Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20132014
OR
o 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)
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 x No o
United Dominion Realty, L.P. 
Yes x 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 x No o
United Dominion Realty, L.P. 
Yes x 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 x
 
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 x
 
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 x
United Dominion Realty, L.P. 
Yes o No x
The number of shares of UDR, Inc.’s common stock, $0.01 par value, outstanding as of October 25, 201327, 2014 was 250,739,165.255,217,903.

Table of Contents

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 September 30, 20132014 (unaudited) and December 31, 20122013 (audited) 
4
  
Consolidated Statements of Operations for the three and nine months ended September 30, 20132014 and 20122013 (unaudited)
5
  
Consolidated Statements of Comprehensive Income/(Loss) for the three and nine months ended September 30, 20132014 and 20122013 (unaudited)
6
  
Consolidated Statement of Changes in Equity for the nine months ended September 30, 20132014 (unaudited)
7
  
Consolidated Statements of Cash Flows for the nine months ended September 30, 20132014 and 20122013 (unaudited)
8
  
Notes to Consolidated Financial Statements (unaudited)
9
  
UNITED DOMINION REALTY, L.P.:
 
  
Consolidated Balance Sheets as of September 30, 20132014 (unaudited) and December 31, 20122013 (audited) 
3836
  
Consolidated Statements of Operations for the three and nine months ended September 30, 20132014 and 20122013 (unaudited)
3937
  
Consolidated Statements of Comprehensive Income/(Loss) for the three and nine months ended September 30, 20132014 and 20122013 (unaudited)
4038
  
Consolidated Statement of Changes in Capital for the nine months ended September 30, 20132014 (unaudited)
4139
  
Consolidated Statements of Cash Flows for the nine months ended September 30, 20132014 and 20122013 (unaudited)
4240
  
Notes to Consolidated Financial Statements (unaudited)
4341
  
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
6459
  
Item 3. Quantitative and Qualitative Disclosures About Market Risk
9084
  
Item 4. Controls and Procedures
9084
  
PART II — OTHER INFORMATION
  
Item 1. Legal Proceedings
9186
  
Item 1A. Risk Factors
9186
  
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
10399
  
Item 3. Defaults Upon Senior Securities
104100
  
Item 4. Mine Safety Disclosures
104100
  
Item 5. Other Information
105101
  
Item 6. Exhibits
105101
  
Signatures
106102
  
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 

Table of Contents

EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the quarter ended September 30, 20132014 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 the Operating Partnership. 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 are referred to as the “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, including its taxable REIT subsidiary (“TRS”), RE3, whose activities include development of land and land entitlement. 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 September 30, 20132014, UDR owned 110,883 units (100%) of the general partnership interests of the Operating Partnership and 174,846,997174,000,344 units (or approximately 94.9%(approximately 95.0%) of the limited partnership interests of 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 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.





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

September 30,
2013		 December 31,
2012		September 30,
2014		 December 31,
2013
(unaudited) (audited)(unaudited) (audited)
ASSETS      
Real estate owned:      
Real estate held for investment$7,626,586
 $7,564,780
$8,106,684
 $7,723,844
Less: accumulated depreciation(2,153,141) (1,923,429)(2,378,520) (2,200,815)
Real estate held for investment, net5,473,445
 5,641,351
5,728,164
 5,523,029
Real estate under development (net of accumulated depreciation of $2,524 and $1,253)486,948
 489,795
Real estate under development (net of accumulated depreciation of $513 and $1,411, respectively)321,094
 466,002
Real estate held for disposition (net of accumulated depreciation of $0 and $6,568, respectively)—
 10,152
Total real estate owned, net of accumulated depreciation5,960,393
 6,131,146
6,049,258
 5,999,183
   
Cash and cash equivalents11,149
 12,115
14,605
 30,249
Restricted cash23,022
 23,561
23,969
 22,796
Deferred financing costs, net27,269
 24,990
24,344
 26,924
Notes receivable, net66,707
 64,006
18,318
 83,033
Investment in and advances to unconsolidated joint ventures, net531,712
 477,631
650,441
 507,655
Other assets135,814
 125,654
117,153
 137,882
Total assets$6,756,066
 $6,859,103
$6,898,088
 $6,807,722
      
LIABILITIES AND EQUITY      
   
Liabilities:      
Secured debt$1,381,794
 $1,430,135
$1,399,372
 $1,442,077
Unsecured debt2,081,378
 1,979,198
2,228,820
 2,081,626
Real estate taxes payable29,052
 14,076
29,403
 13,847
Accrued interest payable26,702
 30,937
27,131
 32,279
Security deposits and prepaid rent26,757
 25,025
32,710
 27,203
Distributions payable61,907
 57,915
69,487
 61,907
Accounts payable, accrued expenses, and other liabilities98,607
 104,567
82,233
 118,682
Total liabilities3,706,197
 3,641,853
3,869,156
 3,777,621
      
Commitments and contingencies (Note 12)

 



 

      
Redeemable noncontrolling interests in the Operating Partnership220,964
 223,418
249,814
 217,597
      
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, 2012)46,571
 46,571
Common stock, $0.01 par value; 350,000,000 shares authorized 250,743,021 shares issued and outstanding (250,139,408 shares at December 31, 2012)2,507
 2,501
Preferred stock, no par value; 50,000,000 shares authorized:

 

8.00% Series E Cumulative Convertible; 2,803,812 shares issued and outstanding at September 30, 2014 and December 31, 201346,571
 46,571
Common stock, $0.01 par value; 350,000,000 shares authorized; 255,215,905 and 250,749,665 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively2,552
 2,507
Additional paid-in capital4,106,751
 4,098,882
4,223,893
 4,109,765
Distributions in excess of net income(1,321,202) (1,143,781)(1,493,890) (1,342,070)
Accumulated other comprehensive loss, net(6,608) (11,257)
Accumulated other comprehensive income/(loss), net(866) (5,125)
Total stockholders’ equity2,828,019
 2,992,916
2,778,260
 2,811,648
Noncontrolling interests886
 916
858
 856
Total equity2,828,905
 2,993,832
2,779,118
 2,812,504
Total liabilities and equity$6,756,066
 $6,859,103
$6,898,088
 $6,807,722
See accompanying notes to consolidated financial statements.

4
UDR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

 Three Months Ended September 30, Nine Months Ended September 30,
 2013 2012 2013 2012 Three Months Ended September 30, Nine Months Ended September 30,
         2014 2013 2014 2013
REVENUES:                
Rental income $190,379
 $181,766
 $563,293
 $531,483
 $203,587
 $187,917
 $598,898
 $556,163
        
Joint venture management and other fees 3,207
 3,320
 9,347
 9,026
 3,165
 3,207
 9,599
 9,347
Total revenues 193,586
 185,086
 572,640
 540,509
 206,752
 191,124
 608,497
 565,510
                
OPERATING EXPENSES:                
Property operating and maintenance 37,388
 36,839
 109,607
 106,835
 39,086
 36,686
 112,646
 107,660
Real estate taxes and insurance 24,348
 22,633
 71,074
 65,079
 24,697
 24,080
 73,844
 70,288
Property management 5,236
 4,998
 15,491
 14,615
 5,598
 5,168
 16,470
 15,295
Other operating expenses 1,787
 1,467
 5,237
 4,284
 2,009
 1,775
 6,097
 5,211
Real estate depreciation and amortization 84,266
 88,223
 252,839
 260,604
 89,339
 83,738
 266,748
 251,231
General and administrative 11,364
 10,022
 30,706
 33,139
 11,554
 11,364
 36,078
 30,706
Hurricane-related (recoveries)/charges, net (6,460) —
 (12,253) —
Casualty-related (recoveries)/charges, net —
 (6,460) 500
 (12,253)
Other depreciation and amortization 1,176
 1,078
 3,460
 3,013
 1,385
 1,176
 3,658
 3,460
Total operating expenses 159,105
 165,260
 476,161
 487,569
 173,668
 157,527
 516,041
 471,598
                
Operating income 34,481
 19,826
 96,479
 52,940
 33,084
 33,597
 92,456
 93,912
                
Income/(loss) from unconsolidated entities (3,794) (719) (6,081) (5,822) (939) (3,794) (4,932) (6,081)
Interest expense (30,939) (31,845) (92,723) (108,132) (33,087) (30,939) (97,662) (92,723)
Interest and other income/(expense), net 829
 1,235
 3,291
 2,435
 9,061
 829
 11,902
 3,291
Income/(loss) before income taxes and discontinued operations 577
 (11,503) 966
 (58,579) 8,119
 (307) 1,764
 (1,601)
Tax benefit, net 2,658
 2,960
 7,314
 28,654
Tax benefit/(expense), net 2,492
 2,658
 8,011
 7,314
Income/(loss) from continuing operations 3,235
 (8,543) 8,280
 (29,925) 10,611
 2,351
 9,775
 5,713
Income/(loss) from discontinued operations, net of tax —
 (1,133) —
 263,183
 79
 884
 10
 2,567
Income/(loss) before gain/(loss) on sale of real estate owned 10,690
 3,235
 9,785
 8,280
Gain/(loss) on sale of real estate owned, net of tax 31,302
 —
 82,305
 —
Net income/(loss) 3,235
 (9,676) 8,280
 233,258
 41,992
 3,235
 92,090
 8,280
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership (84) 687
 (198) (8,644) (1,447) (84) (3,171) (198)
Net (income)/loss attributable to noncontrolling interests 37
 (42) 30
 (137) 4
 37
 (2) 30
Net income/(loss) attributable to UDR, Inc. 3,188
 (9,031) 8,112
 224,477
 40,549
 3,188
 88,917
 8,112
Distributions to preferred stockholders — Series E (Convertible) (931) (931) (2,793) (2,793) (931) (931) (2,793) (2,793)
Distributions to preferred stockholders — Series G —
 —
 —
 (2,286)
Premium on preferred stock redemptions, net —
 —
 —
 (2,791)
Net income/(loss) attributable to common stockholders $2,257
 $(9,962) $5,319
 $216,607
 $39,618
 $2,257
 $86,124
 $5,319
                
Income/(loss) per weighted average common share — basic:                
Income/(loss) from continuing operations attributable to common stockholders $0.01
 $(0.04) $0.02
 $(0.16) $0.16
 $0.01
 $0.34
 $0.01
Income/(loss) from discontinued operations attributable to common stockholders $—
 $(0.00) $—
 $1.08
 0.00
 0.00
 0.00
 0.01
Net income/(loss) attributable to common stockholders $0.01
 $(0.04) $0.02
 $0.92
 $0.16
 $0.01
 $0.34
 $0.02
Income/(loss) per weighted average common share — diluted:                
Income/(loss) from continuing operations attributable to common stockholders $0.01
 $(0.04) $0.02
 $(0.16) $0.16
 $0.01
 $0.34
 $0.01
Income/(loss) from discontinued operations attributable to common stockholders $—
 $(0.00) $—
 $1.08
 0.00
 0.00
 0.00
 0.01
Net income/(loss) attributable to common stockholders $0.01
 $(0.04) $0.02
 $0.92
 $0.16
 $0.01
 $0.34
 $0.02
                
Common distributions declared per share $0.235
 $0.220
 $0.705
 $0.660
 $0.260
 $0.235
 $0.780
 $0.705
                
Weighted average number of common shares outstanding — basic 249,985
 249,825
 249,962
 235,173
 251,655
 249,985
 250,701
 249,962
Weighted average number of common shares outstanding — diluted 251,454
 249,825
 251,439
 235,173
 253,732
 251,454
 252,675
 251,439
See accompanying notes to consolidated financial statements.

5
UDR, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(In thousands)
(Unaudited)


Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 20122014 2013 2014 2013
Net income/(loss)$3,235
 $(9,676) $8,280
 $233,258
$41,992
 $3,235
 $92,090
 $8,280
Other comprehensive income/(loss), including portion attributable to noncontrolling interests:              
Other comprehensive income/(loss) - derivative instruments:              
Unrealized holding gain/(loss)(386) (1,355) (334) (4,847)362
 (386) 611
 (334)
(Gain)/loss reclassified into earnings from other comprehensive income1,635
 1,925
 5,180
 5,677
(Gain)/loss reclassified into earnings from other comprehensive income/(loss)1,130
 1,635
 3,809
 5,180
Other comprehensive income/(loss), including portion attributable to noncontrolling interests1,249
 570
 4,846
 830
1,492
 1,249
 4,420
 4,846
Comprehensive income/(loss)4,484
 (9,106) 13,126
 234,088
43,484
 4,484
 96,510
 13,126
Comprehensive (income)/loss attributable to noncontrolling interests(92) 606
 (364) (8,782)(1,500) (92) (3,336) (364)
Comprehensive income/(loss) attributable to UDR, Inc.$4,392
 $(8,500) $12,762
 $225,306
$41,984
 $4,392
 $93,174
 $12,762

See accompanying notes to consolidated financial statements.


6
UDR, INC.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In thousands, except share and per share data)
(Unaudited)


    Paid-in Capital Distributions in Excess of Net Income Accumulated Other Comprehensive Income/(Loss), net Noncontrolling Interests Total    Paid-in Capital Distributions in Excess of Net Income Accumulated Other Comprehensive Income/(Loss), net Noncontrolling Interests Total
Preferred Stock Common Stock Preferred Stock Common Stock 
Shares Amount Shares Amount Shares Amount Shares Amount 
Balance at December 31, 20122,803,812
 $46,571
 250,139,408
 $2,501
 $4,098,882
 $(1,143,781) $(11,257) $916
 $2,993,832
Balance at December 31, 20132,803,812
 $46,571
 250,749,665
 $2,507
 $4,109,765
 $(1,342,070) $(5,125) $856
 $2,812,504
Net income/(loss) attributable to UDR, Inc.—
 —
 —
 —
 —
 8,112
 —
 —
 8,112
—
 —
 —
 —
 —
 88,917
 —
 —
 88,917
Net income/(loss) attributable to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 (30) (30)—
 —
 —
 —
 —
 —
 —
 2
 2
Other comprehensive income/(loss)—
 —
 —
 —
 —
 —
 4,649
 —
 4,649
—
 —
 —
 —
 —
 —
 4,259
 —
 4,259
Issuance of common and restricted shares, net—
 —
 531,772
 5
 6,159
 —
 —
 —
 6,164
Issuance/(forfeiture) of common and restricted shares, net—
 —
 904,354
 9
 9,855
 —
 —
 —
 9,864
Issuance of common shares through public offering—
 —
 3,410,433
 34
 99,957
 —
 —
 —
 99,991
Adjustment for conversion of noncontrolling interest of unitholders in the Operating Partnership—
 —
 71,841
 1
 1,710
 —
 —
 —
 1,711
—
 —
 151,453
 2
 4,316
 —
 —
 —
 4,318
Common stock distributions declared ($0.705 per share)—
 —
 —
 —
 —
 (176,795) —
 —
 (176,795)
Common stock distributions declared ($0.78 per share)—
 —
 —
 —
 —
 (197,173) —
 —
 (197,173)
Preferred stock distributions declared-Series E ($0.9966 per share)—
 —
 —
 —
 —
 (2,793) —
 —
 (2,793)—
 —
 —
 —
 —
 (2,793) —
 —
 (2,793)
Adjustment to reflect redemption value of redeemable noncontrolling interests—
 —
 —
 —
 —
 (5,945) —
 —
 (5,945)—
 —
 —
 —
 —
 (40,771) —
 —
 (40,771)
Balance at September 30, 20132,803,812
 $46,571
 250,743,021
 $2,507
 $4,106,751
 $(1,321,202) $(6,608) $886
 $2,828,905
Balance at September 30, 20142,803,812
 $46,571
 255,215,905
 $2,552
 $4,223,893
 $(1,493,890) $(866) $858
 $2,779,118
See accompanying notes to consolidated financial statements.

7
UDR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except for share data)
(Unaudited)

Nine Months Ended September 30,
2013 2012Nine Months Ended September 30,
   2014 2013
Operating Activities      
Net income/(loss)$8,280
 $233,258
$92,090
 $8,280
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:   
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:   
Depreciation and amortization256,299
 269,957
270,405
 256,299
Net gain on the sale of depreciable property, net of tax—
 (251,398)
Gain on sale of real estate owned, net of tax(82,380) —
Tax benefit, net(7,314) (28,654)(8,049) (7,314)
Loss from unconsolidated entities6,081
 5,822
4,932
 6,081
Hurricane-related (recoveries)/charges, net(618) —
Casualty-related (recoveries)/charges, net500
 (618)
Other19,641
 18,290
19,952
 19,641
Changes in operating assets and liabilities:      
(Increase)/decrease in operating assets(12,543) 17,371
Decrease/(increase) in operating assets(5,870) (12,543)
Increase/(decrease) in operating liabilities(8,529) (14,957)(9,602) (8,529)
Net cash provided by operating activities261,297
 249,689
Net cash provided by/(used in) operating activities281,978
 261,297
      
Investing Activities      
Acquisition of real estate assets (net of liabilities assumed) and initial capital expenditures—
 (16,839)
Acquisition of real estate assets(199,012) —
Proceeds from sale of real estate investments, net233,913
 140,834
Development of real estate assets(229,650) (170,182)(160,643) (229,650)
Capital expenditures and other major improvements — real estate assets, net of escrow reimbursement(112,822) (107,643)(82,332) (112,822)
Capital expenditures — non-real estate assets(6,174) (3,784)(4,277) (6,174)
Investment in unconsolidated joint ventures(24,626) (321,164)(167,160) (24,626)
Distributions received from unconsolidated joint ventures106,618
 28,787
17,884
 106,618
Issuance of notes receivable(2,680) (63,998)
Proceeds from sales of real estate investments, net140,834
 593,367
Purchase deposits on pending acquisitions(4,000) —
Repayment/(issuance) of notes receivable64,715
 (2,680)
Net cash provided by/(used in) investing activities(128,500) (61,456)(300,912) (128,500)
      
Financing Activities      
Payments on secured debt(44,525) (487,133)(44,390) (44,525)
Proceeds from the issuance of secured debt—
 3,851
5,502
 —
Payments on unsecured debt(122,500) (100,000)(312,500) (122,500)
Proceeds from the issuance of unsecured debt299,943
 396,400
298,956
 299,943
Net proceeds/(repayment) of revolving bank debt(76,000) (421,000)
Net proceeds of revolving bank debt160,000
 (76,000)
Proceeds from the issuance of common shares through public offering, net—
 756,236
99,991
 —
Payments for the repurchase of Series G preferred stock, net—
 (81,609)
Distributions paid to redeemable noncontrolling interests(6,987) (6,768)(7,419) (6,987)
Distributions paid to preferred stockholders(2,794) (6,023)(2,793) (2,794)
Distributions paid to common stockholders(172,897) (152,438)(189,742) (172,897)
Other(8,003) (19,875)(4,315) (8,003)
Net cash provided by/(used in) financing activities(133,763) (118,359)3,290
 (133,763)
      
Net increase/(decrease) in cash and cash equivalents(966) 69,874
(15,644) (966)
Cash and cash equivalents, beginning of period12,115
 12,503
30,249
 12,115
Cash and cash equivalents, end of period$11,149
 $82,377
14,605
 11,149
      
Nine Months Ended September 30,   
2013 2012Nine Months Ended September 30,


  2014 2013
Supplemental Information:      
      
Interest paid during the period, net of amounts capitalized$99,266
 $103,173
$105,232
 $99,266
   
Non-cash transactions:      
Secured debt assumed in the acquisitions of properties, including asset exchange$—
 $34,412
Fair market value adjustment of secured debt assumed in acquisitions of properties, including asset exchange$—
 $2,617
Conversion of operating partnership redeemable noncontrolling interests to common stock (71,841 shares in 2013 and 18,440 shares in 2012)$1,711
 $479
Conversion of OP Units into common shares (151,453 shares in 2014 and 71,841 shares in 2013)$4,318
 $1,711
Transfer of real estate owned to investment in and advances to unconsolidated joint ventures$139,950
 —
$—
 $139,950
See accompanying notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 20132014





1. CONSOLIDATION AND BASIS OF PRESENTATION
Consolidation and Basis of Presentation
UDR, Inc., collectively with our consolidated subsidiaries (“UDR”,UDR,” the “Company”, “we”, “our”,“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”). As of September 30, 20132014, there were 184,281,253183,278,698 units in the Operating Partnership outstanding, of which 174,957,880174,111,227 units, or 94.9%95.0%, were owned by UDR and 9,323,3739,167,471 units, or 5.1%5.0%, were owned by limited partners. The consolidated financial statements of UDR include the noncontrolling 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 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 September 30, 20132014, and results of operations for the three and nine months ended September 30, 20132014 and 20122013 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 for the year ended December 31, 20122013 appearing in UDR’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 27, 201325, 2014.
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.No significant recognized or non-recognized subsequent events were noted.

2. SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Pronouncements
In December 2011,April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-10,2014-08, Reporting Discontinued Operations and Disclosures about Offsetting Assetsof Disposals of Components of an Entity, which incorporates a requirement that a disposition represent a strategic shift in an entity’s operations into the definition of a discontinued operation. In accordance with the ASU, a discontinued operation represents (1) a component of an entity or group of components that has been disposed of or is classified as held for sale in a single transaction and Liabilities. The objective of this update is to provide enhanced disclosuresrepresents a strategic shift that has or will enable users of its financial statements to evaluate thehave a major effect or potential effect of netting arrangements on an entity’s financial position. This includes the effectresults, or potential effect of rights of setoff associated with(2) an entity’s recognized assets and recognized liabilities within the scope of this update. The amendments require enhanced disclosures by requiring improved information about financial instruments and derivative instrumentsacquired business that are either 1) offsetis classified as held for sale on the balance sheet in accordancedate of acquisition. A strategic shift could include a disposal of (1) a separate major line of business, (2) a separate major geographic area of operations, (3) a major equity method investment, or (4) other major parts of an entity. The standard requires prospective application and will be effective for interim and annual periods beginning on or after December 15, 2014, with early adoption permitted. The early adoption provision excludes components of an entity that were sold or classified as held for sale prior to the “Offsetting Guidance” in ASC 210-20-45 or ASC 815-10-45 (collectively,adoption of the offsetting guidance) or 2) subjectstandard.
The Company elected to an enforceable master netting arrangement or similar agreement, regardless of whether they are offset in accordance with the “Offsetting Guidance”. The amendments, which were adopted by the Company onearly adopt this standard effective January 1, 2013, impact the Company's disclosures related to its derivative activities. (See Note 10, Derivatives and Hedging Activity.) The new guidance did not have any2014, which had a significant impact on the Company'sCompany’s consolidated financial position, resultsstatements as further discussed in Note 4, Discontinued Operations. Subsequent to the Company’s adoption of operations, or cash flows.
In February 2012,ASU 2014-08, the FASB issued ASU No. 2013-02sale of real estate that does not meet the definition of a discontinued operation under the standard is included in , Other Comprehensive Income (Topic 220)Gain/(loss) on sale of real estate owned, net of tax to require preparers to report, in one place, information about reclassifications out of accumulated other comprehensive income. For significant items reclassified out of AOCI to net income in their entirety in the same reporting period, reporting (either on the faceConsolidated Statements of the statement where net income is presented or in the notes thereto) is required about the effect of the reclassifications on theOperations.

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respective line itemsIn May 2014, FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard specifically excludes lease contracts. The ASU allows for the statement where net income is presented. For items that are not reclassified to net income in their entirety inuse of either the same reporting period, a cross reference to other existing disclosures is required infull or modified retrospective transition method, and the notes. The amendments, which were adopted bystandard will be effective for the Company on January 1, 2013, did2017; early adoption is not permitted. The Company has not yet selected a transition method and we are currently evaluating the effect that the updated standard will have any impact on the Company's consolidated financial position, results of operations, or cash flows. The accompanyingour consolidated financial statements include the required disclosures in the Consolidated Statements of Comprehensive Income/(Loss) or in the notes thereto for each of the three and nine month periods ended September 30, 2013 and 2012.related disclosures.
Revenue and Real Estate Sales Gain Recognition
Rental income related to leases is recognized on an accrual basis when due from residents and tenants in accordance with GAAP. 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, and the amounts are fixed and determinable.
The Company accounts for sales of real estate in accordance with GAAP. 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. Unless certain limited criteria are met, non-monetary transactions, including property exchanges, are accounted for at fair value.
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 defer the gain on the interest we retain. The Company recognizes any deferred gain when the property is sold to a third party. In transactions accounted for 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.
Notes Receivable
The following table summarizes our notes receivable, net as of September 30, 20132014 and December 31, 20122013 (dollars(dollars in thousands)thousands):
 Balance outstanding 
 September 30, 2013 December 31, 2012 Interest rate
Note due October 2014 - related party$24,481
 $24,481
 2.93%
Note due February 201714,580
 13,200
 10.00%
Note due June 2022 (net of discount of $254 and $275)26,246
 26,225
 7.00%
Note due July 20171,400
 100
 8.00%
Total notes receivable, net$66,707
 $64,006
  
 Balance outstanding 
 September 30, 2014 December 31, 2013 Interest rate at September 30, 2014
Note due June 2014 (a)$—
 $40,800
 —%
Note due February 2017 (b)15,818
 14,580
 10.00%
Note due July 2017 (c)2,500
 1,400
 8.00%
Note due June 2022 (net of discount of $0 and $247, respectively) (d)—
 26,253
 —%
Total notes receivable, net$18,318
 $83,033
  
The Company has a $24.5 million unsecured note receivable(a) In the fourth quarter of 2013, in conjunction with the sale of its 95% interest in the Lodge at Stoughton, one of its unconsolidated joint ventures, which bears an interest ratethe Company provided the buyer with a $40.8 million loan secured by the property at LIBOR plus a spread of one month LIBOR plus 2.75% per annum. Interest payments are due monthly. The350 basis points with two three-month extension options at increased rates and a financing fee. In June 2014, the note is due October 2014, and may be extended for one year.was paid in full.
(b) The Company has a secured note receivable with an unaffiliated third party with an aggregate commitment of $14.6$15.8 million,, which bears an interest rate of 10.00% per annum. During the nine months ended September 30, 20132014, the Company loaned an additional $1.4$1.2 million under the note. 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) the fifth anniversary of the date of the note (February 2017).

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In 2012, the Company purchased mezzanine debt securing a mortgage on a class A community in West Los Angeles. The $26.5 million loan was purchased at a yield of 7.25% and bears a coupon rate of 7.00%. Interest payments are due monthly and the note is due June 2022. The discount is amortized using the effective interest method.
(c) The Company has a secured note receivable with an unaffiliated third party with an aggregate commitment of $2.5$2.5 million,, which bears an interest rate of 8.00% per annum. During the nine months endedSeptember 30, 2013,2014, the Company loaned an additional $1.3 million under the note.$1.1 million. 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) the fifth anniversary of the date of the note (July 2017).
During(d) In 2012, the Company purchased a "B" Note secured by a first mortgage on a class A community in West Los Angeles. The $26.5 million loan was purchased at a yield of 7.25% and bore a coupon rate of 7.00%. Interest payments are due monthly and the note is due June 2022. The discount is amortized using the effective interest method. In July 2014, the Company received proceeds of $36.0 million from the repayment of this note, resulting in a net gain of approximately $8.4 million, which is included in Interest and other income/(expense), net on the Consolidated Statements of Operations.
The Company recognized $0.4 million and $3.0 million of interest income from these notes receivable during the three and nine months ended September 30, 2013 and 20122014, the Company recognized $1.1respectively, and $1.1 million and $3.1 million during the three and nine months ended September 30, 2013, respectively. Included in the $931,000three and nine months ended and $1.7 million of interest income, net of accretion, from these notes receivable, of which $184,000September 30, 2013 are $184,000 and $547,000 and $95,000 and $95,000 wasof related party interest income, respectively. Interest income is included in "InterestInterest and other income/(expense), net"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 and nine months ended September 30, 20132014 and 20122013, the Company'sCompany’s other comprehensive income/(loss) consisted of the gain/(loss) (effective portion) 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 redeemable noncontrolling interests. The (gain)/loss on derivative instruments reclassified from other comprehensive income/(loss) is included in interestInterest expense in on the accompanying Consolidated Statements of Operations. See Note 10, Derivatives and Hedging Activity, for further discussion. The allocation of other comprehensive income/(loss) to redeemable noncontrolling interests was $57,000 and $163,000 during the three and nine months ended September 30, 20132014, respectively, and 2012 was $45,000$45,000 and $196,000 during the three and $39,000nine months ended and $1,000,September 30, 2013, 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 Taxabletaxable REIT Subsidiariessubsidiaries (“TRS”), primarily those engaged in development activities.
Income taxes for our TRS, RE3, 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 the timing of expense recognition for certain accrued liabilities. As of September 30, 20132014, UDR recorded aUDR’s net income tax receivable of $695,000 and a deferred tax asset of $31.7was $9.1 million (net of a valuation allowance of $1.4 million)$1.4 million), which are classifiedis included in "Other assets"Other assets on the Consolidated Balance Sheets.

Prior to 2012, RE3 had a history of losses and, as a result, historically recognized a valuation allowance for net deferred tax assets.  Each quarter, the Company evaluates the need to retain all or a portion of the valuation allowance on its net deferred tax assets.  During the three months ended March 31, 2012, the Company determined that it was more likely than not that the deferred tax assets, including any remaining net operating loss carry forward, would be realized. In making this determination, the Company analyzed, among other things, its recent history of earnings from sales of depreciable property, forecasts of future earnings and its cumulative earnings for the last twelve quarters. The reversal of the valuation allowance of $22.9 million in the first quarter of 2012 and the income tax benefit of $5.8 million during nine months ended September 30, 2012 resulted in an income tax benefit of $28.7 million during the nine months endedSeptember 30, 2012, which is reflected in continuing operations, and classified as "Tax benefit, net" in the Consolidated Statements of Operations. 

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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

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of any related appeals or litigation processes, based on the technical merits of the position. TheSecond, the Company will then 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 material unrecognized tax benefit, accrued interest or penalties at September 30, 20132014. UDR and its subsidiaries are subject to federal income tax as well as income tax of various state and local jurisdictions. The tax years 20092010 through 20122013 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 income tax expense.

Tax benefit/(expense), net on the Consolidated Statements of Operations.
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.development, and sold or held for disposition properties. As of September 30, 20132014, the Company owned and consolidated 141 communities in 10 states plus the District of Columbia totaling 41,42040,477 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of September 30, 20132014 and December 31, 20122013 (dollars in thousands):
September 30,
2013		 December 31, 2012September 30,
2014		 December 31, 2013
Land$1,887,520
 $1,907,169
Land and land improvements$1,955,007
 $1,847,127
Depreciable property — held and used:      
Building and improvements5,466,487
 5,384,971
Furniture, fixtures and equipment272,579
 272,640
Building, improvements, and furniture, fixtures and equipment6,151,677
 5,876,717
Under development:      
Land112,091
 151,154
Construction in progress377,381
 339,894
Land and land improvements47,038
 110,769
Building, improvements, and furniture, fixtures and equipment274,569
 356,644
Real estate held for disposition:   
Land and land improvements—
 10,751
Building, improvements, and furniture, fixtures and equipment—
 5,969
Real estate owned8,116,058
 8,055,828
8,428,291
 8,207,977
Accumulated depreciation(2,155,665) (1,924,682)(2,379,033) (2,208,794)
Real estate owned, net$5,960,393
 $6,131,146
$6,049,258
 $5,999,183

In June 2013,During the nine months ended September 30, 2014, the Company sold a 50% interest in five partnerships (the "UDR/MetLife Vitruvian Park® Partnerships") to MetLife for approximately $141.3 million, before transaction costs of $936,000. The properties held by the UDR/MetLife Vitruvian Park® Partnerships are located in Addison, Texas and consist of two operatingsix communities with 739a total of 1,904 apartment homes, one community under development with 391 apartment homes upon completion,an adjacent parcel of land, and 28.4 acresone operating property for gross proceeds of developable land parcels. The transaction resulted$237.7 million, resulting in net proceeds of $233.9 million and a total gain (net of approximately $436,000 which the Company has deferred until completiontax) of $82.4 million. A portion of the development community (projectedsale proceeds was designated for tax-deferred exchanges under Section 1031 of the endInternal Revenue Code and was used to fund acquisitions of 2013). The UDR/MetLife Vitruvian Park® Partnerships are accounted for under the equity methodreal estate as discussed below. Gains (net of accounting andtax) of $82.3 million are included in “Investment in and advances to unconsolidated joint ventures, net”Gain/(loss) on the Consolidated Balance Sheets. See further discussion of this transaction in Note 5, Joint Ventures and Partnerships.

In accordance with GAAP, the operations of the UDR/MetLife Vitruvian Park® Partnerships' assets, prior to the sale of a real estate owned, net of tax50% interest, have been classified as a component of continuing operations on the Consolidated Statements of Operations,Operations. The remaining gains (net of tax) of $0.1 million related to the sale of one operating property, which was classified as UDR will recognize significant direct cash flowsheld for disposition prior to the Company’s adoption of ASU 2014-08 (as described in Note 2, Significant Accounting Policies and Note 4, Discontinued Operations), and, therefore, was included in Income/(loss) from discontinued operations, net of tax on the partially disposed properties over the durationConsolidated Statements of the partnership.Operations.

In January 2014, the Company acquired a fully-entitled land parcel for future development located in Huntington Beach, California for $77.8 million. In the third quarter of 2014, the Company acquired two communities, located in Seattle, Washington and Kirkland, Washington, with a total of 358 apartment homes for $45.5 million and $75.2 million, respectively. The three acquisitions during the nine months ended September 30, 2014 were accomplished through tax-deferred exchanges under Section 1031 of the Internal Revenue Code.

There were no sales during the nine months ended September 30, 2013.

AllPredevelopment, development, and redevelopment projects and related carrying costs are capitalized and reported on the Consolidated Balance Sheets as “Real estate under development.” The costs of development projects which include interest,Total real estate taxes, insurance and allocated development overhead related to supportowned, net of accumulated depreciation. The Company capitalizes costs for personnel working directly on the development are capitalized during the construction period. These costs, excluding the direct costs of development and capitalized interest, for the three and nine months ended September 30, 2013 and 2012, were $2.4 million and $8.5 million and $2.5 million and $7.2 million,

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respectively. Duringdirectly 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 $1.7 million and $7.2 million for the three and nine months ended September 30, 2014, respectively, and $2.4 million and $8.5 million for the three and nine months ended September 30, 2013, respectively. Total interest capitalized was $5.2 million and 2012, total capitalized interest was $6.6$15.4 million for the three and nine months ended September 30, 2014, respectively, and $6.6 million and $23.2 million for the three and $7.6 millionnine months ended September 30, 2013, respectively. As each home in a capital project is completed and $17.6 million, respectively.becomes available for lease-up, the Company ceases capitalization on the related portion and depreciation commences over the estimated useful life.

In October 2012, Hurricane Sandy hit the East Coast, affecting three of the Company’s operating communities (1,706 apartment homes) located in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Company hashad insurance policies that provideprovided coverage for property damage and business interruption, subject to applicable retention.retentions.

Based onDuring the claims filedthree and management’s estimates,nine months ended September 30, 2013, the Company recognizedrecorded $6.5 million and $12.3 million, respectively, of insurance recoveries related to the business interruption and other losses associated with Hurricane Sandy. In 2014, the Company recorded a $500,000 casualty-related loss for one property damaged during an earthquake in California. These recoveries/charges are included in $9.0 million impairment charge for the damaged assets’ net book value and incurred $10.4 million of repair and cleanup costs during the year ended December 31, 2012. The impairment charge and the repair and cleanup costs incurred were reduced as of December 31, 2012 by $14.5 million of estimated insurance recovery, and were classified in “Hurricane-relatedCasualty-related (recoveries)/charges, net”net on the Consolidated Statements of Operations. During the three and nine months endedSeptember 30, 2013, no material adjustments to the impairment charge and the repair and cleanup costs incurred were recognized. With the exception of one of the properties that is under redevelopment at September 30, 2013, the rehabilitation of the remaining two properties was substantially completed as of September 30, 2013.
During 2013, the Company settled the Hurricane Sandy claims and received insurance proceeds in excess of the $14.5 million estimated insurance recovery receivable related to the impairment charge and the repair and cleanup costs incurred. See Note 14, Hurricane-Related (Recoveries)/Charges for additional information.

4. DISCONTINUED OPERATIONS
Effective January 1, 2014, UDR prospectively adopted ASU No. 2014-08, Reporting Discontinued operations represent properties that UDR has eitherOperations and Disclosures of Disposals of Components of an Entity, for all communities not previously sold or which management believes meet the criteria to be classified as held for sale. In orderThe standard had a material impact on the Company’s consolidated financial statements. As a result of adopting the ASU, during the three and nine months ended September 30, 2014, gains (net of tax) of $31.3 million and $81.2 million, respectively, from disposition of real estate, excluding a $1.1 million gain related to the sale of land during the first quarter of 2014, are included in Gain/(loss) on sale of real estate owned, net of tax on the Consolidated Statements of Operations rather than in Income/(loss) from discontinued operations, net of tax on the Consolidated Statements of Operations.
Prior to the prospective adoption of ASU 2014-08, FASB Accounting Standards Codification ("ASC") Subtopic 205-20 required, among other things, that the primary assets and liabilities and the results of operations of UDR’s real properties that have been sold or are held for disposition, be classified as discontinued operations and segregated in UDR’s Consolidated Statements of Operations and Consolidated Balance Sheets. Consequently, the primary assets and liabilities and the net operating results of those properties sold or classified as held for sale and reported as discontinued operations, a property’s operations and cash flows have been or will be divesteddisposition prior to a third party by the Company whereby UDR will not have any continuing involvement in the ownership or operation of the property after the sale or disposition. The results of operations of the propertyJanuary 1, 2014 are presentedaccounted for as discontinued operations for all periods presentedpresented. This presentation does not have an impact on net income available to common stockholders; it only results in the reclassification of the operating results within the Consolidated Statements of Operations for the periods ended September 30, 2014 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, if2013.
In July 2014, the Company determinessold one operating property 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 propertieswas classified as held for disposition prior to the adoption of ASU 2014-08 and, therefore, met the requirements to be reported as a discontinued operation. The sale are presented separately onof this property resulted in an immaterial gain (net of tax) of less than $0.1 million. The gain (net of tax) and operating results of the Consolidated Balance Sheets atproperty for the lower of their carrying amount or their estimated fair value less the costs to sell the assets.
There were no sales during the three and nine months endedSeptember 30, 2013 that met the criteria to be reported as discontinued operations. In addition, the Company had no communities at September 30, 2013 that met the criteria to be classified as held for sale. There were no sales during the three months endedSeptember 30, 2012. During the nine months endedSeptember 30, 2012, the Company sold 21 communities with 6,507 apartment homes, respectively. During the three2014 and nine months endedSeptember 30, 2012, UDR recognized a net gain/(loss) on the sale of communities, before tax of $0.0 and $8.8 million, of $(1.1) million and $260.2 million, respectively, which were included in discontinued operations. The results of operations for sold properties2013, are included in “Income/Income/(loss) from discontinued operations, net of tax”tax on the Consolidated Statements of Operations.
In December 2013, the Company sold two communities with 914 apartments in the Sacramento market. The operating results related to these communities for the three and nine months ended September 30, 2013 are included in Income/(loss) from discontinued operations, net of taxon the Consolidated Statements of Operations.

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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS - (Continued)
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The following is a summary of income/(loss) from discontinued operations, net of tax for the three and nine months ended September 30, 20132014 and 20122013 (dollars in thousands):
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 20122014 2013 2014 2013
Rental income$—
 $—
 $—
 $30,316
$21
 $2,462
 $147
 $7,130
       
Rental expenses—
 —
 —
 10,566
11
 970
 225
 2,733
Property management—
 —
 —
 834
1
 68
 4
 196
Real estate depreciation—
 —
 —
 6,340
—
 528
 —
 1,608
Interest and other (income)/expense, net—
 —
 —
 791
—
 —
 —
 18,531
Income/(loss) attributable to disposed properties—
 —
 —
 11,785
Net gain/(loss) on the sale of depreciable properties, net of tax—
 (1,133) —
 251,398
Other operating expenses3
 12
 21
 26
Income/(loss) attributable to disposed properties and assets held for sale6
 884
 (103) 2,567
Net gain/(loss) on the sale of depreciable properties75
 —
 75
 —
Income tax benefit/(expense)(2) —
 38
 —
Income/(loss) from discontinued operations, net of tax$—
 $(1,133) $—
 $263,183
$79
 $884
 $10
 $2,567
              
Income/(loss) from discontinued operations attributable to UDR, Inc.$—
 $(1,053) $—
 $253,126
$73
 $852
 $6
 $2,475
5. JOINT VENTURES AND PARTNERSHIPS
UDR has entered into joint ventures and partnerships with unrelated third parties to acquire real estate assets that are either consolidated and included in realReal estate owned on the Consolidated Balance Sheets or are accounted for under the equity method of accounting, and are included in "InvestmentInvestment in and advances to unconsolidated joint ventures, net"net on the Consolidated Balance Sheets. The Company consolidates an entity in whichthe entities that we own less than 100% but control the joint venture or partnership as well as any variable interest entity where we are the primary beneficiary. In addition, the Company consolidates any joint venture or partnership 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 the ability to remove us as general partner or managing member without cause.

UDR’s joint ventures and partnerships 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 ventures and partnerships.
Consolidated Joint Ventures

In December 2013, the Company consolidated its 95%/5% development joint ventures: 13th and Market JV in San Diego, CA and Domain College Park JV in Metropolitan D.C. The consolidation was due to the Company becoming the managing member of each of the joint ventures pursuant to amendments to the limited liability company agreement for each joint venture. In connection with the amendments, our partner received equity distributions reducing its capital account balances to zero, the Company replaced our partner as the managing member, and our partner no longer has the ability to substantively participate in the decision-making process, with only protective rights remaining. We accounted for the consolidations as asset acquisitions since the joint ventures were under development and not complete at the time of consolidation, resulting in no gain or loss upon consolidation and increasing our real estate owned by $129.4 million and our debt by $63.6 million. In addition pursuant to the amendments, the Company paid a non-refundable deposit to our partner in January 2014 of $2.0 million for each joint venture, or $4.0 million in total, for the right to exercise options in 2014 to acquire our partner’s upside participation in the joint ventures. The non-refundable deposits will be applied towards the future purchase price, which will be equivalent to our partner’s right to receive certain upside participation from the developments.
Unconsolidated 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.

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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 September 30, 20132014 and December 31, 20122013 (dollars in thousands):
Joint Venture Location of Properties Number of Properties Number of Apartment Homes Investment at UDR’s Ownership Interest Location of Properties Number of Properties Number of Apartment Homes Investment at UDR’s Ownership Interest
 September 30, 2013 December 31, 2012   September 30, 2014 September 30, 2014 September 30, 2014 December 31, 2013 September 30, 2014 December 31, 2013
        
Operating and development:Operating and development:          
UDR/MetLife I (a) Various 8 operating communities 1,641
 $49,550
 $75,129
 13.2% Various 0 operating communities —
 $—
 $40,336
 —% 13.2%
 7 land parcels N/A
     4.0% 5 land parcels N/A
 5,364
 7,161
 4.0% 4.0%
UDR/MetLife II (a) Various 15 operating communities 3,119
 327,446
 327,001
 50.0% Various 21 operating communities 4,642
 436,805
 327,926
 50.0% 50.0%
UDR/MetLife Vitruvian Park® (b)
 Addison, TX 2 operating communities 739
 79,478
 —
 50.0% Addison, TX 2 operating communities 739
 79,807
 79,318
 50.0% 50.0%
 1 development community (*) 391
       1 non-stabilized community 391
        
 6 land parcels N/A
       6 land parcels N/A
        
Lodge at Stoughton Stoughton, MA 1 operating community 240
 14,941
 16,311
 95.0%
UDR/KFH Washington D.C. 3 operating communities 660
 26,998
 29,663
 30.0% Washington, D.C. 3 operating communities 660
 22,891
 25,919
 30.0% 30.0%
Texas Texas 8 operating communities 3,359
 1,522
 3,457
 20.0% Texas 8 operating communities 3,359
 (25,624) (23,591) 20.0% 20.0%
Other UDR/MetLife Development Joint Ventures Various 2 development communities (b) 828
 87,376
 36,313
 51.0% 51.0%
         1 land parcel N/A
        
13th & Market San Diego, CA 1 development community (*) 264
 31,151
 29,930
 95.0%
Domain College Park College Park, MD 1 development community (*) 256
 26,001
 25,546
 95.0%
Investment in and advances to unconsolidated joint ventures, net, before participating loan investmentInvestment in and advances to unconsolidated joint ventures, net, before participating loan investment   606,619
 493,382
    
   557,087
 507,037
            
         Location Interest Rate Years To Maturity Investment at Income From Participating Loan Investment For
Deferred fees and gains on the sale of depreciable property   (25,375) (29,406)  
   September 30, 2014 December 31, 2013 Three Months Ended September 30 Nine Months Ended September 30
        20142013 20142013
Participating loan investment:Participating loan investment:          
Steele Creek Denver, CO 6.5% 3.1 43,822
 14,273
 $642— $1,419—
                  
Total investment in and advances to unconsolidated joint ventures, netTotal investment in and advances to unconsolidated joint ventures, net   $531,712
 $477,631
  Total investment in and advances to unconsolidated joint ventures, net   $650,441
 $507,655
    
(*)(a)
On March 31, 2014, the Company sold its minority ownership interests in two small operating communities located in Los Angeles, CA to MetLife for cash proceeds of $3.0 million, which resulted in an immaterial gain. On April 21, 2014, the Company increased its ownership interest in the remaining six operating communities in the UDR/MetLife I Joint Venture from 12% to 50%, and MetLife and the Company contributed these communities to the UDR/MetLife II Joint Venture. The Company paid MetLife $82.5 million for the additional ownership interests. The Company continues to manage the operating communities that were contributed to the UDR/MetLife II Joint Venture as well as the two operating communities in which it sold its minority ownership interests.

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SEPTEMBER 30, 2014



In July 2014, the Company increased the ownership interest in two of these land sites to 50.1%. The remaining 49.9% continues to be held by our joint venture partner MetLife. The Company paid MetLife approximately $21.5 million for the additional ownership interests. As of September 30, 2014, the remaining assets in the UDR/MetLife I Joint Venture were comprised of five potential development land sites in which the Company has an average ownership interest of approximately 4%.
(b)The number of apartment homes for the communities under development presented in the table above is based on the projected number of total homes. The number of apartment homes completed asAs of September 30, 2013 for one development community at2014, no apartment homes had been completed in Other UDR/MetLife Vitruvian Park®, 13th & Market, and Domain College Park was 239, 9, and 162, respectively.Development Joint Ventures.
(a) In June 2013 and within UDR/MetLife I, the Company exchanged with MetLife its approximately 10% ownership interest in four operating communities and paid MetLife an additional $15.6 million in cash for an increased ownership interest of approximately 35% in two high-rise operating communities, bringing UDR's ownership interest in the two high-rise operating communities to 50% each. The two high-rise operating communities are located in Denver, Colorado and San Diego, California and were subsequently contributed to UDR/MetLife II. The four operating communities in which UDR exchanged its ownership interest are located in Washington, D.C.; San Francisco, California; Dallas, Texas; and Charlotte, North Carolina. At 50% ownership, the Company's pro-rata share of the undepreciated book value of the UDR/MetLife II joint venture assets and outstanding debt was $796.4 million and $444.6 million, respectively, at June 30, 2013. UDR will continue to fee manage the four operating communities in which UDR exchanged its ownership interests.


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SEPTEMBER 30, 2013



(b) In June 2013, the Company sold a 50% interest in five partnerships (the "UDR/MetLife Vitruvian Park® Partnerships") to MetLife for approximately $141.3 million. The transaction resulted in a gain of approximately $436,000 which the Company has deferred until completion of the development community (projected for the end of 2013). Under the terms of the UDR/MetLife Vitruvian Park® Partnerships, the Company serves as the general partner with significant participating rights held by our partner, and earns fees for property management, asset management, and financing transactions. The UDR/MetLife Vitruvian Park® Partnerships are accounted for under the equity method of accounting. Our initial investment was approximately $80.2 million, which consisted of approximately $140.0 million (50% of our net book value of the real estate at the time of the transaction) reduced by our share of the net proceeds received upon encumbering the assets of approximately $58.7 million and other operating adjustments.

At closing, a total of $118.3 million of secured debt was placed on the two operating communities and the community under development. The debt on the two operating communities carries an interest rate of 4.0% with a term of ten years and the non-recourse construction loan on the community under development carries an interest rate of LIBOR plus 175 basis points with a term of two years and twoone-year extension options. The Company has guaranteed the completion of the construction of the development. Proceeds from the construction loan will be used for completion of construction of the development. Upon completion, at its 50% ownership, the Company's pro-rata share of the undepreciated book value of the UDR/MetLife Vitruvian Park® Partnerships' real estate assets and outstanding debt will be approximately $145.0 million and $62.8 million, respectively.
As of September 30, 20132014 and December 31, 20122013, the Company had deferred fees and deferred profit from the sale of properties to joint ventures or partnerships of $25.4$27.1 million and $29.4$25.4 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 $2.8 million and $8.5 million and $3.3 million and $9.0 million of management fees for our management of the joint ventures and partnerships of $2.7 million and $8.3 million for the three and nine months ended September 30, 2014, respectively, and $2.8 million and $8.5 million during the three and nine months ended September 30, 2013, and 2012, respectively, for our management of the joint ventures and partnerships. The management fees are classifiedincluded in “JointJoint venture management and other fees” infees 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 decreasedecreases in the value of its investments in unconsolidated joint ventures or partnerships during the three months and nine months ended September 30, 20132014 and 2012.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
SEPTEMBER 30, 2013



Combined summary financial information relating to all of the unconsolidated joint ventures and partnerships operations (not just our proportionate share), is presented below for the three months and nine months ended September 30, 2013 and 2012 (dollars in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2013 2012 2013 2012
        
Revenues$62,694
 $67,822
 $186,381
 $205,572
Real estate depreciation and amortization22,052
 24,263
 65,166
 76,637
Net (income)/loss4,816
 (3,691) 32,295
 (8,768)
UDR income/(loss) from unconsolidated entities(3,794) (719) (6,081) (5,822)
2013.
Combined summary balance sheets relating to all of the unconsolidated joint ventures and partnerships (not just our proportionate share) are presented below as of September 30, 20132014 and December 31, 20122013 (dollars in thousands):
 September 30, 2013 December 31, 2012
Real estate, net$3,221,001
 $3,189,814
Total assets3,295,430
 3,266,518
Amount due to UDR32,495
 34,843
Third party debt1,777,117
 1,663,427
Total liabilities1,852,178
 1,747,855
Total equity1,443,252
 1,518,663
Equity held by noncontrolling interests—
 12,755
Investment in and advances to unconsolidated joint ventures, net531,712
 477,631
Consolidated Joint Ventures
In January 2012, the Company formed a joint venture with an unaffiliated third party to acquire 399 Fremont (land for future development) in San Francisco, California. At closing, UDR owned a noncontrolling interest of 92.5% in the joint venture. The Company’s total investment was $55.5 million, which consists of its initial investment of $37.3 million and an option to acquire its partner’s 7.5% ownership interest in the joint venture. In October 2012, the Company exercised the option and paid $13.5 million, resulting in the consolidation of the joint venture at fair value. In January 2013, the Company subsequently acquired its partner's 7.5% ownership interest for $4.7 million.

 September 30, 2014 December 31, 2013
Total real estate, net$3,012,380
 $3,124,178
Cash and cash equivalents40,656
 41,792
Other assets37,903
 32,234
Total assets$3,090,939
 $3,198,204
    
Amount due to UDR$10,856
 $12,187
Third party debt1,659,316
 1,722,960
Accounts payable and accrued liabilities49,388
 41,562
Total liabilities1,719,560
 1,776,709
Total equity1,371,379
 1,421,495
Total liabilities and equity$3,090,939
 $3,198,204
    
UDR’s investment in unconsolidated joint ventures$650,441
 $507,655

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS - (Continued)
SEPTEMBER 30, 2014



Combined summary financial information relating to all of the unconsolidated joint ventures’ and partnerships’ operations (not just our proportionate share), is presented below for the three and nine months ended September 30, 2014 and 2013 (dollars in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2014 2013 2014 2013
Total revenues$63,449
 $61,198
 $187,340
 $166,796
Property operating expenses(24,769) (24,509) (74,324) (64,532)
Real estate depreciation and amortization(24,525) (21,285) (73,727) (58,699)
Operating income/(loss)14,155
 15,404
 39,289
 43,565
Interest expense(18,879) (19,370) (56,745) (53,282)
Other income/(expense)—
 —
 (190) 4
Gain/(loss) on sale of real estate(113) —
 (25,492) —
Income/(loss) from discontinued operations—
 (806) 14
 (22,592)
Net income/(loss)$(4,837) $(4,772) $(43,124) $(32,305)
UDR income/(loss) from unconsolidated entities$(939) $(3,794) $(4,932) $(6,081)


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SEPTEMBER 30, 2014



6. SECURED AND UNSECURED DEBT
The following is a summary of our secured and unsecured debt at September 30, 20132014 and December 31, 20122013 (dollars in thousands):
Principal Outstanding For the Nine Months Ended September 30, 2013Principal Outstanding For the Nine Months Ended September 30, 2014
  
Weighted Average
Interest Rate
 
Weighted Average
Years to Maturity
 
Number of Communities
Encumbered
  
Weighted Average
Interest Rate
 
Weighted Average
Years to Maturity
 
Number of Communities
Encumbered
September 30, 2013 December 31, 2012 September 30, 2014 December 31, 2013 
 
Weighted Average
Interest Rate
Weighted Average
Years to Maturity
 
Weighted Average
Interest Rate
Weighted Average
Years to Maturity
Secured Debt:          
Fixed Rate Debt          
Mortgage notes payable (a)$448,191
 $455,533
 5.43% 2.8
 8
$438,172
 $445,706
 5.47% 1.8
 8
Fannie Mae credit facilities (b)627,494
 631,078
 4.99% 5.3
 22
623,754
 626,667
 4.99% 4.3
 22
Total fixed rate secured debt1,075,685
 1,086,611
 5.17% 4.2
 30
1,061,926
 1,072,373
 5.19% 3.2
 30
Variable Rate Debt                  
Mortgage notes payable—
 37,415
 —
 —
 —
31,337
 63,595
 1.94% 2.3
 1
Tax-exempt secured notes payable (c)94,700
 94,700
 0.87% 9.4
 2
94,700
 94,700
 0.77% 8.4
 2
Fannie Mae credit facilities (b)211,409
 211,409
 1.61% 6.8
 7
211,409
 211,409
 1.58% 5.8
 7
Total variable rate secured debt306,109
 343,524
 1.38% 7.6
 9
337,446
 369,704
 1.39% 6.2
 10
Total Secured Debt1,381,794
 1,430,135
 4.33% 5.0
 39
1,399,372
 1,442,077
 4.27% 4.0
 40
                  
Unsecured Debt:                  
Commercial Banks                  
Borrowings outstanding under an unsecured credit facility due December 2017 (d), (h)—
 76,000
 —% 4.2
  
Borrowings outstanding under an unsecured credit facility due December 2017 (d) (f)160,000
 —
 1.10% 3.2
  
Senior Unsecured Notes                  
3.70% Medium-Term Notes due October 2020 (net of discount of $56) (g), (h)299,944
 —
 3.70% 7.0
  
4.63% Medium-Term Notes due January 2022 (net of discount of $2,972 and $3,241) (h)397,028
 396,759
 4.63% 8.3
  
1.44% Term Notes due June 2018 (e), (h)35,000
 35,000
 1.44% 4.7
  
2.50% Term Notes due June 2018 (e), (h)65,000
 65,000
 2.50% 4.7
  
6.05% Medium-Term Notes due June 2013—
 122,500
 —
 —
  
3.70% Medium-Term Notes due October 2020 (net of discounts of $48 and $54, respectively) (f)299,952
 299,946
 3.70% 6.0
  
4.63% Medium-Term Notes due January 2022 (net of discounts of $2,613 and $2,882, respectively) (f)397,387
 397,118
 4.63% 7.3
  
3.75% Medium-Term Notes due July 2024 (net of discount of $1,017) (e) (f)
298,983
 —
 3.75% 9.8
  
1.30% Term Notes due June 2018 (f)35,000
 35,000
 1.30% 3.7
  
1.53% Term Notes due June 2018 (f)100,000
 65,000
 1.53% 3.7
  
5.13% Medium-Term Notes due January 2014184,000
 184,000
 5.13% 0.3
  —
 184,000
 —% —
  
5.50% Medium-Term Notes due April 2014 (net of discount of $37 and $89)128,463
 128,411
 5.50% 0.5
  
5.25% Medium-Term Notes due January 2015 (net of discount of $166 and $262)325,009
 324,913
 5.25% 1.3
  
5.50% Medium-Term Notes due April 2014 (net of discount of $20)—
 128,480
 —% —
  
5.25% Medium-Term Notes due January 2015 (net of discounts of $37 and $134, respectively)325,138
 325,041
 5.25% 0.3
  
5.25% Medium-Term Notes due January 201683,260
 83,260
 5.25% 2.3
  83,260
 83,260
 5.25% 1.3
  
2.73% Term Notes due June 2018 (f), (h)250,000
 250,000
 2.73% 4.7
  
2.17% Term Notes due June 2018 (f)215,000
 250,000
 2.17% 3.7
  
8.50% Debentures due September 202415,644
 15,644
 8.50% 11.0
  15,644
 15,644
 8.50% 10.0
  
4.25% Medium-Term Notes due June 2018 (net of discount of $2,001 and $2,322) (h)297,999
 297,678
 4.25% 4.7
  
4.25% Medium-Term Notes due June 2018 (net of discounts of $1,572 and $1,893, respectively) (f)298,428
 298,107
 4.25% 3.7
  
Other31
 33
 N/A
 N/A
  28
 30
 N/A
 N/A
  
Total Unsecured Debt2,081,378
 1,979,198
 4.35% 4.5
  2,228,820
 2,081,626
 3.80% 4.9
  
Total Debt$3,463,172
 $3,409,333
 4.34% 4.7
  $3,628,192
 $3,523,703
 3.98% 4.5
  


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SEPTEMBER 30, 20132014



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 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. Secured debt encumbers $2.2$2.3 billion or 26.9% of UDR’s total real estate owned based upon gross book value ($5.9($6.1 billion or 73.1% of UDR’s real estate owned based on gross book value is unencumbered) as of September 30, 20132014.
(a) At September 30, 20132014, fixed rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from December 2014 through May 2019 and carry interest rates ranging from 3.43% to 5.94%.
The Company will from time to time acquire properties subject to fixed rate debt instruments. In those situations, management will recordthe Company records the secured debt at its estimated fair value and amortizeamortizes any difference between the fair value and par to interest expense over the life of the underlying debt instrument. During the three and nine months endedSeptember 30, 2013 and 2012, theThe Company had$1.3 million and $3.8 million and $1.3 million and $3.6 million of a reduction to interest expense based on the amortization onof the fair market adjustment of debt assumed in the acquisition of properties of $1.3 million and $3.8 million during the three and nine months ended September 30, 2014, respectively, and $1.3 million and $3.8 million during the three and nine months ended September 30, 2013, respectively. The unamortized fair market adjustment was a net premium of $13.1$8.0 million and $16.9$11.8 million at September 30, 20132014 and December 31, 20122013, respectively.
(b) UDR has three secured credit facilities with Fannie Mae with an aggregate commitment of $927.7$835.2 million at September 30, 2013.2014. The Fannie Mae credit facilities are for terms of seven to ten years (maturing at various dates from May 2017 through July 2023)2023) and bear interest at floating and fixed rates. At September 30, 2013, we have $627.52014, $623.8 million of the outstanding balance was fixed atand had a weighted average interest rate of 4.99% and the remaining balance of $211.4$211.4 million on these facilities is currently at had a weighted average variable interest rate of 1.61%1.58%.

On June 28, 2013, the Company refinanced $186 million of a Fannie Mae credit facility that carried an interest rate equal to LIBOR plus a spread of 284 basis points and was scheduled to mature in 2019. The new loans include a $90 million, 7-year fixed-rate loan that carries an interest rate of 3.95% and a $96 million, 10-year variable-rate loan that carries an interest rate equal to LIBOR plus a spread of 190 basis points. Three of the Company's communities were released from the facility and added to the Company's unencumbered asset pool.
Further information related to these credit facilities is as follows (dollars in thousands):
September 30, 2013 December 31, 2012September 30, 2014 December 31, 2013
Borrowings outstanding$838,903
 $842,487
$835,163
 $838,076
Weighted average borrowings during the period ended840,011
 903,817
836,305
 839,597
Maximum daily borrowings during the period ended841,494
 1,054,735
837,564
 841,494
Weighted average interest rate during the period ended4.2% 4.3%4.1% 4.2%
Weighted average interest rate at the end of the period4.1% 4.4%4.1% 4.1%
(c) The variable rate mortgage notes payable that secure tax-exempt housing bond issues mature on in August 2019 and March 2032, respectively.2032. Interest on these notes is payable in monthly installments. The variable rate mortgage notes have interest rates of 0.80%0.74% and 1.04%, respectively,0.79% as of September 30, 2013.2014.

(d) TheAs of September 30, 2014, the Company has a $900$900 million unsecured revolving credit facility. In June 2013, the Company amended its unsecured revolvingfacility that matures in December 2017. The credit facility. The amendment extended the maturity date to December 2017, includedfacility has a six month extension option and containedcontains an accordion feature that allows the Companyus to increase the facility to $1.45 billion.$1.45 billion. Based on the Company'sCompany’s current credit rating, the credit facility carries an interest rate equal to LIBOR plus a spread of 110100 basis points and a facility fee of 2015 basis points. In the third quarter of 2013, the Company paid off the balance outstanding under the revolving credit facility. As of September 30, 2013, the Company had no balance outstanding under the revolving credit facility.


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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS - (Continued)
SEPTEMBER 30, 20132014



The following is a summary of short-term bank borrowings under UDR’s bank credit facility at September 30, 20132014 and December 31, 20122013 (dollars in thousands):
September 30, 2013 December 31, 2012September 30, 2014 December 31, 2013
Total revolving credit facility$900,000
 $900,000
$900,000
 $900,000
Borrowings outstanding at end of period (1)—
 76,000
160,000
 —
Weighted average daily borrowings during the period ended206,920
 167,038
321,821
 169,844
Maximum daily borrowings during the period ended372,000
 788,000
625,000
 372,000
Weighted average interest rate during the period ended1.2% 1.5%1.2% 1.2%
Interest rate at end of the period—% 1.4%1.1% 1.3%
(1) Excludes $2.3$2.2 million and $3.9 million of letters of credit at September 30, 20132014 and December 31, 2012, respectively.

(e) In June 2013 the Company amended and re-priced its $100 million unsecured term notes due in January 2016. The loan was re-priced from LIBOR plus 142.5 basis points to LIBOR plus 125 basis points, and the maturity date was extended to June 2018.

(f) In(e) On June 2013, the Company amended and re-priced its $250 million unsecured term notes due in January 2016. The loan was re-priced from LIBOR plus 142.5 basis points to LIBOR plus 125 basis points, and the maturity date was extended to June 2018.

(g) On September 26, 2013,2014, the Company issued $300$300 million of 3.70%3.750% senior unsecured medium-term notes due October 2020.July 1, 2024. Interest is payable semiannuallysemi-annually beginning in April 2014.on January 1, 2015. The notes were priced at 99.981%99.652% of the principal amount at issuance and had a discount of $56,000$1.0 million at September 30, 2013. We2014. The Company used the net proceeds to repay thepay down borrowings outstanding on our $900$900 million unsecured credit facility and for general corporate purposes. The notes are fully and unconditionally guaranteed by the Operating Partnership.

(h)(f) The Operating Partnership is a guarantor at September 30, 20132014 and December 31, 20122013.

The aggregate maturities, including amortizing principal payments of unsecured and secured debt, of total debt for the next five calendar years subsequent to September 30, 20132014 are as follows (dollars in thousands):
Year Total Fixed Secured Debt Total Variable Secured Debt Total Secured Debt Total Unsecured Debt (a) Total Debt Total Fixed Secured Debt Total Variable Secured Debt Total Secured Debt Total Unsecured Debt (a) Total Debt
2013 $3,362
 $—
 $3,362
 $—
 $3,362
2014 48,009
 —
 48,009
 311,572
 359,581
 $37,835
 $—
 $37,835
 $—
 $37,835
2015 197,204
 —
 197,204
 324,382
 521,586
 197,359
 —
 197,359
 323,874
 521,233
2016 136,440
 —
 136,440
 432,477
 568,917
 136,434
 31,337
 167,771
 82,417
 250,188
2017 178,372
 65,000
 243,372
 —
 243,372
 177,955
 65,000
 242,955
 160,000
 402,955
2018 176,472
 50,000
 226,472
 648,510
 874,982
Thereafter 512,298
 241,109
 753,407
 1,012,947
 1,766,354
 335,871
 191,109
 526,980
 1,014,019
 1,540,999
Total $1,075,685
 $306,109
 $1,381,794
 $2,081,378
 $3,463,172
 $1,061,926
 $337,446
 $1,399,372
 $2,228,820
 $3,628,192
          
(a) With the exception of the 1.44%1.30% Term Notes due June 2018 and the revolving credit facility which carry a variable interest rate, all unsecured debt carries fixed interest rates.
We were in compliance with the covenants of our debt instruments at September 30, 20132014.


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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS - (Continued)
SEPTEMBER 30, 20132014



7. 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 September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 20122014 2013 2014 2013
Numerator for income/(loss) per share:              
Income/(loss) from continuing operations$3,235
 $(8,543) $8,280
 $(29,925)$10,611
 $2,351
 $9,775
 $5,713
Gain/(loss) on sale of real estate owned, net of tax31,302
 —
 82,305
 —
(Income)/loss from continuing operations attributable to redeemable noncontrolling interests in the Operating Partnership(84) 607
 (198) 1,413
(1,441) (52) (3,167) (106)
(Income)/loss from continuing operations attributable to noncontrolling interests37
 (42) 30
 (137)4
 37
 (2) 30
Income/(loss) from continuing operations attributable to UDR, Inc.3,188
 (7,978) 8,112
 (28,649)40,476
 2,336
 88,911
 5,637
Distributions to preferred stockholders - Series E (Convertible)(931) (931) (2,793) (2,793)(931) (931) (2,793) (2,793)
Distributions to preferred stockholders - Series G—
 —
 —
 (2,286)
Premium on preferred stock redemptions, net—
 —
 —
 (2,791)
Income/(loss) from continuing operations attributable to common stockholders$2,257
 $(8,909) $5,319
 $(36,519)$39,545
 $1,405
 $86,118
 $2,844
              
Income/(loss) from discontinued operations, net of tax$—
 $(1,133) $—
 $263,183
$79
 $884
 $10
 $2,567
(Income)/loss from discontinued operations attributable to redeemable noncontrolling interests in the Operating Partnership—
 80
 —
 (10,057)(6) (32) (4) (92)
Income/(loss) from discontinued operations attributable to common stockholders$—
 $(1,053) $—
 $253,126
$73
 $852
 $6
 $2,475
              
Net income/(loss) attributable to common stockholders$2,257
 $(9,962) $5,319
 $216,607
$39,618
 $2,257
 $86,124
 $5,319
              
Denominator for income/(loss) per share:              
Weighted average common shares outstanding250,744
 250,162
 250,663
 235,904
252,891
 250,744
 251,860
 250,663
Non-vested restricted stock awards(759) (337) (701) (731)(1,236) (759) (1,159) (701)
Denominator for basic income/(loss) per share249,985
 249,825
 249,962
 235,173
251,655
 249,985
 250,701
 249,962
Incremental shares issuable from assumed conversion of:
Stock options and unvested restricted stock
1,469
 —
 1,477
 —
Incremental shares issuable from assumed conversion of stock options and unvested restricted stock2,077
 1,469
 1,974
 1,477
Denominator for diluted income/(loss) per share251,454
 249,825
 251,439
 235,173
253,732
 251,454
 252,675
 251,439
       
Income/(loss) per weighted average common share-basic:              
Income/(loss) from continuing operations attributable to common stockholders$0.01
 $(0.04) $0.02
 $(0.16)$0.16
 $0.01
 $0.34
 $0.01
Income/(loss) from discontinued operations attributable to common stockholders$—
 $(0.00) $—
 $1.08
0.00
 0.00
 0.00
 0.01
Net income/(loss) attributable to common stockholders$0.01
 $(0.04) $0.02
 $0.92
$0.16
 $0.01
 $0.34
 $0.02
       
Income/(loss) per weighted average common share-diluted:              
Income/(loss) from continuing operations attributable to common stockholders$0.01
 $(0.04) $0.02
 $(0.16)$0.16
 $0.01
 $0.34
 $0.01
Income/(loss) from discontinued operations attributable to common stockholders$—
 $(0.00) $—
 $1.08
0.00
 0.00
 0.00
 0.01
Net income/(loss) attributable to common stockholders$0.01
 $(0.04) $0.02
 $0.92
$0.16
 $0.01
 $0.34
 $0.02

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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS - (Continued)
SEPTEMBER 30, 20132014



Basic income/(loss) per common share is computed based upon the weighted average number of common shares outstanding. Diluted income/(loss) per 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, convertible preferred stock, stock options, and restricted stock. 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.
During the three and nine months endedSeptember 30, 2012, the effect of the conversion of the OP Units, convertible preferred stock, 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 attributable to common stockholders.

The following table sets forth the additional shares of Common Stockcommon stock outstanding by equity instrument if converted to Common Stockcommon stock for each of the three and nine months ended September 30, 20132014 and 20122013 (shares in thousands):

 Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30,
 2013 2012 2013 2012 2014 2013 2014 2013
OP Units 9,323
 9,406
 9,343
 9,415
 9,189
 9,323
 9,274
 9,343
Preferred Stock 3,036
 3,036
 3,036
 3,036
Preferred stock 3,036
 3,036
 3,036
 3,036
Stock options and unvested restricted stock 1,469
 1,364
 1,477
 1,360
 2,077
 1,469
 1,974
 1,477
8. NONCONTROLLING INTERESTS
Redeemable Noncontrolling Interests in the Operating Partnership
Interests in the Operating Partnership held by limited partners are represented by 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 noncontrolling 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 partnerpartners at a redemption price equal to and in the form of the Cash Amount as defined in the Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the “Operating 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 Operating 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 Operating Partnership, December 31, 2012$223,418
Mark to market adjustment to redeemable noncontrolling interests in the Operating Partnership5,945
Redeemable noncontrolling interests in the Operating Partnership, December 31, 2013$217,597
Mark-to-market adjustment to redeemable noncontrolling interests in the Operating Partnership40,771
Conversion of OP Units to Common Stock(1,711)(4,318)
Net income/(loss) attributable to redeemable noncontrolling interests in the Operating Partnership198
3,171
Distributions to redeemable noncontrolling interests in the Operating Partnership(7,082)(7,570)
Allocation of other comprehensive income/(loss)196
163
Redeemable noncontrolling interests in the Operating Partnership, September 30, 2013$220,964
Redeemable noncontrolling interests in the Operating Partnership, September 30, 2014$249,814

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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS - (Continued)
SEPTEMBER 30, 20132014




The following sets forth net income/(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 September 30, Nine Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30,
 2013 2012 2013 2012 2014 2013 2014 2013
Net income/(loss) attributable to common stockholders $2,257
 $(9,962) $5,319
 $216,607
 $39,618
 $2,257
 $86,124
 $5,319
Conversion of OP Units to UDR Common Stock —
 333
 1,711
 479
Conversion of OP Units to UDR Common stock 4,127
 —
 4,318
 1,711
Change in equity from net income/(loss) attributable to common stockholders and conversion of OP Units to UDR Common Stock $2,257
 $(9,629) $7,030
 $217,086
 $43,745
 $2,257
 $90,442
 $7,030
Noncontrolling Interests
Noncontrolling interests represent interests of unrelated partners in certain consolidated affiliates, and isare presented as part of equity in the Consolidated Balance Sheets since these interests are not redeemable. DuringNet (income)/loss attributable to noncontrolling interests was $4,000 and $(2,000) during the three and nine months ended September 30, 2014, respectively, and $37,000 and $30,000 during the three and nine months ended September 30, 2013, and 2012, net (income)/loss attributable to noncontrolling interests was $37,000 and $30,000 and $(42,000) and $(137,000), respectively.

9. 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-STATEMENTS - (Continued)
SEPTEMBER 30, 20132014



The estimated fair values of the Company’s financial instruments either recorded or disclosed on a recurring basis as of September 30, 20132014 and December 31, 20122013 are summarized as follows (dollars in thousands):
    Fair Value at September 30, 2013, Using    Fair Value at September 30, 2014, Using
Total Carrying Amount in Statement of Financial Position at September 30, 2013 Fair Value Estimate at September 30, 2013 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Total Carrying Amount in Statement of Financial Position at September 30, 2014 Fair Value Estimate at September 30, 2014 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Description:                  
Notes receivable (a)$66,707
 $67,562
 $—
 $—
 $67,562
$18,318
 $18,858
 $—
 $—
 $18,858
Derivatives- Interest rate contracts (b)299
 299
 —
 299
 —
Total assets$66,707
 $67,562
 $—
 $—
 $67,562
$18,617
 $19,157
 $—
 $299
 $18,858
                  
Derivatives- Interest rate contracts (b)$6,398
 $6,398
 $—
 $6,398
 $—
$2,382
 $2,382
 $—
 $2,382
 $—
Secured debt instruments- fixed rate: (c)                  
Mortgage notes payable448,191
 468,211
 —
 —
 468,211
438,172
 451,582
 —
 —
 451,582
Fannie Mae credit facilities627,494
 657,504
 —
 —
 657,504
623,754
 655,035
 —
 —
 655,035
Secured debt instruments- variable rate: (c)                  
Mortgage notes payable31,337
 31,337
 —
 —
 31,337
Tax-exempt secured notes payable94,700
 94,700
 —
 —
 94,700
94,700
 94,700
 —
 —
 94,700
Fannie Mae credit facilities211,409
 211,409
 —
 —
 211,409
211,409
 211,409
 —
 —
 211,409
Unsecured debt instruments: (c)                  
Commercial bank160,000
 160,000
 —
 —
 160,000
Senior unsecured notes2,081,378
 2,157,302
 —
 —
 2,157,302
2,068,820
 2,136,468
 —
 —
 2,136,468
Total liabilities$3,469,570
 $3,595,524
 $—
 $6,398
 $3,589,126
$3,630,574
 $3,742,913
 $—
 $2,382
 $3,740,531
                  
Redeemable noncontrolling interests in the Operating Partnership (d)$220,964
 $220,964
 $—
 $220,964
 $—
$249,814
 $249,814
 $—
 $249,814
 $—

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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS - (Continued)
SEPTEMBER 30, 20132014



    Fair Value at December 31, 2012, Using    Fair Value at December 31, 2013, Using
Total Carrying Amount in Statement of Financial Position at December 31, 2012 Fair Value Estimate at December 31, 2012 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Total Carrying Amount in Statement of Financial Position at December 31, 2013 Fair Value Estimate at December 31, 2013 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
  
Description:                  
Notes receivable (a)$64,006
 $64,930
 $—
 $—
 $64,930
$83,033
 $83,833
 $—
 $—
 $83,833
Derivatives- Interest rate contracts (b)2
 2
 —
 2
 —
Total assets$64,008
 $64,932
 $—
 $2
 $64,930
$83,033
 $83,833
 $—
 $—
 $83,833
                  
Derivatives- Interest rate contracts (b)$11,022
 $11,022
 $—
 $11,022
 $—
$4,965
 $4,965
 $—
 $4,965
 $—
Secured debt instruments- fixed rate: (c)                  
Mortgage notes payable455,533
 494,728
 —
 —
 494,728
445,706
 466,375
 —
 —
 466,375
Fannie Mae credit facilities631,078
 689,295
 —
 —
 689,295
626,667
 661,094
 —
 —
 661,094
Secured debt instruments- variable rate: (c)   
  
    
   
  
    
Mortgage notes payable37,415
 37,415
 —
 —
 37,415
63,595
 63,595
 —
 —
 63,595
Tax-exempt secured notes payable94,700
 94,700
 —
 —
 94,700
94,700
 94,700
 —
 —
 94,700
Fannie Mae credit facilities211,409
 211,409
 —
 —
 211,409
211,409
 211,409
 —
 —
 211,409
Unsecured debt instruments: (c)                  
Commercial bank76,000
 76,000
 —
 —
 76,000
Senior unsecured notes1,903,198
 2,039,736
 —
 —
 2,039,736
2,081,626
 2,149,003
 —
 —
 2,149,003
Total liabilities$3,420,355
 $3,654,305
 $—
 $11,022
 $3,643,283
$3,528,668
 $3,651,141
 $—
 $4,965
 $3,646,176
                  
Redeemable noncontrolling interests in the Operating Partnership (d)$223,418
 $223,418
 $—
 $223,418
 $—
$217,597
 $217,597
 $—
 $217,597
 $—

(a)
See Note 2, Significant Accounting Policies.
(b)
See Note 10, Derivatives and Hedging Activity.
(c)
See Note 6, Secured and Unsecured Debt.
(d)
See Note 8, Noncontrolling Interests.

There were no transfers into or out of each of the levels of the fair value hierarchy.hierarchy for the periods ending September 30, 2014 and December 31, 2013.
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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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
SEPTEMBER 30, 2013



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 September 30, 2013

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2014



2014 and December 31, 20122013, 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'sFASB’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 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 are classified as Level 2.
Financial Instruments Not Carried at Fair Value
At September 30, 20132014, 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 were determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company would realize on the disposition of the financial instruments. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts.
We estimate the fair value of our notes receivable and debt instruments by discounting the remaining cash flows of the debt instrument at a discount rate equal to the replacement market credit spread plus the corresponding treasury yields. Factors considered in determining a replacement market credit spread include general market conditions, borrower specific credit spreads, time remaining to maturity, loan-to-value ratios and collateral quality, where applicable (Level 3).
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 decrease in the value of its investments in unconsolidated joint ventures during the three and nine months ended September 30, 20132014, respectively. and 2013.
After determining 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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS - (Continued)
SEPTEMBER 30, 20132014



10. DERIVATIVES AND HEDGING ACTIVITY
Risk Management Objective of Using Derivatives
The Company is exposed to certain riskrisks 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 effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in “AccumulatedAccumulated other comprehensive loss, net”income/(loss), net in the Consolidated Balance Sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three and nine months ended September 30, 20132014 and 20122013, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three and nine months ended September 30, 2014, the Company recorded no gain or loss and a gain of approximately $3,000, respectively, related to the ineffective portion of the derivative, which was caused by a timing difference between the derivative and the hedged item. During the three and nine months ended September 30, 2013, and 2012, the Company recorded a loss of less than a  $1,000 loss from ineffectiveness in earnings attributable related to reset date andthe ineffective portion of the derivative, which was caused by an index mismatchesdifference between the derivative and the hedged item, and the fair value of interest rate swaps that were not zero at inception of the hedging relationship.item.
Amounts reported in “AccumulatedAccumulated other comprehensive loss, net”income/(loss), net in the Consolidated Balance Sheets related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Through September 30, 20142015, the Company estimates that an additional $5.1$4.4 million will be reclassified as an increase to interest expense.
As of September 30, 20132014, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollars in thousands):
Interest Rate Derivative Number of Instruments Notional Number of Instruments Notional
Interest rate swaps 11 $419,787
 14 $419,787
Interest rate caps 5 $274,291
 6 $339,488
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 adjustment to earnings for the three and nine months ended September 30, 2014 and a gain/(loss) of $280,000 and $275,000 and $(1,000) and $290,000for the three and nine months ended September 30, 2013, and 2012, respectively.
As of September 30, 20132014, the Company had the followingdid not have any outstanding derivatives that were not designated as hedges in qualifying hedging relationships (relationships.dollars in thousands):
Product Number of Instruments Notional
Interest rate caps 2 $155,197

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS - (Continued)
SEPTEMBER 30, 20132014



Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet
The tabletables below presentspresent the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of September 30, 20132014 and December 31, 20122013 (dollars in thousands):
Asset Derivatives Liability DerivativesAsset Derivatives Liability Derivatives
  Fair Value at:   Fair Value at:  Fair Value at:   Fair Value at:
Balance
Sheet Location
 September 30,
2013		 December 31,
2012		 
Balance
Sheet Location
 September 30,
2013		 December 31,
2012
Balance
Sheet Location
 September 30,
2014		 December 31,
2013		 
Balance
Sheet Location
 September 30,
2014		 December 31,
2013
Derivatives designated as hedging instruments:                      
Interest rate productsOther assets $—
 $2
 Other liabilities $6,398
 $11,022
Other assets $299
 —
 Other liabilities $2,382
 4,965
Total  $—
 $2
   $6,398
 $11,022
        
Derivatives not designated as hedging instruments:
                      
Interest rate productsOther assets $—
 $—
 Other liabilities $—
 $—
Other assets $—
 $—
 Other liabilities $—
 $—
Total  $—
 $—
   $—
 $—

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS - (Continued)
SEPTEMBER 30, 20132014



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 and nine months ended September 30, 20132014 and 20122013 (dollars in thousands):
 Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivatives in Cash Flow Hedging Relationships 2013 2012 2013 2012 2013 2012 2014 2013 2014 2013 2014 2013
            
For the Three Months Ended September 30,                        
Interest rate products $(386) $(1,355) Interest expense $(1,635) $(1,925) Interest expense $—
 $—
 $362
 $(386) Interest expense $(1,130) $(1,635) Interest expense $—
 $—
Total $(386) $(1,355) $(1,635) $(1,925) $—
 $—
                        
For the Nine Months Ended September 30,                        
Interest rate products $(334) $(4,847) Interest expense $(5,180) $(5,677) Interest expense $—
 $—
 $611
 $(334) Interest expense $(3,809) $(5,180) Interest expense $3
 $—
Total $(334) $(4,847) $(5,180) $(5,677) $—
 $—

Derivatives Not Designated as Hedging Instruments Location of Gain or (Loss) Recognized in Income on Derivative Amount of Gain or (Loss) Recognized in Income on Derivative Location of Gain or (Loss) Recognized in Income on Derivative Amount of Gain or (Loss) Recognized in Income on Derivative
2013 20122014 2013
    
For the Three Months Ended September 30,        
Interest rate products Interest and other income, net $280
 $(1) Interest and other income/(loss), net $—
 $280
Total $280
 $(1)
        
For the Nine Months Ended September 30,        
Interest rate products Interest and other income, net $275
 $290
 Interest and other income/(loss), net $—
 $275
Total $275
 $290


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Credit-risk-related Contingent Features
The Company has agreements with some of its derivative counterparties that contain a provision where (1) if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations; or (2) 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.
Certain of the Company’s agreements with its derivative counterparties contain provisions where, if there is a change in the Company’s financial condition that materially changes the Company’s creditworthiness in an adverse manner, the Company may be required to fully collateralize its obligations under the derivative instrument. At September 30, 2013 and December 31, 2012, no cash collateral was posted or required to be posted by the Company or by a counterparty.
The Company also has an agreement with a derivative counterparty that incorporates the loan and financial covenant provisions of the Company’s indebtedness with a lender affiliate of the derivative counterparty. Failure to comply with these covenant provisions would result in the Company being in default on any derivative instrument obligations covered by the agreement.

The Company has certain agreements with some
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Table 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 contract, 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.Contents
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2014



As of September 30, 20132014, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $6.9 million.$2.4 million. As of September 30, 2013,2014, the Company has not posted any collateral related to these agreements. If the Company had breached any of these provisions at September 30, 2013,2014, it wouldmay have been required to settle its obligations under the agreements at their termination value of $6.9 million.$2.4 million.

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TableTabular Disclosure of ContentsOffsetting Derivatives
UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
SEPTEMBER 30, 2013



The Company has elected not to offset derivative positions in 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 September 30, 20132014 and December 31, 20122013 (dollar in thousands):
Offsetting of Derivative Assets        
    Gross Amounts Not Offset in the Consolidated Balance Sheets  
  Gross Amounts of Recognized Assets Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Assets Presented in the Consolidated Balance Sheets (a) Financial Instruments Cash Collateral Received Net Amount
             
September 30, 2013 $—
 $—
 $—
 $—
 $—
 $—
             
December 31, 2012 $2
 $—
 $2
 $—
 $—
 $2
             
Offsetting of Derivative Assets        
    Gross Amounts Not Offset in the Consolidated Balance Sheets  
  Gross Amounts of Recognized Assets Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Assets Presented in the Consolidated Balance Sheets (a) Financial Instruments Cash Collateral Received Net Amount
September 30, 2014 $299
 $—
 $299
 $(253) $—
 $46
             
December 31, 2013 $—
 $—
 $—
 $—
 $—
 $—
(a) Amounts reconcile to the aggregate fair value of derivative assets in the "Tabular“Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet"Sheet” located in this footnote.
Offsetting of Derivative Liabilities        
    Gross Amounts Not Offset in the Consolidated Balance Sheets  
  Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Liabilities Presented in the Consolidated Balance Sheets (b) Financial Instruments Cash Collateral Posted Net Amount
             
September 30, 2013 $6,398
 $—
 $6,398
 $—
 $—
 $6,398
             
December 31, 2012 $11,022
 $—
 $11,022
 $—
 $—
 $11,022
             
Offsetting of Derivative Liabilities        
    Gross Amounts Not Offset in the Consolidated Balance Sheets  
  Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Liabilities Presented in the Consolidated Balance Sheets (b) Financial Instruments Cash Collateral Posted Net Amount
September 30, 2014 $2,382
 $—
 $2,382
 $(253) $—
 $2,129
             
December 31, 2013 $4,965
 $—
 $4,965
 $—
 $—
 $4,965
(b) Amounts reconcile to the aggregate fair value of derivative liabilities in the "Tabular“Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet"Sheet” located in this footnote.

11. STOCK BASED COMPENSATION
DuringThe Company recognized stock based compensation expense, inclusive of awards granted to our independent directors, of $3.5 million and $10.8 million during the three and nine months ended September 30, 2014, respectively, and $2.4 million and $6.7 million during the three and nine months ended September 30, 2013, and 2012respectively., we recognized $2.4 million and $6.7 million and $830,000 and $7.9 million, respectively, as stock based compensation expense, which is inclusive of awards granted to our independent directors.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS - (Continued)
SEPTEMBER 30, 20132014



12. COMMITMENTS AND CONTINGENCIES
Commitments
Real Estate Under Development
The following summarizes the Company’s real estate commitments at September 30, 20132014 (dollars in thousands):
Number of
Properties
 
Costs Incurred
to Date
 
Expected Costs
to Complete (a)
 
 Average Ownership
Stake
Number of
Properties
 
Costs Incurred
to Date (a)
 
Expected Costs
to Complete
 
 Average Ownership
Stake
Wholly owned — under development6 $489,472
 $292,978
 100%
Wholly owned — redevelopment2 117,727
 17,573
 100%
Wholly-owned — under development3 $321,607
(b)$78,793
 100%
Wholly-owned — redevelopment1 80,619
(b)17,381
 100%
Joint ventures:              
Unconsolidated joint ventures3 212,629
 1,778
 76%2 158,986
 143,981
(c)51%
Participating loan investments1 43,822
(d)48,187
(e)0%
  $819,828
 $312,329
    $605,034
 $288,342
  
(a) Represents UDR's remaining equity commitment of unconsolidated joint ventures.
(a)Represents 100% of project costs incurred to date.
(b)
Costs incurred to date include $26.8 million and $2.1 million of accrued fixed assets for development and redevelopment, respectively.
(c)Represents UDR’s contributed and remaining equity commitment in unconsolidated joint ventures.
(d)Represents the participating loan balance funded as of September 30, 2014.
(e)Represents UDR’s remaining participating loan commitment for Steele Creek.
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 flow.

13. 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 2.75% 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:


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SEPTEMBER 30, 2014



Same-Store Communities represent those communities acquired, developed, and stabilized prior to July 1, 20122013 for quarter-to-date comparison and January 1, 20122013 for year-to-date comparison and held as of September 30, 20132014. 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 communities arecommunity 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.


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Non-Mature Communities/Other represent those communities that weredo not meet the criteria to be included in Same-Store Communities, including, but not limited to, recently acquired, or developed in 2011, 2012 or 2013, sold properties, redevelopment properties, consolidated joint ventureand redeveloped properties, and the non-apartment components of mixed use properties.
Management evaluates the performance of each of our apartment communities on a same-store communitySame-Store Community and non-mature community/otherNon-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 Company’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 UDR’s total revenues during the three and nine months ended September 30, 20132014 and 20122013.

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The following table details rental income and NOI from continuing and discontinued operations for UDR’s reportable segments for the three and nine months ended September 30, 20132014 and 20122013, and reconciles NOI to "Net income/(loss) attributableNet Income/(Loss) Attributable to UDR, Inc." perInc. in the Consolidated Statements of Operations (dollars in thousands):
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, (a) Nine Months Ended September 30, (b)
2013 2012 2013 20122014 2013 2014 2013
Reportable apartment home segment rental income              
Same-Store Communities              
West Region$64,183
 $60,414
 $180,105
 $170,533
$68,275
 $64,195
 $189,075
 $177,884
Mid-Atlantic Region41,749
 40,867
 124,700
 121,028
40,479
 40,164
 121,356
 119,937
Southeast Region27,210
 25,851
 80,578
 76,763
Northeast Region14,777
 13,824
 43,440
 40,417
20,721
 19,806
 45,331
 43,441
Southeast Region29,165
 27,983
 86,643
 82,360
Southwest Region13,293
 12,492
 30,280
 28,359
13,859
 13,293
 40,949
 39,012
Non-Mature Communities/Other27,212
 26,186
 98,125
 119,102
33,064
 27,070
 121,756
 106,256
Total segment and consolidated rental income$190,379
 $181,766
 $563,293
 $561,799
Total consolidated rental income$203,608
 $190,379
 $599,045
 $563,293
       
Reportable apartment home segment NOI              
Same-Store Communities              
West Region$45,549
 $41,765
 $127,599
 $118,548
$49,110
 $45,699
 $136,587
 $126,860
Mid-Atlantic Region28,666
 28,251
 86,477
 83,879
27,622
 27,629
 83,581
 83,287
Southeast Region17,480
 16,560
 53,329
 49,866
Northeast Region10,640
 9,987
 31,410
 29,013
15,571
 14,678
 33,361
 31,409
Southeast Region18,607
 17,718
 56,124
 53,076
Southwest Region7,983
 7,455
 18,541
 16,880
8,509
 7,983
 25,130
 23,751
Non-Mature Communities/Other17,198
 17,118
 62,461
 77,923
21,522
 16,094
 80,342
 67,439
Total segment and consolidated NOI128,643
 122,294
 382,612
 379,319
Total consolidated NOI139,814
 128,643
 412,330
 382,612
Reconciling items:              
Joint venture management and other fees3,207
 3,320
 9,347
 9,026
3,165
 3,207
 9,599
 9,347
Property management(5,236) (4,998) (15,491) (15,449)(5,599) (5,236) (16,474) (15,491)
Other operating expenses(1,787) (1,467) (5,237) (4,284)(2,012) (1,787) (6,118) (5,237)
Real estate depreciation and amortization(84,266) (88,223) (252,839) (266,944)(89,339) (84,266) (266,748) (252,839)
General and administrative(11,364) (10,022) (30,706) (33,139)(11,554) (11,364) (36,078) (30,706)
Hurricane-related recoveries/(charges), net6,460
 —
 12,253
 —
Casualty-related recoveries/(charges), net—
 6,460
 (500) 12,253
Other depreciation and amortization(1,176) (1,078) (3,460) (3,013)(1,385) (1,176) (3,658) (3,460)
Income/(loss) from unconsolidated entities(3,794) (719) (6,081) (5,822)(939) (3,794) (4,932) (6,081)
Interest expense(30,939) (31,845) (92,723) (108,132)(33,087) (30,939) (97,662) (92,723)
Interest and other income/(expense), net829
 1,235
 3,291
 1,644
9,061
 829
 11,902
 3,291
Tax benefit, net2,658
 2,960
 7,314
 28,654
Tax benefit/(expense), net2,490
 2,658
 8,049
 7,314
Gain/(loss) on sale of real estate owned, net of tax31,377
 —
 82,380
 —
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership(84) 687
 (198) (8,644)(1,447) (84) (3,171) (198)
Net (income)/loss attributable to noncontrolling interests37
 (42) 30
 (137)4
 37
 (2) 30
Net gain/(loss) on sale of depreciable property, net of tax—
 (1,133) —
 251,398
Net income/(loss) attributable to UDR, Inc.$3,188
 $(9,031) $8,112
 $224,477
$40,549
 $3,188
 $88,917
 $8,112

(a)
Same-Store Community population consisted of 36,268 apartment homes.
(b)
Same-Store Community population consisted of 35,177 apartment homes.


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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS - (Continued)
SEPTEMBER 30, 20132014



The following table details the assets of UDR’s reportable segments as of September 30, 20132014 and December 31, 20122013 (dollars in thousands):
September 30,
2013		 December 31,
2012		September 30,
2014		 December 31,
2013
Reportable apartment home segment assets:      
Same-Store Communities:      
West Region$2,496,900
 $2,422,987
$2,591,838
 $2,412,091
Mid-Atlantic Region1,428,109
 1,419,873
1,404,730
 1,395,772
Southeast Region783,641
 785,134
Northeast Region736,639
 723,437
1,073,905
 1,066,260
Southeast Region885,847
 887,482
Southwest Region433,588
 385,377
438,982
 434,875
Non-Mature Communities/Other2,134,975
 2,216,672
2,135,195
 2,113,845
Total segment assets8,116,058
 8,055,828
Total assets8,428,291
 8,207,977
Accumulated depreciation(2,155,665) (1,924,682)(2,379,033) (2,208,794)
Total segment assets — net book value5,960,393
 6,131,146
Total assets — net book value6,049,258
 5,999,183
Reconciling items:      
Cash and cash equivalents11,149
 12,115
14,605
 30,249
Restricted cash23,022
 23,561
23,969
 22,796
Deferred financing costs, net27,269
 24,990
24,344
 26,924
Notes receivable, net66,707
 64,006
18,318
 83,033
Investment in and advances to unconsolidated joint ventures, net531,712
 477,631
650,441
 507,655
Other assets135,814
 125,654
117,153
 137,882
Total consolidated assets$6,756,066
 $6,859,103
$6,898,088
 $6,807,722
Capital expenditures related to our same-store communitiesSame-Store Communities totaled $15.5$15.1 million and $37.4$36.5 million and $14.6 million and $40.5 million for the three and nine months ended September 30, 2014, respectively, and $14.5 million and $34.6 million for the three and nine months ended September 30, 2013, and 2012, respectively. Capital expenditures related to our non-mature communities/otherNon-Mature Communities/Other totaled $552,000$1.3 million and $2.0$5.0 million and $664,000 and $4.5 million for the three and nine months ended September 30, 2014, respectively, and $1.6 million and $4.8 million for the three and nine months ended September 30, 2013, and 2012, respectively.
Markets included in the above geographic segments are as follows:
i.West Region — San Francisco, Orange County, San Francisco, Seattle, Monterey Peninsula, Los Angeles, San Diego, Inland Empire, Sacramento,Other Southern California, and Portland
ii.Mid-Atlantic Region — WashingtonMetropolitan D.C., Baltimore, Richmond, Baltimore, Norfolk, and otherOther Mid-Atlantic
iii.Northeast Region — New York and Boston
iv.Southeast Region — Tampa, Orlando, Nashville, and otherOther Florida
v.Southwest Region — Dallas and Austin

14. HURRICANE-RELATED (RECOVERIES)/CHARGES

In October 2012, Hurricane Sandy hit the East Coast, affecting three of the Company’s operating communities (1,706 apartment homes) located in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Company has insurance policies that provide coverage for property damage and business interruption, subject to applicable retention.

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UDR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
SEPTEMBER 30, 2013



Based on the claims filed and management’s estimates, the Company recognized a $9.0 million impairment charge for the damaged assets’ net book value and incurred $10.4 million of repair and cleanup costs during the year ended December 31, 2012. The impairment charge and the repair and cleanup costs incurred were reduced as of December 31, 2012 by $14.5 million of estimated insurance recovery, and were classified in “Hurricane-related (recoveries)/charges, net” on the Consolidated Statements of Operations. During the three and nine months endedSeptember 30, 2013, no material adjustments to the impairment charge and the repair and cleanup costs incurred were recognized. With the exception of one of the properties that is under redevelopment at September 30, 2013, the rehabilitation of the remaining two properties was substantially completed as of September 30, 2013.
As of September 30, 2013, the Company had settled the Hurricane Sandy claims and received insurance proceeds in excess of the $14.5 million estimated insurance recovery receivable related to the impairment charge and the repair and cleanup costs incurred. As a result, the Company recognized a Hurricane-related recovery of approximately $2.0 million and $4.8 million and a casualty gain of approximately $654,000 for the three and nine months endedSeptember 30, 2013, respectively. Both the recovery and casualty gain were classified in "Hurricane-related (recoveries)/charges, net" on the Consolidated Statements of Operations.
Based on the claims filed and management’s estimates, the Company recognized $4.4 million of business interruption losses for the year ended December 31, 2012, of which $3.6 million were related to rent concession rebates provided to residents during the period the properties were uninhabitable and were classified in "Hurricane-related (recoveries)/charges, net" on the Consolidated Statements of Operations, and $767,000 were related to rent that was not contractually receivable and were classified as a reduction to “Rental income” on the Consolidated Statements of Operations. As noted below, the Company recovered from the insurance carrier approximately $4.2 million of the $4.4 million of 2012 business interruption losses. The Company estimates that it incurred an additional $3.4 million of business interruption losses for the nine months endedSeptember 30, 2013. As noted below, the Company recovered from the insurance carrier approximately $2.6 million of the $3.4 million of 2013 business interruption losses.
During the three and nine months endedSeptember 30, 2013, the Company received approximately $3.8 million and $6.8 million, respectively, of insurance proceeds for recovery of business interruption losses. Of the $6.8 million of insurance proceeds received during the nine months endedSeptember 30, 2013, $4.2 million related to recovery of business interruption losses incurred in 2012 and the remaining $2.6 million related to recovery of business interruption losses incurred in 2013. The $6.8 million of recovery was classified in “Hurricane-related (recoveries)/charges, net” on the Consolidated Statements of Operations as of September 30, 2013.



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UNITED DOMINION REALTY, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for unit data)



September 30,
2013		 December 31, 2012September 30,
2014		 December 31, 2013
(unaudited) (audited)(unaudited) (audited)
ASSETS      
Real estate owned:      
Real estate held for investment$4,165,089
 $4,095,528
$4,099,395
 $4,108,417
Less: accumulated depreciation(1,231,375) (1,096,001)(1,357,610) (1,241,574)
Real estate held for investment, net2,933,714
 2,999,527
2,741,785
 2,866,843
Real estate under development (net of accumulated depreciation $1,145 and $1,132)139,848
 86,260
Real estate under development (net of accumulated depreciation $513 and $0, respectively)119,315
 80,063
Total real estate owned, net of accumulated depreciation3,073,562
 3,085,787
2,861,100
 2,946,906
Cash and cash equivalents2,422
 2,804
1,484
 1,897
Restricted cash13,488
 12,926
13,989
 13,526
Deferred financing costs, net6,167
 6,072
4,783
 5,848
Other assets26,857
 28,665
25,070
 25,064
Total assets$3,122,496
 $3,136,254
$2,906,426
 $2,993,241
      
LIABILITIES AND CAPITAL      
   
Liabilities:      
Secured debt$937,023
 $967,239
$928,273
 $934,865
Notes payable due to General Partner88,696
 88,696
88,696
 88,696
Real estate taxes payable13,881
 5,783
13,433
 6,228
Accrued interest payable3,390
 3,604
3,195
 3,323
Security deposits and prepaid rent14,378
 13,360
17,331
 14,172
Distributions payable43,488
 40,752
47,788
 43,253
Deferred gains on the sale of depreciable property63,838
 63,838
47,531
 63,838
Accounts payable, accrued expenses, and other liabilities42,849
 34,226
23,850
 35,769
Total liabilities1,207,543
 1,217,498
1,170,097
 1,190,144
      
Commitments and contingencies (Note 11)   
 
      
Capital:      
Partners’ capital:      
General partner: 110,883 OP Units outstanding at September 30, 2013 and December 31, 20121,162
 1,223
Limited partners: 184,170,370 OP Units outstanding at September 30, 2013 and December 31, 20121,819,935
 1,921,445
Accumulated other comprehensive loss, net(3,612) (5,369)
General partner: 110,883 OP Units outstanding at September 30, 2014 and December 31, 20131,114
 1,163
Limited partners: 183,167,815 OP Units outstanding at September 30, 2014 and December 31, 20131,718,119
 1,797,836
Accumulated other comprehensive income/(loss), net(1,475) (3,065)
Total partners’ capital1,817,485
 1,917,299
1,717,758
 1,795,934
Payable/(receivable) due to/(from) General Partner84,804
 (11,056)795
 (9,916)
Noncontrolling interests12,664
 12,513
17,776
 17,079
Total capital1,914,953
 1,918,756
1,736,329
 1,803,097
Total liabilities and capital$3,122,496
 $3,136,254
$2,906,426
 $2,993,241
See accompanying notes to the consolidated financial statements.

3836
UNITED DOMINION REALTY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
(Unaudited)


Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 2012Three Months Ended September 30, Nine Months Ended September 30,
       2014 2013 2014 2013
REVENUES:              
Rental income$103,997
 $100,235
 $306,766
 $294,161
$107,444
 $101,559
 $314,656
 $299,750
              
OPERATING EXPENSES:              
Property operating and maintenance19,994
 19,478
 57,765
 56,959
19,906
 19,339
 56,468
 55,952
Real estate taxes and insurance12,011
 10,930
 34,425
 31,190
11,785
 11,796
 35,050
 33,774
Property management2,860
 2,756
 8,436
 8,089
2,955
 2,793
 8,653
 8,243
Other operating expenses1,406
 1,321
 4,215
 3,944
1,484
 1,405
 4,371
 4,215
Real estate depreciation and amortization44,855
 51,012
 135,555
 148,217
45,043
 44,333
 134,011
 133,962
General and administrative6,855
 4,635
 18,324
 19,581
6,939
 6,855
 21,368
 18,324
Hurricane-related (recoveries)/charges, net(3,807) —
 (8,083) —
Casualty-related (recoveries)/charges, net—
 (3,807) 500
 (8,083)
Total operating expenses84,174
 90,132
 250,637
 267,980
88,112
 82,714
 260,421
 246,387
              
Operating income19,823
 10,103
 56,129
 26,181
19,332
 18,845
 54,235
 53,363
              
Interest expense8,506
 9,357
 26,284
 34,240
(9,306) (8,506) (27,176) (26,284)
Interest expense on note payable due to General Partner267
 490
 801
 1,468
(1,151) (267) (3,453) (801)
Income/(loss) from continuing operations11,050
 256
 29,044
 (9,527)8,875
 10,072
 23,606
 26,278
Income/(loss) from discontinued operations—
 (132) —
 54,162
—
 978
 —
 2,766
Income/(loss) before gain/(loss) on sale of real estate owned8,875
 11,050
 23,606
 29,044
Gain/(loss) on sale of real estate owned—
 —
 40,687
 —
Net income/(loss)11,050
 124
 29,044
 44,635
8,875
 11,050
 64,293
 29,044
Net (income)/loss attributable to noncontrolling interests(39) (39) (151) (304)(238) (39) (697) (151)
Net income/(loss) attributable to OP unitholders$11,011
 $85
 $28,893
 $44,331
$8,637
 $11,011
 $63,596
 $28,893
              
Income/(loss) per weighted average OP Unit- basic and diluted:       
Income/(loss) per weighted average OP Unit - basic and diluted:       
Income/(loss) from continuing operations attributable to OP unitholders$0.06
 $0.00
 $0.16
 $(0.05)$0.05
 $0.05
 $0.35
 $0.14
Income(loss) from discontinued operations attributable to OP unitholders$—
 $0.00
 $—
 $0.29
Income/(loss) from discontinued operations attributable to OP unitholders—
 0.01
 —
 0.02
Net income/(loss) attributable to OP unitholders$0.06
 $0.00
 $0.16
 $0.24
$0.05
 $0.06
 $0.35
 $0.16
              
Weighted average OP Units outstanding - basic and diluted184,281
 184,281
 184,281
 184,281
183,279
 184,281
 183,279
 184,281
See accompanying notes to the consolidated financial statements.


3937
UNITED DOMINION REALTY, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(In thousands)
(Unaudited)


Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 2012Three Months Ended September 30, Nine Months Ended September 30,
       2014 2013 2014 2013
Net income/(loss)$11,050
 $124
 $29,044
 $44,635
$8,875
 $11,050
 $64,293
 $29,044
       
Other comprehensive income/(loss), including portion attributable to noncontrolling interests:              
Other comprehensive income/(loss)- derivative instruments:       
Other comprehensive income/(loss) - derivative instruments:       
Unrealized holding gain/(loss)(201) (503) (284) (1,873)(3) (201) (194) (284)
(Gain)/loss reclassified into earnings from other comprehensive income/(loss)590
 863
 2,041
 2,545
588
 590
 1,784
 2,041
Other comprehensive income/(loss), including portion attributable to noncontrolling interests389
 360
 1,757
 672
585
 389
 1,590
 1,757
       
Comprehensive income/(loss)11,439
 484
 30,801
 45,307
9,460
 11,439
 65,883
 30,801
       
Comprehensive (income)/loss attributable to noncontrolling interests(39) (39) (151) (304)(238) (39) (697) (151)
       
Comprehensive income/(loss) attributable to OP unitholders$11,400
 $445
 $30,650
 $45,003
$9,222
 $11,400
 $65,186
 $30,650

See accompanying notes to consolidated financial statements.



4038
UNITED DOMINION REALTY, L.P.
CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL
(In thousands)
(Unaudited)


               
Class A Limited
Partners
 
Limited
Partners
 UDR, Inc. 
Accumulated Other Comprehensive
Income/(Loss), net
 
Total Partners’
Capital
 
Payable/(Receivable) due to/(from) General
Partner
 
Noncontrolling
Interests
  
Class A Limited
Partners
 
Limited
Partners
 UDR, Inc. 
Accumulated Other Comprehensive
Income/(Loss), net
 
Total Partners'
Capital
 
Payable/(Receivable) due to/(from) General
Partner
 
Noncontrolling
Interests
   Limited Partner 
General
Partner
 Total
 Limited Partner 
General
Partner
 Total
Balance at December 31, 2012$41,656
 $181,762
 $1,698,027
 $1,223
 $(5,369) $1,917,299
 $(11,056) $12,513
 $1,918,756
Balance at December 31, 2013$40,902
 $176,695
 $1,580,239
 $1,163
 $(3,065) $1,795,934
 $(9,916) $17,079
 $1,803,097
Net income/(loss)608
 2,618
 60,332
 38
 —
 63,596
 —
 697
 64,293
Distributions(1,742) (5,340) (123,304) (78) —
 (130,464) —
 —
 (130,464)(1,746) (5,861) (135,668) (87) —
 (143,362) —
 —
 (143,362)
OP Unit Redemptions for common shares of UDR—
 (1,711) 1,711
 —
 —
 —
 —
 —
 —
—
 (4,317) 4,317
 —
 —
 —
 —
 —
 —
Adjustment to reflect limited partners’ capital at redemption value1,327
 3,550
 (4,877) —
 —
 —
 —
 —
 —
7,969
 32,946
 (40,915) —
 —
 —
 —
 —
 —
Net income/(loss)275
 1,187
 27,414
 17
 —
 28,893
 —
 151
 29,044
Other comprehensive income/(loss)—
 —
 —
 —
 1,757
 1,757
 —
 —
 1,757
—
 —
 —
 —
 1,590
 1,590
 —
 —
 1,590
Net change in amount due to/(from) General Partner—
 —
 —
 —
 —
 —
 95,860
 —
 95,860
—
 —
 —
 —
 —
 —
 10,711
 —
 10,711
Balance at September 30, 2013$41,516
 $179,448
 $1,598,971
 $1,162
 $(3,612) $1,817,485
 $84,804
 $12,664
 $1,914,953
Balance at September 30, 2014$47,733
 $202,081
 $1,468,305
 $1,114
 $(1,475) $1,717,758
 $795
 $17,776
 $1,736,329
See accompanying notes to the consolidated financial statements.


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UNITED DOMINION REALTY, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except for unit data)
(Unaudited)

Nine Months Ended September 30,Nine Months Ended September 30,
2013 20122014 2013
Operating Activities      
Net income/(loss)29,044
 44,635
$64,293
 $29,044
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:   
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:   
Depreciation and amortization135,555
 149,422
134,011
 135,555
Net gain on the sale of depreciable property—
 (51,050)
Hurricane-related (recoveries)/charges, net(618) —
Gain on sale of real estate owned(40,687) —
Casualty-related (recoveries)/charges, net500
 (618)
Other2,413
 2,363
187
 2,413
Changes in operating assets and liabilities:      
(Increase)/decrease in operating assets(10,201) 454
(2,540) (10,201)
Increase/(decrease) in operating liabilities8,495
 8,584
2,077
 8,495
Net cash provided by operating activities164,688
 154,408
Net cash provided by/(used in) operating activities157,841
 164,688
      
Investing Activities      
Proceeds from sale of real estate investments, net47,922
 —
Development of real estate assets(45,490) (11,531)(41,701) (45,490)
Proceeds from sales of real estate investments, net—
 113,126
Capital expenditures and other major improvements — real estate assets, net of escrow reimbursement(59,223) (67,188)(32,631) (59,223)
Net cash provided by/(used in) investing activities(104,713) 34,407
(26,410) (104,713)
      
Financing Activities      
Advances from/(to) General Partner, net(11,199) 41,273
(120,698) (11,199)
Proceeds from the issuance of secured debt—
 26,054
Payments on secured debt(41,034) (248,160)(3,727) (41,034)
Distributions paid to partnership unitholders(6,987) (6,768)(7,419) (6,987)
Payments of financing costs(1,137) —
—
 (1,137)
Net cash provided by/(used in) financing activities(60,357) (187,601)(131,844) (60,357)
Net increase/(decrease) in cash and cash equivalents(382) 1,214
(413) (382)
Cash and cash equivalents, beginning of period2,804
 704
1,897
 2,804
Cash and cash equivalents, end of period$2,422
 $1,918
$1,484
 $2,422
      
Supplemental Information:      
Interest paid during the period, net of amounts capitalized$31,933
 $37,552
$32,792
 $31,933
Non-cash transactions:   
Reallocation of credit facilities debt from General Partner$13,682
 $—
$—
 $13,682
See accompanying notes to the consolidated financial statements.

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UNITED DOMINION REALTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 20132014




1. CONSOLIDATION AND BASIS OF PRESENTATION
Consolidation and Basis of Presentation
United Dominion Realty, L.P. (“UDR, L.P.,”, the “Operating Partnership”,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 and nine months ended September 30, 20132014 and 20122013, rental revenues of the Operating Partnership represented 53%, 53%, 55% and 54% and 55% and 54%, respectively, of the General Partner’s consolidated rental revenues (including those classified within discontinued operations). AtAs of September 30, 20132014, the Operating Partnership’s apartment portfolio consisted of 7067 communities located in 1817 markets consisting of 21,68520,753 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 September 30, 20132014, there were 184,281,253183,278,698 OP Units outstanding, of which 174,957,880174,111,227 or 94.9%95.0% were owned by UDR and affiliated entities and 9,323,3739,167,471 or 5.1%5.0% were owned by non-affiliated limited partners. See Note 9, 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 September 30, 20132014, and results of operations for the three and nine months ended September 30, 20132014 and 20122013 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 for the year ended December 31, 20122013 included in the Annual Report on Form 10-K filed by UDR and the Operating Partnership with the SEC on February 27, 201325, 2014.
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. Certain previously reported amounts have been reclassified to conform to the current financial statement presentation.
The Operating Partnership evaluated subsequent events through the date its financial statements were issued. No recognized or non-recognized subsequent events were noted.

2. SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Pronouncements
In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which incorporates a requirement that a disposition represent a strategic shift in an entity’s operations into the definition of a discontinued operation. In accordance with the ASU, a discontinued operation represents (1) a component of an entity or group of

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2. SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-10, Disclosures about Offsetting Assetscomponents that has been disposed of or is classified as held for sale in a single transaction and Liabilities. The objective of this update is to provide enhanced disclosuresrepresents a strategic shift that has or will enable users of its financial statements to evaluate thehave a major effect or potential effect of netting arrangements on an entity’s financial position. This includes the effectresults, or potential effect of rights of setoff associated with(2) an entity’s recognized assets and recognized liabilities within the scope of this update. The amendments require enhanced disclosures by requiring improved information about financial instruments and derivative instrumentsacquired business that are either 1) offsetis classified as held for sale on the balance sheetdate of acquisition. A strategic shift could include a disposal of (1) a separate major line of business, (2) a separate major geographic area of operations, (3) a major equity method investment, or (4) other major parts of an entity. The standard requires prospective application and will be effective for interim and annual periods beginning on or after December 15, 2014, with early adoption permitted. The early adoption provision excludes components of an entity that were sold or classified as held for sale prior to the adoption of the standard.
The Operating Partnership elected to early adopt this standard effective January 1, 2014, which had a significant impact on the Operating Partnership’s consolidated financial statements as further discussed in accordanceNote 4, Discontinued Operations. Subsequent to the Operating Partnership’s adoption of ASU 2014-08, the sale of real estate that does not meet the definition of a discontinued operation under the standard is included in Gain/(loss) on sale of real estate owned on the Consolidated Statements of Operations.
In May 2014, FASB issued ASU No. 2014-09, Revenue from Contracts with the “Offsetting Guidance” in ASC 210-20-45 or ASC 815-10-45 (collectively, the offsetting guidance) or 2) subject to an enforceable master netting arrangement or similar agreement, regardless of whether they are offset in accordance with the “Offsetting Guidance”Customers. The amendments, which were adopted bystandard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard specifically excludes lease contracts. The ASU allows for the use of either the full or modified retrospective transition method, and the standard will be effective for the Operating Partnership on January 1, 2013, impact the2017; early adoption is not permitted. The Operating Partnership's disclosures related to its derivative activities. (See Note 8, DerivativesPartnership has not yet selected a transition method and Hedging Activity.) The new guidance did not have any impact on the Operating Partnership's consolidated financial position, results of operations, or cash flows.

In February 2012, the FASB issued ASU No. 2013-02, Other Comprehensive Income (Topic 220) to require preparers to report, in one place, information about reclassifications out of accumulated other comprehensive income. For significant items reclassified out of AOCI to net income in their entirety in the same reporting period, reporting (either on the face of the statement where net income is presented or in the notes thereto) is required aboutwe are currently evaluating the effect ofthat the reclassificationsupdated standard will have on the respective line items in the statement where net income is presented. For items that are not reclassified to net income in their entirety in the same reporting period, a cross reference to other existing disclosures is required in the notes. The amendments, which were adopted by the Operating Partnership on January 1, 2013, did not have any impact on the Operating Partnership's consolidated financial position, results of operations, or cash flows. The accompanyingits consolidated financial statements include the required disclosures in the Consolidated Statements of Comprehensive Income/(Loss) or in the notes thereto for each of the three and nine month periods ended September 30, 2013 and 2012.related disclosures.
Revenue and Real Estate Sales Gain Recognition
Rental income related to leases is recognized on an accrual basis when due from residents and tenants in accordance with GAAP. Rental payments are generally due on a monthly basis and recognized when earned. The Operating Partnership recognizes interest income, management and other fees and incentives when earned, fixed and determinable.
The Operating Partnership accounts for sales of real estate in accordance with GAAP. For sale transactions meeting the requirements for full accrual profit recognition, such as the Operating Partnership 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. Unless certain limited criteria are met, non-monetary transactions, including property exchanges, are accounted for at fair value.
Sales to entities in which we or our General Partner 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 or our General Partner retain. The Operating Partnership will recognizerecognizes 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.

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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,unitholders, is displayed in the accompanying Consolidated Statements of Comprehensive Income/(Loss). For the three and nine months ended September 30, 20132014 and 20122013, the Operating Partnership'sPartnership’s other comprehensive income/(loss) consisted of the gain/(loss) (effective portion) on derivative instruments that are designated as and qualify as cash flow hedges and (gain)/loss reclassified from other comprehensive income/(loss) into earnings. The (gain)/loss reclassified from other comprehensive income/(loss) is included in interestInterest expense in on the accompanying Consolidated Statements of Operations. See Note 8, Derivatives and Hedging Activity, for further discussion.

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Income taxesTaxes
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 General PartnerOperating Partnership has reviewed all open tax years (2009(2010 through 2012)2013) of tax jurisdictions and concluded there is no material tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns.


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3. REAL ESTATE OWNED
Real estate assets owned by the Operating Partnership consists of income producing operating properties, properties held for sale, properties under development, and land held for future development. Atdevelopment, and sold or held for disposition properties. As of September 30, 20132014, the Operating Partnership owned and consolidated 7067 communities in nine states plus the District of Columbia totaling 21,68520,753 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of September 30, 20132014 and December 31, 20122013 (dollars in thousands):
September 30,
2013		 December 31, 2012September 30,
2014		 December 31, 2013
Land$1,014,663
 $1,006,724
$998,797
 $1,004,447
Depreciable property — held and used:      
Buildings and improvements3,024,688
 2,970,510
Furniture, fixtures and equipment125,738
 118,294
Buildings, improvements, and furniture, fixture and equipment3,100,598
 3,103,970
Under development:      
Land25,833
 25,833
9,447
 9,447
Construction in progress115,160
 61,559
Buildings, improvements, and furniture, fixture and equipment110,381
 70,616
Real estate owned4,306,082
 4,182,920
4,219,223
 4,188,480
Accumulated depreciation(1,232,520) (1,097,133)(1,358,123) (1,241,574)
Real estate owned, net$3,073,562
 $3,085,787
$2,861,100
 $2,946,906
The Operating Partnership did not have any acquisitions during the nine months ended September 30, 2014 and 2013.
During the nine months ended September 30, 2014, the Operating Partnership sold one community and an adjacent parcel of land in San Diego, CA for gross proceeds of $48.7 million, resulting in a $24.4 million gain and net proceeds of $47.9 million. The Operating Partnership also recorded a gain of $16.3 million in connection with the sale of one community in Tampa, Florida, which was previously deferred. The total gains of $40.7 million are included in Gain/(loss) on sale of real estate owned on the Consolidated Statements of Operations.
There were no real estate sales during the three and nine months endedSeptember 30, 2013 and 2012.2013.
AllPredevelopment, development, and redevelopment projects and related carrying costs are capitalized and reported on the Consolidated Balance Sheets as “Real Total real estate under development.”owned, net of accumulated depreciation. The Operating Partnership capitalizes

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costs directly related to the predevelopment, development, and redevelopment of development projectsa 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 directly on the development sitecapital 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 construction period.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 $496,000 and $1.8 million for the three and nine months ended September 30, 2014, respectively, and $618,000 and $2.0 million for the three and nine months ended September 30, 2013, respectively. Total interest capitalized was $805,000 and 2012, were $618,000$2.8 million during the three and nine months ended September 30, 2014, respectively, and $1.7 million and $2.04.4 million and $564,000 and $1.4 million, respectively. Duringduring the three and nine months ended September 30, 2013, respectively. As each home in a capital project is completed and 2012, total capitalized interest was $1.7 millionbecomes available for lease-up, the Company ceases capitalization on the related portion and $4.4 million and $1.2 million and $2.5 million, respectively.depreciation commences over the estimated useful life.

In October 2012, Hurricane Sandy hit the East Coast, affecting two of the Operating Partnership’s operating communities (1,001 apartment homes) located in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Operating Partnership hashad insurance policies that provideprovided coverage for property damage and business interruption, subject to applicable retention.retentions.

Based onDuring the claims filedthree and management’s estimates,nine months ended September 30, 2013, the Operating Partnership recognizedrecorded $3.8 million and $8.1 million, respectively, of insurance recoveries related to the business interruption and other losses associated with Hurricane Sandy. During the nine months ended September 30, 2014, we recorded a $500,000 casualty-related loss for one property damaged during an earthquake in California. These recoveries/charges were included in $7.1 million impairment charge for the damaged assets’ net book value and incurred $7.0 million of repair and cleanup costs during the year ended December 31, 2012. The impairment charge and the repair and cleanup costs incurred were reduced as of December 31, 2012 by $10.8 million of estimated insurance recovery, and were classified in "Hurricane-relatedCasualty-related (recoveries)/charges, net"net on the Consolidated Statements of Operations. During
4. DISCONTINUED OPERATIONS
Effective January 1, 2014, UDR prospectively adopted ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, for all communities not previously sold or classified as held for sale. The standard had a material impact on the Company’s consolidated financial statements. As a result of adopting the ASU, during the three and nine months endedSeptember 30, 2013, no material adjustments2014, net gains of zero and $39.6 million, respectively, from disposition of real estate, excluding a $1.1 million gain related to the impairment charge andsale of land during the repair and cleanup costs incurredfirst quarter of 2014, were recognized. The rehabilitationincluded in Gain/(loss) on sale of these two properties was substantially completed asreal estate owned on the Consolidated Statements of September 30, 2013.Operations rather than in Income/(loss) from discontinued operations on the Consolidated Statements of Operations.

Prior to the prospective adoption of ASU 2014-08, FASB ASC Subtopic 205-20, required, among other things, that the primary assets and liabilities and the results of operations of UDR’s real properties that have been sold or are held for disposition, be classified as discontinued operations and segregated in UDR’s Consolidated Statements of Operations and Consolidated Balance Sheets. Consequently, the primary assets and liabilities and the net operating results of those properties sold or classified as held for disposition prior to January 1, 2014 are accounted for as discontinued operations for all periods presented. This presentation does not have an impact on net income available to common stockholders, it only results in the reclassification of the operating results within the Consolidated Statements of Operations for the periods ended September 30, 2014 and 2013.
DuringIn 2013, the Company settledsold two communities with 914 apartment homes in the Hurricane Sandy claims and received insurance proceeds in excess of the $10.8 million estimated insurance recovery receivableSacramento market. The operating results related to these communities for the impairment chargethree and the repair and cleanup costs incurred. See Note 13,nine months ended September 30, 2013 are included in Hurricane-Related (Recoveries)/ChargesIncome/(loss) from discontinued operations for additional information.on the Consolidated Statements of Operations.


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4. DISCONTINUED OPERATIONS
Discontinued operations represent properties that the Operating Partnership 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 or will be divested to a third party by the Operating Partnership whereby the Operating Partnership 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 Operating Partnership. Once a property is deemed as held for sale, depreciation is no longer recorded. However, if the Operating Partnership determines that the property no longer meets the criteria of held for sale, the Operating Partnership will recapture any unrecorded depreciation for the property. The assets and liabilities of properties deemed as held for sale are presented separately on the Consolidated Balance Sheets. Properties deemed as held for sale are reported at the lower of their carrying amount or their estimated fair value less the costs to sell the assets.
During the three and nine months endedSeptember 30, 2013, the Operating Partnership did not dispose of any communities. During the nine months endedSeptember 30, 2012, the Operating Partnership sold four communities with 1,314 apartment homes. At September 30, 2013, the Operating Partnership had no communities that met the criteria to be classified as held for sale and included in discontinued operations.
During the three and nine months endedSeptember 30, 2012, the Operating Partnership recognized a net gain/(loss) on the sale of communities of $(132,000) and $51.1 million, respectively, which were included in discontinued operations. The results of operations for these properties are classified in the Consolidated Statements of Operations in the line item entitled “Income/(loss) from discontinued operations.”
The following is a summary of income/(loss) from discontinued operations for the three and nine months ended September 30, 20132014 and 20122013 (dollars in thousands):
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 20122014 2013 2014 2013
Rental income$—
 $—
 $—
 $6,750
$—
 $2,438
 $—
 $7,016
       
Rental expenses—
 —
 —
 2,247
—
 869
 —
 2,467
Property management—
 —
 —
 186
—
 67
 —
 193
Real estate depreciation—
 —
 —
 1,205
Real estate depreciation and amortization—
 524
 —
 1,590
Income/(loss) from discontinued operations$—
 $978
 $—
 $2,766
—
 —
 —
 3,638
       
Income/(loss) attributable to disposed properties—
 —
 —
 3,112
Net gain/(loss) on the sale of depreciable property—
 (132) —
 51,050
Income/(loss) from discontinued operations$—
 $(132) $—
 $54,162
Income/(loss) from discontinued operations attributable to UDR, Inc.$—
 $978
 $—
 $2,766


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5. 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 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 September 30, 20132014 and December 31, 20122013 (dollars in thousands):
Principal Outstanding For the Nine Months Ended September 30, 2013Principal Outstanding For the Nine Months Ended September 30, 2014
September 30,
2013		 December 31, 2012 
Weighted Average
Interest Rate
 
Weighted Average
Years to Maturity
 
Number of Communities
Encumbered
September 30,
2014		 December 31, 2013 
Weighted Average
Interest Rate
 
Weighted Average
Years to Maturity
 
Number of Communities
Encumbered
Fixed Rate Debt                  
Mortgage notes payable$388,878
 $394,999
 5.43% 2.8
 5
$380,506
 $386,803
 5.46% 1.8
 5
Fannie Mae credit facilities379,087
 370,638
 4.71% 5.7
 10
378,709
 379,003
 4.71% 4.7
 10
Total fixed rate secured debt767,965
 765,637
 5.07% 4.2
 15
759,215
 765,806
 5.09% 3.3
 15
Variable Rate Debt                  
Mortgage notes payable—
 37,415
 —
 —
 —
Tax-exempt secured note payable27,000
 27,000
 1.04% 18.5
 1
27,000
 27,000
 0.74% 17.5
 1
Fannie Mae credit facilities142,058
 137,187
 1.91% 8.0
 5
142,058
 142,059
 1.88% 7.0
 5
Total variable rate secured debt169,058
 201,602
 1.77% 9.7
 6
169,058
 169,059
 1.70% 8.7
 6
Total Secured Debt$937,023
 $967,239
 4.48% 5.2
 21
$928,273
 $934,865
 4.47% 4.3
 21
As of September 30, 2013,2014, the General Partner had secured credit facilities with Fannie Mae with an aggregate commitment of $927.7$835.2 million with $838.9$835.2 million outstanding. The Fannie Mae credit facilities are for an initial term of seven to 10 years (maturing at various dates from May 2017 through July 2023) and bear interest at floating and fixed rates. At September 30, 2013, $627.52014, $623.8 million of the outstanding balance was fixed atand had a weighted average interest rate of 4.99% and the remaining balance of $211.4$211.4 million on these facilities had a weighted average variable interest rate of 1.58%.
1.61%. During the three months ended June 30, 2013, the General Partner reallocated an additional $13.7 million of the Fannie Mae credit facilities to the Operating Partnership. At September 30, 2013, there was a total of $521.1 million of these credit facilities allocated to the Operating Partnership based on the ownership of the assets securing the debt. Following isThe following information relatedrelates to the credit facilities allocated to the Operating Partnership:Partnership (dollars in thousands):

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September 30,
2013		 December 31, 2012
(dollars in thousands)September 30,
2014		 December 31, 2013
Borrowings outstanding$521,145
 $507,825
$520,768
 $521,062
Weighted average borrowings during the period ended521,834
 544,793
521,480
 522,007
Maximum daily borrowings during the period522,755
 635,762
522,265
 523,187
Weighted average interest rate during the period ended4.2% 4.3%3.9% 4.2%
Interest rate at the end of the period4.1% 4.4%3.9% 4.1%
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 unamortized fair value adjustment of the fixed rate debt instruments on the Operating Partnership’s properties was a net premium of $10.9$7.1 million and $13.810.0 million at September 30, 20132014 and December 31, 20122013, respectively.

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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 December 2015 through May 2019 and carry interest rates ranging from 3.43% to 5.94%.
Secured credit facilities. At September 30, 2013,2014, the General Partner had borrowings against its fixed rate facilities of $627.5$623.8 million, of which $379.1$378.7 million was allocated to the Operating Partnership based on the ownership of the assets securing the debt. As of September 30, 2013,2014, the fixed rate Fannie Mae credit facilities allocated to the Operating Partnership had a weighted average fixed interest rate of 4.71%.
Variable Rate Debt
Tax-exempt secured note payable. The variable rate mortgage note payable that secures tax-exempt housing bond issues matures March 2032.2032. Interest on this note is payable in monthly installments. The mortgage note hadpayable has an interest rate of 1.04%0.74% as of September 30, 2013.2014.
Secured credit facilities. At September 30, 2013,2014, the General Partner had borrowings against its variable rate facilities of $211.4$211.4 million, of which $142.1$142.1 million was allocated to the Operating Partnership based on the ownership of the assets securing the debt. As of September 30, 2013,2014, the variable rate borrowings under the Fannie Mae credit facilities allocated to the Operating Partnership had a weighted average floating interest rate of 1.91%1.88%.
The aggregate maturities of the Operating Partnership’s secured debt due during each of the next five calendar years subsequent to September 30, 20132014 are as follows (dollars in thousands):
Fixed Variable   Fixed Variable  
Mortgage
Notes
 
Credit
Facilities
 
Tax Exempt
Notes Payable
 
Credit
Facilities
 Total
2013$2,109
 $84
 $—
 $—
 $2,193
Year 
Mortgage
Notes
 
Credit
Facilities
 
Tax Exempt
Notes Payable
 
Credit
Facilities
 Total
20148,573
 344
 —
 —
 8,917
 $2,134
 $89
 $—
 $—
 $2,223
2015192,923
 364
 —
 —
 193,287
 193,075
 366
 —
 —
 193,441
2016131,956
 382
 —
 —
 132,338
 131,946
 385
 —
 —
 132,331
20171,640
 15,684
 —
 6,566
 23,890
 1,630
 15,640
 —
 6,566
 23,836
2018 1,685
 161,754
 —
 46,272
 209,711
Thereafter51,677
 362,229
 27,000
 135,492
 576,398
 50,036
 200,475
 27,000
 89,220
 366,731
Total$388,878
 $379,087
 $27,000
 $142,058
 $937,023
 $380,506
 $378,709
 $27,000
 $142,058
 $928,273

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Guarantor on Unsecured Debt
The Operating Partnership is a guarantor on the General Partner’s unsecured revolving credit facility with an aggregate borrowing capacity of $900 million, $250 million of term notes due June 2018, $100 million of term notes due June 2018, $300 million of medium-term notes due June 2018, $300$300 million of medium-term notes due October 2020,, and $400 million of medium-term notes due January 2022., and $300 million of medium-term notes due July 2024. As of September 30, 2014, the outstanding balance under the unsecured revolving credit facility was $160.0 million. As of December 31, 2013, there were no outstanding borrowings under the unsecured revolving credit facility. As of December 31, 2012, the outstanding balance under the unsecured credit facility was $76.0 million.


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6. RELATED PARTY TRANSACTIONS
Payable/(Receivable) Due To/(From) the General Partner
The Operating Partnership participates in the General Partner’s central cash management program, wherein all the Operating Partnership’s cash receipts are remitted to the General Partner and all cash disbursements are funded by the General Partner. In addition, other miscellaneous costs such as administrative expenses are incurred by the General Partner on behalf of the Operating Partnership. As a result of these various transactions between the Operating Partnership and the General Partner, the Operating Partnership had a net payable balancepayable/(receivable) balances of $84.8$795,000 and $(9.9) million and a net receivable balance of $11.1 million at September 30, 20132014 and December 31, 2012,2013, respectively, which is reflected as an increase and a reduction of capital, respectively, on the Consolidated Balance Sheets.
Allocation of General and Administrative Expenses
The General Partner provides various general and administrative and other overhead services for the Operating Partnership including legal assistance, acquisitions analysis, marketing and advertising, and allocates these expenses to the Operating Partnership first on the basis of direct usage when identifiable, with the remainder allocated based on its pro-rata portion of UDR’s total apartment homes. During the three and nine months ended September 30, 2013 and 2012, theThe general and administrative expenses allocated to the Operating Partnership by UDR were $6.5$6.6 million and $20.5 million during the three and nine months ended September 30, 2014, respectively, and $6.5 million and $17.4 million during the three and $4.5 million and $19.1 million,nine months ended September 30, 2013, respectively, and are included in “GeneralGeneral and administrative” expensesadministrative 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 and nine months ended September 30, 2013 and 20122014, the Operating Partnership incurred $3.1$3.2 million and $9.1$9.4 million, respectively, and $2.8during the three and nine months ended September 30, 2013 incurred $3.1 million and $8.3$9.1 million,, respectively, of related party management fees related to a management agreement entered into in 2011 with wholly ownedwholly-owned subsidiaries of RE3. (See further discussion in paragraph below.) These related party management fees are initially recorded in “GeneralGeneral and administrative”administrative on the Consolidated Statements of Operations, and a portion related to management fees charged by the Taxabletaxable REIT Subsidiarysubsidiary (“TRS”) of the General Partner is reclassified to "Property management"Property management on the Consolidated Statements of Operations. (See further discussion below.)
Management Fee
In 2011, the Operating Partnership entered into a management agreement with wholly owned subsidiaries of RE3. Under the management agreement, the Operating Partnership is charged a management fee equal to 2.75% of gross rental revenues, which is classified in "Property management"Property management on the Consolidated Statements of Operations.
Guaranties by theNotes Payable to General Partner
TheAs of September 30, 2014 and December 31, 2013, the Operating Partnership provided a “bottom dollar” guarantyhad $88.7 million of unsecured notes payable to certainthe General Partner at annual interest rates between 5.18% and 5.34%. Certain limited partners as part of the Operating Partnership have provided guarantees related to these notes payable. The guarantees were provided by the limited partners in conjunction with their original contribution of properties to the Operating Partnership. The guaranty protects the tax basis of the underlying contribution and is reflectednotes mature on the OP unitholder’s Schedule K-1 tax form. The guaranty was made in the form of a note payable issued by the Operating Partnership to the General Partner at an annual interest rate of 0.932% at September 30, 2013August 31, 2021 and December 31, 20122023, respectively. Interest and interest payments are made monthlymonthly. The Operating Partnership recognized interest expense on the notes payable of $1.2 million and $3.5 million during the note is due December 31, 2013. At three and nine months ended September 30, 2014, respectively, and $267,000, and $801,000 during the three and nine months ended September 30, 2013, respectively. and December 31, 2012, respectively, the note payable due to the General Partner was $83.2 million.
In 2011, the Operating Partnership also provided a "bottom dollar" guaranty in conjunction with 1,802,239 OP Units issued in partial consideration to the seller for the acquisition of an operating community. The guaranty was made in the form of a note payable issued by the Operating Partnership to the General Partner at an annual interest rate of 5.337%. Interest payments are due monthly and the note matures on August 31, 2021. At September 30, 2013 and December 31, 2012, respectively, the note payable due to the General Partner was $5.5 million.



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7. 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.
The estimated fair values of the Operating Partnership’s financial instruments either recorded or disclosed on a recurring basis as of September 30, 20132014 and December 31, 20122013 are summarized as follows (dollars in thousands):
    Fair Value at September 30, 2013, Using    Fair Value at September 30, 2014, Using
Total Carrying Amount in Statement of Financial Position on September 30, 2013 Fair Value Estimate at September 30, 2013 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Total Carrying Amount in Statement of Financial Position on September 30, 2014 Fair Value Estimate at September 30, 2014 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Description:                  
Derivatives- Interest rate contracts (a)$5
 $5
 $—
 $5
 $—
Total assets$5
 $5
 $—
 $5
 $—
         
Derivatives- Interest rate contracts (a)$3,181
 $3,181
 $—
 $3,181
 $—
$1,324
 $1,324
 $—
 $1,324
 $—
Secured debt instruments- fixed rate: (b)                  
Mortgage notes payable388,878
 406,823
 —
 —
 406,823
380,506
 392,883
 —
 —
 392,883
Fannie Mae credit facilities379,087
 392,764
 —
 —
 392,764
378,709
 394,849
 —
 —
 394,849
Secured debt instruments- variable rate: (b)                  
Tax-exempt secured notes payable27,000
 27,000
 —
 —
 27,000
27,000
 27,000
 —
 —
 27,000
Fannie Mae credit facilities142,058
 142,058
 —
 —
 142,058
142,059
 142,059
 —
 —
 142,059
Total liabilities$940,204
 $971,826
 $—
 $3,181
 $968,645
$929,598
 $958,115
 $—
 $1,324
 $956,791

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    Fair Value at December 31, 2012, Using    Fair Value at December 31, 2013, Using
Total Carrying Amount in Statement of Financial Position on December 31, 2012 Fair Value Estimate at December 31, 2012 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Total Carrying Amount in Statement of Financial Position on December 31, 2013 Fair Value Estimate at December 31, 2013 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Description:                  
Derivatives- Interest rate contracts (a)$2
 $2
 $—
 $2
 $—
$2,731
 $2,731
 $—
 $2,731
 $—
Total assets$2
 $2
 $—
 $2
 $—
         
Derivatives- Interest rate contracts (a)$4,750
 $4,750
 $—
 $4,750
 $—
Secured debt instruments- fixed rate: (b)                  
Mortgage notes payable394,999
 429,973
 —
 —
 429,973
386,803
 403,695
 —
 —
 403,695
Fannie Mae credit facilities370,638
 399,389
 —
 —
 399,389
379,003
 394,239
 —
 —
 394,239
Secured debt instruments- variable rate: (b)                  
Mortgage notes payable37,415
 37,415
 —
 —
 37,415
Tax-exempt secured notes payable27,000
 27,000
 —
 —
 27,000
27,000
 27,000
 —
 —
 27,000
Fannie Mae credit facilities137,187
 137,187
 —
 —
 137,187
142,059
 142,059
 —
 —
 142,059
Total liabilities$971,989
 $1,035,714
 $—
 $4,750
 $1,030,964
$937,596
 $969,724
 $—
 $2,731
 $966,993

(a)
See Note 8, Derivatives and Hedging Activity.
(b)
See Note 5, Debt.
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 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 September 30, 20132014 and December 31, 20122013, 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'sFASB’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
AtAs of September 30, 20132014, 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

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approximated their carrying values because of the short term nature of these instruments. The estimated fair values of other

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financial instruments were determined by the Operating Partnership using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Operating Partnership would realize on the disposition of the financial instruments. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts.
The General Partner estimates the fairFair value of our debt instruments is estimated by discounting the remaining cash flows of the debt instrument at a discount rate equal to the replacement market credit spread plus the corresponding treasury yields. Factors considered in determining a replacement market credit spread include general market conditions, borrower specific credit spreads, time remaining to maturity, loan-to-value ratios and collateral quality (Level 3).
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.

8. DERIVATIVES AND HEDGING ACTIVITY
Risk Management Objective of Using Derivatives
The Operating Partnership is exposed to certain riskrisks 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 receipts and its known or expected cash payments principally related to the General Partner’s investments and 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.
A portion of the General Partner’s interest rate derivatives have been allocated to the Operating Partnership based on the General Partner’s underlying debt instruments allocated to the Operating Partnership. (See Note 5, Debt.)
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in “AccumulatedAccumulated other comprehensive loss, net”income/(loss), net in the Consolidated Balance Sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three and nine months ended September 30, 20132014 and 20122013, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. DuringThe Operating Partnership recorded zero gain or loss from ineffectiveness during the three and nine months ended September 30, 2013 and 20122014, the Operating Partnership recordedand less than a $1,000 loss of loss from ineffectiveness in earnings attributable to reset dateduring the three and index mismatches between the derivative and the hedged item.nine months ended September 30, 2013.

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Amounts reported in “AccumulatedAccumulated other comprehensive loss, net”income/(loss), net related to derivatives will be reclassified to interest expense as interest payments are made on the General Partner’s variable-rate debt that is allocated to the Operating

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Partnership. During the next twelve months through September 30, 20142015, we estimate that an additional $2.3$1.3 million will be reclassified as an increase to interest expense.
As of September 30, 20132014, the Operating Partnership had the following outstanding interest rate derivatives designated as cash flow hedges of interest rate risk (dollars in thousands):
Interest Rate Derivative Number of Instruments Notional
Interest rate swaps 2 $96,974
Interest rate caps 5 $255,561
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 losses ofno adjustment to earnings for the three and nine months ended $0September 30, 2014 and $5,000gains/(losses) of zero and $2,000 and $9,000(5,000) for the three and nine months ended September 30, 2013, and 2012, respectively.
As of September 30, 20132014, we had the followingOperating Partnership did not have any outstanding derivatives that were not designated as hedges in qualifying hedging relationships (relationships.dollars in thousands):
Product Number of Instruments Notional
Interest rate caps 1 $83,289

Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the fair value of the Operating Partnership’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of September 30, 20132014 and December 31, 20122013. (dollars in thousands):
Asset Derivatives Liability DerivativesAsset Derivatives Liability Derivatives
  Fair Value at:   Fair Value at:  Fair Value at:   Fair Value at:
Balance
Sheet Location
 September 30,
2013		 December 31,
2012		 
Balance
Sheet Location
 September 30,
2013		 December 31,
2012
Balance
Sheet Location
 September 30,
2014		 December 31,
2013		 
Balance
Sheet Location
 September 30,
2014		 December 31,
2013
Derivatives designated as hedging instruments:                      
Interest rate productsOther assets $—
 $2
 Other liabilities $3,181
 $4,750
Other assets $5
 $—
 Other liabilities $1,324
 $2,731
Total  $—
 $2
   $3,181
 $4,750
                
Derivatives not designated as hedging instruments:
                      
Interest rate productsOther assets $—
 $—
 Other liabilities $—
 $—
Other assets $—
 $—
 Other liabilities $—
 $—
Total  $—
 $—
   $—
 $—


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Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statements of Operations
The tables below present the effect of the derivative financial instruments on the Consolidated Statements of Operations for the three and nine months ended September 30, 20132014 and 20122013 (dollars in thousands):

 Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)     Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)    
Derivatives in Cash Flow Hedging Relationships Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
2013 2012 Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)2013 2012 2014 2013 Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)2014 2013
        
For the Three Months Ended September 30,                
        
Interest rate products $(201) $(503) Interest expense $(590) $(863) $(3) $(201) Interest expense $(588) $(590)
Total $(201) $(503) $(590) $(863)
                
For the Nine Months Ended September 30,                
Interest rate products $(284) $(1,873) Interest expense $(2,041) $(2,545) $(194) $(284) Interest expense $(1,784) $(2,041)
Total $(284) $(1,873) $(2,041) $(2,545)

 Derivatives Not Designated as Hedging Instruments Location of Gain or (Loss) Recognized in Income on Derivative Amount of Gain or (Loss) Recognized in Income on Derivative
 
 2013 2012
        
 For the Three Months Ended September 30,      
 Interest rate products Other operating expenses $—
 $(2)
 Total   $—
 $(2)
 For the Nine Months Ended September 30,      
 Interest rate products Other operating expenses $(5) $(9)
 Total   $(5) $(9)
 Derivatives Not Designated as Hedging Instruments Location of Gain or (Loss) Recognized in Income on Derivatives Amount of Gain or (Loss) Recognized in Income on Derivatives
 
 2014 2013
 For the Three Months Ended September 30,      
 Interest rate products Other operating expenses $—
 $—
        
 For the Nine Months Ended September 30,      
 Interest rate products Other operating expenses $—
 $(5)
Credit-risk-related Contingent Features
The General Partner has agreements with some of its derivative counterparties that contain a provision where (1) if the General Partner defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the General Partner could also be declared in default on its derivative obligations; or (2) 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.
Certain of the General Partner’s agreements with its derivative counterparties contain provisions where if there is a change in the General Partner’s financial condition that materially changes the General Partner’s creditworthiness in an adverse

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manner, the General Partner may be required to fully collateralize its obligations under the derivative instrument. At September 30, 20132014 and December 31, 2012, 2013, no cash collateral was posted or required to be posted by the General Partner or by a counterparty.
The General Partner also has an agreement with a derivative counterparty that incorporates the loan and financial covenant provisions of the General Partner’s indebtedness with a lender affiliate of the derivative counterparty. Failure to comply with these covenant provisions would result in the General Partner being in default on any derivative instrument obligations covered by the agreement.

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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 contract, 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'sentity’s creditworthiness is materially weaker than the original party to the derivative agreement.
As of September 30, 2013,2014, the fair value of derivatives in a net liability position that were allocated to the Operating Partnership, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $3.3 million.$1.5 million. As of September 30, 2013,2014, the General Partner has not posted any collateral related to these agreements. If the General Partner had breached any of these provisions at September 30, 2013,2014, it would have been required to settle its obligations under the agreements at their termination value of $3.3 million.$1.5 million.

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The General Partner has elected not to offset derivative positions in the consolidated financial statements. The table below presents the effect on the Operating Partnership'sPartnership’s financial position had the General Partner made the election to offset its derivative positions as of September 30, 20132014 and December 31, 20122013:
Offsetting of Derivative Assets        
    Gross Amounts Not Offset in the Consolidated Balance Sheets  
  Gross Amounts of Recognized Assets Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Assets Presented in the Consolidated Balance Sheets (a) Financial Instruments Cash Collateral Received Net Amount
             
September 30, 2013 $—
 $—
 $—
 $—
 $—
 $—
             
December 31, 2012 $2
 $—
 $2
 $—
 $—
 $2
             
Offsetting of Derivative Assets        
    Gross Amounts Not Offset in the Consolidated Balance Sheets  
  Gross Amounts of Recognized Assets Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Assets Presented in the Consolidated Balance Sheets (a) Financial Instruments Cash Collateral Received Net Amount
September 30, 2014 $5
 $—
 $5
 $—
 $—
 $5
             
December 31, 2013 $—
 $—
 $—
 $—
 $—
 $—
(a) Amounts reconcile to the aggregate fair value of derivative assets in the "Tabular“Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet"Sheet” located in this footnote.
Offsetting of Derivative Liabilities        
    Gross Amounts Not Offset in the Consolidated Balance Sheets  
  Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Liabilities Presented in the Consolidated Balance Sheets (b) Financial Instruments Cash Collateral Posted Net Amount
             
September 30, 2013 $3,181
 $—
 $3,181
 $—
 $—
 $3,181
             
December 31, 2012 $4,750
 $—
 $4,750
 $—
 $—
 $4,750
             
Offsetting of Derivative Liabilities        
    Gross Amounts Not Offset in the Consolidated Balance Sheets  
  Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Liabilities Presented in the Consolidated Balance Sheets (b) Financial Instruments Cash Collateral Posted Net Amount
September 30, 2014 $1,324
 $—
 $1,324
 $—
 $—
 $1,324
             
December 31, 2013 $2,731
 $—
 $2,731
 $—
 $—
 $2,731
(b) Amounts reconcile to the aggregate fair value of derivative liabilities in the "Tabular“Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet"Sheet” located in this footnote.


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9. 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 110,883 General Partnership units outstanding at September 30, 20132014 and December 31, 20122013, all of which were held by UDR.
Limited Partnership Units
AtAs of September 30, 20132014 and December 31, 20122013, there were 184,170,370183,167,815 limited partnership units outstanding, of which 1,873,332 were Class A Limited Partnership units.Units. UDR owned 174,846,997174,000,344, or 94.9%95.0% of, and 174,775,152173,848,891, or 94.9% of, OP Units outstanding at September 30, 20132014 and December 31, 20122013, respectively, of which 121,661 were Class A Limited Partnership units.Units. The remaining 9,323,3739,167,471, or 5.1%5.0% of, and 9,395,2189,318,924, or 5.1% limited partnership units, of, OP Units outstanding, were held by non-affiliated partners at September 30, 20132014 and December 31, 20122013, respectively, of which 1,751,671 were Class A Limited Partnership units.Units.
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 limited partners was $221.0$249.8 million and $223.4$217.6 million as of September 30, 20132014 and December 31, 20122013, 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 unitsUnits 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.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 any Class A Limited Partnership units, (iv) enter into a merger or acquisition, or (v) amend or modify the Agreement of Limited Partnership of the Operating Partnership in a manner that adversely affects the relative rights, preferences or privileges of the Class A Limited Partnership Units.
Allocation of profitsProfits and lossesLosses
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

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Partners'Partners’ capital accounts.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.

10. INCOME/(LOSS) PER OPERATING PARTNERSHIP UNIT
Basic income/(loss) per OP Unit is computed by dividing net income/(loss) attributable to general and limited partner unitsunitholders by the weighted average number of general and limited partner units (including redeemable OP Units) outstanding during the year.period. 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 thatand then shared in the income/(loss) of the Operating Partnership. For the three and nine months ended September 30, 20132014 and 20122013, there were no dilutive instruments outstanding, and therefore, diluted income/(loss) per OP Unit and basic income/(loss) per OP Unit are the same. See note 9, Capital Structure, for further discussion on redemption rights of OP Units.
The following table sets forth the computation of basic and diluted income/(loss) per OP Unit for the periods presented (dollars in thousands, except per OP Unit data):
         
  Three Months Ended September 30, Nine Months Ended September 30,
  2013 2012 2013 2012
         
Numerator for income/(loss) per OP Unit — basic and diluted:        
Income/(loss) from continuing operations $11,050
 $256
 $29,044
 $(9,527)
(Income)/loss from continuing operations attributable to noncontrolling interests (39) (40) (151) (118)
Income/(loss) from continuing operations attributable to OP unitholders $11,011
 $216
 $28,893
 $(9,645)
         
Income/(loss) from discontinued operations $—
 $(132) $—
 $54,162
(Income)/loss from discontinued operations attributable to noncontrolling interests —
 1
 —
 (186)
Income/(loss) from discontinued operations attributable to OP unitholders $—
 $(131) $—
 $53,976
         
Net income/(loss) $11,050
 $124
 $29,044
 $44,635
Net (income)/loss attributable to noncontrolling interests (39) (39) (151) (304)
Net income/(loss) attributable to OP unitholders $11,011
 $85
 $28,893
 $44,331
         
Denominator for income/(loss) per OP Unit — basic and diluted:        
Weighted average OP Units outstanding — basic and diluted 184,281
 184,281
 184,281
 184,281
         
Income/(loss) per weighted average OP Unit — basic and diluted:        
Income/(loss) from continuing operations attributable to OP unitholders $0.06
 $0.00
 $0.16
 $(0.05)
Income/(loss) from discontinued operations attributable to OP unitholders $—
 $(0.00) $—
 $0.29
Net income/(loss) attributable to OP unitholders $0.06
 $0.00
 $0.16
 $0.24



  Three Months Ended September 30, Nine Months Ended September 30,
  2014 2013 2014 2013
Numerator for income/(loss) per OP Unit — basic and diluted:        
Income/(loss) from continuing operations $8,875
 $10,072
 $23,606
 $26,278
Gain/(loss) on sale of real estate owned —
 —
 40,687
 —
(Income)/loss from continuing operations attributable to noncontrolling interests (238) (39) (697) (151)
Income/(loss) from continuing operations attributable to OP unitholders $8,637
 $10,033
 $63,596
 $26,127
         
Income/(loss) from discontinued operations $—
 $978
 $—
 $2,766
(Income)/loss from discontinued operations attributable to noncontrolling interests —
 —
 —
 —
Income/(loss) from discontinued operations attributable to OP unitholders $—
 $978
 $—
 $2,766
         
Net income/(loss) $8,875
 $11,050
 $64,293
 $29,044
Net (income)/loss attributable to noncontrolling interests (238) (39) (697) (151)
Net income/(loss) attributable to OP unitholders $8,637
 $11,011
 $63,596
 $28,893
         
Denominator for income/(loss) per OP Unit — basic and diluted:        
Weighted average OP Units outstanding — basic and diluted 183,279
 184,281
 183,279
 184,281
         
Income/(loss) per weighted average OP Unit — basic and diluted:        
Income/(loss) from continuing operations attributable to OP unitholders $0.05
 0.05
 $0.35
 $0.14
Income/(loss) from discontinued operations attributable to OP unitholders $—
 $0.01
 $—
 $0.02
Net income/(loss) attributable to OP unitholders $0.05
 0.06
 $0.35
 $0.16

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11. COMMITMENTS AND CONTINGENCIES
Commitments
Real Estate Under Development
The following summarizes the Operating Partnership’s real estate commitments at September 30, 2014 (dollars in thousands):
 
Number of
Properties
 
Costs Incurred
to Date (a)
 
Expected Costs
to Complete (unaudited)
Real estate communities — under development1 $119,828
 $12,172

(a) Includes $7.0 million of accrued fixed assets for development.
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 flow.

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 UDR’sthe 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 is property management expense which is calculated as 2.75% of property revenue to cover the regional supervision and accounting costs related to consolidated property operations, and land rent. 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 July 1, 20122013 for quarter-to-date comparison and January 1, 20122013 for year-to-date comparison and held as of September 30, 20132014. 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 communities arecommunity 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 weredo not meet the criteria to be included in Same-Store Communities, including, but not limited to, recently acquired, or developed in 2011, 2012 or 2013, sold properties, redevelopmentand redeveloped properties, and the non-apartment components of mixed use properties.

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Management of the General Partner evaluates the performance of each of the Operating Partnership'sPartnership’s apartment communities on a same-store communitySame-Store Community and non-mature community/otherNon-Mature Community/Other basis, as well as individually and geographically. This is consistent with the aggregation criteria of Topic 280under GAAP as each of the 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 and nine months ended September 30, 20132014 and 20122013.

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The following table details rental income and NOI from continuing and discontinued operations for the Operating Partnership’s reportable segments for the three and nine months ended September 30, 20132014 and 20122013, and reconciles NOI to "NetNet income/(loss) attributable to OP unitholders" perunitholders in the Consolidated Statements of Operations (dollars in thousands):
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, (a) Nine Months Ended September 30, (b)
2013 2012 2013 20122014 2013 2014 2013
Reportable apartment home segment rental income              
Same-Store Communities              
West Region$49,840
 $46,848
 $137,641
 $130,492
$49,279
 $46,246
 $144,252
 $135,418
Mid-Atlantic Region17,105
 16,789
 51,095
 49,719
17,169
 17,105
 51,779
 51,095
Southeast Region11,368
 10,841
 33,753
 32,177
Northeast Region9,303
 8,861
 27,414
 25,649
14,968
 14,331
 28,410
 27,414
Southeast Region10,841
 10,292
 32,177
 30,356
Southwest Region6,508
 6,117
 15,751
 14,799
6,667
 6,508
 19,873
 19,098
Non-Mature Communities/Other10,400
 11,328
 42,688
 49,896
7,993
 8,966
 36,589
 41,564
Total segment and consolidated rental income$103,997
 $100,235
 $306,766
 $300,911
Total consolidated rental income$107,444
 $103,997
 $314,656
 $306,766
Reportable apartment home segment NOI              
Same-Store Communities              
West Region$35,691
 $32,522
 $98,275
 $91,318
$35,801
 $33,307
 $105,375
 $97,533
Mid-Atlantic Region11,483
 11,569
 34,689
 34,151
11,422
 11,483
 34,888
 34,689
Southeast Region7,327
 6,957
 22,286
 20,898
Northeast Region6,750
 6,581
 20,083
 18,821
11,609
 10,789
 21,448
 20,083
Southeast Region6,957
 6,616
 20,898
 19,785
Southwest Region4,040
 3,847
 9,945
 9,112
4,192
 4,040
 12,578
 11,987
Non-Mature Communities/Other7,071
 8,692
 30,686
 37,328
5,402
 5,417
 26,563
 29,383
Total segment and consolidated NOI71,992
 69,827
 214,576
 210,515
Total consolidated NOI75,753
 71,993
 223,138
 214,573
Reconciling items:              
Property management(2,860) (2,756) (8,436) (8,275)(2,955) (2,860) (8,653) (8,436)
Other operating expenses(1,406) (1,321) (4,215) (3,944)(1,484) (1,405) (4,371) (4,215)
Real estate depreciation and amortization(44,855) (51,012) (135,555) (149,422)(45,043) (44,857) (134,011) (135,552)
General and administrative(6,855) (4,635) (18,324) (19,581)(6,939) (6,855) (21,368) (18,324)
Hurricane-related recoveries/(charges), net3,807
 —
 8,083
 —
Casualty-related recoveries/(charges), net—
 3,807
 (500) 8,083
Interest expense(8,773) (9,847) (27,085) (35,708)(10,457) (8,773) (30,629) (27,085)
Net gain/(loss) on the sale of depreciable real estate—
 (132) —
 51,050
Gain/(loss) on sale of real estate owned—
 —
 40,687
 —
Net (income)/loss attributable to noncontrolling interests(39) (39) (151) (304)(238) (39) (697) (151)
Net income/(loss) attributable to OP unitholders$11,011
 $85
 $28,893
 $44,331
$8,637
 $11,011
 $63,596
 $28,893






(a)Same-store consists of 19,518 apartment homes.
(b)Same-store consists of 19,010 apartment homes.


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The following table details the assets of the Operating Partnership’s reportable segments as of September 30, 20132014 and December 31, 20122013 (dollars in thousands):
September 30,
2013		 December 31, 2012September 30,
2014		 December 31, 2013
Reportable apartment home segment assets      
Same-Store Communities      
West Region$1,838,689
 $1,827,648
$1,742,559
 $1,733,144
Mid-Atlantic Region705,107
 701,741
710,277
 706,447
Southeast Region331,727
 328,150
Northeast Region442,586
 434,138
776,310
 770,937
Southeast Region326,639
 322,882
Southwest Region225,728
 224,429
227,886
 226,252
Non-Mature Communities/Other767,333
 672,082
430,464
 423,550
Total segment assets4,306,082
 4,182,920
Total assets4,219,223
 4,188,480
Accumulated depreciation(1,232,520) (1,097,133)(1,358,123) (1,241,574)
Total segment assets - net book value3,073,562
 3,085,787
Total assets - net book value2,861,100
 2,946,906
Reconciling items:      
Cash and cash equivalents2,422
 2,804
1,484
 1,897
Restricted cash13,488
 12,926
13,989
 13,526
Deferred financing costs, net6,167
 6,072
4,783
 5,848
Other assets26,857
 28,665
25,070
 25,064
Total consolidated assets$3,122,496
 $3,136,254
$2,906,426
 $2,993,241
Capital expenditures related to the Operating Partnership’s same-store communitiesSame-Store Communities totaled $7.2$8.6 million and $19.6$20.0 million and $8.7 million and $23.6 million for the three and nine months ended September 30, 2014, respectively, and $6.9 million and $18.5 million for the three and nine months ended September 30, 2013, and 2012, respectively. Capital expenditures related to the Operating Partnership’s non-mature communities/otherNon-Mature Communities/Other totaled $124,000$137,000 and $369,000 and $307,000 and $1.2 million$555,000 for the three and nine months ended September 30, 2014, respectively, and $436,000 and $1.5 million for the three and nine months ended September 30, 2013, and 2012, respectively.
Markets included in the above geographic segments are as follows:
i.West Region — San Francisco, Orange County, San Francisco,Seattle, Monterey Peninsula, Los Angeles, Seattle, Sacramento, Inland Empire,Other Southern California, and Portland and San Diego
ii.Mid-Atlantic Region — Metropolitan D.C. and Baltimore
iii.Northeast Region — New York and Boston
iv.Southeast Region — Nashville, Tampa, and otherOther Florida
v.Southwest Region — Dallas and Austin

13. HURRICANE-RELATED (RECOVERIES)/CHARGES

In October 2012, Hurricane Sandy hit the East Coast, affecting two of the Operating Partnership’s operating communities (1,001 apartment homes) located in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Operating Partnership has insurance policies that provide coverage for property damage and business interruption, subject to applicable retention.

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Based on the claims filed and management’s estimates, the Operating Partnership recognized a $7.1 million impairment charge for the damaged assets’ net book value and incurred $7.0 million of repair and cleanup costs during the year ended December 31, 2012. The impairment charge and the repair and cleanup costs incurred were reduced as of December 31, 2012 by $10.8 million of estimated insurance recovery, and were classified in "Hurricane-related (recoveries)/charges, net" on the Consolidated Statements of Operations. During the three and nine months endedSeptember 30, 2013, no material adjustments to the impairment charge and the repair and cleanup costs incurred were recognized. The rehabilitation of these two properties was substantially completed as of September 30, 2013.
As of September 30, 2013, the Operating Partnership had settled the Hurricane Sandy claims and received insurance proceeds in excess of the $10.8 million estimated insurance recovery receivable related to the impairment charge and the repair and cleanup costs incurred. As a result, the Company recognized a Hurricane-related recovery of approximately $1.0 million and $3.3 million and a casualty gain of approximately $582,000 for the three and nine months endedSeptember 30, 2013, respectively. Both the recovery and casualty gain were classified in "Hurricane-related (recoveries)/charges, net" on the Consolidated Statements of Operations.
Based on the claims filed and management’s estimates, the Operating Partnership recognized $2.2 million of business interruption losses for the year ended December 31, 2012, of which $1.8 million were related to rent concession rebates provided to residents during the period the properties were uninhabitable and were classified in “Hurricane-related (recoveries)/charges, net” on the Consolidated Statements of Operations, and $400,000 were related to rent that was not contractually receivable and were classified as a reduction to “Rental income” on the Consolidated Statements of Operations. The Company estimates that it incurred an additional $2.1 million of business interruption losses for the nine months endedSeptember 30, 2013. As noted, the Company settled the Hurricane Sandy claims as of September 30, 2013.
During the three and nine months endedSeptember 30, 2013, the Operating Partnership received approximately $2.2 million and $4.2 million, respectively, of insurance proceeds for recovery of business interruption losses. Of the $4.2 million of insurance proceeds received during the nine months endedSeptember 30, 2013, $2.1 million related to recovery of business interruption losses incurred in 2012 and the remaining $2.1 million related to recovery of business interruption losses incurred in 2013. The $4.2 million of recovery was classified as "Hurricane-related (recoveries)/charges, net" on the Consolidated Statements of Operations.

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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, and rental expense growth. 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, unfavorable changes in the apartment market, changing economic conditions, the impact of inflation/deflation on rental rates and property operating expenses, expectations concerning availability of capital and the stabilization of the capital markets, the impact of competition and competitive pricing, acquisitions, developments and redevelopments not achieving anticipated results, delays in completing developments, redevelopments and lease-ups on schedule, expectations on job growth, home affordability anand demand/supply ratio for multifamily housing, expectations concerning development and redevelopment activities, expectations on occupancy levels, expectations concerning the joint ventures 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:

general economic conditions;

unfavorable changes in apartment market and economic conditions that could adversely affect occupancy levels and rental rates;

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 extraordinary losses for which we may not have insurance or adequate reserves;

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;

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;

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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 and 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.
UDR, INC.Inc.:
Business Overview
UDR, Inc. is a self-administered real estate investment trust, or REIT, that owns, acquires, renovates, develops, and manages apartment communities. We were formed in 1972 as a Virginia corporation. In September 2003, we changed our state of incorporation from Virginia to Maryland. Our subsidiaries include an operating partnership, United Dominion Realty, L.P., a Delaware limited 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 September 30, 20132014, our consolidated real estate portfolio included 141 communities in 10 states plus the District of Columbia totaling 41,42040,477 apartment homes. In addition, we had an ownership interest in 35 communities with 9,791 apartment homes and our total real estate portfolio, inclusive of ourthrough unconsolidated operating communities, included an additionalcommunities. The 37Same-Store Community communities with 10,168 apartment homes. The same-store community apartment home population for the three and nine months endedSeptember 30, 20132014 was 37,99536,268 and 36,704,35,177, respectively.

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The following table summarizes our market information by major geographic markets as of September 30, 20132014.
   As of September 30, 2013 For the Three Months Ended September 30, 2013 For the Nine Months Ended September 30, 2013   As of September 30, 2014 For the Three Months Ended September 30, 2014 For the Nine Months Ended September 30, 2014
 Number of
Apartment Communities		 Number of Apartment Homes Percentage
of Total
Carrying Value		 Total
Carrying Value (in thousands)		 Average
Physical Occupancy		 Monthly Income
per Occupied Home (a)		 Average
Physical Occupancy		 Monthly Income
per Occupied Home (a)		 Number of
Apartment Communities		 Number of Apartment Homes Percentage
of Total
Carrying Value		 Total
Carrying Value (in thousands)		 Average
Physical Occupancy		 Monthly Income
per Occupied Home (a)		 Average
Physical Occupancy		 Monthly Income
per Occupied Home (a)
Same-Store Communities  
West Region                                
San Francisco, CA 11
 2,436
 7.9% $663,938
 97.7% $2,842
 97.2% $2,776
Orange County, CA 10
 3,290
 7.5% $605,963
 95.5% $1,690
 95.0% $1,676
 10
 3,290
 7.1% 610,081
 96.0% 1,763
 95.3% 1,745
San Francisco, CA 11
 2,436
 8.1% 659,573
 96.6% 2,654
 96.4% 2,643
Seattle, WA 11
 2,165
 5.8% 474,677
 96.7% 1,519
 96.3% 1,492
 11
 2,165
 5.7% 477,883
 96.7% 1,615
 96.9% 1,583
Los Angeles, CA 5
 919
 3.6% 295,667
 94.9% 2,126
 95.3% 2,101
 5
 1,383
 5.5% 463,647
 96.1% 2,262
 95.5% 2,259
Monterey Peninsula, CA 7
 1,565
 2.0% 158,788
 96.8% 1,173
 93.7% 1,155
 7
 1,565
 1.9% 161,225
 97.6% 1,230
 95.5% 1,203
Inland Empire, CA 2
 654
 1.3% 101,745
 95.3% 1,451
 94.7% 1,446
Other Southern California 4
 875
 1.7% 141,488
 96.4% 1,560
 96.0% 1,541
Portland, OR 3
 716
 0.9% 72,565
 97.0% 1,116
 96.8% 1,094
 3
 716
 0.9% 73,576
 97.8% 1,203
 97.7% 1,181
Sacramento, CA 2
 914
 0.9% 70,598
 95.6% 930
 93.0% 917
San Diego, CA 2
 366
 0.7% 57,324
 94.7% 1,549
 95.0% 1,517
Mid-Atlantic Region                                
Metropolitan D.C. 13
 4,313
 10.9% 884,199
 96.7% 1,825
 96.9% 1,810
 13
 4,313
 10.5% 890,559
 97.1% 1,818
 97.1% 1,821
Baltimore, MD 11
 2,301
 3.8% 305,234
 96.0% 1,451
 96.3% 1,445
 11
 2,301
 3.7% 308,621
 96.4% 1,467
 96.7% 1,462
Richmond, VA 4
 1,358
 1.7% 137,887
 95.7% 1,205
 96.3% 1,191
 4
 1,358
 1.7% 139,153
 96.7% 1,224
 96.7% 1,216
Norfolk, VA 6
 1,438
 1.1% 88,421
 94.0% 1,013
 93.9% 1,013
 4
 846
 0.6% 53,572
 94.9% 1,060
 94.8% 1,049
Other Mid-Atlantic 1
 168
 0.2% 12,367
 95.2% 1,031
 96.3% 1,011
 1
 168
 0.2% 12,824
 96.2% 1,029
 96.7% 1,012
Southeast Region                
Orlando, FL 10
 2,796
 2.8% 238,273
 96.7% 1,060
 96.8% 1,038
Tampa, FL 9
 2,775
 3.3% 274,144
 96.6% 1,131
 96.6% 1,120
Nashville, TN 8
 2,260
 2.3% 190,209
 97.5% 1,062
 97.4% 1,051
Other Florida 1
 636
 1.0% 81,015
 96.5% 1,358
 96.4% 1,351
Northeast Region                                
New York, NY 2
 700
 5.1% 417,429
 97.7% 3,609
 97.0% 3,561
 3
 1,208
 8.8% 751,731
 97.7% 3,672
 97.6% 3,696
Boston, MA 4
 1,179
 3.9% 319,211
 96.2% 2,167
 96.4% 2,119
 4
 1,179
 3.8% 322,174
 96.5% 2,262
 96.4% 2,210
Southeast Region                
Tampa, FL 10
 3,452
 4.1% 334,838
 95.6% 1,093
 96.0% 1,088
Orlando, FL 11
 3,167
 3.5% 284,340
 96.0% 1,020
 96.0% 1,004
Nashville, TN 8
 2,260
 2.3% 187,070
 97.2% 1,011
 97.0% 996
Other Florida 1
 636
 1.0% 79,599
 95.2% 1,309
 95.4% 1,298
Southwest Region                                
Dallas, TX 8
 2,725
 3.5% 287,901
 96.5% 1,108
 96.5% 1,086
 8
 2,725
 3.5% 291,318
 97.3% 1,137
 97.1% 1,127
Austin, TX 4
 1,273
 1.8% 145,687
 96.9% 1,231
 96.7% 1,350
 4
 1,273
 1.8% 147,664
 97.2% 1,296
 96.9% 1,271
Total/Average Same- Store Communities 136
 37,995
 73.7% 5,981,083
 96.1% $1,490
 95.9% $1,468
Non Matures, Commercial Properties & Other 5
 3,016
 20.3% 1,645,503
        
Total/Average Same-Store Communities 131
 36,268
 74.7% 6,293,095
 96.8% $1,619
 96.6% $1,560
Non-Mature, Commercial Properties & Other 10
 3,938
 21.5% 1,813,589
        
Total Real Estate Held for Investment 141
 41,011
 94.0% 7,626,586
         141
 40,206
 96.2% 8,106,684
        
Real Estate Under Development (b) —
 409
 6.0% 489,472
         —
 271
 3.8% 321,607
        
Total Real Estate Owned 141
 41,420
 100.0% 8,116,058
         141
 40,477
 100.0% 8,428,291
        
Total Accumulated Depreciation       (2,155,665)               (2,379,033)        
Total Real Estate Owned, Net of Accumulated Depreciation       $5,960,393
               $6,049,258
        

(a)Monthly Income per Occupied Home represents total monthly revenues divided by the product of occupancy and the number of mature apartment homes.


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(b)
The Company is currently developing sixthree wholly-owned communities with 1,976874 apartment homes, 409 of which 271 have been completed.
We report in two segments: Same-Store Communities and Non-Mature Communities/Other.

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Table of Contents

Our Same-Store Communities segment represents those communities acquired, developed, and stabilized prior to July 1, 20122013 for quarter-to-date comparison and January 1, 20122013 for year-to-date comparison and held as of September 30, 20132014. 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 arecommunity 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.
Our Non-Mature Communities/Other segment represents those communities that weredo not meet the criteria to be included in Same-Store Communities, including, but not limited to, recently acquired, or developed in 2011, 2012 or 2013, sold properties, redevelopment properties, consolidated joint ventureand redeveloped properties, 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, 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 unsecured credit facility 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 repositioned our portfolio.
We expect to meet our short-term liquidity requirements generally through net cash provided by property operations and borrowings under our credit agreements. 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 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 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 dispositions of properties.
We have a shelf registration statement filed with the Securities and Exchange Commission, or the SEC, which provides for the issuance of an indeterminate amount of common stock, preferred stock, 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.
On June 26, 2014, the Company issued $300 million of 3.750% senior unsecured medium-term notes due July 1, 2024. Interest is payable semi-annually beginning on January 1, 2015. The notes were priced at 99.652% of the principal amount at issuance. We used the net proceeds to pay down borrowings outstanding on our $900 million unsecured credit facility and for general corporate purposes. The notes are fully and unconditionally guaranteed by the Operating Partnership.
In April 2012, the Company entered into a new equity distribution agreement, which was amended in July 2014, under which the Company may offer and sell up to 20 million shares of its common stock, from time to time, to or through its sales agents. During the three months ended September 30, 2014, the Company sold 3,410,433 shares of common stock through this program for aggregate gross proceeds of approximately $102.1 million at a weighted average price per share of $29.95. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $2.0 million, were approximately $100.0 million, which will be primarily used to fund the Company's Steele Creek participating loan investment. As of September 30, 2014, we had 16.5 million shares of common stock available for future issuance under the April 2012 program.
Future Capital Needs
Future development and redevelopment expenditures may be funded through borrowings under unsecured or secured credit facilities, proceeds from the issuance of equity or debt securities, the salesales of properties, and, to a lesser extent, from cash flowsflow provided by property operations. Acquisition activity in strategic markets may be funded 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.
We have a shelf registration statement filed with the Securities and Exchange Commission, or "SEC" which provides for the issuance of an indeterminate amount of common stock, preferred stock, 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.
As of September 30, 2013,2014, we had approximately $3.4$37.8 million of secured debt maturing, inclusive of principal payments on securedamortization, and no unsecured debt inmaturing, during the remainder of 2013 and $359.6 million in 2014.
We anticipate repaying that 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.

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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 other 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 27, 201325, 2014. There have been no significant changes in our critical accounting policies from those reported in our Form

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10-K filed with the SEC on February 27, 201325, 2014. 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.
Effective January 1, 2014, UDR prospectively adopted Accounting Standards Update (“ASU”) No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, for all communities not previously sold or classified as held for sale. ASU 2014-08 incorporates into the definition of a discontinued operation a requirement that a disposition represent a strategic shift in an entity’s operations, which resulted in UDR no longer classifying the sale of communities as a discontinued operation. See Note 2, Significant Accounting Policies, to the UDR Consolidated Financial Statements for more information on the new accounting pronouncement.
Statements of Cash Flows
The following discussion explains the changes in net cash provided byby/(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 nine months ended September 30, 20132014 and 20122013.
Operating Activities
For the nine months endedSeptember 30, 2013,2014, our net cash flow provided byby/(used in) operating activities was $261.3$282.0 million compared to $249.7$261.3 million for the comparable period in 2012.2013. The increase in cash flow from operating activities is primarily due to improved income from continuing operations.
Investing Activities
For the nine months endedSeptember 30, 2013,2014, net cash provided by/(used in)in) investing activities was $(128.5)$(300.9) million compared to $(61.5)$(128.5) million for the comparable period in 2012.2013. The change in investing activities was due to changes in the level of investment activities, which reflect our strategy as it relates to our investments in unconsolidated joint ventures and partnerships, dispositions, capital expenditures, and development activities, all of which are discussed in further detail throughout this Report.
Acquisitions
In January 2014, the Company acquired a fully-entitled land parcel for future development located in Huntington Beach, California for $77.8 million. In the third quarter of 2014, the Company acquired two communities, located in Seattle, Washington and Kirkland, Washington, with a total of 358 apartment homes for $45.5 million and $75.2 million, respectively. These acquisitions were accomplished through tax-deferred exchanges under Section 1031 of the Internal Revenue Code.
Dispositions

During the nine months ended September 30, 2014, the Company sold six communities with a total of 1,904 apartment homes, an adjacent parcel of land, and one operating property for gross proceeds of $237.7 million, resulting in net proceeds of $233.9 million and a total gain (net of tax) of $82.4 million. A portion of the sale proceeds was designated for tax-deferred exchanges under Section 1031 of the Internal Revenue Code.
In June 2013, the Company sold a 50% interest in two operating communities, developable land and a community under development to MetLife, resulting in net proceeds of $140.8 million and the formation of the UDR/MetLife Vitruvian Park® joint venture.
Capital Expenditures
In conformity with GAAP, weWe 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.

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Total capital expenditures, which in aggregate include recurring capital expenditures and major renovations, of $133.7$64.0 million or $3,247$1,607 per stabilized home were spent on all of our communities, excluding development and commercial properties, for the nine months endedSeptember 30, 20132014 as compared to $109.6$133.7 million or $2,449$3,246 per stabilized home for the comparable period in prior year.
The increasedecrease in total capital expenditures was primarily due to:
an increasea decrease in major renovations of 43.6%72.7% or $29.0 million.$69.5 million. Major renovations of $95.6$26.1 million or $2,323$656 per home were spent for the nine months endedSeptember 30, 20132014 as compared to $66.6$95.6 million or $1,487$2,322 per home for the comparable period in the prior year. Major renovations for the nine months endedSeptember 30, 20132014 were primarily attributable to the redevelopment of two wholly-owned communities (1,670 homes)(1,456 of 1,703 apartment homes being redeveloped, 1,435 of which have been completed) with a budget of $135.3$178.0 million, of which we have incurred $117.7had $158.6 million of costs incurred at September 30, 2013;
2014. The redevelopment of one of the two communities was completed as of June 30, 2014.
This increasedecrease was partially offset by:
a decreasean increase of 31.2%12.0% or $3.2 million$851,000 in revenue-enhancing capital expenditures, such as kitchen and bath remodels, on our existing operating portfolio; andremodels.
a decrease in total recurring capital expenditures of 5.4% or $1.8 million. Total recurring capital expenditures of $31.0 million or $752 per stabilized home were spent for the nine months endedSeptember 30, 2013 as compared to $32.7 million or $732 per stabilized home for the comparable period in the prior year, which was due to a 19.3% or $2.1 million decrease in turnover capital expenditures and a 1.7% or $367,000 increase in asset preservation expenditures.




The following table outlines capital expenditures and repair and maintenance costs for all of our communities, excluding real estate under development, non-stabilized communities, and commercial properties, for the nine months ended September 30, 20132014 and 20122013:

 Per Home
 Per Home
Nine Months Ended September 30, Nine Months Ended September 30,Nine Months Ended September 30, Nine Months Ended September 30,
 (dollars in thousands)  (dollars in thousands) 
2013 2012 % Change 2013 2012 % Change2014 2013 % Change 2014 2013 % Change
Turnover capital expenditures$8,912
 $11,040
 (19.3)% $216
 $247
 (12.6)%$9,171
 $8,912
 2.9 % $230
 $216
 6.5 %
Asset preservation expenditures22,063
 21,696
 1.7 % 536
 485
 10.5 %20,806
 22,063
 (5.7)% 522
 536
 (2.6)%
Total recurring capital expenditures30,975
 32,736
 (5.4)% 752
 732
 2.7 %29,977
 30,975
 (3.2)% 752
 752
 — %
Revenue enhancing improvements7,081
 10,286
 (31.2)% 172
 230
 (25.2)%7,932
 7,081
 12.0 % 199
 172
 15.7 %
Major renovations95,605
 66,578
 43.6 % 2,323
 1,487
 56.2 %26,118
 95,605
 (72.7)% 656
 2,322
 (71.7)%
Total capital expenditures$133,661
 $109,600
 22.0 % $3,247
 $2,449
 32.6 %$64,027
 $133,661
 (52.1)% $1,607
 $3,246
 (50.5)%
Repair and maintenance expense$24,455
 $27,937
 (12.5)% $594
 $624
 (4.8)%$23,542
 $24,455
 (3.7)% $591
 $594
 (0.5)%
Average stabilized home count (a)41,167
 44,762
        
Average number of homes (a)39,805
 41,167
        

(a)Average number of homes is calculated based on the number of stabilized homes outstanding at the end of each month.
We willintend to continue to selectively add revenue 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. Recurring capital expenditures during 20132014 are projected to be approximately $1,020$1,100 per home.
Real Estate Under Development and Redevelopment
At As of September 30, 2013,2014, our development pipeline for sixthree wholly-owned communities totaled 1,976874 homes, 409 of which 271 have been completed, with a budget of $782.5$400.4 million, in which we have a carrying value of $489.5 million. The$321.6 million. These communities are estimated completion date for these communities willto be throughcompleted during the fourth quarter of 2014 and second quarter of 2015.
As of September 30, 2014, the Company was redeveloping 708 apartment homes, 687 of which have been completed, at one wholly-owned community with 739 total apartment homes. This community is estimated to be completed during the fourth quarter of 2014.

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Consolidated Joint Ventures

In January 2012,December 2013, the Company formedconsolidated its 95%/5% development joint ventures: 13th and Market JV in San Diego, CA and Domain College Park JV in Metropolitan D.C. The consolidation was due to the Company becoming the managing member of each of the joint ventures pursuant to amendments to the limited liability company agreement for each joint venture. In connection with the amendments, our partner received equity distributions reducing its capital account balances to zero, the Company replaced our partner as the managing member, and our partner no longer has the ability to substantively participate in the decision-making process, with only protective rights remaining. We accounted for the consolidations as asset acquisitions since the joint ventures were under development and not complete at the time of consolidation resulting in no gain or loss upon consolidation and increasing our real estate owned by $129.4 million and our debt owed by $63.6 million. In addition pursuant to the amendments, the Company paid a non-refundable deposit to our partner in January 2014 of $2.0 million for each joint venture, with an unaffiliated third partyor $4.0 million in total, for the right to exercise options in 2014 to acquire 399 Fremont (land for future development) in San Francisco, California. At closing, UDR owned a noncontrolling interest of 92.5%our partner’s upside participation in the joint venture.ventures. The Company’s total investment was $55.5 million,non-refundable deposits will be applied towards the future purchase price, which consists of its initial investment of $37.3 million and an optionwill be equivalent to acquire itsour partner’s 7.5% ownership interest inright to receive certain upside participation from the joint venture. In October 2012, the Company exercised the option and paid $13.5 million, resulting in the consolidation of the joint venture at fair value. In January 2013, the Company subsequently acquired its partner's 7.5% ownership interest for $4.7 million.developments.
Unconsolidated 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 earningsincome 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.

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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 September 30, 20132014 and December 31, 20122013 (dollars in thousands):
Joint Venture Location of Properties Number of Properties Number of Apartment Homes Investment at UDR’s Ownership Interest Location of Properties Number of Properties Number of Apartment Homes Investment at UDR’s Ownership Interest
 September 30, 2013 December 31, 2012   2014 2014 September 30, 2014 December 31, 2013 September 30, 2014 December 31, 2013
        
Operating and development:Operating and development:          
UDR/MetLife I (a) Various 8 operating communities 1,641
 $49,550
 $75,129
 13.2% Various 0 operating communities —
 $—
 $40,336
 —  13.2%
 7 land parcels N/A
     4.0% 5 land parcels N/A
 5,364
 7,161
 4.0% 4.0%
UDR/MetLife II (a) Various 15 operating communities 3,119
 327,446
 327,001
 50.0% Various 21 operating communities 4,642
 436,805
 327,926
 50.0% 50.0%
UDR/MetLife Vitruvian Park® (b)
 Addison, TX 2 operating communities 739
 79,478
 —
 50.0% Addison, TX 2 operating communities 739
 79,807
 79,318
 50.0% 50.0%
 1 development community (*) 391
       1 non-stabilized community 391
        
 6 land parcels N/A
       6 land parcels N/A
        
Lodge at Stoughton Stoughton, MA 1 operating community 240
 14,941
 16,311
 95.0%
UDR/KFH Washington D.C. 3 operating communities 660
 26,998
 29,663
 30.0% Washington, D.C. 3 operating communities 660
 22,891
 25,919
 30.0% 30.0%
Texas Texas 8 operating communities 3,359
 1,522
 3,457
 20.0% Texas 8 operating communities 3,359
 (25,624) (23,591) 20.0% 20.0%
Other UDR/MetLife Development Joint Ventures Various 2 development communities (b) 828
 87,376
 36,313
 51.0% 51.0%
         1 land parcel N/A
        
13th & Market San Diego, CA 1 development community (*) 264
 31,151
 29,930
 95.0%
Domain College Park College Park, MD 1 development community (*) 256
 26,001
 25,546
 95.0%
Investment in and advances to unconsolidated joint ventures, net, before participating loan investmentInvestment in and advances to unconsolidated joint ventures, net, before participating loan investment   606,619
 493,382
    
   557,087
 507,037
            
         Location Interest Rate Years To Maturity Investment at Income From Participating Loan Investment For
Deferred fees and gains on the sale of depreciable property   (25,375) (29,406)  
   September 30, 2014 December 31, 2013 Three Months Ended September 30 Nine Months Ended September 30
        20142013 20142013
Participating loan investment:Participating loan investment:          
Steele Creek Denver, CO 6.5% 3.1 43,822
 14,273
 $642— $1,419—
                  
Total investment in and advances to unconsolidated joint ventures, netTotal investment in and advances to unconsolidated joint ventures, net   $531,712
 $477,631
  Total investment in and advances to unconsolidated joint ventures, net   $650,441
 $507,655
    
(*)(a)
On March 31, 2014, the Company sold its minority ownership interests in two small operating communities located in Los Angeles, CA to MetLife for cash proceeds of $3.0 million, which resulted in an immaterial gain. On April 21, 2014, the Company increased its ownership interest in the remaining six operating communities in the UDR/MetLife I Joint Venture from 12% to 50%, and MetLife and the Company contributed these communities to the UDR/MetLife II Joint Venture. The Company paid MetLife $82.5 million for the additional ownership interests. The Company continues to manage the operating communities that were contributed to the UDR/MetLife II Joint Venture as well as the two operating communities in which it sold its minority ownership interests.
In July 2014, the Company increased the ownership interest in two of these land sites to 50.1%. The remaining 49.9% continues to be held by our joint venture partner MetLife. The Company paid MetLife approximately $21.5 million for the additional ownership interests. As of September 30, 2014, the remaining assets in the UDR/MetLife I Joint Venture were comprised of five potential development land sites in which the Company has an average ownership interest of approximately 4%.

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(b)The number of apartment homes for the communities under development presented in the table above is based on the projected number of total homes. The number of apartment homes completed asAs of September 30, 2013 for one development community at2014, no apartment homes had been completed in Other UDR/MetLife Vitruvian Park®, 13th & Market, and Domain College Park were 239, 9, and 162, respectively.Development Joint Ventures.
(a) In June 2013 and within UDR/MetLife I, the Company exchanged with MetLife its approximately 10% ownership interest in four operating communities and paid MetLife an additional $15.6 million in cash for an increased ownership interest of approximately 35% in two high-rise operating communities, bringing UDR's ownership interest in the two high-rise operating communities to 50% each. The two high-rise operating communities are located in Denver, Colorado and San Diego, California and were subsequently contributed to UDR/MetLife II. The four operating communities in which UDR exchanged its ownership interest are located in Washington, D.C.; San Francisco, California; Dallas, Texas; and Charlotte, North Carolina. At 50% ownership, the Company's pro-rata share of the undepreciated book value of the UDR/MetLife II joint venture assets and outstanding debt was $796.4 million and $444.6 million, respectively, at June 30, 2013. UDR will continue to fee manage the four operating communities in which UDR exchanged its ownership interests.



(b) In June 2013, the Company sold a 50% interest in five partnerships (the "UDR/MetLife Vitruvian Park® Partnerships") to MetLife for approximately $141.3 million. The transaction resulted in a gain of approximately $436,000 which the Company has deferred until completion of the development community (projected for the end of 2013). Under the terms of the UDR/MetLife Vitruvian Park® Partnerships, the Company serves as the general partner with significant participating rights held by our partner, and earns fees for property management, asset management, and financing transactions. The UDR/MetLife Vitruvian Park® Partnerships are accounted for under the equity method of accounting. Our initial investment was approximately $80.2 million, which consisted of approximately $140.0 million (50% of our net book value of the real estate at the time of the transaction) reduced by our share of the net proceeds received upon encumbering the assets of approximately $58.7 million and other operating adjustments.

At closing, a total of $118.3 million of secured debt was placed on the two operating communities and the community under development. The debt on the two operating communities carries an interest rate of 4.0% with a term of ten years and the non-recourse construction loan on the community under development carries an interest rate of LIBOR plus 175 basis points with a term of two years and twoone-year extension options. The Company has guaranteed the completion of the construction of the development. Proceeds from the construction loan will be used for completion of construction of the development. Upon completion, at its 50% ownership, the Company's pro-rata share of the undepreciated book value of the UDR/MetLife Vitruvian Park® Partnerships' real estate assets and outstanding debt will be approximately $145.0 million and $62.8 million, respectively.
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 decreasedecreases in the value of its investments in unconsolidated joint ventures and partnerships during the three months and nine months ended September 30, 20132014 and 2012.2013.
Financing Activities
For the nine months endedSeptember 30, 2013,2014, our net cash provided by/(used in) financing activities was $(133.8)$3.3 million compared to $(118.4)$(133.8) million for the comparable period of 2012.2013.
The following significant financing activities occurred during the nine months ended September 30, 20132014:
amended its $900 million unsecured revolving credit facility. The amendment extended the maturity date from October 2015 to December 2017, included a six month extension option, and contained an accordion feature that allows the Company to increase the facility to $1.45 billion. Based on the Company's current credit rating, the credit facility carries an interest rate equal to LIBOR plus a spread of 110 basis points and a facility fee of 20 basis points;
amended and re-priced its $100 million and $250 million unsecured term notes due in January 2016. The loans were re-priced from LIBOR plus 142.5 basis points to LIBOR plus 125 basis points, and the maturity date was extended to June 2018;
on June 28, 2013, the Company refinanced $186 million of a Fannie Mae credit facility that carried an interest rate equal to LIBOR plus a spread of 284 basis points and was scheduled to mature in 2019. The new loans include a $90 million, 7-year fixed-rate loan that carries an interest rate of 3.95% and a $96 million, 10-year variable-rate loan that carries an interest rate equal to LIBOR plus a spread of 190 basis points. Three of the Company's communities were released from the facility and added to the Company's unencumbered asset pool;
on September 26, 2013, the Company issued $300 million of 3.70% senior unsecured medium-term notes due October 2020. Interest is payable semiannually beginning in April 2014. The notes were priced at 99.981% of the principal amount at issuance and had a discount of $56,000 at September 30, 2013. We used the net proceeds to repay the borrowings outstanding on our $900 million unsecured credit facility and for general corporate purposes. The notes are fully and unconditionally guaranteed by the Operating Partnership.
repaid $44.5 million of secured debt. The $44.5$44.4 million of secured debt, included $40.9including $41.5 million of mortgage payments and the repayment of $3.6$2.9 million of credit facilities;
repaid $122.5$184.0 million of 6.05%5.13% unsecured medium-term notes due June 2013; andJanuary 2014;

repaid $128.5 million of 5.50% unsecured medium-term notes due April 2014;
paid off the balance outstandingissued $300 million of 3.750% senior unsecured medium-term notes due July 1, 2024;
sold 3,410,433 shares of common stock for aggregate gross proceeds of approximately $102.1 million at a weighted average price per share of $29.95;
net borrowings of $160.0 million under the Company’s $900 million unsecured revolving credit facility.facility; and


paid distributions of $189.7 million to our common stockholders.

In 2012, the Company entered into an equity distribution agreement under which the Company could offer and sell up to 20 million shares of its common stock, from time to time, to or through its sales agents. During the year ended December 31, 2012, we sold 71,000 shares of common stock through this program. As of September 30, 2013, we had 19,929,000 shares of common stock available for sale under this program.
Credit Facilities
As of September 30, 2013, we have2014, the Company has secured credit facilities with Fannie Mae with an aggregate commitment of $927.7$835.2 million with $838.9$835.2 million outstanding. The Fannie Mae credit facilities are for terms of seven to ten years and bear interest at floating and fixed rates. We have $627.5The Company has $623.8 million of the funded balance fixed at a weighted average interest rate of 4.99%, and the remaining balance of $211.4$211.4 million on these facilities is currently athas a weighted average variable rate of 1.61%1.58% at September 30, 20132014. In June 2013, we refinanced $186 million of a Fannie Mae credit facility as discussed above.

In June 2013, we amended our $900 million unsecured revolving credit facility as discussed above. As of September 30, 20132014, the Company has a $900 million unsecured revolving credit facility that matures in December 2017. The credit facility has a six month extension option and contains an accordion feature that allows us to increase the facility to $1.45 billion. Based on the Company’s current credit rating, the credit facility carries an interest rate equal to LIBOR plus a spread of 100 basis points and a facility fee of 15 basis points. As of September 30, 2014, we had no$160.0 million outstanding borrowings under the credit facility, leaving $900$740.0 million of unused capacity (excluding $2.3$2.2 million of letters of credit at September 30, 20132014).
The Fannie Mae credit facilities and the bank unsecured revolving credit facility are subject to customary financial covenants and limitations.
Derivative Instruments
As part of UDR’s overall interest rate risk management strategy, we use derivatives as a means to fix the interest rates of variable rate debt obligations or to hedge anticipated financing transactions. UDR’s derivative transactions used for interest rate risk management include interest rate swaps with indexes that relate to the pricing of specific debt instruments of UDR. We believe that we have appropriately controlled our interest rate risk through the use of derivative instruments to minimize any unintended effect on consolidated earnings.Derivative contracts did not have a material impact on the results of operations during the three and nine months ended September 30, 20132014 (see Note 10, Derivatives and Hedging Activity, in the Notes to the UDR Consolidated Financial Statements of UDR, Inc. included in this Report).
Interest Rate Risk

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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 $341.1$532.4 million in variable rate debt that is not subject to interest rate swap contracts as of September 30, 2013.2014. If market interest rates for variable rate debt increased by 100 basis points, our interest expense for the nine months ended September 30, 2014 would increase by $5.9$5.4 million based on the average balance outstanding during the year.period.
These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. These analyses doThis 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 10, Derivatives and Hedging Activities, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional discussion of derivate instruments.
Funds from Operations, Funds from Operations as Adjusted, and Adjusted Funds from Operations

Funds from Operations

Funds from operations (“FFO”) is defined as net income (computed in accordance with generally accepted accounting principles, or “GAAP”)GAAP), excluding impairment write-downs of depreciable real estate or of investments in non-consolidated investees that are driven by measurable decreases in the fair value of depreciable real estate held by the investee, gains (or losses)or losses from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for


unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust'sTrust’s (“NAREIT”) definition issued in April 2002.2002 and is comparable to FFO, diluted in the accompanying reconciliation. 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'sREIT’s operating performance. In the computation of diluted FFO, OP Units, unvested restricted stock, stock options, and the shares of Series E Cumulative Convertible Preferred Stock are dilutive; therefore, they are included in the diluted share count.

Activities of our taxable REIT subsidiary (“TRS”), RE3, include development and land entitlement. From time to time, we develop and subsequently sell a TRS property which results in a short-term use of funds that produces a profit that differs from the traditional long-term investment in real estate for REITs. We believe that the inclusion of these TRS gains in FFO is consistent with the standards established by NAREIT as the short-term investment is incidental to our main business. TRS gains on sales, net of taxes, are defined as net sales proceeds less a tax provision and the gross investment basis of the asset before accumulated depreciation.

We consider FFO a useful metric for investors as we use FFO in evaluating property acquisitions and our operating performance, and believe that FFO should be considered along with, but not as an alternative to, net income and cash flow as a measure of our 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 is defined as FFO excluding the impact of acquisition-related costs and other non-comparable items including, but not limited to, prepayment costs/benefits associated with early debt retirement, gains on sales of marketable securities and TRS property, deferred tax valuation allowance increases and decreases, storm-related expenses and recoveries, severance costs and legal costs. Management believes that FFO as Adjusted 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.

FFO as Adjusted 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 attributable to UDR, Inc. is the most directly comparable GAAP financial measure to FFO as Adjusted. However, other REITs may use different methodologies for calculating FFO as Adjusted or

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similar FFO measures and, accordingly, our FFO as Adjusted may not always be comparable to FFO as Adjusted or similar FFO measures calculated by other REITs. FFO as Adjusted 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, or “AFFO”, is a non-GAAP financial measure that management uses as a supplemental measure of our performance. AFFO is defined as FFO as Adjusted less recurring capital expenditures that are necessary to help preserve the value of and maintain functionality at our communities. Therefore, Managementmanagement considers AFFO a useful supplemental performance metric for investors as it is more indicative of the Company'sCompany’s operational performance than FFO or FFO as Adjusted.

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 attributable to UDR, Inc. 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 (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, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.


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The following table outlines our reconciliation of net income/(loss) attributable Net Income/(Loss) Attributable to UDR, Inc. to FFO, FFO as Adjusted, and AFFO for the three and nine months endedSeptember 30, 20132014 and 20122013 (dollars in thousands):
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 20122014 2013 2014 2013
Net income/(loss) attributable to UDR, Inc.$3,188
 $(9,031) $8,112
 $224,477
$40,549
 $3,188
 $88,917
 8,112
Distributions to preferred stockholders(931) (931) (2,793) (5,079)(931) (931) (2,793) (2,793)
Real estate depreciation and amortization, including discontinued operations84,266
 88,223
 252,839
 266,944
89,339
 84,266
 266,748
 252,839
Net income/(loss) attributable to noncontrolling interests47
 (645) 168
 8,781
1,443
 47
 3,173
 168
Real estate depreciation and amortization on unconsolidated joint ventures10,514
 6,852
 25,462
 22,634
10,398
 10,514
 29,926
 25,462
Net (gain)/loss on the sale of depreciable property in discontinued operations, excluding TRS—
 1,133
 —
 (243,649)
Premium on preferred stock redemptions, net—
 —
 —
 (2,791)
Net (gain)/loss on the sale of depreciable property, excluding TRS(31,377) —
 (81,260) —
Funds from operations (“FFO”), basic$97,084
 $85,601
 $283,788
 $271,317
$109,421
 $97,084
 $304,711
 $283,788
Distribution to preferred stockholders — Series E (Convertible)931
 931
 2,793
 2,793
931
 931
 2,793
 2,793
FFO, diluted$98,015
 $86,532
 $286,581
 $274,110
$110,352
 $98,015
 $307,504
 $286,581
FFO per common share, basic$0.37
 $0.33
 $1.09
 $1.11
$0.42
 $0.37
 $1.17
 $1.09
FFO per common share, diluted$0.37
 $0.33
 $1.09
 $1.10
$0.41
 $0.37
 $1.16
 $1.09
Weighted average number of common shares and OP Units outstanding — basic259,308
 259,231
 259,305
 244,588
260,844
 259,308
 259,975
 259,305
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted263,813
 263,631
 263,818
 248,984
265,957
 263,813
 264,985
 263,818
              
Impact of adjustments to FFO:              
Acquisition-related costs (including joint ventures)$—
 $1,451
 $—
 $2,230
$164
 $—
 $266
 $—
Joint venture financing and acquisition fee(36) —
 (254) —
(88) (36) (88) (254)
Costs/(benefit) associated with debt extinguishment and tender offer—
 —
 178
 (277)—
 —
 192
 178
Redemption of preferred stock—
 —
 —
 2,791
Gain on sale of TRS property and marketable securities—
 —
 —
 (7,749)
Severance costs and other restructuring expense—
 —
 —
 171
Reversal of deferred tax valuation allowance—
 —
 —
 (22,876)
Hurricane-related recoveries, net(4,059) —
 (9,665) —
Gains on sale of TRS property and marketable securities(8,411) —
 (9,531) —
Casualty-related (recoveries)/charges, net—
 (4,059) 500
 (9,665)
$(4,095) $1,451
 $(9,741) $(25,710)$(8,335) $(4,095) $(8,661) $(9,741)
              
FFO as Adjusted, diluted$93,920
 $87,983
 $276,840
 $248,400
$102,017
 $93,920
 $298,843
 $276,840
              
FFO as Adjusted per common share, diluted$0.36
 $0.33
 $1.05
 $1.00
$0.38
 $0.36
 $1.13
 $1.05
              
Recurring capital expenditures(11,989) (12,848) (30,975) (32,736)(12,280) (11,989) (29,977) (30,975)
AFFO$81,931
 $75,135
 $245,865
 $215,664
$89,737
 $81,931
 $268,866
 $245,865
              
AFFO per common share, diluted$0.31
 $0.29
 $0.93
 $0.87
$0.34
 $0.31
 $1.01
 $0.93


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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 and nine months endedSeptember 30, 20132014 and 20122013 (shares in thousands):
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 20122014 2013 2014 2013
Weighted average number of common shares and OP Units outstanding — basic259,308
 259,231
 259,305
 244,588
260,844
 259,308
 259,975
 259,305
Weighted average number of OP Units outstanding(9,323) (9,406) (9,343) (9,415)(9,189) (9,323) (9,274) (9,343)
Weighted average number of common shares outstanding — basic per the Consolidated Statements of Operations249,985
 249,825
 249,962
 235,173
251,655
 249,985
 250,701
 249,962
              
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted263,813
 263,631
 263,818
 248,984
265,957
 263,813
 264,985
 263,818
Weighted average number of OP Units outstanding(9,323) (9,406) (9,343) (9,415)(9,189) (9,323) (9,274) (9,343)
Weighted average incremental shares from assumed conversion of stock options—
 (1,242) —
 (1,238)
Weighted average incremental shares from unvested restricted stock—
 (122) —
 (122)
Weighted average number of Series E preferred shares outstanding(3,036) (3,036) (3,036) (3,036)(3,036) (3,036) (3,036) (3,036)
Weighted average number of common shares outstanding — diluted per the Consolidated Statements of Operations251,454
 249,825
 251,439
 235,173
253,732
 251,454
 252,675
 251,439
A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands):
Nine Months Ended September 30,Nine Months Ended September 30,
2013 20122014 2013
Net cash provided by operating activities$261,297
 $249,689
Net cash provided by/(used in) operating activities$281,978
 $261,297
Net cash provided by/(used in) investing activities$(128,500) $(61,456)$(300,912) $(128,500)
Net cash provided by/(used in) financing activities$(133,763) $(118,359)$3,290
 $(133,763)
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 and nine months ended September 30, 20132014 and 20122013, and includes the results of both continuing and discontinued operations for the periods presented.
Net Income/(Loss) Attributable to Common Stockholders
Net income attributable to common stockholders was $2.3$39.6 million ($0.01 ($0.16 per diluted share) for the three months ended September 30, 20132014 as compared to net loss of $10.0$2.3 million ($0.04 ($0.01 per diluted share) for the comparable period in the prior year. The increase in net income/(loss)income attributable to common stockholders for the three months ended September 30, 20132014 resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:

gains (net of tax) of $31.3 million on the sale of three communities and one operating property during the three months ended September 30, 2014;and

an increase in total property NOI primarily due to higher occupancy and higher revenue per occupied home, at our same-store communities;and NOI from the homes placed in service related to development and redevelopment projects completed in 2013 and 2014, partially offset by the disposition of communities in 2013 and 2014.
This was partially offset by:
an increase in depreciation and amortization expense primarily from the homes placed in service related to development and redevelopment projects completed in 2013 and 2014, partially offset by a decrease from sold communities and fully depreciated assets; and
hurricane-related recoveries in 2013 resulting from the effects of Hurricane Sandy on three of our New York New YorkCity communities in 2012 (see Note 14,3, Hurricane-Related (Recoveries)/ChargesReal Estate Owned, in the Notes to the UDR Consolidated Financial Statements for more details); and

a decrease in depreciation and amortization expense primarily from the disposition of assets in 2012 partially offset by the depreciation from developed or redeveloped units placed in service in 2012 and 2013.
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This was partially offset by:

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an increase in losses from unconsolidated entities primarily related to the increase in depreciation from the UDR/MetLife Vitruvian Park® transaction in June 2013.
Net income attributable to common stockholders was $5.3$86.1 million ($0.02 ($0.34 per diluted share) for the nine months ended September 30, 20132014 as compared to net income of $216.6$5.3 million ($0.92 ($0.02 per diluted share) for the comparable period in the prior year. The decreaseincrease in net income attributable to common stockholders for the nine months ended September 30, 20132014 resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:

a decrease in net gains (net of $251.4tax) of $82.3 million on the sale of depreciable property related tosix communities with a total of 1,904 apartment homes and an adjacent parcel of land during the disposition of 21 communities in 2012;nine months ended September 30, 2014; and
a decrease in tax benefit, net primarily due to a reversal of tax valuation allowance of $22.9 million in 2012.
This was partially offset by:
an increase in total property NOI primarily due to higher occupancy and higher revenue per occupied home, and NOI from the homes placed in service related to development and redevelopment projects completed in 2013 and 2014, partially offset by the disposition of 21 communities in 2012;2013 and 2014.
This was partially offset by:
an increase in depreciation and amortization expense primarily from the homes placed in service related to development and redevelopment projects completed in 2013 and 2014, partially offset by a decrease from sold communities and fully depreciated assets; and
hurricane-related recoveries in 2013 resulting from the effects of Hurricane Sandy on three of our New York New YorkCity communities in 2012 (see Note 14,3, Hurricane-Related (Recoveries)/ChargesReal Estate Owned, in the Notes to the UDR Consolidated Financial Statements for more details);.
a decrease in depreciation and amortization expense primarily from the disposition of assets in 2012 and intangible assets related to in place leases acquired in 2011 and 2012 becoming fully amortized in 2012 partially offset by the depreciation from developed and redeveloped units placed in service in 2012 and 2013; and
a decrease in interest expense due to lower debt balances and lower interest rates.
Apartment Community Operations
Our net income results are primarily from net operating income ("NOI")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 2.75% of property revenue to cover the regional supervision and accounting costs related to consolidated property operations, and land rent.

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The following table summarizes the operating performance of our total property NOI (which includes discontinued operations) for each of the periods presented three and nine months endedSeptember 30, 2013 and 2012(dollars in thousands):
Three Months Ended September 30, (a)   Nine Months Ended September 30, (b)  Three Months Ended September 30, (a)   Nine Months Ended September 30, (b)  
2013 2012 
% Change
 2013 2012 
% Change
2014 2013 
% Change
 2014 2013 
% Change
Same-Store Communities:                      
Same-store rental income$163,167
 $155,580
 4.9 % $465,168
 $442,697
 5.1 %$170,544
 $163,309
 4.4 % $477,289
 $457,037
 4.4 %
Same-store operating expense (c)(51,722) (50,404) 2.6 % (145,017) (141,301) 2.6 %(52,252) (50,760) 2.9 % (145,301) (141,864) 2.4 %
Same-store NOI111,445
 105,176
 6.0 % 320,151
 301,396
 6.2 %118,292
 112,549
 5.1 % 331,988
 315,173
 5.3 %
                      
Non-Mature Communities/Other NOI:                      
Acquired communities NOI4,039
 3,670
 10.1 % 14,229
 12,049
 18.1 %169
 —
 —
 12,383
 11,060
 12.0 %
Sold communities NOI(1) 1,358
 (100.1)% 2,291
 22,699
 (89.9)%
Sold or held for disposition communities NOI310
 5,380
 (94.2)% 6,688
 18,432
 (63.7)%
Developed communities NOI1,749
 (165) (1,160.0)% 2,507
 (120) (2,189.2)%7,955
 1,755
 353.3 % 19,039
 2,523
 654.6 %
Redeveloped communities NOI9,643
 8,246
 16.9 % 32,829
 31,340
 4.8 %9,603
 7,111
 35.0 % 33,100
 26,380
 25.5 %
Commercial NOI and other1,768
 4,009
 (55.9)% 10,605
 11,955
 (11.3)%3,485
 1,848
 88.6 % 9,132
 9,044
 1.0 %
Total non-mature communities/other NOI17,198
 17,118
 0.5 % 62,461
 77,923
 (19.8)%21,522
 16,094
 33.7 % 80,342
 67,439
 19.1 %
                      
Total Property NOI$128,643
 $122,294
 5.2 % $382,612
 $379,319
 0.9 %$139,814
 $128,643
 8.7 % $412,330
 $382,612
 7.8 %

(a)
Same-store consistsSame-Store Community population consisted of 37,99536,268 apartment homes.
(b)
Same-store consistsSame-Store Community population consisted of 36,70435,177 apartment homes.
(c)Excludes depreciation, amortization, and property management expenses.


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The following table is our reconciliation of total property NOI to Net income/(loss) attributableIncome/(Loss) Attributable to UDR, Inc. as reflected, for both continuing and discontinued operations, for each of the three and nine months endedSeptember 30, 2013 and 2012periods presented (dollars in thousands):
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 20122014 2013 2014 2013
Total property NOI$128,643
 $122,294
 $382,612
 $379,319
$139,814
 $128,643
 $412,330
 $382,612
Joint venture management and other fees3,207
 3,320
 9,347
 9,026
3,165
 3,207
 9,599
 9,347
Property management(5,236) (4,998) (15,491) (15,449)(5,599) (5,236) (16,474) (15,491)
Other operating expenses(1,787) (1,467) (5,237) (4,284)(2,012) (1,787) (6,118) (5,237)
Real estate depreciation and amortization(84,266) (88,223) (252,839) (266,944)(89,339) (84,266) (266,748) (252,839)
General and administrative(11,364) (10,022) (30,706) (33,139)(11,554) (11,364) (36,078) (30,706)
Hurricane-related recoveries/(charges), net6,460
 —
 12,253
 —
Casualty-related recoveries/(charges), net—
 6,460
 (500) 12,253
Other depreciation and amortization(1,176) (1,078) (3,460) (3,013)(1,385) (1,176) (3,658) (3,460)
Income/(loss) from unconsolidated entities(3,794) (719) (6,081) (5,822)(939) (3,794) (4,932) (6,081)
Interest expense(30,939) (31,845) (92,723) (108,132)(33,087) (30,939) (97,662) (92,723)
Interest and other income/(expense), net829
 1,235
 3,291
 1,644
9,061
 829
 11,902
 3,291
Tax benefit, net2,658
 2,960
 7,314
 28,654
Tax benefit/(expense), net2,490
 2,658
 8,049
 7,314
Gain/(loss) on sale of real estate owned, net of tax31,377
 —
 82,380
 —
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership(84) 687
 (198) (8,644)(1,447) (84) (3,171) (198)
Net (income)/loss attributable to noncontrolling interests37
 (42) 30
 (137)4
 37
 (2) 30
Net gain/(loss) on sale of depreciable properties, net of tax—
 (1,133) —
 251,398
Net income/(loss) attributable to UDR, Inc.$3,188
 $(9,031) $8,112
 $224,477
$40,549
 $3,188
 $88,917
 $8,112

Same-Store Communities
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TableOur Same-Store Community properties (those acquired, developed, and stabilized prior to April 1, 2013 for quarter-to-date comparison and January 1, 2013 for year-to-date comparison and held as of ContentsSeptember 30, 2014) consisted of 36,268 and 35,177 apartment homes and provided 85% and 81% of our total NOI for the three and nine months ended September 30, 2014, respectively.

Three Months Ended September 30, 20132014 vs. Three Months Ended September 30, 2012
2013
NOI for our Same-Store Communities
Our same-store community properties (those acquired, developed, and stabilized prior to July 1, 2012Community and held on September 30, 2013) consisted of 37,995 apartment homes and provided 87% of our total NOIproperties increased 5.1% or $5.7 million for the three months ended September 30, 2013.
NOI for our same-store community properties increased6.0% or $6.3 million for the three months ended September 30, 20132014 compared to the same period in 2012. The increase in property NOI was attributable to a 4.9% or $7.6 million increase in property rental income partially offset by a 2.6% or $1.3 million increase in operating expenses. The increase in revenues was primarily driven by a 4.0% or $6.0 million increase in rental rates, a 7.9% or $922,000 increase in reimbursement and fee income and a 46.2% or $403,000 decrease in concessions. Physical occupancy increased 0.2% to 96.1% and total monthly income per occupied home increased 4.7% to $1,490.
The increase in operating expenses was primarily driven by an 8.7% or $1.4 million increase in real estate taxes and a 16.2% or $331,000 increase in insurance costs, which was partially offset by a 5.2% or $436,000 decrease in repair and maintenance expense.
As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 68.3% for the three months ended September 30, 2013 as compared to 67.6% for the comparable period in 2012.
Non-Mature Communities/Other
The remaining $17.2 million or 13% of our total NOI during the three months ended September 30, 2013 was generated from our “non-mature communities/other.” UDR’s non-mature communities/other consist of communities that do not meet the criteria to be included in same-store communities, which includes communities developed or acquired, redevelopment properties, sold properties, and non-apartment components of mixed use properties. NOI from non-mature communities/other increased by 0.5% or $80,000 for the three months ended September 30, 2013 as compared to the same period in 2012. The increase was primarily driven by an increase in NOI of $1.4 million from redevelopment communities, an increase of $1.9 million from development communities completed in 2012 and 2013, and an increase of 10.1% or $369,000 from communities acquired in 2011 and 2012, which was partially offset by a decrease in NOI of $1.4 million from communities sold in 2012 and a decrease of 55.9% or $2.2 million from commercial and other communities.
Nine Months Ended September 30,2013 vs. Nine Months Ended September 30,2012
Our same-store community properties (those acquired, developed, and stabilized prior to January 1, 2012 and held on September 30, 2013) consisted of 36,704 apartment homes and provided 84% of our total NOI for the nine months endedSeptember 30, 2013.
NOI for our same-store community properties increased 6.2% or $18.8 million for the nine months endedSeptember 30, 2013 compared to the same period in 2012.2013. The increase in property NOI was attributable to a 5.1%4.4% or $22.5$7.2 million increase in property rental income, which was partially offset by a 2.6%2.9% or $3.7$1.5 million increase in operating expenses. The increase in revenuesproperty income was primarily driven by a 4.1%3.4% or $17.8$5.4 million increase in rental rates, an 8.7%a 4.7% or $2.8 million$575,000 increase in reimbursement and fee income and a 45.3%17.1% or $1.4$1.1 million decrease in concessions.vacancy loss and bad debt. Physical occupancy increased 0.2%0.6% to 95.9%96.8% and total monthly income per occupied home increased 4.9%3.8% to $1,468.$1,619.
The increase in operating expenses was primarily driven by a 9.1%6.2% or $4.1 million$774,000 increase in personnel costs, 1.3% or $217,000 increase in real estate taxes and a 4.4%20.3% or $1.5 million$451,000 increase in personnel costs, which was partially offset by a 6.9% or $1.6 million decrease in repair and maintenance expense and a 4.9% or $474,000 decrease in administration and marketinginsurance expenses.
As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 68.8%69.4% for the ninethree months endedSeptember 30, 20132014 as compared to 68.1%68.9% for the comparable period in 2013.
Nine Months Ended 2012September 30, 2014. vs. Nine Months Ended September 30, 2013
NOI for our Same-Store Community properties increased 5.3% or $16.8 million for the nine months ended September 30, 2014 compared to the same period in 2013. The increase in property NOI was attributable to a 4.4% or $20.3 million increase in property rental income, which was partially offset by a 2.4% or $3.4 million increase in operating expenses. The increase in property income was primarily driven by a 3.4% or $14.9 million increase in rental rates, a 5.5% or $1.9 million increase in reimbursement and fee income and an 14.2% or $2.5 million decrease in vacancy loss and bad debt. Physical occupancy increased 0.5% to 96.6% and total monthly income per occupied home increased 3.8% to $1,560.

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The increase in operating expenses was primarily driven by a 2.2% or $1.0 million increase in real estate taxes, a 19.6% or $1.2 million increase in insurance expense, and a 1.5% or $518,000 increase in personnel costs.
As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 69.6% for the nine months ended September 30, 2014 as compared to 69.0% for the comparable period in 2013.
Non-Mature Communities/Other
The remainingUDR’s $62.5 millionNon-Mature Communities/Other or 16% of our total NOI during the nine months endedSeptember 30, 2013 was generated from our “non-mature communities/other.” UDR’s non-mature communities/other consist ofrepresent those communities that do not meet the criteria to be included in same communities, which includes communitiesSame-Store Communities, including, but not limited to, recently acquired, developed or acquired, redevelopment properties,

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soldand redeveloped properties, and the non-apartment components of mixed use properties. NOI from non-mature communities/other decreased by
Three Months Ended 19.8%September 30, 2014 orvs. Three Months Ended $15.5 million for the nine months endedSeptember 30, 2013
The remaining 15% or $21.5 million of our total NOI during the three months ended September 30, 2014 was generated from our Non-Mature Communities/Other. NOI from Non-Mature Communities/Other increased by 33.7% or $5.4 million for the three months ended September 30, 2014 as compared to the same period in 2012.2013. The decreaseincrease was primarily driven by an increase in NOI of $6.2 million and $2.5 million from developed and redeveloped communities, respectively, completed in 2013 and 2014 and an increase of $1.6 million from commercial and other communities, which was partially offset by a decrease in NOI of $20.4$5.1 million from communities sold in 2012, partially offset2013 and 2014.
Nine Months Ended September 30, 2014 vs. Nine Months Ended September 30, 2013
The remaining 19% or $80.3 million of our total NOI during the nine months ended September 30, 2014 was generated from our Non-Mature Communities/Other. NOI from Non-Mature Communities/Other increased by 19.1% or $12.9 million for the nine months ended September 30, 2014 as compared to the same period in 2013. The increase was primarily driven by an increase in NOI of 18.1% or $2.2$16.5 million and $6.7 million from development and redevelopment communities, acquiredrespectively, completed in 20112013 and 2012,2014 and an increase of $2.6$88,000 from commercial and other communities, which was partially offset by a decrease in NOI of $11.7 million from development communities completedsold in 20122013 and 2013.2014.
Real Estate Depreciation and Amortization
For the three months ended September 30, 2013, real estate depreciation and amortization attributable to both continuing and discontinued operations decreased4.5% or $4.0 million as compared to the comparable period in 2012. The decrease in depreciation and amortization for the three months ended September 30, 2013 was primarily from the disposition of assets in 2012 partially offset by the depreciation from developed and redeveloped units placed in service in 2012 and 2013. During the nine months endedSeptember 30, 20132014, real estate depreciation and amortization on both continuing and discontinued operations decreased5.3%increased 6.0% or $14.1$5.1 million as compared to the comparable period in 2012.2013. The increase in depreciation and amortization for the three months ended September 30, 2014 was primarily due to homes delivered from our development and redevelopment communities, partially offset by a decrease from sold communities and fully depreciated assets.
During the nine months ended September 30, 2014, real estate depreciation and amortization on both continuing and discontinued operations increased 5.5% or $13.9 million as compared to the comparable period in 2013. The increase in depreciation and amortization for the nine months ended September 30, 20132014 was primarily due to homes delivered from the disposition of assets in 2012our development and intangible assets related to in place leases acquired in 2011 and 2012 becoming fully amortized in 2012. The decrease wasredevelopment communities, partially offset by the depreciationa decrease from developedsold communities and redeveloped units placed in service in 2012 and 2013.fully depreciated assets.

Tax Benefit, NetGeneral and Administrative

UDR elected for RE3 to be treated as a TRS. Income taxes for RE3 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 recognized an income tax benefit from RE3 of $2.7 million and $7.3 million and $3.0 million and $28.7 million forFor the three and nine months ended September 30, 2013 and 20122014, respectively. Includedgeneral and administrative expense increased 1.7% or $190,000 as compared to the comparable period in 2013. The increase in general and administrative expense for the three months endedSeptember 30, 2014 was primarily due to salary and benefit increases.

For the nine months ended September 30, 2012 is an income tax benefit of $22.9 million from RE32014, which resulted fromgeneral and administrative expense increased 17.5% or $5.4 million as compared to the reversal of a net deferred tax asset valuation allowance. Priorcomparable period in 2013. The increase was primarily due to 2012, RE3 had a history of losses and, as a result, had historically recognized a valuation allowance for net deferred tax assets.  Each quarter, the Company evaluates the need to retain all or a portion of the valuation allowance on its net deferred tax assets. In the first quarter of 2012, the Company determined that it is more likely than not that the deferred tax assets, including any remaining net operating losses, will be realized.  In making this determination, the Company analyzed, among other things, its recent history of earnings, forecasts of future earnings from sales of depreciable property, and its cumulative earningsan increase in stock-based compensation expense for the last twelve quarters. long-term incentive plan and salary and benefit increases.

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Hurricane-RelatedCasualty-Related (Recoveries)/Charges, Net

In October 2012, Hurricane Sandy hit the East Coast, affecting three of the Company’s operating communities (1,706 apartment homes) located in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Company hashad insurance policies that provideprovided coverage for property damage and business interruption, subject to applicable retention.
Based on the claims filed and management’s estimates, the Company recognized a $9.0 million impairment charge for the damaged assets’ net book value and incurred $10.4 million of repair and cleanup costs during the year ended December 31, 2012. The impairment charge and the repair and cleanup costs incurred were reduced as of December 31, 2012 by $14.5 million of estimated insurance recovery, and were classified in “Hurricane related (recoveries)/charges, net” on the Consolidated Statements of Operations. During the three and nine months endedSeptember 30, 2013, no material adjustments to the impairment charge and the repair and cleanup costs incurred were recognized. With the exception of one of the properties that is under redevelopment at September 30, 2013, the rehabilitation of the remaining two properties was primarily completed in the third quarter of 2013.
As of September 30, 2013, the Company had settled the Hurricane Sandy claims and received insurance proceeds in excess of the $14.5 million estimated insurance recovery receivable related to the impairment charge and the repair and cleanup costs incurred. As a result, the Company recognized a Hurricane-related recovery of approximately $2.0 million and $4.8 million and a casualty gain of approximately $654,000 for the three and nine months endedSeptember 30, 2013, respectively. Both the recovery and casualty gain were classified in "Hurricane-related (recoveries)/charges, net" on the Consolidated Statements of Operations.

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Based on the claims filed and management’s estimates, the Company recognized $4.4 million of business interruption losses for the year ended December 31, 2012, of which $3.6 million were related to rent concession rebates provided to residents during the period the properties were uninhabitable and were classified in "Hurricane-related (recoveries)/charges, net" on the Consolidated Statements of Operations, and $767,000 were related to rent that was not contractually receivable and were classified as a reduction to “Rental income” on the Consolidated Statements of Operations. The Company estimates that it incurred an additional $3.4 million of business interruption losses for the nine months endedSeptember 30, 2013. As noted, the Company settled the Hurricane Sandy claims as of September 30, 2013.retentions.
During the three and nine months endedSeptember 30, 2013, the Company received approximately $3.8 million and $6.8 million, respectively, of insurance proceeds for recovery of business interruption losses. Of the $6.8 million of insurance proceeds received during the nine months endedSeptember 30, 2013, $4.2 million related to recovery of business interruption losses incurred in 2012 and the remaining $2.6 million related to recovery of business interruption losses incurred in 2013. The $6.8 million of recovery was classified as “Hurricane-related (recoveries)/charges, net” on the Consolidated Statements of Operations as of September 30, 2013.

General and Administrative

For the three months ended September 30, 2013, generalthe Company recorded $6.5 million and administrative expense increased 13.4% or $1.3$12.3 million, as compared respectively, of insurance recoveries related to the comparable periods in 2012. The increase in general and administrative expense for the three months ended September 30, 2013 was primarily due to an increase in stock based compensation expense for the long-term incentive planbusiness interruption and other compensation expense partially offset by acquisition costs incurredlosses associated with Hurricane Sandy. These recoveries were included in 2012. ForCasualty-related (recoveries)/charges, net on the UDR Consolidated Statements of Operations.

During the nine months ended September 30, 2013, general and administrative expense decreased 7.3% or $2.4 million as compared to the comparable periods2014, we recorded a $500,000 casualty-related loss for one property damaged during an earthquake in 2012. The decrease was primarily due to acquisitions costs incurred in 2012.California.

Interest Expense

For the three months ended September 30, 20132014, interest expense decreasedincreased by 2.8%6.9% or $906,000$2.1 million as compared to the comparable period in 2012.2013. The decreaseincrease in interest expense for the three months ended September 30, 20132014 was primarily due to less interest capitalized in 2014 as a result of completed developments, partially offset by a decrease in interest expense due to replacement of debt at lower debt balances and lower interest rates.
For the nine months ended September 30, 20132014, interest expense decreasedincreased by 14.3%5.3% or $15.4$4.9 million as compared to the comparable period in 2012.2013. The increase in interest expense for the three months ended September 30, 2014 was primarily due to less interest capitalized in 2014 as a result of completed developments, partially offset by a decrease in interest expense fordue to replacement of debt at lower rates.

Gain/(Loss) on Sale of Real Estate Owned, Net of Tax
During the three months ended September 30, 2014, the Company recognized gains (net of tax) of $31.3 million on the sale of three communities with a total of 963 apartment homes.
During the nine months ended September 30, 20132014 was primarily due to lower debt balances and lower interest rates and higher capitalized interest from development and redevelopment activity.

Net Gain/(Loss), the Company recognized gains (net of tax) of $82.3 million on the Salesale of Depreciable Properties, Netsix communities with a total of Tax1,904 apartment homes and an adjacent parcel of land.
Due to the Company’s adoption ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, effective January 1, 2014, these gains (net of tax) are included in Gain/(loss) on sale of real estate owned, net of tax on the UDR Consolidated Statements of Operations. See Note 2, Significant Accounting Policies, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional information.
There were no sales during gains recognized on the three and nine months endedSeptember 30, 2013 that met the criteria to be classified as held for sale and reported as discontinued operations. Forof real estate during the three and nine months ended September 30, 2012, we recognized a net gain/(loss) on the sale of communities of $(1.1) million and $251.4 million, respectively. The gain/(loss) is included in Income/(loss) from discontinued operations, net of tax on the Consolidated Statements of Operations. Changes in the level of gains recognized from period to period reflect the changing level of our divestiture activity from period to period as well as the extent of gains related to specific properties sold.2013.

Inflation
We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results through wage pressures, utilities and material costs, the majority of our leases are for a term of fourteen months or less, which generally enables us to compensate for any inflationary effects by increasing rents on our apartment homes. Although an extreme escalation in energy and food 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 and nine months ended September 30, 20132014.
Off-Balance Sheet ArrangementsFinancing Activities
For the nine months ended September 30, 2014, our net cash provided by/(used in) financing activities was $3.3 million compared to $(133.8) million for the comparable period of 2013.
The following significant financing activities occurred during the nine months endedSeptember 30, 2014:
repaid $44.4 million of secured debt, including $41.5 million of mortgage payments and the repayment of $2.9 million of credit facilities;
repaid $184.0 million of 5.13% unsecured medium-term notes due January 2014;
repaid $128.5 million of 5.50% unsecured medium-term notes due April 2014;
issued $300 million of 3.750% senior unsecured medium-term notes due July 1, 2024;
sold 3,410,433 shares of common stock for aggregate gross proceeds of approximately $102.1 million at a weighted average price per share of $29.95;
net borrowings of $160.0 million under the Company’s $900 million unsecured revolving credit facility; and
paid distributions of $189.7 million to our common stockholders.

Credit Facilities
As of September 30, 2014, the Company has secured credit facilities with Fannie Mae with an aggregate commitment of $835.2 million with $835.2 million outstanding. The Fannie Mae credit facilities are for terms of seven to ten years and bear interest at floating and fixed rates. The Company has $623.8 million of the funded balance fixed at a weighted average interest rate of 4.99%, and the remaining balance of $211.4 million on these facilities has a weighted average variable rate of 1.58% at September 30, 2014.

As of September 30, 2014, the Company has a $900 million unsecured revolving credit facility that matures in December 2017. The credit facility has a six month extension option and contains an accordion feature that allows us to increase the facility to $1.45 billion. Based on the Company’s current credit rating, the credit facility carries an interest rate equal to LIBOR plus a spread of 100 basis points and a facility fee of 15 basis points. As of September 30, 2014, we had $160.0 million outstanding borrowings under the credit facility, leaving $740.0 million of unused capacity (excluding $2.2 million of letters of credit at September 30, 2014).
The Fannie Mae credit facilities and the bank unsecured revolving credit facility are subject to customary financial covenants and limitations.
Derivative Instruments
As part of UDR’s overall interest rate risk management strategy, we use derivatives as a means to fix the interest rates of variable rate debt obligations or to hedge anticipated financing transactions. UDR’s derivative transactions used for interest rate risk management include interest rate swaps with indexes that relate to the pricing of specific debt instruments of UDR. We believe that we have appropriately controlled our interest rate risk through the use of derivative instruments to minimize any unintended effect on consolidated earnings.Derivative contracts did not have a material impact on the results of operations during the three and nine months endedSeptember 30, 2014 (see Note 10, Derivatives and Hedging Activity, in the Notes to the UDR Consolidated Financial Statements included in this Report).
Interest Rate Risk

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We are exposed to interest rate risk associated with variable rate notes payable and maturing debt that has to be refinanced. We do not have any off-balance sheet arrangementshold 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 $532.4 million in variable rate debt that have, oris not subject to interest rate swap contracts as of September 30, 2014. If market interest rates for variable rate debt increased by 100 basis points, our interest expense for the nine months ended September 30, 2014 would increase by $5.4 million based on the average balance outstanding during the period.
These amounts are reasonably likely to have, a current or future effectdetermined 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 condition,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 10, Derivatives and Hedging Activities, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional discussion of derivate instruments.
Funds from Operations, Funds from Operations as Adjusted, and Adjusted Funds from Operations

Funds from Operations

Funds from operations (“FFO”) is defined as net income (computed in accordance with GAAP), excluding impairment write-downs of depreciable real estate or of investments in non-consolidated investees that are driven by measurable decreases in the fair value of depreciable real estate held by the investee, gains or losses from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for 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 is comparable to FFO, diluted in the accompanying reconciliation. 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, OP Units, unvested restricted stock, stock options, and the shares of Series E Cumulative Convertible Preferred Stock are dilutive; therefore, they are included in the diluted share count.

Activities of our taxable REIT subsidiary (“TRS”), RE3,include development and land entitlement. From time to time, we develop and subsequently sell a TRS property which results in a short-term use of funds that produces a profit that differs from the traditional long-term investment in real estate for REITs. We believe that the inclusion of these TRS gains in FFO is consistent with the standards established by NAREIT as the short-term investment is incidental to our main business. TRS gains on sales, net of taxes, are defined as net sales proceeds less a tax provision and the gross investment basis of the asset before accumulated depreciation.

We consider FFO a useful metric for investors as we use FFO in evaluating property acquisitions and our operating performance, and believe that FFO should be considered along with, but not as an alternative to, net income and cash flow as a measure of our 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 is defined as FFO excluding the impact of acquisition-related costs and other non-comparable items including, but not limited to, prepayment costs/benefits associated with early debt retirement, gains on sales of marketable securities and TRS property, deferred tax valuation allowance increases and decreases, storm-related expenses and recoveries, severance costs and legal costs. Management believes that FFO as Adjusted 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.

FFO as Adjusted 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 attributable to UDR, Inc. is the most directly comparable GAAP financial measure to FFO as Adjusted. However, other REITs may use different methodologies for calculating FFO as Adjusted or

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similar FFO measures and, accordingly, our FFO as Adjusted may not always be comparable to FFO as Adjusted or similar FFO measures calculated by other REITs. FFO as Adjusted 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, or “AFFO”, is a non-GAAP financial measure that management uses as a supplemental measure of our performance. AFFO is defined as FFO as Adjusted less recurring capital expenditures 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 FFO as Adjusted.

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 attributable to UDR, Inc. 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 (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, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.


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The following table outlines our reconciliation of Net Income/(Loss) Attributable to UDR, Inc. to FFO, FFO as Adjusted, and AFFO for the three and nine months endedSeptember 30, 2014 and 2013 (dollars in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2014 2013 2014 2013
Net income/(loss) attributable to UDR, Inc.$40,549
 $3,188
 $88,917
 8,112
Distributions to preferred stockholders(931) (931) (2,793) (2,793)
Real estate depreciation and amortization, including discontinued operations89,339
 84,266
 266,748
 252,839
Net income/(loss) attributable to noncontrolling interests1,443
 47
 3,173
 168
Real estate depreciation and amortization on unconsolidated joint ventures10,398
 10,514
 29,926
 25,462
Net (gain)/loss on the sale of depreciable property, excluding TRS(31,377) —
 (81,260) —
Funds from operations (“FFO”), basic$109,421
 $97,084
 $304,711
 $283,788
Distribution to preferred stockholders — Series E (Convertible)931
 931
 2,793
 2,793
FFO, diluted$110,352
 $98,015
 $307,504
 $286,581
FFO per common share, basic$0.42
 $0.37
 $1.17
 $1.09
FFO per common share, diluted$0.41
 $0.37
 $1.16
 $1.09
Weighted average number of common shares and OP Units outstanding — basic260,844
 259,308
 259,975
 259,305
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted265,957
 263,813
 264,985
 263,818
        
Impact of adjustments to FFO:       
   Acquisition-related costs (including joint ventures)$164
 $—
 $266
 $—
   Joint venture financing and acquisition fee(88) (36) (88) (254)
Costs/(benefit) associated with debt extinguishment and tender offer—
 —
 192
 178
   Gains on sale of TRS property and marketable securities(8,411) —
 (9,531) —
   Casualty-related (recoveries)/charges, net—
 (4,059) 500
 (9,665)
 $(8,335) $(4,095) $(8,661) $(9,741)
        
FFO as Adjusted, diluted$102,017
 $93,920
 $298,843
 $276,840
        
FFO as Adjusted per common share, diluted$0.38
 $0.36
 $1.13
 $1.05
        
Recurring capital expenditures(12,280) (11,989) (29,977) (30,975)
AFFO$89,737
 $81,931
 $268,866
 $245,865
        
AFFO per common share, diluted$0.34
 $0.31
 $1.01
 $0.93


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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 and nine months endedSeptember 30, 2014 and 2013(shares in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2014 2013 2014 2013
Weighted average number of common shares and OP Units outstanding — basic260,844
 259,308
 259,975
 259,305
Weighted average number of OP Units outstanding(9,189) (9,323) (9,274) (9,343)
Weighted average number of common shares outstanding — basic per the Consolidated Statements of Operations251,655
 249,985
 250,701
 249,962
        
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted265,957
 263,813
 264,985
 263,818
Weighted average number of OP Units outstanding(9,189) (9,323) (9,274) (9,343)
Weighted average number of Series E preferred shares outstanding(3,036) (3,036) (3,036) (3,036)
Weighted average number of common shares outstanding — diluted per the Consolidated Statements of Operations253,732
 251,454
 252,675
 251,439
A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands):
 Nine Months Ended September 30,
 2014 2013
Net cash provided by/(used in) operating activities$281,978
 $261,297
Net cash provided by/(used in) investing activities$(300,912) $(128,500)
Net cash provided by/(used in) financing activities$3,290
 $(133,763)
Results of Operations
The following discussion explains the changes in financial condition, revenue or expenses, results of operations liquidity, capital expenditures or capital resources that are material.presented in our Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and 2013, and includes the results of both continuing and discontinued operations for the periods presented.
Net Income/(Loss) Attributable to Common Stockholders
Net income attributable to common stockholders was $39.6 million ($0.16 per diluted share) for the three months ended September 30, 2014 as compared to $2.3 million ($0.01 per diluted share) for the comparable period in the prior year. The increase in net income attributable to common stockholders for the three months ended September 30, 2014 resulted primarily from the following items, which are discussed in further detail elsewhere within this Report:

gains (net of tax) of $31.3 million on the sale of three communities and one operating property during the three months ended September 30, 2014;and

an increase in total property NOI primarily due to higher occupancy and higher revenue per occupied home, and NOI from the homes placed in service related to development and redevelopment projects completed in 2013 and 2014, partially offset by the disposition of communities in 2013 and 2014.
This was partially offset by:
an increase in depreciation and amortization expense primarily from the homes placed in service related to development and redevelopment projects completed in 2013 and 2014, partially offset by a decrease from sold communities and fully depreciated assets; and
hurricane-related recoveries in 2013 resulting from the effects of Hurricane Sandy on three of our New York City communities in 2012 (see Note 3, Real Estate Owned, in the Notes to the UDR Consolidated Financial Statements for more details);

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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 pursuantNet income attributable to common stockholders was $86.1 million ($0.34 per diluted share) for the provisions of the Delaware Revised Uniform Limited Partnership Act (as amended from time to time, or any successor to such statute, the “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. Atnine months ended September 30, 2013, the Operating Partnership’s real estate portfolio included 702014 communities locatedas compared to $5.3 million ($0.02 per diluted share) for the comparable period in the prior year. The increase in net income attributable to common stockholders for the nine months ended nineSeptember 30, 2014 states andresulted primarily from the Districtfollowing items, which are discussed in further detail elsewhere within this Report:

gains (net of Columbiatax) of $82.3 million on the sale of six communities with a total of 1,904 apartment homes and an adjacent parcel of land during the nine months ended September 30, 2014; and

an increase in total property NOI primarily due to higher occupancy and higher revenue per occupied home, and NOI from the homes placed in service related to development and redevelopment projects completed in 2013 and 2014, partially offset by the disposition of communities in 2013 and 2014.
This was partially offset by:
an increase in depreciation and amortization expense primarily from the homes placed in service related to development and redevelopment projects completed in 2013 and 2014, partially offset by a decrease from sold communities and fully depreciated assets; and
21,685hurricane-related recoveries in 2013 resulting from the effects of Hurricane Sandy on three of our New York City communities in 2012 (see Note 3, Real Estate Owned, in the Notes to the UDR Consolidated Financial Statements for more details).
Apartment Community Operations
Our net income results are primarily from NOI generated from the operation of our apartment homes.communities.
The following table summarizes the operating performance of our total property NOI (which includes discontinued operations) for each of the periods presented (dollars in thousands):
 Three Months Ended September 30, (a)   Nine Months Ended September 30, (b)  
 2014 2013 
% Change
 2014 2013 
% Change
Same-Store Communities:           
Same-store rental income$170,544
 $163,309
 4.4 % $477,289
 $457,037
 4.4 %
Same-store operating expense (c)(52,252) (50,760) 2.9 % (145,301) (141,864) 2.4 %
Same-store NOI118,292
 112,549
 5.1 % 331,988
 315,173
 5.3 %
            
Non-Mature Communities/Other NOI:           
Acquired communities NOI169
 —
 —
 12,383
 11,060
 12.0 %
Sold or held for disposition communities NOI310
 5,380
 (94.2)% 6,688
 18,432
 (63.7)%
Developed communities NOI7,955
 1,755
 353.3 % 19,039
 2,523
 654.6 %
Redeveloped communities NOI9,603
 7,111
 35.0 % 33,100
 26,380
 25.5 %
Commercial NOI and other3,485
 1,848
 88.6 % 9,132
 9,044
 1.0 %
Total non-mature communities/other NOI21,522
 16,094
 33.7 % 80,342
 67,439
 19.1 %
            
Total Property NOI$139,814
 $128,643
 8.7 % $412,330
 $382,612
 7.8 %

(a)
Same-Store Community population consisted of 36,268 apartment homes.
(b)
Same-Store Community population consisted of 35,177 apartment homes.
(c)Excludes depreciation, amortization, and property management expenses.


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AsThe following table is our reconciliation of total property NOI to Net Income/(Loss) Attributable to UDR, Inc. as reflected, for both continuing and discontinued operations, for each of the periods presented (dollars in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2014 2013 2014 2013
Total property NOI$139,814
 $128,643
 $412,330
 $382,612
Joint venture management and other fees3,165
 3,207
 9,599
 9,347
Property management(5,599) (5,236) (16,474) (15,491)
Other operating expenses(2,012) (1,787) (6,118) (5,237)
Real estate depreciation and amortization(89,339) (84,266) (266,748) (252,839)
General and administrative(11,554) (11,364) (36,078) (30,706)
Casualty-related recoveries/(charges), net—
 6,460
 (500) 12,253
Other depreciation and amortization(1,385) (1,176) (3,658) (3,460)
Income/(loss) from unconsolidated entities(939) (3,794) (4,932) (6,081)
Interest expense(33,087) (30,939) (97,662) (92,723)
Interest and other income/(expense), net9,061
 829
 11,902
 3,291
Tax benefit/(expense), net2,490
 2,658
 8,049
 7,314
Gain/(loss) on sale of real estate owned, net of tax31,377
 —
 82,380
 —
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership(1,447) (84) (3,171) (198)
Net (income)/loss attributable to noncontrolling interests4
 37
 (2) 30
Net income/(loss) attributable to UDR, Inc.$40,549
 $3,188
 $88,917
 $8,112
Same-Store Communities
Our Same-Store Community properties (those acquired, developed, and stabilized prior to April 1, 2013 for quarter-to-date comparison and January 1, 2013 for year-to-date comparison and held as of September 30, 20132014, UDR owned 110,883 units) consisted of 36,268 and 35,177 apartment homes and provided 85% and 81% of our general limited partnership interests and 174,846,997 units of our limited partnership interests (the “OP Units”), or approximately 94.9% 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 Report to the Operating Partnership or “we,” “us” or “our” refer to UDR, L.P. together with its consolidated subsidiaries. We refer to our General Partner together with its consolidated subsidiaries (including us) and the General Partner’s consolidated joint ventures as “UDR” or the “General Partner.”
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 September 2003. At September 30, 2013, the General Partner’s consolidated real estate portfolio included 141 communities located in 10 states and the District of Columbia with a total of 41,420 apartment homes. In addition, the General Partner had an ownership interest in 37 communities with 10,168 completed apartment homes through unconsolidated operating communities. The Operating Partnership's same-store community apartment home populationNOI for the three and nine months ended September 30, 20132014, respectively.
Three Months Ended September 30, 2014 vs. Three Months Ended September 30, 2013
NOI for our Same-Store Community properties increased 5.1% or $5.7 million for the three months ended September 30, 2014 compared to the same period in 2013. The increase in property NOI was 20,188attributable to a 4.4% or $7.2 million increase in property rental income, which was partially offset by a 2.9% or $1.5 million increase in operating expenses. The increase in property income was primarily driven by a 3.4% or $5.4 million increase in rental rates, a 4.7% or $575,000 increase in reimbursement and 19,530, respectively.fee income and a 17.1% or $1.1 million decrease in vacancy loss and bad debt. Physical occupancy increased 0.6% to 96.8% and total monthly income per occupied home increased 3.8% to $1,619.
The increase in operating expenses was primarily driven by a 6.2% or $774,000 increase in personnel costs, 1.3% or $217,000 increase in real estate taxes and a 20.3% or $451,000 increase in insurance expenses.
As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 69.4% for the three months ended September 30, 2014 as compared to 68.9% for the comparable period in 2013.
Nine Months Ended September 30, 2014 vs. Nine Months Ended September 30, 2013
NOI for our Same-Store Community properties increased 5.3% or $16.8 million for the nine months ended September 30, 2014 compared to the same period in 2013. The increase in property NOI was attributable to a 4.4% or $20.3 million increase in property rental income, which was partially offset by a 2.4% or $3.4 million increase in operating expenses. The increase in property income was primarily driven by a 3.4% or $14.9 million increase in rental rates, a 5.5% or $1.9 million increase in reimbursement and fee income and an 14.2% or $2.5 million decrease in vacancy loss and bad debt. Physical occupancy increased 0.5% to 96.6% and total monthly income per occupied home increased 3.8% to $1,560.

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The increase in operating expenses was primarily driven by a 2.2% or $1.0 million increase in real estate taxes, a 19.6% or $1.2 million increase in insurance expense, and a 1.5% or $518,000 increase in personnel costs.
The following table summarizes our market informationAs a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by major geographic markets as of property rental income) increased to 69.6% for the nine months ended September 30, 20132014 as compared to 69.0% for the comparable period in 2013.
Non-Mature Communities/Other
UDR’s .Non-Mature Communities/Other
    As of September 30, 2013 For the Three Months Ended September 30, 2013 For the Nine Months Ended September 30, 2013
Same-Store Communities Number of
Apartment Communities		 Number of
Apartment Homes		 Percentage of Total
Carrying Value		 Total Carrying
Value (in thousands)		 Average
Physical Occupancy		 Monthly Income
per Occupied Home (a)		 Average
Physical Occupancy		 Monthly Income
per Occupied Home (a)
West Region                
Orange County, CA 8
 2,935
 12.0% $516,518
 94.6% $1,649
 94.8% $1,634
San Francisco, CA 9
 2,185
 12.9% 555,625
 96.7% 2,496
 96.5% 2,462
Seattle, WA 5
 932
 4.9% 210,661
 97.3% 1,479
 97.1% 1,440
Los Angeles, CA 3
 463
 2.9% 126,536
 94.5% 1,964
 95.0% 1,933
Monterey Peninsula, CA 7
 1,565
 3.7% 158,788
 96.8% 1,173
 93.7% 1,155
Inland Empire, CA 1
 414
 1.6% 70,073
 95.7% 1,562
 94.7% 1,548
Portland, OR 3
 716
 1.7% 72,565
 97.0% 1,116
 96.8% 1,094
Sacramento, CA 2
 914
 1.6% 70,598
 95.6% 930
 93.0% 914
San Diego, CA 2
 366
 1.3% 57,324
 94.7% 1,549
 95.0% 1,517
Mid-Atlantic Region                
Metropolitan D.C. 7
 2,378
 12.9% 555,803
 96.2% 1,907
 96.4% 1,896
Baltimore, MD 5
 994
 3.5% 149,304
 87.9% 1,533
 87.8% 1,525
Northeast Region                
New York, NY 1
 493
 6.2% 266,643
 97.7% 3,468
 96.9% 3,422
Boston, MA 2
 833
 4.1% 175,943
 95.9% 1,790
 96.3% 1,759
Southeast Region                
Tampa, FL 3
 1,154
 2.7% 115,175
 95.9% 1,155
 96.3% 1,142
Nashville, TN 6
 1,612
 3.1% 131,865
 97.0% 987
 97.0% 971
Other Florida 1
 636
 1.8% 79,599
 95.2% 1,309
 95.4% 1,298
Southwest Region                
Dallas, TX 2
 1,348
 4.3% 186,453
 95.5% 1,386
 95.6% 1,358
Austin, TX 1
 250
 0.9% 39,275
 97.5% 1,578
 —
 —
Total/Average Same-Store Communities 68
 20,188
 82.1% 3,538,748
 95.8% $1,614
 95.3% $1,577
Non Matures, Commercial Properties & Other 2
 1,472
 14.6% 626,341
        
Real Estate Under Development (b) —
 25
 3.3% 140,993
        
Total Real Estate Owned 70
 21,685
 100.0% 4,306,082
        
Total Accumulated Depreciation       (1,232,520)        
Total Real Estate Owned, Net of Accumulated Depreciation       $3,073,562
        

(a)Monthly Income per Occupied Home represents total monthly revenues divided by the product of occupancy and the number of mature apartment homes.
(b)As of September 30, 2013 the Operating Partnership was developing two wholly-owned communities with 652 homes, 25 of which were completed.

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We report represent those communities that do not meet the criteria to be included in two segments: Same-Store Communities and Non-Mature Communities/Other.
Our Same-Store Communities segment represents those communities, including, but not limited to, recently acquired, developed and stabilized prior to July 1, 2012 for quarter-to-date comparison, and January 1, 2012 for year-to-date comparison, and held as of September 30, 2013. 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 were acquired or developed in 2011, 2012 or 2013, sold properties, redevelopment properties, consolidated joint ventureredeveloped properties, and the non-apartment components of mixed use properties.
Liquidity and Capital ResourcesThree Months Ended September 30, 2014 vs. Three Months Ended September 30, 2013
Liquidity isThe remaining 15% or $21.5 million of our total NOI during the ability to meet present and future financial obligations either through operating cash flows,three months ended September 30, 2014 was generated from our Non-Mature Communities/Other. NOI from Non-Mature Communities/Other increased by 33.7% or $5.4 million for the sale of properties, and the issuance of debt. Both the coordination of asset and liability maturities and effective capital management are importantthree months ended September 30, 2014 as compared to the maintenancesame period in 2013. The increase was primarily driven by an increase in NOI of liquidity. The Operating Partnership’s primary source$6.2 million and $2.5 million from developed and redeveloped communities, respectively, completed in 2013 and 2014 and an increase of liquidity is cash flow$1.6 million from operations as determinedcommercial and other communities, which was partially offset by rental rates, occupancy levels,a decrease in NOI of $5.1 million from communities sold in 2013 and operating expenses related to our portfolio of apartment homes and borrowings allocated to us under the General Partner’s credit agreements. The General Partner will routinely use its unsecured credit facility 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 repositioned our portfolio.
We expect to meet our short-term liquidity requirements generally through net cash provided by operations and borrowings allocated to 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 borrowings and the disposition of properties. We believe that our net cash provided by 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, and borrowings allocated to us under the General Partner’s credit agreements.
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 allocated to us under our General Partner’s credit agreements, and to a lesser extent, from cash flows provided by operating activities.2014.
As of Nine Months Ended September 30, 2014 vs. Nine Months Ended September 30, 2013
The remaining 19% or $80.3 million of our total NOI during the Operating Partnership had approximatelynine months ended $2.2 millionSeptember 30, 2014 was generated from our Non-Mature Communities/Other. NOI from Non-Mature Communities/Other increased by 19.1% or $12.9 million for the nine months ended September 30, 2014 as compared to the same period in 2013. The increase was primarily driven by an increase in NOI of principal payments on secured debt$16.5 million and $6.7 million from development and redevelopment communities, respectively, completed in the remainder of 2013 and $8.9 million2014 and an increase of $88,000 from commercial and other communities, which was partially offset by a decrease in 2014. We anticipate that we will repay that debt with operating cash flows or proceedsNOI of $11.7 million from borrowings allocated to us under our General Partner’s credit agreements. The repayment of debt will be recorded as an offset to the “Payable/(receivable) due to/(from) General Partner.”communities sold in 2013 and 2014.
Critical Accounting PoliciesReal Estate Depreciation and Estimates
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.Amortization
Our other 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 current Report on Form 10-K, filed with the SEC on February 27, 2013. There have been no significant changes in our critical accounting policies from those reported in UDR's Form 10-K filed with the SEC on February 27, 2013. 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 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 forFor the ninethree months ended September 30, 20132014, real estate depreciation and amortization on both continuing and discontinued operations increased 6.0% or $5.1 million as compared to the comparable period in 2013. The increase in depreciation and amortization for the three months ended September 30, 2014 was primarily due to homes delivered from our development and redevelopment communities, partially offset by a decrease from sold communities and fully depreciated assets.
During the nine months ended 2012September 30, 2014., real estate depreciation and amortization on both continuing and discontinued operations increased 5.5% or $13.9 million as compared to the comparable period in 2013. The increase in depreciation and amortization for the nine months ended September 30, 2014 was primarily due to homes delivered from our development and redevelopment communities, partially offset by a decrease from sold communities and fully depreciated assets.

General and Administrative

For the three months endedSeptember 30, 2014, general and administrative expense increased 1.7% or $190,000 as compared to the comparable period in 2013. The increase in general and administrative expense for the three months endedSeptember 30, 2014 was primarily due to salary and benefit increases.

For the nine months ended September 30, 2014, general and administrative expense increased 17.5% or $5.4 million as compared to the comparable period in 2013. The increase was primarily due to an increase in stock-based compensation expense for the long-term incentive plan and salary and benefit increases.

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Operating Activities
Casualty-Related (Recoveries)/Charges, Net

In October 2012, Hurricane Sandy hit the East Coast, affecting three of the Company’s operating communities located in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Company had insurance policies that provided coverage for property damage and business interruption, subject to applicable retentions.
During the three and nine months ended September 30, 2013, the Company recorded $6.5 million and $12.3 million, respectively, of insurance recoveries related to the business interruption and other losses associated with Hurricane Sandy. These recoveries were included in Casualty-related (recoveries)/charges, net on the UDR Consolidated Statements of Operations.

During the nine months ended September 30, 2014, we recorded a $500,000 casualty-related loss for one property damaged during an earthquake in California.

Interest Expense
For the ninethree months endedSeptember 30, 20132014, net cash flow providedinterest expense increased by operating activities was $164.7 6.9% or $2.1 million as compared to$154.4 million for the comparable period in 2012.2013. The increase in net cash flow from operating activitiesinterest expense for the three months ended September 30, 2014 was primarily due to improved income from continuing operations.less interest capitalized in 2014 as a result of completed developments, partially offset by a decrease in interest expense due to replacement of debt at lower rates.
Investing Activities
For the nine months endedSeptember 30, 20132014, net cash provided by/(used in) investing activities was $(104.7)interest expense increased by 5.3% or $4.9 million as compared to$34.4 million for the comparable period in 2012.2013. The changeincrease in interest expense for the three months ended September 30, 2014 was primarily due to the increaseless interest capitalized in development activities and2014 as a result of completed developments, partially offset by a decrease in dispositions. Changes in the levelinterest expense due to replacement of investment activities from period to period reflect our strategy as it relates to development activities, capital expenditures, and dispositions.debt at lower rates.

Gain/(Loss) on Sale of Real Estate Under Development and RedevelopmentOwned, Net of Tax
AtDuring the three months ended September 30, 20132014, the Operating Partnership was developing two wholly-ownedCompany recognized gains (net of tax) of $31.3 million on the sale of three communities totaling 652 homes with a budgettotal of $219.1 million in which we had a carrying value of $141.0 million. The estimated completion date for these communities will be through the third quarter of 2014.963 apartment homes.
AtDuring the nine months ended September 30, 20132014, the Operating Partnership is redeveloping one wholly-owned communityCompany recognized gains (net of tax) of $82.3 million on the sale of six communities with 964a total of 1,904 apartment homes and an adjacent parcel of which 511land.
Due to the Company’s adoption ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, effective January 1, 2014, these gains (net of tax) are included in Gain/(loss) on sale of real estate owned, net of tax on the UDR Consolidated Statements of Operations. See Note 2, Significant Accounting Policies, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional information.
There were no gains recognized on the sale of real estate during the three and nine months ended September 30, 2013.

Inflation
We believe that the direct effects of inflation on our operations have been completed. The estimated completion dateimmaterial. While the impact of inflation primarily impacts our results through wage pressures, utilities and material costs, the majority of our leases are for a term of fourteen months or less, which generally enables us to compensate for any inflationary effects by increasing rents on our apartment homes. Although an extreme escalation in energy and food costs could have a negative impact on our residents and their ability to absorb rent increases, we do not believe this community will be throughhas had a material impact on our results for the second quarter of 2014.three and nine months ended September 30, 2014.
Financing Activities
For the nine months ended September 30, 2014, our net cash provided by/(used in) financing activities was $3.3 million compared to $(133.8) million for the comparable period of 2013.
ForThe following significant financing activities occurred during the nine months ended September 30, 20132014, our net cash provided by/(:used in) financing activities was $(60.4)
repaid $44.4 million compared to $(187.6) million for the comparable period of2012. The decrease in cash used in financing activities was primarily due to a decrease in payments on secured debt, including $41.5 million of mortgage payments and the repayment of $2.9 million of credit facilities;
repaid $184.0 million of 5.13% unsecured medium-term notes due January 2014;
repaid $128.5 million of 5.50% unsecured medium-term notes due April 2014;
issued $300 million of 3.750% senior unsecured medium-term notes due July 1, 2024;
sold 3,410,433 shares of common stock for aggregate gross proceeds of approximately $102.1 million at a decrease in advances fromweighted average price per share of $29.95;
net borrowings of $160.0 million under the General Partner,Company’s $900 million unsecured revolving credit facility; and a decrease in proceeds from the issuance
paid distributions of secured debt.$189.7 million to our common stockholders.

Credit Facilities
As of September 30, 2013,2014, the General Partner hadCompany has secured credit facilities with Fannie Mae with an aggregate commitment of $927.7$835.2 million with $838.9$835.2 million outstanding. The Fannie Mae credit facilities are for terms of seven to ten years and bear interest at floating and fixed rates. At September 30, 2013, $627.5The Company has $623.8 million of the funded balance was fixed at a weighted average interest rate of 4.99%, and the remaining balance of $211.4 million on these facilities was athas a weighted average variable rate of 1.61%. During the three months ended June 30, 2013, the General Partner reallocated an additional $13.7 million of the Fannie Mae credit facilities to the Operating Partnership. At1.58% at September 30, 20132014, there was a total of $521.1 million of these credit facilities allocated to the Operating Partnership based on the ownership of the assets securing the debt..

The Operating Partnership is a guarantor on the General Partner’s unsecured revolving credit facility with an aggregate borrowing capacity of $900 million, $250 million of term notes due June 2018, $100 million of term notes due June 2018, $300 million of medium-term notes due June 2018, $300 million of medium-term notes due October 2020, and $400 million of medium-term notes due January 2022. As of September 30, 20132014, there was nothe Company has a $900 million unsecured revolving credit facility that matures in December 2017. The credit facility has a six month extension option and contains an accordion feature that allows us to increase the facility to $1.45 billion. Based on the Company’s current credit rating, the credit facility carries an interest rate equal to LIBOR plus a spread of 100 basis points and a facility fee of 15 basis points. As of September 30, 2014, we had $160.0 million outstanding borrowings under the unsecured credit facility. As of December 31, 2012, the outstanding balance under the unsecured credit facility, wasleaving $740.0 million of unused capacity (excluding $2.2 million of letters of credit at $76.0 millionSeptember 30, 2014).
The Fannie Mae credit facilities and the bank unsecured revolving credit facility are subject to customary financial covenants and limitations.
Derivative Instruments
As part of our General Partner'sUDR’s overall interest rate risk management strategy, our General Partner useswe use derivatives as a means to fix the interest rates of variable rate debt obligations or to hedge anticipated financing transactions. Our General Partner'sUDR’s derivative transactions used for interest rate risk management include interest rate swaps with indexes that relate to the pricing of specific debt instruments of our General Partner that are allocated to the Operating Partnership. The General Partner believesUDR. We believe that we have appropriately controlled our interest rate risk through the use of derivative instruments (allocated to the Operating Partnership based on the General Partner's underlying debt instruments allocated to the Operating Partnership) to minimize any unintended effect on consolidated earnings.Derivative contracts did not have a material impact on the results of operations during the three and nine months ended September 30, 20132014 (see Note 8,10, Derivatives and Hedging Activity, in the Notes to the UDR Consolidated Financial Statements of United Dominion Realty, L.P. included in this Report).

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Interest Rate Risk

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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 $169.1$532.4 million in variable rate debt that is not subject to interest rate swap contracts as of September 30, 2013.2014. If market interest rates for variable rate debt increased by 100 basis points, our interest expense for the nine months ended September 30, 2014 would increase by $1.7$5.4 million based on the average balance at September 30, 2013.outstanding during the period.
These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. These analyses doThis 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 General PartnerCompany also utilizes derivative financial instruments allocated to the Operating Partnership to manage interest rate risk and generally designates these financial instruments as cash flow hedges. See Note 8,10, Derivatives and Hedging Activities, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional discussion of derivate instruments.
Funds from Operations, Funds from Operations as Adjusted, and Adjusted Funds from Operations

Funds from Operations

Funds from operations (“FFO”) is defined as net income (computed in accordance with GAAP), excluding impairment write-downs of depreciable real estate or of investments in non-consolidated investees that are driven by measurable decreases in the fair value of depreciable real estate held by the investee, gains or losses from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for 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 is comparable to FFO, diluted in the accompanying reconciliation. 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, OP Units, unvested restricted stock, stock options, and the shares of Series E Cumulative Convertible Preferred Stock are dilutive; therefore, they are included in the diluted share count.

Activities of our taxable REIT subsidiary (“TRS”), RE3,include development and land entitlement. From time to time, we develop and subsequently sell a TRS property which results in a short-term use of funds that produces a profit that differs from the traditional long-term investment in real estate for REITs. We believe that the inclusion of these TRS gains in FFO is consistent with the standards established by NAREIT as the short-term investment is incidental to our main business. TRS gains on sales, net of taxes, are defined as net sales proceeds less a tax provision and the gross investment basis of the asset before accumulated depreciation.

We consider FFO a useful metric for investors as we use FFO in evaluating property acquisitions and our operating performance, and believe that FFO should be considered along with, but not as an alternative to, net income and cash flow as a measure of our 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 is defined as FFO excluding the impact of acquisition-related costs and other non-comparable items including, but not limited to, prepayment costs/benefits associated with early debt retirement, gains on sales of marketable securities and TRS property, deferred tax valuation allowance increases and decreases, storm-related expenses and recoveries, severance costs and legal costs. Management believes that FFO as Adjusted 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.

FFO as Adjusted 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 attributable to UDR, Inc. is the most directly comparable GAAP financial measure to FFO as Adjusted. However, other REITs may use different methodologies for calculating FFO as Adjusted or

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similar FFO measures and, accordingly, our FFO as Adjusted may not always be comparable to FFO as Adjusted or similar FFO measures calculated by other REITs. FFO as Adjusted 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, or “AFFO”, is a non-GAAP financial measure that management uses as a supplemental measure of our performance. AFFO is defined as FFO as Adjusted less recurring capital expenditures 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 FFO as Adjusted.

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 attributable to UDR, Inc. 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 (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, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.


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The following table outlines our reconciliation of Net Income/(Loss) Attributable to UDR, Inc. to FFO, FFO as Adjusted, and AFFO for the three and nine months endedSeptember 30, 2014 and 2013 (dollars in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2014 2013 2014 2013
Net income/(loss) attributable to UDR, Inc.$40,549
 $3,188
 $88,917
 8,112
Distributions to preferred stockholders(931) (931) (2,793) (2,793)
Real estate depreciation and amortization, including discontinued operations89,339
 84,266
 266,748
 252,839
Net income/(loss) attributable to noncontrolling interests1,443
 47
 3,173
 168
Real estate depreciation and amortization on unconsolidated joint ventures10,398
 10,514
 29,926
 25,462
Net (gain)/loss on the sale of depreciable property, excluding TRS(31,377) —
 (81,260) —
Funds from operations (“FFO”), basic$109,421
 $97,084
 $304,711
 $283,788
Distribution to preferred stockholders — Series E (Convertible)931
 931
 2,793
 2,793
FFO, diluted$110,352
 $98,015
 $307,504
 $286,581
FFO per common share, basic$0.42
 $0.37
 $1.17
 $1.09
FFO per common share, diluted$0.41
 $0.37
 $1.16
 $1.09
Weighted average number of common shares and OP Units outstanding — basic260,844
 259,308
 259,975
 259,305
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted265,957
 263,813
 264,985
 263,818
        
Impact of adjustments to FFO:       
   Acquisition-related costs (including joint ventures)$164
 $—
 $266
 $—
   Joint venture financing and acquisition fee(88) (36) (88) (254)
Costs/(benefit) associated with debt extinguishment and tender offer—
 —
 192
 178
   Gains on sale of TRS property and marketable securities(8,411) —
 (9,531) —
   Casualty-related (recoveries)/charges, net—
 (4,059) 500
 (9,665)
 $(8,335) $(4,095) $(8,661) $(9,741)
        
FFO as Adjusted, diluted$102,017
 $93,920
 $298,843
 $276,840
        
FFO as Adjusted per common share, diluted$0.38
 $0.36
 $1.13
 $1.05
        
Recurring capital expenditures(12,280) (11,989) (29,977) (30,975)
AFFO$89,737
 $81,931
 $268,866
 $245,865
        
AFFO per common share, diluted$0.34
 $0.31
 $1.01
 $0.93


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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 and nine months endedSeptember 30, 2014 and 2013(shares in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2014 2013 2014 2013
Weighted average number of common shares and OP Units outstanding — basic260,844
 259,308
 259,975
 259,305
Weighted average number of OP Units outstanding(9,189) (9,323) (9,274) (9,343)
Weighted average number of common shares outstanding — basic per the Consolidated Statements of Operations251,655
 249,985
 250,701
 249,962
        
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted265,957
 263,813
 264,985
 263,818
Weighted average number of OP Units outstanding(9,189) (9,323) (9,274) (9,343)
Weighted average number of Series E preferred shares outstanding(3,036) (3,036) (3,036) (3,036)
Weighted average number of common shares outstanding — diluted per the Consolidated Statements of Operations253,732
 251,454
 252,675
 251,439
A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands):
 Nine Months Ended September 30,
 2014 2013
Net cash provided by/(used in) operating activities$281,978
 $261,297
Net cash provided by/(used in) investing activities$(300,912) $(128,500)
Net cash provided by/(used in) financing activities$3,290
 $(133,763)
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 and nine months ended September 30, 20132014 and 20122013, and includes the results of both continuing and discontinued operations for the periods presented.

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Net Income/(Loss) Attributable to OP UnitholdersCommon Stockholders
Net income/(loss)income attributable to OP unitholderscommon stockholders was $11.0$39.6 million ($0.06 ($0.16 per diluted OP Unit)share) for the three months ended September 30, 20132014 as compared to $85,000 ($0.00$2.3 million ($0.01 per diluted OP Unit)share) for the comparable period in the prior year. The increase in net income attributable to OP unitholderscommon stockholders for the three months ended September 30, 2014 resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:

hurricane-related recoveries in 2013 resulting fromgains (net of tax) of $31.3 million on the effectssale of Hurricane Sandy on two of our New York, New Yorkthree communities in 2012 (see Note 13, Hurricane-Related (Recoveries)/Charges, inand one operating property during the Notes to the Consolidated Financial Statements for more details);three months ended September 30, 2014;and
a decrease in depreciation and amortization expense primarily from the disposition of assets in 2012 partially offset by the depreciation from developed or redeveloped units placed in service in 2012 and 2013; and
an increase in total property NOI primarily due to higher occupancy and higher revenue per occupied home, at our same-store communities.
Net income/(loss) attributable to OP unitholders was $28.9 million ($0.16 per diluted OP Unit) for the nine months ended September 30, 2013 as compared to $44.3 million ($0.24 per diluted OP Unit) for the comparable period in the prior year. The decrease in net income/(loss) attributable to OP unitholders resulted primarilyand NOI from the following items, all of which are discussedhomes placed in further detail elsewhere within this Report:
a decreaseservice related to development and redevelopment projects completed in net gains of $51.1 million on the sale of depreciable property related to2013 and 2014, partially offset by the disposition of four communities in 2012.
2013 and 2014.
This was partially offset by:
a decreasean increase in depreciation and amortization expense primarily from the disposition of assetshomes placed in 2012,service related to development and redevelopment projects completed in 2013 and 2014, partially offset by the depreciationa decrease from developed or redeveloped units placed in service in 2012sold communities and 2013;fully depreciated assets; and
hurricane-related recoveries in 2013 resulting from the effects of Hurricane Sandy on twothree of our New York New YorkCity communities in 2012 (see Note 13,3, Hurricane-Related (Recoveries)/ChargesReal Estate Owned, in the Notes to the UDR Consolidated Financial Statements for more details); and

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Net income attributable to common stockholders was $86.1 million ($0.34 per diluted share) for the nine months ended September 30, 2014 as compared to $5.3 million ($0.02 per diluted share) for the comparable period in the prior year. The increase in net income attributable to common stockholders for the nine months ended September 30, 2014 resulted primarily from the following items, which are discussed in further detail elsewhere within this Report:

gains (net of tax) of $82.3 million on the sale of six communities with a total of 1,904 apartment homes and an adjacent parcel of land during the nine months ended September 30, 2014; and

an increase in total property NOI primarily due to higher occupancy and higher revenue per occupied home, and NOI from the homes placed in service related to development and redevelopment projects completed in 2013 and 2014, partially offset by the disposition of communities in 2013 and 2014.
This was partially offset by:
an increase in depreciation and amortization expense primarily from the homes placed in service related to development and redevelopment projects completed in 2013 and 2014, partially offset by a decrease from sold communities and fully depreciated assets; and
hurricane-related recoveries in interest expense due2013 resulting from the effects of Hurricane Sandy on three of our New York City communities in 2012 (see Note 3, Real Estate Owned, in the Notes to lower debt balances and lower interest rates.the UDR Consolidated Financial Statements for more details).

Apartment Community Operations
Our net income results are primarily from net operating income ("NOI")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 is property management expense which is calculated as 2.75% of property revenue to cover regional supervision and accounting costs related to consolidated property operations, and land rent.

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The following table summarizes the operating performance of our total portfolioproperty NOI (which includes discontinued operations) for each of the periods presented three and nine months ended September 30, 2013 and 2012(dollars in thousands):
Three Months Ended September 30, (a)   Nine Months Ended September 30, (b)  Three Months Ended September 30, (a)   Nine Months Ended September 30, (b)  
2013 2012 % Change 2013 2012 % Change2014 2013 
% Change
 2014 2013 
% Change
Same-Store Communities:                      
Same-store rental income$93,597
 $88,907
 5.3 % $264,079
 $251,013
 5.2 %$170,544
 $163,309
 4.4 % $477,289
 $457,037
 4.4 %
Same-store operating expense (c)(28,676) (27,772) 3.3 % (80,189) (77,826) 3.0 %(52,252) (50,760) 2.9 % (145,301) (141,864) 2.4 %
Same-store NOI64,921
 61,135
 6.2 % 183,890
 173,187
 6.2 %118,292
 112,549
 5.1 % 331,988
 315,173
 5.3 %
                      
Non-Mature Communities/Other NOI:                      
Acquired communities NOI4,039
 3,673
 10.0 % 11,060
 10,520
 5.1 %169
 —
 —
 12,383
 11,060
 12.0 %
Sold communities NOI—
 —
 — % —
 4,503
 (100.0)%
Sold or held for disposition communities NOI310
 5,380
 (94.2)% 6,688
 18,432
 (63.7)%
Developed communities NOI(110) (32) 243.8 % (129) —
 — %7,955
 1,755
 353.3 % 19,039
 2,523
 654.6 %
Redeveloped communities NOI2,342
 2,719
 (13.9)% 13,869
 15,274
 (9.2)%9,603
 7,111
 35.0 % 33,100
 26,380
 25.5 %
Commercial NOI and other800
 2,332
 (65.7)% 5,886
 7,031
 (16.3)%3,485
 1,848
 88.6 % 9,132
 9,044
 1.0 %
Total non-mature communities/other NOI7,071
 8,692
 (18.6)% 30,686
 37,328
 (17.8)%21,522
 16,094
 33.7 % 80,342
 67,439
 19.1 %
                      
Total Property NOI$71,992
 $69,827
 3.1 % $214,576
 $210,515
 1.9 %$139,814
 $128,643
 8.7 % $412,330
 $382,612
 7.8 %

(a)Same-store consists
Same-Store Community population consisted of 20,18836,268 apartment homes.
(b)Same-store consists
Same-Store Community population consisted of 19,53035,177 apartment homes.
(c)Excludes depreciation, amortization, and property management expenses.


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The following table is our reconciliation of total property NOI to net income/(loss) attributableNet Income/(Loss) Attributable to OP unitholdersUDR, Inc. as reflected, for both continuing and discontinued operations, for each of the periods presented (dollars in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2014 2013 2014 2013
Total property NOI$139,814
 $128,643
 $412,330
 $382,612
Joint venture management and other fees3,165
 3,207
 9,599
 9,347
Property management(5,599) (5,236) (16,474) (15,491)
Other operating expenses(2,012) (1,787) (6,118) (5,237)
Real estate depreciation and amortization(89,339) (84,266) (266,748) (252,839)
General and administrative(11,554) (11,364) (36,078) (30,706)
Casualty-related recoveries/(charges), net—
 6,460
 (500) 12,253
Other depreciation and amortization(1,385) (1,176) (3,658) (3,460)
Income/(loss) from unconsolidated entities(939) (3,794) (4,932) (6,081)
Interest expense(33,087) (30,939) (97,662) (92,723)
Interest and other income/(expense), net9,061
 829
 11,902
 3,291
Tax benefit/(expense), net2,490
 2,658
 8,049
 7,314
Gain/(loss) on sale of real estate owned, net of tax31,377
 —
 82,380
 —
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership(1,447) (84) (3,171) (198)
Net (income)/loss attributable to noncontrolling interests4
 37
 (2) 30
Net income/(loss) attributable to UDR, Inc.$40,549
 $3,188
 $88,917
 $8,112
Same-Store Communities
Our Same-Store Community properties (those acquired, developed, and stabilized prior to April 1, 2013 for quarter-to-date comparison and January 1, 2013 for year-to-date comparison and held as of September 30, 2014) consisted of 36,268 and 35,177 apartment homes and provided 85% and 81% of our total NOI for the three and nine months ended September 30, 2013 and 2012(dollars in thousands)2014:, respectively.
 Three Months Ended September 30, Nine Months Ended September 30,
 2013 2012 2013 2012
Total property NOI$71,992
 $69,827
 $214,576
 $210,515
Property management(2,860) (2,756) (8,436) (8,275)
Other operating expenses(1,406) (1,321) (4,215) (3,944)
Real estate depreciation and amortization(44,855) (51,012) (135,555) (149,422)
General and administrative(6,855) (4,635) (18,324) (19,581)
Hurricane-related recoveries/(charges), net3,807
 —
 8,083
 —
Interest expense(8,773) (9,847) (27,085) (35,708)
Net gain/(loss) on sale of depreciable property—
 (132) —
 51,050
Net (income)/loss attributable to noncontrolling interests(39) (39) (151) (304)
Net income/(loss) attributable to OP unitholders$11,011
 $85
 $28,893
 $44,331
Three Months Ended September 30, 20132014 vs. Three Months Ended September 30, 2012
2013
NOI for our Same-Store Communities
Our same-store communities (those acquired, developed, and stabilized prior to July 1, 2012Community and held on September 30, 2013) consisted of 20,188 apartment homes and provided 90% of our total NOIproperties increased 5.1% or $5.7 million for the three months ended September 30, 2013.

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NOI for our same-store community properties increased6.2% or $3.8 million for the three months ended September 30, 20132014 compared to the same period in 2012.2013. The increase in property NOI was primarily attributable to a 5.3%4.4% or $4.7$7.2 millionincrease in total revenue,property rental income, which was partially offset by a 3.3%2.9% or $904,000$1.5 million increase in operating expenses. The increase in revenuesproperty income was primarily driven by a 4.3%3.4% or $3.7$5.4 millionincrease in rental rates, a 4.7% or $575,000 increase in reimbursement and fee income and a 6.7%17.1% or $452,000increase$1.1 million decrease in feevacancy loss and reimbursement income.bad debt. Physical occupancy increased0.5% 0.6% to 95.8%96.8% and total monthly income per occupied home increased4.8% 3.8% to $1,614 for the three months ended September 30, 2013 compared to the same period in 2012.$1,619.
The increase in property operating expenses was primarily driven by an 8.9%a 6.2% or $781,000$774,000 increase in personnel costs, 1.3% or $217,000 increase in real estate taxes.taxes and a 20.3% or $451,000 increase in insurance expenses.
As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) was increased to 69.4% for the three months ended September 30, 20132014 as compared to 68.8%68.9% for the comparable period in 2013.
Nine Months Ended 2012September 30, 2014. vs. Nine Months Ended September 30, 2013
NOI for our Same-Store Community properties increased 5.3% or $16.8 million for the nine months ended September 30, 2014 compared to the same period in 2013. The increase in property NOI was attributable to a 4.4% or $20.3 million increase in property rental income, which was partially offset by a 2.4% or $3.4 million increase in operating expenses. The increase in property income was primarily driven by a 3.4% or $14.9 million increase in rental rates, a 5.5% or $1.9 million increase in reimbursement and fee income and an 14.2% or $2.5 million decrease in vacancy loss and bad debt. Physical occupancy increased 0.5% to 96.6% and total monthly income per occupied home increased 3.8% to $1,560.

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The increase in operating expenses was primarily driven by a 2.2% or $1.0 million increase in real estate taxes, a 19.6% or $1.2 million increase in insurance expense, and a 1.5% or $518,000 increase in personnel costs.
As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 69.6% for the nine months ended September 30, 2014 as compared to 69.0% for the comparable period in 2013.
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, including, but not limited to, recently acquired, developed and redeveloped properties, and the non-apartment components of mixed use properties.
Three Months Ended September 30, 2014 vs. Three Months Ended September 30, 2013
The remaining $7.115% or $21.5 million or 10% of our total NOI during the three months ended September 30, 20132014, was generated from communities that we classify as “Non-Matureour Non-Mature Communities/Other.” The Operating Partnership’s non-mature communities/other consist of communities that do not meet the criteria to be included in same-store communities, which includes communities developed or acquired, redevelopment properties, sold properties, and non-apartment components of mixed use properties.Other. NOI from non-mature communities/other decreased 18.6%Non-Mature Communities/Other increased by 33.7% or $1.6$5.4 million for the three months ended September 30, 20132014 as compared to the same period in 2012.2013. The decreaseincrease was primarily driven by an increase in NOI of $6.2 million and $2.5 million from developed and redeveloped communities, respectively, completed in 2013 and 2014 and an increase of $1.6 million from commercial and other communities, which was partially offset by a decrease in NOI of $1.5$5.1 million from Commercialcommunities sold in 2013 and other properties.2014.
Nine Months Ended September 30,2013 2014 vs. Nine Months Ended September 30,2012
Same-Store Communities
Our same-store communities (those acquired, developed, and stabilized prior to January 1, 2012 and held on September 30, 2013
) consisted of 19,530 apartment homes and provided 86%The remaining 19% or $80.3 million of our total NOI forduring the nine months endedSeptember 30, 2014 June 30, 2013.was generated from our
Non-Mature Communities/Other. NOI for our same-store community propertiesfrom increased6.2%Non-Mature Communities/Other increased by 19.1% or $10.7$12.9 million for the nine months endedSeptember 30, 20132014 as compared to the same period in 2012.2013. The increase in property NOI was primarily attributable to a 5.2% or $13.1 milliondriven by an increase in total revenue,NOI of $16.5 million and $6.7 million from development and redevelopment communities, respectively, completed in 2013 and 2014 and an increase of $88,000 from commercial and other communities, which was partially offset by a 3.0% or $2.4 million increase in operating expenses. The increase in revenues was primarily driven by a 4.4% or $10.8 million increase in rental rates and a 7.6% or $1.4 million increase in fee and reimbursement income. Physical occupancy increased 0.2% to 95.3% and total income per occupied home increased 5.0% to $1,577 for the nine months endedSeptember 30, 2013 compared to the same period in 2012.
The increase in property operating expenses was primarily driven by an 8.7% or $2.2 million increase in real estate tax and a 4.9% or $899,000 increase in personnel costs, which was partially offset by a 6.7% or $860,000 decrease in repair and maintenance expense.
As a result of the percentage changes in property rental income, the operating margin (property net operating income divided by property rental income) was 69.6% for the nine months endedSeptember 30, 2013 as compared to 69.0% for the comparable period in 2012.
Non-Mature Communities/Other
The remaining $30.7 million or 14% of our total NOI during the nine months endedSeptember 30, 2013, was generated from communities that we classify as Non-Mature Communities/Other. The Operating Partnership’s Non-Mature Communities/Other consist of communities that do not meet the criteria to be included in same-store communities, which includes communities developed or acquired, redevelopment properties, sold properties, and non-apartment components of mixed use properties. NOI from Non-Mature Communities/Other decreased 17.8% or $6.6 million for the nine months endedSeptember 30, 2013 compared to the same period in 2012. The decrease was primarily driven by a decrease in NOI of $4.5$11.7 million from propertiescommunities sold in 20122013 and a decrease of 9.2% or $1.4 million from redeveloped properties.2014.

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Real Estate Depreciation and Amortization
For the three and ninethree months ended September 30, 20132014, real estate depreciation and amortization fromon both continuing and discontinued operations decreased by 12.1%increased 6.0% or $6.2$5.1 million and 9.3% or $13.9 million as compared to the comparable period in 2012.2013. The decreaseincrease in depreciation and amortization for the three months ended September 30, 2014 was primarily due to homes delivered from our development and redevelopment communities, partially offset by a decrease from sold communities and fully depreciated assets.
During the nine months ended September 30, 2014, real estate depreciation and amortization on both continuing and discontinued operations increased 5.5% or $13.9 million as compared to the comparable period in 2013. The increase in depreciation and amortization for the nine months ended September 30, 2014 was primarily due to homes delivered from our development and redevelopment communities, partially offset by a decrease from sold communities and fully depreciated assets.

General and Administrative

For the three months ended September 30, 20132014, general and administrative expense increased 1.7% or $190,000 as compared to the comparable period in 2013. The increase in general and administrative expense for the three months endedSeptember 30, 2014 iswas primarily from disposition of assets in 2012, partially offset by the depreciation from developeddue to salary and redeveloped units placed in service in 2012 and 2013.benefit increases.

Interest Expense

For the three and nine months endedSeptember 30, 20132014, interestgeneral and administrative expense decreased by 10.9%increased 17.5% or $1.1$5.4 million and 24.1% or $8.6 million as compared to the comparable periodsperiod in 2012.2013. The decreaseincrease was primarily due to an increase in intereststock-based compensation expense for the threelong-term incentive plan and nine months endedSeptember 30, 2013 is primarily due to lower debt balancessalary and lower interest rates.benefit increases.

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Hurricane-relatedCasualty-Related (Recoveries)/Charges, Net

In October 2012, Hurricane Sandy hit the East Coast, affecting twothree of the Operating Partnership’sCompany’s operating communities (1,001 apartment homes) located in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Operating Partnership hasCompany had insurance policies that provideprovided coverage for property damage and business interruption, subject to applicable retention.

retentions.
Based on the claims filed and management’s estimates, the Operating Partnership recognized a $7.1 million impairment charge for the damaged assets’ net book value and incurred $7.0 million of repair and cleanup costs during the year ended December 31, 2012. The impairment charge and the repair and cleanup costs incurred were reduced as of December 31, 2012 by $10.8 million of estimated insurance recovery, and were classified in "Hurricane related (recoveries)/charges, net" on the Consolidated Statements of Operations. During the three and nine months endedSeptember 30, 2013, no material adjustments to the impairment charge and the repair and cleanup costs incurred were recognized. The rehabilitation of these two properties was primarily completed in the third quarter of 2013.
As of September 30, 2013, the Operating Partnership had settled the Hurricane Sandy claims and received insurance proceeds in excess of the $10.8 million estimated insurance recovery receivable related to the impairment charge and the repair and cleanup costs incurred. As a result, the Company recognized a Hurricane-related recovery of approximately $1.0 million and $3.3 million and a casualty gain of approximately $582,000 for the three and nine months endedSeptember 30, 2013, the Company recorded $6.5 million and $12.3 million, respectively, of insurance recoveries related to the business interruption and other losses associated with Hurricane Sandy. These recoveries were included in , respectively. Both the recovery and casualty gain were classified in "Hurricane relatedCasualty-related (recoveries)/charges, net"net on the UDR Consolidated Statements of Operations.

During the nine months ended September 30, 2014, we recorded a $500,000 casualty-related loss for one property damaged during an earthquake in California.

Interest Expense
BasedFor the three months ended September 30, 2014, interest expense increased by 6.9% or $2.1 million as compared to the comparable period in 2013. The increase in interest expense for the three months ended September 30, 2014 was primarily due to less interest capitalized in 2014 as a result of completed developments, partially offset by a decrease in interest expense due to replacement of debt at lower rates.
For the nine months ended September 30, 2014, interest expense increased by 5.3% or $4.9 million as compared to the comparable period in 2013. The increase in interest expense for the three months ended September 30, 2014 was primarily due to less interest capitalized in 2014 as a result of completed developments, partially offset by a decrease in interest expense due to replacement of debt at lower rates.

Gain/(Loss) on Sale of Real Estate Owned, Net of Tax
During the three months ended September 30, 2014, the Company recognized gains (net of tax) of $31.3 million on the claims filed and management’s estimates,sale of three communities with a total of 963 apartment homes.
During the Operating Partnershipnine months ended September 30, 2014, the Company recognized $2.2gains (net of tax) of $82.3 million of business interruption losses for the year ended December 31, 2012, of which $1.8 million were related to rent concession rebates provided to residents during the period the properties were uninhabitable and were classified in “Hurricane related (recoveries)/charges, net” on the Consolidated Statementssale of six communities with a total of 1,904 apartment homes and an adjacent parcel of land.
Due to the Company’s adoption ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity$400,000, effective January 1, 2014, these gains (net of tax) are included in Gain/(loss) on sale of real estate owned, net of tax were related to rent that was not contractually receivable and were classified as a reduction to “Rental income” on the UDR Consolidated Statements of Operations. The Company estimates that it incurred anSee Note 2, Significant Accounting Policies, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional information.$2.1 million
There were no gains recognized on the sale of business interruption losses forreal estate during the nine months endedSeptember 30, 2013. As noted, the Company settled the Hurricane Sandy claims as of September 30, 2013.
During the three and nine months endedSeptember 30, 2013, the Operating Partnership received approximately $2.2 million and $4.2 million, respectively, of insurance proceeds for recovery of business interruption losses. Of the $4.2 million of insurance proceeds received during the nine months endedSeptember 30, 2013, $2.1 million related to recovery of business interruption losses incurred in 2012 and the remaining $2.1 million related to recovery of business interruption losses incurred in 2013. The $4.2 million of recovery was classified as "Hurricane related (recoveries)/charges, net" on the Consolidated Statements of Operations.
Net Gain/(Loss) on the Sale of Depreciable Properties
There were no sales during the three and nine months endedSeptember 30, 2013. For the three and nine months ended June 30, 2012, we recognized net gain/(loss) on the sale of communities of $(132,000) and $51.1 million, respectively. The net gain/(loss) is included in "Income/(loss) from discontinued operations" on the Consolidated Statements of Operations. Changes in the level of gains recognized from period to period reflect the changing level of our divestiture activity from period to period as well as the extent of gains related to specific properties sold.

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Inflation
We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results through wage pressures, utilities and material costs, substantially allthe majority of our leases are for a term of one yearfourteen months or less, which generally enables us to compensate for any inflationary effects by increasing rents on our apartment homes. Although an extreme escalation in energy and food 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 and nine months endedSeptember 30, 20132014.
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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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 September 30, 2014, the Operating Partnership’s real estate portfolio included 67 communities located in nine states and the District of Columbia with a total of 20,753 apartment homes.
As of September 30, 2014, UDR owned 110,883 units of our general limited partnership interests and 174,000,344 units of our limited partnership interests (the “OP Units”), or approximately 95.0% 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 to the Operating Partnership or “we,” “us” or “our” refer to UDR, L.P. together with its consolidated subsidiaries. In this section, we refer to the General Partner together with its consolidated subsidiaries (including us) and the General Partner’s consolidated joint ventures as “UDR” or the “General Partner.”
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 September 2003. At September 30, 2014, the General Partner’s consolidated real estate portfolio included 141 communities located in 10 states and the District of Columbia with a total of 40,477 apartment homes. In addition, the General Partner had an ownership interest in 35 communities with 9,791 completed apartment homes through unconsolidated operating communities.
The Operating Partnership’s same-store community apartment home population for the three and nine months ended September 30, 2014 was 19,518 and 19,010, respectively.

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The following table summarizes our market information by major geographic markets as of September 30, 2014:
    As of September 30, 2014 For the Three Months Ended September 30, 2014 For the Nine Months Ended September 30, 2014
Same-Store Communities Number of
Apartment Communities		 Number of
Apartment Homes		 Percentage of Total
Carrying Value		 Total Carrying
Value (in thousands)		 Average
Physical Occupancy		 Monthly Income
per Occupied Home (a)		 Average
Physical Occupancy		 Monthly Income
per Occupied Home (a)
West Region                
San Francisco, CA 9
 2,185
 13.3% 558,751
 96.7% 2,716
 96.4% 2,641
Orange County, CA 8
 2,935
 12.3% $520,188
 95.4% $1,730
 94.8% $1,711
Seattle, WA 5
 932
 5.0% 212,018
 97.3% 1,546
 97.1% 1,528
Los Angeles, CA 2
 344
 2.5% 107,192
 94.7% 2,182
 94.4% 2,167
Monterey Peninsula, CA 7
 1,565
 3.8% 161,225
 96.8% 1,240
 93.7% 1,227
Other Southern California 3
 635
 2.6% 109,609
 94.7% 1,678
 94.9% 1,646
Portland, OR 3
 716
 1.7% 73,576
 97.0% 1,213
 96.8% 1,191
Mid-Atlantic Region                
Metropolitan D.C. 7
 2,378
 13.3% 559,023
 96.2% 1,907
 96.4% 1,916
Baltimore, MD 5
 994
 3.6% 151,254
 87.9% 1,558
 87.8% 1,559
Southeast Region                
Tampa, FL 3
 1,154
 2.8% 116,661
 95.9% 1,206
 96.3% 1,187
Nashville, TN 6
 1,612
 3.2% 134,051
 97.0% 1,036
 97.0% 1,026
Other Florida 1
 636
 1.9% 81,015
 95.2% 1,376
 95.4% 1,365
Northeast Region                
New York, NY 2
 1,001
 14.2% 598,188
 97.3% 3,566
 96.9% 3,508
Boston, MA 2
 833
 4.2% 178,122
 95.9% 1,901
 96.3% 1,845
Southwest Region                
Dallas, TX 2
 1,348
 4.5% 188,372
 95.5% 1,418
 95.6% 1,635
Austin, TX 1
 250
 0.9% 39,514
 97.5% 1,632
 96.7% 1,407
Total/Average Same-Store Communities 66
 19,518
 89.8% 3,788,759
 95.8% $1,773
 95.4% $1,703
Non-Mature, Commercial Properties & Other 1
 964
 7.4% 310,636
        
Real Estate Under Development (b) —
 271
 2.8% 119,828
        
Total Real Estate Owned 67
 20,753
 100.0% 4,219,223
        
Total Accumulated Depreciation       (1,358,123)        
Total Real Estate Owned, Net of Accumulated Depreciation       $2,861,100
        

(a)Monthly Income per Occupied Home represents total monthly revenues divided by the product of occupancy and the number of mature apartment homes.
(b)As of September 30, 2014, the Operating Partnership was developing one wholly-owned community with 332 apartment homes, 271 of which were completed.
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 July 1, 2013 for quarter-to-date comparison and January 1, 2013 for year-to-date comparison and held as of September 30, 2014. 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.

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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 properties, 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 allocated to us under the General Partner’s credit agreements. The General Partner will routinely use its unsecured credit facility 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 repositioned our portfolio.
We expect to meet our short-term liquidity requirements generally through net cash provided by operations and borrowings allocated to 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 borrowings and the disposition of properties. We believe that our net cash provided by 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, and borrowings allocated to us under the General Partner’s credit agreements.
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 allocated to us under our General Partner’s credit agreements, and to a lesser extent, from cash flows provided by operating activities.
As of September 30, 2014, the Operating Partnership had approximately $2.2 million of principal payments on secured debt maturing during the remainder of 2014. We anticipate that we will repay that debt with operating cash flows or proceeds from borrowings allocated to us under our General Partner’s credit agreements. The repayment of debt will be recorded as an offset to the Payable/(receivable) due to/(from) General Partner.
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 current Report on Form 10-K, filed with the SEC on February 25, 2014. 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.
Effective January 1, 2014, the Operating Partnership prospectively adopted Accounting Standards Update (“ASU”) No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, for all communities not previously sold or classified as held for sale. ASU 2014-08 incorporates into the definition of a discontinued operation a requirement that a disposition represent a strategic shift in an entity’s operations, which resulted in UDR no longer classifying the sale of communities as a discontinued operation. See Note 2, Significant Accounting Policies, to the Operating Partnership’s Consolidated Financial Statements for more information on the new accounting pronouncement.
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 nine months endedSeptember 30, 2014 and 2013.

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Operating Activities
For the nine months ended September 30, 2014, net cash flow provided by/(used in) operating activities was $157.8 million compared to $164.7 million for the comparable period in 2013. The decrease in net cash flow from operating activities was primarily due to lower income from continuing operations, primarily caused by dispositions.
Investing Activities
For the nine months endedSeptember 30, 2014, net cash provided by/(used in) investing activities was $(26.4) million compared to $(104.7) million for the comparable period in 2013. The change was primarily due to a decrease in development and redevelopment activities and an increase in dispositions in the nine months ended September 30, 2014 as compared to the comparable period in the prior year. Changes in the level of investment activities from period to period reflect our strategy as it relates to development activities, capital expenditures, and dispositions.
Disposition of Investments
During the nine months ended September 30, 2014, the Operating Partnership sold one community and an adjacent land parcel in San Diego, CA for gross proceeds of $48.7 million, resulting in a $24.4 million gain and net proceeds of $47.9 million. In connection with the sale of one community in Tampa, Florida, the Operating Partnership recognized a gain of $16.3 million, which was previously deferred. The total gains of $40.7 million were included in Income/(loss) on sale of real estate owned on the Operating Partnership’s Consolidated Statements of Operations. Proceeds were used primarily to fund development and redevelopment activities and to reduce debt.
Real Estate Under Development and Redevelopment
At September 30, 2014, the Operating Partnership was developing one wholly-owned community totaling 332 homes, 271 of which have been completed, with a budget of $132.0 million, in which we had a carrying value of $119.8 million. This community is estimated to be completed during the fourth quarter of 2014.
Financing Activities
For the nine months endedSeptember 30, 2014, our net cash provided by/(used in) financing activities was $(131.8) million compared to $(60.4) million for the comparable period of 2013. The increase in cash used in financing activities was primarily due to an increase in advances to the General Partner.
Credit Facilities
As of September 30, 2014, the General Partner had secured credit facilities with Fannie Mae with an aggregate commitment of $835.2 million with $835.2 million outstanding. The Fannie Mae credit facilities are for terms of seven to ten years and bear interest at floating and fixed rates. At September 30, 2014, $623.8 million of the funded balance was fixed at a weighted average interest rate of 4.99%, and the remaining balance on these facilities was at a weighted average variable rate of 1.58%. At September 30, 2014, there was a total of $520.8 million of these credit facilities allocated to the Operating Partnership based on the ownership of the assets securing the debt.
The Operating Partnership is a guarantor on the General Partner’s unsecured revolving credit facility with an aggregate borrowing capacity of $900 million, $250 million of term notes due June 2018, $100 million of term notes due June 2018, $300 million of medium-term notes due June 2018, $300 million of medium-term notes due October 2020, $400 million of medium-term notes due January 2022, and $300 million of medium-term notes due July 2024. As of September 30, 2014 and December 31, 2013 there was $160.0 million and zero, respectively, of outstanding borrowings under the unsecured revolving credit facility.
The credit facilities are subject to customary financial covenants and limitations.
Derivative Instruments
As part of our General Partner’s overall interest rate risk management strategy, our General Partner uses derivatives as a means to fix the interest rates of variable rate debt obligations or to hedge anticipated financing transactions. Our General Partner’s derivative transactions used for interest rate risk management include interest rate swaps with indexes that relate to the pricing of specific debt instruments of our General Partner that are allocated to the Operating Partnership. The General Partner believes that we have appropriately controlled our interest rate risk through the use of derivative instruments (allocated o the Operating Partnership based on the General Partner’s underlying debt instruments allocated to the Operating Partnership)

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to minimize any unintended effect on consolidated earnings. Derivative contracts did not have a material impact on the results of operations during the three and nine months endedSeptember 30, 2014 (see Note 8, Derivatives and Hedging Activity, in the Notes to the Operating Partnership’s Consolidated Financial Statements included in this Report).
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 $169.1 million in variable rate debt that is not subject to interest rate swap contracts as of September 30, 2014. If market interest rates for variable rate debt increased by 100 basis points, our interest expense for the nine months ended September 30, 2014 would increase by $1.3 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 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 General Partner also utilizes derivative financial instruments allocated to the Operating Partnership to manage interest rate risk and generally designates these financial instruments as cash flow hedges. See Note 8, Derivatives and Hedging Activities, in the Notes to the Operating Partnership’s Consolidated Financial Statements for additional discussion of derivate instruments.
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 and nine months ended September 30, 2014 and 2013, and includes the results of both continuing and discontinued operations for the periods presented.
Net Income/(Loss) Attributable to OP Unitholders
Net income attributable to OP unitholders was $8.6 million ($0.05 per diluted OP Unit) for the three months ended September 30, 2014 as compared to net income of $11.0 million ($0.06 per diluted OP Unit) for the comparable period in the prior year. The decrease in net income attributable to OP unitholders resulted primarily from the following items, which are discussed in further detail elsewhere within this Report:
hurricane-related recoveries in 2013 resulting from the effects of Hurricane Sandy on two of our New York City communities in 2012 (see Note 3, Real Estate Owned, in the Notes to the Operating Partnership’s Consolidated Financial Statements for more details).
This was partially offset by:
an increase in total property NOI primarily due to higher occupancy and higher revenue per occupied home, NOI from the homes placed in service related to development and redevelopment projects completed in 2013 and 2014, partially offset by the disposition of communities in 2013 and 2014.
Net income attributable to OP unitholders was $63.6 million ($0.35 per diluted OP Unit) for the nine months ended September 30, 2014 as compared to net income of $28.9 million ($0.16 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 items, which are discussed in further detail elsewhere within this Report:
net gains of $40.7 million on the sale of one property with an adjacent land parcel in San Diego, CA and the sale of one community in Tampa, Florida in 2014; and
an increase in total property NOI primarily due to higher occupancy and higher revenue per occupied home, NOI from the homes placed in service related to development and redevelopment projects completed in 2013 and 2014, partially offset by the disposition of communities in 2013 and 2014.

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This was partially offset by:
hurricane-related recoveries in 2013 resulting from the effects of Hurricane Sandy on two of our New York City communities in 2012 (see Note 3, Real Estate Owned, in the Notes to the Operating Partnership’s Consolidated Financial Statements for more details).

Apartment Community Operations
Our net income results primarily from net operating income (“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 is property management expense, which is calculated as 2.75% of property revenue to cover regional supervision and accounting costs related to consolidated property operations, and land rent.
The following table summarizes the operating performance of our total portfolio (which includes discontinued operations) for the three and nine months ended September 30, 2014 and 2013(dollars in thousands):
 Three Months Ended September 30, (a)   Nine Months Ended September 30, (b)  
 2014 2013 % Change 2014 2013 % Change
Same-Store Communities:           
Same-store rental income$99,451
 $95,031
 4.7 % $278,067
 $265,202
 4.9 %
Same-store operating expense (c)(29,100) (28,455) 2.3 % (81,492) (80,012) 1.8 %
Same-store NOI70,351
 66,576
 5.7 % 196,575
 185,190
 6.1 %
            
Non-Mature Communities/Other NOI:           
Acquired communities NOI—
 —
 — % 12,214
 11,060
 10.4 %
Sold and held for sale communities NOI—
 —
 — % 11
 6,748
 (99.8)%
Developed communities NOI(404) (4) 10,000.0 % (480) (13) 3,592.3 %
Redeveloped communities NOI3,989
 2,342
 70.3 % 10,212
 7,419
 37.6 %
Commercial NOI and other1,817
 3,079
 (41.0)% 4,606
 4,169
 10.5 %
Total non-mature communities/other NOI5,402
 5,417
 (0.3)% 26,563
 29,383
 (9.6)%
            
Total Property NOI$75,753
 $71,993
 5.2 % $223,138
 $214,573
 4.0 %

(a)Same-store consists of 19,518 apartment homes.
(b)Same-store consists of 19,010 apartment homes.
(c)Excludes depreciation, amortization, and property management expenses.


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The following table is our reconciliation of total property NOI to Net Income/(Loss) Attributable to OP Unitholders as reflected, for both continuing and discontinued operations, for the three and nine months ended September 30, 2014 and 2013(dollars in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2014 2013 2014 2013
Total property NOI$75,753
 $71,993
 $223,138
 $214,573
Property management(2,955) (2,860) (8,653) (8,436)
Other operating expenses(1,484) (1,405) (4,371) (4,215)
Real estate depreciation and amortization(45,043) (44,857) (134,011) (135,552)
General and administrative(6,939) (6,855) (21,368) (18,324)
Casualty-related recoveries/(charges), net—
 3,807
 (500) 8,083
Interest expense(10,457) (8,773) (30,629) (27,085)
Gain/(loss) on sale of real estate owned—
 —
 40,687
 —
Net (income)/loss attributable to noncontrolling interests(238) (39) (697) (151)
Net income/(loss) attributable to OP unitholders$8,637
 $11,011
 $63,596
 $28,893
Same-Store Communities
Our Same-Store Community properties (those acquired, developed, and stabilized prior to July 1, 2013 for quarter-to-date comparison and January 1, 2013 for year-to-date comparison and held as of September 30, 2014) consisted of 19,518 and 19,010 apartment homes and provided 92.9% and 88.1% of our total NOI for the three and nine months ended September 30, 2014, respectively.
Three Months Ended September 30, 2014 vs. Three Months Ended September 30, 2013
NOI for our Same-Store Community properties increased 5.7% or $3.8 million for the three months ended September 30, 2014 compared to the same period in 2013. The increase in property NOI was primarily attributable to a 4.7% or $4.4 million increase in property rental income, which was partially offset by a 2.3% or $645,000 increase in operating expenses. The increase in revenues was primarily driven by a 3.6% or $3.3 million increase in rental rates, an 18.9% or $708,000 decrease in vacancy loss and bad debt, and a 3.5% or $250,000 increase in fee and reimbursement income. Physical occupancy increased 0.4% to 95.8% and total income per occupied home increased 4.2% to $1,773 for the three months ended September 30, 2014 compared to the same period in 2013.
The increase in property operating expenses was primarily driven by a 4.6% or $324,000 increase in personnel cost, a 2.6% or $239,000 increase in real estate tax expense, and a 19.5% or $229,000 increase in insurance expense.
As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 70.7% for the three months ended September 30, 2014 as compared to 70.1% for the comparable period in 2013.
Nine Months Ended September 30, 2014 vs. Nine Months Ended September 30, 2013
NOI for our Same-Store Community properties increased 6.1% or $11.4 million for the nine months ended September 30, 2014 compared to the same period in 2013. The increased in property NOI was primarily attributable to a 4.9% or $12.9 million increase in property rental income, which was partially offset by a 1.8% or $1.5 million increase in operating expenses. The increase in revenues was primarily driven by a 3.6% or $9.2 million increase in rental rates, a 17.9% or $2.0 million decrease in vacancy loss and bad debt, and a 4.7% or $930,000 increase in fee and reimbursement income. Physical occupancy increased 0.2% to 95.4% and total income per occupied home increased 4.6% to $1,703 for the nine months ended September 30, 2014 compared to the same period in 2013.
The increase in property operating expenses was primarily driven by a 2.5% or $708,000 increase in real estate tax expense and a 21.2% or $674,000 increase in insurance expense.
As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 70.7% for the nine months ended September 30, 2014 as compared to 69.8% for the comparable period in 2013.

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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, including, but not limited to, recently acquired, developed and redeveloped properties, and the non-apartment components of mixed use properties.
Three Months Ended September 30, 2014 vs. Three Months Ended September 30, 2013
The remaining 7.1% or $5.4 million of our total NOI during the three months ended September 30, 2014 was generated from our Non-Mature Communities. NOI from Non-Mature Communities/Other decreased 0.3% or $15,000 for the three months ended September 30, 2014 compared to the same period in 2013. The decrease was primarily driven by a decrease in NOI of $1.7 million from commercial, development, and other properties, which was partially offset by an increase in NOI of $1.6 million from redeveloped properties.
Nine Months Ended September 30, 2014 vs. Nine Months Ended September 30, 2013
The remaining 11.9% or $26.6 million of our total NOI during the nine months ended September 30, 2014 was generated from our Non-Mature Communities. NOI from Non-Mature Communities/Other decreased 9.6% or $2.8 million for the nine months ended September 30, 2014 compared to the same period in 2013. The decrease was primarily driven by a decrease in NOI of $6.7 million from sold properties, which was partially offset by an increase in NOI of $2.8 million from redevelopment properties.
Real Estate Depreciation and Amortization
For the three months endedSeptember 30, 2014, real estate depreciation and amortization on both continuing and discontinued operations increased 0.4% or $186,000 as compared to the comparable period in 2013. The increase in depreciation and amortization for the three months ended September 30, 2014 was primarily due to homes delivered from our development and redevelopment communities, partially offset by a decrease from sold communities and fully depreciated assets.
During the nine months ended September 30, 2014, real estate depreciation and amortization on both continuing and discontinued operations decreased 1.1% or $1.5 million as compared to the comparable period in 2013. The decrease in depreciation and amortization for the nine months ended September 30, 2014 was primarily from disposition of assets in 2013 and 2014, partially offset by the depreciation from developed and redeveloped units placed in service in 2013.

General and Administrative

For the three months endedSeptember 30, 2014, general and administrative expense increased 1.2% or $84,000 as compared to the comparable period in 2013. The increase in general and administrative expense for the three months endedSeptember 30, 2014 was primarily due to salary and benefit increases.

For the nine months ended September 30, 2014, general and administrative expense increased 16.6% or $3.0 million as compared to the comparable period in 2013. The increase was primarily due to an increase in stock-based compensation expense for the long-term incentive plan and salary and benefit increases.

Casualty-Related (Recoveries)/Charges, Net

In October 2012, Hurricane Sandy hit the East Coast, affecting two of the Operating Partnership’s operating communities located in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Operating Partnership had insurance policies that provided coverage for property damage and business interruption, subject to applicable retentions.

During the three and nine months ended September 30, 2013, the Operating Partnership recorded $3.8 million and $8.1 million, respectively, of insurance recoveries related to the business interruption and other losses associated with Hurricane Sandy. These recoveries were included in Casualty-related (recoveries)/charges, net on the Operating Partnership’s Consolidated Statements of Operations.

During the nine months September 30, 2014, we recorded a $500,000 of casualty-related loss for one property damaged during an earthquake in California.


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Interest Expense

For the three and nine months ended September 30, 2014, interest expense increased by 19.2% or $1.7 million and 13.1% or $3.5 million as compared to the comparable periods in 2013. The increase in interest expense for the three and nine months ended September 30, 2014 was primarily due to lower portion of interest capitalized in 2014 as a result of completed developments, partially offset by a decrease in interest expense due to replacement of debt at lower rates.

Gain/(Loss) on Sale of Real Estate Owned

During the nine months ended September 30, 2014, the Operating Partnership recognized $40.7 million of gains on the sale of one community and an adjacent parcel of land in San Diego, CA and the sale of one community in Tampa, Florida.
Due to the Company’s adoption ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, effective January 1, 2014, these gains were included in Gain/(loss) on sale of real estate owned on the Operating Partnership’s Consolidated Statements of Operations. See Note 2, Significant Accounting Policies, in the Notes to the Operating Partnership’s Consolidated Financial Statements included in this Report for additional information.

Inflation
We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results through wage pressures, utilities and material costs, substantially all of our leases are for a term of one year or less, which generally enables us to compensate for any inflationary effects by increasing rents on our apartment homes. Although an extreme escalation in energy and food 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 and nine months endedSeptember 30, 2014.
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.

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, 20122013 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 September 30, 20132014, 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, 20122013.

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.

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As of September 30, 20132014, 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 Exchange Act) during the second 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
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 and unfavorable economic conditions generally may significantly affect our occupancy levels, our rental rates and collections, the value of the properties and our ability to strategically 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 marketand 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, personal debt levels, a downturn in the housing market, stock market volatility and uncertainty about the future. Some of our major expenses, including mortgage payments and real estate taxes, generally do not decline when related rents decline. We would expect that declines in our occupancy levels, rental revenues and/or the values of our apartment communities would cause us to have less cash available to pay our indebtedness and to distribute to UDR'sUDR’s stockholders, which could adversely affect our financial condition and 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 national, regional and local economic conditions, particularly increases in unemployment; 

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

government or builder incentives which enable first time homebuyers to put little or no money down, 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;

declines in household formation; and

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


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We May Be Unable to Renew Leases or Relet Apartment Units as Leases Expire. 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 than current lease 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 significantly 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, we may be unable to increase rent and/or delinquencies may increase.
Continued Economic Weakness Following the Economic Recession that the U.S. Economy Most Recently Experienced May Materially and Adversely Affect our Financial Condition and Results of Operations. The U.S. economy continues to experience some weakness following a severe recession, including relatively high levels of unemployment and weak consumer spending. In addition, while the Federal Reserve took policy actions to promote market liquidity and encourage economic growth following the recession, such actions are now being curtailed as signs of improvement in the economy have emerged, and the impact of these monetary policy actions on the economy is uncertain. If the economic recovery slows or stalls, or if the economy experiences another recession, we may experience adverse effects on our occupancy levels, our rental revenues and the value of our properties, any of which could adversely affect our cash flow, financial condition and results of operations. We are also exposed to risks relating to the housing market recovery that has

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accompanied the economic recovery, to the extent that when demand for single family homes increases, demand for apartments may decline, which could adversely affect our cash flow, financial condition and results of operations.
Substantial International, National and Local Government Spending and Increasing Deficits May Adversely Impact Our Business, Financial Condition and Results of Operations. The values of, and the cash flows from, the properties we own are affected by developments in global, national and local economies. As a result of the most recent recession and the significant government interventions, federal, state and local governments have incurred record deficits and assumed or guaranteed liabilities of private financial institutions or other private entities. These increased budget deficits and the weakened financial condition of federal, state and local governments may lead to reduced governmental spending, tax increases, public sector job losses, increased interest rates, currency devaluations or other adverse economic events, which may directly or indirectly adversely affect our business, financial condition and results of operations.
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 interest and general and administrative expenses increase at a rate higherfaster than increases in our rental rates. The predominant effects of deflation include high unemployment and credit contraction. Restricted lending practices could impact our ability to obtain financing or refinancing for our properties. High unemployment may have a negative effect on our occupancy levels and our rental revenues.
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 like the ones 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. These conditions may limit our ability to dispose of properties and to change our portfolio promptly in order to meet our strategic objectives, which may in turn have a material adverse effect on our financial condition and the market value of our securities. We are also subject to the following risks in connection with sales of our apartment communities:  
a significant portion of the proceeds from our overall 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.rents, which could materially adversely affect our results of operations and financial condition.

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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 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:         
we may be unable to obtain financing for acquisitions on favorable terms or at all;

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 acquisition;

even if we enter into an acquisition agreement for an apartment community, we may be unable to complete the acquisition 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 are subsequently unable to 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 adversely affect our expected return on our investments and our overall profitability.


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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 pursue attractive investment opportunities on favorable terms, which could adversely affect our ability to grow.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:         
we may be unable to obtain construction financing for development activities under favorable terms, including but not limited to interest rates, maturity dates 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 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;

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;

if we are unable to find joint venture partners to help fund the development of a community or otherwise obtain acceptable financing for the developments, our development capacity may be limited;

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 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;


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occupancy rates and rents at a newly developed community may fluctuate depending on a number of factors, including market and economic conditions, preventing us from meeting our profitability goals for that community; and

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

In some cases in the past, the costs of upgrading acquired communities exceeded our original estimates. We may experience similar cost increases in the future. Our inability to charge rents that will be sufficient to offset the effects of any increases in these costs may impair our profitability.
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. As a result, bankruptcies or defaults by these counterparties 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'counterparties’ ability to complete transactions with us as intended, both of which could result in disruptions to our operations that may adversely affect our business and results of operations.
Property Ownership Through 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 joint ventures with other persons or entities when we believe circumstances warrant the use of such structures. If we use suchWe currently have 12 active joint ventures and partnerships, excluding our participating loan investment, with a structure, wetotal equity investment of $606.6 million. We could become engaged in a dispute with one or more of our joint venture partners thatwhich might affect our ability to operate a jointly-owned property. Moreover, joint venture 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, joint venture partners may have competing interests in our markets that could create conflicts of interest. Also, our joint venture partners might refuse to make capital contributions when due and we may be responsible to our partners for indemnifiable losses. Frequently, 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 partners'partners’ 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 joint venture (if we are the seller) or of the other partner'spartner’s interest in the joint venture (if we are the buyer) at levels which may not be representative of the valuation that would result from an arm'sarm’s length marketing process.
We are also subject to risk in cases where an institutional owner is our joint venture partner, including (i) a deadlock if we and our joint venture partner are unable to agree upon certain major and other decisions, (ii) the limitation of our ability to

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liquidate our position in the joint venture without the consent of the other joint venture partner, and (iii) the requirement to provide guarantees in favor of lenders with respect to the indebtedness of the joint venture.
We Could Incur Significant Insurance Costs and Some Potential Losses May Not Be Adequately Covered by Insurance. We have a comprehensive insurance program with limits of liability customary within the multi-family industry covering our property and operating activities. 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 occur, 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 adversely affect our cash flow and ability to make distributions to UDR'sUDR’s stockholders.
As a result of our substantial real estate holdings, the cost of insuring our apartment communities is a significant component of expense. Insurance premiums are subject to significant increases and fluctuations, which can be widelyare 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 of our insurance companies that we hold policies with may be negatively impacted resulting 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 of one or more insurance companies may increase the costs to renew our insurance policies or increase the cost of insuring additional properties and recently developed or redeveloped properties.

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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.

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. 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 materially and adversely affect our 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

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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 issues will not affect our ability to make distributions to our shareholders, or that such costs or liabilities will not have a material adverse effect on our financial condition and results of operations.
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. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants or others if property damage or personal injury occurs.
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. From time to time claims may be asserted against us with

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respect to some of our properties under this 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.
Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. 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 will affect our cash flow and results of operations.
Real Estate Tax and Other Laws. 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 or (ii) rent control or rent stabilization laws or other laws regulating housing, such as the Americans with Disabilities Act and the Fair Housing Amendments Act of 1988, may result in significant unanticipated expenditures, which would adversely affect funds from operations and the ability to make distributions to stockholders.
Risk of Damage from Catastrophic Weather Events.and Natural Events and Potential Climate Change. Certain of our communities are located in the general vicinity ofareas that may experience catastrophic weather and other natural events from time to time, including mudslides, and fires, and others where there are hurricanes, tornadoes, snow or risks ofice storms, or other severe inclement weather. TheThese 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 materially and adversely affect our business and our financial condition and results of operations.
To the extent that we experience any significant changes in the climate in areas where our communities are located, we may experience extreme weather conditions and prolonged 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. Should the impact of such climate change be material in nature, or occur for lengthy periods of time, our financial condition and results of operations may be adversely affected.
Risk of Earthquake Damage. Some of our communities are located in the general vicinity of active 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 would also continue to be obligated to repay any mortgage indebtedness or other obligations related to the community. Any such loss could materially and adversely affect our business and 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'smanagement’s view, economically impractical.
Risk of Accidental Death Due to Fire, Natural Disasters or Other Hazards. The accidental death of persons living in our communities due to fire, natural disasters or other hazards could have a material 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

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marketing communities where such any such events have occurred, which could have a material adverse effect on our business 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 a material 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 a material adverse effect on our business and results of operations.
Mezzanine Loan Assets Involve Greater Risks of Loss than Senior Loans Secured by Income-producing Properties. We may acquire mezzanine loans, which take the form of subordinated loans secured by second mortgages on the underlying property or loans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the

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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 long-term senior mortgage lending secured by income-producing real property, because the loan may become unsecured 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 initial expenditure. In addition, mezzanine loans may 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.
We May Experience a Decline in the Fair Value of Our Assets and Be Forced to Recognize Impairment Charges, Which Could Materially and Adversely Impact Our Financial Condition, Liquidity and Results of Operations and the Market Price of UDR'sUDR’s Common Stock. A decline in the fair value of our assets may require us to recognize an impairment against such assets under 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 to maturity or 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 materially and adversely affect our financial condition, liquidity, results of operations and the per share trading price of UDR'sUDR’s common stock.
Any Material Weaknesses Identified in Our Internal Control Over Financial Reporting Could Have an Adverse Effect on UDR'sUDR’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 identify 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 UDR'sUDR’s stock price.
Our Business and Operations Would Suffer in the Event of System Failures.Failures or Breaches in Data Security. Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our internal information technology systems, our systems are vulnerable to damages from any number of sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war, and telecommunication failures. We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information and to manage or support a variety of our business processes, including financial transactions and keeping of records, which may include personal identifying information of tenants and lease data. We rely on commercially available systems, software, tools and monitoring to provide security for processing, transmitting and storing confidential tenant information, such as individually identifiable information relating to financial accounts. Although we take steps to protect the security of the data maintained in our information systems, it is possible that our security measures will not be able to prevent the systems'systems’ improper functioning, or the improper disclosure of personally identifiable information, such as in the event of cyber attacks. Security breaches, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential information. Any failure to maintain proper function, security and availability of our information systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties and could materially and adversely affect us.

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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.
We May be Adversely Affected by New Federal Laws and Regulations. The United States Administration and Congress have enacted, or called for consideration of, proposals relating to a variety of issues, including with respect to health care, financial regulation reform, climate change, executive compensation and others. We believe that these and other potential proposals could have varying degrees of impact on us ranging from minimal to material. At this time, we are unable to predict with certainty what level of impact specific proposals could have on us.
Federal rulemaking and administrative efforts that may have an impact on us focus principally on the areas perceived as contributing to the global financial crisis and the recent economic downturn. These initiatives have created a degree of uncertainty regarding the basic rules governing the real estate industry and many other businesses that is unprecedented in the

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United States at least since the wave of lawmaking and regulatory reform that followed in the wake of the Great Depression. The federal legislative response in this area culminated in the enactment on July 21, 2010 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). Many of the provisions of the Dodd-Frank Act have extended implementation periods and delayed effective dates and will require extensive rulemaking by regulatory authorities; thus, the impact on us may not be known for an extended period of time. The Dodd-Frank Act, including future rules implementing its provisions and the interpretation of those rules, along with other legislative and regulatory proposals that are proposed or pending in the United States Congress, may limit our revenues, impose fees or taxes on us, and/or intensify the regulatory framework in which we operate in ways that are not currently identifiable.
Changing laws, regulations and standards relating to corporate governance and public disclosure in particular, including certain provisions of the Dodd-Frank Act and the rules and regulations promulgated thereunder, have created uncertainty for public companies like ours and could significantly increase the costs and risks associated with accessing the U.S. public markets. Because we are committed to maintaining high standards of internal control over financial reporting, corporate governance and public disclosure, our management team will need to devote significant time and financial resources to comply with these evolving standards for public companies. We intend to continue to invest appropriate resources to comply with both existing and evolving standards, and this investment has resulted and will likely continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.
We May be Adversely Affected by New State and Local Laws and Regulations. We are subject to state and local laws, regulations and ordinances at locations where we operate and to the rules and regulations of various local authorities regarding a wide variety of matters that could affect, directly or indirectly, our operations. We cannot predict what matters might be considered in the future by these state and local authorities, nor can we judge what impact, if any, the implementation of new legislation might have on our business.
The Adoption of Derivatives Legislation Adopted by Congress Could Have an Adverse Impact on our Ability to Hedge Risks Associated with our Business. The Dodd-Frank Act regulates derivative transactions, which include certain instruments used in our risk management activities. The Dodd-Frank Act contemplates that most swaps will be required to be cleared through a registered clearing facility and traded on a designated exchange or swap execution facility. There are some exceptions to these requirements for entities that use swaps to hedge or mitigate commercial risk and REITs meeting certain criteria. While we may ultimately be eligible for such exceptions, we cannot ensure we will qualify for them. Although the Dodd-Frank Act includes significant new provisions regarding the regulation of derivatives, the impact of those requirements will not be known definitively until regulations have been adopted and fully implemented by both the SEC and the Commodities Futures Trading Commission, and market participants establish and operate registered clearing facilities under those regulations. The new legislationDodd-Frank Act provisions regarding derivatives and any newthe implementing regulations could increase the operational and transactional cost of derivatives contracts and affect the number and/or creditworthiness of available hedge counterparties to us.
Changes in the System for Establishing U.S. Accounting Standards May Materially and Adversely Affect Our Reported Results of Operations. Accounting for public companies in the United States has historically been conducted in accordance with generally accepted accounting principles as in effect in the United States (“GAAP”). GAAP 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. The International Accounting Standards Board (the “IASB”) is a London-based independent board established in 2001 and charged with the development of International Financial Reporting Standards (“IFRS”). IFRS generally reflects accounting practices that prevail in Europe and in developed nations around the world.

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IFRS differs in material respects from GAAP. Among other things, IFRS has historically relied more on “fair value” models of accounting for assets and liabilities than GAAP. “Fair value” models are based on periodic revaluation of assets and liabilities, often resulting in fluctuations in such values as compared to GAAP, which relies more frequently on historical cost as the basis for asset and liability valuation.
We are monitoring the SEC'sSEC’s activity with respect to the proposed adoption of IFRS by United States public companies. It is unclear at this time how the SEC will propose that GAAP and IFRS be harmonized if the proposed change is adopted. In addition, switching to a new method of accounting and adopting IFRS would be a complex undertaking. We would potentially need to develop new systems and controls based on the principles of IFRS. Since these are new endeavors, and the precise requirements of the pronouncements ultimately to be adopted are not now known, the magnitude of costs associated with this conversion are uncertain.
We are currently evaluating the impact of the adoption of IFRS on our financial position and results of operations. Such evaluation cannot be completed, however, without more clarity regarding the specific IFRS standards that would potentially be

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adopted. Until there is more certainty with respect to the IFRS standards that could be adopted, prospective investors should consider that our conversion to IFRS could have a material adverse impact on our reported results of operations.
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 principal payments and still satisfy UDR'sUDR’s distribution requirements to maintain its status as a REIT for federal income tax purposes. In addition, the full limits of our line of credit may not be available to us 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 an adverse effect on our cash flow, increase our financing costs and impact our ability to make distributions to UDR'sUDR’s stockholders.
Failure to Generate Sufficient Revenue Could Impair Debt Service Payments and Distributions to Stockholders. If our apartment communities do not generate sufficient net rental income to meet rental expenses, our ability to make required payments of interest and principal on our debt securities and to pay distributions to UDR'sUDR’s stockholders will be adversely affected. The following factors, among others, may affect the net rental income generated by our apartment communities:
the national and local economies;

local real estate market conditions, such as an oversupply of apartment homes;
tenants'
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 multi-family 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 rental income 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.
Our Debt Level May Be Increased. Our current debt policy does not contain any limitations on the level of debt that we may incur, although 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.

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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 and other forms of secured and 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. If we issue additional equity securities to finance developments and acquisitions instead of incurring debt, the interests of our existing stockholders could be diluted.

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Failure To Maintain Our Current Credit Ratings Could Adversely Affect Our Cost of Funds, Related Margins, Liquidity, and Access to Capital Markets. Moody'sMoody’s and Standard & Poor's,Poor’s, the major debt rating agencies, routinely evaluate our debt and have given us ratings on our senior unsecured debt 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 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.
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'sUDR’s Stock. Our ability to make scheduled payments or to refinance 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. During the past fewseveral years, the United States stock and credit markets have experienced significant price volatility, dislocations and liquidity disruptions, which have caused market prices of many stocks to fluctuate substantially and the spreads on prospective debt financings to widen considerably. These circumstances have materially impacted liquidity in the financial markets at times, making terms for certain financings less attractive, and in some cases have resulted in the unavailability of financing. The potential downgrade of the U.S.'s’s credit rating and the European debt crisis haverecently contributed to instability in global credit markets. Continued uncertainty in the stock and credit markets may negatively impact our ability to access additional financing for acquisitions, development of our properties and other purposes at reasonable terms, which may negatively affect our business. Additionally, due to this uncertainty, we may be unable to refinance our existing indebtedness or the terms of any refinancing may not be as favorable as the terms of our existing indebtedness. If we are not successful in refinancing this debt 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'sUDR’s common or preferred stock. The disruptions in the financial markets have had and may continue to have a material adverse effect on the market value of UDR'sUDR’s common shares and other adverse effects on us and our business.
Prospective buyers of our properties may also experience difficulty in obtaining debt financing which might make it more difficult for us to sell properties at acceptable pricing levels. Tightening of credit in financial markets and high unemployment rates may also adversely affect the ability of tenants to meet their lease obligations and for us to continue increasing rents on a prospective basis. Disruptions in the credit and financial markets may also have other adverse effects on us and the overall economy.
A Change in U.S. Government Policy Regarding Fannie Mae or Freddie Mac Could Have a Material Adverse Impact on Our Business. Fannie Mae and Freddie Mac are a major source of financing for secured multifamily rental real estate. We and other multifamily companies depend heavily on Fannie Mae and Freddie Mac to finance growth by purchasing or guaranteeing apartment loans. In September 2008, the U.S. government assumed control of Fannie Mae and Freddie Mac and placed both companies into a government conservatorship under the Federal Housing Finance Agency. The Administration and lawmakers have proposed potential options for the future of mortgage finance in the U.S. that could involve 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, it would significantly reduce our access to debt capital and adversely affect our ability to finance or refinance existing indebtedness at competitive rates and it may adversely affect our ability to sell assets. Uncertainty in the future activity and involvement of Fannie Mae and Freddie Mac as a source of financing could negatively impact our ability to make acquisitions and make it more difficult or not possible for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of debt financing or difficulties in obtaining debt financing.
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 business and results of operations.

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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 at rates that vary with market interest rates. As of September 30, 2013,2014, UDR had approximately $341.1$532.4 million of variable rate indebtedness outstanding, which constitutes approximately 9.8%14.7% of total outstanding indebtedness as of such date. As of September 30, 2013,2014, the Operating Partnership had approximately $169.1$169.1 million of variable rate indebtedness outstanding, which constitutes approximately18.0%

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18.2% of total outstanding indebtedness to third parties 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. 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. In addition, an increase in market interest rates may lead our security holders to demand a higher annual yield, which could adversely affect the market price of UDR'sUDR’s common and preferred stock and debt securities.
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 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'sUDR’s stockholders.
If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates, and would not be allowed to deduct dividends paid to UDR'sUDR’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'sUDR’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'sUDR’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.
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. shareholders is 20%. Unlike dividends received from a corporation that is not a REIT, our distributions to individual shareholders generally are not eligible for the reduced rates.
UDR May Conduct a Portion of Our Business Through Taxable REIT Subsidiaries, Which are Subject to Certain Tax Risks. We have established several taxable REIT subsidiaries. Despite UDR'sUDR’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 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 successfully achieve that result. Furthermore, we may be subject to a 100% penalty tax, we may jeopardize our ability to retain

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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'sarm’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

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distributed earnings not to be subject to corporate income tax. We intend to make distributions to UDR'sUDR’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'sUDR’s ability to satisfy the income tests for qualification as a REIT for federal income tax purposes.
We Could Face Possible State and Local Tax Audits and Adverse Changes in State and Local Tax Laws. As discussed in the risk factors above, 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 municipalities 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'sUDR’s stockholders. In the normal course of business, entities through which we own real estate may also become subject to tax audits. If such entities become subject to state or local tax audits, the ultimate result of such audits could have an adverse effect on our financial condition.
The Operating Partnership Intends to Qualify as a Partnership, But Cannot Guarantee That It Will Qualify. The Operating Partnership intends to qualify as a partnership for federal income tax purposes at any such time that the Operating Partnership admits additional limited partners other than UDR. If classified as a partnership, the Operating Partnership generally will not be a taxable entity and will not incur federal income tax liability. However, the Operating Partnership would be treated as a corporation for federal income tax purposes if it were a “publicly traded partnership,” unless at least 90% of the Operating Partnership'sPartnership’s 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 the Operating Partnership'sPartnership’s partnership units are not traded on an established securities market, because of the redemption right, the Operating Partnership'sPartnership’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 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 may not meet this qualifying income test. If the Operating 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.
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

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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.


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Risks Related to Our Organization and Ownership of UDR'sUDR’s Stock
Changes in Market Conditions and Volatility of Stock Prices Could Adversely Affect the Market Price of UDR'sUDR’s Common Stock. The stock markets, including the New York Stock Exchange (“NYSE”), on which we list UDR'sUDR’s common stock, have experienced significant price and volume fluctuations. As a result, the market price of UDR'sUDR’s common stock could be similarly volatile, and investors in UDR'sUDR’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'sUDR’s common stock, including:
general market and economic conditions;

actual or anticipated variations in UDR'sUDR’s quarterly operating results or dividends or UDR'sUDR’s payment of dividends in shares of UDR'sUDR’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'sUDR’s stock to demand a higher annual yield from future dividends;

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'sUDR’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'sUDR’s common stock, or the perception that such sales might occur, including under UDR'sUDR’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'sUDR’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'sUDR’s Common Stock in the Future. The decision to declare and pay dividends on UDR'sUDR’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,

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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 a material adverse effect on the market price of UDR'sUDR’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'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'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'sUDR’s stock representing 10% or more of the voting power without our board of directors'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

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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'sUDR’s Stockholders to Effect a Change in Control of Our Company Restricts the Transferability of UDR'sUDR’s Stock and May Prevent Takeovers That are Beneficial to UDR'sUDR’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'sUDR’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'sUDR’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'sUDR’s stockholders or might otherwise be in UDR's stockholders'UDR’s stockholders’ best interests.
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 limited partnership OP Units have the right to require the Operating Partnership to redeem all or a portion of their limited partnership 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.

On April 16, 2013,During the three and nine months ended September 30, 2014, we issued 2,604144,061 and 151,453, respectively, shares of our common stock upon redemption of OP Units. Because these shares of common stock were issued to accredited investors in transactions not involving a public offering, the transaction istransactions were exempt from registration under the Securities Act of 1933 in accordance with Section 4(2) of the Securities Act. We did not issue any other shares of our common stock upon redemption of OP Units during the three months endedSeptember 30, 20134(a)(2).

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. As reflected in the table below, no shares of common stock were repurchased under these programs during the quarter ended September 30, 20132014.
Period Total Number
of Shares Purchased		 Average
Price per Share		 Total Number of Shares
Purchased as Part
of Publicly Announced Plans or Programs		 Maximum Number of
Shares that May Yet Be
Purchased Under the Plans or Programs (1)
Beginning Balance 9,967,490
 $22.00
 9,967,490
 15,032,510
July 1, 2013 through July 31, 2013 —
 —
 —
 15,032,510
August 1, 2013 through August 31, 2013 —
 —
 —
 15,032,510
September 1, 2013 through September 30, 2013 —
 —
 —
 15,032,510
Balance as of September 30, 2013 9,967,490
 $22.00
 9,967,490
 15,032,510

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Period Total Number
of Shares Purchased		 Average
Price per Share		 Total Number of Shares
Purchased as Part
of Publicly Announced Plans or Programs		 Maximum Number of
Shares that May Yet Be
Purchased Under the Plans or Programs (1)
Beginning Balance 9,967,490
 $22.00
 9,967,490
 15,032,510
July 1, 2014 through July 31, 2014 —
 —
 —
 15,032,510
August 1, 2014 through August 31, 2014 —
 —
 —
 15,032,510
September 1, 2014 through September 30, 2014 —
 —
 —
 15,032,510
Balance as of September 30, 2014 9,967,490
 $22.00
 9,967,490
 15,032,510

(1)This number reflects the amount of shares that were available for purchase under our 10,000,000 share repurchase program authorized in February 2006 and our 15,000,000 share repurchase program authorized in January 2008.


Item 3.        DEFAULTS UPON SENIOR SECURITIES
None.

Item 4.        MINE SAFETY DISCLOSURES
Not applicable.


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Item 5.        OTHER INFORMATION
On July 18, 2013, the Company terminated the Employees’ Stock Purchase Plan, which had permitted eligible employees to purchase shares of the Company’s common stock. There is no other information required to be disclosed in a report on Form 8-K during the quarter ended September 30, 2013, that was not previously disclosed in a Form 8-K.None.

Item 6.        EXHIBITS
The exhibits filed or furnished with this Report are set forth in the Exhibit Index.

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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.
  
UDR, Inc.
(registrant)
 
Date:October 29, 20132014/s/ Mark A. Schumacher
  Mark A. Schumacher
Chief Accounting Officer and Senior Vice President (Principal Accounting Officer)
   
  
United Dominion Realty, L.P.
(registrant)
 
  By: UDR, Inc., its general partner  
   
Date:October 29, 20132014/s/ Mark A. Schumacher
  
Mark A. Schumacher
Chief Accounting Officer and Senior Vice President (Principal Accounting Officer)


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EXHIBIT INDEX
Exhibit No. Description
   
3.1 Articles of Restatement of UDR, Inc. (incorporated by reference to Exhibit 3.09 to UDR, Inc.'s’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’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 and filed with the State Department of Assessments and Taxation of the State of Maryland on August 30, 2011 (incorporated by reference to Exhibit 3.1 to UDR, Inc.'s’s Current Report on Form 8-K dated and filed with the SEC on September 1, 2011.
   
3.4 Certificate of Limited Partnership of United Dominion Realty, L.P. dated February 19, 2004 (incorporated by reference to Exhibit 3.4 to United Dominion Realty, L.P.'s’s Post-Effective Amendment No. 1 to Registration Statement on Form S-3 dated and filed with the SEC on October 15, 2010).
   
3.5 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’s Annual Report on Form 10-K for the year ended December 31, 2003).
   
3.6 First Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated June 24, 2005 (incorporated by reference to Exhibit 10.06 to UDR, Inc.'s’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005).
   
3.7 Second Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated February 23, 2006 (incorporated by reference to Exhibit 10.6 to UDR, Inc.'s’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006).
   
3.8 Third Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated February 2, 2007 (incorporated by reference to Exhibit 99.1 to UDR, Inc.'s’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
   
3.9 Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated December 27, 2007 (incorporated by reference to Exhibit 10.25 to UDR, Inc.'s’s Annual Report on Form 10-K for the year ended December 31, 2007).
   
3.10 Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated March 7, 2008 (incorporated by reference to Exhibit 10.53 to UDR, Inc.'s’s Annual Report on Form 10-K for the year ended December 31, 2008).
   
3.11 Sixth Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated 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).
   
3.12 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’s Current Report on Form 8-K dated March 18, 2009 and filed with the SEC on March 19, 2009).

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Exhibit No.Description
   
3.13 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’s Current Report on Form 8-K dated November 18, 2010 and filed with the SEC on November 18, 2010).

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Exhibit No.Description
   
3.14 Amended and Restated Bylaws of UDR, Inc. (as amended through May 12, 2011) (incorporated by reference to Exhibit 3.1 to UDR, Inc.'s’s Current Report on Form 8-K filed with the SEC on May 13, 2011).
10.1
Amendment No. 1, dated July 29, 2014, to the ATM Equity OfferingSM Sales Agreement among UDR, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, dated April 4, 2012 (incorporated by reference to Exhibit 1.1 to UDR, Inc.’s Current Report on Form 8-K filed with the SEC on July 31, 2014).
10.2Amendment No. 1, dated July 29, 2014, to the Third Amended and Restated Distribution Agreement among UDR, Inc., United Dominion Realty, L.P., as Guarantor, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated and Wells Fargo Securities, LLC, as Agents, dated September 1, 2011, with respect to the issue and sale by UDR, Inc. of its Medium-Term Notes, Series A Due Nine Months or More From Date of Issue (incorporated by reference to Exhibit 1.2 to UDR, Inc.’s Current Report on Form 8-K filed with the SEC on July 31, 2014).
   
12.1 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends of UDR, Inc.
   
12.2 Computation of Ratio of Earnings to Fixed Charges of United Dominion Realty, L.P.
   
31.1 Rule 13a-14(a) Certification of the Chief Executive Officer of UDR, Inc.
   
31.2 Rule 13a-14(a) Certification of the Chief Financial Officer of UDR, Inc.
   
31.3 Rule 13a-14(a) Certification of the Chief Executive Officer of UDR Inc., general partner of United Dominion Realty, L.P.
   
31.4 Rule 13a-14(a) Certification of the Chief Financial Officer of UDR Inc., general partner of United Dominion Realty, L.P.
   
32.1 Section 1350 Certification of the Chief Executive Officer of UDR, Inc.
   
32.2 Section 1350 Certification of the Chief Financial Officer of UDR, Inc.
   
32.3 Section 1350 Certification of the Chief Executive Officer of UDR Inc., general partner of United Dominion Realty, L.P.
   
32.4 Section 1350 Certification of the Chief Financial Officer of UDR Inc., general partner of United Dominion Realty, L.P.
   
101 
XBRL (Extensible Business Reporting Language). The following materials from this Quarterly Report on Form 10-Q for the periods ended September 30, 2013,2014, formatted in 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 comprehensive income/(loss) of United Dominion Realty, L.P.;, (x) consolidated statements of changes in capital of United Dominion Realty, L.P., (xi) consolidated statements of cash flows of United Dominion Realty, L.P., (xi) notes to consolidated financial statements of United Dominion Realty, L.P.




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EXHIBIT 12.1

UDR, Inc.
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
(Dollars in thousands)
 Three Months Ended September 30, Nine Months Ended September 30,
 2013 2012 2013 2012
Income/(loss) from continuing operations$3,235
 $(8,543) $8,280
 $(29,925)
        
Add (from continuing operations):       
Interest on indebtedness30,939
 31,845
 92,723
 108,132
Portion of rents representative of the interest factor554
 510
 1,596
 1,534
 $34,728
 $23,812
 $102,599
 $79,741
Fixed charges and preferred stock dividends (from continuing operations):       
Interest on indebtedness$30,939
 $31,845
 $92,723
 $108,132
Capitalized interest6,635
 7,616
 23,212
 17,604
Portion of rents representative of the interest factor554
 510
 1,596
 1,534
Fixed charges$38,128
 $39,971
 $117,531
 $127,270
        
Add:       
Preferred stock dividends$931
 $931
 $2,793
 $5,079
Premium on preferred stock redemptions, net—
 —
 —
 2,791
Combined fixed charges and preferred stock dividends$39,059
 $40,902
 $120,324
 $135,140
        
Ratio of earnings to fixed charges—
 —
 —
 —
Ratio of earnings to combined fixed charges and preferred stock dividends—
 —
 —
 —
For the three months endedSeptember 30, 2013, the ratio of earnings to fixed charges and the ratio of earnings to combined fixed charges and preferred stock dividends were deficient of 1:1 ratio by $3.4 million and $4.3 million, respectively.
For the nine months endedSeptember 30, 2013, the ratio of earnings to fixed charges and the ratio of earnings to combined fixed charges and preferred stock dividends were deficient of 1:1 ratio by $14.9 million and $17.7 million, respectively.
For the three months endedSeptember 30, 2012, the ratio of earnings to fixed charges and the ratio of earnings to combined fixed charges and preferred stock dividends were deficient of 1:1 ratio by $16.2 million and $17.1 million, respectively.
For the nine months endedSeptember 30, 2012, the ratio of earnings to fixed charges and the ratio of earnings to combined fixed charges and preferred stock dividends were deficient of 1:1 ratio by $47.5 million and $55.4 million, respectively.



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EXHIBIT 12.2

United Dominion Realty, L.P.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
 Three Months Ended September 30, Nine Months Ended September 30,
 2013 2012 2013 2012
Income/(loss) from continuing operations$11,050
 $256
 $29,044
 $(9,527)
        
Add from continuing operations:       
Interest on indebtedness8,773
 9,847
 27,085
 35,708
Portion of rents representative of the interest factor426
 416
 1,271
 1,242
 $20,249
 $10,519
 $57,400
 $27,423
Fixed charges from continuing operations:       
Interest on indebtedness$8,773
 $9,847
 $27,085
 $35,708
Capitalized interest1,689
 1,151
 4,408
 2,470
Portion of rents representative of the interest factor426
 416
 1,271
 1,242
Fixed charges$10,888
 $11,414
 $32,764
 $39,420
        
Ratio of earnings to fixed charges1.9
 —
 1.8
 —
For the three months endedSeptember 30, 2012, the ratio of earnings to fixed charges was deficient of achieving a 1:1 ratio by $895,000.
For the nine months endedSeptember 30, 2012, the ratio of earnings to fixed charges was deficient of achieving a 1:1 ratio by $12.0 million.




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EXHIBIT 31.1

CERTIFICATION

I, Thomas W. Toomey, certify that:

1. I have reviewed this quarterly report on Form 10-Q of UDR, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date:October 29, 2013/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President (Principal Executive Officer)

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EXHIBIT 31.2

CERTIFICATION

I, Thomas M. Herzog, certify that:

1. I have reviewed this quarterly report on Form 10-Q of UDR, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:October 29, 2013/s/ Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and Chief Financial Officer (Principal Financial Officer)


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EXHIBIT 31.3

CERTIFICATION

I, Thomas W. Toomey, certify that:

1. I have reviewed this quarterly report on Form 10-Q of United Dominion Realty, L.P.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:October 29, 2013/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President of UDR, Inc. (Principal Executive Officer),
general partner of United Dominion Realty, L.P.

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EXHIBIT 31.4

CERTIFICATION

I, Thomas M. Herzog, certify that:

1. I have reviewed this quarterly report on Form 10-Q of United Dominion Realty, L.P.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:October 29, 2013/s/ Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and Chief Financial Officer of UDR, Inc. (Principal Financial Officer),
general partner of United Dominion Realty, L.P.

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EXHIBIT 32.1

CERTIFICATION

In connection with the periodic report of UDR, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2013, as filed with the Securities and Exchange Commission (the “Report”), I, Thomas W. Toomey, Chief Executive Officer and President of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date:October 29, 2013/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President (Principal Executive Officer)



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EXHIBIT 32.2

CERTIFICATION

In connection with the periodic report of UDR, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2013, as filed with the Securities and Exchange Commission (the “Report”), I, Thomas M. Herzog, Senior Vice President and Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date:October 29, 2013/s/ Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and Chief Financial Officer (Principal Financial Officer)


116
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EXHIBIT 32.3

CERTIFICATION

In connection with the periodic report of United Dominion Realty, L.P. (the “Operating Partnership”) on Form 10-Q for the quarter ended September 30, 2013, as filed with the Securities and Exchange Commission (the “Report”), I, Thomas W. Toomey, Chief Executive Officer and President of UDR, Inc., the general partner of the Operating Partnership, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership at the dates and for the periods indicated.

Date:October 29, 2013/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President of UDR, Inc. (Principal Executive Officer),
general partner of United Dominion Realty, L.P.


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EXHIBIT 32.4

CERTIFICATION

In connection with the periodic report of United Dominion Realty, L.P. (the “Operating Partnership”) on Form 10-Q for the quarter ended September 30, 2013, as filed with the Securities and Exchange Commission (the “Report”), I, Thomas M. Herzog, Senior Vice President and Chief Financial Officer of UDR, Inc., the general partner of the Operating Partnership, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership at the dates and for the periods indicated.

Date:October 29, 2013/s/ Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and Chief Financial Officer of UDR, Inc. (Principal Financial Officer),
general partner of United Dominion Realty, L.P.



118