REPORTABLE SEGMENTS

9 Months Ended

Sep. 30, 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, and land rent. Property management expense covers costs directly related to consolidated property operations, inclusive of corporate management, regional supervision, accounting and other costs. 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 July 1, 2019 (for quarter-to-date comparison) and January 1, 2019 (for year-to-date comparison) and held as of September 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 nine months ended September 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 nine months ended September 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				Nine Months Ended
	September 30, (a)				September 30, (b)
	2020		2019		2020		2019
Reportable apartment home segment lease revenue
Same-Store Communities (a)
West Region	$	102,609	$	110,860	$	294,355	$	301,291
Mid-Atlantic Region		52,411		53,019		159,015		157,914
Northeast Region		32,705		40,558		83,314		91,203
Southeast Region		34,207		33,283		92,555		89,859
Southwest Region		16,418		16,229		49,435		48,600
Non-Mature Communities/Other		58,848		25,292		227,725		119,262
Total segment and consolidated lease revenue	$	297,198	$	279,241	$	906,399	$	808,129
Reportable apartment home segment other revenue
Same-Store Communities (a)
West Region	$	3,418	$	3,510	$	8,788	$	9,313
Mid-Atlantic Region		1,831		2,012		4,725		5,611
Northeast Region		1,102		1,008		2,051		2,200
Southeast Region		1,436		1,782		3,949		5,115
Southwest Region		710		749		1,815		2,191
Non-Mature Communities/Other		3,150		706		7,193		2,834
Total segment and consolidated other revenue	$	11,647	$	9,767	$	28,521	$	27,264
Total reportable apartment home segment rental income
Same-Store Communities (a)
West Region	$	106,027	$	114,370	$	303,143	$	310,604
Mid-Atlantic Region		54,242		55,031		163,740		163,525
Northeast Region		33,807		41,566		85,365		93,403
Southeast Region		35,643		35,065		96,504		94,974
Southwest Region		17,128		16,978		51,250		50,791
Non-Mature Communities/Other		61,998		25,998		234,918		122,096
Total segment and consolidated rental income	$	308,845	$	289,008	$	934,920	$	835,393
Reportable apartment home segment NOI
Same-Store Communities (a)
West Region	$	77,361	$	86,159	$	226,538	$	235,925
Mid-Atlantic Region		37,258		38,483		113,913		114,892
Northeast Region		18,981		27,962		52,020		63,012
Southeast Region		23,714		24,033		66,029		66,301
Southwest Region		10,496		10,449		32,019		31,221
Non-Mature Communities/Other		43,322		16,563		158,331		81,716
Total segment and consolidated NOI		211,132		203,649		648,850		593,067
Reconciling items:
Joint venture management and other fees		1,199		6,386		3,861		11,982
Property management		(8,879)		(8,309)		(26,879)		(24,018)
Other operating expenses		(5,543)		(2,751)		(16,609)		(11,132)
Real estate depreciation and amortization		(151,949)		(127,391)		(462,481)		(357,793)
General and administrative		(11,958)		(12,197)		(37,907)		(37,002)
Casualty-related (charges)/recoveries, net		—		1,088		(1,353)		842
Other depreciation and amortization		(3,887)		(1,619)		(7,939)		(4,953)
Gain/(loss) on sale of real estate owned		—		—		61,303		5,282
Income/(loss) from unconsolidated entities		2,940		12,713		14,328		19,387
Interest expense		(62,268)		(42,523)		(140,182)		(110,482)
Interest income and other income/(expense), net		2,183		1,875		7,304		12,998
Tax (provision)/benefit, net		(187)		(1,499)		(1,877)		(3,836)
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership		1,990		(2,162)		(2,614)		(6,871)
Net (income)/loss attributable to noncontrolling interests		(31)		(56)		(71)		(145)
Net income/(loss) attributable to UDR, Inc.	$	(25,258)	$	27,204	$	37,734	$	87,326

(a) Same-Store Community population consisted of 40,258 apartment homes.

(b) Same-Store Community population consisted of 37,607 apartment homes.

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

	September 30,		December 31,
	2020		2019
Reportable apartment home segment assets:
Same-Store Communities (a):
West Region	$	4,253,098	$	4,228,359
Mid-Atlantic Region		2,244,315		2,222,405
Northeast Region		2,079,168		2,073,052
Southeast Region		967,465		953,029
Southwest Region		607,326		600,349
Non-Mature Communities/Other		2,709,648		2,524,907
Total segment assets		12,861,020		12,602,101
Accumulated depreciation		(4,512,771)		(4,131,353)
Total segment assets — net book value		8,348,249		8,470,748
Reconciling items:
Cash and cash equivalents		927		8,106
Restricted cash		23,273		25,185
Notes receivable, net		156,996		153,650
Investment in and advances to unconsolidated joint ventures, net		646,355		588,262
Operating lease right-of-use assets		201,754		204,225
Other assets		173,834		186,296
Total consolidated assets	$	9,551,388	$	9,636,472

(a) Same-Store Community population consisted of 40,258 apartment homes.

Markets included in the above geographic segments are as follows:

i. West Region — Orange County, San Francisco, Seattle, Monterey Peninsula, Los Angeles, 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 — Tampa, Orlando, Nashville and Other Florida

v. Southwest Region — Dallas, Austin and Denver