Unsecured Debt

6 Months Ended

Jun. 30, 2011

7. UNSECURED DEBT

A summary of unsecured debt as of June 30, 2011 and December 31, 2010 is as follows (dollars in thousands):


	June 30,		December 31,
	2011		2010
Commercial Banks

Borrowings outstanding under an unsecured credit facility due July 2012 ( a )	$	5,000	$	31,750

Senior Unsecured Notes
3.625% Convertible Senior Notes due September 2011 (net of Subtopic 470-20 discount of $419 and $1,138) ( b ), ( g )		96,680		95,961
5.00% Medium-Term Notes due January 2012		100,000		100,000
2.95% Term Notes due December 2013		100,000		100,000
6.05% Medium-Term Notes due June 2013		122,500		122,500
5.13% Medium-Term Notes due January 2014		184,000		184,000
5.50% Medium-Term Notes due April 2014 (net of discount of $192 and $226 )		128,308		128,274
5.25% Medium-Term Notes due January 2015 (includes discount of $455 and $519) ( c )		324,721		324,656
5.25% Medium-Term Notes due January 2016		83,260		83,260
2.27% Term Notes due January 2016 ( e )		—		150,000
3.48% Term Notes due January 2016 ( e )		250,000		100,000
8.50% Debentures due September 2024		15,644		15,644
4.00% Convertible Senior Notes due December 2035 ( f ), ( g )		—		167,750
4.25% Medium-Term Notes due June 2018 (net of discount of $2,965) (d)		297,035		—
Other		37		39

		1,702,185		1,572,084


	$	1,707,185	$	1,603,834


(a)		Our unsecured credit facility provides us with an aggregate borrowing capacity of $600 million, which at our election we can increase to $750 million under certain circumstances. Our unsecured credit facility with a consortium of financial institutions carries an interest rate equal to LIBOR plus a spread of 47.5 basis points (0.8% and 0.9% interest rate at June 30, 2011 and December 31, 2010, respectively) and matures in July 2012. In addition, the unsecured credit facility contains a provision that allows us to bid up to 50% of the commitment and we can bid out the entire unsecured credit facility once per quarter so long as we maintain an investment grade rating.

(b)		Subject to the restrictions on ownership of our common stock and certain other conditions, at any time on or after July 15, 2011 and prior to the close of business on the second business day prior to the maturity date of September 15, 2011, and also following the occurrence of certain events, holders of outstanding 3.625% notes may convert their notes into cash and, if applicable, shares of our common stock, at the conversion rate in effect at such time. Upon conversion of the notes, UDR will deliver cash and common stock, if any, based on a daily conversion value calculated on a proportionate basis for each trading day of the relevant 30 trading day observation period. The initial conversion rate for each $1,000 principal amount of notes was 26.6326 shares of our common stock (equivalent to an initial conversion price of approximately $37.55 per share), subject to adjustment under certain circumstances. If UDR undergoes certain change in control transactions, holders of the 3.625% notes may require us to repurchase their notes in whole or in part for cash equal to 100% of the principal amount of the notes to be repurchased plus any unpaid interest accrued to the repurchase date. In connection with the issuance of the 3.625% notes, UDR entered into a capped call transaction covering approximately 6.7 million shares of our common stock, subject to anti-dilution adjustments similar to those contained in the notes. The capped call expires on the maturity date of the 3.625% notes. The capped call transaction combines a purchased call option with a strike price of $37.548 with a written call option with a strike price of $43.806. The capped call transaction effectively increased the initial conversion price to $43.806 per share, representing a 40% conversion premium. The net cost of approximately $12.6 million of the capped call transaction was included in stockholders’ equity.


(c)		On December 7, 2009, the Company entered into an Amended and Restated Distribution Agreement with respect to the issue and sale by the Company from time to time of its Medium-Term Notes, Series A Due Nine Months or More From Date of Issue. During the three months ended March 31, 2010, the Company issued $150 million of 5.25% senior unsecured medium-term notes under the Amended and Restated Distribution Agreement. These notes were priced at 99.46% of the principal amount at issuance and had a discount of $455,000 at June 30, 2011.

(d)		On May 3, 2011, the Company entered into a Second Amended and Restated Distribution Agreement with respect to the issue and sale by the Company from time to time of its Medium-Term Notes, Series A Due Nine Months or More From Date of Issue. During the three months ended June 30, 2011, the Company issued $300 million of 4.25% senior unsecured medium-term notes under the Amended and Restated Distribution Agreement. These notes were priced at 98.988% of the principal amount at issuance and had a discount of $3.0 million at June 30, 2011.

(e)		During the three months ended March 31, 2011, the Company entered into a new interest rate swap agreement for the remaining $150 million balance. As a result, the $250 million term notes carry a fixed interest rate of 3.48% at June 30, 2011.

(f)		During the three months ended March 31, 2011, holders of the 4.00% Convertible Senior Notes due 2035 tendered $10.8 million of Notes. As a result, the Company retired debt with a notional value of $10.8 million and wrote off unamortized financing costs of $207,000.

		On March 2, 2011, the Company called all of its outstanding 4.00% Convertible Senior Notes due 2035. The redemption date for the Notes was April 4, 2011, and the redemption price was 100% of the principal amount of the outstanding Notes, plus accrued and unpaid interest on the Notes to, but not including, the date of redemption. Subject to and in accordance with the terms and conditions set forth in the Indenture governing the Notes dated as of December 19, 2005, holders of Notes had the right to convert their Notes at any time until March 31, 2011, at a conversion rate of 38.8650 shares of our common stock per $1,000 principal amount of Notes (equivalent to a conversion price of approximately $25.73 per share). The Company accelerated the amortization of the remaining financing costs of $3.0 million to the April 4, 2011 redemption date during the three months ended March 31, 2011.


(g)		ASC Subtopic 470-20 applies to all convertible debt instruments that have a “net settlement feature”, which means that such convertible debt instruments, by their terms, may be settled either wholly or partially in cash upon conversion. This guidance requires issuers of convertible debt instruments that may be settled wholly or partially in cash upon conversion to separately account for the liability and equity components in a manner reflective of the issuers’ nonconvertible debt borrowing rate. The guidance impacted the historical accounting for the 3.625% convertible senior notes due September 2011 and the 4.00% convertible senior notes due December 2035, and resulted in increased interest expense of $359,000 and $718,000 and $928,000 and $1.9 million for the three and six months ended June 30, 2011 and 2010, respectively.

The following is a summary of short-term bank borrowings under UDR’s bank credit facility at June 30, 2011 and December 31, 2010 (dollars in thousands):


	June 30,			December 31,
	2011			2010

Total revolving credit facility	$	600,000		$	600,000
Borrowings outstanding at end of period (1)		5,000			31,750
Weighted average daily borrowings during the period ended		125,719			161,260
Maximum daily borrowings during the period ended		335,300			337,600
Weighted average interest rate during the period ended		0.7	%		0.8	%
Interest rate at end of the period		0.8	%		0.9	%


(1)		Excludes $1.7 million of letters of credit at June 30, 2011.

The convertible notes are convertible at the option of the holder, and as such are presented as if the holder will convert the debt instrument at the earliest available date. The aggregate maturities of unsecured debt for the five years subsequent to June 30, 2011 are as follows (dollars in thousands):


	Bank		Unsecured		Total
Year	Lines		Debt		Unsecured

2011	$	—	$	96,373	$	96,373
2012		5,000		99,385		104,385
2013		—		221,885		221,885
2014		—		311,930		311,930
2015		—		324,744		324,744
Thereafter		—		647,868		647,868

Total	$	5,000	$	1,702,185	$	1,707,185

We were in compliance with the covenants of our debt instruments at June 30, 2011.

In 2010, the Operating Partnership guaranteed certain outstanding debt securities of UDR, Inc. These guarantees provide that the Operating Partnership, as primary obligor and not merely as surety, irrevocably and unconditionally guarantees to each holder of the applicable securities and to the trustee and their successors and assigns under the respective indenture (a) the full and punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of the Company under the respective indenture whether for principal or interest on the securities (and premium, if any), and all other monetary obligations of the Company under the respective indenture and the terms of the applicable securities and (b) the full and punctual performance within the applicable grace periods of all other obligations of the Company under the respective indenture and the terms of applicable securities.