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
| (Mark One) | ||
|
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
|
| For the fiscal year ended December 31, 2010 | ||
|
or
|
||
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
|
| For the transition period from to | ||
Commission file number 1-10524 (UDR, Inc.)
Commission file number 333-156002-01 (United Dominion Realty, L.P.)
Commission file number 333-156002-01 (United Dominion Realty, L.P.)
UDR, INC.
United Dominion Realty, L.P.
(Exact name of registrant as specified in its charter)
United Dominion Realty, L.P.
(Exact name of registrant as specified in its charter)
|
Maryland (UDR, Inc.)
Delaware (United Dominion Realty, L.P.) (State or other jurisdiction of incorporation or organization) |
54-0857512
54-1776887 (I.R.S. Employer Identification No.) |
1745 Shea
Center Drive, Suite 200, Highlands Ranch, Colorado 80129
(Address of principal executive offices) (zip code)
(Address of principal executive offices) (zip code)
Registrant’s telephone number, including area code:
(720) 283-6120
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Name of Each Exchange on Which Registered | |
| Common Stock, $0.01 par value (UDR, Inc.) | New York Stock Exchange | |
| 6.75% Series G Cumulative Redeemable Preferred Stock (UDR, Inc.) | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
(Title of Class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act.
|
UDR, Inc.
|
Yes þ No o | |
|
United Dominion Realty, L.P.
|
Yes o No þ |
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act.
|
UDR, Inc.
|
Yes o No þ | |
|
United Dominion Realty, L.P.
|
Yes o No þ |
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
|
UDR, Inc.
|
Yes þ No o | |
|
United Dominion Realty, L.P.
|
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
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such files).
|
UDR, Inc.
|
Yes þ No o | |
|
United Dominion Realty, L.P.
|
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 Registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer
or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in
Rule 12b-2
of the Exchange Act. (Check one):
|
UDR, Inc.:
|
||||||
|
Large accelerated
filer
þ
|
Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
| (Do not check if a smaller reporting company) |
|
United Dominion Realty, L.P.:
|
||||||
|
Large accelerated
filer
o
|
Accelerated filer o | Non-accelerated filer þ | 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).
|
UDR, Inc.
|
Yes o No þ | |
|
United Dominion Realty, L.P.
|
Yes o No þ |
The aggregate market value of the shares of common stock of UDR,
Inc. held by non-affiliates on June 30, 2010 was
approximately $1.9 billion. This calculation excludes
shares of common stock held by the registrant’s officers
and directors and each person known by the registrant to
beneficially own more than 5% of the registrant’s
outstanding shares, as such persons may be deemed to be
affiliates. This determination of affiliate status should not be
deemed conclusive for any other purpose. As of February 17,
2011 there were 182,496,330 shares of UDR, Inc’s
common stock outstanding.
There is no public trading market for the partnership units of
United Dominion Realty, L.P. As a result, an aggregate market
value of the partnership units of United Dominion Realty, L.P.
cannot be determined.
DOCUMENTS
INCORPORATED BY REFERENCE
The information required by Part III of this Report, to the
extent not set forth herein, is incorporated by reference from
UDR, Inc.’s definitive proxy statement for the Annual
Meeting of Stockholders to be held on May 12, 2011.
TABLE OF
CONTENTS
Table of Contents
EXPLANATORY
NOTE
This report combines the annual reports on
Form 10-K
for the fiscal year ended December 31, 2010 of UDR, Inc. a
Maryland corporation, and United Dominion Realty, L.P., a
Delaware limited partnership, of which UDR is the parent company
and sole general partner. Unless the context otherwise requires,
all references in this Report to “we,” “us,”
“our,” the “Company”, “UDR” or
UDR, Inc. refer collectively to UDR, Inc., together with its
consolidated subsidiaries and joint ventures, including the
Operating Partnership. Unless the context otherwise requires,
the references in this Report to the “Operating
Partnership” refer to United Dominion Realty, L.P. together
with its consolidated subsidiaries. “Common stock”
refers to the common stock of UDR and “stockholders”
means the holders of shares of UDR’s common stock and
preferred stock. The limited partnership interests of the
Operating Partnership are referred to as
“OP Units” and the holders of the OP Units
are referred to as “unitholders”. This combined
Form 10-K
is being filed separately by UDR and the Operating Partnership.
There are a number of differences between our company and our
operating partnership, which are reflected in our disclosure in
this report. UDR is a real estate investment trust (a
“REIT”), whose most significant asset is its ownership
interest in the Operating Partnership. UDR also conducts
business through other subsidiaries and operating partnerships,
including its subsidiary
RE
3
,
which focuses on development, land entitlement and short-term
hold investments. UDR does not conduct business itself, other
than by acting as the sole general partner of the Operating
Partnership, holding interests in other operating partnerships,
subsidiaries and joint ventures, issuing securities from time to
time and guaranteeing debt of certain of our subsidiaries. The
Operating Partnership conducts the operations of a substantial
portion of the business and is structured as a partnership with
no publicly traded equity securities. The Operating Partnership
has guaranteed certain outstanding securities of UDR.
As of December 31, 2010, UDR owned 110,883 units of
the general partnership interests of the Operating Partnership
and 174,736,557 units (or approximately 97.2%) of the
limited partnership interests of the Operating Partnership (the
“OP Units”). UDR conducts a substantial amount of
its business and holds a substantial amount of its assets
through the Operating Partnership, and, by virtue of its
ownership of the OP Units and being the Operating
Partnership’s sole general partner, UDR has the ability to
control all of the
day-to-day
operations of the Operating Partnership. Separate financial
statements and accompanying notes, as well as separate
discussions under “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,”
“Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchasers of Equity
Securities” and “Controls and Procedures” are
provided for each of UDR and the Operating Partnership. In
addition, certain disclosures in “Business” are
separated by entity to the extent that the discussion relates to
UDR’s business outside of the Operating Partnership.
Table of Contents
Forward-Looking
Statements
This Annual Report contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934.
Such forward-looking statements include, without limitation,
statements concerning property acquisitions and dispositions,
development activity and capital expenditures, capital raising
activities, rent growth, occupancy, and rental expense growth.
Words such as “expects,” “anticipates,”
“intends,” “plans,” “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 Annual Report may not
prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a
representation by us or any other person that the results or
conditions described in such statements or our objectives and
plans will be achieved. For a further discussion of these and
other factors that could impact future results, performance or
transactions, see “Item 1A. Risk Factors”
elsewhere in this Annual Report.
Forward-looking statements and such risks, uncertainties and
other factors speak only as of the date of this Annual Report,
and we expressly disclaim any obligation or undertaking to
update or revise any forward-looking statement contained herein,
to reflect any change in our expectations with regard thereto,
or any other change in events, conditions or circumstances on
which any such statement is based, except to the extent
otherwise required by law.
| Item 1. | BUSINESS |
General
UDR is a self administered real estate investment trust, or
REIT, that owns, acquires, renovates, develops, redevelops, and
manages apartment communities in select markets throughout the
United States. At December 31, 2010, our consolidated
apartment portfolio included 172 communities located in 23
markets, with a total of 48,553 completed apartment homes, which
are held through our operating partnerships, including the
Operating Partnership and Heritage Communities L.P., our
subsidiaries and consolidated joint ventures. In addition, we
have an ownership interest in 37 communities containing 9,891
completed apartment homes through unconsolidated joint ventures.
At December 31, 2010, the Operating Partnership’s
consolidated apartment portfolio included 81 communities located
in 19 markets, with a total of 23,351 completed apartment homes.
The Operating Partnership owns, acquires, renovates, develops,
redevelops, manages, and disposes of multifamily apartment
communities generally located in high
barrier-to-entry
markets located in the United States. The high
barrier-to-entry
markets are characterized by limited land for new construction,
difficult and lengthy entitlement process, expensive
single-family home prices and significant employment growth
potential. During the fiscal year ended December 31, 2010,
revenues of the Operating Partnership represented approximately
55% of our total rental revenues.
UDR 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
2
Table of Contents
net income to our stockholders annually. In 2010, we declared
total distributions of $0.730 per common share and paid
dividends of $0.725 per common share.
| Dividends Declared in 2010 | Dividends Paid in 2010 | |||||||
|
First Quarter
|
$ | 0.180 | $ | 0.180 | ||||
|
Second Quarter
|
0.180 | 0.180 | ||||||
|
Third Quarter
|
0.185 | 0.180 | ||||||
|
Fourth Quarter
|
0.185 | 0.185 | ||||||
|
Total
|
$ | 0.730 | $ | 0.725 | ||||
UDR was formed in 1972 as a Virginia corporation. In June 2003,
we changed our state of incorporation from Virginia to Maryland.
The Operating Partnership was formed in 2004 as Delaware limited
partnership. The Operating Partnership is the
successor-in-interest
to United Dominion Realty, L.P., a limited partnership formed
under the laws of Virginia, which commenced operations in 1995.
Our corporate offices are located at 1745 Shea Center Drive,
Suite 200, Highlands Ranch, Colorado and our telephone
number is
(720) 283-6120.
Our website is located at
www.udr.com
.
As of February 17, 2011, we had 1,547 full-time
associates and 85 part-time associates, all of whom were
employed by UDR.
Reporting
Segments
We report in two segments: Same Communities and Non-Mature/Other
Communities. Our Same Communities segment includes those
communities acquired, developed, and stabilized prior to
January 1, 2009, and held as of December 31, 2010.
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. Our Non-Mature/Other Communities segment includes those
communities that were acquired or developed in 2008, 2009 or
2010, 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. For additional information regarding our
operating segments, see Note 15 to UDR’s consolidated
financial statements and Note 12 to the Operating
Partnership’s consolidated financial statements.
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 developing apartment communities; | |
| • | empower site associates to manage our communities efficiently and effectively; | |
| • | measure and reward associates based on specific performance targets; and | |
| • | manage our capital structure to help enhance predictability of earnings and dividends. |
3
Table of Contents
2010
Highlights
| • | We acquired five operating communities with 1,374 homes located in Orange County, California; Baltimore, Maryland; Los Angeles, California; and Boston, Massachusetts for $412 million. We also acquired a land parcel located in San Francisco, California for $23.6 million. | |
| • | We acquired an interest in a joint venture with Metropolitan Life Insurance Company (“MetLife”) for $100.8 million. The joint venture owns 26 operating communities with 5,748 homes and 11 parcels of land with the potential to develop approximately 2,300 additional homes. The majority of the portfolio is comprised of mid/high-rise buildings located in urban, in-fill locations. The assets are located in many of our core markets with rent and quality levels at the top of each market. | |
| • | We completed the development of four wholly-owned communities with 1,575 homes at a total cost of $259.7 million. | |
| • | We completed the development of one community (274 apartment homes) held by a consolidated joint venture for a total cost of $122.3 million. | |
| • | We repaid $187.3 million of secured debt and $50 million of maturing medium-term unsecured notes. The $187.3 million of secured debt includes $70.5 million for a maturing construction loan held by one of our consolidated joint ventures, repayment of $52.7 million of credit facilities and $64.1 million of mortgage payments. | |
| • | We repurchased unsecured debt with a notional amount of $29.2 million for $29.4 million resulting in a loss on extinguishment of $1 million, which includes the write off of related deferred finance charges. The unsecured debt repurchased by the Company matures in 2011. As a result of this repurchase, the loss is represented as an addition to interest expense on the Consolidated Statement of Operations. | |
| • | We closed on a $250 million, five-year unsecured term loan facility of which $100 million was swapped into a fixed rate of 3.76% and $150 million has rate of LIBOR plus 200 basis points. | |
| • | In 2009, we entered into an Amended and Restated Distribution Agreement with respect to the issue and sale by us from time to time of our Medium-Term Notes, Series A Due Nine Months or More From Date of Issue. In February 2010, we issued $150 million of 5.25% senior unsecured medium-term notes under the Amended and Restated Distribution Agreement. These notes were priced at 99.46% of the principal amount at issuance and the unamortized discount was $519,000 at December 31, 2010. | |
| • | In 2009, we initiated an “At the Market” equity distribution program pursuant to which we may sell up to 15,000,000 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. During the year ended December 31, 2010, we sold 6,144,367 shares of Common Stock through this program for aggregate gross proceeds of approximately $110.8 million at a weighted average price per share of $18.04. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $2.2 million, were approximately $108.6 million. | |
| • | We initiated an underwritten public offering to sell 16,000,000 shares of Common Stock at a price of $20.35 per share. We granted the underwriters a 30-day option to purchase up to an additional 2,400,000 shares of Common Stock to cover overallotments, if any. We sold 18,400,000 shares of Common Stock in this offering for aggregate gross proceeds of approximately $374.4 million at a price of $20.35 per share. Aggregate net proceeds from the offering, after deducting related expenses were approximately $359.2 million. |
Other than the following, there were no significant changes to
the Operating Partnership’s business during 2010 (the above
2010 highlights relate to UDR or other subsidiaries of UDR):
| • | On September 30, 2010, the Operating Partnership guaranteed certain outstanding securities of UDR, such that the Operating Partnership, as primary obligor and not merely as surety, irrevocably and unconditionally guarantees to each holder of the applicable securities and to the trustee and their |
4
Table of Contents
| successors and assigns under the respective indenture (a) the full and punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of UDR under the respective indenture whether for principal of or interest on the securities (and premium, if any), and all other monetary obligations of UDR under the respective indenture and the terms of the applicable securities and (b) the full and punctual performance within the applicable grace periods of all other obligations of UDR under the respective indenture and the terms of the applicable securities. |
Our
Strategies and Vision
We previously announced our vision to be the innovative
multifamily public real estate investment trust 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
We are focused on increasing our presence in markets with
favorable job formation, low single-family home affordability,
and a favorable demand/supply ratio for multifamily housing.
Portfolio decisions consider internal analyses and third-party
research, taking into account job growth, multifamily permitting
and housing affordability.
For the year ended December 31, 2010, approximately 55.7%
of our same store net operating income was provided by our
communities located in California, Metropolitan
Washington, D.C., Oregon and Washington state.
Operating
Partnership Strategies and Vision
The Operating Partnership’s long-term strategic plan is to
achieve greater operating efficiencies by investing in fewer,
more concentrated markets. As a result, the Operating
Partnership has sought to expand its interests in communities
located in California, Metropolitan Washington 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 continue to 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.
Acquisitions
and Dispositions
During 2010, in conjunction with our strategy to strengthen our
portfolio, we acquired five operating communities with 1,374
apartment homes for approximately $412 million.
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 operations and redevelopment; | |
| • | terms of resident leases, including the potential for rent increases; | |
| • | occupancy and demand by residents for properties of a similar type in the vicinity; |
5
Table of Contents
| • | 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; | |
| • | markets where we do not intend to establish a long-term concentration; and | |
| • | operating efficiencies. |
During 2010, we sold one 149 apartment home community. This
apartment home community was not owned by the Operating
Partnership.
The following table summarizes our apartment community
acquisitions, apartment community dispositions and our
consolidated year-end ownership position for the past five years
(
dollars in thousands
):
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
|
Homes acquired
|
1,374 | 289 | 4,558 | 2,671 | 2,763 | |||||||||||||||
|
Homes disposed
|
149 | — | 25,684 | 7,125 | 7,653 | |||||||||||||||
|
Homes owned at December 31
|
48,553 | 45,913 | 44,388 | 65,867 | 70,339 | |||||||||||||||
|
Total real estate owned, at cost
|
$ | 6,881,347 | $ | 6,315,047 | $ | 5,831,753 | $ | 5,956,481 | $ | 5,820,122 | ||||||||||
The following table summarizes our apartment community
acquisitions, apartment community dispositions and our year-end
ownership position of the Operating Partnership for the past
five years (
dollars in thousands
):
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
|
Homes acquired
|
— | — | 3,346 | 943 | 1,487 | |||||||||||||||
|
Homes disposed
|
— | — | 16,960 | 4,631 | 7,836 | |||||||||||||||
|
Homes owned at December 31
|
23,351 | 23,351 | 23,351 | 36,965 | 40,653 | |||||||||||||||
|
Total real estate owned, at cost
|
$ | 3,706,184 | $ | 3,640,888 | $ | 3,569,239 | $ | 2,685,249 | $ | 2,584,495 | ||||||||||
Development
Activities
The following wholly owned projects were under development as of
December 31, 2010:
|
Number of
|
Completed
|
Cost to
|
Budgeted
|
Estimated
|
Expected
|
|||||||||||||||||||
| Apartment | Apartment | Date | Cost | Cost | Completion | |||||||||||||||||||
| Homes | Homes | (In thousands) | (In thousands) | Per Home | Date | |||||||||||||||||||
|
Savoye II (Phase II of Vitruvian Park)
|
||||||||||||||||||||||||
|
Addison, TX
|
347 | — | $ | 26,984 | $ | 69,000 | $ | 198,847 | 1Q12 | |||||||||||||||
|
2400 14th Streeet
|
||||||||||||||||||||||||
|
Washington, DC
|
255 | — | 45,681 | 126,100 | 494,510 | 4Q12 | ||||||||||||||||||
|
Mission Bay
|
||||||||||||||||||||||||
|
San Francisco, CA
|
315 | — | 24,354 | 139,600 | 443,175 | 3Q13 | ||||||||||||||||||
|
Belmont Townhomes
|
||||||||||||||||||||||||
|
Dallas, TX
|
13 | — | 893 | 4,175 | 321,154 | 2Q12 | ||||||||||||||||||
| 930 | — | $ | 97,912 | $ | 338,875 | $ | 364,382 | |||||||||||||||||
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None of these projects are held by the Operating Partnership.
Redevelopment
Activities
During 2010, we continued to redevelop properties in targeted
markets where we concluded there was an opportunity to add
value. During the year ended December 31, 2010, we incurred
$30.8 million in major renovations, which include major
structural changes
and/or
architectural revisions to existing buildings.
Joint
Venture Activities
In 2010, we completed the development of an apartment community
located in Bellevue, Washington with 274 apartment homes,
45,394 square feet of retail space and a carrying value of
$122.3 million. On October 16, 2009, our partner in
the joint venture (“Elements Too”) in this property
resigned as managing member and appointed us 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, we were required to
consolidate the joint venture. On December 30, 2009, we
entered into an agreement with our partner to purchase its 49%
interest in Elements Too for $3.2 million, which was paid
in 2010. At closing, our interest in Elements Too increased to
98%.
We are 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 31, 2009, our partner
resigned as managing member and appointed us 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. Concurrently,
we entered into an agreement with our partner to purchase its
49% interest in 989 Elements for $7.7 million, which was
paid in 2010. At closing, our interest in 989 Elements increased
to 98%.
We are a partner with an unaffiliated third party in a joint
venture (“Bellevue Plaza”) which owns an operating
retail site in Bellevue, Washington. We 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. On
December 30, 2009, our partner relinquished its voting
rights and approval rights and its ability to substantively
participate in the decision-making process of the joint venture.
Our partner also resigned as managing member and appointed us as
managing member. Concurrently, we entered into an agreement with
our partner to purchase its 49% interest in Bellevue Plaza for
$5.2 million, which was paid in 2010. At closing, our
interest in Bellevue Plaza increased from 49% to 98%.
For additional information regarding these consolidated joint
ventures, see Note 5,
Joint Ventures
to the
Consolidated Financial Statements of UDR, Inc. included in this
Report.
In November 2010, we acquired The Hanover Company’s
(“Hanover”) partnership interests in the
Hanover/MetLife Master Limited Partnership (the
“UDR/MetLife Partnership”). The UDR/MetLife
Partnership owns a portfolio of 26 operating communities
containing 5,748 homes and 11 land parcels with the
potential to develop approximately 2,300 additional homes. Under
the terms of the UDR/MetLife Partnership, we will act as the
general partner and earn fees for property and asset management
and financing transactions. We acquired ownership interests of
12.27% in the operating communities and 4.14% in the land
parcels for $100.8 million. Our initial investment of
$100.8 million consists of $71.8 million in cash,
which includes associated transaction costs, and a
$30 million payable (includes discount of $1 million)
to Hanover. We agreed to pay the $30 million balance to
Hanover in two interest free installments in the amounts of
$20 million and $10 million on the first and second
anniversaries of the closing, respectively. Our investment at
December 31, 2010 was $122.2 million.
In October 2010, the Company entered into a venture with an
affiliate of Hanover to develop a 240 apartment home
community in the metropolitan Boston, Massachusetts area. At the
closing and at
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December 31, 2010, UDR owned a noncontrolling interest of
95% in the joint venture. Our initial investment was
$10 million and our investment at December 31, 2010
was $10.3 million.
During 2009, we and an unaffiliated third party formed a joint
venture for the investment of up to $450 million in
multi-family properties located in key, high barrier to entry
markets. The partners will contribute equity of
$180 million of which our maximum equity will be 30% or
$54 million when fully invested. During the year ended
December 31, 2010, the joint venture acquired its first
property (151 homes) located in Metropolitan Washington D.C. for
$43.1 million. At closing and at December 31, 2010, we
owned 30% of the joint venture. Our investment at
December 31, 2010 and 2009 was $5.2 million and
$242,000, respectively.
The Operating Partnership is not a party to any of the joint
venture activities described above.
Continually
Improve Operations
We continue to make progress on automating our business as a way
to drive operating efficiencies and to better meet the changing
needs of our residents. Since its launch in January 2009, our
residents have been utilizing the resident internet portal on
our website. Our 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. In July 2010, we completed the
roll out of online renewals throughout our entire portfolio. 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 us have also resulted in a
decline in marketing and advertising costs, improved cash
management, and improved capabilities to better manage pricing
of our available apartment homes.
In 2010, we launched an enhanced
www.udr.com
website along and a new Modern Living website that highlights
our premier urban-style location communities. Both UDR.com and
Modern Living feature innovative
point-of-view
walking tours (at select locations), social media content
sharing and a new “save to favorites” feature that
entices first-time visitors to revisit www.udr.com. In addition
to improvements to www.udr.com, we also increased our suite of
mobile and tablet device offerings with the addition of an iPad,
Android, BlackBerry and Palm Pre apartment search applications.
These overall enhancements have contributed to increasing our
web visitor traffic to over 2.3 million visitors (up 24%)
and almost 1.5 million organic search engine visitors (up
30%) which contributed to a 20%
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 our 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 our 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.
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”),
8
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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, we 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, we 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 2010:
| • | repaid $187.3 million of secured debt and $50.0 million of maturing medium-term unsecured notes. The $187.3 million of secured debt includes $70.5 million for a maturing construction loan held by one of our consolidated joint ventures, repayment of $52.7 million of credit facilities and $64.1 million of mortgage payments; | |
| • | repurchased unsecured debt with a notional amount of $29.2 million for $29.4 million resulting in a loss on extinguishment of $1 million, which includes the write off of related deferred finance charges. The unsecured debt repurchased by us matures in 2011. As a result of this repurchase, the loss is represented as an addition to interest expense on the Consolidated Statement of Operations; | |
| • | closed on a $250 million, five-year unsecured term loan facility of which $100 million was swapped into a fixed rate of 3.76% and $150 million has a rate of LIBOR plus 200 basis points; | |
| • | in 2009, we entered into an Amended and Restated Distribution Agreement with respect to the issue and sale by us from time to time of our Medium-Term Notes, Series A Due Nine Months or More From Date of Issue. In February 2010, we issued $150 million of 5.25% senior unsecured medium-term notes under the Amended and Restated Distribution Agreement. These notes were priced at 99.46% of the principal amount at issuance and had a discount of $519,000 at December 31, 2010; | |
| • | in 2009, we initiated an “At the Market” equity distribution program pursuant to which we may sell up to 15,000,000 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. During the year ended December 31, 2010, we sold 6,144,367 shares of common stock through this program for aggregate gross proceeds of approximately $110.8 million at a weighted average price per share of $18.04. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $2.2 million, were approximately $108.6 million; | |
| • | in 2010, we initiated an underwritten public offering to sell 16,000,000 shares of our common stock at a price of $20.35 per share. We granted the underwriters a 30-day option to purchase up to an additional 2,400,000 shares of common stock to cover overallotments, if any. We sold 18,400,000 shares of common stock in this offering for aggregate gross proceeds of approximately $374.4 million at a price of $20.35 per share. Aggregate net proceeds from the offering, after deducting related expenses were approximately $359.2 million; and | |
| • | on September 30, 2010, the Operating Partnership guaranteed certain outstanding securities of UDR, such that the Operating Partnership, as primary obligor and not merely as surety, irrevocably and unconditionally guarantees to each holder of the applicable securities and to the trustee and their successors and assigns under the respective indenture (a) the full and punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of UDR under the respective indenture whether for principal of or interest on the securities (and premium, if any), and all other monetary obligations of UDR under the respective indenture and the terms of the applicable securities |
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| and (b) the full and punctual performance within the applicable grace periods of all other obligations of UDR under the respective indenture and the terms of the applicable securities. |
Markets
and Competitive Conditions
At December 31, 2010, 55.7% of our consolidated same store
net operating income and 76% of the Operating Partnership’s
same store net operating income was generated from apartment
homes located in California, Metropolitan Washington D.C.,
Oregon, and Washington state. We believe that this
diversification increases investment opportunity and decreases
the risk associated with cyclical local real estate markets and
economies, thereby increasing the stability and predictability
of our earnings.
Competition for new residents is generally intense across all of
our markets. Some competing communities offer features that our
communities do not have. Competing communities can use
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, 2010, our apartment portfolio included 172
consolidated communities having a total of 48,553 completed
apartment homes and an additional 930 apartment homes under
development, which included the Operating Partnership’s
apartment portfolio of 81 consolidated communities having a
total of 23,351 completed apartment homes. The overall quality
of our portfolio enables us to raise rents and to attract
residents with higher levels of disposable income who are more
likely to absorb 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
Store 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
community population are operating communities which we own and
have stabilized occupancy, revenues and expenses as of the
beginning of the prior year.
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For the year ended December 31, 2010, our same store NOI
decreased by $6.2 million or 1.7% compared to the prior
year. The decrease in NOI for the 40,699 apartment homes which
make up the same store population was driven by a decrease in
rental rates and an increase in expenses which was partially
offset by increased occupancy.
For the year ended December 31, 2010, the Operating
Partnership’s same store NOI decreased by $6.0 million
or 2.7% compared to the prior year. The decrease in NOI for the
22,104 apartment homes which make up the same store population
was driven by a decrease in revenue rental rates and increase in
operating expenses which was partially offset by increased
occupancy.
Revenue growth in 2011 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.
Tax
Matters
UDR has elected to be taxed as a REIT under the Code. To
continue to qualify as a REIT, UDR must continue to meet certain
tests that, among other things, generally require that our
assets consist primarily of real estate assets, our income be
derived primarily from real estate assets, and that we
distribute at least 90% of our REIT taxable income (other than
net capital gains) to our stockholders annually. Provided we
maintain our qualification as a REIT, we generally will not be
subject to U.S. federal income taxes at the corporate level
on our net income to the extent such net income is distributed
to our stockholders annually. Even if we continue to qualify as
a REIT, we will continue to be subject to certain federal, state
and local taxes on our income and property.
We may utilize 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.
The Operating Partnership intends to qualify as a partnership
for federal income tax purposes. As a partnership, the Operating
Partnership generally is not a taxable entity and does not incur
federal income tax liability. However, any state or local
revenue, excise or franchise taxes that result from the
operating activities of the Operating Partnership are incurred
at the entity level.
Inflation
We believe that the direct effects of inflation on our
operations have been immaterial. While the impact of inflation
primarily impacts our results through wage pressures, 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, 2010.
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
11
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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 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
UDR is the sole general partner of the Operating Partnership.
The following table sets forth information about our executive
officers as of February 17, 2011. 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
|
50 | Chief Executive Officer, President and Director | 2001 | |||||||
|
Warren L. Troupe
|
57 | Senior Executive Vice President | 2008 | |||||||
|
Richard A Giannotti
|
55 | Executive Vice President — Redevelopment | 1985 | |||||||
|
Matthew T. Akin
|
43 | Senior Vice President — Acquisitions & Dispositions | 1994 | |||||||
|
Harry G. Alcock
|
48 | Senior Vice President — Asset Management | 2010 | |||||||
|
Mark M. Culwell, Jr.
|
59 | Senior Vice President — Development | 2006 | |||||||
|
Jerry A. Davis
|
48 | Senior Vice President — Property Operations | 2008 | |||||||
|
Cameron A. Etezadi
|
35 | Senior Vice President — Chief Information Officer | 2010 | |||||||
|
David L. Messenger
|
40 | Senior Vice President — Chief Financial Officer | 2008 | |||||||
|
Katie Miles-Ley
|
49 | Senior Vice President — Human Resources | 2007 | |||||||
Set forth below is certain biographical information about our
executive officers.
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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 acquisition
transactions, including tender offers, hostile proxy contests
and negotiated acquisitions. He currently is a member of NMHC,
PREA and the Urban Land Institute.
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. He was promoted to Due Diligence
Analyst in April 1998 and to Asset Manager for the Western
Region in 1999. Mr. Akin was promoted to Vice President,
Senior Business Analyst in September 2000 and his focus shifted
to acquisitions for the Western Region. In May 2004 he was
promoted to Vice President — Acquisitions, and in
August 2006 he was promoted to Senior Vice President —
Acquisitions and Dispositions.
Mr. Alcock oversees the Company’s acquisitions,
dispositions, redevelopment and asset management in the
company’s east coast markets. He joined us in December 2010
as Senior Vice President — Asset Management. Prior to
joining the company, Mr. Alcock was with AIMCO for over
16 years, serving most recently as Executive Vice
President, co-Head of Transactions and Asset Management. He was
appointed Executive Vice President and Chief Investment officer
in 1999, a position he held through 2007. Mr. Alcock
established and chaired the company’s Investment Committee,
established the portfolio management function and at various
times ran the property debt and redevelopment departments. Prior
to the formation of AIMCO, from 1992 to 1994, Mr. Alcock
was with Heron Financial and PDI, predecessor companies to
AIMCO. From 1988 to 1992 he worked for Larwin Company, a
national homebuilder. Mr. Alcock holds a Bachelor of
Science in Finance from San Jose State University.
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.
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Mr. Davis oversees property operations, human resources and
technology. 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. Etezadi oversees all aspects of the company’s
technology infrastructure and strategy. He joined us in June
2010 as Senior Vice President — Chief Information
Officer. Prior to joining the company, Mr. Etezadi was with
Amazon.com from 2007 to 2010, where he served as Senior Manager,
overseeing domestic and international teams of software
engineers responsible for global payment processing and order
placement systems. From 1996 to 2007 Mr. Etezadi was with
Microsoft Corporation where he began as a Software Design
Engineer and Test Lead working on Windows NT4 and Windows
2000. In 2000 he began three years in Sweden as part of a
technical leadership team focused on transforming a company
Microsoft acquired into an integrated subsidiary. In 2003, upon
his return to the U.S., he led various teams in developing
mobile web technologies, speech recognition software, and mobile
computing hardware. Mr. Etezadi holds a Bachelor of Arts
degree in Chemical Engineering and Biochemistry from Rice
University and an MBA from the University of Washington.
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. Prior to
joining the company in 2002, Mr. Messenger was owner and
President of TRC Management Company, a restaurant management
company, in Chicago. Mr. Messenger began his career in real
estate and financial services with Ernst & Young LLP,
as a manager in their Chicago real estate division.
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. Ms. Miles-Ley holds
a Bachelor of Arts degree in Human Relations from Golden Gate
University and an MBA from the University of Denver.
Available
Information
Both UDR and the Operating Partnership file electronically with
the Securities and Exchange Commission their respective annual
reports on
Form 10-K,
quarterly reports on
Form 10-Q,
and current reports on
Form 8-K,
pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934. You may obtain a free copy of our annual
reports on
Form 10-K,
quarterly reports on
Form 10-Q,
and current reports on
Form 8-K,
and amendments to those reports on the day of filing with the
SEC on our website at
www.udr.com
, or by sending an
e-mail
message to
ir@udr.com.
| Item 1A. | RISK FACTORS |
There are many factors that affect 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.
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
14
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dispose of apartment communities on economically favorable
terms. Our ability to lease our properties at favorable rates is
adversely affected by the increase in supply in the multifamily
market and is dependent upon the overall level in the economy,
which is adversely affected by, among other things, job losses
and unemployment levels, recession, personal debt levels, the
downturn in the housing market, stock market volatility and
uncertainty about the future. 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; | |
| • | 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. |
Continued Economic Weakness Following the Economic Recession
that the U.S. Economy Recently Experienced May Materially
and Adversely Affect our Financial Condition and Results of
Operations.
The U.S. economy continues to
experience weakness following a severe recession, which has
resulted in increased unemployment, decreased consumer spending
and a decline in residential and commercial property values.
Although the U.S. economy has emerged from the recession,
high levels of unemployment have persisted. If the economic
recovery slows or stalls, we may experience adverse effects on
our occupancy levels, our rental revenues and the value of our
properties, any of which could adversely affect our cash flow,
financial condition and results of operations.
Substantial International, National and Local Government
Spending and Increasing Deficits May Adversely Impact Our
Business, Financial Condition and Results of
Operations.
The values of, and the cash flows
from, the properties we own are affected by developments in
global, national and local economies. As a result of the recent
recession and the significant government interventions, federal,
state and local governments have incurred record deficits and
assumed or guaranteed liabilities of private financial
institutions or other private entities. These increased budget
deficits and the weakened financial condition of federal, state
and local governments may lead to reduced governmental spending,
tax increases, public sector job losses, increased interest
rates, currency devaluations or other adverse economic events,
which may directly or indirectly adversely affect our business,
financial condition and results of operations.
Risk of Inflation/Deflation.
Substantial
inflationary or deflationary pressures could have a negative
effect on rental rates and property operating expenses. Neither
inflation nor deflation has materially impacted our operations
in the recent past. The general risk of inflation is that our
debt interest and general and administrative expenses increase
at a rate higher than our rental rates. The predominant effects
of deflation include high unemployment and credit contraction.
Restricted lending practices could impact our ability to obtain
financing or refinancing for our properties. High unemployment
may have a negative effect on our occupancy levels and our
rental revenues.
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We Are Subject to Certain Risks Associated with Selling
Apartment Communities, Which Could Limit Our Operational and
Financial Flexibility.
We periodically dispose of
apartment communities that no longer meet our strategic
objectives, but adverse market conditions may make it difficult
to sell apartment communities like the ones we own. We cannot
predict whether we will be able to sell any property for the
price or on the terms we set, or whether any price or other
terms offered by a prospective purchaser would be acceptable to
us. We also cannot predict the length of time needed to find a
willing purchaser and to close the sale of a property.
Furthermore, we may be required to expend funds to correct
defects or to make improvements before a property can be sold.
These conditions may limit our ability to dispose of properties
and to change our portfolio promptly in order to meet our
strategic objectives, which may in turn have a 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 Internal Revenue Code of 1986, as amended, or the “Code,” so that any related capital gain can be deferred for federal income tax purposes. As a result, we may not have immediate access to all of the cash proceeds generated from our property sales; and | |
| • | federal tax laws limit our ability to profit on the sale of communities that we have owned for less than two years, and this limitation may prevent us from selling communities when market conditions are favorable. |
Competition Could Limit Our Ability to Lease Apartment Homes
or Increase or Maintain Rents.
Our apartment
communities compete with numerous housing alternatives in
attracting residents, including other apartment communities,
condominiums and single-family rental homes, as well as owner
occupied single-and multi-family homes. Competitive housing in a
particular area could adversely affect our ability to lease
apartment homes and increase or maintain rents.
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 are able to finance the acquisition, cash flow from the acquisition may be insufficient to meet our required principal and interest payments on the acquisition; | |
| • | even if we enter into an acquisition agreement for an apartment community, we may be unable to complete the acquisition after incurring certain acquisition-related costs; | |
| • | we may incur significant costs and divert management attention in connection with the evaluation and negotiation of potential acquisitions, including potential acquisitions that we are subsequently unable to complete; | |
| • | 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. |
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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 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.
Bankruptcy of Developers in Our Development Joint Ventures
Could Impose Delays and Costs on Us With Respect to the
Development of Our Communities and May Adversely Affect Our
Financial Condition and Results of
Operations.
The bankruptcy of one of the
developers in any of our development joint ventures could
materially and adversely affect the relevant property or
properties. If the relevant joint venture through which we have
invested in a property has incurred recourse obligations, the
discharge in bankruptcy of the developer may require us to honor
a completion guarantee and therefore might result in our
ultimate liability for a greater portion of those obligations
than we would otherwise bear.
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
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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.
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.
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. |
Potential Liability for Environmental Contamination Could
Result in Substantial Costs.
Under various
federal, state and local environmental laws, as a current or
former owner or operator of real estate, we could be required to
investigate and remediate the effects of contamination of
currently or formerly owned real estate by hazardous or toxic
substances, often regardless of our knowledge of or
responsibility for the contamination and solely by virtue of our
current or former ownership or operation of the real estate. In
addition, we could be held liable to a governmental authority or
to third parties for property damage and for investigation and
clean-up
costs incurred in connection with the contamination. These costs
could be substantial, and in many cases environmental laws
create liens in favor of governmental authorities to secure
their payment. The presence of such substances or a failure to
properly remediate any resulting contamination could materially
and adversely affect our ability to borrow against, sell or rent
an affected property.
In addition, our properties are subject to various federal,
state and local environmental, health and safety laws, including
laws governing the management of wastes and underground and
aboveground storage tanks. Noncompliance with these
environmental, health and safety laws could subject us to
liability. Changes in laws could increase the potential costs of
compliance with environmental laws, health and safety laws or
increase liability for noncompliance. This may result in
significant unanticipated expenditures or may otherwise
materially and adversely affect our operations.
As the owner or operator of real property, we may also incur
liability based on various building conditions. For example,
buildings and other structures on properties that we currently
own or operate or those we acquire or operate in the future
contain, may contain, or may have contained, asbestos-containing
material, or ACM. Environmental, health and safety laws require
that ACM be properly managed and maintained and may impose fines
or penalties on owners, operators or employers for
non-compliance with those requirements.
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These requirements include special precautions, such as removal,
abatement or air monitoring, if ACM would be disturbed during
maintenance, renovation or demolition of a building, potentially
resulting in substantial costs. In addition, we may be subject
to liability for personal injury or property damage sustained as
a result of exposure to ACM or releases of ACM into the
environment.
We cannot assure you that costs or liabilities incurred as a
result of environmental issues will not affect our ability to
make distributions to our shareholders, or that such costs or
liabilities will not have a material adverse effect on our
financial condition and results of operations.
Our Properties May Contain or Develop Harmful Mold or Suffer
from Other Indoor Air Quality Issues, Which Could Lead to
Liability for Adverse Health Effects or Property Damage or Cost
for Remediation.
When excessive moisture
accumulates in buildings or on building materials, mold growth
may occur, particularly if the moisture problem remains
undiscovered or is not addressed over a period of time. Some
molds may produce airborne toxins or irritants. Indoor air
quality issues can also stem from inadequate ventilation,
chemical contamination from indoor or outdoor sources, and other
biological contaminants such as pollen, viruses and bacteria.
Indoor exposure to airborne toxins or irritants can be alleged
to cause a variety of adverse health effects and symptoms,
including allergic or other reactions. As a result, the presence
of significant mold or other airborne contaminants at any of our
properties could require us to undertake a costly remediation
program to contain or remove the mold or other airborne
contaminants or to increase ventilation. In addition, the
presence of significant mold or other airborne contaminants
could expose us to liability from our tenants or others if
property damage or personal injury occurs.
Compliance or Failure to Comply with the Americans with
Disabilities Act of 1990 or Other Safety Regulations and
Requirements Could Result in Substantial
Costs.
The Americans with Disabilities Act
generally requires that public buildings, including our
properties, be made accessible to disabled persons.
Noncompliance could result in the imposition of fines by the
federal government or the award of damages to private litigants.
From time to time claims may be asserted against us with respect
to some of our properties under 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 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.
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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.
We May Experience a Decline in the Fair Value of Our Assets
and Be Forced to Recognize Impairment Charges, Which Could
Materially and Adversely Impact Our Financial Condition,
Liquidity and Results of Operations and the Market Price of Our
Common Stock.
A decline in the fair value of our
assets may require us to recognize an impairment against such
assets under GAAP if we were to determine that, with respect to
any assets in unrealized loss positions, we do not have the
ability and intent to hold such assets to maturity or for a
period of time sufficient to allow for recovery to the amortized
cost of such assets. If such a determination were to be made, we
would recognize unrealized losses through earnings and write
down the amortized cost of such assets to a new cost basis,
based on the fair value of such assets on the date they are
considered to be impaired. Such impairment charges reflect
non-cash losses at the time of recognition; subsequent
disposition or sale of such assets could further affect our
future losses or gains, as they are based on the difference
between the sale price received and adjusted amortized cost of
such assets at the time of sale. If we are required to recognize
asset impairment charges in the future, these charges could
materially and adversely affect our financial condition,
liquidity, results of operations and the per share trading price
of our common stock.
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.
We May be Adversely Affected by New Laws and
Regulations.
The current United States
administration and Congress have enacted, or called for
consideration of, proposals relating to a variety of issues,
including with respect to health care, financial regulation
reform, climate control, executive compensation and others. We
believe that these and other potential proposals could have
varying degrees of impact on us ranging from minimal to
material. At this time, we are unable to predict with certainty
what level of impact specific proposals could have on us.
Certain rulemaking and administrative efforts that may have an
impact on us focus principally on the areas perceived as
contributing to the global financial crisis and the continuing
economic downturn. These initiatives have created a degree of
uncertainty regarding the basic rules governing the real estate
industry and many other businesses that is unprecedented in the
United States at least since the wave of lawmaking and
regulatory reform that followed in the wake of the Great
Depression. The federal legislative response in this area has
culminated most recently in the enactment on July 21, 2010
of the Dodd-Frank Wall Street Reform and Consumer Protection Act
(“Dodd-Frank Act”). Many of the provisions of the
Dodd-Frank Act have extended implementation periods and delayed
effective dates and will require extensive rulemaking by
regulatory authorities; thus, the impact on us may not be known
for an extended period of time. The Dodd-Frank Act, including
future rules implementing its provisions and the interpretation
of those rules, along with other legislative and regulatory
proposals that are proposed or pending in the United States
Congress, may
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limit our revenues, impose fees or taxes on us,
and/or
intensify the regulatory framework in which we operate in ways
that are not currently identifiable.
Changing laws, regulations and standards relating to corporate
governance and public disclosure in particular, including
certain provisions of the Dodd-Frank Act and the rules and
regulations promulgated thereunder, have created uncertainty for
public companies like ours and could significantly increase the
costs and risks associated with accessing the U.S. public
markets. Because we are committed to maintaining high standards
of internal control over financial reporting, corporate
governance and public disclosure, our management team will need
to devote significant time and financial resources to comply
with these evolving standards for public companies. We intend to
continue to invest appropriate resources to comply with both
existing and evolving standards, and this investment has
resulted and will likely continue to result in increased general
and administrative expenses and a diversion of management time
and attention from revenue generating activities to compliance
activities.
Changes in the System for Establishing U.S. Accounting
Standards May Materially and Adversely Affect Our Reported
Results of Operations.
Accounting for public
companies in the United States has historically been conducted
in accordance with generally accepted accounting principles as
in effect in the United States (“GAAP”). GAAP is
established by the Financial Accounting Standards Board (the
“FASB”), an independent body whose standards are
recognized by the SEC as authoritative for publicly held
companies. The International Accounting Standards Board (the
“IASB”) is a London-based independent board
established in 2001 and charged with the development of
International Financial Reporting Standards (“IFRS”).
IFRS generally reflects accounting practices that prevail in
Europe and in developed nations around the world.
IFRS differs in material respects from GAAP. Among other things,
IFRS has historically relied more on “fair value”
models of accounting for assets and liabilities than GAAP.
“Fair value” models are based on periodic revaluation
of assets and liabilities, often resulting in fluctuations in
such values as compared to GAAP, which relies more frequently on
historical cost as the basis for asset and liability valuation.
The SEC has proposed the mandatory adoption of IFRS by United
States public companies starting in 2015, with early adoption
permitted before that date. It is unclear at this time how the
SEC will propose that GAAP and IFRS be harmonized if the
proposed change is adopted. In addition, switching to a new
method of accounting and adopting IFRS will be a complex
undertaking. We may need to develop new systems and controls
based on the principles of IFRS. Since these are new endeavors,
and the precise requirements of the pronouncements ultimately
adopted are not now known, the magnitude of costs associated
with this conversion are uncertain.
We are currently evaluating the impact of the adoption of IFRS
on our financial position and results of operations. Such
evaluation cannot be completed, however, without more clarity
regarding the specific IFRS standards that will be adopted.
Until there is more certainty with respect to the IFRS standards
to be adopted, prospective investors should consider that our
conversion to IFRS could have a material adverse impact on our
reported 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 UDR’ Inc.’s distribution
requirements to maintain its status as a REIT for federal income
tax purposes. In addition, the full limits of our line of credit
may not be available to us if our operating performance falls
outside the constraints of our debt covenants. We are also
likely to need to refinance substantially all of our outstanding
debt as it matures. We may not be able to refinance existing
debt, or the terms of any refinancing may not be as favorable as
the terms of the existing debt, which could create pressures to
sell assets or to issue additional equity when we would
otherwise not choose to do so. In addition, our failure to
comply with our debt covenants could result in a requirement to
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repay our indebtedness prior to its maturity, which could have
an adverse effect on our cash flow, increase our financing costs
and impact our ability to make distributions to our stockholders.
Failure to Generate Sufficient Revenue Could Impair Debt
Service Payments and Distributions to
Stockholders.
If our apartment communities do not
generate sufficient net rental income to meet rental expenses,
our ability to make required payments of interest and principal
on our debt securities and to pay distributions to UDR,
Inc.’s stockholders will be adversely affected. The
following factors, among others, may affect the net rental
income generated by our apartment communities:
| • | the national and local economies; | |
| • | local real estate market conditions, such as an oversupply of apartment homes; | |
| • | tenants’ perceptions of the safety, convenience, and attractiveness of our communities and the neighborhoods where they are located; | |
| • | our ability to provide adequate management, maintenance and insurance; | |
| • | rental expenses, including real estate taxes and utilities; | |
| • | competition from other apartment communities; | |
| • | changes in interest rates and the availability of financing; | |
| • | changes in governmental regulations and the related costs of compliance; and | |
| • | changes in tax and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing. |
Expenses associated with our investment in an apartment
community, such as debt service, real estate taxes, insurance
and maintenance costs, are generally not reduced when
circumstances cause a reduction in rental income from that
community. If a community is mortgaged to secure payment of debt
and we are unable to make the mortgage payments, we could
sustain a loss as a result of foreclosure on the community or
the exercise of other remedies by the mortgage holder.
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.
Disruptions in Financial Markets May Adversely Impact
Availability and Cost of Credit 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. During the past few years, the United States stock
and credit markets have 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
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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 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. Tightening of credit in financial markets and high
unemployment rates 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.
A Change in U.S. Government Policy Regarding Fannie Mae
or Freddie Mac Could Have a Material Adverse Impact on Our
Business.
Fannie Mae and Freddie Mac are a major
source of financing for secured multifamily rental real estate.
We and other multifamily companies depend heavily on Fannie Mae
and Freddie Mac to finance growth by purchasing or guaranteeing
apartment loans. In September 2008, the U.S. government
assumed control of Fannie Mae and Freddie Mac and placed both
companies into a government conservatorship under the Federal
Housing Finance Agency. The Administration has recently proposed
potential options for the future of mortgage finance in the
U.S. that could involve the phase out of Fannie Mae and
Freddie Mac. While we believe Fannie Mae and Freddie Mac will
continue to provide liquidity to our sector, should they
discontinue doing so, have their mandates changed or reduced or
be disbanded or reorganized by the government, it would
significantly reduce our access to debt capital and adversely
affect our ability to finance or refinance existing indebtedness
at competitive rates and it may adversely affect our ability to
sale assets. Uncertainty in the future activity and involvement
of Fannie Mae and Freddie Mac as a source of financing could
negatively impact our ability to make acquisitions and make it
more difficult or not possible for us to sell properties or may
adversely affect the price we receive for properties that we do
sell, as prospective buyers may experience increased costs of
debt financing or difficulties in obtaining debt financing.
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, 2010, UDR,
Inc. had approximately $1 billion of variable rate
indebtedness outstanding, which constitutes approximately 29% of
total outstanding indebtedness as of such date. As of
December 31, 2010, the Operating Partnership had
approximately $304 million of variable rate indebtedness
outstanding, which constitutes approximately 28% of 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
23
Table of Contents
rates during the period prior to the pricing of the securities
by entering into interest rate hedging contracts. We may do this
to increase the predictability of our financing costs. Also,
from time to time we may rely on interest rate hedging contracts
to limit our exposure under variable rate debt to unfavorable
changes in market interest rates. If the terms of new debt
securities are not within the parameters of, or market interest
rates fall below that which we incur under a particular interest
rate hedging contract, the contract is ineffective. Furthermore,
the settlement of interest rate hedging contracts has involved
and may in the future involve material charges. In addition, our
use of interest rate hedging arrangements may expose us to
additional risks, including a risk that a counterparty to a
hedging arrangement may fail to honor its obligations.
Developing an effective interest rate risk strategy is complex
and no strategy can completely insulate us from risks associated
with interest rate fluctuations. There can be no assurance that
our hedging activities will have desired beneficial impact on
our results of operations or financial condition. Termination of
these hedging agreements typically involves costs, such as
transaction fees or breakage costs.
Risks
Related to Tax Laws
We Would Incur Adverse Tax Consequences if UDR Failed to
Qualify as a REIT.
UDR has elected to be taxed as
a REIT under the Code. Our qualification as a REIT requires us
to satisfy numerous requirements, some on an annual and
quarterly basis, established under highly technical and complex
Code provisions for which there are only limited judicial or
administrative interpretations, and involves the determination
of various factual matters and circumstances not entirely within
our control. We intend that our current organization and method
of operation enable us to continue to qualify as a REIT, but we
may not so qualify or we may not be able to remain so qualified
in the future. In addition, U.S. federal income tax laws
governing REITs and other corporations and the administrative
interpretations of those laws may be amended at any time,
potentially with retroactive effect. Future legislation, new
regulations, administrative interpretations or court decisions
could adversely affect our ability to qualify as a REIT or
adversely affect our stockholders.
If we fail to qualify as a REIT in any taxable year, we would be
subject to federal income tax (including any applicable
alternative minimum tax) on our taxable income at regular
corporate rates, and would not be allowed to deduct dividends
paid to our stockholders in computing our taxable income. Also,
unless the Internal Revenue Service granted us relief under
certain statutory provisions, we could not re-elect REIT status
until the fifth calendar year after the year in which we first
failed to qualify as a REIT. The additional tax liability from
the failure to qualify as a REIT would reduce or eliminate the
amount of cash available for investment or distribution to 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.
24
Table of Contents
UDR May Conduct a Portion of Our Business Through Taxable
REIT Subsidiaries, Which are Subject to Certain Tax
Risks.
We have established several taxable REIT
subsidiaries. Despite UDR’s qualification as a REIT, its
taxable REIT subsidiaries must pay income tax on their taxable
income. In addition, we must comply with various tests to
continue to qualify as a REIT for federal income tax purposes,
and our income from and investments in our taxable REIT
subsidiaries generally do not constitute permissible income and
investments for these tests. While we will attempt to ensure
that our dealings with our taxable REIT subsidiaries will not
adversely affect our REIT qualification, we cannot provide
assurance that we will successfully achieve that result.
Furthermore, we may be subject to a 100% penalty tax, we may
jeopardize our ability to retain future gains on real property
sales, or our taxable REIT subsidiaries may be denied
deductions, to the extent our dealings with our taxable REIT
subsidiaries are not deemed to be arm’s length in nature or
are otherwise not respected.
REIT Distribution Requirements Limit Our Available
Cash.
As a REIT, UDR is subject to annual
distribution requirements, which limit the amount of cash we
retain for other business purposes, including amounts to fund
our growth. We generally must distribute annually at least 90%
of our net REIT taxable income, excluding any net capital gain,
in order for our distributed earnings not to be subject to
corporate income tax. We intend to make distributions to 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, we do not believe that our occasional transfers or
disposals of property are prohibited transactions. However,
whether property is held for investment purposes is a question
of fact that depends on all the facts and circumstances
surrounding the particular transaction. The Internal Revenue
Service may contend that certain transfers or disposals of
properties by us are prohibited transactions. If the Internal
Revenue Service were to argue successfully that a transfer or
disposition of property constituted a prohibited transaction,
then we would be required to pay a 100% penalty tax on any gain
allocable to us from the prohibited transaction and we may
jeopardize our ability to retain future gains on real property
sales. In addition, income from a prohibited transaction might
adversely affect UDR’s ability to satisfy the income tests
for qualification as a REIT for federal income tax purposes.
We Could Face Possible State and Local Tax Audits and Adverse
Changes in State and Local Tax Laws.
As discussed
in the risk factors above, because UDR is organized and
qualifies as a REIT it is generally not subject to federal
income taxes, but it is subject to certain state and local
taxes. From time to time, changes in state and local tax laws or
regulations are enacted, which may result in an increase in our
tax liability. A shortfall in tax revenues for states and
municipalities in which we own apartment communities may lead to
an increase in the frequency and size of such changes. If such
changes occur, we may be required to pay additional state and
local taxes. These increased tax costs could adversely affect
our financial condition and the amount of cash available for the
payment of distributions to 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.
The Operating Partnership Intends to Qualify as a
Partnership, But Cannot Guarantee That It Will
Qualify.
The Operating Partnership intends to
qualify as a partnership for federal income tax purposes at any
such time that the Operating Partnership admits additional
limited partners other than UDR, Inc. If classified as a
partnership, the Operating Partnership generally will not be a
taxable entity and will not incur federal income tax liability.
However, the Operating Partnership would be treated as a
corporation for federal income tax purposes if it were a
“publicly traded partnership,” unless at least 90% of
the Operating Partnership’s income was qualifying income as
defined in the Code. A “publicly traded partnership”
is a partnership whose
25
Table of Contents
partnership interests are traded on an established securities
market or are readily tradable on a secondary market (or the
substantial equivalent thereof). Although the Operating
Partnership’s partnership units are not traded on an
established securities market, because of the redemption right,
the Operating Partnership’s units held by limited partners
could be viewed as readily tradable on a secondary market (or
the substantial equivalent thereof), and the Operating
Partnership may not qualify for one of the “safe
harbors” under the applicable tax regulations. Qualifying
income for the 90% test generally includes passive income, such
as real property rents, dividends and interest. The income
requirements applicable to REITs and the definition of
qualifying income for purposes of this 90% test are similar in
most respects. The Operating Partnership may not meet this
qualifying income test. If the Operating Partnership were to be
taxed as a corporation, it would incur substantial tax
liabilities, and UDR, Inc. would then fail to qualify as a REIT
for tax purposes, unless it qualified for relief under certain
statutory savings provisions, and our ability to raise
additional capital would be impaired.
Risks
Related to Our Organization and Ownership of UDR, Inc.’s
Stock
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 UDR, Inc’s common stock,
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. In addition
to the risks listed in this “Risk Factors” section, a
number of factors could negatively affect the price per share of
our common stock, 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; | |
| • | changes in market valuations of similar companies; | |
| • | publication of research reports about us or the real estate industry; | |
| • | the general reputation of real estate investment trusts and the attractiveness of their equity securities in comparison to other equity securities (including securities issued by other real estate companies); | |
| • | general stock and bond market conditions, including changes in interest rates on fixed income securities, that may lead prospective purchasers of our stock to demand a higher annual yield from future dividends; | |
| • | a change in analyst ratings; | |
| • | additions or departures of key management personnel; | |
| • | adverse market reaction to any additional debt we incur in the future; | |
| • | speculation in the press or investment community; | |
| • | terrorist activity which may adversely affect the markets in which our securities trade, possibly increasing market volatility and causing the further erosion of business and consumer confidence and spending; | |
| • | failure to qualify as a REIT; | |
| • | strategic decisions by us or by our competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in business strategy; |
26
Table of Contents
| • | failure to satisfy listing requirements of the NYSE; | |
| • | 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 UDR’s common stock, as well as the timing, amount and
composition of any such future dividends, will be at the sole
discretion of our board of directors and will depend on our
earnings, funds from operations, liquidity, financial condition,
capital requirements, contractual prohibitions or other
limitations under our indebtedness, the annual distribution
requirements under the REIT provisions of the Code, state law
and such other factors as our board of directors considers
relevant. Any change in our dividend policy could have a
material adverse effect on the market price of UDR’s common
stock.
Maryland Law May Limit the Ability of a Third Party to
Acquire Control of Us, Which May Not be in 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
Restricts the Transferability of Our Stock and 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. Absent
such an exemption from our board of directors, the transfer of
our stock to any person in excess of the applicable ownership
limit, or any transfer of shares of such stock in violation of
the ownership requirements of the Code for REITs, will be
considered null and void, and the intended transferee of such
stock will acquire no rights in such shares. These provisions of
our charter may have the effect of delaying, deferring or
preventing someone from taking control of us, even though a
change of control might involve a premium price for our
stockholders or might otherwise be in our stockholders’
best interests.
| Item 1B. | UNRESOLVED STAFF COMMENTS |
None.
27
Table of Contents
| Item 2. | PROPERTIES |
At December 31, 2010, our consolidated apartment portfolio
included 172 communities located in 23 markets, with a total of
48,553 completed apartment homes.
We lease approximately 35,000 square feet of office space
in Highlands Ranch, Colorado, for our corporate headquarters and
lease an additional 39,000 square feet for two regional
offices located in Dallas, Texas and Richmond, Virginia. The
lease term on 21,000 square feet in Richmond, Virginia
expires in February 2011.
The tables below set forth a summary of real estate portfolio by
geographic market of the Company and of the Operating
Partnership at December 31, 2010.
SUMMARY
OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT DECEMBER 31,
2010
UDR,
INC.
|
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 | 4,479 | 12.4 | % | $ | 853,952 | $ | 348,808 | $ | 190,657 | 95.2 | % | 841 | |||||||||||||||||||
|
San Francisco, CA
|
11 | 2,339 | 8.1 | % | 555,023 | 105,236 | 237,291 | 93.7 | % | 805 | ||||||||||||||||||||||
|
Los Angeles, CA
|
9 | 2,261 | 8.5 | % | 583,553 | 232,198 | 258,095 | 95.8 | % | 950 | ||||||||||||||||||||||
|
Seattle, WA
|
11 | 2,165 | 6.8 | % | 465,661 | 54,278 | 215,086 | 95.3 | % | 882 | ||||||||||||||||||||||
|
San Diego, CA
|
5 | 1,123 | 2.5 | % | 174,659 | 21,774 | 155,529 | 95.3 | % | 797 | ||||||||||||||||||||||
|
Monterey Peninsula, CA
|
7 | 1,565 | 2.2 | % | 152,645 | — | 97,537 | 94.1 | % | 724 | ||||||||||||||||||||||
|
Inland Empire, CA
|
3 | 1,074 | 2.2 | % | 150,276 | 81,279 | 139,922 | 94.9 | % | 886 | ||||||||||||||||||||||
|
Sacramento, CA
|
2 | 914 | 1.0 | % | 68,061 | 46,611 | 74,465 | 93.5 | % | 820 | ||||||||||||||||||||||
|
Portland, OR
|
3 | 716 | 1.0 | % | 69,543 | 43,037 | 97,127 | 95.9 | % | 918 | ||||||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||||||
|
Metropolitan DC
|
13 | 4,343 | 11.5 | % | 790,243 | 194,172 | 181,958 | 92.3 | %(a) | 963 | ||||||||||||||||||||||
|
Baltimore, MD
|
11 | 2,301 | 4.3 | % | 297,685 | 131,460 | 129,372 | 96.5 | % | 1,001 | ||||||||||||||||||||||
|
Richmond, VA
|
6 | 2,211 | 2.7 | % | 187,044 | 67,820 | 84,597 | 95.9 | % | 966 | ||||||||||||||||||||||
|
Norfolk, VA
|
6 | 1,438 | 1.2 | % | 84,401 | — | 58,693 | 95.5 | % | 1,016 | ||||||||||||||||||||||
|
Boston, MA
|
2 | 346 | 2.0 | % | 137,692 | 25,375 | 397,954 | 94.1 | % | 1,041 | ||||||||||||||||||||||
|
Other Mid-Atlantic
|
6 | 1,491 | 1.9 | % | 128,216 | 32,126 | 85,993 | 82.7 | %(a) | 972 | ||||||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||||||
|
Tampa, FL
|
11 | 3,804 | 4.9 | % | 334,062 | 50,682 | 87,819 | 95.5 | % | 963 | ||||||||||||||||||||||
|
Orlando, FL
|
11 | 3,167 | 3.9 | % | 271,043 | 88,009 | 85,584 | 94.4 | % | 978 | ||||||||||||||||||||||
|
Nashville, TN
|
8 | 2,260 | 2.6 | % | 180,413 | 25,294 | 79,829 | 96.5 | % | 933 | ||||||||||||||||||||||
|
Jacksonville, FL
|
5 | 1,857 | 2.3 | % | 156,540 | 17,930 | 84,297 | 95.0 | % | 913 | ||||||||||||||||||||||
|
Other Florida
|
4 | 1,184 | 1.6 | % | 112,072 | 40,133 | 94,655 | 94.2 | % | 1,035 | ||||||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||||||
|
Dallas, TX
|
13 | 4,320 | 7.1 | % | 486,109 | 211,265 | 112,525 | 86.8 | %(a) | 906 | ||||||||||||||||||||||
|
Phoenix, AZ
|
6 | 1,744 | 2.5 | % | 169,990 | 62,132 | 97,471 | 88.3 | %(a) | 970 | ||||||||||||||||||||||
|
Austin, TX
|
2 | 640 | 1.3 | % | 92,361 | 25,079 | 144,314 | 93.4 | % | 888 | ||||||||||||||||||||||
|
Other Texas
|
3 | 811 | 0.9 | % | 65,218 | 36,701 | 80,417 | 94.1 | % | 859 | ||||||||||||||||||||||
|
Total Operating Communities
|
172 | 48,553 | 95.4 | % | $ | 6,566,462 | $ | 1,941,399 | $ | 135,243 | 93.5 | % | 919 | |||||||||||||||||||
|
Real Estate Under Development(b)
|
— | — | 1.4 | % | 97,912 | — | ||||||||||||||||||||||||||
|
Land
|
— | — | 2.0 | % | 131,889 | — | ||||||||||||||||||||||||||
|
Other
|
— | — | 1.2 | % | 85,084 | 22,271 | ||||||||||||||||||||||||||
|
Total Real Estate Owned
|
172 | 48,553 | 100.0 | % | $ | 6,881,347 | $ | 1,963,670 | ||||||||||||||||||||||||
| (a) | Markets include properties in lease-up during the year. | |
| (b) | The Company is currently developing four wholly-owned communities with 930 apartment homes that have not yet been completed. |
28
Table of Contents
SUMMARY
OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT DECEMBER 31,
2010
UNITED
DOMINION REALTY, L.P.
|
Average
|
||||||||||||||||||||||||||||||||
|
Number of
|
Number of
|
Percentage of
|
Carrying
|
Average
|
Home Size
|
|||||||||||||||||||||||||||
|
Apartment
|
Apartment
|
Carrying
|
Value
|
Encumbrances
|
Cost per
|
Physical
|
(In Square
|
|||||||||||||||||||||||||
| Communities | Homes | Value | (In thousands) | (In thousands) | Home | Occupancy | Feet) | |||||||||||||||||||||||||
|
WESTERN REGION
|
||||||||||||||||||||||||||||||||
|
Orange County, CA
|
12 | 4,124 | 20.6 | % | $ | 765,097 | $ | 348,808 | $ | 185,523 | 95.4 | % | 820 | |||||||||||||||||||
|
San Francisco, CA
|
10 | 2,315 | 14.6 | % | 542,531 | 105,236 | 234,355 | 93.6 | % | 806 | ||||||||||||||||||||||
|
Los Angeles, CA
|
6 | 1,222 | 7.2 | % | 265,084 | 64,499 | 216,926 | 96.0 | % | 967 | ||||||||||||||||||||||
|
Seattle, WA
|
5 | 932 | 5.6 | % | 206,953 | 33,777 | 222,053 | 96.6 | % | 865 | ||||||||||||||||||||||
|
San Diego, CA
|
3 | 689 | 2.7 | % | 99,586 | 21,774 | 144,537 | 95.1 | % | 788 | ||||||||||||||||||||||
|
Monterey Peninsula, CA
|
7 | 1,565 | 4.1 | % | 152,645 | — | 97,537 | 94.1 | % | 724 | ||||||||||||||||||||||
|
Inland Empire, CA
|
2 | 834 | 3.2 | % | 119,199 | 54,308 | 142,924 | 95.0 | % | 882 | ||||||||||||||||||||||
|
Sacramento, CA
|
2 | 914 | 1.8 | % | 68,061 | 46,611 | 74,465 | 93.5 | % | 820 | ||||||||||||||||||||||
|
Portland, OR
|
3 | 716 | 1.9 | % | 69,543 | 43,037 | 97,127 | 95.9 | % | 918 | ||||||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||||||
|
Metropolitan DC
|
8 | 2,565 | 15.5 | % | 574,504 | 98,174 | 223,978 | 96.4 | % | 948 | ||||||||||||||||||||||
|
Baltimore, MD
|
5 | 994 | 3.9 | % | 145,968 | 82,887 | 146,849 | 96.4 | % | 971 | ||||||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||||||
|
Tampa, FL
|
3 | 1,154 | 2.9 | % | 109,081 | 7,330 | 94,524 | 95.6 | % | 1,029 | ||||||||||||||||||||||
|
Nashville, TN
|
6 | 1,612 | 3.4 | % | 127,178 | — | 78,895 | 96.5 | % | 925 | ||||||||||||||||||||||
|
Jacksonville, FL
|
1 | 400 | 1.1 | % | 42,292 | — | 105,730 | 94.9 | % | 964 | ||||||||||||||||||||||
|
Other Florida
|
1 | 636 | 2.1 | % | 76,310 | 40,133 | 119,984 | 95.1 | % | 1,130 | ||||||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||||||
|
Dallas, TX
|
2 | 1,348 | 4.9 | % | 182,840 | 90,475 | 135,638 | 95.6 | % | 909 | ||||||||||||||||||||||
|
Phoenix, AZ
|
3 | 914 | 1.9 | % | 71,646 | 33,012 | 78,387 | 95.3 | % | 1,000 | ||||||||||||||||||||||
|
Austin, TX
|
1 | 250 | 0.8 | % | 32,180 | — | 128,720 | 89.8 | % | 883 | ||||||||||||||||||||||
|
Other Texas
|
1 | 167 | 0.8 | % | 19,179 | — | 114,844 | — | 710 | |||||||||||||||||||||||
|
Total Operating Communities
|
81 | 23,351 | 99.0 | % | 3,669,877 | 1,070,061 | 157,161 | 94.6 | % | 887 | ||||||||||||||||||||||
|
Land and other
|
— | 1.0 | % | 36,307 | — | |||||||||||||||||||||||||||
|
Total Real Estate Owned
|
81 | 23,351 | 100.0 | % | $ | 3,706,184 | $ | 1,070,061 | ||||||||||||||||||||||||
| Item 3. | LEGAL PROCEEDINGS |
We are subject to various legal proceedings and claims arising
in the ordinary course of business. We cannot determine the
ultimate liability with respect to such legal proceedings and
claims at this time. We believe that such liability, to the
extent not provided for through insurance or otherwise, will not
have a material adverse effect on our financial condition,
results of operations or cash flow.
| Item 4. | (Removed and Reserved) |
29
Table of Contents
| Item 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER |
MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
UDR,
Inc.
Common
Stock
UDR, Inc.’s common stock has been listed on the New York
Stock Exchange under the symbol “UDR” since
May 7, 1990. The following tables set forth the quarterly
high and low sale prices per common share reported on the NYSE
for each quarter of the last two fiscal years. Distribution
information for common stock reflects distributions declared per
share for each calendar quarter and paid at the end of the
following month.
| 2010 | 2009 | |||||||||||||||||||||||||||||||
|
Distributions
|
Distributions
|
|||||||||||||||||||||||||||||||
| High | Low | Declared | High | Low | Declared | |||||||||||||||||||||||||||
|
Quarter ended March 31,
|
$ | 18.26 | $ | 14.47 | $ | 0.180 | $ | 14.27 | $ | 6.73 | $ | 0.310 | ||||||||||||||||||||
|
Quarter ended June 30,
|
$ | 21.82 | $ | 17.57 | $ | 0.180 | $ | 11.92 | $ | 7.93 | $ | 0.180 | ||||||||||||||||||||
|
Quarter ended September 30,
|
$ | 22.26 | $ | 17.93 | $ | 0.185 | $ | 16.23 | $ | 9.06 | $ | 0.180 | ||||||||||||||||||||
|
Quarter ended December 31,
|
$ | 24.10 | $ | 20.99 | $ | 0.185 | $ | 17.26 | $ | 13.93 | $ | 0.180 | ||||||||||||||||||||
On February 17, 2011, the closing sale price of our common
stock was $23.82 per share on the NYSE and there were 4,804
holders of record of the 182,496,330 outstanding shares of our
common stock.
We have determined that, for federal income tax purposes,
approximately 95% of the distributions for 2010 represented
ordinary income, 3% represented long-term capital gain, and 2%
represented unrecaptured section 1250 gain.
UDR pays regular quarterly distributions to holders of its
common stock. Future distributions will be at the discretion of
our Board of Directors and will depend on our actual funds from
operations, financial condition and capital requirements, the
annual distribution requirements under the REIT provisions of
the Code, and other factors. The annual distribution payment for
calendar year 2010 necessary for us to maintain our status as a
REIT was $0.002 per share of common stock. We declared total
distributions of $0.73 per share of common stock for 2010.
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 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 2010 were $1.33
per share or $0.3322 per quarter. The Series E is not
listed on any exchange. At December 31, 2010, 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 (“Series F”) Preferred Stock. The
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 the Series F for
each OP Unit held. At December 31,
30
Table of Contents
2010, a total of 3,208,706 shares of the Series F were
outstanding at a value of $321. 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.
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,
2010, the Company repurchased 27,400 shares of
Series G, for less than the liquidation preference of $25
per share resulting in a $25,000 benefit to our net loss
attributable to common stockholders. Distributions declared on
the Series G for the year ended December 31, 2010 was
$1.69 per share. The Series G is listed on the NYSE under
the symbol “UDRPrG.” At December 31, 2010, a
total of 3,405,562 shares of the Series G were
outstanding.
Distribution
Reinvestment and Stock Purchase Plan
We have a Distribution Reinvestment and Stock Purchase Plan
under which holders of our common stock may elect to
automatically reinvest their distributions and make additional
cash payments to acquire additional shares of our common stock.
Stockholders who do not participate in the plan continue to
receive distributions as declared. As of February 17, 2011,
there were approximately 2,707 participants in the plan.
United
Dominion Realty, L.P.
Operating
Partnership Units
There is no established public trading market for United
Dominion Realty, L.P.’s Operating Partnership Units. From
time to time we issue shares of our common stock in exchange for
OP Units tendered to the Operating Partnership, for
redemption in accordance with the provisions of the Operating
Partnership’s limited partnership agreement. At
December 31, 2010, there were 179,909,408 OP Units
outstanding in the Operating Partnership, of which 174,847,440
OP Units or 97.2% were owned by UDR and 5,061,968
OP Units or 2.8% were owned by limited partners. Under the
terms of the Operating Partnership’s limited partnership
agreement, the holders of OP Units have the right to
require the Operating Partnership to redeem all or a portion of
the OP Units held by the holder in exchange for a cash
payment based on the market value of our common stock at the
time of redemption. However, the Operating Partnership’s
obligation to pay the cash amount is subject to the prior right
of the Company to acquire such OP Units in exchange for
either the cash amount or the number of shares of our common
stock equal to the number of OP Units being redeemed.
During 2010, we issued a total of 924,624 shares of common
stock upon redemption of OP Units.
Purchases
of Equity Securities
In February 2006, UDR’s Board of Directors authorized a
10,000,000 share repurchase program. In January 2008,
UDR’s Board of Directors authorized a new
15,000,000 share repurchase program. Under the two share
repurchase programs, UDR may repurchase shares of our common
stock in open market purchases, block purchases, privately
negotiated transactions or otherwise. As reflected in the table
below, no shares of common stock were repurchased under these
programs during the quarter ended December 31, 2010.
31
Table of Contents
The following tables set forth certain information regarding our
common stock repurchases during the quarter ended
December 31, 2010.
|
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, 2010 through October 31, 2010
|
— | — | — | 15,032,510 | ||||||||||||
|
November 1, 2010 through November 30, 2010
|
— | — | — | 15,032,510 | ||||||||||||
|
December 1, 2010 through December 31, 2010
|
— | — | — | 15,032,510 | ||||||||||||
|
Balance as of December 31, 2010
|
9,967,490 | $ | 22.00 | 9,967,490 | 15,032,510 | |||||||||||
| (1) | This number reflects the amount of shares that were available for purchase under our 10,000,000 share repurchase program authorized in February 2006 and our 15,000,000 share repurchase program authorized in January 2008. |
32
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 | 12/31/09 | 01/31/10 | 02/28/10 | 03/31/10 | 04/30/10 | 05/31/10 | 06/30/10 | 07/31/10 | 08/31/10 | 09/30/10 | 10/31/10 | 11/30/10 | 12/31/10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
UDR, Inc.
|
100.00 | 95.72 | 103.35 | 108.52 | 126.17 | 126.29 | 118.84 | 132.34 | 129.02 | 132.40 | 142.12 | 140.98 | 148.70 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
NAREIT Equity Appartment Index
|
100.00 | 94.54 | 102.45 | 109.67 | 127.34 | 123.91 | 116.29 | 128.84 | 128.52 | 132.83 | 138.00 | 141.04 | 147.04 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
US MSCI REITS
|
100.00 | 94.66 | 99.98 | 110.09 | 117.87 | 111.51 | 105.70 | 115.97 | 114.57 | 119.63 | 125.33 | 122.80 | 128.48 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
S&P 500
|
100.00 | 96.40 | 99.39 | 105.39 | 107.05 | 98.50 | 93.35 | 99.89 | 95.38 | 103.89 | 107.84 | 107.86 | 115.06 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
NAREIT Equity REIT Index
|
100.00 | 94.79 | 99.85 | 110.02 | 117.66 | 111.13 | 105.56 | 115.61 | 114.00 | 119.10 | 124.70 | 122.25 | 127.96 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Three-year
| Period Ending | |||||||||||||||||||||||||||||||||||
| Index | 12/31/07 | 06/30/08 | 12/31/08 | 06/30/09 | 12/31/09 | 06/30/10 | 12/31/10 | ||||||||||||||||||||||||||||
|
UDR, Inc.
|
100.00 | 116.24 | 75.89 | 58.98 | 96.78 | 115.01 | 143.90 | ||||||||||||||||||||||||||||
|
NAREIT Equity Appartment Index
|
100.00 | 104.35 | 74.87 | 64.56 | 97.63 | 113.54 | 143.56 | ||||||||||||||||||||||||||||
|
US MSCI REITS
|
100.00 | 96.55 | 62.03 | 54.32 | 79.78 | 84.33 | 102.50 | ||||||||||||||||||||||||||||
|
S&P 500
|
100.00 | 88.09 | 63.00 | 65.00 | 79.68 | 74.37 | 91.68 | ||||||||||||||||||||||||||||
|
NAREIT Equity REIT Index
|
100.00 | 96.41 | 62.27 | 54.67 | 79.70 | 84.13 | 101.99 | ||||||||||||||||||||||||||||
33
Table of Contents
| Five-year | Total Return Performance |
Five-year
| Period Ending | ||||||||||||||||||||||||||||||
| Index | 12/31/05 | 12/31/06 | 12/31/07 | 12/31/08 | 12/31/09 | 12/31/10 | ||||||||||||||||||||||||
|
UDR, Inc.
|
100.00 | 141.79 | 92.70 | 70.35 | 89.71 | 133.40 | ||||||||||||||||||||||||
|
NAREIT Equity Appartment Index
|
100.00 | 139.95 | 104.36 | 78.14 | 101.89 | 149.82 | ||||||||||||||||||||||||
|
US MSCI REITS
|
100.00 | 135.92 | 113.06 | 70.13 | 90.20 | 115.89 | ||||||||||||||||||||||||
|
S&P 500
|
100.00 | 115.79 | 122.16 | 76.96 | 97.33 | 111.99 | ||||||||||||||||||||||||
|
NAREIT Equity REIT Index
|
100.00 | 135.06 | 113.87 | 70.91 | 90.76 | 116.13 | ||||||||||||||||||||||||
The performance graph, and the related chart and text, are
being furnished solely to accompany this Annual Report on
Form 10-K
pursuant to Item 201(e) of
Regulation S-K,
and are not being filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, and are not to be
incorporated by reference into any filing of ours, whether made
before or after the date hereof, regardless of any general
incorporation language in such filing.
34
Table of Contents
| Item 6. | SELECTED FINANCIAL DATA |
The following tables set forth selected consolidated financial
and other information of UDR, Inc. and of the Operating
Partnership as of and for each of the years in the five-year
period ended December 31, 2010. The table should be read in
conjunction with each of UDR, Inc.’s and the Operating
Partnership’s respective consolidated financial statements
and the notes thereto, and Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations, included elsewhere in this Report.
|
UDR, Inc.
|
||||||||||||||||||||
|
Years Ended December 31,
|
||||||||||||||||||||
|
(In thousands, except per share data and
|
||||||||||||||||||||
| apartment homes owned) | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
|
OPERATING DATA:
|
||||||||||||||||||||
|
Rental income(a)
|
$ | 632,249 | $ | 600,702 | $ | 561,073 | $ | 499,538 | $ | 465,389 | ||||||||||
|
(Loss)/income from continuing operations(a)
|
(111,313 | ) | (94,812 | ) | (63,202 | ) | 44,051 | (78,480 | ) | |||||||||||
|
Income from discontinued operations(a)
|
4,725 | 3,189 | 807,069 | 182,679 | 210,825 | |||||||||||||||
|
Consolidated net (loss)/income
|
(106,588 | ) | (91,623 | ) | 743,867 | 226,730 | 132,345 | |||||||||||||
|
Distributions to preferred stockholders
|
9,488 | 10,912 | 12,138 | 13,910 | 15,370 | |||||||||||||||
|
Net (loss)/income attributable to common
|
||||||||||||||||||||
|
stockholders
|
(112,362 | ) | (95,858 | ) | 688,708 | 198,958 | 109,738 | |||||||||||||
|
Common distributions declared
|
126,085 | 127,066 | 308,313 | 177,540 | 168,408 | |||||||||||||||
|
Special Dividend declared
|
— | — | 177,074 | — | — | |||||||||||||||
|
Earnings per share — basic and diluted:
|
||||||||||||||||||||
|
(Loss)/income from continuing operations attributable to
stockholders
|
$ | (0.71 | ) | $ | (0.66 | ) | $ | (0.91 | ) | $ | 0.12 | $ | (0.76 | ) | ||||||
|
Income from discontinued operations(a)
|
0.03 | 0.02 | 6.20 | 1.36 | 1.58 | |||||||||||||||
|
Net (loss)/income attributable to common stockholders
|
(0.68 | ) | (0.64 | ) | 5.29 | 1.48 | 0.82 | |||||||||||||
|
Weighted average number of Common Share outstanding —
basic and diluted
|
165,857 | 149,090 | 130,219 | 134,016 | 133,732 | |||||||||||||||
|
Weighted average number of Common Share outstanding, OP Units
and Common Stock equivalents
outstanding — diluted(b)
|
176,900 | 159,561 | 142,904 | 147,199 | 147,981 | |||||||||||||||
|
Common distributions declared
|
$ | 0.73 | $ | 0.85 | $ | 2.29 | $ | 1.22 | $ | 1.25 | ||||||||||
|
Balance Sheet Data:
|
||||||||||||||||||||
|
Real estate owned, at cost
|
$ | 6,881,347 | $ | 6,315,047 | $ | 5,831,753 | $ | 5,956,481 | $ | 5,820,122 | ||||||||||
|
Accumulated depreciation
|
1,638,326 | 1,351,293 | 1,078,689 | 1,371,759 | 1,253,727 | |||||||||||||||
|
Total real estate owned, net of accumulated depreciation
|
5,243,021 | 4,963,754 | 4,753,064 | 4,584,722 | 4,566,395 | |||||||||||||||
|
Total assets
|
5,529,540 | 5,132,617 | 5,143,805 | 4,800,454 | 4,675,875 | |||||||||||||||
|
Secured debt
|
1,963,670 | 1,989,434 | 1,462,471 | 1,137,936 | 1,182,919 | |||||||||||||||
|
Unsecured debt
|
1,603,834 | 1,437,155 | 1,798,662 | 2,341,895 | 2,155,866 | |||||||||||||||
|
Total debt
|
3,567,504 | 3,426,589 | 3,261,133 | 3,479,831 | 3,338,785 | |||||||||||||||
|
Stockholders’ equity
|
1,606,343 | 1,395,441 | 1,415,989 | 941,205 | 942,467 | |||||||||||||||
|
Number of common shares outstanding
|
182,496 | 155,465 | 137,423 | 133,318 | 135,029 | |||||||||||||||
|
Other Data:
|
||||||||||||||||||||
|
Total apartments owned (at end of period)
|
48,553 | 45,913 | 44,388 | 65,867 | 70,339 | |||||||||||||||
|
Weighted average number of apartment homes owned during the year
|
47,571 | 45,113 | 46,149 | 69,662 | 73,731 | |||||||||||||||
|
Cash Flow Data
|
||||||||||||||||||||
|
Cash provided by operating activities
|
$ | 214,180 | $ | 229,383 | $ | 179,754 | $ | 269,281 | $ | 237,881 | ||||||||||
|
Cash (used in)/provided by investing activities
|
(583,754 | ) | (158,045 | ) | 302,304 | (90,100 | ) | (158,241 | ) | |||||||||||
|
Cash provided by/(used in) financing activities
|
373,075 | (78,093 | ) | (472,537 | ) | (178,105 | ) | (93,040 | ) | |||||||||||
|
Funds from Operations(b)
|
||||||||||||||||||||
|
Funds from operations — basic
|
$ | 189,045 | $ | 180,858 | $ | 204,213 | $ | 238,722 | $ | 240,851 | ||||||||||
|
Funds from operations — diluted
|
192,771 | 184,582 | 207,937 | 242,446 | 244,577 | |||||||||||||||
35
Table of Contents
| (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 4, Discontinued Operations , to the Consolidated Financial Statements included in this Report. | |
| (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 produces a profit that differs from the traditional long-term investment in real estate for REITs. | ||
| For 2010, FFO includes a loss of $1.2 million due to debt extinguishment of unsecured debt, partially offset by $6.8 million of severance and restructuring expenses and $567,000 of storm related expenses. | ||
| For 2009, FFO includes a gain of $9.8 million due to the extinguishment of unsecured debt, partially offset by charges 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 of storm related expenses. | ||
| 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 charges 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. | ||
| See “Funds from Operations” below for a reconciliation of FFO and Net (loss)/income attributable to UDR, Inc. |
36
Table of Contents
|
United Dominion Realty, L.P.
|
||||||||||||||||||||
|
Years Ended December 31,
|
||||||||||||||||||||
|
(In thousands, except per OP unit data and
|
||||||||||||||||||||
| apartment homes owned) | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
|
OPERATING DATA:
|
||||||||||||||||||||
|
Rental income(a)
|
$ | 350,394 | $ | 353,056 | $ | 336,674 | $ | 297,094 | $ | 280,648 | ||||||||||
|
(Loss)/income from continuing operations(a)
|
(20,846 | ) | (5,520 | ) | 9,636 | 116,370 | 15,522 | |||||||||||||
|
Income from discontinued operations
|
152 | 1,475 | 489,272 | 78,060 | 153,745 | |||||||||||||||
|
Consolidated net (loss)/income
|
(20,694 | ) | (4,045 | ) | 498,908 | 194,430 | 169,267 | |||||||||||||
|
Net (loss)/income attributable to OP unitholders
|
(20,735 | ) | (4,176 | ) | 497,720 | 193,688 | 168,772 | |||||||||||||
|
Earnings per OP unit — basic and diluted:
|
||||||||||||||||||||
|
(Loss)/income from continuing operations(a)
|
$ | (0.12 | ) | $ | (0.03 | ) | $ | 0.06 | $ | 0.70 | $ | 0.10 | ||||||||
|
Income from discontinued operations
|
0.00 | 0.01 | 2.94 | 0.47 | 0.92 | |||||||||||||||
|
Net (loss)/income attributable to OP unitholders
|
(0.12 | ) | (0.02 | ) | 3.00 | 1.17 | 1.02 | |||||||||||||
|
Weighted average number of OP units outstanding —
basic and diluted
|
179,909 | 178,817 | 166,163 | 166,174 | 166,252 | |||||||||||||||
|
Balance Sheet Data:
|
||||||||||||||||||||
|
Real estate owned, at cost
|
$ | 3,706,184 | $ | 3,640,888 | $ | 3,569,239 | $ | 2,685,249 | $ | 2,584,495 | ||||||||||
|
Accumulated depreciation
|
884,083 | 717,892 | 552,369 | 403,092 | 348,352 | |||||||||||||||
|
Total real estate owned, net of accumulated depreciation
|
2,822,101 | 2,922,996 | 3,016,870 | 2,282,157 | 2,236,143 | |||||||||||||||
|
Total assets
|
2,861,395 | 2,961,067 | 3,254,851 | 2,909,707 | 2,961,297 | |||||||||||||||
|
Secured debt(a)
|
1,070,061 | 1,122,198 | 851,901 | 594,845 | 697,096 | |||||||||||||||
|
Total liabilities
|
1,299,772 | 1,339,319 | 1,272,101 | 920,698 | 951,735 | |||||||||||||||
|
Total partners’ capital
|
2,042,241 | 2,197,753 | 2,345,825 | 2,232,404 | 2,257,406 | |||||||||||||||
|
Receivable due from General Partner
|
492,709 | 588,185 | 375,124 | 254,256 | 257,963 | |||||||||||||||
|
Number of OP units outstanding
|
179,909 | 179,909 | 166,163 | 166,163 | 166,186 | |||||||||||||||
|
Other Data:
|
||||||||||||||||||||
|
Total apartments owned (at end of period)
|
23,351 | 23,351 | 23,351 | 36,965 | 40,653 | |||||||||||||||
|
Cash Flow Data
|
||||||||||||||||||||
|
Cash provided by operating activities
|
$ | 146,604 | $ | 157,333 | $ | 168,660 | $ | 212,727 | $ | 203,195 | ||||||||||
|
Cash (used in)/provided by investing activities
|
(59,458 | ) | 129,628 | 81,993 | 75,069 | 217,992 | ||||||||||||||
|
Cash used in financing activities
|
(86,668 | ) | (290,109 | ) | (247,150 | ) | (287,847 | ) | (422,117 | ) | ||||||||||
| (a) | Excludes amounts classified as Discontinued Operations, where applicable. |
| 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.
37
Table of Contents
The following factors, among others, could cause our future
results to differ materially from those expressed in the
forward-looking statements:
| • | general economic conditions; | |
| • | unfavorable changes in apartment market and economic conditions that could adversely affect occupancy levels and rental rates; | |
| • | the failure of acquisitions to achieve anticipated results; | |
| • | possible difficulty in selling apartment communities; | |
| • | competitive factors that may limit our ability to lease apartment homes or increase or maintain rents; | |
| • | insufficient cash flow that could affect our debt financing and create refinancing risk; | |
| • | failure to generate sufficient revenue, which could impair our debt service payments and distributions to stockholders; | |
| • | development and construction risks that may impact our profitability; | |
| • | potential damage from natural disasters, including hurricanes and other weather-related events, which could result in substantial costs to us; | |
| • | risks from extraordinary losses for which we may not have insurance or adequate reserves; | |
| • | uninsured losses due to insurance deductibles, self-insurance retention, uninsured claims or casualties, or losses in excess of applicable coverage; | |
| • | delays in completing developments and lease-ups on schedule; | |
| • | our failure to succeed in new markets; | |
| • | changing interest rates, which could increase interest costs and affect the market price of our securities; | |
| • | potential liability for environmental contamination, which could result in substantial costs to us; | |
| • | the imposition of federal taxes if we fail to qualify as a REIT under the Code in any taxable year; | |
| • | 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.
Although we believe that the assumptions underlying the
forward-looking statements contained herein are reasonable, any
of the assumptions could be inaccurate, and therefore such
statements included in this Report may not prove to be accurate.
In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by
us or any other person that the results or conditions described
in such statements or our objectives and plans will be achieved.
Forward-looking statements and such risks, uncertainties and
other factors speak only as of the date of this report, and we
expressly disclaim any obligation or undertaking to update or
revise any forward-looking statement contained herein, to
reflect any change in our expectations with regard thereto, or
any other change in events, conditions or circumstances on which
any such statement is based, except to the extent otherwise
required by law.
The following discussion should be read in conjunction with the
consolidated financial statements appearing elsewhere herein and
is based primarily on the consolidated financial statements and
the
38
Table of Contents
accompanying notes for the years ended December 31, 2010,
2009 and 2008 of each of UDR, Inc. and United Domination Realty,
L.P.
UDR,
Inc.:
Business
Overview
We are a self administered real estate investment trust, or
REIT, that owns, acquires, renovates, develops, redevelops, and
manages apartment communities in select markets throughout the
United States. 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.
At December 31, 2010, our consolidated real estate
portfolio included 172 communities located in 23 markets with a
total of 48,553 completed apartment homes and our total real
estate portfolio, inclusive of our unconsolidated communities,
included an additional 37 communities with 9,891 completed
apartment homes.
39
Table of Contents
The following table summarizes our market information by major
geographic markets as of December 31, 2010.
| As of December 31, 2010 | Year Ended December 31, 2010 | |||||||||||||||||||||||||||
|
Percentage
|
Total
|
|||||||||||||||||||||||||||
|
Number of
|
Number of
|
of Total
|
Carrying
|
Average
|
Total Income
|
Net Operating
|
||||||||||||||||||||||
|
Apartment
|
Apartment
|
Carrying
|
Value
|
Physical
|
per Occupied
|
Income(a)
|
||||||||||||||||||||||
| Communities | Homes | Value | (In thousands) | Occupancy | Home | (In thousands) | ||||||||||||||||||||||
|
SAME COMMUNITIES
|
||||||||||||||||||||||||||||
|
WESTERN REGION
|
||||||||||||||||||||||||||||
|
Orange County, CA
|
13 | 4,214 | 11.4 | % | $ | 785,358 | 95.4 | % | $ | 1,483 | $ | 50,006 | ||||||||||||||||
|
San Francisco, CA
|
9 | 1,727 | 5.9 | % | 404,890 | 96.9 | % | 1,910 | 26,840 | |||||||||||||||||||
|
Monterey Peninsula, CA
|
7 | 1,565 | 2.2 | % | 152,645 | 94.1 | % | 1,066 | 12,820 | |||||||||||||||||||
|
Los Angeles, CA
|
7 | 1,380 | 4.2 | % | 289,501 | 95.9 | % | 1,535 | 16,066 | |||||||||||||||||||
|
San Diego, CA
|
5 | 1,123 | 2.5 | % | 174,659 | 95.3 | % | 1,332 | 11,735 | |||||||||||||||||||
|
Seattle, WA
|
9 | 1,725 | 4.4 | % | 304,462 | 96.4 | % | 1,173 | 15,841 | |||||||||||||||||||
|
Inland Empire, CA
|
3 | 1,074 | 2.2 | % | 150,275 | 94.9 | % | 1,220 | 9,909 | |||||||||||||||||||
|
Sacramento, CA
|
2 | 914 | 1.0 | % | 68,061 | 93.5 | % | 867 | 5,857 | |||||||||||||||||||
|
Portland, OR
|
3 | 716 | 1.0 | % | 69,543 | 95.9 | % | 946 | 5,211 | |||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||
|
Metropolitan DC
|
11 | 3,765 | 9.8 | % | 672,228 | 97.0 | % | 1,538 | 45,066 | |||||||||||||||||||
|
Richmond, VA
|
6 | 2,211 | 2.7 | % | 187,044 | 95.9 | % | 1,012 | 18,182 | |||||||||||||||||||
|
Baltimore, MD
|
10 | 2,121 | 3.7 | % | 252,236 | 96.7 | % | 1,269 | 21,895 | |||||||||||||||||||
|
Norfolk VA
|
6 | 1,438 | 1.2 | % | 84,400 | 95.5 | % | 958 | 10,565 | |||||||||||||||||||
|
Other Mid-Atlantic
|
5 | 1,132 | 1.1 | % | 78,761 | 96.2 | % | 1,017 | 9,201 | |||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||
|
Tampa, FL
|
10 | 3,278 | 3.7 | % | 254,713 | 95.4 | % | 919 | 21,275 | |||||||||||||||||||
|
Orlando, FL
|
10 | 2,796 | 3.2 | % | 220,743 | 95.2 | % | 896 | 18,562 | |||||||||||||||||||
|
Nashville, TN
|
8 | 2,260 | 2.6 | % | 180,413 | 96.5 | % | 847 | 14,170 | |||||||||||||||||||
|
Jacksonville, FL
|
5 | 1,857 | 2.3 | % | 156,540 | 95.0 | % | 818 | 10,654 | |||||||||||||||||||
|
Other Florida
|
4 | 1,184 | 1.6 | % | 112,072 | 94.2 | % | 978 | 7,936 | |||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||
|
Dallas, TX
|
9 | 2,595 | 3.9 | % | 269,684 | 95.7 | % | 949 | 16,101 | |||||||||||||||||||
|
Phoenix, AZ
|
3 | 914 | 1.0 | % | 71,646 | 95.3 | % | 855 | 5,620 | |||||||||||||||||||
|
Austin, TX
|
1 | 390 | 0.9 | % | 60,181 | 95.8 | % | 1,115 | 2,684 | |||||||||||||||||||
|
Houston, TX
|
1 | 320 | 0.4 | % | 22,226 | 93.1 | % | 893 | 1,764 | |||||||||||||||||||
|
Total/Average Same Communities
|
147 | 40,699 | 72.9 | % | 5,022,281 | 95.7 | % | $ | 1,155 | $ | 357,960 | |||||||||||||||||
|
Non Matures, Commercial Properties & Other
|
25 | 7,854 | 26.7 | % | 1,761,154 | |||||||||||||||||||||||
|
Total Real Estate Held for Investment
|
172 | 48,553 | 99.6 | % | 6,783,435 | |||||||||||||||||||||||
|
Real Estate Under Development(b)
|
— | — | 0.4 | % | 97,912 | |||||||||||||||||||||||
|
Total Real Estate Owned
|
172 | 48,553 | 100.0 | % | 6,881,347 | |||||||||||||||||||||||
|
Total Accumulated Depreciation
|
(1,638,326 | ) | ||||||||||||||||||||||||||
|
Total Real Estate Owned, Net of Accumulated Depreciation
|
$ | 5,243,021 | ||||||||||||||||||||||||||
| (a) | Total Income per Occupied Home represents total revenues divided by the product of occupancy and the number of mature apartment homes. |
| (b) | The Company is currently developing four wholly-owned communities with 930 apartment homes, none of which have been completed. |
We report in two segments: Same Communities and Non-Mature/Other
Communities. Our Same Communities segment includes those
communities acquired, developed, and stabilized prior to
January 1, 2009, and held as of December 31, 2010.
These communities were owned and had stabilized occupancy and
40
Table of Contents
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. Our Non-Mature/Other Communities segment includes those
communities that were acquired or developed in 2008, 2009 or
2010, 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.
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 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 cash flow 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 Securities
and Exchange Commission, or “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 13, 2010, the Company entered into an
agreement to sell 16,000,000 shares of its Common Stock at
a price of $20.35 per share in an underwritten public offering.
The Company granted the underwriters a
30-day
option to purchase up to an additional 2,400,000 shares of
Common Stock to cover overallotments. We sold
18,400,000 shares of Common Stock in this offering, with
aggregate gross proceeds of approximately $374.4 million at
a price per share of $20.35. Aggregate net proceeds from the
offering, after deducting related expenses were approximately
$359.2 million.
On September 15, 2009, the Company entered into an equity
distribution agreement under which the Company may offer and
sell up to 15,000,000 shares of its Common Stock over time
to or through its sales agents. During the year ended
December 31, 2010, we sold 6,144,367 shares of Common
Stock through this program for aggregate gross proceeds of
approximately $110.8 million at a weighted average price
per share of $18.04. Aggregate net proceeds from such sales,
after deducting related expenses, including commissions paid to
the sales agents of approximately $2.2 million, were
approximately $108.6 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.
In February 2010, the Company issued $150 million of
5.25% senior unsecured medium-term notes under the Amended
and Restated Distribution Agreement. These notes were priced at
99.46% of the principal amount at issuance and had a discount of
$519,000 at December 31, 2010.
41
Table of Contents
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 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 2011, we have approximately $63.4 million of secured
debt maturing, inclusive of principal amortization and net of
extension rights of $188.1 million, and $95.8 million
of unsecured debt maturing. We anticipate repaying that debt
with proceeds from debt and equity offerings and by exercising
extension rights with respect to the 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.
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 2010, $47.1 million or $1,047 per apartment home was
spent on recurring capital expenditures. These include revenue
enhancing capital expenditures, exterior/interior upgrades,
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. In addition, major
renovations totaled $30.8 million for the year ended
December 31, 2010. Total capital expenditures, which in
aggregate include recurring capital expenditures and major
renovations, of $77.9 million or $1,732 per home was spent
on all of our communities, excluding development and commercial
properties, for the year ended December 31, 2010.
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 | ||||||||||||||||||||||||
| 2010 | 2009 | % Change | 2010 | 2009 | % Change | |||||||||||||||||||
|
Revenue enhancing improvements
|
$ | 15,043 | $ | 23,626 | −36.3 | % | $ | 334 | $ | 543 | −38.5 | % | ||||||||||||
|
Turnover capital expenditures
|
9,528 | 9,401 | 1.4 | % | 212 | 216 | −1.9 | % | ||||||||||||||||
|
Asset preservation expenditures
|
22,538 | 19,912 | 13.2 | % | 501 | 458 | 9.4 | % | ||||||||||||||||
|
Total recurring capital expenditures
|
47,109 | 52,939 | −11.0 | % | 1,047 | 1,217 | −14.0 | % | ||||||||||||||||
|
Major renovations
|
30,816 | 33,466 | −7.9 | % | 685 | 769 | −10.9 | % | ||||||||||||||||
|
Total capital expenditures
|
$ | 77,925 | $ | 86,405 | −9.8 | % | $ | 1,732 | $ | 1,986 | −12.8 | % | ||||||||||||
|
Repair and maintenance expense
|
$ | 33,224 | $ | 30,450 | 9.1 | % | $ | 738 | $ | 700 | 5.4 | % | ||||||||||||
|
Average stabilized home count
|
44,999 | 43,505 | ||||||||||||||||||||||
42
Table of Contents
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 2011 are currently
expected to be approximately $1,050 per apartment home.
Investment
in Unconsolidated Joint Ventures
We continually evaluate our investments in unconsolidated joint
ventures when events or changes in circumstances indicate that
there may be an
other-than-temporary
decline in value. We consider various factors to determine if a
decrease in the value of the investment is
other-than-temporary.
These factors include, but are not limited to, age of the
venture, our intent and ability to retain our investment in the
entity, the financial condition and long-term prospects of the
entity, and the relationships with the other joint venture
partners and its lenders. The amount of loss recognized is the
excess of the investment’s carrying amount over its
estimated fair value. If we believe that the decline in fair
value is temporary, no impairment is recorded. The
aforementioned factors are taken as a whole by management in
determining the valuation of our investment property. Should the
actual results differ from management’s judgment, the
valuation could be negatively affected and may result in a
negative impact to our Consolidated Financial Statements.
Impairment
of Long-Lived Assets
We record impairment losses on long-lived assets used in
operations when events and circumstances indicate that the
assets might be impaired and the undiscounted cash flows
estimated to be generated by the future operation and
disposition of those assets are less than the net book value of
those assets. Our cash flow estimates are based upon historical
results adjusted to reflect our best estimate of future market
and operating conditions and our estimated holding periods. The
net book value of impaired assets is reduced to fair market
value. Our estimates of fair market value represent our best
estimate based 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. The
purchase price is allocated based on the 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, 2010 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.
43
Table of Contents
The following discussion explains the changes in net cash
provided by operating activities and net cash provided by/(used
in) investing and net cash (used in)/provided by financing
activities that are presented in our Consolidated Statements of
Cash Flows.
Operating
Activities
For the year ended December 31, 2010, our net cash flow
provided by operating activities was $214.2 million
compared to $229.4 million for 2009. The decrease in cash
flow from operating activities is primarily due to changes in
operating assets, which include an increase in lease tangibles
related to the acquisition of five operating communities in
2010, and operating liabilities, which include accrued
restructuring and severance charges. This decrease is partially
offset by an increase in property net operating income.
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.
Investing
Activities
For the year ended December 31, 2010, net cash used in
investing activities was $583.8 million compared to net
cash used in investing activities of $158 million for 2009.
The change relates to acquisitions of real estate assets and
investments in unconsolidated joint ventures, which are
discussed in further detail throughout this Report.
For the year ended December 31, 2009, net cash used in
investing activities was $158 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.
Acquisitions
For the year ended December 31, 2010, the Company acquired
five apartment communities located in Orange County, California;
Baltimore, Maryland; Los Angeles, California; and Boston,
Massachusetts for a total gross purchase price of
$412 million. During the same period, the Company also
acquired land located in San Francisco, California for a
gross purchase price of $23.6 million.
The following table summarizes UDR’s real estate community
acquisitions for the year ended December 31, 2010
(dollar amounts in thousands)
:
|
Apartment
|
Purchase
|
|||||||||||
| Property Name | Market | Acquisition Date | Homes | Price(a) | ||||||||
|
1818 Platinum Triangle
|
Orange County, CA | August 2010 | 265 | $ | 70,500 | |||||||
|
Domain Brewers Hill
|
Baltimore, MD | August 2010 | 180 | 46,000 | ||||||||
|
Garrison Square
|
Boston, MA | September 2010 | 160 | 98,000 | ||||||||
|
Marina Pointe
|
Los Angeles, CA | September 2010 | 583 | 157,500 | ||||||||
|
Ridge at Blue Hills
|
Boston, MA | September 2010 | 186 | 40,000 | ||||||||
| 1,374 | $ | 412,000 | ||||||||||
| (a) | The purchase price is the contractual amount paid by UDR to the third party and does not include any costs that the Company incurred in the pursuit of the property. |
Our long-term strategic plan is to continue achieving greater
operating efficiencies by investing in fewer, more concentrated
markets. As a result, we have been seeking to expand our
interests in communities located in California, Boston,
Metropolitan D.C., Oregon and Washington state markets over the
past years. Prospectively, we plan to channel new investments
into those markets we believe will provide the best
44
Table of Contents
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.
For the year ended December 31, 2009, we acquired one
community in Dallas, Texas with 289 apartment homes for
$28.5 million.
Real
Estate Under Development
At December 31, 2010, our development pipeline for
wholly-owned communities totaled 930 apartment homes with a
budget of $338.9 million in which we have a carrying value
of $97.9 million. We anticipate the completion of these
communities from the first quarter of 2012 through the third
quarter of 2013.
For the year ended December 31, 2010, we invested
approximately $92.1 million in development projects, a
decrease of $91.0 million from our 2009 level of
$183.2 million. In 2010, we completed development on four
wholly-owned communities with 1,575 apartment homes that have a
carrying value of $259.7 million and one community held by
a consolidated joint venture with 274 apartment homes and a
carrying value of $122.3 million.
Consolidated
Joint Ventures
UDR is a partner with an unaffiliated third party in a joint
venture (“Elements Too”) which owns and operates a 274
home apartment community in the central business district of
Bellevue, Washington. Construction began in the fourth quarter
of 2006 and was completed in the first quarter of 2010. At
closing, 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 resulting in the consolidation of the joint
venture. As a result of UDR’s appointment as managing
member, the Company was required to consolidate the joint
venture. In March 2010, the Company paid $3.2 million to
acquire our partner’s 49% interest in the joint venture. At
the closing of the agreement and at December 31, 2010, the
Company held a 98% interest in Elements Too.
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 $7.7 million. 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 resulting in
the consolidation of the joint venture. In March 2010, the
Company paid $7.7 million and acquired our partner’s
49% interest in the joint venture. At the closing of the
agreement and December 31, 2010, the Company held a 98%
interest in 989 Elements.
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. On
December 30, 2009, UDR entered into an agreement with our
partner to purchase its 49% interest in Bellevue for
$5.2 million. 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 resulting in
the consolidation of the joint venture at fair value. In March
2010, the Company paid $5.2 million and acquired our
partner’s 49% interest in the joint venture. At the closing
of the agreement and at December 31, 2010, the Company held
a 98% interest in Bellevue.
Prior to their consolidation in 2009, we evaluated our
investments in these joint ventures when events or changes in
circumstances indicate that there may be an
other-than-temporary
decline in value. We considered
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Table of Contents
various factors to determine if a decrease in value of each of
these investments is
other-than-temporary.
In 2009, we recognized a non-cash charge of $16 million
representing the
other-than-temporary
decline in fair values below the carrying values of two of the
Company’s Bellevue, Washington joint ventures.
For additional information regarding these joint ventures, see
Note 5,
Joint Ventures
, in the Consolidated
Financial Statements included in this Report.
Unconsolidated
Joint Ventures
In November 2010, the Company acquired The Hanover
Company’s (“Hanover”) partnership interests in
the Hanover/MetLife Master Limited Partnership (the
“UDR/MetLife Partnership”). The UDR/MetLife
Partnership owns a portfolio of 26 operating communities
containing 5,748 homes and 11 land parcels with the
potential to develop approximately 2,300 additional homes. Under
the terms of the UDR/MetLife Partnership, UDR will act as the
general partner and earn fees for property and asset management
and financing transactions. UDR acquired ownership interests of
12.27% in the operating communities and 4.14% in the land
parcels for $100.8 million. The initial investment of
$100.8 million consists of $71.8 million in cash,
which includes associated transaction costs, and a
$30 million payable (includes discount of $1 million)
to Hanover. UDR agreed to pay the $30 million balance to
Hanover in two interest free installments in the amounts of
$20 million and $10 million on the first and second
anniversaries of the closing, respectively. At December 31,
2010, the Company’s investment in the Partnership was
$122.2 million.
In October 2010, the Company entered into a venture with an
affiliate of Hanover to develop a 240 apartment home community
in the metropolitan Boston, Massachusetts area. At the closing
and at December 31, 2010, UDR owned a noncontrolling
interest of 95% in the joint venture. Our initial investment was
$10 million and our investment at December 31, 2010
was $10.3 million.
During 2009, UDR and an unaffiliated third party formed a joint
venture for the investment of up to $450 million in
multifamily properties located in key, high barrier to entry
markets. The partners will contribute equity of
$180 million of which the Company’s maximum equity
will be 30% or $54.0 million when fully invested. During
2010, the joint venture acquired its first property (151 homes)
located in Metropolitan Washington D.C. for $43.1 million.
At closing and at December 31, 2010, the Company owned 30%.
Our investment at December 31, 2010 and 2009 was
$5.2 million and $242,000, respectively.
In November 2007, UDR and an unaffiliated third party formed a
joint venture which owns and operates various properties located
in Texas. 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, 2010 and 2009 was $10.3 million and
$13.9 million, respectively.
Disposition
of Investments
In 2010, UDR sold one 149 apartment home community. UDR
recognized an after-tax gain for financial reporting purposes of
$4 million on this sale that is included in discontinued
operations. Proceeds from the sale were used primarily to reduce
debt.
During the year ended December 31, 2009, we did not dispose
of any communities.
We plan to continue to pursue our strategy of exiting markets
where long-term growth prospects are limited and redeploying
capital into markets we believe will provide the best investment
returns.
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 received
$1.5 billion in cash and a note in the principal amount of
$200 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
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Table of Contents
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 apartment homes 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 in 2009.
Financing
Activities
For the year ended December 31, 2010, our net cash provided
by/(used in) financing activities was $373.1 million
compared to ($78.1 million) for the comparable period of
2009.
The following significant financing activity occurred during the
year ended December 31, 2010:
| • | repaid $187.3 million of secured debt and $50.0 million of maturing medium-term unsecured notes. The $187.3 million of secured debt includes $70.5 million for a maturing construction loan held by one of our consolidated joint ventures, repayment of $52.7 million of credit facilities and $64.1 million of mortgage payments; | |
| • | repurchased unsecured debt with a notional amount of $29.2 million for $29.4 million resulting in a loss on extinguishment of $1 million, which includes the write off of related deferred finance charges. The unsecured debt repurchased by the Company matures in 2011. As a result of this repurchase, the loss is represented as an addition to interest expense on the Consolidated Statement of Operations; | |
| • | net repayments of $157.6 million were applied toward our $600 million revolving credit facility; | |
| • | received proceeds of $70.2 million from secured debt financings. The $70.2 million includes $37.8 million in variable rate mortgages, $21.1 million in fixed rate mortgages, and $11.3 million in credit facilities; | |
| • | closed on a $250 million, five-year unsecured term loan facility of which $100 million was swapped into a fixed rate of 3.76% and $150 million has rate of LIBOR plus 200 basis points; | |
| • | in February 2010, we issued $150 million of 5.25% senior unsecured medium-term notes under our Amended and Restated Distribution Agreement with respect to the issue and sale by us from time to time of our Medium-Term Notes, Series A Due Nine Months or More From Date of Issue. These notes were priced at 99.46% of the principal amount at issuance and had a discount of $519,000 at December 31, 2010; | |
| • | we sold 6,144,367 shares of Common Stock for aggregate gross proceeds of approximately $110.8 million at a weighted average price per share of $18.04 through our “At the Market” equity distribution program, which we initiated in 2009, pursuant to which we may sell up to 15,000,000 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. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $2.2 million, were approximately $108.6 million; | |
| • | initiated an underwritten public offering to sell 16,000,000 shares of our common stock at a price of $20.35 per share. We granted the underwriters a 30-day option to purchase up to an additional 2,400,000 shares of common stock to cover overallotments, if any. We sold 18,400,000 shares of common stock in this offering for aggregate gross proceeds of approximately $374.4 million at a price |
47
Table of Contents
| of $20.35 per share. Aggregate net proceeds from the offering, after deducting related expenses were approximately $359.2 million; and |
| • | repurchased 27,400 shares of our 6.75% Series G Cumulative Redeemable Preferred Stock for $637,000, less than their liquidation value of $685,000. |
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. The
decrease in financing activities was due to a net issuance of
debt in 2009 versus net payments in 2008 and the repurchase of
shares of our Common Stock in 2008. These cash outflows were
offset by the issuance of common equity through a public
offering.
Credit
Facilities
As of December 31, 2010 and 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 $897.3 million
of the funded balance fixed at a weighted average interest rate
of 5.3% and the remaining balance on these facilities is
currently at a weighted average variable rate of 1.7% as of
December 31, 2010. We had $950.0 million of the funded
balance fixed at a weighted average interest rate of 5.4% and
the remaining balance on these facilities was at a weighted
average variable rate of 1.7% as of December 31, 2009.
We have a $600 million unsecured revolving credit facility
that matures on July 26, 2012. Under certain circumstances,
we may increase the $600 million credit facility to
$750 million. Based on our current credit rating, the
$600 million credit facility carries an interest rate equal
to LIBOR plus 47.5 basis points. 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. As of December 31, 2010, we had
$31.8 million of borrowings outstanding under the credit
facility leaving $568.2 million of unused capacity
(excluding $4.8 million of letters of credit at
December 31, 2010). As of December 31, 2009, we had
$189.3 million of borrowings outstanding under the credit
facility.
The Fannie Mae credit facilities and the bank revolving credit
facility are subject to customary financial covenants and
limitations. As of December 31, 2010, we were in compliance
with all financial covenants under these credit facilities.
Interest
Rate Risk
We are exposed to interest rate risk associated with variable
rate notes payable and maturing debt that has to be refinanced.
We do not hold financial instruments for trading or other
speculative purposes, but rather issue these financial
instruments to finance our portfolio of real estate assets.
Interest rate sensitivity is the relationship between changes in
market interest rates and the fair value of market rate
sensitive assets and liabilities. Our earnings are affected as
changes in short-term interest rates impact our cost of variable
rate debt and maturing fixed rate debt. We had $1 billion
in variable rate debt that is not subject to interest rate swap
contracts as of December 31, 2010. If market interest rates
for variable rate debt increased by 100 basis points, our
interest expense would increase by $9.3 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.
48
Table of Contents
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 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.
49
Table of Contents
The following table outlines our FFO calculation and
reconciliation to GAAP for the three years ended
December 31, 2010
(dollars in thousands):
| For the Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Net (loss)/income attributable to UDR, Inc.
|
$ | (102,899 | ) | $ | (87,532 | ) | $ | 697,790 | ||||
|
Adjustments:
|
||||||||||||
|
Distributions to preferred stockholders
|
(9,488 | ) | (10,912 | ) | (12,138 | ) | ||||||
|
Real estate depreciation and amortization, including
discontinued operations
|
303,446 | 278,391 | 251,984 | |||||||||
|
Net loss attributable to redeemable non-controlling interests in
OP
|
(3,835 | ) | (4,282 | ) | 45,875 | |||||||
|
Net income attributable to non-controlling interests
|
146 | 191 | 202 | |||||||||
|
Real estate depreciation and amortization on unconsolidated
joint ventures
|
5,698 | 4,759 | 4,502 | |||||||||
|
Net gains on the sale of depreciable property in discontinued
operations, excluding
RE
3
|
(4,048 | ) | (2,343 | ) | (787,058 | ) | ||||||
|
Discount on preferred stock repurchases, net
|
25 | 2,586 | 3,056 | |||||||||
|
Funds from operations — basic
|
$ | 189,045 | $ | 180,858 | $ | 204,213 | ||||||
|
Distributions to preferred stockholders —
Series E (Convertible)
|
3,726 | 3,724 | 3,724 | |||||||||
|
Funds from operations — diluted
|
$ | 192,771 | $ | 184,582 | $ | 207,937 | ||||||
|
Weighted average number of common shares and OP Units
outstanding — basic
|
171,569 | 155,796 | 138,971 | |||||||||
|
Weighted average number of common shares and OP Units
outstanding — diluted
|
176,900 | 159,561 | 142,904 | |||||||||
In the computation of diluted FFO, OP Units, unvested
restricted stock, stock options, and the shares of Series E
Cumulative Convertible Preferred Stock are dilutive; therefore,
they are included in the diluted share count. The effect of the
conversion of the Series E Out-Performance Partnership
Shares (the Series E Out-Performance Program terminated on
December 31, 2009) are anti-dilutive for the years
ended December 31, 2009 and 2008 and are excluded from 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 produces a profit that differs from the traditional
long-term investment in real estate for REITs.
50
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, 2010
(shares in thousands):
| For the Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Weighted average number of Common Shares and OP Units
|
||||||||||||
|
outstanding basic
|
171,569 | 155,796 | 138,971 | |||||||||
|
Weighted average number of OP Units outstanding
|
(5,712 | ) | (6,706 | ) | (8,752 | ) | ||||||
|
Weighted average number of Common Shares outstanding - basic per
the Consolidated Statement of Operations
|
165,857 | 149,090 | 130,219 | |||||||||
|
Weighted average number of Common Shares, OP Units, and common
stock equivalents outstanding — diluted
|
176,900 | 159,561 | 142,904 | |||||||||
|
Weighted average number of OP Units outstanding
|
(5,712 | ) | (6,706 | ) | (8,752 | ) | ||||||
|
Weighted average incremental shares from assumed conversion of
stock options
|
(1,637 | ) | (567 | ) | (412 | ) | ||||||
|
Weighted average incremental shares from unvested restricted
stock
|
(658 | ) | (162 | ) | (717 | ) | ||||||
|
Weighted average number of Series E preferred shares
outstanding
|
(3,036 | ) | (3,036 | ) | (2,804 | ) | ||||||
|
Weighted average number of Common Shares outstanding —
diluted per the Consolidated Statements of Operations
|
165,857 | 149,090 | 130,219 | |||||||||
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, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Net cash provided by operating activities
|
$ | 214,180 | $ | 229,383 | $ | 179,754 | ||||||
|
Net cash (used in)/provided by investing activities
|
(583,754 | ) | (158,045 | ) | 302,304 | |||||||
|
Net cash provided by/(used in) financing activities
|
373,075 | (78,093 | ) | (472,537 | ) | |||||||
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
2010
-vs-2009
Net loss attributable to common stockholders was
$112.4 million ($0.68 per diluted share) for the year ended
December 31, 2010 as compared to net loss attributable to
common stockholders of $95.9 million ($0.64 per diluted
share) for the comparable period in the prior year. The increase
in net loss attributable to common stockholders for the year
ended December 31, 2010 resulted primarily from the
following items, all of which are discussed in further detail
elsewhere within this Report:
| • | an increase in depreciation expense primarily due to the Company’s acquisition of five apartment communities in the third quarter of 2010, consolidation of certain joint venture assets in the fourth quarter of 2009, and the completion of redevelopment and development communities in 2009 and 2010; | |
| • | an increase in interest expense primarily due to debt extinguishment gain from the repurchase of unsecured debt securities in 2009; and |
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Table of Contents
| • | an increase in severance costs and restructuring charges in the fourth quarter of 2010 due to the consolidation of corporate operations and the centralization of job functions from its Richmond, Virginia office to its Highlands Ranch, Colorado headquarters, in addition to severance costs related to the retirement of an executive officer of the Company. |
The increase to our net loss attributable to common stockholders
was partially offset by:
| • | an increase in our net operating income (“NOI”); and | |
| • | a decrease in our loss from unconsolidated entities primarily due to the recognition of a $16 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 year ended December 31, 2009. |
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 $3.2 million and $807.1 million for the years ended December 31, 2009 and 2008, respectively; | |
| • | an increase in our loss from unconsolidated entities, primarily due to the recognition of a $16 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 year ended December 31, 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 redeemable 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.
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, | |||||||||||||||||||||||
| 2010 | 2009 | % Change | 2009 | 2008 | % Change | |||||||||||||||||||
|
Property rental income
|
$ | 624,981 | $ | 594,359 | 5.2 | % | $ | 594,359 | $ | 599,343 | −0.8 | % | ||||||||||||
|
Property operating expense(a)
|
(220,279 | ) | (202,773 | ) | 8.6 | % | (202,773 | ) | (207,563 | ) | −2.3 | % | ||||||||||||
|
Property net operating income
|
$ | 404,702 | $ | 391,586 | 3.3 | % | $ | 391,586 | $ | 391,780 | 0.0 | % | ||||||||||||
| (a) | Excludes depreciation, amortization, and property management expenses. |
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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, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Property net operating income
|
$ | 404,702 | $ | 391,586 | $ | 391,780 | ||||||
|
Other net operating income
|
6,362 | 6,874 | 5,206 | |||||||||
|
Non-property income
|
14,347 | 12,362 | 27,190 | |||||||||
|
Real estate depreciation and amortization
|
(303,446 | ) | (278,391 | ) | (251,984 | ) | ||||||
|
Interest, net
|
(150,796 | ) | (142,152 | ) | (145,630 | ) | ||||||
|
General and administrative and property management
|
(60,142 | ) | (55,925 | ) | (55,359 | ) | ||||||
|
Severance costs and other restructuring charges
|
(6,803 | ) | — | (653 | ) | |||||||
|
Other depreciation and amortization
|
(4,843 | ) | (5,161 | ) | (4,866 | ) | ||||||
|
Loss from unconsolidated entities
|
(4,204 | ) | (18,665 | ) | (3,612 | ) | ||||||
|
Other operating expenses
|
(5,848 | ) | (6,487 | ) | (4,569 | ) | ||||||
|
Redeemable non-controlling interests in OP
|
3,835 | 4,282 | (45,875 | ) | ||||||||
|
Non-controlling interests
|
(146 | ) | (191 | ) | (202 | ) | ||||||
|
Gain on consolidation of joint ventures
|
— | 1,912 | — | |||||||||
|
Net gain on the sale of depreciable property
|
4,083 | 2,424 | 786,364 | |||||||||
|
Net (loss)/income attributable to UDR, Inc.
|
$ | (102,899 | ) | $ | (87,532 | ) | $ | 697,790 | ||||
Same
Communities
2010-vs.-2009
Our same store communities (those acquired, developed, and
stabilized prior to January 1, 2009 and held on
December 31, 2010) consisted of 40,699 apartment homes
and provided $358.0 million or 88% of our total property
NOI for the year ended December 31, 2010.
NOI for our same community properties decreased 1.7% or
$6.2 million for the year ended December 31, 2010
compared to the same period in 2009. The decrease in property
NOI was primarily attributable to a 0.9% or $5.0 million
decrease in property rental income and a 0.6% or
$1.1 million increase in operating expenses. The decrease
in revenues was primarily driven by a 2.4% or $12.8 million
decrease in rental rates which was offset by a 57.7% or
$2.7 million decrease in concessions, an 8.3% or
$1.8 million decrease in vacancy loss and a 12.4% or
$2.8 million increase in reimbursement income. Physical
occupancy increased 0.4% to 95.7% and total income per occupied
home decreased $16 to $1,155.
The increase in property operating expenses was primarily driven
by a 3.3% or $935,000 increase in utilities expense, a 3.8% or
$1.1 million increase in repairs and maintenance, and a
2.6% or $1.2 million increase in personnel costs, which was
partially offset by a 3.2% or $1.8 million decrease in real
estate taxes.
As a result of the percentage changes in property rental income
and property operating expenses, the operating margin (property
net operating income divided by property rental income)
decreased to 66.3% as compared to 66.8% in the comparable period
in the prior year.
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 $296.4 million or 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
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Table of Contents
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 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.
Non-Mature
Communities
2010-vs.-2009
The remaining $46.7 million and $27.5 million of our
NOI during the year ended December 31, 2010 and 2009,
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 include communities
developed or acquired, redevelopment properties, sold
properties, properties classified as real estate held for
disposition, joint venture properties, properties managed by
third-parties,
and the non-apartment components of mixed use properties, and
condominium properties. For the year ended December 31,
2010, we recognized NOI for our developments of
$15.7 million, acquired communities of $12.7 million,
redeveloped properties of $12.3 million, and sold
properties of $980,000. For the year ended December 31,
2009, we recognized NOI for our developments of
$6.3 million, acquired communities of $2.8 million,
redeveloped properties of $11.5 million, and sold
properties of $1.4 million.
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 include communities
developed or acquired, redevelopment properties, sold
properties, properties classified as real estate held for
disposition, joint venture properties, properties managed by
third-parties,
and the non-apartment components of mixed use properties, 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.
Other
Income
For the year ended December 31, 2010, significant amounts
reflected in other income include: a gain of $4.7 million
from the sale of marketable securities, a reversal of certain
tax accruals of $2.1 million, and $3.2 million of fees
earned for both recurring and non-recurring items related to the
Company’s joint ventures. For the years ended
December 31, 2010 and 2009, other income also included
interest income and discount amortization from an interest in a
convertible debt security of $2.9 million and
$3.6 million, respectively. For the year ended
December 31, 2009, other income also included
$5.1 million of 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.
Tax
Benefit/Expense of 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
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Table of Contents
tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities from a change in tax rate
is recognized in earnings in the period of the enactment date.
For the year ended December 31, 2010, we recognized a net
benefit of $2.5 million from the write-off of income taxes
payable (net of income taxes paid). For the year ended
December 31, 2009, we recognized tax expense of $311,000 to
the extent of cash taxes paid. For the year ended
December 31, 2008, we recognized a benefit of
$9.7 million in continuing operations due to the results of
operations and temporary differences associated with the TRS.
Tax benefits and expenses recognized during the years are
included in “General and administrative” in the
Consolidated Statements of Operations included in this Report.
Other
Operating Expenses
Other operating expenses decreased 9.9% or $639,000 for the year
ended December 31, 2010 from the comparable period in 2009.
The decrease was due to a number of factors, none of which are
significant. For the year ended December 31, 2009, other
operating expenses increased 42.2% or $1.9 million compared
to the comparable period in 2008. The increase is 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, 2010, real estate
depreciation and amortization on both continuing and
discontinued operations increased 9.0% or $25.1 million as
compared to the comparable period in 2009. The increase in
depreciation and amortization for the year ended
December 31, 2010 is primarily the result of the
Company’s acquisition of five communities with 1,374
apartment homes during 2010, development completions during 2010
and 2009, 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, 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.
Interest
Expense
For the year ended December 31, 2010, interest expense on
both continuing and discontinued operations increased 6.1% or
$8.6 million as compared to 2009. This increase is
primarily due to the Company’s debt repurchase activity
during 2010 and 2009. During the year ended December 31,
2010, we recognized a loss of $1.0 million as a result of
repurchasing some of our 3.625% convertible Senior Notes in the
open market as compared to our recognition of $9.8 million
in gains resulting from the repurchase of unsecured debt
securities with a notional amount of $238.9 million in the
open market in 2009. The decrease in our gain from debt
repurchase activity was partially offset by a decrease of
$3.8 million of expenses related to the tender of
$37.5 million of unsecured debt in 2009.
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
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Table of Contents
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.
General
and Administrative
For the year ended December 31, 2010, general and
administrative expenses increased 8.6% or $3.4 million as
compared to 2009. The increase is primarily due to an increase
in acquisition costs of $2.9 million related to the
Company’s acquisitions of five operating communities and
one parcel of land in 2010; an increase of $4.8 million in
compensation expense, including deferred compensation and
bonuses; which was partially offset by a decrease in taxes of
$1.6 million and an increase in tax benefit, which is
discussed in “Tax Benefit/Expense of TRS” above.
For the year ended December 31, 2009, general and
administrative expenses increased 4.7% or $1.8 million as
compared to 2008. The increase was due to a decrease in tax
benefit, which is discussed in “Tax Benefit/Expense of
TRS” above and is offset by a number of factors, including
the Company writing off acquisition-related costs, the Company
no longer pursuing a condominium strategy (which 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 (which resulted in a
charge of $1.7 million), and the acquisitions of certain
contractual rights related to a joint venture (which resulted in
the Company incurring a charge of $305,000 for the profit
component of the contracts which were in recognized in 2008).
Severance
Costs and Other Restructuring Charges
For the year ended December 31, 2010, the Company
recognized $6.8 million of severance and restructuring
charges as the Company consolidated its corporate operations and
centralized job functions to its Highlands Ranch, Colorado
headquarters from its Richmond, Virginia office. Also included
in these charges were severance costs related to the retirement
of an executive officer.
For the year ended December 31, 2008, the Company
recognized $653,000 of severance and restructuring charges as
the Company consolidated its operations in Highlands Ranch,
Colorado. In addition, we announced reductions to certain
positions related to both operations and corporate staff.
Gains on
the Sale of Land and Depreciable Property
For the years ended December 31, 2010, 2009 and 2008, we
recognized after-tax gains for financial reporting purposes of
$4.1 million, $2.4 million, and $786.2 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, 2010.
Off-Balance
Sheet Arrangements
In connection with the purchase of Hanover’s interests in
the UDR/MetLife Partnership, UDR agreed to indemnify Hanover
from liabilities from Hanover’s guaranty of
$333 million in loans which are secured by a
56
Table of Contents
security interest in the operating community subject to the loan
at December 31, 2010. The loans are to the
sub-tier
partnerships which own the 26 operating communities. The Company
anticipates that the balance of these loans will be refinanced
by the Partnership over the next twelve months.
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.
Contractual
Obligations
The following table summarizes our contractual obligations as of
December 31, 2010
(dollars in thousands):
| Payments Due by Period | ||||||||||||||||||||
| Contractual Obligations | 2011 | 2012-2013 | 2014-2015 | Thereafter | Total | |||||||||||||||
|
Long-term debt obligations
|
$ | 347,283 | $ | 847,182 | $ | 762,570 | $ | 1,610,469 | $ | 3,567,504 | ||||||||||
|
Interest on debt obligations
|
147,655 | 240,750 | 156,901 | 275,503 | 820,809 | |||||||||||||||
|
Letters of credit
|
4,727 | 23 | — | — | 4,750 | |||||||||||||||
|
Unfunded commitments on development projects(a)
|
240,963 | — | — | — | 240,963 | |||||||||||||||
|
Operating lease obligations:
|
||||||||||||||||||||
|
Operating space
|
671 | 864 | 939 | 50 | 2,524 | |||||||||||||||
|
Ground leases(b)
|
4,557 | 9,114 | 9,114 | 294,866 | 317,651 | |||||||||||||||
| $ | 745,856 | $ | 1,097,933 | $ | 929,524 | $ | 2,180,888 | $ | 4,954,201 | |||||||||||
| (a) | Any unfunded costs at December 31, 2010 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 2010, we incurred gross interest costs of
$158.6 million, of which $12.5 million was capitalized.
UNITED
DOMINION REALTY, L.P.:
Business
Overview
United Dominion Realty, L.P. (the “Operating
Partnership” or “UDR, L.P.”), is a Delaware
limited partnership formed in February 2004 and organized
pursuant to the provisions of the Delaware Revised Uniform
Limited Partnership Act (as amended from time to time, or any
successor to such statute, the “Act”). The Operating
Partnership is the
successor-in-interest
to United Dominion Realty, L.P., a limited partnership formed
under the laws of Virginia, which commenced operations on
November 4, 1995. Our sole general partner is UDR, Inc., a
Maryland corporation (“UDR” or the “General
Partner”), which conducts a substantial amount of its
business and holds a substantial amount of its assets through
the Operating Partnership. At December 31, 2010, the
Operating Partnership’s real estate portfolio included 81
communities located in 8 states plus the District of
Columbia, with a total of 23,351 apartment homes.
As of December 31, 2010, UDR owned 110,883 units of
our general limited partnership interests and
174,736,557 units of our limited partnership interests (the
“OP Units”), or approximately 97.2% of our
outstanding OP Units. By virtue of its ownership of our
OP Units and being our sole general partner, UDR has the
ability to control all of the
day-to-day
operations of the Operating Partnership. Unless otherwise
indicated or unless the context requires otherwise, all
references in this Report to the Operating Partnership refer to
the Operating Partnership together with its consolidated
subsidiaries, and all references in this “Item 7.
Management’s Discussion and Analysis — United
Dominion Realty, L.P.” to “we,” “us” or
“our” refer to the Operating Partnership together with
its consolidated subsidiaries. We refer to our General Partner
together with
57
Table of Contents
its consolidated subsidiaries (including us) and the General
Partner’s consolidated joint ventures as “UDR” or
the “General Partner.”
UDR operates as a self administered real estate investment
trust, or REIT, for federal income tax purposes. UDR focuses on
owning, acquiring, renovating, developing, redeveloping, and
managing apartment communities in select markets throughout the
United States. The General Partner was formed in 1972 as a
Virginia corporation and changed its state of incorporation from
Virginia to Maryland in September 2003. At December 31,
2010, the General Partner’s consolidated real estate
portfolio included 172 communities located in 23 markets with a
total of 48,553 apartment homes. In addition, the General
Partner has an ownership interest in 37 communities with 9,891
completed apartment homes through unconsolidated joint ventures.
The following table summarizes our market information by major
geographic markets as of December 31, 2010.
| As of December 31, 2010 | Year Ended December 31, 2010 | |||||||||||||||||||||||||||
|
Percentage
|
Total
|
|||||||||||||||||||||||||||
|
Number of
|
Number of
|
of Total
|
Carrying
|
Average
|
Total Income
|
Net Operating
|
||||||||||||||||||||||
|
Apartment
|
Apartment
|
Carrying
|
Value
|
Physical
|
per Occupied
|
Income(a)
|
||||||||||||||||||||||
| Communities | Homes | Value | (In thousands) | Occupancy | Home | (In thousands) | ||||||||||||||||||||||
|
SAME COMMUNITIES
|
||||||||||||||||||||||||||||
|
WESTERN REGION
|
||||||||||||||||||||||||||||
|
Orange Co, CA
|
12 | 4,124 | 20.6 | % | $ | 765,098 | 95.4 | % | $ | 1,478 | $ | 48,793 | ||||||||||||||||
|
San Francisco, CA
|
8 | 1,703 | 10.6 | % | 392,398 | 96.9 | % | 1,907 | 26,620 | |||||||||||||||||||
|
Monterey Peninsula, CA
|
7 | 1,565 | 4.1 | % | 152,645 | 94.1 | % | 1,066 | 12,820 | |||||||||||||||||||
|
Los Angeles, CA
|
6 | 1,222 | 7.2 | % | 265,084 | 96.0 | % | 1,544 | 14,360 | |||||||||||||||||||
|
San Diego, CA
|
3 | 689 | 2.7 | % | 99,585 | 95.1 | % | 1,258 | 6,472 | |||||||||||||||||||
|
Seattle, WA
|
5 | 932 | 5.6 | % | 206,953 | 96.6 | % | 1,191 | 8,584 | |||||||||||||||||||
|
Inland Empire, CA
|
2 | 834 | 3.2 | % | 119,199 | 95.0 | % | 1,243 | 7,876 | |||||||||||||||||||
|
Sacramento, CA
|
2 | 914 | 1.8 | % | 68,061 | 93.5 | % | 867 | 5,857 | |||||||||||||||||||
|
Portland, OR
|
3 | 716 | 1.9 | % | 69,543 | 95.9 | % | 946 | 5,211 | |||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||
|
Metropolitan DC
|
7 | 2,347 | 14.4 | % | 535,141 | 96.4 | % | 1,642 | 30,221 | |||||||||||||||||||
|
Baltimore, MD
|
5 | 994 | 3.9 | % | 145,968 | 96.4 | % | 1,314 | 10,673 | |||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||
|
Tampa, FL
|
3 | 1,154 | 2.9 | % | 109,081 | 95.6 | % | 1,000 | 8,338 | |||||||||||||||||||
|
Nashville, TN
|
6 | 1,612 | 3.4 | % | 127,177 | 96.5 | % | 824 | 9,717 | |||||||||||||||||||
|
Jacksonville, FL
|
1 | 400 | 1.2 | % | 42,292 | 94.9 | % | 852 | 2,379 | |||||||||||||||||||
|
Other Florida
|
1 | 636 | 2.1 | % | 76,310 | 95.1 | % | 1,148 | 5,224 | |||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||
|
Dallas, TX
|
2 | 1,348 | 4.9 | % | 182,840 | 95.6 | % | 1,131 | 10,554 | |||||||||||||||||||
|
Phoenix, AZ
|
3 | 914 | 2.0 | % | 71,646 | 95.3 | % | 855 | 5,621 | |||||||||||||||||||
|
Total/Average Same Communities
|
76 | 22,104 | 92.5 | % | 3,429,021 | 95.6 | % | $ | 1,287 | $ | 219,320 | |||||||||||||||||
|
Non Matures, Commercial Properties & Other
|
5 | 1,247 | 7.5 | % | 277,163 | |||||||||||||||||||||||
|
Total Real Estate Held for Investment
|
81 | 23,351 | 100.0 | % | 3,706,184 | |||||||||||||||||||||||
|
Total Accumulated Depreciation
|
(884,083 | ) | ||||||||||||||||||||||||||
|
Total Real Estate Owned, Net of Accumulated Depreciation
|
$ | 2,822,101 | ||||||||||||||||||||||||||
| (a) | Total Income per Occupied Home represents total revenues divided by the product of occupancy and the number of mature apartment homes. |
58
Table of Contents
We report in two segments: Same Communities and Non-Mature/Other
Communities. Our Same Communities segment includes those
communities acquired, developed, and stabilized prior to
January 1, 2009, and held as of December 31, 2010.
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. Our Non-Mature/Other Communities segment includes those
communities that were acquired or developed in 2008, 2009 or
2010, 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.
Liquidity
and Capital Resources
Liquidity is the ability to meet present and future financial
obligations either through operating cash flows, the sale of
properties, and the issuance of debt. Both the coordination of
asset and liability maturities and effective capital management
are important to the maintenance of liquidity. The Operating
Partnership’s primary source of liquidity is cash flow from
operations as determined by rental rates, occupancy levels, and
operating expenses related to our portfolio of apartment homes
and borrowings allocated to us under the General Partner’s
credit agreements. The General Partner will routinely use its
unsecured credit facility to temporarily fund certain investing
and financing activities prior to arranging for longer-term
financing or the issuance of equity or debt securities. During
the past several years, proceeds from the sale of real estate
have been used for both investing and financing activities as we
repositioned our portfolio.
We expect to meet our short-term liquidity requirements
generally through net cash provided by operations and borrowings
allocated to us under the General Partner’s credit
agreements. We expect to meet certain long-term liquidity
requirements such as scheduled debt maturities and potential
property acquisitions through borrowings and the disposition of
properties. We believe that our net cash provided by operations
and borrowings will continue to be adequate to meet both
operating requirements and the payment of distributions.
Likewise, the budgeted expenditures for improvements and
renovations of certain properties are expected to be funded from
property operations and borrowings allocated to us under the
General Partner’s credit agreements the Operating
Partnership is a party to.
Future
Capital Needs
Future capital expenditures are expected to be funded with
proceeds from the issuance of secured debt, the sale of
properties, the borrowings allocated to us under our General
Partner’s credit agreements, 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, the
issuance of OP Units and the assumption or placement of
secured debt.
During 2011, we have approximately $42.2 million of secured
debt maturing and we anticipate that we will repay that debt
with operating cash flows, proceeds from borrowings allocated to
us under our General Partner’s credit agreements, or by
exercising extension rights on such secured debt, as applicable.
The repayment of debt will be recorded as an offset to the
“Receivable due from General Partner”.
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 and that
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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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 year ended December 31, 2010, $59.5 million was
spent on capital expenditures for all of our communities as
compared to $70.4 million for the twelve months ended
December 31, 2009. These capital improvements included
turnover-related capital expenditures, revenue enhancing capital
expenditures, asset preservation expenditures, kitchen and bath
upgrades, other extensive interior/exterior upgrades and major
renovations.
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.
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 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.
Statements
of Cash Flows
The following discussion explains the changes in net cash
provided by operating activities, net cash (used in)/provided by
investing activities and net cash used in financing activities
that are presented in our Consolidated Statements of Cash Flows.
Operating
Activities
For the year ended December 31, 2010, net cash flow
provided by operating activities was $146.6 million
compared to $157.3 million for the comparable period in
2009. The decrease in net cash flow from operating activities is
primarily due an increase in consolidated net loss, primarily
due to a decrease in property net operating income and an
increase in allocated general and administrative costs.
For the year ended December 31, 2009, our net cash flow
provided by operating activities was $157.3 million
compared to $168.7 million for 2008. The decrease in net
cash flow from operating activities is primarily due to a
decrease in property net operating income from our apartment
community portfolio, a decrease in interest income related to a
$200 million note receivable that was paid off during 2009
and higher interest expense, partially offset by a decrease in
other operating liabilities.
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Investing
Activities
For the year ended December 31, 2010, net cash used in
investing activities was $59.5 million compared to net cash
provided by investing activities of $129.6 million for the
comparable period in 2009. This change was primarily due to the
full payment received on a $200 million note receivable in
2009. The activity during 2010 consisted entirely of capital
expenditures.
For the year ended December 31, 2009, net cash provided by
investing activities was $129.6 million compared to
$82.0 million for 2008. The increase in cash is primarily
driven by the proceeds from a $200 million note receivable
in 2009 and a reduction in acquisition activity and capital
expenditures in 2009 as compared to 2008. This is partially
offset by the proceeds from dispositions of $880 million in
2008.
Acquisitions
For the years ended December 31, 2010 and 2009, we had no
property acquisitions. For the year ended December 31,
2008, we acquired nine apartment communities with 3,348
apartment homes for aggregate consideration of
$713.6 million. The Operating Partnership’s long-term
strategic plan is to achieve greater operating efficiencies by
investing in fewer, more concentrated markets. As a result, we
have been seeking to expand our interests in communities located
in California, Metropolitan Washington 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 continue to 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.
Dispositions
During the years ended December 31, 2010 and 2009, we did
not dispose of any communities. During the year ended
December 31, 2008, we sold 55 communities with a total of
16,960 apartment homes, for net proceeds of $880 million.
We recognized gains for financial reporting purposes of
$475.2 million on these sales. Proceeds from the sales were
used primarily to acquire new communities, reduce debt, and
repay our General Partner.
In conjunction with this transaction, a subsidiary of the
Operating Partnership received a note in the amount of
$200 million. The note was paid in full in 2009.
Financing
Activities
For the year ended December 31, 2010, our net cash used in
financing activities was $86.7 million compared to
$290.1 million for 2009. The decrease in cash used in
financing activities was primarily due to a net decrease in
payments to the General Partner, partially offset by a decrease
in the proceeds from secured debt.
For the year ended December 31, 2009, our net cash used in
financing activities was $290.1 million compared to
$247.2 million for the comparable period of 2008. The
increase in cash used in financing activities was primarily due
to a net increase in payments to the General Partner, which was
partially offset by the net activity on secured debt.
Credit
Facilities
As of December 31, 2010 and 2009, the General Partner had
secured 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 the General Partner’s option.
At December 31, 2010, $897.3 million of the funded
balance was fixed at a weighted average interest rate of 5.3%
and the remaining balance on these facilities was at a weighted
average variable rate of 1.7%. At December 31, 2010,
$736.9 million of these credit facilities are allocated to
the Operating Partnership based on the ownership of the assets
securing the debt.
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At December 31, 2009, there was $950 million of the
funded balance fixed at a weighted average interest rate of 5.4%
and the remaining balance on these facilities was at a weighted
average variable rate of 1.7%. $750.4 million of these
credit facilities were allocated to the Operating Partnership at
December 31, 2009 based on the ownership of the assets
securing the debt.
The Operating Partnership is a guarantor on the General
Partner’s unsecured credit facility, with an aggregate
borrowing capacity of $600 million, on a $100 million
term loan, and on the $250 million term loan facility. At
December 31, 2010 and December 31, 2009, the
outstanding balance under the unsecured credit facility was
$31.8 million and $189.3 million, respectively.
The credit facilities are subject to customary financial
covenants and limitations.
Other
Guarantees
At December 31, 2010, the Operating Partnership guaranteed
certain outstanding securities of UDR, such that the Operating
Partnership, as primary obligor and not merely as surety,
irrevocably and unconditionally guarantees to each holder of the
applicable securities and to the trustee and their successors
and assigns under the respective indenture (a) the full and
punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all obligations of UDR under the
respective indenture whether for principal of or interest on the
securities (and premium, if any), and all other monetary
obligations of UDR under the respective indenture and the terms
of the applicable securities and (b) the full and punctual
performance within the applicable grace periods of all other
obligations of UDR under the respective indenture and the terms
of the applicable securities.
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
$303.5 million in variable rate debt that is not subject to
interest rate swap contracts as of December 31, 2010. If
market interest rates for variable rate debt increased by
100 basis points, our interest expense would increase by
$3 million based on the balance at December 31, 2010.
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.
A presentation of cash flow metrics based on GAAP is as follows
(
dollars in thousands
):
| For the Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Net cash provided by operating activities
|
$ | 146,604 | $ | 157,333 | $ | 168,660 | ||||||
|
Net cash (used in)/provided by investing activities
|
(59,458 | ) | 129,628 | 81,993 | ||||||||
|
Net cash used in financing activities
|
(86,668 | ) | (290,109 | ) | (247,150 | ) | ||||||
Results
of Operations
The following discussion explains the changes in results of
operations that are presented in our Consolidated Statements of
Operations for each of the three years in the period ended
December 31, 2010, and includes the results of both
continuing and discontinued operations for the periods presented.
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Net
(Loss)/Income Attributable to OP Unitholders
2010-vs.-2009
Net loss attributable to OP unit holders was $20.7 million
($0.12 per OP unit) for the year ended December 31, 2010 as
compared to $4.2 million ($0.02 per OP unit) for the
comparable period in the prior year. The increase in net loss
attributable to OP unit holders for the year ended
December 31, 2010 resulted primarily from the following
items, all of which are discussed in further detail elsewhere
within this Report:
| • | a decrease in net operating income (“NOI”); | |
| • | an increase in general and administrative expenses allocated to us by our General Partner; and | |
| • | a decrease in other income. |
2009-vs.-2008
Net loss attributable to OP unit holders was $4.2 million
($0.02 per OP unit) for the year ended December 31, 2009 as
compared to net income attributable to OP unit holders of
$497.7 million ($3.00 per OP unit) for the comparable
period in the prior year. The decrease in net income
attributable to OP unit holders 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. We recognized net gains of $1.5 million and $475.2 million for the years ended December 31, 2009 and 2008, respectively; | |
| • | a decrease in net operating income due to the disposition of properties in 2008; | |
| • | an increase in interest expense incurred on new debt; | |
| • | an increase in depreciation expense primarily due to the acquisition of operating properties in 2008; and | |
| • | a decrease in other income primarily due to a decrease in interest income. |
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 portfolio for the years ended December 31, 2010, 2009
and 2008
(dollars in thousands)
:
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
| 2010 | 2009 | % Change | 2009 | 2008 | % Change | |||||||||||||||||||
|
Property rental income
|
$ | 350,394 | $ | 353,056 | −0.8 | % | $ | 353,056 | $ | 362,012 | −2.5 | % | ||||||||||||
|
Property operating expense(a)
|
(116,278 | ) | (112,488 | ) | 3.4 | % | (112,488 | ) | (115,972 | ) | —3.0 | % | ||||||||||||
|
Property net operating income (“NOI”)
|
$ | 234,116 | $ | 240,568 | −2.7 | % | $ | 240,568 | $ | 246,040 | −2.2 | % | ||||||||||||
| (a) | Excludes depreciation, amortization, and property management expenses. |
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The following table is our reconciliation of property NOI to net
income attributable to OP unit holders as reflected, for both
continuing and discontinued operations, for the years ended
December 31, 2010, 2009 and 2008
(dollars in
thousands)
:
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Property net operating income
|
$ | 234,116 | $ | 240,568 | $ | 246,040 | ||||||
|
Other income
|
1,695 | 5,695 | 13,106 | |||||||||
|
Real estate depreciation and amortization
|
(166,480 | ) | (166,773 | ) | (154,584 | ) | ||||||
|
Interest expense
|
(52,222 | ) | (53,547 | ) | (47,139 | ) | ||||||
|
General and administrative and property management
|
(32,927 | ) | (26,595 | ) | (29,037 | ) | ||||||
|
Other depreciation and amortization
|
— | — | (327 | ) | ||||||||
|
Other operating expenses
|
(5,028 | ) | (4,868 | ) | (4,400 | ) | ||||||
|
Net gain on sale of real estate
|
152 | 1,475 | 475,249 | |||||||||
|
Non-controlling interests
|
(41 | ) | (131 | ) | (1,188 | ) | ||||||
|
Net (loss)/income attributable to OP unitholders
|
$ | (20,735 | ) | $ | (4,176 | ) | $ | 497,720 | ||||
Same
Store Communities
2010-vs.-2009
Our same store communities (those acquired, developed, and
stabilized prior to January 1, 2009 and held on
December 31, 2010) consisted of 22,104 apartment homes
and provided 93.7% of our total NOI for the year ended
December 31, 2010.
NOI for our same store community properties decreased 2.7% or
$6.0 million for the year ended December 31, 2010
compared to the same period in 2009. The decrease in property
NOI was primarily attributable to a 1.4% or $4.6 million
decrease in property rental income and by a 1.4% or
$1.5 million increase in operating expenses. The decrease
in revenues was primarily driven by a 2.9% or $9.4 million
decrease in rental rates which was partially offset by a 4.9% or
$1.2 million increase in reimbursement income. Physical
occupancy increased 0.4% to 95.6% and total income per occupied
home decreased $24 to $1,287 for the year ended
December 31, 2010 as compared to the prior year.
The increase in property operating expenses was primarily driven
by a 3.6% or $582,000 increase in utilities, a $764,000 or 4.8%
increase in repairs and maintenance, and a 3.1% or $767,000
increase in personnel costs which was partially offset by a 1.6%
or $571,000 decrease in real estate taxes and a 3.7% or $252,000
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) was
67.2% for the year ended December 31, 2010 as compared to
68.1% for the comparable period in 2009.
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 17,332 apartment homes
and provided 72% of our total NOI for the year ended
December 31, 2009.
NOI for our same store community properties decreased 2.5% or
$4.4 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 2.4% or $6.2 million
decrease in property rental income, which was partially offset
by a 2.3% or $1.8 million decrease in operating expenses.
The decrease in revenues was primarily driven by a 3.1% or
$7.7 million decrease in rental rates and a 52.1% or
$573,000 increase in bad debt which was offset by an 13.7% or
$1.6 million decrease in vacancy loss and a 7.3% or
$739,000 increase in reimbursement income. Physical occupancy
increased 0.3% to 95.3% and total income per occupied home
decreased $23 to $1,266.
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The decrease in property operating expenses was primarily driven
by a 6.0% or $223,000 decrease in insurance, a 2.1% or $249,000
decrease in utilities, a 5.5% or $706,000 decrease in repairs
and maintenance, a 38.3% or $298,000 decrease in incentive
bonuses, and a 6.6% or $365,000 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) was
69.3% during the years ended December 31, 2009 and 2008.
Non-Mature/Other
Communities
2010-vs.-2009
The remaining $14.8 million and $15.2 million of our
NOI during the year ended December 31, 2010 and 2009,
respectively, was generated from communities that we classify as
“non-mature communities.” Our non-mature communities
consist of communities that do not meet the criteria to be
included in same store communities, which includes communities
developed or acquired, redevelopment properties, sold
properties, properties managed by third-parties, the
non-apartment components of mixed use properties, and properties
classified as real estate held for disposition. For the year
ended December 31, 2010, we recognized NOI for
redevelopments of $10.2 million. The remainder was
primarily due to the non-apartment components of mixed use
properties. For the year ended December 31, 2008, we
recognized NOI for redeveloped properties of $9.5 million.
The remaining NOI was primarily due to the non-apartment
components of mixed use properties.
2009-vs.-2008
The remaining $66.8 million and $67.8 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.” Our non-mature communities
consist of communities that do not meet the criteria to be
included in same store communities, which includes communities
developed or acquired, redevelopment properties, sold properties
and properties classified as real estate held for disposition.
For the year ended December 31, 2009, we recognized NOI for
our acquired communities of $49.3 million and
redevelopments of $11.8 million. For the year ended
December 31, 2008, we recognized NOI for our acquired
communities of $35.5 million, sold communities of
$15.2 million, and redeveloped properties of
$11.8 million.
Other
Income
For the year ended December 31, 2010, other income
primarily includes a reversal of certain real estate tax
accruals partially offset by losses due to the change in the
fair value of derivatives.
For the years ended December 31, 2009 and 2008, other
income primarily includes interest income on a note for
$200 million that a subsidiary of the Operating Partnership
received related to the disposition of 55 properties during
2008. In May 2009, the $200 million note was paid in full.
Real
Estate Depreciation and Amortization
For the years ended December 31, 2010 and 2009, real estate
depreciation and amortization did not change significantly as
the Operating Partnership did not have any acquisitions or
dispositions during these respective periods.
For the year ended December 31, 2009, real estate
depreciation and amortization increased 7.9% or
$12.2 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
acquisition of nine communities with 3,348 apartment homes
during 2008, and additional capital expenditures. As part of the
Operating Partnership’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.
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Interest
Expense
For the year ended December 31, 2010, interest expense
decreased 2.5% or $1.3 million, as compared to the same
period in 2009. This decrease is primarily due a decrease in the
interest rate charged on the note payable due to the General
Partner partially offset by slightly higher average borrowings
on secured credit facilities.
For the year ended December 31, 2009, interest expense on
both continuing and discontinued operations increased 14.7% or
$6.9 million as compared to 2008. This increase is
primarily due to additional borrowings on FNMA credit facilities
offset by debt repayments and maturities.
General
and Administrative
The Operating Partnership is charged directly for general and
administrative expenses it incurs. The Operating Partnership is
also charged for other general and administrative expenses that
have been allocated by UDR to each of its subsidiaries,
including the Operating Partnership, based on each
subsidiary’s pro-rata portion of UDR’s total apartment
homes.
For the year ended December 31, 2010, general and
administrative expenses increased 37.9% or $6.4 million, as
compared to the comparable period in 2009. The increase was due
to a number of factors including acquisition-related costs and
severance and other restructuring charges recognized in 2010.
The increases were consistent with the changes in UDR’s
general and administrative expenses and severance and other
restructuring expenses for the year ended December 31, 2010.
For the year ended December 31, 2009, general and
administrative expenses decreased 11.5% or $2.2 million as
compared to 2008. The decrease was primarily due to a number of
factors including the write off of acquisition-related costs and
severance and restructuring costs recognized in 2008.
Income
from Discontinued Operations
For the years ended December 31, 2010, 2009 and 2008, we
recognized gains for financial reporting purposes of $152,000,
$1.5 million and $475.2 million, respectively. Changes
in the level of gains recognized from period to period reflect
the residual activities from 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, 2010.
Off-Balance
Sheet Arrangements
The Operating Partnership is a guarantor on the General
Partner’s unsecured credit facility, with an aggregate
borrowing capacity of $600 million, a $100 million
term loan, and a $250 million term loan. At
December 31, 2010 and 2009, the outstanding balance under
the unsecured credit facility was $31.8 million and
$189.3 million, respectively.
On September 30, 2010, the Operating Partnership guaranteed
certain outstanding debt securities of the General Partner.
These guarantees provide that the Operating Partnership, as
primary obligor and not merely as surety, irrevocably and
unconditionally guarantees to each holder of the applicable
securities and to the trustee and their successors and assigns
under the respective indenture (a) the full and punctual
payment when due, whether as stated maturity, by acceleration or
otherwise, of all obligations of the General Partner under the
respective indenture whether for principal or interest on the
securities (and premium, if any), and all other monetary
obligations of the General Partner under the respective
indenture and the terms of the applicable
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securities and (b) the full and punctual performance within
the applicable grace periods of all other obligations of the
General Partner under the respective indenture and the terms of
applicable securities.
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.
Contractual
Obligations
The following table summarizes our contractual obligations as of
December 31, 2010 (
dollars in thousands
):
| Payments Due by Period | ||||||||||||||||||||
| Contractual Obligations | 2011 | 2012-2013 | 2014-2015 | Thereafter | Total | |||||||||||||||
|
Long-term debt obligations
|
$ | 42,183 | $ | 373,746 | $ | 1,270 | $ | 652,862 | $ | 1,070,061 | ||||||||||
|
Interest on debt obligations
|
46,854 | 74,252 | 59,180 | 89,334 | 269,620 | |||||||||||||||
|
Operating lease obligations- Ground leases(a)
|
4,456 | 8,913 | 8,913 | 294,377 | 316,659 | |||||||||||||||
| $ | 93,493 | $ | 456,911 | $ | 69,363 | $ | 1,036,573 | $ | 1,656,340 | |||||||||||
| 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 73 of this Report for the Index
to Consolidated Financial Statements and Schedule of UDR, Inc.
and United Dominion Realty, L.P.
| Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
| Item 9A. | CONTROLS AND PROCEDURES |
Disclosure
Controls and Procedures
The disclosure controls and procedures of the Company and the
Operating Partnership are designed with the objective of
ensuring that information required to be disclosed in our
reports filed under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms. Our
disclosure controls and procedures are also designed to ensure
that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
It should be noted that the design of any system of controls is
based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential
future conditions, regardless of how remote. As a result, our
disclosure controls and procedures are designed to provide
reasonable assurance that such disclosure controls and
procedures will meet their objectives.
As of December 31, 2010, we carried out an evaluation,
under the supervision and with the participation of the Chief
Executive Officer and Chief Financial Officer of the Company, of
the effectiveness of the design and operation of the disclosure
controls and procedures of the Company and the Operating
Partnership. Based on this evaluation, the Chief Executive
Officer and Chief Financial Officer of the Company concluded
that the
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disclosure controls and procedures of the Company and the
Operating Partnership are effective at the reasonable assurance
level described above.
Management’s
Report on Internal Control over Financial Reporting
The management of UDR, Inc. 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 the management, the Chief Executive Officer and
Chief Financial Officer of UDR, Inc. conducted an evaluation of
the effectiveness of the internal control over financial
reporting based on the framework in
Internal
Control — Integrated Framework
issued by the
Committee of Sponsoring Organizations (COSO). Based on such
evaluation, management concluded that UDR, Inc.’s internal
control over financial reporting was effective as of
December 31, 2010.
Ernst & Young LLP, the independent registered public
accounting firm that audited our consolidated financial
statements included in this Report, has audited UDR, Inc.’s
internal control over financial reporting as of
December 31, 2010. The report of Ernst & Young
LLP, which expresses an unqualified opinion on UDR, Inc.’s
internal control over financial reporting as of
December 31, 2010, is included under the heading
“Report of Independent Registered Public Accounting
Firm” of UDR, Inc. contained in this Report.
This Report does not include a report of management’s
assessment regarding internal control over financial reporting
of United Dominion Realty, L.P. or an attestation report of the
registered public accounting firm of United Dominion Realty,
L.P. due to a transition period established by the rules of the
Securities and Exchange Commission for newly public companies.
Further, an attestation report of the registered public
accounting firm of United Dominion Realty, L.P. will not be
required as long as United Dominion Realty, L.P. is a
non-accelerated filer.
Changes
in Internal Control Over Financial Reporting
There have not been any changes in either the Company’s or
the Operating Partnership’s internal control over financial
reporting (as such term is defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) during the fourth fiscal quarter to
which this report relates that materially affected, or are
reasonably likely to materially affect, the internal control
over financial reporting of either the Company or the Operating
Partnership.
| Item 9B. | OTHER INFORMATION |
None.
68
Table of Contents
| 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 UDR, Inc.’s definitive proxy
statement (our “definitive proxy statement”) for its
Annual Meeting of Stockholders to be held on May 12, 2011.
UDR is the sole general partner of the Operating Partnership.
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
UDR’s Annual Meeting of Stockholders to be held on
May 12, 2011. 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 the definitive proxy statement for
UDR’s Annual Meeting of Stockholders to be held on
May 12, 2011. UDR is the sole general partner of the
Operating Partnership.
| Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The information required by this item is incorporated by
reference to the information set forth under the headings
“Security Ownership of Certain Beneficial Owners and
Management,” “Executive Compensation” and
“Equity Compensation Plan Information” in the
definitive proxy statement for UDR’s Annual Meeting of
Stockholders to be held on May 12, 2011. UDR is the sole
general partner of the Operating Partnership.
| Item 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
The information required by this item is incorporated by
reference to the information set forth under the heading
“Security Ownership of Certain Beneficial Owners and
Management,” “Corporate Governance Matters-Corporate
Governance Overview,” “Corporate Governance
Matters-Director
Independence,” “Corporate Governance
Matters-Independence of Audit, Compensation and Governance
Committees,” and “Executive Compensation” in the
definitive proxy statement for UDR’s Annual Meeting of
Stockholders to be held on May 12, 2011. UDR is the sole
general partner of the Operating Partnership.
| 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 the definitive proxy statement for
UDR’s Annual Meeting of Stockholders to be held on
May 12, 2011. UDR is the sole general partner of the
Operating Partnership.
69
Table of Contents
| 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 Schedules of UDR, Inc. and United
Dominion Realty, L.P. on page 73 of this Report.
2.
Financial Statement Schedules.
See Index to
Consolidated Financial Statements and Schedule of UDR, Inc. and
United Dominion Realty, L.P. on page 73 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.
70
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 23, 2011
|
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 23,
2011 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/ Eric
J. Foss
Director |
|||
|
/s/ David
L. Messenger
Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
/s/ Robert
P. Freeman
Director |
|||
|
/s/ James
D. Klingbeil
Chairman of the Board |
/s/ Jon
A. Grove
Director |
|||
|
/s/ Lynne
B. Sagalyn
Vice Chair of the Board |
/s/ Mark
J. Sandler
Director |
|||
|
/s/ Katherine
A. Cattanach
Director |
/s/ Thomas
C. Wajnert
Director |
|||
71
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.
|
UNITED DOMINION REALTY, L.P.
|
||||
|
By:
UDR,
INC., its sole general partner
|
||||
|
Date: February 23, 2011
|
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 23,
2011 by the following persons on behalf of the registrant and in
the capacities indicated.
|
/s/ Thomas
W. Toomey
Chief Executive Officer, President, and Director of the General Partner |
/s/ Eric
J. Foss
Director of the General Partner |
|||
|
/s/ David
L. Messenger
Senior Vice President and Chief Financial Officer of the General Partner (Principal Financial and Accounting Officer) |
/s/ Robert
P. Freeman
Director of the General Partner |
|||
|
/s/ James
D. Klingbeil
Chairman of the Board of the General Partner |
/s/ Jon
A. Grove
Director of the General Partner |
|||
|
/s/ Lynne
B. Sagalyn
Vice Chair of the Board of the General Partner |
/s/ Mark
J. Sandler
Director of the General Partner |
|||
|
/s/ Katherine
A. Cattanach
Director of the General Partner |
/s/ Thomas
C. Wajnert
Director of the General Partner |
|||
72
Table of Contents
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
| Page | ||||
|
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
|
||||
|
UDR, INC.:
|
||||
| 74 | ||||
| 76 | ||||
| 77 | ||||
| 78 | ||||
| 80 | ||||
| 82 | ||||
|
UNITED DOMINION REALTY, L.P.:
|
||||
| 121 | ||||
| 122 | ||||
| 123 | ||||
| 124 | ||||
| 125 | ||||
| 126 | ||||
|
SCHEDULES FILED AS PART OF THIS REPORT
|
||||
|
UDR, INC.:
|
||||
| 151 | ||||
|
UNITED DOMINION REALTY, L.P.:
|
||||
| 157 | ||||
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.
73
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, 2010
and 2009, and the related consolidated statements of operations,
stockholders’ equity and comprehensive income/(loss), and
cash flows for each of the three years in the period ended
December 31, 2010. 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, 2010 and
2009, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
December 31, 2010, 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.
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, 2010, 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 23, 2011 expressed an unqualified
opinion thereon.
/s/ Ernst &
Young LLP
Denver, Colorado
February 23, 2011
74
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, 2010, 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, 2010, 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,
2010 and 2009, and the related consolidated statements of
operations, stockholders’ equity and comprehensive
income/(loss), and cash flows for each of the three years in the
period ended December 31, 2010 of UDR, Inc. and our report
dated February 23, 2011, expressed an unqualified opinion
thereon.
/s/ Ernst &
Young LLP
Denver, Colorado
February 23, 2011
75
Table of Contents
UDR,
Inc.
(In
thousands, except share and per share data)
| December 31, | ||||||||
| 2010 | 2009 | |||||||
|
ASSETS
|
||||||||
|
Real estate owned:
|
||||||||
|
Real estate held for investment
|
$ | 6,783,435 | $ | 5,975,239 | ||||
|
Less: accumulated depreciation
|
(1,638,326 | ) | (1,346,689 | ) | ||||
|
Real estate investment, net
|
5,145,109 | 4,628,550 | ||||||
|
Real estate under development (net of accumulated depreciation
of $0 and $1,226)
|
97,912 | 318,531 | ||||||
|
Real estate held for disposition (net of accumulated
depreciation of $0 and $3,378)
|
— | 16,673 | ||||||
|
Total real estate owned, net of accumulated depreciation
|
5,243,021 | 4,963,754 | ||||||
|
Cash and cash equivalents
|
9,486 | 5,985 | ||||||
|
Marketable securities
|
3,866 | 37,650 | ||||||
|
Restricted cash
|
15,447 | 8,879 | ||||||
|
Deferred financing costs, net
|
27,267 | 26,601 | ||||||
|
Notes receivable
|
7,800 | 7,800 | ||||||
|
Investment in unconsolidated joint ventures
|
148,057 | 14,126 | ||||||
|
Other assets
|
74,596 | 67,822 | ||||||
|
Total assets
|
$ | 5,529,540 | $ | 5,132,617 | ||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Secured debt
|
$ | 1,963,670 | $ | 1,989,434 | ||||
|
Unsecured debt
|
1,603,834 | 1,437,155 | ||||||
|
Real estate taxes payable
|
14,585 | 16,976 | ||||||
|
Accrued interest payable
|
20,889 | 19,146 | ||||||
|
Security deposits and prepaid rent
|
26,046 | 31,798 | ||||||
|
Distributions payable
|
36,561 | 30,857 | ||||||
|
Deferred fees and gains on the sale of depreciable property
|
28,943 | 28,826 | ||||||
|
Accounts payable, accrued expenses, and other liabilities
|
105,925 | 80,685 | ||||||
|
Total liabilities
|
3,800,453 | 3,634,877 | ||||||
|
Redeemable non-controlling interests in operating partnership
|
119,057 | 98,758 | ||||||
|
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, 2009)
|
46,571 | 46,571 | ||||||
|
3,405,562 shares of 6.75% Series G Cumulative
Redeemable issued and outstanding (3,432,962 shares at
December 31, 2009)
|
85,139 | 85,824 | ||||||
|
Common stock, $0.01 par value; 250,000,000 shares
authorized 182,496,330 shares issued and outstanding
(155,465,482 shares at December 31, 2009)
|
1,825 | 1,555 | ||||||
|
Additional paid-in capital
|
2,450,141 | 1,948,669 | ||||||
|
Distributions in excess of net income
|
(973,864 | ) | (687,180 | ) | ||||
|
Accumulated other comprehensive loss, net
|
(3,469 | ) | 2 | |||||
|
Total UDR, Inc. stockholders’ equity
|
1,606,343 | 1,395,441 | ||||||
|
Non-controlling interest
|
3,687 | 3,541 | ||||||
|
Total equity
|
1,610,030 | 1,398,982 | ||||||
|
Total liabilities and stockholders’ equity
|
$ | 5,529,540 | $ | 5,132,617 | ||||
See accompanying notes to consolidated financial
statements.
76
Table of Contents
UDR,
Inc.
(In
thousands, except per share data)
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
REVENUES
|
||||||||||||
|
Rental income
|
$ | 632,249 | $ | 600,702 | $ | 561,073 | ||||||
|
Non-property income:
|
||||||||||||
|
Other income
|
14,347 | 12,362 | 27,190 | |||||||||
|
Gain on consolidation of joint ventures
|
— | 1,912 | — | |||||||||
|
Total revenues
|
646,596 | 614,976 | 588,263 | |||||||||
|
EXPENSES
|
||||||||||||
|
Rental expenses:
|
||||||||||||
|
Real estate taxes and insurance
|
78,168 | 74,338 | 66,717 | |||||||||
|
Personnel
|
57,441 | 51,543 | 48,383 | |||||||||
|
Utilities
|
34,440 | 31,638 | 29,238 | |||||||||
|
Repair and maintenance
|
35,712 | 31,581 | 30,232 | |||||||||
|
Administrative and marketing
|
16,406 | 14,510 | 14,575 | |||||||||
|
Property management
|
17,387 | 16,520 | 15,430 | |||||||||
|
Other operating expenses
|
5,848 | 6,487 | 4,563 | |||||||||
|
Real estate depreciation and amortization
|
303,151 | 277,849 | 251,402 | |||||||||
|
Interest
|
||||||||||||
|
Expense incurred
|
146,062 | 141,380 | 158,525 | |||||||||
|
Net loss/(gain) on debt extinguishment
|
1,204 | (9,849 | ) | (26,306 | ) | |||||||
|
Amortization of convertible debt discount
|
3,530 | 4,283 | 6,598 | |||||||||
|
Prepayment penalty on debt restructure
|
— | 1,022 | 4,201 | |||||||||
|
Write-off of fair market value adjustment for debt paid off on
consolidated joint venture
|
— | 1,552 | — | |||||||||
|
Expenses related to tender offer
|
— | 3,764 | — | |||||||||
|
General and administrative
|
42,710 | 39,344 | 38,776 | |||||||||
|
Severance costs and other restructuring charges
|
6,803 | — | 653 | |||||||||
|
Other depreciation and amortization
|
4,843 | 5,161 | 4,866 | |||||||||
|
Total expenses
|
753,705 | 691,123 | 647,853 | |||||||||
|
Loss from operations
|
(107,109 | ) | (76,147 | ) | (59,590 | ) | ||||||
|
Loss from unconsolidated entities
|
(4,204 | ) | (18,665 | ) | (3,612 | ) | ||||||
|
Loss from continuing operations
|
(111,313 | ) | (94,812 | ) | (63,202 | ) | ||||||
|
Income from discontinued operations
|
4,725 | 3,189 | 807,069 | |||||||||
|
Consolidated net (loss)/income
|
(106,588 | ) | (91,623 | ) | 743,867 | |||||||
|
Net loss attributable to redeemable non-controlling interests in
OP
|
3,835 | 4,282 | (45,875 | ) | ||||||||
|
Net income attributable to non-controlling interests
|
(146 | ) | (191 | ) | (202 | ) | ||||||
|
Net (loss)/income attributable to UDR, Inc.
|
(102,899 | ) | (87,532 | ) | 697,790 | |||||||
|
Distributions to preferred stockholders —
Series E (Convertible)
|
(3,726 | ) | (3,724 | ) | (3,724 | ) | ||||||
|
Distributions to preferred stockholders — Series G
|
(5,762 | ) | (7,188 | ) | (8,414 | ) | ||||||
|
Discount on preferred stock repurchases, net
|
25 | 2,586 | 3,056 | |||||||||
|
Net (loss)/income attributable to common stockholders
|
$ | (112,362 | ) | $ | (95,858 | ) | $ | 688,708 | ||||
|
Earnings per weighted average common share — basic:
|
||||||||||||
|
Loss from continuing operations attributable to common
stockholders
|
$ | (0.71 | ) | $ | (0.66 | ) | $ | (0.91 | ) | |||
|
Income from discontinued operations
|
$ | 0.03 | $ | 0.02 | $ | 6.20 | ||||||
|
Net (loss)/income attributable to common stockholders
|
$ | (0.68 | ) | $ | (0.64 | ) | $ | 5.29 | ||||
|
Earnings per weighted average common share — diluted:
|
||||||||||||
|
Loss from continuing operations attributable to common
stockholders
|
$ | (0.71 | ) | $ | (0.66 | ) | $ | (0.91 | ) | |||
|
Income from discontinued operations
|
$ | 0.03 | $ | 0.02 | $ | 6.20 | ||||||
|
Net (loss)/income attributable to common stockholders
|
$ | (0.68 | ) | $ | (0.64 | ) | $ | 5.29 | ||||
|
Common distributions declared per share
|
$ | 0.73 | $ | 0.85 | $ | 2.29 | ||||||
|
Weighted average number of common shares outstanding —
basic
|
165,857 | 149,090 | 130,219 | |||||||||
|
Weighted average number of common shares outstanding —
diluted
|
165,857 | 149,090 | 130,219 | |||||||||
See accompanying notes to consolidated financial
statements.
77
Table of Contents
UDR,
Inc.
(In
thousands, except for share data)
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Operating Activities
|
||||||||||||
|
Consolidated net (loss)/income
|
$ | (106,588 | ) | $ | (91,623 | ) | $ | 743,867 | ||||
|
Adjustments to reconcile net (loss)/income to net cash provided
by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
308,289 | 283,552 | 256,850 | |||||||||
|
Net gain on sale of marketable securities
|
(4,725 | ) | — | — | ||||||||
|
Net gains on the sale of depreciable property
|
(4,083 | ) | (2,424 | ) | (786,181 | ) | ||||||
|
Net gains on the sale of land
|
— | — | (183 | ) | ||||||||
|
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 | — | |||||||||
|
Loss/(gain) on debt extinguishment
|
1,204 | (9,849 | ) | (26,306 | ) | |||||||
|
Write off of bad debt
|
2,838 | 3,570 | 2,411 | |||||||||
|
Write off of note receivable and other assets
|
— | 1,354 | — | |||||||||
|
Loss from unconsolidated entities
|
4,204 | 18,665 | 3,612 | |||||||||
|
Amortization of deferred financing costs and other
|
8,957 | 7,953 | 7,585 | |||||||||
|
Amortization of deferred compensation
|
11,411 | 7,605 | 7,024 | |||||||||
|
Amortization of convertible debt discount
|
3,530 | 4,283 | 6,598 | |||||||||
|
Changes in income tax accrual
|
(865 | ) | 2,854 | (6,846 | ) | |||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
(Increase)/decrease in operating assets
|
(5,332 | ) | 3,512 | (1,532 | ) | |||||||
|
(Decrease)/increase in operating liabilities
|
(4,660 | ) | 291 | (27,145 | ) | |||||||
|
Net cash provided by operating activities
|
214,180 | 229,383 | 179,754 | |||||||||
|
Investing Activities
|
||||||||||||
|
Proceeds from sales of real estate investments, net
|
20,738 | — | 1,487,067 | |||||||||
|
Proceeds from the sale of marketable securities
|
39,488 | — | — | |||||||||
|
Acquisition of real estate assets (net of liabilities assumed)
and initial capital expenditures
|
(347,582 | ) | (28,528 | ) | (936,538 | ) | ||||||
|
Development of real estate assets
|
(92,142 | ) | (183,157 | ) | (160,074 | ) | ||||||
|
Capital expenditures and other major improvements —
real estate assets, net of escrow reimbursement
|
(73,977 | ) | (85,403 | ) | (123,234 | ) | ||||||
|
Capital expenditures — non-real estate assets
|
(4,342 | ) | (6,269 | ) | (23,249 | ) | ||||||
|
Payments related to the buyout of joint venture partner
|
(16,141 | ) | — | — | ||||||||
|
Investment in unconsolidated joint ventures
|
(110,921 | ) | (24,988 | ) | (1,595 | ) | ||||||
|
Distributions received from/(paid to) unconsolidated joint
venture
|
1,125 | 1,741 | (801 | ) | ||||||||
|
Disbursements related to notes receivable
|
— | (500 | ) | (13,569 | ) | |||||||
|
Purchase of marketable securities
|
— | (30,941 | ) | — | ||||||||
|
Proceeds from note receivable
|
— | 200,000 | 18,774 | |||||||||
|
Purchase deposits on pending real estate acquisitions
|
— | — | (694 | ) | ||||||||
|
Change in funds held in escrow from IRC Section 1031
exchanges
|
— | — | 56,217 | |||||||||
|
Net cash (used in)/provided by investing activities
|
(583,754 | ) | (158,045 | ) | 302,304 | |||||||
78
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, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Financing Activities
|
||||||||||||
|
Payments on secured debt
|
(187,308 | ) | (159,612 | ) | (216,354 | ) | ||||||
|
Proceeds from the issuance of secured debt
|
68,380 | 560,436 | 445,162 | |||||||||
|
Proceeds from the issuance of unsecured debt
|
399,190 | 100,000 | 240,000 | |||||||||
|
Payments on unsecured debt
|
(79,236 | ) | (641,759 | ) | (452,156 | ) | ||||||
|
Net (repayment)/proceeds of revolving bank debt
|
(157,550 | ) | 189,300 | (309,500 | ) | |||||||
|
Payment of financing costs
|
(8,244 | ) | (8,650 | ) | (6,702 | ) | ||||||
|
Issuance of common and restricted stock, net
|
5,446 | 398 | 2,588 | |||||||||
|
Proceeds from the issuance of common shares through public
offering, net
|
467,565 | 67,151 | 184,327 | |||||||||
|
Payments from the repurchase of Series G preferred stock,
net
|
(637 | ) | (21,505 | ) | (20,347 | ) | ||||||
|
Repayment from the investment of performance based programs, net
|
— | — | (944 | ) | ||||||||
|
Distributions paid to non-controlling interests
|
(4,314 | ) | (7,275 | ) | (18,666 | ) | ||||||
|
Distributions paid to preferred stockholders
|
(9,488 | ) | (11,203 | ) | (12,429 | ) | ||||||
|
Distributions paid to common stockholders
|
(120,729 | ) | (144,576 | ) | (166,983 | ) | ||||||
|
Repurchase of common stock
|
— | (798 | ) | (140,533 | ) | |||||||
|
Net cash provided by/(used in) financing activities
|
373,075 | (78,093 | ) | (472,537 | ) | |||||||
|
Net increase/(decrease) in cash and cash equivalents
|
3,501 | (6,755 | ) | 9,521 | ||||||||
|
Cash and cash equivalents, beginning of year
|
5,985 | 12,740 | 3,219 | |||||||||
|
Cash and cash equivalents, end of year
|
$ | 9,486 | $ | 5,985 | $ | 12,740 | ||||||
|
Supplemental Information:
|
||||||||||||
|
Interest paid during the year, net of amounts capitalized
|
$ | 160,184 | $ | 164,357 | $ | 176,087 | ||||||
|
Non-cash transactions:
|
||||||||||||
|
Secured debt assumed with the acquisition of properties, net of
fair value adjustment
|
93,262 | — | 95,728 | |||||||||
|
Conversion of operating partnership non-controlling interests to
Common Stock
|
||||||||||||
|
(923,944 in 2010; 2,130,452 in 2009; and 1,474,532 in 2008)
|
18,429 | 21,117 | 12,175 | |||||||||
|
Retirement of fully depreciated assets
|
8,680 | 4,407 | — | |||||||||
|
Issuance of restricted stock awards
|
16 | 2 | 6 | |||||||||
|
Payment of Special Dividend through the issuance of
11,358,042 shares of Common Stock
|
— | 132,787 | — | |||||||||
|
Issuance of note receivable upon the disposition of real estate
|
— | — | 200,000 | |||||||||
See accompanying notes to consolidated financial
statements.
79
Table of Contents
UDR,
Inc.
(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, January 1, 2008
|
$ | 8,203,812 | $ | 181,571 | $ | 133,317,706 | $ | 1,333 | $ | 1,653,143 | $ | (894,072 | ) | $ | (770 | ) | $ | 3,148 | $ | 944,353 | ||||||||||||||||
|
Comprehensive Income
|
||||||||||||||||||||||||||||||||||||
|
Net income attributable to UDR, Inc.
|
— | — | — | — | — | 697,790 | — | 697,790 | ||||||||||||||||||||||||||||
|
Change in equity due to non-controlling interest
|
— | — | — | — | — | — | — | 202 | 202 | |||||||||||||||||||||||||||
|
Other comprehensive income:
|
||||||||||||||||||||||||||||||||||||
|
Unrealized loss on derivative financial instruments
|
— | — | — | — | — | — | (11,901 | ) | — | (11,901 | ) | |||||||||||||||||||||||||
|
Allocation to redeemable non-controlling interests
|
— | — | — | — | — | — | 744 | — | 744 | |||||||||||||||||||||||||||
|
Comprehensive income/(loss)
|
— | — | — | — | — | 697,790 | (11,157 | ) | 202 | 686,835 | ||||||||||||||||||||||||||
|
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)
|
— | — | — | — | — | (308,312 | ) | — | — | (308,312 | ) | |||||||||||||||||||||||||
|
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 attributable to UDR, Inc.
|
— | — | — | — | — | (87,532 | ) | — | (87,532 | ) | ||||||||||||||||||||||||||
|
Change in equity due to non-controlling interest
|
— | — | — | — | — | — | — | 191 | 191 | |||||||||||||||||||||||||||
|
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-controlling interests
|
— | — | — | — | — | — | (788 | ) | — | (788 | ) | |||||||||||||||||||||||||
|
Comprehensive income/(loss)
|
(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 | ) | |||||||||||||||||||||||
80
Table of Contents
UDR,
Inc.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE
INCOME/(LOSS)
(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 | ||||||||||||||||||||||||||||
|
Adjustment for conversion of non-controlling 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 | ||||||||||||||||||||||||||
|
Comprehensive (loss)/income
|
||||||||||||||||||||||||||||||||||||
|
Net loss attributable to UDR, Inc.
|
— | — | — | — | — | (102,899 | ) | — | (102,899 | ) | ||||||||||||||||||||||||||
|
Change in equity due to non-controlling interest
|
— | — | — | — | — | — | — | 146 | 146 | |||||||||||||||||||||||||||
|
Other comprehensive income
|
||||||||||||||||||||||||||||||||||||
|
Change in fair value of marketable securities
|
— | — | — | — | — | — | (1,092 | ) | — | (1,092 | ) | |||||||||||||||||||||||||
|
Unrealized gain on derivative financial instruments
|
— | — | — | — | — | — | (2,497 | ) | — | (2,497 | ) | |||||||||||||||||||||||||
|
Allocation to redeemable non-controlling interests
|
— | — | — | — | — | — | 118 | — | 118 | |||||||||||||||||||||||||||
|
Comprehensive income/(loss)
|
(102,899 | ) | (3,471 | ) | 146 | (106,224 | ) | |||||||||||||||||||||||||||||
|
Issuance of common and restricted shares
|
— | — | 1,562,537 | 16 | 15,710 | — | — | — | 15,726 | |||||||||||||||||||||||||||
|
Issuance of common shares through public offering
|
— | — | 24,544,367 | 245 | 467,319 | 467,564 | ||||||||||||||||||||||||||||||
|
Repurchase of 27,400 shares of 6.75% Series G
Cumulative
|
(27,400 | ) | (685 | ) | 23 | 25 | — | — | (637 | ) | ||||||||||||||||||||||||||
|
Adjustment for conversion of non-controlling interests
|
||||||||||||||||||||||||||||||||||||
|
of unitholders in operating partnerships
|
— | — | 923,944 | 9 | 18,420 | — | — | — | 18,429 | |||||||||||||||||||||||||||
|
Common stock distributions declared ($0.73 per share)
|
— | — | — | — | — | (126,086 | ) | — | — | (126,086 | ) | |||||||||||||||||||||||||
|
Preferred stock distributions declared-Series E ($1.3288
per share)
|
— | — | — | — | — | (3,726 | ) | — | — | (3,726 | ) | |||||||||||||||||||||||||
|
Preferred stock distributions declared-Series G ($1.6875
per share)
|
— | — | — | — | — | (5,762 | ) | — | — | (5,762 | ) | |||||||||||||||||||||||||
|
Adjustment to reflect redeemable non-controlling redemption value
|
— | — | — | — | — | (48,236 | ) | — | (48,236 | ) | ||||||||||||||||||||||||||
|
Balance, December 31, 2010
|
6,209,374 | $ | 131,710 | 182,496,330 | $ | 1,825 | $ | 2,450,141 | $ | (973,864 | ) | $ | (3,469 | ) | $ | 3,687 | $ | 1,610,030 | ||||||||||||||||||
See accompanying notes to consolidated financial
statements.
81
Table of Contents
UDR,
INC.
DECEMBER 31, 2010
| 1. | CONSOLIDATION AND BASIS OF PRESENTATION |
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, redevelops, and manages apartment
communities generally in high
barrier-to-entry
markets located in the United States. The high
barrier-to-entry
markets are characterized by limited land for new construction,
difficult and lengthy entitlement process, expensive
single-family home prices and significant employment growth
potential. At December 31, 2010, our apartment portfolio
consisted of 172 consolidated communities located in 23 markets
consisting of 48,553 apartment homes. In addition, the Company
has an ownership interest in 9,891 apartment homes 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 Special Dividend was
paid on January 29, 2009 to stockholders of record on
December 9, 2008. The Special 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 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.
The Special Dividend, totaling $177.1 million was paid on
137,266,557 Common 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
was
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 year ended December 31, 2008,
basic and diluted net income attributable to Common Stockholders
per weighted average common share prior to retrospective
adjustment was $4.89. This was based on weighted average common
shares of 140,982,000 (basic and diluted) for the year ended
December 31, 2008.
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 5,
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, 2010, there were 179,909,408 units in the
Operating Partnership outstanding, of which
174,847,440 units or 97.2% were owned by UDR and
82
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
5,061,968 units or 2.8% were owned by limited partners. The
consolidated financial statements of UDR include the
non-controlling interests of the unitholders in the Operating
Partnership. The consolidated financial statements of UDR
include the non-controlling interests of the unitholders in the
Heritage OP prior to UDR’s ownership of 100% of
6,264,260 units outstanding in Heritage OP as of
December 31, 2009.
The Company evaluated subsequent events through the date of
issuance of the Company’s financial statements. No
recognized or non-recognized subsequent events were noted.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
Recent
Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update
(“ASU”)
No. 2010-06,
“Improving Disclosures about Fair Value Measurements”
an amendment to ASC Topic 820, “Fair Value Measurements and
Disclosures.” This amendment provides for more robust
disclosures about (1) the different classes of assets and
liabilities measured at fair value, (2) the valuation
techniques and inputs used, (3) the activity in
Level 3 fair value measurements, and (4) the transfers
between Levels 1, 2, and 3. ASU
No. 2010-06
was effective for the Company for our fiscal year beginning in
January 1, 2010.
In December 2010, the FASB issued ASU
2010-29,
which addresses diversity in practice about the interpretation
of the pro forma revenue and earnings disclosure requirements
for business combinations. The amendments in ASU
2010-29
specify that if a public entity presents comparative financial
statements, the entity should disclose revenue and earnings of
the combined entity as though the business combination(s) that
occurred during the current year had occurred as of the
beginning of the comparable prior annual reporting period only.
The amendments in ASU
2010-29
also
expand the supplemental pro forma disclosures to include a
description of the nature and amount of material, nonrecurring
pro forma adjustments directly attributable to the business
combination included in the reported pro forma revenue and
earnings. The amendments in
ASU 2010-29
are effective prospectively for business combinations for which
the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15,
2010.
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.
Reclassifications
Certain previously reported amounts have been reclassified to
conform to the current financial statement presentation.
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.
83
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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,
2010, the Company did not assess any of our joint ventures as
variable interest entities where UDR was the primary beneficiary.
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 equity method investments.
Should the actual results differ from management’s
judgment, the valuation could be negatively affected and may
result in a negative impact to our Consolidated Financial
Statements.
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 4,
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
84
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
useful life of the asset and the in-place leases are amortized
over their remaining contractual life. Property acquisition
costs are expensed as incurred.
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 to the excess of the
carrying amount of the asset over its estimated fair value. Our
estimates of fair market value represent our best estimate based
primarily upon unobservable inputs related to rental rates,
operating costs, growth rates, discount rates, capitalization
rates, industry trends and reference to market rates and
transactions.
For long-lived assets to be disposed of, impairment losses are
recognized when the fair value of the asset less estimated cost
to sell is less than the carrying value of the asset. Properties
classified as real estate held for 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, 2010 and
2009, the value of our net intangible assets which are reflected
in “Other assets” was $13.3 million and
$7.3 million, respectively. As of December 31, 2010
and 2009, the value of our net intangible liabilities which are
reflected in “Accounts payable, accrued expenses, and other
liabilities” was $3.9 million and $5.2 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 2010, 2009, and 2008, total
interest capitalized was $12.5 million, $16.9 million,
and $14.9 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.
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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 cash flow hedges. Derivative financial
instruments are recorded on our Consolidated Balance Sheets as
either an asset or liability and measured quarterly at their
fair value. The changes in fair value for cash flow hedges that
are deemed effective are reflected in other comprehensive income
and for non-designated derivative financial instruments in
earnings. The ineffective component of cash flow hedges, 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 remaining term of the related
debt instrument and other related costs are expensed. The
balance of any unamortized financing costs associated with
retired debt is expensed upon retirement. Deferred financing
costs for new debt instruments include fees and costs incurred
by the Company to obtain financing. Deferred financing costs are
generally amortized on a straight-line basis, which approximates
the effective interest method, over a period not to exceed the
term of the related debt.
Preferred
Share 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,
2010, 2009, and 2008, recognized share issuance costs of
$23,000, $853,000, and $829,000, respectively as part of the
amount reported in “Discount/(premium) on Preferred Stock
repurchases, net” in the Consolidated Statement of
Stockholders’ Equity and Comprehensive Income/(Loss).
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/(Loss). For the year ended
December 31, 2010, other comprehensive income/(loss)
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 the allocation of other
comprehensive income/(loss) to redeemable non-controlling
interests. (See Note 5,
Joint Ventures
for further
discussion.)
86
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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.
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 2010, 2009, and
2008, total advertising expense was $6.4 million,
$5.7 million, and $6.1 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
adjustments made on a cumulative basis until the award is
settled and the final compensation is known.
Redeemable
non-controlling interests in the Operating Partnership
Interests in operating partnerships held by limited partners are
represented by operating partnership units
(“OP Units”). 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.
Limited partners have the right to require the Operating
Partnership to redeem all or a portion of the OP Units held
by the limited partner at a redemption price equal to and in the
form of the Cash Amount (as defined in the limited partnership
agreement of the Operating Partnership (the “Partnership
Agreement”)),
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
provided that such OP Units have been outstanding for at
least one year. UDR, as the general partner of the Operating
Partnership may, in its sole discretion, purchase the
OP Units by paying to the limited partner either the Cash
Amount or the REIT Share Amount (generally one share of Common
Stock of the Company for each OP Unit), as defined in the
Partnership Agreement. Accordingly, the Company records the
OP Units outside of permanent equity and reports the
OP Units at their redemption value at each balance sheet
date.
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.
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, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Numerator for earnings per share — basic and diluted:
|
||||||||||||
|
Net (loss)/earnings attributable to common stockholders
|
$ | (112,362 | ) | $ | (95,858 | ) | $ | 688,708 | ||||
|
Denominator for earnings per share — basic and diluted:
|
||||||||||||
|
Weighted average common shares outstanding
|
167,365 | 150,067 | 131,364 | |||||||||
|
Non-vested restricted stock awards
|
(1,508 | ) | (977 | ) | (1,145 | ) | ||||||
|
Denominator for basic and diluted earnings per share
|
165,857 | 149,090 | 130,219 | |||||||||
|
Net (loss)/income attributable to common stockholders- basic and
diluted
|
$ | (0.68 | ) | $ | (0.64 | ) | $ | 5.29 | ||||
The effect of the conversion of the OP Units, convertible
Preferred Stock, convertible debt, stock options, and restricted
stock is not dilutive and is therefore not included in the above
calculations as the Company reported a loss from continuing
operations.
If the operating partnership units were converted to Common
Stock, the additional shares of Common Stock outstanding for the
years ended December 31, 2010, 2009, and 2008 would be
5,711,275; 6,705,624; and 8,751,367 weighted average Common
Shares, respectively.
If the convertible Preferred Stock were converted to Common
Stock, the additional shares of Common Stock outstanding would
be 3,035,548 weighted average Common Shares for the years ended
December 31, 2010 and 2009, and 2,803,812 weighted average
Common Shares for the year ended December 31, 2008.
If the stock options and unvested restricted stock were
converted to Common Stock, the additional weighted average
Common Shares outstanding using the treasury stock method for
the three years ended December 31, 2010, 2009, and 2008
would be 2,296,097; 729,592; and 1,129,907 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
88
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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 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 11% and 10% of our apartment communities are
located in Orange County, California and Metropolitan Washington
D.C., respectively, based on the carrying value of our real
estate portfolio as of December 31, 2010. Therefore, the
Company is subject to increased exposure (positive or negative)
from economic and other competitive factors specific to these
markets.
| 3. | 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, 2010, the Company owned and
consolidated 172 communities in 10 states and the District
of Columbia totaling 48,553 apartment homes. The following table
summarizes the carrying amounts for our real estate owned (at
cost) as of December 31, 2010 and December 31, 2009
(dollar amounts in thousands):
| December 31, | ||||||||
| 2010 | 2009 | |||||||
|
Land
|
$ | 1,783,707 | $ | 1,622,838 | ||||
|
Depreciable property — held and used:
|
||||||||
|
Building and improvements
|
4,696,414 | 4,104,165 | ||||||
|
Furniture, fixtures and equipment
|
303,314 | 248,236 | ||||||
|
Under development:
|
||||||||
|
Land
|
62,410 | 65,525 | ||||||
|
Construction in progress
|
35,502 | 254,232 | ||||||
|
Held for disposition:
|
||||||||
|
Land
|
— | 12,563 | ||||||
|
Building and improvements
|
— | 7,089 | ||||||
|
Furniture, fixtures and equipment
|
— | 399 | ||||||
|
Real estate owned
|
6,881,347 | 6,315,047 | ||||||
|
Accumulated depreciation
|
(1,638,326 | ) | (1,351,293 | ) | ||||
|
Real estate owned, net
|
$ | 5,243,021 | $ | 4,963,754 | ||||
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following table summarizes UDR’s real estate community
acquisitions for the year ended December 31, 2010
(dollar amounts in thousands)
:
|
Apartment
|
Purchase
|
|||||||
| Property Name | Market | Acquisition Date | Homes | Price(a) | ||||
|
1818 Platinum Triangle
|
Orange County, CA | August 2010 | 265 | $ 70,500 | ||||
|
Domain Brewers Hill
|
Baltimore, MD | August 2010 | 180 | 46,000 | ||||
|
Garrison Square
|
Boston, MA | September 2010 | 160 | 98,000 | ||||
|
Marina Pointe
|
Los Angeles, CA | September 2010 | 583 | 157,500 | ||||
|
Ridge at Blue Hills
|
Boston, MA | September 2010 | 186 | 40,000 | ||||
| 1,374 | $ 412,000 | |||||||
| (a) | The purchase price is the contractual amount paid by UDR to the third party and does not include any costs that the Company incurred in the pursuit of the property. |
The $412 million purchase price, which includes assumed
debt with a fair value of $93.3 million, was allocated
$81.1 million to land; $317.7 million to building and
improvements; $3.1 million to furniture, fixtures, and
equipment; and $10.1 million to intangible assets.
During the year ended December 31, 2010, the Company also
acquired land located in San Francisco, California with a
purchase price of $23.6 million.
The Company incurred $2.9 million and $0 of
acquisition-related costs during the years ended 2010 and 2009,
respectively. These expenses are classified on the Consolidated
Statements of Operations in the line item entitled “General
and administrative.”
During the year ended December 31, 2009, the Company
acquired one community with 289 apartment homes in Dallas,
Texas. The purchase related to an agreement previously entered
into by UDR, which contains 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.
| 4. | 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
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,
2010, within the Consolidated Statements of Operations for the
years ended December 31, 2010, 2009, and 2008, and the
reclassification of the assets and liabilities within the
Consolidated Balance Sheets as of December 31, 2010 and
2009, if applicable. The results of operations from these
properties are classified on the Consolidated Statements of
Operations in the line item entitled “Income from
discontinued operations.”
During the year ended December 31, 2010, UDR sold one 149
apartment home community. UDR recognized gains for financial
reporting purposes of $4 million on this sale, which is
included in discontinued operations.
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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.
The following is a summary of income from discontinued
operations for the three years ended December 31, 2010
(dollars in thousands)
:
| December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Rental income
|
$ | 1,619 | $ | 2,197 | $ | 41,932 | ||||||
|
Non-property income
|
— | — | 183 | |||||||||
| 1,619 | 2,197 | 42,115 | ||||||||||
|
Rental expenses
|
637 | 829 | 16,874 | |||||||||
|
Property management fee
|
45 | 61 | 1,153 | |||||||||
|
Real estate depreciation
|
295 | 542 | 582 | |||||||||
|
Interest
|
— | — | 2,612 | |||||||||
|
Other expenses
|
— | — | 6 | |||||||||
| 977 | 1,432 | 21,227 | ||||||||||
|
Income before net gain on the sale of depreciable property
|
642 | 765 | 20,888 | |||||||||
|
Net gain on the sale of depreciable property, excluding TRS
|
4,048 | 2,343 | 787,059 | |||||||||
|
TRS gain/(loss) on sale of real estate, net of tax
|
35 | 81 | (878 | ) | ||||||||
|
Income from discontinued operations
|
$ | 4,725 | $ | 3,189 | $ | 807,069 | ||||||
In the fourth quarter of 2008, the Company 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.
| 5. | 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.
91
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
UDR’s joint ventures are funded with a combination of debt
and equity. Our losses are limited to our investment and except
as noted below, the Company does not guarantee any debt, capital
payout or other obligations associated with our joint venture
portfolio.
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. On December 30,
2009, UDR entered into an agreement with our partner to purchase
its 49% interest in 989 Elements for $7.7 million.
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 resulting in the consolidation of
the joint venture. The joint venture assets and liabilities were
recorded at fair value. The fair value of the assets was
$55 million ($54.8 million of real estate owned and
$200,000 of current assets) and the fair value of liabilities
was $34.1 million ($33.4 million of a construction
loan, net of fair market value adjustment of $1.6 million
and $700,000 of current liabilities) at the consolidation date.
During the year ended December 31, 2009, 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.
On December 31, 2009, the Company repaid the outstanding
balance of $35 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 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 for the year ended
December 31, 2009. In March 2010, the Company paid
$7.7 million and acquired our partner’s 49% interest
in the joint venture. At the closing of the agreement and at
December 31, 2010, the Company’s interest in 989
Elements was 98%. The activities and accounts of 989 Elements
are included in the Company’s consolidated financial
position as of December 31, 2010 and 2009 and consolidated
results of operations and cash flows during the year ended
December 31, 2010 and the two day period ending
December 31, 2009.
UDR is a partner with an unaffiliated third party in a joint
venture (“Elements Too”) which owns and operates a 274
home apartment community in the central business district of
Bellevue, Washington. Construction began in the fourth quarter
of 2006 and was completed in the first quarter of 2010. 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 resulting in the consolidation of
the joint venture. The joint venture assets and liabilities were
recorded at fair value. Prior to consolidation, our equity
investment in Elements Too was $24.4 million (net of an
$11 million impairment loss discussed below) at
October 16, 2009. The fair value of the assets was
$100.3 million ($99.5 million of real estate owned and
$814,000 of other assets) and the fair value of liabilities was
$75.6 million ($70.5 million of a construction loan,
$917,000 of a derivative instrument, and $4.2 million of
other liabilities). During the year ended December 31,
2009, 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.
On December 30, 2009, UDR entered into an agreement with
our partner to purchase its 49% interest in Elements Too for
$3.2 million. In March 2010, the Company paid the
outstanding balance of $3.2 million and acquired our
partner’s 49% interest in the joint venture. At the closing
of the agreement and at December 31, 2010, the
Company’s interest in Elements Too was 98%. During the year
ended December 31, 2010, the Company repaid the outstanding
balance of $70.5 million on the construction loan held by
Elements Too. The activities and accounts of Elements Too are
included in the Company’s consolidated financial position
as of
92
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
December 31, 2010 and 2009 and consolidated results of
operations and cash flows during the year ended
December 31, 2010 and the seventy-six day period ending
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. On
December 30, 2009, UDR entered into an agreement with our
partner to purchase its 49% interest in Bellevue for
$5.2 million. 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 resulting in
the consolidation of the joint venture at fair value. Prior to
consolidation, our equity investment in Bellevue was
$5 million (net of a $5 million impairment loss
discussed below). The fair value of the assets was
$33 million ($32.8 million of real estate owned and
$211,000 of other assets) and the fair value of liabilities was
$23.0 million ($22.3 million of a mortgage payable,
$506,000 of a derivative instrument, and $213,000 of other
liabilities). During the year ended December 31, 2009, 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. In March 2010, the
Company paid $5.2 million and acquired our partner’s
49% interest in the joint venture. At the closing of the
agreement, the Company’s interest in Bellevue was 98%. At
December 31, 2010, the carrying value of the mortgage
payable guaranteed by the Company was $22.3 million. The
activities and accounts of Elements Too are included in the
Company’s consolidated financial position as of
December 31, 2010 and 2009 and consolidated results of
operations and cash flows during year ended December 31,
2010 and the
two-day
period ending December 31, 2009.
Prior to their consolidation in 2009, we evaluated our
investments in these joint ventures when events or changes in
circumstances indicate that there may be an
other-than-temporary
decline in value. We considered various factors to determine if
a decrease in value of each of these investments was
other-than-temporary.
In 2009, we recognized a non-cash charge of $16 million
representing the
other-than-temporary
decline in fair values below the carrying values of two of the
Company’s investments in Bellevue, Washington joint
ventures.
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 is 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 services to
the unconsolidated joint ventures. As of December 31, 2010,
UDR had investments in the following unconsolidated joint
ventures which are accounted for under the equity method of
accounting.
In November 2010, the Company acquired The Hanover
Company’s (“Hanover”) partnership interests in
the Hanover/MetLife Master Limited Partnership
(the“UDR/MetLife Partnership”). The UDR/MetLife
93
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Partnership owns a portfolio of 26 operating communities
containing 5,748 apartment homes and 11 land parcels with
the potential to develop approximately 2,300 additional
apartment homes. Under the terms of the UDR/MetLife Partnership,
UDR will act as the general partner and earn fees for property
and asset management and financing transactions.
UDR acquired ownership interests of 12.27% in the operating
communities and 4.14% in the land parcels for
$100.8 million. The initial investment of
$100.8 million consists of $71.8 million in cash,
which includes associated transaction costs, and a
$30 million payable (includes discount of $1 million)
to Hanover. UDR agreed to pay the $30 million balance to
Hanover in two interest free installments in the amounts of
$20 million and $10 million on the first and second
anniversaries of the closing, respectively. The $30 million
payable was recorded at its present value of $29 million
using an effective interest rate of 2.67%. At December 31,
2010, the net carrying value of the payable was
$29.1 million, and interest expense of $129,000 was
recorded during the year ended December 31, 2010. At
December 31, 2010, the Company’s investment was
$122.2 million.
UDR’s total cost of its equity investment of
$100.8 million differed from the fair value of its
proportionate share in the underlying net assets of the
UDR/MetLife Partnership of $111.4 million. The difference
of $10.6 million was attributable to certain assets and
adjustments were allocated to UDR’s proportionate share in
the UDR/MetLife Partnership’s buildings of
$8.4 million, land of $3.9 million, and
($1.6 million) of lease intangible assets. With the
exception of land, the difference related to buildings is
amortized and recorded as a component of loss from
unconsolidated entities over 45 years and the difference
related to lease intangible assets is amortized and recorded as
a component of loss from unconsolidated entities over
11 months with the offset to the Company’s carrying
value of its equity investment. During the year ended
December 31, 2010, the Company recorded $264,000 of
amortization.
In connection with the purchase of Hanover’s interests in
the UDR/MetLife Partnership, UDR agreed to indemnify Hanover
from liabilities from Hanover’s guaranty of
$333 million (outstanding at December 31,
2010) in loans which are secured by a security interest in
the operating communities subject to the loan. The loans are to
the
sub-tier
partnerships which own the 26 operating communities. The Company
anticipates that the balance of these loans will be refinanced
by the UDR/MetLife Partnership over the next twelve months.
In October 2010, the Company entered into a venture with an
affiliate of Hanover to develop a 240-home community in
Stoughton, Massachusetts. At closing and at December 31,
2010, UDR owned a noncontrolling interest of 95% in the joint
venture. Our initial investment was $10 million and our
investment at December 31, 2010 was $10.3 million.
During 2009, UDR and an unaffiliated third party formed a joint
venture for the investment of up to $450 million in
multifamily properties located in key, high barrier to entry
markets. The partners will contribute equity of
$180 million of which the Company’s maximum equity
will be 30% or $54 million when fully invested. During the
year ended December 31, 2010, the joint venture acquired
its first property (151 homes) located in Metropolitan
Washington D.C. for $43.1 million. At closing and at
December 31, 2010, the Company owned 30%. Our investment at
December 31, 2010 and 2009 was $5.2 million and
$242,000, respectively.
In November 2007, UDR and an unaffiliated third party formed a
joint venture which owns and operates 10 operating properties
located in Texas (3,992 homes). UDR contributed cash and a
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, 2010 and 2009 was $10.3 million and
$13.9 million, respectively.
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
94
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
if a decrease in the value of the investment is
other-than-temporary.
Prior to their consolidation and during the year ended
December 31, 2009, we recognized a non-cash charge of
$16 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. The
Company did not recognize any
other-than-temporary
decrease in the value of its other investments in unconsolidated
joint ventures during the years ended December 31, 2010 and
2009.
Summarized combined financial information relating to all the
unconsolidated joint ventures operations (not just our
proportionate share), is presented below for the three years
ended December 31, 2010 (
dollars in thousands):
| Year Ended December 31, | ||||||||||||
| 2010 | 2009(a) | 2008(a) | ||||||||||
|
For the year ended:
|
||||||||||||
|
Revenues
|
$ | 60,234 | $ | 48,575 | $ | 43,486 | ||||||
|
Real estate depreciation and amortization
|
28,744 | 21,133 | 22,509 | |||||||||
|
Net loss
|
(29,737 | ) | (11,719 | ) | (18,167 | ) | ||||||
|
UDR recorded loss from unconsolidated entities
|
(4,204 | ) | (18,665 | ) | (3,612 | ) | ||||||
| (a) | Includes results of operations of equity method joint ventures through the effective date of consolidation. See “Consolidated Joint Ventures” above. |
Combined summary balance sheets relating to all the
unconsolidated joint ventures (not just our proportionate share)
is presented below for the years ended December 31,
(
dollars in thousands
):
| 2010 | 2009 | |||||||
|
Real estate, net
|
$ | 2,692,167 | $ | 320,786 | ||||
|
Total assets
|
2,807,886 | 332,694 | ||||||
|
Amount due to UDR
|
672 | 779 | ||||||
|
Third party debt
|
1,524,872 | 254,000 | ||||||
|
Total liabilities
|
1,580,733 | 265,091 | ||||||
|
Non-controlling interest
|
69,445 | — | ||||||
|
Equity
|
1,157,708 | 67,603 | ||||||
As of December 31, 2010, the Company had deferred fees and
deferred profit from the sale of properties of
$28.9 million, the majority of which the Company will not
recognize until the underlying properties are sold to a third
party. The Company recognized $3.2 million of management
fees during the year ended December 31, 2010 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.
| 6. | 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
45% of UDR’s real estate owned based upon gross
95
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
book value ($3.8 billion or 55% of UDR’s real estate
owned is unencumbered) consists of the following as of
December 31, 2010 (
dollar amounts in thousands
):
| 2010 | ||||||||||||||||||||
| Principal Outstanding |
Weighted
|
Weighted
|
Number of
|
|||||||||||||||||
| December 31, |
Average
|
Average
|
Communities
|
|||||||||||||||||
| 2010 | 2009 | Interest Rate | Years to Maturity | Encumbered | ||||||||||||||||
|
Fixed Rate Debt
|
||||||||||||||||||||
|
Mortgage notes payable
|
$ | 292,236 | $ | 506,203 | 5.18 | % | 2.8 | 8 | ||||||||||||
|
Tax-exempt secured notes payable
|
13,325 | 13,325 | 5.30 | % | 20.2 | 1 | ||||||||||||||
|
Fannie Mae credit facilities
|
897,318 | 949,971 | 5.32 | % | 6.4 | 14 | ||||||||||||||
|
Total fixed rate secured debt
|
1,202,879 | 1,469,499 | 5.29 | % | 5.7 | 23 | ||||||||||||||
|
Variable Rate Debt
|
||||||||||||||||||||
|
Mortgage notes payable
|
405,641 | 243,810 | 2.33 | % | 2.6 | 14 | ||||||||||||||
|
Tax-exempt secured note payable
|
94,700 | 27,000 | 1.05 | % | 19.2 | 2 | ||||||||||||||
|
Fannie Mae credit facilities
|
260,450 | 249,125 | 1.68 | % | 5.1 | 32 | ||||||||||||||
|
Total variable rate secured debt
|
760,791 | 519,935 | 1.95 | % | 5.5 | 48 | ||||||||||||||
|
Total secured debt
|
$ | 1,963,670 | $ | 1,989,434 | 3.99 | % | 5.6 | 71 | ||||||||||||
UDR entered into secured revolving credit facilities with Fannie
Mae with an aggregate commitment of $1.4 billion at
December 31, 2010. 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
$897.3 million of the funded balance fixed at a weighted
average interest rate of 5.3% and the remaining balance on these
facilities is currently at a weighted average variable rate of
1.7%. Further information related to these credit facilities is
as follows:
|
December 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
| (dollar amounts in thousands) | ||||||||
|
Borrowings outstanding
|
$ | 1,157,768 | $ | 1,199,096 | ||||
|
Weighted average borrowings during the period ended
|
1,198,771 | 1,033,658 | ||||||
|
Maximum daily borrowings during the period ended
|
1,209,739 | 1,199,322 | ||||||
|
Weighted average interest rate during the period ended
|
4.6 | % | 4.6 | % | ||||
|
Weighted average interest rate at the end of the period
|
4.5 | % | 4.6 | % | ||||
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 $694,000 and $987,000 at December 31, 2010 and
2009, 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
2011 through February 2017 and carry interest rates ranging from
2.66% to 6.60%. Mortgage notes payable includes debt associated
with development activities.
96
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, 2010, UDR’s fixed rate secured credit
facilities consisted of $897.3 million on a
$1.4 billion aggregate commitment under five revolving
secured credit facilities with Fannie Mae (the Company also owes
$260.5 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,
2010, the fixed rate Fannie Mae credit facilities had a weighted
average fixed rate of interest of 5.3%.
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 January
2011 through April 2016. The mortgage notes payable interest is
based on LIBOR plus some basis points, which translate into
interest rates ranging from 0.94% to 5.25% at December 31,
2010.
Tax-exempt secured note payable.
The variable
rate mortgage notes payable that secures tax-exempt housing bond
issues mature at various dates from August 2019 and March 2030.
Interest on this note is payable in monthly installments. The
mortgage notes payable have interest rates of 1.05% and 1.07% as
of December 31, 2010.
Secured credit facilities.
The variable rate
secured credit facilities consisted of $260.5 million
outstanding on the Fannie Mae credit facilities. As of
December 31, 2010, the variable rate Fannie Mae credit
facilities had a weighted average floating rate of interest of
1.7%.
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 | ||||||||||||||||||||||
|
2011
|
$ | 78,978 | $ | — | $ | 2,808 | $ | 130,215 | $ | — | $ | 39,513 | $ | 251,514 | ||||||||||||||
|
2012
|
57,397 | — | 177,944 | 59,285 | — | 59,529 | 354,155 | |||||||||||||||||||||
|
2013
|
62,021 | — | 38,631 | 38,509 | — | — | 139,161 | |||||||||||||||||||||
|
2014
|
382 | — | 3,328 | 101,102 | — | — | 104,812 | |||||||||||||||||||||
|
2015
|
403 | — | 3,522 | 16,313 | — | — | 20,238 | |||||||||||||||||||||
|
Thereafter
|
93,055 | 13,325 | 671,085 | 60,217 | 94,700 | 161,408 | 1,093,790 | |||||||||||||||||||||
|
Total
|
$ | 292,236 | $ | 13,325 | $ | 897,318 | $ | 405,641 | $ | 94,700 | $ | 260,450 | $ | 1,963,670 | ||||||||||||||
97
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 7. | UNSECURED DEBT |
A summary of unsecured debt as of December 31, 2010 and
2009 is as follows
(dollars in thousands):
| December 31, | ||||||||
| 2010 | 2009 | |||||||
|
Commercial Banks
|
||||||||
|
Borrowings outstanding under an unsecured credit facility due
July 2012(a)
|
31,750 | 189,300 | ||||||
|
Senior Unsecured Notes
|
||||||||
|
3.90% Medium-Term Notes due March 2010 (includes premium of $34)
|
— | 50,034 | ||||||
|
3.625% Convertible Senior Notes due September 2011 (net of
Subtopic
470-20
discount of $1,138 and $3,351)(b),(d),(h)
|
95,961 | 122,984 | ||||||
|
5.00% Medium-Term Notes due January 2012
|
100,000 | 100,000 | ||||||
|
3.04% Term Notes due December 2013(c)
|
100,000 | 100,000 | ||||||
|
6.05% Medium-Term Notes due June 2013
|
122,500 | 122,500 | ||||||
|
5.13% Medium-Term Notes due January 2014(e)
|
184,000 | 184,000 | ||||||
|
5.50% Medium-Term Notes due April 2014 (net of discount of $226
and $295)(e)
|
128,274 | 128,205 | ||||||
|
5.25% Medium-Term Notes due January 2015 (includes discount of
$519 and $177)(e),(f)
|
324,656 | 175,352 | ||||||
|
5.25% Medium-Term Notes due January 2016
|
83,260 | 83,260 | ||||||
|
2.26% Term Notes due January 2016
|
150,000 | — | ||||||
|
3.76% Term Notes due January 2016
|
100,000 | — | ||||||
|
8.50% Debentures due September 2024
|
15,644 | 15,644 | ||||||
|
4.00% Convertible Senior Notes due December 2035 (net of
Subtopic
470-20
discount of $0 and $1,916)(g),(h)
|
167,750 | 165,834 | ||||||
|
Other
|
39 | 42 | ||||||
| 1,572,084 | 1,247,855 | |||||||
| $ | 1,603,834 | $ | 1,437,155 | |||||
| (a) | 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 (0.9% interest rate at December 31, 2010) 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. | |
| (b) | 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 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 |
98
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 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. | ||
| (c) | The Company had an interest rate swap agreement related to these notes, which expired during the year ended December 31, 2010. The notes carried a variable interest rate of 3.04% at December 31, 2010 and a fixed interest rate of 6.26% at December 31, 2009. | |
| (d) | During the year ended December 31, 2010, the Company repurchased some of its 3.625% convertible Senior Notes in open market purchases. As a result of these transactions, we retired debt with a notional value of $29.2 million for $29.4 million of cash. Consistent with our accounting policy, the Company expensed $206,000 of unamortized financing costs and $599,000 of unamortized discount on convertible debt as a result of these debt retirements for the year ended December 31, 2010. The loss of $1.0 million is included within a separate component of interest expense on our Consolidated Statements of Operations for the year ended December 31, 2010. | |
| (e) | 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. | |
| (f) | 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. During the three months ended March 31, 2010, the Company issued $150 million of 5.25% senior unsecured medium-term notes under the Amended and Restated Distribution Agreement. These notes were priced at 99.46% of the principal amount at issuance and had a discount of $519,000 at December 31, 2010. | |
| (g) | 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 |
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INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 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). | ||
| (h) | 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. |
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 $3.5 million,
$4.3 million, and $6.6 million for the years ended
December 31, 2010, 2009, and 2008, respectively.
The following is a summary of short-term bank borrowings under
UDR’s bank credit facility at December 31, 2010 and
2009
(dollars in thousands):
| December 31, | ||||||||
| 2010 | 2009 | |||||||
|
Total revolving credit facility
|
$ | 600,000 | $ | 600,000 | ||||
|
Borrowings outstanding at end of year(1)
|
31,750 | 189,300 | ||||||
|
Weighted average daily borrowings during the year
|
161,260 | 83,875 | ||||||
|
Maximum daily borrowings during the year ended
|
337,600 | 279,400 | ||||||
|
Weighted average interest rate during the year
|
0.8 | % | 0.9 | % | ||||
|
Interest rate at end of the year
|
0.9 | % | 0.7 | % | ||||
| (1) | Excludes $4.8 million of letters of credit at December 31, 2010 |
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, 2010 are as follows
(dollars
in thousands):
|
Bank
|
Unsecured
|
|||||||||||
| Lines | Debt | Total | ||||||||||
|
2011(a)
|
$ | — | $ | 95,769 | $ | 95,769 | ||||||
|
2012
|
31,750 | 99,808 | 131,558 | |||||||||
|
2013
|
— | 222,308 | 222,308 | |||||||||
|
2014
|
— | 312,353 | 312,353 | |||||||||
|
2015
|
— | 325,167 | 325,167 | |||||||||
|
Thereafter
|
— | 516,679 | 516,679 | |||||||||
| $ | 31,750 | $ | 1,572,084 | $ | 1,603,834 | |||||||
| (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 $97.1 million. |
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INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 8. | 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, 2010.
During the year ended December 31, 2010, the Company
entered into the following equity transactions for our common
stock:
| • | Issued 6,144,367 shares of common stock in connection with an “at the market” equity distribution program where we received gross proceeds of approximately $110.8 million; | |
| • | Issued 18,400,000 shares of common stock in connection with an underwritten public offering where we received gross proceeds of approximately $374.4 million; | |
| • | Issued 553,097 shares of common stock in connection with stock options exercised; | |
| • | Issued 1,009,440 shares of common stock through the Company’s 1999 Long-Term Incentive Plan (the “LTIP”), net of forfeitures; and | |
| • | Converted 923,944 OP Units into Company common stock. |
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, 2010 and 2009 totaled $0.73
and $0.85 per share, respectively. For taxable years ending on
or before December 31, 2010, 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 (1.083 shares after the Special
Dividend). The holders of the Series E are entitled to vote
on an as-converted basis as a single class in combination with
the holders of common stock at any meeting of our stockholders
for the election of directors or for any other purpose on which
the holders of common stock are entitled to vote. The
Series E has no stated maturity and is not subject to any
sinking fund or any mandatory redemption.
Distributions declared on the Series E for the years ended
December 31, 2010 and 2009 were $1.33 per share. The
Series E is not listed on any exchange. At
December 31, 2010 and 2009, a total of
2,803,812 shares of the Series E were outstanding.
UDR is authorized to issue up to 20,000,000 shares of the
Series F Preferred Stock (“Series F”). The
Series F may be purchased by holders of UDR’s
operating partnership units, or OP Units, at a purchase
price of $0.0001 per share. OP Unitholders are entitled to
subscribe for and purchase one share of UDR’s Series F
for each OP Unit held. A total of 3,208,706 and
2,959,428 shares of the Series F were outstanding at a
value of $321 and $296 at December 31, 2010 and 2009,
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 the 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
101
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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,
2010 and 2009, the Company repurchased 27,400 and
997,738 shares of Series G, respectively, for less
than the liquidation preference of $25 per share resulting in a
$25,000 and $2.6 million benefit to our net income/(loss)
attributable to common stockholders, respectively.
Distributions declared on the Series G for the year ended
December 31, 2010 and 2009 was $1.69 per share. The
Series G is listed on the NYSE under the symbol
“UDRPrG.” At December 31, 2010 and 2009, a total
of 3,405,562 and 3,432,962 shares of the Series G were
outstanding, respectively.
Distribution
Reinvestment and Stock Purchase Plan
UDR’s Distribution Reinvestment and Stock Purchase Plan
(the “Stock Purchase Plan”) allows common and
preferred stockholders the opportunity to purchase, through the
reinvestment of cash dividends, additional shares of UDR’s
common stock. From inception through December 31, 2008,
shareholders have elected to utilize the Stock Purchase Plan to
reinvest their distribution for the equivalent of
9,957,233 shares of Company common stock. Shares in the
amount of 13,134,256 were reserved for issuance under the Stock
Purchase Plan as of December 31, 2010. During the year
ended December 31, 2010, UDR acquired all shares issued
through the open market.
| 9. | EMPLOYEE BENEFIT PLANS |
In May 2001, the stockholders of UDR approved the long term
incentive plan (“LTIP”), which supersedes the 1985
Stock Option Plan. The LTIP authorizes the granting of awards
which may take the form of options to purchase shares of common
stock, stock appreciation rights, restricted stock, dividend
equivalents, other stock-based awards, and any other right or
interest relating to common stock or cash incentive awards to
Company directors, employees and outside trustees to promote the
success of the Company by linking individual’s compensation
via grants of share based payment. During the year ended
December 31, 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, 2010, there were 9,019,122 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.
102
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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, 2010 is as
follows:
| Option Outstanding | Option Exercisable | |||||||||||||||
|
Weighted
|
Weighted
|
|||||||||||||||
|
Average
|
Average
|
|||||||||||||||
|
Number of
|
Exercise
|
Number of
|
Exercise
|
|||||||||||||
| Options | Price | Options | Price | |||||||||||||
|
Balance, January 1, 2008
|
1,078,659 | $ | 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 | |||||||||||
|
Granted
|
— | — | ||||||||||||||
|
Exercised
|
(565,820 | ) | 10.69 | |||||||||||||
|
Forfeited
|
(7,827 | ) | 25.10 | |||||||||||||
|
Balance, December 31, 2010
|
3,837,177 | $ | 12.00 | 1,880,168 | $ | 13.19 | ||||||||||
Total remaining compensation cost related to unvested share
options as of December 31, 2010 was approximately
$1.4 million.
The weighted average remaining contractual life on all options
outstanding as of December 31, 2010 is 13.9 years.
3,287,639 of share options had exercise prices between $10.06
and $10.30; 53,004 of share options had exercise prices between
$13.15 and $13.74; 496,534 of share options had exercise prices
between $24.38 and $25.10.
During the years ended December 31, 2010, 2009, and 2008 we
recognized $1.3 million, $1.3 million, and $372,000 of
net compensation expense related to outstanding stock options.
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 the Company’s performance. For the years
ended December 31, 2010, 2009 and 2008, we recognized
$12.2 million, $7.6 million, and $7.0 million of
compensation expense related to the amortization of restricted
stock, respectively. As of December 31, 2010, the Company
had issued 2,750,363 shares of restricted stock under the
LTIP. The total remaining compensation cost on unvested
restricted stock awards was $14.0 million and has a
weighted average remaining contractual life of 2.0 years as
of December 31, 2010.
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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, 2010,
2009, and 2008 were $0.7 million, $0.7 million, and
$0.9 million, respectively.
| 10. | INCOME TAXES |
For 2010, 2009, and 2008, 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,
(dollars in thousands)
:
| December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Net (loss)/income attributable to common stockholders
|
$ | (112,362 | ) | $ | (95,858 | ) | $ | 688,708 | ||||
|
Book to tax differences
|
||||||||||||
|
Elimination of TRS loss
|
43,206 | 49,012 | 44,436 | |||||||||
|
Depreciation and amortization
|
75,109 | 50,745 | 52,662 | |||||||||
|
Disposition of properties
|
2,102 | 103,296 | (449,599 | ) | ||||||||
|
Revenue recognition
|
(3,722 | ) | 161 | (1,897 | ) | |||||||
|
Operating expense
|
(7,353 | ) | (5,285 | ) | (19,197 | ) | ||||||
|
Other adjustments
|
9,488 | 7,893 | 50,609 | |||||||||
|
REIT taxable income before dividends
|
$ | 6,468 | $ | 109,964 | $ | 365,722 | ||||||
|
Dividend paid deduction
|
$ | 95,072 | $ | 109,964 | $ | 365,722 | ||||||
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, 2010,
taxable distributions paid per common share were taxable as
follows:
| December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Ordinary income
|
$ | 0.69 | $ | 0.08 | $ | 0.20 | ||||||
|
Long-term capital gain
|
0.03 | 0.54 | 1.82 | |||||||||
|
Unrecapture section 1250 gain
|
0.01 | 0.05 | 0.59 | |||||||||
| $ | 0.73 | $ | 0.67 | $ | 2.61 | |||||||
We have Taxable REIT Subsidiaries (“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
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
income tax. The components of the provision for income taxes for
the three years ended December 31, are as follows
(dollars in thousands)
:
| December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Income tax (benefit)/expense
|
||||||||||||
|
Current
|
||||||||||||
|
Federal
|
$ | (3,510 | ) | $ | (11,925 | ) | $ | 2,421 | ||||
|
State
|
977 | (2,573 | ) | (1,873 | ) | |||||||
|
Total current
|
(2,533 | ) | (14,498 | ) | 548 | |||||||
|
Deferred
|
||||||||||||
|
Federal
|
119 | 12,030 | (10,504 | ) | ||||||||
|
State
|
(119 | ) | 2,779 | 83 | ||||||||
|
Total deferred
|
— | 14,809 | (10,421 | ) | ||||||||
|
Total income tax (benefit)/expense
|
$ | (2,533 | ) | $ | 311 | $ | (9,873 | ) | ||||
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):
| 2010 | 2009 | 2008 | ||||||||||
|
Deferred tax assets:
|
||||||||||||
|
Federal and state tax attributes
|
$ | 33,053 | $ | 20,239 | $ | 21,123 | ||||||
|
Book/tax depreciation
|
9,708 | 3,946 | 3,851 | |||||||||
|
Construction capitalization differences
|
5,235 | 3,045 | 468 | |||||||||
|
Investment in partnerships
|
3,346 | 4,711 | — | |||||||||
|
Debt and interest deductions
|
10,784 | 8,175 | 12,262 | |||||||||
|
Other
|
586 | 285 | 270 | |||||||||
|
Total deferred tax assets
|
62,712 | 40,401 | 37,974 | |||||||||
|
Valuation allowance
|
(55,516 | ) | (33,554 | ) | (15,304 | ) | ||||||
|
Net deferred income tax assets
|
7,196 | 6,847 | 22,670 | |||||||||
|
Deferred tax liabilities
|
||||||||||||
|
Investment in partnerships
|
— | — | (177 | ) | ||||||||
|
Other
|
(640 | ) | (291 | ) | (1,149 | ) | ||||||
|
Total deferred tax liabilities
|
(640 | ) | (291 | ) | (1,326 | ) | ||||||
|
Net deferred tax asset
|
$ | 6,556 | $ | 6,556 | $ | 21,344 | ||||||
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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, 2010, as follows
(dollars in thousands):
| December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Income tax (benefit)/expense
|
||||||||||||
|
U.S. federal income tax benefit
|
$ | (16,006 | ) | $ | (17,042 | ) | $ | (19,019 | ) | |||
|
State income tax (net of federal benefit)
|
19 | (1,391 | ) | (1,991 | ) | |||||||
|
Other items
|
(5,100 | ) | 1,260 | 1 | ||||||||
|
Valuation allowance
|
18,554 | 17,484 | 11,136 | |||||||||
|
Total income tax (benefit)/expense
|
$ | (2,533 | ) | $ | 311 | $ | (9,873 | ) | ||||
|
Classification of income tax (benefit)/expense
|
||||||||||||
|
Continuing operations
|
$ | (2,533 | ) | $ | 311 | $ | (9,713 | ) | ||||
|
Discontinued operations
|
— | — | (160 | ) | ||||||||
As of December 31, 2010, the Company through our TRS had
federal net loss carryovers (“NOL”) of approximately
$81.4 million. Of the total NOL, $20.5 million will be
expiring in 2028, $30.0 million expiring in 2029 and the
remaining $30.9 million expiring in 2030. As of
December 31, 2010, the TRS had state NOL of approximately
$92.0 million, of which approximately $1.8 million
begins to expire in 2012 with the remainder expiring in 2020
through 2030. As of December 31, 2010, the Company had a
valuation allowance of $55.5 million against 100% of its
deferred tax assets and 78% of its federal net operating losses.
During the year ended December 31, 2010, the Company had a
net change of $21.9 million in the valuation allowance.
FASB ASC 740,
Income Taxes
(“Topic 740”)
(formerly FASB Interpretation 48, “Accounting for
Uncertainty in Income Taxes-An Interpretation of FASB Statement
No. 109”) 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 as a result of a change in measurement of certain
items. As of December 31, 2010 and 2009, UDR does not
believe we have any unrecognized tax benefits.
A reconciliation of the beginning and ending amount of
unrecognized tax benefits, excluding interest and penalties is
as follows (
dollars in thousands
):
| December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Balance at beginning of year
|
$ | — | $ | — | $ | 415 | ||||||
|
Reductions for tax positions of prior years
|
— | — | (415 | ) | ||||||||
| $ | — | $ | — | $ | — | |||||||
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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, 2010, the
Company recognized $0 in interest and penalties. As of
December 31, 2010 and 2009, 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 2007.
| 11. | NONCONTROLLING INTERESTS |
Redeemable
noncontrolling interests 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 attributable to common
stockholders and the weighted average number of OP Units
outstanding to total common shares plus OP Units
outstanding during the period. Capital contributions,
distributions, and profits and losses are allocated to
non-controlling interests in accordance with the terms of the
individual partnership agreements.
Limited partners have the right to require the Operating
Partnership to redeem all or a portion of the OP Units held
by the limited partner at a redemption price equal to and in the
form of the Cash Amount [as defined in the limited partnership
agreement of the Operating Partnership (the “Partnership
Agreement”)], provided that such OP Units have been
outstanding for at least one year. UDR, as the general partner
of the Operating Partnership may, in its sole discretion,
purchase the OP Units by paying to the limited partner
either the Cash Amount or the REIT Share Amount (generally one
share of common stock of the Company for each OP Unit), as
defined in the Partnership Agreement. Accordingly, the Company
records the OP Units outside of permanent equity and
reports the OP Units at their redemption value using the
Company’s stock price at each balance sheet date.
The following table sets forth redeemable noncontrolling
interests in the Operating Partnership for the following periods
(
dollars in thousands
):
| Years Ended December 31, | ||||||||
| 2010 | 2009 | |||||||
|
Beginning redeemable noncontrolling interests in the OP
|
$ | 98,758 | $ | 108,092 | ||||
|
Mark to market adjustment to redeemable noncontrolling interests
in the OP
|
48,236 | 15,519 | ||||||
|
Conversion of OP Units to Common Stock
|
(18,429 | ) | (21,117 | ) | ||||
|
Forfeitures of Out-Performance Partnership Shares
|
— | (1,458 | ) | |||||
|
Repurchase of OP units from redeemable noncontrolling interests
|
(327 | ) | — | |||||
|
Net loss attributable to redeemable noncontrolling interests in
the OP
|
(3,835 | ) | (4,282 | ) | ||||
|
Distributions to redeemable noncontrolling interests in the OP
|
(5,228 | ) | (6,081 | ) | ||||
|
Issuance of OP Units through Special Dividend
|
— | 7,297 | ||||||
|
Allocation of other comprehensive (loss)/income
|
(118 | ) | 788 | |||||
|
Ending redeemable noncontrolling interests in the OP
|
$ | 119,057 | $ | 98,758 | ||||
107
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following sets forth net loss attributable to common
stockholders and transfers from redeemable noncontrolling
interests in the Operating Partnership for the following periods
(
dollars in thousands
):
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Net (loss)/income attributable to common stockholders
|
$ | (112,362 | ) | $ | (95,858 | ) | $ | 688,708 | ||||
|
Conversion of OP units to UDR Common Stock
|
18,429 | 21,117 | 12,175 | |||||||||
|
Change in equity from net (loss)/income attributable to common
|
||||||||||||
|
stockholders and conversion of OP units to UDR Common Stock
|
$ | (93,933 | ) | $ | (74,741 | ) | $ | 700,883 | ||||
Non-controlling
interests
Non-controlling interests represent interests of unrelated
partners in certain consolidated affiliates, and is presented as
part of equity in the Consolidated Balance Sheets since these
interests are not redeemable into any other ownership interests
of the Company. During the years ended December 31, 2010,
2009, and 2008, net income attributable to non-controlling
interests was $146,000; $191,000 and $202,000, respectively.
| 12. | FAIR VALUE OF DERIVATIVES AND FINANCIAL INSTRUMENTS |
Fair value is based on the price that would be received to sell
an asset or the exit price that would be paid to transfer a
liability in an orderly transaction between market participants
at the measurement date. A three-level valuation hierarchy
prioritizes observable and unobservable inputs used to measure
fair value. The fair value hierarchy consists of three broad
levels, which are described below:
| • | Level 1 — Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. | |
| • | Level 2 — Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data. | |
| • | 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. |
108
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The estimated fair values of the Company’s financial
instruments either recorded or disclosed on a recurring basis as
of December 31, 2010 and 2009 are summarized as follows
(dollars in thousands)
:
| Fair Value at December 31, 2010 Using | ||||||||||||||||
|
Quoted Prices in
|
||||||||||||||||
|
Active Markets
|
Significant
|
|||||||||||||||
|
for Identical
|
Other
|
Significant
|
||||||||||||||
|
Assets or
|
Observable
|
Unobservable
|
||||||||||||||
|
Liabilities
|
Inputs
|
Inputs
|
||||||||||||||
| December 31, 2010 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
Description:
|
||||||||||||||||
|
Available-for-sale
equity securities
|
$ | 3,866 | $ | 3,866 | $ | — | $ | — | ||||||||
|
Derivatives- Interest rate contracts(c)
|
514 | — | 514 | — | ||||||||||||
|
Total assets
|
$ | 4,380 | $ | 3,866 | $ | 514 | $ | — | ||||||||
|
Derivatives- Interest rate contracts(c)
|
$ | 6,597 | $ | — | $ | 6,597 | $ | — | ||||||||
|
Contingent purchase consideration(d)
|
5,402 | — | — | 5,402 | ||||||||||||
|
Secured debt instruments- fixed rate:(a)
|
||||||||||||||||
|
Mortgage notes payable
|
306,515 | — | — | 306,515 | ||||||||||||
|
Tax-exempt secured notes payable
|
13,885 | — | — | 13,885 | ||||||||||||
|
Fannie Mae credit facilities
|
927,413 | — | — | 927,413 | ||||||||||||
|
Secured debt instruments- variable rate:(a)
|
||||||||||||||||
|
Mortgage notes payable
|
405,641 | — | — | 405,641 | ||||||||||||
|
Tax-exempt secured notes payable
|
94,700 | — | — | 94,700 | ||||||||||||
|
Fannie Mae credit facilities
|
260,450 | — | — | 260,450 | ||||||||||||
|
Unsecured debt instruments:(b)
|
||||||||||||||||
|
Commercial bank
|
31,750 | — | — | 31,750 | ||||||||||||
|
Senior Unsecured Notes
|
1,625,492 | 264,849 | — | 1,360,643 | ||||||||||||
|
Total liabilities
|
$ | 3,677,845 | $ | 264,849 | $ | 6,597 | $ | 3,406,399 | ||||||||
109
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| Fair Value at December 31, 2009 Using | ||||||||||||||||
|
Quoted Prices in
|
Significant
|
|||||||||||||||
|
Active Markets for
|
Other
|
Significant
|
||||||||||||||
|
Identical Assets or
|
Observable
|
Unobservable
|
||||||||||||||
|
Liabilities
|
Inputs
|
Inputs
|
||||||||||||||
| December 31, 2009 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
Description:
|
||||||||||||||||
|
Available-for-sale
debt securities- Corporate debt
|
$ | 37,650 | $ | 37,650 | $ | — | $ | — | ||||||||
|
Derivatives- Interest rate contracts(c)
|
2,294 | — | 2,294 | — | ||||||||||||
|
Total assets
|
$ | 39,944 | $ | 37,650 | $ | 2,294 | $ | — | ||||||||
|
Derivatives- Interest rate contracts(c)
|
$ | 5,947 | $ | — | $ | 5,947 | $ | — | ||||||||
|
Secured debt instruments- fixed rate:(a)
|
||||||||||||||||
|
Mortgage notes payable
|
516,578 | — | — | 516,578 | ||||||||||||
|
Tax-exempt secured notes payable
|
13,540 | — | — | 13,540 | ||||||||||||
|
Fannie Mae credit facilities
|
952,468 | — | — | 952,468 | ||||||||||||
|
Secured debt instruments- variable rate:(a)
|
||||||||||||||||
|
Mortgage notes payable
|
243,810 | — | — | 243,810 | ||||||||||||
|
Tax-exempt secured notes payable
|
27,000 | — | — | 27,000 | ||||||||||||
|
Fannie Mae credit facilities
|
249,125 | — | — | 249,125 | ||||||||||||
|
Unsecured debt instruments:(b)
|
||||||||||||||||
|
Commercial bank
|
189,300 | — | — | 189,300 | ||||||||||||
|
Senior Unsecured Notes
|
1,247,512 | 294,085 | — | 953,427 | ||||||||||||
|
Total liabilities
|
$ | 3,445,280 | $ | 294,085 | $ | 5,947 | $ | 3,145,248 | ||||||||
| (a) | See Note 6, Secured Debt | |
| (b) | See Note 7, Unsecured Debt | |
| (c) | See Note 10, Derivatives and Hedging Activity | |
| (d) | As of March 31, 2010, the Company accrued a liability of $6 million related to a contingent purchase consideration on one of its properties. The contingent consideration was determined based on the fair market value of the related asset which is estimated using Level 3 inputs utilized in a third party appraisal. The Company paid approximately $635,000 of the liability in 2010. |
Financial
Instruments Carried at Fair Value
The fair values of the corporate debt securities and equity
securities are determined by Level 1 inputs which utilize
quoted prices in active markets where we have the ability to
access values for identical assets.
110
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The cost, gross unrealized gains and fair values of the
Company’s investments at December 31, 2010 and 2009
are as follows (
dollars in thousands
):
|
Corporate Debt
|
Corporate Equity
|
Total Available-
|
||||||||||
| Securities- U.S. | Securities- U.S. | for-Sale Securities | ||||||||||
|
As of December 31, 2010:
|
||||||||||||
|
Cost(a)
|
$ | — | $ | 374 | $ | 374 | ||||||
|
Gross unrealized gains
|
— | 3,492 | 3,492 | |||||||||
|
Estimated fair value (net carrying amount)
|
$ | — | $ | 3,866 | $ | 3,866 | ||||||
|
As of December 31, 2009:
|
||||||||||||
|
Cost(a)
|
$ | 33,066 | $ | — | $ | 33,066 | ||||||
|
Gross unrealized gains
|
4,584 | — | 4,584 | |||||||||
|
Estimated fair value (net carrying amount)
|
$ | 37,650 | $ | — | $ | 37,650 | ||||||
| (a) | Amortized cost is presented for corporate debt securities. |
Proceeds from the sale of available for sale securities during
the year ended December 31, 2010 were $39.5 million,
resulting in gross realized gains of $4.7 million. These
gains are included in “Other income” in the
Consolidated Statements of Operations.
The fair values of interest rate swaps are determined using the
market standard methodology of netting the discounted future
fixed cash receipts (or payments) and the discounted expected
variable cash payments (or receipts). The variable cash payments
(or receipts) are based on an expectation of future interest
rates (forward curves) derived from observable market interest
rate curves. The fair values of interest rate options are
determined using the market standard methodology of discounting
the future expected cash receipts that would occur if variable
interest rates rise above the strike rate of the caps. The
variable interest rates used in the calculation of projected
receipts on the cap are based on an expectation of future
interest rates derived from observable market interest rate
curves and volatilities.
The Company incorporates credit valuation adjustments to
appropriately reflect both its own nonperformance risk and the
respective counterparty’s nonperformance risk in the fair
value measurements. In adjusting the fair value of its
derivative contracts for the effect of nonperformance risk, the
Company has considered the impact of netting and any applicable
credit enhancements, such as collateral postings, thresholds,
mutual puts, and guarantees.
Although the Company has determined that the majority of the
inputs used to value its derivatives fall within Level 2 of
the fair value hierarchy, the credit valuation adjustments
associated with its derivatives utilize Level 3 inputs,
such as estimates of current credit spreads to evaluate the
likelihood of default by itself and its counterparties. However,
as of December 31, 2010 and 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. As a
result, the Company has determined that its derivative
valuations in their entirety are classified in Level 2 of
the fair value hierarchy.
We estimate the fair value of our Convertible Senior Unsecured
Notes based on Level 1 inputs which utilize quoted prices
in active markets where we have the ability to access value for
identical liabilities.
Redeemable non-controlling interests in the Operating
Partnership have a redemption feature and are marked to its
redemption value. The redemption value is based on the fair
value of the Company’s Common Stock at the redemption date,
and therefore, is calculated based on the fair value of the
Company’s Common Stock at the balance sheet date. Since the
valuation is based on observable inputs such as quoted prices
for similar instruments in active markets, redeemable
non-controlling interests in the Operating Partnership are
classified as Level 2.
111
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Financial
Instruments Not Carried at Fair Value
At December 31, 2010, the fair values of cash and cash
equivalents, restricted cash, notes receivable, accounts
receivable, prepaids, real estate taxes payable, accrued
interest payable, security deposits and prepaid rent,
distributions payable and accounts payable approximated their
carrying values because of the short term nature of these
instruments. The estimated fair values of other financial
instruments were determined by the Company using available
market information and appropriate valuation methodologies.
Considerable judgment is necessary to interpret market data and
develop estimated fair values. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts
the Company would realize on the disposition of the financial
instruments. The use of different market assumptions or
estimation methodologies may have a material effect on the
estimated fair value amounts.
We estimate the fair value of our 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).
We record impairment losses on long-lived assets used in
operations when events and circumstances indicate that the
assets might be impaired and the undiscounted cash flows
estimated to be generated by the future operation and
disposition of those assets are less than the net book value of
those assets. Our cash flow estimates are based upon historical
results adjusted to reflect our best estimate of future market
and operating conditions and our estimated holding periods. The
net book value of impaired assets is reduced to fair value. Our
estimates of fair value represent our best estimate based upon
Level 3 inputs such as industry trends and reference to
market rates and transactions.
We consider various factors to determine if a decrease in the
value of 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. In 2009, we
recognized a non-cash charge of $16 million representing
the
other-than-temporary
decline in fair values below the carrying values of two of our
unconsolidated joint ventures. The Company did not recognize any
other-than-temporary
decrease in the value of its other investments in unconsolidated
joint ventures during the years ended December 31, 2010 and
2009.
After determining an
other-than-temporary
decrease in the value of an equity method investment has
occurred, we estimate the fair value of our investment by
estimating the proceeds we would receive upon a hypothetical
liquidation of the investment at the date of measurement. Inputs
reflect management’s best estimate of what market
participants would use in pricing the investment giving
consideration to the terms of the joint venture agreement and
the estimated discounted future cash flows to be generated from
the underlying joint venture 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.
| 13. | 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
112
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
rate, liquidity, and credit risk primarily by managing the
amount, sources, and duration of its debt funding and the use of
derivative financial instruments. Specifically, the Company may
enter into derivative financial instruments to manage exposures
that arise from business activities that result in the receipt
or payment of future known and uncertain cash amounts, the value
of which are determined by interest rates. The Company’s
derivative financial instruments are used to manage differences
in the amount, timing, and duration of the Company’s known
or expected cash receipts and its known or expected cash
payments principally related to the Company’s investments
and borrowings.
Cash Flow
Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives
are to add stability to interest expense and to manage its
exposure to interest rate movements. To accomplish this
objective, the Company primarily uses interest rate swaps and
caps as part of its interest rate risk management strategy.
Interest rate swaps designated as cash flow hedges involve the
receipt of variable-rate amounts from a counterparty in exchange
for the Company making fixed-rate payments over the life of the
agreements without exchange of the underlying notional amount.
Interest rate caps designated as cash flow hedges involve the
receipt of variable-rate amounts from a counterparty if interest
rates rise above the strike rate on the contract in exchange for
an up front premium.
The effective portion of changes in the fair value of
derivatives designated and that qualify as cash flow hedges is
recorded in “Accumulated Other Comprehensive
Income/(Loss)” and is subsequently reclassified into
earnings in the period that the hedged forecasted transaction
affects earnings. During the years ended December 31, 2010
and 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 years
ended December 31, 2010 and 2009, the Company recorded less
than a $1,000 loss of ineffectiveness in earnings attributable
to reset date and index mismatches between the derivative and
the hedged item, and the fair value of interest rate swaps that
were not zero at inception of the hedging relationship.
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. Through December 31,
2011, the Company estimates that an additional $6.7 million
will be reclassified as an increase to interest expense.
As of December 31, 2010, 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
|
15 | $ | 455,287 | |||||
|
Interest rate caps
|
3 | $ | 137,004 | |||||
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 loss of $991,000
for the year ended December 31, 2010, and a gain of
$593,000 for the year ended December 31, 2009. As of
December 31,
113
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
2010, 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 caps
|
5 | $ | 309,984 | |||||
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, 2010.
| Asset Derivatives | Liability Derivatives | |||||||||||||||||||
| Fair Value at: | Fair Value at: | |||||||||||||||||||
|
Balance Sheet
|
December 31,
|
December 31,
|
Balance Sheet
|
December 31,
|
December 31,
|
|||||||||||||||
| Location | 2010 | 2009 | Location | 2010 | 2009 | |||||||||||||||
|
Derivatives designated as hedging instruments:
|
||||||||||||||||||||
|
Interest Rate Products
|
Other Assets | $ | 243 | $ | 1,348 | Other Liabilities | $ | 6,597 | $ | 5,282 | ||||||||||
|
Total
|
$ | 243 | $ | 1,348 | $ | 6,597 | $ | 5,282 | ||||||||||||
|
Derivatives
not
designated as hedging instruments:
|
||||||||||||||||||||
|
Interest Rate Products
|
Other Assets | $ | 271 | $ | 946 | Other Liabilities | $ | — | $ | 665 | ||||||||||
|
Total
|
$ | 271 | $ | 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 years ended December 31, 2010 and
2009 (
dollar amounts in thousands
):
|
Location of Loss
|
||||||||||||||||||||||||||||
|
Recognized in
|
Amount of Gain or (Loss)
|
|||||||||||||||||||||||||||
|
Location of Loss
|
Income on
|
Recognized
|
||||||||||||||||||||||||||
|
Reclassified
|
Amount of Gain or (Loss)
|
Derivative
|
in Income on Derivative
|
|||||||||||||||||||||||||
|
Amount of Gain or (Loss)
|
from
|
Reclassified from
|
(Ineffective
|
(Ineffective
|
||||||||||||||||||||||||
|
Recognized in
|
Accumulated
|
Accumulated OCI
|
Portion
|
Portion and Amount
|
||||||||||||||||||||||||
|
Derivatives in
|
OCI on Derivative (Effective
|
OCI
|
into Income (Effective
|
and Amount
|
Excluded from
|
|||||||||||||||||||||||
|
Topic 815 Cash
|
Portion) |
into Income
|
Portion) |
Excluded from
|
Effectiveness Testing) | |||||||||||||||||||||||
|
Flow Hedging
|
December 31,
|
December 31,
|
(Effective
|
December 31,
|
December 31,
|
Effectiveness
|
December 31,
|
December 31,
|
||||||||||||||||||||
| Relationships | 2010 | 2009 | Portion) | 2010 | 2009 | Testing) | 2010 | 2009 | ||||||||||||||||||||
|
Interest Rate Products
|
$ | (9,273 | ) | $ | (3,949 | ) | Interest expense | $ | (6,777 | ) | $ | (12,082 | ) | Other expense | $ | (1 | ) | $ | — | |||||||||
|
Total
|
$ | (9,273 | ) | $ | (3,949 | ) | $ | (6,777 | ) | $ | (12,082 | ) | $ | (1 | ) | $ | — | |||||||||||
|
Amount of
|
||||||||||
|
Gain
|
||||||||||
|
Recognized in
|
||||||||||
|
Income on
|
||||||||||
|
Derivatives Not Designated as
|
Location of Gain or
|
Derivative | ||||||||
|
Hedging Instruments Under
|
(Loss) Recognized in
|
December 31,
|
December 31,
|
|||||||
| Topic 815 | Income on Derivative | 2010 | 2009 | |||||||
|
Interest Rate Products
|
Other income/(expense) | $ | (991 | ) | $ | 593 | ||||
|
Total
|
$ | (991 | ) | $ | 593 | |||||
114
Table of Contents
UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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.
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, 2010, 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 $7.1 million. As of December 31,
2010, the Company has not posted any collateral related to these
agreements. If the Company had breached any of these provisions
at December 31, 2010, it would have been required to settle
its obligations under the agreements at their termination value
of $7.1 million.
| 14. | COMMITMENTS AND CONTINGENCIES |
Commitments
Real
Estate Under Development
The Company is committed to completing our real estate projects
under development. As of December 31, 2010, the Company had
four wholly owned properties under development with estimated
costs of $338.9 million of which $97.9 million was
incurred to date.
Ground
and Other Leases
UDR owns five communities which are subject to ground leases
expiring between 2019 and 2072. In addition, UDR is party to
various operating leases related to office space rented by the
Company with expiration dates though 2016. The leases are
accounted for in accordance with FASB ASC 840,
Leases
. Future minimum lease payments as of
December 31, 2010 are as follows
(dollars in
thousands):
|
Ground
|
Office
|
|||||||
| Leases(a) | Space | |||||||
|
2011
|
$ | 4,557 | $ | 671 | ||||
|
2012
|
4,557 | 423 | ||||||
|
2013
|
4,557 | 441 | ||||||
|
2014
|
4,557 | 460 | ||||||
|
2015
|
4,557 | 479 | ||||||
|
Thereafter
|
294,866 | 50 | ||||||
| $ | 317,651 | $ | 2,524 | |||||
| (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 |
115
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 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 $4.8 million, $5.0 million, and
$4.1 million of ground rent expense for the years ended
December 31, 2010, 2009, and 2008, respectively. The
Company incurred $1.1 million, $2.0 million, and
$1.4 million of rent expense related to office space for
the years ended December 31, 2010, 2009, and 2008,
respectively.
Contingencies
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 believes that such liability, to the
extent not provided for through insurance or otherwise, will not
have a material adverse effect on our financial condition,
results of operations or cash flow.
| 15. | REPORTABLE SEGMENTS |
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 store communities represent those communities acquired, developed, and stabilized prior to January 1, 2009, and held as of December 31, 2010. 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 2008, 2009 or 2010, 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.
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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,
2010, 2009, or 2008.
The accounting policies applicable to the operating segments
described above are the same as those described in Note 2,
Significant Accounting Policies
. The following table
details rental income and NOI for UDR’s reportable segments
for the years ended December 31, 2010, 2009, and 2008, and
reconciles NOI to (loss)/income from continuing operations per
the consolidated statement of operations
(dollars in
thousands)
:
| December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Reportable apartment home segment rental income
|
||||||||||||
|
Same Communities
|
||||||||||||
|
Western Region
|
$ | 225,236 | $ | 231,554 | $ | 227,251 | ||||||
|
Mid-Atlantic Region
|
153,468 | 150,849 | 141,232 | |||||||||
|
Southeastern Region
|
115,664 | 116,976 | 119,569 | |||||||||
|
Southwestern Region
|
45,420 | 45,416 | 39,206 | |||||||||
|
Non-Mature communities/Other
|
94,080 | 58,104 | 75,747 | |||||||||
|
Total segment and consolidated rental income
|
$ | 633,868 | $ | 602,899 | $ | 603,005 | ||||||
|
Reportable apartment home segment NOI
|
||||||||||||
|
Same Communities
|
||||||||||||
|
Western Region
|
$ | 154,285 | $ | 162,365 | $ | 159,619 | ||||||
|
Mid-Atlantic Region
|
104,909 | 103,022 | 95,781 | |||||||||
|
Southeastern Region
|
72,597 | 73,095 | 74,643 | |||||||||
|
Southwestern Region
|
26,169 | 25,629 | 22,373 | |||||||||
|
Non-Mature communities/Other
|
53,104 | 34,349 | 44,570 | |||||||||
|
Total segment and consolidated NOI
|
411,064 | 398,460 | 396,986 | |||||||||
|
Reconciling items:
|
||||||||||||
|
Non-property income
|
14,347 | 12,362 | 27,190 | |||||||||
|
Property management
|
(17,432 | ) | (16,581 | ) | (16,583 | ) | ||||||
|
Other operating expenses
|
(5,848 | ) | (6,487 | ) | (4,569 | ) | ||||||
|
Depreciation and amortization
|
(303,446 | ) | (278,391 | ) | (251,984 | ) | ||||||
|
Interest, net
|
(150,796 | ) | (142,152 | ) | (145,630 | ) | ||||||
|
General and administrative
|
(42,710 | ) | (39,344 | ) | (38,776 | ) | ||||||
|
Severance costs and other restructuring charges
|
(6,803 | ) | — | (653 | ) | |||||||
|
Other depreciation and amortization
|
(4,843 | ) | (5,161 | ) | (4,866 | ) | ||||||
|
Loss from unconsolidated entities
|
(4,204 | ) | (18,665 | ) | (3,612 | ) | ||||||
|
Redeemable non-controlling interests in OP
|
3,835 | 4,282 | (45,875 | ) | ||||||||
|
Non-controlling interests
|
(146 | ) | (191 | ) | (202 | ) | ||||||
|
Gain on consolidation of joint ventures
|
— | 1,912 | — | |||||||||
|
Net gain on the sale of depreciable property
|
4,083 | 2,424 | 786,364 | |||||||||
|
Net (loss)/income attributable to UDR, Inc.
|
$ | (102,899 | ) | $ | (87,532 | ) | $ | 697,790 | ||||
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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.
The following table details the assets of UDR’s reportable
segments for the years ended December 31, 2010 and 2009
(dollars in thousands)
:
| December 31, | ||||||||
| 2010 | 2009 | |||||||
|
Reportable apartment home segment assets
|
||||||||
|
Same Communities
|
||||||||
|
Western Region
|
$ | 2,399,394 | $ | 2,384,168 | ||||
|
Mid-Atlantic Region
|
1,274,669 | 1,263,755 | ||||||
|
Southeastern Region
|
924,481 | 911,973 | ||||||
|
Southwestern Region
|
423,737 | 418,303 | ||||||
|
Non-Mature communities/Other
|
1,859,066 | 1,336,848 | ||||||
|
Total segment assets
|
6,881,347 | 6,315,047 | ||||||
|
Accumulated depreciation
|
(1,638,326 | ) | (1,351,293 | ) | ||||
|
Total segment assets — net book value
|
5,243,021 | 4,963,754 | ||||||
|
Reconciling items:
|
||||||||
|
Cash and cash equivalents
|
9,486 | 5,985 | ||||||
|
Marketable securities
|
3,866 | 37,650 | ||||||
|
Restricted cash
|
15,447 | 8,879 | ||||||
|
Deferred financing costs, net
|
27,267 | 26,601 | ||||||
|
Notes receivable
|
7,800 | 7,800 | ||||||
|
Investment in unconsolidated joint ventures
|
148,057 | 14,126 | ||||||
|
Other assets
|
74,596 | 67,822 | ||||||
|
Total consolidated assets
|
$ | 5,529,540 | $ | 5,132,617 | ||||
Capital expenditures related to our same communities totaled
$44.7 million, $51.3 million, and $79.0 million
for the three years ended December 31, 2010, 2009, and
2008, respectively. Capital expenditures related to our
non-mature/other communities totaled $3.9 million,
$5.0 million, and $4.7 million for the three years
ended December 31, 2010, 2009, and 2008, 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 — Dallas, Phoenix, Austin, and
Houston
| 16. | RESTRUCTURING CHARGES |
As of December 31, 2010, UDR decided to consolidate
corporate operations and centralize job functions to its
Highlands Ranch, Colorado headquarters from its Richmond,
Virginia office. During the fourth quarter
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UDR,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
of 2010, the Company recorded a severance charge of
$6.8 million, which includes costs related to these
activities in addition to severance related to the retirement of
an executive officer of the Company. These costs are reported in
the Consolidated Statements of Operations within the line item
“Severance costs and other restructuring charges”.
As of December 31, 2008, UDR restructured our operations
resulting in a severance related charge of $653,000 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 positions.
| 17. | UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA |
Selected consolidated quarterly financial data for the years
ended December 31, 2010 and 2009 is summarized in the table
below
(dollars in thousands, except per share amounts)
:
| Three Months Ended | ||||||||||||||||
| March 31, | June 30, | September 30, | December 31, | |||||||||||||
|
2010
|
||||||||||||||||
|
Rental income(a)
|
$ | 151,092 | $ | 153,369 | $ | 159,795 | $ | 167,993 | ||||||||
|
Loss from continuing operations
|
(25,172 | ) | (28,030 | ) | (28,745 | ) | (29,366 | ) | ||||||||
|
Income from discontinued operations
|
146 | 390 | 4,140 | 49 | ||||||||||||
|
Net loss attributable to common stockholders
|
(26,435 | ) | (28,968 | ) | (26,134 | ) | (30,825 | ) | ||||||||
|
Loss per share(b)
|
||||||||||||||||
|
Basic and diluted
|
$ | (0.17 | ) | $ | (0.18 | ) | $ | (0.16 | ) | $ | (0.17 | ) | ||||
|
2009
|
||||||||||||||||
|
Rental income(a)
|
$ | 150,061 | $ | 151,285 | $ | 149,756 | $ | 149,600 | ||||||||
|
Loss from continuing operations
|
(13,430 | ) | (14,947 | ) | (40,555 | ) | (25,880 | ) | ||||||||
|
Income from discontinued operations
|
7 | 2,287 | 800 | 95 | ||||||||||||
|
Net loss attributable 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 | ) | ||||
| (a) | Represents rental income from continuing operations, excluding amounts classified as discontinued operations. | |
| (b) | Quarterly earnings per common share amounts may not total to the annual amounts due to rounding. |
119
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[This page
is intentionally left blank.]
120
Table of Contents
The Partners
United Dominion Realty, L.P.
We have audited the accompanying consolidated balance sheets of
United Dominion Realty, L.P. (the “Partnership”) as of
December 31, 2010 and 2009, and the related consolidated
statements of operations, partners’ capital and
comprehensive income and cash flows for each of the three years
in the period ended December 31, 2010. Our audits also
included the financial statement schedule listed in the Index at
Item 15(a). These financial statements and schedule are the
responsibility of the Partnership’s management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Partnership’s internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Partnership’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of the Partnership at December 31, 2010
and 2009, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
December 31, 2010, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly, in all material respects the information set
forth therein.
/s/ Ernst &
Young LLP
Denver, Colorado
February 23, 2011
121
Table of Contents
UNITED
DOMINION REALTY, L.P.
CONSOLIDATED
BALANCE SHEETS
(In thousands, except for unit data)
(In thousands, except for unit data)
| December 31, | ||||||||
| 2010 | 2009 | |||||||
|
ASSETS
|
||||||||
|
Real estate owned:
|
||||||||
|
Real estate held for investment
|
$ | 3,706,184 | $ | 3,640,888 | ||||
|
Less: accumulated depreciation
|
(884,083 | ) | (717,892 | ) | ||||
|
Total real estate owned, net of accumulated depreciation
|
2,822,101 | 2,922,996 | ||||||
|
Cash and cash equivalents
|
920 | 442 | ||||||
|
Restricted cash
|
8,022 | 6,865 | ||||||
|
Deferred financing costs, net
|
7,465 | 8,727 | ||||||
|
Other assets
|
22,887 | 22,037 | ||||||
|
Total assets
|
$ | 2,861,395 | $ | 2,961,067 | ||||
| LIABILITIES AND CAPITAL | ||||||||
|
Secured debt
|
$ | 1,070,061 | $ | 1,122,198 | ||||
|
Note payable due to General Partner
|
78,271 | 71,547 | ||||||
|
Real estate taxes payable
|
5,245 | 8,561 | ||||||
|
Accrued interest payable
|
518 | 933 | ||||||
|
Security deposits and prepaid rent
|
13,158 | 13,728 | ||||||
|
Distributions payable
|
33,559 | 32,642 | ||||||
|
Deferred gains on the sale of depreciable property
|
63,838 | 63,838 | ||||||
|
Accounts payable, accrued expenses, and other liabilities
|
35,122 | 25,872 | ||||||
|
Total liabilities
|
1,299,772 | 1,339,319 | ||||||
|
Capital:
|
||||||||
|
Partners’ capital:
|
||||||||
|
Operating partnership units: 179,909,408 OP units outstanding at
December 31, 2010 and 2009
|
||||||||
|
General partner: 110,883 OP units outstanding at
December 31, 2010 and 2009
|
1,363 | 1,456 | ||||||
|
Limited partners: 179,798,525 OP units outstanding at
December 31, 2010 and 2009
|
2,046,380 | 2,199,450 | ||||||
|
Accumulated other comprehensive loss
|
(5,502 | ) | (3,153 | ) | ||||
|
Total partners’ capital
|
2,042,241 | 2,197,753 | ||||||
|
Receivable due from General Partner
|
(492,709 | ) | (588,185 | ) | ||||
|
Non-controlling interest
|
12,091 | 12,180 | ||||||
|
Total capital
|
1,561,623 | 1,621,748 | ||||||
|
Total liabilities and capital
|
$ | 2,861,395 | $ | 2,961,067 | ||||
See accompanying notes to consolidated financial
statements.
122
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UNITED
DOMINION REALTY, L.P.
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
REVENUES
|
||||||||||||
|
Rental income
|
$ | 350,394 | $ | 353,056 | $ | 336,674 | ||||||
|
Non-property income:
|
||||||||||||
|
Other income
|
1,695 | 5,695 | 13,106 | |||||||||
|
Total revenues
|
352,089 | 358,751 | 349,780 | |||||||||
|
EXPENSES
|
||||||||||||
|
Rental expenses:
|
||||||||||||
|
Real estate taxes and insurance
|
43,067 | 43,031 | 38,939 | |||||||||
|
Personnel
|
29,082 | 27,344 | 26,591 | |||||||||
|
Utilities
|
18,073 | 17,236 | 15,667 | |||||||||
|
Repair and maintenance
|
18,598 | 17,355 | 17,231 | |||||||||
|
Administrative and marketing
|
7,458 | 7,522 | 7,394 | |||||||||
|
Property management
|
9,636 | 9,709 | 9,259 | |||||||||
|
Other operating expenses
|
5,028 | 4,868 | 4,400 | |||||||||
|
Real estate depreciation and amortization
|
166,480 | 166,773 | 154,584 | |||||||||
|
Interest expense:
|
||||||||||||
|
Interest on secured debt
|
51,798 | 48,519 | 41,643 | |||||||||
|
Interest on note payable due to General Partner
|
424 | 5,028 | 5,028 | |||||||||
|
General and administrative
|
23,291 | 16,886 | 19,081 | |||||||||
|
Other depreciation and amortization
|
— | — | 327 | |||||||||
|
Total expenses
|
372,935 | 364,271 | 340,144 | |||||||||
|
(Loss)/income from continuing operations
|
(20,846 | ) | (5,520 | ) | 9,636 | |||||||
|
Income from discontinued operations
|
152 | 1,475 | 489,272 | |||||||||
|
Consolidated net (loss)/income
|
(20,694 | ) | (4,045 | ) | 498,908 | |||||||
|
Net income attributable to non-controlling interests
|
(41 | ) | (131 | ) | (1,188 | ) | ||||||
|
Net (loss)/income attributable to OP unitholders
|
$ | (20,735 | ) | $ | (4,176 | ) | $ | 497,720 | ||||
|
Earnings per OP unit- basic and diluted:
|
||||||||||||
|
(Loss)/income from continuing operations attributable to OP
unitholders
|
$ | (0.12 | ) | $ | (0.03 | ) | $ | 0.06 | ||||
|
Income from discontinued operations
|
$ | 0.00 | $ | 0.01 | $ | 2.94 | ||||||
|
(Loss)/income attributable to OP unitholders
|
$ | (0.12 | ) | $ | (0.02 | ) | $ | 3.00 | ||||
|
Weighted average OP units outstanding
|
179,909 | 178,817 | 166,163 | |||||||||
See accompanying notes to consolidated financial
statements.
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United
Dominion Realty, L.P.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands, except for unit data)
(In thousands, except for unit data)
(unaudited)
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Operating Activities
|
||||||||||||
|
Consolidated net (loss)/income
|
$ | (20,694 | ) | $ | (4,045 | ) | $ | 498,908 | ||||
|
Adjustments to reconcile net (loss)/income to net cash provided
by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
166,480 | 166,773 | 154,911 | |||||||||
|
Net gain on the sale of depreciable property
|
(152 | ) | (1,475 | ) | (475,249 | ) | ||||||
|
Write off of bad debt
|
1,760 | 2,216 | 1,439 | |||||||||
|
Amortization of deferred financing costs and other
|
1,652 | 2,195 | 1,766 | |||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Increase in operating assets
|
(3,705 | ) | (3,340 | ) | (3,463 | ) | ||||||
|
Increase/(decrease) in operating liabilities
|
1,263 | (4,991 | ) | (9,652 | ) | |||||||
|
Net cash provided by operating activities
|
146,604 | 157,333 | 168,660 | |||||||||
|
Investing Activities
|
||||||||||||
|
Proceeds from sales of real estate investments, net
|
— | — | 879,930 | |||||||||
|
Proceeds from note receivable
|
— | 200,000 | — | |||||||||
|
Acquisition of real estate assets (net of liabilities assumed)
and initial capital expenditures
|
— | — | (713,649 | ) | ||||||||
|
Capital expenditures and other major improvements —
real estate assets, net of escrow reimbursement
|
(59,458 | ) | (70,372 | ) | (84,288 | ) | ||||||
|
Net cash (used in)/provided by investing activities
|
(59,458 | ) | 129,628 | 81,993 | ||||||||
|
Financing Activities
|
||||||||||||
|
Payments to General Partner
|
(31,359 | ) | (550,392 | ) | (319,478 | ) | ||||||
|
Proceeds from the issuance of secured debt
|
11,326 | 340,608 | 292,120 | |||||||||
|
Payments on secured debt
|
(60,686 | ) | (64,455 | ) | (204,205 | ) | ||||||
|
Payment of financing costs
|
(391 | ) | (4,073 | ) | (3,639 | ) | ||||||
|
Repurchase of Out-Performance Partnership Units
|
— | — | (524 | ) | ||||||||
|
OP unit redemption
|
(327 | ) | — | — | ||||||||
|
Distributions paid to partnership unitholders
|
(5,231 | ) | (11,797 | ) | (11,424 | ) | ||||||
|
Net cash used in financing activities
|
(86,668 | ) | (290,109 | ) | (247,150 | ) | ||||||
|
Net increase/(decrease) in cash and cash equivalents
|
478 | (3,148 | ) | 3,503 | ||||||||
|
Cash and cash equivalents, beginning of year
|
442 | 3,590 | 87 | |||||||||
|
Cash and cash equivalents, end of year
|
$ | 920 | $ | 442 | $ | 3,590 | ||||||
|
Supplemental Information:
|
||||||||||||
|
Interest paid during the year, net of amounts capitalized
|
$ | 51,854 | $ | 46,029 | $ | 41,929 | ||||||
|
Non-cash transactions:
|
||||||||||||
|
Issuance of note receivable upon the disposition of real estate
|
$ | — | $ | — | $ | 200,000 | ||||||
|
Secured debt assumed at acquisition
|
— | — | 95,705 | |||||||||
See accompanying notes to consolidated financial
statements.
124
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UNITED
DOMINION REALTY, L.P.
CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL AND COMPREHENSIVE INCOME/(LOSS)
(In thousands)
(unaudited)
CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL AND COMPREHENSIVE INCOME/(LOSS)
(In thousands)
(unaudited)
| UDR, Inc. |
Accumulated
|
|||||||||||||||||||||||||||||||||||||||
|
Out-
|
Other
|
Receivable
|
||||||||||||||||||||||||||||||||||||||
|
Class A
|
Performance
|
Comprehensive
|
Total
|
due from
|
Non-
|
|||||||||||||||||||||||||||||||||||
|
Limited
|
Limited
|
Limited
|
General
|
Partnership
|
Income/
|
Partnership
|
General
|
controlling
|
||||||||||||||||||||||||||||||||
| Partner | Partners | Partner | Partner | Shares | (Loss) | Equity | Partner | interest | Total | |||||||||||||||||||||||||||||||
|
Balance, January 1, 2008
|
$ | 32,114 | $ | 139,660 | $ | 2,057,267 | $ | 1,381 | $ | 1,982 | $ | — | $ | 2,232,404 | $ | (254,256 | ) | $ | 10,861 | $ | 1,989,009 | |||||||||||||||||||
|
Distributions
|
(3,719 | ) | (13,067 | ) | (361,879 | ) | (236 | ) | — | — | (378,901 | ) | — | — | (378,901 | ) | ||||||||||||||||||||||||
|
Repurchases
|
— | — | — | — | (524 | ) | — | (524 | ) | — | — | (524 | ) | |||||||||||||||||||||||||||
|
OP Unit Redemptions for common shares of UDR
|
— | (29,136 | ) | 29,136 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
|
Adjustment to reflect limited partners’ capital at
redemption value
|
(10,949 | ) | (35,863 | ) | 46,812 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
|
Other comprehensive income/(loss):
|
||||||||||||||||||||||||||||||||||||||||
|
Unrealized loss on derivative financial instruments
|
— | — | — | — | — | (4,874 | ) | (4,874 | ) | — | — | (4,874 | ) | |||||||||||||||||||||||||||
|
Net income
|
4,864 | 17,091 | 475,458 | 307 | — | — | 497,720 | — | 1,188 | 498,908 | ||||||||||||||||||||||||||||||
|
Total comprehensive income/(loss)
|
4,864 | 17,091 | 475,458 | 307 | — | (4,874 | ) | 492,846 | — | 1,188 | 494,034 | |||||||||||||||||||||||||||||
|
Net change in receivable due from General Partner
|
— | — | — | — | — | — | — | (120,868 | ) | — | (120,868 | ) | ||||||||||||||||||||||||||||
|
Balance, December 31, 2008
|
22,310 | 78,685 | 2,246,794 | 1,452 | 1,458 | (4,874 | ) | 2,345,825 | (375,124 | ) | 12,049 | 1,982,750 | ||||||||||||||||||||||||||||
|
Distributions
|
(2,328 | ) | (3,600 | ) | (146,954 | ) | (94 | ) | — | — | (152,976 | ) | — | — | (152,976 | ) | ||||||||||||||||||||||||
|
Issuance of OP Units through Special Dividend
|
1,568 | 5,691 | — | 100 | — | 7,359 | 153,611 | 160,970 | ||||||||||||||||||||||||||||||||
|
Forfeitures- OPPS units
|
14 | 34 | 1,409 | 1 | (1,458 | ) | — | — | — | — | — | |||||||||||||||||||||||||||||
|
OP Unit Redemptions for common shares of UDR
|
— | (23,308 | ) | 23,308 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
|
Adjustment to reflect limited partners’ capital at
redemption value
|
7,274 | 12,218 | (19,492 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
|
Other comprehensive income/(loss):
|
||||||||||||||||||||||||||||||||||||||||
|
Unrealized gain on derivative financial instruments
|
— | — | — | — | — | 1,721 | 1,721 | — | — | 1,721 | ||||||||||||||||||||||||||||||
|
Net loss
|
(41 | ) | (98 | ) | (4,034 | ) | (3 | ) | — | — | (4,176 | ) | — | 131 | (4,045 | ) | ||||||||||||||||||||||||
|
Total comprehensive loss
|
(41 | ) | (98 | ) | (4,034 | ) | (3 | ) | — | 1,721 | (2,455 | ) | — | 131 | (2,324 | ) | ||||||||||||||||||||||||
|
Net change in receivable due from General Partner
|
— | — | — | — | — | — | — | (366,672 | ) | — | (366,672 | ) | ||||||||||||||||||||||||||||
|
Balance, December 31, 2009
|
28,797 | 69,622 | 2,101,031 | 1,456 | — | (3,153 | ) | 2,197,753 | (588,185 | ) | 12,180 | 1,621,748 | ||||||||||||||||||||||||||||
|
Distributions
|
(2,328 | ) | (2,819 | ) | (127,201 | ) | (80 | ) | — | — | (132,428 | ) | — | — | (132,428 | ) | ||||||||||||||||||||||||
|
OP Unit Redemptions for common shares of UDR
|
— | (18,214 | ) | 18,214 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
|
OP Unit Redemptions for cash
|
— | (327 | ) | 327 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
|
Adjustment to reflect limited partners’ capital at
redemption value
|
14,932 | 30,019 | (44,951 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
|
Change in UDR, L.P. non-controlling interest
|
— | — | — | — | — | — | — | — | (130 | ) | (130 | ) | ||||||||||||||||||||||||||||
|
Other comprehensive income/(loss):
|
||||||||||||||||||||||||||||||||||||||||
|
Unrealized loss on derivative financial instruments
|
— | — | — | — | — | (2,349 | ) | (2,349 | ) | — | — | (2,349 | ) | |||||||||||||||||||||||||||
|
Net loss
|
(202 | ) | (423 | ) | (20,097 | ) | (13 | ) | — | — | (20,735 | ) | — | 41 | (20,694 | ) | ||||||||||||||||||||||||
|
Total comprehensive loss
|
(202 | ) | (423 | ) | (20,097 | ) | (13 | ) | — | (2,349 | ) | (23,084 | ) | — | 41 | (23,043 | ) | |||||||||||||||||||||||
|
Net change in receivable due from General Partner
|
— | — | — | — | — | — | — | 95,476 | — | 95,476 | ||||||||||||||||||||||||||||||
|
Balance, December 31, 2010
|
$ | 41,199 | $ | 77,858 | $ | 1,927,323 | $ | 1,363 | $ | — | $ | (5,502 | ) | $ | 2,042,241 | $ | (492,709 | ) | $ | 12,091 | $ | 1,561,623 | ||||||||||||||||||
See accompanying notes to consolidated financial
statements.
125
Table of Contents
UNITED
DOMINION REALTY, L.P.
DECEMBER
31, 2010
| 1. | CONSOLIDATION AND BASIS OF PRESENTATION |
Consolidation
and Basis of Presentation
United Dominion Realty, L.P. (“UDR, L.P.”, the
“Operating Partnership”, “we” or
“our”) is a Delaware limited partnership, that owns,
acquires, renovates, develops, redevelops, manages, and disposes
of multifamily apartment communities generally located in high
barrier-to-entry
markets located in the United States. The high
barrier-to-entry
markets are characterized by limited land for new construction,
difficult and lengthy entitlement process, expensive
single-family home prices and significant employment growth
potential. UDR, L.P. is a subsidiary of UDR, Inc.
(“UDR” or the “General Partner”) , a real
estate investment trust under the Internal Revenue Code of 1986,
and through which UDR conducts a significant portion of its
business. During the twelve months ended December 31, 2010
and 2009, rental revenues of the Operating Partnership
represented of 55% and 59% of the General Partner’s
consolidated rental revenues. At December 31, 2010, the
Operating Partnership’s apartment portfolio consisted of 81
communities located in 19 markets consisting of 23,351 apartment
homes.
Interests in UDR, L.P. are represented by Operating Partnership
Units (“OP Units”). The Operating
Partnership’s net income is allocated to the partners,
which is initially based on their respective distributions made
during the year and secondly, their percentage interests.
Distributions are made in accordance with the terms of the
Amended and Restated Agreement of Limited Partnership of United
Dominion Realty, L.P. (the “Operating Partnership
Agreement”), on a per unit basis that is generally equal to
the dividend per share on UDR’s common stock, which is
publicly traded on the New York Stock Exchange
(“NYSE”) under the ticker symbol “UDR”.
As of December 31, 2010, there were 179,909,408 OP units in
the Operating Partnership outstanding, of which 174,847,440 or
97.2% were owned by UDR and affiliated entities and 5,061,968 or
2.8%, which were owned by non-affiliated limited partners. There
were 179,909,408 OP units in the Operating Partnership
outstanding as of December 31, 2009 of which, 173,922,816
or 96.7% were owned by UDR and affiliated entities and 5,986,592
or 3.3%, which were owned by non-affiliated limited partners.
See Note 9,
Capital Structure
.
As sole general partner of the Operating Partnership, UDR owned
110,883 general partnership interest units or 0.06% of the total
OP Units outstanding as of December 31, 2010 and 2009.
At December 31, 2010 and 2009, there were 179,798,525 OP
units outstanding of limited partnership interest, of which
1,751,671 were Class A Limited Partnership OP units. UDR
owned 174,736,557 or 97.2% and 173,811,933 or 96.7% at
December 31, 2010 and 2009, respectively. The remaining
5,061,968 or 2.8% and 5,986,592 or 3.3% OP units outstanding of
limited partnership interest were held by non- affiliated
partners at December 31, 2010 and 2009, respectively, of
which 1,751,671 were Class A Limited Partnership units.
Basis of
presentation
The accompanying Consolidated Financial Statements consists of
the Operating Partnership and its subsidiaries. Profits and
losses are allocated in accordance with the terms of the
Operating Partnership agreement. All significant intercompany
accounts and transactions have been eliminated in consolidation.
The Operating Partnership evaluated subsequent events through
the date of issuance of the Operating Partnership’s
financial statements. No recognized or non-recognized subsequent
events were noted.
126
Table of Contents
UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
Recent
Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update
(“ASU”)
No. 2010-06,
“Improving Disclosures about Fair Value Measurements”
an amendment to ASC Topic 820, “Fair Value Measurements and
Disclosures.” This amendment provides for more robust
disclosures about (1) the different classes of assets and
liabilities measured at fair value, (2) the valuation
techniques and inputs used, (3) the activity in
Level 3 fair value measurements, and (4) the transfers
between Levels 1, 2, and 3. ASU
No. 2010-06
was effective for the Operating Partnership for our fiscal year
beginning in January 1, 2010.
In December 2010, the FASB issued ASU
2010-29,
which addresses diversity in practice about the interpretation
of the pro forma revenue and earnings disclosure requirements
for business combinations. The amendments in ASU
2010-29
specify that if a public entity presents comparative financial
statements, the entity should disclose revenue and earnings of
the combined entity as though the business combination(s) that
occurred during the current year had occurred as of the
beginning of the comparable prior annual reporting period only.
The amendments in ASU
2010-29
also
expand the supplemental pro forma disclosures to include a
description of the nature and amount of material, nonrecurring
pro forma adjustments directly attributable to the business
combination included in the reported pro forma revenue and
earnings. The amendments in ASU
2010-29
are
effective prospectively for business combinations for which the
acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15,
2010.
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.
Reclassifications
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 Operating Partnership
or related parties will not have any significant continuing
involvement in the ownership or operation of the property after
the sale or disposition. Once a property is deemed as
held-for-sale,
depreciation is no longer recorded. However, if the Operating
Partnership determines that the property no longer meets the
criteria for
held-for-sale,
the Company will recapture any unrecorded depreciation on the
property (see Note 4,
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.
127
Table of Contents
UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Expenditures for ordinary repair and maintenance costs are
charged to expense as incurred. Expenditures for improvements,
renovations, and replacements related to the acquisition
and/or
improvement of real estate assets are capitalized and
depreciated over their estimated useful lives if the
expenditures qualify as a betterment or the life of the related
asset will be substantially extended beyond the original life
expectancy.
The Operating Partnership purchases real estate investment
properties and 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 Operating Partnership estimates the intangible
value of the lease agreements by determining the lost revenue
associated with a hypothetical
lease-up.
Depreciation on the building is based on the expected useful
life of the asset and the in-place leases are amortized over
their remaining contractual life. Property acquisition costs are
expense as incurred.
Quarterly or when changes in circumstances warrant, UDR, L.P.
will assess our real estate portfolio for indicators of
impairment. In determining whether the Operating Partnership has
indicators of impairment in our real estate assets, we assess
whether the long-lived asset’s carrying value exceeds the
community’s undiscounted future cash flows, which is
representative of projected NOI plus the residual value of the
community. Our future cash flow estimates are based upon
historical results adjusted to reflect our best estimate of
future market and operating conditions and our estimated holding
periods. If such indicators of impairment are present and the
carrying value exceeds the undiscounted cash flows of the
community, an impairment loss is recognized equal to the excess
of the carrying amount of the asset over its estimated fair
value. Our estimates of fair market value represent our best
estimate based primarily upon unobservable inputs related to
rental rates, operating costs, growth rates, discount rates and
capitalization rates, industry trends and reference to market
rates and transactions.
For long-lived assets to be disposed of, impairment losses are
recognized when the fair value of the asset less estimated cost
to sell is less than the carrying value of the asset. Properties
classified as real estate held for 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, 2010 and
2009, the value of our net intangible assets which are reflected
in “Other assets” was $4.1 million and
$4.8 million, respectively. As of December 31, 2010
and 2009, the value of our net intangible liabilities which are
reflected in “Accounts payable, accrued expenses, and other
liabilities” was $3.3 million and $3.6 million in
our Consolidated Balance Sheets. The balances are being
amortized over the remaining life of the respective intangible.
All development and redevelopment projects and related carrying
costs are capitalized during periods in which activities
necessary to get the property ready for its intended use are in
progress. As each building in a project is completed and becomes
available for
lease-up,
the Operating Partnership ceases capitalization and the assets
are depreciated over their estimated useful lives. The costs of
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 2010, 2009,
and 2008, total interest capitalized pertaining to redevelopment
projects and land held for future development was
$1.3 million, $444,000, and $580,000, respectively.
128
Table of Contents
UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cash,
cash equivalents and restricted cash
Cash and cash equivalents consist of cash on hand and demand
deposits with financial institutions. Restricted cash consists
of escrow deposits held by lenders for real estate taxes,
insurance and replacement reserves, and security deposits.
Derivative
financial instruments
The General Partner utilizes derivative financial instruments to
manage interest rate risk and will generally designate these
financial instruments as cash flow hedges. Derivative financial
instruments associated with the Operating Partnership’s
allocation of the General Partner’s debt are recorded on
our Consolidated Balance Sheets as either an asset or liability
and measured quarterly at their fair value. The changes in fair
value for the General Partner’s cash flow hedges allocated
to the Operating Partnership that are deemed effective are
reflected in other comprehensive income and for non-designated
derivative financial instruments in earnings. The ineffective
component of cash flow hedges, if any, is recorded in earnings.
Comprehensive
income
Comprehensive income, which is defined as all changes in capital
during each period except for those resulting from investments
by or distributions to partners, is displayed in the
accompanying Consolidated Statements of Partners’ Capital
and Comprehensive Income/(Loss). For the year ended
December 31, 2010, other comprehensive income/(loss)
consisted of the change in the fair value of the General
Partner’s effective cash flow hedges that are allocated to
the Operating Partnership.
Income
taxes
The taxable income or loss of the Operating Partnership is
reported on the tax returns of the partners. Accordingly, no
provision has been made in the accompanying financial statements
for federal or state income taxes on income that is passed
through to the partners. However, any state or local revenue,
excise or franchise taxes that result from the operating
activities of the Operating Partnership are recorded at the
entity level. The Operating Partnership’s tax returns are
subject to examination by federal and state taxing authorities.
Net income for financial reporting purposes differs from the net
income for income tax reporting purposes primarily due to
temporary differences, principally real estate depreciation and
the tax deferral of certain gains on property sales. The
differences in depreciation result from differences in the book
and tax basis of certain real estate assets and the differences
in the methods of depreciation and lives of the real estate
assets.
The Operating Partnership adopted certain accounting guidance
within ASC Topic 740,
Income Taxes
, with respect to how
uncertain tax positions should be recognized, measured,
presented, and disclosed in the financial statements. The
guidance requires the accounting and disclosure of tax positions
taken or expected to be taken in the course of preparing the
Operating Partnership’s tax returns to determine whether
the tax positions are “more-likely-than-not” of being
sustained by the applicable tax authority. Tax positions not
deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year.
Management of the Operating Partnership is required to analyze
all open tax years, as defined by the statute of limitations,
for all major jurisdictions, which include federal and certain
states. The Operating Partnership has no examinations in
progress and none are expected at this time.
Management of the Operating Partnership has reviewed all open
tax years (2005- 2009) and major jurisdictions and
concluded the adoption of the new accounting guidance resulted
in no impact to the Operating Partnership’s financial
position or results of operations. There is no tax liability
resulting from unrecognized tax benefits relating to uncertain
income tax positions taken or expected to be taken in future tax
returns.
129
Table of Contents
UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 Operating Partnership recognizes
interest income, management and other fees and incentives when
earned, fixed and determinable.
The Operating Partnership 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 Operating Partnership 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.
Sales to entities in which we or our General Partner retain or
otherwise own an interest are accounted for as partial sales. If
all other requirements for recognizing profit under the full
accrual method have been satisfied and no other forms of
continuing involvement are present, we recognize profit
proportionate to the outside interest in the buyer and will
defer the gain on the interest we or our General Partner retain.
The Operating Partnership 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.
Earnings
per Operating Partnership Unit
Basic earnings per OP Unit is computed by dividing net
(loss)/income attributable to general and limited partner
unitholders by the weighted average number of general and
limited partner units (including redeemable OP Units)
outstanding during the year. Diluted earnings per OP Unit
reflects the potential dilution that could occur if securities
or other contracts to issue OP Units were exercised or
converted into OP Units or resulted in the issuance of
OP Units and then shared in the earnings of the Operating
Partnership. For the years ended December 31, 2010, 2009,
and 2008, there were no dilutive instruments, and therefore,
diluted earnings per OP Unit and basic earnings per
OP Unit are the same. See Note 9,
Capital
Structure
, for further discussion on redemption rights of
OP Units.
Non-controlling
interests
The noncontrolling interests represent the General
Partner’s interests in certain consolidated subsidiaries
and are presented in the capital section of the consolidated
balance sheets since these interests are not convertible or
redeemable into any other ownership interests of the Operating
Partnership.
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 2010, 2009, and
2008, total advertising expense from continuing and discontinued
operations was $2.3 million, $2.4 million, and
$2.6 million, respectively.
Allocation
of General and Administrative Expenses
The Operating Partnership is charged directly with general and
administrative expenses it incurs. The Operating Partnership is
also charged with other general and administrative expenses that
have been allocated
130
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UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
by the General Partner to each of its subsidiaries, including
the Operating Partnership, based on each subsidiary’s
pro-rata portion of UDR’s total apartment homes. (See
Note 6,
Related Party Transactions
.)
Market
concentration risk
Approximately 20.6%, 14.4% and 10.6% of our apartment
communities are located in Orange County, California;
Metropolitan Washington DC; and San Francisco, California,
respectively, based on the carrying value of our real estate
portfolio as of December 31, 2010. Therefore, the
Partnership is subject to increased exposure (positive or
negative) from economic and other competitive factors specific
to those markets.
| 3. | REAL ESTATE OWNED |
Real estate assets owned by the Operating Partnership consists
of income producing operating properties and land held for
future development. As of December 31, 2010, the Operating
Partnership owned and consolidated 81 communities in
8 states plus the District of Columbia totaling 23,351
apartment homes. The following table summarizes the carrying
amounts for our real estate owned (at cost) as of
December 31, 2010 and 2009
(dollar amounts in
thousands):
| December 31, | ||||||||
| 2010 | 2009 | |||||||
|
Land
|
$ | 989,924 | $ | 985,126 | ||||
|
Depreciable property — held and used
|
||||||||
|
Buildings and improvements
|
2,573,921 | 2,525,812 | ||||||
|
Furniture, fixtures and equipment
|
116,324 | 108,094 | ||||||
|
Land held for future development
|
26,015 | 21,856 | ||||||
|
Investment in real estate
|
3,706,184 | 3,640,888 | ||||||
|
Accumulated depreciation
|
(884,083 | ) | (717,892 | ) | ||||
|
Investment in real estate, net
|
$ | 2,822,101 | $ | 2,922,996 | ||||
The Operating Partnership did not have any acquisitions during
the years ended December 31, 2010 and 2009.
| 4. | 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
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 ASC Topic 360 does not have an impact on net income
attributable to unit holders. The application of ASC Topic 360
results in the reclassification of the operating results of all
properties sold or classified as held for disposition through
December 31, 2010, within the Consolidated Statements of
Operations for the years ended December 31, 2010, 2009, and
2008, and the reclassification of the assets and liabilities
within the Consolidated Balance Sheets as of December 31,
2010 and 2009, if applicable.
For the years ended December 31, 2010 and 2009, the
Operating Partnership did not dispose of any communities. At
December 31, 2010, the Operating Partnership did not have
any assets that met the criteria to be included in discontinued
operations.
For the year ended December 31, 2008, the Operating
Partnership sold 55 communities and recognized gains for
financial reporting purposes of $475.2 million on these
sales. In conjunction with the sale of these communities, the
Operating Partnership received a $200 million note that was
fully repaid in 2009.
131
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UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following is a summary of income from discontinued
operations for the three years ended December 31, 2010
(dollars in thousands)
:
| 2010 | 2009 | 2008 | ||||||||||
|
Rental income
|
$ | — | $ | — | $ | 25,338 | ||||||
|
Rental expenses
|
— | — | 10,150 | |||||||||
|
Property management fee
|
— | — | 697 | |||||||||
|
Interest
|
— | — | 468 | |||||||||
| — | — | 11,315 | ||||||||||
|
Income before net gain on the sale of property
|
— | — | 14,023 | |||||||||
|
Net gain on the sale of property
|
152 | 1,475 | 475,249 | |||||||||
|
Income from discontinued operations
|
$ | 152 | $ | 1,475 | $ | 489,272 | ||||||
| 5. | DEBT |
Our secured debt instruments generally feature either monthly
interest and principal or monthly interest-only payments with
balloon payments due at maturity. For purposes of classification
in the following table, variable rate debt with a derivative
financial instrument designated as a cash flow hedge is deemed
as fixed rate debt due to the Operating Partnership having
effectively established the interest rate for the underlying
debt instrument. Secured debt consists of the following as of
December 31, 2010 and 2009 (
dollars in thousands
):
| 2010 | ||||||||||||||||||||
|
Principal Outstanding
|
Weighted
|
Weighted
|
Number of
|
|||||||||||||||||
| December 31 |
Average
|
Average
|
Communities
|
|||||||||||||||||
| 2010 | 2009 | Interest Rate | Years to Maturity | Encumbered | ||||||||||||||||
|
Fixed Rate Debt
|
||||||||||||||||||||
|
Mortgage notes payable
|
$ | 192,205 | $ | 230,852 | 5.54 | % | 3.3 | 5 | ||||||||||||
|
Tax-exempt secured notes payable
|
13,325 | 13,325 | 5.30 | % | 20.2 | 1 | ||||||||||||||
|
Fannie Mae credit facilities
|
560,993 | 587,403 | 5.21 | % | 6.4 | 9 | ||||||||||||||
|
Total fixed rate secured debt
|
766,523 | 831,580 | 5.29 | % | 5.8 | 15 | ||||||||||||||
|
Variable Rate Debt
|
||||||||||||||||||||
|
Mortgage notes payable
|
100,590 | 100,590 | 2.75 | % | 4.2 | 4 | ||||||||||||||
|
Tax-exempt secured note payable
|
27,000 | 27,000 | 1.07 | % | 19.2 | 1 | ||||||||||||||
|
Fannie Mae credit facilities
|
175,948 | 163,028 | 1.93 | % | 4.7 | 18 | ||||||||||||||
|
Total variable rate secured debt
|
303,538 | 290,618 | 2.13 | % | 5.8 | 23 | ||||||||||||||
|
Total secured debt
|
$ | 1,070,061 | $ | 1,122,198 | 4.40 | % | 5.8 | 38 | ||||||||||||
As of December 31, 2010, the General Partner had secured
credit facilities with Fannie Mae (“FNMA”) 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 the General Partner’s option.
At December 31, 2010, $897.3 million of the funded
balance was fixed at a weighted average interest rate of 5.3%
and the remaining balance of $260.5 million on these
facilities had a weighted average variable rate of 1.7%.
$736.9 million of
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UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
these credit facilities were allocated to the Operating
Partnership at December 31, 2010 based on the ownership of
the assets securing the debt. Further information related to
these credit facilities is as follows:
|
December 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
| (dollar amounts in thousands) | ||||||||
|
Borrowings outstanding
|
$ | 736,941 | $ | 750,431 | ||||
|
Weighted average borrowings during the year ended
|
763,040 | 646,895 | ||||||
|
Maximum daily borrowings during the year
|
770,021 | 750,572 | ||||||
|
Weighted average interest rate during the year ended
|
4.5 | % | 4.6 | % | ||||
|
Interest rate at the end of the year
|
4.4 | % | 4.6 | % | ||||
The Operating Partnership may from time to time acquire
properties subject to fixed rate debt instruments. In those
situations, management will record the secured debt at its
estimated fair value and amortize any difference between the
fair value and par to interest expense over the life of the
underlying debt instrument. The unamortized fair value
adjustment of the fixed rate debt instruments on the Operating
Partnership’s properties was a net discount of
$1.1 million and $1.2 million at December 31,
2010 and 2009, 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 August
2011 through June 2016 and carry interest rates ranging from
5.03% to 5.94%.
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, 2010, the General Partner had borrowings
against its fixed rate facilities of $897.3 million of
which $561.0 million was allocated to the Operating
Partnership based on the ownership of the assets securing the
debt. As of December 31, 2010, the fixed rate Fannie Mae
credit facilities allocated to the Operating Partnership had a
weighted average fixed rate of interest of 5.21%.
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 July
2013 through April 2016. Interest on the variable rate mortgage
notes is based on LIBOR plus some basis points, which translated
into interest rates ranging from 1.10% to 3.89% at
December 31, 2010.
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 1.07% as of December 31, 2010.
Secured credit facilities.
At
December 31, 2010, the General Partner had borrowings
against its variable rate facilities of $260.5 million of
which $175.9 million was allocated to the Operating
Partnership based on the ownership of the assets securing the
debt. As of December 31, 2010, the variable rate borrowings
under the Fannie Mae credit facilities allocated to the
Operating Partnership had a weighted average floating rate of
interest of 1.93%.
133
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UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The aggregate maturities of the Operating Partnership’s
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 | ||||||||||||||||||||||
|
2011
|
$ | 10,874 | $ | — | $ | — | $ | 423 | $ | — | $ | 30,886 | $ | 42,183 | ||||||||||||||
|
2012
|
49,623 | — | 136,792 | 633 | — | 59,529 | 246,577 | |||||||||||||||||||||
|
2013
|
61,381 | — | 27,739 | 38,049 | — | — | 127,169 | |||||||||||||||||||||
|
2014
|
— | — | — | 634 | — | — | 634 | |||||||||||||||||||||
|
2015
|
— | — | — | 636 | — | — | 636 | |||||||||||||||||||||
|
Thereafter
|
70,327 | 13,325 | 396,462 | 60,215 | 27,000 | 85,533 | 652,862 | |||||||||||||||||||||
|
Total
|
$ | 192,205 | $ | 13,325 | $ | 560,993 | $ | 100,590 | $ | 27,000 | $ | 175,948 | $ | 1,070,061 | ||||||||||||||
Guarantor
on Unsecured Debt
The Operating Partnership is a guarantor on the General
Partner’s unsecured credit facility, with an aggregate
borrowing capacity of $600 million, a $100 million
term loan, and a $250 million term loan. At
December 31, 2010 and December 31, 2009, the
outstanding balance under the unsecured credit facility was
$31.8 million and $189.3 million, respectively.
On September 30, 2010, the Operating Partnership guaranteed
certain outstanding debt securities of the General Partner.
These guarantees provide that the Operating Partnership, as
primary obligor and not merely as surety, irrevocably and
unconditionally guarantees to each holder of the applicable
securities and to the trustee and their successors and assigns
under the respective indenture (a) the full and punctual
payment when due, whether as stated maturity, by acceleration or
otherwise, of all obligations of the General Partner under the
respective indenture whether for principal or interest on the
securities (and premium, if any), and all other monetary
obligations of the General Partner under the respective
indenture and the terms of the applicable securities and
(b) the full and punctual performance within the applicable
grace periods of all other obligations of the General Partner
under the respective indenture and the terms of applicable
securities. There was $96 million (net of a discount of
$1.1 million) and $123 million (net of a discount of
$3.4 million) outstanding of the General Partner’s
3.625% Convertible Senior Notes at December 31, 2010
and 2009, respectively. There was $167.8 million and
$165.8 million (net of a discount of $1.9 million)
outstanding of the General Partner’s 4.00% Convertible
Senior Notes at December 31, 2010 and 2009, respectively.
| 6. | RELATED PARTY TRANSACTIONS |
Receivable
due from the General Partner
The Operating Partnership participates in the General
Partner’s central cash management program, wherein all the
Operating Partnership’s cash receipts are remitted to the
General Partner and all cash disbursements are funded by the
General Partner. In addition, other miscellaneous costs such as
administrative expenses are incurred by the General Partner on
behalf of the Operating Partnership. As a result of these
various transactions between the Operating Partnership and the
General Partner, the Operating Partnership had a net receivable
balance of $492.7 million and $588.2 million at
December 31, 2010 and 2009, respectively, which is
reflected as a reduction of capital on the consolidated balance
sheets.
Allocation
of General and Administrative Expenses
The General Partner performs various general and administrative
and other overhead services, including property management, for
the Operating Partnership including legal assistance,
acquisitions analysis, marketing
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UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
and advertising, and allocates these expenses to the Operating
Partnership first on the basis of direct usage when
identifiable, with the remainder allocated based on its pro-rata
portion of UDR’s apartment homes excluding units held in
UDR’s taxable REIT subsidiary. During the years ended
December 31, 2010, 2009 and 2008, the general and
administrative expenses and property management expenses,
allocated to the Operating Partnership by UDR were
$32.4 million and $25.9 million and
$28.9 million, respectively, and are included in
“General and Administrative” expenses and
“Property management” expenses on the consolidated
statements of operations. In the opinion of management, this
method of allocation reflects the level of services received by
the Operating Partnership from the General Partner.
Guaranty
by the General Partner
The General Partner provided a “bottom dollar”
guaranty to certain limited partners as part of their original
contribution to the Operating Partnership. The guaranty protects
the tax basis of the underlying contribution and is reflected on
the OP unitholder’s
Schedule K-1
tax form. The guaranty was made in the form of a loan from the
General Partner to the Operating Partnership at an annual
interest rate of 0.593% and 5.83% at December 31, 2010 and
2009, respectively. Interest payments are made monthly and the
note is due December 31, 2011. At December 31, 2010
and 2009, the note payable due to the General Partner was
$78.3 million and $71.5 million, respectively.
| 7. | FAIR VALUE OF DERIVATIVES AND FINANCIAL INSTRUMENTS |
Fair value is based on the price that would be received to sell
an asset or the exit price that would be paid to transfer a
liability in an orderly transaction between market participants
at the measurement date. A three-level valuation hierarchy
prioritizes observable and unobservable inputs used to measure
fair value. The fair value hierarchy consists of three broad
levels, which are described below:
| • | Level 1 — Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. | |
| • | Level 2 — Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data. | |
| • | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
135
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UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The estimated fair values of the Operating Partnership’s
financial instruments either recorded or disclosed on a
recurring basis as of December 31, 2010 and 2009 are
summarized as follows
(dollars in thousands)
:
| Fair Value at December 31, 2010 Using | ||||||||||||||||
|
Quoted Prices in
|
||||||||||||||||
|
Active Markets for
|
||||||||||||||||
|
Identical Assets or
|
Significant Other
|
Significant
|
||||||||||||||
|
Liabilities
|
Observable Inputs
|
Unobservable Inputs
|
||||||||||||||
| December 31, 2010 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
Description:
|
||||||||||||||||
|
Derivatives- Interest rate contracts(b)
|
$ | 376 | $ | — | $ | 376 | $ | — | ||||||||
|
Total assets
|
$ | 376 | $ | — | $ | 376 | $ | — | ||||||||
|
Derivatives- Interest rate contracts(b)
|
$ | 5,111 | $ | — | $ | 5,111 | $ | — | ||||||||
|
Contingent purchase consideration(c)
|
5,402 | — | — | 5,402 | ||||||||||||
|
Secured debt instruments- fixed rate:(a)
|
||||||||||||||||
|
Mortgage notes payable
|
205,750 | — | — | 205,750 | ||||||||||||
|
Tax-exempt secured notes payable
|
13,885 | — | — | 13,885 | ||||||||||||
|
Fannie Mae credit facilities
|
358,896 | — | — | 358,896 | ||||||||||||
|
Secured debt instruments-variable rate:(a)
|
||||||||||||||||
|
Mortgage notes payable
|
100,590 | — | — | 100,590 | ||||||||||||
|
Tax-exempt secured notes payable
|
27,000 | — | — | 27,000 | ||||||||||||
|
Fannie Mae credit facilities
|
175,948 | — | — | 175,948 | ||||||||||||
|
Total liabilities
|
$ | 892,582 | $ | — | $ | 5,111 | $ | 887,471 | ||||||||
| Fair Value at December 31, 2009 Using | ||||||||||||||||
|
Quoted Prices in
|
||||||||||||||||
|
Active Markets for
|
||||||||||||||||
|
Identical Assets or
|
Significant Other
|
Significant
|
||||||||||||||
|
Liabilities
|
Observable Inputs
|
Unobservable Inputs
|
||||||||||||||
| December 31, 2009 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
Description:
|
||||||||||||||||
|
Derivatives- Interest rate contracts(b)
|
$ | 1,992 | $ | — | $ | 1,992 | $ | — | ||||||||
|
Total assets
|
$ | 1,992 | $ | — | $ | 1,992 | $ | — | ||||||||
|
Derivatives- Interest rate contracts(b)
|
$ | 3,832 | $ | — | $ | 3,832 | $ | — | ||||||||
|
Secured debt instruments- fixed rate:(a)
|
||||||||||||||||
|
Mortgage notes payable
|
239,814 | — | — | 239,814 | ||||||||||||
|
Tax-exempt secured notes payable
|
13,540 | — | — | 13,540 | ||||||||||||
|
Fannie Mae credit facilities
|
592,783 | — | — | 592,783 | ||||||||||||
|
Secured debt instruments- variable rate:(a)
|
||||||||||||||||
|
Mortgage notes payable
|
100,590 | — | — | 100,590 | ||||||||||||
|
Tax-exempt secured notes payable
|
27,000 | — | — | 27,000 | ||||||||||||
|
Fannie Mae credit facilities
|
163,028 | — | — | 163,028 | ||||||||||||
|
Total liabilities
|
$ | 1,140,587 | $ | — | $ | 3,832 | $ | 1,136,755 | ||||||||
136
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UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| (a) | See Note 5, Debt | |
| (b) | See Note 8, Derivatives and Hedging Activity | |
| (c) | In March 2010, the Operating Partnership accrued a liability of $6.0 million related to a contingent purchase consideration on one of its properties. The contingent consideration was determined based on the fair market value of the related asset which is estimated using Level 3 inputs utilized in a third party appraisal. In July 2010, the Company paid approximately $635,000 towards the liability. |
Financial
Instruments Carried at Fair Value
The fair values of interest rate swaps are determined using the
market standard methodology of netting the discounted future
fixed cash receipts (or payments) and the discounted expected
variable cash payments (or receipts). The variable cash payments
(or receipts) are based on an expectation of future interest
rates (forward curves) derived from observable market interest
rate curves. The fair values of interest rate options are
determined using the market standard methodology of discounting
the future expected cash receipts that would occur if variable
interest rates rise above the strike rate of the caps. The
variable interest rates used in the calculation of projected
receipts on the cap are based on an expectation of future
interest rates derived from observable market interest rate
curves and volatilities.
The Operating Partnership incorporates credit valuation
adjustments to appropriately reflect both its own nonperformance
risk and the respective counterparty’s nonperformance risk
in the fair value measurements. In adjusting the fair value of
its derivative contracts for the effect of nonperformance risk,
the Operating Partnership has considered the impact of netting
and any applicable credit enhancements, such as collateral
postings, thresholds, mutual puts, and guarantees.
Although the Operating Partnership has determined that the
majority of the inputs used to value its derivatives fall within
Level 2 of the fair value hierarchy, the credit valuation
adjustments associated with its derivatives utilize Level 3
inputs, such as estimates of current credit spreads to evaluate
the likelihood of default by itself and its counterparties.
However, as of December 31, 2010 and 2009, the Operating
Partnership has assessed the significance of the impact of the
credit valuation adjustments on the overall valuation of its
derivative positions and has determined that the credit
valuation adjustments are not significant to the overall
valuation of its derivatives. As a result, the Operating
Partnership has determined that its derivative valuations in
their entirety are classified in Level 2 of the fair value
hierarchy.
Financial
Instruments Not Carried at Fair Value
At December 31, 2010, the fair values of cash and cash
equivalents, restricted cash, accounts receivable, prepaids,
real estate taxes payable, accrued interest payable, security
deposits and prepaid rent, distributions payable and accounts
payable approximated their carrying values because of the short
term nature of these instruments. The estimated fair values of
other financial instruments were determined by the Operating
Partnership using available market information and appropriate
valuation methodologies. Considerable judgment is necessary to
interpret market data and develop estimated fair values.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Operating Partnership would
realize on the disposition of the financial instruments. The use
of different market assumptions or estimation methodologies may
have a material effect on the estimated fair value amounts.
The General Partner estimates the fair value of our debt
instruments by discounting the remaining cash flows of the debt
instrument at a discount rate equal to the replacement market
credit spread plus the corresponding treasury yields. Factors
considered in determining a replacement market credit spread
include general market conditions, borrower specific credit
spreads, time remaining to maturity,
loan-to-value
ratios and collateral quality (Level 3).
137
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UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Operating Partnership records impairment losses on
long-lived assets used in operations when events and
circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by the future
operation and disposition of those assets are less than the net
book value of those assets. Cash flow estimates are based upon
historical results adjusted to reflect management’s best
estimate of future market and operating conditions and our
estimated holding periods. The net book value of impaired assets
is reduced to fair value. The General Partner’s estimates
of fair value represent management’s estimates based upon
Level 3 inputs such as rental rates, operating expenses,
growth rates, discount rates, capitalization rates, industry
trends, and references to market rates and transactions.
| 8. | DERIVATIVES AND HEDGING ACTIVITY |
Risk
Management Objective of Using Derivatives
The Operating Partnership is exposed to certain risk arising
from both its business operations and economic conditions. The
General Partner principally manages its exposures to a wide
variety of business and operational risks through management of
its core business activities. The General Partner manages
economic risks, including interest rate, liquidity, and credit
risk primarily by managing the amount, sources, and duration of
its debt funding and through the use of derivative financial
instruments. Specifically, the General Partner enters into
derivative financial instruments to manage exposures that arise
from business activities that result in the receipt or payment
of future known and uncertain cash amounts, the value of which
are determined by interest rates. The General Partner’s and
the Operating Partnership’s derivative financial
instruments are used to manage differences in the amount,
timing, and duration of the General Partner’s known or
expected cash receipts and its known or expected cash payments
principally related to the General Partner’s investments
and borrowings.
Cash Flow
Hedges of Interest Rate Risk
The General Partner’s objectives in using interest rate
derivatives are to add stability to interest expense and to
manage its exposure to interest rate movements. To accomplish
this objective, the General Partner primarily uses interest rate
swaps and caps as part of its interest rate risk management
strategy. Interest rate swaps designated as cash flow hedges
involve the receipt of variable-rate amounts from a counterparty
in exchange for the General Partner making fixed-rate payments
over the life of the agreements without exchange of the
underlying notional amount. Interest rate caps designated as
cash flow hedges involve the receipt of variable-rate amounts
from a counterparty if interest rates rise above the strike rate
on the contract in exchange for an up front premium.
A portion of the General Partner’s interest rate
derivatives have been allocated to the Operating Partnership
based on the General Partner’s underlying debt instruments
allocated to the Operating Partnership. (See Note 5,
Debt.
)
The effective portion of changes in the fair value of
derivatives designated and that qualify as cash flow hedges is
recorded in “Accumulated Other Comprehensive
Income/(Loss)” and is subsequently reclassified into
earnings in the period that the hedged forecasted transaction
affects earnings. During the year ended December 31, 2010,
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, 2010, the Operating Partnership recorded less
than $1,000 of ineffectiveness in earnings attributable to reset
date and index mismatches between the derivative and the hedged
item.
Amounts reported in “Accumulated Other Comprehensive
Income/(Loss)” related to derivatives will be reclassified
to interest expense as interest payments are made on the General
Partner’s variable-rate debt that
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
is allocated to the Operating Partnership. During the year ended
December 31, 2011, we estimate that an additional
$5.5 million will be reclassified as an increase to
interest expense.
As of December 31, 2010, the Operating Partnership had the
following outstanding interest rate derivatives designated as
cash flow hedges of interest rate risk (
dollar amounts in
thousands
):
|
Number of
|
||||||||
| Interest Rate Derivative | Instruments | Notional | ||||||
|
Interest rate swaps
|
6 | $ | 261,532 | |||||
|
Interest rate caps
|
2 | $ | 108,628 | |||||
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”). Changes in the fair value of derivatives not
designated in hedging relationships are recorded directly in
earnings and resulted in a loss of $684,000 and a gain of
$538,000 for the years ended December 31, 2010 and 2009,
respectively. As of December 31, 2010, we 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 caps
|
4 | $ | 217,173 | |||||
Tabular
Disclosure of Fair Values of Derivative Instruments on the
Balance Sheet
The table below presents the fair value of our derivative
financial instruments as well as their classification on the
Consolidated Balance Sheets as of December 31, 2010.
| Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||
| Fair Value at: | Fair Value at: | |||||||||||||||||||||||
|
Balance
|
December 31,
|
December 31,
|
Balance
|
December 31,
|
December 31,
|
|||||||||||||||||||
| Sheet Location | 2010 | 2009 | Sheet Location | 2010 | 2009 | |||||||||||||||||||
|
Derivatives designated as hedging instruments:
|
||||||||||||||||||||||||
|
Interest Rate Products
|
Other Assets | $ | 217 | $ | 1,046 | Other Liabilities | $ | 5,111 | $ | 3,832 | ||||||||||||||
|
Total derivatives designated as hedging instruments
|
$ | 217 | $ | 1,046 | $ | 5,111 | $ | 3,832 | ||||||||||||||||
|
Derivatives
not
designated as hedging instruments:
|
||||||||||||||||||||||||
|
Interest Rate Products
|
Other Assets | $ | 159 | $ | 946 | Other Liabilities | $ | — | $ | — | ||||||||||||||
|
Total derivatives
not
designated as hedging instruments
|
$ | 159 | $ | 946 | $ | — | $ | — | ||||||||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Tabular
Disclosure of the Effect of Derivative Instruments on the
Consolidated Statements of
Operations
Operations
The tables below present the effect of the derivative financial
instruments on the Consolidated Statements of Operations for the
years ended December 31, 2010 and 2009 (
dollar amounts
in thousands
):
|
Location of Loss
|
Amount of Gain or
|
|||||||||||||||||
|
Reclassified from
|
(Loss) Reclassified from Accumulated OCI
|
|||||||||||||||||
|
Amount of Gain or (Loss) Recognized in OCI
|
Accumulated OCI
|
into Income
|
||||||||||||||||
|
on Derivative (Effective
|
into Income
|
(Effective
|
||||||||||||||||
|
Derivatives in Cash Flow Hedging
|
Portion) |
(Effective
|
Portion) | |||||||||||||||
| Relationships | 2010 | 2009 | Portion) | 2010 | 2009 | |||||||||||||
|
For the year ended December 31,
|
||||||||||||||||||
|
Interest Rate Products
|
$ | (4,281 | ) | $ | (2,676 | ) | Interest expense | $ | (6,631 | ) | $ | (4,397 | ) | |||||
|
Total
|
$ | (4,281 | ) | $ | (2,676 | ) | $ | (6,631 | ) | $ | (4,397 | ) | ||||||
|
Location of Gain or
|
Amount of Gain or (Loss) Recognized in
|
|||||||||
|
Derivatives Not Designated as
|
(Loss) Recognized in
|
Income on
|
||||||||
|
Hedging
|
Income on
|
Derivative | ||||||||
| Instruments | Derivative | 2010 | 2009 | |||||||
|
For the ended December 31,
|
||||||||||
|
Interest Rate Products
|
Other income/(expense) | $ | (684 | ) | $ | 538 | ||||
|
Total
|
$ | (684 | ) | $ | 538 | |||||
Credit-risk-related
Contingent Features
The General Partner has agreements with some of its derivative
counterparties that contain a provision where (1) if the
General Partner defaults on any of its indebtedness, including
default where repayment of the indebtedness has not been
accelerated by the lender, then the General Partner could also
be declared in default on its derivative obligations; or
(2) the General Partner could be declared in default on its
derivative obligations if repayment of the underlying
indebtedness is accelerated by the lender due to the General
Partner’s default on the indebtedness.
Certain of the General Partner ’s agreements with its
derivative counterparties contain provisions where if there is a
change in the General Partner’s financial condition that
materially changes the General Partner ’s creditworthiness
in an adverse manner, the General Partner may be required to
fully collateralize its obligations under the derivative
instrument.
The General Partner also has an agreement with a derivative
counterparty that incorporates the loan and financial covenant
provisions of the General Partner’s indebtedness with a
lender affiliate of the derivative counterparty. Failure to
comply with these covenant provisions would result in the
General Partner being in default on any derivative instrument
obligations covered by the agreement.
As of December 31, 2010, the fair value of derivatives in a
net liability position that were allocated to the Operating
Partnership, which includes accrued interest but excludes any
adjustment for nonperformance risk, related to these agreements
was $5.5 million. As of December 31, 2010, the General
Partner has not posted any collateral related to these
agreements. If the General Partner had breached any of these
provisions at December 31, 2010, it would have been
required to settle its obligations under the agreements at their
termination value of $5.5 million.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| 9. | CAPITAL STRUCTURE |
General
Partnership Units
The General Partner has complete discretion to manage and
control the operations and business of the Operating
Partnership, which includes but is not limited to the
acquisition and disposition of real property, construction of
buildings and making capital improvements, and the borrowing of
funds from outside lenders or UDR and its subsidiaries to
finance such activities. The General Partner can authorize,
issue, sell, redeem or purchase any OP unit or securities of the
Operating Partnership without the approval of the limited
partners. The General Partner can also approve, with regard to
the issuances of OP units, the class or one or more series of
classes, with designations, preferences, participating, optional
or other special rights, powers and duties including rights,
powers and duties senior to limited partnership interests
without approval of any limited partners. There were 110,883 OP
units of general partnership interest at December 31, 2010
and 2009, all of which were held by UDR.
Limited
Partnership Units
At December 31, 2010 and 2009, there were 179,798,525 OP
units outstanding of limited partnership interest, of which
1,751,671 were Class A Limited Partnership OP units. UDR
owned 174,736,557 or 97.2% and 173,811,933 or 96.7% at
December 31, 2010 and 2009, respectively. The remaining
5,061,968 or 2.8% and 5,986,592 or 3.3% OP units outstanding of
limited partnership interest were held by non- affiliated
partners at December 31, 2010 and 2009, respectively, of
which 1,751,671 were Class A Limited Partnership units.
The limited partners have the right to require the Operating
Partnership to redeem all or a portion of the OP units held by
the limited partner at a redemption price equal to and in the
form of the Cash Amount (as defined in the Operating Partnership
Agreement), provided that such OP Units have been
outstanding for at least one year. UDR, as general partner of
the Operating Partnership may, in its sole discretion, purchase
the OP Units by paying to the limited partner either the
Cash Amount or the REIT Share Amount (generally one share of
common stock of UDR for each OP Unit), as defined in the
Operating Partnership Agreement. (Pursuant to the Fourth
Amendment to the Operating Partnership Agreement, redemptions
related to the Series A Out-Performance Partnership Shares
[discussed below] were made on a one for 1.5091 during the
period from December 27, 2007 to March 13, 2009.)
The non-affiliated limited partners’ capital is adjusted to
redemption value at the end of each reporting period with the
corresponding offset against the UDR limited partner capital
account based on the redemption rights note above. The aggregate
value upon redemption of the then-outstanding OP units held by
limited partners was $119.1 million, $98.4 million,
and $101.0 million as of December 31, 2010, 2009, and
2008, respectively, based on the value of UDR’s common
stock at each period end. Once each OP unit has been redeemed,
the redeeming partner has no right to receive any distributions
from the Operating Partnership on or after the date of
redemption.
Class A
Limited Partnership Units
Class A Partnership units have a cumulative annual,
non-compounded preferred return, which is equal to 8% based on a
value of $16.61 per Class A Limited Partnership Unit.
Holders of the Class A Limited Partnership units
exclusively possess certain voting rights. The Operating
Partnership may not perform the following without approval of
the holders of the Class A Partnership units:
(i) increase the authorized or issued amount of
Class A Partnership Units, (ii) reclassify any other
partnership interest into Class A Partnership Units,
(iii) create, authorize or issue any obligations or
security convertible into or the right to purchase any
Class Partnership Units, without the approval of the
holders of the Class A
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Partnership units, (iv) enter into a merger or acquisition,
or (v) amend or modify the Operating Partnership Agreement
that affects the rights, preferences or privileges of the
Class A Partnership Units.
Allocation
of profits and losses
Profit of the Operating Partnership is allocated in the
following order: (i) to the General Partner and the Limited
Partners in proportion to and up to the amount of cash
distributions made during the year, and (ii) to the General
Partner and Limited Partners in accordance with their percentage
interests. Losses and depreciation and amortization expenses,
non-recourse liabilities are allocated to the General Partner
and Limited Partners in accordance with their percentage
interests. Losses allocated to the Limited Partners are capped
to the extent that such an allocation would not cause a deficit
in the Limited Partners capital account. Such losses are,
therefore, allocated to the General Partner. If any
Partner’s capital balance were to fall into a deficit any
income and gains are allocated to each Partner sufficient to
eliminate its negative capital balance.
Out-Performance
Programs
Series A
Out-Performance Program
In May 2001, the Board of Directors of UDR approved the
Series A Out-Performance Program (the “Series A
Program”) pursuant to which certain executive officers and
other key officers of UDR (the “Participants”) were
given the opportunity to invest indirectly in UDR by purchasing
interests in a limited liability company (the
“Series A LLC”), the only asset of which is a
special class of partnership units of the Operating Partnership
(“Series A Out-Performance Partnership Shares” or
“Series A OPPSs”), for an initial investment of
$1.27 million (the full market value of the Series A
OPPS, at inception, as determined by an independent investment
banking firm). The Series A Program measured the cumulative
total return on UDR’s common stock over a
28-month
period beginning February 2001 and ending May 31, 2003.
The Series A 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,
measured by the cumulative amount of dividends paid plus share
price appreciation during the measurement period, exceeded the
greater of (a) the cumulative total return of the Morgan
Stanley REIT Index over the same period; and (b) is at
least the equivalent of a 30% total return, or 12% annualized.
At the conclusion of the measurement period on May 31,
2003, UDR’s total return satisfied these criteria. As a
result, the Series A LLC as holder of the Series A
OPPSs received distributions and allocations of income and loss
from the Operating Partnership equal to the distributions and
allocations that were received on 1,853,204 OP Units, which
distributions and allocations were distributed to the
participants on a pro rata basis based on the ownership of the
Series A LLC.
Series C
Out-Performance Program
In May 2005, the stockholders of UDR approved a new
Out-Performance Program and the first series of new
Out-Performance Partnership Shares under the program are the
Series C Out-Performance Units (the “Series C
Program”) pursuant to which certain executive officers and
other key employees of UDR (the “Series C
Participants”) were given the opportunity to invest
indirectly in UDR by purchasing interests in UDR Out-Performance
III, LLC, a Delaware limited liability company (the
“Series C LLC”), the only asset of which is a
special class of partnership units of the Operating Partnership
(“Series C Out-Performance Partnership Shares” or
“Series C OPPSs”). The purchase price for the
Series C OPPSs was determined by the Compensation Committee
of UDR’s Board of Directors to be $750,000, assuming 100%
participation, and was based upon the advice of an independent
valuation expert. UDR’s performance for the Series C
Program was measured over the
36-month
period from June 1, 2005 to May 30, 2008.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Series C 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 is 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 satisfies these criteria, the
Series C LLC as holder of the Series C OPPSs will
receive (for the indirect benefit of the Series C
Participants as holders of interests in the Series C
LLC) distributions and allocations of income and loss from
the Operating Partnership equal to the distributions and
allocations that would be 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, common stock equivalents and
OP Units); and
iii. dividing the number obtained in clause (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 common stock for the 20 trading days immediately
preceding the valuation date.
For the Series C OPPSs, the number determined pursuant to
(ii) above is capped at 1% of market capitalization.
If, on the valuation date, the cumulative total return of
UDR’s common stock does not meet the Minimum Return, then
the Series C Participants will forfeit their entire initial
investment.
At the conclusion of the measurement period, May 30, 2008,
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 C OPPSs program and the investment
made by the holders of the Series C OPPSs was forfeited.
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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
At the conclusion of the measurement period, December 31,
2008, 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 D OPPSs program and the
investment 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 made by the holders of the Series E OPPSs was
forfeited.
The following table shows OP Unit activity and OP units
outstanding during the three years ended December 31, 2010:
| UDR, Inc. | ||||||||||||||||||||
|
Class A Limited
|
Limited
|
Limited
|
General
|
|||||||||||||||||
| Partner | Partners | Partner | Partner | Total | ||||||||||||||||
|
Beginning balance at January 1, 2008
|
1,617,815 | 7,035,746 | 157,407,216 | 102,410 | 166,163,187 | |||||||||||||||
|
OP redemptions for UDR stock
|
— | (1,329,782 | ) | 1,329,782 | — | — | ||||||||||||||
|
Ending balance at December 31, 2008
|
1,617,815 | 5,705,964 | 158,736,998 | 102,410 | 166,163,187 | |||||||||||||||
|
Issuance of units through Special Dividend
|
133,856 | 485,986 | 13,117,906 | 8,473 | 13,746,221 | |||||||||||||||
|
OP redemptions for UDR stock
|
— | (1,957,029 | ) | 1,957,029 | — | — | ||||||||||||||
|
Ending balance at December 31, 2009
|
1,751,671 | 4,234,921 | 173,811,933 | 110,883 | 179,909,408 | |||||||||||||||
|
Issuance of units
|
||||||||||||||||||||
|
OP redemptions for UDR cash
|
— | (19,076 | ) | 19,076 | — | — | ||||||||||||||
|
OP redemptions for UDR stock
|
— | (905,548 | ) | 905,548 | — | — | ||||||||||||||
|
Ending balance at December 31, 2010
|
1,751,671 | 3,310,297 | 174,736,557 | 110,883 | 179,909,408 | |||||||||||||||
| 10. | COMMITMENTS AND CONTINGENCIES |
Commitments
Ground
Leases
The Operating Partnership owns four communities which are
subject to ground leases expiring between 2019 and 2103. The
leases are accounted for in accordance with FASB ASC 840,
Leases
(formerly SFAS 13). Future minimum lease
payments as of December 31, 2010 are $4.5 million for
each of the years ending December 31, 2011 to 2015, and a
total of $294.4 million for years thereafter. For purposes
of our ground lease contracts, the Operating Partnership uses
the minimum lease payment, if stated in the agreement. For
ground lease agreements where there is a reset provision based
on the communities appraised value or consumer price index but
does not included a specified minimum lease payment, the
Operating Partnership uses the current rent over the remainder
of the lease term.
The Operating Partnership incurred $4.7 million,
$4.6 million, and $4.3 million of ground rent expense
for the years ended December 31, 2010, 2009, and 2008,
respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Contingencies
Litigation
and Legal Matters
The Operating Partnership is subject to various legal
proceedings and claims arising in the ordinary course of
business. The Operating Partnership cannot determine the
ultimate liability with respect to such legal proceedings and
claims at this time. The General Partner believes that such
liability, to the extent not provided for through insurance or
otherwise, will not have a material adverse effect on the
Operating Partnership’s financial condition, results of
operations or cash flow.
| 11. | 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. The Operating Partnership has the same chief
operating decision maker as that of its parent, the General
Partner. The chief operating decision maker consists of several
members of UDR’s executive management team who use several
generally accepted industry financial measures to assess the
performance of the business for our reportable operating
segments.
The Operating Partnership owns and operates multifamily
apartment communities throughout the United States that generate
rental and other property related income through the leasing of
apartment homes to a diverse base of tenants. The primary
financial measures of the Operating Partnership’s apartment
communities are rental income and net operating income
(“NOI”), and are included in the chief operating
decision maker’s assessment of UDR’s performance on a
consolidated basis. Rental income represents gross market rent
less adjustments for concessions, vacancy loss and bad debt. NOI
is defined as total revenues less direct property operating
expenses. The chief operating decision maker utilizes NOI as the
key measure of segment profit or loss.
The Operating Partnership’s two reportable segments are
same communities and non-mature/other communities:
| • | Same store communities represent those communities acquired, developed, and stabilized prior to January 1, 2009, and held as of December 31, 2010. 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 2008, 2009 or 2010, 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 Operating
Partnership’s reportable segments have been aggregated by
geography in a manner identical to that which is provided to the
chief operating decision maker.
All revenues are from external customers and no single tenant or
related group of tenants contributed 10% or more of the
Operating Partnership’s total revenues during the years
ended December 31, 2010, 2009, and 2008.
146
Table of Contents
UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The accounting policies applicable to the operating segments
described above are the same as those described in Note 2,
Summary of Significant Accounting Policies
. The following
table details rental income and NOI for the Operating
Partnership’s reportable segments for the years ended
December 31, 2010, 2009, and 2008, and reconciles NOI to
income from continuing and discontinued operations per the
consolidated statement of operations
(dollars in
thousands)
:
| December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Reportable apartment home segment rental income
|
||||||||||||
|
Same Store Communities
|
||||||||||||
|
Western Region
|
$ | 199,386 | $ | 205,175 | $ | 200,993 | ||||||
|
Mid-Atlantic Region
|
59,696 | 57,883 | 49,899 | |||||||||
|
Southeastern Region
|
40,846 | 41,210 | 41,610 | |||||||||
|
Southwestern Region
|
26,428 | 26,669 | 24,144 | |||||||||
|
Non-Mature communities/Other
|
24,038 | 22,119 | 45,366 | |||||||||
|
Total segment and consolidated rental income
|
$ | 350,394 | $ | 353,056 | $ | 362,012 | ||||||
|
Reportable apartment home segment NOI
|
||||||||||||
|
Same Store Communities
|
||||||||||||
|
Western Region
|
$ | 136,592 | $ | 143,940 | $ | 141,056 | ||||||
|
Mid-Atlantic Region
|
40,893 | 39,172 | 33,316 | |||||||||
|
Southeastern Region
|
25,659 | 25,984 | 26,260 | |||||||||
|
Southwestern Region
|
16,175 | 16,271 | 14,879 | |||||||||
|
Non-Mature communities/Other
|
14,797 | 15,201 | 30,529 | |||||||||
|
Total segment and consolidated NOI
|
234,116 | 240,568 | 246,040 | |||||||||
|
Reconciling items:
|
||||||||||||
|
Non-property income
|
1,695 | 5,695 | 13,106 | |||||||||
|
Property management
|
(9,636 | ) | (9,709 | ) | (9,956 | ) | ||||||
|
Other operating expenses
|
(5,028 | ) | (4,868 | ) | (4,400 | ) | ||||||
|
Depreciation and amortization
|
(166,480 | ) | (166,773 | ) | (154,584 | ) | ||||||
|
Interest
|
(52,222 | ) | (53,547 | ) | (47,139 | ) | ||||||
|
General and administrative
|
(23,291 | ) | (16,886 | ) | (19,081 | ) | ||||||
|
Other depreciation and amortization
|
— | — | (327 | ) | ||||||||
|
Net gain on the sale of real estate
|
152 | 1,475 | 475,249 | |||||||||
|
Non-controlling interests
|
(41 | ) | (131 | ) | (1,188 | ) | ||||||
|
Net (loss)/income attributable to OP unit holders
|
$ | (20,735 | ) | $ | (4,176 | ) | $ | 497,720 | ||||
147
Table of Contents
UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table details the assets of the Operating
Partnership’s reportable segments for the years ended
December 31, 2010 and 2009
(dollars in thousands)
:
| December 31, | ||||||||
| . | 2010 | 2009 | ||||||
|
Reportable apartment home segment assets
|
||||||||
|
Same Store Communities
|
||||||||
|
Western Region
|
$ | 2,138,566 | $ | 2,124,692 | ||||
|
Mid-Atlantic Region
|
681,109 | 675,223 | ||||||
|
Southeastern Region
|
354,861 | 350,084 | ||||||
|
Southwestern Region
|
254,485 | 251,778 | ||||||
|
Non-Mature communities/Other
|
277,163 | 239,111 | ||||||
|
Total segment assets
|
3,706,184 | 3,640,888 | ||||||
|
Accumulated depreciation
|
(884,083 | ) | (717,892 | ) | ||||
|
Total segment assets — net book value
|
2,822,101 | 2,922,996 | ||||||
|
Reconciling items:
|
||||||||
|
Cash and cash equivalents
|
920 | 442 | ||||||
|
Restricted cash
|
8,022 | 6,865 | ||||||
|
Deferred financing costs, net
|
7,465 | 8,727 | ||||||
|
Other assets
|
22,887 | 22,037 | ||||||
|
Total consolidated assets
|
$ | 2,861,395 | $ | 2,961,067 | ||||
Capital expenditures related to our same communities totaled
$24.6 million, $30.7 million, and $43.0 million
for the three years ended December 31, 2010, 2009, and
2008, respectively. Capital expenditures related to our
non-mature/other communities totaled $366,000,
$1.2 million, and $2.8 million for the three years
ended December 31, 2010, 2009, and 2008, respectively.
Markets included in the above geographic segments are as follows:
i. Western — Orange County, San Francisco,
Monterey Peninsula, Los Angeles, Seattle, Sacramento, Inland
Empire, Portland, and San Diego
ii. Mid-Atlantic — Metropolitan DC and Baltimore
iii. Southeastern — Nashville, Tampa,
Jacksonville, and Other Florida
iv. Southwestern — Dallas and Phoenix
148
Table of Contents
UNITED
DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| 12. | UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA |
Selected consolidated quarterly financial data for the years
ended December 31, 2010 and 2009 is summarized in the table
blow (
dollars in thousands, except per share amounts
):
| Three Months Ended | ||||||||||||||||
| March 31, | June 30, | September 30, | December 31, | |||||||||||||
|
2010
|
||||||||||||||||
|
Rental income(a)
|
$ | 86,200 | $ | 87,095 | $ | 88,222 | $ | 88,877 | ||||||||
|
Loss from continuing operations(b)
|
(2,993 | ) | (2,589 | ) | (6,863 | ) | (8,401 | ) | ||||||||
|
Income from discontinued operations
|
60 | 37 | 27 | 28 | ||||||||||||
|
Loss attributable to OP unitholders(b)
|
(2,950 | ) | (2,570 | ) | (6,845 | ) | (8,370 | ) | ||||||||
|
Loss per OP unit- basic and diluted
|
$ | (0.02 | ) | $ | (0.01 | ) | $ | (0.04 | ) | $ | (0.05 | ) | ||||
|
2009
|
||||||||||||||||
|
Rental income(a)
|
$ | 89,860 | $ | 89,399 | $ | 87,745 | $ | 86,052 | ||||||||
|
Income/(loss) from continuing operations
|
3,813 | 1,461 | (3,517 | ) | (7,277 | ) | ||||||||||
|
Income from discontinued operations
|
49 | 1,367 | 146 | (87 | ) | |||||||||||
|
Income/(loss) attributable to OP unitholders
|
3,861 | 2,827 | (3,371 | ) | (7,493 | ) | ||||||||||
|
Income/(loss) per OP unit- basic and diluted
|
$ | 0.02 | $ | 0.02 | $ | (0.02 | ) | $ | (0.04 | ) | ||||||
| (a) | Represents rental income from continuing operations | |
| (b) | Previously reported amounts have been restated to correct the amount of general and administrative expenses allocated to the Operating Partnership by the General Partner. |
149
Table of Contents
[This
page is intentionally left blank.]
150
Table of Contents
(In thousands)
|
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
|
$ | 47,091 | $ | 20,477 | $ | 28,538 | $ | 49,015 | $ | 10,872 | $ | 20,716 | $ | 39,171 | $ | 59,887 | $ | 18,028 | 2003 | Jun-03 | ||||||||||||||||||||
|
Pine Brook Village
|
18,270 | 2,582 | 25,504 | 28,086 | 4,480 | 3,841 | 28,725 | 32,566 | 12,393 | 1979 | Jun-03 | |||||||||||||||||||||||||||||
|
Pacific Shores
|
19,145 | 7,345 | 22,624 | 29,969 | 7,200 | 7,477 | 29,692 | 37,169 | 13,220 | 2003 | Jun-03 | |||||||||||||||||||||||||||||
|
Huntington Vista
|
31,274 | 8,055 | 22,486 | 30,541 | 5,863 | 8,238 | 28,166 | 36,404 | 12,670 | 1970 | Jun-03 | |||||||||||||||||||||||||||||
|
Missions at Back Bay
|
11,326 | 229 | 14,129 | 14,358 | 1,648 | 10,727 | 5,279 | 16,006 | 2,523 | 1969 | Dec-03 | |||||||||||||||||||||||||||||
|
Huntington Villas
|
55,752 | 61,535 | 18,017 | 79,552 | 4,624 | 61,819 | 22,357 | 84,176 | 9,274 | 1972 | Sep-04 | |||||||||||||||||||||||||||||
|
Vista Del Rey
|
12,659 | 10,670 | 7,080 | 17,750 | 1,465 | 10,776 | 8,439 | 19,215 | 3,514 | 1969 | Sep-04 | |||||||||||||||||||||||||||||
|
Foxborough
|
— | 12,071 | 6,187 | 18,258 | 2,003 | 12,139 | 8,122 | 20,261 | 3,035 | 1969 | Sep-04 | |||||||||||||||||||||||||||||
|
Coronado at Newport — North
|
49,766 | 62,516 | 46,082 | 108,598 | 14,632 | 63,244 | 59,986 | 123,230 | 24,367 | 2000 | Oct-04 | |||||||||||||||||||||||||||||
|
Villa Venetia
|
— | 70,825 | 24,179 | 95,004 | 4,769 | 70,938 | 28,835 | 99,773 | 11,484 | 1972 | Oct-04 | |||||||||||||||||||||||||||||
|
The Arboretum
|
— | 29,563 | 14,283 | 43,846 | 4,843 | 29,685 | 19,004 | 48,689 | 7,843 | 1970 | Oct-04 | |||||||||||||||||||||||||||||
|
Coronado South
|
103,525 | 58,785 | 50,067 | 108,852 | 11,106 | 59,002 | 60,956 | 119,958 | 23,819 | 2000 | Mar-05 | |||||||||||||||||||||||||||||
|
Pine Brook Village II
|
— | 25,922 | 60,961 | 86,883 | 1,141 | 25,924 | 62,100 | 88,024 | 9,498 | 1975 | May-08 | |||||||||||||||||||||||||||||
|
1818 Platinum Triangle
|
— | 16,663 | 51,905 | 68,568 | 26 | 16,663 | 51,931 | 68,594 | 1,161 | 2009 | Aug-10 | |||||||||||||||||||||||||||||
|
ORANGE COUNTY, CA
|
348,808 | 387,238 | 392,042 | 779,280 | 74,672 | 401,189 | 452,763 | 853,952 | 152,829 | |||||||||||||||||||||||||||||||
|
2000 Post Street
|
— | 9,861 | 44,578 | 54,439 | 6,574 | 10,158 | 50,855 | 61,013 | 17,723 | 1987 | Dec-98 | |||||||||||||||||||||||||||||
|
Birch Creek
|
— | 4,365 | 16,696 | 21,061 | 5,010 | 4,991 | 21,080 | 26,071 | 9,758 | 1968 | Dec-98 | |||||||||||||||||||||||||||||
|
Highlands Of Marin
|
— | 5,996 | 24,868 | 30,864 | 26,113 | 6,972 | 50,005 | 56,977 | 13,800 | 1991 | Dec-98 | |||||||||||||||||||||||||||||
|
Marina Playa
|
— | 6,224 | 23,916 | 30,140 | 7,242 | 6,727 | 30,655 | 37,382 | 13,618 | 1971 | Dec-98 | |||||||||||||||||||||||||||||
|
2000 Post III
|
— | 1,756 | 7,753 | 9,509 | 2,983 | 3,290 | 9,202 | 12,492 | 2,999 | 2006 | Dec-98 | |||||||||||||||||||||||||||||
|
Crossroads Apartments
|
— | 4,811 | 10,170 | 14,981 | 3,396 | 5,024 | 13,353 | 18,377 | 5,763 | 1986 | Jul-04 | |||||||||||||||||||||||||||||
|
River Terrace
|
33,130 | 22,161 | 40,137 | 62,298 | 1,604 | 22,250 | 41,652 | 63,902 | 13,429 | 2005 | Aug-05 | |||||||||||||||||||||||||||||
|
Bay Terrace
|
— | 8,545 | 14,458 | 23,003 | 1,596 | 8,549 | 16,050 | 24,599 | 4,868 | 1962 | Oct-05 | |||||||||||||||||||||||||||||
|
CitySouth
|
— | 14,031 | 30,537 | 44,568 | 14,981 | 14,033 | 45,516 | 59,549 | 10,321 | 1972 | Nov-05 | |||||||||||||||||||||||||||||
|
Highlands of Marin Phase II
|
— | 5,353 | 18,559 | 23,912 | 9,696 | 5,706 | 27,902 | 33,608 | 4,559 | 1968 | Oct-07 | |||||||||||||||||||||||||||||
|
Edgewater
|
45,106 | 30,657 | 83,872 | 114,529 | 1,551 | 30,663 | 85,417 | 116,080 | 13,843 | 2007 | Mar-08 | |||||||||||||||||||||||||||||
|
Almaden Lake Village
|
27,000 | 594 | 42,515 | 43,109 | 1,864 | 622 | 44,351 | 44,973 | 6,555 | 1999 | Jul-08 | |||||||||||||||||||||||||||||
|
SAN FRANCISCO, CA
|
105,236 | 114,354 | 358,059 | 472,413 | 82,610 | 118,985 | 436,038 | 555,023 | 117,236 | |||||||||||||||||||||||||||||||
|
The Crest
|
55,602 | 21,953 | 67,809 | 89,762 | 6,708 | 22,136 | 74,334 | 96,470 | 28,264 | 1989 | Sep-04 | |||||||||||||||||||||||||||||
|
Rosebeach
|
— | 8,414 | 17,449 | 25,863 | 1,754 | 8,462 | 19,155 | 27,617 | 7,294 | 1970 | Sep-04 | |||||||||||||||||||||||||||||
|
The Villas @ San Dimas
|
— | 8,181 | 16,735 | 24,916 | 2,221 | 8,241 | 18,896 | 27,137 | 7,413 | 1981 | Oct-04 | |||||||||||||||||||||||||||||
|
The Villas at Bonita
|
— | 4,499 | 11,699 | 16,198 | 771 | 4,536 | 12,433 | 16,969 | 4,671 | 1981 | Oct-04 | |||||||||||||||||||||||||||||
|
Ocean Villas
|
8,896 | 5,135 | 12,789 | 17,924 | 1,092 | 5,205 | 13,811 | 19,016 | 5,036 | 1965 | Oct-04 | |||||||||||||||||||||||||||||
|
Pine@Sixth
|
— | 5,805 | 6,305 | 12,110 | 12,306 | 6,238 | 18,178 | 24,416 | 9,704 | 2008 | Aug-06 | |||||||||||||||||||||||||||||
|
Jefferson at Marina del Rey
|
100,000 | 55,651 | — | 55,651 | 87,751 | 61,125 | 82,277 | 143,402 | 9,892 | 2008 | Sep-07 | |||||||||||||||||||||||||||||
|
Tierra Del Rey
|
— | 39,586 | 36,679 | 76,265 | 1,610 | 39,589 | 38,286 | 77,875 | 6,976 | 1999 | Dec-07 | |||||||||||||||||||||||||||||
|
Marina Pointe
|
67,700 | 48,182 | 102,364 | 150,546 | 105 | 48,186 | 102,465 | 150,651 | — | 1993 | Sep-10 | |||||||||||||||||||||||||||||
|
LOS ANGELES, CA
|
232,198 | 197,406 | 271,829 | 469,235 | 114,318 | 203,718 | 379,835 | 583,553 | 79,250 | |||||||||||||||||||||||||||||||
|
Arbor Terrace
|
9,682 | 1,453 | 11,995 | 13,448 | 2,518 | 1,732 | 14,234 | 15,966 | 6,797 | 1996 | Mar-98 | |||||||||||||||||||||||||||||
|
Aspen Creek
|
10,819 | 1,178 | 9,116 | 10,294 | 1,788 | 1,411 | 10,671 | 12,082 | 4,529 | 1996 | Dec-98 | |||||||||||||||||||||||||||||
|
Crowne Pointe
|
8,229 | 2,486 | 6,437 | 8,923 | 3,961 | 2,737 | 10,147 | 12,884 | 5,014 | 1987 | Dec-98 | |||||||||||||||||||||||||||||
|
Hilltop
|
7,607 | 2,174 | 7,408 | 9,582 | 2,971 | 2,635 | 9,918 | 12,553 | 4,561 | 1985 | Dec-98 | |||||||||||||||||||||||||||||
|
The Hawthorne
|
— | 6,474 | 30,226 | 36,700 | 1,613 | 6,511 | 31,802 | 38,313 | 10,559 | 2003 | Jul-05 | |||||||||||||||||||||||||||||
|
The Kennedy
|
17,941 | 6,179 | 22,307 | 28,486 | 913 | 6,212 | 23,187 | 29,399 | 7,026 | 2005 | Nov-05 | |||||||||||||||||||||||||||||
|
Borgata
|
— | 6,379 | 24,569 | 30,948 | 200 | 6,384 | 24,764 | 31,148 | 5,214 | 2001 | May-07 | |||||||||||||||||||||||||||||
|
Hearthstone at Merrill Creek
|
— | 6,848 | 30,922 | 37,770 | 1,507 | 6,859 | 32,418 | 39,277 | 5,099 | 2000 | May-08 | |||||||||||||||||||||||||||||
|
Island Square
|
— | 21,284 | 89,389 | 110,673 | 2,167 | 21,331 | 91,509 | 112,840 | 13,022 | 2007 | Jul-08 | |||||||||||||||||||||||||||||
|
989 elements
|
— | 8,541 | 45,990 | 54,531 | 358 | 8,507 | 46,382 | 54,889 | 2,666 | 2006 | Dec-09 | |||||||||||||||||||||||||||||
|
elements too
|
— | 27,468 | 72,036 | 99,504 | 6,806 | 29,649 | 76,661 | 106,310 | 6,844 | 2010 | Feb-10 | |||||||||||||||||||||||||||||
|
SEATTLE, WA
|
54,278 | 90,464 | 350,395 | 440,859 | 24,802 | 93,968 | 371,693 | 465,661 | 71,331 | |||||||||||||||||||||||||||||||
|
Rancho Vallecitos
|
— | 3,303 | 10,877 | 14,180 | 5,040 | 3,774 | 15,446 | 19,220 | 10,030 | 1988 | Oct-99 | |||||||||||||||||||||||||||||
|
Presidio at Rancho Del Oro
|
13,325 | 9,164 | 22,694 | 31,858 | 4,879 | 9,571 | 27,166 | 36,737 | 11,350 | 1987 | Jun-04 | |||||||||||||||||||||||||||||
|
Villas at Carlsbad
|
8,449 | 6,517 | 10,718 | 17,235 | 1,288 | 6,618 | 11,905 | 18,523 | 4,351 | 1966 | Oct-04 | |||||||||||||||||||||||||||||
|
Summit at Mission Bay
|
— | 22,598 | 17,182 | 39,780 | 4,546 | 22,627 | 21,699 | 44,326 | 7,840 | 1953 | Nov-04 | |||||||||||||||||||||||||||||
151
Table of Contents
UDR,
INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
(In thousands)
|
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 | ||||||||||||||||||||||||||||||
|
Milazzo
|
— | 15,920 | 35,578 | 51,498 | 4,355 | 15,936 | 39,917 | 55,853 | 11,548 | 1986 | May-06 | |||||||||||||||||||||||||||||
|
SAN DIEGO, CA
|
21,774 | 57,502 | 97,049 | 154,551 | 20,108 | 58,526 | 116,133 | 174,659 | 45,119 | |||||||||||||||||||||||||||||||
|
Boronda Manor
|
— | 1,946 | 8,982 | 10,928 | 8,210 | 3,099 | 16,039 | 19,138 | 6,056 | 1979 | Dec-98 | |||||||||||||||||||||||||||||
|
Garden Court
|
— | 888 | 4,188 | 5,076 | 4,142 | 1,454 | 7,764 | 9,218 | 3,048 | 1973 | Dec-98 | |||||||||||||||||||||||||||||
|
Cambridge Court
|
— | 3,039 | 12,883 | 15,922 | 12,804 | 5,131 | 23,595 | 28,726 | 9,345 | 1974 | Dec-98 | |||||||||||||||||||||||||||||
|
Laurel Tree
|
— | 1,304 | 5,115 | 6,419 | 5,255 | 2,058 | 9,616 | 11,674 | 3,715 | 1977 | Dec-98 | |||||||||||||||||||||||||||||
|
The Pointe At Harden Ranch
|
— | 6,388 | 23,854 | 30,242 | 22,990 | 9,731 | 43,501 | 53,232 | 16,496 | 1986 | Dec-98 | |||||||||||||||||||||||||||||
|
The Pointe At Northridge
|
— | 2,044 | 8,028 | 10,072 | 8,980 | 3,190 | 15,862 | 19,052 | 6,269 | 1979 | Dec-98 | |||||||||||||||||||||||||||||
|
The Pointe At Westlake
|
— | 1,329 | 5,334 | 6,663 | 4,942 | 2,106 | 9,499 | 11,605 | 3,604 | 1975 | Dec-98 | |||||||||||||||||||||||||||||
|
MONTEREY PENINSULA, CA
|
— | 16,938 | 68,384 | 85,322 | 67,323 | 26,769 | 125,876 | 152,645 | 48,533 | |||||||||||||||||||||||||||||||
|
Verano at Rancho Cucamonga Town Square
|
54,308 | 13,557 | 3,645 | 17,202 | 51,947 | 22,898 | 46,251 | 69,149 | 18,494 | 2006 | Oct-02 | |||||||||||||||||||||||||||||
|
Windemere at Sycamore Highland
|
26,971 | 5,810 | 23,450 | 29,260 | 1,817 | 5,953 | 25,124 | 31,077 | 12,150 | 2001 | Nov-02 | |||||||||||||||||||||||||||||
|
Waterstone at Murrieta
|
— | 10,598 | 34,703 | 45,301 | 4,749 | 10,858 | 39,192 | 50,050 | 15,894 | 1990 | Nov-04 | |||||||||||||||||||||||||||||
|
INLAND EMPIRE, CA
|
81,279 | 29,965 | 61,798 | 91,763 | 58,513 | 39,709 | 110,567 | 150,276 | 46,538 | |||||||||||||||||||||||||||||||
|
Foothills Tennis Village
|
15,629 | 3,618 | 14,542 | 18,160 | 5,277 | 3,958 | 19,479 | 23,437 | 9,740 | 1988 | Dec-98 | |||||||||||||||||||||||||||||
|
Woodlake Village
|
30,982 | 6,772 | 26,967 | 33,739 | 10,885 | 7,722 | 36,902 | 44,624 | 18,857 | 1979 | Dec-98 | |||||||||||||||||||||||||||||
|
SACRAMENTO, CA
|
46,611 | 10,390 | 41,509 | 51,899 | 16,162 | 11,680 | 56,381 | 68,061 | 28,597 | |||||||||||||||||||||||||||||||
|
Tualatin Heights
|
10,079 | 3,273 | 9,134 | 12,407 | 5,391 | 3,688 | 14,110 | 17,798 | 6,871 | 1989 | Dec-98 | |||||||||||||||||||||||||||||
|
Andover Park
|
15,938 | 2,916 | 16,995 | 19,911 | 6,257 | 3,102 | 23,066 | 26,168 | 9,794 | 1989 | Sep-04 | |||||||||||||||||||||||||||||
|
Hunt Club
|
17,020 | 6,014 | 14,870 | 20,884 | 4,693 | 6,281 | 19,296 | 25,577 | 8,265 | 1985 | Sep-04 | |||||||||||||||||||||||||||||
|
PORTLAND, OR
|
43,037 | 12,203 | 40,999 | 53,202 | 16,341 | 13,071 | 56,472 | 69,543 | 24,930 | |||||||||||||||||||||||||||||||
|
TOTAL WESTERN REGION
|
933,221 | 916,460 | 1,682,064 | 2,598,524 | 474,849 | 967,615 | 2,105,758 | 3,073,373 | 614,363 | |||||||||||||||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||||||||||||||
|
Dominion Lake Ridge
|
23,257 | 2,366 | 8,387 | 10,753 | 5,027 | 2,765 | 13,015 | 15,780 | 7,627 | 1987 | Feb-96 | |||||||||||||||||||||||||||||
|
Dominion Middle Ridge
|
34,042 | 3,311 | 13,283 | 16,594 | 6,216 | 3,626 | 19,184 | 22,810 | 10,660 | 1990 | Jun-96 | |||||||||||||||||||||||||||||
|
The Whitmore
|
— | 6,418 | 13,411 | 19,829 | 19,534 | 7,423 | 31,940 | 39,363 | 14,032 | 2008 | Apr-02 | |||||||||||||||||||||||||||||
|
Presidential Greens
|
— | 11,238 | 18,790 | 30,028 | 6,970 | 11,518 | 25,480 | 36,998 | 14,241 | 1938 | May-02 | |||||||||||||||||||||||||||||
|
Ridgewood
|
— | 5,612 | 20,086 | 25,698 | 6,972 | 5,814 | 26,856 | 32,670 | 14,404 | 1988 | Aug-02 | |||||||||||||||||||||||||||||
|
The Calvert
|
— | 263 | 11,189 | 11,452 | 15,457 | 8,275 | 18,634 | 26,909 | 8,111 | 1962 | Nov-03 | |||||||||||||||||||||||||||||
|
Commons at Town Square
|
— | 136 | 7,724 | 7,860 | 985 | 6,871 | 1,974 | 8,845 | 966 | 1971 | Dec-03 | |||||||||||||||||||||||||||||
|
Waterside Towers
|
— | 874 | 38,209 | 39,083 | 9,218 | 26,194 | 22,107 | 48,301 | 10,258 | 1971 | Dec-03 | |||||||||||||||||||||||||||||
|
Waterside Townhomes
|
— | 129 | 3,724 | 3,853 | 435 | 2,725 | 1,563 | 4,288 | 737 | 1971 | Dec-03 | |||||||||||||||||||||||||||||
|
Wellington Place at Olde Town
|
28,681 | 13,753 | 36,059 | 49,812 | 16,131 | 14,497 | 51,446 | 65,943 | 18,594 | 2008 | Sep-05 | |||||||||||||||||||||||||||||
|
Andover House
|
— | 14,357 | 51,577 | 65,934 | 2,335 | 14,360 | 53,909 | 68,269 | 11,806 | 2004 | Mar-07 | |||||||||||||||||||||||||||||
|
Sullivan Place
|
— | 1,137 | 103,676 | 104,813 | 2,676 | 1,175 | 106,314 | 107,489 | 19,073 | 2007 | Dec-07 | |||||||||||||||||||||||||||||
|
Circle Towers
|
69,493 | 33,011 | 107,051 | 140,062 | 4,689 | 32,827 | 111,924 | 144,751 | 17,226 | 1972 | Mar-08 | |||||||||||||||||||||||||||||
|
Delancey at Shirlington
|
— | 21,606 | 66,765 | 88,371 | 804 | 21,616 | 67,559 | 89,175 | 10,740 | 2006/07 | Mar-08 | |||||||||||||||||||||||||||||
|
Signal Hill
|
38,699 | 13,290 | — | 13,290 | 65,362 | 24,612 | 54,040 | 78,652 | 1,599 | 2010 | Nov-10 | |||||||||||||||||||||||||||||
|
METROPOLITAN, DC
|
194,172 | 127,501 | 499,931 | 627,432 | 162,811 | 184,298 | 605,945 | 790,243 | 160,074 | |||||||||||||||||||||||||||||||
|
Dominion Kings Place
|
16,582 | 1,565 | 7,007 | 8,572 | 3,538 | 1,794 | 10,316 | 12,110 | 6,296 | 1983 | Dec-92 | |||||||||||||||||||||||||||||
|
Dominion At Eden Brook
|
21,308 | 2,361 | 9,384 | 11,745 | 5,611 | 2,881 | 14,475 | 17,356 | 9,211 | 1984 | Dec-92 | |||||||||||||||||||||||||||||
|
Ellicott Grove
|
— | 2,920 | 9,099 | 12,019 | 22,044 | 5,189 | 28,874 | 34,063 | 15,546 | 2008 | Jul-94 | |||||||||||||||||||||||||||||
|
Dominion Constant Freindship
|
10,683 | 903 | 4,669 | 5,572 | 3,220 | 1,138 | 7,654 | 8,792 | 4,457 | 1990 | May-95 | |||||||||||||||||||||||||||||
|
Lakeside Mill
|
15,242 | 2,666 | 10,109 | 12,775 | 3,484 | 2,845 | 13,414 | 16,259 | 8,566 | 1989 | Dec-99 | |||||||||||||||||||||||||||||
|
Tamar Meadow
|
17,602 | 4,145 | 17,150 | 21,295 | 4,230 | 4,490 | 21,035 | 25,525 | 10,757 | 1990 | Nov-02 | |||||||||||||||||||||||||||||
|
Calvert’s Walk
|
18,043 | 4,408 | 24,692 | 29,100 | 5,478 | 4,549 | 30,029 | 34,578 | 12,624 | 1988 | Mar-04 | |||||||||||||||||||||||||||||
|
Arborview Apartments
|
— | 4,653 | 23,952 | 28,605 | 5,342 | 4,994 | 28,953 | 33,947 | 12,997 | 1992 | Mar-04 | |||||||||||||||||||||||||||||
|
Liriope Apartments
|
— | 1,620 | 6,791 | 8,411 | 819 | 1,629 | 7,601 | 9,230 | 3,228 | 1997 | Mar-04 | |||||||||||||||||||||||||||||
|
20 Lambourne
|
32,000 | 11,750 | 45,590 | 57,340 | 3,036 | 11,808 | 48,568 | 60,376 | 8,417 | 2003 | Mar-08 | |||||||||||||||||||||||||||||
|
Domain Brewers Hill
|
— | 4,669 | 40,630 | 45,299 | 150 | 4,669 | 40,780 | 45,449 | 865 | 2009 | Aug-10 | |||||||||||||||||||||||||||||
|
BALTIMORE, MD
|
131,460 | 41,660 | 199,073 | 240,733 | 56,952 | 45,986 | 251,699 | 297,685 | 92,964 | |||||||||||||||||||||||||||||||
|
Dominion Olde West
|
— | 1,965 | 12,204 | 14,169 | 5,155 | 2,605 | 16,719 | 19,324 | 11,597 | 1978/82/84/85/87 | Dec-84 & Aug-91 | |||||||||||||||||||||||||||||
|
Dominion Creekwood
|
— | — | — | — | 4,562 | 187 | 4,375 | 4,562 | 2,552 | 1984 | Aug-91 | |||||||||||||||||||||||||||||
152
Table of Contents
UDR,
INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
(In thousands)
|
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 English Hills
|
— | 1,979 | 11,524 | 13,503 | 8,224 | 2,873 | 18,854 | 21,727 | 11,134 | 1969/76 | Dec-91 | |||||||||||||||||||||||||||||
|
Legacy at Mayland
|
41,507 | — | — | — | 18,906 | 1,701 | 17,205 | 18,906 | 9,761 | 2007 | Dec-91 | |||||||||||||||||||||||||||||
|
Gayton Pointe Townhomes
|
— | 826 | 5,148 | 5,974 | 28,589 | 3,302 | 31,261 | 34,563 | 18,433 | 2007 | Sep-95 | |||||||||||||||||||||||||||||
|
Dominion West End
|
26,313 | 2,059 | 15,049 | 17,108 | 11,704 | 4,453 | 24,359 | 28,812 | 13,795 | 1989 | Dec-95 | |||||||||||||||||||||||||||||
|
Waterside At Ironbridge
|
— | 1,844 | 13,238 | 15,082 | 6,321 | 2,249 | 19,154 | 21,403 | 9,281 | 1987 | Sep-97 | |||||||||||||||||||||||||||||
|
Carriage Homes at Wyndham
|
— | 474 | 30,997 | 31,471 | 6,276 | 3,729 | 34,018 | 37,747 | 15,035 | 1998 | Nov-03 | |||||||||||||||||||||||||||||
|
RICHMOND, VA
|
67,820 | 9,147 | 88,160 | 97,307 | 89,737 | 21,099 | 165,945 | 187,044 | 91,588 | |||||||||||||||||||||||||||||||
|
Heather Lake
|
— | 617 | 3,400 | 4,017 | 9,311 | 1,157 | 12,171 | 13,328 | 10,205 | 1972/74 | Mar-80 | |||||||||||||||||||||||||||||
|
Woodscape
|
— | 798 | 7,209 | 8,007 | 8,493 | 1,996 | 14,504 | 16,500 | 11,249 | 1974/76 | Dec-87 | |||||||||||||||||||||||||||||
|
Eastwind
|
— | 155 | 5,317 | 5,472 | 5,404 | 600 | 10,276 | 10,876 | 7,384 | 1970 | Apr-88 | |||||||||||||||||||||||||||||
|
Forest Lake At Oyster Point
|
— | 780 | 8,862 | 9,642 | 7,892 | 1,337 | 16,197 | 17,534 | 9,911 | 1986 | Aug-95 | |||||||||||||||||||||||||||||
|
Dominion Waterside At Lynnhave
|
— | 1,824 | 4,107 | 5,931 | 5,344 | 2,154 | 9,121 | 11,275 | 5,930 | 1966 | Aug-96 | |||||||||||||||||||||||||||||
|
Dominion Yorkshire Downs
|
— | 1,089 | 8,582 | 9,671 | 5,217 | 1,489 | 13,399 | 14,888 | 7,029 | 1987 | Dec-97 | |||||||||||||||||||||||||||||
|
NORFOLK, VA
|
— | 5,263 | 37,477 | 42,740 | 41,661 | 8,733 | 75,668 | 84,401 | 51,708 | |||||||||||||||||||||||||||||||
|
Garrison Square
|
— | 5,591 | 91,027 | 96,618 | 48 | 5,591 | 91,075 | 96,666 | 1,629 | 1887/1990 | Sep-10 | |||||||||||||||||||||||||||||
|
Ridge at Blue Hills
|
25,375 | 6,039 | 34,869 | 40,908 | 118 | 6,039 | 34,987 | 41,026 | — | 2007 | Sep-10 | |||||||||||||||||||||||||||||
|
BOSTON, MA
|
25,375 | 11,630 | 125,896 | 137,526 | 166 | 11,630 | 126,062 | 137,692 | 1,629 | |||||||||||||||||||||||||||||||
|
Greens At Falls Run
|
— | 2,731 | 5,300 | 8,031 | 4,359 | 3,069 | 9,321 | 12,390 | 5,398 | 1989 | May-95 | |||||||||||||||||||||||||||||
|
Manor At England Run
|
— | 3,194 | 13,505 | 16,699 | 19,423 | 5,095 | 31,027 | 36,122 | 17,608 | 1990 | May-95 | |||||||||||||||||||||||||||||
|
Brittingham Square
|
— | 650 | 4,962 | 5,612 | 3,453 | 916 | 8,149 | 9,065 | 4,654 | 1991 | May-95 | |||||||||||||||||||||||||||||
|
Greens At Schumaker Pond
|
— | 710 | 6,118 | 6,828 | 4,844 | 958 | 10,714 | 11,672 | 6,478 | 1988 | May-95 | |||||||||||||||||||||||||||||
|
Greens At Cross Court
|
— | 1,182 | 4,544 | 5,726 | 3,786 | 1,433 | 8,079 | 9,512 | 4,866 | 1987 | May-95 | |||||||||||||||||||||||||||||
|
The Tribute on Glenwood
|
32,126 | 4,719 | — | 4,719 | 44,736 | 12,128 | 37,327 | 49,455 | 2,153 | 2010 | Jun-10 | |||||||||||||||||||||||||||||
|
OTHER MID-ATLANTIC
|
32,126 | 13,186 | 34,429 | 47,615 | 80,601 | 23,599 | 104,617 | 128,216 | 41,157 | |||||||||||||||||||||||||||||||
|
TOTAL MID-ATLANTIC REGION
|
450,953 | 208,387 | 984,966 | 1,193,353 | 431,928 | 295,345 | 1,329,936 | 1,625,281 | 439,120 | |||||||||||||||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||||||||||||||
|
Summit West
|
— | 2,176 | 4,710 | 6,886 | 7,000 | 3,042 | 10,844 | 13,886 | 8,146 | 1972 | Dec-92 | |||||||||||||||||||||||||||||
|
The Breyley
|
— | 1,780 | 2,458 | 4,238 | 16,302 | 3,131 | 17,409 | 20,540 | 12,030 | 2007 | Sep-93 | |||||||||||||||||||||||||||||
|
Lakewood Place
|
21,149 | 1,395 | 10,647 | 12,042 | 6,953 | 2,035 | 16,960 | 18,995 | 10,768 | 1986 | Mar-94 | |||||||||||||||||||||||||||||
|
Hunters Ridge
|
22,203 | 2,462 | 10,942 | 13,404 | 5,786 | 3,408 | 15,782 | 19,190 | 9,299 | 1992 | Jun-95 | |||||||||||||||||||||||||||||
|
Bay Meadow
|
— | 2,893 | 9,254 | 12,147 | 8,328 | 3,791 | 16,684 | 20,475 | 10,291 | 2004 | Dec-96 | |||||||||||||||||||||||||||||
|
Cambridge Woods
|
— | 1,791 | 7,166 | 8,957 | 6,778 | 2,451 | 13,284 | 15,735 | 7,877 | 1985 | Jun-97 | |||||||||||||||||||||||||||||
|
Sugar Mill Creek
|
7,330 | 2,242 | 7,553 | 9,795 | 5,508 | 2,648 | 12,655 | 15,303 | 6,572 | 1988 | Dec-98 | |||||||||||||||||||||||||||||
|
Inlet Bay
|
— | 7,702 | 23,150 | 30,852 | 10,933 | 8,520 | 33,265 | 41,785 | 17,432 | 1988/89 | Jun-03 | |||||||||||||||||||||||||||||
|
MacAlpine Place
|
— | 10,869 | 36,858 | 47,727 | 4,266 | 10,970 | 41,023 | 51,993 | 15,769 | 2001 | Dec-04 | |||||||||||||||||||||||||||||
|
Island Walk
|
— | 7,231 | 19,897 | 27,128 | 9,684 | 9,131 | 27,681 | 36,812 | 15,688 | 1985/87 | Jul-06 | |||||||||||||||||||||||||||||
|
Gallery at Bayport II
|
— | 5,775 | 17,236 | 23,011 | 2,051 | 8,525 | 16,537 | 25,062 | 5,836 | 2008 | Oct-06 | |||||||||||||||||||||||||||||
|
The Vintage Lofts at West End
|
— | 6,611 | 37,663 | 44,274 | 10,012 | 14,983 | 39,303 | 54,286 | 5,958 | 2009 | Jul-09 | |||||||||||||||||||||||||||||
|
TAMPA, FL
|
50,682 | 52,927 | 187,534 | 240,461 | 93,601 | 72,635 | 261,427 | 334,062 | 125,666 | |||||||||||||||||||||||||||||||
|
The Canopy Apartment Villas
|
— | 2,895 | 6,456 | 9,351 | 21,457 | 5,204 | 25,604 | 30,808 | 16,542 | 2008 | Mar-93 | |||||||||||||||||||||||||||||
|
Altamira Place
|
15,640 | 1,533 | 11,076 | 12,609 | 18,430 | 3,150 | 27,889 | 31,039 | 19,087 | 2007 | Apr-94 | |||||||||||||||||||||||||||||
|
Regatta Shore
|
— | 757 | 6,608 | 7,365 | 13,580 | 1,803 | 19,142 | 20,945 | 12,840 | 2007 | Jun-94 | |||||||||||||||||||||||||||||
|
Alafaya Woods
|
20,622 | 1,653 | 9,042 | 10,695 | 7,290 | 2,332 | 15,653 | 17,985 | 9,719 | 2006 | Oct-94 | |||||||||||||||||||||||||||||
|
Seabrook
|
— | 1,846 | 4,155 | 6,001 | 6,771 | 2,532 | 10,240 | 12,772 | 7,113 | 2004 | Feb-96 | |||||||||||||||||||||||||||||
|
Los Altos
|
25,048 | 2,804 | 12,349 | 15,153 | 7,243 | 3,623 | 18,773 | 22,396 | 10,776 | 2004 | Oct-96 | |||||||||||||||||||||||||||||
|
Lotus Landing
|
— | 2,185 | 8,639 | 10,824 | 7,426 | 2,657 | 15,593 | 18,250 | 8,068 | 2006 | Jul-97 | |||||||||||||||||||||||||||||
|
Seville On The Green
|
— | 1,282 | 6,498 | 7,780 | 5,879 | 1,656 | 12,003 | 13,659 | 6,564 | 2004 | Oct-97 | |||||||||||||||||||||||||||||
|
Ashton @ Waterford
|
26,699 | 3,872 | 17,538 | 21,410 | 1,586 | 4,039 | 18,957 | 22,996 | 10,220 | 2000 | May-98 | |||||||||||||||||||||||||||||
|
Arbors at Lee Vista DCO
|
— | 6,692 | 12,860 | 19,552 | 10,341 | 6,903 | 22,990 | 29,893 | 12,798 | 2007 | Aug-06 | |||||||||||||||||||||||||||||
|
The Place on Millenia Blvd
|
— | 12,172 | 37,143 | 49,315 | 985 | 12,194 | 38,106 | 50,300 | 8,131 | 2007 | Jan-08 | |||||||||||||||||||||||||||||
|
ORLANDO, FL
|
88,009 | 37,691 | 132,364 | 170,055 | 100,988 | 46,093 | 224,950 | 271,043 | 121,858 | |||||||||||||||||||||||||||||||
|
Legacy Hill
|
— | 1,148 | 5,867 | 7,015 | 7,615 | 1,669 | 12,961 | 14,630 | 8,722 | 1977 | Nov-95 | |||||||||||||||||||||||||||||
|
Hickory Run
|
— | 1,469 | 11,584 | 13,053 | 8,107 | 1,959 | 19,201 | 21,160 | 10,044 | 1989 | Dec-95 | |||||||||||||||||||||||||||||
153
Table of Contents
UDR,
INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
(In thousands)
|
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 | ||||||||||||||||||||||||||||||
|
Carrington Hills
|
— | 2,117 | — | 2,117 | 31,902 | 4,214 | 29,805 | 34,019 | 14,760 | 1999 | Dec-95 | |||||||||||||||||||||||||||||
|
Brookridge
|
— | 708 | 5,461 | 6,169 | 3,594 | 998 | 8,765 | 9,763 | 5,165 | 1986 | Mar-96 | |||||||||||||||||||||||||||||
|
Breckenridge
|
— | 766 | 7,714 | 8,480 | 3,329 | 1,141 | 10,668 | 11,809 | 5,781 | 1986 | Mar-97 | |||||||||||||||||||||||||||||
|
Colonnade
|
— | 1,460 | 16,015 | 17,475 | 3,284 | 1,799 | 18,960 | 20,759 | 8,339 | 1998 | Jan-99 | |||||||||||||||||||||||||||||
|
The Preserve at Brentwood
|
25,294 | 3,181 | 24,674 | 27,855 | 4,621 | 3,304 | 29,172 | 32,476 | 12,534 | 1998 | Jun-04 | |||||||||||||||||||||||||||||
|
Polo Park
|
— | 4,583 | 16,293 | 20,876 | 14,921 | 5,485 | 30,312 | 35,797 | 11,216 | 2008 | May-06 | |||||||||||||||||||||||||||||
|
NASHVILLE, TN
|
25,294 | 15,432 | 87,608 | 103,040 | 77,373 | 20,569 | 159,844 | 180,413 | 76,561 | |||||||||||||||||||||||||||||||
|
Greentree
|
17,930 | 1,634 | 11,227 | 12,861 | 12,147 | 2,683 | 22,325 | 25,008 | 13,885 | 2007 | Jul-94 | |||||||||||||||||||||||||||||
|
Westland
|
— | 1,835 | 14,865 | 16,700 | 10,521 | 3,085 | 24,136 | 27,221 | 15,014 | 1990 | May-96 | |||||||||||||||||||||||||||||
|
Antlers
|
— | 4,034 | 11,193 | 15,227 | 11,329 | 5,130 | 21,426 | 26,556 | 13,906 | 1985 | May-96 | |||||||||||||||||||||||||||||
|
St Johns Plantation
|
— | 4,288 | 33,102 | 37,390 | 4,902 | 4,474 | 37,818 | 42,292 | 14,071 | 2006 | Jun-05 | |||||||||||||||||||||||||||||
|
The Kensley
|
— | 3,179 | 30,711 | 33,890 | 1,573 | 3,191 | 32,272 | 35,463 | 7,030 | 2004 | Jul-07 | |||||||||||||||||||||||||||||
|
JACKSONVILLE, FL
|
17,930 | 14,970 | 101,098 | 116,068 | 40,472 | 18,563 | 137,977 | 156,540 | 63,906 | |||||||||||||||||||||||||||||||
|
The Groves
|
— | 790 | 4,767 | 5,557 | 5,110 | 1,606 | 9,061 | 10,667 | 6,059 | 1989 | Dec-95 | |||||||||||||||||||||||||||||
|
Mallards of Brandywine
|
— | 766 | 5,407 | 6,173 | 2,875 | 1,101 | 7,947 | 9,048 | 4,531 | 1985 | Jul-97 | |||||||||||||||||||||||||||||
|
The Reserve and Park at Riverbridge
|
40,133 | 15,968 | 56,401 | 72,369 | 3,941 | 16,128 | 60,182 | 76,310 | 22,492 | 1999/2001 | Dec-04 | |||||||||||||||||||||||||||||
|
PIERPOINT Port Orange
|
— | 3,373 | 7,096 | 10,469 | 5,578 | 3,792 | 12,255 | 16,047 | 9,479 | 2007 | Dec-05 | |||||||||||||||||||||||||||||
|
OTHER FLORIDA
|
40,133 | 20,897 | 73,671 | 94,568 | 17,504 | 22,627 | 89,445 | 112,072 | 42,561 | |||||||||||||||||||||||||||||||
|
TOTAL SOUTHEASTERN REGION
|
222,048 | 141,917 | 582,275 | 724,192 | 329,938 | 180,487 | 873,643 | 1,054,130 | 430,552 | |||||||||||||||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||||||||||||||
|
Highlands of Preston
|
— | 2,151 | 8,168 | 10,319 | 29,371 | 5,877 | 33,813 | 39,690 | 13,667 | 2008 | Mar-98 | |||||||||||||||||||||||||||||
|
THIRTY377
|
31,175 | 24,036 | 32,951 | 56,987 | 5,544 | 24,213 | 38,318 | 62,531 | 10,981 | 2007 | Aug-06 | |||||||||||||||||||||||||||||
|
Garden Oaks
|
— | 2,132 | 5,367 | 7,499 | 854 | 6,854 | 1,499 | 8,353 | 793 | 1979 | Mar-07 | |||||||||||||||||||||||||||||
|
Springhaven
|
— | 6,688 | 3,354 | 10,042 | 521 | 8,225 | 2,338 | 10,563 | 1,410 | 1977 | Apr-07 | |||||||||||||||||||||||||||||
|
Glenwood
|
— | 7,903 | 554 | 8,457 | 811 | 8,068 | 1,200 | 9,268 | 504 | 1970 | May-07 | |||||||||||||||||||||||||||||
|
Talisker of Addison
|
7,341 | 10,440 | 634 | 11,074 | 1,199 | 10,792 | 1,481 | 12,273 | 687 | 1975 | May-07 | |||||||||||||||||||||||||||||
|
Clipper Pointe
|
6,816 | 13,221 | 2,507 | 15,728 | 1,351 | 14,803 | 2,276 | 17,079 | 1,343 | 1978 | May-07 | |||||||||||||||||||||||||||||
|
Ridgeview Park
|
— | 2,350 | — | 2,350 | 8,307 | 2,364 | 8,293 | 10,657 | 2,179 | 2007 | Jul-07 | |||||||||||||||||||||||||||||
|
RIACHI AT ONE21
|
17,704 | 2,342 | — | 2,342 | 16,310 | 4,691 | 13,961 | 18,652 | 3,955 | 2007 | Dec-07 | |||||||||||||||||||||||||||||
|
Legacy Village
|
59,300 | 16,882 | 100,102 | 116,984 | 3,325 | 16,991 | 103,318 | 120,309 | 17,609 | 2005/06/07 | Mar-08 | |||||||||||||||||||||||||||||
|
Riachi at One21 Ph II
|
12,791 | 1,918 | — | 1,918 | 14,895 | 4,156 | 12,657 | 16,813 | 1,982 | 2009 | Mar-09 | |||||||||||||||||||||||||||||
|
Mustang Park
|
— | 5,556 | 22,664 | 28,220 | 84 | 5,623 | 22,681 | 28,304 | 1,939 | 2009 | Jul-09 | |||||||||||||||||||||||||||||
|
The Belmont
|
47,056 | 11,720 | — | 11,720 | 54,251 | 20,929 | 45,042 | 65,971 | 4,424 | 2010 | Apr-10 | |||||||||||||||||||||||||||||
|
Savoye
|
29,082 | 7,374 | 3,367 | 10,741 | 54,905 | 14,556 | 51,090 | 65,646 | 2,693 | 2010 | Aug-10 | |||||||||||||||||||||||||||||
|
DALLAS, TX
|
211,265 | 114,713 | 179,668 | 294,381 | 191,728 | 148,142 | 337,967 | 486,109 | 64,166 | |||||||||||||||||||||||||||||||
|
Sierra Foothills
|
20,977 | 2,728 | — | 2,728 | 20,710 | 5,032 | 18,406 | 23,438 | 12,303 | 1998 | Feb-98 | |||||||||||||||||||||||||||||
|
Finisterra
|
— | 1,274 | 26,392 | 27,666 | 3,885 | 1,673 | 29,878 | 31,551 | 12,835 | 1997 | Mar-98 | |||||||||||||||||||||||||||||
|
Sierra Canyon
|
12,035 | 1,810 | 12,964 | 14,774 | 1,883 | 2,014 | 14,643 | 16,657 | 8,361 | 2001 | Dec-01 | |||||||||||||||||||||||||||||
|
Lumiere
|
— | 5,092 | 11,998 | 17,090 | 6,688 | 4,708 | 19,070 | 23,778 | 11,211 | 1996 | May-06 | |||||||||||||||||||||||||||||
|
Waterford at Peoria
|
— | 2,225 | 21,593 | 23,818 | 1,527 | 2,971 | 22,374 | 25,345 | 3,215 | 2008 | Aug-08 | |||||||||||||||||||||||||||||
|
Residences at Stadium Village
|
29,120 | 7,930 | — | 7,930 | 41,291 | 15,157 | 34,064 | 49,221 | 3,631 | 2009 | May-09 | |||||||||||||||||||||||||||||
|
PHOENIX, AZ
|
62,132 | 21,059 | 72,947 | 94,006 | 75,984 | 31,555 | 138,435 | 169,990 | 51,556 | |||||||||||||||||||||||||||||||
|
Barton Creek Landing
|
— | 3,151 | 14,269 | 17,420 | 14,760 | 3,535 | 28,645 | 32,180 | 9,717 | 1986 | Mar-02 | |||||||||||||||||||||||||||||
|
Residences at the Domain
|
25,079 | 4,034 | 55,256 | 59,290 | 891 | 4,053 | 56,128 | 60,181 | 8,039 | 2007 | Aug-08 | |||||||||||||||||||||||||||||
|
AUSTIN, TX
|
25,079 | 7,185 | 69,525 | 76,710 | 15,651 | 7,588 | 84,773 | 92,361 | 17,756 | |||||||||||||||||||||||||||||||
|
Inn @ Los Patios
|
— | 3,005 | 11,545 | 14,550 | 4,629 | 4,279 | 14,900 | 19,179 | 4,052 | 1990 | Aug-98 | |||||||||||||||||||||||||||||
|
Tiburon
|
17,500 | 3,600 | — | 3,600 | 18,626 | 6,258 | 15,968 | 22,226 | 4,073 | 2008 | Jul-06 | |||||||||||||||||||||||||||||
|
Laurelwoode
|
19,201 | 3,459 | — | 3,459 | 20,354 | 7,302 | 16,511 | 23,813 | 3,582 | 2008 | Jan-07 | |||||||||||||||||||||||||||||
|
OTHER TEXAS
|
36,701 | 10,064 | 11,545 | 21,609 | 43,609 | 17,839 | 47,379 | 65,218 | 11,707 | |||||||||||||||||||||||||||||||
|
TOTAL SOUTHWESTERN REGION
|
335,177 | 153,021 | 333,685 | 486,706 | 326,972 | 205,124 | 608,554 | 813,678 | 145,185 | |||||||||||||||||||||||||||||||
154
Table of Contents
UDR,
INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
(In thousands)
|
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 | ||||||||||||||||||||||||||||||
|
REAL ESTATE UNDER DEVELOPMENT
|
||||||||||||||||||||||||||||||||||||||||
|
Savoye II
|
— | 6,510 | 3,774 | 10,284 | 16,700 | 6,510 | 20,474 | 26,984 | — | |||||||||||||||||||||||||||||||
|
Mission Bay
|
— | 23,625 | — | 23,625 | 729 | 23,654 | 700 | 24,354 | — | |||||||||||||||||||||||||||||||
|
Belmont Townhomes
|
— | 288 | — | 288 | 605 | 853 | 40 | 893 | — | |||||||||||||||||||||||||||||||
|
2400 14th Street
|
— | 31,747 | — | 31,747 | 13,934 | 31,392 | 14,289 | 45,681 | — | |||||||||||||||||||||||||||||||
|
TOTAL REAL ESTATE UNDER DEVELOPMENT
|
— | 62,170 | 3,774 | 65,944 | 31,968 | 62,409 | 35,503 | 97,912 | — | |||||||||||||||||||||||||||||||
|
LAND
|
||||||||||||||||||||||||||||||||||||||||
|
Waterside
|
— | 11,862 | 93 | 11,955 | 126 | 11,862 | 219 | 12,081 | 176 | |||||||||||||||||||||||||||||||
|
Presidio
|
— | 1,524 | — | 1,524 | 921 | 1,300 | 1,145 | 2,445 | — | |||||||||||||||||||||||||||||||
|
UDR Pacific Los Alisos, LP
|
— | 17,298 | — | 17,298 | 6,273 | 16,385 | 7,186 | 23,571 | — | |||||||||||||||||||||||||||||||
|
Parkers Landing II TRS
|
— | 1,710 | — | 1,710 | 762 | 1,511 | 961 | 2,472 | (1,310 | ) | ||||||||||||||||||||||||||||||
|
3033 Wilshire
|
— | 11,055 | — | 11,055 | 4,091 | 11,055 | 4,091 | 15,146 | — | |||||||||||||||||||||||||||||||
|
Vitruvian
|
— | 15,664 | 19,607 | 35,271 | 40,903 | 46,038 | 30,136 | 76,174 | — | |||||||||||||||||||||||||||||||
|
TOTAL LAND
|
— | 59,113 | 19,700 | 78,813 | 53,076 | 88,151 | 43,738 | 131,889 | (1,134 | ) | ||||||||||||||||||||||||||||||
|
TOTAL REAL ESTATE UNDER DEVELOPMENT
|
— | 121,283 | 23,474 | 144,757 | 85,044 | 150,560 | 79,241 | 229,801 | (1,134 | ) | ||||||||||||||||||||||||||||||
|
COMMERCIAL
|
||||||||||||||||||||||||||||||||||||||||
|
Hanover Village
|
— | 1,624 | — | 1,624 | — | 1,104 | 520 | 1,624 | 518 | |||||||||||||||||||||||||||||||
|
The Calvert — commercial side
|
— | 34 | 1,598 | 1,632 | 1,176 | 1,172 | 1,636 | 2,808 | 670 | |||||||||||||||||||||||||||||||
|
Circle Towers Office Bldg
|
— | 1,407 | 4,498 | 5,905 | 900 | 1,380 | 5,425 | 6,805 | 744 | |||||||||||||||||||||||||||||||
|
Brookhaven Shopping Center
|
— | 4,138 | 7,093 | 11,231 | 9,459 | 6,928 | 13,762 | 20,690 | 1,704 | |||||||||||||||||||||||||||||||
|
Bellevue Plaza retail
|
22,271 | 24,377 | 7,517 | 31,894 | (61 | ) | 29,920 | 1,913 | 31,833 | 105 | ||||||||||||||||||||||||||||||
|
Grandview DCO
|
— | 7,266 | 9,702 | 16,968 | 2,097 | 10,750 | 8,315 | 19,065 | 6,501 | |||||||||||||||||||||||||||||||
|
TOTAL COMMERCIAL
|
22,271 | 38,846 | 30,408 | 69,254 | 13,571 | 51,254 | 31,571 | 82,825 | 10,242 | |||||||||||||||||||||||||||||||
|
Other(b)
|
— | — | — | — | 2,259 | 5 | 2,254 | 2,259 | (2 | ) | ||||||||||||||||||||||||||||||
|
TOTAL CORPORATE
|
— | — | — | — | 2,259 | 5 | 2,254 | 2,259 | (2 | ) | ||||||||||||||||||||||||||||||
|
TOTAL COMMERCIAL & CORPORATE
|
22,271 | 38,846 | 30,408 | 69,254 | 15,830 | 51,259 | 33,825 | 85,084 | 10,240 | |||||||||||||||||||||||||||||||
| — | ||||||||||||||||||||||||||||||||||||||||
|
TOTAL REAL ESTATE OWNED
|
$ | 1,963,670 | $ | 1,579,914 | $ | 3,636,872 | $ | 5,216,786 | $ | 1,664,561 | $ | 1,850,390 | $ | 5,030,957 | $ | 6,881,347 | $ | 1,638,326 | ||||||||||||||||||||||
| (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 $6.2 billion at December 31, 2010.
The depreciable life for all buildings is 35 years.
155
Table of Contents
UDR,
INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
(In thousands)
3-YEAR
ROLLFORWARD OF REAL ESTATE OWNED AND ACCUMULATED
DEPRECIATION
The following is a reconciliation of the carrying amount of
total real estate owned at December 31,
(in thousands):
| 2010 | 2009 | 2008 | ||||||||||
|
Balance at beginning of the year
|
$ | 6,315,047 | $ | 5,831,753 | $ | 5,956,481 | ||||||
|
Real estate acquired
|
425,825 | 28,220 | 1,014,232 | |||||||||
|
Real estate acquired through JV consolidation
|
— | 185,929 | — | |||||||||
|
Capital expenditures and development
|
167,986 | 273,552 | 297,565 | |||||||||
|
Real estate sold
|
(20,328 | ) | — | (1,436,525 | ) | |||||||
|
Retirement of fully depreciated assets
|
(7,183 | ) | (4,407 | ) | — | |||||||
|
Balance at end of the year
|
$ | 6,881,347 | $ | 6,315,047 | $ | 5,831,753 | ||||||
The following is a reconciliation of total accumulated
depreciation for real estate owned at December 31:
| 2010 | 2009 | 2008 | ||||||||||
|
Balance at beginning of the year
|
$ | 1,351,293 | $ | 1,078,689 | $ | 1,371,759 | ||||||
|
Depreciation expense for the year
|
297,889 | 277,011 | 245,898 | |||||||||
|
Accumulated depreciation on sales
|
(3,673 | ) | — | (538,968 | ) | |||||||
|
Accumulated depreciation on retirements
|
(7,183 | ) | (4,407 | ) | — | |||||||
|
Balance at end of year
|
$ | 1,638,326 | $ | 1,351,293 | $ | 1,078,689 | ||||||
156
Table of Contents
UNITED
DOMINION REALTY, L.P.
SCHEDULE III — REAL ESTATE OWNED
FOR THE YEAR ENDED DECEMBER 31, 2010
SCHEDULE III — REAL ESTATE OWNED
FOR THE YEAR ENDED DECEMBER 31, 2010
(In thousands)
|
Cost of
|
||||||||||||||||||||||||||||||||||||||||
|
Improvements
|
Gross Amount at Which
|
|||||||||||||||||||||||||||||||||||||||
| Initial Costs |
Total
|
Capitalized
|
Carried at Close of Period | |||||||||||||||||||||||||||||||||||||
|
Land and
|
Buildings
|
Initial
|
Subsequent
|
Land and
|
Buildings &
|
Total
|
||||||||||||||||||||||||||||||||||
|
Land
|
and
|
Acquisition
|
to Acquisition
|
Land
|
Buildings
|
Carrying
|
Accumulated
|
Date of
|
Date
|
|||||||||||||||||||||||||||||||
| Encumbrances | Improvements | Improvements | Costs | Costs | Improvements | Improvements | Value | Depreciation | Construction(a) | Acquired | ||||||||||||||||||||||||||||||
|
WESTERN REGION
|
||||||||||||||||||||||||||||||||||||||||
|
Harbor at Mesa Verde
|
$ | 47,091 | $ | 20,477 | $ | 28,538 | $ | 49,015 | $ | 10,872 | $ | 20,716 | $ | 39,171 | $ | 59,887 | $ | 18,028 | 2003 | Jun-03 | ||||||||||||||||||||
|
Pine Brook Village
|
18,270 | 2,582 | 25,504 | 28,086 | 4,480 | 3,841 | 28,725 | 32,566 | 12,393 | 1979 | Jun-03 | |||||||||||||||||||||||||||||
|
Pacific Shores
|
19,145 | 7,345 | 22,624 | 29,969 | 7,200 | 7,477 | 29,692 | 37,169 | 13,220 | 2003 | Jun-03 | |||||||||||||||||||||||||||||
|
Huntington Vista
|
31,274 | 8,055 | 22,486 | 30,541 | 5,863 | 8,238 | 28,166 | 36,404 | 12,670 | 1970 | Jun-03 | |||||||||||||||||||||||||||||
|
Missions at Back Bay
|
11,326 | 229 | 14,129 | 14,358 | 1,648 | 10,727 | 5,279 | 16,006 | 2,523 | 1969 | Dec-03 | |||||||||||||||||||||||||||||
|
Coronado at Newport — North
|
49,766 | 62,516 | 46,082 | 108,598 | 14,632 | 63,244 | 59,986 | 123,230 | 24,367 | 2000 | Oct-04 | |||||||||||||||||||||||||||||
|
Huntington Villas
|
55,752 | 61,535 | 18,017 | 79,552 | 4,624 | 61,819 | 22,357 | 84,176 | 9,274 | 1972 | Sep-04 | |||||||||||||||||||||||||||||
|
Villa Venetia
|
— | 70,825 | 24,179 | 95,004 | 4,769 | 70,938 | 28,835 | 99,773 | 11,484 | 1972 | Oct-04 | |||||||||||||||||||||||||||||
|
Vista Del Rey
|
12,659 | 10,670 | 7,080 | 17,750 | 1,465 | 10,776 | 8,439 | 19,215 | 3,514 | 1969 | Sep-04 | |||||||||||||||||||||||||||||
|
Coronado South
|
103,525 | 58,785 | 50,067 | 108,852 | 11,106 | 59,002 | 60,956 | 119,958 | 23,819 | 2000 | Mar-05 | |||||||||||||||||||||||||||||
|
Pine Brook Village II
|
— | 25,922 | 60,961 | 86,883 | 1,141 | 25,924 | 62,100 | 88,024 | 9,498 | 1975 | May-08 | |||||||||||||||||||||||||||||
|
The Arboretum
|
— | 29,563 | 14,283 | 43,846 | 4,843 | 29,685 | 19,004 | 48,689 | 7,843 | 1970 | Oct-04 | |||||||||||||||||||||||||||||
|
ORANGE COUNTY, CA
|
348,808 | 358,504 | 333,950 | 692,454 | 72,643 | 372,387 | 392,710 | 765,097 | 148,633 | |||||||||||||||||||||||||||||||
|
2000 Post Street
|
— | 9,861 | 44,578 | 54,439 | 6,574 | 10,158 | 50,855 | 61,013 | 17,723 | 1987 | Dec-98 | |||||||||||||||||||||||||||||
|
Birch Creek
|
— | 4,365 | 16,696 | 21,061 | 5,010 | 4,991 | 21,080 | 26,071 | 9,758 | 1968 | Dec-98 | |||||||||||||||||||||||||||||
|
Highlands Of Marin
|
— | 5,996 | 24,868 | 30,864 | 26,113 | 6,972 | 50,005 | 56,977 | 13,800 | 1991 | Dec-98 | |||||||||||||||||||||||||||||
|
Marina Playa
|
— | 6,224 | 23,916 | 30,140 | 7,242 | 6,727 | 30,655 | 37,382 | 13,618 | 1971 | Dec-98 | |||||||||||||||||||||||||||||
|
Crossroads Apartments
|
— | 4,811 | 10,170 | 14,981 | 3,396 | 5,024 | 13,353 | 18,377 | 5,763 | 1986 | Jul-04 | |||||||||||||||||||||||||||||
|
River Terrace
|
33,130 | 22,161 | 40,137 | 62,298 | 1,604 | 22,250 | 41,652 | 63,902 | 13,429 | 2005 | Aug-05 | |||||||||||||||||||||||||||||
|
CitySouth
|
— | 14,031 | 30,537 | 44,568 | 14,981 | 14,033 | 45,516 | 59,549 | 10,321 | 1972 | Nov-05 | |||||||||||||||||||||||||||||
|
Bay Terrace
|
— | 8,545 | 14,458 | 23,003 | 1,596 | 8,549 | 16,050 | 24,599 | 4,868 | 1962 | Oct-05 | |||||||||||||||||||||||||||||
|
Highlands of Marin Phase II
|
— | 5,353 | 18,559 | 23,912 | 9,696 | 5,706 | 27,902 | 33,608 | 4,559 | 1968 | Oct-07 | |||||||||||||||||||||||||||||
|
Edgewater
|
45,106 | 30,657 | 83,872 | 114,529 | 1,551 | 30,663 | 85,417 | 116,080 | 13,843 | 2007 | Mar-08 | |||||||||||||||||||||||||||||
|
Almaden Lake Village
|
27,000 | 594 | 42,515 | 43,109 | 1,864 | 622 | 44,351 | 44,973 | 6,555 | 1999 | Jul-08 | |||||||||||||||||||||||||||||
|
SAN FRANCISCO, CA
|
105,236 | 112,598 | 350,306 | 462,904 | 79,627 | 115,695 | 426,836 | 542,531 | 114,237 | |||||||||||||||||||||||||||||||
|
The Crest
|
55,602 | 21,953 | 67,809 | 89,762 | 6,708 | 22,136 | 74,334 | 96,470 | 28,264 | 1989 | Sep-04 | |||||||||||||||||||||||||||||
|
Rosebeach
|
— | 8,414 | 17,449 | 25,863 | 1,754 | 8,462 | 19,155 | 27,617 | 7,294 | 1970 | Sep-04 | |||||||||||||||||||||||||||||
|
The Villas @ San Dimas
|
— | 8,181 | 16,735 | 24,916 | 2,221 | 8,241 | 18,896 | 27,137 | 7,413 | 1981 | Oct-04 | |||||||||||||||||||||||||||||
|
The Villas at Bonita
|
— | 4,499 | 11,699 | 16,198 | 771 | 4,536 | 12,433 | 16,969 | 4,671 | 1981 | Oct-04 | |||||||||||||||||||||||||||||
|
Ocean Villas
|
8,896 | 5,135 | 12,789 | 17,924 | 1,092 | 5,205 | 13,811 | 19,016 | 5,036 | 1965 | Oct-04 | |||||||||||||||||||||||||||||
|
Tierra Del Rey
|
— | 39,586 | 36,679 | 76,265 | 1,610 | 39,589 | 38,286 | 77,875 | 6,976 | 1999 | Dec-07 | |||||||||||||||||||||||||||||
|
LOS ANGELES, CA
|
64,498 | 87,768 | 163,160 | 250,928 | 14,156 | 88,169 | 176,915 | 265,084 | 59,654 | |||||||||||||||||||||||||||||||
|
Crowne Pointe
|
8,229 | 2,486 | 6,437 | 8,923 | 3,961 | 2,737 | 10,147 | 12,884 | 5,014 | 1987 | Dec-98 | |||||||||||||||||||||||||||||
|
Hilltop
|
7,607 | 2,174 | 7,408 | 9,582 | 2,971 | 2,635 | 9,918 | 12,553 | 4,561 | 1985 | Dec-98 | |||||||||||||||||||||||||||||
|
The Kennedy
|
17,941 | 6,179 | 22,307 | 28,486 | 913 | 6,212 | 23,187 | 29,399 | 7,026 | 2005 | Nov-05 | |||||||||||||||||||||||||||||
|
Hearthstone at Merrill Creek
|
— | 6,848 | 30,922 | 37,770 | 1,507 | 6,859 | 32,418 | 39,277 | 5,099 | 2000 | May-08 | |||||||||||||||||||||||||||||
|
Island Square
|
— | 21,284 | 89,389 | 110,673 | 2,167 | 21,331 | 91,509 | 112,840 | 13,022 | 2007 | Jul-08 | |||||||||||||||||||||||||||||
|
SEATTLE, WA
|
33,777 | 38,971 | 156,463 | 195,434 | 11,519 | 39,774 | 167,179 | 206,953 | 34,722 | |||||||||||||||||||||||||||||||
|
Presidio at Rancho Del Oro
|
13,325 | 9,164 | 22,694 | 31,858 | 4,879 | 9,571 | 27,166 | 36,737 | 11,350 | 1987 | Jun-04 | |||||||||||||||||||||||||||||
|
Villas at Carlsbad
|
8,449 | 6,517 | 10,718 | 17,235 | 1,288 | 6,618 | 11,905 | 18,523 | 4,351 | 1966 | Oct-04 | |||||||||||||||||||||||||||||
|
Summit at Mission Bay
|
— | 22,598 | 17,182 | 39,780 | 4,546 | 22,627 | 21,699 | 44,326 | 7,840 | 1953 | Nov-04 | |||||||||||||||||||||||||||||
|
SAN DIEGO, CA
|
21,774 | 38,279 | 50,594 | 88,873 | 10,713 | 38,816 | 60,770 | 99,586 | 23,541 | |||||||||||||||||||||||||||||||
|
Boronda Manor
|
— | 1,946 | 8,982 | 10,928 | 8,210 | 3,099 | 16,039 | 19,138 | 6,056 | 1979 | Dec-98 | |||||||||||||||||||||||||||||
|
Garden Court
|
— | 888 | 4,188 | 5,076 | 4,142 | 1,454 | 7,764 | 9,218 | 3,048 | 1973 | Dec-98 | |||||||||||||||||||||||||||||
|
Cambridge Court
|
— | 3,039 | 12,883 | 15,922 | 12,804 | 5,131 | 23,595 | 28,726 | 9,345 | 1974 | Dec-98 | |||||||||||||||||||||||||||||
|
Laurel Tree
|
— | 1,304 | 5,115 | 6,419 | 5,255 | 2,058 | 9,616 | 11,674 | 3,715 | 1977 | Dec-98 | |||||||||||||||||||||||||||||
|
The Pointe At Harden Ranch
|
— | 6,388 | 23,854 | 30,242 | 22,990 | 9,731 | 43,501 | 53,232 | 16,496 | 1986 | Dec-98 | |||||||||||||||||||||||||||||
|
The Pointe At Northridge
|
— | 2,044 | 8,028 | 10,072 | 8,980 | 3,190 | 15,862 | 19,052 | 6,269 | 1979 | Dec-98 | |||||||||||||||||||||||||||||
|
The Pointe At Westlake
|
— | 1,329 | 5,334 | 6,663 | 4,942 | 2,106 | 9,499 | 11,605 | 3,604 | 1975 | Dec-98 | |||||||||||||||||||||||||||||
|
MONTEREY PENINSULA, CA
|
— | 16,938 | 68,384 | 85,322 | 67,323 | 26,769 | 125,876 | 152,645 | 48,533 | |||||||||||||||||||||||||||||||
|
Verano at Rancho Cucamonga Town Square
|
54,308 | 13,557 | 3,645 | 17,202 | 51,947 | 22,898 | 46,251 | 69,149 | 18,494 | 2006 | Oct-02 | |||||||||||||||||||||||||||||
|
Waterstone at Murrieta
|
— | 10,598 | 34,703 | 45,301 | 4,749 | 10,858 | 39,192 | 50,050 | 15,894 | 1990 | Nov-04 | |||||||||||||||||||||||||||||
|
INLAND EMPIRE, CA
|
54,308 | 24,155 | 38,348 | 62,503 | 56,696 | 33,756 | 85,443 | 119,199 | 34,388 | |||||||||||||||||||||||||||||||
157
Table of Contents
UNITED
DOMINION REALTY, L.P.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
(In thousands)
|
Cost of
|
||||||||||||||||||||||||||||||||||||||||
|
Improvements
|
Gross Amount at Which
|
|||||||||||||||||||||||||||||||||||||||
| Initial Costs |
Total
|
Capitalized
|
Carried at Close of Period | |||||||||||||||||||||||||||||||||||||
|
Land and
|
Buildings
|
Initial
|
Subsequent
|
Land and
|
Buildings &
|
Total
|
||||||||||||||||||||||||||||||||||
|
Land
|
and
|
Acquisition
|
to Acquisition
|
Land
|
Buildings
|
Carrying
|
Accumulated
|
Date of
|
Date
|
|||||||||||||||||||||||||||||||
| Encumbrances | Improvements | Improvements | Costs | Costs | Improvements | Improvements | Value | Depreciation | Construction(a) | Acquired | ||||||||||||||||||||||||||||||
|
Foothills Tennis Village
|
15,629 | 3,618 | 14,542 | 18,160 | 5,277 | 3,958 | 19,479 | 23,437 | 9,740 | 1988 | Dec-98 | |||||||||||||||||||||||||||||
|
Woodlake Village
|
30,982 | 6,772 | 26,967 | 33,739 | 10,885 | 7,722 | 36,902 | 44,624 | 18,857 | 1979 | Dec-98 | |||||||||||||||||||||||||||||
|
SACRAMENTO, CA
|
46,611 | 10,390 | 41,509 | 51,899 | 16,162 | 11,680 | 56,381 | 68,061 | 28,597 | |||||||||||||||||||||||||||||||
|
Tualatin Heights
|
10,079 | 3,273 | 9,134 | 12,407 | 5,391 | 3,688 | 14,110 | 17,798 | 6,871 | 1989 | Dec-98 | |||||||||||||||||||||||||||||
|
Andover Park
|
15,938 | 2,916 | 16,995 | 19,911 | 6,257 | 3,102 | 23,066 | 26,168 | 9,794 | 1989 | Sep-04 | |||||||||||||||||||||||||||||
|
Hunt Club
|
17,020 | 6,014 | 14,870 | 20,884 | 4,693 | 6,281 | 19,296 | 25,577 | 8,265 | 1985 | Sep-04 | |||||||||||||||||||||||||||||
|
PORTLAND, OR
|
43,037 | 12,203 | 40,999 | 53,202 | 16,341 | 13,071 | 56,472 | 69,543 | 24,930 | |||||||||||||||||||||||||||||||
|
TOTAL WESTERN REGION
|
718,049 | 699,806 | 1,243,713 | 1,943,519 | 345,180 | 740,117 | 1,548,582 | 2,288,699 | 517,235 | |||||||||||||||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||||||||||||||
|
The Whitmore
|
— | 6,418 | 13,411 | 19,829 | 19,534 | 7,423 | 31,940 | 39,363 | 14,032 | 2008 | Apr-02 | |||||||||||||||||||||||||||||
|
Ridgewood
|
— | 5,612 | 20,086 | 25,698 | 6,972 | 5,814 | 26,856 | 32,670 | 14,404 | 1988 | Aug-02 | |||||||||||||||||||||||||||||
|
The Calvert
|
— | 263 | 11,189 | 11,452 | 15,457 | 8,275 | 18,634 | 26,909 | 8,111 | 1962 | Nov-03 | |||||||||||||||||||||||||||||
|
Wellington Place at Olde Town
|
28,681 | 13,753 | 36,059 | 49,812 | 16,131 | 14,497 | 51,446 | 65,943 | 18,594 | 2008 | Sep-05 | |||||||||||||||||||||||||||||
|
Andover House
|
— | 14,357 | 51,577 | 65,934 | 2,335 | 14,360 | 53,909 | 68,269 | 11,806 | 2004 | Mar-07 | |||||||||||||||||||||||||||||
|
Sullivan Place
|
— | 1,137 | 103,676 | 104,813 | 2,611 | 1,175 | 106,249 | 107,424 | 19,049 | 2007 | Dec-07 | |||||||||||||||||||||||||||||
|
Circle Towers
|
69,493 | 33,011 | 107,051 | 140,062 | 4,689 | 32,827 | 111,924 | 144,751 | 17,226 | 1972 | Mar-08 | |||||||||||||||||||||||||||||
|
Delancey at Shirlington
|
— | 21,606 | 66,765 | 88,371 | 804 | 21,616 | 67,559 | 89,175 | 10,740 | 2006/07 | Mar-08 | |||||||||||||||||||||||||||||
|
METROPOLITAN, DC
|
98,174 | 96,157 | 409,814 | 505,971 | 68,533 | 105,987 | 468,517 | 574,504 | 113,962 | |||||||||||||||||||||||||||||||
|
Lakeside Mill
|
15,242 | 2,666 | 10,109 | 12,775 | 3,484 | 2,845 | 13,414 | 16,259 | 8,566 | 1989 | Dec-99 | |||||||||||||||||||||||||||||
|
Tamar Meadow
|
17,602 | 4,145 | 17,150 | 21,295 | 4,230 | 4,490 | 21,035 | 25,525 | 10,757 | 1990 | Nov-02 | |||||||||||||||||||||||||||||
|
Calvert’s Walk
|
18,043 | 4,408 | 24,692 | 29,100 | 5,478 | 4,549 | 30,029 | 34,578 | 12,624 | 1988 | Mar-04 | |||||||||||||||||||||||||||||
|
Liriope Apartments
|
— | 1,620 | 6,791 | 8,411 | 819 | 1,629 | 7,601 | 9,230 | 3,228 | 1997 | Mar-04 | |||||||||||||||||||||||||||||
|
20 Lambourne
|
32,000 | 11,750 | 45,590 | 57,340 | 3,036 | 11,808 | 48,568 | 60,376 | 8,417 | 2003 | Mar-08 | |||||||||||||||||||||||||||||
|
BALTIMORE, MD
|
82,887 | 24,589 | 104,332 | 128,921 | 17,047 | 25,321 | 120,647 | 145,968 | 43,592 | |||||||||||||||||||||||||||||||
|
TOTAL MID-ATLANTIC REGION
|
181,061 | 120,746 | 514,146 | 634,892 | 85,580 | 131,308 | 589,164 | 720,472 | 157,554 | |||||||||||||||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||||||||||||||
|
Sugar Mill Creek
|
7,330 | 2,242 | 7,553 | 9,795 | 5,508 | 2,648 | 12,655 | 15,303 | 6,572 | 1988 | Dec-98 | |||||||||||||||||||||||||||||
|
Inlet Bay
|
— | 7,702 | 23,150 | 30,852 | 10,933 | 8,520 | 33,265 | 41,785 | 17,432 | 1988/89 | Jun-03 | |||||||||||||||||||||||||||||
|
MacAlpine Place
|
— | 10,869 | 36,858 | 47,727 | 4,266 | 10,970 | 41,023 | 51,993 | 15,769 | 2001 | Dec-04 | |||||||||||||||||||||||||||||
|
TAMPA, FL
|
7,330 | 20,813 | 67,561 | 88,374 | 20,707 | 22,138 | 86,943 | 109,081 | 39,773 | |||||||||||||||||||||||||||||||
|
Legacy Hill
|
— | 1,148 | 5,867 | 7,015 | 7,615 | 1,669 | 12,961 | 14,630 | 8,722 | 1977 | Nov-95 | |||||||||||||||||||||||||||||
|
Hickory Run
|
— | 1,469 | 11,584 | 13,053 | 8,107 | 1,959 | 19,201 | 21,160 | 10,044 | 1989 | Dec-95 | |||||||||||||||||||||||||||||
|
Carrington Hills
|
— | 2,117 | — | 2,117 | 31,902 | 4,214 | 29,805 | 34,019 | 14,760 | 1999 | Dec-95 | |||||||||||||||||||||||||||||
|
Brookridge
|
— | 708 | 5,461 | 6,169 | 3,594 | 998 | 8,765 | 9,763 | 5,165 | 1986 | Mar-96 | |||||||||||||||||||||||||||||
|
Breckenridge
|
— | 766 | 7,714 | 8,480 | 3,329 | 1,141 | 10,668 | 11,809 | 5,781 | 1986 | Mar-97 | |||||||||||||||||||||||||||||
|
Polo Park
|
— | 4,583 | 16,293 | 20,876 | 14,921 | 5,485 | 30,312 | 35,797 | 11,216 | 2008 | May-06 | |||||||||||||||||||||||||||||
|
NASHVILLE, TN
|
— | 10,791 | 46,919 | 57,710 | 69,468 | 15,466 | 111,712 | 127,178 | 55,688 | |||||||||||||||||||||||||||||||
|
St Johns Plantation
|
— | 4,288 | 33,102 | 37,390 | 4,902 | 4,474 | 37,818 | 42,292 | 14,071 | 2006 | Jun-05 | |||||||||||||||||||||||||||||
|
JACKSONVILLE, FL
|
— | 4,288 | 33,102 | 37,390 | 4,902 | 4,474 | 37,818 | 42,292 | 14,071 | |||||||||||||||||||||||||||||||
|
The Reserve and Park at Riverbridge
|
40,133 | 15,968 | 56,401 | 72,369 | 3,941 | 16,128 | 60,182 | 76,310 | 22,492 | 1999/2001 | Dec-04 | |||||||||||||||||||||||||||||
|
OTHER FLORIDA
|
40,133 | 15,968 | 56,401 | 72,369 | 3,941 | 16,128 | 60,182 | 76,310 | 22,492 | |||||||||||||||||||||||||||||||
|
TOTAL SOUTHEASTERN REGION
|
47,463 | 51,860 | 203,983 | 255,843 | 99,018 | 58,206 | 296,655 | 354,861 | 132,024 | |||||||||||||||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||||||||||||||
|
THIRTY377
|
31,175 | 24,036 | 32,951 | 56,987 | 5,544 | 24,213 | 38,318 | 62,531 | 10,981 | 2007 | Aug-06 | |||||||||||||||||||||||||||||
|
Legacy Village
|
59,300 | 16,882 | 100,102 | 116,984 | 3,325 | 16,991 | 103,318 | 120,309 | 17,609 | 2005/06/07 | Mar-08 | |||||||||||||||||||||||||||||
|
DALLAS, TX
|
90,475 | 40,918 | 133,053 | 173,971 | 8,869 | 41,204 | 141,636 | 182,840 | 28,590 | |||||||||||||||||||||||||||||||
|
Finisterra
|
— | 1,274 | 26,392 | 27,666 | 3,885 | 1,673 | 29,878 | 31,551 | 12,835 | 1997 | Mar-98 | |||||||||||||||||||||||||||||
|
Sierra Foothills
|
20,977 | 2,728 | — | 2,728 | 20,710 | 5,032 | 18,406 | 23,438 | 12,303 | 1998 | Feb-98 | |||||||||||||||||||||||||||||
|
Sierra Canyon
|
12,036 | 1,810 | 12,964 | 14,774 | 1,883 | 2,014 | 14,643 | 16,657 | 8,361 | 2001 | Dec-01 | |||||||||||||||||||||||||||||
|
PHOENIX, AZ
|
33,013 | 5,812 | 39,356 | 45,168 | 26,478 | 8,719 | 62,927 | 71,646 | 33,499 | |||||||||||||||||||||||||||||||
|
Barton Creek Landing
|
— | 3,151 | 14,269 | 17,420 | 14,760 | 3,535 | 28,645 | 32,180 | 9,717 | 1986 | Mar-02 | |||||||||||||||||||||||||||||
|
AUSTIN, TX
|
— | 3,151 | 14,269 | 17,420 | 14,760 | 3,535 | 28,645 | 32,180 | 9,717 | |||||||||||||||||||||||||||||||
|
Inn @ Los Patios
|
— | 3,005 | 11,545 | 14,550 | 4,629 | 4,279 | 14,900 | 19,179 | 4,052 | 1990 | Aug-98 | |||||||||||||||||||||||||||||
158
Table of Contents
UNITED
DOMINION REALTY, L.P.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
(In thousands)
|
Cost of
|
||||||||||||||||||||||||||||||||||||||||
|
Improvements
|
Gross Amount at Which
|
|||||||||||||||||||||||||||||||||||||||
| Initial Costs |
Total
|
Capitalized
|
Carried at Close of Period | |||||||||||||||||||||||||||||||||||||
|
Land and
|
Buildings
|
Initial
|
Subsequent
|
Land and
|
Buildings &
|
Total
|
||||||||||||||||||||||||||||||||||
|
Land
|
and
|
Acquisition
|
to Acquisition
|
Land
|
Buildings
|
Carrying
|
Accumulated
|
Date of
|
Date
|
|||||||||||||||||||||||||||||||
| Encumbrances | Improvements | Improvements | Costs | Costs | Improvements | Improvements | Value | Depreciation | Construction(a) | Acquired | ||||||||||||||||||||||||||||||
|
OTHER TEXAS
|
— | 3,005 | 11,545 | 14,550 | 4,629 | 4,279 | 14,900 | 19,179 | 4,052 | |||||||||||||||||||||||||||||||
|
TOTAL SOUTHWESTERN REGION
|
123,488 | 52,886 | 198,223 | 251,109 | 54,736 | 57,737 | 248,108 | 305,845 | 75,858 | |||||||||||||||||||||||||||||||
|
LAND
|
— | |||||||||||||||||||||||||||||||||||||||
|
Presidio
|
— | 1,524 | — | 1,524 | 921 | 1,300 | 1,145 | 2,445 | — | |||||||||||||||||||||||||||||||
|
UDR Pacific Los Alisos, LP
|
— | 17,298 | — | 17,298 | 6,273 | 16,385 | 7,186 | 23,571 | — | |||||||||||||||||||||||||||||||
|
TOTAL LAND
|
— | 18,822 | — | 18,822 | 7,194 | 17,685 | 8,331 | 26,016 | — | |||||||||||||||||||||||||||||||
|
COMMERCIAL
|
— | |||||||||||||||||||||||||||||||||||||||
|
The Calvert — commercial side
|
— | 34 | 1,598 | 1,632 | 1,176 | 1,172 | 1,636 | 2,808 | 670 | |||||||||||||||||||||||||||||||
|
Circle Towers Office Bldg
|
— | 1,407 | 4,498 | 5,905 | 900 | 1,380 | 5,425 | 6,805 | 745 | |||||||||||||||||||||||||||||||
|
TOTAL COMMERCIAL
|
— | 1,441 | 6,096 | 7,537 | 2,076 | 2,552 | 7,061 | 9,613 | 1,415 | |||||||||||||||||||||||||||||||
|
Other(b)
|
— | — | — | — | 678 | 5 | 673 | 678 | (3 | ) | ||||||||||||||||||||||||||||||
|
TOTAL CORPORATE
|
— | — | — | — | 678 | 5 | 673 | 678 | (3 | ) | ||||||||||||||||||||||||||||||
| — | ||||||||||||||||||||||||||||||||||||||||
|
TOTAL COMMERCIAL & CORPORATE
|
— | 1,441 | 6,096 | 7,537 | 2,754 | 2,557 | 7,734 | 10,291 | 1,412 | |||||||||||||||||||||||||||||||
|
TOTAL REAL ESTATE OWNED
|
$ | 1,070,061 | $ | 945,561 | $ | 2,166,161 | $ | 3,111,722 | $ | 594,462 | $ | 1,007,610 | $ | 2,698,574 | $ | 3,706,184 | $ | 884,083 | ||||||||||||||||||||||
| (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 $3.1 billion at December 31, 2010.
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,
(in thousands):
| 2010 | 2009 | 2008 | ||||||||||
|
Balance at beginning of the year
|
$ | 3,640,888 | $ | 3,569,239 | $ | 3,639,379 | ||||||
|
Real estate acquired
|
— | — | 801,852 | |||||||||
|
Capital expenditures and development
|
65,296 | 71,649 | 84,313 | |||||||||
|
Real estate transferred
|
— | — | — | |||||||||
|
Real estate sold
|
— | — | (956,305 | ) | ||||||||
|
Balance at end of year
|
$ | 3,706,184 | $ | 3,640,888 | $ | 3,569,239 | ||||||
The following is a reconciliation of total accumulated
depreciation for real estate owned at December 31:
| 2010 | 2009 | 2008 | ||||||||||
|
Balance at beginning of the year
|
$ | 717,892 | $ | 552,369 | $ | 754,996 | ||||||
|
Depreciation expense for the year
|
166,191 | 165,757 | 148,997 | |||||||||
|
Accumulated depreciation on assets transferred
|
— | — | — | |||||||||
|
Accumulated depreciation on asset retirements
|
— | (234 | ) | — | ||||||||
|
Accumulated depreciation on sales
|
— | — | (351,624 | ) | ||||||||
|
Balance at end of year
|
$ | 884,083 | $ | 717,892 | $ | 552,369 | ||||||
159
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 UDR, Inc.’s
Exchange Act filings referenced below is 1-10524. The Commission
file number for United Dominion Realty, L.P.’s Exchange Act
filings is
333-156002-01.
| Exhibit | Description | Location | ||||
| 2 | .01 | Partnership Interest Purchase and Exchange Agreement dated as of September 10, 1998, by and between UDR, Inc., United Dominion Realty, L.P., American Apartment Communities Operating Partnership, L.P., AAC Management LLC, Schnitzer Investment Corp., Fox Point Ltd. and James D. Klingbeil including as an exhibit thereto the proposed form of the Third Amended and Restated Limited Partnership Agreement of United Dominion Realty, L.P. | Exhibit 2(d) to UDR, Inc.’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 UDR, Inc.’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 UDR, Inc.’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 UDR, Inc.’s Current Report on Form 8-K/A dated September 29, 2004 and filed with the Commission on November 1, 2004. | |||
Table of Contents
| Exhibit | Description | Location | ||||
| 2 | .05 | Agreement of Purchase and Sale dated as of January 23, 2008, by and between UDR, Inc., United Dominion Realty, L.P., UDR Texas Properties LLC, UDR Western Residential, Inc., UDR South Carolina Trust, UDR Ohio Properties, LLC, UDR of Tennessee, L.P., UDR of NC, Limited Partnership, Heritage Communities L.P., Governour’s Square of Columbus Co., Fountainhead Apartments Limited Partnership, AAC Vancouver I, L.P., AAC Funding Partnership III, AAC Funding Partnership II and DRA Fund VI LLC. | Exhibit 2.1 to UDR, Inc.’s Current Report on Form 8-K dated January 23, 2008 and filed with the Commission on January 29, 2008. | |||
| 2 | .06 | First Amendment to Agreement of Purchase and Sale dated as of February 14, 2008, by and between UDR, Inc., United Dominion Realty, L.P., UDR Texas Properties LLC, UDR Western Residential, Inc., UDR South Carolina Trust, UDR Ohio Properties, LLC, UDR of Tennessee, L.P., UDR of NC, Limited Partnership, Heritage Communities L.P., Governour’s Square of Columbus Co., Fountainhead Apartments Limited Partnership, AAC Vancouver I, L.P., AAC Funding Partnership III, AAC Funding Partnership II and DRA Fund VI LLC. | Exhibit 2.2 to UDR, Inc.’s Current Report on Form 8-K/A dated March 3, 2008 and filed with the Commission on May 2, 2008. | |||
| 3 | .01 | Articles of Restatement of UDR, Inc. | Exhibit 3.09 to UDR, Inc.’s Current Report on Form 8-K dated July 27, 2005 and filed with the Commission on August 1, 2005. | |||
| 3 | .02 | Articles of Amendment to the Articles of Restatement of UDR, Inc. dated and filed with the State Department of Assessments and Taxation of the State of Maryland on March 14, 2007. | Exhibit 3.2 to UDR, Inc.’s Current Report on Form 8-K dated March 14, 2007 and filed with the Commission on March 15, 2007. | |||
| 3 | .03 | Articles Supplementary relating to UDR, Inc.’s 6.75% Series G Cumulative Redeemable Preferred Stock dated and filed with the State Department of Assessments and Taxation of the State of Maryland on May 30, 2007. | Exhibit 3.4 to UDR, Inc.’s Form 8-A Registration Statement dated and filed with the Commission on May 30, 2007. | |||
| 3 | .04 | Amended and Restated Bylaws of UDR, Inc. (as amended through May 14, 2010). | Exhibit 3.1 to UDR, Inc.’s Current Report on Form 8-K dated May 14, 2010 and filed with the Commission on May 17, 2010. | |||
| 3 | .05 | Certificate of Limited Partnership of United Dominion Realty, L.P. dated as of February 19, 2004. | Exhibit 3.4 to United Dominion Realty, L.P.’s Post-Effective Amendment No. 1 to Registration Statement on Form S-3 dated and filed with the Commission on October 15, 2010. | |||
| 3 | .06 | Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 23, 2004. | Exhibit 10.23 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003. | |||
| 3 | .07 | First Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of June 24, 2005. | Exhibit 10.06 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005. | |||
Table of Contents
| Exhibit | Description | Location | ||||
| 3 | .08 | Second Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 23, 2006. | Exhibit 10.6 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006. | |||
| 3 | .09 | Third Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 2, 2007. | Exhibit 99.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009. | |||
| 3 | .10 | Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of December 27, 2007. | Exhibit 10.25 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2007. | |||
| 3 | .11 | Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of March 7, 2008. | Exhibit 10.53 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008. | |||
| 3 | .12 | Sixth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of December 9, 2008. | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated December 9, 2008 and filed with the Commission on December 10, 2008. | |||
| 3 | .13 | Seventh Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P., dated as of March 13, 2009. | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated March 18, 2009 and filed with the Commission on March 19, 2009 | |||
| 3 | .14 | Eighth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P., dated as of November 17, 2010. | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on November 18, 2010. | |||
| 4 | .01 | Form of UDR, Inc. Common Stock Certificate. | Exhibit 4.1 to UDR, Inc.’s Current Report on Form 8-K dated March 14, 2007 and filed with the Commission on March 15, 2007. | |||
| 4 | .02 | Senior Indenture dated as of November 1, 1995, by and between UDR, Inc. and First Union National Bank of Virginia, N.A., as trustee. | Exhibit 4(ii)(h)(1) to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1996. | |||
| 4 | .03 | Supplemental Indenture dated as of June 11, 2003, by and between UDR, Inc. and Wachovia Bank, National Association, as trustee. | Exhibit 4.03 to UDR, Inc.’s Current Report on Form 8-K dated June 17, 2004 and filed with the Commission on June 18, 2004. | |||
| 4 | .04 | Subordinated Indenture dated as of August 1, 1994 by and between UDR, Inc. and Crestar Bank, as trustee. | Exhibit 4(i)(m) to UDR, Inc.’s Form S-3 Registration Statement (Registration No. 33-64725) filed with the Commission on November 15, 1995. | |||
| 4 | .05 | Indenture dated as of December 19, 2005, by and between UDR, Inc. and SunTrust Bank, as trustee, relating to UDR, Inc.’s 4.00% Convertible Senior Notes due 2035, including the form of note. | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated December 13, 2005 and filed with the Commission on December 19, 2005. | |||
| 4 | .06 | Indenture dated as of October 12, 2006, by and between UDR, Inc. and U.S. Bank National Association, as trustee, relating to UDR, Inc.’s 3.625% Convertible Senior Notes due 2011, including the form of note. | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated October 5, 2006 and filed with the Commission on October 12, 2006. | |||
Table of Contents
| Exhibit | Description | Location | ||||
| 4 | .07 | Form UDR, Inc. of Senior Debt Security. | Exhibit 4(i)(n) to UDR, Inc.’s Form S-3 Registration Statement (Registration No. 33-64725) filed with the Commission on November 15, 1995. | |||
| 4 | .08 | Form of UDR, Inc. Subordinated Debt Security. | Exhibit 4(i)(p) to UDR, Inc.’s Form S-3 Registration Statement (Registration No. 33-55159) filed with the Commission on August 19, 1994. | |||
| 4 | .09 | Form of UDR, Inc. Fixed Rate Medium-Term Note, Series A. | Exhibit 4.01 to UDR, Inc.’s Current Report on Form 8-K dated March 20, 2007 and filed with the Commission on March 22, 2007. | |||
| 4 | .10 | Form of UDR, Inc. Floating Rate Medium-Term Note, Series A. | Exhibit 4.02 to UDR, Inc.’s Current Report on Form 8-K dated March 20, 2007 and filed with the Commission on March 22, 2007. | |||
| 4 | .11 | UDR, Inc. 6.50% Note due 2009, issued June 19, 2002. | Exhibit 4 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. | |||
| 4 | .12 | UDR, Inc. 5.13% Medium-Term Notes due January 2014, issued October 3, 2003, January 15, 2004 and March 18, 2004 | Exhibit 4.2 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, and Exhibits 4.1 and 4.2 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004. | |||
| 4 | .13 | UDR, Inc. 3.90% Medium-Term Note due March 2010, issued March 18, 2004. | Exhibit 4.3 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004. | |||
| 4 | .14 | UDR, Inc. 5.00% Medium-Term Note due January 2012, issued October 7, 2004. | Exhibit 4.19 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004. | |||
| 4 | .15 | UDR, Inc. 5.25% Medium-Term Note due January 2015, issued November 1, 2004. | Exhibit 4.21 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004. | |||
| 4 | .16 | UDR, Inc. 5.25% Medium-Term Note due January 2015, issued February 14, 2005. | Exhibit 4.22 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004. | |||
| 4 | .17 | UDR, Inc. 5.25% Medium-Term Note due January 2015, issued March 8, 2005. | Exhibit 4.23 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004. | |||
| 4 | .18 | UDR, Inc. 5.25% Medium-Term Note due January 2015, issued May 3, 2005. | Exhibit 4.3 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005. | |||
| 4 | .19 | UDR, Inc. 5.25% Medium-Term Note due January 2016, issued September 7, 2005. | Exhibit 4.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. | |||
| 4 | .20 | UDR, Inc. 6.05% Medium-Term Note due June 2013, issued June 7, 2006. | Exhibit 4.3 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006. | |||
| 4 | .21 | UDR, Inc. 5.50% Medium-Term Note, Series A due April 2014, issued March 27, 2007. | Exhibit 4.5 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007. | |||
| 4 | .22 | Form of UDR, Inc. Certificate for Shares of 6.75% Series G Cumulative Redeemable Preferred Stock. | Exhibit 4.1 to UDR, Inc.’s Form 8-A Registration Statement dated and filed with the Commission on May 30, 2007. | |||
Table of Contents
| Exhibit | Description | Location | ||||
| 4 | .23 | Articles Supplementary relating to UDR, Inc.’s 6.75% Series G Cumulative Redeemable Preferred Stock. | See Exhibit 3.03. | |||
| 4 | .24 | Registration Rights Agreement dated as of October 12, 2006, by and between UDR, Inc. and the Initial Purchasers of UDR, Inc.’s 3.625% Convertible Senior Notes due 2011. | Exhibit 4.1 to UDR, Inc.’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, by and between UDR, Inc. and Nationsbank of Virginia, N.A., as trustee. | Exhibit 4(ii)(f)(1) to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1994. | |||
| 4 | .26 | Supplemental Indenture dated as of August 20, 2009, by and between UDR, Inc. and U.S. Bank National Association, as trustee, to UDR, Inc.’s Indenture dated as of April 1, 1994. | Exhibit 4.1 to UDR, Inc.’s Current Report on Form 8-K dated August 20, 2009 and filed with the Commission on August 21, 2009. | |||
| 4 | .27 | Guaranty of United Dominion Realty, L.P. with respect to UDR, Inc.’s Indenture dated as of November 1, 1995. | Exhibit 99.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on September 30, 2010. | |||
| 4 | .28 | Guaranty of United Dominion Realty, L.P. with respect to UDR, Inc.’s Indenture dated as of October 12, 2006. | Exhibit 99.2 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on September 30, 2010. | |||
| 10 | .01* | UDR, Inc. 1985 Stock Option Plan, as amended. | Exhibit 10(iv) to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998. | |||
| 10 | .02* | UDR, Inc. 1991 Stock Purchase and Loan Plan. | Exhibit 10(viii) to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1997. | |||
| 10 | .03* | UDR, Inc. 1999 Long-Term Incentive Plan (as amended and restated May 13, 2009). | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on May 13, 2009. | |||
| 10 | .04* | Form of UDR, Inc. Restricted Stock Award Agreement under the 1999 Long-Term Incentive Plan. | Exhibit 99.6 to UDR, Inc.’s Current Report on Form 8-K dated December 31, 2004 and filed with the Commission on January 11, 2005. | |||
| 10 | .05 | Description of UDR, Inc. Shareholder Value Plan. | Exhibit 10(x) to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999. | |||
| 10 | .06* | Description of UDR, Inc. Executive Deferral Plan. | Exhibit 10(xi) to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999. | |||
| 10 | .07* | Description of the UDR, Inc. New Out-Performance Program. | Exhibit 10.01 to UDR, Inc.’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 UDR, Inc. Series E Out-Performance Program. | UDR, Inc.’s Definitive Proxy Statement dated March 26, 2007 and filed with the Commission on March 23, 2007. | |||
| 10 | .09* | Description of the UDR, Inc. 2010-2012 Long-Term Incentive Program for Senior Executive Officers. | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated February 26, 2010 and filed with the Commission on March 4, 2010. | |||
| 10 | .10 | Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P. | Exhibit 10.3 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003. | |||
Table of Contents
| Exhibit | Description | Location | ||||
| 10 | .11 | First Amendment of Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P. | Exhibit 10.4 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003. | |||
| 10 | .12 | Second Amendment to Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P. | Exhibit 10.5 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003. | |||
| 10 | .13 | Third Amendment to Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P. | Exhibit 10.2 to UDR, Inc.’s Current Report on Form 8-K dated December 9, 2008 and filed with the Commission on December 10, 2008. | |||
| 10 | .14 | Credit Agreement dated as of August 14, 2001, by and between UDR, Inc. and certain subsidiaries and ARCS Commercial Mortgage Co., L.P., as Lender, as amended through October 5, 2006. | Exhibit 10.15 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2006. | |||
| 10 | .15 | Credit Agreement dated as of December 12, 2001, by and between UDR, Inc. and certain subsidiaries and ARCS Commercial Mortgage Co., L.P., as Lender, as amended through September 29, 2006. | Exhibit 10.16 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2006. | |||
| 10 | .16 | Amended and Restated Credit Agreement dated as of May 25, 2005, by and between UDR, Inc. 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 UDR, Inc.’s Current Report on Form 8-K dated May 25, 2005 and filed with the Commission on May 27, 2005. | |||
| 10 | .17* | Employment Agreement dated as of December 8, 1998, by and between UDR, Inc. and Richard A. Giannotti, as amended. | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on December 23, 2008. | |||
| 10 | .18* | Agreement dated as of November 7, 2005, by and between UDR, Inc. and Thomas W. Toomey, regarding corporate aircraft. | Exhibit 10.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. | |||
| 10 | .19* | Form of UDR, Inc. Indemnification Agreement. | Exhibit 10.3 to UDR, Inc.’s Current Report on Form 8-K dated May 2, 2006 and filed with the Commission on May 8, 2006. | |||
| 10 | .20* | Form of UDR, Inc. Notice of Performance Contingent Restricted Stock Award. | Exhibit 10.2 to UDR, Inc.’s Current Report on Form 8-K dated May 2, 2006 and filed with the Commission on May 8, 2006. | |||
| 10 | .21* | UDR, Inc. 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 UDR, Inc.’s Current Report on Form 8-K dated June 21, 2006 and filed with the Commission on June 23, 2006. | |||
Table of Contents
| Exhibit | Description | Location | ||||
| 10 | .22* | UDR, Inc. Restricted Stock Award Agreement for 7,418 Shares for Mark M. Culwell, Jr. | Exhibit 10.2 to UDR, Inc.’s Current Report on Form 8-K dated June 21, 2006 and filed with the Commission on June 23, 2006. | |||
| 10 | .23* | UDR, Inc. Restricted Stock Award Agreement for 37,092 Shares for Mark M. Culwell, Jr. | Exhibit 10.3 to UDR, Inc.’s Current Report on Form 8-K dated June 21, 2006 and filed with the Commission on June 23, 2006. | |||
| 10 | .24 | Amended and Restated Master Credit Facility Agreement dated as of June 24, 2002 by and between UDR, Inc. and Green Park Financial Limited Partnership, as amended through February 14, 2007. | Exhibit 10.41 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2006. | |||
| 10 | .25 | Limited Liability Company Agreement of UDR Texas Ventures LLC, a Delaware limited liability company, dated as of November 5, 2007. | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated November 5, 2007 and filed with the Commission on November 9, 2007. | |||
| 10 | .26 | Second Amended and Restated Credit Agreement dated as of July 27, 2007, by and among UDR, Inc., Wachovia Capital Markets, LLC, J.P. Morgan Securities Inc. and the other signatories thereto. | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated July 27, 2007 and filed with the Commission on August 2, 2007. | |||
| 10 | .27* | Summary of UDR, Inc. 2010 Non-Employee Director Compensation Program. | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated January 8, 2010 and filed with the Commission on January 12, 2010. | |||
| 10 | .28* | Form of UDR, Inc. Restricted Stock Award Agreement for awards outside of the 1999 Long-Term Incentive Plan. | Exhibit 99.3 to UDR, Inc.’s Current Report on Form 8-K dated March 19, 2007 and filed with the Commission on March 19, 2007. | |||
| 10 | .29* | Letter Agreement dated as of February 18, 2008, by and between UDR, Inc. and Warren L. Troupe. | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated February 22, 2008 and filed with the Commission on February 27, 2008. | |||
| 10 | .30* | Indemnification Agreement dated as of March 3, 2008, by and between UDR, Inc. and Warren L. Troupe. | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated February 22, 2008 and filed with the Commission on February 27, 2008. | |||
| 10 | .31* | UDR, Inc. Amended 2008 Independent Director Compensation Program. | Exhibit 10.2 to UDR, Inc.’s Current Report on Form 8-K dated May 30, 2008 and filed with the Commission on June 2, 2008. | |||
| 10 | .32* | Summary of UDR, Inc. 2009 Non-Employee Director Compensation. | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on January 7, 2009. | |||
| 10 | .33 | Subordination Agreement dated as of April 16, 1998, by and between UDR, Inc. and United Dominion Realty, L.P. | Exhibit 10(vi)(a) to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998. | |||
| 10 | .34 | Servicing and Purchase Agreement dated as of June 24, 1999, by and between UDR, Inc. and Crestar Bank including as an exhibit thereto the Note and Participation Agreement forms. | Exhibit 10(vii) to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999. | |||
| 10 | .35 | Sales Agreement dated as of September 15, 2009, by and among UDR, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated. | Exhibit 1.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on September 15, 2009. | |||
Table of Contents
| Exhibit | Description | Location | ||||
| 10 | .36* | Letter Agreement dated as of October 7, 2010, by and between UDR, Inc. and W. Mark Wallis. | Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on October 12, 2010. | |||
| 10 | .37 | Term Loan Agreement dated as of December 14, 2009, by and among UDR, Inc., Regions Capital Markets, PNC Capital Markets LLC, Regions Bank, PNC Bank, National Association, U.S. Bank National Association and the other signatories thereto. | Exhibit 99.1 to UDR, Inc.’s Current Report on Form 8-K dated December 14, 2009 and filed with the Commission on December 17, 2009. | |||
| 12 | .1 | Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends of UDR, Inc. | Filed herewith. | |||
| 12 | .2 | Computation of Ratio of Earnings to Fixed Charges of United Dominion Realty, L.P. | Filed herewith. | |||
| 21 | .1 | Subsidiaries of UDR, Inc. | Filed herewith. | |||
| 21 | .2 | Subsidiaries of United Dominion Realty, L.P. | Filed herewith. | |||
| 23 | .1 | Consent of Independent Registered Public Accounting Firm for UDR, Inc. | Filed herewith. | |||
| 23 | .2 | Consent of Independent Registered Public Accounting Firm for United Dominion Realty, L.P. | Filed herewith. | |||
| 31 | .1 | Rule 13a-14(a) Certification of the Chief Executive Officer of UDR, Inc. | Filed herewith. | |||
| 31 | .2 | Rule 13a-14(a) Certification of the Chief Financial Officer of UDR, Inc. | Filed herewith. | |||
| 31 | .3 | Rule 13a-14(a) Certification of the Chief Executive Officer of United Dominion Realty, L.P. | Filed herewith. | |||
| 31 | .4 | Rule 13a-14(a) Certification of the Chief Financial Officer of United Dominion Realty, L.P. | Filed herewith. | |||
| 32 | .1 | Section 1350 Certification of the Chief Executive Officer of UDR, Inc. | Filed herewith. | |||
| 32 | .2 | Section 1350 Certification of the Chief Financial Officer of UDR, Inc. | Filed herewith. | |||
| 32 | .3 | Section 1350 Certification of the Chief Executive Officer of United Dominion Realty, L.P. | Filed herewith. | |||
| 32 | .4 | Section 1350 Certification of the Chief Financial Officer of United Dominion Realty, L.P. | Filed herewith. | |||
| 101 | XBRL (Extensible Business Reporting Language). The following materials from UDR, Inc.’s Annual Report on Form 10-K for the period ended December 31, 2010, formatted in XBRL: (i) consolidated balance sheets of UDR, Inc., (ii) consolidated statements of operations of UDR, Inc., (iii) consolidated statements of cash flows of UDR, Inc., (iv) consolidated statements of stockholders’ equity and comprehensive income/(loss) of UDR, Inc., and (v) notes to consolidated financial statements of UDR, Inc. | Filed herewith. | ||||
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. (removed and Reserved)Part 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