UDR 10K 2005 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, 2005


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		(I.R.S. Employer
incorporation or organization)		Identification No.)

1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado 80129
(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code:(720) 283-6120

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


Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $0.01 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 checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yesþ Noo

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yeso Noþ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filerþ Accelerated filero Non-accelerated filero

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

The aggregate market value of the shares of common stock held by non-affiliates on June 30, 2005 was approximately $3.3 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 February 24, 2006 there were 134,286,524 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 2, 2006.

TABLE OF CONTENTS


		PAGE
PART I.

Item 1.	Business		2
Item 1A.	Risk Factors		11
Item 1B.	Unresolved Staff Comments		16
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		22
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		37
Item 8.	Financial Statements and Supplementary Data		37
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		37
Item 9A.	Controls and Procedures		37
Item 9B.	Other Information		38

PART III.

Item 10.	Directors and Executive Officers of the Registrant		38
Item 11.	Executive Compensation		38
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		38
Item 13.	Certain Relationships and Related Transactions		39
Item 14.	Principal Accountant Fees and Services		39

PART IV.

Item 15.	Exhibits, Financial Statement Schedules		39
Amended and Restated Bylaws
Computation of Ratio of Earnings to Fixed Charges
Subsidiaries
Consent of Independent Registered Public Accounting Firm
Rule 13a-14(a) Certification of the CEO
Rule 13a-14(a) Certification of the CFO
Section 1350 Certification of the CEO
Section 1350 Certification of the CFO

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 apartment communities nationwide. At December 31, 2005, our apartment portfolio included 259 communities located in 43 markets, with a total of 74,875 completed apartment homes. In addition, we had five apartment communities under development.

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 which, among other things, generally require that our assets consist primarily of real estate assets, our income be derived primarily from real estate assets, 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 U.S. federal income taxes at the corporate level on our net income to the extent we distribute such net income to our stockholders. In 2005, we declared total distributions of $1.20 per share to our stockholders, which represents our 29th 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 February 24, 2006, we had 1,900 full-time employees and 136 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.

2005 Accomplishments

	•		We increased our dividend for the 29th consecutive year.

	•		We completed over $1.5 billion of capital transactions in 2005.

	•		We amended our credit facility and extended its term for an additional two years, thereby reducing our costs.

	•		We acquired 2,561 apartment homes in eight communities for approximately $390.9 million and one parcel of land for $2.9 million.

	•		We completed the disposition of 22 apartment communities with 6,352 apartment homes for an aggregate sales price of approximately $387.2 million and one parcel of land for $0.9 million. In addition, we sold 240 condominiums within five communities for a total of $69.1 million and our investment in an unconsolidated joint venture for $39.2 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 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 2005, using the proceeds from our disposition program, as well as equity and debt offerings, we acquired eight communities with 2,561 apartment homes at a total cost of approximately $390.9 million, including the assumption of secured debt. In addition, we purchased one parcel of land for $2.9 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):


	2005		2004		2003		2002		2001
Homes acquired		2,561		8,060		5,220		4,611		1,304
Homes owned at December 31		74,875		78,855		76,244		74,480		77,567
Total real estate owned, at carrying value	$	5,512,424	$	5,243,296	$	4,351,551	$	3,967,483	$	3,907,667

Dispositions

We regularly monitor and adjust our assets to increase portfolio profitability. During 2005, we sold over 6,300 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, 2005, there were four communities with a total of 384 condominiums and two parcels 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 2005, 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 2005, we spent $49.3 million on five development projects that are expected to be completed in 2006 and 2007. Revenue enhancing capital expenditures, including kitchen and bath renovations, and other extensive interior upgrades totaled $98.6 million or $1,302 per home for the year ended December 31, 2005. In addition, we spent $18.7 million on major renovation projects that included major structural changes and/or architectural revisions to existing buildings and the wiring and/or re-plumbing of an entire building.

The following wholly owned projects were under development as of December 31, 2005:


	Number of		Completed		Cost to		Budgeted		Estimated		Expected
	Apartment		Apartment		Date		Cost		Cost		Completion
	Homes		Homes		(In thousands)		(In thousands)		Per Home		Date
Verano at Town Square		414		66	$	55,653	$	66,300	$	160,100		1Q06
Rancho Cucamonga, CA
Mandalay on the Lake		369		—		26,339		30,900		83,700		2Q06
Irving, TX
2000 Post — Phase III		24		—		4,835		9,000		375,000		2Q06
San Francisco, CA
Ridgeview		225		—		6,883		18,000		80,000		1Q07
Plano, TX
Lincoln Towne Square — Phase II		303		—		3,007		21,000		69,300		3Q07
Plano, TX

		1,335		66	$	96,717	$	145,200	$	108,800

In addition, we owned four parcels of land held for future development aggregating $20.8 million at December 31, 2005.

Financing Activities

As part of our plan to strengthen our capital structure, we utilized proceeds from dispositions, debt and equity offerings and refinancings to extend maturities, pay down existing debt, and acquire apartment communities. The following is a summary of our major financing activities in 2005:

Repaid $133.8 million of secured debt and $70.9 million of unsecured debt, and incurred $8.5 million in prepayment penalties.

	§		Sold $50 million aggregate principal amount of 5.25% senior unsecured notes due January 2015 in February 2005 under our medium-term note program. These notes represent a re-opening of the 5.25% senior unsecured notes due January 2015 that were issued in November 2004, and these notes constitute a single series of notes. The February 2005 issuance of these notes brought the aggregate principal amount of the 5.25% senior unsecured notes to $150 million. The net proceeds of approximately $50 million were used for debt repayment and to fund the acquisition of apartment communities.

	§		Sold our shares in Rent.com, a leading Internet listing web site in the apartment and rental housing industry, in February 2005. As a result, we received cash proceeds and recorded a one-time gain of $12.3 million on the sale. As part of the transaction, an additional $0.8 million was placed in escrow and will be recorded as revenue when received.

	§		Sold $50 million aggregate principal amount of 5.25% senior unsecured notes due January 2015 in March 2005 under our medium-term note program. These notes represent a re-opening of the 5.25% senior unsecured notes due January 2015 that were issued in November 2004, and these notes constitute a single series of notes. The March 2005 issuance of these notes brought the aggregate principal amount of the 5.25% senior unsecured notes to $200 million. The net proceeds of approximately $50 million were used for debt repayment and to fund the acquisition of apartment communities.

	§		Sold $50 million aggregate principal amount of 5.25% senior unsecured notes due January 2015 in May 2005 under our medium-term note program. These notes represent a re-opening of the 5.25% senior unsecured notes due January 2015 that were issued in November 2004, and these notes constitute a single series of notes. The May 2005 issuance of these notes brought the aggregate principal amount of the 5.25% senior unsecured notes to $250 million. The net proceeds of approximately $50 million were used for debt repayment and to fund the acquisition of apartment communities.

	§		Amended and restated our $500 million unsecured revolving credit facility and extended the term an additional two years. The credit facility matures on May 31, 2008, and, at our option, can be extended for an additional year. We have the right to increase the credit facility to $750 million if the initial lenders increase their commitments or we receive commitments from additional lenders. Based on our current credit ratings, the credit facility carries an interest rate equal to LIBOR plus a spread of 57.5 basis points, which represents a 12.5 basis point reduction to the previous unsecured revolver, and the facility fee was reduced from 20 basis points to 15 basis points. Under a competitive bid feature and for so long as we maintain an Investment Grade Rating, we have the right to bid out 100% of the commitment amount.

	§		Converted a $75 million variable rate debt facility to a fixed rate of 4.86% on December 1, 2005.

	§		Sold $100 million aggregate principal amount of 5.25% medium-term notes due January 2016 in September 2005 under our medium-term note program. The net proceeds of approximately $100 million were used for debt repayment.

	§		Sold $250 million aggregate principal amount of our 4.00% convertible senior notes due 2035 in December 2005. We used the net proceeds of approximately $245 million to repay outstanding debt under our unsecured revolving bank credit facility and to repurchase shares of our common stock.

	§		Repurchased 1,069,500 shares of our common stock at an average price per share of $22.08 under our common stock repurchase program and repurchased 2,110,850 shares of our common stock at an average price per share of $23.51 in connection with the offering of our 4.00% convertible senior notes due 2035. As of December 31, 2005, approximately 1.2 million shares of common stock remained available for repurchase under the common stock repurchase program.

Markets and Competitive Conditions

At December 31, 2005, we owned 259 apartment communities in 43 markets in 16 states. When comparing fourth quarter 2005 to the same period in the prior year, 84% of the portfolio generated positive revenue growth and 69% of the portfolio generated positive net operating income growth. 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.

In many 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 renters across a geographically diverse platform, should position us for continued operational improvement.

Communities

At December 31, 2005, our apartment portfolio included 259 communities having a total of 74,875 completed apartment homes. In addition, we had five 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 and rehabilitation 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 2005, same community property operating income increased 3.4% or $10.3 million compared to 2004. The increase in property operating income was primarily attributable to a 3.8% or $18.6 million increase in revenues from rental and other income that was partially offset by a 4.4% or $8.3 million increase in operating expenses. The increase in revenues from rental and other income was primarily driven by a 2.0% or $10.3 million increase in rental rates, a 20.2% or $2.9 million decrease in concession expense, a 7.5% or $2.6 million increase in utility reimbursement income and fee income, a 7.8% or $2.5 million decrease in vacancy loss, and a 15.6% or $0.4 million decrease in bad debt expense. Physical occupancy increased 0.6% to 94.5%.

The increase in property operating expenses was primarily driven by a 4.3% or $2.0 million increase in real estate taxes, a 3.8% or $1.9 million increase in personnel costs, a 3.8% or $1.1 million increase in utilities expense, a 2.9% or $0.9 million increase in repair and maintenance costs, a 4.7% or $0.8 million increase in administrative and marketing costs, a 46.7% or $0.7 million increase in incentive compensation, and a 5.4% or $0.5 million increase in insurance costs.

Customers

Our upgrade and rehabilitation programs enable us to raise rents and 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. 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 assets, our income be derived primarily from real estate assets, and that we distribute at least 90% of our REIT taxable income (other than our net capital gain) to our stockholders. Provided we maintain our qualification as a REIT, we generally will not be subject to U.S. federal income taxes at the corporate level on our net income to the extent such net income is distributed 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 utilize several taxable REIT subsidiaries to engage in activities that REITs may be prohibited from performing, including the provision of management and other services to third parties and the conduct of certain nonqualifying real estate transactions. Taxable REIT subsidiaries generally are taxable as regular corporations and therefore are subject to federal, state and local income taxes.

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

Various environmental laws govern certain aspects of the ongoing operation of our communities. Such environmental laws include those regulating the existence of asbestos-containing materials in buildings, management of surfaces with lead-based paint (and notices of residents about the lead-based paint), use of active underground petroleum storage tanks, and waste-management activities. The failure to comply with such requirements could subject us to a government enforcement action and/or claims for damages by a private party.

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. 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.

Executive Officers of the Company

The following table sets forth information about our executive officers as of March 3, 2006. The executive officers listed below serve in their respective capacities at the discretion of our board of directors.


Name	Age		Office	Since
Thomas W. Toomey		45	Chief Executive Officer -		2001
			President and Director

W. Mark Wallis		55	Senior Executive Vice President		2001

Christopher D. Genry		45	Executive Vice President — Corporate		2001
			Strategy & Chief Financial Officer

Richard A. Giannotti		50	Executive Vice President — Asset Quality		1985

Sara Jo Light		60	Executive Vice President —		2005
			Director of Talent Management

Martha R. Carlin		43	Executive Vice President —		2001
			Director of Property Operations


Name	Age		Office	Since
Lester C. Boeckel		57	Senior Vice President —		2001
			Dispositions & Acquisitions

Patrick S. Gregory		56	Senior Vice President —		1997
			Chief Information Officer

Michael J. Kelly		38	Senior Vice President —		2004
			Acquisitions

Scott A. Shanaberger		37	Senior Vice President —		1994
			Chief Accounting Officer
			& Assistant Secretary

Thomas A. Spangler		45	Senior Vice President —		1998
			Business Development
			& Chief Risk Officer

Mark E. Wood		53	Senior Vice President —		1994
			Development

Mary Ellen Norwood		51	Vice President —		2001
			Legal Administration
			& Secretary

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 and was named Executive Vice President of Corporate Strategy and Chief Financial Officer in 2005. 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. Light joined us in 2005 as Executive Vice President and Director of Talent Management. Prior to joining us, Ms. Light was the Senior Vice President and Director of Human Resources at Taubman Centers, Inc., one of the pre-eminent retail developers/owners/managers in the United States. Prior to joining Taubman, Ms. Light had over 20 years of human resource experience with various firms both in the United States and abroad.

Ms. Carlin joined us in March 2001 as a Senior Vice President responsible for operational efficiencies and revenue enhancement. She was promoted to Senior Vice President, Director of Property Operations in 2004 and to Executive Vice President, Director of Property Operations in 2005. 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. 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. 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.

NYSE Certification

On June 1, 2005, our Chief Executive Officer submitted to the New York Stock Exchange the annual certification required by Section 303A.12(a) of the NYSE Listed Company Manual regarding our compliance with NYSE corporate governance listing standards. In addition, the certifications of our Chief Executive Officer and Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act of 2002 are filed as Exhibits 31.1 and 31.2, respectively, to this Annual Report on Form 10-K for the year ended December 31, 2005.

Item 1A. RISK FACTORS

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 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.

New Acquisitions, Developments and Condominium Projects May Not Achieve Anticipated Results.We intend to continue to selectively acquire apartment communities that meet our investment criteria and to develop apartment communities for rental operations, to convert properties into condominiums and to develop condominium projects. Our acquisition, development and condominium 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,

	•		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, and

	•		an over supply of condominiums in a given market may cause a decrease in the prices at which we expect to sell condominium properties.

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. Sufficient cash flow may not be available to make all required principal payments and still satisfy our distribution requirements to maintain our status as a REIT for federal income tax purposes, and the full limits of our line of credit may not be available to us if our operating performance falls outside the constraints of our debt covenants. 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 Adversely Affect Our Cash Flow and the Market Price of Our Securities.We currently have, and expect to incur in the future, interest-bearing debt at rates that vary with market interest rates. As of December 31, 2005, we had approximately $578 million of variable rate indebtedness outstanding, which constitutes approximately 18% of our total outstanding indebtedness as of such date. An increase in interest rates would increase our interest expenses to the extent our variable rate debt is not hedged effectively, and it would increase the costs of refinancing existing indebtedness and of issuing new debt. Accordingly, higher interest rates could adversely affect cash flow and our ability to service our debt and to make distributions to security holders. 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 Would Incur Adverse Tax Consequences if We Fail to Qualify as a REIT. 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 continue to qualify as a REIT, but we may not so qualify or we may not be able to remain so qualified in the future. In addition, U.S. federal income tax laws governing REITs and other corporations and the administrative interpretations of those laws may be amended at any time, potentially with retroactive effect. Future legislation, new regulations, administrative interpretations or court decisions could adversely affect our ability to qualify as a REIT or adversely affect 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 regular corporate rates, and would not be allowed to deduct dividends paid to our stockholders in computing our taxable income. Also, unless the Internal Revenue Service granted us relief under certain statutory provisions, we would be disqualified from treatment as a REIT for the four taxable years following the year in which we first failed to qualify. The additional tax liability from the failure to qualify as a REIT would reduce or eliminate the amount of cash available for investment or distribution to our stockholders. This would likely have a significant adverse effect on the value of our securities and our ability to raise additional capital. In addition, we would no longer be required to make distributions to 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 are Subject to Certain Tax Risks.We have established several taxable REIT subsidiaries. Despite our qualification as a REIT, our taxable REIT subsidiaries must pay income tax on their taxable income. In addition, we must comply with various tests to continue to qualify as a REIT for federal income tax purposes, and our income from and investments in our taxable REIT subsidiaries generally do not constitute permissible income and investments for these tests. While we will attempt to ensure that our dealings with our taxable REIT subsidiaries will not adversely affect our REIT qualification, we cannot provide assurance that we will successfully achieve that result. Furthermore, we may be subject to a 100% penalty tax, we may jeopardize our ability to retain 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 or are otherwise not respected.

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 66 2/3% 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 represents 10% (and certain higher levels) of the voting power in electing directors will have no voting rights unless approved by a vote of two-thirds of the shares eligible to vote.

Limitations on Share Ownership and Limitations on the Ability of 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 charter contains 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.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

At December 31, 2005, our apartment portfolio included 259 communities located in 43 markets, with a total of 74,875 completed apartment homes. In addition, we had five 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, 2005.

SUMMARY OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET AT DECEMBER 31, 2005


																			Total
																	Collections		Income		Average
	Number of		Number of		Percentage of			Carrying									per		per		Home Size
	Apartment		Apartment		Carrying			Value		Encumbrances		Cost Per		Physical			Occupied		Occupied		(Square
	Communities		Homes		Value			(in thousands)		(in thousands)		Home		Occupancy			Home (a)		Home (b)		Feet)
MID-ATLANTIC REGION
Metropolitan DC		8		2,487		4.6	%	$	253,914	$	30,691	$	102,097		93.0	%	$	1,052	$	1,168		925
Raleigh, NC		11		3,663		4.0	%		218,931		63,752		59,768		93.6	%		644		671		957
Baltimore, MD		10		2,118		3.1	%		169,951		13,286		80,241		96.3	%		959		994		925
Richmond, VA		9		2,636		2.8	%		156,903		61,532		59,523		93.5	%		835		821		1,109
Greensboro, NC		8		2,123		2.0	%		110,713		—		52,149		92.7	%		581		603		981
Charlotte, NC		7		1,686		2.0	%		110,229		—		65,379		94.5	%		655		685		1,024
Wilmington, NC		6		1,868		1.8	%		98,512		—		52,737		96.3	%		691		716		952
Norfolk, VA		6		1,438		1.3	%		68,968		9,117		47,961		95.3	%		823		866		1,016
Other North Carolina		8		1,893		1.5	%		81,159		13,320		42,873		93.9	%		620		648		895
Other Mid-Atlantic		6		1,156		1.1	%		61,200		16,770		52,941		94.9	%		839		876		922
Other Virginia		3		820		0.9	%		48,888		19,462		59,620		93.6	%		975		1,004		942

WESTERN REGION
Southern California		26		7,018		19.3	%		1,062,700		230,292		151,425		93.7	%		1,194		1,262		840
Northern California		10		2,689		6.5	%		356,640		67,354		132,629		94.5	%		957		1,220		798
Seattle, WA		8		1,984		3.0	%		167,657		68,452		84,505		93.4	%		719		823		905
Monterey Peninsula, CA		7		1,568		2.6	%		140,507		—		89,609		91.8	%		915		931		724
Portland, OR		6		1,422		1.6	%		89,099		17,790		62,658		93.7	%		693		691		882

SOUTHEASTERN REGION
Tampa, FL		12		4,306		4.7	%		259,936		61,749		60,366		93.7	%		796		844		978
Orlando, FL		14		4,140		4.2	%		230,968		69,311		55,789		95.8	%		767		792		937
Nashville, TN		9		2,580		2.8	%		156,721		28,976		60,745		95.0	%		695		722		950
Jacksonville, FL		4		1,557		1.9	%		103,277		—		66,331		95.2	%		658		786		913
Atlanta, GA		6		1,426		1.4	%		78,116		18,558		54,780		92.8	%		622		668		908
Columbia, SC		6		1,584		1.2	%		67,911		—		42,873		95.3	%		611		641		838
Other Florida		6		1,737		2.2	%		118,984		44,873		68,500		96.3	%		835		884		944
Other Southeastern		2		798		0.8	%		41,610		—		52,143		94.9	%		512		527		811

SOUTHWESTERN REGION
Houston, TX		16		5,447		4.6	%		253,408		39,604		46,522		93.7	%		624		650		811
Phoenix, AZ		6		1,567		2.0	%		108,881		37,081		69,484		89.3	%		775		789		972
Arlington, TX		7		2,156		1.9	%		104,796		18,375		48,607		94.5	%		614		646		794
Denver, CO		3		1,484		1.8	%		100,142		—		67,481		91.5	%		637		674		938
Dallas, TX		4		1,383		1.7	%		96,208		51,971		69,565		96.2	%		761		787		900
Austin, TX		5		1,425		1.5	%		83,484		6,073		58,585		95.7	%		653		678		805
Other Southwestern		10		3,676		3.6	%		200,980		53,558		54,674		94.9	%		647		679		842

MIDWESTERN REGION
Columbus, OH		6		2,530		2.9	%		160,093		39,278		63,278		92.6	%		675		709		904
Other Midwestern		3		444		0.4	%		23,980		5,985		54,009		92.9	%		694		736		955

Real Estate Under Development		1		66		1.8	%		96,717		25,325		n/a		n/a			n/a		n/a		n/a
Land		n/a		n/a		0.4	%		24,774		n/a		n/a		n/a			n/a		n/a		n/a

Total Apartments (c)		259		74,875		99.9	%	$	5,506,957	$	1,112,535	$	73,549		94.1	%	$	777	$	820		903


Commercial Property		n/a		n/a		0.1	%		3,255		—		n/a		n/a			n/a		n/a		n/a
Richmond — Corporate		n/a		n/a		0.0	%		2,212		3,724		n/a		n/a			n/a		n/a		n/a

Total Real Estate Owned		259		74,875		100.0	%	$	5,512,424	$	1,116,259	$	73,549		94.1	%	$	777	$	820		903


(a)		Collections per Occupied Home represents net rental and fee income, excluding utility reimbursements, per weighted average number of homes occupied.
(b)		Total Income per Occupied Home represents total revenues per weighted average number of homes occupied.
(c)		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, 2005.

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 fiscal years. Distribution information for common stock reflects distributions declared per share for each calendar quarter and paid at the end of the following month.


	High		Low		Distributions Declared
2005
1st Quarter	$	24.75	$	20.55	$	.3000
2nd Quarter		24.15		20.57		.3000
3rd Quarter		25.97		22.70		.3000
4th Quarter		23.97		20.88		.3000

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

On February 24, 2006, the closing sale price of our common stock was $26.86 per share on the NYSE and there were 6,328 holders of record of the 134,286,524 outstanding shares of our common stock.

We have determined that, for federal income tax purposes, approximately 53% of the distributions for each of the four quarters of 2005 represented ordinary income, 18% represented long-term capital gain, 11% represented unrecaptured section 1250 gain, and 18% 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 2005 necessary for us to maintain our status as a REIT was approximately $0.57 per share. We declared total distributions of $1.20 per share of common stock for 2005.

Series E Preferred Stock

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.

Distributions declared on the Series E in 2005 were $1.33 per share or $0.3322 per quarter. The Series E is not listed on any exchange. At December 31, 2005 a total of 2,803,812 shares of the Series E were outstanding.

Series F Preferred Stock

We are authorized to issue up to 20,000,000 shares of our Series F Preferred Stock. Our Series F Preferred Stock may be purchased by holders of our operating partnership units, or OP Units, described below under “Operating Partnership Units,” at a purchase price of $0.0001 per share. OP Unitholders are entitled to subscribe for and purchase one share of our Series F Preferred Stock for each OP Unit held. As of February 24, 2006, we have not issued any shares of our Series F Preferred Stock. If we issue shares of our Series F Preferred Stock, the holders thereof will be entitled to one vote for each share of the Series F Preferred Stock they hold, voting together with the holders of our common stock, on each matter submitted to a vote of securityholders at a meeting of our stockholders. The Series F Preferred Stock does not entitle its holders to any other rights, privileges or preferences.

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 Cumulative Redeemable 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 February 24, 2006, there were 3,547 participants in the plan.

Operating Partnership Units

From time to time we issue shares of our common stock in exchange for 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, 2005, there were 10,177,792 OP Units (of which 1,764,662 are owned by the holders of the Series A OPPS (see Note 1 in the Notes to Consolidated Financial Statements)) and 338,628 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 2005, we issued a total of 99,573 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, 2005, we have repurchased a total of 9,526,263 shares of common stock under this program. We repurchased a total of 1,069,500 shares of our common stock under this program during the quarter ended December 31, 2005. In addition, we repurchased 2,110,850 shares of our common stock in December 2005 at an average purchase price per share of $23.51 in connection with our offering of $250 million aggregate principal amount of our 4.00% convertible senior notes due 2035. We will not repurchase any additional shares of common stock in connection with the notes offering. Information regarding the offering of our 4.00% convertible senior notes due 2035 and the repurchase of our common stock in connection with the offering is set forth in our Current Report on Form 8-K dated December 13, 2005, and filed with the SEC on December 19, 2005, and our Current Report on Form 8-K dated and filed with the SEC on December 23, 2005.

The following table sets forth certain information regarding our common stock repurchases during the quarter ended December 31, 2005:


					Total Number of Shares		Maximum Number of
	Total Number		Average		Purchased as Part of		Shares that May Yet Be
	of Shares		Price Per		Publicly Announced		Purchased Under the
Period	Purchased		Share		Plans or Programs		Plans or Programs
October 1, 2005 through October 31, 2005		398,500	$	21.58		398,500		1,851,737
November 1, 2005 through November 30, 2005		378,000	$	21.72		378,000		1,473,737
December 1, 2005 through December 31, 2005		2,403,850	$	23.48		2,403,850		1,180,737	*

Total		3,180,350	$	23.03		3,180,350

* This number reflects the number of shares that were available for purchase under our repurchase program on December 31, 2005. On February 10, 2006, our board of directors authorized a repurchase program pursuant to which we may repurchase up to a total of 10,000,000 shares of our common stock in open market purchases, block purchases, privately negotiated transactions or otherwise. This repurchase program replaces our previous repurchase program discussed above.

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, 2005. 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.


	Years ended December 31,
	2005			2004			2003			2002			2001
	(in thousands, except per share data and apartment homes owned)
Operating Data(a)
Rental income	$	680,553		$	572,408		$	509,555		$	487,129		$	453,215
Income/(loss) before minority interests and discontinued operations		18,590			24,548			23,305			(15,289	)		1,773
Income from discontinued operations, net of minority interests		136,864			72,731			46,216			67,214			59,904
Net income		155,166			97,152			70,404			53,229			61,828
Distributions to preferred stockholders		15,370			19,531			26,326			27,424			31,190
Net income available to common stockholders		139,796			71,892			24,807			25,805			27,142
Common distributions declared		163,690			152,203			134,876			118,888			108,956
Weighted average number of common shares outstanding — basic		136,143			128,097			114,672			106,078			100,339
Weighted average number of common shares outstanding — diluted		137,013			128,097			114,672			106,078			100,339
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted		150,141			145,842			136,975			127,838			120,728
Per share — basic:
Income/(loss) from continuing operations available to common stockholders, net of minority interests	$	0.02		$	(0.01	)	$	(0.18	)	$	(0.39	)	$	(0.33	)
Income from discontinued operations, net of minority interests		1.01			0.57			0.40			0.63			0.60
Net income available to common stockholders		1.03			0.56			0.22			0.24			0.27
Per share — diluted:
Income/(loss) from continuing operations available to common stockholders, net of minority interests	$	0.02		$	(0.01	)	$	(0.18	)	$	(0.39	)	$	(0.33	)
Income from discontinued operations, net of minority interests		1.00			0.57			0.40			0.63			0.60
Net income available to common stockholders		1.02			0.56			0.22			0.24			0.27
Common distributions declared		1.20			1.17			1.14			1.11			1.08
Balance Sheet Data
Real estate owned, at carrying value	$	5,512,424		$	5,243,296		$	4,351,551		$	3,967,483		$	3,907,667
Accumulated depreciation		1,123,829			1,007,887			896,630			748,733			646,366
Total real estate owned, net of accumulated depreciation		4,388,595			4,235,409			3,454,921			3,218,750			3,261,301
Total assets		4,541,593			4,332,001			3,543,643			3,276,136			3,348,091
Secured debt		1,116,259			1,197,924			1,018,028			1,015,740			974,177
Unsecured debt		2,043,518			1,682,058			1,114,009			1,041,900			1,090,020
Total debt		3,159,777			2,879,982			2,132,037			2,057,640			2,064,197
Stockholders’ equity		1,107,724			1,195,451			1,163,436			1,001,271			1,042,725
Number of common shares outstanding		134,012			136,430			127,295			106,605			103,133
Other Data
*Cash Flow Data*
Cash provided by operating activities	$	248,186		$	251,747		$	234,945		$	229,001		$	224,411
Cash used in investing activities		(219,017	)		(595,966	)		(304,217	)		(67,363	)		(64,055	)
Cash (used in)/provided by financing activities		(21,530	)		347,299			70,944			(163,127	)		(166,020	)

*Funds from Operations*(b)
Funds from operations — basic	$	238,254		$	211,670		$	193,750		$	153,016		$	159,202
Funds from operations — diluted		241,980			219,557			208,431			168,795			174,630

*Apartment Homes Owned*
Total apartment homes owned at December 31		74,875			78,855			76,244			74,480			77,567
Weighted average number of apartment homes owned during the year		76,069			76,873			74,550			76,567			76,487


(a)		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.

(b)		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 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 2005, FFO includes $2.5 million of hurricane related insurance recoveries. 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 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.


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 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, 2005, our portfolio included 259 communities with 74,875 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
	As of December 31, 2005									December 31, 2005
	Number of		Number of		Percentage of			Carrying		Average			Total
	Apartment		Apartment		Carrying			Value		Physical			Income per
	Communities		Homes		Value			(in thousands)		Occupancy			Occupied Home (a)
MID-ATLANTIC REGION
Metropolitan DC		8		2,487		4.6	%	$	253,914		93.0	%	$	1,168
Raleigh, NC		11		3,663		4.0	%		218,931		93.6	%		671
Baltimore, MD		10		2,118		3.1	%		169,951		96.3	%		994
Richmond, VA		9		2,636		2.8	%		156,903		93.5	%		821
Greensboro, NC		8		2,123		2.0	%		110,713		92.7	%		603
Charlotte, NC		7		1,686		2.0	%		110,229		94.5	%		685
Wilmington, NC		6		1,868		1.8	%		98,512		96.3	%		716
Norfolk, VA		6		1,438		1.3	%		68,968		95.3	%		866
Other North Carolina		8		1,893		1.5	%		81,159		93.9	%		648
Other Mid-Atlantic		6		1,156		1.1	%		61,200		94.9	%		876
Other Virginia		3		820		0.9	%		48,888		93.6	%		1,004

WESTERN REGION
Southern California		26		7,018		19.3	%		1,062,700		93.7	%		1,262
Northern California		10		2,689		6.5	%		356,640		94.5	%		1,220
Seattle, WA		8		1,984		3.0	%		167,657		93.4	%		823
Monterey Peninsula, CA		7		1,568		2.7	%		140,507		91.8	%		931
Portland, OR		6		1,422		1.6	%		89,099		93.7	%		691

SOUTHEASTERN REGION
Tampa, FL		12		4,306		4.7	%		259,936		93.7	%		844
Orlando, FL		14		4,140		4.2	%		230,968		95.8	%		792
Nashville, TN		9		2,580		2.8	%		156,721		95.0	%		722
Jacksonville, FL		4		1,557		1.9	%		103,277		95.2	%		786
Atlanta, GA		6		1,426		1.4	%		78,116		92.8	%		668
Columbia, SC		6		1,584		1.2	%		67,911		95.3	%		641
Other Florida		6		1,737		2.2	%		118,984		96.3	%		884
Other Southeastern		2		798		0.8	%		41,610		94.9	%		527

SOUTHWESTERN REGION
Houston, TX		16		5,447		4.6	%		253,408		93.7	%		650
Phoenix, AZ		6		1,567		2.0	%		108,881		89.3	%		789
Arlington, TX		7		2,156		1.9	%		104,796		94.5	%		646
Denver, CO		3		1,484		1.8	%		100,142		91.5	%		674
Dallas, TX		4		1,383		1.7	%		96,208		96.2	%		787
Austin, TX		5		1,425		1.5	%		83,484		95.7	%		678
Other Southwestern		10		3,676		3.6	%		200,980		94.9	%		679

MIDWESTERN REGION
Columbus, OH		6		2,530		2.9	%		160,093		92.6	%		709
Other Midwestern		3		444		0.4	%		23,980		92.9	%		736

Real Estate Under Development		1		66		1.8	%		96,717		—			—
Land		—		—		0.4	%		24,774		—			—

Total		259		74,875		100.0	%	$	5,506,957		94.1	%	$	820


(a)		Total Income per Occupied Home represents total revenues per weighted average number of apartment homes occupied.

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 an indeterminate amount of common stock, preferred stock, debt securities, warrants, purchase contracts and units to facilitate future financing activities in the public capital markets. This shelf registration statement replaces our previous $1.5 billion shelf registration statement. In 2005, we completed various financing activities under our previous $1.5 billion shelf registration statement. These activities are summarized in the section titled “Financing Activities” that follows. Access to capital markets is dependent on market conditions at the time of issuance.

Future Capital Needs

Future development expenditures are expected to be funded with proceeds from the sale of property, with construction loans, through joint ventures 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 2006, we have approximately $36.6 million of secured debt and $135.2 million of unsecured debt maturing and we anticipate repaying that debt with proceeds from borrowings under our secured or unsecured credit facilities, the issuance of new unsecured debt securities or equity, or from disposition proceeds.

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 2005, $156.1 million or $2,062 per home was spent on capital expenditures for all of our communities, excluding development and commercial properties. These capital improvements included turnover related expenditures for floor coverings and appliances, other recurring capital expenditures such as HVAC equipment, roofs, siding, parking lots, and other non-revenue enhancing capital expenditures, which aggregated $38.8 million or $513 per home. In addition, revenue enhancing capital expenditures, kitchen and bath upgrades, and other extensive interior upgrades totaled $98.6 million or $1,302 per home, and major renovations totaled $18.7 million or $247 per home for the year ended December 31, 2005.

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


	Year Ended December 31,							Year Ended December 31,
	(dollars in thousands)							(per home)
	2005		2004		% Change			2005		2004		% Change
Turnover capital expenditures	$	17,916	$	16,863		6.2	%	$	237	$	220		7.7	%
Other recurring capital expenditures		20,928		19,191		9.1	%		276		250		10.4	%

Total recurring capital expenditures		38,844		36,054		7.7	%		513		470		9.2	%

Revenue enhancing improvements		98,592		45,933		114.6	%		1,302		599		117.4	%

Major renovations		18,686		261		7059.4	%		247		3		8133.3	%


Total capital improvements	$	156,122	$	82,248		89.8	%	$	2,062	$	1,072		92.4	%


Repair and maintenance		45,266		42,196		7.3	%		598		550		8.7	%

Total expenditures	$	201,388	$	124,444		61.8	%	$	2,660	$	1,622		64.0	%

Total capital improvements increased $73.9 million or $990 per home for the year ended December 31, 2005 compared to the same period in 2004. This increase was attributable to $18.7 million of major renovations at certain of our properties. These renovations included the re-wiring and/or re-plumbing of an entire building as well as major structural changes and/or architectural revisions to existing buildings. The increase was also attributable to an additional $52.7 million being invested in revenue enhancing improvements. 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 2006 are currently expected to be approximately $530 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 activities and net cash used in investing and financing activities that are presented in our Consolidated Statements of Cash Flows.

Operating Activities

For the year ended December 31, 2005, our net cash flow provided by operating activities was $248.2 million compared to $251.7 million for 2004. During 2005, the slight decrease in cash flow from operating activities resulted primarily from a $47.2 million increase in interest expense that was primarily offset by a $9.1 million net increase in operating assets/liabilities for the period, and a $32.6 million increase in property operating results from our apartment community portfolio (see discussion under “Apartment Community Operations”).

Investing Activities

For the year ended December 31, 2005, net cash used in investing activities was $219.0 million compared to $596.0 million for 2004. 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, 2005, we acquired eight apartment communities with 2,561 apartment homes for an aggregate consideration of $390.9 million and one parcel of land for $2.9 million. For 2004, we acquired 28 apartment communities with 8,060 apartment homes for an aggregate consideration of $390.9 million and one parcel of land for $16.3 million. 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 Washington DC markets over the past two years. During 2006, 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, 2005, we invested approximately $49.3 million in development projects, an increase of $30.2 million from our 2004 level of $19.1 million.

The following projects were under development as of December 31, 2005:


	Number of		Completed		Cost to		Budgeted		Estimated		Expected
	Apartment		Apartment		Date		Cost		Cost		Completion
	Homes		Homes		(In thousands)		(In thousands)		Per Home		Date
Verano at Town Square Rancho Cucamonga, CA		414		66	$	55,653	$	66,300	$	160,100		1Q06
Mandalay on the Lake Irving, TX		369		—		26,339		30,900		83,700		2Q06
2000 Post — Phase III San Francisco, CA		24		—		4,835		9,000		375,000		2Q06
Ridgeview Plano, TX		225		—		6,883		18,000		80,000		1Q07
Lincoln Towne Square — Phase II Plano, TX		303		—		3,007		21,000		69,300		3Q07

		1,335		66	$	96,717	$	145,200	$	108,800

In addition, we own four parcels of land that we continue to hold for future development that had a carrying value as of December 31, 2005 of $20.8 million.

Disposition of Investments

For the year ended December 31, 2005, United Dominion sold 22 communities with 6,352 apartment homes and 240 condominiums from five communities with a total of 648 condominiums for a gross consideration of $456.3 million. In addition, we sold our investment in an unconsolidated joint venture for $39.2 million and one parcel of land for $0.9 million. We recognized gains for financial reporting purposes of $143.5 million on these sales. Proceeds from the sales were used primarily to reduce debt and acquire additional communities. In connection with our third quarter portfolio sale of ten communities in Texas and North Carolina, we received short-term notes of $124.7 million. These notes had maturities ranging from September 2005 to July 2006. As of December 31, 2005, the outstanding balance on these notes was $59.8 million, bearing interest at 6.75%.

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.

During 2006, 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 2006 dispositions to reduce debt, acquire communities, and fund development activity.

Financing Activities

Net cash used in financing activities during 2005 was $21.5 million compared to net cash provided by financing activities of $347.3 million in 2004. 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, 2005:

§		Repaid $133.8 million of secured debt and $70.9 million of unsecured debt, and incurred $8.5 million in prepayment penalties.

§		Sold $50 million aggregate principal amount of 5.25% senior unsecured notes due January 2015 in February 2005 under our medium-term note program. These notes represent a re-opening of the 5.25% senior unsecured

		notes due January 2015 that were issued in November 2004, and these notes constitute a single series of notes. The February 2005 issuance of these notes brought the aggregate principal amount of the 5.25% senior unsecured notes to $150 million. The net proceeds of approximately $50 million were used for debt repayment and to fund the acquisition of apartment communities.

§		Sold our shares in Rent.com, a leading Internet listing web site in the apartment and rental housing industry, in February 2005. As a result, we received cash proceeds and recorded a one-time gain of $12.3 million on the sale. As part of the transaction, an additional $0.8 million was placed in escrow and will be recorded as revenue when received.

§		Sold $50 million aggregate principal amount of 5.25% senior unsecured notes due January 2015 in March 2005 under our medium-term note program. These notes represent a re-opening of the 5.25% senior unsecured notes due January 2015 that were issued in November 2004, and these notes constitute a single series of notes. The March 2005 issuance of these notes brought the aggregate principal amount of the 5.25% senior unsecured notes to $200 million. The net proceeds of approximately $50 million were used for debt repayment and to fund the acquisition of apartment communities.

§		Sold $50 million aggregate principal amount of 5.25% senior unsecured notes due January 2015 in May 2005 under our medium-term note program. These notes represent a re-opening of the 5.25% senior unsecured notes due January 2015 that were issued in November 2004, and these notes constitute a single series of notes. The May 2005 issuance of these notes brought the aggregate principal amount of the 5.25% senior unsecured notes to $250 million. The net proceeds of approximately $50 million were used for debt repayment and to fund the acquisition of apartment communities.

§		Amended and restated our $500 million unsecured revolving credit facility and extended the term an additional two years. The credit facility matures on May 31, 2008, and, at our option, can be extended for an additional year. We have the right to increase the credit facility to $750 million if the initial lenders increase their commitments or we receive commitments from additional lenders. Based on our current credit ratings, the credit facility carries an interest rate equal to LIBOR plus a spread of 57.5 basis points, which represents a 12.5 basis point reduction to the previous unsecured revolver, and the facility fee was reduced from 20 basis points to 15 basis points. Under a competitive bid feature and for so long as we maintain an Investment Grade Rating, we have the right to bid out 100% of the commitment amount.

§		Converted a $75 million variable rate debt facility to a fixed rate of 4.86% on December 1, 2005.

§		Sold $100 million aggregate principal amount of 5.25% medium-term notes due January 2016 in September 2005 under our medium-term note program. The net proceeds of approximately $100 million were used for debt repayment.

§		Sold $250 million aggregate principal amount of our 4.00% convertible senior notes due 2035 in December 2005. We used the net proceeds of approximately $245 million to repay outstanding debt under our unsecured revolving bank credit facility and to repurchase shares of our common stock.

§		Repurchased 1,069,500 shares of our common stock at an average price per share of $22.08 under our common stock repurchase program and repurchased 2,110,850 shares of our common stock at an average price per share of $23.51 in connection with the offering of our 4.00% convertible senior notes due 2035. As of December 31, 2005, approximately 1.2 million shares of common stock remained available for repurchase under the common stock repurchase program.

Credit Facilities

We have four secured revolving credit facilities with Fannie Mae with an aggregate commitment of $860 million. As of December 31, 2005, $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. We have $363.9 million of the funded balance fixed at a weighted average interest rate of 6.1%. The remaining balance on these facilities is currently at a weighted average variable rate of 4.7%.

We have a $500 million unsecured revolving credit facility that matures in May 2008 and, at our option, can be extended an additional year. We have the right to increase the credit facility to $750 million under certain circumstances. Based on our current credit ratings, the credit facility bears interest at a rate equal to LIBOR plus 57.5 basis points. As of December 31, 2005, $210.8 million was outstanding under the credit facility leaving $289.2 million of unused capacity.

The Fannie Mae credit facility and the bank revolving credit facility are subject to customary financial covenants and limitations.

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 credit facility and our bank revolving credit facility, which totaled $292.5 million and $210.8 million, respectively, at December 31, 2005. The impact on our financial statements of refinancing fixed rate debt that matured during 2005 was immaterial.

If market interest rates for variable rate debt average 100 basis points more in 2006 than they did during 2005, our interest expense would increase, and income before taxes would decrease by $6.0 million. Comparatively, if market interest rates for variable rate debt had averaged 100 basis points more in 2005 than in 2004, our interest expense would have increased, and net income would have decreased by $7.4 million. If market rates for fixed rate debt were 100 basis points higher at December 31, 2005, the fair value of fixed rate debt would have decreased from $2.6 billion to $2.4 billion. If market interest rates for fixed rate debt were 100 basis points lower at December 31, 2005, the fair value of fixed rate debt would have increased from $2.6 billion to $2.7 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, 2005 (dollars in thousands):


	2005			2004			2003
Net income	$	155,166		$	97,152		$	70,404

Adjustments:
Distributions to preferred stockholders		(15,370	)		(19,531	)		(26,326	)
Real estate depreciation, net of outside partners’ interest		209,856			163,176			136,578
Minority interests of unitholders in operating partnership		180			(55	)		(1,497	)
Real estate depreciation related to unconsolidated entities		311			279			196

Discontinued Operations:
Real estate depreciation		2,568			17,452			26,380
Minority interests of unitholders in operating partnership		8,550			4,898			3,144
Net gains on the sale of depreciable property		(139,724	)		(52,903	)		(15,941	)
Net incremental gains on the sale of condominium homes		16,717			1,202			—
Gains on the disposition of real estate developed for sale		—			—			812


Funds from operations — basic	$	238,254		$	211,670		$	193,750


Distributions to preferred stockholders — Series D and E (Convertible)		3,726			7,887			14,681


Funds from operations — diluted	$	241,980		$	219,557		$	208,431


Weighted average number of common shares and OP Units outstanding — basic		144,689			136,852			122,589
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted		150,141			145,842			136,975

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.

Net incremental gains on the sale of condominium homes and the net incremental gain on the sale of a depreciable asset related to an unconsolidated entity are defined as net sales proceeds less a tax provision and the gross investment basis of the asset before accumulated depreciation. We consider FFO with gains/losses on the sale of condominium homes and gains/losses on the sale of depreciable assets related to an unconsolidated entity to be a meaningful supplemental measure of performance because the short-term use of funds produce a profit that differs from the traditional long-term investment in real estate for REITs.

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, 2005 (shares in thousands):


	2005			2004			2003
Weighted average number of common shares and OP units outstanding — basic		144,689			136,852			122,589
Weighted average number of OP units outstanding		(8,546	)		(8,755	)		(7,917	)

Weighted average number of common shares outstanding — basic per the Consolidated Statements of Operations		136,143			128,097			114,672


Weighted average number of common shares, OP units, and common stock equivalents outstanding — diluted		150,141			145,842			136,975
Weighted average number of OP units outstanding		(8,546	)		(8,755	)		(7,917	)
Weighted average number of incremental shares from assumed conversion of stock options		—			(897	)		(976	)
Weighted average number of Series A OPPSs outstanding		(1,778	)		(1,791	)		(1,773	)
Weighted average number of Series D preferred stock outstanding		—			(2,892	)		(10,033	)
Weighted average number of Series E preferred stock outstanding		(2,804	)		(3,410	)		(1,604	)

Weighted average number of common shares outstanding — diluted per the Consolidated Statements of Operations		137,013			128,097			114,672

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):


	2005			2004			2003
Net cash provided by operating activities	$	248,186		$	251,747		$	234,945
Net cash used in investing activities		(219,017	)		(595,966	)		(304,217	)
Net cash (used in)/provided by financing activities		(21,530	)		347,299			70,944

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

2005-vs.-2004

Net income available to common stockholders was $139.8 million ($1.02 per diluted share) for the year ended December 31, 2005, compared to $71.9 million ($0.56 per diluted share) for the year ended December 31, 2004, representing an increase of $67.9 million ($0.46 per diluted share). The increase for the year ended December 31, 2005, when compared to the same period in 2004, resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:

• $90.6 million more in gains recognized from the sale of depreciable property and an unconsolidated joint venture in 2005,

• a $32.6 million increase in apartment community operating results in 2005,

• a $14.2 million increase in non-property income in 2005,

	•		a $5.7 million decrease in premiums paid on preferred stock conversions in 2005,

	•		a $5.5 million charge recorded for hurricane related expenses in 2004,

	•		$4.2 million less in preferred stock distributions in 2005, and

	•		$2.5 million in hurricane related insurance recoveries in 2005.

These increases in income were partially offset by a $38.7 million increase in interest expense, a $31.8 million increase in real estate depreciation and amortization expense, an $8.5 million increase in losses on early debt retirement, and a $5.5 million increase in general and administrative expense in 2005 when compared to 2004.

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 apartment community 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.

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,
	2005			2004			% Change			2004			2003			% Change
Property rental income	$	700,344		$	649,952			7.8	%	$	649,952		$	613,550			5.9	%
Property operating expense*		(269,486	)		(251,697	)		7.1	%		(251,697	)		(234,478	)		7.3	%

Property operating income	$	430,858		$	398,255			8.2	%	$	398,255		$	379,072			5.1	%


Weighted average number of homes		76,069			76,873			-1.0	%		76,873			74,550			3.1	%
Physical occupancy**		94.1	%		93.6	%		0.5	%		93.6	%		93.2	%		0.4	%


*		Excludes depreciation, amortization, and property management expenses. Also excludes $5.5 million of hurricane related expenses in 2004 and $2.5 million of hurricane related insurance recoveries in 2005.

**		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):


	2005			2004			2003
Property operating income	$	430,858		$	398,255		$	379,072
Commercial operating income		1,997			512			733
Non-property income		16,849			2,608			1,068
Depreciation and amortization		(215,192	)		(184,000	)		(166,577	)
Interest		(162,723	)		(124,087	)		(117,416	)
General and administrative and property management		(44,128	)		(37,197	)		(37,499	)
Other operating expenses		(1,178	)		(1,314	)		(1,265	)
Net gains on the sale of depreciable property and an unconsolidated joint venture		143,547			52,903			15,941
Loss on early debt retirement		(8,483	)		—			—
Impairment loss on real estate and investments		—			—			(1,392	)
Hurricane related expenses		—			(5,503	)		—
Hurricane related insurance recoveries		2,457			—			—
Minority interests		(8,838	)		(5,025	)		(2,261	)

Net income per the Consolidated Statements of Operations	$	155,166		$	97,152		$	70,404

2005-vs.-2004

Same Communities

Our same communities (those communities acquired, developed, and stabilized prior to September 30, 2004 and held on December 31, 2005, which consisted of 58,840 apartment homes) provided 73% of our property operating income for the year ended December 31, 2005.

For the year ended December 31, 2005, same community property operating income increased 3.4% or $10.3 million compared to 2004. The increase in property operating income was primarily attributable to a 3.8% or $18.6 million increase in revenues from rental and other income that was partially offset by a 4.4% or $8.3 million increase in operating expenses. The increase in revenues from rental and other income was primarily driven by a 2.0% or $10.3 million increase in rental rates, a 20.2% or $2.9 million decrease in concession expense, a 7.5% or $2.6 million increase in utility reimbursement income and fee income, a 7.8% or $2.5 million decrease in vacancy loss, and a 15.6% or $0.4 million decrease in bad debt expense. Physical occupancy increased 0.6% to 94.5%.

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 0.3% to 61.5%.

Non-Mature Communities

The remaining 27% of our property operating income during 2005 was generated from communities that we classify as “non-mature communities” (primarily those communities acquired or developed in 2003, 2004 and 2005, sold properties, and those properties classified as real estate held for disposition). The 41 communities with 12,458 apartment homes that we acquired in the fourth quarter of 2003, and in 2004 and 2005, provided $87.5 million of property operating income. The 22 communities with 6,352 apartment homes and 240 condominiums sold during 2005 provided $10.0 million of property operating income. In addition, our development communities, which included 244 apartment homes constructed since January 1, 2003, provided $0.7 million of property operating income during 2005, the four communities with a total of 384 condominiums classified as real estate held for disposition provided $0.3 million of property operating income, and other non-mature communities which includes homes that are undergoing major rehabilitation, provided $17.5

million of property operating income for the year ended December 31, 2005.

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.

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.

As a result of the percentage changes in property rental income and property operating expenses, the operating margin 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.

Real Estate Depreciation and Amortization

For the year ended December 31, 2005, real estate depreciation and amortization on both continuing and discontinued operations increased $31.8 million or 17.6% compared to 2004, primarily due to the significant increase in the per home acquisition cost compared to the existing portfolio, and other capital expenditures.

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, the significant increase in the per home acquisition cost compared to the existing portfolio, and other capital expenditures.

Interest Expense

For the year ended December 31, 2005, interest expense on both continuing and discontinued operations increased $47.2 million or 38.1% from 2004 primarily due to the issuance of debt and $8.5 million in prepayment penalties. For the year ended December 31, 2005, the weighted average amount of debt outstanding increased 30.7% or $697.4 million compared to 2004 and the weighted average interest rate increased from 5.0% to 5.3% during 2005. The weighted average amount of debt outstanding during 2005 is higher than 2004 as acquisition costs in 2005 have been funded, in most part, by the issuance of debt. The increase in the weighted average interest rate during 2005 reflects short-term bank borrowings and variable rate debt that had higher interest rates when compared

to the prior year.

For the year ended December 31, 2004, interest expense on both continuing and discontinued operations increased $6.8 million or 5.8% 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.

General and Administrative

For the year ended December 31, 2005, general and administrative expenses increased $5.5 million or 28.5% over 2004 primarily as a result of an increase in personnel and incentive compensation costs, an operating lease on an airplane, compliance costs and an operations improvement initiative.

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.

Hurricane Related Expenses and Hurricane Related Insurance Recoveries

In 2005, $2.5 million of hurricane related insurance recoveries were recorded. 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 the Sale of Land, Depreciable Property and an Unconsolidated Joint Venture

For the years ended December 31, 2005 and 2004, we recognized gains for financial reporting purposes of $143.5 million and $52.9 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 preferred stock. 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 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 owned 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 our contractual obligations as of December 31, 2005 (dollars in thousands):


	Payments Due by Period
Contractual Obligations	Total		2006		2007-2008		2009-2010		Thereafter
Long-Term Debt Obligations	$	3,159,777	$	171,989	$	769,179	$	541,742	$	1,676,867
Capital Lease Obligations		—		—		—		—		—
Operating Lease Obligations		30,771		2,217		3,862		3,453		21,239
Purchase Obligations		—		—		—		—		—
Other Long-Term Liabilities Reflected on the Balance Sheet Under GAAP		—		—		—		—		—

During 2005, we incurred interest costs of $165.5 million, of which $2.8 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 41 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, 2005, 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 quarter ended December 31, 2005, 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, 2005. Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 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

None.

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-Audit Committee Financial Expert” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 2, 2006.

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 2, 2006. 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 headings “Security Ownership of Certain Beneficial Owners and Management,” “Compensation of Executive Officers,” “Agreements with Executive Officers” and “Compensation of Directors” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 2, 2006.


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 2, 2006.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference to the information set forth under the heading “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 2, 2006.

Item 14. PRINCIPAL ACCOUNTANT 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 Policies and Procedures” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 2, 2006.

PART IV

Item 15. EXHIBITS, 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 41 of this Report.

2.Financial Statement Schedule.See Index to Consolidated Financial Statements and Schedule on page 41 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 7, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below on March 7, 2006 by the following persons on behalf of the registrant and in the capacities indicated.


/s/ Thomas W. Toomey				/s/ Jon A. Grove

Thomas W. Toomey				Jon A. Grove
Chief Executive Officer, President, and Director				Director

/s/ Christopher D. Genry				/s/ Thomas R. Oliver

Christopher D. Genry				Thomas R. Oliver
Executive Vice President- Corporate Strategy and Chief Financial Officer				Director

/s/ Scott A. Shanaberger				/s/ Lynne B. Sagalyn

Scott A. Shanaberger				Lynne B. Sagalyn
Senior Vice President and Chief Accounting Officer				Director

/s/ Robert C. Larson				/s/ Mark J. Sandler

Robert C. Larson				Mark J. Sandler
Chairman of the Board				Director

/s/ James D. Klingbeil				/s/ Robert W. Scharar

James D. Klingbeil				Robert W. Scharar
Vice Chairman of the Board				Director

/s/ Eric J. Foss				/s/ Thomas C. Wajnert

Eric J. Foss				Thomas C. Wajnert
Director				Director

/s/ Robert P. Freeman

Robert P. Freeman
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		42

FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT

Report of Independent Registered Public Accounting Firm		43

Consolidated Balance Sheets at December 31, 2005 and 2004		44

Consolidated Statements of Operations for each of the three years in the period ended December 31, 2005		45

Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2005		46

Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, 2005		47

Notes to Consolidated Financial Statements		48

SCHEDULE FILED AS PART OF THIS REPORT

Schedule III — Summary of Real Estate Owned		68

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 the accompanying 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, 2005, based on criteria established in Internal Control — Integrated Framework issued 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, 2005, 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, 2005, 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, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005 of United Dominion Realty Trust, Inc. and our report dated February 17, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Richmond, Virginia
February 17, 2006

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, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. 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, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. 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, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Richmond, Virginia
February 17, 2006

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)


	December 31,
	2005			2004
ASSETS

Real estate owned:
Real estate held for investment	$	5,360,106		$	4,795,278
Less: accumulated depreciation		(1,123,119	)		(921,805	)

		4,236,987			3,873,473
Real estate under development (net of accumulated depreciation of $140 and $0)		117,328			64,921
Real estate held for disposition (net of accumulated depreciation of $570 and $86,082)		34,280			297,015

Total real estate owned, net of accumulated depreciation		4,388,595			4,235,409
Cash and cash equivalents		15,543			7,904
Restricted cash		4,583			6,086
Deferred financing costs, net		31,036			25,151
Notes receivable		64,805			5,000
Investment in unconsolidated development joint venture		—			458
Funds held in escrow from 1031 exchanges pending the acquisition of real estate		—			17,039
Other assets		34,011			34,115
Other assets — real estate held for disposition		3,020			839

Total assets	$	4,541,593		$	4,332,001


LIABILITIES AND STOCKHOLDERS’ EQUITY

Secured debt	$	1,116,259		$	1,145,578
Secured debt — real estate held for disposition		—			52,346
Unsecured debt		2,043,518			1,682,058
Real estate taxes payable		24,672			28,380
Accrued interest payable		26,672			18,773
Security deposits and prepaid rent		26,362			24,129
Distributions payable		45,313			44,624
Accounts payable, accrued expenses, and other liabilities		55,460			49,757
Other liabilities — real estate held for disposition		11,794			7,312

Total liabilities		3,350,050			3,052,957

Minority interests		83,819			83,593

Stockholders’ equity:
Preferred stock, no par value; 50,000,000 shares authorized
5,416,009 shares 8.60% Series B Cumulative Redeemable issued and outstanding (5,416,009 in 2004)		135,400			135,400
2,803,812 shares 8.00% Series E Cumulative Convertible issued and outstanding (2,803,812 in 2004)		46,571			46,571
Common stock, $0.01 par value ($1.00 par value in 2004); 250,000,000 shares authorized 134,012,053 shares issued and outstanding (136,429,592 in 2004)		1,340			136,430
Additional paid-in capital		1,680,115			1,608,858
Distributions in excess of net income		(755,702	)		(731,808	)

Total stockholders’ equity		1,107,724			1,195,451

Total liabilities and stockholders’ equity	$	4,541,593		$	4,332,001

See accompanying notes to consolidated financial statements.

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)


	Years ended December 31,
	2005			2004			2003
REVENUES
Rental income	$	680,553		$	572,408		$	509,555
Non-property income:
Sale of technology investment		12,306			—			—
Sale of unconsolidated joint venture		3,823			—			—
Other income		4,535			2,608			1,068

Total non-property income		20,664			2,608			1,068

Total revenues		701,217			575,016			510,623


EXPENSES
Rental expenses:
Real estate taxes and insurance		81,151			66,424			57,756
Personnel		69,939			59,912			51,648
Utilities		40,037			34,360			30,069
Repair and maintenance		40,570			41,689			32,900
Administrative and marketing		23,846			20,013			18,541
Property management		19,309			17,881			16,873
Other operating expenses		1,178			1,226			1,205
Real estate depreciation and amortization		209,856			163,176			137,013
Interest		162,508			123,170			116,294
General and administrative		24,819			19,316			20,626
Other depreciation and amortization		2,752			3,301			3,001
Loss on early debt retirement		6,662			—			—
Impairment loss on investments		—			—			1,392

Total expenses		682,627			550,468			487,318


Income before minority interests and discontinued operations		18,590			24,548			23,305
Minority interests of outside partnerships		(108	)		(182	)		(614	)
Minority interests of unitholders in operating partnerships		(180	)		55			1,497

Income before discontinued operations, net of minority interests		18,302			24,421			24,188
Income from discontinued operations, net of minority interests		136,864			72,731			46,216

Net income		155,166			97,152			70,404
Distributions to preferred stockholders — Series B		(11,644	)		(11,644	)		(11,645	)
Distributions to preferred stockholders — Series D (Convertible)		—			(3,473	)		(12,178	)
Distributions to preferred stockholders — Series E (Convertible)		(3,726	)		(4,414	)		(2,503	)
Premium on preferred stock conversions		—			(5,729	)		(19,271	)

Net income available to common stockholders	$	139,796		$	71,892		$	24,807


Earnings per common share — basic:
Income/(loss) from continuing operations available to common stockholders, net of minority interests	$	0.02		$	(0.01	)	$	(0.18	)
Income from discontinued operations, net of minority interests	$	1.01		$	0.57		$	0.40
Net income available to common stockholders	$	1.03		$	0.56		$	0.22
Earnings per common share — diluted:
Income/(loss) from continuing operations available to common stockholders, net of minority interests	$	0.02		$	(0.01	)	$	(0.18	)
Income from discontinued operations, net of minority interests	$	1.00		$	0.57		$	0.40
Net income available to common stockholders	$	1.02		$	0.56		$	0.22

Common distributions declared per share	$	1.20		$	1.17		$	1.14

Weighted average number of common shares outstanding — basic		136,143			128,097			114,672
Weighted average number of common shares outstanding — diluted		137,013			128,097			114,672

See accompanying notes to consolidated financial statements.

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)


	Years ended December 31,
	2005			2004			2003
Operating Activities
Net income	$	155,166		$	97,152		$	70,404
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		215,192			184,088			166,637
Impairment loss on real estate and investments		—			—			1,392
Net gains on the sale of land and depreciable property		(139,724	)		(52,903	)		(15,941	)
Cancellation of operating partnership units in connection with the sale of equity investment		(1,000	)		—			—
Gain on the sale of technology investment		(12,306	)		—			—
Gain on the sale of unconsolidated joint venture		(3,823	)		—			—
Distribution of earnings from unconsolidated joint venture		124			—			—
Minority interests		8,838			5,025			2,261
Amortization of deferred financing costs and other		5,287			7,206			6,148
Amortization of deferred compensation		2,939			2,780			—
Changes in operating assets and liabilities:
Decrease/(increase) in operating assets		8,695			(1,769	)		(2,560	)
Increase in operating liabilities		8,798			10,168			6,604

Net cash provided by operating activities		248,186			251,747			234,945

Investing Activities
Proceeds from the sale of real estate investments, net		308,753			190,105			93,613
Repayment of notes receivables		64,845			75,586			—
Acquisition of real estate assets (net of liabilities assumed and equity)		(413,744	)		(755,966	)		(314,739	)
Development of real estate assets		(49,343	)		(19,131	)		(13,640	)
Capital expenditures and other major improvements — real estate assets		(156,122	)		(82,390	)		(53,146	)
Capital expenditures — non-real estate assets		(3,209	)		(1,578	)		(1,858	)
Proceeds from the sale of technology investment		12,306			—			—
Distribution of capital from unconsolidated joint venture		458			—			—
Decrease/(increase) in funds held in escrow from tax free exchanges pending the acquisition of real estate		17,039			(2,592	)		(14,447	)

Net cash used in investing activities		(219,017	)		(595,966	)		(304,217	)

Financing Activities
Proceeds from the issuance of secured debt		25,342			—			37,415
Scheduled principal payments on secured debt		(8,611	)		(36,814	)		(22,442	)
Non-scheduled principal payments on secured debt		(125,221	)		(95,011	)		(17,549	)
Proceeds from the issuance of unsecured debt		499,983			475,775			323,382
Payments on unsecured debt		(70,860	)		(46,585	)		(214,591	)
Net (repayment)/proceeds of revolving bank debt		(67,300	)		140,200			(37,900	)
Payment of financing costs		(14,455	)		(8,849	)		(6,463	)
Issuance of note receivable		—			—			(8,000	)
Proceeds from the issuance of common stock		4,334			99,461			179,811
Proceeds from the repayment of officer loans		—			459			2,171
Proceeds from the issuance of performance shares		343			(50	)		657
Purchase of minority interest from outside partners		(522	)		—			—
Conversion of operating partnership units to cash		(50	)		—			—
Distributions paid to minority interests		(12,900	)		(13,553	)		(9,756	)
Distributions paid to preferred stockholders		(15,370	)		(20,347	)		(27,532	)
Distributions paid to common stockholders		(163,001	)		(147,387	)		(128,188	)
Repurchases of common and preferred stock		(73,242	)		—			(71	)

Net cash (used in)/provided by financing activities		(21,530	)		347,299			70,944

Net increase in cash and cash equivalents		7,639			3,080			1,672
Cash and cash equivalents, beginning of year		7,904			4,824			3,152

Cash and cash equivalents, end of year	$	15,543		$	7,904		$	4,824


Supplemental Information:
Interest paid during the period	$	160,367		$	115,519		$	116,057
Non-cash transactions:
Conversion of operating partnership minority interests to common stock (99,573 shares in 2005, 170,209 shares in 2004, and 216,983 shares in 2003)		1,444			2,035			2,206
Conversion of minority interests in Series B, LLC		690			—			—
Issuance of restricted stock awards		7,709			3,250			5,297
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		7,653			—			7,135
Cancellation of a note receivable with the acquisition of a property		—			8,000			—
Secured debt assumed with the acquisition of properties		26,825			311,714			4,865
Receipt of a note receivable in connection with sales of real estate investments		124,650			75,586			—
Deferred gain in connection with the sale of real estate investments		6,410			—			—

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
																Distributions in			Unearned			from			Other
	Preferred Stock						Common Stock						Paid-in			Excess of			Restricted			Officer-			Comprehensive
	Shares			Amount			Shares			Amount			Capital			Net Income			Stock 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 and restricted shares								1,546,525			1,547			18,664						(5,297	)								14,914
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
Common shares repurchased								(4,564	)		(5	)		(66	)														(71	)
Adjustment for 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

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 and restricted shares								769,083			769			10,171															10,940
Issuance of common shares through public offering								4,497,000			4,497			86,804															91,301
Adjustment for 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	)
Adjustment for FASB 123 adoption														(5,588	)					5,588									—

Balance, December 31, 2004		8,219,821			181,971			136,429,592			136,430			1,608,858			(731,808	)		—			—			—			1,195,451

Comprehensive Income
Net income																	155,166												155,166

Comprehensive income																	155,166												155,166

Issuance of common and restricted shares								663,238			680			6,595															7,275
Common shares repurchased								(3,180,350	)		(32	)		(73,210	)														(73,242	)
Adjustment for change in par value from $1.00 to $0.01											(135,822	)		135,822															—
Adjustment for conversion of minority interests of unitholders in operating partnerships								99,573			84			1,360															1,444
Adjustment for conversion of minority interests in Series B LLC														690															690
Common stock distributions declared ($1.20 per share)																	(163,690	)											(163,690	)
Preferred stock distributions declared-Series B ($2.15 per share)																	(11,644	)											(11,644	)
Preferred stock distributions declared-Series E ($1.33 per share)																	(3,726	)											(3,726	)

Balance, December 31, 2005		8,219,821		$	181,971			134,012,053		$	1,340		$	1,680,115		$	(755,702	)	$	—		$	—		$	—		$	1,107,724

See accompanying notes to consolidated financial statements.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

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, 2005, United Dominion owned 259 communities with 74,875 completed apartment homes and had five communities with 1,335 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, 2005, there were 166,300,080 units in the Operating Partnership outstanding, of which 156,122,288 units or 93.9% were owned by United Dominion and 10,177,792 units or 6.1% were owned by limited partners (of which 1,764,662 are owned by the holders of the Series A OPPS, see below). As of December 31, 2005, there were 5,542,200 units in the Heritage OP outstanding, of which 5,203,572 units or 93.9% were owned by United Dominion and 338,628 units or 6.1% 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.

Use of estimates

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. Certain previously reported amounts have been reclassified to conform to the current financial statement presentation.

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. 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

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

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 2005, 2004, and 2003, total interest capitalized was $2.8 million, $1.0 million, and $1.8 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.

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 2005, 2004, and 2003, amortization expense was $6.5 million, $5.1 million, and $4.7 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

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

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 collectability 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 2005, 2004, and 2003, total advertising expense was $11.2 million, $10.5 million, and $10.6 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, 2005, United Dominion has no derivative financial instruments reported on its Consolidated Balance Sheet. Prior to their maturity in July 2004, 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 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.

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

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 for 2004 and 2003 consisted 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 123(R) on January 1, 2006. Because Statement 123(R) 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 123(R). We do not anticipate that the adoption of Statement 123(R) will have a material impact on our 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 Units and shares outstanding, were 5.9% at December 31, 2005, 6.3% at December 31, 2004, and 6.4% at December 31, 2003.

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% ($1.33 per share) 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.

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

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


	2005			2004			2003
Numerator for basic and diluted earnings per share - Net income available to common stockholders	$	139,796		$	71,892		$	24,807

Denominator:
Denominator for basic earnings per share - Weighted average common shares outstanding		136,920			128,711			115,109
Non-vested restricted stock awards		(777	)		(614	)		(437	)

		136,143			128,097			114,672


Effect of dilutive securities:
Employee stock options and non-vested restricted stock awards		870			—			—

Denominator for dilutive earnings per share		137,013			128,097			114,672

Basic earnings per share	$	1.03		$	0.56		$	0.22

Diluted earnings per share	$	1.02		$	0.56		$	0.22

The effect of the conversion of the operating partnership units, Series A Out-Performance Partnership Shares, and convertible preferred stock is not dilutive and is therefore not included in the above calculations. If the operating partnership units were converted to common stock, the additional shares of common stock outstanding for the three years ended December 31, 2005, would be 10,324,037, 10,460,639, and 9,690,883 weighted average common shares, respectively. If the Series A Out-Performance Partnership Shares were converted to common stock, the additional shares of common stock outstanding for the three years ended December 31, 2005, would be 1,778,251, 1,791,329, and 1,853,204 weighted average common shares, respectively. If the convertible preferred stock were converted to common stock, the additional shares of common stock outstanding for the three years ended December 31, 2005, would be 2,803,812, 6,301,821, and 11,636,293 weighted average common shares, respectively.

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 is subject to certain state and local excise or franchise taxes, for which provision has been made. If we fail to qualify as a REIT in any taxable year, our taxable income will be subject to United States Federal income tax at regular corporate rates (including any applicable alternative minimum tax). Even if we qualify as a REIT, we may be subject to certain state and local income taxes and to United States Federal income tax. We also will be required to pay a 100% tax on non-arms length transactions between us and a taxable REIT subsidiary and on any net income from sales of property that the IRS successfully asserts was property held for sale to customers in the ordinary course.

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.

Impact of recently issued accounting pronouncements

In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an Interpretation of FASB Statement No. 143, Asset Retirement Obligations” (FIN 47). A conditional asset retirement obligation refers to a legal obligation to retire assets where the timing and/or method of settlement are conditioned on future events. FIN 47 requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. We adopted the provisions of FIN 47 for the year ended December 31, 2005. The adoption of this Interpretation did not have a material impact on our consolidated financial position, results of operations or cash flows.

In June 2005, the FASB ratified its consensus in EITF Issue 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (Issue 04-05). The effective date for Issue 04-05 is June 29, 2005 for all new or modified partnerships and January 1, 2006 for our remaining partnerships for the applicable provisions. The adoption of the provisions of EITF 04-05 is not anticipated to have a material impact on our financial position or results of operations.

2. REAL ESTATE OWNED

United Dominion operates in 43 markets dispersed throughout 16 states. At December 31, 2005, our largest apartment market was Southern California, where we owned 19.8% of our apartment homes, based upon carrying value. Excluding Southern California, United Dominion did not own more than 6.7% of its apartment homes in any one market, based upon carrying value.

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

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


	2005			2004
Land and land improvements	$	1,289,107		$	1,145,259
Buildings and improvements		3,804,555			3,430,339
Furniture, fixtures, and equipment		266,444			219,680

Real estate held for investment		5,360,106			4,795,278
Accumulated depreciation		(1,123,119	)		(921,805	)

Real estate held for investment, net	$	4,236,987		$	3,873,473

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


	2005		2004		2003
Balance at beginning of year	$	4,795,278	$	3,669,907	$	3,220,769
Real estate acquired		400,588		1,025,066		399,425	(a)
Capital expenditures		164,240		100,305		47,725
Transfers from development		—		—		12,157
Transfers to held for disposition, net		—		—		(10,169	)

Balance at end of year	$	5,360,106	$	4,795,278	$	3,669,907


(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):


	2005			2004		2003
Balance at beginning of year	$	921,805		$	761,339	$	626,327
Depreciation expense for the year (b)		206,005			160,466		136,482
Transfers to wholly owned taxable REIT subsidiary		(4,691	)		—		—
Transfers to held for disposition, net		—			—		(1,470	)

Balance at end of year	$	1,123,119		$	921,805	$	761,339


(b)		Includes $0.8 million, $0.8 million, and $1.0 million for 2005, 2004, and 2003, 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 $4.8 million, $3.4 million, and $1.3 million in 2005, 2004, and 2003, respectively, of amortization expense on the fair market value of in-place leases at the time of acquisition.

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

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, 2005 (dollars in thousands):


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

MID-ATLANTIC REGION
Metropolitan DC		8	$	226,964	$	251,024	$	28,044	$	30,691
Raleigh, NC		11		179,935		218,931		69,640		63,752
Baltimore, MD		10		146,257		169,951		37,096		13,286
Richmond, VA		9		106,326		156,903		52,635		61,532
Greensboro, NC		8		85,362		110,713		34,119		—
Charlotte, NC		7		88,294		110,229		30,795		—
Wilmington, NC		6		64,213		98,512		34,592		—
Norfolk, VA		6		42,741		68,968		27,877		9,117
Other North Carolina		8		61,677		81,159		34,497		13,320
Other Mid-Atlantic		6		46,135		61,200		20,184		16,770
Other Virginia		3		30,946		48,888		15,138		19,462

WESTERN REGION
Southern California		26		1,014,412		1,062,700		61,347		230,292
Northern California		10		334,096		356,640		42,186		67,354
Seattle, WA		8		158,622		167,657		24,608		68,452
Monterey Peninsula, CA		7		85,323		140,507		22,135		—
Portland, OR		5		76,990		81,625		11,223		17,790

SOUTHEASTERN REGION
Tampa, FL		12		203,254		251,435		57,456		61,749
Orlando, FL		14		167,524		230,968		79,061		69,311
Nashville, TN		9		111,843		156,721		41,703		28,976
Jacksonville, FL		4		82,396		103,277		25,411		—
Atlanta, GA		6		57,669		78,116		28,611		18,558
Columbia, SC		6		52,795		67,911		27,082		—
Other Florida		6		106,255		118,984		17,880		44,873
Other Southeastern		2		29,839		41,610		13,143		—

SOUTHWESTERN REGION
Houston, TX		16		185,965		253,408		67,194		39,604
Arlington, TX		7		85,845		104,796		28,669		18,375
Denver, CO		3		92,333		100,142		21,927		—
Phoenix, AZ		5		74,368		98,543		27,843		37,081
Dallas, TX		4		89,552		96,208		17,716		51,971
Austin, TX		5		75,779		83,484		19,574		6,073
Other Southwestern		10		166,468		200,980		56,402		53,558

MIDWESTERN REGION
Columbus, OH		6		111,315		160,093		40,016		39,278
Other Midwestern		3		20,241		23,980		5,720		5,985

Richmond Corporate		—		6,597		2,212		1,435		3,724
Commercial		—		1,631		1,631		160		—

		256	$	4,469,962	$	5,360,106	$	1,123,119	$	1,090,934

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

The following is a summary of real estate held for disposition by major category at December 31, 2005 (dollars in thousands):


			Initial
	Number of		Acquisition		Carrying		Accumulated
	Properties		Cost		Value		Depreciation		Encumbrances

Apartments		4	$	47,285	$	29,203	$	78	$	—
Land		2		5,556		5,647		492		—

			$	52,841	$	34,850	$	570	$	—

The following is a summary of real estate under development by major category at December 31, 2005 (dollars in thousands):


			Initial
	Number of		Acquisition		Carrying		Accumulated
	Properties		Cost		Value		Depreciation		Encumbrances

Apartments		3	$	52,515	$	96,717	$	140	$	25,325
Land		4		20,751		20,751		—		—

			$	73,266	$	117,468	$	140	$	25,325


Total Real Estate Owned			$	4,596,069	$	5,512,424	$	1,123,829	$	1,116,259

In 2005, $2.5 million of hurricane related insurance recoveries were recorded. 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.

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, 2005, 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, 2005 within the Consolidated Statements of Operations for the years ended December 31, 2005, 2004, and 2003, and the reclassification of the assets and liabilities within the Consolidated Balance Sheets as of December 31, 2005 and 2004.

For the year ended December 31, 2005, United Dominion sold 22 communities with a total of 6,352 apartment homes, 240 condominiums from five communities with a total of 648 condominiums, and one parcel of land. We recognized gains for financial reporting purposes of $139.7 million on these sales. At December 31, 2005, United Dominion had four communities with a total of 384 condominiums and a net book value of $29.1 million, and two

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

parcels of land with a net book value of $5.2 million included in real estate held for disposition. In conjunction with the sale of ten communities in July 2005, we received short-term notes for $124.7 million that bear interest at 6.75% and had maturities ranging from September 2005 to July 2006. As of December 31, 2005, the balance on the notes receivable was $59.8 million. We recognized gains for financial reporting purposes of $15.2 million and will recognize $6.4 million in additional gains in 2006 as the notes receivable mature and are paid. During 2004, United Dominion sold 19 communities with a total of 5,425 apartment homes, 24 condominiums from a community of 36 condominiums, and one parcel of land. During 2003, United Dominion sold seven communities with a total of 1,927 apartment homes and two commercial properties. 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.”

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


	2005			2004			2003
Rental income	$	21,817		$	77,999		$	104,735
Non-property income/(loss)		8			(2	)		—

		21,825			77,997			104,735

Rental expenses		11,515			34,829			43,810
Real estate depreciation		2,568			17,452			26,380
Interest		215			831			883
Loss on early debt retirement		1,821			—			—
Other expenses		16			159			243

		16,135			53,271			71,316
Income before net gain on the sale of depreciable property and minority interests		5,690			24,726			33,419
Net gain on the sale of depreciable property		139,724			52,903			15,941

Income before minority interests		145,414			77,629			49,360
Minority interests on income from discontinued operations		(8,550	)		(4,898	)		(3,144	)

Income from discontinued operations, net of minority interests	$	136,864		$	72,731		$	46,216

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

4. SECURED DEBT

Secured debt on continuing and discontinued operations of United Dominion’s real estate portfolio, which encumbers $1.9 billion or 35% of real estate owned based upon book value ($3.6 billion or 65% of United Dominion’s real estate owned is unencumbered) consists of the following as of December 31, 2005 (dollars in thousands):


					Weighted			Weighted		Number of
	Principal Outstanding				Average			Average		Communities
	December 31,		December 31,		Interest Rate			Years to Maturity		Encumbered
	2005		2004		2005			2005		2005
Fixed Rate Debt
Mortgage notes payable	$	359,281	$	428,223		5.33	%		5.4		14
Tax-exempt secured notes payable		26,400		39,160		5.85	%		19.1		3
Fannie Mae credit facilities		363,875		288,875		6.09	%		5.3		9

Total fixed rate secured debt		749,556		756,258		5.71	%		5.8		26

Variable Rate Debt
Mortgage notes payable		66,464		45,758		5.40	%		5.1		4
Tax-exempt secured note payable		7,770		7,770		3.45	%		22.5		1
Fannie Mae credit facilities		292,469		367,469		4.71	%		6.9		47
Freddie Mac credit facility		—		20,669		n/a			n/a		n/a

Total variable rate secured debt		366,703		441,666		4.81	%		6.9		52

Total secured debt	$	1,116,259	$	1,197,924		5.42	%		6.2		78

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 September 2006 through July 2027 and carry interest rates ranging from 4.10% to 7.87%.

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 6.47%. Interest on these notes is generally payable in semi-annual installments.

Secured credit facilitiesAt December 31, 2005, United Dominion’s fixed rate secured credit facilities consisted of $363.9 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 our discretion. As of December 31, 2005, the fixed rate Fannie Mae credit facilities had a weighted average fixed rate of interest of 6.09%.

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 May 2006 through July 2013. As of December 31, 2005, these notes had interest rates ranging from 4.82% to 6.23%.

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, 2005, this note had an interest rate of 3.45%. Interest on this note is payable in monthly installments.

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

Secured credit facilitiesAt December 31, 2005, United Dominion’s variable rate secured credit facilities consisted of $292.5 million outstanding on the Fannie Mae credit facilities. As of December 31, 2005, the variable rate Fannie Mae credit facilities had a weighted average floating rate of interest of 4.71%.

The aggregate maturities of secured debt for the fifteen years subsequent to December 31, 2005 are as follows (dollars in thousands):


	Fixed						Variable
	Mortgage		Tax-Exempt		Credit		Mortgage		Tax-Exempt		Credit
Year	Notes		Notes		Facilities		Notes		Notes		Facilities		TOTAL
2006	$	31,703	$	320	$	—	$	4,750	$	—	$	—	$	36,593
2007		81,247		345		—		901		—		—		82,493
2008		4,109		5,145		—		23,578		—		—		32,832
2009		4,330		245		—		—		—		—		4,575
2010		98,007		265		138,875		—		—		—		237,147
2011		11,797		280		125,000		—		—		39,513		176,590
2012		50,312		300		100,000		—		—		52,956		203,568
2013		61,885		315		—		37,415		—		200,000		299,615
2014		704		340		—		—		—		—		1,044
2015		756		360		—		—		—		—		1,116
2016		812		—		—		—		—		—		812
2017		873		—		—		—		—		—		873
2018		939		—		—		—		—		—		939
2019		1,010		—		—		—		—		—		1,010
2020		1,087		—		—		—		—		—		1,087
Thereafter		9,710		18,485		—		—		7,770		—		35,965

	$	359,281	$	26,400	$	363,875	$	66,464	$	7,770	$	292,469	$	1,116,259

During the first quarter of 2005, we prepaid approximately $110 million of secured debt. In conjunction with these prepayments, we incurred prepayment penalties of $8.5 million in both continuing and discontinued operations as “Loss on early debt retirement.” These penalties were funded by the proceeds from the sale of our technology investment of $12.3 million.

5. UNSECURED DEBT

A summary of unsecured debt as of December 31, 2005 and 2004 is as follows (dollars in thousands):


	2005		2004
Commercial Banks
Borrowings outstanding under an unsecured credit facility due May 2008 (a)	$	210,800	$	278,100

Senior Unsecured Notes — Other
7.73% Medium-Term Notes due April 2005		—		21,100
7.02% Medium-Term Notes due November 2005		—		49,760
7.95% Medium-Term Notes due July 2006		85,374		85,374
7.07% Medium-Term Notes due November 2006		25,000		25,000
7.25% Notes due January 2007		92,255		92,255
4.30% Medium-Term Notes due July 2007		75,000		75,000
4.50% Medium-Term Notes due March 2008		200,000		200,000
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		50,000
5.00% Medium-Term Notes due January 2012		100,000		100,000
5.13% Medium-Term Notes due January 2014		200,000		200,000

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005


	2005		2004
5.25% Medium-Term Notes due January 2015		250,000		100,000
5.25% Medium-Term Notes due January 2016		100,000		—
8.50% Debentures due September 2024		54,118		54,118
4.00% Convertible Senior Notes due December 2035 (b)		250,000		—
Other (c)		370		750

		1,761,198		1,332,438


Unsecured Notes — Other
Verano Construction Loan due February 2006		24,820		24,820
ABAG Tax-Exempt Bonds due August 2008		46,700		46,700

		71,520		71,520


Total Unsecured Debt	$	2,043,518	$	1,682,058


(a)		During the second quarter of 2005, United Dominion amended and restated its $500 million unsecured revolving credit facility and extended the term an additional two years. The credit facility matures on May 31, 2008, and at United Dominion’s option, can be extended for an additional year. United Dominion has the right to increase the credit facility to $750 million if the initial lenders increase their commitments or we receive commitments from additional lenders. Based on United Dominion’s current credit ratings, the credit facility carries an interest rate equal to LIBOR plus a spread of 57.5 basis points, which represents a 12.5 basis point reduction to the previous unsecured revolver, and the facility fee was reduced from 20 basis points to 15 basis points. Under a competitive bid feature and for so long as United Dominion maintains an Investment Grade Rating, United Dominion has the right to bid out 100% of the commitment amount.

(b)		Prior to December 15, 2030, upon the occurrence of specified events, the notes will be convertible at the option of the holder into cash and, in certain circumstances, shares of United Dominion’s common stock at an initial conversion rate of 35.2988 shares per $1,000 principal amount of notes (which equates to an initial conversion price of approximately $28.33 per share). On or after December 15, 2030, the notes will be convertible at any time prior to the second business day prior to maturity at the option of the holder into cash and, in certain circumstances, shares of United Dominion’s common stock at the above initial conversion rate. The initial conversion rate is subject to adjustment in certain circumstances.

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

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


	2005			2004			2003

Total revolving credit facilities at December 31	$	500,000		$	500,000		$	500,000
Borrowings outstanding at December 31		210,800			278,100			137,900
Weighted average daily borrowings during the year		315,487			127,665			171,179
Maximum daily borrowings during the year		440,200			356,500			272,800
Weighted average interest rate during the year		3.6	%		2.0	%		2.1	%
Weighted average interest rate at December 31		4.7	%		2.7	%		1.6	%
Weighted average interest rate at December 31 - after giving effect to swap agreements		n/a			n/a			4.2	%

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

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 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.

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

Distributions declared on the Series B in 2005 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, 2005, a total of 5,416,009 shares of the Series B were outstanding.

All of the remaining outstanding shares of our Series D Cumulative Convertible Redeemable Preferred Stock were 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.

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.

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, 2005, 9,849,009 shares of common stock had been issued under the Stock Purchase Plan. Shares in the amount of 15,150,991 were reserved for further issuance under the Stock Purchase Plan as of December 31, 2005. During 2005, 55,818 shares were issued under the Stock Purchase Plan for a total consideration of approximately $1.3 million.

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. For the years ended December 31, 2005, 2004 and 2003, we recognized $3.2 million, $2.7 million, and $2.2 million, respectively, of compensation expense related to the amortization of restricted stock. As of December 31, 2005, 903,481 shares of restricted stock have been issued under the LTIP.

Shareholder Rights Plan

United Dominion’s First Amended and Restated Rights Agreement 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

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

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, 2005 and 2004, are summarized as follows(dollars in thousands):

2005

2004

Carrying

Fair

Carrying

Fair

Amount

Value

Amount

Value

Secured debt

1,116,259

1,123,108

1,197,924

1,228,953

Unsecured debt

2,043,518

2,032,211

1,682,058

1,654,760

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 July 2005, United Dominion received short-term notes in the principal amount of $124.7 million that bear interest at 6.75% and had maturities ranging from September 2005 to July 2006. The notes were received in conjunction with the sale of ten communities. As of December 31, 2005, the outstanding balance on these notes was $59.8 million. In June 2003, United Dominion received a promissory note in the 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 these notes receivable approximate their 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, 2005 and 2004. 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, 2005 and 2004.

Derivative financial instruments

At December 31, 2005, United Dominion has no derivative financial instruments reported on its Consolidated Balance Sheet.

For the years ended December 31, 2004 and 2003, United Dominion recognized $1.9 million and $8.1 million, respectively, of unrealized gains in comprehensive income. For the year ended December 31, 2004, United

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

Dominion recognized a loss of $0.2 million in net income related to the ineffective portion of United Dominion’s hedging instruments. For the year ended December 31, 2003, United Dominion recognized $0.3 million in realized gains in net income related to the ineffective portion of United Dominion’s hedging instruments.

8. INCOME TAXES

The aggregate cost of our real estate assets for federal income tax purposes was approximately $4.9 billion at December 31, 2005.

The following table reconciles United Dominion’s net income to REIT taxable income for the three years ended December 31, 2005(dollars in thousands):


	2005			2004			2003
Net income	$	155,166		$	97,152		$	70,404
Elimination of TRS income		(17,802	)		(1,120	)		(246	)
Minority interest		(1,828	)		(1,950	)		(3,364	)
Depreciation and amortization expense		56,274			46,916			44,108
Disposition of properties		(74,323	)		(10,029	)		2,363
Revenue recognition timing differences		(87	)		(195	)		1,750
Investment loss, not deductible for tax		—			(593	)		—
Other expense timing differences		(1,160	)		(1,072	)		(844	)

REIT taxable income before dividends	$	116,240		$	129,109		$	114,171

Dividend paid deduction	$	149,475		$	153,409		$	132,722

For income tax purposes, distributions paid to common stockholders may consist of ordinary income, capital gains, and non-taxable return of capital, or a combination thereof. Distributions that exceed our current and accumulated earnings and profits constitute a return of capital rather than taxable income and reduce the stockholder’s basis in their common shares. To the extent that a distribution exceeds both current and accumulated earnings and profits and the stockholder’s basis in the common shares, it generally will be treated as a gain from the sale or exchange of that stockholder’s common shares. For the three years ended December 31, 2005, distributions declared per common share were taxable as follows:

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005


	2005		2004		2003
Ordinary income	$	0.64	$	0.77	$	0.82
Long-term capital gain		0.22		0.20		0.10
Unrecaptured section 1250 gain		0.13		0.08		0.02
Return of capital		0.21		0.12		0.20

	$	1.20	$	1.17	$	1.14

We have a taxable REIT subsidiary that is subject to state and federal income taxes. Income tax expense consists of the following for the years ended December 31, 2005 and 2004, and is included in gains on the sales (dollars in thousands):


	2005		2004
Income tax expense
Current	$	11,090	$	867
Deferred		313		—

Total income tax expense	$	11,403	$	867

Income tax expense differed from the amounts computed by applying the U.S. federal income tax rate of 35% to pretax income for the years ended December 31, 2005 and 2004 as follows (dollars in thousands):


	2005		2004
Income tax expense
Computed tax expense	$	10,193	$	675
Increase in income tax expense resulting from state taxes and other		1,210		192

Total income tax expense	$	11,403	$	867

Deferred income taxes reflect the estimated net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts for income tax purposes. Our taxable REIT subsidiary’s deferred tax assets and liabilities are as follows at December 31, 2005 and 2004 (dollars in thousands):


	2005			2004
Deferred tax assets:
Depreciation	$	32		$	—
Reserves		19			—

Total deferred tax assets		51			—
Deferred tax liabilities:
Gain on sales		(49	)		—
Interest		(315	)		—

Total deferred tax liabilities		(364	)		—

Net deferred tax liability	$	(313	)	$	—

9. 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

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

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, 2005, 2004, and 2003 were $0.6 million, $0.6 million, and $0.3 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 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 123(R) on January 1, 2006. Because Statement 123(R) 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 123(R). There were no options granted during 2005, 2004 or 2003.

A summary of United Dominion’s stock option activity during the three years ended December 31, 2005 is provided in the following table:


	Number			Weighted Average		Range of
	Outstanding			Exercise Price		Exercise Prices

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
Granted		—			—					—
Exercised		(298,566	)		12.02		9.88	—		14.63
Forfeited		(19,834	)		13.80		9.88	—		15.25

Balance, December 31, 2005		1,642,223		$	11.84	$	9.63	—	$	15.38


Exercisable at December 31,
2003		2,207,685		$	11.77	$	9.63	—	$	15.38
2004		1,938,343			11.84		9.63	—		15.38
2005		1,635,666			11.82		9.63	—		15.38

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

The weighted average remaining contractual life on all options outstanding is 4.1 years. 643,110 of share options had exercise prices between $9.63 and $10.88, 596,796 of share options had exercise prices between $11.15 and $12.23, and 402,317 of share options had exercise prices between $13.76 and $15.38.

As of December 31, 2005 and 2004, stock-based awards for 2,583,586 and 2,890,251 shares of common stock, respectively, were available for future grants under the 1999 LTIP’s existing authorization.

10. 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 $48.5 million as of December 31, 2005.

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 and an airplane. Future minimum lease payments for non-cancelable land and other leases as of December 31, 2005 are as follows(dollars in thousands):


	Ground		Operating
	Leases		Leases
2006	$	1,060	$	1,157
2007		1,060		902
2008		1,060		840
2009		1,064		837
2010		1,064		488
Thereafter		21,239		—

	$	26,547	$	4,224

United Dominion incurred $2.4 million of rent expense for the year ended December 31, 2005. United Dominion incurred $1.9 million of rent expense for each of the years ended December 31, 2004 and 2003.

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 “Series B 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 measured 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 was 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) exceeded the cumulative total return of the Morgan Stanley REIT Index peer group index over the same period; and (b) was at least the

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

equivalent of a 22% total return, or 11% annualized.

At the conclusion of the measurement period on May 31, 2005, United Dominion’s total cumulative return did not satisfy these criteria, and therefore, the Series B LLC as holder of the Series B OPPSs did not receive (for the indirect benefit of the Series B 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. As a result, the investment made by the holders of the Series B OPPSs was forfeited.

Series C Out-Performance Program

In May 2005, the stockholders of United Dominion approved the Series C Out-Performance Program (the “Series C Program”) pursuant to which certain executive officers and other key employees of United Dominion (the “Series C Participants”) were given the opportunity to invest indirectly in United Dominion by purchasing interests in UDR Out-Performance III, LLC, a Delaware limited liability company (the “Series C LLC”), the only asset of which is a special class of partnership units of United Dominion Realty, L.P. (“Series C Out-Performance Partnership Shares” or “Series C OPPSs”) . The purchase price for the Series C OPPSs was determined by the Compensation Committee of United Dominion’s board of directors to be $750,000, assuming 100% participation, and was based upon the advice of an independent valuation expert. The Series C Program will measure the cumulative total return on our common stock over the 36-month period from June 1, 2005 to May 30, 2008.

The Series C 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 is at least the equivalent of a 36% total return, or 12% annualized (“Minimum Return”).

At the conclusion of the measurement period, if United Dominion’s total cumulative return satisfies these criteria, the Series C LLC as holder of the Series C OPPSs will receive (for the indirect benefit of the Series C Participants as holders of interests in the Series C LLC) distributions and allocations of income and loss from the Operating Partnership equal to the distributions and allocations that would be received on the number of 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 Minimum Return (such excess being the “Excess Return”);

	ii.		multiplying 2% of the Excess Return by United Dominion’s market capitalization (defined as the average number of shares outstanding over the 36-month period, including common stock, OP Units, and common stock equivalents) multiplied by the daily closing price of United Dominion’s common stock, up to a maximum of 1% of market capitalization; and

	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 Series C 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.

UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

11. 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 2005, 2004, or 2003.

12. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA

Summarized consolidated quarterly financial data for the year ended December 31, 2005, with restated amounts that reflect discontinued operations as of December 31, 2005, is as follows(dollars in thousands, except per share amounts):


	Three Months Ended
	Previously				Previously				Previously
	Reported		Restated		Reported		Restated		Reported		Restated
	March 31		March 31		June 30		June 30		September 30		September 30		December 31
Rental income (a)	$	171,331	$	163,331	$	169,427	$	168,078	$	172,514	$	172,273	$	176,871
Income before minority interests and discontinued operations		6,662		6,208		5,561		5,005		3,106		3,055		4,322
Gain on sale of land and depreciable property		7,023		7,023		46,781		46,781		12,851		12,851		73,068
Income from discontinued operations, net of minority interests		8,499		8,924		47,041		47,549		11,952		11,999		68,392
Net income available to common stockholders		11,099		11,099		48,599		48,599		11,293		11,292		68,806

Earnings per common share:
Basic	$	0.08	$	0.08	$	0.36	$	0.36	$	0.08	$	0.08	$	0.51
Diluted		0.08		0.08		0.36		0.36		0.08		0.08		0.50


(a)		Represents rental income from continuing operations.

Summarized consolidated quarterly financial data for the year ended December 31, 2004, with restated amounts that reflect discontinued operations as of December 31, 2005, 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(a)		March 31(a)		June 30 (a)		June 30 (a)		September 30(a)		September 30(a)		December 31(a)		December 31(a)
Rental income (b)	$	135,501	$	135,137	$	139,357	$	139,013	$	142,590	$	142,280	$	156,288	$	155,978
Income before minority interests and discontinued operations		7,746		7,667		9,576		9,514		3,364		3,351		4,050		4,016
Gain on sale of land and depreciable property		1,205		1,205		13,814		13,814		20,220		20,220		17,664		17,664
Income from discontinued operations, net of minority interests		7,716		7,790		19,173		19,231		24,297		24,310		21,368		21,400
Net income available to common stockholders		8,665		8,665		21,855		21,855		21,160		21,160		20,212		20,212

Earnings per common share:
Basic	$	0.07	$	0.07	$	0.17	$	0.17	$	0.17	$	0.17	$	0.15	$	0.15
Diluted		0.07		0.07		0.17		0.17		0.17		0.17		0.15		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 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.

UNITED DOMINION REALTY TRUST

SCHEDULE III — REAL ESTATE OWNED

FOR THE YEAR ENDED DECEMBER 31, 2005


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

Dominion Middle Ridge	$	17,769,407	$	3,311,468	$	13,283,047	$	16,594,515	$	3,549,584	$	3,536,061	$	16,608,039	$	20,144,099	$	5,673,690	1990	06/25/96
Dominion Lake Ridge		12,921,808		2,366,061		8,386,439		10,752,500		2,825,393		2,573,392		11,004,501		13,577,893		3,959,984	1987	02/23/96
Presidential Greens		—		11,237,698		18,789,985		30,027,683		2,628,284		11,387,017		21,268,950		32,655,967		4,663,728	1938	05/15/02
Taylor Place		—		6,417,889		13,411,278		19,829,167		4,385,013		6,591,430		17,622,750		24,214,180		4,034,036	1962	04/17/02
Ridgewood		—		5,612,147		20,085,474		25,697,621		3,573,634		5,684,212		23,587,043		29,271,255		4,777,857	1988	08/26/02
The Calvert		—		262,807		11,188,623		11,451,430		2,917,630		2,330,329		12,038,731		14,369,061		1,628,459	1962	11/26/03
Commons at Town Square		—		135,780		10,012,173		10,147,953		600,795		9,154,107		1,594,641		10,748,747		258,829	1971	12/03/03
Waterside Towers		—		873,713		46,852,061		47,725,775		2,893,127		34,675,076		15,943,825		50,618,902		2,196,087	1971	12/03/03
Waterside Townhomes		—		129,000		4,621,000		4,750,000		323,665		3,638,423		1,435,242		5,073,665		195,924	1971	12/03/03
Wellington Place at Olde Town		—		13,753,346		36,233,961		49,987,307		362,520		13,753,346		36,596,481		50,349,827		655,589	1987	09/13/05
METROPOLITAN DC		30,691,215		44,099,910		182,864,041		226,963,950		24,059,645		93,323,393		157,700,203		251,023,595		28,044,183

Dominion On Spring Forest		—		1,257,500		8,586,255		9,843,755		5,664,058		1,819,508		13,688,305		15,507,813		8,063,732	1978/81	05/21/91
Dominion Park Green		—		500,000		4,321,872		4,821,872		2,895,880		742,725		6,975,027		7,717,752		3,665,544	1987	09/27/91
Dominion On Lake Lynn		12,134,000		3,622,103		12,405,020		16,027,123		5,925,326		4,313,650		17,638,799		21,952,449		7,529,371	1986	12/01/92
Dominion Courtney Place		—		1,114,600		5,119,259		6,233,859		4,575,575		1,510,378		9,299,056		10,809,434		4,900,517	1979/81	07/08/93
Dominion Walnut Ridge		9,589,520		1,791,215		11,968,852		13,760,067		4,218,718		2,316,086		15,662,699		17,978,785		6,657,701	1982/84	03/04/94
Dominion Walnut Creek		15,153,866		3,170,290		21,717,407		24,887,697		6,569,026		3,814,435		27,642,288		31,456,723		11,616,249	1985/86	05/17/94
Dominion		—		907,605		6,819,154		7,726,759		1,989,904		1,062,270		8,654,393		9,716,663		3,125,715	1988	08/15/96
Copper Mill		—		1,548,280		16,066,720		17,615,000		1,710,445		1,925,344		17,400,101		19,325,445		5,483,226	1997	12/31/96
Trinity Park		10,968,900		4,579,648		17,575,712		22,155,360		2,591,061		4,695,582		20,050,839		24,746,421		6,214,686	1987	02/28/97
Meadows at Kildaire		15,906,030		2,846,027		20,768,425		23,614,452		2,108,239		6,925,532		18,797,159		25,722,691		6,798,874	2000	05/25/00
Oaks at Weston		—		9,943,644		23,305,862		33,249,506		747,025		10,203,256		23,793,275		33,996,531		5,584,096	2001	06/28/02
RALEIGH, NC		63,752,316		31,280,912		148,654,538		179,935,450		38,995,258		39,328,765		179,601,942		218,930,708		69,639,710

Gatewater Landing		—		2,078,422		6,084,526		8,162,948		3,803,951		2,352,778		9,614,121		11,966,899		4,359,887	1970	12/16/92
Dominion Kings Place		—		1,564,942		7,006,574		8,571,516		2,227,550		1,671,923		9,127,143		10,799,066		3,893,849	1983	12/29/92
Dominion At Eden Brook		—		2,361,167		9,384,171		11,745,338		3,518,669		2,726,003		12,538,004		15,264,007		5,397,884	1984	12/29/92
Dominion Great Oaks		13,285,808		2,919,481		9,099,691		12,019,172		5,571,060		4,328,152		13,262,080		17,590,232		6,469,950	1974	07/01/94
Dominion Constant Friendship		—		903,122		4,668,956		5,572,078		1,566,714		1,086,412		6,052,380		7,138,792		2,425,700	1990	05/04/95
Lakeside Mill		—		2,665,869		10,109,175		12,775,044		1,510,604		2,710,326		11,575,322		14,285,648		4,703,932	1989	12/10/99
Tamar Meadow		—		4,144,926		17,149,514		21,294,440		2,272,188		4,202,461		19,364,168		23,566,628		3,593,416	1990	11/22/02
Calvert’s Walk		—		4,408,192		24,692,115		29,100,307		1,568,902		4,452,121		26,217,088		30,669,209		2,759,740	1988	03/30/04
Arborview		—		4,653,393		23,951,828		28,605,221		1,523,017		4,694,342		25,433,896		30,128,238		2,736,663	1992	03/30/04
Liriope		—		1,620,382		6,790,681		8,411,063		131,693		1,622,363		6,920,392		8,542,755		755,333	1997	03/30/04
BALTIMORE, MD		13,285,808		27,319,896		118,937,230		146,257,126		23,694,348		29,846,880		140,104,594		169,951,474		37,096,354

Dominion Olde West		—		1,965,097		12,203,965		14,169,062		5,512,982		2,444,251		17,237,793		19,682,044		9,307,383	1978/82/84/85/87	12/31/84 & 8/27/91
Dominion Creekwood		—		—		—		—		3,331,437		76,962		3,254,475		3,331,437		955,451	1984	08/27/91
Dominion Laurel Springs		—		464,480		3,119,716		3,584,196		3,056,812		778,979		5,862,029		6,641,008		2,894,355	1972	09/06/91
Dominion English Hills		15,409,295		1,979,174		11,524,313		13,503,487		7,771,090		2,873,091		18,401,486		21,274,577		10,231,879	1969/76	12/06/91
Dominion Gayton Crossing		10,063,000		825,760		5,147,968		5,973,728		7,111,805		1,435,820		11,649,713		13,085,533		7,614,479	1973	09/28/95
Dominion West End		16,896,683		2,059,252		15,049,088		17,108,340		5,801,844		2,870,787		20,039,397		22,910,184		7,711,367	1989	12/28/95
Courthouse Green		7,865,616		732,050		4,702,353		5,434,403		3,741,406		1,196,356		7,979,453		9,175,809		5,052,964	1974/78	12/31/84
Waterside At Ironbridge		11,297,000		1,843,819		13,238,590		15,082,409		2,377,879		2,068,745		15,391,543		17,460,288		4,494,457	1987	09/30/97
Carriage Homes at Wyndham		—		473,695		30,996,525		31,470,220		975,207		3,654,306		28,791,121		32,445,427		3,679,651	1998	11/25/03
Legacy at Mayland		—		—		—		—		10,896,257		622,305		10,273,952		10,896,257		692,693
RICHMOND, VA		61,531,594	��	10,343,327		95,982,518		106,325,845		50,576,720		18,021,603		138,880,962		156,902,565		52,634,677

Beechwood		—		1,409,377		6,086,677		7,496,054		2,052,996		1,691,278		7,857,772		9,549,050		3,560,316	1985	12/22/93
Steeplechase		—		3,208,108		11,513,978		14,722,086		13,454,071		4,093,435		24,082,722		28,176,157		8,094,402	1990/97	03/07/96
Northwinds		—		1,557,654		11,735,787		13,293,441		2,067,610		1,875,137		13,485,914		15,361,051		4,837,876	1989/97	08/15/96
Deerwood Crossings		—		1,539,901		7,989,043		9,528,944		2,124,045		1,715,826		9,937,164		11,652,989		3,877,552	1973	08/15/96
Dutch Village		—		1,197,593		4,826,266		6,023,859		1,555,262		1,312,239		6,266,882		7,579,121		2,531,503	1970	08/15/96
Lake Brandt		—		1,546,950		13,489,466		15,036,416		1,418,731		1,857,767		14,597,379		16,455,147		5,222,300	1995	08/15/96
Park Forest		—		679,671		5,770,413		6,450,084		1,833,426		970,920		7,312,589		8,283,510		2,372,182	1987	09/26/96
Deep River Pointe		—		1,670,648		11,140,329		12,810,977		844,860		1,836,524		11,819,312		13,655,837		3,623,282	1997	10/01/97
GREENSBORO, NC		—		12,809,902		72,551,959		85,361,861		25,351,001		15,353,127		95,359,735		110,712,862		34,119,414

Dominion Harris Pond		—		886,788		6,728,097		7,614,885		2,411,470		1,292,902		8,733,453		10,026,355		3,696,584	1987	07/01/94
Dominion Mallard Creek		—		698,860		6,488,061		7,186,921		1,950,035		728,374		8,408,582		9,136,956		3,050,931	1989	08/16/94
Dominion At Sharon		—		667,368		4,856,103		5,523,471		1,797,222		970,559		6,350,133		7,320,693		2,467,435	1984	08/15/96

UNITED DOMINION REALTY TRUST
SCHEDULE III — REAL ESTATE OWNED
FOR THE YEAR ENDED DECEMBER 31, 2005


									Cost of		Gross Amount at
			Initial Costs						Improvements		Which Carried at Close of Period
							Total		Capitalized
			Land and		Buildings		Initial		Subsequent		Land and		Buildings		Total
			Land		and		Acquisition		to Acquisition		Land		and		Carrying		Accumulated		Date of	Date
Property	Encumbrances		Improvements		Improvements		Costs		(Net of Disposals)		Improvements		Improvements		Value (A)		Depreciation (B)		Construction	Acquired
Providence Court		—		—		22,047,803		22,047,803		10,919,273		7,634,765		25,332,311		32,967,076		9,050,790	1997	09/30/97
Dominion Crown Point		—		2,122,179		22,338,577		24,460,756		3,813,162		3,971,293		24,302,625		28,273,918		10,932,380	1987/2000	07/01/94
Dominion Crossing		—		1,666,312		4,774,020		6,440,332		479,761		1,666,398		5,253,695		6,920,093		454,238	1985	08/31/04
Dominion Norcroft		—		1,968,664		13,051,238		15,019,902		563,625		1,979,077		13,604,449		15,583,526		1,142,781	1991/97	08/31/04
CHARLOTTE, NC		—		8,010,171		80,283,899		88,294,070		21,934,547		18,243,370		91,985,247		110,228,617		30,795,140

Cape Harbor		—		1,891,671		18,113,109		20,004,780		2,715,319		2,310,437		20,409,662		22,720,099		7,012,838	1996	08/15/96
Mill Creek		—		1,404,498		4,489,398		5,893,896		15,103,701		1,979,446		19,018,150		20,997,597		7,115,288	1986/98	09/30/91
The Creek		—		417,500		2,506,206		2,923,706		2,949,452		546,034		5,327,124		5,873,158		2,977,376	1973	06/30/92
Forest Hills		—		1,028,000		5,420,478		6,448,478		3,988,083		1,219,115		9,217,446		10,436,561		4,644,726	1964/69	06/30/92
Clear Run		—		874,830		8,740,602		9,615,432		7,010,480		1,341,941		15,283,971		16,625,912		6,223,558	1987/89	07/22/94
Crosswinds		—		1,096,196		18,230,236		19,326,432		2,531,781		1,242,450		20,615,763		21,858,213		6,617,858	1990	02/28/97
WILMINGTON, NC		—		6,712,695		57,500,029		64,212,724		34,298,815		8,639,424		89,872,116		98,511,539		34,591,644

Forest Lake At Oyster Point		—		780,117		8,861,878		9,641,995		4,068,878		1,223,412		12,487,461		13,710,873		5,044,122	1986	08/15/95
Woodscape		—		798,700		7,209,525		8,008,225		6,014,965		1,895,654		12,127,536		14,023,190		6,538,636	1974/76	12/29/87
Eastwind		—		155,000		5,316,738		5,471,738		3,636,350		493,355		8,614,734		9,108,088		4,247,478	1970	04/04/88
Dominion Waterside at Lynnhaven		—		1,823,983		4,106,710		5,930,693		3,369,516		2,064,906		7,235,303		9,300,209		2,857,998	1966	08/15/96
Heather Lake		—		616,800		3,400,672		4,017,472		6,658,926		1,088,260		9,588,138		10,676,398		6,084,003	1972/74	03/01/80
Dominion Yorkshire Downs		9,117,528		1,088,887		8,581,771		9,670,658		2,478,815		1,316,333		10,833,140		12,149,473		3,104,717	1987	12/23/97
NORFOLK, VA		9,117,528		5,263,487		37,477,294		42,740,781		26,227,450		8,081,920		60,886,311		68,968,231		27,876,953

Colony Village		—		346,330		3,036,956		3,383,286		2,634,311		597,409		5,420,187		6,017,597		3,945,908	1972/74	12/31/84
Brynn Marr		—		432,974		3,821,508		4,254,482		3,205,922		731,721		6,728,683		7,460,404		4,839,141	1973/77	12/31/84
Liberty Crossing		—		840,000		3,873,139		4,713,139		4,076,267		1,540,137		7,249,269		8,789,406		5,061,739	1972/74	11/30/90
Bramblewood		—		401,538		3,150,912		3,552,450		2,234,316		631,891		5,154,875		5,786,766		3,625,468	1980/82	12/31/84
Cumberland Trace		—		632,281		7,895,674		8,527,955		2,210,837		742,110		9,996,682		10,738,792		3,458,082	1973	08/15/96
Village At Cliffdale		13,319,700		941,284		15,498,216		16,439,500		2,303,162		1,218,326		17,524,336		18,742,662		5,945,914	1992	08/15/96
Morganton Place		—		819,090		13,217,086		14,036,176		1,101,917		895,716		14,242,376		15,138,093		4,580,293	1994	08/15/96
Woodberry		—		388,699		6,380,899		6,769,598		1,715,755		1,009,255		7,476,098		8,485,353		3,040,343	1987	08/15/96
OTHER NORTH CAROLINA		13,319,700		4,802,196		56,874,390		61,676,586		19,482,487		7,366,566		73,792,507		81,159,073		34,496,890

Brittingham Square		—		650,143		4,962,246		5,612,389		1,478,815		837,604		6,253,601		7,091,204		2,421,065	1991	05/04/95
Greens at Schumaker Pond		—		709,559		6,117,582		6,827,141		2,226,841		919,231		8,134,752		9,053,982		3,050,332	1988	05/04/95
Greens at Cross Court		—		1,182,414		4,544,012		5,726,426		2,235,144		1,403,696		6,557,874		7,961,570		2,517,177	1987	05/04/95
Greens at Hilton Run		16,770,382		2,754,447		10,482,579		13,237,026		3,580,418		3,127,309		13,690,135		16,817,444		5,155,165	1988	05/04/95
Dover Country		—		2,007,878		6,365,053		8,372,931		4,344,090		2,384,744		10,332,277		12,717,021		4,635,012	1970	07/01/94
Greens At Cedar Chase		—		1,528,667		4,830,738		6,359,405		1,199,533		1,729,307		5,829,631		7,558,938		2,404,961	1988	05/04/95
OTHER MID-ATLANTIC		16,770,382		8,833,108		37,302,210		46,135,318		15,064,841		10,401,890		50,798,269		61,200,159		20,183,712

Greens at Falls Run		—		2,730,722		5,300,203		8,030,925		2,429,791		2,947,874		7,512,842		10,460,716		2,760,958	1989	05/04/95
Manor at England Run		19,462,000		3,194,527		13,505,239		16,699,766		14,271,592		4,958,881		26,012,478		30,971,358		9,866,718	1990	05/04/95
Greens at Hollymead		—		965,114		5,250,374		6,215,488		1,240,357		1,100,699		6,355,146		7,455,845		2,510,755	1990	05/04/95
OTHER VIRGINIA		19,462,000		6,890,363		24,055,816		30,946,179		17,941,740		9,007,454		39,880,465		48,887,919		15,138,431

TOTAL MID-ATLANTIC REGION		227,930,543		166,365,967		912,483,924		1,078,849,891		297,626,852		257,614,390		1,118,862,352		1,376,476,743		384,617,107

WESTERN REGION

Pine Avenue		—		2,158,423		8,887,744		11,046,167		4,248,781		2,857,568		12,437,380		15,294,948		3,022,136	1987	12/07/98
Grand Terrace		—		2,144,340		6,594,615		8,738,955		1,635,202		2,259,958		8,114,199		10,374,157		2,354,278	1986	06/30/99
Windemere at Sycamore Highland		—		5,809,490		23,450,119		29,259,609		406,018		5,815,647		23,849,980		29,665,627		4,518,565	2001	11/21/02
Harbor Greens		—		20,476,466		28,537,805		49,014,271		7,108,916		20,482,155		35,641,032		56,123,187		5,099,246	1965	06/12/03
Pine Brook Village		18,270,000		2,581,763		25,504,086		28,085,849		3,697,355		3,793,142		27,990,063		31,783,204		4,017,816	1979	06/12/03
Pacific Shores		19,145,000		7,345,226		22,623,676		29,968,902		5,270,219		7,347,018		27,892,103		35,239,121		3,810,635	1971	06/12/03
Huntington Vista		—		8,055,452		22,485,746		30,541,198		3,089,261		8,055,452		25,575,007		33,630,459		3,651,094	1970	06/12/03
Pacific Palms		—		12,285,059		6,236,783		18,521,843		926,178		12,308,339		7,139,682		19,448,021		1,116,431	1962	07/31/03
Missions at Back Bay		—		229,270		14,128,763		14,358,033		199,454		10,618,842		3,938,645		14,557,486		539,691	1969	12/16/03
Presidio at Rancho Del Oro		13,325,000		9,163,939		22,694,492		31,858,431		1,698,811		9,265,907		24,291,335		33,557,242		2,230,902	1987	06/25/04
Coronado at Newport — North		55,498,155		62,515,901		46,082,056		108,597,957		3,896,466		62,519,046		49,975,377		112,494,423		3,555,007	1968	10/28/04
Huntington Villas		—		61,535,270		18,017,201		79,552,471		1,647,465		61,541,458		19,658,479		81,199,936		1,560,777	1972	09/30/04
Villa Venetia		—		70,825,106		24,179,600		95,004,706		1,786,795		70,828,801		25,962,699		96,791,500		1,912,611	1972	10/28/04
The Crest		60,515,659		21,953,480		67,808,654		89,762,134		1,456,026		21,954,350		69,263,810		91,218,160		5,109,811	1989	09/30/04
Vista Del Rey		—		10,670,493		7,079,834		17,750,327		509,512		10,670,512		7,589,327		18,259,839		586,484	1969	09/30/04
Foxborough		—		12,070,601		6,186,721		18,257,322		897,406		12,076,129		7,078,599		19,154,728		538,375	1969	09/30/04
Villas at Carlsbad		9,472,903		6,516,636		10,717,601		17,234,237		571,493		6,516,636		11,289,094		17,805,730		781,680	1966	10/28/04

UNITED DOMINION REALTY TRUST
SCHEDULE III — REAL ESTATE OWNED
FOR THE YEAR ENDED DECEMBER 31, 2005


									Cost of		Gross Amount at
			Initial Costs						Improvements		Which Carried at Close of Period
							Total		Capitalized
			Land and		Buildings		Initial		Subsequent		Land and		Buildings		Total
			Land		and		Acquisition		to Acquisition		Land		and		Carrying		Accumulated		Date of	Date
Property	Encumbrances		Improvements		Improvements		Costs		(Net of Disposals)		Improvements		Improvements		Value (A)		Depreciation (B)		Construction	Acquired
Rosebeach		—		8,414,478		17,449,593		25,864,072		483,267		8,414,478		17,932,861		26,347,339		1,341,572	1970	09/30/04
The Villas at San Dimas		13,069,635		8,180,619		16,735,364		24,915,983		451,401		8,180,619		17,186,765		25,367,384		1,209,848	1981	10/28/04
The Villas at Bonita		8,314,665		4,498,439		11,699,117		16,197,556		313,956		4,499,424		12,012,088		16,511,512		849,453	1981	10/28/04
Ocean Villa		9,912,557		5,134,982		12,788,885		17,923,867		429,140		5,134,982		13,218,025		18,353,007		917,962	1965	10/28/04
Waterstone at Murrieta		—		10,597,865		34,702,760		45,300,625		1,261,303		10,597,865		35,964,063		46,561,928		2,550,103	1990	11/02/04
Summit at Mission Bay		—		22,598,529		17,181,401		39,779,930		1,575,564		22,598,529		18,756,966		41,355,494		1,351,725	1953	11/01/04
Coronado South		—		58,784,785		50,066,757		108,851,542		650,232		58,784,785		50,716,989		109,501,774		2,331,741	1970	03/31/05
The Arboretum		22,768,196		29,562,468		14,283,292		43,845,760		2,161,614		29,563,965		16,443,410		46,007,374		1,159,104	1970	10/28/04
Rancho Vallecitos		—		3,302,967		10,877,286		14,180,253		1,916,363		3,498,434		12,598,183		16,096,616		5,230,480	1988	10/13/99
SOUTHERN CALIFORNIA		230,291,770		467,412,047		546,999,951		1,014,411,998		48,288,200		480,184,039		582,516,158		1,062,700,197		61,347,528

Foothills Tennis Village		15,851,700		3,617,507		14,542,028		18,159,535		3,899,508		3,806,188		18,252,855		22,059,043		4,394,898	1988	12/07/98
Woodlake Village		31,454,300		6,772,438		26,966,750		33,739,188		6,988,099		7,161,625		33,565,662		40,727,287		8,463,964	1979	12/07/98
2000 Post Street		—		9,860,627		44,577,506		54,438,133		1,321,886		10,037,339		45,722,680		55,760,019		8,857,791	1987	12/07/98
Birch Creek		7,561,729		4,365,315		16,695,509		21,060,824		3,542,166		4,709,287		19,893,704		24,602,990		5,036,201	1968	12/07/98
Highlands of Marin		—		5,995,838		24,868,350		30,864,188		1,592,849		6,150,835		26,306,203		32,457,037		5,918,324	1991	12/07/98
Marina Playa		12,486,738		6,224,383		23,916,283		30,140,666		4,317,585		6,518,063		27,940,188		34,458,251		7,199,190	1971	12/07/98
Crossroads		—		4,811,488		10,169,520		14,981,008		674,295		4,835,724		10,819,578		15,655,303		939,332	1986	07/28/04
River Terrace		—		22,161,247		40,547,515		62,708,762		80,209		22,161,397		40,627,574		62,788,971		1,012,097	2005	08/01/05
Lake Pines		—		14,031,365		30,813,108		44,844,472		48,568		14,031,365		30,861,675		44,893,040		161,719	1972	11/29/05
Bay Terrace		—		8,544,559		14,614,803		23,159,362		79,031		8,544,559		14,693,834		23,238,394		202,306	1962	10/07/05
NORTHERN CALIFORNIA		67,354,467		86,384,767		247,711,371		334,096,138		22,544,197		87,956,382		268,683,954		356,640,335		42,185,822

Arbor Terrace		12,862,690		1,453,342		11,994,972		13,448,314		1,349,701		1,565,777		13,232,237		14,798,015		3,988,470	1996	03/27/98
Aspen Creek		—		1,177,714		9,115,789		10,293,503		774,784		1,327,649		9,740,639		11,068,287		2,464,521	1996	12/07/98
Crowne Pointe		8,640,800		2,486,252		6,437,256		8,923,508		1,897,342		2,589,065		8,231,785		10,820,850		2,478,935	1987	12/07/98
Hilltop		6,540,100		2,173,969		7,407,628		9,581,597		1,446,523		2,348,366		8,679,754		11,028,120		2,263,836	1985	12/07/98
Beaumont		13,583,200		2,339,132		12,559,224		14,898,356		1,015,988		2,456,550		13,457,795		15,914,344		5,379,787	1996	06/14/00
Stonehaven		—		6,471,126		29,535,426		36,006,552		2,364,993		6,700,583		31,670,962		38,371,545		7,017,594	1989/90	05/28/02
The Hawthorne		26,825,490		6,473,970		30,500,720		36,974,690		114,787		6,475,086		30,614,391		37,089,477		830,468	2003	07/21/05
The Kennedy Building		—		6,178,440		22,317,620		28,496,060		70,798		6,180,746		22,386,111		28,566,858		184,435	2005	11/10/05
SEATTLE, WA		68,452,280		28,753,945		129,868,635		158,622,580		9,034,916		29,643,822		138,013,674		167,657,496		24,608,047

Boronda Manor		—		1,946,423		8,981,742		10,928,165		6,786,982		3,000,418		14,714,730		17,715,147		2,842,751	1979	12/07/98
Garden Court		—		888,038		4,187,950		5,075,988		3,469,128		1,369,130		7,175,986		8,545,116		1,399,511	1973	12/07/98
Cambridge Court		—		3,038,877		12,883,312		15,922,189		10,568,856		4,714,689		21,776,356		26,491,045		4,366,375	1974	12/07/98
Laurel Tree		—		1,303,902		5,115,356		6,419,258		4,374,304		1,994,152		8,799,410		10,793,562		1,753,520	1977	12/07/98
The Pointe at Harden Ranch		—		6,388,446		23,853,534		30,241,980		19,026,637		9,438,067		39,830,550		49,268,617		7,408,399	1986	12/07/98
The Pointe at Northridge		—		2,043,736		8,028,443		10,072,179		6,767,092		3,107,993		13,731,277		16,839,271		2,633,433	1979	12/07/98
The Pointe at Westlake		—		1,329,064		5,334,004		6,663,068		4,191,497		2,028,735		8,825,829		10,854,565		1,731,103	1975	12/07/98
MONTEREY PENINSULA, CA		—		16,938,486		68,384,341		85,322,827		55,184,496		25,653,185		114,854,138		140,507,323		22,135,091

Lancaster Commons		8,570,300		2,485,291		7,451,165		9,936,456		730,253		2,553,632		8,113,076		10,666,709		2,359,445	1992	12/07/98
Tualatin Heights		9,220,000		3,272,585		9,134,089		12,406,674		1,276,665		3,441,883		10,241,456		13,683,339		2,971,205	1989	12/07/98
Evergreen Park		—		3,878,138		9,973,051		13,851,189		1,745,562		4,061,970		11,534,781		15,596,751		3,345,800	1988	03/27/98
Andover Park		—		2,916,576		16,994,580		19,911,155		490,885		2,943,565		17,458,475		20,402,040		1,347,087	1989	09/30/04
Hunt Club		—		6,014,006		14,870,326		20,884,332		391,675		6,049,453		15,226,554		21,276,007		1,199,044	1985	09/30/04
PORTLAND, OR		17,790,300		18,566,596		58,423,211		76,989,807		4,635,039		19,050,504		62,574,342		81,624,846		11,222,580


TOTAL WESTERN REGION		383,888,817		618,055,841		1,051,387,508		1,669,443,349		139,686,848		642,487,932		1,166,642,265		1,809,130,197		161,499,068


SOUTHEASTERN REGION

Bay Cove		—		2,928,847		6,578,257		9,507,104		7,097,576		3,542,795		13,061,885		16,604,680		6,767,252	1972	12/16/92
Summit West		—		2,176,500		4,709,970		6,886,470		5,058,919		2,688,145		9,257,244		11,945,389		4,945,099	1972	12/16/92
Pinebrook		—		1,780,375		2,458,172		4,238,547		4,887,880		2,080,046		7,046,382		9,126,427		4,216,408	1977	09/28/93
Lakewood Place		9,855,656		1,395,051		10,647,377		12,042,428		3,605,908		1,765,018		13,883,318		15,648,336		5,575,384	1986	03/10/94
Hunters Ridge		10,312,031		2,461,548		10,942,434		13,403,982		3,770,741		3,133,653		14,041,071		17,174,723		5,655,441	1992	06/30/95
Bay Meadow		—		2,892,526		9,253,525		12,146,051		4,658,265		3,572,076		13,232,240		16,804,316		5,085,080	1985	12/09/96
Cambridge		—		1,790,804		7,166,329		8,957,133		2,436,260		2,179,335		9,214,058		11,393,393		3,447,886	1985	06/06/97
Laurel Oaks		—		1,361,553		6,541,980		7,903,533		2,538,839		1,640,637		8,801,735		10,442,372		3,133,963	1986	07/01/97
Island Walk		—		8,446,075		31,350,185		39,796,260		7,485,979		9,470,997		37,811,241		47,282,239		9,255,687	1991	12/07/98
Sugar Mill Creek		9,107,000		2,241,880		7,552,520		9,794,400		2,089,869		2,420,028		9,464,242		11,884,269		2,533,096	1988	12/07/98
Inlet Bay		—		7,701,679		23,149,670		30,851,349		3,904,987		7,823,325		26,933,011		34,756,336		4,294,661	1988/89	06/30/03
MacAlpine Place		32,474,234		10,869,386		36,857,512		47,726,898		645,703		10,875,525		37,497,076		48,372,601		2,546,194	2001	12/01/04
TAMPA, FL		61,748,921		46,046,224		157,207,931		203,254,155		48,180,926		51,191,578		200,243,502		251,435,081		57,456,151

UNITED DOMINION REALTY TRUST
SCHEDULE III — REAL ESTATE OWNED
FOR THE YEAR ENDED DECEMBER 31, 2005


									Cost of		Gross Amount at
			Initial Costs						Improvements		Which Carried at Close of Period
							Total		Capitalized
			Land and		Buildings		Initial		Subsequent		Land and		Buildings		Total
			Land		and		Acquisition		to Acquisition		Land		and		Carrying		Accumulated		Date of	Date
Property	Encumbrances		Improvements		Improvements		Costs		(Net of Disposals)		Improvements		Improvements		Value (A)		Depreciation (B)		Construction	Acquired
Fisherman’s Village		—		2,387,368		7,458,897		9,846,265		5,240,486		3,280,304		11,806,448		15,086,751		5,631,076	1984	12/29/95
Seabrook		—		1,845,853		4,155,275		6,001,128		4,451,370		2,342,339		8,110,159		10,452,498		4,283,055	1984	02/20/96
Dover Village		—		2,894,702		6,456,100		9,350,802		5,246,095		3,459,772		11,137,125		14,596,897		6,285,412	1981	03/31/93
Lakeside North		—		1,532,700		11,076,062		12,608,762		6,416,200		2,297,399		16,727,564		19,024,962		7,994,702	1984	04/14/94
Regatta Shore		—		757,008		6,607,367		7,364,375		8,127,967		1,573,700		13,918,642		15,492,342		6,786,596	1988	06/30/94
Alafaya Woods		8,950,593		1,653,000		9,042,256		10,695,256		4,374,945		2,235,052		12,835,150		15,070,201		5,481,688	1988/90	10/21/94
Vinyards		7,920,000		1,840,230		11,571,625		13,411,855		5,311,383		2,665,622		16,057,617		18,723,238		7,246,599	1984/86	10/31/94
Andover Place		12,925,000		3,692,187		7,756,919		11,449,106		4,455,590		4,622,276		11,282,419		15,904,696		5,624,941	1988	09/29/95 & 09/30/96
Los Altos		12,134,612		2,803,805		12,348,464		15,152,269		4,080,504		3,519,625		15,713,148		19,232,773		6,137,430	1990	10/31/96
Lotus Landing		—		2,184,723		8,638,664		10,823,387		3,602,105		2,442,815		11,982,676		14,425,492		3,828,172	1985	07/01/97
Seville On The Green		—		1,282,616		6,498,062		7,780,678		3,955,393		1,574,921		10,161,150		11,736,071		3,213,602	1986	10/21/97
Arbors at Lee Vista		13,394,266		3,975,679		16,920,454		20,896,133		3,910,511		4,473,618		20,333,026		24,806,644		6,106,608	1991	12/31/97
Heron Lake		—		1,446,553		9,287,878		10,734,431		3,455,489		1,633,813		12,556,107		14,189,920		3,552,080	1989	03/27/98
Ashton at Waterford		13,986,375		3,871,744		17,537,879		21,409,623		816,301		3,987,764		18,238,161		22,225,924		6,888,837	2000	05/28/98
ORLANDO, FL		69,310,846		32,168,168		135,355,902		167,524,070		63,444,340		40,109,020		190,859,390		230,968,410		79,060,796

Legacy Hill		—		1,147,660		5,867,567		7,015,227		4,665,564		1,487,672		10,193,118		11,680,791		4,619,571	1977	11/06/95
Hickory Run		—		1,468,727		11,583,786		13,052,513		3,161,700		1,892,764		14,321,449		16,214,213		5,563,167	1989	12/29/95
Carrington Hills		17,683,960		2,117,244		—		2,117,244		25,690,844		3,889,506		23,918,582		27,808,088		7,894,361	1999	12/06/95
Brookridge		—		707,508		5,461,251		6,168,759		2,104,418		945,770		7,327,407		8,273,177		2,976,007	1986	03/28/96
Club at Hickory Hollow		—		2,139,774		15,231,201		17,370,975		3,100,465		2,804,820		17,666,620		20,471,440		6,400,972	1987	02/21/97
Breckenridge		—		766,428		7,713,862		8,480,290		1,631,146		992,549		9,118,887		10,111,436		3,064,351	1986	03/27/97
Williamsburg		—		1,376,190		10,931,309		12,307,499		2,135,780		1,665,463		12,777,817		14,443,279		4,141,614	1986	05/20/98
Colonnade		11,292,100		1,459,754		16,014,857		17,474,611		1,185,285		1,686,284		16,973,612		18,659,896		4,473,308	1998	01/07/99
The Preserve at Brentwood		—		3,181,524		24,674,264		27,855,788		1,202,666		3,182,047		25,876,407		29,058,454		2,569,478	1998	06/01/04
NASHVILLE, TN		28,976,060		14,364,809		97,478,097		111,842,906		44,877,868		18,546,875		138,173,899		156,720,774		41,702,829

Greentree		—		1,634,330		11,226,990		12,861,320		6,290,517		2,469,872		16,681,965		19,151,837		7,617,668	1986	07/22/94
Westland		—		1,834,535		14,864,742		16,699,277		6,201,004		2,749,764		20,150,516		22,900,281		8,525,876	1990	05/09/96
Antlers		—		4,034,039		11,192,842		15,226,881		7,881,166		5,021,183		18,086,864		23,108,047		8,237,422	1985	05/28/96
St. John’s Plantation		—		4,288,214		33,320,388		37,608,602		508,541		4,288,214		33,828,929		38,117,143		1,029,640	1989	06/30/05
JACKSONVILLE, FL		—		11,791,118		70,604,962		82,396,080		20,881,228		14,529,034		88,748,274		103,277,308		25,410,605

Stanford Village		—		884,500		2,807,839		3,692,339		1,719,656		1,205,252		4,206,742		5,411,995		2,845,335	1985	09/26/89
Griffin Crossing		—		1,509,633		7,544,018		9,053,651		2,434,940		1,887,112		9,601,478		11,488,591		4,487,014	1987/89	06/08/94
Gwinnett Square		6,384,352		1,924,325		7,376,454		9,300,779		2,922,554		2,233,488		9,989,846		12,223,333		4,178,804	1985	03/29/95
Dunwoody Pointe		6,123,700		2,763,324		6,902,996		9,666,320		6,453,088		3,455,697		12,663,711		16,119,408		6,535,332	1980	10/24/95
Riverwood		6,050,000		2,985,599		11,087,903		14,073,502		5,271,345		3,508,441		15,836,406		19,344,847		7,322,929	1980	06/26/96
Waterford Place		—		1,579,478		10,302,679		11,882,157		1,645,626		1,716,769		11,811,014		13,527,783		3,241,264	1985	04/15/98
ATLANTA, GA		18,558,052		11,646,859		46,021,889		57,668,748		20,447,208		14,006,759		64,109,197		78,115,956		28,610,677

Gable Hill		—		824,847		5,307,194		6,132,041		2,056,722		1,201,961		6,986,802		8,188,763		4,003,897	1985	12/04/89
St. Andrews Commons		—		1,428,826		9,371,378		10,800,204		2,938,014		2,037,918		11,700,301		13,738,218		5,717,327	1986	05/20/93
Forestbrook		—		395,516		2,902,040		3,297,556		2,212,233		597,465		4,912,323		5,509,789		3,174,993	1974	07/01/93
Waterford		—		957,980		6,947,939		7,905,919		2,703,770		1,332,380		9,277,309		10,609,689		4,068,515	1985	07/01/94
Hampton Greene		—		1,363,046		10,118,453		11,481,499		2,318,609		2,026,860		11,773,248		13,800,108		5,155,351	1990	08/19/94
Rivergate		—		1,122,500		12,055,625		13,178,125		2,885,879		1,503,300		14,560,704		16,064,004		4,962,097	1989	08/15/96
COLUMBIA, SC		—		6,092,715		46,702,629		52,795,344		15,115,227		8,699,885		59,210,687		67,910,571		27,082,179

Mallards of Wedgewood		—		959,284		6,864,666		7,823,950		2,835,350		1,267,652		9,391,649		10,659,300		4,014,918	1985	07/27/95
Riverbridge		44,873,487		15,968,090		56,400,716		72,368,806		1,103,059		15,971,280		57,500,585		73,471,865		3,765,471	1999/2001	12/01/04
The Groves		—		789,953		4,767,055		5,557,008		3,008,510		1,508,555		7,056,962		8,565,518		3,163,467	1989	12/13/95
Mallards of Brandywine		—		765,949		5,407,683		6,173,632		1,826,871		996,812		7,003,692		8,000,503		2,675,747	1985	07/01/97
LakePointe		—		1,434,450		4,940,166		6,374,616		3,952,896		1,843,711		8,483,801		10,327,512		4,252,549	1984	09/24/93
Lakeside		—		3,373,265		4,583,677		7,956,942		2,076		3,373,265		4,585,754		7,959,018		7,584	1985	12/29/05
OTHER FLORIDA		44,873,487		23,290,991		82,963,963		106,254,954		12,728,762		24,961,274		94,022,442		118,983,716		17,879,736

Patriot Place		—		212,500		1,600,757		1,813,257		6,091,516		1,516,329		6,388,444		7,904,773		4,759,768	1974	10/23/85
The Trails at Mount Moriah		—		5,930,816		22,094,751		28,025,567		5,679,201		6,587,342		27,117,427		33,704,768		8,383,676	1990	01/09/98
OTHER SOUTHEASTERN		—		6,143,316		23,695,508		29,838,824		11,770,717		8,103,671		33,505,870		41,609,541		13,143,445


TOTAL SOUTHEASTERN REGION		223,467,366		151,544,200		660,030,881		811,575,081		237,446,276		180,148,096		868,873,262		1,049,021,358		290,346,419


SOUTHWESTERN REGION

UNITED DOMINION REALTY TRUST
SCHEDULE III — REAL ESTATE OWNED
FOR THE YEAR ENDED DECEMBER 31, 2005


									Cost of			Gross Amount at
			Initial Costs						Improvements			Which Carried at Close of Period
							Total		Capitalized
			Land and		Buildings		Initial		Subsequent			Land and		Buildings		Total
			Land		and		Acquisition		to Acquisition			Land		and		Carrying		Accumulated		Date of	Date
Property	Encumbrances		Improvements		Improvements		Costs		(Net of Disposals)			Improvements		Improvements		Value (A)		Depreciation (B)		Construction	Acquired
Woodtrail		—		1,543,000		5,457,000		7,000,000		3,216,199			1,786,784		8,429,414		10,216,199		3,873,883	1978	12/31/96
Green Oaks		—		5,313,920		19,626,181		24,940,101		5,804,076			6,136,571		24,607,606		30,744,177		8,513,754	1985	06/25/97
Sky Hawk		—		2,297,741		7,157,965		9,455,706		2,890,390			2,815,773		9,530,322		12,346,096		3,938,390	1984	05/08/97
South Grand at Pecan Grove		—		4,058,090		14,755,809		18,813,899		8,071,277			5,036,823		21,848,353		26,885,176		7,889,074	1985	09/26/97
Braesridge		12,361,700		3,048,212		10,961,749		14,009,961		3,391,006			3,589,476		13,811,491		17,400,967		4,880,233	1982	09/26/97
Skylar Pointe		—		3,604,483		11,592,432		15,196,915		5,661,263			3,828,771		17,029,408		20,858,178		6,823,784	1979	11/20/97
Stone Canyon		—		899,515		—		899,515		9,666,559			1,333,651		9,232,422		10,566,074		2,821,750	1998	12/17/97
Chelsea Park		5,737,800		1,991,478		5,787,626		7,779,104		2,777,460			2,487,334		8,069,230		10,556,564		3,046,647	1983	03/27/98
Country Club Place		5,005,200		498,632		6,520,172		7,018,804		1,689,454			720,952		7,987,306		8,708,258		2,639,222	1985	03/27/98
Arbor Ridge		—		1,688,948		6,684,229		8,373,177		1,032,378			2,128,817		7,276,738		9,405,555		2,736,015	1983	03/27/98
London Park		—		2,018,478		6,667,450		8,685,928		2,848,867			2,552,445		8,982,350		11,534,795		3,453,294	1983	03/27/98
Marymont		—		1,150,669		4,155,411		5,306,080		1,405,359			1,193,462		5,517,977		6,711,439		1,643,175	1983	03/27/98
Riviera Pines		—		1,413,851		6,453,847		7,867,698		1,946,742			1,502,364		8,312,076		9,814,440		2,220,737	1979	03/27/98
Towne Lake		—		1,333,958		5,308,884		6,642,842		2,287,407			1,737,352		7,192,897		8,930,249		2,700,965	1984	03/27/98
The Legend at Park 10		—		1,995,011		—		1,995,011		11,989,145			3,864,976		10,119,181		13,984,156		4,774,986	1998	05/19/98
The Bradford		16,498,944		1,151,180		40,829,514		41,980,694		2,765,258			6,623,188		38,122,765		44,745,952		5,238,174	1990/91	11/20/03
HOUSTON, TX		39,603,644		34,007,166		151,958,269		185,965,435		67,442,840			47,338,739		206,069,536		253,408,275		67,194,084

Autumnwood		—		2,412,180		8,687,820		11,100,000		2,373,588			2,809,344		10,664,244		13,473,588		3,944,912	1984	12/31/96
Cobblestone		—		2,925,372		10,527,738		13,453,110		4,382,497			3,347,912		14,487,695		17,835,607		5,522,986	1984	12/31/96
Summit Ridge		6,456,400		1,725,508		6,308,032		8,033,540		2,637,265			2,320,264		8,350,541		10,670,805		3,016,710	1983	03/27/98
Greenwood Creek		—		1,958,378		8,551,018		10,509,396		2,947,248			2,339,302		11,117,342		13,456,644		3,604,729	1984	03/27/98
Derby Park		8,818,600		3,121,153		11,764,974		14,886,127		2,805,619			3,811,885		13,879,861		17,691,746		5,050,391	1984	03/27/98
Aspen Court		3,099,900		776,587		4,944,947		5,721,534		1,669,751			1,168,152		6,223,133		7,391,285		2,152,258	1986	03/27/98
The Cliffs		—		3,483,876		18,657,051		22,140,927		2,135,771			3,840,227		20,436,471		24,276,698		5,377,326	1992	01/29/02
ARLINGTON, TX		18,374,900		16,403,054		69,441,580		85,844,634		18,951,740			19,637,086		85,159,287		104,796,374		28,669,312

Greensview		—		6,450,216		24,405,137		30,855,353		2,669,358			6,066,831		27,457,879		33,524,711		8,320,439	1987/2002	12/07/98
Mountain View		—		6,401,851		21,569,403		27,971,254		3,497,600			6,387,939		25,080,915		31,468,854		6,895,396	1973	12/07/98
The Reflections		—		6,305,326		27,201,579		33,506,905		1,641,491			6,534,151		28,614,245		35,148,396		6,710,791	1981/96	04/30/02
DENVER, CO		—		19,157,393		73,176,119		92,333,512		7,808,448			18,988,921		81,153,039		100,141,960		21,926,626

Vista Point		—		1,587,400		5,612,600		7,200,000		1,966,000			1,823,509		7,342,491		9,166,000		2,840,743	1986	12/31/96
Sierra Palms		14,945,588		4,638,950		17,361,050		22,000,000		1,108,221			4,822,937		18,285,284		23,108,221		5,792,797	1996	12/31/96
Finisterra		—		1,273,798		26,392,207		27,666,005		1,373,300			1,411,829		27,627,476		29,039,305		7,464,413	1997	03/27/98
Sierra Foothills		14,031,553		2,728,172		—		2,728,172		19,206,215			4,882,732		17,051,655		21,934,387		8,147,644	1998	02/18/98
Sierra Canyon		8,104,100		1,809,864		12,963,581		14,773,444		521,384			1,870,350		13,424,479		15,294,828		3,597,072	2001	12/28/01
PHOENIX, AZ		37,081,241		12,038,184		62,329,438		74,367,621		24,175,120			14,811,357		83,731,385		98,542,742		27,842,669

Summergate		—		1,171,300		3,928,700		5,100,000		1,307,129			1,432,497		4,974,632		6,407,129		1,969,003	1984	12/31/96
Highlands of Preston		—		2,151,056		8,167,630		10,318,686		2,836,789			2,557,570		10,597,904		13,155,475		3,576,398	1985	03/27/98
Meridian		23,970,724		6,012,806		29,094,168		35,106,974		1,660,017			6,440,129		30,326,862		36,766,991		8,429,794	2000/02	1/27/98 & 12/28/01
Lincoln Towne Square		28,000,000		7,541,141		31,484,858		39,025,999		852,083			7,546,164		32,331,918		39,878,082		3,741,085	1999	03/12/04
DALLAS, TX		51,970,724		16,876,303		72,675,356		89,551,659		6,656,017			17,976,360		78,231,316		96,207,676		17,716,280

Pecan Grove		—		1,406,750		5,293,250		6,700,000		1,378,860			1,487,178		6,591,682		8,078,860		2,016,109	1984	12/31/96
Anderson Mill		6,072,561		3,134,669		11,170,376		14,305,045		4,355,990			3,554,049		15,106,986		18,661,035		6,695,640	1984	03/27/97
Red Stone Ranch		—		1,896,723		17,525,536		19,422,259		548,484			5,393,898		14,576,845		19,970,743		5,840,232	2000	06/14/00
Barton Creek Landing		—		3,150,998		14,269,086		17,420,084		1,187,298			3,187,081		15,420,301		18,607,382		3,673,370	1986	03/28/02
Lakeline Villas		—		4,633,398		13,297,860		17,931,258		234,284			4,633,454		13,532,088		18,165,542		1,348,673	2002	07/15/04
AUSTIN, TX		6,072,561		14,222,538		61,556,108		75,778,646		7,704,916			18,255,660		65,227,902		83,483,562		19,574,024

Oak Park		18,278,466		3,966,129		22,227,701		26,193,830		1,702,837			5,701,753		22,194,914		27,896,667		8,800,874	1982/98	12/31/96
Catalina		—		1,543,321		5,631,679		7,175,000		1,606,557			1,760,097		7,021,461		8,781,557		2,513,996	1982	12/31/96
Wimbledon Court		—		1,809,183		10,930,306		12,739,489		3,156,365			2,923,748		12,972,106		15,895,854		4,456,626	1983	12/31/96
Oak Forest		23,395,160		5,630,740		23,293,922		28,924,662		11,882,036			6,602,836		34,203,862		40,806,698		13,047,020	1996/98	12/31/96
Oaks of Lewisville		11,884,206		3,726,795		13,563,181		17,289,976		5,368,205			4,618,214		18,039,968		22,658,181		7,240,586	1983	03/27/97
Parc Plaza		—		1,683,531		5,279,123		6,962,654		2,283,169			2,254,565		6,991,258		9,245,823		2,976,568	1986	10/30/97
Mandolin		—		4,222,640		27,909,437		32,132,077		4,584,407			6,401,642		30,314,842		36,716,484		7,582,342	2001	12/28/01
Inn at Los Patios		—		3,005,300		11,544,700		14,550,000		(1,490,425	)		3,005,300		10,054,275		13,059,575		2,396,606	1990	08/15/98
Turtle Creek		—		1,913,177		7,086,823		9,000,000		2,090,290			2,283,999		8,806,291		11,090,290		3,130,326	1985	12/31/96
Shadow Lake		—		2,523,670		8,976,330		11,500,000		3,329,195			2,955,682		11,873,513		14,829,195		4,257,609	1984	12/31/96
OTHER SOUTHWESTERN		53,557,832		30,024,486		136,443,202		166,467,688		34,512,637			38,507,835		162,472,490		200,980,325		56,402,552


TOTAL SOUTHWESTERN REGION		206,660,902		142,729,124		627,580,073		770,309,196		167,251,717			175,515,959		762,044,955		937,560,914		239,325,547

UNITED DOMINION REALTY TRUST
SCHEDULE III — REAL ESTATE OWNED
FOR THE YEAR ENDED DECEMBER 31, 2005


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

Sycamore Ridge		—		4,067,900		15,433,285		19,501,185		2,880,987			4,392,526		17,989,645			22,382,172		4,798,033		1997	07/02/98
Heritage Green		—		2,990,199		11,391,797		14,381,996		10,047,897			3,259,776		21,170,116			24,429,893		6,021,964		1998	07/02/98
Alexander Court		11,770,120		1,573,412		—		1,573,412		21,866,129			6,305,483		17,134,058			23,439,541		7,184,446		1999	07/02/98
Governour’s Square		27,507,483		7,512,513		28,695,050		36,207,563		6,643,191			8,080,536		34,770,218			42,850,754		9,487,577		1967	12/07/98
Hickory Creek		—		3,421,413		13,539,402		16,960,815		3,829,210			3,805,819		16,984,207			20,790,025		4,442,530		1988	12/07/98
Britton Woods		—		3,476,851		19,213,411		22,690,262		3,510,780			4,209,922		21,991,120			26,201,042		8,081,231		1991	04/20/01
COLUMBUS, OH		39,277,603		23,042,288		88,272,945		111,315,233		48,778,194			30,054,063		130,039,364			160,093,427		40,015,780

Washington Park		—		2,011,520		7,565,279		9,576,799		1,399,256			2,158,441		8,817,613			10,976,055		2,529,500		1998	12/07/98
Fountainhead		—		390,542		1,420,166		1,810,708		432,682			406,183		1,837,207			2,243,390		595,292		1966	12/07/98
Jamestown of Toledo		5,984,700		1,800,271		7,053,585		8,853,856		1,906,768			1,962,901		8,797,724			10,760,624		2,595,483		1965	12/07/98
OTHER MIDWESTERN		5,984,700		4,202,333		16,039,030		20,241,363		3,738,706			4,527,525		19,452,544			23,980,069		5,720,276


TOTAL MIDWESTERN REGION		45,262,303		27,244,621		104,311,975		131,556,596		52,516,900			34,581,588		149,491,908			184,073,496		45,736,056



TOTAL APARTMENTS	$	1,087,209,931	$	1,105,939,752	$	3,355,794,361	$	4,461,734,113	$	894,528,594		$	1,290,347,965	$	4,065,914,742		$	5,356,262,707	$	1,121,524,197


REAL ESTATE HELD FOR DISPOSITION
Apartments
Montgomery Chase	$	—	$	6,802,519	$	14,427,386	$	21,229,905	$	(18,339,918	)	$	7,469,801	$	(4,579,814	)	$	2,889,986	$	(9,727	)	1983	01/04/05
Belcara at McCormick Ranch		—		1,999,645		5,655,296		7,654,941		2,682,310			2,199,482		8,137,770			10,337,252		30,874		1980	01/31/05
University Park		—		3,079,034		7,256,292		10,335,326		(2,860,918	)		3,121,973		4,352,435			7,474,408		22,845		1980	02/11/05
The Gallery at Bayport		—		1,732,280		6,332,455		8,064,735		436,496			1,818,294		6,682,938			8,501,232		34,104		1991	07/21/05

Total Apartments		—		13,613,478		33,671,429		47,284,907		(18,082,030	)		14,609,550		14,593,328			29,202,877		78,096


Land
Fossil Creek		—		3,932,115		—		3,932,115		91,483			3,683,156		340,442			4,023,598		—
Hanover Village		—		1,623,910		—		1,623,910		5			1,103,600		520,315			1,623,915		491,869

Total Held for Disposition	$	—	$	19,169,503	$	33,671,429	$	52,840,932	$	(17,990,542	)	$	19,396,306	$	15,454,084		$	34,850,390	$	569,964


REAL ESTATE UNDER DEVELOPMENT
Apartments
2000 Post III	$	—	$	1,755,643	$	779,735	$	2,535,378	$	2,299,574		$	1,755,643	$	3,079,309		$	4,834,952	$	—
Verano at Town Square		25,325,194		13,557,235		3,645,406		17,202,641		38,450,206			17,272,015		38,380,832			55,652,847		140,437
Manadaly on the Lake		—		6,222,578		16,992,320		23,214,898		3,124,019			3,124,019		23,214,898			26,338,917		—
Ridgeview Phase I		—		2,341,936		—		2,341,936		240,024			1,789,978		791,982			2,581,960		—
Ridgeview Phase II		—		1,918,411		—		1,918,411		32,836			1,469,609		481,638			1,951,247		—
Ridgeview Townhomes		—		2,349,923		—		2,349,923		—			2,349,923		—			2,349,923		—
Lincoln Towne Square Phase II		—		2,951,277		—		2,951,277		55,510			2,939,593		67,193			3,006,787		—


Total Apartments		25,325,194		31,097,003		21,417,461		52,514,464		44,202,169			30,700,781		66,015,852			96,716,632		140,437


Land
Mountain View Phase II		—		220,000		—		220,000		—			220,000		—			220,000		—
Presidio		—		1,523,922		—		1,523,922		—			1,523,922		—			1,523,922		—
UDR/ Pacific Los Alisos, LP		—		17,297,661		—		17,297,661		—			17,297,661		—			17,297,661		—
Parkers Landing II		—		1,709,606		—		1,709,606		—			1,709,606		—			1,709,606		—

Total Land		—		20,751,189		—		20,751,189		—			20,751,189		—			20,751,189		—



Total Real Estate Under Development	$	25,325,194	$	51,848,192	$	21,417,461	$	73,265,653	$	44,202,169		$	51,451,970	$	66,015,852		$	117,467,822	$	140,437


Commercial Held for Investment
The Calvert	$	—	$	34,128	$	1,597,359	$	1,631,486	$	153		$	326,899	$	1,304,741		$	1,631,639	$	159,691		1962	11/26/03

Commercial Properties		—		34,128		1,597,359		1,631,486		153			326,899		1,304,741			1,631,639		159,691


Richmond Corporate		3,724,034		245,332		6,351,847	$	6,597,179		(4,207,447	)		277,225		1,934,307			2,211,532		1,434,792

Commercial & Corporate	$	3,724,034	$	279,460	$	7,949,206	$	8,228,665	$	(4,207,294	)	$	604,124	$	3,239,048		$	3,843,171	$	1,594,483



TOTAL REAL ESTATE OWNED	$	1,116,259,159	$	1,177,236,907	$	3,418,832,457	$	4,596,069,364	$	916,532,926		$	1,361,800,364	$	4,150,623,726		$	5,512,424,090	$	1,123,829,081


(A)		The aggregate cost for federal income tax purposes was approximately $4.9 billion at December 31, 2005.

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

EXHIBIT INDEX

The exhibits listed below are filed as part of this Report. References under the caption “Location” to exhibits or other filings indicate that the exhibit 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. Management contracts and compensatory plans or arrangements filed as exhibits to this Report are identified by an asterisk. 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	Certificate of Correction to 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 on March 21, 2005.	Exhibit 2.02 to the Company’s Current Report on Form 8-K dated March 17, 2005 and filed with the Commission on March 22, 2005.


Exhibit	Description	Location
2.06	Certificate of Correction to 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 on July 27, 2005.	Exhibit 2.03 to the Company’s Current Report on Form 8-K dated July 27, 2005 and filed with the Commission on August 1, 2005.

2.07	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.

2.08	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.

2.09	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.

2.10	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	Articles of Restatement.	Exhibit 3.09 to the Company’s Current Report on Form 8-K dated July 27, 2005 and filed with the Commission on August 1, 2005.

3.02	Amended and Restated Bylaws (as amended through February 9, 2006).	Filed herewith.


Exhibit	Description	Location
4.01	Form of Common Stock Certificate.	Exhibit 4.1 to the Company’s Registration Statement on Form 8-A/A dated and filed with the Commission on November 7, 2005.

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 10, 1997 and filed with the Commission on June 11, 1997.

4.03	Form of Rights Certificate.	Exhibit 4(e) to the Company’s Registration Statement on Form 8-A dated and filed with the Commission on February 4, 1998.

4.04	First Amended and Restated Rights Agreement dated as of September 14, 1999, between the Company and the 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.

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	Indenture dated December 19, 2005 between the Company and SunTrust Bank, as Trustee, relating to the Company’s 4.00% Convertible Senior Notes due 2035, including the form note.	Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 13, 2005 and filed with the Commission on December 19, 2005.

4.10	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.


Exhibit	Description	Location
4.11	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.

4.12	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.

4.13	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.

4.14	6.50% Notes due 2009.	Exhibit 4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.

4.15	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.

4.16	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.

4.17	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.

4.18	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.

4.19	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.

4.20	5.00% Medium-Term Notes due January 2012.	Exhibit 4.19 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

4.21	4.30% Medium-Term Note due July 2007.	Exhibit 4.20 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

4.22	5.25% Medium-Term Note due January 2015, issued November 1, 2004.	Exhibit 4.21 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

4.23	5.25% Medium-Term Note due January 2015, issued February 14, 2005.	Exhibit 4.22 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

4.24	5.25% Medium-Term Note due January 2015, issued March 8, 2005.	Exhibit 4.23 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

4.25	5.25% Medium-Term Note due January 2015, issued May 3, 2005.	Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.


Exhibit	Description	Location
4.26	5.25% Medium-Term Note due January 2016, issued September 7, 2005	Exhibit 4.1 to the Company’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2005.

4.27	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.

4.28	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	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.

10.04	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.

10.05*	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.

10.06	Description of United Dominion Realty Trust, Inc. Shareholder Value Plan.	Exhibit 10(x) to the Company’s Annual Report onForm 10-K for the year ended December 31, 1999.

10.07*	Description of United Dominion Realty Trust, Inc. Executive Deferral Plan.	Exhibit 10(xi) to the Company’s Annual Report onForm 10-K for the year ended December 31, 1999.

10.8*	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.


Exhibit	Description	Location
10.09*	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.

10.10*	Description of Amendment to Series A Out-Performance Program.	Exhibit 10.03 to the Company’s Current Report on Form 8-K dated May 3, 2005 and filed with the Commission on May 9, 2005.

10.11*	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.

10.12	Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P.	Exhibit 10.3 to the Company’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2003.

10.13	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 onForm 10-Q for the quarter ended September 30, 2003.

10.14	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 onForm 10-Q for the quarter ended September 30, 2003.

10.15	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 onForm 10-K for the year ended December 31, 2000.

10.16	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.

10.17	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 onForm 10-K for the year ended December 31, 2001.

10.18	Amended and Restated Credit Agreement dated May 25, 2005 between the Company and Wachovia Capital Markets,	Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 25, 2005 and filed with the Commission on May 27, 2005.


Exhibit	Description	Location
	LLC and J.P. Morgan Securities Inc., as Joint Lead Arrangers and Joint Bookrunners, Wachovia Bank, National Association, as Administrative Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, SunTrust Bank and Wells Fargo Bank, National Association, as Documentation Agents, Citicorp North America, Inc., KeyBank, N.A. and U.S. Bank National Association, as Managing Agents, and LaSalle Bank National Association, Mizuho Corporate Bank, Ltd., New York Branch and UFJ Bank Limited, New York Branch as Co-Agents, and each of the financial institutions initially signatory thereto and their assignees.

10.19*	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.

10.20*	Description of New Out-Performance Program.	Exhibit 10.01 to the Company’s Current Report on Form 8-K dated May 3, 2005 and filed with the Commission on May 9, 2005.

10.21*	Description of Series C Out-Performance Program.	Exhibit 10.02 to the Company’s Current Report on Form 8-K dated May 3, 2005 and filed with the Commission on May 9, 2005.

10.22*	Participation in the Series C Out-Performance Program.	Exhibit 10.07 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.

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	First Amendment to the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P.	Exhibit 10.06 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.

10.25*	Employment Agreement of Richard A. Giannotti dated December 8, 1998.	Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

10.26*	Summary of 2006 Director Compensation.	Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 3, 2006 and filed with the Commission on January 6, 2006.

10.27*	Description of the Series D Out-Performance Program	Exhibit 10.2 to the Company’s Current Report on Form 8-K dated February 9, 2006 and filed with the Commission on February 15, 2006.

10.28*	Executive Compensation Summary.	Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 15, 2006 and filed with the Commission on February 21, 2006.

10.29*	Agreement between the Company and Thomas W. Toomey dated November 7, 2005, regarding corporate aircraft.	Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.


Exhibit	Description	Location
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-K2005 FY Annual report

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