Edgar Filing: UDR, Inc.

United Dominion Realty, L.P.

UDR-2014.12.31-10K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K




þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014




o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-10524 (UDR, Inc.)

Commission file number 333-156002-01 (United Dominion Realty, L.P.)

UDR, Inc.

United Dominion Realty, L.P.

(Exact name of registrant as specified in its charter)




Maryland (UDR, Inc.)		54-0857512
Delaware (United Dominion Realty, L.P.)		54-1776887
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado 80129

(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code: (720) 283-6120

Securities registered pursuant to Section 12(b) of the Act:




Title of Each Class		Name of Each Exchange on Which Registered

Common Stock, $0.01 par value (UDR, Inc.)		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The aggregate market value of the shares of common stock of UDR, Inc. held by non-affiliates on June 30, 2014 was approximately $3.0 billion. This calculation excludes shares of common stock held by the registrant’s officers and directors and each person known by the registrant to beneficially own more than 5% of the registrant’s outstanding shares, as such persons may be deemed to be affiliates. This determination of affiliate status should not be deemed conclusive for any other purpose. As of February 19, 2015, there were 258,765,713 shares of UDR, Inc.’s common stock outstanding.

There is no public trading market for the partnership units of United Dominion Realty, L.P. As a result, an aggregate market value of the partnership units of United Dominion Realty, L.P. cannot be determined.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Report, to the extent not set forth herein, is incorporated by reference from UDR, Inc.’s definitive proxy statement for the 2015 Annual Meeting of Stockholders.

TABLE OF CONTENTS




	PAGE
PART I

Item 1. Business	2

Item 1A. Risk Factors	9

Item 1B. Unresolved Staff Comments	21

Item 2. Properties	22

Item 3. Legal Proceedings	24

Item 4. Mine Safety Disclosures	24

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25

Item 6. Selected Financial Data	29

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 7A. Quantitative and Qualitative Disclosures about Market Risk	63

Item 8. Financial Statements and Supplementary Data	63

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	63

Item 9A. Controls and Procedures	63

Item 9B. Other Information	64

PART III

Item 10. Directors, Executive Officers and Corporate Governance	65

Item 11. Executive Compensation	65

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	65

Item 13. Certain Relationships and Related Transactions, and Director Independence	65

Item 14. Principal Accountant Fees and Services	65

PART IV

Item 15. Exhibits, Financial Statement Schedules	66

EXPLANATORY NOTE

This Report combines the annual reports on Form 10-K for the fiscal year ended December 31, 2014 of UDR, Inc. a Maryland corporation, and United Dominion Realty, L.P., a Delaware limited partnership, of which UDR, Inc. is the parent company and sole general partner. Unless the context otherwise requires, all references in this Report to “we,” “us,” “our,” the “Company,” “UDR” or “UDR, Inc.” refer collectively to UDR, Inc., together with its consolidated subsidiaries and joint ventures, including United Dominion Realty, L.P. Unless the context otherwise requires, the references in this Report to the “Operating Partnership” or the “OP” refer to United Dominion Realty, L.P., together with its consolidated subsidiaries. “Common stock” refers to the common stock of UDR and “stockholders” means the holders of shares of UDR’s common stock and preferred stock. The limited partnership interests of the Operating Partnership are referred to as “OP Units” and the holders of the OP Units are referred to as “unitholders.” This combined Form 10-K is being filed separately by UDR and the Operating Partnership.

There are a number of differences between the Company and the Operating Partnership, which are reflected in our disclosure in this Report. UDR is a real estate investment trust (“REIT”), whose most significant asset is its ownership interest in the Operating Partnership. UDR also conducts business through other subsidiaries, including its taxable REIT subsidiary (“TRS”) whose activities include development of land and land entitlement. UDR acts as the sole general partner of the Operating Partnership, holds interests in subsidiaries and joint ventures, owns and operates properties, issues securities from time to time and guarantees debt of certain of our subsidiaries. The Operating Partnership conducts the operations of a substantial portion of the business and is structured as a partnership with no publicly traded equity securities. The Operating Partnership has guaranteed certain outstanding debt of UDR.

As of December 31, 2014, UDR owned 110,883 units (100%) of the general partnership interests of the Operating Partnership and 174,002,342 units (or approximately 95.0%) of the limited partnership interests of the Operating Partnership. UDR conducts a substantial amount of its business and holds a substantial amount of its assets through the Operating Partnership, and, by virtue of its ownership of the OP Units and being the Operating Partnership’s sole general partner, UDR has the ability to control all of the day-to-day operations of the Operating Partnership. Separate financial statements and accompanying notes, as well as separate discussions under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchasers of Equity Securities” and “Control and Procedures” are provided for each of UDR and the Operating Partnership. In addition, certain disclosures in “Business” are separated by entity to the extent that the discussion relates to UDR’s business outside of the Operating Partnership.

PART I

Forward-Looking Statements

This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, without limitation, statements concerning property acquisitions and dispositions, development activity and capital expenditures, capital raising activities, rent growth, occupancy, and rental expense growth. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Such factors include, among other things, unfavorable changes in the apartment market, changing economic conditions, the impact of inflation/deflation on rental rates and property operating expenses, expectations concerning availability of capital and the stabilization of the capital markets, the impact of competition and competitive pricing, acquisitions, developments and redevelopments not achieving anticipated results, delays in completing developments, redevelopments and lease-ups on schedule, expectations on job growth, home affordability and demand/supply ratio for multifamily housing, expectations concerning development and redevelopment activities, expectations on occupancy levels, expectations concerning the joint ventures with third parties, expectations that automation will help grow net operating income, and expectations on annualized net operating income. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Annual Report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see “Item 1A. Risk Factors” elsewhere in this Annual Report.

Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Annual Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.

Item 1. BUSINESS

General

UDR is a self-administered real estate investment trust, or REIT, that owns, operates, acquires, renovates, develops, redevelops, and manages multifamily apartment communities generally located in high barrier-to-entry markets located throughout the United States. The high barrier-to-entry markets are characterized by limited land for new construction, difficult and lengthy entitlement processes, low single-family home affordability and strong employment growth potential. At December 31, 2014, our consolidated real estate portfolio included 139 communities located in 20 markets, with a total of 39,851 completed apartment homes, which are held through our subsidiaries, including the Operating Partnership, and consolidated joint ventures. In addition, we have an ownership interest in 36 communities containing 10,055 apartment homes through unconsolidated joint ventures or partnerships. As of December 31, 2014, the Company was developing one wholly-owned community with 369 apartment homes and three unconsolidated joint venture communities with 1,018 apartment homes, none of which have been completed.

At December 31, 2014, the Operating Partnership’s consolidated real estate portfolio included 68 communities located in 17 markets, with a total of 20,814 completed apartment homes. The Operating Partnership owns, operates, acquires, renovates, develops, redevelops, and manages multifamily apartment communities generally located in high barrier-to-entry markets located throughout the United States. During the year ended December 31, 2014, revenues of the Operating Partnership represented approximately 52% 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 2014, we declared total distributions of $1.04 per common share and paid dividends of $1.015 per common share.



	Dividends Declared in 2014		Dividends Paid in 2014
First Quarter	$	0.260	$	0.235
Second Quarter	0.260		0.260
Third Quarter	0.260		0.260
Fourth Quarter	0.260		0.260
Total	$	1.040	$	1.015

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.

As of February 19, 2015, we had 1,523 full-time associates and 59 part-time associates, all of whom were employed by UDR.

Reporting Segments

We report in two segments: Same-Store Communities and Non-Mature Communities/Other.

Our Same-Store Communities segment includes those communities acquired, developed, and stabilized prior to January 1, 2013, and held as of December 31, 2014. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan to conduct substantial redevelopment activities, and the community is not classified as held for sale at year end. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months.

Our Non-Mature 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 15, 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 earnings and dividends.

2014 Highlights


•	In July 2014, the Company marked its 42nd year as a REIT and paid its 168th consecutive quarterly dividend in October. The Company’s annualized declared 2014 dividend of $1.04 represented a 10.6% increase over the previous year.


•	We achieved Same-Store revenue growth of 4.3% and Same-Store net operating income (“NOI”) growth of 5.2%.


•	During the year ended December, 31, 2014, we invested approximately $251.5 million in wholly-owned development projects and $31.5 million in redevelopment projects and major renovations, including completion of 980 development apartment homes and 401 redevelopment apartment homes in primary markets.


•	We expanded our relationship with the Metropolitan Life Insurance Company (“MetLife”):


•	We increased our ownership interest in the remaining six operating communities in the UDR/MetLife I Joint Venture from 12% to 50%, and MetLife and the Company contributed the communities to the UDR/MetLife II Joint Venture. We paid MetLife $82.5 million for the additional ownership interests.


•	We increased our ownership interest in four land sites in the UDR/MetLife I Joint Venture from approximately 3% to 50%. The remaining interest continues to be held by our joint venture partner MetLife. We paid MetLife approximately $36.8 million for the additional ownership interests.


•	We sold 50% of our interest in 3033 Wilshire and 49% of our interest in 13th and Market to MetLife for gross proceeds of approximately $62.5 million, resulting in the assets being held by unconsolidated joint ventures.


•	We issued $300 million of 3.75%, 10-year senior unsecured medium-term notes in June. Net proceeds were used to pay down borrowings outstanding on our unsecured revolving credit facility and for general corporate purposes.


•	We completed five developments containing 1,396 homes for an estimated aggregate cost of $480.0 million.


•	We acquired land parcels for future development located in Huntington Beach, California for $77.8 million and Boston, Massachusetts for $32.2 million.


•	We acquired two communities located in Seattle, Washington and Kirkland, Washington with a total of 358 apartment homes for $45.5 million and $75.2 million, respectively.


•	We recognized gains on the sale of real estate of $143.6 million, net of tax, which consisted of:


•	the sale of nine communities with a total of 2,500 apartment homes, an adjacent parcel of land, and one operating property for gross proceeds of $328.4 million, resulting in a gain, net of tax, of approximately $138.6 million; and


•	the sale of our 49% interest in a recently completed development for gross proceeds of $54.2 million, resulting in a gain, net of tax, of $7.2 million and our 50% interest in a land parcel for gross proceeds of $8.3 million, resulting in a loss, net of tax, of $2.2 million.


•	We sold common stock under our amended equity distribution agreement for net proceeds of approximately $99.8 million, which was primarily used to fund the Company's Steele Creek participating loan investment.

Other than the following, there were no significant changes to the Operating Partnership’s business during 2014 (the above 2014 highlights relate to UDR or other subsidiaries of UDR):

•

The Operating Partnership sold one operating community and an adjacent parcel of land in San Diego, California for gross proceeds of $48.7 million, resulting in a gain of approximately $24.4 million and net proceeds of $47.9 million. The Operating Partnership also recorded gains of $39.2 million in connection with UDR’s sale of two communities in Tampa, Florida and Los Angeles, California, which were previously deferred.

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 2014.

Our Strategies and Vision

Our vision is to be the innovative multifamily public REIT of choice. Our strategic priorities are:

1. Strengthen the Quality of Our Portfolio

2. Flexible/Strong Balance Sheet

3. Increase Cash Flow to Support Dividend Growth

4. A Great Place to Work and Live

Capital Allocation

Acquisitions and Dispositions

When evaluating potential acquisitions, we consider:


•	population growth, cost of alternative housing, overall potential for economic growth and the tax and regulatory environment of the community in which the property is located;


•	geographic location, including proximity to jobs, entertainment, transportation, and our existing communities which can deliver significant economies of scale;


•	construction quality, condition and design of the property;


•	current and projected cash flow of the property and the ability to increase cash flow;


•	potential for capital appreciation of the property;


•	ability to increase the value and profitability of the property through operations and redevelopment;


•	whether it is located in a high barrier-to-entry market;


•	terms of resident leases, including the potential for rent increases;


•	occupancy and demand by residents for properties of a similar type in the vicinity;


•	prospects for liquidity through sale, financing, or refinancing of the property; and


•	competition from existing multifamily communities and the potential for the construction of new multifamily properties in the area.

We regularly monitor our assets to increase the quality and performance of our portfolio. Factors we consider in deciding whether to dispose of a property include:


•	current market price for an asset compared to projected economics for that asset;


•	potential increases in new construction in the market area;


•	areas with low job growth prospects;


•	markets where we do not intend to establish a long-term concentration; 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):



	2014		2013		2012		2011		2010
Homes acquired	358		—		633		3,161		1,374
Homes disposed	2,500		914		6,507		4,488		149
Homes owned at December 31,	39,851		41,250		41,571		47,343		48,553
Total real estate owned, at cost	$	8,383,259	$	8,207,977	$	8,055,828	$	8,074,471	$	6,881,347

The following table summarizes our apartment community acquisitions and dispositions and our year-end ownership position of the Operating Partnership for the past five years (dollars in thousands):



	2014		2013		2012		2011		2010
Homes acquired	—		—		—		1,833		—
Homes disposed	264		914		1,314		2,024		—
Homes owned at December 31,	20,814		20,746		21,660		23,160		23,351
Total real estate owned, at cost	$	4,238,770	$	4,188,480	$	4,182,920	$	4,205,298	$	3,706,184

Development Activities

Our objective in developing a community is to create value while improving the quality of our portfolio. Demographic trends, economic drivers, and how multifamily fundamentals/valuations have trended over the long-term govern our review process on where to allocate development capital. At December 31, 2014, our development pipeline included one wholly-owned community located in Boston, Massachusetts with 369 homes and a budget of $217.7 million, in which we have a carrying value of $177.6 million.

Redevelopment Activities

Our objective in redeveloping a community is twofold: we aim to meaningfully grow rental rates while also producing a higher yielding and more valuable asset through asset quality improvement. During 2014, we continued to redevelop properties in primary markets where we concluded there was an opportunity to add value. At December 31, 2014, the Company was redeveloping 708 apartment homes, 694 of which have been completed, at one wholly-owned community with 739 apartment homes located in New York, New York. During the year ended December 31, 2014, we incurred $31.5 million in major renovations, which include major structural changes and/or architectural revisions to existing buildings.

Joint Venture 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.

The Operating Partnership is not a party to any of the joint venture activities described above.

Balance Sheet Management

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.

Financing Activities

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.

Operational Excellence, Cash Flow and Dividend Growth

Investment in new technologies continues to drive operating efficiencies in our business and help us to better meet the changing needs of our residents. Since its launch in January 2009, our residents have been utilizing our web-based resident internet portal on our website. Our residents have the ability to conduct business with us 24 hours a day, 7 days a week and complete online leasing applications and renewals throughout our portfolio.

We launched a new website at the end of 2014. This is the third major revision of UDR.com, and represents a complete rebuild of our on-line presence. It was completed after several months of research with customer focus groups that told us what they wanted to see in an on-line shopping experience. The new website features elements such as on-line appointment scheduling, enhanced neighborhood information, and comparison shopping tools, all of which are available via any device the customer may choose. To date, we are exceeding our initial targets for the site by converting a higher than expected amount of traffic to community visits.

As a result of transforming our operations through technology, residents’ satisfaction 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.

Portfolio Improvement

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.

For the year ended December 31, 2014, approximately 65.0% of our same-store NOI was generated by communities located in our primary markets of: Seattle, Washington; San Francisco Bay Area, California; Los Angeles, California; Orange County, California; Austin, Texas; Dallas, Texas; Boston, Massachusetts; New York, New York; and Metropolitan D.C.

Operating Partnership Strategies and Vision

The Operating Partnership’s long-term strategic plan is to achieve greater operating efficiencies by investing in fewer, more concentrated markets and enhance resident and associate service through technology. As a result, the Operating Partnership has sought to expand its interests in communities located in New York, New York; San Francisco Bay Area, California; Boston, Massachusetts; and Metropolitan D.C. over the past years. Prospectively, we plan to continue to channel new investments into those markets we believe will continue to provide the best investment returns. Markets will be targeted based upon defined criteria including above average job growth, low single-family home affordability and limited new supply for multifamily housing, which are three key drivers to strong rental growth.

Markets and Competitive Conditions

During the year ended December 31, 2014, 65.0% of our consolidated same-store NOI was generated from apartment homes located in our primary markets. At December 31, 2014, the Company held 70.7% of its same-store carrying value of its real estate portfolio in our primary markets. During the year ended December 31, 2014, 72.9% of the Operating Partnership’s same-store NOI was generated from apartment homes located in our primary markets. At December 31, 2014, the Operating Partnership held 76.1% of its same-store carrying value of its real estate portfolio in its primary markets. We believe that this diversification increases investment opportunity and decreases the risk associated with cyclical local real estate markets and economies, thereby increasing the stability and predictability of our earnings.

Competition for new residents is generally intense across all of our markets. Some competing communities offer features that our communities do not have. Competing communities can use 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 20 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 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, 2014, our consolidated real estate portfolio included 139 communities with a total of 39,851 completed apartment homes, which included the Operating Partnership’s consolidated real estate portfolio of 68 communities with a total of 20,814 completed apartment homes. The overall quality of our portfolio enables us to raise rents and to attract residents with higher levels of disposable income who are more likely to absorb such rents.

At December 31, 2014, the Company was developing one wholly-owned community with 369 apartment homes, none of which have been completed. In addition, at December 31, 2014, the Company had three communities with 825 apartment homes which were completed but not yet stabilized.

At December 31, 2014, the Company was redeveloping 708 apartment homes, 694 of which have been completed, at one wholly-owned community with 739 apartment homes.

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 expenses excluding property management and other operating expenses. 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.

For the year ended December 31, 2014, our same-store NOI increased by $21.6 million or 5.2% compared to the prior year. Our same-store community properties provided 79.2% of our total NOI for the year ended December 31, 2014. The increase in NOI for the 34,581 same-store apartment homes, or 86.8% of our portfolio, was driven by an increase in rental rates, fee and reimbursement income, and increased occupancy, partially offset by an increase in real estate taxes and insurance expenses.

For the year ended December 31, 2014, the Operating Partnership’s same-store NOI increased by $15.2 million or 6.1% compared to the prior year. Our same-store community properties provided 88.1% of our total NOI for the year ended December 31, 2014. The increase in NOI for the 19,010 same-store apartment homes, or 91.3% of the Operating Partnership’s portfolio, was driven by an increase in rental rates, fee and reimbursement income, and increased occupancy, partially offset by an increase in operating expenses.

Revenue growth in 2015 may be impacted by adverse developments affecting the economy generally, 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 through wage pressures, property taxes, utilities and material costs, substantially all of our leases are for a term of 14 months or less, which generally enables us to compensate for any inflationary effects by increasing rents on our apartment homes. Although an escalation in energy and food costs could have a negative impact on our residents and their ability to absorb rent increases, we do not believe this has had a material impact on our results for the year ended December 31, 2014.

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

There are many factors that affect the business and the results of operations of the Company and the Operating Partnership, some of which are beyond the control of the Company and the Operating Partnership. The following is a description of important factors that may cause the actual results of operations of the Company and the Operating Partnership in future periods to differ materially from those currently expected or discussed in forward-looking statements set forth in this Report relating to our financial results, operations and business prospects. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.

Risks Related to Our Real Estate Investments and Our Operations

Unfavorable Apartment Market and Economic Conditions Could Adversely Affect Occupancy Levels, Rental Revenues and the Value of Our Real Estate Assets. Unfavorable market conditions in the areas in which we operate and unfavorable economic conditions generally may significantly affect our occupancy levels, our rental rates and collections, the value of the properties and our ability to strategically acquire or dispose of apartment communities on economically favorable terms. Our ability to lease our properties at favorable rates is adversely affected by the increase in supply in the multifamily 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, personal debt levels, a downturn in the housing market, stock market volatility and uncertainty about the future. Some of our major expenses, including mortgage payments, generally do not decline when related rents decline. We would expect that declines in our occupancy levels, rental revenues and/or the values of our apartment communities would cause us to have less cash available to pay our indebtedness and to distribute to UDR’s stockholders, which could adversely affect our financial condition and the market value of our securities. Factors that may affect our occupancy levels, our rental revenues, and/or the value of our properties include the following, among others:


•	downturns in the national, regional and local economic conditions, particularly increases in unemployment;


•	declines in mortgage interest rates, making alternative housing more affordable;


•	government or builder incentives which enable first time homebuyers to put little or no money down, making alternative housing options more attractive;


•	local real estate market conditions, including oversupply of, or reduced demand for, apartment homes;


•	declines in the financial condition of our tenants, which may make it more difficult for us to collect rents from some tenants;


•	changes in market rental rates;


•	our ability to renew leases or re-lease space on favorable terms;


•	the timing and costs associated with property improvements, repairs or renovations;


•	declines in household formation; and


•	rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases in operating costs.

We May Be Unable to Renew Leases or Relet Apartment Units as Leases Expire. 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. If we are unable to promptly renew the leases or relet the apartment units, or if the rental rates upon renewal or reletting are significantly 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, we may be unable to increase rent and/or delinquencies may increase.

Substantial International, National and Local Government Spending and Increasing Deficits May Adversely Impact Our Business, Financial Condition and Results of Operations. The values of, and the cash flows from, the properties we own are affected by developments in global, national and local economies. As a result of the most recent recession and the significant government interventions, federal, state and local governments have incurred record deficits and assumed or guaranteed liabilities of private financial institutions or other private entities. These increased budget deficits and the weakened financial condition of federal, state and local governments may lead to reduced governmental spending, tax increases, public sector job losses, increased interest rates, currency devaluations or other adverse economic events, which may directly or indirectly adversely affect our business, financial condition and results of operations.

Risk of Inflation/Deflation. Substantial inflationary or deflationary pressures could have a negative effect on rental rates and property operating expenses. The general risk of inflation is that interest on our debt and general and administrative expenses increase at a rate faster than increases in our rental rates, which could adversely affect our results of operations, cash flow and ability to make distributions to UDR’s stockholders. The predominant effects of deflation include high unemployment and credit contraction. Restricted lending practices could impact our ability to obtain financing or refinancing for our properties.

We Are Subject to Certain Risks Associated with Selling Apartment Communities, Which Could Limit Our Operational and Financial Flexibility. We periodically dispose of apartment communities that no longer meet our strategic objectives, but adverse market conditions may make it difficult to sell apartment communities like the ones we own. We cannot predict whether we will be able to sell any property for the price or on the terms we set, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property. Furthermore, we may be required to expend funds to correct defects or to make improvements before a property can be sold. These conditions may limit our ability to dispose of properties and to change our portfolio promptly in order to meet our strategic objectives, which may in turn have a material adverse effect on our financial condition and the market value of our securities. We are also subject to the following risks in connection with sales of our apartment communities:

•

a significant portion of the proceeds from our overall property sales may be held by intermediaries in order for some sales to qualify as like-kind exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended, or the “Code,” so that any related capital gain can be deferred for federal income tax purposes. As a result, we may not have immediate access to all of the cash proceeds generated from our property sales; and


•	federal tax laws limit our ability to profit on the sale of communities that we have owned for less than two years, and this limitation may prevent us from selling communities when market conditions are favorable.

Competition Could Limit Our Ability to Lease Apartment Homes or Increase or Maintain Rents. Our apartment communities compete with numerous housing alternatives in attracting residents, including other apartment communities, condominiums and single-family rental homes, as well as owner occupied single-and multi-family homes. Competitive housing in a particular area could adversely affect our ability to lease apartment homes and increase or maintain rents, 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:


•	we may be unable to obtain financing for acquisitions on favorable terms or at all;


•	even if we are able to finance the acquisition, cash flow from the acquisition may be insufficient to meet our required principal and interest payments on the acquisition;


•	even if we enter into an acquisition agreement for an apartment community, we may be unable to complete the acquisition after incurring certain acquisition-related costs;


•	we may incur significant costs and divert management attention in connection with the evaluation and negotiation of potential acquisitions, including potential acquisitions that we are subsequently unable to complete;


•	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 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 pursue 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:


•	we may be unable to obtain construction financing for development activities under favorable terms, including but not limited to interest rates, maturity dates and/or loan to value ratios, or at all which could cause us to delay or even abandon potential developments;

•

we may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, which could result in increased development costs, could delay initial occupancy dates for all or a portion of a development community, and could require us to abandon our activities entirely with respect to a project for which we are unable to obtain permits or authorizations;


•	yields may be less than anticipated as a result of delays in completing projects, costs that exceed budget and/or higher than expected concessions for lease up and lower rents than expected;


•	if we are unable to find joint venture partners to help fund the development of a community or otherwise obtain acceptable financing for the developments, our development capacity may be limited;


•	we may abandon development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring such opportunities;


•	we may be unable to complete construction and lease-up of a community on schedule, or incur development or construction costs that exceed our original estimates, and we may be unable to charge rents that would compensate for any increase in such costs;


•	occupancy rates and rents at a newly developed community may fluctuate depending on a number of factors, including market and economic conditions, preventing us from meeting our profitability goals for that community; and


•	when we sell to third parties communities or properties that we developed or renovated, we may be subject to warranty or construction defect claims that are uninsured or exceed the limits of our insurance.

In some cases in the past, the costs of upgrading acquired communities exceeded our original estimates. We may experience similar cost increases in the future. Our inability to charge rents that will be sufficient to offset the effects of any increases in these costs may impair our profitability.

Bankruptcy 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. As a result, bankruptcies or defaults by these counterparties could result in services not being provided, projects not being completed on time, or on budget, or at all, 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 business and results of operations.

Property Ownership Through Joint Ventures May Limit Our Ability to Act Exclusively in Our Interest. We have in the past and may in the future develop and/or acquire properties in joint ventures with other persons or entities when we believe circumstances warrant the use of such structures. We currently have 15 active joint ventures and partnerships, excluding our participating loan investment, with a total equity investment of $655.5 million. We could become engaged in a dispute with one or more of our joint venture partners which might affect our ability to operate a jointly-owned property. Moreover, joint venture partners may have business, economic or other objectives that are inconsistent with our objectives, including objectives that relate to the appropriate timing and terms of any sale or refinancing of a property. In some instances, joint venture partners may have competing interests in our markets that could create conflicts of interest. Also, our joint venture partners might refuse to make capital contributions when due and 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 arrangement, which could cause us to sell our interest, or acquire our partners’ 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 joint venture (if we are the seller) or of the other partner’s interest in the 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.

We are also subject to risk in cases where an institutional owner is our joint venture partner, including (i) a deadlock if we and our joint venture partner are unable to agree upon certain major and other decisions, (ii) the limitation of our ability to liquidate our position in the joint venture without the consent of the other joint venture partner, and (iii) the requirement to provide guarantees in favor of lenders with respect to the indebtedness of the joint venture.

We Could Incur Significant Insurance Costs and Some Potential Losses May Not Be Adequately Covered by Insurance. We have a comprehensive insurance program covering our property and operating activities with limits of liability customary within the multi-family 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 occur, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur in the future. If one or more of our significant properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Such events could adversely affect our cash flow and ability to make distributions to UDR’s stockholders.

As a result of our substantial real estate holdings, the cost of insuring our apartment communities is a significant component of expense. Insurance premiums are subject to significant increases and fluctuations, which are generally outside of our control. We insure our properties with insurance companies that we believe have a good rating at the time our policies are put into effect. The financial condition of one or more of our insurance companies that we hold policies with may be negatively impacted, 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 of one or more insurance companies may increase the costs to renew our insurance policies or increase the cost of insuring additional properties and recently developed or redeveloped properties.

Failure to Succeed in New Markets May Limit Our Growth. We have acquired in the past, and we may acquire in the future if appropriate opportunities arise, apartment communities that are outside of our existing markets. Entering into new markets may expose us to a variety of risks, and we may not be able to operate successfully in new markets. These risks include, among others:


•	inability to accurately evaluate local apartment market conditions and local economies;


•	inability to hire and retain key personnel;


•	lack of familiarity with local governmental and permitting procedures; and


•	inability to achieve budgeted financial results.

Potential Liability for Environmental Contamination Could Result in Substantial Costs. Under various federal, state and local environmental laws, as a current or former owner or operator of real estate, we could be required to investigate and remediate the effects of contamination of currently or formerly owned real estate by hazardous or toxic substances, often regardless of our knowledge of or responsibility for the contamination and solely by virtue of our current or former ownership or operation of the real estate. In addition, we could be held liable to a governmental authority or to third parties for property damage and for investigation and clean-up costs incurred in connection with the contamination. These costs could be substantial, and in many cases environmental laws create liens in favor of governmental authorities to secure their payment. The presence of such substances or a failure to properly remediate any resulting contamination could materially and adversely affect our ability to borrow against, sell or rent an affected property.

In addition, our properties are subject to various federal, state and local environmental, health and safety laws, including laws governing the management of wastes and underground and aboveground storage tanks. Noncompliance with these environmental, health and safety laws could subject us to liability. Changes in laws could increase the potential costs of compliance with environmental laws, health and safety laws or increase liability for noncompliance. This may result in significant unanticipated expenditures or may otherwise materially and adversely affect our operations.

As the owner or operator of real property, we may also incur liability based on various building conditions. For example, buildings and other structures on properties that we currently own or operate or those we acquire or operate in the future contain, may contain, or may have contained, asbestos-containing material, or ACM. Environmental, health and safety laws require that ACM be properly managed and maintained and may impose fines or penalties on owners, operators or employers for non-compliance with those requirements.

These requirements include special precautions, such as removal, abatement or air monitoring, if ACM would be disturbed during maintenance, renovation or demolition of a building, potentially resulting in substantial costs. In addition, we may be subject to liability for personal injury or property damage sustained as a result of exposure to ACM or releases of ACM into the environment.

We cannot assure you that costs or liabilities incurred as a result of environmental issues will not affect our ability to make distributions to our stockholders, or that such costs or liabilities will not have a material adverse effect on our financial condition and results of operations.

Our Properties May Contain or Develop Harmful Mold or Suffer from Other Indoor Air Quality Issues, Which Could Lead to Liability for Adverse Health Effects or Property Damage or Cost for Remediation. When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants or to increase ventilation, 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 if property damage or personal injury occurs.

Compliance or Failure to Comply with the Americans with Disabilities Act of 1990 or Other Safety Regulations and Requirements Could Result in Substantial Costs. The Americans with Disabilities Act generally requires that public buildings, including our properties, be made accessible to disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants. From time to time claims may be asserted against us with respect to some of our properties under 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.

Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not

know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that will affect our cash flow and results of operations.

Compliance with or Changes in Real Estate Tax and Other Laws Could Adversely Affect Our Funds from Operations and Our Ability to Make Distributions to Stockholders. Generally we do not directly pass through costs resulting from compliance with or changes in real estate tax laws to residential property tenants. We also do not generally pass through increases in income, service or other taxes, to tenants under leases. These costs may adversely affect net operating income and the ability to make distributions to stockholders. Similarly, compliance with or changes in (i) laws increasing the potential liability for environmental conditions existing on properties or the restrictions on discharges or other conditions or (ii) rent control or rent stabilization laws or other laws regulating housing, such as the Americans with Disabilities Act and the Fair Housing Amendments Act of 1988, may result in significant unanticipated expenditures, which would adversely affect our funds from operations and the ability to make distributions to stockholders.

Risk of Damage from Catastrophic Weather and Natural Events and Potential Climate Change. Certain of our communities are located in areas that may experience catastrophic weather and other natural events from time to time, including mudslides, fires, hurricanes, tornadoes, 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 materially and adversely affect our business and our financial condition and results of operations.

To the extent that we experience any significant changes in the climate in areas where our communities are located, we may experience extreme weather conditions and prolonged 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. Should the impact of such climate change be material in nature, or occur for lengthy periods of time, our financial condition and results of operations may be adversely affected.

Risk of Earthquake Damage. Some of our communities are located in the general vicinity of active 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 would also continue to be obligated to repay any mortgage indebtedness or other obligations related to the community. Any such loss could materially and adversely affect our business, 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 Due to Fire, Natural Disasters or Other Hazards. The accidental death of persons living in our communities due to fire, natural disasters or other hazards could have a material 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 such any such events have occurred, which could have a material adverse effect on our business and results of operations.

Actual or Threatened Terrorist Attacks May Have an Adverse Effect on Our Business and Operating Results and Could Decrease the Value of Our Assets. Actual or threatened terrorist attacks and other acts of violence or war could have a material adverse effect on our business and operating results. Attacks that directly impact one or more of our apartment communities could significantly affect our ability to operate those communities and thereby impair our ability to achieve our expected results. Further, our insurance coverage may not cover all losses caused by a terrorist attack. In addition, the adverse effects that such violent acts and threats of future attacks could have on the U.S. economy could similarly have a material adverse effect on our business and results of operations.

Mezzanine Loan Assets Involve Greater Risks of Loss than Senior Loans Secured by Income-producing Properties. We may acquire mezzanine loans, which take the form of subordinated loans secured by second mortgages on the underlying property or 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 long-term senior mortgage lending secured by income-producing real property, because the loan may become unsecured 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 initial expenditure. In addition, mezzanine loans may 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.

We May Experience a Decline in the Fair Value of Our Assets and Be Forced to Recognize Impairment Charges, Which Could Materially and Adversely Impact Our Financial Condition, Liquidity and Results of Operations and the Market Price of UDR’s Common Stock. A decline in the fair value of our assets may require us to recognize an impairment against such assets under 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 to maturity or for a period of time sufficient to allow for recovery to the amortized cost of such assets. If such a determination were to be made, we would recognize unrealized losses through earnings and write down the amortized cost of such assets to a new cost basis, based on the fair value of such assets on the date they are considered to be impaired. Such impairment charges reflect non-cash losses at the time of recognition; subsequent disposition or sale of such assets could further affect our future losses or gains, as they are based on the difference between the sale price received and adjusted amortized cost of such assets at the time of sale. If we are required to recognize asset impairment charges in the future, these charges could materially and adversely affect our financial condition, liquidity, results of operations and the per share trading price of UDR’s common stock.

Any Material Weaknesses Identified in Our Internal Control Over Financial Reporting Could Have an Adverse Effect on UDR’s Stock Price. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting. If we identify one or more material weaknesses in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, which in turn could have an adverse effect on UDR’s stock price.

Our Business and Operations Would Suffer in the Event of System Failures or Breaches in Data Security. Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our internal information technology systems, our systems are vulnerable to damages from any number of sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war, and telecommunication failures. We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information and to manage or support a variety of our business processes, including financial transactions and keeping of records, which may include personal identifying information of tenants and lease data. We rely on commercially available systems, software, tools and monitoring to provide security for processing, transmitting and storing confidential tenant information, such as individually identifiable information relating to financial accounts. Although we take steps to protect the security of the data maintained in our information systems, it is possible that our security measures will not be able to prevent the systems’ improper functioning, or the improper disclosure of personally identifiable information, such as in the event of cyber attacks. Security breaches, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential information. Any failure to maintain proper function, security and availability of our information systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties and could materially and adversely affect us.

Our Success Depends on Our Senior Management. Our success depends upon the retention of our senior management, whose continued service is not guaranteed. We may not be able to find qualified replacements for the individuals who make up our senior management if their services should no longer be available to us. The loss of services of one or more members of our senior management team could have a material adverse effect on our business, financial condition and results of operations.

We May be Adversely Affected by New Federal Laws and Regulations. The United States Administration and Congress have enacted, or called for consideration of, proposals relating to a variety of issues, including with respect to health care, financial regulation reform, climate change, executive compensation and others. We believe that these and other potential proposals could have varying degrees of impact on us ranging from minimal to material. At this time, we are unable to predict with certainty what level of impact specific proposals could have on us.

Federal rulemaking and administrative efforts that may have an impact on us focus principally on the areas perceived as contributing to the global financial crisis and the most recent economic recession. These initiatives have created a degree of uncertainty regarding the basic rules governing the real estate industry and many other businesses that is unprecedented in the United States at least since the wave of lawmaking and regulatory reform that followed in the wake of the Great Depression. The federal legislative response in this area culminated in the enactment on July 21, 2010 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). Many of the provisions of the Dodd-Frank Act have extended implementation periods and delayed effective dates and continue to require extensive rulemaking by regulatory authorities; thus, the impact on us may not be known for an extended period of time. The Dodd-Frank Act, including future rules implementing its provisions and the interpretation of those rules, along with other legislative and regulatory proposals that are

proposed or pending in the United States Congress, may limit our revenues, impose fees or taxes on us, and/or intensify the regulatory framework in which we operate in ways that are not currently identifiable.

Changing laws, regulations and standards relating to corporate governance and public disclosure in particular, including certain provisions of the Dodd-Frank Act and the rules and regulations promulgated thereunder, have created uncertainty for public companies like ours and could significantly increase the costs and risks associated with accessing the U.S. public markets. Because we are committed to maintaining high standards of internal control over financial reporting, corporate governance and public disclosure, our management team will need to devote significant time and financial resources to comply with these evolving standards for public companies. We intend to continue to invest appropriate resources to comply with both existing and evolving standards, and this investment has resulted and will likely continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

We May be Adversely Affected by New State and Local Laws and Regulations. We are subject to state and local laws, regulations and ordinances at locations where we operate and to the rules and regulations of various local authorities regarding a wide variety of matters that could affect, directly or indirectly, our operations. We cannot predict what matters might be considered in the future by these state and local authorities, nor can we judge what impact, if any, the implementation of new legislation might have on our business.

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.

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, or could restrict our borrowing capacity under our line of credit due to debt covenant restraints. Sufficient cash flow may not be available to make all required principal payments and still satisfy UDR’s distribution requirements to maintain its status as a REIT for federal income tax purposes. In addition, the full limits of our line of credit may not be available to us if our operating performance falls outside the constraints of our debt covenants. We are also likely to need to refinance substantially all of our outstanding debt as it matures. We may not be able to refinance existing debt, or the terms of any refinancing may not be as favorable as the terms of the existing debt, which could create pressures to sell assets or to issue additional equity when we would otherwise not choose to do so. In addition, our failure to comply with our debt covenants could result in a requirement to repay our indebtedness prior to its maturity, which could have an adverse effect on our cash flow, increase our financing costs and impact our ability to make distributions to UDR’s stockholders.

Failure to Generate Sufficient Revenue Could Impair Debt Service Payments and Distributions to Stockholders. If our apartment communities do not generate sufficient net rental income to meet rental expenses, our ability to make required payments of interest and principal on our debt securities and to pay distributions to UDR’s stockholders will be adversely affected. The following factors, among others, may affect the net rental income generated by our apartment communities:


•	the national and local economies;


•	local real estate market conditions, such as an oversupply of apartment homes;


•	tenants’ perceptions of the safety, convenience, and attractiveness of our communities and the neighborhoods where they are located;


•	our ability to provide adequate management, maintenance and insurance;


•	rental expenses, including real estate taxes and utilities;


•	competition from other apartment communities;


•	changes in interest rates and the availability of financing;


•	changes in governmental regulations and the related costs of compliance; and


•	changes in tax and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing.

Expenses associated with our investment in an apartment community, such as debt service, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a reduction in rental income from that community. If a community is mortgaged to secure payment of debt and we are unable to make the mortgage payments, we could sustain a loss as a result of foreclosure on the community or the exercise of other remedies by the mortgage holder.

Our Debt Level May Be Increased. Our current debt policy does not contain any limitations on the level of debt that we may incur, although our ability to incur debt is limited by covenants in our bank and other credit agreements. We manage our debt to be in compliance with these debt covenants, but subject to compliance with these covenants, we may increase the amount of our debt at any time without a concurrent improvement in our ability to service the additional debt.

Financing May Not Be Available and Could Be Dilutive. Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including common and preferred equity. We and other companies in the real estate industry have experienced limited availability of financing from time to time. If we issue additional equity securities to finance developments and acquisitions instead of incurring debt, the interests of our existing stockholders could be diluted.

Failure To Maintain Our Current Credit Ratings Could Adversely Affect Our Cost of Funds, Related Margins, Liquidity, and Access to Capital Markets. Moody’s and Standard & Poor’s, the major debt rating agencies, routinely evaluate our debt and have given us ratings on our senior unsecured debt 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.

Disruptions in Financial Markets May Adversely Impact Availability and Cost of Credit and Have Other Adverse Effects on Us and the Market Price of UDR’s Stock. Our ability to make scheduled payments or to refinance debt obligations will depend on our operating and financial performance, which in turn is subject to prevailing economic conditions and to financial, business and other factors beyond our control. During the global financial crisis and the economic recession that followed it, the United States stock and credit markets experienced significant price volatility, dislocations and liquidity disruptions, which caused market prices of many stocks to fluctuate substantially and the spreads on debt financings to widen considerably. Those circumstances materially impacted liquidity in the financial markets at times, making terms for certain financings less attractive, and in some cases resulted in the unavailability of financing. Any future disruptions or uncertainty in the stock 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. 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 Regarding Fannie Mae or Freddie Mac Could Have a Material Adverse Impact on Our Business. Fannie Mae and Freddie Mac are a major source of financing for secured multifamily rental real estate. We and other multifamily companies depend heavily on Fannie Mae and Freddie Mac to finance growth by purchasing or guaranteeing apartment loans. In September 2008, the U.S. government assumed control of Fannie Mae and Freddie Mac and placed both companies into a government conservatorship under the Federal Housing Finance Agency. The Administration and lawmakers have proposed potential options for the future of mortgage finance in the U.S. that could involve the phase out of Fannie Mae and Freddie Mac. While we believe Fannie Mae and Freddie Mac will continue to provide liquidity to our sector, should they discontinue doing so, have their mandates changed or reduced or be disbanded or reorganized by the government, it would significantly reduce our access to debt capital and adversely affect our ability to finance or refinance existing indebtedness at competitive rates and it may adversely affect our ability to sell assets. Uncertainty in the future activity and involvement of Fannie Mae and Freddie Mac as a source of financing could negatively impact our ability to make acquisitions and make it more difficult or not possible for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of debt financing or difficulties in obtaining debt financing.

The Soundness of Financial Institutions Could Adversely Affect Us. We have relationships with many financial institutions, including lenders under our credit facilities, and, from time to time, we execute transactions with counterparties in the financial services industry. As a result, defaults by, or even rumors or questions about, financial institutions or the financial services industry generally, could result in losses or defaults by these institutions. In the event that the volatility of the financial markets adversely affects these financial institutions or counterparties, we or other parties to the transactions with us may be unable to complete transactions as intended, which could adversely affect our business and results of operations.

Changing Interest Rates Could Increase Interest Costs and Adversely Affect Our Cash Flow and the Market Price of Our Securities. We currently have, and expect to incur in the future, interest-bearing debt at rates that vary with market interest rates. As of December 31, 2014, UDR had approximately $579.7 million of variable rate indebtedness outstanding, which constitutes approximately 16.1% of total outstanding indebtedness as of such date. As of December 31, 2014, the Operating Partnership had approximately $219.8 million of variable rate indebtedness outstanding, which constitutes approximately 23.6% of total outstanding indebtedness to third parties as of such date. An increase in interest rates would increase our interest expenses and increase the costs of refinancing existing indebtedness and of issuing new debt. Accordingly, higher interest rates could adversely affect cash flow and our ability to service our debt and to make distributions to security holders. The effect of prolonged interest rate increases could negatively impact our ability to make acquisitions and develop properties. In addition, an increase in market interest rates may lead our security holders to demand a higher annual yield, which could adversely affect the market price of UDR’s common and preferred stock and debt securities.

Interest Rate Hedging Contracts May Be Ineffective and May Result in Material Charges. From time to time when we anticipate issuing debt securities, we may seek to limit our exposure to fluctuations in interest rates during the period prior to the pricing of the securities by entering into interest rate hedging contracts. We may do this to increase the predictability of our financing costs. Also, from time to time we may rely on interest rate hedging contracts to limit our exposure under variable rate debt to unfavorable changes in market interest rates. If the terms of new debt securities are not within the parameters of, or market interest rates fall below that which we incur under a particular interest rate hedging contract, the contract is ineffective. Furthermore, the settlement of interest rate hedging contracts has involved and may in the future involve material charges. In addition, our use of interest rate hedging arrangements may expose us to additional risks, including a risk that a counterparty to a hedging arrangement may fail to honor its obligations. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging activities will have desired beneficial impact on our results of operations or financial condition. Termination of these hedging agreements typically involves costs, such as transaction fees or breakage costs.

Risks Related to Tax Laws

We Would Incur Adverse Tax Consequences if UDR Failed to Qualify as a REIT. UDR has elected to be taxed as a REIT under the Code. Our qualification as a REIT requires us to satisfy numerous requirements, some on an annual and quarterly basis, established under highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control. We intend that our current organization and method of operation enable us to continue to qualify as a REIT, but we may not so qualify or we may not be able to remain so qualified in the future. In addition, U.S. federal income tax laws governing REITs and other corporations and the administrative interpretations of those laws may be amended at any time, potentially with retroactive effect. Future legislation, new regulations, administrative interpretations or court decisions could adversely affect our ability to qualify as a REIT or adversely affect UDR’s stockholders.

If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates, and would not be allowed to deduct dividends paid to UDR’s stockholders in computing our taxable income. Also, unless the Internal Revenue Service granted us relief under certain statutory provisions, we could not re-elect REIT status until the fifth calendar year after the year in which we first failed to qualify as a REIT. The additional tax liability from the failure to qualify as a REIT would reduce or eliminate the amount of cash available for investment or distribution to UDR’s stockholders. This would likely have a significant adverse effect on the value of our securities and our ability to raise additional capital. In addition, we would no longer be required to make distributions to UDR’s stockholders. Even if we continue to qualify as a REIT, we will continue to be subject to certain federal, state and local taxes on our income and property.

Certain of our subsidiaries have also elected to be taxed as a REIT under the Code, and are therefore subject to the same risks in the event that they fail 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 distributions to individual stockholders generally are not eligible for the reduced rates.

UDR May Conduct a Portion of Our Business Through Taxable REIT Subsidiaries, Which are Subject to Certain Tax Risks. We have established several taxable REIT subsidiaries. Despite UDR’s qualification as a REIT, its taxable REIT subsidiaries must pay income tax on their taxable income. In addition, we must comply with various tests to continue to qualify as a REIT for federal income tax purposes, and our income from and investments in our taxable REIT subsidiaries generally do not constitute permissible income and investments for these tests. While we will attempt to ensure that our dealings with our taxable REIT subsidiaries will not adversely affect our REIT qualification, we cannot provide assurance that we will successfully achieve that result. Furthermore, we may be subject to a 100% penalty tax, we may jeopardize our ability to retain future gains on real property sales, or our taxable REIT subsidiaries may be denied deductions, to the extent our dealings with our taxable REIT subsidiaries are not deemed to be arm’s length in nature or are otherwise not respected.

REIT Distribution Requirements Limit Our Available Cash. As a REIT, UDR is subject to annual distribution requirements, which limit the amount of cash we retain for other business purposes, including amounts to fund our growth. We generally must distribute annually at least 90% of our net REIT taxable income, excluding any net capital gain, in order for our distributed earnings not to be subject to corporate income tax. We intend to make distributions to UDR’s stockholders to comply with the requirements of the Code. However, differences in timing between the recognition of taxable income and the actual receipt of cash could require us to sell assets or borrow funds on a short-term or long-term basis to meet the 90% distribution requirement of the Code.

Certain Property Transfers May Generate Prohibited Transaction Income, Resulting in a Penalty Tax on Gain Attributable to the Transaction. From time to time, we may transfer or otherwise dispose of some of our properties. Under the Code, any gain resulting from transfers of properties that we hold as inventory or primarily for sale to customers in the ordinary course of business would be treated as income from a prohibited transaction and subject to a 100% penalty tax. Since we acquire properties for investment purposes, we do not believe that our occasional transfers or disposals of property are prohibited transactions. However, whether property is held for investment purposes is a question of fact that depends on all the facts and circumstances surrounding the particular transaction. The Internal Revenue Service may contend that certain transfers or disposals of properties by us are prohibited transactions. If the Internal Revenue Service were to argue successfully that a transfer or disposition of property constituted a prohibited transaction, then we would be required to pay a 100% penalty tax on any gain allocable to us from the prohibited transaction and we may jeopardize our ability to retain future gains on real property sales. In addition, income from a prohibited transaction might adversely affect UDR’s ability to satisfy the income tests for qualification as a REIT for federal income tax purposes.

We Could Face Possible State and Local Tax Audits and Adverse Changes in State and Local Tax Laws. As discussed in the risk factors above, because UDR is organized and qualifies as a REIT it is generally not subject to federal income taxes, but it is subject to certain state and local taxes. From time to time, changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. A shortfall in tax revenues for states and municipalities in which we own apartment communities may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional state and local taxes. These increased tax costs could adversely affect our financial condition and the amount of cash available for the payment of distributions to UDR’s stockholders. In the normal course of business, entities through which we own real estate may also become subject to tax audits. If such entities become subject to state or local tax audits, the ultimate result of such audits could have an adverse effect on our financial condition.

The Operating Partnership Intends to Qualify as a Partnership, But Cannot Guarantee That It Will Qualify. The Operating Partnership intends to qualify as a partnership for federal income tax purposes at any such time that the Operating Partnership admits additional limited partners other than UDR. If classified as a partnership, the Operating Partnership generally will not be a taxable entity and will not incur federal income tax liability. However, the Operating Partnership would be treated as a corporation for federal income tax purposes if it were a “publicly traded partnership,” unless at least 90% of the Operating Partnership’s income was qualifying income as defined in the Code. A “publicly traded partnership” is a partnership whose partnership interests are traded on an established securities market or are readily tradable on a secondary market (or the substantial equivalent thereof). Although the Operating Partnership’s partnership units are not traded on an established securities market, because of the redemption right, the Operating Partnership’s units held by limited partners could be viewed as readily tradable on a secondary market (or the substantial equivalent thereof), and the Operating Partnership may not qualify for one of the “safe harbors” under the applicable tax regulations. Qualifying income for the 90% test generally includes passive income, such as real property rents, dividends and interest. The income requirements applicable to REITs and the definition of qualifying income for purposes of this 90% test are similar in most respects. The Operating Partnership may not meet this qualifying income test. If the Operating Partnership were to be taxed as a corporation, it would incur substantial tax

liabilities, and UDR would then fail to qualify as a REIT for tax purposes, unless it qualified for relief under certain statutory savings provisions, and our ability to raise additional capital would be impaired.

Qualifying as a REIT Involves Highly Technical and Complex Provisions of the Code. Our qualification as a REIT involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Moreover, new legislation, court decisions or administrative guidance, in each case possibly with retroactive effect, may make it more difficult or impossible for us to qualify as a REIT. Our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, shareholder ownership and other requirements on a continuing basis. Our ability to satisfy the REIT income and asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination and for which we will not obtain independent appraisals, and upon our ability to successfully manage the composition of our income and assets on an ongoing basis. In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.

Risks Related to Our Organization and Ownership of UDR’s Stock

Changes in Market Conditions and Volatility of Stock Prices Could Adversely Affect the Market Price of UDR’s Common Stock. The stock markets, including the New York Stock Exchange (“NYSE”), on which we list UDR’s common stock, have experienced significant price and volume fluctuations. As a result, the market price of UDR’s common stock could be similarly volatile, and investors in UDR’s common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. In addition to the risks listed in this “Risk Factors” section, a number of factors could negatively affect the price per share of UDR’s common stock, including:


•	general market and economic conditions;


•	actual or anticipated variations in UDR’s quarterly operating results or dividends or UDR’s payment of dividends in shares of UDR’s stock;


•	changes in our funds from operations or earnings estimates;


•	difficulties or inability to access capital or extend or refinance existing debt;


•	decreasing (or uncertainty in) real estate valuations;


•	changes in market valuations of similar companies;


•	publication of research reports about us or the real estate industry;


•	the general reputation of real estate investment trusts and the attractiveness of their equity securities in comparison to other equity securities (including securities issued by other real estate companies);


•	general stock and bond market conditions, including changes in interest rates on fixed income securities, that may lead prospective purchasers of UDR’s stock to demand a higher annual yield from future dividends;


•	a change in analyst ratings;


•	additions or departures of key management personnel;


•	adverse market reaction to any additional debt we incur in the future;


•	speculation in the press or investment community;


•	terrorist activity which may adversely affect the markets in which UDR’s securities trade, possibly increasing market volatility and causing the further erosion of business and consumer confidence and spending;


•	failure to qualify as a REIT;


•	strategic decisions by us or by our competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in business strategy;


•	failure to satisfy listing requirements of the NYSE;


•	governmental regulatory action and changes in tax laws; and


•	the issuance of additional shares of UDR’s common stock, or the perception that such sales might occur, including under UDR’s at-the-market equity distribution program.

Many of the factors listed above are beyond our control. These factors may cause the market price of shares of UDR’s common stock to decline, regardless of our financial condition, results of operations, business or our prospects.

We May Change the Dividend Policy for UDR’s Common Stock in the Future. The decision to declare and pay dividends on UDR’s common stock, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our board of directors and will depend on our earnings, funds from operations, liquidity, financial condition, capital requirements, contractual prohibitions or other limitations under our indebtedness, the annual distribution requirements under the REIT provisions of the Code, state law and such other factors as our board of directors considers relevant. Any change in our dividend policy could have a material adverse effect on the market price of UDR’s common stock.

Maryland Law May Limit the Ability of a Third Party to Acquire Control of Us, Which May Not be in UDR’s Stockholders’ Best Interests. Maryland business statutes may limit the ability of a third party to acquire control of us. As a Maryland corporation, we are subject to various Maryland laws which may have the effect of discouraging offers to acquire our Company and of increasing the difficulty of consummating any such offers, even if our acquisition would be in UDR’s stockholders’ best interests. The Maryland General Corporation Law restricts mergers and other business combination transactions between us and any person who acquires beneficial ownership of shares of UDR’s stock representing 10% or more of the voting power without our board of directors’ prior approval. Any such business combination transaction could not be completed until five years after the person acquired such voting power, and generally only with the approval of stockholders representing 80% of all votes entitled to be cast and 66 2/3 % of the votes entitled to be cast, excluding the interested stockholder, or upon payment of a fair price. Maryland law also provides generally that a person who acquires shares of our equity stock that represents 10% (and certain higher levels) of the voting power in electing directors will have no voting rights unless approved by a vote of two-thirds of the shares eligible to vote.

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

None.

Item 2. PROPERTIES

At December 31, 2014, our consolidated apartment portfolio included 139 communities located in 20 markets, with a total of 39,851 completed apartment homes.

As of December 31, 2014, we leased approximately 44,000 square feet of office space in Highlands Ranch, Colorado for our corporate headquarters. We also leased an aggregate of approximately 9,000 square feet of office space in Dallas, Texas, Richmond, Virginia and Alexandria, Virginia.

In February 2015, the Company acquired the office building in Highlands Ranch, Colorado housing its corporate offices, as well as other leased office space, for total consideration of approximately $24.0 million, which was comprised of assumed debt. The building consists of approximately 120,000 square feet, of which UDR occupies approximately 44,000 square feet. All existing leases were assumed by the Company at the time of the acquisition.

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, 2014.

SUMMARY OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT DECEMBER 31, 2014

UDR, INC.



	Number of Apartment Communities	Number of Apartment Homes	Percentage of Carrying Value		Gross Amount (in thousands)		Encumbrances (in thousands)		Cost per Home		Average Physical Occupancy		Average Home Size (in square feet)
WEST REGION
San Francisco, CA	12	2,751	9.7	%	$	815,153	$	66,310	$	296,312	94.6	%	836
Orange County, CA	14	5,214	14.3	%	1,202,995		193,873		230,724		89.2	%	804
Seattle, WA	11	2,085	6.9	%	575,008		58,457		275,783		85.6	%	849
Los Angeles, CA	4	1,225	5.3	%	440,329		100,335		359,452		95.2	%	967
Monterey Peninsula, CA	7	1,565	1.9	%	161,633		—		103,280		95.8	%	728
Other Southern California	4	875	1.7	%	141,660		46,471		161,897		96.1	%	928
Portland, OR	3	716	0.9	%	73,811		35,141		103,088		97.6	%	918
MID-ATLANTIC REGION
Metropolitan D.C.	16	5,156	14.4	%	1,211,295		184,172		234,929		90.7	%	834
Baltimore, MD	11	2,301	3.7	%	309,894		66,711		134,678		96.6	%	957
Richmond, VA	4	1,358	1.7	%	139,538		34,567		102,753		96.5	%	1,018
Norfolk, VA	4	846	0.6	%	54,077		—		63,921		94.6	%	1,023
Other Mid-Atlantic	1	168	0.2	%	12,971		—		77,208		95.4	%	1,002
SOUTHEAST REGION
Tampa, FL	9	2,775	3.3	%	275,355		31,239		99,227		96.6	%	955
Orlando, FL	10	2,796	2.8	%	238,375		63,394		85,256		96.7	%	961
Nashville, TN	8	2,260	2.3	%	191,393		38,834		84,687		97.5	%	933
Other Florida	1	636	0.9	%	81,316		39,179		127,855		96.5	%	1,130
NORTHEAST REGION
New York, NY	4	1,947	15.2	%	1,278,432		190,462		656,616		95.0	%	740
Boston, MA	4	1,179	3.9	%	323,419		79,286		274,316		96.3	%	1,097
SOUTHWEST REGION
Dallas, TX	8	2,725	3.5	%	292,848		102,438		107,467		97.2	%	846
Austin, TX	4	1,273	1.8	%	147,873		30,660		116,161		97.1	%	913
Total Operating Communities	139	39,851	95.0	%	7,967,375		1,361,529		$	199,929	94.1	%	887
Real Estate Under Development (a)	—	—	2.1	%	177,632		—
Land	—	—	2.1	%	171,253		—
Other	—	—	0.8	%	66,999		—
Total Real Estate Owned	139	39,851	100.0	%	$	8,383,259	$	1,361,529


(a)	As of December 31, 2014, the Company was developing one wholly-owned community with 369 apartment homes, which has not been completed.

SUMMARY OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT DECEMBER 31, 2014

UNITED DOMINION REALTY, L.P.



	Number of Apartment Communities	Number of Apartment Homes	Percentage of Carrying Value		Gross Amount (in thousands)		Encumbrances (in thousands)		Cost per Home		Average Physical Occupancy		Average Home Size (in square feet)
WEST REGION
San Francisco, CA	9	2,185	13.2	%	$	560,868	$	66,310	$	256,690	97.2	%	821
Orange County, CA	9	3,899	19.5	%	823,931		193,874		211,319		93.8	%	764
Seattle, WA	5	932	5.0	%	213,238		22,957		228,796		97.3	%	869
Los Angeles, CA	2	344	2.5	%	108,081		32,635		314,189		95.6	%	976
Monterey Peninsula, CA	7	1,565	3.8	%	161,633		—		103,280		95.8	%	728
Other Southern California	3	635	2.6	%	109,744		46,471		172,825		96.1	%	939
Portland, OR	3	716	1.7	%	73,811		35,141		103,088		97.6	%	918
MID-ATLANTIC REGION
Metropolitan D.C.	8	2,710	16.3	%	686,019		102,643		253,144		86.4	%	901
Baltimore, MD	5	994	3.6	%	152,040		43,403		152,958		96.3	%	1,064
SOUTHEAST REGION
Tampa, FL	3	1,154	2.8	%	117,261		—		101,613		96.8	%	1,003
Nashville, TN	6	1,612	3.2	%	134,852		—		83,655		97.5	%	925
Other Florida	1	636	1.9	%	81,316		39,179		127,855		96.5	%	1,130
NORTHEAST REGION
New York, NY	2	1,001	14.1	%	598,999		190,462		598,401		97.4	%	685
Boston, MA	2	833	4.2	%	178,607		56,447		214,414		96.5	%	1,120
SOUTHWEST REGION
Dallas, TX	2	1,348	4.5	%	189,458		102,437		140,547		97.0	%	910
Austin, TX	1	250	0.9	%	39,538		—		158,152		96.2	%	883
Total Operating Communities	68	20,814	99.8	%	4,229,396		931,959		$	203,200	94.9	%	876
Other	—	—	0.2	%	9,374		—
Total Real Estate Owned	68	20,814	100.0	%	$	4,238,770	$	931,959

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 DISCLOSURES

Not Applicable.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

UDR, Inc.:

Common Stock

UDR, Inc.’s common stock has been listed on the New York Stock Exchange, or “NYSE”, under the symbol “UDR” since May 7, 1990. The following tables set forth the quarterly high and low sale prices per common share reported on the NYSE for each quarter of the last two fiscal years. Distribution information for common stock reflects distributions declared per share for each calendar quarter and paid at the end of the following month.



	2014						2013
	High		Low		Distributions Declared		High		Low		Distributions Declared
Quarter ended March 31,	$	26.63	$	23.27	$	0.260	$	25.18	$	24.83	$	0.235
Quarter ended June 30,	$	28.64	$	25.28	$	0.260	$	27.04	$	26.59	$	0.235
Quarter ended September 30,	$	30.30	$	27.18	$	0.260	$	26.35	$	26.00	$	0.235
Quarter ended December 31,	$	31.74	$	27.27	$	0.260	$	25.42	$	25.03	$	0.235

On February 19, 2015, the closing sale price of our common stock was $31.83 per share on the NYSE, and there were 4,306 holders of record of the 258,765,713 outstanding shares of our common stock.

We have determined that, for federal income tax purposes, approximately 68% of the distributions for 2014 represented ordinary income, 14% represented qualified ordinary income, 10% represented long-term capital gain, and 8% represented unrecaptured section 1250 gain.

UDR pays regular quarterly distributions to holders of its common stock. Future distributions will be at the discretion of our Board of Directors and will depend on our actual funds from operations, financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the Code, and other factors.

Series E Preferred Stock

The Series E Cumulative Convertible Preferred Stock (“Series E”) has no stated par value and a liquidation preference of $16.61 per share. Subject to certain adjustments and conditions, each share of the Series E is convertible at any time and from time to time at the holder’s option into 1.083 shares of our common stock. The holders of the Series E are entitled to vote on an as-converted basis as a single class in combination with the holders of common stock at any meeting of our stockholders for the election of directors or for any other purpose on which the holders of common stock are entitled to vote. The Series E has no stated maturity and is not subject to any sinking fund or any mandatory redemption. In connection with a special dividend (declared on November 5, 2008), the Company reserved for issuance upon conversion of the Series E additional shares of common stock to which a holder of the Series E would have received if the holder had converted the Series E immediately prior to the record date for this special dividend.

Distributions declared on the Series E for the years ended December 31, 2014 and December 31, 2013 were $1.33 per share or $0.3322 per quarter. The Series E is not listed on any exchange. At December 31, 2014, a total of 2,803,812 shares of the Series E were outstanding.

Series F Preferred Stock

We are authorized to issue up to 20,000,000 shares of our Series F 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,” at a purchase price of $0.0001 per share. OP Unitholders are entitled to subscribe for and purchase one share of the Series F for each OP Unit held. As of December 31, 2014, a total of 2,464,183 shares of the Series F were outstanding with an aggregate purchase value of $246. 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 19, 2015, there were approximately 2,289 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, 2014, there were 183,278,698 OP Units outstanding in the Operating Partnership, of which 174,113,225 OP Units or 95.0% were owned by UDR and 9,165,473 OP Units or 5.0% were owned by limited partners. Under the terms of the Operating Partnership’s limited partnership agreement, the holders of OP Units have the right to require the Operating Partnership to redeem all or a portion of the OP Units held by the holder in exchange for a cash payment based on the market value of our common stock at the time of redemption. However, the Operating Partnership’s obligation to pay the cash amount is subject to the prior right of the Company to acquire such OP Units in exchange for either the cash amount or the number of shares of our common stock equal to the number of OP Units being redeemed. During 2014, we issued a total of 153,451 shares of common stock upon redemption of OP Units.

On October 20, 2014, we issued 1,998 shares of our common stock upon redemption of OP Units. Because these shares of common stock were issued to accredited investors in transactions not involving a public offering, the transaction is exempt from registration under the Securities Act of 1933 in accordance with Section 4(a)(2) of the Securities Act.

We did not issue any other shares of our common stock upon redemption of OP Units during the three months ended December 31, 2014.

Purchases of Equity Securities

In February 2006, UDR’s Board of Directors authorized a 10,000,000 share repurchase program. In January 2008, UDR’s Board of Directors authorized a new 15,000,000 share repurchase program. Under the two share repurchase programs, UDR may repurchase shares of our common stock in open market purchases, block purchases, privately negotiated transactions or otherwise. As reflected in the table below, no shares of common stock were repurchased under these programs during the quarter ended December 31, 2014.



Period	Total Number of Shares Purchased	Average Price per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (a)
Beginning Balance	9,967,490	$	22.00	9,967,490	15,032,510
October 1, 2014 through October 31, 2014	—	—		—	15,032,510
November 1, 2014 through November 30, 2014	—	—		—	15,032,510
December 1, 2014 through December 31, 2014	—	—		—	15,032,510
Balance as of December 31, 2014	9,967,490	$	22.00	9,967,490	15,032,510


(a)	This number reflects the amount of shares that were available for purchase under our 10,000,000 share repurchase program authorized in February 2006 and our 15,000,000 share repurchase program authorized in January 2008.

During the three months ended December 31, 2014, certain of our employees surrendered shares of common stock owned by them to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted shares of common stock issued under our 1999 Long-Term Incentive Plan (the “LTIP”). The following table summarizes all of these repurchases during the three months ended December 31, 2014.



Period	Total Number of Shares Purchased	Average Price Paid per Share(a)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1, 2014 through October 31, 2014	—	$	—	N/A	N/A
November 1, 2014 through November 30, 2014	—	—		N/A	N/A
December 1, 2014 through December 31, 2014	107,113	30.82		N/A	N/A
Total	107,113	$	30.82


(a)	The price paid per share is based on the closing price of our common stock as of the date of the determination of the statutory minimum for federal and state tax obligations.

Comparison of Five-year Cumulative Total Returns

The following graph compares the five-year cumulative total returns for UDR common stock with the comparable cumulative return of the NAREIT Equity REIT Index, Standard & Poor’s 500 Stock Index, the NAREIT Equity Apartment Index and the MSCI US REIT Index. The graph assumes that $100 was invested on December 31, 2009, 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	12/31/2009	12/31/2010	12/31/2011	12/31/2012	12/31/2013	12/31/2014
UDR, Inc.	100.00	148.70	163.91	160.75	163.92	224.86
NAREIT Equity Apartment Index	100.00	147.04	169.23	180.97	169.76	237.02
US MSCI REITS	100.00	128.48	139.65	164.46	168.52	219.72
S&P 500	100.00	115.06	117.49	136.30	180.44	205.14
NAREIT Equity REIT Index	100.00	127.96	138.57	163.60	167.63	218.16

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

The following tables set forth selected consolidated financial and other information of UDR, Inc. and of the Operating Partnership as of and for each of the years in the five-year period ended December 31, 2014. The table should be read in conjunction with each of UDR, Inc.’s and the Operating Partnership’s respective consolidated financial statements and the notes thereto, and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, included elsewhere in this Report.



	UDR, Inc. Year Ended December 31, (In thousands, except per share data and apartment homes owned)
	2014		2013			2012			2011			2010
OPERATING DATA:
Rental income	$	805,002	$	746,484		$	704,701		$	613,689		$	503,097
Income/(loss) from continuing operations	16,260		2,340			(46,305		)	(126,869		)	(121,117		)
Income/(loss) from discontinued operations, net of tax	10		43,942			266,608			147,454			14,529
Net income/(loss)	159,842		46,282			220,303			20,585			(106,588		)
Distributions to preferred stockholders	3,724		3,724			6,010			9,311			9,488
Net income/(loss) attributable to common stockholders	150,610		41,088			203,376			10,537			(112,362		)
Common distributions declared	263,503		235,721			215,654			165,590			126,086
Income/(loss) per weighted average common share — basic:
Income/(loss) from continuing operations attributable to common stockholders	$	0.60	$	(0.01	)	$	(0.22	)	$	(0.65	)	$	(0.77	)
Income/(loss) from discontinued operations attributable to common stockholders	—		0.17			1.07			0.71			0.09
Net income/(loss) attributable to common stockholders	$	0.60	$	0.16		$	0.85		$	0.05		$	(0.68	)
Income/(loss) per weighted average common share — diluted:
Income/(loss) from continuing operations attributable to common stockholders	$	0.59	$	(0.01	)	$	(0.22	)	$	(0.65	)	$	(0.77	)
Income/(loss) from discontinued operations attributable to common stockholders	—		0.17			1.07			0.71			0.09
Net income/(loss) attributable to common stockholders	$	0.59	$	0.16		$	0.85		$	0.05		$	(0.68	)
Weighted average number of Common Shares outstanding — basic	251,528		249,969			238,851			201,294			165,857
Weighted average number of Common Shares outstanding — diluted	253,445		249,969			238,851			201,294			165,857
Weighted average number of Common Shares outstanding, OP Units and Common Stock equivalents outstanding — diluted	265,728		263,926			252,659			214,086			176,900
Common distributions declared	$	1.04	$	0.94		$	0.88		$	0.80		$	0.73
Balance Sheet Data:
Real estate owned, at cost (a)	$	8,383,259	$	8,207,977		$	8,055,828		$	8,074,471		$	6,881,347
Accumulated depreciation (a)	2,434,772		2,208,794			1,924,682			1,831,727			1,638,326
Total real estate owned, net of accumulated depreciation (a)	5,948,487		5,999,183			6,131,146			6,242,744			5,243,021
Total assets	6,846,534		6,807,722			6,859,103			6,692,254			5,500,597
Secured debt (a)	1,361,529		1,442,077			1,430,135			1,891,553			1,963,670
Unsecured debt	2,221,576		2,081,626			1,979,198			2,026,817			1,603,834
Total debt	3,583,105		3,523,703			3,409,333			3,918,370			3,567,504
Total stockholders’ equity	2,735,097		2,811,648			2,992,916			2,314,050			1,606,343
Number of Common Shares outstanding	255,115		250,750			250,139			219,650			182,496



	UDR, Inc. Year Ended December 31, (In thousands, except per share data and apartment homes owned)
	2014			2013			2012			2011			2010
OPERATING DATA (continued):
Other Data (a)
Total consolidated apartment homes owned (at end of year) (a)	39,851			41,250			41,571			47,343			48,553
Weighted average number of consolidated apartment homes owned during the year	40,644			41,392			42,747			48,531			47,571
Cash Flow Data:
Cash provided by/(used in) operating activities	$	392,360		$	339,902		$	327,187		$	251,411		$	214,180
Cash provided by/(used in) investing activities	(293,660		)	(123,209		)	(211,582		)	(1,054,683		)	(583,754		)
Cash provided by/(used in) financing activities	(113,725		)	(198,559		)	(115,993		)	806,289			373,075
Funds from Operations (b):
Funds from operations — basic	$	411,702		$	376,778		$	350,628		$	269,856		$	189,045
Funds from operations — diluted	415,426			380,502			354,532			273,580			192,771


(a)	Includes amounts classified as Held for Sale, where applicable.

(b)

Funds from operations, or FFO, is defined as net income (computed in accordance with generally accepted accounting principles, or “GAAP”), excluding impairment write-downs of depreciable real estate or of investments in non-consolidated investees that are driven by measurable decreases in the fair value of depreciable real estate held by the investee, gains (or losses) from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust’s definition issued in April 2002. We consider FFO a useful metric for investors as we use FFO in evaluating property acquisitions and our operating performance, and believe that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of our activities in accordance with GAAP. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of funds available to fund our cash needs.

Activities of our TRSinclude development and land entitlement. From time to time, we develop and subsequently sell a TRS property which results in a short-term use of funds that produces a profit that differs from the traditional long-term investment in real estate for REITs. We believe that the inclusion of these TRS gains in FFO is consistent with the standards established by NAREIT as the short-term investment is incidental to our main business. TRS gains on sales, net of taxes, are defined as net sales proceeds less a tax provision and the gross investment basis of the asset before accumulated depreciation.

See “Funds from Operations” in Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations for a reconciliation of FFO and Net income/(loss) attributable to UDR, Inc.

United Dominion Realty, L.P.

Year Ended December 31,

(In thousands, except per OP unit data

and apartment homes owned)



	2014			2013			2012			2011			2010
OPERATING DATA:
Rental income	$	422,634		$	401,853		$	384,946		$	344,937		$	297,380
Income/(loss) from continuing operations	33,544			32,766			(13,309		)	(40,744		)	(30,937		)
Income/(loss) from discontinued operations	—			45,176			57,643			70,973			10,243
Net income/(loss)	97,179			77,942			44,334			30,229			(20,694		)
Net income/(loss) attributable to OP unitholders	96,227			73,376			43,982			30,159			(20,735		)
Income/(loss) per weighted average OP Unit - basic and diluted:
Income/(loss) from continuing operations attributable to OP unitholder	$	0.53		$	0.16		$	(0.07	)	$	(0.22	)	$	(0.18	)
Income/(loss) from discontinued operations attributable to OP unitholder	—			0.24			0.31			0.39			0.06
Net income/(loss) attributable to OP unitholders	0.53			0.40			0.24			0.17			(0.12		)
Weighted average number of OP Units outstanding — basic and diluted	183,279			184,196			184,281			182,448			179,909
Balance Sheet Data:
Real estate owned, at cost (a)	$	4,238,770		$	4,188,480		$	4,182,920		$	4,205,298		$	3,706,184
Accumulated depreciation (a)	1,403,303			1,241,574			1,097,133			976,358			884,083
Total real estate owned, net of accumulated depreciation (a)	2,835,467			2,946,906			3,085,787			3,228,940			2,822,101
Total assets	2,878,284			2,993,241			3,136,254			3,292,167			2,861,395
Secured debt (a)	931,959			934,865			967,239			1,189,645			1,070,061
Total liabilities	1,144,233			1,190,144			1,217,498			1,438,798			1,299,772
Total partners’ capital	1,703,001			1,795,934			1,917,299			2,034,792			2,042,241
Advances to/(from) General Partner	(13,624		)	9,916			11,056			193,584			492,709
Number of OP units outstanding	183,279			183,279			184,281			184,281			179,909
Other Data:
Total consolidated apartment homes owned (at end of year) (a)	20,814			20,746			21,660			23,160			23,351
Cash Flow Data:
Cash provided by/(used in) operating activities	$	208,032		$	208,346		$	201,095		$	156,071		$	146,604
Cash provided by/(used in) investing activities	(46,650		)	(63,954		)	4,273			(226,980		)	(59,458		)
Cash provided by/(used in) financing activities	(162,777		)	(145,299		)	(203,268		)	70,693			(86,668		)


(a)	Includes amounts classified as Held for Sale, where applicable.


Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

Forward-Looking Statements

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, without limitation, statements concerning property acquisitions and dispositions, development activity and capital expenditures, capital raising activities, rent growth, occupancy, and rental expense growth. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Such factors include, among other things, unfavorable changes in the apartment market, changing economic conditions, the impact of inflation/deflation on rental rates and property operating expenses, expectations concerning availability of capital and the stabilization of the capital markets, the impact of competition and competitive pricing, acquisitions, developments and redevelopments not achieving anticipated results, delays in completing developments, redevelopments and lease-ups on schedule, expectations on job growth, home affordability and demand/supply ratio for multifamily housing, expectations concerning development and redevelopment activities, expectations on occupancy levels, expectations concerning the joint ventures with third parties, expectations that automation will help grow net operating income, and expectations on annualized net operating income.

The following factors, among others, could cause our future results to differ materially from those expressed in the forward-looking statements:


•	general economic conditions;


•	unfavorable changes in apartment market and economic conditions that could adversely affect occupancy levels and rental rates;


•	the failure of acquisitions to achieve anticipated results;


•	possible difficulty in selling apartment communities;


•	competitive factors that may limit our ability to lease apartment homes or increase or maintain rents;


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


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


•	development and construction risks that may impact our profitability;


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


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


•	uninsured losses due to insurance deductibles, self-insurance retention, uninsured claims or casualties, or losses in excess of applicable coverage;


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


•	our failure to succeed in new markets;


•	changing interest rates, which could increase interest costs and affect the market price of our securities;


•	potential liability for environmental contamination, which could result in substantial costs to us;


•	the imposition of federal taxes if we fail to qualify as a REIT under the Code in any taxable year;


•	our internal control over financial reporting may not be considered effective which could result in a loss of investor confidence in our financial reports, and in turn have an adverse effect on our stock price; and


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

A discussion of these and other factors affecting our business and prospects is set forth in Part II, Item 1A. Risk Factors. We encourage investors to review these risk factors.

Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.

Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.

The following discussion should be read in conjunction with the consolidated financial statements appearing elsewhere herein and is based primarily on the consolidated financial statements and the accompanying notes for the years ended December 31, 2014, 2013 and 2012 of each of UDR, Inc. and United Domination Realty, L.P.

UDR, Inc.:

Business Overview

We are a self-administered real estate investment trust, or REIT, that owns, acquires, renovates, develops, and manages 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. 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, 2014, our consolidated real estate portfolio included 139 communities in 10 states plus the District of Columbia totaling 39,851 apartment homes, and our total real estate portfolio, inclusive of our unconsolidated communities, included an additional 36 communities with 10,055 apartment homes.

At December 31, 2014, the Company was developing one wholly-owned community with 369 apartment homes and three unconsolidated joint venture communities with 1,018 apartment homes, none of which have been completed. In addition, the Company was redeveloping 708 apartment homes, 694 of which have been completed, at one wholly-owned community with 739 apartment homes.

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 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, 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, 2014, 2013, and 2012 were $29.2 million, $40.5 million, and $36.4 million, respectively.

Investment in Unconsolidated Joint Ventures

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

We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book value of those assets. Our cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. The net book value of impaired assets is reduced to fair market value. Our estimates of fair market value represent our best estimate based primarily upon unobservable inputs (defined as Level 3 inputs in the fair value hierarchy) related to rental rates, operating costs, growth rates, discount rates, capitalization rates, industry trends and reference to market rates and transactions.

Real Estate Investment Properties

We purchase real estate investment properties from time to time and record the fair value to various components, such as land, buildings, and intangibles related to in-place leases, based on the fair value of each component. 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, 2014 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, 2014.



		As of December 31, 2014						Year Ended December 31, 2014
Same-Store Communities	Number of Apartment Communities	Number of Apartment Homes	Percentage of Total Carrying Value		Total Carrying Value (in thousands)			Average Physical Occupancy		Monthly Income per Occupied Home (a)		Net Operating Income (in thousands)
West Region
San Francisco, CA	11	2,436	7.9	%	$	666,210		97.2	%	$	2,804	$	60,730
Orange County, CA	10	3,290	7.3	%	612,309			95.5	%	1,752		47,990
Seattle, WA	9	1,727	5.4	%	449,375			97.1	%	1,732		24,812
Los Angeles, CA	3	642	3.0	%	253,448			95.3	%	2,409		12,159
Monterey Peninsula, CA	7	1,565	1.9	%	161,635			95.8	%	1,216		15,326
Other Southern California	4	875	1.7	%	141,656			96.1	%	1,550		10,938
Portland, OR	3	716	0.9	%	73,811			97.6	%	1,195		6,971
Mid-Atlantic Region
Metropolitan D.C.	13	4,313	10.6	%	893,677			97.1	%	1,818		62,261
Baltimore, MD	11	2,301	3.7	%	309,894			96.6	%	1,462		27,431
Richmond, VA	4	1,358	1.7	%	139,538			96.5	%	1,220		14,309
Norfolk, VA	4	846	0.6	%	54,076			94.6	%	1,047		6,520
Other Mid-Atlantic	1	168	0.2	%	12,972			95.4	%	1,021		1,241
Southeast Region
Tampa, FL	9	2,775	3.3	%	275,354			96.6	%	1,126		23,276
Orlando, FL	10	2,796	2.8	%	238,375			96.7	%	1,045		22,839
Nashville, TN	8	2,260	2.3	%	191,393			97.5	%	1,053		18,922
Other Florida	1	636	1.0	%	81,316			96.5	%	1,362		6,491
Northeast Region
New York, NY	2	700	5.0	%	423,130			97.8	%	3,711		23,280
Boston, MA	4	1,179	3.9	%	323,420			96.3	%	2,225		21,617
Southwest Region
Dallas, TX	8	2,725	3.5	%	292,847			97.2	%	1,130		22,657
Austin, TX	4	1,273	1.8	%	147,873			97.1	%	1,274		11,068
Total/Average Same-Store Communities	126	34,581	68.5	%	5,742,309			96.7	%	$	1,573	440,838
Non Matures, Commercial Properties & Other	13	5,270	29.4	%	2,463,318							115,580
Total Real Estate Held for Investment	139	39,851	97.9	%	8,205,627							556,418
Real Estate Under Development (b)	—	—	2.1	%	177,632							(97		)
Total Real Estate Owned	139	39,851	100.0	%	8,383,259							$	556,321
Total Accumulated Depreciation					(2,434,772		)
Total Real Estate Owned, Net of Accumulated Depreciation					$	5,948,487


(a)	Monthly Income per Occupied Home represents total monthly revenues divided by the product of occupancy and the number of mature apartment homes.


(b)	As of December 31, 2014, the Company was developing one wholly-owned community with 369 apartment homes, which has not been completed.

We report in two segments: Same-Store Communities and Non-Mature Communities/Other.

Our Same-Store Communities segment represents those communities acquired, developed, and stabilized prior to January 1, 2013 and held as of December 31, 2014. 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 sale at year end. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months.

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 unsecured revolving credit facility to temporarily fund certain investing and financing activities prior to arranging for longer-term financing or the issuance of equity or debt securities. During the past several years, proceeds from the sale of real estate have been used for both investing and financing activities as we repositioned our portfolio.

We expect to meet our short-term liquidity requirements generally through net cash provided by property operations and borrowings under our credit agreements. We expect to meet certain long-term liquidity requirements such as scheduled debt maturities, the repayment of financing on development activities, and potential property acquisitions, through secured and unsecured borrowings, the issuance of debt or equity securities, and/or the disposition of properties. We believe that our net cash provided by property operations and borrowings under credit agreements will continue to be adequate to meet both operating requirements and the payment of dividends by the Company in accordance with REIT requirements. Likewise, the budgeted expenditures for improvements and renovations of certain properties are expected to be funded from property operations, borrowings under credit agreements, the issuance of debt or equity securities, and dispositions of properties.

We have a shelf registration statement filed with the Securities and Exchange Commission, or “SEC,” which provides for the issuance of an indeterminate amount of common stock, preferred stock, 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.

During 2014, the Company issued $300 million of 3.750% senior unsecured medium-term notes due July 1, 2024. Interest is payable semi-annually beginning on January 1, 2015. The notes were priced at 99.652% of the principal amount at issuance. We used the net proceeds to pay down borrowings outstanding on our $900 million unsecured credit facility and for general corporate purposes. The notes are fully and unconditionally guaranteed by the Operating Partnership.

In April 2012, the Company entered into a new equity distribution agreement, which was amended in July 2014, under which the Company could offer and sell up to 20 million shares of its common stock, from time to time, to or through its sales agents. During the year ended December 31, 2014, the Company sold 3,410,433 shares of common stock through this program for aggregate gross proceeds of approximately $102.1 million at a weighted average price per share of $29.95. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $2.3 million, were approximately $99.8 million, which was primarily used to fund the Company's Steele Creek participating loan investment. As of December 31, 2014, we had 16,518,567 shares of common stock available for sale under the April 2012 program.

Future Capital Needs

Future development and redevelopment expenditures may be funded through unsecured or secured credit facilities, 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 2015, we have approximately $196.6 million of secured debt maturing, inclusive of principal amortization, and $324.3 million of unsecured debt maturing. In January 2015, we paid off $325.2 million of 5.25% medium-term notes due January 2015 with borrowings under the Company’s $900 million unsecured revolving credit facility. We anticipate repaying the remaining debt with cash flow from our operations, proceeds from debt or equity offerings, proceeds from the dispositions of properties, or from borrowings under our credit agreements.

Statements of Cash Flow

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, 2014, 2013, and 2012.

Operating Activities

For the year ended December 31, 2014, Net cash provided by/(used in) operating activities was $392.4 million compared to $339.9 million for 2013. The increase in cash flow from operating activities was primarily due to improved income from continuing operations and changes in operating assets and liabilities.

For the year ended December 31, 2013, Net cash provided by/(used in) operating activities was $339.9 million compared to $327.2 million for 2012. The increase in cash flow from operating activities is primarily due to improved income from continuing operations, partially offset by changes in operating assets and operating liabilities.

Investing Activities

For the year ended December 31, 2014, Net cash provided by/(used in) investing activities was $(293.7) million compared to $(123.2) million for 2013. The increase in cash used in investing activities is primarily related to increased acquisitions of real estate and investments in unconsolidated joint ventures, partially offset by increased proceeds from sales of real estate, lower spend on development and redevelopment, and repayment of notes receivable.

For the year ended December 31, 2013, Net cash provided by/(used in) investing activities was $(123.2) million compared to $(211.6) million in 2012. The change in investing activities was due to changes in the level of investment activities, which reflect our strategy as it relates to our investments in unconsolidated joint ventures and partnerships, acquisitions, dispositions, capital expenditures, and development activities, all of which are discussed in further detail throughout this Report.

Acquisitions

In 2014, the Company acquired a fully-entitled land parcel for future development located in Huntington Beach, California for $77.8 million, two communities located in Seattle, Washington and Kirkland, Washington with a total of 358 apartment homes for $45.5 million and $75.2 million, respectively, and a land parcel for future development located in Boston, Massachusetts for $32.2 million The four acquisitions during the year ended December 31, 2014 were accomplished through tax-deferred exchanges under Section 1031 of the Internal Revenue Code.

The Company did not acquire any real estate assets in 2013. During 2012, the Company acquired the remaining 80% ownership interests in two apartment communities (633 homes) located in Austin, Texas for $11.7 million from its joint venture partner. In addition, the Company also acquired two parcels of land for development in San Francisco, California and Boston, Massachusetts for a total purchase price of $77.2 million.

Capital Expenditures

Total capital expenditures, which in aggregate include recurring capital expenditures and major renovations, of $90.1 million or $2,274 per stabilized home were spent on all of our communities, excluding development and commercial properties, for the year ended December 31, 2014 as compared to $145.2 million or $3,537 per stabilized home for the prior year.

The decrease in total capital expenditures was primarily due to a decrease in major renovations of 65.8% or $60.6 million. Major renovations of $31.5 million or $796 per home were spent for the year ended December 31, 2014 as compared to $92.1 million or $2,244 per home for the prior year. The decrease is primarily attributable to our 27 Seventy Five Mesa

Verde project in Orange County, which incurred a full year of major renovation costs in 2013. The renovation project was completed in the second quarter of 2014.

The following table outlines capital expenditures and repair and maintenance costs for all of our communities, excluding real estate under developments and commercial properties, for the years ended December 31, 2014 and 2013 (dollars in thousands):



							Per Home
	Year Ended December 31,						Year Ended December 31,
	2014		2013		% Change		2014		2013		% Change
Turnover capital expenditures	$	12,160	$	11,850	2.6	%	$	307	$	288	6.6	%
Asset preservation expenditures	31,761		30,857		2.9	%	801		752		6.5	%
Total recurring capital expenditures	43,921		42,707		2.8	%	1,108		1,040		6.5	%
Revenue-enhancing improvements	14,647		10,364		41.3	%	370		253		46.2	%
Major renovations	31,547		92,141		(65.8	)%	796		2,244		(64.5	)%
Total capital expenditures	$	90,115	$	145,212	(37.9	)%	$	2,274	$	3,537	(35.7	)%
Repair and maintenance expense	$	31,288	$	32,692	(4.3	)%	$	789	$	796	(0.9	)%
Average stabilized home count (a)	39,637		41,052

(a) Average number of homes is calculated based on the number of stabilized homes outstanding at the end of each

month.

This table reports amounts capitalized during the year. Actual capital spending is impacted by the net change in capital expenditure accruals.

We will continue to selectively add revenue enhancing improvements which we believe will provide a return on investment in excess of our cost of capital. Our objective in redeveloping a community is twofold: we aim to meaningfully grow rental rates while also achieving cap rate compression through asset quality improvement. Recurring capital expenditures during 2015 are projected to be approximately $1,150 per home.

Real Estate Under Development and Redevelopment

At December 31, 2014, our development pipeline for one wholly-owned community totaled 369 homes with a budget of $217.7 million, in which we have a carrying value of $177.6 million. The estimated completion date for this community is in the second quarter of 2015. During 2014, we incurred $251.5 million for development costs, a decrease of $29.1 million from our 2013 level of $280.6 million.

The following wholly-owned projects were under development or recently completed as of December 31, 2014 (dollars in thousands):



	Location	Number of Apartment Homes	Completed Apartment Homes	Cost to Date		Budgeted Cost		Estimated Cost Per Home		Expected Completion Date
Projects Under Construction:
Pier 4	Boston, MA	369	—	$	177,632	$	217,700	$	590	2Q2015
Completed Projects, Non-Stabilized:
DelRay Tower (a)(b)	Alexandria, VA	332	332	124,873		132,000		398		4Q2014
Beach & Ocean (c)	Huntington Beach, CA	173	173	51,038		51,900		300		4Q2014
Los Alisos	Mission Viejo, CA	320	320	87,180		87,500		273		1Q2014
Total completed projects		825	825	263,091		271,400		329
Total Projects		1,194	825	$	440,723	$	489,100	$	410

(a) This project is held by the Operating Partnership.

(b) Formerly known as The Calvert.

At December 31, 2014, the Company was redeveloping 708 apartment homes, 694 of which have been completed, at one wholly-owned community with 739 total apartment homes. During the year ended December 31, 2014, we incurred $31.5 million in major renovations, which include major structural changes and/or architectural revisions to existing buildings, a decrease of $60.6 million from our 2013 level of $92.1 million. The estimated completion date for this community is the second quarter of 2015.

At December 31, 2014, the following community was in redevelopment (dollars in thousands):



	Location	Number of Apartment Homes	Scheduled Redevelopment Homes	Completed Apartment Homes	Cost to Date		Budgeted Cost		Estimated Cost Per Home		Expected Completion Date
View 34 (a)	New York, NY	739	708	694	$	83,778	$	98,000	$	138	2Q2015

(a) Formerly known as Rivergate.

Consolidated Joint Ventures

In December 2013, the Company consolidated its 95%/5% development joint ventures 13^th and Market in San Diego, California and Domain College Park in Metropolitan, D.C. The consolidation was due to the Company becoming the managing partner of each of the joint ventures pursuant to amendments to the LLC Agreements. In connection with the amendments, our partner received equity distributions reducing its capital account balances to zero, the Company replaced our partner as the managing partner, and our partner no longer has the ability to substantively participate in the decision-making process, with only protective rights remaining. We accounted for the consolidations as asset acquisitions since the joint ventures were under development and not complete at the time of consolidation resulting in no gain or loss upon consolidation and increasing our real estate owned by $129.4 million and our debt owed by $63.6 million. In addition pursuant to the amendments, the Company paid a non-refundable deposit to our partner in January 2014 of $2.0 million for each joint venture, or $4.0 million in total, for the right to exercise options in 2014 to acquire our partner’s upside participation in the joint ventures. The non-refundable deposits were applied towards the total purchase price of approximately $24.7 million when the Company acquired 100% of the interest in the joint ventures in November 2014.

In December 2014, the Company sold a 49% interest in 13th and Market to MetLife for $54.2 million, resulting in a gain, net of tax, of $7.2 million. Additionally, the Company sold a 50% interest in a wholly owned land parcel to MetLife for $8.3 million, resulting in a loss, net of tax, of $2.2 million. As a result, the Company no longer controls these two joint ventures and they were deconsolidated by the Company in December 2014.

Unconsolidated Joint Ventures and Partnerships

The following table summarizes the Company’s investment in and advances to unconsolidated joint ventures and partnerships, net which are accounted for under the equity method of accounting as of December 31, 2014 and 2013 (dollars in thousands):



Joint Venture	Location of Properties	Number of Properties	Number of Apartment Homes	Investment at						UDR’s Ownership Interest
Joint Venture	Location of Properties	2014	2014	2014			2013			2014			2013
Operating and development:
UDR/MetLife I (a)	Various	4 land parcels	—	$	13,306		$	47,497		15.7		%	4.5		%
UDR/MetLife II (a)	Various	21 operating communities	4,642	431,277			327,926			50.0		%	50.0		%
Other UDR/MetLife Joint Ventures (a)	Various	1 operating community, 3 development communities (b), 2 land parcels	1,282	134,939			36,313			50.6		%	35.8		%
UDR/MetLife Vitruvian Park® (c)	Addison, TX	3 operating communities, 6 land parcels	1,394	80,302			79,318			50.0		%	50.0		%
UDR/KFH (d)	Washington, D.C.	3 operating communities	660	21,596			25,919			30.0		%	30.0		%
Texas (e)	Texas	8 operating communities	3,359	(25,901		)	(23,591		)	20.0		%	20.0		%
Investment in and advances to unconsolidated joint ventures, net, before participating loan investment				655,519			493,382

	Location	Preferred Return	Years To Maturity	Investment at						Income From Participating Loan Investment For The Year Ended
Participating loan investment:				2014			2013			2014	2013			2012
Steele Creek (f)	Denver, CO	6.5%	2.8	62,707			14,273			$2,350	$156			$—

Total investment in and advances to unconsolidated joint ventures, net				$	718,226		$	507,655

(a)

In January 2012, the Company formed a joint venture with an unaffiliated third party to acquire 399 Fremont (land for future development) in San Francisco, California, which is included in Other UDR/MetLife Joint Ventures in the table above. At closing, UDR owned a noncontrolling interest of 92.5% in the joint venture. The Company’s total investment was $55.5 million, which consisted of its initial investment of $37.3 million and an option to exercise its right to acquire its partner’s 7.5% ownership interest in the joint venture. In October 2012, the Company exercised its option and paid $13.5 million. In January 2013, the Company subsequently acquired its partner’s 7.5% ownership interest for $4.7 million. In December 2013, the Company sold a 49% ownership interest to MetLife in the fully-entitled 399 Fremont land parcel for approximately $29.9 million. In conjunction with the sale, the Company formed a new unconsolidated real estate joint venture with MetLife, UDR/MetLife 399 Fremont, to develop a $318 million, 447-home, luxury high-rise tower on the site. Construction commenced in the first quarter 2014. As the Company recently acquired the 399 Fremont land parcel, the sale price was equivalent to the cost basis resulting in no gain or loss on the transaction. Under the terms of the partnership, the Company serves as the general partner with significant participating rights held by our partner, and has the ability to earn fees for development management, property management, asset management, and financing transactions. The UDR/MetLife 399 Fremont Joint Venture is accounted for under the equity method of accounting. Our initial investment was approximately $31.1 million.

In June 2013 and within UDR/MetLife I, the Company exchanged with MetLife its approximately 10% ownership interest in four operating communities and paid MetLife an additional $15.6 million in cash for an increased ownership interest of approximately 35% in two high-rise operating communities, bringing UDR's ownership interest in the two high-rise operating communities to 50% each. The two high-rise operating communities are located in Denver, Colorado and San Diego, California and were subsequently contributed to UDR/MetLife II. The four operating communities in which UDR exchanged its ownership interest are located in Washington D.C.; San Francisco, California; Dallas, Texas; and Charlotte, North Carolina. UDR continues to fee manage these four operating communities.

In March 2014, the Company sold its minority ownership interests in two operating communities located in Los Angeles, California to MetLife for cash proceeds of $3.0 million, which resulted in an immaterial gain. In April 2014, the Company increased its ownership interest in the remaining six operating communities in the UDR/MetLife I Joint Venture from 12% to 50%, and MetLife and the Company contributed the communities to the UDR/MetLife II Joint Venture. The Company paid MetLife $82.5 million for the additional ownership interests. The Company continues to fee manage the operating communities that were contributed to the UDR/MetLife II Joint Venture as well as the two operating communities in which it sold its minority ownership interests.

In July 2014, the Company increased the ownership interest in two land sites in UDR/Metlife I to 50.1% and formed individual asset joint ventures, which are included in Other UDR/MetLife Joint Ventures in the table above. The remaining 49.9% continues to be held by our joint venture partner MetLife. The Company paid MetLife approximately $21.5 million for the additional ownership interests.

In December 2014, the Company increased its ownership interest in one land site in the UDR/MetLife I Joint Venture to 50%. Additionally, the Company increased its ownership interest in another land site to 50.1%, which MetLife and the Company contributed to a separate joint venture and is included in Other UDR/MetLife Joint Ventures in the table above. The Company paid MetLife approximately $15.3 million for the additional ownership interests. As of December 31, 2014, the remaining assets in the UDR/MetLife I Joint Venture were comprised of three potential development land sites in which the Company has an average ownership interest of approximately 5% and one fully entitled land parcel in which the Company owns 50%.

In December 2014, the Company sold a 49% interest in 13th and Market located in San Diego, California to MetLife for gross proceeds of $54.2 million, resulting in a gain, net of tax, of $7.2 million and a 50% interest in 3033 Wilshire in Los Angeles, California, also to MetLife for gross proceeds of $8.3 million, resulting in a loss, net of tax, of $2.2 million.


(b)	The number of apartment homes for the communities under development presented in the table above is based on the projected number of total homes. As of December 31, 2014, no apartment homes had been completed in Other UDR/MetLife Joint Ventures.

(c)

In June 2013, the Company sold a 50% interest in five partnerships (the “UDR/MetLife Vitruvian Park^® Partnerships”) to MetLife for approximately $141.3 million. The transaction resulted in a gain of approximately $436,000 which the Company has deferred until the terms of the construction completion guarantee have been met. Under the terms of the UDR/MetLife Vitruvian Park^® Partnerships, the Company serves as the general partner with significant participating rights held by our partner, and earns fees for property management, asset management, and financing transactions. The UDR/MetLife Vitruvian Park^® Partnerships are accounted for under the equity method of accounting. Our initial investment was approximately $80.2 million, which consisted of approximately $140.0 million (50% of our net book value of the real estate at the time of the transaction) reduced by our share of the net proceeds received upon encumbering the assets of approximately $58.7 million and other operating adjustments.

At closing, a total of $118.3 million of secured debt was placed on the two operating communities and the community under development. The debt on the two operating communities carries an interest rate of 4.0% with a term of ten years and the non-recourse construction loan on the community under development carries an interest rate of LIBOR plus 175 basis points with a term of two years and two one-year extension options. The Company has guaranteed the completion of the construction of the development. Proceeds from the construction loan will be used for completion of construction of the development. Upon completion, at its 50% ownership, the Company's pro-rata share of the undepreciated book value of the UDR/MetLife Vitruvian Park^® Partnerships' real estate assets and outstanding debt will be approximately $145.0 million and $62.8 million, respectively.

(d) UDR is a partner with an unaffiliated third party, which formed a joint venture for the investment of up to $450 million in multifamily properties located in key, high barrier to entry markets. The partners will contribute equity of $180 million of which the Company’s maximum equity will be 30% or $54 million when fully invested.

(e) In November 2007, UDR and an unaffiliated third party formed a joint venture to own and operate 10 communities located in Texas. UDR contributed cash and property equal to 20% of the fair value of the joint venture. During the year ended December 31, 2012, the Company acquired the remaining 80% ownership interests in two communities in Austin, Texas for $11.7 million. The Company’s investment in the joint venture at December 31, 2014 and 2013 was net of deferred profits on the sale of depreciable properties to the joint venture of $23.9 million and $24.0 million, respectively.

In January 2015, the eight communities held by the Texas joint venture were sold, generating proceeds to UDR of $43.5 million. The Company recorded promote and fee income of approximately $9.6 million and a gain of approximately $59.1 million (including $24.2 million of previously deferred gains) in connection with the sale.

(f) In October 2013, the Company entered into a participating debt financing arrangement with a third party that is developing a $108 million, 218-home, high-rise luxury community located adjacent to the Cherry Creek Mall in Denver, Colorado. Under the agreement, UDR will finance up to 85%, or approximately $92.0 million, of the development cost at an interest rate of 6.5% per annum on the outstanding debt balance. In addition, the Company has the option to purchase the community upon completion of construction and has a 50% participating interest in the profit upon the acquisition of the community or sale to a third party. The Company accounts for the arrangement consistent with an investment in real estate under the equity method of accounting.

As of December 31, 2014, and 2013, our participating loan investment was $62.7 million and $14.3 million, respectively, which was included in Investment in and advances to unconsolidated joint ventures, net on the Consolidated Balance Sheets. We also recognized $2.4 million and $156,000 of income included in Income/(loss) from unconsolidated entities on the Consolidated Statements of Operations for the years ended December 31, 2014 and 2013, respectively.

Dispositions

During the year ended December 31, 2014, the Company recognized gains on the sale of real estate, net of tax, of $143.6 million. The Company sold nine communities consisting of a total of 2,500 apartment homes, an adjacent parcel of land, and one operating property for gross proceeds of $328.4 million, resulting in net proceeds of $324.4 million and a total gain, net of tax, of $138.6 million. The Company also sold 49% interest in a recently completed development for gross proceeds of $54.2 million, resulting in a gain, net of tax, of $7.2 million, and 50% interest in a land parcel for gross proceeds of $8.3 million, resulting in a loss, net of tax, of $2.2 million. A portion of the sale proceeds was designated for tax-deferred exchanges under Section 1031 of the Internal Revenue Code and was used to fund acquisitions of real estate as discussed above.

In 2013, UDR sold two apartment communities in the Sacramento market, consisting of 914 apartment homes for gross proceeds of $81.1 million. UDR recognized gains of $41.9 million, which are included in Income/(loss) from discontinued operations, net of tax on the UDR Consolidated Statements of Operations. Proceeds were used primarily to fund development and redevelopment activity and reduce debt.

In 2012, UDR sold 21 apartment communities, which had 6,507 apartment homes for gross proceeds of $609.4 million. UDR recognized gains (before tax) of $260.4 million, which are included in Income/(loss) from discontinued operations, net of tax on the UDR Consolidated Statements of Operations. Proceeds were used primarily to fund development and redevelopment activity and reduce debt.

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.

Financing Activities

For the years ended December 31, 2014, 2013 and 2012, Net cash provided by/(used in) financing activities was $(113.7) million, $(198.6) million and ($116.0) million, respectively.

The following significant financing activities occurred during the year ended December 31, 2014:


•	repaid $81.0 million of secured debt;


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


•	repaid $128.5 million of 5.50% unsecured medium-term notes due April 2014;


•	issued $300.0 million of 3.750% senior unsecured medium-term notes due July 2024;


•	sold 3,410,433 shares of common stock for aggregate net proceeds of approximately $99.8 million after deducting related expenses;


•	net borrowings of $152.5 million under the Company’s $900 million unsecured revolving credit facility; and


•	paid distributions of $256.1 million to our common stockholders.

The following significant financing activities occurred during the year ended December 31, 2013:


•	issued $300 million of 3.70% senior unsecured medium-term notes due October 2020;


•	repaid $46.6 million of secured debt. The $46.6 million of secured debt included $42.2 million of mortgage payments and the repayment of $4.4 million of credit facilities;


•	repaid $122.5 million of 6.05% unsecured medium-term notes due June 2013; and


•	re-priced our $100 million and $250 million unsecured term notes from LIBOR plus 142.5 basis points to LIBOR plus 125 basis points, and extended the maturity dates from January 2016 to June 2018.

Credit Facilities

As of December 31, 2014, we have secured credit facilities with Fannie Mae with an aggregate commitment of $834.3 million, all of which was outstanding. The Fannie Mae credit facilities mature at various dates from May 2017 through July 2023, and bear interest at floating and fixed rates. The Company has $568.1 million of the funded balance fixed at a weighted average interest rate of 5.12% and the remaining balance of $266.2 million on these facilities had at a weighted average variable rate of 1.60% at December 31, 2014.

As of December 31, 2014, the Company has a $900 million unsecured revolving credit facility that matures in December 2017. The credit facility has a six month extension option and contains an accordion feature that allows us to increase the facility to $1.45 billion. Based on the Company’s current credit rating, the credit facility carries an interest rate equal to LIBOR plus a spread of 100 basis points and a facility fee of 15 basis points. As of December 31, 2014, we had $152.5 million of outstanding borrowings under the credit facility, leaving $747.5 million of unused capacity (excluding $1.9 million of letters of credit at December 31, 2014).

The Fannie Mae credit facilities and the bank unsecured revolving credit facility are subject to customary financial covenants and limitations. As of December 31, 2014, we were in compliance with all financial covenants under these credit facilities.

Interest Rate Risk

We are exposed to interest rate risk associated with variable rate notes payable and maturing debt that has to be refinanced. We do not hold financial instruments for trading or other speculative purposes, but rather issue these financial instruments to finance our portfolio of real estate assets. Interest rate sensitivity is the relationship between changes in market interest rates and the fair value of market rate sensitive assets and liabilities. Our earnings are affected as changes in short-term interest rates impact our cost of variable rate debt and maturing fixed rate debt. We had $579.7 million in variable rate debt that is not subject to interest rate swap contracts as of December 31, 2014. If market interest rates for variable rate debt increased by 100 basis points, our interest expense would increase by $6.9 million based on the average balance outstanding during the year.

These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. These analysis do not consider the effects of the adjusted level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no change in our financial structure.

The Company also utilizes derivative financial instruments to manage interest rate risk and generally designates these financial instruments as cash flow hedges. See Note 13, Derivatives and Hedging Activities, in the Notes to Consolidated Financial Statements included in this Report for additional discussion of derivate instruments.

Funds from Operations, Funds from Operations as Adjusted, and Adjusted Funds from Operations

Funds from Operations

Funds from operations (“FFO”) is defined as net income (computed in accordance with GAAP), excluding impairment write-downs of depreciable real estate or of investments in non-consolidated investees that are driven by measurable decreases in the fair value of depreciable real estate held by the investee, gains or losses from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust’s (“NAREIT”) definition issued in April 2002 and is comparable to FFO, diluted in the accompanying reconciliation. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure of a REIT’s operating performance. In the computation of diluted FFO, OP Units, unvested restricted stock, stock options, and the shares of Series E Cumulative Convertible Preferred Stock are dilutive; therefore, they are included in the diluted share count.

Activities of our TRS include development and land entitlement. From time to time, we develop and subsequently sell a TRS property which results in a short-term use of funds that produces a profit that differs from the traditional long-term investment in real estate for REITs. We believe that the inclusion of these TRS gains in FFO is consistent with the standards established by NAREIT as the short-term investment is incidental to our main business. TRS gains on sales, net of taxes, are defined as net sales proceeds less a tax provision and the gross investment basis of the asset before accumulated depreciation.

We consider FFO a useful metric for investors as we use FFO in evaluating property acquisitions and our operating performance, and believe that FFO should be considered along with, but not as an alternative to, net income and cash flow as a measure of our activities in accordance with GAAP. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of funds available to fund our cash needs.

Funds from Operations as Adjusted

FFO as Adjusted is defined as FFO excluding the impact of acquisition-related costs and other non-comparable items including, but not limited to, prepayment costs/benefits associated with early debt retirement, gains on sales of marketable securities and TRS property, deferred tax valuation allowance increases and decreases, casualty-related expenses and recoveries, severance costs and legal costs. Management believes that FFO as Adjusted is useful supplemental information regarding our operating performance as it provides a consistent comparison of our operating performance across time periods and allows investors to more easily compare our operating results with other REITs.

FFO as Adjusted is not intended to represent cash flow or liquidity for the period, and is only intended to provide an additional measure of our operating performance. We believe that net income attributable to UDR, Inc. is the most directly comparable GAAP financial measure to FFO as Adjusted. However, other REITs may use different methodologies for calculating FFO as Adjusted or similar FFO measures and, accordingly, our FFO as Adjusted may not always be comparable to FFO as Adjusted or similar FFO measures calculated by other REITs. FFO as Adjusted should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity.

Adjusted Funds from Operations

Adjusted FFO, or “AFFO”, is a non-GAAP financial measure that management uses as a supplemental measure of our performance. AFFO is defined as FFO as Adjusted less recurring capital expenditures that are necessary to help preserve the value of and maintain functionality at our communities. Therefore, management considers AFFO a useful supplemental performance metric for investors as it is more indicative of the Company’s operational performance than FFO or FFO as Adjusted.

AFFO is not intended to represent cash flow or liquidity for the period, and is only intended to provide an additional measure of our operating performance. We believe that net income attributable to UDR, Inc. is the most directly comparable GAAP financial measure to AFFO. Management believes that AFFO is a widely recognized measure of the operations of REITs, and presenting AFFO will enable investors to assess our performance in comparison to other REITs. However, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not always be comparable to AFFO calculated by other REITs. AFFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to cash flows from operating activities (determined

in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.

The following table outlines our reconciliation of Net Income/(Loss) Attributable to UDR, Inc. to FFO, FFO as Adjusted, and AFFO for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Net income/(loss) attributable to UDR, Inc.	$	154,334		$	44,812		$	212,177
Distributions to preferred stockholders	(3,724		)	(3,724		)	(6,010		)
Real estate depreciation and amortization, including discontinued operations	358,154			341,490			350,400
Noncontrolling interests	5,508			1,470			8,126
Real estate depreciation and amortization on unconsolidated joint ventures	42,133			33,180			32,531
Net (gain)/loss on the sale of depreciable property, excluding TRS	(144,703		)	(40,450		)	(243,805		)
Premium on preferred stock redemption or repurchases, net	—			—			(2,791		)
Funds from operations (“FFO”), basic	411,702			376,778			350,628
Distribution to preferred stockholders — Series E (Convertible)	3,724			3,724			3,724
FFO, diluted	$	415,426		$	380,502		$	354,352
FFO per common share, basic	$	1.58		$	1.45		$	1.41
FFO per common share, diluted	$	1.56		$	1.44		$	1.40
Weighted average number of common shares and OP Units outstanding — basic	260,775			259,306			248,262
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted	265,728			263,926			252,659

Impact of adjustments to FFO:
Acquisition-related costs/(fees), including joint ventures	$	442		$	(254	)	$	2,762
Costs/(benefit) associated with debt extinguishment and tender offer	192			178			(277		)
Redemption of preferred stock	—			—			2,791
(Gain)/loss on sale of land	1,056			—			—
Net gain on prepayment of note receivable	(8,411		)	—			—
Tax benefit associated with the conversion of certain TRS entities into REITs	(5,770		)	—			—
Gain on sale of TRS property/marketable securities	—			(2,651		)	(7,749		)
Severance costs and other restructuring expense	—			—			733
Reversal of deferred tax valuation allowance	—			—			(21,530		)
Casualty-related (recoveries)/charges, net	541			(9,665		)	9,262
	$	(11,950	)	$	(12,392	)	$	(14,008	)

FFO as Adjusted, diluted	$	403,476		$	368,110		$	340,344

FFO as Adjusted per common share, diluted	$	1.52		$	1.39		$	1.35

Recurring capital expenditures	(43,921		)	(42,707		)	(42,249		)
AFFO	$	359,555		$	325,403		$	298,095

AFFO per common share, diluted	$	1.35		$	1.23		$	1.18

The following table is our reconciliation of FFO share information to weighted average common shares outstanding, basic and diluted, reflected on the Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012 (shares in thousands):



	Year Ended December 31,
	2014		2013		2012
Weighted average number of common shares and OP Units outstanding — basic	260,775		259,306		248,262
Weighted average number of OP Units outstanding	(9,247	)	(9,337	)	(9,411	)
Weighted average number of common shares outstanding — basic per the Consolidated Statements of Operations	251,528		249,969		238,851

Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted	265,728		263,926		252,659
Weighted average number of OP Units outstanding	(9,247	)	(9,337	)	(9,411	)
Weighted average incremental shares from assumed conversion of stock options	—		(1,169	)	(1,213	)
Weighted average incremental shares from unvested restricted stock	—		(415	)	(148	)
Weighted average number of Series E preferred shares outstanding	(3,036	)	(3,036	)	(3,036	)
Weighted average number of common shares outstanding — diluted per the Consolidated Statements of Operations	253,445		249,969		238,851

A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Net cash provided by/(used in) operating activities	$	392,360		$	339,902		$	327,187
Net cash provided by/(used in) investing activities	(293,660		)	(123,209		)	(211,582		)
Net cash provided by/(used in) financing activities	(113,725		)	(198,559		)	(115,993		)

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, 2014, 2013, and 2012, and includes the results of both continuing and discontinued operations for the periods presented.

Net Income/(Loss) Attributable to Common Stockholders

2014 -vs- 2013

Net income attributable to common stockholders was $150.6 million ($0.59 per diluted share) for the year ended December 31, 2014 as compared to net income of $41.1 million ($0.16 per diluted share) for the prior year. The increase in net income attributable to common stockholders for the year ended December 31, 2014 resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:


•	gains, net of tax, of $143.6 million on the sale of real estate during the year ended December 31, 2014. These gains consisted of:


•	the sale of nine communities with a total of 2,500 apartment homes, an adjacent parcel of land, and one operating property for gross proceeds of $328.4 million, resulting in a gain, net of tax, of approximately $138.6 million; and


•	the sale of 49% interest in a recently completed development for gross proceeds of $54.2 million, resulting in a gain, net of tax, of $7.2 million and 50% interest in a land parcel for gross proceeds of $8.3 million, resulting in a loss, net of tax, of $2.2 million.


•	an increase in total property net operating income (“NOI”) primarily due to higher occupancy and higher revenue per occupied home, and NOI from the homes placed in service related to development and redevelopment projects completed in 2014 and 2013, partially offset by the disposition of communities in 2014 and 2013.

This was partially offset by:


•	an increase in depreciation and amortization expense primarily from the homes placed in service related to development and redevelopment projects completed in 2014 and 2013, partially offset by a decrease from sold communities and fully depreciated assets; and


•	casualty-related recoveries in 2013 resulting from the effects of Hurricane Sandy on three of our New York City communities in 2012 (see Note 4, Real Estate Owned, in the Notes to the UDR Consolidated Financial Statements for more details);

2013 -vs- 2012

Net income attributable to common stockholders was $41.1 million ($0.16 per diluted share) for the year ended December 31, 2013 as compared to net income of $203.4 million ($0.85 per diluted share) for the prior year. The decrease in net income attributable to common stockholders for the year ended December 31, 2013 resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:


•	a decrease in net gains of $218.5 million on the sale of depreciable property related to the disposition of two communities in 2013 as compared to 21 communities in 2012; and


•	a decrease of $23.0 million in tax benefit primarily due to the reversal of our tax valuation allowance during 2012.

This was partially offset by:


•	an increase in total property NOI primarily due to higher occupancy and higher revenue per occupied home partially offset by the disposition of 21 communities in 2012;


•	casualty-related recoveries in 2013 resulting from the effects of Hurricane Sandy on three of our New York, New York communities in 2012 (see Note 16, Casualty-Related (Recoveries)/Charges, in the Notes to the UDR Consolidated Financial Statements included in this Report for more details);


•	a decrease in depreciation and amortization expense primarily from the disposition of assets in 2012 and intangible assets related to in place leases acquired in 2011 and 2012 becoming fully amortized in 2012, which was partially offset by the depreciation from developed and redeveloped units placed in service in 2012 and 2013;


•	a decrease in loss from unconsolidated entities primarily due to an $8.3 million gain ($5.3 million net of tax expense) on the sale of our 95% interest in the Lodge at Stoughton; and


•	a decrease in interest expense due to lower average debt balances, lower average interest rates, and higher capitalized interest from development and redevelopment activities.

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 2.75% of property revenue to cover the regional supervision and accounting costs related to consolidated property operations and land rent.

Although the Company considers NOI a useful measure of a 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 (which includes discontinued operations) for each of the periods presented (dollars in thousands):



	Year Ended December 31, (a)								Year Ended December 31, (b)
	2014			2013			% Change		2013			2012			% Change
Same-Store Communities:
Same-store rental income	$	630,966		$	604,729		4.3	%	$	613,733		$	584,999		4.9	%
Same-store operating expense (c)	(190,128		)	(185,512		)	2.5	%	(189,224		)	(184,393		)	2.6	%
Same-store NOI	440,838			419,217			5.2	%	424,509			400,606			6.0	%

Non-Mature Communities/Other NOI:
Acquired communities NOI	17,788			14,997			18.6	%	19,291			16,709			15.5	%
Sold or held for sale communities NOI	14,108			28,662			(50.8	)%	7,932			29,941			(73.5	)%
Developed communities NOI	26,492			4,920			438.5	%	4,846			(334		)	(1,550.9	)%
Redeveloped communities NOI	45,578			36,229			25.8	%	44,991			42,026			7.1	%
Commercial NOI and other	11,517			10,016			15.0	%	12,472			15,252			(18.2	)%
Total non-mature communities/other NOI	115,483			94,824			21.8	%	89,532			103,594			(13.6	)%

Total Property NOI	$	556,321		$	514,041		8.2	%	$	514,041		$	504,200		2.0	%

(a) Same-store consists of 34,581 apartment homes.

(b) Same-store consists of 35,790 apartment homes.

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



	Year Ended December 31,
	2014			2013			2012
Total property NOI	$	556,321		$	514,041		$	504,200
Joint venture management and other fees	13,044			12,442			11,911
Property management	(22,142		)	(20,780		)	(20,465		)
Other operating expenses	(8,271		)	(7,136		)	(5,718		)
Real estate depreciation and amortization	(358,154		)	(341,490		)	(350,401		)
General and administrative	(47,800		)	(42,238		)	(43,792		)
Casualty-related recoveries/(charges), net	(541		)	12,253			(8,495		)
Other depreciation and amortization	(5,775		)	(6,741		)	(4,105		)
Income/(loss) from unconsolidated entities	(7,006		)	(415		)	(8,579		)
Interest expense	(130,454		)	(126,083		)	(138,792		)
Interest and other income/(expense), net	11,837			4,681			2,703
Tax benefit/(provision), net	15,136			7,299			30,282
Gain/(loss) on sale of real estate owned, net of tax	143,647			40,449			251,554
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership	(5,511		)	(1,530		)	(7,986		)
Net (income)/loss attributable to noncontrolling interests	3			60			(140		)
Net income/(loss) attributable to UDR, Inc.	$	154,334		$	44,812		$	212,177

Same -Store Communities

2014 -vs- 2013

Our same-store community properties (those acquired, developed, and stabilized prior to January 1, 2013 and held on December 31, 2014) consisted of 34,581 apartment homes and provided 79.2% of our total NOI for the year ended December 31, 2014.

NOI for our same-store community properties increased 5.2% or $21.6 million for the year ended December 31, 2014 compared to 2013. The increase in property NOI was attributable to a 4.3% or $26.2 million increase in property rental income, which was partially offset by a 2.5% or $4.6 million increase in operating expenses. The increase in revenues was primarily driven by a 3.5% or $20.2 million increase in rental rates and a 4.9% or $2.2 million increase in reimbursement and fee income. Physical occupancy increased 0.6% to 96.7% and total monthly income per occupied home increased by 3.8% to $1,573.

The increase in operating expenses was primarily driven by a 4.1% or $2.6 million increase in real estate tax caused by higher real estate valuations and a 15.5% or $1.3 million increase in insurance expense primarily caused by a higher volume of small claims.

As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 69.9% for the year ended December 31, 2014 as compared to 69.3% for 2013.

2013 -vs- 2012

Our same-store community properties (those acquired, developed, and stabilized prior to January 1, 2012 and held on December 31, 2013) consisted of 35,790 apartment homes and provided 82.6% of our total NOI for the year ended December 31, 2013.

NOI for our same-store community properties increased 6.0% or $23.9 million for the year ended December 31, 2013 compared to 2012. The increase in property NOI was attributable to a 4.9% or $28.7 million increase in property rental income, which was partially offset by a 2.6% or $4.8 million increase in operating expenses. The increase in revenues was primarily driven by a 4.0% or $22.7 million increase in rental rates and a 7.7% or $3.6 million increase in reimbursement and fee income. Physical occupancy increased 0.2% to 96.0% and total monthly income per occupied home increased by 4.7% to $1,488.

The increase in operating expenses was primarily driven by a 6.7% or $3.9 million increase in real estate tax and a 4.6% or $2.0 million increase in personnel costs, which was partially offset by a 4.2% or $1.3 million decrease in repair and maintenance expense.

As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 69.2% for the year ended December 31, 2013 as compared to 68.5% for 2012.

Non-Mature Communities/Other

2014 -vs- 2013

The remaining $115.5 million or 20.8% of our total NOI for the year ended December 31, 2014 was generated from our non-mature communities/other. UDR’s non-mature communities/other consist of communities that do not meet the criteria to be included in same-store communities, which includes communities developed or acquired, redevelopment properties, sold or held for sale properties, and non-apartment components of mixed use properties. NOI from non-mature communities/other increased by 21.8% or $20.7 million for the year ended December 31, 2014 compared to 2013. The increase was primarily driven by a increase in NOI of 438.5% or $21.6 million from development communities and 25.8% or $9.3 million from redevelopment communities completed in 2014 and 2013, which was partially offset by an decrease in NOI of 50.8% or $14.6 million from communities sold in 2014 and 2013.

2013 -vs- 2012

The remaining $89.5 million of our total NOI for the year ended December 31, 2013 was generated from our non-mature communities/other. NOI from non-mature communities decreased by 13.6% or $14.1 million for the year ended December 31, 2013 compared to 2012. The decrease was primarily driven by a decrease in NOI of 73.5% or $22.0 million from communities

sold in 2012, partially offset by an increase in NOI of 1,550.9% or $5.2 million from development communities completed in 2013 and 2012 and an increase in NOI of 7.1% or $3.0 million from redeveloped communities completed in 2013 and 2012.

Real Estate Depreciation and Amortization

For the year ended December 31, 2014, real estate depreciation and amortization on both continuing and discontinued operations increased 4.9% or $16.7 million as compared to 2013. The increase in depreciation and amortization for the year ended December 31, 2014 was primarily due to homes delivered from our development and redevelopment communities, partially offset by a decrease from sold communities and fully depreciated assets.

For the year ended December 31, 2013, real estate depreciation and amortization on both continuing and discontinued operations decreased 2.5% or $8.9 million as compared to 2012. The decrease in depreciation and amortization for the year ended December 31, 2013 was primarily from the disposition of assets in 2012 and intangible assets related to in place leases acquired in 2012 and 2011 becoming fully amortized in 2012. The decrease was partially offset by the depreciation from developed and redeveloped units placed in service in 2013 and 2012.

General and Administrative

For the year ended December 31, 2014, general and administrative expense increased 13.2% or $5.6 million from 2013. The increase was primarily due to a $3.8 million increase in stock-based compensation expense under the long-term incentive plan and salary and benefit increases.

For the year ended December 31, 2013, general and administrative expense decreased 3.5% or $1.6 million from 2012. The decrease was primarily due to acquisition costs incurred in 2012.

Interest Expense

For the year ended December 31, 2014, interest expense increased by 3.5% or $4.4 million as compared to 2013. The increase in interest expense was primarily due lower capitalized interest from development and redevelopment activities.

For the year ended December 31, 2013, interest expense decreased 9.2% or $12.7 million as compared to 2012. The decrease in interest expense was primarily due to lower debt balances and lower interest rates and higher capitalized interest from development and redevelopment activities.

Tax Benefit/(Provision), Net

The Company recognized a Tax benefit/(provision), net of $15.1 million, $7.3 million and $30.3 million for the years ended December 31, 2014, 2013 and 2012, respectively. The increase from 2013 to 2014 is primarily attributable to a one-time benefit of $5.8 million related to the conversion of certain taxable REIT subsidiaries into REITs in 2014. The decrease from 2012 to 2013 was primarily attributable to the reversal of a $21.5 million net deferred tax asset valuation allowance in 2012. Prior to 2012, our TRS had a history of losses and, as a result, had historically recognized a valuation allowance for net deferred tax assets. Each quarter, the Company evaluates the need to retain all or a portion of the valuation allowance on its net deferred tax assets. In the first quarter of 2012, the Company determined that it is more likely than not that the deferred tax assets, including any remaining net operating losses, will be realized. In making this determination, the Company analyzed, among other things, its recent history of earnings, forecasts of future earnings from sales of depreciable property, and its cumulative earnings for the last twelve quarters.

Casualty-Related (Recoveries)/Charges, Net

In October 2012, Hurricane Sandy hit the East Coast, affecting three of the Company’s operating communities (1,706 apartment homes) located in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Company has insurance policies that provide coverage for property damage and business interruption, subject to applicable retention.

Based on the claims filed and management’s estimates, the Company recognized a $9.0 million impairment charge for the damaged assets’ net book value and incurred $10.4 million of repair and cleanup costs during the year ended December 31, 2012. The impairment charge and the repair and cleanup costs incurred were reduced as of December 31, 2012 by $14.5 million of estimated insurance recovery, and were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations. During the year ended December 31, 2013, no material adjustments to the impairment charge and the repair and cleanup costs incurred were recognized. With the exception of one of the properties that is under redevelopment at December 31, 2013, the rehabilitation of the remaining two properties was substantially completed as of December 31, 2013 and was completed during 2014.

As of December 31, 2013, the Company had settled the Hurricane Sandy claims and received insurance proceeds in excess of the $14.5 million estimated insurance recovery receivable related to the impairment charge and the repair and cleanup costs incurred. As a result, the Company recognized a Casualty-related recovery of approximately $4.8 million and a casualty gain of approximately $654,000 for the year ended December 31, 2013. Both the recovery and casualty gain were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.

Based on the claims filed and management’s estimates, the Company recognized $4.4 million of business interruption losses for the year ended December 31, 2012, of which $3.6 million were related to rent concession rebates provided to residents during the period the properties were uninhabitable and were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations, and $767,000 were related to rent that was not contractually receivable and were classified as a reduction to Rental income on the Consolidated Statements of Operations. As noted below, the Company recovered from the insurance carrier approximately $4.2 million of the $4.4 million of 2012 business interruption losses. The Company estimates that it incurred an additional $3.4 million of business interruption losses for the year ended December 31, 2013. As noted below, the Company recovered from the insurance carrier approximately $2.6 million of the $3.4 million of 2013 business interruption losses.

During the year ended December 31, 2013, the Company received approximately $6.8 million of insurance proceeds for recovery of business interruption losses. Of the $6.8 million of insurance proceeds received in 2013, $4.2 million related to recovery of business interruption losses incurred in 2012 and the remaining $2.6 million related to recovery of business interruption losses incurred in 2013. The $6.8 million of recovery was classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations as of December 31, 2013.

During the year ended December 31, 2014, the Company recorded $541,000 of casualty-related losses due to property damage incurred during an earthquake and a storm in California, all of which are included in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.

Income/(Loss) from Unconsolidated Entities

For the years ended December 31, 2014, 2013 and 2012, we recognized losses from unconsolidated entities of $7.0 million, $415,000, and $8.6 million, respectively. These losses relate to our investments in unconsolidated joint ventures and partnerships and are included in Income/(loss) from unconsolidated entities on the UDR Consolidated Statements of Operations included in this Report. The increase in loss in 2014 as compared to 2013, as well as the decrease in loss in 2013 as compared to 2012, was primarily due to an $8.3 million gain ($5.3 million net of tax expense) on the sale of our 95% interest in the Lodge at Stoughton in 2013.

Interest and other income/(expense), net

For the years ended December 31, 2014, 2013 and 2012, we recognized Interest and other income/(expense), net of $11.9 million, $4.6 million, and $3.5 million, respectively. The increase in 2014 as compared to 2013 and 2012 was primarily attributable to the net gain of $8.4 million realized on the repayment of a note receivable in 2014.

Gain/(Loss) on Sale of Real Estate Owned, Net of Tax

During the year ended December 31, 2014, the Company recognized gains on the sale of real estate, net of tax, of $143.6 million. The Company sold nine communities consisting of a total of 2,500 apartment homes, an adjacent parcel of land, and one operating property for gross proceeds of $328.4 million, resulting in net proceeds of $324.4 million and a total gain, net of tax, of $138.6 million. The Company also sold 49% interest in a recently completed development for gross proceeds of $54.2 million, resulting in a gain, net of tax, of $7.2 million; and our 50% interest in a land parcel for gross proceeds of $8.3 million, resulting in a loss, net of tax, of $2.2 million. A portion of the sale proceeds was designated for tax-deferred exchanges under Section 1031 of the Internal Revenue Code and was used to fund acquisitions of real estate as discussed below.

Due to the Company’s adoption ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, effective January 1, 2014, these gains, net of tax, are included in Gain/(loss) on sale of real estate owned, net of tax on the UDR Consolidated Statements of Operations. See Note 2, Significant Accounting Policies, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional information.

For the years ended December 31, 2013 and 2012, we recognized gains (before tax) of $41.9 million, and $260.4 million, respectively. These gains are included in Income/(loss) from discontinued operations, net of tax on the Consolidated Statements of Operations of UDR included in this Report. Changes in the level of gains recognized from period to period reflect the changing level of our divestiture activity from period to period as well as the extent of gains related to specific properties sold.

Inflation

We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results through wage pressures, utilities and material costs, the majority of our leases are for a term of fourteen months or less, which generally enables us to compensate for any inflationary effects by increasing rents on our apartment homes. Although an extreme escalation in energy and food costs could have a negative impact on our residents and their ability to absorb rent increases, we do not believe this has had a material impact on our results for the year ended December 31, 2014.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2014 (dollars in thousands):



	Payments Due by Period
Contractual Obligations	2015		2016-2017		2018-2019		Thereafter		Total
Long-term debt obligations	$	520,934	$	644,155	$	1,190,637	$	1,227,379	$	3,583,105
Interest on debt obligations (a)	125,037		200,454		135,239		114,451		575,181
Letters of credit	1,866		—		—		—		1,866
Unfunded commitments on:
Development projects (b)	40,068		—		—		—		40,068
Unconsolidated joint ventures (b) (c)	—		172,155		—		—		172,155
Redevelopment projects (b)	14,222		—		—		—		14,222
Participating loan investments (d)	29,302								29,302
Operating lease obligations:
Operating space	709		200		152		109		1,170
Ground leases (e)	5,412		10,824		10,824		313,735		340,795
	$	737,550	$	1,027,788	$	1,336,852	$	1,655,674	$	4,757,864


(a)	Interest payments on variable rate debt instruments are based on each debt instrument’s respective year-end interest rate at December 31, 2014.


(b)	Any unfunded costs at December 31, 2014 are shown in the year of estimated completion.


(c)	Represents UDR’s contributed and remaining equity commitment in unconsolidated joint ventures.


(d)	Represents UDR’s remaining participating loan commitment for Steele Creek.


(e)	For purposes of our ground lease contracts, the Company uses the minimum lease payment, if stated in the agreement. For ground lease agreements where there is a reset provision based on the communities appraised value or consumer price index but does not included a specified minimum lease payment, the Company uses the current rent over the remainder of the lease term.

During 2014, we incurred gross interest costs of $150.7 million, of which $20.2 million was capitalized.

UNITED DOMINION REALTY, L.P.:

Business Overview

United Dominion Realty, L.P. (the “Operating Partnership” or “UDR, L.P.”) is a Delaware limited partnership formed in February 2004 and organized pursuant to the provisions of the Delaware Revised Uniform Limited Partnership Act. 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, 2014, the Operating Partnership’s real estate portfolio included 68 communities located in nine states and the District of Columbia with a total of 20,814 apartment homes.

As of December 31, 2014, UDR owned 110,883 units of our general limited partnership interests and 174,002,342 units of our limited partnership interests (the “OP Units”), or approximately 95.0% 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. We refer to our General Partner together with its consolidated subsidiaries (including us) and the General Partner’s consolidated joint ventures as “UDR” or the “General Partner.”

UDR is a self-administered real estate investment trust, or REIT, that owns, acquires, renovates, develops, and manages apartment communities. The General Partner was formed in 1972 as a Virginia corporation and changed its state of incorporation from Virginia to Maryland in September 2003. At December 31, 2014, the General Partner’s consolidated real estate portfolio included 139 communities located in 10 states and the District of Columbia with a total of 39,851 apartment homes. In addition, the General Partner had an ownership interest in 36 communities with 10,055 completed apartment homes through unconsolidated operating communities.

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 addition, 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, 2014, 2013, and 2012, were $4.9 million, $8.4 million, and $5.8 million, respectively.

Impairment of Long-Lived Assets

We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book value of those assets. Our cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. The net book value of impaired assets is reduced to fair market value. Our estimates of fair market value represent our best estimate based 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.

Real Estate Investment Properties

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, 2014.



		As of December 31, 2014						Year Ended December 31, 2014
Same-Store Communities	Number of Apartment Communities	Number of Apartment Homes	Percentage of Total Carrying Value		Total Carrying Value (in thousands)			Average Physical Occupancy		Monthly Income per Occupied Home (a)		Net Operating Income (in thousands)
West Region
San Francisco, CA	9	2,185	13.3	%	$	560,828		96.4	%	$	2,671	$	52,012
Orange County, CA	8	2,935	12.3	%	522,264			94.8	%	1,721		42,097
Seattle, WA	5	932	5.0	%	213,135			97.1	%	1,540		11,989
Los Angeles, CA	2	344	2.5	%	108,080			94.4	%	2,179		5,646
Monterey Peninsula, CA	7	1,565	3.8	%	161,635			93.7	%	1,243		15,325
Other Southern California	3	635	2.6	%	109,741			94.9	%	1,658		8,349
Portland, OR	3	716	1.7	%	73,811			96.8	%	1,204		6,970
Mid-Atlantic Region
Metropolitan D.C.	7	2,378	13.2	%	561,052			96.4	%	1,909		35,342
Baltimore, MD	5	994	3.6	%	152,041			87.8	%	1,558		11,297
Southeast Region
Tampa, FL	3	1,154	2.8	%	117,260			96.3	%	1,192		10,336
Nashville, TN	6	1,612	3.2	%	134,852			97.0	%	1,029		12,988
Other Florida	1	636	1.9	%	81,316			95.4	%	1,378		6,491
Northeast Region
New York, NY	1	493	6.3	%	268,662			96.9	%	3,528		16,193
Boston, MA	2	833	4.2	%	178,607			96.3	%	1,855		12,737
Southwest Region
Dallas, TX	2	1,348	4.5	%	189,458			95.6	%	1,410		14,020
Austin, TX	1	250	1.0	%	39,538			96.2	%	1,653		2,801
Total/Average Same-Store Communities	65	19,010	81.9	%	3,472,280			95.4	%	$	1,713	264,593
Non Matures, Commercial Properties & Other	3	1,804	18.1	%	766,490							35,720
Total Real Estate Owned	68	20,814	100	%	4,238,770							$	300,313
Total Accumulated Depreciation					(1,403,303		)
Total Real Estate Owned, Net of Accumulated Depreciation					$	2,835,467


(a)	Monthly Income per Occupied Home represents total revenues divided by the product of occupancy and the number of mature apartment homes.

We report in two segments: Same-Store Communities and Non-Mature Communities/Other.

Liquidity and Capital Resources

Liquidity is the ability to meet present and future financial obligations either through operating cash flows, the sale of properties, and the issuance of debt. Both the coordination of asset and liability maturities and effective capital management are important to the maintenance of liquidity. The Operating Partnership’s primary source of liquidity is cash flow from operations as determined by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment homes and borrowings allocated to us under the General Partner’s credit agreements. The General Partner will routinely use its unsecured credit facility to temporarily fund certain investing and financing activities prior to arranging for longer-term financing or the issuance of equity or debt securities. During the past several years, proceeds from the sale of real estate have been used for both investing and financing activities as we repositioned our portfolio.

We expect to meet our short-term liquidity requirements generally through net cash provided by operations and borrowings allocated to us under the General Partner’s credit agreements. We expect to meet certain long-term liquidity requirements such as scheduled debt maturities and potential property acquisitions through borrowings and the disposition of properties. We believe that our net cash provided by operations and borrowings will continue to be adequate to meet both operating requirements and the payment of distributions. Likewise, the budgeted expenditures for improvements and renovations of certain properties are expected to be funded from property operations, and borrowings allocated to us under the General Partner’s credit agreements.

Future Capital Needs

Future capital expenditures are expected to be funded with proceeds from the issuance of secured debt or unsecured debt, sales of properties, borrowings allocated to us under our General Partner’s credit agreements, and to a lesser extent, from cash flows provided by operating activities.

As of December 31, 2014, the Operating Partnership had approximately $193.0 million of principal payments on secured debt maturing in 2015. We anticipate that we will repay that debt with operating cash flows or proceeds from borrowings allocated to us under our General Partner’s credit agreements. The repayment of debt will be recorded as an offset to the Advances (to)/from General Partner.

Statements of Cash Flows

Operating Activities

For the year ended December 31, 2014, Net cash provided by/(used in) operating activities was $208.0 million compared to $208.3 million for 2013. The increase in cash flow due to improved income from continuing operations was offset by changes in operating assets and liabilities.

For the year ended December 31, 2013, Net cash provided by/(used in) operating activities was $208.3 million compared to $201.1 million for 2012. The increase in net cash flow from operating activities was primarily due to an increase in property net operating income from our apartment community portfolio and changes in operating assets and operating liabilities.

Investing Activities

For the year ended December 31, 2014, Net cash provided by/(used in) investing activities was $(46.7) million compared to $(64.0) million for 2013. The decrease in cash used in investing activities was primarily related to lower spend on development and redevelopment.

For the year ended December 31, 2013, Net cash provided by/(used in) investing activities was $(64.0) million compared to $4.3 million for 2012. Changes in the level of investment activities from period to period reflect our strategy as it relates to acquisitions, dispositions, development, redevelopment, and capital expenditures.

Disposition of Investments

During the year ended December 31, 2014 the Operating Partnership sold one community and an adjacent parcel of land in San Diego, California for gross proceeds of $48.7 million, resulting in a $24.4 million gain and net proceeds of $47.9

million. The Operating Partnership also recorded gains of $39.2 million in connection with UDR’s sale of two communities in Tampa, Florida and Los Angeles, California, which were previously deferred. The total gains of $63.6 million were included in Gain/(loss) on sale of real estate owned on the Consolidated Statements of Operations.

In 2013, the Operating Partnership sold two apartment communities in the Sacramento market, consisting of 914 apartment homes for gross proceeds of $81.1 million. The Operating Partnership recognized a gain of $41.5 million, which is included in Income/(loss) from discontinued operations on the Operating Partnership’s Consolidated Statements of Operations. Proceeds were used primarily to fund development and redevelopment activity and reduce debt.

Also in 2013, the Operating Partnership distributed the development property Los Alisos to the General Partner as a capital distribution. Upon the distribution of the property, the Operating Partnership redeemed 1,002,556 limited partnership units owned by UDR and affiliated entities and reduced its receivable from the General Partner by $53.7 million, resulting in a net capital reduction of $77.0 million.

In 2012, the Operating Partnership sold four communities with 1,314 apartment homes for a gain of $51.1 million.

Financing Activities

For the year ended December 31, 2014, Net cash provided by/(used in) financing activities was $(162.8) million compared to $(145.3) million for 2013. The increase in cash used in financing activities was primarily due to increased advances to the General Partner, partially offset by decreased payments on secured debt and proceeds from the issuance of secured debt.

For the year ended December 31, 2013, Net cash provided by/(used in) financing activities was $(145.3) million compared to $(203.3) million for 2012. The decrease in cash used in financing activities was primarily due to a decrease in payments on secured debt, a decrease in advances from the General Partner, and a decrease in proceeds from the issuance of secured debt.

Credit Facilities

As of December 31, 2014, an aggregate commitment of $526.6 million of the General Partner's secured credit facilities with Fannie Mae was allocated to the Operating Partnership based on the ownership of the assets securing the debt. The entire commitment was outstanding at December 31, 2014. The Fannie Mae credit facilities mature at various dates from May 2017 through July 2023 and bear interest at floating and fixed rates. At December 31, 2014, $333.8 million of the outstanding balance was fixed at a weighted average interest rate of 4.90% and the remaining balance of $192.8 million on these facilities had a weighted average variable interest rate of 1.83%. During 2013, the General Partner reallocated an additional $13.7 million of the Fannie Mae credit facilities to the Operating Partnership.

The Operating Partnership is a guarantor on the General Partner’s unsecured revolving credit facility, with an aggregate borrowing capacity of $900 million, $250 million of term notes due June 2018, $100 million of term notes due June 2018, $300 million of medium-term notes due June 2018, $300 million of medium-term notes due October 2020, $400 million of medium-term notes due January 2022, and $300 million of medium-term notes due July 2024. As of December 31, 2014, there were $152.5 million outstanding borrowings under the unsecured credit facility. As of December 31, 2013, there was no outstanding balance under the unsecured credit facility.

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 $219.8 million in variable rate debt that is not subject to interest rate swap contracts as of December 31, 2014. If market interest rates for variable rate debt increased by 100 basis points, our interest expense would increase by $2.2 million based on the balance at December 31, 2014.

These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. These analyses do not consider the effects of the adjusted level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate our exposure to

the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no change in our financial structure.

The General Partner also utilizes derivative financial instruments allocated to the Operating Partnership to manage interest rate risk and generally designates these financial instruments as cash flow hedges. See Note 8, Derivatives and Hedging Activity, in the Notes to the Operating Partnership’s Consolidated Financial Statements included in this Report for additional discussion of derivative instruments.

Results of Operations

Net Income(Loss) Attributable to OP Unitholders

2014 -vs- 2013

Net income/(loss) attributable to OP unitholders was $96.2 million ($0.53 per OP Unit) for the year ended December 31, 2014 as compared to $73.4 million ($0.40 per OP Unit) for the the prior year. The increase resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:


•	the Operating Partnership sold one community and an adjacent parcel of land in San Diego, California for gross proceeds of $48.7 million, resulting in a $24.4 million gain and net proceeds of $47.9 million. The Operating Partnership also recorded gains of $39.2 million in connection with UDR’s sale of two communities in Tampa, Florida and Los Angeles, California, which were previously deferred;


•	an increase in total property net operating income (“NOI”) primarily due to higher occupancy and higher revenue per occupied home, and NOI from the homes placed in service related to development and redevelopment projects completed in 2014 and 2013, partially offset by the disposition of communities in 2014 and 2013.

This was partially offset by:


•	casualty-related recoveries in 2013 resulting from the effects of Hurricane Sandy on two of our New York City communities in 2012 (see Note 13, Casualty-Related (Recoveries)/Charges, in the Notes to the Operating Partnership’s Consolidated Financial Statements for more details).

2013 -vs- 2012

Net income/(loss) attributable to OP unitholders was $73.4 million ($0.40 per OP Unit) for the year ended December 31, 2013 as compared to $44.0 million ($0.24 per OP Unit) for the prior year. The increase resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:


•	an increase in total property NOI primarily due to higher occupancy and higher revenue per occupied home, partially offset by a decrease in NOI due to the disposition of four communities in 2012;


•	a decrease in depreciation and amortization expense primarily from the disposition of assets in 2012, partially offset by the depreciation from developed or redeveloped units placed in service in 2013 and 2012;


•	casualty-related recoveries in 2013 resulting from the effects of Hurricane Sandy on two of our New York, New York communities in 2012 (see Note 13, Casualty-Related (Recoveries)/Charges, in the Notes to the Operating Partnership’s Consolidated Financial Statements included in this Report for more details); and


•	a decrease in interest expense due to lower average debt balances, lower average interest rates, and higher capitalized interest from development and redevelopment activities.

This was partially offset by:


•	a decrease in net gains of $9.6 million on the sale of depreciable properties related to the disposition of two communities in 2013 as compared to four communities in 2012.

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 is property management expense which is calculated as 2.75% of property revenue to cover regional supervision and accounting costs related to consolidated property operations and land rent.

The following table summarizes the operating performance of our total portfolio (which includes discontinued operations) for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands):



	Year Ended December 31, (a)								Year Ended December 31, (b)
	2014			2013			% Change		2013			2012			% Change
Same-Store Communities:
Same-store rental income	$	372,818		$	355,585		4.8	%	$	344,525		$	327,877		5.1	%
Same-store operating expense (c)	(108,225		)	(106,228		)	1.9	%	(103,252		)	(99,944		)	3.3	%
Same-store NOI	264,593			249,357			6.1	%	241,273			227,933			5.9	%

Non-Mature Communities/Other NOI:
Acquired communities NOI	16,417			14,998			9.5	%	14,997			14,160			5.9	%
Sold communities NOI	11			8,671			(99.9	)%	5,581			10,296			(45.8	)%
Developed communities NOI	(603		)	(17		)	3,447.1	%	(17		)	(2		)	750.0	%
Redeveloped communities NOI	14,245			10,084			41.3	%	18,848			20,093			(6.2	)%
Commercial NOI and other	5,650			4,442			27.2	%	6,853			9,058			(24.3	)%
Total non-mature communities/other NOI	35,720			38,178			(6.4	)%	46,262			53,605			(13.7	)%

Total Property NOI	$	300,313		$	287,535		4.4	%	$	287,535		$	281,538		2.1	%


(a)	Same-store consists of 19,010 apartment homes.


(b)	Same-store consists of 18,616 apartment homes.


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

The following table is our reconciliation of total property NOI to Net income/(loss) attributable to OP unitholders as reflected, for both continuing and discontinued operations, for the years ended December 31, 2014, 2013 and 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Total property NOI	$	300,313		$	287,535		$	281,538
Property management	(11,622		)	(11,298		)	(11,019		)
Other operating expenses	(5,172		)	(5,728		)	(5,272		)
Real estate depreciation and amortization	(179,176		)	(181,302		)	(195,051		)
General and administrative	(28,541		)	(24,808		)	(26,204		)
Casualty-related recoveries/(charges), net	(541		)	8,083			(5,518		)
Interest expense	(41,717		)	(36,058		)	(45,234		)
Gain/(loss) on sale of real estate owned	63,635			41,518			51,094
Net (income)/loss attributable to noncontrolling interests	(952		)	(4,566		)	(352		)
Net income/(loss) attributable to OP unitholders	$	96,227		$	73,376		$	43,982

Same-Store Communities

2014 -vs- 2013

Our same-store community properties (those acquired, developed, and stabilized prior to January 1, 2013 and held on December 31, 2014) consisted of 19,010 apartment homes and provided 88.1% of our total NOI for the year ended December 31, 2014.

NOI for our same-store community properties increased 6.1% or $15.2 million for the year ended December 31, 2014 compared to 2013. The increase in property NOI was primarily attributable to a 4.8% or $17.2 million increase in property rental income, which was partially offset by a 1.9% or $2.0 million increase in operating expenses. The increase in revenues was primarily driven by a 3.7% or $12.8 million increase in rental rates and a 4.0% or $1.1 million increase in reimbursement and fee income. Physical occupancy increased 0.2% to 95.4% and total monthly income per occupied home increased by 4.6% to $1,713 for the year ended December 31, 2014 compared to 2013.

The increase in operating expenses was primarily driven by a 4.2% or $1.5 million increase in real estate tax caused by higher real estate valuations and a 18.7% or $810,000 increase in insurance expense primarily caused by a higher volume of small claims, which was partially offset by a 2.3% or $367,000 decrease in repairs and maintenance costs.

As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 71.0% for the year ended December 31, 2014 as compared to 70.0% for 2013.

2013 -vs- 2012

Our same-store community properties (those acquired, developed, and stabilized prior to January 1, 2012 and held on December 31, 2013) consisted of 18,616 apartment homes and provided 83.9% of our total NOI for the year ended December 31, 2013.

NOI for our same-store community properties increased 5.9% or $13.3 million for the year ended December 31, 2013 compared to 2012. The increase in property NOI was primarily attributable to a 5.1% or $16.6 million increase in property rental income, which was partially offset by a 3.3% or $3.3 million increase in operating expenses. The increase in revenues was primarily driven by a 4.3% or $13.7 million increase in rental rates and a 6.8% or $1.8 million increase in reimbursement and fee income. Physical occupancy increased 0.2% to 95.8% and total monthly income per occupied home increased by 4.8% to $1,609 for the year ended December 31, 2013 compared to 2012.

The increase in operating expenses was primarily driven by a 7.0% or $2.3 million increase in real estate tax and a 5.2% or $1.2 million increase in personnel costs, which was partially offset by a 3.1% or $502,000 decrease in repairs and maintenance costs.

As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 70.0% for the year ended December 31, 2013 as compared to 69.5% for 2012.

Non-Mature Communities/Other

2014 -vs- 2013

The remaining $35.7 million or 11.9% of our total NOI during the year ended December 31, 2014 was generated from our non-mature communities/other. The Operating Partnership’s non-mature communities/other consist of communities that do not meet the criteria to be included in same-store communities, which includes communities developed or acquired, redevelopment properties, sold properties, and non-apartment components of mixed use properties. NOI from non-mature communities/other decreased 6.4% or $2.5 million for the year ended December 31, 2014 compared to 2013. The decrease was primarily driven by a decrease in NOI of 99.9% or $8.7 million from properties sold during 2014 and 2013, which was partially offset by an increase in NOI of 27.2% or $1.2 million from commercial/other properties, and an increase of 41.3% or $4.2 million from redevelopment properties.

2013 -vs- 2012

The remaining $46.3 million or 16.1% of our total NOI during the year ended December 31, 2013 was generated from our non-mature communities/other. The Operating Partnership’s non-mature communities/other consist of communities that do not meet the criteria to be included in same-store communities, which includes communities developed or acquired, redevelopment properties, sold properties, and non-apartment components of mixed use properties. NOI from non-mature communities/other decreased 13.7% or $7.3 million for the year ended December 31, 2013 compared to 2012. The decrease was primarily driven by a decrease in NOI of 45.8% or $4.7 million from properties sold during 2013 and 2012, a decrease in NOI of 24.3% or $2.2 million from commercial/other properties, and a decrease of 6.2% or $1.2 million from redevelopment properties.

Real Estate Depreciation and Amortization

For the year ended December 31, 2014, real estate depreciation and amortization from continuing and discontinued operations decreased by 1.2% or $2.1 million as compared to 2013. The decrease in depreciation and amortization for the year ended December 31, 2014 was primarily from disposition of assets in 2014 and 2013, partially offset by the depreciation from developed and redeveloped units placed in service in 2014 and 2013.

For the year ended December 31, 2013, real estate depreciation and amortization from continuing and discontinued operations decreased by 7.0% or $13.7 million as compared to 2012. The decrease in depreciation and amortization for the year ended December 31, 2013 was primarily from the disposition of assets in 2012.

Casualty-Related Recoveries/(Charges), Net

In October 2012, Hurricane Sandy hit the East Coast, affecting two of the Operating Partnership’s operating communities (1,001 apartment homes) located in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Operating Partnership has insurance policies that provide coverage for property damage and business interruption, subject to applicable retention.

Based on the claims filed and management’s estimates, the Operating Partnership recognized a $7.1 million impairment charge for the damaged assets’ net book value and incurred $7.0 million of repair and cleanup costs during the year ended December 31, 2012. The impairment charge and the repair and cleanup costs incurred were reduced as of December 31, 2012 by $10.8 million of estimated insurance recovery, and were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations. During the year ended December 31, 2013, no material adjustments to the impairment charge and the repair and cleanup costs incurred were recognized. The rehabilitation of these two properties was substantially completed as of December 31, 2013.

As of December 31, 2013, the Operating Partnership had settled the Hurricane Sandy claims and received insurance proceeds in excess of the $10.8 million estimated insurance recovery receivable related to the impairment charge and the repair and cleanup costs incurred. As a result, the Company recognized a Casualty-related recovery of approximately $3.3 million and a casualty gain of approximately $582,000 for the year ended December 31, 2013. Both the recovery and casualty gain were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.

Based on the claims filed and management’s estimates, the Operating Partnership recognized $2.2 million of business interruption losses for the year ended December 31, 2012, of which $1.8 million were related to rent concession rebates provided to residents during the period the properties were uninhabitable and were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations, and $400,000 were related to rent that was not contractually receivable and were classified as a reduction to Rental income on the Consolidated Statements of Operations. The Company estimates that it incurred an additional $2.1 million of business interruption losses for the year ended December 31, 2013. As noted, the Company settled the Hurricane Sandy claims as of December 31, 2013.

During the year ended December 31, 2013, the Operating Partnership received approximately $4.2 million of insurance proceeds for recovery of business interruption losses. Of the $4.2 million of insurance proceeds received during the year ended December 31, 2013, $2.1 million related to recovery of business interruption losses incurred in 2012 and the remaining $2.1 million related to recovery of business interruption losses incurred in 2013. The $4.2 million of recovery was included in Casualty-related (recoveries)/charges, net on the Operating Partnership’s Consolidated Statements of Operations.

Interest Expense

For the year ended December 31, 2014, interest expense increased by 15.7% or $5.7 million as compared to 2013, which was primarily due to lower portion of interest capitalized in 2014 as a result of completed developments, partially offset by a decrease in interest expense due to replacement of debt at lower rates.

For the year ended December 31, 2013, interest expense decreased by 20.3% or $9.2 million as compared to 2012, which was primarily due to lower portion of interest capitalized in 2013 as a result of completed developments, partially offset by a decrease in interest expense due to replacement of debt at lower rates.

Gain/(Loss) on the Sale of Real Estate Owned

For the year ended December 31, 2014, the Operating Partnership sold one community and an adjacent parcel of land in San Diego, California for gross proceeds of $48.7 million, resulting in a $24.4 million gain and net proceeds of $47.9 million. The Operating Partnership also recorded gains of $39.2 million in connection with UDR’s sale of two communities in Tampa, Florida and Los Angeles, California, which were previously deferred.

Due to the Company’s adoption ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, effective January 1, 2014, these gains were included in Gain/(loss) on sale of real estate owned on the Operating Partnership’s Consolidated Statements of Operations. See Note 2, Significant Accounting Policies, in the Notes to the Operating Partnership’s Consolidated Financial Statements included in this Report for additional information.

For the years ended December 31, 2013, and 2012, we recognized gains on sale of depreciable property of $41.5 million, and $51.1 million, respectively. These gains are included in Income/(loss) from discontinued operations on the Operating Partnership’s Consolidated Statements of Operations included in this Report. Changes in the level of gains recognized from period to period reflect the changing level of our divestiture activity from period to period as well as the extent of gains related to specific properties sold.

Net (Income)/Loss Attributable to Noncontrolling Interests

For the year ended December 31, 2014, net income attributable to noncontrolling interests was $952,000 as compared to $4.6 million for 2013. The decrease of $3.6 million was primarily due to the Operating Partnership correcting an error in the General Partner’s ownership interest in one of the consolidated subsidiaries resulting in a cumulative adjustment recorded in 2013 of $3.3 million. Management believes the impact of the cumulative adjustment in 2013 is immaterial to the financial statements taken as a whole.

Inflation

homes. Although an extreme escalation in energy and food costs could have a negative impact on our residents and their ability to absorb rent increases, we do not believe this has had a material impact on our results for the year ended December 31, 2014.

Off-Balance Sheet Arrangements

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2014 (dollars in thousands):



	Payments Due by Period
Contractual Obligations	2015		2016-2017		2018-2019		Thereafter		Total
Long-term debt obligations	$	193,003	$	154,455	$	384,992	$	199,509	$	931,959
Interest on debt obligations (a)	40,906		49,287		33,497		11,132		134,822
Operating lease obligations — ground leases (b)	5,308		10,616		10,616		313,648		340,188
	$	239,217	$	214,358	$	429,105	$	524,289	$	1,406,969


(a)	Interest payments on variable rate debt instruments are based on each debt instrument’s respective year-end interest rate at December 31, 2014.


(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 reset provision based on the communities appraised value or 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

Information required by this item is included in and incorporated by reference from Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Report.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and related financial information required to be filed are attached to this Report. Reference is made to page F-1 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 ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The disclosure controls and procedures of the Company and the Operating Partnership are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. As a result, our disclosure controls and procedures are designed to provide reasonable assurance that such disclosure controls and procedures will meet their objectives.

As of December 31, 2014, we carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, which is the sole General Partner of the Operating Partnership, of the effectiveness of the design and operation of the disclosure controls and procedures of the Company and the Operating Partnership. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer of the Company concluded that the disclosure controls and procedures of the Company and the Operating Partnership are effective at the reasonable assurance level described above.

Management’s Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the 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 evaluation of the effectiveness of the internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations (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, 2014.

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, 2014. The report of Ernst & Young LLP, which expresses an unqualified opinion on UDR, Inc.’s internal control over financial reporting as of December 31, 2014, 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

None.

PART III

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,” “Executive Officers” and “Other Matters - Section 16(a) Beneficial Ownership Reporting Compliance” in UDR, Inc.’s definitive proxy statement (our “definitive proxy statement”) for its 2015 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 2015 Annual Meeting of Stockholders. We intend to satisfy the disclosure requirements under Item 10 of Form 8-K regarding an amendment to, or a waiver from, a provision of our codes by posting such amendment or waiver on our website.

Item 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the information set forth under the headings “Security Ownership of Certain Beneficial Owners and Management,” “Corporate Governance Matters-Board Leadership Structure and Committees-Compensation Committee Interlocks and Insider Participation,” “Executive Compensation,” “Compensation of Directors” and “Compensation Committee Report” in the definitive proxy statement for UDR’s 2015 Annual Meeting of Stockholders. UDR is the sole general partner of the Operating Partnership.


Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated by reference to the information set forth under the headings “Security Ownership of Certain Beneficial Owners and Management,” “Executive Compensation” and “Executive Compensation - Equity Compensation Plan Information” in the definitive proxy statement for UDR’s 2015 Annual Meeting of Stockholders. UDR is the sole general partner of the Operating Partnership.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference to the information set forth under the heading “Security Ownership of Certain Beneficial Owners and Management,” “Corporate Governance Matters-Corporate Governance Overview,” “Corporate Governance Matters-Director Independence,” “Corporate Governance Matters-Board Leadership Structure and Committees-Independence of the Audit, Compensation and Governance Committees,” and “Executive Compensation” in the definitive proxy statement for UDR’s 2015 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 6, 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 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 2015 Annual Meeting of Stockholders. UDR is the sole general partner of the Operating Partnership.

PART IV

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 F-1 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.

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.




		UDR, Inc.
Date:	February 24, 2015	By:	/s/ Thomas W. Toomey
			Thomas W. Toomey
			Chief Executive Officer and President (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below on February 24, 2015 by the following persons on behalf of the registrant and in the capacities indicated.




/s/ Thomas W. Toomey		/s/ Katherine A. Cattanach
Thomas W. Toomey		Katherine A. Cattanach
Chief Executive Officer, President, and Director (Principal Executive Officer)		Director

/s/ Thomas M. Herzog		/s/ Eric J. Foss
Thomas M. Herzog		Eric J. Foss
Senior Vice President and Chief Financial Officer (Principal Financial Officer)		Director

/s/ Mark A. Schumacher		/s/ Robert P. Freeman
Mark A. Schumacher		Robert P. Freeman
Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)		Director

/s/ James D. Klingbeil		/s/ Jon A. Grove
James D. Klingbeil		Jon A. Grove
Chairman of the Board		Director

/s/ Lynne B. Sagalyn		/s/ Robert A. McNamara
Lynne B. Sagalyn		Robert A. McNamara
Vice Chair of the Board		Director

		/s/ Mark R. Patterson
		Mark R. Patterson
		Director

SIGNATURES




		UNITED DOMINION REALTY, L.P. By: UDR, Inc., its sole general partner
Date:	February 24, 2015	By:	/s/ Thomas W. Toomey
			Thomas W. Toomey
			Chief Executive Officer and President (Principal Executive Officer)




/s/ Thomas W. Toomey		/s/ Katherine A. Cattanach
Thomas W. Toomey		Katherine A. Cattanach
Chief Executive Officer, President, and		Director of the General Partner
Director of the General Partner (Principal Executive Officer)

/s/ Thomas M. Herzog		/s/ Eric J. Foss
Thomas M. Herzog		Eric J. Foss
Senior Vice President and Chief Financial		Director of the General Partner
Officer of the General Partner (Principal Financial Officer)

/s/ Mark A. Schumacher		/s/ Robert P. Freeman
Mark A. Schumacher		Robert P. Freeman
Senior Vice President and Chief Accounting		Director of the General Partner
Officer of the General Partner (Principal Accounting Officer)

/s/ James D. Klingbeil		/s/ Jon A. Grove
James D. Klingbeil		Jon A. Grove
Chairman of the Board of the General Partner		Director of the General Partner

/s/ Lynne B. Sagalyn		/s/ Robert A. McNamara
Lynne B. Sagalyn		Robert A. McNamara
Vice Chair of the Board of the General Partner		Director of the General Partner

		/s/ Mark R. Patterson
		Mark R. Patterson
		Director of the General Partner

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE




	PAGE
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT

UDR, INC.:

Reports of Independent Registered Public Accounting Firm	F - 2

Consolidated Balance Sheets at December 31, 2014 and 2013	F - 4

Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012	F - 5

Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2014, 2013, and 2012	F - 7

Consolidated Statements of Changes in Equity for the years ended December 31, 2014, 2013, and 2012	F - 8

Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012	F - 10

Notes to Consolidated Financial Statements	F - 12

UNITED DOMINION REALTY, L.P.:

Report of Independent Registered Public Accounting Firm	F - 51

Consolidated Balance Sheets at December 31, 2014 and 2013	F - 52

Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012	F - 53

Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2014, 2013, and 2012	F - 54

Consolidated Statements of Changes in Capital for the years ended December 31, 2014, 2013, and 2012	F - 55

Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012	F - 56

Notes to Consolidated Financial Statements	F - 57

SCHEDULES FILED AS PART OF THIS REPORT

UDR, INC.:

Schedule III- Summary of Real Estate Owned	S - 1

UNITED DOMINION REALTY, L.P.:

Schedule III- Summary of Real Estate Owned	S - 6

All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of UDR, Inc.

We have audited the accompanying consolidated balance sheets of UDR, Inc. (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income/(loss), changes in equity, and cash flows for each of the three years in the period ended December 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of UDR, Inc. at December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), UDR, Inc.'s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 24, 2015 expressed an unqualified opinion thereon.

As discussed in Notes 2 and 3 to the consolidated financial statements, the Company changed its reporting of discontinued operations as a result of the adoption of the amendments to the FASB Accounting Standards Codification resulting from Accounting Standards Update No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”.



			/s/ Ernst & Young LLP

Denver, Colorado
February 24, 2015

F - 2

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of UDR, Inc.

We have audited UDR, Inc.'s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). UDR, Inc.'s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting included in Item 9A. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, UDR, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of UDR, Inc. as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income/(loss), changes in equity, and cash flows for each of the three years in the period ended December 31, 2014 and our report dated February 24, 2015, expressed an unqualified opinion thereon.



			/s/ Ernst & Young LLP

Denver, Colorado
February 24, 2015

F - 3

UDR, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)



	December 31, 2014			December 31, 2013
ASSETS
Real estate owned:
Real estate held for investment	$	8,205,627		$	7,723,844
Less: accumulated depreciation	(2,434,772		)	(2,200,815		)
Real estate held for investment, net	5,770,855			5,523,029
Real estate under development (net of accumulated depreciation of $0 and $1,411, respectively)	177,632			466,002
Real estate sold or held for disposition (net of accumulated depreciation of $0 and $6,568, respectively)	—			10,152
Total real estate owned, net of accumulated depreciation	5,948,487			5,999,183
Cash and cash equivalents	15,224			30,249
Restricted cash	22,340			22,796
Deferred financing costs, net	22,686			26,924
Notes receivable, net	14,369			83,033
Investment in and advances to unconsolidated joint ventures, net	718,226			507,655
Other assets	105,202			137,882
Total assets	$	6,846,534		$	6,807,722

LIABILITIES AND EQUITY
Liabilities:
Secured debt	$	1,361,529		$	1,442,077
Unsecured debt	2,221,576			2,081,626
Real estate taxes payable	15,978			13,847
Accrued interest payable	34,215			32,279
Security deposits and prepaid rent	34,064			27,203
Distributions payable	69,460			61,907
Accounts payable, accrued expenses, and other liabilities	91,282			118,682
Total liabilities	3,828,104			3,777,621

Commitments and contingencies (Note 14)

Redeemable noncontrolling interests in the Operating Partnership	282,480			217,597

Equity:
Preferred stock, no par value; 50,000,000 shares authorized:
8.00% Series E Cumulative Convertible; 2,803,812 shares issued and outstanding at December 31, 2014 and 2013	46,571			46,571
Common stock, $0.01 par value; 350,000,000 shares authorized; 255,114,603 and 250,749,665 shares issued and outstanding at December 31, 2014 and 2013, respectively	2,551			2,507
Additional paid-in capital	4,223,747			4,109,765
Distributions in excess of net income	(1,528,917		)	(1,342,070		)
Accumulated other comprehensive income/(loss), net	(8,855		)	(5,125		)
Total stockholders’ equity	2,735,097			2,811,648
Noncontrolling interests	853			856
Total equity	2,735,950			2,812,504
Total liabilities and equity	$	6,846,534		$	6,807,722

See accompanying notes to consolidated financial statements.

F - 4

UDR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)



	Year Ended December 31,
	2014			2013			2012
REVENUES:
Rental income	$	805,002		$	746,484		$	704,701
Joint venture management and other fees	13,044			12,442			11,911
Total revenues	818,046			758,926			716,612

OPERATING EXPENSES:
Property operating and maintenance	149,428			144,319			139,784
Real estate taxes and insurance	99,175			93,765			86,154
Property management	22,138			20,528			19,378
Other operating expenses	8,271			7,136			5,718
Real estate depreciation and amortization	358,154			339,532			341,926
General and administrative	47,800			42,238			43,792
Casualty-related (recoveries)/charges, net	541			(12,253		)	8,495
Other depreciation and amortization	5,775			6,741			4,105
Total operating expenses	691,282			642,006			649,352

Operating income	126,764			116,920			67,260

Income/(loss) from unconsolidated entities	(7,006		)	(415		)	(8,579		)
Interest expense	(130,454		)	(126,083		)	(138,792		)
Interest and other income/(expense), net	11,858			4,619			3,524
Income/(loss) before income taxes, discontinued operations and gain/(loss) on sale of real estate owned	1,162			(4,959		)	(76,587		)
Tax benefit/(provision), net	15,098			7,299			30,282
Income/(loss) from continuing operations	16,260			2,340			(46,305		)
Income/(loss) from discontinued operations, net of tax	10			43,942			266,608
Income/(loss) before gain/(loss) on sale of real estate owned	16,270			46,282			220,303
Gain/(loss) on sale of real estate owned, net of tax	143,572			—			—
Net income/(loss)	159,842			46,282			220,303
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership	(5,511		)	(1,530		)	(7,986		)
Net (income)/loss attributable to noncontrolling interests	3			60			(140		)
Net income/(loss) attributable to UDR, Inc.	154,334			44,812			212,177
Distributions to preferred stockholders — Series E (Convertible)	(3,724		)	(3,724		)	(3,724		)
Distributions to preferred stockholders — Series G	—			—			(2,286		)
Premium on preferred stock redemption or repurchases, net	—			—			(2,791		)
Net income/(loss) attributable to common stockholders	$	150,610		$	41,088		$	203,376

Income/(loss) per weighted average common share — basic:
Income/(loss) from continuing operations attributable to common stockholders	$	0.60		$	(0.01	)	$	(0.22	)
Income/(loss) from discontinued operations attributable to common stockholders	—			0.17			1.07
Net income/(loss) attributable to common stockholders	$	0.60		$	0.16		$	0.85

F - 5

UDR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)



	Year Ended December 31,
	2014		2013			2012
Income/(loss) per weighted average common share — diluted:
Income/(loss) from continuing operations attributable to common stockholders	$	0.59	$	(0.01	)	$	(0.22	)
Income/(loss) from discontinued operations attributable to common stockholders	—		0.17			1.07
Net income/(loss) attributable to common stockholders	$	0.59	$	0.16		$	0.85

Weighted average number of common shares outstanding — basic	251,528		249,969			238,851
Weighted average number of common shares outstanding — diluted	253,445		249,969			238,851

See accompanying notes to consolidated financial statements.

F - 6

UDR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(In thousands)



	Year Ended December 31,
	2014			2013			2012
Net income/(loss)	$	159,842		$	46,282		$	220,303
Other comprehensive income/(loss), including portion attributable to noncontrolling interests:
Other comprehensive income/(loss) - derivative instruments:
Unrealized holding gain/(loss)	(8,695		)	(469		)	(4,924		)
(Gain)/loss reclassified into earnings from other comprehensive income/(loss)	4,834			6,851			7,649
Other comprehensive income/(loss), including portion attributable to noncontrolling interests	(3,861		)	6,382			2,725
Comprehensive income/(loss)	155,981			52,664			223,028
Comprehensive (income)/loss attributable to noncontrolling interests	(5,375		)	(1,720		)	(8,206		)
Comprehensive income/(loss) attributable to UDR, Inc.	$	150,606		$	50,944		$	214,822

See accompanying notes to consolidated financial statements.

F - 7

UDR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share and per share data)



	Preferred Stock					Common Stock					Paid-in Capital			Distributions in Excess of Net Income			Accumulated Other Comprehensive Income/(Loss), net			Noncontrolling Interests			Total
	Shares		Amount			Shares		Amount			Paid-in Capital			Distributions in Excess of Net Income			Accumulated Other Comprehensive Income/(Loss), net			Noncontrolling Interests			Total
Balance at December 31, 2011	6,068,174		$	128,180		219,650,225		$	2,197		$	3,340,470		$	(1,142,895	)	$	(13,902	)	$	4,734		$	2,318,784
Net income/(loss) attributable to UDR, Inc.	—		—			—		—			—			212,177			—			—			212,177
Net income/(loss) attributable to noncontrolling interests	—		—			—		—			—			—			—			140			140
Other comprehensive income/(loss)	—		—			—		—			—			—			2,645			—			2,645
Issuance/(forfeiture) of common and restricted shares, net	—		—			(22,224	)	—			(742		)	—			—			—			(742		)
Issuance of common shares through public offering	—		—			30,490,969		305			755,833			—			—			—			756,138
Redemption of 3,264,362 shares of 6.75% Series G Cumulative Redeemable Shares	(3,264,362	)	(81,609		)	—		—			2,791			(2,791		)	—			—			(81,609		)
Adjustment for conversion of noncontrolling interest of unitholders in the Operating Partnership	—		—			20,438		(1		)	530			—			—			—			529
Acquisition of noncontrolling interests	—		—			—		—			—			—			—			(4,871		)	(4,871		)
Increase in noncontrolling interests from business combination, net	—		—			—		—			—			—			—			913			913
Common stock distributions declared ($0.88 per share)	—		—			—		—			—			(215,654		)	—			—			(215,654		)
Preferred stock distributions declared-Series E ($1.3288 per share)	—		—			—		—			—			(3,724		)	—			—			(3,724		)
Preferred stock distributions declared-Series G ($0.5671875 per share)	—		—			—		—			—			(2,286		)	—			—			(2,286		)
Adjustment to reflect redemption value of redeemable noncontrolling interests	—		—			—		—			—			11,392			—			—			11,392
Balance at December 31, 2012	2,803,812		46,571			250,139,408		2,501			4,098,882			(1,143,781		)	(11,257		)	916			2,993,832
Net income/(loss) attributable to UDR, Inc.	—		—			—		—			—			44,812			—			—			44,812
Net income/(loss) attributable to noncontrolling interests	—		—			—		—			—			—			—			(60		)	(60		)
Other comprehensive income/(loss)	—		—			—		—			—			—			6,132			—			6,132
Issuance/(forfeiture) of common and restricted shares, net	—		—			533,966		5			9,067			—			—			—			9,072
Adjustment for conversion of noncontrolling interest of unitholders in the. Operating Partnership	—		—			76,291		1			1,816			—			—			—			1,817
Common stock distributions declared ($0.94 per share)	—		—			—		—			—			(235,721		)	—			—			(235,721		)
Preferred stock distributions declared-Series E ($1.3288 per share)	—		—			—		—			—			(3,724		)	—			—			(3,724		)
Adjustment to reflect redemption value of redeemable noncontrolling interests	—		—			—		—			—			(3,656		)	—			—			(3,656		)

F - 8

UDR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)

(In thousands, expect share and per share data)



	Preferred Stock			Common Stock			Paid-in Capital		Distributions in Excess of Net Income			Accumulated Other Comprehensive Income/(Loss), net			Noncontrolling Interests			Total
	Shares	Amount		Shares	Amount		Paid-in Capital		Distributions in Excess of Net Income			Accumulated Other Comprehensive Income/(Loss), net			Noncontrolling Interests			Total
Balance at December 31, 2013	2,803,812	46,571		250,749,665	2,507		4,109,765		(1,342,070		)	(5,125		)	856			2,812,504
Net income/(loss) attributable to UDR, Inc.	—	—		—	—		—		154,334			—			—			154,334
Net income/(loss) attributable to noncontrolling interests	—	—		—	—		—		—			—			(3		)	(3		)
Other comprehensive income/(loss)	—	—		—	—		—		—			(3,730		)	—			(3,730		)
Issuance/(forfeiture) of common and restricted shares, net	—	—		801,054	8		9,797		—			—			—			9,805
Issuance of common shares through public offering	—	—		3,410,433	34		99,815		—			—			—			99,849
Adjustment for conversion of noncontrolling interest of unitholders in Operating Partnership	—	—		153,451	2		4,370		—			—			—			4,372
Common stock distributions declared ($1.04 per share)	—	—		—	—		—		(263,503		)	—			—			(263,503		)
Preferred stock distributions declared-Series E ($1.3288 per share)	—	—		—	—		—		(3,724		)	—			—			(3,724		)
Adjustment to reflect redemption value of redeemable noncontrolling interests	—	—		—	—		—		(73,954		)	—			—			(73,954		)
Balance at December 31, 2014	2,803,812	$	46,571	255,114,603	$	2,551	$	4,223,747	$	(1,528,917	)	$	(8,855	)	$	853		$	2,735,950

See accompanying notes to consolidated financial statements.

F - 9

UDR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except for share data)



	Year Ended December 31,
	2014			2013			2012
Operating Activities
Net income/(loss)	$	159,842		$	46,282		$	220,303
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Depreciation and amortization	363,929			348,231			354,505
Gain/(loss) on sale of real estate owned, net of tax	(143,647		)	(41,919		)	(251,554		)
Impairment loss, net of tax	—			1,470			—
Tax benefit/(provision), net	(15,136		)	(7,299		)	(30,282		)
Loss from unconsolidated entities	7,006			415			8,579
Casualty-related (recoveries)/charges, net	541			(270		)	8,495
Other	26,517			24,826			26,009
Changes in operating assets and liabilities:
(Increase)/decrease in operating assets	(1,074		)	(15,135		)	12,647
Increase/(decrease) in operating liabilities	(5,618		)	(16,699		)	(21,515		)
Net cash provided by/(used in) operating activities	392,360			339,902			327,187

Investing Activities
Acquisition of real estate assets (net of liabilities assumed) and initial capital expenditures	(228,810		)	—			(108,215		)
Proceeds from sales of real estate investments, net	383,886			250,043			593,167
Development of real estate assets	(251,493		)	(280,603		)	(246,923		)
Capital expenditures and other major improvements — real estate assets, net of escrow reimbursement	(96,679		)	(153,676		)	(144,877		)
Capital expenditures — non-real estate assets	(5,497		)	(7,639		)	(7,947		)
Investment in unconsolidated joint ventures	(222,930		)	(43,291		)	(283,369		)
Distributions received from unconsolidated joint ventures	59,199			130,984			50,580
(Issuance)/repayment of notes receivable	68,664			(19,027		)	(63,998		)
Net cash provided by/(used in) investing activities	(293,660		)	(123,209		)	(211,582		)

Financing Activities
Payments on secured debt	(80,961		)	(46,564		)	(491,885		)
Proceeds from the issuance of secured debt	5,502			—			250
Payments on unsecured debt	(312,500		)	(122,500		)	(100,000		)
Proceeds from the issuance of unsecured debt	298,956			299,943			396,400
Net proceeds/(repayment) of revolving bank debt	152,500			(76,000		)	(345,000		)
Proceeds from the issuance of common shares through public offering, net	99,849			—			756,138
Payments for the repurchase of Series G preferred stock, net	—			—			(81,609		)
Distributions paid to redeemable noncontrolling interests	(9,929		)	(9,348		)	(9,033		)
Acquisition of nonredeemable noncontrolling interests	—			—			(4,871		)
Distributions paid to preferred stockholders	(3,724		)	(3,724		)	(6,954		)
Distributions paid to common stockholders	(256,100		)	(231,822		)	(207,470		)
Other	(7,318		)	(8,544		)	(21,959		)
Net cash provided by/(used in) financing activities	(113,725		)	(198,559		)	(115,993		)
Net increase/(decrease) in cash and cash equivalents	(15,025		)	18,134			(388		)
Cash and cash equivalents, beginning of year	30,249			12,115			12,503
Cash and cash equivalents, end of year	$	15,224		$	30,249		$	12,115

F - 10

UDR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands, except for share data)



	Year Ended December 31,
	2014		2013		2012
Supplemental Information:

Interest paid during the period, net of amounts capitalized	$	131,815	$	127,877	$	133,133

Non-cash transactions:
Real estate acquired in asset exchange or upon consolidation of joint ventures	—		129,437		—
Transfer of real estate owned to investment in and advances to unconsolidated ventures	54,938		175,951		—
Secured debt assumed in the acquisitions of properties, including asset exchange and consolidation of joint ventures	—		63,595		34,412
Fair market value adjustment of secured debt assumed in acquisitions of properties, including asset exchange	—		—		2,617
Development costs and capital expenditures incurred but not yet paid	34,746		37,220		24,551
Contribution of purchase deposit made in 2011 to unconsolidated joint venture	—		—		80,397
Conversion of operating partnership noncontrolling interests to common stock (153,451 shares in 2014, 76,291 shares in 2013; and 20,438 shares in 2012)	4,372		1,817		529

See accompanying notes to consolidated financial statements.

F - 11

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014

1. CONSOLIDATION AND BASIS OF PRESENTATION

Organization and Formation

UDR, Inc. (“UDR,” the “Company,” “we,” or “our”) is a self-administered real estate investment trust, or REIT, that owns, operates, acquires, renovates, develops, redevelops, and manages apartment communities generally in high barrier-to-entry markets located in the United States. The high barrier-to-entry markets are characterized by limited land for new construction, difficult and lengthy entitlement process, expensive single-family home prices and significant employment growth potential. At December 31, 2014, our consolidated apartment portfolio consisted of 139 consolidated communities located in 20 markets consisting of 39,851 apartment homes. In addition, the Company has an ownership interest in 10,055 apartment homes through unconsolidated joint ventures.

Basis of Presentation

The accompanying consolidated financial statements of UDR include its wholly-owned and/or controlled subsidiaries (see the “Consolidated Joint Ventures” section of Note 5, Joint Ventures and Partnerships, for further discussion). All significant intercompany accounts and transactions have been eliminated in consolidation. Certain previously reported amounts have been reclassified to conform to the current financial statement presentation.

The accompanying consolidated financial statements include the accounts of UDR and its subsidiaries, including United Dominion Realty, L.P. (the “Operating Partnership” or the “OP”). As of December 31, 2014 and 2013, there were 183,278,698 units in the Operating Partnership outstanding, of which 174,113,225 or 95.0% and 173,959,774 or 94.9%, respectively, were owned by UDR and 9,165,473 or 5.0% and 9,318,924 or 5.1%, respectively, were owned by limited partners. The consolidated financial statements of UDR include the noncontrolling interests of the unitholders in the Operating Partnership.

The Company evaluated subsequent events through the date its financial statements were issued. No significant recognized or non-recognized subsequent events were noted other than those mentioned in Note 5, Joint Ventures and Partnerships, and Note 8, Stockholders’ Equity.

2. SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which incorporates a requirement that a disposition represent a strategic shift in an entity’s operations into the definition of a discontinued operation. In accordance with the ASU, a discontinued operation represents (1) a component of an entity or group of components that has been disposed of or is classified as held for sale in a single transaction and represents a strategic shift that has or will have a major effect on an entity’s financial results, or (2) an acquired business that is classified as held for sale on the date of acquisition. A strategic shift could include a disposal of (1) a separate major line of business, (2) a separate major geographic area of operations, (3) a major equity method investment, or (4) other major parts of an entity. The standard requires prospective application and will be effective for interim and annual periods beginning on or after December 15, 2014, with early adoption permitted. The early adoption provision excludes components of an entity that were sold or classified as held for sale prior to the adoption of the standard.

The Company elected to early adopt this standard effective January 1, 2014, which had a significant impact on the Company’s consolidated financial statements as further discussed in Note 3, Discontinued Operations. Subsequent to the Company’s adoption of ASU 2014-08, the sale of real estate that does not meet the definition of a discontinued operation under the standard is included in Gain/(loss) on sale of real estate owned, net of tax on the Consolidated Statements of Operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard specifically excludes lease contracts. The ASU allows for the use of either the full or modified retrospective transition method, and the standard will be effective for the Company on January 1, 2017; early adoption is not permitted. The Company has not yet selected a transition method and we

F - 12

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.

Real Estate

Real estate assets held for investment are carried at historical cost and consist of land, buildings and improvements, furniture, fixtures and equipment and other costs incurred during their development, acquisition and redevelopment.

Expenditures for ordinary repair and maintenance costs are charged to expense as incurred. Expenditures for improvements, renovations, and replacements related to the acquisition and/or improvement of real estate assets are capitalized and depreciated over their estimated useful lives if the expenditures qualify as a betterment or the life of the related asset will be substantially extended beyond the original life expectancy.

UDR purchases real estate investment properties and records the tangible and identifiable intangible assets and liabilities acquired based on their estimated fair value. The primary, although not only, identifiable intangible asset associated with our portfolio is the value of existing lease agreements. When recording the acquisition of a community, we first assign fair value to the estimated intangible value of the existing lease agreements and then to the estimated value of the land, building and fixtures assuming the community is vacant. The Company estimates the intangible value of the lease agreements by determining the lost revenue associated with a hypothetical lease-up. Depreciation on the building is based on the expected useful life of the asset and the in-place leases are amortized over their remaining average contractual life. Property acquisition costs are expensed as incurred.

Quarterly or when changes in circumstances warrant, UDR will assess our real estate properties for indicators of impairment. In determining whether the Company has indicators of impairment in our real estate assets, we assess whether the long-lived asset’s carrying value exceeds the community’s undiscounted future cash flows, which is representative of projected net operating income (“NOI”) plus the residual value of the community. Our future cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. If such indicators of impairment are present and the carrying value exceeds the undiscounted cash flows of the community, an impairment loss is recognized equal to the excess of the carrying amount of the asset over its estimated fair value. Our estimates of fair market value represent our best estimate based primarily upon unobservable inputs related to rental rates, operating costs, growth rates, discount rates, capitalization rates, industry trends and reference to market rates and transactions.

For long-lived assets to be disposed of, impairment losses are recognized when the fair value of the asset less estimated cost to sell is less than the carrying value of the asset. Properties classified as real estate held for sale generally represent properties that are actively marketed or contracted for sale with the closing expected to occur within the next twelve months. Real estate held for sale is carried at the lower of cost, net of accumulated depreciation, or fair value, less the cost to sell, determined on an asset-by-asset basis. Expenditures for ordinary repair and maintenance costs on held for sale properties are charged to expense as incurred. Expenditures for improvements, renovations, and replacements related to held for sale properties are capitalized at cost. Depreciation is not recorded on real estate held for sale.

Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets which are 35 to 55 years for buildings, 10 to 35 years for major improvements, and 3 to 10 years for furniture, fixtures, equipment, and other assets.

Predevelopment, development, and redevelopment projects and related costs are capitalized and reported on the Consolidated Balance Sheets as Total real estate owned, net of accumulated depreciation. The Company capitalizes 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. These costs, excluding the direct costs of development and redevelopment and capitalized interest, for the years ended December 31, 2014, 2013, and 2012 were $9.0 million, $11.1 million and $10.0 million, respectively. During the years ended December 31, 2014, 2013, and 2012, total interest capitalized was $20.2 million, $29.4 million, and $26.4 million, respectively. As each home in a capital project is completed and becomes available for lease-up, the Company ceases capitalization on the related portion and depreciation commences over the estimated useful life.

F - 13

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, demand deposits with financial institutions and short-term, highly liquid investments. We consider all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The majority of the Company’s cash and cash equivalents are held at major commercial banks.

Restricted Cash

Restricted cash consists of escrow deposits held by lenders for real estate taxes, insurance and replacement reserves, and security deposits.

Revenue and Real Estate Sales Gain Recognition

Rental income related to leases is recognized on an accrual basis when due from residents and tenants in accordance with GAAP. Rental payments are generally due on a monthly basis and recognized when earned. The Company recognizes interest income, management and other fees and incentives when earned, and the amounts are fixed and determinable.

For sale transactions meeting the requirements for full accrual profit recognition, we remove the related assets and liabilities from our Consolidated Balance Sheets and record the gain or loss in the period the transaction closes. For sale transactions that do not meet the full accrual sale criteria due to our continuing involvement, we evaluate the nature of the continuing involvement and account for the transaction under an alternate method of accounting. Unless certain limited criteria are met, non-monetary transactions, including property exchanges, are accounted for at fair value.

Sales to entities in which we retain or otherwise own an interest are accounted for as partial sales. If all other requirements for recognizing profit under the full accrual method have been satisfied and no other forms of continuing involvement are present, we recognize profit proportionate to the outside interest in the buyer and defer the gain on the interest we retain. The Company recognizes any deferred gain when the property is sold to a third party. In transactions accounted for by us as partial sales, we determine if the buyer of the majority equity interest in the venture was provided a preference as to cash flows in either an operating or a capital waterfall. If a cash flow preference has been provided, we recognize profit only to the extent that proceeds from the sale of the majority equity interest exceed costs related to the entire property.

Notes Receivable

The following table summarizes our notes receivable, net as of December 31, 2014 and 2013 (dollars in thousands):



	Interest rate at December 31, 2014		Balance Outstanding
	Interest rate at December 31, 2014		December 31, 2014		December 31, 2013
Note due June 2014 (a)			$	—	$	40,800
Note due February 2017 (b)	10.00	%	11,869		14,580
Note due July 2017 (c)	8.00	%	2,500		1,400
Note due June 2022 (net of discount of $0 and $247, respectively) (d)			—		26,253
Total notes receivable, net			$	14,369	$	83,033

(a) In the fourth quarter of 2013, in conjunction with the sale of its 95% interest in the Lodge at Stoughton, one of its unconsolidated joint ventures, the Company provided the buyer with a $40.8 million loan secured by the property at LIBOR plus a spread of 350 basis points with two three-month extension options at increased rates and a financing fee. In June 2014, the note was paid in full.

(b) The Company has a secured note receivable with an unaffiliated third party with an aggregate commitment of $11.9 million, which bears an interest rate of 10.00% per annum. During the year ended December 31, 2014, the Company loaned an additional $1.2 million and received a payment of $3.9 million in the fourth quarter under this note. Interest payments are due monthly. The note matures at the earliest of the following: (a) the closing of any private or public capital raising in the amount of $5.0 million or greater; (b) an acquisition; (c) acceleration in the event of default; or (d) the fifth anniversary of the date of the note (February 2017).

F - 14

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

(c) The Company has a secured note receivable with an unaffiliated third party with an aggregate commitment of $2.5 million, which bears an interest rate of 8.00% per annum. During the year ended December 31, 2014, the Company loaned an additional $1.1 million under the note. Interest payments are due monthly. The note matures at the earliest of the following: (a) the closing of any private or public capital raising in the amount of $5.0 million or greater; (b) an acquisition; (c) acceleration in the event of default; or (d) the fifth anniversary of the date of the note (July 2017).

(d) In 2012, the Company purchased a "B" Note secured by a first mortgage on a class A community in West Los Angeles. The $26.5 million loan was purchased at a yield of 7.25% and bore a coupon rate of 7.00%. Interest payments are due monthly and the note is due June 2022. The discount is amortized using the effective interest method. In July 2014, the Company received proceeds of $36.0 million from the repayment of this note, resulting in a net gain of approximately $8.4 million, which is included in Interest and other income/(expense), net on the Consolidated Statements of Operations.

During the years ended December 31, 2014, 2013 and 2012, the Company recognized $3.4 million, $4.1 million and $2.7 million, respectively, of interest income from these notes receivable, of which $0, $765,000 and $281,000, respectively, were related party interest income. Interest income is included in Interest and other income/(expense), net on the Consolidated Statements of Operations.

Investment in Joint Ventures and Partnerships

We use the equity method to account for investments in joint ventures and partnerships that qualify as variable interest entities where we are not the primary beneficiary and entities that we do not control or where we do not own a majority of the economic interest but have the ability to exercise significant influence over the operating and financial policies of the investee. Throughout these financial statements we use the term “joint venture” or “partnership” when referring to investments in entities in which we do not have a 100% ownership interest. The Company also uses the equity method when we function as the managing partner and our venture partner has substantive participating rights or where we can be replaced by our venture partner as managing partner without cause. For a joint venture or partnership accounted for under the equity method, our share of net earnings or losses is reflected as income/loss when earned/incurred and distributions are credited against our investment in the joint venture or partnership as received.

In determining whether a joint venture or partnership is a variable interest entity, the Company considers: the form of our ownership interest and legal structure; the size of our investment; the financing structure of the entity, including necessity of subordinated debt; estimates of future cash flows; ours and our partner’s ability to participate in the decision making related to acquisitions, disposition, budgeting and financing of the entity; obligation to absorb losses and preferential returns; nature of our partner’s primary operations; and the degree, if any, of disproportionality between the economic and voting interests of the entity. As of December 31, 2014, the Company did not determine any of our joint ventures or partnerships to be variable interest entities.

We evaluate our investments in unconsolidated joint ventures for events or changes in circumstances that indicate there may be an other-than-temporary decline in value. We consider various factors to determine if a decrease in the value of the investment is other-than-temporary. These factors include, but are not limited to, age of the venture, our intent and ability to retain our investment in the entity, the financial condition and long-term prospects of the entity, the fair value of the property of the joint venture, and the relationships with the other joint venture partners and its lenders. The amount of loss recognized is the excess of the investment’s carrying amount over its estimated fair value. If we believe that the decline in fair value is temporary, no impairment is recorded. The aforementioned factors are taken into consideration as a whole by management in determining the valuation of our equity method investments. Should the actual results differ from management’s judgment, the valuation could be negatively affected and may result in a negative impact to our Consolidated Financial Statements.

Derivative Financial Instruments

The Company utilizes derivative financial instruments to manage interest rate risk and generally designates these financial instruments as cash flow hedges. Derivative financial instruments are recorded on our Consolidated Balance Sheets as either an asset or liability and measured quarterly at their fair value. The changes in fair value for cash flow hedges that are deemed effective are reflected in other comprehensive income/(loss) and for non-designated derivative financial instruments in earnings. The ineffective component of cash flow hedges, if any, is recorded in earnings.

F - 15

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

Redeemable Noncontrolling Interests in the Operating Partnership

Interests in the Operating Partnership held by limited partners are represented by Operating Partnership units (“OP Units”). The income is allocated to holders of OP Units based upon net income available to common stockholders and the weighted average number of OP Units outstanding to total common shares plus OP Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to noncontrolling interests in accordance with the terms of the partnership agreement.

Limited partners have the right to require the Operating Partnership to redeem all or a portion of the OP Units held by the limited partner at a redemption price equal to and in the form of the Cash Amount as defined in the Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the “Operating Partnership Agreement”), provided that such OP Units have been outstanding for at least one year. UDR, as the general partner of the Operating Partnership may, in its sole discretion, purchase the OP Units by paying to the limited partner either the Cash Amount or the REIT Share Amount (generally one share of Common Stock of the Company for each OP Unit), as defined in the Operating Partnership Agreement. Accordingly, the Company records the OP Units outside of permanent equity and reports the OP Units at their redemption value using the Company’s stock price at each balance sheet date.

Income Taxes

Due to the structure of the Company as a REIT and the nature of the operations for the operating properties, no provision for federal income taxes has been provided for at UDR. Historically, the Company has generally incurred only state and local excise and franchise taxes. UDR has elected for certain consolidated subsidiaries to be treated as taxable REIT subsidiaries (“TRS”), primarily those engaged in development activities.

Income taxes for our TRS are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rate is recognized in earnings in the period of the enactment date. The Company’s deferred tax assets are generally the result of differing depreciable lives on capitalized assets and timing of expense recognition for certain accrued liabilities. As of December 31, 2014 and 2013, UDR’s net deferred tax asset of $7.0 million, which had no valuation allowance, and $32.3 million, net of a valuation allowance of $1.3 million, respectively, was included in Other assets on the Consolidated Balance Sheets.

Prior to 2012, our TRS had a history of losses and, as a result, historically recognized a valuation allowance for net deferred tax assets. Each quarter, the Company evaluates the need to retain all or a portion of the valuation allowance on its net deferred tax assets. In 2012, the Company determined that it was more likely than not that the deferred tax assets, including any remaining net operating loss carry forward, would be realized. In making this determination, the Company analyzed, among other things, its recent history of earnings from sales of depreciable property, forecasts of future earnings and its cumulative earnings for the last twelve quarters. The reversal of the valuation allowance resulted in an income tax benefit of $44.4 million during the year ended December 31, 2012, $21.5 million of which is reported in continuing operations and included within Tax benefit/(provision), net in the Consolidated Statements of Operations, and $22.9 million of which is included within Income/(loss) from discontinued operations, net of tax in the Consolidated Statements of Operations.

GAAP defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. GAAP also provides guidance on derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition.

The Company recognizes its tax positions and evaluates them using a two-step process. First, UDR determines whether a tax position is more likely than not (greater than 50 percent probability) to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement.

UDR had no material unrecognized tax benefit, accrued interest or penalties at December 31, 2014. UDR and its subsidiaries are subject to federal income tax as well as income tax of various state and local jurisdictions. The tax years 2010 through 2013 remain open to examination by tax jurisdictions to which we are subject. When applicable, UDR recognizes interest and/or penalties related to uncertain tax positions in income tax expense.

F - 16

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

Discontinued Operations

Prior to the adoption of ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the results of operations for those properties sold during the year or classified as held for sale at the end of the current year are classified as discontinued operations in the current and prior periods. Further, to meet the discontinued operations criteria, the Company will not have any significant continuing involvement in the ownership or operation of the property after the sale or disposition. Once a property is classified as held for sale, depreciation is no longer recorded. However, if the Company determines that the property no longer meets the criteria for held for sale, the Company will recapture any unrecorded depreciation on the property. The assets and liabilities, if any, of properties classified as held for sale are presented separately on the Consolidated Balance Sheets at the lower of their carrying amount or their estimated fair value less the costs to sell the assets. (See Note 3, Discontinued Operations and Assets Held for Sale, for further discussion).

Stock-Based Employee Compensation Plans

The Company measures the cost of employee services received in exchange for an award of an equity instrument based on the award’s fair value on the grant date and recognizes the cost over the period during which the employee is required to provide service in exchange for the award, which is generally the vesting period. The fair value for stock options issued by the Company is calculated utilizing the Black-Scholes-Merton formula. For performance based awards, the Company remeasures the fair value each balance sheet date with adjustments made on a cumulative basis until the award is settled and the final compensation is known. The fair value for market based awards issued by the Company is calculated utilizing a Monte Carlo simulation. For further discussion, see Note 9, Employee Benefit Plans.

Advertising Costs

All advertising costs are expensed as incurred and reported on the Consolidated Statements of Operations within the line item General and administrative. During the years ended December 31, 2014, 2013, and 2012, total advertising expense was $6.0 million, $5.7 million, and $6.2 million, respectively.

Cost of Raising Capital

Costs incurred in connection with the issuance of equity securities are deducted from stockholders’ equity. Costs incurred in connection with the issuance or renewal of debt are recorded based on the terms of the debt issuance or renewal. Accordingly, if the terms of the renewed or modified debt instrument are deemed to be substantially different (i.e. a 10 percent or greater difference in the cash flows between instruments), all unamortized financing costs associated with the extinguished debt are charged to earnings in the current period and certain costs of new debt issuances are capitalized and amortized over the term of the debt. When the cash flows are not substantially different, the lender costs associated with the renewal or modification are capitalized and amortized into interest expense over the remaining term of the related debt instrument and other related costs are expensed. The balance of any unamortized financing costs associated with retired debt is expensed upon retirement. Deferred financing costs for new debt instruments include fees and costs incurred by the Company to obtain financing. Deferred financing costs are generally amortized on a straight-line basis, which approximates the effective interest method, over a period not to exceed the term of the related debt.

Preferred Share Redemption and Repurchases

During the year ended December 31, 2012, the Company completed the redemption of all outstanding shares of its 6.75% Series G Cumulative Redeemable Preferred Stock. A total of 3,264,362 shares of the Series G Preferred Stock was redeemed at a redemption price of $25 per share in cash, plus accrued and unpaid dividends to the redemption date for a total cost of $82.1 million.

When redeeming or repurchasing preferred stock, the Company recognizes share issuance costs as a charge to the preferred stock on a pro rata basis to the total costs incurred for the preferred stock as well as any premium or discount on the redemption or repurchase. In connection with the redemption of the Series G Preferred Stock, the Company recognized a (decrease)/increase in net income/(loss) attributable to common stockholders of $(2.8) million for the year ended December 31, 2012, which is reported in Premium on preferred stock redemption or repurchases, net on the Consolidated Statements of Operations.

Comprehensive Income/(Loss)

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

Comprehensive income/(loss), which is defined as the change in equity during each period from transactions and other events and circumstances from nonowner sources, including all changes in equity during a period except for those resulting from investments by or distributions to stockholders, is displayed in the accompanying Consolidated Statements of Comprehensive Income/(Loss). For the years ended December 31, 2014, 2013, and 2012, the Company's other comprehensive income/(loss) consisted of the gain/(loss) (effective portion) on derivative instruments that are designated as and qualify as cash flow hedges, (gain)/loss on derivative instruments and marketable securities reclassified from other comprehensive income/(loss) into earnings, and the allocation of other comprehensive income/(loss) to redeemable noncontrolling interests. The (gain)/loss on derivative instruments reclassified from other comprehensive income/(loss) is included in interest expense in the accompanying Consolidated Statements of Operations. See Note 13, Derivatives and Hedging Activity, for further discussion. The (gain)/loss on marketable securities reclassified from other comprehensive income/(loss) is included in Interest and other income/(expense), net on the Consolidated Statements of Operations. The allocation of other comprehensive income/(loss) to redeemable noncontrolling interests during the years ended December 31, 2014, 2013, and 2012 was $(133,000), $250,000, and $80,000, respectively.

Use of Estimates

The preparation of these financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates.

Market Concentration Risk

The Company is subject to increased exposure from economic and other competitive factors specific to markets where the Company holds a significant percentage of the carrying value of its real estate portfolio. At December 31, 2014, the Company held greater than 10% of the carrying value of its real estate portfolio in the Orange County, California; Metropolitan D.C.; and New York, New York markets.

3. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

Effective January 1, 2014, UDR prospectively adopted ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, for all communities not previously sold or classified as held for sale. The standard had a material impact on the Company’s consolidated financial statements. As a result of adopting the ASU, during the year ended December 31, 2014, gains, net of tax, of $142.5 million from disposition of real estate, excluding a $1.1 million gain related to the sale of land, are included in Gain/(loss) on sale of real estate owned, net of tax on the Consolidated Statements of Operations rather than in Income/(loss) from discontinued operations, net of tax on the Consolidated Statements of Operations.

Prior to the prospective adoption of ASU 2014-08, FASB Accounting Standards Codification ("ASC") Subtopic 205-20 required, among other things, that the primary assets and liabilities and the results of operations of UDR’s real properties that have been sold or are held for disposition, be classified as discontinued operations and segregated in UDR’s Consolidated Statements of Operations and Consolidated Balance Sheets. Consequently, the primary assets and liabilities and the net operating results of those properties sold or classified as held for disposition prior to January 1, 2014 are accounted for as discontinued operations for all periods presented. This presentation does not have an impact on net income available to common stockholders; it only results in the reclassification of the operating results within the Consolidated Statements of Operations for the periods ended December 31, 2014, 2013, and 2012.

During 2014, the Company sold one operating property that was classified as held for disposition prior to the adoption of ASU 2014-08 and, therefore, met the requirements to be reported as a discontinued operation. The sale of this property resulted in an immaterial gain, net of tax, of $75,000. The gain, net of tax, and operating results of the property for the years ended December 31, 2014, 2013, and 2012, are included in Income/(loss) from discontinued operations, net of tax on the Consolidated Statements of Operations.

During the year ended December 31, 2013, the Company sold two communities in the Sacramento market with 914 apartment homes for gross proceeds of $81.1 million. During the year ended December 31, 2012, the Company sold 21 communities with 6,507 apartment homes for gross proceeds of $609.4 million.

F - 18

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

During the years ended December 31, 2014, 2013, and 2012, UDR recognized net gain/(loss) on the sale of depreciable properties, before tax of $75,000, $41.9 million, and $260.4 million, respectively, which are included in Income/(Loss) from Discontinued Operations, Net of Tax on the Consolidated Statements of Operations.

The following is a summary of Income/(loss) from discontinued operations, net of tax for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Rental income	$	147		$	9,152		$	39,543
Rental expenses	225			3,511			14,106
Property management	4			252			1,087
Real estate depreciation	—			1,958			8,475
Interest and other (income)/expense, net	21			(62		)	821
Income/(loss) attributable to disposed properties and assets held for sale	(103		)	3,493			15,054
Net gain/(loss) on the sale of depreciable property	75			41,919			260,404
Impairment charges	—			(2,355		)	—
Income tax benefit/(expense)	38			885			(8,850		)
Income/(loss) from discontinued operations, net of tax	$	10		$	43,942		$	266,608

Income/(loss) from discontinued operations attributable to UDR, Inc.	$	10		$	42,364		$	256,533

4. REAL ESTATE OWNED

Real estate assets owned by the Company consist of income producing operating properties, properties under development, land held for future development, and sold or held for sale properties. As of December 31, 2014, the Company owned and consolidated 139 communities in 10 states plus the District of Columbia totaling 39,851 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of December 31, 2014 and 2013 (dollars in thousands):



	December 31, 2014			December 31, 2013
Land and land improvements	$	1,980,221		$	1,847,127
Depreciable property — held and used:
Building, improvements, and furniture, fixtures and equipment	6,225,406			5,876,717
Under development:
Land	24,584			110,769
Building, improvements, and furniture, fixtures and equipment	153,048			356,644
Real estate held for disposition:
Land	—			10,751
Building, improvements, and furniture, fixtures and equipment	—			5,969
Real estate owned	8,383,259			8,207,977
Accumulated depreciation	(2,434,772		)	(2,208,794		)
Real estate owned, net	$	5,948,487		$	5,999,183

During the year ended December 31, 2014, the Company sold nine communities consisting of a total of 2,500 apartment homes, an adjacent parcel of land, and one operating property for gross proceeds of $328.4 million, resulting in net proceeds of $324.4 million and a total gain, net of tax, of $138.6 million. A portion of the sale proceeds was designated for tax-deferred exchanges under Section 1031 of the Internal Revenue Code and was used to fund acquisitions of real estate as discussed below.

F - 19

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

In December 2014, the Company sold a 49% interest in 13th and Market and a 50% interest in 3033 Wilshire to MetLife for approximately $54.2 million and $8.3 million, respectively, and recognized, net of tax, a gain of $7.2 million and a loss of $2.2 million, respectively. Subsequent to the sale, the two communities are accounted for under the equity method of accounting and are included in Investment in and advances to unconsolidated joint ventures, net on the Consolidated Balance Sheets. See further discussion of this transaction in Note 5, Joint Ventures and Partnerships. The activity of the two communities prior to sale is classified as a component of continuing operations on the Consolidated Statements of Operations.

In 2014, the Company acquired a fully-entitled land parcel for future development located in Huntington Beach, California for $77.8 million, two communities, located in Seattle, Washington and Kirkland, Washington, with a total of 358 apartment homes for $45.5 million and $75.2 million, respectively, a land parcel for future development located in Boston, Massachusetts for $32.2 million. The four acquisitions during the year ended December 31, 2014 were accomplished through tax-deferred exchanges under Section 1031 of the Internal Revenue Code.

In June 2013, the Company sold a 50% interest in five partnerships (the “UDR/MetLife Vitruvian Park^® Partnerships”) to MetLife for approximately $141.3 million, before transaction costs of $936,000. The properties held by the UDR/MetLife Vitruvian Park^® Partnerships are located in Addison, Texas and consist of two operating communities with 739 apartment homes, one recently completed development community in lease-up with 391 apartment homes, and 28.4 acres of developable land parcels. The transaction resulted in a gain of approximately $436,000 which the Company has deferred until the terms of the construction completion guarantee have been met. The UDR/MetLife Vitruvian Park^® Partnerships are accounted for under the equity method of accounting and are included in Investment In and Advances To Unconsolidated Joint Ventures, Net on the Consolidated Balance Sheets. See further discussion of this transaction in Note 5, Joint Ventures and Partnerships.

The operations of the UDR/MetLife Vitruvian Park^® Partnerships' assets, prior to the sale of a 50% interest, have been classified as a component of continuing operations on the Consolidated Statements of Operations, as UDR has continuing involvement over the duration of the partnership.

In December 2013, the Company sold a 49% interest to MetLife in the Company’s fully-entitled 399 Fremont land parcel located in San Francisco, California for approximately $29.9 million. In conjunction with the sale, the Company formed a new unconsolidated joint venture, UDR/MetLife 399 Fremont, to develop a $318 million, 447-home, luxury high-rise tower on the site. As the Company recently acquired the 399 Fremont land parcel, the sale price was equivalent to the cost basis resulting in no gain or loss on the transaction. For more information on this transaction see Note 5, Joint Ventures and Partnerships.

In December 2013, the Company became the managing partner of two joint ventures resulting in consolidation of both and increasing the real estate owned by $129.4 million. See Note 5, Joint Ventures and Partnerships, for further details.

The Company incurred $373,000, $59,000 and $2.3 million of acquisition-related costs during the years ended December 31, 2014, 2013, and 2012, respectively. These expenses are reported within the line item General and Administrative on the Consolidated Statements of Operations.

In February 2015, the Company acquired an office building in Highlands Ranch, Colorado, for total consideration of approximately $24.0 million, which was comprised of assumed debt. The Company’s corporate offices, as well as other leased office space, are located in the acquired building. The building consists of approximately 120,000 square feet, of which UDR occupies approximately 44,000 square feet. All existing leases were assumed by the Company at the time of the acquisition.

5. JOINT VENTURES AND PARTNERSHIPS

UDR has entered into joint ventures and partnerships with unrelated third parties to acquire real estate assets that are either consolidated and included in Real Estate Owned on the Consolidated Balance Sheets or are accounted for under the equity method of accounting, and are included in Investment in and Advances to Unconsolidated Joint Ventures, Net on the Consolidated Balance Sheets. The Company consolidates the entities that we control as well as any variable interest entity where we are the primary beneficiary. In addition, the Company consolidates any joint venture or partnership in which we are the general partner or managing partner and the third party does not have the ability to substantively participate in the decision-making process nor the ability to remove us as general partner or managing partner without cause.

F - 20

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

UDR’s joint ventures and partnerships are funded with a combination of debt and equity. Our losses are limited to our investment and except as noted below, the Company does not guarantee any debt, capital payout or other obligations associated with our joint ventures and partnerships.

Consolidated Joint Ventures

Unconsolidated Joint Ventures and Partnerships

The Company recognizes earnings or losses from our investments in unconsolidated joint ventures and partnerships consisting of our proportionate share of the net earnings or losses of the joint ventures and partnerships. In addition, we may earn fees for providing management services to the unconsolidated joint ventures and partnerships.

F - 21

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

The following table summarizes the Company’s investment in and advances to unconsolidated joint ventures and partnerships, net, which are accounted for under the equity method of accounting as of December 31, 2014 and 2013 (dollars in thousands):



Joint Venture	Location of Properties	Number of Properties	Number of Apartment Homes	Investment at						UDR’s Ownership Interest
Joint Venture	Location of Properties	2014	2014	2014			2013			2014			2013
Operating and development:
UDR/MetLife I (a)	Various	4 land parcels	—	$	13,306		$	47,497		15.7		%	4.5		%
UDR/MetLife II (a)	Various	21 operating communities	4,642	431,277			327,926			50.0		%	50.0		%
Other UDR/MetLife Joint Ventures (a)	Various	1 operating community, 3 development communities (b), 2 land parcels	1,282	134,939			36,313			50.6		%	35.8		%
UDR/MetLife Vitruvian Park^®(c)	Addison, TX	3 operating communities, 6 land parcels	1,394	80,302			79,318			50.0		%	50.0		%
UDR/KFH (d)	Washington, D.C.	3 operating communities	660	21,596			25,919			30.0		%	30.0		%
Texas (e)	Texas	8 operating communities	3,359	(25,901		)	(23,591		)	20.0		%	20.0		%
Investment in and advances to unconsolidated joint ventures, net, before participating loan investment				655,519			493,382

	Location	Preferred Return	Years To Maturity	Investment at						Income From Participating Loan Investment For The Year Ended
Participating loan investment:				2014			2013			2014	2013			2012
Steele Creek (f)	Denver, CO	6.5%	2.8	62,707			14,273			$2,350	$156			$—

Total investment in and advances to unconsolidated joint ventures, net				$	718,226		$	507,655

(a)

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014


(b)	The number of apartment homes for the communities under development presented in the table above is based on the projected number of total homes. As of December 31, 2014, no apartment homes had been completed in Other UDR/MetLife Development Joint Ventures.

(c)

F - 23

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

In January 2015, the eight communities held by the Texas joint venture were sold, generating net proceeds to UDR of $43.5 million. The Company recorded promote and fee income of $9.6 million and a gain of $59.1 million (including $24.2 million of previously deferred gains) in connection with the sale.

As of December 31, 2014 and 2013, the Company had deferred fees and deferred profit from the sale of properties to joint ventures or partnerships of $24.7 million and $25.4 million, respectively, which will be recognized through earnings over the weighted average life of the related properties, upon the disposition of the properties to a third party, or upon completion of certain development obligations.

The Company recognized $11.3 million, $11.2 million, and $11.8 million of management fees during the years ended December 31, 2014, 2013, and 2012, respectively, for our management of the joint ventures and partnerships. The management fees are included in Joint venture management and other fees on the Consolidated Statements of Operations.

The Company may, in the future, make additional capital contributions to certain of our joint ventures and partnerships should additional capital contributions be necessary to fund acquisitions or operations.

We evaluate our investments in unconsolidated joint ventures and partnerships when events or changes in circumstances indicate that there may be an other-than-temporary decline in value. We consider various factors to determine if a decrease in the value of the investment is other-than-temporary. The Company did not recognize any other-than-temporary decrease in the value of its other investments in unconsolidated joint ventures or partnerships during the years ended December 31, 2014, 2013, and 2012.

Combined summary financial information relating to all of the unconsolidated joint ventures and partnerships operations (not just our proportionate share), is presented below for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands):

F - 24

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014



As of and For the Year Ended December 31, 2014	UDR/MetLife I			UDR/MetLife II			UDR/MetLife Vitruvian Park^®			Texas			UDR/KFH			Other joint ventures			Total
Condensed Statements of Operations:
Total revenues	$	727		$	152,047		$	19,376		$	—		$	19,724		$	1,579		$	193,453
Property operating expenses	618			52,150			10,711			—			7,498			1,122			72,099
Real estate depreciation and amortization	2,130			41,504			7,380			—			14,426			3,959			69,399
Operating income/(loss)	(2,021		)	58,393			1,285			—			(2,200		)	(3,502		)	51,955
Interest expense	—			(48,493		)	(4,131		)	—			(5,873		)	(94		)	(58,591		)
Other income/(expense)	—			—			—			—			—			—			—
Gain/(loss) on sale of real estate	—			—			—			—			—			—			—
Income/(loss) from discontinued operations	(31,802		)	—			—			(4,229		)	—			—			(36,031		)
Net income/(loss)	$	(33,823	)	$	9,900		$	(2,846	)	$	(4,229	)	$	(8,073	)	$	(3,596	)	$	(42,667	)
UDR recorded income (loss) from unconsolidated entities	$	(2,955	)	$	2,814		$	(4,068	)	$	(772	)	$	(2,601	)	$	576		$	(7,006	)

Condensed Balance Sheets:
Total real estate, net	$	89,482		$	1,986,237		$	278,600		$	—		$	235,623		$	351,861		$	2,941,803
Assets held for sale	1,978			—			—			214,218			—			—			216,196
Cash and cash equivalents	1,983			15,245			6,570			—			2,507			6,239			32,544
Other assets	(146		)	19,589			3,933			—			1,128			4,203			28,707
Total assets	93,297			2,021,071			289,103			214,218			239,258			362,303			3,219,250
Amount due/(from) to UDR	107			(444		)	1,960			—			531			843			2,997
Third party debt	—			1,147,109			123,649			—			165,209			68,510			1,504,477
Liabilities held for sale	5,110			—			—			224,596			—			—			229,706
Accounts payable and accrued liabilities	749			17,573			6,766			—			1,396			17,851			44,335
Total liabilities	5,966			1,164,238			132,375			224,596			167,136			87,204			1,781,515
Total equity	$	87,331		$	856,833		$	156,728		$	(10,378	)	$	72,122		$	275,099		$	1,437,735
UDR’s investment in unconsolidated joint ventures	$	13,306		$	431,277		$	80,302		$	(25,901	)	$	21,596		$	197,646		$	718,226

F - 25

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014



As of and For the Year Ended December 31, 2013	UDR/MetLife I			UDR/MetLife II			UDR/MetLife Vitruvian Park^®			Texas			UDR/KFH			Other joint ventures			Total
Condensed Statements of Operations:
Total revenues	$	691		$	109,926		$	7,680		$	—		$	19,221		$	5,324		$	142,842
Property operating expenses	621			33,809			4,633			—			7,035			3,292			49,390
Real estate depreciation and amortization	115			30,122			3,830			—			14,199			3,564			51,830
Operating income/(loss)	(45		)	45,995			(783		)	—			(2,013		)	(1,532		)	41,622
Interest expense	—			(37,055		)	(1,886		)	—			(5,872		)	(913		)	(45,726		)
Other income/(expense)	—			1			—			—			—			—			1
Income/(loss) from discontinued operations	(22,388		)	—			—			(9,584		)	—			—			(31,972		)
Net income/(loss)	$	(22,433	)	$	8,941		$	(2,669	)	$	(9,584	)	$	(7,885	)	$	(2,445	)	$	(36,075	)
UDR recorded income/(loss) from unconsolidated entities	$	(4,675	)	$	4,471		$	(2,851	)	$	(1,218	)	$	(2,366	)	$	6,224		$	(415	)

Condensed Balance Sheets:
Total real estate, net	$	90,971		$	1,476,588		$	283,878		$	—		$	249,097		$	65,133		$	2,165,667
Assets held for sale	753,427			—			—			231,981			—			—			985,408
Cash and cash equivalents	305			16,454			3,498			—			2,289			—			22,546
Other assets	4,782			16,666			1,578			—			1,474			83			24,583
Total assets	849,485			1,509,708			288,954			231,981			252,860			65,216			3,198,204
Amount due to UDR	4,520			2,275			1,352			—			420			1,136			9,703
Third party debt	—			877,799			120,999			—			165,209			—			1,164,007
Liabilities held for sale	346,810			—			—			230,393			—			—			577,203
Accounts payable and accrued liabilities	89			14,508			7,152			—			1,234			2,813			25,796
Total liabilities	351,419			894,582			129,503			230,393			166,863			3,949			1,776,709
Total equity	$	498,066		$	615,126		$	159,451		$	1,588		$	85,997		$	61,267		$	1,421,495
UDR’s investment in unconsolidated joint ventures	$	47,497		$	327,926		$	79,318		$	(23,591	)	$	25,919		$	50,586		$	507,655



For the Year Ended December 31, 2012	UDR/MetLife I			UDR/MetLife II			UDR/MetLife Vitruvian Park^®		Texas			UDR/KFH			Other joint ventures			Total
Condensed Statements of Operations:
Total revenues	$	632		$	87,386		$	—	$	—		$	18,670		$	2,724		$	109,412
Property operating expenses	252			25,737			—		—			6,831			1,368			34,188
Real estate depreciation and amortization	124			32,553			—		—			16,546			1,897			51,120
Operating income/(loss)	256			29,096			—		—			(4,707		)	(541		)	24,104
Interest expense	—			(29,170		)	—		—			(5,890		)	(561		)	(35,621		)
Other income/(expense)	—			(9		)	—		—			—			—			(9		)
Income/(loss) from discontinued operations	8,609			—			—		(1,040		)	—			—			7,569
Net income/(loss)	$	8,865		$	(83	)	$	—	$	(1,040	)	$	(10,597	)	$	(1,102	)	$	(3,957	)
UDR recorded income/(loss) from unconsolidated entities	$	(1,750	)	$	15		$	—	$	(2,399	)	$	(3,221	)	$	(1,224	)	$	(8,579	)

F - 26

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

6. SECURED AND UNSECURED DEBT

The following is a summary of our secured and unsecured debt at December 31, 2014 and 2013 (dollars in thousands):



	Principal Outstanding				For the Year Ended December 31, 2014
					Weighted Average Interest Rate		Weighted Average Years to Maturity	Number of Communities Encumbered
	December 31,
	2014		2013
Secured Debt:
Fixed Rate Debt
Mortgage notes payable (a)	$	401,210	$	445,706	5.46	%	1.6	6
Fannie Mae credit facilities (b)	568,086		626,667		5.12	%	4.0	22
Total fixed rate secured debt	969,296		1,072,373		5.26	%	3.0	28
Variable Rate Debt
Mortgage notes payable	31,337		63,595		1.94	%	2.1	1
Tax-exempt secured notes payable (c)	94,700		94,700		0.83	%	8.2	2
Fannie Mae credit facilities (b)	266,196		211,409		1.60	%	5.2	7
Total variable rate secured debt	392,233		369,704		1.44	%	5.7	10
Total Secured Debt	1,361,529		1,442,077		4.16	%	3.8	38

Unsecured Debt:
Commercial Banks
Borrowings outstanding under an unsecured credit facility due December 2017 (d) (h)	152,500		—		1.09	%	2.9
Senior Unsecured Notes
5.13% Medium-Term Notes due January 2014 (e)	—		184,000		—	%	—
5.50% Medium-Term Notes due April 2014 (net of discount of $20) (e)	—		128,480		—	%	—
5.25% Medium-Term Notes due January 2015 (net of discounts of $6 and $134, respectively) (f)	325,169		325,041		5.25	%	—
5.25% Medium-Term Notes due January 2016	83,260		83,260		5.25	%	1.0
4.25% Medium-Term Notes due June 2018 (net of discounts of $1,465 and $1,893, respectively) (h)	298,535		298,107		4.25	%	3.4
2.17% Term Notes due June 2018 (h)	215,000		250,000		2.17	%	3.4
1.53% Term Notes due June 2018 (h)	100,000		65,000		1.53	%	3.4
1.31% Term Notes due June 2018 (h)	35,000		35,000		1.31	%	3.4
3.70% Medium-Term Notes due October 2020 (net of discounts of $46 and $54, respectively) (h)	299,954		299,946		3.70	%	5.8
4.63% Medium-Term Notes due January 2022 (net of discounts of $2,523 and $2,882, respectively) (h)	397,477		397,118		4.63	%	7.0
3.75% Medium-Term Notes due July 2024 (net of discount of $990) (g) (h)	299,010		—		3.75	%	9.5
8.50% Debentures due September 2024	15,644		15,644		8.50	%	9.7
Other	27		30		N/A		N/A
Total Unsecured Debt	2,221,576		2,081,626		3.81	%	4.6
Total Debt	$	3,583,105	$	3,523,703	3.94	%	4.3

F - 27

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

Our secured debt instruments generally feature either monthly interest and principal or monthly interest-only payments with balloon payments due at maturity. For purposes of classification of the above table, variable rate debt with a derivative financial instrument designated as a cash flow hedge is deemed as fixed rate debt due to the Company having effectively established a fixed interest rate for the underlying debt instrument. As of December 31, 2014, secured debt encumbered $2.2 billion or 26.6% of UDR’s total real estate owned based upon gross book value ($6.2 billion or 73.4% of UDR’s real estate owned based on gross book value is unencumbered).

(a) At December 31, 2014, fixed rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from December 2015 through May 2019 and carry interest rates ranging from 3.43% to 5.94%.

The Company will from time to time acquire properties subject to fixed rate debt instruments. In those situations, management will record the secured debt at its estimated fair value and amortize any difference between the fair value and par to interest expense over the life of the underlying debt instrument. During the years ended December 31, 2014, 2013, and 2012, the Company had $5.1 million, $5.1 million, and $4.9 million, respectively, of amortization expense on the fair market adjustment of debt assumed in acquisition of properties, which was included in Interest expense on the Consolidated Statements of Operations. The unamortized fair market adjustment was a net premium of $6.7 million and $11.8 million at December 31, 2014 and 2013, respectively.

(b) UDR has three secured credit facilities with Fannie Mae with an aggregate commitment of $834.3 million at December 31, 2014. The Fannie Mae credit facilities are for terms of seven to ten years (maturing at various dates from May 2017 through July 2023) and bear interest at floating and fixed rates. At December 31, 2014, we have $568.1 million of the outstanding balance is fixed at a weighted average interest rate of 5.12% and the remaining balance of $266.2 million on these facilities is currently at a weighted average variable interest rate of 1.60%.

Further information related to these credit facilities is as follows (dollars in thousands):



	December 31, 2014			December 31, 2013
Borrowings outstanding	$	834,282		$	838,076
Weighted average borrowings during the period ended	835,873			839,597
Maximum daily borrowings during the period ended	837,564			841,494
Weighted average interest rate during the period ended	4.1		%	4.2		%
Weighted average interest rate at the end of the period	4.0		%	4.1		%

(c) The variable rate mortgage notes payable that secure tax-exempt housing bond issues mature on August 2019 and March 2032. Interest on these notes is payable in monthly installments. The variable mortgage notes have interest rates of 0.78% and 0.93%, respectively, as of December 31, 2014.

(d) The Company has a $900 million unsecured revolving credit facility with a maturity date to December 2017, a six month extension option, and an accordion feature that allows the Company to increase the facility to $1.45 billion. Based on the Company's current credit rating, the credit facility carries an interest rate equal to LIBOR plus a spread of 100 basis points and a facility fee of 15 basis points. As of December 31, 2014, the Company had a balance of $152.5 million outstanding under the revolving credit facility.

F - 28

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

The following is a summary of short-term bank borrowings under UDR’s bank credit facility at December 31, 2014 and 2013 (dollars in thousands):



	December 31, 2014			December 31, 2013
Total revolving credit facility	$	900,000		$	900,000
Borrowings outstanding at end of period (1)	152,500			—
Weighted average daily borrowings during the period ended	291,761			169,844
Maximum daily borrowings during the period ended	625,000			372,000
Weighted average interest rate during the period ended	1.2		%	1.2		%
Interest rate at end of the period	1.1		%	1.3		%

(1) Excludes $1.9 million and $2.2 million of letters of credit at December 31, 2014 and 2013, respectively.

(e) Paid off at maturity with borrowings under the Company’s $900 million unsecured revolving credit facility.


(f)	In January 2015, we paid off $325.2 million of 5.25% medium-term notes due January 2015 with borrowings under the Company’s $900 million unsecured revolving credit facility.

(g) In June 2014, the Company issued $300 million of 3.750% senior unsecured medium-term notes due July 1, 2024. Interest is payable semi-annually beginning on January 1, 2015. These notes were issued at 99.652% of the principal amount and had a discount of $1.0 million at December 31, 2014. The Company used the net proceeds to pay down borrowings outstanding on our $900 million unsecured credit facility and for general corporate purposes.

(h) The Operating Partnership is a guarantor at December 31, 2014 and 2013.

The aggregate maturities, including amortizing principal payments of secured debt, of total debt for the next five years subsequent to December 31, 2014 are as follows (dollars in thousands):



Year	Secured Fixed Rate Debt		Secured Variable Rate Debt		Total Secured Debt		Total Unsecured Debt (a)		Total Debt
2015	$	196,648	$	—	$	196,648	$	324,286	$	520,934
2016	135,167		31,337		166,504		82,377		248,881
2017	177,774		65,000		242,774		152,500		395,274
2018	120,969		104,787		225,756		648,443		874,199
2019	248,738		67,700		316,438		—		316,438
Thereafter	90,000		123,409		213,409		1,013,970		1,227,379
Total	$	969,296	$	392,233	$	1,361,529	$	2,221,576	$	3,583,105

(a) With the exception of the 1.31% Term Notes due June 2018 and revolving credit facility which carry a variable interest rate, all unsecured debt carries fixed interest rates.

We were in compliance with the covenants of our debt instruments at December 31, 2014.

F - 29

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

7. INCOME/(LOSS) PER SHARE

The following table sets forth the computation of basic and diluted income/(loss) per share for the periods presented (dollars and shares in thousands, except per share data):



	Year Ended December 31,
	2014			2013			2012
Numerator for income/(loss) per share:
Income/(loss) from continuing operations	$	16,260		$	2,340		$	(46,305	)
Gain/(loss) on sale of real estate owned, net of tax	143,572			—			—
(Income)/loss from continuing operations attributable to redeemable noncontrolling interests in the Operating Partnership	(5,511		)	48			2,089
(Income)/loss from continuing operations attributable to noncontrolling interests	3			60			(140		)
Income/(loss) from continuing operations attributable to UDR, Inc.	154,324			2,448			(44,356		)
Distributions to preferred stockholders - Series E (Convertible)	(3,724		)	(3,724		)	(3,724		)
Distributions to preferred stockholders - Series G	—			—			(2,286		)
Premium on preferred stock redemption or repurchases, net	—			—			(2,791		)
Income/(loss) from continuing operations attributable to common stockholders	$	150,600		$	(1,276	)	$	(53,157	)

Income/(loss) from discontinued operations, net of tax	$	10		$	43,942		$	266,608
(Income)/loss from discontinued operations attributable to redeemable noncontrolling interests in the Operating Partnership	—			(1,578		)	(10,075		)
Income/(loss) from discontinued operations attributable to common stockholders	$	10		$	42,364		$	256,533

Net income/(loss) attributable to common stockholders	$	150,610		$	41,088		$	203,376

Denominator for income/(loss) per share - basic and diluted:
Weighted average common shares outstanding	252,707			250,684			239,482
Non-vested restricted stock awards	(1,179		)	(715		)	(631		)
Denominator for income/(loss) per share - basic	251,528			249,969			238,851
Incremental shares issuable from assumed conversion of: Stock options and unvested resticted stock	1,917			—			—
Denominator for income/(loss) per share - diluted	253,445			249,969			238,851

Income/(loss) per weighted average common share - basic:
Income/(loss) from continuing operations attributable to common stockholders	$	0.60		$	(0.01	)	$	(0.22	)
Income/(loss) from discontinued operations attributable to common stockholders	—			0.17			1.07
Net income/(loss) attributable to common stockholders	$	0.60		$	0.16		$	0.85

Income/(loss) per weighted average common share - diluted:
Income/(loss) from continuing operations attributable to common stockholders	$	0.59		$	(0.01	)	$	(0.22	)
Income/(loss) from discontinued operations attributable to common stockholders	—			0.17			1.07
Net income/(loss) attributable to common stockholders	$	0.59		$	0.16		$	0.85

F - 30

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

Basic income/(loss) per common share is computed based upon the weighted average number of common shares outstanding. Diluted income/(loss) per share is computed based upon the common shares issuable from the assumed conversion of the OP Units, convertible preferred stock, stock options, and restricted stock. Only those instruments having a dilutive impact on our basic income/(loss) per share are included in diluted income/(loss) per share during the periods.

During the years ended December 31, 2013 and 2012, the effect of the conversion of the OP Units, convertible preferred stock, stock options and restricted stock is not dilutive, and is therefore not included in the above calculations as the Company reported a loss from continuing operations attributable to common stockholders.

The following table sets forth the additional shares of common stock outstanding by equity instrument if converted to common stock for each of the years ended December 31, 2014, 2013, and 2012 (shares in thousands):



	Year Ended December 31,
	2014	2013	2012
OP Units	9,247	9,337	9,411
Preferred Stock	3,036	3,036	3,036
Stock options and unvested restricted stock	1,917	1,584	1,361

8. STOCKHOLDERS’ EQUITY

UDR has an effective registration statement that allows the Company to sell an undetermined number of debt and equity securities as defined in the prospectus. The Company has the ability to issue 350,000,000 shares of common stock and 50,000,000 shares of preferred shares as of December 31, 2014.

The company has an equity distribution agreement which allows it from time to time, through its sales agents, to offer and sell up to 20,000,000 shares of its common stock. Sales of such shares will be made by means of ordinary brokers’ transactions on the NYSE at market prices. As of December 31, 2014, 16,518,567 shares were available for sale under the continuous equity program.

During the year ended December 31, 2014, the Company entered into the following equity transactions for our common stock:


•	Sold 3,410,433 shares of common stock through the Company’s equity distribution agreement at a weighted average price per share of $29.95, for aggregate gross proceeds of approximately $102.1 million;


•	Issued 860,811 shares of common stock through the Company’s 1999 Long-Term Incentive Plan (the “LTIP”), net of forfeitures of 12,199; and


•	Converted 153,451 OP Units into Company common stock.

In 2015, through February 24, 2015, we sold 3,432,936 shares of common stock through the Company’s equity distribution agreement at a weighted average price per share of $32.28, for aggregate gross proceeds of approximately $110.8 million.

Distributions are subject to the approval of the Board of Directors and are dependent upon our strategy, financial condition and operating results. UDR’s common distributions for the years ended December 31, 2014, 2013, and 2012 totaled $1.04, $0.94, and $0.88 per share, respectively. For taxable years ending on or before December 31, 2014, the Internal Revenue Service (“IRS”) allowed REITs to distribute up to 90% of total distributions in common shares with the residual distributed in cash as a means of enhancing liquidity.

Preferred Stock

F - 31

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

purpose on which the holders of common stock are entitled to vote. The Series E has no stated maturity and is not subject to any sinking fund or any mandatory redemption.

Distributions declared on the Series E for the years ended December 31, 2014, 2013, and 2012 were $1.33 per share. The Series E is not listed on any exchange. At December 31, 2014 and 2013, a total of 2,803,812 shares of the Series E were outstanding.

UDR is authorized to issue up to 20,000,000 shares of the Series F Preferred Stock (“Series F”). The Series F may be purchased by holders of UDR’s operating partnership units, or OP Units, at a purchase price of $0.0001 per share. OP Unitholders are entitled to subscribe for and purchase one share of UDR’s Series F for each OP Unit held. At December 31, 2014 and 2013, a total of 2,464,183 shares of the Series F were outstanding with an aggregate purchase value of $246. Holders of the Series F are entitled to one vote for each share of the Series F they hold, voting together with the holders of our common stock, on each matter submitted to a vote of security holders at a meeting of our stockholders. The Series F does not entitle its holders to any other rights, privileges or preferences.

In May 2007, UDR issued 5,400,000 shares of the 6.75% Series G Cumulative Redeemable Preferred Stock (“Series G”). On May 31, 2012, the Company completed the redemption of all outstanding shares of its Series G. A total of 3,264,362 shares of the Series G was redeemed at a redemption price of $25 per share in cash, plus accrued and unpaid dividends to the redemption date for a total cost of $82.1 million. As a result of this redemption, the write off of additional paid in capital of $2.8 million related to the issuance of the Series G is recognized as a decrease to our net income/(loss) attributable to common stockholders.

Distributions declared on the Series G for the years ended December 31, 2014, 2013, and 2012 were $0.00, $0.00 and $0.57 per share, respectively. At December 31, 2014 and 2013, there were no shares of the Series G outstanding.

Distribution Reinvestment and Stock Purchase Plan

UDR’s Distribution Reinvestment and Stock Purchase Plan (the “Stock Purchase Plan”) allows common and preferred stockholders the opportunity to purchase, through the reinvestment of cash dividends, additional shares of UDR’s common stock. From inception through December 31, 2008, shareholders have elected to utilize the Stock Purchase Plan to reinvest their distribution for the equivalent of 9,957,233 shares of Company common stock. Shares in the amount of 10,963,730 were reserved for issuance under the Stock Purchase Plan as of December 31, 2014. During the year ended December 31, 2014, UDR acquired all shares issued through the open market.

9. EMPLOYEE BENEFIT PLANS

In May 2001, the stockholders of UDR approved the long term incentive plan (“LTIP”), which supersedes the 1985 Stock Option Plan. The LTIP authorizes the granting of awards which may take the form of options to purchase shares of common stock, stock appreciation rights, restricted stock, dividend equivalents, other stock-based awards, and any other right or interest relating to common stock or cash incentive awards to Company directors, employees and outside trustees to promote the success of the Company by linking individual’s compensation via grants of share based payment. During the year ended December 31, 2014, the stockholders of UDR voted to amend and restate the LTIP to increase the number of shares reserved from 16,000,000 shares to 19,000,000 shares on an unadjusted basis for issuance upon the grant or exercise of awards under the LTIP. As of December 31, 2014, there were 10,067,371 common shares available for issuance under the LTIP.

The LTIP contains change of control provisions allowing for the immediate vesting of an award upon certain events such as a merger where UDR is not the surviving entity. Upon the death or disability of an award recipient all outstanding instruments will vest and all restrictions will lapse. Unless otherwise specified in the agreement, upon the retirement of an award recipient, all outstanding instruments will vest and all restrictions will lapse. The LTIP specifies that in the event of a capital transaction, which includes but is not limited to stock dividends, stock splits, extraordinary cash dividends and spin-offs, the number of shares available for grant in totality or to a single individual is to be adjusted proportionately. The LTIP specifies that when a capital transaction occurs that would dilute the holder of the stock award, prior grants are to be adjusted such that the recipient is no worse as a result of the capital transaction.

A summary of UDR’s stock option and restricted stock activities during the year ended December 31, 2014 is as follows:

F - 32

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014



	Option Outstanding				Option Exercisable				Restricted Stock
	Number of Options		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price		Number of shares		Weighted Average Fair Value Per Restricted Stock
Balance, December 31, 2013	2,430,127		$	12.63	2,430,127		$	12.63	758,745		$	23.89
Granted	—		—		—		—		873,010		23.14
Exercised	(164,285	)	10.06		(164,285	)	10.06		—		—
Vested	—		—		—		—		(619,578	)	22.70
Forfeited	—		—		—		—		(12,199	)	23.74
Balance, December 31, 2014	2,265,842		$	12.82	2,265,842		$	12.82	999,978		$	23.98

As of December 31, 2014, the Company had issued 4,517,514 shares of restricted stock under the LTIP.

Stock Option Plan

UDR has granted stock options to our employees, subject to certain conditions. Each stock option is exercisable into one common share.

There is no remaining compensation cost related to unvested stock options as of December 31, 2014.

During the year ended December 31, 2014, stock options with a fair value of $4.8 million were exercised.

The weighted average remaining contractual life on all options outstanding as of December 31, 2014 is 3.4 years. 1,830,672 of share options had exercise prices at $10.06; 404,291 of share options had exercise prices at $24.38; and 30,879 of share options had exercise prices at $25.10.

During the years ended December 31, 2014, 2013, and 2012, respectively, we recognized $0.0, $0.0, and $95,000 of net compensation expense related to outstanding stock options.

Restricted Stock Awards

Restricted stock awards are granted to Company employees, officers, and directors. The restricted stock awards are valued based upon the closing sales price of UDR common stock on the date of grant. Compensation expense is recorded under the straight-line method over the vesting period, which is generally three to four years. Restricted stock awards earn dividends payable in cash. Some of the restricted stock grants are based on the Company’s performance and are subject to adjustment during the initial one year performance period. For the years ended December 31, 2014, 2013, and 2012, we recognized $4.2 million, $3.6 million, and $3.7 million of compensation expense related to the amortization of restricted stock awards, respectively. The total remaining compensation cost on unvested restricted stock awards was $2.5 million and had a weighted average remaining contractual life of 1.1 years as of December 31, 2014.

Long-Term Incentive Compensation

In February 2014, certain officers of the Company were awarded a restricted stock grant under the 2014 Long-Term Incentive Program (“2014 LTI”). Fifty percent of the 2014 LTI award is based upon FFO as Adjusted and fifty percent is based on Total Shareholder Return (“TSR”) as measured relative to comparable apartment REITs. The actual amount that vests was determined in February 2015 based upon the actual achievement of the metrics. Each award vests pro rata over three years commencing with the establishment of the award and continuing for two years following determination of the amount of the award at the end of the annual performance period. The portion of the restricted stock grant based upon FFO as Adjusted was valued based upon the closing sales price of UDR common stock on the date of grant. The portion of the restricted stock grant based upon TSR was valued at $21.15 per share on the grant date as determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation using a volatility factor of 23.8%.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

In February 2013, certain officers of the Company were awarded a restricted stock grant under the 2013 Long-Term Incentive Program (“2013 LTI”). Fifty percent of the 2013 LTI award is based upon FFO and fifty percent is based on Total Shareholder Return (“TSR”) as measured relative to comparable apartment REITs. The actual amount that vests was determined in February 2014 based upon the actual achievement of the metrics. Each award vests pro rata over three years commencing with the establishment of the award and continuing for two years following determination of the amount of the award at the end of the annual performance period. The portion of the restricted stock grant based upon FFO was valued based upon the closing sales price of UDR common stock on the date of grant. The portion of the restricted stock grant based upon TSR was valued at $21.97 per share on the grant date as determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation using a volatility factor of 15.8%.

Compensation expense is recorded under the accelerated method over the vesting period for the 2014 LTI and 2013 LTI. For the year ended December 31, 2014 and 2013, we recognized $9.8 million and $5.9 million, respectively, of compensation expense related to the amortization of the awards. The total remaining compensation cost on unvested 2014 LTI and 2013 LTI awards was $5.8 million and had a weighted average remaining contractual life of 1.8 years as of December 31, 2014.

During 2010, certain officers of the Company were awarded a restricted stock grant under the 2010-2012 Long-Term Incentive Program (“2010-2012 LTI”). The actual amount of the awards that vested in 2012 was determined based upon the Company’s achievement of the specified performance metrics during the three-year performance period. The grants were valued on the grant date based upon the market price of UDR common stock on the date of grant. Compensation expense was recorded pro rata over the three-year performance period. For the year ended December 31, 2012, we recognized $4.9 million of compensation expense related to the amortization of the awards.

Profit Sharing Plan

Our profit sharing plan (the “Plan”) is a defined contribution plan covering all eligible full-time employees. Under the Plan, UDR makes discretionary profit sharing and matching contributions to the Plan as determined by the Compensation Committee of the Board of Directors. Aggregate provisions for contributions, both matching and discretionary, which are included in UDR’s Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012, was $854,000, $919,000, and $631,000, respectively.

10. INCOME TAXES

For 2014, 2013, and 2012, UDR believes that we have complied with the REIT requirements specified in the Code. As such, the REIT would generally not be subject to federal income taxes.

For income tax purposes, distributions paid to common stockholders may consist of ordinary income, qualified dividends, capital gains, unrecaptured section 1250 gains, return of capital, or a combination thereof. Distributions that exceed our current and accumulated earnings and profits constitute a return of capital rather than taxable income and reduce the stockholder’s basis in their common shares. To the extent that a distribution exceeds both current and accumulated earnings and profits and the stockholder’s basis in the common shares, it generally will be treated as a gain from the sale or exchange of that stockholder’s common shares. Taxable distributions paid per common share were taxable as follows for the years ended December 31, 2014, 2013, and 2012:



	Year Ended December 31,
	2014		2013		2012
Ordinary income	$	0.695	$	0.744	$	0.174
Qualified ordinary income	0.139		—		—
Long-term capital gain	0.105		0.114		0.186
Unrecaptured section 1250 gain	0.076		0.067		0.515
Total	$	1.015	$	0.925	$	0.875

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

We have a TRS that is subject to federal and state income taxes. A TRS is a C-corporation which has not elected REIT status and as such is subject to United States federal and state income tax. The components of the provision for income taxes are as follows for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Income tax (benefit)/expense
Current
Federal	$	147		$	(1,030	)	$	1,961
State	550			846			1,463
Total current	697			(184		)	3,424
Deferred
Federal	20,138			(6,907		)	(21,479		)
State	5,159			(1,190		)	(3,021		)
Total deferred	25,297			(8,097		)	(24,500		)
Total income tax (benefit)/expense	$	25,994		$	(8,281	)	$	(21,076	)
Classification of income tax (benefit)/expense
Continuing operations	$	(15,098	)	$	(7,299	)	$	(30,717	)
Gain/(loss) on sale of real estate owned	41,087			—			—
Discontinued operations	5			(982		)	9,641

Deferred income taxes are provided for the change in temporary differences between the basis of certain assets and liabilities for financial reporting purposes and income tax reporting purposes. The expected future tax rates are based upon enacted tax laws. The components of our TRS deferred tax assets and liabilities are as follows for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Deferred tax assets:
Federal and state tax attributes	$	—		$	13,069		$	1,464
Book/tax depreciation	6,692			19,354			12,345
Construction capitalization differences	75			—			6,635
Investment in partnerships	—			—			3,112
Debt and interest deductions	—			10,311			—
Other	401			—			2,009
Total deferred tax assets	7,168			42,734			25,565
Valuation allowance	—			(1,310		)	(1,390		)
Net deferred tax assets	7,168			41,424			24,175
Deferred tax liabilities:
Construction capitalization differences	—			(3,766		)	—
Investment in partnerships	—			(5,080		)	—
Other	(192		)	(305		)	—
Total deferred tax liabilities	(192		)	(9,151		)	—
Net deferred tax asset	$	6,976		$	32,273		$	24,175

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

Income tax benefit/(expense), net differed from the amounts computed by applying the U.S. statutory rate of 35% to pretax income/(loss) for the years ended December 31, 2014, 2013, and 2012 as follows (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Income tax (benefit)/expense
U.S. federal income tax (benefit)/expense	$	28,819		$	(8,493	)	$	21,853
State income tax provision	2,678			46			2,497
Other items	(137		)	246			(1,682		)
Conversion of certain TRS entities to REITs	(5,770		)	—			—
Valuation allowance	404			(80		)	(43,744		)
Total income tax (benefit)/expense	$	25,994		$	(8,281	)	$	(21,076	)

As of December 31, 2014, the Company, through our TRS, had federal net operating loss carryovers (“NOL”) of $19.5 million expiring in 2032 through 2033. As of December 31, 2014, the TRS had state NOLs of approximately $57.8 million expiring in 2020 through 2031. Prior to the conversion adjustment, as of December 31, 2014, the Company had a valuation allowance of $1.7 million against its state NOL. During the year ended December 31, 2014, the Company had a net change of $400,000 in the valuation allowance. These attributes are still available to the new REITs, but are carried at a zero effective tax rate.

For the year ended December 31, 2014, the Tax benefit/(provision), net increased $7.8 million as compared to 2013. The increase was primarily a result of the Company recognizing a one-time tax benefit of $5.8 million in 2014 related to the conversion of certain taxable REIT subsidiary entities into REITs. Additionally, Gain/(loss) on sale of real estate owned, net of tax included approximately $41.1 million of tax.

GAAP defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The financial statements reflect expected future tax consequences of income tax positions presuming the taxing authorities’ full knowledge of the tax position and all relevant facts, but without considering time values. GAAP also provides guidance on derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition.

The Company evaluates our tax position using a two-step process. First, we determine whether a tax position is more likely than not (greater than 50 percent probability) to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company will then determine the amount of benefit to recognize and record the amount of the benefit that is more likely than not to be realized upon ultimate settlement. When applicable, UDR recognizes interest and/or penalties related to uncertain tax positions in income tax expense. As of December 31, 2014 and 2013, UDR has no material unrecognized income tax benefits/(provisions).

The Company files income tax returns in federal and various state and local jurisdictions. With few exceptions, the Company is no longer subject to federal, state and local income tax examination by tax authorities for years prior to 2010. The tax years 2010 through 2013 remain open to examination by the major taxing jurisdictions to which the Company is subject.

11. NONCONTROLLING INTERESTS

Redeemable Noncontrolling Interests in the Operating Partnership

Interests in the Operating Partnership held by limited partners are represented by OP Units. The income is allocated to holders of OP Units based upon net income attributable to common stockholders and the weighted average number of OP Units outstanding to total common shares plus OP Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to noncontrolling interests in accordance with the terms of the individual partnership agreements.

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

discretion, purchase the OP Units by paying to the limited partner either the Cash Amount or the REIT Share Amount (generally one share of common stock of the Company for each OP Unit), as defined in the Operating Partnership Agreement. Accordingly, the Company records the OP Units outside of permanent equity and reports the OP Units at their redemption value using the Company’s stock price at each balance sheet date.

The following table sets forth redeemable noncontrolling interests in the Operating Partnership for the years ended December 31, 2014 and 2013 (dollars in thousands):



	Year Ended December 31,
	2014			2013
Redeemable noncontrolling interests in the Operating Partnership, beginning of year	$	217,597		$	223,418
Mark-to-market adjustment to redeemable noncontrolling interests in the Operating Partnership	73,954			3,656
Conversion of OP Units to Common Stock	(4,372		)	(1,817		)
Net income/(loss) attributable to redeemable noncontrolling interests in the Operating Partnership	5,511			1,530
Distributions to redeemable noncontrolling interests in the Operating Partnership	(10,077		)	(9,440		)
Allocation of other comprehensive income/(loss)	(133		)	250
Redeemable noncontrolling interests in the Operating Partnership, end of year	$	282,480		$	217,597

The following sets forth net income/(loss) attributable to common stockholders and transfers from redeemable noncontrolling interests in the Operating Partnership for the following periods (dollars in thousands):



	Year Ended December 31,
	2014		2013		2012
Net income/(loss) attributable to common stockholders	$	150,610	$	41,088	$	203,376
Conversion of OP units to UDR Common Stock	4,372		1,817		529
Change in equity from net income/(loss) attributable to common stockholders and conversion of OP units to UDR Common Stock	$	154,982	$	42,905	$	203,905

Noncontrolling Interests

Noncontrolling interests represent interests of unrelated partners in certain consolidated affiliates, and is presented as part of equity in the Consolidated Balance Sheets since these interests are not redeemable. During the years ended December 31, 2014, 2013, and 2012, net (income)/loss attributable to noncontrolling interests was $3,000, $60,000, and $(140,000), respectively.

During the year ended December 31, 2012, the Company acquired all of the noncontrolling interests in two consolidated affiliates for $4.9 million, one of which owns a 434 apartment home community for $4.0 million and the other is a development project for $900,000. See the “Consolidated Joint Ventures” section of Note 5, Unconsolidated Joint Ventures and Partnerships, for additional information on the consolidated development joint venture.

12. FAIR VALUE OF DERIVATIVES AND FINANCIAL INSTRUMENTS

Fair value is based on the price that would be received to sell an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level valuation hierarchy prioritizes observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below:


•	Level 1 — Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.


•	Level 2 — Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014


•	Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The estimated fair values of the Company’s financial instruments either recorded or disclosed on a recurring basis as of December 31, 2014 and 2013 are summarized as follows (dollars in thousands):



					Fair Value at December 31, 2014, Using
	Total Carrying Amount in Statement of Financial Position at December 31, 2014		Fair Value Estimate at December 31, 2014		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Description:
Notes receivable (a)	$	14,369	$	14,808	$	—	$	—	$	14,808
Derivatives - Interest rate contracts (b)	88		88		—		88		—
Total assets	$	14,457	$	14,896	$	—	$	88	$	14,808

Derivatives - Interest rate contracts (b)	$	10,368	$	10,368	$	—	$	10,368	$	—
Secured debt instruments - fixed rate: (c)
Mortgage notes payable	401,210		415,663		—		—		415,663
Fannie Mae credit facilities	568,086		606,623		—		—		606,623
Secured debt instruments- variable rate: (c)
Mortgage notes payable	31,337		31,337		—		—		31,337
Tax-exempt secured notes payable	94,700		94,700		—		—		94,700
Fannie Mae credit facilities	266,196		266,196		—		—		266,196
Unsecured debt instruments (c):
Commercial banks	152,500		152,500		—		—		152,500
Senior unsecured notes	2,069,076		2,144,125		—		—		2,144,125
Total liabilities	$	3,593,473	$	3,721,512	$	—	$	10,368	$	3,711,144

Redeemable noncontrolling interests in the Operating Partnership (d)	$	282,480	$	282,480	$	—	$	282,480	$	—

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014



					Fair Value at December 31, 2013, Using
	Total Carrying Amount in Statement of Financial Position at December 31, 2013		Fair Value Estimate at December 31, 2013		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Description:
Notes receivable (a)	$	83,033	$	83,833	$	—	$	—	83,833
Total assets	$	83,033	$	83,833	$	—	$	—	$	83,833

Derivatives- Interest rate contracts (b)	$	4,965	$	4,965	$	—	$	4,965	$	—
Secured debt instruments- fixed rate: (c)
Mortgage notes payable	445,706		466,375		—		—		466,375
Fannie Mae credit facilities	626,667		661,094		—		—		661,094
Secured debt instruments- variable rate: (c)
Mortgage notes payable	63,595		63,595		—		—		63,595
Tax-exempt secured notes payable	94,700		94,700		—		—		94,700
Fannie Mae credit facilities	211,409		211,409		—		—		211,409
Unsecured debt instruments: (c)
Senior unsecured notes	2,081,626		2,149,003		—		—		2,149,003
Total liabilities	$	3,528,668	$	3,651,141	$	—	$	4,965	$	3,646,176

Redeemable noncontrolling interests in the Operating Partnership (d)	$	217,597	$	217,597	$	—	$	217,597	$	—


(a)	See Note 2, Significant Accounting Policies.


(b)	See Note 13, Derivatives and Hedging Activity.


(c)	See Note 6, Secured Debt and Unsecured Debt.


(d)	See Note 11, Noncontrolling Interests.

There were no transfers into or out of each of the levels of the fair value hierarchy.

Financial Instruments Carried at Fair Value

The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair values of interest rate options are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of December 31, 2014 and 2013, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. In conjunction with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Redeemable noncontrolling interests in the Operating Partnership have a redemption feature and are marked to their redemption value. The redemption value is based on the fair value of the Company’s common stock at the redemption date, and therefore, is calculated based on the fair value of the Company’s common stock at the balance sheet date. Since the valuation is based on observable inputs such as quoted prices for similar instruments in active markets, redeemable noncontrolling interests in the Operating Partnership are classified as Level 2.

Financial Instruments Not Carried at Fair Value

At December 31, 2014, the fair values of cash and cash equivalents, restricted cash, accounts receivable, prepaids, real estate taxes payable, accrued interest payable, security deposits and prepaid rent, distributions payable and accounts payable approximated their carrying values because of the short term nature of these instruments. The estimated fair values of other financial instruments were determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company would realize on the disposition of the financial instruments. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts.

We estimate the fair value of our notes receivable and debt instruments by discounting the remaining cash flows of the debt instrument at a discount rate equal to the replacement market credit spread plus the corresponding treasury yields. Factors considered in determining a replacement market credit spread include general market conditions, borrower specific credit spreads, time remaining to maturity, loan-to-value ratios and collateral quality, where applicable (Level 3).

We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book value of those assets. Our cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. The net book value of impaired assets is reduced to fair value. Our estimates of fair value represent our best estimate based upon Level 3 inputs such as industry trends and reference to market rates and transactions.

We consider various factors to determine if a decrease in the value of our investment in and advances to unconsolidated joint ventures, net is other-than-temporary. These factors include, but are not limited to, age of the venture, our intent and ability to retain our investment in the entity, the financial condition and long-term prospects of the entity, and the relationships with the other joint venture partners and its lenders. Based on the significance of the unobservable inputs, we classify these fair value measurements within Level 3 of the valuation hierarchy. The Company did not incur any other-than-temporary decrease in the value of its investments in unconsolidated joint ventures during the years ended December 31, 2014, 2013, and 2012.

After determining an other-than-temporary decrease in the value of an equity method investment has occurred, we estimate the fair value of our investment by estimating the proceeds we would receive upon a hypothetical liquidation of the investment at the date of measurement. Inputs reflect management’s best estimate of what market participants would use in pricing the investment giving consideration to the terms of the joint venture agreement and the estimated discounted future cash flows to be generated from the underlying joint venture assets. The inputs and assumptions utilized to estimate the future cash flows of the underlying assets are based upon the Company’s evaluation of the economy, market trends, operating results, and other factors, including judgments regarding costs to complete any construction activities, lease up and occupancy rates, rental rates, inflation rates, capitalization rates utilized to estimate the projected cash flows at the disposition, and discount rates.

13. DERIVATIVES AND HEDGING ACTIVITY

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and through the use of derivative financial instruments. Specifically, the Company may enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up front premium.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated other comprehensive income/(loss), net in the Consolidated Balance Sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the years ended December 31, 2014, 2013, and 2012, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt and forecasted issuances of fixed-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the year ended December 31, 2014 the Company recorded a gain of approximately $3,000 from ineffectiveness in earnings attributable to a timing mismatch between the derivative and the hedged item. During the years ended December 31, 2013, and 2012, the Company recorded less than $1,000 of loss from ineffectiveness in earnings attributable to reset date and index mismatches between the derivative and the hedged item, and interest rate swaps with a fair value other than zero at inception of the hedging relationship.

Amounts reported in Accumulated other comprehensive income/(loss), net in the Consolidated Balance Sheets relate to derivatives that will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Through December 31, 2015, the Company estimates that an additional $5.0 million will be reclassified as an increase to interest expense.

As of December 31, 2014, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollars in thousands):

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of GAAP. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings and resulted in a gain/(loss) of $(4,000), $271,000, and $290,000 for the years ended December 31, 2014, 2013, and 2012, respectively.

As of December 31, 2014, the Company had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships (dollars in thousands):

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of December 31, 2014 and 2013 (dollars in thousands):



	Asset Derivatives (included in Other assets)				Liability Derivatives (included in Other liabilities)
	Fair Value at:				Fair Value at:
	December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013
Derivatives designated as hedging instruments:
Interest rate products	$	86	$	—	$	10,368	$	4,965

Derivatives not designated as hedging instruments:
Interest rate products	$	2	$	—	$	—	$	—

Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statements of Operations

The tables below present the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands):



Derivatives in Cash Flow Hedging Relationships	Unrealized holding gain/(loss) Recognized in OCI (Effective Portion)									Gain/(Loss) Reclassified from Accumulated OCI into Interest expense (Effective Portion)									Gain/(Loss) Recognized in Interest expense (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	Year ended December 31,									Year ended December 31,									Year ended December 31,
	2014			2013			2012			2014			2013			2012			2014		2013		2012
Interest rate products	$	(8,695	)	$	(469	)	$	(4,924	)	$	(4,834	)	$	(6,851	)	$	(7,649	)	$	3	$	—	$	—



	Gain/(Loss) Recognized in Interest and other income/(expense), net
	Year ended December 31,
Derivatives Not Designated as Hedging Instruments	2014			2013		2012
Interest rate products	$	(4	)	$	271	$	290

Credit-risk-related Contingent Features

The Company has agreements with some of its derivative counterparties that contain a provision where (1) if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations; or (2) the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness.

Certain of the Company’s agreements with its derivative counterparties contain provisions where if there is a change in the Company’s financial condition that materially changes the Company’s creditworthiness in an adverse manner, the Company may be required to fully collateralize its obligations under the derivative instrument. At December 31, 2014 and 2013, no cash collateral was posted or required to be posted by the Company or by a counterparty.

The Company also has an agreement with a derivative counterparty that incorporates the loan and financial covenant provisions of the Company’s indebtedness with a lender affiliate of the derivative counterparty. Failure to comply with these covenant provisions would result in the Company being in default on any derivative instrument obligations covered by the agreement.

F - 42

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

The Company has certain agreements with some of its derivative counterparties that contain a provision where, in the event of default by the Company or the counterparty, the right of setoff may be exercised. Any amount payable to one party by the other party may be reduced by its setoff against any amounts payable by the other party. Events that give rise to default by either party may include, but are not limited to, the failure to pay or deliver payment under the derivative contract, the failure to comply with or perform under the derivative agreement, bankruptcy, a merger without assumption of the derivative agreement, or in a merger, a surviving entity's creditworthiness is materially weaker than the original party to the derivative agreement.

As of December 31, 2014, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $10.6 million. If the Company had breached any of these provisions at December 31, 2014, it would have been required to settle its obligations under the agreements at their termination value of $10.6 million.

The Company has elected not to offset derivative positions in the consolidated financial statements. The tables below present the effect on its financial position had the Company made the election to offset its derivative positions as of December 31, 2014 and December 31, 2013 (dollars in thousands):



Offsetting of Derivative Assets
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Assets Presented in the Consolidated Balance Sheets (a)		Gross Amounts Not Offset in the Consolidated Balance Sheets					Net Amount
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets				Financial Instruments			Cash Collateral Received		Net Amount
December 31, 2014	$	88	$	—	$	88	$	(27	)	$	—	$	61

December 31, 2013	$	—	$	—	$	—	$	—		$	—	$	—

(a) Amounts reconcile to the aggregate fair value of derivative assets in the “Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet” located in this footnote.



Offsetting of Derivative Liabilities
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Liabilities Presented in the Consolidated Balance Sheets (a)		Gross Amounts Not Offset in the Consolidated Balance Sheets					Net Amount
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets				Financial Instruments			Cash Collateral Posted		Net Amount
December 31, 2014	$	10,368	$	—	$	10,368	$	(27	)	$	—	$	10,341

December 31, 2013	$	4,965	$	—	$	4,965	$	—		$	—	$	4,965

(a) Amounts reconcile to the aggregate fair value of derivative liabilities in the “Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet” located in this footnote.

F - 43

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

14. COMMITMENTS AND CONTINGENCIES

Commitments

Real Estate Under Development

The following summarizes the Company’s real estate commitments at December 31, 2014 (dollars in thousands):



	Number of Properties	Costs Incurred to Date (a)			Expected Costs to Complete (unaudited)			Average Ownership Stake
Wholly-owned — under development	1	$	177,632	(b)	$	40,068		100	%
Wholly-owned — redevelopment	1	83,778		(b)	14,222			100	%
Joint ventures:
Unconsolidated joint ventures	3	225,013			172,155		(c)	Various
Participating loan investments	1	62,707		(d)	29,302		(e)	0	%
Total		$	549,130		$	255,747

(a) Represents 100% of project costs incurred to date.

(b) Costs incurred to date include $14.7 million and $1.8 million of accrued fixed assets for development and redevelopment, respectively.

(d) Represents the participating loan balance funded as of December 31, 2014.

(e) Represents UDR’s remaining participating loan commitment for Steele Creek.

Ground and Other Leases

UDR owns six communities which are subject to ground leases expiring between 2019 and 2103. In addition, UDR is a lessee to various operating leases related to office space rented by the Company with expiration dates through 2016. Future minimum lease payments as of December 31, 2014 are as follows (dollars in thousands):



	Ground Leases (a)		Office Space
2015	$	5,412	$	709
2016	5,412		124
2017	5,412		76
2018	5,412		76
2019	5,412		76
Thereafter	313,735		109
Total	$	340,795	$	1,170


(a)	For purposes of our ground lease contracts, the Company uses the minimum lease payment, if stated in the agreement. For ground lease agreements where there is a reset provision based on the communities appraised value or consumer price index but does not include a specified minimum lease payment, the Company uses the current rent over the remainder of the lease term.

UDR incurred $5.4 million, $5.2 million, $5.1 million of ground rent expense for the years ended December 31, 2014, 2013, and 2012, respectively. These costs are reported within the line item Other Operating Expenses on the Consolidated Statements of Operations. The Company incurred $1.3 million, $1.3 million, $1.1 million of rent expense related to office space for the years ended December 31, 2014, 2013, and 2012, respectively. These costs are included in General and Administrative on the Consolidated Statements of Operations. In February 2015, the Company acquired the office building in Highlands

F - 44

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

Ranch, Colorado, which housed its corporate offices it had previously leased. See Note 4, Real Estate Owned, for additional details.

Contingencies

Litigation and Legal Matters

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

15. REPORTABLE SEGMENTS

GAAP guidance requires that segment disclosures present the measure(s) used by the chief operating decision maker to decide how to allocate resources and for purposes of assessing such segments’ performance. UDR’s chief operating decision maker is comprised of several members of its executive management team who use several generally accepted industry financial measures to assess the performance of the business for our reportable operating segments.

UDR owns and operates multifamily apartment communities that generate rental and other property related income through the leasing of apartment homes to a diverse base of tenants. The primary financial measures for UDR’s apartment communities are rental income and NOI. Rental income represents gross market rent less adjustments for concessions, vacancy loss and bad debt. NOI is defined as rental income less direct property rental expenses. Rental expenses include real estate taxes, insurance, personnel, utilities, repairs and maintenance, administrative and marketing. Excluded from NOI is property management expense which is calculated as 2.75% of property revenue to cover the regional supervision and accounting costs related to consolidated property operations, and land rent. UDR’s chief operating decision maker utilizes NOI as the key measure of segment profit or loss.

UDR’s two reportable segments are Same-Store Communities and Non-Mature Communities/Other:

•

Same-Store Communities represent those communities acquired, developed, and stabilized prior to January 1, 2013 and held as of December 31, 2014. A comparison of operating results from the prior year is meaningful as these communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan to conduct substantial redevelopment activities, and the community is not held for disposition within the current year. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months.


•	Non-Mature Communities/Other represent those communities that do not meet the criteria to be included in Same-Store Communities, including, but not limited to, recently acquired, developed and redeveloped communities, and the non-apartment components of mixed use properties.

Management evaluates the performance of each of our apartment communities on a Same-Store Community and Non-Mature Community/Other basis, as well as individually and geographically. This is consistent with the aggregation criteria under GAAP as each of our apartment communities generally has similar economic characteristics, facilities, services, and tenants. Therefore, the Company’s reportable segments have been aggregated by geography in a manner identical to that which is provided to the chief operating decision maker.

All revenues are from external customers and no single tenant or related group of tenants contributed 10% or more of UDR’s total revenues during the years ended December 31, 2014, 2013, and 2012.

F - 45

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

The following table details rental income and NOI from continuing and discontinued operations for UDR’s reportable segments for the years ended December 31, 2014, 2013, and 2012, and reconciles NOI to Net income/(loss) attributable to UDR, Inc. in the Consolidated Statements of Operations (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Reportable apartment home segment rental income
Same-Store Communities
West Region	$	245,803		$	231,156		$	218,268
Mid-Atlantic Region	161,566			160,208			155,777
Southeast Region	107,991			102,988			97,699
Northeast Region	60,796			58,075			54,461
Southwest Region	54,810			52,302			46,800
Non-Mature Communities/Other	174,183			150,907			171,239
Total segment and consolidated rental income	$	805,149		$	755,636		$	744,244

Reportable apartment home segment NOI
Same-Store Communities
West Region	$	178,926		$	166,033		$	154,205
Mid-Atlantic Region	111,762			111,643			108,490
Southeast Region	71,528			67,264			63,122
Northeast Region	44,897			42,350			39,377
Southwest Region	33,725			31,927			27,878
Non-Mature Communities/Other	115,483			94,824			111,128
Total segment and consolidated NOI	556,321			514,041			504,200
Reconciling items:
Joint venture management and other fees	13,044			12,442			11,911
Property management	(22,142		)	(20,780		)	(20,465		)
Other operating expenses	(8,271		)	(7,136		)	(5,718		)
Real estate depreciation and amortization	(358,154		)	(341,490		)	(350,401		)
General and administrative	(47,800		)	(42,238		)	(43,792		)
Casualty-related recoveries/(charges), net	(541		)	12,253			(8,495		)
Other depreciation and amortization	(5,775		)	(6,741		)	(4,105		)
Income/(loss) from unconsolidated entities	(7,006		)	(415		)	(8,579		)
Interest expense	(130,454		)	(126,083		)	(138,792		)
Interest and other income/(expense), net	11,837			4,681			2,703
Tax benefit/(provision), net	15,136			7,299			30,282
Gain/(loss) on sale of real estate owned, net of tax	143,647			40,449			251,554
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership	(5,511		)	(1,530		)	(7,986		)
Net (income)/loss attributable to noncontrolling interests	3			60			(140		)
Net income/(loss) attributable to UDR, Inc.	$	154,334		$	44,812		$	212,177

F - 46

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

The following table details the assets of UDR’s reportable segments as of December 31, 2014 and 2013 (dollars in thousands):



	December 31, 2014			December 31, 2013
Reportable apartment home segment assets:
Same-Store communities:
West Region	$	2,358,444		$	2,337,980
Mid-Atlantic Region	1,410,156			1,395,772
Southeast Region	786,438			785,134
Northeast Region	746,550			738,805
Southwest Region	440,721			434,875
Non-mature Communities/Other	2,640,950			2,515,411
Total segment assets	8,383,259			8,207,977
Accumulated depreciation	(2,434,772		)	(2,208,794		)
Total segment assets — net book value	5,948,487			5,999,183
Reconciling items:
Cash and cash equivalents	15,224			30,249
Restricted cash	22,340			22,796
Deferred financing costs, net	22,686			26,924
Notes receivable, net	14,369			83,033
Investment in and advances to unconsolidated joint ventures, net	718,226			507,655
Other assets	105,202			137,882
Total consolidated assets	$	6,846,534		$	6,807,722

Capital expenditures related to our Same-Store Communities totaled $55.3 million, $47.5 million, and $46.4 million for the years ended December 31, 2014, 2013, and 2012, respectively. Capital expenditures related to our Non-Mature Communities/Other totaled $8.1 million, $8.3 million, and $8.7 million for the years ended December 31, 2014, 2013, and 2012, respectively.

Markets included in the above geographic segments are as follows:


i.	West Region — Orange County, San Francisco, Seattle, Monterey Peninsula, Los Angeles, Other Southern California, and Portland


ii.	Mid-Atlantic Region — Metropolitan D.C., Baltimore, Richmond, Norfolk, and Other Mid-Atlantic


iii.	Southeast Region — Tampa, Orlando, Nashville, and Other Florida


iv.	Northeast Region — New York and Boston


v.	Southwest Region — Dallas and Austin

16. CASUALTY-RELATED (RECOVERIES)/CHARGES

F - 47

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

Statements of Operations. During the year ended December 31, 2013, no material adjustments to the impairment charge and the repair and cleanup costs incurred were recognized. With the exception of one of the properties that is under redevelopment at December 31, 2013, the rehabilitation of the remaining two properties was substantially completed as of December 31, 2013 and was completed during 2014.

F - 48

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

17. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA

Selected consolidated quarterly financial data for the three and twelve months ended December 31, 2014 and 2013 is summarized in the table below (dollars in thousands, except per share amounts):



	Three Months Ended
	March 31,			June 30,		September 30,		December 31,
2014
Rental income (a)	$	194,352		$	200,959	$	203,587	$	206,104
Income/(loss) from continuing operations	(5,195		)	4,359		10,611		6,485
Income/(loss) from discontinued operations, net of tax	(87		)	18		79		—
Net income/(loss) attributable to common stockholders	17,430			29,076		39,618		64,486
Income/(loss) attributable to common stockholders per weighted average common share (b):
Basic and diluted	$	0.07		$	0.12	$	0.16	$	0.25
Weighted average number of shares outstanding
Basic	250,177			250,255		251,655		253,983
Diluted	251,822			252,191		253,732		256,000
2013
Rental income (a)	$	181,961		$	186,285	$	187,917	$	190,321
Income/(loss) from continuing operations	(1,162		)	4,525		2,351		(3,374		)
Income/(loss) from discontinued operations, net of tax	853			829		884		41,376
Net income/(loss) attributable to common stockholders	(1,199		)	4,261		2,257		35,769
Income/(loss) attributable to common stockholders per weighted average common share (b):
Basic and diluted	$	(0.00	)	$	0.02	$	0.01	$	0.14
Weighted average number of shares outstanding
Basic	249,917			249,985		249,985		249,987
Diluted	249,917			251,406		251,454		249,987


(a)	Represents rental income from continuing operations, excluding amounts classified as discontinued operations.


(b)	Quarterly income/(loss) per share amounts may not total to the annual amounts.

F - 49

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Report of Independent Registered Public Accounting Firm

The Partners

United Dominion Realty, L.P.

We have audited the accompanying consolidated balance sheets of United Dominion Realty, L.P. (the “Partnership”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income/(loss), changes in capital, and cash flows for each of the three years in the period ended December 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of United Dominion Realty, L.P. at December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity with U. S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects the information set forth therein.

As discussed in Notes 2 and 3 to the consolidated financial statements, the Partnership changed its reporting of discontinued operations as a result of the adoption of the amendments to the FASB Accounting Standards Codification resulting from Accounting Standards Update No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”.



			/s/ Ernst & Young LLP

Denver, Colorado
February 24, 2015

F - 51

UNITED DOMINION REALTY, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for unit data)



	December 31, 2014			December 31, 2013
ASSETS
Real estate owned:
Real estate held for investment	$	4,238,770		$	4,108,417
Less: accumulated depreciation	(1,403,303		)	(1,241,574		)
Real estate held for investment, net	2,835,467			2,866,843
Real estate under development (net of accumulated depreciation of $0)	—			80,063
Total real estate owned, net of accumulated depreciation	2,835,467			2,946,906
Cash and cash equivalents	502			1,897
Restricted cash	13,811			13,526
Deferred financing costs, net	4,475			5,848
Other assets	24,029			25,064
Total assets	$	2,878,284		$	2,993,241

LIABILITIES AND CAPITAL
Liabilities:
Secured debt	$	931,959		$	934,865
Notes payable due to General Partner	88,696			88,696
Real estate taxes payable	7,061			6,228
Accrued interest payable	3,284			3,323
Security deposits and prepaid rent	18,387			14,172
Distributions payable	47,788			43,253
Deferred gains on the sale of depreciable property	24,622			63,838
Accounts payable, accrued expenses, and other liabilities	22,436			35,769
Total liabilities	1,144,233			1,190,144

Commitments and contingencies (Note 11)

Capital:
Partners’ capital:
General partner: 110,883 OP Units outstanding at December 31, 2014 and 2013	1,105			1,163
Limited partners: 183,167,815 OP Units outstanding at December 31, 2014 and 2013	1,702,971			1,797,836
Accumulated other comprehensive loss	(1,075		)	(3,065		)
Total partners’ capital	1,703,001			1,795,934
Advances (to)/from General Partner	13,624			(9,916		)
Noncontrolling interests	17,426			17,079
Total capital	1,734,051			1,803,097
Total liabilities and capital	$	2,878,284		$	2,993,241

See accompanying notes to the consolidated financial statements.

F - 52

UNITED DOMINION REALTY, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)



	Year Ended December 31,
	2014			2013			2012
REVENUES:
Rental income	$	422,634		$	401,853		$	384,946

OPERATING EXPENSES:
Property operating and maintenance	75,211			75,019			72,843
Real estate taxes and insurance	47,110			45,139			40,866
Property management	11,622			11,051			10,587
Other operating expenses	5,172			5,728			5,272
Real estate depreciation and amortization	179,176			179,367			191,731
General and administrative	28,541			24,808			26,204
Casualty-related (recoveries)/charges, net	541			(8,083		)	5,518
Total operating expenses	347,373			333,029			353,021

Operating income	75,261			68,824			31,925

Interest expense	37,114			34,989			43,277
Interest expense on note payable due to General Partner	4,603			1,069			1,957
Income/(loss) from continuing operations	33,544			32,766			(13,309		)
Income/(loss) from discontinued operations	—			45,176			57,643
Income/(loss) before gain/(loss) on sale of real estate owned	33,544			77,942			44,334
Gain/(loss) on sale of real estate owned	63,635			—			—
Net income/(loss)	97,179			77,942			44,334
Net (income)/loss attributable to noncontrolling interests	(952		)	(4,566		)	(352		)
Net income/(loss) attributable to OP unitholders	$	96,227		$	73,376		$	43,982

Income/(loss) per weighted average OP Unit - basic and diluted:
Income/(loss) from continuing operations attributable to OP unitholders	$	0.53		$	0.16		$	(0.07	)
Income/(loss) from discontinued operations attributable to OP unitholders	—			0.24			0.31
Net income/(loss) attributable to OP unitholders	$	0.53		$	0.40		$	0.24

Weighted average OP Units outstanding - basic and diluted	183,279			184,196			184,281

See accompanying notes to the consolidated financial statements.

F - 53

UNITED DOMINION REALTY, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(In thousands)



	Year Ended December 31,
	2014			2013			2012
Net income/(loss)	$	97,179		$	77,942		$	44,334
Other comprehensive income/(loss), including portion attributable to noncontrolling interests:
Other comprehensive income/(loss) - derivative instruments:
Unrealized holding gain/(loss)	(285		)	(348		)	(1,898		)
(Gain)/loss reclassified into earnings from other comprehensive income/(loss)	2,275			2,652			3,431
Other comprehensive income/(loss), including portion attributable to noncontrolling interests	1,990			2,304			1,533
Comprehensive income/(loss)	99,169			80,246			45,867
Comprehensive (income)/loss attributable to noncontrolling interests	(952		)	(4,566		)	(352		)
Comprehensive income/(loss) attributable to OP unitholders	$	98,217		$	75,680		$	45,515

See accompanying notes to consolidated financial statements.

F - 54

UNITED DOMINION REALTY, L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

(In thousands)



	Class A Limited Partner			Limited Partners			UDR, Inc.						Accumulated Other Comprehensive Income/(Loss), net			Total Partners’ Capital			Advances (to)/from General Partner			Noncontrolling Interests
	Class A Limited Partner			Limited Partners			Limited Partner			General Partner			Accumulated Other Comprehensive Income/(Loss), net			Total Partners’ Capital			Advances (to)/from General Partner			Noncontrolling Interests			Total
Balance at December 31, 2011	$	43,967		$	192,508		$	1,803,926		$	1,293		$	(6,902	)	$	2,034,792		$	(193,584	)	$	12,161		$	1,853,369
Distributions	(2,328		)	(6,738		)	(153,846		)	(96		)	—			(163,008		)	—			—			(163,008		)
OP Unit redemptions for common shares of UDR	—			(529		)	529			—			—			—			—			—			—
OP Unit redemptions for cash	—			(133		)	133			—			—			—			—			—			—
Adjustment to reflect limited partners’ capital at redemption value	(596		)	(5,166		)	5,762			—			—			—			—			—			—
Net income/(loss)	613			1,820			41,523			26			—			43,982			—			352			44,334
Other comprehensive income/(loss)	—			—			—			—			1,533			1,533			—			—			1,533
Net change in advances (to)/from General Partner	—			—			—			—			—			—			182,528			—			182,528
Balance at December 31, 2012	41,656			181,762			1,698,027			1,223			(5,369		)	1,917,299			(11,056		)	12,513			1,918,756
Distributions	(2,324		)	(7,118		)	(164,170		)	(104		)	—			(173,716		)	—			—			(173,716		)
OP Unit redemptions for common shares of UDR	—			(1,817		)	1,817			—			—			—			—			—			—
Distribution of community to UDR	—			—			(23,329		)	—			—			(23,329		)	(53,712		)	—			(77,041		)
Adjustment to reflect limited partners’ capital at redemption value	702			852			(1,554		)	—			—			—			—			—			—
Net income/(loss)	868			3,016			69,448			44			—			73,376			—			4,566			77,942
Other comprehensive income/(loss)	—			—			—			—			2,304			2,304			—			—			2,304
Net change in advances (to)/from General Partner	—			—			—			—			—			—			54,852			—			54,852
Balance at December 31, 2013	40,902			176,695			1,580,239			1,163			(3,065		)	1,795,934			(9,916		)	17,079			1,803,097
Distributions	(2,328		)	(7,789		)	(180,917		)	(116		)	—			(191,150		)	—			—			(191,150		)
OP Unit redemptions for common shares of UDR	—			(4,371		)	4,371			—			—			—			—			—			—
Adjustment to reflect limited partners’ capital at redemption value	14,493			60,020			(74,513		)	—			—			—			—			—			—
Net income/(loss)	920			3,938			91,311			58			—			96,227			—			952			97,179
Other comprehensive income/(loss)	—			—			—			—			1,990			1,990			—			—			1,990
Net change in advances (to)/from General Partner	—			—			—			—			—			—			23,540			(605		)	22,935
Balance at December 31, 2014	$	53,987		$	228,493		$	1,420,491		$	1,105		$	(1,075	)	$	1,703,001		$	13,624		$	17,426		$	1,734,051

See accompanying notes to the consolidated financial statements.

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UNITED DOMINION REALTY, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



	Year Ended December 31,
	2014			2013			2012
Operating Activities
Net income/(loss)	$	97,179		$	77,942		$	44,334
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Depreciation and amortization	179,176			181,302			195,051
Net gain on the sale of depreciable property	(63,635		)	(41,518		)	(51,094		)
Casualty-related (recoveries)/charges, net	541			(270		)	5,518
Other	1,956			2,097			3,624
Changes in operating assets and liabilities:
(Increase)/decrease in operating assets	(1,756		)	(11,685		)	(1,543		)
Increase/(decrease) in operating liabilities	(5,429		)	478			5,205
Net cash provided by/(used in) operating activities	208,032			208,346			201,095

Investing Activities
Proceeds from sales of real estate investments, net	47,922			79,437			113,175
Development of real estate assets	(47,220		)	(66,407		)	(36,804		)
Capital expenditures and other major improvements — real estate assets, net of escrow reimbursement	(47,352		)	(76,984		)	(72,098		)
Net cash provided by/(used in) investing activities	(46,650		)	(63,954		)	4,273

Financing Activities
Advances (to)/from General Partner, net	(153,751		)	(92,537		)	29,391
Proceeds from the issuance of secured debt	5,909			—			26,054
Payments on secured debt	(4,995		)	(42,237		)	(249,680		)
Distributions paid to partnership unitholders	(9,929		)	(9,348		)	(9,033		)
Payments of financing costs	(11		)	(1,177		)	—
Net cash provided by/(used in) financing activities	(162,777		)	(145,299		)	(203,268		)
Net increase/(decrease) in cash and cash equivalents	(1,395		)	(907		)	2,100
Cash and cash equivalents, beginning of year	1,897			2,804			704
Cash and cash equivalents, end of year	$	502		$	1,897		$	2,804

Supplemental Information:
Interest paid during the period, net of amounts capitalized	$	44,629		$	42,506		$	48,545
Non-cash transactions:
Real estate distributed to the General Partner	—			74,586			—
OP Units redeemed by General Partner in partial consideration for real estate distributed	—			23,329			—
Reallocation of credit facilities debt from General Partner	—			13,682			—
Development costs and capital expenditures incurred but not yet paid	7,254			6,371			7,440

See accompanying notes to the consolidated financial statements.

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UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014

1. CONSOLIDATION AND BASIS OF PRESENTATION

United Dominion Realty, L.P. (“UDR, L.P.,” the “Operating Partnership,” “we” or “our”) is a Delaware limited partnership that owns, acquires, renovates, redevelops, manages, and disposes of multifamily apartment communities generally located in high barrier to entry markets located in the United States. The high barrier to entry markets are characterized by limited land for new construction, difficult and lengthy entitlement process, expensive single-family home prices and significant employment growth potential. UDR, L.P. is a subsidiary of UDR, Inc. (“UDR” or the “General Partner”), a self-administered real estate investment trust, or REIT, through which UDR conducts a significant portion of its business. During the years ended December 31, 2014, 2013, and 2012, rental revenues of the Operating Partnership represented 52%, 54%, 54%, respectively, of the General Partner’s consolidated rental revenues (including those classified within discontinued operations). At December 31, 2014, the Operating Partnership’s apartment portfolio consisted of 68 communities located in 17 markets consisting of 20,814 apartment homes.

Interests in UDR, L.P. are represented by operating partnership units (“OP Units”). The Operating Partnership’s net income is allocated to the partners, which is initially based on their respective distributions made during the year and secondly, their percentage interests. Distributions are made in accordance with the terms of the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. (the “Operating Partnership Agreement”), on a per unit basis that is generally equal to the dividend per share on UDR’s common stock, which is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “UDR.”

As of December 31, 2014, there were 183,278,698 OP Units outstanding, of which 174,113,225 or 95.0% were owned by UDR and affiliated entities and 9,165,473 or 5.0% were owned by non-affiliated limited partners. There were 183,278,698 OP Units in the Operating Partnership outstanding as of December 31, 2013, of which 173,959,774 or 94.9% were owned by UDR and affiliated entities and 9,318,924 or 5.1% were owned by non-affiliated limited partners.

As sole general partner of the Operating Partnership, UDR owned 110,883 general partnership interest units or 0.06% of the total OP Units outstanding as of December 31, 2014 and 2013. At December 31, 2014 and 2013, there were 183,167,815 OP Units outstanding, of which 1,873,332 were Class A Limited Partnership OP Units. UDR owned 174,002,342 or 95.0% and 173,848,891 or 94.9% at December 31, 2014 and 2013, respectively. The remaining 9,165,473 or 5.0% and 9,318,924 or 5.1% OP Units outstanding of limited partnership interest were held by non-affiliated partners at December 31, 2014 and 2013, respectively, of which 1,751,671 were Class A Limited Partnership units. See Note 9, Capital Structure.

The Operating Partnership evaluated subsequent events through the date its financial statements were issued. No recognized or non-recognized subsequent events were noted.

2. SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which incorporates a requirement that a disposition represent a strategic shift in an entity’s operations into the definition of a discontinued operation. In accordance with the ASU, a discontinued operation represents (1) a component of an entity or group of components that has been disposed of or is classified as held for sale in a single transaction and represents a strategic shift that has or will have a major effect on an entity’s financial results, or (2) an acquired business that is classified as held for sale on the date of acquisition. A strategic shift could include a disposal of (1) a separate major line of business, (2) a separate major geographic area of operations, (3) a major equity method investment, or (4) other major parts of an entity. The standard requires prospective application and will be effective for interim and annual periods beginning on or after December 15, 2014, with early adoption permitted. The early adoption provision excludes components of an entity that were sold or classified as held for sale prior to the adoption of the standard.

The Operating Partnership elected to early adopt this standard effective January 1, 2014, which had a significant impact on the Operating Partnership’s consolidated financial statements as further discussed in Note 3, Discontinued Operations. Subsequent to the Operating Partnership’s adoption of ASU 2014-08, the sale of real estate that does not meet the definition of a discontinued operation under the standard is included in Gain/(loss) on sale of real estate owned, net of tax on the Consolidated Statements of Operations.

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UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard specifically excludes lease contracts. The ASU allows for the use of either the full or modified retrospective transition method, and the standard will be effective for the Operating Partnership on January 1, 2017; early adoption is not permitted. The Operating Partnership has not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.

Real Estate

The Operating Partnership purchases real estate investment properties and records the tangible and identifiable intangible assets and liabilities acquired based on their estimated fair value. The primary, although not only, identifiable intangible asset associated with our portfolio is the value of existing lease agreements. When recording the acquisition of a community, we first assign fair value to the estimated intangible value of the existing lease agreements and then to the estimated value of the land, building and fixtures assuming the community is vacant. The Operating Partnership estimates the intangible value of the lease agreements by determining the lost revenue associated with a hypothetical lease-up. Depreciation on the building is based on the expected useful life of the asset and the in-place leases are amortized over their remaining average contractual life. Property acquisition costs are expensed as incurred.

Quarterly or when changes in circumstances warrant, the Operating Partnership will assess our real estate properties for indicators of impairment. In determining whether the Operating Partnership has indicators of impairment in our real estate assets, we assess whether the long-lived asset’s carrying value exceeds the community’s undiscounted future cash flows, which is representative of projected net operating income (“NOI”) plus the residual value of the community. Our future cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. If such indicators of impairment are present and the carrying value exceeds the undiscounted cash flows of the community, an impairment loss is recognized equal to the excess of the carrying amount of the asset over its estimated fair value. Our estimates of fair market value represent our best estimate based primarily upon unobservable inputs related to rental rates, operating costs, growth rates, discount rates and capitalization rates, industry trends and reference to market rates and transactions.

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UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

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. These costs, excluding the direct costs of development and redevelopment and capitalized interest, for the years ended December 31, 2014, 2013, and 2012 were $2.0 million, $2.5 million, and $2.1 million, respectively. During the years ended December 31, 2014, 2013, and 2012, total interest capitalized was $2.9 million, $5.9 million, $3.7 million, respectively. As each home in a capital project is completed and becomes available for lease-up, the Operating Partnership ceases capitalization on the related portion and depreciation commences over the estimated useful life.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, demand deposits with financial institutions and short-term, highly liquid investments. We consider all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The majority of the Operating Partnership’s cash and cash equivalents are held at major commercial banks.

Restricted Cash

Restricted cash consists of escrow deposits held by lenders for real estate taxes, insurance and replacement reserves, and security deposits.

Revenue and Real Estate Sales Gain Recognition

Rental income related to leases is recognized on an accrual basis when due from residents and tenants in accordance with GAAP. Rental payments are generally due on a monthly basis and recognized when earned. The Operating Partnership recognizes interest income, management and other fees and incentives when earned, fixed and determinable.

Sales to entities in which we or our General Partner retain or otherwise own an interest are accounted for as partial sales. If all other requirements for recognizing profit under the full accrual method have been satisfied and no other forms of continuing involvement are present, we recognize profit proportionate to the outside interest in the buyer and defer the gain on the interest we or our General Partner retain. The Operating Partnership recognizes any deferred gain when the property is sold to a third party. In transactions accounted by us as partial sales, we determine if the buyer of the majority equity interest in the venture was provided a preference as to cash flows in either an operating or a capital waterfall. If a cash flow preference has been provided, we recognize profit only to the extent that proceeds from the sale of the majority equity interest exceed costs related to the entire property.

Derivative Financial Instruments

The General Partner utilizes derivative financial instruments to manage interest rate risk and generally designates these financial instruments as cash flow hedges. Derivative financial instruments associated with the Operating Partnership’s allocation of the General Partner’s debt are recorded on our Consolidated Balance Sheets as either an asset or liability and measured quarterly at their fair value. The changes in fair value for the General Partner’s cash flow hedges allocated to the Operating Partnership that are deemed effective are reflected in other comprehensive income and for non-designated derivative financial instruments in earnings. The ineffective component of cash flow hedges, if any, is recorded in earnings.

Noncontrolling Interests

The noncontrolling interests represent the General Partner’s interests in certain consolidated subsidiaries and are presented in the capital section of the Consolidated Balance Sheets since these interests are not convertible or redeemable into any other ownership interests of the Operating Partnership.

During the year ended December 31, 2013, the Operating Partnership corrected an error in the General Partner’s ownership interest in one of the consolidated subsidiaries. The correction increased the General Partner’s ownership interest resulting in a cumulative adjustment increasing Net (income)/loss attributable to noncontrolling interests by $3.3 million on the Consolidated Statements of Operations with a corresponding increase to Noncontrolling interests on the Consolidated Balance

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UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

Sheets. Management believes the impact of the cumulative adjustment in 2013 is immaterial to the financial statements taken as a whole.

Income Taxes

The taxable income or loss of the Operating Partnership is reported on the tax returns of the partners. Accordingly, no provision has been made in the accompanying financial statements for federal or state income taxes on income that is passed through to the partners. However, any state or local revenue, excise or franchise taxes that result from the operating activities of the Operating Partnership are recorded at the entity level. The Operating Partnership’s tax returns are subject to examination by federal and state taxing authorities. Net income for financial reporting purposes differs from the net income for income tax reporting purposes primarily due to temporary differences, principally real estate depreciation and the tax deferral of certain gains on property sales. The differences in depreciation result from differences in the book and tax basis of certain real estate assets and the differences in the methods of depreciation and lives of the real estate assets.

The Operating Partnership follows the accounting guidance within GAAP, with respect to how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. The guidance requires the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing the Operating Partnership’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management of the Operating Partnership is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states. The Operating Partnership has no examinations in progress and none are expected at this time.

Management of the Operating Partnership has reviewed all open tax years (2010 through 2013) and major jurisdictions, and concluded there is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns.

Discontinued Operations

Under GAAP, the results of operations for those properties sold during the year or classified as held for sale at the end of the current year are classified as discontinued operations in the current and prior periods. Further, to meet the discontinued operations criteria, the Operating Partnership or related parties will not have any significant continuing involvement in the ownership or operation of the property after the sale or disposition. Once a property is classified as held for sale, depreciation is no longer recorded. However, if the Operating Partnership determines that the property no longer meets the criteria for held for sale, the Operating Partnership will recapture any unrecorded depreciation on the property. The assets and liabilities, if any, of properties classified as held for sale are presented separately on the Consolidated Balance Sheets at lower of their carrying amount or their estimated fair value less the costs to sell the assets. (See Note 3, Discontinued Operations and Assets Held for Sale, for further discussion).

Allocation of General and Administrative Expenses

The Operating Partnership is charged directly for general and administrative expenses it incurs. The Operating Partnership is also charged with other general and administrative expenses that have been allocated by the General Partner to each of its subsidiaries, including the Operating Partnership, based on each subsidiary’s pro-rata portion of UDR’s total apartment homes. (See Note 6, Related Party Transactions.)

Advertising Costs

All advertising costs are expensed as incurred and reported on the Consolidated Statements of Operations within the line item General and administrative. During the years ended December 31, 2014, 2013, and 2012, total advertising expense from continuing and discontinued operations was $2.5 million, $2.5 million, and $2.4 million, respectively.

Comprehensive Income/(Loss)

Comprehensive income/(loss), which is defined as the change in capital during each period from transactions and other events and circumstances from nonowner sources, including all changes in capital during a period except for those resulting from investments by or distributions to partners, is displayed in the accompanying Consolidated Statements of Comprehensive Income/(Loss). For the years ended December 31, 2014, 2013, and 2012, the Operating Partnership’s other comprehensive

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

income/(loss) consisted of the gain/(loss) (effective portion) on derivative instruments that are designated as and qualify as cash flow hedges and (gain)/loss reclassified from other comprehensive income/(loss) into earnings. The (gain)/loss reclassified from other comprehensive income/(loss) is included in Interest expense on the Consolidated Statements of Operations. See Note 8, Derivatives and Hedging Activity, for further discussion.

Use of Estimates

Market Concentration Risk

The Operating Partnership is subject to increased exposure from economic and other competitive factors specific to those markets where it holds a significant percentage of the carrying value of its real estate portfolio at December 31, 2014, the Operating Partnership held greater than 10% of the carrying value of its real estate portfolio in the Orange County, California; San Francisco, California; Metropolitan D.C.; and New York, New York markets.

3. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

Effective January 1, 2014, UDR, L.P. prospectively adopted ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, for all communities not previously sold or classified as held for sale. The standard had a material impact on the Operating Partnership’s consolidated financial statements. As a result of adopting the ASU, during the year ended December 31, 2014, gains, net of tax, of $62.5 million from disposition of real estate, excluding a $1.1 million gain related to the sale of land, are included in Gain/(loss) on sale of real estate owned, net of tax on the Consolidated Statements of Operations rather than in Income/(loss) from discontinued operations, net of tax on the Consolidated Statements of Operations.

Prior to the prospective adoption of ASU 2014-08, FASB Accounting Standards Codification ("ASC") Subtopic 205-20 required, among other things, that the primary assets and liabilities and the results of operations of the Operating Partnership’s real properties that have been sold or are held for disposition, be classified as discontinued operations and segregated in UDR, L.P.’s Consolidated Statements of Operations and Consolidated Balance Sheets. Consequently, the primary assets and liabilities and the net operating results of those properties sold or classified as held for disposition prior to January 1, 2014 are accounted for as discontinued operations for all periods presented. This presentation does not have an impact on net income available to common stockholders; it only results in the reclassification of the operating results within the Consolidated Statements of Operations for the periods ended December 31, 2014, 2013, and 2012.

During the year ended December 31, 2013, the Operating Partnership sold two communities in the Sacramento market with 914 apartment homes for gross proceeds of $81.1 million. During the year ended December 31, 2012, the Operating Partnership sold four communities with 1,314 apartment homes. At December 31, 2014 and 2013, the Operating Partnership had no communities that met the criteria to be classified as held for sale and included in Income/(loss) from discontinued operations on the Consolidated Statements of Operations.

During the years ended December 31, 2014, 2013, and 2012, the Operating Partnership recognized net gain/(loss) on the sale of depreciable properties of $0, $41.5 million, and $51.1 million, respectively, in Income/(loss) from discontinued operations on the Consolidated Statements of Operations.

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UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

The following is a summary of income from discontinued operations for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands):



	Year Ended December 31,
	2014		2013		2012
Rental income	$	—	$	8,989	$	15,745
Rental expenses	—		3,149		5,444
Property management	—		247		432
Real estate depreciation	—		1,935		3,320
Income/(loss) attributable to disposed properties	—		3,658		6,549
Net gain/(loss) on the sale of depreciable properties	—		41,518		51,094
Income/(loss) from discontinued operations	$	—	$	45,176	$	57,643

4. REAL ESTATE OWNED

Real estate assets owned by the Operating Partnership consists of income producing operating properties, properties under development, land held for future development, and sold or held for sale properties. At December 31, 2014, the Operating Partnership owned and consolidated 68 communities in nine states plus the District of Columbia totaling 20,814 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of December 31, 2014 and 2013 (dollars in thousands):



	December 31, 2014			December 31, 2013
Land	$	1,008,014		$	1,004,447
Depreciable property — held and used:
Buildings, improvements, and furniture, fixtures and equipment	3,230,756			3,103,970
Under development:
Land	—			9,447
Construction in progress	—			70,616
Real estate owned	4,238,770			4,188,480
Accumulated depreciation	(1,403,303		)	(1,241,574		)
Real estate owned, net	$	2,835,467		$	2,946,906

The Operating Partnership had no acquisitions during the years ended December 31, 2014, 2013 and 2012.

During the year ended December 31, 2014, the Operating Partnership sold one community and an adjacent parcel of land in San Diego, California for gross proceeds of $48.7 million, resulting in a $24.4 million gain and net proceeds of $47.9 million. The Operating Partnership also recorded a gain of $39.2 million in connection with the sale of two communities, one in Tampa, Florida and one in Los Angeles, California, which was previously deferred. The total gains of $63.6 million were included in Gain/(loss) on sale of real estate owned on the Consolidated Statements of Operations.

In November 2013, the Operating Partnership distributed the development property Los Alisos to the General Partner. See Note 6, Related Party Transactions, for more details.

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UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

5. DEBT

Our secured debt instruments generally feature either monthly interest and principal or monthly interest-only payments with balloon payments due at maturity. For purposes of classification in the following table, variable rate debt with a derivative financial instrument designated as a cash flow hedge is deemed as fixed rate debt due to the Operating Partnership having effectively established the fixed interest rate for the underlying debt instrument. Secured debt consists of the following as of December 31, 2014 and 2013 (dollars in thousands):



	Principal Outstanding				For the Year Ended December 31, 2014
	December 31,				Weighted Average Interest Rate		Weighted Average Years to Maturity	Number of Communities Encumbered
	2014		2013		Weighted Average Interest Rate		Weighted Average Years to Maturity	Number of Communities Encumbered
Fixed Rate Debt
Mortgage notes payable	$	378,371	$	386,803	5.47	%	1.6	5
Fannie Mae credit facilities	333,828		379,003		4.90	%	4.6	10
Total fixed rate secured debt	712,199		765,806		5.20	%	3.0	15
Variable Rate Debt
Tax-exempt secured note payable	27,000		27,000		0.93	%	17.2	1
Fannie Mae credit facilities	192,760		142,059		1.83	%	6.0	5
Total variable rate secured debt	219,760		169,059		1.72	%	7.4	6
Total secured debt	$	931,959	$	934,865	4.38	%	4.0	21



	December 31, 2014			December 31, 2013
Borrowings outstanding	$	526,588		$	521,062
Weighted average borrowings during the period ended	527,592			522,007
Maximum daily borrowings during the period ended	528,659			523,187
Weighted average interest rate during the period ended	4.1		%	4.2		%
Interest rate at the end of the period	4.0		%	4.1		%

The Operating Partnership may from time to time acquire properties subject to fixed rate debt instruments. In those situations, management will record the secured debt at its estimated fair value and amortize any difference between the fair value and par to interest expense over the life of the underlying debt instrument. The unamortized fair value adjustment of the fixed rate debt instruments on the Operating Partnership’s properties was a net premium of $6.2 million and $10.0 million at December 31, 2014 and 2013, respectively.

Fixed Rate Debt

Mortgage notes payable. Fixed rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from December 2015 through May 2019 and carry interest rates ranging from 3.43% to 5.94%.

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UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

Secured credit facilities. At December 31, 2014, the General Partner had borrowings against its fixed rate facilities of $568.1 million, of which $333.8 million was allocated to the Operating Partnership based on the ownership of the assets securing the debt. As of December 31, 2014, the fixed rate Fannie Mae credit facilities allocated to the Operating Partnership had a weighted average fixed interest rate of 4.90%.

Variable Rate Debt

Tax-exempt secured note payable. The variable rate mortgage note payable that secures tax-exempt housing bond issues matures in March 2032. Interest on this note is payable in monthly installments. The mortgage note payable has an interest rate of 0.93% as of December 31, 2014.

Secured credit facilities. At December 31, 2014, the General Partner had borrowings against its variable rate facilities of $266.2 million, of which $192.8 million was allocated to the Operating Partnership based on the ownership of the assets securing the debt. As of December 31, 2014, the variable rate borrowings under the Fannie Mae credit facilities allocated to the Operating Partnership had a weighted average floating interest rate of 1.83%.

The aggregate maturities of the Operating Partnership’s secured debt due during each of the next five calendar years subsequent to December 31, 2014 are as follows (dollars in thousands):



	Fixed				Variable
	Mortgage Notes Payable		Secured Credit Facilities		Tax-Exempt Secured Notes Payable		Secured Credit Facilities		Total
2015	$	192,637	$	366	$	—	$	—	$	193,003
2016	130,951		385		—		—		131,336
2017	913		15,640		—		6,566		23,119
2018	968		111,052		—		96,974		208,994
2019	52,902		123,096		—		—		175,998
Thereafter	—		83,289		27,000		89,220		199,509
Total	$	378,371	$	333,828	$	27,000	$	192,760	$	931,959

Guarantor on Unsecured Debt

6. RELATED PARTY TRANSACTIONS

Advances (To)/From the General Partner

The Operating Partnership participates in the General Partner’s central cash management program, wherein all the Operating Partnership’s cash receipts are remitted to the General Partner and all cash disbursements are funded by the General Partner. In addition, other miscellaneous costs such as administrative expenses are incurred by the General Partner on behalf of the Operating Partnership. As a result of these various transactions between the Operating Partnership and the General Partner, the Operating Partnership had net advances (to)/from the General Partner of $13.6 million and $(9.9) million at December 31, 2014 and 2013, respectively, which is reflected as an increase/(reduction) of capital on the Consolidated Balance Sheets.

Allocation of General and Administrative Expenses

The General Partner provides various general and administrative and other overhead services for the Operating Partnership including legal assistance, acquisitions analysis, marketing and advertising, and allocates these expenses to the Operating Partnership first on the basis of direct usage when identifiable, with the remainder allocated based on its pro-rata

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

portion of UDR’s total apartment homes. During the years ended December 31, 2014, 2013, and 2012, the general and administrative expenses allocated to the Operating Partnership by UDR were $27.4 million, $23.5 million, and $25.2 million, respectively, and are included in General and administrative on the Consolidated Statements of Operations. In the opinion of management, this method of allocation reflects the level of services received by the Operating Partnership from the General Partner.

During the years ended December 31, 2014, 2013, and 2012, the Operating Partnership incurred $12.7 million, $12.3 million, and $11.9 million, respectively, of related party management fees related to a management agreement entered into in 2011 with wholly-owned subsidiaries of our TRS. (See further discussion in paragraph below.) These related party management fees are initially recorded within the line item General and administrative on the Consolidated Statements of Operations, and a portion related to management fees charged by the TRS of the General Partner is reclassified to Property management on the Consolidated Statements of Operations. (See further discussion below.)

Management Fee

In 2011, the Operating Partnership entered into a management agreement with wholly-owned subsidiaries of our TRS. Under the management agreement, the Operating Partnership is charged a management fee equal to 2.75% of gross rental revenues, which is reported in Property management on the Consolidated Statements of Operations.

Guaranties by the General Partner

The Operating Partnership provided a “bottom dollar” guaranty to certain limited partners as part of their original contribution to the Operating Partnership. The guaranty protects the tax basis of the underlying contribution and is reflected on the OP unitholder’s Schedule K-1 tax form. The guaranty was made in the form of a note payable issued by the Operating Partnership to the General Partner at an annual interest rate of 5.18% for the years ended December 31, 2014 and 2013, respectively. On December 31, 2013, the note was renewed at an annual interest rate of 5.18%. Interest payments are made monthly and the renewed note is due December 31, 2023. At December 31, 2014 and 2013, the note payable due to the General Partner was $83.2 million, respectively.

In 2011, the Operating Partnership also provided a “bottom dollar” guaranty in conjunction with 1,802,239 OP Units issued in partial consideration to the seller for the acquisition of an operating community. The guaranty was made in the form of a note payable issued by the Operating Partnership to the General Partner at an annual interest rate of 5.34%. Interest payments are due monthly and the note matures on August 31, 2021. At December 31, 2014 and 2013, the note payable due to the General Partner was $5.5 million.

In November 2013, the Operating Partnership distributed the development property Los Alisos to the General Partner as a capital distribution. Upon the distribution of the property, the Operating Partnership redeemed 1,002,556 limited partnership units owned by UDR and affiliated entities and reduced its receivable from the General Partner by $53.7 million, resulting in a net capital reduction of $77.0 million.

7. FAIR VALUE OF DERIVATIVES AND FINANCIAL INSTRUMENTS


•	Level 1 — Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.


•	Level 2 — Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.


•	Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

The estimated fair values of the Operating Partnership’s financial instruments either recorded or disclosed on a recurring basis as of December 31, 2014 and 2013 are summarized as follows (dollars in thousands):



					Fair Value at December 31, 2014, Using
	Total Carrying Amount in Statement of Financial Position at		Fair Value Estimate at		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	December 31, 2014		December 31, 2014				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Description:
Derivatives- Interest rate contracts (a)	$	39	$	39	$	—	$	39	$	—
Total assets	$	39	$	39	$	—	$	39	$	—

Derivatives - Interest rate contracts (a)	$	918	$	918	$	—	$	918	$	—
Secured debt instruments - fixed rate: (b)
Mortgage notes payable	378,371		391,835		—		—		391,835
Fannie Mae credit facilities	333,828		355,470		—		—		355,470
Secured debt instruments - variable rate: (b)
Tax-exempt secured notes payable	27,000		27,000		—		—		27,000
Fannie Mae credit facilities	192,760		192,760		—		—		192,760
Total liabilities	$	932,877	$	967,983	$	—	$	918	$	967,065



					Fair Value at December 31, 2013, Using
	Total Carrying Amount in Statement of Financial Position at		Fair Value Estimate at		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	December 31, 2013		December 31, 2013				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Description:
Derivatives- Interest rate contracts (a)	$	2,731	$	2,731	$	—	$	2,731	$	—
Secured debt instruments - fixed rate: (b)
Mortgage notes payable	386,803		403,695		—		—		403,695
Fannie Mae credit facilities	379,003		394,239		—		—		394,239
Secured debt instruments - variable rate: (b)
Tax-exempt secured notes payable	27,000		27,000		—		—		27,000
Fannie Mae credit facilities	142,059		142,059		—		—		142,059
Total liabilities	$	937,596	$	969,724	$	—	$	2,731	$	966,993


(a)	See Note 8, Derivatives and Hedging Activity.


(b)	See Note 5, Debt.

There were no transfers into or out of each of the levels of the fair value hierarchy.

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DECEMBER 31, 2014

Financial Instruments Carried at Fair Value

The Operating Partnership incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Operating Partnership has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although the Operating Partnership has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of December 31, 2014 and December 31, 2013, the Operating Partnership has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Operating Partnership has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. In conjunction with the FASB’s fair value measurement guidance, the Operating Partnership made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Financial Instruments Not Carried at Fair Value

At December 31, 2014, the fair values of cash and cash equivalents, restricted cash, accounts receivable, prepaids, real estate taxes payable, accrued interest payable, security deposits and prepaid rent, distributions payable and accounts payable approximated their carrying values because of the short term nature of these instruments. The estimated fair values of other financial instruments were determined by the Operating Partnership using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Operating Partnership would realize on the disposition of the financial instruments. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts.

The General Partner estimates the fair value of our debt instruments by discounting the remaining cash flows of the debt instrument at a discount rate equal to the replacement market credit spread plus the corresponding treasury yields. Factors considered in determining a replacement market credit spread include general market conditions, borrower specific credit spreads, time remaining to maturity, loan-to-value ratios and collateral quality (Level 3).

The Operating Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book value of those assets. Cash flow estimates are based upon historical results adjusted to reflect management’s best estimate of future market and operating conditions and our estimated holding periods. The net book value of impaired assets is reduced to fair value. The General Partner’s estimates of fair value represent management’s estimates based upon Level 3 inputs such as industry trends and reference to market rates and transactions.

8. DERIVATIVES AND HEDGING ACTIVITY

Risk Management Objective of Using Derivatives

The Operating Partnership is exposed to certain risks arising from both its business operations and economic conditions. The General Partner principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The General Partner manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and through the use of derivative financial

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instruments. Specifically, the General Partner enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The General Partner’s and the Operating Partnership’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the General Partner’s known or expected cash payments principally related to the General Partner’s borrowings.

Cash Flow Hedges of Interest Rate Risk

The General Partner’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the General Partner primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the General Partner making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up front premium.

A portion of the General Partner’s interest rate derivatives have been allocated to the Operating Partnership based on the General Partner’s underlying debt instruments allocated to the Operating Partnership. (See Note 5, Debt.)

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated other comprehensive loss in the Consolidated Balance Sheets, and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the years ended December 31, 2014, 2013, and 2012, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt and forecasted issuances of fixed-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the years ended December 31, 2014, 2013, and 2012, the Operating Partnership recorded less than $1,000 of ineffectiveness in earnings attributable to reset date and index mismatches between the derivative and the hedged item.

Amounts reported in Accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the General Partner’s variable-rate debt that is allocated to the Operating Partnership. During the next twelve months through December 31, 2015, we estimate that an additional $946,000 will be reclassified as an increase to interest expense.

As of December 31, 2014, the Operating Partnership had the following outstanding interest rate derivatives designated as cash flow hedges of interest rate risk (dollars in thousands):

Derivatives not designated as hedges are not speculative and are used to manage the Operating Partnership’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of GAAP. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings and resulted in losses of $3,000, $9,000, and $9,000 for the years ended December 31, 2014, 2013, and 2012, respectively.

As of December 31, 2014, we had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships (dollars in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Operating Partnership’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of December 31, 2014 and 2013 (dollars in thousands):



	Asset Derivatives (included in Other assets)				Liability Derivatives (Included in Other liabilities)
	Fair Value at:				Fair Value at:
	December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013
Derivatives designated as hedging instruments:
Interest rate products	$	37	$	—	$	918	$	2,731

Derivatives not designated as hedging instruments:
Interest rate products	$	2	$	—	$	—	$	—

Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statements of Operations

The tables below present the effect of the derivative financial instruments on the Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands):



Derivatives in Cash Flow Hedging Relationships	Unrealized holding gain/(loss) Recognized in OCI (Effective Portion)							Gain/(Loss) Reclassified from Accumulated OCI into Interest expense (Effective Portion)
	Year ended December 31,							Year ended December 31,
	2014			2013			2012	2014			2013			2012
Interest rate products	$	(285	)	$	(348	)	$(1,898)	$	(2,275	)	$	(2,652	)	$	(3,431	)



Derivatives Not Designated as Hedging Instruments	Gain/(Loss) Recognized in Interest and other income/(expense), net
	Year ended December 31,
	2014			2013			2012
Interest rate products	$	(3	)	$	(9	)	$	(9	)

Credit-risk-related Contingent Features

The General Partner has agreements with some of its derivative counterparties that contain a provision where (1) if the General Partner defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the General Partner could also be declared in default on its derivative obligations; or (2) the General Partner could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the General Partner’s default on the indebtedness.

Certain of the General Partner’s agreements with its derivative counterparties contain provisions where if there is a change in the General Partner’s financial condition that materially changes the General Partner’s creditworthiness in an adverse manner, the General Partner may be required to fully collateralize its obligations under the derivative instrument. At December 31, 2014 and 2013, no cash collateral was posted or required to be posted by the General Partner or by a counterparty.

The General Partner also has an agreement with a derivative counterparty that incorporates the loan and financial covenant provisions of the General Partner’s indebtedness with a lender affiliate of the derivative counterparty. Failure to

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DECEMBER 31, 2014

comply with these covenant provisions would result in the General Partner being in default on any derivative instrument obligations covered by the agreement.

As of December 31, 2014, the fair value of derivatives in a net liability position that were allocated to the Operating Partnership, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $969,000. If the General Partner had breached any of these provisions at December 31, 2014, it would have been required to settle its obligations under the agreements at their termination value of $969,000.

The General Partner has elected not to offset derivative positions in the consolidated financial statements. The table below presents the effect on the Operating Partnership's financial position had the General Partner made the election to offset its derivative positions as of December 31, 2014 and December 31, 2013:



Offsetting of Derivative Assets
							Gross Amounts Not Offset in the Consolidated Balance Sheets
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Assets Presented in the Consolidated Balance Sheets (a)		Financial Instruments		Cash Collateral Received		Net Amount
December 31, 2014	$	39	$	—	$	39	$	—	$	—	$	39

December 31, 2013	$	—	$	—	$	—	$	—	$	—	$	—

(a) Amounts reconcile to the aggregate fair value of derivative assets in the “Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet” located in this footnote.



Offsetting of Derivative Liabilities
							Gross Amounts Not Offset in the Consolidated Balance Sheets
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Liabilities Presented in the Consolidated Balance Sheets (b)		Financial Instruments		Cash Collateral Posted		Net Amount
December 31, 2014	$	918	$	—	$	918	$	—	$	—	$	918

December 31, 2013	$	2,731	$	—	$	2,731	$	—	$	—	$	2,731

(b) Amounts reconcile to the aggregate fair value of derivative liabilities in the “Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet” located in this footnote.

9. CAPITAL STRUCTURE

General Partnership Units

The General Partner has complete discretion to manage and control the operations and business of the Operating Partnership, which includes but is not limited to the acquisition and disposition of real property, construction of buildings and making capital improvements, and the borrowing of funds from outside lenders or UDR and its subsidiaries to finance such activities. The General Partner can generally authorize, issue, sell, redeem or purchase any OP Unit or securities of the Operating Partnership without the approval of the limited partners. The General Partner can also approve, with regard to the issuances of OP Units, the class or one or more series of classes, with designations, preferences, participating, optional or other

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DECEMBER 31, 2014

special rights, powers and duties including rights, powers and duties senior to limited partnership interests without approval of any limited partners except holders of Class A Limited Partnership Units. There were 110,883 General Partnership units outstanding at December 31, 2014 and 2013, all of which were held by UDR.

Limited Partnership Units

At December 31, 2014 and 2013, there were 183,167,815 limited partnership units outstanding, of which 1,873,332 were Class A Limited Partnership Units. UDR owned 174,002,342 limited partnership units or 95.0% and 173,848,891 limited partnership units or 94.9% at December 31, 2014 and 2013, respectively. The remaining 9,165,473 or 5.0% and 9,318,924 or 5.1% OP Units outstanding were held by non-affiliated partners at December 31, 2014 and 2013, respectively, of which 1,751,671 were Class A Limited Partnership Units.

Subject to the terms of the Operating Partnership Agreement, the limited partners have the right to require the Operating Partnership to redeem all or a portion of the OP Units held by the limited partner at a redemption price equal to and in the form of the Cash Amount (as defined in the Operating Partnership Agreement), provided that such OP Units have been outstanding for at least one year. UDR, as general partner of the Operating Partnership, may, in its sole discretion, purchase the OP Units by paying to the limited partner either the Cash Amount or the REIT Share Amount (generally one share of common stock of UDR for each OP Unit), as defined in the Operating Partnership Agreement.

The non-affiliated limited partners’ capital is adjusted to redemption value at the end of each reporting period with the corresponding offset against UDR’s limited partner capital account based on the redemption rights noted above. The aggregate value upon redemption of the then-outstanding OP Units held by limited partners was $282.5 million and $217.6 million as of December 31, 2014 and December 31, 2013, respectively, based on the value of UDR’s common stock at each period end. A limited partner has no right to receive any distributions from the Operating Partnership on or after the date of redemption of its OP Units.

Class A Limited Partnership Units

Class A Limited Partnership Units have a cumulative, annual, non-compounded preferred return, which is equal to 8% based on a value of $16.61 per Class A Limited Partnership Unit.

Holders of the Class A Limited Partnership Units exclusively possess certain voting rights. The Operating Partnership may not do the following without approval of the holders of the Class A Limited Partnership Units: (i) increase the authorized or issued amount of Class A Limited Partnership Units, (ii) reclassify any other partnership interest into Class A Limited Partnership Units, (iii) create, authorize or issue any obligations or security convertible into or the right to purchase any Class of Limited Partnership units, without the approval of the holders of the Class A Limited Partnership Units, (iv) enter into a merger or acquisition, or (v) amend or modify the Agreement of Limited Partnership of the Operating Partnership in a manner that adversely affects the relative rights, preferences or privileges of the Class A Limited Partnership Units.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

The following table shows OP Units outstanding and OP Unit activity as of and for the years ended December 31, 2014, 2013, and 2012:



				UDR, Inc.
	Class A Limited Partner	Limited Partners		Limited Partner		General Partner	Total
Ending balance at December 31, 2011	1,751,671	7,669,632		174,749,068		110,883	184,281,254
OP redemptions for cash	—	(5,646	)	5,646		—	—
OP redemptions for UDR stock	—	(20,438	)	20,438		—	—
Ending balance at December 31, 2012	1,751,671	7,643,548		174,775,152		110,883	184,281,254
OP Units redeemed for the distribution of real estate to the General partner (a)	—	—		(1,002,556	)	—	(1,002,556	)
OP redemptions for UDR stock	—	(76,295	)	76,295		—	—
Ending balance at December 31, 2013	1,751,671	7,567,253		173,848,891		110,883	183,278,698
OP redemptions for UDR stock	—	(153,451	)	153,451		—	—
Ending balance at December 31, 2014	1,751,671	7,413,802		174,002,342		110,883	183,278,698

(a) In November 2013, the Operating Partnership distributed the development property Los Alisos to the General Partner as a capital distribution. Upon the distribution of the property, the Operating Partnership redeemed 1,002,556 limited partnership units owned by UDR and affiliated entities, resulting in a capital reduction of $23.3 million.

Allocation of Profits and Losses

Profit of the Operating Partnership is allocated in the following order: (i) to the General Partner and the Limited Partners in proportion to and up to the amount of cash distributions made during the year, and (ii) to the General Partner and Limited Partners in accordance with their percentage interests. Losses and depreciation and amortization expenses, non-recourse liabilities are allocated to the General Partner and Limited Partners in accordance with their percentage interests. Losses allocated to the Limited Partners are capped to the extent that such an allocation would not cause a deficit in the Limited Partners capital account. Such losses are, therefore, allocated to the General Partner. If any Partner’s capital balance were to fall into a deficit any income and gains are allocated to each Partner sufficient to eliminate its negative capital balance.

10. INCOME/(LOSS) PER OPERATING PARTNERSHIP UNIT

Basic income/(loss) per OP Unit is computed by dividing net income/(loss) attributable to general and limited partner unitholders by the weighted average number of general and limited partner units (including redeemable OP Units) outstanding during the year. Diluted income/(loss) per OP Unit reflects the potential dilution that could occur if securities or other contracts to issue OP Units were exercised or converted into OP Units or resulted in the issuance of OP Units and then shared in the income/(loss) of the Operating Partnership. For the years ended December 31, 2014, 2013, and 2012, there were no dilutive instruments, and therefore, diluted income/(loss) per OP Unit and basic income/(loss) per OP Unit are the same. See Note 9, Capital Structure, for further discussion on redemption rights of OP Units.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

The following table sets forth the computation of basic and diluted income/(loss) per OP Unit for the periods presented (dollars in thousands, except per OP Unit data):



	Year Ended December 31,
	2014			2013			2012
Numerator for income/(loss) per OP Unit — basic and diluted:
Income/(loss) from continuing operations	$	33,544		$	32,766		$	(13,309	)
Gain/(loss) on sale of real estate owned	63,635			—			—
(Income)/loss from continuing operations attributable to noncontrolling interests	(952		)	(4,114		)	(100		)
Income/(loss) from continuing operations attributable to OP unitholders	$	96,227		$	28,652		$	(13,409	)

Income/(loss) from discontinued operations	$	—		$	45,176		$	57,643
(Income)/loss from discontinued operations attributable to noncontrolling interests	—			(452		)	(252		)
Income/(loss) from discontinued operations attributable to OP unitholders	$	—		$	44,724		$	57,391

Net income/(loss)	$	97,179		$	77,942		$	44,334
Net (income)/loss attributable to noncontrolling interests	(952		)	(4,566		)	(352		)
Net income/(loss) attributable to OP unitholders	$	96,227		$	73,376		$	43,982

Denominator for income/(loss) per OP Unit — basic and diluted:
Weighted average OP Units outstanding — basic and diluted	183,279			184,196			184,281

Income/(loss) per weighted average OP Unit — basic and diluted:
Income/(loss) from continuing operations attributable to OP unitholders	$	0.53		$	0.16		$	(0.07	)
Income/(loss) from discontinued operations attributable to OP unitholders	—			0.24			0.31
Net income/(loss) attributable to OP unitholders	$	0.53		$	0.40		$	0.24

11. COMMITMENTS AND CONTINGENCIES

Commitments

Ground Leases

The Operating Partnership owns five communities, which are subject to ground leases expiring between 2019 and 2103. Future minimum lease payments as of December 31, 2014 are $5.3 million for each of the years ending December 31, 2014 to 2018, and a total of $313.6 million for years thereafter. For purposes of our ground lease contracts, the Operating Partnership uses the minimum lease payment, if stated in the agreement. For ground lease agreements where there is a reset provision based on the communities appraised value or consumer price index but does not include a specified minimum lease payment, the Operating Partnership uses the current rent over the remainder of the lease term.

The Operating Partnership incurred $5.3 million, $5.1 million, and $5.0 million of ground rent expense for the years ended December 31, 2014, 2013, and 2012, respectively.

Contingencies

Litigation and Legal Matters

The Operating Partnership is subject to various legal proceedings and claims arising in the ordinary course of business. The Operating Partnership cannot determine the ultimate liability with respect to such legal proceedings and claims at this time.

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The General Partner believes that such liability, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on the Operating Partnership’s financial condition, results of operations or cash flow.

12. REPORTABLE SEGMENTS

GAAP guidance requires that segment disclosures present the measure(s) used by the chief operating decision maker to decide how to allocate resources and for purposes of assessing such segments’ performance. The Operating Partnership has the same chief operating decision maker as that of its parent, the General Partner. The chief operating decision maker consists of several members of UDR’s executive management team who use several generally accepted industry financial measures to assess the performance of the business for our reportable operating segments.

The Operating Partnership owns and operates multifamily apartment communities throughout the United States that generate rental and other property related income through the leasing of apartment homes to a diverse base of tenants. The primary financial measures of the Operating Partnership’s apartment communities are rental income and NOI, and are included in the chief operating decision maker’s assessment of UDR’s performance on a consolidated basis. Rental income represents gross market rent less adjustments for concessions, vacancy loss and bad debt. NOI is defined as total revenues less direct property operating expenses. Rental expenses include real estate taxes, insurance, personnel, utilities, repairs and maintenance, administrative and marketing. Excluded from NOI is property management expense, which is calculated as 2.75% of property revenue to cover the regional supervision and accounting costs related to consolidated property operations and land rent. The chief operating decision maker of the General Partner utilizes NOI as the key measure of segment profit or loss.

The Operating Partnership’s two reportable segments are Same-Store Communities and Non-Mature/Other communities:

•

Same-Store Communities represent those communities acquired, developed, and stabilized prior to January 1, 2013 and held as of December 31, 2014. A comparison of operating results from the prior year is meaningful as these communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan to conduct substantial redevelopment activities, and the communities are not held for disposition within the current year. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months.


•	Non-Mature Communities/Other represent those communities that do not meet the criteria to be included in Same-Store Communities, including, but not limited to, recently acquired, developed and redeveloped communities, and the non-apartment components of mixed use properties.

Management of the General Partner evaluates the performance of each of the Operating Partnership's apartment communities on a Same-Store Community and Non-Mature Community/Other basis, as well as individually and geographically. This is consistent with the aggregation criteria under GAAP as each of our apartment communities generally has similar economic characteristics, facilities, services, and tenants. Therefore, the Operating Partnership’s reportable segments have been aggregated by geography in a manner identical to that which is provided to the chief operating decision maker.

All revenues are from external customers and no single tenant or related group of tenants contributed 10% or more of the Operating Partnership’s total revenues during the years ended December 31, 2014, 2013, and 2012.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

The following table details rental income and NOI from continuing and discontinued operations for the Operating Partnership’s reportable segments for the years ended December 31, 2014, 2013, and 2012, and reconciles NOI to Net income/(loss) attributable to OP unitholders in the Consolidated Statements of Operations (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Reportable apartment home segment rental income
Same-Store Communities
West Region	$	194,105		$	181,935		$	172,096
Mid-Atlantic Region	68,822			68,205			66,487
Northeast Region	38,087			36,623			34,579
Southeast Region	45,224			43,208			40,771
Southwest Region	26,580			25,614			23,980
Non-Mature Communities/Other	49,816			55,257			62,778
Total segment and consolidated rental income	$	422,634		$	410,842		$	400,691
Reportable apartment home segment NOI
Same-Store Communities
West Region	$	142,388		$	131,276		$	122,477
Mid-Atlantic Region	46,639			46,770			45,801
Northeast Region	28,930			27,149			25,653
Southeast Region	29,815			28,105			26,510
Southwest Region	16,821			16,057			14,738
Non-Mature Communities/Other	35,720			38,178			46,359
Total segment and consolidated NOI	300,313			287,535			281,538
Reconciling items:
Property management	(11,622		)	(11,298		)	(11,019		)
Other operating expenses	(5,172		)	(5,728		)	(5,272		)
Real estate depreciation and amortization	(179,176		)	(181,302		)	(195,051		)
General and administrative	(28,541		)	(24,808		)	(26,204		)
Casualty-related recoveries/(charges), net	(541		)	8,083			(5,518		)
Interest expense	(41,717		)	(36,058		)	(45,234		)
Gain/(loss) on sale of real estate owned, net of tax	63,635			41,518			51,094
Net income/(loss) attributable to noncontrolling interests	(952		)	(4,566		)	(352		)
Net income/(loss) attributable to OP unitholders	$	96,227		$	73,376		$	43,982

F - 75

UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

The following table details the assets of the Operating Partnership’s reportable segments as of December 31, 2014 and 2013 (dollars in thousands):



	December 31, 2014			December 31, 2013
Reportable apartment home segment assets
Same-Store Communities
West Region	$	1,749,494		$	1,733,144
Mid-Atlantic Region	713,093			706,447
Northeast Region	447,269			443,483
Southeast Region	333,428			328,150
Southwest Region	228,996			226,252
Non-Mature Communities/Other	766,490			751,004
Total segment assets	4,238,770			4,188,480
Accumulated depreciation	(1,403,303		)	(1,241,574		)
Total segment assets - net book value	2,835,467			2,946,906
Reconciling items:
Cash and cash equivalents	502			1,897
Restricted cash	13,811			13,526
Deferred financing costs, net	4,475			5,848
Other assets	24,029			25,064
Total consolidated assets	$	2,878,284		$	2,993,241

Capital expenditures related to the Operating Partnership’s Same-Store Communities totaled $32.8 million and $25.8 million for the years ended December 31, 2014 and 2013, respectively. Capital expenditures related to the Operating Partnership’s Non-Mature Communities/Other totaled $1.0 million and $2.0 million for the years ended December 31, 2014 and 2013, respectively.

Markets included in the above geographic segments are as follows:


i.	West Region — Orange County, San Francisco, Monterey Peninsula, Los Angeles, Seattle, Inland Empire, Portland, and San Diego


ii.	Mid-Atlantic Region — Metropolitan, D.C. and Baltimore


iii.	Northeast Region — New York and Boston


iv.	Southeast Region — Nashville, Tampa, and Other Florida


v.	Southwest Region — Dallas

13. CASUALTY-RELATED (RECOVERIES)/CHARGES

F - 76

UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2014

charge and the repair and cleanup costs incurred were recognized. The rehabilitation of these two properties was substantially completed as of December 31, 2013.

As of December 31, 2013, the Operating Partnership had settled the Hurricane Sandy claims and received insurance proceeds in excess of the $10.8 million estimated insurance recovery receivable related to the impairment charge and the repair and cleanup costs incurred. As a result, the Operating Partnership recognized a Casualty-related recovery of approximately $3.3 million and a casualty gain of approximately $582,000 for the year ended December 31, 2013. Both the recovery and casualty gain were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.

Based on the claims filed and management’s estimates, the Operating Partnership recognized $2.2 million of business interruption losses for the year ended December 31, 2012, of which $1.8 million were related to rent concession rebates provided to residents during the period the properties were uninhabitable and were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations, and $400,000 were related to rent that was not contractually receivable and were classified as a reduction to Rental income on the Consolidated Statements of Operations. The Operating Partnership estimates that it incurred an additional $2.1 million of business interruption losses for the year ended December 31, 2013. As noted, the Operating Partnership settled the Hurricane Sandy claims as of December 31, 2013.

During the year ended December 31, 2014, the Operating Partnership recorded $541,000 of casualty-related losses due to property damage incurred during an earthquake and a storm in California, all of which are included in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.

14. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA

Selected consolidated quarterly financial data for the years ended December 31, 2014 and 2013 is summarized in the table blow (dollars in thousands, except per share amounts):



	Three Months Ended
	March 31,		June 30,		September 30,		December 31,
2014
Rental income (a)	$	102,370	$	104,842	$	107,444	$	107,978
Income/(loss) from continuing operations	6,411		8,319		8,875		9,939
Income/(loss) attributable to OP unitholders	30,533		24,426		8,637		32,631
Income/(loss) attributable to OP unitholders per weighted average OP Unit — basic and diluted (b)	$	0.17	$	0.13	$	0.05	$	0.18
2013
Rental income (a)	$	97,770	$	100,421	$	101,558	$	102,104
Income/(loss) from continuing operations	6,870		9,339		10,069		6,488
Income/(loss) from discontinued operations	905		882		982		42,407
Income/(loss) attributable to OP unitholders	7,729		10,154		11,011		44,482
Income/(loss) attributable to OP unitholders per weighted average OP Unit — basic and diluted (b)	$	0.04	$	0.06	$	0.06	$	0.24


(a)	Represents rental income from continuing operations, excluding amounts classified as discontinued operations.


(b)	Quarterly income/(loss) per OP Unit amounts may not total to the annual amounts.

F - 77

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UDR, INC.

SCHEDULE III — REAL ESTATE OWNED

DECEMBER 31, 2014

(In thousands)



			Initial Costs								Gross Amount at Which Carried at Close of Period
	Encumbrances		Land and Land Improvements		Buildings and Improvements		Total Initial Acquisition Costs		Costs of Improvements Capitalized Subsequent to Acquisition Costs		Land and Land Improvements		Buildings & Buildings Improvements		Total Carrying Value		Accumulated Depreciation		Date of Construction(a)	Date Acquired
WEST REGION
Harbor at Mesa Verde	$	50,358	$	20,476	$	28,538	$	49,014	$	12,949	$	21,058	$	40,905	$	61,963	$	26,242	2003	Jun-03
27 Seventy Five Mesa Verde	30,660		99,329		110,644		209,973		91,693		112,333		189,333		301,666		72,689		1972/2013	Oct-04
Pacific Shores	34,112		7,345		22,624		29,969		9,150		7,759		31,360		39,119		19,665		2003	Jun-03
Huntington Vista	27,972		8,055		22,486		30,541		7,637		8,438		29,740		38,178		18,655		1970	Jun-03
Missions at Back Bay	—		229		14,129		14,358		2,133		10,802		5,689		16,491		3,994		1969	Dec-03
Coronado at Newport — North	—		62,516		46,082		108,598		24,693		66,756		66,535		133,291		41,982		2000	Oct-04
Huntington Villas	50,771		61,535		18,017		79,552		7,132		62,223		24,461		86,684		16,061		1972	Sep-04
Vista Del Rey	—		10,670		7,080		17,750		2,062		10,830		8,982		19,812		5,769		1969	Sep-04
Foxborough	—		12,071		6,187		18,258		2,749		12,366		8,641		21,007		5,119		1969	Sep-04
Coronado South	—		58,785		50,067		108,852		17,875		59,277		67,450		126,727		40,783		2000	Mar-05
1818 Platinum Triangle	—		16,663		51,905		68,568		470		16,693		52,345		69,038		13,682		2009	Aug-10
Beach & Ocean	—		12,878		—		12,878		38,160		13,007		38,031		51,038		347		2014	Aug-11
The Residences at Bella Terra	—		25,000		—		25,000		125,801		25,080		125,721		150,801		11,032		2013	Oct-11
Los Alisos at Mission Viejo	—		17,298		—		17,298		69,882		16,386		70,794		87,180		4,449		2014	Jun-04
ORANGE COUNTY, CA	193,873		412,850		377,759		790,609		412,386		443,008		759,987		1,202,995		280,469
2000 Post Street	—		9,861		44,578		54,439		8,965		10,241		53,163		63,404		24,289		1987	Dec-98
Birch Creek	—		4,365		16,696		21,061		6,544		5,068		22,537		27,605		12,889		1968	Dec-98
Highlands Of Marin	—		5,996		24,868		30,864		25,720		7,127		49,457		56,584		26,904		2010	Dec-98
Marina Playa	—		6,224		23,916		30,140		9,482		6,908		32,714		39,622		18,351		1971	Dec-98
River Terrace	39,310		22,161		40,137		62,298		3,315		22,359		43,254		65,613		23,857		2005	Aug-05
CitySouth	—		14,031		30,537		44,568		35,190		16,261		63,497		79,758		30,810		2012	Nov-05
Bay Terrace	—		8,545		14,458		23,003		4,571		11,424		16,150		27,574		8,710		1962	Oct-05
Highlands of Marin Phase II	—		5,353		18,559		23,912		11,059		5,753		29,218		34,971		13,438		2010	Oct-07
Edgewater	—		30,657		83,872		114,529		3,261		30,687		87,103		117,790		34,141		2007	Mar-08
Almaden Lake Village	27,000		594		42,515		43,109		4,838		741		47,206		47,947		18,420		1999	Jul-08
388 Beale	—		14,253		74,104		88,357		4,511		14,276		78,592		92,868		16,399		1999	Apr-11
Channel @ Mission Bay	—		23,625		—		23,625		125,275		23,657		125,243		148,900		7,463		2014	Sep-10
2000 Post III	—		1,756		7,753		9,509		3,008		3,291		9,226		12,517		5,535		2006	Dec-98
SAN FRANCISCO, CA	66,310		147,421		421,993		569,414		245,739		157,793		657,360		815,153		241,206
Rosebeach	—		8,414		17,449		25,863		2,945		8,584		20,224		28,808		11,880		1970	Sep-04
Tierra Del Rey	32,635		39,586		36,679		76,265		3,008		39,647		39,626		79,273		16,561		1999	Dec-07
The Westerly	67,700		48,182		102,364		150,546		36,334		50,662		136,218		186,880		35,540		2013	Sep-10
Jefferson at Marina del Rey	—		55,651		—		55,651		89,717		61,262		84,106		145,368		27,682		2008	Sep-07
LOS ANGELES, CA	100,335		151,833		156,492		308,325		132,004		160,155		280,174		440,329		91,663
Crowne Pointe	—		2,486		6,437		8,923		5,074		2,822		11,175		13,997		7,069		1987	Dec-98
Hilltop	—		2,174		7,408		9,582		3,722		2,668		10,636		13,304		6,431		1985	Dec-98
The Hawthorne	35,500		6,474		30,226		36,700		3,187		6,575		33,312		39,887		18,512		2003	Jul-05
The Kennedy	—		6,179		22,307		28,486		1,742		6,242		23,986		30,228		12,640		2005	Nov-05
Hearthstone at Merrill Creek	22,957		6,848		30,922		37,770		3,180		6,984		33,966		40,950		13,370		2000	May-08
Island Square	—		21,284		89,389		110,673		4,086		21,413		93,346		114,759		34,577		2007	Jul-08
Borgata	—		6,379		24,569		30,948		722		6,404		25,287		31,691		11,013		2001	May-07
elements too	—		27,468		72,036		99,504		14,258		30,100		83,662		113,762		33,927		2010	Feb-10
989elements	—		8,541		45,990		54,531		1,592		8,552		47,571		56,123		13,663		2006	Dec-09
Lightbox	—		6,449		38,884		45,333		55		6,449		38,939		45,388		854		2014	Aug-14
Waterscape	—		9,693		65,176		74,869		50		9,693		65,226		74,919		1,028		2014	Sep-14
SEATTLE, WA	58,457		103,975		433,344		537,319		37,668		107,902		467,106		575,008		153,084
Boronda Manor	—		1,946		8,982		10,928		9,398		3,169		17,136		20,305		8,611		1979	Dec-98
Garden Court	—		888		4,188		5,076		5,304		1,552		8,828		10,380		4,603		1973	Dec-98

S - 1

UDR, INC.

SCHEDULE III — REAL ESTATE OWNED - (Continued)

DECEMBER 31, 2014

(In thousands)



		Initial Costs				Gross Amount at Which Carried at Close of Period
	Encumbrances	Land and Land Improvements	Buildings and Improvements	Total Initial Acquisition Costs	Costs of Improvements Capitalized Subsequent to Acquisition Costs	Land and Land Improvements	Buildings & Buildings Improvements	Total Carrying Value	Accumulated Depreciation	Date of Construction(a)	Date Acquired
Cambridge Court	—	3,039	12,883	15,922	14,266	5,274	24,914	30,188	13,065	1974	Dec-98
Laurel Tree	—	1,304	5,115	6,419	5,872	2,139	10,152	12,291	5,264	1977	Dec-98
The Pointe At Harden Ranch	—	6,388	23,854	30,242	25,703	9,848	46,097	55,945	23,292	1986	Dec-98
The Pointe At Northridge	—	2,044	8,028	10,072	9,582	3,269	16,385	19,654	8,761	1979	Dec-98
The Pointe At Westlake	—	1,329	5,334	6,663	6,207	2,154	10,716	12,870	5,276	1975	Dec-98
MONTEREY PENINSULA, CA	—	16,938	68,384	85,322	76,332	27,405	134,228	161,633	68,872
Verano at Rancho Cucamonga Town Square	46,471	13,557	3,645	17,202	53,385	23,066	47,521	70,587	31,638	2006	Oct-02
Windemere at Sycamore Highland	—	5,810	23,450	29,260	2,656	6,100	25,816	31,916	16,798	2001	Nov-02
Villas at Carlsbad	—	6,517	10,718	17,235	2,181	6,763	12,653	19,416	7,330	1966	Oct-04
Ocean Villas	—	5,135	12,789	17,924	1,817	5,326	14,415	19,741	8,442	1965	Oct-04
OTHER SOUTHERN, CA	46,471	31,019	50,602	81,621	60,039	41,255	100,405	141,660	64,208
Tualatin Heights	—	3,273	9,134	12,407	6,517	3,839	15,085	18,924	9,653	1989	Dec-98
Andover Park	16,818	2,916	16,995	19,911	8,174	3,210	24,875	28,085	16,127	1989	Sep-04
Hunt Club	18,323	6,014	14,870	20,884	5,918	6,364	20,438	26,802	13,604	1985	Sep-04
PORTLAND, OR	35,141	12,203	40,999	53,202	20,609	13,413	60,398	73,811	39,384
TOTAL WEST REGION	500,587	876,239	1,549,573	2,425,812	984,777	950,931	2,459,658	3,410,589	938,886
MID-ATLANTIC REGION
Dominion Middle Ridge	29,820	3,311	13,283	16,594	6,738	3,823	19,509	23,332	13,634	1990	Jun-96
Dominion Lake Ridge	20,372	2,366	8,387	10,753	6,207	2,865	14,095	16,960	9,879	1987	Feb-96
Presidential Greens	—	11,238	18,790	30,028	9,111	11,640	27,499	39,139	18,907	1938	May-02
The Whitmore	—	6,418	13,411	19,829	20,350	7,493	32,686	40,179	21,571	2008	Apr-02
Ridgewood	—	5,612	20,086	25,698	8,108	6,012	27,794	33,806	19,540	1988	Aug-02
DelRay Tower	—	297	12,786	13,083	111,790	9,447	115,426	124,873	2,382	2014	Jan-08
Waterside Towers	—	1,139	49,657	50,796	15,246	36,028	30,014	66,042	19,530	1971	Dec-03
Wellington Place at Olde Town	32,037	13,753	36,059	49,812	17,071	14,650	52,233	66,883	32,364	2008	Sep-05
Andover House	—	14,357	51,577	65,934	3,173	14,373	54,669	69,042	24,673	2004	Mar-07
Sullivan Place	—	1,137	103,676	104,813	5,604	1,373	109,044	110,417	44,942	2007	Dec-07
Circle Towers	70,606	32,815	107,051	139,866	10,812	33,105	117,573	150,678	45,360	1972	Mar-08
Delancey at Shirlington	—	21,606	66,765	88,371	1,770	21,632	68,509	90,141	26,624	2006/2007	Mar-08
View 14	—	5,710	97,941	103,651	2,407	5,721	100,337	106,058	20,042	2009	Jun-11
Signal Hill	—	13,290	—	13,290	69,526	25,399	57,417	82,816	20,799	2010	Mar-07
Capitol View on 14th	—	31,393	—	31,393	94,301	31,394	94,300	125,694	11,374	2013	Sep-07
Domain College Park	31,337	7,300	—	7,300	57,935	7,306	57,929	65,235	4,247	2014	Jun-11
METROPOLITAN, D.C.	184,172	171,742	599,469	771,211	440,149	232,261	979,034	1,211,295	335,868
Dominion Kings Place	14,525	1,565	7,007	8,572	4,199	1,808	10,963	12,771	8,117	1983	Dec-92
Dominion At Eden Brook	—	2,361	9,384	11,745	6,515	2,952	15,308	18,260	11,890	1984	Dec-92
Ellicott Grove	—	2,920	9,099	12,019	23,075	5,306	29,788	35,094	22,140	2008	Jul-94
Dominion Constant Freindship	8,783	903	4,669	5,572	3,941	1,277	8,236	9,513	5,965	1990	May-95
Lakeside Mill	12,569	2,666	10,109	12,775	4,581	2,985	14,371	17,356	10,818	1989	Dec-99
Tamar Meadow	—	4,145	17,150	21,295	5,089	4,577	21,807	26,384	14,882	1990	Nov-02
Calvert’s Walk	—	4,408	24,692	29,100	6,766	4,726	31,140	35,866	19,763	1988	Mar-04
Arborview Apartments	—	4,653	23,952	28,605	7,731	5,209	31,127	36,336	20,296	1992	Mar-04
Liriope Apartments	—	1,620	6,791	8,411	1,250	1,646	8,015	9,661	5,090	1997	Mar-04
20 Lambourne	30,834	11,750	45,590	57,340	5,433	12,018	50,755	62,773	21,218	2003	Mar-08
Domain Brewers Hill	—	4,669	40,630	45,299	581	4,678	41,202	45,880	10,343	2009	Aug-10
BALTIMORE, MD	66,711	41,660	199,073	240,733	69,161	47,182	262,712	309,894	150,522
Dominion English Hills	—	1,979	11,524	13,503	8,224	2,873	18,854	21,727	11,134	1969/1976	Dec-91
Gayton Pointe Townhomes	—	826	5,148	5,974	29,434	3,420	31,988	35,408	25,999	2007	Sep-95
Waterside At Ironbridge	—	1,844	13,239	15,083	7,335	2,299	20,119	22,418	13,123	1987	Sep-97
Carriage Homes at Wyndham	—	474	30,997	31,471	7,560	3,801	35,230	39,031	23,205	1998	Nov-03

S - 2

UDR, INC.

SCHEDULE III — REAL ESTATE OWNED - (Continued)

DECEMBER 31, 2014

(In thousands)



		Initial Costs				Gross Amount at Which Carried at Close of Period
	Encumbrances	Land and Land Improvements	Buildings and Improvements	Total Initial Acquisition Costs	Costs of Improvements Capitalized Subsequent to Acquisition Costs	Land and Land Improvements	Buildings & Buildings Improvements	Total Carrying Value	Accumulated Depreciation	Date of Construction(a)	Date Acquired
Legacy at Mayland	34,567	—	—	—	20,954	1,975	18,979	20,954	18,906	2007	Dec-91
RICHMOND, VA	34,567	5,123	60,908	66,031	73,507	14,368	125,170	139,538	92,367
Eastwind	—	155	5,317	5,472	6,374	659	11,187	11,846	9,145	1970	Apr-88
Dominion Waterside At Lynnhaven	—	1,824	4,107	5,931	6,369	2,337	9,963	12,300	7,634	1966	Aug-96
Heather Lake	—	617	3,400	4,017	10,120	1,205	12,932	14,137	12,126	1972/1974	Mar-80
Dominion Yorkshire Downs	—	1,089	8,582	9,671	6,123	1,594	14,200	15,794	9,290	1987	Dec-97
NORFOLK, VA	—	3,685	21,406	25,091	28,986	5,795	48,282	54,077	38,195
Greens At Schumaker Pond	—	710	6,118	6,828	6,143	1,043	11,928	12,971	8,541	1988	May-95
OTHER MID-ATLANTIC	—	710	6,118	6,828	6,143	1,043	11,928	12,971	8,541
TOTAL MID-ATLANTIC REGION	285,450	222,920	886,974	1,109,894	617,946	300,649	1,427,126	1,727,775	625,493
SOUTHEAST REGION
Summit West	—	2,176	4,710	6,886	8,513	3,236	12,163	15,399	10,443	1972	Dec-92
The Breyley	—	1,780	2,458	4,238	17,167	3,346	18,059	21,405	16,232	2007	Sep-93
Lakewood Place	18,526	1,395	10,647	12,042	8,972	2,329	18,685	21,014	13,790	1986	Mar-94
Bay Meadow	—	2,893	9,254	12,147	10,416	4,277	18,286	22,563	13,550	2004	Dec-96
Cambridge Woods	12,713	1,791	7,166	8,957	8,655	2,613	14,999	17,612	10,681	1985	Jun-97
Sugar Mill Creek	—	2,242	7,553	9,795	6,846	2,734	13,907	16,641	8,998	1988	Dec-98
Inlet Bay	—	7,702	23,150	30,852	14,657	9,211	36,298	45,509	25,585	1988/1989	Jun-03
MacAlpine Place	—	10,869	36,858	47,727	7,384	11,408	43,703	55,111	27,162	2001	Dec-04
The Vintage Lofts at West End	—	6,611	37,663	44,274	15,827	15,120	44,981	60,101	19,020	2009	Jul-09
TAMPA, FL	31,239	37,459	139,459	176,918	98,437	54,274	221,081	275,355	145,461
Seabrook	—	1,846	4,155	6,001	8,052	2,681	11,372	14,053	9,077	2004	Feb-96
The Canopy Apartment Villas	—	2,895	6,456	9,351	21,457	5,470	25,338	30,808	22,904	2008	Mar-93
Altamira Place	—	1,533	11,076	12,609	20,241	3,450	29,400	32,850	24,329	2007	Apr-94
Regatta Shore	—	757	6,608	7,365	15,549	2,018	20,896	22,914	16,423	2007	Jun-94
Alafaya Woods	18,064	1,653	9,042	10,695	8,911	2,522	17,084	19,606	12,624	2006	Oct-94
Los Altos	21,942	2,804	12,349	15,153	10,494	4,020	21,627	25,647	14,273	2004	Oct-96
Lotus Landing	—	2,185	8,639	10,824	9,569	2,841	17,552	20,393	11,184	2006	Jul-97
Seville On The Green	—	1,282	6,498	7,780	6,722	1,705	12,797	14,502	8,546	2004	Oct-97
Ashton @ Waterford	23,388	3,872	17,538	21,410	4,049	4,179	21,280	25,459	12,963	2000	May-98
Arbors at Lee Vista	—	6,692	12,860	19,552	12,591	7,220	24,923	32,143	18,328	2007	Aug-06
ORLANDO, FL	63,394	25,519	95,221	120,740	117,635	36,106	202,269	238,375	150,651
Legacy Hill	—	1,148	5,867	7,015	8,636	1,762	13,889	15,651	10,830	1977	Nov-95
Hickory Run	—	1,469	11,584	13,053	9,761	2,139	20,675	22,814	13,482	1989	Dec-95
Carrington Hills	—	2,117	—	2,117	33,846	4,462	31,501	35,963	20,064	1999	Dec-95
Brookridge	—	708	5,461	6,169	4,500	1,143	9,526	10,669	6,641	1986	Mar-96
Breckenridge	—	766	7,714	8,480	4,357	1,258	11,579	12,837	7,704	1986	Mar-97
Colonnade	16,677	1,460	16,015	17,475	4,934	1,946	20,463	22,409	11,461	1998	Jan-99
The Preserve at Brentwood	22,157	3,182	24,674	27,856	6,276	3,508	30,624	34,132	19,951	1998	Jun-04
Polo Park	—	4,583	16,293	20,876	16,042	5,643	31,275	36,918	20,471	2008	May-06
NASHVILLE, TN	38,834	15,433	87,608	103,041	88,352	21,861	169,532	191,393	110,604
The Reserve and Park at Riverbridge	39,179	15,968	56,401	72,369	8,947	16,536	64,780	81,316	38,317	1999/2001	Dec-04
OTHER FLORIDA	39,179	15,968	56,401	72,369	8,947	16,536	64,780	81,316	38,317
TOTAL SOUTHEAST REGION	172,646	94,379	378,689	473,068	313,371	128,777	657,662	786,439	445,033
NORTHEAST REGION
Garrison Square	—	5,591	91,027	96,618	6,048	5,631	97,035	102,666	23,767	1887/1990	Sep-10
Ridge at Blue Hills	22,839	6,039	34,869	40,908	1,238	6,102	36,044	42,146	9,052	2007	Sep-10
Inwood West	56,447	20,778	88,096	108,874	3,034	19,309	92,599	111,908	20,102	2006	Apr-11
14 North	—	10,961	51,175	62,136	4,563	10,999	55,700	66,699	12,750	2005	Apr-11
BOSTON, MA	79,286	43,369	265,167	308,536	14,883	42,041	281,378	323,419	65,671

S - 3

UDR, INC.

SCHEDULE III — REAL ESTATE OWNED - (Continued)

DECEMBER 31, 2014

(In thousands)



			Initial Costs								Gross Amount at Which Carried at Close of Period
	Encumbrances		Land and Land Improvements		Buildings and Improvements		Total Initial Acquisition Costs		Costs of Improvements Capitalized Subsequent to Acquisition Costs		Land and Land Improvements		Buildings & Buildings Improvements		Total Carrying Value		Accumulated Depreciation		Date of Construction(a)	Date Acquired
10 Hanover Square	190,462		41,432		218,983		260,415		8,396		41,481		227,330		268,811		42,678		2005	Apr-11
21 Chelsea	—		36,399		107,154		143,553		10,915		36,399		118,069		154,468		20,910		2001	Aug-11
View 34	—		114,410		324,920		439,330		85,635		115,024		409,941		524,965		72,318		1985/2013	Jul-11
95 Wall Street	—		57,637		266,255		323,892		6,296		57,736		272,452		330,188		54,973		2008	Aug-11
NEW YORK, NY	190,462		249,878		917,312		1,167,190		111,242		250,640		1,027,792		1,278,432		190,879
TOTAL NORTHEAST REGION	269,748		293,247		1,182,479		1,475,726		126,125		292,681		1,309,170		1,601,851		256,550
SOUTHWEST REGION
THIRTY377	30,023		24,036		32,951		56,987		8,162		24,311		40,838		65,149		21,663		2007	Aug-06
Legacy Village	72,415		16,882		100,102		116,984		7,325		17,280		107,029		124,309		44,321		6/7/2005	Mar-08
Garden Oaks	—		2,132		5,367		7,499		1,631		6,936		2,194		9,130		1,842		1979	Mar-07
Glenwood	—		7,903		554		8,457		1,897		8,159		2,195		10,354		1,366		1970	May-07
Talisker of Addison	—		10,440		634		11,074		1,917		10,841		2,150		12,991		1,836		1975	May-07
Springhaven	—		6,688		3,354		10,042		1,289		8,350		2,981		11,331		2,231		1977	Apr-07
Clipper Pointe	—		13,221		2,507		15,728		2,398		14,948		3,178		18,126		2,618		1978	May-07
Highlands of Preston	—		2,151		8,168		10,319		31,139		5,989		35,469		41,458		24,269		2008	Mar-98
DALLAS, TX	102,438		83,453		153,637		237,090		55,758		96,814		196,034		292,848		100,146
Barton Creek Landing	—		3,151		14,269		17,420		22,118		4,807		34,731		39,538		20,260		2010	Mar-02
Residences at the Domain	30,661		4,034		55,256		59,290		2,608		4,200		57,698		61,898		21,988		2007	Aug-08
Red Stone Ranch	—		5,084		17,646		22,730		1,625		5,115		19,240		24,355		3,687		2000	Apr-12
Lakeline Villas	—		4,148		16,869		21,017		1,065		4,159		17,923		22,082		3,370		2004	Apr-12
AUSTIN, TX	30,661		16,417		104,040		120,457		27,416		18,281		129,592		147,873		49,305
TOTAL SOUTHWEST REGION	133,099		99,870		257,677		357,547		83,174		115,095		325,626		440,721		149,451
TOTAL OPERATING COMMUNITIES	1,361,530		1,586,655		4,255,392		5,842,047		2,125,393		1,788,133		6,179,242		7,967,375		2,415,413
REAL ESTATE UNDER DEVELOPMENT
Pier 4	—		24,584		—		24,584		153,048		24,584		153,048		177,632		—
TOTAL REAL ESTATE UNDER DEVELOPMENT	—		24,584		—		24,584		153,048		24,584		153,048		177,632		—
LAND
7 Harcourt	—		884		—		884		4,734		804		4,814		5,618		614
Vitruvian	—		4,325		1,360		5,685		7,965		11,244		2,406		13,650		2,023
Pacific City	—		78,085		—		78,085		7,962		78,085		7,962		86,047		—
Graybar	—		32,938		—		32,938		283		32,938		283		33,221		—
3032 Wilshire	—		9,963		788		10,751		1,642		9,963		2,430		12,393		788
2919 Wilshire	—		6,773		527		7,300		880		6,773		1,407		8,180		527
Waterside	—		11,862		93		11,955		189		12,084		60		12,144		263
TOTAL LAND	—		144,830		2,768		147,598		23,655		151,891		19,362		171,253		4,215
COMMERCIAL
Hanover Village	—		1,624		—		1,624		—		1,104		520		1,624		553
Circle Towers Office Bldg	—		1,407		4,498		5,905		1,516		1,380		6,041		7,421		2,232
Brookhaven Shopping Center	—		4,943		7,093		12,036		9,537		7,793		13,780		21,573		11,676
Bellevue Plaza retail	—		24,377		7,517		31,894		306		29,920		2,280		32,200		636
TOTAL COMMERCIAL	—		32,351		19,108		51,459		11,359		40,197		22,621		62,818		15,097
Other (b)	—		—		—		—		4,181		—		4,181		4,181		47
TOTAL CORPORATE	—		—		—		—		4,181		—		4,181		4,181		47
TOTAL COMMERCIAL & CORPORATE	—		32,351		19,108		51,459		15,540		40,197		26,802		66,999		15,144
TOTAL REAL ESTATE OWNED	$	1,361,530	$	1,788,420	$	4,277,268	$	6,065,688	$	2,317,636	$	2,004,805	$	6,378,454	$	8,383,259	$	2,434,772


(a)	Date of construction or date of last major renovation.


(b)	Includes unallocated accruals and capital expenditures.

The aggregate cost for federal income tax purposes was approximately $7.7 billion at December 31, 2014.

The estimated depreciable lives for all buildings in the latest Consolidated Statements of Operations are 35 to 55 years.

S - 4

UDR, INC.

SCHEDULE III — REAL ESTATE OWNED - (Continued)

DECEMBER 31, 2014

(In thousands)

3-YEAR ROLLFORWARD OF REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION

The following is a reconciliation of the carrying amount of total real estate owned at December 31, (in thousands):



	2014			2013			2012
Balance at beginning of the year	$	8,207,977		$	8,055,828		$	8,074,471
Real estate acquired	231,225			—			141,648
Capital expenditures and development	326,461			452,057			422,480
Real estate sold	(269,681		)	(70,687		)	(559,154		)
Real estate contributed to joint ventures	(112,344		)	(356,303		)	—
Consolidation of joint venture assets	—			129,437			—
Retirement of fully depreciated assets	—			—			(13,945		)
Impairment of assets, including casualty-related impairments	(379		)	(2,355		)	(9,672		)
Real estate acquired through JV consolidation	—			—			—
Balance at end of the year	$	8,383,259		$	8,207,977		$	8,055,828

The following is a reconciliation of total accumulated depreciation for real estate owned at December 31, (in thousands):



	2014			2013			2012
Balance at beginning of the year	$	2,208,794		$	1,924,682		$	1,831,727
Depreciation expense for the year	356,673			339,326			340,800
Accumulated depreciation on sales	(126,151		)	(34,794		)	(233,207		)
Accumulated depreciation on real estate contributed to joint ventures	(4,228		)	(20,662		)	—
Accumulated depreciation on assets of consolidated joint ventures	—			1,374			—
Accumulated depreciation on retirements of fully depreciated assets	—			(1,132		)	(13,945		)
Write off of accumulated depreciation on casualty-related impaired assets	(316		)	—			(693		)
Balance at end of year	$	2,434,772		$	2,208,794		$	1,924,682

S - 5

UNITED DOMINION REALTY, L.P.

SCHEDULE III — REAL ESTATE OWNED

DECEMBER 31, 2014

(In thousands)



			Initial Costs								Gross Amount at Which Carried at Close of Period
	Encumbrances		Land and Land Improvements		Building and Improvements		Total Initial Acquisition Costs		Cost of Improvements Capitalized Subsequent to Acquisition Costs		Land and Land Improvements		Buildings & Buildings Improvements		Total Carrying Value		Accumulated Depreciation		Date of Construction (a)	Date Acquired
WEST REGION
Harbor at Mesa Verde	$	50,358	$	20,476	$	28,538	$	49,014	$	12,949	$	21,058	$	40,905	$	61,963	$	26,242	2003	Jun-03
27 Seventy Five Mesa Verde	30,660		99,329		110,644		209,973		91,693		112,333		189,333		301,666		72,689		1972/2013	Oct-04
Pacific Shores	34,112		7,345		22,624		29,969		9,150		7,759		31,360		39,119		19,665		2003	Jun-03
Huntington Vista	27,972		8,055		22,486		30,541		7,637		8,438		29,740		38,178		18,655		1970	Jun-03
Missions at Back Bay	—		229		14,129		14,358		2,133		10,802		5,689		16,491		3,994		1969	Dec-03
Coronado at Newport — North	—		62,516		46,082		108,598		24,693		66,756		66,535		133,291		41,982		2000	Oct-04
Huntington Villas	50,771		61,535		18,017		79,552		7,132		62,223		24,461		86,684		16,061		1972	Sep-04
Vista Del Rey	—		10,670		7,080		17,750		2,062		10,830		8,982		19,812		5,769		1969	Sep-04
Coronado South	—		58,785		50,067		108,852		17,875		59,277		67,450		126,727		40,783		2000	Mar-05
ORANGE COUNTY, CA	193,873		328,940		319,667		648,607		175,324		359,476		464,455		823,931		245,840
2000 Post Street	—		9,861		44,578		54,439		8,965		10,241		53,163		63,404		24,289		1987	Dec-98
Birch Creek	—		4,365		16,696		21,061		6,544		5,068		22,537		27,605		12,889		1968	Dec-98
Highlands Of Marin	—		5,996		24,868		30,864		25,720		7,127		49,457		56,584		26,904		2010	Dec-98
Marina Playa	—		6,224		23,916		30,140		9,482		6,908		32,714		39,622		18,351		1971	Dec-98
River Terrace	39,310		22,161		40,137		62,298		3,315		22,359		43,254		65,613		23,857		2005	Aug-05
CitySouth	—		14,031		30,537		44,568		35,190		16,261		63,497		79,758		30,810		2012	Nov-05
Bay Terrace	—		8,545		14,458		23,003		4,571		11,424		16,150		27,574		8,710		1962	Oct-05
Highlands of Marin Phase II	—		5,353		18,559		23,912		11,059		5,753		29,218		34,971		13,438		2010	Oct-07
Edgewater	—		30,657		83,872		114,529		3,261		30,687		87,103		117,790		34,141		2007	Mar-08
Almaden Lake Village	27,000		594		42,515		43,109		4,838		741		47,206		47,947		18,420		1999	Jul-08
SAN FRANCISCO, CA	66,310		107,787		340,136		447,923		112,945		116,569		444,299		560,868		211,809
Rosebeach	—		8,414		17,449		25,863		2,945		8,584		20,224		28,808		11,880		1970	Sep-04
Tierra Del Rey	32,635		39,586		36,679		76,265		3,008		39,647		39,626		79,273		16,561		1999	Dec-07
LOS ANGELES, CA	32,635		48,000		54,128		102,128		5,953		48,231		59,850		108,081		28,441
Crowne Pointe	—		2,486		6,437		8,923		5,074		2,822		11,175		13,997		7,069		1987	Dec-98
Hilltop	—		2,174		7,408		9,582		3,722		2,668		10,636		13,304		6,431		1985	Dec-98
The Kennedy	—		6,179		22,307		28,486		1,742		6,242		23,986		30,228		12,640		2005	Nov-05
Hearthstone at Merrill Creek	22,957		6,848		30,922		37,770		3,180		6,984		33,966		40,950		13,370		2000	May-08
Island Square	—		21,284		89,389		110,673		4,086		21,413		93,346		114,759		34,577		2007	Jul-08
SEATTLE, WA	22,957		38,971		156,463		195,434		17,804		40,129		173,109		213,238		74,087
Boronda Manor	—		1,946		8,982		10,928		9,377		3,169		17,136		20,305		8,611		1979	Dec-98
Garden Court	—		888		4,188		5,076		5,304		1,552		8,828		10,380		4,603		1973	Dec-98
Cambridge Court	—		3,039		12,883		15,922		14,266		5,274		24,914		30,188		13,065		1974	Dec-98
Laurel Tree	—		1,304		5,115		6,419		5,872		2,139		10,152		12,291		5,264		1977	Dec-98
The Pointe At Harden Ranch	—		6,388		23,854		30,242		25,703		9,848		46,097		55,945		23,292		1986	Dec-98
The Pointe At Northridge	—		2,044		8,028		10,072		9,582		3,269		16,385		19,654		8,761		1979	Dec-98
The Pointe At Westlake	—		1,329		5,334		6,663		6,207		2,154		10,716		12,870		5,276		1975	Dec-98
MONTEREY PENINSULA, CA	—		16,938		68,384		85,322		76,311		27,405		134,228		161,633		68,872
Verano at Rancho Cucamonga Town Square	46,471		13,557		3,645		17,202		53,385		23,066		47,521		70,587		31,638		2006	Oct-02
Villas at Carlsbad	—		6,517		10,718		17,235		2,181		6,763		12,653		19,416		7,330		1966	Oct-04
Ocean Villas	—		5,135		12,789		17,924		1,817		5,326		14,415		19,741		8,442		1965	Oct-04
OTHER SOUTHERN, CA	46,471		25,209		27,152		52,361		57,383		35,155		74,589		109,744		47,410
Tualatin Heights	—		3,273		9,134		12,407		6,517		3,839		15,085		18,924		9,653		1989	Dec-98
Andover Park	16,818		2,916		16,995		19,911		8,174		3,210		24,875		28,085		16,127		1989	Sep-04
Hunt Club	18,323		6,014		14,870		20,884		5,918		6,364		20,438		26,802		13,604		1985	Sep-04
PORTLAND, OR	35,141		12,203		40,999		53,202		20,609		13,413		60,398		73,811		39,384
TOTAL WEST REGION	397,387		578,048		1,006,929		1,584,977		466,329		640,378		1,410,928		2,051,306		715,843

S - 6

UNITED DOMINION REALTY, L.P.

SCHEDULE III — REAL ESTATE OWNED - (Continued)

DECEMBER 31, 2014

(In thousands)



			Initial Costs								Gross Amount at Which Carried at Close of Period
	Encumbrances		Land and Land Improvements		Building and Improvements		Total Initial Acquisition Costs		Cost of Improvements Capitalized Subsequent to Acquisition Costs		Land and Land Improvements		Buildings & Buildings Improvements		Total Carrying Value		Accumulated Depreciation		Date of Construction (a)	Date Acquired
MID-ATLANTIC REGION
The Whitmore	—		6,418		13,411		19,829		20,350		7,493		32,686		40,179		21,571		2008	Apr-02
Ridgewood	—		5,612		20,086		25,698		8,108		6,012		27,794		33,806		19,540		1988	Aug-02
DelRey Tower	—		297		12,786		13,083		111,790		9,447		115,426		124,873		2,382		2014	Jan-08
Wellington Place at Olde Town	32,037		13,753		36,059		49,812		17,071		14,650		52,233		66,883		32,364		2008	Sep-05
Andover House	—		14,357		51,577		65,934		3,108		14,373		54,669		69,042		24,673		2004	Mar-07
Sullivan Place	—		1,137		103,676		104,813		5,604		1,373		109,044		110,417		44,942		2007	Dec-07
Circle Towers	70,606		32,815		107,051		139,866		10,812		33,105		117,573		150,678		45,360		1972	Mar-08
Delancey at Shirlington	—		21,606		66,765		88,371		1,770		21,632		68,509		90,141		26,624		2006/2007	Mar-08
METROPOLITAN D.C.	102,643		95,995		411,411		507,406		178,613		108,085		577,934		686,019		217,456
Lakeside Mill	12,569		2,666		10,109		12,775		4,581		2,985		14,371		17,356		10,818		1989	Dec-99
Tamar Meadow	—		4,145		17,150		21,295		5,089		4,577		21,807		26,384		14,882		1990	Nov-02
Calvert’s Walk	—		4,408		24,692		29,100		6,766		4,726		31,140		35,866		19,763		1988	Mar-04
Liriope Apartments	—		1,620		6,791		8,411		1,250		1,646		8,015		9,661		5,090		1997	Mar-04
20 Lambourne	30,834		11,750		45,590		57,340		5,433		12,018		50,755		62,773		21,218		2003	Mar-08
BALTIMORE, MD	43,403		24,589		104,332		128,921		23,119		25,952		126,088		152,040		71,771
TOTAL MID-ATLANTIC REGION	146,046		120,584		515,743		636,327		201,732		134,037		704,022		838,059		289,227
SOUTHEAST REGION
Sugar Mill Creek	—		2,242		7,553		9,795		6,846		2,734		13,907		16,641		8,998		1988	Dec-98
Inlet Bay	—		7,702		23,150		30,852		14,657		9,211		36,298		45,509		25,585		1988/1989	Jun-03
MacAlpine Place	—		10,869		36,858		47,727		7,384		11,408		43,703		55,111		27,162		2001	Dec-04
TAMPA, FL	—		20,813		67,561		88,374		28,887		23,353		93,908		117,261		61,745
Legacy Hill	—		1,148		5,867		7,015		8,636		1,762		13,889		15,651		10,830		1977	Nov-95
Hickory Run	—		1,469		11,584		13,053		9,761		2,139		20,675		22,814		13,482		1989	Dec-95
Carrington Hills	—		2,117		—		2,117		33,846		4,462		31,501		35,963		20,064		1999	Dec-95
Brookridge	—		708		5,461		6,169		4,500		1,143		9,526		10,669		6,641		1986	Mar-96
Breckenridge	—		766		7,714		8,480		4,357		1,258		11,579		12,837		7,704		1986	Mar-97
Polo Park	—		4,583		16,293		20,876		16,042		5,643		31,275		36,918		20,471		2008	May-06
NASHVILLE, TN	—		10,791		46,919		57,710		77,142		16,407		118,445		134,852		79,192
The Reserve and Park at Riverbridge	39,179		15,968		56,401		72,369		8,947		16,536		64,780		81,316		38,317		1999/2001	Dec-04
OTHER FLORIDA	39,179		15,968		56,401		72,369		8,947		16,536		64,780		81,316		38,317
TOTAL SOUTHEAST REGION	39,179		47,572		170,881		218,453		114,976		56,296		277,133		333,429		179,254
NORTHEAST REGION
Inwood West	56,447		20,778		88,096		108,874		3,034		19,309		92,599		111,908		20,102		2006	Apr-11
14 North	—		10,961		51,175		62,136		4,563		10,999		55,700		66,699		12,750		2005	Apr-11
BOSTON, MA	56,447		31,739		139,271		171,010		7,597		30,308		148,299		178,607		32,852
10 Hanover Square	190,462		41,432		218,983		260,415		8,396		41,481		227,330		268,811		42,678		2005	Apr-11
95 Wall Street	—		57,637		266,255		323,892		6,296		57,736		272,452		330,188		54,973		2008	Aug-11
NEW YORK, NY	190,462		99,069		485,238		584,307		14,692		99,217		499,782		598,999		97,651
TOTAL NORTHEAST REGION	246,909		130,808		624,509		755,317		22,289		129,525		648,081		777,606		130,503
SOUTHWEST REGION
THIRTY377	30,023		24,036		32,951		56,987		8,162		24,311		40,838		65,149		21,663		2007	Aug-06
Legacy Village	72,415		16,882		100,102		116,984		7,325		17,280		107,029		124,309		44,321		6/7/2005	Mar-08
DALLAS, TX	102,438		40,918		133,053		173,971		15,487		41,591		147,867		189,458		65,984
Barton Creek Landing	—		3,151		14,269		17,420		22,118		4,807		34,731		39,538		20,260		2010	Mar-02
AUSTIN, TX	—		3,151		14,269		17,420		22,118		4,807		34,731		39,538		20,260
TOTAL SOUTHWEST REGION	102,438		44,069		147,322		191,391		37,605		46,398		182,598		228,996		86,244
TOTAL OPERATING COMMUNITIES	931,959		921,081		2,465,384		3,386,465		842,931		1,006,634		3,222,762		4,229,396		1,401,071
COMMERCIAL
Circle Towers Office Bldg	—		1,407		4,498		5,905		1,516		1,380		6,041		7,421		2,232
TOTAL COMMERCIAL	—		1,407		4,498		5,905		1,516		1,380		6,041		7,421		2,232
Other (b)	—		—		—		—		1,953		—		1,953		1,953		—
TOTAL CORPORATE	—		—		—		—		1,953		—		1,953		1,953		—
TOTAL COMMERCIAL & CORPORATE	—		1,407		4,498		5,905		3,469		1,380		7,994		9,374		2,232
TOTAL REAL ESTATE OWNED	$	931,959	$	922,488	$	2,469,882	$	3,392,370	$	846,400	$	1,008,014	$	3,230,756	$	4,238,770	$	1,403,303

S - 7

UNITED DOMINION REALTY, L.P.

SCHEDULE III — REAL ESTATE OWNED - (Continued)

DECEMBER 31, 2014

(In thousands)


(a)	Date of construction or date of last major renovation.


(b)	Includes unallocated accruals and capital expenditures.

The aggregate cost for federal income tax purpose was approximately $3.6 billion at December 31, 2011.

The estimated depreciable lives for all buildings in the latest Consolidated Statements of Operations are 35 to 55 years.

S - 8

UNITED DOMINION REALTY, L.P.

SCHEDULE III — REAL ESTATE OWNED - (Continued)

DECEMBER 31, 2014

(In thousands)

3-YEAR ROLLFORWARD OF REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION

The following is a reconciliation of the carrying amount of total real estate owned at December 31, (in thousands):



	2014			2013			2012
Balance at beginning of the year	$	4,188,480		$	4,182,920		$	4,205,298
Capital expenditures and development	91,682			151,002			115,355
Real estate sold	(41,013		)	(70,687		)	(116,166		)
Real estate transferred to the General Partner	—			(74,755		)	—
Retirement of fully depreciated asset	—			—			(13,945		)
Casualty-related impairment of assets	(379		)	—			(7,622		)
Balance at end of year	$	4,238,770		$	4,188,480		$	4,182,920

The following is a reconciliation of total accumulated depreciation for real estate owned at December 31, (in thousands):



	2014			2013			2012
Balance at beginning of the year	$	1,241,574		$	1,097,133		$	976,358
Depreciation expense for the year	178,719			179,404			189,362
Accumulated depreciation on sales	(16,674		)	(34,794		)	(54,085		)
Accumulated depreciation on retirements of fully depreciated asset	—			—			(13,945		)
Accumulated depreciation on property transferred to the General Partner	—			(169		)	—
Write off of accumulated depreciation on casualty-related impaired assets	(316		)	—			(557		)
Balance at end of year	$	1,403,303		$	1,241,574		$	1,097,133

S - 9

EXHIBIT INDEX

The exhibits listed below are filed as part of this Report. References under the caption “Location” to exhibits or other filings indicate that the exhibit or other filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that the exhibit referred to is incorporated by reference. Management contracts and compensatory plans or arrangements filed as exhibits to this Report are identified by an asterisk. The Commission file number for UDR, Inc.’s Exchange Act filings referenced below is 1-10524. The Commission file number for United Dominion Realty, L.P.’s Exchange Act filings is 333-156002-01.




Exhibit	Description	Location

2.01	Partnership Interest Purchase and Exchange Agreement dated as of September 10, 1998, by and between UDR, Inc., United Dominion Realty, L.P., American Apartment Communities Operating Partnership, L.P., AAC Management LLC, Schnitzer Investment Corp., Fox Point Ltd. and James D. Klingbeil including as an exhibit thereto the proposed form of the Third Amended and Restated Limited Partnership Agreement of United Dominion Realty, L.P.	Exhibit 2(d) to UDR, Inc.’s Form S-3 Registration Statement (Registration No. 333-64281) filed with the Commission on September 25, 1998.

2.02	Agreement of Purchase and Sale dated as of August 13, 2004, by and between United Dominion Realty, L.P., a Delaware limited partnership, as Buyer, and Essex The Crest, L.P., a California limited partnership, Essex El Encanto Apartments, L.P., a California limited partnership, Essex Hunt Club Apartments, L.P., a California limited partnership, and the other signatories named as Sellers therein.	Exhibit 2.1 to UDR, Inc.’s Current Report on Form 8-K dated September 28, 2004 and filed with the Commission on September 29, 2004.

2.03	First Amendment to Agreement of Purchase and Sale dated as of September 29, 2004, by and between United Dominion Realty, L.P., a Delaware limited partnership, as Buyer, and Essex The Crest, L.P., a California limited partnership, Essex El Encanto Apartments, L.P., a California limited partnership, Essex Hunt Club Apartments, L.P., a California limited partnership, and the other signatories named as Sellers therein.	Exhibit 2.2 to UDR, Inc.’s Current Report on Form 8-K dated September 29, 2004 and filed with the Commission on October 5, 2004.

2.04	Second Amendment to Agreement of Purchase and Sale dated as of October 26, 2004, by and between United Dominion Realty, L.P., a Delaware limited partnership, as Buyer, and Essex The Crest, L.P., a California limited partnership, Essex El Encanto Apartments, L.P., a California limited partnership, Essex Hunt Club Apartments, L.P., a California limited partnership, and the other signatories named as Sellers therein.	Exhibit 2.3 to UDR, Inc.’s Current Report on Form 8-K/A dated September 29, 2004 and filed with the Commission on November 1, 2004.




Exhibit	Description	Location

2.05	Agreement of Purchase and Sale dated as of January 23, 2008, by and between UDR, Inc., United Dominion Realty, L.P., UDR Texas Properties LLC, UDR Western Residential, Inc., UDR South Carolina Trust, UDR Ohio Properties, LLC, UDR of Tennessee, L.P., UDR of NC, Limited Partnership, Heritage Communities L.P., Governour’s Square of Columbus Co., Fountainhead Apartments Limited Partnership, AAC Vancouver I, L.P., AAC Funding Partnership III, AAC Funding Partnership II and DRA Fund VI LLC.	Exhibit 2.1 to UDR, Inc.’s Current Report on Form 8-K dated January 23, 2008 and filed with the Commission on January 29, 2008.

2.06	First Amendment to Agreement of Purchase and Sale dated as of February 14, 2008, by and between UDR, Inc., United Dominion Realty, L.P., UDR Texas Properties LLC, UDR Western Residential, Inc., UDR South Carolina Trust, UDR Ohio Properties, LLC, UDR of Tennessee, L.P., UDR of NC, Limited Partnership, Heritage Communities L.P., Governour’s Square of Columbus Co., Fountainhead Apartments Limited Partnership, AAC Vancouver I, L.P., AAC Funding Partnership III, AAC Funding Partnership II and DRA Fund VI LLC.	Exhibit 2.2 to UDR, Inc.’s Current Report on Form 8-K/A dated March 3, 2008 and filed with the Commission on May 2, 2008.

3.01	Articles of Restatement of UDR, Inc.	Exhibit 3.09 to UDR, Inc.’s Current Report on Form 8-K dated July 27, 2005 and filed with the Commission on August 1, 2005.

3.02	Articles of Amendment to the Articles of Restatement of UDR, Inc. dated and filed with the State Department of Assessments and Taxation of the State of Maryland on March 14, 2007.	Exhibit 3.2 to UDR, Inc.’s Current Report on Form 8-K dated March 14, 2007 and filed with the Commission on March 15, 2007.

3.03	Articles of Amendment to the Articles of Restatement of UDR, Inc. dated and filed with the State Department of Assessments and Taxation of the State of Maryland on August 30, 2011.	Exhibit 3.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on September 1, 2011.

3.04	Articles Supplementary relating to UDR, Inc.’s 6.75% Series G Cumulative Redeemable Preferred Stock dated and filed with the State Department of Assessments and Taxation of the State of Maryland on May 30, 2007.	Exhibit 3.4 to UDR, Inc.’s Form 8-A Registration Statement dated and filed with the Commission on May 30, 2007.

3.05	Amended and Restated Bylaws of UDR, Inc. (as amended through May 12, 2011).	Exhibit 3.1 to UDR, Inc.’s Current Report on Form 8-K dated May 12, 2011 and filed with the Commission on May 13, 2011.

3.06	Certificate of Limited Partnership of United Dominion Realty, L.P. dated as of February 19, 2004.	Exhibit 3.4 to United Dominion Realty, L.P.’s Post-Effective Amendment No. 1 to Registration Statement on Form S-3 dated and filed with the Commission on October 15, 2010.




Exhibit	Description	Location

3.07	Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 23, 2004.	Exhibit 10.23 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003.

3.08	First Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of June 24, 2005.	Exhibit 10.06 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.

3.09	Second Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 23, 2006.	Exhibit 10.6 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.

3.10	Third Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 2, 2007.	Exhibit 99.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.

3.11	Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of December 27, 2007.	Exhibit 10.25 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2007.

3.12	Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of March 7, 2008.	Exhibit 10.53 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008.

3.13	Sixth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of December 9, 2008.	Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated December 9, 2008 and filed with the Commission on December 10, 2008.

3.14	Seventh Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P., dated as of March 13, 2009.	Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated March 18, 2009 and filed with the Commission on March 19, 2009.

3.15	Eighth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P., dated as of November 17, 2010.	Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on November 18, 2010.

4.01	Form of UDR, Inc. Common Stock Certificate.	Exhibit 4.1 to UDR, Inc.’s Current Report on Form 8-K dated March 14, 2007 and filed with the Commission on March 15, 2007.

4.02	Senior Indenture dated as of November 1, 1995, by and between UDR, Inc. and First Union National Bank of Virginia, N.A., as trustee.	Exhibit 4(ii)(h)(1) to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.

4.03	Supplemental Indenture dated as of June 11, 2003, by and between UDR, Inc. and Wachovia Bank, National Association, as trustee.	Exhibit 4.03 to UDR, Inc.’s Current Report on Form 8-K dated June 17, 2004 and filed with the Commission on June 18, 2004.

4.04	Subordinated Indenture dated as of August 1, 1994 by and between UDR, Inc. and Crestar Bank, as trustee.	Exhibit 4(i)(m) to UDR, Inc.’s Form S-3 Registration Statement (Registration No. 33-64725) filed with the Commission on November 15, 1995.




Exhibit	Description	Location

4.05	Form UDR, Inc. of Senior Debt Security.	Exhibit 4(i)(n) to UDR, Inc.’s Form S-3 Registration Statement (Registration No. 33-64725) filed with the Commission on November 15, 1995.

4.06	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.

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	UDR, Inc. 5.13% Medium-Term Notes due January 2014, issued October 3, 2003, January 15, 2004 and March 18, 2004	Exhibit 4.2 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, and Exhibits 4.1 and 4.2 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.

4.10	UDR, Inc. 5.25% Medium-Term Note due January 2015, issued November 1, 2004.	Exhibit 4.21 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004.

4.11	UDR, Inc. 5.25% Medium-Term Note due January 2015, issued February 14, 2005.	Exhibit 4.22 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004.

4.12	UDR, Inc. 5.25% Medium-Term Note due January 2015, issued March 8, 2005.	Exhibit 4.23 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004.

4.13	UDR, Inc. 5.25% Medium-Term Note due January 2015, issued May 3, 2005.	Exhibit 4.3 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

4.14	UDR, Inc. 5.25% Medium-Term Note due January 2016, issued September 7, 2005.	Exhibit 4.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.

4.15	UDR, Inc. 5.50% Medium-Term Note, Series A due April 2014, issued March 27, 2007.	Exhibit 4.5 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.

4.16	UDR, Inc. 4.25% Medium-Term Note, Series A due June 2018, issued May 23, 2011.	Exhibit 4.16 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013.

4.17	UDR, Inc. 4.625% Medium-Term Note, Series A due January 2022, issued January 10, 2012.	Exhibit 4.17 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013.




Exhibit	Description	Location

4.18	UDR, Inc. 3.70% Medium-Term Note, Series A due October 2020, issued September 26, 2013.	Exhibit 4.18 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013.

4.19	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.

4.20	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.

4.21	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.

4.22	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.

4.23	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.

4.24	UDR, Inc. 3.75% Medium-Term Note, Series A due October 2024, issued June 26, 2014.	Exhibit 4.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.

10.01*	UDR, Inc. 1999 Long-Term Incentive Plan (as amended and restated February 6, 2014).	Exhibit 10.1 to UDR, Inc.'s Current Report on Form 8-K filed with the Commission on May 28, 2014.

10.02*	Form of UDR, Inc. Restricted Stock Award Agreement under the 1999 Long-Term Incentive Plan.	Exhibit 10.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.

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*	Form of UDR, Inc. Notice of Performance Contingent Restricted Stock Award.	Exhibit 10.2 to UDR, Inc.’s Current Report on Form 8-K dated May 2, 2006 and filed with the Commission on May 8, 2006.

10.05*	Description of UDR, Inc. Shareholder Value Plan.	Exhibit 10(x) to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999.

10.06*	Description of UDR, Inc. Executive Deferral Plan.	Exhibit 10(xi) to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999.




Exhibit	Description	Location

10.07*	Form of UDR, Inc. Indemnification Agreement.	Exhibit 10.3 to UDR, Inc.’s Current Report on Form 8-K dated May 2, 2006 and filed with the Commission on May 8, 2006.

10.08	Amended and Restated Master Credit Facility Agreement dated as of June 24, 2002 by and between UDR, Inc. and Green Park Financial Limited Partnership, as amended through February 14, 2007.	Exhibit 10.41 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2006.

10.09	Limited Liability Company Agreement of UDR Texas Ventures LLC, a Delaware limited liability company, dated as of November 5, 2007.	Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated November 5, 2007 and filed with the Commission on November 9, 2007.

10.10*	Letter Agreement dated as of February 18, 2008, by and between UDR, Inc. and Warren L. Troupe.	Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated February 22, 2008 and filed with the Commission on February 27, 2008.

10.11*	Termination of Letter Agreement dated as of February 18, 2008 by and between UDR, Inc. and Warren L. Troupe, dated as of February 7, 2013 and effective as of December 31, 2012.	Exhibit 10.44 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012.

10.12*	Indemnification Agreement dated as of March 3, 2008, by and between UDR, Inc. and Warren L. Troupe.	Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated February 22, 2008 and filed with the Commission on February 27, 2008.

10.13*	Letter Agreement, dated December 12, 2012, by and between UDR, Inc. and Thomas M. Herzog.	Exhibit 10.43 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012.

10.14	Subordination Agreement dated as of April 16, 1998, by and between UDR, Inc. and United Dominion Realty, L.P.	Exhibit 10(vi)(a) to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.

10.15	Term Loan Agreement dated as of December 14, 2009, by and among UDR, Inc., Regions Capital Markets, PNC Capital Markets LLC, Regions Bank, PNC Bank, National Association, U.S. Bank National Association and the other signatories thereto.	Exhibit 99.1 to UDR, Inc.’s Current Report on Form 8-K dated December 14, 2009 and filed with the Commission on December 17, 2009.

10.16	Amendment to the UDR, Inc. $250 Million Term Loan Agreement.	Exhibit 10.2 to UDR, Inc.’s Current Report on Form 8-K dated June 6, 2013 and filed with the Commission on June 10, 2013.

10.17	Amendment to the UDR, Inc. $100 Million Term Loan Agreement.	Exhibit 10.3 to UDR, Inc.’s Current Report on Form 8-K dated June 6, 2013 and filed with the Commission on June 10, 2013.

10.18	Underwriting Agreement among UDR, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, as Representatives of the several underwriters, dated June 4, 2012.	Exhibit 1.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on June 4, 2012.




Exhibit	Description	Location

10.19	ATM Equity Offering^SM Sales Agreement among UDR, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, dated April 4, 2012.	Exhibit 1.1 to UDR, Inc.’s Current Report on Form 8-K dated April 4, 2012 and filed with the SEC on April 5, 2012.

10.20	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.

10.21	Credit Agreement dated as of October 25, 2011 (the “Credit Agreement”) by and among UDR, Inc., as Borrower, The Financial Institutions party Hereto and Their Assignees under Section 12.5, as Lenders, Wells Fargo Bank, National Association, as Administrative Agent, Wells Fargo Securities, LLC and J.P. Morgan Securities LLC, as Joint Lead Arrangers and Joint Lead Bookrunners, JPMorgan Chase Bank, N.A., as Syndication Agent, and Bank of America, N.A., PNC Bank, National Association and US Bank National Association, as Documentation Agents.	Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the Commission on October 26, 2011.

10.22	First Amendment to the Credit Agreement, dated as of March 1, 2013.	Exhibit 10.22 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013.

10.23	Second Amendment to the Credit Agreement, dated as of June 6, 2013.	Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated June 6, 2013 and filed with the Commission on June 10, 2013.

10.24	Amendment to the UDR, Inc. Term Loan Agreement.	Exhibit 10.24 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013.

10.25	Aircraft Time Sharing Agreement dated as of December 15, 2011, by and between UDR, Inc. and Thomas W. Toomey.	Exhibit 10.42 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2011.

10.26	Aircraft Time Sharing Agreement dated as of December 15, 2011, by and between UDR, Inc. and Warren L. Troupe.	Exhibit 10.2 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.

10.27	Amendment No.1, dated July 29, 2014, to the ATM Equity Offering^SM Sales Agreement among UDR, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, dated April 4, 2012.	Exhibit 1.1 to UDR, Inc.’s Current Report on Form 8-K filed with the Commission on July 31, 2014.




Exhibit	Description	Location

10.28	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 filed with the Commission on July 31, 2014.

12.1	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends of UDR, Inc.	Filed herewith.

12.2	Computation of Ratio of Earnings to Fixed Charges of United Dominion Realty, L.P.	Filed herewith.

21	Subsidiaries of UDR, Inc. and United Dominion Realty, L.P.	Filed herewith.

23.1	Consent of Independent Registered Public Accounting Firm for UDR, Inc.	Filed herewith.

23.2	Consent of Independent Registered Public Accounting Firm for United Dominion Realty, L.P.	Filed herewith.

31.1	Rule 13a-14(a) Certification of the Chief Executive Officer of UDR, Inc.	Filed herewith.

31.2	Rule 13a-14(a) Certification of the Chief Financial Officer of UDR, Inc.	Filed herewith.

31.3	Rule 13a-14(a) Certification of the Chief Executive Officer of United Dominion Realty, L.P.	Filed herewith.

31.4	Rule 13a-14(a) Certification of the Chief Financial Officer of United Dominion Realty, L.P.	Filed herewith.

32.1	Section 1350 Certification of the Chief Executive Officer of UDR, Inc.	Filed herewith.

32.2	Section 1350 Certification of the Chief Financial Officer of UDR, Inc.	Filed herewith.

32.3	Section 1350 Certification of the Chief Executive Officer of United Dominion Realty, L.P.	Filed herewith.

32.4	Section 1350 Certification of the Chief Financial Officer of United Dominion Realty, L.P.	Filed herewith.




Exhibit	Description	Location

101	XBRL (Extensible Business Reporting Language). The following materials from this Annual Report on Form 10-K for the period ended December 31, 2014, formatted in 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., (xi) notes to consolidated financial statements of United Dominion Realty, L.P.	Filed herewith.

*	Management Contract or Compensatory Plan or Arrangement