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•	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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(a)	See Note 2, Significant Accounting Policies

(b)	See Note 10, Derivatives and Hedging Activity

(c)	See Note 6, Secured and Unsecured Debt

(d)	See Note 8, Noncontrolling Interests

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Same store communities represent those communities acquired, developed, and stabilized prior to April 1, 2012 and held as of June 30, 2013. 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.

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•	Non-mature communities/other represent those communities that were acquired or developed in 2011, 2012, or 2013, sold properties, redevelopment properties, consolidated joint venture properties, and the non-apartment components of mixed use properties.

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i.	West Region — Orange County, San Francisco, Seattle, Monterey Peninsula, Los Angeles, San Diego, Inland Empire, Sacramento, and Portland

ii.	Mid-Atlantic Region — Washington D.C., Richmond, Baltimore, Norfolk, and other Mid-Atlantic

iii.	Northeast Region — New York and Boston

iv.	Southeast Region — Tampa, Orlando, Nashville, and other Florida

v.	Southwest Region — Dallas and Austin

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•	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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(a)	See Note 8, Derivatives and Hedging Activity

(b)	See Note 5, Debt

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•

Same store communities represent those communities acquired, developed, and stabilized prior to April 1, 2012 and held as of June 30, 2013. 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 a community that was acquired in 2012, development properties, sold properties, redevelopment properties, and the non-apartment components of mixed use properties.

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i.	West Region — Orange County, San Francisco, Monterey Peninsula, Los Angeles, Seattle, Sacramento, 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

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Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

•	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;

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•	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.

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

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(b)	The Company is currently developing six wholly-owned communities with 1,976 apartment homes, 142 of which have been completed.

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an increase in major renovations of 63.7% or $25.9 million. Major renovations of $66.6 million or $1,610 per home were spent for the six months ended June 30, 2013 as compared to $40.7 million or $876 per home for the comparable period in the prior year. Major renovations for the six months ended June 30, 2013 were primarily attributable to the redevelopment of two wholly-owned communities (1,670 homes) with a budget of $135.3 million of which we have incurred $95.8 million of costs at June 30, 2013;

•	a decrease of 59.0% or $4.8 million in revenue-enhancing capital expenditures, such as kitchen and bath remodels, on our existing operating portfolio; and

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a decrease in total recurring capital expenditures of 4.5% or $902,000. Total recurring capital expenditures of $19.0 million or $459 per stabilized home were spent for the six months ended June 30, 2013 as compared to $19.9 million or $428 per stabilized home for the comparable period in the prior year, which was due to a 17.7% or $1.1 million decrease in turnover capital expenditures and a 1.5% or $199,000 increase in asset preservation expenditures.

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

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amended its $900 million unsecured revolving credit facility. The amendment extends the maturity date from October 2015 to December 2017, includes a six month extension option, and contains 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 110 basis points and a facility fee of 20 basis points;

•	amended and re-priced its $100 million and $250 million unsecured term notes due in January 2016. The loans were re-priced from LIBOR plus 142.5 basis points to LIBOR plus 125 basis points, and the maturity date was extended to June 2018;

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on June 28, 2012, the Company refinanced $186 million of a Fannie Mae credit facility that carried an interest rate equal to LIBOR plus a spread of 284 basis points and was scheduled to mature in 2019. The new loans include a $90 million, 7-year fixed-rate loan that carries an interest rate of 3.95% and a $96 million, 10-year variable-rate loan that carries an interest rate equal to LIBOR plus a spread of 190 basis points. Three of the Company's communities were released from the facility and added to the Company's unencumbered asset pool;

•	repaid $42.6 million of secured debt. The $42.6 million of secured debt includes $39.8 million of mortgage payments and the repayment of $2.8 million of credit facilities;

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

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

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•	a decrease in net gains of $172.0 million on the sale of depreciable property related to the disposition of 15 communities during the three months ended June 30, 2012.

•	a decrease in general and administrative expense primarily due to a decrease in stock-based compensation expense;

•	a decrease in interest expense due to lower debt balances and lower interest rates, as well as lower write-offs of fair value adjustments resulting from early debt extinguishments; and

•	an increase in hurricane-related recoveries, net resulting from the effects of Hurricane Sandy on three of our New York, New York communities in 2012.

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•	a decrease in net gains of $252.5 million on the sale of depreciable property related to the disposition of 21 communities during the six months ended June 30, 2012; and

•	a decrease in tax benefit, net primarily due to a reversal of tax valuation allowance of $22.9 million recognized in 2012.

•	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 becoming fully amortized in 2012;

•	a decrease in general and administrative expense primarily due to a decrease in stock-based compensation expense;

•	a decrease in interest expense due to lower debt balances and lower interest rates; and

•	an increase in hurricane-related recoveries, net resulting from the effects of Hurricane Sandy on three of our New York, New York communities in 2012.

(a)	Same store consists of 37,074 apartment homes

(b)	Same store consists of 36,704 apartment homes

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

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

(b)	The Operating Partnership is currently developing two wholly-owned communities with 652 homes, none of which have been completed.

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•	a decrease in net gains of $51.3 million on the sale of depreciable property related to the disposition of four communities during the second quarter of 2012.

•	a decrease in interest expense due to early extinguishment of secured debt in 2012; and

•	an increase in hurricane-related recoveries, net resulting from the effects of Hurricane Sandy on two of our New York, New York communities in 2012.

•	a decrease in net gains of $51.2 million on the sale of depreciable property related to the disposition of four communities during the second quarter of 2012.

•	a decrease in depreciation and amortization due to the sale of real estate properties in the second quarter of 2012;

•	a decrease in interest expense due to early extinguishment of secured debt in 2012; and

•	an increase in hurricane-related recoveries, net resulting from the effects of Hurricane Sandy on two of our New York, New York communities in 2012.

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(a)	Same store consists of 19,900 apartment homes

(b)	Same store consists of 19,530 apartment homes

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

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•	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.

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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.

•	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; 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.

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•	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;

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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.

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•	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.

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•	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.

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•	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.

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(1)	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.

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(a)	Interest on indebtedness for the three and six months ended June 30, 2012 is presented gross of the (charge)/benefit for early debt extinguishment of $(4.1) million and $285,000, respectively.

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