UDR (UDR) 10-Q 2003 Q1 Quarterly report

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 March 31, 2003

OR

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

For the transition period from                            to                                    

Commission file number 1-10524

United Dominion Realty Trust, Inc.

(Exact name of registrant as specified in its charter)

Virginia (State or other jurisdiction of incorporation of organization) 54-0857512 (I.R.S. Employer 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, and (2) has been subject to filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨

The number of shares of the issuer’s common stock, $1 par value, outstanding as of May 8, 2003 was 112,319,693.

UNITED DOMINION REALTY TRUST, INC.

FORM 10-Q

INDEX

		PAGES
PART I – FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002	3
	Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002	4
	Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002	5
	Consolidated Statement of Shareholders’ Equity for the three months ended March 31, 2003	6
	Notes to Consolidated Financial Statements	7-17
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18-28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 6.	Exhibits and Reports on Form 8-K	29
Signatures		30
Certifications		31-32

2

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share data)

(Unaudited)

	March 31, 2003			December 31, 2002
ASSETS
Real estate owned:
Real estate held for investment (Note 2)	$	3,909,588		$	3,908,746
Less: accumulated depreciation		(784,139	)		(742,876	)
		3,125,449			3,165,870
Real estate under development		35,662			30,624
Real estate held for disposition (net of accumulated depreciation of $437 and $5,857) (Note 3)		25,389			22,256
Total real estate owned, net of accumulated depreciation		3,186,500			3,218,750
Cash and cash equivalents		4,513			3,152
Restricted cash		10,798			11,773
Deferred financing costs, net		21,586			17,548
Other assets		27,824			24,870
Real estate held for disposition assets		25			43
Total assets	$	3,251,246		$	3,276,136
LIABILITIES AND SHAREHOLDERS’ EQUITY
Secured debt (Note 4)	$	1,008,779		$	1,015,740
Unsecured debt (Note 5)		1,026,544			1,041,900
Real estate taxes payable		17,048			29,743
Accrued interest payable		14,337			11,908
Security deposits and prepaid rent		20,792			21,379
Distributions payable		36,700			35,141
Accounts payable, accrued expenses, and other liabilities		43,770			49,634
Real estate held for disposition liabilities		127			204
Total liabilities		2,168,097			2,205,649
Minority interests		67,911			69,216
Shareholder’ equity:
Preferred stock, no par value; $25 liquidation preference, 25,000,000 shares authorized;
5,416,009 shares 8.60% Series B Cumulative Redeemable issued and outstanding (5,416,009 in 2002)		135,400			135,400
8,000,000 shares 7.50% Series D Cumulative Convertible Redeemable issued and outstanding (8,000,000 in 2002)		175,000			175,000
Common stock, $1 par value; 150,000,000 shares authorized
109,028,102 shares issued and outstanding (106,605,259 in 2002)		109,028			106,605
Additional paid-in capital		1,175,356			1,140,786
Distributions in excess of net income		(566,024	)		(541,428	)
Deferred compensation—unearned restricted stock awards		(4,098	)		(2,504	)
Notes receivable from officer-shareholders		(2,539	)		(2,630	)
Accumulated other comprehensive loss, net (Note 9)		(6,885	)		(9,958	)
Total shareholders’ equity		1,015,238			1,001,271
Total liabilities and shareholders’ equity	$	3,251,246		$	3,276,136

See accompanying notes to consolidated financial statements.

3

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended March 31,	2003			2002
REVENUES
Rental income	$	151,418		$	145,676
Non-property income		202			347
Total revenues		151,620			146,023
EXPENSES
Rental expenses:
Real estate taxes and insurance		17,486			16,483
Personnel		15,397			14,494
Utilities		9,494			8,639
Repairs and maintenance		9,635			8,478
Administrative and marketing		5,570			5,435
Property management		4,178			4,362
Other operating expenses		294			333
Real estate depreciation		39,305			35,630
Interest		31,507			31,613
(Gain) / loss on early debt retirement		(182	)		15,814
General and administrative		5,449			7,621
Other depreciation and amortization		760			1,062
Total expenses		138,893			149,964
Income / (loss) before gains on sales of investments, minority interests, and discontinued operations		12,727			(3,941	)
Gains on sales of land and depreciable property		—			1,201
Income / (loss) before minority interests and discontinued operations		12,727			(2,740	)
Minority interests of outside partnerships		(375	)		(454	)
Minority interests of unitholders in operating partnerships		(367	)		640
Income / (loss) before discontinued operations		11,985			(2,554	)
Income from discontinued operations, net of minority interests (Note 3)		1,456			891
Net income / (loss)		13,441			(1,663	)
Distributions to preferred shareholders—Series A and B		(2,911	)		(2,911	)
Distributions to preferred shareholders—Series D (Convertible)		(4,036	)		(3,964	)
Net income / (loss) available to common shareholders	$	6,494		$	(8,538	)
Earnings / (loss) per common share—basic and diluted:
Income / (loss) before discontinued operations, net of minority interests	$	0.05		$	(0.09	)
Income from discontinued operations, net of minority interests	$	0.01		$	0.01
Net income / (loss) available to common shareholders	$	0.06		$	(0.08	)
Common distributions declared per share	$	0.2850		$	0.2775
Weighted average number of common shares outstanding—basic		107,698			103,654
Weighted average number of common shares outstanding—diluted		108,590			103,654

See accompanying notes to consolidated financial statements.

4

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three Months Ended March 31,	2003			2002
Operating Activities
Net income / (loss)	$	13,441		$	(1,663	)
Adjustments to reconcile net income / (loss) to net cash provided by operating activities:
Depreciation and amortization		40,065			40,387
Impairment loss on real estate and investments		—			2,301
Gains on sales of land and depreciable property		(1,045	)		(918	)
Minority interests		836			(125	)
(Gain) / loss on early debt retirement		(182	)		15,814
Amortization of deferred financing costs and other		1,442			1,149
Changes in operating assets and liabilities:
Decrease in operating liabilities		(15,424	)		(13,478	)
(Increase) / decrease in operating assets		(2,069	)		471
Net cash provided by operating activities		37,064			43,938
Investing Activities
Proceeds from sales of real estate investments, net		11,350			3,042
Acquisition of real estate assets, net of liabilities assumed		(3,570	)		(39,631	)
Development of real estate assets		(4,152	)		(6,692	)
Capital expenditures and other major improvements—real estate assets, net of escrow reimbursement		(8,559	)		(9,872	)
Capital expenditures—non-real estate assets		(238	)		(732	)
Net cash used in investing activities		(5,169	)		(53,885	)
Financing Activities
Proceeds from the issuance of secured debt		—			324,282
Scheduled principal payments on secured debt		(6,729	)		(5,341	)
Non-scheduled principal payments and prepayment penalties on secured debt		—			(230,768	)
Proceeds from the issuance of unsecured debt		150,000			—
Payments and prepayment penalties on unsecured debt		(207,307	)		(54,281	)
Net proceeds / (repayment) of revolving bank debt		42,000			(33,200	)
Payment of financing costs		(4,883	)		(2,884	)
Proceeds from the issuance of common stock		34,973			54,317
Proceeds from the issuance of performance shares		—			55
Distributions paid to minority interests		(2,040	)		(2,152	)
Distributions paid to preferred shareholders		(6,875	)		(6,885	)
Distributions paid to common shareholders		(29,602	)		(27,865	)
Repurchase of common and preferred stock		(71	)		(1,943	)
Net cash (used in) / provided by financing activities		(30,534	)		13,335
Net increase in cash and cash equivalents		1,361			3,388
Cash and cash equivalents, beginning of period		3,152			4,641
Cash and cash equivalents, end of period	$	4,513		$	8,029
Supplemental Information:
Interest paid during the period	$	28,334		$	33,306
Issuance of restricted stock awards		2,106			2,161
Non-cash transactions:
Conversion of operating partnership minority interests to common stock (5,956 shares in 2003 and 10,542 shares in 2002)		92			153

See accompanying notes to consolidated financial statements.

5

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

(In thousands, except share data)

(Unaudited)

	Preferred Stock			Common Stock					Paid-in Capital			Distributions in Excess of Net Income			Deferred Compensation - Unearned Restricted Stock Awards			Notes Receivable from Officer- Shareholders			Accumulated Other Comprehensive Loss			Total
	Shares	Amount		Shares		Amount
Balance, December 31, 2002	13,416,009	$	310,400	106,605,259		$	106,605		$	1,140,786		$	(541,428	)	$	(2,504	)	$	(2,630	)	$	(9,958	)	$	1,001,271
Comprehensive Income
Net income													13,441												13,441
Other comprehensive income:
Unrealized gain on derivative instruments (Note 6)																						3,073			3,073
Comprehensive income													13,441									3,073			16,514
Issuance of common shares to employees, officers and director-shareholders				281,359			281			3,582															3,863
Issuance of common shares through dividend reinvestment and stock purchase plan				4,564			5			52															57
Issuance of common shares through public offering				2,000,000			2,000			28,946															30,946
Purchase of common and preferred stock				(4,564	)		(5	)		(66	)														(71	)
Issuance of restricted stock awards				135,528			136			1,970						(2,106	)								—
Adjustment for conversion of minority interests of unitholders in operating partnerships				5,956			6			86															92
Principal repayments on notes receivable from officer-shareholders																			91						91
Common stock distributions declared ($.285 per share)													(31,090	)											(31,090	)
Preferred stock distributions declared-Series B ($.5375 per share)													(2,911	)											(2,911	)
Preferred stock distributions declared-Series D ($.5089 per share)													(4,036	)											(4,036	)
Amortization of deferred compensation																512									512
Balance, March 31, 2003	13,416,009	$	310,400	109,028,102		$	109,028		$	1,175,356		$	(566,024	)	$	(4,098	)	$	(2,539	)	$	(6,885	)	$	1,015,238

See accompanying notes to consolidated financial statements.

6

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003

(UNAUDITED)

1. CONSOLIDATION AND BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of United Dominion Realty Trust, Inc. and its subsidiaries, including United Dominion Realty, L.P. (the “Operating Partnership”), and Heritage Communities L.P. (the “Heritage OP”), (collectively, “United Dominion”). As of March 31, 2003, there were 100,984,826 units in the Operating Partnership outstanding, of which 94,618,101 units, or 93.7%, were owned by United Dominion and 6,366,725 units, or 6.3%, were owned by non-affiliated limited partners. As of March 31, 2003, there were 3,492,889 units in the Heritage OP outstanding, of which 3,115,471 units, or 89.2%, were owned by United Dominion and 377,418 units, or 10.8%, were owned by non-affiliated limited partners. The consolidated financial statements of United Dominion include the minority interests of the unitholders in the operating partnerships.

The accompanying interim unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. The accompanying consolidated financial statements should be read in conjunction with the audited financial statements and related notes appearing in United Dominion’s Annual Report on Form 10-K for the year ended December 31, 2002, filed with the Securities and Exchange Commission.

In the opinion of management, the consolidated financial statements reflect all adjustments which are necessary for the fair presentation of financial position at March 31, 2003 and results of operations for the interim periods ended March 31, 2003 and 2002. Such adjustments are normal and recurring in nature. All significant inter-company accounts and transactions have been eliminated in consolidation. The interim results presented are not necessarily indicative of results that can be expected for a full year.

The preparation of these financial statements 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 financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates.

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

7

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003

(UNAUDITED)

2. REAL ESTATE HELD FOR INVESTMENT

At March 31, 2003, there are 258 communities with 73,998 apartment homes classified as real estate held for investment. The following table summarizes the components of real estate held for investment at March 31,(dollars in thousands):

	March 31,			December 31,
	2003			2002
Land and land improvements	$	717,022		$	718,109
Buildings and improvements		2,980,285			2,980,689
Furniture, fixtures, and equipment		212,089			209,696
Construction in progress		192			252
Real estate held for investment		3,909,588			3,908,746
Accumulated depreciation		(784,139	)		(742,876	)
Real estate held for investment, net	$	3,125,449		$	3,165,870

3. INCOME FROM DISCONTINUED OPERATIONS

During 2002, United Dominion sold 25 communities with a total of 6,990 apartment homes, one parcel of land, and one commercial property with 143,000 square feet. For the three months ended March 31, 2003, United Dominion sold one community with a total of 220 apartment homes and one commercial property with 104,000 square feet. At March 31, 2003, United Dominion had one community with 264 apartment homes with a net book value of $16.3 million and three parcels of land with a net book value of $9.1 million included in real estate held for disposition. The results of operations for these properties are classified on the Consolidated Statements of Operations in the line item entitled “Income from discontinued operations, net of minority interests.”

The following is a summary of income from discontinued operations for the three months ended March 31, 2003 and 2002 (dollars in thousands):

	Three Months Ended March 31,
	2003			2002
Rental income	$	785		$	13,361
Rental expenses		280			5,284
Real estate depreciation		—			3,656
Interest		—			845
Impairment loss on real estate and investments		—			2,301
Other expenses		—			40
		280			12,126
Income before gains on sales of investments, and minority interests		505			1,235
Gain / (loss) on sale of depreciable property		1,045			(283	)
Income before minority interests		1,550			952
Minority interests on income from discontinued operations		(94	)		(61	)
Income from discontinued operations, net of minority interests	$	1,456		$	891

8

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003

(UNAUDITED)

4. SECURED DEBT

Secured debt on continuing and discontinued operations, which encumbers $1.5 billion or 38.2% of United Dominion’s real estate owned ($2.4 billion or 61.8% of United Dominion’s real estate owned is unencumbered) consists of the following at March 31, 2003 (dollars in thousands):

	Principal Outstanding
					Weighted Average Interest Rate		Weighted Average Years to Maturity	Number of Communities Encumbered
	March 31, 2003		December 31, 2002		2003		2003	2003
Fixed Rate Debt
Mortgage notes payable (a)	$	186,824	$	187,927	7.56	%	6.4	13
Tax-exempt secured notes payable		55,545		61,278	6.55	%	11.0	7
Fannie Mae credit facilities		288,875		288,875	6.40	%	7.8	9
Fannie Mae credit facilities—swapped		17,000		17,000	6.74	%	1.1	—
Total fixed rate secured debt		548,244		555,080	6.82	%	7.4	29
Variable Rate Debt
Mortgage notes payable		11,627		11,752	4.34	%	7.0	3
Tax-exempt secured notes payable		7,770		7,770	1.01	%	24.9	1
Fannie Mae credit facilities		370,469		370,469	1.81	%	13.9	51
Freddie Mac credit facility		70,669		70,669	1.77	%	7.8	8
Total variable rate secured debt		460,535		460,660	1.85	%	13.0	63
Total Secured Debt	$	1,008,779	$	1,015,740	4.55	%	10.0	92

(a) Includes fair value adjustments aggregating $1.9 million at March 31, 2003 and $2.2 million at December 31, 2002, recorded in connection with the assumption of debt associated with two acquisitions consummated in 1998.

Approximate principal payments due during each of the next five calendar years and thereafter, as of March 31, 2003, are as follows(dollars in thousands):

Year	Fixed Rate Maturities		Variable Rate Maturities		Total Secured Maturities
2003	$	17,264	$	330	$	17,594
2004		60,027		462		60,489
2005		19,338		4,963		24,301
2006		31,226		3,846		35,072
2007		7,198		147		7,345
Thereafter		413,191		450,787		863,978
	$	548,244	$	460,535	$	1,008,779

For the three months ended March 31, 2002, United Dominion recognized $15.8 million ($0.15 per diluted share) of expense as a result of prepayment penalties incurred from the refinancing of certain secured loans, using proceeds from the Fannie Mae and Freddie Mac credit facilities.

9

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003

(UNAUDITED)

5. UNSECURED DEBT

A summary of unsecured debt at March 31, 2003 and December 31, 2002 is as follows (dollars in thousands):

	2003		2002
Commercial Banks
Borrowings outstanding under an unsecured credit facility due March 2007 (a)	$	217,800	$	—
Borrowings outstanding under an unsecured credit facility due August 2003 (a)		—		175,800
Borrowings outstanding under an unsecured term loan due May 2004–2005 (a)		—		100,000
Senior Unsecured Notes – Other
7.65% Medium-Term Notes due January 2003		—		10,000
7.22% Medium-Term Notes due February 2003		—		11,815
8.63% Notes due March 2003		—		78,005
7.98% Notes due March 2002–2003		—		7,428
5.05% City of Portland, OR Bonds due October 2003		7,345		7,345
7.67% Medium-Term Notes due January 2004		46,585		46,585
7.73% Medium-Term Notes due April 2005		21,100		21,100
7.02% Medium-Term Notes due November 2005		49,760		49,760
7.95% Medium-Term Notes due July 2006		85,374		85,374
7.07% Medium-Term Notes due November 2006		25,000		25,000
7.25% Notes due January 2007		92,255		92,265
4.50% Medium-Term Notes due March 2008 (b)		150,000		—
ABAG Tax-Exempt Bonds due August 2008		46,700		46,700
8.50% Monthly Income Notes due November 2008		29,081		29,081
6.50% Notes due June 2009		200,000		200,000
8.50% Debentures due September 2024 (c)		54,118		54,118
Other (d)		1,426		1,524
		808,744		766,100
Total Unsecured Debt	$	1,026,544	$	1,041,900

(a) During the first quarter of 2003, United Dominion closed on a new three-year $500 million unsecured revolving credit facility. The credit facility replaced United Dominion’s $375 million unsecured revolving credit facility and $100 million unsecured term loan. If United Dominion receives commitments from additional lenders or if the initial lenders increase their commitments, United Dominion will be able to increase the credit facility to $650 million. At United Dominion’s option, the credit facility can be extended for one year to March 2007. At March 31, 2003, United Dominion had ten interest rate swap agreements associated with commercial bank borrowings under the new revolver with an aggregate notional value of $205 million under which United Dominion paid a fixed rate of interest and received a variable rate of interest on the notional amounts. The interest rate swaps, which mature from May 2003 through July 2004, effectively change United Dominion’s interest rate exposure on the $205 million of borrowings from a variable rate to a weighted average fixed rate of

10

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003

(UNAUDITED)

approximately 7.6%. As of March 31, 2003, the weighted average interest rate of the $217.8 million in commercial borrowings, after giving effect to swap agreements, was 7.2%.

(b) In February 2003, United Dominion issued $150 million of 4.50% senior unsecured medium-term notes due in March 2008. The net proceeds of $149.3 million from the sale were used to repay amounts outstanding on United Dominion’s $375 million unsecured revolving credit facility.

(c) Includes an investor put feature that grants a one-time option to redeem the debentures in September 2004.

(d) Includes $1.4 million and $1.5 million at March 31, 2003 and December 31, 2002, respectively, of deferred gains from the termination of interest rate risk management agreements.

6. FINANCIAL INSTRUMENTS

United Dominion accounts for its derivative instruments in accordance with Statements of Financial Accounting Standards No. 133 and 138,“Accounting for Certain Derivative Instruments and Hedging Activities.” At March 31, 2003, all of United Dominion’s derivative financial instruments are interest rate swap agreements that are designated as cash flow hedges of debt with variable interest rate features, and are qualifying hedges for financial reporting purposes. For derivative instruments that qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings during the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in current earnings during the period of change.

The fair value of United Dominion’s derivative instruments is reported on the balance sheet at their current fair value. Estimated fair values for interest rate swaps rely on prevailing market interest rates. These fair value amounts should not be viewed in isolation, but rather in relation to the values of the underlying hedged transactions and investments and to the overall reduction in exposure to adverse fluctuations in interest rates. Each interest rate swap agreement is designated with all or a portion of the principal balance and term of a specific debt obligation. The interest rate swaps involve the periodic exchange of payments over the life of the related agreements. Amounts received or paid on the interest rate swaps are recorded on an accrual basis as an adjustment to the related interest expense of the outstanding debt based on the accrual method of accounting. The related amounts payable to and receivable from counterparties are included in other liabilities and other assets, respectively.

11

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003

(UNAUDITED)

The following table presents the fair values of United Dominion’s derivative financial instruments outstanding, based on external market quotations, as of March 31, 2003(dollars in thousands):

Notional Amount	Fixed Rate	Type of Contract	Effective Date	Contract Maturity	Fair Value
Secured Debt:
FNMA
$10,000	6.92%	Swap	12/01/99	04/01/04		(565	)
7,000	6.48%	Swap	06/30/99	06/30/04	$	(469	)
17,000	6.74%					(1,034	)
Unsecured Debt:
Bank Credit Facility
25,000	7.34%	Swap	11/15/00	05/15/03		(213	)
20,000	7.34%	Swap	11/15/00	05/15/03		(171	)
8,500	7.11%	Swap	12/04/00	05/15/03		(69	)
25,000	7.29%	Swap	11/01/00	08/01/03		(548	)
25,000	7.29%	Swap	11/01/00	08/01/03		(548	)
25,000	7.11%	Swap	12/01/00	08/01/03		(529	)
25,000	7.11%	Swap	12/04/00	08/01/03		(529	)
23,500	8.52%	Swap	11/15/00	05/15/04		(1,479	)
23,000	8.52%	Swap	11/15/00	05/15/04		(1,448	)
5,000	8.65%	Swap	06/26/95	07/01/04		(338	)
205,000	7.56%					(5,872	)
$222,000	7.50%				$	(6,906	)

During the quarter ended March 31, 2003, United Dominion recognized $3.1 million of unrealized gains in comprehensive income and no gain or loss was recorded to net income for what would be the ineffective portion of its hedging instruments. In addition, United Dominion has recognized $6.9 million of derivative financial instrument liabilities on the Consolidated Balance Sheet.

As of March 31, 2003, United Dominion expects to reclassify $6.4 million of net losses on derivative instruments from accumulated other comprehensive loss to earnings (interest expense which, combined with the interest paid on the underlying debt, results in interest expense at the fixed rates shown above) during the next twelve months on the related hedged transactions.

7. EARNINGS PER SHARE

Basic earnings per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed based upon common shares outstanding plus the effect of dilutive stock options and other potentially dilutive common stock equivalents. The dilutive effect of stock options and other potentially dilutive common stock equivalents is determined using the treasury stock method based on United Dominion’s average stock price.

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UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003

(UNAUDITED)

The following table sets forth the computation of basic and diluted earnings per share(dollars in thousands, except per share data):

	Three months ended March 31,
	2003			2002
Numerator for basic and diluted earnings per share—
net income/(loss) available to common shareholders	$	6,494		$	(8,538	)
Denominator:
Denominator for basic earnings per share—
Weighted average common shares outstanding		108,072			103,940
Non-vested restricted stock awards		(374	)		(286	)
		107,698			103,654
Effect of dilutive securities:
Employee stock options and non-vested restricted stock awards		892			—
Denominator for diluted earnings per share		108,590			103,654
Basic and diluted earnings/(loss) per share	$	0.06		$	(0.08	)

The effect of the conversion of the operating partnership units and convertible preferred stock is not dilutive and is therefore not included in the above calculations. If the operating partnership units were converted to common stock, the additional shares of common stock outstanding for the three months ended March 31, 2003 and 2002 would be 6,961,519 and 7,055,186 weighted average shares, respectively. If the convertible preferred stock was converted to common stock, the additional shares of common stock outstanding for the three months ended March 31, 2003 and 2002 would be 12,307,692 weighted average common shares.

The effect of employee stock options for the three months ended March 31, 2002, was not included since its effect would be anti-dilutive due to the net loss to common shareholders incurred during the period.

8. STOCK-BASED COMPENSATION

United Dominion has elected to follow the intrinsic value method under Accounting Principles Board Opinion No. 25,“Accounting for Stock Issued to Employees” (“APB 25”) in accounting for its employee stock options because the alternative fair value accounting provided for under Statement 123,“Accounting for Stock Based Compensation” (“SFAS 123”), requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of United Dominion’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation cost has been recognized.

13

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003

(UNAUDITED)

The following table sets forth United Dominion’s earnings/(loss) and earnings/(loss) per share had United Dominion’s stock-based compensation expense been determined based upon the fair value method at the date of grant, consistent with the provisions of SFAS 123 (in thousand, except per share data):

	Three months ended March 31,
	2003			2002
Reported net income/(loss)	$	6,494		$	(8,538	)
Stock-based employee compensation cost included in net income / (loss)		513			1,383
Stock-based employee compensation cost that would have been included in net income/(loss) under the fair value method		(587	)		(1,476	)
Proforma net income/(loss)	$	6,420		$	(8,631	)
Earnings per common share—basic and diluted
As reported	$	0.06		$	(0.08	)
Pro forma	$	0.06		$	(0.08	)

9. COMPREHENSIVE INCOME

Total comprehensive income for the three months ended March 31, 2003 and 2002 was $16.5 million and $1.5 million, respectively. The difference between net income and total comprehensive income is primarily due to the fair value accounting for interest rate swaps.

10. COMMITMENTS AND CONTINGENCIES

Commitments

United Dominion is committed to completing its real estate currently under development, which has an estimated cost to complete of $56.0 million at March 31, 2003.

Contingencies

Out-Performance Program

In May 2001, the shareholders of United Dominion approved the Out-Performance Program (the “Program”) pursuant to which executives and other key officers of United Dominion were given the opportunity to invest in United Dominion by purchasing performance shares (“Out-Performance Partnership Shares” or “OPPSs”) of the Operating Partnership for an initial investment of $1.27 million (the full market value of the OPPSs at inception, as determined by an independent investment banking firm). The Program measures United Dominion’s performance over a 28-month period beginning February 2001.

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UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003

(UNAUDITED)

The Program is designed to provide participants with the possibility of substantial returns on their investment if United Dominion’s total return, considering the reinvestment of dividend income as well as share price appreciation, on its common stock during the measurement period exceeds the greater of (a) industry average (defined as the total cumulative return of the Morgan Stanley REIT Index over the same period) or (b) a 30% total return (12% annualized) (the “minimum return”).

At the conclusion of the measurement period, if United Dominion’s total return satisfies these criteria, the holders of the OPPSs will receive distributions and allocations of income and loss from the Operating Partnership equal to the distributions and allocations that would be received on the number of interests in the Operating Partnership (“OP Units”) obtained by:

i. determining the amount by which the cumulative total return of United Dominion’s common stock over the measurement period exceeds the greater of the cumulative total return of the peer group index (the Morgan Stanley REIT Index) or the minimum return (such being the “excess return”);

ii. multiplying 4% of the excess return by United Dominion’s market capitalization (defined as the average number of shares and OP Units outstanding over the 28-month period multiplied by the daily closing price of United Dominion’s common stock) up to a maximum of 2% of market capitalization; and

iii. dividing the number obtained in (ii) by the market value of one share of United Dominion common stock on the valuation date, determined by the volume-weighted average price of the common stock for the 20 trading days immediately preceding the valuation date.

If, on the valuation date, the cumulative total return of United Dominion’s common stock does not meet the minimum return or the total return of the peer group and there is no excess return, then the holders of the OPPSs will forfeit their entire initial investment of $1.27 million. The OPPSs, unlike United Dominion’s other OP Units, are not convertible into common stock except upon a change of control of United Dominion or upon the death of the participant. It is this feature, combined with the fact that management paid market value for the shares, that we believe makes this program better than previous programs, such as stock options, that were likewise designed to motivate and retain executives and key management. It ensures that management’s goals are perpetually aligned with the shareholders since the OP Units can not be conveyed or disposed of except as outlined previously. Accordingly, the contingently issuable OPPSs are not included in common stock and common stock equivalents in the calculation of earnings per share. Based upon results through March 31, 2003, 1,561,191 OPPSs would have been issued had the Program terminated on that date. However, since the ultimate determination of OPPSs to be issued will not occur until June 2003, and the number of OPPSs is determinable only upon future events, the financial statements do not reflect any additional impact for these events.

Legal Matters

United Dominion and its subsidiaries are engaged in various litigations and have a number of unresolved claims pending. The ultimate liability in respect of such litigations and claims cannot be determined at this time. United Dominion is of the opinion that such liability, to the extent not provided for through insurance or otherwise, is not likely to be material in relation to the consolidated financial statements of United Dominion.

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UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003

(UNAUDITED)

11. RELATED PARTY TRANSACTIONS

As of March 31, 2003, United Dominion has $2.5 million of notes receivable from certain officers and directors of United Dominion (original principal balances of $3.0 million), at an interest rate of 7.0% that mature between December 2003 and October 2005. The purpose of the loans was for the borrowers to purchase shares of United Dominion’s common stock pursuant to United Dominion’s 1991 Stock Purchase and Loan Plan. The loans are evidenced by promissory notes between the borrowers and United Dominion and are secured by a pledge of the shares of common stock (236,750 shares with a market value of $3.8 million at March 31, 2003). The notes require that dividends received on the shares be applied towards payment of the notes.

In addition, United Dominion entered into a Servicing and Purchase Agreement (the “ Servicing Agreement”) with SunTrust Bank (the “Bank”) whereby United Dominion has agreed to act as servicing agent for and to purchase certain loans made by the Bank to officers and directors of United Dominion (the “Borrowers”) to finance the purchase of shares of United Dominion’s common stock. The loans are evidenced by promissory notes (“Notes”) between each Borrower and the Bank. The Servicing Agreement provides that the Bank can require United Dominion to purchase the Notes upon an event of default by the Borrower or United Dominion under the Servicing Agreement and at certain other times during the term of the Servicing Agreement. The aggregate outstanding principal balance of the Notes as of March 31, 2003 was $10.8 million (original principal balance was $12.2 million), and all of the Notes mature during 2004. Because certain of the Borrowers elected floating rate loans and others elected fixed rate loans, the interest rates on these loans as of March 31, 2003 ranged from 2.08% to 7.68%. Each Borrower entered into a Participation Agreement with United Dominion that requires that all cash dividends received on the shares (1,033,347 shares at March 31, 2003 with a closing market value of $16.5 million) be applied towards payment of the Notes. Based upon the fact that 100% of all cash dividend payments are paid to amortize the Notes and that the Notes are recourse to the Borrowers, United Dominion believes that its exposure to liability under the Notes is remote.

12. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2003, the FASB issued Interpretation 46,“Consolidation of Variable Interest Entities.” This statement refines the identification process of variable interest entities and how an entity assesses its interests in a variable interest entity to decide whether to consolidate that entity. United Dominion, from time to time, enters into partnership and joint venture arrangements, which may be required to be consolidated under this statement. As of March 31, 2003, none of United Dominion’s joint venture investments require consolidation.

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148“Accounting for Stock-Based Compensation, Transition and Disclosure” (“SFAS 148”). SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS 148 also requires that disclosures of the pro forma effect of using the fair value method of accounting for stock-based compensation be displayed more prominently and in a tabular format. Additionally, SFAS 148 requires disclosure of the pro forma effect in interim financial statements. The transition disclosure requirements of SFAS 148 are effective for the fiscal year 2003. The interim and annual disclosure requirements are effective for the third quarter of 2003. As of March 31, 2003, United Dominion has elected to adopt the disclosure requirements of SFAS 148.

In November 2002, the FASB issued Interpretation 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This statement requires that a liability for the fair value of a guarantee be recognized at the time the obligation is undertaken. The statement also requires that the liability be measured over the term of the related guarantee. This statement is effective for all

16

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003

(UNAUDITED)

guarantees entered into subsequent to December 31, 2002. For all guarantees entered into prior to December 31, 2002, there is to be no change in accounting; however, disclosure of management’s estimate of its future obligation under the guarantee is to be made. As of March 31, 2003, management estimates that its likelihood of funding its guarantor obligations is remote and that the impact to United Dominion would be immaterial.

In April 2002, the FASB issued Statement 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Correction” (“SFAS No. 145”). Statement 4, “Reporting Gains and Losses from Extinguishment of Debt” (“SFAS No. 4”), required that gains and losses from the extinguishment of debt that were included in the determination of net income be aggregated and, if material, classified as an extraordinary item. As of March 31, 2003, United Dominion has recorded current period items and reclassified prior period items that do not meet the extraordinary classification into continuing operations in accordance with the provisions of SFAS No. 145. Additionally, gains and losses related to debt extinguishment are now classified in income from continuing operations.

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

Forward-Looking Statements

This quarterly 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”, “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 the actual results, performance or achievements of United Dominion Realty Trust, Inc. 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, unanticipated adverse business developments affecting United Dominion, or its properties, adverse changes in the real estate markets and general and local economies and business conditions. Although United Dominion believes 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 United Dominion or any other person that the results or conditions described in such statements or the objectives and plans of United Dominion will be achieved.

Business Overview

United Dominion is a real estate investment trust, or REIT, that owns, acquires, renovates, develops, and manages middle-market apartment communities nationwide. We were formed in 1972 as a Virginia corporation and our subsidiaries include two operating partnerships, United Dominion Realty, L.P. and Heritage Communities, L.P. Unless the context otherwise requires, all references in this report to “we,” “us,” “our,” or “United Dominion” refer collectively to United Dominion Realty Trust, Inc. and its subsidiaries.

From 1996 through 1999, United Dominion acquired other REITs, private portfolios, and individual communities to create a national platform. Since that time, we have upgraded the quality of our portfolio through capital reinvestment, development, divestitures and acquisitions, and invested in infrastructure and technology to support our portfolio of assets. In 2001, management established a long-term strategy that resulted in certain fundamental conclusions and initial steps towards achieving our goals.

We believe that we must distinguish ourselves within the industry to maintain a leadership position over the long-term. We believe an increased focus on being an excellent operator of apartment homes will be a compelling and successful business model to differentiate United Dominion in the eyes of residents, associates, and investors. With this strategy, we believe that we can become the best in the multifamily industry based upon the following key principles:

OPERATIONAL EXCELLENCE– Operational excellence is a way of doing business with consistent, standard systems and business processes throughout our organization, to provide customers, residents, and associates similar experiences regardless of location. Through operational excellence, we believe that we can enhance our existing portfolio and new properties we seek to acquire, deliver superior service to our residents, and provide greater returns to our investors.

MIDDLE-MARKET – United Dominion will focus efforts on owning and managing apartments that provide housing for customers who cannot typically afford an entry-level home, or customers who choose apartment living over other alternatives. We will primarily serve the price-sensitive, value-for-money customers, in the broad middle-market segments of the population.

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PORTFOLIO MANAGEMENT – We intend to continue to own and operate middle-market apartment homes across a geographically diverse platform. We believe that enhancing our presence in 25 to 30 core markets will enable us to capitalize on operating efficiencies. As local market cycles create opportunities, we intend to exit current markets where long-term growth is below the national average (the “non-core markets”), and redeploy capital within our core markets.

We believe that over the long-term, the fundamental principles of operational excellence, middle-market focus, and proactive portfolio management will better position United Dominion to serve its residents, increase profitability, provide rewarding careers to our associates, and capitalize on changes in the marketplace.

At March 31, 2003, United Dominion’s portfolio included 259 communities with 74,262 apartment homes nationwide. The following table summarizes United Dominion’s market information by major geographic markets (includes real estate held for disposition, real estate under development, and land, but excludes commercial properties):

	As of March 31, 2003						Quarter Ended March 31, 2003
	Number of Apartment Communities	Number of Apartment Homes	Percentage of Carrying Value		Carrying Value (in thousands)		Average Physical Occupancy		Average Monthly Rental Rates
Dallas, TX	15	5,133	6.6	%	$	262,593	95.6	%	$	674
Houston, TX	22	5,726	5.9	%		232,705	89.6	%		644
Phoenix, AZ	11	3,635	5.5	%		217,108	91.8	%		717
Orlando, FL	14	4,140	5.2	%		207,031	93.0	%		717
Raleigh, NC	11	3,663	5.2	%		204,413	93.0	%		742
Metropolitan DC	8	2,331	4.4	%		173,331	95.8	%		972
Arlington, TX	10	3,465	4.0	%		158,419	94.8	%		668
Tampa, FL	10	3,372	3.9	%		154,419	93.5	%		700
Columbus, OH	6	2,530	3.8	%		149,397	93.4	%		680
San Francisco, CA	4	980	3.6	%		141,346	96.3	%		1,536
Charlotte, NC	10	2,711	3.5	%		139,229	96.0	%		604
Southern California	5	1,558	3.3	%		130,607	95.1	%		964
Nashville, TN	8	2,220	3.0	%		120,764	93.4	%		660
Greensboro, NC	8	2,122	2.6	%		104,769	93.7	%		579
Monterey Peninsula, CA	9	1,706	2.5	%		98,664	92.7	%		912
Richmond, VA	8	2,372	2.5	%		98,114	95.8	%		710
Wilmington, NC	6	1,868	2.3	%		91,394	91.1	%		635
Baltimore, MD	7	1,470	2.3	%		89,698	96.0	%		900
Atlanta, GA	6	1,426	1.8	%		72,705	92.3	%		677
Columbia, SC	6	1,584	1.6	%		62,877	93.8	%		597
Jacksonville, FL	3	1,157	1.5	%		59,067	96.5	%		677
Norfolk, VA	6	1,438	1.4	%		54,899	95.3	%		716
Lansing, MI	4	1,226	1.3	%		50,565	95.1	%		658
Seattle, WA	3	628	0.9	%		34,362	91.5	%		744
Other Western	6	2,650	4.0	%		157,517	89.4	%		793
Other Pacific	8	2,275	3.1	%		124,349	92.6	%		754
Other Southwestern	8	2,077	2.8	%		110,472	87.2	%		687
Other Florida	8	2,089	2.7	%		108,326	95.7	%		843
Other Midwestern	10	2,123	2.4	%		96,571	94.4	%		624
Other North Carolina	8	1,893	1.9	%		76,041	92.9	%		580
Other Southeastern	4	1,394	1.8	%		69,464	89.9	%		582
Other Mid-Atlantic	5	928	1.1	%		42,911	96.7	%		822
Other Northeastern	2	372	0.5	%		18,272	96.3	%		707
Real Estate Under Development	—	—	0.6	%		24,366	—			—
Land	—	—	0.5	%		20,351	—			—
Total Apartments	259	74,262	100.0	%	$	3,957,116	93.3	%	$	719

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Liquidity and Capital Resources

Liquidity is the ability to meet present and future financial obligations either through the sale or maturity of existing assets or by the acquisition of additional funds through capital management. Both the coordination of asset and liability maturities and effective capital management are important to the maintenance of liquidity. United Dominion’s primary source of liquidity is its cash flow from operations as determined by rental rates, occupancy levels, and operating expenses related to its portfolio of apartment homes. United Dominion routinely uses its unsecured bank credit facility to temporarily fund certain investing and financing activities prior to arranging for longer-term financing. During the past several years, proceeds from the sale of real estate have been used for both investing and financing activities.

United Dominion expects to meet its short-term liquidity requirements generally through its net cash provided by operations and borrowings under credit arrangements. 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 long-term secured and unsecured borrowings, the disposition of properties, and the issuance of additional debt or equity securities of United Dominion. We believe that our net cash provided by operations will continue to be adequate to meet both operating requirements and the payment of dividends by United Dominion in accordance with REIT requirements in both the short- and long-term. Likewise, the budgeted expenditures for improvements and renovations of certain properties are expected to be funded from property operations.

In January 2003, coinciding with our inclusion in the S&P MidCap 400 Index, United Dominion sold 2.0 million shares of common stock at a public offering price of $15.71 per share under its $1.0 billion shelf registration statement. We received net proceeds from this offering, after an underwriting discount, of $31.2 million, which were used to repay debt and for general corporate purposes. In February 2003, United Dominion sold $150 million of 4.50% medium-term notes due in March 2008 under a new $300 million medium-term note program. The net proceeds from the issuance of approximately $149.3 million were used to repay amounts outstanding on United Dominion’s unsecured revolving credit facility. As of March 31, 2003, approximately $819 million of equity and debt securities remain available for use under the shelf registration. Access to capital markets is dependent on market conditions at the time of issuance.

Subsequent to March 31, 2003, United Dominion sold 3.0 million shares of common stock at a public offering price of $16.97 per share. We received net proceeds from this offering of $49.2 million, which will be used for general corporate purposes, including the repayment of debt and the repurchase of shares of preferred stock.

Future Capital Needs

Future development expenditures are expected to be funded primarily through joint ventures or with proceeds from the sale of property and, to a lesser extent, cash flows provided by operating activities. Acquisition activity in strategic markets is expected to be largely financed through the issuance of equity and debt securities, the issuance of operating partnership units, the assumption of secured debt, and by the reinvestment of proceeds from the sale of property in non-strategic markets.

During the remainder of 2003, United Dominion has approximately $17.6 million of secured debt and $7.7 million of unsecured debt maturing that we anticipate repaying using proceeds from borrowings under our secured or unsecured credit facilities, or the issuance of new unsecured debt securities.

Critical Accounting Policies 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, and (3) derivatives and hedging activities. Our critical

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accounting policies are described in more detail in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2002. There have been no significant changes in our critical accounting policies from those reported in our 2002 Annual Report on Form 10-K. With respect to these critical accounting policies, management believes 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 Flow

The following discussion explains the changes in net cash provided by operating activities and net cash used in investing and financing activities that are presented in United Dominion’s Consolidated Statements of Cash Flows.

Operating Activities

For the quarter ended March 31, 2003, United Dominion’s cash flow provided by operating activities was $37.1 million compared to $43.9 million for the quarter ended March 31, 2002. The decrease in cash flow provided by operating activities resulted primarily from a decrease in property operating income provided by our same communities and a decrease in the overall size of United Dominion’s apartment community portfolio (see discussion under “Apartment Community Operations”), and to a lesser extent, the increase in other assets related to payments made for prepaid insurance premiums that were made in the prior year, partially offset by a decrease in general and administrative expenses.

Investing Activities

For the quarter ended March 31, 2003, net cash used in investing activities was $5.2 million compared to $53.9 million for the quarter ended March 31, 2002. Changes in the level of investing activities from period to period reflects United Dominion’s strategy as it relates to its acquisition, capital expenditure, development, and disposition programs, as well as the impact of the capital market environment on these activities.

Acquisitions

During the three months ended March 31, 2003, United Dominion acquired one parcel of land in Irving, Texas for $3.1 million. During 2003, we plan to continue to channel new investments to those markets that are projected to provide the best investment returns for us over the next ten years. Markets will be targeted based upon defined criteria including past performance, expected job growth, current and anticipated housing supply and demand, and the ability to attract and support household formation.

Capital Expenditures

In conformity with accounting principles generally accepted in the United States, United Dominion capitalizes those expenditures related to acquiring new assets, materially enhancing the value of an existing asset, or substantially extending the useful life of an existing asset. Expenditures necessary to maintain an existing property in ordinary operating condition are expensed as incurred.

During the quarter ended March 31, 2003, $8.5 million or $116 per home was spent on capital expenditures for all of United Dominion’s communities excluding development and commercial properties. These capital improvements included turnover related expenditures for floor coverings and appliances, other recurring capital expenditures such as HVAC equipment, roofs, landscaping, siding, parking lots, and other non-revenue enhancing capital expenditures, which aggregated $6.7 million or $91 per home. In addition, revenue enhancing capital expenditures, including water sub-metering, the initial installation of microwaves or washer-dryers, and extensive

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interior upgrades totaled $1.3 million or $18 per home and major renovations totaled $0.5 million or $7 per home for the quarter ended March 31, 2003.

The following table outlines capital expenditures and repairs and maintenance costs for United Dominion’s total portfolio, excluding real estate under development and commercial properties for the periods presented (dollars in thousands):

	Quarter ended March 31,						(Per Unit) Quarter ended March 31,
	2003		2002		% Change		2003		2002		% Change
Turnover capital expenditures	$	3,090	$	4,416	-30.0	%	$	42	$	58	-27.6	%
Other recurring capital expenditures		3,607		2,989	20.7	%		49		39	25.6	%
Total recurring capital expenditures		6,697		7,405	-9.6	%		91		97	-6.2	%
Revenue enhancing improvements		1,338		2,451	-45.4	%		18		32	-43.8	%
Major renovations		524		16	3175.0	%		7		—	100.0	%
Total capital improvements	$	8,559	$	9,872	-13.3	%	$	116	$	129	-10.1	%
Repairs and maintenance		9,646		9,177	5.1	%		132		120	10.0	%
Total expenditures	$	18,205	$	19,049	-4.4	%	$	248	$	249	-0.4	%

Total capital improvements decreased $1.3 million or $13 per home in the first quarter of 2003 compared to the first quarter of 2002 as challenging economic conditions negatively impacted the visibility of potential investment returns. United Dominion will continue to selectively add revenue enhancing improvements which we believe will provide a return on investment substantially in excess of United Dominion’s cost of capital. Recurring capital expenditures during 2003 are currently expected to be approximately $435 per home.

Real Estate Under Development

Development activity is focused in core markets that have strong operations in place. For the quarter ended March 31, 2003, United Dominion invested approximately $4.2 million in development projects, down $2.5 million from $6.7 million for the quarter ended March 31, 2002.

The following projects were under development at March 31, 2003:

	Location	Number of Apartment Homes	Completed Apartment Homes	Cost to Date (In thousands)		Budgeted Cost (In thousands)		Estimated Cost Per Home		Expected Completion Date
The Mandolin II	Dallas, TX	178	—	$	8,100	$	13,300	$	74,700	4Q03
2000 Post III	San Francisco, CA	24	—		2,100		6,600		275,000	3Q04
Rancho Cucamonga	Los Angeles, CA	414	—		14,200		60,400		145,900	4Q05
		616	—	$	24,400	$	80,300	$	130,400

In addition, United Dominion owns seven parcels of land that it continues to hold for future development that had a carrying value at March 31, 2003 of $11.3 million. Five of the seven parcels represent additional phases to existing communities as United Dominion plans to add apartment homes adjacent to currently owned communities that are in improving markets.

Development Joint Venture

In September 2002, United Dominion signed a development joint venture agreement with AEGON USA Realty Advisors, Inc. in which United Dominion serves as the managing member. The joint venture is expected to

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develop approximately eight to ten garden style apartment communities over the next three to five years, with a total development cost of up to $210 million. The joint venture will obtain bank construction financing for 65% to 80% of total costs. The joint venture will provide equity contributions for the balance of the costs with AEGON providing 80% and United Dominion providing 20%. United Dominion will serve as the developer, general contractor, and property manager for the joint venture, and will guarantee those project development costs, excluding financing costs (including fees and interest), which exceed the defined project cost budgeted amounts for each respective project, as they come to fruition. As of March 31, 2003, the joint venture had not commenced operations.

Disposition of Investments

For the three months ended March 31, 2003, United Dominion sold one community with 220 apartment homes and one commercial property for an aggregate sales price of approximately $12.2 million and recognized gains for financial reporting purposes of $1.0 million. Proceeds from the sales were used primarily to reduce debt.

During 2003, United Dominion plans to continue to pursue its strategy of exiting markets where long-term growth prospects are limited and redeploying capital into markets that would enhance future growth rates and economies of scale. We intend to use proceeds from 2003 dispositions to acquire communities, fund development activity, and reduce debt.

Financing Activities

Net cash used in financing activities during the three months ended March 31, 2003 was $30.5 million compared to net cash provided by financing activities of $13.3 million for the three months ended March 31, 2002. As part of the plan to improve United Dominion’s balance sheet position, we utilized proceeds from dispositions, equity and debt offerings, and refinancings to extend maturities, pay down existing debt, and purchase new properties.

The following is a summary of our financing activities for the three months ended March 31, 2003:

• Repaid $6.7 million of secured debt and $207.3 million of unsecured debt.

• Sold 2.0 million shares of common stock at a public offering price of $15.71 per share under our $1 billion shelf registration statement in January 2003. We received net proceeds from this offering, after an underwriting discount, of $31.2 million, which were used to repay debt and for general corporate purposes.

• Sold $150 million of 4.50% medium-term notes due in March 2008 in February 2003 under a new $300 million medium-term note program. The net proceeds from the issuance of $149.3 million were used to repay amounts outstanding on United Dominion’s $375 million unsecured revolving credit facility.

• Negotiated a new $500 million unsecured revolving credit facility to replace United Dominion’s $375 million unsecured revolver and $100 million unsecured term loan in March 2003. The credit facility’s interest rate is 25 and 30 basis points lower than the previous unsecured revolver and term loan, respectively.

Credit Facilities

United Dominion has four secured revolving credit facilities with Fannie Mae with an aggregate commitment of $860 million and one with Freddie Mac for $72 million. As of March 31, 2003, $676.3 million was outstanding under the Fannie Mae credit facilities leaving $183.7 million of unused capacity. The Fannie Mae credit facilities are for an initial term of ten years, bear interest at floating and fixed rates, and can be extended for an additional five years at United Dominion’s discretion. As of March 31, 2003, $70.7 million had been funded under the Freddie Mac credit facility leaving $1.3 million of unused capacity. The Freddie Mac credit facility is for an

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initial term of five years with an option by United Dominion to extend for an additional four-year term at the then market rate.

As of March 31, 2003, the aggregate borrowings under both the Fannie Mae and Freddie Mac credit facilities was $747.0 million. We have $305.9 million of the funded balance fixed at a weighted average interest rate of 6.4%. The remaining balance on these facilities is currently at a weighted average variable rate of 1.8%.

United Dominion has a new $500 million three-year unsecured revolving credit facility that matures in March 2006. The credit facility replaces United Dominion’s $375 million unsecured revolver and $100 million unsecured term loan. If United Dominion receives commitments from additional lenders or if the initial lenders increase their commitments, it will be able to increase the credit facility to $650 million. At United Dominion’s option, the credit facility can be extended one year to March 2007. Based on our current credit ratings, the credit facility bears interest at a rate equal to LIBOR plus 90 basis points. As of March 31, 2003, $217.8 million was outstanding under the credit facility leaving $282.2 million of unused capacity.

The Fannie Mae and Freddie Mac credit facilities and the bank revolving credit facility are subject to customary financial covenants and limitations. As of March 31, 2003, management believes that United Dominion is in compliance with all covenants and limitations.

Information concerning short-term bank borrowings under United Dominion’s credit facility and unsecured term loan is summarized in the table that follows (dollars in thousands):

	Three months ended March 31, 2003			Twelve months ended December 31, 2002
Total line of credit	$	500,000		$	475,000
Borrowings outstanding at end of period		217,800			275,800
Weighted average daily borrowings during the period		188,829			256,493
Maximum daily borrowings outstanding during the period		218,800			411,600
Weighted average interest rate during the period		2.3	%		3.0	%
Weighted average interest rate at end of period		2.2	%		2.5	%
Weighted average interest rate at end of period, after giving effect to swap agreements		7.2	%		6.8	%

Derivative Instruments

As part of United Dominion’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. United Dominion’s derivative transactions used for interest rate risk management include various interest rate swaps with indices that relate to the pricing of specific financial instruments of United Dominion. United Dominion believes that it has appropriately controlled its interest rate risk through the use of derivative instruments. During the first three months of 2003, the fair value of United Dominion’s derivative instruments has improved from an unfavorable value position of $9.6 million at December 31, 2002 to an unfavorable value position of $6.9 million at March 31, 2003. This decrease is primarily due to the normal progression of the fair market value of derivative instruments to get closer to zero as they near the end of their terms (see Note 6 to the consolidated financial statements).

Funds from Operations

Funds from operations (“FFO”) is defined as net income (computed in accordance with generally accepted accounting principles), excluding gains (losses) from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. United Dominion computes

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FFO for all periods presented in accordance with the recommendations set forth by the National Association of Real Estate Investment Trust’s October 1, 1999 White Paper. Adjusted funds from operations (“AFFO”) is defined as FFO less recurring capital expenditures for our stabilized portfolio of $435 per unit in 2003 and $425 per unit in 2002. The 2003 unit charge will be adjusted to actual at year end. United Dominion considers FFO and AFFO in evaluating property acquisitions and its operating performance, and believes that FFO and AFFO should be considered along with, but not as an alternative to, net income as a measure of United Dominion’s operating performance and liquidity. FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs. We believe that FFO and AFFO are the best measures of economic profitability for real estate investment trusts.

The following table outlines United Dominion’s FFO calculation for the three months ended March 31,(dollars in thousands):

	Three Months Ended March 31,
In thousands, except per share amounts	2003			2002
Net income (loss)	$	13,441		$	(1,663	)
Adjustments:
Distributions to preferred shareholders		(6,947	)		(6,875	)
Real estate depreciation, net of outside partners’ interest		39,108			35,239
Minority interests of unitholders in operating partnership		367			(640	)
Real estate depreciation related to unconsolidated entities		33			183
Gains on sales of depreciable property, net of outside partners’ interest		—			(1,201	)
Discontinued Operations:
Real estate depreciation		—			3,656
Minority interests of unitholders in operating partnership		94			61
Impairment loss on real estate		—			2,301
(Gains) / losses on sales of depreciable property		(1,045	)		283
Funds from operations (“FFO”)—basic	$	45,051		$	31,344
Adjustment:
Distribution to preferred shareholders—Series D (Convertible)	$	4,036		$	3,964
Funds from operations—diluted	$	49,087		$	35,308
Adjustment:
Recurring capital expenditures	$	(7,969	)	$	(8,133	)
Adjusted funds from operations (“AFFO”)—diluted	$	41,118		$	27,175
Weighted average number of common shares and OP Units outstanding—basic		114,659			111,006
Weighted average number of common shares, OP Units, and common stock equivalents outstanding—diluted		129,420			124,977

In the computation of diluted FFO, OP Units, out-performance partnership shares, and the shares of Series D convertible preferred stock are dilutive; therefore, they are included in the diluted share count.

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Results of Operations

The following discussion includes the results of both continuing and discontinued operations for the periods presented.

Net Income Available to Common Shareholders

Net income available to common shareholders was $6.5 million ($0.06 per share) for the quarter ended March 31, 2003, compared to a net loss of $8.5 million ($0.08 per share) for the quarter ended March 31, 2002. The increase in net income available to common shareholders resulted primarily from $15.8 million in prepayment penalties paid in 2002 in connection with the refinancing of mortgage debt, a $2.3 million impairment charge in 2002 related to a portfolio of assets sold in Memphis, Tennessee, and a $1.5 million provision made for the buyout of certain long-term security monitoring contracts during the first quarter of 2002. Excluding these charges, the decrease for the period was primarily due to the overall decrease in total apartment community operating income as further discussed below.

Apartment Community Operations

United Dominion’s net income is primarily generated from the operation of its apartment communities. The following table summarizes the operating performance of United Dominion’s total apartment portfolio for each of the periods presented (dollars in thousands):

	Three Months Ended March 31,
	2003			2002			% Change
Property rental income	$	151,924		$	158,561		-4.2	%
Property operating expense*		(57,775	)		(58,614	)	-1.4	%
Property operating income	$	94,149		$	99,947		-5.8	%
Weighted average number of homes		73,629			77,741		-5.3	%
Physical occupancy**		93.4	%		93.5	%	-0.1	%

* Excludes depreciation, amortization, and property management expenses

** Based upon weighted average number of homes

The decrease in property operating income provided by the same communities, development communities, and acquisition communities since March 31, 2002 is primarily due to a 4.5% or $4.1 million decrease in same community property operating income, and to a lesser extent, the overall decrease in the size of United Dominion’s apartment community portfolio.

Same Communities

United Dominion’s same communities (those communities acquired, developed, and stabilized prior to January 1, 2002 and held on January 1, 2003, which consisted of 68,729 apartment homes at March 31, 2003) provided 92% of our property operating income for the three month period ended March 31, 2003.

For the first quarter of 2003, same community property operating income decreased 4.5% or $4.1 million compared to the same period in 2002 as a result of a 2.1% or $3.0 million decrease in revenues from rental and other income and a 2.0% or $1.1 million increase in operating expenses. The decrease in revenues from rental and other income was primarily driven by a 1.9% or $2.8 million decrease in rental rates, a 7.1 % or $0.3 million increase in concessions, a 139.2% or $0.4 million increase in bad debt, and a 6.8% or $0.3 million decrease in other fee income. These decreases in income were partially offset by a 19.9% or $0.7 million increase in sub-meter, trash, and vacant utility reimbursements. Physical occupancy remained constant at 93.5% for both periods. The increase

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in property operating expenses was primarily driven by a 7.5% or $0.6 million increase in repairs and maintenance costs, a 3.3% or $0.4 million increase in personnel costs, an 8.3% or $0.4 million increase in administrative and marketing expense, a 3.1% or $0.4 million increase in taxes, and a 3.7 % or $0.3 million increase in utilities expense. These increases were partially offset by a 13.0% or $0.4 million decrease in insurance costs and a 67.6% or $0.4 million decrease in incentive compensation.

As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property operating income divided by property rental income) decreased 1.6% to 61.9%.

Non-Mature Communities

The remaining 8% of United Dominion’s property operating income during the first quarter of 2003 was generated from its non-mature communities (those communities acquired or developed during 2002 and 2003, sold properties, and those properties classified as real estate held for disposition). The 11 communities with 3,685 apartment homes acquired by United Dominion during 2002 and 2003 provided $5.4 million of property operating income. In addition, United Dominion’s development communities, which included 208 apartment homes constructed since January 1, 2002, provided $1.2 million of property operating income during 2003, the one community with 264 apartment homes classified as real estate held for disposition provided $0.4 million of property operating income, and other non-mature communities provided $0.9 million of property operating income for the quarter ended March 31, 2003.

Real Estate Depreciation

For the three months ended March 31, 2003, real estate depreciation on both continuing and discontinued operations remained relatively constant compared to the same period in 2002 regardless of a decrease in the weighted average number of apartment homes experienced from March 31 2002 to March 31, 2003 primarily due to the newly acquired properties having a significantly higher per home cost compared to those properties that have been disposed of, and other capital expenditures.

Interest Expense

For the three months ended March 31, 2003, interest expense on both continuing and discontinued operations decreased $1.0 million or 2.9% from the same period in 2002 primarily due to debt refinancings, decreasing interest rates, and an overall decrease in the weighted average level of debt outstanding. For the quarter ended March 31, 2003, the weighted average amount of debt outstanding decreased 1.2% or $26.0 million when compared to the same period in the prior year and the weighted average interest rate decreased from 6.2% to 5.9% in 2003. The weighted average amount of debt employed during 2003 is lower than 2002 as we have used proceeds from the issuance of common stock to repay debt. The decrease in the average interest rate during 2003 reflects the ability of United Dominion to take advantage of declining interest rates through refinancing and the utilization of variable rate debt.

General and Administrative

For the three months ended March 31, 2003, general and administrative expenses decreased $2.2 million or 28.5% compared to the same period in 2002. The decrease was primarily due to a provision made in the first quarter of 2002 for the pending buyout of certain long-term security monitoring contracts as well as a decrease in incentive compensation expense for the quarter ended March 31, 2003.

Gains on Sales of Land and Depreciable Property

For the three months ended March 31, 2003, United Dominion recognized gains for financial reporting purposes of $1.0 million compared to $0.9 million for the comparable period last year. Changes in the level of gains

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recognized from period to period reflect the changing level of United Dominion’s divestiture activity from period to period, as well as the extent of gains related to specific properties sold.

Inflation

United Dominion believes that the direct effects of inflation on our operations have been immaterial. Substantially all of United Dominion’s leases are for a term of one year or less which generally minimizes our risk from the adverse effects of inflation.

Factors Affecting Our Business Prospects

There are may factors that affect our business and the results of our operations, some of which are beyond our control. These factors include:

• 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 shareholders.

• Development and construction risks that may impact our profitability.

• 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.

• The imposition of federal taxes if we fail to qualify as a REIT in any taxable year.

For a discussion of these and other factors affecting our business and prospects, see “Item 1.—Business—Factors Affecting Our Business and Prospects” in our Annual Report on Form 10-K for the year ended December 31, 2002.

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

United Dominion is 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. United Dominion’s involvement with derivative financial instruments is limited and we do not expect to use them for trading or other speculative purposes. United Dominion uses derivative instruments solely to manage its exposure to interest rates.

See United Dominion’s Form 10-K for the year ended December 31, 2002 “Item 7A Qualitative and Quantitative Disclosures About Market Risk” for a more complete discussion of our interest rate sensitive assets and

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liabilities. As of March 31, 2003, United Dominion’s market risk has not changed materially from the amounts reported on the Form 10-K for the year ended December 31, 2002.

Item 4.CONTROLS AND PROCEDURES

Within the 90 days prior to the filing of this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of United Dominion’s disclosure controls and procedures. Our disclosure controls and procedures 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. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC reports. 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.

There have been no significant changes in United Dominion’s internal controls or in other factors which could significantly affect internal controls subsequent to the date of this evaluation.

PART II

Item 1.LEGAL PROCEEDINGS

United Dominion and its subsidiaries are engaged in various litigations and have a number of unresolved claims pending. The ultimate liability in respect of such litigations and claims cannot be determined at this time. United Dominion is of the opinion that such liability, to the extent not provided for through insurance or otherwise, is not likely to be material in relation to the consolidated financial statements of United Dominion.

Item 6.EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

The exhibits filed with this Report are set forth in the Exhibit Index.

(b) Reports on Form 8-K.

We filed the following Current Reports on Form 8-K during the quarter ended March 31, 2003. The information provided under Item 9. Regulation FD Disclosure is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.

Current Report on Form 8-K dated January 27, 2003, filed with the Securities Exchange Commission on January 30, 2003, under Item 5. Other Events and under Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

Current Report on Form 8-K dated February 10, 2003, filed with the Securities Exchange Commission on February 12, 2003, under Item 5. Other Events and under Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

Current Report on Form 8-K dated February 24, 2003, filed with the Securities Exchange Commission on February 25, 2003, under Item 5. Other Events and under Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	UNITED DOMINION REALTY TRUST, INC.         (registrant)
Date: May 12, 2003	/s/    CHRISTOPHER D. GENRY         Christopher D. Genry Executive Vice President and Chief Financial Officer
Date: May 12, 2003	/s/    SCOTT A. SHANABERGER
		Scott A. Shanaberger Senior Vice President and Chief Accounting Officer

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CERTIFICATIONS

I, Thomas W. Toomey, Chief Executive Officer and President of United Dominion Realty Trust, Inc., certify that:

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

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 12, 2003	/s/    THOMAS W. TOOMEY
		Thomas W. Toomey Chief Executive Officer and President

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CERTIFICATIONS

I, Christopher D. Genry, Executive Vice President and Chief Financial Officer of United Dominion Realty Trust, Inc., certify that:

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

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 12, 2003	/s/    CHRISTOPHER D. GENRY
		Christopher D. Genry Executive Vice President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit	Description
4.1*	Form of Fixed Rate Note.
4.2*	Form of Floating Rate Note.
12	Computation of Ratio of Earnings to Fixed Charges.
99.1	Certification of the Chief Executive Officer.
99.2	Certification of the Chief Financial Officer.

* Incorporated by reference to the Registrant’s Current Report on Form 8-K dated February 24, 2003, as filed with the Securities and Exchange Commission on February 25, 2003 (Commission File No. 1-10524).

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