Real Estate Owned

6 Months Ended

Jun. 30, 2011

REAL ESTATE OWNED

3. REAL ESTATE OWNED

Real estate assets owned by the Company consist of income producing operating properties, properties under development, land held for future development, and properties held for sale. As of June 30, 2011 the Company owned and consolidated 170 communities in 11 states plus the District of Columbia totaling 48,556 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of June 30, 2011 and December 31, 2010 (dollar amounts in thousands):

	June 30,			December 31,
	2011			2010
Land	$	1,799,780		$	1,693,775
Depreciable property — held and used:
Building and improvements		5,035,481			4,499,920
Furniture, fixtures and equipment		306,244			297,096
Under development:
Land		78,794			62,410
Construction in progress		78,507			35,502
Held for sale:
Land		—			89,932
Building and improvements		—			196,494
Furniture, fixtures and equipment		—			6,218
Real estate owned		7,298,806			6,881,347
Accumulated depreciation		(1,726,258	)		(1,638,326	)
Real estate owned, net	$	5,572,548		$	5,243,021

The following table summarizes UDR’s real estate community acquisitions for the six months ended June 30, 2011.

					Purchase
Property Name	Market	Acquisition Date	Units		Price (a)
10 Hanover Square	New York, NY	April 2011		493	$	259,750
388 Beale	San Francisco, CA	April 2011		227		90,500
14 North	Boston, MA	April 2011		387		64,500
Inwood West	Boston, MA	April 2011		446		108,000
View 14	Metropolitan D.C.	June 2011		185		105,538
				1,738	$	628,288

(a) The purchase price is the contractual sales price between UDR and the third party and does not include any costs that the Company incurred in the pursuit of the property.

In April 2011, the Company and the Operating Partnership closed on the acquisition of 10 Hanover Square. The community was acquired for $259.8 million, which included assumed debt of $192.0 million (with a fair value of $208.1 million), and the issuance of 2,569,606 operating partnership units (“OP Units”) of the Operating Partnership. The OP Units were deemed to have a value equal to the greater of $25.00 or the closing price per share of the Company’s common stock for the 10 day period ended on (and including) the date one business day prior to the settlement date. For purchase price accounting purposes, the fair value of these OP units was $24.47.

In April 2011, the Company and the Operating Partnership completed a $500 million asset exchange whereby UDR acquired 388 Beale, and the Operating Partnership acquired 14 North, and Inwood West. The communities acquired were valued at $263.0 million representing their estimated fair value. The Company paid $28.1 million of cash and assumed debt of $55.8 million (with a fair value of $61.7 million). UDR sold two multifamily apartment communities (434 homes) and the Operating Partnership sold four multifamily apartment communities (984 homes) located in California as part of the transaction. (See Note 4, Discontinued Operations, for further discussion of real estate community dispositions.)

The Company allocates the purchase price to the tangible and identifiable intangible assets acquired based on their estimated fair value. When allocating cost to an acquired community, the Company first allocates costs to the estimated intangible value of the existing lease agreements and then to the estimated value of the land, building and fixtures assuming the community is vacant. The primary, although not only, identifiable intangible asset associated with our portfolio is the value of existing lease agreements. The Company estimates the intangible value of the lease agreements by determining the lost revenue associated with a hypothetical lease-up. The fair value allocated to land is generally based on relevant market data. The building is valued using the direct capitalization method. The fair values for the land, real estate assets and in place leases incorporate significant unobservable inputs, and therefore are considered to be Level 3 prices within the fair value hierarchy.

The $628.3 million purchase price, which is gross of the difference between the value of the OP Units of $25.00 and the fair value of $24.47, was allocated $114.5 million to land; $506.8 million to buildings and improvements; $3.4 million to furniture, fixtures, and equipment; $25.4 million to intangible assets; and $23.2 million to intangible liabilities. The purchase price allocation of the View 14 acquisition is subject to change as the Company obtains more complete information during the measurement period.

The Company’s results of operations include operating revenues of $10.8 million and loss from continuing operations of $6.7 million of the acquired properties from the acquisition dates to June 30, 3011.

The unaudited pro forma information below summarizes the Company’s combined results of operations for the three and six months ended June 30, 2011 and 2010 as though the acquisitions of 10 Hanover Square and the asset exchange were completed at January 1, 2010. The information for the three and six months ended June 30, 2011 includes pro forma results for the portion of the period prior to the acquisition date and actual results from the date of acquisition through the end of the period. The supplemental pro forma operating data is not necessarily indicative of what the actual results of operations would have been assuming the transaction had been completed as set forth above, nor do they purport to represent the Company’s results of operations for future periods (in thousands except for per share amounts).

	Three months ended June 30,					Six months ended June 30,
	2011		2010			2011			2010
Pro forma revenues	$	179,152	$	164,268		$	356,019		$	328,535
Pro forma income/(loss) attributable to common stockholders		12,076		(24,113	)		(24,909	)		(48,225	)
Proforma income/(loss) attributable to common stockholders — basic		0.06		(0.15	)		(0.13	)		(0.30	)
Pro forma income/(loss) attributable to common stockholders — diluted		0.06		(0.15	)		(0.13	)		(0.30	)

The Company did not have any acquisitions during the three and six months ended June 30, 2010.

The Company incurred $2.1 million and $2.7 million of acquisition related costs during the three and six months ended June 30, 2011, respectively. These expenses are classified on the Consolidated Statements of Operations in the line item entitled “General and administrative,” and have been excluded from the pro forma results as the costs do not have a continuing impact on the results of operations.

All development projects and related carrying costs are capitalized and reported on the Consolidated Balance Sheets as “Real estate under development.” The costs of development projects which include interest, real estate taxes, insurance, and allocated development overhead related to support costs for personnel working directly on the development site are capitalized during the construction period. During the three and six months ended June 30, 2011 and 2010, total interest capitalized was $3.5 million and $6.1 million and $3.3 million and $7.3 million, respectively.

United Dominion Reality.L.P [Member]

REAL ESTATE OWNED

3. REAL ESTATE OWNED

Real estate assets owned by the Operating Partnership consists of income producing operating properties, properties held for sale, properties under development, and land held for future development. At June 30, 2011, the Operating Partnership owned and consolidated 80 communities in 8 states plus the District of Columbia totaling 23,693 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of June 30, 2011 and December 31, 2010 (dollar amounts in thousands):

	June 30,			December 31,
	2011			2010
Land	$	1,004,190		$	925,326
Depreciable property — held and used
Buildings and improvements		2,828,622			2,452,746
Furniture, fixtures and equipment		118,962			112,831
Sold or held for sale:
Land		—			64,598
Buildings and improvements		—			121,175
Furniture, fixtures and equipment		—			3,493
Under development
Land		16,385			—
Construction in progress		8,275			—
Land held for future development		2,445			26,015
Real estate owned		3,978,879			3,706,184
Accumulated depreciation		(919,971	)		(884,083	)
Real estate owned, net	$	3,058,908		$	2,822,101

The following table summarizes the Operating Partnership’s real estate community acquisitions for the three and six months ended June 30, 2011.

					Purchase
Property Name	Market	Acquisition Date	Units		Price (a)
10 Hanover Square	New York, NY	April 2011		493	$	259,750
14 North	Boston, MA	April 2011		387		64,500
Inwood West	Boston, MA	April 2011		446		108,000
				1,326	$	432,250

(a) The purchase price is the contractual sales price by the Operating Partnership and the third party and does not include any costs that the Operating Partnership incurred in the pursuit of the property.

On April 1, 2011, UDR, through the Operating Partnership closed on the acquisition of 10 Hanover Square. The community was acquired for $259.8 million, which included assumed debt of $192.0 million (with a fair value of $208.1 million), and the issuance of 2,569,606 OP Units of the Operating Partnership. The OP Units were deemed to have a value equal to the greater of $25.00 or the closing price per share of the Company’s common stock for the 10 day period ended on (and including) the date one business day prior to the settlement date. For purchase price accounting purposes, the fair value of these OP units was $24.47.

On April 5, 2011, UDR and the Operating Partnership completed a $500 million asset exchange with an unaffiliated third party whereby UDR acquired 388 Beale, and the Operating Partnership acquired 14 North, and Inwood West. The communities acquired were valued at $263.0 million representing their estimated fair value. The Company and the Operating Partnership paid $28.1 million of cash and assumed debt of $55.8 million (with a fair value of $61.7 million). UDR sold two multifamily apartment communities (434 homes) and the Operating Partnership sold four multifamily apartment communities (984 homes) located in California as part of the transaction. (See Note 4, Discontinued Operations, for further discussion of real estate community dispositions.)

The Operating Partnership allocates the purchase price to the tangible and identifiable intangible assets acquired based on their estimated fair value. When allocating cost to an acquired community, the Operating Partnership first allocates costs to the estimated intangible value of the existing lease agreements and then to the estimated value of the land, building and fixtures assuming the community is vacant. The primary, although not only, identifiable intangible asset associated with our portfolio is the value of existing lease agreements. The Operating Partnership estimates the intangible value of the lease agreements by determining the lost revenue associated with a hypothetical lease-up. The fair value allocated to land is generally based on relevant market data. The building is valued using the direct capitalization method. The fair values for the land, real estate assets and in place leases incorporate significant unobservable inputs, and therefore are considered to be Level 3 prices within the fair value hierarchy.

The $432.3 million purchase price, which is gross of the difference between the value of the OP Units of $25.00 and the fair value of $24.47, was allocated $73.2 million to land; $355.3 million to buildings and improvements; $2.8 million to furniture, fixtures, and equipment; $22.9 million to intangible assets; and $23.3 million to intangible liabilities.

Operating revenues and loss from operations of the acquired properties included in the Operating Partnership’s results of operations from the acquisition dates to June 30, 2011 were $8.7 million and $6.6 million, respectively.

The unaudited pro forma information below summarizes the Operating Partnership’s combined results of operations for the three and six months ended June 30, 2011 and 2010 as though the acquisitions of 10 Hanover Square and the asset exchange were completed on January 1, 2010. The information for the three and six months ended June 30, 2011 includes pro forma results for the portion of the period prior to the acquisition date and actual results from the date of acquisition through the end of the period. The supplemental pro forma operating data is not necessarily indicative of what the actual results of operations would have been assuming the transaction had been completed as set forth above, nor do they purport to represent the Operating Partnership’s results of operations for future periods (in thousands except for per share amounts).

	Three months ended					Six months ended
	June 30,					June 30,
	2011		2010			2011			2010
Pro forma revenues	$	96,124	$	91,652		$	190,662		$	183,303
Pro forma income/(loss) attributable to OP unitholders		7,397		(6,677	)		(1,332	)		(13,354	)
Pro forma earnings per OP unit- basic:
Net income/(loss) attributable to OP unitholders	$	0.04	$	(0.04	)	$	(0.01	)	$	(0.07	)
Earnings per common share- diluted:
Net income/(loss) attributable to OP unitholders	$	0.04	$	(0.04	)	$	(0.01	)	$	(0.07	)

The Operating Partnership did not have any acquisitions during the three and six months ended June 30, 2010.

The Operating Partnership incurred $1.7 million and $2.1 million of acquisition related costs during the three and six months ended June 30, 2011, respectively. There were no acquisition costs during the three and six months ended June 30, 2010. These expenses are classified on the Consolidated Statements of Operations line item entitled “General and administrative.”