REPORTABLE SEGMENTS

3 Months Ended

Mar. 31, 2020

REPORTABLE SEGMENTS

REPORTABLE SEGMENTS

14. 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, 2019 and held as of March 31, 2020. 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 period, 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 three months ended March 31, 2020 and 2019.

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 three months ended March 31, 2020 and 2019, and reconciles NOI to Net income/(loss) attributable to UDR, Inc. on the Consolidated Statements of Operations (dollars in thousands):

	March 31, (a)
	2020		2019
Reportable apartment home segment lease revenue
Same-Store Communities (a)
West Region	$	102,616	$	98,633
Mid-Atlantic Region		56,085		54,300
Northeast Region		30,942		30,193
Southeast Region		30,677		29,531
Southwest Region		16,626		16,077
Non-Mature Communities/Other		74,676		30,169
Total segment and consolidated lease revenue	$	311,622	$	258,903
Reportable apartment home segment other revenue
Same-Store Communities (a)
West Region	$	2,774	$	3,076
Mid-Atlantic Region		1,573		2,002
Northeast Region		501		629
Southeast Region		1,429		1,790
Southwest Region		590		763
Non-Mature Communities/Other		1,604		759
Total segment and consolidated other revenue	$	8,471	$	9,019
Total reportable apartment home segment rental income
Same-Store Communities (a)
West Region	$	105,390	$	101,709
Mid-Atlantic Region		57,658		56,302
Northeast Region		31,443		30,822
Southeast Region		32,106		31,321
Southwest Region		17,216		16,840
Non-Mature Communities/Other		76,280		30,928
Total segment and consolidated rental income	$	320,093	$	267,922
Reportable apartment home segment NOI
Same-Store Communities (a)
West Region	$	79,823	$	76,984
Mid-Atlantic Region		40,377		39,179
Northeast Region		20,614		20,977
Southeast Region		22,617		22,010
Southwest Region		11,056		10,328
Non-Mature Communities/Other		50,978		20,205
Total segment and consolidated NOI		225,465		189,683
Reconciling items:
Joint venture management and other fees		1,388		2,751
Property management		(9,203)		(7,703)
Other operating expenses		(4,966)		(5,646)
Real estate depreciation and amortization		(155,476)		(112,468)
General and administrative		(14,978)		(12,467)
Casualty-related (charges)/recoveries, net		(1,251)		—
Other depreciation and amortization		(2,025)		(1,656)
Income/(loss) from unconsolidated entities		3,367		49
Interest expense		(39,317)		(33,542)
Interest income and other income/(expense), net		2,700		9,813
Tax (provision)/benefit, net		(164)		(2,212)
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership		(313)		(2,057)
Net (income)/loss attributable to noncontrolling interests		(6)		(42)
Net income/(loss) attributable to UDR, Inc.	$	5,221	$	24,503

(a) Same-Store Community population consisted of 37,910 apartment homes.

The following table details the assets of UDR’s reportable segments as of March 31, 2020 and December 31, 2019 (dollars in thousands):

	March 31,		December 31,
	2020		2019
Reportable apartment home segment assets:
Same-Store Communities (a):
West Region	$	3,704,480	$	3,696,544
Mid-Atlantic Region		2,356,688		2,350,341
Northeast Region		1,501,767		1,500,597
Southeast Region		810,984		806,830
Southwest Region		603,082		600,350
Non-Mature Communities/Other		3,840,997		3,647,439
Total segment assets		12,817,998		12,602,101
Accumulated depreciation		(4,272,471)		(4,131,353)
Total segment assets — net book value		8,545,527		8,470,748
Reconciling items:
Cash and cash equivalents		980		8,106
Restricted cash		21,949		25,185
Notes receivable, net		151,543		153,650
Investment in and advances to unconsolidated joint ventures, net		588,395		588,262
Operating lease right-of-use assets		203,410		204,225
Other assets		179,301		186,296
Total consolidated assets	$	9,691,105	$	9,636,472

(a) Same-Store Community population consisted of 37,910 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. Northeast Region — New York and Boston

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

v. Southwest Region — Dallas, Austin and Denver