UDR

UDR, Inc. 10-Q Filing Summary

Business Context and Reporting Period

Company: UDR, Inc. (REIT)
Reporting Period: Quarter and six months ended June 30, 2007
Business Overview: UDR owns, acquires, renovates, develops, and manages apartment communities nationwide. As of June 30, 2007, the portfolio consisted of 249 communities with 71,290 apartment homes. The company operates through two primary operating partnerships: United Dominion Realty, L.P. and Heritage Communities L.P.

Key Financial Metrics

Note: Total Debt includes $1,254,612 in secured debt and $2,339,752 in unsecured debt.

Material Changes vs. Prior Period

• Net Income Decline: Net income available to common stockholders decreased to $28.8 million ($0.21 per share) for the six months ended June 30, 2007, compared to $36.5 million ($0.27 per share) in the prior year period. This decrease was primarily driven by a $10.8 million increase in real estate depreciation and amortization and a $5.8 million increase in general and administrative expenses.
• Operating Performance: Despite the net income decline, property operating income increased 1.6% to $233.9 million. Same-community property operating income increased 6.7%, driven by a 4.8% increase in rental rates.
• Discontinued Operations: The company recognized after-tax gains of $50.5 million from the sale of three communities, 22 condominiums, and one parcel of land. This compares to $48.8 million in gains for the same period in 2006.
• Capital Expenditures: Total capital improvements increased 3.7% to $104.2 million, largely due to a 141.1% increase in major renovations ($42.4 million) and a 114.3% increase in recurring capital expenditures.

Guidance, Outlook, and Risks

Capital Strategy: UDR plans to continue channeling investments into strategic markets (Southern California, Florida, Texas, and Metropolitan Washington DC). The company intends to use proceeds from dispositions to reduce debt, acquire communities, and fund development. Future development expenditures are expected to be funded by property sales, construction loans, joint ventures, and credit facilities.

Debt Management: Approximately $79.8 million of secured debt and $75.4 million of unsecured debt are scheduled to mature in the remainder of 2007. The company anticipates repaying these via borrowings, new issuances, or disposition proceeds.

Subsequent Event: On July 27, 2007, UDR amended its senior unsecured revolving credit facility, increasing the capacity from $500 million to $600 million and extending the maturity to July 26, 2012. The interest rate spread was reduced by 10 basis points.

Risks: Key risks include unfavorable changes in apartment market conditions affecting occupancy and rental rates, refinancing risk, development and construction risks, and potential liability for environmental contamination. The company also notes risks associated with failing to qualify as a REIT.

Investor Verification Checklist

• Debt Maturities: Verify the company's ability to refinance or repay the ~$155 million in debt maturing in late 2007.
• Development Pipeline: Review the status of the $436 million in committed costs for wholly owned development and the $204 million for joint ventures.
• Preferred Stock Swap: Confirm the impact of redeeming Series B preferred stock ($135.4 million) and issuing Series G preferred stock ($135 million) on future dividend obligations.
• Same-Store Growth: Monitor the sustainability of the 4.8% rental rate increase in same-community operations against rising operating expenses (specifically insurance and maintenance).
• Discontinued Operations: Assess the reliance on gains from property sales ($50.5 million) to support net income, as these are non-recurring.