UDR, INC.
10-Ks and 10-Qs
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Table of Contents
UNITED
STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form
10-K
þ
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2009
or
o
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period
from to
Commission file number 1-10524
UDR, INC.
(Exact name of registrant as
specified in its charter)
|
Maryland
(State or other jurisdiction of incorporation or organization) |
54-0857512
(I.R.S. Employer Identification No.) |
1745 Shea
Center Drive, Suite 200, Highlands Ranch, Colorado
80129
(Address of principal executive
offices) (zip code)
Registrant’s telephone number, including area code:
(720) 283-6120
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Name of Each Exchange on Which Registered | |
| Common Stock, $0.01 par value | New York Stock Exchange | |
|
6.75% Series G Cumulative Redeemable Preferred Stock
|
New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by checkmark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities
Act. Yes
þ
No
o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
o
No
þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes
o
No
o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of the registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act. (Check one):
|
Large accelerated
filer
þ
|
Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes
o
No
þ
The aggregate market value of the shares of common stock held by
non-affiliates on June 30, 2009 was approximately
$936.4 million. This calculation excludes shares of common
stock held by the registrant’s officers and directors and
each person known by the registrant to beneficially own more
than 5% of the registrant’s outstanding shares, as such
persons may be deemed to be affiliates. This determination of
affiliate status should not be deemed conclusive for any other
purpose. As of February 19, 2010 there were
156,058,930 shares of the registrant’s common stock
outstanding.
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
the registrant’s definitive proxy statement for the Annual
Meeting of Stockholders to be held on May 14, 2010.
TABLE OF
CONTENTS
Table of Contents
| Item 1. | BUSINESS |
General
UDR, Inc. is a self administered real estate investment trust,
or REIT, that owns, acquires, renovates, develops, and manages
apartment communities nationwide. At December 31, 2009, our
consolidated apartment portfolio included 165 communities
located in 23 markets, with a total of 45,913 completed
apartment homes. In addition, we have an ownership interest in
3,992 apartment homes through our unconsolidated joint ventures.
We have 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 qualified 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 2009, we declared total distributions
of $0.845 per common share. Dividends paid in 2009 include a
special dividend of $0.96 per common share that was declared in
the fourth quarter of 2008 and paid to our common stockholders
in the first quarter of 2009. Beginning with the dividend
declared in the second quarter of 2009, we reduced the regularly
declared quarterly dividend on our common stock to $0.18 per
share in order to increase our retained capital.
| Dividends Declared in 2009 | Dividends Paid in 2009 | |||||||
|
First Quarter
|
$ | 0.305 | $ | 1.290 | ||||
|
Second Quarter
|
0.180 | 0.305 | ||||||
|
Third Quarter
|
0.180 | 0.180 | ||||||
|
Fourth Quarter
|
0.180 | 0.180 | ||||||
|
Total
|
$ | 0.845 | $ | 1.955 | ||||
We were formed in 1972 as a Virginia corporation. In June 2003,
we changed our state of incorporation from Virginia to Maryland.
Our corporate offices are located at 1745 Shea Center Drive,
Suite 200, Highlands Ranch, Colorado. As of
February 12, 2010, we had 1,280 full-time employees
and 83 part-time employees.
Our subsidiaries include two operating partnerships, Heritage
Communities L.P., a Delaware limited partnership, and United
Dominion Realty L.P., a Delaware limited partnership, and RE3,
our subsidiary that focuses on development, land entitlement and
short-term hold investments. 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.
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 markets that have the best growth prospects based on favorable job formation and low home affordability, thus enhancing stability and predictability of returns to our stockholders; | |
| • | manage real estate cycles by taking an opportunistic approach to buying, selling, renovating, and building apartment communities; | |
| • | empower site associates to manage our communities efficiently and effectively; | |
| • | measure and reward associates based on specific performance targets; and | |
| • | manage our capital structure to help enhance predictability of earnings and dividends. |
2
Table of Contents
2009
Accomplishments
| • | Repaid $159.6 million of secured debt and $658.2 million of unsecured debt (represents the notional amount of debt repaid and excludes the gain on extinguishment). The $658.2 million of unsecured debt includes the prepayment of our $240 million term loan, $141.9 million for maturing medium-term notes and $276.3 million for the repurchase of unsecured debt. The unsecured debt repurchases includes the tender offer of $37.5 million in aggregate principle amount of our 8.50%, debentures due September 15, 2024 for $41.2 million of cash. | |
| • | We repurchased unsecured debt with a notional amount of $238.9 million for $222.3 million, which is included in the $658.2 million above, resulting in a gain on extinguishment of $9.8 million, net of deferred finance charges. The unsecured debt repurchased by the Company matured in 2009, 2011, 2013, 2024 and 2035. | |
| • | We closed on a $200 million secured credit facility. At December 31, 2009, $106.9 million of the amount drawn under the facility matures October 2019 and carries a fixed rate of 5.38% and $88.9 million of the amount drawn under the facility matures December 2019 and carries a fixed interest rate of 5.16%. The Company has one year from September 11, 2009 to draw on the remaining $4.2 million of capacity. | |
| • | Initiated an “At the Market” equity distribution program pursuant to which we may sell up to 15 million shares of common stock from time to time to or through sales agents, by means of ordinary brokers’ transactions on the New York Stock Exchange at prevailing market prices at the time of sale, or as otherwise agreed with the applicable agent. As of December 31, 2009, the Company sold 4,460,032 shares of common stock under the program at an average price per share of $15.48, for aggregate gross proceeds of approximately $69.1 million. Aggregate net proceeds from such sales, after deducting commissions paid to the sales agents of approximately $1.4 million and related issuance costs of approximately $500,000, were approximately $67.2 million. | |
| • | We established a joint venture with Kuwait Finance House for the investment of up to $450.0 million in multifamily properties located in key, high barrier to entry markets. | |
| • | We acquired a newly constructed community with 289 units located in Dallas, Texas for approximately $28.5 million. | |
| • | We completed development on three wholly-owned communities with 831 apartment homes at a total cost of $119.5 million. |
UDR’s
Strategies and Vision
UDR previously announced its vision to be the innovative
multifamily public real estate investment of choice. We
identified the following strategies to guide decision-making and
growth:
1. Strengthen our portfolio
2. Continually improve operations
3. Maintain access to low-cost capital
Strengthen
our Portfolio
UDR is focused on increasing its presence in markets with
favorable job formation, low single-family home affordability,
and a favorable demand/supply ratio for multifamily housing.
Portfolio decisions consider third-party research, taking into
account job growth, multifamily permitting and housing
affordability.
In 2008, UDR sold a portfolio of properties in 86 communities
for total consideration of approximately $1.7 billion. This
portfolio sale dramatically accelerated our transformation to
focus on markets that have the best growth prospects based on
favorable job formation and low single-family home
affordability. At
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Table of Contents
December 31, 2009, approximately 56.8% of the
Company’s same store net operating income was provided by
our communities located in California, Metropolitan
Washington, D.C., Oregon and Washington State.
Acquisitions
and Dispositions
During 2009, in conjunction with our strategy to strengthen our
portfolio, UDR acquired a new constructed community with 289
apartment homes for approximately $28.5 million. UDR
targets apartment community acquisitions in markets where job
growth expectations are favorable, single-family home
affordability is low, and the demand/supply ratio for
multi-family housing is favorable.
When evaluating potential acquisitions, we consider:
| • | population growth, cost of alternative housing, overall potential for economic growth and the tax and regulatory environment of the community in which the property is located; | |
| • | geographic location, including proximity to jobs, entertainment, transportation, and our existing communities which can deliver significant economies of scale; | |
| • | construction quality, condition and design of the community; | |
| • | current and projected cash flow of the property and the ability to increase cash flow; | |
| • | potential for capital appreciation of the property; | |
| • | ability to increase the value and profitability of the property through upgrades and repositioning; | |
| • | 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 where the economy is not expected to grow substantially; and | |
| • | markets where we do not intend to establish long-term concentration. |
We did not have any dispositions of properties in 2009.
The following table summarizes our apartment community
acquisitions, apartment community dispositions, and our year-end
ownership position for the past five years (
dollars in
thousands
):
| 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
|
Homes acquired
|
289 | 4,558 | 2,671 | 2,763 | 2,561 | |||||||||||||||
|
Homes disposed
|
— | 25,684 | 7,125 | 7,653 | 6,352 | |||||||||||||||
|
Homes owned at December 31
|
45,913 | 44,388 | 65,867 | 70,339 | 74,875 | |||||||||||||||
|
Total real estate owned, at cost
|
$ | 6,315,047 | $ | 5,831,753 | $ | 5,956,481 | $ | 5,820,122 | $ | 5,512,424 | ||||||||||
4
Table of Contents
Development
Activities
The following wholly owned projects were under development as of
December 31, 2009:
|
Number of
|
Completed
|
Cost to
|
Budgeted
|
Estimated
|
Expected
|
|||||||||||||||||||
|
Apartment
|
Apartment
|
Date
|
Cost
|
Cost
|
Completion
|
|||||||||||||||||||
| Homes | Homes | (In thousands) | (In thousands) | Per Home | Date | |||||||||||||||||||
|
Tribute
|
||||||||||||||||||||||||
|
Raleigh, NC
|
359 | — | $ | 42,644 | $ | 46,500 | $ | 129,526 | 1Q10 | |||||||||||||||
|
Belmont
Dallas, TX |
465 | 176 | 62,516 | 62,900 | 135,269 | 2Q10 | ||||||||||||||||||
|
Vitruvian Park
Addison, TX |
392 | — | 59,432 | 66,500 | 169,643 | 3Q10 | ||||||||||||||||||
|
Signal Hill
Woodbridge, VA |
360 | — | 52,323 | 82,700 | 229,722 | 3Q10 | ||||||||||||||||||
| 1,576 | 176 | $ | 216,915 | $ | 258,600 | $ | 164,086 | |||||||||||||||||
Redevelopment
Activities
During 2009, we continued to reposition properties in targeted
markets where we concluded there was an opportunity to add
value. During the year ended December 31, 2009, we incurred
$33.5 million in major renovations, which include major
structural changes
and/or
architectural revisions to existing buildings.
Joint
Venture Activities
The Company has an interest in a consolidated joint venture,
which has the following project under development as of
December 31, 2009 (amounts are based on 100% ownership
interest):
|
Number of
|
Completed
|
Cost to
|
Budgeted
|
Estimated
|
Expected
|
|||||||||||||||||||||||
|
Apartment
|
Apartment
|
Date(a)
|
Cost
|
Cost
|
Completion
|
|||||||||||||||||||||||
| Homes | Homes | (In thousands) | (In thousands) | Per Home | Date | |||||||||||||||||||||||
|
Elements Too
Bellevue, WA |
274 | 259 | $ | 120,057 | $ | 123,000 | $ | 369,343 | 1Q10 | |||||||||||||||||||
| (a) | This represents cost incurred to date and does not include fair value and other-than-temporary decline in value adjustments. |
On October 16, 2009, our partner in the joint venture,
noted in the table above, resigned as managing member and
appointed UDR as managing member. In addition, our partner
relinquished its voting rights and approval rights and its
ability to substantively participate in the decision-making
process of the joint venture. As a result of UDR’s control
of the joint venture, the Company is required to consolidate the
joint venture. On December 30, 2009, UDR entered into an
agreement with our partner to purchase its 49% interest in
Elements Too for $3.2 million (outstanding at
December 31, 2009). Upon the closing of the agreement, the
Company’s equity interest in Elements Too will be 98%.
UDR is a partner with an unaffiliated third party in a joint
venture (“989 Elements”) which owns and operates a
23-story, 166 home high-rise apartment community in the central
business district of Bellevue, Washington. At closing, UDR owned
49% of the joint venture. Our initial investment was
$11.8 million. On December 30, 2009, UDR entered into
an agreement with our partner to purchase its 49% interest in
989 Elements for $7.8 million (outstanding at
December 31, 2009). Concurrently, our partner resigned as
managing member and appointed UDR as managing member. In
addition, our partner relinquished its voting rights and
approval rights and its ability to substantively participate in
the decision-making process of the joint venture. At closing,
the Company’s equity interest in 989 Elements will increase
to 98%.
UDR is a partner with an unaffiliated third party in a joint
venture (“Bellevue Plaza”) which owns an operating
retail site in Bellevue, Washington. The Company initially
planned to develop a 430 home high rise
5
Table of Contents
apartment building with ground floor retail on an existing
operating retail center. However, during the year ended
December 31, 2009, the joint venture decided to continue to
operate the retail property as opposed to developing a high rise
apartment building on the site. On December 30, 2009, UDR
entered into an agreement with our partner to purchase its 49%
interest in Bellevue Plaza for $5.2 million (outstanding at
December 31, 2009). In addition, our partner resigned as
managing member and appointed UDR as managing member. Concurrent
with its resignation, our partner relinquished its voting rights
and approval rights and its ability to substantively participate
in the decision-making process of the joint venture. At closing,
the Company’s equity interest in Bellevue Plaza will
increase from 49% to 98%.
For additional information regarding these consolidated joint
ventures, see Note 4 “Joint Ventures” to the
Consolidated Financial Statements included in this Report.
During 2009, the Company established a joint venture with Kuwait
Finance House for the investment of up to $450.0 million in
multifamily properties located in key, high barrier to entry
markets. The partners will contribute equity of
$180.0 million of which the Company’s maximum equity
contribution will be 30% or $54.0 million when fully
invested. At closing, we owned 30% of the joint venture. Our
investment at December 31, 2009 was $242,000. At
December 31, 2009, the joint venture did not own any
multi-family properties. The joint venture intends to be fully
invested over a two year investment period, and the Company will
receive asset and property management fees from the jont venture.
Continually
Improve Operations
The Company continues to make progress on automating its
business as a way to drive operating efficiencies and to better
meet the changing needs of our residents. Since its launch in
January 2009, UDR residents have been utilizing the resident
internet portal on our website. UDR’s residents have access
to conduct business with us 24 hours a day, 7 days a
week to pay rent on line and to submit service requests. As a
result of transforming operations through technology our
residents get the convenience they want and our operating teams
have become more efficient. These improvements in adopting the
web as a way to conduct business with the Company have also
resulted in a decline in marketing and advertising costs and
improved cash management.
During 2009, UDR continually enhanced
www.udr.com
and individual community websites through deploying an
innovative customized room painter selection program, apartment
floor selector application, and updating the websites source
code to make the webpages load faster. In addition to
improvements to UDR.com, we also added an augmented reality
apartment search application, an iPhone apartment search
application and soon to be released Android, BlackBerry and Palm
Pre apartment search applications. These enhancements have
increased overall web visitor traffic to over 1.9 million
visitors and almost 1.2 million organic search engine
visitors which contributed to a 78%
year-over-year
lead stream increase.
Maintaining
Access to Low-Cost Capital
We seek to maintain a capital structure that allows us to seek,
and not just react to, opportunities available in the
marketplace. We have structured our borrowings to stagger our
debt maturities and to be able to opportunistically access both
secured and unsecured debt.
Special
Dividend
On November 5, 2008, our Board of Directors declared a
dividend on a pre-adjusted basis of $1.29 per share (“the
Special Dividend”). The Special Dividend was paid on
January 29, 2009 to stockholders of record on
December 9, 2008. The dividend represented the
Company’s fourth quarter recurring distribution of $0.33
per share and an additional special distribution of $0.96 per
share due to taxable income arising from our dispositions
occurring during the year. Subject to the Company’s right
to pay the entire Special Dividend in cash, stockholders had the
option to make an election to receive payment in cash or in
shares, however, the aggregate amount of cash payable to
stockholders, other than cash payable in lieu of fractional
shares, would not be less than $44.0 million.
6
Table of Contents
The Special Dividend, totaling $177.1 million, was paid on
137,266,557 shares issued and outstanding on the record
date. Approximately $133.1 million of the Special Dividend
was paid through the issuance of 11,358,042 shares of
common stock, which was determined based on the volume weighted
average closing sales price of our common stock of $11.71 per
share on the NYSE on January 21, 2009 and January 22,
2009. In January 2010, the Financial Accounting Standards
Board’s (“FASB”) issued Accounting Standards
Update
2010-01,
Accounting for Distributions to Shareholders with Components
of Stock and Cash
(“ASU
2010-01”),
which considers distributions that contain components of cash
and stock and allows shareholders to select their preferred form
of distribution as a stock dividend. Such a distribution is
treated as a stock issuance on the date the dividend is paid. At
December 31, 2008, the Company accrued $133.1 million
of distribution payable related to the Special Dividend. ASU
2010-01
is
effective for the Company on December 15, 2009 and should
be applied on a retrospective basis. As a result, the Company
reversed the effect of the issuance of additional shares of
common stock pursuant to the Special Dividend, which was
retroactively reflected in each of the historical periods
presented within the Company’s
Form 8-K
filed with the Securities and Exchange Commission, or the
“SEC” on May 22, 2009, and effectively issued
these shares on January 29, 2009 (the payment date of the
Special Dividend).
Financing
Activities
As part of our plan to strengthen our capital structure, we
utilized proceeds from debt and equity offerings and
refinancings to extend maturities, pay down existing debt, and
acquire apartment communities. The following is a summary of our
major financing activities in 2009:
| • | Repaid $159.6 million of secured debt and $658.2 million of unsecured debt (represents the notional amount of debt repaid and excludes the gain on extinguishment). The $658.2 million of unsecured debt includes the prepayment of our $240 million term loan, $141.9 million for maturing medium-term notes and $276.3 million for the repurchase of unsecured debt. The unsecured debt repurchases includes the tender offer of $37.5 million in aggregate principle amount of our 8.50% debentures due September 15, 2024 for $41.2 million of cash. | |
| • | Repurchased unsecured debt with a notional amount of $238.9 million for $222.3 million, which is included in the $658.2 million above, resulting in a gain on extinguishment of $9.8 million, net of deferred finance charges. The unsecured debt repurchased by the Company matured in 2009, 2011, 2013, 2024 and 2035. | |
| • | Closed on a $200 million secured credit facility. At December 31, 2009, $106.9 million of the amount drawn under the facility matures October 2019 and carries a fixed rate of 5.38% and $88.9 million of the amount drawn under the facility matures December 2019 and carries a fixed interest rate of 5.16%. The Company has one year from September 11, 2009 to draw on the remaining $4.2 million of capacity. | |
| • | Repurchased 997,738 shares of our 6.75% Series G Cumulative Redeemable Preferred Stock for $21.5 million, less than their liquidation value of $24.9 million. | |
| • | Initiated an “At the Market” equity distribution program pursuant to which we may sell up to 15 million shares of common stock from time to time to or through sales agents, by means of ordinary brokers’ transactions on the New York Stock Exchange at prevailing market prices at the time of sale, or as otherwise agreed with the applicable agent. As of December 31, 2009, the Company sold 4,460,032 shares of common stock under the program at an average price per share of $15.48, resulting in gross proceeds of approximately $69.1 million. Aggregate net proceeds from such sales, after deducting commissions paid to the sales agents of approximately $1.4 million and related issuance costs of approximately $500,000, were approximately $67.2 million. |
Markets
and Competitive Conditions
At December 31, 2009, 56.8% of the Company’s same
store net operating income was generated from apartment homes
located in California, Metropolitan Washington D.C., Oregon, and
Washington State. We
7
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believe that this diversification increases investment
opportunity and decreases the risk associated with cyclical
local real estate markets and economies, thereby increasing the
stability and predictability of our earnings.
Competition for new residents is generally intense across all of
our markets. Some competing communities offer features that our
communities do not have. Competing communities can use
concessions or lower rents to obtain temporary competitive
advantages. Also, some competing communities are larger or newer
than our communities. The competitive position of each community
is different depending upon many factors including
sub-market
supply and demand. In addition, other real estate investors
compete with us to acquire existing properties and to develop
new properties. These competitors include insurance companies,
pension and investment funds, public and private real estate
companies, investment companies and other public and private
apartment REITs, some of which may have greater resources, or
lower capital costs, than we do.
We believe that, in general, we are well-positioned to compete
effectively for residents and investments. We believe our
competitive advantages include:
| • | a fully integrated organization with property management, development, redevelopment, acquisition, marketing, sales and financing expertise; | |
| • | scalable operating and support systems, which include automated systems to meet the changing electronic needs of our residents and to effectively focus on our Internet marketing efforts; | |
| • | purchasing power; | |
| • | geographic diversification with a presence in 23 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 emphasize aggressive lease
management, improved expense control, increased resident
retention efforts and the alignment of employee incentive plans
tied to 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 improvement in
spite of the difficult economic environment.
Communities
At December 31, 2009, our apartment portfolio included 165
consolidated communities having a total of 45,913 completed
apartment homes and an additional 1,415 under development. 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 accept the transfer of expenses, such as
water and sewer costs, from the landlord to the resident. In
addition, it potentially reduces recurring capital expenditures
per apartment home, and therefore should result in increased
cash flow in the future.
Same
Community Comparison
We believe that one pertinent qualitative measurement of the
performance of our portfolio is tracking the results of our same
store community’s net operating income (“NOI”),
which is total rental revenue, less rental expenses excluding
property management and other operating expenses. Our same store
population are 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, 2009,
our same store NOI decreased by $6.6 million or 2.2%
compared to the prior year. The decrease in NOI for the 33,166
apartment homes which make up the same store population was
driven by a decrease in revenue rental rates which was partially
offset by increased occupancy and a decrease in expenses.
Revenue growth in 2010 may be impacted by general adverse
conditions affecting the economy, reduced occupancy rates,
increased rental concessions, increased bad debt and other
factors which may adversely impact our ability to increase rents.
8
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Tax
Matters
We have elected to be taxed as a REIT under the Code. To
continue to qualify as a REIT, we 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 taxable REIT subsidiaries 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.
Taxable REIT subsidiaries generally are taxable as regular
corporations and therefore are subject to federal, state and
local income taxes.
Inflation
We believe that the direct effects of inflation on our
operations have been immaterial. While the impact of inflation
primarily impacts our results through wage pressures, utilities
and material costs, substantially all of our leases are for a
term of one year or less, which generally enables us to
compensate for any inflationary effects by increasing rents on
our apartment homes. Although an extreme escalation in energy
and food costs could have a negative impact on our residents and
their ability to absorb rent increases, we do not believe this
has had a material impact on our results for the year ended
December 31, 2009.
Environmental
Matters
Various environmental laws govern certain aspects of the ongoing
operation of our communities. Such environmental laws include
those regulating the existence of asbestos-containing materials
in buildings, management of surfaces with lead-based paint (and
notices to residents about the lead-based paint), use of active
underground petroleum storage tanks, and waste-management
activities. The failure to comply with such requirements could
subject us to a government enforcement action
and/or
claims for damages by a private party.
To date, compliance with federal, state and local environmental
protection regulations has not had a material effect on our
capital expenditures, earnings or competitive position. We have
a property management plan for hazardous materials. As part of
the plan, Phase I environmental site investigations and reports
have been completed for each property we acquire. In addition,
all proposed acquisitions are inspected prior to acquisition.
The inspections are conducted by qualified environmental
consultants, and we review the issued report prior to the
purchase or development of any property. Nevertheless, it is
possible that our environmental assessments will not reveal all
environmental liabilities, or that some material environmental
liabilities exist of which we are unaware. In some cases, we
have abandoned otherwise economically attractive acquisitions
because the costs of removal or control of hazardous materials
have been prohibitive or we have been unwilling to accept the
potential risks involved. We do not believe we will be required
to engage in any large-scale abatement at any of our properties.
We believe that through professional environmental inspections
and testing for asbestos, lead paint and other hazardous
materials, coupled with a relatively conservative posture toward
accepting known environmental risk, we can minimize our exposure
to potential liability associated with environmental hazards.
Federal legislation requires owners and landlords of residential
housing constructed prior to 1978 to disclose to potential
residents or purchasers of the communities any known lead paint
hazards and imposes treble damages for failure to provide such
notification. In addition, lead based paint in any of the
communities may result in lead poisoning in children residing in
that community if chips or particles of such lead based paint
are ingested, and we may be held liable under state laws for any
such injuries caused by ingestion of lead based paint by
children living at the communities.
We are unaware of any environmental hazards at any of our
properties that individually or in the aggregate may have a
material adverse impact on our operations or financial position.
We have not been
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notified by any governmental authority, and we are not otherwise
aware, of any material non-compliance, liability, or claim
relating to environmental liabilities in connection with any of
our properties. We do not believe that the cost of continued
compliance with applicable environmental laws and regulations
will have a material adverse effect on us or our financial
condition or results of operations. Future environmental laws,
regulations, or ordinances, however, may require additional
remediation of existing conditions that are not 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 us and our financial condition.
Insurance
We carry comprehensive general liability coverage on our
communities, with limits of liability customary within the
industry to insure against liability claims and related defense
costs. We are also insured, with limits of liability customary
within the 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.
Executive
Officers of the Company
The following table sets forth information about our executive
officers as of February 15, 2010. The executive officers
listed below serve in their respective capacities at the
discretion of our Board of Directors.
|
Name
|
Age
|
Office
|
Since
|
|||||||
|
Thomas W. Toomey
|
49 | Chief Executive Officer, President and Director | 2001 | |||||||
|
Warren L. Troupe
|
56 | Senior Executive Vice President | 2008 | |||||||
|
W. Mark Wallis
|
59 | Senior Executive Vice President | 2001 | |||||||
|
Richard A Giannotti
|
54 | Executive Vice President — Redevelopment | 1985 | |||||||
|
Matthew T. Akin
|
42 | Senior Vice President — Acquisitions & Dispositions | 1994 | |||||||
|
Mark M. Culwell, Jr.
|
58 | Senior Vice President — Development | 2006 | |||||||
|
Jerry A. Davis
|
47 | Senior Vice President — Property Operations | 2008 | |||||||
|
David L. Messenger
|
39 | Senior Vice President — Chief Financial Officer | 2008 | |||||||
|
Katie Miles-Ley
|
48 | Senior Vice President — Human Resources | 2007 | |||||||
|
Thomas A. Spangler
|
49 | Senior Vice President — Business Development | 1998 | |||||||
|
S. Douglas Walker
|
54 | Senior Vice President — Transactions | 2006 | |||||||
Set forth below is certain biographical information about our
executive officers.
Mr. Toomey spearheads the vision and strategic direction of
the Company and oversees its executive officers. He joined us in
February 2001 as President, Chief Executive Officer and
Director. Prior to joining us, Mr. Toomey was with
Apartment Investment and Management Company (AIMCO), where he
served as Chief Operating Officer for two years and Chief
Financial Officer for four years. During his tenure at AIMCO,
Mr. Toomey was instrumental in the growth of AIMCO from
34,000 apartment homes to 360,000 apartment homes. He has also
served as a Senior Vice President at Lincoln Property Company, a
national real estate development, property management and real
estate consulting company, from 1990 to 1995. He currently
serves as a member of the board of the National Association of
Real Estate Investment Trusts (NAREIT), the National Multi
Housing Council (NMHC), a member of the Real Estate Roundtable,
a member of the Pension Real Estate Association (PREA), an Urban
Land Institute Governor and a trustee of the Oregon State
University Foundation.
Mr. Troupe oversees all financial, treasury, tax and legal
functions of the Company. He joined us in March 2008 as Senior
Executive Vice President. In May 2008, he was appointed the
Company’s Corporate Compliance Officer and in October 2008
he was named the Company’s Corporate Secretary. Prior to
joining us, Mr. Troupe was a partner with
Morrison & Forester LLP from 1997 to 2008, where his
practice focused on all aspects of corporate finance including,
but not limited to, public and private equity offerings,
traditional loan structures, debt placements to subordinated
debt financings, workouts and recapitalizations. While at
Morrison & Forester LLP he represented both public and
private entities in connection with merger and
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acquisition transactions, including tender offers, hostile proxy
contests and negotiated acquisitions. He currently serves as a
member of NMHC and a member of PREA.
Mr. Wallis oversees the areas of acquisitions,
dispositions, asset quality and development. He joined us in
April 2001 as Senior Executive Vice President responsible for
acquisitions, dispositions, development and redevelopment. Prior
to joining us, Mr. Wallis was the President of Golden
Living Communities, a company he established in 1995 to develop
senior housing. From 1980 to 1995, Mr. Wallis was Executive
Vice President of Finance and Administration at Lincoln Property
Company where he handled interim and permanent financing for
office, retail, multi-family and mixed-use developments. His
responsibilities also included the negotiation of acquisitions,
dispositions, and management contracts, and he oversaw the
direction of the national accounting and computer services
divisions. He currently serves as a member of the Board for NMHC
and serves on the Board of Trustees for Harding University.
Mr. Giannotti oversees redevelopment projects and
acquisition efforts and development projects in the mid-Atlantic
region. He joined us in September 1985 as Director of
Development and Construction. He was appointed Assistant Vice
President in 1988, Vice President in 1989, and Senior Vice
President in 1996. In 1998, he was assigned the additional
responsibilities of Director of Development for the Eastern
Region. In 2003, Mr. Giannotti was promoted to Executive
Vice President.
Mr. Akin oversees the Company’s acquisition and
disposition efforts. He joined us in 1996 in connection with the
merger with SouthWest Property Trust, where he had been a
Financial Analyst since 1994.
Mr. Culwell oversees all aspects of in-house development,
joint venture development and pre-sale opportunities. He joined
us in June 2006 as Senior Vice President —
Development. Prior to joining us, Mr. Culwell served as
Regional Vice President of Development for Gables Residential,
where he established a $300 million pipeline of new
development and redevelopment opportunities. Before joining
Gables Residential, Mr. Culwell had over 30 years of
real estate experience, including working for Elsinore Group,
LLC, Lexford Residential Trust, Cornerstone Housing Corporation
and Trammell Crow Residential Company, where his development and
construction responsibilities included site selection and
acquisition, construction oversight, asset management, as well
as obtaining financing for acquisitions and rehabilitations.
Mr. Davis oversees property operations. He originally
joined us in March 1989 as Controller and subsequently moved
into Operations as an Area Director and in 2001, he accepted the
position of Chief Operating Officer of JH Management Co., a
California-based apartment company. He returned to the Company
in March 2002 and in 2008, Mr. Davis was promoted to Senior
Vice President — Property Operations. He began his
career in 1984 as a Staff Accountant for Arthur
Young & Co.
Mr. Messenger oversees the areas of accounting, risk
management, financial planning and analysis, property tax
administration and SEC reporting. He joined us in August 2002 as
Vice President and Controller. In March 2006, Mr. Messenger
was appointed Vice President and Chief Accounting Officer and in
January 2007, while retaining the Chief Accounting Officer
title, he was promoted to Senior Vice President. In June 2008 he
was named Chief Financial Officer.
Ms. Miles-Ley oversees employee relations, organizational
development, succession planning, staffing and recruitment,
compensation, training and development, benefits administration,
HRIS and payroll. She joined us in June 2007 as Senior Vice
President — Human Resources. Prior to joining us,
Ms. Miles-Ley was with Starz Entertainment Group LLC from
2001 to 2007 where she served as Vice President, Human
Resources & Organizational Development.
Ms. Miles-Ley had over twenty years of experience with both
domestic and international work forces.
Mr. Spangler oversees utilities management, procurement and
non-rental revenue programs. He joined us in August 1998 as
Assistant Vice President, Operational Planning and Asset
Management, and was promoted to Vice President, Director of
Operational Planning and Asset Management that same year. He was
promoted to Senior Vice President — Business
Development in February 2003. Prior to joining us,
Mr. Spangler served for nine years as an Asset Manager for
Summit Enterprises, Inc. of Virginia, a private investment
management firm.
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Mr. Walker oversees the Company’s Asset Quality,
Kitchen & Bath and sustainability programs in addition
to all non-residential owned and leased real estate. He joined
us in May 2006 as Senior Vice President —
Transactions. He has authored “Green Building”
articles for industry publications and has been recognized by
the EPA and the Department of Energy for his contributions to
the commercial real estate industry. Prior to joining us,
Mr. Walker served as a consultant to the multi-family
industry.
Available
Information
We file electronically with the Securities and Exchange
Commission our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
and current reports on
Form 8-K,
pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934. You may obtain a free copy of our annual
reports on
Form 10-K,
quarterly reports on
Form 10-Q,
and current reports on
Form 8-K,
and amendments to those reports on the day of filing with the
SEC on our website at
www.udr.com
, or by sending an
e-mail
message to
ir@udr.com.
NYSE
Certification
On May 19, 2009 our Chief Executive Officer submitted to
the New York Stock Exchange the annual certification required by
Section 303A.12(a) of the NYSE Listed Company Manual
regarding our compliance with NYSE corporate governance listing
standards. In addition, the certifications of our Chief
Executive Officer and Chief Financial Officer required under
Section 302 of the Sarbanes-Oxley Act of 2002 are filed as
Exhibits 31.1 and 31.2, respectively, to this Report.
| Item 1A. | RISK FACTORS |
There are many factors that affect our business and our results
of operations, some of which are beyond our control. The
following is a description of important factors that may cause
our actual results of operations in future periods to differ
materially from those currently expected or discussed in
forward-looking statements set forth in this report relating to
our financial results, operations and business prospects. Except
as required by law, we undertake no obligation to update any
such forward-looking statements to reflect events or
circumstances after the date on which it is made.
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. Some of our major expenses, including mortgage payments
and real estate taxes, 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 our
stockholders, which could adversely affect our financial
condition and the market value of our securities. Factors that
may affect our occupancy levels, our rental revenues,
and/or
the
value of our properties include the following, among others:
| • | downturns in the national, regional and local economic conditions, particularly increases in unemployment; | |
| • | declines in mortgage interest rates, making alternative housing more affordable; | |
| • | government or builder incentives which enable first time homebuyers to put little or no money down, making alternative housing options more attractive; | |
| • | local real estate market conditions, including oversupply of, or reduced demand for, apartment homes; | |
| • | declines in the financial condition of our tenants, which may make it more difficult for us to collect rents from some tenants; | |
| • | changes in market rental rates; |
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| • | the timing and costs associated with property improvements, repairs or renovations; | |
| • | declines in household formation; and | |
| • | rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases in operating costs. |
We Are Subject to Certain Risks Associated with Selling
Apartment Communities, Which Could Limit Our Operational and
Financial Flexibility.
We have periodically
disposed 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,
and purchasers may not be willing to pay prices acceptable to
us. 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 materially
adverse effect on our financial condition and the market value
of our securities. We are also subject to the following risks in
connection with sales of our apartment communities:
| • | a significant portion of the proceeds from our overall property sales may be held by intermediaries in order for some sales to qualify as like-kind exchanges under Section 1031 of the 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 flow generated from our property sales; and | |
| • | federal tax laws limit our ability to profit on the sale of communities that we have owned for less than two years, and this limitation may prevent us from selling communities when market conditions are favorable. |
Competition Could Limit Our Ability to Lease Apartment Homes
or Increase or Maintain Rents.
Our apartment
communities compete with numerous housing alternatives in
attracting residents, including other apartment communities,
condominiums and single-family rental homes, as well as owner
occupied single- and multi-family homes. Competitive housing in
a particular area could adversely affect our ability to lease
apartment homes and increase or maintain rents.
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:
| • | we may be unable to obtain financing for acquisitions on favorable terms or at all; | |
| • | even if we enter into an acquisition agreement for an apartment community, we may be unable to complete the acquisition after incurring certain acquisition-related costs; | |
| • | an acquired apartment community may fail to perform as we expected in analyzing our investment, or a significant exposure related to the acquired property may go undetected during our due diligence procedures; | |
| • | 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; 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. |
We do not expect to acquire apartment communities at the rate we
have in prior years, which may limit our growth and have a
material adverse effect on our business and the market value of
our securities. 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
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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 growth.
Development and Construction Risks Could Impact Our
Profitability.
In the past we have selectively
pursued the development and construction of apartment
communities, and we intend to do so in the future as appropriate
opportunities arise. Development activities have been, and in
the future may be, conducted through wholly owned affiliated
companies or through joint ventures with unaffiliated parties.
Our development and construction activities are subject to the
following risks:
| • | we may be unable to obtain construction financing for development activities under favorable terms, including but not limited to interest rates, maturity dates and/or loan to value ratios, or at all which could cause us to delay or even abandon potential developments; | |
| • | we may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, which could result in increased development costs, could delay initial occupancy dates for all or a portion of a development community, and could require us to abandon our activities entirely with respect to a project for which we are unable to obtain permits or authorizations; | |
| • | yields may be less than anticipated as a result of delays in completing projects, costs that exceed budget and/or higher than expected concessions for lease up and lower rents than pro forma; | |
| • | if we are unable to find joint venture partners to help fund the development of a community or otherwise obtain acceptable financing for the developments, our development capacity may be limited; | |
| • | we may abandon development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring such opportunities; | |
| • | we may be unable to complete construction and lease-up of a community on schedule, or incur development or construction costs that exceed our original estimates, and we may be unable to charge rents that would compensate for any increase in such costs; | |
| • | occupancy rates and rents at a newly developed community may fluctuate depending on a number of factors, including market and economic conditions, preventing us from meeting our profitability goals for that community; and | |
| • | when we sell to third parties communities or properties that we developed or renovated, we may be subject to warranty or construction defect claims that are uninsured or exceed the limits of our insurance. |
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.
Some Potential Losses May Not Be Adequately Covered by
Insurance.
We have a comprehensive insurance
program covering our property and operating activities. We
believe the policy specifications and insured limits of these
policies are adequate and appropriate. There are, however,
certain types of extraordinary losses which may not be
adequately covered under our insurance program. In addition, we
will sustain losses due to insurance deductibles, self-insured
retention, uninsured claims or casualties, or losses in excess
of applicable coverage.
If an uninsured loss or a loss in excess of insured limits
occur, we could lose all or a portion of the capital we have
invested in a property, as well as the anticipated future
revenue from the property. In such an event, we might
nevertheless remain obligated for any mortgage debt or other
financial obligations related to the property. Material losses
in excess of insurance proceeds may occur in the future. If one
or more of our significant properties were to experience a
catastrophic loss, it could seriously disrupt our operations,
delay revenue and result in large expenses to repair or rebuild
the property. Such events could adversely affect our cash flow
and ability to make distributions to our stockholders.
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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; | |
| • | lack of familiarity with local governmental and permitting procedures; and | |
| • | inability to achieve budgeted financial results. |
Risk of Inflation/Deflation.
Substantial
inflationary or deflationary pressures could have a negative
effect on rental rates and property operating expenses. Although
inflation has not materially impacted our operations in the
recent past, increased inflation could have a more pronounced
negative impact on our debt interest and general and
administrative expenses, as these costs could increase at a rate
higher than our rental rates.
Potential Liability for Environmental Contamination Could
Result in Substantial Costs.
Under various
federal, state and local environmental laws, as a current or
former owner or operator of real estate, we could be required to
investigate and remediate the effects of contamination of
currently or formerly owned real estate by hazardous or toxic
substances, often regardless of our knowledge of or
responsibility for the contamination and solely by virtue of our
current or former ownership or operation of the real estate. In
addition, we could be held liable to a governmental authority or
to third parties for property damage and for investigation and
clean-up
costs incurred in connection with the contamination. These costs
could be substantial, and in many cases environmental laws
create liens in favor of governmental authorities to secure
their payment. The presence of such substances or a failure to
properly remediate any resulting contamination could materially
and adversely affect our ability to borrow against, sell or rent
an affected property.
Property Ownership Through Joint Ventures May Limit Our
Ability to Act Exclusively in Our Interest.
We
have in the past and may in the future develop and acquire
properties in joint ventures with other persons or entities when
we believe circumstances warrant the use of such structures. If
we use such a structure, we could become engaged in a dispute
with one or more of our joint venture partners that might affect
our ability to operate a jointly-owned property. Moreover, joint
venture partners may have business, economic or other objectives
that are inconsistent with our objectives, including objectives
that relate to the appropriate timing and terms of any sale or
refinancing of a property. In some instances, joint venture
partners may have competing interests in our markets that could
create conflicts of interest.
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 this 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.
Real Estate Tax and Other Laws.
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
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restrictions on discharges or other conditions or (ii) rent
control or rent stabilization laws or other laws regulating
housing, such as the Americans with Disabilities Act and the
Fair Housing Amendments Act of 1988, may result in significant
unanticipated expenditures, which would adversely affect funds
from operations and the ability to make distributions to
stockholders.
Risk of Damage from Catastrophic Weather
Events.
Certain of our communities are located in
the general vicinity of active earthquake faults, mudslides and
fires, and others where there are hurricanes, tornadoes or risks
of other inclement weather. The adverse weather events could
cause damage or losses that may be greater than insured levels.
In the event of a loss in excess of insured limits, we could
lose our capital invested in the affected community, as well as
anticipated future revenue from that community. We would also
continue to be obligated to repay any mortgage indebtedness or
other obligations related to the community. Any such loss could
materially and adversely affect our business and our financial
condition and results of operations.
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.
Any Weaknesses Identified in Our Internal Control Over
Financial Reporting Could Have an Adverse Effect on Our Stock
Price.
Section 404 of the Sarbanes-Oxley Act
of 2002 requires us to evaluate and report on our internal
control over financial reporting. If we identify one or more
material weaknesses in our internal control over financial
reporting, we could lose investor confidence in the accuracy and
completeness of our financial reports, which in turn could have
an adverse effect on our stock price.
Our Success Depends on Our Senior
Management.
Our success depends upon the
retention of our senior management, whose continued service in
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.
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 our distribution requirements to
maintain our status as a REIT for federal income tax purposes,
and the full limits of our line of credit may not be available
to us if our operating performance falls outside the constraints
of our debt covenants. Additionally, we are likely to need to
refinance substantially all of our outstanding debt as it
matures. We may not be able to refinance existing debt, or the
terms of any refinancing may not be as favorable as the terms of
the existing debt, which could create pressures to sell assets
or to issue additional equity when we would otherwise not choose
to do so. In addition, our failure to comply with our debt
covenants could result in a requirement to repay our
indebtedness prior to its maturity, which could have an adverse
effect on our cash flow and increase our financing costs.
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
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distributions to our stockholders will be adversely affected.
The following factors, among others, may affect the net rental
income generated by our apartment communities:
| • | the national and local economies; | |
| • | local real estate market conditions, such as an oversupply of apartment homes; | |
| • | tenants’ perceptions of the safety, convenience, and attractiveness of our communities and the neighborhoods where they are located; | |
| • | our ability to provide adequate management, maintenance and insurance; | |
| • | rental expenses, including real estate taxes and utilities; | |
| • | changes in interest rates and the availability of financing; and | |
| • | changes in tax and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing. |
Expenses associated with our investment in an apartment
community, such as debt service, real estate taxes, insurance
and maintenance costs, are generally not reduced when
circumstances cause a reduction in rental income from that
community. If a community is mortgaged to secure payment of debt
and we are unable to make the mortgage payments, we could
sustain a loss as a result of foreclosure on the community or
the exercise of other remedies by the mortgage holder.
Debt Level May Be Increased.
Our current
debt policy does not contain any limitations on the level of
debt that we may incur, although our ability to incur debt is
limited by covenants in our bank and other credit agreements. We
manage our debt to be in compliance with these debt covenants,
but subject to compliance with these covenants, we may increase
the amount of our debt at any time without a concurrent
improvement in our ability to service the additional debt.
Financing May Not Be Available and Could Be
Dilutive.
Our ability to execute our business
strategy depends on our access to an appropriate blend of debt
financing, including unsecured lines of credit and other forms
of secured and unsecured debt, and equity financing, including
common and preferred equity. We and other companies in the real
estate industry have experienced limited availability of
financing from time to time. If we issue additional equity
securities to finance developments and acquisitions instead of
incurring debt, the interests of our existing stockholders could
be diluted.
Financing Could be Impacted by Negative Capital Market
Conditions.
Recently, domestic financial markets
have experienced unusual volatility and uncertainty. While this
condition has occurred most visibly within the
“subprime” mortgage lending sector of the credit
market, liquidity has tightened in overall domestic financial
markets, including the investment grade debt and equity capital
markets. Consequently, there is greater risk that the financial
institutions we do business with could experience disruptions
that would negatively affect our ability to obtain financing.
Disruptions in Financial Markets May Adversely Impact
Availability and Cost of Credit, Impact Our Tenant Base, and
Have other Adverse Effects on Us and the Market Price of Our
Stock.
Our ability to make scheduled payments or
to refinance debt obligations will depend on our operating and
financial performance, which in turn is subject to prevailing
economic conditions and to financial, business and other factors
beyond our control. The United States stock and credit markets
have recently experienced significant price volatility,
dislocations and liquidity disruptions, which have caused market
prices of many stocks to fluctuate substantially and the spreads
on prospective debt financings to widen considerably. These
circumstances have materially impacted liquidity in the
financial markets, making terms for certain financings less
attractive, and in some cases have resulted in the
unavailability of financing. Continued uncertainty in the stock
and credit markets may negatively impact our ability to access
additional financing for acquisitions, development of our
properties and other purposes at reasonable terms, which may
negatively affect our business. Additionally, due to this
uncertainty, we may be unable to refinance our existing
indebtedness or the terms of any refinancing may not be as
favorable as the terms of our existing indebtedness. If we are
not successful in refinancing this debt when it becomes due, we
may be forced to dispose of properties on disadvantageous terms,
which might
17
Table of Contents
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 our common or preferred stock. The disruptions in the
financial markets have had and may continue to have a material
adverse effect on the market value of our common shares and
other adverse effects on us and our business.
Prospective buyers of our properties may also experience
difficulty in obtaining debt financing which might make it more
difficult for us to sell properties at acceptable pricing
levels. Current tightening of credit in financial markets and
increasing unemployment may also adversely affect the ability of
tenants to meet their lease obligations and for us to continue
increasing rents on a prospective basis. Disruptions in the
credit and financial markets may also have other adverse effects
on us and the overall economy.
The Soundness of Financial Institutions Could Adversely
Affect Us.
We have relationships with many
financial institutions, including lenders under our credit
facilities, and, from time to time, we execute transactions with
counterparties in the financial services industry. As a result,
defaults by, or even rumors or questions about, financial
institutions or the financial services industry generally, could
result in losses or defaults by these institutions. In the event
that the volatility of the financial markets adversely affects
these financial institutions or counterparties, we or other
parties to the transactions with us may be unable to complete
transactions as intended, which could adversely affect our
business and results of operations.
Changing Interest Rates Could Increase Interest Costs and
Adversely Affect Our Cash Flow and the Market Price of Our
Securities.
We currently have, and expect to
incur in the future, interest-bearing debt at rates that vary
with market interest rates. As of December 31, 2009, we had
approximately $709.2 million of variable rate indebtedness
outstanding, which constitutes approximately 20.7% of our total
outstanding indebtedness as of such date. An increase in
interest rates would increase our interest expenses and increase
the costs of refinancing existing indebtedness and of issuing
new debt. Accordingly, higher interest rates could adversely
affect cash flow and our ability to service our debt and to make
distributions to security holders. The effect of prolonged
interest rate increases could negatively impact our ability to
make acquisitions and develop properties. In addition, an
increase in market interest rates may lead our security holders
to demand a higher annual yield, which could adversely affect
the market price of our common and preferred stock and debt
securities.
Interest Rate Hedging Contracts May Be Ineffective and May
Result in Material Charges.
From time to time
when we anticipate issuing debt securities, we may seek to limit
our exposure to fluctuations in interest rates during the period
prior to the pricing of the securities by entering into interest
rate hedging contracts. We may do this to increase the
predictability of our financing costs. Also, from time to time
we may rely on interest rate hedging contracts to limit our
exposure under variable rate debt to unfavorable changes in
market interest rates. If the terms of new debt securities are
not within the parameters of, or market interest rates fall
below that which we incur under a particular interest rate
hedging contract, the contract is ineffective. Furthermore, the
settlement of interest rate hedging contracts has involved and
may in the future involve material charges.
Risks
Related to Tax Laws
We Would Incur Adverse Tax Consequences if We Fail to Qualify
as a REIT.
We have 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 our stockholders.
18
Table of Contents
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 our stockholders in computing our taxable income. Also,
unless the Internal Revenue Service granted us relief under
certain statutory provisions, we would be disqualified from
treatment as a REIT for the two taxable years following the year
in which we first failed to qualify. 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 our 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 our 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.
REITs May Pay a Portion of Dividends in Common
Stock.
In December 2009, the Internal Revenue
Service issued Revenue Procedure
2010-12,
which expanded previously issued temporary guidance relating to
certain stock distributions made by publicly traded REITs to
satisfy their tax-related distribution requirements. This
expanded temporary guidance is intended to permit REITs to limit
cash distributions in order to maintain liquidity during the
current downturn in economic conditions. Under this expanded
guidance, for stock dividends declared on or after
January 1, 2008 and before December 31, 2012, with
respect to a taxable year ending on or before December 31,
2011, the Internal Revenue Service will treat a distribution of
stock by a publicly traded REIT, pursuant to certain stockholder
elections to receive either stock or cash, as a taxable
distribution of property, provided that, among other conditions,
(i) the total amount of cash available for distribution is
not less than 10% of the aggregate declared distribution, and
(ii) if too many stockholders elect to receive cash, each
stockholder electing to receive cash will receive a pro rata
amount of cash corresponding to its respective entitlement under
the declaration, but in no event will any such electing
stockholder receive less than 10% of the stockholder’s
entire entitlement in money. The amount of such stock
distribution will generally be treated as equal to the amount of
cash that could have been received instead. If we pay a portion
of our dividends in shares of our common stock pursuant to this
temporary guidance, our stockholders may receive less cash than
they received in distributions in prior years and the market
value of our securities may decline.
We 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 our qualification as a REIT, our taxable
REIT subsidiaries must pay income tax on their taxable income.
In addition, we must comply with various tests to continue to
qualify as a REIT for federal income tax purposes, and our
income from and investments in our taxable REIT subsidiaries
generally do not constitute permissible income and investments
for these tests. While we will attempt to ensure that our
dealings with our taxable REIT subsidiaries will not adversely
affect our REIT qualification, we cannot provide assurance that
we will successfully achieve that result. Furthermore, we may be
subject to a 100% penalty tax, we may jeopardize our ability to
retain future gains on real property sales, or our taxable REIT
subsidiaries may be denied deductions, to the extent our
dealings with our taxable REIT subsidiaries are not deemed to be
arm’s length in nature or are otherwise not respected.
REIT Distribution Requirements Limit Our Available
Cash.
As a REIT, we are 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 our
stockholders to comply with the requirements of the Code.
However, differences in timing between the recognition of
taxable income and the actual receipt of cash could require us
to sell assets or borrow funds on a short-term or long-term
basis to meet the 90% distribution requirement of the Code.
Certain Property Transfers May Generate Prohibited
Transaction Income, Resulting in a Penalty Tax on Gain
Attributable to the Transaction.
From time to
time, we may transfer or otherwise dispose of some of our
properties. Under the Code, any gain resulting from transfers of
properties that we hold as inventory or primarily for sale to
customers in the ordinary course of business would be treated as
income from a prohibited transaction and subject to a 100%
penalty tax. Since we acquire properties for investment
purposes,
19
Table of Contents
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 our ability
to satisfy the income tests for qualification as a REIT for
federal income tax purposes.
We Could Face Possible State and Local Tax Audits and Adverse
Changes in State and Local Tax Laws.
As discussed
in the risk factors above, because we are organized and qualify
as a REIT we are generally not subject to federal income taxes,
but we are 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 our stockholders. In the normal course of
business, entities through which we own real estate may also
become subject to tax audits. If such entities become subject to
state or local tax audits, the ultimate result of such audits
could have an adverse effect on our financial condition.
Risks
Related to Our Organization and Our Shares
Changes in Market Conditions and Volatility of Stock Prices
Could Adversely Affect the Market Price of Our Common
Stock.
The stock markets, including the New York
Stock Exchange, on which we list our common shares, have
experienced significant price and volume fluctuations. As a
result, the market price of our common stock could be similarly
volatile, and investors in our common stock may experience a
decrease in the value of their shares, including decreases
unrelated to our operating performance or prospects.
The market price per share of our common stock may decline or
fluctuate significantly in response to many factors, including:
| • | general market and economic conditions, | |
| • | actual or anticipated variations in our quarterly operating results or dividends or our payment of dividends in shares of our 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, | |
| • | 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-based companies), | |
| • | general stock and bond market conditions, including changes in interest rates on fixed income securities, that may lead prospective purchasers of our stock to demand a higher annual yield from future dividends, | |
| • | a change in analyst ratings, | |
| • | adverse market reaction to any additional debt we incur in the future, | |
| • | speculation in the press or investment community, |
20
Table of Contents
| • | terrorist activity which may adversely affect the markets in which our securities trade, possibly increasing market volatility and causing the further erosion of business and consumer confidence and spending, | |
| • | governmental regulatory action and changes in tax laws, and | |
| • | the issuance of additional shares of our common stock, or the perception that such sales might occur, including under our at-the-market equity distribution program. |
Many of the factors listed above are beyond our control. These
factors may cause the market price of shares of our common stock
to decline, regardless of our financial condition, results of
operations, business or our prospects.
We May Change the Dividend Policy for Our Common Stock in the
Future.
The decision to declare and pay dividends
on our common stock in the future, 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 our common stock.
Maryland Law May Limit the Ability of a Third Party to
Acquire Control of Us, Which May Not be in Our
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 our 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 our stock
representing 10% or more of the voting power without our board
of directors’ prior approval. Any such business combination
transaction could not be completed until five years after the
person acquired such voting power, and generally only with the
approval of stockholders representing 80% of all votes entitled
to be cast and
66
2
/
3
%
of the votes entitled to be cast, excluding the interested
stockholder, or upon payment of a fair price. Maryland law also
provides generally that a person who acquires shares of our
equity stock that represents 10% (and certain higher levels) of
the voting power in electing directors will have no voting
rights unless approved by a vote of two-thirds of the shares
eligible to vote.
Limitations on Share Ownership and Limitations on the Ability
of Our Stockholders to Effect a Change in Control of Our Company
May Prevent Takeovers That are Beneficial to Our
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 our 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. These
provisions 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 our
stockholders or might otherwise be in our stockholders’
best interests.
| Item 1B. | UNRESOLVED STAFF COMMENTS |
None.
| Item 2. | PROPERTIES |
At December 31, 2009, our consolidated apartment portfolio
included 165 communities located in 23 markets, with a total of
45,913 completed apartment homes.
21
Table of Contents
We lease approximately 39,000 square feet of office space
in Highlands Ranch, Colorado, for our corporate headquarters and
lease an additional 42,000 square feet for three of our
regional offices throughout the country. The table below sets
forth a summary of our real estate portfolio by geographic
market at December 31, 2009.
SUMMARY
OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT
DECEMBER 31, 2009
|
Average
|
||||||||||||||||||||||||||||||||
|
Number of
|
Number of
|
Percentage of
|
Carrying
|
Average
|
Home Size
|
|||||||||||||||||||||||||||
|
Apartment
|
Apartment
|
Carrying
|
Value
|
Encumbrances
|
Cost per
|
Physical
|
Square
|
|||||||||||||||||||||||||
| Communities | Homes | Value | (In thousands) | (In thousands) | Home | Occupancy | Feet | |||||||||||||||||||||||||
|
WESTERN REGION
|
||||||||||||||||||||||||||||||||
|
Orange County, CA
|
14 | 4,363 | 12.7 | % | $ | 801,467 | $ | 327,274 | $ | 183,696 | 95.2 | % | 832 | |||||||||||||||||||
|
San Francisco, CA
|
11 | 2,339 | 8.4 | % | 530,177 | 101,167 | 226,668 | 92.8 | % | 805 | ||||||||||||||||||||||
|
Los Angeles, CA
|
8 | 1,678 | 6.8 | % | 431,197 | 176,056 | 256,971 | 94.0 | %(a) | 983 | ||||||||||||||||||||||
|
Seattle, WA
|
10 | 1,891 | 5.7 | % | 357,192 | 72,132 | 188,891 | 95.4 | % | 889 | ||||||||||||||||||||||
|
San Diego, CA
|
5 | 1,123 | 2.7 | % | 173,417 | 40,352 | 154,423 | 95.3 | % | 797 | ||||||||||||||||||||||
|
Monterey Peninsula, CA
|
7 | 1,565 | 2.4 | % | 150,928 | — | 96,440 | 94.6 | % | 724 | ||||||||||||||||||||||
|
Inland Empire, CA
|
3 | 1,074 | 2.4 | % | 149,573 | 77,208 | 139,267 | 94.8 | % | 886 | ||||||||||||||||||||||
|
Sacramento, CA
|
2 | 914 | 1.1 | % | 67,384 | 48,563 | 73,724 | 93.4 | % | 820 | ||||||||||||||||||||||
|
Portland, OR
|
3 | 716 | 1.1 | % | 68,710 | 46,933 | 95,964 | 95.8 | % | 918 | ||||||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||||||
|
Metropolitan DC
|
12 | 3,983 | 11.2 | % | 705,525 | 192,051 | 177,134 | 96.0 | % | 957 | ||||||||||||||||||||||
|
Baltimore, MD
|
10 | 2,120 | 3.9 | % | 248,887 | 93,501 | 117,400 | 96.4 | % | 952 | ||||||||||||||||||||||
|
Richmond, VA
|
6 | 2,211 | 3.0 | % | 188,152 | 73,831 | 85,098 | 96.1 | % | 966 | ||||||||||||||||||||||
|
Norfolk, VA
|
6 | 1,438 | 1.3 | % | 83,015 | 33,766 | 57,729 | 95.5 | % | 1016 | ||||||||||||||||||||||
|
Other Mid-Atlantic
|
5 | 1,132 | 1.2 | % | 77,370 | — | 68,348 | 96.3 | % | 948 | ||||||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||||||
|
Tampa, FL
|
11 | 3,804 | 5.2 | % | 328,956 | 44,533 | 86,476 | 93.6 | %(a) | 963 | ||||||||||||||||||||||
|
Orlando, Fl
|
11 | 3,167 | 4.2 | % | 268,282 | 87,565 | 84,712 | 94.3 | % | 978 | ||||||||||||||||||||||
|
Nashville, TN
|
8 | 2,260 | 2.8 | % | 177,600 | 63,013 | 78,584 | 95.6 | % | 933 | ||||||||||||||||||||||
|
Jacksonville, FL
|
5 | 1,857 | 2.5 | % | 154,858 | 15,656 | 83,391 | 94.4 | % | 913 | ||||||||||||||||||||||
|
Other Florida
|
4 | 1,184 | 1.8 | % | 111,040 | 40,133 | 93,784 | 94.4 | % | 1035 | ||||||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||||||
|
Dallas, TX
|
11 | 3,464 | 5.6 | % | 350,999 | 144,914 | 101,328 | 92.8 | %(a) | 882 | ||||||||||||||||||||||
|
Phoenix, AZ
|
6 | 1,744 | 2.7 | % | 168,269 | 63,460 | 96,485 | 75.8 | %(a) | 970 | ||||||||||||||||||||||
|
Austin, TX
|
2 | 640 | 1.3 | % | 87,018 | 26,162 | 135,966 | 93.6 | % | 888 | ||||||||||||||||||||||
|
Other Texas
|
3 | 811 | 0.9 | % | 58,291 | 36,522 | 71,875 | 89.3 | %(a) | 859 | ||||||||||||||||||||||
|
Total Operating Communities
|
163 | 45,478 | 90.9 | % | $ | 5,738,307 | $ | 1,804,792 | $ | 126,178 | 93.6 | % | 913 | |||||||||||||||||||
|
Real Estate Under Development(b)
|
2 | 435 | 5.0 | % | 319,757 | 162,372 | ||||||||||||||||||||||||||
|
Land
|
— | 2.7 | % | 171,040 | — | |||||||||||||||||||||||||||
|
Other
|
— | 1.4 | % | 85,943 | 22,270 | |||||||||||||||||||||||||||
|
Total Real Estate Owned
|
165 | 45,913 | 100.0 | % | $ | 6,315,047 | $ | 1,989,434 | ||||||||||||||||||||||||
| (a) | Markets include properties in lease up during the year. | |
| (b) | The Company is currently developing four wholly-owned communities and one community held by a consolidated joint venture with 1,415 apartment homes that have not yet been completed. |
| 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.
22
Table of Contents
| Item 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
No matters were submitted to a vote of our security holders
during the fourth quarter of the year ended December 31,
2009.
| Item 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER |
MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Common
Stock
Our common stock is traded on the New York Stock Exchange under
the symbol “UDR.” 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.
| 2009 | 2008 | |||||||||||||||||||||||||||||||
|
Distributions
|
Distributions
|
|||||||||||||||||||||||||||||||
| High | Low | Declared | High | Low | Declared | |||||||||||||||||||||||||||
|
Quarter ended March 31,
|
$ | 14.27 | $ | 6.73 | $ | 0.31 | $ | 25.91 | $ | 18.29 | $ | 0.33 | ||||||||||||||||||||
|
Quarter ended June 30,
|
$ | 11.92 | $ | 7.93 | $ | 0.18 | $ | 25.95 | $ | 22.11 | $ | 0.33 | ||||||||||||||||||||
|
Quarter ended September 30,
|
$ | 16.23 | $ | 9.06 | $ | 0.18 | $ | 28.50 | $ | 21.42 | $ | 0.33 | ||||||||||||||||||||
|
Quarter ended December 31,
|
$ | 17.26 | $ | 13.93 | $ | 0.18 | $ | 25.50 | $ | 10.00 | $ | 1.29 | ||||||||||||||||||||
We declared a Special Dividend on our common stock on
November 5, 2008 of $0.96 per share in addition to our
quarterly dividend of $0.33 per share, which represented an
aggregate dividend of approximately $1.29 per share or
$177.1 million. The aggregate amount of cash that the
Company paid to stockholders related to the 2008 fourth quarter
distribution was $44.0 million. In connection with the
Special Dividend the Company issued 11,358,042 shares
($133.1 million) of our common stock to our stockholders on
January 29, 2009.
On February 19, 2010, the closing sale price of our common
stock was $16.31 per share on the NYSE and there were 5,060
holders of record of the 156,058,930 outstanding shares of our
common stock.
We have determined that, for federal income tax purposes,
approximately 12% of the distributions for 2009 represented
ordinary income, 80% represented long-term capital gain, and 8%
represented unrecaptured section 1250 gain.
We pay regular quarterly distributions to holders of our 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. The annual distribution payment for
calendar year 2009 necessary for us to maintain our status as a
REIT was approximately $0.04 per share of common stock. We
declared total distributions of $0.85 per share of common stock
for 2009.
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 one share of our common stock prior to
the Special Dividend. The holders of the Series E are
entitled to vote on an as-converted basis as a single class in
combination with the holders of common stock at any meeting of
our stockholders for the election of directors or for any other
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 the Special Dividend, the Company reserved for
issuance upon conversion of the Series E
23
Table of Contents
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 the
Special Dividend.
Distributions declared on the Series E in 2009 were $1.33
per share or $0.3322 per quarter. The Series E is not
listed on any exchange. At December 31, 2009, a total of
2,803,812 shares of the Series E were outstanding.
Series F
Preferred Stock
We are authorized to issue up to 20,000,000 shares of our
Series F Preferred Stock. Our Series F Preferred Stock
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 our Series F Preferred Stock for each
OP Unit held. At December 31, 2009, a total of
2,959,428 shares of the Series F Preferred Stock were
outstanding at a value of $296. Holders of the Series F
Preferred Stock are entitled to one vote for each share of the
Series F Preferred Stock they hold, voting together with
the holders of our common stock, on each matter submitted to a
vote of securityholders at a meeting of our stockholders. The
Series F Preferred Stock does not entitle its holders to
any other rights, privileges or preferences.
Series G
Preferred Stock
In May 2007, UDR issued 5,400,000 shares of our 6.75%
Series G Cumulative Redeemable Preferred Stock
(Series G). The Series G has no stated par value and a
liquidation preference of $25 per share. The Series G
generally has no voting rights except under certain limited
circumstances and as required by law. The Series G has no
stated maturity and is not subject to any sinking fund or
mandatory redemption and is not convertible into any of our
other securities. The Series G is not redeemable prior to
May 31, 2012. On or after this date, the Series G may
be redeemed for cash at our option, in whole or in part, at a
redemption price of $25 per share plus accrued and unpaid
dividends. During the year ended December 31, 2009, the
Company repurchased 997,738 shares of Series G, for
less than the liquidation preference of $25 per share resulting
in a $2.6 million benefit to our net loss attributable to
common stockholders. Distributions declared on the Series G
for the year ended December 31, 2009 was $1.69 per share.
The Series G is listed on the NYSE under the symbol
“UDRPrG.” At December 31, 2009, a total of
3,432,962 shares of the Series G were outstanding.
Dividend
Reinvestment and Stock Purchase Plan
We have a Dividend 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 dividends
as declared. As of February 12, 2010, there were
approximately 2,900 participants in the plan.
Operating
Partnership Units
From time to time we issue shares of our common stock in
exchange for operating partnership units
(“OP Units”) tendered to our operating
partnerships, United Dominion Realty, L.P. and Heritage
Communities L.P., for redemption in accordance with the
provisions of their respective partnership agreements.
The holder of the OP Units has the right to require United
Dominion Realty, L.P. 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, United Dominion Realty, L.P.’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 shares of our common stock. During
2009, we issued a total of 1,837,792 shares of common stock
upon redemption of OP Units. At December 31, 2009
there were 5,986,588 OP Units in United Dominion Realty,
L.P. that were owned by limited partners.
Heritage Communities L.P. OP Units are convertible into
common stock in lieu of cash, at our option, once the holder
elects to convert, at an exchange ratio of 1.575 shares for
each OP Unit. During 2009, we
24
Table of Contents
issued a total of 292,660 shares of common stock upon
redemption of OP Units. At December 31, 2009, there
were no OP Units in Heritage Communities L.P. that were
owned by limited partners.
Purchases
of Equity Securities
In February 2006, our Board of Directors authorized a
10 million share repurchase program. In January 2008, our
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, 2009. For the year ended
December 31, 2009, the Company repurchased
100,000 shares of our common stock under these programs.
The following tables set forth certain information regarding our
common stock repurchases during the quarter ended
December 31, 2009.
|
Total Number
|
||||||||||||||||
|
of Shares
|
Maximum Number
|
|||||||||||||||
|
Purchased as
|
of Shares
|
|||||||||||||||
|
Total Number
|
Average
|
Part of Publicly
|
that May Yet Be
|
|||||||||||||
|
of Shares
|
Price per
|
Announced Plans or
|
Purchased Under the
|
|||||||||||||
|
Period
|
Purchased | Share | Programs | Plans or Programs(1) | ||||||||||||
|
Beginning Balance
|
9,967,490 | $ | 22.00 | 9,967,490 | 15,032,510 | |||||||||||
|
October 1, 2009 through October 31, 2009
|
— | — | — | 15,032,510 | ||||||||||||
|
November 1, 2009 through November 30, 2009
|
— | — | — | 15,032,510 | ||||||||||||
|
December 1, 2009 through December 31, 2009
|
— | — | — | 15,032,510 | ||||||||||||
|
Balance as of December 31, 2009
|
9,967,490 | $ | 22.00 | 9,967,490 | 15,032,510 | |||||||||||
| (1) | This number reflects the number of shares that were available for purchase under our 10 million share repurchase program in effect on December 31, 2007 and our 15 million share repurchase program announced on January 31, 2008. |
Recent
Sales of Unregistered Securities
On March 23, 2009, March 27, 2009 and May 13,
2009, the Company issued and sold 2,237,282; 25,126; and
30,727 shares, respectively, of its Series F Preferred
Stock, without par value, at a purchase price of $0.0001 per
share, for an aggregate purchase price of $223.73, $2.52 and
$3.07, respectively. The shares of the Series F Preferred
Stock were sold to certain accredited investors who hold limited
partnership interests, or OP Units, in United Dominion
Realty, L.P. Because the shares of Series F Preferred Stock
described above were sold to accredited investors in
transactions not involving a public offering, the transactions
are exempt from registration under the Securities Act of 1933 in
accordance with Section 4(2) of the Securities Act.
25
Table of Contents
Comparison
of One-, Three- and Five- year Cumulative Total
Returns
The following graphs compare the one-, three- and five-year
cumulative total returns for UDR common stock with the
comparable cumulative return of the NAREIT Equity REIT Index,
Standard & Poor’s 500 Stock Index, the NAREIT
Equity Apartment Index and the MSCI US REIT Index. Each graph
assumes that $100 was invested on December 31 (of the initial
year shown in the graph), in each of our common stock and the
indices presented. Historical stock price performance is not
necessarily indicative of future stock price performance. The
comparisons assume that all dividends are reinvested.
|
One-year
|
Three-year |
| Total Return Performance | Total Return Performance |
One-year
| Period Ending | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Index | 12/31/08 | 01/31/09 | 02/28/09 | 03/31/09 | 04/30/09 | 05/31/09 | 06/30/09 | 07/31/09 | 08/31/09 | 09/30/09 | 10/31/09 | 11/30/09 | 12/31/09 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
UDR, Inc.
|
100.00 | 85.06 | 57.36 | 62.44 | 75.77 | 82.77 | 77.73 | 80.13 | 98.08 | 120.70 | 111.55 | 116.12 | 127.53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
NAREIT Equity Appartment Index
|
100.00 | 84.16 | 63.34 | 69.38 | 85.44 | 91.53 | 86.23 | 91.09 | 105.43 | 118.77 | 110.66 | 119.77 | 130.40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
US MSCI REITS
|
100.00 | 82.21 | 64.87 | 67.27 | 88.45 | 90.49 | 87.57 | 96.89 | 110.48 | 117.86 | 112.41 | 120.12 | 128.61 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
S&P 500
|
100.00 | 91.57 | 81.82 | 88.99 | 97.51 | 102.96 | 103.16 | 110.97 | 114.97 | 119.26 | 117.05 | 124.07 | 126.46 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
NAREIT Equity REIT Index
|
100.00 | 82.69 | 65.47 | 68.13 | 89.27 | 91.19 | 87.79 | 96.98 | 109.97 | 117.00 | 111.73 | 119.45 | 127.99 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Three-year
| Period Ending | |||||||||||||||||||||||||||||||||||
| Index | 12/31/06 | 06/30/07 | 12/31/07 | 06/30/08 | 12/31/08 | 06/30/09 | 12/31/09 | ||||||||||||||||||||||||||||
|
UDR, Inc.
|
100.00 | 84.47 | 65.38 | 76.00 | 53.63 | 41.68 | 68.39 | ||||||||||||||||||||||||||||
|
NAREIT Equity Appartment Index
|
100.00 | 94.72 | 74.57 | 77.82 | 55.83 | 48.15 | 72.81 | ||||||||||||||||||||||||||||
|
US MSCI REITS
|
100.00 | 93.55 | 83.18 | 80.32 | 51.60 | 45.19 | 66.36 | ||||||||||||||||||||||||||||
|
S&P 500
|
100.00 | 106.96 | 105.49 | 92.93 | 66.46 | 68.57 | 84.05 | ||||||||||||||||||||||||||||
|
NAREIT Equity REIT Index
|
100.00 | 94.11 | 84.31 | 81.28 | 52.50 | 46.09 | 67.20 | ||||||||||||||||||||||||||||
26
Table of Contents
| Five-year | Total Return Performance |
Five-year
| Period Ending | ||||||||||||||||||||||||||||||
| Index | 12/31/04 | 12/31/05 | 12/31/06 | 12/31/07 | 12/31/08 | 12/31/09 | ||||||||||||||||||||||||
|
UDR, Inc.
|
100.00 | 99.70 | 141.37 | 92.43 | 75.81 | 96.68 | ||||||||||||||||||||||||
|
NAREIT Equity Appartment Index
|
100.00 | 114.65 | 160.45 | 120.24 | 90.03 | 117.40 | ||||||||||||||||||||||||
|
US MSCI REITS
|
100.00 | 112.13 | 152.41 | 126.78 | 78.64 | 101.14 | ||||||||||||||||||||||||
|
S&P 500
|
100.00 | 104.91 | 121.48 | 128.16 | 80.74 | 102.11 | ||||||||||||||||||||||||
|
NAREIT Equity REIT Index
|
100.00 | 112.16 | 151.49 | 127.72 | 79.53 | 101.79 | ||||||||||||||||||||||||
The foregoing graphs and charts shall not be deemed
incorporated by reference by any general statement incorporating
by reference this Report into any filing under the Securities
Act or under the Exchange Act, except to the extent we
specifically incorporate this information by reference
27
Table of Contents
| Item 6. | SELECTED FINANCIAL DATA |
The following table sets forth selected consolidated financial
and other information as of and for each of the years in the
five-year period ended December 31, 2009. The table should
be read in conjunction with our 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.
|
Years Ended December 31,
|
||||||||||||||||||||
|
(In thousands, except per share data and
|
||||||||||||||||||||
| apartment homes owned) | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
|
OPERATING DATA:
|
||||||||||||||||||||
|
Rental income
|
$ | 602,899 | $ | 563,408 | $ | 501,618 | $ | 467,511 | $ | 410,120 | ||||||||||
|
(Loss)/income from continuing operations
|
(94,047 | ) | (62,306 | ) | 44,660 | (77,772 | ) | (54,068 | ) | |||||||||||
|
Income from discontinued operations
|
2,424 | 806,173 | 182,070 | 210,117 | 205,250 | |||||||||||||||
|
Consolidated net (loss)/income
|
(91,623 | ) | 743,867 | 226,730 | 132,345 | 155,166 | ||||||||||||||
|
Distributions to preferred stockholders
|
10,912 | 12,138 | 13,910 | 15,370 | 15,370 | |||||||||||||||
|
Net (loss)/income attributable to common stockholders
|
(95,858 | ) | 688,708 | 198,958 | 109,738 | 139,796 | ||||||||||||||
|
Common distributions declared
|
127,066 | 308,313 | 177,540 | 168,408 | 163,690 | |||||||||||||||
|
Special Dividend declared
|
— | 177,074 | — | — | — | |||||||||||||||
|
Earnings per share — basic and diluted:
|
||||||||||||||||||||
|
(Loss)/income from continuing operations available to
stockholders
|
$ | (0.66 | ) | $ | (0.90 | ) | $ | 0.13 | $ | (0.75 | ) | $ | (0.48 | ) | ||||||
|
Income from discontinued operations(a)
|
0.02 | 6.19 | 1.35 | 1.57 | 1.51 | |||||||||||||||
|
Net (loss)/income attributable to common stockholders
|
(0.64 | ) | 5.29 | 1.48 | 0.82 | 1.03 | ||||||||||||||
|
Weighted average number of common share outstanding —
basic and diluted
|
149,090 | 130,219 | 134,016 | 133,732 | 136,143 | |||||||||||||||
|
Weighted average number of common share outstanding, OP Units
and common
|
||||||||||||||||||||
|
stock equivalents outstanding — diluted(b)
|
159,561 | 142,904 | 147,199 | 147,981 | 150,141 | |||||||||||||||
|
Common distributions declared
|
$ | 0.85 | $ | 2.29 | $ | 1.22 | $ | 1.25 | $ | 1.20 | ||||||||||
|
Balance Sheet Data:
|
||||||||||||||||||||
|
Real estate owned, at cost
|
6,315,047 | 5,831,753 | 5,956,481 | 5,820,122 | 5,512,424 | |||||||||||||||
|
Accumulated depreciation
|
1,351,293 | 1,078,689 | 1,371,759 | 1,253,727 | 1,123,829 | |||||||||||||||
|
Total real estate owned, net of accumulated depreciation
|
4,963,754 | 4,753,064 | 4,584,722 | 4,566,395 | 4,388,595 | |||||||||||||||
|
Total assets
|
5,132,617 | 5,143,805 | 4,800,454 | 4,675,875 | 4,541,593 | |||||||||||||||
|
Secured debt
|
1,989,434 | 1,462,471 | 1,137,936 | 1,182,919 | 1,116,259 | |||||||||||||||
|
Unsecured debt
|
1,437,155 | 1,798,662 | 2,341,895 | 2,155,866 | 2,043,518 | |||||||||||||||
|
Total debt
|
3,426,589 | 3,261,133 | 3,479,831 | 3,338,785 | 3,159,777 | |||||||||||||||
|
Stockholders’ equity
|
1,395,441 | 1,415,989 | 941,205 | 942,467 | 1,107,724 | |||||||||||||||
|
Number of common shares outstanding
|
155,465 | 137,423 | 133,318 | 135,029 | 134,012 | |||||||||||||||
|
Other Data:
|
||||||||||||||||||||
|
Total apartments owned (at end of period)
|
45,913 | 44,388 | 65,867 | 70,339 | 74,875 | |||||||||||||||
|
Weighted average number of apartment homes owned during the year
|
45,113 | 46,149 | 69,662 | 73,731 | 76,069 | |||||||||||||||
|
Cash Flow Data
|
||||||||||||||||||||
|
Cash provided by operating activities
|
$ | 229,383 | $ | 179,754 | $ | 269,281 | $ | 237,881 | $ | 248,186 | ||||||||||
|
Cash (used in)/provided by investing activities
|
(158,045 | ) | 302,304 | (90,100 | ) | (158,241 | ) | (219,017 | ) | |||||||||||
|
Cash used in financing activities
|
(78,093 | ) | (472,537 | ) | (178,105 | ) | (93,040 | ) | (21,530 | ) | ||||||||||
|
Funds from Operations(b)
|
||||||||||||||||||||
|
Funds from operations — basic
|
$ | 178,272 | $ | 201,157 | $ | 240,983 | $ | 240,851 | $ | 238,254 | ||||||||||
|
Funds from operations — diluted
|
181,996 | 204,881 | 244,707 | 244,577 | 241,980 | |||||||||||||||
| (a) | Reclassified to conform to current year presentation in accordance with Topic 360, Property, Plant and Equipment (formerly FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,”) as described in Note 3, Discontinued Operations , to the Consolidated Financial Statements included in this Report. |
28
Table of Contents
| (b) | Funds from operations, or FFO, is defined as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of depreciable property, premiums or original issuance costs associated with preferred stock redemptions, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust’s definition issued in April 2002. We consider FFO in evaluating property acquisitions and our operating performance and believe that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of our activities in accordance with generally accepted accounting principles. FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs. | |
| RE 3 is our subsidiary that focuses on development, land entitlement and short-term hold investments. RE 3 tax benefits and gain on sales, net of taxes, is defined as net sales proceeds less a tax provision and the gross investment basis of the asset before accumulated depreciation. We consider FFO with RE 3 tax benefits and gain on sales, net of taxes, to be a meaningful supplemental measure of performance because the short-term use of funds produce a profit that differs from the traditional long-term investment in real estate for REITs. | ||
| For 2009, FFO includes a gain of $9.8 million due to the extinguishment of unsecured debt, partially offset by a charge of $1.0 million prepayment penalty on debt restructure, $1.6 million on the write-off of a fair market adjustment for debt paid on a consolidated joint venture, $3.8 million of expenses related to a tender offer, and $127,000 incurred on hurricane related expenses. FFO excludes $2.6 million related to the premium on preferred stock repurchases. | ||
| For 2008, FFO includes a gain of $26.3 million due to the extinguishment of unsecured debt and $1.6 million of net hurricane related recoveries, partially offset by a charge of $1.7 million incurred for exiting the condominium business, $1.7 million for cancelling a pre-sale contract, $4.7 million related to penalties and the write off of the associated deferred financing costs for debt refinancing and $0.7 million for severance. FFO excludes $3.1 million related to the premium on preferred stock repurchases. | ||
| For 2005, FFO includes $2.5 million of hurricane related insurance recoveries. For 2004, FFO includes a charge of $5.5 million to cover hurricane related expenses. For the years ended December 31, 2007 and 2004, distributions to preferred stockholders exclude $2.3 million and $5.7 million, respectively, related to premiums on preferred stock repurchases. |
| Item 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Forward-Looking
Statements
This Report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such
forward-looking statements include, without limitation,
statements concerning property acquisitions and dispositions,
development activity and capital expenditures, capital raising
activities, rent growth, occupancy, and rental expense growth.
Words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,”
“seeks,” “estimates,” and variations of such
words and similar expressions are intended to identify such
forward-looking statements. Such statements involve known and
unknown risks, uncertainties and other factors which may cause
our actual results, performance or achievements to be materially
different from the results of operations or plans expressed or
implied by such forward-looking statements. Such factors
include, among other things, unanticipated adverse business
developments affecting us, or our properties, adverse changes in
the real estate markets and general and local economies and
business conditions. Although we believe that the assumptions
underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and
therefore such statements included in this Report may not prove
to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a
representation by us or any other person that the results or
conditions described in such statements or our objectives and
plans will be achieved.
Business
Overview
We are a real estate investment trust, or REIT, that owns,
acquires, renovates, develops, and manages apartment communities
nationwide. 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 two operating
partnerships, Heritage Communities L.P., a Delaware limited
partnership, and United Dominion Realty, L.P., a Delaware
limited partnership. Unless the context otherwise requires, all
references in this Report to “we,” “us,”
“our,” “the Company,” or “UDR”
refer collectively to UDR, Inc. and its subsidiaries.
At December 31, 2009, our consolidated real estate
portfolio included 165 communities with 45,913 apartment homes
and our total real estate portfolio, inclusive of our
unconsolidated communities, included an additional 10
communities with 3,992 apartment homes.
29
Table of Contents
The following table summarizes our market information by major
geographic markets as of December 31, 2009.
|
Percentage
|
Total
|
|||||||||||||||||||||||||||
|
Number of
|
Number of
|
of Total
|
Carrying
|
Average
|
Total Income
|
Net Operating
|
||||||||||||||||||||||
|
Apartment
|
Apartment
|
Carrying
|
Value
|
Physical
|
per Occupied
|
Income
|
||||||||||||||||||||||
| Communities | Homes | Value | (In thousands) | Occupancy | Home (a) | (In thousands) | ||||||||||||||||||||||
|
SAME COMMUNITIES
|
||||||||||||||||||||||||||||
|
WESTERN REGION
|
||||||||||||||||||||||||||||
|
Orange Co, CA
|
13 | 4,067 | 11.3 | % | $ | 713,543 | 95.1 | % | $ | 1,513 | $ | 50,052 | ||||||||||||||||
|
San Francisco, CA
|
7 | 1,548 | 4.4 | % | 278,529 | 95.7 | % | 1,814 | 23,762 | |||||||||||||||||||
|
Monterey Peninsula, CA
|
7 | 1,565 | 2.4 | % | 150,928 | 94.6 | % | 1,091 | 13,721 | |||||||||||||||||||
|
Los Angeles, CA
|
5 | 1,052 | 2.9 | % | 186,102 | 95.1 | % | 1,470 | 12,054 | |||||||||||||||||||
|
San Diego, CA
|
5 | 1,123 | 2.7 | % | 173,417 | 95.3 | % | 1,371 | 12,237 | |||||||||||||||||||
|
Seattle, WA
|
7 | 1,270 | 2.4 | % | 151,186 | 95.9 | % | 1,155 | 11,939 | |||||||||||||||||||
|
Inland Empire, CA
|
3 | 1,074 | 2.4 | % | 149,573 | 94.8 | % | 1,238 | 10,041 | |||||||||||||||||||
|
Sacramento, CA
|
2 | 914 | 1.1 | % | 67,384 | 93.4 | % | 897 | 6,365 | |||||||||||||||||||
|
Portland, OR
|
3 | 716 | 1.1 | % | 68,711 | 95.8 | % | 978 | 5,551 | |||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||
|
Metropolitan DC
|
7 | 2,050 | 4.1 | % | 261,206 | 97.0 | % | 1,428 | 22,570 | |||||||||||||||||||
|
Richmond, VA
|
5 | 1,958 | 2.4 | % | 153,767 | 96.1 | % | 1,002 | 15,946 | |||||||||||||||||||
|
Baltimore, MD
|
8 | 1,556 | 2.5 | % | 155,063 | 97.0 | % | 1,180 | 15,101 | |||||||||||||||||||
|
Norfolk VA
|
6 | 1,438 | 1.3 | % | 83,015 | 95.5 | % | 955 | 10,521 | |||||||||||||||||||
|
Other Mid-Atlantic
|
5 | 1,132 | 1.2 | % | 77,370 | 96.3 | % | 1,016 | 9,360 | |||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||
|
Tampa, FL
|
9 | 3,069 | 3.6 | % | 229,919 | 95.1 | % | 922 | 19,935 | |||||||||||||||||||
|
Orlando, FL
|
9 | 2,500 | 3.0 | % | 187,489 | 94.9 | % | 912 | 16,633 | |||||||||||||||||||
|
Nashville, TN
|
7 | 1,874 | 2.2 | % | 142,064 | 95.8 | % | 867 | 12,211 | |||||||||||||||||||
|
Jacksonville, FL
|
5 | 1,857 | 2.5 | % | 154,858 | 94.4 | % | 829 | 10,657 | |||||||||||||||||||
|
Other Florida
|
4 | 1,184 | 1.8 | % | 111,040 | 94.4 | % | 1,000 | 8,079 | |||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||
|
Phoenix, AZ
|
3 | 914 | 1.1 | % | 70,507 | 94.9 | % | 886 | 6,101 | |||||||||||||||||||
|
Dallas, TX
|
1 | 305 | 1.0 | % | 61,873 | 96.3 | % | 1,607 | 3,577 | |||||||||||||||||||
|
Total/Average Same Communities
|
121 | 33,166 | 57.4 | % | 3,627,544 | 95.4 | % | $ | 1,149 | $ | 296,413 | |||||||||||||||||
|
Non Matures, Commercial Properties & Other
|
42 | 12,312 | 37.5 | % | 2,367,746 | |||||||||||||||||||||||
|
Total Real Estate Held for Investment
|
163 | 45,478 | 94.9 | % | 5,995,290 | |||||||||||||||||||||||
|
Real Estate Under Development(b)
|
2 | 435 | 5.1 | % | 319,757 | |||||||||||||||||||||||
|
Total
|
165 | 45,913 | 100.0 | % | $ | 6,315,047 | ||||||||||||||||||||||
| (a) | Total Income per Occupied Home represents total monthly revenues per weighted average number of apartment homes occupied. | |
| (b) | The Company is currently developing four wholly-owned communities and one community held by a consolidated joint venture with an additional 1,415 apartment homes that have not yet been completed. |
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 and equity. Both the
coordination of asset and liability maturities and effective
capital management are important to the maintenance of
liquidity. 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 credit agreements. We routinely use our
unsecured credit facility to temporarily fund certain investing
and financing activities prior to
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arranging for longer-term financing or the issuance of equity or
debt securities. During the past several years, proceeds from
the sale of real estate have been used for both investing and
financing activities as we repositioned our portfolio.
We expect to meet our short-term liquidity requirements
generally through net cash provided by operations and borrowings
under credit agreements. We expect to meet certain long-term
liquidity requirements such as scheduled debt maturities, the
repayment of financing on development activities, and potential
property acquisitions, through secured and unsecured borrowings,
the issuance of debt or equity securities, and the disposition
of properties. We believe that our net cash provided by
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, and the issuance of debt or equity securities.
We have a shelf registration statement filed with the SEC which
provides for the issuance of an indeterminate amount of common
stock, preferred stock, 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 September 15, 2009, the Company entered into an equity
distribution agreement under which the Company may offer and
sell up to 15.0 million shares of its common stock over
time to or through its sales agents. During the year ended
December 31, 2009, we sold 4,460,032 shares of common
stock through this program for aggregate gross proceeds of
approximately $69.1 million at a weighted average price per
share of $15.48. Aggregate net proceeds from such sales, after
deducting related expenses, including commissions paid to the
sales agents of approximately $1.4 million and related
issuance costs of approximately $500,000, were approximately
$67.2 million.
On December 7, 2009, the Company entered into an amended
and restated distribution agreement with respect to the issue
and sale by the Company from time to time of its Medium-Term
Notes, Series A Due Nine Months or More From Date of Issue.
As of December 31, 2009, the Company had not issued any
medium-term notes under the amended and restated distribution
agreement dated December 7, 2009.
Future
Capital Needs
Future development expenditures are expected to be funded with
proceeds from construction loans, through joint ventures,
unsecured or secured credit facilities, proceeds from the
issuance of equity or debt securities, the sale of properties
and to a lesser extent, with cash flows provided by operating
activities. Acquisition activity in strategic markets is
expected to be largely financed 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 2010, we have approximately $237.4 million of
secured debt and $50.0 million of unsecured debt maturing
and we anticipate repaying that debt with proceeds from
borrowings under our secured or unsecured credit facilities, the
issuance of equity or debt securities, and by exercising
extension rights of $151.5 million with respect to secured
debt.
Critical
Accounting Policies and Estimates
The preparation of financial statements in conformity with 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.
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Table of Contents
Capital
Expenditures
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.
During 2009, $86.4 million or $1,986 per home was spent on
capital expenditures for all of our communities, excluding
development, condominium conversions and commercial properties
compared to $131.0 million or $2,838 per home spent in
2008. These capital improvements included turnover related
expenditures for floor coverings and appliances, other recurring
capital expenditures such as exterior paint, roofs, siding,
parking lots, and asset preservation capital expenditures, which
aggregated $29.3 million or $674 per home for the year
ended December 31, 2009. In addition, revenue enhancing
capital expenditures, kitchen and bath upgrades, and other
extensive exterior/interior upgrades totaled $23.6 million
or $543 per home, and major renovations totaled
$33.5 million for the year ended December 31, 2009.
The following table outlines capital expenditures and repair and
maintenance costs for all of our communities, excluding real
estate under development, condominium conversions and commercial
properties, for the periods presented:
|
Year Ended December 31,
|
||||||||||||||||||||||||
| (dollars in thousands, except for per apartment homes) | ||||||||||||||||||||||||
| Per Apartment Home | ||||||||||||||||||||||||
| 2009 | 2008 | % Change | 2009 | 2008 | % Change | |||||||||||||||||||
|
Turnover capital expenditures
|
$ | 9,401 | $ | 9,342 | 0.6 | % | $ | 216 | $ | 202 | 6.9 | % | ||||||||||||
|
Asset preservation expenditures
|
19,912 | 19,737 | 0.9 | % | 458 | 428 | 7.0 | % | ||||||||||||||||
|
Total recurring capital expenditures
|
29,313 | 29,079 | 0.8 | % | 674 | 630 | 7.0 | % | ||||||||||||||||
|
Revenue enhancing improvements
|
23,626 | 50,059 | –52.8 | % | 543 | 1,085 | –50.0 | % | ||||||||||||||||
|
Major renovations
|
33,466 | 51,823 | –35.4 | % | 769 | 1,123 | –31.5 | % | ||||||||||||||||
|
Total capital expenditures
|
$ | 86,405 | $ | 130,961 | –34.0 | % | $ | 1,986 | $ | 2,838 | –30.0 | % | ||||||||||||
|
Repair and maintenance expense
|
$ | 30,450 | $ | 32,679 | –6.8 | % | $ | 700 | $ | 708 | –1.1 | % | ||||||||||||
|
Average Stabilized Home Count
|
43,505 | 46,149 | ||||||||||||||||||||||
We will continue to selectively add revenue enhancing
improvements which we believe will provide a return on
investment substantially in excess of our cost of capital.
Recurring capital expenditures during 2010 are currently
expected to be approximately $1,000 per home.
Investment
in Unconsolidated Joint Ventures
In accordance with FASB Accounting Standards Codificiation
(“ASC”)
323-10,
Investments- Equity Method and Joint Ventures
(formerly
APB Opinion 18, “The Equity Method of Accounting for
Investments in Common Stock”) (“Subtopic
323-10”),
we continually evaluate our investments in unconsolidated joint
ventures when events or changes in circumstances indicate that
there may be an
other-than-temporary
decline in value. We consider various factors to determine if a
decrease in the value of the investment is
other-than-temporary.
These factors include, but are not limited to, age of the
venture, our intent and ability to retain our investment in the
entity, the financial condition and long-term prospects of the
entity, and the relationships with the other joint venture
partners and its lenders. The amount of loss recognized is the
excess of the investment’s carrying amount over its
estimated fair value. If we believe that the decline in fair
value is temporary, no impairment is recorded. The
aforementioned factors are taken as a whole by management in
determining the valuation of our investment property. Should the
actual results differ from management’s judgment, the
valuation could be negatively affected and may result in a
negative impact to our Consolidated Financial Statements.
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Table of Contents
Impairment
of Long-Lived Assets
We record impairment losses on long-lived assets used in
operations when events and circumstances indicate that the
assets might be impaired and the undiscounted cash flows
estimated to be generated by the future operation and
disposition of those assets are less than the net book value of
those assets. Our cash flow estimates are based upon historical
results adjusted to reflect our best estimate of future market
and operating conditions and our estimated holding periods. The
net book value of impaired assets is reduced to fair market
value. Our estimates of fair market value represent our best
estimate based upon industry trends and reference to market
rates and transactions.
Real
Estate Investment Properties
We purchase real estate investment properties from time to time
and allocate the purchase price to various components, such as
land, buildings, and intangibles related to in-place leases in
accordance with FASB ASC 805,
Business Combinations
(formerly SFAS 141R, “Business
Combinations”). The purchase price is allocated based on
the relative fair value of each component. The fair value of
buildings is determined as if the buildings were vacant upon
acquisition and subsequently leased at market rental rates. As
such, the determination of fair value considers the present
value of all cash flows expected to be generated from the
property including an initial
lease-up
period. We determine the fair value of in-place leases by
assessing the net effective rent and remaining term of the lease
relative to market terms for similar leases at acquisition. In
addition, we consider the cost of acquiring similar leases, the
foregone rents associated with the
lease-up
period, and the carrying costs associated with the
lease-up
period. The fair value of in-place leases is recorded and
amortized as amortization expense over the remaining contractual
lease period.
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, 2009 in our
Consolidated Statements of Operations we would have incurred
immaterial federal and state GAAP income taxes if we had failed
to qualify as a REIT.
The following discussion explains the changes in net cash
provided by operating activities and net cash provided by/(used
in) investing and financing activities that are presented in our
Consolidated Statements of Cash Flows.
Operating
Activities
For the year ended December 31, 2009, our net cash flow
provided by operating activities was $229.4 million
compared to $179.8 million for 2008. The increase in cash
flow from operating activities is primarily due to changes in
operating liabilities and is partially offset by a reduction in
property operating income.
For the year ended December 31, 2008, our net cash flow
provided by operating activities was $179.8 million
compared to $269.3 million for 2007. During 2008, the
decrease in cash flow from operating activities resulted
primarily from a reduction in property operating income from our
apartment community portfolio and a significant reduction in
operating liabilities. The reduction in property operating
income was driven by the Company completing the sale of a
significant component of our portfolio in the first quarter of
2008. A portion of the proceeds from the disposition were
reinvested in subsequent quarters which diluted the net cash
provided by operations for the period in which the Company held
restricted 1031 cash funds in lieu of revenue generating
operating communities.
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Table of Contents
Investing
Activities
For the year ended December 31, 2009, net cash used in
investing activities was $158.0 million compared to net
cash provided by investing activities of $302.3 million for
2008. The change is primarily driven by a reduction in the
disposition of real estate investments partially offset by a
reduction in the acquisition of real estate assets and capital
expenditures, all of which are discussed in further detail
throughout this Report.
For the year ended December 31, 2008, net cash provided by
investing activities was $302.3 million compared to net
cash used in investing activities of $90.1 million for
2007. Changes in the level of investing activities from period
to period reflects our strategy as it relates to acquisitions,
capital expenditures, development and disposition activities, as
well as the impact of the capital market environment on these
activities, all of which are discussed in further detail
throughout this Report.
Acquisitions
For the year ended December 31, 2009, we acquired one
community in Dallas, Texas with 289 units for
$28.5 million. For the year ended December 31, 2008,
we acquired 13 apartment communities with 4,558 apartment homes,
two parcels of land, and one retail property for aggregate
consideration of $1.0 billion. Our long-term strategic plan
is to achieve greater operating efficiencies by investing in
fewer, more concentrated markets. As a result, we have been
expanding our interests in communities located in California,
Florida, Metropolitan D.C. and the Washington State markets over
the past years. Prospectively, we plan to continue to channel
new investments into those markets we believe will provide the
best investment returns. Markets will be targeted based upon
defined criteria including favorable job formation, low
single-family home affordability and favorable demand/supply
ratio for multifamily housing.
Real
Estate Under Development
At December 31, 2009, our development pipeline for
wholly-owned communities totaled 1,576 homes with a budget of
$258.6 million in which we have a carrying value of
$216.9 million. We anticipate the completion of these
communities during 2010.
For the year ended December 31, 2009, we invested
approximately $183.2 million in development projects, an
increase of $23.1 million from our 2008 level of
$160.1 million. As a result of our investment in
developments, we completed development on three wholly-owned
communities with 831 apartment homes that have a carrying value
of $119.5 million.
Consolidated
Joint Ventures
UDR is a partner with an unaffiliated third party in a joint
venture (“Elements Too”) which is developing a 274
home apartment community in the central business district of
Bellevue, Washington. Construction began in the fourth quarter
of 2006 and is scheduled to be completed in the first quarter of
2010. At closing and at December 31, 2008, we owned 49% of
the joint venture. Our initial investment was
$10.0 million. On October 16, 2009, our partner in the
joint venture resigned as managing member and appointed UDR as
managing member. In addition, our partner relinquished its
voting rights and approval rights and its ability to
substantively participate in the decision-making process of the
joint venture. As a result of UDR’s appointment as managing
member, the Company is required to consolidate the joint
venture. On December 30, 2009, UDR entered into an
agreement with our partner to purchase its 49% interest in
Elements Too for $3.2 million (outstanding at
December 31, 2009). Upon closing of the agreement, the
Company’s equity interest in Elements Too will be 98%.
UDR is a partner with an unaffiliated third party in a joint
venture (“989 Elements”) which owns and operates a
23-story, 166 home high-rise apartment community in the central
business district of Bellevue, Washington. At closing, UDR owned
49% of the joint venture. Our initial investment was
$11.8 million. On December 30, 2009, UDR entered into
an agreement with our partner to purchase 49% of its interest in
989 Elements in consideration for $7.8 million (outstanding
at December 31, 2009). Concurrently, our partner resigned
as managing member and appointed UDR as managing member. In
addition, our partner relinquished
34
Table of Contents
its voting rights and approval rights and its ability to
substantively participate in the decision-making process of the
joint venture. At closing, the Company’s interest will
increase to 98%.
UDR is a partner with an unaffiliated third party in a joint
venture (“Bellevue Plaza”) which owns an operating
retail site in Bellevue, Washington. The Company initially
planned to develop a 430 home high rise apartment building with
ground floor retail on an existing operating retail center.
However, during the year ended December 31, 2009, the joint
venture decided to continue to operate the retail property as
opposed to developing the site. On December 30, 2009, UDR
entered into an agreement with our partner to purchase its 49%
interest in Bellevue Plaza for $5.2 million (outstanding at
December 31, 2009). In addition, our partner resigned as
managing member and appointed UDR as managing member. Concurrent
with its resignation, our partner relinquished its voting rights
and approval rights and its ability to substantively participate
in the decision-making process of the joint venture. At closing,
the Company will increase its interest in Bellevue Plaza from
49% to 98%.
For additional information regarding these joint ventures, see
Note 4, “Joint Ventures,” in the Consolidated
Financial Statements included in this Report.
During 2009, the Company established a joint venture with Kuwait
Finance House for the investment of up to $450.0 million in
multifamily properties located in key, high barrier to entry
markets. The partners will contribute equity of
$180.0 million of which the Company’s maximum equity
contribution will be 30% or $54.0 million when fully
invested. At closing, we owned 30% of the joint venture. Our
investment at December 31, 2009 was $242,000. At
December 31, 2009, the joint venture did not hold any
property.
Disposition
of Investments
During the year ended December 31, 2009, we did not dispose
of any communities. During the year ended December 31,
2008, UDR sold 86 communities with a total of 25,684 apartment
homes, for gross consideration of $1.7 billion, 53
condominiums from two communities with a total of 640
condominiums for gross consideration of $6.9 million, one
parcel of land for gross proceeds of $1.6 million and one
commercial property for gross proceeds of $6.5 million. We
recognized after-tax gains for financial reporting purposes of
$786.4 million on these sales. Proceeds from the sales were
used primarily to acquire new communities and reduce debt.
During 2008, we decided to discontinue sales of units with the
two communities identified for condominium conversion until such
time that the market conditions turn favorable and it is
economically beneficial to sell those units versus operate the
residual 525 units of those communities. As a result of our
decision to revert the remaining units to operations the Company
recorded a charge to earnings of $1.7 million, excluding
the catch up for depreciation on the units when they were
returned to operations.
As a result of our disposition activities in 2008, the Company
declared a Special Dividend payable to holders of our common
stock for $0.96 per share included with our recurring
distribution for the Company’s fourth quarter of 2008 for a
total of $1.29 per share payable on January 29, 2009 to
stockholders of record on December 9, 2008. Additional
information regarding the Special Dividend is set forth in
Item 1. Business in Part 1 of this Report.
In conjunction with the transaction in which we sold 86
communities for $1.7 billion, we received a note in the
amount of $200.0 million. The note was paid in full during
the year ended December 31, 2009.
For the year ended December 31, 2007, UDR sold 21
communities with a total of 7,125 apartment homes for gross
consideration of $729.2 million, one parcel of land for
$4.5 million, and contributed one property under
development, at cost, to a joint venture arrangement in Texas.
In addition, we sold 61 condominiums from two communities with a
total of 640 condominiums for gross consideration of
$10.4 million. We recognized after-tax gains for financial
reporting purposes of $239.1 million on these sales.
Proceeds from the sales were used primarily to reduce debt.
Financing
Activities
For the year ended December 31, 2009, our net cash used in
financing activities was $78.1 million compared to
$472.5 million for the comparable period of 2008.
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Table of Contents
The following significant financing activity occurred during the
year ended December 31, 2009:
| • | Repaid $159.6 million of secured debt and $658.2 million of unsecured debt (represents the notional amount of debt repaid and excludes the gain on extinguishment). The $658.2 million of unsecured debt includes the prepayment of our $240 million term loan, $141.9 million for maturing medium-term notes and $276.3 million for the repurchase of unsecured debt. The unsecured debt repurchases includes the tender offer of $37.5 million in aggregate principle amount of our 8.50% debentures due September 15, 2024 for $41.2 million of cash. | |
| • | Repurchased unsecured debt with a notional amount of $238.9 million for $222.3 million, which is included in the $658.2 million above, resulting in a gain on extinguishment of $9.8 million, net of deferred finance charges. The unsecured debt repurchased by the Company matured in 2009, 2011, 2013, 2024 and 2035. | |
| • | Closed on a $200 million secured credit facility. At December 31, 2009, $106.9 million of the amount drawn under the facility matures October 2019 and carries a fixed rate of 5.38% and $88.9 million of the amount drawn under the facility matures December 2019 and carries a fixed interest rate of 5.16%. The Company has one year from September 11, 2009 to draw on the remaining $4.2 million of capacity. | |
| • | Repurchased 997,738 shares of our 6.75% Series G Cumulative Redeemable Preferred Stock for $21.5 million, less than their liquidation value of $24.9 million. | |
| • | Initiated an “At the Market” equity distribution program pursuant to which we may sell up to 15 million shares of common stock from time to time to or through sales agents, by means of ordinary brokers’ transactions on the New York Stock Exchange at prevailing market prices at the time of sale, or as otherwise agreed with the applicable agent. As of December 31, 2009, the Company sold 4,460,032 shares of common stock under the program at an average price per share of $15.48, for aggregate gross proceeds of approximately $69.1 million. Aggregate net proceeds from such sales, after deducting commissions paid to the sales agents of approximately $1.4 million and related issuance costs of approximately $500,000, were approximately $67.2 million. |
For the year ended December 31, 2008, our net cash used in
financing activities was $472.5 million compared to
$178.1 million for the comparable period of 2007. The
increase in financing activities was due to increased net
payments, including debt buybacks on secured and unsecured debt;
the repurchase of shares of our 6.75% Series G Cumulative
Redeemable Preferred Stock; and the repurchase of shares of our
common stock. These cash outflows were offset by the issuance of
common equity through a public offering.
Credit
Facilities
As of December 31, 2009, we have secured revolving credit
facilities with Fannie Mae with an aggregate commitment of
$1.4 billion with $1.2 billion outstanding. The Fannie
Mae credit facilities are for an initial term of 10 years,
bear interest at floating and fixed rates, and certain variable
rate facilities can be extended for an additional five years at
our option. We have $950.0 million of the funded balance
fixed at a weighted average interest rate of 5.4% and the
remaining balance on these facilities is currently at a weighted
average variable rate of 1.7%.
As of December 31, 2008, we had secured revolving credit
facilities with Fannie Mae with an aggregate commitment of
$1.0 billion with $831.2 million outstanding. The
Fannie Mae credit facilities are for an initial term of
10 years, bear interest at floating and fixed rates, and
certain variable rate facilities can be extended for an
additional five years at our option. We had $666.6 million
of the funded balance fixed at a weighted average interest rate
of 5.5% and the remaining balance on these facilities is
currently at a weighted average variable rate of 3.1%.
On July 27, 2007, we amended and restated our existing
three-year $500 million unsecured bank revolving credit
facility with a maturity date of May 31, 2008 (which could
be extended for an additional year at our option), to increase
the facility to $600 million and to extend its maturity to
July 26, 2012. Under
36
Table of Contents
certain circumstances, we may increase the $600 million
credit facility to $750 million. Based on our current
credit ratings, the $600 million credit facility carries an
interest rate equal to LIBOR plus a spread of 47.5 basis
points, which represents a 10 basis point reduction to the
previous $500 million revolving credit facility. Under a
competitive bid feature and for so long as we maintain an
investment grade rating, we have the right under the
$600 million credit facility to bid out 50% of the
commitment amount and we can bid out 100% of the commitment
amount once per quarter. As of December 31, 2009 and 2008,
there was $189.3 million and $0, respectively, outstanding
on the unsecured revolving credit facility.
The Fannie Mae credit facility and the bank revolving credit
facility are subject to customary financial covenants and
limitations.
Interest
Rate Risk
We are exposed to interest rate risk associated with variable
rate notes payable and maturing debt that has to be refinanced.
We do not hold financial instruments for trading or other
speculative purposes, but rather issue these financial
instruments to finance our portfolio of real estate assets.
Interest rate sensitivity is the relationship between changes in
market interest rates and the fair value of market rate
sensitive assets and liabilities. Our earnings are affected as
changes in short-term interest rates impact our cost of variable
rate debt and maturing fixed rate debt. We had
$709.2 million in variable rate debt that is not subject to
interest rate swap contracts as of December 31, 2009. If
market interest rates for variable rate debt increased by
100 basis points, our interest expense would increase by
$6.0 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
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.
Funds
from Operations
Funds from operations, or FFO, is defined as net income
(computed in accordance with GAAP), excluding gains (or losses)
from sales of depreciable property, plus real estate
depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. We compute FFO
for all periods presented in accordance with the recommendations
set forth by the National Association of Real Estate Investment
Trust’s (“NAREIT”) April 1, 2002 White
Paper. We consider 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
generally accepted accounting principles. FFO does not represent
cash generated from operating activities in accordance with
generally accepted accounting principles and is not necessarily
indicative of cash available to fund cash needs.
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 REIT operating performance and defines FFO as net income
(computed in accordance with accounting principles generally
accepted in the United States), excluding gains (or losses) from
sales of depreciable property, premiums or original issuance
costs associated with preferred stock redemptions, plus
depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. The use of FFO,
combined with the required presentations, has been fundamentally
beneficial, improving the understanding of operating results of
REITs among the investing public and making comparisons of REIT
operating results more meaningful. We generally consider FFO to
be a useful measure for reviewing our comparative operating and
financial performance (although FFO
37
Table of Contents
should be reviewed in conjunction with net income which remains
the primary measure of performance) because by excluding gains
or losses related to sales of previously depreciated operating
real estate assets and excluding real estate asset depreciation
and amortization, FFO can help one compare the operating
performance of a Company’s real estate between periods or
as compared to different companies. We believe that FFO is the
best measure of economic profitability for real estate
investment trusts.
The following table outlines our FFO calculation and
reconciliation to GAAP for the three years ended
December 31, 2009
(dollars in thousands):
| For the Year Ended December 31, | ||||||||||||||||
| 2009 | 2008 | 2007 | ||||||||||||||
|
Net (loss)/income attributable to UDR, Inc.
|
$ | (87,532 | ) | $ | 697,790 | $ | 215,129 | |||||||||
|
Adjustments:
|
||||||||||||||||
|
Distributions to preferred stockholders
|
(10,912 | ) | (12,138 | ) | (13,910 | ) | ||||||||||
|
Real estate depreciation and amortization, including
discontinued operations
|
278,391 | 251,984 | 257,450 | |||||||||||||
|
Non-controlling interest
|
(4,091 | ) | 46,077 | 11,601 | ||||||||||||
|
Real estate depreciation and amortization on unconsolidated
joint ventures
|
4,759 | 4,502 | 1,980 | |||||||||||||
|
Net gains on the sale of depreciable property to a joint venture
|
— | — | (113,799 | ) | ||||||||||||
|
Net gains on the sale of depreciable property in discontinued
operations, excluding RE3
|
(2,343 | ) | (787,058 | ) | (117,468 | ) | ||||||||||
|
Funds from operations — basic
|
$ | 178,272 | $ | 201,157 | $ | 240,983 | ||||||||||
|
Distributions to preferred stockholders —
Series E (Convertible)
|
3,724 | 3,724 | 3,724 | |||||||||||||
|
Funds from operations — diluted
|
$ | 181,996 | $ | 204,881 | $ | 244,707 | ||||||||||
|
Write-off of convertible debt premium for repurchases
|
3,365 | 3,333 | — | |||||||||||||
|
Amortization of convertible debt premium
|
4,283 | 6,598 | 6,680 | |||||||||||||
|
Funds from operations as adjusted — diluted
|
$ | 189,644 | $ | 214,812 | $ | 251,387 | ||||||||||
|
Weighted average number of common shares and OP Units
outstanding — basic
|
155,796 | 138,971 | 141,778 | |||||||||||||
|
Weighted average number of common shares and OP Units
outstanding — diluted
|
159,561 | 142,904 | 147,199 | |||||||||||||
In the computation of diluted FFO, OP Units,
out-performance partnership units, unvested restricted stock,
stock options, and the shares of Series E Cumulative
Convertible Preferred Stock are dilutive; therefore, they are
included in the diluted share count.
RE
3
is
our subsidiary that focuses on development, land entitlement and
short-term hold investments.
RE
3
tax
benefits and gain on sales, net of taxes, is defined as net
sales proceeds less a tax provision and the gross investment
basis of the asset before accumulated depreciation. We consider
FFO with
RE
3
tax
benefits and gain on sales, net of taxes, to be a meaningful
supplemental measure of performance because the short-term use
of funds produce a profit that differs from the traditional
long-term investment in real estate for REITs.
38
Table of Contents
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 three years ended December 31, 2009
(shares in thousands):
| For the Year Ended December 31, | ||||||||||||||||||||
| 2009 | 2008 | 2007 | ||||||||||||||||||
|
Weighted average number of common shares and OP units
outstanding basic
|
155,796 | 138,971 | 141,778 | |||||||||||||||||
|
Weighted average number of OP units outstanding
|
(6,706 | ) | (8,752 | ) | (7,762 | ) | ||||||||||||||
|
Weighted average number of common shares outstanding —
basic per the Consolidated Statement of Operations
|
149,090 | 130,219 | 134,016 | |||||||||||||||||
|
Weighted average number of common shares, OP units, and common
stock equivalents outstanding — diluted
|
159,561 | 142,904 | 147,199 | |||||||||||||||||
|
Weighted average number of OP units outstanding
|
(6,706 | ) | (8,752 | ) | (7,762 | ) | ||||||||||||||
|
Weighted average incremental shares from assumed conversion of
stock options
|
(567 | ) | (412 | ) | (630 | ) | ||||||||||||||
|
Weighted average incremental shares from unvested restricted
stock
|
(162 | ) | (717 | ) | (408 | ) | ||||||||||||||
|
Weighted average number of Series A OPPSs outstanding
|
— | — | (1,579 | ) | ||||||||||||||||
|
Weighted average number of Series E preferred shares
outstanding
|
(3,036 | ) | (2,804 | ) | (2,804 | ) | ||||||||||||||
|
Weighted average number of common shares outstanding —
diluted per the Consolidated Statements of Operations
|
149,090 | 130,219 | 134,016 | |||||||||||||||||
FFO also does not represent cash generated from operating
activities in accordance with GAAP, and therefore should not be
considered an alternative to net cash flows from operating
activities, as determined by generally accepted accounting
principles, as a measure of liquidity. Additionally, it is not
necessarily indicative of cash availability to fund cash needs.
A presentation of cash flow metrics based on GAAP is as follows
(dollars in thousands):
| For the Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Net cash provided by operating activities
|
$ | 229,383 | $ | 179,754 | $ | 269,281 | ||||||
|
Net cash (used in)/provided by investing activities
|
(158,045 | ) | 302,304 | (90,100 | ) | |||||||
|
Net cash used in financing activities
|
(78,093 | ) | (472,537 | ) | (178,105 | ) | ||||||
Results
of Operations
The following discussion includes the results of both continuing
and discontinued operations for the periods presented.
Net
(Loss)/ Income Attributable to Common Stockholders
2009
-vs-2008
Net loss attributable to common stockholders was
($95.9 million) ($0.64 per diluted share) for the year
ended December 31, 2009 as compared to net income
attributable to common stockholders of $688.7 million
($5.29 per diluted share) for the comparable period in the prior
year. The decrease in net income available to common
stockholders for the year ended December 31, 2009 resulted
primarily from the following items, all of which are discussed
in further detail elsewhere within this Report:
| • | a reduction in disposition gains in 2009 as compared to 2008. The Company recognized net gains of $2.4 million and $786.4 million for the years ended December 31, 2009 and 2008, respectively; |
39
Table of Contents
| • | an increase in our loss from unconsolidated entities, primarily due to the recognition of a $16.0 million non-cash charge representing an other-than-temporary decline in the fair value of equity investments in two of our unconsolidated joint ventures during the quarter ended September 30, 2009; | |
| • | the recognition of an income tax benefit from the Company’s Taxable REIT Subsidiaries, or “TRS” during 2008; | |
| • | an increase in depreciation expense primarily due to the Company’s acquisition of operating properties and the completion of redevelopment and development communities in 2008 and 2009; | |
| • | a decrease in other income primarily due to a reduction in fees earned for both recurring and non-recurring items related to the Company’s joint ventures and a decrease in interest income; | |
| • | change in net income/(loss) attributable to non-controlling interest of $50.2 million. |
The decreases to our net income available to common stockholders
were partially offset by a decrease in general and
administrative expense of $7.4 million when compared to
2008.
2008
-vs-2007
Net income attributable to common stockholders was
$688.7 million ($5.29 per diluted share) for the year ended
December 31, 2008 as compared to $199.0 million ($1.48
per diluted share) for the comparable period in the prior year.
The increase in net income attributable to common stockholders
for the year ended December 31, 2008 resulted primarily
from the following items, all of which are discussed in further
detail elsewhere within this Report.
| • | an increase of $547.3 million in the gains on the disposition of our property inclusive of gains on sale to a joint venture; | |
| • | a decrease of $39.0 million in total interest expense due in part to the Company recognizing gains of $26.3 on the extinguishment of certain unsecured debt instruments; | |
| • | an increase of $16.9 million related to interest income generated by the Company; and | |
| • | a gain of $3.1 million related to the repurchase of shares of our 6.75% Series G Cumulative Redeemable Preferred Stock at less than their liquation value |
The increases to our net income attributable to common
stockholders were offset by: a reduction in property NOI of
$82.1 million due to our dispositions; an increase in net
income attributable to non-controlling interest of
$34.5 million; and an increase in general and
administrative expense of $7.6 million when compared to
2007.
Apartment
Community Operations
Our net income is primarily generated from the operation of our
apartment communities. The following table summarizes the
operating performance of our total apartment portfolio which
excludes commercial operating income and expense for each of the
periods presented
(dollars in thousands):
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
| 2009 | 2008 | % Change | 2008 | 2007 | % Change | |||||||||||||||||||
|
Property rental income
|
$ | 594,359 | $ | 599,343 | –0.8 | % | $ | 599,343 | $ | 735,293 | –18.5 | % | ||||||||||||
|
Property operating expense(a)
|
(202,773 | ) | (207,563 | ) | –2.3 | % | (207,563 | ) | (258,895 | ) | –19.8 | % | ||||||||||||
|
Property net operating income
|
$ | 391,586 | $ | 391,780 | 0.0 | % | $ | 391,780 | $ | 476,398 | –17.8 | % | ||||||||||||
| (a) | Excludes depreciation, amortization, and property management expenses. |
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Table of Contents
The following table is our reconciliation of property NOI to net
(loss)/income attributable to UDR, Inc. as reflected, for both
continuing and discontinued operations, for the periods
presented
(dollars in thousands):
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Property net operating income
|
$ | 391,586 | $ | 391,780 | $ | 476,398 | ||||||
|
Other net operating income
|
6,874 | 5,206 | 2,713 | |||||||||
|
Non-property income
|
12,362 | 27,190 | 4,321 | |||||||||
|
Hurricane related expenses
|
(127 | ) | (1,310 | ) | — | |||||||
|
Real estate depreciation and amortization
|
(278,391 | ) | (251,985 | ) | (257,450 | ) | ||||||
|
Interest, net
|
(142,152 | ) | (145,630 | ) | (184,597 | ) | ||||||
|
General and administrative and property management
|
(56,393 | ) | (63,762 | ) | (59,881 | ) | ||||||
|
Severance costs and other restructuring charges
|
— | (653 | ) | (4,333 | ) | |||||||
|
Other depreciation and amortization
|
(5,161 | ) | (4,866 | ) | (3,077 | ) | ||||||
|
Other operating expenses
|
(5,581 | ) | (4,569 | ) | (1,953 | ) | ||||||
|
Loss from unconsolidated entities
|
(18,665 | ) | (3,612 | ) | (1,589 | ) | ||||||
|
Tax (expense)/benefit for the TRS
|
(311 | ) | 9,713 | 17,110 | ||||||||
|
Net gain on sale of real estate
|
2,424 | 786,365 | 239,068 | |||||||||
|
Gain on consolidation of joint ventures
|
1,912 | — | — | |||||||||
|
Non-controlling interests
|
4,091 | (46,077 | ) | (11,601 | ) | |||||||
|
Net (loss)/income attributable to UDR, Inc.
|
$ | (87,532 | ) | $ | 697,790 | $ | 215,129 | |||||
Same
Communities
2009-vs.-2008
Our same store communities (those acquired, developed, and
stabilized prior to January 1, 2008 and held on
December 31, 2009) consisted of 33,166 apartment homes
and provided 76% of our total NOI for the year ended
December 31, 2009.
NOI for our same community properties decreased 2.2% or
$6.6 million for the year ended December 31, 2009
compared to the same period in 2008. The decrease in property
NOI was primarily attributable to a 2.0% or $8.8 million
decrease in property rental income, which was partially offset
by a 1.6% or $2.3 million decrease in operating expenses.
The decrease in revenues was primarily driven by a 2.9% or
$12.9 million decrease in rental rates which was offset by
an 18.9% or $4.0 million decrease in vacancy loss and an
8.6% or $1.4 million increase in reimbursement income.
Physical occupancy slightly increased 0.6% to 95.4% and total
income per occupied home decreased $30 to $1,149.
The decrease in property operating expenses was primarily driven
by a 1.3% or $568,000 decrease in real estate taxes due to
favorable tax appeals, a 3.3% or $764,000 decrease in repairs
and maintenance, and a 9.7% or $970,000 decrease in
administrative and marketing 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)
decreased to 68.0% as compared to 68.1% in the comparable period
in the prior year.
2008-vs.-2007
Our same store communities (those acquired, developed, and
stabilized prior to January 1, 2007 and held on
December 31, 2008) consisted of 32,124 apartment homes
and provided 74% of our property NOI for the year ended
December 31, 2008.
NOI for our same community properties increased 3.8% or
$10.8 million for the year ended December 31, 2008
compared to the same period in 2007. The increase in property
NOI was primarily attributable to a 3.6%
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or $14.8 million increase in rental revenues and other
income partially offset by a 3.1% or $4.1 million increase
in operating expenses. The increase in revenues was primarily
driven by a 1.4% or $6.0 million increase in rental rates,
a 13.9% or $2.0 million increase in reimbursement income,
and a 76.9% or $4.3 million decrease in rental concessions.
Physical occupancy increased 0.3% to 94.8% and total income per
occupied home increased $37 to $1,176.
The increase in property operating expenses was primarily driven
by a 5.9% or $2.3 million increase in real estate taxes due
to higher assessed values on our communities and favorable tax
appeals in 2007 and a 5.4% or $1.7 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 68.3% as compared to 68.1% in the comparable period
in the prior year.
Non-Mature
Communities
2009-vs.-2008
The remaining $95.2 million and $88.8 million of our
NOI during the year ended December 31, 2009 and 2008,
respectively, was generated from communities that we classify as
“non-mature communities.” UDR’s non-mature
communities consist of communities that do not meet the criteria
to be included in same communities, which includes communities
developed or acquired, redevelopment properties, sold
properties, properties classified as real estate held for
disposition and condominium properties. For the year ended
December 31, 2009, we recognized NOI for our developments
of $10.5 million, acquired communities of
$54.3 million, and redeveloped properties of
$24.8 million. For the year ended December 31, 2008,
we recognized NOI for our developments of $2.4 million,
acquired communities of $38.2 million, redeveloped
properties of $22.1 million and sold properties of
$23.5 million.
2008-vs.-2007
The remaining $103.6 million and $196.5 million of our
NOI during the year ended December 31, 2008 and 2007,
respectively, was generated from communities that we classify as
“non-mature communities.” For the year ended
December 31, 2008, we recognized NOI for our developments
of $7.5 million, acquired communities of
$46.0 million, redeveloped properties of $19.2 million
and sold properties of $25.0 million. For the year ended
December 31, 2007, we recognized net operating income for
our developments of $4.0 million, acquired communities of
$6.6 million, redeveloped properties of $14.9 million
and sold properties of $146.1 million. In addition, in 2007
the Company sold a portfolio of properties into a joint venture
that we continue to manage after the transaction and as such is
not deemed discontinued operations. The NOI from those
communities was $18.3 million.
Other
Income
For the year ended December 31, 2009, significant amounts
reflected in other income include: interest income and discount
amortization from an interest in a convertible debt security,
and fees earned for both recurring and non-recurring items
related to the Company’s joint ventures. For the years
ended December 31, 2009 and 2008, other income also
included interest income from a note for $200 million that
the Company received related to the disposition of 86 properties
during 2008. In May 2009, the $200 million note was paid in
full. For the year ended December 31, 2008, interest income
also included interest from uninvested 1031 proceeds. The
Company had redeployed all 1031 proceeds by December 31,
2008.
Tax
Benefit for TRS
UDR elected for certain consolidated subsidiaries to be treated
as 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
42
Table of Contents
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. For the year ended
December 31, 2009, we recognized tax expense to the extent
of cash taxes paid. For the years ended December 31, 2008
and 2007, we recognized a benefit due to the results of
operations and temporary differences associated with the TRS.
Other
Operating Expenses
For the year ended December 31, 2009, the increases in
other operating expenses are primarily due to additional costs
incurred by the Company related to long-term ground leases
associated with properties acquired in December 2007 and July
2008. A schedule of future obligations related to ground leases
is set forth under “Contractual Obligations” below.
Real
Estate Depreciation and Amortization
For the year ended December 31, 2009, real estate
depreciation and amortization on both continuing and
discontinued operations increased 10.5% or $26.4 million as
compared to the comparable period in 2008. The increase in
depreciation and amortization for the year ended
December 31, 2009 is primarily the result of the
Company’s acquisition of 13 communities with 4,558
apartment homes during 2008, development completions during 2009
and 2008, and additional capital expenditures. As part of the
Company’s acquisition activity a portion of the purchase
price is allocated to intangible assets and are typically
amortized over a period of less than one year.
For the year ended December 31, 2008, real estate
depreciation and amortization on both continuing and
discontinued operations decreased 2.1% or $5.5 million as
compared to the comparable period in 2007. The decrease in
depreciation and amortization for the year ended
December 31, 2008 is a result of the Company’s
repositioning efforts that included the sale of 86 operating
communities. As the properties sold in 2008 did not meet the
criteria to be deemed as
held-for-sale
the communities until late in the fourth quarter of 2007, we did
not cease depreciation until that time. With the proceeds from
the sale, the Company purchased $1.0 billion of properties.
As part of our allocation of fair value associated with the
purchase price, we attributed $14.0 million to in-place
leases for our multi-family communities, which are generally
amortized over an 11 month period. During the year ended
December 31, 2008, the Company recorded $3.7 million
of depreciation related to two properties that we had previously
been marketing as condominiums and classified as
held-for-sale
when we determined it prudent to operate these as rental
properties.
Interest
Expense
For the year ended December 31, 2009, interest expense on
both continuing and discontinued operations decreased 2.4% or
$3.5 million as compared to 2008. This decrease is
primarily due to the Company’s debt repurchase activity
during 2008 and 2009. During 2009, we recognized a gain of
$9.8 million as a result of repurchasing unsecured debt
securities with a notional amount of $238.9 million in the
open market throughout the year. The gains were partially offset
by $3.8 million of expenses related to the tender of
$37.5 million of unsecured debt and $2.6 million for
prepayment penalties and the write-off of the fair market value
adjustment for consolidated joint venture debt. In addition, the
weighted average interest rate decreased from 4.9% in 2008 to
4.5% in 2009, which further reduced our interest expense. The
decrease in the weighted average interest rate during 2009
reflects short-term bank borrowings and variable rate debt that
had lower interest rates in 2009 when compared to the same
period in 2008.
For the year ended December 31, 2008, interest expense on
both continuing and discontinued operations decreased 21.1% or
$39.0 million as compared to 2007. This decrease is
primarily due to the Company recognizing a gain of
$26.3 million on debt extinguishment that was partially
offset by a $4.2 million prepayment penalty incurred by the
Company in refinancing a secured debt instrument in 2008. The
gain on debt extinguishment was a result of the Company
repurchasing unsecured debt securities with a notional amount of
$207.7 million in the open market throughout the year. In
addition, the weighted average interest rate decreased from 5.3%
in 2007 to 4.9% in 2008, which further reduced our interest
expense. The decrease
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in the weighted average interest rate during 2008 reflects
short-term bank borrowings and variable rate debt that had lower
interest rates in 2008 when compared to the same period in 2007.
General
and Administrative
For the year ended December 31, 2009, general and
administrative expenses decreased 15.6% or $7.4 million as
compared to 2008. The decrease was primarily due to the one-time
charges during 2008 listed below.
For the year ended December 31, 2008, general and
administrative expenses increased 19.2% or $7.6 million as
compared to 2007. The increase was due to a number of factors,
including the Company writing off acquisition-related costs, the
Company no longer pursuing a condominium strategy resulted in
writing off $1.7 million in deferred sales charges, the
renegotiation
and/or
cancellation of certain operating leases
and/or
vendor contracts of $0.8 million, the Company cancelling a
contract to acquire a pre-sale property resulting in a charge of
$1.7 million and the Company acquiring certain contractual
rights related to a joint venture resulted in the Company
incurring a charge of $305,000 for the profit component of the
contracts.
Severance
Costs and Other Restructuring Charges
For the year ended December 31, 2008, the Company
recognized $653,000 of severance and restructuring charges as
the Company continued to consolidate our operations in Highlands
Ranch, Colorado. In addition, we announced reductions to certain
positions related to both operations and corporate staff.
For the year ended December 31, 2007, UDR recognized
$4.3 million in severance costs and other restructuring
charges partly as a result of our disposition of 86 communities
consisting of 25,684 apartment homes. As a result of a
comprehensive review of the organizational structure of UDR and
its operations, UDR recorded a charge of $3.6 million
during the fourth quarter of 2007 related to workforce
reductions, relocation costs, and other related costs. These
charges are included in the Consolidated Statements of
Operations within the line item “Severance costs and other
restructuring charges.” All charges were approved by
management and our Board of Directors in October 2007. The
Company had a zero balance related to the 2007 charges as of
December 31, 2008.
Gains on
the Sale of Land and Depreciable Property
For the years ended December 31, 2009, 2008 and 2007, we
recognized after-tax gains for financial reporting purposes of
$2.4 million, $786.4 million, and $239.1 million,
respectively. Changes in the level of gains recognized from
period to period reflect the changing level of our divestiture
activity from period to period as well as the extent of gains
related to specific properties sold.
Inflation
We believe that the direct effects of inflation on our
operations have been immaterial. While the impact of inflation
primarily impacts our results through wage pressures, utilities
and material costs, substantially all of our leases are for a
term of one year or less, which generally enables us to
compensate for any inflationary effects by increasing rents on
our apartment homes. Although an extreme escalation in energy
and food costs could have a negative impact on our residents and
their ability to absorb rent increases, we do not believe this
has had a material impact on our results for the year ended
December 31, 2009.
Off-Balance
Sheet Arrangements
We do not have any other off-balance sheet arrangements that
have, or are reasonably likely to have, a current or future
effect on our financial condition, changes in financial
condition, revenue or expenses, results of operations,
liquidity, capital expenditures or capital resources that are
material.
44
Table of Contents
Contractual
Obligations
The following table summarizes our contractual obligations as of
December 31, 2009
(dollars in thousands):
| Payments Due by Period | ||||||||||||||||||||
|
Contractual
Obligations
|
2010 | 2011-2012 | 2013-2014 | Thereafter | Total | |||||||||||||||
|
Long-term debt obligations
|
$ | 287,392 | $ | 1,264,050 | $ | 578,151 | $ | 1,296,996 | $ | 3,426,589 | ||||||||||
|
Interest on debt obligations
|
145,683 | 239,517 | 148,299 | 191,682 | 725,181 | |||||||||||||||
|
Unfunded commitments on development projects(a)
|
44,628 | — | — | — | 44,628 | |||||||||||||||
|
Operating lease obligations:
|
||||||||||||||||||||
|
Operating space
|
997 | 919 | — | — | 1,916 | |||||||||||||||
|
Ground leases(b)
|
4,545 | 9,090 | 9,090 | 295,686 | 318,411 | |||||||||||||||
| $ | 483,245 | $ | 1,513,576 | $ | 735,540 | $ | 1,784,364 | $ | 4,516,725 | |||||||||||
| (a) | Any unfunded costs at December 31, 2009 are shown in the year of estimated completion. The Company has project debt on many of our development projects. | |
| (b) | 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 2009, we incurred gross interest costs of
$159.3 million, of which $16.9 million was capitalized.
Factors
Affecting Our Business and Prospects
There are many factors that affect our business and the results
of our operations, some of which are beyond our control. These
factors include:
| • | general economic factors; | |
| • | unfavorable changes in apartment market and economic conditions that could adversely affect occupancy levels and rental rates; | |
| • | the failure of acquisitions to achieve anticipated results; | |
| • | possible difficulty in selling apartment communities; | |
| • | competitive factors that may limit our ability to lease apartment homes or increase or maintain rents; | |
| • | insufficient cash flow that could affect our debt financing and create refinancing risk; | |
| • | failure to generate sufficient revenue, which could impair our debt service payments and distributions to stockholders; | |
| • | development and construction risks that may impact our profitability; | |
| • | potential damage from natural disasters, including hurricanes and other weather-related events, which could result in substantial costs to us; | |
| • | risks from extraordinary losses for which we may not have insurance or adequate reserves; | |
| • | uninsured losses due to insurance deductibles, self-insurance retention, uninsured claims or casualties, or losses in excess of applicable coverage; | |
| • | delays in completing developments and lease-ups on schedule; | |
| • | our failure to succeed in new markets; | |
| • | changing interest rates, which could increase interest costs and affect the market price of our securities; |
45
Table of Contents
| • | 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; | |
| • | our internal control over financial reporting may not be considered effective which could result in a loss of investor confidence in our financial reports, and in turn have an adverse effect on our stock price; and | |
| • | changes in real estate laws, tax laws and other laws affecting our business. |
A discussion of these and other factors affecting our business
and prospects is set forth in Part I, Item 1A. Risk
Factors. We encourage investors to review these risk factors.
| 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 50 of this Report for the Index
to Consolidated Financial Statements and Schedule.
| Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
| Item 9A. | CONTROLS AND PROCEDURES |
Disclosure
Controls and Procedures
As of December 31, 2009, we carried out an evaluation,
under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures. Our disclosure controls and procedures
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. Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective in timely
alerting them to material information required to be included in
our periodic SEC reports.
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. However, our Chief
Executive Officer and Chief Financial Officer have concluded
that our disclosure controls and procedures are effective under
circumstances where our disclosure controls and procedures
should reasonably be expected to operate effectively.
Management’s
Report on Internal Control over Financial Reporting
UDR’s management is responsible for establishing and
maintaining adequate internal control over financial reporting
as defined in
Rule 13a-15(f)
under the Exchange Act. Under the supervision and with the
participation of our management, our Chief Executive Officer and
Chief Financial Officer conducted an evaluation of the
effectiveness of our internal control over financial reporting
based on the framework in
Internal Control —
Integrated Framework
issued by the Committee of Sponsoring
Organizations (COSO).
Based on UDR’s evaluation, management concluded that our
internal control over financial reporting was effective as of
December 31, 2009.
46
Table of Contents
Ernst & Young LLP, the independent registered public
accounting firm that audited our consolidated financial
statements included in this Report, has audited UDR’s
internal control over financial reporting as of
December 31, 2009. The report of Ernst & Young
LLP, which expresses an unqualified opinion on UDR’s
internal control over financial reporting as of
December 31, 2009, is included under the heading
“Report of Independent Registered Public Accounting Firm on
Internal Control Over Financial Reporting” contained in
this Report.
Changes
in Internal Control Over Financial Reporting
Our Chief Executive Officer and our Chief Financial Officer
concluded that during the quarter ended December 31, 2009,
there has been no change in our internal control over financial
reporting that has materially affected, or is reasonably likely
to materially affect, our internal control over financial
reporting.
| Item 9B. | OTHER INFORMATION |
None.
| 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
“Election of Directors,” “Corporate Governance
Matters,” “Audit Committee Report,”
“Corporate Governance Matters-Audit Committee Financial
Expert,” “Corporate Governance Matters-Identification
and Selection of Nominees for Directors,” “Corporate
Governance Matters-Board of Directors and Committee
Meetings” and “Section 16(a) Beneficial Ownership
Reporting Compliance” in our definitive proxy statement for
our Annual Meeting of Stockholders to be held on May 14,
2010.
Information required by this item regarding our executive
officers is included in Part I of this Report in the
section entitled “Business-Executive Officers of the
Company.”
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
our Annual Meeting of Stockholders to be held on May 14,
2010. We intend to satisfy the disclosure requirements under
Item 10 of
Form 8-K
regarding an amendment to, or a waiver from, a provision of our
codes by posting such amendment or waiver on our website.
| Item 11. | EXECUTIVE COMPENSATION |
The information required by this item is incorporated by
reference to the information set forth under the headings
“Security Ownership of Certain Beneficial Owners and
Management,” “Corporate Governance
Matters-Compensation Committee Interlocks and Insider
Participation,” “Executive Compensation,”
“Compensation of Directors” and “Compensation
Committee Report” in our definitive proxy statement for our
Annual Meeting of Stockholders to be held on May 14, 2010.
| 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
“Equity Compensation Plan Information” in our
definitive proxy statement for our Annual Meeting of
Stockholders to be held on May 14, 2010.
47
Table of Contents
| Item 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
The information required by this item is incorporated by
reference to the information set forth under the heading
“Security Ownership of Certain Beneficial Owners and
Management,” “Corporate Governance Matters-Corporate
Governance Overview,” “Corporate Governance
Matters-Director
Independence,” “Corporate Governance
Matters-Independence of Audit, Compensation and Governance
Committees,” and “Executive Compensation” in our
definitive proxy statement for our Annual Meeting of
Stockholders to be held on May 14, 2010.
| 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 Fees” and “Pre-Approval Policies and
Procedures” in our definitive proxy statement for our
Annual Meeting of Stockholders to be held on May 14, 2010.
| Item 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
(a) The following documents are filed as part of this
Report:
1.
Financial Statements.
See Index to Consolidated
Financial Statements and Schedule on page 50 of this Report.
2.
Financial Statement Schedule.
See Index to
Consolidated Financial Statements and Schedule on page 50
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.
48
Table of Contents
SIGNATURES
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.
| UDR, INC. | ||||
|
Date: February 25, 2010
|
By: |
/s/ Thomas
W. Toomey
Chief Executive Officer and President |
||
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below on February 25,
2010 by the following persons on behalf of the registrant and in
the capacities indicated.
|
/s/ Thomas
W. Toomey
Chief Executive Officer, President, and Director |
/s/ Robert
P. Freeman
Director |
|||
|
/s/ David
L. Messenger
Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
/s/ Jon
A. Grove
Director |
|||
|
/s/ Robert
C. Larson
Chairman of the Board |
/s/ Thomas
R. Oliver
Director |
|||
|
/s/ James
D. Klingbeil
Vice Chairman of the Board |
/s/ Lynne
B. Sagalyn
Director |
|||
|
/s/ Katherine
A. Cattanach
Director |
/s/ Mark
J. Sandler
Director |
|||
|
/s/ Eric
J. Foss
Director |
/s/ Thomas
C. Wajnert
Director |
|||
49
Table of Contents
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
UDR, INC.
UDR, INC.
| Page | ||||
| 51 | ||||
|
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
|
||||
| 52 | ||||
| 53 | ||||
| 54 | ||||
| 55 | ||||
| 57 | ||||
| 59 | ||||
|
SCHEDULE FILED AS PART OF THIS REPORT
|
||||
| 97 | ||||
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.
50
Table of Contents
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
UDR, Inc.
We have audited UDR, Inc.’s internal control over financial
reporting as of December 31, 2009, based on criteria
established in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (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
effectiveness of 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, 2009, 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,
2009 and 2008, and the related consolidated statements of
operations, stockholders’ equity and comprehensive income,
and cash flows for each of the three years in the period ended
December 31, 2009 of UDR, Inc. and our report dated
February 25, 2010, expressed an unqualified opinion thereon.
/s/ Ernst &
Young LLP
Denver, Colorado
February 25, 2010
51
Table of Contents
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
UDR, Inc.
UDR, Inc.
We have audited the accompanying consolidated balance sheets of
UDR, Inc. (the “Company”) as of December 31, 2009
and 2008, and the related consolidated statements of operations,
stockholders’ equity and comprehensive income, and cash
flows for each of the three years in the period ended
December 31, 2009. 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, 2009 and
2008, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
December 31, 2009, 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 consolidated financial statements taken as
a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in Note 1 to the consolidated financial
statements, the Company adopted Financial Accounting Standards
Board Staff Position No. APB 14 — 1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash Upon Conversion (Including Partial Cash
Settlement)
(“FSP APB 14 — 1”) (codified
in FASB ASC Topic 470, Debt with Conversions and Other Options);
SFAS No. 160,
Non-controlling Interests in
Consolidated Financial Statements
(“SFAS 160”) (codified in FASB ASC Topic 810,
Consolidation); and EITF 09-E,
Accounting for
Distributions to Shareholders with Components of Stock and Cash
(“EITF 09-E”) (codified in ASU
2010-01,
Accounting for Distributions to Shareholders with Components of
Stock and Cash) and retrospectively adjusted its accounting for
its consolidated financial statements for all periods presented
herein.
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, 2009, based on criteria established in
Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
and our report dated February 25, 2010 expressed an
unqualified opinion thereon.
/s/ Ernst &
Young LLP
Denver, Colorado
February 25, 2010
52
Table of Contents
UDR,
Inc.
(In thousands, except for share data)
| December 31, | ||||||||
| 2009 | 2008 | |||||||
|
ASSETS
|
||||||||
|
Real estate owned:
|
||||||||
|
Real estate held for investment
|
$ | 5,995,290 | $ | 5,644,930 | ||||
|
Less: accumulated depreciation
|
(1,350,067 | ) | (1,078,637 | ) | ||||
| 4,645,223 | 4,566,293 | |||||||
|
Real estate under development (net of accumulated depreciation
of
$1,226 and $52) |
318,531 | 186,771 | ||||||
|
Total real estate owned, net of accumulated depreciation
|
4,963,754 | 4,753,064 | ||||||
|
Cash and cash equivalents
|
5,985 | 12,740 | ||||||
|
Marketable securities
|
37,650 | — | ||||||
|
Restricted cash
|
8,879 | 7,726 | ||||||
|
Deferred financing costs, net
|
26,601 | 29,168 | ||||||
|
Notes receivable
|
7,800 | 207,450 | ||||||
|
Investment in unconsolidated joint ventures
|
14,126 | 47,048 | ||||||
|
Other assets
|
67,822 | 85,842 | ||||||
|
Other assets — real estate held for disposition
|
— | 767 | ||||||
|
Total assets
|
$ | 5,132,617 | $ | 5,143,805 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
|
Secured debt
|
$ | 1,989,434 | $ | 1,462,471 | ||||
|
Unsecured debt
|
1,437,155 | 1,798,662 | ||||||
|
Real estate taxes payable
|
16,976 | 14,035 | ||||||
|
Accrued interest payable
|
19,146 | 20,744 | ||||||
|
Security deposits and prepaid rent
|
31,798 | 28,829 | ||||||
|
Distributions payable
|
30,857 | 190,189 | ||||||
|
Deferred gains on the sale of depreciable property
|
28,826 | 28,845 | ||||||
|
Accounts payable, accrued expenses, and other liabilities
|
80,685 | 71,395 | ||||||
|
Other liabilities — real estate held for disposition
|
— | 1,204 | ||||||
|
Total liabilities
|
3,634,877 | 3,616,374 | ||||||
|
Redeemable non-controlling interests in operating partnership
|
98,758 | 108,092 | ||||||
|
Stockholders’ equity
|
||||||||
|
Preferred stock, no par value; 50,000,000 shares authorized
2,803,812 shares of 8.00% Series E Cumulative
Convertible issued and outstanding (2,803,812 shares at
December 31, 2008)
|
46,571 | 46,571 | ||||||
|
3,432,962 shares of 6.75% Series G Cumulative
Redeemable issued and outstanding (4,430,700 shares at
December 31, 2008)
|
85,824 | 110,768 | ||||||
|
Common stock, $0.01 par value; 250,000,000 shares
authorized 155,465,482 shares issued and outstanding
(137,423,074 shares at December 31, 2008)
|
1,555 | 1,374 | ||||||
|
Additional paid-in capital
|
1,948,669 | 1,717,940 | ||||||
|
Distributions in excess of net income
|
(687,180 | ) | (448,737 | ) | ||||
|
Accumulated other comprehensive income/(loss), net
|
2 | (11,927 | ) | |||||
|
Total UDR, Inc. stockholders’ equity
|
1,395,441 | 1,415,989 | ||||||
|
Non-controlling interest
|
3,541 | 3,350 | ||||||
|
Total equity
|
1,398,982 | 1,419,339 | ||||||
|
Total liabilities and stockholders’ equity
|
$ | 5,132,617 | $ | 5,143,805 | ||||
See accompanying notes to consolidated financial
statements.
53
Table of Contents
UDR,
Inc.
(In thousands, except per share data)
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
REVENUES
|
||||||||||||
|
Rental income
|
$ | 602,899 | $ | 563,408 | $ | 501,618 | ||||||
|
Non-property income:
|
||||||||||||
|
Other income
|
12,362 | 27,190 | 4,320 | |||||||||
|
Gain on consolidation of joint ventures
|
1,912 | — | — | |||||||||
|
Total Revenues
|
617,173 | 590,598 | 505,938 | |||||||||
|
EXPENSES
|
||||||||||||
|
Rental expenses:
|
||||||||||||
|
Real estate taxes and insurance
|
74,617 | 66,992 | 59,036 | |||||||||
|
Personnel
|
51,808 | 48,672 | 43,038 | |||||||||
|
Utilities
|
31,718 | 29,301 | 26,147 | |||||||||
|
Repair and maintenance
|
31,697 | 30,333 | 27,342 | |||||||||
|
Administrative and marketing
|
14,599 | 14,640 | 13,009 | |||||||||
|
Property management
|
16,581 | 15,494 | 13,792 | |||||||||
|
Other operating expenses
|
5,581 | 4,563 | 1,442 | |||||||||
|
Real estate depreciation and amortization
|
278,391 | 251,984 | 191,478 | |||||||||
|
Interest
|
||||||||||||
|
Expense incurred
|
141,380 | 158,525 | 161,658 | |||||||||
|
Net gain on debt extinguishment
|
(9,849 | ) | (26,306 | ) | — | |||||||
|
Amortization of convertible debt discount
|
4,283 | 6,598 | 6,680 | |||||||||
|
Prepayment penalty on debt restructure
|
1,022 | 4,201 | — | |||||||||
|
Write-off of FMV adjustment for debt paid off on consolidated
joint venture
|
1,552 | — | — | |||||||||
|
Expenses related to tender offer
|
3,764 | — | — | |||||||||
|
General and administrative
|
39,812 | 47,179 | 39,566 | |||||||||
|
Severance costs and other restructuring charges
|
— | 653 | 4,333 | |||||||||
|
Hurricane related expenses
|
127 | 1,310 | — | |||||||||
|
Other depreciation and amortization
|
5,161 | 4,866 | 3,077 | |||||||||
|
Total Expenses
|
692,244 | 659,005 | 590,598 | |||||||||
|
Loss from operations
|
(75,071 | ) | (68,407 | ) | (84,660 | ) | ||||||
|
Loss from unconsolidated entities
|
(18,665 | ) | (3,612 | ) | (1,589 | ) | ||||||
|
Tax (expense)/benefit for taxable REIT subsidiary
|
(311 | ) | 9,713 | 17,110 | ||||||||
|
Net gain on the sale of depreciable property to a joint venture
|
— | — | 113,799 | |||||||||
|
(Loss)/income from continuing operations
|
(94,047 | ) | (62,306 | ) | 44,660 | |||||||
|
Income from discontinued operations
|
2,424 | 806,173 | 182,070 | |||||||||
|
Consolidated net (loss)/income
|
(91,623 | ) | 743,867 | 226,730 | ||||||||
|
Net loss/(income) attributable to non-controlling interests
|
4,091 | (46,077 | ) | (11,601 | ) | |||||||
|
Net (loss)/income attributable to UDR, Inc.
|
(87,532 | ) | 697,790 | 215,129 | ||||||||
|
Distributions to preferred stockholders — Series B
|
— | — | (4,819 | ) | ||||||||
|
Distributions to preferred stockholders —
Series E (Convertible)
|
(3,724 | ) | (3,724 | ) | (3,724 | ) | ||||||
|
Distributions to preferred stockholders — Series G
|
(7,188 | ) | (8,414 | ) | (5,367 | ) | ||||||
|
Discount/(premium) on preferred stock repurchases, net
|
2,586 | 3,056 | (2,261 | ) | ||||||||
|
Net (loss)/income attributable to common stockholders
|
$ | (95,858 | ) | $ | 688,708 | $ | 198,958 | |||||
|
Earnings per weighted average common share — basic and
diluted:
|
||||||||||||
|
(Loss)/income from continuing operations attributable to common
stockholders
|
$ | (0.66 | ) | $ | (0.90 | ) | $ | 0.13 | ||||
|
Income from discontinued operations
|
$ | 0.02 | $ | 6.19 | $ | 1.35 | ||||||
|
Net (loss)/income attributable to common stockholders
|
$ | (0.64 | ) | $ | 5.29 | $ | 1.48 | |||||
|
Common distributions declared per share
|
$ | 0.85 | $ | 2.29 | $ | 1.22 | ||||||
|
Weighted average number of common shares outstanding —
basic
|
149,090 | 130,219 | 134,016 | |||||||||
|
Weighted average number of common shares outstanding —
diluted
|
149,090 | 130,219 | 134,016 | |||||||||
See accompanying notes to consolidated financial
statements.
54
Table of Contents
UDR,
Inc.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands, except for share data)
(In thousands, except for share data)
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Operating Activities
|
||||||||||||
|
Consolidated net (loss)/income
|
$ | (91,623 | ) | $ | 743,867 | $ | 226,730 | |||||
|
Adjustments to reconcile net (loss)/income to net cash provided
by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
283,552 | 256,850 | 261,038 | |||||||||
|
Net gains on the sale of depreciable property
|
(2,424 | ) | (786,181 | ) | (125,269 | ) | ||||||
|
Net gains on the sale of land
|
— | (183 | ) | — | ||||||||
|
Net gains on the sale of depreciable property to a joint venture
|
— | — | (113,799 | ) | ||||||||
|
Gain on consolidation of joint ventures
|
(1,912 | ) | — | — | ||||||||
|
Write off of the fair market adjustment for debt paid off on
consolidated joint venture
|
1,552 | — | — | |||||||||
|
Gains on debt extinguishment
|
(9,849 | ) | (26,306 | ) | — | |||||||
|
Write off of bad debt
|
3,570 | 2,411 | 4,042 | |||||||||
|
Write off of note receivable and other assets
|
1,354 | — | — | |||||||||
|
Loss from unconsolidated entities
|
18,665 | 3,612 | 1,589 | |||||||||
|
Amortization of deferred financing costs and other
|
7,953 | 7,585 | 7,378 | |||||||||
|
Amortization of deferred compensation
|
7,605 | 7,024 | 6,356 | |||||||||
|
Amortization of convertible debt discount
|
4,283 | 6,598 | 6,680 | |||||||||
|
Prepayments/(refunds) on income taxes
|
2,854 | (6,846 | ) | 6,284 | ||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Increase in operating assets
|
3,512 | (1,532 | ) | (7,495 | ) | |||||||
|
Increase/(decrease) in operating liabilities
|
291 | (27,145 | ) | (4,253 | ) | |||||||
|
Net cash provided by operating activities
|
$ | 229,383 | $ | 179,754 | $ | 269,281 | ||||||
|
Investing Activities
|
||||||||||||
|
Proceeds from sales of real estate investments, net
|
$ | — | $ | 1,487,067 | $ | 737,201 | ||||||
|
Proceeds from note receivable
|
200,000 | 18,774 | 4,000 | |||||||||
|
Disbursements related to notes receivable
|
(500 | ) | (13,569 | ) | (6,155 | ) | ||||||
|
Acquisition of real estate assets (net of liabilities assumed)
and initial capital expenditures
|
(28,528 | ) | (936,538 | ) | (435,997 | ) | ||||||
|
Development of real estate assets
|
(183,157 | ) | (160,074 | ) | (101,460 | ) | ||||||
|
Capital expenditures and other major improvements —
real estate assets, net of escrow reimbursement
|
(85,403 | ) | (123,234 | ) | (194,427 | ) | ||||||
|
Capital expenditures — non-real estate assets
|
(6,269 | ) | (23,249 | ) | (4,547 | ) | ||||||
|
Investment in unconsolidated joint venture
|
(24,988 | ) | (2,396 | ) | (24,954 | ) | ||||||
|
Distributions received from unconsolidated joint venture
|
1,741 | — | — | |||||||||
|
Purchase of marketable securities
|
(30,941 | ) | — | — | ||||||||
|
Purchase deposits on pending real estate acquisitions
|
— | (694 | ) | (7,544 | ) | |||||||
|
Change in funds held in escrow from IRC Section 1031
exchanges
|
— | 56,217 | (56,217 | ) | ||||||||
|
Net cash (used in)/provided by investing activities
|
$ | (158,045 | ) | $ | 302,304 | $ | (90,100 | ) | ||||
55
Table of Contents
UDR,
Inc.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands, except for share data) — (Continued)
(In thousands, except for share data) — (Continued)
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Financing Activities
|
||||||||||||
|
Payments on secured debt
|
$ | (159,612 | ) | $ | (216,354 | ) | $ | (186,831 | ) | |||
|
Proceeds from the issuance of secured debt
|
560,436 | 445,162 | 91,804 | |||||||||
|
Proceeds from the issuance of unsecured debt
|
100,000 | 240,000 | 150,000 | |||||||||
|
Payments on unsecured debt
|
(641,759 | ) | (452,156 | ) | (167,255 | ) | ||||||
|
Net proceeds/(repayment) of revolving bank debt
|
189,300 | (309,500 | ) | 222,300 | ||||||||
|
Payment of financing costs
|
(8,650 | ) | (6,702 | ) | (6,772 | ) | ||||||
|
Issuance of common and restricted stock, net
|
398 | 2,588 | 2,524 | |||||||||
|
Proceeds from the issuance of common shares through public
offering, net
|
67,151 | 184,327 | — | |||||||||
|
(Payments)/proceeds from the (repurchase)/issuance of
Series G preferred stock, net
|
(21,505 | ) | (20,347 | ) | 135,000 | |||||||
|
Payment of preferred stock issuance costs
|
— | — | (4,252 | ) | ||||||||
|
(Repayment)/proceeds from the investment of performance based
programs, net
|
— | (944 | ) | 50 | ||||||||
|
Distributions paid to non-controlling interests
|
(7,275 | ) | (18,666 | ) | (12,099 | ) | ||||||
|
Distributions paid to preferred stockholders
|
(11,203 | ) | (12,429 | ) | (13,312 | ) | ||||||
|
Distributions paid to common stockholders
|
(144,576 | ) | (166,983 | ) | (175,923 | ) | ||||||
|
Repurchase of common stock
|
(798 | ) | (140,533 | ) | (77,939 | ) | ||||||
|
Redemption of Series B preferred stock
|
— | — | (135,400 | ) | ||||||||
|
Net cash used in financing activities
|
(78,093 | ) | (472,537 | ) | (178,105 | ) | ||||||
|
Net (decrease)/increase in cash and cash equivalents
|
(6,755 | ) | 9,521 | 1,076 | ||||||||
|
Cash and cash equivalents, beginning of year
|
12,740 | 3,219 | 2,143 | |||||||||
|
Cash and cash equivalents, end of year
|
$ | 5,985 | $ | 12,740 | $ | 3,219 | ||||||
|
Supplemental Information:
|
||||||||||||
|
Interest paid during the year, net of amounts capitalized
|
$ | 164,357 | $ | 176,087 | $ | 197,722 | ||||||
|
Non-cash transactions:
|
||||||||||||
|
Conversion of operating partnership non-controlling interests to
common stock
|
||||||||||||
|
(2,130,452 in 2009, 1,474,532 in 2008, and 1,031,627 shares
in 2007)
|
21,117 | 12,176 | 8,794 | |||||||||
|
Payment of Special Dividend through the issuance of
11,358,042 shares of common stock
|
132,787 | — | — | |||||||||
|
Issuance of restricted stock awards
|
2 | 6 | 1 | |||||||||
|
Issuance of note receivable upon the disposition of real estate
|
— | 200,000 | — | |||||||||
|
Secured debt assumed with the acquisition of properties, net of
fair value adjustment
|
— | 95,728 | 72,680 | |||||||||
|
Real estate assets contributed
|
— | — | 10,350 | |||||||||
See accompanying notes to consolidated financial
statements.
56
Table of Contents
UDR,
Inc.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE
INCOME
(In
thousands, except per share data)
|
Accumulated
|
||||||||||||||||||||||||||||||||||||
|
Distributions in
|
Other
|
|||||||||||||||||||||||||||||||||||
|
Excess of
|
Comprehensive
|
Non-
|
||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock |
Paid-in
|
Net
|
Income/
|
controlling
|
|||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | (Loss) | interest | Total | ||||||||||||||||||||||||||||
|
Balance, December 31, 2006
|
8,219,821 | $ | 181,971 | 135,029,126 | $ | 1,350 | $ | 1,715,411 | $ | (956,265 | ) | $ | — | $ | 2,996 | $ | 945,463 | |||||||||||||||||||
|
Comprehensive Income
|
||||||||||||||||||||||||||||||||||||
|
Net income
|
— | — | — | — | — | 215,129 | — | 152 | 215,281 | |||||||||||||||||||||||||||
|
Other comprehensive income:
|
||||||||||||||||||||||||||||||||||||
|
Unrealized loss on derivative financial instruments
|
— | — | — | — | — | — | (814 | ) | — | (814 | ) | |||||||||||||||||||||||||
|
Allocation to redeemable non-controllable interests
|
— | — | — | — | — | — | 44 | — | 44 | |||||||||||||||||||||||||||
|
Comprehensive Income
|
215,129 | (770 | ) | 152 | 214,511 | |||||||||||||||||||||||||||||||
|
Issuance of common and restricted shares
|
— | — | 371,453 | 4 | 8,944 | — | — | — | 8,948 | |||||||||||||||||||||||||||
|
Purchase of common shares
|
— | — | (3,114,500 | ) | (31 | ) | (77,905 | ) | — | — | — | (77,936 | ) | |||||||||||||||||||||||
|
Redemption of 8.60% Series B Cumulative Redeemable shares
|
(5,416,009 | ) | (135,400 | ) | — | — | 2,261 | (2,261 | ) | — | — | (135,400 | ) | |||||||||||||||||||||||
|
Issuance of 6.75% Series G Cumulative Redeemable shares
|
5,400,000 | 135,000 | — | — | (4,252 | ) | — | — | — | 130,748 | ||||||||||||||||||||||||||
|
Adjustment for conversion of non-controlling interests
|
||||||||||||||||||||||||||||||||||||
|
of unitholders in operating partnerships
|
— | — | 1,031,627 | 10 | 8,684 | — | — | — | 8,694 | |||||||||||||||||||||||||||
|
Common stock distributions declared ($1.22 per share)
|
— | — | — | — | — | (177,540 | ) | — | — | (177,540 | ) | |||||||||||||||||||||||||
|
Preferred stock distributions declared-Series B ($1.07 per
share)
|
— | — | — | — | — | (4,819 | ) | — | — | (4,819 | ) | |||||||||||||||||||||||||
|
Preferred stock distributions declared-Series E ($1.33 per
share)
|
— | — | — | — | — | (3,726 | ) | — | — | (3,726 | ) | |||||||||||||||||||||||||
|
Preferred stock distributions declared-Series G ($1.13 per
share)
|
— | — | — | — | — | (5,366 | ) | — | — | (5,366 | ) | |||||||||||||||||||||||||
|
Adjustment to reflect redeemable non-controlling OP units at
|
||||||||||||||||||||||||||||||||||||
|
redemption value
|
— | — | — | — | — | 40,776 | — | — | 40,776 | |||||||||||||||||||||||||||
|
Balance, December 31, 2007
|
8,203,812 | 181,571 | 133,317,706 | 1,333 | 1,653,143 | (894,072 | ) | (770 | ) | 3,148 | 944,353 | |||||||||||||||||||||||||
|
Comprehensive Income
|
||||||||||||||||||||||||||||||||||||
|
Net income
|
— | — | — | — | — | 697,791 | — | 202 | 697,993 | |||||||||||||||||||||||||||
|
Other comprehensive income:
|
||||||||||||||||||||||||||||||||||||
|
Unrealized loss on derivative financial instruments
|
— | — | — | — | — | — | (11,901 | ) | (11,901 | ) | ||||||||||||||||||||||||||
|
Allocation to redeemable non-controllable interests
|
— | — | — | — | — | — | 744 | — | 744 | |||||||||||||||||||||||||||
|
Comprehensive income
|
— | — | — | — | — | 697,791 | (11,157 | ) | 202 | 686,836 | ||||||||||||||||||||||||||
|
Issuance of common and restricted shares
|
— | — | 630,536 | 6 | 9,191 | — | — | — | 9,197 | |||||||||||||||||||||||||||
|
Issuance of common shares through public offering
|
— | — | 8,000,000 | 80 | 183,085 | — | — | — | 183,165 | |||||||||||||||||||||||||||
|
Redemption of 969,300 shares of 6.75% Series G
Cumulative
|
||||||||||||||||||||||||||||||||||||
|
Redeemable Shares
|
(969,300 | ) | (24,232 | ) | — | — | 829 | 3,056 | — | — | (20,347 | ) | ||||||||||||||||||||||||
|
Purchase of common shares
|
— | — | (5,999,700 | ) | (60 | ) | (140,468 | ) | — | — | — | (140,528 | ) | |||||||||||||||||||||||
|
Adjustment for conversion of non-controlling interests
|
||||||||||||||||||||||||||||||||||||
|
of unitholders in operating partnerships
|
— | — | 1,474,532 | 15 | 12,160 | — | — | — | 12,175 | |||||||||||||||||||||||||||
|
Common stock distributions declared ($2.2900 per share)
|
— | — | — | — | — | (308,313 | ) | — | — | (308,313 | ) | |||||||||||||||||||||||||
57
Table of Contents
UDR,
Inc.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE
INCOME
(In
thousands, except per share
data) — (Continued)
|
Accumulated
|
||||||||||||||||||||||||||||||||||||
|
Distributions in
|
Other
|
|||||||||||||||||||||||||||||||||||
|
Excess of
|
Comprehensive
|
Non-
|
||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock |
Paid-in
|
Net
|
Income/
|
controlling
|
|||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | (Loss) | interest | Total | ||||||||||||||||||||||||||||
|
Preferred stock distributions declared-Series E ($1.3288
per share)
|
— | — | — | — | — | (3,724 | ) | — | — | (3,724 | ) | |||||||||||||||||||||||||
|
Preferred stock distributions declared-Series G ($1.6875
per share)
|
— | — | — | — | — | (8,414 | ) | — | — | (8,414 | ) | |||||||||||||||||||||||||
|
Adjustment to reflect redeemable non-controlling OP units at
|
||||||||||||||||||||||||||||||||||||
|
redemption value
|
— | — | — | — | — | 64,939 | — | — | 64,939 | |||||||||||||||||||||||||||
|
Balance, December 31, 2008
|
7,234,512 | 157,339 | 137,423,074 | 1,374 | 1,717,940 | (448,737 | ) | (11,927 | ) | 3,350 | 1,419,339 | |||||||||||||||||||||||||
|
Comprehensive (loss)/income
|
||||||||||||||||||||||||||||||||||||
|
Net loss
|
— | — | — | — | — | (87,532 | ) | — | 191 | (87,341 | ) | |||||||||||||||||||||||||
|
Other comprehensive income
|
||||||||||||||||||||||||||||||||||||
|
Change in fair value of marketable securities
|
— | — | — | — | — | — | 4,584 | — | 4,584 | |||||||||||||||||||||||||||
|
Unrealized gain on derivative financial instruments
|
— | — | — | — | — | — | 8,133 | — | 8,133 | |||||||||||||||||||||||||||
|
Allocation to redeemable non-controllable interests
|
— | — | — | — | — | — | (788 | ) | — | (788 | ) | |||||||||||||||||||||||||
|
Comprehensive (loss)/income
|
(87,532 | ) | 11,929 | 191 | (75,412 | ) | ||||||||||||||||||||||||||||||
|
Issuance of common and restricted shares
|
— | — | 193,882 | 2 | 8,262 | — | — | — | 8,264 | |||||||||||||||||||||||||||
|
Issuance of common shares through public offering, net of
issuance costs
|
— | — | 4,460,032 | 45 | 67,186 | 67,231 | ||||||||||||||||||||||||||||||
|
Redemption of 997,738 shares of 6.75% Series G
Cumulative
|
||||||||||||||||||||||||||||||||||||
|
Redeemable Shares
|
(997,738 | ) | (24,944 | ) | — | — | 853 | 2,586 | — | — | (21,505 | ) | ||||||||||||||||||||||||
|
Purchase of common shares
|
— | — | (100,000 | ) | (1 | ) | (797 | ) | — | — | — | (798 | ) | |||||||||||||||||||||||
|
Adjustment for conversion of non-controlling interest in
Series B and C LLC
|
||||||||||||||||||||||||||||||||||||
|
Series C, D and E LLC
|
— | — | — | — | 1,456 | — | — | — | 1,456 | |||||||||||||||||||||||||||
|
Adjustment for conversion of non-controlling interests
|
||||||||||||||||||||||||||||||||||||
|
of unitholders in operating partnerships
|
— | — | 2,130,452 | 21 | 21,096 | — | — | — | 21,117 | |||||||||||||||||||||||||||
|
Issuance of common shares through special dividend
|
— | — | 11,358,042 | 114 | 132,673 | — | — | — | 132,787 | |||||||||||||||||||||||||||
|
Common stock distributions declared ($0.845 per share)
|
— | — | — | — | — | (127,066 | ) | — | — | (127,066 | ) | |||||||||||||||||||||||||
|
Preferred stock distributions declared-Series E ($1.3288
per share)
|
— | — | — | — | — | (3,724 | ) | — | — | (3,724 | ) | |||||||||||||||||||||||||
|
Preferred stock distributions declared-Series G ($1.6875
per share)
|
— | — | — | — | — | (7,188 | ) | — | — | (7,188 | ) | |||||||||||||||||||||||||
|
Adjustment to reflect redeemable non-controlling redemption value
|
— | — | — | — | — | (15,519 | ) | — | (15,519 | ) | ||||||||||||||||||||||||||
|
Balance, December 31, 2009
|
6,236,774 | $ | 132,395 | 155,465,482 | $ | 1,555 | $ | 1,948,669 | $ | (687,180 | ) | $ | 2 | $ | 3,541 | $ | 1,398,982 | |||||||||||||||||||
See accompanying notes to consolidated financial
statements.
58
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009
| 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Organization,
formation and special dividend
UDR, Inc. (“UDR”, the “Company”
“we” or “our”) is a self-administered real
estate investment trust, or REIT, that owns, operates, acquires,
renovates, develops, and manages apartment communities generally
in high
barrier-to-entry
markets located in the United States. The high
barrier-to-entry
markets are characterized by limited land for new construction,
difficult and lengthy entitlement process, expensive
single-family home prices and significant employment growth
potential. At December 31, 2009, our apartment portfolio
consisted of 165 consolidated communities located in 23 markets
consisting of 45,913 apartment homes. In addition, the Company
has an ownership interest in 3,992 apartment units through
unconsolidated joint ventures.
On November 5, 2008, our Board of Directors declared a
dividend of $1.29 per share (“the Special Dividend”)
payable to holders of our common stock. The dividend was paid on
January 29, 2009 to stockholders of record on
December 9, 2008. The dividend represented the
Company’s 2008 fourth quarter recurring distribution of
$0.33 per share and an additional special distribution in the
amount of $0.96 per share due to taxable income arising from our
disposition activity occurring during the year. Subject to the
Company’s right to pay the entire dividend in cash,
stockholders had the option to make an election to receive
payment in cash or in shares, however, the aggregate amount of
cash payable to stockholders, other than cash payable in lieu of
fractional shares, would not be less than $44.0 million.
The Special Dividend, totaling $177.1 million was paid on
137,266,557 shares issued and outstanding on the record
date. Approximately $133.1 million of the Special Dividend
was paid through the issuance of 11,358,042 shares of
common stock, which was determined based on the volume weighted
average closing sales price of our common stock of $11.71 per
share on the NYSE on January 21, 2009 and January 22,
2009. In January 2010, the Financial Accounting Standards
Board’s (“FASB”) issued Accounting Standards
Update
2010-01,
Accounting for Distributions to Shareholders with Components
of Stock and Cash
(“ASU
2010-01”),
which considers distributions that contain components of cash
and stock and allows shareholders to select their preferred form
of distribution. Such a distribution, to the extent paid in
stock. is now treated as a stock issuance on the date the
dividend is paid. At December 31, 2008, the Company accrued
$133.1 million of distribution payable related to the
Special Dividend. ASU
2010-01
is
effective for the Company on December 15, 2009 and was
applied on a retrospective basis. As a result, the Company
reversed the effect of the issuance of additional shares of
common stock pursuant to the Special Dividend, which was
retroactively reflected in each of the historical periods
presented within the Company’s
Form 8-K
filed with the SEC on May 22, 2009, and effectively issued
these shares on January 29, 2009 (the payment date of the
Special Dividend). For the years ended December 31, 2008
and 2007, basic and diluted net income attributable to common
stockholders per weighted average common share prior to
retrospective adjustment was $4.89 and $1.37, respectively. This
was based on weighted average common shares of 140,982,000 and
145,092,000 (basic and diluted), for the years ended
December 31, 2008 and 2007, respectively.
Basis of
presentation
The accompanying Consolidated Financial Statements of UDR and
its wholly-owned subsidiaries includes certain joint ventures,
which the Company previously accounted for as investments under
the equity method (see Note 4, “Joint Ventures”,
for further discussion). All significant intercompany accounts
and transactions have been eliminated in consolidation.
The Company’s subsidiaries include United Dominion Realty,
L.P., (the “Operating Partnership”), and Heritage
Communities L.P. (the “Heritage OP”). As of
December 31, 2009, there were 179,863,065 units in the
Operating Partnership outstanding, of which
173,876,477 units or 96.7% were owned by UDR and
5,986,588 units or 3.3% were owned by limited partners. As
of December 31, 2009, there were 6,264,460 units
59
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
in the Heritage OP outstanding, of which 100% were owned by UDR.
The Consolidated Financial Statements of UDR include the
non-controlling interests of the unitholders in the Operating
Partnership and the Heritage OP.
The Company evaluated subsequent events through
February 25, 2010, the date of issuance of the
Company’s financial statements. No recognized or
non-recognized subsequent events were noted.
Recent
Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board
(“FASB”) issued Statement of Financial Accounting
Standard (“SFAS”) No. 168, “The FASB
Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles — a replacement of FASB
Statement No. 162” (“SFAS 168”).
Effective for our financial statements issued for interim and
annual periods commencing with the quarterly period ended
September 30, 2009, the FASB Accounting Standards
Codification (“Codification” or “ASC”) is
the source of authoritative U.S. GAAP recognized by the
FASB to be applied by nongovernmental entities. Rules and
interpretive releases of the SEC under authority of federal
securities laws are also sources of authoritative GAAP for SEC
registrants. The Codification supersedes all then-existing,
non-SEC accounting and reporting standards. In the FASB’s
view, the Codification does not change GAAP, and therefore the
adoption of SFAS 168, now referred to as FASB ASC 105,
Generally Accepted Accounting Principles
, did not have an
effect on our consolidated financial position, results of
operations or cash flows. However, where we have referred to
specific authoritative accounting literature, both the
Codification and pre-Codification GAAP literature are disclosed.
FASB ASC 810,
Consolidation
(formerly SFAS 160,
“Non-controlling Interests in Consolidated Financial
Statements- an amendment of Accounting Research Bulletin 51
(“Consolidated Financial Statements”)”
establishes accounting and reporting standards for the
non-controlling (minority) interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a
non-controlling interest in a subsidiary should be reported as
equity in the consolidated financial statements. Consolidated
net income should include the net income for both the parent and
the non-controlling interest with disclosure of both amounts on
the consolidated statement of operations. The calculation of
earnings per share will continue to be based on income amounts
attributable to the parent. The Company adopted this standard,
effective January 1, 2009. As a result, loss from
continuing operations attributable to common stockholders per
diluted share decreased by $0.39 and $0.07 for the years ended
December 31, 2008 and 2007, respectively and income from
discontinued operations per diluted share increased by the same
amounts. There was no impact to net (loss)/income attributable
to common stockholders per diluted share due to the adoption of
this standard. As part of our adoption of this standard, we have
retroactively adopted the measurement provisions of FASB ASC
480,
Distinguishing Liabilities from Equity
(formerly
EITF Topic D-98, “Classification and Measurement of
Redeemable Securities”). Upon adoption, we adjusted the
carrying amount of the operating partnership units by
recognizing an $86.8 million increase to “Redeemable
non-controlling interest in operating partnership” on the
balance sheet and a corresponding decrease in
“Distributions in Excess of Net Income,” which was
accounted for as a cumulative effect adjustment as of
January 1, 2006.
FASB ASC
470-20,
Debt with Conversion and Other Options
(formerly FASB
Staff Position APB
14-1,
“Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion”) (“Subtopic
470-20”)
requires entities that issued certain convertible debt
instruments that may be settled or partially settled in cash on
conversion to separately account for the liability (debt) and
equity (conversion option) components of the instrument in a
manner that reflects the entity’s nonconvertible debt
borrowing rate. This standard requires that an entity determine
the estimated fair value of a similar debt instrument as of the
date of the issuance without the conversion feature but
inclusive of any other embedded features such as puts and calls
and assign that value to the debt component of the instrument,
which would result in a discount being recorded. The debt is
subsequently accreted to its par value over its expected life
using the market rate at the date of issuance. The residual
value between the initial proceeds and the value allocated to
the debt would be
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NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
reflected in equity as additional paid in capital. The Company
adopted this standard, effective for fiscal years beginning
after December 15, 2008 and retrospectively applied it to
both new and existing convertible instruments. Accordingly, the
Company recognized a decrease in “Distributions in Excess
of Net Income” of $117,000 on January 1, 2006 for the
cumulative change in interest expense. We also recorded a
$32.6 million increase to “Additional Paid in
Capital” for the allocation of the equity component. The
Company recognized an additional $7.6 million ($0.05 per
diluted share), $9.9 million ($0.08 per diluted share), and
$6.7 million ($0.05 per diluted share) of interest expense
for the years ended December 31, 2009, 2008, and 2007,
respectively due to the adoption of this standard. This impact
includes both regular amortization of convertible debt premium
and the effect of write offs due to convertible debt repurchases.
FASB ASC 260,
Earnings per Share
(formerly FSP
EITF 03-6-1,
“Determining Whether Instruments Granted in Share-Based
Payment Transactions are Participating Securities”) was
effective January 1, 2009 and has been applied
retrospectively. This standard clarifies that unvested
share-based payment awards that participate in dividends similar
to shares of common stock or operating partnership units should
be treated as participating securities. It also affects the
computation of basic and diluted earnings per share for unvested
restricted stock awards which entitle the holders to dividends.
The standard did not affect earnings per share amounts for the
year ended December 31, 2009 because we reported a net loss
for the period and accordingly had no undistributed earnings.
This standard had an immaterial affect on the earnings per share
amount for the year ended December 31, 2009. We do not
expect it to have a material effect on future earnings per share
amounts.
FASB ASC 820,
Fair Value Measurements and Disclosures
(formerly SFAS 157, “Fair Value Instruments”
and FASB Staff Position
No. FAS 157-2,
“Effective Date of FASB Statement No. 157”)
(“Topic 820”) defines fair value, establishes a
framework for measuring fair value in accordance with GAAP and
expands disclosures about fair value measurement. Topic 820
applies to other accounting pronouncements that require or
permit fair value measurements but does not require any new fair
value measurements. The adoption of Topic 820 for financial
assets and liabilities, as of January 1, 2008, did not have
a material impact on our financial position or operations. Topic
820 delayed the effective date of Topic 820’s fair value
measurement requirements for nonfinancial assets and liabilities
that are not required or permitted to be measured at fair value
on a recurring basis. Fair value measurements identified in
Topic 820 was effective for our fiscal year beginning
January 1, 2009 and did not have an impact on our
consolidated financial position, results of operations or cash
flows.
FASB ASC 805,
Business Combinations
(formerly
SFAS 141R, “Business Combinations”) became
effective for fiscal years beginning after December 15,
2008. This standard establishes principles and requirements for
how the acquirer of a business recognizes and measures in its
financial statements the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the
acquiree. This standard also provides guidance for recognizing
and measuring the goodwill acquired in the business combination,
recognizing assets acquired and liabilities assumed arising from
contingencies, and determining what information to disclose to
enable users of the financial statements to evaluate the nature
and financial effects of the business combination. The adoption
of this guidance could materially impact our future consolidated
financial position and results of operations depending on the
Company’s acquisition activity as certain acquisition costs
that have historically been capitalized as part of the basis of
the real estate and amortized over the real estate’s useful
life will now be expensed as incurred. This guidance did not
have a material impact on our financial statements during the
year ended December 31, 2009.
FASB ASC 815,
Derivatives
(formerly SFAS 161,
“Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133”)
(“Topic 815”), effective for our fiscal year beginning
January 1, 2009, presents disclosure requirements to
enhance the financial statement user’s understanding of:
(a) how and why an entity uses derivative instruments,
(b) how derivative instruments and related hedged items are
accounted for under Topic 815 and its related interpretations,
and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial
performance, and cash flows. The standard
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NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
did not have any impact on our consolidated financial position,
results of operations or cash flows. However, it requires
qualitative disclosures about objectives and strategies for
using derivatives, quantitative disclosures about the fair value
of and gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in
derivative instruments. See Note 9,
Derivative and
Hedging Activity,
for these additional disclosures.
In June 2009, the FASB issued SFAS 167, “Amendments to
FASB Interpretation No. 46(R) (“SFAS 167”),
which (1) addresses the effects of eliminating the
qualifying special-purpose entity concept from ASC 860,
Transfers and Servicing
(formerly SFAS 140,
“Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities”), and (2) responds
to concerns about the application of certain key provisions of
ASC 810,
Consolidation
(formerly FASB Interpretation
No. 46(R), “Consolidation of Variable Interest
Entities”), including concerns over the transparency of
enterprises’ involvement with variable interest entities
(“VIEs”). SFAS 167 is effective beginning on
January 1, 2010. The Company does not expect a material
impact on our consolidated financial position, results of
operations or cash flows as a result of the new guidance.
In August 2009, the FASB issued Accounting Standards Update
(ASU)
No. 2009-05,
“Measuring Liabilities at Fair Value” (“ASU
2009-05”),
which provides amendments to Topic 820. ASU
2009-05
provides additional guidance clarifying the measurement of
liabilities at fair value. ASU
2009-05
was
effective in the fourth quarter 2009 for a calendar year entity.
This guidance did not have a material impact on our consolidated
financial position, results of operations or cash flows during
the year ended December 31, 2009.
Investment
in joint ventures
We use the equity method to account for investments that qualify
as variable interest entities where we are not the primary
beneficiary and entities that we do not control or where we do
not own a majority of the economic interest but have the ability
to exercise significant influence over the operating and
financial policies of the investee. Throughout these financial
statements we use the term “joint venture” when
referring to entities in which we do not have a 100% ownership
interest. The Company will also use the equity method when we
function as the managing member and our joint venture partner
has substantive participating rights or where we can be replaced
by our joint venture partner as managing member without cause.
For a joint venture accounted for under the equity method, our
share of net earnings or losses is reflected as income when
earned and distributions are credited against our investment in
the joint venture as received.
In determining whether a joint venture 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 disproportionally between the economic
and voting interests of the entity. As of December 31,
2009, the Company did not assess any of our joint ventures as
variable interest entities where UDR was the primary beneficiary.
In accordance with FASB ASC
323-10,
Investments- Equity Method and Joint Ventures
(formerly
APB Opinion 18, “The Equity Method of Accounting for
Investments in Common Stock”) (“Subtopic
323-10”),
we continually evaluate our investments in unconsolidated joint
ventures when events or changes in circumstances indicate that
there may be an
other-than-temporary
decline in value. We consider various factors to determine if a
decrease in the value of the investment is
other-than-temporary.
These factors include, but are not limited to, age of the
venture, our intent and ability to retain our investment in the
entity, the financial condition and long-term prospects of the
entity, and the relationships with the other joint venture
partners and its lenders. The amount of loss recognized is the
excess of the investment’s carrying amount over its
estimated fair value. If we believe that the decline in fair
value is temporary, no impairment is recorded. The
aforementioned
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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.
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. Certain previously reported
amounts have been reclassified to conform to the current
financial statement presentation.
Discontinued
operations
For properties accounted for under FASB ASC 360,
Property,
Plant and Equipment
(formerly
SFAS
144,
“Accounting for the Impairment or Disposal of Long-Lived
Assets”) (“Topic 360”), the results of operations
for those properties sold during the year or classified as
held-for-sale
at the end of the current year are classified as discontinued
operations in the current and prior periods. Further, to meet
the discontinued operations criteria, the Company will not have
any significant continuing involvement in the ownership or
operation of the property after the sale or disposition. Once a
property is deemed as
held-for-sale,
depreciation is no longer recorded. However, if the Company
determines that the property no longer meets the criteria for
held-for-sale,
the Company will recapture any unrecorded depreciation on the
property. The sales related to condominium units are also
included in discontinued operations (see Note 3,
“Discontinued Operations” for further discussion).
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 allocates
the purchase price to the tangible and identifiable intangible
assets 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 allocating cost to an acquired community, we
first allocate costs to the estimated intangible value of the
existing lease agreements and then to the estimated value of the
land, building and fixtures assuming the community is vacant.
The Company estimates the intangible value of the lease
agreements by determining the lost revenue associated with a
hypothetical
lease-up.
Depreciation on the building is based on the expected useful
life of the asset and the in-place leases are amortized over
their remaining contractual life.
Quarterly or when changes in circumstances warrant, UDR will
assess our real estate portfolio for indicators of impairment.
In determining whether the Company has indicators of impairment
in our real estate assets, we assess whether the long-lived
asset’s carrying value exceeds the community’s
undiscounted future cash flows, which is representative of
projected 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
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INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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 upon industry trends and
reference to market rates and transactions.
For long-lived assets to be disposed of, impairment losses are
recognized when the fair value of the asset less estimated cost
to sell is less than the carrying value of the asset. Properties
classified as real estate held for 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 dispose, determined on an
asset-by-asset
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 straight-line basis over the
estimated useful lives of the related assets which are
35 years for buildings, 10 to 35 years for major
improvements, and 3 to 10 years for furniture, fixtures,
equipment, and other assets. As of December 31, 2009 and
2008, the value of our net intangible assets which are reflected
in “Other assets” was $7.3 million and
$10.7 million, respectively. As of December 31, 2009
and 2008, the value of our net intangible liabilities which are
reflected in “Accounts payable, accrued expenses, and other
liabilities” was $5.2 million and $7.1 million in
our Consolidated Balance Sheets. The balances are being
amortized over the remaining life of the respective intangible.
All development projects and related carrying costs are
capitalized and reported on the Consolidated Balance Sheets as
“Real estate under development.” As each building in a
project is completed and becomes available for
lease-up,
the total cost of the building is transferred to real estate
held for investment and the assets are depreciated over their
estimated useful lives. The costs of development projects which
include interest, real estate taxes, insurance, and allocated
development overhead related to support costs for personnel
working directly on the development site are capitalized during
the construction period. During 2009, 2008, and 2007, total
interest capitalized was $16.9 million, $14.9 million,
and $13.2 million, respectively.
Cash and
cash equivalents
Cash and cash equivalents consist of cash on hand, demand
deposits with financial institutions and short-term, highly
liquid investments. We consider all highly liquid investments
with maturities of three months or less when purchased to be
cash equivalents. The majority of the Company’s cash and
cash equivalents are held at major commercial banks.
Restricted
cash
Restricted cash consists of escrow deposits held by lenders for
real estate taxes, insurance and replacement reserves, and
security deposits.
Escrow —
1031 exchange funds
In most cases, disposition proceeds are set aside and designated
to fund future tax-deferred exchanges of qualifying real estate
investments. If these proceeds are not redeployed to qualifying
real estate investment within 180 days, these funds are
redesignated as cash and cash equivalents.
Derivative
financial instruments
The Company utilizes derivative financial instruments to manage
interest rate risk and will generally designate these financial
instruments as a cash flow hedge. 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
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
income and for non-designated derivative financial instruments
in earnings. For cash flow hedges the ineffective component, if
any, is recorded in earnings.
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 subject
to the provisions of FASB ASC
470-50,
Debt Modification and Extinguishment
(formerly
EITF 96-19,
“Debtors’ Accounting for a Modification or Exchange of
Debt Instruments”). 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. When the
cash flows are not substantially different, the costs associated
with the renewal or modification are capitalized and amortized
into interest expense over the term of the related debt
instrument. The balance of any unamortized financing costs
associated with retired debt is expensed upon retirement.
Deferred financing costs for new debt instruments include fees
and costs incurred by the Company to obtain financing. Deferred
financing costs are generally amortized on a straight-line
basis, which approximates the effective interest method, over a
period not to exceed the term of the related debt.
Preferred
share repurchases
When repurchasing preferred stock, the Company recognizes share
issuance costs as a charge to the preferred stock on a pro rata
basis to the total costs incurred for the preferred stock
offering. The Company, during the years ended December 31,
2009, 2008 and 2007, recognized share issuance costs of
$853,000, $829,000 and $2.3 million, respectively as part
of the amount reported in “Discount/(premium) on preferred
stock repurchases, net” in the Consolidated Statement of
Stockholders Equity.
Comprehensive
income
Comprehensive income, which is defined as all changes in equity
during each period except for those resulting from investments
by or distributions to stockholders, is displayed in the
accompanying Consolidated Statements of Stockholders’
Equity and Comprehensive Income. For the year ended
December 31, 2009, other comprehensive income consisted of
the change in fair value of marketable securities, the change in
the fair value of effective cash flow hedges from our
consolidated subsidiaries and our proportionate percentage of
previously unconsolidated joint ventures in which UDR has
elected to utilize hedge accounting. (See Note 4,
“Joint Ventures” for further discussion.)
Revenue
and real estate sales gain recognition
Rental income related to leases is recognized on an accrual
basis when due from residents in accordance with FASB ASC 840,
Leases
(formerly SFAS 13 “Accounting for
Leases”) and SEC Staff Accounting
Bulletin No. 104, “Revenue Recognition”.
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, fixed and
determinable.
The Company accounts for sales of real estate in accordance with
FASB ASC
360-20,
Real Estate Sales
(formerly SFAS 66,
“Accounting for Sales of Real Estate”). For sale
transactions meeting the requirements for full accrual profit
recognition, such as the Company no longer having continuing
involvement in the property, 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.
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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 will defer the gain on the
interest we retain. The Company will recognize any deferred gain
when the property is then 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.
Advertising
costs
All advertising costs are expensed as incurred and reported on
the Consolidated Statements of Operations within the line item
“Administrative and marketing”. During 2009, 2008, and
2007, total advertising expense was $5.7 million,
$6.1 million, and $7.8 million, respectively.
Stock-based
employee compensation plans
UDR accounts for its stock-based employee compensation plans in
accordance with FASB ASC 718,
Compensation- Stock
Compensation
(formerly SFAS 123(R), “Share-Based
Payments”). This standard requires an entity to measure 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 recognize the cost over the period during which
the employee is required to provide service in exchange for the
award, which is generally the vesting period. The fair value for
stock options issued by the Company is calculated utilizing the
Black-Scholes-Merton formula. For performance based awards, the
Company remeasures the fair value each balance sheet date with
adjustment made on a cumulative basis until the award is settled
and the final compensation is known.
Non-controlling
interests of unitholders in operating partnerships
Interests in operating partnerships held by limited partners are
represented by operating partnership units
(“OP Units”). The income is allocated to holders
of OP Units based upon net income available to common
stockholders and the weighted average number of OP Units
outstanding to total common shares plus OP Units
outstanding during the period. Capital contributions,
distributions, and profits and losses are allocated to
non-controlling interests in accordance with the terms of the
individual partnership agreements. Operating Partnership units
can be exchanged for cash or shares of UDR’s common stock
on a
one-for-one
basis, at the option of UDR. Heritage OP units can be exchanged
for cash or shares of UDR’s common stock on a 1.575 for one
basis, at the option of UDR. During 2009, all Heritage OP units
were redeemed and converted into 292,660 shares of common
stock.
Earnings
per share
Basic earnings per common share is computed based upon the
weighted average number of common shares outstanding during the
year. Diluted earnings per common share is computed based upon
common shares outstanding plus the effect of dilutive stock
options and other potentially dilutive common stock equivalents.
The dilutive effect of OP units, stock options and other
potentially dilutive common stock equivalents is determined
using the treasury stock method based on UDR’s average
stock price. The number of shares used to compute basic and
dilutive earnings per share have been adjusted to reflect the
Special Dividend during the year ended December 31, 2009.
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UDR,
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NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following table sets forth the computation of basic and
diluted earning per share
(dollars in thousands, except per
share amounts)
:
| Years Ended December 31, | ||||||||||||||||
| 2009 | 2008 | 2007 | ||||||||||||||
|
Numerator for earnings per share — basic and diluted:
|
||||||||||||||||
|
Net (loss)/earnings attributable to common stockholders
|
$ | (95,858 | ) | $ | 688,708 | $ | 198,958 | |||||||||
|
Denominator for earnings per share — basic and diluted:
|
||||||||||||||||
|
Weighted average common shares outstanding
|
150,067 | 131,364 | 134,888 | |||||||||||||
|
Non-vested restricted stock awards
|
(977 | ) | (1,145 | ) | (872 | ) | ||||||||||
|
Denominator for basic and diluted earnings per share
|
149,090 | 130,219 | 134,016 | |||||||||||||
|
Net (loss)/income attributable to common stockholders- basic and
diluted
|
$ | (0.64 | ) | $ | 5.29 | $ | 1.48 | |||||||||
The effect of the conversion of the operating partnership units,
stock options, restricted stock, convertible preferred stock,
and convertible debt, is not dilutive and is therefore not
included in the above calculations.
If the operating partnership units were converted to common
stock, the additional shares of common stock outstanding for the
years ended December 31, 2009, 2008 and 2007 would be
6,705,624; 8,751,367; and 7,762,070 weighted average common
shares, respectively.
The measurement period of the Series E Out-Performance
Program ended on December 31, 2009, and no Series E
Out-Performance Partnership Shares were issued. Accordingly, no
additional operating partnership units were issued at that date
(see Note 12, “
Commitments and
Contingencies”
, for discussion of UDR’s
Outperformance Programs).
If the convertible preferred stock were converted to common
stock, the additional shares of common stock outstanding would
be 3,035,548 for the year ended December 31, 2009, and
2,803,812 weighted average common shares for the years ended
December 31, 2008 and 2007.
If the stock options and unvested restricted stock were
converted to common stock, the additional weighted average
common shares outstanding for the three years ended
December 31, 2009, 2008, and 2007 would be 729,592;
1,129,907; and 1,038,446 weighted average common shares,
respectively.
Income
taxes
UDR is operated as, and elects to be taxed as a REIT. Generally,
a REIT complies with the provisions of the Code if it meets
certain requirements concerning its income and assets, as well
as if it distributes at least 90% of its REIT taxable income to
its stockholders and will not be subject to U.S. federal
income taxes if it distributes at least 100% of its income.
Accordingly, no provision has been made for federal income taxes
of the REIT. UDR is subject to certain state and local excise or
franchise taxes, for which provision has been made. If we fail
to qualify as a REIT in any taxable year, our taxable income
will be subject to United States Federal income tax at regular
corporate rates (including any applicable alternative minimum
tax). Even if we qualify as a REIT, we may be subject to certain
state and local income taxes and to United States Federal income
tax. We also will be required to pay a 100% tax on non-arms
length transactions between us and a taxable REIT subsidiary and
on any net income from sales of property that the IRS
successfully asserts was property held for sale to customers in
the ordinary course.
UDR elected for certain consolidated subsidiaries to be treated
as Taxable REIT Subsidiaries (“TRS”) relating to the
Company’s development activities. Income taxes for our TRS
are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for future tax
consequences attributable
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NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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.
Market
concentration risk
Approximately 12.7% and 11.2% of our apartment communities are
located in Orange County, California and Metropolitan DC,
respectively, based on the carrying value of our real estate
portfolio as of December 31, 2009. Therefore, the Company
is subject to increased exposure (positive or negative) from
economic and other competitive factors specific to those markets.
| 2. | REAL ESTATE OWNED |
Real estate assets owned by the Company consist of income
producing operating properties, properties under development,
land held for future development and properties deemed as held
for sale. As of December 31, 2009, the Company owned and
consolidated 165 communities in 10 states plus the District
of Columbia totaling 45,913 apartment homes. The following table
summarizes the carrying amounts for our real estate owned (at
cost) as of December 31, 2009 and December 31, 2008
(dollar amounts in thousands):
| December 31, | ||||||||
| 2009 | 2008 | |||||||
|
Land
|
$ | 1,635,401 | $ | 1,567,737 | ||||
|
Depreciable property — held and used
|
||||||||
|
Building and improvements
|
4,111,254 | 3,859,245 | ||||||
|
Furniture, fixtures and equipment
|
248,635 | 217,948 | ||||||
|
Under development
|
||||||||
|
Land
|
65,525 | 52,294 | ||||||
|
Construction in progress
|
254,232 | 134,529 | ||||||
|
Investment in real estate
|
$ | 6,315,047 | $ | 5,831,753 | ||||
|
Accumulated depreciation
|
(1,351,293 | ) | (1,078,689 | ) | ||||
|
Investment in real estate, net
|
$ | 4,963,754 | $ | 4,753,064 | ||||
During the year ended December 31, 2009, the Company
acquired one community with 289 units in Dallas, Texas. The
purchase relates to a pre-sale agreement previously entered into
by UDR, which contain provisions that will require the Company
and the builder to jointly agree upon the fair market value of
each property at a later point in time (generally within two
years of stabilization). A percentage of the increase in the
fair market value over cost will then be paid to the developer,
ranging from 50% to 70%, which is not included in the initial
purchase price of $28.5 million nor is the contingent
obligation accrued for by the Company.
The purchase price of the acquisition was allocated to land;
building and improvements; furniture, fixtures and equipment;
and intangible assets based on preliminary estimates and are
subject to change as we obtain more complete information.
| 3. | DISCONTINUED OPERATIONS |
The results of operations for properties sold during the year or
designated as
held-for-sale
at the end of the year are classified as discontinued operations
for all periods presented. Properties classified as real estate
68
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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. The application
of Topic 360 does not have an impact on net income available to
common stockholders. The application of Topic 360 results in the
reclassification of the operating results of all properties sold
or classified as held for disposition through December 31,
2009, within the Consolidated Statements of Operations for the
years ended December 31, 2009, 2008, and 2007, and the
reclassification of the assets and liabilities within the
Consolidated Balance Sheets as of December 31, 2009 and
2008, if applicable.
For the year ended December 31, 2009, the Company did not
dispose of any communities. At December 31, 2009, UDR did
not have any assets that met the criteria to be included in
discontinued operations.
For the year ended December 31, 2008, UDR sold 86
communities, one commercial property, one parcel of land, and 53
condominiums from two communities with a total of 640
condominiums. UDR recognized after-tax gains for financial
reporting purposes of $786.4 million on these sales. At
December 31, 2008, UDR did not have any assets that met the
criteria to be included in discontinued operations. In
conjunction with the sale of the 86 communities during 2008, UDR
received a $200.0 million note. The Company received full
payment of the note during the year ended December 31, 2009.
For the year ended December 31, 2007, UDR sold 21
communities, 61 condominiums from two communities with a total
of 640 condominiums, and one parcel of land. UDR recognized
after-tax gains for financial reporting purposes of
$239.1 million on these sales, of which $125.3 million
are included in discontinued operations. The remaining
$113.8 million of gains recognized, related to the sale of
nine additional communities and the contribution of one
development property, at cost, to a joint venture in which UDR
holds a 20% interest, and is reported as a component of
continuing operations as disclosed in Note 4, “Joint
Ventures”. At December 31, 2007, UDR had 86
communities with a net book value of $885.5 million, two
communities with a total of 579 condominiums and a net book
value of $40.8 million, and one commercial unit with a net
book value of $0.4 million included in real estate held for
disposition. The results of operations for these properties and
the interest expense associated with the secured debt on these
properties are classified on the Consolidated Statements of
Operations in the line item entitled “Income from
discontinued operations.”
The following is a summary of income from discontinued
operations for the years ended December 31,
(dollars in
thousands)
:
| December 31, | ||||||||||||
| 2009 | 2007 | 2008 | ||||||||||
|
Rental income
|
$ | — | $ | 39,597 | $ | 237,188 | ||||||
|
Non-property income
|
— | 183 | 1 | |||||||||
| — | 39,780 | 237,189 | ||||||||||
|
Rental expenses
|
16,081 | 91,123 | ||||||||||
|
Property management fee
|
1,089 | 6,523 | ||||||||||
|
Real estate depreciation
|
— | — | 65,972 | |||||||||
|
Interest
|
2,612 | 16,259 | ||||||||||
|
Other expenses
|
— | 6 | 511 | |||||||||
| — | 19,788 | 180,388 | ||||||||||
|
Income before net gain on the sale of depreciable property
|
— | 19,992 | 56,801 | |||||||||
|
Net gain on the sale of depreciable property, excluding RE3
|
2,343 | 787,058 | 117,468 | |||||||||
|
RE3 gain/(loss) on sale of real estate, net of tax
|
81 | (877 | ) | 7,801 | ||||||||
|
Income from discontinued operations
|
$ | 2,424 | $ | 806,173 | $ | 182,070 | ||||||
69
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The Company in the fourth quarter of 2008 made the strategic
decision to exit our activity related to the conversion and sale
of condominium units. As a result of our decision, the Company
incurred a charge to earnings of $1.7 million. The unsold
units were reverted to operating apartment homes. In addition,
as the Company reverted the former condominium properties to
operating communities and removed operating results from
discontinued operations to continuing operations. Previously
unrecorded depreciation of $3.7 million was recorded during
the year ended December 31, 2008.
| 4. | JOINT VENTURES |
UDR has entered into joint ventures with unrelated third parties
for real estate assets that are either consolidated and included
in real estate owned on our Consolidated Balance Sheets or are
accounted for under the equity method of accounting, which are
not consolidated and are included in investment in
unconsolidated joint ventures on our Consolidated Balance
Sheets. The Company consolidates an entity in which we own less
than 100% but control the joint venture as well as any variable
interest entity where we are the primary beneficiary. In
addition, the Company consolidates any joint venture in which we
are the general partner or managing member and the third party
does not have the ability to substantively participate in the
decision-making process nor do they have the ability to remove
us as general partner or managing member, without cause.
UDR’s joint ventures are funded with a combination of debt
and equity. Our losses are limited to our investment and the
Company does not guarantee any debt (issued by our
unconsolidated joint ventures), capital payout or other
obligations associated with our joint venture portfolio. The
Company guarantees 100% of debt issued by our consolidated joint
venture for which our equity ownership percentage is expected to
increase to 98% in the first quarter of 2010.
Consolidated
Joint Ventures
UDR is a partner with an unaffiliated third party in a joint
venture (“989 Elements”) which owns and operates a
23-story, 166 home high-rise apartment community in the central
business district of Bellevue, Washington. At closing, UDR owned
49% of the joint venture. Our initial investment was
$11.8 million. On December 30, 2009, UDR entered into
an agreement with our partner to purchase its 49% interest in
989 Elements for $7.8 million (outstanding at
December 31, 2009). At closing of the agreement, the
Company’s interest will be 98%. Concurrently, our partner
resigned as managing member and appointed UDR as managing
member. In addition, our partner relinquished its voting rights
and approval rights and its ability to substantively participate
in the decision-making process of the joint venture. As a result
of UDR’s appointment as managing member, the Company is
required to consolidate the joint venture under Topic 810. This
event required UDR’s pre-existing interest in the joint
venture, the acquired assets and the assumed liabilities to be
remeasured at fair value in accordance with FASB ASC,
Business Combinations
(“Topic 805”). Prior to
consolidation, our equity investment in 989 Elements was
$9.8 million and $10.4 million at December 30,
2009 and December 31, 2008, respectively. The fair value of
the assets acquired was $55.0 million ($54.8 million
of real estate owned and $200,000 of working capital assets) and
the fair value of assumed liabilities was $34.1 million
($33.4 million of a construction loan and $700,000 of
working capital liabilities) at the consolidation date. UDR
recognized a gain on the remeasurement of our previously held
equity interest in the joint venture, acquired assets and
assumed liabilities to fair value of $3.4 million and is
included in “Gain on consolidation of joint ventures”
on our Consolidated Statements of Operations. The joint
venture’s activities and accounts are included in the
Company’s consolidated financial position as of
December 31, 2009 and consolidated results of operations
and cash flows during the two day period ending
December 31, 2009 to UDR’s Consolidated Financial
Statements as of and for the year ended December 31, 2009.
On December 31, 2009, the Company repaid the outstanding
balance of $35.0 million on the construction loan held by
989 Elements. As a result, the Company wrote off the adjustment
to record the fair value of the
70
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
construction loan assumed on December 30, 2009 of
$1.6 million and is included in “Write off of fair
market value adjustment” on our Consolidated Statements of
Operations.
UDR is a partner with an unaffiliated third party in a joint
venture (“Elements Too”) which is developing a 274
home apartment community in the central business district of
Bellevue, Washington. Construction began in the fourth quarter
of 2006 and is scheduled to be completed in the first quarter of
2010. At closing and at December 31, 2008, we owned 49% of
the joint venture. Our initial investment was $10.0 million.
On October 16, 2009, our partner resigned as managing
member and appointed UDR as managing member. In addition, our
partner relinquished its voting rights and approval rights and
its ability to substantively participate in the decision-making
process of the joint venture. As a result of UDR’s control
of the joint venture, the Company is required to consolidate the
joint venture under Topic 810. This event required UDR’s
pre-existing interest in the joint venture, the acquired assets
and the assumed liabilities to be remeasured at fair value in
accordance with Topic 805. Prior to consolidation, our equity
investment in Elements Too was $24.4 million (net of an
$11.0 million equity loss discussed below) and
$9.9 million at October 16, 2009 and December 31,
2008, respectively. The fair value of the assets acquired was
$100.3 million ($99.5 million of real estate owned and
$814,000 of working capital assets) and the fair value of
assumed liabilities was $75.6 million ($70.5 million
of a construction loan, $917,000 of a derivative instrument, and
$4.2 million of working capital liabilities) at the
consolidation date. On December 30, 2009, UDR entered into
an agreement with our partner to purchase its 49% interest in
Elements Too in consideration for $3.2 million (outstanding
at December 31, 2009). At closing, the Company’s
interest in Elements Too will be 98%. UDR recognized a loss on
the remeasurement of our previously held equity interest in the
joint venture, acquired assets and assumed liabilities to fair
value of $1.9 million and is included in “Gain on
consolidation of joint ventures” on our Consolidated
Statements of Operations. The joint venture’s activities
and accounts are included in the Company’s consolidated
financial position as of December 31, 2009 and consolidated
results of operations and cash flows during the seventy-six day
period ending December 31, 2009 to UDR’s Consolidated
Financial Statements as of and for the year ended
December 31, 2009.
UDR is a partner with an unaffiliated third party in a joint
venture (“Bellevue”) which owns an operating retail
site in Bellevue, Washington. The Company initially planned to
develop a 430 home high rise apartment building with ground
floor retail on an existing operating retail center. However,
during the year ended December 31, 2009, the joint venture
decided to continue to operate the retail property as opposed to
developing a high rise apartment building on the site. At
closing and at December 31, 2008, we owned 49% of the joint
venture. Our initial investment was $5.7 million.
On December 30, 2009, UDR entered into an agreement with
our partner to purchase its 49% interest in Bellevue in
consideration for $5.2 million (outstanding at
December 31, 2009). At closing, the Company’s interest
will be 98%. In addition, our partner resigned as managing
member and appointed UDR as managing member. Concurrent with its
resignation, our partner relinquished its voting rights and
approval rights and its ability to substantively participate in
the decision-making process of the joint venture. As a result of
UDR’s appointment as managing member, the Company is
required to consolidate the joint venture under Topic 810. This
event required UDR’s pre-existing interest in Bellevue, the
acquired assets and the assumed liabilities at fair value to be
remeasured at fair value in accordance with Topic 805. Prior to
consolidation, our equity investment in Bellevue was
$5.0 million (net of a $5.0 million equity loss
discussed below) and $10.2 million at December 29,
2009 and December 31, 2008, respectively. The fair value of
the assets acquired was $33.0 million ($32.8 million
of real estate owned and $211,000 of working capital assets) and
the fair value of assumed liabilities was $23.0 million
($22.3 million of a mortgage payable, $506,000 of a
derivative instrument, and $213,000 of working capital
liabilities). UDR recognized a gain on the remeasurement of our
previously held equity interest in the joint venture, acquired
assets and assumed liabilities to fair value of $315,000 and is
included in “Gain on consolidation of joint ventures”
on our Consolidated Statements of Operations. The joint
venture’s activities and accounts are included in the
Company’s consolidated financial
71
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
position as of December 31, 2009 and consolidated results
of operations and cash flows during the
two-day
period ending December 31, 2009 to UDR’s Consolidated
Financial Statements as of and for the year ended
December 31, 2009.
During 2008, we completed the development of a consolidated
joint venture located in Marina del Rey, California with 298
apartment homes and a carrying value of $139.3 million. In
December 2008, we acquired for $1.5 million our joint
venture partner’s interest in their profit participation
and terminated the property management agreement that had
approximately two years remaining on the pre-existing contract.
As a result of terminating our arrangement, the Company recorded
a charge to earnings of $305,000 as the profit component related
to the management agreement and capitalized the balance as part
of the investment in real estate. The component capitalized as
the investment in real estate will be depreciated over the
average remaining life of the tangible assets. As of
December 31, 2008, the Company included this property as a
component of our wholly-owned communities.
Unconsolidated
Joint Ventures
The Company recognizes earnings or losses from our investments
in unconsolidated joint ventures consisting of our proportionate
share of the net earnings or loss of the joint venture. In
addition, we may earn fees for providing management and
development services to the unconsolidated joint ventures. As of
December 31, 2009, UDR had investments in the following
unconsolidated joint ventures which are accounted for under the
equity method of accounting.
During 2009, the Company established a joint venture with Kuwait
Finance House to invest up to $450.0 million in multifamily
properties located in key, high barrier to entry markets. The
partners will contribute equity of $180.0 million of which
the Company’s maximum equity contribution will be 30% or
$54.0 million when fully invested. At closing, we owned 30%
of the joint venture. Our investment at December 31, 2009
was $242,000. At December 31, 2009, the joint venture did
not own any multi-family properties.
In November 2007, UDR and an unaffiliated third party formed a
joint venture which owns and operates various properties located
in Texas. In November 2007, UDR sold nine operating properties,
consisting of 3,690 units, and contributed one property
under development to the joint venture. The property under
development has 302 units and was completed in 2008 and
commenced lease up at that time. UDR contributed cash and
property equal to 20% of the fair value of the properties. The
unaffiliated member contributed cash equal to 80% of the fair
value of the properties comprising the joint venture, which was
then used to purchase the nine operating properties from UDR.
Our initial investment was $20.4 million. Our investment at
December 31, 2009 and December 31, 2008 was
$13.9 million and $16.5 million, respectively.
In accordance with Subtopic
323-10,
we
evaluate our investments in unconsolidated joint ventures when
events or changes in circumstances indicate that there may be an
other-than-temporary
decline in value. We consider various factors to determine if a
decrease in the value of the investment is
other-than-temporary.
During the year ended December 31, 2009, we recognized a
non-cash charge of $16.0 million representing the
other-than-temporary
decline in the fair values below the carrying values of two of
the Company’s Bellevue, Washington joint ventures, which
were previously accounted for under the equity method. As
discussed above, the joint ventures were subsequently
consolidated and their accounts included in the Company’s
consolidated financial position as of December 31, 2009 to
UDR’s Consolidated Balance Sheets as of December 31,
2009. The activities of Bellevue Plaza are included in the
consolidated results of operations and cash flows during the two
day period ending December 31, 2009 to UDR’s
Consolidated Statements of Operations and Consolidated
Statements of Cash Flows for the year ended December 31,
2009. The activities of Elements Too are included in the
consolidated results of operations and cash flows during the
seventy-six day period ending December 31, 2009 to
UDR’s Consolidated Statement of Operations and Consolidated
Statements of Cash Flows for the year ended December 31,
2009. The Company did not recognize any
other-than-temporary
72
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
decrease in the value of its other investments in unconsolidated
joint ventures during the year ended December 31, 2009.
Summarized financial information relating to 100% of all the
unconsolidated joint ventures operations (not just our
proportionate share), is presented below for the years ended
December 31, (
dollars in thousands):
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
For the year ended(a):
|
||||||||||||
|
Revenues
|
$ | 48,575 | $ | 43,486 | $ | 9,495 | ||||||
|
Real estate depreciation and amortization
|
21,133 | 22,509 | 4,671 | |||||||||
|
Net loss
|
(11,719 | ) | (18,167 | ) | (3,532 | ) | ||||||
| (a) | Includes results of operations of newly consolidated joint ventures through the effective date of consolidation. See “Consolidated Joint Ventures” above. |
Combined summary balance sheets relating to 100% of all the
unconsolidated joint ventures (not just our proportionate share)
is presented below for the years ended December 31,
(
dollars in thousands
):
| 2009 | 2008(a) | |||||||
|
Real estate, net
|
$ | 320,786 | $ | 517,549 | ||||
|
Total assets
|
332,694 | 534,751 | ||||||
|
Amount due to UDR
|
779 | 3,898 | ||||||
|
Third party debt
|
254,000 | 373,353 | ||||||
|
Total liabilities
|
265,091 | 397,135 | ||||||
|
Equity
|
67,602 | 137,616 | ||||||
| (a) | Amounts include certain joint ventures subsequently consolidated during the year ended December 31, 2009. See “Consolidated Joint Ventures” above. |
As of December 31, 2009, the Company had deferred profit
from the sale of properties of $28.8 million, which the
Company will not recognize until the underlying property is sold
to a third party. The Company recognized $1.9 million of
management fees for our involvement in the joint ventures.
The Company may be required to make additional capital
contributions to certain of our joint ventures should additional
capital contributions be necessary to fund development costs or
operating shortfalls.
| 5. | SECURED DEBT |
Our secured debt instruments generally feature either monthly
interest and principal or monthly interest-only payments with
balloon payments due at maturity. For purposes of classification
in the following table, variable rate debt with a derivative
financial instrument designated as a cash flow hedge is deemed
as fixed rate debt due to the Company having effectively
established the interest rate for the underlying debt
instrument. Secured debt, which encumbers $3.1 billion or
49% of UDR’s real estate owned based upon gross
73
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
book value ($3.2 billion or 51% of UDR’s real estate
owned is unencumbered) consists of the following as of
December 31, 2009 (
dollars in thousands
):
| 2009 | ||||||||||||||||||||
| Principal Outstanding |
Weighted
|
Weighted
|
Number of
|
|||||||||||||||||
| December 31 |
Average
|
Average
|
Communities
|
|||||||||||||||||
| 2009 | 2008 | Interest Rate | Years to Maturity | Encumbered | ||||||||||||||||
|
Fixed Rate Debt
|
||||||||||||||||||||
|
Mortgage notes payable
|
$ | 506,203 | $ | 476,810 | 5.18 | % | 2.1 | 12 | ||||||||||||
|
Tax-exempt secured notes payable
|
13,325 | 13,325 | 5.30 | % | 21.2 | 1 | ||||||||||||||
|
Fannie Mae credit facilities
|
949,971 | 666,642 | 5.40 | % | 7.1 | 14 | ||||||||||||||
|
Total fixed rate secured debt
|
1,469,499 | 1,156,777 | 5.32 | % | 5.5 | 27 | ||||||||||||||
|
Variable Rate Debt
|
||||||||||||||||||||
|
Mortgage notes payable
|
243,810 | 114,181 | 2.74 | % | 3.5 | 14 | ||||||||||||||
|
Tax-exempt secured note payable
|
27,000 | 27,000 | 1.36 | % | 20.2 | 1 | ||||||||||||||
|
Fannie Mae credit facilities
|
249,125 | 164,513 | 1.68 | % | 6.3 | 34 | ||||||||||||||
|
Total variable rate secured debt
|
519,935 | 305,694 | 2.16 | % | 5.7 | 49 | ||||||||||||||
|
Total secured debt
|
$ | 1,989,434 | $ | 1,462,471 | 4.50 | % | 5.6 | 76 | ||||||||||||
UDR entered into secured revolving credit facilities with Fannie
Mae with an aggregate commitment of $1.4 billion at
December 31, 2009. The Fannie Mae credit facilities are for
an initial term of 10 years, bear interest at floating and
fixed rates, and certain variable rate facilities can be
extended for an additional five years at our option. We have
$950.0 million of the funded balance fixed at a weighted
average interest rate of 5.4% and the remaining balance on these
facilities is currently at a weighted average variable rate of
1. 7%
|
December 31,
|
December 31,
|
|||||||
| 2009 | 2008 | |||||||
| (dollar amounts in thousands) | ||||||||
|
Borrowings outstanding
|
$ | 1,199,096 | $ | 831,155 | ||||
|
Weighted average borrowings during the period ended
|
1,033,658 | 702,620 | ||||||
|
Maximum daily borrowings during the period ended
|
1,199,322 | 831,370 | ||||||
|
Weighted average interest rate during the period ended
|
4.6 | % | 5.5 | % | ||||
|
Weighted average interest rate at the end of the period
|
4.6 | % | 5.0 | % | ||||
The Company will from time to time acquire properties subject to
fixed rate debt instruments. In those situations, management
will record the secured debt at its estimated fair value and
amortize any difference between the fair value and par to
interest expense over the life of the underlying debt
instrument. The unamortized fair market adjustment was a net
discount of $987,000 and $763,000 at December 31, 2009 and
December 31, 2008, respectively.
Fixed
Rate Debt
Mortgage notes payable.
Fixed rate mortgage
notes payable are generally due in monthly installments of
principal and interest and mature at various dates from January
2010 through June 2016 and carry interest rates ranging from
2.50% to 8.02%. Mortgage notes payable includes debt associated
with development activities.
74
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Tax-exempt secured notes payable.
Fixed rate
mortgage notes payable that secure tax-exempt housing bond
issues mature in March 2031 and carry an interest rate of 5.30%.
Interest on these notes is payable in semi-annual installments.
Secured credit facilities.
At
December 31, 2009, UDR’s fixed rate secured credit
facilities consisted of $950.0 million on a
$1.4 billion aggregate commitment under five revolving
secured credit facilities with Fannie Mae (the Company also owes
$249.1 million under the variable rate component of this
instrument). The Fannie Mae credit facilities are for an initial
term of 10 years, bear interest at floating and fixed
rates, and certain variable rate facilities can be extended for
an additional five years at our option. As of December 31,
2009, the fixed rate Fannie Mae credit facilities had a weighted
average fixed rate of interest of 5.40%.
Variable
Rate Debt
Mortgage notes payable.
Variable rate mortgage
notes payable are generally due in monthly installments of
principal and interest and mature at various dates from August
2010 through April 2016. The mortgage notes payable interest is
based on LIBOR plus some basis points, which translate into
interest rates ranging from 0.93% to 5.25% at December 31,
2009.
Tax-exempt secured note payable.
The variable
rate mortgage note payable that secures tax-exempt housing bond
issues matures in March 2030. Interest on this note is payable
in monthly installments. The mortgage note payable has an
interest rate of 1.36% as of December 31, 2009.
Secured credit facilities.
The variable rate
secured credit facilities consisted of $249.1 million
outstanding on the Fannie Mae credit facilities. As of
December 31, 2009, the variable rate Fannie Mae credit
facilities had a weighted average floating rate of interest of
1.68%.
The aggregate maturities of our secured debt due during each of
the next five calendar years and thereafter are as follows
(dollars in thousands):
| Fixed | Variable | |||||||||||||||||||||||||||
|
Mortgage
|
Tax-Exempt
|
Credit
|
Mortgage
|
Tax Exempt
|
Credit
|
|||||||||||||||||||||||
| Notes | Notes Payable | Facilities | Notes | Notes Payable | Facilities | Total | ||||||||||||||||||||||
|
2010
|
$ | 221,200 | $ | — | $ | 2,654 | $ | 13,535 | $ | — | $ | — | $ | 237,389 | ||||||||||||||
|
2011
|
96,475 | — | 52,808 | 67,871 | — | 39,513 | 256,667 | |||||||||||||||||||||
|
2012
|
56,895 | — | 177,944 | 46,283 | — | 48,203 | 329,325 | |||||||||||||||||||||
|
2013
|
61,578 | — | 38,631 | 38,518 | — | — | 138,727 | |||||||||||||||||||||
|
2014
|
— | — | 3,328 | 1,111 | — | — | 4,439 | |||||||||||||||||||||
|
Thereafter
|
70,055 | 13,325 | 674,606 | 76,492 | 27,000 | 161,409 | 1,022,887 | |||||||||||||||||||||
|
Total
|
$ | 506,203 | $ | 13,325 | $ | 949,971 | $ | 243,810 | $ | 27,000 | $ | 249,125 | $ | 1,989,434 | ||||||||||||||
75
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 6. | UNSECURED DEBT |
A summary of unsecured debt as of December 31, 2009 and
2008 is as follows
(dollars in thousands):
| December 31, | ||||||||
| 2009 | 2008 | |||||||
|
Commercial Banks
|
||||||||
|
Borrowings outstanding under an unsecured term loan due February
2010(a)
|
$ | — | $ | 240,000 | ||||
|
Borrowings outstanding under an unsecured credit facility due
July 2012(b)
|
189,300 | — | ||||||
| 189,300 | 240,000 | |||||||
|
Senior Unsecured Notes
|
||||||||
|
4.25% Medium-Term Notes due January 2009
|
— | 50,000 | ||||||
|
6.50% Notes due June 2009
|
— | 200,000 | ||||||
|
3.90% Medium-Term Notes due March 2010 (includes premium of $34
and $190)
|
50,034 | 50,190 | ||||||
|
3.625% Convertible Senior Notes due September 2011 (net of
Subtopic
470-20
discount of $3,351 and $7,080)(c),(d)
|
122,984 | 164,255 | ||||||
|
5.00% Medium-Term Notes due January 2012
|
100,000 | 100,000 | ||||||
|
6.26% Term Notes due July 2012
|
100,000 | — | ||||||
|
6.05% Medium-Term Notes due June 2013(d)
|
122,500 | 125,000 | ||||||
|
5.13% Medium-Term Notes due January 2014
|
184,000 | 184,000 | ||||||
|
5.50% Medium-Term Notes due April 2014 (net of discount of $295
and $363)
|
128,205 | 128,137 | ||||||
|
5.25% Medium-Term Notes due January 2015 (includes premium of
$177 and $212)(d)
|
175,352 | 175,387 | ||||||
|
5.25% Medium-Term Notes due January 2016
|
83,260 | 83,260 | ||||||
|
8.50% Debentures due September 2024(d),(f)
|
15,644 | 54,118 | ||||||
|
4.00% Convertible Senior Notes due December 2035 (net of
Subtopic
470-20
discount of $1,916 and $5,834)(d),(e)
|
165,834 | 244,166 | ||||||
|
Other
|
42 | 149 | ||||||
| 1,247,855 | 1,558,662 | |||||||
| $ | 1,437,155 | $ | 1,798,662 | |||||
| (a) | During the year ended December 31, 2008, UDR borrowed $240 million in the form of a two-year unsecured term loan from a consortium of banks. UDR entered into one interest rate swap agreement associated with the borrowings under the term loan with an aggregate notional value of $200 million in which the Company pays a fixed rate of interest and receives a variable rate of interest on the notional amount. The loan was paid in full in December 2009. | |
| (b) | Our unsecured credit facility provides us with an aggregate borrowing capacity of $600 million, which at our election we can increase to $750 million under certain circumstances. Our unsecured credit facility with a consortium of financial institutions carries an interest rate equal to LIBOR plus a spread of 47.5 basis points and matures in July 2012. In addition, the unsecured credit facility contains a provision that allows us to bid up to 50% of the commitment and we can bid out the entire unsecured credit facility once per quarter so long as we maintain an investment grade rating. | |
| (c) | Subject to the restrictions on ownership of our common stock and certain other conditions, at any time on or after July 15, 2011 and prior to the close of business on the second business day prior to the maturity |
76
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| date of September 15, 2011, and also following the occurrence of certain events, holders of outstanding 3.625% notes may convert their notes into cash and, if applicable, shares of our common stock, at the conversion rate in effect at such time. Upon conversion of the notes, UDR will deliver cash and common stock, if any, based on a daily conversion value calculated on a proportionate basis for each trading day of the relevant 30 trading day observation period. The initial conversion rate for each $1,000 principal amount of notes was 26.6326 shares of our common stock (equivalent to an initial conversion price of approximately $37.55 per share), subject to adjustment under certain circumstances. The Company’s Special Dividend paid in January 2009 met the criteria to adjust the conversion rate and resulted in an adjusted conversion rate of 29.0207 shares of our common stock for each $1,000 of principal (equivalent to a conversion price of approximately $34.46 per share). If UDR undergoes certain change in control transactions, holders of the 3.625% notes may require us to repurchase their notes in whole or in part for cash equal to 100% of the principal amount of the notes to be repurchased plus any unpaid interest accrued to the repurchase date. In connection with the issuance of the 3.625% notes, UDR entered into a capped call transaction covering approximately 6.7 million shares of our common stock, subject to anti-dilution adjustments similar to those contained in the notes. The capped call expires on the maturity date of the 3.625% notes. The capped call transaction combines a purchased call option with a strike price of $37.548 with a written call option with a strike price of $43.806. The capped call transaction effectively increased the initial conversion price to $43.806 per share, representing a 40% conversion premium. The net cost of approximately $12.6 million of the capped call transaction was included in stockholders’ equity. | ||
| (d) | During the year ended December 31, 2009, the Company repurchased several different traunches of its unsecured debt in open market purchases resulting in retired debt with a notional value of $238.9 million for $222.3 million of cash. The gain of $9.8 million is presented as a separate component of interest expense on our Consolidated Statements of Operations for the year ended December 31, 2009. Consistent with our accounting policy, the Company expensed $2.3 million of unamortized financing costs and $3.4 million of unamortized discount on convertible debt as a result of these debt retirements for the year ended December 31, 2009. | |
| (e) | Holders of the outstanding 4.00% notes may require us to repurchase their notes in whole or in part on January 15, 2011, December 15, 2015, December 15, 2020, December 15, 2025 and December 15, 2030, or upon the occurrence of a fundamental change, for cash equal to 100% of the principal amount of the notes to be repurchased plus any accrued and unpaid interest. On or after January 15, 2011, UDR will have the right to redeem the 4.00% notes in whole or in part, at any time or from time to time, for cash equal to 100% of the principal amount of the notes to be redeemed plus any accrued and unpaid interest. Subject to the restrictions on ownership of shares of our common stock and certain other conditions, holders of the 4.00% notes may convert their notes, into cash and, if applicable, shares of our common stock, at the conversion rate in effect at such time, as follows: (i) prior to the close of business on the second business day immediately preceding the stated maturity date at any time on or after December 15, 2030, and (ii) prior to December 15, 2030 under certain specified circumstances. The initial conversion rate for the notes was 35.2988 shares of our common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $28.33 per share), subject to adjustment under certain circumstances. The Company’s Special Dividend paid in January 2009 met the criteria to adjust the conversion rate and the conversion rate was adjusted to 38.7123 shares of our common stock for each $1,000 of principal (equivalent to a conversion price of approximately $25.83 per share). | |
| (f) | During the year ended December 31, 2009, pursuant to a cash tender offer announced on August 4, 2009, the Company repurchased $37.5 million in aggregate principal amount of its 8.50% Debentures due September 15, 2024 for $41.2 million of cash. In connection with this repurchase, the Company recorded a premium and related transaction costs. The tender offer expired on September 3, 2009. |
77
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Subtopic
470-20
applies to all convertible debt instruments that have a
“net settlement feature”, which means that such
convertible debt instruments, by their terms, may be settled
either wholly or partially in cash upon conversion. This
guidance requires issuers of convertible debt instruments that
may be settled wholly or partially in cash upon conversion to
separately account for the liability and equity components in a
manner reflective of the issuers’ nonconvertible debt
borrowing rate. The Company adopted provisions under
Subtopic
470-20
as of
January 1, 2009, and the adoption impacted the historical
accounting for the 3.625% convertible senior notes due September
2011 and the 4.00% convertible senior notes due December 2035,
and resulted in increased interest expense of $4.3 million,
$6.6 million, and $6.7 million for the years ended
December 31, 2009, 2008, and 2007, respectively.
The following is a summary of short-term bank borrowings under
UDR’s bank credit facility at December 31,
(dollars
in thousands):
| December 31, | ||||||||
|
|
2009 | 2008 | ||||||
|
Total revolving credit facility
|
$ | 600,000 | $ | 600,000 | ||||
|
Borrowings outstanding at end of period
|
189,300 | — | ||||||
|
Weighted average daily borrowings during the period ended
|
83,875 | 84,566 | ||||||
|
Maximum daily borrowings during the period ended
|
279,400 | 587,400 | ||||||
|
Weighted average interest rate during the period ended
|
0.9 | % | 4.1 | % | ||||
|
Weighted average interest rate at the end of the period
|
0.7 | % | N/A | |||||
The convertible notes are convertible at the option of the
holder, and as such are presented as if the holder will convert
the debt instrument at the earliest available date. The
aggregate maturities of unsecured debt for the five years
subsequent to December 31, 2009 are as follows
(dollars
in thousands):
|
Bank
|
Unsecured
|
|||||||||||
| Lines | Debt | Total | ||||||||||
|
2010
|
$ | — | $ | 50,003 | $ | 50,003 | ||||||
|
2011(a)
|
— | 288,788 | 288,788 | |||||||||
|
2012
|
189,300 | 199,970 | 389,270 | |||||||||
|
2013
|
— | 122,470 | 122,470 | |||||||||
|
2014
|
— | 312,515 | 312,515 | |||||||||
|
Thereafter
|
— | 274,109 | 274,109 | |||||||||
| $ | 189,300 | $ | 1,247,855 | $ | 1,437,155 | |||||||
| (a) | The convertible debt balances have been adjusted to reflect the effect of Subtopic 470-20. Excluding the adjustment, total maturities in 2011 would be $294.1 million. |
| 7. | 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 250,000,000 shares of common stock and
50,000,000 shares of preferred shares as of
December 31, 2009.
During the year ended December 31, 2009, the Company
entered into the following equity transactions for our common
stock:
| • | Issued 4,460,032 shares of common stock in connection with an “at the market” equity distribution program where we received gross proceeds of approximately $69.1 million; |
78
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| • | Issued 153,525 shares of common stock in connection with stock options exercised; | |
| • | Issued 40,357 shares of common stock through the Company’s 1999 Long-Term Incentive Plan (the “LTIP”), net of forfeitures; | |
| • | Converted 2,130,452 OP Units into Company common stock; | |
| • | Issued 11,358,042 shares of common stock through the Special Dividend; | |
| • | Repurchased 100,000 of common stock through the Company’s stock repurchase program. |
Distributions are subject to the approval of the Board of
Directors and are dependent upon our strategy, financial
condition and operating results. UDR common distributions for
the years ended December 31, 2009 and 2008 totaled $0.85
and $2.29 per share, respectively. For taxable years ending on
or before December 31, 2009, the IRS is allowing REITS to
distribute up to 90% of total distributions in common shares
with the residual distributed in cash as a means of enhancing
liquidity.
Preferred
Stock
The Series E Cumulative Convertible Preferred Stock
(Series E) has no stated par value and a liquidation
preference of $16.61 per share. Subject to certain adjustments
and conditions, each share of the Series E is convertible
at any time and from time to time at the holder’s option
into one share of our common stock prior to the Special
Dividend. The holders of the Series E are entitled to vote
on an as-converted basis as a single class in combination with
the holders of common stock at any meeting of our stockholders
for the election of directors or for any other 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 in for the year
ended December 31, 2009 and 2008 was $1.33 per share. The
Series E is not listed on any exchange. At
December 31, 2009 and 2008, a total of
2,803,812 shares of the Series E were outstanding,
respectively.
UDR is 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 UDR’s operating partnership
units, or OP Units, at a purchase price of $0.0001 per
share. OP Unitholders are entitled to subscribe for and
purchase one share of UDR’s Series F for each
OP Unit held. A total of 2,959,428 and 666,293 shares
of the Series F, respectively, were outstanding at a value
of $296 and $67 at December 31, 2009 and 2008,
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
any other rights, privileges or preferences.
In May 2007, UDR issued 5,400,000 shares of our 6.75%
Series G Cumulative Redeemable Preferred Stock
(Series G). The Series G has no stated par value and a
liquidation preference of $25 per share. The Series G
generally has no voting rights except under certain limited
circumstances and as required by law. The Series G has no
stated maturity and is not subject to any sinking fund or
mandatory redemption and is not convertible into any of our
other securities. The Series G is not redeemable prior to
May 31, 2012. On or after this date, the Series G may
be redeemed for cash at our option, in whole or in part, at a
redemption price of $25 per share plus accrued and unpaid
dividends. During the years ended December 31, 2009 and
2008, the Company repurchased 997,738 and 969,300 shares of
Series G, respectively, for less than the liquidation
preference of $25 per share resulting in a $2.6 million and
$3.1 million benefit to our net income/(loss) attributable
to common stockholders, respectively.
Distributions declared on the Series G for the year ended
December 31, 2009 and 2008 was $1.69 per share. The
Series G is listed on the NYSE under the symbol
“UDRPrG.” At December 31, 2009 and 2008, a total
of 3,432,962 and 4,430,700 shares of the Series G were
outstanding, respectively.
79
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Dividend
Reinvestment and Stock Purchase Plan
UDR’s Dividend 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, 2009,
shareholders have elected to utilize the Stock Purchase Plan to
reinvest their dividends for the equivalent of
9,957,233 shares of Company common stock. Shares in the
amount of 13,134,256 were reserved for issuance under the Stock
Purchase Plan as of December 31, 2009. During the year
ended December 31, 2009, UDR acquired all shares issued
through the open market.
| 8. | EMPLOYEE BENEFIT PLANS |
In May 2001, the stockholders of UDR approved the long term
incentive plan (“LTIP”), which supersedes the 1985
Stock Option Plan. The LTIP authorizes the granting of awards
which may take the form of options to purchase shares of common
stock, stock appreciation rights, restricted stock, dividend
equivalents, other stock-based awards, and any other right or
interest relating to common stock or cash incentive awards to
Company directors, employees and outside trustees to promote the
success of the Company by linking individual’s compensation
via grants of share based payment. During the year ended
December 31, 2009, the stockholders of UDR voted to amend
and restate the LTIP to increase the number of shares reserved
from 4,000,000 shares to 16,000,000 shares on an
unadjusted basis for issuance upon the grant or exercise of
awards under the LTIP, which all can be for incentive stock
option grants. The LTIP generally provides, among other things,
that options are granted at exercise prices not lower than the
market value of the shares on the date of grant and that options
granted must be exercised within 10 years. As of
December 31, 2009, there were 10,113,864 common shares
available for issuance under the LTIP.
The LTIP contains change of control provisions allowing for the
immediate vesting of an award upon certain events such as a
merger where UDR is not the surviving entity. Upon the death or
disability of an award recipient all outstanding instruments
will vest and all restrictions will lapse. Further, upon the
retirement of an award recipient, all outstanding instruments
will vest and all restrictions will lapse. The LTIP specifies
that in the event of a capital transaction, which includes but
is not limited to stock dividends, stock splits, extraordinary
cash dividends and spin-offs, the number of shares available for
grant in totality or to a single individual is to be adjusted
proportionately. The LTIP specifies that when a capital
transaction occurs that would dilute the holder of the stock
award, prior grants are to be adjusted such that the recipient
is no worse as a result of the capital transaction.
Stock
Option Plan
UDR has granted stock options to our employees, subject to
certain conditions. Each stock option is exercisable into one
common share.
80
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
A summary of UDR’s stock option activity on an unadjusted
basis during the three years ended December 31, 2009 is as
follows:
| Option Outstanding | Option Exercisable | |||||||||||||||
|
Weighted
|
Weighted
|
|||||||||||||||
|
Average
|
Average
|
|||||||||||||||
|
Number of
|
Exercise
|
Number of
|
Exercise
|
|||||||||||||
| Options | Price | Options | Price | |||||||||||||
|
Balance, January 1, 2007
|
1,299,390 | $ | 11.44 | |||||||||||||
|
Exercised
|
(213,731 | ) | 12.25 | |||||||||||||
|
Forfeited
|
(7,000 | ) | 12.76 | |||||||||||||
|
Balance, December 31, 2007
|
1,078,659 | $ | 11.25 | 1,078,689 | $ | 11.25 | ||||||||||
|
Granted
|
465,841 | $ | 26.55 | |||||||||||||
|
Exercised
|
(220,333 | ) | 10.67 | |||||||||||||
|
Forfeited
|
— | — | ||||||||||||||
|
Balance, December 31, 2008
|
1,324,167 | $ | 16.73 | 1,124,167 | $ | 15.01 | ||||||||||
|
Granted
|
3,260,752 | $ | 10.24 | |||||||||||||
|
Exercised
|
(153,525 | ) | 8.95 | |||||||||||||
|
Forfeited
|
(20,570 | ) | 10.33 | |||||||||||||
|
Balance, December 31, 2009
|
4,410,824 | $ | 11.85 | 1,475,311 | $ | 13.84 | ||||||||||
The weighted-average grant date fair value of options granted
during the year ended December 31, 2009 was estimated at
$1.19 per share. Utilizing the Black-Scholes-Merten option
pricing model, the Company used the following assumptions:
dividend yield of 12.13%, volatility of 42.9%, risk-free
interest rate of 1.76% and an expected life of approximately
4.5 years. Total remaining compensation cost related to
unvested share options as of December 31, 2009 was
approximately $2.7 million.
The weighted average remaining contractual life on all options
outstanding as of December 31, 2009 is 2.9 years.
96,151 of share options had exercise prices between $9.12 and
$9.99, 3,497,723 of share options had exercise prices between
$10.06 and $10.30, 312,589 of share options had exercise prices
between $11.30 and $13.74 and 504,361 of share options had
exercise prices between $24.38 and $25.10.
During the year ended December 31, 2009, we recognized
$1.3 million of net compensation expense related to our
stock option grants.
Restricted
Stock Awards
Restricted stock is granted to Company employees, officers,
consultants, and directors. The restricted stock is valued on
the grant date based upon the market price of UDR common stock
on the date of grant. Compensation expense is recorded over the
vesting period, which is generally three to four years.
Restricted stock earn dividends payable in cash until the
earlier of the date of the underlying restricted stock is
exercised or the expiration of the underlying restricted stock
award. Some of the restricted stock is performance based and is
adjusted based on Company performance. For the years ended
December 31, 2009, 2008 and 2007, we recognized
$7.6 million, $7.0 million, and $6.1 million of
compensation expense related to the amortization of restricted
stock, respectively. As of December 31, 2009, the Company
had issued 1,689,108 shares of restricted stock under the
LTIP. The total remaining compensation cost on unvested
restricted stock awards was $6.3 million and has a weighted
average remaining contractual life of 1.4 years as of
December 31, 2009.
81
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Profit
Sharing Plan
Our profit sharing plan (the “Plan”) is a defined
contribution plan covering all eligible full-time employees.
Under the Plan, UDR makes discretionary profit sharing and
matching contributions to the Plan as determined by the
Compensation Committee of the Board of Directors. Aggregate
provisions for contributions, both matching and discretionary,
which are included in UDR’s Consolidated Statements of
Operations for the three years ended December 31, 2009,
2008, and 2007 were $0.7 million, $0.9 million, and
$0.8 million, respectively.
| 9. | INCOME TAXES |
For 2009, 2008, and 2007, 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.
The following table reconciles UDR’s net income to REIT
taxable income for the three years ended December 31, 2009
(dollars in thousands)
:
| December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
GAAP Net (loss)/income
|
$ | (91,623 | ) | $ | 743,867 | $ | 226,730 | |||||
|
Book to tax differences
|
||||||||||||
|
Elimination of TRS loss
|
49,012 | 44,436 | 13,284 | |||||||||
|
Non-controlling interest
|
258 | (8,714 | ) | (15,977 | ) | |||||||
|
Depreciation and amortization expense
|
50,745 | 52,662 | 18,539 | |||||||||
|
Disposition of properties
|
— | (449,598 | ) | (52,192 | ) | |||||||
|
Revenue recognition timing differences
|
103,457 | (1,897 | ) | (2,439 | ) | |||||||
|
Compensation related differences
|
7,324 | (1,666 | ) | (1,804 | ) | |||||||
|
Other expense timing differences
|
(5,285 | ) | (9,443 | ) | 7,125 | |||||||
|
Net operating loss
|
(3,924 | ) | (3,925 | ) | (3,925 | ) | ||||||
|
REIT taxable income before dividends
|
$ | 109,964 | $ | 365,722 | $ | 189,341 | ||||||
|
Dividend paid deduction
|
$ | 109,964 | $ | 365,722 | $ | 189,341 | ||||||
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. For the three years ended December 31, 2009,
taxable distributions paid per common share were taxable as
follows:
| December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Ordinary income
|
$ | 0.08 | $ | 0.20 | $ | 0.20 | ||||||
|
Long-term capital gain
|
0.54 | 1.82 | 0.84 | |||||||||
|
Unrecapture section 1250 gain
|
0.05 | 0.59 | 0.26 | |||||||||
| $ | 0.67 | $ | 2.61 | $ | 1.30 | |||||||
82
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
We have TRS that are subject to state and federal income taxes.
A TRS is a C-corporation which has not elected REIT status and
as such is subject to United States Federal and state income
tax. The components of the provision for income taxes for the
three years ended December 31, 2009 are as follows
(dollars in thousands)
:
| December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Income tax (benefit)/expense
|
||||||||||||
|
Current
|
||||||||||||
|
Federal
|
$ | (11,925 | ) | $ | 2,421 | $ | (6,749 | ) | ||||
|
State
|
(2,573 | ) | (1,873 | ) | (832 | ) | ||||||
|
Total current
|
(14,498 | ) | 548 | (7,581 | ) | |||||||
|
Deferred
|
||||||||||||
|
Federal
|
12,030 | (10,504 | ) | (908 | ) | |||||||
|
State
|
2,779 | 83 | (111 | ) | ||||||||
|
Total deferred
|
14,809 | (10,421 | ) | (1,019 | ) | |||||||
|
Total income tax expense/(benefit)
|
$ | 311 | $ | (9,873 | ) | $ | (8,600 | ) | ||||
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 three years ended
December 31,
(dollars in thousands):
| 2009 | 2008 | 2007 | ||||||||||
|
Deferred tax assets:
|
||||||||||||
|
Federal and state tax attributes
|
$ | 20,239 | $ | 21,123 | $ | 380 | ||||||
|
Book/tax depreciation
|
3,946 | 3,851 | 593 | |||||||||
|
Construction capitalization differences
|
3,045 | 468 | 605 | |||||||||
|
Investment in partnerships
|
4,711 | — | — | |||||||||
|
Debt and interest deductions
|
8,175 | 12,262 | — | |||||||||
|
Other
|
285 | 270 | 124 | |||||||||
|
Total deferred tax assets
|
40,401 | 37,974 | 1,702 | |||||||||
|
Valuation allowance
|
(33,554 | ) | (15,304 | ) | — | |||||||
|
Net deferred income tax assets
|
6,847 | 22,670 | 1,702 | |||||||||
|
Deferred tax liabilities
|
||||||||||||
|
Investment in partnerships
|
— | (177 | ) | (35 | ) | |||||||
|
Other
|
(291 | ) | (1,149 | ) | (281 | ) | ||||||
|
Total deferred tax liabilities
|
(291 | ) | (1,326 | ) | (316 | ) | ||||||
|
Net deferred tax asset
|
$ | 6,556 | $ | 21,344 | $ | 1,386 | ||||||
83
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Income tax (benefit) or expense differed from the amounts
computed by applying the U.S. statutory rate of 35% to
pretax income or (loss) for the three years ended
December 31, 2009, as follows
(dollars in thousands):
| December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Income tax (benefit)/expense
|
||||||||||||
|
U.S. federal income tax benefit
|
$ | (17,042 | ) | $ | (19,019 | ) | $ | (7,659 | ) | |||
|
State income tax (net of federal benefit)
|
(1,391 | ) | (1,991 | ) | (943 | ) | ||||||
|
Valuation allowance
|
17,484 | 11,136 | — | |||||||||
|
Other items
|
1,260 | 1 | 2 | |||||||||
|
Total income tax expense/(benefit)
|
$ | 311 | $ | (9,873 | ) | $ | (8,600 | ) | ||||
|
Classification of income tax expense/(benefit)
|
||||||||||||
|
Continuining operations
|
$ | 311 | $ | (9,713 | ) | $ | (17,110 | ) | ||||
|
Discontinued operations
|
— | (160 | ) | 8,510 | ||||||||
As of December 31, 2009, the Company through our TRS had
federal net loss carryovers (“NOL”) of approximately
$53.0 million. Of the total NOL, $6.0 million
($2.1 million tax effected) will be carried back to
previous years with the balance of $20.5 million expiring
in 2028 and $20.5 million expiring in 2029. As of
December 31, 2009, the TRS had state NOL of approximately
$73.0 million, of which approximately $1.8 million
begins to expire in 2012 with the remainder expiring in 2022
through 2029. As of December 31, 2009, the Company had a
valuation allowance of $33.5 million against 100% of its
deferred tax assets and 50% of its federal net operating losses.
During the year ended December 31, 2009, the Company had a
net change of $18.3 million in the valuation allowance.
UDR adopted FASB ASC 740,
Income Taxes
(“Topic
740”) (formerly FASB Interpretation 48, “Accounting
for Uncertainty in Income Taxes-An Interpretation of FASB
Statement No. 109”), on January 1, 2007. Topic
740 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. Topic
740 requires 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. Topic 740
also provides guidance on derecognition, classification,
interest and penalties, accounting for interim periods,
disclosure and transition.
The Company evaluates our tax position using a two-step process.
First, we determine whether a tax position is more likely than
not (greater than 50 percent probability) to be sustained
upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the
position. Then the Company will determine the amount of benefit
to recognize and record the amount of the benefit that is more
likely than not to be realized upon ultimate settlement. When
applicable, UDR recognizes interest
and/or
penalties related to uncertain tax positions in income tax
expense. As of December 31, 2008, we reduced our recognized
tax benefits under FIN 48 as a result of a change in
measurement of certain items. As of December 31, 2009, UDR
does not believe we have any unrecognized tax benefits.
84
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
A reconciliation of the beginning and ending amount of
unrecognized tax benefits, excluding interest and penalties is
as follows (
dollars in thousands
):
| December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Balance at beginning of year
|
$ | — | $ | 415 | $ | 538 | ||||||
|
Reductions for tax positions of prior years
|
— | (415 | ) | (123 | ) | |||||||
|
Balance at end of year
|
$ | — | $ | — | $ | 415 | ||||||
The total amount of unrecognized tax benefits that, if
recognized would affect the effective rate is $0. We do not
currently believe the unrecognized tax benefits will change
significantly within the next 12 months.
We recognize interest and penalties accrued related to
unrecognized tax benefits as a component of the provision for
income taxes. During the year ended December 31, 2009, the
Company recognized $0 in interest and penalties. As of
December 31, 2009 and 2008, UDR had $0 of interest and
penalties accrued, respectively.
The Company files income tax returns in federal and various
state 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 2006.
| 10. | FAIR VALUE OF DERIVATIVES AND FINANCIAL INSTRUMENTS |
Effective January 1, 2008, UDR adopted FASB ASC 820,
Fair Value of Measurements and Disclosures
(formerly
SFAS 157, “Fair Value Measurements”) (“Topic
820”), which defines fair value 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. Topic 820
establishes a fair value hierarchy that 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. |
At December 31, 2009 and December 31, 2008, the fair
values of cash and cash equivalents, restricted cash, notes
receivable, escrow 1031exchange funds, 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.
The Company adopted the provisions of FASB ASC 825,
Financial
Instruments
(formerly FSP
FAS 107-1
and APB
28-1,
“Interim Disclosures about Fair Value of Financial
Instruments”) on June 30, 2009, which
85
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
require disclosures about the fair value of financial
instruments in interim as well as annual financial statements.
The carrying amounts and estimated fair value of the
Company’s financial instruments, where different, as of
December 31, 2009 and 2008 are summarized as follows
(dollars in thousands)
:
| December 31, | ||||||||||||||||
| 2009 | 2008 | |||||||||||||||
|
Carrying
|
Estimated
|
Carrying
|
Estimated
|
|||||||||||||
|
|
Amounts | Fair Value | Amounts | Fair Value | ||||||||||||
|
Debt instruments
|
||||||||||||||||
|
Secured debt(a)
|
$ | 1,989,434 | $ | 2,002,522 | $ | 1,462,471 | $ | 1,419,411 | ||||||||
|
Unsecured debt(b)
|
1,437,155 | 1,425,814 | 1,798,662 | 1,183,098 | ||||||||||||
|
Derivative contracts(c)
|
||||||||||||||||
|
Interest rate swaps
|
$ | (5,947 | ) | $ | (5,947 | ) | $ | (11,011 | ) | $ | (11,011 | ) | ||||
|
Interest rate caps
|
2,294 | 2,294 | 62 | 62 | ||||||||||||
| (a) | See Note 5, “Secured Debt” | |
| (b) | See Note 6, “Unsecured Debt” | |
| (c) | See Note 11, “Derivatives and Hedging Activity” |
We estimate the fair value of our fixed rate debt instruments by
discounting the remaining cash flows of the debt instrument at a
discount rate equal to the replacement market credit spread plus
the corresponding treasury yields. Factors considered in
determining a replacement market credit spread include general
market conditions, borrower specific credit spreads, time
remaining to maturity,
loan-to-value
ratios and collateral quality (Level 3).
The Company has derivative contracts that are measured and
recognized at fair value using the Topic 820 hierarchy. The
derivative contracts are recorded in “Other assets”
and in “Accounts payable, accrued expenses and other
liabilities” in the Consolidated Balance Sheets for
$2.3 million and $5.9 million, and $62,000 and
$11.0 million as of December 31, 2009 and 2008,
respectively.
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.
To comply with the provisions of Topic 820, the Company
incorporates credit valuation adjustments to appropriately
reflect both its own nonperformance risk and the respective
counterparty’s nonperformance risk in the fair value
measurements. In adjusting the fair value of its derivative
contracts for the effect of nonperformance risk, the Company has
considered the impact of netting and any applicable credit
enhancements, such as collateral postings, thresholds, mutual
puts, and guarantees.
Although the Company has determined that the majority of the
inputs used to value its derivatives fall within Level 2 of
the fair value hierarchy, the credit valuation adjustments
associated with its derivatives utilize Level 3 inputs,
such as estimates of current credit spreads to evaluate the
likelihood of default by itself and its counterparties. However,
as of December 31, 2009, 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.
86
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
As a result, the Company has determined that its derivative
valuations in their entirety are classified in Level 2 of
the fair value hierarchy.
FASB ASC 320,
Investments- Debt and Equity Securities
(formerly FSP
FAS 115-2
and
FAS 124-2,
“Recognition and Presentation of
Other-Than-Temporary
Impairments”), which provides additional guidance designed
to create greater clarity and consistency in accounting for and
presenting impairment losses on securities. The amortized cost,
gross unrealized gains and losses and fair value of the
Company’s investments at December 31, 2009 are as
follows (
dollars in thousands
):
|
Gross
|
Gross
|
Estimated Fair
|
||||||||||||||
|
Amortized
|
Unrealized
|
Unrealized
|
Value (Net Carrying
|
|||||||||||||
| Cost | Gains | Losses | Amount) | |||||||||||||
|
Corporate debt securities- U.S.
|
$ | 33,066 | $ | 4,584 | $ | — | $ | 37,650 | ||||||||
The fair value of the corporate debt securities is determined by
Level 1 inputs which utilize quoted prices in active
markets where we have the ability to access values for identical
assets.
Since the Company recognized an unrealized gain during the year
ended December 31, 2009, and it does not intend to sell the
investments at a loss nor will it be required to sell the
investments before recovery of its amortized cost basis by the
time the Company’s rights to redeem the debt securities
become effective in March 2012, the Company does not consider
the investment in these securities to be
other-than-temporarily
impaired at December 31, 2009.
During the third quarter of 2009, the Company recognized a
non-cash charge of $16.0 million representing the
other-than-temporary
decline in the fair values below the carrying values of two of
the Company’s equity investments in our Bellevue,
Washington unconsolidated joint ventures. (See Note 4,
“Joint Ventures” for further discussion on these joint
ventures, which were subsequently consolidated in UDR’s
Consolidated Financial Statements during the quarter ended
December 31, 2009.) The Company did not recognize any
other-than-temporary
decrease in the value of its other investments in unconsolidated
joint ventures during the year ended December 31, 2009. We
consider various factors to determine if a decrease in the value
of the investment is
other-than-temporary.
These factors include, but are not limited to, age of the
venture, our intent and ability to retain our investment in the
entity, the financial condition and long-term prospects of the
entity, and the relationships with the other joint venture
partners and its lenders. Based on the significance of the
unobservable inputs, we classify these fair value measurements
within Level 3 of the valuation hierarchy.
After determining an
other-than-temporary
decrease in the value of an equity method 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 asset. The inputs and assumptions utilized to
estimate the future cash flows of the underlying asset 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.
| 11. | DERIVATIVES AND HEDGING ACTIVITY |
Risk
Management Objective of Using Derivatives
The Company is exposed to certain risk 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
87
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
the use of derivative financial instruments. Specifically, the
Company 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
Company’s derivative financial instruments are used to
manage differences in the amount, timing, and duration of the
Company’s known or expected cash receipts and its known or
expected cash payments principally related to the Company’s
investments and borrowings.
Cash Flow
Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives
are to add stability to interest expense and to manage its
exposure to interest rate movements. To accomplish this
objective, the Company primarily uses interest rate swaps and
caps as part of its interest rate risk management strategy.
Interest rate swaps designated as cash flow hedges involve the
receipt of variable-rate amounts from a counterparty in exchange
for the Company making fixed-rate payments over the life of the
agreements without exchange of the underlying notional amount.
Interest rate caps designated as cash flow hedges involve the
receipt of variable-rate amounts from a counterparty if interest
rates rise above the strike rate on the contract in exchange for
an up front premium.
The effective portion of changes in the fair value of
derivatives designated and that qualify as cash flow hedges is
recorded in “Accumulated Other Comprehensive
Income/(Loss)” and is subsequently reclassified into
earnings in the period that the hedged forecasted transaction
affects earnings. During the year ended December 31, 2009,
such derivatives were used to hedge the variable cash flows
associated with existing variable-rate debt. The ineffective
portion of the change in fair value of the derivatives is
recognized directly in earnings. During the year ended
December 31, 2009, the Company recorded less than $1,000 of
ineffectiveness in earnings attributable to reset date and index
mismatches between the derivative and the hedged item.
Amounts reported in “Accumulated Other Comprehensive
Income/(Loss)” related to derivatives will be reclassified
to interest expense as interest payments are made on the
Company’s variable-rate debt. During the year ended
December 31, 2009, the Company estimates that an additional
$5.7 million will be reclassified as an increase to
interest expense.
As of December 31, 2009, the Company had the following
outstanding interest rate derivatives that were designated as
cash flow hedges of interest rate risk (
dollar amounts in
thousands
):
|
Number of
|
||||||||
|
Interest Rate Derivative
|
Instruments | Notional | ||||||
|
Interest rate swaps
|
10 | $ | 500,368 | |||||
|
Interest rate caps
|
2 | $ | 113,909 | |||||
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 FASB ASC 815,
Derivatives
and Hedging
(formerly SFAS 133, “Accounting for
Derivative Instruments and Hedging Activities”)
(“Topic 815”). Changes in the fair value of
derivatives not designated in hedging relationships are recorded
directly in earnings and resulted in a gain of $593,000 for the
year ended December 31, 2009. As of December 31, 2009,
the Company had the following outstanding derivatives that were
not designated as hedges in qualifying hedging relationships
(
dollar amounts in thousands
):
|
Number of
|
||||||||
|
Product
|
Instruments | Notional | ||||||
|
Interest rate swaps
|
4 | $ | 90,500 | |||||
|
Interest rate caps
|
5 | $ | 270,166 | |||||
88
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Tabular
Disclosure of Fair Values of Derivative Instruments on the
Balance Sheet
The table below presents the fair value of the Company’s
derivative financial instruments as well as their classification
on the Consolidated Balance Sheets as of December 31, 2009.
| Tabular Disclosure of Fair Values of Derivative Instruments (amounts in thousands) | ||||||||||||||||
| Asset Derivatives | Liability Derivatives | |||||||||||||||
|
Balance Sheet
|
Balance Sheet
|
|||||||||||||||
| Location | Fair Value | Location | Fair Value | |||||||||||||
|
Derivatives designated as hedging instruments under Topic 815
|
||||||||||||||||
|
Interest Rate Products
|
Other Assets | $ | 1,348 | Other Liabilities | $ | 5,282 | ||||||||||
|
Total derivatives designated as hedging instruments under Topic
815
|
$ | 1,348 | $ | 5,282 | ||||||||||||
|
Derivatives
not
designated as hedging instruments under
Topic 815
|
||||||||||||||||
|
Interest Rate Products
|
Other Assets | $ | 946 | Other Liabilities | $ | 665 | ||||||||||
|
Total derivatives
not
designated as hedging instruments
under Topic 815
|
$ | 946 | $ | 665 | ||||||||||||
Tabular
Disclosure of the Effect of Derivative Instruments on the
Consolidated Statements of
Operations
Operations
The tables below present the effect of the Company’s
derivative financial instruments on the Consolidated Statements
of Operations for the year ended December 31, 2009 (dollar
amounts in thousands):
|
Location of Loss
|
Amount of Gain or
|
|||||||||||||||
|
Location of Loss
|
Amount of Gain or
|
Recognized in Income on
|
(Loss) Recognized in
|
|||||||||||||
|
Amount of Gain or (Loss)
|
Reclassified from
|
(Loss) Reclassified from
|
Derivative (Ineffective
|
Income on Derivative
|
||||||||||||
|
Derivatives in Topic 815
|
Recognized in OCI on
|
Accumulated OCI into
|
Accumulated OCI into
|
Portionand Amount
|
(Ineffective Portion and
|
|||||||||||
|
Cash Flow Hedging
|
Derivative (Effective
|
Income (Effective
|
Income (Effective
|
Excluded from
|
Amount Excluded from
|
|||||||||||
|
Relationships
|
Portion) | Portion) | Portion) | Effectiveness Testing) | Effectiveness Testing) | |||||||||||
|
Interest Rate Products
|
$ | (3,949 | ) | Interest expense | $ | (12,082 | ) | Other expense | $ | — | ||||||
|
Total
|
$ | (3,949 | ) | $ | (12,082 | ) | $ | — | ||||||||
|
Amount of
|
||||||
|
Gain
|
||||||
|
Derivatives Not Designated as
|
Location of Gain or
|
Recognized in
|
||||
|
Hedging Instruments
|
(Loss) Recognized in
|
Income on
|
||||
|
Under Topic 815
|
Income on Derivative
|
Derivative | ||||
|
Interest Rate Products
|
Other income/(expense) | $ | 593 | |||
|
Total
|
$ | 593 | ||||
Credit-risk-related
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.
89
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Certain of the Company’s agreements with its derivative
counterparties contain provisions where if there is a change in
the Company’s financial condition that materially changes
the Company’s creditworthiness in an adverse manner, the
Company may be required to fully collateralize its obligations
under the derivative instrument.
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.
As of December 31, 2009, 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 $6.7 million. As of December 31,
2009, the Company has not posted any collateral related to these
agreements. If the Company had breached any of these provisions
at December 31, 2009, it would have been required to settle
its obligations under the agreements at their termination value
of $6.7 million.
| 12. | COMMITMENTS AND CONTINGENCIES |
Commitments
Real
Estate Under Development
The Company is committed to completing our real estate projects
under development and our development joint ventures. The
following summarizes the Company’s real estate commitments
as of December 31, 2009 (
dollars in thousands
):
|
Number of
|
Costs Incurred
|
Total
|
Ownership
|
|||||||||||||
| Properties | to Date | Budgeted Costs | Stake | |||||||||||||
|
Wholly owned — under development
|
4 | $ | 216,915 | $ | 258,600 | 100 | % | |||||||||
|
Joint Venture — Consolidated
|
1 | 120,057 | 123,000 | 49 | % | |||||||||||
| $ | 336,972 | $ | 381,600 | |||||||||||||
The Company may be required to make additional capital
contributions to certain of our joint ventures should additional
capital contributions be necessary to fund development costs or
operating shortfalls.
Ground
and Other Leases
UDR owns five communities which are subject to ground leases
expiring between 2019 and 2103. In addition, UDR is party to
various operating leases related to office space rented by the
Company with expiration dates though 2012. The leases are
accounted for in accordance with FASB ASC 840,
Leases
(formerly SFAS 13). Future minimum lease payments as of
December 31, 2009 are as follows
(dollars in
thousands):
|
Ground
|
Office
|
|||||||
| Leases(a) | Space | |||||||
|
2010
|
$ | 4,545 | $ | 997 | ||||
|
2011
|
4,545 | 637 | ||||||
|
2012
|
4,545 | 282 | ||||||
|
2013
|
4,545 | — | ||||||
|
2014
|
4,545 | — | ||||||
|
Thereafter
|
295,686 | — | ||||||
| $ | 318,411 | $ | 1,916 | |||||
90
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| (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 included a specified minimum lease payment, the Company uses the current rent over the remainder of the lease term. |
UDR incurred $5.0 million, $4.1 million and
$1.4 million of ground rent expense for the years ended
December 31, 2009, 2008, and 2007, respectively. The
Company incurred $2.0 million, $1.4 million and
$1.1 million of rent expense related to office space for
the years ended December 31, 2009, 2008, and 2007,
respectively.
Contingencies
Series D
Out-Performance Program
In February 2006, the Board of Directors of UDR approved the
Series D Out-Performance Program (the “Series D
Program”) pursuant to which certain executive officers of
UDR (the “Series D Participants”) were given the
opportunity to invest indirectly in UDR by purchasing interests
in UDR Out-Performance IV, LLC, a Delaware limited liability
company (the “Series D LLC”), the only asset of
which is a special class of partnership units of the Operating
Partnership (“Series D Out-Performance Partnership
Shares” or “Series D OPPSs”). The
Series D Program was part of the New Out-Performance
Program approved by UDR’s stockholders in May 2005. The
Series D LLC agreed to sell 830,000 membership units
unadjusted for the Special Dividend to certain members of
UDR’s senior management at a price of $1.00 per unit. The
aggregate purchase price of $830,000 for the Series D
OPPSs, assuming 100% participation, was based upon the advice of
an independent valuation expert. The Series D Program
measured the cumulative total return on our common stock over
the
36-month
period beginning January 1, 2006 and ending
December 31, 2008.
The Series D Program was designed to provide participants
with the possibility of substantial returns on their investment
if the cumulative total return on UDR’s common stock, as
measured by the cumulative amount of dividends paid plus share
price appreciation during the measurement period was at least
the equivalent of a 36% total return, or 12% annualized
(“Minimum Return”).
At the conclusion of the measurement period, if UDR’s
cumulative total return satisfied these criteria, the
Series D LLC as holder of the Series D OPPSs would
receive (for the indirect benefit of the Series D
Participants as holders of interests in the Series D
LLC) distributions and allocations of income and loss from
the Operating Partnership equal to the distributions and
allocations that would have been received on the number of
OP Units obtained by:
i. determining the amount by which the cumulative total
return of UDR’s common stock over the measurement period
exceeds the Minimum Return (such excess being the “Excess
Return”);
ii. multiplying 2% of the Excess Return by UDR’s
market capitalization (defined as the average number of shares
outstanding over the
36-month
period, including common stock, OP Units, common stock
equivalents and OP Units); and
iii. dividing the number obtained in (ii) by the
market value of one share of UDR’s common stock on the
valuation date, computed as the volume-weighted average price
per day of the common stock for the 20 trading days immediately
preceding the valuation date.
For the Series D OPPSs, the number determined pursuant to
clause (ii) above was capped at 1% of market capitalization.
If, on the valuation date, the cumulative total return of
UDR’s common stock did not meet the Minimum Return, then
the Series D Participants would forfeit their entire
initial investment. At the conclusion of the measurement period,
December 31, 2008, the total cumulative return on
UDR’s common stock did not meet
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
the minimum return threshold. As a result, there were no payouts
under the Series D OPPSs program and the investment in the
amount of $443,267 made by the holders of the Series D
OPPSs was forfeited.
Series E
Out-Performance Program
In February 2007, the board of directors of UDR approved the
Series E Out-Performance Program (the “Series E
Program”) pursuant to which certain executive officers of
UDR (the “Series E Participants”) were given the
opportunity to invest indirectly in UDR by purchasing interests
in UDR Out-Performance V, LLC, a Delaware limited liability
company (the “Series E LLC”), the only asset of
which is a special class of partnership units of the Operating
Partnership (“Series E Out-Performance Partnership
Shares” or “Series E OPPSs”). The
Series E Program was part of the New Out-Performance
Program approved by UDR’s stockholders in May 2005. The
Series E LLC agreed to sell 805,000 membership units to
certain members of UDR’s senior management at a price of
$1.00 per unit. The aggregate purchase price of $805,000 for the
Series E OPPSs, assuming 100% participation, was based upon
the advice of an independent valuation expert. The Series E
Program measured the cumulative total return on our common stock
over the
36-month
period beginning January 1, 2007 and ending
December 31, 2009.
The Series E Program was designed to provide participants
with the possibility of substantial returns on their investment
if the cumulative total return on UDR’s common stock, as
measured by the cumulative amount of dividends paid plus share
price appreciation during the measurement period was at least
the equivalent of a 36% total return, or 12% annualized
(“Minimum Return”).
At the conclusion of the measurement period, if UDR’s
cumulative total return satisfied these criteria, the
Series E LLC as holder of the Series E OPPSs would
receive (for the indirect benefit of the Series E
Participants as holders of interests in the Series E
LLC) distributions and allocations of income and loss from
the Operating Partnership equal to the distributions and
allocations that would have been received on the number of
OP Units obtained by:
i. determining the amount by which the cumulative total
return of UDR’s common stock over the measurement period
exceeds the Minimum Return (such excess being the “Excess
Return”);
ii. multiplying 2% of the Excess Return by UDR’s
market capitalization (defined as the average number of shares
outstanding over the
36-month
period, including common stock, OP Units, common stock
equivalents and OP Units); and
iii. dividing the number obtained in (ii) by the
market value of one share of UDR’s common stock on the
valuation date, computed as the volume-weighted average price
per day of the common stock for the 20 trading days immediately
preceding the valuation date.
For the Series E OPPSs, the number determined pursuant to
clause (ii) above was capped at 0.5% of market
capitalization.
If, on the valuation date, the cumulative total return of
UDR’s common stock did not meet the Minimum Return, then
the Series E Participants would forfeit their entire
initial investment.
At the conclusion of the measurement period, December 31,
2009, the total cumulative return on UDR’s common stock did
not meet the minimum return threshold. As a result, there were
no payouts under the Series E OPPSs program and the
investment in the amount of $517,500 made by the holders of the
Series E OPPSs was forfeited.
Litigation
and Legal Matters
UDR is subject to various legal proceedings and claims arising
in the ordinary course of business. UDR cannot determine the
ultimate liability with respect to such legal proceedings and
claims at this time. UDR
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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.
| 13. | REPORTABLE SEGMENTS |
FASB ASC Topic 280,
Segment Reporting
(formerly
SFAS 131, “Disclosures about Segments of an Enterprise
and Related Information”) (“Topic 280”), 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
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 for
UDR’s apartment communities are rental income and net
operating income (“NOI”). 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. UDR’s chief operating decision
maker utilizes NOI as the key measure of segment profit or loss.
UDR’s two reportable segments are same communities and
non-mature/other communities:
| • | Same communities represent those communities acquired, developed, and stabilized prior to January 1, 2008, and held as of December 31, 2009. A comparison of operating results from the prior year is meaningful as these communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan to conduct substantial redevelopment activities, and the community is not held for disposition within the current year. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months. | |
| • | Non-mature/other communities represent those communities that were acquired or developed in 2007, 2008 or 2009, sold properties, redevelopment properties, properties classified as real estate held for disposition, condominium conversion properties, joint venture properties, properties managed by third parties, and the non-apartment components of mixed use properties. |
Management evaluates the performance of each of our apartment
communities on a same community and non-mature/other basis, as
well as individually and geographically. This is consistent with
the aggregation criteria of Topic 280 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 three years ended December 31,
2009, 2008, or 2007.
The accounting policies applicable to the operating segments
described above are the same as those described in Note 1,
“Summary of Significant Accounting Policies.” The
following table details rental income and NOI for UDR’s
reportable segments for the three years ended December 31,
2009, 2008, and 2007, and
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
reconciles NOI to (loss)/income from continuing operations per
the consolidated statement of operations
(dollars in
thousands)
:
| December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Reportable apartment home segment rental income
|
||||||||||||
|
Same Communities
|
||||||||||||
|
Western Region
|
$ | 206,375 | $ | 212,373 | $ | 200,962 | ||||||
|
Mid-Atlantic Region
|
107,089 | 106,162 | 101,550 | |||||||||
|
Southeastern Region
|
107,783 | 110,943 | 108,721 | |||||||||
|
Southwestern Region
|
14,890 | 15,475 | 14,934 | |||||||||
|
Non-Mature communities/Other
|
166,762 | 118,455 | 75,451 | |||||||||
|
Total segment and consolidated rental income
|
$ | 602,899 | $ | 563,408 | $ | 501,618 | ||||||
|
Reportable apartment home segment NOI
|
||||||||||||
|
Same Communities
|
||||||||||||
|
Western Region
|
$ | 145,722 | $ | 150,069 | $ | 139,911 | ||||||
|
Mid-Atlantic Region
|
73,498 | 73,016 | 70,787 | |||||||||
|
Southeastern Region
|
67,515 | 69,668 | 69,111 | |||||||||
|
Southwestern Region
|
9,678 | 10,222 | 9,864 | |||||||||
|
Non-Mature communities/Other
|
102,047 | 70,495 | 43,373 | |||||||||
|
Total segment and consolidated NOI
|
$ | 398,460 | $ | 373,470 | $ | 333,046 | ||||||
|
Reconciling items:
|
||||||||||||
|
Non-property income
|
12,362 | 27,190 | 4,320 | |||||||||
|
Property management
|
(16,581 | ) | (15,494 | ) | (13,792 | ) | ||||||
|
Other operating expenses
|
(5,581 | ) | (4,563 | ) | (1,442 | ) | ||||||
|
Hurricane related expenses
|
(127 | ) | (1,310 | ) | — | |||||||
|
Depreciation and amortization
|
(278,391 | ) | (251,984 | ) | (191,478 | ) | ||||||
|
Interest, net
|
(142,152 | ) | (143,018 | ) | (168,338 | ) | ||||||
|
General and administrative
|
(39,812 | ) | (47,179 | ) | (39,566 | ) | ||||||
|
Severance costs and other restructuring charges
|
— | (653 | ) | (4,333 | ) | |||||||
|
Other depreciation and amortization
|
(5,161 | ) | (4,866 | ) | (3,077 | ) | ||||||
|
Loss from unconsolidated entities
|
(18,665 | ) | (3,612 | ) | (1,589 | ) | ||||||
|
Tax (expense)/benefit for the TRS
|
(311 | ) | 9,713 | 17,110 | ||||||||
|
Gain on consolidation of joint ventures
|
1,912 | — | — | |||||||||
|
Net gain on the sale of depreciable property to joint venture
|
— | — | 113,799 | |||||||||
|
(Loss)/income from continuing operations
|
$ | (94,047 | ) | $ | (62,306 | ) | $ | 44,660 | ||||
Included within non-property income as other income for the year
ended December 31, 2008 is net revenue of $2.9 million
for insurance related recoveries owed from one of the
Company’s joint ventures as a result of Hurricane Ike.
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following table details the assets of UDR’s reportable
segments for the years ended December 31, 2009 and 2008
(dollars in thousands)
:
| December 31, | ||||||||
| . | 2009 | 2008 | ||||||
|
Reportable apartment home segment assets
|
||||||||
|
Same Communities
|
||||||||
|
Western Region
|
$ | 1,939,373 | $ | 1,917,347 | ||||
|
Mid-Atlantic Region
|
730,420 | 718,124 | ||||||
|
Southeastern Region
|
825,371 | 814,204 | ||||||
|
Southwestern Region
|
132,381 | 131,250 | ||||||
|
Non-Mature communities/Other
|
2,687,502 | 2,250,828 | ||||||
|
Total segment assets
|
6,315,047 | 5,831,753 | ||||||
|
Accumulated depreciation
|
(1,351,293 | ) | (1,078,689 | ) | ||||
|
Total segment assets — net book value
|
4,963,754 | 4,753,064 | ||||||
|
Reconciling items:
|
||||||||
|
Cash and cash equivalents
|
5,985 | 12,740 | ||||||
|
Marketable securities
|
37,650 | — | ||||||
|
Restricted cash
|
8,879 | 7,726 | ||||||
|
Deferred financing costs, net
|
26,601 | 29,168 | ||||||
|
Notes receivable
|
7,800 | 207,450 | ||||||
|
Investment in unconsolidated joint ventures
|
14,126 | 47,048 | ||||||
|
Other assets
|
67,822 | 85,842 | ||||||
|
Other assets — real estate held for disposition
|
— | 767 | ||||||
|
Total consolidated assets
|
$ | 5,132,617 | $ | 5,143,805 | ||||
Capital expenditures related to our same communities totaled
$44.4 million, $70.6 million, and $73.6 million
for the three years ended December 31, 2009, 2008, and
2007, respectively. Capital expenditures related to our
non-mature/other communities totaled $10.8 million,
$13.0 million, and $62.5 million for the three years
ended December 31, 2009, 2008, and 2007, respectively.
Markets included in the above geographic segments are as follows:
| i. | Western — Orange County, San Francisco, Monterey Peninsula, Los Angeles, Seattle, San Diego, Inland Empire, Sacramento and Portland |
| ii. | Mid-Atlantic — Metropolitan DC, Baltimore, Richmond, Norfolk, and Other Mid-Atlantic |
| iii. | Southeastern — Tampa, Orlando, Nashville, Jacksonville, and Other Florida |
| iv. | Southwestern — Phoenix and Dallas |
| 14. | RESTRUCTURING CHARGES |
As of December 31, 2008, UDR restructured our operations
resulting in a severance related charge of $912,000 reported in
the Consolidated Statements of Operations within the line item
“Severance costs and other restructuring charges”. The
Company incurred this charge as a result of the restructuring
and consolidating 24 positions as we continue to focus on
obtaining efficiencies.
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
As of December 31, 2007, UDR has established Highlands
Ranch, Colorado, as its corporate headquarters and realigned
resources to improve efficiencies and centralize job functions
in fewer locations. As a result of a comprehensive review of the
organizational structure of UDR and its operations, UDR recorded
a charge of $3.6 million during the fourth quarter of 2007
related to workforce reductions, relocation costs, and other
related costs.
| 15. | UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA |
Selected consolidated quarterly financial data for the years
ended December 31, 2009 and 2008 is summarized in the table
below
(dollars in thousands, except per share amounts)
:
| Three Months Ended | ||||||||||||||||
| March 31, | June 30, | September 30, | December 31, | |||||||||||||
|
2009
|
||||||||||||||||
|
Rental income(a)
|
$ | 150,615 | $ | 151,843 | $ | 150,311 | $ | 150,130 | ||||||||
|
Loss from continuing operations
|
(13,255 | ) | (14,713 | ) | (40,356 | ) | (25,723 | ) | ||||||||
|
(Loss)/income from discontinued operations
|
(168 | ) | 2,053 | 601 | (62 | ) | ||||||||||
|
Net loss available to common stockholders
|
(15,429 | ) | (14,858 | ) | (40,776 | ) | (24,795 | ) | ||||||||
|
Loss per share(b)
|
||||||||||||||||
|
Basic and diluted
|
$ | (0.11 | ) | $ | (0.10 | ) | $ | (0.27 | ) | $ | (0.16 | ) | ||||
|
2008
|
||||||||||||||||
|
Rental income(a)
|
$ | 126,586 | $ | 139,955 | $ | 147,414 | $ | 149,453 | ||||||||
|
Loss from continuing operations
|
(14,401 | ) | (13,681 | ) | (17,100 | ) | (17,124 | ) | ||||||||
|
Income from discontinued operations
|
786,856 | 13,316 | 6,736 | (735 | ) | |||||||||||
|
Net income/(loss) available to common stockholders
|
720,510 | (3,886 | ) | (9,778 | ) | (18,138 | ) | |||||||||
|
Earnings/(loss) per share(b),(c)
|
||||||||||||||||
|
Basic and diluted
|
$ | 5.47 | $ | (0.03 | ) | $ | (0.08 | ) | $ | (0.13 | ) | |||||
| (a) | Represents rental income from continuing operations | |
| (b) | Quarterly earnings per common share amounts may not total to the annual amounts due to rounding. | |
| (c) | Prior to retrospective adjustment of the Special Dividend, earnings/(loss) per share-basic and diluted was $5.05, ($0.03), ($0.07) and ($0.13) for the quarters ended March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008. (See Note 1, “Summary of Significant Accounting Policies” for further discussion of the Special Dividend). |
96
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UDR,
INC.
SCHEDULE III — REAL ESTATE OWNED
FOR THE YEAR ENDED DECEMBER 31, 2009
SCHEDULE III — REAL ESTATE OWNED
FOR THE YEAR ENDED DECEMBER 31, 2009
|
Cost of
|
Gross Amount at Which
|
|||||||||||||||||||||||||||||||||||||||
| Initial Costs |
Total
|
Improvements
|
Carried at Close of Period | |||||||||||||||||||||||||||||||||||||
|
Land and
|
Buildings
|
Initial
|
Capitalized
|
Land and
|
Buildings
|
Total
|
||||||||||||||||||||||||||||||||||
|
Land
|
and
|
Acquisition
|
Subsequent
|
Land
|
Buildings
|
Carrying
|
Accumulated
|
Date of
|
Date
|
|||||||||||||||||||||||||||||||
| Encumbrances | Improvements | Improvements | Costs | to Acquisition Costs | Improvements | Improvements | Value | Depreciation | Construction(a) | Acquired | ||||||||||||||||||||||||||||||
|
WESTERN REGION
|
||||||||||||||||||||||||||||||||||||||||
|
Harbor at Mesa Verde
|
46,627,165 | 20,476,466 | 28,537,805 | 49,014,271 | 10,618,870 | 20,670,994 | 38,962,147 | 59,633,141 | 15,484,576 | 2003 | Jun-03 | |||||||||||||||||||||||||||||
|
Pine Brook Village
|
18,270,000 | 2,581,763 | 25,504,086 | 28,085,849 | 4,384,221 | 3,824,329 | 28,645,741 | 32,470,070 | 10,737,269 | 1979 | Jun-03 | |||||||||||||||||||||||||||||
|
Pacific Shores
|
19,145,000 | 7,345,226 | 22,623,676 | 29,968,902 | 7,068,306 | 7,449,054 | 29,588,154 | 37,037,208 | 11,340,412 | 2003 | Jun-03 | |||||||||||||||||||||||||||||
|
Huntington Vista
|
30,965,678 | 8,055,452 | 22,485,746 | 30,541,198 | 5,551,185 | 8,159,932 | 27,932,451 | 36,092,383 | 10,809,161 | 1970 | Jun-03 | |||||||||||||||||||||||||||||
|
Pacific Palms
|
— | 12,285,059 | 6,236,783 | 18,521,842 | 1,528,737 | 12,562,735 | 7,487,844 | 20,050,579 | 3,377,614 | 1962 | Jul-03 | |||||||||||||||||||||||||||||
|
Missions at Back Bay
|
— | 229,270 | 14,128,763 | 14,358,033 | 1,506,839 | 10,722,883 | 5,141,989 | 15,864,872 | 2,069,251 | 1969 | Dec-03 | |||||||||||||||||||||||||||||
|
Huntington Villas
|
55,202,275 | 61,535,270 | 18,017,201 | 79,552,471 | 3,901,751 | 61,811,460 | 21,642,762 | 83,454,222 | 7,621,200 | 1972 | Sep-04 | |||||||||||||||||||||||||||||
|
Vista Del Rey
|
13,287,960 | 10,670,493 | 7,079,834 | 17,750,327 | 1,350,982 | 10,720,737 | 8,380,572 | 19,101,309 | 2,906,278 | 1969 | Sep-04 | |||||||||||||||||||||||||||||
|
Foxborough
|
— | 12,070,601 | 6,186,721 | 18,257,322 | 1,861,577 | 12,121,983 | 7,996,916 | 20,118,899 | 2,541,650 | 1969 | Sep-04 | |||||||||||||||||||||||||||||
|
Coronado at Newport — North
|
51,022,183 | 62,515,901 | 46,082,056 | 108,597,957 | 13,483,171 | 62,881,081 | 59,200,047 | 122,081,128 | 19,779,984 | 2000 | Oct-04 | |||||||||||||||||||||||||||||
|
Villa Venetia
|
— | 70,825,106 | 24,179,600 | 95,004,706 | 4,578,761 | 70,879,030 | 28,704,437 | 99,583,467 | 9,557,500 | 1972 | Oct-04 | |||||||||||||||||||||||||||||
|
The Arboretum
|
— | 29,562,468 | 14,283,292 | 43,845,760 | 4,651,571 | 29,644,322 | 18,853,009 | 48,497,331 | 6,437,211 | 1970 | Oct-04 | |||||||||||||||||||||||||||||
|
Coronado South
|
92,753,546 | 58,784,785 | 50,066,757 | 108,851,542 | 10,707,321 | 58,998,987 | 60,559,876 | 119,558,863 | 18,980,841 | 2000 | Mar-05 | |||||||||||||||||||||||||||||
|
Pine Brook Village II
|
— | 25,921,787 | 60,961,271 | 86,883,058 | 1,040,022 | 25,922,661 | 62,000,419 | 87,923,080 | 5,822,994 | 1975 | May-08 | |||||||||||||||||||||||||||||
|
ORANGE COUNTY, CA
|
327,273,807 | 382,859,647 | 346,373,591 | 729,233,238 | 72,233,314 | 396,370,188 | 405,096,364 | 801,466,552 | 127,465,941 | |||||||||||||||||||||||||||||||
|
2000 Post Street
|
— | 9,860,627 | 44,577,506 | 54,438,133 | 6,204,104 | 10,108,051 | 50,534,186 | 60,642,237 | 15,722,757 | 1987 | Dec-98 | |||||||||||||||||||||||||||||
|
Birch Creek
|
— | 4,365,315 | 16,695,509 | 21,060,824 | 4,830,938 | 4,974,519 | 20,917,243 | 25,891,762 | 8,992,023 | 1968 | Dec-98 | |||||||||||||||||||||||||||||
|
Highlands Of Marin
|
— | 5,995,838 | 24,868,350 | 30,864,188 | 20,819,591 | 6,565,347 | 45,118,432 | 51,683,779 | 10,873,389 | 1991 | Dec-98 | |||||||||||||||||||||||||||||
|
Marina Playa
|
— | 6,224,383 | 23,916,283 | 30,140,666 | 6,714,093 | 6,704,196 | 30,150,563 | 36,854,759 | 12,466,018 | 1971 | Dec-98 | |||||||||||||||||||||||||||||
|
2000 Post III
|
— | 1,755,643 | 7,753,477 | 9,509,120 | 2,937,173 | 3,290,476 | 9,155,817 | 12,446,293 | 2,227,848 | 2006 | Dec-98 | |||||||||||||||||||||||||||||
|
Crossroads Apartments
|
— | 4,811,488 | 10,169,520 | 14,981,008 | 3,262,201 | 4,981,126 | 13,262,083 | 18,243,209 | 4,681,688 | 1986 | Jul-04 | |||||||||||||||||||||||||||||
|
River Terrace
|
33,130,377 | 22,161,247 | 40,137,141 | 62,298,388 | 1,322,899 | 22,207,243 | 41,414,044 | 63,621,287 | 10,860,801 | 2005 | Aug-05 | |||||||||||||||||||||||||||||
|
Bay Terrace
|
— | 8,544,559 | 14,457,992 | 23,002,551 | 1,210,528 | 8,549,384 | 15,663,695 | 24,213,079 | 3,889,870 | 1962 | Oct-05 | |||||||||||||||||||||||||||||
|
Lake Pines
|
— | 14,031,365 | 30,536,982 | 44,568,347 | 4,494,356 | 14,032,728 | 35,029,975 | 49,062,703 | 8,167,660 | 1972 | Nov-05 | |||||||||||||||||||||||||||||
|
Highlands of Marin Phase II
|
— | 5,352,554 | 18,558,883 | 23,911,437 | 3,472,383 | 5,516,687 | 21,867,133 | 27,383,820 | 2,631,881 | 1968 | Oct-07 | |||||||||||||||||||||||||||||
|
Edgewater
|
41,037,000 | 30,657,223 | 83,872,319 | 114,529,542 | 1,121,379 | 30,658,037 | 84,992,884 | 115,650,921 | 8,889,460 | 2007 | Mar-08 | |||||||||||||||||||||||||||||
|
Almaden Lake Village
|
27,000,000 | 593,923 | 42,514,864 | 43,108,787 | 1,374,282 | 606,613 | 43,876,456 | 44,483,069 | 3,826,089 | 1999 | Jul-08 | |||||||||||||||||||||||||||||
|
SAN FRANCISCO, CA
|
101,167,377 | 114,354,165 | 358,058,826 | 472,412,991 | 57,763,927 | 118,194,407 | 411,982,511 | 530,176,918 | 93,229,484 | |||||||||||||||||||||||||||||||
|
The Crest
|
56,695,508 | 21,953,480 | 67,808,654 | 89,762,134 | 6,159,041 | 22,072,766 | 73,848,409 | 95,921,175 | 23,589,881 | 1989 | Sep-04 | |||||||||||||||||||||||||||||
|
Rosebeach
|
— | 8,414,478 | 17,449,593 | 25,864,071 | 1,397,453 | 8,461,848 | 18,799,676 | 27,261,524 | 6,073,469 | 1970 | Sep-04 | |||||||||||||||||||||||||||||
|
The Villas @ San Dimas
|
— | 8,180,619 | 16,735,364 | 24,915,983 | 2,182,227 | 8,238,635 | 18,859,575 | 27,098,210 | 6,096,833 | 1981 | Oct-04 | |||||||||||||||||||||||||||||
|
The Villas at Bonita
|
— | 4,498,439 | 11,699,117 | 16,197,556 | 733,750 | 4,535,953 | 12,395,353 | 16,931,306 | 3,910,957 | 1981 | Oct-04 | |||||||||||||||||||||||||||||
|
Ocean Villa
|
9,118,462 | 5,134,982 | 12,788,885 | 17,923,867 | 965,877 | 5,204,838 | 13,684,906 | 18,889,744 | 4,186,143 | 1965 | Oct-04 | |||||||||||||||||||||||||||||
|
Pine@Sixth
|
— | 5,805,234 | 6,305,030 | 12,110,264 | 12,258,627 | 6,238,333 | 18,130,558 | 24,368,891 | 7,839,954 | 2008 | Aug-06 | |||||||||||||||||||||||||||||
|
Jefferson at Marina del Rey
|
110,242,483 | 55,651,137 | — | 55,651,137 | 87,512,774 | 61,107,309 | 82,056,602 | 143,163,911 | 5,499,982 | 2008 | Sep-07 | |||||||||||||||||||||||||||||
|
Tierra Del Rey
|
— | 39,585,534 | 36,678,725 | 76,264,259 | 1,297,920 | 39,588,890 | 37,973,289 | 77,562,179 | 4,613,762 | 1999 | Dec-07 | |||||||||||||||||||||||||||||
|
LOS ANGELES, CA
|
176,056,453 | 149,223,903 | 169,465,368 | 318,689,271 | 112,507,669 | 155,448,572 | 275,748,368 | 431,196,940 | 61,810,981 | |||||||||||||||||||||||||||||||
|
Arbor Terrace
|
13,206,912 | 1,453,342 | 11,994,972 | 13,448,314 | 2,300,489 | 1,726,400 | 14,022,403 | 15,748,803 | 6,257,356 | 1996 | Mar-98 | |||||||||||||||||||||||||||||
|
Aspen Creek
|
10,819,093 | 1,177,714 | 9,115,789 | 10,293,503 | 1,637,298 | 1,403,221 | 10,527,580 | 11,930,801 | 4,095,067 | 1996 | Dec-98 | |||||||||||||||||||||||||||||
|
Crowne Pointe
|
11,002,109 | 2,486,252 | 6,437,256 | 8,923,508 | 3,777,319 | 2,666,047 | 10,034,780 | 12,700,827 | 4,480,845 | 1987 | Dec-98 | |||||||||||||||||||||||||||||
|
Hilltop
|
8,545,060 | 2,173,969 | 7,407,628 | 9,581,597 | 2,733,418 | 2,526,400 | 9,788,615 | 12,315,015 | 4,080,310 | 1985 | Dec-98 | |||||||||||||||||||||||||||||
|
The Hawthorne
|
— | 6,473,970 | 30,226,079 | 36,700,049 | 1,427,221 | 6,476,325 | 31,650,945 | 38,127,270 | 8,575,385 | 2003 | Jul-05 | |||||||||||||||||||||||||||||
|
The Kennedy
|
18,839,339 | 6,178,440 | 22,306,568 | 28,485,008 | 784,042 | 6,195,752 | 23,073,298 | 29,269,050 | 5,604,659 | 2005 | Nov-05 | |||||||||||||||||||||||||||||
|
Borgata
|
9,719,789 | 6,378,894 | 24,569,021 | 30,947,915 | 146,281 | 6,378,894 | 24,715,302 | 31,094,196 | 3,772,582 | 2001 | May-07 | |||||||||||||||||||||||||||||
|
Hearthstone at Merrill Creek
|
— | 6,848,144 | 30,922,147 | 37,770,291 | 1,183,116 | 6,854,137 | 32,099,270 | 38,953,407 | 3,102,096 | 2000 | May-08 | |||||||||||||||||||||||||||||
|
Island Square
|
— | 21,284,245 | 89,389,087 | 110,673,332 | 1,847,145 | 21,290,237 | 91,230,240 | 112,520,477 | 7,712,456 | 2007 | Jul-08 | |||||||||||||||||||||||||||||
|
989elements
|
— | 8,540,860 | 45,990,377 | 54,531,237 | 1,018 | 8,495,626 | 46,036,629 | 54,532,255 | 7,094 | 2006 | Dec-09 | |||||||||||||||||||||||||||||
|
SEATTLE, WA
|
72,132,302 | 62,995,830 | 278,358,924 | 341,354,754 | 15,837,347 | 64,013,039 | 293,179,062 | 357,192,101 | 47,687,850 | |||||||||||||||||||||||||||||||
|
Rancho Vallecitos
|
18,356,242 | 3,302,967 | 10,877,286 | 14,180,253 | 4,885,171 | 3,762,698 | 15,302,726 | 19,065,424 | 9,172,087 | 1988 | Oct-99 | |||||||||||||||||||||||||||||
|
Presidio at Rancho Del Oro
|
13,325,000 | 9,163,939 | 22,694,492 | 31,858,431 | 4,278,261 | 9,515,265 | 26,621,427 | 36,136,692 | 9,443,315 | 1987 | Jun-04 | |||||||||||||||||||||||||||||
|
Villas at Carlsbad
|
8,671,273 | 6,516,636 | 10,717,601 | 17,234,237 | 1,165,928 | 6,596,917 | 11,803,248 | 18,400,165 | 3,630,228 | 1966 | Oct-04 | |||||||||||||||||||||||||||||
|
Summit at Mission Bay
|
— | 22,598,529 | 17,181,401 | 39,779,930 | 4,323,759 | 22,620,629 | 21,483,060 | 44,103,689 | 6,598,142 | 1953 | Nov-04 | |||||||||||||||||||||||||||||
|
Milazzo
|
— | 15,920,401 | 35,577,599 | 51,498,000 | 4,212,614 | 15,930,792 | 39,779,822 | 55,710,614 | 8,857,927 | 1986 | May-06 | |||||||||||||||||||||||||||||
|
SAN DIEGO, CA
|
40,352,515 | 57,502,472 | 97,048,379 | 154,550,851 | 18,865,733 | 58,426,301 | 114,990,283 | 173,416,584 | 37,701,699 | |||||||||||||||||||||||||||||||
97
Table of Contents
UDR,
INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
|
Cost of
|
Gross Amount at Which
|
|||||||||||||||||||||||||||||||||||||||
| Initial Costs |
Total
|
Improvements
|
Carried at Close of Period | |||||||||||||||||||||||||||||||||||||
|
Land and
|
Buildings
|
Initial
|
Capitalized
|
Land and
|
Buildings
|
Total
|
||||||||||||||||||||||||||||||||||
|
Land
|
and
|
Acquisition
|
Subsequent
|
Land
|
Buildings
|
Carrying
|
Accumulated
|
Date of
|
Date
|
|||||||||||||||||||||||||||||||
| Encumbrances | Improvements | Improvements | Costs | to Acquisition Costs | Improvements | Improvements | Value | Depreciation | Construction(a) | Acquired | ||||||||||||||||||||||||||||||
|
Boronda Manor
|
— | 1,946,423 | 8,981,742 | 10,928,165 | 7,815,427 | 3,079,131 | 15,664,461 | 18,743,592 | 5,431,440 | 1979 | Dec-98 | |||||||||||||||||||||||||||||
|
Garden Court
|
— | 888,038 | 4,187,950 | 5,075,988 | 3,997,400 | 1,424,192 | 7,649,196 | 9,073,388 | 2,723,125 | 1973 | Dec-98 | |||||||||||||||||||||||||||||
|
Cambridge Court
|
— | 3,038,877 | 12,883,312 | 15,922,189 | 12,364,763 | 5,119,301 | 23,167,651 | 28,286,952 | 8,390,404 | 1974 | Dec-98 | |||||||||||||||||||||||||||||
|
Laurel Tree
|
— | 1,303,902 | 5,115,356 | 6,419,258 | 5,155,032 | 2,056,277 | 9,518,013 | 11,574,290 | 3,306,423 | 1977 | Dec-98 | |||||||||||||||||||||||||||||
|
The Pointe At Harden Ranch
|
— | 6,388,446 | 23,853,534 | 30,241,980 | 22,641,042 | 9,695,985 | 43,187,037 | 52,883,022 | 14,625,757 | 1986 | Dec-98 | |||||||||||||||||||||||||||||
|
The Pointe At Northridge
|
— | 2,043,736 | 8,028,443 | 10,072,179 | 8,776,279 | 3,190,463 | 15,657,995 | 18,848,458 | 5,479,156 | 1979 | Dec-98 | |||||||||||||||||||||||||||||
|
The Pointe At Westlake
|
— | 1,329,064 | 5,334,004 | 6,663,068 | 4,854,800 | 2,105,691 | 9,412,177 | 11,517,868 | 3,233,985 | 1975 | Dec-98 | |||||||||||||||||||||||||||||
|
MONTEREY PENINSULA, CA
|
— | 16,938,486 | 68,384,341 | 85,322,827 | 65,604,743 | 26,671,040 | 124,256,530 | 150,927,570 | 43,190,290 | |||||||||||||||||||||||||||||||
|
Verano at Rancho Cucamonga Town Square
|
53,773,090 | 13,557,235 | 3,645,406 | 17,202,641 | 51,738,113 | 22,856,282 | 46,084,472 | 68,940,754 | 14,612,379 | 2006 | Oct-02 | |||||||||||||||||||||||||||||
|
Windemere at Sycamore Highland
|
23,434,559 | 5,809,490 | 23,450,119 | 29,259,609 | 1,604,589 | 5,888,784 | 24,975,414 | 30,864,198 | 10,607,203 | 2001 | Nov-02 | |||||||||||||||||||||||||||||
|
Waterstone at Murrieta
|
— | 10,597,865 | 34,702,760 | 45,300,625 | 4,467,706 | 10,766,548 | 39,001,783 | 49,768,331 | 13,175,753 | 1990 | Nov-04 | |||||||||||||||||||||||||||||
|
INLAND EMPIRE, CA
|
77,207,649 | 29,964,590 | 61,798,285 | 91,762,875 | 57,810,408 | 39,511,614 | 110,061,669 | 149,573,283 | 38,395,335 | |||||||||||||||||||||||||||||||
|
Foothills Tennis Village
|
17,408,221 | 3,617,507 | 14,542,028 | 18,159,535 | 5,016,140 | 3,918,693 | 19,256,982 | 23,175,675 | 8,898,165 | 1988 | Dec-98 | |||||||||||||||||||||||||||||
|
Woodlake Village
|
31,154,663 | 6,772,438 | 26,966,750 | 33,739,188 | 10,469,336 | 7,626,752 | 36,581,772 | 44,208,524 | 16,996,018 | 1979 | Dec-98 | |||||||||||||||||||||||||||||
|
SACRAMENTO, CA
|
48,562,884 | 10,389,945 | 41,508,778 | 51,898,723 | 15,485,476 | 11,545,445 | 55,838,754 | 67,384,199 | 25,894,183 | |||||||||||||||||||||||||||||||
|
Tualatin Heights
|
11,312,843 | 3,272,585 | 9,134,089 | 12,406,674 | 5,037,441 | 3,612,751 | 13,831,364 | 17,444,115 | 5,949,885 | 1989 | Dec-98 | |||||||||||||||||||||||||||||
|
Andover Park
|
17,225,000 | 2,916,576 | 16,994,580 | 19,911,156 | 6,036,815 | 3,097,964 | 22,850,007 | 25,947,971 | 7,890,920 | 1989 | Sep-04 | |||||||||||||||||||||||||||||
|
Hunt Club
|
18,395,000 | 6,014,006 | 14,870,326 | 20,884,332 | 4,434,125 | 6,200,539 | 19,117,918 | 25,318,457 | 6,640,143 | 1985 | Sep-04 | |||||||||||||||||||||||||||||
|
PORTLAND, OR
|
46,932,843 | 12,203,167 | 40,998,995 | 53,202,162 | 15,508,381 | 12,911,254 | 55,799,289 | 68,710,543 | 20,480,948 | |||||||||||||||||||||||||||||||
|
TOTAL WESTERN REGION
|
889,685,830 | 836,432,205 | 1,461,995,487 | 2,298,427,692 | 431,616,998 | 883,091,860 | 1,846,952,830 | 2,730,044,690 | 495,856,711 | |||||||||||||||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||||||||||||||
|
Dominion Lake Ridge
|
22,940,418 | 2,366,061 | 8,386,439 | 10,752,500 | 4,756,792 | 2,752,624 | 12,756,668 | 15,509,292 | 6,899,359 | 1987 | Feb-96 | |||||||||||||||||||||||||||||
|
Dominion Middle Ridge
|
35,087,686 | 3,311,468 | 13,283,047 | 16,594,515 | 5,987,361 | 3,610,703 | 18,971,173 | 22,581,876 | 9,695,302 | 1990 | Jun-96 | |||||||||||||||||||||||||||||
|
The Whitmore
|
— | 6,417,889 | 13,411,278 | 19,829,167 | 19,365,296 | 7,420,651 | 31,773,812 | 39,194,463 | 11,523,493 | 2008 | Apr-02 | |||||||||||||||||||||||||||||
|
Presidential Greens
|
— | 11,237,698 | 18,789,985 | 30,027,683 | 6,733,591 | 11,504,261 | 25,257,013 | 36,761,274 | 12,338,735 | 1938 | May-02 | |||||||||||||||||||||||||||||
|
Ridgewood
|
— | 5,612,147 | 20,085,474 | 25,697,621 | 6,656,435 | 5,789,750 | 26,564,306 | 32,354,056 | 12,497,527 | 1988 | Aug-02 | |||||||||||||||||||||||||||||
|
The Calvert
|
— | 262,807 | 11,188,623 | 11,451,430 | 14,173,170 | 8,264,652 | 17,359,948 | 25,624,600 | 6,920,949 | 1962 | Nov-03 | |||||||||||||||||||||||||||||
|
Commons at Town Square
|
— | 135,780 | 7,723,647 | 7,859,427 | 887,760 | 6,866,705 | 1,880,482 | 8,747,187 | 820,020 | 1971 | Dec-03 | |||||||||||||||||||||||||||||
|
Waterside Towers
|
— | 873,713 | 38,209,345 | 39,083,058 | 8,200,812 | 26,177,439 | 21,106,431 | 47,283,870 | 8,445,415 | 1971 | Dec-03 | |||||||||||||||||||||||||||||
|
Waterside Townhomes
|
— | 129,000 | 3,723,896 | 3,852,896 | 430,575 | 2,724,925 | 1,558,546 | 4,283,471 | 626,582 | 1971 | Dec-03 | |||||||||||||||||||||||||||||
|
Wellington Place at Olde Town
|
28,680,802 | 13,753,346 | 36,059,193 | 49,812,539 | 15,850,078 | 14,474,320 | 51,188,297 | 65,662,617 | 14,325,997 | 2008 | Sep-05 | |||||||||||||||||||||||||||||
|
Andover House
|
36,127,024 | 14,357,021 | 51,577,112 | 65,934,133 | 2,125,845 | 14,359,813 | 53,700,165 | 68,059,978 | 8,548,042 | 2004 | Mar-07 | |||||||||||||||||||||||||||||
|
Sullivan Place
|
— | 1,136,778 | 103,676,103 | 104,812,881 | 2,155,733 | 1,173,249 | 105,795,365 | 106,968,614 | 12,678,340 | 2007 | Dec-07 | |||||||||||||||||||||||||||||
|
Delancey at Shirlington
|
— | 21,605,992 | 66,765,252 | 88,371,244 | 658,983 | 21,611,692 | 67,418,535 | 89,030,227 | 6,807,335 | 2006/07 | Mar-08 | |||||||||||||||||||||||||||||
|
Circle Towers
|
69,214,719 | 33,010,740 | 107,051,197 | 140,061,937 | 3,401,703 | 32,815,406 | 110,648,234 | 143,463,640 | 10,867,671 | 1972 | Mar-08 | |||||||||||||||||||||||||||||
|
METROPOLITAN, DC
|
192,050,649 | 114,210,440 | 499,930,591 | 614,141,031 | 91,384,134 | 159,546,190 | 545,978,975 | 705,525,165 | 122,994,767 | |||||||||||||||||||||||||||||||
|
Dominion Kings Place
|
— | 1,564,942 | 7,006,574 | 8,571,516 | 3,206,611 | 1,773,242 | 10,004,885 | 11,778,127 | 5,826,301 | 1983 | Dec-92 | |||||||||||||||||||||||||||||
|
Dominion At Eden Brook
|
— | 2,361,167 | 9,384,171 | 11,745,338 | 5,364,831 | 2,875,314 | 14,234,855 | 17,110,169 | 8,448,296 | 1984 | Dec-92 | |||||||||||||||||||||||||||||
|
Ellicott Grove
|
— | 2,919,481 | 9,099,691 | 12,019,172 | 21,940,939 | 5,188,970 | 28,771,141 | 33,960,111 | 13,136,128 | 2008 | Jul-94 | |||||||||||||||||||||||||||||
|
Dominion Constant Freindship
|
10,683,003 | 903,122 | 4,668,956 | 5,572,078 | 2,923,714 | 1,112,322 | 7,383,470 | 8,495,792 | 4,007,093 | 1990 | May-95 | |||||||||||||||||||||||||||||
|
Lakeside Mill
|
15,241,992 | 2,665,869 | 10,109,175 | 12,775,044 | 3,175,979 | 2,821,986 | 13,129,037 | 15,951,023 | 7,941,043 | 1989 | Dec-99 | |||||||||||||||||||||||||||||
|
Tamar Meadow
|
16,075,701 | 4,144,926 | 17,149,514 | 21,294,440 | 3,914,310 | 4,457,718 | 20,751,032 | 25,208,750 | 9,343,582 | 1990 | Nov-02 | |||||||||||||||||||||||||||||
|
Calvert’s Walk
|
19,500,000 | 4,408,192 | 24,692,115 | 29,100,307 | 4,790,617 | 4,546,169 | 29,344,755 | 33,890,924 | 10,580,495 | 1988 | Mar-04 | |||||||||||||||||||||||||||||
|
Arborview Apartments
|
— | 4,653,393 | 23,951,828 | 28,605,221 | 4,878,675 | 4,936,414 | 28,547,482 | 33,483,896 | 10,876,063 | 1992 | Mar-04 | |||||||||||||||||||||||||||||
|
Liriope Apartments
|
— | 1,620,382 | 6,790,681 | 8,411,063 | 732,897 | 1,628,063 | 7,515,897 | 9,143,960 | 2,711,366 | 1997 | Mar-04 | |||||||||||||||||||||||||||||
|
20 Lambourne
|
32,000,000 | 11,749,575 | 45,589,714 | 57,339,289 | 2,525,271 | 11,777,026 | 48,087,534 | 59,864,560 | 5,286,929 | 2003 | Mar-08 | |||||||||||||||||||||||||||||
|
BALTIMORE, MD
|
93,500,696 | 36,991,049 | 158,442,419 | 195,433,468 | 53,453,844 | 41,117,224 | 207,770,088 | 248,887,312 | 78,157,296 | |||||||||||||||||||||||||||||||
|
Dominion Olde West
|
— | 1,965,097 | 12,203,965 | 14,169,062 | 5,052,699 | 2,605,130 | 16,616,631 | 19,221,761 | 10,520,073 | 1978/82/84/85/87 | Dec-84 & Aug-91 | |||||||||||||||||||||||||||||
|
Dominion Creekwood
|
— | — | — | — | 5,418,882 | 131,462 | 5,287,420 | 5,418,882 | 3,351,549 | 1984 | Aug-91 | |||||||||||||||||||||||||||||
|
Dominion English Hills
|
— | 1,979,174 | 11,524,313 | 13,503,487 | 8,223,928 | 2,873,091 | 18,854,324 | 21,727,415 | 11,134,039 | 1969/76 | Dec-91 | |||||||||||||||||||||||||||||
|
Legacy at Mayland
|
41,507,210 | — | — | — | 23,648,465 | 1,682,509 | 21,965,956 | 23,648,465 | 12,598,398 | 2007 | Dec-91 | |||||||||||||||||||||||||||||
|
Gayton Pointe Townhomes
|
— | 825,760 | 5,147,968 | 5,973,728 | 28,411,770 | 3,302,137 | 31,083,361 | 34,385,498 | 15,505,595 | 2007 | Sep-95 | |||||||||||||||||||||||||||||
98
Table of Contents
UDR,
INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
|
Cost of
|
Gross Amount at Which
|
|||||||||||||||||||||||||||||||||||||||
| Initial Costs |
Total
|
Improvements
|
Carried at Close of Period | |||||||||||||||||||||||||||||||||||||
|
Land and
|
Buildings
|
Initial
|
Capitalized
|
Land and
|
Buildings
|
Total
|
||||||||||||||||||||||||||||||||||
|
Land
|
and
|
Acquisition
|
Subsequent
|
Land
|
Buildings
|
Carrying
|
Accumulated
|
Date of
|
Date
|
|||||||||||||||||||||||||||||||
| Encumbrances | Improvements | Improvements | Costs | to Acquisition Costs | Improvements | Improvements | Value | Depreciation | Construction(a) | Acquired | ||||||||||||||||||||||||||||||
|
Dominion West End
|
32,324,436 | 2,059,252 | 15,049,088 | 17,108,340 | 8,825,944 | 3,028,952 | 22,905,332 | 25,934,284 | 12,606,588 | 1989 | Dec-95 | |||||||||||||||||||||||||||||
|
Waterside At Ironbridge
|
— | 1,843,819 | 13,238,590 | 15,082,409 | 5,558,673 | 2,248,478 | 18,392,604 | 20,641,082 | 8,173,090 | 1987 | Sep-97 | |||||||||||||||||||||||||||||
|
Carriage Homes at Wyndham
|
— | 473,695 | 30,996,525 | 31,470,220 | 5,704,528 | 3,715,031 | 33,459,717 | 37,174,748 | 12,517,590 | 1998 | Nov-03 | |||||||||||||||||||||||||||||
|
RICHMOND, VA
|
73,831,646 | 9,146,797 | 88,160,449 | 97,307,246 | 90,844,889 | 19,586,790 | 168,565,345 | 188,152,135 | 86,406,922 | |||||||||||||||||||||||||||||||
|
Heather Lake
|
— | 616,800 | 3,400,672 | 4,017,472 | 9,158,110 | 1,150,744 | 12,024,838 | 13,175,582 | 9,466,895 | 1972/74 | Mar-80 | |||||||||||||||||||||||||||||
|
Woodscape
|
— | 798,700 | 7,209,525 | 8,008,225 | 8,268,978 | 1,969,568 | 14,307,635 | 16,277,203 | 10,470,058 | 1974/76 | Dec-87 | |||||||||||||||||||||||||||||
|
Eastwind
|
— | 155,000 | 5,316,738 | 5,471,738 | 5,175,626 | 597,301 | 10,050,063 | 10,647,364 | 6,855,060 | 1970 | Apr-88 | |||||||||||||||||||||||||||||
|
Forest Lake At Oyster Point
|
17,447,968 | 780,117 | 8,861,878 | 9,641,995 | 7,609,368 | 1,337,388 | 15,913,975 | 17,251,363 | 8,846,772 | 1986 | Aug-95 | |||||||||||||||||||||||||||||
|
Dominion Waterside At Lynnhaven
|
— | 1,823,983 | 4,106,710 | 5,930,693 | 5,185,089 | 2,143,513 | 8,972,269 | 11,115,782 | 5,394,396 | 1966 | Aug-96 | |||||||||||||||||||||||||||||
|
Dominion Yorkshire Downs
|
16,317,839 | 1,088,887 | 8,581,771 | 9,670,658 | 4,876,908 | 1,451,386 | 13,096,180 | 14,547,566 | 6,201,534 | 1987 | Dec-97 | |||||||||||||||||||||||||||||
|
NORFOLK, VA
|
33,765,807 | 5,263,487 | 37,477,294 | 42,740,781 | 40,274,079 | 8,649,900 | 74,364,960 | 83,014,860 | 47,234,715 | |||||||||||||||||||||||||||||||
|
Greens At Falls Run
|
— | 2,730,722 | 5,300,203 | 8,030,925 | 4,171,868 | 3,020,904 | 9,181,889 | 12,202,793 | 4,856,211 | 1989 | May-95 | |||||||||||||||||||||||||||||
|
Manor At England Run
|
— | 3,194,527 | 13,505,239 | 16,699,766 | 18,546,259 | 5,042,702 | 30,203,323 | 35,246,025 | 15,963,710 | 1990 | May-95 | |||||||||||||||||||||||||||||
|
Brittingham Square
|
— | 650,143 | 4,962,246 | 5,612,389 | 3,336,067 | 916,267 | 8,032,189 | 8,948,456 | 4,137,462 | 1991 | May-95 | |||||||||||||||||||||||||||||
|
Greens At Schumaker Pond
|
— | 709,559 | 6,117,582 | 6,827,141 | 4,737,305 | 958,337 | 10,606,109 | 11,564,446 | 5,753,254 | 1988 | May-95 | |||||||||||||||||||||||||||||
|
Greens At Cross Court
|
— | 1,182,414 | 4,544,012 | 5,726,426 | 3,681,760 | 1,431,119 | 7,977,067 | 9,408,186 | 4,386,010 | 1987 | May-95 | |||||||||||||||||||||||||||||
|
OTHER MID-ATLANTIC
|
— | 8,467,365 | 34,429,282 | 42,896,647 | 34,473,259 | 11,369,329 | 66,000,577 | 77,369,906 | 35,096,647 | |||||||||||||||||||||||||||||||
|
TOTAL MID-ATLANTIC REGION
|
393,148,798 | 174,079,138 | 818,440,035 | 992,519,173 | 310,430,205 | 240,269,433 | 1,062,679,945 | 1,302,949,378 | 369,890,347 | |||||||||||||||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||||||||||||||
|
Summit West
|
— | 2,176,500 | 4,709,970 | 6,886,470 | 6,622,680 | 2,954,267 | 10,554,883 | 13,509,150 | 7,539,186 | 1972 | Dec-92 | |||||||||||||||||||||||||||||
|
The Breyley
|
— | 1,780,375 | 2,458,172 | 4,238,547 | 16,175,369 | 3,091,579 | 17,322,337 | 20,413,916 | 10,201,055 | 2007 | Sep-93 | |||||||||||||||||||||||||||||
|
Lakewood Place
|
18,755,348 | 1,395,051 | 10,647,377 | 12,042,428 | 6,624,418 | 1,975,007 | 16,691,839 | 18,666,846 | 9,740,624 | 1986 | Mar-94 | |||||||||||||||||||||||||||||
|
Hunters Ridge
|
15,593,011 | 2,461,548 | 10,942,434 | 13,403,982 | 5,121,842 | 3,331,197 | 15,194,627 | 18,525,824 | 8,591,418 | 1992 | Jun-95 | |||||||||||||||||||||||||||||
|
Bay Meadow
|
— | 2,892,526 | 9,253,525 | 12,146,051 | 7,683,220 | 3,767,243 | 16,062,028 | 19,829,271 | 9,234,635 | 2004 | Dec-96 | |||||||||||||||||||||||||||||
|
Cambridge Woods
|
— | 1,790,804 | 7,166,329 | 8,957,133 | 6,421,470 | 2,335,666 | 13,042,937 | 15,378,603 | 6,860,175 | 1985 | Jun-97 | |||||||||||||||||||||||||||||
|
Sugar Mill Creek
|
10,185,064 | 2,241,880 | 7,552,520 | 9,794,400 | 5,344,307 | 2,647,456 | 12,491,251 | 15,138,707 | 5,751,666 | 1988 | Dec-98 | |||||||||||||||||||||||||||||
|
Inlet Bay
|
— | 7,701,679 | 23,149,670 | 30,851,349 | 10,177,448 | 8,409,425 | 32,619,372 | 41,028,797 | 14,725,170 | 1988/89 | Jun-03 | |||||||||||||||||||||||||||||
|
MacAlpine Place
|
— | 10,869,386 | 36,857,512 | 47,726,898 | 3,543,389 | 10,947,551 | 40,322,736 | 51,270,287 | 13,027,338 | 2001 | Dec-04 | |||||||||||||||||||||||||||||
|
Island Walk
|
— | 7,230,575 | 19,897,415 | 27,127,990 | 9,443,889 | 9,123,798 | 27,448,081 | 36,571,879 | 13,430,463 | 1985/87 | Jul-06 | |||||||||||||||||||||||||||||
|
Gallery at Bayport II
|
— | 5,775,144 | 17,236,146 | 23,011,290 | 1,889,655 | 8,522,414 | 16,378,531 | 24,900,945 | 5,261,345 | 2008 | Oct-06 | |||||||||||||||||||||||||||||
|
The Vintage Lofts at West End
|
— | 6,611,191 | 37,662,923 | 44,274,114 | 9,447,210 | 14,911,677 | 38,809,647 | 53,721,324 | 2,690,238 | 2009 | Jul-09 | |||||||||||||||||||||||||||||
|
TAMPA, FL
|
44,533,423 | 52,926,659 | 187,533,993 | 240,460,652 | 88,494,897 | 72,017,280 | 256,938,269 | 328,955,549 | 107,053,313 | |||||||||||||||||||||||||||||||
|
The Canopy Apartment Villas
|
— | 2,894,702 | 6,456,100 | 9,350,802 | 21,301,609 | 5,152,278 | 25,500,133 | 30,652,411 | 13,987,829 | 2008 | Mar-93 | |||||||||||||||||||||||||||||
|
Altamira Place
|
15,640,205 | 1,532,700 | 11,076,062 | 12,608,762 | 18,243,868 | 3,134,213 | 27,718,417 | 30,852,630 | 16,695,691 | 2007 | Apr-94 | |||||||||||||||||||||||||||||
|
Regatta Shore
|
— | 757,008 | 6,607,367 | 7,364,375 | 13,359,664 | 1,787,506 | 18,936,533 | 20,724,039 | 11,806,207 | 2007 | Jun-94 | |||||||||||||||||||||||||||||
|
Alafaya Woods
|
22,167,545 | 1,653,000 | 9,042,256 | 10,695,256 | 7,025,087 | 2,310,364 | 15,409,979 | 17,720,343 | 8,781,465 | 2006 | Oct-94 | |||||||||||||||||||||||||||||
|
Seabrook
|
— | 1,845,853 | 4,155,275 | 6,001,128 | 6,464,276 | 2,477,216 | 9,988,188 | 12,465,404 | 6,572,716 | 2004 | Feb-96 | |||||||||||||||||||||||||||||
|
Los Altos
|
20,855,010 | 2,803,805 | 12,348,464 | 15,152,269 | 6,801,622 | 3,566,545 | 18,387,346 | 21,953,891 | 9,820,242 | 2004 | Oct-96 | |||||||||||||||||||||||||||||
|
Lotus Landing
|
— | 2,184,723 | 8,638,664 | 10,823,387 | 7,060,016 | 2,644,738 | 15,238,665 | 17,883,403 | 7,134,216 | 2006 | Jul-97 | |||||||||||||||||||||||||||||
|
Seville On The Green
|
— | 1,282,616 | 6,498,062 | 7,780,678 | 5,655,940 | 1,653,081 | 11,783,537 | 13,436,618 | 5,924,086 | 2004 | Oct-97 | |||||||||||||||||||||||||||||
|
Ashton @ Waterford
|
28,902,062 | 3,871,744 | 17,537,879 | 21,409,623 | 1,412,488 | 4,036,325 | 18,785,786 | 22,822,111 | 9,603,941 | 2000 | May-98 | |||||||||||||||||||||||||||||
|
Arbors at Lee Vista DCO
|
— | 6,692,423 | 12,860,210 | 19,552,633 | 10,078,309 | 6,846,924 | 22,784,018 | 29,630,942 | 11,236,413 | 2007 | Aug-06 | |||||||||||||||||||||||||||||
|
Millenia Mall
|
— | 12,172,634 | 37,143,420 | 49,316,054 | 824,206 | 12,179,642 | 37,960,618 | 50,140,260 | 5,362,807 | 2007 | Jan-08 | |||||||||||||||||||||||||||||
|
ORLANDO, FL
|
87,564,822 | 37,691,208 | 132,363,759 | 170,054,967 | 98,227,085 | 45,788,832 | 222,493,220 | 268,282,052 | 106,925,613 | |||||||||||||||||||||||||||||||
|
Legacy Hill
|
— | 1,147,660 | 5,867,567 | 7,015,227 | 7,414,277 | 1,668,638 | 12,760,866 | 14,429,504 | 7,878,230 | 1977 | Nov-95 | |||||||||||||||||||||||||||||
|
Hickory Run
|
— | 1,468,727 | 11,583,786 | 13,052,513 | 7,312,612 | 1,959,094 | 18,406,031 | 20,365,125 | 9,029,778 | 1989 | Dec-95 | |||||||||||||||||||||||||||||
|
Carrington Hills
|
20,204,103 | 2,117,244 | — | 2,117,244 | 31,294,081 | 4,133,316 | 29,278,009 | 33,411,325 | 13,245,118 | 1999 | Dec-95 | |||||||||||||||||||||||||||||
|
Brookridge
|
— | 707,508 | 5,461,251 | 6,168,759 | 3,424,991 | 989,147 | 8,604,603 | 9,593,750 | 4,703,651 | 1986 | Mar-96 | |||||||||||||||||||||||||||||
|
Breckenridge
|
— | 766,428 | 7,713,862 | 8,480,290 | 3,207,484 | 1,125,805 | 10,561,969 | 11,687,774 | 5,204,746 | 1986 | Mar-97 | |||||||||||||||||||||||||||||
|
Colonnade
|
11,890,540 | 1,459,754 | 16,014,857 | 17,474,611 | 2,963,411 | 1,778,345 | 18,659,677 | 20,438,022 | 7,506,346 | 1998 | Jan-99 | |||||||||||||||||||||||||||||
|
The Preserve at Brentwood
|
30,918,109 | 3,181,524 | 24,674,264 | 27,855,788 | 4,283,097 | 3,283,153 | 28,855,732 | 32,138,885 | 10,416,528 | 1998 | Jun-04 | |||||||||||||||||||||||||||||
|
Polo Park
|
— | 4,582,666 | 16,293,022 | 20,875,688 | 14,659,449 | 5,485,024 | 30,050,113 | 35,535,137 | 8,253,655 | 2008 | May-06 | |||||||||||||||||||||||||||||
|
NASHVILLE, TN
|
63,012,752 | 15,431,511 | 87,608,609 | 103,040,120 | 74,559,402 | 20,422,522 | 157,177,000 | 177,599,522 | 66,238,052 | |||||||||||||||||||||||||||||||
99
Table of Contents
UDR,
INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
|
Cost of
|
Gross Amount at Which
|
|||||||||||||||||||||||||||||||||||||||
| Initial Costs |
Total
|
Improvements
|
Carried at Close of Period | |||||||||||||||||||||||||||||||||||||
|
Land and
|
Buildings
|
Initial
|
Capitalized
|
Land and
|
Buildings
|
Total
|
||||||||||||||||||||||||||||||||||
|
Land
|
and
|
Acquisition
|
Subsequent
|
Land
|
Buildings
|
Carrying
|
Accumulated
|
Date of
|
Date
|
|||||||||||||||||||||||||||||||
| Encumbrances | Improvements | Improvements | Costs | to Acquisition Costs | Improvements | Improvements | Value | Depreciation | Construction(a) | Acquired | ||||||||||||||||||||||||||||||
|
Greentree
|
15,655,691 | 1,634,330 | 11,226,990 | 12,861,320 | 11,882,921 | 2,680,015 | 22,064,226 | 24,744,241 | 12,602,287 | 2007 | Jul-94 | |||||||||||||||||||||||||||||
|
Westland
|
— | 1,834,535 | 14,864,742 | 16,699,277 | 9,953,125 | 2,885,578 | 23,766,824 | 26,652,402 | 13,692,680 | 1990 | May-96 | |||||||||||||||||||||||||||||
|
Antlers
|
— | 4,034,039 | 11,192,842 | 15,226,881 | 10,873,436 | 5,127,428 | 20,972,889 | 26,100,317 | 12,780,096 | 1985 | May-96 | |||||||||||||||||||||||||||||
|
St Johns Plantation
|
— | 4,288,214 | 33,101,763 | 37,389,977 | 4,578,015 | 4,414,682 | 37,553,310 | 41,967,992 | 11,355,762 | 2006 | Jun-05 | |||||||||||||||||||||||||||||
|
The Kensley
|
— | 3,178,992 | 30,711,474 | 33,890,466 | 1,502,327 | 3,189,069 | 32,203,724 | 35,392,793 | 4,936,942 | 2004 | Jul-07 | |||||||||||||||||||||||||||||
|
JACKSONVILLE, FL
|
15,655,691 | 14,970,110 | 101,097,811 | 116,067,921 | 38,789,824 | 18,296,772 | 136,560,973 | 154,857,745 | 55,367,767 | |||||||||||||||||||||||||||||||
|
The Groves
|
— | 789,953 | 4,767,055 | 5,557,008 | 4,974,192 | 1,595,960 | 8,935,240 | 10,531,200 | 5,452,064 | 1989 | Dec-95 | |||||||||||||||||||||||||||||
|
Mallards of Brandywine
|
— | 765,949 | 5,407,683 | 6,173,632 | 2,722,436 | 1,088,273 | 7,807,795 | 8,896,068 | 4,184,953 | 1985 | Jul-97 | |||||||||||||||||||||||||||||
|
The Reserve and The Park at Riverbridge
|
40,133,018 | 15,968,090 | 56,400,716 | 72,368,806 | 3,287,053 | 16,123,077 | 59,532,782 | 75,655,859 | 18,734,255 | 1999/2001 | Dec-04 | |||||||||||||||||||||||||||||
|
Piermont
|
— | 3,373,265 | 7,095,763 | 10,469,028 | 5,488,344 | 3,791,959 | 12,165,413 | 15,957,372 | 7,748,714 | 2007 | Dec-05 | |||||||||||||||||||||||||||||
|
OTHER FLORIDA
|
40,133,018 | 20,897,257 | 73,671,217 | 94,568,474 | 16,472,025 | 22,599,269 | 88,441,230 | 111,040,499 | 36,119,986 | |||||||||||||||||||||||||||||||
|
TOTAL SOUTHEASTERN REGION
|
250,899,706 | 141,916,745 | 582,275,389 | 724,192,134 | 316,543,233 | 179,124,675 | 861,610,692 | 1,040,735,367 | 371,704,731 | |||||||||||||||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||||||||||||||
|
Highlands of Preston
|
— | 2,151,056 | 8,167,630 | 10,318,686 | 29,187,810 | 5,845,988 | 33,660,508 | 39,506,496 | 10,734,485 | 2008 | Mar-98 | |||||||||||||||||||||||||||||
|
THIRTY377
|
31,175,000 | 24,035,881 | 32,950,822 | 56,986,703 | 4,887,121 | 24,139,018 | 37,734,806 | 61,873,824 | 8,199,741 | 2007 | Aug-06 | |||||||||||||||||||||||||||||
|
Garden Oaks
|
5,066,950 | 2,131,988 | 5,367,040 | 7,499,028 | 578,553 | 6,826,179 | 1,251,402 | 8,077,581 | 584,375 | 1979 | Mar-07 | |||||||||||||||||||||||||||||
|
Springhaven
|
— | 6,687,621 | 3,354,680 | 10,042,301 | 275,038 | 8,210,579 | 2,106,760 | 10,317,339 | 1,291,436 | 1977 | Apr-07 | |||||||||||||||||||||||||||||
|
Glenwood
|
— | 7,902,690 | 554,021 | 8,456,711 | 537,537 | 8,053,251 | 940,997 | 8,994,248 | 342,799 | 1970 | May-07 | |||||||||||||||||||||||||||||
|
Talisker of Addison
|
7,516,053 | 10,439,794 | 634,320 | 11,074,114 | 833,397 | 10,765,207 | 1,142,304 | 11,907,511 | 577,859 | 1975 | May-07 | |||||||||||||||||||||||||||||
|
Clipper Pointe
|
6,998,911 | 13,220,993 | 2,506,569 | 15,727,562 | 955,459 | 14,761,974 | 1,921,047 | 16,683,021 | 1,227,700 | 1978 | May-07 | |||||||||||||||||||||||||||||
|
Ridgeview Park
|
— | 2,349,923 | — | 2,349,923 | 8,266,059 | 2,352,630 | 8,263,352 | 10,615,982 | 1,584,021 | 2007 | Jul-07 | |||||||||||||||||||||||||||||
|
RIACHI AT ONE21
|
17,429,876 | 2,341,936 | — | 2,341,936 | 16,164,712 | 4,664,923 | 13,841,725 | 18,506,648 | 2,788,811 | 2007 | Dec-07 | |||||||||||||||||||||||||||||
|
Legacy Village
|
64,090,000 | 16,881,795 | 100,101,840 | 116,983,635 | 2,413,489 | 16,889,308 | 102,507,816 | 119,397,124 | 11,014,059 | 2005/06/07 | Mar-08 | |||||||||||||||||||||||||||||
|
Riachi at One21 Ph II
|
12,637,017 | 1,918,411 | — | 1,918,411 | 14,862,124 | 4,156,304 | 12,624,231 | 16,780,535 | 929,722 | 2009 | Mar-09 | |||||||||||||||||||||||||||||
|
Mustang Park
|
— | 5,556,489 | 22,664,123 | 28,220,612 | 118,314 | 5,556,489 | 22,782,437 | 28,338,926 | 571,465 | 2009 | Jul-09 | |||||||||||||||||||||||||||||
|
DALLAS, TX
|
144,913,807 | 95,618,577 | 176,301,045 | 271,919,622 | 79,079,613 | 112,221,850 | 238,777,385 | 350,999,235 | 39,846,473 | |||||||||||||||||||||||||||||||
|
Sierra Foothills
|
20,770,824 | 2,728,172 | — | 2,728,172 | 20,432,147 | 4,985,042 | 18,175,277 | 23,160,319 | 11,661,524 | 1998 | Feb-98 | |||||||||||||||||||||||||||||
|
Finisterra
|
— | 1,273,798 | 26,392,207 | 27,666,005 | 3,202,796 | 1,571,058 | 29,297,743 | 30,868,801 | 11,684,634 | 1997 | Mar-98 | |||||||||||||||||||||||||||||
|
Sierra Canyon
|
14,890,446 | 1,809,864 | 12,963,581 | 14,773,445 | 1,704,350 | 2,009,699 | 14,468,096 | 16,477,795 | 7,361,765 | 2001 | Dec-01 | |||||||||||||||||||||||||||||
|
Lumiere
|
— | 5,091,616 | 11,997,769 | 17,089,385 | 6,484,551 | 4,706,340 | 18,867,596 | 23,573,936 | 9,616,945 | 1996 | May-06 | |||||||||||||||||||||||||||||
|
Waterford at Peoria
|
— | 2,225,595 | 21,593,714 | 23,819,309 | 1,415,741 | 2,956,763 | 22,278,287 | 25,235,050 | 1,823,267 | 2008 | Aug-08 | |||||||||||||||||||||||||||||
|
Residences at Stadium Village
|
27,798,861 | 7,930,171 | — | 7,930,171 | 41,023,394 | 13,797,212 | 35,156,353 | 48,953,565 | 903,218 | 2009 | May-09 | |||||||||||||||||||||||||||||
|
PHOENIX, AZ
|
63,460,131 | 21,059,216 | 72,947,271 | 94,006,487 | 74,262,979 | 30,026,114 | 138,243,352 | 168,269,466 | 43,051,353 | |||||||||||||||||||||||||||||||
|
Barton Creek Landing
|
— | 3,150,998 | 14,269,086 | 17,420,084 | 9,867,134 | 3,201,989 | 24,085,229 | 27,287,218 | 8,402,460 | 1986 | Mar-02 | |||||||||||||||||||||||||||||
|
Residences at the Domain
|
26,162,000 | 4,034,365 | 55,255,613 | 59,289,978 | 440,720 | 4,035,861 | 55,694,837 | 59,730,698 | 4,644,126 | 2007 | Aug-08 | |||||||||||||||||||||||||||||
|
AUSTIN, TX
|
26,162,000 | 7,185,363 | 69,524,699 | 76,710,062 | 10,307,854 | 7,237,850 | 79,780,066 | 87,017,916 | 13,046,586 | |||||||||||||||||||||||||||||||
|
Inn @ Los Patios
|
— | 3,005,300 | 11,544,700 | 14,550,000 | (1,453,572 | ) | 3,023,264 | 10,073,164 | 13,096,428 | 3,574,516 | 1990 | Aug-98 | ||||||||||||||||||||||||||||
|
Tiburon
|
17,500,000 | 3,600,000 | — | 3,600,000 | 18,092,477 | 6,198,033 | 15,494,444 | 21,692,477 | 2,670,442 | 2008 | Jul-06 | |||||||||||||||||||||||||||||
|
Laurelwoode
|
19,021,967 | 3,458,393 | — | 3,458,393 | 20,043,973 | 7,255,212 | 16,247,154 | 23,502,366 | 2,138,787 | 2008 | Jan-07 | |||||||||||||||||||||||||||||
|
OTHER TEXAS
|
36,521,967 | 10,063,693 | 11,544,700 | 21,608,393 | 36,682,878 | 16,476,509 | 41,814,762 | 58,291,271 | 8,383,745 | |||||||||||||||||||||||||||||||
|
TOTAL SOUTHWESTERN REGION
|
271,057,905 | 133,926,849 | 330,317,715 | 464,244,564 | 200,333,324 | 165,962,323 | 498,615,565 | 664,577,888 | 104,328,157 | |||||||||||||||||||||||||||||||
|
TOTAL APARTMENTS
|
1,804,792,239 | 1,286,354,937 | 3,193,028,626 | 4,479,383,563 | 1,258,923,760 | 1,468,448,291 | 4,269,859,032 | 5,738,307,323 | 1,341,779,946 | |||||||||||||||||||||||||||||||
|
REAL ESTATE UNDER DEVELOPMENT
|
||||||||||||||||||||||||||||||||||||||||
|
Signal Hill
|
11,720,886 | 13,290,186 | — | 13,290,186 | 39,032,595 | 13,199,915 | 39,122,866 | 52,322,781 | — | |||||||||||||||||||||||||||||||
|
elements too
|
70,470,607 | 27,468,121 | 72,035,622 | 99,503,743 | 3,338,723 | 28,527,805 | 74,314,661 | 102,842,466 | 745,828 | |||||||||||||||||||||||||||||||
|
The Tribute on Glenwood
|
22,689,774 | 4,718,622 | — | 4,718,622 | 37,925,393 | 4,210,268 | 38,433,747 | 42,644,015 | 1,417 | |||||||||||||||||||||||||||||||
|
The Belmont
|
40,099,366 | 11,720,456 | — | 11,720,456 | 50,795,884 | 15,900,191 | 46,616,149 | 62,516,340 | 477,102 | |||||||||||||||||||||||||||||||
|
Vitruvian Park — Phase I South
|
17,390,891 | 7,374,000 | 3,367,009 | 10,741,009 | 48,690,624 | 3,687,030 | 55,744,603 | 59,431,633 | 1,520 | |||||||||||||||||||||||||||||||
|
TOTAL REAL ESTATE UNDER DEVELOPMENT
|
162,371,524 | 64,571,385 | 75,402,631 | 139,974,016 | 179,783,219 | 65,525,209 | 254,232,026 | 319,757,235 | 1,225,867 | |||||||||||||||||||||||||||||||
100
Table of Contents
UDR,
INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
|
Cost of
|
Gross Amount at Which
|
|||||||||||||||||||||||||||||||||||||||
| Initial Costs |
Total
|
Improvements
|
Carried at Close of Period | |||||||||||||||||||||||||||||||||||||
|
Land and
|
Buildings
|
Initial
|
Capitalized
|
Land and
|
Buildings
|
Total
|
||||||||||||||||||||||||||||||||||
|
Land
|
and
|
Acquisition
|
Subsequent
|
Land
|
Buildings
|
Carrying
|
Accumulated
|
Date of
|
Date
|
|||||||||||||||||||||||||||||||
| Encumbrances | Improvements | Improvements | Costs | to Acquisition Costs | Improvements | Improvements | Value | Depreciation | Construction(a) | Acquired | ||||||||||||||||||||||||||||||
|
LAND
|
||||||||||||||||||||||||||||||||||||||||
|
Waterside
|
— | 11,861,682 | 93,478 | 11,955,160 | 117,879 | 11,861,682 | 211,357 | 12,073,039 | 151,788 | |||||||||||||||||||||||||||||||
|
Presidio
|
— | 1,523,922 | — | 1,523,922 | 923,218 | 1,300,000 | 1,147,140 | 2,447,140 | — | |||||||||||||||||||||||||||||||
|
UDR Pacific Los Alisos, LP
|
— | 17,297,661 | — | 17,297,661 | 2,111,335 | 16,384,597 | 3,024,399 | 19,408,996 | — | |||||||||||||||||||||||||||||||
|
2400 14th Street
|
— | 31,747,409 | — | 31,747,409 | 10,449,795 | 31,392,614 | 10,804,590 | 42,197,204 | — | |||||||||||||||||||||||||||||||
|
Parkers Landing II TRS
|
— | 1,709,606 | — | 1,709,606 | 762,350 | 1,511,375 | 960,581 | 2,471,956 | (767,890 | ) | ||||||||||||||||||||||||||||||
|
3033 Wilshire
|
— | 11,055,310 | — | 11,055,310 | 3,215,895 | 11,055,310 | 3,215,895 | 14,271,205 | — | |||||||||||||||||||||||||||||||
|
Vitruvian
|
— | 22,174,509 | 23,380,657 | 45,555,166 | 32,615,121 | 52,548,424 | 25,621,863 | 78,170,287 | (258 | ) | ||||||||||||||||||||||||||||||
|
TOTAL LAND
|
— | 97,370,099 | 23,474,135 | 120,844,234 | 50,195,593 | 126,054,002 | 44,985,825 | 171,039,827 | (616,360 | ) | ||||||||||||||||||||||||||||||
|
TOTAL REAL ESTATE UNDER DEVELOPMENT
|
162,371,524 | 161,941,484 | 98,876,766 | 260,818,250 | 229,978,812 | 191,579,211 | 299,217,851 | 490,797,062 | 609,507 | |||||||||||||||||||||||||||||||
|
COMMERCIAL HELD FOR INVESTMENT
|
||||||||||||||||||||||||||||||||||||||||
|
Hanover Village
|
— | 1,623,910 | — | 1,623,910 | 5 | 1,103,600 | 520,315 | 1,623,915 | 503,018 | |||||||||||||||||||||||||||||||
|
The Calvert — commercial side
|
— | 34,128 | 1,597,359 | 1,631,487 | 1,175,098 | 1,171,995 | 1,634,590 | 2,806,585 | 569,920 | |||||||||||||||||||||||||||||||
|
Circle Towers Office Bldg
|
— | 1,406,626 | 4,498,210 | 5,904,836 | 877,163 | 1,380,054 | 5,401,945 | 6,781,999 | 457,484 | |||||||||||||||||||||||||||||||
|
Brookhaven Shopping Center
|
— | 4,137,935 | 7,093,172 | 11,231,107 | 9,379,017 | 6,882,886 | 13,727,238 | 20,610,124 | 887,091 | |||||||||||||||||||||||||||||||
|
Grandview DCO
|
— | 7,266,024 | 9,701,625 | 16,967,649 | 2,051,848 | 10,750,324 | 8,269,173 | 19,019,497 | 6,478,862 | |||||||||||||||||||||||||||||||
|
Bellevue Plaza retail
|
22,270,500 | 24,377,141 | 7,517,341 | 31,894,482 | — | 23,740,345 | 8,154,137 | 31,894,482 | 1,257 | |||||||||||||||||||||||||||||||
| 22,270,500 | 38,845,764 | 30,407,707 | 69,253,471 | 13,483,131 | 45,029,204 | 37,707,398 | 82,736,602 | 8,897,632 | ||||||||||||||||||||||||||||||||
|
TOTAL COMMERCIAL
|
||||||||||||||||||||||||||||||||||||||||
|
Other(b)
|
— | — | — | — | 3,205,324 | 8,959 | 3,196,365 | 3,206,324 | 5,478 | |||||||||||||||||||||||||||||||
|
TOTAL CORPORATE
|
— | — | — | — | 3,205,324 | 8,959 | 3,196,365 | 3,206,324 | 5,478 | |||||||||||||||||||||||||||||||
|
TOTAL COMMERCIAL & CORPORATE
|
22,270,500 | 38,845,764 | 30,407,707 | 69,253,471 | 16,688,455 | 45,038,163 | 40,903,763 | 85,942,926 | 8,903,110 | |||||||||||||||||||||||||||||||
|
TOTAL REAL ESTATE OWNED
|
1,989,434,263 | 1,487,142,185 | 3,322,313,099 | 4,809,455,284 | 1,505,591,027 | 1,705,065,665 | 4,609,980,646 | 6,315,047,311 | 1,351,292,563 | |||||||||||||||||||||||||||||||
| (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 $5.6 billion at December 31, 2009.
The depreciable life for all buildings is 35 years.
3-YEAR
ROLLFORWARD OF REAL ESTATE OWNED AND ACCUMULATED
DEPRECIATION
The following is a reconciliation of the carrying amount of
total real estate owned at December 31:
| 2009 | 2008 | 2007 | ||||||||||
|
Balance at beginning of the year
|
$ | 5,831,752,318 | $ | 5,956,481,074 | $ | 5,820,122,155 | ||||||
|
Real estate acquired
|
28,220,612 | 1,014,231,819 | 509,976,871 | |||||||||
|
Real estate acquired through JV consolidation
|
185,929,462 | — | — | |||||||||
|
Capital expenditures and development
|
273,551,952 | 297,564,557 | 234,724,992 | |||||||||
|
Real estate sold
|
— | (1,436,525,132 | ) | (608,342,944 | ) | |||||||
|
Retirement of fully depreciated assets
|
(4,407,033 | ) | — | — | ||||||||
|
Balance at end of year
|
$ | 6,315,047,311 | $ | 5,831,752,318 | $ | 5,956,481,074 | ||||||
101
Table of Contents
UDR,
INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
The following is a reconciliation of total accumulated
depreciation for real estate owned at December 31:
| 2009 | 2008 | 2007 | ||||||||||
|
Balance at beginning of the year
|
$ | 1,078,689,047 | $ | 1,371,759,339 | $ | 1,253,726,781 | ||||||
|
Depreciation expense for the year
|
277,010,549 | 245,898,189 | 256,931,873 | |||||||||
|
Accumulated depreciation on sales
|
— | (538,968,481 | ) | (138,899,315 | ) | |||||||
|
Accumulated depreciation on retirements
|
(4,407,033 | ) | — | — | ||||||||
|
Balance at end of year
|
$ | 1,351,292,563 | $ | 1,078,689,047 | $ | 1,371,759,339 | ||||||
102
Table of Contents
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 our Exchange Act
filings referenced below is 1-10524.
|
Exhibit
|
Description
|
Location
|
||||
| 2 | .01 | Partnership Interest Purchase and Exchange Agreement dated as of September 10, 1998, between the Company, 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. | Exhibit 2(d) to the Company’s Form S-3 Registration Statement (Registration No. 333-64281) filed with the Commission on September 25, 1998. | |||
| 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. | Exhibit 2.1 to the Company’s Current Report on Form 8-K dated September 28, 2004 and filed with the Commission on September 29, 2004. | |||
| 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. | Exhibit 2.2 to the Company’s Current Report on Form 8-K dated September 29, 2004 and filed with the Commission on October 5, 2004. | |||
| 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 2.3 to the Company’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 January 23, 2008, by and between the Company, DRA Fund VI LLC and the other signatories thereto. | Exhibit 2.1 to the Company’s Current Report on Form 8-K dated January 23, 2008 and filed with the Commission on January 29, 2008. | |||
| 2 | .06 | First Amendment to Agreement of Purchase and Sale by and between the Company, DRA Fund VI LLC and the other signatories thereto. | Exhibit 2.2 to the Company’s Current Report on Form 8-K/A dated March 3, 2008 and filed with the Commission on May 2, 2008. | |||
Table of Contents
|
Exhibit
|
Description
|
Location
|
||||
| 3 | .01 | Articles of Restatement. | Exhibit 3.09 to the Company’s Current Report on Form 8-K dated July 27, 2005 and filed with the Commission on August 1, 2005. | |||
| 3 | .02 | Articles of Amendment to the Articles of Restatement dated and filed with the State Department of Assessments and Taxation of the State of Maryland on March 14, 2007. | Exhibit 3.2 to the Company’s Current Report on Form 8-K dated March 14, 2007 and filed with the Commission on March 15, 2007. | |||
| 3 | .03 | Articles Supplementary relating to the Company’s 6.75% Series G Cumulative Redeemable Preferred Stock, dated and filed with the State Department of Assessments and Taxation of the State of Maryland on May 30, 2007. | Exhibit 3.4 to the Company’s Form 8-A Registration Statement dated and filed with the Commission on May 30, 2007. | |||
| 3 | .04 | Amended and Restated Bylaws (as amended through April 1, 2009). | Exhibit 3.1 to the Company’s Current Report on Form 8-K dated and filed with the Commission on April 1, 2009. | |||
| 4 | .01 | Form of Common Stock Certificate. | Exhibit 4.1 to the Company’s Current Report on Form 8-K dated March 14, 2007 and filed with the Commission on March 15, 2007. | |||
| 4 | .02 | Senior Indenture dated as of November 1, 1995. | Exhibit 4(ii)(h)(1) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1996. | |||
| 4 | .03 | Supplemental Indenture dated as of June 11, 2003. | Exhibit 4.03 to the Company’s Current Report on Form 8-K dated June 17, 2004 and filed with the Commission on June 18, 2004. | |||
| 4 | .04 | Subordinated Indenture dated as of August 1, 1994. | Exhibit 4(i)(m) to the Company’s Form S-3 Registration Statement (Registration No. 33-64725) filed with the Commission on November 15, 1995. | |||
| 4 | .05 | Indenture dated December 19, 2005 between the Company and SunTrust Bank, as Trustee, relating to the Company’s 4.00% Convertible Senior Notes due 2035, including the form of note. | Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 13, 2005 and filed with the Commission on December 19, 2005. | |||
| 4 | .06 | Indenture dated October 12, 2006 between the Company and U.S. Bank National Association, as Trustee, relating to the Company’s 3.625% Convertible Senior Notes due 2011, including the form of note. | Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 5, 2006 and filed with the Commission on October 12, 2006. | |||
| 4 | .07 | Form of Senior Debt Security. | Exhibit 4(i)(n) to the Company’s Form S-3 Registration Statement (Registration No. 33-64725) filed with the Commission on November 15, 1995. | |||
| 4 | .08 | Form of Subordinated Debt Security. | Exhibit 4(i)(o) to the Company’s Form S-3 Registration Statement (Registration No. 33-55159) filed with the Commission on August 19, 1994. | |||
| 4 | .09 | Form of Fixed Rate Medium-Term Note, Series A. | Exhibit 4.01 to the Company’s Current Report on Form 8-K dated March 20, 2007 and filed with the Commission on March 22, 2007. | |||
| 4 | .10 | Form of Floating Rate Medium-Term Note, Series A. | Exhibit 4.02 to the Company’s Current Report on Form 8-K dated March 20, 2007 and filed with the Commission on March 22, 2007. | |||
Table of Contents
|
Exhibit
|
Description
|
Location
|
||||
| 4 | .11 | 6.50% Notes due 2009. | Exhibit 4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. | |||
| 4 | .12 | 5.13% Medium-Term Note due January 2014. | Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, and Exhibits 4.1 and 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004. | |||
| 4 | .13 | 3.90% Medium-Term Note due March 2010. | Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004. | |||
| 4 | .14 | 5.00% Medium-Term Notes due January 2012. | Exhibit 4.19 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. | |||
| 4 | .15 | 5.25% Medium-Term Note due January 2015, issued November 1, 2004. | Exhibit 4.21 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. | |||
| 4 | .16 | 5.25% Medium-Term Note due January 2015, issued February 14, 2005. | Exhibit 4.22 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. | |||
| 4 | .17 | 5.25% Medium-Term Note due January 2015, issued March 8, 2005. | Exhibit 4.23 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. | |||
| 4 | .18 | 5.25% Medium-Term Note due January 2015, issued May 3, 2005. | Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005. | |||
| 4 | .19 | 5.25% Medium-Term Note due January 2016, issued September 7, 2005. | Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. | |||
| 4 | .20 | 6.05% Medium-Term Note due June 2013, issued June 7, 2006. | Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006. | |||
| 4 | .21 | 5.50% Medium-Term Note, Series A due April 2014, issued March 27, 2007. | Exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007. | |||
| 4 | .22 | Form of Certificate for Shares of the Company’s 6.75% Series G Cumulative Redeemable Preferred Stock. | Exhibit 4.1 to the Company’s Form 8-A Registration Statement dated and filed with the Commission on May 30, 2007. | |||
| 4 | .23 | Articles Supplementary relating to the Company’s 6.75% Series G Cumulative Redeemable Preferred Stock. | See Exhibit 3.03. | |||
| 4 | .24 | Registration Rights Agreement dated October 12, 2006 between the Company and the Initial Purchasers of the Company’s 3.625% Convertible Senior Notes due 2011. | Exhibit 4.1 to the Company’s Current Report on Form 8-K dated October 5, 2006 and filed with the Commission on October 12, 2006. | |||
| 4 | .25 | Indenture dated as of April 1, 1994. | Exhibit 4(ii)(f)(1) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1994. | |||
| 4 | .26 | Supplemental Indenture dated August 20, 2009, by and between the Company and U.S. Bank National Association, as trustee, to the Company’s Indenture dated as of April 1, 1994. | Exhibit 4.1 to the Company’s Current Report on Form 8-K dated August 20, 2009 and filed with the Commission on August 21, 2009. | |||
Table of Contents
|
Exhibit
|
Description
|
Location
|
||||
| 10 | .01* | 1985 Stock Option Plan, as amended. | Exhibit 10(iv) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998. | |||
| 10 | .02* | 1991 Stock Purchase and Loan Plan. | Exhibit 10(viii) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1997. | |||
| 10 | .03* | 1999 Long-Term Incentive Plan (as amended and restated May 13, 2009). | Exhibit 10.1 to the Company’s Current Report on Form 8-K dated and filed with the Commission on May 13, 2009. | |||
| 10 | .04* | Form of Restricted Stock Awards. | Exhibit 99.6 to the Company’s Current Report on Form 8-K dated December 31, 2004 and filed with the Commission on January 11, 2005. | |||
| 10 | .05 | Description of Shareholder Value Plan. | Exhibit 10(x) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999. | |||
| 10 | .06* | Description of Executive Deferral Plan. | Exhibit 10(xi) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999. | |||
| 10 | .07* | Description of New Out-Performance Program. | Exhibit 10.01 to the Company’s Current Report on Form 8-K dated May 3, 2005 and filed with the Commission on May 9, 2005. | |||
| 10 | .08* | Description of the Series E Out-Performance Program. | Company’s Definitive Proxy Statement dated March 26, 2007 and filed with the Commission on March 23, 2007. | |||
| 10 | .09 | Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P. | Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003. | |||
| 10 | .10 | First Amendment of Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P. | Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003. | |||
| 10 | .11 | Second Amendment to Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P. | Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003. | |||
| 10 | .12 | Third Amendment to Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P. | Exhibit 10.2 to the Company’s Current Report on Form 8-K dated December 9, 2008 and filed with the Commission on December 10, 2008. | |||
| 10 | .13 | Credit Agreement dated as of August 14, 2001, between the Company and certain subsidiaries and ARCS Commercial Mortgage Co., L.P., as Lender, as amended through October 5, 2006. | Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. | |||
| 10 | .14 | Credit Agreement dated as of December 12, 2001, between the Company and certain subsidiaries and ARCS Commercial Mortgage Co., L.P., as Lender, as amended through September 29, 2006. | Exhibit 10.16 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. | |||
Table of Contents
|
Exhibit
|
Description
|
Location
|
||||
| 10 | .15 | Amended and Restated Credit Agreement dated May 25, 2005 between the Company and Wachovia Capital Markets, LLC and J.P. Morgan Securities Inc., as Joint Lead Arrangers and Joint Bookrunners, Wachovia Bank, National Association, as Administrative Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, SunTrust Bank and Wells Fargo Bank, National Association, as Documentation Agents, Citicorp North America, Inc., KeyBank, N.A. and U.S. Bank National Association, as Managing Agents, and LaSalle Bank National Association, Mizuho Corporate Bank, Ltd., New York Branch and UFJ Bank Limited, New York Branch as Co-Agents, and each of the financial institutions initially signatory thereto and their assignees. | Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 25, 2005 and filed with the Commission on May 27, 2005. | |||
| 10 | .16 | Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 23, 2004. | Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. | |||
| 10 | .17 | First Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. | Exhibit 10.06 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005. | |||
| 10 | .18 | Second Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. | Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006. | |||
| 10 | .19* | Employment Agreement between the Company and Richard A. Giannotti, as amended. | Exhibit 10.1 to the Company’s Current Report on Form 8-K dated and filed with the Commission on December 23, 2008. | |||
| 10 | .20 | Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. | Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. | |||
| 10 | .21* | Agreement between the Company and Thomas W. Toomey dated November 7, 2005, regarding corporate aircraft. | Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. | |||
| 10 | .22 | Indenture dated October 12, 2006 between the Company and U.S. Bank National Association, as Trustee, including the form of note. | See Exhibit 4.06. | |||
| 10 | .23* | Form of Indemnification Agreement. | Exhibit 10.3 to the Company’s Current Report on Form 8-K dated May 2, 2006 and filed with the Commission on May 8, 2006. | |||
| 10 | .24* | Form of Notice of Performance Contingent Restricted Stock Award. | Exhibit 10.2 to the Company’s Current Report on Form 8-K dated May 2, 2006 and filed with the Commission on May 8, 2006. | |||
| 10 | .25 | Senior Indenture dated as of November 1, 1995, as supplemented by Supplemental Indenture dated as of June 11, 2003. | See Exhibits 4.02 and 4.03. | |||
| 10 | .26 | Indenture dated December 19, 2005 between the Company and SunTrust Bank, as Trustee, including form of note. | See Exhibit 4.05. | |||
Table of Contents
|
Exhibit
|
Description
|
Location
|
||||
| 10 | .27* | Notice of Performance Contingent Restricted Stock Award, including Restricted Stock Award Agreement for 2,350 Shares, for Mark M. Culwell, Jr. | Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 21, 2006 and filed with the Commission on June 23, 2006. | |||
| 10 | .28* | Restricted Stock Award Agreement for 7,418 Shares for Mark M. Culwell, Jr. | Exhibit 10.2 to the Company’s Current Report on Form 8-K dated June 21, 2006 and filed with the Commission on June 23, 2006. | |||
| 10 | .29* | Restricted Stock Award Agreement for 37,092 Shares for Mark M. Culwell, Jr. | Exhibit 10.3 to the Company’s Current Report on Form 8-K dated June 21, 2006 and filed with the Commission on June 23, 2006. | |||
| 10 | .30 | Amended and Restated Master Credit Facility Agreement dated June 24, 2002 between the Company and Green Park Financial Limited Partnership, as amended through February 14, 2007. | Exhibit 10.41 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. | |||
| 10 | .31 | Third Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. | Exhibit 99.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009. | |||
| 10 | .32 | Agreement of Purchase and Sale dated January 23, 2008, by and between the Company, DRA Fund VI LLC and the other signatories thereto, as amended. | See Exhibits 2.05 and 2.06. | |||
| 10 | .33 | Limited Liability Company Agreement of UDR Texas Ventures LLC, a Delaware limited liability company, dated as of November 5, 2007. | Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 5, 2007 and filed with the Commission on November 9, 2007. | |||
| 10 | .34 | Second Amended and Restated Credit Agreement dated as of July 27, 2007. | Exhibit 10.1 to the Company’s Current Report on Form 8-K dated July 27, 2007 and filed with the Commission on August 2, 2007. | |||
| 10 | .35* | Summary of 2010 Non-Employee Director Compensation Program | Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 8, 2010 and filed with the Commission on January 12, 2010. | |||
| 10 | .36* | Form of Restricted Stock Award Agreement for awards outside of the 1999 Long-Term Incentive Plan. | Exhibit 99.3 to Company’s Current Report on Form 8-K dated March 19, 2007 and filed with the Commission on March 19, 2007. | |||
| 10 | .37* | Letter Agreement between the Company and Warren L. Troupe. | Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 22, 2008 and filed with the Commission on February 27, 2008. | |||
| 10 | .38* | Indemnification Agreement between the Company and Warren L. Troupe. | Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 22, 2008 and filed with the Commission on February 27, 2008. | |||
| 10 | .39* | Amended 2008 Independent Director Compensation Program. | Exhibit 10.2 to the Company’s Current Report on Form 8-K dated May 30, 2008 and filed with the Commission on June 2, 2008. | |||
| 10 | .40* | Summary of 2009 Non-Employee Director Compensation | Exhibit 10.1 to the Company’s Current Report on Form 8-K dated and filed with the Commission on January 7, 2009. | |||
| 10 | .41 | 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 the Company’s Current Report on Form 8-K dated December 9, 2008 and filed with the Commission on December 10, 2008. | |||
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| 10 | .42 | Subordination Agreement dated April 16, 1998, between the Company and United Dominion Realty, L.P. | Exhibit 10(vi)(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998. | |||
| 10 | .43 | Servicing and Purchase Agreement dated as of June 24, 1999, including as an exhibit thereto the Note and Participation Agreement forms. | Exhibit 10(vii) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999. | |||
| 10 | .44 | Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. | Exhibit 10.53 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. | |||
| 10 | .45 | Sales Agreement dated September 15, 2009, among the Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated. | Exhibit 1.1 to the Company’s Current Report on Form 8-K dated and filed with the Commission on September 15, 2009. | |||
| 10 | .46 | 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 the Company’s Current Report on Form 8-K dated March 18, 2009 and filed with the Commission on March 19, 2009. | |||
| 12 | Computation of Ratio of Earnings to Fixed Charges. | Filed herewith. | ||||
| 21 | Subsidiaries. | Filed herewith. | ||||
| 23 | Consent of Independent Registered Public Accounting Firm. | Filed herewith. | ||||
| 31 | .1 | Rule 13a-14(a) Certification of the Chief Executive Officer. | Filed herewith. | |||
| 31 | .2 | Rule 13a-14(a) Certification of the Chief Financial Officer. | Filed herewith. | |||
| 32 | .1 | Section 1350 Certification of the Chief Executive Officer. | Filed herewith. | |||
| 32 | .2 | Section 1350 Certification of the Chief Financial Officer. | Filed herewith. | |||
| 99 | .1 | Term Loan Agreement dated as of December 14, 2009. | Exhibit 99.1 to the Company’s Current Report on Form 8-K dated December 14, 2009 and filed with the Commission on December 17, 2009. | |||
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission Of Matters To A Vote Of Security HoldersPart IIItem 5. Market For Registrant S Common Equity, Related StockholderItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPart IVItem 15. Exhibits, Financial Statement Schedules