsetting of Derivative Assets
Gross
Amounts
Offset in the
Consolidated
Balance
Sheets
Net Amounts of
Assets
Presented in the
Consolidated
Balance Sheets
(a)
Gross
Amounts of
Recognized
Assets
Gross Amounts Not Offset
in the Consolidated
Balance Sheets
Financial
Instruments
Cash
Collateral
Received
Net
Amount
December 31,
2016
$
December 31,
2015
$
1 $
— $
1 $
— $
— $
8 $
— $
8 $
— $
— $
1
8
(a) Amounts reconcile to the aggregate fair value of derivative assets in the “Tabular Disclosure of Fair Values of Derivative
Instruments on the Consolidated Balance Sheets” located in this footnote.
Offsetting of Derivative Liabilities
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
Gross
Amounts of
Recognized
Liabilities
Net
Amount
December 31,
2016
$
December 31,
2015
$
— $
— $
— $
— $
— $
—
— $
— $
— $
— $
— $
—
(a) Amounts reconcile to the aggregate fair value of derivative liabilities in the “Tabular Disclosure of Fair Values of
Derivative Instruments on the Consolidated Balance Sheets” 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 special rights, powers and duties including
rights, powers and duties senior to limited partnership interests without approval of
F 73
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
any limited partners except holders of Class A Limited Partnership Units. There were 110,883 General Partnership units outstanding
at December 31, 2016 and 2015, all of which were held by UDR.
Limited Partnership Units
At December 31, 2016 and 2015, there were 183,167,815 limited partnership units outstanding, of which 1,873,332 were
Class A Limited Partnership Units. UDR owned 174,119,201 or 95.1% and 174,114,516 or 95.1%, of OP Units outstanding
at December 31, 2016 and 2015, respectively, of which 121,661 were Class A Limited Partnership Units. The
remaining 9,048,614 or 4.9% and 9,053,299 or 4.9% of OP Units units outstanding were held by nonaffiliated partners
at December 31, 2016 and 2015, 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 nonaffiliated 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 thenoutstanding OP Units held by limited partners was $330.1 million and $340.1 million as
of December 31, 2016 and 2015, 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, noncompounded 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 Class A Limited Partnership Units,
(iv) enter into a merger or acquisition, or (v) amend or modify the Operating Partnership Agreement in a manner that adversely affects
the relative rights, preferences or privileges of the Class A Limited Partnership Units.
The following table shows OP Units outstanding and OP Unit activity as of and for the years ended December 31,
2016, 2015, and 2014:
Class A
Limited
Partners
Limited
Partners
Limited
Partner
UDR, Inc.
Class A
Limited
Partner
General
Partner
Total
1,751,671 7,567,253 173,727,230
121,661
110,883 183,278,698
—
(153,451)
153,451
—
—
—
1,751,671 7,413,802 173,880,681
121,661
110,883 183,278,698
—
(112,174)
112,174
—
—
—
1,751,671 7,301,628 173,992,855
121,661
110,883 183,278,698
—
(4,685)
4,685
—
—
—
Ending balance at
December 31, 2013
OP redemptions for
UDR stock
Ending balance at
December 31, 2014
OP redemptions for
UDR stock
Ending balance at
December 31, 2015
OP redemptions for
UDR stock
Ending balance at
December 31, 2016
1,751,671
7,296,943
173,997,540
121,661
110,883
183,278,698
F 74
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
LTIP Units
UDR grants longterm incentive plan units ("LTIP Units") to certain employees and nonemployee directors. The LTIP Units
represent an ownership interest in the Operating Partnership and have voting and distribution rights consistent with OP Units. The
LTIP Units are subject to the terms of UDR's longterm incentive plan.
Two classes of LTIP Units are granted, Class 1 LTIP Units and Class 2 LTIP Units. Class 1 LTIP Units are granted to non
employee directors and vest after one year. Class 2 LTIP Units are granted to certain employees and vest over a period from one to
three years subject to certain performance and market conditions being achieved. Vested LTIP Units may be converted into OP Units
provided that such LTIP Units have been outstanding for at least two years from the date of grant.
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, nonrecourse 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. COMMITMENTS AND CONTINGENCIES
Commitments
Real Estate Under Redevelopment
The following summarizes the Operating Partnership’s real estate commitments at December 31, 2016 (dollars in
thousands):
Number of
Properties
Costs Incurred
to Date (a)
Expected Costs
to Complete
(unaudited)
Real estate communities — redevelopment
1
$
6,289 $
711
(a) Costs incurred to date include $0.9 million of accrued fixed assets for redevelopment.
Ground Leases
The Operating Partnership owns five communities which are subject to ground leases expiring between 2044 and 2103,
including extension options. Future minimum lease payments as of December 31, 2016 are $5.5 million for each of the years ending
December 31, 2017 to 2021 and a total of $334.6 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 $5.5 million, $5.4 million, and $5.3 million of ground rent expense for the years
ended December 31, 2016, 2015, and 2014, 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. 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.
F 75
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
11. 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 the Operating Partnership’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 are property management costs, which are the Operating Partnership’s allocable share of costs
incurred by the General Partner for shared services of corporate level property management employees and related support functions
and costs. 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 SameStore Communities and NonMature Communities/Other:
•
SameStore Communities represent those communities acquired, developed, and stabilized prior to January 1, 2015 and
held as of December 31, 2016. 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.
• NonMature Communities/Other represent those communities that do not meet the criteria to be included in SameStore
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 SameStore Community and NonMature 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, 2016, 2015, and 2014.
F 76
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
The following table details rental income and NOI for the Operating Partnership’s reportable segments for the years
ended December 31, 2016, 2015, and 2014, and reconciles NOI to Net income/(loss) attributable to OP unitholders in the
Consolidated Statements of Operations (dollars in thousands):
Reportable apartment home segment rental income
SameStore Communities
West Region
MidAtlantic Region
Northeast Region
Southeast Region
NonMature Communities/Other
Year Ended December 31,
2016
2015
2014
$ 183,153 $ 169,621 $ 153,951
38,987
53,036
47,792
37,502
51,086
44,981
37,216
48,493
42,568
81,447
137,218
140,406
Total segment and consolidated rental income
$ 404,415 $ 440,408 $ 422,634
Reportable apartment home segment NOI
SameStore Communities
West Region
MidAtlantic Region
Northeast Region
Southeast Region
NonMature Communities/Other
$ 137,784 $ 126,600 $
111,467
26,525
40,704
32,519
59,589
25,281
39,765
30,106
95,845
25,604
37,788
28,111
97,343
Total segment and consolidated NOI
297,121
317,597
300,313
Reconciling items:
Property management
Other operating expenses
(11,122)
(12,111)
(11,622)
(6,059)
(5,923)
(5,172)
Real estate depreciation and amortization
(147,074)
(169,784)
(179,176)
General and administrative
Casualtyrelated recoveries/(charges), net
Income/(loss) from unconsolidated entities
Interest expense
Gain/(loss) on sale of real estate owned
(18,808)
(27,016)
(28,541)
(484)
(843)
(37,425)
(4,659)
(541)
—
(30,067)
(40,321)
(41,717)
33,180
158,123
63,635
Net income/(loss) attributable to noncontrolling interests
(1,444)
(1,762)
(952)
Net income/(loss) attributable to OP unitholders
$
77,818 $ 213,301 $
96,227
F 77
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
The following table details the assets of the Operating Partnership’s reportable segments as of December 31,
2016 and 2015 (dollars in thousands):
Reportable apartment home segment assets
SameStore Communities
West Region
MidAtlantic Region
Northeast Region
Southeast Region
NonMature Communities/Other
Total segment assets
Accumulated depreciation
Total segment assets net book value
Reconciling items:
Cash and cash equivalents
Restricted cash
Investment in unconsolidated entities
Other assets
Total consolidated assets
December 31,
2016
December 31,
2015
$
1,521,762 $ 1,497,867
388,893
674,928
328,729
760,392
383,111
669,082
321,787
759,058
3,674,704
3,630,905
(1,408,815)
(1,281,258)
2,265,889
2,349,647
756
11,694
112,867
24,329
3,103
11,344
166,186
24,528
$
2,415,535 $ 2,554,808
Capital expenditures related to the Operating Partnership’s SameStore Communities totaled $41.7 million and $31.6
million for the years ended December 31, 2016 and 2015, respectively. Capital expenditures related to the Operating
Partnership’s NonMature Communities/Other totaled $2.4 million and $13.4 million for the years ended December 31,
2016 and 2015, respectively.
Markets included in the above geographic segments are as follows:
i. West Region — Orange County, San Francisco, Seattle, Los Angeles, Monterey Peninsula, Other Southern California and
Portland
ii. MidAtlantic Region — Metropolitan, D.C. and Baltimore
iii. Northeast Region — New York and Boston
iv. Southeast Region — Nashville, Tampa and Other Florida
F 78
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
12. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA
Selected consolidated quarterly financial data for the years ended December 31, 2016 and 2015 is summarized in the table
below (dollars in thousands, except per share amounts):
2016
Rental income
Three Months Ended
March 31,
June 30,
September
30,
December
31,
$
98,786 $
100,892 $
102,595 $
102,142
Income/(loss) from continuing operations
5,131
11,394
11,885
17,672
Income/(loss) attributable to OP
unitholders
Income/(loss) attributable to OP
unitholders per weighted average OP Unit
— basic and diluted (a)
2015
Rental income
$
$
4,787
11,044
11,517
50,470
0.03 $
0.06 $
0.06 $
0.27
110,095 $
113,158 $
115,173 $
101,982
Income/(loss) from continuing operations
12,117
15,355
14,952
14,516
Income/(loss) attributable to OP
unitholders
Income/(loss) attributable to OP
unitholders per weighted average OP Unit
— basic and diluted (a)
$
36,346
47,383
14,617
114,955
0.20 $
0.26 $
0.08 $
0.62
(a) Quarterly net income/(loss) per weighted average OP Unit amounts may not total to the annual amounts.
F 79
[This page is intentionally left blank.]
UDR, INC.
SCHEDULE III — REAL ESTATE OWNED
DECEMBER 31, 2016
(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
Construction(a)
Date of
Date
Acquired
$ 61,050 $ 20,476 $ 28,538 $ 49,014 $ 17,240 $ 21,806 $ 44,448 $
66,254 $ 29,331
2003
Jun03
36,423
99,329
110,644
209,973
95,047
112,935
192,085
305,020
101,329 1972/2013 Oct04
42,552
7,345
22,624
29,969
10,836
7,974
32,831
40,805
21,939
2003
Jun03
36,980
8,055
22,486
30,541
12,778
9,047
34,272
43,319
21,224
1970
Jun03
—
229
14,129
14,358
3,098
10,951
6,505
17,456
4,506
1969
Dec03
—
62,516
46,082
108,598
37,967
68,031
78,534
146,565
47,601 2000/2016 Oct04
—
—
—
—
—
—
—
58,785
10,670
12,071
50,067
7,080
6,187
108,852
17,750
18,258
27,603
3,146
3,466
60,314
11,066
12,430
76,141
9,830
9,294
136,455
20,896
21,724
45,661 2000/2016 Mar05
Sep04
6,505
Sep04
5,753
1969
1969
16,663
51,905
68,568
1,952
16,901
53,619
70,520
20,288
12,878
—
12,878
38,796
13,017
38,657
51,674
5,327
2009
2014
Aug10
Aug11
25,000
17,298
—
—
25,000
126,243
25,071
126,172
151,243
27,388
2013
Oct11
17,298
70,366
16,462
71,202
87,664
13,561
2014
Jun04
177,005
351,315
359,742
711,057
448,538
386,005
773,590 1,159,595
350,413
34,677 1987/2016 Dec98
Dec98
14,688
1968
—
—
—
—
38,495
—
—
—
—
27,000
—
9,861
4,365
5,996
6,224
22,161
14,031
8,545
5,353
30,657
594
14,253
44,578
16,696
24,868
23,916
40,137
30,537
14,458
18,559
83,872
42,515
74,104
54,439
21,061
30,864
30,140
62,298
44,568
23,003
23,912
114,529
43,109
88,357
33,188
7,773
26,932
10,927
5,036
36,210
5,490
11,136
9,876
6,923
7,927
14,313
5,142
7,643
7,080
22,563
16,297
11,479
5,758
30,701
886
14,319
73,314
23,692
50,153
33,987
44,771
64,481
17,014
29,290
93,704
49,146
81,965
87,627
28,834
57,796
41,067
67,334
80,778
28,493
35,048
124,405
50,032
96,284
31,243
20,789
27,326
40,345
10,240
16,838
44,392
24,602
26,324
—
23,625
—
23,625
129,282
23,683
129,224
152,907
24,083
65,495
145,665
414,240
559,905
290,700
159,864
690,741
850,605
315,547
—
—
—
—
—
—
2,486
2,174
6,474
6,179
6,437
7,408
30,226
22,307
8,923
9,582
36,700
28,486
6,903
4,841
5,620
2,479
3,082
2,727
6,673
6,280
12,744
11,696
35,647
24,685
15,826
14,423
42,320
30,965
8,180
7,389
21,678
14,674
6,848
21,284
30,922
89,389
37,770
110,673
4,338
5,450
7,009
21,538
35,099
94,585
42,108
116,123
17,826
45,522
2010
1971
2005
2012
1962
2010
2007
1999
1999
2014
1987
1985
2003
2005
2000
2007
Dec98
Dec98
Aug05
Nov05
Oct05
Oct07
Mar08
Jul08
Apr11
Sep10
Dec98
Dec98
Jul05
Nov05
May08
Jul08
WEST REGION
Harbor at
Mesa Verde
27 Seventy
Five Mesa
Verde
Pacific
Shores
Huntington
Vista
Missions at
Back Bay
Eight 80
Newport
Beach —
North
Eight 80
Newport
Beach —
South
Vista Del Rey
Foxborough
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
SAN
FRANCISCO,
CA
Crowne
Pointe
Hilltop
The
Hawthorne
The Kennedy
Hearthstone
at Merrill
Creek
Island Square
Borgata
elements too
989elements
Lightbox
Waterscape
Ashton
Bellevue
TEN20
Milehouse
SEATTLE, WA
Rosebeach
Tierra Del
Rey
The Westerly
Jefferson at
Marina del
Rey
LOS ANGELES,
CA
Boronda
Manor
Garden Court
—
—
—
—
—
50,059
29,518
—
79,577
—
43,078
67,700
6,379
27,468
8,541
6,449
9,693
8,287
5,247
5,976
123,485
8,414
39,586
48,182
24,569
72,036
45,990
38,884
65,176
124,939
76,587
63,041
697,911
17,449
36,679
102,364
30,948
99,504
54,531
45,333
74,869
133,226
81,834
69,017
821,396
25,863
76,265
150,546
5,049
16,514
2,356
585
813
186
386
18
55,538
4,070
4,236
38,235
6,418
30,244
8,583
6,470
9,704
8,353
5,291
5,976
128,348
8,787
39,696
50,796
29,579
85,774
48,304
39,448
65,978
125,059
76,929
63,059
748,586
21,146
40,805
137,985
35,997
116,018
56,887
45,918
75,682
133,412
82,220
69,035
876,934
29,933
80,501
188,781
2010
14,416 2001/2016 May07
Feb10
45,959
Dec09
19,372
Aug14
5,932
Sep14
8,861
2006
2014
2014
1,685
1,039
596
213,129
13,517
21,234
57,413
2009
2009
2016
1970
1999
2013
Oct16
Oct16
Nov16
Sep04
Dec07
Sep10
—
55,651
—
55,651
91,599
61,549
85,701
147,250
37,031
2008
Sep07
110,778
151,833
156,492
308,325
138,140
160,828
285,637
446,465
129,195
—
—
1,946
888
8,982
4,188
10,928
5,076
9,967
5,655
3,232
1,600
17,663
9,131
20,895
10,731
9,879
5,338
1979
1973
Dec98
Dec98
S 1
UDR, INC.
SCHEDULE III — REAL ESTATE OWNED (Continued)
DECEMBER 31, 2016
(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
Construction(a)
Date of
Date
Acquired
—
—
—
—
—
—
3,039
1,304
12,883
5,115
15,922
6,419
15,744
6,293
5,407
2,223
26,259
10,489
31,666
12,712
14,911
6,008
6,388
23,854
30,242
28,743
10,139
48,846
58,985
26,688
2,044
1,329
8,028
10,072
10,487
3,345
17,214
20,559
5,334
6,663
6,794
2,236
11,221
13,457
9,874
6,145
1974
1977
1986
1979
1975
Dec98
Dec98
Dec98
Dec98
Dec98
16,938
68,384
85,322
83,683
28,182
140,823
169,005
78,843
55,263
13,557
3,645
17,202
54,509
23,290
48,421
71,711
36,766
2006
Oct02
—
—
5,810
23,450
29,260
3,331
6,168
26,423
32,591
18,455
6,517
10,718
17,235
3,354
6,819
13,770
20,589
8,416
55,263
—
—
—
25,884
3,273
6,014
9,287
63,637
61,194
10,794
7,115
15,190
7,153
25,984
14,268
488,118 824,407 1,758,586 2,582,993 1,092,061 909,868 2,765,186 3,675,054 1,176,748
124,891
19,522
28,037
47,559
36,277
3,881
6,483
10,364
88,614
15,641
21,554
37,195
37,813
9,134
14,870
24,004
63,697
12,407
20,884
33,291
21,478
3,311
13,283
16,594
7,077
3,891
19,780
23,671
14,646
2,366
8,387
10,753
7,978
2,918
15,813
18,731
10,993
11,238
6,418
5,612
297
18,790
13,411
20,086
12,786
30,028
19,829
25,698
13,083
10,556
21,313
9,418
113,740
11,705
7,505
6,087
9,484
28,879
33,637
29,029
117,339
40,584
41,142
35,116
126,823
21,082
24,435
21,187
17,547
1,139
49,657
50,796
21,756
36,485
36,067
72,552
22,610
13,753
14,357
1,137
32,815
21,606
5,710
13,290
31,393
7,300
9,748
27,749
15,566
50,881
14,697
55,283
36,059
51,577
103,676
107,051
66,765
97,941
—
49,812
65,934
104,813
139,866
88,371
103,651
13,290
18,201
4,506
8,368
17,054
3,286
4,157
70,271
14,770
14,401
1,510
33,425
21,636
5,721
25,499
53,243
56,039
111,671
123,495
70,021
102,087
58,062
68,013
70,440
113,181
156,920
91,657
107,808
83,561
36,833
31,072
58,412
61,100
—
31,393
94,799
31,395
94,797
126,192
23,793
—
68,022
7,300
77,770
58,381
890
7,335
9,750
58,346
68,910
65,681
78,660
11,780
4,679
34,684 2006/2007 Mar08
Jun11
31,753
Mar07
29,152
2010
2009
111,878
107,539
159,728
83,834
177,454
139,627
123,105
210,609
98,531
232,737
1,495
1,156
1,273
4,666
8,082
27,752
15,576
50,881
14,714
55,376
113,370
108,685
161,001
88,483
185,443
141,122
124,261
211,882
103,197
240,819
8,987
7,427
12,750 1969/2015 Oct15
Oct15
7,007
Oct15
14,724
2000
1968
2001
1966
1989
1985
1990
1987
1938
2008
1988
2014
1971
2008
2004
2007
1972
Nov02
Oct04
Dec98
Sep04
Jun96
Feb96
May02
Apr02
Aug02
Jan08
Dec03
Sep05
Mar07
Dec07
Mar08
2013
2014
2010
2011
2014
Sep07
Jun11
Oct15
Oct15
Oct15
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
OTHER
SOUTHERN CA
Tualatin Heights
Hunt Club
PORTLAND, OR
TOTAL WEST REGION
MIDATLANTIC 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
1200 East West
Courts at
Huntington
Station
Eleven55 Ripley
Arbor Park of
Alexandria
Courts at Dulles
Newport Village
—
—
—
—
—
—
31,373
—
—
—
—
—
—
—
—
—
—
—
92,468
—
127,600
METROPOLITAN,
D.C.
272,919 345,666 1,307,924 1,653,590
488,423 407,816 1,734,197 2,142,013
506,653
Gayton Pointe
Townhomes
Waterside At
Ironbridge
Carriage Homes
at Wyndham
Legacy at
Mayland
RICHMOND, VA
Calvert’s Walk
20 Lambourne
Domain
Brewers Hill
BALTIMORE, MD
TOTAL MID
ATLANTIC REGION
—
—
—
33,850
33,850
—
—
—
—
826
5,148
5,974
30,124
3,509
32,589
36,098
28,530
1,844
13,239
15,083
8,457
2,394
21,146
23,540
14,529
474
30,997
31,471
8,455
3,912
36,014
39,926
25,281
2007
1987
1998
Sep95
Sep97
Nov03
1,979
5,123
4,408
11,750
4,669
20,827
11,524
60,908
24,692
45,590
13,503
66,031
29,100
57,340
40,630
110,912
45,299
131,739
30,706
77,742
7,732
8,131
1,647
17,510
5,027
14,842
4,884
12,224
4,762
21,870
39,182
128,931
31,948
53,247
42,184
127,379
44,209
143,773
36,832
65,471
46,946
149,249
33,519 1969/2007 Dec91
101,859
21,879
27,526
Mar04
Mar08
1988
2003
2009
Aug10
15,168
64,573
306,769 371,616 1,479,744 1,851,360
583,675 444,528 1,990,507 2,435,035
673,085
S 2
UDR, INC.
SCHEDULE III — REAL ESTATE OWNED (Continued)
DECEMBER 31, 2016
(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
Construction(a)
Date of
Date
Acquired
260,415
143,553
439,330
323,892
272,996
66,557
12,581
41,571
218,983
35,335
156,662
36,416
13,109
107,154
538,824 126,818 1985/2013
99,494 115,037
324,920
266,255
88,704
332,685
57,972
8,793
917,312 1,167,190 133,977 250,996 1,050,171 1,301,167 317,414
231,425
120,246
423,787
274,713
2001
2008
2005
Apr11
Aug11
Jul11
Aug11
91,027
96,618
8,718
5,637
99,699
105,336
35,663 1887/1990 Sep10
34,869
88,096
51,175
—
265,167
2,443
40,908
7,622
108,874
62,136
7,672
24,584 201,018
333,120 227,473
6,184
19,429
11,094
24,585
66,929
37,167
97,067
58,714
201,017
493,664
43,351
116,496
69,808
225,602
560,593
13,499
32,202
20,723
17,906
119,993
78,350 317,831
1,182,479 1,500,310 361,450 317,925 1,543,835 1,861,760 437,407
2007
2006
2005
2015
2004
2007
2007
2006
2004
2006
2004
2000
2007
1977
1989
1999
1986
1986
1998
1998
2008
1972
2007
1986
Sep10
Apr11
Apr11
Dec15
Feb96
Apr94
Jun94
Oct94
Oct96
Jul97
Oct97
May98
Aug06
Nov95
Dec95
Dec95
Mar96
Mar97
Jan99
Jun04
May06
Dec92
Sep93
Mar94
4,155
6,001
9,101
2,895
12,207
15,102
10,007
11,076
6,608
9,042
12,349
8,639
12,609
7,365
10,695
15,153
10,824
6,498
7,780
17,538
21,410
21,216
16,628
9,937
11,697
10,614
7,505
4,982
3,582
2,136
2,564
4,163
2,943
30,243
21,857
18,068
22,687
18,495
33,825
23,993
20,632
26,850
21,438
26,714
18,267
13,996
16,290
12,784
1,751
13,534
15,285
9,586
4,317
22,075
26,392
14,743
12,860
88,765
5,867
11,584
—
5,461
7,714
16,015
24,674
16,293
87,608
4,710
2,458
19,552
13,579
111,389 105,259
9,351
11,462
7,015
13,053
2,117
6,169
8,480
17,475
27,856
20,876
103,041
6,886
4,238
35,400
5,621
5,109
6,397
8,287
16,798
98,425
10,042
17,938
7,355
31,706
1,882
2,216
4,577
1,283
1,383
1,997
3,709
5,781
22,828
3,617
3,642
25,776
184,942
14,484
22,299
32,940
10,507
12,206
21,875
32,434
31,893
178,638
13,311
18,534
20,595
33,131
216,648 142,982
11,674
16,366
15,071
24,515
37,517
11,790
13,589
23,872
22,595
7,439
8,613
13,150
36,143
22,257
23,980
37,674
201,466 124,779
11,632
16,928
17,716
22,176
10,647
12,042
10,793
2,794
20,041
22,835
15,279
7,166
23,150
36,858
37,663
8,957
30,852
47,727
44,274
9,729
16,397
8,897
16,470
2,760
9,505
11,699
15,111
15,926
37,744
44,925
45,633
18,686
47,249
56,624
60,744
11,947
28,569 1988/1989
1985
Jun97
Jun03
30,408
25,145
2001
2009
Dec04
Jul09
NORTHEAST REGION
10 Hanover
Square
21 Chelsea
View 34
95 Wall Street
NEW YORK, NY
Garrison
Square
Ridge at Blue
Hills
Inwood West
14 North
100 Pier 4
BOSTON, MA
TOTAL NORTHEAST
REGION
SOUTHEAST REGION
41,432
—
—
36,399
— 114,410
—
57,637
— 249,878
—
25,000
53,350
—
—
78,350
5,591
6,039
20,778
10,961
24,584
67,953
Seabrook
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
Summit West
The Breyley
Lakewood
Place
Cambridge
Woods
Inlet Bay
MacAlpine
Place
The Vintage
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16,331
25,090
23,550
64,971
—
—
—
12,450
—
1,846
1,533
757
1,653
2,804
2,185
1,282
3,872
6,692
22,624
1,148
1,469
2,117
708
766
1,460
3,182
4,583
15,433
2,176
1,780
1,395
1,791
7,702
—
—
10,869
6,611
Lofts at West
End
TAMPA, FL
12,450
32,324
122,652
154,976
90,266
49,128
196,114
245,242 140,696
The Reserve
and Park at
Riverbridge
OTHER
FLORIDA
TOTAL SOUTHEAST
REGION
SOUTHWEST REGION
39,787
39,787
15,968
15,968
56,401
72,369
11,036
16,721
66,684
83,405
43,050 1999/2001 Dec04
56,401
72,369
11,036
16,721
66,684
83,405
43,050
117,208
86,349
355,426
441,775 304,986 120,383
626,378
746,761 451,507
Thirty377
Legacy
Village
Garden Oaks
Glenwood
Talisker of
Addison
Springhaven
Clipper Pointe
DALLAS, TX
25,000
82,734
—
—
—
—
—
107,734
24,036
16,882
2,132
7,903
10,440
6,688
13,221
81,302
32,951
56,987
11,831
24,382
44,436
68,818
26,542
2007
Aug06
100,102
5,367
554
634
3,354
2,507
145,469
116,984
7,499
8,457
11,074
10,042
15,728
226,771
11,943
2,174
2,646
3,085
1,889
3,013
36,581
18,041
6,988
8,174
10,882
8,387
15,016
91,870
110,886
2,685
2,929
3,277
3,544
3,725
171,482
128,927
9,673
11,103
14,159
11,931
18,741
263,352
S 3
57,766 2005/06/07 Mar08
Mar07
2,155
May07
1,804
1970
1979
1975
1977
1978
May07
Apr07
May07
2,261
2,717
3,176
96,421
UDR, INC.
SCHEDULE III — REAL ESTATE OWNED (Continued)
DECEMBER 31, 2016
(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
Construction(a)
Date of
Date
Acquired
—
3,151
14,269
17,420
23,150
5,071
35,499
40,570
24,964
2010
Mar
02
36,299
—
—
36,299
4,034
5,084
4,148
16,417
55,256
17,646
16,869
104,040
59,290
22,730
21,017
120,457
9,946
2,602
1,854
37,552
4,285
5,409
4,378
19,143
64,951
19,923
18,493
138,866
69,236
25,332
22,871
158,009
29,516
6,870
6,168
67,518
2007
2000
2004
144,033
97,719
249,509
347,228
74,133
111,013
310,348
421,361
163,939
1,134,478
1,697,922
5,025,744
6,723,666
2,416,305
1,903,717
7,236,254
9,139,971
2,902,686
08
Aug
Apr
Apr
12
12
Barton
Creek
Landing
Residences
at the
Domain
Red Stone
Ranch
Lakeline
Villas
AUSTIN, TX
TOTAL
SOUTHWEST
REGION
TOTAL OPERATING
COMMUNITIES
REAL ESTATE
UNDER
DEVELOPMENT
The
Residences
at Pacific
City
345Harrison
Street
TOTAL REAL
ESTATE UNDER
DEVELOPMENT
LAND
Waterside
7 Harcourt
Vitruvian
Park®
Wilshire at
LaJolla
Dublin Land
TOTAL LAND
HELD FOR
DISPOSITION
Hanover
Village
TOTAL HELD FOR
DISPOSITION
COMMERCIAL
Circle
Towers
Office Bldg
Brookhaven
Shopping
Center
TOTAL
COMMERCIAL
Other (b)
1745 Shea
Center I
TOTAL
CORPORATE
TOTAL
COMMERCIAL &
CORPORATE
—
—
78,085
32,938
—
111,023
78,085
32,938
156,190
75,069
78,085
32,943
156,190
234,275
75,064
108,007
111,023
231,259
111,028
231,254
342,282
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
20,534
20,534
11,862
884
4,325
31,105
8,922
57,098
1,624
1,624
1,407
4,943
6,350
—
3,034
3,034
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
309
—
2,175
—
—
2,484
222
5,530
9,208
112
259
15,331
12,084
804
11,326
31,217
8,922
64,353
—
5,610
2,207
—
259
8,076
12,084
6,414
13,533
31,217
9,181
72,429
11,862
884
4,325
31,105
8,922
57,098
1,624
1,624
—
—
1,104
1,104
520
520
1,624
1,624
553
553
1,407
6,110
1,380
6,137
7,517
3,138
4,943
6,350
—
23,568
23,568
17,363
23,473
5,011
1,045
6,056
7,793
9,173
—
3,034
3,034
14,513
20,650
5,011
21,579
26,590
22,306
29,823
5,011
24,613
29,624
13,321
16,459
74
1,369
1,443
9,384
20,534
29,918
29,529
12,207
47,240
59,447
17,902
Deferred Financing
Costs
(3,620)
$
TOTAL REAL ESTATE
OWNED
$ 1,130,858 $ 1,877,051 $ 5,046,278 $ 6,923,329 $ 2,692,424 $ 2,092,409 $ 7,523,344 $ 9,615,753 $ 2,923,625
(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 $8.7 billion at December 31, 2016 (unaudited).
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, 2016
(In thousands)
3YEAR 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
Impairment of assets, including casualtyrelated impairments
Balance at end of the year
2016
2015
2014
$9,190,276 $8,383,259 $8,207,977
324,104
906,446
231,225
339,813
203,183
326,461
(238,440)
(301,920)
(269,681)
—
—
—
(112,344)
(692)
(379)
$9,615,753 $9,190,276 $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
Write off of accumulated depreciation on casualtyrelated
impaired assets
2016
2015
2014
$2,646,874 $2,434,772 $2,208,794
398,904
364,622
356,673
(122,153)
(152,520)
(126,151)
—
—
—
(4,228)
—
(316)
Balance at end of year
$2,923,625 $2,646,874 $2,434,772
S 5
UNITED DOMINION REALTY, L.P.
SCHEDULE III — REAL ESTATE OWNED
DECEMBER 31, 2016
(In thousands)
Initial Costs
Gross Amount at Which
Carried at Close of
Period
Encumbrances
WEST REGION
Land and
Land
Improvements Building and
Improvements
Cost of
Improvements
Capitalized
Subsequent to
Acquisition
Costs
Total Initial
Acquisition
Costs
Land and
Land
Improvements
Buildings &
Buildings
Improvements Total Carrying
Value
Accumulated
Depreciation
Date of
Construction
(a)
Date Acquired
Harbor at
Mesa Verde
27 Seventy
Five Mesa
Verde
Pacific
Shores
Huntington
Vista
Missions at
Back Bay
Coronado at
Newport —
North
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
Crowne
Pointe
Hilltop
The Kennedy
Hearthstone
at Merrill
Creek
Island Square
SEATTLE, WA
Rosebeach
Tierra Del
Rey
LOS
ANGELES, CA
Boronda
Manor
Garden Court
Cambridge
Court
Laurel Tree
The Pointe At
Harden
Ranch
$ 61,050 $ 20,476 $ 28,538 $
49,014 $ 17,240 $ 21,806 $
44,448 $
66,254 $ 29,331
2003
Jun03
36,423
99,329
110,644
209,973
95,047
112,935
192,085
305,020
101,329 1972/2013 Oct04
42,552
7,345
22,624
29,969
10,836
36,980
8,055
22,486
30,541
12,778
7,974
9,047
32,831
40,805
21,939
2003
Jun03
34,272
43,319
21,224
1970
Jun03
—
—
—
—
229
14,129
14,358
3,098
10,951
6,505
17,456
4,506
1969
Dec03
62,516
10,670
46,082
7,080
108,598
17,750
37,967
3,146
68,031
11,066
78,534
9,830
146,565
20,896
47,601 2000/2016 Oct04
Sep04
6,505
1969
58,785
50,067
108,852
27,603
60,314
76,141
136,455
45,661 2000/2016 Mar05
177,005
267,405
301,650
569,055
207,715
302,124
474,646
776,770
278,096
—
—
—
—
38,493
—
—
9,861
4,365
5,996
6,224
22,161
14,031
8,545
44,578
16,696
24,868
23,916
40,137
30,537
14,458
54,439
21,061
30,864
30,140
62,298
44,568
23,003
20,657
7,773
26,932
10,927
5,036
36,210
5,490
11,021
5,142
7,643
7,080
22,563
16,297
11,479
64,075
23,692
50,153
33,987
44,771
64,481
17,014
75,096
28,834
57,796
41,067
67,334
80,778
28,493
31,243
20,789
27,326
40,345
10,240
28,006 1987/2016 Dec98
Dec98
14,688
1968
—
—
5,353
30,657
18,559
83,872
23,912
114,529
11,136
9,876
5,758
30,701
29,290
93,704
35,048
124,405
16,838
44,392
27,000
594
42,515
43,109
6,923
886
49,146
50,032
24,602
1999
Jul08
65,493
107,787
340,136
447,923
140,960
118,570
470,313
588,883
258,469
—
—
—
—
—
—
—
2,486
2,174
6,179
6,437
7,408
22,307
6,848
21,284
38,971
8,414
30,922
89,389
156,463
17,449
8,923
9,582
28,486
37,770
110,673
195,434
25,863
6,903
4,841
2,479
4,338
5,450
24,011
4,070
3,082
2,727
6,280
7,009
21,538
40,636
8,787
12,744
11,696
24,685
35,099
94,585
178,809
21,146
15,826
14,423
30,965
8,180
7,389
14,674
42,108
116,123
219,445
29,933
17,826
45,522
93,591
13,517
43,078
39,586
36,679
76,265
4,236
39,696
40,805
80,501
21,234
43,078
48,000
54,128
102,128
8,306
48,483
61,951
110,434
34,751
—
—
—
—
1,946
888
3,039
1,304
8,982
4,188
12,883
5,115
10,928
5,076
15,922
6,419
9,967
5,655
15,744
6,293
3,232
1,600
5,407
2,223
17,663
9,131
26,259
10,489
20,895
10,731
31,666
12,712
9,879
5,338
14,911
6,008
1987
1985
2005
2000
2007
1970
1999
1979
1973
1974
1977
Dec98
Dec98
Nov05
May08
Jul08
Sep04
Dec07
Dec98
Dec98
Dec98
Dec98
—
6,388
23,854
30,242
28,743
10,139
48,846
58,985
26,688
1986
Dec98
2010
1971
2005
2012
1962
2010
2007
Dec98
Dec98
Aug05
Nov05
Oct05
Oct07
Mar08
The Pointe At
Northridge
The Pointe At
Westlake
MONTEREY
PENINSULA,
CA
Verano at
Rancho
Cucamonga
Town Square
Villas at
Carlsbad
OTHER
SOUTHERN
CA
Tualatin
Heights
Hunt Club
PORTLAND,
OR
TOTAL WEST
REGION
MIDATLANTIC
REGION
—
—
2,044
8,028
10,072
10,487
3,345
17,214
20,559
9,874
1979
Dec98
1,329
5,334
6,663
6,794
2,236
11,221
13,457
6,145
1975
Dec98
—
16,938
68,384
85,322
83,683
28,182
140,823
169,005
78,843
55,263
13,557
3,645
17,202
54,509
23,290
48,421
71,711
36,766
—
6,517
10,718
17,235
3,354
6,819
13,770
20,589
8,416
2006
1966
Oct02
Oct04
55,263
20,074
14,363
34,437
57,863
30,109
62,191
92,300
45,182
—
—
—
3,273
6,014
9,134
14,870
12,407
20,884
7,115
7,153
3,881
6,483
15,641
21,554
19,522
28,037
10,794
15,190
1989
1985
Dec98
Sep04
9,287
24,004
33,291
14,268
10,364
37,195
47,559
25,984
340,839
508,462
959,128 1,467,590
536,806
578,468 1,425,928 2,004,396
814,916
Ridgewood
DelRey
Tower
—
—
5,612
20,086
25,698
9,418
6,087
29,029
35,116
21,187
1988
Aug02
297
12,786
13,083
113,740
9,484
117,339
126,823
17,547
2014
Jan08
S 6
UNITED DOMINION REALTY, L.P.
SCHEDULE III — REAL ESTATE OWNED (Continued)
DECEMBER 31, 2016
(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
Wellington Place
at Olde Town
31,373
13,753
36,059
51,577
49,812
18,201
14,770
65,934
4,506
14,401
53,243
56,039
68,013
70,440
14,357
1,137
103,676
104,813
8,303
1,510
111,606
113,116
27,749
111,878
139,627
1,495
27,752
113,370
141,122
—
—
—
36,833
31,072
58,347
8,987
31,373
62,905
336,062
398,967
155,663
74,004
480,626
554,630
173,973
—
—
—
4,408
11,750
16,158
24,692
45,590
70,282
29,100
57,340
86,440
7,732
4,884
8,131
15,863
12,224
17,108
31,948
53,247
85,195
36,832
21,879
65,471
102,303
27,526
49,405
31,373
79,063
406,344
485,407
171,526
91,112
565,821
656,933
223,378
2008
2004
2007
2011
1988
2003
2005
2008
05
07
Sep
Mar
Dec
Oct
07
15
04
Mar
Mar
08
11
Apr
Aug
11
2005
Apr
11
41,432
218,983
260,415
12,581
41,571
231,425
272,996
66,557
57,637
99,069
10,961
10,961
266,255
485,238
51,175
51,175
323,892
584,307
62,136
62,136
8,793
21,374
7,672
7,672
57,972
99,543
11,094
11,094
274,713
506,138
58,714
58,714
332,685
605,681
69,808
69,808
88,704
155,261
20,723
20,723
110,030
536,413
646,443
29,046
110,637
564,852
675,489
175,984
1,148
1,469
2,117
708
766
4,583
10,791
7,702
10,869
18,571
5,867
11,584
—
5,461
7,714
16,293
46,919
23,150
36,858
60,008
56,401
56,401
7,015
9,351
13,053
11,462
2,117
6,169
8,480
20,876
57,710
35,400
5,621
5,109
16,798
83,741
1,882
2,216
4,577
1,283
1,383
14,484
22,299
32,940
10,507
12,206
16,366
24,515
37,517
11,790
13,589
11,674
15,071
22,595
7,439
8,613
5,781
17,122
31,893
124,329
37,674
141,451
23,980
89,372
1977
1989
1999
1986
1986
2008
95
95
95
Nov
Dec
Dec
Mar
Mar
May
97
96
06
30,852
16,397
9,505
47,727
78,579
72,369
72,369
8,897
25,294
11,699
21,204
11,036
11,036
16,721
16,721
37,744
44,925
82,669
66,684
66,684
47,249
28,569 1988/1989
Jun
03
56,624
103,873
83,405
83,405
2001
Dec
04
30,408
58,977
43,050 1999/2001 Dec
43,050
04
39,787
39,787
15,968
15,968
63,337
45,330
163,328
208,658
120,071
55,047
273,682
328,729
191,399
435,549
742,885
2,065,213
2,808,098
857,449
835,264
2,830,283
3,665,547
1,405,677
Andover House
Sullivan Place
Courts at
Huntington Station
METROPOLITAN
D.C.
Calvert’s Walk
20 Lambourne
BALTIMORE, MD
TOTAL MID
ATLANTIC REGION
NORTHEAST REGION
10 Hanover Square
95 Wall Street
NEW YORK, NY
14 North
BOSTON, MA
TOTAL NORTHEAST
REGION
SOUTHEAST REGION
Legacy Hill
Hickory Run
Carrington Hills
Brookridge
Breckenridge
Polo Park
NASHVILLE, TN
Inlet Bay
MacAlpine Place
TAMPA, FL
The Reserve and
Park at
Riverbridge
OTHER FLORIDA
TOTAL SOUTHEAST
REGION
TOTAL OPERATING
COMMUNITIES
COMMERCIAL
—
—
—
—
—
—
—
—
—
—
—
23,550
23,550
—
—
—
Circle Towers
Office Bldg
TOTAL
COMMERCIAL
Other (b)
TOTAL
CORPORATE
—
—
—
—
TOTAL COMMERCIAL
& CORPORATE
Deferred Financing Costs
—
$ (1,575)
1,407
1,407
—
—
1,407
—
—
—
—
—
1,407
1,407
—
—
1,407
6,110
6,110
1,640
1,640
7,750
1,380
1,380
—
—
1,380
6,137
6,137
1,640
1,640
7,777
7,517
7,517
1,640
1,640
9,157
3,138
3,138
—
—
3,138
TOTAL REAL
ESTATE OWNED
$ 433,974 $ 744,292 $ 2,065,213 $ 2,809,505 $ 865,199 $ 836,644 $ 2,838,060 $ 3,674,704 $ 1,408,815
(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 $3.1 billion at December 31, 2016 (unaudited).
The estimated depreciable lives for all buildings in the latest Consolidated Statements of Operations are 35 to 55 years.
S 7
UNITED DOMINION REALTY, L.P.
SCHEDULE III — REAL ESTATE OWNED (Continued)
DECEMBER 31, 2016
(In thousands)
3YEAR 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 deconsolidated
Casualtyrelated impairment of assets
Balance at end of year
2016
2015
2014
$3,630,905 $4,238,770 $4,188,480
—
139,627
—
71,720
61,196
91,682
(27,921)
(180,069)
(41,013)
—
—
(628,479)
(140)
—
(379)
$3,674,704 $3,630,905 $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
2016
2015
2014
$1,281,258 $1,403,303 $1,241,574
144,942
168,495
178,719
(17,385)
(67,177)
(16,674)
Accumulated depreciation on property deconsolidated
—
(223,363)
—
Write off of accumulated depreciation on casualtyrelated
impaired assets
Balance at end of year
—
—
(316)
$1,408,815 $1,281,258 $1,403,303
S 8
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 33315600201.
Exhibit
Description
Location
2.01 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.
2.02 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.
2.03 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.
2.04 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. 33364281)
filed with the
Commission on
September 25,
1998.
Exhibit 2.1 to
UDR, Inc.’s Current
Report on Form 8K
dated
September 28, 2004
and filed with the
Commission on
September 29,
2004.
Exhibit 2.2 to
UDR, Inc.’s Current
Report on Form 8K
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.
2.05 Agreement of Purchase and Sale dated as of January 23, 2008, by and
Exhibit 2.1 to
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
UDR, Inc.’s Current
Report on Form 8K
dated January 23,
2008 and filed with
Co., Fountainhead Apartments Limited Partnership, AAC Vancouver I,
L.P., AAC Funding Partnership III, AAC Funding Partnership II and DRA
Fund VI LLC.
the Commission on
January 29, 2008.
Exhibit
Description
Location
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 8K/A dated
March 3, 2008 and
filed with the
Commission on May 2,
2008.
2.07 Contribution Agreement by and among Home Properties, L.P., UDR,
Inc., United Dominion Realty, L.P. and LSREF 4 Lighthouse
Acquisitions, LLC, dated June 22, 2015 (UDR, Inc. and United
Dominion Realty, L.P. have omitted certain schedules and exhibits
pursuant to Item 601(b)(2) of Regulation SK and shall furnish
supplementally to the Commission copies of any of the omitted
schedules and exhibits upon request by the Commission.)
Exhibit 2.1 to UDR,
Inc.’s Current Report
on Form 8K dated and
filed with the
Commission on June
22, 2015.
2.08 Amendment Agreement, dated as of August 27, 2015, by and among
UDR, Inc., United Dominion Realty, L.P., Home Properties, Inc., Home
Properties, L.P., LSREF4 Lighthouse Acquisitions, LLC LSREF4
Lighthouse Corporate Acquisitions, LLC and LSREF4 Lighthouse
Operating Acquisitions, LLC.
Exhibit 2.1 to UDR,
Inc.’s Quarterly Report
on Form 10Q for the
quarter ended
September 30, 2015.
3.01 Articles of Restatement of UDR, Inc.
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.
3.03 Articles of Amendment to the Articles of Restatement of UDR, Inc.
dated August 30, 2011 and filed with the State Department of
Assessments and Taxation of the State of Maryland on August 31,
2011.
Exhibit 3.09 to UDR,
Inc.’s Current Report
on Form 8K dated
July 27, 2005 and filed
with the Commission
on August 1, 2005.
Exhibit 3.2 to UDR,
Inc.’s Current Report
on Form 8K dated
March 14, 2007 and
filed with the
Commission on
March 15, 2007.
Exhibit 3.1 to UDR,
Inc.’s Current Report
on Form 8K dated
August 29, 2011 and
filed with the
Commission on
September 1, 2011.
3.04 Articles Supplementary relating to UDR, Inc.’s 6.75% Series G
Exhibit 3.4 to UDR,
Cumulative Redeemable Preferred Stock dated and filed with the State
Department of Assessments and Taxation of the State of Maryland on
May 30, 2007.
Inc.’s Form 8A
Registration Statement
dated and filed with
3.05 Amended and Restated Bylaws of UDR, Inc. (as amended through May
12, 2016).
3.06 Certificate of Limited Partnership of United Dominion Realty, L.P.
dated as of February 19, 2004.
3.07 Amended and Restated Agreement of Limited Partnership of United
Dominion Realty, L.P. dated as of February 23, 2004.
the Commission on
May 30, 2007.
Exhibit 3.1 to UDR,
Inc.’s Current Report
on Form 8K dated
May 12, 2016 and
filed with the
Commission on May
18, 2016.
Exhibit 3.4 to United
Dominion Realty,
L.P.’s PostEffective
Amendment No. 1 to
Registration Statement
on Form S3 dated and
filed with the
Commission on
October 15, 2010.
Exhibit 10.23 to UDR,
Inc.’s Annual Report
on Form 10K for the
year ended
December 31, 2003.
Exhibit
Description
Location
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 10Q 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 10Q 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 10Q 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 10K 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 10K 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 8K 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 8K 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 8K dated and filed with the
Commission on November 18, 2010.
3.16 Ninth Amendment to the Amended and
Restated Agreement of Limited Partnership of
United Dominion Realty, L.P., dated as of
December 4, 2015.
Exhibit 10.1 to UDR, Inc.’s Current Report on
Form 8K dated December 4, 2015 and filed
with the Commission on December 10, 2015.
4.01 Form of UDR, Inc. Common Stock Certificate.
Exhibit 4.1 to UDR, Inc.’s Current Report on
Form 8K dated March 14, 2007 and filed
with the Commission on March 15, 2007.
4.02 Senior Indenture dated as of November 1, 1995,
Exhibit 4(ii)(h)(1) to UDR, Inc.’s Quarterly
by and between UDR, Inc. and First Union
National Bank of Virginia, N.A., as trustee.
Report on Form 10Q 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 8K 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 S3
Registration Statement (Registration No. 33
64725) filed with the Commission on
November 15, 1995.
Exhibit
Description
Location
4.05 Form of UDR, Inc. Senior Debt Security.
4.06 Form of UDR, Inc. Subordinated Debt Security.
4.07 Form of UDR, Inc. Fixed Rate MediumTerm Note, Series A.
4.08 Form of UDR, Inc. Floating Rate MediumTerm Note,
Series A.
4.09 UDR, Inc. 4.25% MediumTerm Note, Series A due June
2018, issued May 23, 2011.
4.10
4.11
UDR, Inc. 4.625% MediumTerm Note, Series A due
January 2022, issued January 10, 2012.
UDR, Inc. 3.70% MediumTerm Note, Series A due October
2020, issued September 26, 2013.
4.12 Indenture dated as of April 1, 1994, by and between UDR,
Inc. and Nationsbank of Virginia, N.A., as trustee.
Exhibit 4(i)(n) to UDR, Inc.’s
Form S3 Registration Statement
(Registration No. 3364725) filed
with the Commission on
November 15, 1995.
Exhibit 4(i)(p) to UDR, Inc.’s
Form S3 Registration Statement
(Registration No. 3355159) filed
with the Commission on
August 19, 1994.
Exhibit 4.01 to UDR, Inc.’s
Current Report on Form 8K dated
March 20, 2007 and filed with the
Commission on March 22, 2007.
Exhibit 4.02 to UDR, Inc.’s
Current Report on Form 8K dated
March 20, 2007 and filed with the
Commission on March 22, 2007.
Exhibit 4.16 to UDR, Inc.’s
Annual Report on Form 10K for
the year ended December 31,
2013.
Exhibit 4.17 to UDR, Inc.’s
Annual Report on Form 10K for
the year ended December 31,
2013.
Exhibit 4.18 to UDR, Inc.’s
Annual Report on Form 10K for
the year ended December 31,
2013.
Exhibit 4(ii)(f)(1) to UDR, Inc.’s
Quarterly Report on Form 10Q
for the quarter ended March 31,
1994.
4.13 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 8K dated August
20, 2009 and filed with the
Commission on August 21, 2009.
4.14 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 8K dated
4.15 Guaranty of United Dominion Realty, L.P. with respect to
UDR, Inc.’s Indenture dated as of October 12, 2006.
4.16 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
MediumTerm Notes, Series A, due Nine Months or More
from Date of Issue.
4.17 UDR, Inc. 3.75% MediumTerm Note, Series A due October
2024, issued June 26, 2014.
and filed with the Commission on
September 30, 2010.
Exhibit 99.2 to UDR, Inc.’s
Current Report on Form 8K dated
and filed with the Commission on
September 30, 2010.
Exhibit 4.1 to UDR, Inc.’s Current
Report on Form 8K filed with the
Commission on May 4, 2011.
Exhibit 4.1 to UDR, Inc.’s
Quarterly Report on Form 10Q
for the quarter ended June 30,
2014.
Exhibit
Description
Location
4.18 UDR, Inc.’s 4.00% MediumTerm Note, Series A due
October 2025, issued September 22, 2015.
4.19 UDR, Inc. 2.950% MediumTerm Note, Series A due
September 2026, issued August 23, 2016.
Exhibit 4.23 to UDR, Inc.’s Annual
Report on Form 10K for the year
ended December 31, 2015.
Exhibit 4.1 to UDR, Inc.’s Quarterly
Report on Form 10Q for the quarter
ended September 30, 2016.
10.01* UDR, Inc. 1999 LongTerm Incentive Plan (as amended
Filed herewith.
and restated February 2, 2017).
10.02* Form of UDR, Inc. Restricted Stock Award Agreement
Filed herewith.
under the 1999 LongTerm Incentive Plan.
10.03* Form of UDR, Inc. Restricted Stock Award Agreement
for awards outside of the 1999 LongTerm Incentive
Plan.
10.04* Form of UDR, Inc. Notice of Performance Contingent
Restricted Stock Award.
10.05* Description of UDR, Inc. Shareholder Value Plan.
10.06* Description of UDR, Inc. Executive Deferral Plan.
Exhibit 99.3 to UDR, Inc.’s Current
Report on Form 8K dated March 19,
2007 and filed with the Commission
on March 19, 2007.
Exhibit 10.2 to UDR, Inc.’s Current
Report on Form 8K dated May 2,
2006 and filed with the Commission
on May 8, 2006.
Exhibit 10(x) to UDR, Inc.’s Annual
Report on Form 10K for the year
ended December 31, 1999.
Exhibit 10(xi) to UDR, Inc.’s Annual
Report on Form 10K for the year
ended December 31, 1999.
10.07* Indemnification Agreement by and between UDR, Inc.
and each of its directors and officers listed on Schedule
A thereto.
Filed herewith.
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 10K 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 8K dated November
5, 2007 and filed with the
Commission on November 9, 2007.
10.10* Letter Agreement between UDR, Inc. and Thomas M.
Exhibit 10.1 to UDR, Inc.’s Current
Herzog, dated May 12, 2016.
Report on Form 8K dated May 12,
2016 and filed with the Commission
on May 18, 2016.
10.11 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 10Q for the
quarter ended March 31, 1998.
Exhibit
Description
Location
10.12 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.
10.13 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 MediumTerm Notes, Series
A Due Nine Months or More From Date of Issue.
10.14 Credit Agreement, dated as of October 20, 2015, by and among UDR, Inc.,
as borrower, and the lenders and agents party thereto.
10.15 Guaranty of United Dominion Realty, L.P., dated as of October 20, 2015,
with respect to the Credit Agreement, dated as of October 20, 2015.
Exhibit 1.1 to
UDR, Inc.’s
Current Report on
Form 8K dated
April 4, 2012 and
filed with the
Commission on
April 5, 2012.
Exhibit 1.2 to
UDR, Inc.’s
Current Report on
Form 8K dated
and filed with the
Commission on
September 1,
2011.
Exhibit 10.1 to
UDR, Inc.’s
Current Report on
Form 8K dated
October 20, 2015
and filed with the
Commission on
October 26, 2015.
Exhibit 10.2 to
UDR, Inc.’s
Current Report on
Form 8K dated
October 20, 2015
and filed with the
Commission on
October 26, 2015.
10.16 Aircraft Time Sharing Agreement dated as of November 11, 2016, by and
Filed herewith.
between UDR, Inc. and Thomas W. Toomey.
10.17 Aircraft Time Sharing Agreement dated as of November 11, 2016, by and
Filed herewith.
between UDR, Inc. and Warren L. Troupe.
10.18 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 8K dated
July 29, 2014 and
filed with the
Commission on
July 31, 2014.
10.19 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 MediumTerm Notes, Series A Due Nine Months or More From
Date of Issue.
Exhibit 1.2 to
UDR, Inc.’s
Current Report on
Form 8K dated
July 29, 2014 and
filed with the
Commission on
July 31, 2014.
10.20 Underwriting Agreement between UDR, Inc. and Credit Suisse Securities
(USA) LLC dated August 19, 2015.
10.21 Agreement of Limited Partnership of UDR Lighthouse DownREIT L.P.,
dated as of October 5, 2015, as amended.
Exhibit 1.1 to
UDR, Inc.’s
Current Report on
Form 8K dated
August 19, 2015
and filed with the
Commission on
August 24, 2015.
Exhibit 10.21 to
UDR, Inc.’s
Annual Report on
Form 10K for the
year ended
December 31,
2015.
Exhibit
Description
Location
10.22* Class 1 LTIP Unit Award Agreement
10.23* Notice of Class 2 LTIP Unit Award
Exhibit 10.22 to UDR, Inc.’s
Annual Report on Form 10K for
the year ended December 31,
2015.
Exhibit 10.23 to UDR, Inc.’s
Annual Report on Form 10K for
the year ended December 31,
2015.
10.24 First Amendment, dated January 20, 2017, to the Credit
Agreement, dated as of October 20, 2015, by and among
UDR, Inc., as borrower, and the lenders and agents party
thereto.
Filed herewith.
12.1 Computation of Ratio of Earnings to Combined Fixed
Filed herewith.
Charges and Preferred Stock Dividends of UDR, Inc.
12.2 Computation of Ratio of Earnings to Fixed Charges of
Filed herewith.
United Dominion Realty, L.P.
21 Subsidiaries of UDR, Inc. and United Dominion Realty, L.P.
Filed herewith.
23.1 Consent of Independent Registered Public Accounting Firm
Filed herewith.
for UDR, Inc.
23.2 Consent of Independent Registered Public Accounting Firm
Filed herewith.
for United Dominion Realty, L.P.
23.3 Consent of Independent Registered Public Accounting Firm
Filed herewith.
for UDR Lighthouse DownREIT L.P.
31.1 Rule 13a14(a) Certification of the Chief Executive Officer
Filed herewith.
of UDR, Inc.
31.2 Rule 13a14(a) Certification of the Chief Financial Officer of
Filed herewith.
UDR, Inc.
31.3 Rule 13a14(a) Certification of the Chief Executive Officer
Filed herewith.
of United Dominion Realty, L.P.
31.4 Rule 13a14(a) Certification of the Chief Financial Officer of
Filed herewith.
United Dominion Realty, L.P.
32.1 Section 1350 Certification of the Chief Executive Officer of
Filed herewith.
UDR, Inc.
32.2 Section 1350 Certification of the Chief Financial Officer of
Filed herewith.
UDR, Inc.
32.3 Section 1350 Certification of the Chief Executive Officer of
Filed herewith.
United Dominion Realty, L.P.
Exhibit
Description
Location
32.4 Section 1350 Certification of the Chief Financial
Filed herewith.
Officer of United Dominion Realty, L.P.
99.1 UDR Lighthouse DownREIT L.P. financial
Filed herewith.
statements as required under Rule 309 of
Regulation SX.
101 XBRL (Extensible Business Reporting Language).
The following materials from this Annual Report on
Form 10K for the period ended December 31,
2016, 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. and
(xii) notes to consolidated financial statements of
United Dominion Realty, L.P.
* Management Contract or Compensatory Plan or Arrangement
(Back To Top)
Section 2: EX10.1 (EXHIBIT 10.1)
Exhibit 10.01
UDR, INC.
1999 LONGTERM INCENTIVE PLAN
(AS AMENDED AND RESTATED FEBRUARY 2, 2017)
ARTICLE 1
PURPOSE
1.1
GENERAL. The purpose of the UDR, Inc. 1999 LongTerm Incentive Plan (the “Plan”) is to
promote the success, and enhance the value, of UDR, Inc. (the “Company”), by linking the personal interests of
its employees, officers, consultants and directors to those of Company stockholders and by providing such
persons with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the
Company in its ability to motivate, attract, and retain the services of employees, officers, consultants and
directors upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is
largely dependent. Accordingly, the Plan permits the grant of incentive awards from time to time to selected
employees, officers, consultants and directors.
ARTICLE 2
EFFECTIVE DATE
2.1
EFFECTIVE DATE. For tax reasons, the Plan was approved by the Board of Directors in
interim stages. First, the Board approved the Plan on March 9, 1999 as it relates to Awards of Restricted Stock
and Performance Units only (the “First Effective Date”), and the Plan became effective as of the First Effective
Date for the limited purpose of (i) making Awards of Restricted Stock on or prior to May 31, 1999 to nonofficer
employees of the Company and (ii) making cash Performance Unit Awards under ARTICLE 9 of the Plan with
respect to a performance period beginning on January 1, 1999.
On January 25, 2000, the Board approved the Plan for the purpose of (i) making Awards of Restricted
Stock on or prior to May 31, 2000 to nonofficer employees of the Company, (ii) making Awards of Restricted
Stock on or prior to May 31, 2000 to certain officers of the Company from shares purchased by the Company on
the open market, and (iii) making cash Performance Unit Awards under ARTICLE 9 of the Plan with respect to a
performance period beginning on January 1, 2000 (the “Second Effective Date”).
On March 20, 2001, the Board approved the Plan as it relates to all types of Awards under the Plan (the
“Third Effective Date”) and the Plan became fully effective as of the Third Effective Date. The Plan was
approved by the stockholders of the Company on May 8, 2001. In the discretion of the Committee, Awards may
be made to Covered Employees which are intended to constitute qualified performancebased compensation
under Code Section 162(m).
The Plan was amended and restated by the Board of Directors on May 4, 2004 to eliminate the express
authority under Section 7.1(c) to pay the exercise price of an Option with a promissory note, which amendment
and restatement of the Plan is not subject to stockholder approval.
The Plan was amended and restated by the Board of Directors on July 23, 2004 to modify Sections 14.8
and 14.9 to provide that unless otherwise provided in a Participant’s Award Agreement upon a Participant’s
Death, Disability or Retirement, all outstanding Options, Stock Appreciation Rights and other Awards in the
nature of rights that may be exercised shall become fully exercisable and all restrictions on outstanding Awards
shall lapse, which amendment and restatement of the Plan is not subject to stockholder approval.
The Plan was amended and restated by the Board of Directors on February 10, 2006, to eliminate the
automatic grant of formula awards to nonemployee directors and to update non‑material terms of the Plan (par
value of common stock and other nomenclature) to conform to Maryland versus Virginia corporate law, which
amendment and restatement of the Plan is not subject to stockholder approval.
The Plan was amended and restated by the Board of Directors on February 7, 2008 generally as follows:
(i) to change the name of the Company from United Dominion Realty Trust, Inc. to UDR, Inc.; and (ii) to
provide that the grant price of any Stock Appreciation Right may not be reduced except as provided in
Section 15.1 or otherwise with the consent of the stockholders, which amendment and restatement of the Plan is
not subject to stockholder approval.
The Plan was amended and restated by the Board of Directors on May 30, 2008 generally as follows: (i)
to limit the term of Options and Stock Appreciation Rights to 10 years; (ii) to provide that shares of stock that
are (a) not issued or delivered as a result of the net settlement of a Stock Appreciation Right or Option, (b) used
to pay the exercise price or withholding taxes related to an outstanding Award or (c) repurchased on the open
market with the proceeds of the Option exercise price shall not again become available for issuance under the
Plan; (iii) to provide that the exercise price per share of an Option shall in no event be less than the Fair Market
Value of one share of stock on the date of grant; (iv) to provide that the maximum Fair Market Value of any
Awards, other than Options or Stock Appreciation Rights, that may be received by a Participant during any one
calendar year shall be $2,000,000; (v) to provide that in no event may a Stock Appreciation Right be exercisable
for more than 10 years from the date of its grant; (vi) to provide that, except as provided in Section 15.1, without
the consent of stockholders an Award may not be exchanged or bought out if the effect is to lower the exercise
price of the Option or the grant price of the Stock Appreciation Right; (vii) to provide that, except as provided in
Section 15.1, without consent of the stockholders, an Award may not be granted in substitution of another Award
if the effect is to replace an Option or Stock Appreciation Right with an Award with a lower exercise or grant
price and (viii) to expand the Performance Goals.
Subject to stockholder approval, the Plan was amended and restated by the Board of Directors on March
12, 2009 generally as follows: (i) to increase the number of shares of Stock available for issuance pursuant to
Awards from 4,000,000 to 16,000,000; (ii) to provide that the maximum Fair Market Value of any Awards, other
than Options or Stock Appreciation Rights, that may be received by a Participant during any one calendar year
shall be $5,000,000, (iii) to provide that the maximum number of shares of Stock with respect to one or more
Options and/or Stock Appreciation Rights that may be granted during any one calendar year under the Plan to
any one Participant shall be 5,000,000 shares and (iv) to provide that Awards (other than Options or Stock
Appreciation Rights) granted from and after the approval of the Plan at the Company’s 2009 Annual Meeting of
Stockholders shall count against the Plan reserve as 2.28 shares of Stock for each share of Stock actually subject
to the Award.
The Plan was amended and restated by the Board of Directors on February 8, 2013, to revise the
treatment of Awards in connection with certain Change of Control transactions.
The Plan was amended and restated by the Board of Directors on February 6, 2014 generally as follows:
to (i) increase the number of shares of Stock available for issuance pursuant to Awards from 16,000,000 to
19,000,000; (ii) change the annual per Participant limits on Awards (other than Options, SARs and CashBased
Awards) to 1,000,000 shares; (iii) provide for CashBased Awards; and (iv) expand the Performance Goals.
The Plan was amended and restated by the Committee on December 4, 2015 to provide for Awards of
LTIP Units, which amendment and restatement of the Plan is not subject to stockholder approval.
The Plan was amended and restated by the Committee on February 2, 2017 to provide for flexibility with
respect to withholding for tax purposes in accordance with revised standards published by the Financial
Accounting Standards Board, which amendment and restatement of the Plan is not subject to stockholder
approval.
ARTICLE 3
DEFINITIONS
3.1
DEFINITIONS. When a word or phrase appears in this Plan with the initial letter capitalized,
and the word or phrase does not commence a sentence, the word or phrase shall generally be given the meaning
ascribed to it in this Section or in Section 1.1 unless a clearly different meaning is required by the context. The
following words and phrases shall have the following meanings:
(a)
“Award” means any Option, Stock Appreciation Right, Restricted Stock Award, Performance
Unit Award, Dividend Equivalent Award, Other StockBased Award, CashBased Award or LTIP Unit, or any other right
or interest relating to Stock or cash, granted to a Participant under the Plan.
(b)
document evidencing an Award.
“Award Agreement” means any written agreement, contract, or other instrument or
(c)
(d)
(e)
“Board” means the Board of Directors of the Company.
“CashBased Award” means a right granted to a Participant under Article 13.
“Change of Control” means and includes each of the following:
(1)
a merger or consolidation in which the Company is not the surviving entity,
except for a transaction the principal purpose of which is to change the state in which the Company is
incorporated;
(2)
than to an affiliate or Subsidiary of the Company;
the transfer or sale of all or substantially all of the assets of the Company other
(3)
(4)
the liquidation of the Company;
the acquisition by any person, or by a group of persons acting in concert, of
more than fifty percent (50%) of the outstanding voting securities of the Company, which results in the
resignation or addition of fifty percent (50%) or more independent members of the Board;
(5)
any reverse merger or series of related transactions culminating in a reverse
merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the
surviving entity but (A) the shares of Stock outstanding immediately prior to such merger are converted or
exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or
(B) in which securities possessing more than forty percent (40%) of the total combined voting power of the
Company’s outstanding securities are transferred to a person or persons different from those who held such
securities immediately prior to such merger or the initial transaction culminating in such merger, but excluding
any such transaction or series of related transactions that the Committee determines shall not be a Change of
Control; or
(6)
a change in the composition of the Board over a period of twelve (12) months
or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of
one or more contested elections for Board membership, to be comprised of individuals who are Continuing
Directors.
(f)
(g)
(h)
(i)
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Committee” means the committee of the Board described in ARTICLE 4.
“Company” means UDR, Inc., a Maryland corporation.
“Consultant” means, and is limited to, a “consultant” or “advisor” with respect to whom
the Company would be permitted to use Form S8 to register the issuance of securities, as described in the
General Instructions to Form S8 under the 1933 Act.
(j)
“Continuing Directors” means members of the Board who either (i) have been Board
members continuously for a period of at least twelve (12) months or (ii) have been Board members for less than
twelve (12) months and were elected or nominated for election as Board members by at least a majority of the
Board members described in clause (i) who were still in office at the time such election or nomination was
approved by the Board.
(3).
(k)
(l)
“Covered Employee” means a covered employee as defined in Code Section 162(m)
“Disability” shall mean any illness or other physical or mental condition of a
Participant that renders the Participant incapable of performing his customary and usual duties for the Company,
or any medically determinable illness or other physical or mental condition resulting from a bodily injury,
disease or mental disorder which, in the judgment of the Committee, is permanent and continuous in nature. The
Committee may require such medical or other evidence as it deems necessary to judge the nature and
permanency of the Participant’s condition. Notwithstanding the above, with respect to an Incentive Stock
Option, Disability shall mean Permanent and Total Disability as defined in Section 22(e)(3) of the Code.
(m)
“Dividend Equivalent” means a right granted to a Participant under ARTICLE 11.
requires, as such terms are defined in Section 2.1.
(n)
“Effective Date” means the First, Second or Third Effective Date, as the context
(o)
“Fair Market Value”, on any date, means the closing sales price on the New York Stock
Exchange on such date or, in the absence of reported sales on such date, the closing sales price on the
immediately preceding date on which sales were reported.
(p)
“Incentive Stock Option” means an Option that is intended to meet the requirements of
Section 422 of the Code or any successor provision thereto.
(q)
“LTIP Unit” means an “LTIP Unit” of the Partnership, including “Class 1 LTIP Units”
and “Class 2 LTIP Units” (each, as defined in the Partnership Agreement), that is granted under Section 13.2 and
is intended to constitute a “profits interest” within the meaning of the Code.”
(r)
“NonEmployee Director” means a member of the Board who is not an employee of the
Company or any Parent or Subsidiary.
(s)
(t)
“NonQualified Stock Option” means an Option that is not an Incentive Stock Option.
“Option” means a right granted to a Participant under ARTICLE 7 of the Plan to
purchase Stock at a specified price during specified time periods. An Option may be either an Incentive Stock
Option or a NonQualified Stock Option.
(u)
“Other StockBased Award” means a right, granted to a Participant under ARTICLE 12
that relates to or is valued by reference to Stock or other Awards relating to Stock.
(v)
“Parent” means a corporation that owns or beneficially owns a majority of the
outstanding voting stock or voting power of the Company. For Incentive Stock Options, the term shall have the
same meaning as set forth in Code Section 424(e).
(w)
“Participant” means a person who, as an employee, officer, consultant or director of
the Company or any Parent or Subsidiary, has been granted an Award under the Plan.
(x)
(y)
“Partnership” means United Dominion Realty, L.P., a Delaware limited partnership.
“Partnership Agreement” means the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P. (as amended from time to time).
(z)
“Performance Unit” means a right granted to a Participant under Article 9, to receive
cash, Stock, or other Awards, the payment of which is contingent upon achieving certain performance goals
established by the Committee.
(aa)
“Plan” means the UDR, Inc. 1999 LongTerm Incentive Plan, as amended from time
to time.
(bb) “Restricted Stock Award” means Stock granted to a Participant under ARTICLE 10 that is
subject to certain restrictions and to risk of forfeiture.
(cc) “Retirement” means a Participant’s termination of employment with the Company, Parent
or Subsidiary after attaining any normal or early retirement age specified in any pension, profit
sharing or other retirement program sponsored by such company, or, in the event of the inapplicability thereof
with respect to the person in question, as determined by the Committee in its reasonable judgment.
(dd) “Stock” means the $0.01 par value Common Stock of the Company, and such other
securities of the Company as may be substituted for Stock pursuant to ARTICLE 14.
(ee) “Stock Appreciation Right” or “SAR” means a right granted to a Participant under
ARTICLE 8 to receive a payment equal to the difference between the Fair Market Value of a share of Stock as of
the date of exercise of the SAR over the grant price of the SAR, all as determined pursuant to ARTICLE 8.
(ff) “Subsidiary” means any corporation, limited liability company, partnership or other entity
that is directly, or indirectly through one or more intermediaries, controlled by or under common control with
the Company. Notwithstanding the foregoing, for purposes of Incentive Stock Options granted under the Plan,
the term “Subsidiary” shall have the meaning set forth in Code Section 424(f).
(gg) “1933 Act” means the Securities Act of 1933, as amended from time to time.
(hh) “1934 Act” means the Securities Exchange Act of 1934, as amended from time to time.
ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by the Compensation Committee of the Board or, at
the discretion of the Board from time to time, by the Board. The Committee shall consist of two or more
members of the Board. It is intended that the directors appointed to serve on the Committee shall be “non
employee directors” (within the meaning of Rule 16b3 promulgated under the 1934 Act) and “outside
directors” (within the meaning of Code Section 162(m) and the regulations thereunder) to the extent that Rule
16b3 and, if necessary for relief from the limitation under Code Section 162(m) and such relief is sought by the
Company, Code Section 162(m), respectively, are applicable. However, the mere fact that a Committee member
shall fail to qualify under either of the foregoing requirements shall not invalidate any Award made by the
Committee, which Award is otherwise validly made under the Plan. The members of the Committee shall be
appointed by, and may be changed at any time and from time to time in the discretion of, the Board. During any
time that the Board is acting as administrator of the Plan, it shall have all the powers of the Committee
hereunder, and any reference herein to the Committee (other than in this Section 4.1) shall include the Board.
4.2 ACTION BY THE COMMITTEE. For purposes of administering the Plan, the following rules of
procedure shall govern the Committee. A majority of the Committee shall constitute a quorum. The acts of a
majority of the members present at any meeting at which a quorum is present, and acts approved unanimously in
writing by the members of the Committee in lieu of a meeting shall be deemed the acts of the Committee. Each
member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished
to that member by any officer or other employee of the Company or any Parent or Subsidiary, the Company’s
independent certified public accountants, or any executive compensation consultant or other professional
retained by the Company to assist in the administration of the Plan.
4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power, authority and
discretion to do the following; except as such discretion shall be delegated as provided below in this Section 4.3:
(ab)
(ac)
(ad)
Designate Participants;
Determine the type or types of Awards to be granted to each Participant;
Determine the number of Awards to be granted and the number of shares of Stock or
LTIP Units to which an Award will relate;
(ae)
Determine the terms and conditions of any Award granted under the Plan, including
but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the Award,
any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and
accelerations or waivers thereof, based in each case on such considerations as the Committee in its sole
discretion determines;
(af)
Accelerate the vesting, exercisability or lapse of restrictions of any outstanding
Award, based in each case on such considerations as the Committee in its sole discretion determines;
(ag)
Determine whether, to what extent, and under what circumstances an Award may be
settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an
Award may be canceled, forfeited, or surrendered;
(ah)
Prescribe the form of each Award Agreement, which need not be identical for each
Participant;
(ai)
Decide all other matters that must be determined in connection with an Award;
(aj)
advisable to administer the Plan;
Establish, adopt or revise any rules and regulations as it may deem necessary or
(ak)
Make all other decisions and determinations that may be required under the Plan or as
the Committee deems necessary or advisable to administer the Plan; and
(al)
Amend the Plan or any Award Agreement as provided herein.
Notwithstanding the above, the Board or the Committee may expressly delegate to a special committee
consisting of one or more directors who are also officers of the Company some or all of the Committee’s
authority under subsections (a) through (g) above with respect to those eligible Participants who, at the time of
grant are not, and are not anticipated to become, either (i) Covered Employees or (ii) persons subject to the
insider trading rules of Section 16 of the 1934 Act.
4.4 DECISIONS BINDING. The Committee’s interpretation of the Plan, any Awards granted under
the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan
are final, binding, and conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 15.1, the aggregate number
of shares of Stock reserved and available for Awards or which may be used to provide a basis of measurement
for or to determine the value of an Award (such as with a Stock Appreciation Right or Performance Unit Award)
shall be 19,000,000. The maximum number of shares of Stock that may be issued subject to Incentive Stock
Options shall be 19,000,000 shares. Awards (other than Options or Stock Appreciation Rights) granted from and
after the approval of the Plan at the Company’s 2009 Annual Meeting of Stockholders, shall be counted against
this number as 2.28 shares of Stock for each share of Stock actually subject to the Award. Each LTIP Unit issued
pursuant to an Award shall be treated as a share of Stock for purposes of calculating the aggregate number of
shares of Stock available for issuance under the Plan as set forth in this Section 5.1 and for purposes of
calculating the award limits set forth in Section 5.4 hereof.
5.2 LAPSED AWARDS. To the extent that an Award is canceled, terminates, expires, is forfeited or
lapses for any reason, any shares of Stock subject to the Award will again be available for the grant of an Award
under the Plan and shares subject to SARs or other Awards settled in cash will be available for the grant of an
Award under the Plan. Shares of Stock that are (a) not issued or delivered as a result of the net settlement of a
Stock Appreciation Right or Option, (b) used to pay the exercise price or withholding taxes related to an
outstanding Award, or (c) repurchased on the open market with the proceeds of the Option exercise price shall
not again become available for issuance under the Plan. If shares subject to an Award again become available
under the Plan pursuant to this Section 5.2, the number of shares that become available shall equal the number of
shares that counted against the Plan reserve pursuant to Section 5.1.
5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may consist, in whole or in
part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.
5.4 LIMITATION ON AWARDS. Notwithstanding any provision in the Plan to the contrary (but
subject to adjustment as provided in Section 15.1), the maximum number of shares of Stock with respect to one
or more Options and/or SARs that may be granted during any one calendar year under the Plan to any one
Participant shall be 5,000,000. The maximum number of shares of Stock with respect Awards (other than
Options, SARs and/or CashBased Awards) that are intended to constitute qualified performancebased
compensation under Code Section 162(m) that may be received by a Participant during any one calendar year
under the Plan shall be 1,000,000. For CashBased Awards that are intended to constitute qualified performance
based compensation under Code Section 162(m), with respect to each twelve month period that constitutes or is
part of each performance period, the maximum amount that may be paid to a Participant pursuant to such
Awards shall be $10,000,000. In addition, the foregoing limitation shall be prorated for any performance period
consisting of fewer than twelve months by multiplying such limitation by a fraction, the numerator of which is
the number of months in the performance period and the denominator of which is twelve.
ARTICLE 6
ELIGIBILITY
6.1 GENERAL. Awards may be granted only to individuals who are employees, officers, consultants or
directors of the Company or a Parent or Subsidiary.
ARTICLE 7
STOCK OPTIONS
7.1 GENERAL. The Committee is authorized to grant Options to Participants on the following terms
and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock under an Option shall be
determined by the Committee, but shall in no event be less than the Fair Market Value of one share of Stock on
the date of grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine the time or
times at which an Option may be exercised in whole or in part, subject to Section 7.1(e). The Committee also
shall determine the performance or other conditions, if any, that must be satisfied before all or part of an Option
may be exercised or vested. The Committee may waive any exercise or vesting provisions at any time in whole
or in part based upon factors as the Committee may determine in its sole discretion so that the Option becomes
exercisable or vested at an earlier date. The Committee may permit an arrangement whereby receipt of Stock
upon exercise of an Option is delayed until a specified future date.
(c) PAYMENT. The Committee shall determine the methods by which the exercise price of an
Option may be paid, the form of payment, including, without limitation, cash, shares of Stock, or other property
(including “cashless exercise” arrangements), and the methods by which shares of Stock shall be delivered or
deemed to be delivered to Participants; provided that if shares of Stock are used to pay the exercise price of an
Option, such shares must have been held by the Participant for the minimum period required to avoid an adverse
accounting impact for the Company. When shares of Stock are delivered, such delivery may be by attestation of
ownership or actual delivery.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a written Award Agreement
between the Company and the Participant. The Award Agreement shall include such provisions, not inconsistent
with the Plan, as may be specified by the Committee.
(e) EXERCISE TERM. In no event may any Option be exercisable for more than ten years
from the date of its grant.
(f) NO RELOAD OPTIONS. The Committee shall not provide in an Award Agreement, or in
an amendment thereto, for the automatic grant of a new Option to any Participant who delivers shares of Stock
as full or partial payment of the exercise price of the original Option.
7.2 INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options granted under the Plan
must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock shall be set by the Committee,
provided that the exercise price for any Incentive Stock Option shall not be less than the Fair Market Value as of
the date of the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be exercisable for more than ten
years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse under the earliest of the
following circumstances; provided, however, that the Committee may, prior to the lapse of the Incentive Stock
Option under the circumstances described in paragraphs (3), (4) and (5) below, provide in writing that the
Option will extend until a later date, but if an Option is exercised after the dates specified in paragraphs (3), (4)
and (5) below, it will automatically become a NonQualified Stock Option:
(1)
in the Award Agreement.
The Incentive Stock Option shall lapse as of the option expiration date set forth
earlier time is set in the Award Agreement.
(2)
The Incentive Stock Option shall lapse ten years after it is granted, unless an
(3)
If the Participant terminates employment for any reason other than as provided
in paragraph (4) or (5) below, the Incentive Stock Option shall lapse, unless it is previously exercised, three
months after the Participant’s termination of employment; provided, however, that if the Participant’s
employment is terminated by the Company for cause or by the Participant without the consent of the Company
(in either case, as determined by the Company and communicated in writing to the Participant), the Incentive
Stock Option shall (to the extent not previously exercised) lapse immediately.
(4)
If the Participant terminates employment by reason of his Disability, the
Incentive Stock Option shall lapse, unless it is previously exercised, one year after the Participant’s termination
of employment.
(5)
If the Participant dies while employed, or during the threemonth period
described in paragraph (3) or during the oneyear period described in paragraph (4) and before the Option
otherwise lapses, the Option shall lapse one year after the Participant’s death. Upon the Participant’s death, any
exercisable Incentive Stock Options may be exercised by the Participant’s beneficiary, determined in accordance
with Section 14.5.
If a Participant exercises an Option after termination of employment, the Option may be exercised only
with respect to the shares that were otherwise vested on the Participant’s termination of employment.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value (determined as
of the time an Award is made) of all shares of Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed $100,000.00.
(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be granted to any individual
who, at the date of grant, owns stock possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or any Parent or Subsidiary unless the exercise price
per share of such Option is at least 110% of the Fair Market Value per share of Stock at the date of grant and the
Option expires no later than five years after the date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an Incentive Stock
Option may be made pursuant to the Plan after the day immediately prior to the tenth anniversary of a Plan
effective date under Code Section 422(b)(2).
(g) RIGHT TO EXERCISE. During a Participant’s lifetime, an Incentive Stock Option may be
exercised only by the Participant or, in the case of the Participant’s Disability, by the Participant’s guardian or
legal representative.
(h) DIRECTORS AND CONSULTANTS. The Committee may not grant an Incentive Stock
Option to a nonemployee director or consultant. The Committee may grant an Incentive Stock Option to a
director who is also an employee of the Company or Parent or Subsidiary but only in that individual’s position
as an employee and not as a director.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 GRANT OF SARs. The Committee is authorized to grant SARs to Participants on the following
terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation Right, the Participant to
whom it is granted has the right to receive the excess, if any, of:
(1) The Fair Market Value of one share of Stock on the date of exercise; over
which shall not be less than the Fair Market Value of one share of Stock on the date of grant.
(2) The grant price of the Stock Appreciation Right as determined by the Committee,
(b) TERM OF SARs. In no event may any Stock Appreciation Right be exercisable for more
than ten years from the date of its grant.
(c) OTHER TERMS. All awards of Stock Appreciation Rights shall be evidenced by an Award
Agreement. The terms, methods of exercise, methods of settlement, form of consideration payable in settlement,
and any other terms and conditions of any Stock Appreciation Right shall be determined by the Committee at
the time of the grant of the Award and shall be reflected in the Award Agreement.
ARTICLE 9
PERFORMANCE UNITS
9.1 GRANT OF PERFORMANCE UNITS. The Committee is authorized to grant Performance Units
to Participants on such terms and conditions as may be selected by the Committee. The Committee shall have
the complete discretion to determine the number of Performance Units granted to each Participant, subject to
Section 5.4. All Awards of Performance Units shall be evidenced by an Award Agreement.
9.2 RIGHT TO PAYMENT. A grant of Performance Units gives the Participant rights, valued as
determined by the Committee, and payable to, or exercisable by, the Participant to whom the Performance Units
are granted, in whole or in part, as the Committee shall establish at grant or thereafter. The Committee shall set
performance goals and other terms or conditions to payment of the Performance Units in its discretion which,
depending on the extent to which they are met, will determine the number and value of Performance Units that
will be paid to the Participant. If the terms of a Performance Unit so provide, the Participant may elect to defer
payment of the Performance Unit under an applicable deferred compensation plan maintained by the Company.
9.3 OTHER TERMS. Performance Units may be payable in cash, Stock, or other property, and have
such other terms and conditions as determined by the Committee and reflected in the Award Agreement.
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1 GRANT OF RESTRICTED STOCK. The Committee is authorized to make Awards of Restricted
Stock to Participants in such amounts and subject to such terms and conditions as may be selected by the
Committee. All Awards of Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.
10.2 ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to such restrictions on
transferability and other restrictions as the Committee may impose (including, without limitation, limitations on
the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions
may lapse separately or in combination at such times, under such circumstances, in such installments, upon the
satisfaction of performance goals or otherwise, as the Committee determines at the time of the grant of the
Award or thereafter.
10.3 FORFEITURE. Except as otherwise determined by the Committee at the time of the grant of the
Award or thereafter, upon termination of employment during the applicable restriction period or upon failure to
satisfy a performance goal during the applicable restriction period, Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Company; provided, however, that the Committee may
provide in any Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may
in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.
10.4 CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted
Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Restricted Stock.
ARTICLE 11
DIVIDEND EQUIVALENTS
11.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend
Equivalents to Participants subject to such terms and conditions as may be selected by the Committee. Dividend
Equivalents shall entitle the Participant to receive payments equal to dividends with respect to
all or a portion of the number of shares of Stock subject to an Award, as determined by the Committee. The
Committee may provide that Dividend Equivalents be paid or distributed when accrued or be deemed to have
been reinvested in additional shares of Stock, or otherwise reinvested. Dividend Equivalents shall not be granted
with respect to Options or SARs. Dividend Equivalents granted with respect to Performance Units may not be
paid except to the extent the underlying shares of Stock have been earned.
ARTICLE 12
OTHER STOCKBASED AWARDS
12.1 GRANT OF OTHER STOCKBASED AWARDS. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards that are payable in, valued in whole
or in part by reference to, or otherwise based on or related to shares of Stock, as deemed by the Committee to be
consistent with the purposes of the Plan, including without limitation shares of Stock awarded purely as a
“bonus” and not subject to any restrictions or conditions, convertible or exchangeable debt securities, other
rights convertible or exchangeable into shares of Stock, and Awards valued by reference to book value of shares
of Stock or the value of securities of or the performance of specified Parents or Subsidiaries. The Committee
shall determine the terms and conditions of such Awards.
ARTICLE 13
13.1 GRANT OF OTHER CASHBASED AWARDS. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants Awards that are denominated in cash and that may be
settled in cash and/or shares of Stock, as deemed by the Committee to be consistent with the purposes of the
Plan. The Committee shall determine the terms and conditions of such Awards.
13.2 LTIP UNITS. The Committee is authorized to grant LTIP Units to Participants in such amounts
and subject to such terms and conditions as may be selected by the Committee; provided, however, that LTIP
Units may only be issued to a Participant for the performance of services to or for the benefit of the Partnership
(a) in the Participant’s capacity as a partner of the Partnership, (b) in anticipation of the Participant becoming a
partner of the Partnership, or (c) as otherwise determined by the Committee, provided that the LTIP Units are
intended to constitute “profits interests” within the meaning of the Code, including, to the extent applicable,
Revenue Procedure 9327, 19932 C.B. 343 and Revenue Procedure 200143, 20012 C.B. 191. The Committee
shall specify the conditions and dates upon which the LTIP Units shall vest and become nonforfeitable. LTIP
Units shall be subject to the terms and conditions of the Partnership Agreement and such other restrictions,
including restrictions on transferability (including by redemption or conversion), as the Committee may impose.
These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such
installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.
ARTICLE 14
PROVISIONS APPLICABLE TO AWARDS
14.1 STANDALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under the Plan
may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in
substitution for, any other Award granted under the Plan. If an Award is granted in substitution for another
Award, the Committee may require the surrender of such other Award in consideration of the grant of the new
Award. Notwithstanding the foregoing, as provided in Section 16.1, except as provided in Section 15.1, without
the consent of the stockholders, an Award may not be granted in substitution of
another Award if the effect is to replace an Option or Stock Appreciation Right with an Award with a lower
exercise or grant price. Awards granted in addition to or in tandem with other Awards may be granted either at
the same time as or at a different time from the grant of such other Awards.
14.2 EXCHANGE PROVISIONS. The Committee may at any time offer to exchange or buy out any
previously granted Award for a payment in cash, Stock, or another Award (subject to Section 15.1), based on the
terms and conditions the Committee determines and communicates to the Participant at the time the offer is
made, and after taking into account the tax, securities and accounting effects of such an exchange.
Notwithstanding the foregoing, as provided in Section 16.1, except as provided in Section 15.1, without the
consent of the stockholders an Award may not be exchanged or bought out if the effect is to lower the exercise
price of the Option or the grant price of the Stock Appreciation Right.
14.3 TERM OF AWARD. The term of each Award shall be for the period as determined by the
Committee, provided that in no event shall the term of any Incentive Stock Option or a Stock Appreciation Right
granted in tandem with the Incentive Stock Option exceed a period of ten years from the date of its grant (or, if
Section 7.2(e) applies, five years from the date of its grant).
14.4 FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and any applicable law or
Award Agreement, payments or transfers to be made by the Company or a Parent or Subsidiary on the grant or
exercise of an Award may be made in such form as the Committee determines at or after the time of grant,
including without limitation, cash, Stock, other Awards, or other property, or any combination, and may be made
in a single payment or transfer, in installments, or on a deferred basis, in each case determined in accordance
with rules adopted by, and at the discretion of, the Committee.
14.5 LIMITS ON TRANSFER. No right or interest of a Participant in any unexercised or restricted
Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a
Parent or Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party
other than the Company or a Parent or Subsidiary. No unexercised or restricted Award shall be assignable or
transferable by a Participant other than by will or the laws of descent and distribution or, except in the case of an
Incentive Stock Option, pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A) of the
Code if such Section applied to an Award under the Plan; provided, however, that the Committee may (but need
not) permit other transfers where the Committee concludes that such transferability (i) does not result in
accelerated taxation, (ii) does not cause any Option intended to be an incentive stock option to fail to be
described in Code Section 422(b), and (iii) is otherwise appropriate and desirable, taking into account any
factors deemed relevant, including without limitation, any state or federal tax or securities laws or regulations
applicable to transferable Awards.
14.6 BENEFICIARIES. Notwithstanding Section 14.5, a Participant may, in the manner determined by
the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution
with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or
other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award
Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide,
and to any additional restrictions deemed necessary or appropriate by the Committee. If no beneficiary has been
designated or survives the Participant, payment shall be made to the Participant’s estate. Subject to the
foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the
change or revocation is filed with the Committee.
14.7 STOCK CERTIFICATES. All Stock issued under the Plan is subject to any stoptransfer orders
and other restrictions as the Committee deems necessary or advisable to comply with federal or state securities
laws, rules and regulations and the rules of any national securities exchange or automated quotation system on
which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate or issue
instructions to the transfer agent to reference restrictions applicable to the Stock.
14.8 ACCELERATION UPON DEATH OR DISABILITY. Notwithstanding any other provision in the
Plan and unless otherwise provided in any Participant’s Award Agreement, upon the Participant’s death or
Disability during his employment or service as a director or consultant, all outstanding Options, Stock
Appreciation Rights, and other Awards in the nature of rights that may be exercised shall become fully
exercisable and all restrictions on outstanding Awards shall lapse. Any Option or Stock Appreciation Rights
Awards shall thereafter continue or lapse in accordance with the other provisions of the Plan and the Award
Agreement. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set
forth in Section 7.2(d), the excess Options shall be deemed to be NonQualified Stock Options.
14.9 ACCELERATION UPON RETIREMENT. Notwithstanding any other provision in the Plan and
unless otherwise provided in any Participant’s Award Agreement, upon the Participant’s Retirement, all
outstanding Options, Stock Appreciation Rights, and other Awards in the nature of rights that may be exercised
shall become fully exercisable and all restrictions on outstanding Awards shall lapse. Any Option or Stock
Appreciation Rights Awards shall thereafter remain exercisable until the original expiration date of the Award.
To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in
Section 7.2(d), the excess Options shall be deemed to be NonQualified Stock Options.
14.10 ACCELERATION UPON A CHANGE OF CONTROL. Except as otherwise provided in the
Award Agreement, upon the occurrence of a Change of Control, all outstanding Options, Stock Appreciation
Rights, and other Awards in the nature of rights that may be exercised shall become fully exercisable and all
restrictions on outstanding Awards shall lapse. To the extent that this provision causes Incentive Stock Options
to exceed the dollar limitation set forth in Section 7.2(d), the excess Options shall be deemed to be Non
Qualified Stock Options.
14.11 RESERVED.
14.12 RESERVED.
14.13 EFFECT OF ACCELERATION. In the event of a Change of Control, the Committee may, in its
sole discretion, provide (i) (other than in the event of a Change of Control defined in Section 3.1(e)(4) or 3.1(e)
(6)) that the Award will expire after a designated period of time to the extent not then exercised, (ii) that the
Award will be settled in cash rather than Stock, (iii) that the Award will be assumed by another party to the
transaction giving rise to the acceleration or otherwise be equitably converted in connection with such
transaction, or (iv) any combination of the foregoing. The Committee’s determination need not be uniform and
may be different for different Participants whether or not such Participants are similarly situated.
14.14 PERFORMANCE GOALS. The Committee may determine that any Award granted pursuant to
this Plan to a Participant (including, but not limited to, Participants who are Covered Employees) shall be
determined solely on the basis of (a) the achievement by the Company or a Parent or
Subsidiary of a specified target return, or target growth in return, on equity or assets, (b) the Company’s total
stockholder return (stock price appreciation plus reinvested dividends) relative to a defined comparison group or
target over a specific performance period or periods, (c) the Company’s stock price, (d) the achievement by an
individual, group of individuals, the Company, or a business unit or division of the Company, Parent or
Subsidiary of a specified target, or target growth in, relative to a defined comparison group or otherwise,
revenues, net income or earnings per share, or including but not limited to, targets based, in whole or part, on
funds from operations (adjusted or otherwise), net asset value, asset quality, same store revenue growth, same
store expense growth, net operating income (including, but not limited to, same store net operating income),
operating margin, development or redevelopment activities (including, but not limited to, development or
redevelopment funds from operations), leaseup activities, funds from operations payout ratio, net financial
capabilities (including, but not limited to, with respect to cash, liquid receivables, available lines of credit or
debt maturities), leverage ratio, balance sheet, credit rating, debt maturity, liquidity, credit capacity, fixed
charges (including, but not limited to, fixed charge ratios), debt, net debt, earnings before or after taxes, interest,
depreciation, or amortization, transactions (including, but not limited to, consummation of acquisitions, sales,
joint ventures or financings), portfolio enhancement, mitigation plans or strategies or (e) the achievement of
objectively determinable goals with respect to service or product delivery, service or product quality, sales or
marketing (including, but not limited to, web traffic, technology penetration, web platform (including, but not
limited to, social networking platform), online leasing, concierge services or call centers), customer retention or
satisfaction, expansion of revenue or income streams, sourcing of low cost capital, operational efficiencies,
dividend growth, earnings multiple improvement, meeting budgets, staffing, retention, growth, development,
engagement, integration, succession and/or reviewing performance of employees, business or strategic plans,
investor communications or relations, compliance (including, but not limited to, with respect to accounting, tax,
external or regulatory filings, internal financial reporting, audits (including, but not limited to, internal audits) or
contract policies), financial planning or analysis or (e) any combination or subset of the goals set forth in (a)
through (d) above. If an Award is made on such basis, the Committee shall establish goals prior to the beginning
of the period for which such performance goal relates (or such later date as may be permitted under Code
Section 162(m) or the regulations thereunder) and the Committee has the right for any reason to reduce (but not
increase) the Award, notwithstanding the achievement of a specified goal. Any payment of an Award granted
with performance goals shall be conditioned on the written certification of the Committee in each case that the
performance goals and any other material conditions were satisfied.
14.15 TERMINATION OF EMPLOYMENT. Whether military, government or other service or other
leave of absence shall constitute a termination of employment shall be determined in each case by the
Committee at its discretion, and any determination by the Committee shall be final and conclusive. A
termination of employment shall not occur (i) in a circumstance in which a Participant transfers from the
Company to one of its Parents or Subsidiaries, transfers from a Parent or Subsidiary to the Company, or transfers
from one Parent or Subsidiary to another Parent or Subsidiary, or (ii) in the discretion of the Committee as
specified at or prior to such occurrence, in the case of a spinoff, sale or disposition of the Participant’s employer
from the Company or any Parent or Subsidiary. To the extent that this provision causes Incentive Stock Options
to extend beyond three months from the date a Participant is deemed to be an employee of the Company, a
Parent or Subsidiary for purposes of Section 424(f) of the Code, the Options held by such Participant shall be
deemed to be NonQualified Stock Options.
ARTICLE 15
CHANGES IN CAPITAL STRUCTURE
15.1 GENERAL. In the event of a corporate transaction involving the Company (including, without
limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, splitup, spinoff, combination or exchange of shares), the authorization limits under Section 5.1
and 5.4 shall be adjusted proportionately, and the Committee shall adjust Awards to preserve the benefits or
potential benefits of the Awards. Action by the Committee shall include: (i) adjustment of the number and kind
of shares or other securities which may be delivered under the Plan; (ii) adjustment of the number and kind of
shares or other securities subject to outstanding Awards; (iii) adjustment of the exercise price of outstanding
Awards; and (iv) any other adjustments that the Committee determines to be equitable. Without limiting the
foregoing, in the event a stock dividend or stock split is declared upon the Stock, the authorization limits under
Section 5.1 and 5.4 shall be increased proportionately, and the shares of Stock or other securities then subject to
each Award shall be increased proportionately without any change in the aggregate purchase price therefor.
ARTICLE 16
AMENDMENT, MODIFICATION AND TERMINATION
16.1 AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committee may, at
any time and from time to time, amend, modify or terminate the Plan without stockholder approval; provided,
however, that the Board or Committee may condition any amendment or modification on the approval of
stockholders of the Company if such approval is necessary or deemed advisable with respect to tax, securities or
other applicable laws, policies or regulations.
16.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the Committee may
amend, modify or terminate any outstanding Award without approval of the Participant; provided, however, that,
subject to the terms of the applicable Award Agreement, such amendment, modification or termination shall not,
without the Participant’s consent, reduce or diminish the value of such Award determined as if the Award had
been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination, and
provided further that, except as provided in Section 15.1 or otherwise with the consent of the stockholders, the
exercise price of any Option or the grant price of any Stock Appreciation Right may not be reduced. No
termination, amendment, or modification of the Plan shall adversely affect any Award previously granted under
the Plan, without the written consent of the Participant.
ARTICLE 17
GENERAL PROVISIONS
17.1 NO RIGHTS TO AWARDS. No Participant or eligible participant shall have any claim to be
granted any Award under the Plan, and neither the Company nor the Committee is obligated to treat Participants
or eligible participants uniformly.
17.2 NO STOCKHOLDER RIGHTS. No Award gives the Participant any of the rights of a stockholder
of the Company unless and until shares of Stock are in fact issued to such person in connection with such
Award.
17.3 WITHHOLDING. The Company or any Parent or Subsidiary shall have the authority and the
right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state, and local taxes (including the Participant’s FICA obligation) required by law to be withheld with
respect to any taxable event arising as a result of the Plan. With respect to withholding required upon any
taxable event under the Plan, the Committee may, at the time the Award is granted or thereafter, require or
permit that any such withholding requirement be satisfied, in whole or in part, by withholding from the Award
shares of Stock, all in accordance with such procedures as the Committee establishes.
17.4 NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan or any Award Agreement shall
interfere with or limit in any way the right of the Company or any Parent or Subsidiary to terminate any
Participant’s employment or status as an officer, consultant or director at any time, nor confer upon any
Participant any right to continue as an employee, officer, consultant or director of the Company or any Parent or
Subsidiary.
17.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an “unfunded” plan for
incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an
Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are
greater than those of a general creditor of the Company or any Parent or Subsidiary.
17.6 INDEMNIFICATION. To the extent allowable under applicable law, each member of the
Committee shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that
may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim,
action, suit, or proceeding to which such member may be a party or in which he may be involved by reason of
any action or failure to act under the Plan and against and from any and all amounts paid by such member in
satisfaction of judgment in such action, suit, or proceeding against him provided he gives the Company an
opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on
his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or
Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold
them harmless.
17.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be taken into
account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance,
welfare or benefit plan of the Company or any Parent or Subsidiary unless provided otherwise in such other
plan.
17.8 EXPENSES. The expenses of administering the Plan shall be borne by the Company and its
Parents or Subsidiaries.
17.9 TITLES AND HEADINGS. The titles and headings of the Sections in the Plan are for
convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or
headings, shall control.
17.10 GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine
term used herein also shall include the feminine; the plural shall include the singular and the singular shall
include the plural.
17.11 FRACTIONAL SHARES. No fractional shares of Stock shall be issued and the Committee shall
determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional
shares shall be eliminated by rounding up.
17.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to make
payment of awards in Stock, LTIP Units or otherwise shall be subject to all applicable laws, rules, and
regulations, and to such approvals by government agencies as may be required. The Company shall be under no
obligation to register under the 1933 Act, or any state securities act, any of the shares of Stock or LTIP Units
issued in connection with the Plan. The shares or LTIP Units issued in connection with the Plan may in certain
circumstances be exempt from registration under the 1933 Act, and the Company may restrict the transfer of
such shares or LTIP Units in such manner as it deems advisable to ensure the availability of any such exemption.
17.13 GOVERNING LAW. To the extent not governed by federal law, the Plan and all Award
Agreements shall be construed in accordance with and governed by the laws of the Commonwealth of Virginia.
17.14 ADDITIONAL PROVISIONS. Each Award Agreement may contain such other terms and
conditions as the Committee may determine; provided that such other terms and conditions are not inconsistent
with the provisions of this Plan. The foregoing is hereby acknowledged as being the UDR, Inc. 1999 LongTerm
Incentive Plan as amended and restated by the Committee on February 2, 2017.
UDR, INC.
By: /s/ Warren L. Troupe
Warren L. Troupe
Senior Executive Vice
President
and Secretary
(Back To Top)
Section 3: EX10.2 (EXHIBIT 10.2)
RESTRICTED STOCK AWARD AGREEMENT
under the
UDR, INC.
1999 LONGTERM INCENTIVE PLAN
Exhibit 10.02
(AS AMENDED AND RESTATED FEBRUARY 2, 2017)
Grantee:
Number of Shares:
Date of Grant:
[Name]
[Shares]
, 2017
Value as of Grant Date:
$______ per share
1. Grant of Shares. UDR, Inc. (the "Company") hereby grants to the Grantee named above (the
"Grantee"), as additional compensation for services to be rendered, and subject to the restrictions and the other
terms and conditions set forth in the Company's 1999 LongTerm Incentive Plan (the "Plan") and in this
Restricted Stock Award Agreement (this "Agreement"), the number of shares indicated above of the Company's
$0.01 par value common stock (the "Shares"). Capitalized terms used herein and not otherwise defined shall
have the meanings assigned such terms in the Plan.
2. Vesting of Restricted Stock. Unless the vesting under this Agreement is accelerated in accordance with
Article 14 of the Plan, 100% of the Shares subject to this Agreement shall vest (become exercisable) under the
following terms: 1/4 of the Shares shall vest on __________, 2018; 1/4 of the Shares shall vest on ___________,
2019; 1/4 of the Shares shall vest on __________, 2020; and the remaining 1/4 of the Shares shall vest on
__________, 2021.
3. Restrictions. The Shares are subject to each of the following restrictions. "Restricted Shares" means
those Shares that are subject to the restrictions imposed hereunder which restrictions have not then expired or
terminated. Restricted Shares may not be sold, transferred, exchanged, assigned, pledged, hypothecated or
otherwise encumbered. If the Grantee's employment with the Company or any Parent or Subsidiary terminates
for any reason other than as set forth in paragraph (a) or (b) of Section 4 hereof, then the Grantee shall forfeit all
of the Grantee's right, title and interest in and to the Restricted Shares as of the date of employment termination
and such Restricted Shares shall be reconveyed to the Company without further consideration or any act or
action by the Grantee.
The restrictions imposed under this Section 3 shall apply to all shares of the Company's stock or other
securities issued with respect to Restricted Shares hereunder in connection with any merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate structure affecting the common
stock of the Company.
4. Expiration and Termination of Restrictions. The restrictions imposed under Section 3 will expire on
the earliest to occur of the following:
(a)
On the date of termination of the Grantee's employment with the Company or any Parent or
Subsidiary because of his or her death or Disability; or
(b)
On the date specified by the Committee or as otherwise established in the Plan in the event of
an acceleration of vesting under Article 14 of the Plan (including, without limitation, upon the
occurrence of a Change in Control, as defined in the Plan).
5. Delivery of Shares. The Shares will be registered in the name of the Grantee as Restricted Stock and
may be held by the Company prior to the lapse of the restrictions thereon as provided in Section 4 hereof (the
"Restricted Period"). Any certificate for Shares issued during the Restricted Period shall be registered in the
name of the Grantee and shall bear a legend in substantially the following form:
THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE
SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE AND
RESTRICTIONS AGAINST TRANSFER) CONTAINED IN A RESTRICTED STOCK
AWARD AGREEMENT DATED ___________, 2017 BETWEEN THE REGISTERED
OWNER OF THE SHARES REPRESENTED HEREBY AND UDR, INC. RELEASE FROM
SUCH TERMS AND CONDITIONS SHALL BE MADE ONLY IN ACCORDANCE WITH
THE PROVISIONS OF SUCH AGREEMENT, COPIES OF WHICH ARE ON FILE IN THE
OFFICE OF UDR, INC.
If requested, the Grantee shall deposit with the Company, a stock power, or powers, executed in blank
and sufficient to reconvey the Restricted Shares to the Company upon termination of the Grantee's employment
during the Restricted Period, in accordance with the provisions of this Agreement.
6. Voting and Dividend Rights. The Grantee, as beneficial owner of the Shares, shall have full voting
rights with respect to the Shares and shall receive dividends on the Shares during the Restricted Period.
Dividends on the Shares are not eligible for participation in the Company's Dividend Reinvestment Plan during
the Restricted Period.
7. Restrictions on Transfer and Pledge. The Restricted Shares may not be pledged, encumbered, or
hypothecated to or in favor of any party other than the Company or a Parent or Subsidiary, or be subject to any
lien, obligation, or liability of the Grantee to any other party other than the Company or a Parent or Subsidiary.
The Restricted Shares are not assignable or transferable by the Grantee other than by will or the laws of descent
and distribution.
8. Changes in Capital Structure. In the event a stock dividend is declared upon the Stock, the shares of
Stock then subject to this Agreement shall be increased proportionately. In the event the Stock shall be changed
into or exchanged for a different number or class of shares of stock or securities of the Company or of another
corporation, whether through reorganization, recapitalization, reclassification, share exchange, stock splitup,
combination of shares, merger or consolidation, there shall be substituted for each such share of Stock then
subject to this Agreement the number and class of shares into which each outstanding share of Stock shall be so
exchanged, or there shall be made such other equitable adjustment as the Committee shall approve.
9.
Stop Transfer Notices. In order to ensure compliance with the restrictions on transfer set forth in this
Agreement or the Plan, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if
any, and, if the Company transfers its own securities, it may make appropriate notations to the same effect in its
own records.
10.
Refusal to Transfer. The Company shall not be required (a) to transfer on its books any
Restricted Shares that have been sold or otherwise transferred in violation of any of the provisions of this
Agreement or (b) to treat as owner of such Restricted Shares or to accord the right to vote or pay dividends to
any purchaser or other transferee to whom such Restricted Shares shall have been so transferred.
11. No Right of Continued Employment. Nothing in this Agreement shall interfere with or limit in any
way the right of the Company or any Parent or Subsidiary to terminate the Grantee's employment at any time,
nor confer upon the Grantee any right to continue in the employ of the Company or any Parent or Subsidiary.
12.
Payment of Taxes.
(a)
The Grantee upon issuance of the Shares hereunder, shall be authorized to make an election to
be taxed upon such award under Section 83(b) of the Code. To effect such election, the Grantee may file
an appropriate election with the Internal Revenue Service within thirty (30) days after award of the
Shares and otherwise in accordance with applicable Treasury Regulations.
(b)
The Grantee will, no later than the date as of which any amount related to the Shares first
becomes includable in the Grantee's gross income for federal income tax purposes, pay to the Company,
or make other arrangements satisfactory to the Committee regarding payment of, any federal, state and
local taxes of any kind required or permitted by law to be withheld with respect to such amount. For the
avoidance of doubt, the Grantee may satisfy such payment by permitting the Company to reduce the
number of Shares issued. The obligations of the Company under this Agreement will be conditional on
such payment or arrangements, and the Company, and, where applicable, its Subsidiaries will, to the
extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise
due to the Grantee.
13.
Grantee's Covenant. The Grantee hereby agrees to use his best efforts to provide services to
the Company in a workmanlike manner and to promote the Company's interests.
14.
Amendment. The Committee may amend, modify or terminate this Agreement without
approval of the Grantee; provided, however, that such amendment, modification or termination shall not,
without the Grantee's consent, reduce or diminish the value of this award determined as if it had been fully
vested on the date of such amendment or termination.
15.
Plan Controls. The terms contained in the Plan are incorporated into and made a part of this
Agreement and this Agreement shall be governed by and construed in accordance with the Plan. In the event of
any actual or alleged conflict between the provisions of the Plan and the provisions of this Agreement, the
provisions of the Plan shall be controlling and determinative.
16.
Successors. This Agreement shall be binding upon any successor of the Company, in
accordance with the terms of this Agreement and the Plan.
17.
Severability. If any one or more of the provisions contained in this Agreement is invalid,
illegal or unenforceable, the other provisions of this Agreement will be construed and enforced as if the invalid,
illegal or unenforceable provision had never been included.
18.
Notice. Notices and communications under this Agreement must be in writing and either
personally delivered or sent by registered or certified United States mail, return receipt requested, postage
prepaid. Notices to the Company must be addressed to:
UDR, Inc.
1745 Shea Center Dr., Suite 200
Highlands Ranch, Colorado 80129
Attn: Corporate Secretary
or any other address designated by the Company in a written notice to the Grantee. Notices to the Grantee will
be directed to the address of the Grantee then currently on file with the Company, or at any other address given
by the Grantee in a written notice to the Company.
19.
Dispute Resolution. The provisions of this Section 19 shall be the exclusive means of
resolving disputes arising out of or relating to the Plan and this Agreement. The Company, the Grantee, and the
Grantee’s assignees (the “parties”) shall attempt in good faith to resolve any disputes arising out of or relating to
the Plan and this Agreement by negotiation between individuals who have authority to settle the controversy.
Negotiations shall be commenced by either party by notice of a written statement of the party’s position and the
name and title of the individual who will represent the party. Within thirty (30) days of the written notification,
the parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem
necessary, to resolve the dispute. If the dispute has not been resolved by negotiation, the parties agree that any
suit, action, or proceeding arising out of or relating to the Plan or this Agreement shall be brought in the United
States District Court for the District of Colorado (or should such court lack jurisdiction to hear such action, suit
or proceeding, in a state court in Colorado) and that the parties shall submit to the jurisdiction of such court. The
parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying
of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY
WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION
OR PROCEEDING. If any one or more provisions of this Section 19 shall for any reason be held invalid or
unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum
extent necessary to make it or its application valid and enforceable.
IN WITNESS WHEREOF, the Company and the Grantee have executed this Agreement and agree that
the Shares are to be governed by the terms and conditions of this Agreement and the Plan.
UDR, Inc.
By:
Name: Thomas W. Toomey
Title:
Chief Executive Officer & President
The Grantee acknowledges receipt of a copy of the Plan and this Agreement and represents that he or she is
familiar with the terms and provisions thereof, and hereby accepts the Shares subject to all of the terms and
provisions hereof and thereof. The Grantee has reviewed this Agreement and the Plan in their entirety, has had
an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all
provisions of this Agreement and the Plan. The Grantee hereby agrees that all disputes arising out of or relating
to this Agreement and the Plan shall be resolved in accordance with Section 19 of this Agreement.
The Grantee further agrees to notify the Company upon any change in the residence address indicated in this
Agreement.
GRANTEE:
[Name]
(Back To Top)
Section 4: EX10.7 (EXHIBIT 10.7)
INDEMNIFICATION AGREEMENT
Exhibit 10.07
THIS INDEMNIFICATION AGREEMENT (the “Agreement”) is entered into as of
__________________ (“Effective Date”), by and between UDR, Inc., a Maryland corporation (the “Company”),
and __________________ (the “Indemnitee”). See Schedule A for a list of officers and directors who have
entered into this Indemnification Agreement with the Company.
WHEREAS, the Indemnitee, at the request of the Company, is serving as an officer or a member of the
Board of Directors (“Board”) of the Company and in such capacity is performing a valuable service for the
Company;
WHEREAS, the law of the State of Maryland, the Company’s state of formation, permits the Company
to enter into contracts with its officers or members of its Board with respect to indemnification of such persons;
and
WHEREAS, to induce the Indemnitee to continue to provide services to the Company as an officer or a
member of the Board, and to provide the Indemnitee with specific contractual assurance that indemnification
will be available to the Indemnitee regardless of, among other things, any amendment to or revocation of the
Company’s Articles of Restatement or Amended and Restated Bylaws (as amended collectively the “Charter
Documents”), or any acquisition transaction relating to the Company, the Company desires to provide the
Indemnitee with protection against personal liability to the fullest extent permitted by law.
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company
and the Indemnitee hereby agree as follows:
1. Definitions. For purposes of this Agreement:
(a) “Change in Control” shall mean a change in control of the Company occurring after the Effective
Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the
Exchange Act (as hereinafter defined), whether or not the Company is then subject to such reporting
requirement; provided, however, that, without limitation, a Change in Control shall be deemed to have occurred
if, after the Effective Date, any of the following events shall occur:
(I) An acquisition (other than directly from the Company) of any voting securities of the
Company (the “Voting Securities”) by any “Person” (as the term person is used for purposes of Section 13(d) or
14(d) of the Exchange Act, immediately after which such Person has “Beneficial Ownership” (within the
meaning of Rule 13d3 promulgated under the Exchange Act), directly or indirectly, of 30% or more of the
combined voting power of the Company’s then outstanding Voting
1
Securities; provided, however, that in determining whether a Change in Control has occurred, Voting Securities
which are acquired in a “NonControl Acquisition” (as hereinafter defined) shall not constitute an acquisition
which would cause a Change in Control. A “NonControl Acquisition” shall mean an acquisition by (i) an
employee benefit plan (or a trust forming a part thereof) maintained by (x) the Company or (y) any corporation
or other Person of which a majority of its voting power or its equity securities or equity interest is owned
directly or indirectly by the Company (a “Subsidiary”), (ii) the Company or any Subsidiary or (iii) any Person in
connection with a “NonControl Transaction” (as hereinafter defined);
(II) approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the Company unless:
(1) the stockholders of the Company, immediately before such merger,
consolidation or reorganization, own, directly or indirectly, immediately following such merger, consolidation or
reorganization, at least seventy percent (70%) of the combined voting power of the outstanding Voting Securities
of the corporation or other entity resulting from such merger or consolidation or reorganization (the “Surviving
Corporation”) in substantially the same proportion as among themselves as their ownership of the Voting
Securities immediately before such merger, consolidation or reorganization; and
(2) the individuals who were members of the incumbent Board immediately prior
to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least a
majority of the members of the board of directors or board of trustees of the Surviving Corporation or a
corporation or other entity beneficially owning, directly or indirectly, a majority of the Voting Securities of the
Surviving Corporation;
Section 1(a)(II)(A) shall herein be referred to as a “NonControl Transaction);
(A) Transaction meeting the conditions described in clauses (1) and (2) of
(B) A complete liquidation or dissolution of the Company; or
all of the assets of the Company to any Person (other than to an entity of which the Company directly or
indirectly owns at least 70% of the Voting Securities).
(C) An agreement for the sale or other disposition of all or substantially
(III) There occurs a proxy contest, as a consequence of which members of the Board in office
immediately prior thereto constitute less than a majority of the Board thereafter; or
(IV) During any period of two consecutive years, individuals who at the beginning of such
period constituted the Board (including for this purpose any new director whose election or nomination for
election by the Company’s stockholders was approved by a vote of at least twothirds of
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the directors then still in office who were directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board. Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the “Subject Person”) acquired Beneficial Ownership of more than
30% of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities outstanding, increases the proportionate number of shares
Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Voting
Securities which increases the percentage of the then outstanding Voting Securities Beneficially Owned by the
Subject Person, then a Change in Control shall occur.
(b) “Corporate Status” means the status of a person who is or was a director, officer, employee, agent or
fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise (whether conducted for profit or not for profit) which such person is or was serving at the
request of the Company.
(c) “Disinterested Director” means a director of the Company who is not and was not a party to the
Proceeding (as hereinafter defined) in respect of which indemnification and/or advancement of Expenses (as
hereinafter defined), as the case may be, is sought by the Indemnitee.
(d) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
(e) “Expenses” shall include all reasonable attorneys and paralegals’ fees and costs, retainers, discovery
costs, court costs, transcript costs, fees of experts and consultants, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements
or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute
or defend, investigating, or being or preparing to be a witness in a Proceeding. Expenses shall also include
Expenses incurred in connection with any appeal resulting from any Proceeding, including, without limitation,
the premium, security for and other costs relating to any cost bond, supersedeas bond or other appeal bond or its
equivalent.
(f) “Independent Counsel” means a law firm, or a member of a law firm, selected by the Board by the
vote required for determination of the Indemnitee’s entitlement to indemnification as provided in clause (ii) of
Section 9(b) hereof, that (i) is experienced in matters of corporation law and (ii) has not, and, as to such law
firm, no member presently is, or in the past five years has been, retained to represent (x) the Company or the
Indemnitee in any matter material to either such party, or (y) any other party to the Proceeding giving rise to a
claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not
include any person who, under the applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or the Indemnitee in an action to determine the
Indemnitee’s rights under this Agreement, unless such conflict of interest is waived by both the Company and
the Indemnitee.
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(g) “Liabilities” means all liabilities, and losses (including judgments, fines, ERISA excise taxes or
penalties, and amounts paid or to be paid in settlement, and any interest, assessments, or other charges imposed
thereon, and any federal, state, local, or foreign taxes imposed on any Indemnitee as a result of the actual or
deemed receipt of any payments under this Agreement).
(h) “Proceeding” includes any threatened, pending or completed action, claim, suit, arbitration, alternate
dispute resolution mechanism, investigation, inquiry, administrative hearing, or any other proceeding, including
appeals therefrom, whether civil, criminal, administrative, or investigative (formal or informal), except one
(i) initiated by the Indemnitee pursuant to Section 12 of this Agreement to enforce such Indemnitee’s rights
under this Agreement or (ii) pending or completed on or before the Effective Date, unless otherwise specifically
agreed in writing by the Company and the Indemnitee. If the Indemnitee reasonably believes that a given
situation may lead to or culminate in the institution of a Proceeding, such situation shall also be considered a
Proceeding.
2. Indemnification General. The Company shall indemnify, and advance Expenses to, the Indemnitee
(i) as provided in this Agreement and (ii) otherwise to the fullest extent permitted by Maryland law in effect on
the Effective Date and as amended from time to time (provided, however, that no change in Maryland law shall
have the effect of reducing the benefits available to the Indemnitee hereunder based on Maryland law as in effect
on the Effective Date). The rights of the Indemnitee provided in this Section 2 shall include, without limitation,
the rights set forth in the other sections of this Agreement, including any additional indemnification permitted by
Section 2418(g) of the Maryland General Corporation Law (the “MGCL”).
3. Proceedings Other than Proceedings by or in the Right of the Company. The Indemnitee shall be
entitled to the rights of indemnification provided in this Section 3 if, by reason of Indemnitee’s Corporate Status,
Indemnitee is, or is threatened to be, made a party to or a witness in any Proceeding, other than a Proceeding by
or in the right of the Company. The Company shall also indemnify Indemnitee’s spouse (whether by statute or at
common law and without regard to the location of the governing jurisdiction) and children to the same extent
and subject to the same limitations applicable to Indemnitee hereunder for claims arising out of the status of
such person as a spouse or child of Indemnitee, including claims seeking damages from marital property
(including community property) or property held by such Indemnitee and such spouse or child or property
transferred to such spouse or child, but such indemnity shall not otherwise extend to protect the spouse or child
against liabilities caused by the spouse’s or child’s own acts. Pursuant to this Section 3, the Indemnitee shall be
indemnified against all Liabilities and all Expenses actually and reasonably incurred by Indemnitee or on
Indemnitee’s behalf in connection with a Proceeding by reason of such Indemnitee’s Corporate Status unless it is
established that (i) the act or omission of the Indemnitee was material to the matter giving rise to the Proceeding
and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty on the part of the
Indemnitee, (ii) the Indemnitee actually received an improper personal benefit in money, property or services, or
(iii) in the case of any criminal Proceeding, the Indemnitee had reasonable cause to believe
4
that his or her conduct was unlawful. Notwithstanding the foregoing, (A) if clause (ii) of the preceding sentence
applies, the Indemnitee shall be disqualified from indemnification under this Agreement only to the extent of the
improper personal benefit in money, property or services actually received by the Indemnitee, unless otherwise
required by Maryland law; and (B) it is the intention of the parties that the Indemnitee shall in any event be
entitled to indemnification and advancement or recovery of Expenses to the maximum extent permitted by
Maryland law, so that if and to the extent Maryland law now or hereafter permits indemnification and/or
advancement or recovery of Expenses under the circumstances described in clauses (i), (ii) or (iii) of the
preceding sentence, then and in such event, the Indemnitee shall be entitled thereto.
4. Proceedings by or in the Right of the Company. The Indemnitee shall be entitled to the rights of
indemnification provided in this Section 4 if, by reason of the Indemnitee’s Corporate Status, Indemnitee is, or is
threatened to be, made a party to or a witness in any Proceeding brought by or in the right of the Company to
procure a judgment in its favor. Pursuant to this Section 4, the Indemnitee shall be indemnified against all
amounts paid in settlement and all Expenses actually and reasonably incurred by the Indemnitee or on the
Indemnitee’s behalf in connection with such Proceeding unless it is established that (i) the act or omission of the
Indemnitee was material to the matter giving rise to such a Proceeding and (a) was committed in bad faith or
(b) was the result of active and deliberate dishonesty or (ii) the Indemnitee actually received an improper
personal benefit in money, property or services.
5. CourtOrdered Indemnification. Notwithstanding any other provision of this Agreement, a court of
appropriate jurisdiction, upon application of the Indemnitee and such notice as the court shall require, may order
indemnification in the following circumstances:
(a) if it determines that the Indemnitee is entitled to reimbursement under Section 2418(d)(1) of the
MGCL, the court shall order indemnification, in which case the Indemnitee shall be entitled to recover the
Expenses of securing such reimbursement; or
(b) if it determines that the Indemnitee is fairly and reasonably entitled to indemnification in view of all
the relevant circumstances, whether or not the Indemnitee (i) has met the standards of conduct set forth in
Section 2418(b) of the MGCL or (ii) has been adjudged liable for receipt of an improper personal benefit under
Section 2418(c) of the MGCL, the court may order such indemnification as the court shall deem proper.
However, indemnification with respect to any Proceeding by or in the right of the Company or in which liability
shall have been adjudged in the circumstances described in Section 2418(c) of the MGCL shall be limited to
Expenses.
6. Expenses of a Successful Party. Notwithstanding any other provision of this Agreement and without
limiting the effect of any such provision, to the extent that the Indemnitee is, by reason of such Indemnitee’s
Corporate Status, made a party to and is successful, on the merits or otherwise, in the defense of any Proceeding,
such Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by or on behalf of
such Indemnitee in connection therewith. If the Indemnitee is not wholly successful in such Proceeding, but is
successful, on the merits or otherwise, as to one or more but
5
less than all claims, issues, or matters in such Proceeding, the Company shall indemnify the Indemnitee under
this Section 6 against all Expenses actually and reasonably incurred by or on behalf of such Indemnitee in
connection with each successfully resolved claim, issue or matter, allocated on a reasonable and proportionate
basis. For purposes of this Section 6, the term “successful on the merits or otherwise” shall include, but not be
limited to, (i) any termination, withdrawal or dismissal (with our without prejudice) of any claim, issue or matter
in such Proceeding against Indemnitee without any express finding of liability or guilt against the Indemnitee,
(ii) the expiration of 180 days after the making of any claim or threat of a Proceeding without the institution of
the same and without any promise of payment or payment made to induce a settlement or (iii) the settlement of
any Proceeding, pursuant to which Indemnitee pays less than $10,000.
7. Witness Expenses. Notwithstanding any other provision of this Agreement, to the extent that the
Indemnitee is, by reason of such Indemnitee’s Corporate Status, a witness for any reason in any Proceeding to
which such Indemnitee is not a party, or receives a subpoena in any Proceeding to which such Indemnitee is not
a party, such Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by or on
behalf of such Indemnitee in connection therewith.
8. Advancement of Expenses. The Company shall advance all reasonable Expenses actually and
reasonably incurred by or on behalf of the Indemnitee in connection with any Proceeding (other than a
proceeding brought to enforce indemnification under this Agreement, applicable law, the Charter Documents,
any agreement or a resolution of the stockholders entitled to vote in the election of directors, but including any
Proceeding in which the Indemnitee is not a party in accordance with Section 7) within 20 days after the receipt
by the Company of a statement from the Indemnitee requesting such advance from time to time, whether prior
to, during or after final disposition of such Proceeding. Such statement shall reasonably evidence the Expenses
incurred by the Indemnitee and shall include or be preceded or accompanied by a written affirmation by the
Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by
the Company as authorized by law and by this Agreement has been met and a written undertaking by or on
behalf of the Indemnitee, in substantially the form attached hereto as Exhibit A or in such form as may be
required under applicable law as in effect at the time of the execution thereof, to reimburse the portion of any
Expenses advanced to the Indemnitee relating to claims, issues or matters in the Proceeding as to which it shall
ultimately be established that the standard of conduct has not been met and which have not been successfully
resolved as described in Section 6. To the extent that Expenses advanced to the Indemnitee do not relate to a
specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and
proportionate basis. The undertaking required by this Section 8 shall be an unlimited general obligation by or on
behalf of the Indemnitee and shall be accepted without reference to the Indemnitee’s financial ability to repay
such advanced Expenses and without any requirement to post security therefor.
9. Determination of Entitlement to Indemnification.
6
(a) To obtain indemnification under this Agreement, the Indemnitee shall submit to the Company a
written request, including therein or therewith such documentation and information as is reasonably available to
the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to
indemnification. The Indemnitee may submit one or more such requests from time to time and at such time(s) as
the Indemnitee deems appropriate in his or her discretion. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board in writing that the Indemnitee has requested
indemnification.
(b) Upon such written request pursuant to Section 9(a) hereof, a determination, if required by applicable
law, with respect to the Indemnitee’s entitlement thereto shall be made in the specific case: (i) if a Change in
Control shall have occurred, by Independent Counsel (which Independent Counsel shall be selected by the
Indemnitee and approved by the Board of Directors in accordance with Section 2418(e)(2)(ii) of the MGCL,
which approval shall not be unreasonably withheld, conditioned or delayed) in a written opinion to the Board, a
copy of which shall be delivered to the Indemnitee (unless the Indemnitee shall request that such determination
be made by the Board, in which case by the person or persons or in the manner provided in clause (ii) of this
Section 9(b)); or (ii) if a Change in Control shall not have occurred, (a) by the Board (or a duly authorized
committee thereof) by a majority vote of a quorum consisting of Disinterested Directors (if obtainable), or (b) if
a quorum of the Board consisting of Disinterested Directors is not obtainable, or, even if obtainable, if such
quorum of Disinterested Directors so directs, by Independent Counsel (which Independent Counsel shall be
selected by the Board of Directors in accordance with Section 2418(e)(2)(ii) of the MGCL and approved by the
Indemnitee, which approval shall not be unreasonably withheld, conditioned or delayed) in a written opinion to
the Board, a copy of which shall be delivered to the Indemnitee; and, if it is so determined that the Indemnitee is
entitled to indemnification, payment to the Indemnitee shall be made within ten days after such determination.
(c) The Indemnitee shall cooperate with the person or entity making such determination with respect to
the Indemnitee’s entitlement to indemnification, including providing upon reasonable advance request any
documentation or information which is not privileged or otherwise protected from disclosure and which is
reasonably available to the Indemnitee and reasonably necessary to such determination. Any Expenses incurred
by the Indemnitee in so cooperating shall be borne by the Company (irrespective of the determination as to the
Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold the
Indemnitee harmless therefrom.
(d) The Company shall pay the reasonable fees and expenses of Independent Counsel, if one is
appointed in accordance in Section 9(b).
10. Presumptions.
(a) In making a determination with respect to entitlement to indemnification hereunder, the person or
entity making such determination shall presume that the Indemnitee is entitled to indemnification under this
Agreement if the Indemnitee has submitted a request for indemnification in
7
accordance with Section 9(a) hereof, and the Company shall have the burden of proof to overcome such
presumption in connection with the making of any determination contrary to that presumption.
(b) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation
prior to judgment, or by dismissal, with or without prejudice, shall not create a presumption that the Indemnitee
did not meet the requisite standard of conduct described herein for indemnification.
(c) For purposes of any determination hereunder, Indemnitee shall be deemed to have acted in good
faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the
Company and its stockholders, or, with respect to any criminal action or proceeding, to have had no reasonable
cause to believe Indemnitee’s conduct was unlawful, if Indemnitee’s action was based on (i) the records or
books of account of the Company or another person, including financial statements, (ii) information supplied to
the Indemnitee by the officers of the Company or another person in the course of their duties, (iii) the advice of
legal counsel for the Company or another person, or (iv) information or records given or reports made to the
Company or another person by an independent certified public accountant or by an appraiser or other expert
selected with reasonable care by the Company or another person.
(d) The knowledge and/or actions, or failure to act, of any other director, officer, employee or agent of
the Company or any other director, trustee, officer, partner, manager, managing member, fiduciary, employee or
agent of any other foreign or domestic corporation, real estate investment trust, partnership, limited liability
company, joint venture, trust, employee benefit plan or other enterprise shall not be imputed to the Indemnitee
for purposes of determining any other right to indemnification under this Agreement.
11. Limitation on Indemnification. Notwithstanding any other provision herein to the contrary, the
Company shall not be obligated pursuant to this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance Expenses to Indemnitee under this
Agreement with respect to any Proceeding brought by the Indemnitee, unless (a) the Proceeding is brought to
enforce indemnification under this Agreement or otherwise or (b) the Charter Documents, a resolution of the
stockholders entitled to vote generally in the election of directors or of the Board or an agreement approved by
the Board to which the Company is a party expressly provide otherwise.
(b) Section 16(b) Violations. To indemnify Indemnitee on account of any Proceeding with respect to
which final judgment is rendered against Indemnitee for payment or an accounting of its profits arising from the
purchase or sale by Indemnitee of securities in violation of Section 16(b) of the Exchange Act, or any similar
successor statute.
(c) Noncompete and Nondisclosure. To indemnify Indemnitee in connection with Proceedings
involving the enforcement of noncompete and/or nondisclosure agreements or the non
8
compete and/or nondisclosure provisions of employment, consulting or similar agreements the Indemnitee may
be a party to with the Company, or any subsidiary of the Company or any other applicable foreign or domestic
corporation, partnership, joint venture or other enterprise, if any.
12. Remedies.
(a) If (i) a determination is made pursuant to Section 9 of this Agreement that the Indemnitee is not
entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made
pursuant to Section 9(b) of this Agreement within 30 days after receipt by the Company of the request for
indemnification, (iv) payment of indemnification is not made pursuant to Section 6 of this Agreement within 20
days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made
within 20 days after a determination has been made that the Indemnitee is entitled to indemnification, the
Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Maryland, or in any other
court of competent jurisdiction, of his or her entitlement to such indemnification or advancement of Expenses.
The Indemnitee shall commence such proceeding seeking an adjudication within 180 days following the date on
which the Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided,
however, that the foregoing clause shall not apply in respect of a proceeding brought by the Indemnitee to
enforce Indemnitee’s rights under Section 6 of this Agreement.
(b) In the event that a determination shall have been made pursuant to this Agreement that the
Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 12
shall be conducted in all respects as a de novo trial, on the merits and the Indemnitee shall not be prejudiced by
reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this
Section 12, the Indemnitee shall be presumed to be entitled to indemnification or advancement of expenses, as
the case may be, and the Company shall have the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been made pursuant to this Agreement
that the Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any
judicial proceeding commenced pursuant to this Section 12, absent: (i) a misstatement by the Indemnitee of a
material fact, or an omission of a material fact necessary to make the Indemnitee’s statement not materially
misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification
under applicable law.
(d) The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to
this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable
and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement.
9
(e) In the event that the Indemnitee, pursuant to this Section 12, seeks a judicial adjudication of such
Indemnitee’s rights under, or to recover damages for breach of, this Agreement, if successful in whole or in part,
the Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against,
any and all Expenses actually and reasonably incurred by such Indemnitee in such judicial adjudication.
13. Defense of the Underlying Proceeding.
(a) The Indemnitee shall notify the Company promptly upon being served with or receiving any
summons, citation, subpoena, complaint, indictment, information, notice, request or other document relating to
any Proceeding which may result in the right to indemnification or the advancement of Expenses hereunder, and
shall include with such notice a description of the Proceeding and a summary of the facts underlying the
Proceeding; provided, however, that the failure to give any such notice shall not disqualify the Indemnitee from
the right, or otherwise affect in any manner any right of the Indemnitee, to indemnification or the advance of
Expenses under this Agreement unless the Company’s ability to defend in such Proceeding or to obtain proceeds
under any insurance policy is materially and adversely prejudiced thereby, and then only to the extent the
Company is thereby actually so prejudiced.
(b) Subject to the provisions of the last sentence of this Section 13(b) and of Section 13(c) below, the
Company shall have the right to defend the Indemnitee in any Proceeding which may give rise to
indemnification hereunder; provided, however, that the Company shall notify the Indemnitee of any such
decision to defend within 15 calendar days following receipt of notice of any such Proceeding under Section
13(a) above. The Company shall not, without the prior written consent of the Indemnitee, which shall not be
unreasonably withheld, conditioned or delayed, consent to the entry of any judgment against the Indemnitee or
enter into any settlement or compromise which (i) includes an admission of fault of the Indemnitee, (ii) does not
include, as an unconditional term thereof, the full release of the Indemnitee from all liability in respect of such
Proceeding, which release shall be in form and substance reasonably satisfactory to the Indemnitee or (iii) would
impose any Expense, judgment, fine, penalty or limitation on the Indemnitee. This Section 13(b) shall not apply
to a Proceeding brought by the Indemnitee under Section 11 or Section 12 above.
(c) Notwithstanding the provisions of Section 13(b) above, if in a Proceeding to which the Indemnitee
is a party by reason of the Indemnitee’s Corporate Status, (i) the Indemnitee reasonably concludes, based upon
an opinion of Indemnitee’s counsel (which counsel shall be subject to the prior approval of the Company, which
approval shall not be unreasonably withheld, conditioned or delayed), that he or she may have separate defenses
or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such
Proceeding, (ii) the Indemnitee reasonably concludes, based upon an opinion of Indemnitee’s counsel, that an
actual or apparent conflict of interest or potential conflict of interest exists between the Indemnitee and the
Company, or (iii) if the Company fails to assume the defense of such Proceeding in a timely manner, the
Indemnitee shall be entitled to be represented by separate legal counsel of the Indemnitee’s choice, subject to the
prior approval of the Company, which
10
shall not be unreasonably withheld, conditioned or delayed, at the expense of the Company. In addition, if the
Company fails to comply with any of its obligations under this Agreement or in the event that the Company or
any other person takes any action to declare this Agreement void or unenforceable, or institutes any Proceeding
to deny or to recover from the Indemnitee the benefits intended to be provided to the Indemnitee hereunder, the
Indemnitee shall have the right to retain counsel of the Indemnitee’s choice, subject to the prior approval of the
Company, which shall not be unreasonably withheld, conditioned or delayed, at the expense of the Company, to
represent the Indemnitee in connection with any such matter.
14. NonExclusivity. The rights of indemnification and to receive advancement of Expenses as
provided by this Agreement shall not be deemed exclusive of any other rights to which the Indemnitee may at
any time be entitled under applicable law, the Charter Documents, any agreement or a resolution of the
stockholders entitled to vote generally in the election of directors or of the Board, or otherwise; provided,
however the Company shall not be liable under this Agreement to make any payment of amounts otherwise
indemnifiable hereunder if and to the extent that the Indemnitee has otherwise actually received such payment
under any insurance policy, contract, agreement, or otherwise.. No amendment, alteration or repeal of this
Agreement or any provision hereof shall be effective as to the Indemnitee with respect to any action taken or
omitted by the Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal.
15. Subrogation. In the event of any payment under this Agreement, the Company shall be subrogated
to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers
required and take all actions necessary to secure such rights, including execution of such documents as are
necessary to enable the Company to bring suit to enforce such rights.
16. Maintenance of Liability Insurance.
(a) The Company will use its reasonable efforts to acquire directors and officers liability insurance
(including “insuring clause A”, commonly known as “Side A Coverage”, or similar coverage pursuant to which
the Indemnitee as an individual, and not the Company, is the insured party, with reasonable limits, retentions and
other terms and conditions), on terms and conditions and in such amounts deemed appropriate by the Board,
covering the Indemnitee or any claim made against the Indemnitee for service as a director or officer of the
Company and covering the Company for any indemnification or advance of expenses made by the Company to
the Indemnitee for any claims made against the Indemnitee for service as a director or officer of the Company.
Without in any way limiting any other obligation under this Agreement, the Company shall indemnify the
Indemnitee for any payment by the Indemnitee arising out of the amount of any deductible or retention and the
amount of any excess of the aggregate of all judgments, penalties, fines, settlements and reasonable expenses
incurred by the Indemnitee in connection with a Proceeding over the coverage of any insurance referred to in the
previous sentence.
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(b) If, at the time of the receipt of a notice of a claim pursuant to Section 9 hereof, the Company has
directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement
of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of
Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.
(c) To the extent that the Company maintains an insurance policy or policies providing liability
insurance for directors or officers of the Company, the Indemnitee shall be covered by such policy or policies in
accordance with its or their terms to the maximum extent of the coverage available, and upon any “Change in
Control”, the Company shall obtain continuation and/or “tail” coverage for the Indemnitee to the maximum
amount obtainable at such time.
17. Continuation of Indemnity.
(a) All agreements and obligations of the Company contained herein shall continue during the period
the Indemnitee is an officer or a member of the Board of the Company and shall continue thereafter so long as
the Indemnitee shall be subject to any threatened, pending or completed Proceeding by reason of such
Indemnitee’s Corporate Status and during the period of any statute of limitations for any act or omission
occurring during the Indemnitee’s term of Corporate Status. No legal action shall be brought and no cause of
action shall be asserted by or on behalf of the Company against the Indemnitee, the Indemnitee’s spouse, heirs,
executors or personal or legal representatives after the expiration of two (2) years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such two (2) year period; provided, however,
that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period
shall govern. Notwithstanding the foregoing limitations on the period within which such claim may be brought,
to the extent that any applicable statute of limitations provides for a tolling of the limitation period under certain
circumstances, then the limitations provided for in this Section 17 shall also be tolled in the event such
circumstances exist with respect to any such claim or cause of action. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of the Indemnitee and such Indemnitee’s
heirs, executors and administrators.
(b) The indemnification and advance of Expenses provided by, or granted pursuant to, this Agreement
shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns
(including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially
all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director,
trustee, officer, employee or agent of the Company or of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise which such person is or was serving at the request of the Company,
and shall inure to the benefit of the Indemnitee and his or her spouse, assigns, heirs, devisees, executors and
administrators and other legal representatives.
12
(c) The Company shall require and cause any successor (whether direct or indirect by purchase, merger,
consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the
Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent that the Company would be required
to perform if no such succession had taken place.
18. Change In Law. To the extent that a change in state law (whether by statute or judicial decision)
shall permit broader indemnification or advancement of expenses than is provided under the terms of the
organizational documents of the Company and this Agreement, Indemnitee shall be entitled to such broader
indemnification and advancements, and this Agreement shall be deemed to be amended to such extent.
19. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal, or
unenforceable for any reason whatsoever, (a) the validity, legality, and enforceability of the remaining provisions
of this Agreement (including, without limitation, each portion of any section of this Agreement containing any
such provision held to be invalid, illegal, or unenforceable, that is not itself invalid, illegal, or unenforceable)
shall not in any way be affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, each portion of any section of this Agreement containing any such
provision held to be invalid, illegal, or unenforceable, that is not itself invalid, illegal, or unenforceable) shall be
construed so as to give effect to the intent manifested by the provisions held invalid, illegal, or unenforceable.
20. NonDisclosure of Payments. Except as expressly required by Federal securities laws or other
applicable laws or regulations or by judicial process, Indemnitee shall not disclose any payments made under
this Agreement, whether indemnification or advancement of expenses, without the prior written approval of the
Company.
21. Headings. The headings of the sections of this Agreement are inserted for convenience only and
shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
22. Modification and Waiver. Except as provided in Section 18 above with respect to changes in state
law which broaden the right of Indemnitee to be indemnified by the Company, no supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other
provisions of this Agreement (whether or not similar), nor shall such waiver constitute a continuing waiver.
23. Successors. This Agreement shall be (a) binding upon all successors and assigns of the Company
(including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and
any direct or indirect successor by merger or consolidation or otherwise by operation of law) and (b) binding on
and shall inure to the benefit of the heirs, personal representatives, executors and administrators of Indemnitee.
This Agreement shall continue for the benefit of Indemnitee and such heirs,
13
personal representatives, executors and administrators after Indemnitee has ceased to have Corporate Status.
24. Notices. All notices, requests, demands, and other communications hereunder shall be in writing
and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so mailed, if so delivered or mailed, as the
case may be, to the following addresses:
If to the Indemnitee, to the address set forth in the records of the Company.
If to the Company,
to:
UDR, Inc.
1745 Shea Center Drive, Suite 200
Highlands Ranch, CO 80129
Attn.: Chief Executive Officer
or to such other address as may have been furnished to the Indemnitee by the Company or to the Company by
the Indemnitee, as the case may be.
25. Entire Agreement. This Agreement contains the entire agreement of the parties with respect to the
subject matter hereof and supersedes any prior agreements, commitments, drafts, communications, discussions
and understandings, oral or written, with respect thereto.
26. Employment Rights. Nothing in this Agreement is intended to create in Indemnitee any right to
employment or continued employment.
27. Governing Law. The parties agree that this Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Maryland.
28. Consent to Jurisdiction. Each party to this Agreement hereby (a) consents to the jurisdiction of the
United States District Court for the District of Colorado or, if such court does not have jurisdiction over such
matter, the applicable Colorado State or County Court that has jurisdiction, (b) irrevocably agrees that all actions
or proceedings arising out of or relating to this Agreement shall be litigated in such court and (c) consents to
personal jurisdiction within Denver, Colorado. Each party to this Agreement accepts for itself and in connection
with its properties, generally and unconditionally, the exclusive jurisdiction and venue of the aforesaid courts
and waives any defense of lack of personal jurisdiction or inconvenient forum or any similar defense, and
irrevocably agrees to be bound by any nonappealable judgment rendered thereby in connection with this
Agreement.
29. Counterparts. This Agreement may be executed in one or more counterparts, including
electronically transmitted counterparts, each of which shall constitute an original and all of which together shall
constitute a single agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first
above written.
14
UDR, INC., a Maryland corporation
By:
Warren L. Troupe, Senior Executive Vice President
_______________________________________________
_______________________, an individual
15
EXHIBIT A
FORM OF UNDERTAKING TO REPAY EXPENSES ADVANCED
The Board of Directors of UDR, Inc.
Re: Undertaking to Repay Expenses Advanced
Ladies and Gentlemen:
This undertaking is being provided pursuant to that certain Indemnification Agreement dated
_________________ by and between UDR, Inc. (the “Company”) and the undersigned Indemnitee (the
“Indemnification Agreement”), pursuant to which I am entitled to advancement of expenses in connection with
[Description of Proceeding] (the “Proceeding”).
Terms used herein and not otherwise defined shall have the meanings specified in the Indemnification
Agreement.
I am subject to the Proceeding by reason of my Corporate Status or by reason of alleged actions or
omissions by me in such capacity. I hereby affirm that at all times, insofar as I was involved as [a director] [an
officer] of the Company, in any of the facts or events giving rise to the Proceeding, I (1) acted in good faith and
honestly, (2) did not receive any improper personal benefit in money, property or services and (3) in the case of
any criminal proceeding, had no reasonable cause to believe that any act or omission by me was unlawful.
In consideration of the advance of expenses by the Company for reasonable attorney’s fees and related
Expenses incurred by me in connection with the Proceeding (the “Advanced Expenses”), I hereby agree that if,
in connection with the Proceeding, it is established that (1) an act or omission by me was material to the matter
giving rise to the Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate
dishonesty or (2) I actually received an improper personal benefit in money, property or services or (3) in the
case of any criminal proceeding, I had reasonable cause to believe that the act or omission was unlawful, then I
shall promptly reimburse the portion of the Advanced Expenses relating to the claims, issues or matters in the
Proceeding as to which the foregoing findings have been established and which have not been successfully
resolved as described in Section 6 of the Indemnification Agreement.
To the extent that Advanced Expenses do not relate to a specific claim, issue or matter in the Proceeding,
I agree that such Expenses shall be allocated on a reasonable and proportionate basis.
IN WITNESS WHEREOF, I have executed this Affirmation and Undertaking on this ___ day of ___,
20___.
___________________________________
A1
________________ , an individual
A1
SCHEDULE A
LISTING OF OFFICERS AND DIRECTORS WHO HAVE ENTERED INTO THIS
INDEMNIFICATION AGREEMENT WITH THE COMPANY
The following directors and officers have signed the Indemnification Agreement and all of them are
dated February 4, 2016, except as otherwise noted:
Katherine A. Cattanach
Robert P. Freeman
Jon A. Grove
Mary Ann King
James D. Klingbeil
Clint D. McDonnough
Robert A. McNamara
Mark R. Patterson
Lynne B. Sagalyn
Thomas W. Toomey
Warren L. Troupe
Harry G. Alcock
Jerry A. Davis
Joseph D. Fisher (January 1, 2017)
(Back To Top)
A1
Section 5: EX10.16 (EXHIBIT 10.16)
Exhibit 10.16
AIRCRAFT TIME SHARING AGREEMENT
This Aircraft Time Sharing Agreement (this "Agreement") is made effective as of November 11, 2016
(the "Effective Date") by and between UDR, Inc., a Maryland corporation (the "Company"), and Thomas W.
Toomey (the "Executive"). The Company and Executive are hereinafter sometimes referred to individually as
"Party" and also collectively as the "Parties."
RECITALS
WHEREAS, the Company owns and has the exclusive right to possess, use and operate the Raytheon
Hawker 4000 aircraft bearing manufacturer serial number RC54 and United States FAA Registration No.
N837RE (the "Aircraft"); and
WHEREAS, the Company has entered into an Aircraft Management Agreement, dated as of September
20, 2011 between the Company and Executive Jet Management, Inc. (the "Aircraft Management Agreement"),
for Executive Jet Management, Inc. to provide a fully qualified flight crew acceptable to and approved by the
Company to operate the Aircraft; and
WHEREAS, the Executive is the Chief Executive Officer and President of the Company; and
WHEREAS, the Company and the Executive desire to lease the Aircraft and the flight crew from time to
time on a time sharing basis, as defined in Section 91.501(c)(1) of the Federal Aviation Regulations ("FAR").
NOW, THEREFORE, in consideration of the foregoing, and based on the mutual covenants and
conditions set forth herein, the Parties agree as follows:
1. Lease of Aircraft. Pursuant to and in accordance with the provisions of Section 91.501(c)(1) of the
FAR:
(a)
the Company hereby agrees to lease the Aircraft from time to time to the Executive on a time
sharing, noncontinuous and nonexclusive basis and the Executive hereby agrees to lease the Aircraft from time
to time from the Company on a time sharing, noncontinuous and nonexclusive basis, during the Term (as
defined in Section 8) and subject to the terms and conditions herein contained; and
(b) the Company hereby agrees that any guest of the Executive, regardless whether the Executive is
accompanying such guest on a particular flight, and regardless whether such flight is within the scope of, or
incidental to, the business of the Company, shall be deemed to be a guest of the Company for purposes of
Section 91.501(b)(6) of the FAR.
2. Delivery and Redelivery of Aircraft. Upon the request of the Executive, subject to the availability of
the Aircraft as determined by the Company in accordance with Section 3, the Company shall make the Aircraft
available to the Executive at such locations as the Executive may reasonably request. The Executive
acknowledges that the Company currently bases the Aircraft at Centennial Airport (KAPA), Englewood,
Colorado (the "Home Base"). The repositioning, ferry or dead head flights of the Aircraft required in connection
with the Executive's flights of the Aircraft under this Agreement, including delivery and/or redelivery of the
Aircraft to the Home Base or to such other location as determined by the Company's specific schedule of the
Aircraft usage for its intended business or as the Parties may
otherwise agree, shall be deemed to be use of the Aircraft by the Executive and at the Executive's expense
subject to the Rent (as defined in Section 4).
3. Availability, Scheduling and Use of Aircraft Flights. The Executive shall advise the Company of his
request for flight time and use of the Aircraft under this Agreement by giving the Company advance notice by
telephone and/or facsimile and/or electronic mail as far in advance of any given flight as possible, and in any
case, at least two (2) business days in advance of the Executive's planned departure (unless the Company agrees
to a shorter notice in its sole discretion). The Executive's notice shall provide the customary information
required by the Company and its flight crew for each proposed flight, including the following: (i) proposed
departure point, (ii) destination, (iii) date and time of flight, (iv) the number and name of the anticipated
passengers, (v) the nature and extent of luggage and/or cargo to be carried, (vi) the date and time of return flight,
if any, and (vii) any other information concerning the proposed flight that may be pertinent or required by the
Company or the Company's flight crew. The Company, in its sole discretion, shall have final authority over the
scheduling of the Aircraft and in the event of a scheduling conflict, the Company's plans and decisions shall
control.
4. Rent. For each flight, including the repositioning, ferry or dead head flights set forth under Section 2
above, conducted under this Agreement, the Executive shall pay to the Company rent (the "Rent") as may be set
by the Company's Board of Directors from time to time for those flight expenses that may be charged in
accordance with Section 91.501(d) of the FAR.
5. Rent Limitation. In the unlikely event that the valuation of a flight transporting the Executive and/or
his guests on board the Aircraft under this Agreement using the special noncommercial flight valuation rule for
a control employee determined under the base aircraft valuation formula (also known as the Standard Industry
Fare Level formula, or "SIFL"), in accordance with the applicable provisions of federal income tax regulations,
Section 1.6121(g) of the Treasury regulations (the "Treasury Regulations") promulgated under the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), with respect to such flight should exceed the
amount of the Rent chargeable for such flight, then such excess difference shall be imputed as taxable
compensation to the Executive includable in the Executive's gross income in accordance with the applicable
provisions of the Internal Revenue Code and Treasury Regulations promulgated thereunder and correctly treated
and documented for income tax and employment tax and reporting purposes.
6. Federal Excise Tax on Transportation by Air. The Executive agrees and accepts that the Executive
shall be responsible for paying to the Company the federal excise tax under Section 4261 of the Internal
Revenue Code on the Rent paid to the Company in accordance with Section 4.
7. Method of Payment. The Company will pay all expenses related to the operation of the Aircraft when
incurred, and will invoice the Executive for the applicable Rent on the last day of the month in which any flight
or flights for the account of the Executive occur.
8. Term and Termination. The term of this Agreement (the “Term”) shall commence on the date set
forth above and shall continue until terminated by either Party on written notice to the other Party, such
termination to become effective ten (10) days from the date of the notice; provided, however, that this
Agreement may be terminated by the Company on such shorter notice as may be required for the Company to
comply with applicable law, regulations, the requirements of any financial institution with a security or other
interest in the Aircraft, insurance requirements, or in the event the insurance required hereunder is not in full
force and effect. This Agreement shall automatically terminate upon the date that the Executive is no longer
employed by the Company.
9. Operational Control and Crew. With respect to each flight undertaken under this Agreement, the
Company shall have and retain operational control of the Aircraft as provided in the applicable FAR (as defined
in Section 1.1 of the FAR, "operational control" with respect to a flight means the exercise of authority over
initiating, conducting, or terminating a flight); and, for federal tax purposes, the Company shall have and retain
"possession, command and control" of the Aircraft. The Company shall employ, pay for and provide to the
Executive a qualified flight crew for each flight undertaken under this Agreement.
10. Duties and Responsibilities of Crew. In accordance with applicable provisions of the FAR, the
qualified flight crew provided by the Company will exercise all of its duties and responsibilities in regard to the
safety of each flight conducted hereunder. The Executive specifically agrees that the flight crew, in its sole
discretion, may terminate any flight, refuse to commence any flight, or take other action which in the considered
judgment of the pilot in command is necessitated by considerations of safety. The pilot in command shall have
final and complete authority to cancel any flight for any reason or condition which, in his or her judgment,
would compromise the safety of the flight. No such action of the pilot in command shall create or support any
liability for loss, injury, damage or delay to the Executive or any other person. The Executive acknowledges and
agrees that the Company shall not be liable under any circumstances for delay or failure to furnish the Aircraft
and crew pursuant to this Agreement, except in the event of willful misconduct by the Company.
11. Maintenance. The Company shall be solely responsible for securing maintenance, preventive
maintenance and required or otherwise necessary inspections on the Aircraft, and shall take such requirements
into account in scheduling the Aircraft. No period of maintenance, preventative maintenance or inspection shall
be delayed or postponed for the purpose of scheduling the Aircraft, unless said maintenance or inspection can be
safely conducted at a later time in compliance with all applicable laws and regulations, and within the sound
discretion of the pilot in command.
12. Insurance.
(a) Insurance by Company. The Company, at its sole cost, shall maintain in effect during the Term of
this Agreement its present liability insurance covering public liability, property damage, including passenger
legal liability, and the Company's allrisk hull and engine insurance. The Company's insurance shall be primary
and without right of contribution from any other insurance. The Company shall cause the Executive to be an
additional named insured with respect to the liability coverage.
(b) Further Insurance. The Company will provide such additional insurance coverage as the Executive
shall request or require, provided, however, that the cost of such additional insurance shall be borne by the
Executive.
13. Representations and Warranties.
(a) The Company hereby represents and warrants to the Executive the following:
(i) The Company has the full power, authority and legal right to execute, deliver and perform the
terms of this Agreement; and
(ii) The Company shall operate and maintain the Aircraft in a prudent and professional manner,
in accordance with the flight manual and all recommended manufacturer's operating practices and procedures,
and in full compliance with all applicable federal, state or local rules and regulations, and the provisions of the
Company's insurance policy.
(b) The Executive hereby represents and warrants that:
terms of this Agreement;
(i)
He has the full power, authority and legal right to execute, deliver and perform the
(ii) He will use the Aircraft only for and on account of his own business or personal use only,
including the transportation of his guests (regardless of whether the Executive accompanies any such guest on
the Aircraft), and will not use the Aircraft for the purpose of providing transportation of passengers or cargo in
air commerce for compensation or hire;
(iii) He will refrain from incurring any mechanics or other lien in connection with inspection,
preventative maintenance, maintenance or storage of the Aircraft, whether permissible or impermissible under
this Agreement, nor shall there be any attempt by Executive to convey, mortgage, assign, lease or any way
alienate the Aircraft or create any kind of lien or security interest involving the Aircraft or do anything to take or
fail to take any action that might mature into such a lien or security interest attaching to the Aircraft; and
(iv) During the Term of this Agreement, he will, and will cause any guests to, abide by all such
laws, governmental and airport orders, rules and regulations, as shall from time to time be in effect relating in
any way to the operation and use of the Aircraft by a time sharing lessee.
14. Risk of Loss. The Company assumes and shall bear the entire risk of loss, theft, confiscation,
damage to, or destruction of the Aircraft. The Company shall release, indemnify, defend and hold harmless the
Executive and his heirs, executors and personal representatives from and against any and all losses, liabilities,
claims, judgments, damages, fines, penalties, deficiencies and expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred or suffered by the Executive on account of a claim or action
made or instituted by a third person arising out of or resulting from operations of the Aircraft hereunder and/or
any services provided by the Company to the Executive hereunder, except to the extent attributable to the gross
negligence or willful misconduct of the Executive or his guests on the Aircraft.
15. No Warranties or Representations as to Certain Matters. Neither the Company (nor its affiliates)
makes, has made or shall be deemed to make or have made any warranty or representation, either express or
implied, written or oral, with respect to any Aircraft to be used hereunder or any engine or component thereof
including, without limitation, any warranty as to design, compliance with specifications, quality of materials or
workmanship, merchantability, fitness for any purpose, use or operation, airworthiness, safety, patent, trademark
or copyright infringement or title.
16. Copy of the Agreement in the Aircraft. A copy of this Agreement shall be carried in the Aircraft and
available for review at the request of the Federal Aviation Administration on all flights conducted pursuant to
this Agreement.
17. No Assignment. Neither this Agreement nor any Party's interest herein shall be assignable to any
other party whatsoever. This Agreement shall inure to the benefit of and be binding upon the Parties hereto, and
their respective heirs, representatives and successors.
18. Entire Agreement. This Agreement constitutes the entire agreement between the Parties pertaining
to the subject matter of this Agreement and supersedes any prior or contemporaneous agreements between the
Parties with respect to the subject matter of this Agreement. There are no
representations, warranties, covenants, promises or undertakings, other than those expressly set forth or referred
to herein.
19. Further Acts. The Company and the Executive shall, from time to time, perform such other and
further acts and execute such other and further instruments as may be required by law or may be reasonably
necessary (i) to carry out the intent and purpose of this Agreement, and (ii) to establish, maintain and protect the
respective rights and remedies of the other Party.
20. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws
of the State of Colorado.
21. Amendments. This Agreement may not be changed, altered, modified or amended, except in writing
signed by all Parties to this Agreement. This Agreement shall be binding upon the Parties hereto and their
respective successors and permitted assigns.
22. Counterparts. This Agreement may be executed in one or more counterparts, and by the different
Parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
23. Waiver. No purported waiver by any Party of any default by any other party of any term or
provision contained herein shall be deemed to be a waiver of such term or provision unless the waiver is in
writing and signed by the waiving Party. No such waiver shall in any event be deemed a waiver of any
subsequent default under the same or any other term or provision contained herein.
24. Jointly Prepared. This Agreement is to be deemed to have been prepared jointly by the Parties
hereto, and any uncertainty or ambiguity existing herein, if any, shall not be interpreted against any Party, but
shall be interpreted according to the application of rules of interpretation for arm'slength agreements.
25. No Third Party Rights. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person other than the Parties hereto and their successors or assigns, any rights or
remedies under or by reason of this Agreement.
26. No Joint Venture. Nothing contained in this Agreement shall be deemed or construed by the Parties
hereto or by any third person to create the relationship of principal and agent or of partnership or of joint
venture.
27. Survival. All representations, warranties, covenants and agreements of the Parties contained in this
Agreement, or in any instrument, certificate, exhibit, schedule or other writing provided for in it, shall survive
the Term of this Agreement.
28. TruthinLeasing Compliance. The Company, on behalf of the Executive, shall (i) deliver a copy of
this Agreement to the Federal Aviation Administration, Aircraft Registration Branch, Attn: Technical Section, P.
O. Box 25724, Oklahoma City, Oklahoma 73125 within 24 hours of its execution, (ii) notify the appropriate
Flight Standards District Office at least 48 hours prior to the first flight under this Agreement of the registration
number of the Aircraft, the location of the airport of departure and the departure time for such flight, and (iii)
carry a copy of this Agreement onboard the Aircraft at all times when the Aircraft is being operated under this
Agreement, as specified in Section 16 of this Agreement.
29.
TRUTHINLEASING STATEMENT PURSUANT TO SECTION 91.23 OF THE FEDERAL
AVIATION REGULATIONS.
THE COMPANY CERTIFIES THAT THE AIRCRAFT PRESENTLY COMPLIES WITH
APPLICABLE FAA MAINTENANCE AND INSPECTION REQUIREMENTS FOR OPERATION TO BE
CONDUCTED UNDER THIS AGREEMENT AND THAT THE AIRCRAFT HAS BEEN MAINTAINED
AND INSPECTED FOR THE LAST 12 MONTHS AND IN THE FUTURE WILL BE MAINTAINED AND
INSPECTED UNDER PART 91 OF THE FEDERAL AVIATION REGULATIONS FOR OPERATIONS TO BE
CONDUCTED UNDER THIS AGREEMENT.
THE COMPANY CERTIFIES THAT THE COMPANY, AND NOT THE EXECUTIVE, IS
RESPONSIBLE FOR OPERATION CONTROL OF THE AIRCRAFT UNDER THIS AGREEMENT
DURING THE TERM HEREOF AND THE COMPANY WILL BE THE OPERATOR OF THE AIRCRAFT
AS PROVIDED HEREIN.
AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT
FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT
STANDARDS DISTRICT OFFICE, GENERAL AVIATION DISTRICT OFFICE, OR AIR CARRIER
DISTRICT OFFICE.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.
UDR, Inc.
By:
/s/ Warren L. Troupe
Name: Warren L. Troupe
Title:
Senior Executive Vice President
/s/ Thomas W. Toomey
Name: Thomas W. Toomey
(Back To Top)
Section 6: EX10.17 (EXHIBIT 10.17)
AIRCRAFT TIME SHARING AGREEMENT
This Aircraft Time Sharing Agreement (this "Agreement") is made effective as of November 11, 2016
(the "Effective Date") by and between UDR, Inc., a Maryland corporation (the "Company"), and Warren L.
Exhibit 10.17
Troupe (the "Executive"). The Company and Executive are hereinafter sometimes referred to individually as
"Party" and also collectively as the "Parties."
RECITALS
WHEREAS, the Company owns and has the exclusive right to possess, use and operate the Raytheon
Hawker 4000 aircraft bearing manufacturer serial number RC54 and United States FAA Registration No.
N837RE (the "Aircraft"); and
WHEREAS, the Company has entered into an Aircraft Management Agreement, dated as of September
20, 2011 between the Company and Executive Jet Management, Inc. (the "Aircraft Management Agreement"),
for Executive Jet Management, Inc. to provide a fully qualified flight crew acceptable to and approved by the
Company to operate the Aircraft; and
WHEREAS, the Executive is the Senior Executive Vice President of the Company; and
WHEREAS, the Company and the Executive desire to lease the Aircraft and the flight crew from time to
time on a time sharing basis, as defined in Section 91.501(c)(1) of the Federal Aviation Regulations ("FAR").
NOW, THEREFORE, in consideration of the foregoing, and based on the mutual covenants and
conditions set forth herein, the Parties agree as follows:
1. Lease of Aircraft. Pursuant to and in accordance with the provisions of Section 91.501(c)(1) of the
FAR:
(a)
the Company hereby agrees to lease the Aircraft from time to time to the Executive on a time
sharing, noncontinuous and nonexclusive basis and the Executive hereby agrees to lease the Aircraft from time
to time from the Company on a time sharing, noncontinuous and nonexclusive basis, during the Term (as
defined in Section 8) and subject to the terms and conditions herein contained; and
(b) the Company hereby agrees that any guest of the Executive, regardless whether the Executive is
accompanying such guest on a particular flight, and regardless whether such flight is within the scope of, or
incidental to, the business of the Company, shall be deemed to be a guest of the Company for purposes of
Section 91.501(b)(6) of the FAR.
2. Delivery and Redelivery of Aircraft. Upon the request of the Executive, subject to the availability of
the Aircraft as determined by the Company in accordance with Section 3, the Company shall make the Aircraft
available to the Executive at such locations as the Executive may reasonably request. The Executive
acknowledges that the Company currently bases the Aircraft at Centennial Airport (KAPA), Englewood,
Colorado (the "Home Base"). The repositioning, ferry or dead head flights of the Aircraft required in connection
with the Executive's flights of the Aircraft under this Agreement, including delivery and/or redelivery of the
Aircraft to the Home Base or to such other location as determined by the Company's specific schedule of the
Aircraft usage for its intended business or as the Parties may
otherwise agree, shall be deemed to be use of the Aircraft by the Executive and at the Executive's expense
subject to the Rent (as defined in Section 4).
3. Availability, Scheduling and Use of Aircraft Flights. The Executive shall advise the Company of his
request for flight time and use of the Aircraft under this Agreement by giving the Company advance notice by
telephone and/or facsimile and/or electronic mail as far in advance of any given flight as possible, and in any
case, at least two (2) business days in advance of the Executive's planned departure (unless the Company agrees
to a shorter notice in its sole discretion). The Executive's notice shall provide the customary information
required by the Company and its flight crew for each proposed flight, including the following: (i) proposed
departure point, (ii) destination, (iii) date and time of flight, (iv) the number and name of the anticipated
passengers, (v) the nature and extent of luggage and/or cargo to be carried, (vi) the date and time of return flight,
if any, and (vii) any other information concerning the proposed flight that may be pertinent or required by the
Company or the Company's flight crew. The Company, in its sole discretion, shall have final authority over the
scheduling of the Aircraft and in the event of a scheduling conflict, the Company's plans and decisions shall
control.
4. Rent. For each flight, including the repositioning, ferry or dead head flights set forth under Section 2
above, conducted under this Agreement, the Executive shall pay to the Company rent (the "Rent") as may be set
by the Company's Board of Directors from time to time for those flight expenses that may be charged in
accordance with Section 91.501(d) of the FAR.
5. Rent Limitation. In the unlikely event that the valuation of a flight transporting the Executive and/or
his guests on board the Aircraft under this Agreement using the special noncommercial flight valuation rule for
a control employee determined under the base aircraft valuation formula (also known as the Standard Industry
Fare Level formula, or "SIFL"), in accordance with the applicable provisions of federal income tax regulations,
Section 1.6121(g) of the Treasury regulations (the "Treasury Regulations") promulgated under the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), with respect to such flight should exceed the
amount of the Rent chargeable for such flight, then such excess difference shall be imputed as taxable
compensation to the Executive includable in the Executive's gross income in accordance with the applicable
provisions of the Internal Revenue Code and Treasury Regulations promulgated thereunder and correctly treated
and documented for income tax and employment tax and reporting purposes.
6. Federal Excise Tax on Transportation by Air. The Executive agrees and accepts that the Executive
shall be responsible for paying to the Company the federal excise tax under Section 4261 of the Internal
Revenue Code on the Rent paid to the Company in accordance with Section 4.
7. Method of Payment. The Company will pay all expenses related to the operation of the Aircraft when
incurred, and will invoice the Executive for the applicable Rent on the last day of the month in which any flight
or flights for the account of the Executive occur.
8. Term and Termination. The term of this Agreement (the “Term”) shall commence on the date set
forth above and shall continue until terminated by either Party on written notice to the other Party, such
termination to become effective ten (10) days from the date of the notice; provided, however, that this
Agreement may be terminated by the Company on such shorter notice as may be required for the Company to
comply with applicable law, regulations, the requirements of any financial institution with a security or other
interest in the Aircraft, insurance requirements, or in the event the insurance required hereunder is not in full
force and effect. This Agreement shall automatically terminate upon the date that the Executive is no longer
employed by the Company.
9. Operational Control and Crew. With respect to each flight undertaken under this Agreement, the
Company shall have and retain operational control of the Aircraft as provided in the applicable FAR (as defined
in Section 1.1 of the FAR, "operational control" with respect to a flight means the exercise of authority over
initiating, conducting, or terminating a flight); and, for federal tax purposes, the Company shall have and retain
"possession, command and control" of the Aircraft. The Company shall employ, pay for and provide to the
Executive a qualified flight crew for each flight undertaken under this Agreement.
10. Duties and Responsibilities of Crew. In accordance with applicable provisions of the FAR, the
qualified flight crew provided by the Company will exercise all of its duties and responsibilities in regard to the
safety of each flight conducted hereunder. The Executive specifically agrees that the flight crew, in its sole
discretion, may terminate any flight, refuse to commence any flight, or take other action which in the considered
judgment of the pilot in command is necessitated by considerations of safety. The pilot in command shall have
final and complete authority to cancel any flight for any reason or condition which, in his or her judgment,
would compromise the safety of the flight. No such action of the pilot in command shall create or support any
liability for loss, injury, damage or delay to the Executive or any other person. The Executive acknowledges and
agrees that the Company shall not be liable under any circumstances for delay or failure to furnish the Aircraft
and crew pursuant to this Agreement, except in the event of willful misconduct by the Company.
11. Maintenance. The Company shall be solely responsible for securing maintenance, preventive
maintenance and required or otherwise necessary inspections on the Aircraft, and shall take such requirements
into account in scheduling the Aircraft. No period of maintenance, preventative maintenance or inspection shall
be delayed or postponed for the purpose of scheduling the Aircraft, unless said maintenance or inspection can be
safely conducted at a later time in compliance with all applicable laws and regulations, and within the sound
discretion of the pilot in command.
12. Insurance.
(a) Insurance by Company. The Company, at its sole cost, shall maintain in effect during the Term of
this Agreement its present liability insurance covering public liability, property damage, including passenger
legal liability, and the Company's allrisk hull and engine insurance. The Company's insurance shall be primary
and without right of contribution from any other insurance. The Company shall cause the Executive to be an
additional named insured with respect to the liability coverage.
(b) Further Insurance. The Company will provide such additional insurance coverage as the Executive
shall request or require, provided, however, that the cost of such additional insurance shall be borne by the
Executive.
13. Representations and Warranties.
(a) The Company hereby represents and warrants to the Executive the following:
(i) The Company has the full power, authority and legal right to execute, deliver and perform the
terms of this Agreement; and
(ii) The Company shall operate and maintain the Aircraft in a prudent and professional manner,
in accordance with the flight manual and all recommended manufacturer's operating practices and procedures,
and in full compliance with all applicable federal, state or local rules and regulations, and the provisions of the
Company's insurance policy.
(b) The Executive hereby represents and warrants that:
(i)
He has the full power, authority and legal right to execute, deliver and perform the
terms of this Agreement;
(ii) He will use the Aircraft only for and on account of his own business or personal use only,
including the transportation of his guests (regardless of whether the Executive accompanies any such guest on
the Aircraft), and will not use the Aircraft for the purpose of providing transportation of passengers or cargo in
air commerce for compensation or hire;
(iii) He will refrain from incurring any mechanics or other lien in connection with inspection,
preventative maintenance, maintenance or storage of the Aircraft, whether permissible or impermissible under
this Agreement, nor shall there be any attempt by Executive to convey, mortgage, assign, lease or any way
alienate the Aircraft or create any kind of lien or security interest involving the Aircraft or do anything to take or
fail to take any action that might mature into such a lien or security interest attaching to the Aircraft; and
(iv) During the Term of this Agreement, he will, and will cause any guests to, abide by all such
laws, governmental and airport orders, rules and regulations, as shall from time to time be in effect relating in
any way to the operation and use of the Aircraft by a time sharing lessee.
14. Risk of Loss. The Company assumes and shall bear the entire risk of loss, theft, confiscation,
damage to, or destruction of the Aircraft. The Company shall release, indemnify, defend and hold harmless the
Executive and his heirs, executors and personal representatives from and against any and all losses, liabilities,
claims, judgments, damages, fines, penalties, deficiencies and expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred or suffered by the Executive on account of a claim or action
made or instituted by a third person arising out of or resulting from operations of the Aircraft hereunder and/or
any services provided by the Company to the Executive hereunder, except to the extent attributable to the gross
negligence or willful misconduct of the Executive or his guests on the Aircraft.
15. No Warranties or Representations as to Certain Matters. Neither the Company (nor its affiliates)
makes, has made or shall be deemed to make or have made any warranty or representation, either express or
implied, written or oral, with respect to any Aircraft to be used hereunder or any engine or component thereof
including, without limitation, any warranty as to design, compliance with specifications, quality of materials or
workmanship, merchantability, fitness for any purpose, use or operation, airworthiness, safety, patent, trademark
or copyright infringement or title.
16. Copy of the Agreement in the Aircraft. A copy of this Agreement shall be carried in the Aircraft and
available for review at the request of the Federal Aviation Administration on all flights conducted pursuant to
this Agreement.
17. No Assignment. Neither this Agreement nor any Party's interest herein shall be assignable to any
other party whatsoever. This Agreement shall inure to the benefit of and be binding upon the Parties hereto, and
their respective heirs, representatives and successors.
18. Entire Agreement. This Agreement constitutes the entire agreement between the Parties pertaining
to the subject matter of this Agreement and supersedes any prior or contemporaneous agreements between the
Parties with respect to the subject matter of this Agreement. There are no
representations, warranties, covenants, promises or undertakings, other than those expressly set forth or referred
to herein.
19. Further Acts. The Company and the Executive shall, from time to time, perform such other and
further acts and execute such other and further instruments as may be required by law or may be reasonably
necessary (i) to carry out the intent and purpose of this Agreement, and (ii) to establish, maintain and protect the
respective rights and remedies of the other Party.
20. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws
of the State of Colorado.
21. Amendments. This Agreement may not be changed, altered, modified or amended, except in writing
signed by all Parties to this Agreement. This Agreement shall be binding upon the Parties hereto and their
respective successors and permitted assigns.
22. Counterparts. This Agreement may be executed in one or more counterparts, and by the different
Parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
23. Waiver. No purported waiver by any Party of any default by any other party of any term or
provision contained herein shall be deemed to be a waiver of such term or provision unless the waiver is in
writing and signed by the waiving Party. No such waiver shall in any event be deemed a waiver of any
subsequent default under the same or any other term or provision contained herein.
24. Jointly Prepared. This Agreement is to be deemed to have been prepared jointly by the Parties
hereto, and any uncertainty or ambiguity existing herein, if any, shall not be interpreted against any Party, but
shall be interpreted according to the application of rules of interpretation for arm'slength agreements.
25. No Third Party Rights. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person other than the Parties hereto and their successors or assigns, any rights or
remedies under or by reason of this Agreement.
26. No Joint Venture. Nothing contained in this Agreement shall be deemed or construed by the Parties
hereto or by any third person to create the relationship of principal and agent or of partnership or of joint
venture.
27. Survival. All representations, warranties, covenants and agreements of the Parties contained in this
Agreement, or in any instrument, certificate, exhibit, schedule or other writing provided for in it, shall survive
the Term of this Agreement.
28. TruthinLeasing Compliance. The Company, on behalf of the Executive, shall (i) deliver a copy of
this Agreement to the Federal Aviation Administration, Aircraft Registration Branch, Attn: Technical Section, P.
O. Box 25724, Oklahoma City, Oklahoma 73125 within 24 hours of its execution, (ii) notify the appropriate
Flight Standards District Office at least 48 hours prior to the first flight under this Agreement of the registration
number of the Aircraft, the location of the airport of departure and the departure time for such flight, and (iii)
carry a copy of this Agreement onboard the Aircraft at all times when the Aircraft is being operated under this
Agreement, as specified in Section 16 of this Agreement.
29.
TRUTHINLEASING STATEMENT PURSUANT TO SECTION 91.23 OF THE FEDERAL
AVIATION REGULATIONS.
THE COMPANY CERTIFIES THAT THE AIRCRAFT PRESENTLY COMPLIES WITH
APPLICABLE FAA MAINTENANCE AND INSPECTION REQUIREMENTS FOR OPERATION TO BE
CONDUCTED UNDER THIS AGREEMENT AND THAT THE AIRCRAFT HAS BEEN MAINTAINED
AND INSPECTED FOR THE LAST 12 MONTHS AND IN THE FUTURE WILL BE MAINTAINED AND
INSPECTED UNDER PART 91 OF THE FEDERAL AVIATION REGULATIONS FOR OPERATIONS TO BE
CONDUCTED UNDER THIS AGREEMENT.
THE COMPANY CERTIFIES THAT THE COMPANY, AND NOT THE EXECUTIVE, IS
RESPONSIBLE FOR OPERATION CONTROL OF THE AIRCRAFT UNDER THIS AGREEMENT
DURING THE TERM HEREOF AND THE COMPANY WILL BE THE OPERATOR OF THE AIRCRAFT
AS PROVIDED HEREIN.
AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT
FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT
STANDARDS DISTRICT OFFICE, GENERAL AVIATION DISTRICT OFFICE, OR AIR CARRIER
DISTRICT OFFICE.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.
UDR, Inc.
By:
/s/ Thomas W. Toomey
Name: Thomas W. Toomey
Title: Chief Executive Officer and President
/s/ Warren L. Troupe
Name: Warren L. Troupe
(Back To Top)
Section 7: EX10.24 (EXHIBIT 10.24)
FIRST AMENDMENT TO CREDIT AGREEMENT
Exhibit 10.24
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) dated as of January 20, 2017 by
and among UDR, Inc., a Maryland corporation (the “Borrower”), each of the Lenders party hereto and WELLS FARGO
BANK, NATIONAL ASSOCIATION, as Administrative Agent (the “Administrative Agent”).
WHEREAS, the Borrower, the Lenders, the Administrative Agent and certain other parties have entered into that
certain Credit Agreement dated as of October 20, 2015 (as in effect immediately prior to the effectiveness hereof, the
“Credit Agreement”); and
WHEREAS, the Borrower, the Lenders and the Administrative Agent desire to amend certain provisions of the
Credit Agreement on the terms and conditions contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto hereby agree as follows:
Section 1. Specific Amendments to Credit Agreement. Upon the effectiveness of this Amendment, the parties
hereto agree that the Credit Agreement is amended as follows:
(a)
The Credit Agreement is amended by adding the following new definitions to Section 1.1 in
the appropriate alphabetical location:
“BailIn Action” means the exercise of any WriteDown and Conversion Powers by the applicable EEA
Resolution Authority in respect of any liability of an EEA Financial Institution.
“BailIn Legislation” means, with respect to any EEA Member Country implementing Article 55 of
Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing
law for such EEA Member Country from time to time which is described in the EU BailIn Legislation Schedule.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA
Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in
an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any
financial institution established in an EEA Member Country which is a subsidiary of an institution described in
clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland,
Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any person entrusted with
public administrative authority of any EEA Member Country (including any delegee) having responsibility for the
resolution of any EEA Financial Institution.
“EU BailIn Legislation Schedule” means the EU BailIn Legislation Schedule published by the Loan
Market Association (or any successor person), as in effect from time to time.
“WriteDown and Conversion Powers” means, with respect to any EEA Resolution Authority, the
writedown and conversion powers of such EEA Resolution Authority from time to time under the BailIn
Legislation for the applicable EEA Member Country, which writedown and conversion powers are described in
the EU BailIn Legislation Schedule.
(b)
The Credit Agreement is amended by adding “or (iii) become the subject of a BailIn Action”
immediately prior to the proviso of clause (d) of the definition of “Defaulting Lender” in Section 1.1.
(c)
The Credit Agreement is amended by restating the first sentence of Section 2.1(b) in its
entirety to read as follows:
Not later than 7:00 a.m. Pacific time on the proposed date of a borrowing of Revolving Loans that are to be Base
Rate Loans and not later than 7:00 a.m. Pacific time at least 3 Business Days prior to a borrowing of Revolving
Loans that are to be LIBOR Loans, the Borrower shall deliver to the Administrative Agent a Notice of Revolving
Borrowing.
(d)
The Credit Agreement is amended by restating Section 2.1(c) in its entirety to read as follows:
(c) Funding of Revolving Loans. Promptly after receipt of a Notice of Revolving Borrowing under the
immediately preceding subsection (b), the Administrative Agent shall notify each Revolving Lender of the
proposed borrowing. Each Revolving Lender shall deposit an amount equal to the Revolving Loan to be made by
such Lender to the Borrower with the Administrative Agent at the Principal Office, in immediately available
funds not later than (i) in the case of Revolving Loans that are to be Base Rate Loans, 11:00 a.m. Pacific time on
the date of such proposed Revolving Loans and (ii) in the case of Revolving Loans that are to be LIBOR Loans,
9:00 a.m. Pacific time on the date of such proposed Revolving Loans. Subject to fulfillment of all applicable
conditions set forth herein, the Administrative Agent shall make available to the Borrower in the account
specified in the Disbursement Instruction Agreement, the proceeds of such amounts received by the
Administrative Agent (x) in the case of Revolving Loans that are to be Base Rate Loans, not later than 1:00 p.m.
Pacific time on the date of the requested borrowing of such Revolving Loans and (y) in the case of Revolving
Loans that are to be LIBOR Loans, not later than 12:00 noon Pacific time on the date of the requested borrowing
of such Revolving Loans.
(e)
The Credit Agreement is amended by restating the last sentence of Section 3.9(d) in its
entirety to read as follows:
Subject to Section 12.20., no reallocation hereunder shall constitute a waiver or release of any claim of any party
hereunder against a Defaulting Lender arising from that Revolving Lender having become a Defaulting Lender,
including any claim of a Non‑Defaulting Lender as a result of such Non‑Defaulting Lender’s increased exposure
following such reallocation.
(f)
The Credit Agreement is amended by restating the parenthetical in Section 5.2(b) in its
entirety to read as follows:
(excluding in the case of any Credit Event occurring after the Effective Date, the representations and warranties
contained in clause (i) of Section 6.1.(i) and in Section 6.1.(l))
(g)
Article XII:
The Credit Agreement is amended by adding the following new Section 12.20 to the end of
Section 12.20. Acknowledgement and Consent to BailIn of EEA Financial Institutions.
Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement
or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial
Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the
Write‑Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and
acknowledges and agrees to be bound by:
(a) the application of any WriteDown and Conversion Powers by an EEA Resolution Authority
to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA
Financial Institution; and
(b) the effects of any Bailin Action on any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of
ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that
may be issued to it or otherwise conferred on it, and that such shares or other instruments of
ownership will be accepted by it in lieu of any rights with respect to any such liability under this
Amendment or any other Loan Document; or
(iii) the variation of the terms of such liability in connection with the exercise of the
WriteDown and Conversion Powers of any EEA Resolution Authority.
Section 2. Conditions Precedent. The effectiveness of this Amendment is subject to receipt by the Administrative
Agent of each of the following, each in form and substance satisfactory to the Administrative Agent:
(a) A counterpart of this Amendment duly executed by the Borrower, the Guarantor and Lenders constituting
the Requisite Lenders and the Requisite Class Lenders of Revolving Lenders; and
(b) Such other documents, instruments and agreements as the Administrative Agent may reasonably request.
Section 3. Guarantor Reaffirmation. The Guarantor hereby reaffirms its continuing obligations to the
Administrative Agent and the Lenders under the Guaranty and agrees that the transactions contemplated by this
Amendment shall not in any way affect the validity and enforceability of the Guaranty, or reduce, impair or discharge the
obligations of the Guarantor thereunder.
Section 4. Representations. The Borrower represents and warrants to the Administrative Agent and the Lenders
that:
(a) Authorization. The Borrower has the right and power, and has taken all necessary action to authorize it, to
execute and deliver this Amendment and to perform its obligations hereunder and under the Credit Agreement, as
amended by this Amendment, in accordance with their respective terms. This Amendment has been duly executed and
delivered by a duly authorized officer of the Borrower and each of this Amendment and the Credit Agreement, as
amended by this Amendment, is a legal, valid and binding obligation of the Borrower enforceable against the Borrower in
accordance with its respective terms, except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors rights generally and (ii) the availability of equitable remedies may be limited by equitable
principles of general applicability.
(b) Compliance with Laws, etc. The execution and delivery by the Borrower of this Amendment and the
performance by the Borrower of this Amendment and the Credit Agreement, as amended by this Amendment, in
accordance with their respective terms, do not and will not, by the passage of time, the giving of notice or otherwise:
(i) require any Government Approvals or violate any Applicable Laws relating to the Borrower; (ii) conflict with, result
in a breach of or constitute a default under the Borrower’s articles of incorporation or by‑laws or any indenture,
agreement or other instrument to which the Borrower is a party or by which the Borrower or any of its properties may be
bound; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned
or hereafter acquired by the Borrower other than Permitted Liens. The Borrower, each Subsidiary and each other Loan
Party is in compliance with each Governmental Approval applicable to it and in compliance with all other Applicable
Laws (including without limitation, Environmental Laws) relating to the Borrower, a Subsidiary or such
other Loan Party except for noncompliances which, and Governmental Approvals the failure to possess which, would not,
individually or in the aggregate, cause a Default or Event of Default or have a Material Adverse Effect.
(c) No Default. No Default or Event of Default has occurred and is continuing as of the date hereof nor will
exist immediately after giving effect to this Amendment.
(d) No Guarantors. As of the effective date of this Amendment, no Subsidiary other than United Dominion
Realty, L.P. is required to be a Guarantor pursuant to the Credit Agreement.
Section 5. Reaffirmation of Representations by the Borrower. The Borrower hereby repeats and reaffirms all
representations and warranties made by it to the Administrative Agent and the Lenders in the Credit Agreement and the
other Loan Documents to which it is a party on and as of the date hereof with the same force and effect as if such
representations and warranties were set forth in this Amendment in full.
Section 6. Certain References. Each reference to the Credit Agreement in any of the Loan Documents shall be
deemed to be a reference to the Credit Agreement as amended by this Amendment.
Section 7. Obligations. The Borrower confirms that all advances to, and debts, liabilities, obligations, covenants
and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan, whether direct or
indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter
arising and including interest and fees that accrue under the Loan Documents after the commencement by or against any
Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in
such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding, are “Obligations”
under and as defined in the Credit Agreement.
Section 8. Costs and Expenses. The Borrower shall reimburse the Administrative Agent upon demand for all
costs and expenses (including attorneys’ fees) incurred by the Administrative Agent in connection with the preparation,
negotiation and execution of this Amendment and the other agreements and documents executed and delivered in
connection herewith.
Section 9. Benefits. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns.
Section 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.
Section 11. Effect. Except as expressly herein amended, the terms and conditions of the Credit Agreement and
the other Loan Documents remain in full force and effect. The amendments contained herein shall be deemed to have
prospective application only, unless otherwise specifically stated herein. The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any
Lender or the Administrative Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of
the Loan Documents.
Section 12. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall
be deemed to be an original and shall be binding upon all parties, their successors and assigns.
Section 13. Definitions. All capitalized terms not otherwise defined herein are used herein with the respective
definitions given them in the Credit Agreement.
[Signatures on Next Page]
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Credit Agreement to be
executed as of the date first above written.
UDR, Inc., a Maryland corporation
By:
/s/ J. Abram Claude
Name: J. Abram Claude
Title: VP Treasurer
UNTIED DOMINION REALTY, L.P., a Delaware
limited
partnership
By: UDR, INC., a Maryland corporation
By:
/s/ J. Abram Claude
Name: J. Abram Claude
Title: VP Treasurer
[Signatures Continue on Next Page]
[Signature Page to First Amendment to Credit Agreement with UDR, Inc.]
WELLS FARGO BANK, NATIONAL ASSOCIATION, in
its
capacity as Administrative Agent and individually as a
Lender
By:
/s/ Kevin A. Stacker
Name: Kevin A. Stacker
Title: Senior Vice President
[Signatures Continue on Next Page]
[Signature Page to First Amendment to Credit Agreement with UDR, Inc.]
J.P. Morgan Chase Bank, N.A. as a Lender
By:
/s/ Chiara Carter
Name: Chiara Carter
Title: Executive Director
(Back To Top)
Section 8: EX12.1 (EXHIBIT 12.1)
EXHIBIT 12.1
UDR, Inc.
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
(Dollars in thousands)
Earnings:
Income/(loss) from continuing
operations
Add (from continuing operations):
2016
2015
2014
2013
2012
$109,529 $105,482 $ 16,260
$
2,340
$ (46,305)
Interest on indebtedness (a)
123,031
121,875
130,262
125,905
139,069
Portion of rents representative
of the interest factor
Amortization of capitalized
interest
1,923
1,922
2,224
2,163
2,073
4,599
4,112
3,711
3,374
2,883
Total earnings
$239,082 $233,391 $152,457
$133,782
$ 97,720
Fixed charges and preferred stock
dividends (from continuing
operations):
Interest on indebtedness (a)
$123,031 $121,875 $130,262
$125,905
$139,069
Interest capitalized
16,482
16,105
20,249
29,384
26,368
Portion of rents representative
1,923
1,922
2,224
2,163
2,073
of the interest factor
Fixed charges
$141,436 $139,902 $152,735
$157,452
$167,510
Add:
Preferred stock dividends
$
3,717 $
3,722 $
3,724
$
3,724
$
6,010
Premium/(discount) on
preferred stock redemption or
repurchase, net
Combined fixed charges and
preferred stock dividends
—
—
—
—
2,791
$145,153 $143,624 $156,459
$161,176
$176,311
Ratio of earnings to fixed charges
1.69
1.67
— (b)
— (b)
— (b)
Ratio of earnings to combined
fixed charges and preferred stock
dividends
1.65
1.63
— (c)
— (c)
— (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, and 2012 as earnings were inadequate to cover fixed
charges by deficiencies of approximately $0.3 million, $23.7 million, and $69.8 million, respectively.
(c) The ratio was less than 1:1 for the years ended December 31, 2014, 2013, and 2012 as earnings were inadequate to cover
combined fixed charges and preferred stock dividends by deficiencies of approximately $4.0 million, $27.4 million, and $78.6
million, respectively.
(Back To Top)
Section 9: EX12.2 (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:
Year Ended December 31,
2016
2015
2014
2013
2012
$ 46,082 $ 56,940 $ 33,544 $ 32,766 $(13,309)
Interest on indebtedness (a)
30,067
40,321
41,717
36,058
45,234
Portion of rents representative of
the interest factor
1,826
1,868
1,751
1,705
1,665
Amortization of capitalized interest
744
734
725
580
398
Total earnings
$ 78,719 $ 99,863 $ 77,737 $ 71,109 $ 33,988
Fixed charges from continuing
operations:
Interest on indebtedness (a)
$ 30,067 $ 40,321 $ 41,717 $ 36,058 $ 45,234
Interest capitalized
206
182
2,890
5,870
3,679
Portion of rents representative of
the interest factor
1,826
1,868
1,751
1,705
1,665
Fixed charges
$ 32,099 $ 42,371 $ 46,358 $ 43,633 $ 50,578
Ratio of earnings to fixed charges
2.45
2.36
1.68
1.63
— (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 year ended December 31, 2012 as earnings were inadequate to cover fixed charges by
deficiencies of approximately $16.6 million.
(Back To Top)
Section 10: EX21 (EXHIBIT 21)
EXHIBIT 21
The Company has the following subsidiaries. Joint Venture entities are shown in red italics. 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 95.1% of the aggregate partnership interest. Entities marked with
an asterisk are those entities in which United Dominion Realty, L.P. is either a member or a partner. UDR Lighthouse DownREIT L.P.
is also a limited partnership with outside limited partners. The Company owns general and limited partnership interests in UDR
Lighthouse DownREIT L.P. constituting 50.9% of the aggregate partnership interest. Entities marked with a double asterisk are those
entities in which UDR Lighthouse DownREIT L.P. owns an interest. All other entities are wholly owned.
State of Incorporation
Subsidiary or Organization
101 Colorado HighRise, LP Delaware
101 Colorado Master Condominium Association, Inc. Texas
1020 Tower GP LLC Delaware
1020 Tower, LP Delaware
1211 S. Olive REIT GP LLC Delaware
1211 & Olive REIT LP Delaware
1211 S. Olive Street Development, L.P. California
1211 S. Olive GP LLC Delaware
13th And Market Properties LLC Delaware
1745 LLC Delaware
20 Lambourne LLC Delaware
24 Hundred Properties LLC Delaware
2000 Post Owners Association Delaware
345 Harrison LLC Delaware
399 Fremont LLC Delaware
8th & Republican REIT LP Delaware
8th And Republican, LLC Washington
AAC Funding II, Inc. Delaware
AAC Funding III LLC** Delaware
AAC Funding IV LLC* California
AAC Funding IV, Inc. Delaware
AAC Funding Partnership II* Delaware
AAC Seattle I, Inc. Delaware
AAC/FSC Crown Pointe Investors, LLC Washington
AAC/FSC Hilltop Investors, LLC Washington
AAC/FSC Seattle Properties, LLC* Delaware
Acoma HighRise, LP Delaware
Andover House LLC Delaware
Andover Member 1 LLC Delaware
Andover Member 2 LLC Delaware
Apartments on Chestnut Limited Partnership Delaware
Ashton at Dublin Station, LLC Delaware
Ashwood Commons, L.L.C. Washington
Ashwood Commons North LLC Washington
ASR Investments Corporation Maryland
Bella Terra Villas LLC Delaware
Bellevue Plaza Development LLC Delaware
CMP1, LLC Delaware
Cambridge Woods LLC Delaware
Cedar Street HighRise, L.P. Delaware
Circle Towers LLC** Delaware
CityLine Development Phase I LLC Washington
Coastal Monterey Properties, LLC* Delaware
College Park Holding LLC Delaware
Columbia City Apartments REIT LP Delaware
Columbia City Apartments REIT GP LLC Delaware
Columbus Square 775 LLC Delaware
Columbus Square 795 LLC Delaware
Columbus Square 801 LLC Delaware
Columbus Square 805 LLC Delaware
Columbus Square 808 LLC Delaware
ConsolidatedHampton, LLC Maryland
Coronado South Apartments, L.P.* Delaware
DCO 2400 14th Street LLC Delaware
DCO 2919 Wilshire LLC Delaware
DCO 3032 Wilshire LLC Delaware
DCO 3033 Wilshire LLC Delaware
DCO Addison at Brookhaven LP Delaware
DCO Arbors at Lee Vista LLC Delaware
DCO Beach Walk LLC Delaware
DCO Borgata LLC Delaware
DCO Brookhaven Center LP Delaware
DCO Caroline Development LLC Delaware
DCO Clipper Pointe LP Delaware
DCO College Park LLC Delaware
DCO/CWP 2919 Wilshire LLC Delaware
DCO/CWP 3032 Wilshire LLC Delaware
DCO Fiori LLC Delaware
DCO Garden Oaks LP Delaware
DCO Glenwood Apartments LP Delaware
DCO Highlands LLC Delaware
DCO Market LLC Delaware
DCO Mission Bay LP Delaware
DCO Pacific City LLC Delaware
DCO Pine Avenue LP Delaware
DCO Realty, Inc. Delaware
DCO Realty LP LLC Delaware
DCO Savoye LLC Delaware
DCO Savoye 2 LLC Delaware
DCO Springhaven LP Delaware
DCO Talisker LP Delaware
Domain Mountain View LLC Delaware
Dominion Constant Friendship LLC Delaware
Dominion Eden Brook LLC Delaware
Dominion Kings Place LLC Delaware
Domus SPE General Partner, LLC Delaware
Eastern Residential, Inc. Delaware
Easton Partners I, LP Delaware
FMP Member, Inc. Delaware
Fiori LLC Delaware
Foxborough Lodge Limited Partnership Delaware
Garrison Harcourt Square LLC Delaware
Governour’s Square of Columbus Co. Ltd.* Ohio
HPI 2161 Sutter LP Delaware
Hanover Square SPE LLC* Delaware
Harding Park LP LLC Delaware
Hawthorne Apartments LLC Delaware
Heritage Communities LLC** Delaware
Icon Tower, LP Delaware
Inlet Bay at Gateway, LLC Delaware
Inwood Development LLC* Delaware
Jamestown of St. Matthews Limited Partnership* Ohio
Jefferson at Marina del Rey, L.P. Delaware
K/UDR Venture LLC Delaware
Katella Grand GP LLC Delaware
Katella Grand II GP LLC Delaware
Katella Grand II REIT LP Delaware
Katella Grand II REIT GP LLC Delaware
Katella Grand REIT GP LLC Delaware
Katella Grand REIT LP Delaware
Kelvin and Jamboree Properties, LLC Delaware
Kelvin Jamboree LLC Delaware
L.A. Southpark High Rise, LP Delaware
La Jolla Wilshire, LLC Delaware
Lakeside Mill LLC Delaware
Lenox Farms Limited Partnership Delaware
Lightbox LLC Delaware
Lincoln TC II, L.P. Delaware
LJW LLC Delaware
Lodge at Ames Pond Limited Partnership Delaware
Lofts at Charles River Landing, LLC Delaware
LPC Millenia Place Apartments LLC Delaware
MacAlpine Place Apartment Partners, Ltd.* Florida
Management Company Services, Inc. Delaware
MCS Insurance Sub Producer Services LLC Delaware
Ninety Five Wall Street LLC* Delaware
Northbay Properties II, L.P.* California
Olive Way HighRise LP Delaware
Pacific Los Alisos LLC Delaware
Pier 4 LLC Delaware
Platinum Gateway Development Company, LP California
Platinum Vista Apartments, LP California
Polo Park Apartments LLC* Delaware
Portico Properties, LLC Delaware
Rancho Cucamonga Town Square Owners Association California
Savoye LLC Delaware
Savoye 2 LLC Delaware
Strata Properties, LLC Delaware
Tennessee Colonnade LLC* Delaware
THC/UDR Domain College Park LLC Delaware
The Commons of Columbia, Inc. Virginia
The Domain Condominium Association, Inc. Texas
Thomas Circle Properties LLC Delaware
Town Square Commons, LLC District of Columbia
Towson Holdings, LLC Delaware
Towson Promenade, LLC Delaware
Trilon Townhouses, LLC District of Columbia
TSTW LLC Delaware
UDR 10 Hanover LLC* Delaware
UDR 345 Harrison LLC Delaware
UDR 1818 Platinum LLC Delaware
UDR 1200 East West LLC Delaware
UDR Altamira Place LLC Delaware
UDR Arbor Park LLC** Delaware
UDR Arborview Associates LLC Delaware
UDR Aspen Creek, LLC Virginia
UDR Barton Creek LLC** Delaware
UDR California GP, LLC* Delaware
UDR California GP II, LLC Delaware
UDR California Properties, LLC Virginia
UDR Calvert, LLC* Delaware
UDR Calvert’s Walk Associates Limited Partnership Maryland
UDR Calverts Walk GP, LLC Delaware
UDR Carlsbad Apartments, L.P.* Delaware
UDR Carriage Homes, LLC Delaware
UDR Chelsea LLC Delaware
UDR Courts at Dulles LLC** Delaware
UDR Courts at Huntington LLC* Delaware
UDR Crane Brook LLC* Delaware
UDR Delancey at Shirlington LLC** Delaware
UDR Developers, Inc. Virginia
UDR Domain Brewers Hill LLC Delaware
UDR EAS LLC Delaware
UDR Eleven55 Ripley LLC** Delaware
UDR Foxglove Associates L.L.C.* Maryland
UDR Garrison Square LLC Delaware
UDR Harbor Greens, L.P.* Delaware
UDR Holdings, LLC* Virginia
UDR Huntington Vista, L.P.* Delaware
UDR Inwood LLC** Delaware
UDR, Inc. Maryland
UDR/K Venture Member LLC Delaware
UDR Lakeline Villas LLC Delaware
UDR Lakeside Mill, LLC* Virginia
UDR Legacy at Mayland LLC Delaware
UDR Legacy Village LLC** Delaware
UDR Lincoln at Towne Square LLC Delaware
UDR Lincoln at Towne Square II LLC Delaware
UDR Lighthouse DownREIT L.P.* Delaware
UDR Lighthouse EAS LLC** Delaware
UDR MCS EAS LLC Delaware
UDR Marina Pointe LLC Delaware
UDR Maryland Properties, LLC* Virginia
UDR/MetLife G.P. LLC Delaware
UDR/MetLife GP II LLC Delaware
UDR/MetLife Master Limited Partnership Delaware
UDR/MetLife Master Limited Partnership II Delaware
UDR Milehouse LLC Delaware
UDR/ML Venture LLC Delaware
UDR/ML Venture 2 LLC Delaware
UDR Midlands Acquisition, LLC* Delaware
UDR Newport Beach North, L.P.* Delaware
UDR Newport Village LLC** Delaware
UDR Ocean Villa Apartments, L.P.* Delaware
UDR of Tennessee, L.P.* Virginia
UDR Okeeheelee LLC* Delaware
UDR Pinebrook, L.P.* Delaware
UDR Presidential Greens, L.L.C. Delaware
UDR Rancho Cucamonga, L.P. Delaware
UDR Red Stone Ranch LLC Delaware
UDR Ridgewood (II) Garden, LLC* Virginia
UDR Ridge at Blue Hills LLC** Delaware
UDR River Terrace LLC Delaware
UDR Rivergate LLC Delaware
UDR Stone Canyon LLC Delaware
UDR Texas Properties LLC Delaware
UDR Texas Ventures LLC Delaware
UDR The Bradford LLC Delaware
UDR The Cliffs LLC Delaware
UDR The Legend at Park Ten LLC Delaware
UDR The Mandolin LLC Delaware
UDR The Meridian LLC Delaware
UDR Towers By The Bay LLC Delaware
UDR TX Fund LLC Delaware
UDR Villa Venetia Apartments, L.P.* Delaware
UDR Virginia Properties, LLC Virginia
UDR Wellington Place LLC Delaware
UDR Whitmore LLC** Delaware
UDR Windjammer, L.P.* Delaware
UDR WJV Member LLC Delaware
UDR Woodland Apartments II, L.P. Delaware
UDR Woodland GP, LLC Delaware
UDRLP EAS LLC* Delaware
UDRT of Delaware 4 LLC* Delaware
United Dominion Realty, L.P. Delaware
View 14 Investments LLC Delaware
VP West 1 LLC Delaware
VPDEV 1 LLC Delaware
VPDEV 2 LLC Delaware
Washington Vue, LP Delaware
Waterscape Village LLC Delaware
Waterside Towers, L.L.C. Delaware
WCH LLC Delaware
West El Camino Real, LLC Delaware
Western Residential, Inc. Virginia
Wilshire Crescent Heights, LLC Delaware
Windemere at Sycamore Highlands, LLC Delaware
Winterland San Francisco Partners* California
WREP II NonREIT Investments, L.P. Delaware
(Back To Top)
Section 11: EX23.1 (EXHIBIT 23.1)
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 21, 2017, 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 10K)
for the year ended December 31, 2016:
EXHIBIT 23.1
Registration
Statement
Number
Description
333129743
Form S3, 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.
333197710
Form S3, 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.
333167270 Form S3, pertaining to the registration of 3,882,187 shares of Common Stock.
333180553 Form S3, pertaining to the registration of 2,569,606 shares of Common Stock.
333183510 Form S3, pertaining to the registration of 1,802,239 shares of Common Stock.
333212727 Form S3, pertaining to the registration of 16,137,973 shares of Common Stock.
333160180 Form S8, pertaining to the Company’s 1999 LongTerm Incentive Plan.
333201192 Form S8, pertaining to the Company’s 1999 LongTerm Incentive Plan.
33375897
Form S8, pertaining to the Company’s 1999 LongTerm Incentive Plan.
/s/ Ernst & Young LLP
Denver, Colorado
February 21, 2017
(Back To Top)
Section 12: EX23.2 (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 21, 2017, with respect to the consolidated financial statements and schedule of United Dominion
Realty, L.P., included in this Annual Report (Form 10K) for the year ended December 31, 2016:
Registration
Statement
Number
Description
333129743
Form S3, 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.
333197710
Form S3, 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.
333167270 Form S3, pertaining to the registration of 3,882,187 shares of Common Stock
333180553 Form S3, pertaining to the registration of 2,569,606 shares of Common Stock.
333183510 Form S3, pertaining to the registration of 1,802,239 shares of Common Stock.
333212727 Form S3, pertaining to the registration of 16,137,973 shares of Common Stock.
333160180 Form S8, pertaining to the Company’s 1999 LongTerm Incentive Plan.
333201192 Form S8, pertaining to the Company’s 1999 LongTerm Incentive Plan.
33375897
Form S8, pertaining to the Company’s 1999 LongTerm Incentive Plan.
/s/ Ernst & Young LLP
Denver, Colorado
February 21, 2017
(Back To Top)
Section 13: EX23.3 (EXHIBIT 23.3)
Consent of Independent Auditors
EXHIBIT 23.3
We consent to the incorporation by reference in the following Registration Statements of UDR, Inc. and related Prospectuses of
our report dated February 21, 2017, with respect to the combined financial statements of UDR Lighthouse DownREIT L.P.,
included in this Annual Report (Form 10K) for the year ended December 31, 2016:
Registration
Statement
Number
Description
333129743
Form S3, 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.
333197710
Form S3, 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.
333167270 Form S3, pertaining to the registration of 3,882,187 shares of Common Stock
333180553 Form S3, pertaining to the registration of 2,569,606 shares of Common Stock.
333183510 Form S3, pertaining to the registration of 1,802,239 shares of Common Stock.
333212727 Form S3, pertaining to the registration of 16,137,973 shares of Common Stock.
333160180 Form S8, pertaining to the Company’s 1999 LongTerm Incentive Plan.
333201192 Form S8, pertaining to the Company’s 1999 LongTerm Incentive Plan.
33375897
Form S8, pertaining to the Company’s 1999 LongTerm Incentive Plan.
/s/ Ernst & Young LLP
Denver, Colorado
February 21, 2017
(Back To Top)
Section 14: EX31.1 (EXHIBIT 31.1)
I, Thomas W. Toomey, certify that:
1. I have reviewed this Annual Report on Form 10K 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 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a15(f) and 15d15(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 21, 2017
/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President
(Principal Executive Officer)
(Back To Top)
Section 15: EX31.2 (EXHIBIT 31.2)
I, Joseph D. Fisher, certify that:
1. I have reviewed this Annual Report on Form 10K 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 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a15(f) and 15d15(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 21, 2017
/s/ Joseph D. Fisher
Joseph D. Fisher
Chief Financial Officer and Senior Vice
President (Principal Financial Officer)
(Back To Top)
Section 16: EX31.3 (EXHIBIT 31.3)
EXHIBIT 31.3
I, Thomas W. Toomey, certify that:
1. I have reviewed this Annual Report on Form 10K of United Dominion Realty, L.P.;
CERTIFICATION
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 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a15(f) and 15d15(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 21, 2017
/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President
(Principal Executive Officer) of UDR, Inc.,
general partner of United Dominion Realty,
L.P.
(Back To Top)
Section 17: EX31.4 (EXHIBIT 31.4)
EXHIBIT 31.4
I, Joseph D. Fisher, certify that:
1. I have reviewed this Annual Report on Form 10K of United Dominion Realty, L.P.;
CERTIFICATION
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 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a15(f) and 15d15(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 21, 2017
/s/ Joseph D. Fisher
Joseph D. Fisher
Chief Financial Officer and Senior Vice President
(Principal Financial Officer) of UDR, Inc.,
general partner of United Dominion Realty, L.P.
(Back To Top)
Section 18: EX32.1 (EXHIBIT 32.1)
CERTIFICATION
EXHIBIT 32.1
In connection with the periodic report of UDR, Inc. (the “Company”) on Form 10K for the year ended December 31, 2016, 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 21, 2017
/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President
(Principal Executive Officer)
(Back To Top)
Section 19: EX32.2 (EXHIBIT 32.2)
CERTIFICATION
EXHIBIT 32.2
In connection with the periodic report of UDR, Inc. (the “Company”) on Form 10K for the year ended December 31, 2016, as
filed with the Securities and Exchange Commission (the “Report”), I, Joseph D. Fisher, 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 21, 2017
/s/ Joseph D. Fisher
Joseph D. Fisher
Chief Financial Officer and Senior Vice
President (Principal Financial Officer)
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Section 20: EX32.3 (EXHIBIT 32.3)
CERTIFICATION
EXHIBIT 32.3
In connection with the periodic report of United Dominion Realty, L.P. (the “Operating Partnership”) on Form 10K for the year
ended December 31, 2016, 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 21, 2017
/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President
(Principal Executive Officer) of UDR, Inc.,
general partner of United Dominion Realty, L.P.
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Section 21: EX32.4 (EXHIBIT 32.4)
CERTIFICATION
EXHIBIT 32.4
In connection with the periodic report of United Dominion Realty, L.P. (the “Operating Partnership”) on Form 10K for the year
ended December 31, 2016, as filed with the Securities and Exchange Commission (the “Report”), I, Joseph D. Fisher, 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 21, 2017
/s/ Joseph D. Fisher
Joseph D. Fisher
Chief Financial Officer and Senior Vice President
(Principal Financial Officer) of UDR, Inc.,
general partner of United Dominion Realty, L.P.
(Back To Top)
Section 22: EX99.1 (EXHIBIT 99.1)
UDR LIGHTHOUSE DOWNREIT L.P.
Exhibit 99.1
Financial Statements as of December 31, 2016 (audited) and 2015 (unaudited) and
for the year ended December 31, 2016 (audited) and
for the period from October 5, 2015 through December 31, 2015 (unaudited)
and Independent Auditors' Report
1
UDR LIGHTHOUSE DOWNREIT L.P.
INDEX
PAGE
Combined Financial Statements
Combined Balance Sheets as of December 31, 2016 (audited) and 2015 (unaudited)
Combined Statements of Operations for the year ended December 31, 2016 (audited)
and period from October 5, 2015 through December 31, 2015 (unaudited)
Combined Statements of Comprehensive Income/(Loss) for the year ended December
31, 2016 (audited) and period from October 5, 2015 through December 31, 2015
(unaudited)
Combined Statement of Changes in Capital for the year ended December 31, 2016
(audited) and period from October 5, 2015 through December 31, 2015 (unaudited)
Combined Statements of Cash Flows for the year ended December 31, 2016 (audited)
and period from October 5, 2015 through December 31, 2015 (unaudited)
Notes to Combined Financial Statements
4
5
6
7
8
9
2
The Partners
UDR Lighthouse DownREIT L.P.
Report of Independent Auditors
We have audited the accompanying combined financial statements of UDR Lighthouse DownREIT L.P., which comprise the
combined balance sheet as of December 31, 2016, and the related combined statements of operations, comprehensive income/(loss),
changes in capital, and cash flows for the year then ended, and the related notes to the combined financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S.
generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to
the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in
accordance with auditing standards generally accepted in the 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement
of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial
position of UDR Lighthouse DownREIT L.P. at December 31, 2016, and the combined results of its operations and its cash flows for
the year then ended in conformity with U.S. generally accepted accounting principles.
Report on summarized comparative information
We have not audited, reviewed or compiled the summarized combined comparative information presented herein as of
December 31, 2015 or for the period from October 5, 2015 to December 31, 2015, and, accordingly, we express no opinion on it.
/s/ Ernst & Young LLP
Denver, Colorado
February 21, 2017
3
UDR LIGHTHOUSE DOWNREIT L.P.
COMBINED BALANCE SHEETS
(In thousands, except for unit data)
ASSETS
Real estate owned:
Real estate held for investment
Less: accumulated depreciation
Total real estate owned, net of accumulated depreciation
Cash and cash equivalents
Restricted cash
Note receivable from the General Partner
Other assets
Total assets
LIABILITIES AND CAPITAL
Liabilities:
Secured debt, net
Real estate taxes payable
Accrued interest payable
Security deposits and prepaid rent
Distributions payable
Accounts payable, accrued expenses, and other liabilities
December 31,
2016
December 31,
2015
(audited)
(unaudited)
$
1,511,627 $
1,475,520
(97,644)
1,413,983
66
334
126,500
4,509
(18,276)
1,457,244
89
518
126,500
36,771
1,545,392 $
1,621,122
443,607 $
524,052
6,832
1,443
3,565
9,548
6,183
7,295
1,554
3,903
8,982
3,814
$
$
Total liabilities
471,178
549,600
Commitments and contingencies (Note 9)
Capital:
Limited partners:
32,367,380 DownREIT Units outstanding at December
31, 2016 and December 31, 2015
Accumulated other comprehensive income/(loss), net
Total partners’ capital
Advances (to)/from the General Partner
Total capital
Total liabilities and capital
1,022,890
1,106,864
(46)
1,022,844
51,370
1,074,214
$
1,545,392 $
(49)
1,106,815
(35,293)
1,071,522
1,621,122
See accompanying notes to the combined financial statements.
4
UDR LIGHTHOUSE DOWNREIT L.P.
COMBINED 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
Casualtyrelated charges/(recoveries), net
Total operating expenses
Period From
Year Ended
October 5, 2015 to
December 31,
2016
(audited)
December 31,
2015
(unaudited)
$
130,121 $
29,933
24,849
18,603
3,578
195
111,453
7,503
271
166,452
5,640
3,943
823
62
28,934
3,750
84
43,236
Operating income/(loss)
(36,331)
(13,303)
Interest expense
Interest income on note receivable from the General Partner
Net income/(loss) attributable to DownREIT unitholders
Net income/(loss) per weighted average DownREIT Unit
basic and diluted:
(14,208)
4,743
(45,796) $
(3,632)
1,131
(15,804)
(1.41) $
(0.49)
$
$
Weighted average DownREIT Units outstanding basic and
diluted
32,367
32,367
See accompanying notes to the combined financial statements.
5
UDR LIGHTHOUSE DOWNREIT L.P.
COMBINED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(In thousands)
Period From
Year Ended
October 5, 2015 to
December 31, 2016
December 31, 2015
(audited)
(unaudited)
Net income/(loss) attributable to DownREIT unitholders
$
(45,796) $
(15,804)
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)
(2)
5
3
(52)
3
(49)
Comprehensive income/(loss) attributable to DownREIT unitholders
$
(45,793) $
(15,853)
6
UDR LIGHTHOUSE DOWNREIT L.P.
COMBINED STATEMENTS OF CHANGES IN CAPITAL
(In thousands)
Limited
Partners
UDR, Inc.
Limited
Partner
Accumulated
Other
Comprehensive
Income/(Loss), net
Total
Partners'
Capital
Advances
(to)/from the
General
Partner
Total
$
— $
— $
— $
— $
— $
—
Beginning balance at October
5, 2015
Units issued in exchange for
Real Estate
Net income/(loss)
Distributions
Adjustment to reflect limited
partners’ capital at redemption
value
Unrealized gain on derivative
financial investments
Net change in advances
(to)/from the General Partner
Balance at December 31, 2015
Net income/(loss)
(8,939)
Distributions
DownREIT Unit redemptions
for common shares of UDR
Adjustment to reflect limited
partners’ capital at redemption
value
Unrealized gain on derivative
financial investments
Net change in advances
(to)/from the General Partner
Balance at December 31, 2016 $ 579,389 $
(17,136)
—
—
564,514
4,514
(4,768)
567,713
(20,318)
(4,791)
42,044
(42,044)
—
—
—
606,304
18,081
(18,921)
—
500,560
(63,877)
(19,257)
8,939
17,136
—
—
443,501 $
—
—
—
—
(49)
—
(49)
—
—
—
—
3
—
(46) $
1,132,227
(15,804)
(9,559)
—
(49)
—
1,106,815
(45,796)
(38,178)
—
—
3
—
1,022,844 $
—
—
—
—
—
1,132,227
(15,804)
(9,559)
—
(49)
(35,293)
(35,293)
—
—
(35,293)
1,071,522
(45,796)
(38,178)
—
—
—
—
—
3
86,663
86,663
51,370 $ 1,074,214
See accompanying notes to the combined financial statements.
7
UDR LIGHTHOUSE DOWNREIT L.P.
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
Period From
Year Ended
October 5, 2015 to
December 31,
2016
(audited)
December 31,
2015
(unaudited)
Operating Activities
Net income/(loss) attributable to DownREIT unitholders
$
(45,796) $
(15,804)
Adjustments to reconcile net income/(loss) to net cash
provided by/(used in) operating activities:
Depreciation and amortization
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
Capital expenditures and other major improvements — real
estate assets, net of escrow reimbursement
Issuance of note receivable from the General Partner
Net cash provided by/(used in) investing activities
Financing Activities
Advances (to)/from the 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
$
111,453
(5,578)
(475)
1,549
61,153
(35,190)
—
(35,190)
67,972
50,000
(124,998)
(18,921)
(39)
(25,986)
(23)
89
66 $
28,934
(2,232)
(1,709)
4,467
13,656
(2,927)
(126,500)
(129,427)
(5,414)
127,600
(796)
(4,768)
(762)
115,860
89
—
89
Supplemental Information:
Interest paid during the period, net of amounts capitalized
$
19,480 $
4,694
Noncash transactions:
Contribution of real estate in exchange for DownREIT
Units
Secured debt assumed in the contribution of real estate in
exchange for DownREIT Units
Fair value adjustment of secured debt assumed in the
contribution of real estate in exchange for DownREIT
Units
Reallocation of credit facilities debt from the General
Partner
Development costs and capital expenditures incurred but
—
—
—
—
1,535
1,132,227
366,069
16,912
16,798
504
not yet paid
Dividends declared but not yet paid
9,548
8,982
See accompanying notes to the combined financial statements.
8
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2016
1. CONSOLIDATION AND BASIS OF PRESENTATION
Basis of Presentation
UDR Lighthouse DownREIT L.P. (the “DownREIT Partnership," "we" or "our"), a Delaware limited partnership, was formed
on October 5, 2015 ("inception") to own, acquire, renovate, redevelop, manage and dispose of multifamily apartment communities.
The DownREIT Partnership is a subsidiary of UDR, Inc. (“UDR” or the “General Partner”), a selfadministered real estate investment
trust, or REIT. At December 31, 2016, the DownREIT Partnership’s apartment portfolio consisted of 13 communities located
in four markets consisting of 6,261 apartment homes.
Interests in the DownREIT Partnership are represented by units of limited partnership interest (“DownREIT Units”). The
DownREIT Partnership’s net income (or individual items thereof) is allocated to the partners in accordance with the terms of the
Agreement of Limited Partnership of UDR Lighthouse DownREIT L.P. (the “DownREIT Partnership Agreement”), which is generally
first based on their respective distributions made during the year and secondly, 99% to UDR and 1% to the outside partners.
Distributions are made in accordance with the terms of the DownREIT Partnership Agreement first 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” and secondly, 99% to UDR and 1% to the outside partners.
UDR is the sole general partner and a limited partner of the DownREIT Partnership. As the sole general partner of the
DownREIT Partnership, UDR has full, complete and exclusive discretion to manage and control the business of the DownREIT
Partnership and to make all decisions affecting the business and assets of the DownREIT Partnership, subject to certain limitations.
United Dominion Realty, L.P., a Delaware limited partnership (the “Operating Partnership”), a subsidiary of UDR, is also a limited
partner in the DownREIT Partnership. UDR and the Operating Partnership received their limited partnership interests in exchange for
their contribution of the properties to the DownREIT Partnership. As of December 31, 2016, UDR and the Operating Partnership
owned approximately 9.3% and 41.6%, respectively, of the DownREIT Units.
The Operating Partnership accounts for its ownership interest in the DownREIT Partnership as an equity method investment.
As of December 31, 2016, there were 32,367,380 DownREIT Units outstanding, of which 16,485,014 or 50.9% were owned
by UDR and affiliated entities, of which 13,470,651 or 41.6% were held by the Operating Partnership, and 15,882,366 or 49.1% were
owned by nonaffiliated limited partners. See Note 8, Capital Structure.
The DownREIT Partnership evaluated subsequent events through the date its financial statements were issued. No
recognized or nonrecognized subsequent events were noted.
2. SIGNIFICANT ACCOUNT POLICIES
Recent Accounting Pronouncements
In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017
01, Business Combinations (Topic 805), Clarifying the Definition of a Business. The ASU changes the definition of a business to
assist entities with evaluating whether a set of transfered assets is a business. As a result, the accounting for acquisitions of real estate
could be impacted. The updated standard will be effective for the DownREIT Partnership on January 1, 2018; early adoption is
permitted. The ASU will be applied prospectively to any transactions occurring within the period of adoption. The DownREIT
Partnership expects that the updated standard will result in fewer acquisitions of real estate meeting the definition of a business and
fewer acquisitionrelated costs being expensed.
In November 2016, the FASB issued ASU 201618, Statement of Cash Flows (Topic 230), Restricted Cash. The ASU
addresses the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. The updated standard will
be effective for the DownREIT Partnership on January 1, 2018 and must be applied retrospectively to all periods presented; early
adoption is permitted. The DownREIT Partnership does not expect the updated standard to have a material impact on the combined
financial statements and related disclosures.
In August 2016, the FASB issued ASU 201615, Statement of Cash Flows (Topic 230), Classification of Certain Cash
Receipts and Cash Payments. The ASU addresses specific cash flow items with the objective of reducing existing diversity in
9
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
practice, including the treatment of distributions received from equity method investees. The updated standard will be effective for
the DownREIT Partnership on January 1, 2018 and must be applied retrospectively to all periods presented; early adoption is
permitted. The DownREIT Partnership elected to early adopt ASU 201615 in 2016. The adoption did not have an impact on the
DownREIT Partnership’s consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU 201613, Financial InstrumentsCredit Losses (Topic 326), Measurement of Credit
Losses on Financial Instruments. The standard requires entities to estimate a lifetime expected credit loss for most financial assets,
including trade and other receivables, heldtomaturity debt securities, loans and other financial instruments, and to present the net
amount of the financial instrument expected to be collected. The updated standard will be effective for the DownREIT Partnership on
January 1, 2020; early adoption is permitted on January 1, 2019. The DownREIT Partnership is currently evaluating the effect that
the updated standard will have on the combined financial statements and related disclosures.
In February 2016, the FASB issued ASU No. 201602, Leases. The standard amends the existing lease accounting guidance
and requires lessees to recognize a lease liability and a rightofuse asset for all leases (except for shortterm leases that have a
duration of one year or less) on their balance sheets. Lessees will continue to recognize lease expense in a manner similar to current
accounting. For lessors, accounting for leases under the new guidance is substantially the same as in prior periods, but eliminates
current real estatespecific provisions and changes the treatment of initial direct costs. Entities are required to use a modified
retrospective approach for leases that exist or are entered into after the beginning of the earliest comparable period presented, with an
option to elect certain transition relief. Full retrospective application is prohibited. The standard will be effective for the DownREIT
Partnership on January 1, 2019, with early adoption permitted. The DownREIT Partnership is currently evaluating the effect that the
updated standard will have on our combined financial statements and related disclosures.
In May 2014, the FASB issued ASU No. 201409, 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 will replace most existing
revenue recognition guidance in U.S. GAAP when it becomes effective, including industryspecific revenue guidance. The standard
specifically excludes lease contracts. The ASU allows for the use of either the full or modified retrospective transition method and
will be effective for the DownREIT Partnership on January 1, 2018, at which time the DownREIT Partnership expects to adopt the
updated standard using the modified retrospective approach. However, as the majority of the DownREIT Partnership's revenue is from
rental income related to leases, the DownREIT Partnership does not expect the ASU to have a material impact on the combined
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 DownREIT 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 DownREIT Partnership estimates the intangible value of the lease
agreements by determining the lost revenue associated with a hypothetical leaseup. Depreciation on the building is based on the
expected useful life of the asset and the inplace leases are amortized over their remaining average contractual life. Property
acquisition costs are expensed as incurred.
Quarterly or when changes in circumstances warrant, the DownREIT Partnership will assess our real estate properties for
indicators of impairment. In determining whether the DownREIT Partnership has indicators of impairment in our real estate assets, we
assess whether the longlived 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
10
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
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 longlived 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 disposition 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 disposition is carried at the lower of cost, net of accumulated depreciation, or fair value, less the cost to sell, determined on an
assetbyasset basis. Expenditures for ordinary repair and maintenance costs on held for disposition properties are charged to expense
as incurred. Expenditures for improvements, renovations, and replacements related to held for disposition properties are capitalized at
cost. Depreciation is not recorded on real estate held for disposition.
Depreciation is computed on a straightline 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 Combined
Balance Sheets as Total real estate owned, net of accumulated depreciation. The DownREIT 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 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 redevelopment and capitalized interest, for the year ended December 31, 2016
and period from inception through December 31, 2015 were $0.3 million and less than $0.1 million, respectively. During the year
ended December 31, 2016 and period from inception through December 31, 2015, total interest capitalized was $0.1 million and
$0.0, respectively. As each home in a capital project is completed and becomes available for leaseup, the DownREIT 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 shortterm, 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 DownREIT 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 DownREIT Partnership recognizes
interest income 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 Combined 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, nonmonetary
transactions, including property exchanges, are accounted for at fair value.
11
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
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 DownREIT 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 DownREIT Partnership’s allocation of
the General Partner’s debt are recorded on our Combined 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 DownREIT Partnership that are
deemed effective are reflected in other comprehensive income/(loss) and for nondesignated derivative financial instruments in
earnings. The ineffective component of cash flow hedges, if any, is recorded in earnings.
Income Taxes
The taxable income or loss of the DownREIT 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
DownREIT Partnership are recorded at the entity level. The DownREIT 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 DownREIT Partnership evaluates the accounting and disclosure of tax positions taken or expected to be taken in the
course of preparing the DownREIT Partnership’s tax returns to determine whether the tax positions are “morelikelythannot” of
being sustained by the applicable tax authority. Tax positions not deemed to meet the morelikelythannot threshold would be
recorded as a tax benefit or expense in the current year. Management of the DownREIT 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 DownREIT
Partnership has no examinations in progress and none are expected at this time.
Management of the DownREIT Partnership has reviewed all open tax years (2015) of tax 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.
Allocation of General and Administrative Expenses
The DownREIT Partnership is charged directly for general and administrative expenses it incurs. The DownREIT 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 DownREIT Partnership, based on reasonably anticipated benefits to the parties. (See Note 5, Related Party
Transactions.)
Advertising Costs
All advertising costs are expensed as incurred and reported on the Combined Statements of Operations within the line
item Property operating and maintenance. During the year ended December 31, 2016 and period from inception through December
31, 2015, total advertising expense was $1.3 million and $0.3 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
12
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
from investments by or distributions to partners, is displayed in the accompanying Combined Statements of Comprehensive
Income/(Loss). For the year ended December 31, 2016 and period from inception through December 31, 2015, the DownREIT
Partnership’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 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 Combined Statements of
Operations. See Note 7, 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 DownREIT 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, 2016, the DownREIT
Partnership held greater than 10% of the carrying value of its real estate portfolio in the Metropolitan D.C., Boston, Massachusetts
and Dallas, Texas markets.
3. REAL ESTATE OWNED
Real estate assets owned by the DownREIT Partnership consist of income producing operating properties. At December 31,
2016, the DownREIT Partnership owned and combined 13 operating communities in two states plus the District of Columbia
totaling 6,261 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as
of December 31, 2016 and 2015(dollars in thousands):
Land and land improvements
Depreciable property — held and used:
Buildings, improvements, and furniture, fixtures and
equipment
Real estate owned
Accumulated depreciation
Real estate owned, net
December 31,
2016
December 31,
2015
(audited)
(unaudited)
$
266,867 $
265,698
1,244,760
1,511,627
(97,644)
1,209,822
1,475,520
(18,276)
$
1,413,983 $
1,457,244
At inception, the DownREIT Partnership received the 13 operating communities noted above in exchange for DownREIT
Units with a value of $1.1 billion and the assumption of $366.1 million of secured debt. Nine of the communities were contributed
by the General Partner and the remaining four were contributed by outside limited partnership holders.
13
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
4. DEBT, NET
Our secured debt instruments generally feature either monthly interest and principal or monthly interestonly 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 DownREIT Partnership having effectively
established the fixed interest rate for the underlying debt instrument. Secured debt consists of the following as of December 31,
2016 and 2015 (dollars in thousands):
Principal Outstanding
For the Year Ended December 31, 2016
December 31,
2016
2015
Weighted
Average
Interest Rate
Weighted
Average
Years to
Maturity
Number of
Communities
Encumbered
(audited)
(unaudited)
Fixed Rate Debt
Mortgage notes payable
$
325,991 $
406,358
4.13%
Fannie Mae credit
facilities
Deferred financing costs
Total fixed rate
secured debt, net
Variable Rate Debt
Fannie Mae credit
facilities
6.6
2.8
48,292
(1,236)
48,292
(1,132)
4.78%
373,047
453,518
4.22%
6.0
70,741
70,741
2.32%
3.8
Deferred financing costs
(181)
(207)
Total variable rate
secured debt, net
70,560
70,534
Total secured debt, net
$
443,607 $
524,052
2.32%
2.73%
3.8
5.7
5
2
7
—
—
7
As of December 31, 2016, an aggregate commitment of $119.0 million of the General Partner's secured credit facilities with
Fannie Mae was allocated to the DownREIT Partnership based on the ownership of the assets securing the debt. The entire
commitment was outstanding at December 31, 2016. The portion of the Fannie Mae credit facilities allocated to the DownREIT
Partnership mature at various dates from December 2018 through July 2023 and bear interest at floating and fixed rates.
At December 31, 2016, $48.3 million of the outstanding balance was fixed and had a weighted average interest rate of 4.78% and the
remaining balance of $70.7 million on these facilities had a weighted average variable interest rate of 2.32%. The following
information relates to the credit facilities allocated to the DownREIT Partnership (dollars in thousands):
December 31,
2016
December 31,
2015
(audited)
(unaudited)
Borrowings outstanding
$
119,033
$
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
119,033
119,033
3.2%
3.3%
119,033
119,033
119,033
3.3%
3.1%
Upon the contribution of communities to the DownREIT Partnership, contributed secured debt was recorded at its estimated
fair value and the difference between the fair value and par is amortized to interest expense over the life of the underlying debt
instrument. As of December 31, 2016 and 2015, the DownREIT Partnership had $9.7 million and $15.1 million (unaudited),
respectively, of unamortized fair value adjustments associated with the fixed rate debt instruments on the DownREIT Partnership’s
properties.
Fixed Rate Debt
At December 31, 2016, the General Partner had borrowings against its fixed rate facilities of $355.8 million, of which $48.3
million was allocated to the DownREIT Partnership based on the ownership of the assets securing the debt. As of
14
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
December 31, 2016, the fixed rate Fannie Mae credit facilities allocated to the DownREIT Partnership had a weighted average fixed
interest rate of 4.78%.
Variable Rate Debt
At December 31, 2016, the General Partner had borrowings against its variable rate facilities of $280.9 million, of
which $70.7 million was allocated to the DownREIT Partnership based on the ownership of the assets securing the debt. As
of December 31, 2016, the variable rate borrowings under the Fannie Mae credit facilities allocated to the DownREIT Partnership had
a weighted average floating interest rate of 2.32%.
The aggregate maturities of the DownREIT Partnership’s secured debt due during each of the next ten calendar years
subsequent to December 31, 2016 are as follows (dollars in thousands):
Fixed
Variable
Mortgage
Notes Payable
Secured Credit
Facilities
Secured Credit
Facilities
Total
$
2,949 $
— $
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Thereafter
Subtotal
Noncash (a)
Total
3,096
51,960
80,664
—
—
—
—
127,600
50,000
—
316,269
8,761
21,128
—
27,164
—
—
—
—
—
—
—
— $
41,643
—
—
—
—
29,098
—
—
—
—
2,949
65,867
51,960
107,828
—
—
29,098
—
127,600
50,000
—
435,302
8,305
443,607
48,292
(275)
70,741
(181)
$
325,030 $
48,017 $
70,560 $
(a) Includes the unamortized balance of fair market value adjustments, premiums/discounts, deferred hedge gains, and
deferred financing costs. During the year ended December 31, 2016 and period from inception through December 31,
2015, the DownREIT Partnership amortized less than $0.1 million of deferred financing costs into Interest expense.
5. RELATED PARTY TRANSACTIONS
Advances (To)/From the General Partner
The DownREIT Partnership participates in the General Partner’s central cash management program, wherein all the
DownREIT 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
DownREIT Partnership. As a result of these various transactions between the DownREIT Partnership and the General Partner, the
DownREIT Partnership had net Advances (to)/from the General Partner of $51.4 million and $(35.3) million (unaudited)
at December 31, 2016 and 2015, respectively, which is reflected as increases/(decreases) of capital on the Combined Balance Sheets.
Note Receivable from the General Partner
On October 6, 2015, the DownREIT Partnership entered into a note receivable with the General Partner with an aggregate
commitment of $126.5 million. As of December 31, 2016 and 2015, the note had a balance of $126.5 million. Interest is incurred at a
rate of 3.75% per annum and is paid monthly. The note matures on October 6, 2025. For the year ended December 31, 2016
and period from inception through December 31, 2015, the DownREIT Partnership recognized $4.7 million
15
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
and $1.1 million (unaudited), respectively, of interest income from the note.
Allocation of General and Administrative Expenses
The General Partner shares various general and administrative costs, employees and other overhead costs with the
DownREIT Partnership including legal assistance, acquisitions analysis, marketing, human resources, IT, accounting, rent, supplies
and advertising, and allocates these costs to the DownREIT Partnership first on the basis of direct usage when identifiable, with the
remainder allocated based on the reasonably anticipated benefits to the parties. During the year ended December 31, 2016 and period
from inception through December 31, 2015, the general and administrative expenses allocated to the DownREIT Partnership by UDR
were $5.7 million and $1.7 million (unaudited), respectively, and are included in General and administrative on the Combined
Statements of Operations. In the opinion of management, this method of allocation reflects the level of services received by the
DownREIT Partnership from the General Partner.
During the year ended December 31, 2016 and period from inception through December 31, 2015, the DownREIT
Partnership reimbursed the General Partner $5.4 million and $1.5 million (unaudited), respectively, for shared services related to
corporate level property management costs incurred by the General Partner. These shared cost reimbursements and related party
management fees are initially recorded within the line item General and administrative on the Combined Statements of Operations,
and a portion related to management costs is reclassified to Property management on the Combined Statements of Operations. (See
further discussion below.)
Shared Services/Management Fee
At inception, the DownREIT Partnership selfmanaged its own properties and entered into an InterCompany Employee and
Cost Sharing Agreement with the General Partner. This agreement provides for reimbursements to the General Partner for the
DownREIT Partnership’s allocable share of costs incurred by the General Partner for (a) Shared Services of corporate level property
management employees and related support functions and costs, and (b) general and administrative costs. As discussed above, the
reimbursement for shared services is classified in Property management on the Combined Statements of Operations.
6. 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 threelevel 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.
16
UDR LIGHTHOUSE DOWNREIT L.P.
COMBINED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
The estimated fair values of the DownREIT Partnership’s financial instruments either recorded or disclosed on a recurring
basis as of December 31, 2016 and 2015 are summarized as follows (dollars in thousands):
Fair Value at December 31, 2016, Using
(audited)
Total Carrying
Amount in
Statement of
Financial
Position at
December 31,
2016
Fair Value
Estimate at
December 31,
2016
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
$
$
— $
— $
— $
— $
— $
— $
— $
— $
—
—
Secured debt instruments
fixed rate: (b)
Mortgage notes
payable
Fannie Mae credit
facilities
Secured debt instruments
variable rate: (b)
Fannie Mae credit
facilities
$
325,991 $
310,553 $
— $
— $
310,553
48,292
49,080
—
—
49,080
Total liabilities
$
445,024 $
430,374 $
70,741
70,741
—
— $
—
70,741
— $
430,374
Fair Value at December 31, 2015, Using
(unaudited)
Total Carrying
Amount in
Statement of
Financial
Position at
December 31,
2015
Fair Value
Estimate at
December 31,
2015
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
$
$
Secured debt instruments
2 $
2 $
2 $
2 $
— $
— $
2 $
2 $
—
—
fixed rate: (b)
Mortgage notes payable $
406,358 $
396,290 $
— $
— $
396,290
48,292
50,055
—
—
50,055
Fannie Mae credit
facilities
Secured debt instruments
variable rate: (b)
Fannie Mae credit
facilities
70,741
70,741
—
— $
—
70,741
— $
517,086
Total liabilities
$
525,391 $
517,086 $
(a) See Note 7, Derivatives and Hedging Activity.
(b) See Note 4, Debt, Net.
There were no transfers into or out of each of the levels of the fair value hierarchy.
17
UDR LIGHTHOUSE DOWNREIT L.P.
COMBINED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
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 General Partner, on behalf of the DownREIT 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 DownREIT Partnership has considered the
impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Although the General Partner, on behalf of the DownREIT 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, 2016 and December 31, 2015, the DownREIT 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 DownREIT 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 DownREIT 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, 2016, 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 DownREIT 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 DownREIT 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, loantovalue ratios and collateral quality (Level 3).
The DownREIT Partnership records impairment losses on longlived 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.
7. DERIVATIVES AND HEDGING ACTIVITY
Risk Management Objective of Using Derivatives
The DownREIT 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
18
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
credit risk primarily by managing the amount, sources, and duration of its debt funding and through the use of derivative financial
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 DownREIT 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 fixedrate 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
variablerate 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 has been allocated to the DownREIT Partnership based on the
General Partner’s underlying debt instruments allocated to the DownREIT Partnership. (See Note 4, Debt, Net.)
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 Combined Balance Sheets, and is subsequently reclassified into
earnings in the period that the hedged forecasted transaction affects earnings. During the year ended December 31, 2016 and period
from inception through December 31, 2015, such derivatives were used to hedge the variable cash flows associated with existing
variablerate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the
year ended December 31, 2016, the DownREIT Partnership recorded no gain or loss from ineffectiveness. For the period from
inception through December 31, 2015, the DownREIT Partnership recognized a loss of less than $0.1 million reclassified
from Accumulated other comprehensive income/(loss), net to Interest expense due to the dedesignation of a cash flow hedge and
recorded no other ineffectiveness to earnings.
Amounts reported in Accumulated other comprehensive income/(loss), net related to derivatives will be reclassified to
interest expense as interest payments are made on the General Partner’s variablerate debt that is allocated to the DownREIT
Partnership. Through December 31, 2017, we estimate that less than $0.1 million will be reclassified as an increase to interest
expense.
As of December 31, 2016, the DownREIT Partnership had the following outstanding interest rate derivatives designated as
cash flow hedges of interest rate risk (dollars in thousands):
Product
Interest rate caps
Number of
Instruments Notional
1
$
41,643
Derivatives not designated as hedges are not speculative and are used to manage the DownREIT 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 an adjustment to
earnings of less than $0.1 million for the year ended December 31, 2016 and period from inception through December 31, 2015.
As of December 31, 2016, 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
2
$
34,175
19
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
Tabular Disclosure of Fair Values of Derivative Instruments on the Combined Balance Sheets
The table below presents the fair value of the DownREIT Partnership’s derivative financial instruments as well as their
classification on the Combined Balance Sheets as of December 31, 2016 and 2015 (dollars in thousands):
Asset Derivatives
(included in Other assets)
Liability Derivatives
(Included in Other liabilities)
Fair Value at:
Fair Value at:
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
(audited)
(unaudited)
(audited)
(unaudited)
Derivatives designated as hedging
instruments:
Interest rate products
Derivatives not designated as hedging
instruments:
Interest rate products
$
$
— $
2 $
— $
— $
— $
— $
—
—
Tabular Disclosure of the Effect of Derivative Instruments on the Combined Statements of Operations
The tables below present the effect of the derivative financial instruments on the Combined Statements of Operations for the
year ended December 31, 2016 and period from inception throughDecember 31, 2015 (dollars in thousands):
Unrealized holding
gain/(loss) Recognized in
OCI
(Effective Portion)
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)
Derivatives in
Cash Flow
Hedging
Relationships
Interest rate
products
Period From
October 5,
2015 to
December 31,
2015
(unaudited)
Year Ended
December 31,
2016
(audited)
Period From
October 5,
2015 to
December 31,
2015
(unaudited)
Year Ended
December 31,
2016
(audited)
Period From
October 5,
2015 to
December 31,
2015
(unaudited)
Year Ended
December 31,
2016
(audited)
$
(2) $
(52) $
(5) $
(3) $
— $
(3)
Gain/(Loss) Recognized in
Interest income and other
income/(expense), net
Period From
October 5, 2015
to
December 31,
2015
Year Ended
December 31,
2016
Derivatives Not Designated as Hedging Instruments
(audited)
(unaudited)
Interest rate products
$
— $
(1)
Creditriskrelated Contingent Features
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
20
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
December 31, 2016 and 2015, 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 comply with these
covenant provisions would result in the General Partner being in default on any derivative instrument obligations covered by the
agreement.
The General Partner has certain agreements with some of its derivative counterparties that contain a provision where in the
event of default by the General Partner 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 agreement, 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, 2016, the fair value of derivatives in a net liability position that were allocated to the DownREIT
Partnership, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements
was zero.
The General Partner has elected not to offset derivative positions in the combined financial statements. The table below
presents the effect on the DownREIT Partnership's financial position had the General Partner made the election to offset its derivative
positions as of December 31, 2016 and December 31, 2015:
Offsetting of Derivative Assets
Gross
Amounts
Offset in the
Combined
Balance
Sheets
Net Amounts of
Assets
Presented in the
Combined
Balance Sheets
(a)
Gross
Amounts of
Recognized
Assets
Gross Amounts Not Offset
in the Combined Balance
Sheets
Financial
Instruments
Cash
Collateral
Received
Net
Amount
December 31,
2016
$
December 31,
2015
$
— $
— $
— $
— $
— $
—
2 $
— $
2 $
— $
— $
2
(a) Amounts reconcile to the aggregate fair value of derivative assets in the “Tabular Disclosure of Fair Values of Derivative
Instruments on the Combined Balance Sheets” located in this footnote.
Offsetting of Derivative Liabilities
Gross
Amounts
Offset in the
Combined
Balance
Sheets
Net Amounts of
Liabilities
Presented in the
Combined
Balance Sheets
(a)
Gross Amounts Not Offset
in the Combined Balance
Sheets
Financial
Instruments
Cash
Collateral
Posted
Gross
Amounts of
Recognized
Liabilities
Net
Amount
December 31,
2016
$
December 31,
2015
$
— $
— $
— $
— $
— $
—
— $
— $
— $
— $
— $
—
(a) Amounts reconcile to the aggregate fair value of derivative liabilities in the “Tabular Disclosure of Fair Values of
Derivative Instruments on the Combined Balance Sheets” located in this footnote.
21
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
8. CAPITAL STRUCTURE
General Partner
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 DownREIT Unit or securities of the DownREIT Partnership
without the approval of the limited partners. The General Partner can also approve, with regard to the issuances of DownREIT Units,
the class or one or more series of classes, with designations, preferences, participating, optional or other special rights, powers and
duties including rights, powers and duties senior to limited partnership interests without approval of any limited partners.
UDR, Inc. is the sole general partner of the DownREIT Partnership. Limited partners have no power to remove the general
partner. No general partner DownREIT Units have been issued.
Limited Partnership Units
At December 31, 2016 and 2015, there were 32,367,380 limited partnership units outstanding. UDR
owned 16,485,014 limited partnership units or 50.9% and 16,229,407 limited partnership units or 50.1% at December 31,
2016 and 2015, respectively, of which, 13,470,651 limited partnership units or 41.6% of all units outstanding were held by the
Operating Partnership at December 31, 2016 and 2015. The remaining 15,882,366 or 49.1% and 16,137,973 or 49.9% limited
partnership units outstanding were held by nonaffiliated partners at December 31, 2016 and 2015, respectively.
Subject to the terms of the DownREIT Partnership Agreement, the limited partners have the right to require the DownREIT
Partnership to redeem all or a portion of the DownREIT Units held by the limited partner at a redemption price equal to and in the
form of the Cash Amount (as defined in the DownREIT Partnership Agreement), provided that such DownREIT Units have been
outstanding for at least one year. UDR, as the general partner of the DownREIT Partnership, may, in its sole discretion, purchase the
DownREIT 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 DownREIT Unit), as defined in the DownREIT Partnership Agreement.
The nonaffiliated 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 thenoutstanding DownREIT Units held by limited partners was $579.4 million and $606.3 million as
of December 31, 2016 and 2015, 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 DownREIT Partnership on or after the date of redemption of its DownREIT Units.
The following table shows DownREIT Units outstanding and DownREIT Unit activity as of and for the year ended
December 31, 2016 and period from inception through December 31, 2015:
UDR, Inc.
UDR, L.P.
Limited
Partners
Limited
Partner
Limited
Partner
Total
Inception, October 5, 2015 (unaudited)
16,137,973
2,758,756
13,470,651
32,367,380
Ending balance at December 31,
2015 (unaudited)
16,137,973
2,758,756
13,470,651
32,367,380
DownREIT redemptions for UDR stock
(255,607)
255,607
—
—
Ending balance at December 31, 2016
15,882,366
3,014,363
13,470,651
32,367,380
Allocation of Profits and Losses
The DownREIT Partnership’s net income is allocated to the partners in accordance with the terms of the DownREIT
Partnership Agreement, which is generally first based on their respective distributions made during the year and secondly, 99% to
UDR and 1% to the Outside Partners. Distributions are made in accordance with the terms of the DownREIT Partnership Agreement
first on a per unit basis that is generally equal to the dividend per share on UDR’s common stock, which is publicly
22
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “UDR” and secondly, 99% to UDR and 1% to the
Outside Partners.
9. COMMITMENTS AND CONTINGENCIES
Commitments
Real Estate Under Redevelopment
The following summarizes the DownREIT Partnership’s real estate commitments at December 31, 2016 (dollars in
thousands):
Number of
Properties
Costs Incurred
to Date (a)
Expected Costs
to Complete
(unaudited)
Real estate communities — redevelopment
2
$
8,370 $
9,630
(a) Costs incurred to date include $0.6 million of accrued fixed assets for redevelopment.
Contingencies
Litigation and Legal Matters
The DownREIT Partnership is subject to various legal proceedings and claims arising in the ordinary course of business. The
DownREIT Partnership cannot determine the ultimate liability with respect to such legal proceedings and claims at this time. 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 DownREIT Partnership’s financial condition, results of operations or cash flow.
10. 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 DownREIT 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 DownREIT 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 DownREIT 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 are property management costs, which are the DownREIT Partnership’s allocable share of costs incurred by the
General Partner for shared services of corporate level property management employees and related support functions and costs. The
chief operating decision maker of the General Partner utilizes NOI as the key measure of segment profit or loss.
The DownREIT Partnership’s two reportable segments are SameStore Communities and NonMature Communities/Other:
•
SameStore Communities represent those communities acquired, developed, and stabilized prior to January 1, 2015 and
held as of December 31, 2016. 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.
23
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
No communities held by the DownREIT Partnership as of December 31, 2016 were considered SameStore
Communities as the DownREIT Partnership was formed subsequent to January 1, 2015.
• NonMature Communities/Other represent those communities that do not meet the criteria to be included in SameStore
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 DownREIT Partnership's apartment
communities on a SameStore Community and NonMature 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.
All revenues are from external customers and no single tenant or related group of tenants contributed 10% or more of the
DownREIT Partnership’s total revenues during the year ended December 31, 2016 and period from inception through December 31,
2015.
The following table details rental income and NOI for the DownREIT Partnership’s reportable segments during the year
ended December 31, 2016 and period from inception through December 31, 2015, and reconciles NOI to Net income/(loss)
attributable to DownREIT unitholders in the Combined Statements of Operations (dollars in thousands):
Period From
Year Ended
October 5, 2015 to
December 31,
2016
(audited)
December 31,
2015
(unaudited)
Reportable apartment home segment rental income
NonMature Communities/Other
$
130,121 $
29,933
Reportable apartment home segment NOI
NonMature Communities/Other
Reconciling items:
Property management
Other operating expenses
Real estate depreciation and amortization
General and administrative
Casualtyrelated recoveries/(charges), net
Interest expense
Interest income on note receivable from the General
Partner
Net income/(loss) attributable to DownREIT
unitholders
86,669
20,350
(3,578)
(195)
(111,453)
(7,503)
(271)
(14,208)
(823)
(62)
(28,934)
(3,750)
(84)
(3,632)
4,743
1,131
(45,796) $
(15,804)
$
24
UDR LIGHTHOUSE DOWNREIT L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
The following table details the assets of the DownREIT Partnership’s reportable segments as of December 31,
2016 and 2015 (dollars in thousands):
Reportable apartment home segment assets
NonMature Communities/Other
Accumulated depreciation
Total segment assets net book value
Reconciling items:
Cash and cash equivalents
Restricted cash
Note receivable from the General Partner
Other assets
Total combined assets
December 31,
2016
December 31,
2015
(audited)
(unaudited)
$
1,511,627 $
1,475,520
(97,644)
1,413,983
(18,276)
1,457,244
66
334
126,500
4,509
89
518
126,500
36,771
$
1,545,392 $
1,621,122
Capital expenditures related to the DownREIT Partnership’s NonMature Communities/Other totaled $14.9 million and $2.4
million for the year ended December 31, 2016 and period from inception through December 31, 2015.
11. UNAUDITED SUMMARIZED COMBINED QUARTERLY FINANCIAL DATA
Selected combined quarterly financial data for the year ended December 31, 2016 and period from inception
through December 31, 2015 is summarized in the table below (dollars in thousands, except per share amounts):
2016
Rental income
Net income/(loss) attributable to
DownREIT unitholders
Net income/(loss) attributable to
DownREIT unitholders per weighted
average DownREIT Unit — basic and
diluted (a)
2015 (b)
Rental income
Net income/(loss) attributable to
DownREIT unitholders
Net income/(loss) attributable to
DownREIT unitholders per weighted
average DownREIT Unit — basic and
diluted
Three Months Ended
March 31,
June 30,
September
30,
December
31,
$
31,617 $
32,646 $
33,004 $
32,854
(15,266)
(13,628)
(14,258)
(2,644)
$
$
$
(0.47) $
(0.42) $
(0.44) $
(0.08)
— $
— $
— $
29,933
—
—
—
(15,804)
— $
— $
— $
(0.49)
(a) Quarterly net income/(loss) per weighted average DownREIT Unit amounts may not total to the annual amounts.
(b) Quarterly information is provided only for the three months ended December 31, 2015 as the DownREIT Partnership was
formed in October 2015.
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