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REPORTABLE SEGMENTS (UNITED DOMINION REALTY, L.P.)
6 Months Ended
Jun. 30, 2020
Entity information  
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 April 1, 2019 (for quarter-to-date comparison) and January 1, 2019 (for year-to-date comparison) and held as of June 30, 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.

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, 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. 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. 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 and six months ended June 30, 2020 and 2019, and reconciles NOI to Net income/(loss) attributable to UDR, Inc. on the Consolidated Statements of Operations (dollars in thousands):

Three Months Ended

Six Months Ended

June 30, (a)

June 30, (b)

    

2020

    

2019

    

2020

    

2019

Reportable apartment home segment lease revenue

Same-Store Communities (a)

  

    

  

    

  

    

  

West Region

$

101,551

$

104,196

$

200,750

$

199,495

Mid-Atlantic Region

 

54,803

 

54,905

 

110,889

 

109,205

Northeast Region

 

29,717

 

32,225

 

58,774

 

60,490

Southeast Region

 

32,715

 

31,844

 

61,433

 

59,565

Southwest Region

 

16,391

 

16,294

 

33,017

 

32,370

Non-Mature Communities/Other

 

62,404

 

30,523

 

144,340

 

67,763

Total segment and consolidated lease revenue

$

297,581

$

269,987

$

609,203

$

528,888

Reportable apartment home segment other revenue

Same-Store Communities (a)

  

    

  

    

  

    

  

West Region

$

2,842

$

3,047

$

5,543

$

6,045

Mid-Atlantic Region

 

1,429

 

1,727

 

3,001

 

3,729

Northeast Region

 

761

 

789

 

1,235

 

1,396

Southeast Region

 

1,226

 

1,719

 

2,593

 

3,431

Southwest Region

 

515

 

678

 

1,105

 

1,443

Non-Mature Communities/Other

 

1,628

 

516

 

3,395

 

1,453

Total segment and consolidated other revenue

$

8,401

$

8,476

$

16,872

$

17,497

Total reportable apartment home segment rental income

Same-Store Communities (a)

  

    

  

    

  

    

  

West Region

$

104,393

$

107,243

$

206,293

$

205,540

Mid-Atlantic Region

 

56,232

 

56,632

 

113,890

 

112,934

Northeast Region

 

30,478

 

33,014

 

60,009

 

61,886

Southeast Region

 

33,941

 

33,563

 

64,026

 

62,996

Southwest Region

 

16,906

 

16,972

 

34,122

 

33,813

Non-Mature Communities/Other

 

64,032

 

31,039

 

147,735

 

69,216

Total segment and consolidated rental income

$

305,982

$

278,463

$

626,075

$

546,385

Reportable apartment home segment NOI

 

  

 

  

 

  

 

  

Same-Store Communities (a)

 

  

 

  

 

  

 

  

West Region

$

78,533

$

81,724

$

155,876

$

156,324

Mid-Atlantic Region

 

39,102

 

40,045

 

79,479

 

79,225

Northeast Region

 

19,629

 

22,943

 

38,734

 

42,453

Southeast Region

 

22,801

 

23,322

 

44,257

 

44,169

Southwest Region

 

10,467

 

10,444

 

21,523

 

20,772

Non-Mature Communities/Other

 

41,721

 

21,257

 

97,849

 

46,475

Total segment and consolidated NOI

 

212,253

 

199,735

 

437,718

 

389,418

Reconciling items:

 

  

 

  

 

  

 

  

Joint venture management and other fees

 

1,274

 

2,845

 

2,662

 

5,596

Property management

 

(8,797)

 

(8,006)

 

(18,000)

 

(15,709)

Other operating expenses

 

(6,100)

 

(2,735)

 

(11,066)

 

(8,381)

Real estate depreciation and amortization

 

(155,056)

 

(117,934)

 

(310,532)

 

(230,402)

General and administrative

 

(10,971)

 

(12,338)

 

(25,949)

 

(24,805)

Casualty-related (charges)/recoveries, net

 

(102)

 

(246)

 

(1,353)

 

(246)

Other depreciation and amortization

 

(2,027)

 

(1,678)

 

(4,052)

 

(3,334)

Gain/(loss) on sale of real estate owned

61,303

5,282

61,303

5,282

Income/(loss) from unconsolidated entities

 

8,021

 

6,625

 

11,388

 

6,674

Interest expense

 

(38,597)

 

(34,417)

 

(77,914)

 

(67,959)

Interest income and other income/(expense), net

 

2,421

 

1,310

 

5,121

 

11,123

Tax (provision)/benefit, net

 

(1,526)

 

(125)

 

(1,690)

 

(2,337)

Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership

 

(4,291)

 

(2,652)

 

(4,604)

 

(4,709)

Net (income)/loss attributable to noncontrolling interests

 

(34)

 

(47)

 

(40)

 

(89)

Net income/(loss) attributable to UDR, Inc.

$

57,771

$

35,619

$

62,992

$

60,122

(a)Same-Store Community population consisted of 39,020 apartment homes.
(b)Same-Store Community population consisted of 37,910 apartment homes.

The following table details the assets of UDR’s reportable segments as of June 30, 2020 and December 31, 2019 (dollars in thousands):

    

June 30, 

    

December 31, 

2020

2019

Reportable apartment home segment assets:

 

  

 

  

Same-Store Communities (a):

 

  

 

  

West Region

$

3,889,925

$

3,874,027

Mid-Atlantic Region

 

2,363,674

 

2,350,341

Northeast Region

 

1,635,118

 

1,632,980

Southeast Region

 

913,257

 

903,878

Southwest Region

 

605,801

 

600,349

Non-Mature Communities/Other

 

3,367,864

 

3,240,526

Total segment assets

 

12,775,639

 

12,602,101

Accumulated depreciation

 

(4,372,524)

 

(4,131,353)

Total segment assets — net book value

 

8,403,115

 

8,470,748

Reconciling items:

 

  

 

  

Cash and cash equivalents

 

833

 

8,106

Restricted cash

 

22,043

 

25,185

Notes receivable, net

 

155,956

 

153,650

Investment in and advances to unconsolidated joint ventures, net

 

598,058

 

588,262

Operating lease right-of-use assets

202,586

204,225

Other assets

 

181,880

 

186,296

Total consolidated assets

$

9,564,471

$

9,636,472

(a)Same-Store Community population consisted of 39,020 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
United Dominion Realty L.P.  
Entity information  
REPORTABLE SEGMENTS

12. 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 the Operating Partnership’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 are property management costs, which are the Operating Partnership’s allocable share of costs incurred by the General Partner for shared services of corporate level property management employees and related support functions and costs. 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, 2019 (for the quarter-to-date comparison) and January 1, 2019 (for the year-to-date comparison) and held as of June 30, 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 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 under GAAP as each of our 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, 2020 and 2019.

The following is a description of the principal streams from which the Operating Partnership 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 Operating Partnership transfers a service to the lessee other than the right to use the underlying asset. The Operating Partnership 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 Operating Partnership to its retail and residential tenants and other unrelated third parties. The Operating Partnership recognizes revenue when it satisfies a performance obligation by providing the services specified in a contract to the customer. These fees are generally recognized as earned.

The following table details rental income and NOI for the Operating Partnership’s reportable segments for the three and six months ended June 30, 2020 and 2019, and reconciles NOI to Net income/(loss) attributable to OP unitholders on the Consolidated Statements of Operations (dollars in thousands):

Three Months Ended

Six Months Ended

June 30, (a)

June 30, (a)

    

2020

    

2019

    

2020

    

2019

Reportable apartment home segment lease revenue

 

  

 

  

 

  

 

  

Same-Store Communities (a)

 

  

 

  

 

  

 

  

West Region

$

60,897

$

62,298

$

124,140

$

123,080

Mid-Atlantic Region

 

14,656

 

14,881

 

29,820

 

29,691

Northeast Region

 

7,329

 

7,966

 

15,558

 

15,938

Southeast Region

 

12,949

 

12,686

 

25,936

 

25,148

Southwest Region

1,834

1,950

3,664

3,875

Non-Mature Communities/Other

 

4,672

 

7,326

 

12,222

 

14,052

Total segment and consolidated lease revenue

$

102,337

$

107,107

$

211,340

$

211,784

Reportable apartment home segment other revenue

 

  

 

  

 

  

 

  

Same-Store Communities (a)

 

  

 

  

 

  

 

  

West Region

$

1,603

$

1,852

$

3,379

$

3,846

Mid-Atlantic Region

 

376

 

429

 

807

 

964

Northeast Region

 

94

 

168

 

196

 

334

Southeast Region

 

549

 

727

 

1,193

 

1,502

Southwest Region

35

91

106

122

Non-Mature Communities/Other

 

207

 

(24)

 

345

 

132

Total segment and consolidated other revenue

$

2,864

$

3,243

$

6,026

$

6,900

Total reportable apartment home segment rental income

 

  

 

  

 

  

 

  

Same-Store Communities (a)

 

  

 

  

 

  

 

  

West Region

$

62,500

$

64,150

$

127,519

$

126,926

Mid-Atlantic Region

 

15,032

 

15,310

 

30,627

 

30,655

Northeast Region

 

7,423

 

8,134

 

15,754

 

16,272

Southeast Region

 

13,498

 

13,413

 

27,129

 

26,650

Southwest Region

1,869

2,041

3,770

3,997

Non-Mature Communities/Other

 

4,879

 

7,302

 

12,567

 

14,184

Total segment and consolidated rental income

$

105,201

$

110,350

$

217,366

$

218,684

Reportable apartment home segment NOI

 

  

 

  

 

  

 

  

Same-Store Communities (a)

 

  

 

  

 

  

 

  

West Region

$

47,645

$

49,348

$

97,138

$

97,145

Mid-Atlantic Region

 

10,231

 

10,555

 

21,027

 

21,079

Northeast Region

 

5,061

 

6,260

 

10,970

 

12,466

Southeast Region

 

9,021

 

9,356

 

18,572

 

18,613

Southwest Region

1,334

1,484

2,725

2,820

Non-Mature Communities/Other

 

1,832

 

4,677

 

6,247

 

8,696

Total segment and consolidated NOI

 

75,124

 

81,680

 

156,679

 

160,819

Reconciling items:

 

  

 

  

 

  

 

  

Property management

 

(3,024)

 

(3,308)

 

(6,249)

 

(6,287)

Other operating expenses

 

(3,837)

 

(2,422)

 

(7,696)

 

(4,822)

Real estate depreciation and amortization

 

(35,430)

 

(34,921)

 

(70,730)

 

(69,575)

General and administrative

 

(3,951)

 

(4,151)

 

(9,259)

 

(8,812)

Casualty-related (charges)/recoveries, net

 

(190)

 

81

 

(188)

 

81

Income/(loss) from unconsolidated entities

 

(1,661)

 

(1,794)

 

(3,422)

 

(4,534)

Interest expense

 

(7,170)

 

(7,355)

 

(14,634)

 

(14,726)

Net (income)/loss attributable to noncontrolling interests

 

(488)

 

(416)

 

(1,010)

 

(804)

Net income/(loss) attributable to OP unitholders

$

19,373

$

27,394

$

43,491

$

51,340

(a)Same-Store Community population consisted of 15,941 apartment homes.

The following table details the assets of the Operating Partnership’s reportable segments as of June 30, 2020 and December 31, 2019 (dollars in thousands):

    

June 30, 

    

December 31, 

2020

2019

Reportable apartment home segment assets

 

  

 

  

Same-Store Communities (a):

 

  

 

  

West Region

$

2,023,401

$

2,011,495

Mid-Atlantic Region

 

673,232

 

669,417

Northeast Region

 

409,242

 

408,703

Southeast Region

 

356,006

 

352,790

Southwest Region

144,751

144,210

Non-Mature Communities/Other

 

292,078

 

288,545

Total segment assets

 

3,898,710

 

3,875,160

Accumulated depreciation

 

(1,867,071)

 

(1,796,568)

Total segment assets - net book value

 

2,031,639

 

2,078,592

Reconciling items:

 

  

 

  

Cash and cash equivalents

 

38

 

24

Restricted cash

 

14,535

 

13,998

Investment in unconsolidated entities

 

63,111

 

76,222

Operating lease right-of-use assets

203,958

205,668

Other assets

 

25,643

 

24,241

Total consolidated assets

$

2,338,924

$

2,398,745

(a)Same-Store Community population consisted of 15,941 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. and Baltimore
iii.Northeast Region — New York and Boston
iv.Southeast Region — Nashville, Tampa and Other Florida
v.Southwest Region — Denver