REPORTABLE SEGMENTS

12 Months Ended

Dec. 31, 2019

REPORTABLE SEGMENTS

REPORTABLE SEGMENTS

16. 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 2.875% of

property revenue to cover the regional supervision and accounting costs related to consolidated property operations, and land rent. UDR’s Chief Operating Decision Maker utilizes NOI as the key measure of segment profit or loss.

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

● Same-Store Communities represent those communities acquired, developed, and stabilized prior to January 1, 2018 and held as of December 31, 2019. A comparison of operating results from the prior year is meaningful as these communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan to conduct substantial redevelopment activities, and the community is not held for disposition within the current year. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months.

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

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

Revenue is measured based on consideration specified in contracts with customers. The Company recognizes revenue when it satisfies a performance obligation by providing the services specified in a contract to the customer. All revenues are from external customers and no single tenant or related group of tenants contributed 10% or more of UDR’s total revenues during the years ended December 31, 2019, 2018, and 2017.

The following is a description of the principal streams from which the Company generates its revenue:

Lease Revenue

Lease revenue related to leases is recognized on an accrual basis when due from residents or tenants in accordance with ASC 842, Leases. Rental payments are generally due on a monthly basis and recognized on a straight-line basis over the noncancellable lease term because collection of the lease payments was probable at lease commencement, inclusive of any periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option. In addition, in circumstances where a lease incentive is provided to tenants, the incentive is recognized as a reduction of lease revenue on a straight-line basis over the lease term.

Lease revenue also includes all pass-through revenue from retail and residential leases and common area maintenance reimbursements from retail leases. These services represent non-lease components in a contract as the Company transfers a service to the lessee other than the right to use the underlying asset. The Company has elected the practical expedient under the leasing standard to not separate lease and non-lease components from its resident and retail lease contracts as the timing and pattern of revenue recognition for the non-lease component and related lease component are the same and the combined single lease component would be classified as an operating lease.

Other Revenue

Other revenue is generated by services provided by the Company to its retail and residential tenants and other unrelated third parties. These fees are generally recognized as earned.

Joint venture management and other fees

The Joint venture management and other fees revenue consists of management fees charged to our equity method joint ventures per the terms of contractual agreements and other fees. Joint venture fee revenue is recognized

monthly as the management services are provided and the fees are earned or upon a transaction whereby the Company earns a fee. Joint venture management and other fees are not allocable to a specific reportable segment or segments.

The following table details rental income and NOI for UDR’s reportable segments for the years ended December 31, 2019, 2018, and 2017, and reconciles NOI to Net income/(loss) attributable to UDR, Inc. on the Consolidated Statements of Operations (dollars in thousands):

	Year Ended December 31,
	2019		2018		2017
Reportable apartment home segment lease revenue
Same-Store Communities (a)
West Region	$	392,456	$	377,259	$	361,277
Mid-Atlantic Region		210,391		204,733		199,206
Southeast Region		113,175		109,189		104,106
Northeast Region		119,910		117,572		115,713
Southwest Region		54,516		52,970		51,949
Non-Mature Communities/Other		162,969		94,176		77,524
Total segment and consolidated lease revenue	$	1,053,417	$	955,899	$	909,775
Reportable apartment home segment other revenue
Same-Store Communities (a)
West Region	$	31,045	$	28,493	$	27,493
Mid-Atlantic Region		17,049		15,717		14,951
Southeast Region		13,557		13,045		12,361
Northeast Region		4,858		4,590		4,307
Southwest Region		5,312		5,281		5,152
Non-Mature Communities/Other		12,900		12,080		10,270
Total segment and consolidated other revenue	$	84,721	$	79,206	$	74,534
Total reportable apartment home segment rental income
Same-Store Communities (a)
West Region	$	423,501	$	405,752	$	388,770
Mid-Atlantic Region		227,440		220,450		214,157
Southeast Region		126,732		122,234		116,467
Northeast Region		124,768		122,162		120,020
Southwest Region		59,828		58,251		57,101
Non-Mature Communities/Other		175,869		106,256		87,794
Total segment and consolidated rental income	$	1,138,138	$	1,035,105	$	984,309
Reportable apartment home segment NOI
Same-Store Communities (a)
West Region	$	321,890	$	306,307	$	291,265
Mid-Atlantic Region		159,665		153,670		150,126
Southeast Region		88,467		85,220		80,726
Northeast Region		83,832		84,059		83,569
Southwest Region		36,589		34,506		34,439
Non-Mature Communities/Other		117,860		68,353		58,378
Total segment and consolidated NOI		808,303		732,115		698,503
Reconciling items:
Joint venture management and other fees		14,055		11,754		11,482
Property management		(32,721)		(28,465)		(27,068)
Other operating expenses		(13,932)		(12,100)		(9,060)
Real estate depreciation and amortization		(501,257)		(429,006)		(430,054)
General and administrative		(51,533)		(46,983)		(48,566)
Casualty-related (charges)/recoveries, net		(474)		(2,121)		(4,335)
Other depreciation and amortization		(6,666)		(6,673)		(6,408)
Gain/(loss) on sale of real estate owned		5,282		136,197		43,404
Income/(loss) from unconsolidated entities		137,873		(5,055)		31,257
Interest expense		(170,917)		(134,168)		(128,711)
Interest income and other income/(expense), net		15,404		6,735		1,971
Tax (provision)/benefit, net		(3,838)		(688)		240
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership		(14,426)		(18,215)		(10,933)
Net (income)/loss attributable to noncontrolling interests		(188)		(221)		(164)
Net income/(loss) attributable to UDR, Inc.	$	184,965	$	203,106	$	121,558

(a) Same-Store Community population consisted of 37,959 apartment homes.

The following table details the assets of UDR’s reportable segments as of December 31, 2019 and 2018 (dollars in thousands):

	December 31,		December 31,
	2019		2018
Reportable apartment home segment assets:
Same-Store Communities (a):
West Region	$	3,810,672	$	3,763,366
Mid-Atlantic Region		2,350,341		2,317,369
Southeast Region		806,830		779,310
Northeast Region		1,500,597		1,491,994
Southwest Region		456,140		447,305
Non-Mature Communities/Other		3,677,521		1,396,815
Total segment assets		12,602,101		10,196,159
Accumulated depreciation		(4,131,353)		(3,654,160)
Total segment assets — net book value		8,470,748		6,541,999
Reconciling items:
Cash and cash equivalents		8,106		185,216
Restricted cash		25,185		23,675
Notes receivable, net		153,650		42,259
Investment in and advances to unconsolidated joint ventures, net		588,262		780,869
Operating lease right-of-use assets		204,225		—
Other assets		186,296		137,710
Total consolidated assets	$	9,636,472	$	7,711,728

(a) Same-Store Community population consisted of 37,959 apartment homes.

Markets included in the above geographic segments are as follows:

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

ii. Mid-Atlantic Region — Metropolitan D.C., Richmond and Baltimore

iii. Southeast Region — Orlando, Nashville, Tampa and Other Florida

iv. Northeast Region — New York and Boston

v. Southwest Region — Dallas, Austin and Denver