News Column

UNITED DOMINION REALTY L P - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

July 29, 2014

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 an demand/supply ratio for multifamily housing, expectations concerning development and redevelopment activities, expectations on occupancy levels, expectations concerning the joint ventures with third parties, expectations that automation will help grow net operating income, and expectations on annualized net operating income. The following factors, among others, could cause our future results to differ materially from those expressed in the forward-looking statements:



• general economic conditions;

• unfavorable changes in apartment market and economic conditions that could

adversely affect occupancy levels and rental rates;

• the failure of acquisitions to achieve anticipated results;

• possible difficulty in selling apartment communities;

• competitive factors that may limit our ability to lease apartment homes or

increase or maintain rents;



• insufficient cash flow that could affect our debt financing and create

refinancing risk; • failure to generate sufficient revenue, which could impair our debt service payments and distributions to stockholders;



• development and construction risks that may impact our profitability;

• potential damage from natural disasters, including hurricanes and other weather-related events, which could result in substantial costs to us;



• risks from extraordinary losses for which we may not have insurance or

adequate reserves;



• uninsured losses due to insurance deductibles, self-insurance retention,

uninsured claims or casualties, or losses in excess of applicable coverage;



• delays in completing developments and lease-ups on schedule;

• our failure to succeed in new markets;

• changing interest rates, which could increase interest costs and affect

the market price of our securities;



• potential liability for environmental contamination, which could result in

substantial costs to us;



• the imposition of federal taxes if we fail to qualify as a REIT under the

Code in any taxable year; 61



--------------------------------------------------------------------------------

Table of Contents

• our internal control over financial reporting may not be considered

effective which could result in a loss of investor confidence in our

financial reports, and in turn have an adverse effect on our stock price;

and



• changes in real estate laws, tax laws and other laws affecting our business.

A discussion of these and other factors affecting our business and prospects is set forth in Part II, Item 1A. Risk Factors. We encourage investors to review these risk factors. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law. UDR, Inc.: Business Overview UDR, Inc. is a self-administered real estate investment trust, or REIT, that owns, acquires, renovates, develops, and manages apartment communities. We were formed in 1972 as a Virginia corporation. In September 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. Unless the context otherwise requires, all references in this Report to "we," "us," "our," "the Company," or "UDR" refer collectively to UDR, Inc., its subsidiaries and its consolidated joint ventures. At June 30, 2014, our consolidated real estate portfolio included 142 communities in 10 states plus the District of Columbia totaling 40,811 apartment homes. In addition, we had an ownership interest in 35 communities with 9,791 apartment homes through unconsolidated operating communities. The Same-Store Community apartment home population for the three and six months June 30, 2014 was 35,685 and 35,177, respectively. 62



--------------------------------------------------------------------------------

Table of Contents

The following table summarizes our market information by major geographic markets as of June 30, 2014.

For the Three Months Ended June For the Six Months Ended June 30, As of June 30, 2014 30, 2014 2014 Number of Number of Percentage Total Average Monthly Income Average Monthly Income Same-Store Apartment Apartment of Total Carrying Value Physical per Occupied Physical per Occupied Communities Communities Homes Carrying Value (in thousands) Occupancy Home (a) Occupancy Home (a) West Region San Francisco, CA 11 2,436 7.9 % $ 662,576 97.4 % $ 2,769 97.0 % 2,741 Orange County, CA 10 3,290 7.3 % 608,700 95.0 % 1,740 94.9 % $ 1,736 Seattle, WA 11 2,165 5.7 % 476,870 97.3 % 1,585 97.1 % 1,566 Monterey Peninsula, CA 7 1,565 1.9 % 160,617 97.4 % 1,195 94.5 % 1,188 Los Angeles, CA 4 800 3.3 % 276,638 95.0 % 2,252 95.3 % 2,246 Other Southern California 4 875 1.7 % 141,163 96.6 % 1,544 95.8 % 1,531 Portland, OR 3 716 0.9 % 73,300 97.7 % 1,176 97.7 % 1,169 Mid-Atlantic Region Metropolitan D.C. 13 4,313 10.6 % 888,649 97.4 % 1,826 97.1 % 1,823 Baltimore, MD 11 2,301 3.7 % 307,324 97.2 % 1,462 96.8 % 1,461 Richmond, VA 4 1,358 1.7 % 138,683 96.5 % 1,221 96.6 % 1,213 Norfolk, VA 4 846 0.6 % 53,377 95.3 % 1,051 94.8 % 1,043 Other Mid-Atlantic 1 168 0.2 % 12,658 97.0 % 1,017 97.0 % 1,003 Southeast Region Tampa, FL 9 2,775 3.3 % 273,009 96.6 % 1,121 96.5 % 1,115 Orlando, FL 10 2,796 2.8 % 236,987 96.9 % 1,034 96.8 % 1,029 Nashville, TN 8 2,260 2.3 % 189,520 97.6 % 1,052 97.3 % 1,045 Other Florida 1 636 1.0 % 80,663 96.2 % 1,352 96.4 % 1,347 Northeast Region New York, NY 3 1,208 9.0 % 750,455 97.1 % 3,624 97.5 % 3,673 Boston, MA 4 1,179 3.9 % 321,088 96.8 % 2,203 96.4 % 2,183 Southwest Region Dallas, TX 8 2,725 3.4 % 290,158 97.6 % 1,122 97.1 % 1,121 Austin, TX 4 1,273 1.8 % 147,229 96.7 % 1,264 96.7 % 1,259 Total/Average Same- Store Communities 130 35,685 73.0 % 6,089,664 96.8 % $ 1,586 96.5 % $ 1,550 Non-Mature, Commercial Properties & Other 12 5,126 23.7 % 1,971,870 Total Real Estate Held for Investment 142 40,811 96.7 % 8,061,534 Real Estate Under Development (b) - - 3.3 % 275,819 Total Real Estate Owned 142 40,811 100.0 % 8,337,353 Total Accumulated Depreciation (2,339,824 ) Total Real Estate Owned, Net of Accumulated Depreciation $ 5,997,529



(a) Monthly Income per Occupied Home represents total monthly revenues divided

by the product of occupancy and the number of mature apartment homes.

(b) The Company is currently developing three wholly-owned communities with 874 apartment homes, of which none have been completed. We report in two segments: Same-Store Communities and Non-Mature Communities/Other. Our Same-Store Communities segment represents those communities acquired, developed, and stabilized prior to April 1, 2013 for quarter-to-date comparison and January 1, 2013 for year-to-date comparison and held as of June 30, 2014. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior period, 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. 63



--------------------------------------------------------------------------------

Table of Contents

Our Non-Mature Communities/Other segment represents those communities that do not meet the criteria to be included in Same-Store Communities, including, but not limited to, recently acquired, developed and redeveloped properties, and the non-apartment components of mixed use properties. Liquidity and Capital Resources Liquidity is the ability to meet present and future financial obligations either through operating cash flows, sales of properties, borrowings under our credit agreements, and/or the issuance of debt and/or equity securities. Our primary source of liquidity is our cash flow from operations related to our portfolio of apartment homes and borrowings under our 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 net cash provided by property operations and borrowings under our credit agreements. We expect to meet certain long-term liquidity requirements such as scheduled debt maturities, the repayment of financing on development activities, and potential property acquisitions, through secured and unsecured borrowings, the issuance of debt or equity securities, and/or the disposition of properties. We believe that our net cash provided by property operations and borrowings under our credit agreements will continue to be adequate to meet both operating requirements and the payment of dividends by the Company in accordance with REIT requirements. Likewise, the budgeted expenditures for improvements and renovations of certain properties are expected to be funded from property operations, borrowings under credit agreements, the issuance of debt or equity securities, and dispositions of properties. Future Capital Needs Future development and redevelopment expenditures may be funded through borrowings under unsecured or secured credit facilities, proceeds from the issuance of equity or debt securities, sales of properties, and, to a lesser extent, from cash flow provided by property operations. Acquisition activity in strategic markets may be funded through joint ventures, by the reinvestment of proceeds from the sale of properties, through the issuance of equity or debt securities, the issuance of operating partnership units and the assumption or placement of secured and/or unsecured debt. 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. As of June 30, 2014, we had approximately $41.2 million of secured debt maturing, inclusive of principal amortization, and no unsecured debt maturing during the remainder of 2014. We anticipate repaying that debt with cash flow from our operations, proceeds from debt or equity offerings, proceeds from dispositions of properties, or from borrowings under our credit agreements. Critical Accounting Policies and Estimates and New Accounting Pronouncements Our critical accounting policies are those having the most impact on the reporting of our financial condition and results and those requiring significant judgments and estimates. These policies include those related to (1) capital expenditures, (2) impairment of long-lived assets, (3) real estate investment properties, and (4) revenue recognition. Our critical accounting policies are described in more detail in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in UDR's Annual Report on Form 10-K, filed with the SEC on February 25, 2014. There have been no significant changes in our critical accounting policies from those reported in our Form 10-K filed with the SEC on February 25, 2014. With respect to these critical accounting policies, we believe that the application of judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented. Effective January 1, 2014, UDR prospectively adopted Accounting Standards Update ("ASU") No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, for all communities not previously sold or classified as held for sale. ASU 2014-08 incorporates into the definition of a discontinued operation a requirement that a disposition represent a strategic shift in an entity's operations, which resulted in UDR no longer classifying the sale of communities as a discontinued operation. See Note 2, Significant Accounting Policies, to the UDR Consolidated Financial Statements for more information on the new accounting pronouncement. 64 -------------------------------------------------------------------------------- Statements of Cash Flows The following discussion explains the changes in net cash provided by operating activities, net cash provided by/(used in) investing activities, and net cash provided by/(used in) financing activities that are presented in our Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013. Operating Activities For the six months ended June 30, 2014, our net cash flow provided by operating activities was $186.2 million compared to $172.4 million for the comparable period in 2013. The increase in cash flow from operating activities is primarily due to improved income from continuing operations. Investing Activities For the six months ended June 30, 2014, net cash provided by/(used in) investing activities was $(279.6) million compared to $(35.9) million for the comparable period in 2013. The change in investing activities was due to changes in the level of investment activities, which reflect our strategy as it relates to our investments in unconsolidated joint ventures and partnerships, dispositions, capital expenditures, and development activities, all of which are discussed in further detail throughout this Report. Acquisitions In January 2014, the Company acquired a fully-entitled land parcel for future development located in Huntington Beach, California for $77.8 million. Disposition of Investments In the first quarter of 2014, the Company sold one community and an adjacent parcel of land in San Diego, CA for gross proceeds of $48.7 million, resulting in net proceeds of $47.9 million and a $24.3 million gain (net of tax). On June 30, 2014, the Company sold two communities in Tampa, Florida with 677 apartment homes for $80.7 million, resulting in net proceeds of $79.5 million and a $26.7 million gain (net of tax). As of June 30, 2014, $49.2 million of the net proceeds were held by a qualified intermediary and were remitted to UDR on July 1, 2014. These proceeds are included in Other Assets on the Consolidated Balance Sheet as of June 30, 2014. The remaining $30.3 million of net proceeds were designated for a future 1031 exchange and are included in Funds held in escrow from IRC Section 1031 exchanges on the Consolidated Balance Sheet as of June 30, 2014. The total gains (net of tax) of $51.0 million are included in Gain/(loss) on sale of real estate owned, net of tax on the Consolidated Statements of Operations. In June 2013, the Company sold a 50% interest in two operating communities, developable land and a community under development to MetLife, resulting in net proceeds of $140.8 million and the formation of the UDR/MetLife Vitruvian Parkฎ joint venture. 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. Total capital expenditures, which in aggregate include recurring capital expenditures and major renovations, of $45.4 million or $1,129 per stabilized home were spent on all of our communities, excluding development and commercial properties, for the six months ended June 30, 2014 as compared to $88.9 million or $2,150 per stabilized home for the comparable period in prior year. The decrease in total capital expenditures was primarily due to: • a decrease in major renovations of 65.7% or $43.7 million. Major



renovations of $22.9 million or $569 per home were spent for the six

months ended June 30, 2014 as compared to $66.6 million or $1,610 per home

for the comparable period in the prior year. Major renovations for the six

months ended June 30, 2014 were primarily attributable to the

redevelopment of two wholly-owned communities (1,456 of 1,703 apartment

homes being redeveloped, 1,400 of which have been completed) with a budget

of $178.0 million, of which we had $154.2 million of costs incurred at June 30, 2014. The redevelopment of one of the two communities has been completed as of June 30, 2014. 65

-------------------------------------------------------------------------------- This decrease was partially offset by: • an increase of 44.4% or $1.5 million in revenue-enhancing capital



expenditures, such as kitchen and bath remodels.

The following table outlines capital expenditures and repair and maintenance costs for all of our communities, excluding real estate under development, non-stabilized communities, and commercial properties, for the six months ended June 30, 2014 and 2013:



Per Home

Six Months Ended June 30, (dollars in thousands) Six



Months Ended June 30,

2014 2013 % Change 2014 2013 % Change Turnover capital expenditures $ 5,465$ 5,124 6.7 % $ 136$ 124 9.7 % Asset preservation expenditures 12,232 13,862 (11.8 )% 304 335 (9.3 )% Total recurring capital expenditures 17,697 18,986 (6.8 )% 440 459 (4.1 )% Revenue enhancing improvements 4,823 3,339 44.4 % 120 81 48.1 % Major renovations 22,872 66,609 (65.7 )% 569 1,610 (64.7 )% Total capital expenditures $ 45,392$ 88,934 (49.0 )% $ 1,129$ 2,150 (47.5 )% Repair and maintenance expense $ 15,424$ 15,947 (3.3 )% $ 384$ 385 (0.3 )% Average stabilized home count (a) 40,204 41,372



(a) Average number of homes is calculated based on the number of stabilized

homes outstanding at the end of each month.

We intend to continue to selectively add revenue enhancing improvements which we believe will provide a return on investment in excess of our cost of capital. Our objective in redeveloping a community is twofold: we aim to meaningfully grow rental rates while also achieving cap rate compression through asset quality improvement. Recurring capital expenditures during 2014 are projected to be approximately $1,100 per home. Real Estate Under Development and Redevelopment As of June 30, 2014, our development pipeline for three wholly-owned communities totaled 874 homes, of which none have been completed, with a budget of $400.4 million, in which we have a carrying value of $275.8 million. These communities are estimated to be completed during the second quarter of 2015. As of June 30, 2014, the Company was redeveloping 708 apartment homes, 652 of which have been completed, at one wholly-owned community with 739 total apartment homes. This community is estimated to be completed during the fourth quarter of 2014. Consolidated Joint Ventures In December 2013, the Company consolidated its 95%/5% development joint ventures: 13th and Market JV in San Diego, CA and Domain College Park JV in Metropolitan D.C. The consolidation was due to the Company becoming the managing member of each of the joint ventures pursuant to amendments to the limited liability company agreement for each joint venture. In connection with the amendments, our partner received equity distributions reducing its capital account balances to zero, the Company replaced our partner as the managing member, and our partner no longer has the ability to substantively participate in the decision-making process, with only protective rights remaining. We accounted for the consolidations as asset acquisitions since the joint ventures were under development and not complete at the time of consolidation resulting in no gain or loss upon consolidation and increasing our real estate owned by $129.4 million and our debt owed by $63.6 million. In addition pursuant to the amendments, the Company paid a non-refundable deposit to our partner in January 2014 of $2.0 million for each joint venture, or $4.0 million in total, for the right to exercise options in 2014 to acquire our partner's upside participation in the joint 66 -------------------------------------------------------------------------------- ventures. The non-refundable deposits will be applied towards the future purchase price, which will be equivalent to our partner's right to receive certain upside participation from the developments. Unconsolidated Joint Ventures and Partnerships The Company recognizes earnings or losses from our investments in unconsolidated joint ventures and partnerships consisting of our proportionate share of the net income or losses of the joint ventures and partnerships. In addition, we may earn fees for providing management services to the unconsolidated joint ventures and partnerships. The following table summarizes the Company's investment in and advances to unconsolidated joint ventures and partnerships, net, which are accounted for under the equity method of accounting, as of June 30, 2014 and December 31, 2013 (dollars in thousands): Number of Number of Apartment Location of Properties Homes Investment at UDR's Ownership Interest Joint Venture Properties 2014 2014 June 30, 2014 December 31, 2013 June 30, 2014 December 31,



2013

Operating and development: UDR/MetLife I Various 0 operating (a) communities - $ - $ 40,336 - % 13.2 % 7 land parcels N/A 7,044 7,161 4.0 % 4.0 % UDR/MetLife II Various 21 operating (a) communities 4,642 439,973 327,926 50.0 % 50.0 % UDR/MetLife Addison, TX Vitruvian 2 operating Parkฎ communities 739 80,896 79,318 50.0 % 50.0 % 1 non-stabilized community 391 6 land parcels N/A UDR/MetLife San 399 Fremont Francisco, 1 development CA community (*) 447 53,791 36,313 51.0 % 51.0 % UDR/KFH Washington, 3 operating D.C. communities 660 23,998 25,919 30.0 % 30.0 % Texas Texas 8 operating communities 3,359 (24,636 ) (23,591 ) 20.0 % 20.0 % Investment in and advances to unconsolidated joint ventures, net, before participating loan investment 581,066 493,382 Years To Location Interest Rate Maturity Investment at Income From Participating Loan Investment For Three Months Ended June 30, 2014 December 31, 2013 June 30 Six Months Ended June 30 2014 2013 2014 2013 Participating loan investment: Steele Creek Denver, CO 6.5% 3.3 31,622 14,273 $456 - $777



-

Participating loan investments 31,622 14,273 Total investment in and advances to unconsolidated joint ventures, net $



612,688 $ 507,655

(*) The number of apartment homes for the communities under development presented in the table above is based on the projected number of total homes. As of June 30, 2014, no apartment homes have been completed at UDR/MetLife 399 Fremont. 67

-------------------------------------------------------------------------------- (a) On March 31, 2014, the Company sold its minority ownership interests in two small operating communities located in Los Angeles, CA to MetLife for cash proceeds of $3.0 million, which resulted in an immaterial gain. On April 21, 2014, the Company increased its ownership interest in the remaining six operating communities in the UDR/MetLife I Joint Venture from 12% to 50%, and MetLife and the Company contributed these communities to the UDR/MetLife II Joint Venture. The Company paid MetLife $82.5 million for the additional ownership interests. The Company continues to manage the operating communities that were contributed to the UDR/MetLife II Joint Venture as well as the two operating communities in which it sold its minority ownership interests. As of June 30, 2014, the remaining assets in the UDR/MetLife I Joint Venture were comprised of seven potential development land sites in which the Company owned approximately 4%. In July 2014, the Company increased the ownership interest in two of these land sites to 50.1% and subsequently contributed the land into two newly formed joint ventures with MetLife. The Company paid MetLife approximately $21.5 million for the additional ownership interests. The Company may, in the future, make additional capital contributions to certain of our joint ventures and partnerships should additional capital contributions be necessary to fund acquisitions or operations. We evaluate our investments in unconsolidated joint ventures and partnerships when events or changes in circumstances indicate that there may be an other-than-temporary decline in value. We consider various factors to determine if a decrease in the value of the investment is other-than-temporary. The Company did not recognize any other-than-temporary decreases in the value of its investments in unconsolidated joint ventures and partnerships during the three and six months ended June 30, 2014 and 2013. Financing Activities For the six months ended June 30, 2014, our net cash provided by/(used in) financing activities was $89.9 million compared to $(139.6) million for the comparable period of 2013. The following significant financing activities occurred during the six months ended June 30, 2014: • repaid $42.3 million of secured debt, including $40.2 million of mortgage



payments and the repayment of $2.1 million of credit facilities;

• repaid $184.0 million of 5.13% unsecured medium-term notes due January 2014;

• repaid $128.5 million of 5.50% unsecured medium-term notes due April 2014; • on June 26, 2014, issued $300 million of 3.750% senior unsecured



medium-term notes due July 1, 2024. Interest is payable semi-annually

beginning on January 1, 2015. The notes were priced at 99.652% of the principal amount at issuance and had a discount of $1.0 million at June



30, 2014. We used the net proceeds to pay down borrowings outstanding on

our $900 million unsecured credit facility and for general corporate purposes. The notes are fully and unconditionally guaranteed by the Operating Partnership; • net borrowings of $276.5 million under the Company's $900 million unsecured revolving credit facility; and



• paid distributions of 124.3 million to our common stockholders.

Credit Facilities As of June 30, 2014, the Company has secured credit facilities with Fannie Mae with an aggregate commitment of $836.0 million with $836.0 million outstanding. The Fannie Mae credit facilities are for terms of seven to ten years and bear interest at floating and fixed rates. The Company has $624.6 million of the funded balance fixed at a weighted average interest rate of 4.99%, and the remaining balance of $211.4 million on these facilities has a weighted average variable rate of 1.58% at June 30, 2014. As of June 30, 2014, the Company has a $900 million unsecured revolving credit facility that matures in December 2017. The credit facility has a six month extension option and contains an accordion feature that allows us to increase the facility to $1.45 billion. Based on the Company's current credit rating, the credit facility carries an interest rate equal to LIBOR plus a spread of 110 basis points and a facility fee of 20 basis points. As of June 30, 2014, we had $276.5 million outstanding borrowings under the credit facility, leaving $623.5 million of unused capacity (excluding $2.2 million of letters of credit at June 30, 2014). The Fannie Mae credit facilities and the bank unsecured revolving credit facility are subject to customary financial covenants and limitations. 68 -------------------------------------------------------------------------------- Derivative Instruments As part of UDR's overall interest rate risk management strategy, we use derivatives as a means to fix the interest rates of variable rate debt obligations or to hedge anticipated financing transactions. UDR's derivative transactions used for interest rate risk management include interest rate swaps with indexes that relate to the pricing of specific debt instruments of UDR. We believe that we have appropriately controlled our interest rate risk through the use of derivative instruments to minimize any unintended effect on consolidated earnings. Derivative contracts did not have a material impact on the results of operations during the three and six months ended June 30, 2014 (see Note 10, Derivatives and Hedging Activity, in the Notes to the UDR Consolidated Financial Statements included in this Report). 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 $648.9 million in variable rate debt that is not subject to interest rate swap contracts as of June 30, 2014. If market interest rates for variable rate debt increased by 100 basis points, our interest expense for the six months ended June 30, 2014 would increase by $4.0 million based on the average balance outstanding during the period. These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. This analysis does not consider the effects of the adjusted level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no change in our financial structure. The Company also utilizes derivative financial instruments to manage interest rate risk and generally designates these financial instruments as cash flow hedges. See Note 10, Derivatives and Hedging Activities, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional discussion of derivate instruments. Funds from Operations, Funds from Operations as Adjusted, and Adjusted Funds from Operations Funds from Operations Funds from operations ("FFO") is defined as net income (computed in accordance with GAAP, excluding impairment write-downs of depreciable real estate or of investments in non-consolidated investees that are driven by measurable decreases in the fair value of depreciable real estate held by the investee, gains (or losses) from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust's ("NAREIT") definition issued in April 2002. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure of a REIT's operating performance. In the computation of diluted FFO, OP Units, unvested restricted stock, stock options, and the shares of Series E Cumulative Convertible Preferred Stock are dilutive; therefore, they are included in the diluted share count. Activities of taxable REIT subsidiary ("TRS"), RE3, include development and land entitlement. From time to time, we develop and subsequently sell a TRS property which results in a short-term use of funds that produces a profit that differs from the traditional long-term investment in real estate for REITs. We believe that the inclusion of these TRS gains in FFO is consistent with the standards established by NAREIT as the short-term investment is incidental to our main business. TRS gains on sales, net of taxes, are defined as net sales proceeds less a tax provision and the gross investment basis of the asset before accumulated depreciation. We consider FFO a useful metric for investors as we use FFO in evaluating property acquisitions and our operating performance, and believe that FFO should be considered along with, but not as an alternative to, net income and cash flow as a measure of our activities in accordance with GAAP. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of funds available to fund our cash needs. 69 --------------------------------------------------------------------------------



Funds from Operations as Adjusted

FFO as Adjusted is defined as FFO excluding the impact of acquisition-related costs and other non-comparable items including, but not limited to, prepayment costs/benefits associated with early debt retirement, gains on sales of marketable securities and TRS property, deferred tax valuation allowance increases and decreases, storm-related expenses and recoveries, severance costs and legal costs. Management believes that FFO as Adjusted is useful supplemental information regarding our operating performance as it provides a consistent comparison of our operating performance across time periods and allows investors to more easily compare our operating results with other REITs. FFO as Adjusted is not intended to represent cash flow or liquidity for the period, and is only intended to provide an additional measure of our operating performance. We believe that net income attributable to UDR, Inc. is the most directly comparable GAAP financial measure to FFO as Adjusted. However, other REITs may use different methodologies for calculating FFO as Adjusted or similar FFO measures and, accordingly, our FFO as Adjusted may not always be comparable to FFO as Adjusted or similar FFO measures calculated by other REITs. FFO as Adjusted should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity.



Adjusted Funds from Operations

Adjusted FFO, or "AFFO", is a non-GAAP financial measure that management uses as a supplemental measure of our performance. AFFO is defined as FFO as Adjusted less recurring capital expenditures that are necessary to help preserve the value of and maintain functionality at our communities. Therefore, management considers AFFO a useful supplemental performance metric for investors as it is more indicative of the Company's operational performance than FFO or FFO as Adjusted. AFFO is not intended to represent cash flow or liquidity for the period, and is only intended to provide an additional measure of our operating performance. We believe that net income attributable to UDR, Inc. is the most directly comparable GAAP financial measure to AFFO. Management believes that AFFO is a widely recognized measure of the operations of REITs, and presenting AFFO will enable investors to assess our performance in comparison to other REITs. However, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not always be comparable to AFFO calculated by other REITs. AFFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. 70 --------------------------------------------------------------------------------



The following table outlines our reconciliation of Net Income/(Loss) Attributable to UDR, Inc. to FFO, FFO as Adjusted, and AFFO for the three and six months ended June 30, 2014 and 2013 (dollars in thousands):

Three Months Ended June 30,



Six Months Ended June 30,

2014 2013 2014 2013 Net income/(loss) attributable to UDR, Inc. $ 30,007$ 5,192$ 48,368 4,924 Distributions to preferred stockholders (931 ) (931 ) (1,862 ) (1,862 ) Real estate depreciation and amortization, including discontinued operations 88,876 85,131 177,409 168,573 Net income/(loss) attributable to noncontrolling interests 1,079 162 1,730 121 Real estate depreciation and amortization on unconsolidated joint ventures 8,861 5,943 19,528 14,948 Net (gain)/loss on the sale of depreciable property, excluding TRS (26,709 ) - (49,883 ) -



Funds from operations ("FFO"), basic $ 101,183$ 95,497

$ 195,290$ 186,704 Distribution to preferred stockholders - Series E (Convertible) 931 931 1,862 1,862 FFO, diluted $ 102,114$ 96,428$ 197,152$ 188,566 FFO per common share, basic $ 0.39 $ 0.37$ 0.75$ 0.72 FFO per common share, diluted $ 0.39 $ 0.37$ 0.75$ 0.71 Weighted average number of common shares and OP Units outstanding - basic 259,571 259,309 259,533 259,303 Weighted average number of common shares, OP Units, and common stock equivalents outstanding - diluted 264,543 263,766



264,444 263,741

Impact of adjustments to FFO:

Acquisition-related costs (including joint ventures) $ - $ -



$ 102 $ -

Joint venture financing and acquisition fee - (218 ) - (218 ) Costs/(benefit) associated with debt extinguishment and tender offer 192 178 192 178 Gains on sale of TRS property and marketable securities - - (1,120 ) - Casualty-related (recoveries)/charges, net - (2,772 ) 500 (5,606 ) $ 192 $ (2,812 )$ (326 )$ (5,646 ) FFO as Adjusted, diluted $ 102,306$ 93,616



$ 196,826$ 182,920

FFO as Adjusted per common share, diluted $ 0.39 $ 0.35

$ 0.74$ 0.69

Recurring capital expenditures (11,096 ) (12,224 ) (17,697 ) (18,986 ) AFFO $ 91,210$ 81,392



$ 179,129$ 163,934

AFFO per common share, diluted $ 0.34 $ 0.31$ 0.68$ 0.62 71

--------------------------------------------------------------------------------



The following table is our reconciliation of FFO share information to weighted average common shares outstanding, basic and diluted, reflected on the UDR Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013 (shares in thousands):

Three Months Ended June 30,



Six Months Ended June 30,

2014 2013 2014 2013 Weighted average number of common shares and OP Units outstanding - basic 259,571 259,309 259,533 259,303 Weighted average number of OP Units outstanding (9,316 ) (9,324 ) (9,317 ) (9,352 ) Weighted average number of common shares outstanding - basic per the Consolidated Statements of Operations 250,255 249,985 250,216 249,951 Weighted average number of common shares, OP Units, and common stock equivalents outstanding - diluted 264,543 263,766 264,444 263,741 Weighted average number of OP Units outstanding (9,316 ) (9,324 ) (9,317 ) (9,352 ) Weighted average incremental shares from assumed conversion of stock options - - - - Weighted average incremental shares from unvested restricted stock - - - - Weighted average number of Series E preferred shares outstanding (3,036 ) (3,036 ) (3,036 ) (3,036 ) Weighted average number of common shares outstanding - diluted per the Consolidated Statements of Operations 252,191 251,406 252,091 251,353 A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands): Six Months Ended June 30, 2014 2013 Net cash provided by operating activities $ 186,213 $



172,389

Net cash provided by/(used in) investing activities $ (279,574 )$ (35,913 ) Net cash provided by/(used in) financing activities $ 89,928$ (139,556 )

Results of Operations The following discussion explains the changes in results of operations that are presented in our Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013, and includes the results of both continuing and discontinued operations for the periods presented. Net Income/(Loss) Attributable to Common Stockholders Net income attributable to common stockholders was $29.1 million ($0.12 per diluted share) for the three months ended June 30, 2014 as compared to $4.3 million ($0.02 per diluted share) for the comparable period in the prior year. The increase in net income attributable to common stockholders for the three months ended June 30, 2014 resulted primarily from the following items, which are discussed in further detail elsewhere within this Report: • gains (net of tax) of $26.7 million on the sale of two communities in Tampa, Florida during the three months ended June 30, 2014; and



• an increase in total property NOI primarily due to higher occupancy and

higher revenue per occupied home, and NOI from the homes placed in service

related to development and redevelopment projects completed in 2013 and 2014, partially offset by the disposition of communities in 2013 and 2014.



This was partially offset by: • an increase in depreciation and amortization expense primarily from the

homes placed in service related to development and redevelopment projects

completed 2013 and 2014, partially offset by a decrease from sold and fully depreciated properties; and 72



--------------------------------------------------------------------------------

Table of Contents

• hurricane-related recoveries in 2013 resulting from the effects of

Hurricane Sandy on three of our New York City communities in 2012 (see

Note 3, Real Estate Owned, in the Notes to the UDR Consolidated Financial

Statements for more details);

Net income attributable to common stockholders was $46.5 million ($0.18 per diluted share) for the six months ended June 30, 2014 as compared to $3.1 million ($0.01 per diluted share) for the comparable period in the prior year. The increase in net income attributable to common stockholders for the six months ended June 30, 2014 resulted primarily from the following items, which are discussed in further detail elsewhere within this Report:



• gains (net of tax) of $51.0 million on the sale of one property with an

adjacent land parcel in San Diego, CA and the sale of two communities in

Tampa, Florida during the six months ended June 30, 2014; and



• an increase in total property NOI primarily due to higher occupancy and

higher revenue per occupied home, and NOI from the homes placed in service

related to development and redevelopment projects completed in 2013 and 2014, partially offset by the disposition of communities in 2013 and 2014.



This was partially offset by: • an increase in depreciation and amortization expense primarily from the

homes placed in service related to development and redevelopment projects

completed 2013 and 2014, partially offset by a decrease from sold and fully depreciated properties; and • hurricane-related recoveries in 2013 resulting from the effects of Hurricane Sandy on three of our New York City communities in 2012 (see



Note 3, Real Estate Owned, in the Notes to the UDR Consolidated Financial

Statements for more details).

Apartment Community Operations Our net income results are primarily from NOI generated from the operation of our apartment communities. The following table summarizes the operating performance of our total property NOI (which includes discontinued operations) for each of the periods presented (dollars in thousands): Three Months Ended June 30, (a)



Six Months Ended June 30, (b)

2014 2013 % Change 2014 2013 % Change Same-Store Communities: Same-store rental income $ 164,472$ 157,566 4.4 % $ 315,823$ 302,362 4.5 % Same-store operating expense (c) (48,637 ) (47,805 ) 1.7 % (95,167 ) (93,164 ) 2.1 % Same-store NOI 115,835 109,761 5.5 % 220,656 209,198 5.5 % Non-Mature Communities/Other NOI: Acquired communities NOI - - - 7,900 7,022 12.5 % Sold or held for disposition communities NOI 3,160 6,158 (48.7 )% 6,378 13,050 (51.1 )% Developed communities NOI 7,857 512 1,434.6 % 12,154 768 1,482.6 % Redeveloped communities NOI 10,754 8,602 25.0 % 20,853 16,736 24.6 % Commercial NOI and other 2,786 3,620 (23.0 )% 4,575 7,195 (36.4 )% Total non-mature communities/other NOI 24,557 18,892 30.0 % 51,860 44,771 15.8 % Total Property NOI $ 140,392$ 128,653 9.1 % $ 272,516$ 253,969 7.3 %



(a) Same-Store Community population consisted of 35,685 apartment homes.

(b) Same-Store Community population consisted of 35,177 apartment homes.

(c) Excludes depreciation, amortization, and property management expenses.

73



--------------------------------------------------------------------------------

Table of Contents

The following table is our reconciliation of total property NOI to Net Income/(Loss) Attributable to UDR, Inc. as reflected, for both continuing and discontinued operations, for each of the periods presented (dollars in thousands):

Three Months Ended June 30,



Six Months Ended June 30,

2014 2013 2014 2013 Total property NOI $ 140,392$ 128,653$ 272,516$ 253,969 Joint venture management and other fees 2,747 3,217 6,434 6,140 Property management (5,529 ) (5,187 ) (10,875 ) (10,255 ) Other operating expenses (2,171 ) (1,807 ) (4,106 ) (3,450 ) Real estate depreciation and amortization (88,876 ) (85,131 ) (177,409 ) (168,573 ) General and administrative (12,530 ) (9,866 ) (24,524 ) (19,342 ) Casualty-related recoveries/(charges), net - 2,772 (500 ) 5,793 Other depreciation and amortization (1,193 ) (1,138 ) (2,273 ) (2,284 ) Income/(loss) from unconsolidated entities (428 ) 515 (3,993 ) (2,287 ) Interest expense (31,691 ) (30,803 ) (64,575 ) (61,784 ) Interest and other income/(expense), net 1,426 1,446 2,841 2,462 Tax benefit, net 2,230 2,683 5,559 4,656 Gain/(loss) on sale of real estate owned, net of tax 26,709 - 51,003 - Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership (1,077 ) (159 ) (1,724 ) (114 ) Net (income)/loss attributable to noncontrolling interests (2 ) (3 ) (6 ) (7 ) Net income/(loss) attributable to UDR, Inc. $ 30,007$ 5,192$ 48,368$ 4,924 Same-Store Communities Our Same-Store Community properties (those acquired, developed, and stabilized prior to April 1, 2013 for quarter-to-date comparison and January 1, 2013 for year-to-date comparison and held as of June 30, 2014) consisted of 35,685 and 35,177 apartment homes and provided 83% and 81% of our total NOI for the three and six months ended June 30, 2014, respectively. Three Months Ended June 30, 2014 vs. Three Months Ended June 30, 2013 NOI for our Same-Store Community properties increased 5.5% or $6.1 million for the three months ended June 30, 2014 compared to the same period in 2013. The increase in property NOI was attributable to a 4.4% or $6.9 million increase in property rental income, which was partially offset by a 1.7% or $832,000 increase in operating expenses. The increase in property income was primarily driven by a 3.4% or $5.1 million increase in rental rates, a 5.8% or $677,000 increase in reimbursement and fee income and an 12.9% or $716,000 decrease in vacancy loss and bad debt. Physical occupancy increased 0.5% to 96.8% and total monthly income per occupied home increased 3.7% to $1,586. The increase in operating expenses was primarily driven by a 2.5% or $407,000 increase in real estate taxes and a 19.8% or $375,000 increase in insurance expenses. As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 70.4% for the three months ended June 30, 2014 as compared to 69.7% for the comparable period in 2013. Six Months Ended June 30, 2014 vs. Six Months Ended June 30, 2013 NOI for our Same-Store Community properties increased 5.5% or $11.5 million for the six months ended June 30, 2014 compared to the same period in 2013. The increase in property NOI was attributable to a 4.5% or $13.5 million increase in property rental income, which was partially offset by a 2.1% or $2.0 million increase in operating expenses. The increase in property income was primarily driven by a 3.4% or $9.9 million increase in rental rates, a 6.0% or $1.3 million increase in reimbursement and fee income and an 12.4% or $1.4 million decrease in vacancy loss and bad debt. Physical occupancy increased 0.6% to 96.5% and total monthly income per occupied home increased 3.9% to $1,550. 74



--------------------------------------------------------------------------------

Table of Contents

The increase in operating expenses was primarily driven by a 2.8% or $909,000 increase in real estate taxes, an 18.4% or $706,000 increase in insurance expense, and a 2.9% or $431,000 increase in utilities 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 69.9% for the six months ended June 30, 2014 as compared to 69.2% for the comparable period in 2013. Non-Mature Communities/Other UDR's Non-Mature Communities/Other represent those communities that do not meet the criteria to be included in Same-Store Communities, including, but not limited to, recently acquired, developed and redeveloped properties, and the non-apartment components of mixed use properties. Three Months Ended June 30, 2014 vs. Three Months Ended June 30, 2013 The remaining 17% or $24.6 million of our total NOI during the three months ended June 30, 2014 was generated from our Non-Mature Communities/Other. NOI from Non-Mature Communities/Other increased by 30.0% or $5.7 million for the three months ended June 30, 2014 as compared to the same period in 2013. The increase was primarily driven by an increase in NOI of $7.3 million and $2.2 million from developed and redeveloped communities completed in 2013 and 2014, respectively, which was partially offset by a decrease in NOI of $3.0 million from communities sold in 2013 and 2014 or held for sale as of June 30, 2014 and a decrease of $834,000 from commercial and other communities. Six Months Ended June 30, 2014 vs. Six Months Ended June 30, 2013 The remaining 19% or $51.9 million of our total NOI during the six months ended June 30, 2014 was generated from our Non-Mature Communities/Other. NOI from Non-Mature Communities/Other increased by 15.8% or $7.1 million for the six months ended June 30, 2014 as compared to the same period in 2013. The increase was primarily driven by an increase in NOI of $11.4 million and $4.1 million from development and redevelopment communities completed in 2013 and 2014, respectively, which was partially offset by a decrease in NOI of $6.7 million from communities sold in 2013 and 2014 or held for sale as of June 30, 2014 and a decrease of $2.6 million from commercial and other communities. Real Estate Depreciation and Amortization For the three months ended June 30, 2014, real estate depreciation and amortization on both continuing and discontinued operations increased 4.4% or $3.7 million as compared to the comparable period in 2013. The increase in depreciation and amortization for the three months ended June 30, 2014 was primarily due to homes delivered from our development and redevelopment communities, partially offset by a decrease from sold and fully depreciated properties. During the six months ended June 30, 2014, real estate depreciation and amortization on both continuing and discontinued operations increased 5.2% or $8.8 million as compared to the comparable period in 2013. The increase in depreciation and amortization for the six months ended June 30, 2014 was primarily due to homes delivered from our development and redevelopment communities, partially offset by a decrease from sold and fully depreciated properties.



General and Administrative

For the three months ended June 30, 2014, general and administrative expense increased 27.0% or $2.7 million as compared to the comparable periods in 2013. The increase in general and administrative expense for the three months ended June 30, 2014 was primarily due to an increase in stock based compensation expense for the long-term incentive plan and salary and benefit increases.



For the six months ended June 30, 2014, general and administrative expense increased 26.8% or $5.2 million as compared to the comparable periods in 2013. The increase was primarily due to an increase in stock based compensation expense for the long-term incentive plan and salary and benefit increases.

Casualty-Related (Recoveries)/Charges, Net

In October 2012, Hurricane Sandy hit the East Coast, affecting three of the Company's operating communities located in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Company had insurance policies that provided coverage for property damage and business interruption, subject to applicable retentions.

75



--------------------------------------------------------------------------------

Table of Contents

During the three and six months ended June 30, 2013, the Company recorded $2.8 million and 5.8 million, respectively, of insurance recoveries related to the business interruption and other losses associated with Hurricane Sandy. These recoveries were included in Casualty-related (recoveries)/charges, net on the UDR Consolidated Statements of Operations.



During the six months ended June 30, 2014, we recorded a $500,000 casualty-related loss for one property damaged during an earthquake in California.

Interest Expense For the three months ended June 30, 2014, interest expense increased by 2.9% or $888,000 as compared to the comparable period in 2013. The increase in interest expense for the three months ended June 30, 2014 was primarily due to less interest capitalized in 2014 as a result of completed developments, partially offset by a decrease in interest expense due to replacement of debt at lower rates. For the six months ended June 30, 2014, interest expense increased by 4.5% or $2.8 million as compared to the comparable period in 2013. The increase in interest expense for the three months ended June 30, 2014 was primarily due to less interest capitalized in 2014 as a result of completed developments, partially offset by a decrease in interest expense due to replacement of debt at lower rates. Gain/(Loss) on Sale of Real Estate Owned, Net of Tax During the three months ended June 30, 2014, the Company recognized gains (net of tax) of $26.7 million on the sale of two communities in Tampa, Florida with 677 apartment homes. During the six months ended June 30, 2014, the Company recognized gains (net of tax) of $51.0 million on the sale of one community with an adjacent parcel of land in San Diego, CA and the sale of two communities in Tampa, Florida with 677 apartment homes. There were no gains recognized on the sale of real estate during the six months ended June 30, 2013. Due to the Company's adoption ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, effective January 1, 2014, these gains (net of tax) are included in Gain/(loss) on sale of real estate owned, net of tax on the UDR Consolidated Statements of Operations. See Note 2, Significant Accounting Policies, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional information.



Inflation

We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results through wage pressures, utilities and material costs, the majority of our leases are for a term of fourteen months or less, which generally enables us to compensate for any inflationary effects by increasing rents on our apartment homes. Although an extreme escalation in energy and food costs could have a negative impact on our residents and their ability to absorb rent increases, we do not believe this has had a material impact on our results for the three and six months ended June 30, 2014. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material. 76



--------------------------------------------------------------------------------

Table of Contents

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 June 30, 2014, the Operating Partnership's real estate portfolio included 67 communities located in nine states and the District of Columbia with a total of 20,482 apartment homes. As of June 30, 2014, UDR owned 110,883 units of our general limited partnership interests and 173,856,283 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 or "we," "us" or "our" refer to UDR, L.P. together with its consolidated subsidiaries. We refer to our General Partner together with its consolidated subsidiaries (including us) and the General Partner's consolidated joint ventures as "UDR" or the "General Partner." UDR is a self-administered real estate investment trust, or REIT that owns, acquires, renovates, develops, and manages apartment communities. The General Partner was formed in 1972 as a Virginia corporation and changed its state of incorporation from Virginia to Maryland in September 2003. At June 30, 2014, the General Partner's consolidated real estate portfolio included 142 communities located in 10 states and the District of Columbia with a total of 40,811 apartment homes. In addition, the General Partner had an ownership interest in 35 communities with 9,791 completed apartment homes through unconsolidated operating communities. The Operating Partnership's same-store community apartment home population for the three and six months ended June 30, 2014 was 19,518 and 18,472, respectively. 77



--------------------------------------------------------------------------------

Table of Contents

The following table summarizes our market information by major geographic markets as of June 30, 2014.

For the Three Months Ended June For the Six Months Ended June 30, As of June 30, 2014 30, 2014 2014 Number of Number of Percentage of Total Carrying Average Monthly Income Average Monthly Income Same-Store Apartment Apartment Total Value (in Physical per Occupied Physical per Occupied Communities Communities Homes Carrying Value thousands) Occupancy Home (a) Occupancy Home (a) West Region Orange County, CA 8 2,935 12.4 % $ 518,966 95.4 % $ 1,692 96.5 % $ 1,696 San Francisco, CA 9 2,185 13.3 % 557,565 96.7 % 2,634 94.8 % 2,613 Seattle, WA 5 932 5.0 % 211,588 97.3 % 1,533 91.7 % 1,517 Los Angeles, CA 2 344 2.6 % 107,059 94.7 % 2,144 94.4 % 2,157 Monterey Peninsula, CA 7 1,565 3.8 % 160,617 96.8 % 1,203 93.7 % 1,199 Portland, OR 3 716 1.7 % 73,300 97.0 % 1,183 96.8 % 1,179 Other Southern California 3 635 2.6 % 109,390 94.7 % 1,668 94.9 % 1,632 Mid-Atlantic Region Metropolitan D.C. 7 2,378 13.3 % 557,824 96.2 % 1,936 96.4 % 1,923 Baltimore, MD 5 994 3.6 % 150,422 87.9 % 1,556 87.8 % 1,558 Southeast Region Tampa, FL 3 1,154 2.8 % 116,268 95.9 % 1,188 96.3 % 1,180 Nashville, TN 6 1,612 3.2 % 133,571 97.0 % 1,028 97.0 % 1,020 Other Florida 1 636 1.9 % 80,663 95.2 % 1,367 95.4 % 1,361 Northeast Region New York, NY 2 1,001 14.2 % 597,633 97.3 % 3,497 96.9 % 3,483 Boston, MA 2 833 4.2 % 177,312 95.9 % 1,856 96.3 % 1,822 Southwest Region Dallas, TX 2 1,348 4.5 % 187,840 95.5 % 1,413 95.3 % 1,402 Austin, TX 1 250 0.9 % 39,405 97.5 % 1,637 - - Total/Average Same-Store Communities 66 19,518 90.0 % 3,779,423 95.8 % $ 1,748 95.4 % $ 1,678 Non-Mature, Commercial Properties & Other 1 964 7.4 % 309,484 Real Estate Under Development (b) - - 2.6 % 108,705 Total Real Estate Owned 67 20,482 100.0 % 4,197,612 Total Accumulated Depreciation (1,313,209 ) Total Real Estate Owned, Net of Accumulated Depreciation $ 2,884,403



(a) Monthly Income per Occupied Home represents total monthly revenues divided

by the product of occupancy and the number of mature apartment homes.

(b) As of June 30, 2014, the Operating Partnership was developing one wholly-owned community with 332 apartment homes, none of which were completed. We report in two segments: Same-Store Communities and Non-Mature Communities/Other. Our Same-Store Communities segment represents those communities acquired, developed, and stabilized prior to April 1, 2013 for quarter-to-date comparison and January 1, 2013 for year-to-date comparison and held as of June 30, 2014. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior period, there is no plan to conduct substantial redevelopment activities, and the communities are not held for disposition within the current year. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months. 78



--------------------------------------------------------------------------------

Table of Contents

Our Non-Mature Communities/Other segment represents those communities that do not meet the criteria to be included in Same-Store Communities, including, but not limited to, recently acquired, developed and redeveloped properties, and the non-apartment components of mixed use properties. Liquidity and Capital Resources Liquidity is the ability to meet present and future financial obligations either through operating cash flows, the sale of properties, and the issuance of debt. Both the coordination of asset and liability maturities and effective capital management are important to the maintenance of liquidity. The Operating Partnership's primary source of liquidity is cash flow from operations as determined by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment homes and borrowings allocated to us under the General Partner's credit agreements. The General Partner will routinely use its unsecured credit facility to temporarily fund certain investing and financing activities prior to arranging for longer-term financing or the issuance of equity or debt securities. During the past several years, proceeds from the sale of real estate have been used for both investing and financing activities as we repositioned our portfolio. We expect to meet our short-term liquidity requirements generally through net cash provided by operations and borrowings allocated to us under the General Partner's credit agreements. We expect to meet certain long-term liquidity requirements such as scheduled debt maturities and potential property acquisitions through borrowings and the disposition of properties. We believe that our net cash provided by operations and borrowings will continue to be adequate to meet both operating requirements and the payment of distributions. Likewise, the budgeted expenditures for improvements and renovations of certain properties are expected to be funded from property operations, and borrowings allocated to us under the General Partner's credit agreements. Future Capital Needs Future capital expenditures are expected to be funded with proceeds from the issuance of secured debt or unsecured debt, sales of properties, borrowings allocated to us under our General Partner's credit agreements, and to a lesser extent, from cash flows provided by operating activities. As of June 30, 2014, the Operating Partnership had approximately $4.5 million of principal payments on secured debt maturing in 2014. We anticipate that we will repay that debt with operating cash flows or proceeds from borrowings allocated to us under our General Partner's credit agreements. The repayment of debt will be recorded as an offset to the Payable/(receivable) due to/(from) General Partner. Critical Accounting Policies and Estimates and New Accounting Pronouncements Our critical accounting policies are those having the most impact on the reporting of our financial condition and results and those requiring significant judgments and estimates. These policies include those related to (1) capital expenditures, (2) impairment of long-lived assets, (3) real estate investment properties, and (4) revenue recognition. Our critical accounting policies are described in more detail in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Operating Partnership's current Report on Form 10-K, filed with the SEC on February 25, 2014. There have been no significant changes in our critical accounting policies from those reported in Operating Partnership's Form 10-K filed with the SEC on February 25, 2014. With respect to these critical accounting policies, we believe that the application of judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented. Effective January 1, 2014, the Operating Partnership prospectively adopted Accounting Standards Update ("ASU") No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, for all communities not previously sold or classified as held for sale. ASU 2014-08 incorporates into the definition of a discontinued operation a requirement that a disposition represent a strategic shift in an entity's operations, which resulted in UDR no longer classifying the sale of communities as a discontinued operation. See Note 2, Significant Accounting Policies, to the Operating Partnership's Consolidated Financial Statements for more information on the new accounting pronouncement. Statements of Cash Flows The following discussion explains the changes in net cash provided by operating activities, net cash provided by/(used in) investing activities, and net cash provided by/(used in) financing activities that are presented in our Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013. 79



--------------------------------------------------------------------------------

Table of Contents

Operating Activities For the six months ended June 30, 2014, net cash flow provided by operating activities was $103.4 million compared to $111.2 million for the comparable period in 2013. The decrease in net cash flow from operating activities was primarily due to changes in operating assets and operating liabilities, partially offset by improved income from continuing operations. Investing Activities For the six months ended June 30, 2014, net cash provided by/(used in) investing activities was $(2.6) million compared to $(75.8) million for the comparable period in 2013. The change was primarily due to a decrease in development and redevelopment activities and an increase in dispositions in the six months ended June 30, 2014 as compared to prior year. Changes in the level of investment activities from period to period reflect our strategy as it relates to development activities, capital expenditures, and dispositions. Disposition of Investments During the six months ended June 30, 2014, the Operating Partnership sold one community and an adjacent land parcel in San Diego, CA for gross proceeds of $48.7 million, resulting in a $24.4 million gain and net proceeds of $47.9 million. In the second quarter 2014, in connection with the sale of one community in Tampa, Florida the Operating Partnership recognized a gain of $16.3 million, which was previously deferred. The total gains of $40.7 million were included in Income/(loss) on sale of real estate owned on the Operating Partnership's Consolidated Statements of Operations. Proceeds were used primarily to fund development and redevelopment activities and to reduce debt. Real Estate Under Development and Redevelopment At June 30, 2014, the Operating Partnership was developing one wholly-owned community totaling 332 homes, none of which have been completed, with a budget of $132.0 million, in which we had a carrying value of $108.7 million. This community is estimated to be completed during the fourth quarter of 2014. Financing Activities For the six months ended June 30, 2014, our net cash provided by/(used in) financing activities was $(101.5) million compared to $(35.0) million for the comparable period of 2013. The increase in cash used in financing activities was primarily due to an increase in advances from the General Partner. Credit Facilities As of June 30, 2014, the General Partner had secured credit facilities with Fannie Mae with an aggregate commitment of $836.0 million with $836.0 million outstanding. The Fannie Mae credit facilities are for terms of seven to ten years and bear interest at floating and fixed rates. At June 30, 2014, $624.6 million of the funded balance was fixed at a weighted average interest rate of 4.99%, and the remaining balance on these facilities was at a weighted average variable rate of 1.58%. At June 30, 2014, there was a total of $520.9 million of these credit facilities allocated to the Operating Partnership based on the ownership of the assets securing the debt. The Operating Partnership is a guarantor on the General Partner's unsecured revolving credit facility with an aggregate borrowing capacity of $900 million, $250 million of term notes due June 2018, $100 million of term notes due June 2018, $300 million of medium-term notes due June 2018, $300 million of medium-term notes due October 2020, $400 million of medium-term notes due January 2022, and $300 million of medium-term notes due July 2024. As of June 30, 2014 and December 31, 2013 there was $276.5 million and $0 outstanding borrowings under the unsecured revolving credit facility. The credit facilities are subject to customary financial covenants and limitations. Derivative Instruments As part of our General Partner's overall interest rate risk management strategy, our General Partner uses derivatives as a means to fix the interest rates of variable rate debt obligations or to hedge anticipated financing transactions. Our General Partner's derivative transactions used for interest rate risk management include interest rate swaps with indexes that relate to the pricing of specific debt instruments of our General Partner that are allocated to the Operating Partnership. The General Partner believes that we have appropriately controlled our interest rate risk through the use of derivative instruments (allocated o the Operating Partnership based on the General Partner's underlying debt instruments allocated to the Operating Partnership) to minimize any unintended effect on consolidated earnings. Derivative contracts did not have a material impact on the results 80



--------------------------------------------------------------------------------

Table of Contents

of operations during the three and six months ended June 30, 2014 (see Note 8, Derivatives and Hedging Activity, in the Notes to the Operating Partnership's Consolidated Financial Statements included in this Report). 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 $169.1 million in variable rate debt that is not subject to interest rate swap contracts as of June 30, 2014. If market interest rates for variable rate debt increased by 100 basis points, our interest expense for the six months ended June 30, 2014 would increase by $846,000 based on the average balance outstanding during the period. These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. These analyses do not consider the effects of the adjusted level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no change in our financial structure. The General Partner also utilizes derivative financial instruments allocated to the Operating Partnership to manage interest rate risk and generally designates these financial instruments as cash flow hedges. See Note 8, Derivatives and Hedging Activities, in the Notes to the Operating Partnership's Consolidated Financial Statements for additional discussion of derivate instruments. Results of Operations The following discussion explains the changes in results of operations that are presented in our Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013, and includes the results of both continuing and discontinued operations for the periods presented. Net Income/(Loss) Attributable to OP Unitholders Net income attributable to OP unitholders was $24.4 million ($0.13 per diluted OP Unit) for the three months ended June 30, 2014 as compared to net income of $10.2 million ($0.06 per diluted OP Unit) for the comparable period in the prior year. The increase in net income attributable to OP unitholders resulted primarily from the following items, which are discussed in further detail elsewhere within this Report: • a gain of $16.3 million in connection with the sale of one community in



Tampa, Florida in 2014; and

• an increase in total property NOI primarily due to higher occupancy and

higher revenue per occupied home, NOI from the homes placed in service

related to development and redevelopment projects completed in 2013 and 2014, partially offset by the disposition of communities in 2013 and 2014. This was partially offset by: • hurricane-related recoveries in 2013 resulting from the effects of Hurricane Sandy on two of our New York City communities in 2012 (see Note 3, Real Estate Owned, in the Notes to the Operating Partnership's Consolidated Financial Statements for more details). Net income attributable to OP unitholders was $55.0 million ($0.30 per diluted OP Unit) for the six months ended June 30, 2014 as compared to net income of $17.9 million ($0.10 per diluted OP Unit) for the comparable period in the prior year. The increase in net income attributable to OP unitholders resulted primarily from the following items, which are discussed in further detail elsewhere within this Report: • net gains of $40.7 million on the sale of one property with an adjacent land parcel in San Diego, CA and the sale of one community in Tampa, Florida in 2014; and



• an increase in total property NOI primarily due to higher occupancy and

higher revenue per occupied home, NOI from the homes placed in service

related to development and redevelopment projects completed in 2013 and 2014, partially offset by the disposition of communities in 2013 and 2014. 81



--------------------------------------------------------------------------------

Table of Contents

This was partially offset by: • hurricane-related recoveries in 2013 resulting from the effects of Hurricane Sandy on two of our New York City communities in 2012 (see Note 3, Real Estate Owned, in the Notes to the Operating Partnership's Consolidated Financial Statements for more details). Apartment Community Operations Our net income results primarily from net operating income ("NOI") generated from the operation of our apartment communities. The Operating Partnership defines NOI, which is a non-GAAP financial measure, as rental income less direct property rental expenses. Rental income represents gross market rent less adjustments for concessions, vacancy loss and bad debt. Rental expenses include real estate taxes, insurance, personnel, utilities, repairs and maintenance, administrative and marketing. Excluded from NOI is property management expense, which is calculated as 2.75% of property revenue to cover regional supervision and accounting costs related to consolidated property operations, and land rent. The following table summarizes the operating performance of our total portfolio (which includes discontinued operations) for the three and six months ended June 30, 2014 and 2013 (dollars in thousands): Three Months Ended June 30, (a)



Six Months Ended June 30, (b)

2014 2013 % Change 2014 2013 % Change Same-Store Communities: Same-store rental income $ 98,045$ 93,590 4.8 % $ 177,402$ 169,225 4.8 % Same-store operating expense (a) (27,723 ) (27,568 ) 0.6 % (51,533 ) (50,793 ) 1.5 % Same-store NOI 70,322 66,022 6.5 % 125,869 118,432 6.3 % Non-Mature Communities/Other NOI: Acquired communities 12.5 % NOI - - - % 7,900 7,022 Sold and held for sale (99.8 )% communities NOI - 2,273 (100.0 )% 11 4,470 Developed communities 850.0 % NOI (70 ) (6 ) 1,066.7 % (76 ) (8 ) Redeveloped 17.1 % communities NOI 3,331 2,507 32.9 % 10,891 9,299 Commercial NOI and (17.2 )% other 1,385 1,665 (16.8 )% 2,790 3,369 Total non-mature (10.9 )% communities/other NOI 4,646 6,439 (27.8 )% 21,516 24,152 Total Property NOI $ 74,968$ 72,461 3.5 % $ 147,385$ 142,584 3.4 %



(a) Same-store consists of 19,518 apartment homes.

(b) Same-store consists of 18,472 apartment homes.

(c) Excludes depreciation, amortization, and property management expenses.

82



--------------------------------------------------------------------------------

Table of Contents

The following table is our reconciliation of total property NOI to Net Income/(Loss) Attributable to OP Unitholders as reflected, for both continuing and discontinued operations, for the three and six months ended June 30, 2014 and 2013 (dollars in thousands): Three Months Ended June 30,



Six Months Ended June 30,

2014 2013 2014 2013 Total property NOI $ 74,968$ 72,461$ 147,385$ 142,584 Property management (2,883 ) (2,824 ) (5,698 ) (5,576 ) Other operating expenses (1,451 ) (1,423 ) (2,887 ) (2,809 ) Real estate depreciation and amortization (44,697 ) (45,307 ) (88,968 ) (90,700 ) General and administrative (7,459 ) (5,894 ) (14,429 ) (11,469 ) Casualty-related recoveries/(charges), net - 2,257 (500 ) 4,276 Interest expense (10,159 ) (9,050 ) (20,173 ) (18,312 ) Gain/(loss) on sale of real estate owned 16,285 - 40,687 - Net (income)/loss attributable to noncontrolling interests (178 ) (66 ) (458 ) (112 ) Net income/(loss) attributable to OP unitholders $ 24,426$ 10,154$ 54,959$ 17,882 Same-Store Communities Our Same-Store Community properties (those acquired, developed, and stabilized prior to April 1, 2013 for quarter-to-date comparison and January 1, 2013 for year-to-date comparison and held as of June 30, 2014) consisted of 19,518 and 18,472 apartment homes and provided 93.8% and 85.4% of our total NOI for the three and six months ended June 30, 2014, respectively Three Months Ended June 30, 2014 vs. Three Months Ended June 30, 2013 NOI for our Same-Store Community properties increased 6.5% or $4.3 million for the three months ended June 30, 2014 compared to the same period in 2013. The increase in property NOI was primarily attributable to a 4.8% or $4.5 million increase in property rental income, which was partially offset by a 0.6% or $155,000 increase in operating expenses. The increase in revenues was primarily driven by a 3.6% or $3.2 million increase in rental rates, a 15.0% or $526,000 decrease in vacancy loss and bad debt, and a 5.2% or $360,000 increase in fee and reimbursement income. Physical occupancy increased 0.4% to 95.8% and total income per occupied home increased 4.4% to $1,748 for the three months ended June 30, 2014 compared to the same period in 2013. The increase in property operating expenses was primarily driven by a 2.6% or $243,000 increase in real estate tax expense and a 16.1% or $168,000 increase in insurance expense. As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 71.7% for the three months ended June 30, 2014 as compared to 70.5% for the comparable period in 2013. Six Months Ended June 30, 2014 vs. Six Months Ended June 30, 2013 NOI for our Same-Store Community properties increased 6.3% or $7.4 million for the six months ended June 30, 2014 compared to the same period in 2013. The increased in property NOI was primarily attributable to a 4.8% or $8.2 million increase in property rental income, which was partially offset by a 1.5% or $740,000 increase in operating expenses. The increase in revenues was primarily driven by a 3.5% or $5.7 million increase in rental rates, a 17.5% or $1.3 million decrease in vacancy loss and bad debt, and a 5.6% or $702,000 increase in fee and reimbursement income. Physical occupancy increased 0.2% to 95.4% and total income per occupied home increased 4.6% to $1,678 for the six months ended June 30, 2014 compared to the same period in 2013. The increase in property operating expenses was primarily driven by a 2.2% or $387,000 increase in real estate tax expense and a 22.3% or $442,000 increase in insurance expense. As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 71.0% for the six months ended June 30, 2014 as compared to 70.0% for the comparable period in 2013. 83



--------------------------------------------------------------------------------

Table of Contents

Non-Mature Communities/Other The Operating Partnership's Non-Mature Communities/Other represent those communities that do not meet the criteria to be included in Same-Store Communities, including, but not limited to, recently acquired, developed and redeveloped properties, and the non-apartment components of mixed use properties. Three Months Ended June 30, 2014 vs. Three Months Ended June 30, 2013 The remaining 6.2% or $4.6 million of our total NOI during the three months ended June 30, 2014, was generated from our Non-Mature Communities. NOI from Non-Mature Communities/Other decreased 27.8% or $1.8 million for the three months ended June 30, 2014 compared to the same period in 2013. The decrease was primarily driven by a decrease in NOI of $2.3 million from sold properties, which was partially offset by an increase in NOI of $824,000 from redeveloped properties. Six Months Ended June 30, 2014 vs. Six Months Ended June 30, 2013 The remaining 14.6% or $21.5 million of our total NOI during the six months ended June 30, 2014, was generated from our Non-Mature Communities. NOI from Non-Mature Communities/Other decreased 10.9% or $2.6 million for the six months ended June 30, 2014 compared to the same period in 2013. The decrease was primarily driven by a decrease in NOI of $4.5 million from sold properties, which was partially offset by an increase in NOI of $1.6 million from redevelopment properties. Real Estate Depreciation and Amortization For the three and six months ended June 30, 2014, real estate depreciation and amortization from continuing and discontinued operations decreased by 1.3% or $610,000 and 1.9% or $1.7 million as compared to the comparable periods in 2013. The decreased in depreciation and amortization for the three and six months ended June 30, 2014 was primarily from disposition of assets in 2013 and 2014, partially offset by the depreciation from developed and redeveloped units placed in service in 2013. General and Administrative For the three and six months ended June 30, 2014, general and administrative expense increased by 26.6% or $1.6 million and 25.8% or $3.0 million as compared to the comparable periods in 2013. The increase in general and administrative expense for the three and six months ended June 30, 2014 was primarily due to an increase in stock based compensation expense for the long-term incentive plan and salary and benefit increases.



Casualty-Related (Recoveries)/Charges, Net

In October 2012, Hurricane Sandy hit the East Coast, affecting two of the Operating Partnership's operating communities located in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Operating Partnership had insurance policies that provided coverage for property damage and business interruption, subject to applicable retentions. During the three and six months ended June 30, 2013, the Operating Partnership recorded $2.3 million and $4.3 million, respectively, of insurance recoveries related to the business interruption and other losses associated with Hurricane Sandy. These recoveries were included in Casualty-related (recoveries)/charges, net on the Operating Partnership's Consolidated Statements of Operations.



During the six months June 30, 2014, we recorded a $500,000 of casualty-related loss for one property damaged during an earthquake in California.

Interest Expense

For the three and six months ended June 30, 2014, interest expense increased by 12.3% or $1.1 million and 10.2% or $1.9 million as compared to the comparable periods in 2013. The increase in interest expense for the three and six months ended June 30, 2014 was primarily due to lower portion of interest capitalized in 2014 as a result of completed developments, partially offset by a decrease in interest expense due to replacement of debt at lower rates. 84



--------------------------------------------------------------------------------

Table of Contents

Gain/(Loss) on Sale of Real Estate Owned During the three months ended June 30, 2014, in connection with the sale of one community in Tampa, Florida, the Operating Partnership recognized a gain of $16.3 million, which was previously deferred. During the six months ended June 30, 2014, the Operating Partnership recognized $40.7 million of gains on the sale of one community and an adjacent parcel of land in San Diego, CA and the sale of one community in Tampa, Florida. Due to the Company's adoption ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, effective January 1, 2014, these gains were included in Gain/(loss) on sale of real estate owned on the Operating Partnership's Consolidated Statements of Operations. See Note 2, Significant Accounting Policies, in the Notes to the Operating Partnership's Consolidated Financial Statements included in this Report for additional information.



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 three and six months ended June 30, 2014. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Edgar Glimpses


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters