Reportable Segments (UNITED DOMINION REALTY, L.P.)

6 Months Ended

Jun. 30, 2013

Entity Information [Line Items]

REPORTABLE SEGMENTS

REPORTABLE SEGMENTS

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

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

UDR’s two reportable segments are same store communities and non-mature communities/other:

• Same store communities represent those communities acquired, developed, and stabilized prior to 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 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.

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

All revenues are from external customers and no single tenant or related group of tenants contributed 10% or more of UDR’s total revenues during the three and six months ended June 30, 2013 and 2012.

The following table details rental income and NOI from continuing and discontinued operations for UDR’s reportable segments for the three and six months ended June 30, 2013 and 2012, and reconciles NOI to net income/(loss) attributable to UDR, Inc. per the Consolidated Statements of Operations (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Reportable apartment home segment rental income
Same Store Communities
West Region	$	61,047		$	57,852		$	120,303		$	114,140
Mid-Atlantic Region	41,600			40,436			82,950			80,162
Northeast Region	14,564			13,450			28,663			26,593
Southeast Region	28,934			27,364			57,478			54,376
Southwest Region	11,162			10,472			22,168			20,639
Non-Mature Communities/Other	31,306			41,116			61,352			84,123
Total segment and consolidated rental income	$	188,613		$	190,690		$	372,914		$	380,033
Reportable apartment home segment NOI
Same Store Communities
West Region	$	43,448		$	40,435		$	85,311		$	79,663
Mid-Atlantic Region	29,049			28,063			57,811			55,629
Northeast Region	10,699			9,725			20,770			19,026
Southeast Region	18,812			17,764			37,516			35,356
Southwest Region	6,966			6,019			13,667			12,190
Non-Mature Communities/Other	19,679			26,905			38,894			55,161
Total segment and consolidated NOI	128,653			128,911			253,969			257,025
Reconciling items:
Joint venture management and other fees	3,217			2,717			6,140			5,706
Property management	(5,187		)	(5,244		)	(10,255		)	(10,451		)
Other operating expenses	(1,807		)	(1,434		)	(3,450		)	(2,817		)
Real estate depreciation and amortization	(85,131		)	(84,474		)	(168,573		)	(178,721		)
General and administrative	(9,866		)	(13,738		)	(19,342		)	(23,117		)
Hurricane-related recoveries/(charges), net	2,772			—			5,793			—
Other depreciation and amortization	(1,138		)	(1,017		)	(2,284		)	(1,935		)
Income/(loss) from unconsolidated entities	515			(2,412		)	(2,287		)	(5,103		)
Interest expense	(30,803		)	(41,542		)	(61,784		)	(76,287		)
Interest and other income/(expense), net	1,446			(285		)	2,462			409
Tax benefit, net	2,683			2,818			4,656			25,694
Net income attributable to redeemable noncontrolling interests in OP	(159		)	(5,911		)	(114		)	(9,331		)
Net income attributable to noncontrolling interests	(3		)	(43		)	(7		)	(95		)
Net gain on sale of depreciable property, net of tax	—			172,006			—			252,531
Net income attributable to UDR, Inc.	$	5,192		$	150,352		$	4,924		$	233,508

The following table details the assets of UDR’s reportable segments as of June 30, 2013 and December 31, 2012(dollars in thousands):

	June 30, 2013			December 31, 2012
Reportable apartment home segment assets:
Same Store Communities:
West Region	$	2,412,380		$	2,422,987
Mid-Atlantic Region	1,424,669			1,419,873
Northeast Region	730,427			723,437
Southeast Region	880,537			887,482
Southwest Region	387,275			385,377
Non-Mature Communities/Other	2,181,400			2,216,672
Total segment assets	8,016,688			8,055,828
Accumulated depreciation	(2,071,649		)	(1,924,682		)
Total segment assets — net book value	5,945,039			6,131,146
Reconciling items:
Cash and cash equivalents	9,035			12,115
Restricted cash	24,843			23,561
Deferred financing costs, net	27,043			24,990
Notes receivable, net	66,700			64,006
Investment in and advances to unconsolidated joint ventures, net	533,335			477,631
Other assets	137,548			125,654
Total consolidated assets	$	6,743,543		$	6,859,103

Capital expenditures related to our same store communities totaled $14.8 million and $21.7 million and $15.7 million and $25.6 million for the three and six months ended June 30, 2013 and 2012, respectively. Capital expenditures related to our non-mature communities/other totaled $1.3 million and $1.6 million and $1.6 million and $4.0 million for the three and six months ended June 30, 2013 and 2012, respectively.

Markets included in the above geographic segments are as follows:

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

United Dominion Reality L.P. [Member]

Entity Information [Line Items]

REPORTABLE SEGMENTS

REPORTABLE SEGMENTS

GAAP guidance requires that segment disclosures present the measure(s) used by the chief operating decision maker to decide how to allocate resources and for purposes of assessing such segments’ performance. The Operating Partnership has the same chief operating decision maker as that of its parent, the General Partner. The chief operating decision maker consists of several members of UDR’s executive management team who use several generally accepted industry financial measures to assess the performance of the business for our reportable operating segments.

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

The Operating Partnership’s two reportable segments are same store communities and non-mature communities/other:

• 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.

Management of the General Partner evaluates the performance of each of the Operating Partnership's apartment communities on a same store community and non-mature community/other basis, as well as individually and geographically. This is consistent with the aggregation criteria of Topic 280 as each of the apartment communities generally has similar economic characteristics, facilities, services, and tenants. Therefore, the Operating Partnership’s reportable segments have been aggregated by geography in a manner identical to that which is provided to the chief operating decision maker.

All revenues are from external customers and no single tenant or related group of tenants contributed 10% or more of the Operating Partnership’s total revenues during the three and six months ended June 30, 2013 and 2012.

The following table details rental income and NOI from continuing and discontinued operations for the Operating Partnership’s reportable segments for the three and six months ended June 30, 2013 and 2012, and reconciles NOI to net income/(loss) attributable to OP unitholders per the Consolidated Statements of Operations (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Reportable apartment home segment rental income
Same Store Communities
West Region	$	46,848		$	44,442		$	92,179		$	87,665
Mid-Atlantic Region	17,079			16,594			33,990			32,930
Northeast Region	9,205			8,414			18,111			16,788
Southeast Region	10,750			10,078			21,336			20,063
Southwest Region	6,369			5,979			12,590			11,729
Non-Mature Communities/Other	12,458			15,901			24,563			31,501
Total segment and consolidated rental income	$	102,709		$	101,408		$	202,769		$	200,676
Reportable apartment home segment NOI
Same Store Communities
West Region	$	33,596		$	31,369		$	65,840		$	61,677
Mid-Atlantic Region	11,673			11,410			23,206			22,582
Northeast Region	6,858			6,193			13,333			12,240
Southeast Region	6,936			6,592			13,941			13,169
Southwest Region	4,104			3,515			7,946			7,091
Non-Mature Communities/Other	9,294			12,071			18,318			23,929
Total segment and consolidated NOI	72,461			71,150			142,584			140,688
Reconciling items:
Property management	(2,824		)	(2,789		)	(5,576		)	(5,519		)
Other operating expenses	(1,423		)	(1,305		)	(2,809		)	(2,623		)
Real estate depreciation and amortization	(45,307		)	(46,733		)	(90,700		)	(98,410		)
General and administrative	(5,894		)	(7,295		)	(11,469		)	(14,946		)
Hurricane-related recoveries/(charges), net	2,257			—			4,276			—
Interest expense	(9,050		)	(12,891		)	(18,312		)	(25,861		)
Net gain on the sale of depreciable real estate	—			51,266			—			51,182
Net income attributable to noncontrolling interests	(66		)	(231		)	(112		)	(265		)
Net income attributable to OP unitholders	$	10,154		$	51,172		$	17,882		$	44,246

The following table details the assets of the Operating Partnership’s reportable segments as of June 30, 2013 and December 31, 2012(dollars in thousands):

	June 30, 2013			December 31, 2012
Reportable apartment home segment assets
Same Store Communities
West Region	$	1,755,434		$	1,748,369
Mid-Atlantic Region	703,932			701,741
Northeast Region	438,113			434,138
Southeast Region	325,200			322,882
Southwest Region	225,282			224,429
Non-Mature Communities/Other	814,684			751,361
Total segment assets	4,262,645			4,182,920
Accumulated depreciation	(1,187,753		)	(1,097,133		)
Total segment assets - net book value	3,074,892			3,085,787
Reconciling items:
Cash and cash equivalents	3,197			2,804
Restricted cash	13,912			12,926
Deferred financing costs, net	6,516			6,072
Other assets	28,213			28,665
Total consolidated assets	$	3,126,730		$	3,136,254

Capital expenditures related to the Operating Partnership’s same store communities totaled $8.4 million and $12.3 million and $8.8 million and $14.9 million for the three and six months ended June 30, 2013 and 2012, respectively. Capital expenditures related to the Operating Partnership’s non-mature communities/other totaled $249,000 and $328,000 and $573,000 and $1.0 million for the three and six months ended June 30, 2013 and 2012, respectively.

Markets included in the above geographic segments are as follows:

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