EDGAR 10-K Filing

Company CIK: 1018254
Filing Year: 2021
Filename: 1018254_10-K_2021_0000074208-21-000025.json

---

ITEM 1. BUSINESS
Item 1. BUSINESS
General
UDR is a self-administered real estate investment trust, or REIT, that owns, operates, acquires, renovates, develops, redevelops, disposes of, and manages multifamily apartment communities generally located in high barrier-to-entry markets throughout the United States. The high barrier-to-entry markets are characterized by limited land for new construction, difficult and lengthy entitlement processes, low single-family home affordability and strong employment growth potential. At December 31, 2020, our consolidated real estate portfolio consisted of 149 communities located in 21 markets, consisting of 48,283 completed apartment homes, which are held directly or through our subsidiaries, including the Operating Partnership and the DownREIT Partnership, and consolidated joint ventures. In addition, we have an ownership interest in 5,295 completed or to-be-completed apartment homes through unconsolidated joint ventures or partnerships, including 2,165 apartment homes owned by entities in which we hold preferred equity investments. At December 31, 2020, the Company was developing five wholly-owned communities totaling 1,378 homes, 202 of which have been completed.
At December 31, 2020, the Operating Partnership’s consolidated real estate portfolio included 53 communities located in 15 markets, with a total of 17,174 completed apartment homes. The Operating Partnership owns, operates, acquires, renovates, develops, redevelops, disposes of, and manages multifamily apartment communities generally located in high barrier-to-entry markets located throughout the United States. During the year ended December 31, 2020, rental revenues of the Operating Partnership represented approximately 35% of our total rental revenues.
UDR has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, which we refer to in this Report as the “Code.” To continue to qualify as a REIT, we must continue to meet certain tests which, among other things, generally require that our assets consist primarily of real estate assets, our income be derived primarily from real estate assets, and that we distribute at least 90% of our REIT taxable income (other than our net capital gains) to our stockholders annually. As a REIT, we generally will not be subject to U.S. federal income taxes at the corporate level on our net income to the extent we distribute such net income to our stockholders annually. In 2020, we declared total distributions of $1.44 per common share and paid dividends of $1.4225 per common share.
Dividends
Dividends
Declared in
Paid in
First Quarter
$
0.3600
$
0.3425
Second Quarter
0.3600
0.3600
Third Quarter
0.3600
0.3600
Fourth Quarter
0.3600
0.3600
Total
$
1.4400
$
1.4225
UDR was formed in 1972 as a Virginia corporation. In June 2003, we changed our state of incorporation from Virginia to Maryland. The Operating Partnership is the successor-in-interest to United Dominion Realty, L.P., a limited partnership formed under the laws of Virginia, which commenced operations in 1995. The Operating Partnership was redomiciled in 2004 as a Delaware limited partnership. Our corporate offices are located at 1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado and our telephone number is (720) 283-6120. Our website is www.udr.com. The information contained on our website, including any information referred to in this Report as being available on our website, is not a part of or incorporated into this Report.
Human Capital Management
As of February 16, 2021, we had 1,263 full-time associates and 8 part-time associates, all of whom were employed by UDR. Of such number 994 associates are employed in roles that are located at or that are solely related to our communities and the remainder are employed in corporate roles. Recruiting and retaining our associates, as well as assisting them in their professional development, are critically important in successfully managing our business. UDR’s culture is one based on innovation, inclusion, empowerment, adaptability, and execution, and understanding and maintaining our culture is fundamental to recruiting and retaining associates. To that end, in 2020 we updated our culture statement and launched an associate facing culture website to ensure that our associates understand our culture and have an opportunity to participate in its evolution.
Associate Compensation
Attracting, developing, and retaining high-quality, and diverse associates across our business is critical to the long-term success of the Company. A crucial factor in ensuring this occurs is compensation practices that are attractive and that are fair and non-biased. We use a number of recruiting methods depending on the job function for which candidates are needed including an associate referral program, internet-based recruiting platforms, and third-party recruiting agencies. With respect to compensation, we utilize market surveys and other third party information when determining salary ranges and we design our compensation programs to include bonus potential in order to incentivize performance. In addition, we annually evaluate and analyze our compensation on gender and diversity bases for each job title in order to monitor pay equity and to identify areas for further action. The results of our evaluation and analysis are provided annually to our Board of Directors.
Associate Growth and Development
We believe that training is important to our associates’ job satisfaction, is essential to furthering their effectiveness, and assists in associate career advancement and retention, helping us to create a more efficient workforce. Accordingly, we offer a wide variety of training opportunities. In addition to required training designed to address regulatory and statutory matters (e.g., harassment, cybersecurity, fair housing, etc.), associates have the option of participating in management development through our Certified Manager and Career Mobility Programs. These programs are designed to enable our associates to acquire skills that will be useful to them as they progress in their career. Our training program also includes annual “refreshment” training, as appropriate. In total, there are over 5,000 courses available to our associates. Examples of program topics include: leasing skills, basic property maintenance, customer service, project management, and system applications. In 2020, we enhanced our training through creating a better process to ensure required training is taken in a timely manner and by increasing or modifying training availability and training programs, including in the areas of safety and cybersecurity.
Certifications are important in the apartment business and we encourage our associates to become professionally certified in areas that interest them and are beneficial to the Company. Certifications range from master’s degree programs to certified property manager programs, to technical licenses for HVAC systems, all of which equip our associates with knowledge and the potential for career-expansion opportunities. UDR offers partial tuition reimbursement related to attaining these certifications.
Each UDR associate is required to engage in an annual performance review with their direct supervisor. Among other things, the performance review establishes the associate’s training plans for the upcoming year and provides feedback on career development for each associate.
In addition, we monitor associate turnover and take action when issues are identified if appropriate.
Diversity and Inclusion
We are committed to creating and maintaining a diverse and inclusive workplace environment that supports the development and advancement of all associates.
As of December 31, 2020, our total workforce is 61% male and 39% female. The ethnicity of our workforce is 55% White, 26% Hispanic/Latino, 11% Black, 3% Asian and 5% Other. “Other” includes: American Indian, Alaska Native, Native Hawaiian, Pacific Islander, Not Specified or two or more races.
As of December 31, 2020, our management team (associates with the title of community director or director and higher job classifications) is 45% male and 55% female. The ethnicity of our management team is 80% White and 20% non-White.
Over the three-year period ending December 31, 2020, 740 associates were promoted. Of the associates that were promoted to the positions of community director, director, or a higher job classification during the period, 60% were female and 15% were non-White.
Associate Engagement and Outreach
We conduct an associate engagement survey every two years, which surveys all associates on a variety of issues. In our 2019 survey, the results showed that 97% of associates are proud to work at the Company, 87% of associates feel that people from diverse backgrounds can succeed at the Company, and 84% of associates feel that the Company is innovative.
We believe that our associates should also be involved in their communities and that we should assist with those efforts. In 2019, UDR provided 2,558 hours of paid time off for our associates to be used for volunteer work with more than 25 local organizations that make a difference in the communities in which we operate. UDR provides paid time off during specified, Company-wide volunteer days in 2019 and our associates responded with a 25% year-over-year increase in volunteer hours. While the COVID-19 pandemic negatively affected the program in 2020, we intend to continue it when we are able.
COVID-19 and Employee Safety, Health and Wellness
The safety, health and wellness of our associates is a top priority. The COVID-19 pandemic presented a unique challenge with regard to maintaining associate safety, health and wellness while continuing to operate our business.
During the pandemic, through the adaptability of our management and our associates, we were and continue to be able to transition to a work schedule allowing employees to work from remote locations and provide a safe working environment for associates performing resident-facing activities at our communities.
We have taken a number of actions to promote the health and well-being of our associates during the pandemic and to ensure that our associates understand their value to the Company. Among other things, we have:
● asked all associates not to come to work (and to work remotely, if possible) when they experienced or have been in contact with others who experienced signs or symptoms of a possible COVID-19 infection;
● provided up to two weeks of paid time off if an associate had an absence due to having COVID-19 symptoms or a COVID-19 diagnosis or are caring for others who have COVID-19 symptoms or a COVID-19 diagnosis;
● provided flexible work arrangements;
● provided a one-time bonus for the front-line associates at our communities;
● increased communication internally, including frequent calls or webinars with our associates and our Chairman and Chief Executive Officer; and
● offered a vacation buy-back program twice during 2020 whereby associates could sell a portion of their accrued but unused vacation back to the Company.
In addition, in connection with on-going efforts with respect to associate health and well-being in 2020, we created and distributed to all associates a brochure setting forth the mental health programs that our associates may access. We also provide all associates with the opportunity to participate in a wide set of employee benefits, including health, dental and vision insurance coverage.
Reporting Segments
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 January 1, 2019, and held as of December 31, 2020. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan to conduct substantial redevelopment activities, and the communities are not classified as held for disposition at year end. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months.
Our Non-Mature 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 communities, and the non-apartment components of mixed use properties. For additional information regarding our operating segments, see Note 16, Reportable Segments, in the Notes to the UDR Consolidated Financial Statements included in this Report and Note 12, Reportable Segments, in the Notes to the Operating Partnership’s Consolidated Financial Statements included in this Report.
Business Objectives
Our principal business objective is to maximize the economic returns of our apartment communities to provide our stockholders with the greatest possible total return and value. To achieve this objective, we intend to continue to pursue the following goals and strategies:
● own and operate apartments in high barrier-to-entry markets, which are characterized by limited land for new construction, difficult and lengthy entitlement processes, low single-family home affordability and strong employment growth potential, thus enhancing stability and predictability of returns to our stockholders;
● manage real estate cycles by taking an opportunistic approach to buying, selling, renovating, redeveloping, and developing apartment communities;
● empower site associates to manage our communities efficiently and effectively;
● measure and reward associates based on specific performance targets; and
● manage our capital structure to help enhance predictability of liquidity, earnings and dividends.
2020 Highlights
Commitment to Shareholders
● In July 2020, the Company marked its 48th year as a REIT and, in October 2020, paid its 192nd consecutive quarterly dividend. The Company’s annualized declared 2020 dividend of $1.44 represented a 5.1% increase over the previous year.
Property Operations
●
Net income attributable to common stockholders was $60.0 million as compared to $180.9 million in the prior year. The decrease was primarily driven by an increase in depreciation expense and interest expense in 2020 and a decrease in gains on the sale of unconsolidated real estate in 2020, partially offset by higher total net operating income (“NOI”) in 2020 and higher gains on the sale of real estate in 2020.
●
Total revenues increased 7.7% and total NOI increased 5.6% over the prior year primarily due to communities acquired during 2020 and 2019, partially offset by negative rent growth in the San Francisco, New York, and Boston markets.
Investing and Developments
● We acquired one to-be-developed land parcel located in King of Prussia, Pennsylvania, for a total of approximately $16.2 million.
● We commenced the development of two communities located in Washington, D.C., and King of Prussia, Pennsylvania, with a total of 500 apartment homes.
● We acquired three communities with a total of 1,366 apartment homes located in Tampa, Florida, and Herndon, Virginia, for a total of approximately $335.6 million.
● We increased our ownership interest in one community from our West Coast Development joint venture with a total of 276 apartment homes, located in Hillsboro, Oregon, for a total cash purchase price of approximately $21.6 million after the repayment of joint venture construction financing.
● We recognized gains of $119.3 million from the sale of three operating communities located in Kirkland, Washington, Bellevue, Washington, and Alexandria, Virginia.
● We contributed $66.3 million to four investments under our Developer Capital Program, which earn preferred returns ranging between 8.5% to 13.0%.
● Our full investment in one Development Capital Program investment was repaid, which earned an 11.0% preferred return. We received cash of $53.7 million, consisting of our investment of $38.6 million and contractually accrued interest of $15.1 million.
Balance Sheet
● We issued $950.0 million of senior unsecured medium-term notes (including a $350.0 million “green bond”) at a weighted average contractual interest rate of 2.3%, and prepaid $300.0 million of senior unsecured medium-term notes at a weighted average interest rate of 3.69%.
● We repaid $425.8 million of secured debt at a weighted average contractual interest rate of 4.4% through the issuance of senior unsecured notes and the proceeds from the issuance of secured debt of $160.9 million at a weighted average interest rate of 2.62%
● We sold 2.1 million shares of common stock through a forward sales agreement for aggregate net proceeds of $102.2 million at a weighted average price per share of $48.23 under our ATM program.
● We repurchased 0.6 million shares of common stock at an average price of $33.11 per share for total consideration of approximately $19.8 million under our share repurchase program.
Corporate Responsibility Report
We have published our 2020 Annual Corporate Responsibility Report on our website, which discloses our environmental and social programs and performance. The report’s Environmental, Social, and Governance (ESG) disclosures were prepared in accordance with the Global Reporting Initiative (GRI) Standards (core), the Sustainability Accounting Standards Board (SASB) standards, and the Task Force for Climate-related Financial Disclosure (TCFD) framework.
Refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for further information on the Company’s and the Operating Partnership’s activities in 2020.
COVID-19 Update
On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The pandemic has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place or similar orders. While vaccines have been developed and are being administered it is unclear when or if the vaccine may allow a return to pre-pandemic activity levels.
While operations in certain areas have been allowed to fully or partially re-open, many areas are experiencing new closures or restrictions subsequent to re-opening and no assurance can be given that such closures or restrictions will not continue to occur. Our headquarters, all of our properties and our corporate offices are located in areas that are or have been subject to shelter-in-place orders and restrictions on the types of businesses that may continue to operate. These orders and restrictions and other impacts of the COVID-19 pandemic have adversely affected, and could continue to adversely affect, the ability of our residents and retail and commercial tenants to pay their rent. It is still uncertain how various legislation or orders adopted by the federal government and state and local governments, or those that may be modified or enacted in the future, may continue to impact, the ability of our residents and retail and commercial tenants to pay their rent. The governmental actions intended to prevent the spread of COVID-19 have also caused us to reduce staffing at certain of our locations, and have impacted, and may continue to impact, our ability to conduct our business in the ordinary course. Further, the federal government and a number of the states, counties and municipalities in which we operate have adopted, and may extend, eviction moratoriums, either directly or indirectly (such as through direction to law enforcement or courts not to serve notices or take actions related to eviction), which have negatively impacted, and may continue to negatively impact, our ability to enforce our legal and contractual rights and our ability to remove residents or retail and commercial tenants who are not paying their rent and our ability to rent their units or other space to new residents or retail and commercial tenants, respectively. In addition, certain jurisdictions have restricted our ability to charge certain fees, including fees for late payment of rent. We have received, and continue to receive, more
requests from our residents and retail and commercial tenants for assistance with respect to paying rent than we have historically received. In response, we have instituted a number of initiatives to assist residents and other tenants, including rent deferrals, payment plans, and waiving late payment fees when appropriate. In addition, we have seen an increase in tenant rent concessions compared to prior year periods, as discussed further below. In particular, the urban core markets of New York, NY, San Francisco Bay Area, CA, and Boston, MA have been more adversely impacted by the COVID-19 pandemic in comparison to our other markets, resulting in larger decreases in rental income from elevated rent concessions and lower occupancy in those markets. We also have experienced an increase in resident move-outs and turnover on an annualized basis. With respect to leasing activities, leasing traffic and visits by potential residents had decreased during much of the year; however, they increased during the quarter ended December 31, 2020 as compared to the same quarter in 2019. Our percentage of leases entered into with a prospective tenant has increased year over year.
During the year ended December 31, 2020, the Company performed an analysis in accordance with the ASC 842, Leases, guidance to assess the collectibility of its operating lease receivables in light of the COVID-19 pandemic. This analysis included an assessment of collectibility of current and future rents and whether those lease payments were no longer probable of collection. In accordance with the leases guidance, if lease payments are no longer deemed to be probable over the life of the lease contract, we recognize revenue only when cash is received, and all existing contractual operating lease receivables and straight-line lease receivables are reserved.
As a result of its analysis, the Company reserved approximately $13.5 million of multifamily tenant lease receivables and approximately $6.0 million of retail tenant lease receivables (inclusive of $3.3 million of reserves on straight-line lease receivables) for its wholly-owned communities and communities held by joint ventures. In aggregate, the reserve is reflected as an $18.4 million reduction to Rental income and a $1.1 million reduction to Income/(loss) from unconsolidated entities on the Consolidated Statements of Operations for the year ended December 31, 2020. The impact to deferred leasing commissions was not material for the year ended December 31, 2020.
During the year ended December 31, 2020, the Company recorded an impairment charge of $3.1 million on its investment in equity securities of a non-core investment. The Company did not recognize any other adjustments to the carrying amounts of assets or asset impairment charges due to the COVID-19 pandemic for the year ended December 31, 2020.
As of January 31, 2021, we had collected 97.0%, 96.1% and 95.2% of billed monthly rents for our multifamily residents for October, November and December, respectively. While our cash rent collections in November, December, and January showed marginal declines versus October, this slight seasonal deterioration is consistent with historical collection trends in prior years.
The Operating Partnership reserved approximately $5.5 million of multifamily tenant lease receivables and approximately $3.5 million of retail tenant lease receivables (inclusive of $2.2 million of reserves on straight-line lease receivables) for its wholly-owned communities. In aggregate, the reserve is reflected as a $9.0 million reduction to Rental income on the Consolidated Statements of Operations for the year ended December 31, 2020. The impact to deferred leasing commissions was not material for the year ended December 31, 2020.
The Operating Partnership did not recognize any other adjustments to the carrying amounts of assets or asset impairment charges due to the COVID-19 pandemic for the year ended December 31, 2020.
Our Strategic Vision
Our strategic vision is to be the multifamily public REIT of choice. We intend to realize this vision by executing on our strategic objectives, which are:
1. Maintaining a Diversified Portfolio and Allocating Capital to Accretive Investment Opportunities
2. Maintaining a Strong Balance Sheet
3. Consistently Driving Operating Excellence
4. Advancing a Strong Corporate Culture and Ensuring High Resident Satisfaction
Maintaining a Diversified Portfolio and Allocating Capital to Accretive Investment Opportunities
We believe greater portfolio diversification, as defined by geographic concentration, location within a market (i.e., urban or suburban) and property quality (i.e., A or B), reduces the volatility of our same-store growth throughout the real estate cycle, appeals to a wider renter and investor audience and lessens the market risk associated with owning a homogenous portfolio. Diversified characteristics of our portfolio include:
● our consolidated apartment portfolio includes 149 communities located in 21 markets throughout the U.S., including both coastal and sunbelt locations; and
● our mix of urban/suburban communities is approximately 37%/63% and our mix of A/B quality properties is approximately 55%/45%.
We are focused on increasing our presence in markets with favorable job formation, high propensity to rent, low single-family home affordability, and a favorable demand/supply ratio for multifamily housing. Portfolio investment decisions consider internal analyses and third-party research.
Acquisitions and Dispositions
When evaluating potential acquisitions, we consider a wide variety of factors, including:
● whether it is located in a high barrier-to-entry market;
● population growth, cost of alternative housing, overall potential for economic growth and the tax and regulatory environment of the market in which the property is located;
● geographic location, including proximity to jobs, entertainment, transportation, and our existing communities which can deliver significant economies of scale;
● construction quality, condition and design of the property;
● current and projected cash flow of the property and the ability to increase cash flow;
● ability of the property’s projected returns to exceed our cost of capital;
● potential for capital appreciation of the property;
● ability to increase the value and profitability of the property through operations and redevelopment;
● terms of resident leases, including the potential for rent increases;
● occupancy and demand by residents for properties of a similar type in the vicinity;
● prospects for liquidity through sale, financing or refinancing of the property; and
● competition from existing multifamily communities and the potential for the construction of new multifamily properties in the area.
We regularly monitor our assets to increase the quality and performance of our portfolio. Factors we consider in deciding whether to dispose of a property include:
● whether it is in a market targeted for divestment or a reduction in investment;
● current market price for an asset compared to projected economics for that asset;
● potential increases in new construction in the market area;
● areas with low job growth prospects;
● near- and long-term capital expenditure needs for the asset; and
● operating efficiencies.
The following table summarizes our apartment community acquisitions and dispositions and our consolidated year-end ownership position for the past five years (dollars in thousands):
Homes acquired
1,642
7,079
-
Homes disposed
-
1,782
Homes owned at December 31,
48,283
47,010
39,931
39,998
39,454
Total real estate owned, at cost
$
13,071,472
$
12,602,101
$
10,196,159
$
10,177,206
$
9,615,753
The following table summarizes the Operating Partnership’s apartment community acquisitions and dispositions and year-end ownership position for the past five years (dollars in thousands):
Homes acquired
1,072
-
-
-
Homes disposed
-
Homes owned at December 31,
17,174
16,434
16,434
16,698
16,698
Total real estate owned, at cost
$
4,043,725
$
3,875,160
$
3,811,985
$
3,816,956
$
3,674,704
Development Activities
Our objective in developing a community is to create value while improving the quality of our portfolio. How demographic trends, economic drivers, and multifamily fundamentals and valuations have trended over the long-term and our portfolio strategy generally govern our review process on where and when to allocate development capital. At December 31, 2020, the Company was developing five wholly-owned communities located in Addison, Texas, Denver, Colorado, Dublin, California, Washington, D.C., and King of Prussia, Pennsylvania, totaling 1,378 homes, 202 of which have been completed, with a budget of $491.5 million, in which we have an investment of $247.9 million. The communities are estimated to be completed between the first quarter of 2021 and the second quarter of 2023.
Redevelopment Activities
Our objective in redeveloping a community is twofold: we aim to grow rental rates while also producing a higher yielding and more valuable asset through asset quality improvement. During the year ended December 31, 2020, we incurred $48.3 million in major renovations, which included major structural changes and/or architectural revisions to existing buildings. As of December 31, 2020, the Company was not redeveloping any communities.
Joint Venture and Partnership Activities
We have entered into, and may continue in the future to enter into, joint ventures (including limited liability companies or partnerships) through which we would own an indirect economic interest of less than 100% of the community or communities owned directly by such joint ventures. Our decision to either hold an apartment community in fee simple or have an indirect interest in the community through a joint venture is based on a variety of factors and considerations, including: (i) the economic and tax terms required by the seller of land or a community; (ii) our desire to diversify our portfolio of communities by market, submarket and product type; (iii) our desire at times to preserve our capital resources to maintain liquidity or balance sheet strength; and (iv) our projections, in some circumstances, that we will achieve higher returns on our invested capital or reduce our risk if a joint venture vehicle is used. Each joint venture agreement is individually negotiated, and our ability to operate and/or dispose of a community in our sole discretion may be limited to varying degrees depending on the terms of the joint venture agreement.
Maintaining a Strong Balance Sheet
We maintain a capital structure that we believe allows us to proactively source potential investment opportunities in the marketplace. We have structured our debt maturity schedule to be able to opportunistically access both secured and unsecured debt markets when appropriate.
As part of our plan to finance our activities, we utilize proceeds from debt and equity offerings and refinancings to extend maturities, pay down existing debt, fund development and redevelopment activities, and acquire apartment communities.
Consistently Driving Operational Excellence
Investment in new technologies continues to drive operating efficiencies in our business and help us to better meet the changing needs of our business and our residents. Our residents can conduct business with us 24 hours a day, 7 days a week and complete online leasing applications and renewals throughout our portfolio using our web-based resident internet portal or, increasingly, a smart-device application.
As a result of transforming our operations through technology, residents’ satisfaction has improved, and our operating teams have become more efficient. Web-based technologies have also resulted in declining marketing and advertising costs, improved cash management, and better pricing management of our available apartment homes.
Operating Partnership Strategies and Vision
The Operating Partnership’s long-term strategic vision is the same as that of the Company described above.
Competitive Conditions
Competition for new residents is generally intense across our markets. Some competing communities offer amenities that our communities do not have. Competing communities can use rental concessions or lower rents to obtain temporary competitive advantages. Also, some competing communities are larger or newer than our communities. The competitive position of each community is different depending upon many factors, including sub-market supply and demand. In addition, other real estate investors compete with us to acquire existing properties, redevelop existing properties, and to develop new properties. These competitors include insurance companies, pension and investment funds, public and private real estate companies, investment companies and other public and private apartment REITs, some of which may have greater resources, or lower capital costs, than we do.
We believe that, in general, we are well-positioned to compete effectively for residents and investments. We believe our competitive advantages include:
● a fully integrated organization with property management, development, redevelopment, acquisition, marketing, sales and financing expertise;
● scalable operating and support systems, which include automated systems to meet the changing electronic needs of our residents and to effectively focus on our internet marketing efforts;
● access to sources of capital;
● geographic diversification with a presence in 21 markets across the country; and
● significant presence in many of our major markets that allows us to be a local operating expert.
Moving forward, we will continue to optimize lease management, improve expense control, increase resident retention efforts and align employee incentive plans with metrics that impact our bottom-line performance. We believe this plan of operation, coupled with the portfolio’s strengths in targeting renters across a geographically diverse platform, should position us for continued operational upside.
Communities
At December 31, 2020, our consolidated real estate portfolio included 149 communities with a total of 48,283 completed apartment homes, which included the Operating Partnership’s consolidated real estate portfolio of 53 communities with a total of 17,174 completed apartment homes. The overall quality of our portfolio generally enables us to raise rents and to attract residents with higher levels of disposable income who are more likely to absorb such rents.
At December 31, 2020, the Company was developing five wholly-owned communities located in Addison, Texas, Denver, Colorado, Dublin, California, Washington, D.C., and King of Prussia, Pennsylvania, totaling 1,378 homes, 202 of which have been completed, with a budget of $491.5 million, in which we have an investment of $247.9 million. The communities are estimated to be completed between the first quarter of 2021 and the second quarter of 2023.
At December 31, 2020, the Company was not redeveloping any communities.
Same-Store Community Comparison
We believe that one pertinent quantitative measurement of the performance of our portfolio is tracking the results of our Same-Store Communities’ NOI, which is total rental revenue, less rental and other operating expenses excluding property management. Our Same-Store Community population is comprised of operating communities which we own and have stabilized occupancy, revenues and expenses as of the beginning of the prior year.
Net income attributable to common stockholders was $60.0 million as compared to $180.9 million in the prior year. The decrease was primarily driven by an increase in depreciation expense and interest expense in 2020 and a decrease in gains on the sale of unconsolidated real estate in 2020, partially offset by higher total NOI in 2020 and higher gains on the sale of real estate in 2020.
For the year ended December 31, 2020, our Same-Store NOI decreased by $(40.2) million compared to the prior year. Our Same-Store Community properties provided 75.5% of our total NOI for the year ended December 31, 2020. The decrease in NOI for the 37,607 Same-Store apartment homes, or 77.9% of our portfolio, was primarily driven by an increase in our reserve on multifamily tenant lease receivables, higher rent concessions, economic occupancy loss, higher repair and maintenance expense and real estate taxes, partially offset by an increase in rental rates, an increase in reimbursement, ancillary and fee income, and a decrease in personnel expense.
For the year ended December 31, 2020, the Operating Partnership’s Same-Store NOI decreased by $17.7 million compared to the prior year. The Operating Partnership’s Same-Store Community properties provided 93.1% of its total NOI for the year ended December 31, 2020. The decrease in NOI for the 15,607 Same-Store apartment homes, or 90.9% of the Operating Partnership’s portfolio, was primarily driven by an increase in our reserve on multifamily tenant lease receivables, higher rent concessions, economic occupancy loss, higher repair and maintenance expense and real estate taxes, partially offset by an increase in rental rates, an increase in reimbursement, ancillary and fee income, and a decrease in personnel expense.
Revenue growth in 2021 may be impacted by adverse developments affecting the general economy, inclusive of economic conditions as a result of the COVID-19 pandemic, reduced occupancy rates, increased rental concessions, new supply, increased bad debt and other factors which may adversely impact our ability to increase rents.
Tax Matters
UDR has elected to be taxed as a REIT under the Code. To continue to qualify as a REIT, UDR must continue to meet certain tests that, among other things, generally require that our assets consist primarily of real estate assets, our income be derived primarily from real estate assets, and that we distribute at least 90% of our REIT taxable income (other than net capital gains) to our stockholders annually. Provided we maintain our qualification as a REIT, we generally will not be subject to U.S. federal income taxes at the corporate level on our net income to the extent such net income is distributed to our stockholders annually. Even if we continue to qualify as a REIT, we will continue to be subject to certain federal, state and local taxes on our income and property.
We may utilize our taxable REIT subsidiary (“TRS”) to engage in activities that REITs may be prohibited from performing, including the provision of management and other services to third parties and the conduct of certain nonqualifying real estate transactions. Our TRS generally is taxable as a regular corporation, and therefore, subject to federal, state and local income taxes.
The Operating Partnership intends to qualify as a partnership for federal income tax purposes. As a partnership, the Operating Partnership generally is not a taxable entity and does not incur federal income tax liability. However, any state or local revenue, excise or franchise taxes that result from the operating activities of the Operating Partnership are incurred at the entity level.
Inflation
We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results of operations as a result of wage pressures and increases in utilities and material costs, the majority of our apartment leases have initial terms of 12 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 costs could have a negative impact on our residents and their ability to absorb rent increases, we do not believe this has had a material impact on our results for the year ended December 31, 2020.
Environmental Matters
Various environmental laws govern certain aspects of the ongoing operation of our communities. Such environmental laws include those regulating the existence of asbestos-containing materials in buildings, management of surfaces with lead-based paint (and notices to residents about the lead-based paint), use of active underground petroleum storage tanks, and waste-management activities. The failure to comply with such requirements could subject us to a government enforcement action and/or claims for damages by a private party.
To date, compliance with federal, state and local environmental protection regulations has not had a material effect on our capital expenditures, earnings or competitive position. We have a property management plan for hazardous materials. As part of the plan, Phase I environmental site investigations and reports have been completed for each property we acquire. In addition, all proposed acquisitions are inspected prior to acquisition. The inspections are conducted by qualified environmental consultants, and we review the issued report prior to the purchase or development of any property. Nevertheless, it is possible that the environmental assessments will not reveal all environmental liabilities, or that some material environmental liabilities exist of which we are unaware. In some cases, we have abandoned otherwise economically attractive acquisitions because the costs of removal or control of hazardous materials have been prohibitive or we have been unwilling to accept the potential risks involved. We do not believe we will be required to engage in any large-scale abatement at any of our properties. We believe that through professional environmental inspections and testing for asbestos, lead paint and other hazardous materials, coupled with a relatively conservative posture toward accepting known environmental risk, we can minimize our exposure to potential liability associated with environmental hazards.
Federal legislation requires owners and landlords of residential housing constructed prior to 1978 to disclose to potential residents or purchasers of the communities any known lead paint hazards and imposes treble damages for failure to provide such notification. In addition, lead based paint in any of the communities may result in lead poisoning in children residing in that community if chips or particles of such lead based paint are ingested, and we may be held liable under state laws for any such injuries caused by ingestion of lead based paint by children living at the communities.
We are unaware of any environmental hazards at any of our properties that individually or in the aggregate may have a material adverse impact on our operations or financial position. We have not been notified by any governmental authority, and we are not otherwise aware, of any material non-compliance, liability, or claim relating to environmental liabilities in connection with any of our properties. We do not believe that the cost of continued compliance with applicable environmental laws and regulations will have a material adverse effect on us or our financial condition or results of operations. Future environmental laws, regulations, or ordinances, however, may require additional remediation of existing conditions that are not currently actionable. Also, if more stringent requirements are imposed on us in the future, the costs of compliance could have a material adverse effect on our results of operations and our financial condition.
Insurance
We carry comprehensive general liability coverage on our communities, with limits of liability customary within the multi-family apartment industry to insure against liability claims and related defense costs. We are also insured, with limits of liability customary within the multi-family apartment industry, against the risk of direct physical damage in amounts necessary to reimburse us on a replacement cost basis for costs incurred to repair or rebuild each property, including loss of rental income during the reconstruction period.
Available Information
Both UDR and the Operating Partnership file electronically with the Securities and Exchange Commission their respective annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and amendments to those reports on the day of filing with the SEC on our website at www.udr.com, or by sending an e-mail message to ir@udr.com.

---

ITEM 1A. RISK FACTORS
Item 1A.
RISK FACTORS
There are many factors that affect the business and the results of operations of the Company and the Operating Partnership, some of which are beyond the control of the Company and the Operating Partnership. The following is a description of important factors that may cause the actual results of operations of the Company and the Operating Partnership in future periods to differ materially from those currently expected or discussed in forward-looking statements set forth in this Report relating to our financial results, operations and business prospects. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.
Risks Related to Our Real Estate Investments and Our Operations
The Ongoing COVID-19 Pandemic and Measures Intended to Prevent its Spread Could Have a Material Adverse Effect on our Business, Results of Operations, Cash Flows and Financial Condition.
Since being first reported in December 2019, COVID-19 has spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The pandemic has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders. While operations in certain areas have been allowed to fully or partially re-open, many areas are experiencing new closures or restrictions subsequent to re-opening and no assurance can be given that such closures or restrictions will not continue to occur. Our headquarters and all of our properties and our corporate offices are located in areas that are or have been subject to shelter-in-place orders and restrictions on the types of businesses that may continue to operate.
The impact of the COVID-19 pandemic and measures to prevent its spread could materially and adversely affect our business in a number of ways. Our rental revenue and operating results depend significantly on the occupancy levels at our properties and the ability of our residents and retail and commercial tenants to meet their rent obligations to us, which have been in certain cases, and could continue to be, adversely affected by, among other things, job losses, furloughs, store closures, lower incomes and uncertainty about the future as a result of the COVID-19 pandemic. The deterioration of economic conditions as a result of the pandemic in certain locations have materially decreased, and in other locations may ultimately materially decrease, occupancy levels and rents in our portfolio, which could adversely affect the value of our properties. In addition, numerous state, local, federal and industry-initiated efforts, including eviction moratoriums, shelter-in-place orders, prohibitions on charging certain fees and limitations on collection laws, have affected, and may continue to affect, our ability to collect rent or enforce legal or contractual remedies for the failure to pay rent, which have negatively impacted, and may continue to negatively impact, our ability to remove residents or retail and commercial tenants who are not paying rent and our ability to rent their units or other space to new residents or retail and commercial tenants, respectively. Even if these measures are lifted, additional cases of COVID-19 have resulted in, and may continue to result in, governments reinstating these or similar measures. State, local, and federal governments also have increased, and may in the future increase, property taxes or other taxes, or fees, or may enact new taxes or fees, in order to increase revenue, which has in the past increased, and may in the future increase our expenses. Our development and construction projects, including those in our Developer Capital Program, also could be adversely affected, including as a result of disruptions in supply chains and government restrictions on the types of projects that may continue during the pandemic or as a result of delayed construction schedules due to social distancing efforts or occurrences of the virus at a construction site. The COVID-19 pandemic and measures to prevent its spread also could adversely affect the businesses and financial condition of our counterparties, including our joint venture partners, participants in the Developer Capital Program, and general contractors and their subcontractors, and their ability to satisfy their obligations to us and to complete transactions or projects with us as intended. In addition, a significant number of our retail tenants were, or have been, forced to close, either temporarily or completely, or operate on a limited basis as a result of COVID-19 and related government actions, which has resulted in, and could continue to result in, delays in rent payments, rent concessions, early lease terminations or tenant bankruptcies.
The COVID-19 pandemic also has caused, and may continue to cause, severe economic, market and other disruptions worldwide. Disruptions in the financial markets could adversely impact our access to equity and debt financing, including through our commercial paper program, on favorable terms or at all, which could adversely affect our ability to consummate acquisitions, fund developments and capital expenditures, and repay or refinance indebtedness
as it becomes due. See “Risks Related to Our Indebtedness and Financings-Disruptions in Financial Markets May Adversely Impact Availability and Cost of Credit and Have Other Adverse Effects on Us and the Market Price of UDR’s Stock.”
The extent of the COVID-19 pandemic’s effect on our operational and financial performance will depend on future developments, including the duration and intensity of the pandemic, the timing and effectiveness of COVID-19 vaccines, and the duration of, or the reinstatement of, government measures to mitigate the pandemic or address its effects, all of which are uncertain and difficult to predict. Due to the speed with which the situation is developing, we are not able at this time to estimate the full effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material.
Unfavorable Apartment Market and Economic Conditions Could Adversely Affect Occupancy Levels, Rental Revenues and the Value of Our Real Estate Assets. Unfavorable market conditions in the areas in which we operate or unfavorable economic conditions generally, including as a result of COVID-19, may significantly affect our occupancy levels, our rental rates and collections, the value of our properties and our ability to acquire or dispose of apartment communities on economically favorable terms. Our ability to lease our properties at favorable rates is adversely affected by the increase in supply in the multifamily and other rental markets and is dependent upon the overall level in the economy, which is adversely affected by, among other things, job losses and unemployment levels, recession, debt levels, housing markets, stock market volatility and uncertainty about the future. Some of our major expenses generally do not decline when related rents decline. We would expect that declines in our occupancy levels and rental revenues would cause us to have less cash available to pay our indebtedness and to distribute to UDR’s stockholders, which could adversely affect our financial condition or the market value of our securities. Factors that may affect our occupancy levels, our rental revenues, and/or the value of our properties include the following, among others:
● downturns in the global, national, regional and local economic conditions, particularly increases in unemployment;
● declines in mortgage interest rates, making alternative housing more affordable;
● government or builder incentives with respect to home ownership, making alternative housing options more attractive;
● local real estate market conditions, including oversupply of, or reduced demand for, apartment homes;
● declines in the financial condition of our tenants, which may make it more difficult for us to collect rents from some tenants;
● changes in market rental rates;
● our ability to renew leases or re-lease space on favorable terms;
● the timing and costs associated with property improvements, repairs or renovations;
● changes in household formation; and
● rent control or stabilization laws, or other laws regulating or impacting rental housing, which could prevent us from raising rents to offset increases in operating costs or otherwise impact us.
The Geographic Concentration of Our Communities in Certain Markets Could Have an Adverse Effect on Our Operations if a Particular Market is Adversely Impacted by Economic or Other Conditions. For the year ended December 31, 2020, approximately 58.7% of our total NOI was generated from communities located in Metropolitan D.C. (16.3%), Orange County, CA (13.1%), the San Francisco Bay Area, CA (10.1%), Boston, MA (11.6%) and New York, NY (7.6%). As a result, if any one or more of these markets is adversely impacted by regional or local economic conditions or real estate market conditions, such conditions may have a greater adverse impact on our results of operations than if our portfolio was more geographically diverse. For example, the urban core markets of New York, NY, San Francisco Bay Area, CA, and Boston, MA have been more adversely impacted by the COVID-19 pandemic in comparison to our other markets, resulting in larger decreases in rental income from elevated rent concessions and lower occupancy in those markets. In addition, if one or more of these markets is adversely affected by changes in regional or local regulations, including those related to rent control or stabilization, such regulations may have a greater adverse impact on our results of operation than if our portfolio was more geographically diverse.
We May Be Unable to Renew Leases or Relet Apartment Units as Leases Expire, or the Terms of Renewals or New Leases May Be Less Favorable Than Current Leases. When our residents decide to leave our apartments, whether because they decide not to renew their leases or they leave prior to their lease expiration date, we may not be able to relet their apartment units. Even if the residents do renew or we can relet the apartment units, the terms of renewal or reletting may be less favorable than current lease terms. Furthermore, because the majority of our apartment leases have initial terms of 12 months or less, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms. If we are unable to promptly renew the leases or relet the apartment units, or if the rental rates upon renewal or reletting are lower than expected rates, then our results of operations and financial condition may be adversely affected. If residents do not experience increases in their income or if they experience decreases in their income or job losses, we may be unable to increase or maintain rent and/or delinquencies may increase.
We Face Certain Risks Related to Our Retail and Commercial Space. Certain of our properties include retail or commercial space that we lease to third parties. The long term nature of our retail and commercial leases (generally five to ten years with market-based or fixed-price renewal options) and the characteristics of many of our tenants (generally small and/or local businesses) may subject us to certain risks, including risks related to such tenants being required not to operate, or to operate on a limited basis, due to the COVID-19 pandemic. The longer term leases could result in below market lease rates over time. Tenants may provide guarantees and other credit support which may prove to be inadequate or uncollectable, and the failure rate of small and/or local businesses may be higher than average. We may not be able to lease new space for rents that are consistent with our projections or for market rates. Also, when leases for our retail or commercial space terminate either at the end of the lease or because a tenant leaves early, the space may not be relet or the terms of reletting, including the cost of allowances and concessions to tenants, may be less favorable than the prior lease terms or we may incur additional expenses related to modifications of the spaces in order to satisfy new tenants. Our properties compete with other properties with retail or commercial space. The presence of competitive alternatives may adversely affect our ability to lease space and the level of rents we can obtain. If our retail or commercial tenants experience financial distress or bankruptcy, they have in the past and may in the future fail to comply with their contractual obligations, seek concessions in order to continue operations, or cease their operations, which could adversely impact our results of operations and financial condition.
Risk of Inflation/Deflation. Substantial inflationary or deflationary pressures could have a negative effect on rental rates and property operating expenses. The general risk of inflation is that interest on our debt, general and administrative expenses and other expenses increase at a rate faster than increases in our rental rates, which could adversely affect our financial condition or results of operations.
We Are Subject to Certain Risks Associated with Selling Apartment Communities, Which Could Limit Our Operational and Financial Flexibility. We periodically dispose of apartment communities that no longer meet our strategic objectives, but adverse market conditions may make it difficult to sell apartment communities we own. We cannot predict whether we will be able to sell any property for the price or on the terms we set, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property. Furthermore, we may be required to expend funds to correct defects or to make improvements before a property can be sold or the purchase price may be reduced to cover any cost of correcting defects or making improvements. These conditions may limit our ability to dispose of properties and to change our portfolio in order to meet our strategic objectives, which could in turn adversely affect our financial condition, results of operations or our ability to fund other activities in which we may want to engage such as the purchase of properties, development or redevelopment, or funding the Developer Capital Program. We are also subject to the following risks in connection with sales of our apartment communities, among others:
● a significant portion of the proceeds from some property sales may be held by intermediaries in order for such sales to qualify as like-kind exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended, or the “Code,” so that any related capital gain can be deferred for federal income tax purposes. As a result, we may not have immediate access to all of the cash proceeds generated from our property sales; and
● federal tax laws limit our ability to profit on the sale of communities that we have owned for less than two years, and this limitation may prevent us from selling communities when market conditions are favorable.
Competition Could Limit Our Ability to Lease Apartment Homes or Increase or Maintain Rents. Our apartment communities compete with numerous housing alternatives in attracting residents, including other apartment communities, condominiums and single-family rental homes, as well as owner occupied single- and multi-family homes.
Competitive housing in a particular area could adversely affect our ability to lease apartment homes and increase or maintain rents, which could materially adversely affect our results of operations and financial condition.
We May Not Realize the Anticipated Benefits of Past or Future Acquisitions, and the Failure to Integrate Acquired Communities and New Personnel Successfully Could Create Inefficiencies. We have selectively acquired in the past, and if presented with attractive opportunities we intend to selectively acquire in the future, apartment communities that meet our investment criteria. Our acquisition activities and their success are subject to the following risks, among others:
● we may be unable to obtain financing for acquisitions on favorable terms, including but not limited to interest rates, term and/or loan-to-value ratios, or at all, all of which could cause us to delay or even abandon potential acquisitions;
● even if we are able to finance the acquisition, cash flow from the acquisition may be insufficient to meet our required principal and interest payments on the debt used to finance the acquisition;
● even if we enter into an acquisition agreement for an apartment community, we may not complete the acquisition for a variety of reasons after incurring certain acquisition-related costs;
● we may incur significant costs and divert management attention in connection with the evaluation and negotiation of potential acquisitions, including potential acquisitions that we subsequently do not complete;
● when we acquire an apartment community, we may invest additional amounts in it with the intention of increasing profitability, and these additional investments may not produce the anticipated improvements in profitability;
● the expected occupancy rates and rental rates may differ from actual results; and
● we may be unable to quickly and efficiently integrate acquired apartment communities and new personnel into our existing operations, and the failure to successfully integrate such apartment communities or personnel will result in inefficiencies that could materially and adversely affect our expected return on our investments and our overall profitability.
Competition Could Adversely Affect Our Ability to Acquire Properties. In the past, other real estate investors, including insurance companies, pension and investment funds, developer partnerships, investment companies and other public and private apartment REITs, have competed with us to acquire existing properties and to develop new properties, and such competition in the future may make it more difficult for us to acquire attractive investment opportunities on favorable terms, which could adversely affect our ability to grow or acquire properties profitably or with attractive returns.
Development and Construction Risks Could Impact Our Profitability. In the past we have selectively pursued the development and construction of apartment communities, and we intend to do so in the future as appropriate opportunities arise. Development activities have been, and in the future may be, conducted through wholly-owned affiliated companies or through joint ventures with unaffiliated parties. Our development and construction activities are subject to the following risks, among others:
● we may be unable to obtain construction financing for development activities on favorable terms, including but not limited to interest rates, term and/or loan-to-value ratios, or at all, which could cause us to delay or even abandon potential developments;
● we may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental or quasi-governmental permits and authorizations, which could result in increased development costs, could delay initial occupancy dates for all or a portion of a development community, and could require us to abandon our activities entirely with respect to a project for which we are unable to obtain permits or authorizations;
● cost may be higher or yields may be less than anticipated as a result of delays in completing projects, costs that exceed budget and/or higher than expected concessions for lease up and lower rents than expected;
● we may abandon development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring such development opportunities;
● we may be unable to complete construction and lease-up of a community on schedule, or incur development or construction costs that exceed our original estimates, and we may be unable to charge rents that would compensate for any increase in such costs;
● occupancy rates, rents and concessions at a newly developed community may fluctuate depending on a number of factors, including market and economic conditions, preventing us from meeting our expected return on our investment and our overall profitability goals; and
● when we sell communities or properties that we developed or renovated to third parties, we may be subject to warranty or construction defect claims that are uninsured or exceed the limits of our insurance.
Bankruptcy or Defaults of Our Counterparties Could Adversely Affect Our Performance. We have relationships with and, from time to time, we execute transactions with or receive services from many counterparties, such as general contractors engaged in connection with our development activities, borrowers, or joint venture partners, among others. As a result, bankruptcies or defaults by these counterparties or their subcontractors could result in services not being provided, projects not being completed on time, or on budget, or at all, or contractual obligations to us not being satisfied, or volatility in the financial markets and economic weakness could affect the counterparties’ ability to complete transactions with us as intended, both of which could result in disruptions to our operations that may adversely affect our financial condition and results of operations.
Property Ownership Through Partnerships and Joint Ventures May Limit Our Ability to Act Exclusively in Our Interest. We have in the past and may in the future develop and/or acquire properties in partnerships and joint ventures, including those in which we own a preferred interest, with other persons or entities when we believe circumstances warrant the use of such structures. As of December 31, 2020, we had active joint ventures and partnerships, including our preferred equity investments, with a total equity investment of $600.2 million. We could become engaged in a dispute with one or more of our partners which could adversely impact us. Moreover, our partners may have business, economic or other objectives that are inconsistent with our objectives, including objectives that relate to the appropriate timing and terms of any sale or refinancing of a property. In some instances, our partners may have competing interests in our markets that could create conflicts of interest. Also, our partners might fail to make capital contributions when due, which may require us to contribute additional capital or may negatively impact the project. In addition, we may be responsible to our partners for indemnifiable losses. In general, we and our partners may each have the right to trigger a buy-sell or other similar arrangement, which could cause us to sell our interest, or acquire our partner’s interest, at a time when we otherwise would not have initiated such a transaction and may result in the valuation of our interest in the partnership or joint venture (if we are the seller) or of the other partner’s interest in the partnership or joint venture (if we are the buyer) at levels which may not be representative of the valuation that would result from an arm’s length marketing process and could cause us to recognize unanticipated capital gains or losses or the loss of fee income.
We are also subject to other risks in connection with partnerships or joint ventures, including (i) a deadlock if we and our partner are unable to agree upon certain major and other decisions (which could result in litigation or disposing of an asset at a time at which we otherwise would not sell the asset), (ii) limitations on our ability to liquidate our position in the partnership or joint venture without the consent of the other partner, and (iii) requirements to provide guarantees in favor of lenders with respect to the indebtedness of the joint venture.
We May Not be Permitted to Dispose of Certain Properties or Pay Down the Indebtedness Associated with Those Properties When We Might Otherwise Desire to do so Without Incurring Additional Costs. In connection with certain property acquisitions, we have agreed with the sellers that we will not dispose of the acquired properties or reduce the mortgage indebtedness on such properties for significant periods of time unless we pay certain of the resulting tax costs of the sellers or dispose of the property in a transaction in which a gain is not recognized for federal income tax purposes by such sellers, and we may enter into similar agreements in connection with future property acquisitions. These agreements could result in us retaining properties that we would otherwise sell or not paying down or refinancing indebtedness that we would otherwise pay down or refinance. However, subject to certain conditions, we retain the right to substitute other property or debt to meet these obligations to the sellers.
We Could Incur Significant Insurance Costs and Some Potential Losses May Not Be Adequately Covered by Insurance. We have a comprehensive insurance program covering our properties and operating activities with limits of liability, deductibles and self-insured retentions customary within the multifamily industry. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, certain types of extraordinary losses which may not be adequately covered under our insurance program. In addition, we will sustain losses due to insurance deductibles, self-insured retention, uninsured claims or casualties, or losses in excess of applicable coverage.
If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur in the future. If one or more of our significant properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Such events could materially and adversely affect our financial condition and results of operations.
The cost of insuring our apartment communities and our operations is a component of expense. Insurance premiums and the terms and conditions of insurance policies are subject to significant fluctuations and changes, which are generally outside of our control. We insure our properties and our operations with insurance companies that we believe have a good rating at the time our policies are put into effect. The financial condition of one or more insurance companies that insure us may be negatively impacted, which could result in their inability to pay on future insurance claims. Their inability to pay future claims may have a negative impact on our financial results. In addition, the failure, or exit or partial exit from an insurance market, of one or more insurance companies may affect our ability to obtain insurance coverage in the amounts that we seek, or at all, or increase the costs to renew or replace our insurance policies, or cause us to self-insure a portion of the risk, or increase the cost of insuring properties.
Failure to Succeed in New Markets May Limit Our Growth. We have acquired in the past, and we may acquire in the future if appropriate opportunities arise, apartment communities that are outside of our existing markets. Entering into new markets may expose us to a variety of risks, and we may not be able to operate successfully in new markets. These risks include, among others:
● inability to accurately evaluate local apartment market conditions and local economies;
● inability to hire and retain key personnel;
● lack of familiarity with local governmental and permitting procedures; and
● inability to achieve budgeted financial results.
Failure to Succeed with New Initiatives May Limit Our Ability to Grow Same-Store NOI. We have in the past developed and may in the future develop initiatives that are intended to drive operating efficiencies and grow same-store NOI, including smart home technologies and self-service options that are accessible to residents through smart devices. Such initiatives may also involve our associates having new or different responsibilities and processes. We may incur significant costs and divert resources in connection with such initiatives, and these initiatives may not perform as projected, which could adversely affect our results of operations and the market price of UDR’s common stock.
Potential Liability for Environmental Contamination Could Result in Substantial Costs. Under various federal, state and local environmental laws, as a current or former owner or operator of real estate, we could be required to investigate and remediate the effects of contamination of currently or formerly owned real estate by hazardous or toxic substances, often regardless of our knowledge of or responsibility for the contamination and solely by virtue of our current or former ownership or operation of the real estate. In addition, we could be held liable to a governmental authority or to third parties for property damage and for investigation and clean-up costs incurred in connection with the contamination or we could be required to incur additional costs to change how the property is constructed or operated due to presence of such substances. These costs could be substantial, and in many cases environmental laws create liens in favor of governmental authorities to secure their payment. The presence of such substances or a failure to properly remediate any resulting contamination could materially and adversely affect our ability to borrow against, sell or rent an affected property.
In addition, our properties are subject to various federal, state and local environmental, health and safety laws, including laws governing the management of wastes and underground and aboveground storage tanks. Noncompliance with these environmental, health and safety laws could subject us to liability. Changes in laws could increase the potential costs of compliance with environmental laws, health and safety laws or increase liability for noncompliance. This may result in significant unanticipated expenditures or may otherwise adversely affect our financial condition and results of operations.
As the owner or operator of real property, we may also incur liability based on various building conditions. For example, buildings and other structures on properties that we currently own or operate or those we acquire or operate in the future contain, may contain, or may have contained, asbestos-containing material, or ACM. Environmental, health
and safety laws require that ACM be properly managed and maintained and may impose fines or penalties on owners, operators or employers for non-compliance with those requirements.
These requirements include special precautions, such as removal, abatement or air monitoring, if ACM would be disturbed during maintenance, renovation or demolition of a building, potentially resulting in substantial costs. In addition, we may be subject to liability for personal injury or property damage sustained as a result of exposure to ACM or releases of ACM into the environment.
We cannot assure you that costs or liabilities incurred as a result of environmental or building condition issues will not adversely affect our financial condition and results of operations.
Our Properties May Contain or Develop Harmful Mold or Suffer from Other Indoor Air Quality Issues, Which Could Lead to Liability for Adverse Health Effects or Property Damage or Cost for Remediation. When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants or to increase ventilation, which could adversely affect our results of operations and cash flow. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants or others for property damage or personal injury.
Compliance or Failure to Comply with the Americans with Disabilities Act of 1990 or Other Safety Regulations and Requirements Could Result in Substantial Costs. The Americans with Disabilities Act generally requires that public buildings, including our properties, be made accessible to disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants. Claims have been asserted, and in the future claims may be asserted, against us with respect to some of our properties under the Americans with Disabilities Act. If, under the Americans with Disabilities Act, we are required to make substantial alterations and capital expenditures in one or more of our properties, including the removal of access barriers, it could adversely affect our financial condition and results of operations. In addition, if claims arise, we may expend resources and incur costs in investigating and resolving such claims even if our property was in compliance with the law.
Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements and federal, state and local accessibility requirements in addition to those imposed by the Americans with Disabilities Act. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that could adversely affect our financial condition or results of operations.
The Adoption of, or Changes to, Rent Control, Rent Stabilization, Eviction, Tenants’ Rights and Similar Laws and Regulations in Our Markets Could Have an Adverse Effect on Our Results of Operations and Property Values. Various state and local governments have enacted and may continue to enact rent control, rent stabilization, or limitations, and similar laws and regulations that could limit our ability to raise rents or charge certain fees, including laws or court orders, either of which could have a retroactive effect. For example, in June 2019, the State of New York enacted new rent control regulations known as the Housing Stability and Tenant Protection Act of 2019 and, in October of 2019, the State of California enacted the Tenant Protection Act of 2019. We have seen a recent increase in governments enacting or considering, or being urged to consider, such laws and regulations. Federal, state and local governments or courts also have made, and may make in the future, changes to laws related to allowable fees, eviction and other tenants’ rights laws and regulations (including changes in response to COVID-19 and other changes that apply retroactively) that could adversely impact our results of operations and the value of our properties. Laws and regulations regarding rent control, rent stabilization, eviction, tenants’ rights, and similar matters, as well as any lawsuits against us arising from such laws and regulations, may limit our ability to charge market rents, limit our ability to increase rents, evict delinquent tenants or change fees, or recover increases in our operating expenses, which could have an adverse effect on our results of operations and the value of our properties.
Compliance with or Changes in Real Estate Tax and Other Laws and Regulations Could Adversely Affect Our Funds from Operations and Our Ability to Make Distributions to Stockholders. We are subject to federal, state and local
laws, regulations, rules and ordinances at locations where we operate regarding a wide variety of matters that could affect, directly or indirectly, our operations. Generally, we do not directly pass through costs resulting from compliance with or changes in real estate tax laws to residential property tenants. We also do not generally pass through increases in income, service or other taxes to tenants under leases. These costs may adversely affect net operating income and the ability to make distributions to stockholders. Similarly, compliance with or changes in (i) laws increasing the potential liability for environmental conditions existing on properties or the restrictions on discharges or other conditions, (ii) laws and regulations regulating housing, such as the Americans with Disabilities Act and the Fair Housing Amendments Act of 1988, or (iii) employment related laws, may result in significant unanticipated expenditures, which could adversely affect our financial condition and results of operations. In addition, changes in federal and state legislation and regulation on climate change may result in increased capital expenditures to improve the energy efficiency of our existing communities and also may require us to spend more on our new development communities without a corresponding increase in revenue.
Risk of Damage from Catastrophic Weather and Natural Events. Our communities are located in areas that may experience catastrophic weather and other natural events from time to time, including mudslides, fires, hurricanes, tornadoes, floods, snow or ice storms, or other severe inclement weather. These adverse weather and natural events could cause damage or losses that may be greater than insured levels. In the event of a loss in excess of insured limits, we could lose our capital invested in the affected community, as well as anticipated future revenue from that community. We would also continue to be obligated to repay any mortgage indebtedness or other obligations related to the community. Any such loss could adversely affect our financial condition and results of operations.
Risk of Potential Climate Change. To the extent significant changes in the climate in areas where our communities are located occur, we may experience extreme weather conditions and changes in precipitation and temperature, all of which could result in physical damage to, and/or a decrease in demand for, our communities located in these areas or communities that are otherwise affected by these changes. Should the impact of such climate changes be material in nature, or occur for lengthy periods of time, our financial condition and results of operations could be adversely affected.
Risk of Earthquake Damage. Some of our communities are located in areas subject to earthquakes, including in the general vicinity of earthquake faults. We cannot assure you that an earthquake would not cause damage or losses greater than insured levels. In the event of a loss in excess of insured limits, we could lose our capital invested in the affected community, as well as anticipated future revenue from that community. We may also continue to be obligated to repay any mortgage indebtedness or other obligations related to the community. Any such loss could adversely affect our financial condition and results of operations. Insurance coverage for earthquakes can be costly due to limited industry capacity. As a result, we may experience shortages in desired coverage levels if market conditions are such that insurance is not available or the cost of insurance makes it, in management’s view, economically impractical.
Risk of Accidental Death or Injury Due to Fire, Natural Disasters or Other Hazards. The accidental death or injury of persons living in our communities due to fire, natural disasters or other hazards could have an adverse effect on our business and results of operations. Our insurance coverage may not cover all losses associated with such events, and we may experience difficulty marketing communities where any such events have occurred, which could have an adverse effect on our financial condition and results of operations.
Actual or Threatened Terrorist Attacks May Have an Adverse Effect on Our Business and Operating Results and Could Decrease the Value of Our Assets. Actual or threatened terrorist attacks and other acts of violence, destruction or war could have an adverse effect on our business and operating results. Attacks or other similar actions that directly impact one or more of our apartment communities could significantly affect our ability to operate those communities and thereby impair our ability to achieve our expected results. Further, our insurance coverage may not cover all losses caused by a terrorist attack or similar events. In addition, the adverse effects that such violent acts and threats of future attacks could have on the U.S. economy could similarly have an adverse effect on our financial condition and results of operations.
Mezzanine Loan Assets Involve Greater Risks of Loss than Senior Loans Secured by Income-Producing Properties. We have in the past and may in the future originate mezzanine loans, which take the form of subordinated loans secured by second mortgages on the underlying property or subordinated loans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the ownership interests of the entity that owns the interest in the entity owning the property. Mezzanine loans may involve a higher degree of risk than a senior mortgage secured by real property, because the security for the loan may lose all or substantially all of its value as a result of foreclosure by the senior lender and because it is in second position and there may not be adequate equity in the
property. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt. As a result, we may not recover some of or all our investment. In addition, mezzanine loans typically have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal.
Risk Related to Preferred Equity Investments. We have made in the past and may in the future make preferred equity investments in corporations, limited partnerships, limited liability companies or other entities that have been formed for the purpose of acquiring, developing or managing real property. Generally, we will not have the ability to control the daily operations of the entity, and we will not have the ability to select or remove a majority of the members of the board of directors, managers, general partner or partners or similar governing body of the entity or otherwise control its operations. Although we would seek to maintain sufficient influence over the entity to achieve our objectives, our partners may have interests that differ from ours and may be in a position to take actions without our consent or that are inconsistent with our interests. Further, if our partners were to fail to invest additional capital in the entity when required, we may have to invest additional capital to protect our investment. Our partners may fail to develop or operate the real property or refinance property indebtedness or sell the real property in the manner intended and as a result the entity may not be able to redeem our investment or pay the return expected to us in a timely manner if at all. In addition, we may not be able to dispose of our investment in the entity in a timely manner or at the price at which we would want to divest. In the event that such an entity fails to meet expectations or becomes insolvent, we may lose our entire investment in the entity.
Risks Related to Ground Leases. We have in the past and may in the future enter into, as either landlord or tenant, a long-term ground lease with respect to a property or a portion thereof. Such ground leases may contain a rent reset provision that requires both parties to agree to a new rent or is based upon factors, for example fair market rent, that are not objective and are not within our control. We may not be able to agree with the counterparty to a revised rental rate, or the revised rental rate may be set by external factors, which could result in a different rental rate than we forecasted. In the past we have had disagreements with respect to revised rental rates and certain of such disagreements have gone to arbitration (for resolution as provided in the applicable lease agreement) and have been resolved in a manner adverse to us. In addition, the other party may not perform as expected under the ground lease or there may be a dispute with the other party to the ground lease. Any of these circumstances could have an adverse effect on our business, financial condition or operating results.
We May Experience a Decline in the Fair Value of Our Assets and Be Forced to Recognize Impairment Charges, Which Could Adversely Impact Our Financial Condition, Liquidity and Results of Operations and the Market Price of UDR’s Common Stock. A decline in the fair value of our assets may require us to recognize an impairment against such assets under generally accepted accounting principles as in effect in the United States (“GAAP”), if we were to determine that, with respect to any assets in unrealized loss positions, we do not have the ability and intent to hold such assets for a period of time sufficient to allow for recovery to the amortized cost of such assets. If such a determination were to be made, we would recognize unrealized losses through earnings and write down the amortized cost of such assets to a new cost basis, based on the fair value of such assets on the date they are considered to be impaired. Such impairment charges reflect non-cash losses at the time of recognition; subsequent disposition or sale of such assets could further affect our future losses or gains, as they are based on the difference between the sale price received and adjusted amortized cost of such assets at the time of sale. If we are required to recognize asset impairment charges in the future, these charges could adversely affect our financial condition, liquidity, results of operations and the per share trading price of UDR’s common stock.
Any Material Weaknesses Identified in Our Internal Control Over Financial Reporting Could Have an Adverse Effect on UDR’s Stock Price. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting. If we fail to maintain the adequacy of our internal controls over financial reporting, including any failure to implement required new or improved controls as a result of changes to our business or otherwise, or if we experience difficulties in their implementation, our business, results of operations and financial condition could be materially adversely harmed and we could fail to meet our reporting obligations. In addition, if we have one or more material weaknesses in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, which in turn could have an adverse effect on the per share trading price of UDR’s common stock.
A Breach of Information Technology Systems On Which We Rely Could Materially and Adversely Impact Our Business, Financial Condition, Results of Operations and Reputation. We rely on information technology systems,
including the internet and networks and systems and software developed, maintained and controlled by third party vendors and other third parties, to process, transmit and store information and to manage or support our business processes. Third party vendors may collect and hold personally identifiable information and other confidential information of our tenants, prospective tenants and employees. We also maintain financial and business information regarding us and persons and entities with which we do business on our information technology systems. While we take steps, and generally require third party vendors to take steps, to protect the security of the information maintained in our and third party vendors’ information technology systems, including associate training and testing and the use of commercially available systems, software, tools and monitoring to provide security for processing, transmitting and storing of the information, it is possible that our or our third party vendors’ security measures will not be able to prevent human error or the systems’ or software’s improper functioning, or the loss, misappropriation, disclosure or corruption of personally identifiable information or other confidential or sensitive information, including information about our tenants and employees. Cybersecurity breaches, including physical or electronic break-ins, computer viruses, malware, phishing scams, attacks by hackers, breaches due to employee error or misconduct, and similar breaches, can create system disruptions, shutdowns or unauthorized access to information maintained on our information technology systems or the information technology systems of our third party vendors or other third parties or otherwise cause disruption or negative impacts to occur to our business and adversely affect our financial condition and results of operations. While we maintain cyber risk insurance to provide some coverage for certain risks arising out of cybersecurity breaches, there is no assurance that such insurance would cover all or a significant portion of the costs or consequences associated with a cybersecurity breach. We have in the past experienced cybersecurity breaches on our information technology systems or relating to software that we utilize, and, while none to date have been material, we expect such breaches may continue to occur in the future. As the techniques used to obtain unauthorized access to information technology systems become more varied and sophisticated and the occurrence of such breaches becomes more frequent, we and our third party vendors and other third parties may be unable to adequately anticipate these techniques or breaches and implement appropriate preventative measures. Any failure to prevent cybersecurity breaches and maintain the proper function, security and availability of our or our third party vendors’ and other third parties’ information technology systems could interrupt our operations, damage our reputation and brand, damage our competitive position, make it difficult for us to attract and retain tenants, and subject us to liability claims or regulatory penalties that could adversely affect our business, financial condition and results of operations.
Our Business and Operations Would Suffer in the Event of Information Technology System Failures. Despite system redundancy and the existence of a disaster recovery plan for our information technology systems, our information technology systems and the information technology systems maintained by our third party vendors are vulnerable to damage arising from any number of sources beyond our or our third party vendors’ control, including energy blackouts, natural disasters, terrorism, war, and telecommunication failures. Any failure to maintain proper function and availability of our or third party vendors’ information technology systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties and could adversely affect our business, financial condition and results of operations.
A Failure to Keep Pace with Developments in Technology Could Impair our Operations or Competitive Position. Our business continues to demand the use of sophisticated systems, software and technology. These systems, software and technologies must be refined, updated and replaced on a regular basis in order for us to meet our business requirements and our residents’ demands and expectations. If we are unable to do so on a timely basis or at a reasonable cost, or fail to do so our business could suffer. We also may not achieve the benefits that we anticipate from any new system, software or technology, and a failure to do so could result in higher than anticipated costs or could adversely affect our results of operation.
Social Media Presents Risks. The use of social media could cause us to suffer brand damage or unintended information disclosure. Negative posts or communications about us on a social networking website could damage our reputation. Further, employees or others may disclose non-public information regarding us or our business or otherwise make negative comments regarding us on social networking or other websites, which could adversely affect our business and results of operations. As social media evolves we will be presented with new risks and challenges.
Our Success Depends on Our Senior Management. Our success depends upon the retention of our senior management, whose continued service is not guaranteed. We may not be able to find qualified replacements for the individuals who make up our senior management if their services should no longer be available to us. The loss of services of one or more members of our senior management team could have a material adverse effect on our business, financial condition and results of operations.
Changes in U.S. Accounting Standards May Materially and Adversely Affect Our Reported Results of Operations. Accounting for public companies in the United States is in accordance with GAAP, which is established by the Financial Accounting Standards Board (the “FASB”), an independent body whose standards are recognized by the SEC as authoritative for publicly held companies. Uncertainties posed by various initiatives of accounting standard-setting by the FASB and the SEC, which create and interpret applicable accounting standards for U.S. companies, may change the financial accounting and reporting standards or their interpretation and application of these standards that govern the preparation of our financial statements. These changes could have a material impact on our reported financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in potentially material restatements of prior period financial statements.
Third-Party Expectations Relating to Environmental, Social and Governance Factors May Impose Additional Costs and Expose Us to New Risks. There is an increasing focus from certain investors, tenants, employees, and other stakeholders concerning corporate responsibility, specifically related to environmental, social and governance factors. Some investors may use these factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies relating to corporate responsibility are inadequate. Third-party providers of corporate responsibility ratings and reports on companies have increased in number, resulting in varied and in some cases inconsistent standards. In addition, the criteria by which companies’ corporate responsibility practices are assessed are evolving, which could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. Alternatively, if we elect not to or are unable to satisfy such new criteria or do not meet the criteria of a specific third-party provider, some investors may conclude that our policies with respect to corporate responsibility are inadequate. We may face reputational damage in the event that our corporate responsibility procedures or standards do not meet the standards set by various constituencies. Furthermore, if our competitors’ corporate responsibility performance is perceived to be greater than ours, potential or current investors may elect to invest with our competitors instead. In addition, in the event that we communicate certain initiatives and goals regarding environmental, social and governance matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals. If we fail to satisfy the expectations of investors, tenants and other stakeholders or our initiatives are not executed as planned, our reputation and financial results could be adversely affected.
Risks Related to Our Indebtedness and Financings
Insufficient Cash Flow Could Affect Our Debt Financing and Create Refinancing Risk. We are subject to the risks normally associated with debt financing, including the risk that our operating income and cash flow will be insufficient to make required payments of principal and interest, could restrict or limit our ability to incur additional debt, or could restrict our borrowing capacity under our line of credit due to debt covenant restraints. Sufficient cash flow may not be available to make all required debt payments and satisfy UDR’s distribution requirements to maintain its status as a REIT for federal income tax purposes. In addition, the amounts under our line of credit may not be available to us and we may not be able to access the commercial paper market if our operating performance falls outside the constraints of our debt covenants. We are also likely to need to refinance substantially all of our outstanding debt as it matures. We may not be able to refinance existing debt, or the terms of any refinancing may not be as favorable as the terms of the existing debt, which could create pressures to sell assets or to issue additional equity when we would otherwise not choose to do so. In addition, our failure to comply with our debt covenants could result in a requirement to repay our indebtedness prior to its maturity, which could have a material adverse effect on our financial condition and cash flow, and increase our financing costs and impact our ability to make distributions to UDR’s stockholders.
Failure to Generate Sufficient Income Could Impair Debt Service Payments and Distributions to Stockholders. If our apartment communities do not generate sufficient revenue to meet rental expenses, our ability to make required payments of interest and principal on our debt securities and to pay distributions to UDR’s stockholders or the Operating Partnership’s or the DownREIT Partnership’s unitholders will be adversely affected. The following factors, among others, may affect the income generated by our apartment communities:
● the national and local economies;
● local real estate market conditions, such as an oversupply of apartment homes;
● tenants’ perceptions of the safety, convenience, and attractiveness of our communities and the neighborhoods where they are located;
● our ability to provide adequate management, maintenance and insurance;
● rental expenses, including real estate taxes and utilities;
● competition from other apartment communities;
● changes in interest rates and the availability of financing;
● changes in governmental regulations and the related costs of compliance; and
● changes in tax and housing laws, including the enactment of rent control laws or other laws regulating multifamily housing.
Expenses associated with our investment in an apartment community, such as debt service, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a reduction in revenue from that community. If a community is mortgaged to secure payment of debt and we are unable to make the mortgage payments, we could sustain a loss as a result of foreclosure on the community or the exercise of other remedies by the mortgage holder.
Changing Interest Rates Could Increase Interest Costs and Adversely Affect Our Cash Flow and the Market Price of Our Securities. We currently have, and expect to incur in the future, interest-bearing debt, including unsecured commercial paper, at rates that vary with market interest rates. As of December 31, 2020, UDR had approximately $280.0 million of variable rate indebtedness outstanding, which constitutes approximately 5.5% of total outstanding indebtedness as of such date. As of December 31, 2020, the Operating Partnership had approximately $27.0 million of variable rate indebtedness outstanding, which constitutes approximately 27.1% of total outstanding indebtedness as of such date. An increase in interest rates would increase our interest expenses and increase the costs of refinancing existing indebtedness and of issuing new debt, including unsecured commercial paper. Accordingly, higher interest rates could adversely affect cash flow and our ability to service our debt and to make distributions to security holders. The effect of prolonged interest rate increases could negatively impact our ability to make acquisitions and develop properties.
The Phase-Out of LIBOR and Transition to SOFR as a Benchmark Interest Rate Could Have Adverse Effects. In 2018, the Alternative Reference Rate Committee identified the Secured Overnight Financing Rate (“SOFR”) as the alternative to LIBOR. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities, published by the Federal Reserve Bank of New York. By the end of 2021, it is expected that new contracts will not reference LIBOR and will instead use SOFR. Due to the broad use of LIBOR as a reference rate, all financial market participants, including us, are impacted by the risks associated with this transition and therefore it could adversely affect our operations and cash flows.
Our Debt Level May Be Increased. Our ability to incur debt is limited by covenants in our bank and other credit agreements. We manage our debt to be in compliance with these debt covenants, but subject to compliance with these covenants, we may increase the amount of our debt at any time without a concurrent improvement in our ability to service the additional debt.
Financing May Not Be Available and Could Be Dilutive. Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit, construction loans and other forms of secured debt, commercial paper and other forms of unsecured debt, and equity financing, including common and preferred equity. We and other companies in the real estate industry have experienced limited availability of financing from time to time, including due to regulatory changes directly or indirectly affecting financing markets, for example the changes in terms on construction loans brought about by the Basel III capital requirements and the associated “High Volatility Commercial Real Estate” designation, which has adversely impacted the availability of loans, including construction loans, and the proceeds of and the interest rate thereon. Restricted lending practices could impact our ability to obtain financing or refinancing for our properties. If we issue additional equity securities to finance developments and acquisitions instead of incurring debt, the interests of UDR’s existing stockholders could be diluted.
Failure To Maintain Our Current Credit Ratings Could Adversely Affect Our Cost of Funds, Related Margins, Liquidity, and Access to Capital Markets. Moody’s and Standard & Poor’s routinely evaluate our debt and have given us ratings on our senior unsecured debt, commercial paper program and preferred stock. These ratings are based on a number of factors, which included their assessment of our financial strength, liquidity, capital structure, asset quality, and sustainability of cash flow and earnings. Due to changes in these factors and market conditions, we may not be able to maintain our current credit ratings, which could adversely affect our cost of funds and related margins, liquidity, and access to capital markets, including our ability to access the commercial paper market.
Disruptions in Financial Markets May Adversely Impact Availability and Cost of Credit and Have Other Adverse Effects on Us and the Market Price of UDR’s Stock. Our ability to make scheduled payments on, or to refinance, our debt obligations will depend on our operating and financial performance, which in turn is subject to prevailing economic conditions and to financial, business and other factors beyond our control. The global equity and credit markets experienced, and may experience in the future, periods of extraordinary turmoil and volatility as a result of the COVID-19 pandemic, related government actions and uncertainty regarding their duration and impact. These circumstances may materially and adversely impact liquidity in the financial markets at times, making terms for certain financings less attractive or in some cases unavailable. Disruptions and uncertainty in the equity and credit markets may negatively impact our ability to refinance existing indebtedness and access additional financing for acquisitions, development of our properties and other purposes at reasonable terms or at all, which may negatively affect our business and the market price of UDR’s common stock. We also rely on the financial institutions that are parties to our revolving credit facility and other credit facilities. If these institutions become capital constrained, tighten their lending standards or become insolvent or if they experience excessive volumes of borrowing requests from other borrowers within a short period of time, they may be unable or unwilling to honor their funding commitments to us, which would adversely affect our ability to draw on our revolving credit facility. If we are not successful in refinancing our existing indebtedness when it becomes due, we may be forced to dispose of properties on disadvantageous terms, which might adversely affect our ability to service other debt and to meet our other obligations. A prolonged downturn in the financial markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our business plan accordingly. These events also may make it more difficult or costly for us to raise capital through the issuance of UDR’s common or preferred stock.
A Change in U.S. Government Policy or Support Regarding Fannie Mae or Freddie Mac Could Have a Material Adverse Impact on Our Business. While in recent years we have decreased our borrowing from Fannie Mae and Freddie Mac, Fannie Mae and Freddie Mac are a major source of financing to participants in the multifamily housing market including potential purchasers of our properties. Potential options for the future of agency mortgage financing in the U.S. have been, and may in the future be, suggested that could involve a reduction in the amount of financing Fannie Mae and Freddie Mac are able to provide, limitations on the loans that the agencies may make, which may not include loans secured by properties like our properties, or the phase out of Fannie Mae and Freddie Mac. While we believe Fannie Mae and Freddie Mac will continue to provide liquidity to our sector, should they discontinue doing so, have their mandates changed or reduced or be disbanded or reorganized by the government, or if there is reduced government support for multifamily housing generally, it may adversely affect interest rates, capital availability, development of multifamily communities and the value of multifamily residential real estate and, as a result, may adversely affect our business and results of operations.
The Soundness of Financial Institutions Could Adversely Affect Us. We have relationships with many financial institutions, including lenders under our credit facilities, and, from time to time, we execute transactions with counterparties in the financial services industry. As a result, defaults by, or even rumors or questions about, financial institutions or the financial services industry generally, could result in losses or defaults by these institutions. In the event that the volatility of the financial markets adversely affects these financial institutions or counterparties, we or other parties to the transactions with us may be unable to complete transactions as intended, which could adversely affect our results of operations.
Interest Rate Hedging Contracts May Be Ineffective and May Result in Material Charges. From time to time when we anticipate issuing debt securities, we may seek to limit our exposure to fluctuations in interest rates during the period prior to the pricing of the securities by entering into interest rate hedging contracts. We may do this to increase the predictability of our financing costs. Also, from time to time we may rely on interest rate hedging contracts to limit our exposure under variable rate debt to unfavorable changes in market interest rates. If the terms of new debt securities are not within the parameters of, or market interest rates fall below that which we incur under a particular interest rate hedging contract, the contract is ineffective. Furthermore, the settlement of interest rate hedging contracts has involved and may in the future involve material charges. In addition, our use of interest rate hedging arrangements may expose us to additional risks, including a risk that a counterparty to a hedging arrangement may fail to honor its obligations. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging activities will have the desired beneficial impact on our results of operations or financial condition. Termination of these hedging agreements typically involves costs, such as transaction fees or breakage costs.
Risks Related to Tax Laws
We Would Incur Adverse Tax Consequences if UDR Failed to Qualify as a REIT. UDR has elected to be taxed as a REIT under the Code. Our qualification as a REIT requires us to satisfy numerous requirements, some on an annual and quarterly basis, established under highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control. We intend that our current organization and method of operation enable us to continue to qualify as a REIT, but we may not so qualify or we may not be able to remain so qualified in the future. In addition, U.S. federal income tax laws governing REITs and other corporations and the administrative interpretations of those laws may be amended at any time, potentially with retroactive effect. Future legislation, new regulations, administrative interpretations or court decisions could adversely affect our ability to qualify as a REIT or adversely affect UDR’s stockholders.
If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax (including, for periods prior to 2018, any applicable alternative minimum tax) on our taxable income at regular corporate rates, and would not be allowed to deduct dividends paid to UDR’s stockholders in computing our taxable income. Also, unless the Internal Revenue Service granted us relief under certain statutory provisions, we could not re-elect REIT status until the fifth calendar year after the year in which we first failed to qualify as a REIT. The additional tax liability from the failure to qualify as a REIT would reduce or eliminate the amount of cash available for investment or distribution to UDR’s stockholders. This would likely have a significant adverse effect on the value of our securities and our ability to raise additional capital. In addition, we would no longer be required to make distributions to UDR’s stockholders. Even if we continue to qualify as a REIT, we will continue to be subject to certain federal, state and local taxes on our income and property.
Certain of our subsidiaries have also elected to be taxed as REITs under the Code, and are therefore subject to the same risks in the event that any such subsidiary fails to qualify as a REIT in any taxable year.
Dividends Paid by REITs Generally Do Not Qualify for Reduced Tax Rates. In general, the maximum U.S. federal income tax rate for dividends paid to individual U.S. stockholders is 20%. Unlike dividends received from a corporation that is not a REIT, our regular dividends (i.e., dividends other than capital gain dividends) paid to individual stockholders generally are not eligible for the reduced rates. However, individual U.S. stockholders generally may deduct 20% of such regular dividends under Section 199A of the Code, reducing the effective tax rate applicable to such dividends (although such provision will expire after 2025 absent future legislation).
UDR Conduct’s a Portion of Its Business Through Taxable REIT Subsidiaries, Which Are Subject to Certain Tax Risks. We have established and conduct a portion of our business through taxable REIT subsidiaries. Despite UDR’s qualification as a REIT, its taxable REIT subsidiaries must pay income tax on their taxable income. In addition, we must comply with various tests to continue to qualify as a REIT for federal income tax purposes, and our income from and investments in our taxable REIT subsidiaries generally do not constitute permissible income and investments for certain of these tests. While we will attempt to ensure that our dealings with our taxable REIT subsidiaries will not adversely affect our REIT qualification, we cannot provide assurance that we will successfully achieve that result. Furthermore, we may be subject to a 100% penalty tax, we may jeopardize our ability to retain future gains on real property sales, or our taxable REIT subsidiaries may be denied deductions, to the extent our dealings with our taxable REIT subsidiaries are not deemed to be arm’s length in nature or are otherwise not respected.
REIT Distribution Requirements Limit Our Available Cash. As a REIT, UDR is subject to annual distribution requirements, which limit the amount of cash we retain for other business purposes, including amounts to fund our growth. We generally must distribute annually at least 90% of our net REIT taxable income, excluding any net capital gain, in order for our distributed earnings not to be subject to corporate income tax. We intend to make distributions to UDR’s stockholders to comply with the requirements of the Code. However, differences in timing between the recognition of taxable income and the actual receipt of cash could require us to sell assets or borrow funds on a short-term or long-term basis to meet the 90% distribution requirement of the Code.
Certain Property Transfers May Generate Prohibited Transaction Income, Resulting in a Penalty Tax on Gain Attributable to the Transaction. From time to time, we may transfer or otherwise dispose of some of our properties. Under the Code, any gain resulting from transfers of properties that we hold as inventory or primarily for sale to customers in the ordinary course of business would be treated as income from a prohibited transaction and subject to a 100% penalty tax. Since we acquire properties for investment purposes, we do not believe that our occasional transfers or disposals of property are prohibited transactions. However, whether property is held for investment purposes is a
question of fact that depends on all the facts and circumstances surrounding the particular transaction. The Internal Revenue Service may contend that certain transfers or disposals of properties by us are prohibited transactions. If the Internal Revenue Service were to argue successfully that a transfer or disposition of property constituted a prohibited transaction, then we would be required to pay a 100% penalty tax on any gain allocable to us from the prohibited transaction and we may jeopardize our ability to retain future gains on real property sales. In addition, income from a prohibited transaction might adversely affect UDR’s ability to satisfy the income tests for qualification as a REIT for federal income tax purposes.
Changes to the U.S. Federal Income Tax Laws, including the Enactment of Certain Tax Reform Measures, Could Have an Adverse Impact on Our Business and Financial Results. In recent years, numerous legislative, judicial and administrative changes have been made to the U.S. federal income tax laws applicable to investments in real estate and REITs, including the passage of the Tax Cuts and Jobs Act of 2017. Federal legislation intended to ameliorate the economic impact of the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), has been enacted that makes technical corrections to, or modifies on a temporary basis, certain of the provisions of the Tax Cut and Jobs Act of 2017, and it is possible that additional such legislation may be enacted in the future. The full impact of the Tax Cut and Jobs Act of 2017 and the CARES Act may not become evident for some period of time. In addition, there can be no assurance that future changes to the U.S. federal income tax laws or regulatory changes will not be proposed or enacted that could impact our business and financial results. The REIT rules are regularly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department, which may result in revisions to regulations and interpretations in addition to statutory changes. If enacted, certain of such changes could have an adverse impact on our business and financial results.
We cannot predict whether, when or to what extent any new U.S. federal tax laws, regulations, interpretations or rulings will impact the real estate investment industry or REITs. Prospective investors are urged to consult their tax advisors regarding the effect of potential future changes to the federal tax laws on an investment in our shares.
We May Be Adversely Affected by Changes in State and Local Tax Laws and May Become Subject to Tax Audits from Time to Time. Because UDR is organized and qualifies as a REIT, it is generally not subject to federal income taxes, but it is subject to certain state and local taxes. From time to time, changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. A shortfall in tax revenues for states and local jurisdictions in which we own apartment communities may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional state and local taxes. These increased tax costs could adversely affect our financial condition and the amount of cash available for the payment of distributions to UDR’s stockholders. In the normal course of business, we or our affiliates (including entities through which we own real estate) may also become subject to federal, state or local tax audits. If we (or such entities) become subject to federal, state or local tax audits, the ultimate result of such audits could have an adverse effect on our financial condition and results of operations.
The Operating Partnership and the DownREIT Partnership Intend to Qualify as Partnerships, but Cannot Guarantee That They Will Qualify. The Operating Partnership and the DownREIT Partnership intend to qualify as partnerships for federal income tax purposes, and intend to take that position for all income tax reporting purposes. If classified as partnerships, the Operating Partnership and the DownREIT Partnership generally will not be taxable entities and will not incur federal income tax liability. However, the Operating Partnership and the DownREIT Partnership would be treated as corporations for federal income tax purposes if they were “publicly traded partnerships,” unless at least 90% of their income was qualifying income as defined in the Code. A “publicly traded partnership” is a partnership whose partnership interests are traded on an established securities market or are readily tradable on a secondary market (or the substantial equivalent thereof). Although neither the Operating Partnership’s nor the DownREIT Partnership’s partnership units are traded on an established securities market, because of the redemption rights of their limited partners, the Operating Partnership’s and DownREIT Partnership’s units held by limited partners could be viewed as readily tradable on a secondary market (or the substantial equivalent thereof), and the Operating Partnership and the DownREIT Partnership may not qualify for one of the “safe harbors” under the applicable tax regulations. Qualifying income for the 90% test generally includes passive income, such as real property rents, dividends and interest. The income requirements applicable to REITs and the definition of qualifying income for purposes of this 90% test are similar in most respects. The Operating Partnership and the DownREIT Partnership may not meet this qualifying income test. If either the Operating Partnership or the DownREIT Partnership were to be taxed as a corporation, it would incur substantial tax liabilities, and UDR would then fail to qualify as a REIT for tax purposes, unless it qualified for relief under certain statutory savings provisions, and our ability to raise additional capital would be impaired. In addition, even
if the 90% test were met if the Operating Partnership or the DownREIT Partnership were a publicly traded partnership, there could be adverse tax impacts for certain limited partners.
Qualifying as a REIT Involves Highly Technical and Complex Provisions of the Code. Our qualification as a REIT involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Moreover, new legislation, court decisions or administrative guidance, in each case possibly with retroactive effect, may make it more difficult or impossible for us to qualify as a REIT. Our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, shareholder ownership and other requirements on a continuing basis. Our ability to satisfy the REIT income and asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination and for which we will not obtain independent appraisals, and upon our ability to successfully manage the composition of our income and assets on an ongoing basis. In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.
Risks Related to Our Organization and Ownership of UDR’s Stock
Changes in Market Conditions and Volatility of Stock Prices Could Adversely Affect the Market Price of UDR’s Common Stock. The stock markets, including the New York Stock Exchange (“NYSE”), on which we list UDR’s common stock, have experienced significant price and volume fluctuations, including recently as a result of the COVID-19 pandemic. As a result, the market price of UDR’s common stock has been, and in the future could be similarly volatile, and investors in UDR’s common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. In addition to the risks listed in this “Risk Factors” section, a number of factors could negatively affect the price per share of UDR’s common stock, including:
● general market and economic conditions;
● actual or anticipated variations in UDR’s quarterly operating results or dividends or UDR’s payment of dividends in shares of UDR’s stock;
● changes in our funds from operations or earnings estimates;
● difficulties or inability to access capital or extend or refinance existing debt;
● decreasing (or uncertainty in) real estate valuations;
● changes in market valuations of similar companies;
● publication of research reports about us or the real estate industry;
● the general reputation of real estate investment trusts and the attractiveness of their equity securities in comparison to other equity securities (including securities issued by other real estate companies);
● general stock and bond market conditions, including changes in interest rates on fixed income securities, that may lead prospective purchasers of UDR’s stock to demand a higher annual yield from future dividends;
● a change in analyst ratings;
● additions or departures of key management personnel;
● adverse market reaction to any additional debt we incur in the future;
● speculation in the press or investment community;
● terrorist activity which may adversely affect the markets in which UDR’s securities trade, possibly increasing market volatility and causing the further erosion of business and consumer confidence and spending;
● failure to qualify as a REIT;
● strategic decisions by us or by our competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in business strategy;
● failure to satisfy listing requirements of the NYSE;
● governmental regulatory action and changes in tax laws; and
● the issuance of additional shares of UDR’s common stock, or the perception that such sales might occur, including under UDR’s at-the-market equity distribution program.
Many of the factors listed above are beyond our control. These factors may cause the market price of shares of UDR’s common stock to decline, regardless of our financial condition, results of operations, business or our prospects.
We May Change the Dividend Policy for UDR’s Common Stock in the Future. The decision to declare and pay dividends on UDR’s common stock, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our board of directors and will depend on our earnings, funds from operations, liquidity, financial condition, capital requirements, contractual prohibitions or other limitations under our indebtedness, the annual distribution requirements under the REIT provisions of the Code, state law and such other factors as our board of directors considers relevant. Any change in our dividend policy could have an adverse effect on the market price of UDR’s common stock.
Maryland Law May Limit the Ability of a Third Party to Acquire Control of Us, Which May Not be in UDR’s Stockholders’ Best Interests. Maryland business statutes may limit the ability of a third party to acquire control of us. As a Maryland corporation, we are subject to various Maryland laws which may have the effect of discouraging offers to acquire our Company and of increasing the difficulty of consummating any such offers, even if our acquisition would be in UDR’s stockholders’ best interests. The Maryland General Corporation Law restricts mergers and other business combination transactions between us and any person who acquires beneficial ownership of shares of UDR’s stock representing 10% or more of the voting power without our board of directors’ prior approval. Any such business combination transaction could not be completed until five years after the person acquired such voting power, and generally only with the approval of stockholders representing 80% of all votes entitled to be cast and 66 2/3 % of the votes entitled to be cast, excluding the interested stockholder, or upon payment of a fair price. Maryland law also provides generally that a person who acquires shares of our equity stock that represents 10% (and certain higher levels) of the voting power in electing directors will have no voting rights unless approved by a vote of two-thirds of the shares eligible to vote.
Limitations on Share Ownership and Limitations on the Ability of UDR’s Stockholders to Effect a Change in Control of Our Company Restricts the Transferability of UDR’s Stock and May Prevent Takeovers That are Beneficial to UDR’s Stockholders. One of the requirements for maintenance of our qualification as a REIT for U.S. federal income tax purposes is that no more than 50% in value of our outstanding capital stock may be owned by five or fewer individuals, including entities specified in the Code, during the last half of any taxable year. Our charter contains ownership and transfer restrictions relating to UDR’s stock primarily to assist us in complying with this and other REIT ownership requirements; however, the restrictions may have the effect of preventing a change of control, which does not threaten REIT status. These restrictions include a provision that generally limits ownership by any person of more than 9.9% of the value of our outstanding equity stock, unless our board of directors exempts the person from such ownership limitation, provided that any such exemption shall not allow the person to exceed 13% of the value of our outstanding equity stock. Absent such an exemption from our board of directors, the transfer of UDR’s stock to any person in excess of the applicable ownership limit, or any transfer of shares of such stock in violation of the ownership requirements of the Code for REITs, will be considered null and void, and the intended transferee of such stock will acquire no rights in such shares. These provisions of our charter may have the effect of delaying, deferring or preventing someone from taking control of us, even though a change of control might involve a premium price for UDR’s stockholders or might otherwise be in UDR’s stockholders’ best interests.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. UNRESOLVED STAFF COMMENTS
None.

---

ITEM 2. PROPERTIES
Item 2. PROPERTIES
At December 31, 2020, our consolidated apartment portfolio included 149 communities located in 21 markets, with a total of 48,283 completed apartment homes.
The tables below set forth a summary of real estate portfolio by geographic market of the Company and of the Operating Partnership at December 31, 2020.
SUMMARY OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT DECEMBER 31, 2020
UDR, INC.
Percentage
Total
Average
Number of
Number of
of Total
Carrying
Average
Home Size
Apartment
Apartment
Carrying
Value
Encumbrances
Cost per
Physical
(in square
Communities
Homes
Value
(in thousands)
(in thousands)
Home
Occupancy
feet)
WEST REGION
Orange County, CA
4,950
11.5
%
$
1,500,611
$
-
$
303,154
96.4
%
San Francisco, CA
2,751
6.8
%
888,683
27,000
323,041
91.5
%
Seattle, WA
2,725
7.3
%
957,686
-
351,444
96.7
%
Monterey Peninsula, CA
1,565
1.4
%
185,224
-
118,353
96.6
%
Los Angeles, CA
1,225
3.5
%
463,166
-
378,094
95.5
%
Other Southern California
1.6
%
211,285
-
258,611
97.2
%
1,018
Portland, OR
0.9
%
120,324
-
160,005
96.6
%
MID-ATLANTIC REGION
Metropolitan D.C.
8,402
18.1
%
2,350,124
288,530
279,710
96.5
%
Baltimore, MD
1,597
2.6
%
338,347
58,600
211,864
97.1
%
Richmond, VA
1,358
1.2
%
153,906
-
113,333
97.8
%
1,018
NORTHEAST REGION
New York, NY
2,318
11.9
%
1,552,358
-
669,697
92.5
%
Boston, MA
4,298
12.8
%
1,669,381
271,550
388,409
94.4
%
Philadelphia, PA
0.8
%
107,736
-
344,204
96.1
%
1,054
SOUTHEAST REGION
Tampa, FL
3,874
4.8
%
625,752
-
161,526
97.0
%
Orlando, FL
2,500
1.8
%
240,102
-
96,041
96.8
%
Nashville, TN
2,260
1.7
%
223,827
-
99,038
97.8
%
Other Florida
0.7
%
89,630
-
140,928
97.2
%
1,130
SOUTHWEST REGION
Dallas, TX
3,864
4.4
%
581,118
205,870
150,393
96.8
%
Austin, TX
1,272
1.3
%
171,482
-
134,813
97.6
%
Denver, CO
1.1
%
144,998
-
665,128
93.1
%
Total Operating Communities
47,695
96.2
%
12,575,740
851,550
$
263,670
96.0
%
Real Estate Under Development (a)
-
1.9
%
247,877
-
Land
-
-
0.5
%
61,682
-
Held for Disposition
0.9
%
116,655
-
Other
-
-
0.5
%
69,518
10,597
Total Real Estate Owned
48,283
100.0
%
$
13,071,472
$
862,147
(a) As of December 31, 2020, the Company was developing five wholly owned communities with a total of 1,378 apartment homes, 202 of which have been completed.
SUMMARY OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT DECEMBER 31, 2020
UNITED DOMINION REALTY, L.P.
Percentage
Total
Average
Number of
Number of
of Total
Carrying
Average
Home Size
Apartment
Apartment
Carrying
Value
Encumbrances
Cost per
Physical
(in square
Communities
Homes
Value
(in thousands)
(in thousands)
Home
Occupancy
feet)
WEST REGION
Orange County, CA
3,119
19.3
%
$
753,801
$
-
$
241,680
96.6
%
San Francisco, CA
2,185
15.8
%
617,359
27,000
282,546
93.6
%
Seattle, WA
5.9
%
233,963
-
251,033
97.0
%
Monterey Peninsula, CA
1,565
4.7
%
185,224
-
118,353
96.6
%
Los Angeles, CA
3.0
%
118,281
-
343,837
96.4
%
Other Southern California
1.9
%
76,906
-
185,763
97.6
%
Portland, OR
1.3
%
52,126
-
109,508
97.1
%
MID-ATLANTIC REGION
Metropolitan D.C.
2,136
14.7
%
568,202
-
266,012
95.6
%
Baltimore, MD
2.8
%
108,779
-
201,443
97.8
%
NORTHEAST REGION
New York, NY
16.0
%
624,255
-
626,762
90.0
%
Boston, MA
1.9
%
76,059
72,500
196,535
95.5
%
1,069
SOUTHEAST REGION
Tampa, FL
1,614
2.8
%
233,991
-
144,976
97.7
%
1,068
Nashville, TN
1,612
3.9
%
157,415
-
97,652
97.6
%
Other Florida
2.3
%
89,630
-
140,928
97.2
%
1,130
SOUTHWEST REGION
Denver, CO
3.7
%
144,998
-
665,128
93.1
%
Total Operating Communities
17,174
100.0
%
4,040,989
99,500
$
235,297
96.0
%
Other
-
-
-
%
2,736
(396)
Total Real Estate Owned
17,174
100.0
%
$
4,043,725
$
99,104

---

ITEM 3. LEGAL PROCEEDINGS
Item 3. LEGAL PROCEEDINGS
We are subject to various legal proceedings and claims arising in the ordinary course of business. We cannot determine the ultimate liability with respect to such legal proceedings and claims at this time. We believe that such liability, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on our financial condition, results of operations or cash flow.

---

ITEM 4. MINE SAFETY DISCLOSURE
Item 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
UDR, Inc.:
Common Stock
UDR, Inc.’s common stock has been listed on the New York Stock Exchange (“NYSE”) under the symbol “UDR” since May 7, 1990.
On February 16, 2021, there were 3,173 holders of record of the 296,820,995 outstanding shares of our common stock.
We have determined that, for federal income tax purposes, approximately 73% of the distributions for 2020 represented ordinary income, less than 1% represented qualified ordinary income, 21% represented long-term capital gain and 6% represented unrecaptured section 1250 gain.
UDR pays regular quarterly distributions to holders of its common stock. Future distributions will be at the discretion of our Board of Directors and will depend on our actual funds from operations, financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the Code, and other factors.
Series E Preferred Stock
The Series E Cumulative Convertible Preferred Stock (“Series E”) has no stated par value and a liquidation preference of $16.61 per share. Subject to certain adjustments and conditions, each share of the Series E is convertible at any time at the holder’s option into 1.083 shares of our common stock. The holders of the Series E are entitled to vote on an as-converted basis as a single class in combination with the holders of common stock at any meeting of our stockholders for the election of directors or for any other purpose on which the holders of common stock are entitled to vote. The Series E has no stated maturity and is not subject to any sinking fund or any mandatory redemption. In connection with a special dividend (declared on November 5, 2008), the Company reserved for issuance upon conversion of the Series E additional shares of common stock to which a holder of the Series E would have received if the holder had converted the Series E immediately prior to the record date for this special dividend.
Distributions declared on the Series E for the years ended December 31, 2020 and 2019 were $1.5592 per share, or $0.3898 per quarter, and $1.4832 per share, or $0.3708 per quarter, respectively. The Series E is not listed on any exchange. At December 31, 2020, a total of 2.7 million shares of the Series E were outstanding.
Series F Preferred Stock
We are authorized to issue up to 20.0 million shares of our Series F Preferred Stock (“Series F”). The Series F may be purchased by holders of our Operating Partnership Units, or OP Units, described below under “Operating Partnership Units,” and holders of limited partnership interests in the DownREIT Partnership at a purchase price of $0.0001 per share. OP/DownREIT unitholders are entitled to subscribe for and purchase one share of the Series F for each OP/DownREIT Unit held.
As of December 31, 2020, a total of 14.4 million shares of the Series F were outstanding. Holders of the Series F are entitled to one vote for each share of the Series F they hold, voting together with the holders of our common stock, on each matter submitted to a vote of security holders at a meeting of our stockholders. The Series F does not entitle its holders to any other rights, privileges or preferences.
Distribution Reinvestment and Stock Purchase Plan
We have a Distribution Reinvestment and Stock Purchase Plan under which holders of our common stock may elect to automatically reinvest their distributions and make additional cash payments to acquire additional shares of our common stock. Stockholders who do not participate in the plan continue to receive distributions as and when declared. As of February 16, 2021, there were approximately 1,911 participants in the plan.
United Dominion Realty, L.P.:
Operating Partnership Units
There is no established public trading market for United Dominion Realty, L.P.’s Operating Partnership Units. From time to time we issue shares of our common stock in exchange for OP Units tendered to the Operating Partnership for redemption in accordance with the provisions of the Operating Partnership’s limited partnership agreement. At December 31, 2020, there were 184.8 million OP Units outstanding in the Operating Partnership, of which 176.2 million OP Units or 95.3% were owned by UDR and affiliated entities and 8.6 million OP Units or 4.7% were owned by non-affiliated limited partners. Under the terms of the Operating Partnership’s limited partnership agreement, the holders of OP Units have the right to require the Operating Partnership to redeem all or a portion of the OP Units held by the holder in exchange for a cash payment based on the market value of our common stock at the time of redemption. However, the Operating Partnership’s obligation to pay the cash amount is subject to the prior right of the Company to acquire such OP Units in exchange for either the cash amount or the number of shares of our common stock equal to the number of OP Units being redeemed.
During the three months ended December 31, 2020, we did not issue any shares of our common stock upon redemption of OP Units in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933.
Purchases of Equity Securities
In February 2006, UDR’s Board of Directors authorized a 10 million share repurchase program. In January 2008, UDR’s Board of Directors authorized a new 15 million share repurchase program. Under the two share repurchase programs, UDR may repurchase shares of our common stock in open market purchases, block purchases, privately negotiated transactions or otherwise. The following table summarizes all of UDR’s repurchases of shares of common stock under these programs during the quarter ended December 31, 2020 (shares in thousands):
Total Number
Maximum
of Shares
Number of
Purchased as
Shares that
Total
Part of
May Yet Be
Number of
Average
Publicly
Purchased
Shares
Price Paid
Announced Plans
Under the Plans
Period
Purchased
per Share
or Programs
or Programs (a)
Beginning Balance
11,158
$
23.75
11,158
14,439
October 1, 2020 through October 31, 2020
-
-
-
14,439
November 1, 2020 through November 30, 2020
-
-
-
14,439
December 1, 2020 through December 31, 2020
-
-
-
14,439
Balance as of December 31, 2020
11,158
$
23.75
11,158
14,439
(a) This number reflects the amount of shares that were available for purchase under our 10 million share repurchase program authorized in February 2006 and our 15 million share repurchase program authorized in January 2008.
Comparison of Five-year Cumulative Total Returns
The following graph compares the five-year cumulative total returns for UDR common stock with the comparable cumulative return of the Nareit Equity REIT Index, Standard & Poor’s 500 Stock Index, the Nareit Equity Apartment Index and the MSCI U.S. REIT Index. The graph assumes that $100 was invested on December 31, 2014, in each of our common stock and the indices presented. Historical stock price performance is not necessarily indicative of future stock price performance. The comparison assumes that all dividends are reinvested.
Period Ending
Index
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
12/31/2020
UDR, Inc.
100.00
100.27
109.41
116.42
141.42
120.74
Nareit Equity Apartment Index
100.00
102.86
106.68
110.63
139.75
118.30
MSCI U.S. REIT Index
100.00
108.60
114.11
108.89
137.03
126.65
S&P 500 Index
100.00
111.96
136.40
130.42
171.49
203.04
Nareit Equity REIT Index
100.00
108.52
114.19
108.91
137.23
126.25
The performance graph and the related chart and text, are being furnished solely to accompany this Annual Report on Form 10-K pursuant to Item 201(e) of Regulation S-K, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of ours, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

---

ITEM 6. SELECTED FINANCIAL DATA
Item 6. SELECTED FINANCIAL DATA
Not Applicable.

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, without limitation, statements concerning property acquisitions and dispositions, development activity and capital expenditures, capital raising activities, rent growth, occupancy, rental expense growth and expected or potential impacts of the novel coronavirus disease (“COVID-19”) pandemic. 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, the impact of the COVID-19 pandemic and measures intended to prevent its spread or address its effect, unfavorable changes in the apartment market, changing economic conditions, the impact of inflation/deflation on rental rates and property operating expenses, expectations concerning the availability of capital and the stability of the capital markets, the impact of competition and competitive pricing, acquisitions, developments and redevelopments not achieving anticipated results, delays in completing developments and redevelopments, delays in completing lease-ups on schedule or at expected rent and occupancy levels, expectations on job growth, home affordability and demand/supply ratio for multifamily housing, expectations concerning development and redevelopment activities, expectations on occupancy levels and rental rates, expectations concerning joint ventures and partnerships 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:
● the impact of the COVID-19 pandemic and measures intended to prevent its spread or address its effects;
● general economic conditions;
● unfavorable changes in apartment market and economic conditions that could adversely affect occupancy levels and rental rates, including as a result of COVID-19;
● 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 climate change that impacts our properties or operations;
● risks from extraordinary losses for which we may not have insurance or adequate reserves;
● risks from cybersecurity breaches of our information technology systems and the information technology systems of our third party vendors and other third parties;
● 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;
● risks that third parties who have an interest in or are otherwise involved in projects in which we have an interest, including mezzanine borrowers, joint venture partners or other investors, do not perform as expected;
● changing interest rates, which could increase interest costs and affect the market price of our securities;
● potential liability for environmental contamination, which could result in substantial costs to us;
● the imposition of federal taxes if we fail to qualify as a REIT under the Code in any taxable year;
● our internal control over financial reporting may not be considered effective which could result in a loss of investor confidence in our financial reports, and in turn have an adverse effect on our stock price; and
● changes in real estate laws, tax laws, rent control or stabilization laws or other laws affecting our business.
A discussion of these and other factors affecting our business and prospects is set forth in Part I, Item 1A. Risk Factors. We encourage investors to review these risk factors.
Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.
Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.
COVID-19 Update
See Part I, Item 1. “Business - COVID-19 Update” above for more information on the impact of COVID-19 on the Company.
The following discussion should be read in conjunction with the consolidated financial statements appearing elsewhere herein and is based primarily on the consolidated financial statements for the years ended December 31, 2020, and 2019 of each UDR, Inc. and United Domination Realty, L.P.
This section of this Form 10-K generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019 of UDR, Inc. and United Domination Realty, L.P. Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
UDR, Inc.:
Business Overview
We are a self-administered real estate investment trust, or REIT, that owns, operates, acquires, renovates, develops, redevelops, disposes of, and manages multifamily apartment communities. We were formed in 1972 as a Virginia corporation. In June 2003, we changed our state of incorporation from Virginia to Maryland. Our subsidiaries include the Operating Partnership and the DownREIT 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 December 31, 2020, our consolidated real estate portfolio included of 149 communities in 13 states plus the District of Columbia totaling of 48,283 apartment homes. In addition, we have an ownership interest in 5,295 completed or to-be-completed apartment homes through unconsolidated joint ventures or partnerships, including 2,165 apartment homes owned by entities in which we hold preferred equity investments. The Same-Store Community apartment home population for the year ended December 31, 2020, was 37,607.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to use judgment in the application of accounting policies, including making estimates and assumptions. A critical accounting policy is one that is both important to our financial condition and results of operations as well as involves some degree of uncertainty. Estimates are prepared based on management’s assessment after considering all evidence available. Changes in estimates could affect our financial position or results of operations. Below is a discussion of the accounting policies that we consider critical to understanding our financial condition or results of operations where there is uncertainty or where significant judgment is required. A discussion of our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2, Significant Accounting Policies, to the Notes to the UDR, Inc. Consolidated Financial Statements included in this Report.
Cost Capitalization
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.
In addition to construction costs, we capitalize costs directly related to the predevelopment, development, and redevelopment of a capital project, which include, but are not limited to, interest, real estate taxes, insurance, and allocated development and redevelopment overhead related to support costs for personnel working on the capital projects. We use our professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. These costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress and such costs are incremental and identifiable to a specific activity to get the asset ready for its intended use. As each home in a capital project is completed and becomes available for lease-up, the Company ceases capitalization on the related portion. The costs capitalized are reported on the Consolidated Balance Sheets as Total real estate owned, net of accumulated depreciation. Amounts capitalized during the years ended December 31, 2020, 2019, and 2018 were $19.0 million, $13.5 million, and $18.1 million, respectively.
Investment in Unconsolidated Entities
We may enter into various joint venture agreements and/or partnerships with unrelated third parties to hold or develop real estate assets. We must determine for each of these ventures whether to consolidate the entity or account for our investment under the equity method of accounting. We determine whether to consolidate a joint venture or partnership based on our rights and obligations under the venture agreement, applying the applicable accounting guidance. The application of the rules in evaluating the accounting treatment for each joint venture or partnership is complex and requires substantial management judgment. We evaluate our accounting for investments on a regular basis including when a significant change in the design of an entity occurs. Throughout our financial statements, and in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we use the term “joint venture” or “partnership” when referring to investments in entities in which we do not have a 100% ownership interest.
We continually evaluate our investments in unconsolidated joint ventures when events or changes in circumstances indicate that there may be an other-than-temporary decline in value. We consider various factors to determine if a decrease in the value of the investment is other-than-temporary. These factors include, but are not limited to, age of the venture, our intent and ability to retain our investment in the entity, the financial condition and long-term prospects of the entity, and the relationships with the other joint venture partners and its lenders. The amount of loss recognized is the excess of the investment’s carrying amount over its estimated fair value. If we believe that the decline in fair value is temporary, no impairment is recorded. The aforementioned factors are taken as a whole by management in determining the valuation of our investment property. Should the actual results differ from management’s judgment, the valuation could be negatively affected and may result in a negative impact to our Consolidated Financial Statements.
Impairment of Long-Lived Assets
Quarterly or when changes in circumstances warrant, we will assess our real estate properties for indicators
of impairment. The judgments regarding the existence of impairment indicators are based on certain factors. Such factors include, among other things, operational performance, market conditions, the Company’s intent and ability to hold the related asset, as well as any significant cost overruns on development properties.
If a real estate property has indicators of impairment, we assess whether the long-lived asset’s carrying value exceeds the community’s undiscounted future cash flows, which is representative of projected net operating income (“NOI”) plus the residual value of the community. Our future cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. If such indicators of impairment are present and the carrying value exceeds the undiscounted cash flows of the community, an impairment loss is recognized equal to the excess of the carrying amount of the asset over its estimated fair value. Our estimates of fair value represent our best estimate based primarily upon unobservable inputs related to rental rates, operating costs, growth rates, discount rates, capitalization rates, industry trends and reference to market rates and transactions.
For long-lived assets to be disposed of, impairment losses are recognized when the fair value of the asset less estimated cost to sell is less than the carrying value of the asset. Properties classified as real estate held for disposition generally represent properties that are actively marketed or contracted for sale with the closing expected to occur within the next twelve months. Real estate held for disposition is carried at the lower of cost, net of accumulated depreciation, or fair value, less the cost to sell, determined on an asset-by-asset basis. Expenditures for ordinary repair and maintenance costs on held for disposition properties are charged to expense as incurred. Expenditures for improvements, renovations, and replacements related to held for disposition properties are capitalized at cost. Depreciation is not recorded on real estate held for disposition.
Real Estate Investment Properties
We purchase real estate investment properties from time to time and record the fair value to various components, such as land, buildings, and intangibles related to in-place leases, based on the fair value of each component. In making estimates of fair values for purposes of allocating purchase price, we utilize various sources, including independent appraisals, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. The fair value of buildings is determined as if the buildings were vacant upon acquisition and subsequently leased at market rental rates. As such, the determination of fair value considers the present value of all cash flows expected to be generated from the property including an initial lease-up period. We determine the fair value of in-place leases by assessing the net effective rent and remaining term of the lease relative to market terms for similar leases at acquisition. In addition, we consider the cost of acquiring similar leases, the foregone rents associated with the lease-up period, and the carrying costs associated with the lease-up period. The fair value of in-place leases is recorded and amortized as amortization expense over the remaining average contractual lease period.
REIT Status
We are a Maryland corporation that has elected to be treated for federal income tax purposes as a REIT. A REIT is a legal entity that holds interests in real estate and is required by the Code to meet a number of organizational and operational requirements, including a requirement that a REIT must distribute at least 90% of our REIT taxable income (other than our net capital gain) to our stockholders. If we were to fail to qualify as a REIT in any taxable year, we will be subject to federal and state income taxes at the regular corporate rates and may not be able to qualify as a REIT for four years. Based on the net earnings reported for the year ended December 31, 2020 in our Consolidated Statements of Operations, we would have incurred federal and state GAAP income taxes if we had failed to qualify as a REIT.
Summary of Real Estate Portfolio by Geographic Market
The following table summarizes our market information by major geographic markets as of and for the year ended December 31, 2020:
December 31, 2020
Year Ended December 31, 2020
Percentage
Total
Monthly
Net
Number of
Number of
of Total
Carrying
Average
Income per
Operating
Apartment
Apartment
Carrying
Value (in
Physical
Occupied
Income
Same-Store Communities
Communities
Homes
Value
thousands)
Occupancy
Home (a)
(in thousands)
West Region
Orange County, CA
4,434
8.8
%
$
1,145,371
96.5
%
$
2,328
$
91,704
San Francisco, CA
2,751
6.8
%
885,036
91.5
%
3,501
76,760
Seattle, WA
2,570
6.8
%
889,749
96.7
%
2,471
53,010
Monterey Peninsula, CA
1,565
1.4
%
185,224
96.6
%
1,940
27,587
Los Angeles, CA
1,225
3.5
%
463,167
95.5
%
2,765
27,585
Other Southern California
0.9
%
111,656
97.7
%
2,038
11,796
Portland, OR
0.4
%
52,126
97.1
%
1,637
6,623
Mid-Atlantic Region
Metropolitan D.C.
7,496
14.9
%
1,944,746
96.8
%
2,077
125,654
Baltimore, MD
1.2
%
156,797
97.9
%
1,720
9,603
Richmond, VA
1,358
1.2
%
153,906
97.8
%
1,422
16,874
Northeast Region
Boston, MA
1,388
3.6
%
470,541
95.1
%
2,783
32,372
New York, NY
1,452
7.9
%
1,037,337
92.6
%
4,135
33,181
Southeast Region
Tampa, FL
2,287
2.1
%
274,126
97.1
%
1,484
25,949
Orlando, FL
2,500
1.8
%
240,100
96.8
%
1,413
28,541
Nashville, TN
2,260
1.7
%
223,827
97.8
%
1,378
25,943
Other Florida
0.7
%
89,630
97.2
%
1,656
8,085
Southwest Region
Dallas, TX
2,345
2.3
%
298,205
97.3
%
1,382
24,124
Austin, TX
1,272
1.3
%
171,483
97.6
%
1,548
13,607
Denver, CO
1.1
%
144,959
93.1
%
3,012
5,200
Total/Average Same-Store Communities
37,607
68.4
%
8,937,986
96.3
%
$
2,126
644,198
Non-Mature, Commercial Properties & Other
10,088
28.8
%
3,768,954
196,868
Total Real Estate Held for Investment
47,695
97.2
%
12,706,940
841,066
Real Estate Under Development (b)
-
1.9
%
247,877
Real Estate Held for Disposition (c)
0.9
%
116,655
12,421
Total Real Estate Owned
48,283
100.0
%
13,071,472
$
853,702
Total Accumulated Depreciation
(4,605,366)
Total Real Estate Owned, Net of Accumulated Depreciation
$
8,466,106
(a) Monthly Income per Occupied Home represents total monthly revenues divided by the average physical number of occupied apartment homes in our Same-Store portfolio.
(b) As of December 31, 2020, the Company was developing five wholly owned communities with a total of 1,378 apartment homes, 202 of which have been completed.
(c) The Company had one community located in Orange County, California that met the criteria to be classified as held for disposition at December 31, 2020.
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 January 1, 2019 and held as of December 31, 2020. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan to conduct substantial redevelopment activities, and the communities are not classified as held for disposition at year end. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months.
Our Non-Mature 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 communities, 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, as determined by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment homes, and borrowings under our credit agreements. We routinely use our working capital credit facility, our unsecured revolving credit facility and issuances of commercial paper 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 continue to execute on maintaining a diversified portfolio.
We expect to meet our short-term liquidity requirements generally through net cash provided by property operations and borrowings under our credit agreements and our unsecured commercial paper program. 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 net cash provided by property operations, 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 and our unsecured commercial paper program 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/or dispositions of properties.
We have a shelf registration statement filed with the Securities and Exchange Commission, or “SEC,” which provides for the issuance of common stock, preferred stock, depositary shares, debt securities, guarantees of debt securities, warrants, subscription rights, purchase contracts and units to facilitate future financing activities in the public capital markets. Access to capital markets is dependent on market conditions at the time of issuance.
In July 2017, the Company entered into an ATM sales agreement under which the Company may offer and sell up to 20.0 million shares of its common stock, from time to time, to or through its sales agents and may enter into separate forward sales agreements to or through its forward purchasers. Upon entering into the ATM sales agreement, the Company simultaneously terminated the sales agreement for its prior at-the-market equity offering program, which was entered into in April 2017, which replaced the prior at-the-market equity offering program entered into in April 2012. During the year ended December 31, 2020, the Company did not sell any shares of common stock through its ATM program, other than the forward sales described below. As of December 31, 2020, we had 9.6 million shares of common stock available for future issuance under the ATM program.
In February 2020, the Company issued $200.0 million of 3.20% senior unsecured medium-term notes due 2030 (the “2030 Notes”). Interest is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2020. The notes were priced at 105.660% of the principal amount at issuance. This was a further issuance of the 2030 Notes, and forms a single series with, the $300.0 million aggregate principal amount of the Company’s 2030 Notes that were issued in July 2019 and the $100.0 million aggregate principal amount of the Company’s 2030 Notes that were issued in October 2019. As of the completion of the offering, the aggregate principal amount of outstanding 2030 notes was $600.0 million.
In July 2020, the Company refinanced a 4.35% fixed rate mortgage note payable due in November 2020 with a balance of $79.3 million with a $160.9 million, 2.62% fixed rate mortgage note payable due in 2031. The Company incurred net extinguishment costs of $0.5 million in connection with the refinancing. The incremental proceeds were used to reduce the Company’s borrowings under its unsecured commercial paper program.
In July 2020, the Company announced that it commenced a cash tender offer for any and all of its outstanding 3.75% unsecured medium-term notes due July 2024 (the “2024 Notes”). Pursuant to the tender offer, on July 21, 2020, the Company completed the purchase of $116.9 million aggregate principal amount of the 2024 Notes, or 39.0% of the $300.0 million aggregate principal amount of the 2024 Notes. The tender offer consideration was $1,101.92 for each $1,000 principal amount of the 2024 Notes, plus accrued and unpaid interest to, but not including, July 21, 2020.
In July 2020, the Company issued $400.0 million of 2.10% senior unsecured medium-term notes due August 1, 2032. Interest is payable semi-annually in arrears on February 1 and August 1. The notes were priced at 99.894% of the principal amount at issuance. The Company used a portion of the net proceeds to fund the purchase of the 2024 Notes accepted pursuant to the tender offer described above and to prepay $245.8 million of 4.64% secured debt due in 2023. The combined prepayment and make-whole amounts for the purchase of the 2024 Notes and the prepayment of the secured debt due in 2023, inclusive of the acceleration of fair market value adjustments originally recorded on secured debt assumed in property acquisitions, totaled approximately $24.0 million.
In December 2020, the Company issued $350.0 million of 1.90% senior unsecured medium-term notes due March 15, 2033 (the “2033 Notes”). Interest is payable semi-annually in arrears on March 15 and September 15. The notes were priced at 99.578% of the principal amount at issuance. The Company used the net proceeds for the repayment of debt, including the redemption of the remaining $183.1 million aggregate principal amount (plus the make-whole amount of approximately $21.1 million) of its 2024 Notes, $67.5 million of secured debt maturing in 2023, and outstanding indebtedness under our commercial paper program and working capital credit facility. The 2033 Notes were issued as “green” bonds and, as a result, the Company will allocate an amount equal to the net proceeds from the sale of the 2033 Notes to fund eligible green projects.
During the year ended December 31, 2020, the Company repurchased 0.6 million shares of its common stock at an average price of $33.11 per share for total consideration of approximately $19.8 million under its share repurchase program.
During the year ended December 31, 2020, the Company entered into forward sales agreements under its ATM program for a total of 2.1 million shares of common stock at a weighted average initial forward price per share of $49.56. The initial forward price per share received by the Company upon settlement was determined on the
applicable settlement date based on adjustments made to the initial forward price to reflect the then-current federal funds rate and the amount of dividends paid to holders of UDR common stock over the term of the forward sales agreement.
In December 2020, the Company settled all 2.1 million shares sold under the forward sales agreement at a weighted average forward price per share of $48.23, which is inclusive of adjustments made to reflect the then-current federal funds rate, the amount of dividends paid to holders of UDR common stock and commissions paid to sales agents of approximately $3.9 million, for net proceeds of $102.3 million. Aggregate net proceeds from such sales, after deducting related expenses, was $102.2 million.
Future Capital Needs
Future development and redevelopment expenditures may be funded through unsecured or secured credit facilities, unsecured commercial paper, proceeds from the issuance of equity or debt securities, sales of properties, joint ventures, and, to a lesser extent, from cash flows 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.
During 2021, we have approximately $1.1 million of secured debt maturing, comprised solely of principal amortization, and $190.0 million of unsecured debt maturing, comprised solely of the unsecured commercial paper. Additionally, the Company has no secured or unsecured debt maturing in 2022, other than the unsecured working capital credit facility. We anticipate repaying the debt due in 2021 and 2022 with cash flow from our operations, proceeds from debt or equity offerings, proceeds from dispositions of properties, or from borrowings under our credit agreements and our unsecured commercial paper program.
In January 2021, the entire $190.0 million of outstanding unsecured commercial paper as of December 31, 2020 was repaid at maturity with additional proceeds of unsecured commercial paper with maturity dates in February 2021 and proceeds under the Working Capital Credit Facility. As of February 16, 2021, we had no borrowings outstanding under the Revolving Credit Facility, leaving $1.1 billion of unused capacity (excluding $1.9 million of letters of credit), and we had $0.2 million outstanding under the Working Capital Credit Facility, leaving $74.8 million of unused capacity.
On February 11, 2021, the Company priced an offering of $300.0 million of 2.10% senior unsecured medium-term notes due 2033. The notes were priced at 99.592% of the principal amount of the notes. The Company intends to
use the net proceeds to repay indebtedness, including the redemption of its $300.0 million 4.00% senior unsecured medium-term notes due October 2025 (plus the make-whole amount and accrued and unpaid interest), to fund potential acquisitions, or for other general corporate purposes. The settlement of the offering is expected to occur on February 26, 2021, subject to the satisfaction of customary closing conditions.
Statements of Cash Flows
The following discussion explains the changes in Net cash provided by/(used in) 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 years ended December 31, 2020 and 2019.
Operating Activities
For the year ended December 31, 2020, our Net cash provided by/(used in) operating activities was $604.3 million compared to $630.7 million for 2019. The decrease in cash flow from operating activities was primarily due to changes in operating assets and liabilities, partially offset by an increase in return on investments in unconsolidated joint ventures and improved net operating income, primarily driven by net operating income from communities acquired in 2020 and 2019.
Investing Activities
For the year ended December 31, 2020, Net cash provided by/(used in) investing activities was $(460.8) million compared to $(1.7) billion for 2019. The decrease in cash used in investing activities was primarily due to the decrease in acquisitions made during the current year and an increase in proceeds from sales of real estate investments, partially offset by an increase in spend for development of real estate assets and a decrease in distributions received from unconsolidated joint ventures.
Acquisitions
In January 2020, the Company acquired a 294 apartment home operating community located in Tampa, Florida for approximately $85.2 million. The Company increased its real estate assets owned by approximately $83.1 million and recorded approximately $2.1 million of in-place lease intangibles.
In January 2020, the Company increased its ownership interest from 49% to 100% in a 276 apartment home operating community located in Hillsboro, Oregon, for a cash purchase price of approximately $21.6 million. In connection with the acquisition, the Company repaid approximately $35.6 million of joint venture construction financing. As a result, the Company consolidated the operating community. The Company had previously accounted for its 49% ownership interest as a preferred equity investment in an unconsolidated joint venture (see Note 5, Joint Ventures and Partnerships). The Company accounted for the consolidation as an asset acquisition resulting in no gain or loss upon consolidation and increased its real estate assets owned by approximately $67.8 million and recorded approximately $1.7 million of in-place lease intangibles.
In August 2020, the Company acquired a to-be-developed parcel of land located in King of Prussia, Pennsylvania for approximately $16.2 million.
In November 2020, the Company acquired a 672 apartment home operating community located in Tampa, Florida for approximately $122.5 million. The Company increased its real estate assets owned by approximately $119.4 million and recorded approximately $3.1 million of in-place lease intangibles.
In December 2020, the Company acquired a 400 apartment home operating community located in Herndon, Virginia for approximately $128.6 million. The Company increased its real estate assets owned by approximately $125.9 million and recorded approximately $2.7 million of in-place lease intangibles.
In January 2019, the Company increased its ownership interest from 49% to 100% in a 386 apartment home operating community located in Anaheim, California, for a cash purchase price of approximately $33.5 million. In connection with the acquisition, the Company repaid approximately $59.8 million of joint venture construction financing. As a result, the Company consolidated the operating community. The Company had previously accounted for its 49% ownership interest as a preferred equity investment in an unconsolidated joint venture. The Company accounted
for the consolidation as an asset acquisition resulting in no gain upon consolidation and increased its real estate assets owned by approximately $115.7 million and recorded approximately $2.4 million of in-place lease intangibles.
In January 2019, the Company increased its ownership interest from 49% to 100% in a 155 apartment home operating community located in Seattle, Washington, for a cash purchase price of approximately $20.0 million. In connection with the acquisition, the Company repaid approximately $26.0 million of joint venture construction financing. As a result, the Company consolidated the operating community. The Company had previously accounted for its 49% ownership interest as a preferred equity investment in an unconsolidated joint venture. The Company accounted for the consolidation as an asset acquisition resulting in no gain upon consolidation and increased its real estate assets owned by approximately $58.1 million and recorded approximately $2.4 million of real estate intangibles and approximately $0.6 million of in-place lease intangibles.
In January 2019, the Company acquired a to-be-developed parcel of land located in Washington, D.C. for approximately $27.1 million.
In February 2019, the Company acquired a to-be-developed parcel of land located in Denver, Colorado for approximately $13.7 million.
In February 2019, the Company acquired a 188 apartment home operating community located in Brooklyn, New York for approximately $132.1 million. The Company increased its real estate assets owned by approximately $97.5 million and recorded approximately $33.6 million of real estate intangibles and approximately $1.0 million of in-place lease intangibles.
In February 2019, the Company acquired a 381 apartment home operating community located in St. Petersburg, Florida for approximately $98.3 million. The Company increased its real estate assets owned by approximately $96.0 million and recorded approximately $2.3 million of in-place lease intangibles.
In April 2019, the Company acquired a 498 apartment home operating community located in Towson, Maryland for approximately $86.4 million. The Company increased its real estate assets owned by approximately $82.5 million and recorded approximately $3.9 million of in-place lease intangibles.
In May 2019, the Company acquired a 313 apartment home operating community located in King of Prussia, Pennsylvania for approximately $107.3 million. The Company increased its real estate assets owned by approximately $106.4 million and recorded approximately $0.9 million of in-place lease intangibles.
In May 2019, the Company acquired a 240 apartment home operating community located in St. Petersburg, Florida for approximately $49.4 million. The Company increased its real estate assets owned by approximately $48.2 million and recorded approximately $1.2 million of in-place lease intangibles.
In June 2019, the Company acquired a 200 apartment home operating community located in Waltham, Massachusetts for approximately $84.6 million. The Company increased its real estate assets owned by approximately $82.6 million and recorded approximately $2.0 million of in-place lease intangibles.
In August 2019, the Company acquired a 914 apartment home operating community located in Norwood, Massachusetts for approximately $270.2 million. The Company increased its real estate assets owned by approximately $260.1 million and recorded approximately $10.1 million of in-place lease intangibles.
In August 2019, the Company acquired a 185 apartment home operating community located in Englewood, New Jersey for approximately $83.6 million. The Company increased its real estate assets owned by approximately $77.5 million and recorded approximately $4.6 million of real estate intangibles and approximately $1.5 million of in-place lease intangibles.
In August 2019, the Company purchased a 292 apartment home operating community in Washington, D.C., directly from the UDR/KFH joint venture, thereby increasing its ownership interest from 30% to 100%, for a purchase price at 100% of approximately $184.0 million, before $2.8 million of closing costs incurred by UDR at acquisition. The Company accounted for the consolidation as an asset acquisition, resulting in no gain upon consolidation, and increased its real estate assets owned by approximately $156.0 million and recorded approximately $5.9 million of in-place lease intangibles.
In November 2019, the Company acquired the approximately 50% ownership interest not previously owned in 10 UDR/MetLife operating communities, one development community and four land parcels valued at $1.1 billion, or $564.2 million at UDR’s share, and sold its approximately 50% ownership interest in five UDR/MetLife operating communities valued at $645.8 million, or $322.9 million at UDR’s share, to MetLife. The Company paid $109.2 million directly to MetLife to complete the transaction. As a result, the Company consolidated the 10 operating communities, one development community and four land parcels, and they are no longer accounted for as equity method investments in an unconsolidated joint venture (see Note 5, Joint Ventures and Partnerships). The Company accounted for the consolidation as an asset acquisition resulting in no gain upon consolidation and increased its real estate assets owned by approximately $977.8 million and recorded approximately $30.0 million of in-place lease intangibles. In connection with the acquisition, the Company assumed six secured fixed rate mortgage notes payable and one credit facility secured by four communities with a combined outstanding balance of $518.4 million and estimated fair value of $551.8 million. The Company recorded the debt at its fair value in Secured debt, net on the Consolidated Balance Sheets.
The following table is a summary of the 10 communities, one development community and four land parcels acquired from the UDR/MetLife joint venture:
Property
Type
Number of Homes
Location
Strata
Operating Community
San Diego, CA
Crescent Falls Church
Operating Community
Washington, D.C.
Charles River Landing
Operating Community
Boston, MA
Lodge at Ames Pond
Operating Community
Boston, MA
Lenox Farms
Operating Community
Boston, MA
Towson Promenade
Operating Community
Baltimore, MD
Savoye
Operating Community
Addison, TX
Savoye2
Operating Community
Addison, TX
Fiori on Vitruvian Park ®
Operating Community
Addison, TX
Vitruvian West
Operating Community
Addison, TX
Vitruvian West Phase 2 (a)
Development Community
Addison, TX
Vitruvian Park ®
4 Land Parcels
N/A
Addison, TX
(a) The number of apartment homes for the community under development presented in the table above is based on the projected number of total homes upon completion of development. As of December 31, 2019, no apartment homes had been completed.
Dispositions
In May 2020, the Company sold an operating community located in Bellevue, Washington with a total of 71 apartment homes for gross proceeds of $49.7 million, resulting in a gain of approximately $29.6 million. The sale was partially financed by the Company through the issuance of a promissory note totaling $4.0 million which was repaid in January 2021. (See Note 2, Significant Accounting Policies for further discussion.) The proceeds were designated for a tax-deferred Section 1031 exchange that were used to pay a portion of the purchase price for the above mentioned acquisition of an operating community in Tampa, Florida, in January 2020.
In May 2020, the Company sold an operating community located in Kirkland, Washington with a total of 196 apartment homes for gross proceeds of $92.9 million, resulting in a gain of approximately $31.7 million.
In October 2020, the Company sold an operating community located in Alexandria, Virginia with a total of 332 apartment homes for gross proceeds of $145.0 million, resulting in a gain of approximately $58.0 million. The proceeds were designated for a tax-deferred Section 1031 exchange and were used to pay a portion of the purchase price for acquisitions in November and December 2020.
In June 2019, the Company sold a parcel of land located in Los Angeles, California for $38.0 million, resulting in a gain of approximately $5.3 million. Prior to the sale, the parcel of land was subject to a ground lease, under which UDR was the lessor, scheduled to expire in 2065. The ground lease included a purchase option for the lessee to acquire the land during specific periods of the ground lease term. During the second quarter of 2019, the lessee exercised the purchase option resulting in the sale by the Company and the ground lease being terminated.
We plan to continue to pursue our strategy of exiting markets where long-term growth prospects are limited and redeploying capital to primary locations in markets we believe will provide the best investment returns.
Capital Expenditures
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.
For the year ended December 31, 2020, total capital expenditures of $165.8 million or $3,494 per stabilized home, which in aggregate include recurring capital expenditures and major renovations, were spent across our portfolio, excluding development, as compared to $158.0 million or $3,710 per stabilized home for the prior year.
The increase in total capital expenditures was primarily due to:
● an increase of 35.8%, or $12.7 million, in major renovations, which include major structural changes and/or architectural revisions to existing buildings; and
● an increase of 11.1%, or $5.7 million, in recurring capital expenditures, which include asset preservation and turnover related expenditures; and
● an increase of 11.6%, or $5.1 million, in NOI enhancing improvements, such as kitchen and bath remodels and upgrades to common areas.
This was partially offset by:
● a decrease of 56.8%, or $15.6 million, in spend as compared to 2019 for our operations platform, which includes smart home installations at certain of our properties.
The following table outlines capital expenditures and repair and maintenance costs for all of our communities, excluding real estate under development, for the years ended December 31, 2020 and 2019 (dollars in thousands except Per Home amounts):
Per Home
Year Ended December 31,
Year Ended December 31,
% Change
% Change
Turnover capital expenditures
$
12,978
$
11,192
16.0
%
$
$
3.8
%
Asset preservation expenditures
43,946
40,054
9.7
%
(1.6)
%
Total recurring capital expenditures
56,924
51,246
11.1
%
1,199
1,204
(0.4)
%
NOI enhancing improvements (a)
48,752
43,689
11.6
%
1,027
1,026
0.1
%
Major renovations (b)
48,317
35,569
35.8
%
1,018
21.9
%
Operations platform
11,853
27,445
(56.8)
%
(61.3)
%
Total capital expenditures (c)
$
165,846
$
157,949
5.0
%
$
3,494
$
3,710
(5.8)
%
Repair and maintenance expense
$
56,794
$
43,525
30.5
%
$
1,196
$
1,022
17.0
%
Average home count (d)
47,475
42,579
11.5
%
(a) NOI enhancing improvements are expenditures that result in increased income generation or decreased expense growth.
(b) Major renovations include major structural changes and/or architectural revisions to existing buildings.
(c) Total capital expenditures includes amounts capitalized during the year. Cash paid for capital expenditures is impacted by the net change in related accruals.
(d) Average number of homes is calculated based on the number of homes outstanding at the end of each month.
We intend to continue to selectively add NOI 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.
Consolidated Real Estate Under Development and Redevelopment
At December 31, 2020, our development pipeline consisted of five wholly-owned communities located in Denver, Colorado, Dublin, California, Addison, Texas, King of Prussia, Pennsylvania and Washington D.C., totaling 1,378 homes, 202 of which have been completed, with a budget of $491.5 million, in which we have an investment of
$247.9 million. The communities are estimated to be completed between the first quarter of 2021 and the second quarter of 2023. During 2020, we incurred $121.2 million for development costs, an increase of $95.8 million as compared to costs incurred in 2019 of $25.4 million.
At December 31, 2020, the Company was not redeveloping any communities.
Unconsolidated Joint Ventures and Partnerships
The Company recognizes income 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 communities held by the unconsolidated joint ventures and partnerships.
The Company’s Investment in and advances to unconsolidated joint ventures and partnerships, net, are accounted for under the equity method of accounting. For the year ended December 31, 2020:
● we made investments totaling $76.1 million in our unconsolidated joint ventures, including contributions of $66.3 million to four unconsolidated investments under our Developer Capital Program, which earn preferred returns ranging from 8.5% to 13.0%;
● our proportionate share of the net income/(loss) of the joint ventures and partnerships was $18.8 million; and
● we received distributions of $70.0 million, of which $20.7 million were operating cash flows and $49.3 million were investing cash flows.
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 impairments in the value of its investments in unconsolidated joint ventures or partnerships during the years ended December 31, 2020 and 2019.
Notes Receivable, net
Notes receivable relate to financing arrangements that are typically secured by real estate, real estate related projects or other assets.
The following significant activities occurred during the year ended December 31, 2020:
● in August 2020, the Company exercised the purchase option associated with the $115.0 million secured note receivable. The purchase is expected to close in 2021. When the note was funded, the Company also entered into a purchase option agreement and paid a deposit of $10.0 million, which gave the Company the option to acquire the community at a fixed price of $170.0 million. The deposit is generally nonrefundable other than due to a failure of closing conditions pursuant to the terms of the agreement. If the Company fails to close the purchase other than due to seller’s failure or other breaches in the purchase option agreement, per the terms of the agreement, the note will be modified to extend the maturity date to 10 years following the date the temporary certificate of occupancy was issued, which was July 2020. Upon modification, the loan would be interest only for the first three years and after such date payments will be based on a 30-year amortization schedule.
Financing Activities
For the years ended December 31, 2020 and 2019, Net cash provided by/(used in) financing activities was $(152.6) million and $880.4 million, respectively.
The following significant financing activities occurred during the year ended December 31, 2020:
● repayments of secured debt of $425.8 million, which was partially offset by proceeds from the issuance of secured debt of $160.9 million;
● issuance of $200.0 million of 3.20% senior unsecured medium-term notes due January 15, 2030, for net proceeds of approximately $211.3 million;
● issuance of $400.0 million of 2.10% senior unsecured medium-term notes due August 1, 2032, for net proceeds of approximately $399.6 million;
● issuance of $350.0 million of 1.90% senior unsecured medium-term notes due March 15, 2023, for net proceeds of approximately $348.5 million;
● repayment of $300.0 million senior unsecured medium-term notes due July 2024, $116.9 million of which was pursuant to our tender offer;
● net repayment of $110.0 million on our unsecured commercial paper program;
● sale of 2.1 million shares of common stock under our forward sales agreement for aggregate net proceeds of $102.2 million at a price per share of $48.23;
● repurchase of 0.6 million common shares for approximately $19.8 million;
● distributions of $419.4 million to our common stockholders; and
● payment of debt extinguishment costs of $62.6 million from the early prepayment of debt.
The following significant financing activities occurred during the year ended December 31, 2019:
● issuance of $300 million of 3.20% senior unsecured medium-term notes due 2030 (3.42% effective rate after the effect of a cash flow hedge), for net proceeds of approximately $296.6 million;
● issuance of $400 million of 3.00% senior unsecured medium-term notes due 2031 (3.01% effective rate after the effect of a cash flow hedge), for net proceeds of approximately $395.7 million, $300.0 million of which was used to repay 3.70% medium-term notes due in October 2020;
● issuance of $100 million of 3.20% senior unsecured medium-term notes due 2030 (3.24% effective rate after the effect of a cash flow hedge), and issuance of $300 million of 3.10% senior unsecured medium-term notes due 2034 (3.13% effective rate after the effect of a cash flow hedge), for net proceeds of approximately $398.6 million, which was used to repay $400.0 million of 4.63% medium-term notes due in January 2022;
● net proceeds of $198.9 million from the Company’s unsecured commercial paper program;
● net proceeds of $16.6 million from the Company’s unsecured revolving credit facilities;
● repayments of $162.3 million of secured debt, which was offset by net proceeds of $162.5 million from the issuance of secured debt;
● sale of 7.5 million shares of common stock in an underwritten public offering for net proceeds of approximately $349.8 million at a price per share of $46.65;
● sale of 7.0 million shares of common stock under our ATM program for proceeds of $312.3 million at an weighted average price per share of $45.29;
● sale of 1.3 million shares of common stock under our forward sales agreement for net proceeds of $63.5 million at a price per share of $47.41; and
● distributions of $383.1 million to our common stockholders.
Credit Facilities and Commercial Paper Program
During the year ended December 31, 2020, the Company prepaid the $201.9 million outstanding balance under its secured credit facility with New York Life with proceeds from the issuance of senior unsecured medium-term notes. The Company incurred net extinguishment costs of $9.0 million during the year ended December 31, 2020, which was included in Interest expense on the Consolidated Statements of Operations.
The Company has a $1.1 billion unsecured revolving credit facility and a $350.0 million unsecured term loan. The Credit Agreement for these facilities allows the total commitments under the Revolving Credit Facility and the total
borrowings under the Term Loan to be increased to an aggregate maximum amount of up to $2.0 billion, subject to certain conditions, including obtaining commitments from one or more lenders. The Revolving Credit Facility has a scheduled maturity date of January 31, 2023, with two six-month extension options, subject to certain conditions. The Term Loan has a scheduled maturity date of September 30, 2023.
Based on the Company’s current credit rating, the Revolving Credit Facility has an interest rate equal to LIBOR plus a margin of 82.5 basis points and a facility fee of 15 basis points, and the Term Loan has an interest rate equal to LIBOR plus a margin of 90 basis points. Depending on the Company’s credit rating, the margin under the Revolving Credit Facility ranges from 75 to 145 basis points, the facility fee ranges from 10 to 30 basis points, and the margin under the Term Loan ranges from 80 to 165 basis points.
As of December 31, 2020, we had no outstanding borrowings under the Revolving Credit Facility, leaving $1.1 billion of unused capacity (excluding $2.8 million of letters of credit at December 31, 2020), and $350.0 million of outstanding borrowings under the Term Loan.
We have a working capital credit facility, which provides for a $75 million unsecured revolving credit facility (the “Working Capital Credit Facility”) with a scheduled maturity date of January 14, 2022. Based on the Company’s current credit rating, the Working Capital Credit Facility has an interest rate equal to LIBOR plus a margin of 82.5 basis points. Depending on the Company’s credit rating, the margin ranges from 75 to 145 basis points.
As of December 31, 2020, we had $28.0 million of outstanding borrowings under the Working Capital Credit Facility, leaving $47.0 million of unused capacity.
The bank revolving credit facilities and the term loan are subject to customary financial covenants and limitations, all of which we were in compliance with at December 31, 2020.
We have an unsecured commercial paper program. Under the terms of the program, we may issue unsecured commercial paper up to a maximum aggregate amount outstanding of $500 million. The notes are sold under customary terms in the United States commercial paper market and rank pari passu with all of our other unsecured indebtedness. The notes are fully and unconditionally guaranteed by the Operating Partnership. As of December 31, 2020, we had issued $190.0 million of commercial paper, for one month terms, at a weighted average annualized rate of 0.27%, leaving $310.0 million of unused capacity. In January 2021, the entire $190.0 million of outstanding unsecured commercial paper as of December 31, 2020 was repaid at maturity with additional proceeds of unsecured commercial paper with maturity dates in February 2021 and proceeds under the Working Capital Credit Facility.
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 and operations. 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 $280.0 million in variable rate debt that is not subject to interest rate swap contracts as of December 31, 2020. If market interest rates for variable rate debt increased by 100 basis points, our interest expense would increase by $3.8 million based on the average balance outstanding during the year.
These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. 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 14, Derivatives and Hedging Activities, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional discussion of derivative instruments.
A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands):
Year Ended December 31,
Net cash provided by/(used in) operating activities
$
604,316
$
630,704
Net cash provided by/(used in) investing activities
(460,842)
(1,686,687)
Net cash provided by/(used in) financing activities
(152,594)
880,383
Results of Operations
The following discussion explains the changes in results of operations that are presented in our Consolidated Statements of Operations for the years ended December 31, 2020 and 2019.
Net Income/(Loss) Attributable to Common Stockholders
Net income/(loss) attributable to common stockholders was $60.0 million ($0.20 per diluted share) for the year ended December 31, 2020, as compared to $180.9 million ($0.63 per diluted share) for the comparable period in the prior year. The decrease resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:
● an increase in real estate depreciation expense of $107.4 million primarily due to communities acquired in 2020 and 2019, partially offset by a decrease from sold communities and fully depreciated assets;
● an increase in interest expense of $31.8 million primarily due to higher average debt balances and the early pay off of debt during 2020 and 2019, resulting in prepayment costs of $49.2 million and $29.6 million, respectively;
● a decrease in income/(loss) from unconsolidated entities of $119.0 million, primarily attributable to a $114.9 million gain from the disposition of five operating communities from our UDR/MetLife II joint venture, a $10.6 million gain recognized on the sale of two operating properties from our UDR/KFH joint venture, a $4.6 million unrealized gain recorded on an unconsolidated technology investment, and an increase in preferred interest earned due to increased Developer Capital Program investments in 2019; and
● a decrease in interest income and other income/(expense), net of $9.1 million, primarily attributable to an $8.5 million promoted interest on the prepayment of a note to a multifamily technology company in 2019.
This was partially offset by:
● gains of $119.3 million from the sale of three operating communities located in Kirkland, Washington, Bellevue, Washington and Alexandria, Virginia, during the year ended December 31, 2020, as compared to a gain of $5.3 million on the sale of a parcel of land in Los Angeles, California during the year ended December 31, 2019; and
● an increase in total property NOI of $45.4 million primarily due to NOI from additional operating communities, including those acquired in 2020 and 2019, partially offset by an increase of $11.2 million in property operating expenses.
Apartment Community Operations
Our net income results are primarily from NOI generated from the operation of our apartment communities. The Company 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 2.875% of property revenue, and land rent. Property management expense covers costs directly related to consolidated property operations, inclusive of corporate management, regional supervision, accounting and other costs.
Management considers NOI a useful metric for investors as it is a more meaningful representation of a community’s continuing operating performance than net income as it is prior to corporate-level expense allocations, general and administrative costs, capital structure and depreciation and amortization.
Although the Company considers NOI a useful measure of operating performance, NOI should not be considered an alternative to net income or net cash flow from operating activities as determined in accordance with GAAP. NOI excludes several income and expense categories as detailed in the reconciliation of NOI to Net income/(loss) attributable to UDR, Inc. below.
The following table summarizes the operating performance of our total property NOI for each of the periods presented (dollars in thousands):
Year Ended
Year Ended
December 31, (a)
December 31, (b)
% Change
% Change
Same-Store Communities:
Same-Store rental income
$
924,138
$
953,121
(3.0)
%
$
962,269
$
928,849
3.6
%
Same-Store operating expense (c)
(279,940)
(268,718)
4.2
%
(271,826)
(265,087)
2.5
%
Same-Store NOI
644,198
684,403
(5.9)
%
690,443
663,762
4.0
%
Non-Mature Communities/Other NOI:
Stabilized, non-mature communities NOI (d)
161,258
98,193
64.2
%
79,007
11,968
560.2
%
Acquired communities NOI
7,919
939.2
%
5,830
-
-
%
Redevelopment communities NOI
-
-
-
%
18,571
21,875
(15.1)
%
Development communities NOI
(8)
NM
*
(8)
4,374
NM
*
Non-residential/other NOI (e)
27,694
12,954
113.8
%
13,174
18,609
(29.2)
%
Sold and held for disposition communities NOI
12,419
11,999
3.5
%
1,286
11,527
(88.8)
%
Total Non-Mature Communities/Other NOI
209,504
123,900
69.1
%
117,860
68,353
72.4
%
Total property NOI
$
853,702
$
808,303
5.6
%
$
808,303
$
732,115
10.4
%
*
Not meaningful
(a) Same-Store consists of 37,607 apartment homes.
(b) Same-Store consists of 37,959 apartment homes.
(c) Excludes depreciation, amortization, and property management expenses.
(d) Represents non-mature communities that have achieved 90% occupancy for three consecutive months but do not meet the criteria to be included in Same-Store Communities.
(e) Primarily non-residential revenue and expense and straight-line adjustment for concessions.
The following table is our reconciliation of Net income/(loss) attributable to UDR, Inc. to total property NOI for each of the periods presented (dollars in thousands):
Year Ended December 31,
Net income/(loss) attributable to UDR, Inc.
$
64,266
$
184,965
$
203,106
Joint venture management and other fees
(5,069)
(14,055)
(11,754)
Property management
35,538
32,721
28,465
Other operating expenses
22,762
13,932
12,100
Real estate depreciation and amortization
608,616
501,257
429,006
General and administrative
49,885
51,533
46,983
Casualty-related charges/(recoveries), net
2,131
2,121
Other depreciation and amortization
10,013
6,666
6,673
(Gain)/loss on sale of real estate owned
(119,277)
(5,282)
(136,197)
(Income)/loss from unconsolidated entities
(18,844)
(137,873)
5,055
Interest expense
202,706
170,917
134,168
Interest income and other (income)/expense, net
(6,274)
(15,404)
(6,735)
Tax provision/(benefit), net
2,545
3,838
Net income/(loss) attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership
4,543
14,426
18,215
Net income/(loss) attributable to noncontrolling interests
Total property NOI
$
853,702
$
808,303
$
732,115
Same-Store Communities
Our Same-Store Community properties (those acquired, developed, and stabilized prior to January 1, 2019 and held on December 31, 2020) consisted of 37,607 apartment homes and provided 75.5% of our total NOI for the year ended December 31, 2020.
NOI for our Same-Store Community properties decreased 5.9%, or $40.2 million, for the year ended December 31, 2020 compared to the same period in 2019. The decrease in property NOI was attributable to a 3.0%, or $29.0 million, decrease in property rental income and a 4.2%, or $11.2 million, increase in operating expenses. The decrease in property rental income was primarily driven by an $11.7 million increase in our reserve on multifamily tenant lease receivables, an increase of $15.1 million in rent concessions and an increase of $10.0 million in economic occupancy loss, partially offset by a 0.7%, or $6.0 million, increase in rental rates and a 1.7%, or $1.8 million, increase in reimbursement and ancillary and fee income. Physical occupancy decreased by 0.5% to 96.3% and total monthly income per occupied home decreased 2.6% to $2,126.
The increase in operating expenses was primarily driven by a 12.5%, or $4.8 million, increase in repair and maintenance expense due to the increased use of third party vendors, partially offset by a 2.7%, or $1.7 million, decrease in personnel expense as a result of fewer employees, and a 6.9%, or $7.7 million, increase in real estate taxes, which was primarily due to higher assessed valuations.
The operating margin (property net operating income divided by property rental income) was 69.7% and 71.8% for the years ended December 31, 2020 and 2019, respectively.
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, which include communities recently developed or acquired, redevelopment properties, sold or held for disposition properties, and non-apartment components of mixed use properties.
The remaining 24.5%, or $209.5 million, of our total NOI during the year ended December 31, 2020 was generated from our Non-Mature Communities/Other. NOI from Non-Mature Communities/Other increased by 69.1%, or $85.6 million, for the year ended December 31, 2020 as compared to the same period in 2019. The increase was primarily attributable to a $63.1 million increase in NOI from stabilized, non-mature communities, primarily due to communities acquired in 2020 and 2019, a $14.7 million increase in non-residential/other primarily due to changes in straight-line rent as a result of increased tenant rent concessions during the period, and a $7.2 million increase in acquired communities.
Real estate depreciation and amortization
For the years ended December 31, 2020 and 2019, the Company recognized real estate depreciation and amortization of $608.6 million and $501.3 million, respectively. The increase in 2020 as compared to 2019 was primarily attributable to communities acquired in 2020 and 2019, partially offset by a decrease from sold communities and fully depreciated assets.
Gain/(Loss) on Sale of Real Estate Owned
During the year ended December 31, 2020, the Company recognized gains of $119.3 million from the sale of three operating communities located in Kirkland, Washington, Bellevue, Washington and Alexandria, Virginia.
During the year ended December 31, 2019, the Company recognized a gain of $5.3 million on the sale of a parcel of land in Los Angeles, California.
Income/(Loss) from Unconsolidated Entities
For the years ended December 31, 2020 and 2019, we recognized income/(loss) from unconsolidated entities of $18.8 million and $137.9 million, respectively. The decrease of $119.1 million was primarily due to:
● no dispositions from the Company’s unconsolidated entities during the year ended December 31, 2020.
As compared to:
● gains of $114.9 million from the disposition of five operating communities from our UDR/MetLife II joint venture, a $10.6 million gain from the sale of two operating communities in our UDR/KFH joint venture, and a $4.6 million unrealized gain recorded on an unconsolidated technology investment and an increase in Developer Capital Program investments during the year ended December 31, 2019.
Interest expense
For the years ended December 31, 2020 and 2019, the Company recognized interest expense of $202.7 million and $170.9 million, respectively. The increase in 2020 as compared to 2019 was primarily attributable to higher average debt balances, and the early pay off of debt during 2020 and 2019, resulting in prepayment costs of $49.2 million and $29.6 million, respectively.
Interest income and other income/(expense), net
For the years ended December 31, 2020 and 2019, the Company recognized interest income and other income/(expense), net of $6.3 million and $15.4 million, respectively. The decrease in 2020 as compared to 2019 was primarily attributable to an $8.5 million promoted interest on the prepayment of a note to a multifamily technology company in 2019.
Inflation
We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results of operations as a result of wage pressures and increases in utilities and material costs, the majority of our apartment leases have initial terms of 12 months or less, which generally enables us to compensate for any inflationary effects by increasing rental rates on our apartment homes. Although an extreme escalation in costs could have a negative impact on our residents and their ability to absorb rent increases, we do not believe this has had a material impact on our results for the year ended December 31, 2020.
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.
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2020 (dollars in thousands):
Payments Due by Period
Contractual Obligations
2022-2023
2024-2025
Thereafter
Total
Long-term debt obligations
$
191,097
$
380,347
$
584,113
$
3,829,660
$
4,985,217
Interest on debt obligations (a)
149,982
297,275
271,162
479,084
1,197,503
Letters of credit
2,839
-
-
-
2,839
Operating lease obligations:
Ground leases (b)
12,442
24,884
24,884
442,778
504,988
$
356,360
$
702,506
$
880,159
$
4,751,522
$
6,690,547
(a) Interest payments on variable rate debt instruments are based on each debt instrument’s respective year-end interest rate at December 31, 2020.
(b) For purposes of our ground lease contracts, the Company uses the minimum lease payment, if stated in the agreement. For ground lease agreements where there is a rent reset provision based on fair market value or changes in the consumer price index but does not include a specified minimum lease payment, the Company uses the current rent over the remainder of the lease term.
During 2020, we incurred gross interest costs of $209.7 million, of which $7.0 million was capitalized.
Funds from Operations, Funds from Operations as Adjusted, and Adjusted Funds from Operations
Funds from Operations
Funds from operations (“FFO”) attributable to common stockholders and unitholders is defined as Net income/(loss) attributable to common stockholders (computed in accordance with GAAP), excluding impairment write-downs of depreciable real estate related to the main business of the Company or of investments in non-consolidated investees that are directly attributable to decreases in the fair value of depreciable real estate held by the investee, gains and losses from sales of depreciable real estate related to the main business of the Company and income taxes directly associated with those gains and losses, plus real estate depreciation and amortization, and after adjustments for noncontrolling interests, and the Company’s share of unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust’s (“Nareit”) definition issued in April 2002 and restated in November 2018. 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, if OP Units, DownREIT Units, unvested restricted stock, unvested LTIP Units, stock options, and the shares of Series E Cumulative Convertible Preferred Stock are dilutive, they are included in the diluted share count.
Management considers FFO a useful metric for investors as the Company uses FFO in evaluating property acquisitions and its operating performance, and believes that FFO should be considered along with, but not as an alternative to, net income and cash flow as a measure of the Company’s 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.
Funds from Operations as Adjusted
FFO as Adjusted (“FFOA”) attributable to common stockholders and unitholders is defined as FFO excluding the impact of non-comparable items including, but not limited to, acquisition related costs, prepayment costs/benefits associated with early debt retirement, impairment write downs or gains and losses on sales of real estate or other assets incidental to the main business of the Company and income taxes directly associated with those gains and losses, casualty-related expenses and recoveries, severance costs and legal and other costs.
Management believes that FFOA 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. FFOA 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/(loss) attributable to common stockholders is the most directly comparable GAAP financial measure to FFOA. However, other REITs may use different methodologies for calculating FFOA or similar FFO measures and, accordingly, our FFOA may not always be comparable to FFOA or similar FFO measures calculated by other REITs. FFOA 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 (“AFFO”) attributable to common stockholders and unitholders is defined as FFOA less recurring capital expenditures on consolidated communities 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 FFOA.
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/(loss) attributable to common stockholders 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/(loss) (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.
The following table outlines our reconciliation of Net income/(loss) attributable to common stockholders to FFO, FFOA, and AFFO for the years ended December 31, 2020, 2019, and 2018 (dollars in thousands):
Year Ended December 31,
Net income/(loss) attributable to common stockholders
$
60,036
$
180,861
$
199,238
Real estate depreciation and amortization
608,616
501,257
429,006
Noncontrolling interests
4,704
14,614
18,436
Real estate depreciation and amortization on unconsolidated joint ventures
35,023
57,954
61,871
Net gain on the sale of unconsolidated depreciable property
-
(125,407)
-
Net gain on the sale of depreciable real estate owned, net of tax
(118,852)
-
(136,197)
FFO attributable to common stockholders and unitholders, basic
$
589,527
$
629,279
$
570,254
Distributions to preferred stockholders - Series E (Convertible)
4,230
4,104
3,868
FFO attributable to common stockholders and unitholders, diluted
$
593,757
$
633,383
$
574,122
Income/(loss) per weighted average common share, diluted
$
0.20
$
0.63
$
0.74
FFO per weighted average common share and unit, basic
$
1.86
$
2.04
$
1.95
FFO per weighted average common share and unit, diluted
$
1.85
$
2.03
$
1.93
Weighted average number of common shares and OP/DownREIT Units outstanding - basic
316,855
308,020
292,727
Weighted average number of common shares, OP/DownREIT Units, and common stock equivalents outstanding - diluted
320,187
311,799
297,042
Impact of adjustments to FFO:
-
Costs associated with debt extinguishment and other
$
49,190
$
29,594
$
3,476
Promoted interest on settlement of note receivable, net of tax
-
(6,482)
-
Legal and other costs
8,973
3,660
1,622
Net gain on the sale of non-depreciable real estate owned
-
(5,282)
-
Realized/unrealized (gain)/loss on unconsolidated technology investments, net of tax
(3,582)
(3,300)
-
Joint venture development success fee
-
(3,750)
-
Severance costs and other restructuring expense
1,948
Casualty-related charges/(recoveries), net
2,545
2,364
Casualty-related charges/(recoveries) on unconsolidated joint ventures, net
(374)
-
$
59,105
$
15,092
$
7,576
FFOA attributable to common stockholders and unitholders, diluted
$
652,862
$
648,475
$
581,698
FFOA per weighted average common share and unit, diluted
$
2.04
$
2.08
$
1.96
Recurring capital expenditures
(56,924)
(51,246)
(46,915)
AFFO attributable to common stockholders and unitholders, diluted
$
595,938
$
597,229
$
534,783
AFFO per weighted average common share and unit, diluted
$
1.86
$
1.92
$
1.80
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 years ended December 31, 2020, 2019, and 2018 (shares in thousands):
Year Ended December 31,
Weighted average number of common shares and OP/DownREIT Units outstanding - basic
316,855
308,020
292,727
Weighted average number of OP/DownREIT Units outstanding
(22,310)
(22,773)
(24,548)
Weighted average number of common shares outstanding - basic per the Consolidated Statements of Operations
294,545
285,247
268,179
Weighted average number of common shares, OP/DownREIT Units, and common stock equivalents outstanding - diluted
320,187
311,799
297,042
Weighted average number of OP/DownREIT Units outstanding
(22,310)
(22,773)
(24,548)
Weighted average number of Series E Cumulative Convertible Preferred shares outstanding
(2,950)
(3,011)
(3,011)
Weighted average number of common shares outstanding - diluted per the Consolidated Statements of Operations
294,927
286,015
269,483
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. The Operating Partnership is the successor-in-interest to United Dominion Realty, L.P., a limited partnership formed under the laws of Virginia, which commenced operations on November 4, 1995. Our sole general partner is UDR, Inc., a Maryland corporation (“UDR” or the “General Partner”), which conducts a substantial amount of its business and holds a substantial amount of its assets through the Operating Partnership. At December 31, 2020, the Operating Partnership’s real estate portfolio included 53 communities located in nine states and the District of Columbia with a total of 17,174 apartment homes.
As of December 31, 2020, UDR owned 0.1 million units of our general partnership interests and 176.1 million units of our limited partnership interests (the “OP Units”), or approximately 95.3% 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 section of this Report to the Operating Partnership or “we,” “us” or “our” refer to UDR, L.P. together with its consolidated subsidiaries, and all references in this section to “UDR” or the “General Partner” refer solely to UDR, Inc.
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 June 2003. At December 31, 2020, the General Partner’s consolidated real estate portfolio included 149 communities located in 13 states and the District of Columbia with a total of 48,283 apartment homes. In addition, the General Partner had an ownership interest in 5,295 completed or to-be-completed apartment homes through unconsolidated joint ventures or partnerships, including 2,165 apartment homes owned by entities in which we hold preferred equity investments.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to use judgment in the application of accounting policies, including making estimates and assumptions. A critical accounting policy is one that is both important to our financial condition and results of operations as well as involves some degree of uncertainty. Estimates are prepared based on management’s assessment after considering all evidence available. Changes in estimates could affect our financial position or results of operations. Below is a discussion of the accounting policies that we consider critical to understanding our financial condition or results of operations where there is uncertainty or where significant judgment is required. A discussion of
our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2, Significant Accounting Policies, to the Notes to the Operating Partnership’s Consolidated Financial Statements included in this Report.
Cost Capitalization
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.
In addition to construction costs, we capitalize costs directly related to the predevelopment, development, and redevelopment of a capital project, which include, but are not limited to, interest, real estate taxes, insurance, and allocated development and redevelopment overhead related to support costs for personnel working on the capital projects. We use our professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. These costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress and such costs are incremental and identifiable to a specific activity to get the asset ready for its intended use. As each home in a capital project is completed and becomes available for lease-up, the Operating Partnership ceases capitalization on the related portion. The costs capitalized are reported on the Consolidated Balance Sheets as Total real estate owned, net of accumulated depreciation. Amounts capitalized during the years ended December 31, 2020, 2019, and 2018 were $1.0 million, $1.0 million, and less than $0.1 million, respectively.
Investment in Unconsolidated Entities
We may enter into various joint venture agreements and/or partnerships with unrelated third parties to hold or develop real estate assets. We must determine for each of these ventures whether to consolidate the entity or account for our investment under the equity method of accounting. We determine whether to consolidate a joint venture or partnership based on our rights and obligations under the venture agreement, applying the applicable accounting guidance. The application of the rules in evaluating the accounting treatment for each joint venture or partnership is complex and requires substantial management judgment. We evaluate our accounting for investments on a regular basis including when a significant change in the design of an entity occurs. Throughout our financial statements, and in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we use the term “joint venture” or “partnership” when referring to investments in entities in which we do not have a 100% ownership interest.
We continually evaluate our investments in unconsolidated joint ventures when events or changes in circumstances indicate that there may be an other-than-temporary decline in value. We consider various factors to determine if a decrease in the value of the investment is other-than-temporary. These factors include, but are not limited to, age of the venture, our intent and ability to retain our investment in the entity, the financial condition and long-term prospects of the entity, and the relationships with the other joint venture partners and its lenders. The amount of loss recognized is the excess of the investment’s carrying amount over its estimated fair value. If we believe that the decline in fair value is temporary, no impairment is recorded. The aforementioned factors are taken as a whole by management in determining the valuation of our investment property. Should the actual results differ from management’s judgment, the valuation could be negatively affected and may result in a negative impact to our Consolidated Financial Statements.
Impairment of Long-Lived Assets
Quarterly or when changes in circumstances warrant, we will assess our real estate properties for indicators of impairment. The judgments regarding the existence of impairment indicators are based on certain factors. Such factors include, among other things, operational performance, market conditions, the Operating Partnership’s intent and ability to hold the related asset, as well as any significant cost overruns on development properties.
If a real estate property has indicators of impairment, we assess whether the long-lived asset’s carrying value exceeds the community’s undiscounted future cash flows, which is representative of projected net operating income (“NOI”) plus the residual value of the community. Our future cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. If such indicators of impairment are present and the carrying value exceeds the undiscounted cash flows of the community, an impairment loss is recognized equal to the excess of the carrying amount of the asset over its estimated fair value. Our estimates of fair value represent our best estimate based primarily upon unobservable inputs related to rental rates, operating costs, growth rates, discount rates and capitalization rates, industry trends and reference to market rates and transactions.
For long-lived assets to be disposed of, impairment losses are recognized when the fair value of the asset less estimated cost to sell is less than the carrying value of the asset. Properties classified as real estate held for disposition generally represent properties that are actively marketed or contracted for sale with the closing expected to occur within the next twelve months. Real estate held for disposition is carried at the lower of cost, net of accumulated depreciation, or fair value, less the cost to sell, determined on an asset-by-asset basis. Expenditures for ordinary repair and maintenance costs on held for disposition properties are charged to expense as incurred. Expenditures for improvements, renovations, and replacements related to held for disposition properties are capitalized at cost. Depreciation is not recorded on real estate held for disposition.
Real Estate Investment Properties
We purchase real estate investment properties from time to time and record the fair value to various components, such as land, buildings, and intangibles related to in-place leases, based on the fair value of each component. In making estimates of fair values for purposes of allocating purchase price, we utilize various sources, including independent appraisals, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. The fair value of buildings is determined as if the buildings were vacant upon acquisition and subsequently leased at market rental rates. As such, the determination of fair value considers the present value of all cash flows expected to be generated from the property including an initial lease-up period. We determine the fair value of in-place leases by assessing the net effective rent and remaining term of the lease relative to market terms for similar leases at acquisition. In addition, we consider the cost of acquiring similar leases, the foregone rents associated with the lease-up period, and the carrying costs associated with the lease-up period. The fair value of in-place leases is recorded and amortized as amortization expense over the remaining average contractual lease period.
Summary of Real Estate Portfolio by Geographic Market
The following table summarizes our market information by major geographic markets as of and for the year ended December 31, 2020:
December 31, 2020
Year Ended December 31, 2020
Percentage
Total
Monthly
Net
Number of
Number of
of Total
Carrying
Average
Income per
Operating
Apartment
Apartment
Carrying
Value (in
Physical
Occupied
Income
Same-Store Communities
Communities
Homes
Value
thousands)
Occupancy
Home (a)
(in thousands)
West Region
Orange County, CA
3,119
18.6
%
$
753,801
96.6
%
$
2,277
$
62,791
San Francisco, CA
2,185
15.3
%
617,293
92.6
%
3,198
57,812
Seattle, WA
5.8
%
233,525
97.0
%
2,086
15,840
Monterey Peninsula, CA
1,565
4.6
%
185,224
96.6
%
1,940
27,587
Los Angeles, CA
2.9
%
118,281
96.4
%
2,728
7,740
Other Southern California
1.9
%
76,883
97.6
%
2,155
7,897
Portland, OR
1.3
%
52,126
97.1
%
1,637
6,623
Mid-Atlantic Region
Metropolitan D.C.
1,736
10.9
%
442,224
96.3
%
2,106
29,262
Baltimore, MD
2.7
%
108,779
97.8
%
1,563
6,781
Northeast Region
Boston, MA
1.9
%
76,059
95.5
%
2,086
6,656
New York, NY
8.3
%
334,347
90.9
%
3,449
10,684
Southeast Region
Tampa, FL
2.8
%
114,452
97.7
%
1,556
11,333
Nashville, TN
1,612
3.9
%
157,415
97.6
%
1,352
18,159
Other Florida
2.2
%
89,630
97.2
%
1,656
8,085
Southwest Region
Denver, CO
3.6
%
144,959
93.1
%
3,012
5,199
Total/Average Same-Store Communities
15,609
86.7
%
3,504,998
96.0
%
$
2,173
$
282,449
Non-Mature, Commercial Properties & Other
1,565
13.3
%
538,727
20,838
Total Real Estate Owned
17,174
100.0
%
4,043,725
$
303,287
Total Accumulated Depreciation
(1,892,011)
Total Real Estate Owned, Net of Accumulated Depreciation
$
2,151,714
(a) Monthly Income per Occupied Home represents total monthly revenues divided by the average physical number of occupied apartment homes in our Same-Store portfolio.
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 January 1, 2019 and held as of December 31, 2020. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan to conduct substantial redevelopment activities, and the communities are not classified as held for disposition at year end. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months.
Our Non-Mature 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 communities, 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 owed by us under the General Partner’s credit agreements. The General
Partner will routinely use its working capital credit facility, its unsecured revolving credit facility and issuances of commercial paper 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 continue to execute on maintaining a diversified portfolio.
We expect to meet our short-term liquidity requirements generally through net cash provided by property operations and borrowings owed by 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 net cash provided by property operations, borrowings and the disposition of properties. We believe that our net cash provided by property 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, borrowings owed by us under the General Partner’s credit agreements, and the disposition of properties.
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 owed by us under our General Partner’s credit agreements, and to a lesser extent, from cash flows provided by operating activities.
As of December 31, 2020, the Operating Partnership does not have any debt maturing in 2021.
Statements of Cash Flows
The following discussion explains the changes in Net cash provided by/(used in) 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 years ended December 31, 2020 and 2019.
Operating Activities
For the year ended December 31, 2020, Net cash provided by/(used in) operating activities was $217.7 million compared to $255.1 million for 2019. The decrease in cash flow from operating activities was primarily due to a decrease in net operating income and changes in operating assets and liabilities.
Investing Activities
For the year ended December 31, 2020, Net cash provided by/(used in) investing activities was $(140.0) million compared to $(43.9) million for 2019. The increase in cash used in investing activities was primarily due to the acquisition of two operating communities in 2020, partially offset by proceeds from the sale of an operating community 2020 and a decrease in capital expenditures and other major improvements in 2020, as compared to 2019.
Acquisitions
In November 2020, the Operating Partnership acquired a 672 apartment home operating community located in Tampa, Florida for approximately $122.5 million. The Operating Partnership increased its real estate assets owned by approximately $119.4 million and recorded approximately $3.1 million of in-place lease intangibles.
In December 2020, the Operating Partnership acquired a 400 apartment home operating community located in Herndon, Virginia for approximately $128.6 million. The Operating Partnership increased its real estate assets owned by approximately $125.9 million and recorded approximately $2.7 million of in-place lease intangibles.
During the year ended December 31, 2019, the Operating Partnership did not have any acquisitions of real estate.
Dispositions
In October 2020, the Operating Partnership sold an operating community located in Alexandria, Virginia with a total of 332 apartment homes for gross proceeds of $145.0 million, resulting in a gain of approximately $58.0 million.
The proceeds were designated for a tax-deferred Section 1031 exchange and were used to pay a portion of the purchase price for acquisitions in November and December 2020.
During the year ended December 31, 2019, the Operating Partnership did not have any dispositions of real estate.
Financing Activities
For the year ended December 31, 2020, Net cash provided by/(used in) financing activities was $(76.6) million compared to $(210.9) million for 2019. The decrease in cash used in financing activities was primarily due to a decrease in repayments of notes payable to the General Partner, partially offset by proceeds from the issuance of secured debt in 2019.
Guarantor on Unsecured Debt
The Operating Partnership is the guarantor on the General Partner’s unsecured revolving credit facility with an aggregate borrowing capacity of $1.1 billion, an unsecured commercial paper program with an aggregate borrowing capacity of $500 million, a $350 million term loan due September 2023, $300 million of medium-term notes due October 2025, $300 million of medium-term notes due September 2026, $300 million of medium-term notes due July 2027, $300 million of medium-term notes due January 2028, $300 million of medium-term notes due January 2029, $600 million of medium-term notes due January 2030, $400 million of medium-term notes due August 2031, $400 million of medium-term notes due August 2032, $350 million of medium-term notes due March 2033 and $300 million of medium-term notes due November 2034. As of December 31, 2020 and 2019, the General Partner did not have an outstanding balance under the unsecured revolving credit facility and had $190.0 million and $300.0 million, respectively, outstanding under its unsecured commercial paper program.
The credit facilities are subject to customary financial covenants and limitations.
Interest Rate Risk
We are exposed to interest rate risk associated with variable rate notes payable and maturing debt that has to be refinanced. We do not hold financial instruments for trading or other speculative purposes, but rather issue these financial instruments to finance our portfolio of real estate assets. Interest rate sensitivity is the relationship between changes in market interest rates and the fair value of market rate sensitive assets and liabilities. Our earnings are affected as changes in short-term interest rates impact our cost of variable rate debt and maturing fixed rate debt. We had $27.0 million in variable rate debt that is not subject to interest rate swap contracts as of December 31, 2020. If market interest rates for variable rate debt increased by 100 basis points, our interest expense would increase by $0.3 million based on the average balance at December 31, 2020.
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 amount, 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 owed by the Operating Partnership to manage interest rate risk and generally designates these financial instruments as cash flow hedges. See Note 9, Derivatives and Hedging Activities, in the Notes to the Operating Partnership’s Consolidated Financial Statements for additional discussion of derivative instruments.
A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands):
Year Ended December 31,
Net cash provided by/(used in) operating activities
$
217,683
$
255,093
Net cash provided by/(used in) investing activities
(140,039)
(43,906)
Net cash provided by/(used in) financing activities
(76,578)
(210,853)
Results of Operations
The following discussion explains the changes in results of operations that are presented in our Consolidated Statements of Operations for the years ended December 31, 2020 and 2019.
Net Income/(Loss) Attributable to OP Unitholders
Net income/(loss) attributable to OP unitholders was $134.2 million ($0.73 per diluted OP Unit) for the year ended December 31, 2020 as compared to net income of $102.2 million ($0.56 per diluted OP Unit) for 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:
● gain of $58.0 million on the sale of an operating community in Alexandria, Virginia during the year ended December 31, 2020, as compared to no gains on the sale of real estate in 2019.
This was partially offset by:
● a decrease in total property NOI of $19.7 million primarily due to an approximately $5.5 million reserve recorded on our multifamily tenant lease receivables, an increase in real estate taxes due to higher assessed valuations, and an increase in repair and maintenance expenses due to increased use of third party vendors, partially offset by a decrease in personnel expense as result of fewer employees; and
● an increase in other operating expenses of $6.7 million primarily due to higher ground lease expense.
Apartment Community Operations
Our net income results primarily from 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 are property management costs, which are the Operating Partnership’s allocable share of costs incurred by the General Partner for shared services of corporate level property management employees and related support functions and costs.
Management considers NOI a useful metric for investors as it is a more meaningful representation of a community’s continuing operating performance than net income as it is prior to corporate-level expense allocations, general and administrative costs, capital structure and depreciation and amortization.
Although we consider NOI a useful measure of operating performance, NOI should not be considered an alternative to net income or net cash flow from operating activities as determined in accordance with GAAP. NOI excludes several income and expense categories as detailed in the reconciliation of NOI to Net income/(loss) attributable to OP unitholders below.
The following table summarizes the operating performance of our total property NOI for each of the periods presented (dollars in thousands):
Year Ended
Year Ended
December 31, (a)
%
December 31, (b)
%
Change
Change
Same-Store Communities:
Same-Store rental income
$
390,848
$
403,551
(3.1)
%
$
404,442
$
390,647
3.5
%
Same-Store operating expense (b)
(108,399)
(103,355)
4.9
%
(104,284)
(100,815)
3.4
%
Same-Store NOI
282,449
300,196
(5.9)
%
300,158
289,832
3.6
%
Non-Mature Communities/Other NOI:
Stabilized, non-mature communities NOI (d)
8,498
12,773
(33.5)
%
5,621
5,125
9.7
%
Acquired communities NOI
1,176
-
-
%
-
-
-
Redevelopment communities NOI
-
-
-
%
12,773
14,878
(14.1)
%
Non-residential/other NOI (c)
6,959
4,504
54.5
%
4,454
6,634
(32.9)
%
Sold and held for disposition communities NOI
4,205
5,533
(24.0)
%
-
(100.0)
%
Total Non-Mature Communities/Other NOI
20,838
22,810
(8.6)
%
22,848
27,548
(17.1)
%
Total property NOI
$
303,287
$
323,006
(6.1)
%
$
323,006
$
317,380
1.8
%
(a) Same-Store consists of 15,609 apartment homes.
(b) Same-Store consists of 15,723 apartment homes.
(c) Excludes depreciation, amortization, and property management expenses.
(d) Represents non-mature communities that have achieved 90% occupancy for three consecutive months but do not meet the criteria to be included in Same-Store Communities.
The following table is our reconciliation of Net income/(loss) attributable to OP unitholders to total property NOI for the years ended December 31, 2020, 2019 and 2018 (dollars in thousands):
Year Ended December 31,
Net income/(loss) attributable to OP unitholders
$
134,229
$
102,163
$
229,763
Property management
12,326
12,701
11,878
Other operating expenses
16,138
9,488
8,864
Real estate depreciation and amortization
143,005
139,975
143,481
General and administrative
17,987
18,014
16,889
Casualty-related charges/(recoveries), net
(Gain)/loss on sale of real estate owned
(57,960)
-
(75,507)
(Income)/loss from unconsolidated entities
5,543
8,313
(43,496)
Interest expense
29,357
29,667
22,835
Net income/(loss) attributable to noncontrolling interests
1,869
1,832
1,722
Total property NOI
$
303,287
$
323,006
$
317,380
Same-Store Communities
Our Same-Store Community properties (those acquired, developed, and stabilized prior to January 1, 2019 and held as of December 31, 2020) consisted of 15,609 apartment homes and provided 93.1% of our total NOI for the year ended December 31, 2020.
NOI for our Same-Store Community properties decreased 5.9%, or $17.7 million, for the year ended December 31, 2020 compared to 2019. The decrease in property NOI was primarily attributable to a 3.1%, or $12.7 million, decrease in property rental income and a 4.9%, or $5.0 million, increase in operating expenses. The decrease in property rental income was primarily driven by a $6.1 million increase in our reserve on multifamily tenant lease receivables, a $5.9 million increase in rent concessions and a $4.7 million increase in economic occupancy loss, partially offset by a 0.8%, or $3.1 million, increase in rental rates and a 2.0%, or $0.9 million, increase in reimbursement and ancillary and fee income. Physical occupancy decreased 0.8% to 96.0% and total monthly income per occupied home decreased 2.4% to $2,173.
The increase in operating expenses was primarily driven by a 15.9%, or $2.6 million, increase in repair and maintenance expense due to the increased use of third party vendors, partially offset by a 9.0%, or $2.0 million, decrease in personnel expense as a result of fewer employees, and a 7.8%, or $3.0 million, increase in real estate taxes, which was primarily due to higher assessed valuations.
The operating margin (property net operating income divided by property rental income) was 72.3% and 74.4% for the years ended December 31, 2020 and 2019, respectively.
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, which include communities recently developed or acquired, redevelopment properties, sold or held for disposition properties and the non-apartment components of mixed use properties.
The remaining 6.9%, or $20.8 million, of our total NOI during the year ended December 31, 2020 was generated from our Non-Mature Communities/Other. NOI from Non-Mature Communities/Other decreased 8.6%, or $2.0 million, for the year ended December 31, 2020 as compared to 2019. The decrease was primarily driven by a decrease in NOI of $4.3 million from stabilized, non-mature communities, and a decrease of $1.3 million from sold and held for disposition communities, partially offset by an increase of $2.5 million from non-residential/other primarily due to changes in straight-line rent as a result of increased tenant rent concessions during 2020, and an increase of $1.2 million from acquired communities.
Other Operating Expense
For the year ended December 31, 2020, other operating expense increased by 70.1%, or $6.7 million, as compared to 2019, which was primarily due to higher ground lease expense in 2020 as a result of a rent reset provision on one of our ground leases.
Gain/(Loss) on Sale of Real Estate Owned
During the year ended December 31, 2020, the Operating Partnership recognized a gain of $58.0 million on the sale of an operating community in Alexandria, Virginia with a total of 332 apartment homes. During the year ended December 31, 2019, the Operating Partnership did not recognize any gains on the sale of real estate.
Inflation
We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results of operations as a result of wage pressures and increases in utilities and material costs, the majority of our apartment leases have initial terms of 12 months or less, which generally enables us to compensate for any inflationary effects by increasing rental rates on our apartment homes. Although an extreme escalation in costs could have a negative impact on our residents and their ability to absorb rent increases, we do not believe this has had a material impact on our results for the year ended December 31, 2020.
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.
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2020 (dollars in thousands):
Payments Due by Period
Contractual Obligations
2022-2023
2024-2025
Thereafter
Total
Long-term debt obligations
$
-
$
-
$
-
$
99,500
$
99,500
Interest on debt obligations (a)
2,475
4,950
4,950
10,593
22,968
Operating lease obligations - ground leases (b)
12,442
24,884
24,884
442,778
504,988
Operating lease obligations - equipment leases
1,748
$
15,096
$
30,204
$
30,220
$
553,684
$
629,204
(a) Interest payments on variable rate debt instruments are based on each debt instrument’s respective year-end interest rate at December 31, 2020.
(b) For purposes of our ground lease contracts, the Operating Partnership uses the minimum lease payment, if stated in the agreement. For ground lease agreements where there is a rent reset provision based on fair market value or changes in the consumer price index but does not include a specified minimum lease payment, the Operating Partnership uses the current rent over the remainder of the lease term.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item is included in and incorporated by reference from Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Report.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and related financial information required to be filed are attached to this Report. Reference is made to page of this Report for the Index to Consolidated Financial Statements and Schedules of UDR, Inc. and United Dominion Realty, L.P.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The disclosure controls and procedures of the Company and the Operating Partnership are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and disclosed within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. As a result, our disclosure controls and procedures are designed to provide reasonable assurance that such disclosure controls and procedures will meet their objectives.
As of December 31, 2020, we carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, which is the sole general partner of the Operating Partnership, of the effectiveness of the design and operation of the disclosure controls and procedures of the Company and the Operating Partnership. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer of the Company concluded that the disclosure controls and procedures of the Company and the Operating Partnership are effective at the reasonable assurance level described above.
Management’s Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934 for the Company and the Operating Partnership. Under the supervision and with the participation of the management, the Chief Executive Officer and Chief Financial Officer of the Company, which is the sole general partner of the Operating Partnership, conducted an assessment of the effectiveness of the internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations (2013 Framework) (COSO). Based on such evaluation, management concluded that the Company’s and the Operating Partnership’s internal control over financial reporting was effective as of December 31, 2020.
Ernst & Young LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this Report, has audited UDR, Inc.’s internal control over financial reporting as of December 31, 2020. The report of Ernst & Young LLP, which expresses an unqualified opinion on UDR, Inc.’s internal control over financial reporting as of December 31, 2020, is included under the heading “Report of Independent Registered Public Accounting Firm” of UDR, Inc. contained in this Report. Further, an attestation report of the registered public accounting firm of United Dominion Realty, L.P. will not be required as long as United Dominion Realty, L.P. is a non-accelerated filer.
Changes in Internal Control Over Financial Reporting
There have not been any changes in either the Company’s or the Operating Partnership’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the fourth fiscal quarter to which this Report relates that materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of either the Company or the Operating Partnership.

---

ITEM 9B. OTHER INFORMATION
Item 9B. OTHER INFORMATION
None.
PART III

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference to the information set forth under the headings “Proposal No. 1 Election of Directors,” “Corporate Governance Matters,” “Audit Committee Report,” “Corporate Governance Matters-Board Leadership Structure and Committees-Audit Committee Financial Expert,” “Corporate Governance Matters-Identification and Selection of Nominees for Directors,” “Corporate Governance Matters-Board of Directors and Committee Meetings” and “Executive Officers” in UDR, Inc.’s definitive proxy statement (our “definitive proxy statement”) for its 2021 Annual Meeting of Stockholders. UDR is the sole general partner of the Operating Partnership.
We have a code of ethics for senior financial officers that applies to our principal executive officer, all members of our finance staff, including the principal financial officer, the principal accounting officer, the treasurer and the controller, our director of investor relations, our corporate secretary, and all other Company officers. We also have a code of business conduct and ethics that applies to all of our employees. Information regarding our codes is available on our website, www.udr.com, and is incorporated by reference to the information set forth under the heading “Corporate Governance Matters” in our definitive proxy statement for UDR’s 2021 Annual Meeting of Stockholders. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, a provision of our codes by posting such amendment or waiver on our website.

---

ITEM 11. EXECUTIVE COMPENSATION
Item 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the information set forth under the headings “Security Ownership of Certain Beneficial Owners and Management,” “Corporate Governance Matters-Board Leadership Structure and Committees-Compensation Committee Interlocks and Insider Participation,” “Executive Compensation,” “Compensation of Directors” and “Executive Compensation-Compensation Committee Report” in the definitive proxy statement for UDR’s 2021 Annual Meeting of Stockholders. UDR is the sole general partner of the Operating Partnership.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference to the information set forth under the headings “Security Ownership of Certain Beneficial Owners and Management,” “Executive Compensation” and “Executive Compensation-Equity Compensation Plan Information” in the definitive proxy statement for UDR’s 2021 Annual Meeting of Stockholders. UDR is the sole general partner of the Operating Partnership.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to the information set forth under the heading “Security Ownership of Certain Beneficial Owners and Management,” “Corporate Governance Matters-Corporate Governance Overview,” “Corporate Governance Matters-Director Independence,” “Corporate Governance Matters-Board Leadership Structure and Committees-Independence of the Audit, Compensation, Governance and Nominating Committees,” and “Executive Compensation” in the definitive proxy statement for UDR’s 2021 Annual Meeting of Stockholders. UDR is the sole general partner of the Operating Partnership. Information regarding related party transactions between UDR and the Operating Partnership is presented in Note 7, Related Party Transactions, of the Consolidated Financial Statements of United Dominion Realty, L.P. referenced in Part IV, Item 15(a) of this Report.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference to the information set forth under the headings “Audit Matters-Audit Fees” and “Audit Matters-Pre-Approval Policies and Procedures” in the definitive proxy statement for UDR’s 2021 Annual Meeting of Stockholders. UDR is the sole general partner of the Operating Partnership.
PART IV

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
The following documents are filed as part of this Report:
1. Financial Statements. See Index to Consolidated Financial Statements and Schedules of UDR, Inc. and United Dominion Realty, L.P. on page of this Report.
2. Financial Statement Schedules. See Index to Consolidated Financial Statements and Schedules of UDR, Inc. and United Dominion Realty, L.P. on page S-1 of this Report. All other schedules are omitted because they are not required, are inapplicable, or the required information is included in the financial statements or notes thereto.
3. Exhibits. The exhibits filed with this Report are set forth in the Exhibit Index appearing immediately below.
EXHIBIT INDEX
The exhibits listed below are filed as part of this Report. References under the caption “Location” to exhibits or other filings indicate that the exhibit or other filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that the exhibit referred to is incorporated by reference. Management contracts and compensatory plans or arrangements filed as exhibits to this Report are identified by an asterisk. The Commission file number for UDR, Inc.’s Exchange Act filings referenced below is 1-10524. The Commission file number for United Dominion Realty, L.P.’s Exchange Act filings is 333-156002-01.
Exhibit
Description
Location
2.01
Partnership Interest Purchase and Exchange Agreement dated as of September 10, 1998, by and between UDR, Inc., United Dominion Realty, L.P., American Apartment Communities Operating Partnership, L.P., AAC Management LLC, Schnitzer Investment Corp., Fox Point Ltd. and James D. Klingbeil including as an exhibit thereto the proposed form of the Third Amended and Restated Limited Partnership Agreement of United Dominion Realty, L.P.
Exhibit 2(d) to UDR, Inc.’s Form S-3 Registration Statement (Registration No. 333-64281) filed with the Commission on September 25, 1998.
2.02
Agreement of Purchase and Sale dated as of August 13, 2004, by and between United Dominion Realty, L.P., a Delaware limited partnership, as Buyer, and Essex The Crest, L.P., a California limited partnership, Essex El Encanto Apartments, L.P., a California limited partnership, Essex Hunt Club Apartments, L.P., a California limited partnership, and the other signatories named as Sellers therein.
Exhibit 2.1 to UDR, Inc.’s Current Report on Form 8-K dated September 28, 2004 and filed with the Commission on September 29, 2004.
2.03
First Amendment to Agreement of Purchase and Sale dated as of September 29, 2004, by and between United Dominion Realty, L.P., a Delaware limited partnership, as Buyer, and Essex The Crest, L.P., a California limited partnership, Essex El Encanto Apartments, L.P., a California limited partnership, Essex Hunt Club Apartments, L.P., a California limited partnership, and the other signatories named as Sellers therein.
Exhibit 2.2 to UDR, Inc.’s Current Report on Form 8-K dated September 29, 2004 and filed with the Commission on October 5, 2004.
Exhibit
Description
Location
2.04
Second Amendment to Agreement of Purchase and Sale dated as of October 26, 2004, by and between United Dominion Realty, L.P., a Delaware limited partnership, as Buyer, and Essex The Crest, L.P., a California limited partnership, Essex El Encanto Apartments, L.P., a California limited partnership, Essex Hunt Club Apartments, L.P., a California limited partnership, and the other signatories named as Sellers therein.
Exhibit 2.3 to UDR, Inc.’s Current Report on Form 8-K/A dated September 29, 2004 and filed with the Commission on November 1, 2004.
2.05
Agreement of Purchase and Sale dated as of January 23, 2008, by and between UDR, Inc., United Dominion Realty, L.P., UDR Texas Properties LLC, UDR Western Residential, Inc., UDR South Carolina Trust, UDR Ohio Properties, LLC, UDR of Tennessee, L.P., UDR of NC, Limited Partnership, Heritage Communities L.P., Governour’s Square of Columbus Co., Fountainhead Apartments Limited Partnership, AAC Vancouver I, L.P., AAC Funding Partnership III, AAC Funding Partnership II and DRA Fund VI LLC.
Exhibit 2.1 to UDR, Inc.’s Current Report on Form 8-K dated January 23, 2008 and filed with the Commission on January 29, 2008.
2.06
First Amendment to Agreement of Purchase and Sale dated as of February 14, 2008, by and between UDR, Inc., United Dominion Realty, L.P., UDR Texas Properties LLC, UDR Western Residential, Inc., UDR South Carolina Trust, UDR Ohio Properties, LLC, UDR of Tennessee, L.P., UDR of NC, Limited Partnership, Heritage Communities L.P., Governour’s Square of Columbus Co., Fountainhead Apartments Limited Partnership, AAC Vancouver I, L.P., AAC Funding Partnership III, AAC Funding Partnership II and DRA Fund VI LLC.
Exhibit 2.2 to UDR, Inc.’s Current Report on Form 8-K/A dated March 3, 2008 and filed with the Commission on May 2, 2008.
2.07
Contribution Agreement by and among Home Properties, L.P., UDR, Inc., United Dominion Realty, L.P. and LSREF 4 Lighthouse Acquisitions, LLC, dated June 22, 2015 (UDR, Inc. and United Dominion Realty, L.P. have omitted certain schedules and exhibits pursuant to Item 601(b)(2) of Regulation S-K and shall furnish supplementally to the Commission copies of any of the omitted schedules and exhibits upon request by the Commission.)
Exhibit 2.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on June 22, 2015.
2.08
Amendment Agreement, dated as of August 27, 2015, by and among UDR, Inc., United Dominion Realty, L.P., Home Properties, Inc., Home Properties, L.P., LSREF4 Lighthouse Acquisitions, LLC LSREF4 Lighthouse Corporate Acquisitions, LLC and LSREF4 Lighthouse Operating Acquisitions, LLC.
Exhibit 2.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015.
3.01
Articles of Restatement of UDR, Inc.
Exhibit 3.09 to UDR, Inc.’s Current Report on Form 8-K dated July 27, 2005 and filed with the Commission on August 1, 2005.
Exhibit
Description
Location
3.02
Articles of Amendment to the Articles of Restatement of UDR, Inc. dated and filed with the State Department of Assessments and Taxation of the State of Maryland on March 14, 2007.
Exhibit 3.2 to UDR, Inc.’s Current Report on Form 8-K dated March 14, 2007 and filed with the Commission on March 15, 2007.
3.03
Articles of Amendment to the Articles of Restatement of UDR, Inc. dated August 30, 2011 and filed with the State Department of Assessments and Taxation of the State of Maryland on August 31, 2011.
Exhibit 3.1 to UDR, Inc.’s Current Report on Form 8-K dated August 29, 2011 and filed with the Commission on September 1, 2011.
3.04
Articles of Amendment to the Articles of Restatement of UDR, Inc. dated and filed with the State Department of Assessments and Taxation of the State of Maryland on May 24, 2018.
Exhibit 3.1 to UDR, Inc.’s Current Report on Form 8-K dated May 24, 2018 and filed with the SEC on May 29, 2018.
3.05
Articles Supplementary relating to UDR, Inc.’s 6.75% Series G Cumulative Redeemable Preferred Stock dated and filed with the State Department of Assessments and Taxation of the State of Maryland on May 30, 2007.
Exhibit 3.4 to UDR, Inc.’s Form 8-A Registration Statement dated and filed with the Commission on May 30, 2007.
3.06
Amended and Restated Bylaws of UDR, Inc. (as amended through May 24, 2018).
Exhibit 3.6 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.
3.07
Certificate of Limited Partnership of United Dominion Realty, L.P. dated as of February 19, 2004.
Exhibit 3.4 to United Dominion Realty, L.P.’s Post-Effective Amendment No. 1 to Registration Statement on Form S-3 dated and filed with the Commission on October 15, 2010.
3.08
Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 23, 2004.
Exhibit 10.23 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003.
3.09
First Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of June 24, 2005.
Exhibit 10.06 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
3.10
Second Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 23, 2006.
Exhibit 10.6 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.
3.11
Third Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 2, 2007.
Exhibit 99.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.
3.12
Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of December 27, 2007.
Exhibit 10.25 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2007.
3.13
Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of March 7, 2008.
Exhibit 10.53 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008.
Exhibit
Description
Location
3.14
Sixth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of December 9, 2008.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated December 9, 2008 and filed with the Commission on December 10, 2008.
3.15
Seventh Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P., dated as of March 13, 2009.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated March 18, 2009 and filed with the Commission on March 19, 2009.
3.16
Eighth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P., dated as of November 17, 2010.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on November 18, 2010.
3.17
Ninth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P., dated as of December 4, 2015.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated December 4, 2015 and filed with the Commission on December 10, 2015.
3.18
Tenth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P., dated as of October 29, 2018.
Exhibit 3.18 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.
3.19
Eleventh Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P., dated as of December 16, 2020.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on December 16, 2020.
4.01
Form of UDR, Inc. Common Stock Certificate.
Exhibit 4.1 to UDR, Inc.’s Current Report on Form 8-K dated March 14, 2007 and filed with the Commission on March 15, 2007.
4.02
Senior Indenture dated as of November 1, 1995, by and between UDR, Inc. and First Union National Bank of Virginia, N.A., as trustee.
Exhibit 4(ii)(h)(1) to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
4.03
Supplemental Indenture dated as of June 11, 2003, by and between UDR, Inc. and Wachovia Bank, National Association, as trustee.
Exhibit 4.03 to UDR, Inc.’s Current Report on Form 8-K dated June 17, 2004 and filed with the Commission on June 18, 2004.
4.04
Subordinated Indenture dated as of August 1, 1994 by and between UDR, Inc. and Crestar Bank, as trustee.
Exhibit 4(i)(m) to UDR, Inc.’s Form S-3 Registration Statement (Registration No. 33-64725) filed with the Commission on November 15, 1995.
4.05
Form of UDR, Inc. Senior Debt Security.
Exhibit 4(i)(n) to UDR, Inc.’s Form S-3 Registration Statement (Registration No. 33-64725) filed with the Commission on November 15, 1995.
4.06
Form of UDR, Inc. Subordinated Debt Security.
Exhibit 4(i)(p) to UDR, Inc.’s Form S-3 Registration Statement (Registration No. 33-55159) filed with the Commission on August 19, 1994.
4.07
Form of UDR, Inc. Fixed Rate Medium-Term Note, Series A.
Exhibit 4.01 to UDR, Inc.’s Current Report on Form 8-K dated March 20, 2007 and filed with the Commission on March 22, 2007.
Exhibit
Description
Location
4.08
Form of UDR, Inc. Floating Rate Medium-Term Note, Series A.
Exhibit 4.02 to UDR, Inc.’s Current Report on Form 8-K dated March 20, 2007 and filed with the Commission on March 22, 2007.
4.09
Indenture dated as of April 1, 1994, by and between UDR, Inc. and Nationsbank of Virginia, N.A., as trustee.
Exhibit 4(ii)(f)(1) to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1994.
4.10
Supplemental Indenture dated as of August 20, 2009, by and between UDR, Inc. and U.S. Bank National Association, as trustee, to UDR, Inc.’s Indenture dated as of April 1, 1994.
Exhibit 4.1 to UDR, Inc.’s Current Report on Form 8-K dated August 20, 2009 and filed with the Commission on August 21, 2009.
4.11
Guaranty of United Dominion Realty, L.P. with respect to UDR, Inc.’s Indenture dated as of November 1, 1995.
Exhibit 99.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on September 30, 2010.
4.12
Guaranty of United Dominion Realty, L.P. with respect to UDR, Inc.’s Indenture dated as of October 12, 2006.
Exhibit 99.2 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on September 30, 2010.
4.13
First Supplemental Indenture among UDR, Inc., United Dominion Realty, L.P. and U.S. Bank National Association, as Trustee, dated as of May 3, 2011, relating to UDR, Inc.’s Medium-Term Notes, Series A, due Nine Months or More from Date of Issue.
Exhibit 4.1 to UDR, Inc.’s Current Report on Form 8-K filed with the Commission on May 4, 2011.
4.14
UDR, Inc. 4.00% Medium-Term Note, Series A due October 2025, issued September 22, 2015.
Exhibit 4.23 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015.
4.15
UDR, Inc. 2.950% Medium-Term Note, Series A due September 2026, issued August 23, 2016.
Exhibit 4.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016.
4.16
UDR, Inc. 3.500% Medium-Term Note, Series A due July 2027, issued June 16, 2017.
Exhibit 10.2 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.
4.17
UDR, Inc. 3.500% Medium-Term Note, Series A due January 2028, issued December 13, 2017.
Exhibit 4.21 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017.
4.18
UDR, Inc. 4.400% Medium-Term Note, Series A due January 2029, issued October 26, 2018.
Exhibit 4.21 to UDR, Inc’s Annual Report on Form 10-K for the year ended December 31, 2018.
4.19
UDR, Inc. 3.200% Medium-Term Note, Series A due January 2030, issued July 2, 2019.
Exhibit 4.1 to UDR, Inc’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019.
4.20
UDR, Inc. 3.000% Medium-Term Note, Series A due August 2031, issued August 15, 2019.
Exhibit 4.2 to UDR, Inc’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019.
Exhibit
Description
Location
4.21
UDR, Inc. 3.100% Medium-Term Note, Series A due November 2034, issued October 11, 2019.
Exhibit 4.22 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019.
4.22
UDR, Inc. 3.200% Medium-Term Note, Series A due January 2030, issued October 11, 2019.
Exhibit 4.23 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019.
4.23
Description of UDR, Inc’s Securities.
Exhibit 4.24 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019.
4.24
UDR, Inc. 3.200% Medium-Term Note, Series A due January 2030, issued February 28, 2020.
Exhibit 4.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 2020.
4.25
UDR, Inc. 2.100% Medium-Term Note, Series A due August 2032, issued July 21, 2020.
Exhibit 4.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2020.
4.26
UDR, Inc. 1.900% Medium-Term Note, Series A due March 2033, issued December 14, 2020.
Filed herewith.
10.01*
UDR, Inc. 1999 Long-Term Incentive Plan (as amended and restated February 2, 2017).
Exhibit 10.1 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016.
10.02*
Form of UDR, Inc. Restricted Stock Award Agreement under the 1999 Long-Term Incentive Plan.
Exhibit 10.2 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019.
10.03*
Form of UDR, Inc. Restricted Stock Award Agreement for awards outside of the 1999 Long-Term Incentive Plan.
Exhibit 99.3 to UDR, Inc.’s Current Report on Form 8-K dated March 19, 2007 and filed with the Commission on March 19, 2007.
10.04*
Description of UDR, Inc. Shareholder Value Plan.
Exhibit 10(x) to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999.
10.05*
Description of UDR, Inc. Executive Deferral Plan.
Exhibit 10(xi) to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999.
10.06*
Indemnification Agreement by and between UDR, Inc. and each of its directors and officers listed on Schedule A thereto.
Exhibit 10.7 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016.
10.07
Subordination Agreement dated as of April 16, 1998, by and between UDR, Inc. and United Dominion Realty, L.P.
Exhibit 10(vi)(a) to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
Exhibit
Description
Location
10.08
Third Amended and Restated Distribution Agreement among UDR, Inc., United Dominion Realty, L.P., as Guarantor, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated and Wells Fargo Securities, LLC, as Agents, dated September 1, 2011, with respect to the issue and sale by UDR, Inc. of its Medium-Term Notes, Series A Due Nine Months or More From Date of Issue.
Exhibit 1.2 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on September 1, 2011.
10.09
First Amended and Restated Credit Agreement, dated as of September 27, 2018, by and among UDR, Inc., as borrower, and the lenders and agents party thereto.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated September 27, 2018 and filed with the Commission on October 1, 2018.
10.10
Guaranty of United Dominion Realty, L.P., dated as of September 27, 2018, with respect to the Credit Agreement, dated as of September 27, 2018.
Exhibit 10.2 to UDR, Inc.’s Current Report on Form 8-K dated September 27, 2018 and filed with the Commission on October 1, 2018.
10.11
Amended and Restated Aircraft Time Sharing Agreement dated as of February 18, 2019, by and between UDR, Inc. and Thomas W. Toomey.
Exhibit 10.15 to UDR, Inc’s Annual Report on Form 10-K for the year ended December 31, 2018.
10.12
Amended and Restated Aircraft Time Sharing Agreement dated as of February 18, 2019, by and between UDR, Inc. and Warren L. Troupe.
Exhibit 10.16 to UDR, Inc’s Annual Report on Form 10-K for the year ended December 31, 2018.
10.13
Amendment No. 1, dated July 29, 2014, to the Third Amended and Restated Distribution Agreement among UDR, Inc., United Dominion Realty, L.P., as Guarantor, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated and Wells Fargo Securities, LLC, as Agents, dated September 1, 2011, with respect to the issue and sale by UDR, Inc. of its Medium-Term Notes, Series A Due Nine Months or More From Date of Issue.
Exhibit 1.2 to UDR, Inc.’s Current Report on Form 8-K dated July 29, 2014 and filed with the Commission on July 31, 2014.
10.14
Agreement of Limited Partnership of UDR Lighthouse DownREIT L.P., dated as of October 5, 2015, as amended.
Exhibit 10.21 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015.
10.15*
Class 1 LTIP Unit Award Agreement.
Exhibit 10.22 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015.
10.16*
Notice of Class 2 LTIP Unit Award.
Exhibit 10.16 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019.
10.17*
Notice of Restricted Stock Unit Award.
Exhibit 10.17 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019.
Exhibit
Description
Location
10.18
Amendment No. 2, dated April 27, 2017, to the Third Amended and Restated Distribution Agreement, dated September 1, 2011 and as amended July 29, 2014, among the Company and Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. LLC, and Wells Fargo Securities, LLC, as Agents, with respect to the issue and sale by UDR, Inc. of its Medium Term Notes, Series A Due Nine Months or More From Date of Issue.
Exhibit 1.2 to UDR, Inc.’s Current Report on Form 8-K dated April 27, 2017 and filed with the Commission on April 27, 2017.
10.19
Letter Agreement, between UDR, Inc. and Warren L. Troupe (including the related release agreement and consulting agreement as exhibits thereto), dated December 31, 2019.
Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated December 31, 2019 and filed with the Commission on January 3, 2020.
10.20
Letter Agreement, between UDR, Inc. and Jerry A. Davis (including the related release agreement and Consulting Agreement as exhibits thereto), dated December 16, 2020.
Exhibit 10.2 to UDR Inc.’s Current Report on Form 8-K dated and filed with the Commission on December 16, 2020.
10.21
Amendment No. 3, dated May 7, 2020, to the Third Amended and Restated Distribution Agreement, dated September 1, 2011 and as amended July 29, 2014 and April 27, 2017.
Exhibit 1.2 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on May 7, 2020.
10.22
Class 1 Performance LTIP Unit Award Agreement.
Filed herewith.
10.23
Class 2 Performance LTIP Unit Award Agreement.
Filed herewith.
10.24
Class 2 Performance LTIP Unit Award Agreement, STI.
Filed herewith.
Subsidiaries of UDR, Inc. and United Dominion Realty, L.P.
Filed herewith.
23.1
Consent of Independent Registered Public Accounting Firm for UDR, Inc.
Filed herewith.
23.2
Consent of Independent Registered Public Accounting Firm for United Dominion Realty, L.P.
Filed herewith.
31.1
Rule 13a-14(a) Certification of the Chief Executive Officer of UDR, Inc.
Filed herewith.
31.2
Rule 13a-14(a) Certification of the Chief Financial Officer of UDR, Inc.
Filed herewith.
31.3
Rule 13a-14(a) Certification of the Chief Executive Officer of United Dominion Realty, L.P.
Filed herewith.
31.4
Rule 13a-14(a) Certification of the Chief Financial Officer of United Dominion Realty, L.P.
Filed herewith.
32.1
Section 1350 Certification of the Chief Executive Officer of UDR, Inc.
Filed herewith.
Exhibit
Description
Location
32.2
Section 1350 Certification of the Chief Financial Officer of UDR, Inc.
Filed herewith.
32.3
Section 1350 Certification of the Chief Executive Officer of United Dominion Realty, L.P.
Filed herewith.
32.4
Section 1350 Certification of the Chief Financial Officer of United Dominion Realty, L.P.
Filed herewith.
Inline XBRL (Extensible Business Reporting Language). The following materials from this Annual Report on Form 10-K for the period ended December 31, 2020, formatted in Inline XBRL: (i) consolidated balance sheets of UDR, Inc., (ii) consolidated statements of operations of UDR, Inc., (iii) consolidated statements of comprehensive income/(loss) of UDR, Inc., (iv) consolidated statements of changes in equity of UDR, Inc., (v) consolidated statements of cash flows of UDR, Inc., (vi) notes to consolidated financial statements of UDR, Inc., (vii) consolidated balance sheets of United Dominion Realty, L.P., (viii) consolidated statements of operations of United Dominion Realty, L.P., (ix) consolidated statements of comprehensive income/(loss) of United Dominion Realty, L.P.; (x) consolidated statements of changes in capital of United Dominion Realty, L.P., (xi) consolidated statements of cash flows of United Dominion Realty, L.P. and (xii) notes to consolidated financial statements of United Dominion Realty, L.P. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
Filed herewith.
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.
Filed herewith.
*
Management Contract or Compensatory Plan or Arrangement