Edgar Filing: UNITED DOMINION REALTY TRUST INC

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

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UNITED DOMINION REALTY TRUST, INC.
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[LOGO] UNITED DOMINION
Realty Trust

April 4, 2002

Dear Shareholders:

Please accept my personal invitation to attend our Annual Meeting of
Shareholders to be held on Tuesday, May 7, 2002, at 4:00 p.m. at The Jefferson
Hotel, 101 West Franklin Street, Richmond, Virginia.

The formal business to be conducted at the meeting is described in the
notice that follows this letter. We will also review 2001, report on recent
financial results, discuss expectations for the future and will be available to
answer your questions during the meeting and afterward.

We rely upon all shareholders to execute and return their proxies promptly
in order to avoid costly proxy solicitation. You may also vote your shares
electronically through the Internet or by telephone. This will eliminate the
need to return your proxy card. Instructions for Internet and telephone voting
are on your proxy card. If you attend the Annual Meeting of Shareholders, you
may withdraw your proxy at the meeting and vote your shares in person from the
floor. Your vote is important to us.

I look forward to seeing you on May 7, 2002, at 4:00 p.m.

Sincerely,

UNITED DOMINION REALTY TRUST, INC.

/s/ Robert C. Larson
Robert C. Larson
Chairman of the Board of Directors

United Dominion Realty Trust, Inc.

Corporate Office: 400 East Cary Street, Richmond, Virginia 23219-3816
Tel: 804.780.2691 Fax: 804.343.1912

Principal Executive Office: 1745 Shea Center Drive, Suite 200, Highlands Ranch,
Colorado 80129-1540
Tel: 720.283.6120 Fax: 720.283.2452

[LOGO] UNITED DOMINION

April 4, 2002

Notice of Annual Meeting of Shareholders

To Be Held On Tuesday, May 7, 2002 at 4:00 p.m.

The Annual Meeting of Shareholders of United Dominion Realty Trust, Inc.
will be held at The Jefferson Hotel, 101 West Franklin Street, Richmond,
Virginia, on Tuesday, May 7, 2002, at 4:00 p.m., for the following purposes:

1. To elect ten directors to serve for the ensuing year;

2. To ratify the selection of Ernst & Young LLP to serve as independent
auditors for the year ending December 31, 2002; and

3. To transact such other business as may properly come before the meeting.

The foregoing items of business are more fully described in the proxy
statement accompanying this notice. Shareholders who owned shares of our common
stock at the close of business on March 20, 2002 are entitled to notice of, and
to vote at, the meeting.

All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to vote
your shares as soon as possible.

By Order of the Board of Directors

/s/ Mary Ellen Norwood
Mary Ellen Norwood
Corporate Secretary

TO ENSURE THAT YOUR VOTE IS RECORDED PROMPTLY, PLEASE VOTE AS SOON AS POSSIBLE,
EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING. MOST SHAREHOLDERS HAVE THREE
OPTIONS FOR SUBMITTING THEIR VOTE: (1) VIA THE INTERNET AT WWW.EPROXY.COM/UDR;
(2) BY PHONE (PLEASE SEE YOUR PROXY CARD FOR INSTRUCTIONS); AND (3) BY MAIL,
USING THE PAPER PROXY CARD.

TABLE OF CONTENTS

Page
----

Information Concerning Solicitation and Voting.................... 1
General........................................................ 1
Record Date and Shares Outstanding............................. 1
Revoking Your Proxy............................................ 1
How Your Proxy Will Be Voted................................... 1
Quorum......................................................... 2
Voting......................................................... 2
Solicitation of Proxies........................................ 2

Proposal No. 1 Election of Directors.............................. 3
Vote Required and Board of Directors' Recommendation........... 4
Board of Directors and Committee Meetings...................... 5
Compensation of Executive Officers............................. 6
Employment, Severance and Change-in-Control Agreements......... 8
Compensation of Directors...................................... 9

Compensation Committee Report on Executive Compensation........... 9
Compensation Committee Interlocks and Insider Participation.... 12

Performance Graph................................................. 13

Audit Committee Report............................................ 14
Audit Fees..................................................... 16

Proposal No. 2 Ratification of Appointment of Independent Auditors 16
Shareholder Proposal........................................... 16
Vote Required and Board of Directors' Recommendation........... 16

Security Ownership of Certain Beneficial Owners and Management.... 17
Section 16(a) Beneficial Ownership Reporting Compliance........ 18

Certain Business Relationships.................................... 19
Indebtedness of Management to the Company...................... 19
Out-Performance Program........................................ 19

Voting via the Internet or by Telephone........................... 21
For Shares Directly Registered in the Name of the Shareholder.. 21
For Shares Registered in the Name of a Broker or a Bank........ 21

Delivery of Voting Materials...................................... 22

Annual Report..................................................... 22

Matters to be Presented at the 2003 Annual Meeting of Shareholders 22

[LOGO] UNITED DOMINION

Proxy Statement

INFORMATION CONCERNING SOLICITATION AND VOTING

General

The enclosed proxy is solicited on behalf of the board of directors of
United Dominion Realty Trust, Inc., a Virginia corporation, for use at our
Annual Meeting of Shareholders to be held on May 7, 2002, and at any
adjournment, continuation or postponement of the meeting.

A number of abbreviations are used in the proxy statement. We refer to the
company as "United Dominion" or "we," "us" or "our." The term "proxy
solicitation materials" includes this proxy statement, as well as the enclosed
proxy card. References to "fiscal 2001" mean our 2001 fiscal year which began
on January 1, 2001 and ended on December 31, 2001. Our 2002 Annual Meeting of
Shareholders is simply referred to as the "annual meeting" or the "meeting."

Our corporate office is located at 400 East Cary Street, Richmond, Virginia
23219-3816. Our corporate office telephone number is (804) 780-2691. Our
principal executive office is located at 1745 Shea Center Drive, Suite 200,
Highlands Ranch, Colorado 80129-1540. Our principal executive office telephone
number is (720) 283-6120.

These proxy solicitation materials were mailed on or about April 4, 2002 to
all shareholders entitled to vote at the annual meeting.

Record Date and Shares Outstanding

Shareholders who owned shares of our common stock at the close of business
on March 20, 2002, referred to as the record date, are entitled to notice of,
and to vote at, the annual meeting. At the record date, we had 106,700,698
shares of common stock issued and outstanding.

Revoking Your Proxy

You may revoke your proxy at any time prior to the date of the annual
meeting by: (1) submitting a later-dated vote, in person at the annual meeting,
via the Internet, by telephone or by mail, or (2) delivering instructions to
the attention of Investor Services at United Dominion's corporate office, 400
East Cary Street, Richmond, Virginia 23219-3816. Any notice of revocation sent
to us must include the shareholder's name and must be received prior to the
meeting to be effective.

How Your Proxy Will Be Voted

All shares represented by properly executed proxies received in time for the
meeting will be voted at the meeting in accordance with the instructions marked
thereon or otherwise as provided therein, unless such proxies have previously
been revoked. Unless instructions to the contrary are marked, or if no
instructions are specified, shares represented by proxies will be voted:

. FOR the election of all nominees for director; and

. FOR the ratification of the selection of Ernst & Young LLP as independent
auditors for the calendar year ending December 31, 2002.

In addition, if any other matters properly come before the annual meeting,
it is the intention of the persons named in the enclosed proxy card to vote the
shares they represent as directed by the board of directors. We have not
received notice of any other matters that may properly be presented at the
annual meeting.

Quorum

Each share of common stock outstanding on the record date is entitled to one
vote. Cumulative voting is not permitted. A quorum, which is a majority of the
outstanding shares as of the record date, must be present in order to hold the
meeting and to conduct business. Your shares will be counted as being present
at the meeting if you appear in person at the meeting, if you vote your shares
by telephone or over the Internet, or if you submit a properly executed proxy
card. Votes against a particular proposal will be counted both to determine the
presence or absence of a quorum and to determine whether the requisite majority
of voting shares has been obtained.

Voting

Tabulation

If a quorum is present, the affirmative vote of (1) a plurality of the
shares of common stock voting at the annual meeting is required to elect
directors, and (2) a majority of the shares voted at the annual meeting is
required to ratify the appointment of Ernst & Young LLP as our independent
accountants for this fiscal year.

Our transfer agent will tabulate votes cast by proxy by an automated system.
Votes cast by proxy or in person at the meeting will be counted by the persons
appointed by us to act as election inspectors for the meeting. Abstentions,
broker non-votes, which are explained below, and shares as to which authority
to vote on any proposal is withheld, are each included in the determination of
the number of shares present and voting at the meeting for purposes of
obtaining a quorum. Each will be tabulated separately.

Abstentions; Broker Non-Votes

In the absence of controlling precedent to the contrary, we intend to treat
abstentions and broker non-votes in the following manner. A broker "non-vote"
occurs when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have the discretionary voting
power with respect to that item and has not received instructions from the
beneficial owner. Broker "non-votes" and shares as to which proxy authority has
been withheld with respect to any matter are not deemed to be entitled to vote
for purposes of determining whether shareholder approval of that matter has
been obtained. As a result, broker "non-votes" are not included in the
tabulation of the voting results on the election of directors or issues
requiring the approval of a majority of the shares of common stock present and
entitled to vote and, therefore, do not have the effect of votes in opposition
for such proposals. With respect to Proposal 1 requiring a plurality vote and
Proposal 2 requiring the affirmative vote of a majority of the common stock,
present and entitled to vote, broker "non-votes" have no effect. Because
abstentions will be included in tabulations of the shares of common stock
entitled to vote for purposes of determining whether a proposal has been
approved, abstentions have the same effect as a negative vote on Proposal 2.

Solicitation of Proxies

This solicitation is being made by mail on behalf of our board of directors,
but may also be made without additional remuneration by our officers or
employees by telephone, telegraph, facsimile transmission, e-mail or personal
interview. We will bear the expense of the preparation, printing and mailing of
the enclosed form of proxy, notice of annual meeting and this proxy statement
and any additional material relating to the meeting that may be furnished to
our shareholders by our board subsequent to the furnishing of this proxy
statement. We will reimburse banks and brokers who hold shares in their name or
custody, or in the name of nominees for others, for their out-of-pocket
expenses incurred in forwarding copies of the proxy materials to those persons
for whom they hold such shares. To obtain the necessary representation of
shareholders at the meeting, supplementary solicitations may be made by mail,
telephone or interview by our officers or employees, without additional
compensation, or selected securities dealers. We anticipate that the cost of
such supplementary solicitations, if any, will not be material.

PROPOSAL NO. 1

ELECTION OF DIRECTORS

Our board of directors is comprised of ten members, all of whom are to be
elected at the annual meeting. The board of directors has nominated the persons
named below for election as directors at the annual meeting. Unless otherwise
directed, the proxy holders will vote the proxies received by them for the ten
nominees named below. If any of the ten nominees is unable or declines to serve
as a director at the time of the annual meeting, the proxies will be voted for
any nominee who is designated by the present board of directors to fill the
vacancy. It is not expected that any nominee will be unable or will decline to
serve as a director. The directors elected will hold office until the next
annual meeting of shareholders or until their successors are elected and
qualified.

The names of the nominees and certain information about them are set forth
below. There is no family relationship between any of our directors or
executive officers.

DIRECTOR
NAME OF NOMINEE AGE POSITION(S) WITH UNITED DOMINION SINCE
--------------- --- -------------------------------- --------

R. Toms Dalton, Jr. 69 Director 1973
Robert P. Freeman.. 57 Director 1998
Jon A. Grove....... 57 Director 1998
James D. Klingbeil. 66 Vice Chairman of the Board 1998
Robert C. Larson... 67 Chairman of the Board 2000
John P. McCann..... 57 Director and Chairman Emeritus 1978
Lynne B. Sagalyn... 54 Director 1996
Mark J. Sandler.... 60 Director 1996
Robert W. Scharar.. 53 Director 1996
Thomas W. Toomey... 41 President, Chief Executive Officer and Director 2001

R. Toms Dalton, Jr. has been a partner with Allen & Carwile, attorneys,
Waynesboro, Virginia, since 1960, and is the Commissioner of Accounts for the
City of Waynesboro, Virginia. He is a director of First Virginia Bank of
Augusta, Waynesboro, Virginia.

Robert P. Freeman has served as Managing Director of Wells Hill Partners,
Ltd., New York, New York, a real estate investment banking firm, since 2000.
Previously, Mr. Freeman was a Managing Director of Lazard Freres & Co. LLC, a
private investment bank, or Lazard, and President of Lazard Freres Real Estate
Investors, LLC, or LFREI, a real estate investment company, from 1992 to 1999.
Mr Freeman is active in, and serves as a director of, numerous private and
charitable organizations.

Jon A. Grove was the Chairman of the Board of Directors, President and Chief
Executive Officer of ASR Investments Corporation since its organization in 1987
until our acquisition of ASR in 1998. He is also a director of American
Southwest Holdings, Inc., in Phoenix, Arizona.

James D. Klingbeil is Vice Chairman of the Board of Directors and has been
the Chairman and Chief Executive Officer of American Apartment Communities III,
or AAC III, a privately owned REIT based in San Francisco, California, since
1997. He was Chairman and Chief Executive Officer of American Apartment
Communities II, or AAC II, from 1995 until our merger with AAC II in December
of 1998. He is also Chairman and CEO of Klingbeil Capital Management, The
Klingbeil Company and Khempco Building Supply Company. He is a director of
Broad Street Financial and numerous private companies.

Robert C. Larson has been Chairman of the Board of Directors since March of
2001. He is a Managing Director of Lazard and Chairman of Lazard Freres Real
Estate Investors, LLC. He is also Chairman of Larson Realty Group (LRG), a
privately owned, Detroit-based company engaged in real estate investment,
development, management, leasing and consulting. Mr. Larson was Chairman of the
Taubman Realty Group from 1990 to 1998 and Vice Chairman of Taubman Centers,
Inc. until his retirement in May 2000. He currently serves as a director

of Six Continents PLC and Brandywine Realty Trust. In addition, Mr. Larson
represents Lazard as a director of American Apartment Communities III, Inc.;
Destination Europe Limited; Commonwealth Atlantic Properties, Inc.; ARV
Assisted Living, Inc. and as a member of the Partnership Committee of DP
Operating Partnership, L.P.

John P. McCann is Chairman Emeritus and was Chairman of the Board of
Directors from January 1997 until March 2001. He served as our Chief Executive
Officer from 1974 to February 2001 and President from 1974 to December 1998. He
is also a director of LandAmerica Financial Group, Inc., Richmond, Virginia,
and Storage USA, Inc., a self-storage REIT headquartered in Memphis, Tennessee.
Since 2001, he has been a private investor.

Lynne B. Sagalyn, Ph.D. is the Earle W. Kazis and Benjamin Schore Director
of the M.B.A. Real Estate Program at Columbia University's Graduate School of
Business and has been a professor in its Finance and Economics Division since
1992. From 1991 to 1992, she was a visiting professor at Columbia University.
From 1987 to 1991, she was an associate professor of Planning and Real Estate
Development at Massachusetts Institute of Technology. Dr. Sagalyn is a trustee
and chair of the Audit Committee of Capital Trust, a public real estate company
that specializes in real estate lending, and a director of J. P. Morgan U.S.
Real Estate Income and Growth Fund and a director of The Retail Initiative.

Mark J. Sandler was a Senior Managing Director of Bear, Stearns & Co., Inc.,
an investment banking firm, in charge of its real estate operations from prior
to 1987 until his retirement in October 1988. Since that time, Mr. Sandler has
managed his personal and family investments. Mr. Sandler was a director of
South West Property Trust Inc. at the time we acquired South West in 1996.

Robert W. Scharar is President and a director of FCA Corp., a registered
investment advisor, which he founded in 1983. He also serves as a trustee of
First Commonwealth Mortgage Trust, Holly Mortgage Trust and Ivy Realty Trust,
all of which are REITs. He is also a director of Commonwealth International
Series Trust, a mutual fund group, and is the past President and a current
director of the American Association of Attorneys-CPAs.

Thomas W. Toomey has been our President and Chief Executive Officer since
February 2001. Prior to joining us, Mr. Toomey was with Apartment Investment
and Management Company, or AIMCO, where he served as Chief Operating Officer
for two years and Chief Financial Officer for four years. During his tenure at
AIMCO, Mr. Toomey was instrumental in the growth of AIMCO from 34,000 apartment
units to 360,000 units. He has also served as a Senior Vice President at
Lincoln Property Company from 1990 to 1995 and as an Audit Manager serving real
estate clients at Arthur Andersen & Co. Mr. Toomey received a BS in Business
Administration/Finance in 1982 from Oregon State University.

Vote Required and Board of Directors' Recommendation

The ten nominees receiving the highest number of affirmative votes of the
shares entitled to be voted shall be elected as directors. OUR BOARD OF
DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE NOMINEES LISTED ABOVE.

Board of Directors and Committee Meetings

The board of directors held ten meetings (including four telephone meetings)
during fiscal 2001. The board of directors has standing audit, compensation and
executive committees and a standing corporate governance committee that also
serves as our nominating committee.

Audit Committee

The members of the audit committee are Lynne B. Sagalyn (Chair), Robert P.
Freeman, Jon A. Grove, John P. McCann and Robert W. Scharar. During 2001, the
audit committee held four meetings. The audit committee assists the board of
directors in its general oversight of our financial reporting, internal
controls and audit functions. For further information see "Audit Committee
Report" on page 14.

Compensation Committee

The members of the compensation committee are James D. Klingbeil (Chair), R.
Toms Dalton, Jr., Robert P. Freeman, Jon A. Grove and Mark J. Sandler. The
compensation committee met four times in 2001. The compensation committee is
responsible for administering and approving all elements of compensation for
key senior management positions and also reviews and ensures the appropriate
administration of our compensation and benefit plans, programs and policies.
More specifically, among other things, the committee sets the compensation of
the Chief Executive Officer and also sets annual objectives for, and evaluates
the performance of, the Chief Executive Officer, with input from the full board
of directors. The compensation committee also approves the compensation of the
employees who report directly to the Chief Executive Officer and approves all
employment agreements. In addition, the compensation committee also develops
and administers the contributions and awards, if any, under our 401(k) and
profit sharing plans and management incentive programs, and other management
compensation, if any, including our Dividend Reinvestment and Stock Purchase
Plan, our 1999 Long-Term Incentive Plan and our Out-Performance Program.

Corporate Governance Committee

The members of the corporate governance committee are Mark J. Sandler
(Chair), R. Toms Dalton, Jr., James D. Klingbeil, Lynne B. Sagalyn and Robert
W. Scharar. The corporate governance committee met four times in 2001. The
corporate governance committee exercises general oversight of board governance
matters, reviews the role, composition and structure of our board of directors
and its committees, reviews and evaluates the board and its members, serves as
the nominating committee for board members and reviews and updates our
Statement on Corporate Governance.

The corporate governance committee considers nominees proposed by
shareholders. Any shareholder who wants to recommend a prospective nominee for
consideration may do so by giving the candidate's name and qualifications in
writing to our Corporate Secretary at our corporate office address.

Executive Committee

The members of the executive committee are Robert C. Larson (Chair), James
D. Klingbeil and Thomas W. Toomey. The executive committee met two times in
2001. The executive committee performs the duties and exercises the powers
delegated to it by the board of directors. The executive committee meets only
when board action on a significant matter is required and it is impractical or
not feasible to convene a full meeting of the board.

Compensation of Executive Officers

Summary Compensation Table

The following table summarizes the total compensation of each person who
served as our Chief Executive Officer last year and our four other most highly
compensated executive officers in fiscal 2001 and, where applicable, the total
compensation earned by each such individual for our two previous fiscal years.

Summary Compensation Table

Long-Term
Compensation
----------------------
Annual Compensation Awards
------------------------------------- ----------------------
Securities
Other Annual Restricted Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Stock Options Compensation
--------------------------- ---- -------- ---------- ------------ ---------- ---------- ------------

Thomas W. Toomey................. 2001 $223,229(1) $1,000,000(2) -- $ -- 320,000 $ --
President and Chief
Executive Officer
W. Mark Wallis................... 2001 $170,604(1) $ 560,000 -- $ -- 300,000 $ 46,720(3)
Senior Executive Vice
President
Ella S. Neyland.................. 2001 $151,648(1) $ 495,000 -- $ -- 175,000 $ 125,679(3)
Executive Vice President and
Treasurer
Christopher D. Genry............. 2001 $151,648(1) $ 200,000 -- $ -- 175,000 $ 83,750(3)
Executive Vice President and
Chief Financial Officer
Martha R. Carlin................. 2001 $140,975(1) $ 260,000 -- $ -- 100,000 $ 26,000(3)
Senior Vice President
John P. McCann................... 2001 $ 95,000(5) $ -- -- $65,300(7) -- $1,256,318(8)
Former Chief Executive 2000 $374,000 $ -- (6) $ -- -- $ 1,000(4)
Officer 1999 $374,000 $ 56,000 -- $ -- 195,000 $ 1,000(4)

--------
(1)This reflects salaries paid between February 12, 2001 and December 31, 2001
for Mr. Toomey, February 26, 2001 and December 31, 2001 for Ms. Carlin, and
April 2, 2001 and December 31, 2001 for Messrs. Wallis and Genry, and Ms.
Neyland.
(2)On February 8, 2002, Mr. Toomey received $1,000,000 of his 2001 bonus in the
form of a grant of 70,225 shares of restricted stock at the closing sales
price of $14.24 per share on the date of grant. These shares vest on
December 31, 2004. Distributions are paid on the restricted common shares at
the same rate as on unrestricted common shares.
(3)Represents employee commitments and relocation costs for Mr. Wallis, Ms.
Neyland, Mr. Genry and Ms. Carlin of $46,720, $125,679, $82,750 and $25,000,
respectively, and includes a $1,000 non-discretionary 401(k) matching
contribution made by us under our Profit Sharing Plan for both Mr. Genry and
Ms. Carlin.
(4)Represents a $1,000 non-discretionary 401(k) matching contribution made by
us under our Profit Sharing Plan.
(5)Represents Mr. McCann's salary from January 1 to March 31, 2001.
(6)Mr. McCann was granted options to purchase 20,000 shares of Realeum, Inc.
common stock, a company in which we have invested, at our average cost for
the shares of $0.372 per share. In 2001, Mr. McCann transferred these
options to us, at which time these options were cancelled.
(7)Mr. McCann received a grant of restricted stock under our Long-Term
Incentive Plan in 2001 as director's compensation--see "Compensation of
Directors." The dollar amount shown equals the number of restricted shares
granted, 5,000, multiplied by $13.06 per share, the closing sales price on
the date of grant. Each grant of restricted stock vests over a one-year
period beginning May 8, 2001, based on the total shareholder return during
such period. Distributions are paid on the restricted common shares at the
same rate as on unrestricted common shares. As of December 31, 2001, Mr.
McCann held a total of 5,000 restricted shares valued at $72,000, based upon
our closing stock price of $14.40 on December 31, 2001.
(8)Though not required, we previously disclosed the amount of $1,256,318,
representing the severance payable to Mr. McCann in accordance with the
terms of his severance agreement approved by the board of directors on March
20, 2001, under the "All Other Compensation" column for the 2000 fiscal
year. The amount now appears under the 2001 fiscal year, the year in which
the severance payment was earned. This amount includes $111,866 for the
estimated fair value of his options as of the date of the agreement using
the Black-Scholes option pricing model.

The foregoing compensation table does not include certain fringe benefits
made available on a non-discriminatory basis to all of our employees such as
group health insurance, dental insurance, long-term disability insurance,
vacation and sick leave. In addition, we make available certain non-monetary
benefits to our executive officers with a view to acquiring and retaining
qualified personnel and facilitating job performance. We consider such benefits
to be ordinary and incidental business costs and expenses. We also did not
include in the table the aggregate value of such benefits in the case of the
executive officers, which cannot be precisely ascertained but which is the
lesser of either (a) 10% of the salary and bonus paid to each such executive
officer or to the group, respectively, or (b) $50,000 or $50,000 times the
number of individuals in the group, as the case may be.

Option Grants Table

The following table provides information relating to the grant of stock
options to the named executive officers during the 2001 fiscal year.

Option Grants In Last Fiscal Year

Potential Realizable Value at Assumed
Annual Rates of Share Price
Individual Grants Appreciation for Option Term (3)
------------------------------------------------------------- -------------------------------------
Number of Percent of
Securities Total Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted (#) (1) Fiscal Year(2) ($/Share) Date 5% ($) 10% ($)
---- --------------- -------------- --------- ---------- --------- ---------

Thomas W. Toomey.... 320,000 24.82% $11.15 2/12/2011 2,243,900 5,686,500
W. Mark Wallis...... 300,000 23.27% $12.23 4/2/2011 2,307,400 5,847,400
Christopher D. Genry 175,000 13.57% $12.23 4/2/2011 1,346,000 3,411,000
Ella S. Neyland..... 175,000 13.57% $12.23 4/2/2011 1,346,000 3,411,000
Martha R. Carlin.... 100,000 7.76% $11.44 3/20/2011 719,500 1,823,200
John P. McCann...... -- -- $ -- -- -- --

--------
(1) These options vest ratably over a three-year period beginning in 2002. Mr.
Toomey's options vest ratably over a three-year period beginning December
31, 2001.
(2) A total of 1,289,484 stock options were granted during 2001.
(3) Potential realizable value is based on an assumption that the stock price
of the common stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the ten-year option term.
These numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect our estimate of
future stock price growth.

Aggregated Option Exercises and Fiscal Year-End Option Values

The following table provides information relating to the exercise of stock
options during the 2001 fiscal year by each of the named executive officers and
the 2001 fiscal year-end value of unexercised options.

Aggregate Option Exercises in 2001 and
2001 Year-End Option Value

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options At
Shares Options At Fiscal Year-End Fiscal Year-End(1)
Acquired Value -------------------------- -------------------------
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------

John P. McCann...... 3,002 $10,544 862,533 -- $2,350,355 $ --
Thomas W. Toomey.... -- $ -- 106,666 213,334 $ 346,668 $693,332
W. Mark Wallis...... -- $ -- -- 300,000 $ -- $651,000
Christopher D. Genry -- $ -- -- 175,000 $ -- $379,750
Ella S. Neyland..... -- $ -- -- 175,000 $ -- $379,750
Martha R. Carlin.... -- $ -- -- 100,000 $ -- $296,000

--------
(1) These values are calculated based on the difference between the exercise
price(s) and the fair market value of our common stock, as determined by
reference to the closing sales prices on the NYSE as of the exercise
date(s) or December 31, 2001, as appropriate.

Employment, Severance and Change-in-Control Agreements

Severance Agreement

In March of 2001, we entered into a severance agreement with Mr. McCann
substantially in accordance with the terms and provisions of his employment
agreement. Under the severance agreement, we agreed to pay Mr. McCann two years
of his annual base salary, the remainder of his salary through the end of 2001
and other incentives/bonuses payable under the terms of his employment
agreement. In addition, we agreed to accelerate the vesting of his options
under our 1999 Long-Term Incentive Plan, to extend the maturity of the notes
payable by Mr. McCann under our Officer's Stock Purchase and Loan Plan until
December 31, 2003, to continue our agreement with SunTrust Bank to pay for such
indebtedness under certain circumstances and to provide COBRA benefits to Mr.
McCann and his wife until Mr. McCann reaches the age of 65, with Mr. McCann
paying that portion of the health insurance premiums as are paid by similarly
situated employees. The agreement also contains confidentiality,
non-solicitation and non-compete provisions prohibiting Mr. McCann from
engaging in certain activities through December 31, 2003. Mr. McCann also
executed an agreement releasing us from all claims.

Change-in-Control Agreements

Under our Out-Performance Program, the valuation period for the performance
units is accelerated to and ends on the date a change of control occurs. If the
performance criteria under the program are satisfied as of such date, the
holders of the performance units would have the right to cause the Operating
Partnership to redeem the performance units for cash in an amount equal to the
price per share of our common stock on the date of such redemption, subject to
our right to acquire the performance units in exchange for an equal number of
shares of our common stock. See "Certain Business
Relationships--Out-Performance Program," for additional information.

Compensation of Directors

Each non-employee director receives an annual retainer fee of $17,500
($27,500 for a non-employee chairman of the board of directors). Each
non-employee director may elect to apply all or any portion of the annual
retainer fee to the receipt of stock options, which options vest quarterly and
are typically priced at the closing sale price of our common stock on the first
business day of the calendar year. In addition, each non-employee director
receives $1,000 for each regular meeting attended and $300 for each telephone
meeting attended. Committee chairpersons receive additional annual compensation
of $3,000. Additional meeting fees are paid for committee meetings held outside
of the normal board schedule in the amount of $300 for each telephone meeting,
and $500 for each in person meeting or $500 per day if a meeting lasts beyond
one day.

Each non-employee director also receives an annual grant of restricted stock
upon re-election. These shares have a one-year vesting period and are priced at
the closing sale price of our common stock on the grant date. The number of
shares that will vest at the end of the one-year period will vary in amount
based upon our performance during such period as follows:

Number of Shares Threshold Performance for Expiration of Restrictions
---------------- ----------------------------------------------------

0 Total shareholder return is less than 12%.
2,000 Total shareholder return is between 12% and 15%.
3,000 Total shareholder return is between 15% and 20%.
5,000 Total shareholder return exceeds 20%.

Directors are entitled to dividends during the vesting period; however, any
unvested shares at the end of the one-year vesting period will be returned to
us and cancelled. In 2001, each non-employee director received a grant of 5,000
shares of restricted stock.

We have also adopted a policy that provides any non-employee director
retiring from the board after at least 20 years of service with $5,000 per year
for the 5 years following retirement.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Our compensation committee is responsible for developing and administering
compensation programs for (1) senior management, including base salaries,
annual incentives and long-term incentive plans, and (2) long-term incentive
compensation plans for all associates.

Compensation Design and Philosophy

Our compensation programs are designed to further our primary goal of
increasing dividend income and share price appreciation by providing economic
motivation to our executive officers and other key employees. More
specifically, our compensation program seeks to:

. provide appropriate incentives for the executives while aligning their
interests with those of our shareholders;

. attract and retain management talent by providing compensation
competitive with other publicly- and privately-held real estate
investment companies; and

. focus executives on current and long-term business objectives and
critical issues.

Compensation of senior management is comprised of three components: (1) base
salary, (2) annual discretionary compensation, and (3) long-term or incentive
compensation. With respect to each of these components, the compensation
committee has adopted the following specific philosophies:

. base salaries should be slightly below industry averages;

. annual incentive compensation, which is tied to meeting company and
individual objectives, should be designed to bring total compensation to
approximately equal industry averages when performance objectives are
met; and

. long-term incentive compensation, which aligns the interests of executive
officers with those of long-term shareholders, can be above industry
averages when the long-term performance of our common stock is above
average.

Annual Incentive Compensation. The primary corporate objectives considered
in annual incentive compensation for the named executives are: (a) growth in
funds from operations per share, or FFO, versus the prior year; (b) our total
return to common shareholders versus other REITs as shown on the performance
graph in this proxy statement; and (c) key company objectives. With respect to
other senior management, the Chief Executive Officer establishes performance
measures and targets, which vary based on company, departmental and personal
performance objectives.

Long-Term Incentives. During 2001, the components of our long-term executive
incentive compensation were our 1999 Long-Term Incentive Plan, our Officer's
Stock Purchase and Loan Plan and our Out-Performance Program. Each of these
programs is intended to align the interests of executive officers with those of
our shareholders.

The compensation committee considers the sale of the performance units under
the Out-Performance Program to be the principal method of retaining key members
of management and incentivising the members of management who own performance
units to focus on achieving superior total returns for our shareholders.

CEO Compensation

In February 2001, Mr. Toomey became our new President and Chief Executive
Officer. In determining Mr. Toomey's compensation, the compensation committee
reviewed comparative financial and pay data of selected peer companies in the
REIT industry, including compensation packages provided to new CEOs hired by
similar companies, and the past compensation of Mr. McCann. Based on this
determination and upon negotiation with Mr. Toomey, the compensation committee
established Mr. Toomey's base salary for 2001 at $250,000, and awarded him
options to purchase 320,000 shares of our common stock at a price based on the
average closing price for the 20 days prior to the date of grant. In
determining the size of his option grant, the compensation committee also
considered Mr. Toomey's ability to influence our long-term growth and
profitability.

In February 2002, the compensation committee awarded Mr. Toomey a $1,000,000
bonus for fiscal 2001 in the form of a grant of 70,225 shares of restricted
stock, which shares vest on December 31, 2004. The primary factor considered by
the compensation committee in determining the bonus amount was Mr. Toomey's
significant contributions to the overall performance of our business during the
past year as evidenced, in part, by the following achievements:

. a total shareholder return of 43% for 2001;

. the fact that over the same period our total shareholder return of 43%
outperformed the total returns of the Morgan Stanley REIT Index--12.9%;
the NAREIT Equity REIT Total Return Index--14.0%; and the NAREIT Equity
Apartment Index--8.7%;

. the hiring and integration of a new management team; and

. Mr. Toomey's leadership in conducting a comprehensive review of our
organizational structure, operations and long-term goals.

Other Executive Compensation

The Chief Executive Officer makes recommendations to, and consults with, the
compensation committee as to the amount of proposed base salaries for the
executive officers who report directly to the CEO. After such consultation, the
compensation committee sets the base salaries for the year for these executive
officers and approves salary ranges for other executive officers based upon
salaries paid for similar positions within the real estate and REIT industry
(with an emphasis on the multi-family sector) as published in industry
statistical surveys and the proposed base salary relative to that of the other
executive officers.

In setting executive officer salaries, the CEO and the compensation
committee also consider factors such as our performance relative to the peer
companies and the individual officer's past performance and future potential.
In accordance with our compensation goals, the executive officers' base
salaries for fiscal 2001 were generally at the median of the range of peer
company base salary data obtained by the compensation committee.

As with the CEO, the size of the stock option grant to each executive
officer is determined by the compensation committee's evaluation of that
officer's ability to influence our long-term growth and profitability. In
addition, the compensation committee considers the incentive effect of
additional option grants given the stock options then held by such executive
officers and the amount of those options that are not yet vested.

For our newly hired executive officers, the compensation committee also
approved the award of stock options at a price based on the average closing
price for the 20 days preceding the date of the grant.

Performance Units

Effective July 1, 2001, we sold to a limited liability company, owned by
members of our senior management (see page 19), certain performance partnership
units of United Dominion Realty, L.P., referred to as the "Operating
Partnership." The sale of performance units was made pursuant to the
Out-Performance Program approved by our shareholders at last year's annual
shareholders meeting. The program is designed to provide participants with the
possibility of substantial returns on their investment if the total return on
our common stock exceeds targeted levels, while putting the participants'
investment at risk if those levels are not exceeded.

The performance units have the following features:

. They represent equity in our Operating Partnership and were sold at a
cash price of $1.00 per unit to the purchasers.

. The purchase price for the performance units was determined by our board
of directors based on an independent valuation prepared by Salomon Smith
Barney, Inc.

. In the event a holder of units leaves our employ prior to the completion
of the performance period and the vesting of the units, we have the
right, but not the obligation, to repurchase the units for the initial
price paid by the purchaser. Should we choose to resell those units, the
purchase price must be determined by an updated valuation to be prepared
by Salomon Smith Barney, Inc.

. The performance units will have no value unless the cumulative total
return on our common stock for the 28-month period from February 1, 2001
to June 1, 2003 exceeds the greater of the cumulative total return of the
Morgan Stanley REIT Index (or such other index adopted by our
compensation committee) or a minimum 30% total return.

At the conclusion of the valuation period, if our total return satisfies the
above performance criteria, the holders of the performance units will receive
distributions and allocations of income and loss from the Operating Partnership
based on the number of interests in the Operating Partnership obtained by a
predetermined formula (see page 20 for further details).

Other Compensation Considerations

Under Section 162(m) of the Internal Revenue Code we may not receive a
federal income tax deduction for compensation paid to our Chief Executive
Officer or any of the four most highly compensated executive officers to the
extent that any of the persons receive more than $1,000,000 in compensation in
any one year. However, if we pay compensation that is "performance-based" under
Section 162(m) we can receive a federal income tax deduction for the
compensation paid even if such compensation exceeds $1,000,000 in a single
year. Our 1999 Long-Term Incentive Plan and Out-Performance Program have been
designed to qualify as "performance-based" plans and therefore compensation
realized in connection with the exercise of options granted under these plans
is fully tax deductible on our federal income tax return. To maintain
flexibility in compensating executive officers in a manner designed to promote
varying corporate goals, the compensation committee has not adopted a policy
that all compensation must be deductible on our federal income tax returns.

James D. Klingbeil, Chairman

R. Toms Dalton, Jr. Robert P. Freeman Jon A. Grove Mark J. Sandler

Compensation Committee Interlocks and Insider Participation

No member of the compensation committee was at any time during fiscal 2001
or at any other time an officer or employee of the company. In addition, none
of our executive officers serves as a member of the board of directors or
compensation committee of any company that has one or more executive officers
serving as a member of our board of directors or compensation committee.

PERFORMANCE GRAPH

The following graph provides a comparison from December 1996 through
December 2001 of the cumulative total shareholder return (assuming reinvestment
of any dividends) among United Dominion, the NAREIT Equity REIT Total Return
Index ("NAREIT Equity Index"), the Standard & Poor's ("S&P 500") Index, the
NAREIT Equity Apartment Index ("NAREIT Equity Apartment") and the Morgan
Stanley REIT Index ("Morgan Stanley REIT Index").

[CHART]
NAREIT
United Dominion Equity S&P NAREIT Equity Morgan Stanley
Realty Trust Index 500 Apartment REIT Index

1996 100 100 100 100 100

D 1997 96.40 120.26 131.01 116.04 118.58
O
L 1998 77.36 99.21 165.95 105.86 98.54
L
A 1999 81.56 94.63 198.36 117.21 94.06
R
S 2000 98.78 119.58 178.25 158.86 119.28

2001 143.09 136.24 155.00 172.62 134.59

The NAREIT Equity Apartment and NAREIT Equity Index are published by The
National Association of Real Estate Investment Trusts ("NAREIT"). Index data
reflects monthly reinvestment of dividends and are based upon the monthly
closing prices of shares of all tax-qualified equity apartment REITs and equity
REITs, including United Dominion, listed on the New York Stock Exchange, the
American Stock Exchange and traded in the NASDAQ National Market System. The
Morgan Stanley REIT Index is a total-return index comprised of the most
actively traded REITs and is designed to be a measure of real estate equity
performance.

AUDIT COMMITTEE REPORT

The following is a report of the audit committee with respect to our audited
financial statements for the fiscal year ended December 31, 2001, which include
our consolidated balance sheets as of December 31, 2001 and 2000, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 2001, and
the notes thereto.

The committee is composed of five non-employee directors. The audit
committee met four times in 2001. All members of the committee, other than Mr.
McCann, are "independent" as defined by New York Stock Exchange listing
standards. Because Mr. McCann retired as our Chief Executive Officer and
Chairman in 2001, Mr. McCann does not meet the NYSE's requirements for
independence, which require, among other things, that for a director to be
considered independent, a period of three years expire from the date a director
was previously an executive officer of the company. After considering Mr.
McCann's knowledge of the operating and financial practices in the apartment
industry, and his detailed knowledge of our operations, the board of directors
determined that it was in the best interest of the company and our shareholders
for Mr. McCann to serve on the audit committee.

The committee operates pursuant to a written charter adopted by the board of
directors. In general, the audit committee charter sets forth:

. the scope of the audit committee's responsibilities and the means by
which it carries out these responsibilities;

. the outside auditor's accountability to the board of directors and the
audit committee; and

. the audit committee's responsibility to monitor the independence of the
outside auditor.

As described more fully in its charter, the purpose of the audit committee
is to assist the board of directors in its general oversight of our financial
reporting, internal control and audit functions. Management is responsible for
the preparation, presentation and integrity of our financial statements,
accounting and financial reporting principles, internal controls and procedures
designed to ensure compliance with accounting standards, applicable laws and
regulations. Ernst & Young LLP, our independent auditing firm, is responsible
for performing an independent audit of the consolidated financial statements in
accordance with generally accepted auditing standards.

The audit committee members are not professional accountants or auditors,
and their functions are not intended to duplicate or to certify the activities
of management and the independent auditor. The committee serves in a
board-level oversight role, in which it provides advice, counsel and direction
to management and the auditors on the basis of the information it receives,
discussions with management and the auditors and the experience of the
committee's members in business, financial and accounting matters.

The committee members have relied, without independent verification, on
management's representation that the financial statements have been prepared
with integrity and objectivity and in conformity with accounting principles
generally accepted in the United States of America and on the representations
of our independent auditor included in their report on our financial
statements. The committee's oversight role does not provide it with an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or policies, or appropriate
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the committee's
considerations and discussions with management and the independent auditor do
not assure that our financial statements are presented in accordance with
generally accepted accounting principles, that the audit of our financial
statements has been carried out in accordance with generally accepted auditing
standards or that our independent accountants are in fact "independent."

Among other matters, the audit committee monitors the activities and
performance of our external auditors, including the audit scope, audit fees,
auditor independence matters and the extent to which the independent auditor
may be retained to perform non-audit services. The audit committee and the
board have ultimate authority and responsibility to select, evaluate and, when
appropriate, replace our independent auditor. The audit committee also reviews
the results of the internal and external audit work with regard to the adequacy
and appropriateness of our financial, accounting and internal controls.
Management and independent auditor presentations to and discussions with the
audit committee also cover various topics and events that may have significant
financial impact or are the subject of discussions between management and the
independent auditor.

Review with Management

The audit committee has reviewed and discussed our audited financial
statements with management. Management represented to the committee that our
consolidated financial statements were prepared in accordance with generally
accepted accounting principles.

Review and Discussions with Independent Accountants

During 2001, the audit committee held meetings with management and the
independent auditors to discuss the overall scope and plans for the audit. We
also met with the independent auditors, with and without management present, to
discuss the results of their examinations and their evaluations of our internal
controls. In addition, the committee has reviewed and discussed the audited
consolidated financial statements for the year ended December 31, 2001 and held
discussions with management and Ernst & Young on the quality, not just the
acceptability, of our accounting principles, the reasonableness of significant
judgments and the clarity of disclosures in the financial statements.

The audit committee has also discussed with Ernst & Young the matters
required to be discussed by SAS 61 (Codification of Statements on Accounting
Standards) which includes, among other items, matters related to the conduct of
the audit of our financial statements.

The audit committee has also received written disclosures and the letter
from Ernst & Young required by Independence Standards Board Standard No. 1
(which relates to the accountant's independence from us and our related
entities) and has discussed with Ernst & Young their independence from United
Dominion. In addition, the audit committee has also considered whether the
provision of those services set forth in the table below are compatible with
Ernst & Young maintaining its independence from United Dominion.

In reliance on the reviews and the meetings, discussions and reports noted
above, the committee recommended to the full board that our audited financial
statements be included in our Annual Report on Form 10-K for the year ended
December 31, 2001 for filing with the SEC.

Lynne B. Sagalyn, Chair

Robert P. Freeman Jon A. Grove John P. McCann Robert W. Scharar

Audit Fees

The following table sets forth the aggregate fees billed or to be billed by
Ernst & Young LLP for the following services during fiscal 2001:

Audit Fees (1)................................................. $293,000
All other fees (2)............................................. $462,000
--------
Total....................................................... $755,000
========

--------
(1) Represents the aggregate fees billed or to be billed for professional
services rendered for the audit of our 2001 annual financial statements and
for the review of the financial statements included in our quarterly
reports during such period.
(2) Represents the aggregate fees billed in 2001 for services other than the
audit of our 2001 annual financial statements, but includes, for example,
fees for separate audits of certain of our subsidiaries and tax-related
services.

PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

Shareholder Proposal

The board of directors, upon the recommendation of our audit committee, has
selected Ernst & Young LLP, independent accountants, to audit our financial
statements for the current fiscal year ending December 31, 2002. We expect that
a representative of Ernst & Young LLP will be present at the annual meeting,
will have the opportunity to make a statement if he or she desires to do so,
and will be available to answer any appropriate questions.

Vote Required and Board of Directors' Recommendation

Although it is not required to do so, the board of directors is submitting
its selection of our independent auditors for ratification by the shareholders
at the annual meeting in order to ascertain the view of the shareholders
regarding such selection. The affirmative vote of the holders of a majority of
the shares of our common stock present or represented and voting at the annual
meeting will be required to approve this proposal. Whether the proposal is
approved or defeated, the board of directors may reconsider its selection. OUR
BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT AUDITORS FOR THE
2002 FISCAL YEAR.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the shares of our common stock beneficially
owned by (1) each of our directors (including the director nominees), (2) our
Chief Executive Officer and the four other most highly paid officers, (3) all
of our directors and executive officers as a group and (4) all persons known by
us to beneficially own greater than 5% of our outstanding stock. Except as
otherwise indicated in the accompanying footnotes, beneficial ownership is
shown as of the record date.

As of the record date, we are not aware of any shareholders who own
beneficially 5% or more of the outstanding shares of common stock, other than
Security Capital Preferred Growth Incorporated, which owns all of our
outstanding shares of the Series D preferred stock, which are convertible into
shares of our common stock.

Amount and Nature of
Beneficial Ownership Total Beneficial Owners
--------------------------------- ----------------------
Shares For Which
Shares Beneficial Ownership
Beneficially Can Be Acquired Number of Percent of
Name of Beneficial Owner Owned(1) Within 60 Days (2) Shares(2) Class(2)
------------------------ ------------ -------------------- ---------- ----------

John P. McCann(3).............................. 573,659 872,148 1,445,807 1.12%
Jon A. Grove................................... 252,239 288,832 541,071 *
Thomas W. Toomey............................... 337,225 106,666 443,891 *
Mark J. Sandler(4)............................. 152,070 56,448 208,518 *
R. Toms Dalton, Jr.(5)......................... 111,811 72,063 183,874 *
W. Mark Wallis................................. 39,818 100,000 139,818 *
Christopher D. Genry........................... 75,000 58,333 133,333 *
Ella S. Neyland................................ 75,000 58,333 133,333 *
Robert W. Scharar.............................. 82,517 41,400 123,917 *
James D. Klingbeil(6).......................... 49,345 62,063 111,408 *
Robert P. Freeman.............................. 49,345 47,015 96,360 *
Lynne B. Sagalyn(7)............................ 24,500 59,195 83,695 *
Martha R. Carlin............................... 25,764 33,333 59,097 *
Robert C. Larson(8)............................ 5,000 -- 5,000 *
All directors and executive officers as a group
(21 persons)................................. 2,060,527 2,151,070 4,211,597 3.26%
Security Capital Preferred Growth Incorporated. -- 12,307,692 12,307,692 9.54%
11 South LaSalle Street, Second Floor
Chicago, Illinois 60603

--------
* Less than 1%.
(1) Shares are considered beneficially owned, for purposes of this table, only
if held by the person indicated, or if such person, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise
has or shares the power to vote, to direct the voting of and/or to dispose
of or to direct the disposition of such security.
(2) Assumes exercise in full of all options exercisable within 60 days by our
directors and executive officers and the conversion of all of our
outstanding Series D preferred stock, 8,000,000 shares, held by Security
Capital Preferred Growth Incorporated. Each share of the Series D preferred
stock is currently convertible into 1.5385 shares of our common stock. For
Mr. Grove, this also includes 243,169 shares beneficially held in ASR
Investments Corporation Key Executive Share Option Plan.
(3) Includes 39,500 shares owned by Planned Property Realty Corp., of which Mr.
McCann is President and the sole shareholder.
(4) Includes 28,000 shares indirectly held in a trust for Mr. Sandler's
children and 12,864 shares in our Dividend Reinvestment and Stock Purchase
Plan.
(5) Includes 1,761 and 1,947 shares indirectly held by Mr. Dalton and his wife,
respectively, in Individual Retirement Accounts.

(6) Mr. Klingbeil is deemed to indirectly beneficially own 1,920,372 operating
partnership units, directly owned by certain limited partnerships and
limited liability companies. The holder of the operating partnership units
has the right to require the Operating Partnership to redeem all or a
portion of the operating partnership units held by the holder in exchange
for a cash payment per operating partnership unit equal to the market value
of a share 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 operating partnership units in
exchange for either cash or an equal number of shares of our common stock.
(7) Includes 500 shares of common stock jointly owned by Dr. Sagalyn and her
daughter, which shares Dr. Sagalyn may be deemed the beneficial owner of as
a result of her shared power to vote and dispose of such shares. Dr.
Sagalyn specifically disclaims any beneficial ownership interest in such
shares.
(8) American Apartment Communities III, L.P. ("AAC III") beneficially owns
586,766 operating partnership units in the Operating Partnership. American
Apartment Communities III, Inc. ("AAC III, Inc.") is the general partner of
AAC III. Lazard Freres Real Estate Investors LLC ("LFREI") is the general
partner of three investment funds that own 100% of the equity interests in
AAC III. Lazard Freres & Co. LLC ("Lazard") is the managing member of
LFREI. LFREI as the general partner of the funds and Lazard as the managing
member of LFREI may be deemed the indirect beneficial owners of the units
held by AAC III. Mr. Larson has served as a director of AAC III, Inc. and
as a member of the partnership committee of AAC III, since February 17,
2000. Mr. Larson, who joined Lazard in August 1999, is a Managing Director
of Lazard, the Chairman and Managing Principal of LFREI, and may be deemed
to indirectly beneficially own all of the units deemed indirectly
beneficially owned by Lazard and LFREI. Mr. Larson disclaims any beneficial
ownership of any units except for any pecuniary interest he possesses by
virtue of his officer positions with Lazard or LFREI.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, or the Exchange Act,
requires our officers and directors and persons who own more than 10% of a
registered class of our equity securities to file reports of ownership on Form
3 and changes in ownership on Form 4 or 5 with the Securities and Exchange
Commission. Such officers, directors and 10% shareholders are also required by
SEC rules to furnish us with copies of all Section 16(a) reports they file.

Based solely on our review of the copies of such forms received by us or
written representations from certain reporting persons that no Forms 5 were
required for such persons, we believe that, during the fiscal year ended
December 31, 2001, all Section 16(a) filing requirements applicable to our
officers, directors and 10% shareholders were complied with, except that Mr.
McCann failed to timely file a Form 4 with respect to one transaction.

CERTAIN BUSINESS RELATIONSHIPS

Indebtedness of Management to the Company

Our executive officers listed in the table below are indebted to us for
shares of common stock they purchased pursuant to the Officer's Stock Purchase
and Loan Plan. The table indicates the largest amount of the indebtedness
outstanding during fiscal year 2001 and the amount outstanding as of March 31,
2002. As provided in the Officer's Stock Purchase and Loan Plan, such
indebtedness bears interest at 7% per annum. The table does not include
indebtedness of our executive officers and directors to SunTrust Bank in the
amount of $10,514,996, which we may be obligated to purchase upon the
occurrence of certain events.

Maximum Indebtedness
Indebtedness at March 31,
during 2001 2002
------------ ------------

Thomas W. Toomey(1) $ 2,879,765 $ --
John P. McCann 1,520,866 1,437,505
Richard A. Giannotti 560,878 535,878
Scott A. Shanaberger 73,020 72,125
Thomas J. Corcoran 73,002 72,105
Patrick S. Gregory 73,002 72,105
Other non-executive officers 692,946 670,975
Former employees(2) 4,656,698 1,466,621
----------- ----------
Total $10,530,177 $4,327,314
=========== ==========

--------
(1) Mr. Toomey's obligation was satisfied by a loan from SunTrust referenced
above.
(2) Amounts owed by former employees are due as set forth in the promissory
note between the company and each of the former employees. The last
outstanding note matures on October 16, 2005.

Out-Performance Program

In July 2001, the Operating Partnership, a limited partnership in which we
serve as the sole general partner, sold an aggregate of 1,270,000 of its
performance units to a limited liability company formed and owned by the
holders of the performance units and governed by a management committee
consisting of Messrs. Klingbeil, Larson, Toomey and Wallis. This limited
liability company is called UDR Out-Performance 1, LLC. The performance units
were subsequently sold to the officers set forth below, in accordance with our
Out-Performance Program adopted by our board of directors and approved by our
shareholders at last year's annual meeting.

Number of % of Units
Name Units # Awarded
---- --------- ----------

Thomas W. Toomey 421,000 33.1%
W. Mark Wallis 185,000 14.6%
Christopher D. Genry 127,000 10.0%
Ella S. Neyland 127,000 10.0%
Martha R. Carlin 76,000 6.0%
Other officers (20 persons) 334,000 26.3%
--------- -----
Total 1,270,000 100.0%
========= =====

The purchase price for the performance units was $1.00 per unit as
determined by our board of directors based on an independent evaluation
prepared by Salomon Smith Barney, Inc. Under the program, our performance is
measured over the valuation period, which commenced on February 1, 2001 and
ends upon the earlier of (1) the date a change of control of the company
occurs, or (2) June 1, 2003. Unless at the end of the

valuation period the cumulative total return on our common stock exceeds the
cumulative total return of the Morgan Stanley REIT Index (or other index
adopted by our compensation committee) and at least the equivalent of a minimum
30% total return, the performance units will be forfeited and the holders will
lose their initial investment.

(1) determining the excess of the cumulative total return of our common
stock during the valuation period over the greater of the cumulative total
return of the peer group index or the minimum return;

(2) multiplying 4% of this amount by our market capitalization (defined
as the average number of shares outstanding over the 28-month period
multiplied by the daily closing price of our common stock), the product of
which is capped at 2% of our market capitalization; and

(3) dividing this amount by the volume-weighted average price per day of
our common stock for the 20 trading days immediately preceding the valuation
date.

Examples of the Value of the Performance Units

The following tables illustrate the value of the performance units under
different share prices and total returns at the valuation date. For the
two-year period ended December 31, 2001, the minimum thresholds for the
performance units would not have been met.

This table assumes that the cumulative total return of the Morgan Stanley
REIT Index is less than the 30% minimum return.

Value to Shareholders
---------------------
UDR Shareholder Value of
Stock Price at Total Value OPPSs to
Valuation Date Return(1) Achieved(2) Management(3)
-------------- --------- ----------- -------------
(Million) (Million)

$13.00 41.5% $ 497.2 $ 6.7
$14.00 51.6% $ 618.7 $12.8
$15.00 61.7% $ 740.0 $19.3
$16.00 71.8% $ 861.0 $26.1
$17.00 81.9% $ 981.8 $32.0
$18.00 91.9% $1,102.4 $32.7

This table assumes that the cumulative total return of the Morgan Stanley
REIT Index is 50% and therefore is the operative threshold instead of the 30%
minimum return.

$13.00 41.5% $ 497.2 $ 0.0
$14.00 51.6% $ 618.7 $ 0.9
$15.00 61.7% $ 740.0 $ 7.1
$16.00 71.8% $ 861.0 $13.6
$17.00 81.9% $ 981.8 $20.4
$18.00 91.9% $1,102.4 $27.4

--------
(1) Total return to our shareholders, assuming a reasonable rate of dividend
growth.
(2) Total return multiplied by beginning market capitalization of $1,200
million.
(3) Out-Performance shareholder value multiplied by management participation of
4% subject to 2% dilution limit.

The numbers used in these tables are for illustrative purposes only. There
can be no assurance that actual outcomes will be within the ranges used. Some
of the factors that could affect the results set forth in these tables are the
timing and duration of fluctuations in the price of our common stock, the
timing and duration of fluctuations in the valuation of the Morgan Stanley REIT
Index and changes in dividends declared on our common stock. These factors may
be affected by general economic conditions, local real estate conditions and
the dividend policy of the company. Amounts used in these tables are updated
from amounts used in the 2001 Proxy, based on variations in these factors
through January 31, 2002.

VOTING VIA THE INTERNET OR BY TELEPHONE

For Shares Directly Registered in the Name of the Shareholder

Shareholders with shares registered directly with Mellon Investor Services
LLC may vote those shares telephonically by calling toll free 1-800-435-6710,
or via the Internet at www.eproxy.com/udr.

For Shares Registered in the Name of a Broker or a Bank

A number of brokers and banks are participating in a program provided
through ADP Investor Communication Services that offers telephone and Internet
voting options. This program is different from the program provided by Mellon
Investor Services LLC for shares registered directly in the name of the
shareholder. If your shares are held in an account with a broker or a bank
participating in the ADP Investor Communication Services program, you may vote
those shares telephonically by calling the telephone number shown on the voting
form received from your broker or bank, or via the Internet at ADP Investor
Communication Services' voting Web site (www.proxyvote.com).

DELIVERY OF VOTING MATERIALS

To reduce the expenses of delivering duplicate voting materials to our
shareholders, we are taking advantage of new householding rules that permit us
to deliver only one set of voting materials, meaning the proxy statement and
the 2001 annual report, to shareholders who share the same address unless
otherwise requested. Each shareholder will receive a separate proxy card or
voting instruction form and will therefore retain a separate right to vote on
all matters presented at the meeting.

If you share an address with another shareholder and have received only one
set of voting materials, you may write or call us to request a separate copy of
these materials at no cost to you. For future annual meetings, you may request
separate voting materials or request that we only send one set of voting
materials to you if you are receiving multiple copies by calling us at (804)
780-2691 or by writing to us to the attention of Investor Services, 400 East
Cary Street, Richmond, Virginia 23219-3816.

ANNUAL REPORT

We have mailed to each of our shareholders our annual report for 2001, which
includes audited financial statements for the year ended December 31, 2001. WE
WILL, UPON WRITTEN REQUEST AND WITHOUT CHARGE, PROVIDE TO ANY PERSON, SOLICITED
HEREUNDER, A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 2001, INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. Requests should be addressed
to the attention of Investor Services, 400 East Cary Street, Richmond, Virginia
23219-3816.

MATTERS TO BE PRESENTED AT THE 2003 ANNUAL MEETING OF SHAREHOLDERS

In accordance with Rule 14a-8 under the Exchange Act, any shareholder who
intends to submit a proposal at our 2003 annual meeting of shareholders and who
wishes to have the proposal considered for inclusion in the proxy statement and
form of proxy for that meeting must, in addition to complying with the
applicable laws and regulations governing submission of such proposals, deliver
the proposal to us for consideration no later than December 5, 2002. Such
proposal should be sent to our Corporate Secretary at 400 East Cary Street,
Richmond, Virginia 23219-3816.

SEC rules also establish a different deadline for submission of shareholder
proposals that are not intended to be included in our proxy statement with
respect to discretionary voting. The discretionary vote deadline for our 2003
annual meeting is February 18, 2003 (45 calendar days prior to the anniversary
of the mailing date of this proxy statement). If a shareholder gives notice of
such a proposal after the discretionary vote deadline, our proxy holders will
be allowed to use their discretionary voting authority to vote against the
shareholder proposal when and if the proposal is raised at our 2003 annual
meeting; generally without including any disclosure of the proposal in the
proxy statement or on the proxy card.

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WE DEPEND UPON ALL
SHAREHOLDERS PROMPTLY SIGNING AND RETURNING THE ENCLOSED PROXY TO AVOID COSTLY
SOLICITATION. YOU CAN SAVE US CONSIDERABLE EXPENSE BY SIGNING AND RETURNING
YOUR PROXY AT ONCE. YOU MAY ALSO VOTE ELECTRONICALLY BY THE INTERNET OR BY
TELEPHONE AS SHOWN ON THE PROXY CARD AND AS DISCUSSED ABOVE.

For the Board of Directors
UNITED DOMINION REALTY TRUST, INC.
/s/ Mary Ellen Norwood
Mary Ellen Norwood
Corporate Secretary

Dated: April 4, 2002

United Dominion (Logo)

PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
UNITED DOMINION REALTY TRUST, INC.

The undersigned hereby appoints Robert C. Larson and Thomas W. Toomey and each
of them, with power to act without the other and with power of substitution, as
proxies and attorneys-in-fact and hereby authorizes them to represent and vote,
as provided on the other side, all the shares of United Dominion Realty Trust,
Inc. Common Stock which the undersigned is entitled to vote, and, in their
discretion, to vote upon such other business as may properly come before the
Annual Meeting of Shareholders of the Company to be held May 7, 2002 or any
adjournment thereof, with all powers which the undersigned would possess if
present at the meeting.

(Continued, and to be marked, dated and signed, on the other side)

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/\ FOLD AND DETACH HERE /\

United Dominion (Logo)

YOUR VOTE IS IMPORTANT!

You can vote in one of three ways:

1. Call toll free 1-800-435-6710 on a Touch-Tone telephone and follow the
instructions given. There is NO CHARGE to you for this call.

2. Vote by Internet at our Internet Address: http://www.eproxy.com/udr

3. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.

PLEASE VOTE

Please mark ----
your votes as | \/ |
indicated in | /\ |
this example ----

1. ELECTION OF DIRECTORS

FOR all nominees WITHHOLD
listed below AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed below
[_] [_]

Nominees: 01-R. Toms Dalton, Jr., 02-Robert P. Freeman, 03-Jon A. Grove,
04-James D. Klingbeil, 05-Robert C. Larson, 06-John P. McCann,
07-Lynne B. Sagalyn, 08-Mark J. Sandler, 09-Robert W. Scharar and
10-Thomas W. Toomey

(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)

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

2. RATIFICATION OF ERNST & YOUNG AS FOR AGAINST ABSTAIN
INDEPENDENT AUDITORS [_] [_] [_]

3. SUCH OTHER BUSINESS AS MAY PROPERLY COME FOR AGAINST ABSTAIN
BEFORE THE MEETING OR ANY ADJOURNMENT [_] [_] [_]
THEREOF

Please mark this If you have Internet access, please consider
box if you plan [_] the following:
to attend the
Annual Meeting "By checking the box to the right, I consent
to future access of the Annual Reports,
Proxy Statements, prospectuses and other
communications electronically via the
Internet. I understand that the Company may
no longer distribute printed materials to me
from any future shareholder meeting until
such consent is revoked. I understand that I
may revoke my consent at any time by
contacting the Company's transfer agent,
Mellon Investor Services LLC, Ridgefield
Park, NJ and that costs normally associated
with electronic access, such as usage and
telephone charges will be my
responsibility."

Signature____________________ Signature____________________ Dated_________, 2002

Please sign exactly as your name(s) appear(s) on this proxy. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee, guardian
or other representative capacity, please give full title as such. PLEASE MARK,
SIGN, DATE AND PROMPTLY RETURN THIS PROXY USING THE ENCLOSED ENVELOPE.

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/\ FOLD AND DETACH HERE /\

Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week

Internet and telephone voting is available through 4PM Eastern Time the
business day prior to annual meeting day.

Your telephone or Internet vote authorizes the named proxies to vote
your shares in the same manner as if you marked,
signed and returned your proxy card.

--------------------------------------------------------------------------------
Internet
http://www.eproxy.com/udr

Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site. You will be prompted to enter your control number, located
in the box below, to create and submit an electronic ballot.

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

--------------------------------------------------------------------------------
Telephone
1-800-435-6710

Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below, and then follow the directions given.

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

--------------------------------------------------------------------------------
Mail

Mark, sign and date
your proxy card
and
return it in the
enclosed postage-paid
envelope.
--------------------------------------------------------------------------------

If you vote your proxy by Internet or by telephone, you do NOT
need to mail back your proxy card.