UDR 10K 2004 Annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K


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

		For the fiscal year ended December 31, 2004

or

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

		For the transition period from to

Commission file number 1-10524

United Dominion Realty Trust, Inc.

(Exact name of registrant as specified in its charter)


Maryland		54-0857512
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado 80129

(Address of principal executive offices, including zip code)

(720) 283-6120

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class		Name of Each Exchange on Which Registered

Common Stock, $1 par value		New York Stock Exchange
Preferred Stock Purchase Rights		New York Stock Exchange
8.60% Series B Cumulative Redeemable Preferred Stock		New York Stock Exchange
8.50% Monthly Income Notes Due 2008		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or other information statements incorporated by reference into Part III of this Form 10-K or any amendment to this Form 10-K. o

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

The aggregate market value of the shares of common stock held by non-affiliates on June 30, 2004 was approximately $2.4 billion. This calculation excludes shares of common stock held by the registrant’s officers and directors and each person known by the registrant to beneficially own more than 5% of the registrant’s outstanding shares, as such persons may be deemed to be affiliates. This determination of affiliate status should not be deemed conclusive for any other purpose. As of March 1, 2005 there were 137,023,872 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Report, to the extent not set forth herein, is incorporated by reference from the registrant’s definitive proxy statement for the Annual Meeting of Stockholders to be held on May 3, 2005.

TABLE OF CONTENTS


		Page

PART I.
Item 1.	Business		2
Item 2.	Properties		17
Item 3.	Legal Proceedings		18
Item 4.	Submission of Matters to a Vote of Security Holders		18

PART II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		18
Item 6.	Selected Financial Data		21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		39
Item 8.	Financial Statements and Supplementary Data		39
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		39
Item 9A.	Controls and Procedures		39
Item 9B.	Other Information		40

PART III.
Item 10.	Directors and Executive Officers of the Registrant		40
Item 11.	Executive Compensation		41
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		41
Item 13.	Certain Relationships and Related Transactions		41
Item 14.	Principal Accounting Fees and Services		41

PART IV.
Item 15.	Exhibits and Financial Statement Schedules		41
Amended and Restated Bylaws
5.00% Medium-Term Notes due January 2012
4.30% Medium-Term Note due July 2007
5.25% Medium-Term Note due January 2015, issued November 1, 2004
5.25% Medium-Term Note due January 2015, issued February 14, 2005
5.25% Medium-Term Note due January 2015, issued March 8, 2005
Employment Agreement of Richard A. Giannotti
Compensation Summary
Computation of Ratio of Earnings to Fixed Charges
Subsidiaries
Consent of Independent Registered Public Accounting Firm
Rule 13a-14(a) Certification of the Chief Executive Officer
Rule 13a-14(a) Certification of the Chief Financial Officer
Section 1350 Certification of the Chief Executive Officer
Section 1350 Certification of the Chief Financial Officer

PART I


Item 1.	*Business*

General

United Dominion Realty Trust, Inc. is a self administered real estate investment trust, or REIT, that owns, acquires, renovates, develops, and manages middle-market apartment communities nationwide. At December 31, 2004, our apartment portfolio included 273 communities located in 43 markets, with a total of 78,855 completed apartment homes. In addition, we had three apartment communities under development.

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986. To continue to qualify as a REIT, we must continue to meet certain tests which, among other things, generally require that our assets consist primarily of real estate, our income be derived primarily from real estate, and that we distribute at least 90% of our REIT taxable income (other than our net capital gain) to our stockholders. As a qualified REIT, we generally will not be subject to federal income taxes on our REIT taxable income to the extent we distribute such income to our stockholders. In 2004, we declared total distributions of $1.17 per share to our stockholders, which represents our 28th year of consecutive dividend increases to our stockholders.

We were formed in 1972 as a Virginia corporation. In June 2003, we changed our state of incorporation from Virginia to Maryland. Our corporate headquarters is located at 400 East Cary Street, Richmond, Virginia. Our principal executive offices are located at 1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado. As of March 1, 2005, we had 1,943 full-time employees and 178 part-time employees.

Our subsidiaries include two operating partnerships, Heritage Communities L.P., a Delaware limited partnership, and United Dominion Realty L.P., a Delaware limited partnership. Unless the context otherwise requires, all references in this Report to “we,” “us,” “our,” “the company,” or “United Dominion” refer collectively to United Dominion Realty Trust, Inc. and its subsidiaries.

2004 Accomplishments


	•	We provided a total stockholder return of 37%.

	•	We increased our dividend for the 28th consecutive year.

	•	We lowered the weighted average interest rate on our debt from 5.2% at December 31, 2003 to 5.0% at December 31, 2004.

	•	We increased the size of our unencumbered pool of assets to $3.3 billion, valued on a historical cost basis.

	•	We completed over $1.8 billion of capital transactions in 2004.

	•	We were upgraded by Moody’s Investor Services on our unsecured debt rating to Baa2 from Baa3 and our preferred stock rating to Baa3 from Ba1 with a stable outlook.

	•	We acquired 8,060 apartment homes in 28 communities for approximately $1.0 billion.

	•	We completed the disposition of 19 apartment communities with 5,425 apartment homes for an aggregate sales price of approximately $270.1 million, exiting markets that no longer met our investment criteria. In addition, we sold 24 of 36 townhomes of a community for $7.3 million.

Business Objectives and Operating Strategies

Our principal business objective is to maximize the economic returns of our apartment communities to provide our stockholders with the greatest possible total return and value. To achieve this objective, we intend to continue to pursue the following goals and strategies:


	•	own and operate middle-market apartments across a national platform, thus enhancing stability and predictability of returns to our stockholders,

	•	manage real estate cycles by taking an opportunistic approach to buying, selling, and building apartment communities,

	•	empower site associates to manage our communities efficiently and effectively,

	•	measure and reward associates based on specific performance targets, and

	•	manage our capital structure to ensure predictability of earnings and dividends.

Acquisitions

During 2004, using the proceeds from our disposition program, equity and debt offerings, we acquired 28 communities with 8,060 apartment homes at a total cost of approximately $1.0 billion, including the assumption of secured debt. In addition, we purchased one parcel of land for $16.3 million.

When evaluating potential acquisitions, we consider:


	•	population growth, cost of alternative housing, overall potential for economic growth and the tax and regulatory environment of the community in which the property is located,

	•	geographic location, including proximity to our existing communities which can deliver significant economies of scale,

	•	construction quality, condition and design of the community,

	•	current and projected cash flow of the property and the ability to increase cash flow,

	•	potential for capital appreciation of the property,

	•	ability to increase the value and profitability of the property through upgrades and repositioning,

	•	terms of resident leases, including the potential for rent increases,

	•	occupancy and demand by residents for properties of a similar type in the vicinity,

	•	prospects for liquidity through sale, financing, or refinancing of the property, and

	•	competition from existing multifamily communities and the potential for the construction of new multifamily properties in the area.

The following table summarizes our apartment acquisitions and our year-end ownership position for the past five years (dollars in thousands):


	2004		2003		2002		2001		2000

Homes acquired		8,060		5,220		4,611		1,304		267
Homes owned at December 31		78,855		76,244		74,480		77,567		77,219
Total real estate owned, at carrying value	$	5,243,296	$	4,351,551	$	3,967,483	$	3,907,667	$	3,836,320

Dispositions

We regularly monitor and adjust our assets to increase portfolio profitability. During 2004, we sold over 5,400 of our slower growing, non-core apartment homes while exiting some markets in an effort to

increase the quality and performance of our portfolio. Proceeds from the disposition program were used primarily to reduce debt and fund acquisitions.

Factors we consider in deciding whether to dispose of a property include:


	•	current market price for an asset compared to projected economics for that asset,

	•	potential increases in new construction in the market area,

	•	areas where the economy is not expected to grow substantially, and

	•	markets where we do not intend to establish long-term concentration.

At December 31, 2004, there were 12 apartment communities and one parcel of land classified as real estate held for disposition. We are in the market for replacement properties that will correspond with our expected sales activity to prevent dilution to earnings.

Upgrading and Development Activities

During 2004, we continued to reposition properties in targeted markets where there was an opportunity to add value and achieve greater than inflationary increases in rents over the long term. In 2004, we spent $17.6 million on three development projects that are expected to be completed in the first half of 2006. In addition, revenue enhancing capital expenditures, including kitchen and bath renovations, and other extensive interior upgrades totaled $45.9 million or $599 per home for the year ended December 31, 2004.

The following wholly-owned projects were under development as of December 31, 2004:


	Number of		Completed						Estimated		Expected
	Apartment		Apartment		Cost to Date		Budgeted Cost		Cost		Completion
	Homes		Homes		(In thousands)		(In thousands)		Per Home		Date

2000 Post Phase III San Francisco, CA		24		—	$	2,754	$	7,000	$	291,700		1Q06
Verano at Town Square Rancho Cucamonga, CA		414		—		27,648		66,300		160,100		2Q06
Mandalay on the Lake Irving, TX		369		—		9,840		30,900		83,700		2Q06

		807		—	$	40,242	$	104,200	$	129,100

In addition, we owned eight parcels of land held for future development aggregating $25.5 million at December 31, 2004. Four of the eight parcels represent additional phases to existing communities.

Financing Activities

As part of our plan to strengthen our capital structure, we utilized proceeds from dispositions, equity offerings and refinancings to extend maturities, pay down existing debt, and acquire apartment communities. The following is a list of our major financing activities in 2004:


	•	Repaid $131.8 million of secured debt and $46.6 million of unsecured debt.

	•	Sold $125 million aggregate principal amount of 5.13% senior unsecured notes due January 2014 ($75 million in January and $50 million in March) under our medium-term note program. These notes represent a re-opening of the 5.13% senior unsecured notes due January 2014 that we issued in October 2003, and these notes constitute a single series of notes, bringing the aggregate principal amount outstanding of the 5.13% senior unsecured notes to $200 million. The net proceeds of $126.0 million were used to repay secured and unsecured debt obligations maturing in the first quarter of 2004 and to fund the acquisition of apartment homes.


	•	Sold $50 million aggregate principal amount of 3.90% senior unsecured notes due March 2010 in March 2004 under our medium-term note program. The net proceeds of approximately $49.4 million were used to fund the acquisition of apartment communities.

	•	Replaced our previous $1.0 billion shelf registration statement in June 2004 with a new shelf registration statement that provides for the issuance of up to $1.5 billion in debt securities and preferred and common stock. The new $1.5 billion shelf registration statement includes $331.3 million of unissued securities carried forward from our previous shelf registration statement.

	•	Sold $50 million aggregate principal amount of 4.30% senior unsecured notes due July 2007 in June 2004 under our new $750 million medium-term note program. The net proceeds of approximately $49.8 million were used to fund the acquisition of apartment communities and repay amounts outstanding on our $500 million unsecured credit facility.

	•	Moody’s Investors Service upgraded our rating on our senior unsecured debt to Baa2 from Baa3 and our preferred stock to Baa3 from Ba1 with a stable outlook in July 2004.

	•	Sold $100 million of 5.00% senior unsecured notes due January 2012 and $25 million of 4.30% senior unsecured notes due July 2007 under our new $750 million medium-term note program in October 2004. The $25 million in notes represent a re-opening of the 4.30% senior unsecured notes due July 2007 that we issued in June 2004, and these notes constitute a single series of notes, bringing the aggregate principal amount outstanding of the 4.30% senior unsecured notes to $75 million. The net proceeds of $124.4 million were used to fund the acquisition of apartment communities.

	•	Sold $100 million aggregate principal amount of 5.25% senior unsecured notes due January 2015 under our new $750 million medium-term note program in October 2004. The net proceeds of $99.0 million were used to fund the acquisition of apartment communities.

	•	Sold 3.5 million shares of common stock at a public offering price of $20.50 per share under our $1.5 billion shelf registration statement in October 2004. We sold an additional 525,000 shares of common stock at a public offering price of $20.50 per share in connection with the exercise of the underwriter’s over-allotment option in October 2004. The net proceeds of $81.9 million were used to reduce outstanding debt balances under our $500 million unsecured revolving credit facility, which was used to fund the acquisition of apartment communities.

	•	Filed a prospectus supplement under the Securities Act of 1933 in October 2004, relating to the offering of up to 5 million shares of our common stock that we may issue and sell through an agent from time to time in “at the market offerings,” as defined in Rule 415 of the Securities Act of 1933. Any sales of these shares will be made under our $1.5 billion shelf registration statement pursuant to a sales agreement that we entered into with the agent in July 2003. The sales price of the common stock that may be sold under the sales agreement will be no lower than the minimum price designated by us prior to the sale. As of December 31, 2004, we have sold a total of 472,000 shares of common stock pursuant to the sales agreement at a weighted average sales price of $20.36, for net proceeds to us of approximately $9.4 million.

	•	Exercised our right to redeem 2 million shares of our Series D Cumulative Convertible Redeemable Preferred Stock in December 2004. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 3,076,769 shares of common stock at a price of $16.25 per share.

	•	In conjunction with certain acquisitions, we assumed secured mortgages of $311.7 million with maturity dates ranging from September 2006 through June 2013.

Markets and Competitive Conditions

At December 31, 2004, we owned 273 apartment communities in 43 markets in 17 states. Of those markets, 25 markets, or 61%, generated positive same community net operating income growth for the

fourth quarter of 2004 when compared to the same period in the prior year. We have a geographically diverse portfolio and we believe that this diversification increases investment opportunity and decreases the risk associated with cyclical local real estate markets and economies, thereby increasing the stability and predictability of our earnings.

We believe changing demographics will have a significant impact on the apartment industry over the next two decades. In particular, we believe the annual number of young people entering the workforce and creating households will be significantly higher over the next 10 to 15 years as compared to the number who entered the workforce over the past 10 years. The number of single people and single parent households continues to grow significantly. The immigrant population is also expected to grow at an accelerated pace. Each of these population segments has a high propensity to rent.

Despite a strengthening United States economy, significant productivity growth has adversely affected employment growth, which is the primary driver of demand in our business. In addition, a sustained low mortgage interest rate environment, combined with government and builder incentives to first time home buyers, has further siphoned off what would traditionally be demand for apartment homes. To maintain occupancy levels during these economic conditions, we have reduced rents, increased our marketing expenses, and provided concessions to our residents.

In most of our markets, competition for new residents is intense. Some competing communities offer features that our communities do not have. Competing communities frequently use concessions or lower rents to obtain temporary competitive advantages. Also, some competing communities are larger or newer than our communities. The competitive position of each community is different depending upon many factors including sub-market supply and demand. In addition, other real estate investors compete with us to acquire existing properties and to develop new properties. These competitors include insurance companies, pension and investment funds, developer partnerships, investment companies and other apartment REITs. This competition could increase prices for properties of the type that we would likely pursue, and our competitors may have greater resources, or lower capital costs, than we do.

We believe that, in general, we are well-positioned to compete effectively for residents and investments. We believe our competitive advantages include:


	•	a fully integrated organization with property management, development, acquisition, marketing and financing expertise,

	•	scalable operating and support systems,

	•	purchasing power,

	•	geographic diversification with a presence in 43 markets across the country, and

	•	significant presence in many of our major markets that allows us to be a local operating expert.

Moving forward, we will continue to emphasize aggressive lease management, improved expense control, increased resident retention efforts and the realignment of employee incentive plans tied to our bottom line performance. We believe this plan of operation, coupled with the portfolio’s strengths in targeting the middle-market of renters across a geographically diverse platform, should position us for continued operational improvement.

Communities

At December 31, 2004, our apartment portfolio included 273 communities having a total of 78,855 completed apartment homes. In addition, we had three apartment communities under development. The overall quality of our portfolio has significantly improved since 2001 with the disposition of non-core apartment homes and our upgrade program. The upgrading of the portfolio provides several key benefits related to portfolio profitability. It enables us to raise rents more significantly and to attract residents with higher levels of disposable income who are more likely to accept the transfer of expenses, such as water

and sewer costs, from the landlord to the resident. In addition, it potentially reduces recurring capital expenditures per apartment home, and therefore increases cash flow.

Same Communities

For 2004, same community property operating income decreased 1.2% or $3.9 million compared to 2003. The overall decrease in property operating income was primarily attributable to a 0.5% or $2.3 million increase in revenues from rental and other income that was offset by a 3.2% or $6.2 million increase in operating expenses. The increase in revenues from rental and other income was primarily driven by a 7.7% or $2.8 million decrease in vacancy loss and a 14.3% or $2.1 million increase in utility reimbursement income. These increases in income were offset by a 0.7% or $3.6 million decrease in rental rates. Physical occupancy increased 0.8% to 93.8%.

The increase in property operating expenses was primarily driven by a 5.4% or $2.8 million increase in personnel costs, a 4.7% or $1.5 million increase in repair and maintenance costs, a 3.5% or $1.1 million increase in utilities expense, and a 1.6% or $0.8 million increase in property taxes.

Customers

We focus on the broad middle-market segment of the apartment market that generally consists of renters-by-necessity. This group includes young professionals, blue-collar families, single parent households, older singles, immigrants, non-related parties and families renting while waiting to purchase a home. We believe this segment provides the highest profit potential in terms of rent growth, stability of occupancy and investment opportunities.

We believe there will be a significant increase in the number of younger renters over the next 10 to 15 years, and that the immigrant population will remain a significant and growing part of the renter base. Accordingly, we plan to target some of our incremental investments to communities that will be attractive to younger households or to the immigrant populations. These communities will often be located close to where these residents work, shop and play.

Tax Matters

We have elected to be taxed as a REIT under the Internal Revenue Code. To continue to qualify as a REIT, we must continue to meet certain tests that, among other things, generally require that our assets consist primarily of real estate, our income be derived primarily from real estate and that we distribute at least 90% of our taxable income (other than our net capital gain) to our stockholders. Provided we maintain our qualification as a REIT, we will generally not be subject to federal income taxes at the corporate level on our net income to the extent net income is distributed to our stockholders.

Inflation

Substantially all of our leases are for a term of one year or less, which may enable us to realize increased rents upon renewal of existing leases or the beginning of new leases. Such short-term leases generally minimize the risk to us of the adverse effects of inflation, although as a general rule these leases permit residents to leave at the end of the lease term without penalty. Short-term leases and relatively consistent demand allow rents, and therefore cash flow from the portfolio, to provide an attractive hedge against inflation.

Environmental Matters

To date, compliance with federal, state and local environmental protection regulations has not had a material effect on our capital expenditures, earnings or competitive position. However, in the past, the issue has been raised regarding the presence of asbestos and other hazardous materials in existing real estate properties. We have a property management plan for hazardous materials. As part of the plan, Phase I environmental site investigations and reports have been completed for each property we own. In

addition, all proposed acquisitions are inspected prior to acquisition. The inspections are conducted by qualified environmental consultants, and we review the issued report prior to the purchase or development of any property. Nevertheless, it is possible that our environmental assessments will not reveal all environmental liabilities, or that some material environmental liabilities exist of which we are unaware. In some cases, we have abandoned otherwise economically attractive acquisitions because the costs of removal or control of hazardous materials have been prohibitive or we have been unwilling to accept the potential risks involved. We do not believe we will be required to engage in any large-scale abatement at any of our properties. We believe that through professional environmental inspections and testing for asbestos, lead paint and other hazardous materials, coupled with a conservative posture toward accepting known risk, we can minimize our exposure to potential liability associated with environmental hazards.

Federal legislation requires owners and landlords of residential housing constructed prior to 1978 to disclose to potential residents or purchasers of the communities any known lead paint hazards and imposes treble damages for failure to provide such notification. In addition, lead based paint in any of the communities may result in lead poisoning in children residing in that community if chips or particles of such lead based paint are ingested, and we may be held liable under state laws for any such injuries caused by ingestion of lead based paint by children living at the communities.

We are unaware of any environmental hazards at any of our properties that individually or in the aggregate may have a material adverse impact on our operations or financial position. We have not been notified by any governmental authority, and we are not otherwise aware, of any material non-compliance, liability, or claim relating to environmental liabilities in connection with any of our properties. We do not believe that the cost of continued compliance with applicable environmental laws and regulations will have a material adverse effect on us or our financial condition or results of operations. Future environmental laws, regulations, or ordinances, however, may require additional remediation of existing conditions that are not currently actionable. Also, if more stringent requirements are imposed on us in the future, the costs of compliance could have a material adverse effect on us and our financial condition.

Insurance

We carry comprehensive general liability coverage on our communities, with limits of liability customary within the industry to insure against liability claims and related defense costs. We are also insured, in all material respects, against the risk of direct physical damage in amounts necessary to reimburse us on a replacement cost basis for costs incurred to repair or rebuild each property, including loss of rental income during the reconstruction period.

Factors Affecting Our Business and Prospects

There are many factors that affect our business and our results of operations, some of which are beyond our control. The following is a description of some of the important factors that may cause our actual results of operations in future periods to differ materially from those currently expected or desired.

Unfavorable Changes in Apartment Market and Economic Conditions Could Adversely Affect Occupancy Levels and Rental Rates. Market and economic conditions in the metropolitan areas in which we operate may significantly affect our occupancy levels and rental rates and, therefore, our profitability. Factors that may adversely affect these conditions include the following:


	•	a reduction in jobs and other local economic downturns,

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

	•	government or builder incentives which enable first time homebuyers to put little or no money down, making alternative housing decisions easier to make,

	•	oversupply of, or reduced demand for, apartment homes,

	•	declines in household formation, and


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

The strength of the United States economy has become increasingly susceptible to global events and threats of terrorism. At the same time, productivity enhancements and the increased exportation of labor have resulted in limited job growth despite an improving economy. Continued weakness in job creation, or any worsening of current economic conditions, generally and in our principal market areas, could have a material adverse effect on our occupancy levels, our rental rates and our ability to strategically acquire and dispose of apartment communities. This may impair our ability to satisfy our financial obligations and pay distributions to our stockholders.

Acquisitions or New Development May Not Achieve Anticipated Results. We intend to continue to selectively acquire apartment communities that meet our investment criteria. Our acquisition activities and their success are subject to the following risks:


	•	an acquired community may fail to perform as we expected in analyzing our investment, or a significant exposure related to the acquired property may go undetected during our due diligence procedures,

	•	when we acquire an apartment community, we often invest additional amounts in it with the intention of increasing profitability. These additional investments may not produce the anticipated improvements in profitability, and

	•	new developments may not achieve pro forma rents or occupancy levels, or problems with construction or local building codes may delay initial occupancy dates for all or a portion of a development community.

Possible Difficulty of Selling Apartment Communities Could Limit Operational and Financial Flexibility. We periodically dispose of apartment communities that no longer meet our strategic objectives, but market conditions could change and purchasers may not be willing to pay prices acceptable to us. A weak market may limit our ability to change our portfolio promptly in response to changing economic conditions. Furthermore, a significant portion of the proceeds from our overall property sales may be held by intermediaries in order for some sales to qualify as like-kind exchanges under Section 1031 of the Internal Revenue Code, so that any related capital gain can be deferred for federal income tax purposes. As a result, we may not have immediate access to all of the cash flow generated from our property sales. In addition, federal tax laws limit our ability to profit on the sale of communities that we have owned for fewer than four years, and this limitation may prevent us from selling communities when market conditions are favorable.

Increased Competition Could Limit Our Ability to Lease Apartment Homes or Increase or Maintain Rents. Our apartment communities compete with numerous housing alternatives in attracting residents, including other apartment communities and single-family rental homes, as well as owner occupied single-and multi-family homes. Competitive housing in a particular area could adversely affect our ability to lease apartment homes and increase or maintain rents.

Insufficient Cash Flow Could Affect Our Debt Financing and Create Refinancing Risk. We are subject to the risks normally associated with debt financing, including the risk that our operating income and cash flow will be insufficient to make required payments of principal and interest, or could restrict our borrowing capacity under our line of credit due to debt covenant restraints. We cannot assure you that sufficient cash flow will be available to make all required principal payments and still satisfy our distribution requirements to maintain our status as a REIT, nor can we assure you that the full limits of our line of credit will be available to us if our operating performance falls outside the constraints of our debt covenants. Additionally, we are likely to need to refinance substantially all of our outstanding debt as it matures. We may not be able to refinance existing debt, or the terms of any refinancing may not be as favorable as the terms of the existing debt, which could create pressures to sell assets or to issue additional equity when we would otherwise not choose to do so.

Failure to Generate Sufficient Revenue Could Impair Debt Service Payments and Distributions to Stockholders. If our apartment communities do not generate sufficient net rental income to meet rental expenses, our ability to make required payments of interest and principal on our debt securities and to pay distributions to our stockholders will be adversely affected. The following factors, among others, may affect the net rental income generated by our apartment communities:


	•	the national and local economies,

	•	local real estate market conditions, such as an oversupply of apartment homes,

	•	tenants’ perceptions of the safety, convenience, and attractiveness of our communities and the neighborhoods where they are located,

	•	our ability to provide adequate management, maintenance and insurance, and

	•	rental expenses, including real estate taxes and utilities.

Expenses associated with our investment in a community, such as debt service, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a reduction in rental income from that community. If a community is mortgaged to secure payment of debt and we are unable to make the mortgage payments, we could sustain a loss as a result of foreclosure on the community or the exercise of other remedies by the mortgage holder.

Debt Level May Be Increased. Our current debt policy does not contain any limitations on the level of debt that we may incur, although our ability to incur debt is limited by covenants in our bank and other credit agreements. We manage our debt to be in compliance with these debt covenants, but subject to compliance with these covenants, we may increase the amount of our debt at any time without a concurrent improvement in our ability to service the additional debt.

Financing May Not Be Available and Could be Dilutive. Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including common and preferred equity. Debt or equity financing may not be available in sufficient amounts, or on favorable terms or at all. If we issue additional equity securities to finance developments and acquisitions instead of incurring debt, the interests of our existing stockholders could be diluted.

Development and Construction Risks Could Impact Our Profitability. We intend to continue to develop and construct apartment communities. Development activities may be conducted through wholly-owned affiliated companies or through joint ventures with unaffiliated parties. Our development and construction activities may be exposed to the following risks:


	•	we may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, which could result in increased development costs and could require us to abandon our activities entirely with respect to a project for which we are unable to obtain permits or authorizations,

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

	•	we may abandon development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring such opportunities,

	•	we may be unable to complete construction and lease-up of a community on schedule, or incur development or construction costs that exceed our original estimates, and we may be unable to charge rents that would compensate for any increase in such costs,

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


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

Construction costs have been increasing in our existing markets, and the costs of upgrading acquired communities have, in some cases, exceeded our original estimates. We may experience similar cost increases in the future. Our inability to charge rents that will be sufficient to offset the effects of any increases in these costs may impair our profitability.

Failure to Succeed in New Markets May Limit Our Growth. We may from time to time make acquisitions outside of our existing market areas if appropriate opportunities arise. We may be exposed to a variety of risks if we choose to enter new markets, and we may not be able to operate successfully in new markets. These risks include, among others:


	•	inability to accurately evaluate local apartment market conditions and local economies,

	•	inability to obtain land for development or to identify appropriate acquisition opportunities,

	•	inability to hire and retain key personnel, and

	•	lack of familiarity with local governmental and permitting procedures.

Changing Interest Rates Could Increase Interest Costs and Could Affect the Market Price of Our Securities. We currently have, and expect to incur in the future, interest-bearing debt at rates that vary with market interest rates. Therefore, if interest rates increase, our interest costs will rise to the extent our variable rate debt is not hedged effectively. In addition, an increase in market interest rates may lead our security holders to demand a higher annual yield, which could adversely affect the market price of our common and preferred stock and debt securities.

Limited Investment Opportunities Could Adversely Affect Our Growth. We expect that other real estate investors will compete with us to acquire existing properties and to develop new properties. These competitors include insurance companies, pension and investment funds, developer partnerships, investment companies and other apartment REITs. This competition could increase prices for properties of the type that we would likely pursue, and our competitors may have greater resources than we do. As a result, we may not be able to make attractive investments on favorable terms, which could adversely affect our growth.

Failure to Integrate Acquired Communities and New Personnel Could Create Inefficiencies. To grow successfully, we must be able to apply our experience in managing our existing portfolio of apartment communities to a larger number of properties. In addition, we must be able to integrate new management and operations personnel as our organization grows in size and complexity. Failures in either area will result in inefficiencies that could adversely affect our expected return on our investments and our overall profitability.

Interest Rate Hedging Contracts May Be Ineffective and May Result in Material Charges. From time to time when we anticipate issuing debt securities, we may seek to limit our exposure to fluctuations in interest rates during the period prior to the pricing of the securities by entering into interest rate hedging contracts. We may do this to increase the predictability of our financing costs. Also, from time to time we may rely on interest rate hedging contracts to limit our exposure under variable rate debt to unfavorable changes in market interest rates. If the terms of new debt securities are not within the parameters of, or market interest rates fall below that which we incur under a particular interest rate hedging contract, the contract is ineffective. Furthermore, the settlement of interest rate hedging contracts has involved and may in the future involve material charges.

Potential Liability for Environmental Contamination Could Result in Substantial Costs. Under various federal, state and local environmental laws, as a current or former owner or operator of real estate, we could be required to investigate and remediate the effects of contamination of currently or formerly owned real estate by hazardous or toxic substances, often regardless of our knowledge of or responsibility

for the contamination and solely by virtue of our current or former ownership or operation of the real estate. In addition, we could be held liable to a governmental authority or to third parties for property damage and for investigation and clean-up costs incurred in connection with the contamination. These costs could be substantial, and in many cases environmental laws create liens in favor of governmental authorities to secure their payment. The presence of such substances or a failure to properly remediate any resulting contamination could materially and adversely affect our ability to borrow against, sell or rent an affected property.

We are Subject to Certain Tax Risks. We have elected to be taxed as a REIT under the Internal Revenue Code. Our qualification as a REIT requires us to satisfy numerous requirements (some on an annual and quarterly basis) established under highly technical and complex Internal Revenue Code provisions for which there are only limited judicial or administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control. We intend that our current organization and method of operation enable us to qualify as a REIT, but we may not so qualify or we may not be able to remain so qualified in the future. In addition, U.S. federal income tax laws governing REITs and other corporations and the administrative interpretations of those laws may be amended at any time, potentially with retroactive effect. Future legislation, new regulations, administrative interpretations or court decisions could adversely affect our ability to qualify as a REIT or adversely affect our stockholders.

If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at corporate rates, and would not be allowed to deduct dividends paid to our stockholders in computing our taxable income. We may also be disqualified from treatment as a REIT for the four taxable years following the year in which we failed to qualify. The additional tax liability would reduce our net earnings available for investment or distribution to stockholders. In addition, we would no longer be required to make distributions to our stockholders. Even if we continue to qualify as a REIT, we will continue to be subject to certain federal, state and local taxes on our income and property.

We May Conduct a Portion of Our Business Through Taxable REIT Subsidiaries, Which Could Have Adverse Tax Consequences. We have established several taxable REIT subsidiaries. Despite our qualification as a REIT, our taxable REIT subsidiaries must pay federal income tax on their taxable income. In addition, we must comply with various tests to continue to qualify as a REIT for federal income tax purposes, and our income from and investments in our taxable REIT subsidiaries generally do not constitute permissible income and investments for these tests. While we will attempt to ensure that our dealings with our taxable REIT subsidiaries will not adversely affect our REIT qualification, we cannot provide assurance that we will successfully achieve that result. Furthermore, we may be subject to a 100% penalty tax, or we may jeopardize our ability to retain future gains on real property sales, or our taxable REIT subsidiaries may be denied deductions, to the extent our dealings with our taxable REIT subsidiaries are not deemed to be arm’s length in nature.

Certain Property Transfers May Generate Prohibited Transaction Income, Resulting in a Penalty Tax on Gain Attributable to the Transaction. From time to time, we may transfer or otherwise dispose of some of our properties. Under the Internal Revenue Code, any gain resulting from transfers of properties that we hold as inventory or primarily for sale to customers in the ordinary course of business would be treated as income from a prohibited transaction subject to a 100% penalty tax. Since we acquire properties for investment purposes, we do not believe that our occasional transfers or disposals of property are prohibited transactions. However, whether property is held for investment purposes is a question of fact that depends on all the facts and circumstances surrounding the particular transaction. The Internal Revenue Service may contend that certain transfers or disposals of properties by us are prohibited transactions. If the Internal Revenue Service were to argue successfully that a transfer or disposition of property constituted a prohibited transaction, then we would be required to pay a 100% penalty tax on any gain allocable to us from the prohibited transaction and we may jeopardize our ability to retain future gains on real property sales. In addition, income from a prohibited transaction might adversely affect our ability to satisfy the income tests for qualification as a REIT for federal income tax purposes.

Maryland Law May Limit the Ability of a Third Party to Acquire Control of Us, Which May Not be in Our Stockholders’ Best Interests. Maryland business statutes may limit the ability of a third party to acquire control of us. As a Maryland corporation, we are subject to various Maryland laws which may have the effect of discouraging offers to acquire our company and of increasing the difficulty of consummating any such offers, even if our acquisition would be in our stockholders’ best interests. The Maryland General Corporation Law restricts mergers and other business combination transactions between us and any person who acquires beneficial ownership of shares of our stock representing 10% or more of the voting power without our board of directors’ prior approval. Any such business combination transaction could not be completed until five years after the person acquired such voting power, and generally only with the approval of stockholders representing 80% of all votes entitled to be cast and 66²/3% of the votes entitled to be cast, excluding the interested stockholder, or upon payment of a fair price. Maryland law also provides generally that a person who acquires shares of our equity stock that represent 10% (and certain higher levels) of the voting power in electing directors will have no voting rights unless approved by a vote of two-thirds of the shares eligible to vote.

Limitations on Share Ownership and Limitations on the Ability of Our Stockholders to Effect a Change in Control of Our Company May Prevent Takeovers That are Beneficial to Our Stockholders. One of the requirements for maintenance of our qualification as a REIT for federal income tax purposes is that no more than 50% in value of our outstanding capital stock may be owned by five or fewer individuals, including entities specified in the Internal Revenue Code, during the last half of any taxable year. Our amended and restated articles of incorporation contain ownership and transfer restrictions relating to our stock primarily to assist us in complying with this requirement. These restrictions include a provision that generally limits a person from beneficially owning or constructively owning shares of our outstanding equity stock in excess of a 9.9% ownership interest, unless our board of directors exempts the person from such ownership limitation, provided that any such exemption shall not allow the person to exceed 13% of the value of our outstanding equity stock. These provisions may have the effect of delaying, deferring or preventing someone from taking control of us, even though a change of control might involve a premium price for our stockholders or might otherwise be in our stockholders’ best interests.

Under the terms of our shareholder rights plan, our board of directors can, in effect, prevent a person or group from acquiring more than 15% of the outstanding shares of our common stock. Unless our board of directors approves the person’s purchase, after that person acquires more than 15% of our outstanding common stock, all other stockholders will have the right to purchase securities from us at a price that is less than their then fair market value. Purchases by other stockholders would substantially reduce the value and influence of the shares of our common stock owned by the acquiring person. Our board of directors, however, can prevent the shareholder rights plan from operating in this manner. This gives our board of directors significant discretion to approve or disapprove a person’s efforts to acquire a large interest in us.

Executive Officers of the Company

The following table sets forth information about our executive officers as of March 1, 2005. The executive officers listed below serve in their respective capacities at the discretion of the board of directors.


Name	Age		Office	Since

Thomas W. Toomey		44	Chief Executive Officer, President and Director		2001
W. Mark Wallis		54	Senior Executive Vice President		2001
Christopher D. Genry		44	Executive Vice President & Chief Financial Officer		2001
Richard A. Giannotti		49	Executive Vice President — Asset Quality		1985
Martha R. Carlin		42	Senior Vice President, Director of Property Operations		2001
Lester C. Boeckel		56	Senior Vice President — Dispositions & Acquisitions		2001
Patrick S. Gregory		55	Senior Vice President, Chief Information Officer		1997
Michael J. Kelly		37	Senior Vice President — Acquisitions		2004
Rodney A. Neuheardt		43	Senior Vice President — Finance & Treasurer		2001
Scott A. Shanaberger		36	Senior Vice President, Chief Accounting Officer & Assistant Secretary		1994
Thomas A. Spangler		44	Senior Vice President — Business Development & Chief Risk Officer		1998
Moises V. Vela, Jr.		43	Senior Vice President, Multicultural Strategy		2005
Mark E. Wood		52	Senior Vice President — Development		1994
Mary Ellen Norwood		50	Vice President — Legal Administration & Secretary		2001

Set forth below is certain biographical information about each of our executive officers.

Mr. Toomey joined us as Chief Executive Officer, President and a director in February 2001. Prior to joining us, Mr. Toomey was with Apartment Investment and Management Company, or AIMCO, a publicly traded real estate investment trust, where he served as Chief Operating Officer for two years and Chief Financial Officer for four years. During his tenure at AIMCO, Mr. Toomey was instrumental in the growth of AIMCO from 34,000 apartment units to 360,000 units. He has also served as a Senior Vice President at Lincoln Property Company, a national real estate development, property management and real estate consulting company, from 1990 to 1995. He currently serves as a member of the board of the National Association of Real Estate Investment Trusts and the National MultiHousing Council and he serves as Co-Chairman of the Homeland Security Task Force of the Real Estate Roundtable.

Mr. Wallis joined us in March 2001 as Senior Executive Vice President responsible for legal, acquisitions, dispositions, and development. Prior to joining us, Mr. Wallis was the President of Golden Living Communities, a company he established in 1995, involved in the development of assisted and independent living communities. Prior to founding Golden Living, Mr. Wallis was Executive Vice President of Finance and Administration of Lincoln Property Company.

Mr. Genry joined us in March 2001 as Executive Vice President and Chief Financial Officer. Mr. Genry had been Chief Financial Officer of Centex Construction Group, a $1 billion subsidiary of the New York Stock Exchange listed Centex Corporation. As Chief Financial Officer, he provided strategic leadership in the development and management of all financial and information systems, the redesign and oversight of internal audit functions, and the identification and evaluation of acquisition opportunities. Prior to joining Centex, he was with Arthur Andersen & Co. in Dallas.

Mr. Giannotti joined us as Director of Development and Construction in September 1985. He was elected Assistant Vice President in 1988, Vice President in 1989, and Senior Vice President in 1996. In 1998, Mr. Giannotti was elected Director of Development-East, and was promoted to Executive Vice President — Asset Quality in 2003.

Ms. Carlin joined us in March 2001 as a Senior Vice President responsible for operational efficiencies and revenue enhancement and was promoted to Senior Vice President, Director of Property Operations in 2004. Ms. Carlin was previously Senior Vice President of Operations for opsXchange, Inc., a real estate procurement technology developer. Previously, she served as Senior Vice President of Ancillary Services at AIMCO and as a member of Arthur Andersen’s Real Estate Services Group.

Mr. Boeckel joined us in July 2001 as Vice President of Dispositions and Acquisitions and was promoted to Senior Vice President in February 2002. Prior to joining United Dominion, Mr. Boeckel was the Senior Vice President of Asset Management at AIMCO. Before becoming the Senior Vice President of Asset Management, Mr. Boeckel was a Regional Vice President with operating responsibility for a portfolio of 12,000 apartment homes. Prior to joining AIMCO, Mr. Boeckel had over ten years of real estate experience with various firms including a regional investment banking firm, a regional financial planning firm, and a national apartment syndication firm.

Mr. Gregory joined us in 1997 as Vice President and Chief Information Officer and was promoted to Senior Vice President in 1999. From 1976 to 1997, Mr. Gregory was employed by Crestar Bank as a New Technology Analyst.

Mr. Kelly joined us in 2003 as Senior Vice President — Acquisitions. Prior to joining United Dominion, Mr. Kelly was Senior Vice President in charge of national apartment acquisitions for Urdang & Associates, a Philadelphia based pension fund advisor. During his tenure he purchased over 4,100 units. Prior to Urdang, Mr. Kelly was a Principal with Lend Lease focusing on national apartment acquisitions. From 1993 to 1998, Mr. Kelly was Vice President and part owner of Apartment Realty Advisors, an apartment brokerage company.

Mr. Neuheardt joined us in June 2001 as Vice President, Finance and was promoted to Senior Vice President, Finance in February 2003, and Treasurer in 2004. Prior to joining us, Mr. Neuheardt was Controller and Treasurer of Sunrise Housing, Ltd., a privately owned apartment development company that manufactures modular units for the construction of affordable apartment communities. Previously, Mr. Neuheardt served as controller of several private energy companies, including Continental Emsco Company. Prior to that, Mr. Neuheardt was a Senior Manager in KPMG, LLP’s audit practice.

Mr. Shanaberger joined us in 1994 as an Accounting Manager and was promoted to Assistant Vice President and Assistant Treasurer in 1997. In 2000, Mr. Shanaberger was promoted to Vice President Corporate Controller and Chief Accounting Officer and was promoted to Senior Vice President in 2002. Prior to joining United Dominion, Mr. Shanaberger was employed by Ernst & Young LLP.

Mr. Spangler joined us as Assistant Vice President, Operational Planning and Asset Management in August 1998 and was promoted to Vice President, Director of Operational Planning and Asset Management that same year. Mr. Spangler was promoted to Senior Vice President — Business Development in February 2003, and Chief Risk Officer in September 2003. Prior to joining United Dominion, Mr. Spangler was an Asset Manager for Summit Enterprises, Inc. of Virginia, a private investment management firm for nine years.

Mr. Vela joined us as Senior Vice President, Multicultural Strategy in February 2005. Prior to joining us, Mr. Vela served as executive director of the National Association of Hispanic Real Estate Professionals and as president of Diverse Directions LLC, a consulting firm that he established in 2000. At Diverse Directions, he advised clients on marketing strategies, government issues and media relations targeting the Hispanic community. From 2002 to 2004, Mr. Vela was of counsel at the law firm of Hebson, Liddon & Slate, P.C. in Birmingham, Alabama.

Mr. Wood joined us as Vice President of Construction in connection with the merger of SouthWest in 1996. He was promoted to Senior Vice President and Director of Development — West in 2000.

Ms. Norwood joined us in 2001 as Vice President — Legal Administration and Secretary. Prior to joining us, Ms. Norwood was employed by Centex Corporation for 15 years, most recently as its Legal Administrator. Centex is a New York Stock Exchange listed company that operates in the home building,

financial services, construction products, construction services, and investment real estate business segments.

Available Information

We file electronically with the Securities and Exchange Commission our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and amendments to those reports on the day of filing with the SEC on our website atwww.udrt.com, or by sending an e-mail message toir@udrt.com.


Item 2.	*Properties*

At December 31, 2004, our apartment portfolio included 273 communities located in 43 markets, with a total of 78,855 completed apartment homes. In addition, we had three apartment communities under development. We own approximately 53,000 square feet of office space in Richmond, Virginia, for our corporate offices and we lease approximately 11,000 square feet of office space in Highlands Ranch, Colorado, for our principal executive offices. The table below sets forth a summary of our real estate portfolio by geographic market at December 31, 2004.

SUMMARY OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT DECEMBER 31, 2004


																			Average								Average
					Number		Percentage												Collections								Home
			Number of		of		of			Carrying		Encumbrances							per								Size
			Apartment		Apartment		Carrying			Value (in		(in		Cost Per		Physical			Occupied					Resident			(Square
			Communities		Homes		Value			thousands)		thousands)		Home		Occupancy			Home(a)		Concessions(b)			Turnover(c)			Feet)

Southern California				26		7,070		18.9	%	$	993,486	$	244,148	$	140,521		94.5	%	$	1,132		1.4	%		30.5	%		832
Houston, TX				21		6,034		5.2	%		271,403		29,382		44,979		91.0	%		625		2.4	%		60.3	%		828
Tampa, FL				12		4,314		4.7	%		244,944		60,275		56,779		93.8	%		726		3.5	%		54.8	%		978
Northern California				7		2,024		4.1	%		217,004		71,038		107,215		94.4	%		1,126		2.9	%		50.7	%		795
Orlando, FL				14		4,140		4.1	%		216,721		72,150		52,348		94.7	%		710		1.5	%		64.8	%		937
Metropolitan DC				7		2,245		4.1	%		213,611		82,058		95,150		96.2	%		1,065		2.3	%		39.0	%		962
Raleigh, NC				11		3,663		4.0	%		212,412		76,116		57,989		93.6	%		637		2.9	%		65.4	%		957
Dallas, TX				11		3,590		3.8	%		198,027		62,530		55,161		96.0	%		644		2.4	%		61.9	%		829
Phoenix, AZ				10		2,779		3.3	%		174,341		31,670		62,735		91.7	%		669		11.3	%		70.5	%		945
Baltimore, MD				10		2,118		3.1	%		162,396		17,836		76,674		96.2	%		919		1.2	%		45.8	%		925
Columbus, OH				6		2,530		3.0	%		155,494		45,864		61,460		91.8	%		668		3.2	%		64.9	%		904
Nashville, TN				9		2,580		2.9	%		152,312		39,299		59,036		94.3	%		679		1.5	%		60.9	%		950
Monterey Peninsula, CA				8		1,580		2.6	%		139,333		—		88,185		91.5	%		919		1.1	%		62.5	%		726
Richmond, VA				9		2,636		2.6	%		137,496		62,207		52,161		93.9	%		750		2.3	%		64.7	%		968
Charlotte, NC				9		2,378		2.6	%		136,790		11,784		57,523		92.1	%		593		1.6	%		58.0	%		977
Arlington, TX				8		2,656		2.4	%		127,009		25,865		47,820		93.1	%		630		2.1	%		57.9	%		811
Greensboro, NC				8		2,123		2.1	%		107,913		—		50,830		93.3	%		588		0.9	%		60.2	%		981
Seattle, WA				6		1,575		1.9	%		99,829		40,774		63,383		93.0	%		758		4.4	%		67.3	%		891
Denver, CO				3		1,484		1.9	%		99,179		—		66,832		93.1	%		641		17.3	%		59.4	%		938
Wilmington, NC				6		1,868		1.8	%		93,902		—		50,269		95.8	%		647		1.4	%		73.1	%		952
Portland, OR				6		1,490		1.8	%		91,943		15,726		61,707		92.2	%		698		5.3	%		41.5	%		879
Austin, TX				5		1,425		1.6	%		82,080		5,391		57,600		93.6	%		631		4.0	%		63.2	%		805
Atlanta, GA				6		1,426		1.4	%		75,604		16,886		53,018		91.7	%		615		2.0	%		62.0	%		908
Columbia, SC				6		1,584		1.2	%		64,985		—		41,026		92.9	%		601		2.7	%		77.4	%		838
Jacksonville, FL				3		1,157		1.2	%		61,251		12,455		52,939		93.3	%		701		1.5	%		71.8	%		896
Norfolk, VA				6		1,438		1.1	%		60,184		9,118		41,853		96.3	%		782		1.2	%		73.7	%		1,016
Other Southwestern				12		4,100		4.0	%		209,653		50,677		51,135		92.9	%		630		1.4	%		62.5	%		828
Other Florida				6		1,737		2.3	%		118,006		44,873		67,937		91.1	%		712		2.1	%		46.3	%		944
Other North Carolina				8		1,893		1.5	%		78,669		12,434		41,558		95.9	%		620		0.7	%		83.6	%		895
Other Mid-Atlantic				6		1,156		1.1	%		56,377		16,770		48,769		94.1	%		816		1.3	%		79.8	%		922
Other Virginia				3		820		0.9	%		47,271		14,671		57,648		92.6	%		926		2.4	%		76.8	%		942
Other Southeastern				2		798		0.8	%		40,989		16,368		51,365		94.4	%		502		1.1	%		54.6	%		811
Other Midwestern				3		444		0.4	%		23,520		5,767		52,973		93.9	%		684		3.1	%		63.1	%		955
Real Estate Under
Development				n/a		n/a		0.8	%		40,241		n/a		n/a		n/a			n/a		n/a			n/a			n/a
Land				n/a		n/a		0.6	%		29,449		n/a		n/a		n/a			n/a		n/a			n/a			n/a

	Total Apartments(d)			273		78,855		99.8	%	$	5,233,824	$	1,194,132	$	66,373		93.6	%	$	728		2.8	%		58.9	%		895

Commercial Property				n/a		n/a		0.1	%		3,256		—		n/a		n/a			n/a		n/a			n/a			n/a
Richmond — Corporate				n/a		n/a		0.1	%		6,216		3,792		n/a		n/a			n/a		n/a			n/a			n/a

		Total Real Estate Owned		273		78,855		100.0	%	$	5,243,296	$	1,197,924	$	66,373		93.6	%	$	728		2.8	%		58.9	%		895


(a)		Average Collections per Occupied Home represents net rental and fee income per weighted average number of homes occupied.

(b)		Concessions disclosed as a percentage of gross potential rent.

(c)		Resident Turnover represents the percentage of homes that would be turned in the course of the year if the average weekly move-outs experienced throughout the most recent quarter were duplicated for the entire year.

(d)		Includes real estate held for disposition, real estate under development, and land, but excludes commercial property.


Item 3.	*Legal Proceedings*

We are subject to various legal proceedings and claims arising in the ordinary course of business. We cannot determine the ultimate liability with respect to such legal proceedings and claims at this time. We believe that such liability, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on our financial condition, results of operations or cash flow.


Item 4.	*Submission of Matters to a Vote of Security Holders*

No matters were submitted to a vote of our security holders during the fourth quarter of the year ended December 31, 2004.

PART II


Item 5.	*Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities*

Common Stock

Our common stock is traded on the New York Stock Exchange under the symbol “UDR.” The following tables set forth the quarterly high and low sale prices per common share reported on the NYSE for each quarter of the last two years. Distribution information for common stock reflects distributions declared per share for each calendar quarter and paid at the end of the following month.


					Distributions
	High		Low		Declared

2004
1st Quarter	$	19.70	$	17.85	$	.2925
2nd Quarter		19.99		17.10		.2925
3rd Quarter		21.38		18.83		.2925
4th Quarter		24.80		19.51		.2925

2003
1st Quarter	$	16.76	$	15.13	$	.2850
2nd Quarter		17.72		15.98		.2850
3rd Quarter		18.96		17.07		.2850
4th Quarter		19.53		17.39		.2850

On March 1, 2005, the closing sale price of our common stock was $22.35 per share on the NYSE and there were 6,779 holders of record of the 137,023,872 outstanding shares of our common stock.

We have determined that, for federal income tax purposes, approximately 66% of the distributions for each of the four quarters of 2004 represented ordinary income, 17% represented long-term capital gain, 7% represented unrecaptured section 1250 gain, and 10% represented return of capital to our stockholders.

We pay regular quarterly distributions to holders of shares of our common stock. Future distributions will be at the discretion of our board of directors and will depend on our actual funds from operations, financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code, and other factors. The annual distribution payment for calendar year 2004 necessary for us to maintain our status as a REIT was approximately $0.69 per share. We declared total distributions of $1.17 per share of common stock for 2004.

A covenant in our $500 million unsecured revolving credit facility prohibits the payment of dividends and distributions on our common stock in excess of 95% of our “Funds From Operations,” as defined in the credit facility, during any period of four consecutive fiscal quarters. Despite this covenant but except as provided in the following sentence, we may pay dividends required to maintain our qualification as a REIT

under the Internal Revenue Code. However, if certain defaults or events of default exist under such facility, this covenant prohibits the payment of dividends and distributions in all circumstances.

Series B Preferred Stock

The Series B Cumulative Redeemable Preferred Stock has no stated par value and a liquidation preference of $25 per share. The Series B has no voting rights except as required by law. The Series B has no stated maturity and is not subject to any sinking fund or mandatory redemption and is not convertible into any of our other securities. The Series B is not redeemable prior to May 29, 2007. On or after this date, the Series B may be redeemed for cash at our option, in whole or in part, at a redemption price of $25 per share plus accrued and unpaid dividends. The redemption price is payable solely out of the sale proceeds of our other capital stock. All dividends due and payable on the Series B have been accrued or paid as of the end of each fiscal year.

Distributions declared on the Series B in 2004 were $2.15 per share or $0.5375 per quarter. The Series B is listed on the NYSE under the symbol “UDRpb.” At December 31, 2004, a total of 5,416,009 shares of the Series B were outstanding.

Series D Preferred Stock

All of the remaining outstanding shares of our Series D Cumulative Convertible Redeemable Preferred Stock have been converted by the holder into shares of our common stock. The Series D had no stated maturity, no stated par value, no voting rights except as required by law, and a liquidation preference of $25 per share. The Series D was convertible at any time into 1.5385 shares of common stock, subject to certain adjustments, at the option of the holder of the Series D. We had the option to redeem at any time all or part of the Series D at a price per share of $25, payable in cash, plus all accrued and unpaid dividends, provided that the current market price of our common stock was at least equal to the conversion price, initially set at $16.25 per share.

In 2004, we exercised our right to redeem the remaining 2 million shares of our Series D that were outstanding. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 3,076,769 shares of common stock at a price of $16.25 per share. In 2003, we exercised our right to redeem 6 million shares of our Series D. Upon receipt of our redemption notice, the 6 million shares to be redeemed were converted by the holder into 9,230,923 shares of common stock at a price of $16.25 per share. Because the shares of common stock that were issued upon conversion of the Series D were issued in transactions not involving a public offering, the transactions are exempt from registration under the Securities Act of 1933 in accordance with Section 4(2) of the Securities Act.

Distributions declared on the Series D in 2004 were $2.09 per share or $0.5223 per quarter. The Series D was not listed on any exchange. At December 31, 2004, there were no outstanding shares of the Series D.

Series E Preferred Stock

The Series E Cumulative Convertible Preferred Stock has no stated par value and a liquidation preference of $16.61 per share. Subject to certain adjustments and conditions, each share of the Series E is convertible at any time and from time to time at the holder’s option into one share of our common stock. The holders of the Series E are entitled to vote on an as-converted basis as a single class in combination with the holders of common stock at any meeting of our stockholders for the election of directors or for any other purpose on which the holders of common stock are entitled to vote. The Series E has no stated maturity and is not subject to any sinking fund or any mandatory redemption.

In 2004, Series E holders converted a total of 621,405 shares of Series E into 621,405 shares of our common stock. Because the shares of common stock that were issued upon conversion of the Series E were issued in transactions not involving a public offering, the transactions are exempt from registration under the Securities Act of 1933 in accordance with Section 4(2) of the Securities Act.

Distributions declared on the Series E in 2004 were $1.33 per share or $0.3322 per quarter. The Series E is not listed on any exchange. At December 31, 2004 a total of 2,803,812 shares of the Series E were outstanding.

Dividend Reinvestment and Stock Purchase Plan

We have a Dividend Reinvestment and Stock Purchase Plan under which holders of our common stock and our Series B preferred stock may elect to automatically reinvest their distributions and make additional cash payments to acquire additional shares of our common stock. Stockholders who do not participate in the plan continue to receive dividends as declared. As of March 1, 2005, there were 3,749 participants in the plan.

Operating Partnership Units

From time to time we issue shares of our common stock in exchange for operating partnership units, or OP Units, tendered to our operating partnerships, United Dominion Realty, L.P. and Heritage Communities L.P., for redemption in accordance with the provisions of their respective partnership agreements. At December 31, 2004, there were 10,024,380 OP Units (of which 1,791,329 and 0 are owned by the holders of the Series A OPPS and the Series B OPPS, respectively (see Notes 1 and 9 in the Notes to Consolidated Financial Statements)) and 355,255 OP Units in United Dominion Realty, L.P. and Heritage Communities L.P., respectively, that were owned by limited partners. The holder of the OP Units has the right to require United Dominion Realty, L.P. to redeem all or a portion of the OP Units held by the holder in exchange for a cash payment based on the market value of our common stock at the time of redemption. However, United Dominion Realty, L.P.’s obligation to pay the cash amount is subject to the prior right of the company to acquire such OP Units in exchange for either the cash amount or shares of our common stock. Heritage Communities L.P. OP Units are convertible into common stock in lieu of cash, at our option, once the holder elects to convert, at an exchange ratio of 1.575 shares for each OP Unit. During 2004, we issued a total of 170,209 shares of common stock in exchange for OP Units.

Purchases of Equity Securities

On June 3, 1999, our board of directors authorized the repurchase in open market transactions, in block transactions, or otherwise, of up to 5.5 million shares of common stock. On December 5, 2000, our board of directors authorized the purchase of up to an additional 5.5 million shares of common stock in open market transactions, in block purchases or otherwise. As of December 31, 2004, we have repurchased a total of 8,749,763 shares of common stock under this program. As disclosed in the table below, we did not purchase any shares of our common stock during the quarter ended December 31, 2004.

Maximum Number

Total Number of Shares

of Shares that May

Total Number

Average

Purchased as Part of

Yet Be Purchased

of Shares

Price Per

Publicly Announced

Under the Plans or

Period

Purchased

Share

Plans or Programs

Programs

October 1, 2004 through
October 31, 2004

N/A

2,250,237

November 1, 2004 through November 30, 2004

N/A

2,250,237

December 1, 2004 through December 31, 2004

N/A

2,250,237

Total

N/A

2,250,237


Item 6.	*Selected Financial Data*

The following table sets forth selected consolidated financial and other information as of and for each of the years in the five-year period ended December 31, 2004. The table should be read in conjunction with our consolidated financial statements and the notes thereto, and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, included elsewhere in this Report.

UNITED DOMINION REALTY TRUST, INC.

SELECTED FINANCIAL DATA

(In thousands, except per share data and apartment homes owned)


			Years Ended December 31,

			2004		2003			2002			2001			2000

Operating Data(c)
	Rental income		$	604,270	$	542,894		$	520,939		$	494,709		$	507,112
	Income/(loss) before minority interests and discontinued operations			32,446		33,089			(4,957	)		9,693			13,382
	Income from discontinued operations, net of minority interests			65,331		37,055			57,520			52,519			63,041
	Net income			97,152		70,404			53,229			61,828			76,615
	Distributions to preferred stockholders			19,531		26,326			27,424			31,190			36,891
	Net income available to common stockholders			71,892		24,807			25,805			27,142			42,653
	Common distributions declared			152,203		134,876			118,888			108,956			110,225
	Weighted average number of common shares outstanding — basic			128,097		114,672			106,078			100,339			103,072
	Weighted average number of common shares outstanding — diluted			129,080		114,672			106,078			100,339			103,072
	Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted			145,842		136,975			127,838			120,728			123,005
	Per share — basic:
		Income/(loss) from continuing operations available to common stockholders, net of minority interests	$	0.05	$	(0.10	)	$	(0.30	)	$	(0.25	)	$	(0.20	)
		Income from discontinued operations, net of minority interests		0.51		0.32			0.54			0.52			0.61
		Net income available to common stockholders		0.56		0.22			0.24			0.27			0.41
	Per share — diluted:
		Income/(loss) from continuing operations available to common stockholders, net of minority interests		0.05		(0.10	)		(0.30	)		(0.25	)		(0.20	)
		Income from discontinued operations, net of minority interests		0.51		0.32			0.54			0.52			0.61
		Net income available to common stockholders		0.56		0.22			0.24			0.27			0.41
	Common distributions declared			1.17		1.14			1.11			1.08			1.07


			Years Ended December 31,

			2004			2003			2002			2001			2000

Balance Sheet Data(c)
	Real estate owned, at carrying value		$	5,243,296		$	4,351,551		$	3,967,483		$	3,907,667		$	3,836,320
	Accumulated depreciation			1,007,887			896,630			748,733			646,366			509,405
	Total real estate owned, net of accumulated depreciation			4,235,409			3,454,921			3,218,750			3,261,301			3,326,915
	Total assets			4,332,001			3,543,643			3,276,136			3,348,091			3,453,957
	Secured debt			1,197,924			1,018,028			1,015,740			974,177			866,115
	Unsecured debt			1,682,058			1,114,009			1,041,900			1,090,020			1,126,215
	Total debt			2,879,982			2,132,037			2,057,640			2,064,197			1,992,330
	Stockholders’ equity			1,195,451			1,163,436			1,001,271			1,042,725			1,218,892
	Number of common shares outstanding			136,430			127,295			106,605			103,133			102,219
Other Data
*Cash Flow Data*
	Cash provided by operating activities		$	251,747		$	234,945		$	229,001		$	224,411		$	224,160
	Cash (used in)/provided by investing activities			(595,966	)		(304,217	)		(67,363	)		(64,055	)		58,705
	Cash provided by/(used in) financing activities			347,299			70,944			(163,127	)		(166,020	)		(280,238	)
*Funds from Operations*(a)
	Funds from operations — basic		$	210,468		$	192,938		$	153,016		$	159,202		$	162,930
	Funds from operations — diluted			218,355			207,619			168,795			174,630			178,230
	Funds from operations with gains on the disposition of real estate developed for sale — diluted(b)			219,557			208,431			168,795			174,630			178,230
*Apartment Homes Owned*
		Total apartment homes owned at December 31		78,855			76,244			74,480			77,567			77,219
		Weighted average number of apartment homes owned during the year		76,873			74,550			76,567			76,487			80,253


(a)		Funds from operations (“FFO”) is defined as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of depreciable property, plus 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. We consider FFO in evaluating property acquisitions and our operating performance and believe that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of our activities in accordance with generally accepted accounting principles. 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. For 2004, FFO includes a charge of $5.5 million to cover hurricane related expenses. For 2001, FFO includes a charge of $8.6 million related to workforce reductions, other severance costs, executive office relocation costs, and the write down of seven undeveloped land sites along with our investment in an online apartment leasing company. For 2000, FFO includes a charge of $3.7 million related to the settlement of litigation and an organizational charge. For the years ended December 31, 2004 and 2003, distributions to preferred stockholders exclude $5.7 million and $19.3 million, respectively, related to premiums on preferred stock conversions.

(b)		Gains on the disposition of real estate investments developed for sale is defined as net sales proceeds less a tax provision (such development by REITs must be conducted in a taxable REIT subsidiary) and the gross investment basis of the asset before accumulated depreciation. We consider FFO with gains (or losses) on real estate development for sale to be a meaningful supplemental measure of performance because of the short-term use of funds to produce a profit which differs from the traditional long-term investment in real estate for REITs.

(c)		Reclassified to conform to current year presentation in accordance with FASB Statement No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets,” as described in Note 3 to the consolidated financial statements.


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*


	*Forward-Looking Statements*

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, without limitation, statements concerning property acquisitions and dispositions, development activity and capital expenditures, capital raising activities, rent growth, occupancy, and rental expense growth. Words such as “expects,” “anticipates,” “intends,” “plans,” “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 us, or our properties, adverse changes in the real estate markets and general and local economies and business conditions. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.


	*Business Overview*

We are 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. In June 2003, we changed our state of incorporation from Virginia to Maryland. Our subsidiaries include two operating partnerships, Heritage Communities L.P., a Delaware limited partnership, and United Dominion Realty, L.P., a Delaware limited partnership. Unless the context otherwise requires, all references in this Report to “we,” “us,” “our,” “the company,” or “United Dominion” refer collectively to United Dominion Realty Trust, Inc. and its subsidiaries.

At December 31, 2004, our portfolio included 273 communities with 78,855 apartment homes nationwide. The following table summarizes our market information by major geographic markets

(includes real estate held for disposition, real estate under development, and land, but excludes commercial properties):


											Year Ended
											December 31, 2004
		As of December 31, 2004
														Average
		Number of		Number of		Percentage			Carrying		Average			Collections
		Apartment		Apartment		of Carrying			Value (in		Physical			per Occupied
		Communities		Homes		Value			thousands)		Occupancy			Home

Southern California			26		7,070		19.0	%	$	993,486		94.5	%	$	1,132
Houston, TX			21		6,034		5.2	%		271,403		91.0	%		625
Tampa, FL			12		4,314		4.7	%		244,944		93.8	%		726
Northern California			7		2,024		4.1	%		217,004		94.4	%		1,126
Orlando, FL			14		4,140		4.1	%		216,721		94.7	%		710
Metropolitan DC			7		2,245		4.1	%		213,611		96.2	%		1,065
Raleigh, NC			11		3,663		4.0	%		212,412		93.6	%		637
Dallas, TX			11		3,590		3.8	%		198,027		96.0	%		644
Phoenix, AZ			10		2,779		3.3	%		174,341		91.7	%		669
Baltimore, MD			10		2,118		3.1	%		162,396		96.2	%		919
Columbus, OH			6		2,530		3.0	%		155,494		91.8	%		668
Nashville, TN			9		2,580		2.9	%		152,312		94.3	%		679
Monterey Peninsula, CA			8		1,580		2.7	%		139,333		91.5	%		919
Richmond, VA			9		2,636		2.6	%		137,496		93.9	%		750
Charlotte, NC			9		2,378		2.6	%		136,790		92.1	%		593
Arlington, TX			8		2,656		2.4	%		127,009		93.1	%		630
Greensboro, NC			8		2,123		2.1	%		107,913		93.3	%		588
Seattle, WA			6		1,575		1.9	%		99,829		93.0	%		758
Denver, CO			3		1,484		1.9	%		99,179		93.1	%		641
Wilmington, NC			6		1,868		1.8	%		93,902		95.8	%		647
Portland, OR			6		1,490		1.8	%		91,943		92.2	%		698
Austin, TX			5		1,425		1.6	%		82,080		93.6	%		631
Atlanta, GA			6		1,426		1.4	%		75,604		91.7	%		615
Columbia, SC			6		1,584		1.2	%		64,985		92.9	%		601
Jacksonville, FL			3		1,157		1.2	%		61,251		93.3	%		701
Norfolk, VA			6		1,438		1.1	%		60,184		96.3	%		782
Other Southwestern			12		4,100		4.0	%		209,653		92.9	%		630
Other Florida			6		1,737		2.3	%		118,006		91.1	%		712
Other North Carolina			8		1,893		1.5	%		78,669		95.9	%		620
Other Mid-Atlantic			6		1,156		1.1	%		56,377		94.1	%		816
Other Virginia			3		820		0.9	%		47,271		92.6	%		926
Other Southeastern			2		798		0.8	%		40,989		94.4	%		502
Other Midwestern			3		444		0.4	%		23,520		93.9	%		684
Real Estate Under Development			—		—		0.8	%		40,241		—			—
Land			—		—		0.6	%		29,449		—			—

	Total		273		78,855		100.0	%	$	5,233,824		93.6	%	$	728


	*Liquidity and Capital Resources*

Liquidity is the ability to meet present and future financial obligations either through operating cash flows, 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. Our primary source of liquidity is our cash flow from operations as determined by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment homes. We routinely use our 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.

We expect to meet our short-term liquidity requirements generally through 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. 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 the company 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.

We have a shelf registration statement filed with the Securities and Exchange Commission which provides for the issuance of up to an aggregate of $1.5 billion in common shares, preferred shares, and debt securities to facilitate future financing activities in the public capital markets. This shelf registration statement replaces our previous $1.0 billion shelf registration statement and includes $331.3 million of unissued securities carried forward from the previous $1.0 billion shelf registration statement. Throughout 2004, we completed various financing activities under our $1.5 billion shelf registration statement. These activities are summarized in the section titled “Financing Activities” that follows. As of December 31, 2004, approximately $1.1 billion of equity and debt securities remained available for use under the shelf registration statement. Access to capital markets is dependent on market conditions at the time of issuance.

In July 2004, Moody’s Investors Service upgraded our rating on our senior unsecured debt to Baa2 from Baa3 and our preferred stock to Baa3 from Ba1 with a stable outlook.

In October 2004, we filed a prospectus supplement under the Securities Act of 1933 relating to the offering of up to 5 million shares of our common stock that we may issue and sell through an agent from time to time in “at the market offerings,” as defined in Rule 415 of the Securities Act of 1933. Any sales of these shares will be made under our $1.5 billion shelf registration statement pursuant to a sales agreement that we entered into with the agent in July 2003. The sales price of the common stock that may be sold under the sales agreement will be no lower than the minimum price designated by us prior to the sale. As of December 31, 2004, we have sold a total of 472,000 shares of common stock pursuant to the sales agreement at a weighted average sales price of $20.36, for net proceeds to us of approximately $9.4 million.


	*Future Capital Needs*

Future development expenditures are expected to be funded primarily through joint ventures, with proceeds from the sale of property, with construction loans and, to a lesser extent, with 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 or placement of secured and/or unsecured debt, and by the reinvestment of proceeds from the sale of properties.

During 2005, we have approximately $27.9 million of secured debt and $71.1 million of unsecured debt maturing and we anticipate repaying that debt with proceeds from borrowings under our secured or unsecured credit facilities, or the issuance of new unsecured debt securities or equity.


	*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) real estate investment properties. With respect to these critical accounting policies, we believe that the application of judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented.


	*Capital Expenditures*

In conformity with accounting principles generally accepted in the United States, we capitalize 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 2004, $82.4 million or $1,075 per home was spent on capital expenditures for all of our communities, excluding development. These capital improvements included turnover related expenditures for floor coverings and appliances, other recurring capital expenditures such as HVAC equipment, roofs, siding, parking lots, and other non-revenue enhancing capital expenditures, which aggregated $36.3 million or $473 per home. In addition, revenue enhancing capital expenditures, kitchen and bath upgrades, and other extensive interior upgrades totaled $45.9 million or $599 per home, and major renovations totaled $0.2 million or $3 per home for the year ended December 31, 2004.

The following table outlines capital expenditures and repair and maintenance costs for all of our communities, excluding real estate under development for the periods presented:


		Year Ended December 31,							Year Ended December 31,
		(dollars in thousands)							(per home)

		2004		2003		% Change			2004		2003		% Change

Turnover capital expenditures		$	16,863	$	15,044		12.1	%	$	220	$	202		8.9	%
Other recurring capital expenditures			19,397		19,478		-0.4	%		253		262		-3.4	%

	Total recurring capital expenditures		36,260		34,522		5.0	%		473		464		1.9	%
Revenue enhancing improvements			45,933		15,408		198.1	%		599		207		189.4	%
Major renovations			197		3,216		-93.9	%		3		43		-93.0	%

	Total capital improvements	$	82,390	$	53,146		55.0	%	$	1,075	$	714		50.6	%

Repair and maintenance			42,196		40,615		3.9	%		550		546		0.7	%

	Total expenditures	$	124,586	$	93,761		32.9	%	$	1,625	$	1,260		29.0	%

Total capital improvements increased $29.2 million or $361 per home in 2004 compared to 2003. We will continue to selectively add revenue enhancing improvements which we believe will provide a return on investment substantially in excess of our cost of capital. Recurring capital expenditures during 2005 are currently expected to be approximately $510 per home.


	Impairment of Long-Lived Assets

We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book value of those assets. Our cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market

and operating conditions and our estimated holding periods. The net book value of impaired assets is reduced to fair market value. Our estimates of fair market value represent our best estimate based upon industry trends and reference to market rates and transactions.


	Real Estate Investment Properties

We purchase real estate investment properties from time to time and allocate the purchase price to various components, such as land, buildings, and intangibles related to in-place leases in accordance with FASB Statement No. 141,“Business Combinations.”The purchase price is allocated based on the relative fair value of each component. The fair value of buildings is determined as if the buildings were vacant upon acquisition and subsequently leased at market rental rates. As such, the determination of fair value considers the present value of all cash flows expected to be generated from the property including an initial lease up period. We determine the fair value of in-place leases by assessing the net effective rent and remaining term of the lease relative to market terms for similar leases at acquisition. In addition, we consider the cost of acquiring similar leases, the foregone rents associated with the lease-up period, and the carrying costs associated with the lease-up period. The fair value of in-place leases is recorded and amortized as amortization expense over the remaining contractual lease period.


	*Statements of Cash Flow*

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


	*Operating Activities*

For the year ended December 31, 2004, our net cash flow provided by operating activities was $251.7 million compared to $234.9 million for 2003. During 2004, the increase in cash flow from operating activities resulted primarily from an increase in property operating income due to the overall increase in our apartment community portfolio (see discussion under “Apartment Community Operations”).


	*Investing Activities*

For the year ended December 31, 2004, net cash used in investing activities was $596.0 million compared to $304.2 million for 2003. Changes in the level of investing activities from period to period reflects our strategy as it relates to our acquisition, capital expenditure, development, and disposition programs, as well as the impact of the capital market environment on these activities, all of which are discussed in further detail below.


	Acquisitions

For the year ended December 31, 2004, we acquired 28 apartment communities with 8,060 apartment homes for an aggregate consideration of $1.0 billion and one parcel of land for $16.3 million. In 2003, we acquired 3,514 apartment homes in 11 communities for an aggregate consideration of $347.7 million and one parcel of land for $3.1 million. In addition, we purchased the remaining 47% joint venture partners’ ownership interest in nine communities with 1,706 apartment homes in Salinas and Pacific Grove, California, for $76.0 million in June 2003.

Our long-term strategic plan is to achieve greater operating efficiencies by investing in fewer, more concentrated markets. As a result, we have been expanding our interests in the fast growing Southern California, Florida, and Metropolitan DC markets over the past two years. During 2005, we plan to continue to channel new investments into those markets we believe will provide the best investment returns. 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.


	Real Estate Under Development

Development activity is focused in core markets in which we have strong operations in place. For the year ended December 31, 2004, we invested approximately $19.1 million in development projects, an increase of $5.5 million from our 2003 level of $13.6 million.

The following projects were under development as of December 31, 2004:


	Number of		Completed						Estimated		Expected
	Apartment		Apartment						Cost Per		Completion
	Homes		Homes		Cost to Date		Budgeted Cost		Home		Date

					(In thousands)		(In thousands)
2000 Post Phase III San Francisco, CA		24		—	$	2,754	$	7,000	$	291,700		1Q06
Verano at Town Square Rancho Cucamonga, CA		414		—		27,648		66,300		160,100		2Q06
Mandalay on the Lake Irving, TX		369		—		9,840		30,900		83,700		2Q06

		807		—	$	40,242	$	104,200	$	129,100

In addition, we own eight parcels of land that we continue to hold for future development that had a carrying value as of December 31, 2004 of $25.5 million. Four of the eight parcels represent additional phases to existing communities as we plan to add apartment homes adjacent to currently owned communities that are in improving markets.


	Disposition of Investments

For the year ended December 31, 2004, we sold 19 communities with 5,425 apartment homes for an aggregate consideration of $270.1 million. In addition, we sold 24 of 36 townhomes of a community for $7.3 million. We recognized gains for financial reporting purposes of $52.9 million on these sales. Proceeds from the sales were used primarily to reduce debt.

For the year ended December 31, 2003, we sold seven communities with 1,927 apartment homes for an aggregate consideration of $88.9 million, one parcel of land for $1.3 million, and two commercial properties for an aggregate consideration of $7.3 million. We recognized gains for financial reporting purposes of $15.9 million on these sales. Proceeds from the sales were used primarily to reduce debt.

During 2005, we plan to continue to pursue our 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 the proceeds from 2005 dispositions to reduce debt, acquire communities, and fund development activity.


	*Financing Activities*

Net cash provided by financing activities during 2004 was $347.3 million compared to $70.9 million in 2003. As part of the plan to improve our balance sheet, 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 year ended December 31, 2004:


	•	Repaid $131.8 million of secured debt and $46.6 million of unsecured debt.

	•	Sold $125 million aggregate principal amount of 5.13% senior unsecured notes due January 2014 ($75 million in January and $50 million in March) under our medium-term note program. These notes represent a re-opening of the 5.13% senior unsecured notes due January 2014 that we issued in October 2003, and these notes constitute a single series of notes, bringing the aggregate principal amount outstanding of the 5.13% senior unsecured notes to $200 million. The net proceeds of


		$126.0 million were used to repay secured and unsecured debt obligations maturing in the first quarter of 2004 and to fund the acquisition of apartment homes.

	•	Sold $50 million aggregate principal amount of 3.90% senior unsecured notes due March 2010 in March 2004 under our medium-term note program. The net proceeds of approximately $49.4 million were used to fund the acquisition of apartment communities.

	•	Replaced our previous $1.0 billion shelf registration statement in June 2004 with a new shelf registration statement that provides for the issuance of up to $1.5 billion in debt securities and preferred and common stock. The new $1.5 billion shelf registration statement includes $331.3 million of unissued securities carried forward from our previous shelf registration statement.

	•	Sold $50 million aggregate principal amount of 4.30% senior unsecured notes due July 2007 in June 2004 under our new $750 million medium-term note program. The net proceeds of approximately $49.8 million were used to fund the acquisition of apartment communities and repay amounts outstanding on our $500 million unsecured credit facility.

	•	Moody’s Investors Service upgraded our rating on our senior unsecured debt to Baa2 from Baa3 and our preferred stock to Baa3 from Ba1 with a stable outlook in July 2004.

	•	Sold $100 million of 5.00% senior unsecured notes due January 2012 and $25 million of 4.30% senior unsecured notes due July 2007 under our new $750 million medium-term note program in October 2004. The $25 million in notes represent a re-opening of the 4.30% senior unsecured notes due July 2007 that we issued in June 2004, and these notes constitute a single series of notes, bringing the aggregate principal amount outstanding of the 4.30% senior unsecured notes to $75 million. The net proceeds of $124.4 million were used to fund the acquisition of apartment communities.

	•	Sold $100 million aggregate principal amount of 5.25% senior unsecured notes due January 2015 under our new $750 million medium-term note program in October 2004. The net proceeds of $99.0 million were used to fund the acquisition of apartment communities.

	•	Sold 3.5 million shares of common stock at a public offering price of $20.50 per share under our $1.5 billion shelf registration statement in October 2004. We sold an additional 525,000 shares of common stock at a public offering price of $20.50 per share in connection with the exercise of the underwriter’s over-allotment option in October 2004. The net proceeds of $81.9 million were used to reduce outstanding debt balances under our $500 million unsecured revolving credit facility, which was used to fund the acquisition of apartment communities.

	•	Filed a prospectus supplement under the Securities Act of 1933 in October 2004, relating to the offering of up to 5 million shares of our common stock that we may issue and sell through an agent from time to time in “at the market offerings,” as defined in Rule 415 of the Securities Act of 1933. Any sales of these shares will be made under our $1.5 billion shelf registration statement pursuant to a sales agreement that we entered into with the agent in July 2003. The sales price of the common stock that may be sold under the sales agreement will be no lower than the minimum price designated by us prior to the sale. As of December 31, 2004, we have sold a total of 472,000 shares of common stock pursuant to the sales agreement at a weighted average sales price of $20.36, for net proceeds to us of approximately $9.4 million.

	•	Exercised our right to redeem 2 million shares of our Series D Cumulative Convertible Redeemable Preferred Stock in December 2004. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 3,076,769 shares of common stock at a price of $16.25 per share.

	•	In conjunction with certain acquisitions, we assumed secured mortgages of $311.7 million with maturity dates ranging from September 2006 through June 2013.


	Credit Facilities

We have 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 December 31, 2004, $656.3 million was outstanding under the Fannie Mae credit facilities leaving $203.7 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 our discretion. As of December 31, 2004, $20.7 million had been funded under the Freddie Mac credit facility leaving $51.3 million of unused capacity. The Freddie Mac credit facility is for an initial term of five years with an option for us to extend for an additional four-year term at the then market rate. As of December 31, 2004, aggregate borrowings under both the Fannie Mae and Freddie Mac credit facilities were $677 million. We have $288.9 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 2.7%.

We have a $500 million three-year unsecured revolving credit facility that matures in March 2006. If we receive commitments from additional lenders or if the initial lenders increase their commitments, we will be able to increase the credit facility to $650 million. At our 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 December 31, 2004, $278.1 million was outstanding under the credit facility leaving $221.9 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.


	Derivative Instruments

As part of our overall interest rate risk management strategy, we have used derivatives as a means to fix the interest rates of variable rate debt obligations or to hedge anticipated financing transactions. Our derivative transactions used for interest rate risk management included various interest rate swaps with indices that related to the pricing of specific financial instruments of the company. We believe that we appropriately controlled our interest rate risk through the use of derivative instruments. During 2004, the fair value of our derivative instruments improved from an unfavorable $1.6 million at December 31, 2003, to $0 at December 31, 2004. This decrease was due to the normal progression of the fair market value of our derivative instruments towards zero as they matured. As of December 31, 2004, all of United Dominion’s interest rate swap agreements had matured.


	Interest Rate Risk

We are exposed to interest rate risk associated with variable rate notes payable and maturing debt that has to be refinanced. United Dominion does not hold financial instruments for trading or other speculative purposes, but rather issues these financial instruments to finance its portfolio of real estate assets. Interest rate sensitivity is the relationship between changes in market interest rates and the fair value of market rate sensitive assets and liabilities. Our earnings are affected as changes in short-term interest rates impact our cost of variable rate debt and maturing fixed rate debt. A large portion of our market risk is exposure to short-term interest rates from variable rate borrowings outstanding under our Fannie Mae and Freddie Mac credit facilities and our bank revolving credit facility, which totaled $388.1 million and $278.1 million, respectively, at December 31, 2004. The impact on our financial statements of refinancing fixed rate debt that matured during 2004 was immaterial.

If market interest rates for variable rate debt average 100 basis points more in 2005 than they did during 2004, our interest expense would increase, and income before taxes would decrease by $7.4 million. Comparatively, if market interest rates for variable rate debt had averaged 100 basis points more in 2004 than in 2003, our interest expense would have increased, and net income would have decreased by $5.8 million. If market rates for fixed rate debt were 100 basis points higher at December 31, 2004, the fair value of fixed rate debt would have remained constant at $2.1 billion. If market interest rates for fixed

rate debt were 100 basis points lower at December 31, 2004, the fair value of fixed rate debt would have increased from $2.1 billion to $2.3 billion.

These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. These analyses do not consider the effects of the adjusted level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no change in our financial structure.


	*Funds from Operations*

Funds from operations, or FFO, is defined as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. We compute FFO for all periods presented in accordance with the recommendations set forth by the National Association of Real Estate Investment Trust’s (“NAREIT”) April 1, 2002 White Paper. We consider FFO in evaluating property acquisitions and our operating performance, and believe that FFO should be considered along with, but not as an alternative to, net income and cash flow as a measure of our activities in accordance with generally accepted accounting principles. 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.

Historical cost accounting for real estate assets in accordance with generally accepted accounting principles implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure of REIT operating performance and defines FFO as net income (computed in accordance with accounting principles generally accepted in the United States), excluding gains (or losses) from sales of depreciable property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. The use of FFO, combined with the required presentations, has been fundamentally beneficial, improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. We generally consider FFO to be a useful measure for reviewing our comparative operating and financial performance (although FFO should be reviewed in conjunction with net income which remains the primary measure of performance) because by excluding gains or losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization, FFO can help one compare the operating performance of a company’s real estate between periods or as compared to different companies. We believe that FFO is the best measure of economic profitability for real estate investment trusts.

The following table outlines our FFO calculation and reconciliation to generally accepted accounting principles for the three years ended December 31, 2004 (dollars in thousands):


		2004			2003			2002

Net income		$	97,152		$	70,404		$	53,229
Adjustments:
	Distributions to preferred stockholders		(19,531	)		(26,326	)		(27,424	)
	Real estate depreciation, net of outside partners’ interest		171,781			145,271			132,619
	Minority interests of unitholders in operating partnership		443			(874	)		(2,080	)
	Real estate depreciation related to unconsolidated entities		279			196			471
Discontinued Operations:
	Real estate depreciation		8,847			17,687			25,110
	Minority interests of unitholders in operating partnership		4,400			2,521			3,789
	Net gains on sales of depreciable property		(52,903	)		(15,941	)		(32,698	)

Funds from operations — basic		$	210,468		$	192,938		$	153,016

	Distributions to preferred stockholders — Series D and E (Convertible)		7,887			14,681			15,779

Funds from operations — diluted		$	218,355		$	207,619		$	168,795

	Gains on the disposition of real estate developed for sale		1,202			812			—

FFO with gains on the disposition of real estate developed for sale — diluted		$	219,557		$	208,431		$	168,795

Weighted average number of common shares and OP Units outstanding — basic			136,852			122,589			113,077
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted			145,842			136,975			127,838

In the computation of diluted FFO, OP Units, out-performance partnership shares, and the shares of Series D Cumulative Convertible Redeemable Preferred Stock and Series E Cumulative Convertible Preferred Stock are dilutive; therefore, they are included in the diluted share count. For the years ended December 31, 2004 and 2003, distributions to preferred stockholders exclude $5.7 million and $19.3 million, respectively, related to premiums on preferred stock conversions.

Gains on the disposition of real estate investments developed for sale is defined as net sales proceeds less a tax provision (such development by REITs must be conducted in a taxable REIT subsidiary) and the gross investment basis of the asset before accumulated depreciation. We consider FFO with gains (or losses) on real estate developed for sale to be a meaningful supplemental measure of performance because of the short-term use of funds to produce a profit that differs from the traditional long-term investment in real estate for REITs.

The following is a reconciliation of GAAP gains on the disposition of real estate developed for sale to gross gains on the disposition of real estate developed for sale for the three years ended December 31, 2004 (dollars in thousands):


	2004			2003			2002

GAAP gains on the disposition of real estate developed for sale	$	1,278		$	1,249		$	—
Less: accumulated depreciation		(76	)		(437	)		—

Gains on the disposition of real estate developed for sale	$	1,202		$	812		$	—

The following table is our reconciliation of FFO share information to weighted average common shares outstanding, basic and diluted, reflected on the Consolidated Statements of Operations for the three years ended December 31, 2004, (shares in thousands):


		2004			2003			2002

Weighted average number of common shares and OP units outstanding — basic			136,852			122,589			113,077
Weighted average number of OP units outstanding			(8,755	)		(7,917	)		(6,999	)

	Weighted average number of common shares outstanding — basic per the Consolidated Statements of Operations		128,097			114,672			106,078

Weighted average number of common shares, OP units, and common stock equivalents outstanding — diluted			145,842			136,975			127,838
Weighted average number of incremental shares from assumed stock option conversions			—			(976	)		(885	)
Weighted average number of incremental shares from assumed restricted stock conversions			86			—			—
Weighted average number of OP units outstanding			(8,755	)		(7,917	)		(6,999	)
Weighted average number of Series A OPPSs outstanding			(1,791	)		(1,773	)		(1,568	)
Weighted average number of Series D preferred stock outstanding			(2,892	)		(10,033	)		(12,308	)
Weighted average number of Series E preferred stock outstanding			(3,410	)		(1,604	)		—

	Weighted average number of common shares outstanding — diluted per the Consolidated Statements of Operations		129,080			114,672			106,078

FFO also does not represent cash generated from operating activities in accordance with generally accepted accounting principles, and therefore should not be considered an alternative to net cash flows from operating activities, as determined by generally accepted accounting principles, as a measure of liquidity. Additionally, it is not necessarily indicative of cash availability to fund cash needs. A presentation of cash flow metrics based on generally accepted accounting principles is as follows (dollars in thousands):


	2004			2003			2002

Net cash provided by operating activities	$	251,747		$	234,945		$	229,001
Net cash used in investing activities		(595,966	)		(304,217	)		(67,363	)
Net cash provided by/(used in) financing activities		347,299			70,944			(163,127	)


	*Results of Operations*

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


	Net Income Available to Common Stockholders


	2004-vs.-2003

Net income available to common stockholders was $71.9 million ($0.56 per diluted share) for the year ended December 31, 2004, compared to $24.8 million ($0.22 per diluted share) for the year ended December 31, 2003, representing an increase of $47.1 million ($0.34 per diluted share). The increase for the year ended December 31, 2004, when compared to the same period in 2003, resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:


	•	$37.0 million more in gains recognized from the sale of depreciable property in 2004,

	•	a $19.2 million increase in operating results in 2004,

	•	a $13.5 million decrease in premiums paid on preferred stock conversions in 2004,


	•	$6.8 million less in preferred stock distributions in 2004,

	•	a $1.5 million increase in non-property income in 2004,

	•	$1.4 million less in impairment loss on investments in 2004, and

	•	a $1.3 million decrease in general and administrative expense in 2004.

These increases in income were partially offset by a $17.2 million increase in depreciation and amortization expense, a $6.6 million increase in interest expense, and a charge of $5.5 million for hurricane related expenses in 2004 when compared to 2003.


	2003-vs.-2002

Net income available to common stockholders was $24.8 million ($0.21 per diluted share) for the year ended December 31, 2003, compared to $25.8 million ($0.24 per diluted share) for the year ended December 31, 2002, representing a decrease of $1.0 million ($0.03 per diluted share). The decrease for the year ended December 31, 2003, when compared to the same period in 2002, resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:


	•	a charge of $19.3 million in 2003 for a premium on preferred stock conversions,

	•	$16.8 million less in gains recognized from the sale of depreciable property in 2003,

	•	a $15.5 million decrease in property operating income in 2003,

	•	a $4.2 million increase in depreciation and amortization expense in 2003, and

	•	a $1.4 million impairment charge taken in 2003 for the write-off of our investment in Realeum, Inc., an unconsolidated development joint venture.

These decreases in income were offset by $37.0 million less in prepayment penalties and premiums paid in 2003 for the refinancing of mortgage debt and the repurchase of unsecured debt, a $15.8 million decrease in interest expense in 2003, and a $2.3 million impairment charge taken in 2002 related to a portfolio of properties in Memphis, Tennessee.


	*Apartment Community Operations*

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


	Year Ended December 31,									Year Ended December 31,

	2004			2003			% Change			2003			2002			% Change

Property rental income	$	649,952		$	613,550			5.9	%	$	613,550		$	627,625			-2.2	%
Property operating expense*		(251,697	)		(234,478	)		7.3	%		(234,478	)		(233,071	)		0.6	%

Property operating income	$	398,255		$	379,072			5.1	%	$	379,072		$	394,554			-3.9	%

Weighted average number of homes		76,873			74,550			3.1	%		74,550			76,567			-2.6	%
Physical occupancy**		93.6	%		93.2	%		0.4	%		93.2	%		93.0	%		0.2	%


	*	Excludes depreciation, amortization, and property management expenses.


**	Based upon weighted average stabilized units.

The following table is our reconciliation of property operating income to net income as reflected on the Consolidated Statements of Operations for the periods presented (dollars in thousands):


		2004			2003			2002

Property operating income		$	398,255		$	379,072		$	394,554
Commercial operating income			513			733			618
Non-property income			2,608			1,068			1,806
Depreciation and amortization			(184,000	)		(166,577	)		(163,183	)
Interest			(124,087	)		(117,416	)		(132,941	)
General and administrative and property management			(37,197	)		(37,499	)		(36,583	)
Other operating expenses			(1,314	)		(1,265	)		(1,351	)
Net gain on sale of depreciable property			52,902			15,941			32,698
Loss on early debt retirement			—			—			(36,965	)
Impairment loss on real estate and investments			—			(1,392	)		(2,301	)
Hurricane related expenses			(5,503	)		—			—
Minority interests			(5,025	)		(2,261	)		(3,123	)

	Net income per the Consolidated Statements of Operations	$	97,152		$	70,404		$	53,229


	2004-vs.-2003


	Same Communities

Our same communities (those communities acquired, developed, and stabilized prior to December 31, 2003 and held on December 31, 2004, which consisted of 62,497 apartment homes) provided 78% of our property operating income for the year ended December 31, 2004.

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 1.0% to 61.0%.


	Non-Mature Communities

The remaining 22% of our property operating income during 2004 was generated from communities that we classify as “non-mature communities” (primarily those communities acquired or developed during 2003 and 2004, sold properties, and those properties classified as real estate held for disposition). The 39 communities with 11,574 apartment homes that we acquired during 2003 and 2004 provided $45.8 million of property operating income. The 19 communities with 5,425 apartment homes sold during 2004 provided $14.4 million of property operating income. In addition, our development communities, which included 178 apartment homes constructed since January 1, 2003, provided $1.0 million of property operating income during 2004, the 12 communities with 2,635 apartment homes classified as real estate held for disposition provided $11.3 million of property operating income, and other non-mature communities provided $13.5 million of property operating income for the year ended December 31, 2004.


	2003-vs.-2002


	Same Communities

Our same communities (those communities acquired, developed, and stabilized prior to January 1, 2002 and held on December 31, 2003, which consisted of 67,814 apartment homes) provided 89% of our property operating income for the year ended December 31, 2003.

For 2003, same community property operating income decreased 4.2% or $14.9 million compared to 2002. The overall decrease in property operating income was primarily attributable to a 1.8% or $9.9 million decrease in revenues from rental and other income and a 2.5% or $5.0 million increase in operating expenses. The decrease in revenues from rental and other income was primarily driven by a 2.2% or $12.8 million decrease in rental rates. This decrease in income was partially offset by an 11.7% or $1.7 million increase in sub-meter, gas, trash, and utility reimbursements, a 5.5% or $1.0 million decrease in concession expense, and a 1.7% or $0.7 million decrease in vacancy loss. Physical occupancy remained constant at 93.2% for both 2003 and 2002.

The increase in property operating expenses was primarily driven by a 17.6% or $1.7 million increase in insurance costs, a 4.3% or $1.4 million increase in utilities expense, a 2.4% or $0.9 million increase in repair and maintenance costs, a 3.9% or $0.8 million increase in administrative and marketing costs, a 0.7% or $0.4 million increase in personnel costs, and a 0.8% or $0.4 million increase in taxes, all of which were partially offset by a 17.6% or $0.2 million decrease in incentive compensation.

As a result of the percentage changes in property rental income and property operating expenses, the operating margin decreased 1.6% to 61.7%.


	Non-Mature Communities

The remaining 11% of our property operating income during 2003 was generated from communities that we classify as “non-mature communities” (primarily those communities acquired or developed during 2002 and 2003, sold properties, and those properties classified as real estate held for disposition). The 21 communities with 6,935 apartment homes that we acquired during 2002 and 2003 provided $30.6 million of property operating income. The seven communities with 1,927 apartment homes sold during 2003 provided $4.6 million of property operating income. In addition, our development communities, which included 972 apartment homes constructed since January 1, 2002, provided $4.8 million of property operating income during 2003, the one community with 100 apartment homes classified as real estate held for disposition provided $0.7 million of property operating income, and other non-mature communities provided $1.7 million of property operating income for the year ended December 31, 2003.


	*Real Estate Depreciation and Amortization*

For the year ended December 31, 2004, real estate depreciation and amortization on both continuing and discontinued operations increased $17.2 million or 10.5% compared to 2003, primarily due to the overall increase in the weighted average number of apartment homes and a significant increase in the per home acquisition cost compared to the existing portfolio, and other capital expenditures.

For the year ended December 31, 2003, real estate depreciation and amortization on both continuing and discontinued operations increased $4.2 million or 2.7% compared to 2002, regardless of the decrease in the weighted average number of apartment homes experienced from December 31, 2002 to December 31, 2003. The increase was primarily due to the newly acquired properties having a significantly higher per home cost compared to those properties that were disposed of, and other capital expenditures.


	*Interest Expense*

For the year ended December 31, 2004, interest expense on both continuing and discontinued operations increased $6.6 million or 5.6% from 2003 primarily due to the issuance of debt. For the year ended December 31, 2004, the weighted average amount of debt outstanding increased 21.2% or

$435.9 million compared to the prior year. However, this was partially offset by the weighted average interest rate declining from 5.4% to 5.0% during 2004. The weighted average amount of debt outstanding during 2004 is higher than 2003 as acquisition costs in 2004 have been funded, in most part, by the issuance of debt. The decrease in the weighted average interest rate during 2004 reflects our ability to take advantage of lower interest rates through refinancing and the utilization of variable rate debt.

For the year ended December 31, 2003, interest expense on both continuing and discontinued operations decreased $15.8 million or 11.9% from 2002 primarily due to debt refinancings, decreasing interest rates, and an overall decrease in the weighted average level of debt outstanding. For the year ended December 31, 2003, the weighted average amount of debt outstanding decreased 1.1% or $23.9 million compared to the prior year and the weighted average interest rate decreased from 6.1% to 5.4% during 2003. The weighted average amount of debt outstanding during 2003 is lower than 2002 primarily due to the high acquisition volume at the beginning of 2002 that was subsequently mitigated by high disposition activity in the second half of 2002. Furthermore, acquisition costs in 2003 that exceeded disposition proceeds were funded, in most part, by equity and OP Unit issuances. The decrease in the average interest rate during 2003 reflects our ability to take advantage of declining interest rates through refinancing and the utilization of variable rate debt.


	*General and Administrative*

For the year ended December 31, 2004, general and administrative expenses decreased $1.3 million or 6.4% over 2003. This decrease was primarily attributable to a decrease in investor relations, legal and consulting expenses.

For the year ended December 31, 2003, general and administrative expenses increased $1.3 million or 6.6% over 2002 primarily due to an increase in restricted stock compensation. Over the past two years, United Dominion has shifted its long-term incentive reward system from stock options to restricted stock, the cost of which is expensed monthly during the vesting period.


	*Hurricane Related Expenses*

In 2004, we recognized a $5.5 million charge to cover expenses associated with the damage in Florida caused by hurricanes Charley, Frances, and Jeanne. United Dominion reported that 25 of its 34 Florida communities were affected by the hurricanes.


	*Impairment Loss on Real Estate and Investments*

In 2003, we recognized a $1.4 million charge for the write-off of our investment in Realeum, Inc., an unconsolidated development joint venture created to develop web-based solutions for multifamily property and portfolio management.


	*Gains on Sales of Land and Depreciable Property*

For the years ended December 31, 2004 and 2003, we recognized gains for financial reporting purposes of $52.9 million and $15.9 million, respectively. Changes in the level of gains recognized from period to period reflect the changing level of our divestiture activity from period to period as well as the extent of gains related to specific properties sold.


	*Premium on Preferred Stock Conversions*

In the fourth quarter of 2004, we exercised our right to redeem 2 million shares of our Series D Cumulative Convertible Redeemable Preferred Stock. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 3,076,769 shares of common stock at a price of $16.25 per share. As a result, we recognized a $5.7 million premium on preferred stock conversions.

In the second quarter of 2003, we exercised our right to redeem 2 million shares of our Series D Cumulative Convertible Redeemable Preferred Stock. Upon receipt of our redemption notice, the shares to

be redeemed were converted by the holder into 3,076,923 shares of common stock at a price of $16.25 per share. In December 2003, we exercised our right to redeem an additional 4 million shares of our Series D. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 6,154,000 shares of common stock at a price of $16.25 per share. As a result, we recognized a $19.3 million premium on preferred stock conversions during 2003.

The premium amount recognized to convert these shares represents the cumulative accretion to date between the conversion value of the preferred stock and the value at which it was recorded at the time of issuance.


	*eBay Purchase of Rent.com*

On December 16, 2004, eBay (Nasdaq: EBAY) announced that it had agreed to acquire privately held Rent.com, a leading Internet listing web site in the apartment and rental housing industry, for approximately $415 million plus acquisition costs, net of Rent.com’s cash on hand. On February 23, 2005, eBay announced that it had completed the acquisition. We own shares in Rent.com, and as a result of the transaction, we recorded a one-time pre-tax gain of $12.3 million on the sale.


	*Inflation*

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


	*Off-Balance Sheet Arrangements*

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material.


	*Contractual Obligations*

The following table summarizes United Dominion’s contractual obligations as of December 31, 2004 (dollars in thousands):


	Payments Due by Period

Contractual Obligations	Total		2005		2006-2007		2008-2009		Thereafter

Long-Term Debt Obligations	$	2,879,982	$	99,002	$	732,444	$	566,477	$	1,482,059
Capital Lease Obligations		—		—		—		—		—
Operating Lease Obligations		28,645		1,709		2,505		2,128		22,303
Purchase Obligations		—		—		—		—		—
Other Long-Term Liabilities Reflected on the Balance Sheet Under GAAP		—		—		—		—		—

During 2004, we incurred interest costs of $124.1 million, of which $1.0 million was capitalized.


	*Factors Affecting Our Business and Prospects*

There are many 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,


	•	the timing and closing of planned dispositions under agreement,

	•	competitive factors that may limit our ability to lease apartment homes or increase or maintain rents,

	•	insufficient cash flow that could affect our debt financing and create refinancing risk,

	•	failure to generate sufficient revenue, which could impair our debt service payments and distributions to stockholders,

	•	development and construction risks that may impact our profitability,

	•	potential damage from natural disasters, including hurricanes and other weather-related events, which could result in substantial costs,

	•	delays in completing developments and lease-ups on schedule,

	•	our failure to succeed in new markets,

	•	changing interest rates, which could increase interest costs and affect the market price of our securities,

	•	potential liability for environmental contamination, which could result in substantial costs, and

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


Item 7A.	Quantitative and Qualitative Disclosures About Market Risk

Information required by this item is included in and incorporated by reference from Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Report.


Item 8.	Financial Statements and Supplementary Data

The consolidated financial statements and related financial information required to be filed are attached to this Report. Reference is made to page 43 of this Report for the Index to Consolidated Financial Statements and Schedule.


Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.


Item 9A.	Controls and Procedures


	*Controls and Procedures*

As of December 31, 2004, 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 our 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. In addition, our Chief Executive Officer and our Chief Financial Officer concluded that during the year ended December 31, 2004, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our internal control over financial reporting is designed with the objective of providing reasonable assurance regarding the reliability of our financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

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. However, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective under circumstances where our disclosure controls and procedures should reasonably be expected to operate effectively.


	*Management’s Report on Internal Control over Financial Reporting*

United Dominion’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of our management, United Dominion’s Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations (COSO).

Based on United Dominion’s evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2004. Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report, which is included herein.


Item 9B.	Other Information

On March 17, 2005, the board of directors will consider and is expected to approve the recommendations of the Compensation Committee as to the final compensation of our executive officers for the year ended 2004. Information with regard to the 2004 and 2005 compensation of the executive officers who will be named in the Summary Compensation Table in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 3, 2005 is set forth in Exhibit 10.25 to this Report and is incorporated in this Item 9B by reference to such exhibit.

PART III


Item 10.	Directors and Executive Officers of the Registrant

The information required by this item is incorporated by reference to the information set forth under the headings “Election of Directors,” “Audit Committee Report”, “Corporate Governance Matters” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 3, 2005.

Information required by this item regarding our executive officers is included in Part I of this Report in the section entitled “Business-Executive Officers of the Company.”

We have a code of ethics for senior financial officers that applies to our principal executive officer, all members of our finance staff, including the principal financial officer, the principal accounting officer, the treasurer and the controller, our director of investor relations, our corporate secretary, and all other company officers. We also have a code of business conduct and ethics that applies to all of our employees. Information regarding our codes is available on our website,www.udrt.com, and is incorporated by reference to the information set forth under the heading “Corporate Governance Matters” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 3, 2005. We intend to satisfy the disclosure requirements under Item 10 of Form 8-K regarding an amendment to, or a waiver from, a provision of our codes by posting such amendment or waiver on our website.


Item 11.	Executive Compensation

The information required by this item is incorporated by reference to the information set forth under the heading “Compensation of Executive Officers” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 3, 2005.


Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated by reference to the information set forth under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 3, 2005.


Item 13.	Certain Relationships and Related Transactions

The information required by this item is incorporated by reference to the information set forth under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Certain Business Relationships” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 3, 2005.


Item 14.	Principal Accounting Fees and Services

The information required by this item is incorporated by reference to the information set forth under the headings “Audit Fees” and “Pre-Approval of Audit and Non-Audit Services” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 3, 2005.

PART IV


Item 15.	Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this Report:


	1. Financial Statements.See Index to Consolidated Financial Statements and Schedule on page 43 of this Report.

	2. Financial Statement Schedule.See Index to Consolidated Financial Statements and Schedule on page 43 of this Report. All other schedules are omitted because they are not required, are inapplicable, or the required information is included in the financial statements or notes thereto.

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

SIGNATURES

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


	UNITED DOMINION REALTY TRUST, INC.


	By:	/s/ Thomas W. Toomey



	Thomas W. Toomey
	Chief Executive Officer and President

Date: March 14, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below on March 14, 2005 by the following persons on behalf of the registrant and in the capacities indicated.



/s/ Thomas W. Toomey Thomas W. Toomey				Chief Executive Officer, President, and Director

/s/ Christopher D. Genry Christopher D. Genry				Executive Vice President and Chief Financial Officer

/s/ Scott A. Shanaberger Scott A. Shanaberger				Senior Vice President and Chief Accounting Officer

/s/ Robert C. Larson Robert C. Larson				Chairman of the Board

/s/ James D. Klingbeil James D. Klingbeil				Vice Chairman of the Board

/s/ Eric J. Foss Eric J. Foss				Director

/s/ Robert P. Freeman Robert P. Freeman				Director

/s/ Jon A. Grove Jon A. Grove				Director

/s/ Thomas R. Oliver Thomas R. Oliver				Director

/s/ Lynne B. Sagalyn Lynne B. Sagalyn				Director

/s/ Mark J. Sandler Mark J. Sandler				Director

/s/ Robert W. Scharar Robert W. Scharar				Director

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

UNITED DOMINION REALTY TRUST, INC.


	Page

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting		44

FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
Report of Independent Registered Public Accounting Firm		45
Consolidated Balance Sheets at December 31, 2004 and 2003		46
Consolidated Statements of Operations for each of the three years in the period ended December 31, 2004		47
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2004		48
Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, 2004		49
Notes to Consolidated Financial Statements		52

SCHEDULE FILED AS PART OF THIS REPORT
Schedule III — Summary of Real Estate Owned		75

All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto.

Report of Independent Registered Public Accounting Firm

on Internal Control Over Financial Reporting

Board of Directors and Stockholders

United Dominion Realty Trust, Inc.

We have audited management’s assessment, included in Management’s Report on Internal Control over Financial Reporting included at Item 9A, that United Dominion Realty Trust, Inc. (the “Company”) maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2004 of United Dominion Realty Trust, Inc. and our report dated March 2, 2005 expressed an unqualified opinion thereon.


	Ernst & Young LLP

Richmond, Virginia

March 2, 2005

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
United Dominion Realty Trust, Inc.

We have audited the accompanying consolidated balance sheets of United Dominion Realty Trust, Inc. (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2004. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of United Dominion Realty Trust, Inc. at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 2, 2005 expressed an unqualified opinion thereon.


	Ernst & Young LLP

Richmond, Virginia

March 2, 2005

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share data)


			December 31,

			2004			2003

ASSETS
Real estate owned:
	Real estate held for investment		$	5,029,516		$	3,900,573
		Less: accumulated depreciation		(978,651	)		(809,524	)

				4,050,865			3,091,049
	Real estate under development			65,758			29,715
	Real estate held for disposition (net of accumulated depreciation of $29,236 and $87,106)			118,786			334,157

	Total real estate owned, net of accumulated depreciation			4,235,409			3,454,921
Cash and cash equivalents				7,904			4,824
Restricted cash				6,086			7,540
Deferred financing costs, net				25,151			21,425
Investment in unconsolidated development joint venture				458			1,673
Funds held in escrow from 1031 exchanges pending the acquisition of real estate				17,039			14,447
Notes receivable				5,000			13,000
Other assets				34,347			25,247
Other assets — real estate held for disposition				607			566

	Total assets		$	4,332,001		$	3,543,643

LIABILITIES AND STOCKHOLDERS’ EQUITY
Secured debt			$	1,197,924		$	1,018,028
Unsecured debt				1,682,058			1,114,009
Real estate taxes payable				31,356			29,776
Accrued interest payable				18,773			12,892
Security deposits and prepaid rent				25,168			21,412
Distributions payable				44,624			40,623
Accounts payable, accrued expenses, and other liabilities				50,217			44,749
Other liabilities — real estate held for disposition				2,837			4,512

	Total liabilities			3,052,957			2,286,001
Minority interests				83,593			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 in 2003)		135,400			135,400
		0 shares 7.50% Series D Cumulative Convertible Redeemable issued and outstanding (2,000,000 in 2003)		—			44,271
		2,803,812 shares 8.00% Series E Cumulative Convertible issued and outstanding (3,425,217 in 2003)		46,571			56,893
	Common stock, $1 par value; 250,000,000 shares authorized 136,429,592 shares issued and outstanding (127,295,126 in 2003)			136,430			127,295
	Additional paid-in capital			1,614,916			1,458,983
	Distributions in excess of net income			(731,808	)		(651,497	)
	Deferred compensation — unearned restricted stock awards			(6,058	)		(5,588	)
	Notes receivable from officer-stockholders			—			(459	)
	Accumulated other comprehensive loss			—			(1,862	)

		Total stockholders’ equity		1,195,451			1,163,436

	Total liabilities and stockholders’ equity		$	4,332,001		$	3,543,643

See accompanying notes to consolidated financial statements.

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for share data)


				Years ended December 31,

				2004			2003			2002

REVENUES
		Rental income		$	604,270		$	542,894		$	520,939
		Non-property income			2,608			1,068			1,806

			Total revenues		606,878			543,962			522,745
EXPENSES
		Rental expenses:
			Real estate taxes and insurance		71,055			62,329			56,959
			Personnel		63,878			55,252			52,611
			Utilities		36,625			32,244			29,397
			Repair and maintenance		38,409			34,909			32,352
			Administrative and marketing		21,299			19,793			18,913
			Property management		17,881			16,873			17,240
			Other operating expenses		1,226			1,205			1,203
		Real estate depreciation and amortization			171,781			145,706			134,045
		Interest			124,087			117,457			128,522
		General and administrative			19,316			20,626			19,343
		Other depreciation and amortization			3,372			3,087			3,956
		Hurricane related expenses			5,503			—			—
		Impairment loss on investments			—			1,392			—
		Loss on early debt retirement			—			—			33,161

			Total expenses		574,432			510,873			527,702

Income/(loss) before minority interests and discontinued operations					32,446			33,089			(4,957	)
Minority interests of outside partnerships					(182	)		(614	)		(1,414	)
Minority interests of unitholders in operating partnerships					(443	)		874			2,080

Income/(loss) before discontinued operations, net of minority interests					31,821			33,349			(4,291	)
Income from discontinued operations, net of minority interests					65,331			37,055			57,520

Net income					97,152			70,404			53,229
Distributions to preferred stockholders — Series B					(11,644	)		(11,645	)		(11,645	)
Distributions to preferred stockholders — Series D (Convertible)					(3,473	)		(12,178	)		(15,779	)
Distributions to preferred stockholders — Series E (Convertible)					(4,414	)		(2,503	)		—
Premium on preferred stock conversions					(5,729	)		(19,271	)		—

Net income available to common stockholders				$	71,892		$	24,807		$	25,805

Earnings per common share — basic and diluted:
	Income/(loss) from continuing operations available to common stockholders, net of minority interests			$	0.05		$	(0.10	)	$	(0.30	)
	Income from discontinued operations, net of minority interests			$	0.51		$	0.32		$	0.54
	Net income available to common stockholders			$	0.56		$	0.22		$	0.24
Common distributions declared per share				$	1.17		$	1.14		$	1.11
Weighted average number of common shares outstanding – basic					128,097			114,672			106,078
Weighted average number of common shares outstanding – diluted					129,080			114,672			106,078

See accompanying notes to consolidated financial statements

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


				Years ended December 31,

				2004			2003			2002

Operating Activities
	Net income			$	97,152		$	70,404		$	53,229
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			184,088			166,637			163,328
		Impairment loss on real estate and investments			—			1,392			2,301
		Gains on sales of land and depreciable property			(52,903	)		(15,941	)		(32,698	)
		Minority interests			5,025			2,261			3,122
		Loss on early debt retirement			—			—			36,965
		Amortization of deferred financing costs and other			7,206			6,148			5,256
		Changes in operating assets and liabilities:
			(Increase)/decrease in operating assets		(1,769	)		(2,560	)		12,763
			Increase/(decrease) in operating liabilities		12,948			6,604			(15,265	)

Net cash provided by operating activities					251,747			234,945			229,001
Investing Activities
	Proceeds from sales of real estate investments, net				265,691			93,613			282,533
	Acquisition of real estate assets, net of liabilities assumed and equity				(755,966	)		(314,739	)		(282,600	)
	Development of real estate assets				(19,131	)		(13,640	)		(22,763	)
	Capital expenditures and other major improvements — real estate assets, net of escrow reimbursement				(82,390	)		(53,146	)		(42,827	)
	Capital expenditures — non-real estate assets				(1,578	)		(1,858	)		(1,706	)
	Increase in funds held in escrow from tax free exchanges pending the acquisition of real estate				(2,592	)		(14,447	)		—

Net cash used in investing activities					(595,966	)		(304,217	)		(67,363	)
Financing Activities
	Proceeds from the issuance of secured debt				—			37,415			324,282
	Scheduled principal payments on secured debt				(36,814	)		(22,442	)		(11,176	)
	Non-scheduled principal payments and prepayment penalties on secured debt				(95,011	)		(17,549	)		(294,662	)
	Proceeds from the issuance of unsecured debt				475,775			323,382			198,476
	Payments and prepayment premiums on unsecured debt				(46,585	)		(214,591	)		(210,413	)
	Net borrowing/(repayment) of revolving bank debt				140,200			(37,900	)		(54,400	)
	Payment of financing costs				(8,849	)		(6,463	)		(5,510	)
	Issuance of note receivable				—			(8,000	)		—
	Proceeds from the issuance of common stock				99,461			179,811			60,252
	Proceeds from the repayment of officer loans				459			2,171			—
	Proceeds from the issuance of performance shares				(50	)		657			—
	Distributions paid to minority interests				(13,553	)		(9,756	)		(8,926	)
	Distributions paid to preferred stockholders				(20,347	)		(27,532	)		(27,424	)
	Distributions paid to common stockholders				(147,387	)		(128,188	)		(117,116	)
	Repurchases of common and preferred stock				—			(71	)		(16,510	)

Net cash provided by/(used in) financing activities					347,299			70,944			(163,127	)
Net increase/(decrease) in cash and cash equivalents					3,080			1,672			(1,489	)
Cash and cash equivalents, beginning of year					4,824			3,152			4,641

Cash and cash equivalents, end of year				$	7,904		$	4,824		$	3,152

Supplemental Information:
	Interest paid during the period			$	115,519		$	116,057		$	135,223
	Non-cash transactions:
		Conversion of operating partnership minority interests to common stock (170,209 shares in 2004, 216,983 shares in 2003, and 92,159 shares in 2002)			2,035			2,206			1,252
		Issuance of restricted stock awards			3,250			5,297			2,904
		Issuance of preferred stock in connection with acquisitions			—			58,811			—
		Issuance of preferred operating partnership units in connection with acquisitions			—			26,872			—
		Issuance of operating partnership units in connection with acquisitions			—			7,135			—
		Cancellation of a note receivable with the acquisition of a property			8,000			—			—
		Secured debt assumed with the acquisition of properties			311,714			4,865			41,636
		Reduction in secured debt from the disposition of properties			—			—			35,885
		Receipt of a note receivable in connection with sales of real estate investments			75,586			—			—

See accompanying notes to consolidated financial statements.

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)


																			Deferred			Notes
																			Compensation —			Receivable			Accumulated
			Preferred Stock				Common Stock									Distributions			Unearned			from			Other
													Paid-in			in Excess of			Restricted			Officer-			Comprehensive
			Shares		Amount		Shares			Amount			Capital			Net Income			Stock Awards			Stockholders			Loss			Total

Balance, December 31, 2001				13,416,009	$	310,400		103,133,279		$	103,133		$	1,098,029		$	(448,345	)	$	(1,312	)	$	(4,309	)	$	(14,871	)	$	1,042,725

Comprehensive Income
	Net income																53,229												53,229
	Other comprehensive income:
		Unrealized gain on derivative financial instruments																								4,913			4,913

	Comprehensive income																53,229									4,913			58,142

	Issuance of common shares to employees, officers, and director-stockholders							1,000,592			1,001			10,782															11,783
	Issuance of common shares through dividend reinvestment and stock purchase plan							152,343			152			2,347															2,499
	Issuance of common shares through public offering							3,166,800			3,167			41,139															44,306
	Purchase of common stock							(1,145,412	)		(1,146	)		(15,369	)														(16,515	)
	Issuance of restricted stock awards							205,498			205			2,699						(2,904	)								—
	Cash purchase and conversion of minority interests of unitholders in operating partnerships							92,159			93			1,159															1,252
	Principal repayments on notes receivable from officer-stockholders																						1,679						1,679
	Common stock distributions declared ($1.11 per share)																(118,888	)											(118,888	)
	Preferred stock distributions declared — Series B ($2.15 per share)																(11,645	)											(11,645	)
	Preferred stock distributions declared — Series D ($1.98 per share)																(15,779	)											(15,779	)
	Amortization of deferred compensation																			1,712									1,712

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY — (Continued)

(In thousands, except share data)


																					Deferred			Notes
																					Compensation —			Receivable			Accumulated
			Preferred Stock						Common Stock									Distributions			Unearned			from			Other
															Paid-in			in Excess of			Restricted Stock			Officer-			Comprehensive
			Shares			Amount			Shares			Amount			Capital			Net Income			Awards			Stockholders			Loss			Total

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																		70,404												70,404
	Other comprehensive income:
		Unrealized gain on derivative financial instruments																										8,096			8,096

	Comprehensive income																		70,404									8,096			78,500

	Issuance of common shares to employees, officers, and director-stockholders									1,117,399			1,118			12,185															13,303
	Issuance of common shares through dividend reinvestment and stock purchase plan									91,190			91			1,520															1,611
	Issuance of common shares through public offering									9,700,000			9,700			154,936															164,636
	Issuance of 8.00% Series E Cumulative Convertible shares			3,425,217			56,893									1,905															58,798
	Purchase of common stock									(4,564	)		(5	)		(66	)														(71	)
	Issuance of restricted stock awards									337,936			338			4,959						(5,297	)								—
	Conversion of minority interests of unitholders in operating partnerships									216,983			217			1,989															2,206
	Principal repayments on notes receivable from officer-stockholders																								2,171						2,171
	Accretion of premium on Series D conversions						19,271												(19,271	)											—
	Conversion of 7.50% Series D Cumulative Convertible Redeemable shares			(6,000,000	)		(150,000	)		9,230,923			9,231			140,769															—
	Common stock distributions declared ($1.14 per share)																		(134,876	)											(134,876	)
	Preferred stock distributions declared — Series B ($2.15 per share)																		(11,645	)											(11,645	)
	Preferred stock distributions declared — Series D ($2.04 per share)																		(12,178	)											(12,178	)
	Preferred stock distributions declared — Series E ($0.84 per share)																		(2,503	)											(2,503	)
	Amortization of deferred compensation																					2,213									2,213

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY — (Continued)

(In thousands, except share data)


																		Deferred			Notes
																		Compensation —			Receivable			Accumulated
			Preferred Stock						Common Stock						Distributions			Unearned			from			Other
													Paid-in		in Excess of			Restricted Stock			Officer-			Comprehensive
			Shares			Amount			Shares		Amount		Capital		Net Income			Awards			Stockholders			Loss			Total

Balance, December 31, 2003				10,841,226		$	236,564			127,295,126	$	127,295	$	1,458,983	$	(651,497	)	$	(5,588	)	$	(459	)	$	(1,862	)	$	1,163,436

Comprehensive Income
	Net income															97,152												97,152
	Other comprehensive income:
		Unrealized gain on derivative financial instruments																							1,862			1,862

	Comprehensive income															97,152									1,862			99,014

	Issuance of common shares to employees, officers, and director-stockholders									549,606		550		5,396														5,946
	Issuance of common shares through dividend reinvestment and stock purchase plan									111,941		112		2,102														2,214
	Issuance of common shares through public offering									4,497,000		4,497		86,804														91,301
	Issuance of restricted stock awards									107,536		107		3,143					(3,250	)								—
	Conversion of minority interests of unitholders in operating partnerships									170,209		170		1,865														2,035
	Principal repayments on notes receivable from officer-stockholders																					459						459
	Accretion of premium on Series D conversions						5,729									(5,729	)											—
	Conversion of 7.50% Series D Cumulative Convertible Redeemable shares			(2,000,000	)		(50,000	)		3,076,769		3,077		46,923														—
	Conversion of 8.00% Series E Cumulative Convertible shares			(621,405	)		(10,322	)		621,405		622		9,700														—
	Common stock distributions declared ($1.17 per share)															(152,203	)											(152,203	)
	Preferred stock distributions declared — Series B ($2.15 per share)															(11,644	)											(11,644	)
	Preferred stock distributions declared — Series D ($2.09 per share)															(3,473	)											(3,473	)
	Preferred stock distributions declared — Series E ($1.33 per share)															(4,414	)											(4,414	)
	Amortization of deferred compensation																		2,780									2,780

Balance, December 31, 2004				8,219,821		$	181,971			136,429,592	$	136,430	$	1,614,916	$	(731,808	)	$	(6,058	)	$	—		$	—		$	1,195,451

See accompanying notes to consolidated financial statements.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2004

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and formation

United Dominion Realty Trust, Inc., a Maryland corporation, was formed in 1972. United Dominion operates within one defined business segment with activities related to the ownership, management, development, acquisition, renovation, and disposition of multifamily apartment communities nationwide. At December 31, 2004, United Dominion owned 273 communities with 78,855 completed apartment homes and had three communities with 807 apartment homes under development.

Basis of presentation

The accompanying consolidated financial statements include the accounts of United Dominion 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 December 31, 2004, there were 166,061,749 units in the Operating Partnership outstanding, of which 156,037,369 units or 94.0% were owned by United Dominion and 10,024,380 units or 6.0% were owned by limited partners (of which 1,791,329 and 0 are owned by the holders of the Series A OPPS and the Series B OPPS, respectively, see below and Note 9). As of December 31, 2004, there were 5,542,200 units in the Heritage OP outstanding, of which 5,186,945 units or 93.6% were owned by United Dominion and 355,255 units or 6.4% were owned by limited partners. The consolidated financial statements of United Dominion include the minority interests of the unitholders in the Operating Partnership and the Heritage OP. All significant intercompany accounts and transactions have been eliminated in consolidation.

Income taxes

United Dominion is operated as, and elects to be taxed as, a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). Generally, a REIT complies with the provisions of the Code if it meets certain requirements concerning its income and assets, as well as if it distributes at least 90% of its REIT taxable income to its stockholders and will not be subject to U.S. federal income taxes if it distributes at least 100% of its income. Accordingly, no provision has been made for federal income taxes of the REIT. United Dominion’s taxable REIT subsidiaries are subject to federal corporate income taxes, based upon their respective taxable incomes. The taxable REIT subsidiaries have no material permanent or temporary differences that would require a provision for federal income tax. Additionally, United Dominion is subject to certain state and local excise or franchise taxes, for which provision has been made.

The differences between net income available to common stockholders for financial reporting purposes and taxable income before dividend deductions relate primarily to temporary differences, principally real estate depreciation and the tax deferral of certain gains on property sales. The differences in depreciation result from differences in the book and tax basis of certain real estate assets and the differences in the methods of depreciation and lives of the real estate assets. The aggregate cost of our real estate assets for federal income tax purposes was approximately $4.5 billion at December 31, 2004.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table reconciles United Dominion’s net income to REIT taxable income for the three years ended December 31, 2004(dollars in thousands):


	2004			2003			2002

Net income	$	97,152		$	70,404		$	53,229
Minority interest expense		(1,950	)		(3,364	)		(1,137	)
Depreciation and amortization expense		46,916			44,108			49,513
(Loss)/gain on the disposition of properties		(10,029	)		2,363			(186	)
Revenue recognition timing differences		(195	)		1,750			1,272
Investment loss, not deductible for tax		(593	)		—			—
Other expense timing differences		(2,192	)		(1,090	)		(3,914	)

REIT taxable income before dividends	$	129,109		$	114,171		$	98,777

Dividend deduction	$	153,409		$	132,722		$	111,965

For income tax purposes, distributions paid to common stockholders consist of ordinary income, capital gains, and return of capital, or a combination thereof. For the three years ended December 31, 2004, distributions declared per common share were taxable as follows:


	2004		2003		2002

Ordinary income	$	0.77	$	0.82	$	0.55
Long-term capital gain		0.20		0.10		0.14
Unrecaptured section 1250 gain		0.08		0.02		0.11
Return of capital		0.12		0.20		0.31

	$	1.17	$	1.14	$	1.11

Use of estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Real estate

Real estate assets held for investment are carried at historical cost less accumulated depreciation and any recorded impairment losses.

Expenditures for ordinary repair and maintenance costs are charged to expense as incurred. Expenditures for improvements, renovations, and replacements related to the acquisition and/or improvement of real estate assets are capitalized at cost and depreciated over their estimated useful lives if the value of the existing asset will be materially enhanced or the life of the related asset will be substantially extended beyond the original life expectancy.

United Dominion recognizes impairment losses on long-lived assets used in operations when there is an event or change in circumstance that indicates an impairment in the value of an asset and the undiscounted future cash flows are not sufficient to recover the asset’s carrying value. Our cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. If such indicators of impairment are present, an impairment loss is recognized based on the excess of the carrying amount of the asset over its fair value.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Our estimates of fair market value represent our best estimate based upon industry trends and reference to market rates and transactions.

United Dominion purchases real estate investment properties from time to time and allocates the purchase price to various components, such as land, buildings, and intangibles related to in-place leases in accordance with FASB Statement No. 141,“Business Combinations.” The purchase price is allocated based on the relative fair value of each component. The fair value of buildings is determined as if the buildings were vacant upon acquisition and subsequently leased at market rental rates. As such, the determination of fair value considers the present value of all cash flows expected to be generated from the property including an initial lease up period. United Dominion determines the fair value of in-place leases by assessing the net effective rent and remaining term of the lease relative to market terms for similar leases at acquisition. The fair value of in-place leases is recorded and amortized as amortization expense over the remaining contractual lease period. United Dominion determines the fair value of in-place leases by considering the cost of acquiring similar leases, the foregone rents associated with the lease-up period, and the carrying costs associated with the lease-up period.

For long-lived assets to be disposed of, impairment losses are recognized when the fair value of the asset less estimated cost to sell is less than the carrying value of the asset. Properties classified as real estate held for disposition generally represent properties that are under contract for sale. Real estate held for disposition is carried at the lower of cost, net of accumulated depreciation, or fair value, less the cost to dispose, determined on an asset by asset basis. Expenditures for ordinary repair and maintenance costs on held for disposition properties are charged to expense as incurred. Expenditures for improvements, renovations, and replacements related to held for disposition properties are capitalized at cost. Depreciation is not recorded on real estate held for disposition.

Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets which is 35 years for buildings, 10 to 35 years for major improvements, and 3 to 10 years for furniture, fixtures, equipment, and other assets. The value of acquired in-place leases is amortized over the remaining term of each acquired in-place lease.

All development projects and related carrying costs are capitalized and reported on the Consolidated Balance Sheet as “Real estate under development.” As each building in a project is completed and becomes available for lease-up, the total cost of the building is transferred to real estate held for investment and the assets are depreciated over their estimated useful lives. The cost of development projects includes interest, real estate taxes, insurance, and allocated development overhead during the construction period.

Interest, real estate taxes, and incremental labor and support costs for personnel working directly on the development site are capitalized as part of the real estate under development to the extent that such charges do not cause the carrying value of the asset to exceed its net realizable value. During 2004, 2003, and 2002, total interest capitalized was $1.0 million, $1.8 million, and $0.9 million, respectively.

Cash equivalents

Cash equivalents include all cash and liquid investments with maturities of three months or less when purchased.

Restricted cash

Restricted cash consists of escrow deposits held by lenders for real estate taxes, insurance and replacement reserves, and security deposits.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred financing costs

Deferred financing costs include fees and other external costs incurred to obtain debt financings and are generally amortized on a straight-line basis, which approximates the effective interest method, over a period not to exceed the term of the related debt. Unamortized financing costs are written-off when debt is retired before its maturity date. During 2004, 2003, and 2002, amortization expense was $5.1 million, $4.7 million, and $4.5 million, respectively.

Investments in unconsolidated development joint ventures

Investments in unconsolidated joint ventures are accounted for using the equity method when major business decisions require approval by the other partners and United Dominion does not have control of the assets. Investments are recorded at cost and subsequently adjusted for equity in net income (loss) and cash contributions and distributions. United Dominion eliminates intercompany profits on sales of services that are provided to joint ventures. Differences between the carrying value of investments and the underlying equity in net assets of the investee are due to capitalized interest on the investment balance and capitalized development and leasing costs that are recovered by United Dominion through fees during construction.

Revenue recognition

United Dominion’s apartment homes are leased under operating leases with terms generally of one year or less. Rental income is recognized after it is earned and collectibility is reasonably assured.

Advertising costs

All advertising costs are expensed as incurred and reported on the Consolidated Statements of Operations within the line item “Administrative and marketing.” During 2004, 2003, and 2002, total advertising expense was $10.5 million, $10.6 million, and $11.0 million, respectively.

Interest rate swap agreements

United Dominion accounts for its derivative instruments in accordance with Statements of Financial Accounting Standards No. 133 and No. 138,“Accounting for Certain Derivative Instruments and Hedging Activities.” At December 31, 2004, United Dominion has no derivative financial instruments reported on its Consolidated Balance Sheet. Prior to their maturity, United Dominion’s derivative financial instruments consisted of interest rate swap agreements that were designated as cash flow hedges of debt with variable interest rate features, and as qualifying hedges for financial reporting purposes. For a derivative instrument that qualifies as a cash flow hedge, 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.

As part of United Dominion’s overall interest rate risk management strategy, we used derivative financial instruments as a means to artificially fix variable rate debt or to hedge anticipated financing transactions. United Dominion’s derivative transactions used for interest rate risk management included various interest rate swaps with indices that related to the pricing of specific financial instruments of United Dominion. Because of the close correlation between the hedging instrument and the underlying cash flow exposure being hedged, fluctuations in the value of the derivative instruments were generally offset by changes in the cash flow of the underlying exposures. As a result, United Dominion appropriately controlled the risk so that derivatives used for interest rate risk management would not have a material

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

unintended effect on consolidated earnings. United Dominion does not enter into derivative financial instruments for trading purposes.

The fair value of United Dominion’s derivative instruments were reported on the balance sheet at their current fair value. The estimated fair value for our interest rate swaps relied on prevailing market interest rates. The interest rate swap agreements were designated with all or a portion of the principal balance and term of a specific debt obligation. Each interest rate swap involved the periodic exchange of payments over the life of the related agreement. An amount received or paid on the interest rate swap was 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 amount payable to and receivable from counterparties was included in other liabilities and other assets, respectively.

When the terms of the underlying transaction were modified, or when the underlying hedged item ceased to exist, all changes in the fair value of the instrument were marked-to-market with changes in value included in net income each period until the instrument matured, unless the instrument was redesignated as a hedge of another transaction. If a derivative instrument was terminated or the hedging transaction was no longer determined to be effective, amounts held in accumulated other comprehensive income were reclassified into earnings over the term of the future cash outflows on the related debt.

Comprehensive income

Comprehensive income, which is defined as all changes in equity during each period except for those resulting from investments by or distributions to stockholders, is displayed in the accompanying Statements of Stockholders’ Equity. Other comprehensive income consists of unrealized gains or losses from derivative financial instruments.

Stock-based employee compensation plans

United Dominion adopted the fair-value-based method of accounting for share-based payments effective January 1, 2004 using the prospective method described in FASB Statement No. 148,“Accounting for Stock-Based Compensation — Transition and Disclosure.” Currently, United Dominion uses the Black-Scholes-Merton formula to estimate the value of stock options granted to employees and expects to continue to use this acceptable option valuation model upon the required adoption of Statement 123R on July 1, 2005. Because Statement 123R must be applied not only to new awards but to previously granted awards that are not fully vested on the effective date, and because United Dominion adopted Statement 123 using the prospective transition method (which applied only to awards granted, modified or settled after the adoption date), compensation cost for some previously granted awards that were not recognized under Statement 123 will be recognized under Statement 123R. However, had United Dominion adopted Statement 123R in prior periods, the impact of the standard would have approximated the impact of Statement 123 as described in the disclosure of pro forma net income and earnings per share in Note 8 to our consolidated financial statements.

Minority interests in operating partnerships

Interests in operating partnerships held by limited partners are represented by operating partnership units (“OP Units”). The operating partnerships’ income is allocated to holders of OP Units based upon net income available to common stockholders and the weighted average number of OP Units outstanding to total common shares plus OP Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to minority interests in accordance with the terms of the individual partnership agreements. OP Units can be exchanged for cash or shares of United Dominion’s common stock on a one-for-one basis, at the option of United Dominion. OP Units, as a percentage of total OP

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Units and shares outstanding, were 6.3% at December 31, 2004, 6.4% at December 31, 2003, and 6.2% at December 31, 2002.

During 2003, we issued 1,617,815 Preferred Operating Partnership Units (“Preferred OP Units”) totaling $26.9 million as partial consideration for the purchase of four communities. The Preferred OP Units carry a fixed coupon of 8.0% until such time as the common share dividend is equal to or exceeds this amount for four consecutive quarters, at which time the Preferred OP Units will be entitled to receive dividends equivalent to the dividend paid to holders of common stock.

Minority interests in other partnerships

United Dominion has limited partners in certain real estate partnerships acquired in certain merger transactions. Net income for these partnerships is allocated based upon the percentage interest owned by these limited partners in each respective real estate partnership.

Earnings per share

Basic earnings per common share is computed based upon the weighted average number of common shares outstanding during the year. 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.

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


		2004			2003			2002

Numerator for basic and diluted earnings per share — Net income available to common stockholders		$	71,892		$	24,807		$	25,805
Denominator:
Denominator for basic earnings per share — Weighted average common shares outstanding			128,711			115,109			106,257
	Non-vested restricted stock awards		(614	)		(437	)		(179	)

			128,097			114,672			106,078

Effect of dilutive securities:
Employee stock options and non-vested restricted stock awards			983			—			—

Denominator for dilutive earnings per share			129,080			114,672			106,078

Basic earnings per share		$	0.56		$	0.22		$	0.24

Diluted earnings per share		$	0.56		$	0.22		$	0.24

The effect of the conversion of the operating partnership units, Series A Out-Performance Partnership Units, and convertible preferred stock is not dilutive and is therefore not included as a dilutive security in the earnings per share computation. The weighted average effect of the conversion of the operating partnership units for the years ended December 31, 2004, 2003, and 2002 was 10,460,639 shares, 9,690,883 shares, and 8,577,918 shares, respectively. The weighted average effect of the conversion of the Series A Out-Performance Partnership Units for the years ended December 31, 2004, 2003, and 2002 was 1,791,329 shares, 1,853,204 shares, and 1,568,000 shares, respectively. The weighted average effect of the conversion

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of the convertible preferred stock for the years ended December 31, 2004, 2003, and 2002 was 6,301,821 shares, 11,636,293 shares, and 12,307,692 shares, respectively.

2. REAL ESTATE OWNED

United Dominion operates in 43 markets dispersed throughout 17 states. At December 31, 2004, our largest apartment market was Southern California, where we owned 18.5% of our apartment homes, based upon carrying value. Excluding Southern California, United Dominion did not own more than 4.9% of its apartment homes in any one market, based upon carrying value.

The following table summarizes real estate held for investment at December 31,(dollars in thousands):


	2004			2003

Land and land improvements	$	1,195,201		$	777,280
Buildings and improvements		3,602,996			2,922,395
Furniture, fixtures, and equipment		231,319			200,898

Real estate held for investment		5,029,516			3,900,573
Accumulated depreciation		(978,651	)		(809,524	)

Real estate held for investment, net	$	4,050,865		$	3,091,049

The following is a reconciliation of the carrying amount of real estate held for investment at December 31,(dollars in thousands):


	2004			2003			2002

Balance at beginning of year	$	3,900,573		$	3,437,898		$	3,858,579
Real estate acquired		1,032,065			399,425	(a)		323,990
Capital expenditures		103,878			51,093			48,923
Transfers from development		—			12,157			29,816
Transfers to held for disposition, net		(7,000	)		—			(823,410	)

Balance at end of year	$	5,029,516		$	3,900,573		$	3,437,898


(a)	In connection with one of our acquisitions in 2003, United Dominion acquired a note receivable for $5 million that is due October 2011. The note bears interest of 9.0% that is payable in annual installments.

The following is a reconciliation of accumulated depreciation for real estate held for investment at December 31,(dollars in thousands):


	2004		2003		2002

Balance at beginning of year	$	809,524	$	664,268	$	646,366
Depreciation expense for the year(b)		169,127		145,256		135,245
Transfers to held for disposition, net		—		—		(117,343	)

Balance at end of year	$	978,651	$	809,524	$	664,268


(b)	Includes $0.8 million, $1.0 million, and $1.2 million for 2004, 2003, and 2002, respectively, related to depreciation on non-real estate assets located at United Dominion’s apartment communities, classified as “Other depreciation and amortization” on the Consolidated Statements of Operations. Excludes

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	$3.4 million and $1.3 million in 2004 and 2003, respectively, of amortization expense on the fair market value of in-place leases at the time of acquisition.

The following is a summary of real estate held for investment by major geographic markets (in order of carrying value, excluding real estate held for disposition and real estate under development) at December 31, 2004 (dollars in thousands):


	Number of		Initial
	Apartment		Acquisition		Carrying		Accumulated
	Communities		Cost		Value		Depreciation		Encumbrances

Southern California		25	$	905,367	$	930,593	$	26,645	$	244,148
Tampa, FL		12		211,505		244,944		48,428		60,275
Houston, TX		16		185,408		244,898		56,175		29,382
Northern California		7		203,385		217,004		33,318		71,038
Orlando, FL		14		167,524		216,721		69,727		72,150
Metropolitan DC		7		197,245		213,611		21,650		82,058
Raleigh, NC		11		179,935		212,412		59,990		76,116
Dallas, TX		11		174,750		198,027		40,136		62,530
Baltimore, MD		10		145,985		162,396		28,924		17,836
Columbus, OH		6		111,315		155,494		33,490		45,864
Nashville, TN		9		111,844		152,312		35,316		39,299
Richmond, VA		9		106,136		137,496		45,034		62,207
Charlotte, NC		9		114,895		136,790		35,809		11,784
Monterey Peninsula, CA		7		85,324		136,665		17,670		—
Phoenix, AZ		7		109,487		135,856		32,518		31,670
Arlington, TX		8		109,305		127,009		30,439		25,865
Greensboro, NC		8		85,362		107,913		30,300		—
Seattle, WA		6		93,152		99,829		18,997		40,774
Denver, CO		3		92,333		99,179		17,362		—
Wilmington, NC		6		64,213		93,902		30,851		—
Portland, OR		6		88,187		91,943		10,019		15,726

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Number of		Initial
	Apartment		Acquisition		Carrying		Accumulated
	Communities		Cost		Value		Depreciation		Encumbrances

Austin, TX		5		75,778		82,080		15,310		5,391
Atlanta, GA		6		57,669		75,604		25,435		16,886
Columbia, SC		6		52,795		64,985		24,552		—
Jacksonville, FL		3		44,788		61,251		21,629		12,455
Norfolk, VA		6		42,741		60,184		24,567		9,118
Other Southwestern		10		166,469		196,114		48,179		50,677
Other Florida		6		107,122		118,006		15,523		44,873
Other North Carolina		8		61,677		78,669		31,419		12,434
Other Mid-Atlantic		6		46,136		56,377		17,890		16,770
Other Virginia		3		30,946		47,271		12,980		14,671
Other Southeastern		2		29,840		40,989		11,710		16,368
Other Midwestern		3		20,241		23,520		4,825		5,767
Richmond Corporate		—		6,597		6,216		1,259		3,792
Commercial		—		3,255		3,256		575		—

		261	$	4,288,711	$	5,029,516	$	978,651	$	1,197,924

The following is a summary of real estate held for disposition by major category at December 31, 2004(dollars in thousands):


	Number		Initial
	of		Acquisition		Carrying		Accumulated
	Properties		Cost		Value		Depreciation		Encumbrances

Apartments		12	$	119,246	$	144,090	$	29,236	$	—
Land		1		3,932		3,932		—		—

			$	123,178	$	148,022	$	29,236	$	—

The following is a summary of real estate under development by major category at December 31, 2004(dollars in thousands):


	Number		Initial
	of		Acquisition		Carrying		Accumulated
	Properties		Cost		Value		Depreciation		Encumbrances

Apartments		3	$	24,814	$	40,241	$	—	$	—
Land		8		25,516		25,517		—		—

			$	50,330	$	65,758	$	—	$	—

Total Real Estate Owned			$	4,462,219	$	5,243,296	$	1,007,887	$	1,197,924

In 2004, United Dominion recognized a $5.5 million charge to cover expenses associated with the damage in Florida caused by hurricanes Charley, Frances, and Jeanne. United Dominion reported that 25 of its 34 Florida communities were affected by the hurricanes.

In 2003, United Dominion recognized a $1.4 million charge for the write-off of its investment in Realeum, Inc., an unconsolidated development joint venture created to develop web-based solutions for multifamily property and portfolio management.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

United Dominion is pursuing its strategy of exiting markets where it views long-term growth prospects as limited and believes the redeployment of capital would enhance future growth rates and economies of scale. During the first quarter of 2002, United Dominion placed nine assets, with an aggregate net book value of $89.3 million, under contract for sale and reclassified them as real estate held for disposition. These sales closed in the second quarter of 2002 and resulted in our withdrawal from Naples, Florida; Tucson, Arizona; Las Vegas, Nevada; and substantially all of Memphis, Tennessee. Although these sales resulted in an aggregate net gain of $11.5 million, certain of these assets were sold at net selling prices below their net book values at March 31, 2002. As a result, United Dominion recorded an aggregate $2.3 million impairment loss in 2002 for the write down of a portfolio of five apartment communities in Memphis, Tennessee.


3.	INCOME FROM DISCONTINUED OPERATIONS

United Dominion adopted FASB Statement No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets,”(FAS 144) as of January 1, 2002. FAS 144 requires, among other things, that the primary assets and liabilities and the results of operations of United Dominion’s real properties which have been sold subsequent to January 1, 2002, or are held for disposition subsequent to January 1, 2002, be classified as discontinued operations and segregated in United Dominion’s Consolidated Statements of Operations and Balance Sheets. Properties classified as real estate held for disposition generally represent properties that are under contract for sale and are expected to close within the next twelve months. For purposes of these financial statements, FAS 144 results in the presentation of the primary assets and liabilities and the net operating results of those properties sold or classified as held for disposition through December 31, 2004, as discontinued operations for all periods presented. The adoption of FAS 144 does not have an impact on net income available to common stockholders. FAS 144 only results in the reclassification of the operating results of all properties sold or classified as held for disposition through December 31, 2004 within the Consolidated Statements of Operations for the years ended December 31, 2004, 2003, and 2002, and the reclassification of the assets and liabilities within the Consolidated Balance Sheets as of December 31, 2004 and 2003.

For the year ended December 31, 2004, United Dominion sold 19 communities with a total of 5,425 apartment homes, 24 townhomes from a community of 36 townhomes, and one parcel of land. At December 31, 2004, United Dominion had 12 communities with a total of 2,635 apartment homes and a net book value of $114.9 million and one parcel of land with a net book value of $3.9 million included in real estate held for disposition. During 2003, United Dominion sold seven communities with a total of 1,927 apartment homes and two commercial properties. During 2002, United Dominion sold 25 communities with a total of 6,990 apartment homes, one parcel of land, and one commercial property. The results of operations for these properties and the interest expense associated with the secured debt on these properties are classified on the Consolidated Statements of Operations in the line item entitled “Income from discontinued operations, net of minority interests.”

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a summary of income from discontinued operations for the years ended December 31, (dollars in thousands):


	2004			2003			2002

Rental income	$	46,223		$	71,675		$	107,932
Rental expenses		20,460			30,196			43,465
Real estate depreciation		8,847			17,687			25,110
Interest		—			—			4,420
Loss on early debt retirement		—			—			3,805
Impairment loss on real estate		—			—			2,301
Other expenses		88			157			220

		29,395			48,040			79,321
Income before net gain on sale of land and depreciable property, and minority interests		16,828			23,635			28,611
Net gain on the sale of land and depreciable property		52,903			15,941			32,698

Income before minority interests		69,731			39,576			61,309
Minority interests on income from discontinued operations		(4,400	)		(2,521	)		(3,789	)

Income from discontinued operations, net of minority interests	$	65,331		$	37,055		$	57,520


4.	SECURED DEBT

Secured debt on continuing and discontinued operations of United Dominion’s real estate portfolio, which encumbers $1.9 billion or 36% of real estate owned ($3.3 billion or 64% of United Dominion’s real estate owned is unencumbered) consists of the following as of December 31, 2004 (dollars in thousands):


					Weighted			Weighted		Number of
					Average			Average		Properties
	Principal Outstanding				Interest Rate			Years to Maturity		Encumbered

	2004		2003		2004			2004		2004

Fixed Rate Debt
Mortgage notes payable	$	428,223	$	174,520		5.76	%		5.8		21
Tax-exempt secured notes payable		39,160		42,540		6.14	%		16.9		4
Fannie Mae credit facilities		288,875		288,875		6.40	%		6.2		9
Fannie Mae credit facilities — swapped		—		17,000		n/a			n/a		n/a

Total fixed rate secured debt		756,258		522,935		6.03	%		6.5		34

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


					Weighted			Weighted		Number of
					Average			Average		Properties
	Principal Outstanding				Interest Rate			Years to Maturity		Encumbered

	2004		2003		2004			2004		2004

Variable Rate Debt
Mortgage notes payable		45,758		46,185		3.01	%		7.1		4
Tax-exempt secured note payable		7,770		7,770		1.72	%		23.5		1
Fannie Mae credit facilities		367,469		370,469		2.67	%		7.6		47
Freddie Mac credit facility		20,669		70,669		2.64	%		2.2		8

Total variable rate secured debt		441,666		495,093		2.68	%		7.6		60

Total secured debt	$	1,197,924	$	1,018,028		4.79	%		6.9		94

Fixed Rate Debt

Mortgage notes payableFixed rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from August 2005 through July 2027 and carry interest rates ranging from 4.10% to 8.50%.

Tax-exempt secured notes payableFixed rate mortgage notes payable that secure tax-exempt housing bond issues mature at various dates from May 2008 through March 2031 and carry interest rates ranging from 5.30% to 6.75%. Interest on these notes is generally payable in semi-annual installments.

Secured credit facilitiesAt December 31, 2004, United Dominion’s fixed rate secured credit facilities consisted of $288.9 million of the $656.3 million outstanding on an $860 million aggregate commitment under four revolving secured credit facilities with Fannie Mae. 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.

Variable Rate Debt

Mortgage notes payableVariable rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from January 2005 through July 2013. As of December 31, 2004, these notes had interest rates ranging from 2.83% to 4.03%.

Tax-exempt secured note payableThe variable rate mortgage note payable that secures tax-exempt housing bond issues matures in July 2028. As of December 31, 2004, this note had an interest rate of 1.72%. Interest on this note is payable in monthly installments.

Secured credit facilitiesAt December 31, 2004, United Dominion’s variable rate secured credit facilities consisted of $367.5 million outstanding on the Fannie Mae credit facilities and $20.7 million outstanding on the Freddie Mac credit facility. As of December 31, 2004, the variable rate Fannie Mae credit facilities had a weighted average floating rate of interest of 2.67% and the Freddie Mac credit facility had a weighted average floating rate of interest of 2.64%.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The aggregate maturities of secured debt for the fifteen years subsequent to December 31, 2004 are as follows (dollars in thousands):


		Fixed						Variable

		Mortgage		Tax-Exempt		Credit		Mortgage		Tax-Exempt		Credit
Year		Notes		Notes		Facilities		Notes		Notes		Facilities		TOTAL

	2005	$	22,945	$	305	$	—	$	4,642	$	—	$	—	$	27,892
	2006		63,879		320		—		3,701		—		—		67,900
	2007		87,481		345		—		—		—		20,669		108,495
	2008		8,538		5,145		—		—		—		—		13,683
	2009		26,768		245		—		—		—		—		27,013
	2010		71,084		265		138,875		—		—		—		210,224
	2011		11,759		280		50,000		—		—		114,513		176,552
	2012		58,834		300		100,000		—		—		52,956		212,090
	2013		61,751		315		—		37,415		—		200,000		299,481
	2014		651		340		—		—		—		—		991
	2015		703		12,815		—		—		—		—		13,518
	2016		760		—		—		—		—		—		760
	2017		821		—		—		—		—		—		821
	2018		887		—		—		—		—		—		887
	2019		958		—		—		—		—		—		958
	Thereafter		10,404		18,485		—		—		7,770		—		36,659

		$	428,223	$	39,160	$	288,875	$	45,758	$	7,770	$	388,138	$	1,197,924

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


5.	UNSECURED DEBT

A summary of unsecured debt as of December 31, 2004 and 2003 is as follows (dollars in thousands):


		2004		2003

Commercial Banks
	Borrowings outstanding under an unsecured credit facility due March 2006(a)	$	278,100	$	137,900

Senior Unsecured Notes — Other
	7.67% Medium-Term Notes due January 2004		—		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
	Verano Construction Loan due February 2006		24,820		—
	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		92,255
	4.30% Medium-Term Notes due July 2007		75,000		—
	4.50% Medium-Term Notes due March 2008		200,000		200,000
	ABAG Tax-Exempt Bonds due August 2008		46,700		46,700
	8.50% Monthly Income Notes due November 2008		29,081		29,081
	4.25% Medium-Term Notes due January 2009		50,000		50,000
	6.50% Notes due June 2009		200,000		200,000
	3.90% Medium-Term Notes due March 2010		50,000		—
	5.00% Medium-Term Notes due January 2012		100,000		—
	5.13% Medium-Term Notes due January 2014		200,000		75,000
	5.25% Medium-Term Notes due January 2015		100,000		—
	8.50% Debentures due September 2024		54,118		54,118
	Other(b)		750		1,136

			1,403,958		976,109

	Total Unsecured Debt	$	1,682,058	$	1,114,009


(a)	United Dominion has a three-year $500 million unsecured revolving credit facility. 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.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a summary of short-term bank borrowings under United Dominion’s bank credit facility at December 31, (dollars in thousands):


	2004			2003			2002

Total revolving credit facilities at December 31	$	500,000		$	500,000		$	475,000
Borrowings outstanding at December 31		278,100			137,900			275,800
Weighted average daily borrowings during the year		127,665			171,179			256,493
Maximum daily borrowings during the year		356,500			272,800			411,600
Weighted average interest rate during the year		2.0	%		2.1	%		3.0	%
Weighted average interest rate at December 31		2.7	%		1.6	%		2.5	%
Weighted average interest rate at December 31 — after giving effect to swap agreements		2.7	%		4.2	%		6.8	%

At December 31, 2004, all of United Dominion’s interest rate swap agreements associated with commercial bank borrowings had matured.


(b)	Represents deferred gains from the termination of interest rate risk management agreements.


6.	STOCKHOLDERS’ EQUITY

Preferred Stock

The Series B Cumulative Redeemable Preferred Stock has no stated par value and a liquidation preference of $25 per share. The Series B has no voting rights except as required by law. The Series B has no stated maturity and is not subject to any sinking fund or mandatory redemption and is not convertible into any of our other securities. The Series B is not redeemable prior to May 29, 2007. On or after this date, the Series B may be redeemed for cash at our option, in whole or in part, at a redemption price of $25 per share plus accrued and unpaid dividends. The redemption price is payable solely out of the sale proceeds of other capital stock. All dividends due and payable on the Series B have been accrued or paid as of the end of each fiscal year.

Distributions declared on the Series B in 2004 were $2.15 per share or $0.5375 per quarter. The Series B is listed on the NYSE under the symbol “UDRpfb.” At December 31, 2004, a total of 5,416,009 shares of the Series B were outstanding.

In 2004, United Dominion exercised its right to redeem the remaining 2 million shares of Series D that were outstanding. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 3,076,769 shares of common stock at a price of $16.25 per share. In 2003, we exercised our right to redeem 6 million shares of our Series D. Upon receipt of our redemption notice, the 6 million shares to be redeemed were converted by the holder into 9,230,923 shares of common stock at a price of $16.25 per share. As a result, United Dominion recognized $5.7 million and $19.3 million in premium on preferred stock conversions in 2004 and 2003, respectively. The premium amount recognized to convert

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

these shares represents the cumulative accretion to date between the conversion value of the preferred stock and the value at which it was recorded at the time of issuance.

Distributions declared on the Series D in 2004 were $2.09 per share or $0.5223 per quarter. The Series D was not listed on an exchange. At December 31, 2004, there were no outstanding shares of the Series D.

In 2004, Series E holders converted a total of 621,405 shares of Series E into 621,405 shares of our common stock.

Distributions declared on the Series E in 2004 were $1.33 per share or $0.3322 per quarter. The Series E is not listed on any exchange. At December 31, 2004, a total of 2,803,812 shares of the Series E were outstanding.

Officers’ Stock Purchase and Loan Plan

United Dominion’s notes receivable from certain officers matured in June 2004 and were satisfied in accordance with their terms. 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 were evidenced by promissory notes between the borrowers and United Dominion and secured by a pledge of the shares of common stock.

In addition, United Dominion had entered into a Servicing and Purchase Agreement (the “Servicing Agreement”) with SunTrust Bank (the “Bank”) whereby United Dominion acted 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 were evidenced by promissory notes (“Notes”) between each Borrower and the Bank. The Servicing Agreement provided that the Bank could 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. All of the Notes matured in June 2004 and were satisfied in accordance with their terms.

Dividend Reinvestment and Stock Purchase Plan

United Dominion’s Dividend Reinvestment and Stock Purchase Plan (the “Stock Purchase Plan”) allows common and preferred stockholders the opportunity to purchase, through the reinvestment of cash dividends, additional shares of United Dominion’s common stock. As of December 31, 2004, 9,793,191 shares of common stock had been issued under the Stock Purchase Plan. Shares in the amount of 4,206,809 were reserved for further issuance under the Stock Purchase Plan as of December 31, 2004. During 2004, 111,941 shares were issued under the Stock Purchase Plan for a total consideration of approximately $2.2 million.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Restricted Stock Awards

United Dominion’s 1999 Long-Term Incentive Plan (“LTIP”) authorizes the grant of restricted stock awards to employees, officers, consultants, and directors of United Dominion. Deferred compensation expense is recorded over the vesting period and is based upon the value of the common stock on the date of issuance. As of December 31, 2004, 682,460 shares of restricted stock have been issued under the LTIP.

Shareholder Rights Plan

United Dominion’s 1998 Shareholder Rights Plan is intended to protect long-term interests of stockholders in the event of an unsolicited, coercive or unfair attempt to take over United Dominion. The plan authorized a dividend of one Preferred Share Purchase Right (the “Rights”) on each share of common stock outstanding. Each Right, which is not currently exercisable, will entitle the holder to purchase 1/1000 of a share of a new series of United Dominion’s preferred stock, to be designated as Series C Junior Participating Cumulative Preferred Stock, at a price to be determined upon the occurrence of the event, and for which the holder must be paid $45 should the takeover occur. Under the Plan, the rights will be exercisable if a person or group acquires more than 15% of United Dominion’s common stock or announces a tender offer that would result in the ownership of 15% of United Dominion’s common stock.


7.	FINANCIAL INSTRUMENTS

The following estimated fair values of financial instruments were determined by United Dominion using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, the estimates presented herein are not necessarily indicative of the amounts United Dominion would realize on the disposition of the financial instruments. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts. The carrying amounts and estimated fair value of United Dominion’s financial instruments as of December 31, 2004 and 2003, are summarized as follows(dollars in thousands):


	2004				2003

	Carrying				Carrying
	Amount		Fair Value		Amount			Fair Value

Secured debt	$	1,197,924	$	1,228,953	$	1,018,028		$	1,063,415
Unsecured debt		1,682,058		1,654,760		1,114,009			1,162,910
Interest rate swap agreements		n/a		n/a		(1,633	)		(1,633	)

The following methods and assumptions were used by United Dominion in estimating fair values.

Cash equivalents

The carrying amount of cash equivalents approximates fair value.

Notes receivable

In April 2004, United Dominion received a promissory note in the principal amount of $75.6 million that matured in December 2004. The note was received in connection with the sale of a portfolio of properties. In August 2003, United Dominion received a promissory note in the principal amount of $8 million that was due September 2006. The note was secured by a second lien on a property that United Dominion managed and had an option to purchase. As of December 31, 2004, United Dominion had received all proceeds on this note. In June 2003, United Dominion received a promissory note in the

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

principal amount of $5 million that is due October 2011. The note was received in connection with one of our acquisitions and bears interest of 9.0% that is payable in annual installments. The carrying amount of the note receivable approximates fair value.

Secured and unsecured debt

Estimated fair value is based on mortgage rates, tax-exempt bond rates, and corporate unsecured debt rates believed to be available to United Dominion for the issuance of debt with similar terms and remaining lives. The carrying amount of United Dominion’s variable rate secured debt approximates fair value as of December 31, 2004 and 2003. The carrying amounts of United Dominion’s borrowings under variable rate unsecured debt arrangements, short-term revolving credit agreements, and lines of credit approximate their fair values as of December 31, 2004 and 2003.

Derivative financial instruments

At December 31, 2004, United Dominion has no derivative financial instruments reported on its Consolidated Balance Sheet.

For the years ended December 31, 2004, 2003, and 2002, United Dominion recognized $1.9 million, $8.1 million, and $4.9 million, respectively, of unrealized gains in comprehensive income. For the year ended December 31, 2004, United Dominion recognized a loss of $0.2 million in net income related to the ineffective portion of United Dominion’s hedging instruments. For the years ended December 31, 2003 and 2002, United Dominion recognized $0.3 million and $0.05 million in realized gains, respectively, in net income related to the ineffective portion of United Dominions hedging instruments. In addition, United Dominion recognized $1.6 million of derivative financial instrument liabilities on the Consolidated Balance Sheets within the line item “Accounts payable, accrued expenses, and other liabilities” for the year ended December 31, 2003.


8.	EMPLOYEE BENEFIT PLANS

Profit Sharing Plan

The United Dominion Realty Trust, Inc. Profit Sharing Plan (the “Plan”) is a defined contribution plan covering all eligible full-time employees. Under the Plan, United Dominion makes discretionary profit sharing and matching contributions to the Plan as determined by the Compensation Committee of the Board of Directors. Aggregate provisions for contributions, both matching and discretionary, which are included in United Dominion’s Consolidated Statements of Operations for the three years ended December 31, 2004, 2003, and 2002 were $0.6 million, $0.3 million, and $0.4 million, respectively.

Stock Option Plan

In May 2001, the stockholders of United Dominion approved the 1999 Long-Term Incentive Plan (the “LTIP”), which supersedes the 1985 Stock Option Plan. With the approval of the LTIP, no additional grants will be made under the 1985 Stock Option Plan. The LTIP authorizes the granting of awards which may take the form of options to purchase shares of common stock, stock appreciation rights, restricted stock, dividend equivalents, other stock-based awards, and any other right or interest relating to common stock or cash. The Board of Directors reserved 4 million shares for issuance upon the grant or exercise of awards under the LTIP. The LTIP generally provides, among other things, that options are granted at exercise prices not lower than the market value of the shares on the date of grant and that options granted must be exercised within ten years. The maximum number of shares of stock that may be issued subject to incentive stock options is 4 million shares. Shares under options that expire or are cancelable are available for subsequent grant.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Pro forma information regarding net income and earnings per share is required for periods prior to the adoption of the fair-value-based accounting method by FASB Statement No. 123“Accounting for Stock-Based Compensation”(FAS 123), and has been determined as if United Dominion had accounted for its employee stock options under the fair value method of accounting as defined in FAS 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 2002:


	2002

Risk free interest rate		4.1	%
Dividend yield		7.7	%
Volatility factor		0.177
Weighted average expected life (years)		4

There were no options granted during 2004 or 2003. The weighted average fair value of options granted during 2002 was $0.84 per option.

The following table illustrates the unaudited effect on net income available to common stockholders and earnings per share if the fair value based method had been applied to all outstanding and unvested share options for the years presented(dollars in thousands):


		2003			2002

Reported net income available to common stockholders		$	24,807		$	25,805
Compensation expense for stock options determined under the fair value based method			(292	)		(380	)
					��
Pro forma net income available to common stockholders		$	24,515		$	25,425

Earnings per common share — basic
	As reported	$	0.22		$	0.24
	Pro forma		0.21			0.24
Earnings per common share — diluted
	As reported	$	0.22		$	0.24
	Pro forma		0.21			0.24

Compensation expense related to restricted stock awards is not presented in the table above because the expense amount is the same under APB No. 25 and Statement 123 and, therefore, is already reflected in net income.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of United Dominion’s stock option activity during the three years ended December 31, 2004 is provided in the following table:


	Number			Weighted Average		Range of
	Outstanding			Exercise Price		Exercise Prices

Balance, December 31, 2001		4,612,372		$	11.90	$	9.63-$15.38
Granted		143,548			14.26		14.15-14.88
Exercised		(1,000,592	)		11.68		9.63-15.38
Forfeited		(87,999	)		11.04		9.63-15.25

Balance, December 31, 2002		3,667,329		$	12.01	$	9.63-$15.38
Granted		—			—		—
Exercised		(1,106,142	)		12.41		9.63-15.38
Forfeited		(25,000	)		9.65		9.63-9.88

Balance, December 31, 2003		2,536,187		$	11.88	$	9.63-$15.38
Granted		—			—		—
Exercised		(562,064	)		11.90		9.63-15.25
Forfeited		(13,500	)		12.02		10.88-13.96

Balance, December 31, 2004		1,960,623		$	11.88	$	9.63-$15.38

Exercisable at December 31,
2002		2,793,811		$	11.97	$	9.63-$15.38
2003		2,207,685			11.77		9.63-15.38
2004		1,938,343			11.84		9.63-15.38

The weighted average remaining contractual life on all options outstanding is 5.0 years. 780,677 of share options had exercise prices between $9.63 and $10.88, 689,129 of share options had exercise prices between $11.15 and $12.23, and 490,817 of share options had exercise prices between $13.76 and $15.38.

As of December 31, 2004 and 2003, stock-based awards for 2,890,251 and 3,028,920 shares of common stock, respectively, were available for future grants under the 1999 LTIP’s existing authorization.


9.	COMMITMENTS AND CONTINGENCIES

Commitments


	Real Estate Under Development

United Dominion is committed to completing its real estate currently under development, which has an estimated cost to complete of $64.0 million as of December 31, 2004.


	Land and Other Leases

United Dominion is party to several ground leases relating to operating communities. In addition, United Dominion is party to various other operating leases related to the operation of its regional offices. Future minimum lease payments for non-cancelable land and other leases as of December 31, 2004 are as follows(dollars in thousands):

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Ground		Operating
	Leases		Leases

2005	$	1,060	$	649
2006		1,060		320
2007		1,060		65
2008		1,060		4
2009		1,064		—
Thereafter		22,303		—

Total	$	27,607	$	1,038

United Dominion incurred $1.9 million of rent expense for each of the years ended December 31, 2004 and 2003. United Dominion incurred $2.0 million of rent expense for the year ended December 31, 2002.

Contingencies


	Series B Out-Performance Program

In May 2003, the stockholders of United Dominion approved the Series B Out-Performance Program (the “Series B Program”) pursuant to which certain executive officers of United Dominion (the “Participants”) were given the opportunity to invest indirectly in United Dominion by purchasing interests in a limited liability company (the “Series B LLC”), the only asset of which is a special class of partnership units of United Dominion Realty, L.P. (“Series B Out-Performance Partnership Shares” or “Series B OPPSs”) . The purchase price for the Series B OPPSs was determined by United Dominion’s board of directors to be $1 million, assuming 100% participation, and was based upon the advice of an independent valuation expert. The Series B Program will measure the cumulative total return on our common stock over the 24-month period from June 1, 2003 to May 31, 2005.

The Series B Program is designed to provide participants with the possibility of substantial returns on their investment if the total cumulative return on United Dominion’s common stock, as measured by the cumulative amount of dividends paid plus share price appreciation during the measurement period (a) exceeds the cumulative total return of the Morgan Stanley REIT Index peer group index over the same period; and (b) is at least the equivalent of a 22% total return, or 11% annualized.

At the conclusion of the measurement period, if United Dominion’s total cumulative return satisfies these criteria, the Series B LLC as holder of the Series B OPPSs will receive (for the indirect benefit of the Participants as holders of interests in the Series B LLC) distributions and allocations of income and loss from the Operating Partnership (accounted for on a consistent basis with all other OP Units) equal to the distributions and allocations that would be received on the number of 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 Morgan Stanley REIT Index, which is the peer group index, or the minimum return (such excess being the “excess return”);

	ii. multiplying 5% of the excess return by United Dominion’s market capitalization (defined as the average number of shares outstanding over the 24-month period, including common stock, OP Units, outstanding options, and convertible securities) multiplied by the daily closing price of United Dominion’s common stock, up to a maximum of 2% of market capitalization; and

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	iii. dividing the number obtained in (ii) by the market value of one share of United Dominion’s common stock on the valuation date, determined by the volume-weighted average price per day of 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, then the participants will forfeit their entire initial investment.


	Litigation and Legal Matters

United Dominion is subject to various legal proceedings and claims arising in the ordinary course of business. United Dominion cannot determine the ultimate liability with respect to such legal proceedings and claims at this time. United Dominion believes that such liability, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on our financial condition, results of operations or cash flow.


10.	INDUSTRY SEGMENTS

United Dominion owns and operates multifamily apartment communities throughout the United States that generate rental and other property related income through the leasing of apartment units to a diverse base of tenants. United Dominion separately evaluates the performance of each of its apartment communities. However, because each of the apartment communities has similar economic characteristics, facilities, services, and tenants, the apartment communities have been aggregated into a single apartment communities segment. All segment disclosure is included in or can be derived from United Dominion’s consolidated financial statements.

There are no tenants that contributed 10% or more of United Dominion’s total revenues during 2004, 2003, or 2002.


11.	UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA

Summarized consolidated quarterly financial data for the year ended December 31, 2004, with restated amounts that reflect discontinued operations as of December 31, 2004, is as follows(dollars in thousands, except per share amounts):


		Three Months Ended

		Previously				Previously				Previously
		Reported		Restated		Reported		Restated		Reported		Restated
		March 31(a)		March 31(a)		June 30(a)		June 30(a)		September 30(a)		September 30(a)		December 31(a)

Rental income(b)		$	154,874	$	143,282	$	156,754	$	146,965	$	155,136	$	150,191	$	163,832
Income before minority interests and discontinued operations			13,744		9,914		15,016		11,534		6,712		5,160		5,838
Gain on sale of land and depreciable property			1,205		1,205		13,814		13,814		20,220		20,220		17,664
Income from discontinued operations, net of minority interests			2,092		5,685		14,067		17,338		21,146		22,615		19,693
Net income available to common stockholders			8,665		8,665		21,855		21,855		21,160		21,160		20,212
Earnings per common share:
	Basic	$	0.07	$	0.07	$	0.17	$	0.17	$	0.17	$	0.17	$	0.15
	Diluted		0.07		0.07		0.17		0.17		0.17		0.17		0.15


(a)	The first, second, and third quarters of 2004 each include $1.6 million of expense for premiums paid for the conversion of shares of Series D preferred stock into common stock. The fourth quarter of

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	2004 includes $1.0 million of expense for premiums paid for the conversion of shares of Series D preferred stock into common stock.

(b)	Represents rental income from continuing operations.

Summarized consolidated quarterly financial data for the year ended December 31, 2003, with restated amounts that reflect discontinued operations as of December 31, 2004, is as follows(dollars in thousands, except per share amounts):


		Three Months Ended

		Previously				Previously						Previously				Previously
		Reported		Restated		Reported			Restated			Reported		Restated		Reported		Restated
		March 31		March 31		June 30(a)			June 30(a)			September 30(a)		September 30(a)		December 31(a)		December 31(a)

Rental income(b)		$	137,914	$	133,052	$	138,983		$	134,085		$	141,863	$	137,025	$	143,617	$	138,732
Income before minority interests and discontinued operations			7,878		6,392		11,288			9,722			9,748		8,415		9,967		8,560
Gain/(loss) on sale of land and depreciable property			1,045		1,045		(112	)		(112	)		7,215		7,215		7,793		7,793
Income from discontinued operations, net of minority interests			5,991		7,383		4,277			5,743			10,793		12,042		10,571		11,887
Net income available to common stockholders			6,494		6,494		2,702			2,702			1,242		1,242		14,369		14,369
Earnings per common share:
	Basic	$	0.06	$	0.06	$	0.02		$	0.02		$	0.01	$	0.01	$	0.13	$	0.13
	Diluted		0.06		0.06		0.02			0.02			0.01		0.01		0.12		0.13


(a)	The second, third, and fourth quarters of 2003 include $6.3 million, $12.1 million, and $0.9 million of expense, respectively, for premiums paid for the conversion of shares of Series D preferred stock into common stock.

(b)	Represents rental income from continuing operations.

12. SUBSEQUENT EVENTS

On December 16, 2004, eBay announced that it had agreed to acquire privately held Rent.com, a leading Internet listing web site in the apartment and rental housing industry, for approximately $415 million plus acquisition costs, net of Rent.com’s cash on hand. United Dominion owns shares in Rent.com. On February 23, 2005, eBay announced that it had completed the transaction. As a result, United Dominion received cash proceeds and recorded a one-time pre-tax gain of $12.3 million on the sale.

UNITED DOMINION REALTY TRUST, INC.

SCHEDULE III — REAL ESTATE OWNED

FOR THE YEAR ENDED DECEMBER 31, 2004

(in thousands)


									Cost of
									Improvements			Gross Amount at Which
			Initial Costs						Capitalized			Carried at Close of Period
							Total		Subsequent
			Land and		Buildings		Initial		to Acquisition			Land and		Buildings		Total		Accumulated
			Land		and		Acquisition		(Net of			Land		and		Carrying		Depreciation		Date of
	Encumbrances		Improvements		Improvements		Costs		Disposals)			Improvements		Improvements		Value(A)		(B)		Construction		Date Acquired

Pine Avenue	$	11,191	$	2,158	$	8,888	$	11,046	$	3,990		$	2,855	$	12,181	$	15,036	$	2,364		1987		12/07/98
Grand Terrace		—		2,144		6,595		8,739		1,386			2,248		7,877		10,125		1,977		1986		06/30/99
Windemere at Sycamore Highland		—		5,810		23,450		29,260		312			5,812		23,760		29,572		3,043		2001		11/21/02
Harbor Greens		—		20,477		28,538		49,015		5,313			20,476		33,852		54,328		2,792		1965		06/12/03
Pine Brook Village		18,270		2,582		25,504		28,086		2,268			2,582		27,772		30,354		2,370		1979		06/12/03
Windjammer		19,145		7,345		22,623		29,968		3,192			7,345		25,815		33,160		2,116		1971		06/12/03
Huntington Vista		—		8,056		22,486		30,542		2,284			8,055		24,771		32,826		2,095		1970		06/12/03
Pacific Palms		—		12,285		6,181		18,466		535			12,304		6,697		19,001		618		1962		07/31/03
Missions at Back Bay		—		229		14,129		14,358		113			10,619		3,852		14,471		267		1969		12/16/03
Presidio at Rancho Del Oro		13,325		9,164		22,695		31,859		359			9,184		23,034		32,218		720		1987		06/25/04
Coronado at Newport — North		56,481		62,516		46,082		108,598		1,461			62,516		47,543		110,059		521		1968		10/28/04
Huntington Villas		—		61,535		18,017		79,552		123			61,537		18,138		79,675		298		1972		09/30/04
Villa Venetia		—		70,825		24,179		95,004		87			70,825		24,266		95,091		278		1972		10/28/04
The Crest		61,350		21,954		67,809		89,763		(27	)		21,954		67,782		89,736		1,010		1989		09/30/04
Vista Del Rey		—		10,671		7,080		17,751		75			10,671		7,155		17,826		112		1969		09/30/04
Foxborough		—		12,071		6,187		18,258		88			12,075		6,271		18,346		99		1969		09/30/04
Villas at Carlsbad		9,653		6,517		10,717		17,234		276			6,517		10,993		17,510		116		1966		10/28/04
Rosebeach		—		8,414		17,449		25,863		88			8,414		17,537		25,951		264		1970		09/30/04
The Villas at San Dimas		13,084		8,181		16,735		24,916		113			8,181		16,848		25,029		181		1981		10/28/04
The Villas at Bonita		8,324		4,498		11,699		16,197		86			4,498		11,785		16,283		127		1981		10/28/04
Ocean Villa		10,089		5,135		12,788		17,923		346			5,135		13,134		18,269		139		1965		10/28/04
Waterstone at Murrieta		—		10,598		34,703		45,301		151			10,598		34,854		45,452		345		1990		11/02/04
Summit at Mission Bay		—		22,599		17,181		39,780		136			22,599		17,317		39,916		180		1953		11/01/04
The Arboretum		23,236		29,562		14,146		43,708		700			29,562		14,846		44,408		163		1970		10/28/04
Rancho Vallecitos		—		3,303		10,877		14,180		1,771			3,420		12,531		15,951		4,450		1988		10/13/99
Southern California		244,148		408,629		496,738		905,367		25,226			419,982		510,611		930,593		26,645


UNITED DOMINION REALTY TRUST, INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
									Cost of
									Improvements		Gross Amount at Which
			Initial Costs						Capitalized		Carried at Close of Period
							Total		Subsequent
			Land and		Buildings		Initial		to Acquisition		Land and		Buildings		Total		Accumulated
			Land		and		Acquisition		(Net of		Land		and		Carrying		Depreciation		Date of
	Encumbrances		Improvements		Improvements		Costs		Disposals)		Improvements		Improvements		Value(A)		(B)		Construction		Date Acquired

Bay Cove		—		2,929		6,578		9,507		5,639		3,528		11,618		15,146		5,982		1972		12/16/92
Summit West		—		2,176		4,710		6,886		4,115		2,530		8,471		11,001		4,395		1972		12/16/92
Pinebrook		—		1,780		2,458		4,238		3,907		2,037		6,108		8,145		3,811		1977		09/28/93
Lakewood Place		9,856		1,395		10,647		12,042		2,206		1,650		12,598		14,248		4,996		1986		03/10/94
Hunter’s Ridge		10,312		2,462		10,942		13,404		2,625		3,016		13,013		16,029		5,010		1992		06/30/95
Bay Meadow		—		2,892		9,254		12,146		3,616		3,459		12,303		15,762		4,398		1985		12/09/96
Cambridge		—		1,791		7,166		8,957		2,016		2,127		8,846		10,973		3,011		1985		06/06/97
Laurel Oaks		—		1,362		6,542		7,904		1,926		1,614		8,216		9,830		2,686		1986		07/01/97
Parker’s Landing		—		10,178		37,869		48,047		3,743		9,381		42,409		51,790		9,455		1991		12/07/98
Sugar Mill Creek		7,633		2,242		7,553		9,795		1,307		2,391		8,711		11,102		2,090		1988		12/07/98
Inlet Bay		—		7,702		23,150		30,852		2,283		7,729		25,406		33,135		2,401		1988/89		06/30/03
MacAlpine Place		32,474		10,869		36,858		47,727		56		10,869		36,914		47,783		193		2001		12/01/04
Tampa, FL		60,275		47,778		163,727		211,505		33,439		50,331		194,613		244,944		48,428
Woodtrail		—		1,543		5,457		7,000		2,871		1,766		8,105		9,871		3,435		1978		12/31/96
Green Oaks		—		5,314		19,626		24,940		4,179		6,079		23,040		29,119		7,314		1985		06/25/97
Sky Hawk		—		2,298		7,158		9,456		2,371		2,753		9,074		11,827		3,458		1984		05/08/97
South Grand at Pecan Grove		5,812		4,058		14,756		18,814		6,438		4,954		20,298		25,252		6,665		1985		09/26/97
Braesridge		9,985		3,048		10,962		14,010		2,826		3,524		13,312		16,836		4,285		1982		09/26/97
Skylar Pointe		—		3,604		11,592		15,196		4,931		3,751		16,376		20,127		5,902		1979		11/20/97
Stone Canyon		—		900		—		900		9,513		1,328		9,085		10,413		2,447		1998		12/17/97
Chelsea Park		4,741		1,991		5,788		7,779		2,422		2,457		7,744		10,201		2,612		1983		03/27/98
Country Club Place		3,918		499		6,520		7,019		1,458		680		7,797		8,477		2,286		1985		03/27/98
Arbor Ridge		1,290		1,689		6,684		8,373		929		2,112		7,190		9,302		2,379		1983		03/27/98
London Park		1,918		2,018		6,668		8,686		2,402		2,522		8,566		11,088		2,961		1983		03/27/98
Marymont		—		1,151		4,155		5,306		1,185		1,184		5,307		6,491		1,377		1983		03/27/98
Riviera Pines		1,718		1,414		6,454		7,868		1,720		1,486		8,102		9,588		1,871		1979		03/27/98
Towne Lake		—		1,334		5,309		6,643		1,842		1,654		6,831		8,485		2,296		1984		03/27/98
The Legend at Park 10		—		1,995		—		1,995		11,850		3,927		9,918		13,845		4,236		1998		05/19/98
The Bradford		—		1,151		40,272		41,423		2,553		6,616		37,360		43,976		2,651		1990/91		11/20/03
Houston, TX		29,382		34,007		151,401		185,408		59,490		46,793		198,105		244,898		56,175
Foothills Tennis Village		13,735		3,618		14,542		18,160		1,396		3,746		15,810		19,556		3,480		1988		12/07/98
Woodlake Village		26,811		6,772		26,967		33,739		2,985		7,026		29,698		36,724		6,928		1979		12/07/98
2000 Post Street		—		9,861		44,578		54,439		1,088		9,964		45,563		55,527		7,599		1987		12/07/98
Birch Creek		7,584		4,365		16,696		21,061		3,081		4,632		19,510		24,142		4,067		1968		12/07/98
Highlands of Marin		—		5,996		24,868		30,864		1,054		6,090		25,828		31,918		5,064		1991		12/07/98
Marina Playa		12,842		6,224		23,916		30,140		3,899		6,489		27,550		34,039		5,913		1971		12/07/98
Crossroads		10,066		4,812		10,170		14,982		116		4,812		10,286		15,098		267		1986		7/28/04
Northern California		71,038		41,648		161,737		203,385		13,619		42,759		174,245		217,004		33,318


UNITED DOMINION REALTY TRUST, INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
									Cost of
									Improvements		Gross Amount at Which
			Initial Costs						Capitalized		Carried at Close of Period
							Total		Subsequent
			Land and		Buildings		Initial		to Acquisition		Land and		Buildings		Total		Accumulated
			Land		and		Acquisition		(Net of		Land		and		Carrying		Depreciation			Date of
	Encumbrances		Improvements		Improvements		Costs		Disposals)		Improvements		Improvements		Value(A)		(B)			Construction		Date Acquired

Fisherman’s Village		—		2,387		7,459		9,846		4,236		3,175		10,907		14,082		5,033			1984		12/29/95
Seabrook		—		1,846		4,155		6,001		3,930		2,335		7,596		9,931		3,736			1984		02/20/96
Dover Village		—		2,895		6,456		9,351		4,511		3,459		10,403		13,862		5,732			1981		03/31/93
Lakeside North		—		1,533		11,076		12,609		5,406		2,284		15,731		18,015		7,233			1984		04/14/94
Regatta Shore		—		757		6,607		7,364		7,629		1,552		13,441		14,993		5,642			1988		06/30/94
Alafaya Woods		8,951		1,653		9,042		10,695		2,689		2,134		11,250		13,384		4,997			1988/90		10/21/94
Vinyards		8,115		1,840		11,572		13,412		3,894		2,500		14,806		17,306		6,595			1984/86		10/31/94
Andover Place		13,035		3,692		7,757		11,449		3,852		4,518		10,783		15,301		5,014			1988		09/29/95 & 09/30/96
Los Altos		12,135		2,804		12,349		15,153		3,383		3,375		15,161		18,536		5,402			1990		10/31/96
Lotus Landing		—		2,185		8,639		10,824		2,277		2,419		10,682		13,101		3,351			1985		07/01/97
Seville on the Green		—		1,282		6,498		7,780		2,642		1,544		8,878		10,422		2,740			1986		10/21/97
Arbors at Lee Vista		13,394		3,976		16,920		20,896		2,571		4,412		19,055		23,467		5,238			1991		12/31/97
Heron Lake		2,534		1,446		9,288		10,734		1,750		1,623		10,861		12,484		3,077			1989		03/27/98
Ashton at Waterford		13,986		3,872		17,538		21,410		427		3,912		17,925		21,837		5,937			2000		5/28/98
Orlando, FL		72,150		32,168		135,356		167,524		49,197		39,242		177,479		216,721		69,727
Dominion Middle Ridge		17,769		3,312		13,283		16,595		2,636		3,495		15,736		19,231		4,843			1990		06/25/96
Dominion Lake Ridge		12,922		2,366		8,386		10,752		1,636		2,548		9,840		12,388		3,419			1987		02/23/96
Presidential Greens		19,492		11,238		18,790		30,028		1,285		11,342		19,971		31,313		3,220			1938		05/15/02
Taylor Place		—		6,418		13,411		19,829		3,716		6,559		16,986		23,545		2,730			1962		04/17/02
Ridgewood Apartments		12,215		5,612		20,086		25,698		2,591		5,682		22,607		28,289		3,123			1988		08/26/02
Ridgewood Townhomes		14,946		4,507		16,263		20,770		758		4,510		17,018		21,528		2,349			1983		08/26/02
The Calvert		4,714		263		11,112		11,375		1,157		2,330		10,202		12,532		715			1962		11/26/03
Commons at Town Square		—		136		10,012		10,148		574		9,154		1,568		10,722		133			1971		12/03/03
Waterside Towers		—		874		46,426		47,300		1,719		34,673		14,346		49,019		1,018			1971		12/03/03
Waterside Townhomes		—		129		4,621		4,750		294		3,638		1,406		5,044		100	��		1971		12/03/03
Metropolitan DC		82,058		34,855		162,390		197,245		16,366		83,931		129,680		213,611		21,650
Dominion on Spring Forest		—		1,257		8,586		9,843		4,846		1,737		12,952		14,689		7,375			1978/81		05/21/91
Dominion Park Green		—		500		4,322		4,822		2,198		720		6,300		7,020		3,294			1987		09/27/91
Dominion on Lake Lynn		16,250		3,622		12,405		16,027		5,078		4,289		16,816		21,105		6,583			1986		12/01/92
Dominion Courtney Place		7,105		1,115		5,119		6,234		4,027		1,475		8,786		10,261		4,341			1979/81		07/08/93
Dominion Walnut Ridge		10,148		1,791		11,969		13,760		3,086		2,205		14,641		16,846		5,950			1982/84		03/04/94
Dominion Walnut Creek		16,055		3,170		21,717		24,887		5,617		3,778		26,726		30,504		10,332			1985/86		05/17/94
Dominion Ramsgate		—		908		6,819		7,727		1,704		1,051		8,380		9,431		2,697			1988		08/15/96
Copper Mill		—		1,548		16,067		17,615		1,413		1,853		17,175		19,028		4,834			1997		12/31/96
Trinity Park		10,585		4,580		17,576		22,156		1,864		4,655		19,365		24,020		5,420			1987		02/28/97
Meadows at Kildaire		15,973		2,846		20,768		23,614		2,022		6,921		18,715		25,636		5,201			2000		05/25/00
Oaks at Weston		—		9,944		23,306		33,250		622		10,196		23,676		33,872		3,963			2001		06/28/02
Raleigh, NC		76,116		31,281		148,654		179,935		32,477		38,880		173,532		212,412		59,990


UNITED DOMINION REALTY TRUST, INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
									Cost of
									Improvements		Gross Amount at Which
			Initial Costs						Capitalized		Carried at Close of Period
							Total		Subsequent
			Land and		Buildings		Initial		to Acquisition		Land and		Buildings		Total		Accumulated
			Land		and		Acquisition		(Net of		Land		and		Carrying		Depreciation		Date of
	Encumbrances		Improvements		Improvements		Costs		Disposals)		Improvements		Improvements		Value(A)		(B)		Construction		Date Acquired
											��
Preston Oaks		—		1,784		6,416		8,200		1,340		1,975		7,565		9,540		2,376		1980		12/31/96
Rock Creek		—		4,077		15,823		19,900		5,521		4,672		20,749		25,421		7,431		1979		12/31/96
Windridge		—		3,414		14,027		17,441		4,183		4,095		17,529		21,624		6,043		1980		12/31/96
Lakeridge		—		1,631		5,669		7,300		1,476		1,858		6,918		8,776		2,474		1984		12/31/96
Summergate		—		1,171		3,929		5,100		1,072		1,433		4,739		6,172		1,712		1984		12/31/96
Kelly Crossing		—		2,497		9,156		11,653		2,134		2,999		10,788		13,787		3,509		1984		06/18/97
Highlands of Preston		—		2,151		8,168		10,319		2,310		2,507		10,122		12,629		3,086		1985		03/27/98
The Summit		6,443		1,932		9,041		10,973		2,171		2,346		10,798		13,144		3,176		1983		03/27/98
Springfield		1,480		3,075		6,823		9,898		1,459		3,285		8,072		11,357		2,496		1985		03/27/98
Meridian		26,607		6,013		29,094		35,107		1,309		6,397		30,019		36,416		6,223		2000/02		1/27/98 & 12/28/01
Lincoln Towne Square		28,000		7,541		31,318		38,859		302		7,541		31,620		39,161		1,610		1999		03/12/04
Dallas, TX		62,530		35,286		139,464		174,750		23,277		39,108		158,919		198,027		40,136
Gatewater Landing		—		2,078		6,085		8,163		2,868		2,236		8,795		11,031		3,811		1970		12/16/92
Dominion Kings Place		—		1,565		7,007		8,572		1,677		1,667		8,582		10,249		3,489		1983		12/29/92
Dominion at Eden Brook		—		2,361		9,384		11,745		2,523		2,491		11,777		14,268		4,799		1984		12/29/92
Dominion Great Oaks		13,286		2,920		9,100		12,020		4,619		4,304		12,335		16,639		5,803		1974		07/01/94
Dominion Constant Friendship		—		903		4,669		5,572		1,257		1,075		5,754		6,829		2,142		1990		05/04/95
Lakeside Mill		4,550		2,666		10,109		12,775		1,034		2,704		11,105		13,809		4,008		1989		12/10/99
Tamar Meadow		—		4,145		17,149		21,294		1,358		4,180		18,472		22,652		2,301		1990		11/22/02
Calvert’s Walk		—		4,408		24,576		28,984		487		4,425		25,046		29,471		1,135		1988		03/30/04
Arborview		—		4,653		23,834		28,487		502		4,670		24,319		28,989		1,117		1992		03/30/04
Liriope		—		1,620		6,753		8,373		86		1,622		6,837		8,459		319		1997		03/30/04
Baltimore, MD		17,836		27,319		118,666		145,985		16,411		29,374		133,022		162,396		28,924
Sycamore Ridge		4,243		4,068		15,433		19,501		2,610		4,291		17,820		22,111		4,080		1997		07/02/98
Heritage Green		—		2,990		11,392		14,382		9,744		3,135		20,991		24,126		5,266		1998		07/02/98
Alexander Court		13,771		1,573		—		1,573		21,665		6,239		16,999		23,238		6,191		1999		07/02/98
Governour’s Square		27,850		7,513		28,695		36,208		4,860		8,025		33,043		41,068		7,932		1967		12/07/98
Hickory Creek		—		3,421		13,539		16,960		2,469		3,639		15,790		19,429		3,647		1988		12/07/98
Britton Woods		—		3,477		19,214		22,691		2,831		4,104		21,418		25,522		6,374		1991		04/20/01
Columbus, OH		45,864		23,042		88,273		111,315		44,179		29,433		126,061		155,494		33,490
Legacy Hill		—		1,148		5,868		7,016		3,663		1,477		9,202		10,679		4,072		1977		11/06/95
Hickory Run		—		1,469		11,584		13,053		2,916		1,867		14,102		15,969		4,927		1989		12/29/95
Carrington Hills		23,427		2,117		—		2,117		25,280		3,863		23,534		27,397		6,909		1999		12/06/95
Brookridge		—		707		5,461		6,168		1,835		943		7,060		8,003		2,661		1986		03/28/96
Club at Hickory Hollow		—		2,140		15,231		17,371		2,746		2,782		17,335		20,117		5,650		1987		02/21/97
Breckenridge		—		766		7,714		8,480		1,111		979		8,612		9,591		2,679		1986		03/27/97
Williamsburg		—		1,376		10,931		12,307		1,881		1,645		12,543		14,188		3,636		1986		05/20/98
Colonnade		15,872		1,460		16,015		17,475		865		1,640		16,700		18,340		3,865		1998		01/07/99
The Preserve at Brentwood		—		3,182		24,675		27,857		171		3,182		24,846		28,028		917		1998		06/01/04
Nashville, TN		39,299		14,365		97,479		111,844		40,468		18,378		133,934		152,312		35,316


UNITED DOMINION REALTY TRUST, INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
									Cost of
									Improvements		Gross Amount at Which
			Initial Costs						Capitalized		Carried at Close of Period
							Total		Subsequent
			Land and		Buildings		Initial		to Acquisition		Land and		Buildings		Total		Accumulated
			Land		and		Acquisition		(Net of		Land		and		Carrying		Depreciation		Date of
	Encumbrances		Improvements		Improvements		Costs		Disposals)		Improvements		Improvements		Value(A)		(B)		Construction		Date Acquired

Dominion Olde West		—		1,965		12,204		14,169		4,017		2,410		15,776		18,186		8,390		1978/82/84/85/87		12/31/84 & 8/27/91
Dominion Creekwood		—		—		—		—		2,044		55		1,989		2,044		598		1984		08/27/91
Dominion Laurel Springs		—		464		3,120		3,584		2,096		665		5,015		5,680		2,527		1972		09/06/91
Dominion English Hills		15,409		1,979		11,524		13,503		6,911		2,871		17,543		20,414		9,351		1969/76		12/06/91
Dominion Gayton Crossing		10,400		826		5,148		5,974		6,740		1,366		11,348		12,714		7,098		1973		09/28/95
Dominion West End		16,897		2,059		15,049		17,108		4,303		2,824		18,587		21,411		6,717		1989		12/28/95
Courthouse Green		7,866		732		4,702		5,434		2,850		1,157		7,127		8,284		4,618		1974/78		12/31/84
Waterside at Ironbridge		11,635		1,844		13,239		15,083		1,688		2,044		14,727		16,771		3,845		1987		09/30/97
Carriage Homes at Wyndham		—		474		30,807		31,281		711		3,654		28,338		31,992		1,890		1998		11/25/03
Richmond, VA		62,207		10,343		95,793		106,136		31,360		17,046		120,450		137,496		45,034
Dominion Peppertree		—		1,546		7,699		9,245		2,220		1,815		9,650		11,465		4,408		1987		12/14/93
Dominion Harris Pond		—		887		6,728		7,615		1,896		1,286		8,225		9,511		3,293		1987		07/01/94
Dominion Mallard Creek		—		699		6,488		7,187		1,153		719		7,621		8,340		2,743		1989		08/16/94
Dominion at Sharon		—		667		4,856		5,523		1,374		917		5,980		6,897		2,150		1984		08/15/96
Providence Court		—		—		22,048		22,048		10,176		7,580		24,644		32,224		7,962		1997		09/30/97
Stoney Pointe		11,784		1,500		15,856		17,356		1,882		1,777		17,461		19,238		5,258		1991		02/28/97
Dominion Crown Point		—		2,122		22,339		24,461		2,960		3,952		23,469		27,421		9,610		1987/00		07/01/94
Dominion Crossing		—		1,666		4,774		6,440		163		1,666		4,937		6,603		108		1985		08/31/04
Dominion Norcroft		—		1,969		13,051		15,020		71		1,969		13,122		15,091		277		1991/97		08/31/04
Charlotte, NC		11,784		11,056		103,839		114,895		21,895		21,681		115,109		136,790		35,809
Boronda Manor		—		1,946		8,982		10,928		6,425		3,000		14,353		17,353		2,272		1979		12/07/98
Garden Court		—		888		4,188		5,076		2,947		1,368		6,655		8,023		1,095		1973		12/07/98
Cambridge Court		—		3,039		12,883		15,922		9,895		4,706		21,111		25,817		3,481		1974		12/07/98
Laurel Tree		—		1,304		5,115		6,419		4,249		1,992		8,676		10,668		1,401		1977		12/07/98
The Pointe at Harden Ranch		—		6,389		23,854		30,243		17,290		9,368		38,165		47,533		5,925		1986		12/07/98
The Pointe at Northridge		—		2,044		8,029		10,073		6,471		3,108		13,436		16,544		2,112		1979		12/07/98
The Pointe at Westlake		—		1,329		5,334		6,663		4,064		2,016		8,711		10,727		1,384		1975		12/07/98
Monterey Peninsula, CA		—		16,939		68,385		85,324		51,341		25,558		111,107		136,665		17,670
Vista Point		—		1,588		5,613		7,201		1,635		1,769		7,067		8,836		2,497		1986		12/31/96
Sierra Palms		—		4,639		17,361		22,000		867		4,764		18,103		22,867		5,140		1996		12/31/96
Finisterra		—		1,274		26,392		27,666		891		1,378		27,179		28,557		6,489		1997		03/27/98
La Privada		16,019		7,303		18,508		25,811		2,619		7,935		20,495		28,430		5,631		1987		03/27/98
Sierra Foothills		13,977		2,728		—		2,728		18,922		4,843		16,807		21,650		7,383		1998		02/18/98
Villagio at McCormick Ranch		1,674		3,333		5,975		9,308		1,045		3,724		6,629		10,353		2,704		1980		01/18/01
Sierra Canyon		—		1,810		12,963		14,773		390		1,827		13,336		15,163		2,674		2001		12/28/01
Phoenix, AZ		31,670		22,675		86,812		109,487		26,369		26,240		109,616		135,856		32,518


UNITED DOMINION REALTY TRUST, INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
									Cost of
									Improvements		Gross Amount at Which
			Initial Costs						Capitalized		Carried at Close of Period
							Total		Subsequent
			Land and		Buildings		Initial		to Acquisition		Land and		Buildings		Total		Accumulated
			Land		and		Acquisition		(Net of		Land		and		Carrying		Depreciation		Date of
	Encumbrances		Improvements		Improvements		Costs		Disposals)		Improvements		Improvements		Value(A)		(B)		Construction		Date Acquired

Autumnwood		—		2,412		8,688		11,100		1,747		2,745		10,102		12,847		3,409		1984		12/31/96
Cobblestone		10,137		2,925		10,527		13,452		3,832		3,217		14,067		17,284		4,748		1984		12/31/96
Pavillion		—		4,428		19,033		23,461		2,622		4,787		21,296		26,083		6,490		1979		12/31/96
Summit Ridge		5,756		1,726		6,308		8,034		1,978		2,244		7,768		10,012		2,618		1983		03/27/98
Greenwood Creek		—		1,958		8,551		10,509		2,013		2,312		10,210		12,522		3,115		1984		03/27/98
Derby Park		7,404		3,121		11,765		14,886		2,456		3,804		13,538		17,342		4,295		1984		03/27/98
Aspen Court		2,568		777		4,945		5,722		1,424		1,107		6,039		7,146		1,848		1986		03/27/98
The Cliffs		—		3,484		18,657		22,141		1,632		3,787		19,986		23,773		3,916		1992		01/29/02
Arlington, TX		25,865		20,831		88,474		109,305		17,704		24,003		103,006		127,009		30,439
Beechwood		—		1,409		6,087		7,496		1,769		1,682		7,583		9,265		3,231		1985		12/22/93
Steeplechase		—		3,208		11,514		14,722		13,153		4,036		23,839		27,875		7,136		1990/97		03/07/96
Northwinds		—		1,558		11,736		13,294		1,688		1,846		13,136		14,982		4,282		1989/97		08/15/96
Deerwood Crossings		—		1,540		7,989		9,529		1,831		1,716		9,644		11,360		3,455		1973		08/15/96
Dutch Village		—		1,197		4,826		6,023		1,286		1,312		5,997		7,309		2,231		1970		08/15/96
Lake Brandt		—		1,547		13,490		15,037		1,165		1,835		14,367		16,202		4,692		1995		08/15/96
Park Forest		—		680		5,770		6,450		1,061		885		6,626		7,511		2,066		1987		09/26/96
Deep River Pointe		—		1,671		11,140		12,811		598		1,821		11,588		13,409		3,207		1997		10/01/97
Greensboro, NC		—		12,810		72,552		85,362		22,551		15,133		92,780		107,913		30,300
Arbor Terrace		10,462		1,453		11,995		13,448		959		1,543		12,864		14,407		3,465		1996		03/27/98
Aspen Creek		6,553		1,178		9,116		10,294		521		1,293		9,522		10,815		2,101		1996		12/07/98
Crowne Pointe		7,279		2,486		6,437		8,923		1,656		2,554		8,025		10,579		2,075		1987		12/07/98
Hilltop		5,231		2,174		7,408		9,582		959		2,341		8,200		10,541		1,893		1985		12/07/98
Beaumont		11,249		2,339		12,559		14,898		779		2,418		13,259		15,677		4,483		1996		06/14/00
Stonehaven		—		6,471		29,536		36,007		1,803		6,550		31,260		37,810		4,980		1989/90		05/28/02
Seattle, WA		40,774		16,101		77,051		93,152		6,677		16,699		83,130		99,829		18,997
Greensview		—		6,450		24,405		30,855		2,531		6,062		27,324		33,386		6,657		1987/02		12/07/98
Mountain View		—		6,402		21,569		27,971		2,861		6,381		24,451		30,832		5,891		1973		12/07/98
The Reflections		—		6,305		27,202		33,507		1,454		6,493		28,468		34,961		4,814		1981/96		04/30/02
Denver, CO		—		19,157		73,176		92,333		6,846		18,936		80,243		99,179		17,362
Cape Harbor		—		1,892		18,113		20,005		1,950		2,294		19,661		21,955		6,212		1996		08/15/96
Mill Creek		—		1,404		4,489		5,893		14,352		1,963		18,282		20,245		6,355		1986/98		09/30/91
The Creek		—		418		2,506		2,924		2,396		508		4,812		5,320		2,689		1973		06/30/92
Forest Hills		—		1,028		5,421		6,449		2,964		1,207		8,206		9,413		4,151		1964/69		06/30/92
Clear Run		—		875		8,741		9,616		6,243		1,306		14,553		15,859		5,582		1987/89		07/22/94
Crosswinds		—		1,096		18,230		19,326		1,784		1,243		19,867		21,110		5,862		1990		02/28/97
Wilmington, NC		—		6,713		57,500		64,213		29,689		8,521		85,381		93,902		30,851


UNITED DOMINION REALTY TRUST, INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
									Cost of
									Improvements		Gross Amount at Which
			Initial Costs						Capitalized		Carried at Close of Period
							Total		Subsequent
			Land and		Buildings		Initial		to Acquisition		Land and		Buildings		Total		Accumulated
			Land		and		Acquisition		(Net of		Land		and		Carrying		Depreciation		Date of
	Encumbrances		Improvements		Improvements		Costs		Disposals)		Improvements		Improvements		Value(A)		(B)		Construction		Date Acquired

Lancaster Commons		7,584		2,485		7,451		9,936		624		2,553		8,007		10,560		2,048		1992		12/07/98
Tualatin Heights		8,142		3,273		9,134		12,407		915		3,378		9,944		13,322		2,568		1989		12/07/98
University Park		—		3,007		8,191		11,198		672		3,061		8,809		11,870		2,009		1987		03/27/98
Evergreen Park		—		3,878		9,973		13,851		1,282		3,979		11,154		15,133		2,890		1988		03/27/98
Andover Park		—		2,917		16,994		19,911		120		2,917		17,114		20,031		267		1989		09/30/04
Hunt Club		—		6,014		14,870		20,884		143		6,014		15,013		21,027		237		1985		09/30/04
Portland, OR		15,726		21,574		66,613		88,187		3,756		21,902		70,041		91,943		10,019
Pecan Grove		—		1,407		5,293		6,700		740		1,482		5,958		7,440		1,758		1984		12/31/96
Anderson Mill		5,391		3,134		11,170		14,304		4,085		3,528		14,861		18,389		5,942		1984		03/27/97
Red Stone Ranch		—		1,897		17,526		19,423		433		5,390		14,466		19,856		4,538		2000		06/14/00
Barton Creek Landing		—		3,151		14,269		17,420		965		3,164		15,221		18,385		2,652		1986		03/28/02
Lakeline Villas		—		4,633		13,298		17,931		79		4,633		13,377		18,010		420		2002		07/15/04
Austin, TX		5,391		14,222		61,556		75,778		6,302		18,197		63,883		82,080		15,310
Stanford Village		—		885		2,808		3,693		1,594		1,200		4,087		5,287		2,650		1985		09/26/89
Griffin Crossing		—		1,510		7,544		9,054		2,218		1,878		9,394		11,272		4,065		1987/89		06/08/94
Gwinnett Square		6,385		1,924		7,376		9,300		2,493		2,219		9,574		11,793		3,726		1985		03/29/95
Dunwoody Pointe		5,308		2,763		6,903		9,666		5,652		3,357		11,961		15,318		5,720		1980		10/24/95
Riverwood		5,193		2,986		11,088		14,074		4,826		3,507		15,393		18,900		6,517		1980		06/26/96
Waterford Place		—		1,579		10,303		11,882		1,152		1,703		11,331		13,034		2,757		1985		04/15/98
Atlanta, GA		16,886		11,647		46,022		57,669		17,935		13,864		61,740		75,604		25,435
Gable Hill		—		825		5,307		6,132		1,901		1,197		6,836		8,033		3,707		1985		12/04/89
St. Andrews Commons		—		1,429		9,371		10,800		2,257		1,925		11,132		13,057		5,214		1986		05/20/93
Forestbrook		—		396		2,902		3,298		2,094		577		4,815		5,392		2,956		1974		07/01/93
Waterford		—		958		6,948		7,906		2,091		1,325		8,672		9,997		3,671		1985		07/01/94
Hampton Greene		—		1,363		10,118		11,481		2,050		2,014		11,517		13,531		4,662		1990		08/19/94
Rivergate		—		1,122		12,056		13,178		1,797		1,492		13,483		14,975		4,342		1989		08/15/96
Columbia, SC		—		6,093		46,702		52,795		12,190		8,530		56,455		64,985		24,552
Greentree		12,455		1,634		11,227		12,861		4,994		2,464		15,391		17,855		6,816		1986		07/22/94
Westland		—		1,835		14,865		16,700		4,667		2,717		18,650		21,367		7,531		1990		05/09/96
Antlers		—		4,034		11,193		15,227		6,802		4,925		17,104		22,029		7,282		1985		05/28/96
Jacksonville, FL		12,455		7,503		37,285		44,788		16,463		10,106		51,145		61,251		21,629
Forest Lake at Oyster Point		—		780		8,862		9,642		2,601		1,209		11,034		12,243		4,455		1986		08/15/95
Woodscape		—		799		7,209		8,008		3,420		1,870		9,558		11,428		5,826		1974/76		12/29/87
Eastwind		—		155		5,317		5,472		2,648		430		7,690		8,120		3,721		1970		04/04/88
Dominion Waterside at Lynnhaven		—		1,824		4,107		5,931		2,666		2,058		6,539		8,597		2,369		1966		08/15/96
Heather Lake		—		617		3,400		4,017		4,604		1,048		7,573		8,621		5,572		1972/74		03/01/80
Dominion Yorkshire Downs		9,118		1,089		8,582		9,671		1,504		1,307		9,868		11,175		2,624		1987		12/23/97
Norfolk, VA		9,118		5,264		37,477		42,741		17,443		7,922		52,262		60,184		24,567


UNITED DOMINION REALTY TRUST, INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
									Cost of
									Improvements			Gross Amount at Which
			Initial Costs						Capitalized			Carried at Close of Period
							Total		Subsequent
			Land and		Buildings		Initial		to Acquisition			Land and		Buildings		Total		Accumulated
			Land		and		Acquisition		(Net of			Land		and		Carrying		Depreciation		Date of
	Encumbrances		Improvements		Improvements		Costs		Disposals)			Improvements		Improvements		Value(A)		(B)		Construction		Date Acquired

Oak Park		16,787		3,966		22,228		26,194		1,149			5,578		21,765		27,343		7,776		1982/98		12/31/96
Catalina		—		1,543		5,632		7,175		1,334			1,693		6,816		8,509		2,184		1982		12/31/96
Wimbledon Court		—		1,809		10,930		12,739		2,814			2,877		12,676		15,553		3,912		1983		12/31/96
Oak Forest		22,446		5,631		23,294		28,925		11,335			6,459		33,801		40,260		11,552		1996/98		12/31/96
Oaks of Lewisville		11,444		3,727		13,563		17,290		4,462			4,566		17,186		21,752		6,388		1983		03/27/97
Parc Plaza		—		1,684		5,279		6,963		1,909			2,184		6,688		8,872		2,571		1986		10/30/97
Mandolin		—		4,223		27,910		32,133		4,322			6,336		30,119		36,455		5,304		2001		12/28/01
Inn at Los Patios		—		3,005		11,545		14,550		(1,491	)		3,005		10,054		13,059		2,101		1990		08/15/98
Turtle Creek		—		1,913		7,087		9,000		1,487			2,220		8,267		10,487		2,722		1985		12/31/96
Shadow Lake		—		2,524		8,976		11,500		2,324			2,851		10,973		13,824		3,669		1984		12/31/96
Other Southwestern		50,677		30,025		136,444		166,469		29,645			37,769		158,345		196,114		48,179
Mallards of Wedgewood		—		959		6,865		7,824		2,299			1,263		8,860		10,123		3,581		1985		07/27/95
Riverbridge		44,873		15,968		56,400		72,368		72			15,968		56,472		72,440		285		1999/01		12/01/04
The Groves		—		790		4,767		5,557		2,104			1,472		6,189		7,661		2,828		1989		12/13/95
Lakeside		—		2,404		6,420		8,824		1,634			2,588		7,870		10,458		2,629		1985		07/01/97
Mallards of Brandywine		—		766		5,408		6,174		1,696			992		6,878		7,870		2,348		1985		07/01/97
LakePointe		—		1,435		4,940		6,375		3,079			1,799		7,655		9,454		3,852		1984		09/24/93
Other Florida		44,873		22,322		84,800		107,122		10,884			24,082		93,924		118,006		15,523
Colony Village		—		347		3,037		3,384		2,357			580		5,161		5,741		3,703		1972/74		12/31/84
Brynn Marr		—		433		3,821		4,254		2,900			732		6,422		7,154		4,562		1973/77		12/31/84
Liberty Crossing		—		840		3,873		4,713		3,640			1,493		6,860		8,353		4,681		1972/74		11/30/90
Bramblewood		—		402		3,151		3,553		1,965			589		4,929		5,518		3,404		1980/82		12/31/84
Cumberland Trace		—		632		7,896		8,528		1,830			742		9,616		10,358		3,021		1973		08/15/96
Village at Cliffdale		12,434		941		15,498		16,439		1,781			1,200		17,020		18,220		5,264		1992		08/15/96
Morganton Place		—		819		13,217		14,036		927			895		14,068		14,963		4,071		1994		08/15/96
Woodberry		—		389		6,381		6,770		1,592			1,009		7,353		8,362		2,713		1987		08/15/96
Other North Carolina		12,434		4,803		56,874		61,677		16,992			7,240		71,429		78,669		31,419
Brittingham Square		—		650		4,962		5,612		1,109			834		5,887		6,721		2,142		1991		05/04/95
Greens at Schumaker Pond		—		710		6,118		6,828		1,353			889		7,292		8,181		2,669		1988		05/04/95
Greens at Cross Court		—		1,182		4,544		5,726		1,506			1,404		5,828		7,232		2,206		1987		05/04/95
Greens at Hilton Run		16,770		2,755		10,483		13,238		2,260			3,127		12,371		15,498		4,543		1988		05/04/95
Dover Country		—		2,008		6,365		8,373		3,059			2,377		9,055		11,432		4,161		1970		07/01/94
Greens at Cedar Chase		—		1,528		4,831		6,359		954			1,722		5,591		7,313		2,169		1988		05/04/95
Other Mid- Atlantic		16,770		8,833		37,303		46,136		10,241			10,353		46,024		56,377		17,890
Greens at Falls Run		—		2,731		5,300		8,031		1,681			2,925		6,787		9,712		2,386		1989		05/04/95
Manor at England Run		14,671		3,195		13,505		16,700		13,623			4,928		25,395		30,323		8,357		1990		05/04/95
Greens at Hollymead		—		965		5,250		6,215		1,021			1,095		6,141		7,236		2,237		1990		05/04/95
Other Virginia		14,671		6,891		24,055		30,946		16,325			8,948		38,323		47,271		12,980


UNITED DOMINION REALTY TRUST, INC.
SCHEDULE III — REAL ESTATE OWNED — (Continued)
									Cost of
									Improvements		Gross Amount at Which
			Initial Costs						Capitalized		Carried at Close of Period
							Total		Subsequent
			Land and		Buildings		Initial		to Acquisition		Land and		Buildings		Total		Accumulated
			Land		and		Acquisition		(Net of		Land		and		Carrying		Depreciation		Date of
	Encumbrances		Improvements		Improvements		Costs		Disposals)		Improvements		Improvements		Value(A)		(B)		Construction		Date Acquired

Patriot Place		—		213		1,601		1,814		5,956		1,516		6,254		7,770		4,517		1974		10/23/85
The Trails at Mount Moriah		16,368		5,931		22,095		28,026		5,193		6,523		26,696		33,219		7,193		1990		01/09/98
Other Southeastern		16,368		6,144		23,696		29,840		11,149		8,039		32,950		40,989		11,710
Washington Park		—		2,011		7,565		9,576		1,338		2,152		8,762		10,914		2,188		1998		12/07/98
Fountainhead		—		391		1,420		1,811		330		406		1,735		2,141		496		1966		12/07/98
Jamestown of Toledo		5,767		1,800		7,054		8,854		1,611		1,954		8,511		10,465		2,141		1965		12/07/98
Other Midwestern		5,767		4,202		16,039		20,241		3,279		4,512		19,008		23,520		4,825$

TOTAL APARTMENTS	$	1,194,132	$	1,016,526	$	3,262,333	$	4,278,859	$	741,185	$	1,193,492	$	3,826,552	$	5,020,044	$	976,817


									Cost of
									Improvements			Gross Amount at
									Capitalized			Which Carried at Close of
			Initial Costs						Subsequent			Period
							Total		to
			Land and		Buildings		Initial		Acquisition			Land and		Buildings				Total
			Land		and		Acquisition		(Net of			Land		and				Carrying		Accumulated		Date of		Date
	Encumbrances		Improvements		Improvements		Costs		Disposals)			Improvements		Improvements				Value(A)		Depreciation(B)		Construction		Acquired

REAL ESTATE HELD FOR DISPOSITION
Apartments
Park Trails	$	—	$	1,145	$	4,105	$	5,250	$	1,627		$	1,283	$	5,594			$	6,877	$	1,889		1983		12/31/96
Briar Park		—		329		2,794		3,123		329			370		3,082				3,452		763		1987		03/27/98
Clear Lake Falls		—		1,090		4,534		5,624		485			1,180		4,929				6,109		1,238		1980		03/27/98
Nantucket Square		—		1,068		4,833		5,901		(281	)		1,090		4,530				5,620		1,083		1983		03/27/98
The Gallery		—		769		3,359		4,128		321			802		3,647				4,449		825		1968		03/27/98
Breakers		—		1,527		5,298		6,825		2,959			1,932		7,852				9,784		2,787		1985		09/26/97
Riverway		—		523		2,828		3,351		403			577		3,177				3,754		930		1985		03/27/98
Northpark Village		—		1,519		13,537		15,056		2,450			1,893		15,613				17,506		4,569		1983		03/27/98
Stonegate		—		735		7,940		8,675		1,298			924		9,049				9,973		2,558		1978		03/27/98
Woodland Park		—		3,017		6,706		9,723		1,283			3,273		7,733				11,006		2,689		1979		06/09/98
The Grand Resort		—		8,884		35,706		44,590		18,302			11,996		50,896				62,892		9,827		1971		12/07/98
UDR Harding Park, Inc.		—		2,670		4,330		7,000		(4,332	)		2,670		(2	)			2,668		78		1984		12/07/98
																	��
Total Apartments		—		23,276		95,970		119,246		24,844			27,990		116,100				144,090		29,236

Land
Fossil Creek		—		3,932		—		3,932		—			3,684		248				3,932		—

	$	—	$	27,208	$	95,970	$	123,178	$	24,844		$	31,674	$	116,348			$	148,022	$	29,236

REAL ESTATE UNDER DEVELOPMENT
Apartments
Mandalay on the Lake	$	—	$	3,009	$	2,067	$	5,076	$	4,763		$	3,009	$	6,830			$	9,839	$	—
Verano at Town Square		—		13,557		3,645		17,202		10,445			13,557		14,090				27,647		—
2000 Post III		—		1,756		780		2,536		219			1,756		999				2,755		—

Total Apartments		—		18,322		6,492		24,814		15,427			18,322		21,919				40,241		—

Land
Copper Mill Phase II		—		837		—		837		—			719		118				837		—
Parker’s Landing Phase II		—		1,192		—		1,192		—			1,116		76				1,192		—
Ridgeview Phase I		—		3,099		—		3,099		—			2,433		666				3,099		—
Ridgeview Phase II		—		2,092		—		2,092		—			1,843		249				2,092		—
Mountain View Phase II		—		220		—		220		—			220		—				220		—
Presidio		—		1,343		—		1,343		—			1,300		43				1,343		—
UDR/ Pacific Los Alisos, LP		—		16,731		—		16,731		—			16,313		418				16,731		—
Ridgeview Townhomes		—		2		—		2		1			—		3				3		—

Total Land		—		25,516		—		25,516		1			23,944		1,573				25,517		—

	$	—	$	43,838	$	6,492	$	50,330	$	15,428		$	42,266	$	23,492			$	65,758	$	—

COMMERCIAL HELD FOR INVESTMENT
Hanover Village	$	—	$	1,624	$	—	$	1,624	$	—		$	1,104	$	520			$	1,624	$	491		—		06/30/86
The Calvert		—		34		1,597		1,631		1			327		1,305				1,632		84		1962		11/26/03

Total Commercial		—		1,658		1,597		3,255		1			1,431		1,825				3,256		575

Richmond Corporate		3,792		245		6,352		6,597		(381	)		277		5,939				6,216		1,259		1999		11/30/99

	$	3,792	$	1,903	$	7,949	$	9,852	$	(380	)	$	1,708	$	7,764			$	9,472	$	1,834

TOTAL REAL ESTATE OWNED	$	1,197,924	$	1,089,475	$	3,372,744	$	4,462,219	$	781,077		$	1,269,140	$	3,974,156			$	5,243,296	$	1,007,887


(A)	The aggregate cost for federal income tax purposes was approximately $4.5 billion at December 31, 2004.


(B)	The depreciable life for buildings is 35 years.

EXHIBIT INDEX

The exhibits listed below are filed as part of this Report. References under the caption “Location” to exhibits, forms, or other filings indicate that the form or other filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that the exhibit referred to is incorporated by reference. The Commission file number for our Exchange Act filings referenced below is 1-10524.


Exhibit			Description	Location

	2	.01	Agreement and Plan of Merger dated as of December 19, 1997, between the Company, ASR Investment Corporation and ASR Acquisition Sub, Inc.	Exhibit 2(a) to the Company’s Form S-4 Registration Statement (Registration No. 333-45305) filed with the Commission on January 30, 1998.
	2	.02	Agreement of Plan of Merger dated as of September 10, 1998, between the Company and American Apartment Communities II, Inc. including as exhibits thereto the proposed terms of the Series D Preferred Stock and the proposed form of Investment Agreement between the Company, United Dominion Realty, L.P., American Apartment Communities II, Inc., American Apartment Communities Operating Partnership, L.P., Schnitzer Investment Corp., AAC Management LLC and LF Strategic Realty Investors, L.P.	Exhibit 2(c) to the Company’s Form S-3 Registration Statement (Registration No. 333-64281) filed with the Commission on September 25, 1998.
	2	.03	Partnership Interest Purchase and Exchange Agreement dated as of September 10, 1998, between the Company, United Dominion Realty, L.P., American Apartment Communities Operating Partnership, L.P., AAC Management LLC, Schnitzer Investment Corp., Fox Point Ltd. and James D. Klingbeil including as an exhibit thereto the proposed form of the Third Amended and Restated Limited Partnership Agreement of United Dominion Realty, L.P.	Exhibit 2(d) to the Company’s Form S-3 Registration Statement (Registration No. 333-64281) filed with the Commission on September 25, 1998.
	2	.04	Articles of Merger between the Company and United Dominion Realty Trust, Inc., a Virginia corporation, filed with the State Department of Assessments and Taxation of the State of Maryland.	Exhibit 2.01 to the Company’s Current Report on Form 8-K dated and filed with the Commission on June 11, 2003.
	2	.05	Articles of Merger between the Company and United Dominion Realty Trust, Inc., a Virginia corporation, filed with the State Corporation Commission of the Commonwealth of Virginia.	Exhibit 2.02 to the Company’s Current Report on Form 8-K dated and filed with the Commission on June 11, 2003.
	2	.06	Agreement of Purchase and Sale dated as of August 13, 2004, by and between United Dominion Realty, L.P., a Delaware limited partnership, as Buyer, and Essex The Crest, L.P., a California limited partnership, Essex El Encanto Apartments, L.P., a California limited partnership, Essex Hunt Club Apartments, L.P., a California limited partnership, and the other signatories named as Sellers therein.	Exhibit 2.1 to the Company’s Current Report on Form 8-K dated September 28, 2004 and filed with the Commission on September 29, 2004.


Exhibit			Description	Location

	2	.07	First Amendment to Agreement of Purchase and Sale dated as of September 29, 2004, by and between United Dominion Realty, L.P., a Delaware limited partnership, as Buyer, and Essex The Crest, L.P., a California limited partnership, Essex El Encanto Apartments, L.P., a California limited partnership, Essex Hunt Club Apartments, L.P., a California limited partnership, and the other signatories named as Sellers therein.	Exhibit 2.2 to the Company’s Current Report on Form 8-K dated September 29, 2004 and filed with the Commission on October 5, 2004.
	2	.08	Second Amendment to Agreement of Purchase and Sale dated as of October 26, 2004, by and between United Dominion Realty, L.P., a Delaware limited partnership, as Buyer, and Essex The Crest, L.P., a California limited partnership, Essex El Encanto Apartments, L.P., a California limited partnership, Essex Hunt Club Apartments, L.P., a California limited partnership, and the other signatories named as Sellers therein.	Exhibit 2.3 to the Company’s Current Report on Form 8-K/A dated September 29, 2004 and filed with the Commission on November 1, 2004.
	3	.01	Amended and Restated Articles of Incorporation.	Exhibit A to Exhibit 2.01 to the Company’s Current Report on Form 8-K dated and filed with the Commission on June 11, 2003.
	3	.02	Amended and Restated Bylaws (as amended through May 4, 2004).	Filed herewith.
	4	.01	Specimen Common Stock Certificate.	Exhibit 4(i) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1993.
	4	.02	Form of Certificate for Shares of 8.60% Series B Cumulative Redeemable Preferred Stock.	Exhibit I(e) to the Company’s Form 8-A Registration Statement dated June 11, 1997.
	4	.03	Form of Rights Certificate.	Exhibit 4(e) to the Company’s Registration Statement on Form 8-A dated February 4, 1998.
	4	.04	First Amended and Restated Rights Agreement dates as of September 14, 1999, between the Company and ChaseMellon Shareholders Services, L.L.C., as Rights Agent.	Exhibit 4(i)(d)(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.
	4	.05	Note Purchase Agreement dated as of February 15, 1993, between the Company and CIGNA Property the Company and CIGNA Property and Casualty Insurance Company, Connecticut General Life Insurance Company, on behalf of one or more separate accounts, Insurance Company of North America, Principal Mutual Life Insurance Company and Aid Association for Lutherans.	Exhibit 6(c)(5) to the Company’s Form 8-A Registration Statement dated April 19, 1990.
	4	.06	Senior Indenture dated as of November 1, 1995.	Exhibit 4(ii)(h)(1) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.


Exhibit			Description	Location

	4	.07	Supplemental Indenture dated as of June 11, 2003.	Exhibit 4.03 to the Company’s Current Report on Form 8-K dated June 17, 2004 and filed with the Commission on June 18, 2004.
	4	.08	Subordinated Indenture dated as of August 1, 1994.	Exhibit 4(i)(m)to the Company’s Form S-3 Registration Statement (Registration No. 33-64725) filed with the Commission on November 15, 1995.
	4	.09	Form of Senior Debt Security.	Exhibit 4(i)(n) to the Company’s Form S-3 Registration Statement (Registration No. 33-64725) filed with the Commission on November 15, 1995.
	4	.10	Form of Subordinated Debt Security.	Exhibit 4(i)(o) to the Company’s Form S-3 Registration Statement (Registration No. 33-55159) filed with the Commission on August 19, 1994.
	4	.11	Form of Fixed Rate Medium-Term Note.	Exhibit 4.01 to the Company’s Current Report on Form 8-K dated June 17, 2004 and filed with the Commission on June 18, 2004.
	4	.12	Form of Floating Rate Medium-Term Note.	Exhibit 4.02 to the Company’s Current Report on Form 8-K dated June 17, 2004 and filed with the Commission on June 18, 2004.
	4	.13	6.50% Notes due 2009.	Exhibit 4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
	4	.14	4.50% Medium-Term Notes due March 2008.	Exhibit 4.13 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, and Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
	4	.15	5.13% Medium-Term Note due January 2014.	Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, and Exhibits 4.1 and 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
	4	.16	4.25% Medium-Term Note due January 2009.	Exhibit 4.15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.
	4	.17	4.30% Medium-Term Note due July 2007.	Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.
	4	.18	3.90% Medium-Term Note due March 2010.	Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
	4	.19	5.00% Medium-Term Notes due January 2012.	Filed herewith.
	4	.20	4.30% Medium-Term Note due July 2007.	Filed herewith.
	4	.21	5.25% Medium-Term Note due January 2015, issued November 1, 2004.	Filed herewith.
	4	.22	5.25% Medium-Term Note due January 2015, issued February 14, 2005.	Filed herewith.


Exhibit			Description	Location

	4	.23	5.25% Medium-Term Note due January 2015, issued March 8, 2005.	Filed herewith.
	4	.24	Registration Rights Agreement dated June 12, 2003 between the Company and the holders of the Series E Cumulative Convertible Preferred Stock.	Exhibit 4.5 to the Company’s Form S-3 Registration Statement (Registration No. 333-106959) filed with the Commission on October 20, 2003.
	4	.25	Investment Agreement dated as of August 14, 2001 between the Company and Security Capital Preferred Growth Incorporated.	Exhibit 4.6 to the Company’s Form S-3 Registration Statement (Registration No. 333-86808) filed with the Commission on April 23, 2002.
	4	.26	Registration Rights Agreement dated June 12, 2003 by and among the Company and the Initial Holders of OP Units.	Exhibit 4.3 to the Company’s Form S-3 Registration Statement (Registration No. 333-116804) filed with the Commission on October 19, 2004.
	10	.01	1985 Stock Option Plan, as amended.	Exhibit 10(iv) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
	10	.02	1991 Stock Purchase and Loan Plan.	Exhibit 10(viii) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
	10	.03	Third Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of December 7, 1998.	Exhibit 10(vi) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998.
	10	.04	Subordination Agreement dated April 16, 1998, between the Company and United Dominion Realty, L.P.	Exhibit 10(vi)(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
	10	.05	First Amendment to Third Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P.	Exhibit 10(vii)(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.
	10	.06	Servicing and Purchase Agreement dated as of June 24, 1999, including as an exhibit thereto the Note and Participation Agreement forms.	Exhibit 10(vii) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.
	10	.07	Form of Restricted Stock Awards.	Exhibit 99.6 to the Company’s Current Report on Form 8-K dated December 31, 2004 and filed with the Commission on January 11, 2005.
	10	.08	Description of United Dominion Realty Trust, Inc. Shareholder Value Plan.	Exhibit 10(x) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999.
	10	.09	Description of United Dominion Realty Trust, Inc. Executive Deferral Plan.	Exhibit 10(xi) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999.
	10	.10	Retirement Agreement and Covenant Not to Compete between the Company and John P. McCann dated March 20, 2001.	Exhibit 10(xv) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
	10	.11	Description of Series A Out-Performance Program.	Exhibit 10(xvii) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.


Exhibit			Description	Location

	10	.12	1999 Long-Term Incentive Plan (as amended and restated through July 22, 2004).	Exhibit 99.5 to the Company’s Current Report on Form 8-K dated December 31, 2004 and filed with the Commission on January 11, 2005.
	10	.13	Second Amendment to Third Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P.	Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
	10	.14	Third Amendment to Third Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P.	Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
	10	.15	Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P.	Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
	10	.16	First Amendment of Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P.	Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
	10	.17	Second Amendment to Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P.	Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
	10	.18	Credit Agreement dated as of November 14, 2000, between the Company and certain subsidiaries and a syndicate of banks represented by First Union National Bank.	Exhibit 4(ii)(g) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000.
	10	.19	Credit Agreement dated as of August 14, 2001, between the Company and certain subsidiaries and ARCS Commercial Mortgage Company, L.P., as Lender.	Exhibit 4(ii)(g) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.
	10	.20	Credit Agreement dated as of December 12, 2001, between the Company and certain subsidiaries and ARCS Commercial Mortgage Company, L.P., as Lender.	Exhibit 4(ii)(h) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.
	10	.21	Credit Agreement dated March 14, 2003 between the Company, Wachovia Securities, Inc. and J.P. Morgan Securities, Inc., as Joint Lead Arrangers/ Joint Bookrunners, JPMorgan Chase Bank and Bank One, NA, as Syndication Agents, Wells Fargo Bank, National Association and KeyBank National Association, as Documentation Agents, SunTrust Bank, Citicorp North America, Inc. and SouthTrust Bank, as Co-Agents, and each of the financial institutions initially a signatory thereto together with their assignees.	Exhibit 99.1 to the Company’s Current Report on Form 8-K dated March 14, 2003 and filed on April 3, 2003.
	10	.22	Description of Series B Out-Performance Program.	Exhibit 10.22 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.
	10	.23	Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 23, 2004.	Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.
	10	.24	Employment Agreement of Richard A. Giannotti dated December 8, 1998.	Filed herewith.


Exhibit			Description	Location

	10	.25	Compensation Summary.	Filed herewith.
	12		Computation of Ratio of Earnings to Fixed Charges.	Filed herewith.
	21		Subsidiaries.	Filed herewith.
	23		Consent of Independent Registered Public Accounting Firm	Filed herewith.
	31	.1	Rule 13a-14(a) Certification of the Chief Executive Officer.	Filed herewith.
	31	.2	Rule 13a-14(a) Certification of the Chief Financial Officer.	Filed herewith.
	32	.1	Section 1350 Certification of the Chief Executive Officer.	Filed herewith.
	32	.2	Section 1350 Certification of the Chief Financial Officer.	Filed herewith.

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UDR (UDR) 10-K2004 FY Annual report

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