UDR (UDR) 8-K Second Quarter Results; Upgrade by Moody’s

EXHIBIT 99.1

	For details contact:
	Monique Elwell Phone (720)283-6135 E-mail: ir@udrt.com www.udrt.com

PRESS RELEASE

For Immediate Release

UNITED DOMINION REALTY TRUST, INC. ANNOUNCES

SECOND QUARTER RESULTS; UPGRADE BY MOODY’S

RICHMOND, VA. (July 19, 2004) United Dominion Realty Trust, Inc. (NYSE: UDR) today reported Funds From Operations (“FFO”) of $56.6 million, or $0.39 per share (diluted), for the quarter ended June 30, 2004, compared to FFO of $52.4 million, or $0.39 per share (diluted), for the same period a year ago. FFO is reported on a fully diluted basis.

“As the economy has generated new jobs, our operating results have improved. We believe, with the continued increases in new jobs, interest rates and construction costs, our prospects will continue to improve. Our Balance Sheet continues to strengthen as evidenced by our upgrade by Moody’s Investors Service. We were the only apartment REIT to be upgraded in the last six years. In addition, we continue to improve the quality and positioning of our assets and with $147 million of acquisitions and sales in the second quarter, we now derive 43% of our projected annual Net Operating Income from California, Metropolitan D.C. and Florida—the nation’s fastest growing apartment markets,” stated Thomas W. Toomey, President and Chief Executive Officer.

Highlights from the Second Quarter

• Received rating upgrade to Baa2 on the Company’s senior unsecured debt and an upgrade to Baa3 on our preferred stock by Moody’s Investors Service

• Acquired two apartment communities for $61.3 million

• Sold seven apartment communities for $86.5 million

• Issued $50 million of 4.3% senior unsecured notes due July 2007

Portfolio Operating Performance and Same Community Results

During the second quarter, 69,286 apartment homes, or 91% of total apartment homes, were classified as Same Community. The Company defines Same Community as all multifamily communities owned and stabilized for at least one year as of the beginning of the most recent quarter.

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Same Community Results, Year/Year
($ in thousands, except monthly rent)

	2nd Qtr '04			2nd Qtr '03			% Change
Rent and other income	$	147,393		$	147,924			-0.4	%
Concessions		4,315			4,532			-4.8	%
Bad debt		716			768			-6.8	%
Total income		142,362			142,624			-0.2	%
Expenses		55,346			52,849			4.7	%
Net operating income		87,016			89,775			-3.1	%
Avg. monthly collections per occupied home	$	699		$	703			-0.6	%
Avg. physical occupancy		93.6	%		93.6	%		—
Operating margin		61.1	%		62.9	%	-180 bps
Annualized resident turnover rate		66.4	%		68.4	%	-200 bps
Associate turnover		38.0	%		55.0	%	-1700 bps
Resident credit loss, % of effective rent		0.5	%		0.5	%		—

On a year-over-year basis, second quarter 2004 Same Community Net Operating Income (“NOI”) decreased 3.1% as a result of a 0.2% decrease in total income and a 4.7% increase in operating expenses.

While year-over-year rents in the second quarter declined by 0.8%, this is an improvement from the 1.5% rent decline seen year-over-year during the first quarter.

Same Community represents 48 markets, of which 18 markets, or 38%, generated positive Same Community NOI growth during the second quarter of 2004 compared to the second quarter of 2003.

During the second quarter, we completed $8.7 million in ROI asset quality upgrades. This brings the total amount of investments to $38.5 million since the Company began these programs in 2002. Since the program’s inception, the average return on investments is 16%.

Same Community Results, Quarter/Quarter
($ in thousands, except monthly rent)

	2nd Qtr '04			1st Qtr '04			% Change
Rent and other income	$	147,393		$	146,014			0.9	%
Concessions		4,315			3,912			10.3	%
Bad debt		716			458			56.3	%
Total income		142,362			141,644			0.5	%
Expenses		55,346			55,812			-0.8	%
Net operating income		87,016			85,832			1.4	%
Avg. monthly collections per occupied home	$	699		$	699			—
Avg. physical occupancy		93.6	%		93.1	%	50 bps
Operating margin		61.1	%		60.6	%	50 bps
Annualized resident turnover rate		66.4	%		56.3	%	1010 bps
Associate turnover		38.0	%		41.0	%	-300 bps
Resident credit loss, % of effective rent		0.5	%		0.3	%	20 bps

2

Sequentially, Same Community NOI increased 1.4% due to a 0.5% increase in total income and a 0.8% decrease in expenses.

Same Community represents 48 markets, of which 26 markets, or 54%, generated positive Same Community NOI growth during the second quarter of 2004 over the first quarter of 2004.

Portfolio Repositioning

During the second quarter, the Company acquired two apartment communities for a total purchase price of $61.3 million (averaging $98,237 per home.) These properties were acquired at an average cap rate of 6.2% using forward twelve months of operations and a reserve for capital expenditures that ranged from $435 to $450 per home, depending on the community.

The Company sold seven communities for $86.5 million (averaging $47,809 per home) at a cap rate of 7.5% using trailing twelve months of operations less an actual capital expenditure reserve of $470 per home and an implied management fee. The gain on the aggregate sale of these communities was $25.2 million or $0.20 per share. For more details on United Dominion’s acquisitions and dispositions activity, we refer you to the Company’s press release dated July 6, 2004.

Financing Activities

In July, Moody’s Investors Service upgraded the Company’s senior unsecured debt rating from Baa3 to Baa2 and our preferred stock from Ba1 to Baa3. Moody’s rating outlook is stable.

During the second quarter, $63.5 million of swaps matured with an average interest rate of 7.3%. In addition, $5 million of secured debt matured at an interest rate of 6.5% and the Company prepaid $16 million of secured debt at an average interest rate of 6.7% incurring prepayment penalties of $111,000. As of today, (assuming the put option on the $54.1 million of 8.5% debentures will not be exercised) there are no remaining debt maturities for the balance of this year and all of our swaps have expired.

In June, the Company issued $50 million of 4.3% senior unsecured medium-term notes at a spread of 110 basis points that mature July 1, 2007. The net proceeds were used to fund acquisitions of apartment communities and repay amounts outstanding on our $500 million unsecured credit facility.

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Earnings Guidance

The Company believes that financial results for 2004 will be affected by international, national and regional economic trends and events, the acquisition and/or disposition of apartment communities and other factors. Given current expectations and judgment, the Company is narrowing its guidance for 2004 FFO to a range of $1.52 to $1.56 per share (diluted.) Management estimates that recurring capital expenditures for 2004 will be $490 per apartment home, or $0.26 per diluted share. Detailed assumptions for the Company’s guidance can be found on our website at www.udrt.com.

A reconciliation of the range provided for projected FFO per share for the full year to Earnings Per Share (“EPS”) for the full year is as follows:

	High Range				Low Range
2004 Funds From Operations	$	1.56		—	$	1.52
Conversion to GAAP Share Count (A)		0.21		—		0.20
Minority Interest of OP Unit Holders (A)		(0.02	)	—		(0.04	)
Depreciation (B)		(1.40	)	—		(1.32	)
Gains (B)		0.21		—		0.46
Preferred Dividends		(0.07	)	—		(0.07	)
Premium on Preferred Share Conversions		(0.05	)	—		(0.05	)
Expected Earnings Per Share	$	0.44		—	$	0.70

^(A) Operating Partnership units are not considered to be common stock equivalents for GAAP purposes.

^(B) Due to the uncertain timing and extent of property dispositions and acquisitions, actual results could differ materially from expected EPS.

Supplemental Information

The Company offers Supplemental Information that provides information regarding the financial position and operating results of the Company. This Supplemental Information is available on the Company’s website at:

www.udrt.com/resources/files/Investor_Relations/2Q2004.pdf

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Conference Call Information

Date: July 20, 2004
Time: 1:00 p.m. Eastern Time

To Participate in the Telephone Conference Call:

Dial in at least five minutes prior to start time.
To Participate in the Telephone Conference Call:
Domestic: 800-218-0530
International: 303-262-2125
If you have any questions, please contact: Karen Droba
Phone: 312-640-6770
E-mail: kdroba@financialrelationsboard.com

Conference Call Playback:
Domestic: 800-405-2236
International: 303-590-3000
Passcode: 581310
The playback can be accessed until July 27, 2004 at midnight EST.

Webcast:

The conference call will also be available on UDR’s website at www.udrt.com and at www.fulldisclosure.com. To listen to a live broadcast, go to one of these sites at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. A replay will also be available for 90 days on UDR’s website and also on CCBN’s website.

About United Dominion Realty Trust, Inc.

United Dominion is the fourth largest apartment REIT, owning and operating apartment communities nationwide. The Company has a 32-year history during which it has raised the dividend each of the last 28 years. United Dominion is included in the S&P MidCap 400 Index. The Company currently owns 76,073 apartment homes and has 1,311 homes currently under development. Additional information about United Dominion may be found on its web site at www.udrt.com.

Statements contained in this press release, which are not historical facts, are forward-looking statements, as the term is defined in the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by the Company’s use of words such as, “expects,” “plans,” “estimates,” “projects,” “intends,” “believes,” and similar expressions that do not relate to historical matters. Such forward-looking statements are subject to risks and uncertainties which can cause actual results to differ materially from those currently anticipated, due to a number of factors, which include, but are not limited to, unfavorable changes in the apartment market, changing economic conditions, the impact of competition and competitive pricing, acquisitions or new developments may not achieve anticipated results, delays in completing developments and lease-ups on schedule, difficulties in selling existing apartment communities, and other risk factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time including the Company’s Annual Report on Form 10-K and the Company’s Quarterly Reports on Form 10-Q. All forward-looking statements in this press release are made as of today, based upon information known to management as of the date hereof, and the Company assumes no obligation to update or revise any of its forward-looking statements even if experience or future changes show that indicated results or events will not be realized.

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Attachment 1

UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
In thousands, except per share amounts	2004			2003			2004			2003
Rental income	$	156,754		$	143,940		$	309,745		$	286,782
Rental expenses:
Real estate taxes and insurance		19,021			16,576			37,788			33,184
Personnel		16,132			14,069			32,210			28,503
Utilities		9,051			8,346			19,123			17,021
Repair and maintenance		10,397			8,941			19,498			17,857
Administrative and marketing		5,622			5,383			11,075			10,568
Property management		4,390			4,201			8,751			8,379
Other operating expenses		291			316			561			610
		64,904			57,832			129,006			116,122
Non-property income		1,062			194			1,406			396
Other expenses:
Real estate depreciation and amortization		43,125			37,364			84,474			74,368
Interest		29,295			29,595			58,201			61,156
General and administrative		4,627			5,157			9,381			10,606
Other depreciation and amortization		849			753			1,783			1,496
		77,896			72,869			153,839			147,626
Income before minority interests and discontinued operations		15,016			13,433			28,306			23,430
Minority interests of outside partnerships		(50	)		(239	)		(115	)		(614	)
Minority interests of unitholders in operating partnerships		(522	)		14			(955	)		(187	)
Income before discontinued operations, net of minority interests		14,444			13,208			27,236			22,629
Income from discontinued operations, net of minority interests (including gain on sales) (A)		14,067			2,276			16,587			6,295
Net income		28,511			15,484			43,823			28,924
Distributions to preferred stockholders — Series B		(2,911	)		(2,911	)		(5,822	)		(5,822	)
Distributions to preferred stockholders — Series D (Convertible)		(1,045	)		(3,393	)		(2,080	)		(7,428	)
Distributions to preferred stockholders — Series E (Convertible)		(1,138	)		(228	)		(2,276	)		(228	)
Premium on preferred share conversions		(1,562	)		(6,250	)		(3,125	)		(6,250	)
Net income available to common stockholders	$	21,855		$	2,702		$	30,520		$	9,196
Earnings per common share — basic and diluted:
Income from continuing operations available to common stockholders, net of minority interests	$	0.06		$	0.00		$	0.11		$	0.02
Income from discontinued operations, net of minority interests	$	0.11		$	0.02		$	0.13		$	0.06
Net income available to common stockholders	$	0.17		$	0.02		$	0.24		$	0.08
Common distributions declared per share	$	0.2925		$	0.2850		$	0.5850		$	0.5700
Weighted average number of common shares outstanding — basic		127,150			112,467			127,057			110,169
Weighted average number of common shares outstanding — diluted		128,065			113,439			127,996			111,101

(A) Discontinued operations represents all properties sold since January 1, 2002 and properties that are currently classified as held for disposition at June 30, 2004.

Attachment 2

UNITED DOMINION REALTY TRUST, INC.
FUNDS FROM OPERATIONS
(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
In thousands, except per share amounts	2004			2003			2004			2003
Net income	$	28,511		$	15,484		$	43,823		$	28,924
Adjustments:
Distributions to preferred stockholders		(5,094	)		(6,532	)		(10,178	)		(13,478	)
Real estate depreciation and amortization, net of outside partners’ interest in 2003		43,125			37,126			84,474			73,933
Minority interests of unitholders in operating partnership		522			(14	)		955			187
Real estate depreciation related to unconsolidated entities		80			52			137			84
Discontinued Operations:
Real estate depreciation		109			2,429			1,670			4,730
Minority interests of unitholders in operating partnership		957			147			1,129			408
Net (gain)/loss on sale of depreciable property		(13,814	)		112			(15,019	)		(935	)
Funds from operations (“FFO”) — basic	$	54,396		$	48,804		$	106,991		$	93,853
Distribution to preferred stockholders — Series D and E (Convertible)		2,183			3,621			4,356			7,656
Funds from operations — diluted	$	56,579		$	52,425		$	111,347		$	101,509
Recurring capital expenditures		(9,158	)		(8,520	)		(18,464	)		(17,027	)
Adjusted funds from operations (“AFFO”) — diluted	$	47,421		$	43,905		$	92,883		$	84,482
Weighted average number of common shares and OP Units outstanding — basic		135,830			119,754			135,740			117,294
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted		145,039			134,211			144,973			132,048
FFO per common share — basic	$	0.40		$	0.41		$	0.79		$	0.80
FFO per common share — diluted	$	0.39		$	0.39		$	0.77		$	0.77

FFO is defined as net income (computed in accordance with GAAP), excluding 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 definition issued in April 2002. United Dominion considers FFO in evaluating property acquisitions and its operating performance and believes that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of United Dominion’s activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs.

For the three and six months ended June 30, 2004, distributions to preferred stockholders exclude $1.6 million and $3.1 million, respectively, related to a premium on preferred share conversions.

AFFO is defined as FFO less recurring capital expenditures for our stabilized portfolio at $490 per home in 2004 and $464 per home in 2003.

Attachment 3

UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

	June 30,			December 31,
In thousands, except per share amounts	2004			2003
ASSETS
Real estate owned:
Real estate held for investment	$	4,362,196		$	4,157,837
Less: accumulated depreciation		(935,677	)		(852,461	)
		3,426,519			3,305,376
Real estate under development		58,069			30,375
Real estate held for disposition (net of accumulated depreciation of $14,068 and $44,169)		47,921			119,170
Total real estate owned, net of accumulated depreciation		3,532,509			3,454,921
Cash and cash equivalents		753			4,824
Restricted cash		6,364			7,540
Deferred financing costs, net		21,131			21,425
Investment in unconsolidated development joint venture		809			1,673
Funds held in escrow from 1031 exchanges pending the acquisition of real estate		2,339			14,447
Note receivable		39,586			—
Other assets		37,385			38,553
Other assets — real estate held for disposition		96			260
Total assets	$	3,640,972		$	3,543,643
LIABILITIES AND STOCKHOLDERS’ EQUITY
Secured debt	$	999,658		$	1,018,028
Unsecured debt		1,267,650			1,114,009
Real estate taxes payable		24,274			30,334
Accrued interest payable		15,042			12,892
Security deposits and prepaid rent		21,715			23,156
Distributions payable		41,782			40,623
Deferred gain on sale of depreciable property		11,413			—
Accounts payable, accrued expenses, and other liabilities		39,990			45,080
Other liabilities — real estate held for disposition		666			1,879
Total liabilities		2,422,190			2,286,001
Minority interests		89,813			94,206
Stockholders’ 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 shares in 2003)		135,400			135,400
2,000,000 shares 7.50% Series D Cumulative Convertible Redeemable issued and outstanding (2,000,000 shares in 2003)		47,396			44,271
3,425,217 shares of 8.00% Series E Cumulative Convertible issued and outstanding (3,425,217 shares in 2003)		56,893			56,893
Common stock, $1 par value; 250,000,000 shares authorized 127,771,383 shares issued and outstanding (127,295,126 shares in 2003)		127,771			127,295
Additional paid-in capital		1,465,452			1,458,983
Distributions in excess of net income		(695,840	)		(651,497	)
Deferred compensation — unearned restricted stock awards		(8,103	)		(5,588	)
Notes receivable from officer-stockholders		—			(459	)
Accumulated other comprehensive loss, net		—			(1,862	)(A)
Total stockholders’ equity		1,128,969			1,163,436
Total liabilities and stockholders’ equity	$	3,640,972		$	3,543,643

(A) Represents net unrealized loss on derivative instrument transactions.