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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

​ | ​
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

​

For the quarterly period ended March 31, 2020

OR

​ | ​
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

​

For the transition period from to

Commission file number

1-10524 (UDR, Inc.)

333-156002-01 (United Dominion Realty, L.P.)

UDR, Inc.

United Dominion Realty, L.P.

(Exact name of registrant as specified in its charter)

​ | ​
Maryland (UDR, Inc.) | 54-0857512
Delaware (United Dominion Realty, L.P.) | 54-1776887
(State or other jurisdiction of | (I.R.S. Employer
incorporation of organization) | Identification No.)

​

1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado 80129

(Address of principal executive offices) (zip code)

(720) 283-6120

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
Common Stock, par value $0.01 | UDR | New York Stock Exchange

​

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

​ | ​
UDR, Inc. | Yes ⌧ No ◻
United Dominion Realty, L.P. | Yes ⌧ No ◻

​

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

​ | ​
UDR, Inc. | Yes ⌧ No ◻
United Dominion Realty, L.P. | Yes ⌧ No ◻

​

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

⌧ | ​ | ​ | ​
UDR, Inc.: | ​ | ​ | ​
Large Accelerated Filer ⌧ | Accelerated Filer ◻ | Non-Accelerated Filer ◻ | Smaller Reporting Company ☐
​ | ​ | ​ | Emerging Growth Company ☐

​

​

⌧ | ​ | ​ | ​
United Dominion Realty, L.P.: | ​ | ​ | ​
Large Accelerated Filer ◻ | Accelerated Filer ◻ | Non-Accelerated Filer ⌧ | Smaller Reporting Company ☐
​ | ​ | ​ | Emerging Growth Company ☐

​

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

​ | ​
UDR, Inc. | ☐
United Dominion Realty, L.P. | ☐

​

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

​ | ​
UDR, Inc. | Yes ☐ No ⌧
United Dominion Realty, L.P. | Yes ☐ No ⌧

​

The number of shares of UDR, Inc.’s common stock, $0.01 par value, outstanding as of May 6, 2020 was 294,886,013.

Table of Contents

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UDR, INC.

UNITED DOMINION REALTY, L.P.

INDEX

​ | PAGE
PART I — FINANCIAL INFORMATION
​ | ​
Item 1. Consolidated Financial Statements | ​
​ | ​
UDR, INC.: | ​
​ | ​
Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019 (audited) | 5
​ | ​
Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 (unaudited) | 6
​ | ​
Consolidated Statements of Comprehensive Income/(Loss) for the three months ended March 31, 2020 and 2019 (unaudited) | 7
​ | ​
Consolidated Statements of Changes in Equity for the three months ended March 31, 2020 and 2019 (unaudited) | 8
​ | ​
Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (unaudited) | 9
​ | ​
Notes to Consolidated Financial Statements (unaudited) | 10
​ | ​
UNITED DOMINION REALTY, L.P.: | ​
​ | ​
Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019 (audited) | 40
​ | ​
Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 (unaudited) | 41
​ | ​
Consolidated Statements of Changes in Capital for the three months ended March 31, 2020 and 2019 (unaudited) | 42
​ | ​
Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (unaudited) | 43
​ | ​
Notes to Consolidated Financial Statements (unaudited) | 44
​ | ​
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 61
​ | ​
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 82
​ | ​
Item 4. Controls and Procedures | 82
​ | ​
PART II — OTHER INFORMATION
​ | ​
Item 1. Legal Proceedings | 83
​ | ​
Item 1A. Risk Factors | 83
​ | ​
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 99
​ | ​
Item 3. Defaults Upon Senior Securities | 100
​ | ​
Item 4. Mine Safety Disclosures | 100
​ | ​
Item 5. Other Information | 100
​ | ​
Item 6. Exhibits | 101
​ | ​
Signatures | 103

Table of Contents

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​ | ​
Exhibit 4.1 Exhibit 31.1 | ​
Exhibit 31.2 | ​
Exhibit 31.3 | ​
Exhibit 31.4 | ​
Exhibit 32.1 | ​
Exhibit 32.2 | ​
Exhibit 32.3 | ​
Exhibit 32.4 | ​

​

​

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EXPLANATORY NOTE

This Report combines the quarterly reports on Form 10-Q for the quarter ended March 31, 2020 of UDR, Inc., a Maryland corporation, and United Dominion Realty, L.P., a Delaware limited partnership, of which UDR, Inc. is the parent company and sole general partner. Unless the context otherwise requires, all references in this Report to “we,” “us,” “our,” the “Company,” “UDR” or “UDR, Inc.” refer collectively to UDR, Inc., together with its consolidated subsidiaries and joint ventures, including United Dominion Realty, L.P. and UDR Lighthouse DownREIT L.P. (the “DownREIT Partnership”), also a Delaware limited partnership of which UDR is the sole general partner. Unless the context otherwise requires, the references in this Report to the “Operating Partnership” or the “OP” refer to United Dominion Realty, L.P., together with its consolidated subsidiaries. “Common stock” refers to the common stock of UDR and “stockholders” means the holders of shares of UDR’s common stock and preferred stock. The limited partnership interests of the Operating Partnership and the DownREIT Partnership are referred to as “OP Units” and “DownREIT Units,” respectively, and the holders of the OP Units and DownREIT Units are referred to as “unitholders.” This combined Form 10-Q is being filed separately by UDR and the Operating Partnership.

There are a number of differences between the Company and the Operating Partnership, which are reflected in our disclosures in this Report. UDR is a real estate investment trust (“REIT”), whose most significant asset is its ownership interest in the Operating Partnership. UDR also conducts business through other subsidiaries, including its taxable REIT subsidiary (“TRS”). UDR acts as the sole general partner of the Operating Partnership, holds interests in subsidiaries and joint ventures, owns and operates properties, issues securities from time to time and guarantees debt of certain of our subsidiaries. The Operating Partnership conducts the operations of a substantial portion of the business and is structured as a partnership with no publicly traded equity securities. The Operating Partnership has guaranteed certain outstanding debt of UDR.

As of March 31, 2020, UDR owned 0.1 million units (100%) of the general partnership interests of the Operating Partnership and 176.1 million OP Units, representing approximately 95.3% of the total outstanding OP Units in the Operating Partnership. UDR conducts a substantial amount of its business and holds a substantial amount of its assets through the Operating Partnership, and, by virtue of its ownership of the OP Units and UDR’s role as the Operating Partnership’s sole general partner, UDR has the ability to control all of the day-to-day operations of the Operating Partnership. Separate financial statements and accompanying notes, as well as separate discussions under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are presented in this report for each of UDR and the Operating Partnership.

​

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Table of Contents

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UDR, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, | ​ | December 31,
​ |  | 2020 |  | 2019
​ | ​ | (unaudited) | ​ | (audited)
ASSETS | ​ | ​ | ​ | ​ | ​ | ​
Real estate owned: |  | ​ |  |  | ​ |
Real estate held for investment | ​ | $ | 12,608,022 | ​ | $ | 12,532,324
Less: accumulated depreciation | ​ |  | (4,231,269) | ​ |  | (4,131,330)
Real estate held for investment, net | ​ |  | 8,376,753 | ​ |  | 8,400,994
Real estate under development (net of accumulated depreciation of $81 and $23, respectively) | ​ |  | 95,245 | ​ |  | 69,754
Real estate held for disposition (net of accumulated depreciation of $41,121 and $0, respectively) | ​ |  | 73,529 | ​ |  | —
Total real estate owned, net of accumulated depreciation | ​ |  | 8,545,527 | ​ |  | 8,470,748
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 assets | ​ | $ | 9,691,105 | ​ | $ | 9,636,472
​ | ​ | ​ | ​ | ​ | ​ | ​
LIABILITIES AND EQUITY | ​ |  |  | ​ |  |
Liabilities: | ​ |  |  | ​ |  |
Secured debt, net | ​ | $ | 1,144,201 | ​ | $ | 1,149,441
Unsecured debt, net | ​ |  | 3,740,937 | ​ |  | 3,558,083
Operating lease liabilities | ​ | ​ | 197,829 | ​ | ​ | 198,558
Real estate taxes payable | ​ |  | 33,134 | ​ |  | 29,445
Accrued interest payable | ​ |  | 31,494 | ​ |  | 45,199
Security deposits and prepaid rent | ​ |  | 48,474 | ​ |  | 48,353
Distributions payable | ​ |  | 115,259 | ​ |  | 109,382
Accounts payable, accrued expenses, and other liabilities | ​ |  | 82,254 | ​ |  | 90,032
Total liabilities | ​ |  | 5,393,582 | ​ |  | 5,228,493
​ | ​ | ​ | ​ | ​ | ​ | ​
Commitments and contingencies (Note 13) | ​ |  |  | ​ |  |
​ | ​ | ​ | ​ | ​ | ​ | ​
Redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership | ​ |  | 819,133 | ​ |  | 1,018,665
​ | ​ | ​ | ​ | ​ | ​ | ​
Equity: | ​ |  |  | ​ |  |
Preferred stock, no par value; 50,000,000 shares authorized: | ​ |  |  | ​ |  |
8.00% Series E Cumulative Convertible; 2,780,994 shares issued and outstanding at March 31, 2020 and December 31, 2019 | ​ |  | 46,200 | ​ |  | 46,200
Series F; 14,543,281 and 14,691,274 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively | ​ |  | 1 | ​ |  | 1
Common stock, $0.01 par value; 350,000,000 shares authorized: | ​ |  |  | ​ |  |
294,881,038 and 294,588,305 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively | ​ |  | 2,949 | ​ |  | 2,946
Additional paid-in capital | ​ |  | 5,788,471 | ​ |  | 5,781,975
Distributions in excess of net income | ​ |  | (2,360,636) | ​ |  | (2,462,132)
Accumulated other comprehensive income/(loss), net | ​ |  | (12,870) | ​ |  | (10,448)
Total stockholders’ equity | ​ |  | 3,464,115 | ​ |  | 3,358,542
Noncontrolling interests | ​ |  | 14,275 | ​ |  | 30,772
Total equity | ​ |  | 3,478,390 | ​ |  | 3,389,314
Total liabilities and equity | ​ | $ | 9,691,105 | ​ | $ | 9,636,472

​

See accompanying notes to consolidated financial statements.

5

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UDR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
​ |  | 2020 | ​ | 2019
REVENUES: |  | ​ |  |  | ​ |
Rental income | ​ | $ | 320,093 | ​ | $ | 267,922
Joint venture management and other fees | ​ |  | 1,388 | ​ |  | 2,751
Total revenues | ​ |  | 321,481 | ​ |  | 270,673
OPERATING EXPENSES: | ​ |  |  | ​ |  |
Property operating and maintenance | ​ |  | 49,483 | ​ |  | 41,939
Real estate taxes and insurance | ​ |  | 45,145 | ​ |  | 36,300
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
Total operating expenses | ​ | ​ | 282,527 | ​ |  | 218,179
​ | ​ | ​ | ​ | ​ | ​ | ​
Operating income | ​ |  | 38,954 | ​ |  | 52,494
​ | ​ | ​ | ​ | ​ | ​ | ​
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
Income/(loss) before income taxes | ​ |  | 5,704 | ​ |  | 28,814
Tax (provision)/benefit, net | ​ |  | (164) | ​ |  | (2,212)
Net income/(loss) | ​ |  | 5,540 | ​ |  | 26,602
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
Distributions to preferred stockholders — Series E (Convertible) | ​ |  | (1,066) | ​ |  | (1,011)
Net income/(loss) attributable to common stockholders | ​ | $ | 4,155 | ​ | $ | 23,492
​ | ​ | ​ | ​ | ​ | ​ | ​
Income/(loss) per weighted average common share: | ​ |  |  | ​ |  |
Basic | ​ | $ | 0.01 | ​ | $ | 0.08
Diluted | ​ | $ | 0.01 | ​ | $ | 0.08
​ | ​ | ​ | ​ | ​ | ​ | ​
Weighted average number of common shares outstanding: | ​ |  |  | ​ |  |
Basic | ​ |  | 294,457 | ​ |  | 277,002
Diluted | ​ |  | 295,160 | ​ |  | 277,557

​

See accompanying notes to consolidated financial statements.

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​

UDR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(In thousands)

(Unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
​ | ​ | 2020 | ​ | 2019
Net income/(loss) | ​ | $ | 5,540 | ​ | $ | 26,602
Other comprehensive income/(loss), including portion attributable to noncontrolling interests: | ​ |  |  | ​ |  |
Other comprehensive income/(loss) - derivative instruments: | ​ |  |  | ​ |  |
Unrealized holding gain/(loss) | ​ |  | (2,917) | ​ |  | (2,210)
(Gain)/loss reclassified into earnings from other comprehensive income/(loss) | ​ |  | 357 | ​ |  | (945)
Other comprehensive income/(loss), including portion attributable to noncontrolling interests | ​ |  | (2,560) | ​ |  | (3,155)
Comprehensive income/(loss) | ​ |  | 2,980 | ​ |  | 23,447
Comprehensive (income)/loss attributable to noncontrolling interests | ​ |  | (181) | ​ |  | (1,847)
Comprehensive income/(loss) attributable to UDR, Inc. | ​ | $ | 2,799 | ​ | $ | 21,600

​

See accompanying notes to consolidated financial statements.

​

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​

UDR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except per share data)

(Unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | Distributions |  | Accumulated Other Comprehensive |  | ​ | ​ |  | ​ | ​
​ | ​ | Preferred | ​ | Common | ​ | Paid-in | ​ | in Excess of | ​ | Income/(Loss), | ​ | Noncontrolling | ​ | ​ | ​
​ | ​ | Stock | ​ | Stock | ​ | Capital | ​ | Net Income | ​ | net | ​ | Interests | ​ | Total
Balance at December 31, 2019 | ​ | $ | 46,201 | ​ | $ | 2,946 | ​ | $ | 5,781,975 | ​ | $ | (2,462,132) | ​ | $ | (10,448) | ​ | $ | 30,772 | ​ | $ | 3,389,314
Net income/(loss) attributable to UDR, Inc. | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 5,221 | ​ |  | — | ​ |  | — | ​ |  | 5,221
Net income/(loss) attributable to noncontrolling interests | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | (10) | ​ |  | (10)
Long Term Incentive Plan Unit grants/(vestings), net | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | (16,487) | ​ |  | (16,487)
Other comprehensive income/(loss) | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | (2,422) | ​ |  | — | ​ |  | (2,422)
Issuance/(forfeiture) of common and restricted shares, net | ​ |  | — | ​ |  | 1 | ​ |  | (1,332) | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | (1,331)
Cumulative effect upon adoption of ASC 326 | ​ | ​ | — | ​ |  | — | ​ |  | — | ​ |  | (2,182) | ​ |  | — | ​ |  | — | ​ |  | (2,182)
Adjustment for conversion of noncontrolling interest of unitholders in the Operating Partnership and DownREIT Partnership | ​ |  | — | ​ |  | 2 | ​ |  | 7,828 | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 7,830
Common stock distributions declared ($0.36 per share) | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | (106,190) | ​ |  | — | ​ |  | — | ​ |  | (106,190)
Preferred stock distributions declared-Series E ($0.3898 per share) | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | (1,066) | ​ |  | — | ​ |  | — | ​ |  | (1,066)
Adjustment to reflect redemption value of redeemable noncontrolling interests | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 205,713 | ​ |  | — | ​ |  | — | ​ |  | 205,713
Balance at March 31, 2020 | ​ | $ | 46,201 | ​ | $ | 2,949 | ​ | $ | 5,788,471 | ​ | $ | (2,360,636) | ​ | $ | (12,870) | ​ | $ | 14,275 | ​ | $ | 3,478,390

​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | Distributions |  | Accumulated Other Comprehensive |  | ​ | ​ |  | ​ | ​
​ | ​ | Preferred | ​ | Common | ​ | Paid-in | ​ | in Excess of | ​ | Income/(Loss), | ​ | Noncontrolling | ​ | ​ | ​
​ | ​ | Stock | ​ | Stock | ​ | Capital | ​ | Net Income | ​ | net | ​ | Interests | ​ | Total
Balance at December 31, 2018 | ​ | $ | 46,201 | ​ | $ | 2,755 | ​ | $ | 4,920,732 | ​ | $ | (2,063,996) | ​ | $ | (67) | ​ | $ | 17,152 | ​ | $ | 2,922,777
Net income/(loss) attributable to UDR, Inc. | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 24,503 | ​ |  | — | ​ |  | — | ​ |  | 24,503
Net income/(loss) attributable to noncontrolling interests | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 30 | ​ |  | 30
Contribution of noncontrolling interests in consolidated real estate | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 125 | ​ |  | 125
Long Term Incentive Plan Unit grants/(vestings), net | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | (3,925) | ​ |  | (3,925)
Other comprehensive income/(loss) | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | (2,903) | ​ |  | — | ​ |  | (2,903)
Issuance/(forfeiture) of common and restricted shares, net | ​ |  | — | ​ |  | — | ​ |  | (1,499) | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | (1,499)
Issuance of common shares through public offering, net | ​ |  | — | ​ |  | 44 | ​ |  | 192,135 | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 192,179
Adjustment for conversion of noncontrolling interest of unitholders in the Operating Partnership and DownREIT Partnership | ​ |  | — | ​ |  | 19 | ​ |  | 72,827 | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 72,846
Common stock distributions declared ($0.3425 per share) | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | (96,561) | ​ |  | — | ​ |  | — | ​ |  | (96,561)
Preferred stock distributions declared-Series E ($0.3708 per share) | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | (1,011) | ​ |  | — | ​ |  | — | ​ |  | (1,011)
Adjustment to reflect redemption value of redeemable noncontrolling interests | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | (144,197) | ​ |  | — | ​ |  | — | ​ |  | (144,197)
Balance at March 31, 2019 | ​ | $ | 46,201 | ​ | $ | 2,818 | ​ | $ | 5,184,195 | ​ | $ | (2,281,262) | ​ | $ | (2,970) | ​ | $ | 13,382 | ​ | $ | 2,962,364

​

See accompanying notes to consolidated financial statements.

​

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​

UDR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except for share data)

(Unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended March 31,
​ |  | 2020 |  | 2019
Operating Activities | ​ | ​ |  |  | ​ |
Net income/(loss) | ​ | $ | 5,540 | ​ | $ | 26,602
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities: | ​ |  |  | ​ |  |
Depreciation and amortization | ​ |  | 157,501 | ​ |  | 114,124
(Income)/loss from unconsolidated entities | ​ |  | (3,367) | ​ |  | (49)
Return on investment in unconsolidated joint ventures | ​ |  | 1,741 | ​ |  | 1,977
Amortization of share-based compensation | ​ |  | 6,808 | ​ |  | 5,937
Other | ​ |  | (1,215) | ​ |  | 3,910
Changes in operating assets and liabilities: | ​ |  |  | ​ |  |
(Increase)/decrease in operating assets | ​ |  | 114 | ​ |  | 2,295
Increase/(decrease) in operating liabilities | ​ |  | (31,666) | ​ |  | (17,463)
Net cash provided by/(used in) operating activities | ​ |  | 135,456 | ​ |  | 137,333
​ | ​ | ​ | ​ | ​ | ​ | ​
Investing Activities | ​ |  |  | ​ |  |
Acquisition of real estate assets | ​ |  | (141,727) | ​ |  | (403,245)
Development of real estate assets | ​ |  | (23,087) | ​ |  | (6,237)
Capital expenditures and other major improvements — real estate assets | ​ |  | (32,983) | ​ |  | (31,264)
Capital expenditures — non-real estate assets | ​ |  | (2,479) | ​ |  | (3,346)
Investment in unconsolidated joint ventures | ​ |  | (16,139) | ​ |  | (21,389)
Distributions received from unconsolidated joint ventures | ​ |  | 3,271 | ​ |  | 10,797
Purchase deposits on pending acquisitions | ​ | ​ | — | ​ | ​ | (10,350)
Repayment/(issuance) of notes receivable, net | ​ |  | (900) | ​ |  | 5,285
Net cash provided by/(used in) investing activities | ​ |  | (214,044) | ​ |  | (459,749)
​ | ​ | ​ | ​ | ​ | ​ | ​
Financing Activities | ​ |  |  | ​ |  |
Payments on secured debt | ​ |  | (2,781) | ​ |  | (962)
Net proceeds from the issuance of unsecured debt | ​ |  | 211,320 | ​ |  | —
Net proceeds/(repayment) of commercial paper | ​ |  | (85,000) | ​ |  | (11,115)
Net proceeds/(repayment) of revolving bank debt | ​ |  | 58,214 | ​ |  | 54,294
Proceeds from the issuance of common shares through public offering, net | ​ |  | — | ​ |  | 192,179
Distributions paid to redeemable noncontrolling interests | ​ |  | (7,618) | ​ |  | (8,553)
Distributions paid to preferred stockholders | ​ |  | (1,015) | ​ |  | (959)
Distributions paid to common stockholders | ​ |  | (100,930) | ​ |  | (88,911)
Other | ​ |  | (3,964) | ​ |  | 1,706
Net cash provided by/(used in) financing activities | ​ |  | 68,226 | ​ |  | 137,679
Net increase/(decrease) in cash, cash equivalents, and restricted cash | ​ |  | (10,362) | ​ |  | (184,737)
Cash, cash equivalents, and restricted cash, beginning of year | ​ |  | 33,291 | ​ |  | 208,891
Cash, cash equivalents, and restricted cash, end of period | ​ | $ | 22,929 | ​ | $ | 24,154
​ | ​ | ​ | ​ | ​ | ​ | ​
Supplemental Information: | ​ |  |  | ​ |  |
Interest paid during the period, net of amounts capitalized | ​ | $ | 57,320 | ​ | $ | 44,271
Cash paid/(refunds received) for income taxes | ​ |  | 323 | ​ |  | 241
Non-cash transactions: | ​ |  |  | ​ |  |
Transfer of investment in and advances to unconsolidated joint ventures to real estate owned | ​ | $ | 14,700 | ​ | $ | 40,433
Acquisition of intellectual property in exchange for cancellation of secured note receivable | ​ | ​ | 2,250 | ​ | ​ | —
Recognition of allowance for credit losses | ​ | ​ | 2,182 | ​ | ​ | —
Recognition of operating lease right-of-use assets | ​ | ​ | — | ​ | ​ | 94,349
Recognition of operating lease liabilities | ​ | ​ | — | ​ | ​ | 88,336
Vesting of LTIP Units | ​ | ​ | 23,018 | ​ | ​ | 14,335
Development costs and capital expenditures incurred but not yet paid | ​ |  | 25,568 | ​ |  | 10,745
Conversion of Operating Partnership and DownREIT Partnership noncontrolling interests to common stock (167,631 shares in 2020 and 1,838,133 shares in 2019) | ​ |  | 7,830 | ​ |  | 72,846
Dividends declared but not yet paid | ​ |  | 115,259 | ​ |  | 105,548
​ | ​ | ​ | ​ | ​ | ​ | ​
The following reconciles cash, cash equivalents, and restricted cash to amounts as shown above: | ​ | ​ | ​ | ​ | ​ | ​
Cash, cash equivalents, and restricted cash, beginning of year: | ​ | ​ | ​ | ​ | ​ | ​
Cash and cash equivalents | ​ | $ | 8,106 | ​ | $ | 185,216
Restricted cash | ​ | ​ | 25,185 | ​ | ​ | 23,675
Total cash, cash equivalents, and restricted cash as shown above | ​ | $ | 33,291 | ​ | $ | 208,891
Cash, cash equivalents, and restricted cash, end of period: | ​ | ​ | ​ | ​ | ​ | ​
Cash and cash equivalents | ​ | $ | 980 | ​ | $ | 1,043
Restricted cash | ​ | ​ | 21,949 | ​ | ​ | 23,111
Total cash, cash equivalents, and restricted cash as shown above | ​ | $ | 22,929 | ​ | $ | 24,154

​

​

See accompanying notes to consolidated financial statements.

​

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

1. BASIS OF PRESENTATION

Basis of Presentation

UDR, Inc., collectively with our consolidated subsidiaries (“UDR,” the “Company,” “we,” “our,” or “us”), is a self-administered real estate investment trust, or REIT, that owns, operates, acquires, renovates, develops, redevelops, and manages apartment communities. The accompanying consolidated financial statements include the accounts of UDR and its subsidiaries, including United Dominion Realty, L.P. (the “Operating Partnership” or the “OP”) and UDR Lighthouse DownREIT L.P. (the “DownREIT Partnership”). As of March 31, 2020, there were 184.8 million units in the Operating Partnership (“OP Units”) outstanding, of which 176.2 million OP Units (including 0.1 million of general partnership units), or 95.3%, were owned by UDR and 8.6 million OP Units, or 4.7%, were owned by outside limited partners. As of March 31, 2020, there were 32.4 million units in the DownREIT Partnership (“DownREIT Units”) outstanding, of which 18.6 million, or 57.4%, were owned by UDR (including 13.5 million DownREIT Units, or 41.6%, that were held by the Operating Partnership) and 13.8 million, or 42.6%, were owned by outside limited partners. The consolidated financial statements of UDR include the noncontrolling interests of the unitholders in the Operating Partnership and DownREIT Partnership.

The accompanying interim unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments and eliminations necessary for the fair presentation of our financial position as of March 31, 2020, and results of operations for the three months ended March 31, 2020 and 2019, have been included. Such adjustments are normal and recurring in nature. The interim results presented are not necessarily indicative of results that can be expected for a full year, particularly in light of the novel coronavirus disease (“COVID-19”) pandemic and measures intended to mitigate its spread. The accompanying interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2019 appearing in UDR’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 18, 2020.

The accompanying interim unaudited consolidated financial statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the interim unaudited consolidated financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company evaluated subsequent events through the date its financial statements were issued. No significant recognized or non-recognized subsequent events were noted other than those noted in Note 2, Significant Accounting Policies, Note 3, Real Estate Owned, Note 7, Secured and Unsecured Debt, Net and Note 15, Subsequent Event.

2. SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The standard required entities to estimate a lifetime expected credit loss for most financial assets, including trade and other receivables, held-to-maturity debt securities, loans and other financial instruments, and to present the net amount of the financial instrument expected to be collected. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which amended the transition requirements and scope of ASU 2016-13 and clarified that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard. The updated standard became effective for the Company on January 1, 2020 and was adopted on a modified retrospective

10

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

basis through a cumulative-effect adjustment to retained earnings of approximately $2.2 million on that date, which was primarily associated with our notes receivable. The Company concluded the cumulative effect was not material to our consolidated financial statements. Disclosures were updated pursuant to the requirements of the ASU.

​

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. The Company does not expect the ASU to have a material impact on the consolidated financial statements.

​

Principles of Consolidation

The Company accounts for subsidiary partnerships, joint ventures and other similar entities in which it holds an ownership interest in accordance with the consolidation guidance. The Company first evaluates whether each entity is a variable interest entity (“VIE”). Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest.

Real Estate Sales Gain Recognition

​

For sale transactions resulting in a transfer of a controlling financial interest of a property, the Company generally derecognizes the related assets and liabilities from its Consolidated Balance Sheets and records the gain or loss in the period in which the transfer of control occurs. If control of the property has not transferred to the counterparty, the criteria for derecognition are not met and the Company will continue to recognize the related assets and liabilities on its Consolidated Balance Sheets.

​

Sale transactions to entities in which the Company sells a controlling financial interest in a property but retains a noncontrolling interest are accounted for as partial sales. Partial sales resulting in a change in control are accounted for at fair value and a full gain or loss is recognized. Therefore, the Company will record a gain or loss on the partial interest sold, and the initial measurement of our retained interest will be accounted for at fair value.

​

Sales of real estate to joint ventures or other noncontrolled investees are also accounted for at fair value and the Company will record a full gain or loss in the period the property is contributed.

​

To the extent that the Company acquires a controlling financial interest in a property that it previously accounted for as an equity method investment, the Company will not remeasure its previously held interest if the acquisition is treated as an asset acquisition. The Company will include the carrying amount of its previously held equity method interest along with the consideration paid and transaction costs incurred in determining the amounts to allocate to the related assets and liabilities acquired on its Consolidated Balance Sheets. When treated as an asset acquisition, the Company will not recognize a gain or loss on consolidation of a property.

​

Allowance for Credit Losses

The Company accounts for allowance for credit losses under the current expected credit loss (“CECL”) impairment model for its financial assets, including trade and other receivables, held-to-maturity debt securities, loans and other financial instruments, and presents the net amount of the financial instrument expected to be collected. The CECL impairment model excludes operating lease receivables. The CECL impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, that considers forecasts of future economic conditions in addition to information about past events and current conditions. Based on this model, we analyze the following criteria, as applicable in developing allowances for credit losses: historical loss information, the borrower’s

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

ability to make scheduled payments, the remaining time to maturity, the value of underlying collateral, projected future performance of the borrower and macroeconomic trends.

​

The Company measures credit losses of financial assets on a collective (pool) basis when similar risk characteristics exist. If the Company determines that a financial asset does not share risk characteristics with its other financial assets, the Company evaluates the financial asset for expected credit losses on an individual basis. Allowance for credit losses are recorded as a direct reduction from an asset’s amortized cost basis. Credit losses and recoveries are recorded in Interest income and other income/(expense), net on the Consolidated Statements of Operations. Recoveries of financial assets previously written off are recorded when received.

​

The Company has made the optional election provided by the standard not to measure allowance for credit losses for accrued interest receivables as the Company writes off any uncollectible accrued interest receivables in a timely manner. The Company periodically evaluates the collectability of its accrued interest receivables. A write-off is recorded when the Company concludes that all or a portion of its accrued interest receivable balance is no longer collectible.

​

Notes Receivable

Notes receivable relate to financing arrangements which are typically secured by real estate, real estate related projects or other assets. Certain of the loans we extend may include characteristics such as options to purchase the project within a specific time window following expected project completion. These characteristics can cause the loans to fall under the definition of a VIE, and thus trigger consolidation consideration. We consider the facts and circumstances pertinent to each loan, including the relative amount of financing we are contributing to the overall project cost, decision making rights or control we hold, and our rights to expected residual gains or our obligations to absorb expected residual losses from the project. If we are deemed to be the primary beneficiary of a VIE due to holding a controlling financial interest, the majority of decision making control, or by other means, consolidation of the VIE would be required. The Company has concluded that it is not the primary beneficiary of the borrowing entities which were deemed to be VIEs.

Additionally, we analyze each loan arrangement that involves real estate development to consider whether the loan qualifies for accounting as a loan or as an investment in a real estate development project. The Company has evaluated its real estate loans, where appropriate, for accounting treatment as loans versus real estate development projects, as required by ASC 310-10. For each loan, the Company has concluded that the characteristics and the facts and circumstances indicate that loan accounting treatment is appropriate.

The following table summarizes our Notes receivable, net as of March 31, 2020 and December 31, 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Interest rate at | ​ | Balance Outstanding
​ |  | March 31, |  | March 31, |  | December 31,
​ | ​ | 2020 | ​ | 2020 | ​ | 2019
Note due April 2020 (a) |  | 12.00 | % | $ | 20,000 | ​ | $ | 20,000
Note due October 2020 (b) |  | 8.00 | % |  | — | ​ |  | 2,250
Note due October 2022 (c) |  | 4.75 | % |  | 115,000 | ​ |  | 115,000
Note due January 2023 (d) | ​ | 10.00 | % | ​ | 17,300 | ​ | ​ | 16,400
Notes Receivable | ​ | ​ | ​ | ​ | 152,300 | ​ | ​ | 153,650
Allowance for credit losses | ​ | ​ | ​ | ​ | (757) | ​ | ​ | —
Total notes receivable, net |  |  | ​ | $ | 151,543 | ​ | $ | 153,650

(a) | The Company has a secured note with an unaffiliated third party with an aggregate commitment of $20.0 million, all of which has been funded. The note is secured by a parcel of land and related land improvements. Interest payments up to December 2019 are due when the loan matures and interest payments after December 2019 are due monthly. In April 2020, the terms of the secured note were amended to extend the term to May 30, 2022, to adjust the interest rate to 8.0% and to add some covenants of the Borrower.

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

(b) | In March 2020, the Company entered into a purchase agreement to acquire all of the unaffiliated third party’s intellectual property in exchange for cancellation of the secured note and accrued interest. All property acquired was recorded in Other assets on the Consolidated Balance Sheets.

(c) | The Company has a secured note with an unaffiliated third party with an aggregate commitment of $115.0 million, all of which has been funded. Interest payments are due when the loan matures. The note is secured by a first priority deed of trust on an under construction 259 apartment home operating community in Bellevue, Washington, which is expected to be completed in 2020. When the note was funded, the Company also entered into a purchase option agreement and paid a deposit of $10.0 million, which gives the Company the option to acquire the community at a fixed price of $170.0 million. The purchase option must be exercised within 30 days following the date the temporary certificate of occupancy for the residential portion of the project is issued. The deposit is generally nonrefundable other than due to a failure of closing conditions pursuant to the terms of the agreement. If the Company does not exercise the purchase option, or if the Company exercises and fails to close the purchase other than due to seller’s failure or other breaches in the purchase option agreement, per the terms of the agreement, the note will be modified to extend the maturity date to 10 years following the date the temporary certificate of occupancy is issued. Upon modification, the loan will be interest only for the first three years and after such date payments will be based on a 30-year amortization schedule.

(d) | The Company has a secured note with an unaffiliated third party with an aggregate commitment of $20.0 million, of which $17.3 million has been funded, including $0.9 million funded during the three months ended March 31, 2020. Interest payments are due monthly. The note matures at the earliest of the following: (a) the closing of any private or public capital raising in the amount of $5.0 million or greater; (b) an acquisition; (c) acceleration in the event of default; or (d) January 2023.

During 2020, the terms of this secured note were amended to increase the aggregate commitment from $16.4 million to $20.0 million, to extend the maturity date of the note to January 2023 and for the April 2020 through July 2020 interest payments to be deferred and paid when the note matures.

The Company recognized $2.6 million and $1.1 million of interest income for the notes receivable described above during the three months ended March 31, 2020 and 2019, respectively, none of which was related party interest. Interest income is included in Interest income and other income/(expense), net on the Consolidated Statements of Operations.

Comprehensive Income/(Loss)

Comprehensive income/(loss), which is defined as the change in equity during each period from transactions and other events and circumstances from nonowner sources, including all changes in equity during a period except for those resulting from investments by or distributions to stockholders, is displayed in the accompanying Consolidated Statements of Comprehensive Income/(Loss). For the three months ended March 31, 2020 and 2019, the Company’s other comprehensive income/(loss) consisted of the gain/(loss) on derivative instruments that are designated as and qualify as cash flow hedges, (gain)/loss on derivative instruments reclassified from other comprehensive income/(loss) into earnings, and the allocation of other comprehensive income/(loss) to noncontrolling interests. The (gain)/loss on derivative instruments reclassified from other comprehensive income/(loss) is included in Interest expense on the Consolidated Statements of Operations. See Note 11, Derivatives and Hedging Activity, for further discussion. The allocation of other comprehensive income/(loss) to redeemable noncontrolling interests during the three months ended March 31, 2020 and 2019 was $(0.1) million and $(0.3) million, respectively.

Income Taxes

Due to the structure of the Company as a REIT and the nature of the operations for the operating properties, no provision for federal income taxes has been provided for at UDR. Historically, the Company has generally incurred only state and local excise and franchise taxes. UDR has elected for certain consolidated subsidiaries to be treated as taxable REIT subsidiaries (“TRS”).

Income taxes for our TRS are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured

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using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rate is recognized in earnings in the period of the enactment date. The Company’s deferred tax assets/(liabilities) are generally the result of differing depreciable lives on capitalized assets, temporary differences between book and tax basis of assets and liabilities and timing of expense recognition for certain accrued liabilities. As of March 31, 2020 and December 31, 2019, UDR’s net deferred tax asset/(liability) was $(1.4) million and $(1.6) million, respectively.

GAAP defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. GAAP also provides guidance on derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition.

The Company recognizes its tax positions and evaluates them using a two-step process. First, UDR determines whether a tax position is more likely than not (greater than 50 percent probability) to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Second, the Company will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement.

The Company invests in assets that qualify for federal investment tax credits (“ITC”) through our TRS. An ITC reduces federal income taxes payable when qualifying depreciable property is acquired. The ITC is determined as a percentage of cost of the assets. The Company accounts for ITCs under the deferral method, under which the tax benefit from the ITC is deferred and amortized as a tax benefit into Tax (provision)/benefit, net on the Consolidated Statements of Operations over the book life of the qualifying depreciable property. The ITCs are recorded in Accounts payable, accrued expenses and other liabilities on the Consolidated Balance Sheets.

UDR had no material unrecognized tax benefit, accrued interest or penalties at March 31, 2020. UDR and its subsidiaries are subject to federal income tax as well as income tax of various state and local jurisdictions. The tax years 2016 through 2018 remain open to examination by tax jurisdictions to which we are subject. When applicable, UDR recognizes interest and/or penalties related to uncertain tax positions in Tax (provision)/benefit, net on the Consolidated Statements of Operations.

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Forward Sales Agreements

​

The Company utilizes forward sales agreements for the future issuance of its common stock. When the Company enters into a forward sales agreement, the contract requires the Company to sell its shares to a counterparty at a predetermined price at a future date. The net sales price and proceeds attained by the Company will be determined on the dates of settlement, with adjustments during the term of the contract for the Company’s anticipated dividends as well as for a daily interest factor that varies with changes in the federal funds rate. The Company generally has the ability to determine the dates and method of settlement (i.e., gross physical settlement, net share settlement or cash settlement), subject to certain conditions and the right of the counterparty to accelerate settlement under certain circumstances.

​

The Company accounts for the shares of common stock reserved for issuance upon settlement as equity in accordance with ASC 815-40, Contracts in Entity's Own Equity, which permits equity classification when a contract is considered indexed to its own stock and the contract requires or permits the issuing entity to settle the contract in shares (either physically or net in shares).

​

The guidance establishes a two-step process for evaluating whether an equity-linked financial instrument is considered indexed to its own stock, first, evaluating the instrument’s contingent exercise provisions and second, evaluating the instrument’s settlement provisions. When entering into forward sales agreements, we determined that (i) none of the agreement’s exercise contingencies are based on observable markets or indices besides those related to the market for our own stock price; and (ii) none of the settlement provisions preclude the agreements from being indexed to our own stock.

​

Before the issuance of shares of common stock, upon physical or net share settlement of the forward sales agreements, the Company expects that the shares issuable upon settlement of the forward sales agreements will be reflected in its diluted income/(loss) per share calculations using the treasury stock method. Under this method, the

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number of shares of common stock used in calculating diluted income/(loss) per share is deemed to be increased by the excess, if any, of the number of shares of common stock that would be issued upon full physical settlement of the forward sales agreements over the number of shares of common stock that could be purchased by the Company in the open market (based on the average market price during the period) using the proceeds receivable upon full physical settlement (based on the adjusted forward sale price at the end of the reporting period). When the Company physically or net share settles any forward sales agreement, the delivery of shares of common stock would result in an increase in the number of weighted average common shares outstanding and dilution to basic income/(loss) per share. (See Note 8, Income/(Loss) per Share for further discussion.)

​

​

​

​

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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 held for disposition properties. As of March 31, 2020, the Company owned and consolidated 150 communities in 13 states plus the District of Columbia totaling 47,579 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of March 31, 2020 and December 31, 2019 (dollars in thousands):

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, |  | December 31,
​ | ​ | 2020 | ​ | 2019
Land | ​ | $ | 2,163,055 | ​ | $ | 2,164,032
Depreciable property — held and used: | ​ |  |  | ​ |  |
Land improvements | ​ |  | 225,850 | ​ |  | 224,964
Building, improvements, and furniture, fixtures and equipment | ​ |  | 10,178,547 | ​ |  | 10,102,758
Real estate intangible assets | ​ | ​ | 40,570 | ​ | ​ | 40,570
Under development: | ​ |  |  | ​ |  |
Land and land improvements | ​ |  | 29,226 | ​ |  | 29,226
Building, improvements, and furniture, fixtures and equipment | ​ |  | 66,100 | ​ |  | 40,551
Real estate held for disposition: | ​ |  |  | ​ |  |
Land and land improvements | ​ |  | 16,245 | ​ |  | —
Building, improvements, and furniture, fixtures and equipment | ​ |  | 98,405 | ​ |  | —
Real estate owned | ​ |  | 12,817,998 | ​ |  | 12,602,101
Accumulated depreciation | ​ |  | (4,272,471) | ​ |  | (4,131,353)
Real estate owned, net | ​ | $ | 8,545,527 | ​ | $ | 8,470,748

​

Acquisitions

In January 2020, the Company acquired a 294 apartment home operating community located in Tampa, Florida for approximately $85.2 million. The Company increased its real estate assets owned by approximately $83.1 million and recorded approximately $2.1 million of in-place lease intangibles.

In January 2020, the Company increased its ownership interest from 49% to 100% in a 276 apartment home operating community located in Hillsboro, Oregon, for a cash purchase price of approximately $21.6 million. In connection with the acquisition, the Company repaid approximately $35.6 million of joint venture construction financing. As a result, the Company consolidated the operating community. The Company had previously accounted for its 49% ownership interest as a preferred equity investment in an unconsolidated joint venture (see Note 5, Joint Ventures and Partnerships). The Company accounted for the consolidation as an asset acquisition resulting in no gain or loss upon consolidation and increased its real estate assets owned by approximately $67.8 million and recorded approximately $1.7 million of in-place lease intangibles.

​

Dispositions

​

In March 2020, the Company received a nonrefundable deposit on the pending sale of an operating community located in Seattle, Washington. The asset is included in Real estate held for disposition on the Consolidated Balance

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Sheet as of March 31, 2020. The sale is expected to close in the second quarter of 2020 at a gross sales price of $49.7 million.

In May 2020, the Company sold an operating community in Seattle, Washington with a total of 196 apartment homes for gross proceeds of $92.9 million, resulting in a gain of approximately $31.7 million. The asset is included in Real estate held for disposition on the Consolidated Balance Sheet as of March 31, 2020.

Other Activity

Predevelopment, development, and redevelopment projects and related costs are capitalized and reported on the Consolidated Balance Sheets as Total real estate owned, net of accumulated depreciation. The Company capitalizes costs directly related to the predevelopment, development, and redevelopment of a capital project, which include, but are not limited to, interest, real estate taxes, insurance, and allocated development and redevelopment overhead related to support costs for personnel working on the capital projects. We use our professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. These costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress and such costs are incremental and identifiable to a specific activity to get the asset ready for its intended use. These costs, excluding the direct costs of development and redevelopment and capitalized interest, for the three months ended March 31, 2020 and 2019, were $6.9 million and $3.3 million, respectively. Total interest capitalized was $1.4 million and $1.1 million for the three months ended March 31, 2020 and 2019, respectively. As each apartment home in a capital project is completed and becomes available for lease-up, the Company ceases capitalization on the related portion of the costs and depreciation commences over the estimated useful life.

In connection with the acquisition of certain properties, the Company agreed to pay certain of the tax liabilities of certain contributors if the Company sells one or more of the properties contributed in a taxable transaction prior to the expiration of specified periods of time following the acquisition. The Company may, however, sell, without being required to pay any tax liabilities, any of such properties in a non-taxable transaction, including, but not limited to, a tax-deferred Section 1031 exchange.

Further, the Company has agreed to maintain certain debt that may be guaranteed by certain contributors for specified periods of time following the acquisition. The Company, however, has the ability to refinance or repay guaranteed debt or to substitute new debt if the debt and the guaranty continue to satisfy certain conditions.

4. VARIABLE INTEREST ENTITIES

The Company has determined that the Operating Partnership and DownREIT Partnership are VIEs as the limited partners lack substantive kick-out rights and substantive participating rights. The Company has concluded that it is the primary beneficiary of, and therefore consolidates, the Operating Partnership and DownREIT Partnership based on its role as the sole general partner of the Operating Partnership and DownREIT Partnership. The Company’s role as community manager and its equity interests give us the power to direct the activities that most significantly impact the economic performance and the obligation to absorb potentially significant losses or the right to receive potentially significant benefits of the Operating Partnership and DownREIT Partnership.

See the consolidated financial statements of the Operating Partnership presented within this Report and Note 4, Unconsolidated Entities, to the Operating Partnership’s consolidated financial statements for the results of operations of the DownREIT Partnership.

5. JOINT VENTURES AND PARTNERSHIPS

UDR has entered into joint ventures and partnerships with unrelated third parties to own, operate, acquire, renovate, develop, redevelop, dispose of, and manage real estate assets that are either consolidated and included in Real estate owned on the Consolidated Balance Sheets or are accounted for under the equity method of accounting, and are included in Investment in and advances to unconsolidated joint ventures, net, on the Consolidated Balance Sheets. The Company consolidates the entities that we control as well as any variable interest entity where we are the primary beneficiary. Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

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Under the voting model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest.

UDR’s joint ventures and partnerships are funded with a combination of debt and equity. Our losses are typically limited to our investment and except as noted below, the Company does not guarantee any debt, capital payout or other obligations associated with our joint ventures and partnerships.

The Company recognizes earnings or losses from our investments in unconsolidated joint ventures and partnerships consisting of our proportionate share of the net earnings or losses of the joint ventures and partnerships. In addition, we may earn fees for providing management services to the unconsolidated joint ventures and partnerships.

The following table summarizes the Company’s investment in and advances to unconsolidated joint ventures and partnerships, net, which are accounted for under the equity method of accounting as of March 31, 2020 and December 31, 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Number of | ​ | Number of | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Operating | ​ | Apartment | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ | Income/(loss) from investments
​ | ​ | ​ | ​ | Communities | ​ | Homes | ​ | Investment at | ​ | UDR’s Ownership Interest | ​ | ​ | Three Months Ended
​ |  | Location of |  | March 31, |  | March 31, |  | March 31, |  | December 31, | ​ | March 31, |  | ​ | December 31, |  | ​ | March 31,
Joint Venture |  | Properties |  | 2020 |  | 2020 |  | 2020 |  | 2019 | ​ | 2020 |  | ​ | 2019 |  | ​ | 2020 |  | 2019
Operating: | ​ |  | ​ |  | ​ |  | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  |  | ​ | ​ | ​ | ​ | ​ | ​
UDR/MetLife I | ​ | Los Angeles, CA | ​ | 1 | ​ | 150 | ​ | $ | 28,570 | ​ | $ | 28,812 | ​ | 50.0 | % | ​ | 50.0 | % | ​ | $ | (454) | ​ | $ | (576)
UDR/MetLife II |  | Various |  | 7 |  | 1,250 |  | ​ | 150,652 |  | ​ | 150,893 | ​ | 50.0 | % | ​ | 50.0 | % | ​ | ​ | (91) | ​ | ​ | 434
Other UDR/MetLife Joint Ventures |  | Various |  | 5 |  | 1,437 |  | ​ | 94,109 |  | ​ | 98,441 | ​ | 50.6 | % | ​ | 50.6 | % | ​ | ​ | (1,811) | ​ | ​ | (1,777)
West Coast Development Joint Ventures | ​ | Los Angeles, CA | ​ | 1 | ​ | 293 | ​ | ​ | 34,943 | ​ | ​ | 34,907 | ​ | 47.0 | % | ​ | 47.0 | % | ​ | ​ | (77) | ​ | ​ | (149)
Sold Joint Ventures | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | — | ​ | ​ | — | ​ | — | % | ​ | — | % | ​ | ​ | — | ​ | ​ | (1,819)
Investment in and advances to unconsolidated joint ventures, net, before preferred equity investments and other investments |  |  | ​ | $ | 308,274 | ​ | $ | 313,053 | ​ |  |  | ​ |  | ​ | ​ | $ | (2,433) | ​ | $ | (3,887)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Income/(loss) from investments | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Investment at | ​ | Three Months Ended | ​
Developer Capital Program |  | ​ |  | ​ |  | Years To | ​ | UDR |  | March 31, |  | December 31, |  | March 31, | ​
and Other Investments (a) |  | Location |  | Rate |  | Maturity | ​ | Commitment (b) |  | 2020 |  | 2019 |  | 2020 |  | 2019 | ​
Preferred equity investments: |  |  |  |  |  |  | ​ | ​ | ​ | ​ |  |  | ​ |  |  | ​ | ​ | ​ |  | ​ |  | ​
West Coast Development Joint Ventures (c) |  | Hillsboro, OR |  | 6.5 | % | N/A | ​ | $ | — | ​ | $ | — | ​ | $ | 17,064 | ​ | $ | (46) | ​ | $ | (161) | ​
1532 Harrison | ​ | San Francisco, CA | ​ | 11.0 | % | 2.3 | ​ | ​ | 24,645 | ​ | ​ | 31,426 | ​ | ​ | 30,585 | ​ | ​ | 836 | ​ | ​ | 748 | ​
1200 Broadway (d) | ​ | Nashville, TN | ​ | 8.0 | % | 2.5 | ​ | ​ | 55,558 | ​ | ​ | 65,254 | ​ | ​ | 63,958 | ​ | ​ | 1,281 | ​ | ​ | 1,169 | ​
Junction | ​ | Santa Monica, CA | ​ | 12.0 | % | 2.3 | ​ | ​ | 8,800 | ​ | ​ | 10,693 | ​ | ​ | 10,379 | ​ | ​ | 314 | ​ | ​ | 275 | ​
1300 Fairmount (d) | ​ | Philadelphia, PA | ​ | Variable | ​ | 3.4 | ​ | ​ | 51,393 | ​ | ​ | 55,840 | ​ | ​ | 51,215 | ​ | ​ | 1,166 | ​ | ​ | 275 | ​
Essex | ​ | Orlando, FL | ​ | 12.5 | % | 3.4 | ​ | ​ | 12,886 | ​ | ​ | 15,270 | ​ | ​ | 14,804 | ​ | ​ | 466 | ​ | ​ | 332 | ​
Modera Lake Merritt (d) | ​ | Oakland, CA | ​ | 9.0 | % | 4.0 | ​ | ​ | 27,250 | ​ | ​ | 28,653 | ​ | ​ | 22,653 | ​ | ​ | 574 | ​ | ​ | — | ​
Thousand Oaks (e) | ​ | Thousand Oaks, CA | ​ | 9.0 | % | 4.9 | ​ | ​ | 20,059 | ​ | ​ | 5,994 | ​ | ​ | — | ​ | ​ | 24 | ​ | ​ | — | ​
Other investments: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
The Portals | ​ | Washington, D.C. | ​ | 11.0 | % | 1.2 | ​ | ​ | 38,559 | ​ | ​ | 49,323 | ​ | ​ | 48,181 | ​ | ​ | 1,335 | ​ | ​ | 1,173 | ​
Other investment ventures | ​ | N/A | ​ | N/A | ​ | N/A | ​ | $ | 34,500 | ​ | ​ | 14,364 | ​ | ​ | 13,598 | ​ | ​ | (150) | ​ | ​ | 125 | ​
Total Developer Capital Program and Other Investments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 276,817 | ​ | ​ | 272,437 | ​ | ​ | 5,800 | ​ | ​ | 3,936 | ​
Total Joint Ventures and Developer Capital Program Investments, net (f) | ​ | ​ | ​ | ​ | $ | 585,091 | ​ | $ | 585,490 | ​ | $ | 3,367 |  | $ | 49 | ​

(a) | The Developer Capital Program is the program through which the Company makes investments, including preferred equity investments, mezzanine loans or other structured investments that may receive a fixed yield on the investment and may include provisions pursuant to which the Company participates in the increase in value of the property upon monetization of the applicable property and/or holds fixed price purchase options.

(b) | Represents UDR’s maximum funding commitment only and therefore excludes other activity such as income from investments.

(c) | In January 2020, the Company increased its ownership interest from 49% to 100% in the 276 apartment home operating community located in Hillsboro, Oregon, for a cash purchase price of approximately $21.6 million. As a result, the Company consolidated the operating community and it is no longer accounted for as a preferred equity investment in an unconsolidated joint venture (see Note 3, Real Estate Owned). In connection with the purchase, the Company repaid the joint venture’s construction loan of approximately $35.6 million.

(d) | The Company’s preferred equity investment receives a variable percentage of the value created from the project upon a capital or liquidating event.

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(e) | In February 2020, the Company entered into a joint venture agreement with an unaffiliated joint venture partner to develop and operate a 142 apartment home community in Thousand Oaks, CA. The Company’s preferred equity investment of up to $20.1 million earns a preferred return of 9.0% per annum and receives a variable percentage of the value created from the project upon a capital or liquidating event. The unaffiliated joint venture partner is the managing member of the joint venture and the developer of the community. The Company has concluded that it does not control the joint venture and, therefore, accounts for it under the equity method of accounting.

(f) | As of March 31, 2020, the Company’s negative investment in 13th and Market Properties LLC of $3.3 million is included in Other UDR/MetLife Joint Ventures in the table above and recorded in Accounts payable, accrued expenses, and other liabilities on the Consolidated Balance Sheet.

As of March 31, 2020 and December 31, 2019, the Company had deferred fees of $9.0 million and $9.0 million, respectively, which will be recognized through earnings over the weighted average life of the related properties, upon the disposition of the properties to a third party, or upon completion of certain development obligations.

The Company recognized management fees of $1.4 million and $2.8 million for the three months ended March 31, 2020 and 2019, respectively, for management of the communities held by the joint ventures and partnerships. The management fees are included in Joint venture management and other fees on the Consolidated Statements of Operations.

The Company may, in the future, make additional capital contributions to certain of our joint ventures and partnerships should additional capital contributions be necessary to fund acquisitions or operations.

We evaluate our investments in unconsolidated joint ventures and partnerships when events or changes in circumstances indicate that there may be an other-than-temporary decline in value. We consider various factors to determine if a decrease in the value of the investment is other-than-temporary. The Company did not recognize any other-than-temporary impairments in the value of its investments in unconsolidated joint ventures or partnerships during the three months ended March 31, 2020 and 2019.

Combined summary balance sheets relating to the unconsolidated joint ventures’ and partnerships’ (not just our proportionate share) are presented below as of March 31, 2020 and December 31, 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, | ​ | December 31,
​ |  | 2020 |  | 2019
Total real estate, net |  | $ | 1,868,502 |  | $ | 1,901,081
Cash and cash equivalents | ​ |  | 32,486 | ​ |  | 29,823
Other assets | ​ | ​ | 180,893 | ​ |  | 172,941
Total assets |  | $ | 2,081,881 |  | $ | 2,103,845
​ | ​ | ​ | ​ | ​ | ​ | ​
Third party debt, net | ​ | $ | 1,136,306 | ​ | $ | 1,148,048
Accounts payable and accrued liabilities | ​ | ​ | 50,262 | ​ | ​ | 55,114
Total liabilities |  | ​ | 1,186,568 |  | ​ | 1,203,162
Total equity |  | $ | 895,313 |  | $ | 900,683

​

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Combined summary financial information relating to the unconsolidated joint ventures’ and partnerships’ operations (not just our proportionate share) is presented below for the three months ended March 31, 2020 and 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
​ |  | 2020 |  | 2019
Total revenues |  | $ | 41,314 |  | $ | 81,532
Property operating expenses | ​ |  | 15,297 | ​ |  | 30,312
Real estate depreciation and amortization | ​ |  | 16,243 | ​ |  | 29,580
Operating income/(loss) | ​ |  | 9,774 | ​ | ​ | 21,640
Interest expense | ​ |  | (10,347) | ​ |  | (21,924)
Net unrealized gain/(loss) on held investments | ​ | ​ | — | ​ | ​ | 1,522
Other income/(loss) | ​ | ​ | (8) | ​ | ​ | 103
Net income/(loss) |  | $ | (581) |  | $ | 1,341

(1) |

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6. LEASES

Lessee - Ground Leases

UDR owns six communities that are subject to ground leases, under which UDR is the lessee, expiring between 2043 and 2103, inclusive of extension options we are reasonably certain will be exercised. All of these leases are classified as operating leases through the lease term expiration based on our election of the practical expedient provided by the leasing standard. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the remaining lease term. We currently do not hold any finance leases. The Company also elected the short-term lease exception provided by the leasing standard and therefore only recognizes right-of-use assets and lease liabilities for leases with a term greater than one year. No leases qualified for the short-term lease exception during the three months ended March 31, 2020 and 2019.

As of March 31, 2020, the Operating lease right-of-use assets was $203.4 million and the Operating lease liabilities was $197.8 million on our Consolidated Balance Sheet related to our ground leases. The value of the Operating lease right-of-use assets exceeds the value of the Operating lease liabilities due to prepaid lease payments and intangible assets for ground leases acquired in the purchase of real estate. The calculation of these amounts includes minimum lease payments over the remaining lease term (described further in the table below). Variable lease payments are excluded from the right-of-use assets and lease liabilities and are recognized in earnings in the period in which the obligation for those payments is incurred.

As the discount rate implicit in the leases was not readily determinable, we determined the discount rate for these leases utilizing the Company’s incremental borrowing rate at a portfolio level, adjusted for the remaining lease term, and the form of underlying collateral.

The weighted average remaining lease term for these leases was 44.5 years at March 31, 2020 and the weighted average discount rate was 5.0% at March 31, 2020.

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Future minimum lease payments and total operating lease liabilities from our ground leases as of March 31, 2020 are as follows (dollars in thousands):

​ | ​ | ​ | ​
​ | ​ | Ground Leases
2020 | ​ | $ | 9,330
2021 | ​ | ​ | 12,442
2022 | ​ | ​ | 12,442
2023 | ​ | ​ | 12,442
2024 | ​ | ​ | 12,442
Thereafter | ​ | ​ | 455,221
Total future minimum lease payments (undiscounted) | ​ | ​ | 514,319
Difference between future undiscounted cash flows and discounted cash flows | ​ | ​ | (316,490)
Total operating lease liabilities (discounted) | ​ | $ | 197,829

​

For purposes of recognizing our ground lease contracts, the Company uses the minimum lease payments, if stated in the agreement. For ground lease agreements where there is a rent reset provision based on a change in an index or a rate (i.e., changes in fair market rental rates or changes in the consumer price index) but that does not include a specified minimum lease payment, the Company uses the current rent over the remainder of the lease term. If there is a contingency upon which some or all of the variable lease payments that will be paid over the remainder of the lease term are based, which is resolved such that those payments now meet the definition of lease payments, the Company will remeasure the right-of-use asset and lease liability on the reset date.

The components of operating lease expenses were as follows (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended March 31,
​ | ​ | 2020 | ​ | 2019
Lease expense: | ​ | ​ | ​ | ​ | ​ | ​
Contractual lease expense | ​ | $ | 3,170 | ​ | $ | 2,159
Variable lease expense (a) | ​ | ​ | 43 | ​ | ​ | 139
Total operating lease expense (b)(c) | ​ | $ | 3,213 | ​ | $ | 2,298

| (a) | Variable lease expense includes adjustments such as changes in the consumer price index and payments based on a percentage of income of the lessee.

| (b) | Lease expense is reported within the line item Other operating expenses on the Consolidated Statements of Operations.

| (c) | For the three months ended March 31, 2020, Operating lease right-of-use assets and Operating lease liabilities amortized by $0.8 million and $0.7 million, respectively, and for the three months ended March 31, 2019 Operating lease right-of-use assets and Operating lease liabilities amortized by $0.2 million and $0.1 million, respectively. The Company recorded $0.1 million and $0.1 million of total operating lease expense during the three months ended March 31, 2020 and 2019, respectively, due to the net impact of the amortization.

​

Lessor - Apartment Home, Retail and Commercial Space Leases

​

UDR’s communities and retail and commercial space are leased to tenants under operating leases. As of March 31, 2020, our apartment home leases generally have initial terms of 12 months or less and represent approximately 98.4% of our total lease revenue. As of March 31, 2020, our retail and commercial space leases generally have initial terms of between 5 and 15 years and represent approximately 1.6% of our total lease revenue. Our apartment home leases are generally renewable at the end of the lease term, subject to potential increases in rental rates, and our retail and commercial space leases generally have renewal options, subject to associated increases in rental rates due to market based or fixed price renewal options and certain other conditions. (See Note 14, Reportable Segments for further discussion around our major revenue streams and disaggregation of our revenue.)

​

Future minimum lease payments from our retail and commercial leases as of March 31, 2020 are as follows (dollars in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

​ | ​ | ​ | ​
​ | ​ | Retail and Commercial Leases
2020 | ​ | $ | 16,849
2021 | ​ | ​ | 22,487
2022 | ​ | ​ | 20,781
2023 | ​ | ​ | 19,317
2024 | ​ | ​ | 17,594
Thereafter | ​ | ​ | 81,662
Total future minimum lease payments (a) | ​ | $ | 178,690

| (a) | We have excluded our apartment home leases from this table as our apartment home leases generally have initial terms of 12 months or less.

Certain of our leases with retail and commercial tenants provide for the payment by the lessee of additional variable rent based on a percentage of the tenant’s revenue. The amounts shown in the table above do not include these variable percentage rents. The Company recorded variable percentage rents of $0.1 million and less than $0.2 million during the three months ended March 31, 2020 and 2019, respectively.

​

​

​

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

7. SECURED AND UNSECURED DEBT, NET

The following is a summary of our secured and unsecured debt at March 31, 2020 and December 31, 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Principal Outstanding | ​ | As of March 31, 2020
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Weighted | ​ | Weighted | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Average | ​ | Average | ​ | Number of
​ | ​ | March 31, | ​ | December 31, | ​ | Interest | ​ | Years to | ​ | Communities
​ |  | 2020 |  | 2019 |  | Rate |  | Maturity |  | Encumbered
Secured Debt: | ​ | ​ |  | ​ | ​ |  | ​ |  | ​ |  | ​ |
Fixed Rate Debt |  | ​ |  |  | ​ |  |  |  |  |  |  |
Mortgage notes payable (a) | ​ | $ | 883,249 | ​ | $ | 884,869 |  | 3.61 | % | 5.9 |  | 15
Credit facilities (b) | ​ |  | 203,429 | ​ |  | 204,590 |  | 4.90 | % | 2.8 |  | 4
Deferred financing costs and other non-cash adjustments | ​ |  | 30,585 | ​ |  | 33,046 |  |  |  |  |  |
Total fixed rate secured debt, net | ​ |  | 1,117,263 | ​ |  | 1,122,505 |  | 3.85 | % | 5.3 |  | 19
Variable Rate Debt | ​ |  |  | ​ |  |  |  |  |  |  |  |
Tax-exempt secured notes payable (c) | ​ |  | 27,000 | ​ |  | 27,000 |  | 1.91 | % | 12.0 |  | 1
Deferred financing costs | ​ |  | (62) | ​ |  | (64) |  |  |  |  |  |
Total variable rate secured debt, net | ​ |  | 26,938 | ​ |  | 26,936 |  | 1.91 | % | 12.0 |  | 1
Total Secured Debt, net | ​ |  | 1,144,201 | ​ |  | 1,149,441 |  | 3.80 | % | 5.5 |  | 20
Unsecured Debt: | ​ |  |  | ​ |  |  |  |  |  |  |  |
Variable Rate Debt | ​ |  |  | ​ |  |  |  |  |  |  |  |
Borrowings outstanding under unsecured credit facility due January 2023 (d) (m) | ​ |  | 50,000 | ​ |  | — |  | 1.75 | % | 2.8 |  |
Borrowings outstanding under unsecured commercial paper program due April 2020 (e) (m) (n) | ​ | ​ | 215,000 | ​ | ​ | 300,000 | ​ | 1.58 | % | 0.1 | ​ | ​
Borrowings outstanding under unsecured working capital credit facility due January 2021 (f) | ​ |  | 24,797 | ​ |  | 16,583 |  | 1.82 | % | 0.8 |  |
Term Loan due September 2023 (d) (m) | ​ |  | 35,000 | ​ |  | 35,000 |  | 2.48 | % | 3.5 |  |
Fixed Rate Debt | ​ |  |  | ​ |  |  |  |  |  |  |  |
1.93% Term Loan due September 2023 (d) (m) | ​ | ​ | 315,000 | ​ |  | 315,000 |  | 1.93 | % | 3.5 | ​ | ​
3.75% Medium-Term Notes due July 2024 (net of discounts of $443 and $470, respectively) (g) (m) | ​ |  | 299,557 | ​ |  | 299,530 |  | 3.75 | % | 4.3 |  |
8.50% Debentures due September 2024 | ​ |  | 15,644 | ​ |  | 15,644 |  | 8.50 | % | 4.5 |  |
4.00% Medium-Term Notes due October 2025 (net of discounts of $379 and $396, respectively) (h) (m) | ​ |  | 299,621 | ​ |  | 299,604 |  | 4.00 | % | 5.5 |  |
2.95% Medium-Term Notes due September 2026 (m) | ​ |  | 300,000 | ​ |  | 300,000 |  | 2.95 | % | 6.4 |  |
3.50% Medium-Term Notes due July 2027 (net of discounts of $511 and $529, respectively) (m) | ​ | ​ | 299,489 | ​ | ​ | 299,471 | ​ | 3.50 | % | 7.3 | ​ | ​
3.50% Medium-Term Notes due January 2028 (net of discounts of $924 and $954, respectively) (m) | ​ | ​ | 299,076 | ​ | ​ | 299,046 | ​ | 3.50 | % | 7.8 | ​ | ​
4.40% Medium-Term Notes due January 2029 (net of discounts of $5 and $5, respectively) (i) (m) | ​ | ​ | 299,995 | ​ | ​ | 299,995 | ​ | 4.40 | % | 8.8 | ​ | ​
3.20% Medium-Term Notes due January 2030 (net of premiums of $13,442 and $2,281, respectively) (j) (m) | ​ | ​ | 613,442 | ​ | ​ | 402,281 | ​ | 3.20 | % | 9.8 | ​ | ​
3.00% Medium-Term Notes due August 2031 (net of discounts of $1,099 and $1,123, respectively) (k) (m) | ​ | ​ | 398,901 | ​ | ​ | 398,877 | ​ | 3.00 | % | 11.4 | ​ | ​
3.10% Medium-Term Notes due November 2034 (net of discounts of $1,287 and $1,309, respectively) (l) (m) | ​ | ​ | 298,713 | ​ | ​ | 298,691 | ​ | 3.10 | % | 14.6 | ​ | ​
Other | ​ |  | 12 | ​ |  | 13 |  |  |  |  |  |
Deferred financing costs | ​ |  | (23,310) | ​ |  | (21,652) |  |  |  |  |  |
Total Unsecured Debt, net | ​ |  | 3,740,937 | ​ |  | 3,558,083 |  | 3.29 | % | 7.5 |  |
Total Debt, net | ​ | $ | 4,885,138 | ​ | $ | 4,707,524 |  | 3.28 | % | 7.1 |  |

​

For purposes of classification of the above table, variable rate debt with a derivative financial instrument designated as a cash flow hedge is deemed as fixed rate debt due to the Company having effectively established a fixed interest rate for the underlying debt instrument.

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MARCH 31, 2020

Our secured debt instruments generally feature either monthly interest and principal or monthly interest-only payments with balloon payments due at maturity. As of March 31, 2020, secured debt encumbered $2.1 billion or 16.6% of UDR’s total real estate owned based upon gross book value ($10.7 billion or 83.4% of UDR’s real estate owned based on gross book value is unencumbered).

(a) At March 31, 2020, fixed rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from August 2020 through February 2030 and carry interest rates ranging from 2.70% to 4.35%.

The Company will from time to time acquire properties subject to fixed rate debt instruments. In those situations, the Company records the debt at its estimated fair value and amortizes any difference between the fair value and par value to interest expense over the life of the underlying debt instrument.

(b) UDR had one secured credit facility with New York Life with an outstanding balance of $203.4 million at March 31, 2020. The New York Life credit facility matures in January 2023 and bears interest at a fixed rate of 4.90%.

During the three months ended March 31, 2020 and 2019, the Company had $2.6 million and $0.6 million, respectively, of amortization of the fair market adjustment of debt assumed in the acquisition of properties inclusive of its fixed rate mortgage notes payable and credit facilities, which was included in Interest expense on the Consolidated Statements of Operations. The unamortized fair market adjustment was a net premium of $32.7 million and $35.3 million at March 31, 2020 and December 31, 2019, respectively.

​

(c) The variable rate mortgage note payable secures a tax-exempt housing bond issue that matures in March 2032. Interest on this note is payable in monthly installments. As of March 31, 2020, the variable interest rate on the mortgage note was 1.91%.
(d) The Company has a $1.1 billion unsecured revolving credit facility (the “Revolving Credit Facility”) and a $350.0 million unsecured term loan (the “Term Loan”). The credit agreement for these facilities (the “Credit Agreement”) allows the total commitments under the Revolving Credit Facility and the total borrowings under the Term Loan to be increased to an aggregate maximum amount of up to $2.0 billion, subject to certain conditions, including obtaining commitments from one or more lenders. The Revolving Credit Facility has a scheduled maturity date of January 31, 2023, with two six-month extension options, subject to certain conditions. The Term Loan has a scheduled maturity date of September 30, 2023.

Based on the Company’s current credit rating, the Revolving Credit Facility has an interest rate equal to LIBOR plus a margin of 82.5 basis points and a facility fee of 15 basis points, and the Term Loan has an interest rate equal to LIBOR plus a margin of 90 basis points. Depending on the Company’s credit rating, the margin under the Revolving Credit Facility ranges from 75 to 145 basis points, the facility fee ranges from 10 to 30 basis points, and the margin under the Term Loan ranges from 80 to 165 basis points.

The Credit Agreement contains customary representations and warranties and financial and other affirmative and negative covenants. The Credit Agreement also includes customary events of default, in certain cases subject to customary periods to cure. The occurrence of an event of default, following the applicable cure period, would permit the lenders to, among other things, declare the unpaid principal, accrued and unpaid interest and all other amounts payable under the Credit Agreement to be immediately due and payable.

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MARCH 31, 2020

The following is a summary of short-term bank borrowings under the Revolving Credit Facility at March 31, 2020 and December 31, 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, |  | December 31, | ​
​ |  | 2020 |  | 2019 | ​
Total revolving credit facility | ​ | $ | 1,100,000 | ​ | $ | 1,100,000 | ​
Borrowings outstanding at end of period (1) | ​ |  | 50,000 | ​ |  | — | ​
Weighted average daily borrowings during the period ended | ​ |  | 11,538 | ​ |  | 55 | ​
Maximum daily borrowings during the period ended | ​ |  | 50,000 | ​ |  | 20,000 | ​
Weighted average interest rate during the period ended | ​ |  | 1.8 | % |  | 2.6 | %
Interest rate at end of the period | ​ |  | 1.8 | % |  | — | %

(1) | Excludes $2.5 million and $2.9 million of letters of credit at March 31, 2020 and December 31, 2019, respectively.

(e) The Company has an unsecured commercial paper program. Under the terms of the program, the Company may issue unsecured commercial paper up to a maximum aggregate amount outstanding of $500.0 million. The notes are sold under customary terms in the United States commercial paper market and rank pari passu with all of the Company’s other unsecured indebtedness. The notes are fully and unconditionally guaranteed by the Operating Partnership.

The following is a summary of short-term bank borrowings under the unsecured commercial paper program at March 31, 2020 and December 31, 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, |  | December 31, |
​ | ​ | 2020 | ​ | 2019 |
Total unsecured commercial paper program |  | $ | 500,000 | ​ | $ | 500,000 | ​
Borrowings outstanding at end of period | ​ |  | 215,000 | ​ |  | 300,000 | ​
Weighted average daily borrowings during the period ended | ​ |  | 346,978 | ​ |  | 173,353 | ​
Maximum daily borrowings during the period ended | ​ |  | 500,000 | ​ |  | 435,000 | ​
Weighted average interest rate during the period ended | ​ |  | 1.8 | % |  | 2.5 | %
Interest rate at end of the period | ​ |  | 1.6 | % |  | 2.0 | %

​

(f) The Company has a working capital credit facility, which provides for a $75.0 million unsecured revolving credit facility (the “Working Capital Credit Facility”) with a scheduled maturity date of January 15, 2021. Based on the Company’s current credit rating, the Working Capital Credit Facility has an interest rate equal to LIBOR plus a margin of 82.5 basis points. Depending on the Company’s credit rating, the margin ranges from 75 to 145 basis points.

The following is a summary of short-term bank borrowings under the Working Capital Credit Facility at March 31, 2020 and December 31, 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, |  | December 31, |
​ | ​ | 2020 | ​ | 2019 |
Total working capital credit facility | ​ | $ | 75,000 | ​ | $ | 75,000 | ​
Borrowings outstanding at end of period | ​ |  | 24,797 | ​ |  | 16,583 | ​
Weighted average daily borrowings during the period ended | ​ |  | 25,212 | ​ |  | 23,487 | ​
Maximum daily borrowings during the period ended | ​ |  | 46,419 | ​ |  | 66,170 | ​
Weighted average interest rate during the period ended | ​ |  | 2.2 | % |  | 3.1 | %
Interest rate at end of the period | ​ |  | 1.8 | % |  | 2.6 | %

​

(g) The Company previously entered into forward starting interest rate swaps to hedge against interest rate risk on $100.0 million of this debt. The all-in weighted average interest rate, inclusive of the impact of these interest rate swaps, was 3.69%.
(h) The Company previously entered into forward starting interest rate swaps to hedge against interest rate risk on $200.0 million of this debt. The all-in weighted average interest rate, inclusive of the impact of these interest rate swaps, was 4.53%.

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MARCH 31, 2020

(i) The Company previously entered into forward starting interest rate swaps to hedge against interest rate risk on $150.0 million of this debt. The all-in weighted average interest rate, inclusive of the impact of these interest rate swaps, was 4.27%.
(j) The Company previously entered into forward starting interest rate swaps to hedge against the interest rate risk of this debt. The all-in weighted average interest rate, inclusive of the impact of these interest rate swaps, was 3.42% for the initial $300.0 million issued. In connection with the additional $100.0 million issued in October 2019, the Company entered into treasury lock agreements to hedge against interest rate risk on all of this debt. The all-in weighted average interest rate, inclusive of the impact of the treasury locks, was 3.24% for the 2030 notes.

In February 2020, the Company issued $200.0 million of 3.20% senior unsecured medium-term notes due 2030. Interest is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2020. The notes were priced at 105.660% of the principal amount at issuance. This was a further issuance of the 2030 notes, and forms a single series with, the $300.0 million aggregate principal amount of the Company’s 3.20% notes due 2030 that were issued in July 2019 and the $100.0 million aggregate principal amount of the Company’s 3.20% notes due 2030 that were issued in October 2019. As of the completion of the offering, the aggregate principal amount of outstanding 2030 notes was $600.0 million.

(k) The Company entered into a treasury lock agreement to hedge against interest rate risk on $150.0 million of this debt. The all-in weighted average interest rate, inclusive of the impact of the treasury lock, was 3.01%.
(l) The Company previously entered into forward starting interest rate swaps to hedge against the interest rate risk of this debt. The all-in weighted average interest rate, inclusive of the impact of these interest rate swaps, was 3.13%.
(m) The Operating Partnership is the guarantor of this debt.

The aggregate maturities, including amortizing principal payments on secured and unsecured debt, of total debt for the next ten calendar years subsequent to March 31, 2020 are as follows (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Total Fixed |  | Total Variable |  | Total |  | Total |  | Total
Year | ​ | Secured Debt | ​ | Secured Debt | ​ | Secured Debt | ​ | Unsecured Debt | ​ | Debt
2020 | ​ | $ | 112,592 | ​ | $ | — | ​ | $ | 112,592 | ​ | $ | 215,000 | (a) | $ | 327,592
2021 | ​ | ​ | 8,763 | ​ | ​ | — | ​ | ​ | 8,763 | ​ | ​ | 24,797 | ​ | ​ | 33,560
2022 | ​ |  | 9,159 | ​ |  | — | ​ |  | 9,159 | ​ |  | — | ​ |  | 9,159
2023 | ​ |  | 295,965 | ​ |  | — | ​ |  | 295,965 | ​ |  | 400,000 | ​ |  | 695,965
2024 | ​ |  | 95,280 | ​ |  | — | ​ |  | 95,280 | ​ |  | 315,644 | ​ |  | 410,924
2025 | ​ |  | 173,189 | ​ |  | — | ​ |  | 173,189 | ​ |  | 300,000 | ​ |  | 473,189
2026 | ​ |  | 51,070 | ​ |  | — | ​ |  | 51,070 | ​ |  | 300,000 | ​ |  | 351,070
2027 | ​ |  | 1,111 | ​ |  | — | ​ |  | 1,111 | ​ |  | 300,000 | ​ |  | 301,111
2028 | ​ |  | 122,465 | ​ |  | — | ​ |  | 122,465 | ​ |  | 300,000 | ​ |  | 422,465
2029 | ​ |  | 144,584 | ​ |  | — | ​ |  | 144,584 | ​ |  | 300,000 | ​ |  | 444,584
Thereafter | ​ |  | 72,500 | ​ |  | 27,000 | ​ |  | 99,500 | ​ |  | 1,300,000 | ​ |  | 1,399,500
Subtotal | ​ |  | 1,086,678 | ​ |  | 27,000 | ​ |  | 1,113,678 | ​ |  | 3,755,441 | ​ |  | 4,869,119
Non-cash (b) | ​ |  | 30,585 | ​ |  | (62) | ​ |  | 30,523 | ​ |  | (14,504) | ​ |  | 16,019
Total | ​ | $ | 1,117,263 | ​ | $ | 26,938 | ​ | $ | 1,144,201 | ​ | $ | 3,740,937 | ​ | $ | 4,885,138

(a) | All unsecured debt due in the remainder of 2020 is related to the Company’s commercial paper program.

(b) | Includes the unamortized balance of fair market value adjustments, premiums/discounts and deferred financing costs. The Company amortized $1.0 million and $1.0 million, respectively, during the three months ended March 31, 2020 and 2019, of deferred financing costs into Interest expense.

We were in compliance with the covenants of our debt instruments at March 31, 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

(n) In April 2020, the entire $215.0 million of outstanding unsecured commercial paper as of March 31, 2020 was repaid at maturity with draws on the Company’s Revolving Credit Facility and Working Capital Credit Facility.

​

8. INCOME/(LOSS) PER SHARE

The following table sets forth the computation of basic and diluted income/(loss) per share for the periods presented (dollars and shares in thousands, except per share data):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​
​ | ​ | March 31, | ​
​ |  | 2020 |  | 2019 | ​
Numerator for income/(loss) per share: | ​ | ​ | ​ | ​ | ​ |  | ​
Net income/(loss) | ​ | $ | 5,540 | ​ | $ | 26,602 | ​
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 | ​
Distributions to preferred stockholders — Series E (Convertible) | ​ |  | (1,066) | ​ |  | (1,011) | ​
Income/(loss) attributable to common stockholders - basic and diluted | ​ | $ | 4,155 | ​ | $ | 23,492 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Denominator for income/(loss) per share: | ​ |  |  | ​ |  |  | ​
Weighted average common shares outstanding | ​ |  | 294,731 | ​ |  | 277,297 | ​
Non-vested restricted stock awards | ​ |  | (274) | ​ |  | (295) | ​
Denominator for basic income/(loss) per share | ​ |  | 294,457 | ​ |  | 277,002 | ​
Incremental shares issuable from assumed conversion of unvested LTIP Units and unvested restricted stock | ​ |  | 703 | ​ |  | 555 | ​
Denominator for diluted income/(loss) per share | ​ |  | 295,160 | ​ |  | 277,557 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income/(loss) per weighted average common share: | ​ |  |  | ​ |  |  | ​
Basic | ​ | $ | 0.01 | ​ | $ | 0.08 | ​
Diluted | ​ | $ | 0.01 | ​ | $ | 0.08 | ​

​

Basic income/(loss) per common share is computed based upon the weighted average number of common shares outstanding. Diluted income/(loss) per common share is computed based upon the weighted average number of common shares outstanding plus the common shares issuable from the assumed conversion of the OP Units and DownREIT Units, convertible preferred stock, stock options, unvested long-term incentive plan units (“LTIP Units”), unvested restricted stock and continuous equity program forward sales agreements. Only those instruments having a dilutive impact on our basic income/(loss) per share are included in diluted income/(loss) per share during the periods. For the three months ended March 31, 2020 and 2019, the effect of the conversion of the OP Units, DownREIT Units, LTIP Units, the Company’s Series E preferred stock and shares issuable upon settlement of forward sales agreements was not dilutive and therefore not included in the above calculation.

In July 2017, the Company entered into an ATM sales agreement under which the Company may offer and sell up to 20.0 million shares of its common stock, from time to time, to or through its sales agents and may enter into separate forward sales agreements to or through its forward purchasers. Upon entering into the ATM sales agreement, the Company simultaneously terminated the sales agreement for its prior at-the-market equity offering program, which was entered into in April 2017, which replaced the prior at-the-market equity offering program entered into in April 2012. During the three months ended March 31, 2020, the Company did not sell any shares of common stock through its ATM program. As of March 31, 2020, we had 11.7 million shares of common stock available for future issuance under the ATM program, including an aggregate of 2.1 million shares subject to the forward sales agreements described below.

In connection with any forward sales agreement under the Company’s ATM program, the relevant forward purchasers will borrow from third parties and, through the relevant sales agent, acting in its role as forward seller, sell a number of shares of the Company’s common stock equal to the number of shares underlying the agreement. The Company does not initially receive any proceeds from any sale of borrowed shares by the forward seller.

​

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MARCH 31, 2020

During the three months ended March 31, 2020, the Company entered into forward sales agreements under its ATM program for a total of 2.1 million shares of common stock at a weighted average initial forward price per share of $49.56. The initial forward price per share to be received by the Company upon settlement will be determined on the applicable settlement date based on adjustments made to the initial forward price to reflect the then-current federal funds rate and the amount of dividends paid to holders of UDR common stock over the term of the forward sales agreement. As of March 31, 2020, no shares under the forward sales agreements have been settled. The final dates by which shares sold under the forward sales agreements must be settled range between February 12, 2021 and March 3, 2021.

​

The Company generally has the ability to determine the dates and method of settlement (i.e., gross physical settlement, net share settlement or cash settlement), subject to certain conditions and the right of the counterparty to accelerate settlement under certain circumstances. The Company currently expects to fully physically settle each forward sales agreement with the relevant forward purchaser on one or more dates specified by the Company on or prior to the maturity date of that particular forward sales agreement, in which case the Company expects to receive aggregate net cash proceeds at settlement equal to the number of shares underlying the particular forward sales agreement multiplied by the relevant forward sale price. However, subject to certain exceptions, the Company may also elect, in its discretion, to cash settle or net share settle a particular forward sales agreement, in which case the Company may not receive any proceeds (in the case of cash settlement) or will not receive any proceeds (in the case of net share settlement), and the Company may owe cash (in the case of cash settlement) or shares of UDR common stock (in the case of net share settlement) to the relevant forward purchaser.

​

The following table sets forth the additional shares of common stock issuable, by equity instrument, if such equity instrument were converted to or redeemed for common stock for each of the three months ended March 31, 2020 and 2019 (in thousands):

​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​
​ | ​ | March 31, | ​
​ | ​ | 2020 | ​ | 2019 | ​
OP/DownREIT Units |  | 22,228 |  | 24,280 |
Convertible preferred stock |  | 3,011 |  | 3,011 |
Unvested LTIP Units and unvested restricted stock |  | 703 |  | 555 |

​

​

9. NONCONTROLLING INTERESTS

Redeemable Noncontrolling Interests in the Operating Partnership and DownREIT Partnership

Interests in the Operating Partnership and the DownREIT Partnership held by limited partners are represented by OP Units and DownREIT Units, respectively. The income is allocated to holders of OP Units/DownREIT Units based upon net income attributable to common stockholders and the weighted average number of OP Units/DownREIT Units outstanding to total common shares plus OP Units/DownREIT Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to noncontrolling interests in accordance with the terms of the partnership agreements of the Operating Partnership and the DownREIT Partnership.

Limited partners of the Operating Partnership and the DownREIT Partnership have the right to require such partnership to redeem all or a portion of the OP Units/DownREIT Units held by the limited partner at a redemption price equal to and in the form of the Cash Amount (as defined in the partnership agreement of the Operating Partnership or the DownREIT Partnership, as applicable), provided that such OP Units/DownREIT Units have been outstanding for at least one year, subject to certain exceptions. UDR, as the general partner of the Operating Partnership and the DownREIT Partnership may, in its sole discretion, purchase the OP Units/DownREIT Units by paying to the limited partner either the Cash Amount or the REIT Share Amount (generally one share of common stock of the Company for each OP Unit/DownREIT Unit), as defined in the partnership agreement of the Operating Partnership or the DownREIT Partnership, as applicable. Accordingly, the Company records the OP Units/DownREIT Units outside of permanent equity and reports the OP Units/DownREIT Units at their redemption value using the Company’s stock price at each balance sheet date.

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

The following table sets forth redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership for the following period (dollars in thousands):

​ | ​ | ​ | ​ | ​
Redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership, December 31, 2019 |  | $ | 1,018,665 | ​
Mark-to-market adjustment to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership | ​ |  | (205,713) | ​
Conversion of OP Units/DownREIT Units to Common Stock | ​ |  | (7,830) | ​
Net income/(loss) attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership | ​ |  | 313 | ​
Distributions to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership | ​ |  | (9,182) | ​
Vesting of Long-Term Incentive Plan Units | ​ | ​ | 23,018 | ​
Allocation of other comprehensive income/(loss) | ​ |  | (138) | ​
Redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership, March 31, 2020 | ​ | $ | 819,133 | ​

​

Noncontrolling Interests

Noncontrolling interests represent interests of unrelated partners and unvested LTIP Units in certain consolidated affiliates, and are presented as part of equity on the Consolidated Balance Sheets since these interests are not redeemable. Net (income)/loss attributable to noncontrolling interests was less than $(0.1) million during each of the three months ended March 31, 2020 and 2019.

The Company grants LTIP Units to certain employees and non-employee directors. The LTIP Units represent an ownership interest in the Operating Partnership and have vesting terms of between one and three years, specific to the individual grants.

Noncontrolling interests related to long-term incentive plan units represent the unvested LTIP Units of these employees and non-employee directors in the Operating Partnership. The net income/(loss) allocated to the unvested LTIP Units is included in Net (income)/loss attributable to noncontrolling interests on the Consolidated Statements of Operations.

10. FAIR VALUE OF DERIVATIVES AND FINANCIAL INSTRUMENTS

Fair value is based on the price that would be received to sell an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level valuation hierarchy prioritizes observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below:

| ● | Level 1 — Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

| ● | Level 2 — Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

| ● | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

The estimated fair values of the Company’s financial instruments either recorded or disclosed on a recurring basis as of March 31, 2020 and December 31, 2019, are summarized as follows (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Fair Value at March 31, 2020, Using
​ | ​ | Total | ​ | ​ | ​ | Quoted | ​ | ​ | ​ | ​
​ | ​ | Carrying | ​ | ​ | ​ | Prices in | ​ | ​ | ​ | ​
​ | ​ | Amount in | ​ | ​ | ​ | Active | ​ | ​ | ​ | ​ | ​
​ | ​ | Statement of | ​ | ​ | ​ | ​ | Markets | ​ | Significant | ​ | ​ | ​
​ | ​ | Financial | ​ | Fair Value | ​ | for Identical | ​ | Other | ​ | Significant
​ | ​ | Position at | ​ | Estimate at | ​ | Assets or | ​ | Observable | ​ | Unobservable
​ | ​ | March 31, | ​ | March 31, | ​ | Liabilities | ​ | Inputs | ​ | Inputs
​ | ​ | 2020 (a) | ​ | 2020 | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3)
Description: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ | ​
Notes receivable (b) | ​ | $ | 151,543 | ​ | $ | 160,515 | ​ | $ | — | ​ | $ | — | ​ | $ | 160,515
Total assets | ​ | $ | 151,543 | ​ | $ | 160,515 | ​ | $ | — | ​ | $ | — | ​ | $ | 160,515
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivatives - Interest rate contracts (c) | ​ | $ | 3,075 | ​ | $ | 3,075 | ​ | $ | — | ​ | $ | 3,075 | ​ | $ | —
Secured debt instruments - fixed rate: (d) | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  | ​
Mortgage notes payable | ​ | ​ | 903,243 | ​ | ​ | 908,088 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 908,088
Credit facilities | ​ |  | 216,181 | ​ |  | 213,026 | ​ |  | — | ​ |  | — | ​ |  | 213,026
Secured debt instruments - variable rate: (d) | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  | ​
Tax-exempt secured notes payable | ​ |  | 27,000 | ​ |  | 27,000 | ​ |  | — | ​ |  | — | ​ |  | 27,000
Unsecured debt instruments: (d) | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  | ​
Revolving credit facility | ​ | ​ | 50,000 | ​ | ​ | 50,000 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 50,000
Working capital credit facility | ​ | ​ | 24,797 | ​ | ​ | 24,797 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 24,797
Commercial paper program | ​ | ​ | 215,000 | ​ | ​ | 215,000 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 215,000
Unsecured notes | ​ | ​ | 3,474,450 | ​ | ​ | 3,466,082 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 3,466,082
Total liabilities | ​ | $ | 4,913,746 | ​ | $ | 4,907,068 | ​ | $ | — | ​ | $ | 3,075 | ​ | $ | 4,903,993
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership (e) | ​ | $ | 819,133 | ​ | $ | 819,133 | ​ | $ | — | ​ | $ | 819,133 | ​ | $ | —

​

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Fair Value at December 31, 2019, Using
​ | ​ | Total | ​ | ​ | ​ | Quoted | ​ | ​ | ​ | ​
​ | ​ | Carrying | ​ | ​ | ​ | Prices in | ​ | ​ | ​ | ​
​ | ​ | Amount in | ​ | ​ | ​ | Active | ​ | ​ | ​ | ​
​ | ​ | Statement of | ​ | ​ | ​ | Markets | ​ | Significant | ​ | ​
​ | ​ | Financial | ​ | Fair Value | ​ | for Identical | ​ | Other | ​ | Significant
​ | ​ | Position at | ​ | Estimate at | ​ | Assets or | ​ | Observable | ​ | Unobservable
​ | ​ | December 31, | ​ | December 31, | ​ | Liabilities | ​ | Inputs | ​ | Inputs
​ |  | 2019 (a) | ​ | 2019 | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3)
Description: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ | ​
Notes receivable (b) | ​ | $ | 153,650 | ​ | $ | 160,197 | ​ | $ | — | ​ | $ | — | ​ | $ | 160,197
Derivatives - Interest rate contracts (c) | ​ |  | 6 | ​ |  | 6 | ​ |  | — | ​ |  | 6 | ​ |  | —
Total assets | ​ | $ | 153,656 | ​ | $ | 160,203 | ​ | $ | — | ​ | $ | 6 | ​ | $ | 160,197
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivatives - Interest rate contracts (c) | ​ | $ | 142 | ​ | $ | 142 | ​ | $ | — | ​ | $ | 142 | ​ | $ | —
Secured debt instruments - fixed rate: (d) | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  | ​
Mortgage notes payable | ​ | ​ | 906,228 | ​ | ​ | 898,329 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 898,329
Credit facilities | ​ |  | 218,490 | ​ |  | 213,661 | ​ |  | — | ​ |  | — | ​ |  | 213,661
Secured debt instruments - variable rate: (d) | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  | ​
Tax-exempt secured notes payable | ​ |  | 27,000 | ​ |  | 27,000 | ​ |  | — | ​ |  | — | ​ |  | 27,000
Unsecured debt instruments: (d) | ​ |  | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  | ​
Working capital credit facility | ​ | ​ | 16,583 | ​ | ​ | 16,583 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 16,583
Commercial paper program | ​ | ​ | 300,000 | ​ | ​ | 300,000 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 300,000
Unsecured notes | ​ | ​ | 3,263,152 | ​ | ​ | 3,397,622 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 3,397,622
Total liabilities | ​ | $ | 4,731,595 | ​ | $ | 4,853,337 | ​ | $ | — | ​ | $ | 142 | ​ | $ | 4,853,195
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership (e) | ​ | $ | 1,018,665 | ​ | $ | 1,018,665 | ​ | $ | — | ​ | $ | 1,018,665 | ​ | $ | —

(a) | Balances include fair market value adjustments and exclude deferred financing costs.

(b) | See Note 2, Significant Accounting Policies.

(c) | See Note 11, Derivatives and Hedging Activity.

(d) | See Note 7, Secured and Unsecured Debt, Net.

(e) | See Note 9, Noncontrolling Interests.

There were no transfers into or out of any of the levels of the fair value hierarchy during the three months ended March 31, 2020.

Financial Instruments Carried at Fair Value

The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair values of interest rate options are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of March 31, 2020 and December 31, 2019, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. In conjunction with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership have a redemption feature and are marked to their redemption value. The redemption value is based on the fair value of the Company’s common stock at the redemption date, and therefore, is calculated based on the fair value of the Company’s common stock at the balance sheet date. Since the valuation is based on observable inputs such as quoted prices for similar instruments in active markets, redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership are classified as Level 2.

Financial Instruments Not Carried at Fair Value

At March 31, 2020 and December 31, 2019, the fair values of cash and cash equivalents, restricted cash, accounts receivable, prepaids, real estate taxes payable, accrued interest payable, security deposits and prepaid rent, distributions payable and accounts payable approximated their carrying values because of the short term nature of these instruments. The estimated fair values of other financial instruments, which includes notes receivable and debt instruments, are classified in Level 3 of the fair value hierarchy due to the significant unobservable inputs that are utilized in their respective valuations.

We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book value of those assets. Our cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. The net book value of impaired assets is reduced to fair value. Our estimates of fair value represent our best estimate based upon Level 3 inputs such as industry trends and reference to market rates and transactions.

We consider various factors to determine if a decrease in the value of our Investment in and advances to unconsolidated joint ventures, net is other-than-temporary. These factors include, but are not limited to, age of the venture, our intent and ability to retain our investment in the entity, the financial condition and long-term prospects of the entity, and the relationships with the other joint venture partners and its lenders. Based on the significance of the unobservable inputs, we classify these fair value measurements within Level 3 of the valuation hierarchy. The Company did not incur any other-than-temporary impairments in the value of its investments in unconsolidated joint ventures during the three months ended March 31, 2020 and 2019.

After determining that an other-than-temporary decrease in the value of an equity method investment has occurred, we estimate the fair value of our investment by estimating the proceeds we would receive upon a hypothetical liquidation of the investment at the date of measurement. Inputs reflect management’s best estimate of what market participants would use in pricing the investment giving consideration to the terms of the joint venture agreement and the estimated discounted future cash flows to be generated from the underlying joint venture assets. The inputs and assumptions utilized to estimate the future cash flows of the underlying assets are based upon the Company’s evaluation of the economy, market trends, operating results, and other factors, including judgments regarding costs to complete any construction activities, lease up and occupancy rates, rental rates, inflation rates, capitalization rates utilized to estimate the projected cash flows at the disposition, and discount rates.

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MARCH 31, 2020

11. DERIVATIVES AND HEDGING ACTIVITY

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its debt funding and through the use of derivative financial instruments. Specifically, the Company may enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in Accumulated other comprehensive income/(loss), net on the Consolidated Balance Sheets and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three months ended March 31, 2020 and 2019, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

Amounts reported in Accumulated other comprehensive income/(loss), net on the Consolidated Balance Sheets related to derivatives that will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Through March 31, 2021, the Company estimates that an additional $4.6 million will be reclassified as an increase to Interest expense.

As of March 31, 2020, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​
​ |  | Number of |  | ​
Product | ​ | Instruments | ​ | Notional
Interest rate swaps | ​ | 1 | ​ | $ | 315,000

​

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of GAAP. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings and resulted in no gain or loss for both the three months ended March 31, 2020 and 2019.

As of March 31, 2020, the Company had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​
​ |  | Number of |  | ​ | ​
Product | ​ | Instruments | ​ | Notional
Interest rate caps | ​ | 1 | ​ | $ | 19,880

​

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Asset Derivatives | ​ | Liability Derivatives
​ | ​ | (included in Other assets) | ​ | (included in Other liabilities)
​ | ​ | Fair Value at: | ​ | Fair Value at:
​ | ​ | March 31, | ​ | December 31, | ​ | March 31, | ​ | December 31,
​ | ​ | 2020 | ​ | 2019 | ​ | 2020 | ​ | 2019
Derivatives designated as hedging instruments: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Interest rate products | ​ | $ | — | ​ | $ | 6 | ​ | $ | 3,075 | ​ | $ | 142

​

Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statements of Operations

The tables below present the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Gain/(Loss) Recognized in
​ | ​ | ​ | ​ | Gain/(Loss) Reclassified | ​ | Interest expense
​ | ​ | Unrealized holding gain/(loss) | ​ | from Accumulated OCI into | ​ | (Amount Excluded from
​ | ​ | Recognized in OCI | ​ | Interest expense | ​ | Effectiveness Testing)
Derivatives in Cash Flow Hedging Relationships |  | 2020 |  | 2019 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Three Months Ended March 31, | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate products | ​ | $ | (2,917) | ​ | $ | (2,210) | ​ | $ | (357) | ​ | $ | 945 | ​ | $ | — | ​ | $ | —

​

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
​ | ​ | 2020 | ​ | 2019
Total amount of Interest expense presented on the Consolidated Statements of Operations | ​ | $ | 39,317 | ​ | $ | 33,542

​

The Company did not recognize any gain/(loss) in Interest income and other income/(expense), net related to derivatives not designated during each of the three months ended March 31, 2020 and 2019.

Credit-risk-related Contingent Features

The Company has agreements with its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness.

The Company has certain agreements with some of its derivative counterparties that contain a provision where, in the event of default by the Company or the counterparty, the right of setoff may be exercised. Any amount payable to one party by the other party may be reduced by its setoff against any amounts payable by the other party. Events that give rise to default by either party may include, but are not limited to, the failure to pay or deliver payment under the derivative agreement, the failure to comply with or perform under the derivative agreement, bankruptcy, a merger without assumption of the derivative agreement, or in a merger, a surviving entity’s creditworthiness is materially weaker than the original party to the derivative agreement.

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

Tabular Disclosure of Offsetting Derivatives

The Company has elected not to offset derivative positions on the consolidated financial statements. The tables below present the effect on its financial position had the Company made the election to offset its derivative positions as of March 31, 2020 and December 31, 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ |  | Gross |  | Net Amounts of |  | Gross Amounts Not Offset | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Amounts | ​ | Assets | ​ | in the Consolidated | ​ | ​ | ​
​ | ​ | Gross | ​ | Offset in the | ​ | Presented in the | ​ | Balance Sheet | ​ | ​ | ​
​ | ​ | Amounts of | ​ | Consolidated | ​ | Consolidated | ​ | ​ | ​ | ​ | Cash | ​ | ​ | ​
​ | ​ | Recognized | ​ | Balance | ​ | Balance Sheets | ​ | Financial | ​ | Collateral | ​ | ​ | ​
Offsetting of Derivative Assets | ​ | Assets | ​ | Sheets | ​ | (a) | ​ | Instruments |  | Received |  | Net Amount
March 31, 2020 | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | —
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
December 31, 2019 | ​ | $ | 6 | ​ | $ | — | ​ | $ | 6 | ​ | $ | (3) | ​ | $ | — | ​ | $ | 3

(a) | Amounts reconcile to the aggregate fair value of derivative assets in the “Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheets” located in this footnote.

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ |  | Gross |  | Net Amounts of |  | Gross Amounts Not Offset | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Amounts | ​ | Liabilities | ​ | in the Consolidated | ​ | ​ | ​
​ | ​ | Gross | ​ | Offset in the | ​ | Presented in the | ​ | Balance Sheet | ​ | ​ | ​
​ | ​ | Amounts of | ​ | Consolidated | ​ | Consolidated | ​ | ​ | ​ | ​ | Cash | ​ | ​ | ​
​ | ​ | Recognized | ​ | Balance | ​ | Balance Sheets | ​ | Financial | ​ | Collateral | ​ | ​ | ​
Offsetting of Derivative Liabilities |  | Liabilities |  | Sheets |  | (a) |  | Instruments |  | Posted |  | Net Amount
March 31, 2020 | ​ | $ | 3,075 | ​ | $ | — | ​ | $ | 3,075 | ​ | $ | — | ​ | $ | — | ​ | $ | 3,075
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
December 31, 2019 | ​ | $ | 142 | ​ | $ | — | ​ | $ | 142 | ​ | $ | (3) | ​ | $ | — | ​ | $ | 139

(a) | Amounts reconcile to the aggregate fair value of derivative liabilities in the “Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheets” located in this footnote.

​

​

12. STOCK BASED COMPENSATION

The Company recognized stock based compensation expense, inclusive of awards granted to our non-employee directors, net of capitalization, of $6.8 million and $5.9 million during the three months ended March 31, 2020 and 2019, respectively.

13. COMMITMENTS AND CONTINGENCIES

Commitments

Real Estate Commitments

The following summarizes the Company’s real estate commitments at March 31, 2020 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Number | ​ | UDR's | ​ | UDR's Remaining | ​
​ | ​ | Properties | ​ | Investment (a) | ​ | Commitment | ​
Wholly-owned — under development |  | 3 | ​ | $ | 95,326 | ​ | $ | 183,174 |
Wholly-owned — redevelopment |  | 2 | ​ | ​ | 17,660 | ​ | ​ | 7,840 |
Joint ventures: |  |  | ​ |  |  | ​ |  |  |
Preferred equity investments |  | 2 | ​ | ​ | 34,647 | (b) | ​ | 14,348 | (c)
Other investments | ​ | - | ​ | ​ | 14,364 | ​ | ​ | 23,700 | (d)
Total |  |  | ​ | $ | 161,997 | ​ | $ | 229,062 |

(a) | Represents UDR’s investment as of March 31, 2020.

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MARCH 31, 2020

(b) | Represents UDR’s investment in Modera Lake Merritt and Thousand Oaks, which were under development as of March 31, 2020.

(c) | Represents UDR’s remaining commitment for Modera Lake Merritt and Thousand Oaks.

(d) | Represents UDR’s remaining commitment for other investment ventures.

​

Purchase Commitments

In 2019, the Company entered into a contract to purchase a development land parcel located in King of Prussia, Pennsylvania for a purchase price of approximately $14.8 million. The Company made a $0.8 million deposit on the purchase, which is generally non-refundable other than due to a failure of closing conditions pursuant to the terms of the purchase agreement. The acquisition is expected to close in 2020, subject to completion of entitlement and customary closing conditions.

Contingencies

Litigation and Legal Matters

The Company is subject to various legal proceedings and claims arising in the ordinary course of business. The Company cannot determine the ultimate liability with respect to such legal proceedings and claims at this time. The Company believes that such liability, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on our financial condition, results of operations or cash flows.

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

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

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):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 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.

​

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2020

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

​

​

15. Subsequent Event

​

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business. The extent of the pandemic’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic and the duration of government measures to mitigate the pandemic, all of which are uncertain and difficult to predict. Although the effect on our results of operations and cash flows through the date of issuance of our financial statements was not material, given the uncertainty, we cannot predict the effect on future periods, but the adverse impact on the Company's future financial condition, results of operations and cash flows could be material, including, but not limited to, as a result of eviction moratoriums, rent deferrals, payment plans, lease concessions, waiving late payment fees, charges from potential adjustments of the carrying amount of receivables, and asset impairment charges.

​

​

​

​

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UNITED DOMINION REALTY, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for unit data)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, |  | December 31,
​ | ​ | 2020 | ​ | 2019
​ | ​ | (unaudited) | ​ | (audited)
ASSETS |  | ​ |  |  | ​ |
Real estate owned: |  | ​ |  |  | ​ |
Real estate held for investment | ​ | $ | 3,886,613 | ​ | $ | 3,875,160
Less: accumulated depreciation | ​ |  | (1,831,814) | ​ |  | (1,796,568)
Total real estate owned, net of accumulated depreciation | ​ |  | 2,054,799 | ​ |  | 2,078,592
Cash and cash equivalents | ​ |  | 40 | ​ |  | 24
Restricted cash | ​ |  | 14,121 | ​ |  | 13,998
Investment in unconsolidated entities | ​ |  | 69,617 | ​ |  | 76,222
Operating lease right-of-use assets | ​ | ​ | 204,723 | ​ | ​ | 205,668
Other assets | ​ |  | 24,042 | ​ |  | 24,241
Total assets | ​ | $ | 2,367,342 | ​ | $ | 2,398,745
LIABILITIES AND CAPITAL | ​ |  |  | ​ |  |
Liabilities: | ​ |  |  | ​ |  |
Secured debt, net | ​ | $ | 99,082 | ​ | $ | 99,071
Notes payable due to the General Partner | ​ |  | 635,738 | ​ |  | 637,233
Operating lease liabilities | ​ | ​ | 199,149 | ​ | ​ | 200,001
Real estate taxes payable | ​ |  | 8,639 | ​ |  | 2,801
Accrued interest payable | ​ |  | 219 | ​ |  | 217
Security deposits and prepaid rent | ​ |  | 17,854 | ​ |  | 17,946
Distributions payable | ​ |  | 66,833 | ​ |  | 63,364
Accounts payable, accrued expenses, and other liabilities | ​ |  | 10,426 | ​ |  | 12,226
Total liabilities | ​ |  | 1,037,940 | ​ |  | 1,032,859
​ | ​ | ​ | ​ | ​ | ​ | ​
Commitments and contingencies (Note 11) | ​ |  |  | ​ |  |
​ | ​ | ​ | ​ | ​ | ​ | ​
Capital: | ​ |  |  | ​ |  |
Partners’ capital: | ​ |  |  | ​ |  |
General partner: | ​ |  |  | ​ |  |
110,883 OP Units outstanding at March 31, 2020 and December 31, 2019 | ​ |  | 833 | ​ |  | 859
Limited partners: | ​ |  |  | ​ |  |
184,724,677 and 183,952,659 OP Units outstanding at March 31, 2020 and December 31, 2019, respectively | ​ |  | 1,310,642 | ​ |  | 1,347,622
Total partners’ capital | ​ |  | 1,311,475 | ​ |  | 1,348,481
Noncontrolling interests | ​ |  | 17,927 | ​ |  | 17,405
Total capital | ​ |  | 1,329,402 | ​ |  | 1,365,886
Total liabilities and capital | ​ | $ | 2,367,342 | ​ | $ | 2,398,745

​

See accompanying notes to the consolidated financial statements.

​

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UNITED DOMINION REALTY, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)

(Unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​
​ | ​ | March 31, | ​
​ |  | 2020 | ​ | 2019 | ​
REVENUES: |  | ​ |  |  | ​ |  | ​
Rental income | ​ | $ | 112,165 | ​ | $ | 108,334 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
OPERATING EXPENSES: | ​ |  |  | ​ |  |  | ​
Property operating and maintenance | ​ |  | 16,837 | ​ |  | 16,531 | ​
Real estate taxes and insurance | ​ |  | 13,773 | ​ |  | 12,664 | ​
Property management | ​ |  | 3,225 | ​ |  | 2,979 | ​
Other operating expenses | ​ |  | 3,859 | ​ |  | 2,400 | ​
Real estate depreciation and amortization | ​ |  | 35,300 | ​ |  | 34,654 | ​
General and administrative | ​ |  | 5,308 | ​ |  | 4,661 | ​
Casualty-related charges/(recoveries), net | ​ |  | (2) | ​ |  | — | ​
Total operating expenses | ​ | ​ | 78,300 | ​ |  | 73,889 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating income | ​ |  | 33,865 | ​ |  | 34,445 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income/(loss) from unconsolidated entities | ​ |  | (1,761) | ​ |  | (2,740) | ​
Interest expense | ​ |  | (742) | ​ |  | (190) | ​
Interest expense on notes payable due to the General Partner | ​ |  | (6,722) | ​ |  | (7,181) | ​
Net income/(loss) | ​ |  | 24,640 | ​ |  | 24,334 | ​
Net (income)/loss attributable to noncontrolling interests | ​ |  | (522) | ​ |  | (388) | ​
Net income/(loss) attributable to OP unitholders | ​ | $ | 24,118 | ​ | $ | 23,946 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net income/(loss) per weighted average OP Unit - basic and diluted | ​ | $ | 0.13 | ​ | $ | 0.13 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Weighted average OP Units outstanding - basic and diluted | ​ |  | 184,503 | ​ |  | 183,949 | ​

​

See accompanying notes to the consolidated financial statements.

​

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UNITED DOMINION REALTY, L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

(In thousands)

(Unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Limited | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | ​
​ | ​ | Class A | ​ | Partners | ​ | UDR, Inc. | ​ | Total | ​ | ​ | ​ | ​ |  | ​
​ | ​ | Limited | ​ | and LTIP | ​ | Limited | ​ | General | ​ | Partners’ | ​ | Noncontrolling | ​ |  | ​
​ |  | Partner |  | Units |  | Partner |  | Partner |  | Capital |  | Interests |  | Total
Balance at December 31, 2019 | ​ | ​ | 81,803 | ​ | ​ | 284,580 | ​ | ​ | 981,239 | ​ | ​ | 859 | ​ | ​ | 1,348,481 | ​ | ​ | 17,405 | ​ | ​ | 1,365,886
Net income/(loss) | ​ | ​ | 229 | ​ | ​ | 896 | ​ | ​ | 22,979 | ​ | ​ | 14 | ​ | ​ | 24,118 | ​ | ​ | 522 | ​ | ​ | 24,640
Distributions | ​ | ​ | (631) | ​ | ​ | (2,588) | ​ | ​ | (63,399) | ​ | ​ | (40) | ​ | ​ | (66,658) | ​ | ​ | — | ​ | ​ | (66,658)
Adjustment to reflect limited partners’ capital at redemption value | ​ | ​ | (17,395) | ​ | ​ | (37,545) | ​ | ​ | 54,940 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Long-Term Incentive Plan Unit grants | ​ | ​ | — | ​ | ​ | 5,534 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 5,534 | ​ | ​ | — | ​ | ​ | 5,534
Balance at March 31, 2020 | ​ | $ | 64,006 | ​ | $ | 250,877 | ​ | $ | 995,759 | ​ | $ | 833 | ​ | $ | 1,311,475 | ​ | $ | 17,927 | ​ | $ | 1,329,402

​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Limited | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | ​
​ | ​ | Class A | ​ | Partners | ​ | UDR, Inc. | ​ | Total | ​ | ​ | ​ | ​ |  | ​
​ | ​ | Limited | ​ | and LTIP | ​ | Limited | ​ | General | ​ | Partners’ | ​ | Noncontrolling | ​ |  | ​
​ |  | Partner |  | Units |  | Partner |  | Partner |  | Capital |  | Interests |  | Total
Balance at December 31, 2018 | ​ | $ | 69,401 | ​ | $ | 302,545 | ​ | $ | 1,099,174 | ​ | $ | 950 | ​ | $ | 1,472,070 | ​ | $ | 13,819 | ​ | $ | 1,485,889
Net income/(loss) | ​ | ​ | 228 | ​ | ​ | 812 | ​ | ​ | 22,892 | ​ | ​ | 14 | ​ | ​ | 23,946 | ​ | ​ | 388 | ​ | ​ | 24,334
Distributions | ​ | ​ | (599) | ​ | ​ | (2,570) | ​ | ​ | (60,262) | ​ | ​ | (38) | ​ | ​ | (63,469) | ​ | ​ | — | ​ | ​ | (63,469)
OP Unit redemptions for common shares of UDR | ​ | ​ | — | ​ | ​ | (71,673) | ​ | ​ | 71,673 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Adjustment to reflect limited partners’ capital at redemption value | ​ | ​ | 10,601 | ​ | ​ | 44,716 | ​ | ​ | (55,317) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Long-Term Incentive Plan Unit grants | ​ | ​ | — | ​ | ​ | 10,032 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 10,032 | ​ | ​ | — | ​ | ​ | 10,032
Balance at March 31, 2019 | ​ | $ | 79,631 | ​ | $ | 283,862 | ​ | $ | 1,078,160 | ​ | $ | 926 | ​ | $ | 1,442,579 | ​ | $ | 14,207 | ​ | $ | 1,456,786

​

See accompanying notes to the consolidated financial statements.

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UNITED DOMINION REALTY, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended March 31,
​ | ​ | 2020 | ​ | 2019
Operating Activities |  | ​ |  |  | ​ |
Net income/(loss) | ​ | $ | 24,640 | ​ | $ | 24,334
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities: | ​ |  |  | ​ |  |
Depreciation and amortization | ​ |  | 35,300 | ​ |  | 34,654
(Income)/loss from unconsolidated entities | ​ |  | 1,761 | ​ |  | 2,740
Other | ​ |  | 880 | ​ |  | 1,364
Changes in operating assets and liabilities: | ​ |  | ​ | ​ |  |
(Increase)/decrease in operating assets | ​ |  | (500) | ​ |  | 2,529
Increase/(decrease) in operating liabilities | ​ |  | 3,324 | ​ |  | 3,006
Net cash provided by/(used in) operating activities | ​ |  | 65,405 | ​ |  | 68,627
​ | ​ | ​ | ​ | ​ | ​ | ​
Investing Activities | ​ |  |  | ​ |  |
Capital expenditures and other major improvements — real estate assets | ​ |  | (10,960) | ​ |  | (14,271)
Distributions received from unconsolidated entities | ​ |  | 4,844 | ​ |  | 4,613
Net cash provided by/(used in) investing activities | ​ |  | (6,116) | ​ |  | (9,658)
​ | ​ | ​ | ​ | ​ | ​ | ​
Financing Activities | ​ |  |  | ​ |  |
Issuance/(repayment) of notes payable to the General Partner | ​ | ​ | (56,497) | ​ | ​ | (55,599)
Distributions paid to partnership unitholders | ​ |  | (2,653) | ​ |  | (2,989)
Net cash provided by/(used in) financing activities | ​ |  | (59,150) | ​ |  | (58,588)
Net increase/(decrease) in cash, cash equivalents, and restricted cash | ​ |  | 139 | ​ |  | 381
Cash, cash equivalents, and restricted cash, beginning of year | ​ |  | 14,022 | ​ |  | 13,688
Cash, cash equivalents, and restricted cash, end of period | ​ | $ | 14,161 | ​ | $ | 14,069
​ | ​ | ​ | ​ | ​ | ​ | ​
Supplemental Information: | ​ |  |  | ​ |  |
Interest paid during the period, net of amounts capitalized | ​ | $ | 10,665 | ​ | $ | 5,031
Non-cash transactions: | ​ |  |  | ​ |  |
Development costs and capital expenditures incurred but not yet paid | ​ | ​ | 3,383 | ​ | ​ | 3,676
Recognition of operating lease right-of-use assets | ​ | ​ | — | ​ | ​ | 94,174
Recognition of operating lease liabilities | ​ | ​ | — | ​ | ​ | 88,161
LTIP Unit grants | ​ |  | 5,534 | ​ |  | 10,032
Distributions declared but not yet paid | ​ | ​ | 66,833 | ​ | ​ | 63,451
​ | ​ | ​ | ​ | ​ | ​ | ​
The following reconciles cash, cash equivalents, and restricted cash to the total of the same amounts as shown above: | ​ | ​ | ​ | ​ | ​ | ​
Cash, cash equivalents, and restricted cash, beginning of year | ​ | ​ | ​ | ​ | ​ | ​
Cash and cash equivalents | ​ | $ | 24 | ​ | $ | 125
Restricted cash | ​ | ​ | 13,998 | ​ | ​ | 13,563
Total cash, cash equivalents, and restricted cash as shown above | ​ | $ | 14,022 | ​ | $ | 13,688
Cash, cash equivalents, and restricted cash, end of period | ​ | ​ | ​ | ​ | ​ | ​
Cash and cash equivalents | ​ | $ | 40 | ​ | $ | 59
Restricted cash | ​ | ​ | 14,121 | ​ | ​ | 14,010
Total cash, cash equivalents, and restricted cash as shown above | ​ | $ | 14,161 | ​ | $ | 14,069

​

See accompanying notes to the consolidated financial statements.

​

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UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

1. CONSOLIDATION AND BASIS OF PRESENTATION

Basis of Presentation

United Dominion Realty, L.P. (“UDR, L.P.,” the “Operating Partnership,” “we” or “our”) is a Delaware limited partnership, that owns, acquires, renovates, redevelops, manages, and disposes of multifamily apartment communities generally located in high barrier to entry markets located in the United States. The high barrier to entry markets are characterized by limited land for new construction, difficult and lengthy entitlement process, expensive single-family home prices and significant employment growth potential. UDR, L.P. is a subsidiary of UDR, Inc. (“UDR” or the “General Partner”), a self-administered real estate investment trust, or REIT, through which UDR conducts a significant portion of its business. During the three months ended March 31, 2020 and 2019, rental revenues of the Operating Partnership represented 35% and 40%, respectively, of the General Partner’s consolidated rental revenues. As of March 31, 2020, the Operating Partnership’s apartment portfolio consisted of 52 communities located in 15 markets consisting of 16,434 apartment homes.

Interests in UDR, L.P. are represented by operating partnership units (“OP Units”). The Operating Partnership’s net income is allocated to the partners, which is initially based on their respective distributions made during the year and secondly, their percentage interests. Distributions are made in accordance with the terms of the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. (the “Operating Partnership Agreement”), on a per unit basis that is generally equal to the dividend per share on UDR’s common stock, which is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “UDR.”

As of March 31, 2020, there were 184.8 million OP Units outstanding, of which 176.2 million, or 95.3%, were owned by UDR and affiliated entities and 8.6 million, or 4.7%, were owned by non-affiliated limited partners. There were 184.1 million OP Units outstanding as of December 31, 2019, of which 176.2 million, or 95.7%, were owned by UDR and affiliated entities and 7.9 million, or 4.3%, were owned by non-affiliated limited partners. See Note 10, Capital Structure.

The accompanying interim unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments and eliminations necessary for the fair presentation of our financial position as of March 31, 2020, and results of operations for the three months ended March 31, 2020 and 2019, have been included. Such adjustments are normal and recurring in nature. The interim results presented are not necessarily indicative of results that can be expected for a full year, particularly in light of the novel coronavirus disease (“COVID-19”) pandemic and measures intended to mitigate its spread. The accompanying interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2019 included in the Annual Report on Form 10-K filed by UDR and the Operating Partnership with the SEC on February 18, 2020.

The accompanying interim unaudited consolidated statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the interim unaudited consolidated financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. All intercompany accounts and transactions have been eliminated in consolidation.

The Operating Partnership evaluated subsequent events through the date its financial statements were issued. No significant recognized or non-recognized subsequent events were noted other than those noted in Note 6, Debt, net and Note 13, Subsequent Event.

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March 31, 2020

2. SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The standard required entities to estimate a lifetime expected credit loss for most financial assets, including trade and other receivables, held-to-maturity debt securities, loans and other financial instruments, and to present the net amount of the financial instrument expected to be collected. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which amended the transition requirements and scope of ASU 2016-13 and clarified that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard. The

updated standard became effective for the Operating Partnership on January 1, 2020 and was adopted on a modified

retrospective basis. However, as the Operating Partnership’s financial assets primarily relate to receivables arising from operating leases, the ASU did not have a material impact on the consolidated financial statements. Disclosures were updated pursuant to the requirements of the ASU.

​

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Operating Partnership elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Operating Partnership continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. The Operating Partnership does not expect the ASU to have a material impact on the consolidated financial statements.

​

Principles of Consolidation

The Operating Partnership accounts for subsidiary partnerships, joint ventures and other similar entities in which it holds an ownership interest in accordance with the consolidation guidance. The Operating Partnership first evaluates whether each entity is a variable interest entity (“VIE”). Under the VIE model, the Operating Partnership consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Operating Partnership consolidates an entity when it controls the entity through ownership of a majority voting interest.

Income/(Loss) Per Operating Partnership Unit

Basic income/(loss) per OP Unit is computed by dividing net income/(loss) attributable to the general and limited partner unitholders by the weighted average number of general and limited partner units outstanding during the year. Diluted income/(loss) per OP Unit reflects the potential dilution that could occur if securities or other contracts to issue OP Units were exercised or converted into OP Units or resulted in the issuance of OP Units and then shared in the income/(loss) of the Operating Partnership.

Real Estate Sales Gain Recognition

​

For sale transactions resulting in a transfer of a controlling financial interest of a property, the Operating Partnership generally derecognizes the related assets and liabilities from its Consolidated Balance Sheets and records the gain or loss in the period in which the transfer of control occurs. If control of the property has not transferred to the counterparty, the criteria for derecognition are not met and the Operating Partnership will continue to recognize the related assets and liabilities on its Consolidated Balance Sheets.

​

Sale transactions to entities in which the Operating Partnership sells a controlling financial interest in a property but retains a noncontrolling interest are accounted for as partial sales. Partial sales resulting in a change in control are

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accounted for at fair value and a full gain or loss is recognized. Therefore, the Operating Partnership will record a gain or loss on the partial interest sold, and the initial measurement of our retained interest will be accounted for at fair value.

​

Sales of real estate to joint ventures or other noncontrolled investees are also accounted for at fair value and the Operating Partnership will record a full gain or loss in the period the property is contributed.

​

To the extent that the Operating Partnership acquires a controlling financial interest in a property that it previously accounted for as an equity method investment, the Operating Partnership will not remeasure its previously held interest if the acquisition is treated as an asset acquisition. The Operating Partnership will include the carrying amount of its previously held equity method interest along with the consideration paid and transaction costs incurred in determining the amounts to allocate to the related assets and liabilities acquired on its Consolidated Balance Sheets. When treated as an asset acquisition, the Operating Partnership will not recognize a gain or loss on consolidation of a property.

​

Income Taxes

The taxable income or loss of the Operating Partnership is reported on the tax returns of the partners. Accordingly, no provision has been made in the accompanying financial statements for federal or state income taxes on income that is passed through to the partners. However, any state or local revenue, excise or franchise taxes that result from the operating activities of the Operating Partnership are recorded at the entity level. The Operating Partnership’s tax returns are subject to examination by federal and state taxing authorities. Net income for financial reporting purposes differs from the net income for income tax reporting purposes primarily due to temporary differences, principally real estate depreciation and the tax deferral of certain gains on property sales. The differences in depreciation result from differences in the book and tax basis of certain real estate assets and the differences in the methods of depreciation and lives of the real estate assets.

The Operating Partnership evaluates the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing the Operating Partnership’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management of the Operating Partnership is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states. The Operating Partnership has no examinations in progress and none are expected at this time.

Management of the Operating Partnership has reviewed all open tax years (2016 through 2018) of tax jurisdictions and concluded there is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns.

​

3. REAL ESTATE OWNED

Real estate assets owned by the Operating Partnership consist of income producing operating properties, properties under development, land held for future development, and sold or held for disposition properties. At March 31, 2020, the Operating Partnership owned and consolidated 52 communities in nine states plus the District of Columbia totaling 16,434 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of March 31, 2020 and December 31, 2019 (dollars in thousands):

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, |  | December 31,
​ | ​ | 2020 | ​ | 2019
Land | ​ | $ | 711,256 | ​ | $ | 711,256
Depreciable property — held and used: | ​ |  | ​ | ​ |  | ​
Land improvements | ​ | ​ | 97,807 | ​ | ​ | 96,864
Buildings, improvements, and furniture, fixtures and equipment | ​ |  | 3,077,550 | ​ |  | 3,067,040
Real estate owned | ​ |  | 3,886,613 | ​ |  | 3,875,160
Accumulated depreciation | ​ |  | (1,831,814) | ​ |  | (1,796,568)
Real estate owned, net | ​ | $ | 2,054,799 | ​ | $ | 2,078,592

​

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March 31, 2020

Acquisitions

The Operating Partnership did not have any acquisitions of real estate during the three months ended March 31, 2020.

Dispositions

The Operating Partnership did not have any dispositions of real estate during the three months ended March 31, 2020.

Other Activity

Predevelopment, development, and redevelopment projects and related costs are capitalized and reported on the Consolidated Balance Sheets as Total real estate owned, net of accumulated depreciation. The Operating Partnership capitalizes costs directly related to the predevelopment, development, and redevelopment of a capital project, which include, but are not limited to, interest, real estate taxes, insurance, and allocated development and redevelopment overhead related to support costs for personnel working on the capital projects. We use our professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. These costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress and such costs are incremental and identifiable to a specific activity to get the asset ready for its intended use. These costs, excluding the direct costs of development and redevelopment and capitalized interest, were $0.4 million and less than $0.1 million for the three months ended March 31, 2020 and 2019, respectively. During both of the three months ended March 31, 2020 and 2019, total interest capitalized was less than $0.1 million and less than $0.1 million, respectively. As each apartment home in a capital project is completed and becomes available for lease-up, the Operating Partnership ceases capitalization on the related portion of the costs and depreciation commences over the estimated useful life.

In connection with the acquisition of certain properties, the Operating Partnership agreed to pay certain of the tax liabilities of certain contributors if the Operating Partnership sells one or more of the properties contributed in a taxable transaction prior to the expiration of specified periods of time following the acquisition. The Operating Partnership may, however, sell, without being required to pay any tax liabilities, any of such properties in a non-taxable transaction, including, but not limited to, a tax deferred Section 1031 exchange.

Further, the Operating Partnership has agreed to maintain certain debt that may be guaranteed by certain contributors for specified periods of time following the acquisition. The Operating Partnership, however, has the ability to refinance or repay guaranteed debt or to substitute new debt if the debt and the guaranty continue to satisfy certain conditions.

4. UNCONSOLIDATED ENTITIES

The DownREIT Partnership is accounted for by the Operating Partnership under the equity method of accounting and is included in Investment in unconsolidated entities on the Consolidated Balance Sheets. The Operating Partnership recognizes earnings or losses from its investments in unconsolidated entities consisting of our proportionate share of the net earnings or losses of the partnership in accordance with the Partnership Agreement.

The DownREIT Partnership is a VIE as the limited partners lack substantive kick-out rights and substantive participating rights. The Operating Partnership is not the primary beneficiary of the DownREIT Partnership as it lacks the power to direct the activities that most significantly impact its economic performance and will continue to account for its interest as an equity method investment. See Note 2, Significant Accounting Policies.

As of March 31, 2020, the DownREIT Partnership owned 12 communities with 5,657 apartment homes. The Operating Partnership’s investment in the DownREIT Partnership was $69.6 million and $76.2 million as of March 31, 2020 and December 31, 2019, respectively.

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March 31, 2020

Combined summary balance sheets relating to all of the DownREIT Partnership (not just our proportionate share) are presented below as of March 31, 2020 and December 31, 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, | ​ | December 31,
​ |  | 2020 |  | 2019
Total real estate, net |  | $ | 1,088,125 |  | $ | 1,106,703
Cash and cash equivalents | ​ |  | 20 | ​ |  | 20
Note receivable from the General Partner | ​ |  | 220,622 | ​ |  | 222,853
Other assets | ​ |  | 5,312 | ​ |  | 4,829
Total assets |  | $ | 1,314,079 |  | $ | 1,334,405
​ | ​ | ​ | ​ | ​ | ​ | ​
Secured debt, net | ​ | $ | 426,724 | ​ | $ | 427,592
Other liabilities | ​ |  | 23,628 | ​ |  | 28,087
Total liabilities | ​ |  | 450,352 | ​ |  | 455,679
Total capital | ​ | $ | 863,727 | ​ | $ | 878,726

​

Combined summary financial information relating to all of the DownREIT Partnership (not just our proportionate share) is presented below for the three months ended March 31, 2020 and 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
​ |  | 2020 |  | 2019
Total revenue | ​ | $ | 32,678 |  | $ | 31,606
Property operating expenses | ​ |  | (13,309) | ​ |  | (13,096)
Real estate depreciation and amortization | ​ |  | (20,986) | ​ |  | (20,294)
Operating income/(loss) | ​ |  | (1,617) | ​ |  | (1,784)
Interest expense | ​ |  | (3,618) | ​ |  | (3,888)
Other income/(loss) | ​ |  | 1,889 | ​ |  | 1,988
Net income/(loss) | ​ | $ | (3,346) |  | $ | (3,684)

​

​

​

​

5. LEASES

Lessee - Ground and Equipment Leases

The Operating Partnership owns six communities that are subject to ground leases, under which the Operating Partnership is the lessee, expiring between 2043 and 2103, inclusive of extension options we are reasonably certain will be exercised. All of these leases are classified as operating leases through the lease term expiration based on our election of the practical expedient provided by the leasing standard. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the remaining lease term. In addition, the Operating Partnership leases equipment at six communities from the General Partner, pursuant to leases that expire in 2029. We currently do not hold any finance leases. The Operating Partnership also elected the short-term lease exception provided by the leasing standard and therefore only recognizes right-of-use assets and lease liabilities for leases with a term greater than one year. No leases qualified for the short-term lease exception during the three months ended March 31, 2020 and 2019.

As of March 31, 2020, the Operating lease right-of-use assets was $204.7 million and the Operating lease liabilities was $199.1 million on our Consolidated Balance Sheets related to our ground and equipment leases. The value of the Operating lease right-of-use assets exceeds the value of the Operating lease liabilities due to prepaid lease payments and intangible assets for ground leases acquired in the purchase of real estate. The calculation of these amounts includes minimum lease payments over the remaining lease term (described further in the table below). Variable lease payments are excluded from the right-of-use assets and lease liabilities and are recognized in earnings in the period in which the obligation for those payments is incurred.

As the discount rate implicit in the leases was not readily determinable, we determined the discount rate for these leases utilizing the Operating Partnership’s incremental borrowing rate at a portfolio level, adjusted for the remaining lease term, and the form of underlying collateral.

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The weighted average remaining lease term for these leases was 44.5 years at March 31, 2020 and the weighted average discount rate was 5.0% at March 31, 2020.

Future minimum lease payments and total operating lease liabilities from our ground and equipment leases as of March 31, 2020 are as follows (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Ground Leases | ​ | Equipment Leases | ​ | Total
2020 | ​ | $ | 9,330 | ​ | $ | 108 | ​ | $ | 9,438
2021 | ​ | ​ | 12,442 | ​ | ​ | 147 | ​ | ​ | 12,589
2022 | ​ | ​ | 12,442 | ​ | ​ | 150 | ​ | ​ | 12,592
2023 | ​ | ​ | 12,442 | ​ | ​ | 153 | ​ | ​ | 12,595
2024 | ​ | ​ | 12,442 | ​ | ​ | 156 | ​ | ​ | 12,598
Thereafter | ​ | ​ | 455,221 | ​ | ​ | 795 | ​ | ​ | 456,016
Total future minimum lease payments (undiscounted) | ​ | ​ | 514,319 | ​ | ​ | 1,509 | ​ | ​ | 515,828
Difference between future undiscounted cash flows and discounted cash flows | ​ | ​ | (316,490) | ​ | ​ | (189) | ​ | ​ | (316,679)
Total operating lease liabilities (discounted) | ​ | $ | 197,829 | ​ | $ | 1,320 | ​ | $ | 199,149

​

For purposes of recognizing our ground lease contracts, the Operating Partnership uses the minimum lease payments, if stated in the agreement. For ground lease agreements where there is a rent reset provision based on a change in an index or a rate (i.e., changes in fair market rental rates or changes in the consumer price index) but that does not include a specified minimum lease payment, the Operating Partnership uses the current rent over the remainder of the lease term. If there is a contingency, upon which some or all of the variable lease payments that will be paid over the remainder of the lease term are based, which is resolved such that those payments now meet the definition of lease payments, the Operating Partnership will remeasure the right-of-use asset and lease liability on the reset date.

The components of operating lease expenses from our ground and equipment leases were as follows (dollars in thousands):

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
​ | ​ | 2020 | ​ | 2019
Ground lease expense: | ​ | ​ | ​ | ​ | ​ | ​
Contractual ground lease rent expense | ​ | $ | 3,170 | ​ | $ | 2,140
Variable ground lease expense (a) | ​ | ​ | 43 | ​ | ​ | 139
Total ground lease expense (b) | ​ | ​ | 3,213 | ​ | ​ | 2,279
Contractual equipment lease expense (b) | ​ | ​ | 36 | ​ | ​ | -
Total operating lease expense (c) | ​ | $ | 3,249 | ​ | $ | 2,279

| (a) | Variable ground lease expense includes adjustments such as changes in the consumer price index and payments based on a percentage of income of the lessee.

| (b) | Ground lease and equipment lease expense are reported within the line item Other operating expenses on the Consolidated Statements of Operations.

| (c) | For the three months ended March 31, 2020, Operating lease right-of-use assets and Operating lease liabilities amortized by $0.9 million and $0.9 million, respectively. The Operating Partnership recorded $0.1 million and $0.1 million of total operating lease expense during the three months ended March 31, 2020 and 2019, respectively, due to the net impact of the amortization.

​

Lessor - Apartment Home and Retail and Commercial Leases

​

The Operating Partnership’s communities and retail and commercial space are leased to tenants under operating leases. As of March 31, 2020, our apartment home leases generally have initial terms of 12 months or less and represent 98.4% of our total lease revenue. As of March 31, 2020, our retail and commercial space leases generally have initial terms between 5 and 15 years and represent approximately 1.6% of our total lease revenue. Our apartment home leases are generally renewable at the end of the lease term, subject to potential increases in rental rates, and our retail and

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commercial space leases generally have renewal options, subject to associated increases in rental rates and certain other conditions. (See Note 12, Reportable Segments for further discussion around our major revenue streams and disaggregation of our revenue.)

​

Future minimum lease payments from our retail and commercial leases as of March 31, 2020 are as follows (dollars in thousands):

​ | ​ | ​ | ​
​ | ​ | Retail and Commercial Leases
2020 | ​ | $ | 5,678
2021 | ​ | ​ | 7,311
2022 | ​ | ​ | 6,688
2023 | ​ | ​ | 6,361
2024 | ​ | ​ | 5,693
Thereafter | ​ | ​ | 14,807
Total future minimum lease payments (a) | ​ | $ | 46,538

| (a) | We have excluded our apartment home leases from this table as our apartment home leases generally have initial terms of 12 months of less.

Certain of our leases with retail and commercial tenants provide for the payment by the lessee of additional variable rent based on a percentage of the tenant’s revenue. The amounts shown in the table above do not include these variable percentage rents. The Operating Partnership recorded variable percentage rents of less than $0.1 million and less than $0.1 million during the three months ended March 31, 2020 and 2019, respectively.

​

6. DEBT, NET

Our secured debt instruments generally feature either monthly interest and principal or monthly interest-only payments with balloon payments due at maturity. For purposes of classification in the following table, variable rate debt with a derivative financial instrument designated as a cash flow hedge is deemed as fixed rate debt due to the Operating Partnership having effectively established the fixed interest rate for the underlying debt instrument. Secured debt consists of the following as of March 31, 2020 and December 31, 2019 (dollars in thousands):

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Principal Outstanding | ​ | As of March 31, 2020
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Weighted | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Weighted | ​ | Average | ​ | ​
​ | ​ | March 31, | ​ | December 31, | ​ | Average | ​ | Years to | ​ | Communities
​ | ​ | 2020 | ​ | 2019 | ​ | Interest Rate | ​ | Maturity | ​ | Encumbered
Fixed Rate Debt |  | ​ |  |  | ​ |  |  |  |  |  |  |
Mortgage note payable | ​ | $ | 72,500 | ​ | $ | 72,500 |  | 3.10 | % | 9.8 |  | 1
Deferred financing costs | ​ |  | (356) | ​ |  | (365) |  |  |  |  |  |
Total fixed rate secured debt, net | ​ |  | 72,144 | ​ |  | 72,135 |  | 3.10 | % | 9.8 |  | 1
Variable Rate Debt | ​ |  |  | ​ |  |  |  |  |  |  |  |
Tax-exempt secured note payable | ​ | $ | 27,000 | ​ | $ | 27,000 |  | 1.91 | % | 12.0 |  | 1
Deferred financing costs | ​ |  | (62) | ​ |  | (64) |  |  |  |  |  |
Total variable rate secured debt, net | ​ |  | 26,938 | ​ |  | 26,936 |  | 1.91 | % | 12.0 |  | 1
Total Secured Debt, Net | ​ | $ | 99,082 | ​ | $ | 99,071 |  | 2.83 | % | 10.4 |  | 2

​

The Operating Partnership may from time to time acquire properties subject to fixed rate debt instruments. In those situations, management will record the secured debt at its estimated fair value and amortize any difference between the fair value and par to interest expense over the life of the underlying debt instrument. The Operating Partnership did not have any unamortized fair value adjustments associated with the fixed rate debt instruments on the Operating Partnership’s properties.

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March 31, 2020

Fixed Rate Debt

Mortgage note payable. At March 31, 2020, the Operating Partnership had a fixed rate mortgage note payable for $72.5 million with an interest rate of 3.10%. Interest payments are due monthly and the note matures in February 2030.

Variable Rate Debt

Tax-exempt secured note payable. The variable rate mortgage note payable that secures a tax-exempt housing bond issue matures March 2032. Interest on this note is payable in monthly installments. The mortgage note payable has an interest rate of 1.91% as of March 31, 2020.

Guarantor on Unsecured Debt

The Operating Partnership is the guarantor on the General Partner’s unsecured revolving credit facility with an aggregate borrowing capacity of $1.1 billion, an unsecured commercial paper program with an aggregate borrowing capacity of $500 million, a $350 million term loan due September 2023, $300 million of medium-term notes due July 2024, $300 million of medium-term notes due October 2025, $300 million of medium-term notes due September 2026, $300 million of medium-term notes due July 2027, $300 million of medium-term notes due January 2028, $300 million of medium-term notes due January 2029, $600 million of medium-term notes due January 2030, $400 million of medium-term notes due August 2031, and $300 million of medium-term notes due November 2034. As of March 31, 2020 and December 31, 2019, the General Partner had $50.0 million and zero, respectively, outstanding balance under the unsecured revolving credit facility and had $215.0 million and $300.0 million, respectively, outstanding under its unsecured commercial paper program.

In April 2020, the entire $215.0 million of outstanding unsecured commercial paper as of March 31, 2020 was repaid at maturity with draws on the General Partner’s Revolving Credit Facility and Working Capital Credit Facility.

7. RELATED PARTY TRANSACTIONS

Shared Services

The Operating Partnership self-manages its own properties and is party to an Inter-Company Employee and Cost Sharing Agreement with the General Partner. This agreement provides for reimbursements to the General Partner for the Operating Partnership’s allocable share of costs incurred by the General Partner for (a) general and administrative costs, and (b) shared services of corporate level property management employees and related support functions and costs.

Allocation of General and Administrative Expenses

The General Partner shares various general and administrative costs, employees and other overhead costs with the Operating Partnership including legal assistance, acquisitions analysis, marketing, human resources, IT, accounting, rent, supplies and advertising, and allocates these costs to the Operating Partnership first on the basis of direct usage when identifiable, with the remainder allocated based on the reasonably anticipated benefits to the parties. The general and administrative expenses allocated to the Operating Partnership by UDR were $3.6 million and $3.6 million during both of the three months ended March 31, 2020 and 2019, respectively, and are included in General and administrative on the Consolidated Statements of Operations. In the opinion of management, this method of allocation reflects the level of services received by the Operating Partnership from the General Partner.

During the three months ended March 31, 2020 and 2019, the Operating Partnership reimbursed the General Partner $4.9 million and $4.0 million, respectively, for shared services related to corporate level property management costs incurred by the General Partner. These shared cost reimbursements are initially recorded within the line item General and administrative on the Consolidated Statements of Operations, and a portion related to management costs is reclassified to Property management on the Consolidated Statements of Operations. (See further discussion below.)

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Notes Payable to the General Partner

The following table summarizes the Operating Partnership’s Notes payable due to the General Partner as of March 31, 2020 and December 31, 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Interest rate at | ​ | Balance Outstanding
​ |  | March 31, | ​ | March 31, |  | December 31,
​ | ​ | 2020 | ​ | 2020 | ​ | 2019
Note due August 2021 |  | 5.34 | % | ​ | $ | 5,500 | ​ | $ | 5,500
Note due December 2023 |  | 5.18 | % | ​ |  | 83,196 | ​ |  | 83,196
Note due April 2026 |  | 4.12 | % | ​ |  | 184,638 | ​ |  | 184,638
Note due November 2028 | ​ | 4.69 | % | ​ | ​ | 133,205 | ​ | ​ | 133,205
Note due December 2028 (a) | ​ | 3.28 | % | ​ | ​ | 229,199 | ​ | ​ | 230,694
Total notes payable due to the General Partner |  |  | ​ | ​ | $ | 635,738 | ​ | $ | 637,233

(a) | There is no limit on the total commitments under this unsecured revolving note. Interest is incurred on the unpaid principal balance at a variable interest rate equivalent to the General Partner’s weighted average interest rate on borrowings, or 3.28% as of March 31, 2020. The note matures on December 1, 2028. To the extent there is an outstanding principal balance on the revolving note payable, the General Partner, at its discretion, can demand payment at any time prior to the stated maturity date of the note.

Certain limited partners of the Operating Partnership have provided guarantees or reimbursement agreements related to these notes payable. The guarantees were provided by the limited partners in conjunction with their contribution of properties to the Operating Partnership. The Operating Partnership recognized interest expense on the notes payable of $6.7 million and $7.2 million during the three months ended March 31, 2020 and 2019, respectively.

8. FAIR VALUE OF DERIVATIVES AND FINANCIAL INSTRUMENTS

Fair value is based on the price that would be received to sell an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level valuation hierarchy prioritizes observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below:

| ● | Level 1 — Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

| ● | Level 2 — Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

| ● | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

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March 31, 2020

The estimated fair values of the Operating Partnership’s financial instruments either recorded or disclosed on a recurring basis as of March 31, 2020 and December 31, 2019 are summarized as follows (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Fair Value at March 31, 2020, Using
​ |  | Total |  | ​ | ​ |  | Quoted |  | ​ | ​ |  | ​ | ​
​ | ​ | Carrying | ​ | ​ | ​ | ​ | Prices in | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Amount in | ​ | ​ | ​ | ​ | Active | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Statement of | ​ | ​ | ​ | ​ | Markets | ​ | Significant | ​ | ​ | ​
​ | ​ | Financial | ​ | Fair Value | ​ | for Identical | ​ | Other | ​ | Significant
​ | ​ | Position at | ​ | Estimate at | ​ | Assets or | ​ | Observable | ​ | Unobservable
​ | ​ | March 31, | ​ | March 31, | ​ | Liabilities | ​ | Inputs | ​ | Inputs
​ | ​ | 2020 (a) | ​ | 2020 | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3)
Description: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Secured debt instrument - fixed rate: (b) | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Mortgage note payable | ​ | $ | 72,500 | ​ | $ | 73,663 | ​ | $ | — | ​ | $ | — | ​ | $ | 73,663
Secured debt instrument - variable rate: (b) | ​ |  |  | ​ |  | ​ | ​ |  |  | ​ |  |  | ​ |  |
Tax-exempt secured note payable | ​ | ​ | 27,000 | ​ | ​ | 27,000 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 27,000
Total liabilities | ​ | $ | 99,500 | ​ | $ | 100,663 | ​ | $ | — | ​ | $ | — | ​ | $ | 100,663

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Fair Value at December 31, 2019, Using
​ |  | ​ | ​ |  | ​ | ​ |  | Quoted |  | ​ | ​ |  | ​ | ​
​ | ​ | Total | ​ | ​ | ​ | ​ | Prices in | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Carrying | ​ | ​ | ​ | ​ | Active | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Amount in | ​ | ​ | ​ | ​ | Markets | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Statement of | ​ | ​ | ​ | ​ | for Identical | ​ | Significant | ​ | ​ | ​
​ | ​ | Financial | ​ | Fair Value | ​ | Assets | ​ | Other | ​ | Significant
​ | ​ | Position at | ​ | Estimate at | ​ | or | ​ | Observable | ​ | Unobservable
​ | ​ | December 31, | ​ | December 31, | ​ | Liabilities | ​ | Inputs | ​ | Inputs
​ | ​ | 2019 (a) | ​ | 2019 | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3)
Description: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Secured debt instruments - fixed rate: (b) | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Mortgage notes payable | ​ | $ | 72,500 | ​ | $ | 71,976 | ​ | $ | — | ​ | $ | — | ​ | $ | 71,976
Secured debt instrument - variable rate: (b) | ​ |  |  | ​ |  | ​ | ​ |  |  | ​ |  |  | ​ |  |
Tax-exempt secured note payable | ​ | $ | 27,000 | ​ | $ | 27,000 | ​ | $ | — | ​ | $ | — | ​ | $ | 27,000
Total liabilities | ​ | $ | 99,500 | ​ | $ | 98,976 | ​ | $ | — | ​ | $ | — | ​ | $ | 98,976

(a) | Balances exclude deferred financing costs.

(b) | See Note 6, Debt, Net.

​

There were no transfers into or out of each of the levels of the fair value hierarchy during the three months ended March 31, 2020.

​

Financial Instruments Carried at Fair Value

The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair values of interest rate options are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.

The General Partner, on behalf of the Operating Partnership, incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the

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UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

March 31, 2020

Operating Partnership has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although the General Partner, on behalf of the Operating Partnership, has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of March 31, 2020 and December 31, 2019, the Operating Partnership has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Operating Partnership has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. In conjunction with the FASB’s fair value measurement guidance, the Operating Partnership made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Financial Instruments Not Carried at Fair Value

As of March 31, 2020, the fair values of cash and cash equivalents, restricted cash, accounts receivable, prepaids, real estate taxes payable, accrued interest payable, security deposits and prepaid rent, distributions payable and accounts payable approximated their carrying values because of the short term nature of these instruments. The estimated fair values of other financial instruments, which includes debt instruments, are classified in Level 3 of the fair value hierarchy due to the significant unobservable inputs that are utilized in their respective valuations.

The Operating Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book value of those assets. Cash flow estimates are based upon historical results adjusted to reflect management’s best estimate of future market and operating conditions and our estimated holding periods. The net book value of impaired assets is reduced to fair value. The General Partner’s estimates of fair value represent management’s estimates based upon Level 3 inputs such as industry trends and reference to market rates and transactions. The Operating Partnership did not incur any impairments on long-lived assets or any other-than-temporary impairments in the value of its investments in unconsolidated entities during the three months ended March 31, 2020 and 2019.

9. DERIVATIVES AND HEDGING ACTIVITY

Risk Management Objective of Using Derivatives

The Operating Partnership is exposed to certain risks arising from both its business operations and economic conditions. The General Partner principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The General Partner manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and through the use of derivative financial instruments. Specifically, the General Partner enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The General Partner’s and the Operating Partnership’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the General Partner’s known or expected cash payments principally related to the General Partner’s borrowings.

Cash Flow Hedges of Interest Rate Risk

The General Partner’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the General Partner primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the General Partner making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

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UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

March 31, 2020

The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated other comprehensive income/(loss), net on the Consolidated Balance Sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. As of and during the three months ended March 31, 2020 and 2019, no derivatives designated as cash flow hedges were held by the Operating Partnership.

Derivatives not designated as hedges are not speculative and are used to manage the Operating Partnership’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of GAAP. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings and resulted in no gain or loss for each of the three months ended March 31, 2020 and 2019.

As of March 31, 2020, we had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​
​ |  | Number of |  | ​ | ​
Product | ​ | Instruments | ​ | Notional
Interest rate caps |  | 1 | ​ | $ | 19,880

​

Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheets

As of March 31, 2020 and December 31, 2019, the fair value of the Operating Partnership’s derivative financial instruments was zero.

Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statements of Operations

During the three months ended March 31, 2020 and 2019, the Operating Partnership’s derivative instruments did not impact the Consolidated Statement of Operations.

Credit-risk-related Contingent Features

The General Partner has agreements with its derivative counterparties that contain a provision where the General Partner could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the General Partner’s default on the indebtedness.

The General Partner has certain agreements with some of its derivative counterparties that contain a provision where, in the event of default by the General Partner or the counterparty, the right of setoff may be exercised. Any amount payable to one party by the other party may be reduced by its setoff against any amounts payable by the other party. Events that give rise to default by either party may include, but are not limited to, the failure to pay or deliver payment under the derivative agreement, the failure to comply with or perform under the derivative agreement, bankruptcy, a merger without assumption of the derivative agreement, or in a merger, a surviving entity’s creditworthiness is materially weaker than the original party to the derivative agreement.

10. CAPITAL STRUCTURE

General Partnership Units

The General Partner has complete discretion to manage and control the operations and business of the Operating Partnership, which includes but is not limited to the acquisition and disposition of real property, construction of buildings and making capital improvements, and the borrowing of funds from outside lenders or UDR and its subsidiaries to finance such activities. The General Partner can generally authorize, issue, sell, redeem or purchase any OP Unit or securities of the Operating Partnership without the approval of the limited partners. The General Partner can also approve, with regard to the issuances of OP Units, the class or one or more series of classes, with designations, preferences, participating, optional or other special rights, powers and duties including rights, powers and duties senior to limited partnership interests without approval of any limited partners except holders of Class A Limited Partnership Units. There were 0.1 million General Partnership units outstanding at March 31, 2020 and December 31, 2019, all of which were held by UDR.

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UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

March 31, 2020

Limited Partnership Units

As of March 31, 2020 and December 31, 2019, there were 184.7 million and 184.0 million, respectively, of limited partnership units outstanding, of which 1.9 million were Class A Limited Partnership Units for both periods. UDR owned 176.1 million, or 95.3%, and 176.1 million, or 95.7%, of OP Units outstanding at March 31, 2020 and December 31, 2019, respectively, of which 0.1 million were Class A Limited Partnership Units for both periods. The remaining 8.6 million, or 4.7%, and 7.9 million, or 4.3%, of OP Units outstanding were held by non-affiliated partners at March 31, 2020 and December 31, 2019, respectively, of which 1.8 million were Class A Limited Partnership Units for both periods.

Subject to the terms of the Operating Partnership Agreement, the limited partners have the right to require the Operating Partnership to redeem all or a portion of the OP Units held by the limited partner at a redemption price equal to and in the form of the Cash Amount (as defined in the Operating Partnership Agreement), provided that such OP Units have been outstanding for at least one year. UDR, as general partner of the Operating Partnership, may, in its sole discretion, purchase the OP Units by paying to the limited partner either the Cash Amount or the REIT Share Amount (generally one share of common stock of UDR for each OP Unit), as defined in the Operating Partnership Agreement.

The non-affiliated limited partners’ capital is adjusted to redemption value at the end of each reporting period with the corresponding offset against UDR’s limited partner capital account based on the redemption rights noted above. The aggregate value upon redemption of the then-outstanding OP Units held by non-affiliated limited partners was $314.9 million and $366.4 million as of March 31, 2020 and December 31, 2019, respectively, based on the value of UDR’s common stock at each period end. A limited partner has no right to receive any distributions from the Operating Partnership on or after the date of redemption of its OP Units.

Class A Limited Partnership Units

Class A Limited Partnership Units have a cumulative, annual, non-compounded preferred return, which is equal to 8% based on a value of $16.61 per Class A Limited Partnership Unit.

Holders of the Class A Limited Partnership Units exclusively possess certain voting rights. The Operating Partnership may not do the following without approval of the holders of the Class A Limited Partnership Units: (i) increase the authorized or issued amount of Class A Limited Partnership Units, (ii) reclassify any other partnership interest into Class A Limited Partnership Units, (iii) create, authorize or issue any obligations or security convertible into or the right to purchase Class A Limited Partnership Units, (iv) enter into a merger or acquisition, or (v) amend or modify the Operating Partnership Agreement in a manner that adversely affects the relative rights, preferences or privileges of the Class A Limited Partnership Units.

The following table shows OP Units outstanding and OP Unit activity as of and for the three months ended March 31, 2020 (units in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | UDR, Inc. | ​ | ​
​ |  | Class A |  | ​ |  | ​ |  | Class A |  | ​ |  | ​
​ | ​ | Limited | ​ | Limited | ​ | Limited | ​ | Limited | ​ | General | ​ | ​
​ | ​ | Partners | ​ | Partners | ​ | Partner | ​ | Partner | ​ | Partner | ​ | Total
Ending balance at December 31, 2019 | ​ | 1,752 | ​ | 6,094 | ​ | 175,986 | ​ | 121 | ​ | 111 | ​ | 184,064
Vesting of LTIP Units | ​ | — | ​ | 772 | ​ | — | ​ | — | ​ | — | ​ | 772
Ending balance at March 31, 2020 |  | 1,752 |  | 6,866 |  | 175,986 |  | 121 |  | 111 |  | 184,836

​

LTIP Units

UDR grants long-term incentive plan units (“LTIP Units”) to certain employees and non-employee directors. The LTIP Units represent an ownership interest in the Operating Partnership and have voting and distribution rights consistent with OP Units. The LTIP Units are subject to the terms of UDR’s long-term incentive plan.

Two classes of LTIP Units are granted, Class 1 LTIP Units and Class 2 LTIP Units. Class 1 LTIP Units are granted to certain employees and non-employee directors and vest over a period of up to four years. Class 2 LTIP Units

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March 31, 2020

are granted to certain employees and vest over a period from one to three years subject to certain performance and market conditions being achieved. Vested LTIP Units may be converted into OP Units provided that such LTIP Units have been outstanding for at least two years from the date of grant.

Allocation of Profits and Losses

Profit of the Operating Partnership is allocated in the following order: (i) to the General Partner and the Limited Partners in proportion to and up to the amount of cash distributions made during the year, and (ii) to the General Partner and Limited Partners in accordance with their percentage interests. Losses and depreciation and amortization expenses, non-recourse liabilities are allocated to the General Partner and Limited Partners in accordance with their percentage interests. Losses allocated to the Limited Partners are capped to the extent that such an allocation would not cause a deficit in the Limited Partners’ capital account. Such losses are, therefore, allocated to the General Partner. If any Partner’s capital balance were to fall into a deficit, any income and gains are allocated to each Partner sufficient to eliminate its negative capital balance.

11. COMMITMENTS AND CONTINGENCIES

Commitments

Real Estate Commitments

The following summarizes the Operating Partnership’s real estate commitments at March 31, 2020 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Number | ​ | ​ | ​ | Operating Partnership's
​ | ​ | Properties | ​ | Investment | ​ | Remaining Commitment
Real estate communities - redevelopment |  | 1 | ​ | $ | 9,150 | ​ | $ | 5,850

​

Contingencies

Litigation and Legal Matters

The Operating Partnership is subject to various legal proceedings and claims arising in the ordinary course of business. The Operating Partnership cannot determine the ultimate liability with respect to such legal proceedings and claims at this time. The General Partner believes that such liability, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on the Operating Partnership’s financial condition, results of operations or cash flows.

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

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UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

March 31, 2020

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

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UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

March 31, 2020

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, (b) | ​
​ |  | 2020 |  | 2019 | ​
Reportable apartment home segment lease revenue |  | ​ |  |  | ​ |  | ​
Same-Store Communities (a) |  | ​ |  |  | ​ |  | ​
West Region | ​ | $ | 63,242 | ​ | $ | 60,782 | ​
Mid-Atlantic Region | ​ |  | 15,164 | ​ |  | 14,810 | ​
Northeast Region | ​ |  | 8,229 | ​ |  | 7,972 | ​
Southeast Region | ​ |  | 12,987 | ​ |  | 12,462 | ​
Southwest Region | ​ | ​ | 1,830 | ​ | ​ | 1,924 | ​
Non-Mature Communities/Other | ​ |  | 7,550 | ​ |  | 6,726 | ​
Total segment and consolidated lease revenue | ​ | $ | 109,002 | ​ | $ | 104,676 | ​
Reportable apartment home segment other revenue |  | ​ |  |  | ​ |  | ​
Same-Store Communities (a) |  | ​ |  |  | ​ |  | ​
West Region | ​ | $ | 1,779 | ​ | $ | 1,995 | ​
Mid-Atlantic Region | ​ |  | 431 | ​ |  | 535 | ​
Northeast Region | ​ |  | 101 | ​ |  | 166 | ​
Southeast Region | ​ |  | 644 | ​ |  | 775 | ​
Southwest Region | ​ | ​ | 71 | ​ | ​ | 31 | ​
Non-Mature Communities/Other | ​ |  | 137 | ​ |  | 156 | ​
Total segment and consolidated other revenue | ​ | $ | 3,163 | ​ | $ | 3,658 | ​
Total reportable apartment home segment rental income |  | ​ |  |  | ​ |  | ​
Same-Store Communities (a) |  | ​ |  |  | ​ |  | ​
West Region | ​ | $ | 65,021 | ​ | $ | 62,777 | ​
Mid-Atlantic Region | ​ |  | 15,595 | ​ |  | 15,345 | ​
Northeast Region | ​ |  | 8,330 | ​ |  | 8,138 | ​
Southeast Region | ​ |  | 13,631 | ​ |  | 13,237 | ​
Southwest Region | ​ | ​ | 1,901 | ​ | ​ | 1,955 | ​
Non-Mature Communities/Other | ​ |  | 7,687 | ​ |  | 6,882 | ​
Total segment and consolidated rental income | ​ | $ | 112,165 | ​ | $ | 108,334 | ​
Reportable apartment home segment NOI | ​ |  |  | ​ |  |  | ​
Same-Store Communities (a) | ​ |  |  | ​ |  |  | ​
West Region | ​ | $ | 49,493 | ​ | $ | 47,797 | ​
Mid-Atlantic Region | ​ |  | 10,796 | ​ |  | 10,524 | ​
Northeast Region | ​ |  | 5,909 | ​ |  | 6,205 | ​
Southeast Region | ​ |  | 9,550 | ​ |  | 9,257 | ​
Southwest Region | ​ | ​ | 1,391 | ​ | ​ | 1,337 | ​
Non-Mature Communities/Other | ​ |  | 4,416 | ​ |  | 4,019 | ​
Total segment and consolidated NOI | ​ |  | 81,555 | ​ |  | 79,139 | ​
Reconciling items: | ​ |  |  | ​ |  |  | ​
Property management | ​ |  | (3,225) | ​ |  | (2,979) | ​
Other operating expenses | ​ |  | (3,859) | ​ |  | (2,400) | ​
Real estate depreciation and amortization | ​ |  | (35,300) | ​ |  | (34,654) | ​
General and administrative | ​ |  | (5,308) | ​ |  | (4,661) | ​
Casualty-related (charges)/recoveries, net | ​ |  | 2 | ​ |  | — | ​
Income/(loss) from unconsolidated entities | ​ |  | (1,761) | ​ |  | (2,740) | ​
Interest expense | ​ |  | (7,464) | ​ |  | (7,371) | ​
Net (income)/loss attributable to noncontrolling interests | ​ |  | (522) | ​ |  | (388) | ​
Net income/(loss) attributable to OP unitholders | ​ | $ | 24,118 | ​ | $ | 23,946 | ​

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

​

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UNITED DOMINION REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

March 31, 2020

The following table details the assets of the Operating Partnership’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 | ​ | $ | 2,017,542 | ​ | $ | 2,011,495
Mid-Atlantic Region | ​ |  | 671,170 | ​ |  | 669,417
Northeast Region | ​ |  | 408,954 | ​ |  | 408,703
Southeast Region | ​ |  | 354,058 | ​ |  | 352,790
Southwest Region | ​ | ​ | 144,640 | ​ | ​ | 144,210
Non-Mature Communities/Other | ​ |  | 290,249 | ​ |  | 288,545
Total segment assets | ​ |  | 3,886,613 | ​ |  | 3,875,160
Accumulated depreciation | ​ |  | (1,831,814) | ​ |  | (1,796,568)
Total segment assets - net book value | ​ |  | 2,054,799 | ​ |  | 2,078,592
Reconciling items: | ​ |  |  | ​ |  |
Cash and cash equivalents | ​ |  | 40 | ​ |  | 24
Restricted cash | ​ |  | 14,121 | ​ |  | 13,998
Investment in unconsolidated entities | ​ |  | 69,617 | ​ |  | 76,222
Operating lease right-of-use assets | ​ | ​ | 204,723 | ​ | ​ | 205,668
Other assets | ​ |  | 24,042 | ​ |  | 24,241
Total consolidated assets | ​ | $ | 2,367,342 | ​ | $ | 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

​

13. Subsequent Event

​

The Operating Partnership is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business. The extent of the pandemic’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic and the duration of government measures to mitigate the pandemic, all of which are uncertain and difficult to predict. Although the effect on our results of operations and cash flows through the date of issuance of our financial statements was not material, given the uncertainty, we cannot predict the effect on future periods, but the adverse impact on the Operating Partnership's future financial condition, results of operations and cash flows could be material, including, but not limited to, as a result of eviction moratoriums, rent deferrals, payment plans, lease concessions, waiving late payment fees, charges from potential adjustments of the carrying amount of receivables, and asset impairment charges.

​

​

​

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Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, without limitation, statements concerning property acquisitions and dispositions, development activity and capital expenditures, capital raising activities, rent growth, occupancy, rental expense growth and expected or potential impacts of the novel coronavirus disease (“COVID-19”) pandemic. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Such factors include, among other things, the impact of the COVID-19 pandemic and measures intended to prevent its spread or address its effects, unfavorable changes in the apartment market, changing economic conditions, the impact of inflation/deflation on rental rates and property operating expenses, expectations concerning the availability of capital and the stability of the capital markets, the impact of competition and competitive pricing, acquisitions, developments and redevelopments not achieving anticipated results, delays in completing developments and redevelopments, delays in completing lease-ups on schedule or at expected rent and occupancy levels, expectations on job growth, home affordability and demand/supply ratio for multifamily housing, expectations concerning development and redevelopment activities, expectations on occupancy levels and rental rates, expectations concerning joint ventures and partnerships with third parties, expectations that automation will help grow net operating income, and expectations on annualized net operating income.

The following factors, among others, could cause our future results to differ materially from those expressed in the forward-looking statements:

| ● | the impact of the COVID-19 pandemic and measures intended to prevent its spread or address its effects;

| ● | general economic conditions;

| ● | unfavorable changes in apartment market and economic conditions that could adversely affect occupancy levels and rental rates, including as a result of COVID-19;

| ● | the failure of acquisitions to achieve anticipated results;

| ● | possible difficulty in selling apartment communities;

| ● | competitive factors that may limit our ability to lease apartment homes or increase or maintain rents;

| ● | insufficient cash flow that could affect our debt financing and create refinancing risk;

| ● | failure to generate sufficient revenue, which could impair our debt service payments and distributions to stockholders;

| ● | development and construction risks that may impact our profitability;

| ● | potential damage from natural disasters, including hurricanes and other weather-related events, which could result in substantial costs to us;

| ● | risks from climate change that impacts our properties or operations;

| ● | risks from extraordinary losses for which we may not have insurance or adequate reserves;

| ● | risks from cybersecurity breaches of our information technology systems and the information technology systems of our third party vendors and other third parties;

| ● | uninsured losses due to insurance deductibles, self-insurance retention, uninsured claims or casualties, or losses in excess of applicable coverage;

| ● | delays in completing developments and lease-ups on schedule;

| ● | our failure to succeed in new markets;

| ● | risks that third parties who have an interest in or are otherwise involved in projects in which we have an interest, including mezzanine borrowers, joint venture partners or other investors, do not perform as expected;

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| ● | changing interest rates, which could increase interest costs and affect the market price of our securities;

| ● | potential liability for environmental contamination, which could result in substantial costs to us;

| ● | the imposition of federal taxes if we fail to qualify as a REIT under the Code in any taxable year;

| ● | our internal control over financial reporting may not be considered effective which could result in a loss of investor confidence in our financial reports, and in turn have an adverse effect on our stock price; and

| ● | changes in real estate laws, tax laws, rent control or stabilization laws or other laws affecting our business.

A discussion of these and other factors affecting our business and prospects is set forth in Part II, Item 1A. Risk Factors. We encourage investors to review these risk factors.

Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.

Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.

COVID-19 Update

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The pandemic has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place or similar orders.

Our headquarters and all of our properties are located in areas that are or have been subject to shelter-in-place orders and restrictions on the types of businesses that may continue to operate. These orders and restrictions and other impacts of the COVID-19 pandemic may adversely affect the ability of our residents and retail and commercial tenants to pay their rent. It is not yet known how various programs adopted by the federal government and state and local governments will impact the ability of our residents and retail and commercial tenants to pay their rent. The governmental actions intended to prevent the spread of COVID-19 have also caused us to reduce staffing at certain of our locations, and have impacted our ability to conduct our business in the ordinary course. Further, a number of the jurisdictions in which we operate have adopted eviction moratoriums, either directly or indirectly (such as through direction to law enforcement or courts not to serve notices or take actions related to eviction), which may negatively impact our ability to remove residents or retail and commercial tenants who are not paying their rent and our ability to rent their units or other space to new residents or retail and commercial tenants, respectively. We have received more requests from our residents and retail and commercial tenants for assistance with respect to paying rent than we have historically received. In response, we have instituted a number of initiatives to assist residents and other tenants, including rent deferrals, payment plans, and waiving late payment fees when appropriate. We also have experienced a decrease in resident move-outs and turnover on an annualized basis. With respect to leasing activities, while inquiries from potential residents have decreased, our percentage of leases entered into with a prospective tenant has increased.

For April 2020, we have collected 95.5% of billed monthly rents from our multifamily residents. In addition, 95.3% of our multifamily residents have paid April monthly rent in full and 2.7% of our multifamily residents have paid a portion of April monthly rent. 2.0% of our multifamily residents have not paid at least a portion of April monthly rent.

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Over the last several years, we have worked to consistently strengthen our balance sheet and improve our liquidity profile, which we believe positions us well to weather the current economic and market challenges. The extent of the COVID-19 pandemic’s effect on our operational and financial performance, however, will depend on future developments, including the duration, spread and intensity of the pandemic and the duration of government measures to mitigate the pandemic, all of which are uncertain and difficult to predict. Although the effect on our operations during the first quarter was not material,

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given the uncertainty, we cannot predict the effect on future periods, but the adverse impact on our future financial condition, results of operations, and cash flows could be material.

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The following discussion should be read in conjunction with the consolidated financial statements appearing elsewhere herein and is based primarily on the consolidated financial statements for the three months ended March 31, 2020 and 2019, of each of UDR, Inc. and United Domination Realty, L.P.

UDR, Inc.:

Business Overview

We are a self-administered real estate investment trust, or REIT, that owns, operates, acquires, renovates, develops, redevelops, disposes of, and manages multifamily apartment communities. We were formed in 1972 as a Virginia corporation. In June 2003, we changed our state of incorporation from Virginia to Maryland. Our subsidiaries include the Operating Partnership and the DownREIT Partnership. Unless the context otherwise requires, all references in this Report to “we,” “us,” “our,” “the Company,” or “UDR” refer collectively to UDR, Inc., its subsidiaries and its consolidated joint ventures.

At March 31, 2020, our consolidated real estate portfolio included 150 communities in 13 states plus the District of Columbia totaling 47,579 apartment homes. In addition, we have an ownership interest in 5,134 completed or to-be-completed apartment homes through unconsolidated joint ventures or partnerships, including 2,004 apartment homes owned by entities in which we hold preferred equity investments. The Same-Store Community apartment home population for the three months ended March 31, 2020, was 37,910.

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The following table summarizes our market information by major geographic markets as of and for the three months ended March 31, 2020:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | March 31, 2020 | ​ | Three Months Ended March 31, 2020
​ |  | ​ |  | ​ |  | Percentage |  | Total |  | ​ |  | Monthly
​ | ​ | Number of | ​ | Number of | ​ | of Total | ​ | Carrying | ​ | Average | ​ | Income per
​ | ​ | Apartment | ​ | Apartment | ​ | Carrying | ​ | Value (in | ​ | Physical | ​ | Occupied
Same-Store Communities | ​ | Communities | ​ | Homes | ​ | Value | ​ | thousands) | ​ | Occupancy | ​ | Home (a)
West Region |  |  |  |  |  |  |  | ​ |  |  |  |  | ​ |
Orange County, CA |  | 10 |  | 4,434 |  | 8.9 | % | $ | 1,139,008 |  | 97.2 | % | $ | 2,379
San Francisco, CA |  | 11 |  | 2,751 |  | 6.9 | % | ​ | 879,361 |  | 96.5 | % | ​ | 3,752
Seattle, WA |  | 13 |  | 2,570 |  | 6.9 | % |  | 883,416 |  | 97.6 | % |  | 2,564
Los Angeles, CA |  | 4 |  | 1,225 |  | 3.6 | % |  | 458,776 |  | 97.0 | % |  | 2,940
Monterey Peninsula, CA |  | 7 |  | 1,565 |  | 1.4 | % |  | 183,271 |  | 95.9 | % |  | 1,954
Other Southern California |  | 2 |  | 654 |  | 0.9 | % |  | 109,793 |  | 97.0 | % |  | 2,047
Portland, OR |  | 2 |  | 476 |  | 0.4 | % |  | 50,855 |  | 97.0 | % |  | 1,643
Mid-Atlantic Region |  |  |  |  |  | ​ | ​ |  |  |  |  | ​ |  |
Metropolitan D.C. |  | 21 |  | 7,799 |  | 16.0 | % |  | 2,050,050 |  | 97.5 | % |  | 2,125
Richmond, VA |  | 4 |  | 1,358 |  | 1.2 | % |  | 152,291 |  | 97.1 | % |  | 1,407
Baltimore, MD |  | 3 |  | 720 |  | 1.2 | % |  | 154,347 |  | 97.3 | % |  | 1,725
Northeast Region |  |  |  |  |  | ​ | ​ |  |  |  |  | ​ |  |
Boston, MA |  | 4 |  | 1,388 |  | 3.6 | % |  | 467,063 |  | 95.9 | % |  | 2,958
New York, NY |  | 3 |  | 1,452 |  | 8.1 | % |  | 1,034,704 |  | 98.4 | % |  | 4,580
Southeast Region |  |  |  |  |  | ​ | ​ |  |  |  |  | ​ |  |
Orlando, FL |  | 9 |  | 2,500 |  | 1.8 | % |  | 234,957 |  | 96.0 | % |  | 1,419
Tampa, FL |  | 7 |  | 2,287 |  | 2.1 | % |  | 267,124 |  | 96.7 | % |  | 1,480
Nashville, TN |  | 8 |  | 2,260 |  | 1.7 | % |  | 221,102 |  | 97.7 | % |  | 1,359
Other Florida |  | 1 |  | 636 |  | 0.7 | % |  | 87,801 |  | 96.4 | % |  | 1,661
Southwest Region |  |  |  |  |  | ​ | ​ |  |  |  |  | ​ |  |
Dallas, TX |  | 7 |  | 2,345 |  | 2.3 | % |  | 290,327 |  | 97.5 | % |  | 1,391
Austin, TX |  | 4 |  | 1,272 |  | 1.3 | % |  | 168,115 |  | 97.6 | % |  | 1,550
Denver, CO | ​ | 1 | ​ | 218 | ​ | 1.1 | % | ​ | 144,640 | ​ | 92.4 | % | ​ | 3,145
Total/Average Same-Store Communities |  | 121 |  | 37,910 |  | 70.1 | % |  | 8,977,001 |  | 97.1 | % | $ | 2,208
Non-Mature, Commercial Properties & Other |  | 27 |  | 9,402 |  | 28.3 | % |  | 3,631,021 |  |  | ​ |  |
Total Real Estate Held for Investment |  | 148 |  | 47,312 |  | 98.4 | % |  | 12,608,022 |  |  | ​ |  |
Real Estate Under Development (b) |  | — |  | — |  | 0.7 | % |  | 95,326 |  |  | ​ |  |
Real Estate Held for Disposition (c) |  | 2 |  | 267 |  | 0.9 | % |  | 114,650 |  |  | ​ |  |
Total Real Estate Owned |  | 150 |  | 47,579 |  | 100.0 | % |  | 12,817,998 |  |  | ​ |  |
Total Accumulated Depreciation |  |  |  |  |  |  | ​ |  | (4,272,471) |  |  | ​ |  |
Total Real Estate Owned, Net of Accumulated Depreciation |  |  |  |  |  |  | ​ | $ | 8,545,527 |  |  | ​ |  |

(a) | Monthly Income per Occupied Home represents total monthly revenues divided by the average physical number of occupied apartment homes in our Same-Store portfolio.

(b) | As of March 31, 2020, the Company was developing three wholly-owned communities with a total of 878 apartment homes, none of which have been completed.

(c) | The Company had two communities located in Seattle, Washington that met the criteria to be classified as held for disposition at March 31, 2020.

We report in two segments: Same-Store Communities and Non-Mature Communities/Other.

Our Same-Store Communities segment represents those communities acquired, developed, and stabilized prior to January 1, 2019 and held as of March 31, 2020. 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 communities are not classified as 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.

Our Non-Mature Communities/Other segment represents 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.

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Liquidity and Capital Resources

Liquidity is the ability to meet present and future financial obligations either through operating cash flows, sales of properties, borrowings under our credit agreements, and/or the issuance of debt and/or equity securities. Our primary source of liquidity is our cash flow from operations, as determined by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment homes, and borrowings under our credit agreements. We routinely use our working capital credit facility, our unsecured revolving credit facility and issuances of commercial paper to temporarily fund certain investing and financing activities prior to arranging for longer-term financing or the issuance of equity or debt securities. During the past several years, proceeds from the sale of real estate have been used for both investing and financing activities as we continue to execute on maintaining a diversified portfolio.

We expect to meet our short-term liquidity requirements generally through net cash provided by property operations and borrowings under our credit agreements and our unsecured commercial paper program. We expect to meet certain long-term liquidity requirements such as scheduled debt maturities, the repayment of financing on development activities, and potential property acquisitions, through net cash provided by property operations, secured and unsecured borrowings, the issuance of debt or equity securities, and/or the disposition of properties. We believe that our net cash provided by property operations and borrowings under our credit agreements and our unsecured commercial paper program will continue to be adequate to meet both operating requirements and the payment of dividends by the Company in accordance with REIT requirements. Likewise, the budgeted expenditures for improvements and renovations of certain properties are expected to be funded from property operations, borrowings under credit agreements, the issuance of debt or equity securities, and/or dispositions of properties.

We have a shelf registration statement filed with the Securities and Exchange Commission, or “SEC,” which provides for the issuance of common stock, preferred stock, depositary shares, debt securities, guarantees of debt securities, warrants, subscription rights, purchase contracts and units to facilitate future financing activities in the public capital markets. Access to capital markets is dependent on market conditions at the time of issuance.

In July 2017, the Company entered into an ATM sales agreement under which the Company may offer and sell up to 20.0 million shares of its common stock, from time to time, to or through its sales agents and may enter into separate forward sales agreements to or through its forward purchasers. Upon entering into the ATM sales agreement, the Company simultaneously terminated the sales agreement for its prior at-the-market equity offering program, which was entered into in April 2017, which replaced the prior at-the-market equity offering program entered into in April 2012. During the three months ended March 31, 2020, the Company did not sell any shares of common stock through its ATM program. As of March 31, 2020, we had 11.7 million shares of common stock available for future issuance under the ATM program, including an aggregate of 2.1 million shares subject to the forward sales agreements described below.

During the three months ended March 31, 2020, the Company entered into forward sales agreements under its ATM program for a total of 2.1 million shares of common stock at a weighted average initial forward price per share of $49.56. The initial forward price per share to be received by the Company upon settlement will be determined on the applicable settlement date based on adjustments made to the initial forward price to reflect the then-current federal funds rate and the amount of dividends paid to holders of UDR common stock over the term of the forward sales agreement. As of March 31, 2020, no shares under the forward sales agreement have been settled. The final date by which shares sold under the forward sales agreements must be settled range between February 12, 2021 and March 3, 2021. See Note 8, Income/(Loss) per Share, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional discussion of forward sales agreements.

​

In February 2020, the Company issued $200.0 million of 3.20% senior unsecured medium-term notes due 2030. Interest is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2020. The notes were priced at 105.660% of the principal amount at issuance. This was a further issuance of the 2030 notes, and form a single series with, the $300.0 million aggregate principal amount of the Company’s 3.20% notes due 2030 that were issued in July 2019 and the $100.0 million aggregate principal amount of the Company’s 3.20% notes due 2030 that were issued in October 2019. As of the completion of the offering, the aggregate principal amount of outstanding 2030 notes was $600.0 million.

Future Capital Needs

Future development and redevelopment expenditures may be funded through unsecured or secured credit facilities, unsecured commercial paper, proceeds from the issuance of equity or debt securities, sales of properties, joint ventures, and, to a lesser extent, from cash flows provided by property operations. Acquisition activity in strategic markets may be funded

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through joint ventures, by the reinvestment of proceeds from the sale of properties, through the issuance of equity or debt securities, the issuance of operating partnership units and the assumption or placement of secured and/or unsecured debt.

During the remainder of 2020, we have approximately $112.6 million of secured debt maturing, inclusive of principal amortization, and $215.0 million of unsecured debt maturing, comprised solely of unsecured commercial paper. We anticipate repaying the remaining debt with cash flow from our operations, proceeds from debt or equity offerings, proceeds from dispositions of properties, or from borrowings under our credit agreements and our unsecured commercial paper program.

In April 2020, the entire $215.0 million of outstanding unsecured commercial paper as of March 31, 2020 was repaid at maturity with draws on the Company’s Revolving Credit Facility and Working Capital Credit Facility. As of April 30, 2020, we had $375.0 million outstanding under the Revolving Credit Facility, leaving $725.0 million of unused capacity (excluding $2.5 million of letters of credit), and we had $24.8 million outstanding under the Working Capital Credit Facility, leaving $50.2 million of unused capacity.

Critical Accounting Policies and Estimates and New Accounting Pronouncements

Our critical accounting policies are those having the most impact on the reporting of our financial condition and results and those requiring significant judgments and estimates. These policies include those related to (1) capital expenditures, (2) impairment of long-lived assets, (3) real estate investment properties, and (4) revenue recognition.

Our critical accounting policies are described in more detail in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in UDR’s Annual Report on Form 10-K, filed with the SEC on February 18, 2020. There have been no significant changes in our critical accounting policies from those reported in our Form 10-K filed with the SEC on February 18, 2020. With respect to these critical accounting policies, we believe that the application of judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented.

Statements of Cash Flows

The following discussion explains the changes in Net cash provided by/(used in) operating activities, Net cash provided by/(used in) investing activities, and Net cash provided by/(used in) financing activities that are presented in our Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019.

Operating Activities

For the three months ended March 31, 2020, our Net cash provided by/(used in) operating activities was $135.5 million, compared to $137.3 million for the comparable period in 2019. The decrease in cash flow from operating activities was primarily due to changes in operating assets and liabilities, partially offset by improved net operating income, primarily driven by revenue growth at communities and net operating income from communities acquired in 2019.

Investing Activities

For the three months ended March 31, 2020, Net cash provided by/(used in) investing activities was $(214.0) million, compared to $(459.7) million for the comparable period in 2019. The decrease in cash used in investing activities was primarily due to the decrease in acquisitions made during the current period, partially offset by an increase in spend for development of real estate assets.

Acquisitions

In January 2020, the Company acquired a 294 apartment home operating community located in Tampa, Florida for approximately $85.2 million. The Company increased its real estate assets owned by approximately $83.1 million and recorded approximately $2.1 million of in-place lease intangibles.

In January 2020, the Company increased its ownership interest from 49% to 100% in a 276 apartment home operating community located in Hillsboro, Oregon, for a cash purchase price of approximately $21.6 million. In connection with the acquisition, the Company repaid approximately $35.6 million of joint venture construction financing. As a result, the Company consolidated the operating community. The Company had previously accounted for its 49% ownership interest as a preferred

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equity investment in an unconsolidated joint venture (see Note 5, Joint Ventures and Partnerships). The Company accounted for the consolidation as an asset acquisition resulting in no gain or loss upon consolidation and increased its real estate assets owned by approximately $67.8 million and recorded approximately $1.7 million of in-place lease intangibles.

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Capital Expenditures

We capitalize those expenditures that materially enhance the value of an existing asset or substantially extend the useful life of an existing asset. Expenditures necessary to maintain an existing property in ordinary operating condition are expensed as incurred.

For the three months ended March 31, 2020, total capital expenditures of $32.2 million, or $677 per stabilized home, which in aggregate include recurring capital expenditures and major renovations, were spent across our portfolio, excluding development, as compared to $34.4 million, or $865 per stabilized home, for the comparable period in 2019.

The decrease in total capital expenditures was primarily due to:

| ● | a decrease of $6.9 million in spend as compared to the comparable period in 2019 for our operations platform, which includes smart home installations in certain of our properties;

partially offset by:

| ● | an increase of 27.6%, or $2.0 million, in recurring capital expenditures, which include asset preservation and turnover related expenditures.

The following table outlines capital expenditures and repair and maintenance costs for all of our communities, excluding real estate under development, for the three months ended March 31, 2020 and 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Per Home |
​ | ​ | Three Months Ended March 31, | ​ | Three Months Ended March 31, |
​ |  | 2020 |  | 2019 |  | % Change |  | 2020 |  | 2019 |  | % Change |
Turnover capital expenditures | ​ | $ | 2,491 | ​ | $ | 2,046 |  | 21.7 | % | $ | 52 | ​ | $ | 51 |  | 2.0 | %
Asset preservation expenditures | ​ |  | 6,718 | ​ |  | 5,172 |  | 29.9 | % |  | 141 | ​ |  | 131 |  | 7.6 | %
Total recurring capital expenditures | ​ |  | 9,209 | ​ |  | 7,218 |  | 27.6 | % |  | 193 | ​ |  | 182 |  | 6.0 | %
NOI enhancing improvements (a) | ​ |  | 7,651 | ​ |  | 6,333 |  | 20.8 | % |  | 161 | ​ |  | 159 |  | 1.3 | %
Major renovations (b) | ​ |  | 9,752 | ​ |  | 8,348 |  | 16.8 | % |  | 205 | ​ |  | 210 |  | (2.4) | %
Operations platform | ​ | ​ | 5,601 | ​ | ​ | 12,500 | ​ | (55.2) | % | ​ | 118 | ​ | ​ | 314 | ​ | (62.5) | %
Total capital expenditures | ​ | $ | 32,213 | ​ | $ | 34,399 |  | (6.4) | % | $ | 677 | ​ | $ | 865 |  | (21.8) | %
Repair and maintenance expense | ​ | $ | 12,925 | ​ | $ | 8,780 |  | 47.2 | % | $ | 272 | ​ | $ | 221 |  | 23.1 | %
Average home count (c) | ​ |  | 47,579 | ​ |  | 39,750 |  | 19.7 | % | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

(a) | NOI enhancing improvements are expenditures that result in increased income generation or decreased expense growth.

(b) | Major renovations include major structural changes and/or architectural revisions to existing buildings.

(c) | Average number of homes is calculated based on the number of homes outstanding at the end of each month.

The above table includes amounts capitalized during the year. Cash paid for capital expenditures is impacted by the net change in related accruals.

We intend to continue to selectively add NOI enhancing improvements, which we believe will provide a return on investment in excess of our cost of capital. Our objective in redeveloping a community is twofold: we aim to meaningfully grow rental rates while also achieving cap rate compression through asset quality improvement.

Consolidated Real Estate Under Development and Redevelopment

At March 31, 2020, our development pipeline consisted of three wholly-owned communities totaling 878 apartment homes, none of which have been completed, with a budget of $278.5 million, in which we have a carrying value of $95.3 million. The communities are estimated to be completed between the first quarter of 2021 and the second quarter of 2022.

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At March 31, 2020, the Company was redeveloping two communities, located in New York, New York and Boston, Massachusetts, which are expected to be completed in the third quarter of 2020 and the first quarter of 2021, respectively. The redevelopments include the renovation of building exteriors, corridors, and common area amenities as well as individual apartment homes.

During the three months ended March 31, 2020, we incurred $9.8 million in major renovations, which include major structural changes and/or architectural revisions to existing buildings, an increase of $1.4 million compared to the three months ended March 31, 2019.

Unconsolidated Joint Ventures and Partnerships

The Company recognizes income or losses from our investments in unconsolidated joint ventures and partnerships consisting of our proportionate share of the net income or losses of the joint ventures and partnerships. In addition, we may earn fees for providing management services to the communities held by the unconsolidated joint ventures and partnerships.

The Company’s Investment in and advances to unconsolidated joint ventures and partnerships, net, are accounted for under the equity method of accounting. For the three months ended March 31, 2020:

| ● | we made investments totaling $16.1 million in our unconsolidated joint ventures, including contributions of $14.8 million to three unconsolidated investments under our Developer Capital Program, which earn preferred returns ranging from 8.5% to 9.0%;

| ● | our proportionate share of the net income/(loss) of the joint ventures and partnerships was $3.4 million; and

| ● | we received distributions of $5.0 million, of which $1.7 million were operating cash flows and $3.3 million were investing cash flows.

We evaluate our investments in unconsolidated joint ventures and partnerships when events or changes in circumstances indicate that there may be an other-than-temporary decline in value. We consider various factors to determine if a decrease in the value of the investment is other-than-temporary. The Company did not recognize any other-than-temporary impairments in the value of its investments in unconsolidated joint ventures or partnerships during the three months ended March 31, 2020 and 2019.

Financing Activities

For the three months ended March 31, 2020, our Net cash provided by/(used in) financing activities was $68.2 million, compared to $137.7 million for the comparable period of 2019.

The following significant financing activities occurred during the three months ended March 31, 2020:

| ● | net repayment of $85.0 million on our unsecured commercial paper program;

| ● | net proceeds of $58.2 million from the Company’s unsecured revolving credit facilities;

| ● | issued $200.0 million of 3.20% senior unsecured medium-term notes due January 15, 2030, for net proceeds of approximately $211.3 million; and

| ● | payment of $100.9 million of distributions to our common stockholders.

Credit Facilities and Commercial Paper Program

UDR had one secured credit facility with New York Life with an outstanding balance of $203.4 million at March 31, 2020. The New York Life credit facility matures in January 2023 and bears interest at a fixed rate of 4.90%.

The Company has a $1.1 billion unsecured revolving credit facility and a $350.0 million unsecured term loan. The Credit Agreement for these facilities allows the total commitments under the Revolving Credit Facility and the total borrowings under the Term Loan to be increased to an aggregate maximum amount of up to $2.0 billion, subject to certain conditions, including obtaining commitments from one or more lenders. The Revolving Credit Facility has a scheduled maturity date of January 31, 2023, with two six-month extension options, subject to certain conditions. The Term Loan has a scheduled maturity date of September 30, 2023.

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Based on the Company’s current credit rating, the Revolving Credit Facility has an interest rate equal to LIBOR plus a margin of 82.5 basis points and a facility fee of 15 basis points, and the Term Loan has an interest rate equal to LIBOR plus a margin of 90 basis points. Depending on the Company’s credit rating, the margin under the Revolving Credit Facility ranges from 75 to 145 basis points, the facility fee ranges from 10 to 30 basis points, and the margin under the Term Loan ranges from 80 to 165 basis points.

As of March 31, 2020, we had $50.0 million outstanding under the Revolving Credit Facility, leaving $1.1 billion of unused capacity (excluding $2.5 million of letters of credit at March 31, 2020), and $350.0 million of outstanding borrowings under the Term Loan.

We have a working capital credit facility, which provides for a $75 million unsecured revolving credit facility (the “Working Capital Credit Facility”) with a scheduled maturity date of January 15, 2021. Based on the Company’s current credit rating, the Working Capital Credit Facility has an interest rate equal to LIBOR plus a margin of 82.5 basis points. Depending on the Company’s credit rating, the margin ranges from 75 to 145 basis points.

As of March 31, 2020, we had $24.8 million of outstanding borrowings under the Working Capital Credit Facility, leaving $50.2 million of unused capacity.

The bank revolving credit facilities and the term loan are subject to customary financial covenants and limitations, all of which we were in compliance with at March 31, 2020.

We have an unsecured commercial paper program. Under the terms of the program, we may issue unsecured commercial paper up to a maximum aggregate amount outstanding of $500 million. The notes are sold under customary terms in the United States commercial paper market and rank pari passu with all of our other unsecured indebtedness. The notes are fully and unconditionally guaranteed by the Operating Partnership. As of March 31, 2020, we had issued $215.0 million of commercial paper, for one month terms, at a weighted average annualized rate of 1.58%, leaving $285.0 million of unused capacity. In April 2020, the entire $215.0 million of outstanding unsecured commercial paper as of March 31, 2020 was repaid at maturity with draws on the Company’s Revolving Credit Facility and Working Capital Credit Facility.

Interest Rate Risk

We are exposed to interest rate risk associated with variable rate notes payable and maturing debt that has to be refinanced. We do not hold financial instruments for trading or other speculative purposes, but rather issue these financial instruments to finance our portfolio of real estate assets and operations. Interest rate sensitivity is the relationship between changes in market interest rates and the fair value of market rate sensitive assets and liabilities. Our earnings are affected as changes in short-term interest rates impact our cost of variable rate debt and maturing fixed rate debt. We had $351.8 million in variable rate debt that is not subject to interest rate swap contracts as of March 31, 2020. If market interest rates for variable rate debt increased by 100 basis points, our interest expense for the three months ended March 31, 2020 would increase by $1.2 million based on the average balance outstanding during the period.

These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. This analysis does not consider the effects of the adjusted level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no change in our financial structure.

The Company also utilizes derivative financial instruments to manage interest rate risk and generally designates these financial instruments as cash flow hedges. See Note 11, Derivatives and Hedging Activities, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional discussion of derivative instruments.

A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended March 31,
​ | ​ | 2020 |  | 2019
Net cash provided by/(used in) operating activities |  | $ | 135,456 |  | $ | 137,333
Net cash provided by/(used in) investing activities | ​ |  | (214,044) |  |  | (459,749)
Net cash provided by/(used in) financing activities | ​ |  | 68,226 |  |  | 137,679

​

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Results of Operations

The following discussion explains the changes in results of operations that are presented in our Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019.

Net Income/(Loss) Attributable to Common Stockholders

Net income/(loss) attributable to common stockholders was $4.2 million ($0.01 per diluted share) for the three months ended March 31, 2020, as compared to $23.5 million ($0.08 per diluted share) for the comparable period in the prior year. The decrease resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:

| ● | an increase in depreciation expense of $43.0 million primarily due to communities acquired in 2019, partially offset by a decrease from fully depreciated assets;

| ● | an increase in interest expense of $5.8 million primarily due to higher average debt balances; and

| ● | a decrease in interest income and other income/(expense), net of $7.1 million, primarily attributable to an $8.5 million promoted interest on the prepayment of a note to a multifamily technology company in 2019.

This was partially offset by:

​

| ● | an increase in total property NOI of $35.8 million primarily due to higher revenue per occupied home and NOI from additional operating communities, including those acquired in 2020 and 2019.

​

Apartment Community Operations

Our net income results are primarily from NOI generated from the operation of our apartment communities. The Company defines NOI, which is a non-GAAP financial measure, as rental income less direct property rental expenses. Rental income represents gross market rent less adjustments for concessions, vacancy loss and bad debt. 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.

Management considers NOI a useful metric for investors as it is a more meaningful representation of a community’s continuing operating performance than net income as it is prior to corporate-level expense allocations, general and administrative costs, capital structure and depreciation and amortization.

Although the Company considers NOI a useful measure of operating performance, NOI should not be considered an alternative to net income or net cash flow from operating activities as determined in accordance with GAAP. NOI excludes several income and expense categories as detailed in the reconciliation of NOI to Net income/(loss) attributable to UDR, Inc. below.

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The following table summarizes the operating performance of our total property NOI for each of the periods presented (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | ​ | ​
​ | ​ | March 31, (a) | ​ | ​ | ​
​ |  | 2020 |  | 2019 |  | % Change | ​
Same-Store Communities: | ​ | ​ | ​ |  | ​ | ​ | ​ | ​ | ​
Same-Store rental income | ​ | $ | 243,813 |  | $ | 236,994 | ​ | 2.9 | %
Same-Store operating expense (b) | ​ |  | (69,326) |  |  | (67,516) | ​ | 2.7 | %
Same-Store NOI | ​ |  | 174,487 |  |  | 169,478 | ​ | 3.0 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-Mature Communities/Other NOI: | ​ | ​ | ​ |  | ​ | ​ | ​ | ​ | ​
Stabilized, non-mature communities NOI (c) | ​ | ​ | 40,294 | ​ | ​ | 11,456 | ​ | 251.7 | %
Acquired communities NOI | ​ |  | 1,394 |  |  | — | ​ | NM | *
Redevelopment communities NOI | ​ | ​ | 4,926 | ​ | ​ | 5,232 | ​ | (5.8) | %
Development communities NOI | ​ |  | (40) |  |  | — | ​ | NM | *
Non-residential/other NOI | ​ | ​ | 2,771 | ​ | ​ | 1,328 | ​ | 108.7 | %
Sold and held for disposition communities NOI | ​ | ​ | 1,633 | ​ | ​ | 2,189 | ​ | (25.4) | %
Total Non-Mature Communities/Other NOI | ​ |  | 50,978 |  |  | 20,205 | ​ | 152.3 | %
Total property NOI | ​ | $ | 225,465 |  | $ | 189,683 | ​ | 18.9 | %

*Not meaningful

(a) | Same-Store consists of 37,910 apartment homes.

(b) | Excludes depreciation, amortization, and property management expenses.

(c) | Represents non-mature communities that have achieved 90% occupancy for three consecutive months but do not meet the criteria to be included in Same-Store Communities.

​

The following table is our reconciliation of Net income/(loss) attributable to UDR, Inc. to total property NOI for the periods presented (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​
​ | ​ | March 31, | ​
​ |  | 2020 |  | 2019 | ​
Net income/(loss) attributable to UDR, Inc. | ​ | $ | 5,221 | ​ | $ | 24,503 | ​
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 | ​
Total property NOI | ​ | $ | 225,465 | ​ | $ | 189,683 | ​

​

Same-Store Communities

Our Same-Store Community properties, those acquired, developed, and stabilized prior to January 1, 2019 and held on March 31, 2020 consisted of 37,910 apartment homes and provided 77.4% of our total NOI for the three months ended March 31, 2020.

NOI for our Same-Store Community properties increased 3.0%, or $5.0 million, for the three months ended March 31, 2020 compared to the same period in 2019. The increase in property NOI was attributable to a 2.9%, or $6.8 million,

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increase in property rental income, which was partially offset by a 2.7%, or $1.8 million, increase in operating expenses. The increase in property income was primarily driven by a 2.6%, or $5.6 million, increase in rental rates and a 4.7%, or $1.2 million, increase in reimbursement and ancillary and fee income. Physical occupancy increased by 0.2% to 97.1% and total monthly income per occupied home increased 0.5% to $2,208.

The increase in operating expenses was primarily driven by a 5.8%, or $1.6 million, increase in real estate taxes, which was primarily due to higher assessed valuations, and a 10.5%, or $0.9 million, increase in repair and maintenance expense due to the increased use of third party vendors, partially offset by an 8.5%, or $1.2 million, decrease in personnel expense as a result of fewer employees.

The operating margin (property net operating income divided by property rental income) was 71.6% and 71.5% for the three months ended March 31, 2020 and 2019, respectively.

Non-Mature Communities/Other

UDR’s Non-Mature Communities/Other represent those communities that do not meet the criteria to be included in Same-Store Communities, which include communities recently developed or acquired, redevelopment properties, sold or held for disposition properties, and non-apartment components of mixed use properties.

The remaining 22.6%, or $51.0 million, of our total NOI during the three months ended March 31, 2020 was generated from our Non-Mature Communities/Other. NOI from Non-Mature Communities/Other increased by 152.3%, or $30.8 million, for the three months ended March 31, 2020 as compared to the same period in 2019. The increase was primarily attributable to a $28.8 million increase in stabilized, non-mature communities NOI, and a $1.4 million increase in acquired communities, partially offset by a $0.6 million decrease in NOI from sold and held for disposition communities.

Real estate depreciation and amortization

For the three months ended March 31, 2020 and 2019, the Company recognized real estate depreciation and amortization of $155.5 million and $112.5 million, respectively. The increase in 2020 as compared to 2019 was primarily attributable to communities acquired in 2019, partially offset by a decrease from fully depreciated assets.

Interest expense

For the three months ended March 31, 2020 and 2019, the Company recognized interest expense of $39.3 million and $33.5 million, respectively. The increase in 2020 as compared to 2019 was primarily attributable to higher average debt balances.

Interest income and other income/(expense), net

For the three months ended March 31, 2020 and 2019, we recognized interest income and other income/(expense), net of $2.7 million and $9.8 million, respectively. The decrease in 2020 as compared to 2019 was primarily attributable to an $8.5 million promoted interest on the prepayment of a note to a multifamily technology company in 2019.

Inflation

We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results of operations as a result of wage pressures and increases in utilities and material costs, the majority of our apartment leases have initial terms of 12 months or less, which generally enables us to compensate for any inflationary effects by increasing rental rates on our apartment homes. Although an extreme escalation in costs could have a negative impact on our residents and their ability to absorb rent increases, we do not believe this has had a material impact on our results for the three months ended March 31, 2020.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material.

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Funds from Operations, Funds from Operations as Adjusted, and Adjusted Funds from Operations

Funds from Operations

Funds from operations (“FFO”) attributable to common stockholders and unitholders is defined as Net income/(loss) attributable to common stockholders (computed in accordance with GAAP), excluding impairment write-downs of depreciable real estate related to the main business of the Company or of investments in non-consolidated investees that are directly attributable to decreases in the fair value of depreciable real estate held by the investee, gains and losses from sales of depreciable real estate related to the main business of the Company and income taxes directly associated with those gains and losses, plus real estate depreciation and amortization, and after adjustments for noncontrolling interests, and the Company’s share of unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust's (“Nareit”) definition issued in April 2002 and restated in November 2018. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, Nareit created FFO as a supplemental measure of a REIT’s operating performance. In the computation of diluted FFO, if OP Units, DownREIT Units, unvested restricted stock, unvested LTIP Units, stock options, and the shares of Series E Cumulative Convertible Preferred Stock are dilutive, they are included in the diluted share count.

Management considers FFO a useful metric for investors as the Company uses FFO in evaluating property acquisitions and its operating performance, and believes that FFO should be considered along with, but not as an alternative to, net income and cash flow as a measure of the Company’s activities in accordance with GAAP. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of funds available to fund our cash needs.

Funds from Operations as Adjusted

FFO as Adjusted (“FFOA”) attributable to common stockholders and unitholders is defined as FFO excluding the impact of non-comparable items including, but not limited to, acquisition-related costs, prepayment costs/benefits associated with early debt retirement, impairment write-downs or gains and losses on sales of real estate or other assets incidental to the main business of the Company and income taxes directly associated with those gains and losses, casualty-related expenses and recoveries, severance costs and legal and other costs.

Management believes that FFOA is useful supplemental information regarding our operating performance as it provides a consistent comparison of our operating performance across time periods and allows investors to more easily compare our operating results with other REITs. FFOA is not intended to represent cash flow or liquidity for the period, and is only intended to provide an additional measure of our operating performance. We believe that Net income/(loss) attributable to common stockholders is the most directly comparable GAAP financial measure to FFOA. However, other REITs may use different methodologies for calculating FFOA or similar FFO measures and, accordingly, our FFOA may not always be comparable to FFOA or similar FFO measures calculated by other REITs. FFOA should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity.

Adjusted Funds from Operations

Adjusted FFO (“AFFO”) attributable to common stockholders and unitholders is defined as FFOA less recurring capital expenditures on consolidated communities that are necessary to help preserve the value of and maintain functionality at our communities. Therefore, management considers AFFO a useful supplemental performance metric for investors as it is more indicative of the Company’s operational performance than FFO or FFOA.

AFFO is not intended to represent cash flow or liquidity for the period, and is only intended to provide an additional measure of our operating performance. We believe that Net income/(loss) attributable to common stockholders is the most directly comparable GAAP financial measure to AFFO. Management believes that AFFO is a widely recognized measure of the operations of REITs, and presenting AFFO will enable investors to assess our performance in comparison to other REITs. However, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not always be comparable to AFFO calculated by other REITs. AFFO should not be considered as an alternative to net income/(loss) (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to cash flows from

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operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.

The following table outlines our reconciliation of Net income/(loss) attributable to common stockholders to FFO, FFOA, and AFFO for the three months ended March 31, 2020 and 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​
​ | ​ | March 31, | ​
​ |  | 2020 |  | 2019 | ​
Net income/(loss) attributable to common stockholders | ​ | $ | 4,155 | ​ | $ | 23,492 | ​
Real estate depreciation and amortization | ​ |  | 155,476 | ​ |  | 112,468 | ​
Noncontrolling interests | ​ |  | 319 | ​ |  | 2,099 | ​
Real estate depreciation and amortization on unconsolidated joint ventures | ​ |  | 8,816 | ​ |  | 15,674 | ​
FFO attributable to common stockholders and unitholders, basic | ​ | $ | 168,766 | ​ | $ | 153,733 | ​
Distributions to preferred stockholders — Series E (Convertible) | ​ |  | 1,066 | ​ |  | 1,011 | ​
FFO attributable to common stockholders and unitholders, diluted | ​ | $ | 169,832 | ​ | $ | 154,744 | ​
Income/(loss) per weighted average common share, diluted | ​ | $ | 0.01 | ​ | $ | 0.08 | ​
FFO per weighted average common share and unit, basic | ​ | $ | 0.53 | ​ | $ | 0.51 | ​
FFO per weighted average common share and unit, diluted | ​ | $ | 0.53 | ​ | $ | 0.51 | ​
Weighted average number of common shares and OP/DownREIT Units outstanding — basic | ​ |  | 316,685 | ​ |  | 301,282 | ​
Weighted average number of common shares, OP/DownREIT Units, and common stock equivalents outstanding — diluted | ​ |  | 320,399 | ​ |  | 304,848 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Impact of adjustments to FFO: | ​ |  |  | ​ |  |  | ​
Promoted interest on settlement of note receivable, net of tax | ​ | $ | — | ​ | $ | (6,482) | ​
Legal and other costs | ​ |  | 758 | ​ |  | 3,660 | ​
Unrealized (gain)/loss on unconsolidated investments, net of tax | ​ | ​ | 32 | ​ | ​ | (229) | ​
Severance costs and other restructuring expense | ​ |  | 1,642 | ​ |  | — | ​
Casualty-related charges/(recoveries), net | ​ |  | 1,399 | ​ |  | 15 | ​
Casualty-related charges/(recoveries) on unconsolidated joint ventures, net | ​ |  | 31 | ​ |  | 146 | ​
​ | ​ | $ | 3,862 | ​ | $ | (2,890) | ​
FFOA attributable to common stockholders and unitholders, diluted | ​ | $ | 173,694 | ​ | $ | 151,854 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
FFOA per weighted average common share and unit, diluted | ​ | $ | 0.54 | ​ | $ | 0.50 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Recurring capital expenditures | ​ |  | (9,209) | ​ |  | (7,218) | ​
AFFO attributable to common stockholders and unitholders, diluted | ​ | $ | 164,485 | ​ | $ | 144,636 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
AFFO per weighted average common share and unit, diluted | ​ | $ | 0.51 | ​ | $ | 0.47 | ​

​

The following table is our reconciliation of FFO share information to weighted average common shares outstanding, basic and diluted, reflected on the UDR Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 (shares in thousands):

​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
​ |  | 2020 |  | 2019
Weighted average number of common shares and OP/DownREIT Units outstanding — basic |  | 316,685 |  | 301,282
Weighted average number of OP/DownREIT Units outstanding |  | (22,228) |  | (24,280)
Weighted average number of common shares outstanding — basic per the Consolidated Statements of Operations |  | 294,457 |  | 277,002
​ | ​ | ​ | ​ | ​
Weighted average number of common shares, OP/DownREIT Units, and common stock equivalents outstanding — diluted |  | 320,399 |  | 304,848
Weighted average number of OP/DownREIT Units outstanding |  | (22,228) |  | (24,280)
Weighted average number of Series E Cumulative Convertible Preferred shares outstanding |  | (3,011) |  | (3,011)
Weighted average number of common shares outstanding — diluted per the Consolidated Statements of Operations |  | 295,160 |  | 277,557

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​

United Dominion Realty, L.P.:

Business Overview

United Dominion Realty, L.P. (the “Operating Partnership” or “UDR, L.P.”) is a Delaware limited partnership formed in February 2004 and organized pursuant to the provisions of the Delaware Revised Uniform Limited Partnership Act. The Operating Partnership is the successor-in-interest to United Dominion Realty, L.P., a limited partnership formed under the laws of Virginia, which commenced operations on November 4, 1995. Our sole general partner is UDR, Inc., a Maryland corporation (“UDR” or the “General Partner”), which conducts a substantial amount of its business and holds a substantial amount of its assets through the Operating Partnership. At March 31, 2020, the Operating Partnership’s real estate portfolio included 52 communities located in nine states and the District of Columbia with a total of 16,434 apartment homes.

As of March 31, 2020, UDR owned 0.1 million units of our general partnership interests and 176.1 million units of our limited partnership interests (the “OP Units”), or approximately 95.3% of our outstanding OP Units. By virtue of its ownership of our OP Units and being our sole general partner, UDR has the ability to control all of the day-to-day operations of the Operating Partnership. Unless otherwise indicated or unless the context requires otherwise, all references in this section of this Report to the Operating Partnership or “we,” “us” or “our” refer to UDR, L.P. together with its consolidated subsidiaries, and all references in this section to “UDR” or the “General Partner” refer solely to UDR, Inc.

UDR is a self-administered real estate investment trust, or REIT, that owns, acquires, renovates, develops, and manages apartment communities. The General Partner was formed in 1972 as a Virginia corporation and changed its state of incorporation from Virginia to Maryland in June 2003. At March 31, 2020, the General Partner’s consolidated real estate portfolio included 150 communities located in 13 states and the District of Columbia with a total of 47,579 apartment homes. In addition, the General Partner had an ownership interest in 5,134 completed or to-be-completed apartment homes through unconsolidated joint ventures or partnerships, including 2,004 apartment homes owned by entities in which we hold preferred equity investments.

The Operating Partnership’s same-store community apartment home population for the three months ended March 31, 2020 was 15,941.

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The following table summarizes our market information by major geographic markets as of and for the three months ended March 31, 2020:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | March 31, 2020 | ​ | Three Months Ended March 31, 2020
​ |  | ​ |  | ​ |  | Percentage |  | Total |  | ​ |  | Monthly
​ | ​ | Number of | ​ | Number of | ​ | of Total | ​ | Carrying | ​ | Average | ​ | Income per
​ | ​ | Apartment | ​ | Apartment | ​ | Carrying | ​ | Value (in | ​ | Physical | ​ | Occupied
Same-Store Communities | ​ | Communities | ​ | Homes | ​ | Value | ​ | thousands) | ​ | Occupancy | ​ | Home (a)
West Region | ​ | ​ |  | ​ |  | ​ |  | ​ | ​ | ​ | ​ |  | ​ | ​
Orange County, CA | ​ | 5 |  | 3,119 |  | 19.3 | % | $ | 748,432 | ​ | 97.4 | % | $ | 2,328
San Francisco, CA |  | 9 |  | 2,185 |  | 15.8 | % | ​ | 612,276 | ​ | 96.6 | % | ​ | 3,386
Seattle, WA |  | 5 |  | 932 |  | 5.9 | % | ​ | 230,553 | ​ | 97.4 | % | ​ | 2,149
Los Angeles, CA |  | 2 |  | 344 |  | 3.0 | % | ​ | 116,667 | ​ | 96.4 | % | ​ | 2,856
Monterey Peninsula, CA |  | 7 |  | 1,565 |  | 4.7 | % | ​ | 183,271 | ​ | 95.9 | % | ​ | 1,954
Other Southern California |  | 1 |  | 414 |  | 2.0 | % | ​ | 75,488 | ​ | 97.3 | % | ​ | 2,154
Portland, OR |  | 2 |  | 476 |  | 1.3 | % | ​ | 50,855 | ​ | 97.0 | % | ​ | 1,643
Mid-Atlantic Region | ​ |  | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ | ​
Metropolitan D.C. |  | 6 |  | 2,068 |  | 14.5 | % | ​ | 564,635 | ​ | 96.9 | % | ​ | 2,189
Baltimore, MD |  | 2 |  | 540 |  | 2.7 | % | ​ | 106,535 | ​ | 97.0 | % | ​ | 1,553
Northeast Region | ​ |  | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ | ​
New York, NY |  | 1 |  | 503 |  | 8.6 | % | ​ | 333,956 | ​ | 99.3 | % | ​ | 3,994
Boston, MA |  | 1 |  | 387 |  | 1.9 | % | ​ | 74,998 | ​ | 94.5 | % | ​ | 2,141
Southeast Region | ​ |  | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ | ​
Tampa, FL |  | 2 |  | 942 |  | 2.8 | % | ​ | 110,657 | ​ | 97.8 | % | ​ | 1,547
Nashville, TN | ​ | 6 |  | 1,612 | ​ | 4.0 | % | ​ | 155,600 | ​ | 97.5 | % | ​ | 1,336
Other Florida |  | 1 |  | 636 |  | 2.3 | % | ​ | 87,801 | ​ | 96.4 | % | ​ | 1,661
Southwest Region | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Denver, CO | ​ | 1 | ​ | 218 | ​ | 3.7 | % | ​ | 144,640 | ​ | 92.4 | % | ​ | 3,145
Total/Average Same-Store Communities |  | 51 |  | 15,941 | ​ | 92.5 | % | ​ | 3,596,364 | ​ | 96.9 | % | $ | 2,254
Non-Mature, Commercial Properties & Other |  | 1 |  | 493 |  | 7.5 | % | ​ | 290,249 | ​ |  |  | ​ | ​
Total Real Estate Owned |  | 52 |  | 16,434 |  | 100.0 | % | ​ | 3,886,613 | ​ |  |  | ​ | ​
Total Accumulated Depreciation | ​ | ​ |  | ​ |  |  |  | ​ | (1,831,814) | ​ |  |  | ​ | ​
Total Real Estate Owned, Net of Accumulated Depreciation | ​ | ​ |  | ​ |  |  |  | $ | 2,054,799 | ​ |  |  | ​ | ​

(a) | Monthly Income per Occupied Home represents total monthly revenues divided by the average physical number of occupied apartment homes in our Same-Store portfolio.

​

We report in two segments: Same-Store Communities and Non-Mature Communities/Other.

Our Same-Store Communities segment represents those communities acquired, developed, and stabilized prior to January 1, 2019 and held as of March 31, 2020. 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 communities are 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.

Our Non-Mature Communities/Other segment represents 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.

Liquidity and Capital Resources

Liquidity is the ability to meet present and future financial obligations either through operating cash flows, the sale of properties, and the issuance of debt. Both the coordination of asset and liability maturities and effective capital management are important to the maintenance of liquidity. The Operating Partnership’s primary source of liquidity is cash flow from operations, as determined by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment homes, and borrowings owed by us under the General Partner’s credit agreements. The General Partner will routinely use its working capital credit facility, its unsecured revolving credit facility and issuances of commercial paper to temporarily fund certain investing and financing activities prior to arranging for longer-term financing or the issuance of equity or debt securities. During the past several years, proceeds from the sale of real estate have been used for both investing and financing activities as we continue to execute on maintaining a diversified portfolio.

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We expect to meet our short-term liquidity requirements generally through net cash provided by property operations and borrowings owed by us under the General Partner’s credit agreements. We expect to meet certain long-term liquidity requirements such as scheduled debt maturities and potential property acquisitions through net cash provided by property operations, borrowings and the disposition of properties. We believe that our net cash provided by property operations and borrowings will continue to be adequate to meet both operating requirements and the payment of distributions. Likewise, the budgeted expenditures for improvements and renovations of certain properties are expected to be funded from property operations, borrowings owed by us under the General Partner’s credit agreements, and the disposition of properties.

Future Capital Needs

Future capital expenditures are expected to be funded with proceeds from the issuance of secured debt or unsecured debt, sales of properties, borrowings owed by us under our General Partner’s credit agreements, and to a lesser extent, from cash flows provided by operating activities.

As of March 31, 2020, the Operating Partnership does not have any debt maturing during the remainder of 2020.

Critical Accounting Policies and Estimates and New Accounting Pronouncements

Our critical accounting policies are those having the most impact on the reporting of our financial condition and results and those requiring significant judgments and estimates. These policies include those related to (1) capital expenditures, (2) impairment of long-lived assets, (3) real estate investment properties, and (4) revenue recognition.

Our critical accounting policies are described in more detail in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Operating Partnership’s Annual Report on Form 10-K, filed with the SEC on February 18, 2020. There have been no significant changes in our critical accounting policies from those reported. With respect to these critical accounting policies, we believe that the application of judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented.

Statements of Cash Flows

The following discussion explains the changes in Net cash provided by/(used in) operating activities, Net cash provided by/(used in) investing activities, and Net cash provided by/(used in) financing activities that are presented in our Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019.

Operating Activities

For the three months ended March 31, 2020, Net cash provided by/(used in) operating activities was $65.4 million compared to $68.6 million for the comparable period in 2019. The decrease in cash flow from operating activities was primarily due to changes in operating assets and liabilities, partially offset by improved net operating income, primarily driven by revenue growth at communities.

Investing Activities

For the three months ended March 31, 2020, Net cash provided by/(used in) investing activities was $(6.1) million compared to $(9.7) million for the comparable period in 2019. The decrease in cash used in investing activities was primarily due to a decrease in capital expenditures during the three months ended March 31, 2020, as compared to the same period in 2019.

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Acquisitions and Dispositions

The Operating Partnership did not have any acquisitions or dispositions of real estate during the three months ended March 31, 2020.

Financing Activities

For the three months ended March 31, 2020 and 2019, our Net cash provided by/(used in) financing activities was $(59.2) million compared to $(58.6) million for the comparable period of 2019. The increase in cash used in financing activities was primarily due to an increase in repayments of notes payable to the General Partner.

Guarantor on Unsecured Debt

The Operating Partnership is the guarantor on the General Partner’s unsecured revolving credit facility with an aggregate borrowing capacity of $1.1 billion, an unsecured commercial paper program with an aggregate borrowing capacity of $500 million, a $350 million term loan due September 2023, $300 million of medium-term notes due July 2024, $300 million of medium-term notes due October 2025, $300 million of medium-term notes due September 2026, $300 million of medium-term notes due July 2027, $300 million of medium-term notes due January 2028, $300 million of medium-term notes due January 2029, $600 million of medium-term notes due January 2030, $400 million of medium-term notes due August 2031, and $300 million of medium-term notes due November 2034. As of March 31, 2020 and December 31, 2019, the General Partner had $50.0 million and zero, respectively, outstanding balance under the unsecured revolving credit facility and had $215.0 million and $300.0 million, respectively, outstanding under its unsecured commercial paper program.

In April 2020, the entire $215.0 million of outstanding unsecured commercial paper as of March 31, 2020 was repaid at maturity with draws on the General Partner’s Revolving Credit Facility and Working Capital Credit Facility.

The credit facilities are subject to customary financial covenants and limitations.

Interest Rate Risk

We are exposed to interest rate risk associated with variable rate notes payable and maturing debt that has to be refinanced. We do not hold financial instruments for trading or other speculative purposes, but rather issue these financial instruments to finance our portfolio of real estate assets. Interest rate sensitivity is the relationship between changes in market interest rates and the fair value of market rate sensitive assets and liabilities. Our earnings are affected as changes in short-term interest rates impact our cost of variable rate debt and maturing fixed rate debt. We had $27.0 million in variable rate debt that is not subject to interest rate swap contracts as of March 31, 2020. If market interest rates for variable rate debt increased by 100 basis points, our interest expense for the three months ended March 31, 2020 would increase by $0.1 million based on the average balance outstanding during the period.

These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. These analyses do not consider the effects of the adjusted level of overall economic activity that could exist in such an environment. Further, in the event of a change of such amount, management would likely take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no change in our financial structure.

The General Partner also utilizes derivative financial instruments owed by the Operating Partnership to manage interest rate risk and generally designates these financial instruments as cash flow hedges. See Note 9, Derivatives and Hedging Activities, in the Notes to the Operating Partnership’s Consolidated Financial Statements for additional discussion of derivative instruments.

A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended March 31,
​ |  | 2020 |  | 2019
Net cash provided by/(used in) operating activities | ​ | $ | 65,405 | ​ | $ | 68,627
Net cash provided by/(used in) investing activities | ​ |  | (6,116) | ​ |  | (9,658)
Net cash provided by/(used in) financing activities | ​ |  | (59,150) | ​ |  | (58,588)

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Results of Operations

The following discussion explains the changes in results of operations that are presented in our Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019.

Net Income/(Loss) Attributable to OP Unitholders

Net income attributable to OP unitholders was $24.1 million ($0.13 per diluted OP Unit) for the three months ended March 31, 2020, as compared to net income of $23.9 million ($0.13 per diluted OP Unit) for the comparable period in the prior year. The increase in net income attributable to OP unitholders resulted primarily from the following item, which is discussed in further detail elsewhere within this Report:

| ● | an increase in total property NOI of $2.4 million, primarily due to higher revenue per occupied home.

This was partially offset by:

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| ● | an increase in other operating expenses of $1.5 million, primarily due to higher ground lease expense.

Apartment Community Operations

Our net income results primarily from NOI generated from the operation of our apartment communities. The Operating Partnership defines NOI, which is a non-GAAP financial measure, as rental income less direct property rental expenses. Rental income represents gross market rent less adjustments for concessions, vacancy loss and bad debt. 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.

Management considers NOI a useful metric for investors as it is a more meaningful representation of a community’s continuing operating performance than net income as it is prior to corporate-level expense allocations, general and administrative costs, capital structure and depreciation and amortization.

Although we consider NOI a useful measure of operating performance, NOI should not be considered an alternative to net income or net cash flow from operating activities as determined in accordance with GAAP. NOI excludes several income and expense categories as detailed in the reconciliation of NOI to Net income/(loss) attributable to OP unitholders below.

The following table summarizes the operating performance of our total property NOI for the three months ended March 31, 2020 and 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | ​ | ​
​ | ​ | March 31, (a) | ​ | % | ​
​ |  | 2020 |  | 2019 | ​ | Change |
Same-Store Communities: | ​ |  | ​ | ​ |  | ​ | ​ | ​ | ​
Same-Store rental income | ​ | $ | 104,478 | ​ | $ | 101,452 | ​ | 3.0 | %
Same-Store operating expense (b) | ​ |  | (27,339) | ​ |  | (26,332) | ​ | 3.8 | %
Same-Store NOI | ​ |  | 77,139 | ​ |  | 75,120 | ​ | 2.7 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-Mature Communities/Other NOI: | ​ |  |  | ​ |  |  | ​ | ​ | ​
Redevelopment communities NOI | ​ |  | 3,451 | ​ |  | 3,547 | ​ | (2.7) | %
Non-residential/other NOI | ​ | ​ | 965 | ​ | ​ | 472 | ​ | 104.4 | %
Total Non-Mature Communities/Other NOI | ​ |  | 4,416 | ​ |  | 4,019 | ​ | 9.9 | %
Total property NOI | ​ | $ | 81,555 | ​ | $ | 79,139 | ​ | 3.1 | %

(a) | Same-Store consists of 15,941 apartment homes.

(b) | Excludes depreciation, amortization, and property management expenses.

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The following table is our reconciliation of Net income/(loss) attributable to OP unitholders to total property NOI for the three months ended March 31, 2020 and 2019 (dollars in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​
​ | ​ | March 31, | ​
​ |  | 2020 |  | 2019 | ​
Net income/(loss) attributable to OP unitholders | ​ | $ | 24,118 | ​ | $ | 23,946 | ​
Property management | ​ |  | 3,225 | ​ |  | 2,979 | ​
Other operating expenses | ​ |  | 3,859 | ​ |  | 2,400 | ​
Real estate depreciation and amortization | ​ |  | 35,300 | ​ |  | 34,654 | ​
General and administrative | ​ |  | 5,308 | ​ |  | 4,661 | ​
Casualty-related charges/(recoveries), net | ​ |  | (2) | ​ |  | — | ​
(Income)/loss from unconsolidated entities | ​ |  | 1,761 | ​ |  | 2,740 | ​
Interest expense | ​ |  | 7,464 | ​ |  | 7,371 | ​
Net income/(loss) attributable to noncontrolling interests | ​ |  | 522 | ​ |  | 388 | ​
Total property NOI | ​ | $ | 81,555 | ​ | $ | 79,139 | ​

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Same-Store Communities

Our Same-Store Community properties, those acquired, developed, and stabilized prior to January 1, 2019 and held as of March 31, 2020, consisted of 15,941 apartment homes and provided 94.6% of our total NOI for the three months ended March 31, 2020.

NOI for our Same-Store Community properties increased 2.7%, or $2.0 million, for the three months ended March 31, 2020 compared to the same period in 2019. The increase in property NOI was primarily attributable to a 3.0%, or $3.0 million, increase in property rental income, which was partially offset by a 3.8%, or $1.0 million, increase in operating expenses. The increase in property income was primarily driven by a 2.5%, or $2.3 million, increase in rental rates and a 6.3%, or $0.7 million, increase in reimbursement and ancillary and fee income. Physical occupancy increased 0.3% to 96.9% and total monthly income per occupied home increased 2.6% to $2,254.

The increase in operating expenses was primarily driven by a 6.4%, or $0.6 million, increase in real estate taxes, which was primarily due to higher assessed valuations, and a 12.0%, or $0.5 million, increase in repair and maintenance expense due to the increased use of third party vendors, partially offset by an 7.0%, or $0.4 million, decrease in personnel expense as a result of fewer employees.

The operating margin (property net operating income divided by property rental income) was 73.8% and 74.0% for the three months ended March 31, 2020 and 2019, respectively.

Non-Mature Communities/Other

The Operating Partnership’s Non-Mature Communities/Other represent those communities that do not meet the criteria to be included in Same-Store Communities, which include communities recently developed or acquired, redevelopment properties, sold or held for disposition properties and the non-apartment components of mixed use properties.

The remaining 5.4%, or $4.4 million, of our total NOI during the three months ended March 31, 2020 was generated from our Non-Mature Communities/Other. NOI from Non-Mature Communities/Other increased 9.9%, or $0.4 million, for the three months ended March 31, 2020, compared to the same period in 2019. The increase was primarily attributable to a $0.5 million increase in NOI from non-residential/other, partially offset by a $0.1 million decrease in NOI from redevelopment communities.

Inflation

We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results of operations as a result of wage pressures and increases in utilities and material costs, the majority of our apartment leases have initial terms of 12 months or less, which generally enables us to compensate for any inflationary effects by increasing rental rates on our apartment homes. Although an extreme escalation in costs could have a negative impact on our residents and their ability to absorb rent increases, we do not believe this has had a material impact on our results for the three months ended March 31, 2020.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material.

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Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company and the Operating Partnership are exposed to interest rate changes associated with our unsecured credit facility and other variable rate debt as well as refinancing risk on our fixed rate debt. The Company’s and the Operating Partnership’s involvement with derivative financial instruments is limited and we do not expect to use them for trading or other speculative purposes. The Company and the Operating Partnership use derivative instruments solely to manage their exposure to interest rates.

See our Annual Report on Form 10-K for the year ended December 31, 2019 under the heading “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for a more complete discussion of our interest rate sensitive assets and liabilities. As of March 31, 2020, our market risk has not changed materially from the amounts reported in our Annual Report on Form 10-K for the year ended December 31, 2019.

Item 4. | CONTROLS AND PROCEDURES

The disclosure controls and procedures of the Company and the Operating Partnership are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. As a result, our disclosure controls and procedures are designed to provide reasonable assurance that such disclosure controls and procedures will meet their objectives.

As of March 31, 2020, we carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, of the effectiveness of the design and operation of the disclosure controls and procedures of the Company and the Operating Partnership. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer of the Company concluded that the disclosure controls and procedures of the Company and the Operating Partnership are effective at the reasonable assurance level described above.

There have not been any changes in either the Company’s or the Operating Partnership’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter to which this report relates that materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of either the Company or the Operating Partnership.

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PART II — OTHER INFORMATION

Item 1. | LEGAL PROCEEDINGS

The Company is a party to various claims and routine litigation arising in the ordinary course of business. We do not believe that the results of any such claims and litigation, individually or in the aggregate, will have a material adverse effect on our business, financial position or results of operations.

Item 1A. | RISK FACTORS

There are many factors that affect the business and the results of operations of the Company and the Operating Partnership, some of which are beyond the control of the Company and the Operating Partnership. The following is a description of important factors that may cause the actual results of operations of the Company and the Operating Partnership in future periods to differ materially from those currently expected or discussed in forward-looking statements set forth in this Report relating to our financial results, operations and business prospects. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.

Risks Related to Our Real Estate Investments and Our Operations

The Ongoing COVID-19 Pandemic and Measures Intended to Prevent its Spread Could Have a Material Adverse Effect on our Business, Results of Operations, Cash Flows and Financial Condition.

Since being first reported in December 2019, COVID-19 has spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The pandemic has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders. Our headquarters and all of our properties and our corporate offices are located in areas that are or have been subject to shelter-in-place orders and restrictions on the types of businesses that may continue to operate.

The impact of the COVID-19 pandemic and measures to prevent its spread could materially and adversely affect our business in a number of ways. Our rental revenue and operating results depend significantly on the occupancy levels at our properties and the ability of our residents and retail and commercial tenants to meet their rent obligations to us, which could be adversely affected by, among other things, job losses, furloughs, store closures, lower incomes and uncertainty about the future as a result of the COVID-19 pandemic. The deterioration of economic conditions as a result of the pandemic may ultimately decrease occupancy levels and rents across our portfolio, which could adversely affect the value of our properties. In addition, numerous state, local, federal and industry-initiated efforts, including eviction moratoriums and shelter-in-place orders, may affect our ability to collect rent or enforce remedies for the failure to pay rent, which may negatively impact our ability to remove residents or retail and commercial tenants who are not paying rent and our ability to rent their units or other space to new residents or retail and commercial tenants, respectively. Our development and construction projects, including those is our Developer Capital Program, also could be adversely affected, including as a result of disruptions in supply chains and government restrictions on the types of projects that may continue during the pandemic or as a result of delayed construction schedules due to social distancing efforts. The COVID-19 pandemic and measures to prevent its spread also could adversely affect the businesses and financial condition of our counterparties, including our joint venture partners, borrowers under our mezzanine loans, and general contractors and their subcontractors, and their ability to satisfy their obligations to us and to complete transactions or projects with us as intended. In addition, a significant number of our retail tenants have been forced to close temporarily as a result of COVID-19 and related government actions, which has resulted in, and could continue to result in, delays in rent payments, rent concessions, early lease terminations or tenant bankruptcies.

The COVID-19 pandemic also has caused, and may continue to cause, severe economic, market and other disruptions worldwide. Disruptions in the financial markets could adversely impact our access to equity and debt financing, including through our commercial paper program, on favorable terms or at all, which could adversely affect our ability to consummate acquisitions, fund developments and capital expenditures, and repay or refinance indebtedness as it becomes due. See “Risks

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Related to Our Indebtedness and Financings—Disruptions in Financial Markets May Adversely Impact Availability and Cost of Credit and Have Other Adverse Effects on Us and the Market Price of UDR’s Stock.”

The extent of the COVID-19 pandemic’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic and the duration of government measures to mitigate the pandemic, all of which are uncertain and difficult to predict. Due to the speed with which the situation is developing, we are not able at this time to estimate the effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material.

Unfavorable Apartment Market and Economic Conditions Could Adversely Affect Occupancy Levels, Rental Revenues and the Value of Our Real Estate Assets. Unfavorable market conditions in the areas in which we operate or unfavorable economic conditions generally, including as a result of COVID-19, may significantly affect our occupancy levels, our rental rates and collections, the value of our properties and our ability to acquire or dispose of apartment communities on economically favorable terms. Our ability to lease our properties at favorable rates is adversely affected by the increase in supply in the multifamily and other rental markets and is dependent upon the overall level in the economy, which is adversely affected by, among other things, job losses and unemployment levels, recession, debt levels, housing markets, stock market volatility and uncertainty about the future. Some of our major expenses generally do not decline when related rents decline. We would expect that declines in our occupancy levels and rental revenues would cause us to have less cash available to pay our indebtedness and to distribute to UDR’s stockholders, which could adversely affect our financial condition or the market value of our securities. Factors that may affect our occupancy levels, our rental revenues, and/or the value of our properties include the following, among others:

| ● | downturns in the global, national, regional and local economic conditions, particularly increases in unemployment;

| ● | declines in mortgage interest rates, making alternative housing more affordable;

| ● | government or builder incentives with respect to home ownership, making alternative housing options more attractive;

| ● | local real estate market conditions, including oversupply of, or reduced demand for, apartment homes;

| ● | declines in the financial condition of our tenants, which may make it more difficult for us to collect rents from some tenants;

| ● | changes in market rental rates;

| ● | our ability to renew leases or re-lease space on favorable terms;

| ● | the timing and costs associated with property improvements, repairs or renovations;

| ● | changes in household formation; and

| ● | rent control or stabilization laws, or other laws regulating or impacting rental housing, which could prevent us from raising rents to offset increases in operating costs or otherwise impact us.

The Geographic Concentration of Our Communities in Certain Markets Could Have an Adverse Effect on Our Operations if a Particular Market is Adversely Impacted by Economic or Other Conditions. For the three months ended March 31, 2020, approximately 51.4% of our total NOI was generated from communities located in the Washington, D.C. metropolitan area (16.0%), Orange County, CA (13.1%), the San Francisco Bay Area, CA (11.0%) and Boston, MA (11.3%). For the year ended December 31, 2019, approximately 52.7% of our total NOI was generated from communities located in the Washington, D.C. metropolitan area (16.2%), Orange County, CA (14.2%), the San Francisco Bay Area, CA (12.2%) and New York, NY (10.1%). As a result, if any one or more of these markets is adversely impacted by regional or local economic conditions or real estate market conditions, such conditions may have a greater adverse impact on our results of operations than if our portfolio was more geographically diverse. In addition, if one or more of these markets is adversely affected by changes in regional or local regulations, including those related to rent control or stabilization, such regulations may have a greater adverse impact on our results of operation than if our portfolio was more geographically diverse.

We May Be Unable to Renew Leases or Relet Apartment Units as Leases Expire, or the Terms of Renewals or New Leases May Be Less Favorable Than Current Leases. When our residents decide to leave our apartments, whether because they decide not to renew their leases or they leave prior to their lease expiration date, we may not be able to relet their apartment units. Even if the residents do renew or we can relet the apartment units, the terms of renewal or reletting may be less favorable

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than current lease terms. Furthermore, because the majority of our apartment leases have initial terms of 12 months or less, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms. If we are unable to promptly renew the leases or relet the apartment units, or if the rental rates upon renewal or reletting are lower than expected rates, then our results of operations and financial condition may be adversely affected. If residents do not experience increases in their income or if they experience decreases in their income or job losses, we may be unable to increase or maintain rent and/or delinquencies may increase.

We Face Certain Risks Related to Our Retail and Commercial Space. Certain of our properties include retail or commercial space that we lease to third parties. The long term nature of our retail and commercial leases (generally five to ten years with market-based or fixed-price renewal options) and the characteristics of many of our tenants (generally small and/or local businesses) may subject us to certain risks. The longer term leases could result in below market lease rates over time. Tenants may provide guarantees and other credit support which may prove to be inadequate or uncollectable, and the failure rate of small and/or local businesses may be higher than average. We may not be able to lease new space for rents that are consistent with our projections or for market rates. Also, when leases for our retail or commercial space terminate either at the end of the lease or because a tenant leaves early, the space may not be relet or the terms of reletting, including the cost of allowances and concessions to tenants, may be less favorable than the prior lease terms. Our properties compete with other properties with retail or commercial space. The presence of competitive alternatives may adversely affect our ability to lease space and the level of rents we can obtain. If our retail or commercial tenants experience financial distress or bankruptcy, they have in the past and may in the future fail to comply with their contractual obligations, seek concessions in order to continue operations, or cease their operations, which could adversely impact our results of operations and financial condition.

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Risk of Inflation/Deflation. Substantial inflationary or deflationary pressures could have a negative effect on rental rates and property operating expenses. The general risk of inflation is that interest on our debt, general and administrative expenses and other expenses increase at a rate faster than increases in our rental rates, which could adversely affect our financial condition or results of operations.

We Are Subject to Certain Risks Associated with Selling Apartment Communities, Which Could Limit Our Operational and Financial Flexibility. We periodically dispose of apartment communities that no longer meet our strategic objectives, but adverse market conditions may make it difficult to sell apartment communities we own. We cannot predict whether we will be able to sell any property for the price or on the terms we set, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property. Furthermore, we may be required to expend funds to correct defects or to make improvements before a property can be sold or the purchase price may be reduced to cover any cost of correcting defects or making improvements. These conditions may limit our ability to dispose of properties and to change our portfolio in order to meet our strategic objectives, which could in turn adversely affect our financial condition, results of operations or our ability to fund other activities in which we may want to engage such as the purchase of properties, development or redevelopment, or funding the Developer Capital Program. We are also subject to the following risks in connection with sales of our apartment communities, among others:

| ● | a significant portion of the proceeds from property sales may be held by intermediaries in order for some sales to qualify as like-kind exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended, or the “Code,” so that any related capital gain can be deferred for federal income tax purposes. As a result, we may not have immediate access to all of the cash proceeds generated from our property sales; and

| ● | federal tax laws limit our ability to profit on the sale of communities that we have owned for less than two years, and this limitation may prevent us from selling communities when market conditions are favorable.

Competition Could Limit Our Ability to Lease Apartment Homes or Increase or Maintain Rents. Our apartment communities compete with numerous housing alternatives in attracting residents, including other apartment communities, condominiums and single-family rental homes, as well as owner occupied single- and multi-family homes. Competitive housing in a particular area could adversely affect our ability to lease apartment homes and increase or maintain rents, which could materially adversely affect our results of operations and financial condition.

We May Not Realize the Anticipated Benefits of Past or Future Acquisitions, and the Failure to Integrate Acquired Communities and New Personnel Successfully Could Create Inefficiencies. We have selectively acquired in the past, and if

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presented with attractive opportunities we intend to selectively acquire in the future, apartment communities that meet our investment criteria. Our acquisition activities and their success are subject to the following risks, among others:

| ● | we may be unable to obtain financing for acquisitions on favorable terms, including but not limited to interest rates, term and/or loan-to-value ratios, or at all, all of which could cause us to delay or even abandon potential acquisitions;

| ● | even if we are able to finance the acquisition, cash flow from the acquisition may be insufficient to meet our required principal and interest payments on the debt used to finance the acquisition;

| ● | even if we enter into an acquisition agreement for an apartment community, we may not complete the acquisition for a variety of reasons after incurring certain acquisition-related costs;

| ● | we may incur significant costs and divert management attention in connection with the evaluation and negotiation of potential acquisitions, including potential acquisitions that we subsequently do not complete;

| ● | when we acquire an apartment community, we may invest additional amounts in it with the intention of increasing profitability, and these additional investments may not produce the anticipated improvements in profitability;

| ● | the expected occupancy rates and rental rates may differ from actual results; and

| ● | we may be unable to quickly and efficiently integrate acquired apartment communities and new personnel into our existing operations, and the failure to successfully integrate such apartment communities or personnel will result in inefficiencies that could materially and adversely affect our expected return on our investments and our overall profitability.

Competition Could Adversely Affect Our Ability to Acquire Properties. In the past, other real estate investors, including insurance companies, pension and investment funds, developer partnerships, investment companies and other public and private apartment REITs, have competed with us to acquire existing properties and to develop new properties, and such competition in the future may make it more difficult for us to acquire attractive investment opportunities on favorable terms, which could adversely affect our ability to grow or acquire properties profitably or with attractive returns.

Development and Construction Risks Could Impact Our Profitability. In the past we have selectively pursued the development and construction of apartment communities, and we intend to do so in the future as appropriate opportunities arise. Development activities have been, and in the future may be, conducted through wholly-owned affiliated companies or through joint ventures with unaffiliated parties. Our development and construction activities are subject to the following risks, among others:

| ● | we may be unable to obtain construction financing for development activities on favorable terms, including but not limited to interest rates, term and/or loan-to-value ratios, or at all, which could cause us to delay or even abandon potential developments;

| ● | we may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental or quasi-governmental permits and authorizations, which could result in increased development costs, could delay initial occupancy dates for all or a portion of a development community, and could require us to abandon our activities entirely with respect to a project for which we are unable to obtain permits or authorizations;

| ● | cost may be higher or yields may be less than anticipated as a result of delays in completing projects, costs that exceed budget and/or higher than expected concessions for lease up and lower rents than expected;

| ● | we may abandon development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring such development opportunities;

| ● | we may be unable to complete construction and lease-up of a community on schedule, or incur development or construction costs that exceed our original estimates, and we may be unable to charge rents that would compensate for any increase in such costs;

| ● | occupancy rates, rents and concessions at a newly developed community may fluctuate depending on a number of factors, including market and economic conditions, preventing us from meeting our expected return on our investment and our overall profitability goals; and

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| ● | when we sell communities or properties that we developed or renovated to third parties, we may be subject to warranty or construction defect claims that are uninsured or exceed the limits of our insurance.

Bankruptcy or Defaults of Our Counterparties Could Adversely Affect Our Performance. We have relationships with and, from time to time, we execute transactions with or receive services from many counterparties, such as general contractors engaged in connection with our development activities or joint venture partners, among others. As a result, bankruptcies or defaults by these counterparties or their subcontractors could result in services not being provided, projects not being completed on time, or on budget, or at all, or volatility in the financial markets and economic weakness could affect the counterparties’ ability to complete transactions with us as intended, both of which could result in disruptions to our operations that may adversely affect our financial condition and results of operations.

Property Ownership Through Partnerships and Joint Ventures May Limit Our Ability to Act Exclusively in Our Interest. We have in the past and may in the future develop and/or acquire properties in partnerships and joint ventures, including those in which we own a preferred interest, with other persons or entities when we believe circumstances warrant the use of such structures. As of March 31, 2020, we had active joint ventures and partnerships, including our preferred equity investments, with a total equity investment of $588.4 million. We could become engaged in a dispute with one or more of our partners which could adversely impact us. Moreover, our partners may have business, economic or other objectives that are inconsistent with our objectives, including objectives that relate to the appropriate timing and terms of any sale or refinancing of a property. In some instances, our partners may have competing interests in our markets that could create conflicts of interest. Also, our partners might fail to make capital contributions when due, which may require us to contribute additional capital or may negatively impact the project. In addition, we may be responsible to our partners for indemnifiable losses. In general, we and our partners may each have the right to trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our partner’s interest, at a time when we otherwise would not have initiated such a transaction and may result in the valuation of our interest in the partnership or joint venture (if we are the seller) or of the other partner’s interest in the partnership or joint venture (if we are the buyer) at levels which may not be representative of the valuation that would result from an arm’s length marketing process and could cause us to recognize unanticipated capital gains or losses or the loss of fee income.

We are also subject to other risks in connection with partnerships or joint ventures, including (i) a deadlock if we and our partner are unable to agree upon certain major and other decisions (which could result in litigation or disposing of an asset at a time at which we otherwise would not sell the asset), (ii) limitations on our ability to liquidate our position in the partnership or joint venture without the consent of the other partner, and (iii) requirements to provide guarantees in favor of lenders with respect to the indebtedness of the joint venture.

We May Not be Permitted to Dispose of Certain Properties or Pay Down the Indebtedness Associated with Those Properties When We Might Otherwise Desire to do so Without Incurring Additional Costs. In connection with certain property acquisitions, we have agreed with the sellers that we will not dispose of the acquired properties or reduce the mortgage indebtedness on such properties for significant periods of time unless we pay certain of the resulting tax costs of the sellers or dispose of the property in a transaction in which a gain is not recognized for federal income tax purposes by such sellers, and we may enter into similar agreements in connection with future property acquisitions. These agreements could result in us retaining properties that we would otherwise sell or not paying down or refinancing indebtedness that we would otherwise pay down or refinance. However, subject to certain conditions, we retain the right to substitute other property or debt to meet these obligations to the sellers.

We Could Incur Significant Insurance Costs and Some Potential Losses May Not Be Adequately Covered by Insurance. We have a comprehensive insurance program covering our properties and operating activities with limits of liability, deductibles and self-insured retentions customary within the multifamily industry. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, certain types of extraordinary losses which may not be adequately covered under our insurance program. In addition, we will sustain losses due to insurance deductibles, self-insured retention, uninsured claims or casualties, or losses in excess of applicable coverage.

If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur in the future. If one or more of our significant properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Such events could materially and adversely affect our financial condition and results of operations.

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The cost of insuring our apartment communities is a component of expense. Insurance premiums and the terms and conditions of insurance policies are subject to significant fluctuations and changes, which are generally outside of our control. We insure our properties with insurance companies that we believe have a good rating at the time our policies are put into effect. The financial condition of one or more insurance companies that we hold policies with may be negatively impacted, which could result in their inability to pay on future insurance claims. Their inability to pay future claims may have a negative impact on our financial results. In addition, the failure, or exit or partial exit from an insurance market, of one or more insurance companies may affect our ability to obtain insurance coverage in the amounts that we seek, or at all, or increase the costs to renew or replace our insurance policies, or cause us to self-insure a portion of the risk, or increase the cost of insuring properties.

Failure to Succeed in New Markets May Limit Our Growth. We have acquired in the past, and we may acquire in the future if appropriate opportunities arise, apartment communities that are outside of our existing markets. Entering into new markets may expose us to a variety of risks, and we may not be able to operate successfully in new markets. These risks include, among others:

| ● | inability to accurately evaluate local apartment market conditions and local economies;

| ● | inability to hire and retain key personnel;

| ● | lack of familiarity with local governmental and permitting procedures; and

| ● | inability to achieve budgeted financial results.

Failure to Succeed with New Initiatives May Limit Our Ability to Grow Same-Store NOI. We have in the past developed and may in the future develop initiatives that are intended to drive operating efficiencies and grow same-store NOI, including smart home technologies and self-service options that are accessible to residents through smart devices. We may incur significant costs and divert resources in connection with such initiatives, and these initiatives may not perform as projected, which could adversely affect our results of operations and the market price of UDR’s common stock.

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Potential Liability for Environmental Contamination Could Result in Substantial Costs. Under various federal, state and local environmental laws, as a current or former owner or operator of real estate, we could be required to investigate and remediate the effects of contamination of currently or formerly owned real estate by hazardous or toxic substances, often regardless of our knowledge of or responsibility for the contamination and solely by virtue of our current or former ownership or operation of the real estate. In addition, we could be held liable to a governmental authority or to third parties for property damage and for investigation and clean-up costs incurred in connection with the contamination or we could be required to incur additional costs to change how the property is constructed or operated due to presence of such substances. These costs could be substantial, and in many cases environmental laws create liens in favor of governmental authorities to secure their payment. The presence of such substances or a failure to properly remediate any resulting contamination could materially and adversely affect our ability to borrow against, sell or rent an affected property.

In addition, our properties are subject to various federal, state and local environmental, health and safety laws, including laws governing the management of wastes and underground and aboveground storage tanks. Noncompliance with these environmental, health and safety laws could subject us to liability. Changes in laws could increase the potential costs of compliance with environmental laws, health and safety laws or increase liability for noncompliance. This may result in significant unanticipated expenditures or may otherwise adversely affect our financial condition and results of operations.

As the owner or operator of real property, we may also incur liability based on various building conditions. For example, buildings and other structures on properties that we currently own or operate or those we acquire or operate in the future contain, may contain, or may have contained, asbestos-containing material, or ACM. Environmental, health and safety laws require that ACM be properly managed and maintained and may impose fines or penalties on owners, operators or employers for non-compliance with those requirements.

These requirements include special precautions, such as removal, abatement or air monitoring, if ACM would be disturbed during maintenance, renovation or demolition of a building, potentially resulting in substantial costs. In addition, we may be subject to liability for personal injury or property damage sustained as a result of exposure to ACM or releases of ACM into the environment.

We cannot assure you that costs or liabilities incurred as a result of environmental or building condition issues will not adversely affect our financial condition and results of operations.

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Our Properties May Contain or Develop Harmful Mold or Suffer from Other Indoor Air Quality Issues, Which Could Lead to Liability for Adverse Health Effects or Property Damage or Cost for Remediation. When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants or to increase ventilation, which could adversely affect our results of operations and cash flow. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants or others for property damage or personal injury.

Compliance or Failure to Comply with the Americans with Disabilities Act of 1990 or Other Safety Regulations and Requirements Could Result in Substantial Costs. The Americans with Disabilities Act generally requires that public buildings, including our properties, be made accessible to disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants. Claims have been asserted, and in the future claims may be asserted, against us with respect to some of our properties under the Americans with Disabilities Act. If, under the Americans with Disabilities Act, we are required to make substantial alterations and capital expenditures in one or more of our properties, including the removal of access barriers, it could adversely affect our financial condition and results of operations. In addition, if claims arise, we may expend resources and incur costs in investigating and resolving such claims even if our property was in compliance with the law.

Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements and federal, state and local accessibility requirements in addition to those imposed by the Americans with Disabilities Act. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that could adversely affect our financial condition or results of operations.

The Adoption of, or Changes to, Rent Control, Rent Stabilization, Eviction, Tenants’ Rights and Similar Laws and Regulations in Our Markets Could Have an Adverse Effect on Our Results of Operations and Property Values. Various state and local governments have enacted and may continue to enact rent control, rent stabilization, or limitations, and similar laws and regulations that could limit our ability to raise rents or charge certain fees, including laws or court orders, either of which could have a retroactive effect. For example, in June 2019, the State of New York enacted new rent control regulations known as the Housing Stability and Tenant Protection Act of 2019 and, in October of 2019, the State of California enacted the Tenant Protection Act of 2019. We have seen a recent increase in governments enacting or considering, or being urged to consider, such laws and regulations. State and local governments or courts also may make changes to laws related to allowable fees, eviction and other tenants’ rights laws and regulations (including changes that apply retroactively) that could adversely impact our results of operations and the value of our properties. Laws and regulations regarding rent control, rent stabilization, eviction, tenants’ rights, and similar matters, as well as any lawsuits against us arising from such laws and regulations, may limit our ability to charge market rents, limit our ability to increase rents, evict delinquent tenants or change fees, or recover increases in our operating expenses, which could have an adverse effect on our results of operations and the value of our properties.

Compliance with or Changes in Real Estate Tax and Other Laws and Regulations Could Adversely Affect Our Funds from Operations and Our Ability to Make Distributions to Stockholders. We are subject to federal, state and local laws, regulations, rules and ordinances at locations where we operate regarding a wide variety of matters that could affect, directly or indirectly, our operations. Generally, we do not directly pass through costs resulting from compliance with or changes in real estate tax laws to residential property tenants. We also do not generally pass through increases in income, service or other taxes to tenants under leases. These costs may adversely affect net operating income and the ability to make distributions to stockholders. Similarly, compliance with or changes in (i) laws increasing the potential liability for environmental conditions existing on properties or the restrictions on discharges or other conditions, (ii) laws and regulations regulating housing, such as the Americans with Disabilities Act and the Fair Housing Amendments Act of 1988, or (iii) employment related laws, may result in significant unanticipated expenditures, which could adversely affect our financial condition and results of operations. In addition, changes in federal and state legislation and regulation on climate change may result in increased capital expenditures to improve the energy efficiency of our existing communities and also may require us to spend more on our new development communities without a corresponding increase in revenue.

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Risk of Damage from Catastrophic Weather and Natural Events. Our communities are located in areas that may experience catastrophic weather and other natural events from time to time, including mudslides, fires, hurricanes, tornadoes, floods, snow or ice storms, or other severe inclement weather. These adverse weather and natural events could cause damage or losses that may be greater than insured levels. In the event of a loss in excess of insured limits, we could lose our capital invested in the affected community, as well as anticipated future revenue from that community. We would also continue to be obligated to repay any mortgage indebtedness or other obligations related to the community. Any such loss could adversely affect our financial condition and results of operations.

Risk of Potential Climate Change. To the extent significant changes in the climate in areas where our communities are located occur, we may experience extreme weather conditions and changes in precipitation and temperature, all of which could result in physical damage to, and/or a decrease in demand for, our communities located in these areas or communities that are otherwise affected by these changes. Should the impact of such climate changes be material in nature, or occur for lengthy periods of time, our financial condition and results of operations could be adversely affected.

Risk of Earthquake Damage. Some of our communities are located in areas subject to earthquakes, including in the general vicinity of earthquake faults. We cannot assure you that an earthquake would not cause damage or losses greater than insured levels. In the event of a loss in excess of insured limits, we could lose our capital invested in the affected community, as well as anticipated future revenue from that community. We may also continue to be obligated to repay any mortgage indebtedness or other obligations related to the community. Any such loss could adversely affect our financial condition and results of operations. Insurance coverage for earthquakes can be costly due to limited industry capacity. As a result, we may experience shortages in desired coverage levels if market conditions are such that insurance is not available or the cost of insurance makes it, in management’s view, economically impractical.

Risk of Accidental Death or Injury Due to Fire, Natural Disasters or Other Hazards. The accidental death or injury of persons living in our communities due to fire, natural disasters or other hazards could have an adverse effect on our business and results of operations. Our insurance coverage may not cover all losses associated with such events, and we may experience difficulty marketing communities where any such events have occurred, which could have an adverse effect on our financial condition and results of operations.

Actual or Threatened Terrorist Attacks May Have an Adverse Effect on Our Business and Operating Results and Could Decrease the Value of Our Assets. Actual or threatened terrorist attacks and other acts of violence or war could have an adverse effect on our business and operating results. Attacks that directly impact one or more of our apartment communities could significantly affect our ability to operate those communities and thereby impair our ability to achieve our expected results. Further, our insurance coverage may not cover all losses caused by a terrorist attack. In addition, the adverse effects that such violent acts and threats of future attacks could have on the U.S. economy could similarly have an adverse effect on our financial condition and results of operations.

Mezzanine Loan Assets Involve Greater Risks of Loss than Senior Loans Secured by Income-Producing Properties. We have in the past and may in the future originate mezzanine loans, which take the form of subordinated loans secured by second mortgages on the underlying property or subordinated loans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the ownership interests of the entity that owns the interest in the entity owning the property. Mezzanine loans may involve a higher degree of risk than a senior mortgage secured by real property, because the security for the loan may lose all or substantially all of its value as a result of foreclosure by the senior lender and because it is in second position and there may not be adequate equity in the property. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt. As a result, we may not recover some of or all our investment. In addition, mezzanine loans typically have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal.

Risk Related to Preferred Equity Investments. We have in the past and may in the future make preferred equity investments in corporations, limited partnerships, limited liability companies or other entities that have been formed for the purpose of acquiring, developing or managing real property. Generally, we will not have the ability to control the daily operations of the entity, and we will not have the ability to select or remove a majority of the members of the board of directors, managers, general partner or partners or similar governing body of the entity or otherwise control its operations. Although we would seek to maintain sufficient influence over the entity to achieve our objectives, our partners may have interests that differ from ours and may be in a position to take actions without our consent or that are inconsistent with our interests. Further, if our partners were to fail to invest additional capital in the entity when required, we may have to invest

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additional capital to protect our investment. Our partners may fail to develop or operate the real property or refinance property indebtedness or sell the real property in the manner intended and as a result the entity may not be able to redeem our investment or pay the return expected to us in a timely manner if at all. In addition, we may not be able to dispose of our investment in the entity in a timely manner or at the price at which we would want to divest. In the event that such an entity fails to meet expectations or becomes insolvent, we may lose our entire investment in the entity.

Risks Related to Ground Leases. We have in the past and may in the future enter into, as either landlord or tenant, a long-term ground lease with respect to a property or a portion thereof. Such ground leases may contain a rent reset provision that requires both parties to agree to a new rent or is based upon factors, for example fair market rent, that are not objective and are not within our control. We may not be able to agree with the counterparty to a revised rental rate, or the revised rental rate may be set by external factors, which could result in a different rental rate than we forecasted. In the past we have had disagreements with respect to revised rental rates and certain of such disagreements have gone to arbitration (for resolution as provided in the applicable lease agreement) and have been resolved in a manner adverse to us. In addition, the other party may not perform as expected under the ground lease or there may be a dispute with the other party to the ground lease. Any of these circumstances could have an adverse effect on our business, financial condition or operating results.

We May Experience a Decline in the Fair Value of Our Assets and Be Forced to Recognize Impairment Charges, Which Could Adversely Impact Our Financial Condition, Liquidity and Results of Operations and the Market Price of UDR’s Common Stock. A decline in the fair value of our assets may require us to recognize an impairment against such assets under generally accepted accounting principles as in effect in the United States (“GAAP”), if we were to determine that, with respect to any assets in unrealized loss positions, we do not have the ability and intent to hold such assets for a period of time sufficient to allow for recovery to the amortized cost of such assets. If such a determination were to be made, we would recognize unrealized losses through earnings and write down the amortized cost of such assets to a new cost basis, based on the fair value of such assets on the date they are considered to be impaired. Such impairment charges reflect non-cash losses at the time of recognition; subsequent disposition or sale of such assets could further affect our future losses or gains, as they are based on the difference between the sale price received and adjusted amortized cost of such assets at the time of sale. If we are required to recognize asset impairment charges in the future, these charges could adversely affect our financial condition, liquidity, results of operations and the per share trading price of UDR’s common stock.

Any Material Weaknesses Identified in Our Internal Control Over Financial Reporting Could Have an Adverse Effect on UDR’s Stock Price. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting. If we fail to maintain the adequacy of our internal controls over financial reporting, including any failure to implement required new or improved controls as a result of changes to our business or otherwise, or if we experience difficulties in their implementation, our business, results of operations and financial condition could be materially adversely harmed and we could fail to meet our reporting obligations. In addition, if we have one or more material weaknesses in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, which in turn could have an adverse effect on the per share trading price of UDR’s common stock.

A Breach of Information Technology Systems On Which We Rely Could Materially and Adversely Impact Our Business, Financial Condition, Results of Operations and Reputation. We rely on information technology systems, including the internet and networks and systems maintained and controlled by third party vendors and other third parties, to process, transmit and store information and to manage or support our business processes. Third party vendors collect and hold personally identifiable information and other confidential information of our tenants, prospective tenants and employees. We also maintain confidential financial and business information regarding us and persons and entities with which we do business on our information technology systems. While we take steps, and generally require third party vendors to take steps, to protect the security of the information maintained in our and third party vendors’ information technology systems, including associate training and testing and the use of commercially available systems, software, tools and monitoring to provide security for processing, transmitting and storing of the information, it is possible that our or our third party vendors’ security measures will not be able to prevent human error or the systems’ improper functioning, or the loss, misappropriation, disclosure or corruption of personally identifiable information or other confidential or sensitive information, including information about our tenants and employees. Cybersecurity breaches, including physical or electronic break-ins, computer viruses, phishing scams, attacks by hackers, breaches due to employee error or misconduct, and similar breaches, can create system disruptions, shutdowns or unauthorized access to information maintained on our information technology systems or the information technology systems of our third party vendors or other third parties or otherwise cause disruption or negative impacts to occur to our business and adversely affect our financial condition and results of operations. While we maintain cyber risk insurance to provide some coverage for certain risks arising out of cybersecurity breaches, there is no assurance that such insurance would cover all or a significant portion of the costs or consequences associated with a cybersecurity breach. We have in the past experienced cybersecurity breaches on our information technology systems, and, while none to date have been material, we expect such

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breaches may occur in the future. As the techniques used to obtain unauthorized access to information technology systems become more varied and sophisticated and the occurrence of such breaches becomes more frequent, we and our third party vendors and other third parties may be unable to adequately anticipate these techniques or breaches and implement appropriate preventative measures. Any failure to prevent cybersecurity breaches and maintain the proper function, security and availability of our or our third party vendors’ and other third parties’ information technology systems could interrupt our operations, damage our reputation and brand, damage our competitive position, make it difficult for us to attract and retain tenants, and subject us to liability claims or regulatory penalties that could adversely affect our business, financial condition and results of operations.

Our Business and Operations Would Suffer in the Event of Information Technology System Failures. Despite system redundancy and the existence of a disaster recovery plan for our information technology systems, our information technology systems and the information technology systems maintained by our third party vendors are vulnerable to damage arising from any number of sources beyond our or our third party vendors’ control, including energy blackouts, natural disasters, terrorism, war, and telecommunication failures. Any failure to maintain proper function and availability of our or third party vendors’ information technology systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties and could adversely affect our business, financial condition and results of operations.

Social Media Presents Risks. The use of social media could cause us to suffer brand damage or unintended information disclosure. Negative posts or communications about us on a social networking website could damage our reputation. Further, employees or others may disclose non-public information regarding us or our business or otherwise make negative comments regarding us on social networking or other websites, which could adversely affect our business and results of operations. As social media evolves we will be presented with new risks and challenges.

Our Success Depends on Our Senior Management. Our success depends upon the retention of our senior management, whose continued service is not guaranteed. We may not be able to find qualified replacements for the individuals who make up our senior management if their services should no longer be available to us. The loss of services of one or more members of our senior management team could have a material adverse effect on our business, financial condition and results of operations.

Changes in U.S. Accounting Standards May Materially and Adversely Affect Our Reported Results of Operations. Accounting for public companies in the United States is in accordance with GAAP, which is established by the Financial Accounting Standards Board (the “FASB”), an independent body whose standards are recognized by the SEC as authoritative for publicly held companies. Uncertainties posed by various initiatives of accounting standard-setting by the FASB and the SEC, which create and interpret applicable accounting standards for U.S. companies, may change the financial accounting and reporting standards or their interpretation and application of these standards that govern the preparation of our financial statements. These changes could have a material impact on our reported financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in potentially material restatements of prior period financial statements.

Third-Party Expectations Relating to Environmental, Social and Governance Factors May Impose Additional Costs and Expose Us to New Risks. There is an increasing focus from certain investors, tenants, employees, and other stakeholders concerning corporate responsibility, specifically related to environmental, social and governance factors. Some investors may use these factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies relating to corporate responsibility are inadequate. Third-party providers of corporate responsibility ratings and reports on companies have increased in number, resulting in varied and in some cases inconsistent standards. In addition, the criteria by which companies’ corporate responsibility practices are assessed are evolving, which could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. Alternatively, if we elect not to or are unable to satisfy such new criteria or do not meet the criteria of a specific third-party provider, some investors may conclude that our policies with respect to corporate responsibility are inadequate. We may face reputational damage in the event that our corporate responsibility procedures or standards do not meet the standards set by various constituencies. Furthermore, if our competitors’ corporate responsibility performance is perceived to be greater than ours, potential or current investors may elect to invest with our competitors instead. In addition, in the event that we communicate certain initiatives and goals regarding environmental, social and governance matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals. If we fail to satisfy the expectations of investors, tenants and other stakeholders or our initiatives are not executed as planned, our reputation and financial results could be adversely affected.

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Risks Related to Our Indebtedness and Financings

Insufficient Cash Flow Could Affect Our Debt Financing and Create Refinancing Risk. We are subject to the risks normally associated with debt financing, including the risk that our operating income and cash flow will be insufficient to make required payments of principal and interest, or could restrict our borrowing capacity under our line of credit due to debt covenant restraints. Sufficient cash flow may not be available to make all required debt payments and satisfy UDR’s distribution requirements to maintain its status as a REIT for federal income tax purposes. In addition, the amounts under our line of credit may not be available to us and we may not be able to access the commercial paper market if our operating performance falls outside the constraints of our debt covenants. We are also likely to need to refinance substantially all of our outstanding debt as it matures. We may not be able to refinance existing debt, or the terms of any refinancing may not be as favorable as the terms of the existing debt, which could create pressures to sell assets or to issue additional equity when we would otherwise not choose to do so. In addition, our failure to comply with our debt covenants could result in a requirement to repay our indebtedness prior to its maturity, which could have a material adverse effect on our financial condition and cash flow, and increase our financing costs and impact our ability to make distributions to UDR’s stockholders.

Failure to Generate Sufficient Income Could Impair Debt Service Payments and Distributions to Stockholders. If our apartment communities do not generate sufficient revenue to meet rental expenses, our ability to make required payments of interest and principal on our debt securities and to pay distributions to UDR’s stockholders or the Operating Partnership’s or the DownREIT Partnership’s unitholders will be adversely affected. The following factors, among others, may affect the income generated by our apartment communities:

| ● | the national and local economies;

| ● | local real estate market conditions, such as an oversupply of apartment homes;

| ● | tenants’ perceptions of the safety, convenience, and attractiveness of our communities and the neighborhoods where they are located;

| ● | our ability to provide adequate management, maintenance and insurance;

| ● | rental expenses, including real estate taxes and utilities;

| ● | competition from other apartment communities;

| ● | changes in interest rates and the availability of financing;

| ● | changes in governmental regulations and the related costs of compliance; and

| ● | changes in tax and housing laws, including the enactment of rent control laws or other laws regulating multifamily housing.

Expenses associated with our investment in an apartment community, such as debt service, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a reduction in revenue from that community. If a community is mortgaged to secure payment of debt and we are unable to make the mortgage payments, we could sustain a loss as a result of foreclosure on the community or the exercise of other remedies by the mortgage holder.

Changing Interest Rates Could Increase Interest Costs and Adversely Affect Our Cash Flow and the Market Price of Our Securities. We currently have, and expect to incur in the future, interest-bearing debt, including unsecured commercial paper, at rates that vary with market interest rates. As of March 31, 2020, UDR had approximately $351.8 million of variable rate indebtedness outstanding, which constitutes approximately 7.1% of total outstanding indebtedness as of such date. As of March 31, 2020, the Operating Partnership had approximately $27.0 million of variable rate indebtedness outstanding, which constitutes approximately 27.1% of total outstanding indebtedness as of such date. An increase in interest rates would increase our interest expenses and increase the costs of refinancing existing indebtedness and of issuing new debt, including unsecured commercial paper. Accordingly, higher interest rates could adversely affect cash flow and our ability to service our debt and to make distributions to security holders. The effect of prolonged interest rate increases could negatively impact our ability to make acquisitions and develop properties.

The Phase-Out of LIBOR and Transition to SOFR as a Benchmark Interest Rate Could Have Adverse Effects. In 2018, the Alternative Reference Rate Committee identified the Secured Overnight Financing Rate (“SOFR”) as the alternative to LIBOR. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities, published by the Federal Reserve Bank of New York. By the end of 2021, it is expected that new contracts will not reference LIBOR and

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will instead use SOFR. Due to the broad use of LIBOR as a reference rate, all financial market participants, including us, are impacted by the risks associated with this transition and therefore it could adversely affect our operations and cash flows.

Our Debt Level May Be Increased. Our ability to incur debt is limited by covenants in our bank and other credit agreements. We manage our debt to be in compliance with these debt covenants, but subject to compliance with these covenants, we may increase the amount of our debt at any time without a concurrent improvement in our ability to service the additional debt.

Financing May Not Be Available and Could Be Dilutive. Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit, construction loans and other forms of secured debt, commercial paper and other forms of unsecured debt, and equity financing, including common and preferred equity. We and other companies in the real estate industry have experienced limited availability of financing from time to time, including due to regulatory changes directly or indirectly affecting financing markets, for example the changes in terms on construction loans brought about by the Basel III capital requirements and the associated “High Volatility Commercial Real Estate” designation, which has adversely impacted the availability of loans, including construction loans, and the proceeds of and the interest rate thereon. Restricted lending practices could impact our ability to obtain financing or refinancing for our properties. If we issue additional equity securities to finance developments and acquisitions instead of incurring debt, the interests of UDR’s existing stockholders could be diluted.

Failure To Maintain Our Current Credit Ratings Could Adversely Affect Our Cost of Funds, Related Margins, Liquidity, and Access to Capital Markets. Moody’s and Standard & Poor’s routinely evaluate our debt and have given us ratings on our senior unsecured debt, commercial paper program and preferred stock. These ratings are based on a number of factors, which included their assessment of our financial strength, liquidity, capital structure, asset quality, and sustainability of cash flow and earnings. Due to changes in these factors and market conditions, we may not be able to maintain our current credit ratings, which could adversely affect our cost of funds and related margins, liquidity, and access to capital markets, including our ability to access the commercial paper market.

Disruptions in Financial Markets May Adversely Impact Availability and Cost of Credit and Have Other Adverse Effects on Us and the Market Price of UDR’s Stock. Our ability to make scheduled payments on, or to refinance, our debt obligations will depend on our operating and financial performance, which in turn is subject to prevailing economic conditions and to financial, business and other factors beyond our control. The global equity and credit markets are experiencing a period of extraordinary turmoil and volatility as a result of the COVID-19 pandemic, related government actions and uncertainty regarding their duration and impact. These circumstances may materially and adversely impact liquidity in the financial markets at times, making terms for certain financings less attractive or in some cases unavailable. Disruptions and uncertainty in the equity and credit markets may negatively impact our ability to refinance existing indebtedness and access additional financing for acquisitions, development of our properties and other purposes at reasonable terms or at all, which may negatively affect our business and the market price of UDR’s common stock. We also rely on the financial institutions that are parties to our revolving credit facility. If these institutions become capital constrained, tighten their lending standards or become insolvent or if they experience excessive volumes of borrowing requests from other borrowers within a short period of time, they may be unable or unwilling to honor their funding commitments to us, which would adversely affect our ability to draw on our revolving credit facility. If we are not successful in refinancing our existing indebtedness when it becomes due, we may be forced to dispose of properties on disadvantageous terms, which might adversely affect our ability to service other debt and to meet our other obligations. A prolonged downturn in the financial markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our business plan accordingly. These events also may make it more difficult or costly for us to raise capital through the issuance of UDR’s common or preferred stock.

A Change in U.S. Government Policy or Support Regarding Fannie Mae or Freddie Mac Could Have a Material Adverse Impact on Our Business. While in recent years we have decreased our borrowing from Fannie Mae and Freddie Mac, Fannie Mae and Freddie Mac are a major source of financing to participants in the multifamily housing market including potential purchasers of our properties. Potential options for the future of agency mortgage financing in the U.S. have been, and may in the future be, suggested that could involve a reduction in the amount of financing Fannie Mae and Freddie Mac are able to provide, limitations on the loans that the agencies may make, which may not include loans secured by properties like our properties, or the phase out of Fannie Mae and Freddie Mac. While we believe Fannie Mae and Freddie Mac will continue to provide liquidity to our sector, should they discontinue doing so, have their mandates changed or reduced or be disbanded or reorganized by the government, or if there is reduced government support for multifamily housing generally, it may adversely affect interest rates, capital availability, development of multifamily communities and the value of multifamily residential real estate and, as a result, may adversely affect our business and results of operations.

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The Soundness of Financial Institutions Could Adversely Affect Us. We have relationships with many financial institutions, including lenders under our credit facilities, and, from time to time, we execute transactions with counterparties in the financial services industry. As a result, defaults by, or even rumors or questions about, financial institutions or the financial services industry generally, could result in losses or defaults by these institutions. In the event that the volatility of the financial markets adversely affects these financial institutions or counterparties, we or other parties to the transactions with us may be unable to complete transactions as intended, which could adversely affect our results of operations.

Interest Rate Hedging Contracts May Be Ineffective and May Result in Material Charges. From time to time when we anticipate issuing debt securities, we may seek to limit our exposure to fluctuations in interest rates during the period prior to the pricing of the securities by entering into interest rate hedging contracts. We may do this to increase the predictability of our financing costs. Also, from time to time we may rely on interest rate hedging contracts to limit our exposure under variable rate debt to unfavorable changes in market interest rates. If the terms of new debt securities are not within the parameters of, or market interest rates fall below that which we incur under a particular interest rate hedging contract, the contract is ineffective. Furthermore, the settlement of interest rate hedging contracts has involved and may in the future involve material charges. In addition, our use of interest rate hedging arrangements may expose us to additional risks, including a risk that a counterparty to a hedging arrangement may fail to honor its obligations. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging activities will have the desired beneficial impact on our results of operations or financial condition. Termination of these hedging agreements typically involves costs, such as transaction fees or breakage costs.

Risks Related to Tax Laws

We Would Incur Adverse Tax Consequences if UDR Failed to Qualify as a REIT. UDR has elected to be taxed as a REIT under the Code. Our qualification as a REIT requires us to satisfy numerous requirements, some on an annual and quarterly basis, established under highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control. We intend that our current organization and method of operation enable us to continue to qualify as a REIT, but we may not so qualify or we may not be able to remain so qualified in the future. In addition, U.S. federal income tax laws governing REITs and other corporations and the administrative interpretations of those laws may be amended at any time, potentially with retroactive effect. Future legislation, new regulations, administrative interpretations or court decisions could adversely affect our ability to qualify as a REIT or adversely affect UDR’s stockholders.

If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax (including, for periods prior to 2018, any applicable alternative minimum tax) on our taxable income at regular corporate rates, and would not be allowed to deduct dividends paid to UDR’s stockholders in computing our taxable income. Also, unless the Internal Revenue Service granted us relief under certain statutory provisions, we could not re-elect REIT status until the fifth calendar year after the year in which we first failed to qualify as a REIT. The additional tax liability from the failure to qualify as a REIT would reduce or eliminate the amount of cash available for investment or distribution to UDR’s stockholders. This would likely have a significant adverse effect on the value of our securities and our ability to raise additional capital. In addition, we would no longer be required to make distributions to UDR’s stockholders. Even if we continue to qualify as a REIT, we will continue to be subject to certain federal, state and local taxes on our income and property.

Certain of our subsidiaries have also elected to be taxed as REITs under the Code, and are therefore subject to the same risks in the event that any such subsidiary fails to qualify as a REIT in any taxable year.

Dividends Paid by REITs Generally Do Not Qualify for Reduced Tax Rates. In general, the maximum U.S. federal income tax rate for dividends paid to individual U.S. stockholders is 20%. Unlike dividends received from a corporation that is not a REIT, our regular dividends (i.e., dividends other than capital gain dividends) paid to individual stockholders generally are not eligible for the reduced rates. However, individual U.S. stockholders generally may deduct 20% of such regular dividends under Section 199A of the Code, reducing the effective tax rate applicable to such dividends (although such provision will expire after 2025 absent future legislation).

UDR May Conduct a Portion of Our Business Through Taxable REIT Subsidiaries, Which Are Subject to Certain Tax Risks. We have established taxable REIT subsidiaries. Despite UDR’s qualification as a REIT, its taxable REIT subsidiaries must pay income tax on their taxable income. In addition, we must comply with various tests to continue to qualify as a REIT for federal income tax purposes, and our income from and investments in our taxable REIT subsidiaries generally do not constitute permissible income and investments for certain of these tests. While we will attempt to ensure that our dealings with our taxable REIT subsidiaries will not adversely affect our REIT qualification, we cannot provide assurance that we will

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successfully achieve that result. Furthermore, we may be subject to a 100% penalty tax, we may jeopardize our ability to retain future gains on real property sales, or our taxable REIT subsidiaries may be denied deductions, to the extent our dealings with our taxable REIT subsidiaries are not deemed to be arm’s length in nature or are otherwise not respected.

REIT Distribution Requirements Limit Our Available Cash. As a REIT, UDR is subject to annual distribution requirements, which limit the amount of cash we retain for other business purposes, including amounts to fund our growth. We generally must distribute annually at least 90% of our net REIT taxable income, excluding any net capital gain, in order for our distributed earnings not to be subject to corporate income tax. We intend to make distributions to UDR’s stockholders to comply with the requirements of the Code. However, differences in timing between the recognition of taxable income and the actual receipt of cash could require us to sell assets or borrow funds on a short-term or long-term basis to meet the 90% distribution requirement of the Code.

Certain Property Transfers May Generate Prohibited Transaction Income, Resulting in a Penalty Tax on Gain Attributable to the Transaction. From time to time, we may transfer or otherwise dispose of some of our properties. Under the Code, any gain resulting from transfers of properties that we hold as inventory or primarily for sale to customers in the ordinary course of business would be treated as income from a prohibited transaction and subject to a 100% penalty tax. Since we acquire properties for investment purposes, we do not believe that our occasional transfers or disposals of property are prohibited transactions. However, whether property is held for investment purposes is a question of fact that depends on all the facts and circumstances surrounding the particular transaction. The Internal Revenue Service may contend that certain transfers or disposals of properties by us are prohibited transactions. If the Internal Revenue Service were to argue successfully that a transfer or disposition of property constituted a prohibited transaction, then we would be required to pay a 100% penalty tax on any gain allocable to us from the prohibited transaction and we may jeopardize our ability to retain future gains on real property sales. In addition, income from a prohibited transaction might adversely affect UDR’s ability to satisfy the income tests for qualification as a REIT for federal income tax purposes.

Changes to the U.S. Federal Income Tax Laws, including the Enactment of Certain Tax Reform Measures, Could Have an Adverse Impact on Our Business and Financial Results. In recent years, numerous legislative, judicial and administrative changes have been made to the U.S. federal income tax laws applicable to investments in real estate and REITs, including the passage of the Tax Cuts and Jobs Act of 2017. Federal legislation intended to ameliorate the economic impact of the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), has been enacted that makes technical corrections to, or modifies on a temporary basis, certain of the provisions of the Tax Cut and Jobs Act of 2017, and it is possible that additional such legislation may be enacted in the future. The full impact of the Tax Cut and Jobs Act of 2017 and the CARES Act may not become evident for some period of time. In addition, there can be no assurance that future changes to the U.S. federal income tax laws or regulatory changes will not be proposed or enacted that could impact our business and financial results. The REIT rules are regularly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department, which may result in revisions to regulations and interpretations in addition to statutory changes. If enacted, certain of such changes could have an adverse impact on our business and financial results.

​

We cannot predict whether, when or to what extent any new U.S. federal tax laws, regulations, interpretations or rulings will impact the real estate investment industry or REITs. Prospective investors are urged to consult their tax advisors regarding the effect of potential future changes to the federal tax laws on an investment in our shares.

We May Be Adversely Affected by Changes in State and Local Tax Laws and May Become Subject to Tax Audits from Time to Time. Because UDR is organized and qualifies as a REIT, it is generally not subject to federal income taxes, but it is subject to certain state and local taxes. From time to time, changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. A shortfall in tax revenues for states and local jurisdictions in which we own apartment communities may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional state and local taxes. These increased tax costs could adversely affect our financial condition and the amount of cash available for the payment of distributions to UDR’s stockholders. In the normal course of business, we or our affiliates (including entities through which we own real estate) may also become subject to federal, state or local tax audits. If we (or such entities) become subject to federal, state or local tax audits, the ultimate result of such audits could have an adverse effect on our financial condition and results of operations.

The Operating Partnership and the DownREIT Partnership Intend to Qualify as Partnerships, but Cannot Guarantee That They Will Qualify. The Operating Partnership and the DownREIT Partnership intend to qualify as partnerships for federal income tax purposes, and intend to take that position for all income tax reporting purposes. If classified as partnerships, the Operating Partnership and the DownREIT Partnership generally will not be taxable entities and will not incur federal income

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tax liability. However, the Operating Partnership and the DownREIT Partnership would be treated as corporations for federal income tax purposes if they were “publicly traded partnerships,” unless at least 90% of their income was qualifying income as defined in the Code. A “publicly traded partnership” is a partnership whose partnership interests are traded on an established securities market or are readily tradable on a secondary market (or the substantial equivalent thereof). Although neither the Operating Partnership’s nor the DownREIT Partnership’s partnership units are traded on an established securities market, because of the redemption rights of their limited partners, the Operating Partnership’s and DownREIT Partnership’s units held by limited partners could be viewed as readily tradable on a secondary market (or the substantial equivalent thereof), and the Operating Partnership and the DownREIT Partnership may not qualify for one of the “safe harbors” under the applicable tax regulations. Qualifying income for the 90% test generally includes passive income, such as real property rents, dividends and interest. The income requirements applicable to REITs and the definition of qualifying income for purposes of this 90% test are similar in most respects. The Operating Partnership and the DownREIT Partnership may not meet this qualifying income test. If either the Operating Partnership or the DownREIT Partnership were to be taxed as a corporation, it would incur substantial tax liabilities, and UDR would then fail to qualify as a REIT for tax purposes, unless it qualified for relief under certain statutory savings provisions, and our ability to raise additional capital would be impaired. In addition, even if the 90% test were met if the Operating Partnership or the DownREIT Partnership were a publicly traded partnership, there could be adverse tax impacts for certain limited partners.

Qualifying as a REIT Involves Highly Technical and Complex Provisions of the Code. Our qualification as a REIT involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Moreover, new legislation, court decisions or administrative guidance, in each case possibly with retroactive effect, may make it more difficult or impossible for us to qualify as a REIT. Our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, shareholder ownership and other requirements on a continuing basis. Our ability to satisfy the REIT income and asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination and for which we will not obtain independent appraisals, and upon our ability to successfully manage the composition of our income and assets on an ongoing basis. In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.

Risks Related to Our Organization and Ownership of UDR’s Stock

Changes in Market Conditions and Volatility of Stock Prices Could Adversely Affect the Market Price of UDR’s Common Stock. The stock markets, including the New York Stock Exchange (“NYSE”), on which we list UDR’s common stock, have experienced significant price and volume fluctuations, including recently as a result of the COVID-19 pandemic. As a result, the market price of UDR’s common stock has been, and in the future could be, similarly volatile, and investors in UDR’s common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. In addition to the risks listed in this “Risk Factors” section, a number of factors could negatively affect the price per share of UDR’s common stock, including:

| ● | general market and economic conditions;

| ● | actual or anticipated variations in UDR’s quarterly operating results or dividends or UDR’s payment of dividends in shares of UDR’s stock;

| ● | changes in our funds from operations or earnings estimates;

| ● | difficulties or inability to access capital or extend or refinance existing debt;

| ● | decreasing (or uncertainty in) real estate valuations;

| ● | changes in market valuations of similar companies;

| ● | publication of research reports about us or the real estate industry;

| ● | the general reputation of real estate investment trusts and the attractiveness of their equity securities in comparison to other equity securities (including securities issued by other real estate companies);

| ● | general stock and bond market conditions, including changes in interest rates on fixed income securities, that may lead prospective purchasers of UDR’s stock to demand a higher annual yield from future dividends;

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| ● | a change in analyst ratings;

| ● | additions or departures of key management personnel;

| ● | adverse market reaction to any additional debt we incur in the future;

| ● | speculation in the press or investment community;

| ● | terrorist activity which may adversely affect the markets in which UDR’s securities trade, possibly increasing market volatility and causing the further erosion of business and consumer confidence and spending;

| ● | failure to qualify as a REIT;

| ● | strategic decisions by us or by our competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in business strategy;

| ● | failure to satisfy listing requirements of the NYSE;

| ● | governmental regulatory action and changes in tax laws; and

| ● | the issuance of additional shares of UDR’s common stock, or the perception that such sales might occur, including under UDR’s at-the-market equity distribution program.

Many of the factors listed above are beyond our control. These factors may cause the market price of shares of UDR’s common stock to decline, regardless of our financial condition, results of operations, business or our prospects.

We May Change the Dividend Policy for UDR’s Common Stock in the Future. The decision to declare and pay dividends on UDR’s common stock, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our board of directors and will depend on our earnings, funds from operations, liquidity, financial condition, capital requirements, contractual prohibitions or other limitations under our indebtedness, the annual distribution requirements under the REIT provisions of the Code, state law and such other factors as our board of directors considers relevant. Any change in our dividend policy could have an adverse effect on the market price of UDR’s common stock.

Maryland Law May Limit the Ability of a Third Party to Acquire Control of Us, Which May Not be in UDR’s Stockholders’ Best Interests. Maryland business statutes may limit the ability of a third party to acquire control of us. As a Maryland corporation, we are subject to various Maryland laws which may have the effect of discouraging offers to acquire our Company and of increasing the difficulty of consummating any such offers, even if our acquisition would be in UDR’s stockholders’ best interests. The Maryland General Corporation Law restricts mergers and other business combination transactions between us and any person who acquires beneficial ownership of shares of UDR’s stock representing 10% or more of the voting power without our board of directors’ prior approval. Any such business combination transaction could not be completed until five years after the person acquired such voting power, and generally only with the approval of stockholders representing 80% of all votes entitled to be cast and 66 2/3 % of the votes entitled to be cast, excluding the interested stockholder, or upon payment of a fair price. Maryland law also provides generally that a person who acquires shares of our equity stock that represents 10% (and certain higher levels) of the voting power in electing directors will have no voting rights unless approved by a vote of two-thirds of the shares eligible to vote.

Limitations on Share Ownership and Limitations on the Ability of UDR’s Stockholders to Effect a Change in Control of Our Company Restricts the Transferability of UDR’s Stock and May Prevent Takeovers That are Beneficial to UDR’s Stockholders. One of the requirements for maintenance of our qualification as a REIT for U.S. federal income tax purposes is that no more than 50% in value of our outstanding capital stock may be owned by five or fewer individuals, including entities specified in the Code, during the last half of any taxable year. Our charter contains ownership and transfer restrictions relating to UDR’s stock primarily to assist us in complying with this and other REIT ownership requirements; however, the restrictions may have the effect of preventing a change of control, which does not threaten REIT status. These restrictions include a provision that generally limits ownership by any person of more than 9.9% of the value of our outstanding equity stock, unless our board of directors exempts the person from such ownership limitation, provided that any such exemption shall not allow the person to exceed 13% of the value of our outstanding equity stock. Absent such an exemption from our board of directors, the transfer of UDR’s stock to any person in excess of the applicable ownership limit, or any transfer of shares of such stock in violation of the ownership requirements of the Code for REITs, will be considered null and void, and the intended transferee of such stock will acquire no rights in such shares. These provisions of our charter may have the effect of delaying, deferring or preventing someone from taking control of us, even though a change of control might involve a premium price for UDR’s stockholders or might otherwise be in UDR’s stockholders’ best interests.

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​

Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

From time to time the Company issues shares of the Company’s common stock in exchange for operating partnership units (“OP Units”) tendered to the Operating Partnership for redemption in accordance with the provisions of the Operating Partnership’s limited partnership agreement. The holders of OP Units have the right to require the Operating Partnership to redeem all or a portion of their OP Units in exchange for a cash payment based on the market value of our common stock at the time of redemption. However, the Operating Partnership’s obligation to pay the cash amount is subject to the prior right of the Company to acquire such OP Units in exchange for either the cash amount or the number of shares of the Company’s common stock equal to the number of OP Units being redeemed.

During the three months ended March 31, 2020, we did not issue any shares of our common stock upon redemption of OP Units in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933.

​

Repurchase of Equity Securities

In February 2006, UDR’s Board of Directors authorized a 10 million share repurchase program. In January 2008, our Board of Directors authorized a new 15 million share repurchase program. Under the two share repurchase programs, UDR may repurchase shares of our common stock in open market purchases, block purchases, privately negotiated transactions or otherwise. The following table summarizes all of UDR’s repurchases of shares of common stock under these programs during the three months ended March 31, 2020:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ |  | ​ | ​ |  | Total Number |  | Maximum
​ | ​ | ​ | ​ | ​ | ​ | of Shares | ​ | Number of
​ | ​ | ​ | ​ | ​ | ​ | Purchased as | ​ | Shares that
​ | Total | ​ | ​ | ​ | ​ | Part of | ​ | May Yet Be
​ | Number of | ​ | Average | ​ | Publicly | ​ | Purchased
​ | Shares | ​ | Price Paid | ​ | Announced Plans | ​ | Under the Plans
Period | Purchased | ​ | per Share | ​ | or Programs | ​ | or Programs (a)
Beginning Balance | 10,561 | ​ | $ | 22.66 |  | 10,561 |  | 14,439
January 1, 2020 through January 31, 2020 | — | ​ |  | — |  | — |  | 14,439
February 1, 2020 through February 29, 2020 | — | ​ |  | — |  | — |  | 14,439
March 1, 2020 through March 31, 2020 | — | ​ |  | — |  | — |  | 14,439
Balance as of March 31, 2020 | 10,561 | ​ | $ | 22.66 |  | 10,561 |  | 14,439

(a) | This number reflects the amount of shares that were available for purchase under our 10 million share repurchase program authorized in February 2006 and our 15 million share repurchase program authorized in January 2008.

During the three months ended March 31, 2020, certain of our employees surrendered shares of common stock owned by them to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted shares of common stock issued under our 1999 Long-Term Incentive Plan (the “LTIP”). The following table summarizes all of these repurchases during the three months ended March 31, 2020:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ |  | ​ | ​ |  | Total Number |  | Maximum
​ | ​ | ​ | ​ | ​ | ​ | of Shares | ​ | Number of
​ | ​ | ​ | ​ | ​ | ​ | Purchased as | ​ | Shares that
​ | Total | ​ | ​ | ​ | ​ | Part of | ​ | May Yet Be
​ | Number of | ​ | Average | ​ | Publicly | ​ | Purchased
​ | Shares | ​ | Price Paid | ​ | Announced Plans | ​ | Under the Plans
Period | Purchased | ​ | per Share (a) | ​ | or Programs | ​ | or Programs
January 1, 2020 through January 31, 2020 | 19,319 | ​ | $ | 46.12 |  | N/A |  | N/A
February 1, 2020 through February 29, 2020 | 39,292 | ​ |  | 48.60 |  | N/A |  | N/A
March 1, 2020 through March 31, 2020 | — | ​ |  | — |  | N/A |  | N/A
Total | 58,611 | ​ | $ | 47.78 |  |  |  |

(a) | The price paid per share is based on the closing price of our common stock as of the date of the determination of the statutory minimum for federal and state tax obligations.

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Item 3. | DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. | MINE SAFETY DISCLOSURES

Not applicable.

Item 5. | OTHER INFORMATION

None.

​

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Item 6. EXHIBITS

​ | ​ | ​
--- | --- | ---
Exhibit No. |  | Description
3.1 | ​ | Articles of Restatement of UDR, Inc. (incorporated by reference to Exhibit 3.09 to UDR, Inc.’s Current Report on Form 8-K dated July 27, 2005 and filed with the SEC on August 1, 2005).
​ | ​ | ​
3.2 | ​ | Articles of Amendment to the Articles of Restatement of UDR, Inc. dated and filed with the State Department of Assessments and Taxation of the State of Maryland on March 14, 2007 (incorporated by reference to Exhibit 3.2 to UDR, Inc.’s Current Report on Form 8-K dated March 14, 2007 and filed with the SEC on March 15, 2007).
​ | ​ | ​
3.3 | ​ | Articles of Amendment to the Articles of Restatement of UDR, Inc. dated August 30, 2011 and filed with the State Department of Assessments and Taxation of the State of Maryland on August 31, 2011 (incorporated by reference to Exhibit 3.1 to UDR, Inc.’s Current Report on Form 8-K dated August 29, 2011 and filed with the SEC on September 1, 2011).
​ | ​ | ​
3.4 | ​ | Articles of Amendment to the Articles of Restatement of UDR, Inc. dated and filed with the State Department of Assessments and Taxation of the State of Maryland on May 24, 2018 (incorporated by reference to Exhibit 3.1 to UDR, Inc.’s Current Report on Form 8-K dated May 24, 2018 and filed with the SEC on May 29, 2018).
​ | ​ | ​
3.5 | ​ | Articles Supplementary relating to UDR, Inc.’s 6.75% Series G Cumulative Redeemable Preferred Stock dated and filed with the State Department of Assessments and Taxation of the State of Maryland on May 30, 2007 (incorporated by reference to Exhibit 3.4 to UDR, Inc.’s Form 8-A Registration Statement dated and filed with the SEC on May 30, 2007).
​ | ​ | ​
3.6 | ​ | Amended and Restated Bylaws of UDR, Inc. (as amended through May 24, 2018) (incorporated by reference to Exhibit 3.6 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018).
​ | ​ | ​
3.7 | ​ | Certificate of Limited Partnership of United Dominion Realty, L.P. dated as of February 19, 2004 (incorporated by reference to Exhibit 3.4 to United Dominion Realty, L.P.’s Post-Effective Amendment No. 1 to Registration Statement on Form S-3 dated and filed with the SEC on October 15, 2010).
​ | ​ | ​
3.8 | ​ | Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 23, 2004 (incorporated by reference to Exhibit 10.23 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003).
​ | ​ | ​
3.9 | ​ | First Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of June 24, 2005 (incorporated by reference to Exhibit 10.06 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005).
​ | ​ | ​
3.10 | ​ | Second Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 23, 2006 (incorporated by reference to Exhibit 10.6 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006).
​ | ​ | ​
3.11 | ​ | Third Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 2, 2007 (incorporated by reference to Exhibit 99.1 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
​ | ​ | ​
3.12 | ​ | Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of December 27, 2007 (incorporated by reference to Exhibit 10.25 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2007).
​ | ​ | ​
3.13 | ​ | Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of March 7, 2008 (incorporated by reference to Exhibit 10.53 to UDR, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008).
​ | ​ | ​
3.14 | ​ | Sixth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of December 9, 2008 (incorporated by reference to Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated December 9, 2008 and filed with the Commission on December 10, 2008).

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​ | ​ | ​
--- | --- | ---
Exhibit No. |  | Description
3.15 | ​ | Seventh Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P., dated as of March 13, 2009 (incorporated by reference to Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated March 18, 2009 and filed with the SEC on March 19, 2009).
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3.16 | ​ | Eighth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P., dated as of November 17, 2010 (incorporated by reference to Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated and filed with the SEC on November 18, 2010).
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3.17 | ​ | Ninth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P., dated as of December 4, 2015 (incorporated by reference to Exhibit 10.1 to UDR, Inc.’s Current Report on Form 8-K dated December 4, 2015 and filed with the SEC on December 10, 2015).
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3.18 | ​ | Tenth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of October 29, 2018 (incorporated by reference to Exhibit 3.18 to UDR, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018).
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4.1 | ​ | UDR, Inc. 3.200% Medium-Term Note, Series A due January 2030, issued February 28, 2020.
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31.1 | ​ | Rule 13a-14(a) Certification of the Chief Executive Officer of UDR, Inc.
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31.2 | ​ | Rule 13a-14(a) Certification of the Chief Financial Officer of UDR, Inc.
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31.3 | ​ | Rule 13a-14(a) Certification of the Chief Executive Officer of UDR, Inc., general partner of United Dominion Realty, L.P.
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31.4 | ​ | Rule 13a-14(a) Certification of the Chief Financial Officer of UDR, Inc., general partner of United Dominion Realty, L.P.
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32.1 | ​ | Section 1350 Certification of the Chief Executive Officer of UDR, Inc.
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32.2 | ​ | Section 1350 Certification of the Chief Financial Officer of UDR, Inc.
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32.3 | ​ | Section 1350 Certification of the Chief Executive Officer of UDR, Inc., general partner of United Dominion Realty, L.P.
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32.4 | ​ | Section 1350 Certification of the Chief Financial Officer of UDR, Inc., general partner of United Dominion Realty, L.P.
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101 | ​ | Inline XBRL (Extensible Business Reporting Language). The following materials from this Quarterly Report on Form 10-Q for the periods ended March 31, 2020, formatted in Inline XBRL: (i) consolidated balance sheets of UDR, Inc., (ii) consolidated statements of operations of UDR, Inc., (iii) consolidated statements of comprehensive income/(loss) of UDR, Inc., (iv) consolidated statements of changes in equity of UDR, Inc., (v) consolidated statements of cash flows of UDR, Inc., (vi) notes to consolidated financial statements of UDR, Inc., (vii) consolidated balance sheets of United Dominion Realty, L.P., (viii) consolidated statements of operations of United Dominion Realty, L.P., (ix) consolidated statements of changes in capital of United Dominion Realty, L.P., (x) consolidated statements of cash flows of United Dominion Realty, L.P. and (xi) notes to consolidated financial statements of United Dominion Realty, L.P.. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
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104 | ​ | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.
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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

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​ | ​ | UDR, Inc.
Date: | May 7, 2020 | /s/ Joseph D. Fisher
​ | ​ | Joseph D. Fisher
​ | ​ | Senior Vice President and Chief Financial Officer (Principal Financial Officer)
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​ | ​ | United Dominion Realty, L.P.
​ | ​ | By: UDR, Inc., its general partner
Date: | May 7, 2020 | /s/ Joseph D. Fisher
​ | ​ | Joseph D. Fisher
​ | ​ | Senior Vice President and Chief Financial Officer (Principal Financial Officer)

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