UDR, INC.
10-Ks and 10-Qs
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Table of Contents
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, 2011
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.
United Dominion Realty, L.P.
(Exact name of registrant as specified in its charter)
| Maryland (UDR, Inc.) | 54-0857512 | |
| Delaware (United Dominion Realty, L.P.) | 54-1776887 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado 80129
(Address of principal executive offices) (zip code)
Registrant’s telephone number, including area code: (720) 283-6120
Securities registered pursuant to Section 12(b) of the Act:
(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.
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UDR, Inc.
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Yes þ | No o | ||||
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United Dominion Realty, L.P.
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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.
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UDR, Inc.
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Yes o | No þ | ||||
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United Dominion Realty, L.P.
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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.
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UDR, Inc.
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Yes þ | No o | ||||
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United Dominion Realty, L.P.
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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).
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UDR, Inc.
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Yes þ | No o | ||||
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United Dominion Realty, L.P.
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Yes þ | 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).
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UDR, Inc.
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Yes o | No þ | ||||
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United Dominion Realty, L.P.
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Yes o | No þ |
The aggregate market value of the shares of common stock of UDR, Inc. held by non-affiliates
on June 30, 2011 was approximately $2.6 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, 2012 there were 223,340,334 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 15, 2012.
TABLE OF CONTENTS
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| EX-10.42 | ||||||||
| EX-10.43 | ||||||||
| EX-12.1 | ||||||||
| EX-12.2 | ||||||||
| EX-21 | ||||||||
| EX-23.1 | ||||||||
| EX-23.2 | ||||||||
| EX-31.1 | ||||||||
| EX-31.2 | ||||||||
| EX-31.3 | ||||||||
| EX-31.4 | ||||||||
| EX-32.1 | ||||||||
| EX-32.2 | ||||||||
| EX-32.3 | ||||||||
| EX-32.4 | ||||||||
| EX-101 INSTANCE DOCUMENT | ||||||||
| EX-101 SCHEMA DOCUMENT | ||||||||
| EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
| EX-101 LABELS LINKBASE DOCUMENT | ||||||||
| EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
| EX-101 DEFINITION LINKBASE DOCUMENT | ||||||||
Table of Contents
EXPLANATORY NOTE
This report combines the annual reports on Form 10-K for the fiscal year ended December 31,
2011 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
, whose activities include development of land. UDR acts as the sole general partner
of the Operating Partnership, holds interests in other operating partnerships, subsidiaries and
joint ventures, owns and operates properties, issues securities from time to time and guarantees
debt of certain of our subsidiaries. The Operating Partnership conducts the operations of a
substantial portion of the business and is structured as a partnership with no publicly traded
equity securities. The Operating Partnership has guaranteed certain outstanding securities of UDR.
As of December 31, 2011, UDR owned 110,883 units of the general partnership interests of the
Operating Partnership and 174,749,068 units (or approximately 94.9%) 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.
2
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,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and
similar expressions are intended to identify such forward-looking statements. Such statements
involve known and unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from the results of operations or
plans expressed or implied by such forward-looking statements. Such factors include, among other
things, unfavorable changes in the apartment market, changing economic conditions, the impact of
inflation/deflation on rental rates and property operating expenses, expectations concerning
availability of capital and the stabilization of the capital markets, the impact of competition and
competitive pricing, acquisitions, developments and redevelopments not achieving anticipated
results, delays in completing developments, redevelopments and lease-ups on schedule, expectations
on job growth, home affordability and demand/supply ratio for multifamily housing, expectations
concerning development and redevelopment activities, and expectations on occupancy levels. 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.
General
UDR is a self administered real estate investment trust, or REIT, that owns, operates,
acquires, renovates, develops, redevelops, and manages multifamily apartment communities generally
located in high barrier-to-entry markets located throughout the United States. The high
barrier-to-entry markets are characterized by limited land for new construction, difficult and
lengthy entitlement process, expensive single-family home prices and significant employment growth
potential. At December 31, 2011, our consolidated apartment portfolio included 163 communities
located in 22 markets, with a total of 47,343 completed apartment homes, which are held through our
operating partnerships, including the Operating Partnership, our subsidiaries and consolidated
joint ventures. In addition, we have an ownership interest in 39 communities containing 10,496
completed apartment homes through unconsolidated joint ventures. At
December 31, 2011, the Company is developing seven wholly-owned
communities with 2,108 apartment homes, 145 of which have been
completed.
At December 31, 2011, the Operating Partnership’s consolidated apartment portfolio included 77
communities located in 17 markets, with a total of 23,160 completed apartment homes. The Operating
Partnership owns, operates, acquires, renovates, develops, redevelops, and manages multifamily
apartment communities generally located in high barrier-to-entry markets located throughout the
United States. During the fiscal year ended December 31, 2011, revenues of the Operating
Partnership represented approximately 53% of our total rental revenues.
3
Table of Contents
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 net income to our
stockholders annually. In 2011, we declared total distributions of $0.80 per common share and paid
dividends of $0.77 per common share.
| Dividends | ||||||||
| Declared in | Dividends Paid | |||||||
| 2011 | in 2011 | |||||||
|
First Quarter
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$ | 0.185 | $ | 0.185 | ||||
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Second Quarter
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0.200 | 0.185 | ||||||
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Third Quarter
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0.200 | 0.200 | ||||||
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Fourth Quarter
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0.215 | 0.200 | ||||||
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Total
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$ | 0.800 | $ | 0.770 | ||||
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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, 2012, we had 1,652 full-time associates and 98 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, 2010, and held as of December 31, 2011. These communities were owned and had stabilized
occupancy and operating expenses as of the beginning of the prior year, there is no plan to conduct
substantial redevelopment activities, and the community is not classified as held for sale at year
end. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at
least three consecutive months. Our Non-Mature/Other Communities segment includes those
communities that were acquired or developed in 2009, 2010 or 2011, sold properties, redevelopment
properties, properties classified as real estate held for sale, 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 11 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. |
4
Table of Contents
2011 Highlights
| • | We acquired eight operating communities with 3,161 homes located in New York, New York; San Francisco, California; Boston, Massachusetts; and Metropolitan D.C. markets for $1.5 billion. We also acquired three parcels of land for $34.3 million. |
| • | We entered into a consolidated joint venture to acquire and redevelop a commercial property into a 173- apartment home community in Orange County, California. We also entered into two unconsolidated joint ventures to develop a 263- apartment home community in San Diego, California and a 256- apartment home community in College Park, Maryland. |
| • | One of our unconsolidated joint ventures acquired two operating communities with 509 homes in the Washington, D.C. market for $237.8 million. |
| • | We repaid $336.0 million of secured debt. The $336.0 million of secured debt includes $197.5 million of construction loans, repayment of $102.8 million of credit facilities, $22.4 million of mortgage payments, and repayment of $13.3 million in tax exempt bonds. |
| • | Certain holders submitted their outstanding 4.00% Convertible Senior Notes due 2035 to the Company for repurchase. As a result, we repurchased notes with a notional value of $10.8 million, representing approximately 6.44% of the $167.8 million in aggregate principal amount outstanding, and expensed $207,000 of unamortized financing costs during the three months ended March 31, 2011. On March 2, 2011 the Company called the remaining outstanding notes with a notional value of $156.9 million. The notes were redeemed on April 4, 2011 and unamortized financing costs of $3.0 million were written off. |
| • | We issued $300 million aggregate principal amount of 4.250% senior unsecured notes due June 2018 under our existing shelf registration statement. Interest is payable semiannually beginning in December 2011. The notes were priced at 98.988% of the principal amount plus accrued interest from May 23, 2011 to yield 4.419% to maturity. The notes are fully and unconditionally guaranteed by the Operating Partnership. |
| • | We repaid $97.1 million on the maturity of our 3.625% Convertible Senior Notes due September 2011. |
| • | We entered into a new $900 million unsecured revolving credit facility, replacing the Company’s $600 million credit facility. The Operating Partnership issued a guarantee in connection with the new facility, similar to the guarantee it issued under the prior facility. The new credit facility has an initial term of four years and includes a one-year extension option, and contains an accordion feature that allows the Company to increase the facility to $1.35 billion. Based on the Company’s current credit ratings, the credit facility carries an interest rate equal to LIBOR plus a spread of 122.5 basis points and a facility fee of 22.5 basis points. In 2011, the Company had net borrowings of $389.3 million on its unsecured revolving credit facilities. |
| • | In September 2009, the Company entered into an equity distribution agreement under which the Company may offer and sell up to 15.0 million shares of its common stock over time to or through its sales agents. During the year ended December 31, 2011, we sold 4,395,601 shares of common stock through an equity distribution agreement for aggregate gross proceeds of approximately $104.5 million at a weighted average price per share of $23.78. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $2.1 million, were approximately $102.4 million, and such proceeds were used for general corporate purposes. |
| • | We entered into a new equity distribution agreement under which the Company may offer and sell up to 20.0 million shares of its common stock over time to or through its sales agents. During the year ended December 31, 2011, we sold 11,849,079 shares of common stock through this program (of which 419,048 shares were settled subsequent to December 31, 2011) for aggregate gross proceeds of approximately $297.7 million at a weighted average price per share of $25.12. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $6.0 million, were approximately $291.7 million, and such proceeds were used for general corporate purposes. In September 2011, the Company entered into a new equity distribution agreement in connection with filing a new registration statement on Form S-3. The new equity distribution agreement replaced the March 2011 agreement, and no material changes were made to the equity distribution agreement. As of December 31, 2011 8,150,921 shares of common stock may be sold under our equity distribution agreement. |
5
Table of Contents
| • | We closed on a public offering of 20,700,000 shares of our common stock, including 2,700,000 shares sold as a result of the underwriters’ exercise of their overallotment option in full at the closing, at a price of $25.00 per share, for net proceeds of approximately $496.3 million after underwriting discounts and commissions and estimated offering expenses. |
| • | We repurchased 141,200 shares of our 6.75% Series G Cumulative Redeemable Preferred Stock for $3.6 million, which is $100,000 more than their liquidation value of $3.5 million. |
Other than the following, there were no significant changes to the Operating Partnership’s
business during 2011 (the above 2011 highlights relate to UDR or other subsidiaries of UDR):
| • | The Operating Partnership acquired four operating communities with 1,833 homes located in the New York, New York and Boston, Massachusetts markets for $761.2 million. In partial consideration for the acquisition of two of these communities, 4,371,845 OP Units were issued. |
| • | The Operating Partnership issued a guarantee on $300 million of medium-term notes due June 2018 issued by UDR. |
| • | The Operating Partnership issued a guarantee in conjunction with a $900 million unsecured revolving credit facility entered into by UDR. The facility replaced the General Partner’s $600 million credit facility, which the Operating Partnership had previously guaranteed. |
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 quality of our portfolio | ||
| 2. | Grow our cash flow to support dividend growth | ||
| 3. | Increase our balance sheet strength and flexibility | ||
| 4. | Great place to work and live |
Strengthen quality of 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, 2011, approximately 50.9% of our same store net operating
income (“NOI”) was provided by our communities located in California, Metropolitan Washington,
D.C., Oregon and Washington state.
6
Table of Contents
Grow our cash flow to support dividend growth
Acquisitions and Dispositions
During 2011, in conjunction with our strategy to strengthen our portfolio, we acquired eight
operating communities with 3,161 apartment homes for approximately $1.5 billion. Four of these
operating communities, representing 1,833 homes, were acquired by the Operating Partnership for
approximately $761.2 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; |
| • | 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 2011, we sold eighteen apartment home communities, of which eight communities were
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
):
| 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
|
|
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|
Homes acquired
|
3,161 | 1,374 | 289 | 4,558 | 2,671 | |||||||||||||||
|
Homes disposed
|
4,488 | 149 | — | 25,684 | 7,125 | |||||||||||||||
|
Homes owned at December 31
|
47,343 | 48,553 | 45,913 | 44,388 | 65,867 | |||||||||||||||
|
Total real estate owned, at cost
|
$ | 8,074,471 | $ | 6,881,347 | $ | 6,315,047 | $ | 5,831,753 | $ | 5,956,481 | ||||||||||
7
Table of Contents
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
):
| 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
|
|
||||||||||||||||||||
|
Homes acquired
|
1,833 | — | — | 3,346 | 943 | |||||||||||||||
|
Homes disposed
|
2,024 | — | — | 16,960 | 4,631 | |||||||||||||||
|
Homes owned at December 31
|
23,160 | 23,351 | 23,351 | 23,351 | 36,965 | |||||||||||||||
|
Total real estate owned, at cost
|
$ | 4,205,298 | $ | 3,706,184 | $ | 3,640,888 | $ | 3,569,239 | $ | 2,685,249 | ||||||||||
Development Activities
The following wholly owned projects were under development as of December 31, 2011:
| Number of | Completed | Cost to | Budgeted | Estimated | Expected | |||||||||||||||||||
| Apartment | Apartment | Date | Cost | Cost | Completion | |||||||||||||||||||
| Homes | Homes | (in thousands) | (in thousands) | Per Home | Date | |||||||||||||||||||
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Savoye
2
(Phase II of
Vitruvian Park) Addison, TX
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347 | 145 | $ | 66,707 | $ | 69,000 | $ | 198,847 | 1Q12 | |||||||||||||||
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Belmont Townhomes Dallas, TX
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13 | — | 1,947 | 4,175 | 321,154 | 2Q12 | ||||||||||||||||||
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2400 14th Street Washington, DC
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255 | — | 64,899 | 126,100 | 494,510 | 4Q12 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Village at Bella Terra
Huntington Beach, CA
|
467 | — | 32,202 | 150,000 | 300,000 | 2Q13 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Mission Bay San Francisco, CA
|
315 | — | 37,679 | 139,600 | 443,175 | 3Q13 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Phase III of Vitruvian Park
Addison, TX
|
391 | — | 18,518 | 98,350 | 251,535 | 3Q13 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Los Alisos (formerly Mission Viejo)
Mission Viejo, CA
|
320 | — | 26,794 | 87,050 | 272,031 | 4Q13 | ||||||||||||||||||
|
|
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|
|
||||||||||||||||||||||||
|
|
2,108 | 145 | $ | 248,746 | $ | 674,275 | $ | 315,168 | ||||||||||||||||
|
|
||||||||||||||||||||||||
None of these projects are held by the Operating Partnership.
Redevelopment Activities
During 2011, we continued to redevelop properties in targeted markets where we concluded there
was an opportunity to add value. During the year ended December 31, 2011, we incurred $30.0 million
in major renovations, which include major structural changes and/or architectural revisions to
existing buildings.
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Joint Venture Activities
Consolidated joint venture
In August 2011, the Company invested in a consolidated joint venture with an unaffiliated
third party to acquire and redevelop an existing commercial property into a 173-apartment home
community in Orange County, California. At closing the Company contributed $9.0 million and at
December 31, 2011, UDR owned a 90% controlling interest in the investment. Under the terms of the
operating agreement, our partner is required to achieve certain criteria as it relates to the
entitlement process. If the criteria are met on or before 730 days after the site plan application
is deemed complete by the city, the Company is obligated to contribute an additional $3.0 million
to the joint venture for distribution to our partner. At the acquisition date, the Company accrued
and capitalized $3.0 million related to the contingent consideration, which represents the
difference between fair value of the property of $9.8 million on the formation date and the
estimated fair value of the underlying property upon completion of the entitlement process of $12.8
million.
Unconsolidated joint ventures
In May 2011, the Company entered into a joint venture to develop a 263-home community in San
Diego, California. At December 31, 2011 and at closing, UDR owned a noncontrolling interest of 95%
in the joint venture. Our initial investment was $9.9 million and our investment at December 31,
2011 was $12.1 million.
In June 2011, one of our existing joint ventures (UDR/MetLife I) sold a parcel of land to a
joint venture, in which the Company is a partner, to develop a 256-home community in College Park,
Maryland. At December 31, 2011 and at closing, UDR owned a noncontrolling interest of 95% in the
joint venture. Our initial investment was $7.1 million and our investment at December 31, 2011 was
$8.6 million.
UDR is a partner with an unaffiliated third party, which formed a joint venture for the
investment of up to $450.0 million in multifamily properties located in key, high barrier to entry
markets such as Metropolitan Washington D.C. The partners will contribute equity of $180.0 million
of which the Company’s maximum equity will be 30% or $54.0 million when fully invested. In 2011,
the joint venture acquired two properties (509 homes). At December 31, 2011, the Company owned a
30% interest in the joint venture. Our investment at December 31, 2011 was $34.1 million.
For additional information regarding these and our other joint ventures, see Note 5,
Joint
Ventures
to the Consolidated Financial Statements of UDR, Inc. in this Report.
The Operating Partnership is not a party to any of the joint venture activities described
above.
9
Table of Contents
We 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.
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 2011.
| • | We received proceeds of $30.7 million from secured debt financings. The $30.7 million includes $25.7 million in variable rate mortgages and $5.0 million in fixed rate mortgages. |
| • | We repaid $336.0 million of secured debt, which includes $197.5 million of construction loans, repayment of $102.8 million of credit facilities, $22.4 million of mortgage payments, and repayment of $13.3 million in tax exempt bonds. |
| • | Certain holders submitted their outstanding 4.00% Convertible Senior Notes due 2035 to us for repurchase. As a result, we repurchased notes with a notional value of $10.8 million, representing approximately 6.44% of the $167.8 million in aggregate principal amount outstanding, and expensed $207,000 of unamortized financing costs during the three months ended March 31, 2011. On March 2, 2011, the Company called the remaining outstanding notes with a notional value of $156.9 million. The notes were redeemed on April 4, 2011 and unamortized financing costs of $3.0 million were written off. |
| • | In May 2011, we issued $300 million aggregate principal amount of 4.250% senior unsecured notes due June 2018 under its existing shelf registration statement. Interest is payable semiannually beginning in December 2011. The notes were priced at 98.988 % of the principal amount plus accrued interest from May 23, 2011 to yield 4.419% to maturity. The notes are fully and unconditionally guaranteed by the Operating Partnership. |
| • | We repaid $97.1 million on our 3.625% Convertible Senior Notes due September 2011. |
| • | In October 2011, we entered into a $900 million unsecured revolving credit facility, replacing the Company’s $600 million credit facility. The Operating Partnership issued a guarantee in connection with the new credit facility, similar to the guarantee it issued under the prior facility. The new facility has an initial term of four years and includes a one-year extension option, and contains an accordion feature that allows the Company to increase the facility to $1.35 billion. Based on the Company’s current credit ratings, the credit facility carries an interest rate equal to LIBOR plus a spread of 122.5 basis points and a facility fee of 22.5 basis points. In 2011, the Company had net borrowings of $389.3 million on its unsecured revolving credit facilities. |
| • | In September 2009, we entered into an equity distribution agreement under which we may offer and sell up to 15.0 million shares of its common stock over time to or through its sales agents. During the year ended December 31, 2011, we sold 4,395,601 shares of common stock through an equity distribution agreement for aggregate gross proceeds of approximately $104.5 million at a weighted average price per share of $23.78. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $2.1 million, were approximately $102.4 million. |
| • | In March 2011, we entered into a new equity distribution agreement under which we may offer and sell up to 20.0 million shares of our common stock over time to or through its sales agents. During the year ended December 31, 2011, we sold 11,849,079 shares of common stock through this program (of which 419,048 shares were settled subsequent to December 31, 2011) for aggregate gross proceeds of approximately $297.7 million at a weighted average price per share of $25.12. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $6.0 million, were approximately $291.7 million. In September 2011, we entered into a new equity distribution agreement in connection with filing a new registration statement on Form S-3. The new equity distribution agreement replaced the March 2011 agreement, and no material changes were made to the equity distribution agreement. |
| • | In July 2011, we closed a public offering of 20,700,000 shares of its common stock, including 2,700,000 shares sold as a result of the underwriters’ exercise of their overallotment option in full at the closing, at a price of $25.00 per share, for net proceeds of approximately $496.3 million after underwriting discounts and commissions and estimated offering expenses. |
| • | We repurchased 141,200 shares of our 6.75% Series G Cumulative Redeemable Preferred Stock for $3.6 million, which was $100,000 more than their liquidation value of $3.5 million. |
Great place to work and live
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 2011, UDR.com features and functionality were enhanced to increase user engagement and
increase lead volume year-over-year, such as, improved photography, enhancements to the online web
forms and improved layout of the individual UDR community homepages. In addition to improvements to
www.udr.com
, we also improved our suite of mobile and tablet devices on the iPhone, iPad
and Android platforms. These overall enhancements have contributed to increasing our web visitor
traffic to almost 3.1 million visitors (up 31%), almost 2.1 million organic search engine visitors
(up 38%), mobile traffic increased 112%, mobile leads generated increased 115% and mobile as a
percent of total web traffic was at 22% in Q4 2011. Overall, the UDR.com and mobile initiatives
contributed to a 17% year-over-year lead stream increase.
10
Table of Contents
Operating Partnership Strategies and Vision
The Operating Partnership’s long-term strategic plan is to achieve greater operating
efficiencies by investing in fewer, more concentrated markets and
enhance resident and associate service through technology. As a result, the Operating
Partnership has sought to expand its interests in communities located in New York, New York; San
Francisco, California; Boston, Massachusetts; and Metropolitan D.C. 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 above average job growth, low single-family home affordability and limited new
supply for multifamily housing- three key drivers to strong rental growth.
Markets and Competitive Conditions
At December 31, 2011, 50.9% of our consolidated same store net operating income and 72.4% 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 22 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, 2011, our apartment portfolio included 163 consolidated communities having a
total of 47,343 completed apartment homes and an additional 1,963 apartment homes under
development, which included the Operating Partnership’s apartment portfolio of 77 consolidated
communities having a total of 23,160 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.
At
December 31, 2011, the Company is developing seven wholly-owned
communities with 2,108 apartment homes, 145 of which have been
completed.
At
December 31, 2011, the Company is redeveloping seven wholly-owned
communities with 3,123 apartment homes, 467 of which have been
completed.
Same Store Community Comparison
We believe that one pertinent quantitative measurement of the performance of our portfolio is
tracking the results of our same store community’s net operating income, 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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Table of Contents
For the year ended December 31, 2011, our same store NOI increased by $18.1 million or 5.6%
compared to the prior year. The increase in NOI for the 37,869 apartment homes which make up the
same store population was driven by an increase in rental rates and fee and reimbursement income,
partially offset by an increase in operating expenses and decreased occupancy.
For the year ended December 31, 2011, the Operating Partnership’s same store NOI increased by
$11.5 million or 6.2% compared to the prior year. The increase in NOI for the 19,194 apartment
homes which make up the same store population was driven by an increase in revenue rental rates,
partially offset by an increase in operating expenses and decreased occupancy.
Revenue growth in 2012 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 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, 2011.
Environmental Matters
Various environmental laws govern certain aspects of the ongoing operation of our communities.
Such environmental laws include those regulating the existence of asbestos-containing materials in
buildings, management of surfaces with lead-based paint (and notices to residents about the
lead-based paint), use of active underground petroleum storage tanks, and waste-management
activities. The failure to comply with such requirements could subject us to a government
enforcement action and/or claims for damages by a private party.
To date, compliance with federal, state and local environmental protection regulations has not
had a material effect on our capital expenditures, earnings or competitive position. We have a
property management plan for hazardous materials. As part of the plan, Phase I environmental site
investigations and reports have been completed for each property we acquire. In addition, all
proposed acquisitions are inspected prior to acquisition. The inspections are conducted by
qualified environmental consultants, and we review the issued report prior to the purchase or
development of any property. Nevertheless, it is possible that our environmental assessments will
not reveal all environmental liabilities, or that some material environmental liabilities exist of
which we are unaware. In some cases, we have abandoned otherwise economically attractive
acquisitions because the costs of removal or control of hazardous materials have been prohibitive
or we have been unwilling to accept the potential risks involved. We do not believe we will be
required to engage in any large-scale abatement at any of our properties. We believe that through
professional environmental inspections and testing for asbestos, lead paint and other hazardous
materials, coupled with a relatively conservative posture toward accepting known environmental
risk, we can minimize our exposure to potential liability associated with environmental hazards.
12
Table of Contents
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, 2012. 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
|
51 | Chief Executive Officer, President and Director | 2001 | |||||||
|
Warren L. Troupe
|
58 | Senior Executive Vice President | 2008 | |||||||
|
Harry G. Alcock
|
49 | Senior Vice President — Asset Management | 2010 | |||||||
|
Jerry A. Davis
|
49 | Senior Vice President — Property Operations | 2008 | |||||||
|
David L. Messenger
|
41 | Senior Vice President — Chief Financial Officer | 2008 | |||||||
|
R. Scott Wesson
|
49 | Senior Vice President — Chief Information Officer | 2011 | |||||||
Set forth below is certain biographical information about our executive officers.
Mr. Toomey spearheads the vision and strategic direction of the Company and oversees its
executive officers. He joined us in February 2001 as President, Chief Executive Officer and
Director. Prior to joining us, Mr. Toomey was with Apartment Investment and Management Company
(AIMCO), where he served as Chief Operating Officer for two years and Chief Financial Officer for
four years. During his tenure at AIMCO, Mr. Toomey was instrumental in the growth of AIMCO from
34,000 apartment homes to 360,000 apartment homes. He has also served as a Senior Vice President
at Lincoln Property Company, a national real estate development, property management and real
estate consulting company, from 1990 to 1995. He currently serves on the Executive Board of the
National Association of Real Estate Investment Trusts (NAREIT), as a member of the Real Estate
Roundtable, as a trustee with the Urban Land Institute and as a trustee of the Oregon State
University Foundation.
13
Table of Contents
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 the
National Multi Housing Council (NMHC), the Pension Real Estate Association (PREA) and the Urban
Land Institute.
Mr. Alcock oversees the Company’s acquisitions, dispositions, redevelopment and asset
management. 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. 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. 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.
Mr. Wesson oversees all aspects of the company’s information technology infrastructure and
strategy. He joined us in May 2011 as Senior Vice President — Chief Information Officer. Prior to
joining the Company, Mr. Wesson was with RealFoundations, a global real estate management
consultancy, where he served as Managing Director from 2008 to 2011. From 1997 to 2008 he was with
Apartment Investment and Management Company (AIMCO) where he served as Senior Vice President, Chief
Investment Officer. He took on the additional role of Chief Strategy Officer for AIMCO in 2006.
From 1991 to 1997 Mr. Wesson was with Lincoln Property Company in the role of Vice President of
Information Systems. Prior to that time he worked for five years as a District Manager for ADP.
Mr. Wesson began his career in Dallas, Texas working as an Analyst for Federated Department Stores.
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.
14
Table of Contents
There are many factors that affect the business and the results of operations of the Company
and the Operating Partnership, some of which are beyond the control of the Company and the
Operating Partnership. The following is a description of important factors that may cause the
actual results of operations of the Company and the Operating Partnership in future periods to
differ materially from those currently expected or discussed in forward-looking statements set
forth in this Report relating to our financial results, operations and business prospects.
Forward-looking statements and such risks, uncertainties and other factors speak only as of the
date of this Report, and we expressly disclaim any obligation or undertaking to update or revise
any forward-looking statement contained herein, to reflect any change in our expectations with
regard thereto, or any other change in events, conditions or circumstances on which any such
statement is based, except to the extent otherwise required by law.
Risks Related to Our Real Estate Investments and Our Operations
Unfavorable Apartment Market and Economic Conditions Could Adversely Affect Occupancy Levels,
Rental Revenues and the Value of Our Real Estate Assets.
Unfavorable market conditions in the
areas in which we operate and unfavorable economic conditions generally may significantly affect
our occupancy levels, our rental rates and collections, the value of the properties and our ability
to strategically acquire or dispose of apartment communities on economically favorable terms. Our
ability to lease our properties at favorable rates is adversely affected by the increase in supply
in the multifamily 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 UDR’s stockholders, which could adversely
affect our financial condition and the market value of our securities. Factors that may affect our
occupancy levels, our rental revenues, and/or the value of our properties include the following,
among others:
| • | downturns in the national, regional and local economic conditions, particularly increases in unemployment; | ||
| • | declines in mortgage interest rates, making alternative housing more affordable; | ||
| • | government or builder incentives which enable first time homebuyers to put little or no money down, making alternative housing options more attractive; | ||
| • | local real estate market conditions, including oversupply of, or reduced demand for, apartment homes; | ||
| • | declines in the financial condition of our tenants, which may make it more difficult for us to collect rents from some tenants; | ||
| • | changes in market rental rates; | ||
| • | our ability to renew leases or re-lease space on favorable terms; | ||
| • | 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 it is not clear whether the U.S. economy has fully emerged
from the recession, high levels of unemployment have continued to persist. 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.
15
Table of Contents
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.
We Are Subject to Certain Risks Associated with Selling Apartment Communities, Which Could
Limit Our Operational and Financial Flexibility.
We periodically dispose of apartment communities
that no longer meet our strategic objectives, but adverse market conditions may make it difficult
to sell apartment communities like the ones we own. We cannot predict whether we will be able to
sell any property for the price or on the terms we set, or whether any price or other terms offered
by a prospective purchaser would be acceptable to us. We also cannot predict the length of time
needed to find a willing purchaser and to close the sale of a property. Furthermore, we may be
required to expend funds to correct defects or to make improvements before a property can be sold.
These conditions may limit our ability to dispose of properties and to change our portfolio
promptly in order to meet our strategic objectives, which may in turn have a material adverse
effect on our financial condition and the market value of our securities. We are also subject to
the following risks in connection with sales of our apartment communities:
| • | a significant portion of the proceeds from our overall property sales may be held by intermediaries in order for some sales to qualify as like-kind exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended, or the “Code,” so that any related capital gain can be deferred for federal income tax purposes. As a result, we may not have immediate access to all of the cash proceeds generated from our property sales; and | ||
| • | federal tax laws limit our ability to profit on the sale of communities that we have owned for less than two years, and this limitation may prevent us from selling communities when market conditions are favorable. |
Competition Could Limit Our Ability to Lease Apartment Homes or Increase or Maintain
Rents.
Our apartment communities compete with numerous housing alternatives in attracting
residents, including other apartment communities, condominiums and single-family rental homes, as
well as owner occupied single-and multi-family homes. Competitive housing in a particular area
could adversely affect our ability to lease apartment homes and increase or maintain rents.
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; |
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| • | 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. |
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. |
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In some cases in the past, the costs of upgrading acquired communities exceeded our original
estimates. We may experience similar cost increases in the future. Our inability to charge rents
that will be sufficient to offset the effects of any increases in these costs may impair our
profitability.
Bankruptcy 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 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.
We Could Incur Significant Insurance Costs and Some Potential Losses May Not Be Adequately
Covered by Insurance.
We have a comprehensive insurance program covering our property and
operating activities. We believe the policy specifications and insured limits of these policies are
adequate and appropriate. There are, however, certain types of extraordinary losses which may not
be adequately covered under our insurance program. In addition, we will sustain losses due to
insurance deductibles, self-insured retention, uninsured claims or casualties, or losses in excess
of applicable coverage.
If an uninsured loss or a loss in excess of insured limits occur, we could lose all or a
portion of the capital we have invested in a property, as well as the anticipated future revenue
from the property. In such an event, we might nevertheless remain obligated for any mortgage debt
or other financial obligations related to the property. Material losses in excess of insurance
proceeds may occur in the future. If one or more of our significant properties were to experience a
catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large
expenses to repair or rebuild the property. Such events could adversely affect our cash flow and
ability to make distributions to UDR’s stockholders.
As a result of our substantial real estate holdings, the cost of insuring our apartment
communities is a significant component of expense. Insurance premiums are subject to significant
increases and fluctuations, which can be widely outside of our control. We insure our properties
with insurance companies that we believe have a good rating at the time our policies are put into
effect. The financial condition of one or more of our insurance companies that we hold policies
with may be negatively impacted resulting in their inability to pay on future insurance claims.
Their inability to pay future claims may have a negative impact on our financial results. In
addition, the failure of one or more insurance companies may increase the costs to renew our
insurance policies or increase the cost of insuring additional properties and recently developed or
redeveloped properties.
Failure to Succeed in New Markets May Limit Our Growth.
We have acquired in the past, and we
may acquire in the future if appropriate opportunities arise, apartment communities that are
outside of our existing markets. Entering into new markets may expose us to a variety of risks, and
we may not be able to operate successfully in new markets. These risks include, among others:
| • | inability to accurately evaluate local apartment market conditions and local economies; | ||
| • | inability to hire and retain key personnel; | ||
| • | lack of familiarity with local governmental and permitting procedures; and | ||
| • | inability to achieve budgeted financial results. |
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Potential Liability for Environmental Contamination Could Result in Substantial Costs.
Under
various federal, state and local environmental laws, as a current or former owner or operator of
real estate, we could be required to investigate and remediate the effects of contamination of
currently or formerly owned real estate by hazardous or toxic substances, often regardless of our
knowledge of or responsibility for the contamination and solely by virtue of our current or former
ownership or operation of the real estate. In addition, we could be held liable to a governmental
authority or to third parties for property damage and for investigation and clean-up costs incurred
in connection with the contamination. These costs could be substantial, and in many cases
environmental laws create liens in favor of governmental authorities to secure their payment. The
presence of such substances or a failure to properly remediate any resulting contamination could
materially and adversely affect our ability to borrow against, sell or rent an affected property.
In addition, our properties are subject to various federal, state and local environmental,
health and safety laws, including laws governing the management of wastes and underground and
aboveground storage tanks. Noncompliance with these environmental, health and safety laws could
subject us to liability. Changes in laws could increase the potential costs of compliance with
environmental laws, health and safety laws or increase liability for noncompliance. This may result
in significant unanticipated expenditures or may otherwise materially and adversely affect our
operations.
As the owner or operator of real property, we may also incur liability based on various
building conditions. For example, buildings and other structures on properties that we currently
own or operate or those we acquire or operate in the future contain, may contain, or may have
contained, asbestos-containing material, or ACM. Environmental, health and safety laws require that
ACM be properly managed and maintained and may impose fines or penalties on owners, operators or
employers for non-compliance with those requirements.
These requirements include special precautions, such as removal, abatement or air monitoring,
if ACM would be disturbed during maintenance, renovation or demolition of a building, potentially
resulting in substantial costs. In addition, we may be subject to liability for personal injury or
property damage sustained as a result of exposure to ACM or releases of ACM into the environment.
We cannot assure you that costs or liabilities incurred as a result of environmental issues
will not affect our ability to make distributions to our 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.
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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.
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 UDR’s 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 UDR’s common stock.
Any Material Weaknesses Identified in Our Internal Control Over Financial Reporting Could Have
an Adverse Effect on UDR’s Stock Price.
Section 404 of the Sarbanes-Oxley Act of 2002 requires us
to evaluate and report on our internal control over financial reporting. If we identify one or more
material weaknesses in our internal control over financial reporting, we could lose investor
confidence in the accuracy and completeness of our financial reports, which in turn could have an
adverse effect on UDR’s stock price.
Our Business and Operations Would Suffer in the Event of System Failures.
Despite system
redundancy, the implementation of security measures and the existence of a disaster recovery plan
for our internal information technology systems, our systems are vulnerable to damages from any
number of sources, including computer viruses, unauthorized access, energy blackouts, natural
disasters, terrorism, war, and telecommunication failures. We rely on information technology
networks and systems, including the Internet, to process, transmit and store electronic information
and to manage or support a variety of our business processes, including financial transactions and
keeping of records, which may include personal identifying information of tenants and lease data.
We rely on commercially available systems, software, tools and monitoring to provide security for
processing, transmitting and storing confidential tenant information, such as individually
identifiable information relating to financial accounts. Although we take steps to protect the
security of the data maintained in our information systems, it is possible that our security
measures will not be able to prevent the systems’ improper functioning, or the improper disclosure
of personally identifiable information, such as in the event of cyber attacks. Security breaches,
including physical or electronic break-ins, computer viruses, attacks by hackers and similar
breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential
information. Any failure to maintain proper function, security and availability of our information
systems could interrupt our operations, damage our reputation, subject us to liability claims or
regulatory penalties and could materially and adversely affect us.
Our Success Depends on Our Senior Management.
Our success depends upon the retention of our
senior management, whose continued service is not guaranteed. We may not be able to find qualified
replacements for the individuals who make up our senior management if their services should no
longer be available to us. The loss of services of one or more members of our senior management
team could have a material adverse effect on our business, financial condition and results of
operations.
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We May be Adversely Affected by New Laws and Regulations.
The United States Administration
and Congress have enacted, or called for consideration of, proposals relating to a variety of
issues, including with respect to health care, financial regulation reform, climate 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 recent 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 culminated in the enactment on
July 21, 2010 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).
Many of the provisions of the Dodd-Frank Act have extended implementation periods and delayed
effective dates and 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 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.
The Adoption of Derivatives Legislation by Congress Could Have an Adverse Impact on our
Ability to Hedge Risks Associated with our Business.
The Dodd-Frank Act regulates derivative
transactions, which include certain instruments used in our risk management activities. The
Dodd-Frank Act contemplates that most swaps will be required to be cleared through a registered
clearing facility and traded on a designated exchange or swap execution facility. There are some
exceptions to these requirements for entities that use swaps to hedge or mitigate commercial risk.
While we may ultimately be eligible for such exceptions, the scope of these exceptions is currently
uncertain, pending further definition through rulemaking proceedings. Although the Dodd-Frank Act
includes significant new provisions regarding the regulation of derivatives, the impact of those
requirements will not be known definitively until regulations have been adopted by the SEC and the
Commodities Futures Trading Commission. The new legislation and any new regulations could increase
the operational and transactional cost of derivatives contracts and affect the number and/or
creditworthiness of available hedge counterparties to us.
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.
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We are monitoring the SEC’s activity with respect to the proposed adoption of IFRS by United
States public companies. 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 to be 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’s distribution requirements to maintain its status as a REIT for federal income tax purposes.
In addition, the full limits of our line of credit may not be available to us if our operating
performance falls outside the constraints of our debt covenants. We are also likely to need to
refinance substantially all of our outstanding debt as it matures. We may not be able to refinance
existing debt, or the terms of any refinancing may not be as favorable as the terms of the existing
debt, which could create pressures to sell assets or to issue additional equity when we would
otherwise not choose to do so. In addition, our failure to comply with our debt covenants could
result in a requirement to repay our indebtedness prior to its maturity, which could have an
adverse effect on our cash flow, increase our financing costs and impact our ability to make
distributions to UDR’s stockholders.
Failure to Generate Sufficient Revenue Could Impair Debt Service Payments and Distributions to
Stockholders.
If our apartment communities do not generate sufficient net rental income to meet
rental expenses, our ability to make required payments of interest and principal on our debt
securities and to pay distributions to UDR’s stockholders will be adversely affected. The following
factors, among others, may affect the net rental income generated by our apartment communities:
| • | the national and local economies; | ||
| • | local real estate market conditions, such as an oversupply of apartment homes; | ||
| • | tenants’ perceptions of the safety, convenience, and attractiveness of our communities and the neighborhoods where they are located; | ||
| • | our ability to provide adequate management, maintenance and insurance; | ||
| • | rental expenses, including real estate taxes and utilities; | ||
| • | competition from other apartment communities; | ||
| • | changes in interest rates and the availability of financing; | ||
| • | changes in governmental regulations and the related costs of compliance; and | ||
| • | changes in tax and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing. |
Expenses associated with our investment in an apartment community, such as debt service, real
estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a
reduction in rental income from that community. If a community is mortgaged to secure payment of
debt and we are unable to make the mortgage payments, we could sustain a loss as a result of
foreclosure on the community or the exercise of other remedies by the mortgage holder.
Our Debt Level May Be Increased.
Our current debt policy does not contain any limitations on
the level of debt that we may incur, although our ability to incur debt is limited by covenants in
our bank and other credit agreements. We manage our debt to be in compliance with these debt
covenants, but subject to compliance with these covenants, we may increase the amount of our debt
at any time without a concurrent improvement in our ability to service the additional debt.
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Financing May Not Be Available and Could Be Dilutive.
Our ability to execute our business
strategy depends on our access to an appropriate blend of debt financing, including unsecured lines
of credit and other forms of secured and unsecured debt, and equity financing, including common and
preferred equity. We and other companies in the real estate industry have experienced limited
availability of financing from time to time. If we issue additional equity securities to finance
developments and acquisitions instead of incurring debt, the interests of our existing stockholders
could be diluted.
Failure To Maintain Our Current Credit Ratings Could Adversely Affect Our Cost of Funds,
Related Margins, Liquidity, and Access to Capital Markets.
Moody’s and Standard & Poor’s, the
major debt rating agencies, routinely evaluate our debt and have given us ratings on our senior
unsecured debt. These ratings are based on a number of factors, which included their assessment of
our financial strength, liquidity, capital structure, asset quality, and sustainability of cash
flow and earnings. Due to changes in market conditions, we may not be able to maintain our current
credit ratings, which could adversely affect our cost of funds and related margins, liquidity, and
access to capital markets.
Disruptions in Financial Markets May Adversely Impact Availability and Cost of Credit and Have
Other Adverse Effects on Us and the Market Price of UDR’s Stock.
Our ability to make scheduled
payments or to refinance debt obligations will depend on our operating and financial performance,
which in turn is subject to prevailing economic conditions and to financial, business and other
factors beyond our control. During the 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. The recent downgrade of the U.S. credit rating by
Standard & Poor’s and the ongoing European debt crisis have contributed to the instability in
global credit markets. Continued uncertainty in the stock and credit markets may negatively impact
our ability to access additional financing for acquisitions, development of our properties and
other purposes at reasonable terms, which may negatively affect our business. Additionally, due to
this uncertainty, we may be unable to refinance our existing indebtedness or the terms of any
refinancing may not be as favorable as the terms of our existing indebtedness. If we are not
successful in refinancing this debt when it becomes due, we may be forced to dispose of properties
on disadvantageous terms, which might adversely affect our ability to service other debt and to
meet our other obligations. A prolonged downturn in the financial markets may cause us to seek
alternative sources of potentially less attractive financing, and may require us to adjust our
business plan accordingly. These events also may make it more difficult or costly for us to raise
capital through the issuance of UDR’s common or preferred stock. The disruptions in the financial
markets have had and may continue to have a material adverse effect on the market value of UDR’s
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
proposed potential options for the future of mortgage finance in the U.S. that could involve the
phase out of Fannie Mae and Freddie Mac. While we believe Fannie Mae and Freddie Mac will continue
to provide liquidity to our sector, should they discontinue doing so, have their mandates changed
or reduced or be disbanded or reorganized by the government, it would significantly reduce our
access to debt capital and adversely affect our ability to finance or refinance existing
indebtedness at competitive rates and it may adversely affect our ability to sell assets.
Uncertainty in the future activity and involvement of Fannie Mae and Freddie Mac as a source of
financing could negatively impact our ability to make acquisitions and make it more difficult or
not possible for us to sell properties or may adversely affect the price we receive for properties
that we do sell, as prospective buyers may experience increased costs of debt financing or
difficulties in obtaining debt financing.
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.
23
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Changing Interest Rates Could Increase Interest Costs and Adversely Affect Our Cash Flow and
the Market Price of Our Securities.
We currently have, and expect to incur in the future,
interest-bearing debt at rates that vary with market interest rates. As of December 31, 2011, UDR
had approximately $1.1 billion of variable rate indebtedness outstanding, which constitutes
approximately 28% of total outstanding indebtedness as of such date. As of December 31, 2011, the
Operating Partnership had approximately $287.0 million of variable rate indebtedness outstanding,
which constitutes approximately 24% of total outstanding indebtedness to third parties as of such
date. An increase in interest rates would increase our interest expenses and increase the costs of
refinancing existing indebtedness and of issuing new debt. Accordingly, higher interest rates could
adversely affect cash flow and our ability to service our debt and to make distributions to
security holders. The effect of prolonged interest rate increases could negatively impact our
ability to make acquisitions and develop properties. In addition, an increase in market interest
rates may lead our security holders to demand a higher annual yield, which could adversely affect
the market price of UDR’s common and preferred stock and debt securities.
Interest Rate Hedging Contracts May Be Ineffective and May Result in Material Charges.
From
time to time when we anticipate issuing debt securities, we may seek to limit our exposure to
fluctuations in interest rates during the period prior to the pricing of the securities by entering
into interest rate hedging contracts. We may do this to increase the predictability of our
financing costs. Also, from time to time we may rely on interest rate hedging contracts to limit
our exposure under variable rate debt to unfavorable changes in market interest rates. If the terms
of new debt securities are not within the parameters of, or market interest rates fall below that
which we incur under a particular interest rate hedging contract, the contract is ineffective.
Furthermore, the settlement of interest rate hedging contracts has involved and may in the future
involve material charges. In addition, our use of interest rate hedging arrangements may expose us
to additional risks, including a risk that a counterparty to a hedging arrangement may fail to
honor its obligations. Developing an effective interest rate risk strategy is complex and no
strategy can completely insulate us from risks associated with interest rate fluctuations. There
can be no assurance that our hedging activities will have desired beneficial impact on our results
of operations or financial condition. Termination of these hedging agreements typically involves
costs, such as transaction fees or breakage costs.
Risks Related to Tax Laws
We Would Incur Adverse Tax Consequences if UDR Failed to Qualify as a REIT.
UDR has elected
to be taxed as a REIT under the Code. Our qualification as a REIT requires us to satisfy numerous
requirements, some on an annual and quarterly basis, established under highly technical and complex
Code provisions for which there are only limited judicial or administrative interpretations, and
involves the determination of various factual matters and circumstances not entirely within our
control. We intend that our current organization and method of operation enable us to continue to
qualify as a REIT, but we may not so qualify or we may not be able to remain so qualified in the
future. In addition, U.S. federal income tax laws governing REITs and other corporations and the
administrative interpretations of those laws may be amended at any time, potentially with
retroactive effect. Future legislation, new regulations, administrative interpretations or court
decisions could adversely affect our ability to qualify as a REIT or adversely affect UDR’s
stockholders.
If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax
(including any applicable alternative minimum tax) on our taxable income at regular corporate
rates, and would not be allowed to deduct dividends paid to UDR’s stockholders in computing our
taxable income. Also, unless the Internal Revenue Service granted us relief under certain statutory
provisions, we could not re-elect REIT status until the fifth calendar year after the year in which
we first failed to qualify as a REIT. The additional tax liability from the failure to qualify as a
REIT would reduce or eliminate the amount of cash available for investment or distribution to UDR’s
stockholders. This would likely have a significant adverse effect on the value of our securities
and our ability to raise additional capital. In addition, we would no longer be required to make
distributions to UDR’s stockholders. Even if we continue to qualify as a REIT, we will continue to
be subject to certain federal, state and local taxes on our income and property.
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 UDR’s common stock pursuant to this temporary guidance, UDR’s stockholders may receive
less cash than they received in distributions in prior years and the market value of our securities
may decline.
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Dividends Paid By REITs Generally Do Not Qualify for Reduced Tax Rates.
In general, the
maximum U.S. federal income tax rate for dividends paid to individual U.S. shareholders is 15%
(through 2012). Unlike dividends received from a corporation that is not a REIT, our distributions
to individual shareholders generally are not eligible for the reduced rates.
UDR May Conduct a Portion of Our Business Through Taxable REIT Subsidiaries, Which are Subject
to Certain Tax Risks.
We have established several taxable REIT subsidiaries. Despite UDR’s
qualification as a REIT, its taxable REIT subsidiaries must pay income tax on their taxable income.
In addition, we must comply with various tests to continue to qualify as a REIT for federal income
tax purposes, and our income from and investments in our taxable REIT subsidiaries generally do not
constitute permissible income and investments for these tests. While we will attempt to ensure that
our dealings with our taxable REIT subsidiaries will not adversely affect our REIT qualification,
we cannot provide assurance that we will successfully achieve that result. Furthermore, we may be
subject to a 100% penalty tax, we may jeopardize our ability to retain future gains on real
property sales, or our taxable REIT subsidiaries may be denied deductions, to the extent our
dealings with our taxable REIT subsidiaries are not deemed to be arm’s length in nature or are
otherwise not respected.
REIT Distribution Requirements Limit Our Available Cash.
As a REIT, UDR is subject to annual
distribution requirements, which limit the amount of cash we retain for other business purposes,
including amounts to fund our growth. We generally must distribute annually at least 90% of our net
REIT taxable income, excluding any net capital gain, in order for our distributed earnings not to
be subject to corporate income tax. We intend to make distributions to UDR’s stockholders to comply
with the requirements of the Code. However, differences in timing between the recognition of
taxable income and the actual receipt of cash could require us to sell assets or borrow funds on a
short-term or long-term basis to meet the 90% distribution requirement of the Code.
Certain Property Transfers May Generate Prohibited Transaction Income, Resulting in a Penalty
Tax on Gain Attributable to the Transaction.
From time to time, we may transfer or otherwise
dispose of some of our properties. Under the Code, any gain resulting from transfers of properties
that we hold as inventory or primarily for sale to customers in the ordinary course of business
would be treated as income from a prohibited transaction and subject to a 100% penalty tax. Since
we acquire properties for investment purposes, we do not believe that our occasional transfers or
disposals of property are prohibited transactions. However, whether property is held for investment
purposes is a question of fact that depends on all the facts and circumstances surrounding the
particular transaction. The Internal Revenue Service may contend that certain transfers or
disposals of properties by us are prohibited transactions. If the Internal Revenue Service were to
argue successfully that a transfer or disposition of property constituted a prohibited transaction,
then we would be required to pay a 100% penalty tax on any gain allocable to us from the prohibited
transaction and we may jeopardize our ability to retain future gains on real property sales. In
addition, income from a prohibited transaction might adversely affect UDR’s ability to satisfy the
income tests for qualification as a REIT for federal income tax purposes.
We Could Face Possible State and Local Tax Audits and Adverse Changes in State and Local Tax
Laws.
As discussed in the risk factors above, because UDR is organized and qualifies as a REIT it
is generally not subject to federal income taxes, but it is subject to certain state and local
taxes. From time to time, changes in state and local tax laws or regulations are enacted, which may
result in an increase in our tax liability. A shortfall in tax revenues for states and
municipalities in which we own apartment communities may lead to an increase in the frequency and
size of such changes. If such changes occur, we may be required to pay additional state and local
taxes. These increased tax costs could adversely affect our financial condition and the amount of
cash available for the payment of distributions to UDR’s stockholders. In the normal course of
business, entities through which we own real estate may also become subject to tax audits. If such
entities become subject to state or local tax audits, the ultimate result of such audits could have
an adverse effect on our financial condition.
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The Operating Partnership Intends to Qualify as a Partnership, But Cannot Guarantee That It
Will Qualify.
The Operating Partnership intends to qualify as a partnership for federal income
tax purposes at any such time that the Operating Partnership admits additional limited partners
other than UDR. If classified as a partnership, the Operating Partnership generally will not be a
taxable entity and will not incur federal income tax liability. However, the Operating Partnership
would be treated as a corporation for federal income tax purposes if it were a “publicly traded
partnership,” unless at least 90% of the Operating Partnership’s income was qualifying income as
defined in the Code. A “publicly traded partnership” is a partnership whose partnership interests
are traded on an established securities market or are readily tradable on a secondary market (or
the substantial equivalent thereof). Although the Operating Partnership’s partnership units are not
traded on an established securities market, because of the redemption right, the Operating
Partnership’s units held by limited partners could be viewed as readily tradable on a secondary
market (or the substantial equivalent thereof), and the Operating Partnership may not qualify for
one of the “safe harbors” under the applicable tax regulations. Qualifying income for the 90% test
generally includes passive income, such as real property rents, dividends and interest. The income
requirements applicable to REITs and the definition of qualifying income for purposes of this 90%
test are similar in most respects. The Operating Partnership may not meet this qualifying income
test. If the Operating Partnership were to be taxed as a corporation, it would incur substantial
tax liabilities, and UDR would then fail to qualify as a REIT for tax purposes, unless it qualified
for relief under certain statutory savings provisions, and our ability to raise additional capital
would be impaired.
Qualifying as a REIT Involves Highly Technical and Complex Provisions of the Code.
Our
qualification as a REIT involves the application of highly technical and complex Code provisions
for which only limited judicial and administrative authorities exist. Even a technical or
inadvertent violation could jeopardize our REIT qualification. Moreover, new legislation, court
decisions or administrative guidance, in each case possibly with retroactive effect, may make it
more difficult or impossible for us to qualify as a REIT. Our qualification as a REIT will depend
on our satisfaction of certain asset, income, organizational, distribution, shareholder ownership
and other requirements on a continuing basis. Our ability to satisfy the REIT income and asset
tests depends upon our analysis of the characterization and fair market values of our assets, some
of which are not susceptible to a precise determination and for which we will not obtain
independent appraisals, and upon our ability to successfully manage the composition of our income
and assets on an ongoing basis. In addition, our ability to satisfy the requirements to qualify as
a REIT depends in part on the actions of third parties over which we have no control or only
limited influence, including in cases where we own an equity interest in an entity that is
classified as a partnership for U.S. federal income tax purposes.
Risks Related to Our Organization and Ownership of UDR’s Stock
Changes in Market Conditions and Volatility of Stock Prices Could Adversely Affect the Market
Price of UDR’s Common Stock.
The stock markets, including the New York Stock Exchange (“NYSE”),
on which we list UDR’s common stock, have experienced significant price and volume fluctuations. As
a result, the market price of UDR’s common stock could be similarly volatile, and investors in
UDR’s common stock may experience a decrease in the value of their shares, including decreases
unrelated to our operating performance or prospects. In addition to the risks listed in this “Risk
Factors” section, a number of factors could negatively affect the price per share of UDR’s common
stock, including:
| • | general market and economic conditions; | ||
| • | actual or anticipated variations in UDR’s quarterly operating results or dividends or UDR’s payment of dividends in shares of UDR’s stock; | ||
| • | changes in our funds from operations or earnings estimates; | ||
| • | difficulties or inability to access capital or extend or refinance existing debt; | ||
| • | decreasing (or uncertainty in) real estate valuations; | ||
| • | changes in market valuations of similar companies; | ||
| • | publication of research reports about us or the real estate industry; | ||
| • | the general reputation of real estate investment trusts and the attractiveness of their equity securities in comparison to other equity securities (including securities issued by other real estate companies); | ||
| • | general stock and bond market conditions, including changes in interest rates on fixed income securities, that may lead prospective purchasers of UDR’s stock to demand a higher annual yield from future dividends; | ||
| • | a change in analyst ratings; |
26
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| • | additions or departures of key management personnel; | ||
| • | adverse market reaction to any additional debt we incur in the future; | ||
| • | speculation in the press or investment community; | ||
| • | terrorist activity which may adversely affect the markets in which UDR’s securities trade, possibly increasing market volatility and causing the further erosion of business and consumer confidence and spending; | ||
| • | failure to qualify as a REIT; | ||
| • | strategic decisions by us or by our competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in business strategy; | ||
| • | failure to satisfy listing requirements of the NYSE; | ||
| • | governmental regulatory action and changes in tax laws; and | ||
| • | the issuance of additional shares of UDR’s common stock, or the perception that such sales might occur, including under UDR’s at-the-market equity distribution program. |
Many of the factors listed above are beyond our control. These factors may cause the market
price of shares of UDR’s common stock to decline, regardless of our financial condition, results of
operations, business or our prospects.
We May Change the Dividend Policy for UDR’s Common Stock in the Future.
The decision to
declare and pay dividends on UDR’s common stock, as well as the timing, amount and composition of
any such future dividends, will be at the sole discretion of our board of directors and will depend
on our earnings, funds from operations, liquidity, financial condition, capital requirements,
contractual prohibitions or other limitations under our indebtedness, the annual distribution
requirements under the REIT provisions of the Code, state law and such other factors as our board
of directors considers relevant. Any change in our dividend policy could have a material adverse
effect on the market price of UDR’s common stock.
Maryland Law May Limit the Ability of a Third Party to Acquire Control of Us, Which May Not be
in UDR’s Stockholders’ Best Interests.
Maryland business statutes may limit the ability of a
third party to acquire control of us. As a Maryland corporation, we are subject to various Maryland
laws which may have the effect of discouraging offers to acquire our Company and of increasing the
difficulty of consummating any such offers, even if our acquisition would be in UDR’s stockholders’
best interests. The Maryland General Corporation Law restricts mergers and other business
combination transactions between us and any person who acquires beneficial ownership of shares of
UDR’s stock representing 10% or more of the voting power without our board of directors’ prior
approval. Any such business combination transaction could not be completed until five years after
the person acquired such voting power, and generally only with the approval of stockholders
representing 80% of all votes entitled to be cast and 66 2 / 3 % of the votes entitled to be cast,
excluding the interested stockholder, or upon payment of a fair price. Maryland law also provides
generally that a person who acquires shares of our equity stock that represents 10% (and certain
higher levels) of the voting power in electing directors will have no voting rights unless approved
by a vote of two-thirds of the shares eligible to vote.
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Table of Contents
Limitations on Share Ownership and Limitations on the Ability of UDR’s Stockholders to Effect
a Change in Control of Our Company Restricts the Transferability of UDR’s Stock and May Prevent
Takeovers That are Beneficial to UDR’s Stockholders.
One of the requirements for maintenance of
our qualification as a REIT for U.S. federal income tax purposes is that no more than 50% in value
of our outstanding capital stock may be owned by five or fewer individuals, including entities
specified in the Code, during the last half of any taxable year. Our charter contains ownership and
transfer restrictions relating to UDR’s stock primarily to assist us in complying with this and
other REIT ownership requirements; however, the restrictions may have the effect of preventing a
change of control, which does not threaten REIT status. These restrictions include a provision that
generally limits ownership by any person of more than 9.9% of the value of our outstanding equity
stock, unless our board of directors exempts the person from such ownership limitation, provided
that any such exemption shall not allow the person to exceed 13% of the value of our outstanding
equity stock. Absent such an exemption from our board of directors, the transfer of UDR’s stock to
any person in excess of the applicable ownership limit, or any transfer of shares of such stock in
violation of the ownership requirements of the Code for REITs, will be considered null and void,
and the intended transferee of such stock will acquire no rights in such shares. These provisions
of our charter may have the effect of delaying, deferring or preventing someone from taking control
of us, even though a change of control might involve a premium price for UDR’s stockholders or
might otherwise be in UDR’s stockholders’ best interests.
None.
28
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At December 31, 2011, our consolidated apartment portfolio included 163 communities located in
24 markets, with a total of 47,343 completed apartment homes.
We lease approximately 38,000 square feet of office space in Highlands Ranch, Colorado for our
corporate headquarters. We also lease an additional 3,000 square feet for a regional office in
Richmond, Virginia.
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, 2011.
SUMMARY OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT DECEMBER 31, 2011
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
|
13 | 4,254 | 10.1 | % | $ | 814,951 | $ | 336,153 | $ | 191,573 | 94.9 | % | 835 | |||||||||||||||||||
|
San Francisco, CA
|
11 | 2,436 | 8.0 | % | 645,240 | 105,236 | 264,877 | 94.3 | % | 833 | ||||||||||||||||||||||
|
Los Angeles, CA
|
6 | 1,502 | 5.5 | % | 445,931 | 166,213 | 296,891 | 95.4 | % | 939 | ||||||||||||||||||||||
|
Seattle, WA
|
11 | 2,165 | 5.8 | % | 471,410 | 68,342 | 217,741 | 95.8 | % | 882 | ||||||||||||||||||||||
|
San Diego, CA
|
2 | 366 | 0.7 | % | 55,679 | — | 152,131 | 94.8 | % | 865 | ||||||||||||||||||||||
|
Monterey Peninsula, CA
|
7 | 1,565 | 1.9 | % | 154,030 | — | 98,422 | 93.8 | % | 724 | ||||||||||||||||||||||
|
Inland Empire, CA
|
2 | 654 | 1.3 | % | 100,946 | 78,325 | 154,353 | 94.9 | % | 955 | ||||||||||||||||||||||
|
Sacramento, CA
|
2 | 914 | 0.9 | % | 69,058 | — | 75,556 | 93.1 | % | 820 | ||||||||||||||||||||||
|
Portland, OR
|
3 | 716 | 0.9 | % | 70,383 | 41,934 | 98,300 | 95.5 | % | 918 | ||||||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||||||
|
Metropolitan DC
|
14 | 4,500 | 11.2 | % | 907,496 | 196,232 | 201,666 | 96.2 | % | 963 | ||||||||||||||||||||||
|
Baltimore, MD
|
11 | 2,301 | 3.7 | % | 300,389 | 131,794 | 130,547 | 96.5 | % | 1,001 | ||||||||||||||||||||||
|
Richmond, VA
|
6 | 2,211 | 2.3 | % | 189,470 | 67,089 | 85,694 | 95.9 | % | 966 | ||||||||||||||||||||||
|
Norfolk, VA
|
6 | 1,438 | 1.1 | % | 86,194 | — | 59,940 | 94.7 | % | 1,016 | ||||||||||||||||||||||
|
Boston, MA
|
4 | 1,179 | 3.9 | % | 313,565 | 85,463 | 265,958 | 96.3 | % | 1,097 | ||||||||||||||||||||||
|
New York, NY
|
4 | 1,916 | 14.5 | % | 1,171,983 | 241,094 | 611,682 | 96.4 | % | 761 | ||||||||||||||||||||||
|
Other Mid-Atlantic
|
3 | 844 | 0.8 | % | 61,393 | — | 72,741 | 95.9 | % | 963 | ||||||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||||||
|
Tampa, FL
|
11 | 3,804 | 4.2 | % | 336,859 | 20,561 | 88,554 | 95.5 | % | 963 | ||||||||||||||||||||||
|
Orlando, FL
|
11 | 3,167 | 3.4 | % | 274,931 | 85,999 | 86,811 | 95.0 | % | 978 | ||||||||||||||||||||||
|
Nashville, TN
|
8 | 2,260 | 2.3 | % | 182,764 | 24,591 | 80,869 | 96.3 | % | 933 | ||||||||||||||||||||||
|
Jacksonville, FL
|
5 | 1,857 | 2.0 | % | 159,213 | — | 85,737 | 94.5 | % | 913 | ||||||||||||||||||||||
|
Other Florida
|
4 | 1,184 | 1.4 | % | 113,640 | 40,133 | 95,980 | 93.7 | % | 1,035 | ||||||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||||||
|
Dallas, TX
|
10 | 3,581 | 5.1 | % | 415,779 | 98,273 | 116,107 | 95.5 | % | 889 | ||||||||||||||||||||||
|
Phoenix, AZ
|
6 | 1,744 | 2.1 | % | 171,782 | 31,695 | 98,499 | 94.6 | % | 970 | ||||||||||||||||||||||
|
Austin, TX
|
2 | 640 | 1.2 | % | 98,146 | 25,079 | 153,350 | 91.8 | % | 888 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total Operating
Communities
|
162 | 47,198 | 94.3 | % | 7,611,232 | 1,844,206 | $ | 161,262 | 95.3 | % | 920 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Real Estate Under Development (a)
|
1 | 145 | 3.1 | % | 248,746 | 25,076 | ||||||||||||||||||||||||||
|
Land
|
— | — | 1.6 | % | 125,824 | — | ||||||||||||||||||||||||||
|
Other
|
— | — | 1.0 | % | 88,669 | 22,271 | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total Real Estate Owned
|
163 | 47,343 | 100.0 | % | $ | 8,074,471 | $ | 1,891,553 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| (a) | The Company is currently developing seven wholly-owned communities with 2,108 apartment homes, 145 of which have been completed. |
29
Table of Contents
SUMMARY OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT DECEMBER 31, 2011
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
|
11 | 3,899 | 17.3 | % | $ | 725,615 | $ | 336,153 | $ | 186,103 | 94.9 | % | 812 | |||||||||||||||||||
|
San Francisco, CA
|
9 | 2,185 | 12.9 | % | 543,953 | 105,236 | 248,949 | 94.0 | % | 809 | ||||||||||||||||||||||
|
Los Angeles, CA
|
3 | 463 | 3.0 | % | 125,104 | 8,663 | 270,201 | 95.4 | % | 960 | ||||||||||||||||||||||
|
Seattle, WA
|
5 | 932 | 4.9 | % | 208,097 | 32,044 | 223,280 | 96.1 | % | 865 | ||||||||||||||||||||||
|
San Diego, CA
|
2 | 366 | 1.3 | % | 55,679 | — | 152,131 | 94.8 | % | 865 | ||||||||||||||||||||||
|
Monterey Peninsula, CA
|
7 | 1,565 | 3.7 | % | 154,030 | — | 98,422 | 93.8 | % | 724 | ||||||||||||||||||||||
|
Inland Empire, CA
|
1 | 414 | 1.7 | % | 69,584 | 54,308 | 168,077 | 94.8 | % | 989 | ||||||||||||||||||||||
|
Sacramento, CA
|
2 | 914 | 1.6 | % | 69,058 | — | 75,556 | 93.1 | % | 820 | ||||||||||||||||||||||
|
Portland, OR
|
3 | 716 | 1.7 | % | 70,383 | 41,934 | 98,300 | 95.5 | % | 918 | ||||||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||||||
|
Metropolitan DC
|
8 | 2,565 | 13.8 | % | 582,283 | 98,452 | 227,011 | 95.6 | % | 948 | ||||||||||||||||||||||
|
Baltimore, MD
|
5 | 994 | 3.5 | % | 147,209 | 83,682 | 148,098 | 95.6 | % | 971 | ||||||||||||||||||||||
|
Boston, MA
|
2 | 833 | 4.1 | % | 172,991 | 60,702 | 207,672 | 96.1 | % | 1,120 | ||||||||||||||||||||||
|
New York, NY
|
2 | 1,000 | 13.9 | % | 586,529 | 205,526 | 586,529 | 95.6 | % | 687 | ||||||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||||||
|
Tampa, FL
|
3 | 1,154 | 2.6 | % | 111,019 | — | 96,203 | 96.0 | % | 1,029 | ||||||||||||||||||||||
|
Nashville, TN
|
6 | 1,612 | 3.1 | % | 128,836 | — | 79,923 | 96.3 | % | 925 | ||||||||||||||||||||||
|
Jacksonville, FL
|
1 | 400 | 1.0 | % | 42,692 | — | 106,730 | 94.3 | % | 964 | ||||||||||||||||||||||
|
Other Florida
|
1 | 636 | 1.8 | % | 77,499 | 40,133 | 121,854 | 93.2 | % | 1,130 | ||||||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||||||
|
Dallas, TX
|
2 | 1,348 | 4.4 | % | 184,158 | 91,117 | 136,616 | 95.8 | % | 909 | ||||||||||||||||||||||
|
Phoenix, AZ
|
3 | 914 | 1.7 | % | 72,919 | 31,695 | 79,781 | 95.0 | % | 1,000 | ||||||||||||||||||||||
|
Austin, TX
|
1 | 250 | 0.9 | % | 37,631 | — | 150,512 | 85.5 | % | 883 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total Operating
Communities
|
77 | 23,160 | 98.9 | % | 4,165,269 | 1,189,645 | 179,848 | 95.0 | % | 890 | ||||||||||||||||||||||
|
Land and other
|
— | — | 1.1 | % | 40,029 | — | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total Real Estate Owned
|
77 | 23,160 | 100.0 | % | $ | 4,205,298 | $ | 1,189,645 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
30
Table of Contents
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.
Not Applicable.
31
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, or “NYSE”, under the
symbol “UDR” since May 7, 1990. The following tables set forth the quarterly high and low sale
prices per common share reported on the NYSE for each quarter of the last two fiscal years.
Distribution information for common stock reflects distributions declared per share for each
calendar quarter and paid at the end of the following month.
| 2011 | 2010 | |||||||||||||||||||||||
| Distributions | Distributions | |||||||||||||||||||||||
| High | Low | Declared | High | Low | Declared | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Quarter ended March 31,
|
$ | 24.42 | $ | 22.19 | $ | 0.185 | $ | 18.26 | $ | 14.47 | $ | 0.180 | ||||||||||||
|
|
||||||||||||||||||||||||
|
Quarter ended June 30,
|
$ | 26.46 | $ | 23.42 | $ | 0.200 | $ | 21.82 | $ | 17.57 | $ | 0.180 | ||||||||||||
|
|
||||||||||||||||||||||||
|
Quarter ended
September 30,
|
$ | 27.26 | $ | 21.18 | $ | 0.200 | $ | 22.26 | $ | 17.93 | $ | 0.185 | ||||||||||||
|
|
||||||||||||||||||||||||
|
Quarter ended December
31,
|
$ | 25.67 | $ | 20.04 | $ | 0.215 | $ | 24.10 | $ | 20.99 | $ | 0.185 | ||||||||||||
On
February 17, 2012, the closing sale price of our common stock
was $25.73 per share on the
NYSE and there were
5,563
holders of record of the
223,340,334
outstanding shares of our common stock.
We have determined that, for federal income tax purposes, approximately 64% of the
distributions for 2011 represented ordinary income, 10% represented long-term capital gain, and 26%
represented unrecaptured section 1250 gain.
UDR pays regular quarterly distributions to holders of its common stock. Future distributions
will be at the discretion of our Board of Directors and will depend on our actual funds from
operations, financial condition and capital requirements, the annual distribution requirements
under the REIT provisions of the Code, and other factors.
Series E Preferred Stock
The Series E Cumulative Convertible Preferred Stock (“Series E”) has no stated par value and a
liquidation preference of $16.61 per share. Subject to certain adjustments and conditions, each
share of the Series E is convertible at any time and from time to time at the holder’s option into
1.083 shares of our common stock. The holders of the Series E are entitled to vote on an
as-converted basis as a single class in combination with the holders of common stock at any meeting
of our stockholders for the election of directors or for any other purpose on which the holders of
common stock are entitled to vote. The Series E has no stated maturity and is not subject to any
sinking fund or any mandatory redemption. In connection with a special dividend (declared on
November 5, 2008), the Company reserved for issuance upon conversion of the Series E additional
shares of common stock to which a holder of the Series E would have received if the holder had
converted the Series E immediately prior to the record date for this special dividend.
Distributions declared on the Series E for the year ended December 31, 2011 were $1.33 per
share or $0.3322 per quarter. The Series E is not listed on any exchange. At December 31, 2011, a
total of 2,803,812 shares of the Series E were outstanding.
32
Table of Contents
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, 2011, a total of 2,534,846 shares of the Series F were
outstanding at a value of $253. 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, 2011, the Company repurchased 141,200 shares of
Series G, for less than the liquidation preference of $25 per share resulting in a loss of $175,000
to our net income attributable to common stockholders. Distributions declared on the Series G for
the year ended December 31, 2011 was $1.69 per share. The Series G is listed on the NYSE under the
symbol “UDRPrG”. At December 31, 2011, a total of 3,264,362 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 and when declared. As of February 17, 2012, there were
approximately
2,607
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, 2011, there were 184,281,253
OP Units outstanding in the Operating Partnership, of which 174,859,951 OP Units or 94.9% were
owned by UDR and 9,421,302 OP Units or 5.1% 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
2011, we issued a total of 12,511 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, 2011.
33
Table of Contents
The following table set forth certain information regarding our common stock repurchases
during the quarter ended December 31, 2011.
| Total Number of Shares | Maximum Number of | |||||||||||||||
| Total Number | Average | Purchased as Part | Shares that May Yet Be | |||||||||||||
| of Shares | Price per | of Publicly Announced | Purchased Under the | |||||||||||||
| Period | Purchased | Share | Plans or Programs | Plans or Programs (1) | ||||||||||||
|
|
||||||||||||||||
|
Beginning Balance
|
9,967,490 | $ | 22.00 | 9,967,490 | 15,032,510 | |||||||||||
|
|
||||||||||||||||
|
October 1, 2011 through October 31, 2011
|
— | — | — | 15,032,510 | ||||||||||||
|
November 1, 2011 through November 30,
2011
|
— | — | — | 15,032,510 | ||||||||||||
|
December 1, 2011 through December 31,
2011
|
— | — | — | 15,032,510 | ||||||||||||
|
|
||||||||||||||||
|
Balance as of December 31, 2011
|
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. |
Comparison of Five- year Cumulative Total Returns
The following graph compares the five-year cumulative total returns for UDR common stock with
the comparable cumulative return of the NAREIT Equity REIT Index, Standard & Poor’s 500 Stock
Index, the NAREIT Equity Apartment Index and the MSCI US REIT Index. 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 comparison assumes that all dividends are reinvested.
| Period Ending | ||||||||||||||||||||||||
| Index | 12/31/06 | 12/31/07 | 12/31/08 | 12/31/09 | 12/31/10 | 12/31/11 | ||||||||||||||||||
|
UDR, Inc.
|
100.00 | 65.38 | 53.19 | 67.84 | 100.87 | 111.19 | ||||||||||||||||||
|
NAREIT Equity Appartment Index
|
100.00 | 74.57 | 55.83 | 72.81 | 107.05 | 123.22 | ||||||||||||||||||
|
US MSCI REITS
|
100.00 | 83.18 | 51.60 | 66.36 | 85.26 | 92.67 | ||||||||||||||||||
|
S&P 500
|
100.00 | 105.49 | 66.46 | 84.05 | 96.71 | 98.76 | ||||||||||||||||||
|
NAREIT Equity REIT Index
|
100.00 | 84.31 | 52.50 | 67.20 | 85.98 | 93.11 | ||||||||||||||||||
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
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, 2011. 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) | ||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
|
OPERATING DATA:
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Rental income (a)
|
$ | 691,263 | $ | 574,084 | $ | 547,820 | $ | 512,683 | $ | 458,159 | ||||||||||
|
(Loss)/income from continuing operations (a)
|
(111,636 | ) | (115,804 | ) | (97,480 | ) | (66,536 | ) | 40,008 | |||||||||||
|
Income from discontinued operations (a)
|
132,221 | 9,216 | 5,857 | 810,403 | 186,722 | |||||||||||||||
|
Consolidated net income/(loss)
|
20,585 | (106,588 | ) | (91,623 | ) | 743,867 | 226,730 | |||||||||||||
|
Distributions to preferred stockholders
|
9,311 | 9,488 | 10,912 | 12,138 | 13,910 | |||||||||||||||
|
Net income/(loss) attributable to common
stockholders
|
10,537 | (112,362 | ) | (95,858 | ) | 688,708 | 198,958 | |||||||||||||
|
Common distributions declared
|
165,590 | 126,086 | 127,066 | 308,313 | 177,540 | |||||||||||||||
|
Special Dividend declared
|
— | — | — | 177,074 | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Earnings per share — basic and diluted:
|
||||||||||||||||||||
|
(Loss)/income from continuing operations
attributable to common stockholders
|
$ | (0.60 | ) | $ | (0.73 | ) | $ | (0.68 | ) | $ | (0.93 | ) | $ | 0.09 | ||||||
|
Income from discontinued operations (a)
|
0.66 | 0.06 | 0.04 | 6.22 | 1.39 | |||||||||||||||
|
Net income/(loss) attributable to common
stockholders
|
0.05 | (0.68 | ) | (0.64 | ) | 5.29 | 1.48 | |||||||||||||
|
Weighted average number of Common
Shares outstanding — basic and diluted
|
201,294 | 165,857 | 149,090 | 130,219 | 134,016 | |||||||||||||||
|
Weighted average number of Common
Shares outstanding, OP Units and Common Stock equivalents outstanding —
diluted (b)
|
214,086 | 176,900 | 159,561 | 142,904 | 147,199 | |||||||||||||||
|
|
||||||||||||||||||||
|
Common distributions declared
|
$ | 0.80 | $ | 0.73 | $ | 0.85 | $ | 2.29 | $ | 1.22 | ||||||||||
|
|
||||||||||||||||||||
|
Balance Sheet Data:
|
||||||||||||||||||||
|
Real estate owned, at cost (c)
|
$ | 8,074,471 | $ | 6,881,347 | $ | 6,315,047 | $ | 5,831,753 | $ | 5,956,481 | ||||||||||
|
Accumulated depreciation (c)
|
1,831,727 | 1,638,326 | 1,351,293 | 1,078,689 | 1,371,759 | |||||||||||||||
|
Total real estate owned, net of accumulated
depreciation (c)
|
6,242,744 | 5,243,021 | 4,963,754 | 4,753,064 | 4,584,722 | |||||||||||||||
|
Total assets
|
6,721,354 | 5,529,540 | 5,132,617 | 5,143,805 | 4,800,454 | |||||||||||||||
|
Secured debt (c)
|
1,891,553 | 1,963,670 | 1,989,434 | 1,462,471 | 1,137,936 | |||||||||||||||
|
Unsecured debt
|
2,026,817 | 1,603,834 | 1,437,155 | 1,798,662 | 2,341,895 | |||||||||||||||
|
Total debt
|
3,918,370 | 3,567,504 | 3,426,589 | 3,261,133 | 3,479,831 | |||||||||||||||
|
Stockholders’ equity
|
2,314,050 | 1,606,343 | 1,395,441 | 1,415,989 | 941,205 | |||||||||||||||
|
Number of Common Shares outstanding
|
219,650 | 182,496 | 155,465 | 137,423 | 133,318 | |||||||||||||||
35
Table of Contents
| UDR, Inc. | ||||||||||||||||||||
| Years Ended December 31, | ||||||||||||||||||||
| (In thousands, except per share data | ||||||||||||||||||||
| and apartment homes owned) | ||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
|
|
||||||||||||||||||||
|
OPERATING DATA (continued):
|
||||||||||||||||||||
|
Other Data (c)
|
||||||||||||||||||||
|
Total apartments owned (at end of year)
|
47,343 | 48,553 | 45,913 | 44,388 | 65,867 | |||||||||||||||
|
Weighted average number of apartment
homes owned during
the year
|
48,531 | 48,531 | 45,113 | 46,149 | 69,662 | |||||||||||||||
|
|
||||||||||||||||||||
|
Cash Flow Data:
|
||||||||||||||||||||
|
Cash provided by operating activities
|
$ | 244,236 | $ | 214,180 | $ | 229,383 | $ | 179,754 | $ | 269,281 | ||||||||||
|
Cash (used in)/provided by investing activities
|
(1,053,182 | ) | (583,754 | ) | (158,045 | ) | 302,304 | (90,100 | ) | |||||||||||
|
Cash provided by/(used in) financing activities
|
811,963 | 373,075 | (78,093 | ) | (472,537 | ) | (178,105 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Funds from Operations (b):
|
||||||||||||||||||||
|
Funds from operations — basic
|
$ | 269,856 | $ | 189,045 | $ | 180,858 | $ | 204,213 | $ | 238,722 | ||||||||||
|
Funds from operations — diluted
|
273,580 | 192,771 | 184,582 | 207,937 | 242,446 | |||||||||||||||
| (a) | Reclassified to conform to current year presentation in accordance with ACS Topic 205-20, Presentation of Financial Statements — Discontinued Operations , as described in Note 4 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 impairment write-downs of depreciable real estate or of investments in non-consolidated investees that are driven by measurable decreases in the fair value of depreciable real estate held by the investee, gains (or losses) from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust’s definition issued in April 2002. We consider FFO 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, and land entitlement. 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. To determine whether gains from RE 3 will be included in FFO, the Company considers whether the operating asset has been a short term investment. 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. | ||
| See “Funds from Operations” below for a reconciliation of FFO and Net income/(loss) attributable to UDR, Inc. | ||
| (c) | Includes amounts classified as Held for Sale, where applicable. |
36
Table of Contents
United Dominion Realty, L.P.
Years Ended December 31,
(In thousands, except per OP unit data
and apartment homes owned)
Years Ended December 31,
(In thousands, except per OP unit data
and apartment homes owned)
| 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
|
OPERATING DATA:
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Rental income (a)
|
$ | 367,245 | $ | 319,089 | $ | 322,456 | $ | 305,016 | $ | 266,387 | ||||||||||
|
(Loss)/income from continuing operations (a)
|
(34,038 | ) | (25,658 | ) | (7,160 | ) | 8,045 | 114,467 | ||||||||||||
|
Income from discontinued operations
|
64,267 | 4,964 | 3,115 | 490,863 | 79,963 | |||||||||||||||
|
Consolidated net income/(loss)
|
30,229 | (20,694 | ) | (4,045 | ) | 498,908 | 194,430 | |||||||||||||
|
Net income/(loss) attributable to OP unitholders
|
30,159 | (20,735 | ) | (4,176 | ) | 497,720 | 193,688 | |||||||||||||
|
|
||||||||||||||||||||
|
Earnings per OP unit- basic and diluted:
|
||||||||||||||||||||
|
(Loss)/income from continuing operations (a)
|
$ | (0.19 | ) | $ | (0.14 | ) | $ | (0.04 | ) | $ | 0.05 | $ | 0.69 | |||||||
|
Income from discontinued operations
|
0.35 | 0.03 | 0.02 | 2.95 | 0.48 | |||||||||||||||
|
Net income/(loss) attributable to OP unitholders
|
0.17 | (0.12 | ) | (0.02 | ) | 3.00 | 1.17 | |||||||||||||
|
|
||||||||||||||||||||
|
Weighted average number of OP units
outstanding — basic and
diluted
|
182,448 | 179,909 | 178,817 | 166,163 | 166,174 | |||||||||||||||
|
|
||||||||||||||||||||
|
Balance Sheet Data:
|
||||||||||||||||||||
|
Real estate owned, at cost (b)
|
$ | 4,205,298 | $ | 3,706,184 | $ | 3,640,888 | $ | 3,569,239 | 2,685,249 | |||||||||||
|
Accumulated depreciation (b)
|
976,358 | 884,083 | 717,892 | 552,369 | 403,092 | |||||||||||||||
|
Total real estate owned, net of accumulated
depreciation (b)
|
3,228,940 | 2,822,101 | 2,922,996 | 3,016,870 | 2,282,157 | |||||||||||||||
|
Total assets
|
3,292,167 | 2,861,395 | 2,961,067 | 3,254,851 | 2,909,707 | |||||||||||||||
|
Secured debt (b)
|
1,189,645 | 1,070,061 | 1,122,198 | 851,901 | 594,845 | |||||||||||||||
|
Total liabilities
|
1,437,665 | 1,299,772 | 1,339,319 | 1,272,101 | 920,698 | |||||||||||||||
|
Total partners’ capital
|
2,034,792 | 2,042,241 | 2,197,753 | 2,345,825 | 2,232,404 | |||||||||||||||
|
Receivable due from General Partner
|
192,451 | 492,709 | 588,185 | 375,124 | 254,256 | |||||||||||||||
|
Number of OP units outstanding
|
184,281 | 179,909 | 179,909 | 166,163 | 166,163 | |||||||||||||||
|
|
||||||||||||||||||||
|
Other Data:
|
||||||||||||||||||||
|
Total apartments owned (at end of year) (b)
|
23,160 | 23,351 | 23,351 | 23,351 | 36,965 | |||||||||||||||
|
|
||||||||||||||||||||
|
Cash Flow Data:
|
||||||||||||||||||||
|
Cash provided by operating activities
|
$ | 156,071 | $ | 146,604 | $ | 157,333 | $ | 168,660 | $ | 212,727 | ||||||||||
|
Cash (used in)/provided by investing activities
|
(226,980 | ) | (59,458 | ) | 129,628 | 81,993 | 75,069 | |||||||||||||
|
Cash provided by/(used in) financing activities
|
70,693 | (86,668 | ) | (290,109 | ) | (247,150 | ) | (287,847 | ) | |||||||||||
| (a) | Reclassified to conform to current year presentation in accordance with ASC Topic 205-20, Presentation of Financial Statements — Discontinued Operations, as described in Note 4 to the Consolidated Financial Statements included in this Report. | |
| (b) | Includes amounts classified as Held for Sale, where applicable. |
37
Table of Contents
| Item 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Forward-Looking Statements
This Report contains forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements
include, without limitation, statements concerning property acquisitions and dispositions,
development activity and capital expenditures, capital raising activities, rent growth, occupancy,
and rental expense growth. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,”
“will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are
intended to identify such forward-looking statements. Such statements involve known and unknown
risks, uncertainties and other factors which may cause our actual results, performance or
achievements to be materially different from the results of operations or plans expressed or
implied by such forward-looking statements. Such factors include, among other things, unfavorable
changes in the apartment market, changing economic conditions, the impact of inflation/deflation on
rental rates and property operating expenses, expectations concerning availability of capital and
the stabilization of the capital markets, the impact of competition and competitive pricing,
acquisitions, developments and redevelopments not achieving anticipated results, delays in
completing developments, redevelopments and lease-ups on schedule, expectations on job growth, home
affordability and demand/supply ratio for multifamily housing, expectations concerning development
and redevelopment activities, and expectations on occupancy levels.
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. |
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Table of Contents
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 accompanying notes for the years ended December 31, 2011, 2010 and 2009 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 an operating partnership
United Dominion Realty, L.P., a Delaware limited partnership.
At December 31, 2011, our consolidated real estate portfolio included 163 communities located
in 22 markets with a total of 47,343 completed apartment homes and our total real estate portfolio,
inclusive of our unconsolidated communities, included an additional 39 communities with 10,400
completed apartment homes.
At
December 31, 2011, the Company is developing seven wholly-owned
communities with 2,108 apartment homes, 145 of which have been
completed.
At
December 31, 2011, the Company is redeveloping seven wholly-owned
communities with 3,123 apartment homes, 467 of which have been
completed.
39
Table of Contents
The following table summarizes our market information by major geographic markets as of
December 31, 2011.
| Twelve Months Ended | ||||||||||||||||||||||||||||
| As of December 31, 2011 | December 31, 2011 | |||||||||||||||||||||||||||
| Percentage | Total | |||||||||||||||||||||||||||
| Number of | Number of | of Total | Carrying | Average | Total Income | Net Operating | ||||||||||||||||||||||
| Apartment | Apartment | Carrying | Value | Physical | per Occupied | Income | ||||||||||||||||||||||
| SAME COMMUNITIES | Communities | Homes | Value | (in thousands) | Occupancy | Home (a) | (in thousands) | |||||||||||||||||||||
|
WESTERN REGION
|
||||||||||||||||||||||||||||
|
Orange County, CA
|
9 | 3,025 | 6.5 | % | $ | 524,771 | 94.8 | % | $ | 1,499 | $ | 36,546 | ||||||||||||||||
|
Seattle, WA
|
9 | 1,725 | 3.8 | % | 306,295 | 95.5 | % | 1,241 | 16,746 | |||||||||||||||||||
|
Monterey Peninsula, CA
|
7 | 1,565 | 1.9 | % | 154,030 | 93.8 | % | 1,110 | 13,305 | |||||||||||||||||||
|
San Francisco, CA
|
7 | 1,477 | 4.5 | % | 364,336 | 96.7 | % | 2,133 | 26,940 | |||||||||||||||||||
|
Los Angeles, CA
|
5 | 919 | 3.6 | % | 293,198 | 95.6 | % | 1,932 | 13,376 | |||||||||||||||||||
|
Sacramento, CA
|
2 | 914 | 0.9 | % | 69,058 | 93.1 | % | 882 | 5,973 | |||||||||||||||||||
|
Portland, OR
|
3 | 716 | 0.9 | % | 70,383 | 95.5 | % | 998 | 5,570 | |||||||||||||||||||
|
Inland Empire, CA
|
2 | 654 | 1.3 | % | 100,946 | 94.9 | % | 1,379 | 7,061 | |||||||||||||||||||
|
San Diego, CA
|
2 | 366 | 0.7 | % | 55,679 | 94.8 | % | 1,365 | 3,775 | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||
|
Metropolitan DC
|
10 | 3,516 | 8.2 | % | 665,877 | 96.9 | % | 1,669 | 46,108 | |||||||||||||||||||
|
Richmond, VA
|
6 | 2,211 | 2.3 | % | 189,470 | 95.9 | % | 1,055 | 19,251 | |||||||||||||||||||
|
Baltimore, MD
|
10 | 2,121 | 3.2 | % | 254,844 | 96.5 | % | 1,316 | 22,759 | |||||||||||||||||||
|
Norfolk VA
|
6 | 1,438 | 1.1 | % | 86,194 | 94.7 | % | 980 | 10,865 | |||||||||||||||||||
|
Other Mid-Atlantic
|
3 | 844 | 0.8 | % | 61,393 | 95.9 | % | 1,079 | 7,410 | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||
|
Tampa, FL
|
11 | 3,804 | 4.2 | % | 336,859 | 95.5 | % | 980 | 26,309 | |||||||||||||||||||
|
Orlando, FL
|
10 | 2,796 | 2.8 | % | 224,069 | 94.9 | % | 916 | 18,884 | |||||||||||||||||||
|
Nashville, TN
|
8 | 2,260 | 2.3 | % | 182,764 | 96.3 | % | 894 | 14,878 | |||||||||||||||||||
|
Jacksonville, FL
|
5 | 1,857 | 2.0 | % | 159,213 | 94.5 | % | 846 | 11,083 | |||||||||||||||||||
|
Other Florida
|
4 | 1,184 | 1.4 | % | 113,640 | 93.7 | % | 1,016 | 8,215 | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||
|
Dallas, TX
|
8 | 2,725 | 3.5 | % | 282,940 | 96.1 | % | 952 | 17,341 | |||||||||||||||||||
|
Phoenix, AZ
|
5 | 1,362 | 1.5 | % | 122,434 | 94.9 | % | 900 | 9,076 | |||||||||||||||||||
|
Austin, TX
|
1 | 390 | 0.7 | % | 60,517 | 95.8 | % | 1,195 | 2,978 | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total/Average Same
Communities
|
133 | 37,869 | 58.1 | % | 4,678,910 | 95.5 | % | $ | 1,188 | $ | 344,449 | |||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Non Matures, Commercial
Properties & Other
|
29 | 9,329 | 39.3 | % | 3,146,815 | |||||||||||||||||||||||
|
Total Real Estate Held for
Invertment
|
162 | 47,198 | 97.4 | % | 7,825,725 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Real Estate Under
Development (b)
|
1 | 145 | 2.6 | % | 248,746 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Real Estate Owned
|
163 | 47,343 | 100.0 | % | 8,074,471 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Accumulated Depreciation
|
(1,831,727 | ) | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Real Estate Owned, Net
of Accumulated
Depreciation
|
$ | 6,242,744 | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| (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 seven wholly-owned communities with 2,108 apartment homes, 145 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, 2010, and held as of December 31, 2011. 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 sale within the current
quarter. 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 2009, 2010, and 2011, sold properties, redevelopment
properties, properties classified as real estate held for sale, condominium conversion properties,
joint venture properties, properties managed by third parties, and the non-apartment components of
mixed use properties.
40
Table of Contents
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.
In September 2009, the Company entered into an equity distribution agreement under which the
Company may offer and sell up to 15.0 million shares of its common stock over time to or through
its sales agents. During the year ended December 31, 2011, we sold 4,395,601 shares of common stock
through this program for aggregate gross proceeds of approximately $104.5 million at a weighted
average price per share of $23.78. Aggregate net proceeds from such sales, after deducting related
expenses, including commissions paid to the sales agents of approximately $2.1 million, were
approximately $102.4 million.
In March 2011, the Company entered into a new equity distribution agreement under which the
Company may offer and sell up to 20.0 million shares of its common stock over time to or through
its sales agents. During the year ended December 31, 2011, we sold 11,849,079 shares of common
stock through this program (of which 419,048 shares were settled subsequent to December 31, 2011)
for aggregate gross proceeds of approximately $297.7 million at a weighted average price per share
of $25.12. Aggregate net proceeds from such sales, after deducting related expenses, including
commissions paid to the sales agents of approximately $6.0 million, were approximately $291.7
million. In September 2011, the Company entered into a new equity distribution agreement in
connection with filing a new registration statement on Form S-3. The new equity distribution
agreement replaced the March 2011 agreement, and no material changes were made to the equity
distribution agreement.
In May 2011, the Company issued $300 million aggregate principal amount of 4.250% senior
unsecured notes due June 2018 under its existing shelf registration statement. Interest is payable
semiannually beginning in December 2011. The notes were priced at 98.988 % of the principal amount
plus accrued interest from May 23, 2011 to yield 4.419% to maturity. The notes are fully and
unconditionally guaranteed by the Operating Partnership.
In July 2011, the Company closed a public offering of 20,700,000 shares of its common stock,
including 2,700,000 shares sold as a result of the underwriters’ exercise of their overallotment
option in full at the closing, at a price of $25.00 per share, for net proceeds of approximately
$496.3 million after underwriting discounts and commissions and estimated offering expenses.
In October 2011, the Company entered into a $900 million unsecured revolving credit facility,
replacing the Company’s $600 million credit facility. The Operating Partnership issued a guarantee
in connection with the new credit facility, similar to the guarantee it issued under the prior
facility. The new facility has an initial term of four years and includes a one-year extension
option, and contains an accordion feature that allows the Company to increase the facility to $1.35
billion. Based on the Company’s current credit ratings, the credit facility carries an interest
rate equal to LIBOR plus a spread of 122.5 basis points and a facility fee of 22.5 basis points.
As of December 31, 2011, we had $421.0 million of borrowings outstanding under the credit facility leaving $479.0 million of
unused capacity (excluding $3.6 million of letters of credit at December 31, 2011).
41
Table of Contents
In January 2012, the Company issued $400 million aggregate principal amount of 4.625% Medium
Term Notes due January 2022. Interest is payable semiannually beginning in July 2012. The notes
were priced at 99.100% of the principal amount plus accrued interest from January 10, 2012 to yield
4.739% to maturity. The notes are fully and unconditionally guaranteed by the Operating
Partnership.
Future Capital Needs
Future development expenditures are expected to be funded through 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 may be funded through joint ventures, by the reinvestment of proceeds from the
sale of properties, through the issuance of equity or debt securities, the issuance of operating
partnership units, and the assumption or placement of secured and/or unsecured debt.
During 2012, we have approximately $207.8 million of secured debt maturing, inclusive of
principal amortization and net of extension rights of $99.0 million, and $99.4 million of unsecured
debt maturing. We anticipate repaying that debt with proceeds from our operations, debt and equity
offerings, proceeds from the sales of properties, 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 2011, $51.9 million or $1,081 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 $30.0 million for the year ended December 31,
2011. Total capital expenditures, which in aggregate include recurring capital expenditures and
major renovations, of $81.9 million or $1,706 per home was spent on all of our communities,
excluding development and commercial properties, for the year ended December 31, 2011.
42
Table of Contents
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 | ||||||||||||||||||||||||
| 2011 | 2010 | % Change | 2011 | 2010 | % Change | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Revenue enhancing improvements
|
$ | 7,330 | $ | 15,043 | -51.3 | % | $ | 153 | $ | 334 | -54.2 | % | ||||||||||||
|
Turnover capital expenditures
|
12,905 | 9,528 | 35.4 | % | 269 | 212 | 26.9 | % | ||||||||||||||||
|
Asset preservation expenditures
|
31,658 | 22,538 | 40.5 | % | 659 | 501 | 31.6 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total recurring capital
expenditures
|
51,893 | 47,109 | 10.2 | % | 1,081 | 1,047 | 3.2 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Major renovations
|
29,992 | 30,816 | -2.7 | % | 625 | 685 | -8.8 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total capital expenditures
|
$ | 81,885 | $ | 77,925 | 5.1 | % | $ | 1,706 | $ | 1,732 | -1.5 | % | ||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Repair and maintenance expense
|
$ | 37,855 | $ | 33,224 | 13.9 | % | $ | 789 | $ | 738 | 6.9 | % | ||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Average stabilized home count
|
48,005 | 44,999 | ||||||||||||||||||||||
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 2012 are currently expected to be approximately $1,150 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 record the fair value to
various components, such as land, buildings, and intangibles related to in-place leases, based on
the fair value of each component. The fair value of buildings is determined as if the buildings
were vacant upon acquisition and subsequently leased at market rental rates. As such, the
determination of fair value considers the present value of all cash flows expected to be generated
from the property including an initial lease-up period. We determine the fair value of in-place
leases by assessing the net effective rent and remaining term of the lease relative to market terms
for similar leases at acquisition. In addition, we consider the cost of acquiring similar leases,
the foregone rents associated with the lease-up period, and the carrying costs associated with the
lease-up period. The fair value of in-place leases is recorded and amortized as amortization
expense over the remaining average contractual lease period.
43
Table of Contents
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, 2011 in
our Consolidated Statements of Operations we would have incurred immaterial federal and state GAAP
income taxes if we had failed to qualify as a REIT.
The following discussion explains the changes in net cash provided by operating activities,
net cash used in investing, and net cash provided by/(used in) financing activities that are
presented in our Consolidated Statements of Cash Flows.
Operating Activities
For the year ended December 31, 2011, our net cash flow provided by operating activities was
$244.2 million compared to $214.2 million for 2010. The increase in cash flow from operating
activities is primarily due to an increase in property net operating income from our apartment
community portfolio, which was partially offset by the increase in operating assets and a decrease
in operating liabilities.
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 and operating
liabilities, which include accrued restructuring and severance charges. This decrease is partially
offset by an increase in property net operating income.
Investing Activities
For the year ended December 31, 2011, net cash used in investing activities was $1.1 billion
compared to net cash used in investing activities of $583.8 million for 2010. 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, 2010, net cash used in investing activities was $583.8 million
compared to net cash used in investing activities of $158.0 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.
44
Table of Contents
Acquisitions
The following table summarizes UDR’s real estate community acquisitions for the year ended
December 31, 2011
(dollar amounts in thousands)
:
| Purchase | ||||||||||||
| Property Name | Market | Acquisition Date | Units | Price (a) | ||||||||
|
|
||||||||||||
|
10 Hanover Square
|
New York, NY | April 2011 | 493 | $ | 259,750 | |||||||
|
388 Beale
|
San Francisco, CA | April 2011 | 227 | 90,500 | ||||||||
|
14 North
|
Boston, MA | April 2011 | 387 | 64,500 | ||||||||
|
Inwood West
|
Boston, MA | April 2011 | 446 | 108,000 | ||||||||
|
View 14
|
Metropolitan D.C. | June 2011 | 185 | 105,538 | ||||||||
|
Rivergate
|
New York, NY | July 2011 | 706 | 443,403 | ||||||||
|
21 Chelsea
|
New York, NY | August 2011 | 210 | 138,930 | ||||||||
|
95 Wall
|
New York, NY | August 2011 | 507 | 328,914 | ||||||||
|
|
||||||||||||
|
|
3,161 | $ | 1,539,535 | |||||||||
|
|
||||||||||||
During the year ended December 31, 2011, the Company also acquired three parcels of land
located in Huntington Beach, California; Addison, Texas; and Boston, Massachusetts for a gross
purchase price of $34.3 million.
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 the New York, New York; San Francisco, California; Boston,
Massachusetts; and Metropolitan D.C. markets over the past years. Prospectively, we plan to channel
new investments into those markets we believe will provide the best investment returns. Markets
will be targeted based upon defined criteria including above average job growth, low single-family
home affordability and limited new supply for multifamily housing-three key drivers to strong
rental growth.
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 $412.0 million. During the same period, the
Company also acquired land located in San Francisco, California for a gross purchase price of $23.6
million.
Real
Estate Under Development and Redevelopment
At
December 31, 2011, our development pipeline for wholly-owned communities totaled 2,108
apartment homes with a budget of $674.3 million in which we have a carrying value of $248.7
million. We anticipate the completion of these communities from the first quarter of 2012 through
the fourth quarter of 2013.
At
December 31, 2011, the Company is redeveloping seven wholly-owned
communities with 3,123 apartment homes, 467 of which have been
completed.
For
the year ended December 31, 2011, we invested approximately $98.7 million in development and redevelopment
projects, an increase of $6.6 million from our 2010 level of $92.1 million.
Consolidated Joint Ventures
In August 2011, the Company invested in a joint venture with an unaffiliated third party to
acquire and redevelop an existing commercial property into a 173 apartment home community in Orange
County, California. At closing the Company contributed $9.0 million and at December 31, 2011, UDR
owned a 90% controlling interest in the investment. Under the terms of the operating agreement, our
partner is required to achieve certain criteria as it relates to the entitlement process. If the
criteria are met on or before 730 days after the site plan application is deemed complete by the
city, the Company is obligated to contribute an additional $3.0 million to the joint venture for
distribution to our partner. At the acquisition date, the Company accrued and capitalized $3.0
million related to the contingent consideration, which represents the difference between fair value
of the property of $9.8 million on the formation date and the estimated fair value of the
underlying property upon completion of the entitlement process of $12.8 million. The Company
estimated the fair value based in part on a third party valuation
that utilized Level 3 inputs.
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During the year ended December 31, 2011, the Company paid $450,000 to acquire from our partner
its remaining 2% noncontrolling interests in the 989 Elements, Elements Too, and Bellevue joint
ventures. The consideration paid was in excess of the book value of the noncontrolling interest,
and is reflected as a reduction of the Company’s equity.
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 ventures.
In addition, we may earn fees for providing management services to the unconsolidated joint
ventures. As of December 31, 2011, 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 (“UDR/MetLife I”) at a cost of $100.8 million.
UDR/MetLife I owns a portfolio of 26 operating communities containing 5,748 apartment homes and 10
land parcels with the potential to develop approximately 2,000 additional apartment homes. Under
the terms of UDR/MetLife I, UDR acts as the general partner and earns fees for property and asset
management and financing transactions.
UDR has a weighted average ownership interest of 12.27% in the operating communities and 4.11%
in the land parcels. The initial investment of $100.8 million consisted of $71.8 million in cash,
which included associated transaction costs, and a $30 million payable (includes present value
discount of $1.0 million) to Hanover. UDR agreed to pay the $30.0 million balance to Hanover in two
interest free installments in the amounts of $20.0 million (paid in November 2011) and $10.0
million on the second anniversary of the closing. The $30.0 million payable was recorded at its
present value of $29.0 million using an effective interest rate of 2.67%. At December 31, 2011 and
2010, the net carrying value of the payable was $9.8 million and $29.1 million, respectively.
Interest expense of $697,000 and $129,000 was recorded during the years ended December 31, 2011 and
2010, respectively. At December 31, 2011 and 2010, the Company’s investment was $133.8 million and
$122.2 million, respectively.
UDR’s total cost of its equity investment of $100.8 million differed from the proportionate
share in the underlying net assets of UDR/MetLife I of $111.4 million. The difference of $10.6
million was attributable to certain assets and adjustments that were allocated to UDR’s
proportionate share in UDR/MetLife I’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 was 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 years ended December 31, 2011 and 2010, the
Company recorded $1.1 million and $264,000 of amortization, respectively.
On January 12, 2012, the Company formed a new real estate joint venture, UDR/MetLife II, with
MetLife wherein each party owns a 50% interest in a $1.3 billion portfolio of 12 operating
communities containing 2,528 apartment homes. The 12 communities in the joint venture include seven
from UDR/MetLife I, while the remaining five operating communities have been newly acquired by
UDR/MetLife II. The newly acquired communities, collectively known as Columbus Square, are recently
developed, high-rise apartment buildings located on the Upper West Side of Manhattan and were
purchased for $630 million.
The Company serves as the general partner for UDR/MetLife II and earns property management,
asset management and financing fees.
With the closing of UDR/MetLife II, the original joint venture between the parties,
UDR/MetLife I, now comprises 19 operating properties containing 3,930 homes as well as 10 vacant
land parcels. Historical cost of the venture now stands at $1.8 billion and the Company’s weighted
average ownership interest in the UDR/MetLife I operating assets is now 12.6 % and 4.0 % for the
land parcels in the venture.
In connection with the purchase of Hanover’s interests in UDR/MetLife I, UDR agreed to
indemnify Hanover from liabilities arising from Hanover’s guaranty of $506.0 million in loans
($51.0 million outstanding at December 31, 2011) which are secured by a security interest in the
operating communities subject to the respective loans. The loans were to the sub-tier partnerships
which own the 26 operating communities. The Company anticipates that the $51.0 million outstanding
at December 31, 2011 will be refinanced by UDR/MetLife I over the next twelve months.
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In October 2010, the Company entered into a joint venture to develop a 240-home community in
Stoughton, Massachusetts. At December 31, 2011 and 2010, UDR owned a noncontrolling interest of 95%
in the joint venture. Our initial investment was $10.0 million. Our investment at December 31, 2011
and 2010 was $17.2 million and $10.3 million, respectively.
In May 2011, the Company entered into a joint venture with to develop a 263-home community in
San Diego, California. At December 31, 2011 and at closing, UDR owned a noncontrolling interest of
95% in the joint venture. Our initial investment was $9.9 million and our investment at December
31, 2011 was $12.1 million.
In
June 2011, UDR/MetLife I sold a parcel of land to a joint
venture, in which the Company is a
partner, to develop a 256-home community in College Park, Maryland. At December 31, 2011 and at
closing, UDR owned a noncontrolling interest of 95% in the joint venture. Our initial investment
was $7.1 million and our investment at December 31, 2011 was $8.6 million.
UDR is a partner with an unaffiliated third party, which formed a joint venture for the
investment of up to $450.0 million in multifamily properties located in key, high barrier to entry
markets such as Metropolitan Washington D.C. The partners will contribute equity of $180.0 million
of which the Company’s maximum equity will be 30% or $54.0 million when fully invested. In 2010,
the joint venture acquired its first property (151 homes). During the year ended December 31,
2011, the joint venture acquired two additional properties (509 homes). At December 31, 2011 and
2010, the Company owned a 30% interest in the joint venture. Our investment at December 31, 2011
and 2010 was $34.1 million and $5.2 million, respectively.
UDR is a partner with an unaffiliated third party, 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, 2011 and 2010 was $7.1 million and $10.3 million, respectively.
Disposition of Investments
In 2011, we sold 18 apartment home communities (4,488 homes), which included six apartment
home communities (1,418 homes) sold in conjunction with an asset exchange in
April 2011, for a total sales price
of $593.4 million. UDR recognized gains for financial reporting purposes of $138.5
million, which is included in discontinued operations. Proceeds from the sale were used primarily
to acquire apartment home communities and reduce debt.
In
2010, UDR sold one 149 apartment home community for a total sales
price of $21.2 million. In
2009, we did not dispose of any apartment home 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.
Financing Activities
For the year ended December 31, 2011, our net cash provided by financing activities was $812.0
million compared to $373.1 million for the comparable period of 2010.
The following significant financing activity occurred during the year ended December 31, 2011.
| • | We received proceeds of $30.7 million from secured debt financings. The $30.7 million includes $25.7 million in variable rate mortgages and $5.0 million in fixed rate mortgages. |
| • | We repaid $336.0 million of secured debt, which includes $197.5 million of construction loans, repayment of $102.8 million of credit facilities, $22.4 million of mortgage payments, and repayment of $13.3 million in tax exempt bonds. |
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| • | Certain holders submitted their outstanding 4.00% Convertible Senior Notes due 2035 to the Company for repurchase. As a result, we repurchased notes with a notional value of $10.8 million, representing approximately 6.44% of the $167.8 million in aggregate principal amount outstanding, and expensed $207,000 of unamortized financing costs during the three months ended March 31, 2011. On March 2, 2011 the Company called the remaining outstanding notes with a notional value of $156.9 million. The notes were redeemed on April 4, 2011 and unamortized financing costs of $3.0 million were written off. |
| • | In May 2011, the Company issued $300 million aggregate principal amount of 4.250% senior unsecured notes due June 2018 under its existing shelf registration statement. Interest is payable semiannually beginning in December 2011. The notes were priced at 98.988% of the principal amount plus accrued interest from May 23, 2011 to yield 4.419% to maturity. The notes are fully and unconditionally guaranteed by the Operating Partnership. |
| • | We repaid $97.1 million on our 3.625% Convertible Senior Notes due September 2011. |
| • | In October 2011, the Company entered into a new $900 million unsecured revolving credit facility, replacing the Company’s $600 million credit facility. The Operating Partnership issued a guarantee in connection with the new credit facility, similar to the guarantee it issued under the prior facility. The new facility has an initial term of four years and includes a one-year extension option, and contains an accordion feature that allows the Company to increase the facility to $1.35 billion. Based on the Company’s current credit ratings, the credit facility carries an interest rate equal to LIBOR plus a spread of 122.5 basis points and a facility fee of 22.5 basis points. In 2011, the Company had net borrowings of $389.3 million on its unsecured revolving credit facilities. |
| • | In September 2009, the Company entered into an equity distribution agreement under which the Company may offer and sell up to 15.0 million shares of its common stock over time to or through its sales agents. During the year ended December 31, 2011, we sold 4,395,601 shares of common stock through an equity distribution agreement for aggregate gross proceeds of approximately $104.5 million at a weighted average price per share of $23.78. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $2.1 million, were approximately $102.4 million, and such proceeds were used for general corporate purposes. |
| • | In March 2011, the Company entered into a new equity distribution agreement under which the Company may offer and sell up to 20.0 million shares of its common stock over time to or through its sales agents. During the year ended December 31, 2011, we sold 11,849,079 shares of common stock through this program (of which 419,048 shares were settled subsequent to December 31, 2011) for aggregate gross proceeds of approximately $297.7 million at a weighted average price per share of $25.12. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $6.0 million, were approximately $291.7 million, and such proceeds were used for general corporate purposes. In September 2011, the Company entered into a new equity distribution agreement in connection with filing a new registration statement on Form S-3. The new equity distribution agreement replaced the March 2011 agreement, and no material changes were made to the equity distribution agreement. As of December 31, 2011 8,150,921 shares of common stock may be sold under our equity distribution agreement. |
| • | In July 2011, the Company closed a public offering of 20,700,000 shares of its common stock, including 2,700,000 shares sold as a result of the underwriters’ exercise of their overallotment option in full at the closing, at a price of $25.00 per share, for net proceeds of approximately $496.3 million after underwriting discounts and commissions and estimated offering expenses. |
| • | We repurchased 141,200 shares of our 6.75% Series G Cumulative Redeemable Preferred Stock for $3.6 million, which was $100,000 more than their liquidation value of $3.5 million. |
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 increase in
cash provided by financing activities was primarily due to an increase in net proceeds from
issuance of our Common Stock through a public offering in 2010.
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Credit Facilities
As of December 31, 2011 and 2010, we have secured revolving credit facilities with Fannie Mae
with an aggregate commitment of $1.3 billion with $1.1 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 $744.5 million of the funded balance fixed at a weighted average interest rate of 5.14% and
the remaining balance on these facilities is currently at a weighted average variable rate of 1.63%
as of December 31, 2011. We had $897.3 million of the funded balance fixed at a weighted average
interest rate of 5.32% and $260.5 million was at a weighted average variable rate of 1.68% as of
December 31, 2010.
In October 2011, the Company entered into a $900 million unsecured revolving credit facility,
replacing the Company’s $600 million credit facility noted below. The Operating Partnership issued
a guarantee in connection with the new facility, similar to the guarantee it issued under the prior
facility. The unsecured credit facility has an initial term of four years and includes a one-year
extension option, and contains an accordion feature that allows the Company to increase the
facility to $1.35 billion. Based on the Company’s current credit ratings, the credit facility
carries an interest rate equal to LIBOR plus a spread of 122.5 basis points and a facility fee of
22.5 basis points (1.53% at December 31, 2011). As of December 31, 2011, we had $421.0 million of
borrowings outstanding under the credit facility leaving $479.0 million of unused capacity
(excluding $3.6 million of letters of credit at December 31, 2011).
We had an unsecured revolving credit facility with an aggregate borrowing capacity of $600
million, which we could have increased to $750 million at our election under certain circumstances.
This credit facility carried an interest rate equal to LIBOR plus 47.5 basis points (0.89% interest
at December 30, 2010), and had a maturity of July 2012. 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).
The Fannie Mae credit facilities and the bank revolving credit facility are subject to
customary financial covenants and limitations. As of December 31, 2011, 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 $1.1 billion in variable rate debt that is not subject to interest rate swap
contracts as of December 31, 2011. If market interest rates for variable rate debt increased by 100
basis points, our interest expense would increase by $9.2 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.
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Table of Contents
Funds from Operations
Funds from operations, or FFO, is defined as net income (computed in accordance with GAAP),
excluding impairment write-downs of depreciable real estate or of investments in non-consolidated
investees that are driven by measurable decreases in the fair value of depreciable real estate held
by the investee, gains (or losses) from sales of depreciable property, plus real estate
depreciation and amortization, and after adjustments for unconsolidated partnerships and joint
ventures. 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.
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The following table outlines our FFO calculation and reconciliation to GAAP for the three
years ended December 31, 2011
(dollars in thousands):
| For the year ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
|
||||||||||||
|
Net income/(loss) attributable to UDR, Inc.
|
$ | 20,023 | $ | (102,899 | ) | $ | (87,532 | ) | ||||
|
Adjustments:
|
||||||||||||
|
Distributions to preferred stockholders
|
(9,311 | ) | (9,488 | ) | (10,912 | ) | ||||||
|
Real estate depreciation and amortization, including discontinued operations
|
370,343 | 303,446 | 278,391 | |||||||||
|
Net income/(loss) attributable to redeemable non-controlling interests in OP
|
395 | (3,835 | ) | (4,282 | ) | |||||||
|
Net income attributable to non-controlling interests
|
167 | 146 | 191 | |||||||||
|
Real estate depreciation and amortization on unconsolidated joint ventures
|
11,631 | 5,698 | 4,759 | |||||||||
|
Net gains on the sale of depreciable property in discontinued operations,
excluding RE3
|
(123,217 | ) | (4,048 | ) | (2,343 | ) | ||||||
|
(Premium)/discount on preferred stock repurchases, net
|
(175 | ) | 25 | 2,586 | ||||||||
|
|
||||||||||||
|
Funds from operations — basic
|
$ | 269,856 | $ | 189,045 | $ | 180,858 | ||||||
|
|
||||||||||||
|
Distributions to preferred stockholders — Series E (Convertible)
|
3,724 | 3,726 | 3,724 | |||||||||
|
|
||||||||||||
|
Funds from operations — diluted
|
$ | 273,580 | $ | 192,771 | $ | 184,582 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Weighted average number of common shares and OP Units outstanding — basic
|
208,896 | 171,569 | 155,796 | |||||||||
|
|
||||||||||||
|
Weighted average number of common shares and OP Units outstanding — diluted
|
214,086 | 176,900 | 159,561 | |||||||||
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 year ended December 31, 2009 and are excluded from the diluted share count.
RE
3
is our subsidiary whose activities include development and land entitlement.
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. To
determine whether gains from RE
3
will be included in FFO, the Company considers whether
the operating asset has been a short term investment. We consider FFO with RE
3
tax
benefits and gain on sales, net of taxes, to be a meaningful supplemental measure of performance
because the short-term use of funds produce a profit that differs from the traditional long-term
investment in real estate for REITs.
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, 2011
(shares in thousands):
| For the year ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
|
||||||||||||
|
Weighted average number of Common Shares and OP Units
outstanding basic
|
208,896 | 171,569 | 155,796 | |||||||||
|
Weighted average number of OP Units outstanding
|
(7,602 | ) | (5,712 | ) | (6,706 | ) | ||||||
|
|
||||||||||||
|
Weighted average number of Common Shares outstanding -
basic per the Consolidated
Statement of Operations
|
201,294 | 165,857 | 149,090 | |||||||||
|
|
||||||||||||
|
Weighted average number of Common Shares, OP Units, and
common stock equivalents outstanding — diluted
|
214,086 | 176,900 | 159,561 | |||||||||
|
Weighted average number of OP Units outstanding
|
(7,602 | ) | (5,712 | ) | (6,706 | ) | ||||||
|
Weighted average incremental shares from assumed conversion
of stock options
|
(1,297 | ) | (1,637 | ) | (567 | ) | ||||||
|
Weighted average incremental shares from unvested restricted stock
|
(857 | ) | (658 | ) | (162 | ) | ||||||
|
Weighted average number of Series E preferred shares outstanding
|
(3,036 | ) | (3,036 | ) | (3,036 | ) | ||||||
|
|
||||||||||||
|
Weighted average number of Common Shares outstanding — diluted
per the Consolidated Statements of Operations
|
201,294 | 165,857 | 149,090 | |||||||||
|
|
||||||||||||
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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, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
|
||||||||||||
|
Net cash provided by operating activities
|
$ | 244,236 | $ | 214,180 | $ | 229,383 | ||||||
|
Net cash used in investing activities
|
(1,053,182 | ) | (583,754 | ) | (158,045 | ) | ||||||
|
Net cash used provided by/(used in)
financing activities
|
811,963 | 373,075 | (78,093 | ) | ||||||||
Results of Operations
The following discussion includes the results of both continuing and discontinued operations
for the periods presented.
Net Income/(Loss) Attributable to Common Stockholders
2011-vs-2010
Net income attributable to common stockholders was $10.5 million ($0.05 per diluted share) for
the year ended December 31, 2011 as compared to net loss attributable to common stockholders of
$112.4 million ($0.68 per diluted share) for the comparable period in the prior year. The increase
in net income attributable to common stockholders for the year ended December 31, 2011 resulted
primarily from the following items, all of which are discussed in further detail elsewhere within
this Report:
| • | an increase in disposition gains in 2011 as compared to 2010. The Company recognized gains of $138.5 million and $4.1 million during the years ended December 31, 2011 and 2010, respectively, on the sale of eighteen apartment home communities and one community, respectively; and |
| • | an increase in our net operating income. |
The increase to our net income attributable to common stockholders was partially offset by:
| • | an increase in depreciation expense primarily due to the Company’s acquisition of eight apartment communities during the year ending December 31, 2011, and the completion of redevelopment and development communities in 2010 and 2011. |
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 |
| • | 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. |
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The increase to our net loss attributable to common stockholders was partially offset by:
| • | an increase in our net operating income; and |
| • | a decrease in our loss from unconsolidated entities primarily due to the recognition of a $16.0 million non-cash charge representing an other-than-temporary decline in the fair value of equity investments in two of our unconsolidated joint ventures during the year ended December 31, 2009. |
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, | |||||||||||||||||||||||
| 2011 | 2010 | % Change | 2010 | 2009 | % Change | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Property rental income
|
$ | 718,800 | $ | 624,981 | 15.0 | % | $ | 624,981 | $ | 594,359 | 5.2 | % | ||||||||||||
|
Property operating expense (a)
|
(243,616 | ) | (220,279 | ) | 10.6 | % | (220,279 | ) | (202,773 | ) | 8.6 | % | ||||||||||||
|
|
||||||||||||||||||||||||
|
Property net operating income
|
$ | 475,184 | $ | 404,702 | 17.4 | % | $ | 404,702 | $ | 391,586 | 3.3 | % | ||||||||||||
|
|
||||||||||||||||||||||||
(a) Excludes depreciation, amortization, and property management expenses.
The following table is our reconciliation of property NOI to net income/(loss) attributable to
UDR, Inc. as reflected, for both continuing and discontinued operations, for the periods presented
(dollars in thousands):
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
|
||||||||||||
|
Property net operating income
|
$ | 475,184 | $ | 404,702 | $ | 391,586 | ||||||
|
Other net operating income
|
9,576 | 6,362 | 6,874 | |||||||||
|
Non-property income
|
17,422 | 14,347 | 14,274 | |||||||||
|
Real estate depreciation and amortization
|
(370,343 | ) | (303,446 | ) | (278,391 | ) | ||||||
|
Interest expense
|
(158,333 | ) | (150,796 | ) | (142,152 | ) | ||||||
|
General and administrative and property
management
|
(66,016 | ) | (62,675 | ) | (55,616 | ) | ||||||
|
Other depreciation and amortization
|
(3,931 | ) | (4,843 | ) | (5,161 | ) | ||||||
|
Other operating expenses
|
(6,217 | ) | (5,848 | ) | (6,485 | ) | ||||||
|
Severance costs and other restructuring charges
|
(1,342 | ) | (6,803 | ) | — | |||||||
|
Loss from unconsolidated entities
|
(6,352 | ) | (4,204 | ) | (18,665 | ) | ||||||
|
Redeemable non-controlling interests in OP
|
(395 | ) | 3,835 | 4,282 | ||||||||
|
Non-controlling interests
|
(167 | ) | (146 | ) | (191 | ) | ||||||
|
Tax (expense)/benefit
|
(7,571 | ) | 2,533 | (311 | ) | |||||||
|
Gain on sale of properties
|
138,508 | 4,083 | 2,424 | |||||||||
|
|
||||||||||||
|
Net income/(loss) attributable to UDR, Inc.
|
$ | 20,023 | $ | (102,899 | ) | $ | (87,532 | ) | ||||
|
|
||||||||||||
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Table of Contents
Same Communities
2011-vs.-2010
Our same store communities (those acquired, developed, and stabilized prior to January 1, 2010
and held on December 31, 2011) consisted of 37,869 apartment homes and provided $344.4 million or
72% of our total property NOI for the year ended December 31, 2011.
NOI for our same community properties increased 5.6% or $18.1 million for the year ended
December 31, 2011 compared to the same period in 2010. The increase in property NOI was primarily
attributable to a 4.1% or $20.5 million increase in property rental income which was offset by a
1.4% or $2.3 million increase in operating expenses. The increase in revenues was primarily driven
by a 4.0% or $19.1 million increase in rental rates and a 12.1% or $4.4 million increase in fee and
reimbursement income which was offset by a 12.2% or $2.2 million increase in vacancy loss. Physical
occupancy decreased 0.2% to 95.5% and total income per occupied home increased $50 to $1,188.
The increase in property operating expenses was primarily driven by a 6.5% or $1.8 million
increase in utilities expense, a 1.5% or $781,000 increase in taxes, and a 4.1% or $369,000
increase in insurance costs, which was partially offset by a 1.5% or $647,000 decrease in personnel
cost.
As a result of the percentage changes in property rental income and property operating
expenses, the operating margin (property net operating income divided by property rental income)
increased to 66.8% as compared to 65.9% in the comparable period in the prior year.
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 39,281 apartment homes and provided $341.3 million or
84% of our total property NOI for the year ended December 31, 2010.
NOI for our same community properties decreased 1.8% 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 $4.6 million decrease in property rental income and a 0.9% or $1.5
million increase in operating expenses. The decrease in revenues was primarily driven by a 2.4% or
$12.1 million decrease in rental rates which was offset by a 57.8% or $2.7 million decrease in
concessions, a 7.9% or $1.7 million decrease in vacancy loss and a 12.4% or $2.7 million increase
in reimbursement income. Physical occupancy increased 0.4% to 95.7% and total income per occupied
home decreased $15 to $1,144.
The increase in property operating expenses was primarily driven by a 3.2% or $874,000
increase in utilities expense, a 3.9% or $1.1 million increase in repairs and maintenance, and a
2.6% or $1.1 million increase in personnel costs, which was partially offset by a 2.5% or $1.3
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 66.1% as compared to 66.7% in the comparable period in the prior year.
Non-Mature Communities
2011-vs.-2010
The remaining $130.8 million and $78.4 million of our NOI during the year ended December 31,
2011 and 2010, 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, and properties classified as real estate held for disposition. For the
year ended December 31, 2011, we recognized NOI for our developments of $14.5 million, acquired
communities of $49.7 million, redeveloped properties of $37.8 million, and sold properties of $23.9
million. For the year ended December 31, 2010, we recognized NOI for our developments of $3.6
million, acquired communities of $8.3 million, redeveloped properties of $23.7 million, and sold
properties of $37.9 million.
2010-vs.-2009
The remaining $63.4 million and $44.1 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 sale, 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 properties held for sale of $18.6 million, developments of $15.6 million, acquired communities
of $10.8 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 properties held for sale of $17.3 million,
developments of $7.0 million, acquired communities of $2.1 million, redeveloped properties of $11.5
million, and sold properties of $1.4 million.
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Table of Contents
Other Income
For the year ended December 31, 2011, significant amounts reflected in other income include:
fees earned from the Company’s joint ventures of $9.6 million, a gain of $3.1 million from the sale
of marketable securities, and a gain of $3.9 million from the sale of our cost investment in a
privately held company. 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 Taxable REIT Subsidiaries
UDR elected for certain consolidated subsidiaries to be treated as Taxable REIT Subsidiaries
(“TRS”). Income taxes for our TRS are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax
rate is recognized in earnings in the period of the enactment date. For the year ended December
31, 2011, we recognized a benefit of $5.7 million in continuing operations due to the results of
operations and temporary differences associated with the TRS, and an
expense of $13.2 million in
discontinued operations due to assets disposed of at a gain. 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.
Real Estate Depreciation and Amortization
For the year ended December 31, 2011, real estate depreciation and amortization on both
continuing and discontinued operations increased 22.0% or $66.9 million as compared to the
comparable period in 2010. The increase in depreciation and amortization for the year ended
December 31, 2011 is primarily the result of the Company’s acquisition of eight communities with
3,161 apartment homes during 2011, development and redevelopment activity during 2011 and 2010, and
additional capital expenditures.
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 attributable
to the fair value of intangible assets which are typically amortized over a period of less than one
year.
Interest Expense
For the year ended December 31, 2011, interest expense on both continuing and discontinued
operations increased 5.0% or $7.5 million as compared to 2010. This increase in interest expense
was primarily due to slightly higher debt balances. The increase was also attributable to the write
off of $4.6 million of deferred financing costs related to the prepayment of debt.
55
Table of Contents
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.
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.
Gains on the Sale of Depreciable Property
For the years ended December 31, 2011, 2010 and 2009, we recognized gains for financial
reporting purposes of $138.5 million, $4.1 million, and $2.4 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, 2011.
Off-Balance Sheet Arrangements
In November 2010, the Company acquired The Hanover Company’s (“Hanover”) partnership interests
in the Hanover/MetLife Master Limited Partnership (“UDR/MetLife I”).
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 $506.0 million in loans
($51.0 million outstanding at December 31, 2011) 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 remaining $51.0 million will be
refinanced by the UDR/MetLife 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.
56
Table of Contents
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2011
(dollars in
thousands):
| Payments Due by Period | ||||||||||||||||||||
| Contractual Obligations | 2012 | 2013-2014 | 2015-2016 | Thereafter | Total | |||||||||||||||
|
|
||||||||||||||||||||
|
Long-term debt obligations
|
$ | 406,197 | $ | 667,595 | $ | 1,527,679 | $ | 1,316,899 | $ | 3,918,370 | ||||||||||
|
Interest on debt obligations
|
150,892 | 254,507 | 158,323 | 137,851 | 701,573 | |||||||||||||||
|
Contingent purchase consideration
|
3,000 | — | — | — | 3,000 | |||||||||||||||
|
Letters of credit
|
3,553 | — | — | — | 3,553 | |||||||||||||||
|
Unfunded commitments on development
projects (a)
|
65,722 | 359,807 | — | — | 425,529 | |||||||||||||||
|
Operating lease obligations:
|
||||||||||||||||||||
|
Operating space
|
458 | 976 | 539 | — | 1,973 | |||||||||||||||
|
Ground leases (b)
|
5,043 | 10,086 | 10,086 | 314,914 | 340,129 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
|
$ | 634,865 | $ | 1,292,971 | $ | 1,696,627 | $ | 1,769,664 | $ | 5,394,127 | ||||||||||
|
|
||||||||||||||||||||
| (a) | Any unfunded costs at December 31, 2011 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 2011, we incurred gross interest costs of $171.3 million, of which $13.0 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, 2011, the
Operating Partnership’s real estate portfolio included 77 communities located in 9 states plus the
District of Columbia, with a total of 23,160 apartment homes.
As of December 31, 2011, UDR owned 110,883 units of our general limited partnership interests
and 174,749,068 units of our limited partnership interests (the “OP Units”), or approximately 94.9%
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 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, 2011, UDR’s consolidated real estate portfolio
included 163 communities located in 22 markets with a total of 47,343 completed apartment homes and
UDR’s total real estate portfolio, inclusive of UDR’s unconsolidated communities, included an
additional 39 communities with 10,400 completed apartment homes.
57
Table of Contents
The following table summarizes our market information by major geographic markets as of
December 31, 2011.
| As of December 31, 2011 | Year Ended | |||||||||||||||||||||||||||
| Percentage | Total | December 31, 2011 | ||||||||||||||||||||||||||
| Number of | Number of | of Total | Carrying | Average | Total Income | Net Operating | ||||||||||||||||||||||
| Apartment | Apartment | Carrying | Value | Physical | per Occupied | Income | ||||||||||||||||||||||
| SAME COMMUNITIES | Communities | Homes | Value | (in thousands) | Occupancy | Home (a) | (in thousands) | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
WESTERN REGION
|
||||||||||||||||||||||||||||
|
Orange County, CA
|
8 | 2,935 | 12.0 | % | $ | 504,228 | 94.8 | % | $ | 1,492 | $ | 35,302 | ||||||||||||||||
|
San Francisco, CA
|
6 | 1,453 | 8.4 | % | 351,843 | 96.7 | % | 2,130 | 26,496 | |||||||||||||||||||
|
Monterey Peninsula, CA
|
7 | 1,565 | 3.7 | % | 154,030 | 93.8 | % | 1,110 | 13,305 | |||||||||||||||||||
|
Los Angeles, CA
|
3 | 463 | 3.0 | % | 125,104 | 95.4 | % | 1,765 | 6,054 | |||||||||||||||||||
|
San Diego, CA
|
2 | 366 | 1.3 | % | 55,679 | 94.8 | % | 1,365 | 3,775 | |||||||||||||||||||
|
Seattle, WA
|
5 | 932 | 4.9 | % | 208,097 | 96.1 | % | 1,276 | 9,273 | |||||||||||||||||||
|
Inland Empire, CA
|
1 | 414 | 1.7 | % | 69,584 | 94.8 | % | 1,495 | 4,883 | |||||||||||||||||||
|
Sacramento, CA
|
2 | 914 | 1.6 | % | 69,058 | 93.1 | % | 882 | 5,973 | |||||||||||||||||||
|
Portland, OR
|
3 | 716 | 1.7 | % | 70,383 | 95.5 | % | 998 | 5,570 | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||
|
Metropolitan DC
|
7 | 2,378 | 13.1 | % | 550,008 | 96.3 | % | 1,770 | 33,452 | |||||||||||||||||||
|
Baltimore, MD
|
5 | 994 | 3.5 | % | 147,209 | 95.6 | % | 1,348 | 10,948 | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||
|
Tampa, FL
|
3 | 1,154 | 2.6 | % | 111,019 | 96.0 | % | 1,036 | 8,723 | |||||||||||||||||||
|
Nashville, TN
|
6 | 1,612 | 3.1 | % | 128,836 | 96.3 | % | 870 | 10,192 | |||||||||||||||||||
|
Jacksonville, FL
|
1 | 400 | 1.0 | % | 42,692 | 94.3 | % | 889 | 2,511 | |||||||||||||||||||
|
Other Florida
|
1 | 636 | 1.8 | % | 77,498 | 93.2 | % | 1,214 | 5,296 | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||
|
Dallas, TX
|
2 | 1,348 | 4.4 | % | 184,158 | 95.8 | % | 1,180 | 10,994 | |||||||||||||||||||
|
Phoenix, AZ
|
3 | 914 | 1.7 | % | 72,919 | 95.0 | % | 890 | 6,133 | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total/Average Same Communities
|
65 | 19,194 | 69.5 | % | 2,922,345 | 95.3 | % | $ | 1,333 | $ | 198,880 | |||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Non Matures, Commercial
Properties & Other
|
12 | 3,966 | 30.5 | % | 1,282,953 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Real Estate Held for
Investment
|
77 | 23,160 | 100.0 | % | 4,205,298 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Accumulated
Depreciation
|
(976,358 | ) | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Real Estate Owned, Net
of Accumulated
Depreciation
|
$ | 3,228,940 | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| (a) | Total Income per Occupied Home represents total revenues divided by the product of occupancy and the number of mature apartment homes. |
We report in two segments: Same Communities and Non-Mature/Other Communities. Our Same
Communities segment includes those communities acquired, developed, and stabilized prior to January
1, 2010, and held as of December 31, 2011. 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 2010 or 2011, 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.
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Table of Contents
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 2012, we have approximately $210.2 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.
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 the year ended December 31, 2011, $63.2 million was spent on capital expenditures for
all of our communities as compared to $59.5 million for the year ended December 31, 2010. 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.
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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 record the fair value to
various components, such as land, buildings, and intangibles related to in-place leases based on
the fair value of each component. The fair value of buildings is determined as if the buildings
were vacant upon acquisition and subsequently leased at market rental rates. As such, the
determination of fair value considers the present value of all cash flows expected to be generated
from the property including an initial lease-up period. We determine the fair value of in-place
leases by assessing the net effective rent and remaining term of the lease relative to market terms
for similar leases at acquisition. In addition, we consider the cost of acquiring similar leases,
the foregone rents associated with the lease-up period, and the carrying costs associated with the
lease-up period. The fair value of in-place leases is recorded and amortized as amortization
expense over the remaining average contractual lease period.
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 provided by/(used in) financing
activities that are presented in our Consolidated Statements of Cash Flows.
Operating Activities
For the year ended December 31, 2011, net cash flow provided by operating activities was
$156.1 million compared to $146.6 million for the comparable period in 2010. The increase in net
cash flow from operating activities is primarily due to an increase in property net operating
income from our apartment community portfolio, which was partially offset by the increase in
operating assets and a decrease in operating liabilities.
For the year ended December 31, 2010, our net cash flow provided by operating activities was
$146.6 million compared to $157.3 million for 2009. The decrease in net cash flow from operating
activities is primarily due to an increase in consolidated net loss, primarily due to a decrease in
property net operating income and increase in allocated general and administrative costs.
Investing Activities
For the year ended December 31, 2011, net cash used in investing activities was $227.0 million
compared to $59.5 million for the comparable period in 2010. The increase in net cash used in
investing activities was primarily due to acquisition activities partially offset by proceeds
received from dispositions in 2011.
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 $200.0 million note
receivable in 2009. The activity during 2010 consisted entirely of capital expenditures.
Acquisitions and Dispositions
In April 2011, UDR and the Operating Partnership closed on an acquisition of a 493- home
multifamily apartment community referred to as 10 Hanover Square, located in New York, New York.
The community was acquired for $259.8 million, which included assumed debt with a fair value of
$208.1 million and the issuance of 2,569,606 OP Units of the Operating Partnership. The OP Units
were deemed to have a value equal to the greater of $25.00 or the volume weighted average closing
price per share of the Company’s common stock for the 10 day period ended on (and including) the
date one business day prior to the settlement date. For purchase price accounting purposes, the
fair value of these OP units was $24.47 at the settlement date.
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In April 2011, the Operating Partnership and its General Partner completed a $500 million
asset exchange whereby the Operating Partnership acquired two multifamily apartment communities
(833 homes) and a parcel of land, and UDR acquired one multifamily apartment community (227 homes).
The acquired assets are: 388 Beale in San Francisco, CA (227 homes)- acquired by UDR; 14 North in
Peabody, MA (387 homes); and Inwood West in Woburn, MA (446 homes). The communities acquired were
valued at $263.0 million representing their estimated fair value. The Company and the Operating
Partnership paid $28.1 million of cash and assumed debt with a fair value of $61.7 million. The
Operating Partnership sold four multifamily apartment communities (984 homes) and UDR sold two
multifamily apartment communities (434 homes) located in California as part of the transaction. The
communities are: Crest at Phillips Ranch, Villas at San Dimas, Villas at Bonita, The Arboretum,
Rancho Vallecitos and Milazzo.
In August 2011, UDR and the Operating Partnership closed on the acquisition of a 507- home
multifamily apartment community referred to as 95 Wall located in New York, New York. The community
was acquired for $328.9 million, which included the issuance of 1,802,239 OP Units of the Operating
Partnership. The OP Units were deemed to have a value equal to the greater of $25.00 or the volume
weighted average closing price per share of the Company’s common stock for the 10-day period ended
on (and including) the date one business day prior to the settlement date. For purchase price
accounting purposes, the fair value of these OP units was $26.71 at the settlement date.
For the year ended December 31, 2010, the Operating Partnership had no property acquisitions.
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 Boston, California, Metropolitan Washington D.C.,
New York, 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 above average
job growth, low single-family home affordability and limited, new supply for multifamily housing-
three key drivers to strong rental growth.
In 2011, the Operating Partnership sold eight apartment home communities (2,024 homes), which
included four apartment home communities (984 homes) sold in conjunction with an asset exchange in
April 2011, for a total sales price of $299.6 million. Proceeds from the sales were used primarily to
acquire new communities, reduce debt, and repay our General Partner. During the year ended December
31, 2010, we did not dispose of any apartment home communities.
Financing Activities
For the year ended December 31, 2011, our net cash provided by financing activities was $70.7
million compared to net cash used in financing activities of $86.7 million for 2010. The increase
in cash provided by financing activities was primarily due to an increase in advances from the
General Partner, partially offset by an increase in payments of secured debt.
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.
Credit Facilities
As of December 31, 2011, the General Partner had secured credit facilities with Fannie Mae
with an aggregate commitment of $1.3 billion with $1.1 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, 2011, $744.5 million of the outstanding balance was fixed at a
weighted average interest rate of 5.14% and the remaining balance of $310.5 million on these
facilities had a weighted average variable interest rate of 1.63%. $667.5 million of these credit
facilities were allocated to the Operating Partnership at December 31, 2011 based on the ownership
of the assets securing the debt.
At December 31, 2010, there was $897.3 million of the funded balance 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%. $736.9 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.
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At December 31, 2010, the Operating Partnership guaranteed the General Partner’s unsecured
credit facility, with an aggregate borrowing capacity of $600 million. The outstanding balance
under the unsecured credit facility was $31.8 million at December 31, 2010. On October 25, 2011,
the Operating Partnership issued a guarantee in conjunction with a new $900 million unsecured
revolving credit facility entered into by our General Partner. The new facility replaces the
General Partner’s $600 million facility. The outstanding balance under the new $900 million
unsecured revolving credit facility was $421.0 million at December 31, 2011.
The
Operating Partnership is also a guarantor on the General
Partner’s $250 million term loan which matures
January 2016, $100 million term loan which matures
December 2016, $300 million of medium term notes due
June 2018, and $400 million of medium term notes due
January 2022 (issued in January 2012).
The credit facilities are subject to customary financial covenants and limitations.
Interest Rate Risk
We are exposed to interest rate risk associated with variable rate notes payable and maturing
debt that has to be refinanced. We do not hold financial instruments for trading or other
speculative purposes, but rather issue these financial instruments to finance our portfolio of real
estate assets. Interest rate sensitivity is the relationship between changes in market interest
rates and the fair value of market rate sensitive assets and liabilities. Our earnings are affected
as changes in short-term interest rates impact our cost of variable rate debt and maturing fixed
rate debt. We had $287.0 million in variable rate debt that is not subject to interest rate swap
contracts as of December 31, 2011. If market interest rates for variable rate debt increased by 100
basis points, our interest expense would increase by $2.8 million based on the balance at December
31, 2011.
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.
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 ended December 31, 2011, and
includes the results of both continuing and discontinued operations for the periods presented.
Net Income/(Loss) Attributable to OP Unitholders
2011 — vs. — 2010
Net income attributable to OP unitholders was $30.2 million ($0.17 per OP unit) for the year
ended December 31, 2011 as compared to a net loss of $20.7 million ($0.12 per OP unit) for the
comparable period in the prior year. The increase in net income attributable to OP unit holders for
the year ended December 31, 2011 resulted primarily from the following items, all of which are
discussed in further detail elsewhere within this Report:
| • | an increase in disposition gains in 2011 as compared to 2010. We recognized net gains of $60.1 million for the year ended December 31, 2011 on the sale of eight apartment home communities. We recognized net gains of $152,000 for the year ended December 31, 2010 on trailing activities of apartment home communities sold in years prior to 2010; and |
| • | an increase in net operating income. |
The increase to our net income attributable to OP unitholders was partially offset by:
| • | an increase in depreciation expense primarily due to the four acquisitions of operating properties in 2011. |
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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; |
| • | an increase in general and administrative expenses allocated to us by our General Partner; and |
| • | a decrease in other 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, 2011, 2010 and 2009
(dollars in thousands)
:
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
| 2011 | 2010 | % Change | 2010 | 2009 | % Change | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Property rental income
|
$ | 387,057 | $ | 350,394 | 10.5 | % | $ | 350,394 | $ | 353,056 | -0.8 | % | ||||||||||||
|
Property operating
expense (a)
|
(122,799 | ) | (116,278 | ) | 5.6 | % | (116,278 | ) | (112,488 | ) | 3.4 | % | ||||||||||||
|
|
||||||||||||||||||||||||
|
Property net
operating income
|
$ | 264,258 | $ | 234,116 | 12.9 | % | $ | 234,116 | $ | 240,568 | -2.7 | % | ||||||||||||
|
|
||||||||||||||||||||||||
| (a) | Excludes depreciation, amortization, and property management expenses. |
The following table is our reconciliation of property NOI to net income attributable to OP
unitholders as reflected, for both continuing and discontinued operations, for the years ended
December 31, 2011, 2010 and 2009
(dollars in thousands)
:
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
|
||||||||||||
|
Property net operating income
|
$ | 264,258 | $ | 234,116 | $ | 240,568 | ||||||
|
Other non-property income
|
— | 1,695 | 5,695 | |||||||||
|
Real estate depreciation and amortization
|
(197,964 | ) | (166,480 | ) | (166,773 | ) | ||||||
|
Interest expense
|
(53,632 | ) | (52,222 | ) | (53,547 | ) | ||||||
|
General and administrative and property
management
|
(37,014 | ) | (32,927 | ) | (26,595 | ) | ||||||
|
Other operating expenses
|
(5,484 | ) | (5,028 | ) | (4,868 | ) | ||||||
|
Net gain on sale of real estate
|
60,065 | 152 | 1,475 | |||||||||
|
Non-controlling interests
|
(70 | ) | (41 | ) | (131 | ) | ||||||
|
|
||||||||||||
|
Net (loss)/income attributable to OP unitholders
|
$ | 30,159 | $ | (20,735 | ) | $ | (4,176 | ) | ||||
|
|
||||||||||||
Same Store Communities
2011 — vs. — 2010
Our same store communities (those acquired, developed, and stabilized prior to January 1, 2010
and held on December 31, 2011) consisted of 19,194 apartment homes and provided 75.3% of our total
NOI for the year ended December 31, 2011.
NOI for our same store community properties increased 6.2% or $11.5 million for the year ended
December 31, 2011 compared to the same period in 2010. The increase in property NOI was primarily
attributable to a 4.5% or $12.7 million increase in rental income and by a 1.3% or $1.2 million
increase in operating expenses. The increase in revenues was primarily driven by a 4.4% or $11.8
million increase in rental rates. Physical occupancy decreased 0.3% to 95.3% and total income per
occupied home increased $62 to $1,333 for the year ended December 31, 2011 as compared to the prior
year.
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The increase in property operating expenses was primarily due to a 6.8% or $989,000 increase
in utility 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 68.0% for the year ended December 31, 2011 as compared to 67.0% for the comparable period in
2010.
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 21,120 apartment homes and provided 88.8% of our total
NOI for the year ended December 31, 2010.
NOI for our same store community properties decreased 2.8 % 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 $4.3 million decrease in property rental income and by a 1.7% or $1.7
million increase in operating expenses. The decrease in revenues was primarily driven by a 2.8% or
$8.8 million decrease in rental rates which was partially offset by a 54.8% or $1.7 million
decrease in concessions, a 7.3% or $926,000 decrease in vacancy loss and a 4.7% or $1.1 million
increase in reimbursement income. Physical occupancy increased 0.3% to 95.6% and total income per
occupied home decreased $22 to $1,279 for the year ended December 31, 2010 as compared to the prior
year.
The increase in property operating expenses was primarily driven by a 3.5% or $533,000
increase in utilities, a 4.9% or $743,000 increase in repairs and maintenance, and a 3.0% or
$719,000 increase in personnel costs which was partially offset by a 0.7% or $242,000 decrease in
real estate taxes and a 3.7% or $241,000 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 67.1% for the year ended December 31, 2010 as compared to 68.1% for the comparable period in
2009.
Non-Mature/Other Communities
2011 — vs. — 2010
The remaining $65.4 million and $46.8 million of our NOI during the year ended December 31,
2011 and 2010, 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 include communities developed or acquired, redevelopment
properties, sold properties, properties managed by third-parties, and properties classified as real
estate held for disposition. For the year ended December 31, 2011, we recognized NOI for acquired
communities of $22.6 million, redevelopments of $23.9 million, and sold properties of $11.8
million. For the year ended December 31, 2010, we recognized NOI for redeveloped properties of
$21.3 million and sold properties of $20.8 million.
2010 — vs. — 2009
The remaining $26.2 million and $26.7 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 sale. For the year ended
December 31, 2010, we recognized NOI of $11.4 million for our properties held for sale and $10.2
million of NOI for our redevelopments. The remainder was primarily due to the non-apartment
components of mixed use properties. For the year ended December 31, 2009, we recognized NOI of
$11.5 million for our properties and $9.5 million of NOI for redeveloped properties. The remaining
NOI was primarily due to the non-apartment components of mixed use properties.
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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, 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 year ended December 31, 2011, real estate depreciation and amortization from
continuing and discontinued operations increased 18.9% or $31.5 million as compared to the
comparable period in 2010. The increase in depreciation and amortization expense is primarily due
to the acquisition of four apartment home communities in 2011. As part of the Operating
Partnership’s acquisition activities a portion of the purchase price is attributable to the fair
value of intangible assets which are typically amortized over a period of less than one year.
For the years ended December 31, 2010, real estate depreciation and amortization from
continuing and discontinued operations did not change significantly as compared to the comparable
period in 2009 as the Operating Partnership did not have any acquisitions or dispositions during
this period.
Interest Expense
For the year ended December 31, 2011, interest expense increased 2.7% or $1.4 million, as
compared to the same period in 2010. This increase is primarily due to a higher debt balances from
mortgages assumed on certain 2011 acquisitions, issuance of a note payable due to the General
Partner in 2011, and an increase in the interest rate charged on the note payable due to the
General Partner. The increase is partially offset by lower average borrowings on secured credit
facilities, lower weighted average interest rates and the payment of a tax exempt secured note
payable in 2011.
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.
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, 2011, general and administrative expenses increased 13.2% or
$3.1 million, as compared to the comparable period in 2010. The increase was primarily due to
acquisition-related costs associated directly with acquisitions of the Operating Partnership.
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.
Income from Discontinued Operations
For
the years ended December 31, 2011, 2010 and 2009, we recognized
gains on property sales for financial
reporting purposes of $60.1 million, $152,000, and $1.5 million, respectively. The increase in
gains recognized for the year ended December 31, 2011 as compared to the comparable period in 2010
was primarily due to the sale of eight apartment home communities in 2011. Changes in the level of
gains recognized in 2010 as compared to 2009 reflect the residual activities from specific
properties sold.
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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, 2011.
Off-Balance Sheet Arrangements
At December 31, 2010, the Operating Partnership was a guarantor on the General Partner’s
unsecured credit facility, with an aggregate borrowing capacity of $600 million ($31.8 million
outstanding at December 31, 2010). On October 25, 2011, the Operating Partnership issued a
guarantee in conjunction with a $900 million unsecured revolving credit facility entered into by
the General Partner. The facility replaced the General Partner’s $600 million credit facility. At
December 31, 2011, the outstanding balance under the $900 million unsecured credit facility was
$421.0 million.
The Operating
Partnership is also a guarantor on the General Partner’s
$250 million term loan
which matures January 2016, a $100 million term loan which matures December 2016, $300 million of medium-term notes due
June 2018, and $400 million medium-term notes due
January 2022 (issued in January 2012).
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, 2011 (
dollars in
thousands
):
| Payments Due by Period | ||||||||||||||||||||
| Contractual Obligations | 2012 | 2013-2014 | 2015-2016 | Thereafter | Total | |||||||||||||||
|
|
||||||||||||||||||||
|
Long-term debt obligations
|
$ | 210,191 | $ | 92,104 | $ | 325,113 | $ | 562,237 | $ | 1,189,645 | ||||||||||
|
Interest on debt obligations
|
49,920 | 85,180 | 68,175 | 56,982 | 260,257 | |||||||||||||||
|
Operating lease
obligations — Ground leases
(a)
|
4,939 | 9,878 | 9,878 | 314,516 | 339,211 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
|
$ | 265,050 | $ | 187,162 | $ | 403,166 | $ | 933,735 | $ | 1,789,113 | ||||||||||
|
|
||||||||||||||||||||
| (a) | 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. |
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.
The consolidated financial statements and related financial information required to be filed
are attached to this Report. Reference is made to page 74 of this Report for the Index to
Consolidated Financial Statements and Schedule of UDR, Inc. and United Dominion Realty, L.P.
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| Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
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, 2011, we carried out an evaluation, under the supervision and with the
participation of the Chief Executive Officer and Chief Financial Officer of the Company, which is the sole
General Partner of the Operating Partnership of the
effectiveness of the design and operation of the disclosure controls and procedures of the Company
and the Operating Partnership. Based on this evaluation, the Chief Executive Officer and Chief
Financial Officer of the Company concluded that the disclosure controls and procedures of the
Company and the Operating Partnership are effective at the reasonable assurance level described
above.
Management’s Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f)
under the Exchange Act for the Company and the Operating Partnership. Under the supervision and with the participation of the management, the
Chief Executive Officer and Chief Financial Officer of the Company, which is the sole General
Partner of the Operating Partnership, conducted an evaluation of the effectiveness of the internal
control over financial reporting based on the framework in
Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations (COSO). Based on such evaluation, management
concluded that the Company’s and the Operating Partnership’s internal control over financial
reporting was effective as of December 31, 2011.
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, 2011. The report of Ernst & Young LLP, which expresses
an unqualified opinion on UDR, Inc.’s internal control over financial reporting as of December 31,
2011, is included under the heading “Report of Independent Registered Public Accounting Firm” of
UDR, Inc. contained in this Report. Further, an attestation report of the registered public
accounting firm of United Dominion Realty, L.P. will not be required as long as United Dominion
Realty, L.P. is a non-accelerated filer.
Changes in Internal Control Over Financial Reporting
There have not been any changes in either the Company’s or the Operating Partnership’s
internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the 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.
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Other Agreements with Executive Officers.
In December 2011, we entered into separate aircraft
time-share agreements with Mr. Toomey and Mr. Troupe. Under each aircraft time-share agreement, we
have agreed to lease an aircraft, including crew and flight services, to each of Mr. Toomey and Mr.
Troupe for personal flights from time to time upon their request. Mr. Toomey and Mr. Troupe will
each pay us a lease fee as may be set by the board from time to time for the flight expenses that
may be charged under applicable regulations. We will invoice Mr. Toomey and Mr. Troupe on the last
day of the month in which any respective flight occurs. Each aircraft time-share agreement will
remain in effect until December 15, 2014, and each agreement may be terminated by either party,
upon ten days’ prior written notice. Each agreement automatically terminates upon the date either
Mr. Toomey or Mr. Troupe, respectively, are no longer employed by the Company.
68
Table of Contents
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-Board Leadership Structure and Committees-Audit Committee
Financial Expert,” “Corporate Governance Matters-Identification and Selection of Nominees for
Directors,” “Corporate Governance Matters-Board of Directors and Committee Meetings” 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 15, 2012.
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 15, 2012. 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.
The information required by this item is incorporated by reference to the information set
forth under the headings “Security Ownership of Certain Beneficial Owners and Management,”
“Corporate Governance Matters-Board Leadership Structure and Committees-Compensation Committee
Interlocks and Insider Participation,” “Executive Compensation,” “Compensation of Directors” and
“Compensation Committee Report” in the definitive proxy statement for UDR’s Annual Meeting of
Stockholders to be held on May 15, 2012. 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 15, 2012. UDR is the sole
general partner of the Operating Partnership.
The information required by this item is incorporated by reference to the information set
forth under the heading “Security Ownership of Certain Beneficial Owners and Management,”
“Corporate Governance Matters-Corporate Governance Overview,” “Corporate Governance
Matters-Director Independence,” “Corporate Governance Matters-Board Leadership Structure and
Committees-Independence of 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 15, 2012. UDR is the sole general partner of the Operating Partnership.
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 15, 2012. UDR is the
sole general partner of the Operating Partnership.
69
Table of Contents
(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 74 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 149 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 27, 2012 | By: | /s/ Thomas W. Toomey | ||
| 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 27, 2012 by the following persons on behalf of the registrant and in the
capacities indicated.
|
/s/ Thomas W. Toomey
|
/s/ Eric J. Foss | |||
|
|
|
|||
|
Chief Executive Officer, President, and Director
|
Director | |||
|
|
||||
|
/s/ David L. Messenger
|
/s/ Robert P. Freeman | |||
|
|
|
|||
|
Senior Vice President and Chief Financial Officer
|
Director | |||
|
(Principal Financial and Accounting Officer)
|
||||
|
|
||||
|
/s/ James D. Klingbeil
|
/s/ Jon A. Grove | |||
|
|
|
|||
|
Chairman of the Board
|
Director | |||
|
|
||||
|
/s/ Lynne B. Sagalyn
|
/s/ Mark J. Sandler | |||
|
|
|
|||
|
Vice Chair of the Board
|
Director | |||
|
|
||||
|
/s/ Katherine A. Cattanach
|
/s/ Thomas C. Wajnert | |||
|
|
|
|||
|
Director
|
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 27, 2012 | By: | /s/ Thomas W. Toomey | ||
| 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 27, 2012 by the following persons on behalf of the registrant and in the
capacities indicated.
|
/s/ Thomas W. Toomey
|
/s/ Eric J. Foss | |||
|
|
|
|||
|
Chief Executive Officer, President, and
|
Director of the General Partner | |||
|
Director of the General Partner
|
||||
|
|
||||
|
/s/ David L. Messenger
|
/s/ Robert P. Freeman | |||
|
|
|
|||
|
Senior Vice President and Chief Financial
|
Director of the General Partner | |||
|
Officer of the General Partner
|
||||
|
(Principal Financial and Accounting Officer)
|
||||
|
|
||||
|
/s/ James D. Klingbeil
|
/s/ Jon A. Grove | |||
|
|
|
|||
|
Chairman of the Board of the General Partner
|
Director of the General Partner | |||
|
|
||||
|
/s/ Lynne B. Sagalyn
|
/s/ Mark J. Sandler | |||
|
|
|
|||
|
Vice Chair of the Board of the General Partner
|
Director of the General Partner | |||
|
|
||||
|
/s/ Katherine A. Cattanach
|
/s/ Thomas C. Wajnert | |||
|
|
|
|||
|
Director of the General Partner
|
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 | ||||
|
|
||||
| 79 | ||||
|
|
||||
| 80 | ||||
|
|
||||
|
UNITED DOMINION REALTY, L.P.:
|
||||
|
|
||||
| 119 | ||||
|
|
||||
| 120 | ||||
|
|
||||
| 121 | ||||
|
|
||||
| 122 | ||||
|
|
||||
| 123 | ||||
|
|
||||
| 124 | ||||
|
|
||||
|
SCHEDULES FILED AS PART OF THIS REPORT
|
||||
|
|
||||
|
UDR, INC.:
|
||||
|
|
||||
| 149 | ||||
|
|
||||
|
UNITED DOMINION REALTY, L.P.:
|
||||
|
|
||||
| 154 | ||||
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.
We have audited the accompanying consolidated balance sheets of UDR, Inc. (the “Company”) as
of December 31, 2011 and 2010, and the related consolidated statements of operations, cash flows,
and changes in equity for each of the three years in the period ended December 31, 2011. 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, 2011 and 2010, and the
consolidated results of its operations and its cash flows for each of the three years in the period
ended December 31, 2011, 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, 2011, 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 27, 2012 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Denver, Colorado
February 27, 2012
`
February 27, 2012
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, 2011,
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, 2011, 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,
2011 and 2010, and the related consolidated statements of operations,
cash flows, and changes in equity
for each of the three years in the period ended December 31, 2011 of UDR, Inc. and our report
dated February 27, 2012, expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Denver, Colorado
February 27, 2012
February 27, 2012
75
Table of Contents
UDR, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| December 31, | ||||||||
| 2011 | 2010 | |||||||
|
ASSETS
|
||||||||
|
Real estate owned:
|
||||||||
|
Real estate held for investment
|
$ | 7,825,725 | $ | 6,198,667 | ||||
|
Less: accumulated depreciation
|
(1,831,157 | ) | (1,505,626 | ) | ||||
|
|
||||||||
|
Real estate held for investment, net
|
5,994,568 | 4,693,041 | ||||||
|
Real estate under development (net of accumlated depreciation of $570 and $0)
|
248,176 | 97,912 | ||||||
|
Real estate held for sale
(net of accumulated depreciation of $0 and $132,700)
|
— | 452,068 | ||||||
|
|
||||||||
|
Total real estate owned, net of accumulated depreciation
|
6,242,744 | 5,243,021 | ||||||
|
Cash and cash equivalents
|
12,503 | 9,486 | ||||||
|
Marketable securities
|
— | 3,866 | ||||||
|
Restricted cash
|
24,634 | 15,447 | ||||||
|
Deferred financing costs, net
|
30,068 | 27,267 | ||||||
|
Notes receivable
|
— | 7,800 | ||||||
|
Investment in unconsolidated joint ventures
|
213,040 | 148,057 | ||||||
|
Other assets
|
198,365 | 74,596 | ||||||
|
|
||||||||
|
Total assets
|
$ | 6,721,354 | $ | 5,529,540 | ||||
|
|
||||||||
|
LIABILITIES AND EQUITY
|
||||||||
|
Liabilities:
|
||||||||
|
Secured debt
|
$ | 1,891,553 | $ | 1,808,746 | ||||
|
Secured debt — real estate held for sale
|
— | 154,924 | ||||||
|
Unsecured debt
|
2,026,817 | 1,603,834 | ||||||
|
Real estate taxes payable
|
13,397 | 14,585 | ||||||
|
Accrued interest payable
|
23,208 | 20,889 | ||||||
|
Security deposits and prepaid rent
|
35,516 | 26,046 | ||||||
|
Distributions payable
|
51,019 | 36,561 | ||||||
|
Deferred fees and gains on the sale of depreciable property
|
29,100 | 28,943 | ||||||
|
Accounts payable, accrued expenses, and other liabilities
|
95,485 | 105,925 | ||||||
|
|
||||||||
|
Total liabilities
|
4,166,095 | 3,800,453 | ||||||
|
Redeemable non-controlling interests in operating partnership
|
236,475 | 119,057 | ||||||
|
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, 2010)
|
46,571 | 46,571 | ||||||
|
3,264,362 shares of 6.75% Series G Cumulative Redeemable issued
and outstanding (3,405,562 shares at December 31, 2010)
|
81,609 | 85,139 | ||||||
|
Common stock, $0.01 par value; 350,000,000 shares authorized
219,650,225 shares issued and outstanding (182,496,330 shares
at December 31, 2010)
|
2,197 | 1,825 | ||||||
|
Additional paid-in capital
|
3,340,470 | 2,450,141 | ||||||
|
Distributions in excess of net income
|
(1,142,895 | ) | (973,864 | ) | ||||
|
Accumulated other comprehensive loss, net
|
(13,902 | ) | (3,469 | ) | ||||
|
|
||||||||
|
Total stockholders’ equity
|
2,314,050 | 1,606,343 | ||||||
|
Non-controlling interest
|
4,734 | 3,687 | ||||||
|
|
||||||||
|
Total equity
|
2,318,784 | 1,610,030 | ||||||
|
|
||||||||
|
Total liabilities and equity
|
$ | 6,721,354 | $ | 5,529,540 | ||||
|
|
||||||||
See accompanying notes to consolidated financial statements.
76
Table of Contents
UDR, Inc.
(In thousands, except per share data)
| Years Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
REVENUES
|
||||||||||||
|
Rental income
|
$ | 691,263 | $ | 574,084 | $ | 547,820 | ||||||
|
Non-property income:
|
||||||||||||
|
Other income
|
17,422 | 12,502 | 14,274 | |||||||||
|
|
||||||||||||
|
Total revenues
|
708,685 | 586,586 | 562,094 | |||||||||
|
|
||||||||||||
|
EXPENSES
|
||||||||||||
|
Rental expenses:
|
||||||||||||
|
Real estate taxes and insurance
|
84,007 | 70,762 | 67,533 | |||||||||
|
Personnel
|
56,617 | 51,696 | 47,121 | |||||||||
|
Utilities
|
37,405 | 31,564 | 29,153 | |||||||||
|
Repair and maintenance
|
37,155 | 32,386 | 29,095 | |||||||||
|
Administrative and marketing
|
15,411 | 14,643 | 12,920 | |||||||||
|
Property management
|
19,009 | 15,788 | 15,066 | |||||||||
|
Other operating expenses
|
5,990 | 5,773 | 6,473 | |||||||||
|
Real estate depreciation and amortization
|
356,011 | 275,615 | 252,952 | |||||||||
|
Interest
|
||||||||||||
|
Expense incurred
|
151,144 | 140,869 | 135,317 | |||||||||
|
Amortization of convertible debt discount
|
1,077 | 3,530 | 4,283 | |||||||||
|
Other debt charges/(gains)
|
4,602 | 1,204 | (3,511 | ) | ||||||||
|
General and administrative
|
45,915 | 45,243 | 39,035 | |||||||||
|
Severance costs and other restructuring charges
|
1,342 | 6,803 | — | |||||||||
|
Other depreciation and amortization
|
3,931 | 4,843 | 5,161 | |||||||||
|
|
||||||||||||
|
Total expenses
|
819,616 | 700,719 | 640,598 | |||||||||
|
|
||||||||||||
|
Loss from operations
|
(110,931 | ) | (114,133 | ) | (78,504 | ) | ||||||
|
Loss from unconsolidated entities
|
(6,352 | ) | (4,204 | ) | (18,665 | ) | ||||||
|
Tax benefit/(expense) of taxable REIT subsidiary
|
5,647 | 2,533 | (311 | ) | ||||||||
|
|
||||||||||||
|
Loss from continuing operations
|
(111,636 | ) | (115,804 | ) | (97,480 | ) | ||||||
|
Income from discontinued operations, net of tax
|
132,221 | 9,216 | 5,857 | |||||||||
|
|
||||||||||||
|
Consolidated net income/(loss)
|
20,585 | (106,588 | ) | (91,623 | ) | |||||||
|
Net (income)/loss attributable to redeemable non-controlling interests in OP
|
(395 | ) | 3,835 | 4,282 | ||||||||
|
Net income attributable to non-controlling interests
|
(167 | ) | (146 | ) | (191 | ) | ||||||
|
|
||||||||||||
|
Net income/(loss) attributable to UDR, Inc.
|
20,023 | (102,899 | ) | (87,532 | ) | |||||||
|
Distributions to preferred stockholders — Series E (Convertible)
|
(3,724 | ) | (3,726 | ) | (3,724 | ) | ||||||
|
Distributions to preferred stockholders — Series G
|
(5,587 | ) | (5,762 | ) | (7,188 | ) | ||||||
|
(Premium)/discount on preferred stock repurchases, net
|
(175 | ) | 25 | 2,586 | ||||||||
|
|
||||||||||||
|
Net income/(loss) attributable to common stockholders
|
$ | 10,537 | $ | (112,362 | ) | $ | (95,858 | ) | ||||
|
|
||||||||||||
|
|
||||||||||||
|
Earnings per weighted average common share — basic and diluted:
|
||||||||||||
|
Loss from continuing operations attributable to common stockholders
|
$ | (0.60 | ) | $ | (0.73 | ) | $ | (0.68 | ) | |||
|
Income from discontinued operations
|
$ | 0.66 | $ | 0.06 | $ | 0.04 | ||||||
|
Net income/(loss) attributable to common stockholders
|
$ | 0.05 | $ | (0.68 | ) | $ | (0.64 | ) | ||||
|
Common distributions declared per share
|
$ | 0.80 | $ | 0.73 | $ | 0.85 | ||||||
|
Weighted average number of common shares outstanding — basic and diluted
|
201,294 | 165,857 | 149,090 | |||||||||
See accompanying notes to consolidated financial statements.
77
Table of Contents
UDR, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except for share data)
| Years Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Operating Activities
|
||||||||||||
|
Consolidated net income/(loss)
|
$ | 20,585 | $ | (106,588 | ) | $ | (91,623 | ) | ||||
|
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
374,274 | 308,289 | 283,552 | |||||||||
|
Net gain on sale of marketable securities
|
(3,123 | ) | (4,725 | ) | — | |||||||
|
Net gain on sale of cost investments
|
(3,946 | ) | — | — | ||||||||
|
Net gains on the sale of depreciable property
|
(125,928 | ) | (4,083 | ) | (2,424 | ) | ||||||
|
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
|
4,602 | 1,204 | (9,849 | ) | ||||||||
|
Write off of bad debt
|
3,613 | 2,838 | 3,570 | |||||||||
|
Write off of note receivable and other assets
|
— | — | 1,354 | |||||||||
|
Loss from unconsolidated entities
|
6,352 | 4,204 | 18,665 | |||||||||
|
Amortization of deferred financing costs and other
|
8,696 | 8,957 | 7,953 | |||||||||
|
Amortization of deferred compensation
|
9,815 | 11,411 | 7,605 | |||||||||
|
Amortization of convertible debt discount
|
1,077 | 3,530 | 4,283 | |||||||||
|
Changes in income tax accruals
|
1,424 | (865 | ) | 2,854 | ||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Decrease/(increase) in operating assets
|
(40,623 | ) | (5,332 | ) | 3,512 | |||||||
|
(Decrease)/increase in operating liabilities
|
(12,582 | ) | (4,660 | ) | 291 | |||||||
|
|
||||||||||||
|
Net cash provided by operating activities
|
244,236 | 214,180 | 229,383 | |||||||||
|
|
||||||||||||
|
Investing Activities
|
||||||||||||
|
Proceeds from sales of real estate investments, net
|
321,803 | 20,738 | — | |||||||||
|
Proceeds from the sale of marketable securities
|
9,799 | 39,488 | — | |||||||||
|
Acquisition of real estate assets (net of liabilities assumed) and initial capital expenditures
|
(989,029 | ) | (347,582 | ) | (28,528 | ) | ||||||
|
Cash paid in nonmonetary asset exchange
|
(28,124 | ) | — | — | ||||||||
|
Development of real estate assets
|
(98,683 | ) | (92,142 | ) | (183,157 | ) | ||||||
|
Capital expenditures and other major improvements — real estate assets,
net of escrow reimbursement
|
(91,476 | ) | (73,977 | ) | (85,403 | ) | ||||||
|
Capital expenditures — non-real estate assets
|
(13,267 | ) | (4,342 | ) | (6,269 | ) | ||||||
|
Payments related to the buyout of joint venture partner
|
— | (16,141 | ) | — | ||||||||
|
Investment in unconsolidated joint ventures
|
(102,810 | ) | (110,921 | ) | (24,988 | ) | ||||||
|
Distributions received from/(paid to) unconsolidated joint venture
|
11,202 | 1,125 | 1,741 | |||||||||
|
Proceeds from note receivable
|
7,800 | — | 200,000 | |||||||||
|
Purchase deposits on pending real estate acquisitions
|
(80,397 | ) | — | — | ||||||||
|
Disbursements related to notes receivable
|
— | — | (500 | ) | ||||||||
|
Purchase of marketable securities
|
— | — | (30,941 | ) | ||||||||
|
|
||||||||||||
|
Net cash used in investing activities
|
(1,053,182 | ) | (583,754 | ) | (158,045 | ) | ||||||
|
|
||||||||||||
|
Financing Activities
|
||||||||||||
|
Payments on secured debt
|
(336,004 | ) | (187,308 | ) | (159,612 | ) | ||||||
|
Proceeds from the issuance of secured debt
|
30,728 | 68,380 | 560,436 | |||||||||
|
Proceeds from the issuance of unsecured debt
|
296,964 | 399,190 | 100,000 | |||||||||
|
Payments on unsecured debt
|
(264,829 | ) | (79,236 | ) | (641,759 | ) | ||||||
|
Net (repayment)/proceeds of revolving bank debt
|
389,250 | (157,550 | ) | 189,300 | ||||||||
|
Payment of financing costs
|
(13,465 | ) | (8,244 | ) | (8,650 | ) | ||||||
|
Issuance of common and restricted stock, net
|
3,866 | 5,446 | 398 | |||||||||
|
Proceeds from the issuance of common shares through public offering, net
|
879,754 | 467,565 | 67,151 | |||||||||
|
Payments for the repurchase of Series G preferred stock, net
|
(3,597 | ) | (637 | ) | (21,505 | ) | ||||||
|
Distributions paid to non-controlling interests
|
(10,947 | ) | (4,314 | ) | (7,275 | ) | ||||||
|
Distributions paid to preferred stockholders
|
(9,311 | ) | (9,488 | ) | (11,203 | ) | ||||||
|
Distributions paid to common stockholders
|
(150,446 | ) | (120,729 | ) | (144,576 | ) | ||||||
|
Repurchase of common stock
|
— | — | (798 | ) | ||||||||
|
|
||||||||||||
|
Net cash provided by/(used in) financing activities
|
811,963 | 373,075 | (78,093 | ) | ||||||||
See accompanying notes to consolidated financial statements.
78
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UDR, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands, except for share data)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands, except for share data)
| Years Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Net increase/(decrease) in cash and cash equivalents
|
3,017 | 3,501 | (6,755 | ) | ||||||||
|
Cash and cash equivalents, beginning of year
|
9,486 | 5,985 | 12,740 | |||||||||
|
|
||||||||||||
|
Cash and cash equivalents, end of year
|
$ | 12,503 | $ | 9,486 | $ | 5,985 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Supplemental Information:
|
||||||||||||
|
Interest paid during the year, net of amounts capitalized
|
$ | 168,577 | $ | 154,843 | $ | 164,357 | ||||||
|
Non-cash transactions:
|
||||||||||||
|
Real estate acquired in asset exchange
|
268,853 | — | — | |||||||||
|
Real estate disposed in asset exchange
|
192,576 | — | — | |||||||||
|
Contingent consideration accrued in business combination
|
3,000 | — | — | |||||||||
|
OP Units issued in partial consideration for property acquisitions
|
111,034 | — | — | |||||||||
|
Secured debt assumed in the acquisitions of properties, including asset exchange
|
278,657 | 91,442 | — | |||||||||
|
Secured debt transferred in asset exchange
|
55,356 | — | — | |||||||||
|
Fair market value adjustment of secured debt assumed in acquisitions of properties,
including asset exchange
|
26,880 | 1,820 | — | |||||||||
|
Fair market value of land contributed by non-controlling interest
|
4,078 | — | — | |||||||||
|
Non-cash consideration to acquire non-real estate asset
|
6,864 | — | — | |||||||||
|
Conversion of operating partnership non-controlling interests to Common Stock
(12,511 in 2011; 923,944 in 2010; and 2,130,452 in 2009)
|
287 | 18,429 | 21,117 | |||||||||
|
Retirement of fully depreciated assets
|
— | 8,680 | 4,407 | |||||||||
|
Issuance of restricted stock awards
|
6 | 16 | 2 | |||||||||
|
Payment of Special Dividend through the issuance of 11,358,042 shares of Common
Stock
|
— | — | 132,787 | |||||||||
See accompanying notes to consolidated financial statements.
79
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UDR, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except per share data)
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Distributions in | Other | |||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Excess of | Comprehensive | Non-controlling | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Net Income | Income/(Loss) | interest | Total | ||||||||||||||||||||||||||||
|
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 | ) | |||||||||||||||||||||||||
|
Net income attributable 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 | ) | |||||||||||||||||||||||
|
Adjustment for conversion of non-controlling interest in Series B and C LLC
Series C, D and E LLC
|
— | — | — | — | 1,456 | — | — | — | 1,456 | |||||||||||||||||||||||||||
|
Adjustment for conversion of non-controlling interests
of unitholders in operating partnerships
|
— | — | 2,130,452 | 21 | 21,096 | — | — | — | 21,117 | |||||||||||||||||||||||||||
|
Issuance of common shares through special dividend
|
— | — | 11,358,042 | 114 | 132,673 | — | — | — | 132,787 | |||||||||||||||||||||||||||
|
Common stock distributions declared ($0.845 per share)
|
— | — | — | — | — | (127,066 | ) | — | — | (127,066 | ) | |||||||||||||||||||||||||
|
Preferred stock distributions declared-Series E ($1.3288 per share)
|
— | — | — | — | — | (3,724 | ) | — | — | (3,724 | ) | |||||||||||||||||||||||||
|
Preferred stock distributions declared-Series G ($1.6875 per share)
|
— | — | — | — | — | (7,188 | ) | — | — | (7,188 | ) | |||||||||||||||||||||||||
|
Adjustment to reflect redeemable non-controlling redemption value
|
— | — | — | — | — | (15,519 | ) | — | (15,519 | ) | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Balance, December 31, 2009
|
6,236,774 | 132,395 | 155,465,482 | 1,555 | 1,948,669 | (687,180 | ) | 2 | 3,541 | 1,398,982 | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Comprehensive (loss)/income
|
||||||||||||||||||||||||||||||||||||
|
Net loss attributable to UDR, Inc.
|
— | — | — | — | — | (102,899 | ) | — | (102,899 | ) | ||||||||||||||||||||||||||
|
Net income attributable to non-controlling interest
|
— | — | — | — | — | — | — | 146 | 146 | |||||||||||||||||||||||||||
|
Other comprehensive income:
|
||||||||||||||||||||||||||||||||||||
|
Change in fair value of marketable securities
|
— | — | — | — | — | — | (1,092 | ) | — | (1,092 | ) | |||||||||||||||||||||||||
|
Unrealized loss 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 Redeemable Shares
|
(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 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Comprehensive (loss)/income
|
||||||||||||||||||||||||||||||||||||
|
Net income attributable to UDR, Inc.
|
— | — | — | — | — | 20,023 | — | 20,023 | ||||||||||||||||||||||||||||
|
Net income attributable to non-controlling interest
|
— | — | — | — | — | — | — | 167 | 167 | |||||||||||||||||||||||||||
|
Other comprehensive income:
|
||||||||||||||||||||||||||||||||||||
|
Change in fair value of marketable securities
|
— | — | — | — | — | — | (3,492 | ) | — | (3,492 | ) | |||||||||||||||||||||||||
|
Unrealized loss on derivative financial
instruments
|
— | — | — | — | — | — | (7,345 | ) | — | (7,345 | ) | |||||||||||||||||||||||||
|
Allocation to redeemable non-controlling
interests
|
— | — | — | — | — | — | 404 | — | 404 | |||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Comprehensive income/(loss)
|
— | — | — | — | — | 20,023 | (10,433 | ) | 167 | 9,757 | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Issuance of common and restricted shares
|
— | — | 615,752 | 6 | 10,996 | — | — | — | 11,002 | |||||||||||||||||||||||||||
|
Issuance of common shares through public offering
|
— | — | 36,525,632 | 366 | 879,388 | 879,754 | ||||||||||||||||||||||||||||||
|
Repurchase of 141,200 shares of 6.75% Series G Cumulative Redeemable Shares
|
(141,200 | ) | (3,530 | ) | 108 | (175 | ) | — | — | (3,597 | ) | |||||||||||||||||||||||||
|
Adjustment for conversion of non-controlling interests
of unitholders in operating partnerships
|
— | — | 12,511 | — | 287 | — | — | — | 287 | |||||||||||||||||||||||||||
|
Acquistion of noncontrolling interest
|
— | — | — | — | (450 | ) | — | — | — | (450 | ) | |||||||||||||||||||||||||
|
Increase in non-controlling interest from business combination, net
|
— | — | — | — | — | — | — | 880 | 880 | |||||||||||||||||||||||||||
|
Common stock distributions declared ($0.80 per share)
|
— | — | — | — | — | (165,590 | ) | — | — | (165,590 | ) | |||||||||||||||||||||||||
|
Preferred stock distributions declared-Series E ($1.3288 per share)
|
— | — | — | — | — | (3,724 | ) | — | — | (3,724 | ) | |||||||||||||||||||||||||
|
Preferred stock distributions declared-Series G ($1.6875 per share)
|
— | — | — | — | — | (5,587 | ) | — | — | (5,587 | ) | |||||||||||||||||||||||||
|
Adjustment to reflect redeemable non-controlling redemption value
|
— | — | — | — | — | (13,978 | ) | — | (13,978 | ) | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Balance, December 31, 2011
|
6,068,174 | $ | 128,180 | 219,650,225 | $ | 2,197 | $ | 3,340,470 | $ | (1,142,895 | ) | $ | (13,902 | ) | $ | 4,734 | $ | 2,318,784 | ||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
80
Table of Contents
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011
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, 2011, our apartment portfolio consisted of 163 consolidated communities
located in 22 markets consisting of 47,343 apartment homes. In addition, the Company has an
ownership interest in 10,496 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.
Basis of presentation
The accompanying Consolidated Financial Statements of UDR includes its wholly-owned and/or
controlled subsidiaries (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”).
As of December 31, 2011 and 2010, there were 184,281,253 and 179,909,408 units in the Operating
Partnership outstanding, of which 174,859,951 units or 94.9% and 174,847,440 units or 97.2% were
owned by UDR and 9,421,302 units or 5.1% and 5,061,968 units or 2.8% were owned by limited
partners, respectively. 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 Communities LP as of December 31,
2009.
The Company evaluated subsequent events through the date its financial statements were issued.
Except as disclosed in Note 18,
Subsequent Events
, no other recognized or non-recognized subsequent
events were noted.
2. SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) No. 2011-05,
Comprehensive Income (Topic 220)
, which provides that an entity has the
option to present the total of comprehensive income, the components of net income, and the
components of other comprehensive income either in a single continuous statement of comprehensive
income or in two separate but consecutive statements. In both
81
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
choices, an entity is required to present each component of net income along with total net
income, each component of other comprehensive income along with a total for other comprehensive
income, and a total amount for comprehensive income. This ASU eliminates the option to present the
components of other comprehensive income as part of the statement of changes in equity. The ASU
does not change the items that must be reported in other comprehensive income or when an item of
other comprehensive income must be reclassified to net income. This requirement is effective for
fiscal years and interim periods beginning after December 15, 2011 for the Company. The Company
does not expect a material impact on its consolidated financial position, results of operations, or
cash flows as a result of this new guidance.
The FASB recently issued ASU Update No. 2011-12,
Deferral of the Effective Date for Amendments
to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in
Accounting Standards Update No. 2011-05
. The amendments are being made to allow the FASB time to
redeliberate whether to present on the face of the financial statements the effects of
reclassifications out of accumulated other comprehensive income on the components of net income and
other comprehensive income for all periods presented. All other requirements in ASU 2011-05 are not
affected by ASU 2011-12, including the requirement to report comprehensive income either in a
single continuous financial statement or in two separate but consecutive financial statements.
In May 2011, the FASB issued ASU No. 2011-04,
Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRS (ASC 820),
which clarifies Topic 820,
but also includes some instances where a particular principle or requirement for measuring fair
value or disclosing information about fair value measurements has changed. This ASU results in
common principles and requirements for measuring fair value and for disclosing information about
fair value measurements in accordance with U.S. GAAP and International Finance Reporting Standards
(“IFRS”). This is effective for periods beginning after December 15, 2011 for the Company. The
Company does not expect a material impact on its consolidated financial position, results of
operations, or cash flows as a result of this new guidance.
In December 2010, the FASB issued ASU No. 2010-29,
Business Combinations (Topic 805):
Disclosure of Supplementary Pro Forma Information for Business Combinations (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 Company adopted the requirements of in ASU 2010-29, which were effective prospectively for the
Company’s business combinations occurring during the year ended December 31, 2011. See Note 3,
Real
Estate Owned
, for these disclosures.
In January 2010, the FASB issued ASU No. 2010-06,
Improving Disclosures about Fair Value
Measurements
an amendment to ASC Topic 820,
Fair Value Measurements and Disclosures (ASU 2010-06)
.
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. With the
exception for the requirement to disclose activity in Level 3 fair value measurements, which
include purchases, sales, issuances and settlements in the rollforward activity, ASU 2010-06 was
effective for the Company for our fiscal year beginning in January 1, 2010. Disclosures of
rollforward activity in Level 3 fair value measurements was effective for the Company for the
interim periods within and for the fiscal year beginning in January 1, 2011, and did not have a
material impact on our consolidated financial position, results of operations or cash flows during
the year ended December 31, 2011.
82
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
Real estate
Real estate assets held for investment are carried at historical cost and consist of land,
buildings and improvements, furniture, fixtures and equipment and other costs incurred during their
development, acquisition and redevelopment.
Expenditures for ordinary repair and maintenance costs are charged to expense as incurred.
Expenditures for improvements, renovations, and replacements related to the acquisition and/or
improvement of real estate assets are capitalized and depreciated over their estimated useful lives
if the expenditures qualify as a betterment or the life of the related asset will be substantially
extended beyond the original life expectancy.
UDR purchases real estate investment properties and records the tangible and identifiable
intangible assets and liabilities acquired based on their estimated fair value. The primary,
although not only, identifiable intangible asset associated with our portfolio is the value of
existing lease agreements. When recording the acquisition of a community, we first assign fair
value to the estimated intangible value of the existing lease agreements and then to the estimated
value of the land, building and fixtures assuming the community is vacant. The Company estimates
the intangible value of the lease agreements by determining the lost revenue associated with a
hypothetical lease-up. Depreciation on the building is based on the expected useful life of the
asset and the in-place leases are amortized over their remaining average contractual life. Property
acquisition costs are expensed as incurred.
Quarterly or when changes in circumstances warrant, UDR will assess our real estate 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 net operating
income (“NOI”) plus the residual value of the community. Our future cash flow estimates are based
upon historical results adjusted to reflect our best estimate of future market and operating
conditions and our estimated holding periods. If such indicators of impairment are present and the
carrying value exceeds the undiscounted cash flows of the community, an impairment loss is
recognized equal to the excess of the carrying amount of the asset over its estimated fair value.
Our estimates of fair market value represent our best estimate based primarily upon unobservable
inputs related to rental rates, operating costs, growth rates, discount rates, capitalization
rates, industry trends and reference to market rates and transactions.
For long-lived assets to be disposed of, impairment losses are recognized when the fair value
of the asset less estimated cost to sell is less than the carrying value of the asset. Properties
classified as real estate held for sale generally represent properties that are actively marketed
or contracted for sale with the closing expected to occur within the next twelve months. Real
estate held for sale is carried at the lower of cost, net of accumulated depreciation, or fair
value, less the cost to sell, determined on an asset-by-asset basis. Expenditures for ordinary
repair and maintenance costs on held for sale properties are charged to expense as incurred.
Expenditures for improvements, renovations, and replacements related to held for sale properties
are capitalized at cost. Depreciation is not recorded on real estate held for sale.
Depreciation is computed on a straight-line basis over the estimated useful lives of the
related assets which are 35 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, 2011 and 2010, the
amount of our net intangible assets which are reflected in “Other assets” was $21.4 million and
$13.3 million, respectively. As of December 31, 2011 and 2010, the amount of our net intangible
liabilities which are reflected in “Accounts payable, accrued expenses, and other liabilities” was
$5.9 million and $3.9 million in our Consolidated Balance Sheets. The balances are being amortized
over the remaining life of the respective intangible.
All development projects and related 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 Company ceases capitalization and the assets are depreciated
over their estimated useful life. 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 the years ended 2011, 2010, and 2009, total interest capitalized
was $13.0 million, $12.5 million, and $16.9 million, respectively.
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
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.
Marketable Securities
Marketable securities represented common stock in a publicly held company and were classified
as “available-for-sale”. At December 31, 2010, the marketable securities were carried at an
estimated fair value of $3.9 million, which consisted of a cost of $374,000 and gross unrealized
gains of $3.5 million that was reported as a component of stockholders’ equity.
During the year ended December 31, 2011, the Company sold the marketable securities for $3.5
million, resulting in a gross realized gain of $3.1 million, which is included in “Other Income” on
the Consolidated Statements of Operations. The cost of securities sold was based on the specific
identification method. As a result of the sale, unrealized gains of $3.5 million were reclassified
out of accumulated other comprehensive income/(loss) into earnings during the year ended December
31, 2011.
During the year ended December 31, 2010, the Company sold previously held corporate debt
securities, which were classified as “available-for-sale”. Proceeds from the sale of these
securities 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 amortization of any
discount and interest income on these securities are also included in “Other Income” on the
Consolidated Statements of Operations for the year ended December 31, 2010 and 2009.
Investment in joint ventures
We use the equity method to account for investments that qualify as variable interest entities
where we are not the primary beneficiary and entities that we do not control or where we do not own
a majority of the economic interest but have the ability to exercise significant influence over the
operating and financial policies of the investee. Throughout these financial statements we use the
term “joint venture” when referring to investments in entities in which we do not have a 100%
ownership interest. The Company also uses the equity method when we function as the managing 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/loss when
earned/incurred and distributions are credited against our investment in the joint venture as
received.
In determining whether a joint venture is a variable interest entity, the Company considers:
the form of our ownership interest and legal structure; the size of our investment; the financing
structure of the entity, including necessity of subordinated debt; estimates of future cash flows;
ours and our partner’s ability to participate in the decision making related to acquisitions,
disposition, budgeting and financing of the entity; obligation to absorb losses and preferential
returns; nature of our partner’s primary operations; and the degree, if any, of disproportionally
between the economic and voting interests of the entity. As of December 31, 2011, the Company did
not assess any of our joint ventures as variable interest entities where UDR was the primary
beneficiary.
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
We evaluate our investments in unconsolidated joint ventures for events or changes in
circumstances that indicate there may be an other-than-temporary decline in value. We consider
various factors to determine if a decrease in the value of the investment is other-than-temporary.
These factors include, but are not limited to, age of the venture, our intent and ability to retain
our investment in the entity, the financial condition and long-term prospects of the entity, the
fair value of the property of the joint venture, and the relationships with the other joint venture
partners and its lenders. The amount of loss recognized is the excess of the investment’s carrying
amount over its estimated fair value. If we believe that the decline in fair value is temporary, no
impairment is recorded. The aforementioned factors are taken into consideration as a whole by
management in determining the valuation of our equity method investments. Should the actual results
differ from management’s judgment, the valuation could be negatively affected and may result in a
negative impact to our Consolidated Financial Statements.
Derivative financial instruments
The Company utilizes derivative financial instruments to manage interest rate risk and
generally designates these financial instruments as cash flow hedges. Derivative financial
instruments are recorded on our Consolidated Balance Sheets as either an asset or liability and
measured quarterly at their fair value. The changes in fair value for cash flow hedges that are
deemed effective are reflected in other comprehensive income and for non-designated derivative
financial instruments in earnings. The ineffective component of cash flow hedges, if any, is
recorded in earnings.
Redeemable noncontrolling interests in the Operating Partnership
Interests in the Operating Partnership 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”)), 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, equivalent to the fair value of a share of UDR
common stock, at each balance sheet date.
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
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
. For sale transactions meeting the requirements for full accrual profit recognition, such as
the Company no longer having continuing involvement in the property, we remove the related assets
and liabilities from our Consolidated Balance Sheets and record the gain or loss in the period the
transaction closes. For sale transactions that do not meet the full accrual sale criteria due to
our continuing involvement, we evaluate the nature of the continuing involvement and account for
the transaction under an alternate method of accounting.
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
Sales to entities in which we retain or otherwise own an interest are accounted for as partial
sales. If all other requirements for recognizing profit under the full accrual method have been
satisfied and no other forms of continuing involvement are present, we recognize profit
proportionate to the outside interest in the buyer and defer the gain on the interest we retain.
The Company recognizes any deferred gain when the property is sold to a third party. In
transactions accounted 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.
Income taxes
UDR is operated as, and elects to be taxed as a REIT. Generally, a REIT complies with the
provisions of the Internal Revenue Code if it meets certain requirements concerning its income and
assets, as well as if it distributes at least 90% of its REIT taxable income to its stockholders
and will not be subject to U.S. federal income taxes if it distributes at least 100% of its income.
Accordingly, no provision has been made for federal income taxes of the REIT. UDR is subject to
certain state and local excise or franchise taxes, for which provision has been made. If we fail to
qualify as a REIT in any taxable year, our taxable income will be subject to United States Federal
income tax at regular corporate rates (including any applicable alternative minimum tax). Even if
we qualify as a REIT, we may be subject to certain state and local income taxes and to United
States Federal income tax. We also will be required to pay a 100% tax on non-arms length
transactions between us and a taxable REIT subsidiary and on any net income from sales of property
that the IRS successfully asserts was property held for sale to customers in the ordinary course.
UDR elected for certain consolidated subsidiaries to be treated as Taxable REIT Subsidiaries
(“TRS”) relating to the Company’s development activities. Income taxes for our TRS are accounted
for under the asset and liability method. Deferred tax assets and liabilities are recognized for
future tax consequences attributable 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.
Discontinued operations
For properties accounted for under FASB ASC 360,
Property, Plant and Equipment
(“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 pursuant to FASB ASC 205-20,
Presentation of Financial Statements — Discontinued
Operations
(“Topic 205-20”). Further, to meet the discontinued operations criteria, the Company
will not have any significant continuing involvement in the ownership or operation of the property
after the sale or disposition. Once a property is classified as held-for-sale, depreciation is no
longer recorded. However, if the Company determines that the property no longer meets the criteria
for held-for-sale, the Company will recapture any unrecorded depreciation on the property. (See
Note 4,
Discontinued Operations
for further discussion).
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.
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
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, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Numerator for earnings per share — basic and diluted:
|
||||||||||||
|
Net income/(loss) attributable to common stockholders
|
$ | 10,537 | $ | (112,362 | ) | $ | (95,858 | ) | ||||
|
|
||||||||||||
|
|
||||||||||||
|
Denominator for earnings per share — basic and diluted:
|
||||||||||||
|
Weighted average common shares outstanding
|
202,573 | 167,365 | 150,067 | |||||||||
|
Non-vested restricted stock awards
|
(1,279 | ) | (1,508 | ) | (977 | ) | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Denominator for basic and diluted earnings per share
|
201,294 | 165,857 | 149,090 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Net income/(loss) attributable to common
stockholders — basic and diluted
|
$ | 0.05 | $ | (0.68 | ) | $ | (0.64 | ) | ||||
|
|
||||||||||||
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 for the years ended
December 31, 2011, 2010, 2009.
If the operating partnership units were converted to Common Stock, the additional shares of
Common Stock outstanding for the years ended December 31, 2011, 2010, and 2009 would be 7,601,693;
5,711,275; and 6,705,624 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, 2011, 2010 and 2009.
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, 2011, 2010, and 2009 would be 2,154,739; 2,296,097; and 729,592 weighted
average Common Shares, respectively.
Stock-based employee compensation plans
UDR accounts for its stock-based employee compensation plans in accordance with FASB ASC 718,
Compensation- Stock Compensation
. 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.
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 2011, 2010, and 2009, total
advertising expense was $5.4 million, $6.4 million, and $5.7 million, respectively.
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
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
. 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.
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 Changes in Equity. For each of the three years ended
December 31, 2011, 2010, and 2009 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, and the
allocation of other comprehensive income/(loss) to redeemable non-controlling interests.
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.
Market concentration risk
The Company is subject to increased exposure from economic and other competitive factors
specific to markets where the Company holds a significant percentage of the carrying value of its
real estate portfolio. At December 31, 2011, the Company held greater than 10% of the
carrying value of its real estate portfolio in the Orange County, California; Metropolitan DC; and
New York, New York markets.
New York, New York markets.
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
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, 2011, the Company owned and consolidated 163 communities in 11 states and
the District of Columbia totaling 47,343 apartment homes. The following table summarizes the
carrying amounts for our real estate owned (at cost) as of December 31, 2011 and 2010
(dollar
amounts in thousands):
| December 31, | ||||||||
| 2011 | 2010 | |||||||
|
Land
|
$ | 1,919,249 | $ | 1,611,740 | ||||
|
Depreciable property — held and used:
|
||||||||
|
Building and improvements
|
5,612,513 | 4,313,338 | ||||||
|
Furniture, fixtures and
equipment
|
293,963 | 273,589 | ||||||
|
Under development:
|
||||||||
|
Land
|
116,051 | 62,410 | ||||||
|
Construction in progress
|
132,695 | 35,502 | ||||||
|
Held for sale:
|
||||||||
|
Land
|
— | 171,967 | ||||||
|
Building and improvements
|
— | 383,076 | ||||||
|
Furniture, fixtures and
equipment
|
— | 29,725 | ||||||
|
|
||||||||
|
Real estate owned
|
8,074,471 | 6,881,347 | ||||||
|
Accumulated depreciation
|
(1,831,727 | ) | (1,638,326 | ) | ||||
|
|
||||||||
|
Real estate owned, net
|
$ | 6,242,744 | $ | 5,243,021 | ||||
|
|
||||||||
The following table summarizes UDR’s real estate community acquisitions for the year
ended December 31, 2011
(dollar amounts in thousands)
:
| Purchase | ||||||||||||||||
| Property Name | Market | Acquisition Date | Units | Price (a) | ||||||||||||
|
|
||||||||||||||||
|
10 Hanover Square
|
New York, NY | April 2011 | 493 | $ | 259,750 | |||||||||||
|
388 Beale
|
San Francisco, CA | April 2011 | 227 | 90,500 | ||||||||||||
|
14 North
|
Boston, MA | April 2011 | 387 | 64,500 | ||||||||||||
|
Inwood West
|
Boston, MA | April 2011 | 446 | 108,000 | ||||||||||||
|
View 14
|
Metropolitan D.C. | June 2011 | 185 | 105,538 | ||||||||||||
|
Rivergate
|
New York, NY | July 2011 | 706 | 443,403 | ||||||||||||
|
21 Chelsea
|
New York, NY | August 2011 | 210 | 138,930 | ||||||||||||
|
95 Wall
|
New York, NY | August 2011 | 507 | 328,914 | ||||||||||||
|
|
||||||||||||||||
|
|
3,161 | $ | 1,539,535 | |||||||||||||
|
|
||||||||||||||||
| (a) | The purchase price is the contractual sales price between UDR and the third party and does not include any costs that the Company incurred in the pursuit of the property or the recorded difference between the agreed upon value and the fair value of the OP Units issued as part of the consideration paid. |
During the year ended December 31, 2011, the Company also acquired three parcels of land
located in Huntington Beach, California; Addison, Texas; and Boston, Massachusetts for a gross
purchase price of $34.3 million.
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
During the year ended December 31, 2011, the Company entered into a joint venture to acquire
and redevelop an existing commercial property. See Note 5,
Joint Ventures.
In April 2011, the Company and the Operating Partnership closed on the acquisition of 10
Hanover Square. The community was acquired for $259.8 million, which included assumed debt with a
fair value of $208.1 million, and the issuance of 2,569,606 OP Units of the Operating Partnership.
The OP Units were deemed to have an agreed upon value equal to the greater of $25.00 or the
volume weighted average closing price per share of the Company’s common stock for the 10 day period
ended on (and including) the date one business day prior to the settlement date. For purchase price
accounting purposes, the fair value of these OP units was $24.47 at the settlement date.
In April 2011, the Company and the Operating Partnership completed a $500.0 million
asset exchange whereby UDR acquired 388 Beale, and the Operating Partnership acquired 14 North, and
Inwood West. The communities acquired were valued at $263.0 million representing their estimated
fair value. The Company paid $28.1 million of cash and assumed debt with a fair value of $61.7
million. UDR sold two multifamily apartment communities (434 homes) and the Operating Partnership
sold four multifamily apartment communities (984 homes) located in California as part of the
transaction. (See Note 4,
Discontinued Operations
, for further discussion of real estate community
dispositions.)
In August 2011, the Company and the Operating Partnership closed on the acquisition of 95
Wall. The community was acquired for $328.9 million, which included the issuance of 1,802,239 OP
Units of the Operating Partnership. The OP Units were deemed to have an agreed upon value
equal to the greater of $25.00 or the volume weighted average closing price per share of the
Company’s common stock for the 10 day period ended on (and including) the date one business day
prior to the settlement date. For purchase price accounting purposes, the fair value of these OP
units was $26.71 at the settlement date.
The Company records the fair value of the tangible and identifiable intangible assets and
liabilities acquired based on their estimated fair value. When recording the acquisition of a
community, the Company first assigns fair value to the estimated intangible value of the existing
lease agreements and then to the estimated value of the land, building and fixtures assuming the
community is vacant. The primary, although not only, identifiable intangible asset associated with
our portfolio is the value of existing lease agreements. The Company estimates the intangible value
of the lease agreements by determining the lost revenue associated with a hypothetical lease-up.
Total acquisition value of the communities, including the difference between the agreed upon
value of the OP Units and the fair value of the OP Units issued at the acquisition date (if
applicable), was recorded $301.7 million to land; $1.2 billion to buildings and improvements; $6.1
million to furniture, fixtures, and equipment; $39.6 million to intangible assets; $3.1 million to
intangible below market lease liabilities; and $305.5 million to assumed debt.
The Company’s results of operations include operating revenues of $58.4 million and loss from
continuing operations of $26.9 million of the acquired properties from the acquisition dates to
December 31, 2011.
The unaudited pro forma information below summarizes the Company’s combined results of
operations for the years ended December 31, 2011, and 2010 as though the above acquisitions were
completed on January 1, 2010. The information for the years
ended December 31, 2011 and 2010 includes
pro forma results for the portion of the period prior to the acquisition date and actual results
from the date of acquisition through the end of the period. The supplemental pro forma operating
data is not necessarily indicative of what the actual results of operations would have been
assuming the transaction had been completed as set forth above, nor does it purport to represent
the Company’s results of operations for future periods (
in thousands except for per share amounts
).
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
| December 31, | ||||||||
| 2011 | 2010 | |||||||
|
Pro forma revenues
|
$ | 740,342 | $ | 712,380 | ||||
|
Pro forma loss attributable to common stockholders
|
(4,309 | ) | (109,442 | ) | ||||
|
Proforma loss attributable to common stockholders — basic
|
(0.02 | ) | (0.64 | ) | ||||
|
Pro forma loss attributable to common stockholders — diluted
|
(0.02 | ) | (0.64 | ) | ||||
During the year ended December 31, 2010, the Company acquired five operating communities
with 1,374 apartment homes for a total purchase price of $412.0 million and a parcel of land for a
total gross purchase price of $23.6 million.
During the year ended December 31, 2009, the Company acquired one community with 289 apartment
homes in Dallas, Texas.
The Company incurred $4.8 million, $2.9 million and $0 of acquisition-related costs during the
years ended December 31, 2011, 2010 and 2009, respectively. These expenses are classified on the
Consolidated Statements of Operations in the line item entitled “General and administrative”.
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 sale 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 sale through December 31, 2011, within the
Consolidated Statements of Operations for the years ended December 31, 2011, 2010, and 2009, and
the reclassification of the assets and liabilities within the Consolidated Balance Sheets as of
December 31, 2011 and 2010, if applicable. The gain on sale and 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, 2011, the Company sold 18 apartment home communities (4,488
homes), which included 6 apartment home communities (1,418 homes) sold in conjunction with an asset
exchange in April 2011, for a total sales price of $593.4 million. During the year ended December
31, 2011, UDR recognized gains on the sale of apartment home communities for financial reporting
purposes of $138.5 million, which is also included in discontinued operations. At December 31,
2011, UDR did not have any assets that met the criteria to be classified as held for sale.
During the year ended December 31, 2010, UDR sold one apartment home community (149 homes).
UDR recognized gains for financial reporting purposes of $4.1 million, which is included in
discontinued operations.
For the year ended December 31, 2009, the Company did not dispose of any apartment home
communities.
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
The following is a summary of income from discontinued operations for the years ended December
31,
(dollars in thousands)
:
| December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Rental income
|
$ | 39,695 | $ | 59,784 | $ | 55,079 | ||||||
|
Non-property income
|
— | 1,845 | — | |||||||||
|
|
||||||||||||
|
|
39,695 | 61,629 | 55,079 | |||||||||
|
Rental expenses
|
15,603 | 21,753 | 18,617 | |||||||||
|
Property management fee
|
1,092 | 1,644 | 1,515 | |||||||||
|
Real estate depreciation
|
14,332 | 27,831 | 25,439 | |||||||||
|
Interest
|
1,510 | 5,193 | 6,063 | |||||||||
|
Other expense
|
227 | 75 | 12 | |||||||||
|
|
||||||||||||
|
|
32,764 | 56,496 | 51,646 | |||||||||
|
Income before net gain on the sale of depreciable
property and income taxes
|
6,931 | 5,133 | 3,433 | |||||||||
|
Gain on the sale of depreciable property
|
138,508 | 4,083 | 2,424 | |||||||||
|
Income tax expense
|
(13,218 | ) | — | — | ||||||||
|
|
||||||||||||
|
Income from discontinued operations
|
$ | 132,221 | $ | 9,216 | $ | 5,857 | ||||||
|
|
||||||||||||
5. JOINT VENTURES
UDR has entered into joint ventures with unrelated third parties to acquire 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, 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. In addition, the Company
would consolidate 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 the ability to remove us as general partner or managing member without cause.
UDR’s joint ventures are funded with a combination of debt and equity. Our losses are limited
to our investment and 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
In August 2011, the Company invested in a joint venture with an unaffiliated third party to
acquire and redevelop an existing commercial property into a 173 apartment home community in Orange
County, California. At closing the Company contributed $9.0 million and at December 31, 2011, UDR
owned a 90% controlling interest in the investment. Under the terms of the operating agreement, our
partner is required to achieve certain criteria as it relates to the entitlement process. If the
criteria are met on or before 730 days after the site plan application is deemed complete by the
city, the Company is obligated to contribute an additional $3.0 million to the joint venture for
distribution to our partner. At the acquisition date, the Company accrued and capitalized $3.0
million related to the contingent consideration, which represents the difference between fair value
of the property of $9.8 million on the formation date and the estimated fair value of the
underlying property upon completion of the entitlement
process of $12.8 million. The Company estimated the fair value based on Level 3 inputs
utilized in a third party valuation.
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
During the year ended December 31, 2011, the Company paid $450,000 to acquire from our partner
its remaining 2% noncontrolling interests in the 989 Elements, Elements Too, and Bellevue joint
ventures. The consideration paid in excess of the book value of the noncontrolling interest, is
reflected as a reduction of the Company’s equity.
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 ventures.
In addition, we may earn fees for providing management services to the unconsolidated joint
ventures. As of December 31, 2011, 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 (“UDR/MetLife I”) at a cost of $100.8 million.
UDR/MetLife I owns a portfolio of 26 operating communities containing 5,748 apartment homes and 10
land parcels with the potential to develop approximately 2,000 (unaudited) additional apartment
homes. Under the terms of UDR/MetLife I, UDR acts as the general partner and earns fees for
property and asset management and financing transactions.
UDR has a weighted average ownership interest of 12.27% in the operating communities and 4.11%
in the land parcels. The initial investment of $100.8 million consisted of $71.8 million in cash,
which included associated transaction costs, and a $30.0 million payable (includes present value
discount of $1.0 million) to Hanover. UDR agreed to pay the $30.0 million balance to Hanover in two
interest free installments in the amounts of $20.0 million (paid in November 2011) and $10.0
million on the first and second anniversaries of the closing, respectively. The $30.0 million
payable was recorded at its present value of $29.0 million using an effective interest rate of
2.67%. At December 31, 2011 and 2010, the net carrying value of the payable was $9.8 million and
$29.1 million, respectively. Interest expense of $697,000 and $129,000 was recorded during the
years ended December 31, 2011 and 2010, respectively. At December 31, 2011 and 2010, the Company’s
investment was $133.8 million and $122.2 million, respectively.
UDR’s total cost of its equity investment of $100.8 million differed from the proportionate
share in the underlying net assets of UDR/MetLife I of $111.4 million. The difference of $10.6
million was attributable to certain assets and adjustments that were allocated to UDR’s
proportionate share in UDR/MetLife I’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 was 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 years ended December 31, 2011 and 2010, the
Company recorded $1.1 million and $264,000 of amortization, respectively.
In connection with the purchase of Hanover’s interests in UDR/MetLife I, UDR agreed to
indemnify Hanover from liabilities arising from Hanover’s guaranty of $506.0 million in loans
($51.0 million outstanding at December 31, 2011) which are secured by a security interest in the
operating communities subject to the respective loans. 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 UDR/MetLife I over the next twelve months.
In October 2010, the Company entered into a joint venture to develop a 240-home community in
Stoughton, Massachusetts. At December 31, 2011 and 2010, UDR owned a noncontrolling interest of 95%
in the joint venture. Our initial investment was $10.0 million. Our investment at December 31, 2011
and 2010 was $17.2 million and $10.3 million, respectively.
In May 2011, the Company entered into a joint venture to develop a 263-home community in San
Diego, California. At December 31, 2011 and at closing, UDR owned a noncontrolling interest of 95%
in the joint venture. Our initial investment was $9.9 million and our investment at December 31,
2011 was $12.1 million.
93
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
In
June 2011, UDR/MetLife I sold a parcel of land to a joint
venture, in which the Company is a
partner, to develop a 256-home community in College Park, Maryland. At December 31, 2011 and at
closing, UDR owned a noncontrolling interest of 95% in the joint venture. Our initial investment
was $7.1 million and our investment at December 31, 2011 was $8.6 million.
UDR is a partner with an unaffiliated third party, which formed a joint venture for the
investment of up to $450.0 million in multifamily properties located in key, high barrier to entry
markets such as Metropolitan Washington D.C. The partners will contribute equity of $180.0 million
of which the Company’s maximum equity will be 30% or $54.0 million when fully invested. In 2010,
the joint venture acquired its first property (151 homes). During the year ended December 31,
2011, the joint venture acquired two additional properties (509 homes). At December 31, 2011 and
2010, the Company owned a 30% interest in the joint venture. Our investment at December 31, 2011
and 2010 was $34.1 million and $5.2 million, respectively.
UDR is a partner with an unaffiliated third party 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, 2011 and 2010 was $7.1 million and $10.3 million, respectively.
We evaluate our investments in unconsolidated joint ventures for events or changes in
circumstances that indicate there may be an other-than-temporary decline in value. We consider
various factors to determine if a decrease in the value of the investment is other-than-temporary.
Prior to their consolidation and during the year ended December 31, 2009, we recognized a non-cash
charge of $16.0 million representing the other-than-temporary decline in the fair values below the
carrying values of two of the Company’s Bellevue, Washington joint ventures, which were previously
accounted for under the equity method. 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, 2011, 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 years ended December 31,
(
dollars in thousands):
| Year ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 (a) | ||||||||||
|
For the year ended:
|
||||||||||||
|
Revenues
|
$ | 201,368 | $ | 60,234 | $ | 48,575 | ||||||
|
Real estate depreciation and amortization
|
69,290 | 28,744 | 21,133 | |||||||||
|
Net loss
|
(21,724 | ) | (29,737 | ) | (11,719 | ) | ||||||
|
UDR recorded loss from unconsolidated
entities
|
6,352 | 4,204 | 18,665 | |||||||||
| (a) | Includes results of operations of joint ventures previously accounted for under the equity method through the effective date of consolidation. |
94
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
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
):
| 2011 | 2010 | |||||||
|
Real estate, net
|
$ | 2,908,623 | $ | 2,692,167 | ||||
|
Total assets
|
2,998,866 | 2,807,886 | ||||||
|
Amount due to UDR
|
6,251 | 672 | ||||||
|
Third party debt
|
1,499,419 | 1,524,872 | ||||||
|
Total liabilities
|
1,561,396 | 1,580,733 | ||||||
|
Total Equity
|
1,437,470 | 1,227,153 | ||||||
|
Equity held by non-controlling interest
|
14,641 | 14,537 | ||||||
As
of December 31, 2011 and 2010, the Company had deferred fees and deferred profit from
the sale of properties to a joint venture of $29.1 million and $28.9 million, respectively, the
majority of which the Company will not recognize until the underlying properties are sold to a
third party. The Company recognized $9.6 million, $3.2 million, and $1.9 million of management fees
during the years ended December 31, 2011, 2010, and 2009, respectively, for our management of the
joint ventures. The management fees are classified in “Other Income” in the Consolidated Statements
of Operations.
At December 31, 2011, the Company is obligated to make additional capital contributions of
$67.3 million to fund our unconsolidated development joint ventures. The Company may, in the
future, make additional capital contributions to certain of our other joint ventures should
additional capital contributions be necessary to fund acquisitions and operating shortfalls.
95
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
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 of 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 a fixed interest rate for the underlying debt instrument.
Secured debt, including debt related to real estate under development and held for sale,
which encumbers $3.1 billion or 38.3% of UDR’s total real estate owned based upon gross book
value ($5.0 billion or 61.7% of UDR’s real estate owned based on gross book value is
unencumbered) consists of the following as of December 31, 2011 (
dollars in thousands
):
| For the Year Ended December 31, 2011 | ||||||||||||||||||||
| Principal Outstanding | Weighted | Weighted | Number of | |||||||||||||||||
| December 31, | Average | Average | Communities | |||||||||||||||||
| 2011 | 2010 | Interest Rate | Years to Maturity | Encumbered | ||||||||||||||||
|
Fixed Rate Debt
|
||||||||||||||||||||
|
Mortgage notes payable
|
$ | 590,208 | $ | 292,236 | 5.10 | % | 4.7 | 10 | ||||||||||||
|
Tax-exempt secured notes payable
|
— | 13,325 | NA | — | — | |||||||||||||||
|
Fannie Mae credit facilities
|
744,509 | 897,318 | 5.14 | % | 6.0 | 12 | ||||||||||||||
|
|
||||||||||||||||||||
|
Total fixed rate secured debt
|
1,334,717 | 1,202,879 | 5.12 | % | 5.4 | 22 | ||||||||||||||
|
|
||||||||||||||||||||
|
Variable Rate Debt
|
||||||||||||||||||||
|
Mortgage notes payable
|
151,685 | 405,641 | 2.08 | % | 1.4 | 6 | ||||||||||||||
|
Tax-exempt secured notes payable
|
94,700 | 94,700 | 0.77 | % | 10.6 | 2 | ||||||||||||||
|
Fannie Mae credit facilities
|
310,451 | 260,450 | 1.63 | % | 4.6 | 28 | ||||||||||||||
|
|
||||||||||||||||||||
|
Total variable rate secured debt
|
556,836 | 760,791 | 1.60 | % | 4.8 | 36 | ||||||||||||||
|
|
||||||||||||||||||||
|
Total secured debt
|
$ | 1,891,553 | $ | 1,963,670 | 4.10 | % | 5.2 | 58 | ||||||||||||
|
|
||||||||||||||||||||
UDR has five secured credit facilities with Fannie Mae with an aggregate commitment
of $1.3 billion at December 31, 2011. 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 $744.5 million
of the outstanding balance fixed at a weighted average interest rate of 5.14% and the
remaining balance on these facilities is currently at a weighted average variable interest
rate of 1.63%. Further information related to these credit facilities as of December 31,
2011 and 2010 is as follows:
| December 31, | ||||||||
| 2011 | 2010 | |||||||
| (dollar amounts in thousands) | ||||||||
|
|
||||||||
|
Borrowings outstanding
|
$ | 1,054,960 | $ | 1,157,768 | ||||
|
Weighted average borrowings during the period
ended
|
1,139,588 | 1,198,771 | ||||||
|
Maximum daily borrowings during the period ended
|
1,157,557 | 1,209,739 | ||||||
|
Weighted average interest rate during the
period ended
|
4.4 | % | 4.6 | % | ||||
|
Weighted average interest rate at the end of
the period
|
4.1 | % | 4.5 | % | ||||
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 premium of $24.1 million and $694,000 at December 31, 2011 and 2010.
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
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 October 2012 through
June 2032 and carry interest rates ranging from 3.25% to 6.76%. Mortgage notes payable
includes debt associated with development activities.
Secured credit facilities.
At December 31, 2011, the Company had $744.5 million
outstanding of fixed rate secured credit facilities with Fannie Mae with a weighted average
fixed interest rate of 5.14%.
Variable Rate Debt
Mortgage notes payable.
Variable rate mortgage notes payable are generally due in
monthly installments of principal and interest and mature at various dates from August 2012
through October 2014. The mortgage notes payable are based on LIBOR plus some basis points,
which translate into interest rates ranging from 0.99% to 2.94% at December 31, 2011.
Tax-exempt secured notes payable.
The variable rate mortgage notes payable that secure
tax-exempt housing bond issues mature in August 2019 and March 2030. Interest on these notes
is payable in monthly installments. The variable mortgage notes have interest rates of 0.57%
to 0.85% as of December 31, 2011.
Secured credit facilities.
At December 31, 2011, the Company had $310.5 million
outstanding of variable rate secured credit facilities with Fannie Mae with a weighted
average floating interest rate of 1.63%.
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
The aggregate maturities, including amortizing principal payments, of our secured debt
due during each of the next five calendar years and thereafter are as follows
(dollars in
thousands):
| Fixed | Variable | |||||||||||||||||||||||
| Mortgage | Credit | Mortgage | Tax-Exempt | Credit | Total | |||||||||||||||||||
| Year | Notes | Facilities | Notes | Notes Payable | Facilities | Secured | ||||||||||||||||||
|
2012
|
$ | 65,480 | $ | 77,944 | $ | 64,345 | $ | — | $ | 99,042 | $ | 306,811 | ||||||||||||
|
2013
|
23,378 | 38,632 | 62,490 | — | — | 124,500 | ||||||||||||||||||
|
2014
|
81,101 | 3,328 | 24,850 | — | — | 109,279 | ||||||||||||||||||
|
2015
|
201,691 | 3,522 | — | — | — | 205,213 | ||||||||||||||||||
|
2016
|
140,180 | 3,702 | — | — | — | 143,882 | ||||||||||||||||||
|
Thereafter
|
78,378 | 617,381 | — | 94,700 | 211,409 | 1,001,868 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 590,208 | $ | 744,509 | $ | 151,685 | $ | 94,700 | $ | 310,451 | $ | 1,891,553 | ||||||||||||
|
|
||||||||||||||||||||||||
7. UNSECURED DEBT
A summary of unsecured debt as of December 31, 2011 and 2010 is as follows
(dollars in
thousands):
| December 31, | ||||||||
| 2011 | 2010 | |||||||
|
Commercial Banks
|
||||||||
|
Borrowings outstanding under an unsecured credit facility due October 2015 (a), (i)
|
$ | 421,000 | $ | — | ||||
|
Borrowings outstanding under an unsecured credit facility due July 2012 (b)
|
— | 31,750 | ||||||
|
Senior Unsecured Notes
|
||||||||
|
5.00% Medium-Term Notes due January 2012
|
100,000 | 100,000 | ||||||
|
1.71% Term Notes due December 2016 (i)
|
100,000 | 100,000 | ||||||
|
6.05% Medium-Term Notes due June 2013
|
122,500 | 122,500 | ||||||
|
5.13% Medium-Term Notes due January 2014
|
184,000 | 184,000 | ||||||
|
5.50% Medium-Term Notes due April 2014 (net of discount of $157 and $226)
|
128,343 | 128,274 | ||||||
|
5.25% Medium-Term Notes due January 2015 (includes discount of $390 and $519) (c)
|
324,785 | 324,656 | ||||||
|
5.25% Medium-Term Notes due January 2016
|
83,260 | 83,260 | ||||||
|
2.90% Term
Notes due January 2016 (d), (i)
|
250,000 | 100,000 | ||||||
|
2.27% Term Notes due January 2016 (d)
|
— | 150,000 | ||||||
|
8.50% Debentures due September 2024
|
15,644 | 15,644 | ||||||
|
4.25% Medium-Term Notes due June 2018 (net of discount of $2,751) (e), (i)
|
297,249 | — | ||||||
|
4.00% Convertible Senior Notes due December 2035 (f), (g)
|
— | 167,750 | ||||||
|
3.625% Convertible Senior Notes due September 2011 (net of Subtopic 470-20 discount
of $1,138 at December 31, 2010) (h), (g)
|
— | 95,961 | ||||||
|
Other
|
36 | 39 | ||||||
|
|
||||||||
|
|
1,605,817 | 1,572,084 | ||||||
|
|
||||||||
|
|
$ | 2,026,817 | $ | 1,603,834 | ||||
|
|
||||||||
98
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
| (a) | On October 25, 2011, the Company entered into a $900 million unsecured revolving credit facility, replacing the Company’s $600 million facility noted in (b) below. The unsecured credit facility has an initial term of four years and includes a one-year extension option, and contains an accordion feature that allows the Company to increase the facility to $1.35 billion. Based on the Company’s current credit ratings, the credit facility carries an interest rate equal to LIBOR plus a spread of 122.5 basis points and a facility fee of 22.5 basis points (1.53% at December 31, 2011). | |
| (b) | The unsecured credit facility provided us with an aggregate borrowing capacity of $600 million, which we could have increased to $750 million at our election under certain circumstances. The unsecured credit facility with a consortium of financial institutions carried an interest rate equal to LIBOR plus a spread of 47.5 basis points (0.89% interest rate at December 31, 2010). The facility was replaced in October 2011. | |
| (c) | 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 an unamortized discount of $390,000 and $519,000 at December 31, 2011 and 2010, respectively. | |
| (d) | During the three months ended March 31, 2011, the Company entered into a new interest rate swap agreement for the remaining $150 million balance. In October 2011, the Company repriced the $250 million unsecured term loan such that the debt currently carries a floating rate of 142.5 basis points over LIBOR, below the previous pricing of 200 basis points over LIBOR. | |
| (e) | On May 3, 2011, the Company entered into a Second 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 June 30, 2011, the Company issued $300 million of 4.25% senior unsecured medium-term notes under the Amended and Restated Distribution Agreement. These notes were priced at 98.988% of the principal amount at issuance and had a discount of $2.8 million at December 31, 2011. | |
| (f) | During the year ended December 31, 2011, holders of the 4.00% Convertible Senior Notes due 2035 tendered $10.8 million of Notes. As a result, the Company retired debt with a notional value of $10.8 million and wrote off unamortized financing costs of $207,000. | |
| On March 2, 2011, the Company called all of its outstanding 4.00% Convertible Senior Notes due 2035. The redemption date for the Notes was April 4, 2011, and the redemption price was 100% of the principal amount of the outstanding Notes, plus accrued and unpaid interest on the Notes to, but not including, the date of redemption. Subject to and in accordance with the terms and conditions set forth in the Indenture governing the Notes dated as of December 19, 2005, holders of Notes had the right to convert their Notes at any time until March 31, 2011, at a conversion rate of 38.8650 shares of our common stock per $1,000 principal amount of Notes (equivalent to a conversion price of approximately $25.73 per share). The Company accelerated the amortization of the remaining financing costs of $3.0 million to the April 4, 2011 redemption date during the year ended December 31, 2011. | ||
| (g) | ASC 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 guidance 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 $1.1 million, $3.5 million, and $4.3 million for the years ended December 31, 2011, 2010, and 2009, respectively. | |
| (h) | During the year ended December 31, 2011, the Company paid $97.1 million at maturity. | |
| (i) | The Operating Partnership is a guarantor at December 31, 2011. |
99
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
The following is a summary of short-term bank borrowings under UDR’s bank credit
facility at December 31, 2011 and 2010
(dollars in thousands):
| December 31, | ||||||||
| 2011 | 2010 | |||||||
|
Total revolving credit facility
|
$ | 900,000 | $ | 600,000 | ||||
|
Borrowings outstanding at end of year (1)
|
421,000 | 31,750 | ||||||
|
Weighted average daily borrowings during the year ended
|
227,498 | 161,260 | ||||||
|
Maximum daily borrowings during the year ended
|
450,000 | 337,600 | ||||||
|
Weighted average interest rate during the year ended
|
1.0 | % | 0.8 | % | ||||
|
Interest rate at end of the year
|
1.5 | % | 0.9 | % | ||||
| (1) | Excludes $3.6 million of letters of credit at December 31, 2011 |
The aggregate maturities of unsecured debt for the five years subsequent to December 31,
2011 are as follows
(dollars in thousands):
| Bank | Unsecured | Total | ||||||||||
| Year | Lines | Debt | Unsecured | |||||||||
|
2012
|
$ | — | $ | 99,386 | $ | 99,386 | ||||||
|
2013
|
— | 121,886 | 121,886 | |||||||||
|
2014
|
— | 311,930 | 311,930 | |||||||||
|
2015
|
421,000 | 324,744 | 745,744 | |||||||||
|
2016
|
— | 432,840 | 432,840 | |||||||||
|
Thereafter
|
— | 315,031 | 315,031 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 421,000 | $ | 1,605,817 | $ | 2,026,817 | ||||||
|
|
||||||||||||
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 350,000,000 shares of common stock and 50,000,000 shares of
preferred shares as of December 31, 2011.
During the year ended December 31, 2011, the Company entered into the following equity
transactions for our common stock:
| • | Issued 15,825,632 shares of common stock in connection with an “at the market” equity distribution program where we received net proceeds of approximately $383.8 million; |
| • | Issued 20,700,000 shares of common stock in connection with an underwritten public offering where we received net proceeds of approximately $496.3 million; |
| • | Issued 691,346 shares of common stock in connection with stock options exercised; |
| • | Issued 199,539 shares of common stock through the Company’s 1999 Long-Term Incentive Plan (the “LTIP”), net of forfeitures of 116,059; and |
| • | Converted 12,511 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, 2011 and 2010 totaled $0.80 and $0.73 per share, respectively.
For taxable years ending on or before December 31, 2011, the IRS allowed REITS to distribute
up to 90% of total distributions in common shares with the residual distributed in cash as a
means of enhancing liquidity.
100
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
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, 2011 and 2010
were $1.33 per share. The Series E is not listed on any exchange. At December 31, 2011 and
2010, 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
2,534,846 shares of the Series F were outstanding at a value of
$253 at December 31, 2011 and
2010. 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 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, 2011 and 2010, the Company repurchased 141,200 and 27,400 shares of Series G,
respectively, for more or less than the liquidation preference of $25 per share resulting in
a loss of $175,000 and a $25,000 benefit to our net income/(loss) attributable to common
stockholders, respectively.
Distributions declared on the Series G for the year ended December 31, 2011 and 2010
were $1.69 per share. The Series G is listed on the NYSE under the symbol “UDRPrG”. At
December 31, 2011 and 2010, a total of 3,264,362 and 3,405,562 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 11,762,192 were reserved for issuance under the Stock Purchase Plan
as of December 31, 2011. During the year ended December 31, 2011, 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, 2011, there were 8,726,944
common shares available for issuance under the LTIP.
101
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
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.
A summary of UDR’s stock option and restricted stock activities
during the year ended December 31, 2011 is as follows:
| Option Outstanding | Option Exercisable | Restricted Stock | ||||||||||||||||||||||
| Weighted | Weighted | Weighted | ||||||||||||||||||||||
| Average | Average | Average Fair | ||||||||||||||||||||||
| Number of | Exercise | Number of | Exercise | Number | Value Per | |||||||||||||||||||
| Options | Price | Options | Price | Of shares | Restricted Stock | |||||||||||||||||||
|
Balance, December 31, 2010
|
3,837,177 | $ | 12.00 | 1,880,168 | $ | 13.19 | 1,433,299 | $ | 27.06 | |||||||||||||||
|
Granted
|
— | — | 199,539 | 23.14 | ||||||||||||||||||||
|
Exercised
|
(937,377 | ) | 10.24 | — | — | |||||||||||||||||||
|
Vested
|
— | — | (309,013 | ) | 19.78 | |||||||||||||||||||
|
Forfeited
|
(208,998 | ) | 12.00 | (116,059 | ) | 19.43 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Balance, December 31, 2011
|
2,690,802 | $ | 12.61 | 1,905,015 | $ | 13.25 | 1,207,766 | $ | 16.24 | |||||||||||||||
|
|
||||||||||||||||||||||||
Stock Option Plan
UDR has granted stock options to our employees, subject to certain conditions. Each
stock option is exercisable into one common share.
Total remaining compensation cost related to unvested share options as of December 31,
2011 was approximately $95,000.
The weighted average remaining contractual life on all options outstanding as of
December 31, 2011 is 9 years. 2,194,957 of share options had exercise prices at $10.06;
26,234 of share options had exercise prices between $13.15 and $13.74; 469,611 of share
options had exercise prices between $24.38 and $25.10.
During the years ended December 31, 2011, 2010, and 2009, respectively, we recognized
$1.1 million, $1.3 million, and $1.3 million 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, 2011, 2010,
and 2009, we recognized $9.8 million, $12.2 million, and $7.6 million of compensation expense
related to the amortization of restricted stock, respectively. As of December 31, 2011, the
Company had issued 2,833,843 shares of restricted stock under the LTIP. The total remaining
compensation cost on unvested restricted stock awards was $7.0 million and has a weighted
average remaining contractual life of one year as of December 31, 2011.
102
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
Profit Sharing Plan
Our profit sharing plan (the “Plan”) is a defined contribution plan covering all
eligible full-time employees. Under the Plan, UDR makes discretionary profit sharing and
matching contributions to the Plan as determined by the Compensation Committee of the Board
of Directors. Aggregate provisions for contributions, both matching and discretionary, which
are included in UDR’s Consolidated Statements of Operations for the years ended December 31,
2011, 2010, and 2009 was $0.7 million.
10. INCOME TAXES
For 2011, 2010, and 2009, UDR believes that we have complied with the REIT requirements
specified in the Code. As such the REIT would generally not be subject to federal income
taxes.
For income tax purposes, distributions paid to common stockholders may consist of
ordinary income, qualified dividends, capital gains, unrecaptured section 1250 gains, return
of capital, or a combination thereof. Distributions that exceed our current and accumulated
earnings and profits constitute a return of capital rather than taxable income and reduce the
stockholder’s basis in their common shares. To the extent that a distribution exceeds both
current and accumulated earnings and profits and the stockholder’s basis in the common
shares, it generally will be treated as a gain from the sale or exchange of that
stockholder’s common shares. Taxable distributions paid per
common share were taxable as follows for the
years ended December 31,
| December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Ordinary income
|
$ | 0.49 | $ | 0.69 | $ | 0.08 | ||||||
|
Long-term capital gain
|
0.07 | 0.03 | 0.54 | |||||||||
|
Unrecapture section 1250 gain
|
0.21 | 0.01 | 0.05 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
|
$ | 0.77 | $ | 0.73 | $ | 0.67 | ||||||
|
|
||||||||||||
103
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
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 income tax. The components of the provision for
income taxes are as follows for the years ended December 31,
(dollars in thousands)
:
| December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Income tax expense/(benefit)
|
||||||||||||
|
Current
|
||||||||||||
|
Federal
|
$ | 463 | $ | (3,510 | ) | $ | (11,925 | ) | ||||
|
State
|
552 | 977 | (2,573 | ) | ||||||||
|
|
||||||||||||
|
Total current
|
1,015 | (2,533 | ) | (14,498 | ) | |||||||
|
|
||||||||||||
|
|
||||||||||||
|
Deferred
|
||||||||||||
|
Federal
|
6,646 | 119 | 12,030 | |||||||||
|
State
|
(90 | ) | (119 | ) | 2,779 | |||||||
|
|
||||||||||||
|
Total deferred
|
6,556 | — | 14,809 | |||||||||
|
|
||||||||||||
|
Total income tax
expense/(benefit)
|
$ | 7,571 | $ | (2,533 | ) | $ | 311 | |||||
|
|
||||||||||||
|
|
||||||||||||
|
Classification of income tax (benefit)/expense
|
||||||||||||
|
Continuing operations
|
$ | (5,647 | ) | $ | (2,533 | ) | $ | 311 | ||||
|
Discontinued operations
|
13,218 | — | — | |||||||||
Deferred income taxes are provided for the change in temporary differences between
the basis of certain assets and liabilities for financial reporting purposes and income tax
reporting purposes. The expected future tax rates are based upon enacted tax laws. The
components of our TRS deferred tax assets and liabilities are as follows for the years ended
December 31,
(dollars in thousands):
| 2011 | 2010 | 2009 | ||||||||||
|
Deferred tax assets:
|
||||||||||||
|
Federal and state tax attributes
|
$ | 24,524 | $ | 33,053 | $ | 20,239 | ||||||
|
Book/tax depreciation
|
10,045 | 9,708 | 3,946 | |||||||||
|
Construction capitalization differences
|
5,948 | 5,235 | 3,045 | |||||||||
|
Investment in partnerships
|
3,618 | 3,346 | 4,711 | |||||||||
|
Debt and interest deductions
|
— | 10,784 | 8,175 | |||||||||
|
Other
|
999 | 586 | 285 | |||||||||
|
|
||||||||||||
|
Total deferred tax assets
|
45,134 | 62,712 | 40,401 | |||||||||
|
Valuation allowance
|
(45,134 | ) | (55,516 | ) | (33,554 | ) | ||||||
|
|
||||||||||||
|
Net deferred tax assets
|
— | 7,196 | 6,847 | |||||||||
|
|
||||||||||||
|
Deferred tax liabilities:
|
||||||||||||
|
Other
|
— | (640 | ) | (291 | ) | |||||||
|
|
||||||||||||
|
Total deferred tax liabilities
|
— | (640 | ) | (291 | ) | |||||||
|
|
||||||||||||
|
Net deferred tax asset
|
$ | — | $ | 6,556 | $ | 6,556 | ||||||
|
|
||||||||||||
104
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
Income tax expense/(benefit) differed from the amounts computed by applying the U.S.
statutory rate of 35% to pretax income or (loss) for the years ended December 31, as follows
(dollars in thousands):
| December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
|
||||||||||||
|
Income tax expense/(benefit)
|
||||||||||||
|
U.S. federal income tax expense/(benefit)
|
$ | 11,715 | $ | (16,006 | ) | $ | (17,042 | ) | ||||
|
State income tax provision/(benefit)
|
2,099 | 19 | (1,391 | ) | ||||||||
|
Other items
|
1,227 | (5,100 | ) | 1,260 | ||||||||
|
Valuation allowance
|
(7,470 | ) | 18,554 | 17,484 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Total income tax expense/(benefit)
|
$ | 7,571 | $ | (2,533 | ) | $ | 311 | |||||
|
|
||||||||||||
As of December 31, 2011, the Company, through our TRS, had federal net loss carryovers
(“NOL”) of approximately $64.7 million. Of the total
NOL, $2.0 million expires in 2028, $30.0
million expires in 2029 and the remaining $32.7 million expires in 2030. As of December 31,
2011, the TRS had state NOL of approximately $60.6 million expiring in 2020 through 2030. As
of December 31, 2011, the Company had a valuation allowance of $45.1 million against 100% of
its deferred tax assets and 100% of its net operating losses. During the year ended December
31, 2011, the Company had a net change of $10.4 million in the valuation allowance.
FASB ASC 740,
Income Taxes
(“Topic 740”) defines a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. Topic 740 requires the financial statements reflect
expected future tax consequences of income tax positions presuming the taxing authorities’
full knowledge of the tax position and all relevant facts, but without considering time
values. Topic 740 also provides guidance on derecognition, classification, interest and
penalties, accounting for interim periods, disclosure and transition.
The Company evaluates our tax position using a two-step process. First, we determine
whether a tax position is more likely than not (greater than 50 percent probability) to be
sustained upon examination, including resolution of any related appeals or litigation
processes, based on the technical merits of the position. The Company will then determine
the amount of benefit to recognize and record the amount of the benefit that is more likely
than not to be realized upon ultimate settlement. When applicable, UDR recognizes interest
and/or penalties related to uncertain tax positions in income tax expense. As of December 31,
2011 and 2010, UDR does not believe we have any unrecognized tax benefits.
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 2008. The tax years 2008-2010 remain open
to examination by the major taxing jurisdictions to which the Company is subject.
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 common stock price at each balance sheet date.
105
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
The following table sets forth redeemable noncontrolling interests in the Operating
Partnership for the following periods (
dollars in thousands
):
| Years Ended December 31, | ||||||||
| 2011 | 2010 | |||||||
|
Redeemable noncontrolling interests in the OP, December 31, 2010
|
$ | 119,057 | $ | 98,758 | ||||
|
Mark to market adjustment to redeemable noncontrolling
interests in the OP
|
13,978 | 48,236 | ||||||
|
Conversion of OP Units to Common Stock
|
(287 | ) | (18,429 | ) | ||||
|
Repurchase of OP Units from redeemable noncontrolling interests
|
— | (327 | ) | |||||
|
Net income/(loss) attributable to redeemable noncontrolling
interests in the OP
|
395 | (3,835 | ) | |||||
|
OP units issued for partial consideration in community acquisition
|
111,034 | — | ||||||
|
Distributions to redeemable noncontrolling interests in the OP
|
(7,298 | ) | (5,228 | ) | ||||
|
Allocation of other comprehensive (loss)/income
|
(404 | ) | (118 | ) | ||||
|
|
||||||||
|
Ending redeemable noncontrolling interests in the OP
|
$ | 236,475 | $ | 119,057 | ||||
|
|
||||||||
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, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Net income/(loss) attributable to common stockholders
|
$ | 10,537 | $ | (112,362 | ) | $ | (95,858 | ) | ||||
|
Conversion of OP units to UDR Common Stock
|
287 | 18,429 | 21,117 | |||||||||
|
|
||||||||||||
|
Change in equity from net income/(loss) attributable to common stockholders
and conversion of OP units
to UDR Common Stock
|
$ | 10,824 | $ | (93,933 | ) | $ | (74,741 | ) | ||||
|
|
||||||||||||
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, 2011, 2010, and 2009, net income attributable to
non-controlling interests was $167,000; $146,000 and $191,000, respectively.
106
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
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. |
The estimated fair values of the Company’s financial instruments either recorded or
disclosed on a recurring basis as of December 31, 2011 and 2010 are summarized as follows
(dollars in thousands)
:
| Fair Value at December 31, 2011 Using | ||||||||||||||||
| Quoted Prices in | ||||||||||||||||
| Active Markets | ||||||||||||||||
| for Identical | Significant Other | Significant | ||||||||||||||
| Assets or | Observable | Unobservable | ||||||||||||||
| Liabilities | Inputs | Inputs | ||||||||||||||
| December 31, 2011 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
|
||||||||||||||||
|
Description:
|
||||||||||||||||
|
|
||||||||||||||||
|
Derivatives- Interest rate contracts (c)
|
$ | 89 | $ | — | $ | 89 | $ | — | ||||||||
|
|
||||||||||||||||
|
Total assets
|
$ | 89 | $ | — | $ | 89 | $ | — | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Derivatives- Interest rate contracts (c)
|
$ | 13,660 | $ | — | $ | 13,660 | $ | — | ||||||||
|
Contingent purchase
Consideration (d)
|
3,000 | — | — | 3,000 | ||||||||||||
|
Secured debt instruments- fixed rate: (a)
|
||||||||||||||||
|
Mortgage notes payable
|
635,531 | — | — | 635,531 | ||||||||||||
|
Fannie Mae credit facilities
|
799,584 | — | — | 799,584 | ||||||||||||
|
Secured debt instruments- variable rate: (a)
|
— | |||||||||||||||
|
Mortgage notes payable
|
151,685 | — | — | 151,685 | ||||||||||||
|
Tax-exempt secured notes
payable
|
94,700 | — | — | 94,700 | ||||||||||||
|
Fannie Mae credit facilities
|
310,451 | — | — | 310,451 | ||||||||||||
|
Unsecured debt instruments: (b)
|
— | |||||||||||||||
|
Commercial bank
|
421,000 | — | — | 421,000 | ||||||||||||
|
Senior Unsecured Notes
|
1,675,189 | — | — | 1,675,189 | ||||||||||||
|
|
||||||||||||||||
|
Total liabilities
|
$ | 4,104,800 | $ | — | $ | 13,660 | $ | 4,091,140 | ||||||||
|
|
||||||||||||||||
107
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
| Fair Value at December 31, 2010 Using | ||||||||||||||||
| Quoted Prices in | ||||||||||||||||
| Active Markets | ||||||||||||||||
| for Identical | Significant 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 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Redeemable Non-controlling Interests
|
$ | 119,057 | $ | — | $ | 119,057 | $ | — | ||||||||
|
|
||||||||||||||||
| (a) | See Note 6, Secured Debt | |
| (b) | See Note 7, Unsecured Debt | |
| (c) | See Note 13, Derivatives and Hedging Activity | |
| (d) | In the first quarter of 2010, the Company 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. The Company paid approximately $635,000 of the liability during the year ended December 31, 2010. The remaining balance of $5.4 million was paid during the year ended December 31, 2011 in conjunction with the sale of the property. The fair value of the contingent purchase consideration is also inclusive of $3.0 million accrued in relation to our acquisition of a development property in a consolidated joint venture as of and during the year ended December 31, 2011. (See Note 5, Joint Ventures .) |
Financial Instruments Carried at Fair Value
The fair values of the corporate 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.
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.
108
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
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, 2011 and 2010, 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.
Redeemable non-controlling interests in the Operating Partnership have a redemption
feature and are marked to their redemption value. The redemption value is based on the fair
value of the Company’s Common Stock at the redemption date, and therefore, is calculated
based on the fair value of the Company’s Common Stock at the balance sheet date. Since the
valuation is based on observable inputs such as quoted prices for similar instruments in
active markets, redeemable non-controlling interests in the Operating Partnership are
classified as Level 2.
Financial Instruments Not Carried at Fair Value
At December 31, 2011, the fair values of cash and cash equivalents, restricted cash,
accounts receivable, prepaids, real estate taxes payable, accrued interest payable, security
deposits and prepaid rent, distributions payable and accounts payable approximated their
carrying values because of the short term nature of these instruments. The estimated fair
values of other financial instruments were determined by the Company using available market
information and appropriate valuation methodologies. Considerable judgment is necessary to
interpret market data and develop estimated fair values. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts the Company would realize on the
disposition of the financial instruments. The use of different market assumptions or
estimation methodologies may have a material effect on the estimated fair value amounts.
We estimate the fair value of our 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 estimated the fair value of our Convertible Senior Unsecured Notes based on Level 1
inputs which utilize quoted prices in active markets where we had the ability to access value
for identical liabilities.
We record impairment losses on long-lived assets used in operations when events and
circumstances indicate that the assets might be impaired and the undiscounted cash flows
estimated to be generated by the future operation and disposition of those assets are less
than the net book value of those assets. Our cash flow estimates are based upon historical
results adjusted to reflect our best estimate of future market and operating conditions and
our estimated holding periods. The net book value of impaired assets is reduced to fair
value. Our estimates of fair value represent our best estimate based upon Level 3 inputs such
as industry trends and reference to market rates and transactions.
We consider various factors to determine if a decrease in the value of our investments
in an unconsolidated joint venture is other-than-temporary. These factors include, but are
not limited to, age of the venture, our intent and ability to retain our investment in the
entity, the financial condition and long-term prospects of the entity, the fair value of the
underlying property of the joint venture, and the relationships with the other joint venture
partners and its lenders. Based on the significance of the unobservable inputs, we classify
these fair value measurements within Level 3 of the valuation hierarchy. The Company did not
incur any other-than-temporary decrease in the value of its investments in unconsolidated
joint ventures during the years ended December 31, 2011 and 2010, respectively.
109
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
After determining an other-than-temporary decrease in the value of an equity method
investment has occurred, we estimate the fair value of our investment by estimating the
proceeds we would receive upon a hypothetical liquidation of the investment at the date of
measurement. Inputs reflect management’s best estimate of what market participants would use
in pricing the investment giving consideration to the terms of the joint venture agreement
and the estimated discounted future cash flows to be generated from the underlying joint
venture assets. The inputs and assumptions utilized to estimate the future cash flows of the
underlying assets are based upon the Company’s evaluation of the economy, market trends,
operating results, and other factors, including judgments regarding costs to complete any
construction activities, lease up and occupancy rates, rental rates, inflation rates,
capitalization rates utilized to estimate the projected cash flows at the disposition, and
discount rates.
13. DERIVATIVES AND HEDGING ACTIVITY
Risk Management Objective of Using Derivatives
The Company is exposed to certain risk arising from both its business operations and
economic conditions. The Company principally manages its exposures to a wide variety of
business and operational risks through management of its core business activities. The
Company manages economic risks, including interest rate, liquidity, and credit risk primarily
by managing the amount, sources, and duration of its debt funding and 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, 2011, 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, 2011, 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. During the
year ended December 31, 2011, the Company reclassified $58,000 loss from Other Comprehensive
Income/(Loss) to earnings due to forecasted transactions no longer probable of occurring
which was the result of the sale of an operating apartment community.
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, 2012, the Company estimates that an
additional $6.3 million will be reclassified as an increase to interest expense.
110
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
As of December 31, 2011, 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
|
13 | $ | 509,787 | |||||
|
|
||||||||
|
Interest rate caps
|
5 | 274,291 | ||||||
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 $23,000 and $991,000 for the years ended December 31, 2011
and 2010, respectively, and a gain of $593,000 for the year ended December 31, 2009. As of
December 31, 2011, 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
|
3 | $ | 172,697 | |||||
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, 2011
(dollar amounts in thousands).
| Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||
| Fair Value at | Fair Value at | |||||||||||||||||||||||
| Balance | December 31, | Balance | December 31, | |||||||||||||||||||||
| Sheet Location | 2011 | 2010 | Sheet Location | 2011 | 2010 | |||||||||||||||||||
|
Derivatives designated as hedging instruments:
|
||||||||||||||||||||||||
|
Interest Rate Products
|
Other Assets | $ | 71 | $ | 243 | Other Liabilities | $ | 13,660 | $ | 6,597 | ||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 71 | $ | 243 | $ | 13,660 | $ | 6,597 | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Derivatives
not
designated as hedging instruments:
|
||||||||||||||||||||||||
|
Interest Rate Products
|
Other Assets | $ | 18 | $ | 271 | Other Liabilities | $ | — | $ | — | ||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 18 | $ | 271 | $ | — | $ | — | ||||||||||||||||
|
|
||||||||||||||||||||||||
111
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated
Statements of Operations
Statements of Operations
The tables below present the effect of the Company’s derivative financial instruments on
the Consolidated Statements of Operations for the three years ended December 31, (
dollar
amounts in thousands
):
| Location of Loss | ||||||||||||||||||||||||||||||||||||||||||||
| Recognized in | ||||||||||||||||||||||||||||||||||||||||||||
| Income on | ||||||||||||||||||||||||||||||||||||||||||||
| Derivative | Amount of Loss Recognized | |||||||||||||||||||||||||||||||||||||||||||
| Location of Loss | Amount of Loss | (Ineffective Portion | in Income on Derivative | |||||||||||||||||||||||||||||||||||||||||
| Derivatives in | Amount of Loss Recognized | Reclassified from | Reclassified from | and Amount | (Ineffective Portion and | |||||||||||||||||||||||||||||||||||||||
| Cash Flow | in OCI on Derivative | Accumulated OCI | Accumulated OCI into | Excluded from | Amount Excluded from | |||||||||||||||||||||||||||||||||||||||
| Hedging | (Effective Portion) | into Income (Effective | Income (Effective Portion) | Effectiveness | Effectiveness Testing) | |||||||||||||||||||||||||||||||||||||||
| Relationships | December 31, | Portion) | December 31, | Testing) | December 31, | |||||||||||||||||||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2011 | 2010 | 2009 | 2011 | 2010 | 2009 | ||||||||||||||||||||||||||||||||||||
|
Interest Rate Products
|
$ | (16,477 | ) | $ | (9,273 | ) | $ | (3,949 | ) | Interest expense | $ | (9,132 | ) | $ | (6,777 | ) | $ | (12,082 | ) | Other expense | $ | (58 | ) | $ | (1 | ) | $ | — | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ | (16,477 | ) | $ | (9,273 | ) | $ | (3,949 | ) | $ | (9,132 | ) | $ | (6,777 | ) | $ | (12,082 | ) | $ | (58 | ) | $ | (1 | ) | $ | — | ||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Location of Gain/(Loss) | ||||||||||||||||
| Derivatives Not Designated | Recognized in Income on | Amount of Gain/(Loss) Recognized in | ||||||||||||||
| as Hedging Instruments | Derivative | Income on Derivative | ||||||||||||||
| 2011 | 2010 | 2009 | ||||||||||||||
|
|
||||||||||||||||
|
Interest Rate Products
|
Other (expense)/income | $ | (23 | ) | $ | (991 | ) | $ | 593 | |||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | (23 | ) | $ | (991 | ) | $ | 593 | ||||||||
|
|
||||||||||||||||
Credit-risk-related Contingent Features
The Company has agreements with some of its derivative counterparties that contain a
provision where (1) if the Company defaults on any of its indebtedness, including default
where repayment of the indebtedness has not been accelerated by the lender, then the Company
could also be declared in default on its derivative obligations; or (2) the Company could be
declared in default on its derivative obligations if repayment of the underlying indebtedness
is accelerated by the lender due to the Company’s default on the indebtedness.
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, 2011, 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 $14.4 million. As of December 31, 2011, the Company has not posted
any collateral related to these agreements. If the Company had breached any of these
provisions at December 31, 2011, it would have been required to settle its obligations under
the agreements at their termination value of $14.4 million.
112
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
14. COMMITMENTS AND CONTINGENCIES
Commitments
Real Estate Under Development
The following summarizes the Company’s real estate commitments at December 31, 2011
(
dollars in thousands
):
| Expected Costs | ||||||||||||||||
| Number of | Costs Incurred | to Complete | Ownership | |||||||||||||
| Properties | to Date | (unaudited) | Stake | |||||||||||||
|
|
||||||||||||||||
|
Wholly owned — under development
|
7 | $ | 248,746 | $ | 425,529 | 100 | % | |||||||||
|
|
||||||||||||||||
|
Joint ventures:
|
||||||||||||||||
|
Consolidated Joint Ventures
|
1 | 13,072 | 32,928 | 90 | % | |||||||||||
|
Unconsolidated Joint Ventures
|
3 | 37,913 | 142,987 | 95 | % | |||||||||||
|
|
||||||||||||||||
|
|
$ | 299,731 | $ | 601,444 | ||||||||||||
|
|
||||||||||||||||
Ground and Other Leases
UDR owns six communities which are subject to ground leases expiring between 2019 and
2103. In addition, UDR is party to various operating leases related to office space rented by
the Company with expiration dates though 2016. The leases are accounted for in accordance
with FASB ASC 840,
Leases
. Future minimum lease payments as of December 31, 2011 are as
follows
(dollars in thousands):
| Ground | Office | |||||||
| Leases (a) | Space | |||||||
|
2012
|
$ | 5,043 | $ | 458 | ||||
|
2013
|
5,043 | 478 | ||||||
|
2014
|
5,043 | 498 | ||||||
|
2015
|
5,043 | 499 | ||||||
|
2016
|
5,043 | 40 | ||||||
|
Thereafter
|
314,914 | — | ||||||
|
|
||||||||
|
|
||||||||
|
|
$ | 340,129 | $ | 1,973 | ||||
|
|
||||||||
| (a) | For purposes of our ground lease contracts, the Company uses the minimum lease payment, if stated in the agreement. For ground lease agreements where there is a reset provision based on the communities appraised value or consumer price index but does not include a specified minimum lease payment, the Company uses the current rent over the remainder of the lease term. |
UDR incurred $4.9 million, $4.8 million, $5.0 million of ground rent expense for the
years ended December 31, 2011, 2010, and 2009, respectively. The Company incurred $1.2
million, $1.1 million, $2.0 million of rent expense related to office space for the years
ended December 31, 2011, 2010, and 2009, respectively.
113
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
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
(“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, 2010, and held as of December 31, 2011. 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 sale 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 2009, 2010 or 2011, sold properties, redevelopment properties, properties classified as real estate held for sale, condominium conversion properties, joint venture properties, properties managed by third parties, and the non-apartment components of mixed use properties. |
Management evaluates the performance of each of our apartment communities on a same
community and non-mature/other basis, as well as individually and geographically. This is
consistent with the aggregation criteria of Topic 280 as each of our apartment communities
generally has similar economic characteristics, facilities, services, and tenants. Therefore,
the Company’s reportable segments have been aggregated by geography in a manner identical to
that which is provided to the chief operating decision maker.
All revenues are from external customers and no single tenant or related group of
tenants contributed 10% or more of UDR’s total revenues during the years ended December 31,
2011, 2010, or 2009.
114
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
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 from continuing and discontinued operations for UDR’s
reportable segments for the years ended December 31, 2011, 2010, and 2009, and reconciles NOI
to loss from continuing operations per the consolidated statement of operations
(dollars in
thousands)
:
| For the Years Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
|
||||||||||||
|
Reportable apartment home segment rental income
|
||||||||||||
|
Same Communities
|
||||||||||||
|
Western Region
|
$ | 185,759 | $ | 177,771 | $ | 182,120 | ||||||
|
Mid-Atlantic Region
|
153,913 | 147,643 | 144,401 | |||||||||
|
Southeastern Region
|
126,604 | 122,412 | 121,659 | |||||||||
|
Southwestern Region
|
49,223 | 47,202 | 46,674 | |||||||||
|
Non-Mature communities/Other
|
215,459 | 138,840 | 108,045 | |||||||||
|
|
||||||||||||
|
Total segment and consolidated rental income
|
$ | 730,958 | $ | 633,868 | $ | 602,899 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Reportable apartment home segment NOI
|
||||||||||||
|
Same Communities
|
||||||||||||
|
Western Region
|
$ | 129,292 | $ | 121,338 | $ | 127,653 | ||||||
|
Mid-Atlantic Region
|
106,393 | 100,875 | 98,483 | |||||||||
|
Southeastern Region
|
79,369 | 76,560 | 74,853 | |||||||||
|
Southwestern Region
|
29,395 | 27,527 | 26,058 | |||||||||
|
Non-Mature communities/Other
|
140,311 | 84,764 | 71,413 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Total segment and consolidated NOI
|
484,760 | 411,064 | 398,460 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Reconciling items:
|
||||||||||||
|
Non-property income
|
17,422 | 14,347 | 14,274 | |||||||||
|
Property management
|
(20,101 | ) | (17,432 | ) | (16,581 | ) | ||||||
|
Other operating expenses
|
(6,217 | ) | (5,848 | ) | (6,485 | ) | ||||||
|
Depreciation and amortization
|
(370,343 | ) | (303,446 | ) | (278,391 | ) | ||||||
|
Interest, net
|
(158,333 | ) | (150,796 | ) | (142,152 | ) | ||||||
|
General and administrative
|
(45,915 | ) | (45,243 | ) | (39,035 | ) | ||||||
|
Severance costs and other restructuring charges
|
(1,342 | ) | (6,803 | ) | — | |||||||
|
Other depreciation and amortization
|
(3,931 | ) | (4,843 | ) | (5,161 | ) | ||||||
|
Loss from unconsolidated entities
|
(6,352 | ) | (4,204 | ) | (18,665 | ) | ||||||
|
Redeemable noncontrolling interests in OP
|
(395 | ) | 3,835 | 4,282 | ||||||||
|
Non-controlling interests
|
(167 | ) | (146 | ) | (191 | ) | ||||||
|
Tax (expense)/ benefit
|
(7,571 | ) | 2,533 | (311 | ) | |||||||
|
Gain on the sale of depreciable property
|
138,508 | 4,083 | 2,424 | |||||||||
|
|
||||||||||||
|
Net income/(loss) attributable to UDR, Inc.
|
$ | 20,023 | $ | (102,899 | ) | $ | (87,532 | ) | ||||
|
|
||||||||||||
115
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
The following table details the assets of UDR’s reportable segments as of December 31,
2011 and 2010
(dollars in thousands)
:
| December 31, | ||||||||
| 2011 | 2010 | |||||||
|
|
||||||||
|
Reportable apartment home segment assets
|
||||||||
|
Same Communities
|
||||||||
|
Western Region
|
$ | 1,958,108 | $ | 1,920,742 | ||||
|
Mid-Atlantic Region
|
1,257,778 | 1,245,737 | ||||||
|
Southeastern Region
|
1,041,658 | 1,003,830 | ||||||
|
Southwestern Region
|
476,812 | 461,015 | ||||||
|
Non-Mature communities/Other
|
3,340,115 | 2,250,023 | ||||||
|
|
||||||||
|
|
||||||||
|
Total segment assets
|
8,074,471 | 6,881,347 | ||||||
|
Accumulated depreciation
|
(1,831,727 | ) | (1,638,326 | ) | ||||
|
|
||||||||
|
Total segment assets — net book value
|
6,242,744 | 5,243,021 | ||||||
|
|
||||||||
|
|
||||||||
|
Reconciling items:
|
||||||||
|
Cash and cash equivalents
|
12,503 | 9,486 | ||||||
|
Marketable securities
|
— | 3,866 | ||||||
|
Restricted cash
|
24,634 | 15,447 | ||||||
|
Deferred financing costs, net
|
30,068 | 27,267 | ||||||
|
Notes receivable
|
— | 7,800 | ||||||
|
Investment in unconsolidated joint ventures
|
213,040 | 148,057 | ||||||
|
Other assets
|
198,365 | 74,596 | ||||||
|
|
||||||||
|
|
||||||||
|
Total consolidated assets
|
$ | 6,721,354 | $ | 5,529,540 | ||||
|
|
||||||||
Capital expenditures related to our same communities totaled $48.3 million, $42.6
million, and $48.0 million for the years ended December 31, 2011, 2010, and 2009,
respectively. Capital expenditures related to our non-mature/other communities totaled $9.5
million, $6.0 million, and $8.3 million for the years ended December 31, 2011, 2010,
and 2009, respectively.
Markets included in the above geographic segments are as follows:
| i. | Western — Orange County, San Francisco, Seattle, Monterey Peninsula, Los Angeles, San Diego, Inland Empire, Sacramento, and Portland | ||
| ii. | Mid-Atlantic — Metropolitan DC, Richmond, Baltimore, Norfolk, and Other Mid-Atlantic | ||
| iii. | Southeastern — Tampa, Orlando, Nashville, Jacksonville, and Other Florida | ||
| iv. | Southwestern — Dallas, Phoenix, and Austin |
16. RESTRUCTURING CHARGES
In 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 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”.
116
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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2011
17. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA
Selected consolidated quarterly financial data for the years ended December 31, 2011 and
2010 is summarized in the table below
(dollars in thousands, except per share amounts)
:
| Three months ended | ||||||||||||||||
| March 31, | June 30, | September 30, | December 31, | |||||||||||||
|
2011
|
||||||||||||||||
|
|
||||||||||||||||
|
Rental income (a)
|
$ | 154,558 | $ | 167,555 | $ | 181,151 | $ | 187,999 | ||||||||
|
Loss from continuing operations
|
(30,746 | ) | (31,322 | ) | (26,763 | ) | (22,805 | ) | ||||||||
|
Income from discontinued operations
|
2,090 | 46,231 | 12,977 | 70,923 | ||||||||||||
|
Net (loss)/income attributable to common stockholders
|
(30,243 | ) | 12,149 | (15,559 | ) | 44,190 | ||||||||||
|
|
||||||||||||||||
|
(Loss)/income per share (b):
|
||||||||||||||||
|
Basic and diluted
|
$ | (0.17 | ) | $ | 0.06 | $ | (0.07 | ) | $ | 0.20 | ||||||
|
|
||||||||||||||||
|
2010
|
||||||||||||||||
|
|
||||||||||||||||
|
Rental income (a)
|
$ | 137,139 | $ | 139,377 | $ | 145,172 | $ | 152,396 | ||||||||
|
Loss from continuing operations
|
(28,412 | ) | (28,745 | ) | (28,605 | ) | (30,042 | ) | ||||||||
|
Income from discontinued operations
|
3,386 | 1,105 | 4,000 | 725 | ||||||||||||
|
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 | ) | ||||
| (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. |
18. SUBSEQUENT EVENTS
On January 10, 2012, the Company issued $400 million aggregate principal amount of
4.625% Medium Term Notes due January 2022. Interest is payable semiannually beginning in July
2012. The notes were priced at 99.100% of the principal amount plus accrued interest from
January 10, 2012 to yield 4.739% to maturity. The notes are fully and unconditionally
guaranteed by the Operating Partnership.
On January 12, 2012, the Company formed a new real estate joint venture, UDR/MetLife II,
with MetLife wherein each party owns a 50% interest in a $1.3 billion portfolio of 12
operating communities containing 2,528 apartment homes. The 12 communities in the joint
venture include seven from UDR/MetLife I, which was formed in November 2010, while the
remaining five operating communities have been newly acquired by UDR/MetLife II. The newly
acquired communities, collectively known as Columbus Square, are recently developed,
high-rise apartment buildings located on the Upper West Side of Manhattan and were purchased
for $630 million.
The Company serves as the general partner for UDR/MetLife II and earns property
management, asset management and financing fees.
With the closing of UDR/MetLife II, the original joint venture between the parties, UDR/MetLife I,
currently includes 19 operating properties containing 3,930 homes as well as 10 vacant land
parcels. Historical cost of the venture is $1.8 billion and the Company’s weighted average
ownership interest in the UDR/MetLife I operating assets is 12.6% and 4.0% for the land parcels
in the venture.
117
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[This page is intentionally left blank.]
118
Table of Contents
Report of Independent Registered Public Accounting Firm
The Partners
United Dominion Realty, L.P.
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, 2011 and 2010, and the related consolidated statements of
operations, cash flows, and changes in capital for each of the three years in the period ended
December 31, 2011. 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, 2011 and 2010, and
the consolidated results of its operations and its cash flows for each of the three years in the
period ended December 31, 2011, 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 27, 2012
February 27, 2012
119
Table of Contents
UNITED DOMINION REALTY, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for unit data)
| December 31, | ||||||||
| 2011 | 2010 | |||||||
|
|
||||||||
|
ASSETS
|
||||||||
|
|
||||||||
|
Real estate owned:
|
||||||||
|
Real estate held for investment
|
$ | 4,205,298 | $ | 3,384,987 | ||||
|
Less: accumulated depreciation
|
(976,358 | ) | (802,344 | ) | ||||
|
|
||||||||
|
Real estate held for investment, net
|
3,228,940 | 2,582,643 | ||||||
|
Held for sale
(net of accumulated depreciation of $0 and $81,739)
|
— | 239,458 | ||||||
|
|
||||||||
|
Total real estate owned, net of accumulated depreciation
|
3,228,940 | 2,822,101 | ||||||
|
Cash and cash equivalents
|
704 | 920 | ||||||
|
Restricted cash
|
12,568 | 8,022 | ||||||
|
Deferred financing costs, net
|
8,184 | 7,465 | ||||||
|
Other assets
|
41,771 | 22,887 | ||||||
|
|
||||||||
|
Total assets
|
$ | 3,292,167 | $ | 2,861,395 | ||||
|
|
||||||||
|
|
||||||||
|
LIABILITIES AND CAPITAL
|
||||||||
|
|
||||||||
|
Secured debt
|
$ | 1,189,645 | $ | 1,014,459 | ||||
|
Secured debt — real estate held for sale
|
— | 55,602 | ||||||
|
Notes payable due to General Partner
|
88,771 | 78,271 | ||||||
|
Real estate taxes payable
|
5,280 | 5,245 | ||||||
|
Accrued interest payable
|
1,886 | 518 | ||||||
|
Security deposits and prepaid rent
|
16,498 | 13,158 | ||||||
|
Distributions payable
|
39,840 | 33,559 | ||||||
|
Deferred gains on the sale of depreciable property
|
63,838 | 63,838 | ||||||
|
Accounts payable, accrued expenses, and other liabilities
|
33,040 | 35,122 | ||||||
|
|
||||||||
|
Total liabilities
|
1,438,798 | 1,299,772 | ||||||
|
|
||||||||
|
Capital:
|
||||||||
|
Partners’ capital:
|
||||||||
|
Operating partnership units: 184,281,253 OP units outstanding at
December 31, 2011 and 179,909,408 at December 31, 2010
|
||||||||
|
General partner: 110,883 OP units outstanding at December 31, 2011 and December 31, 2010
|
1,293 | 1,363 | ||||||
|
Limited partners: 184,170,370 OP units outstanding at December 31,
2011 and 179,798,525 OP units outstanding at December 31, 2010
|
2,040,401 | 2,046,380 | ||||||
|
Accumulated other comprehensive loss
|
(6,902 | ) | (5,502 | ) | ||||
|
|
||||||||
|
Total partners’ capital
|
2,034,792 | 2,042,241 | ||||||
|
Receivable due from General Partner
|
(193,584 | ) | (492,709 | ) | ||||
|
Non-controlling interest
|
12,161 | 12,091 | ||||||
|
|
||||||||
|
Total capital
|
1,853,369 | 1,561,623 | ||||||
|
|
||||||||
|
Total liabilities and capital
|
$ | 3,292,167 | $ | 2,861,395 | ||||
|
|
||||||||
See accompanying notes to the consolidated financial statements.
120
Table of Contents
UNITED DOMINION REALTY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
| Years Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
REVENUES
|
||||||||||||
|
Rental income
|
$ | 367,245 | $ | 319,089 | $ | 322,456 | ||||||
|
Non-property income:
|
||||||||||||
|
Other income
|
— | — | 5,695 | |||||||||
|
|
||||||||||||
|
Total revenues
|
367,245 | 319,089 | 328,151 | |||||||||
|
|
||||||||||||
|
EXPENSES
|
||||||||||||
|
Rental expenses:
|
||||||||||||
|
Real estate taxes and insurance
|
41,233 | 39,389 | 39,436 | |||||||||
|
Personnel
|
28,240 | 26,239 | 25,288 | |||||||||
|
Utilities
|
19,540 | 16,676 | 16,034 | |||||||||
|
Repair and maintenance
|
18,220 | 16,762 | 15,908 | |||||||||
|
Administrative and marketing
|
7,521 | 6,737 | 6,906 | |||||||||
|
Property management
|
10,099 | 8,775 | 8,868 | |||||||||
|
Other operating expenses
|
5,317 | 4,949 | 4,868 | |||||||||
|
Real estate depreciation and amortization
|
191,926 | 152,789 | 152,807 | |||||||||
|
Interest expense:
|
||||||||||||
|
Interest on secured debt
|
51,827 | 48,716 | 43,282 | |||||||||
|
Interest on note payable due to General Partner
|
990 | 424 | 5,028 | |||||||||
|
General and administrative
|
26,370 | 23,291 | 16,886 | |||||||||
|
|
||||||||||||
|
Total expenses
|
401,283 | 344,747 | 335,311 | |||||||||
|
|
||||||||||||
|
Loss from continuing operations
|
(34,038 | ) | (25,658 | ) | (7,160 | ) | ||||||
|
Income from discontinued operations
|
64,267 | 4,964 | 3,115 | |||||||||
|
|
||||||||||||
|
Consolidated net income/(loss)
|
30,229 | (20,694 | ) | (4,045 | ) | |||||||
|
Net income attributable to non-controlling interests
|
(70 | ) | (41 | ) | (131 | ) | ||||||
|
|
||||||||||||
|
Net income/(loss) attributable to OP unitholders
|
$ | 30,159 | $ | (20,735 | ) | $ | (4,176 | ) | ||||
|
|
||||||||||||
|
|
||||||||||||
|
Earnings per OP unit- basic and diluted:
|
||||||||||||
|
Loss from continuing operations attributable to OP unitholders
|
$ | (0.19 | ) | $ | (0.14 | ) | $ | (0.04 | ) | |||
|
Income from discontinued operations
|
$ | 0.35 | $ | 0.03 | $ | 0.02 | ||||||
|
Income/(loss) attributable to OP unitholders
|
$ | 0.17 | $ | (0.12 | ) | $ | (0.02 | ) | ||||
|
|
||||||||||||
|
Weighted average OP units outstanding
|
182,448 | 179,909 | 178,817 | |||||||||
See accompanying notes to the consolidated financial statements.
121
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UNITED DOMINION REALTY, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except for unit data)
| Year ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
|
||||||||||||
|
Operating Activities
|
||||||||||||
|
Consolidated net income/(loss)
|
$ | 30,229 | $ | (20,694 | ) | $ | (4,045 | ) | ||||
|
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
197,964 | 166,480 | 166,773 | |||||||||
|
Net gain on the sale of depreciable property
|
(60,065 | ) | (152 | ) | (1,475 | ) | ||||||
|
Write off of bad debt
|
2,040 | 1,760 | 2,216 | |||||||||
|
Amortization of deferred financing costs and other
|
2,425 | 1,652 | 2,195 | |||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Increase in operating assets
|
(11,516 | ) | (3,705 | ) | (3,340 | ) | ||||||
|
(Decrease)/increase in operating liabilities
|
(5,006 | ) | 1,263 | (4,991 | ) | |||||||
|
|
||||||||||||
|
Net cash provided by operating activities
|
156,071 | 146,604 | 157,333 | |||||||||
|
|
||||||||||||
|
Investing Activities
|
||||||||||||
|
Proceeds from sale of real estate investments, net
|
138,693 | — | — | |||||||||
|
Acquisition of real estate assets (net of liabilities assumed) and initial
capital expenditures
|
(287,075 | ) | — | — | ||||||||
|
Cash paid in nonmonetary asset exchange
|
(15,407 | ) | — | — | ||||||||
|
Proceeds from note receivable
|
— | — | 200,000 | |||||||||
|
Capital expenditures and other major improvements — real estate assets,
net of escrow reimbursement
|
(63,191 | ) | (59,458 | ) | (70,372 | ) | ||||||
|
|
||||||||||||
|
Net cash (used in)/provided by investing activities
|
(226,980 | ) | (59,458 | ) | 129,628 | |||||||
|
|
||||||||||||
|
Financing Activities
|
||||||||||||
|
Advances from/(payments to) General Partner
|
175,964 | (31,359 | ) | (550,392 | ) | |||||||
|
Proceeds from the issuance of secured debt
|
2,074 | 11,326 | 340,608 | |||||||||
|
Payments on secured debt
|
(96,902 | ) | (60,686 | ) | (64,455 | ) | ||||||
|
Payment of financing costs
|
(3,143 | ) | (391 | ) | (4,073 | ) | ||||||
|
OP unit redemption
|
— | (327 | ) | — | ||||||||
|
Distributions paid to partnership unitholders
|
(7,300 | ) | (5,231 | ) | (11,797 | ) | ||||||
|
|
||||||||||||
|
Net cash provided by/(used in) financing activities
|
70,693 | (86,668 | ) | (290,109 | ) | |||||||
|
|
||||||||||||
|
Net increase in cash and cash equivalents
|
(216 | ) | 478 | (3,148 | ) | |||||||
|
Cash and cash equivalents, beginning of year
|
920 | 442 | 3,590 | |||||||||
|
|
||||||||||||
|
Cash and cash equivalents, end of year
|
$ | 704 | $ | 920 | $ | 442 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Supplemental Information:
|
||||||||||||
|
Interest paid during the year, net of amounts capitalized
|
$ | 58,623 | $ | 51,584 | $ | 46,029 | ||||||
|
Non-cash transactions:
|
||||||||||||
|
Properties acquired, including intangibles in asset exchange
|
178,353 | — | — | |||||||||
|
Properties disposed in asset exchange, net of accumulated depreciation
|
139,725 | — | — | |||||||||
|
OP Units issued in partial consideration for property acquisition
|
111,034 | — | — | |||||||||
|
Secured debt assumed in the acquisitions of properties, including asset exchange
|
247,805 | — | — | |||||||||
|
Secured debt transferred in asset exchange
|
55,356 | — | — | |||||||||
|
Fair market value adjustment of secured debt assumed in acquisitions of properties,
including asset exchange
|
21,915 | — | — | |||||||||
See accompanying notes to the consolidated financial statements.
122
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UNITED DOMINION REALTY, L.P.
CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL
(In thousands)
| Out- | Accumulated | ||||||||||||||||||||||||||||||||||||||||
| Class A | UDR, Inc. | Performance | Other | Total | Receivable due | Non- | |||||||||||||||||||||||||||||||||||
| Limited | Limited | Limited | General | Partnership | Comprehensive | Partnership | from General | Controlling | |||||||||||||||||||||||||||||||||
| Partner | Partners | Partner | Partner | Shares | Income/(Loss) | Capital | Partner | Interest | Total | ||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
|
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 income/(loss)
|
— | — | — | — | — | 1,721 | — | — | — | (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
|
— | — | — | — | — | (2,349 | ) | — | — | — | (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 | |||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
|
Distributions
|
(2,328 | ) | (4,973 | ) | (139,853 | ) | (88 | ) | — | — | (147,242 | ) | — | — | (147,242 | ) | |||||||||||||||||||||||||
|
OP Unit Redemptions for common shares of UDR
|
— | (287 | ) | 287 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
|
OP Units issued for acquisitions of real estate
|
— | 111,034 | — | — | — | — | 111,034 | — | — | 111,034 | |||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
|
Adjustment to reflect limited partners’ capital at redemption value
|
4,809 | 7,621 | (12,430 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
|
Change in UDR, L.P. non-controlling interest
|
— | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
|
Other comprehensive income/(loss):
|
|||||||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
|
Unrealized loss on derivative financial instruments
|
— | — | — | — | — | (1,400 | ) | (1,400 | ) | — | — | (1,400 | ) | ||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
|
Net income
|
287 | 1,255 | 28,599 | 18 | — | — | 30,159 | — | 70 | 30,229 | |||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
|
Total comprehensive (loss)/income
|
— | — | — | — | — | (1,400 | ) | — | — | — | 28,829 | ||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
|
Net change in receivable due from General Partner
|
— | — | — | — | — | — | — | 299,125 | — | 299,125 | |||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
|
Balance, December 31, 2011
|
$ | 43,967 | $ | 192,508 | $ | 1,803,926 | $ | 1,293 | $ | — | $ | (6,902 | ) | $ | 2,034,792 | $ | (193,584 | ) | $ | 12,161 | $ | 1,853,369 | |||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
123
Table of Contents
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011
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 year ended
December 31, 2011, 2010 and 2009, rental revenues of the Operating Partnership represented of 53%,
56%, and 59% of the General Partner’s consolidated rental revenues, respectively. At December 31,
2011, the Operating Partnership’s apartment portfolio consisted of 77 communities located in 17
markets consisting of 23,160 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, 2011, there were 184,281,253 OP units in the Operating Partnership
outstanding, of which 174,859,951 or 94.9% were owned by UDR and affiliated entities and 9,421,302
or 5.1%, which were owned by non-affiliated limited partners. There were 179,909,408 OP units in
the Operating Partnership outstanding as of December 31, 2010 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. 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, 2011 and 2010. At
December 31, 2011 and 2010, there were 184,170,370 and 179,798,525, respectively, OP units
outstanding of limited partnership interest, of which 1,751,671 were Class A Limited Partnership OP
units. UDR owned 174,749,068 or 94.9% and 174,736,557 or 97.2% at December 31, 2011 and 2010,
respectively. The remaining 9,421,302 or 5.1% and 5,061,968 or 2.8% OP units outstanding of limited
partnership interest were held by non- affiliated partners at December 31, 2011 and 2010,
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 its financial
statements were issued. Except as disclosed in Note 13,
Subsequent Event
, no other recognized or
non-recognized subsequent events were noted.
124
Table of Contents
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
2. SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) No. 2011-05,
Comprehensive Income (Topic 220)
, which provides that an entity has the
option to present the total of comprehensive income, the components of net income, and the
components of other comprehensive income either in a single continuous statement of comprehensive
income or in two separate but consecutive statements. In both choices, an entity is required to
present each component of net income along with total net income, each component of other
comprehensive income along with a total for other comprehensive income, and a total amount for
comprehensive income. This ASU eliminates the option to present the components of other
comprehensive income as part of the consolidated statement of changes in capital. The ASU does not
change the items that must be reported in other comprehensive income or when an item of other
comprehensive income must be reclassified to net income. This requirement is effective for fiscal
years and interim periods beginning after December 15, 2011 for the Operating Partnership. The
Operating Partnership does not expect a material impact on its consolidated financial position,
results of operations, or cash flows as a result of this new guidance.
The FASB recently issued ASU Update No. 2011-12,
Deferral of the Effective Date for Amendments
to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in
Accounting Standards Update No. 2011-05
. The amendments are being made to allow the FASB time to
redeliberate whether to present on the face of the financial statements the effects of
reclassifications out of accumulated other comprehensive income on the components of net income and
other comprehensive income for all periods presented. All other requirements in ASU 2011-05 are not
affected by ASU 2011-12, including the requirement to report comprehensive income either in a
single continuous financial statement or in two separate but consecutive financial statements.
In May 2011, the FASB issued ASU No. 2011-04,
Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRS (ASC 820),
which clarifies Topic 820,
but also includes some instances where a particular principle or requirement for measuring fair
value or disclosing information about fair value measurements has changed. This ASU results in
common principles and requirements for measuring fair value and for disclosing information about
fair value measurements in accordance with U.S. GAAP and IFRS. This is effective for periods
beginning after December 15, 2011 for the Operating Partnership. The Operating Partnership does not
expect a material impact on its consolidated financial position, results of operations, or cash
flows as a result of this new guidance.
In December 2010, the FASB issued ASU No. 2010-29,
Business Combinations (Topic 805):
Disclosure of Supplementary Pro Forma Information for Business Combinations (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 Operating Partnership adopted the requirements of ASU 2010-29, which were effective
prospectively for the Operating Partnership’s business combinations occurring during the year ended
December 31, 2011. See Note 3,
Real Estate Owned
, for these disclosures.
In January 2010, the FASB issued ASU No. 2010-06,
Improving Disclosures about Fair Value
Measurements
an amendment to ASC Topic 820,
Fair Value Measurements and Disclosures (ASU 2010-06)
.
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. With the
exception for the requirement to disclose activity in Level 3 fair value measurements, which
include purchases, sales, issuances and settlements in the rollforward activity, ASU 2010-06 was
effective for the Operating Partnership for our fiscal year beginning in January 1, 2010.
Disclosures of rollforward activity in Level 3 fair value measurements was effective for the
Operating Partnership for the interim periods within and for the fiscal year beginning in January
1, 2011, and did not have a material impact on our consolidated financial position, results of
operations or cash flows during the year ended December 31, 2011.
125
Table of Contents
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
Real estate
Real estate assets held for investment are carried at historical cost and consist of land,
buildings and improvements, furniture, fixtures and equipment and other costs incurred during their
development, acquisition and redevelopment.
Expenditures for ordinary repair and maintenance costs are charged to expense as incurred.
Expenditures for improvements, renovations, and replacements related to the acquisition and/or
improvement of real estate assets are capitalized and depreciated over their estimated useful lives
if the expenditures qualify as a betterment or the life of the related asset will be substantially
extended beyond the original life expectancy.
The Operating Partnership purchases real estate investment properties and records the tangible
and identifiable intangible assets and liabilities acquired based on their estimated fair value.
The primary, although not only, identifiable intangible asset associated with our portfolio is the
value of existing lease agreements. When recording the acquisition of a community, we first assign
fair value to the estimated intangible value of the existing lease agreements and then to the
estimated value of the land, building and fixtures assuming the community is vacant. The Operating
Partnership estimates the intangible value of the lease agreements by determining the lost revenue
associated with a hypothetical lease-up. Depreciation on the building is based on the expected
useful life of the asset and the in-place leases are amortized over their remaining average
contractual life. Property acquisition costs are expensed as incurred.
Quarterly or when changes in circumstances warrant, the Operating Partnership will assess our
real estate 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 net operating income (“NOI”) plus the residual value of the community.
Our future cash flow estimates are based upon historical results adjusted to reflect our best
estimate of future market and operating conditions and our estimated holding periods. If such
indicators of impairment are present and the carrying value exceeds the undiscounted cash flows of
the community, an impairment loss is recognized equal to the excess of the carrying amount of the
asset over its estimated fair value. Our estimates of fair market value represent our best estimate
based primarily upon unobservable inputs related to rental rates, operating costs, growth rates,
discount rates and capitalization rates, industry trends and reference to market rates and
transactions.
For long-lived assets to be disposed of, impairment losses are recognized when the fair value
of the asset less estimated cost to sell is less than the carrying value of the asset. Properties
classified as real estate held for sale generally represent properties that are actively marketed
or contracted for sale with the closing expected to occur within the next twelve months. Real
estate held for sale is carried at the lower of cost, net of accumulated depreciation, or fair
value, less the cost to sell, determined on an asset-by-asset basis. Expenditures for ordinary
repair and maintenance costs on held for sale properties are charged to expense as incurred.
Expenditures for improvements, renovations, and replacements related to held for sale properties
are capitalized at cost. Depreciation is not recorded on real estate held for sale.
Depreciation is computed on a straight-line basis over the estimated useful lives of the
related assets which are 35 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, 2011 and 2010, the
amount of our net intangible assets which are reflected in “Other assets” was $15.7 million and
$4.1 million, respectively. As of December 31, 2011 and 2010, the amount of our net intangible
liabilities which are reflected in “Accounts payable, accrued expenses, and other liabilities” was
$4.3 million and $3.3 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 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 2011, 2010, and 2009, total interest capitalized
pertaining to redevelopment projects and land held for future development was $1.8 million, $1.3
million, and $444,000, respectively.
126
Table of Contents
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
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
generally designates these financial instruments as cash flow hedges. Derivative financial
instruments associated with the Operating Partnership’s allocation of the General Partner’s debt
are recorded on our Consolidated Balance Sheets as either an asset or liability and measured
quarterly at their fair value. The changes in fair value for the General Partner’s cash flow hedges
allocated to the Operating Partnership that are deemed effective are reflected in other
comprehensive income and for non-designated derivative financial instruments in earnings. The
ineffective component of cash flow hedges, if any, is recorded in earnings.
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.
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
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
. 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 defer the gain on the
interest we or our General Partner retain. The Operating Partnership recognizes any deferred gain
when the property is sold to a third party. In transactions accounted by us as partial sales, we
determine if the buyer of the majority equity interest in the venture was provided a preference as
to cash flows in either an operating or a capital waterfall. If a cash flow preference has been
provided, we recognize profit only to the extent that proceeds from the sale of the majority equity
interest exceed costs related to the entire property.
Discontinued operations
For properties accounted for under FASB ASC 360,
Property, Plant and Equipment
(“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 classified as held-for-sale,
depreciation is no longer recorded. However, if the Operating Partnership determines that the
property no longer meets the criteria for held-for-sale, the Company will recapture any unrecorded
depreciation on the property (see Note 4,
Discontinued Operations
for further discussion).
127
Table of Contents
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
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, 2011, 2010, and 2009, 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.
Allocation of General and Administrative Expenses
The Operating Partnership is charged directly for general and administrative expenses it
incurs. The Operating Partnership is also charged with other general and administrative expenses
that have been allocated by the General Partner to each of its subsidiaries, including the
Operating Partnership, based on each subsidiary’s pro-rata portion of UDR’s total apartment homes.
(See Note 6,
Related Party Transactions
.)
Income taxes
The taxable income or loss of the Operating Partnership is reported on the tax returns of the
partners. Accordingly, no provision has been made in the accompanying financial statements for
federal or state income taxes on income that is passed through to the partners. However, any state
or local revenue, excise or franchise taxes that result from the operating activities of the
Operating Partnership are recorded at the entity level. The Operating Partnership’s tax returns are
subject to examination by federal and state taxing authorities. Net income for financial reporting
purposes differs from the net income for income tax reporting purposes primarily due to temporary
differences, principally real estate depreciation and the tax deferral of certain gains on property
sales. The differences in depreciation result from differences in the book and tax basis of
certain real estate assets and the differences in the methods of depreciation and lives of the real
estate assets.
The Operating Partnership follows the accounting guidance within 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 (2008- 2010) and major
jurisdictions, and concluded there is no tax liability resulting from unrecognized tax benefits
relating to uncertain income tax positions taken or expected to be taken in future tax returns.
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 2011, 2010, and 2009, total
advertising expense from continuing and discontinued operations was $2.5 million, $2.3 million, and
$2.4 million, respectively.
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 Changes in Capital. For the three years ended December 31, 2011, 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.
128
Table of Contents
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
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.
Market concentration risk
The Operating Partnership is subject to
increased exposure from economic and other competitive factors
specific to those markets where it holds a significant percentage of the
carrying value of its real estate portfolio at December 31, 2011, the Operating Partnership held greater than 10% of the carrying
value of its real estate portfolio in the Orange County, California,
San Francisco, California, Metropolitan DC; and New York,
New York 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, 2011, the Operating
Partnership owned and consolidated 77 communities in 8 states plus the District of Columbia
totaling 23,160 apartment homes. The following table summarizes the carrying amounts for our real
estate owned (at cost) as of December 31, 2011 and 2010
(dollar amounts in thousands):
| December 31, | ||||||||
| 2011 | 2010 | |||||||
|
|
||||||||
|
Land
|
$ | 1,021,526 | $ | 882,538 | ||||
|
Depreciable property — held and used:
|
||||||||
|
Buildings and improvements
|
3,035,252 | 2,367,044 | ||||||
|
Furniture, fixtures and
equipment
|
120,427 | 109,390 | ||||||
|
Held for sale:
|
||||||||
|
Land
|
— | 107,386 | ||||||
|
Buildings and improvements
|
— | 206,877 | ||||||
|
Furniture, fixtures and
equipment
|
— | 6,934 | ||||||
|
Under development:
|
||||||||
|
Land
|
16,385 | — | ||||||
|
Construction in progress
|
10,408 | — | ||||||
|
Land held for future development
|
1,300 | 26,015 | ||||||
|
|
||||||||
|
Real estate owned
|
4,205,298 | 3,706,184 | ||||||
|
Accumulated depreciation
|
(976,358 | ) | (884,083 | ) | ||||
|
|
||||||||
|
Real estate owned, net
|
$ | 3,228,940 | $ | 2,822,101 | ||||
|
|
||||||||
129
Table of Contents
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
The following table summarizes the Operating Partnership’s real estate community
acquisitions for the year ended December 31, 2011
(dollars in thousands).
| Purchase | ||||||||||||
| Property Name | Market | Acquisition Date | Units | Price (a) | ||||||||
|
|
||||||||||||
|
10 Hanover Square
|
New York, NY | April 2011 | 493 | $ | 259,750 | |||||||
|
14 North
|
Boston, MA | April 2011 | 387 | 64,500 | ||||||||
|
Inwood West
|
Boston, MA | April 2011 | 446 | 108,000 | ||||||||
|
95 Wall
|
New York, NY | August 2011 | 507 | 328,914 | ||||||||
|
|
||||||||||||
|
|
1,833 | $ | 761,164 | |||||||||
|
|
||||||||||||
| (a) | The purchase price is the contractual sales price by the Operating Partnership and the third party and does not include any costs that the Operating Partnership incurred in the pursuit of the property or the recorded difference between the agreed upon value and the fair value of the OP Units issued as part of the consideration paid. |
In August 2011, UDR, through the Operating Partnership closed on the acquisition of 95
Wall. The community was acquired for $328.9 million, which included the issuance of 1,802,239 OP
Units of the Operating Partnership. The OP Units were deemed to have an agreed upon value equal to
the greater of $25.00 or the volume weighted average closing price per share of the Company’s
common stock for the 10 day period ended on (and including) the date one business day prior to the
settlement date. For purchase price accounting purposes, the fair value of these OP units was
$26.71 at the settlement date.
On April 1, 2011, UDR, through the Operating Partnership closed on the acquisition of 10
Hanover Square. The community was acquired for $259.8 million, which included assumed debt with a
fair value of $208.1 million, and the issuance of 2,569,606 OP Units of the Operating Partnership.
The OP Units were deemed to have an agreed upon value equal to the greater of $25.00 or the volume
weighted average closing price per share of the Company’s common stock for the 10 day period ended
on (and including) the date one business day prior to the settlement date. For purchase price
accounting purposes, the fair value of these OP units was $24.47 at the settlement date.
On April 5, 2011, UDR and the Operating Partnership completed a $500.0 million asset exchange
with an unaffiliated third party whereby UDR acquired 388 Beale, and the Operating Partnership
acquired 14 North, and Inwood West. The communities acquired were valued at $263.0 million
representing their estimated fair value. The Company and the Operating Partnership paid $28.1
million of cash and assumed debt with a fair value of $61.7 million. UDR sold two multifamily
apartment communities (434 homes) and the Operating Partnership sold four multifamily apartment
communities (984 homes) located in California as part of the transaction. (See Note 4,
Discontinued
Operations
, for further discussion of real estate community dispositions.)
The Operating Partnership records the fair value of the tangible and identifiable intangible
assets acquired based on their estimated fair value. When recording the acquisition of a community,
the Operating Partnership first assigns fair value 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 primary, although not only, identifiable intangible asset
associated with our portfolio is the value of existing lease agreements. The Operating Partnership
estimates the intangible value of the lease agreements by determining the lost revenue associated
with a hypothetical lease-up.
Total acquisition value of the communities, including the difference between the agreed upon
value of the OP Units and the fair value of the OP Units issued at the acquisition date (if
applicable), was recorded $130.8 million to land; $621.2 million to buildings and improvements;
$3.5 million to furniture, fixtures, and equipment; $30.5 million to intangible assets; $1.3
million to intangible below market lease liabilities; and $269.7 million of assumed debt.
Operating revenues of $32.5 million and a loss from operations of $22.3 million of the
acquired properties were included in the Operating Partnership’s results of operations from the
acquisition dates to December 31, 2011.
130
Table of Contents
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
The unaudited pro forma information below summarizes the Operating Partnership’s combined
results of operations for the year ended December 31, 2011 and 2010 as though the above
acquisitions were completed on January 1, 2010. The information for the years ended December 31,
2011, and 2010 includes pro forma results for the portion of the period prior to the acquisition
date and actual results from the date of acquisition through the end of the period. The
supplemental pro forma operating data is not necessarily indicative of what the actual results of
operations would have been assuming the transaction had been completed as set forth above, nor do
they purport to represent the Operating Partnership’s results of operations for future periods (
in
thousands except for per share amounts
).
| December 31, | ||||||||
| 2011 | 2010 | |||||||
|
|
||||||||
|
Pro forma revenues
|
$ | 389,303 | $ | 386,481 | ||||
|
Pro forma income/(loss) attributable to OP
unitholders
|
20,760 | (31,426 | ) | |||||
|
|
||||||||
|
Pro forma earnings per OP unit — basic:
|
||||||||
|
|
||||||||
|
Net income/(loss) attributable to OP unitholders
|
$ | 0.11 | $ | (0.17 | ) | |||
|
|
||||||||
|
Earnings per common share — diluted:
|
||||||||
|
|
||||||||
|
Net income/(loss) attributable to OP unitholders
|
$ | 0.11 | $ | (0.17 | ) | |||
The Operating Partnership incurred $2.3 million of acquisition related costs during the years
ended December 31, 2011. These expenses are classified on the Consolidated Statements of Operations
line item entitled “General and administrative”.
The Operating Partnership did not have any acquisitions and did not incur any acquisition
related costs 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 sale 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 sale through December 31, 2011, in the
Consolidated Statements of Operations for the years ended December 31, 2011, 2010, and 2009, and
the reclassification of the assets and liabilities within the Consolidated Balance Sheets as of
December 31, 2011 and 2010, if applicable.
During the year ended December 31, 2011, the Operating Partnership sold eight apartment home
communities (2,024 homes), which included four apartment home communities (984 homes) sold in
conjunction with an asset exchange in April 2011, for a total sales price of
$299.6 million.
During the year ended December 31, 2011, UDR recognized gains on the sale of apartment home
communities for financial reporting purposes of $60.1 million, which is also included in
discontinued operations and classified within the line item entitled “Income from discontinued
operations”. At December 31, 2011, UDR did not have any assets that met the criteria to be
classified as held for sale.
For the years ended December 31, 2010 and 2009, the Operating Partnership did not dispose of
any communities.
131
Table of Contents
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
The following is a summary of income from discontinued operations for each of the three years
ended December 31,
(dollars in thousands)
:
| For the Years Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
|
||||||||||||
|
Rental income
|
$ | 19,812 | $ | 31,305 | $ | 30,600 | ||||||
|
Non-property income
|
— | 1,695 | — | |||||||||
|
|
||||||||||||
|
|
19,812 | 33,000 | 30,600 | |||||||||
|
|
||||||||||||
|
Rental expenses
|
8,045 | 10,475 | 8,916 | |||||||||
|
Property management fee
|
545 | 861 | 841 | |||||||||
|
Real estate depreciation
|
6,038 | 13,691 | 13,966 | |||||||||
|
Interest
|
815 | 3,082 | 5,237 | |||||||||
|
Other expenses
|
167 | 79 | — | |||||||||
|
|
||||||||||||
|
|
15,610 | 28,188 | 28,960 | |||||||||
|
|
||||||||||||
|
Income before net gain on the sale of property
|
4,202 | 4,812 | 1,640 | |||||||||
|
Net gain on the sale of property
|
60,065 | 152 | 1,475 | |||||||||
|
|
||||||||||||
|
Income from discontinued operations
|
$ | 64,267 | $ | 4,964 | $ | 3,115 | ||||||
|
|
||||||||||||
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, 2011 and 2010 (
dollars in thousands
):
| For the Year Ended December 31, 2011 | ||||||||||||||||||||
| Principal Outstanding | Weighted | Weighted | Number of | |||||||||||||||||
| December 31, | Average | Average | Communities | |||||||||||||||||
| 2011 | 2010 | Interest Rate | Years to Maturity | Encumbered | ||||||||||||||||
|
Fixed Rate Debt
|
||||||||||||||||||||
|
Mortgage notes payable
|
$ | 457,723 | $ | 192,205 | 5.28 | % | 4.0 | 7 | ||||||||||||
|
Tax-exempt secured notes payable
|
— | 13,325 | N/A | — | — | |||||||||||||||
|
Fannie Mae credit facilities
|
444,899 | 560,993 | 4.95 | % | 6.0 | 7 | ||||||||||||||
|
|
||||||||||||||||||||
|
Total fixed rate secured debt
|
902,622 | 766,523 | 5.12 | % | 5.0 | 14 | ||||||||||||||
|
|
||||||||||||||||||||
|
Variable Rate Debt
|
||||||||||||||||||||
|
Mortgage notes payable
|
37,415 | 100,590 | 0.99 | % | 1.5 | 2 | ||||||||||||||
|
Tax-exempt secured note payable
|
27,000 | 27,000 | 0.57 | % | 18.2 | 1 | ||||||||||||||
|
Fannie Mae credit facilities
|
222,608 | 175,948 | 1.84 | % | 4.3 | 20 | ||||||||||||||
|
|
||||||||||||||||||||
|
Total variable rate secured debt
|
287,023 | 303,538 | 1.61 | % | 5.3 | 23 | ||||||||||||||
|
|
||||||||||||||||||||
|
Total secured debt
|
$ | 1,189,645 | $ | 1,070,061 | 4.27 | % | 5.1 | 37 | ||||||||||||
|
|
||||||||||||||||||||
As of December 31, 2011, the General Partner had secured credit facilities with Fannie
Mae with an aggregate commitment of $1.3 billion with $1.1 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, 2011, $744.5 million of the outstanding balance was fixed at a
weighted average interest rate of 5.14% and the remaining balance of $310.5 million on these
facilities had a weighted average variable interest rate of 1.63%. $667.5 million of these credit
facilities were allocated to the Operating Partnership at December 31, 2011 based on the ownership
of the assets securing the debt.
132
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
The following is information related to the credit facilities allocated to the Operating
Partnership:
| December 31, | ||||||||
| 2011 | 2010 | |||||||
| (dollar amounts in thousands) | ||||||||
|
|
||||||||
|
Borrowings outstanding
|
$ | 667,507 | $ | 736,941 | ||||
|
Weighted average borrowings during the
period ended
|
721,054 | 763,040 | ||||||
|
Maximum daily borrowings during the period
|
732,423 | 770,021 | ||||||
|
Weighted average interest rate during the
period ended
|
4.4 | % | 4.5 | % | ||||
|
Interest rate at the end of the period
|
4.1 | % | 4.4 | % | ||||
The Operating Partnership may from time to time acquire properties subject to fixed rate
debt instruments. In those situations, management will record the secured debt at its estimated
fair value and amortize any difference between the fair value and par to interest expense over the
life of the underlying debt instrument. The unamortized fair value adjustment of the fixed rate
debt instruments on the Operating Partnership’s properties was a net premium/(discount) of $17.8
million and ($1.1 million) at December 31, 2011 and 2010, respectively.
Fixed Rate Debt
Mortgage notes payable.
Fixed rate mortgage notes payable are generally due in monthly
installments of principal and interest and mature at various dates from December 2012 through May
2019 and carry interest rates ranging from 3.43% to 5.94%.
Secured credit facilities.
At December 31, 2011, the General Partner had borrowings against
its fixed rate facilities of $744.5 million of which $444.9 million was allocated to the Operating
Partnership based on the ownership of the assets securing the debt. As of December 31, 2011, the
fixed rate Fannie Mae credit facilities allocated to the Operating Partnership had a weighted
average fixed interest rate of 4.95%.
Variable Rate Debt
Mortgage notes payable.
Variable rate mortgage notes payable are generally due in monthly
installments of principal and interest and mature on July 2013. Interest on the variable rate
mortgage notes is based on LIBOR plus some basis points, which translated into interest rate of
0.99% at December 31, 2011.
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 0.57% as of December 31, 2011.
Secured credit facilities.
At December 31, 2011, the General Partner had borrowings against
its variable rate facilities of $310.5 million of which $222.6 million was allocated to the
Operating Partnership based on the ownership of the assets securing the debt. As of December 31,
2011, the variable rate borrowings under the Fannie Mae credit facilities allocated to the
Operating Partnership had a weighted average floating interest rate of 1.84%.
133
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
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 | Credit | Mortgage | Tax Exempt | Credit | ||||||||||||||||||||
| Notes | Facilities | Notes | Notes Payable | Facilities | Total | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
2012
|
$ | 54,484 | $ | 62,992 | $ | — | $ | — | $ | 92,715 | $ | 210,191 | ||||||||||||
|
2013
|
16,538 | 29,805 | 37,415 | — | — | 83,758 | ||||||||||||||||||
|
2014
|
8,346 | — | — | — | — | 8,346 | ||||||||||||||||||
|
2015
|
193,209 | — | — | — | — | 193,209 | ||||||||||||||||||
|
2016
|
131,904 | — | — | — | — | 131,904 | ||||||||||||||||||
|
Thereafter
|
53,242 | 352,102 | — | 27,000 | 129,893 | 562,237 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 457,723 | $ | 444,899 | $ | 37,415 | $ | 27,000 | $ | 222,608 | $ | 1,189,645 | ||||||||||||
|
|
||||||||||||||||||||||||
Guarantor on Unsecured Debt
At December 31, 2010, the Operating Partnership was a guarantor on the General Partner’s
unsecured credit facility, with an aggregate borrowing capacity of $600 million ($31.8 million
outstanding at December 31, 2010). On October 25, 2011, the Operating Partnership issued a
guarantee in conjunction with a $900 million unsecured revolving credit facility entered into by
the General Partner. The facility replaced the General Partner’s $600 million credit facility. At
December 31, 2011, the outstanding balance under the $900 million unsecured credit facility was
$421.0 million.
The Operating Partnership is also a guarantor on the General Partner’s $250 million term loan
which matures January 2016, a $100 million term loan which matures December 2016, and $300 million of medium-term notes
due June 2018. Subsequent to December 31, 2011, the Operating Partnership issued an additional
guarantee on medium term notes issued by the General Partner. See Note 13,
Subsequent Event.
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 net receivable balances of $193.6 million
and $492.7 million at December 31, 2011 and 2010, respectively, which are reflected as a reduction
of capital on the Consolidated Balance Sheets.
Allocation of General and Administrative Expenses
The General Partner provides various general and administrative and other overhead services
for the Operating Partnership including legal assistance, acquisitions analysis, marketing and
advertising, and allocates these expenses to the Operating Partnership first on the basis of direct
usage when identifiable, with the remainder allocated based on its pro-rata portion of UDR’s total
apartment homes. During the years ended December 31, 2011, 2010, and 2009, the general and
administrative expenses and property management expenses, allocated to the Operating Partnership by
UDR were $32.6 million, $32.4 million, and $25.9 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.
Management
Fee
During the year ended December 31, 2011, the Operating Partnership
entered into a management agreement with a Taxable REIT
Subsidiary (“TRS”) of the General Partner. The TRS charges the
Operating
Partnership 2.75% of gross rental revenues. During the year ended
December 31, 2011, the Operating Partnership incurred $3.7 million of management fees under the management agrement.
Guaranty by the General Partner
The Operating Partnership provided a “bottom dollar” guaranty to certain limited partners as
part of their original contribution to the Operating Partnership. The guaranty protects the tax
basis of the underlying contribution and is reflected on the OP unitholder’s Schedule K-1 tax form.
The guaranty was made in the form of a note payable issued by the Operating Partnership to the
General Partner at an annual interest rate of 1.14% and 0.593% at December 31, 2011 and 2010,
respectively. Interest payments are made monthly and the note is due December 31, 2012. At December
31, 2011 and 2010, the note payable due to the General Partner was $83.3 million and $78.3 million,
respectively.
134
Table of Contents
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
During the year ended December 31, 2011, the Operating Partnership also provided a guaranty in
conjunction with 1,802,239 OP Units issued in partial consideration to the seller for
the acquisition of an operating community. The guaranty was made in the form of a note payable
issued by the Operating Partnership to the General Partner at an annual interest rate of 5.337%.
Interest payments are due monthly and the note matures on August 31, 2021. At issuance and at
December 31, 2011, the note payable due to the General Partner was $5.5 million.
7. FAIR VALUE OF DERIVATIVES AND FINANCIAL INSTRUMENTS
Fair value is based on the price that would be received to sell an asset or the exit price
that would be paid to transfer a liability in an orderly transaction between market participants at
the measurement date. A three-level valuation hierarchy prioritizes observable and unobservable
inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which
are described below:
| • | Level 1 — Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. |
| • | Level 2 — Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data. |
| • | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
The estimated fair values of the Operating Partnership’s financial instruments either recorded
or disclosed on a recurring basis as of December 31, 2011 and 2010 are summarized as follows
(dollars in thousands)
:
| Fair Value at December 31, 2011 Using | ||||||||||||||||
| Quoted Prices in | ||||||||||||||||
| Active Markets | ||||||||||||||||
| for Identical | Significant Other | Significant | ||||||||||||||
| Assets or | Observable | Unobservable | ||||||||||||||
| Liabilities | Inputs | Inputs | ||||||||||||||
| December 31, 2011 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
|
||||||||||||||||
|
Description:
|
||||||||||||||||
|
|
||||||||||||||||
|
Derivatives- Interest rate contracts (b)
|
$ | 71 | $ | — | $ | 71 | $ | — | ||||||||
|
|
||||||||||||||||
|
Total assets
|
$ | 71 | $ | — | $ | 71 | $ | — | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Derivatives- Interest rate contracts (b)
|
$ | 6,207 | $ | — | $ | 6,207 | $ | — | ||||||||
|
Secured debt instruments- fixed rate: (a)
|
||||||||||||||||
|
Mortgage notes payable
|
495,412 | — | — | 495,412 | ||||||||||||
|
Fannie Mae credit facilities
|
462,621 | — | — | 462,621 | ||||||||||||
|
Secured debt instruments- variable rate: (a)
|
||||||||||||||||
|
Mortgage notes payable
|
37,415 | — | — | 37,415 | ||||||||||||
|
Tax-exempt secured notes payable
|
27,000 | — | — | 27,000 | ||||||||||||
|
Fannie Mae credit facilities
|
222,608 | — | — | 222,608 | ||||||||||||
|
|
||||||||||||||||
|
Total liabilities
|
$ | 1,251,263 | $ | — | $ | 6,207 | $ | 1,245,056 | ||||||||
|
|
||||||||||||||||
135
Table of Contents
UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
| Fair Value at December 31, 2010 Using | ||||||||||||||||
| Quoted Prices in | ||||||||||||||||
| Active Markets | ||||||||||||||||
| for Identical | Significant Other | Significant | ||||||||||||||
| Assets or | Observable | Unobservable | ||||||||||||||
| Liabilities | Inputs | 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
|
576,069 | — | — | 576,069 | ||||||||||||
|
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
|
$ | 1,109,755 | $ | — | $ | 5,111 | $ | 1,104,644 | ||||||||
|
|
||||||||||||||||
| (a) | See Note 5, Debt | |
| (b) | See Note 8, Derivatives and Hedging Activity | |
| (c) | In the first quarter of 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. The Operating Partnership paid approximately $635,000 of the liability during the year ended December 31, 2010. The remaining balance of $5.4 million was paid during the year ended December 31, 2011 in conjunction with the sale of the property. |
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, 2011 and 2010, 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.
136
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
Financial Instruments Not Carried at Fair Value
At December 31, 2011, the fair values of cash and cash equivalents, restricted cash, accounts
receivable, prepaids, real estate taxes payable, accrued interest payable, security deposits and
prepaid rent, distributions payable and accounts payable approximated their carrying values because
of the short term nature of these instruments. The estimated fair values of other financial
instruments were determined by the Operating Partnership using available market information and
appropriate valuation methodologies. Considerable judgment is necessary to interpret market data
and develop estimated fair values. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Operating Partnership would realize on the disposition of the
financial instruments. The use of different market assumptions or estimation methodologies may have
a material effect on the estimated fair value amounts.
The General Partner estimates the fair value of our debt instruments by discounting the
remaining cash flows of the debt instrument at a discount rate equal to the replacement market
credit spread plus the corresponding treasury yields. Factors considered in determining a
replacement market credit spread include general market conditions, borrower specific credit
spreads, time remaining to maturity, loan-to-value ratios and collateral quality (Level 3).
The Operating Partnership records impairment losses on long-lived assets used in operations
when events and circumstances indicate that the assets might be impaired and the undiscounted cash
flows estimated to be generated by the future operation and disposition of those assets are less
than the net book value of those assets. Cash flow estimates are based upon historical results
adjusted to reflect management’s best estimate of future market and operating conditions and our
estimated holding periods. The net book value of impaired assets is reduced to fair value. The
General Partner’s estimates of fair value represent management’s estimates based upon Level 3
inputs such as industry trends and reference to market rates and transactions.
8. DERIVATIVES AND HEDGING ACTIVITY
Risk Management Objective of Using Derivatives
The Operating Partnership is exposed to certain 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.
)
137
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
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, 2011, 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, 2011, 2010 and 2009, 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 is allocated to the Operating Partnership. During the next twelve months
through December 31, 2012, we estimate that an additional $2.9 million will be reclassified as an
increase to interest expense.
As of December 31, 2011, 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
|
4 | $ | 172,813 | |||||
|
|
||||||||
|
Interest rate caps
|
5 | $ | 245,954 | |||||
Derivatives not designated as hedges are not speculative and are used to manage the General
Partner’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
. Changes in the fair value
of derivatives not designated in hedging relationships are recorded directly in earnings and
resulted in losses of $204,000 and $684,000 and a gain of $538,000 for the years ended December 31,
2011, 2010, and 2009, respectively.
As of December 31, 2011, 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
|
1 | $ | 79,847 | |||||
138
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
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, 2011 and 2010
(dollar
amounts in thousands)
.
| Asset Derivatives | Liability Derivatives | |||||||||||||||||||
| Fair Value at | Fair Value at | |||||||||||||||||||
| Balance | December 31, | Balance | December 31, | |||||||||||||||||
| Sheet Location | 2011 | 2010 | Sheet Location | 2011 | 2010 | |||||||||||||||
|
Derivatives designated as hedging instruments:
|
||||||||||||||||||||
|
Interest Rate Products
|
Other Assets | $ | 64 | $ | 217 | Other Liabilities | $ | 6,207 | $ | 5,111 | ||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Total derivatives designated as hedging instruments
|
$ | 64 | $ | 217 | $ | 6,207 | $ | 5,111 | ||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Derivatives
not
designated as hedging instruments:
|
||||||||||||||||||||
|
Interest Rate Products
|
Other Assets | $ | 7 | $ | 159 | Other Liabilities | $ | — | $ | — | ||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Total derivatives
not
designated as hedging
instruments
|
$ | 7 | $ | 159 | $ | — | $ | — | ||||||||||||
|
|
||||||||||||||||||||
Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statements of
Operations
The tables below present the effect of the derivative financial instruments on the
Consolidated Statements of Operations for the years ended December 31, 2011, 2010, and 2009 (
dollar
amounts in thousands
):
| Location of Loss | Amount of Loss Reclassified from | |||||||||||||||||||||||||||
| Amount of Loss Recognized in OCI on | Reclassified from | Accumulated OCI into Income | ||||||||||||||||||||||||||
| Derivatives in | Derivative (Effective Portion) | Accumulated OCI | (Effective Portion) | |||||||||||||||||||||||||
| Cash Flow | For the Years Ended December 31, | into Income | For the Years Ended December 31, | |||||||||||||||||||||||||
| Hedging Relationships | 2011 | 2010 | 2009 | (Effective Portion) | 2011 | 2010 | 2009 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Interest Rate Products
|
$ | (6,119 | ) | $ | (6,631 | ) | $ | (2,676 | ) | Interest expense | $ | (4,719 | ) | $ | (4,281 | ) | $ | (4,397 | ) | |||||||||
|
|
||||||||||||||||||||||||||||
|
Total
|
$ | (6,119 | ) | $ | (4,281 | ) | $ | (2,676 | ) | $ | (4,719 | ) | $ | (6,631 | ) | $ | (4,397 | ) | ||||||||||
|
|
||||||||||||||||||||||||||||
| Amount of Gain or (Loss) Recognized | ||||||||||||||
| Derivatives Not | Location of Gain or (Loss) | in Income on Derivative | ||||||||||||
| Designated as | Recognized in Income on | For the Years Ended December 31, | ||||||||||||
| Hedging Instruments | Derivative | 2011 | 2010 | 2009 | ||||||||||
|
|
||||||||||||||
|
Interest Rate Products
|
Other income / (expense) | $ | (204 | ) | $ | (684 | ) | $ | 538 | |||||
|
|
||||||||||||||
|
|
||||||||||||||
|
Total
|
$ | (204 | ) | $ | (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.
139
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
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, 2011, 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 $6.5 million. As of December 31, 2011, 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, 2011, it would have been required to settle
its obligations under the agreements at their termination value of $6.5 million.
9. CAPITAL STRUCTURE
General Partnership Units
The General Partner has complete discretion to manage and control the operations and business
of the Operating Partnership, which includes but is not limited to the acquisition and disposition
of real property, construction of buildings and making capital improvements, and the borrowing of
funds from outside lenders or UDR and its subsidiaries to finance such activities. The General
Partner can generally authorize, issue, sell, redeem or purchase any OP Unit or securities of the
Operating Partnership without the approval of the limited partners. The General Partner can also
approve, with regard to the issuances of OP units, the class or one or more series of classes, with
designations, preferences, participating, optional or other special rights, powers and duties
including rights, powers and duties senior to limited partnership interests without approval of any
limited partners except holder of Class A Partnership Units. There were 110,883 OP units of general
partnership interest at December 31, 2011 and 2010, all of which were held by UDR.
Limited Partnership Units
At December 31, 2011 and 2010, there were 184,170,370 and 179,798,525 OP units outstanding of
limited partnership interest, respectively, of which 1,751,671 were Class A Limited Partnership OP
units. UDR owned 174,749,068 or 94.9% and 174,736,557 or 97.2% at December 31, 2011 and 2010,
respectively. The remaining 9,421,302 or 5.1% and 5,061,968 or 2.8% OP units outstanding of limited
partnership interest were held by non- affiliated partners at December 31, 2011 and 2010,
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.
The non-affiliated limited partners’ capital is adjusted to redemption value at the end of
each reporting period with the corresponding offset against UDR’s limited partner capital account
based on the redemption rights noted above. The aggregate value upon redemption of the
then-outstanding OP Units held by limited partners was $236.5 million and $119.1 million as of
December 31, 2011 and 2010, respectively, based on the value of UDR’s common stock at each period
end. A limited partner has no right to receive any distributions from the Operating Partnership on
or after the date of redemption of its OP Units.
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
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 Partnership unit.
Holders of the Class A Partnership Units exclusively possess certain voting rights. The
Operating Partnership may not do 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 Partnership Units, (iv) enter
into a merger or acquisition, or (v) amend or modify the Agreement of Limited Partnership of the
Operating Partnership in a manner that adversely affects the relative rights, preferences or
privileges of the Class A 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 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.
141
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
The Series E Program was designed to provide participants with the possibility of
substantial returns on their investment if the cumulative total return on UDR’s common stock, as
measured by the cumulative amount of dividends paid plus share price appreciation during the
measurement period was at least the equivalent of a 36% total return, or 12% annualized (“Minimum
Return”).
At the conclusion of the measurement period, if UDR’s cumulative total return satisfied these
criteria, the Series E LLC as holder of the Series E OPPSs would receive (for the indirect benefit
of the Series E Participants as holders of interests in the Series E LLC) distributions and
allocations of income and loss from the Operating Partnership equal to the distributions and
allocations that would have been received on the number of OP Units obtained by:
| i. | determining the amount by which the cumulative total return of UDR’s common stock over the measurement period exceeds the Minimum Return (such excess being the “Excess Return”); |
| ii. | multiplying 2% of the Excess Return by UDR’s market capitalization (defined as the average number of shares outstanding over the 36-month period, including common stock, OP Units, common stock equivalents and OP Units); and |
| iii. | dividing the number obtained in (ii) by the market value of one share of UDR’s common stock on the valuation date, computed as the volume-weighted average price per day of the common stock for the 20 trading days immediately preceding the valuation date. |
For the Series E OPPSs, the number determined pursuant to clause (ii) above was capped at 0.5%
of market capitalization.
If, on the valuation date, the cumulative total return of UDR’s common stock did not meet the
Minimum Return, then the Series E Participants would forfeit their entire initial investment.
At the conclusion of the measurement period, December 31, 2009, the total cumulative return on
UDR’s common stock did not meet the minimum return threshold. As a result, there were no payouts
under the Series E OPPSs program and the investment 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, 2011:
| UDR, Inc. | ||||||||||||||||||||
| Class A Limited | Limited | Limited | General | |||||||||||||||||
| Partner | Partners | Partner | Partner | Total | ||||||||||||||||
|
|
||||||||||||||||||||
|
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 | |||||||||||||||
|
|
||||||||||||||||||||
|
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 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
OP Units issued for acquisitions of real
estate
|
— | 4,371,845 | — | — | 4,371,845 | |||||||||||||||
|
OP redemptions for UDR stock
|
— | (12,511 | ) | 12,511 | — | — | ||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Ending balance at December 31, 2011
|
1,751,671 | 7,669,631 | 174,749,068 | 110,883 | 184,281,253 | |||||||||||||||
|
|
||||||||||||||||||||
142
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
10. COMMITMENTS AND CONTINGENCIES
Commitments
Ground Leases
The Operating Partnership owns five communities which are subject to ground leases expiring
between 2019 and 2103. The leases are accounted for in accordance with FASB ASC 840,
Leases
. Future
minimum lease payments as of December 31, 2011 are $4.9 million for each of the years ending
December 31, 2012 to 2016, and a total of $314.5 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 $4.9 million, $4.7 million, and $4.6 million of ground rent
expense for the years ended December 31, 2011, 2010, and 2009, respectively.
Contingencies
Litigation and Legal Matters
The Operating Partnership is subject to various legal proceedings and claims arising in the
ordinary course of business. The Operating Partnership cannot determine the ultimate liability with
respect to such legal proceedings and claims at this time. The General Partner believes that such
liability, to the extent not provided for through insurance or otherwise, will not have a material
adverse effect on the Operating Partnership’s financial condition, results of operations or cash
flow.
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
11. REPORTABLE SEGMENTS
FASB ASC Topic 280,
Segment Reporting
, 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 of the General Partner 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 communities represent those communities acquired, developed, and stabilized prior to January 1, 2010 and held as of December 31, 2011. 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 sale 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 2009, 2010, or 2011 sold properties, redevelopment properties, properties classified as real estate held for sale, 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, 2011, 2010, and 2009.
144
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
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 from continuing and discontinued operations for the Operating Partnership’s
reportable segments for the years ended December 31, 2011, 2010, and 2009, and reconciles NOI to
income from continuing and discontinued operations per the consolidated statement of operations
(dollars in thousands)
:
| December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
|
||||||||||||
|
Reportable apartment home segment rental income
|
||||||||||||
|
Same Store Communities
|
||||||||||||
|
Western Region
|
$ | 158,280 | $ | 151,244 | $ | 155,745 | ||||||
|
Mid-Atlantic Region
|
64,020 | 61,262 | 58,774 | |||||||||
|
Southeastern Region
|
42,631 | 40,846 | 41,210 | |||||||||
|
Southwestern Region
|
27,559 | 26,428 | 26,669 | |||||||||
|
Non-Mature communities/Other
|
94,567 | 70,614 | 70,658 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Total segment and consolidated rental income
|
$ | 387,057 | $ | 350,394 | $ | 353,056 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Reportable apartment home segment NOI
|
||||||||||||
|
Same Store Communities
|
||||||||||||
|
Western Region
|
$ | 110,631 | $ | 103,600 | $ | 109,713 | ||||||
|
Mid-Atlantic Region
|
44,400 | 41,908 | 39,556 | |||||||||
|
Southeastern Region
|
26,722 | 25,659 | 25,984 | |||||||||
|
Southwestern Region
|
17,127 | 16,175 | 16,271 | |||||||||
|
Non-Mature communities/Other
|
65,378 | 46,774 | 49,044 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Total segment and consolidated NOI
|
264,258 | 234,116 | 240,568 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Reconciling items:
|
||||||||||||
|
Non-property income
|
— | 1,695 | 5,695 | |||||||||
|
Property management
|
(10,644 | ) | (9,636 | ) | (9,709 | ) | ||||||
|
Other operating expenses
|
(5,484 | ) | (5,028 | ) | (4,868 | ) | ||||||
|
Depreciation and amortization
|
(197,964 | ) | (166,480 | ) | (166,773 | ) | ||||||
|
Interest
|
(53,632 | ) | (52,222 | ) | (53,547 | ) | ||||||
|
General and administrative
|
(26,370 | ) | (23,291 | ) | (16,886 | ) | ||||||
|
Net gain on the sale of real estate
|
60,065 | 152 | 1,475 | |||||||||
|
Non-controlling interests
|
(70 | ) | (41 | ) | (131 | ) | ||||||
|
|
||||||||||||
|
Net income/(loss) attributable to OP unit
holders
|
$ | 30,159 | $ | (20,735 | ) | $ | (4,176 | ) | ||||
|
|
||||||||||||
145
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
The following table details the assets of the Operating Partnership’s reportable segments
as of December 31, 2011 and 2010
(dollars in thousands)
:
| December 31, | ||||||||
| 2011 | 2010 | |||||||
|
|
||||||||
|
Reportable apartment home segment assets
|
||||||||
|
Same Store Communities
|
||||||||
|
Western Region
|
$ | 1,608,006 | $ | 1,591,585 | ||||
|
Mid-Atlantic Region
|
697,217 | 693,564 | ||||||
|
Southeastern Region
|
360,045 | 354,861 | ||||||
|
Southwestern Region
|
257,077 | 254,485 | ||||||
|
Non-Mature communities/Other
|
1,282,953 | 811,689 | ||||||
|
|
||||||||
|
|
||||||||
|
Total segment assets
|
4,205,298 | 3,706,184 | ||||||
|
Accumulated depreciation
|
(976,358 | ) | (884,083 | ) | ||||
|
|
||||||||
|
|
||||||||
|
Total segment assets -
net book value
|
3,228,940 | 2,822,101 | ||||||
|
|
||||||||
|
|
||||||||
|
Reconciling items:
|
||||||||
|
Cash and cash equivalents
|
704 | 920 | ||||||
|
Restricted cash
|
12,568 | 8,022 | ||||||
|
Deferred financing costs, net
|
8,184 | 7,465 | ||||||
|
Other assets
|
41,771 | 22,887 | ||||||
|
|
||||||||
|
|
||||||||
|
Total consolidated assets
|
$ | 3,292,167 | $ | 2,861,395 | ||||
|
|
||||||||
Capital expenditures related to our same communities totaled $26.5 million, $22.5 million, and
$28.0 million for the years ended December 31, 2011, 2010, and 2009, respectively. Capital
expenditures related to our non-mature/other communities totaled $3.2 million, $2.5 million, and
$3.9 million for the years ended December 31, 2011, 2010, and 2009, 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 |
146
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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
DECEMBER 31, 2011
12. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA
Selected consolidated quarterly financial data for the years ended December 31, 2011 and 2010
is summarized in the table blow (
dollars in thousands, except per share amounts
):
| Three months ended | ||||||||||||||||
| March 31, | June 30, | September 30, | December 31, | |||||||||||||
|
2011
|
||||||||||||||||
|
|
||||||||||||||||
|
Rental income (a)
|
$ | 81,396 | $ | 91,675 | $ | 95,523 | $ | 98,651 | ||||||||
|
Loss from continuing operations
|
(3,344 | ) | (9,449 | ) | (7,664 | ) | (13,581 | ) | ||||||||
|
Income from discontinued operations
|
1,340 | 16,957 | 1,064 | 44,906 | ||||||||||||
|
(Loss)/income attributable to OP unitholders
|
(2,031 | ) | 7,476 | (6,632 | ) | 31,346 | ||||||||||
|
|
||||||||||||||||
|
(Loss)/income per OP unit- basic and
diluted (b)
|
$ | (0.01 | ) | $ | 0.04 | $ | (0.04 | ) | $ | 0.17 | ||||||
|
|
||||||||||||||||
|
2010
|
||||||||||||||||
|
|
||||||||||||||||
|
Rental income (a)
|
$ | 82,812 | $ | 83,684 | $ | 84,431 | $ | 68,162 | ||||||||
|
Income/(loss) from continuing operations
|
1,729 | (1,679 | ) | (6,341 | ) | (19,367 | ) | |||||||||
|
(Loss)/income from discontinued operations
|
(4,662 | ) | (873 | ) | (495 | ) | 10,994 | |||||||||
|
Loss attributable to OP unitholders
|
(2,950 | ) | (2,570 | ) | (6,845 | ) | (8,370 | ) | ||||||||
|
|
||||||||||||||||
|
Loss per OP unit — basic and diluted
|
$ | (0.02 | ) | $ | (0.01 | ) | $ | (0.04 | ) | $ | (0.05 | ) | ||||
| (a) | Represents rental income from continuing operations, excluding amounts classified as discontinued operations. | |
| (b) | Quarterly earnings per OP Unit amounts may not total to the annual amounts due to rounding. |
13. SUBSEQUENT EVENT
On January 10, 2012, the Operating Partnership issued a guarantee in conjunction with the
General Partner’s issuance of $400 million of 4.625% Medium Term Notes due January 2022. Interest
is payable semiannually beginning in July 2012. The notes were priced at 99.100% of the principal
amount plus accrued interest from January 10, 2012 to yield 4.739% to maturity.
147
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[This page is intentionally left blank.]
148
Table of Contents
UDR, INC.
SCHEDULE III — REAL ESTATE OWNED
FOR THE YEAR ENDED DECEMBER 31, 2011
(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 | $ | 11,271 | $ | 20,774 | $ | 39,512 | $ | 60,286 | $ | 20,518 | 2003 | Jun-03 | ||||||||||||||||||||
|
Pine Brook Village
|
18,270 | 2,582 | 25,504 | 28,086 | 4,638 | 3,886 | 28,838 | 32,724 | 14,045 | 1979 | Jun-03 | |||||||||||||||||||||||||||||
|
Pacific Shores
|
19,145 | 7,345 | 22,624 | 29,969 | 7,777 | 7,596 | 30,150 | 37,746 | 15,105 | 2003 | Jun-03 | |||||||||||||||||||||||||||||
|
Huntington Vista
|
31,274 | 8,055 | 22,486 | 30,541 | 6,102 | 8,243 | 28,400 | 36,643 | 14,479 | 1970 | Jun-03 | |||||||||||||||||||||||||||||
|
Missions at Back Bay
|
11,326 | 229 | 14,129 | 14,358 | 1,871 | 10,739 | 5,490 | 16,229 | 2,972 | 1969 | Dec-03 | |||||||||||||||||||||||||||||
|
Coronado at Newport — North
|
48,448 | 62,516 | 46,082 | 108,598 | 19,536 | 66,591 | 61,543 | 128,134 | 29,146 | 2000 | Oct-04 | |||||||||||||||||||||||||||||
|
Huntington Villas
|
55,752 | 61,535 | 18,017 | 79,552 | 5,014 | 61,855 | 22,711 | 84,566 | 10,965 | 1972 | Sep-04 | |||||||||||||||||||||||||||||
|
Villa Venetia
|
— | 70,825 | 24,179 | 95,004 | 5,424 | 70,984 | 29,444 | 100,428 | 13,401 | 1972 | Oct-04 | |||||||||||||||||||||||||||||
|
Vista Del Rey
|
12,659 | 10,670 | 7,080 | 17,750 | 1,670 | 10,783 | 8,637 | 19,420 | 4,112 | 1969 | Sep-04 | |||||||||||||||||||||||||||||
|
Foxborough
|
— | 12,071 | 6,187 | 18,258 | 2,285 | 12,180 | 8,363 | 20,543 | 3,558 | 1969 | Sep-04 | |||||||||||||||||||||||||||||
|
Coronado South
|
92,188 | 58,785 | 50,067 | 108,852 | 12,351 | 59,058 | 62,145 | 121,203 | 28,473 | 2000 | Mar-05 | |||||||||||||||||||||||||||||
|
Pine Brook Village II
|
— | 25,922 | 60,961 | 86,883 | 1,353 | 25,997 | 62,239 | 88,236 | 13,190 | 1975 | May-08 | |||||||||||||||||||||||||||||
|
1818 Platinum Triangle
|
— | 16,663 | 51,905 | 68,568 | 225 | 16,665 | 52,128 | 68,793 | 4,225 | 2009 | Aug-10 | |||||||||||||||||||||||||||||
|
ORANGE COUNTY, CA
|
336,153 | 357,675 | 377,759 | 735,434 | 79,517 | 375,351 | 439,600 | 814,951 | 174,189 | |||||||||||||||||||||||||||||||
|
2000 Post Street
|
— | 9,861 | 44,578 | 54,439 | 6,848 | 10,178 | 51,109 | 61,287 | 19,648 | 1987 | Dec-98 | |||||||||||||||||||||||||||||
|
Birch Creek
|
— | 4,365 | 16,696 | 21,061 | 5,320 | 5,022 | 21,359 | 26,381 | 10,517 | 1968 | Dec-98 | |||||||||||||||||||||||||||||
|
Highlands Of Marin
|
— | 5,996 | 24,868 | 30,864 | 25,554 | 7,011 | 49,407 | 56,418 | 17,294 | 1991 | Dec-98 | |||||||||||||||||||||||||||||
|
Marina Playa
|
— | 6,224 | 23,916 | 30,140 | 7,660 | 6,764 | 31,036 | 37,800 | 14,791 | 1971 | Dec-98 | |||||||||||||||||||||||||||||
|
River Terrace
|
33,130 | 22,161 | 40,137 | 62,298 | 2,221 | 22,265 | 42,254 | 64,519 | 15,981 | 2005 | Aug-05 | |||||||||||||||||||||||||||||
|
CitySouth
|
— | 14,031 | 30,537 | 44,568 | 30,689 | 15,672 | 59,585 | 75,257 | 13,826 | 1972 | Nov-05 | |||||||||||||||||||||||||||||
|
Bay Terrace
|
— | 8,545 | 14,458 | 23,003 | 2,543 | 8,549 | 16,997 | 25,546 | 5,827 | 1962 | Oct-05 | |||||||||||||||||||||||||||||
|
Highlands of Marin Phase II
|
— | 5,353 | 18,559 | 23,912 | 10,976 | 5,730 | 29,158 | 34,888 | 6,801 | 1968 | Oct-07 | |||||||||||||||||||||||||||||
|
Edgewater
|
45,106 | 30,657 | 83,872 | 114,529 | 1,760 | 30,668 | 85,621 | 116,289 | 18,845 | 2007 | Mar-08 | |||||||||||||||||||||||||||||
|
Almaden Lake Village
|
27,000 | 594 | 42,515 | 43,109 | 2,459 | 655 | 44,913 | 45,568 | 9,339 | 1999 | Jul-08 | |||||||||||||||||||||||||||||
|
388 Beale
|
— | 14,253 | 74,104 | 88,357 | 438 | 14,253 | 74,542 | 88,795 | 3,076 | 1999 | Apr-11 | |||||||||||||||||||||||||||||
|
2000 Post III
|
— | 1,756 | 7,753 | 9,509 | 2,983 | 3,290 | 9,202 | 12,492 | 3,773 | 2006 | Dec-98 | |||||||||||||||||||||||||||||
|
SAN FRANCISCO, CA
|
105,236 | 123,796 | 421,993 | 545,789 | 99,451 | 130,057 | 515,183 | 645,240 | 139,718 | |||||||||||||||||||||||||||||||
|
Rosebeach
|
— | 8,414 | 17,449 | 25,863 | 1,889 | 8,462 | 19,290 | 27,752 | 8,526 | 1970 | Sep-04 | |||||||||||||||||||||||||||||
|
Ocean Villas
|
8,663 | 5,135 | 12,789 | 17,924 | 1,351 | 5,205 | 14,070 | 19,275 | 5,895 | 1965 | Oct-04 | |||||||||||||||||||||||||||||
|
Tierra Del Rey
|
— | 39,586 | 36,679 | 76,265 | 1,811 | 39,592 | 38,484 | 78,076 | 9,369 | 1999 | Dec-07 | |||||||||||||||||||||||||||||
|
Marina Pointe
|
67,700 | 48,182 | 102,364 | 150,546 | 2,188 | 48,225 | 104,509 | 152,734 | 7,661 | 1993 | Sep-10 | |||||||||||||||||||||||||||||
|
Pine@Sixth
|
— | 5,805 | 6,305 | 12,110 | 12,387 | 6,241 | 18,256 | 24,497 | 11,565 | 2008 | Aug-06 | |||||||||||||||||||||||||||||
|
Jefferson at Marina del Rey
|
89,850 | 55,651 | — | 55,651 | 87,946 | 61,132 | 82,465 | 143,597 | 14,308 | 2008 | Sep-07 | |||||||||||||||||||||||||||||
|
LOS ANGELES, CA
|
166,213 | 162,773 | 175,586 | 338,359 | 107,572 | 168,857 | 277,074 | 445,931 | 57,324 | |||||||||||||||||||||||||||||||
|
Arbor Terrace
|
— | 1,453 | 11,995 | 13,448 | 2,820 | 1,769 | 14,499 | 16,268 | 7,346 | 1996 | Mar-98 | |||||||||||||||||||||||||||||
|
Aspen Creek
|
10,819 | 1,178 | 9,116 | 10,294 | 1,986 | 1,437 | 10,843 | 12,280 | 4,971 | 1996 | Dec-98 | |||||||||||||||||||||||||||||
|
Crowne Pointe
|
7,328 | 2,486 | 6,437 | 8,923 | 4,252 | 2,773 | 10,402 | 13,175 | 5,536 | 1987 | Dec-98 | |||||||||||||||||||||||||||||
|
Hilltop
|
6,774 | 2,174 | 7,408 | 9,582 | 3,164 | 2,641 | 10,105 | 12,746 | 5,052 | 1985 | Dec-98 | |||||||||||||||||||||||||||||
|
The Hawthorne
|
— | 6,474 | 30,226 | 36,700 | 1,758 | 6,533 | 31,925 | 38,458 | 12,495 | 2003 | Jul-05 | |||||||||||||||||||||||||||||
|
The Kennedy
|
17,942 | 6,179 | 22,307 | 28,486 | 1,098 | 6,212 | 23,372 | 29,584 | 8,430 | 2005 | Nov-05 | |||||||||||||||||||||||||||||
|
Hearthstone at Merrill Creek
|
25,479 | 6,848 | 30,922 | 37,770 | 1,706 | 6,860 | 32,616 | 39,476 | 7,132 | 2000 | May-08 | |||||||||||||||||||||||||||||
|
Island Square
|
— | 21,284 | 89,389 | 110,673 | 2,443 | 21,354 | 91,762 | 113,116 | 18,374 | 2007 | Jul-08 | |||||||||||||||||||||||||||||
|
Borgata
|
— | 6,379 | 24,569 | 30,948 | 245 | 6,384 | 24,809 | 31,193 | 6,660 | 2001 | May-07 | |||||||||||||||||||||||||||||
|
elements too
|
— | 27,468 | 72,036 | 99,504 | 10,498 | 30,077 | 79,925 | 110,002 | 13,388 | 2010 | Feb-10 | |||||||||||||||||||||||||||||
|
989elements
|
— | 8,541 | 45,990 | 54,531 | 581 | 8,517 | 46,595 | 55,112 | 5,363 | 2006 | Dec-09 | |||||||||||||||||||||||||||||
|
SEATTLE, WA
|
68,342 | 90,464 | 350,395 | 440,859 | 30,551 | 94,557 | 376,853 | 471,410 | 94,747 | |||||||||||||||||||||||||||||||
|
Presidio at Rancho Del Oro
|
— | 9,164 | 22,694 | 31,858 | 5,073 | 9,600 | 27,331 | 36,931 | 13,176 | 1987 | Jun-04 | |||||||||||||||||||||||||||||
|
Villas at Carlsbad
|
— | 6,517 | 10,718 | 17,235 | 1,514 | 6,639 | 12,110 | 18,749 | 5,079 | 1966 | Oct-04 | |||||||||||||||||||||||||||||
|
SAN DIEGO, CA
|
— | 15,681 | 33,412 | 49,093 | 6,587 | 16,239 | 39,441 | 55,680 | 18,255 | |||||||||||||||||||||||||||||||
|
Boronda Manor
|
— | 1,946 | 8,982 | 10,928 | 8,396 | 3,112 | 16,212 | 19,324 | 6,662 | 1979 | Dec-98 | |||||||||||||||||||||||||||||
|
Garden Court
|
— | 888 | 4,188 | 5,076 | 4,385 | 1,455 | 8,006 | 9,461 | 3,393 | 1973 | Dec-98 | |||||||||||||||||||||||||||||
|
Cambridge Court
|
— | 3,039 | 12,883 | 15,922 | 13,073 | 5,160 | 23,835 | 28,995 | 10,269 | 1974 | Dec-98 | |||||||||||||||||||||||||||||
|
Laurel Tree
|
— | 1,304 | 5,115 | 6,419 | 5,335 | 2,075 | 9,679 | 11,754 | 4,115 | 1977 | Dec-98 | |||||||||||||||||||||||||||||
|
The Pointe At Harden Ranch
|
— | 6,388 | 23,854 | 30,242 | 23,263 | 9,731 | 43,774 | 53,505 | 18,246 | 1986 | Dec-98 | |||||||||||||||||||||||||||||
|
The Pointe At Northridge
|
— | 2,044 | 8,028 | 10,072 | 9,098 | 3,204 | 15,966 | 19,170 | 6,985 | 1979 | Dec-98 | |||||||||||||||||||||||||||||
|
The Pointe At Westlake
|
— | 1,329 | 5,334 | 6,663 | 5,159 | 2,109 | 9,713 | 11,822 | 3,984 | 1975 | Dec-98 | |||||||||||||||||||||||||||||
|
MONTEREY PENINSULA, CA
|
— | 16,938 | 68,384 | 85,322 | 68,709 | 26,846 | 127,185 | 154,031 | 53,654 | |||||||||||||||||||||||||||||||
|
Verano at Rancho Cucamonga
Town Square
|
54,308 | 13,557 | 3,645 | 17,202 | 52,382 | 22,918 | 46,666 | 69,584 | 21,842 | 2006 | Oct-02 | |||||||||||||||||||||||||||||
|
Windemere at Sycamore Highland
|
24,017 | 5,810 | 23,450 | 29,260 | 2,103 | 5,986 | 25,377 | 31,363 | 13,711 | 2001 | Nov-02 | |||||||||||||||||||||||||||||
|
INLAND EMPIRE, CA
|
78,325 | 19,367 | 27,095 | 46,462 | 54,485 | 28,904 | 72,043 | 100,947 | 35,553 | |||||||||||||||||||||||||||||||
|
Foothills Tennis Village
|
— | 3,618 | 14,542 | 18,160 | 5,824 | 3,987 | 19,997 | 23,984 | 10,432 | 1988 | Dec-98 | |||||||||||||||||||||||||||||
|
Woodlake Village
|
— | 6,772 | 26,967 | 33,739 | 11,335 | 7,832 | 37,242 | 45,074 | 20,299 | 1979 | Dec-98 | |||||||||||||||||||||||||||||
|
SACRAMENTO, CA
|
— | 10,390 | 41,509 | 51,899 | 17,159 | 11,819 | 57,239 | 69,058 | 30,731 | |||||||||||||||||||||||||||||||
|
Tualatin Heights
|
8,976 | 3,273 | 9,134 | 12,407 | 5,655 | 3,707 | 14,355 | 18,062 | 7,736 | 1989 | Dec-98 | |||||||||||||||||||||||||||||
|
Andover Park
|
15,938 | 2,916 | 16,995 | 19,911 | 6,676 | 3,105 | 23,482 | 26,587 | 11,570 | 1989 | Sep-04 | |||||||||||||||||||||||||||||
|
Hunt Club
|
17,020 | 6,014 | 14,870 | 20,884 | 4,850 | 6,295 | 19,439 | 25,734 | 9,810 | 1985 | Sep-04 | |||||||||||||||||||||||||||||
|
PORTLAND, OR
|
41,934 | 12,203 | 40,999 | 53,202 | 17,181 | 13,107 | 57,276 | 70,383 | 29,116 | |||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
TOTAL WESTERN REGION
|
796,203 | 809,287 | 1,537,132 | 2,346,419 | 481,212 | 865,737 | 1,961,894 | 2,827,631 | 633,287 | |||||||||||||||||||||||||||||||
|
|
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149
Table of Contents
UDR, INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2011
(In thousands)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2011
(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 | ||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||||||||||||||||||
|
Dominion Middle Ridge
|
33,096 | 3,311 | 13,283 | 16,594 | 5,712 | 3,638 | 18,668 | 22,306 | 11,469 | 1990 | Jun-96 | |||||||||||||||||||||||||||||||||
|
Dominion Lake Ridge
|
22,610 | 2,366 | 8,387 | 10,753 | 5,211 | 2,775 | 13,189 | 15,964 | 8,230 | 1987 | Feb-96 | |||||||||||||||||||||||||||||||||
|
Presidential Greens
|
— | 11,238 | 18,790 | 30,028 | 7,339 | 11,519 | 25,848 | 37,367 | 15,907 | 1938 | May-02 | |||||||||||||||||||||||||||||||||
|
The Whitmore
|
— | 6,418 | 13,411 | 19,829 | 19,602 | 7,424 | 32,007 | 39,431 | 16,461 | 2008 | Apr-02 | |||||||||||||||||||||||||||||||||
|
Ridgewood
|
— | 5,612 | 20,086 | 25,698 | 7,214 | 5,836 | 27,076 | 32,912 | 16,168 | 1988 | Aug-02 | |||||||||||||||||||||||||||||||||
|
The Calvert
|
— | 263 | 11,189 | 11,452 | 20,825 | 8,275 | 24,002 | 32,277 | 9,209 | 1962 | Nov-03 | |||||||||||||||||||||||||||||||||
|
Commons at Town Square
|
— | 136 | 7,724 | 7,860 | 1,013 | 6,874 | 1,999 | 8,873 | 1,115 | 1971 | Dec-03 | |||||||||||||||||||||||||||||||||
|
Waterside Towers
|
— | 874 | 38,209 | 39,083 | 10,007 | 26,215 | 22,875 | 49,090 | 12,048 | 1971 | Dec-03 | |||||||||||||||||||||||||||||||||
|
Waterside Townhomes
|
— | 129 | 3,724 | 3,853 | 658 | 2,725 | 1,786 | 4,511 | 852 | 1971 | Dec-03 | |||||||||||||||||||||||||||||||||
|
Wellington Place at Olde Town
|
28,681 | 13,753 | 36,059 | 49,812 | 16,314 | 14,541 | 51,585 | 66,126 | 22,649 | 2008 | Sep-05 | |||||||||||||||||||||||||||||||||
|
Andover House
|
— | 14,357 | 51,577 | 65,934 | 2,449 | 14,360 | 54,023 | 68,383 | 15,087 | 2004 | Mar-07 | |||||||||||||||||||||||||||||||||
|
Sullivan Place
|
— | 1,137 | 103,676 | 104,813 | 3,080 | 1,181 | 106,712 | 107,893 | 25,545 | 2007 | Dec-07 | |||||||||||||||||||||||||||||||||
|
Circle Towers
|
69,771 | 33,011 | 107,051 | 140,062 | 5,927 | 32,876 | 113,113 | 145,989 | 23,714 | 1972 | Mar-08 | |||||||||||||||||||||||||||||||||
|
Delancey at Shirlington
|
— | 21,606 | 66,765 | 88,371 | 966 | 21,616 | 67,721 | 89,337 | 14,696 | 2006/07 | Mar-08 | |||||||||||||||||||||||||||||||||
|
View 14
|
— | 5,710 | 97,941 | 103,651 | 1,166 | 5,721 | 99,096 | 104,817 | 2,793 | 2009 | Jun-11 | |||||||||||||||||||||||||||||||||
|
Signal Hill
|
42,074 | 13,290 | — | 13,290 | 68,930 | 25,327 | 56,893 | 82,220 | 6,353 | 2010 | Nov-10 | |||||||||||||||||||||||||||||||||
|
METROPOLITAN DC
|
196,232 | 133,211 | 597,872 | 731,083 | 176,413 | 190,903 | 716,593 | 907,496 | 202,296 | |||||||||||||||||||||||||||||||||||
|
Dominion Kings Place
|
16,121 | 1,565 | 7,007 | 8,572 | 3,810 | 1,800 | 10,582 | 12,382 | 6,751 | 1983 | Dec-92 | |||||||||||||||||||||||||||||||||
|
Dominion At Eden Brook
|
21,308 | 2,361 | 9,384 | 11,745 | 5,920 | 2,913 | 14,752 | 17,665 | 9,936 | 1984 | Dec-92 | |||||||||||||||||||||||||||||||||
|
Ellicott Grove
|
— | 2,920 | 9,099 | 12,019 | 22,219 | 5,189 | 29,049 | 34,238 | 17,876 | 2008 | Jul-94 | |||||||||||||||||||||||||||||||||
|
Dominion Constant Freindship
|
10,683 | 903 | 4,669 | 5,572 | 3,315 | 1,146 | 7,741 | 8,887 | 4,883 | 1990 | May-95 | |||||||||||||||||||||||||||||||||
|
Lakeside Mill
|
15,242 | 2,666 | 10,109 | 12,775 | 3,707 | 2,849 | 13,633 | 16,482 | 9,166 | 1989 | Dec-99 | |||||||||||||||||||||||||||||||||
|
Tamar Meadow
|
17,602 | 4,145 | 17,150 | 21,295 | 4,381 | 4,502 | 21,174 | 25,676 | 12,142 | 1990 | Nov-02 | |||||||||||||||||||||||||||||||||
|
Calvert’s Walk
|
18,043 | 4,408 | 24,692 | 29,100 | 5,833 | 4,567 | 30,366 | 34,933 | 14,602 | 1988 | Mar-04 | |||||||||||||||||||||||||||||||||
|
Arborview Apartments
|
— | 4,653 | 23,952 | 28,605 | 5,857 | 5,058 | 29,404 | 34,462 | 15,039 | 1992 | Mar-04 | |||||||||||||||||||||||||||||||||
|
Liriope Apartments
|
— | 1,620 | 6,791 | 8,411 | 896 | 1,629 | 7,678 | 9,307 | 3,752 | 1997 | Mar-04 | |||||||||||||||||||||||||||||||||
|
20 Lambourne
|
32,795 | 11,750 | 45,590 | 57,340 | 3,471 | 11,837 | 48,974 | 60,811 | 11,613 | 2003 | Mar-08 | |||||||||||||||||||||||||||||||||
|
Domain Brewers Hill
|
— | 4,669 | 40,630 | 45,299 | 247 | 4,669 | 40,877 | 45,546 | 3,208 | 2009 | Aug-10 | |||||||||||||||||||||||||||||||||
|
BALTIMORE, MD
|
131,794 | 41,660 | 199,073 | 240,733 | 59,656 | 46,159 | 254,230 | 300,389 | 108,968 | |||||||||||||||||||||||||||||||||||
|
Dominion Olde West
|
— | 1,965 | 12,204 | 14,169 | 5,216 | 2,606 | 16,779 | 19,385 | 12,514 | 1978/82/84/85/87 | Dec-84 & Aug-91 | |||||||||||||||||||||||||||||||||
|
Dominion Creekwood
|
— | — | — | — | 4,975 | 274 | 4,701 | 4,975 | 3,014 | 1984 | Aug-91 | |||||||||||||||||||||||||||||||||
|
Dominion English Hills
|
— | 1,979 | 11,524 | 13,503 | 8,224 | 2,873 | 18,854 | 21,727 | 11,134 | 1969/76 | Dec-91 | |||||||||||||||||||||||||||||||||
|
Gayton Pointe Townhomes
|
— | 826 | 5,148 | 5,974 | 28,743 | 3,319 | 31,398 | 34,717 | 21,308 | 2007 | Sep-95 | |||||||||||||||||||||||||||||||||
|
Dominion West End
|
25,582 | 2,059 | 15,049 | 17,108 | 12,222 | 4,502 | 24,828 | 29,330 | 15,049 | 1989 | Dec-95 | |||||||||||||||||||||||||||||||||
|
Waterside At Ironbridge
|
— | 1,844 | 13,238 | 15,082 | 6,513 | 2,249 | 19,346 | 21,595 | 10,433 | 1987 | Sep-97 | |||||||||||||||||||||||||||||||||
|
Carriage Homes at Wyndham
|
— | 474 | 30,997 | 31,471 | 7,001 | 3,764 | 34,708 | 38,472 | 17,587 | 1998 | Nov-03 | |||||||||||||||||||||||||||||||||
|
Legacy at Mayland
|
41,507 | — | — | — | 19,269 | 1,772 | 17,497 | 19,269 | 12,138 | 2007 | Dec-91 | |||||||||||||||||||||||||||||||||
|
RICHMOND, VA
|
67,089 | 9,147 | 88,160 | 97,307 | 92,163 | 21,359 | 168,111 | 189,470 | 103,177 | |||||||||||||||||||||||||||||||||||
|
Forest Lake At Oyster Point
|
— | 780 | 8,862 | 9,642 | 8,212 | 1,346 | 16,508 | 17,854 | 10,810 | 1986 | Aug-95 | |||||||||||||||||||||||||||||||||
|
Woodscape
|
— | 798 | 7,209 | 8,007 | 8,988 | 2,027 | 14,968 | 16,995 | 11,874 | 1974/76 | Dec-87 | |||||||||||||||||||||||||||||||||
|
Eastwind
|
— | 155 | 5,317 | 5,472 | 5,762 | 601 | 10,633 | 11,234 | 7,864 | 1970 | Apr-88 | |||||||||||||||||||||||||||||||||
|
Dominion Waterside At
Lynnhave
|
— | 1,824 | 4,107 | 5,931 | 5,569 | 2,198 | 9,302 | 11,500 | 6,384 | 1966 | Aug-96 | |||||||||||||||||||||||||||||||||
|
Heather Lake
|
— | 617 | 3,400 | 4,017 | 9,532 | 1,194 | 12,355 | 13,549 | 10,729 | 1972/74 | Mar-80 | |||||||||||||||||||||||||||||||||
|
Dominion Yorkshire Downs
|
— | 1,089 | 8,582 | 9,671 | 5,391 | 1,489 | 13,573 | 15,062 | 7,673 | 1987 | Dec-97 | |||||||||||||||||||||||||||||||||
|
NORFOLK, VA
|
— | 5,263 | 37,477 | 42,740 | 43,454 | 8,855 | 77,339 | 86,194 | 55,334 | |||||||||||||||||||||||||||||||||||
|
Garrison Square
|
— | 5,591 | 91,027 | 96,618 | 2,689 | 5,591 | 93,716 | 99,307 | 6,887 | 1887/1990 | Sep-10 | |||||||||||||||||||||||||||||||||
|
Ridge at Blue Hills
|
24,761 | 6,039 | 34,869 | 40,908 | 359 | 6,042 | 35,225 | 41,267 | 2,657 | 2007 | Sep-10 | |||||||||||||||||||||||||||||||||
|
Inwood West
|
60,702 | 20,778 | 88,096 | 108,874 | 893 | 20,779 | 88,988 | 109,767 | 3,812 | 2006 | Apr-11 | |||||||||||||||||||||||||||||||||
|
14 North
|
— | 10,961 | 51,175 | 62,136 | 1,088 | 10,961 | 52,263 | 63,224 | 2,335 | 2005 | Apr-11 | |||||||||||||||||||||||||||||||||
|
BOSTON, MA
|
85,463 | 43,369 | 265,167 | 308,536 | 5,029 | 43,373 | 270,192 | 313,565 | 15,691 | |||||||||||||||||||||||||||||||||||
|
10 Hanover Square
|
205,526 | 41,432 | 218,983 | 260,415 | 2,085 | 41,432 | 221,068 | 262,500 | 8,945 | 2005 | Apr-11 | |||||||||||||||||||||||||||||||||
|
21 Chelsea
|
35,568 | 36,399 | 107,154 | 143,553 | 409 | 36,399 | 107,563 | 143,962 | 2,109 | 2001 | Aug-11 | |||||||||||||||||||||||||||||||||
|
Rivergate
|
— | 114,410 | 324,920 | 439,330 | 2,162 | 114,414 | 327,078 | 441,492 | 8,215 | 1985 | Jul-11 | |||||||||||||||||||||||||||||||||
|
95 Wall Street
|
— | 57,637 | 266,255 | 323,892 | 137 | 57,641 | 266,388 | 324,029 | 5,738 | 2008 | Aug-11 | |||||||||||||||||||||||||||||||||
|
NEW YORK, NY
|
241,094 | 249,878 | 917,312 | 1,167,190 | 4,793 | 249,886 | 922,097 | 1,171,983 | 25,007 | |||||||||||||||||||||||||||||||||||
|
Greens At Falls Run
|
— | 2,731 | 5,300 | 8,031 | 4,665 | 3,116 | 9,580 | 12,696 | 5,911 | 1989 | May-95 | |||||||||||||||||||||||||||||||||
|
Manor At England Run
|
— | 3,194 | 13,505 | 16,699 | 20,133 | 5,142 | 31,690 | 36,832 | 19,134 | 1990 | May-95 | |||||||||||||||||||||||||||||||||
|
Greens At Schumaker Pond
|
— | 710 | 6,118 | 6,828 | 5,037 | 960 | 10,905 | 11,865 | 7,115 | 1988 | May-95 | |||||||||||||||||||||||||||||||||
|
OTHER MID-ATLANTIC
|
— | 6,635 | 24,923 | 31,558 | 29,835 | 9,218 | 52,175 | 61,393 | 32,160 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL MID-ATLANTIC REGION
|
721,672 | 489,163 | 2,129,984 | 2,619,147 | 411,343 | 569,753 | 2,460,737 | 3,030,490 | 542,633 | |||||||||||||||||||||||||||||||||||
|
|
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150
Table of Contents
UDR, INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2011
(In tho u sands)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2011
(In tho u sands)
| 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 | ||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||||||||||||||
|
Summit West
|
— | 2,176 | 4,710 | 6,886 | 7,379 | 3,097 | 11,168 | 14,265 | 8,712 | 1972 | Dec-92 | |||||||||||||||||||||||||||||
|
The Breyley
|
— | 1,780 | 2,458 | 4,238 | 16,499 | 3,204 | 17,533 | 20,737 | 13,772 | 2007 | Sep-93 | |||||||||||||||||||||||||||||
|
Lakewood Place
|
20,561 | 1,395 | 10,647 | 12,042 | 7,666 | 2,120 | 17,588 | 19,708 | 11,578 | 1986 | Mar-94 | |||||||||||||||||||||||||||||
|
Hunters Ridge
|
— | 2,462 | 10,942 | 13,404 | 6,075 | 3,490 | 15,989 | 19,479 | 9,963 | 1992 | Jun-95 | |||||||||||||||||||||||||||||
|
Bay Meadow
|
— | 2,893 | 9,254 | 12,147 | 8,816 | 3,994 | 16,969 | 20,963 | 11,178 | 2004 | Dec-96 | |||||||||||||||||||||||||||||
|
Cambridge Woods
|
— | 1,791 | 7,166 | 8,957 | 7,281 | 2,492 | 13,746 | 16,238 | 8,771 | 1985 | Jun-97 | |||||||||||||||||||||||||||||
|
Sugar Mill Creek
|
— | 2,242 | 7,553 | 9,795 | 5,616 | 2,648 | 12,763 | 15,411 | 7,243 | 1988 | Dec-98 | |||||||||||||||||||||||||||||
|
Inlet Bay
|
— | 7,702 | 23,150 | 30,852 | 11,958 | 8,857 | 33,953 | 42,810 | 19,948 | 1988/89 | Jun-03 | |||||||||||||||||||||||||||||
|
MacAlpine Place
|
— | 10,869 | 36,858 | 47,727 | 5,070 | 11,091 | 41,706 | 52,797 | 18,542 | 2001 | Dec-04 | |||||||||||||||||||||||||||||
|
The Vintage Lofts at West End
|
— | 6,611 | 37,663 | 44,274 | 7,740 | 15,089 | 36,925 | 52,014 | 8,863 | 2009 | Jul-09 | |||||||||||||||||||||||||||||
|
Gallery at Bayport II
|
— | 5,775 | 17,236 | 23,011 | 2,259 | 8,536 | 16,734 | 25,270 | 6,427 | 2008 | Oct-06 | |||||||||||||||||||||||||||||
|
Island Walk
|
— | 7,231 | 19,897 | 27,128 | 10,038 | 4,935 | 32,231 | 37,166 | 17,716 | 1985/87 | Jul-06 | |||||||||||||||||||||||||||||
|
TAMPA, FL
|
20,561 | 52,927 | 187,534 | 240,461 | 96,397 | 69,553 | 267,305 | 336,858 | 142,713 | |||||||||||||||||||||||||||||||
|
Seabrook
|
— | 1,846 | 4,155 | 6,001 | 7,161 | 2,611 | 10,551 | 13,162 | 7,618 | 2004 | Feb-96 | |||||||||||||||||||||||||||||
|
The Canopy Apartment Villas
|
— | 2,895 | 6,456 | 9,351 | 21,736 | 5,288 | 25,799 | 31,087 | 19,013 | 2008 | Mar-93 | |||||||||||||||||||||||||||||
|
Altamira Place
|
15,640 | 1,533 | 11,076 | 12,609 | 18,659 | 3,190 | 28,078 | 31,268 | 20,860 | 2007 | Apr-94 | |||||||||||||||||||||||||||||
|
Regatta Shore
|
— | 757 | 6,608 | 7,365 | 13,909 | 1,894 | 19,380 | 21,274 | 13,816 | 2007 | Jun-94 | |||||||||||||||||||||||||||||
|
Alafaya Woods
|
20,049 | 1,653 | 9,042 | 10,695 | 7,612 | 2,394 | 15,913 | 18,307 | 10,523 | 2006 | Oct-94 | |||||||||||||||||||||||||||||
|
Los Altos
|
24,352 | 2,804 | 12,349 | 15,153 | 7,768 | 3,770 | 19,151 | 22,921 | 11,655 | 2004 | Oct-96 | |||||||||||||||||||||||||||||
|
Lotus Landing
|
— | 2,185 | 8,639 | 10,824 | 7,802 | 2,717 | 15,909 | 18,626 | 8,892 | 2006 | Jul-97 | |||||||||||||||||||||||||||||
|
Seville On The Green
|
— | 1,282 | 6,498 | 7,780 | 6,049 | 1,668 | 12,161 | 13,829 | 7,084 | 2004 | Oct-97 | |||||||||||||||||||||||||||||
|
Ashton @ Waterford
|
25,958 | 3,872 | 17,538 | 21,410 | 1,823 | 4,041 | 19,192 | 23,233 | 10,786 | 2000 | May-98 | |||||||||||||||||||||||||||||
|
Arbors at Lee Vista DCO
|
— | 6,692 | 12,860 | 19,552 | 10,812 | 6,972 | 23,392 | 30,364 | 14,357 | 2007 | Aug-06 | |||||||||||||||||||||||||||||
|
The Place on Millenia Blvd
|
— | 12,172 | 37,143 | 49,315 | 1,545 | 12,201 | 38,659 | 50,860 | 10,965 | 2007 | Jan-08 | |||||||||||||||||||||||||||||
|
ORLANDO, FL
|
85,999 | 37,691 | 132,364 | 170,055 | 104,876 | 46,746 | 228,185 | 274,931 | 135,569 | |||||||||||||||||||||||||||||||
|
Legacy Hill
|
— | 1,148 | 5,867 | 7,015 | 7,841 | 1,692 | 13,164 | 14,856 | 9,357 | 1977 | Nov-95 | |||||||||||||||||||||||||||||
|
Hickory Run
|
— | 1,469 | 11,584 | 13,053 | 8,458 | 1,989 | 19,522 | 21,511 | 11,013 | 1989 | Dec-95 | |||||||||||||||||||||||||||||
|
Carrington Hills
|
— | 2,117 | — | 2,117 | 32,205 | 4,278 | 30,044 | 34,322 | 16,264 | 1999 | Dec-95 | |||||||||||||||||||||||||||||
|
Brookridge
|
— | 708 | 5,461 | 6,169 | 3,844 | 1,007 | 9,006 | 10,013 | 5,588 | 1986 | Mar-96 | |||||||||||||||||||||||||||||
|
Breckenridge
|
— | 766 | 7,714 | 8,480 | 3,688 | 1,157 | 11,011 | 12,168 | 6,299 | 1986 | Mar-97 | |||||||||||||||||||||||||||||
|
Colonnade
|
— | 1,460 | 16,015 | 17,475 | 3,703 | 1,810 | 19,368 | 21,178 | 9,157 | 1998 | Jan-99 | |||||||||||||||||||||||||||||
|
The Preserve at Brentwood
|
24,591 | 3,181 | 24,674 | 27,855 | 4,895 | 3,354 | 29,396 | 32,750 | 14,627 | 1998 | Jun-04 | |||||||||||||||||||||||||||||
|
Polo Park
|
— | 4,583 | 16,293 | 20,876 | 15,090 | 5,491 | 30,475 | 35,966 | 14,135 | 2008 | May-06 | |||||||||||||||||||||||||||||
|
NASHVILLE, TN
|
24,591 | 15,432 | 87,608 | 103,040 | 79,724 | 20,778 | 161,986 | 182,764 | 86,440 | |||||||||||||||||||||||||||||||
|
Greentree
|
— | 1,634 | 11,227 | 12,861 | 12,531 | 2,761 | 22,631 | 25,392 | 14,972 | 2007 | Jul-94 | |||||||||||||||||||||||||||||
|
Westland
|
— | 1,835 | 14,865 | 16,700 | 10,964 | 3,298 | 24,366 | 27,664 | 16,067 | 1990 | May-96 | |||||||||||||||||||||||||||||
|
Antlers
|
— | 4,034 | 11,193 | 15,227 | 12,629 | 5,224 | 22,632 | 27,856 | 14,941 | 1985 | May-96 | |||||||||||||||||||||||||||||
|
St Johns Plantation
|
— | 4,288 | 33,102 | 37,390 | 5,302 | 4,542 | 38,150 | 42,692 | 16,538 | 2006 | Jun-05 | |||||||||||||||||||||||||||||
|
The Kensley
|
— | 3,179 | 30,711 | 33,890 | 1,719 | 3,193 | 32,416 | 35,609 | 9,143 | 2004 | Jul-07 | |||||||||||||||||||||||||||||
|
JACKSONVILLE, FL
|
— | 14,970 | 101,098 | 116,068 | 43,145 | 19,018 | 140,195 | 159,213 | 71,661 | |||||||||||||||||||||||||||||||
|
The Reserve and Park at
Riverbridge
|
40,133 | 15,968 | 56,401 | 72,369 | 5,130 | 16,282 | 61,217 | 77,499 | 26,261 | 1999/2001 | Dec-04 | |||||||||||||||||||||||||||||
|
The Groves
|
— | 790 | 4,767 | 5,557 | 5,248 | 1,624 | 9,181 | 10,805 | 6,534 | 1989 | Dec-95 | |||||||||||||||||||||||||||||
|
Mallards of Brandywine
|
— | 766 | 5,407 | 6,173 | 3,016 | 1,106 | 8,083 | 9,189 | 4,876 | 1985 | Jul-97 | |||||||||||||||||||||||||||||
|
PIERPOINT Port Orange
|
— | 3,373 | 7,096 | 10,469 | 5,678 | 3,808 | 12,339 | 16,147 | 11,060 | 2007 | Dec-05 | |||||||||||||||||||||||||||||
|
OTHER FLORIDA
|
40,133 | 20,897 | 73,671 | 94,568 | 19,072 | 22,820 | 90,820 | 113,640 | 48,731 | |||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
TOTAL SOUTHEASTERN REGION
|
171,284 | 141,917 | 582,275 | 724,192 | 343,214 | 178,915 | 888,491 | 1,067,406 | 485,114 | |||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||||||||||||||
|
THIRTY377
|
31,816 | 24,036 | 32,951 | 56,987 | 6,117 | 24,229 | 38,875 | 63,104 | 13,838 | 2007 | Aug-06 | |||||||||||||||||||||||||||||
|
Legacy Village
|
59,300 | 16,882 | 100,102 | 116,984 | 4,071 | 17,029 | 104,026 | 121,055 | 24,322 | 2005/06/07 | Mar-08 | |||||||||||||||||||||||||||||
|
Garden Oaks
|
— | 2,132 | 5,367 | 7,499 | 1,093 | 6,878 | 1,714 | 8,592 | 1,052 | 1979 | Mar-07 | |||||||||||||||||||||||||||||
|
Glenwood
|
— | 7,903 | 554 | 8,457 | 1,095 | 8,112 | 1,440 | 9,552 | 714 | 1970 | May-07 | |||||||||||||||||||||||||||||
|
Talisker of Addison
|
7,157 | 10,440 | 634 | 11,074 | 1,506 | 10,830 | 1,750 | 12,580 | 894 | 1975 | May-07 | |||||||||||||||||||||||||||||
|
Springhaven
|
— | 6,688 | 3,354 | 10,042 | 745 | 8,256 | 2,531 | 10,787 | 1,571 | 1977 | Apr-07 | |||||||||||||||||||||||||||||
|
Clipper Pointe
|
— | 13,221 | 2,507 | 15,728 | 1,664 | 14,860 | 2,532 | 17,392 | 1,547 | 1978 | May-07 | |||||||||||||||||||||||||||||
|
Highlands of Preston
|
— | 2,151 | 8,168 | 10,319 | 29,559 | 5,886 | 33,992 | 39,878 | 16,633 | 2008 | Mar-98 | |||||||||||||||||||||||||||||
|
The Belmont
|
— | 11,720 | — | 11,720 | 54,825 | 21,016 | 45,529 | 66,545 | 8,799 | 2010 | Apr-10 | |||||||||||||||||||||||||||||
|
Savoye
|
— | 7,374 | 3,367 | 10,741 | 55,553 | 14,660 | 51,634 | 66,294 | 6,980 | 2010 | Aug-10 | |||||||||||||||||||||||||||||
|
DALLAS, TX
|
98,273 | 102,547 | 157,004 | 259,551 | 156,228 | 131,756 | 284,023 | 415,779 | 76,350 | |||||||||||||||||||||||||||||||
|
Finisterra
|
— | 1,274 | 26,392 | 27,666 | 4,351 | 1,735 | 30,282 | 32,017 | 13,999 | 1997 | Mar-98 | |||||||||||||||||||||||||||||
|
Sierra Foothills
|
20,978 | 2,728 | — | 2,728 | 21,204 | 5,102 | 18,830 | 23,932 | 12,968 | 1998 | Feb-98 | |||||||||||||||||||||||||||||
|
Sierra Canyon
|
10,717 | 1,810 | 12,964 | 14,774 | 2,197 | 2,071 | 14,900 | 16,971 | 9,381 | 2001 | Dec-01 | |||||||||||||||||||||||||||||
|
Waterford at Peoria
|
— | 2,225 | 21,593 | 23,818 | 1,635 | 2,980 | 22,473 | 25,453 | 4,623 | 2008 | Aug-08 | |||||||||||||||||||||||||||||
|
Lumiere
|
— | 5,092 | 11,998 | 17,090 | 6,971 | 4,726 | 19,335 | 24,061 | 12,775 | 1996 | May-06 | |||||||||||||||||||||||||||||
|
Residences at Stadium Village
|
— | 7,930 | — | 7,930 | 41,418 | 15,170 | 34,178 | 49,348 | 6,490 | 2009 | May-09 | |||||||||||||||||||||||||||||
|
PHOENIX, AZ
|
31,695 | 21,059 | 72,947 | 94,006 | 77,776 | 31,784 | 139,998 | 171,782 | 60,236 | |||||||||||||||||||||||||||||||
|
Barton Creek Landing
|
— | 3,151 | 14,269 | 17,420 | 20,208 | 4,414 | 33,214 | 37,628 | 12,086 | 1986 | Mar-02 | |||||||||||||||||||||||||||||
|
Residences at the Domain
|
25,079 | 4,034 | 55,256 | 59,290 | 1,226 | 4,086 | 56,430 | 60,516 | 11,488 | 2007 | Aug-08 | |||||||||||||||||||||||||||||
|
AUSTIN, TX
|
25,079 | 7,185 | 69,525 | 76,710 | 21,434 | 8,500 | 89,644 | 98,144 | 23,574 | |||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
TOTAL SOUTHWESTERN REGION
|
155,047 | 130,791 | 299,476 | 430,267 | 255,438 | 172,040 | 513,665 | 685,705 | 160,160 | |||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
151
Table of Contents
UDR, INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2011
(In thousands)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2011
(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
|
||||||||||||||||||||||||||||||||||||||||||||
|
Los Alisos (formerly Mission Viejo)
|
— | 17,298 | — | 17,298 | 9,496 | 16,385 | 10,409 | 26,794 | — | |||||||||||||||||||||||||||||||||||
|
Mission Bay
|
— | 23,625 | — | 23,625 | 14,054 | 23,653 | 14,026 | 37,679 | — | |||||||||||||||||||||||||||||||||||
|
Belmont Townhomes
|
— | 288 | — | 288 | 1,659 | 854 | 1,093 | 1,947 | — | |||||||||||||||||||||||||||||||||||
|
2400 14th Street
|
— | 31,747 | — | 31,747 | 33,152 | 31,393 | 33,506 | 64,899 | — | |||||||||||||||||||||||||||||||||||
|
Village at Bella Terra
|
— | 25,000 | — | 25,000 | 7,202 | 25,000 | 7,202 | 32,202 | — | |||||||||||||||||||||||||||||||||||
|
Savoye2 (Phase II of Vitruvian Park)
|
25,076 | 6,510 | 3,774 | 10,284 | 56,423 | 11,108 | 55,599 | 66,707 | 570 | |||||||||||||||||||||||||||||||||||
|
Phase III of Vitruvian Park
|
— | 7,659 | 3,601 | 11,260 | 7,258 | 7,659 | 10,859 | 18,518 | — | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL REAL ESTATE UNDER DEVELOPMENT
|
25,076 | 112,127 | 7,375 | 119,502 | 129,244 | 116,052 | 132,694 | 248,746 | 570 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
LAND
|
||||||||||||||||||||||||||||||||||||||||||||
|
Waterside
|
— | 11,862 | 93 | 11,955 | 129 | 11,862 | 222 | 12,084 | 201 | |||||||||||||||||||||||||||||||||||
|
Presidio
|
— | 1,524 | — | 1,524 | 921 | 1,300 | 1,145 | 2,445 | — | |||||||||||||||||||||||||||||||||||
|
Parkers Landing II TRS
|
— | 1,710 | — | 1,710 | 762 | 1,511 | 961 | 2,472 | (1,852 | ) | ||||||||||||||||||||||||||||||||||
|
3033 Wilshire
|
— | 11,055 | — | 11,055 | 4,990 | 11,049 | 4,996 | 16,045 | — | |||||||||||||||||||||||||||||||||||
|
DCO Beach Walk LLC
|
— | 12,878 | — | 12,878 | 194 | 12,878 | 194 | 13,072 | — | |||||||||||||||||||||||||||||||||||
|
7 Harcourt
|
— | 884 | — | 884 | 3,767 | 884 | 3,767 | 4,651 | 7 | |||||||||||||||||||||||||||||||||||
|
Vitruvian
|
— | 8,005 | 16,006 | 24,011 | 46,326 | 38,380 | 31,957 | 70,337 | — | |||||||||||||||||||||||||||||||||||
|
Spring Valley Road
|
— | 2,875 | — | 2,875 | 1,843 | 2,875 | 1,843 | 4,718 | 1 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL LAND
|
— | 50,793 | 16,099 | 66,892 | 58,932 | 80,739 | 45,085 | 125,824 | (1,643 | ) | ||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL REAL ESTATE UNDER DEVELOPMENT
|
25,076 | 162,920 | 23,474 | 186,394 | 188,176 | 196,791 | 177,779 | 374,570 | (1,073 | ) | ||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
COMMERCIAL HELD FOR DEVELOPMENT
|
||||||||||||||||||||||||||||||||||||||||||||
|
Hanover Village
|
— | 1,624 | — | 1,624 | — | 1,104 | 520 | 1,624 | 533 | |||||||||||||||||||||||||||||||||||
|
The Calvert — commercial side
|
— | 34 | 1,598 | 1,632 | 1,174 | 1,172 | 1,634 | 2,806 | 771 | |||||||||||||||||||||||||||||||||||
|
Circle Towers Office Bldg
|
— | 1,407 | 4,498 | 5,905 | 1,275 | 1,380 | 5,800 | 7,180 | 1,023 | |||||||||||||||||||||||||||||||||||
|
Brookhaven Shopping Center
|
— | 4,138 | 7,093 | 11,231 | 11,393 | 7,733 | 14,891 | 22,624 | 2,523 | |||||||||||||||||||||||||||||||||||
|
Bellevue Plaza retail
|
22,271 | 24,377 | 7,517 | 31,894 | 96 | 29,920 | 2,070 | 31,990 | 230 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Grandview DCO
|
— | 7,266 | 9,702 | 16,968 | 2,105 | 10,750 | 8,323 | 19,073 | 6,523 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL COMMERCIAL
|
22,271 | 38,846 | 30,408 | 69,254 | 16,043 | 52,059 | 33,238 | 85,297 | 11,603 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Other(b)
|
— | — | — | — | 3,372 | 5 | 3,367 | 3,372 | 3 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL CORPORATE
|
— | — | — | — | 3,372 | 5 | 3,367 | 3,372 | 3 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL COMMERCIAL & CORPORATE
|
22,271 | 38,846 | 30,408 | 69,254 | 19,415 | 52,064 | 36,605 | 88,669 | 11,606 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Total Real Estate Owned
|
$ | 1,891,553 | $ | 1,772,924 | $ | 4,602,749 | $ | 6,375,673 | $ | 1,698,798 | $ | 2,035,300 | $ | 6,039,171 | $ | 8,074,471 | $ | 1,831,727 | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
| (a) | Date of construction or date of last major renovation. | |
| (b) | Includes unallocated accruals and capital expenditures. | |
| The aggregate cost for federal income tax purposes was approximately $7.3 billion at December 31, 2011. | ||
| The depreciable life for all buildings is 35 years. |
152
Table of Contents
UDR, INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2011
(In thousands)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2011
(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)
:
| 2011 | 2010 | 2009 | ||||||||||
|
Balance at beginning of the year
|
$ | 6,881,347 | $ | 6,315,047 | $ | 5,831,753 | ||||||
|
Real estate acquired
|
1,590,514 | 425,825 | 28,220 | |||||||||
|
Capital expenditures and development
|
189,711 | 167,986 | 273,552 | |||||||||
|
Real estate sold
|
(587,101 | ) | (20,328 | ) | — | |||||||
|
Retirement of fully depreciated assets
|
— | (7,183 | ) | (4,407 | ) | |||||||
|
Real estate acquired through JV
consolidation
|
— | — | 185,929 | |||||||||
|
|
||||||||||||
|
Balance at end of the year
|
$ | 8,074,471 | $ | 6,881,347 | $ | 6,315,047 | ||||||
|
|
||||||||||||
The following is a reconciliation of total accumulated depreciation for real estate owned
at December 31:
| 2011 | 2010 | 2009 | ||||||||||
|
Balance at beginning of the year
|
$ | 1,638,326 | $ | 1,351,293 | $ | 1,078,689 | ||||||
|
Depreciation expense for the year
|
341,925 | 297,889 | 277,011 | |||||||||
|
Accumulated depreciation on sales
|
(148,524 | ) | (3,673 | ) | — | |||||||
|
Accumulated depreciation on retirements
|
— | (7,183 | ) | (4,407 | ) | |||||||
|
|
||||||||||||
|
Balance at end of year
|
$ | 1,831,727 | $ | 1,638,326 | $ | 1,351,293 | ||||||
|
|
||||||||||||
153
Table of Contents
UNITED DOMINION REALTY, L.P.
SCHEDULE III — REAL ESTATE OWNED
FOR THE YEAR ENDED DECEMBER 31, 2011
(In thousands)
SCHEDULE III — REAL ESTATE OWNED
FOR THE YEAR ENDED DECEMBER 31, 2011
(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 | $ | 11,271 | $ | 20,774 | $ | 39,512 | $ | 60,286 | $ | 20,518 | 2003 | Jun-03 | ||||||||||||||||||||||||
|
Pine Brook Village
|
18,270 | 2,582 | 25,504 | 28,086 | 4,638 | 3,886 | 28,838 | 32,724 | 14,045 | 1979 | Jun-03 | |||||||||||||||||||||||||||||||||
|
Pacific Shores
|
19,145 | 7,345 | 22,624 | 29,969 | 7,777 | 7,596 | 30,150 | 37,746 | 15,105 | 2003 | Jun-03 | |||||||||||||||||||||||||||||||||
|
Huntington Vista
|
31,274 | 8,055 | 22,486 | 30,541 | 6,102 | 8,243 | 28,400 | 36,643 | 14,479 | 1970 | Jun-03 | |||||||||||||||||||||||||||||||||
|
Missions at Back Bay
|
11,326 | 229 | 14,129 | 14,358 | 1,871 | 10,739 | 5,490 | 16,229 | 2,972 | 1969 | Dec-03 | |||||||||||||||||||||||||||||||||
|
Coronado at Newport — North
|
48,448 | 62,516 | 46,082 | 108,598 | 19,536 | 66,591 | 61,543 | 128,134 | 29,146 | 2000 | Oct-04 | |||||||||||||||||||||||||||||||||
|
Huntington Villas
|
55,752 | 61,535 | 18,017 | 79,552 | 5,014 | 61,855 | 22,711 | 84,566 | 10,965 | 1972 | Sep-04 | |||||||||||||||||||||||||||||||||
|
Villa Venetia
|
— | 70,825 | 24,179 | 95,004 | 5,424 | 70,984 | 29,444 | 100,428 | 13,401 | 1972 | Oct-04 | |||||||||||||||||||||||||||||||||
|
Vista Del Rey
|
12,659 | 10,670 | 7,080 | 17,750 | 1,670 | 10,783 | 8,637 | 19,420 | 4,112 | 1969 | Sep-04 | |||||||||||||||||||||||||||||||||
|
Coronado South
|
92,188 | 58,785 | 50,067 | 108,852 | 12,351 | 59,058 | 62,145 | 121,203 | 28,473 | 2000 | Mar-05 | |||||||||||||||||||||||||||||||||
|
Pine Brook Village II
|
— | 25,922 | 60,961 | 86,883 | 1,353 | 25,997 | 62,239 | 88,236 | 13,190 | 1975 | May-08 | |||||||||||||||||||||||||||||||||
|
ORANGE COUNTY, CA
|
336,153 | 328,941 | 319,667 | 648,608 | 77,007 | 346,506 | 379,109 | 725,615 | 166,406 | |||||||||||||||||||||||||||||||||||
|
2000 Post Street
|
— | 9,861 | 44,578 | 54,439 | 6,848 | 10,178 | 51,109 | 61,287 | 19,648 | 1987 | Dec-98 | |||||||||||||||||||||||||||||||||
|
Birch Creek
|
— | 4,365 | 16,696 | 21,061 | 5,320 | 5,022 | 21,359 | 26,381 | 10,517 | 1968 | Dec-98 | |||||||||||||||||||||||||||||||||
|
Highlands Of Marin
|
— | 5,996 | 24,868 | 30,864 | 25,554 | 7,011 | 49,407 | 56,418 | 17,294 | 1991 | Dec-98 | |||||||||||||||||||||||||||||||||
|
Marina Playa
|
— | 6,224 | 23,916 | 30,140 | 7,660 | 6,764 | 31,036 | 37,800 | 14,791 | 1971 | Dec-98 | |||||||||||||||||||||||||||||||||
|
River Terrace
|
33,130 | 22,161 | 40,137 | 62,298 | 2,221 | 22,265 | 42,254 | 64,519 | 15,981 | 2005 | Aug-05 | |||||||||||||||||||||||||||||||||
|
CitySouth
|
— | 14,031 | 30,537 | 44,568 | 30,689 | 15,672 | 59,585 | 75,257 | 13,826 | 1972 | Nov-05 | |||||||||||||||||||||||||||||||||
|
Bay Terrace
|
— | 8,545 | 14,458 | 23,003 | 2,543 | 8,549 | 16,997 | 25,546 | 5,827 | 1962 | Oct-05 | |||||||||||||||||||||||||||||||||
|
Highlands of Marin Phase II
|
— | 5,353 | 18,559 | 23,912 | 10,976 | 5,730 | 29,158 | 34,888 | 6,801 | 1968 | Oct-07 | |||||||||||||||||||||||||||||||||
|
Edgewater
|
45,106 | 30,657 | 83,872 | 114,529 | 1,760 | 30,668 | 85,621 | 116,289 | 18,845 | 2007 | Mar-08 | |||||||||||||||||||||||||||||||||
|
Almaden Lake Village
|
27,000 | 594 | 42,515 | 43,109 | 2,459 | 655 | 44,913 | 45,568 | 9,339 | 1999 | Jul-08 | |||||||||||||||||||||||||||||||||
|
SAN FRANCISCO, CA
|
105,236 | 107,787 | 340,136 | 447,923 | 96,030 | 112,514 | 431,439 | 543,953 | 132,869 | |||||||||||||||||||||||||||||||||||
|
Rosebeach
|
— | 8,414 | 17,449 | 25,863 | 1,889 | 8,462 | 19,290 | 27,752 | 8,526 | 1970 | Sep-04 | |||||||||||||||||||||||||||||||||
|
Ocean Villas
|
8,663 | 5,135 | 12,789 | 17,924 | 1,351 | 5,205 | 14,070 | 19,275 | 5,895 | 1965 | Oct-04 | |||||||||||||||||||||||||||||||||
|
Tierra Del Rey
|
— | 39,586 | 36,679 | 76,265 | 1,811 | 39,592 | 38,484 | 78,076 | 9,369 | 1999 | Dec-07 | |||||||||||||||||||||||||||||||||
|
LOS ANGELES, CA
|
8,663 | 53,135 | 66,917 | 120,052 | 5,051 | 53,259 | 71,844 | 125,103 | 23,790 | |||||||||||||||||||||||||||||||||||
|
Crowne Pointe
|
7,328 | 2,486 | 6,437 | 8,923 | 4,252 | 2,773 | 10,402 | 13,175 | 5,536 | 1987 | Dec-98 | |||||||||||||||||||||||||||||||||
|
Hilltop
|
6,774 | 2,174 | 7,408 | 9,582 | 3,164 | 2,641 | 10,105 | 12,746 | 5,052 | 1985 | Dec-98 | |||||||||||||||||||||||||||||||||
|
The Kennedy
|
17,942 | 6,179 | 22,307 | 28,486 | 1,098 | 6,212 | 23,372 | 29,584 | 8,430 | 2005 | Nov-05 | |||||||||||||||||||||||||||||||||
|
Hearthstone at Merrill Creek
|
— | 6,848 | 30,922 | 37,770 | 1,706 | 6,860 | 32,616 | 39,476 | 7,132 | 2000 | May-08 | |||||||||||||||||||||||||||||||||
|
Island Square
|
— | 21,284 | 89,389 | 110,673 | 2,443 | 21,354 | 91,762 | 113,116 | 18,374 | 2007 | Jul-08 | |||||||||||||||||||||||||||||||||
|
SEATTLE, WA
|
32,044 | 38,971 | 156,463 | 195,434 | 12,663 | 39,840 | 168,257 | 208,097 | 44,524 | |||||||||||||||||||||||||||||||||||
|
Presidio at Rancho Del Oro
|
— | 9,164 | 22,694 | 31,858 | 5,073 | 9,600 | 27,331 | 36,931 | 13,176 | 1987 | Jun-04 | |||||||||||||||||||||||||||||||||
|
Villas at Carlsbad
|
— | 6,517 | 10,718 | 17,235 | 1,514 | 6,639 | 12,110 | 18,749 | 5,079 | 1966 | Oct-04 | |||||||||||||||||||||||||||||||||
|
SAN DIEGO, CA
|
— | 15,681 | 33,412 | 49,093 | 6,587 | 16,239 | 39,441 | 55,680 | 18,255 | |||||||||||||||||||||||||||||||||||
|
Boronda Manor
|
— | 1,946 | 8,982 | 10,928 | 8,396 | 3,112 | 16,212 | 19,324 | 6,662 | 1979 | Dec-98 | |||||||||||||||||||||||||||||||||
|
Garden Court
|
— | 888 | 4,188 | 5,076 | 4,385 | 1,455 | 8,006 | 9,461 | 3,393 | 1973 | Dec-98 | |||||||||||||||||||||||||||||||||
|
Cambridge Court
|
— | 3,039 | 12,883 | 15,922 | 13,073 | 5,160 | 23,835 | 28,995 | 10,269 | 1974 | Dec-98 | |||||||||||||||||||||||||||||||||
|
Laurel Tree
|
— | 1,304 | 5,115 | 6,419 | 5,335 | 2,075 | 9,679 | 11,754 | 4,115 | 1977 | Dec-98 | |||||||||||||||||||||||||||||||||
|
The Pointe At Harden Ranch
|
— | 6,388 | 23,854 | 30,242 | 23,263 | 9,731 | 43,774 | 53,505 | 18,246 | 1986 | Dec-98 | |||||||||||||||||||||||||||||||||
|
The Pointe At Northridge
|
— | 2,044 | 8,028 | 10,072 | 9,098 | 3,204 | 15,966 | 19,170 | 6,985 | 1979 | Dec-98 | |||||||||||||||||||||||||||||||||
|
The Pointe At Westlake
|
— | 1,329 | 5,334 | 6,663 | 5,159 | 2,109 | 9,713 | 11,822 | 3,984 | 1975 | Dec-98 | |||||||||||||||||||||||||||||||||
|
MONTEREY PENINSULA, CA
|
— | 16,938 | 68,384 | 85,322 | 68,709 | 26,846 | 127,185 | 154,031 | 53,654 | |||||||||||||||||||||||||||||||||||
|
Verano at Rancho Cucamonga
Town Square
|
54,308 | 13,557 | 3,645 | 17,202 | 52,382 | 22,918 | 46,666 | 69,584 | 21,842 | 2006 | Oct-02 | |||||||||||||||||||||||||||||||||
|
INLAND EMPIRE, CA
|
54,308 | 13,557 | 3,645 | 17,202 | 52,382 | 22,918 | 46,666 | 69,584 | 21,842 | |||||||||||||||||||||||||||||||||||
|
Foothills Tennis Village
|
— | 3,618 | 14,542 | 18,160 | 5,824 | 3,987 | 19,997 | 23,984 | 10,432 | 1988 | Dec-98 | |||||||||||||||||||||||||||||||||
|
Woodlake Village
|
— | 6,772 | 26,967 | 33,739 | 11,335 | 7,832 | 37,242 | 45,074 | 20,299 | 1979 | Dec-98 | |||||||||||||||||||||||||||||||||
|
SACRAMENTO, CA
|
— | 10,390 | 41,509 | 51,899 | 17,159 | 11,819 | 57,239 | 69,058 | 30,731 | |||||||||||||||||||||||||||||||||||
|
Tualatin Heights
|
8,976 | 3,273 | 9,134 | 12,407 | 5,655 | 3,707 | 14,355 | 18,062 | 7,736 | 1989 | Dec-98 | |||||||||||||||||||||||||||||||||
|
Andover Park
|
15,938 | 2,916 | 16,995 | 19,911 | 6,676 | 3,105 | 23,482 | 26,587 | 11,570 | 1989 | Sep-04 | |||||||||||||||||||||||||||||||||
|
Hunt Club
|
17,020 | 6,014 | 14,870 | 20,884 | 4,850 | 6,295 | 19,439 | 25,734 | 9,810 | 1985 | Sep-04 | |||||||||||||||||||||||||||||||||
|
PORTLAND, OR
|
41,934 | 12,203 | 40,999 | 53,202 | 17,181 | 13,107 | 57,276 | 70,383 | 29,116 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL WESTERN REGION
|
578,338 | 597,603 | 1,071,132 | 1,668,735 | 352,769 | 643,048 | 1,378,456 | 2,021,504 | 521,187 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
MID-ATLANTIC REGION
|
||||||||||||||||||||||||||||||||||||||||||||
|
The Whitmore
|
— | 6,418 | 13,411 | 19,829 | 19,602 | 7,424 | 32,007 | 39,431 | 16,461 | 2008 | Apr-02 | |||||||||||||||||||||||||||||||||
|
Ridgewood
|
— | 5,612 | 20,086 | 25,698 | 7,214 | 5,836 | 27,076 | 32,912 | 16,168 | 1988 | Aug-02 | |||||||||||||||||||||||||||||||||
|
The Calvert
|
— | 263 | 11,189 | 11,452 | 20,825 | 8,275 | 24,002 | 32,277 | 9,209 | 1962 | Nov-03 | |||||||||||||||||||||||||||||||||
|
Wellington Place at Olde Town
|
28,681 | 13,753 | 36,059 | 49,812 | 16,314 | 14,541 | 51,585 | 66,126 | 22,649 | 2008 | Sep-05 | |||||||||||||||||||||||||||||||||
|
Andover House
|
— | 14,357 | 51,577 | 65,934 | 2,449 | 14,360 | 54,023 | 68,383 | 15,087 | 2004 | Mar-07 | |||||||||||||||||||||||||||||||||
|
Sullivan Place
|
— | 1,137 | 103,676 | 104,813 | 3,015 | 1,181 | 106,647 | 107,828 | 25,509 | 2007 | Dec-07 | |||||||||||||||||||||||||||||||||
|
Circle Towers
|
69,771 | 33,011 | 107,051 | 140,062 | 5,927 | 32,876 | 113,113 | 145,989 | 23,714 | 1972 | Mar-08 | |||||||||||||||||||||||||||||||||
|
Delancey at Shirlington
|
— | 21,606 | 66,765 | 88,371 | 966 | 21,616 | 67,721 | 89,337 | 14,696 | 2006/07 | Mar-08 | |||||||||||||||||||||||||||||||||
|
METROPOLITAN DC
|
98,452 | 96,157 | 409,814 | 505,971 | 76,312 | 106,109 | 476,174 | 582,283 | 143,493 | |||||||||||||||||||||||||||||||||||
|
Lakeside Mill
|
15,242 | 2,666 | 10,109 | 12,775 | 3,707 | 2,849 | 13,633 | 16,482 | 9,166 | 1989 | Dec-99 | |||||||||||||||||||||||||||||||||
|
Tamar Meadow
|
17,602 | 4,145 | 17,150 | 21,295 | 4,381 | 4,502 | 21,174 | 25,676 | 12,142 | 1990 | Nov-02 | |||||||||||||||||||||||||||||||||
|
Calvert’s Walk
|
18,043 | 4,408 | 24,692 | 29,100 | 5,833 | 4,567 | 30,366 | 34,933 | 14,602 | 1988 | Mar-04 | |||||||||||||||||||||||||||||||||
|
Liriope Apartments
|
— | 1,620 | 6,791 | 8,411 | 896 | 1,629 | 7,678 | 9,307 | 3,752 | 1997 | Mar-04 | |||||||||||||||||||||||||||||||||
|
20 Lambourne
|
32,795 | 11,750 | 45,590 | 57,340 | 3,471 | 11,837 | 48,974 | 60,811 | 11,613 | 2003 | Mar-08 | |||||||||||||||||||||||||||||||||
|
BALTIMORE, MD
|
83,682 | 24,589 | 104,332 | 128,921 | 18,288 | 25,384 | 121,825 | 147,209 | 51,275 | |||||||||||||||||||||||||||||||||||
|
Inwood West
|
60,702 | 20,778 | 88,096 | 108,874 | 893 | 20,779 | 88,988 | 109,767 | 3,812 | 2006 | Apr-11 | |||||||||||||||||||||||||||||||||
|
14 North
|
— | 10,961 | 51,175 | 62,136 | 1,088 | 10,961 | 52,263 | 63,224 | 2,335 | 2005 | Apr-11 | |||||||||||||||||||||||||||||||||
|
BOSTON, MA
|
60,702 | 31,739 | 139,271 | 171,010 | 1,981 | 31,740 | 141,251 | 172,991 | 6,147 | |||||||||||||||||||||||||||||||||||
|
10 Hanover Square
|
205,526 | 41,432 | 218,983 | 260,415 | 2,085 | 41,432 | 221,068 | 262,500 | 8,945 | 2005 | Apr-11 | |||||||||||||||||||||||||||||||||
|
95 Wall Street
|
— | 57,637 | 266,255 | 323,892 | 137 | 57,641 | 266,388 | 324,029 | 5,738 | 2008 | Aug-11 | |||||||||||||||||||||||||||||||||
|
NEW YORK, NY
|
205,526 | 99,069 | 485,238 | 584,307 | 2,222 | 99,073 | 487,456 | 586,529 | 14,683 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL MID-ATLANTIC REGION
|
448,362 | 251,554 | 1,138,655 | 1,390,209 | 98,803 | 262,306 | 1,226,706 | 1,489,012 | 215,598 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
154
Table of Contents
UNITED DOMINION REALTY, L.P.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2011
(In thousands)
SCHEDULE III — REAL ESTATE OWNED — (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2011
(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 | ||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
SOUTHEASTERN REGION
|
||||||||||||||||||||||||||||||||||||||||||||
|
Sugar Mill Creek
|
— | 2,242 | 7,553 | 9,795 | 5,616 | 2,648 | 12,763 | 15,411 | 7,243 | 1988 | Dec-98 | |||||||||||||||||||||||||||||||||
|
Inlet Bay
|
— | 7,702 | 23,150 | 30,852 | 11,958 | 8,857 | 33,953 | 42,810 | 19,948 | 1988/89 | Jun-03 | |||||||||||||||||||||||||||||||||
|
MacAlpine Place
|
— | 10,869 | 36,858 | 47,727 | 5,070 | 11,091 | 41,706 | 52,797 | 18,542 | 2001 | Dec-04 | |||||||||||||||||||||||||||||||||
|
TAMPA, FL
|
— | 20,813 | 67,561 | 88,374 | 22,644 | 22,596 | 88,422 | 111,018 | 45,733 | |||||||||||||||||||||||||||||||||||
|
Legacy Hill
|
— | 1,148 | 5,867 | 7,015 | 7,841 | 1,692 | 13,164 | 14,856 | 9,357 | 1977 | Nov-95 | |||||||||||||||||||||||||||||||||
|
Hickory Run
|
— | 1,469 | 11,584 | 13,053 | 8,458 | 1,989 | 19,522 | 21,511 | 11,013 | 1989 | Dec-95 | |||||||||||||||||||||||||||||||||
|
Carrington Hills
|
— | 2,117 | — | 2,117 | 32,205 | 4,278 | 30,044 | 34,322 | 16,264 | 1999 | Dec-95 | |||||||||||||||||||||||||||||||||
|
Brookridge
|
— | 708 | 5,461 | 6,169 | 3,844 | 1,007 | 9,006 | 10,013 | 5,588 | 1986 | Mar-96 | |||||||||||||||||||||||||||||||||
|
Breckenridge
|
— | 766 | 7,714 | 8,480 | 3,688 | 1,157 | 11,011 | 12,168 | 6,299 | 1986 | Mar-97 | |||||||||||||||||||||||||||||||||
|
Polo Park
|
— | 4,583 | 16,293 | 20,876 | 15,090 | 5,491 | 30,475 | 35,966 | 14,135 | 2008 | May-06 | |||||||||||||||||||||||||||||||||
|
NASHVILLE, TN
|
— | 10,791 | 46,919 | 57,710 | 71,126 | 15,614 | 113,222 | 128,836 | 62,656 | |||||||||||||||||||||||||||||||||||
|
St Johns Plantation
|
— | 4,288 | 33,102 | 37,390 | 5,302 | 4,542 | 38,150 | 42,692 | 16,538 | 2006 | Jun-05 | |||||||||||||||||||||||||||||||||
|
JACKSONVILLE, FL
|
— | 4,288 | 33,102 | 37,390 | 5,302 | 4,542 | 38,150 | 42,692 | 16,538 | |||||||||||||||||||||||||||||||||||
|
The Reserve and Park at Riverbridge
|
40,133 | 15,968 | 56,401 | 72,369 | 5,130 | 16,282 | 61,217 | 77,499 | 26,261 | 1999/2001 | Dec-04 | |||||||||||||||||||||||||||||||||
|
OTHER FLORIDA
|
40,133 | 15,968 | 56,401 | 72,369 | 5,130 | 16,282 | 61,217 | 77,499 | 26,261 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL SOUTHEASTERN REGION
|
40,133 | 51,860 | 203,983 | 255,843 | 104,202 | 59,034 | 301,011 | 360,045 | 151,188 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
SOUTHWESTERN REGION
|
||||||||||||||||||||||||||||||||||||||||||||
|
THIRTY377
|
31,816 | 24,036 | 32,951 | 56,987 | 6,117 | 24,229 | 38,875 | 63,104 | 13,838 | 2007 | Aug-06 | |||||||||||||||||||||||||||||||||
|
Legacy Village
|
59,300 | 16,882 | 100,102 | 116,984 | 4,071 | 17,029 | 104,026 | 121,055 | 24,322 | 2005/06/07 | Mar-08 | |||||||||||||||||||||||||||||||||
|
DALLAS, TX
|
91,116 | 40,918 | 133,053 | 173,971 | 10,188 | 41,258 | 142,901 | 184,159 | 38,160 | |||||||||||||||||||||||||||||||||||
|
Finisterra
|
— | 1,274 | 26,392 | 27,666 | 4,351 | 1,735 | 30,282 | 32,017 | 13,999 | 1997 | Mar-98 | |||||||||||||||||||||||||||||||||
|
Sierra Foothills
|
20,978 | 2,728 | — | 2,728 | 21,204 | 5,102 | 18,830 | 23,932 | 12,968 | 1998 | Feb-98 | |||||||||||||||||||||||||||||||||
|
Sierra Canyon
|
10,717 | 1,810 | 12,964 | 14,774 | 2,197 | 2,071 | 14,900 | 16,971 | 9,381 | 2001 | Dec-01 | |||||||||||||||||||||||||||||||||
|
PHOENIX, AZ
|
31,695 | 5,812 | 39,356 | 45,168 | 27,752 | 8,908 | 64,012 | 72,920 | 36,348 | |||||||||||||||||||||||||||||||||||
|
Barton Creek Landing
|
— | 3,151 | 14,269 | 17,420 | 20,208 | 4,414 | 33,214 | 37,628 | 12,086 | 1986 | Mar-02 | |||||||||||||||||||||||||||||||||
|
AUSTIN, TX
|
— | 3,151 | 14,269 | 17,420 | 20,208 | 4,414 | 33,214 | 37,628 | 12,086 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL SOUTHWESTERN REGION
|
122,811 | 49,881 | 186,678 | 236,559 | 58,148 | 54,580 | 240,127 | 294,707 | 86,594 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
REAL ESTATE UNDER DEVELOPMENT
|
||||||||||||||||||||||||||||||||||||||||||||
|
UDR Pacific Los Alisos, LP
|
— | 17,298 | — | 17,298 | 9,496 | 16,385 | 10,409 | 26,794 | — | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL REAL ESTATE UNDER DEVELOPMENT
|
— | 17,298 | — | 17,298 | 9,496 | 16,385 | 10,409 | 26,794 | — | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
LAND
|
||||||||||||||||||||||||||||||||||||||||||||
|
Presidio
|
— | 1,524 | — | 1,524 | 921 | 1,300 | 1,145 | 2,445 | — | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL LAND
|
— | 1,524 | — | 1,524 | 921 | 1,300 | 1,145 | 2,445 | — | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL REAL ESTATE UNDER DEVELOPMENT
|
— | 18,822 | — | 18,822 | 10,417 | 17,685 | 11,554 | 29,239 | — | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL COMMERCIAL
|
— | 1,441 | 6,096 | 7,537 | 2,449 | 2,552 | 7,434 | 9,986 | 1,791 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Other (b)
|
— | — | — | — | 804 | 6 | 799 | 805 | — | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL CORPORATE
|
— | — | — | — | 804 | 6 | 799 | 805 | — | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
TOTAL COMMERCIAL & CORPORATE
|
— | 1,441 | 6,096 | 7,537 | 3,253 | 2,558 | 8,233 | 10,791 | 1,791 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Total Real Estate Owned
|
$ | 1,189,644 | $ | 971,161 | $ | 2,606,544 | $ | 3,577,705 | $ | 627,592 | $ | 1,039,211 | $ | 3,166,087 | $ | 4,205,298 | $ | 976,358 | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||
| (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 $2.3 billion at December 31, 2011. | ||
| The depreciable life for all buildings is 35 years. |
155
Table of Contents
UNITED DOMINION REALTY, L.P.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2011
SCHEDULE III — REAL ESTATE OWNED — (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2011
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
):
| 2011 | 2010 | 2009 | ||||||||||
|
|
||||||||||||
|
Balance at beginning of the year
|
$ | 3,706,184 | $ | 3,640,888 | $ | 3,569,239 | ||||||
|
Real estate acquired
|
758,707 | — | — | |||||||||
|
Capital expenditures and
development
|
63,191 | 65,296 | 71,649 | |||||||||
|
Real estate sold
|
(322,784 | ) | — | — | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Balance at end of year
|
$ | 4,205,298 | $ | 3,706,184 | $ | 3,640,888 | ||||||
|
|
||||||||||||
The following is a reconciliation of total accumulated depreciation for real estate owned at
December 31:
| 2011 | 2010 | 2009 | ||||||||||
|
|
||||||||||||
|
Balance at beginning of the year
|
$ | 884,083 | $ | 717,892 | $ | 552,369 | ||||||
|
Depreciation expense for the year
|
181,085 | 166,191 | 165,757 | |||||||||
|
Accumulated depreciation on
asset retirements
|
— | — | (234 | ) | ||||||||
|
Accumulated depreciation on sales
|
(88,810 | ) | — | — | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Balance at end of year
|
$ | 976,358 | $ | 884,083 | $ | 717,892 | ||||||
|
|
||||||||||||
156
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. | ||||
157
Table of Contents
| Exhibit | Description | Location | ||||
|
|
||||||
| 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. | ||||
|
|
||||||
| 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. | ||||
158
Table of Contents
| Exhibit | Description | Location | ||||
|
|
||||||
| 3.03 |
Articles of Amendment to the Articles of Restatement of UDR, Inc.
dated and filed with the State Department of Assessments and Taxation
of the State of Maryland on August 30, 2011.
|
Exhibit 3.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on September 1, 2011. | ||||
|
|
||||||
| 3.04 |
Articles Supplementary relating to UDR, Inc.’s 6.75% Series G
Cumulative Redeemable Preferred Stock dated and filed with the State
Department of Assessments and Taxation of the State of Maryland on May
30, 2007.
|
Exhibit 3.4 to UDR, Inc.’s Form 8-A Registration Statement dated and filed with the Commission on May 30, 2007. | ||||
|
|
||||||
| 3.05 |
Amended and Restated Bylaws of UDR, Inc. (as amended through May 12,
2011).
|
Exhibit 3.1 to UDR, Inc.’s Current Report on Form 8-K dated May 12, 2011 and filed with the Commission on May 13, 2011. | ||||
|
|
||||||
| 3.06 |
Certificate of Limited Partnership of United Dominion Realty, L.P.
dated as of February 19, 2004.
|
Exhibit 3.4 to United Dominion Realty, L.P.’s Post-Effective Amendment No. 1 to Registration Statement on Form S-3 dated and filed with the Commission on October 15, 2010. | ||||
|
|
||||||
| 3.07 |
Amended and Restated Agreement of Limited Partnership of United
Dominion Realty, L.P. dated as of February 23, 2004.
|
Exhibit 10.23 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003. | ||||
|
|
||||||
| 3.08 |
First Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P. dated as of June 24, 2005.
|
Exhibit 10.06 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005. | ||||
|
|
||||||
| 3.09 |
Second Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P. dated as of February 23,
2006.
|
Exhibit 10.6 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006. | ||||
|
|
||||||
| 3.10 |
Third Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P. dated as of February 2,
2007.
|
Exhibit 99.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009. | ||||
|
|
||||||
| 3.11 |
Fourth Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P. dated as of December 27,
2007.
|
Exhibit 10.25 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2007. | ||||
|
|
||||||
| 3.12 |
Fifth Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P. dated as of March 7, 2008.
|
Exhibit 10.53 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008. | ||||
|
|
||||||
| 3.13 |
Sixth Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P. dated as of December 9,
2008.
|
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated December 9, 2008 and filed with the Commission on December 10, 2008. | ||||
159
Table of Contents
| Exhibit | Description | Location | ||||
|
|
||||||
| 3.14 |
Seventh Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P., dated as of March 13,
2009.
|
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated March 18, 2009 and filed with the Commission on March 19, 2009 | ||||
|
|
||||||
| 3.15 |
Eighth Amendment to the Amended and Restated Agreement of Limited
Partnership of United Dominion Realty, L.P., dated as of November 17,
2010.
|
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on November 18, 2010. | ||||
|
|
||||||
| 4.01 |
Form of UDR, Inc. Common Stock Certificate.
|
Exhibit 4.1 to UDR, Inc.’s Current Report on Form 8-K dated March 14, 2007 and filed with the Commission on March 15, 2007. | ||||
|
|
||||||
| 4.02 |
Senior Indenture dated as of November 1, 1995, by and between UDR,
Inc. and First Union National Bank of Virginia, N.A., as trustee.
|
Exhibit 4(ii)(h)(1) to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1996. | ||||
|
|
||||||
| 4.03 |
Supplemental Indenture dated as of June 11, 2003, by and between UDR,
Inc. and Wachovia Bank, National Association, as trustee.
|
Exhibit 4.03 to UDR, Inc.’s Current Report on Form 8-K dated June 17, 2004 and filed with the Commission on June 18, 2004. | ||||
|
|
||||||
| 4.04 |
Subordinated Indenture dated as of August 1, 1994 by and between UDR,
Inc. and Crestar Bank, as trustee.
|
Exhibit 4(i)(m) to UDR, Inc.’s Form S-3 Registration Statement (Registration No. 33-64725) filed with the Commission on November 15, 1995. | ||||
|
|
||||||
| 4.05 |
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. | ||||
|
|
||||||
| 4.06 |
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. | ||||
|
|
||||||
| 4.07 |
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. | ||||
|
|
||||||
| 4.08 |
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. | ||||
|
|
||||||
| 4.09 |
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. | ||||
|
|
||||||
| 4.10 |
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. | ||||
160
Table of Contents
| Exhibit | Description | Location | ||||
|
|
||||||
| 4.11 |
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. | ||||
|
|
||||||
| 4.12 |
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. | ||||
|
|
||||||
| 4.13 |
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. | ||||
|
|
||||||
| 4.14 |
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. | ||||
|
|
||||||
| 4.15 |
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. | ||||
|
|
||||||
| 4.16 |
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. | ||||
|
|
||||||
| 4.17 |
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. | ||||
|
|
||||||
| 4.18 |
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. | ||||
|
|
||||||
| 4.19 |
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. | ||||
|
|
||||||
| 4.20 |
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. | ||||
|
|
||||||
| 4.21 |
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. | ||||
|
|
||||||
| 4.22 |
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. | ||||
|
|
||||||
| 4.23 |
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. | ||||
|
|
||||||
| 4.24 |
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. | ||||
161
Table of Contents
| Exhibit | Description | Location | ||||
|
|
||||||
| 4.25 |
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. | ||||
|
|
||||||
| 4.26 |
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. | ||||
|
|
||||||
| 4.27 |
Guaranty of United Dominion Realty, L.P. with
respect to UDR, Inc.’s Indenture dated as of
October 12, 2006.
|
Exhibit 99.2 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on September 30, 2010. | ||||
|
|
||||||
| 4.28 |
First Supplemental Indenture among UDR, Inc.,
United Dominion Realty, L.P. and U.S. Bank National
Association, as Trustee, dated as of May 3, 2011,
relating to UDR, Inc.’s Medium-Term Notes, Series
A, due Nine Months or More from Date of Issue.
|
Exhibit 4.1 to UDR, Inc.’s Current Report on Form 8-K filed with the Commission on May 4, 2011. | ||||
|
|
||||||
| 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. | ||||
162
Table of Contents
| Exhibit | Description | Location | ||||
|
|
||||||
| 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. | ||||
|
|
||||||
| 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. | ||||
163
Table of Contents
| Exhibit | Description | Location | ||||
|
|
||||||
| 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. | ||||
|
|
||||||
| 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* |
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. | ||||
|
|
||||||
| 10.27* |
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. | ||||
|
|
||||||
| 10.28* |
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. | ||||
164
Table of Contents
| Exhibit | Description | Location | ||||
|
|
||||||
| 10.29* |
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. | ||||
|
|
||||||
| 10.30* |
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. | ||||
|
|
||||||
| 10.31* |
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. | ||||
|
|
||||||
| 10.32 |
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. | ||||
|
|
||||||
| 10.33 |
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. | ||||
|
|
||||||
| 10.34 |
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. | ||||
|
|
||||||
| 10.35* |
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. | ||||
|
|
||||||
| 10.36 |
Term Loan Agreement dated as of
December 14, 2009, by and among
UDR, Inc., Regions Capital
Markets, PNC Capital Markets
LLC, Regions Bank, PNC Bank,
National Association, U.S. Bank
National Association and the
other signatories thereto.
|
Exhibit 99.1 to UDR, Inc.’s Current Report on Form 8-K dated December 14, 2009 and filed with the Commission on December 17, 2009. | ||||
|
|
||||||
| 10.37 |
Second Amended and Restated
Distribution Agreement among
UDR, Inc., United Dominion
Realty, L.P., as Guarantor,
Citigroup Global Markets Inc.,
Deutsche Bank Securities Inc.,
J.P. Morgan Securities LLC,
Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Morgan
Stanley & Co. Incorporated and
Wells Fargo Securities, LLC, as
Agents, dated as of May 3, 2011,
with respect to the issue and
sale by UDR, Inc. of its
Medium-Term Notes, Series A Due
Nine Months or More From Date of
Issue.
|
Exhibit 1.1 to UDR, Inc.’s Current Report on Form 8-K filed with the SEC on May 4, 2011. | ||||
165
Table of Contents
| Exhibit | Description | Location | ||||
|
|
||||||
| 10.38 |
Underwriting Agreement among
UDR, Inc., J.P. Morgan
Securities LLC, Merrill Lynch,
Pierce, Fenner & Smith
Incorporated, Morgan Stanley &
Co. Incorporated and Wells Fargo
Securities, LLC, as
Representatives of the several
underwriters, dated July 13,
2011.
|
Exhibit 1.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on July 13, 2011. | ||||
|
|
||||||
| 10.39 |
ATM Equity
Offering
SM
Sales Agreement among UDR, Inc.,
Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Citigroup
Global Markets Inc., Credit
Suisse Securities (USA) LLC and
J.P. Morgan Securities LLC,
dated September 1, 2011.
|
Exhibit 1.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on September 1, 2011. | ||||
|
|
||||||
| 10.40 |
Third Amended and Restated
Distribution Agreement among
UDR, Inc., United Dominion
Realty, L.P., as Guarantor,
Citigroup Global Markets Inc.,
Deutsche Bank Securities Inc.,
J.P. Morgan Securities LLC,
Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Morgan
Stanley & Co. Incorporated and
Wells Fargo Securities, LLC, as
Agents, dated September 1, 2011,
with respect to the issue and
sale by UDR, Inc. of its
Medium-Term Notes, Series A Due
Nine Months or More From Date of
Issue.
|
Exhibit 1.2 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on September 1, 2011. | ||||
|
|
||||||
| 10.41 |
Credit Agreement dated as of
October 25, 2011 by and among
UDR, Inc., as Borrower, The
Financial Institutions party
Hereto and Their Assignees under
Section 12.5, as Lenders, Wells
Fargo Bank, National
Association, as Administrative
Agent, Wells Fargo Securities,
LLC and J.P. Morgan Securities
LLC, as Joint Lead Arrangers and
Joint Lead Bookrunners, JPMorgan
Chase Bank, N.A., as Syndication
Agent, and Bank of America,
N.A., PNC Bank, National
Association and US Bank National
Association, as Documentation
Agents.
|
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on October 26, 2011. | ||||
|
|
||||||
| 10.42 |
Aircraft Time Sharing Agreement
dated as of December 15, 2011,
by and between UDR, Inc. and
Thomas W. Toomey.
|
Filed herewith. | ||||
|
|
||||||
| 10.43 |
Aircraft Time Sharing Agreement
dated as of December 15, 2011,
by and between UDR, Inc. and
Warren L. Troupe.
|
Filed herewith. | ||||
|
|
||||||
| 12.1 |
Computation of Ratio of Earnings
to Combined Fixed Charges and
Preferred Stock Dividends of
UDR, Inc.
|
Filed herewith. | ||||
|
|
||||||
| 12.2 |
Computation of Ratio of Earnings
to Fixed Charges of United
Dominion Realty, L.P.
|
Filed herewith. | ||||
|
|
||||||
| 21 |
Subsidiaries
of UDR, Inc. and United Dominion Realty, L.P.
|
Filed herewith. | ||||
|
|
||||||
| 23.1 |
Consent of Independent
Registered Public Accounting
Firm for UDR, Inc.
|
Filed herewith. | ||||
166
Table of Contents
| Exhibit | Description | Location | ||||
|
|
||||||
| 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, 2011, 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
changes in equity of UDR, Inc.,
(v) notes to consolidated
financial statements of UDR,
Inc., (vi) consolidated balance
sheets of United Dominion
Realty, L.P., (vii) consolidated
statements of operations of
United Dominion Realty, L.P.,
(viii) consolidated statements
of cash flows of United Dominion
Realty, L.P., (ix) consolidated
statements of changes in capital
of United Dominion Realty, L.P.,
and (x) notes to consolidated
financial statements of United
Dominion Realty, L.P.
|
Filed herewith. | ||||
167
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Mine Safety DisclosuresPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 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