UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

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

Commission file number

(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.)

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 þ No o
		United Dominion Realty, L.P.		Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

		UDR, Inc.		Yes þ No o
		United Dominion Realty, L.P.		Yes o No o

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

UDR, Inc.:

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

United Dominion Realty, L.P.:

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Smaller reporting company o
				(Do not check if a smaller reporting company)

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

		UDR, Inc.		Yes o No þ
		United Dominion Realty, L.P.		Yes o No þ

The number of shares of UDR, Inc.’s common stock, $0.01 par value, outstanding as of April 29, 2011, was 189,778,728.

 

 

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, 2011 (unaudited) and December 31, 2010 (audited)			3
Consolidated Statements of Operations for the three months ended March 31, 2011 and 2010 (unaudited)			4
Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010 (unaudited)			5
Consolidated Statements of Stockholders’ Equity and Comprehensive Income/(Loss) for the three months ended March 31, 2011 (unaudited)			6
Notes to Consolidated Financial Statements (unaudited)			7
UNITED DOMINION REALTY, L.P.:
Consolidated Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010 (audited)			30
Consolidated Statements of Operations for the three months ended March 31, 2011 and 2010 (unaudited)			31
Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010 (unaudited)			32
Consolidated Statements of Partners’ Capital and Comprehensive Income/(Loss) for the three months ended March 31, 2011 (unaudited)			33
Notes to Consolidated Financial Statements (unaudited)			34
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			50
Item 3. Quantitative and Qualitative Disclosures About Market Risk			70
Item 4. Controls and Procedures			71
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			71
Item 1A. Risk Factors			71
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			85
Item 3. Defaults Upon Senior Securities			86
Item 4. (Removed and Reserved)			86
Item 5. Other Information			86
Item 6. Exhibits			86
Signatures			87
Exhibit 12.1
Exhibit 12.2
Exhibit 31.1
Exhibit 31.2
Exhibit 31.3
Exhibit 31.4
Exhibit 32.1
Exhibit 32.2
Exhibit 32.3
Exhibit 32.4
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended March 31, 2011 of UDR, Inc. a Maryland corporation, and United Dominion Realty, L.P., a Delaware limited partnership, of which UDR 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 the Operating Partnership. Unless the context otherwise requires, the references in this Report to the “Operating Partnership” 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 are referred to as “OP Units” and the holders of the OP 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 our company and our operating partnership, which are reflected in our disclosure in this report. UDR is a real estate investment trust (a “REIT”), whose most significant asset is its ownership interest in the Operating Partnership. UDR also conducts business through other subsidiaries and operating partnerships, including its subsidiary RE³, whose activities include development, land entitlement and short-term hold investments. UDR acts as the sole general partner of the Operating Partnership, holds interests in other operating partnerships, 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 securities of UDR.

As of March 31, 2011, UDR owned 110,883 units of the general partnership interests of the Operating Partnership and 174,736,557 units (or approximately 97.2%) of the limited partnership interests of the Operating Partnership (the “OP Units”). 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 being 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 provided for each of UDR and the Operating Partnership. This combined Form 10-Q is being filed separately by UDR and the Operating Partnership.

UDR, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

		March 31,				December 31,
		2011				2010
		(unaudited)				(audited)
ASSETS
Real estate owned:
Real estate held for investment		$	6,542,227			$	6,519,095
Less: accumulated depreciation			(1,647,033	)			(1,568,557	)
			4,895,194				4,950,538
Real estate under development			112,537				97,912
Real estate held for disposition (net of accumulated depreciation of $72,018 and $69,769)			192,540				194,571
Total real estate owned, net of accumulated depreciation			5,200,271				5,243,021
Cash and cash equivalents			11,692				9,486
Marketable securities			—				3,866
Restricted cash			15,355				15,447
Deferred financing costs, net			21,850				27,267
Notes receivable			7,800				7,800
Investment in unconsolidated joint ventures			149,095				148,057
Other assets			95,814				74,596
Total assets		$	5,501,877			$	5,529,540
LIABILITIES AND STOCKHOLDERS’ EQUITY
Secured debt		$	1,716,241			$	1,908,068
Secured debt — real estate held for disposition			55,309				55,602
Unsecured debt			1,747,236				1,603,834
Real estate taxes payable			17,605				14,585
Accrued interest payable			20,837				20,889
Security deposits and prepaid rent			26,965				26,046
Distributions payable			37,445				36,561
Deferred fees and gains on the sale of depreciable property			28,931				28,943
Accounts payable, accrued expenses, and other liabilities			90,622				105,925
Total liabilities			3,741,191				3,800,453
Redeemable non-controlling interests in operating partnership			123,360				119,057
Stockholders’ equity
Preferred stock, no par value; 50,000,000 shares authorized
2,803,812 shares of 8.00% Series E Cumulative Convertible issued and outstanding (2,803,812 shares at December 31, 2010)			46,571				46,571
3,405,562 shares of 6.75% Series G Cumulative Redeemable issued and outstanding (3,405,562 shares at December 31, 2010)			85,139				85,139
Common stock, $0.01 par value; 250,000,000 shares authorized
187,273,833 shares issued and outstanding (182,496,330 shares at December 31, 2010)			1,873				1,825
Additional paid-in capital			2,548,818				2,450,141
Distributions in excess of net income			(1,045,117	)			(973,864	)
Accumulated other comprehensive loss, net			(3,696	)			(3,469	)
Total UDR, Inc. stockholders’ equity			1,633,588				1,606,343
Non-controlling interest			3,738				3,687
Total equity			1,637,326				1,610,030
Total liabilities and stockholders’ equity		$	5,501,877			$	5,529,540

See accompanying notes to consolidated financial statements.

UDR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

		Three Months Ended
		March 31,
		2011				2010
		(unaudited)				(unaudited)
REVENUES
Rental income		$	164,520			$	145,153
Non-property income:
Other income			4,536				1,471
Total revenues			169,056				146,624
EXPENSES
Rental expenses:
Real estate taxes and insurance			20,974				18,828
Personnel			14,821				13,077
Utilities			9,050				8,382
Repair and maintenance			9,003				7,598
Administrative and marketing			3,975				3,721
Property management			4,524				3,992
Other operating expenses			1,459				1,485
Real estate depreciation and amortization			81,861				69,137
Interest
Expense incurred			35,588				35,133
Amortization of convertible debt discount			359				967
Other debt charges			4,019				—
General and administrative			10,675				9,640
Other depreciation and amortization			1,043				1,223
Total expenses			197,351				173,183
Loss from operations			(28,295	)			(26,559	)
Loss from unconsolidated entities			(1,332	)			(737	)
Loss from continuing operations			(29,627	)			(27,296	)
Income from discontinued operations			971				2,270
Consolidated net loss			(28,656	)			(25,026	)
Net loss attributable to redeemable non-controlling interests in OP			832				1,005
Net income attributable to non-controlling interests			(51	)			(35	)
Net loss attributable to UDR, Inc.			(27,875	)			(24,056	)
Distributions to preferred stockholders — Series E (Convertible)			(931	)			(931	)
Distributions to preferred stockholders — Series G			(1,437	)			(1,448	)
Net loss attributable to common stockholders		$	(30,243	)		$	(26,435	)
Earnings per weighted average common share — basic:
Loss from continuing operations attributable to common stockholders		$	(0.17	)		$	(0.18	)
Loss from discontinued operations		$	0.00			$	0.01
Net loss attributable to common stockholders		$	(0.17	)		$	(0.17	)
Earnings per weighted average common share — diluted:
Loss from continuing operations attributable to common stockholders		$	(0.17	)		$	(0.18	)
Loss from discontinued operations		$	0.00			$	0.01
Net loss attributable to common stockholders		$	(0.17	)		$	(0.17	)
Common distributions declared per share		$	0.185			$	0.180
Weighted average number of common shares outstanding — basic and diluted			182,531				156,131

See accompanying notes to consolidated financial statements.

UDR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except for share data)

		Three Months Ended March 31,
		2011				2010
		(unaudited)				(unaudited)
Operating Activities
Consolidated net loss		$	(28,656	)		$	(25,026	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			85,158				73,430
Net realized gain on sale of marketable securities			(3,123	)			—
Net (gain)/loss on the sale of depreciable property			(41	)			41
Loss on debt extinguishment			4,019				—
Write off of bad debt			574				674
Loss from unconsolidated entities			1,332				737
Amortization of deferred financing costs and other			2,923				2,094
Amortization of deferred compensation			2,656				2,898
Amortization of convertible debt discount			359				967
Prepayments on income taxes			503				502
Changes in operating assets and liabilities:
(Increase)/decrease in operating assets			(4,854	)			2,044
Decrease in operating liabilities			(12,897	)			(16,851	)
Net cash provided by operating activities			47,953				41,510
Investing Activities
Proceeds from sale of marketable securities			476				—
Payments related to the buyout of joint venture partner			—				(16,141	)
Development of real estate assets			(21,507	)			(28,565	)
Capital expenditures and other major improvements — real estate assets, net of escrow reimbursement			(15,506	)			(10,907	)
Capital expenditures — non-real estate assets			(863	)			(1,936	)
Investment in unconsolidated joint ventures			(2,341	)			(148	)
Distributions received from unconsolidated joint venture			333				328
Purchase deposits on pending real estate acquisitions			(17,450	)			—
Net cash used in investing activities			(56,858	)			(57,369	)
Financing Activities
Payments on secured debt			(202,312	)			(72,357	)
Proceeds from the issuance of secured debt			10,181				28,052
Proceeds from the issuance of unsecured debt			—				149,190
Payments on unsecured debt			(10,807	)			(50,000	)
Net proceeds/(repayment) of revolving bank debt			153,800				(68,300	)
Payment of financing costs			(369	)			(1,766	)
Issuance of common and restricted stock, net			3,662				3,442
Proceeds from the issuance of common shares through public offering, net			94,168				73,310
Distributions paid to non-controlling interests			(1,194	)			(1,344	)
Distributions paid to preferred stockholders			(2,368	)			(2,379	)
Distributions paid to common stockholders			(33,650	)			(28,054	)
Net cash provided by financing activities			11,111				29,794
Net increase in cash and cash equivalents			2,206				13,935
Cash and cash equivalents, beginning of period			9,486				5,985
Cash and cash equivalents, end of period		$	11,692			$	19,920
Supplemental Information:
Interest paid during the year, net of amounts capitalized		$	42,498			$	38,429
Non-cash transactions:
Issuance of restricted stock awards			4				15
Marketable securities sold prior to and settled subsequent to end of period			2,590				—
Conversion of operating partnership non-controlling interests to common stock (41,804 shares in 2010)			—				215
Retirement of fully depreciated assets			—				7,183

See accompanying notes to consolidated financial statements.

UDR, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except share and per share data)
(Unaudited)

																										Accumulated
																						Distributions in				Other				Non-
		Preferred Stock								Common Stock								Paid-in				Excess of				Comprehensive				controlling
		Shares				Amount				Shares				Amount				Capital				Net Income				Income/(Loss)				interest				Total
Balance, December 31, 2010			6,209,374			$	131,710				182,496,330			$	1,825			$	2,450,141			$	(973,864	)		$	(3,469	)		$	3,687			$	1,610,030
Comprehensive income/(loss)
Net loss			—				—				—				—				—				(27,875	)			—				—				(27,875	)
Net income attributable to non-controlling interests			—				—				—				—				—				—				—				51				51
Other comprehensive income
Unrealized gain on sale of marketable securities reclassified into earnings			—				—				—				—				—				—				(3,492	)			—				(3,492	)
Unrealized gain on derivative financial instruments			—				—				—				—				—				—				3,282				—				3,282
Allocation to redeemable non-controlling interests			—				—				—				—				—				—				(17	)			—				(17	)
Comprehensive income/(loss)																							(27,875	)			(227	)			51				(28,051	)
Issuance of common and restricted shares			—				—				733,757				7				4,550				—				—				—				4,557
Issuance of common shares through public offering			—				—				4,043,746				41				94,127				—				—				—				94,168
Common stock distributions declared ($0.185 per share)			—				—				—				—				—				(34,697	)			—				—				(34,697	)
Preferred stock distributions declared-Series E ($0.3322 per share)			—				—				—				—				—				(931	)			—				—				(931	)
Preferred stock distributions declared-Series G ($0.421875 per share)			—				—				—				—				—				(1,437	)			—				—				(1,437	)
Adjustment to reflect redemption value of redeemable non-controlling interests			—				—				—				—				—				(6,313	)			—				—				(6,313	)
Balance, March 31, 2011			6,209,374			$	131,710				187,273,833			$	1,873			$	2,548,818			$	(1,045,117	)		$	(3,696	)		$	3,738			$	1,637,326

See accompanying notes to consolidated financial statements.

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
(Unaudited)

1. CONSOLIDATION AND BASIS OF PRESENTATION

Consolidation and 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, 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”) and Heritage Communities L.P. (the “Heritage OP”). As of March 31, 2011, there were 179,909,408 units in the Operating Partnership outstanding, of which 174,847,440 units or 97.2% were owned by UDR and 5,061,968 units or 2.8% were owned by limited partners. The consolidated financial statements of UDR include the non-controlling interests of the unitholders in the Operating 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 footnote 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, 2011, and results of operations for the three months ended March 31, 2011 and 2010 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. The accompanying interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes appearing in UDR’s Annual Report on Form 10-K for the year ended December 31, 2010, filed with the Securities and Exchange Commission on February 23, 2011.

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. Certain previously reported amounts have been reclassified to conform to the current financial statement presentation.

The Company evaluated subsequent events through the date its financial statements were issued. Except as disclosed in Note 16, Subsequent Events, no other recognized or non-recognized subsequent events were noted.

2. SIGNIFICANT ACCOUNTING POLICIES

Accounting Policies

Revenue and real estate sales gain recognition

Rental income related to leases is recognized on an accrual basis when due from residents in accordance with FASB ASC 840, Leases and SEC Staff Accounting Bulletin No. 104, “Revenue Recognition”. Rental payments are generally due on a monthly basis and recognized when earned. The Company recognizes interest income, management and other fees and incentives when earned, fixed and determinable.

The Company accounts for sales of real estate in accordance with FASB ASC 360-20, Real Estate Sales. For sale transactions meeting the requirements for full accrual profit recognition, such as the Company no longer having continuing involvement in the property, we remove the related assets and liabilities from our Consolidated Balance Sheets and record the gain or loss in the period the transaction closes. For sale transactions that do not meet the full accrual sale criteria due to our continuing involvement, we evaluate the nature of the continuing involvement and account for the transaction under an alternate method of accounting.

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Sales to entities in which we retain or otherwise own an interest are accounted for as partial sales. If all other requirements for recognizing profit under the full accrual method have been satisfied and no other forms of continuing involvement are present, we recognize profit proportionate to the outside interest in the buyer and will defer the gain on the interest we retain. The Company will recognize any deferred gain when the property is then sold to a third party. In transactions accounted by us as partial sales, we determine if the buyer of the majority equity interest in the venture was provided a preference as to cash flows in either an operating or a capital waterfall. If a cash flow preference has been provided, we recognize profit only to the extent that proceeds from the sale of the majority equity interest exceed costs related to the entire property.

Marketable Securities

Marketable securities represent common stock in a publicly held company. Marketable securities are classified as “available-for-sale,” and are carried at fair value with unrealized gains and losses reported as a component of stockholders’ equity. During the three months ended March 31, 2011, the Company sold marketable securities for $3.5 million, resulting in a gross realized gain of $3.1 million, which is included in “Other Income” on the Consolidated Statements of Operations. The cost of securities sold was based on the specific identification method. Unrealized gains of $3.5 million were reclassified out of accumulated other comprehensive income/(loss) into earnings during the three months ended March 31, 2011. Of the $3.5 million of proceeds from the sale of securities, the Company recorded a trade date receivable of $3.0 million at March 31, 2011, which is included in “Other Assets” on the Consolidated Balance Sheets.

The amortization of any discount and interest income on previously held debt securities are included in “Other Income” on the Consolidated Statements of Operations for the three months ended March 31, 2010.

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 income, excise and franchise taxes. UDR has elected for certain consolidated subsidiaries to be treated as Taxable REIT Subsidiaries (“TRS”), primarily those engaged in development activities.

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 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 are generally the result of differing depreciable lives on capitalized assets and timing of expense recognition for certain accrued liabilities. As of March 31, 2011, UDR recorded a net current liability of $553,000 and a deferred tax asset of $6.6 million (net of a valuation allowance of $58.3 million). For the three months ended March 31, 2011 and 2010, UDR recorded income tax expense of $86,000 and $65,000, respectively, which is classified in “General and Administrative” expenses.

FASB ASC 740, Income Taxes (“Topic 740”) 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. Topic 740 also provides guidance on derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition.

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company recognizes its tax positions and evaluates them using a two-step process. First, we determine 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. Then 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.

UDR had no unrecognized tax benefit, accrued interest or penalties at March 31, 2011. UDR and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The tax years 2006 — 2010 remain open to examination by the major taxing jurisdictions to which we are subject. When applicable, UDR recognizes interest and/or penalties related to uncertain tax positions in income tax expense.

3. REAL ESTATE OWNED

Real estate assets owned by the Company consist of income producing operating properties, properties under development and land held for future development. As of March 31, 2011 the Company owned and consolidated 172 communities in 10 states plus the District of Columbia totaling 48,553 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of March 31, 2011 and December 31, 2010 (dollar amounts in thousands):

		March 31,				December 31,
		2011				2010
Land		$	1,703,263			$	1,699,400
Depreciable property — held and used:
Building and improvements			4,539,043				4,522,131
Furniture, fixtures and equipment			299,921				297,564
Under development:
Land			62,410				62,410
Construction in progress			50,127				35,502
Held for disposition:
Land			84,316				84,307
Building and improvements			174,405				174,283
Furniture, fixtures and equipment			5,837				5,750
Real estate owned			6,919,322				6,881,347
Accumulated depreciation			(1,719,051	)			(1,638,326	)
Real estate owned, net		$	5,200,271			$	5,243,021

The Company did not acquire any properties during the three months ended March 31, 2011 and 2010.

4. DISCONTINUED OPERATIONS

Discontinued operations represent properties that UDR has either sold or which management believes meet the criteria to be classified as held for sale. In order to be classified as held for sale and reported as discontinued operations, a property’s operations and cash flows have been or will be divested to a third party by the Company whereby UDR will not have any significant continuing involvement in the ownership or operation of the property after the sale or disposition. The results of operations of the property are presented as discontinued operations for all periods presented and do not impact the net earnings reported by the Company. Once a property is deemed as held for sale, depreciation is no longer recorded. However, if the Company determines that the property no longer meets the criteria of held for sale, the Company will recapture any unrecorded depreciation for the property. The assets and liabilities of properties classified as held for sale are presented separately on the Consolidated Balance Sheets at the lower of their carrying amount or their estimated fair value less the costs to sell the assets.

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company had six communities with 1,418 apartment homes classified as held for disposition at March 31, 2011. The Company did not dispose of any communities during the three months ended March 31, 2011 and 2010. Discontinued operations for the three months ended March 31, 2010 also includes operating activities related to one 149 unit community sold during the third quarter of 2010.

The following is a summary of income from discontinued operations for the three months ended March 31, 2011 and 2010 (dollars in thousands):

		Three Months Ended
		March 31,
		2011				2010
Rental income		$	5,982			$	6,476
Non-property income			—				1,849
			5,982				8,325
Rental expenses			1,882				2,000
Property management fee			165				178
Real estate depreciation			2,254				3,070
Interest			751				766
			5,052				6,014
Income before net gain on the sale of depreciable property			930				2,311
Net gain/(loss) on the sale of depreciable property			41				(41	)
Income from discontinued operations		$	971			$	2,270

5. JOINT VENTURES

UDR has entered into joint ventures with unrelated third parties for real estate assets that are either consolidated and included in real estate owned on our Consolidated Balance Sheets or are accounted for under the equity method of accounting, which are not consolidated and are included in investment in unconsolidated joint ventures on our Consolidated Balance Sheets. The Company consolidates an entity in which we own less than 100% but control the joint venture as well as any variable interest entity where we are the primary beneficiary. In addition, the Company consolidates any joint venture in which we are the general partner or managing member and the third party does not have the ability to substantively participate in the decision-making process nor do they have the ability to remove us as general partner or managing member without cause.

UDR’s joint ventures are funded with a combination of debt and equity. Our losses are 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 venture portfolio.

Consolidated Joint Ventures

UDR is a partner with an unaffiliated third party in a joint venture (“989 Elements”) which owns and operates a 23-story, 166 home high-rise apartment community in the central business district of Bellevue, Washington. In March 2010, the Company paid $7.7 million to acquire our partner’s 49% interest in the joint venture. At March 31, 2011 and December 31, 2010, the Company’s interest in 989 Elements was 98%.

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

UDR is a partner with an unaffiliated third party in a joint venture (“Elements Too”) which owns and operates a 274 home apartment community in the central business district of Bellevue, Washington. Construction began in the fourth quarter of 2006 and was completed in the first quarter of 2010. In March 2010, the Company paid $3.2 million to acquire our partner’s 49% interest in the joint venture. At March 31, 2011 and December 31, 2010, the Company’s interest in Elements Too was 98%.

UDR is a partner with an unaffiliated third party in a joint venture (“Bellevue”) which owns an operating retail site in Bellevue, Washington. The Company initially planned to develop a 430 home high rise apartment building with ground floor retail on an existing operating retail center. However, the joint venture subsequently decided to continue to operate the retail property as opposed to developing a high rise apartment building on the site. In March 2010, the Company paid $5.2 million to acquire our partner’s 49% interest in the joint venture. At March 31, 2011 and December 31, 2010, the Company’s interest in Bellevue was 98%.

Unconsolidated Joint Ventures

The Company recognizes earnings or losses from our investments in unconsolidated joint ventures consisting of our proportionate share of the net earnings or loss of the joint ventures. In addition, we may earn fees for providing management services to the unconsolidated joint ventures. As of March 31, 2011, UDR had investments in the following unconsolidated joint ventures which are accounted for under the equity method of accounting.

In November 2010, the Company acquired The Hanover Company’s (“Hanover”) partnership interests in the Hanover/MetLife Master Limited Partnership (the“UDR/MetLife Partnership”). The UDR/MetLife Partnership owns a portfolio of 26 operating communities containing 5,748 apartment homes and 11 land parcels with the potential to develop approximately 2,300 additional apartment homes. Under the terms of the UDR/MetLife Partnership, UDR acts as the general partner and earns fees for property and asset management and financing transactions.

UDR acquired a weighted average ownership interest of 12.27% in the operating communities and 4.14% in the land parcels for $100.8 million. The initial investment of $100.8 million consists of $71.8 million in cash, which includes associated transaction costs, and a $30 million payable (includes present value discount of $1 million) to Hanover. UDR agreed to pay the $30 million balance to Hanover in two interest free installments in the amounts of $20 million and $10 million on the first and second anniversaries of the closing, respectively. The $30 million payable was recorded at its present value of $29 million using an effective interest rate of 2.67%. At March 31, 2011 and December 31, 2010, the net carrying value of the payable was $29.3 million and $29.1 million, respectively. Interest expense of $195,000 was recorded during the three months ended March 31, 2011. At March 31, 2011 and December 31, 2010, the Company’s investment was $121.9 million and $122.2 million, respectively.

UDR’s total cost of its equity investment of $100.8 million differed from the proportionate share in the underlying net assets of the UDR/MetLife Partnership of $111.4 million. The difference of $10.6 million was attributable to certain assets and adjustments were allocated to UDR’s proportionate share in the UDR/MetLife Partnership’s buildings of $8.4 million, land of $3.9 million, and ($1.6 million) of lease intangible assets. With the exception of land, the difference related to buildings is amortized and recorded as a component of loss from unconsolidated entities over 45 years and the difference related to lease intangible assets is amortized and recorded as a component of loss from unconsolidated entities over 11 months with the offset to the Company’s carrying value of its equity investment. During the three months ended March 31, 2011, the Company recorded $396,000 of amortization.

In connection with the purchase of Hanover’s interests in the UDR/MetLife Partnership, UDR agreed to indemnify Hanover from liabilities from Hanover’s guaranty of $304 million in loans ($333 million outstanding at March 31, 2011) which are secured by a security interest in the operating communities subject to the respective loans. The loans are to the sub-tier partnerships which own the 26 operating communities. The Company anticipates that the balance of these loans will be refinanced by the UDR/MetLife Partnership over the next twelve months.

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In October 2010, the Company entered into a joint venture with an affiliate of Hanover to develop a 240-home community in Stoughton, Massachusetts. At March 31, 2011 and December 31, 2010, UDR owned a noncontrolling interest of 95% in the joint venture. Our initial investment was $10 million. Our investment at March 31, 2011 and December 31, 2010 was $12.8 million and $10.3 million, respectively.

UDR is a partner with an unaffiliated third party, which formed a joint venture for the investment of up to $450 million in multifamily properties located in key, high barrier to entry markets. The partners will contribute equity of $180 million of which the Company’s maximum equity will be 30% or $54 million when fully invested. In 2010, the joint venture acquired its first property (151 homes) located in Metropolitan Washington D.C.. At March 31, 2011 and December 31, 2010, the Company owned a 30% interest in the joint venture. Our investment at March 31, 2011 and December 31, 2010 was $5.1 million and $5.2 million, respectively.

UDR is a partner with an unaffiliated third party which owns and operates 10 operating properties located in Texas (3,992 homes). UDR contributed cash and a property equal to 20% of the fair value of the properties. The unaffiliated member contributed cash equal to 80% of the fair value of the properties comprising the joint venture, which was then used to purchase the nine operating properties from UDR. Our initial investment was $20.4 million. Our investment at March 31, 2011 and December 31, 2010 was $9.3 million and $10.3 million, respectively.

We evaluate our investments in unconsolidated joint ventures 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 decrease in the value of its other investments in unconsolidated joint ventures during the three months ended March 31, 2011 and 2010.

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

		2011				2010
Revenues		$	46,591			$	10,003
Real estate depreciation and amortization			16,601				5,043
Net loss			5,589				3,614
UDR recorded loss from unconsolidated entities			1,332				737

Combined summary balance sheets relating to all of the unconsolidated joint ventures (not just our proportionate share) are presented below as of March 31, 2011 and December 31, 2010 (dollars in thousands):

		March 31,				December 31,
		2011				2010
Real estate, net		$	2,679,770			$	2,692,167
Total assets			2,801,354				2,807,886
Amount due to UDR			3,305				672
Third party debt			1,551,266				1,524,872
Total liabilities			1,579,270				1,580,733
Non-controlling interest			14,582				14,537
Equity			1,207,502				1,212,616

As of March 31, 2011, the Company had deferred fees and deferred profit from the sale of properties to a joint venture of $28.8 million, which the Company will not recognize until the underlying property is sold to a third party. The Company recognized $1.3 million and $391,000 of management fees during the three months ended March 31, 2011 and 2010, respectively, for our management of the joint ventures.

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

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6. SECURED DEBT

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 of 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 Company having effectively established a fixed interest rate for the underlying debt instrument. Secured debt which encumbers $2.8 billion or 40.3% of UDR’s real estate owned based upon book value ($4.1 billion or 59.7% of UDR’s real estate owned is unencumbered) consists of the following as of March 31, 2011 (dollars in thousands):

										2011
		Principal Outstanding								Weighted				Weighted				Number of
		March 31,				December 31,				Average				Average				Communities
		2011				2010				Interest Rate				Years to Maturity				Encumbered
Fixed Rate Debt
Mortgage notes payable		$	317,812			$	292,236				4.71	%			3.1				8
Tax-exempt secured note payable			—				13,325				N/A				—				—
Fannie Mae credit facilities			896,596				897,318				5.32	%			6.1				14
Total fixed rate secured debt			1,214,408				1,202,879				5.16	%			5.4				22
Variable Rate Debt
Mortgage notes payable			201,992				405,641				2.27	%			3.2				9
Tax-exempt secured notes payable			94,700				94,700				1.01	%			19.0				2
Fannie Mae credit facilities			260,450				260,450				1.67	%			4.9				32
Total variable rate secured debt			557,142				760,791				1.78	%			6.7				43
Total secured debt		$	1,771,550			$	1,963,670				4.10	%			5.8				65

UDR has five secured credit facilities with Fannie Mae with an aggregate commitment of $1.4 billion at March 31, 2011. The Fannie Mae credit facilities are for an initial term of 10 years, bear interest at floating and fixed rates, and certain variable rate facilities can be extended for an additional five years at our option. We have $896.6 million of the outstanding balance fixed at a weighted average interest rate of 5.32% and the remaining balance on these facilities is currently at a weighted average variable interest rate of 1.67%.

		March 31, 2011				December 31, 2010
		(dollar amounts in thousands)
Borrowings outstanding		$	1,157,046			$	1,157,768
Weighted average borrowings during the period ended			1,157,316				1,198,771
Maximum daily borrowings during the period ended			1,157,557				1,209,739
Weighted average interest rate during the period ended			4.5	%			4.6	%
Weighted average interest rate at the end of the period			4.5	%			4.5	%

The Company will 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 unamortized fair market adjustment was a net discount of $617,000 and $694,000 at March 31, 2011 and December 31, 2010, respectively.

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fixed Rate Debt

Mortgage notes payable. Fixed rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from August 2011 through February 2017 and carry interest rates ranging from 1.93% to 6.60%. Mortgage notes payable includes debt associated with development activities.

Secured credit facilities. At March 31, 2011, the Company had $896.6 million outstanding of fixed rate secured credit facilities with Fannie Mae with a weighted average fixed interest rate of 5.32%.

Variable Rate Debt

Mortgage notes payable. Variable rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from August 2011 through April 2016. The mortgage notes payable are based on LIBOR plus basis points, which translate into interest rates ranging from 0.99% to 3.89% at March 31, 2011.

Tax-exempt secured notes payable. The variable rate mortgage notes payable that secure tax-exempt housing bond issues mature at various dates from August 2019 and March 2030. Interest on these notes is payable in monthly installments. The variable mortgage notes have interest rates ranging from 0.99% to 1.05% as of March 31, 2011.

Secured credit facilities. At March 31, 2011, the Company had $260.5 million outstanding of variable rate secured credit facilities with Fannie Mae with a weighted average floating interest rate of 1.67%.

The aggregate maturities, including amortizing principal payments, of our secured debt due during each of the next five calendar years and thereafter are as follows (dollars in thousands):

		Fixed								Variable
		Mortgage				Credit				Mortgage				Tax-Exempt				Credit				Total
Year		Notes				Facilities				Notes				Notes Payable				Facilities				Secured
2011		$	39,584			$	2,087			$	42,394			$	—			$	39,513			$	123,578
2012			57,373				177,944				1,060				—				59,529				295,906
2013			62,021				38,631				45,838				—				—				146,490
2014			65,383				3,328				36,081				—				—				104,792
2015			403				3,522				16,402				—				—				20,327
Thereafter			93,048				671,084				60,217				94,700				161,408				1,080,457
Total		$	317,812			$	896,596			$	201,992			$	94,700			$	260,450			$	1,771,550

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7. UNSECURED DEBT

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

		March 31,				December 31,
		2011				2010
Commercial Banks
Borrowings outstanding under an unsecured credit facility due July 2012 (a)			185,550			$	31,750
Senior Unsecured Notes
3.625% Convertible Senior Notes due September 2011 (net of Subtopic 470-20 discount of $779 and $1,138) (b), (f)			96,320				95,961
5.00% Medium-Term Notes due January 2012			100,000				100,000
3.02% Term Notes due December 2013			100,000				100,000
6.05% Medium-Term Notes due June 2013			122,500				122,500
5.13% Medium-Term Notes due January 2014			184,000				184,000
5.50% Medium-Term Notes due April 2014 (net of discount of $209 and $226 )			128,291				128,274
5.25% Medium-Term Notes due January 2015 (includes discount of $487 and $519) (c)			324,689				324,656
5.25% Medium-Term Notes due January 2016			83,260				83,260
2.27% Term Notes due January 2016 (d)			—				150,000
3.48% Term Notes due January 2016 (d)			250,000				100,000
8.50% Debentures due September 2024			15,644				15,644
4.00% Convertible Senior Notes due December 2035 (e), (f)			156,944				167,750
Other			38				39
			1,561,686				1,572,084
		$	1,747,236			$	1,603,834

(a)		Our unsecured credit facility provides us with an aggregate borrowing capacity of $600 million, which at our election we can increase to $750 million under certain circumstances. Our unsecured credit facility with a consortium of financial institutions carries an interest rate equal to LIBOR plus a spread of 47.5 basis points (0.7% and 0.9% interest rate at March 31, 2011 and December 31, 2010, respectively) and matures in July 2012. In addition, the unsecured credit facility contains a provision that allows us to bid up to 50% of the commitment and we can bid out the entire unsecured credit facility once per quarter so long as we maintain an investment grade rating.
(b)		Subject to the restrictions on ownership of our common stock and certain other conditions, at any time on or after July 15, 2011 and prior to the close of business on the second business day prior to the maturity date of September 15, 2011, and also following the occurrence of certain events, holders of outstanding 3.625% notes may convert their notes into cash and, if applicable, shares of our common stock, at the conversion rate in effect at such time. Upon conversion of the notes, UDR will deliver cash and common stock, if any, based on a daily conversion value calculated on a proportionate basis for each trading day of the relevant 30 trading day observation period. The initial conversion rate for each $1,000 principal amount of notes was 26.6326 shares of our common stock (equivalent to an initial conversion price of approximately $37.55 per share), subject to adjustment under certain circumstances. If UDR undergoes certain change in control transactions, holders of the 3.625% notes may require us to repurchase their notes in whole or in part for cash equal to 100% of the principal amount of the notes to be repurchased plus any unpaid interest accrued to the repurchase date. In connection with the issuance of the 3.625% notes, UDR entered into a capped call transaction covering approximately 6.7 million shares of our common stock, subject to anti-dilution adjustments similar to those contained in the notes. The capped call expires on the maturity date of the 3.625% notes. The capped call transaction combines a purchased call option with a strike price of $37.548 with a written call option with a strike price of $43.806. The capped call transaction effectively increased the initial conversion price to $43.806 per share, representing a 40% conversion premium. The net cost of approximately $12.6 million of the capped call transaction was included in stockholders’ equity.

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(c)		On December 7, 2009, the Company entered into an Amended and Restated Distribution Agreement with respect to the issue and sale by the Company from time to time of its Medium-Term Notes, Series A Due Nine Months or More From Date of Issue. During the three months ended March 31, 2010, the Company issued $150 million of 5.25% senior unsecured medium-term notes under the Amended and Restated Distribution Agreement. These notes were priced at 99.46% of the principal amount at issuance and had a discount of $487,000 at March 31, 2011.
(d)		During the three months ended March 31, 2011, the Company entered into an interest rate swap agreement for the remaining $150 million balance. As a result, the $250 million term notes carry a fixed interest rate of 3.48% at March 31, 2011.
(e)		During the three months ended March 31, 2011, holders of the 4.00% Convertible Senior Notes due 2035 tendered $10.8 million of Notes. As a result, the Company retired debt with a notional value of $10.8 million and wrote off unamortized financing costs of $207,000.
		On March 2, 2011, the Company called all of its outstanding 4.00% Convertible Senior Notes due 2035. The redemption date for the Notes was April 4, 2011, and the redemption price was 100% of the principal amount of the outstanding Notes, plus accrued and unpaid interest on the Notes to, but not including, the date of redemption. Subject to and in accordance with the terms and conditions set forth in the Indenture governing the Notes dated as of December 19, 2005, holders of Notes had the right to convert their Notes at any time until March 31, 2011, at a conversion rate of 38.8650 shares of our common stock per $1,000 principal amount of Notes (equivalent to a conversion price of approximately $25.73 per share. The Company accelerated the amortization of the remaining financing costs of $3.0 million to the April 4, 2011 redemption date during the three months ended March 31, 2011.
(f)		ASC Subtopic 470-20 applies to all convertible debt instruments that have a “net settlement feature”, which means that such convertible debt instruments, by their terms, may be settled either wholly or partially in cash upon conversion. This guidance requires issuers of convertible debt instruments that may be settled wholly or partially in cash upon conversion to separately account for the liability and equity components in a manner reflective of the issuers’ nonconvertible debt borrowing rate. The guidance impacted the historical accounting for the 3.625% convertible senior notes due September 2011 and the 4.00% convertible senior notes due December 2035, and resulted in increased interest expense of $359,000 and $967,000 for the three months ended March 31, 2011 and 2010, respectively.

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

		March 31,				December 31,
		2011				2010
Total revolving credit facility		$	600,000			$	600,000
Borrowings outstanding at end of period (1)			185,550				31,750
Weighted average daily borrowings during the period ended			165,379				161,260
Maximum daily borrowings during the period ended			280,700				337,600
Weighted average interest rate during the period ended			0.8	%			0.8	%
Interest rate at end of the period			0.7	%			0.9	%

(1)		Excludes $1.7 million of letters of credit at March 31, 2011.

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The convertible notes are convertible at the option of the holder, and as such are presented as if the holder will convert the debt instrument at the earliest available date. The aggregate maturities of unsecured debt for the five years subsequent to March 31, 2011 are as follows (dollars in thousands):

		Bank				Unsecured				Total
Year		Lines				Debt				Unsecured
2011 (a)		$	—			$	253,121			$	253,121
2012			185,550				99,808				285,358
2013			—				222,308				222,308
2014			—				312,354				312,354
2015			—				325,167				325,167
Thereafter			—				348,928				348,928
Total		$	185,550			$	1,561,686			$	1,747,236

(a)		Includes $156.9 million of 4.00% Convertible Senior Notes due December 2035 which were paid in full subsequent to March 31, 2011.

We were in compliance with the covenants of our debt instruments at March 31, 2011.

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

8. LOSS PER SHARE

Basic and diluted loss per common share are computed based upon the weighted average number of common shares outstanding during the period as the effect of adding stock options and other common stock equivalents such as the non-vested restricted stock awards is anti-dilutive.

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

		Three Months Ended
		March 31,
		2011				2010
Numerator for earnings per share — basic and diluted:
Net loss attributable to common stockholders		$	(30,243	)		$	(26,435	)
Denominator for earnings per share — basic and diluted:
Weighted average common shares outstanding			183,863				157,192
Non-vested restricted stock awards			(1,332	)			(1,061	)
Denominator for basic and diluted earnings per share			182,531				156,131
Net loss attributable to common stockholders- basic and diluted		$	(0.17	)		$	(0.17	)

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of the conversion of the OP Units, convertible preferred stock, convertible debt, stock options and restricted stock is not dilutive and is therefore not included in the above calculations as the Company reported a loss from continuing operations.

If the OP Units were converted to common stock, the additional weighted average common shares outstanding for the three months ended March 31, 2011 and 2010 would be 5,061,968 and 5,975,967, respectively.

If the convertible preferred stock were converted to common stock, the additional shares of common stock outstanding for the three months ended March 31, 2011 and 2010 would be 3,035,548 weighted average common shares.

The dilution from stock options and unvested restricted stock and stock options would be an additional 1,882,083 and 1,514,041 weighted average common shares for the three months ended March 31, 2011 and 2010, respectively.

9. NONCONTROLLING INTERESTS

Redeemable noncontrolling interests in operating partnerships

Interests in operating partnerships held by limited partners are represented by operating partnership units (“OP Units”). The income is allocated to holders of OP Units based upon net income attributable to common stockholders and the weighted average number of OP Units outstanding to total common shares plus OP Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to non-controlling interests in accordance with the terms of the individual partnership agreements.

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 limited partnership agreement of the Operating Partnership (the “Partnership Agreement”), provided that such OP Units have been outstanding for at least one year. UDR, as the 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 the Company for each OP Unit), as defined in the Partnership Agreement. Accordingly, the Company records the OP Units outside of permanent equity and reports the OP Units at their redemption value using the Company’s stock price at each balance sheet date.

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

Redeemable noncontrolling interests in the OP, December 31, 2010		$	119,057
Mark to market adjustment to redeemable noncontrolling interests in the OP			6,313
Net loss attributable to redeemable noncontrolling interests in the OP			(832	)
Distributions to redeemable noncontrolling interests in the OP			(1,195	)
Allocation of other comprehensive (loss)/income			17
Redeemable noncontrolling interests in the OP, March 31, 2011		$	123,360

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following sets forth net loss attributable to common stockholders and transfers from redeemable noncontrolling interests in the Operating Partnership for the following periods (dollars in thousands):

		Three Months Ended March 31,
		2011				2010
Net loss attributable to common stockholders		$	(30,243	)		$	(26,435	)
Conversion of OP units to UDR Common Stock			—				215
Change in equity from net (loss)/income attributable to common stockholders and conversion of OP units to UDR Common Stock		$	(30,243	)		$	(26,220	)

Non-controlling interests

Non-controlling interests represent interests of unrelated partners in certain consolidated affiliates, and is presented as part of equity in the Consolidated Balance Sheets since these interests are not redeemable into any other ownership interests of the Company. During the three months ended March 31, 2011 and 2010, net income attributable to non-controlling interests was $51,000 and $35,000, respectively.

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.

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The estimated fair values of the Company’s financial instruments either recorded or disclosed on a recurring basis as of March 31, 2011 and December 31, 2010 are summarized as follows (dollars in thousands):

						Fair Value at March 31, 2011 Using
						Quoted Prices in
						Active Markets
						for Identical				Significant Other				Significant
						Assets or				Observable				Unobservable
						Liabilities				Inputs				Inputs
		March 31, 2011				(Level 1)				(Level 2)				(Level 3)
Description:
Derivatives- Interest rate contracts (c)		$	1,663			$	—			$	1,663			$	—
Total assets		$	1,663			$	—			$	1,663			$	—
Derivatives- Interest rate contracts (c)		$	4,489			$	—			$	4,489			$	—
Contingent purchase consideration (d)			5,402				—				—				5,402
Secured debt instruments- fixed rate: (a)
Mortgage notes payable			331,314				—				—				331,314
Fannie Mae credit facilities			927,091				—				—				927,091
Secured debt instruments- variable rate: (a)
Mortgage notes payable			201,992				—				—				201,992
Tax-exempt secured notes payable			94,700				—				—				94,700
Fannie Mae credit facilities			260,450				—				—				260,450
Unsecured debt instruments: (b)
Commercial bank			185,550				—				—				185,550
Senior Unsecured Notes			1,618,168				254,043				—				1,364,125
Total liabilities		$	3,629,156			$	254,043			$	4,489			$	3,370,624

						Fair Value at December 31, 2010 Using
						Quoted Prices in
						Active Markets
						for Identical				Significant Other				Significant
						Assets or				Observable				Unobservable
						Liabilities				Inputs				Inputs
		December 31, 2010				(Level 1)				(Level 2)				(Level 3)
Description:
Available-for-sale equity securities		$	3,866			$	3,866			$	—			$	—
Derivatives- Interest rate contracts (c)			514				—				514				—
Total assets		$	4,380			$	3,866			$	514			$	—
Derivatives- Interest rate contracts (c)		$	6,597			$	—			$	6,597			$	—
Contingent purchase consideration (d)			5,402				—				—				5,402
Secured debt instruments- fixed rate: (a)
Mortgage notes payable			306,515				—				—				306,515
Tax-exempt secured notes payable			13,885				—				—				13,885
Fannie Mae credit facilities			927,413				—				—				927,413
Secured debt instruments- variable rate: (a)
Mortgage notes payable			405,641				—				—				405,641
Tax-exempt secured notes payable			94,700				—				—				94,700
Fannie Mae credit facilities			260,450				—				—				260,450
Unsecured debt instruments: (b)
Commercial bank			31,750				—				—				31,750
Senior Unsecured Notes			1,625,492				264,849				—				1,360,643
Total liabilities		$	3,677,845			$	264,849			$	6,597			$	3,406,399