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LEASES

6 Months Ended

Jun. 30, 2025

6. LEASES

Lessee - Ground Leases

UDR has six communities that are subject to ground leases, under which UDR is the lessee, that expire 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 and six months ended June 30, 2025 and 2024.

As of June 30, 2025 and December 31, 2024, the Operating lease right-of-use assets were $185.1 million and $187.0 million, respectively, and the Operating lease liabilities were $180.4 million and $182.3 million, respectively, on our Consolidated Balance Sheets 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. 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 41.1 years and 41.3 years at June 30, 2025 and December 31, 2024, respectively, and the weighted average discount rate was 5.0% at both June 30, 2025 and December 31, 2024.

Future minimum lease payments and total operating lease liabilities from our ground leases as of June 30, 2025 are as follows (dollars in thousands):


	Ground Leases
2025	$	6,222
2026		12,442
2027		12,442
2028		12,442
2029		12,442
Thereafter		393,010
Total future minimum lease payments (undiscounted)		449,000
Difference between future undiscounted cash flows and discounted cash flows		(268,567)
Total operating lease liabilities (discounted)	$	180,433

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 June 30,				Six Months Ended June 30,
	2025		2024		2022		2024
Lease expense:
Contractual lease expense	$	3,363	$	3,350	$	6,726	$	6,700
Variable lease expense (a)		53		43		103		83
Total operating lease expense (b)(c)	$	3,416	$	3,393	$	6,829	$	6,783

(a)

Variable lease expense includes adjustments such as changes in the consumer price index and payments based on a percentage of a community’s revenue.

(b)

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

(c)

For the six months ended June 30, 2025, Operating lease right-of-use assets and Operating lease liabilities amortized by $1.9 million and $1.8 million, respectively. For the six months ended June 30, 2024, Operating lease right-of-use assets and Operating lease liabilities amortized by $1.8 million and $1.8 million, respectively. Due to the net impact of the amortization, the Company recorded less than $0.1 million and less than $0.1 million of total operating lease expense during the three months ended June 30, 2025 and 2024, respectively, and less than $0.1 million and less than $0.1 million of total operating lease expense during the six months ended June 30, 2025 and 2024, respectively.

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 June 30, 2025, our apartment home leases generally have initial terms of 12 months or less. As of June 30, 2025, our

retail and commercial space leases generally have initial terms of between 5 and 15 years and represent approximately 1% to 2% of our total lease revenue. Our apartment home leases are generally renewable at the end of the lease term, subject to potential changes 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 June 30, 2025 are as follows (dollars in thousands):


	Retail and Commercial Leases
2025	$	13,414
2026		27,998
2027		24,944
2028		22,080
2029		17,718
Thereafter		90,009
Total future minimum lease payments (a)	$	196,163

(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 less than $0.1 million and $0.2 million for the three months ended June 30, 2025 and 2024, respectively, and $0.4 million and $0.8 million during the six months ended June 30, 2025 and 2024, respectively.