<PAGE>

                                                                  EXHIBIT 10(xv)
                                                                  --------------

               RETIREMENT AGREEMENT AND COVENANT NOT TO COMPETE
               ------------------------------------------------

     UNITED DOMINION REALTY TRUST, INC., its affiliates, subsidiaries,
divisions, successors and assigns and the employees, officers, directors and
agents thereof (collectively referred to throughout this Retirement Agreement
and Covenant Not to Compete as the "Company"), and JOHN P. McCANN (the
"Executive") agree that:


1.   Agreements of Company.  In consideration for signing this Retirement
     ----------------------
Agreement and Covenant Not to Compete (this "Agreement") and compliance with the
promises made herein, the Company agrees:

     a.   To pay the Executive the full amount of his prorated salary for 2001,
          less lawful deductions, on or before April 12, 2001.

     b.   To pay the Executive $816,000, less lawful deductions, on or before
          April 12, 2001.

     c.   To pay the Executive $7,452 for life and disability benefits, on or
          before April 12, 2001.

     d.   To provide COBRA health insurance coverage (hospitalization and
          dental) for the Executive and his spouse until the Executive reaches
          the age of 65, with the Executive paying the amounts that are paid by
          Company employees and the Company paying the remainder.

     e.   All unvested stock options shall vest and the Executive shall have the
          time specified under each Stock Option Agreement in which to exercise
          the stock options. A report of the status of the Executive's stock
          options is attached as Exhibit A.

     f.   To extend the maturity of the notes made by the Executive under the
          1991 Stock Purchase and Loan Plan to December 31, 2003, or later if
          the Company extends the maturity of notes made by other officers of
          the Company during the same grant years. A list of all of the
          outstanding notes and their balances is attached as Exhibit B.

     g.   To continue to guaranty the notes made by the Executive to Crestar
          Bank, now SunTrust (the "SunTrust Notes") dated as of (i) June 24,
          1999 in the original principal amount of $600,524.10, and (ii) October
          1, 1999 in the original principal amount of $929,841.23 for the full
          term of the Sun Trust Notes and any extension thereof, except as
          provided pursuant to paragraph 3(c) of this Agreement.

                                      -1-
<PAGE>

     h.   To purchase the Executive's interest in UDR Trillium Holdings, Inc.
          for $5,220.34.

     i.   To accelerate the vesting of all the Executive's options under the UDR
          Realeum Stock Incentive Plan, which shall be exercisable until June
          21, 2020.

     j.   To pay for office space, including secretarial support, until December
          31, 2001.

     k.   That the Executive shall be nominated for re-election to the Board of
          Directors of United Dominion Realty Trust, Inc., at the 2001 annual
          meeting of shareholders.

     l.   That the Executive will be named Chairman Emeritus of the Board of
          Directors of United Dominion Realty Trust, Inc.

     This paragraph shall survive the Executive's death or disability. The
Executive's participation in and distributions and vested rights under any
benefits plans shall be governed by the terms of those plans. In the event of
Executive's death, any remaining payments to Executive set forth in this
Agreement shall be made to Executive's estate.

2.   Agreements of the Executive. In consideration of signing this Agreement and
     ---------------------------
the promises contained herein, the Executive agrees as follows:





     a.  To retire from the employment of the Company on March 31, 2001.

     b.  To provide advisory or consulting services to the Company as it may
         reasonably request, taking into account the Executive's health,
         business commitments, geographical location and other relevant
         circumstances, until December 31, 2003.

     c.  To continue to make timely payments on the SunTrust Notes, and if the
         Executive fails to make such timely payments, the Company's obligation
         under paragraph 1(g) of this Agreement shall automatically terminate.

     d.  To continue to make timely payments on the notes issued pursuant to the
         1991 Stock Purchase and Loan Plan, and if the Executive fails to make
         such timely payments, the Company may declare the amounts thereunder
         immediately due and payable.

     e.  To relinquish any rights he may have in the Shareholder Rights Plan.

     f.  To sell his interest in UDR Trillium Holdings, Inc., as provided by
         paragraph 1(h).

                                      -2-
<PAGE>

3.   Confidentiality; Non-Competition and Non-Solicitation Covenants.
     ---------------------------------------------------------------

     a.  Basis for Covenants. The Executive acknowledges that his (i) employment
         -------------------
         with the Company gave him access to confidential and proprietary
         information concerning the Company; (ii) the agreements and covenants
         contained in this Paragraph 3 (the "Covenants") are essential to
         protect the business of the Company; and (iii) the Executive is to
         receive consideration pursuant to this Agreement. Executive recognizes
         and acknowledges that the confidential information described in
         Paragraph 3(b) (the "Confidential Information") which he acquired in
         the course of his employment is utilized by the Company in all
         geographic areas in which the Company does business. Further, the
         Confidential Information may be utilized in all geographic areas into
         which the Company expands its business. Thus, Executive acknowledges
         that he could be a formidable competitor in all areas where the Company
         conducts business. Executive also acknowledges that the Covenants serve
         to protect the Company's investment in the Confidential Information.

     b.  Confidentiality. The Executive acknowledges that during his employment
         ---------------
         by the Company he was exposed and learned a substantial amount of
         information which is proprietary and confidential to the Company,
         whether or not he developed or created such information. The Executive
         acknowledges that such proprietary and confidential information may
         include, but is not limited to, trade secrets; acquisition or merger
         information; advertising and promotional programs; resource or
         developmental projects; plans or strategies for future business
         development; financial or statistical data; customer information,
         including, but not limited to, customer lists, sales records, account
         records, sales and marketing programs, pricing matters, and strategies
         and reports; and any Company manuals, forms, techniques, and other
         business procedures or methods, devices, computer software or matters
         of any kind relating to or with respect to any confidential program or
         projects of the Company, or any other information of a similar nature
         made available to the Executive and not known in the trade in which the
         Company is engaged, which, if misused or disclosed, could adversely
         affect the business or standing of the Company. Confidential
         Information shall not include information that is generally known or
         generally available to the public through no fault of the Executive.
         The Executive agrees that except as required by law, he will not at any
         time divulge to any person, agency, institution, company or other
         entity any information which he knows or has reason to believe is
         proprietary or confidential to the Company, including but not limited
         to the types of information described above, or use such information to
         the competitive disadvantage of the Company. The Executive agrees that
         his duties and obligations under this paragraph 3(b) continue until the
         December 31, 2003 or as long as the Confidential Information remains
         proprietary or confidential to the Company.

     c.  Non-Competition. The Executive agrees that he will not render services
         ---------------
         to, be employed by, serve on the board of directors of, or directly or
         indirectly own any


                                      -3-
<PAGE>

         business entity or property that directly competes with the business of
         the Company until December 31, 2003.

     d.  Non-Solicitation. The Executive agrees that he shall not, directly or
         ----------------
         indirectly, hire or solicit any employee of the Company employed at the
         time of his termination, or encourage any such employee to leave such
         employment until December 31, 2003.

     e.  Reasonableness of Covenants. The Executive agrees that the Covenants
         ---------------------------
         are necessary for the reasonable and proper protection of the Company
         and that the Covenants are reasonable in respect of subject matter,
         length of time, and geographic scope. The Executive further
         acknowledges that the Covenants will not unreasonably restrict him from
         earning a livelihood following his retirement.

     f.  Sophisticated Parties. The Executive and the Company are sophisticated
         ---------------------
parties and fully understand the ramifications of the non-competition, non-
solicitation and confidentiality restrictions of this Agreement.

4.   Life Insurance. The Executive hereby directs the Company to change the
     --------------
beneficiary of any non-group life insurance policy to Rebecca L. McCann. The
Company will also assign whatever rights it may have in these policies to the
Executive.

5.   General Release of Claim. The Executive knowingly and voluntarily releases
     ------------------------
and forever discharges the Company of, and from any and all claims, known and
unknown, against the Company, which the Executive, his heirs, executors,
administrators, successors, and assigns (referenced to collectively throughout
this Agreement as the "Executive") have or may have as of the date of execution
of this Agreement. The Executive also acknowledges the releases on Exhibit C,
which is incorporated herein and made a part hereof.

6.   Remedy. If the Executive fails to comply with any of the covenants
     ------
contained in this Agreement, which is not cured within thirty (30) days after
written notice from the Company, the Company may (i) terminate payment of any
remaining cash; (ii) declare the notes under the 1991 Officer's Stock Loan Plan
immediately due and payable; or (iii) terminate the guaranty of the SunTrust
Notes. Exercise of one remedy does not constitute a waiver of the exercise of
another remedy.

7.   Governing Law and Interpretation. This Agreement shall be governed and
     --------------------------------
conformed in accordance with the internal laws of the Commonwealth of Virginia
without regard to its conflict of laws provision. The parties intend that the
provisions of this Agreement be enforced to the fullest extent permitted under
the laws on public policies applied in each jurisdiction in which enforcement is
sought. Except as set forth in the following sentence, if any provision of this
Agreement be declared illegal or unenforceable by any court of competent
jurisdiction, and cannot be modified to make it enforceable then such provision
shall be null and void, leaving the remainder of this Agreement in full force
and effect. If any part of paragraph 3 of this Agreement

                                      -4-
<PAGE>

should be declared to be illegal or unenforceable by any court of competent
jurisdiction, the parties authorize the court to make it enforceable in the most
restrictive fashion permitted by law, leaving the remainder of paragraph 3 in
full force and effect.

8.   Terms of this Agreement to be Kept Confidential. The Company and the
     -----------------------------------------------
Executive agree not to disclose the terms of this Agreement to any third party,
except as required by law or as necessary for the purposes of receiving counsel
from the parties' families, attorneys accountants or other advisors.

9.   Entire Agreement. This Agreement sets forth the entire agreement between
     ----------------
the parties hereto, and fully supersedes any prior agreements or understandings
between the parties, including the Employment Agreement dated as of December 8,
1998, as amended on December 5, 2000.

     IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily
executed this Agreement as of the date set forth below:

                                            ____________________________________
                                                       John P. McCann

                                            Date:_______________________________


                                            UNITED DOMINION REALTY TRUST, INC.


                                            By:_________________________________
                                            Name:
                                            Title:
                                            Date:_______________________________


                                      -5-
<PAGE>

                                    EXHIBIT A
                                    ---------

                               Schedule of Options

                                                      Last
                  Grant Date  Options     Price  Exercisable Date
                  ----------  -------     -----  ----------------

                  12/10/91      3,002   $   9.19     12/10/01
                  12/15/92    199,200   $  11.56     12/15/02
                  12/13/94     70,000   $  13.13     12/13/04
                  12/12/95     60,000   $  14.63     12/12/05
                  12/13/96     65,000   $  15.25     12/13/06
                  12/09/97     53,333   $  14.25     12/09/07
                  12/08/98    220,000   $ 10.875     12/08/08
                   1/27/99     30,000   $  10.25      1/27/09
                  12/21/99    165,000   $  9.625     12/21/09

                              865,535

                                      -6-
<PAGE>

                                   EXHIBIT B
                                   ---------

           Schedule of notes under 1991 Stock Purchase and Loan Plan

                     Original
                   Note Amount              `   Balance Outstanding
                   -----------                  -------------------

                 $  465,625.00                    $  334,611.31
                 $  256,250.00                    $  201,117.98
                 $  106,250.00                    $   88,962.69
                 $  340,625.00                    $  330,033.90
                 $  328,125.00                    $  311,513.81
                 $  219,375.00                    $  215,074.76
                 $  600,524.10                    $  578,895.51
                 $  929,365.33                    $  893,580.68
                  ------------                     ------------

                 $1,530,365.33                    $1,472,476.19

                                      -7-
<PAGE>

                                    EXHIBIT C
                                    ---------

                                 GENERAL RELEASE
                                 ---------------

     1. Consideration. The Executive understands and agrees that he would not
        -------------
receive the monies and/or benefits specified in this Agreement, except for his
execution of this Agreement and General Release and the fulfillment of the
promises contained herein.

     2. Revocation. The Executive may revoke this Agreement and General Release
        ----------
for a period of seven (7) calendar days following the day he executes this
Agreement and General Release. Any revocation within this period must be
submitted, in writing, to the Company and state, "I hereby revoke my acceptance
of our Agreement and General Release." The revocation must be personally
delivered or mailed to the Company to the attention of the General Counsel and
postmarked within seven (7) calendar days of execution of this Agreement and
General Release. This Agreement and General Release shall not become effective
or enforceable until the revocation period has expired. If the last day of the
revocation period is a Saturday, Sunday, or legal holiday in the Commonwealth of
Virginia, then the revocation period shall not expire until the next following
day which is not a Saturday, Sunday, or legal holiday.

     3. General Release of Claim. The Executive knowingly and voluntarily
        ------------------------
releases and forever discharges Employer of and from any and all claims, known
and unknown, against Employer, that the Executive, his heirs, executors,
administrators, successors, and assigns (referred to collectively throughout
this Agreement as the "Executive") have or may have as of the date of execution
of this Agreement and General Release, other than the promises of the Company
under this Agreement, including, but not limited to, any alleged violation of:


     .  The National Labor Relations Act, as amended;
     .  Title VII of the Civil Rights Act of 1964, as amended;
     .  The Civil Rights Act of 1991;
     .  Sections 1981 through 1988 of Title 42 of the United States Code, as
        amended;
     .  The Employee Retirement Income Security Act of 1974, as amended;
     .  The Immigration Reform Control Act, as amended;
     .  The Americans with Disabilities Act of 1990, as amended;
     .  The Age Discrimination in Employment Act of 1967, as amended;
     .  The Fair Labor Standards Act, as amended;
     .  The Occupational Safety and Health Act, as amended;
     .  The Family and Medical Leave Act of 1993;
     .  The Virginia Civil Rights Act, as amended;
     .  The Virginia Minimum Wage Law, as amended;
     .  Equal Pay Law for Virginia, as amended;

                                      -8-
<PAGE>

     .  Any other federal, state or local civil or human rights law or any other
        local, state or federal law,
        regulation or ordinance;
     .  Any public policy, contract, tort, or common law; or
     .  Any allegation for costs, fees, or other expenses including attorneys'
        fees incurred in these matters.

     4. No Claims Exist. The Executive confirms that he has not filed, caused to
        ---------------
be filed or is a party to any claim, charge, complaint or action against
Employer in any forum or form. In the event that any such claim, charge,
complaint or action is filed and the Executive obtains a judgment, it is the
intent of the parties that all payments made to the Executive hereunder shall be
offset against any judgment he obtains. The Executive further confirms that he
has no known workplace injuries.

     THE EXECUTIVE HAS BEEN ADVISED THAT HE HAS AT LEAST TWENTY-ONE (21)
CALENDAR DAYS TO CONSIDER THIS AGREEMENT AND GENERAL RELEASE AND HAS BEEN
ADVISED IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTION OF THIS
AGREEMENT AND GENERAL RELEASE.

     THE EXECUTIVE AGREES THAT ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO
THIS AGREEMENT AND GENERAL RELEASE DO NOT RESTART OR AFFECT IN ANY MANNER THE
ORIGINAL TWENTY-ONE (21) CALENDAR DAY CONSIDERATION PERIOD. HAVING ELECTED TO
EXECUTE THIS AGREEMENT AND GENERAL RELEASE, TO FULFILL THE PROMISES SET FORTH
HEREIN, AND TO RECEIVE THEREBY THE SUMS AND BENEFITS SET FORTH IN THIS AGREEMENT
AND GENERAL RELEASE, THE EXECUTIVE FREELY AND KNOWINGLY, AND AFTER DUE
CONSIDERATION, ENTERS INTO THIS AGREEMENT AND GENERAL RELEASE INTENDING TO
WAIVE, SETTLE AND RELEASE ALL CLAIMS HE HAS OR MIGHT HAVE AGAINST THE COMPANY,
OTHER THAN THE FULFILLMENT OF THE PROMISES OF THE COMPANY UNDER THIS AGREEMENT.

Date________________________                         ___________________________
                                                     John P. McCann

                                      -9-