UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2010

OR

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

For the transition period from                      to                     

Commission file number 1-10524

UDR, Inc.

Maryland (State or other jurisdiction of incorporation of organization)		54-0857512 (I.R.S. Employer Identification No.)

1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado 80129
(Address of principal executive offices) (zip code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares of the issuer’s common stock, $0.01 par value, outstanding as of July 30, 2010, was 163,386,174.

 

 

UDR, Inc.

INDEX

		PAGE
PART I — FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009 (audited)			3
Consolidated Statements of Operations for the three and six months ended June 30, 2010 and 2009 (unaudited)			4
Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009 (unaudited)			5
Consolidated Statements of Stockholders’ Equity and Comprehensive Income/(Loss) for the six months ended June 30, 2010 (unaudited)			6
Notes to Consolidated Financial Statements (unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures About Market Risk			42
Item 4. Controls and Procedures			42
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			42
Item 1A. Risk Factors			42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			53
Item 3. Defaults Upon Senior Securities			54
Item 4. (Removed and Reserved)			54
Item 5. Other Information			54
Item 6. Exhibits			54
Signatures			55
Exhibit 12
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I- FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

UDR, Inc.

		June 30,				December 31,
		2010				2009
		(unaudited)				(audited)
ASSETS
Real estate owned:
Real estate held for investment		$	6,251,365			$	5,995,290
Less: accumulated depreciation			(1,488,706	)			(1,350,067	)
Real estate held for investment, net			4,762,659				4,645,223
Real estate under development (net of accumulated depreciation of $758 and $1,226)			153,208				318,531
Total real estate owned, net of accumulated depreciation			4,915,867				4,963,754
Cash and cash equivalents			8,074				5,985
Marketable securities			37,878				37,650
Restricted cash			9,744				8,879
Deferred financing costs, net			25,508				26,601
Notes receivable			7,800				7,800
Investment in unconsolidated joint ventures			17,477				14,126
Other assets			57,021				67,822
Total assets		$	5,079,369			$	5,132,617
LIABILITIES AND STOCKHOLDERS’ EQUITY
Secured debt		$	1,957,406			$	1,989,434
Unsecured debt			1,454,252				1,437,155
Real estate taxes payable			15,215				16,976
Accrued interest payable			20,002				19,146
Security deposits and prepaid rent			24,920				31,798
Distributions payable			32,291				30,857
Deferred gains on the sale of depreciable property			28,836				28,826
Accounts payable, accrued expenses, and other liabilities			59,585				80,685
Total liabilities			3,592,507				3,634,877
Redeemable non-controlling interests in operating partnership			113,752				98,758
Stockholders’ equity
Preferred stock, no par value; 50,000,000 shares authorized
2,803,812 shares of 8.00% Series E Cumulative Convertible issued and outstanding (2,803,812 shares at December 31, 2009)			46,571				46,571
3,405,562 shares of 6.75% Series G Cumulative Redeemable issued and outstanding (3,432,962 shares at December 31, 2009)			85,139				85,824
Common stock, $0.01 par value; 250,000,000 shares authorized 163,040,383 shares issued and outstanding (155,465,482 shares at December 31, 2009)			1,630				1,555
Additional paid-in capital			2,061,811				1,948,669
Distributions in excess of net income			(822,057	)			(687,180	)
Accumulated other comprehensive (loss)/income, net			(3,605	)			2
Total UDR, Inc. stockholders’ equity			1,369,489				1,395,441
Non-controlling interest			3,621				3,541
Total equity			1,373,110				1,398,982
Total liabilities and stockholders’ equity		$	5,079,369			$	5,132,617

See accompanying notes to consolidated financial statements

UDR, Inc.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
REVENUES
Rental income		$	153,921			$	151,844			$	305,550			$	302,459
Non-property income:
Other income			2,056				3,958				5,376				8,982
Total Revenues			155,977				155,802				310,926				311,441
EXPENSES
Rental expenses:
Real estate taxes and insurance			19,115				18,843				38,716				38,863
Personnel			14,086				12,782				27,619				25,415
Utilities			7,951				7,350				16,661				15,717
Repair and maintenance			8,516				7,899				16,428				15,108
Administrative and marketing			3,999				3,584				7,849				6,917
Property management			4,233				4,176				8,403				8,318
Other operating expenses			1,457				2,010				2,942				3,664
Real estate depreciation and amortization			73,726				69,067				145,933				138,052
Interest
Expense incurred			35,987				35,376				71,886				71,885
Net loss/(gain) on debt extinguishment			1,030				(2,736	)			1,030				(9,849	)
Amortization of convertible debt premium			928				1,053				1,895				2,349
Storm related expenses			721				—				721				—
General and administrative			9,491				8,905				19,066				18,602
Other depreciation and amortization			1,308				1,478				2,531				2,872
Total Expenses			182,548				169,787				361,680				337,913
Loss from operations			(26,571	)			(13,985	)			(50,754	)			(26,472	)
Loss from unconsolidated entities			(1,185	)			(728	)			(1,922	)			(1,445	)
Tax expense for taxable REIT subsidiary			(81	)			—				(146	)			(51	)
Loss from continuing operations			(27,837	)			(14,713	)			(52,822	)			(27,968	)
Income from discontinued operations			197				2,053				156				1,885
Consolidated net loss			(27,640	)			(12,660	)			(52,666	)			(26,083	)
Net loss attributable to non-controlling interests			1,019				602				1,989				1,396
Net loss attributable to UDR, Inc.			(26,621	)			(12,058	)			(50,677	)			(24,687	)
Distributions to preferred stockholders — Series E (Convertible)			(931	)			(931	)			(1,862	)			(1,862	)
Distributions to preferred stockholders — Series G			(1,441	)			(1,869	)			(2,889	)			(3,738	)
Discount on preferred stock repurchases, net			25				—				25				—
Net loss attributable to common stockholders		$	(28,968	)		$	(14,858	)		$	(55,403	)		$	(30,287	)
Earnings per weighted average common share — basic:
Loss from continuing operations attributable to common stockholders		$	(0.18	)		$	(0.11	)		$	(0.35	)		$	(0.22	)
Income from discontinued operations		$	0.00			$	0.01			$	0.00			$	0.01
Net loss attributable to common stockholders		$	(0.18	)		$	(0.10	)		$	(0.35	)		$	(0.21	)
Earnings per weighted average common share — diluted:
Loss from continuing operations attributable to common stockholders		$	(0.18	)		$	(0.11	)		$	(0.35	)		$	(0.22	)
Income from discontinued operations		$	0.00			$	0.01			$	0.00			$	0.01
Net loss attributable to common stockholders		$	(0.18	)		$	(0.10	)		$	(0.35	)		$	(0.21	)
Common distributions declared per share		$	0.180			$	0.305			$	0.360			$	0.485
Weighted average number of common shares outstanding — basic			160,886				149,444				158,522				146,807
Weighted average number of common shares outstanding — diluted			160,886				149,444				158,522				146,807

See accompanying notes to consolidated financial statements

UDR, Inc.

		Six Months Ended June 30 ,
		2010				2009
		(unaudited)				(unaudited)
Operating Activities
Consolidated net loss		$	(52,666	)		$	(26,083	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			148,464				140,924
Net gain on the sale of depreciable property			(156	)			(1,885	)
Loss/(gain) on debt extinguishment			1,030				(9,849	)
Write off of bad debt			1,208				1,826
Write off of note receivable and other assets			—				952
Loss from unconsolidated entities			1,922				1,445
Amortization of deferred financing costs and other			3,939				3,407
Amortization of deferred compensation			6,008				4,196
Amortization of convertible debt discount			1,895				2,349
Changes in income tax accrual			(292	)			1,127
Changes in operating assets and liabilities:
Decrease in operating assets			2,973				8,849
Decrease in operating liabilities			(12,546	)			(3,264	)
Net cash provided by operating activities			101,779				123,994
Investing Activities
Proceeds from note receivable			—				200,000
Payments related to the buyout of joint venture partner			(16,141	)			—
Development of real estate assets			(61,771	)			(97,761	)
Capital expenditures and other major improvements — real estate assets, net of escrow reimbursement			(36,432	)			(36,724	)
Capital expenditures — non-real estate assets			(2,645	)			(6,645	)
Investment in unconsolidated joint ventures			(5,681	)			(17,341	)
Distributions received from unconsolidated joint venture			479				—
Purchase of marketable securities			—				(30,939	)
Purchase deposits on pending real estate acquisitions			—				(500	)
Net cash (used in)/provided by investing activities			(122,191	)			10,090
Financing Activities
Payments on secured debt			(83,845	)			(22,806	)
Proceeds from the issuance of secured debt			51,880				289,625
Proceeds from the issuance of unsecured debt			149,190				—
Payments on unsecured debt			(79,488	)			(364,233	)
Net (repayment)/proceeds of revolving bank debt			(55,400	)			61,100
Payment of financing costs			(2,491	)			(3,792	)
Issuance of common and restricted stock, net			4,376				(1,253	)
Proceeds from the issuance of common shares through public offering, net			103,444				—
Payments on the repurchase of Series G preferred stock, net			(637	)			—
Distributions paid to non-controlling interests			(2,685	)			(4,159	)
Distributions paid to preferred stockholders			(4,751	)			(5,600	)
Distributions paid to common stockholders			(57,092	)			(89,925	)
Repurchase of common stock			—				(798	)
Net cash provided by/(used in) financing activities			22,501				(141,841	)
Net increase/(decrease) in cash and cash equivalents			2,089				(7,757	)
Cash and cash equivalents, beginning of period			5,985				12,740
Cash and cash equivalents, end of period		$	8,074			$	4,983
Supplemental Information:
Interest paid during the year, net of amounts capitalized		$	78,991			$	81,550
Non-cash transactions:
Conversion of operating partnership non-controlling interests to common stock (39,638 in 2010 and 1,096,105 shares in 2009)			551				17,259
Payment of Special Dividend through the issuance of 11,358,042 shares of common stock			—				132,787
Issuance of restricted stock awards			16				1
Retirement of fully depreciated assets			7,183				—

See accompanying notes to consolidated financial statements

UDR, Inc.

																						Distributions in				Other
		Preferred Stock								Common Stock								Paid-in				Excess of				Comprehensive				Non-controlling
		Shares				Amount				Shares				Amount				Capital				Net Income				Income/(Loss)				interest				Total
Balance, December 31, 2009			6,236,774			$	132,395				155,465,482			$	1,555			$	1,948,669			$	(687,180	)		$	2			$	3,541			$	1,398,982
Comprehensive income (loss)
Net loss			—				—				—				—				—				(50,677	)			—				—				(50,677	)
Change in equity attributable to non-controlling interest			—				—				—				—				—				—				—				80				80
Other comprehensive income (loss)
Change in fair value of marketable securities			—				—				—				—				—				—				(904	)			—				(904	)
Unrealized gain on derivative financial instruments			—				—				—				—				—				—				(2,838	)			—				(2,838	)
Allocation to redeemable non-controlling interests			—				—				—				—				—				—				135				—				135
Comprehensive income (loss)																							(50,677	)			(3,607	)			80				(54,204	)
Issuance of common and restricted shares			—				—				1,629,910				16				9,183				—				—				—				9,199
Issuance of common shares through public offering			—				—				5,905,353				59				103,385				—				—				—				103,444
Repurchase of 27,400 shares of 6.75% Series G Cumulative Redeemable Shares			(27,400	)			(685	)			—				—				23				25				—				—				(637	)
Adjustment for conversion of non-controlling interests of unitholders in operating partnerships			—				—				39,638				—				551				—				—				—				551
Common stock distributions declared ($0.36 per share)			—				—				—				—				—				(58,637	)			—				—				(58,637	)
Preferred stock distributions declared-Series E ($0.6644 per share)			—				—				—				—				—				(1,862	)			—				—				(1,862	)
Preferred stock distributions declared-Series G ($0.84375 per share)			—				—				—				—				—				(2,889	)			—				—				(2,889	)
Adjustment to reflect redeemable non-controlling redemption value			—				—				—				—				—				(20,837	)			—								(20,837	)
Balance, June 30, 2010			6,209,374			$	131,710				163,040,383			$	1,630			$	2,061,811			$	(822,057	)		$	(3,605	)		$	3,621			$	1,373,110

See accompanying notes to consolidated financial statements

UDR, Inc.

1. CONSOLIDATION AND BASIS OF PRESENTATION

Consolidation and Basis of Presentation

UDR, Inc., collectively with our consolidated subsidiaries (“we”, “our”, “us”, “the Company” or “UDR”) is a self-administered real estate investment trust, or REIT, that owns, acquires, renovates, develops, and manages apartment communities nationwide. The accompanying consolidated financial statements include the accounts of UDR and its subsidiaries, including United Dominion Realty, L.P. (the “Operating Partnership”), and Heritage Communities L.P. (the “Heritage OP”). As of June 30, 2010, there were 179,863,065 units in the Operating Partnership outstanding, of which 173,916,795 units or 96.7% were owned by UDR and 5,946,270 units or 3.3% were owned by limited partners. The consolidated financial statements of UDR include the non-controlling interests of the unitholders in the Operating Partnership. The consolidated financial statements of UDR include the non-controlling interests of the unitholders in the Heritage OP prior to UDR’s ownership of 100% of the units outstanding in Heritage OP.

The accompanying interim unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments and eliminations necessary for the fair presentation of our financial position as of June 30, 2010, and results of operations for the three and six months ended June 30, 2010 and 2009 have been included. Such adjustments are normal and recurring in nature. The interim results presented are not necessarily indicative of results that can be expected for a full year. The accompanying interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes appearing in UDR’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission on February 25, 2010.

The accompanying interim unaudited consolidated financial statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the interim unaudited consolidated financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain previously reported amounts have been reclassified to conform to the current financial statement presentation.

The Company evaluated subsequent events through the date its financial statements were issued. No recognized or non-recognized subsequent events were noted.

2. SIGNIFICANT ACCOUNTING POLICIES

Accounting Policies

Real Estate Sales

For sales transactions meeting the requirements for full accrual profit recognition, such as the Company no longer having continuing involvement in the property, we remove the related assets and liabilities from our consolidated balance sheet and record the gain or loss in the period the transaction closes. For sale transactions that do not meet the full accrual sale criteria due to our continuing involvement, we evaluate the nature of the continuing involvement and account for the transaction under an alternate method of accounting.

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

Redeemable non-controlling interests in operating partnerships

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

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

Marketable Securities

Marketable securities represent publicly traded debt securities and are classified as “available for sale” and carried at fair value, with unrealized gains and losses reported as a separate component of stockholders’ equity. Declines in the value of public and private investments that management determines are other than temporary are recorded as a provision for loss on investments. The amortization of any discount and interest income are recorded in “Other Income” on the Consolidated Statements of Operations.

Investment in Unconsolidated Joint Ventures

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

Income Taxes

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

Income taxes for our TRS are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rate is recognized in earnings in the period of the enactment date. The Company’s deferred tax assets are generally the result of differing depreciable lives on capitalized assets and timing of expense recognition for certain accrued liabilities. As of June 30, 2010, UDR has recorded a net current liability of $3.3 million and a deferred tax asset of approximately $6.6 million and recorded income tax expense of $81,000 and $146,000 for the three and six months ended June 30, 2010.

Effective January 1, 2007, the Company adopted guidance which defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition.

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

UDR had no unrecognized tax benefit, accrued interest or penalties at June 30, 2010. UDR and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The tax years 2005 — 2009 remain open to examination by the major taxing jurisdictions to which we are subject. When applicable, UDR recognizes interest and/or penalties related to uncertain tax positions in income tax expense.

3. REAL ESTATE OWNED

Real estate assets owned by the Company consist of income producing operating properties, properties under development and land held for future development. As of June 30, 2010 the Company owned and consolidated 168 communities in 10 states plus the District of Columbia totaling 46,932 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of June 30, 2010 and December 31, 2009 (dollar amounts in thousands):

		June 30, 2010				December 31, 2009
Land		$	1,702,551			$	1,635,401
Depreciable property — held and used:
Building and improvements			4,273,637				4,111,254
Furniture, fixtures and equipment			275,177				248,635
Under development:
Land			33,857				65,525
Construction in progress			120,109				254,232
Real estate owned		$	6,405,331			$	6,315,047
Accumulated depreciation			(1,489,464	)			(1,351,293	)
Real estate owned, net		$	4,915,867			$	4,963,754

4. DISCONTINUED OPERATIONS

Discontinued operations represent properties that UDR has either sold or which management believes meet the criteria to be classified as held for sale. In order to be classified as held for sale and reported as discontinued operations, a property’s operations and cash flows have or will be divested to a third party by the Company whereby UDR will not have any significant continuing involvement in the ownership or operation of the property after the sale or disposition. The results of operations of the property are presented as discontinued operations for all periods presented and do not impact the net earnings reported by the Company. Once a property is deemed as held for sale, depreciation is no longer recorded. However, if the Company determines that the property no longer meets the criteria of held for sale, the Company will recapture any unrecorded depreciation for the property. The assets and liabilities of properties deemed as held for sale are presented separately on the Consolidated Balance Sheets. Properties deemed as held for sale are reported at the lower of their carrying amount or their estimated fair value less the costs to sell the assets.

UDR did not dispose of any communities during the three and six months ended June 30, 2010 and 2009, nor did we have any communities classified as held for disposition at June 30, 2010 and December 31, 2009. During the three and six months ended June 30, 2010 and 2009, the Company recognized $197,000 and $156,000 and $2.1 million and $1.9 million, respectively, of “Income from Discontinued Operations” which relate to residual activities from sold communities.

5. JOINT VENTURES

UDR has entered into joint ventures with unrelated third parties that are either consolidated and included in real estate owned on our Consolidated Balance Sheets or are accounted for under the equity method of accounting, which are not consolidated and are included in investment in unconsolidated joint ventures on our Consolidated Balance Sheets. The Company consolidates an entity in which we own less than 100% when we have the power to direct the activities of the entity that most significantly affect the entity’s economic performance. In addition, the Company consolidates any joint venture in which we are the general partner or managing member and the third party partner or member does not have the ability to substantively participate in the decision-making process nor the ability to remove us as general partner or managing member, without cause.

UDR’s joint ventures are funded with a combination of debt and equity. Our losses are limited to our investment and the Company does not guarantee any debt issued by our unconsolidated joint ventures, capital payout or other obligations associated with our joint ventures. The Company guarantees 100% of the debt owed by one of our consolidated joint ventures for which our equity ownership percentage is 98%.

Consolidated Joint Ventures

UDR is a partner with an unaffiliated third party in a joint venture (“989 Elements”) which owns and operates a 23-story, 166 home high-rise apartment community in the central business district of Bellevue, Washington. On December 30, 2009, UDR entered into an agreement with our partner to purchase its 49% interest in 989 Elements for $7.7 million. Concurrently, our partner resigned as managing member and appointed UDR as managing member. In addition, our partner relinquished its voting rights and approval rights and its ability to substantively participate in the decision-making process of the joint venture resulting in the consolidation of the joint venture. The joint venture assets and liabilities were recorded at fair value. The fair value of the assets was $55.0 million ($54.8 million of real estate owned and $200,000 of current assets) and the fair value of liabilities was $34.1 million ($33.4 million of a construction loan, net of fair market value adjustment of $1.6 million and $700,000 of current liabilities) at the consolidation date. On December 31, 2009, the Company repaid the outstanding balance of $35.0 million on the construction loan held by 989 Elements. In March 2010, the Company paid $7.7 million and acquired our partner’s 49% interest in the joint venture. At closing of the agreement and at June 30, 2010, the Company’s interest in 989 Elements was 98%.

UDR is a partner with an unaffiliated third party in a joint venture (“Elements Too”) which owns and operates a 274 home apartment community in the central business district of Bellevue, Washington. Construction began in the fourth quarter of 2006 and was completed in the first quarter of 2010. On October 16, 2009, our partner resigned as managing member and appointed UDR as managing member. In addition, our partner relinquished its voting rights and approval rights and its ability to substantively participate in the decision-making process of the joint venture resulting in the consolidation of the joint venture. The joint venture assets and liabilities were recorded at fair value. Prior to consolidation, our equity investment in Elements Too was $24.4 million (net of an $11.0 million equity loss recorded as of December 31, 2009) at October 16, 2009. The fair value of the assets was $100.3 million ($99.5 million of real estate owned and $814,000 of current assets) and the fair value of liabilities was $75.6 million ($70.5 million of a construction loan, $917,000 of a derivative instrument, and $4.2 million of current liabilities). On December 30, 2009, UDR entered into an agreement with our partner to purchase its 49% interest in Elements Too for $3.2 million. In March 2010, the Company paid the outstanding balance of $3.2 million and acquired our partner’s 49% interest in the joint venture. At closing of the agreement and at June 30, 2010, the Company’s interest in Elements Too was 98%. During the six months ended June 30, 2010, the Company repaid the outstanding balance of $70.5 million on the construction loan held by Elements Too.

UDR is a partner with an unaffiliated third party in a joint venture (“Bellevue”) which owns an operating retail site in Bellevue, Washington. The Company initially planned to develop a 430 home high rise apartment building with ground floor retail on an existing operating retail center. However, during the year ended December 31, 2009, the joint venture decided to continue to operate the retail property as opposed to developing a high rise apartment building on the site. On December 30, 2009, UDR entered into an agreement with our partner to purchase its 49% interest in Bellevue for $5.2 million. In addition, our partner resigned as managing member and appointed UDR as managing member. Concurrent with its resignation, our partner relinquished its voting rights and approval rights and its ability to substantively participate in the decision-making process of the joint venture resulting in the consolidation of the joint venture at fair value. Prior to consolidation, our equity investment in Bellevue was $5.0 million (net of a $5.0 million equity loss recorded as of December 31, 2009). The fair value of the assets was $33.0 million ($32.8 million of real estate owned and $211,000 of current assets) and the fair value of liabilities was $23.0 million ($22.3 million of a mortgage payable, $506,000 of a derivative instrument, and $213,000 of current liabilities). In March 2010, the Company paid $5.2 million and acquired our partner’s 49% interest in the joint venture. At closing of the agreement and at June 30, 2010, the Company’s interest in Bellevue was 98%. At June 30, 2010, the carrying value of the mortgage payable guaranteed by the Company was $22.3 million.

Prior to their consolidation in 2009, we evaluated our investments in these joint ventures when events or changes in circumstances indicate that there may be an other-than-temporary decline in value. We considered various factors to determine if a decrease in value of each of these investments is other-than-temporary. In 2009, we recognized a non-cash charge of $16.0 million representing the other-than-temporary decline in fair values below the carrying values of two of the Company’s Bellevue, Washington joint ventures.

The activities and accounts of these joint ventures are included in the Company’s consolidated financial position as of June 30, 2010 and December 31, 2009, consolidated results of operations for the three and six months ended June 30, 2010, and consolidated cash flows for the six months ended June 30, 2010.

Unconsolidated Joint Ventures

The Company recognizes earnings or losses from our investments in unconsolidated joint ventures consisting of our proportionate share of the net earnings or loss of the joint venture. In addition, we may earn fees for providing management and development services to the unconsolidated joint ventures. As of June 30, 2010, UDR had investments in the following unconsolidated joint ventures which are accounted for under the equity method of accounting.

In August 2009, UDR and an unaffiliated third party, Kuwait Finance House, formed a jointed venture for the investment of up to $450.0 million in multifamily properties located in key, high barrier to entry markets. The partners will contribute equity of $180.0 million of which the Company’s maximum equity will be 30% or $54.0 million when fully invested. During the quarter ended June 30, 2010, the joint venture acquired its first property (151 homes) located in Metropolitan Washington D.C. for $43.1 million. At closing and at June 30, 2010, the Company owned 30%. Our investment at June 30, 2010 and December 31, 2009 was $5.4 million and $242,000, respectively.

In November 2007, UDR and an unaffiliated third party formed a joint venture which owns and operates 10 operating properties located in Texas (3,992 homes). UDR contributed cash and property equal to 20% of the fair value of the properties. The unaffiliated member contributed cash equal to 80% of the fair value of the properties comprising the joint venture, which was then used to purchase the nine operating properties from UDR. Our initial investment was $20.4 million. Our investment at June 30, 2010 and December 31, 2009 was $12.1 million and $13.9 million, respectively.

We evaluate our investments in unconsolidated joint ventures when events or changes in circumstances indicate that there may be an other-than-temporary decline in value. We consider various factors to determine if a decrease in the value of the investment is other-than-temporary. During the three and six months ended June 30, 2010, the Company did not recognize any other-than-temporary decreases in the value of its investments in unconsolidated joint ventures.

Summary financial information relating to 100% of all the unconsolidated joint ventures operations (not just our proportionate share), is presented below for the three and six months ended June 30, (dollars in thousands):

		2010				2009 (a)
For the three months ended June 30,:
Revenues		$	10,629			$	11,517
Real estate depreciation and amortization			5,526				5,232
Net loss			(5,051	)			(3,541	)
For the six months ended June 30,:
Revenues		$	20,632			$	23,037
Real estate depreciation and amortization			10,569				10,387
Net loss			(8,665	)			(6,427	)

The combined summary balance sheets relating to 100% of all the unconsolidated joint ventures (not just our proportionate share) is presented below as of June 30, 2010 and December 31, 2009 (dollars in thousands):

		June 30,				December 31,
		2010				2009
Real estate, net		$	354,362			$	320,786
Total assets			363,865				332,694
Amount due to UDR			753				779
Third party debt			280,000				254,000
Total liabilities			287,840				265,091
Equity			76,025				67,603

As of June 30, 2010, the Company had deferred profit from the sale of properties of $28.8 million, which the Company will not recognize until the underlying property is sold to a third party. The Company recognized $689,000 and $1.1 million and $513,000 and $987,000 of management fees for our involvement in the joint ventures for the three and six months ended June 30, 2010 and 2009, respectively.

The Company may, in the future, make additional capital contributions to certain of our joint ventures should additional capital contributions be necessary to fund development costs or operating shortfalls.

6. SECURED DEBT

Our secured debt instruments generally feature either monthly interest and principal or monthly interest-only payments with balloon payments due at maturity. For purposes of classification of the following table, variable rate debt with a derivative financial instrument designated as a cash flow hedge is deemed as fixed rate debt due to the Company having effectively established the interest rate for the underlying debt instrument. Secured debt on continuing operations, which encumbers $3.0 billion or 47% of UDR’s real estate owned based upon book value ($3.4 billion or 53% of UDR’s real estate owned is unencumbered) consists of the following as of June 30, 2010 (dollars in thousands):

		Principal Outstanding								Six Months Ended June 30, 2010
										Weighted				Weighted				Number of
		June 30,				December 31,				Average				Average				Communities
		2010				2009				Interest Rate				Years to Maturity				Encumbered
Fixed Rate Debt
Mortgage notes payable		$	337,298			$	506,203				5.09	%			2.6				9
Tax-exempt secured notes payable			13,325				13,325				5.30	%			20.7				1
Fannie Mae credit facilities			948,649				949,971				5.40	%			6.6				14
Total fixed rate secured debt			1,299,272				1,469,499				5.32	%			5.7				24
Variable Rate Debt
Mortgage notes payable			370,683				243,810				2.38	%			2.2				14
Tax-exempt secured note payable			27,000				27,000				1.38	%			19.7				1
Fannie Mae credit facilities			260,451				249,125				1.75	%			5.6				35
Total variable rate secured debt			658,134				519,935				2.08	%			4.3				50
Total secured debt		$	1,957,406			$	1,989,434				4.23	%			5.2				74

UDR has five revolving secured credit facilities with Fannie Mae with an aggregate commitment of $1.4 billion at June 30, 2010. The Fannie Mae credit facilities are for an initial term of 10 years, bear interest at floating and fixed rates, and certain variable rate facilities can be extended for an additional five years at our option. We have $948.6 million of the funded balance fixed at a weighted average interest rate of 5.4% and the remaining balance on these facilities is currently at a weighted average variable rate of 1.8%.

		June 30, 2010				December 31, 2009
		(dollar amounts in thousands)
Borrowings outstanding		$	1,209,100			$	1,199,096
Weighted average borrowings during the period ended			1,205,879				1,033,658
Maximum daily borrowings during the period ended			1,209,739				1,199,322
Weighted average interest rate during the period ended			4.6	%			4.6	%
Weighted average interest rate at the end of the period			4.6	%			4.6	%

The Company will from time to time acquire properties subject to fixed rate debt instruments. In those situations, management will record the secured debt at its estimated fair value and amortize any difference between the fair value and par to interest expense over the life of the underlying debt instrument. The unamortized fair market adjustment was a net discount of $968,000 and $987,000 at June 30, 2010 and December 31, 2009, respectively.

Fixed Rate Debt

Mortgage notes payable. Fixed rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from August 2010 through June 2016 and carry interest rates ranging from 2.50% to 6.84%. Mortgage notes payable includes debt associated with development activities.

Tax-exempt secured notes payable. Fixed rate mortgage notes payable that secure tax-exempt housing bond issues mature in March 2031 and carry an interest rate of 5.30%. Interest on these notes is payable in semi-annual installments.

Secured credit facilities. At June 30, 2010, the Company had $948.6 million outstanding of fixed rate secured credit facilities with Fannie Mae with a weighted average fixed interest rate of 5.40%.

Variable Rate Debt

Mortgage notes payable. Variable rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from August 2010 through April 2016. The mortgage notes payable are based on LIBOR plus basis points, which translate into interest rates ranging from 1.02% to 5.25% at June 30, 2010.

Tax-exempt secured note payable. The variable rate mortgage note payable that secures tax-exempt housing bond issue matures in March 2030. Interest on this note is payable in monthly installments. The variable mortgage note has an interest rate of 1.38% as of June 30, 2010.

Secured credit facilities. At June 30, 2010, the Company had $260.5 million outstanding of variable rate secured credit facilities with Fannie Mae with a weighted average floating interest rate of 1.75%.

The aggregate maturities, including amortizing principal payments, of our secured debt due during each of the next five calendar years and thereafter are as follows (dollars in thousands):

		Fixed												Variable
		Mortgage				Tax Exempt				Credit				Mortgage				Tax Exempt				Credit
		Notes				Notes Payable				Facilities				Notes				Notes Payable				Facilities				Total
2010		$	21,520			$	—			$	1,332			$	111,708			$	—			$	—			$	134,560
2011			127,294				—				52,808				85,582				—				39,513				305,197
2012			56,782				—				177,944				57,176				—				59,529				351,431
2013			61,379				—				38,631				38,469				—				—				138,479
2014			—				—				3,328				1,065				—				—				4,393
Thereafter			70,323				13,325				674,606				76,683				27,000				161,409				1,023,346
Total		$	337,298			$	13,325			$	948,649			$	370,683			$	27,000			$	260,451			$	1,957,406

7. UNSECURED DEBT

A summary of unsecured debt as of June 30, 2010 and December 31, 2009 is as follows (dollars in thousands):

		June 30,				December 31,
		2010				2009
Commercial Banks
Borrowings outstanding under an unsecured credit facility due July 2012 (a)		$	133,900			$	189,300
Senior Unsecured Notes
3.90% Medium-Term Notes due March 2010 (includes premium of $34)			—				50,034
3.63% Convertible Senior Notes due September 2011 (net of discount of $1,857 and $3,351) (b), (d), (h)			95,242				122,984
5.00% Medium-Term Notes due January 2012			100,000				100,000
3.84% Term Notes due July 2012 (c)			100,000				100,000
6.05% Medium-Term Notes due June 2013			122,500				122,500
5.13% Medium-Term Notes due January 2014 (e)			184,000				184,000
5.50% Medium-Term Notes due April 2014 (net of discount of $260 and $295) (e)			128,240				128,205
5.25% Medium-Term Notes due January 2015 (includes net discount of $583 and premium $177) (e),(f)			324,592				175,352
5.25% Medium-Term Notes due January 2016 (e)			83,260				83,260
8.50% Debentures due September 2024			15,644				15,644
4.00% Convertible Senior Notes due December 2035 (net of discount of $916 and $1,916) (g), (h)			166,834				165,834
Other			40				42
			1,320,352				1,247,855
		$	1,454,252			$	1,437,155

The following is a summary of short-term bank borrowings under UDR’s bank credit facility at June 30, 2010 and December 31, 2009 (dollars in thousands):

		June 30,				December 31,
		2010				2009
Total revolving credit facility		$	600,000			$	600,000
Borrowings outstanding at end of period (1)			133,900				189,300
Weighted average daily borrowings during the period ended			142,466				83,875
Maximum daily borrowings during the period ended			296,700				279,400
Weighted average interest rate during the period ended			0.8	%			0.9	%
Weighted average interest rate at the end of the period			0.9	%			0.7	%

The convertible notes are convertible at the option of the holder, and as such are presented as if the holder will convert the debt instrument at the earliest available date. The aggregate maturities of unsecured debt for the five years subsequent to June 30, 2010 are as follows (dollars in thousands):

		Bank				Unsecured
		Lines				Debt				Total
2010		$	—			$	—			$	—
2011 (a)			—				261,884				261,884
2012			133,900				199,808				333,708
2013			—				122,308				122,308
2014			—				312,353				312,353
Thereafter			—				423,999				423,999
		$	133,900			$	1,320,352			$	1,454,252

Our debt instruments contain covenants that we were in compliance with at June 30, 2010.

8. LOSS PER SHARE

Basic loss per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed based upon common shares outstanding plus the effect of dilutive stock options and other potentially dilutive common stock equivalents such as the non-vested restricted stock awards.

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

		Three months ended								Six months ended
		June 30,								June 30,
		2010				2009				2010				2009
Numerator for loss per share — basic and diluted:
Net loss attributable to common stockholders		$	(28,968	)		$	(14,858	)		$	(55,403	)		$	(30,287	)
Denominator for loss per share — basic and diluted:
Weighted average common shares outstanding			162,525				150,393				159,873				147,981
Non-vested restricted stock awards			(1,639	)			(949	)			(1,351	)			(1,174	)
Denominator for basic and diluted loss per share			160,886				149,444				158,522				146,807
Loss per share — basic and diluted		$	(0.18	)		$	(0.10	)		$	(0.35	)		$	(0.21	)

The effect of the conversion of the OP Units, convertible preferred stock, convertible debt, stock options and restricted stock is not dilutive and is therefore not included in the above calculations as the Company reported a loss from continuing operations.

If the OP Units were converted to common stock, the additional weighted average common shares outstanding for the three and six months ended June 30, 2010 and 2009, would be 5,963,669 and 5,969,784, and 6,513,951 and 7,180,686, respectively.

The effect of the conversion of the Series E Out-Performance Partnership Shares (the Series E Out-Performance Program terminated on December 31, 2009) is not dilutive for the three and six months ended June 30, 2009 and is not included in the above calculations as the Company reported a loss from continuing operations.

If the convertible preferred stock were converted to common stock, the additional shares of common stock outstanding for the three and six months ended June 30, 2010 and 2009 would be 3,035,548 weighted average common shares.

The dilution from unvested restricted stock and stock options would be an additional 2,223,682 and 1,957,850, and 45,765 and 20,411 weighted average common shares for the three and six months ended June 30, 2010 and 2009, respectively.

9. FAIR VALUE OF DERIVATIVES AND FINANCIAL INSTRUMENTS

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

•

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

•

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

•

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

The estimated fair values of the Company’s financial instruments either recorded or disclosed on a recurring basis as of June 30, 2010 and December 31, 2009 are summarized as follows (dollars in thousands):

						Fair Value at June 30, 2010 Using
						Quoted Prices in				Significant
						Active Markets for				Other				Significant
						Identical Assets or				Observable				Unobservable
						Liabilities				Inputs				Inputs
		June 30, 2010				(Level 1)				(Level 2)				(Level 3)
Description:
Available-for-sale debt securities- Corporate debt		$	37,878			$	37,878			$	—			$	—
Derivatives- Interest rate contracts (c)			452				—				452				—
Total assets		$	38,330			$	37,878			$	452			$	—
Derivatives- Interest rate contracts (c)		$	7,188			$	—			$	7,188			$	—
Contingent purchase consideration (d)			6,037				—				—				6,037
Secured debt instruments- fixed rate: (a)
Mortgage notes payable			353,738				—				—				353,738
Tax-exempt secured notes payable			15,444				—				—				15,444
Fannie Mae credit facilities			993,350				—				—				993,350
Secured debt instruments- variable rate: (a)
Mortgage notes payable			370,683				—				—				370,683
Tax-exempt secured notes payable			27,000				—				—				27,000
Fannie Mae credit facilities			260,451				—				—				260,451
Unsecured debt instruments: (b)
Commercial bank			133,900				—				—				133,900
Senior Unsecured Notes			1,352,809				—				—				1,352,809
Total liabilities		$	3,520,600			$	—			$	7,188			$	3,513,412

						Fair Value at December 31, 2009 Using
						Quoted Prices in				Significant
						Active Markets for				Other				Significant
						Identical Assets or				Observable				Unobservable
						Liabilities				Inputs				Inputs
		December 31, 2009				(Level 1)				(Level 2)				(Level 3)
Description:
Available-for-sale debt securities- Corporate debt		$	37,650			$	37,650			$	—			$	—
Derivatives- Interest rate contracts (c)			2,294				—				2,294				—
Total assets		$	39,944			$	37,650			$	2,294			$	—
Derivatives- Interest rate contracts (c)		$	5,947			$	—			$	5,947			$	—
Secured debt instruments- fixed rate: (a)
Mortgage notes payable			516,578				—				—				516,578
Tax-exempt secured notes payable			13,540				—				—				13,540
Fannie Mae credit facilities			952,468				—				—				952,468
Secured debt instruments- variable rate: (a)
Mortgage notes payable			243,810				—				—				243,810
Tax-exempt secured notes payable			27,000				—				—				27,000
Fannie Mae credit facilities			249,125				—				—				249,125
Unsecured debt instruments: (b)
Commercial bank			189,300				—				—				189,300
Senior Unsecured Notes			1,236,515				—				—				1,236,515
Total liabilities		$	3,434,283			$	—			$	5,947			$	3,428,336