UDR (UDR) 8-K Other Events

Exhibit 99.1

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, 2006. 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,
	(In thousands, except per share data and apartment homes owned)
	2006			2005			2004			2003			2002
Operating Data(a)
Rental income	$	692,379		$	621,904		$	513,463		$	450,572		$	429,726
(Loss)/income before minority interests and discontinued operations		(29,832	)		(81	)		5,928			5,039			(31,210	)
Income from discontinued operations, net of minority interests		155,830			154,437			90,176			63,318			82,151
Net income		128,605			155,166			97,152			70,404			53,229
Distributions to preferred stockholders		15,370			15,370			19,531			26,326			27,424
Net income available to common stockholders		113,235			139,796			71,892			24,807			25,805
Common distributions declared		168,408			163,690			152,203			134,876			118,888
Weighted average number of common shares outstanding — basic		133,732			136,143			128,097			114,672			106,078
Weighted average number of common shares outstanding — diluted		133,732			136,143			128,097			114,672			106,078
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted		147,981			150,141			145,842			136,975			127,838
Per share — basic and diluted:
Loss from continuing operations available to common stockholders, net of minority interests	$	(0.32	)	$	(0.11	)	$	(0.14	)	$	(0.33	)	$	(0.53	)
Income from discontinued operations, net of minority interests		1.17			1.14			0.70			0.55			0.77
Net income available to common stockholders		0.85			1.03			0.56			0.22			0.24
Common distributions declared		1.25			1.20			1.17			1.14			1.11
Balance Sheet Data
Real estate owned, at carrying value	$	5,820,122		$	5,512,424		$	5,243,296		$	4,351,551		$	3,967,483
Accumulated depreciation		1,253,727			1,123,829			1,007,887			896,630			748,733
Total real estate owned, net of accumulated depreciation		4,566,395			4,388,595			4,235,409			3,454,921			3,218,750
Total assets		4,675,875			4,541,593			4,332,001			3,543,643			3,276,136
Secured debt		1,182,919			1,116,259			1,197,924			1,018,028			1,015,740
Unsecured debt		2,155,866			2,043,518			1,682,058			1,114,009			1,041,900
Total debt		3,338,785			3,159,777			2,879,982			2,132,037			2,057,640
Stockholders’ equity		1,055,255			1,107,724			1,195,451			1,163,436			1,001,271
Number of common shares outstanding		135,029			134,012			136,430			127,295			106,605
Other Data
Cash Flow Data
Cash provided by operating activities	$	229,613		$	248,186		$	251,747		$	234,945		$	229,001
Cash used in investing activities		(149,973	)		(219,017	)		(595,966	)		(304,217	)		(67,363	)
Cash (used in)/provided by financing activities		(93,040	)		(21,530	)		347,299			70,944			(163,127	)
Funds from Operations(b)
Funds from operations — basic	$	244,471		$	238,254		$	211,670		$	193,750		$	153,016
Funds from operations — diluted		248,197			241,980			219,557			208,431			168,795
Apartment Homes Owned
Total apartment homes owned at December 31		70,339			74,875			78,855			76,244			74,480
Weighted average number of apartment homes owned during the year		73,731			76,069			76,873			74,550			76,567

(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 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.

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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 our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Such factors include, among other things, 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 “UDR” refer collectively to UDR, Inc. and its subsidiaries.

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At December 31, 2006, our portfolio included 242 communities with 70,339 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):

	As of December 31, 2006								Year Ended December 31, 2006
	Number of		Number of		Percentage of		Carrying		Average			Total Income per
	Apartment		Apartment		Carrying		Value		Physical			Occupied
	Communities		Homes		Value		(In thousands)		Occupancy			Home(a)
WESTERN REGION
Orange Co., CA		13		4,067		11.8%	$	684,460		94.9	%	$	1,435
San Francisco, CA		10		2,425		7.7%		445,360		96.8	%		1,543
Los Angeles, CA		6		1,210		3.4%		197,287		94.0	%		1,412
San Diego, CA		5		1,123		2.8%		162,878		94.1	%		1,241
Inland Empire, CA		4		1,282		2.7%		156,495		91.4	%		1,033
Monterey Peninsula, CA		7		1,568		2.5%		144,133		89.8	%		955
Seattle, WA		7		1,466		2.3%		130,875		96.4	%		921
Portland, OR		5		1,365		1.5%		86,644		94.5	%		745
Sacramento, CA		2		914		1.1%		64,563		92.7	%		869
MID-ATLANTIC REGION
Metropolitan DC		8		2,469		4.3%		249,270		95.9	%		1,208
Raleigh, NC		11		3,663		4.0%		229,947		92.8	%		695
Baltimore, MD		10		2,118		3.0%		176,424		95.9	%		1,054
Richmond, VA		9		2,636		3.0%		174,696		95.5	%		864
Wilmington, NC		6		1,868		1.8%		103,893		95.2	%		755
Charlotte, NC		6		1,226		1.5%		88,685		94.3	%		739
Norfolk, VA		6		1,438		1.3%		74,475		95.4	%		913
Other Mid-Atlantic		13		2,817		2.5%		145,972		95.0	%		861
SOUTHEASTERN REGION
Tampa, FL		12		4,138		4.7%		273,531		94.1	%		929
Orlando, FL		12		3,476		3.8%		219,802		93.1	%		900
Nashville, TN		10		2,966		3.2%		187,754		95.1	%		747
Jacksonville, FL		4		1,557		1.9%		110,344		94.0	%		845
Atlanta, GA		6		1,426		1.5%		84,779		95.4	%		701
Other Florida		8		2,400		2.8%		164,164		91.6	%		918
Other Southeastern		7		1,752		1.4%		79,467		95.2	%		644
SOUTHWESTERN REGION
Houston, TX		16		5,447		4.6%		265,438		94.4	%		677
Dallas, TX		6		2,684		3.4%		199,570		94.2	%		811
Arlington, TX		6		1,828		1.7%		95,916		94.5	%		679
Phoenix, AZ		4		1,234		1.6%		92,293		93.7	%		905
Austin, TX		5		1,425		1.5%		87,073		96.4	%		726
Denver, CO		2		884		1.2%		70,425		91.9	%		748
Other Southwestern		6		2,469		2.6%		149,892		95.7	%		739
MIDWESTERN REGION
Columbus, OH		6		2,530		2.9%		165,785		93.5	%		734
Other Midwestern		3		444		0.4%		24,890		91.4	%		763
Real Estate Under Development		1		24		1.1%		63,828		—			—
Land		—		—		2.5%		144,633		—			—
Total		242		70,339		100.0%	$	5,795,641		94.3	%	$	899

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

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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. 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 securedand/or unsecured debt and by the reinvestment of proceeds from the sale of properties.

During 2007, we have approximately $81.7 million of secured debt and $167.3 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 2006, $215.7 million or $2,996 per home was spent on capital expenditures for all of our communities, excluding development, condominium conversions and commercial properties. These capital improvements included turnover related expenditures for floor coverings and appliances, other recurring capital expenditures such as roofs, siding, parking lots, and other non-revenue enhancing capital expenditures, which

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aggregated $34.6 million or $480 per home. In addition, revenue enhancing capital expenditures, kitchen and bath upgrades, upgrades to HVAC equipment, and other extensive exterior/interior upgrades totaled $144.1 million or $2,002 per home, and major renovations totaled $37.0 million or $514 per home for the year ended December 31, 2006.

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

	Year Ended December 31,							Year Ended December 31,
	(dollars in thousands)							(per home)
	2006		2005		% Change			2006		2005		% Change
Turnover capital expenditures	$	14,214	$	17,916		(20.7	)%	$	197	$	237		(16.9	)%
Other recurring capital expenditures		20,409		20,928		(2.5	)%		283		276		2.5	%
Total recurring capital expenditures		34,623		38,844		(10.9	)%		480		513		(6.4	)%
Revenue enhancing improvements		144,102		98,592		46.2	%		2,002		1,302		53.8	%
Major renovations		36,996		18,686		98.0	%		514		247		108.1	%
Total capital improvements	$	215,721	$	156,122		38.2	%	$	2,996	$	2,062		45.3	%
Repair and maintenance		43,498		45,266		(3.9	)%		604		598		1.0	%
Total expenditures	$	259,219	$	201,388		28.7	%	$	3,600	$	2,660		35.3	%

Total capital improvements increased $59.6 million or $934 per home for the year ended December 31, 2006 compared to the same period in 2005. This increase was attributable to an additional $18.3 million of major renovations at certain of our properties. These renovations included the re-wiringand/or re-plumbing of an entire building as well as major structural changesand/or architectural revisions to existing buildings. The increase was also attributable to an additional $45.5 million being invested in revenue enhancing improvements. These increases were offset by a $4.2 million decrease in recurring capital expenditures. 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 2007 are currently expected to be approximately $610 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 initiallease-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 thelease-up period, and the carrying costs associated with thelease-up period. The fair value of in-place leases is recorded and amortized as amortization expense over the remaining contractual lease period.

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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, 2006, our net cash flow provided by operating activities was $229.6 million compared to $248.2 million for 2005. During 2006, the decrease in cash flow from operating activities resulted primarily from an $18.5 million increase in interest expense, a decrease of $17.1 million in other income due to a 2005 sale of a technology investment, an $11.4 million increase in operating assets and a $9.8 million decrease in operating liabilities in 2006 as compared to 2005. These decreases in cash flow from operating activities were partially offset by a $34.2 million increase in property operating results from our apartment community portfolio (see discussion under “Apartment Community Operations”), $5.1 million more in gains recognized from the sale of depreciable property and an unconsolidated joint venture in 2006 as compared to 2005, and an $8.5 million decrease in prepayment penalties from 2005.

Investing Activities

For the year ended December 31, 2006, net cash used in investing activities was $150.0 million compared to $219.0 million for 2005. 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, 2006, we acquired eight apartment communities with 2,763 apartment homes for an aggregate consideration of $327.5 million and two parcels of land for $19.9 million. For 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. 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 three years. During 2007, 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, 2006, we invested approximately $101.8 million in development projects, an increase of $52.5 million from our 2005 level of $49.3 million.

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The following wholly owned projects were under development as of December 31, 2006:

	Number of		Completed		Cost to		Budgeted		Estimated		Expected
	Apartment		Apartment		Date		Cost		Cost		Completion
	Homes		Homes		(In thousands)		(In thousands)		per Home		Date
2000 Post — Phase III
San Francisco, CA		24		24	$	10,254	$	11,000	$	458,300		1Q07
Villas at Ridgeview Townhomes
Plano, TX		48		—		7,022		10,000		208,300		3Q07
Ridgeview Apartments
Plano, TX		202		—		8,296		18,000		89,100		3Q07
Northwest Houston — Phase I
Houston, TX		320		—		4,421		22,000		68,800		2Q08
Lincoln Towne Square — Phase II
Plano, TX		302		—		4,384		26,000		86,100		3Q08
		896		24	$	34,377	$	87,000	$	97,100

In addition, we owned five parcels of land held for future development aggregating $35.4 million at December 31, 2006.

Development Joint Ventures

In June 2006, we completed the formation of a development joint venture that will invest approximately $138 million to develop one apartment community with 298 apartment homes in Marina del Rey, California. UDR is the financial partner and is responsible for funding the costs of development and receives a preferred return from 7% to 8.5% before our partner receives a 50% participation. Our initial investment was $27.5 million.

In July 2006, we closed on a joint venture to develop a site in Bellevue, Washington. At closing, we owned 49% of the $135 million project that involves building a 400 home high rise apartment building with ground floor retail. Our initial investment was $5.7 million.

In November 2006, we closed on a joint venture to develop a site close to Bellevue Plaza in the central business district of Bellevue, Washington. This project will include the development of 271 apartment homes. Construction began in the fourth quarter of 2006 and is scheduled for completion in 2008. At closing, we owned 49% of the $97 million project. Our initial investment was $10.0 million.

Under FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” these ventures have been consolidated into UDR’s financial statements. Our joint venture partners are the managing partners as well as the developers, general contractors, and property managers.

The following consolidated joint venture projects were under development as of December 31, 2006:

	Number of		Completed		Cost to		Budgeted		Estimated		Expected
	Apartment		Apartment		Date		Cost		Cost		Completion
	Homes		Homes		(In thousands)		(In thousands)		per Home		Date
Jefferson at Marina del Rey
Marina del Rey, CA		298		—	$	76,601	$	138,000	$	463,100		2Q08
Ashwood Commons
Bellevue, WA		271		—		23,660		97,000		357,900		4Q08
Bellevue Plaza
Bellevue, WA		400		—		34,220		135,000		270,000		4Q09
		969		—	$	134,481	$	370,000	$	381,800

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Disposition of Investments

For the year ended December 31, 2006, UDR sold 24 communities with 7,653 apartment homes for a gross consideration of $444.9 million. In addition, we sold 384 condominiums from four communities with a total of 612 condominiums for a gross consideration of $72.1 million. We recognized after-tax gains for financial reporting purposes of $148.6 million on these sales. Proceeds from the sales were used primarily to reduce debt.

For the year ended December 31, 2005, UDR 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 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, 2006, all of the notes receivable had matured and had been repaid. We recognized previously deferred gains for financial reporting purposes of $6.4 million for the year ended December 31, 2006.

During 2007, we plan to continue to pursue our strategy of exiting markets where long-term growth prospects are limited and redeploying capital into those markets we believe will provide the best investment returns. We intend to use the proceeds from 2007 dispositions to reduce debt, acquire communities, and fund development activity.

Financing Activities

Net cash used in financing activities during 2006 was $93.0 million compared to $21.5 million in 2005. 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, 2006:

•  Repaid $70.3 million of secured debt and $138.8 million of unsecured debt.

•  Authorized a new 10 million share repurchase program in February 2006. This program replaces our previous 11 million share repurchase program under which we repurchased approximately 10 million shares.

•  Sold $125 million aggregate principal amount of 6.05% senior unsecured notes due June 2013 in June 2006 under our medium-term note program. The net proceeds of approximately $124 million were used for debt repayment.

•  Sold $250 million aggregate principal amount of 3.625% convertible senior unsecured notes due 2011 in October 2006. The net proceeds of approximately $245 million were used for the repayment of indebtedness under our revolving credit facility, the cost of a capped call transaction, and for other general corporate purposes. The capped call instrument effectively increased the conversion premium to 40%.

Credit Facilities

We have four secured revolving credit facilities with Fannie Mae with an aggregate commitment of $860 million. As of December 31, 2006, $691.8 million was outstanding under the Fannie Mae credit facilities leaving $168.2 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 $399.4 million of the funded balance fixed at a weighted average interest rate of 6.1% and the remaining balance on these facilities is currently at a weighted average variable rate of 5.9%.

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

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certain circumstances. Based on our current credit ratings, the credit facility bears interest at a rate equal to LIBOR plus 57.5 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. As of December 31, 2006, $87.2 million was outstanding under the credit facility leaving $412.8 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. We do not hold financial instruments for trading or other speculative purposes, but rather issue these financial instruments to finance our portfolio of real estate assets. Interest rate sensitivity is the relationship between changes in market interest rates and the fair value of market rate sensitive assets and liabilities. Our earnings are affected as changes in short-term interest rates impact our cost of variable rate debt and maturing fixed rate debt. 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 $87.2 million, respectively, at December 31, 2006. The impact on our financial statements of refinancing fixed rate debt that matured during 2006 was immaterial.

If market interest rates for variable rate debt average 100 basis points more in 2007 than they did during 2006, our interest expense would increase, and income before taxes would decrease by $4.9 million. Comparatively, if market interest rates for variable rate debt had averaged 100 basis points more in 2006 than in 2005, our interest expense would have increased, and net income would have decreased by $6.0 million. If market rates for fixed rate debt were 100 basis points higher at December 31, 2006, the fair value of fixed rate debt would have decreased from $2.7 billion to $2.6 billion. If market interest rates for fixed rate debt were 100 basis points lower at December 31, 2006, the fair value of fixed rate debt would have increased from $2.7 billion to $2.9 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

9

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, 2006(dollars in thousands):

	2006			2005			2004
Net income	$	128,605		$	155,166		$	97,152
Adjustments:
Distributions to preferred stockholders		(15,370	)		(15,370	)		(19,531	)
Real estate depreciation and amortization		235,141			193,517			147,133
Minority interests of unitholders in operating partnership		(2,710	)		(918	)		(1,230	)
Real estate depreciation related to unconsolidated entities		—			311			279
Discontinued Operations:
Real estate depreciation		8,748			18,907			33,495
Minority interests of unitholders in operating partnership		10,070			9,648			6,073
Net gain on the sale of land and depreciable property		(148,614	)		(139,724	)		(52,903	)
Net incremental gains on the sale of condominium homes and assets developed for sale		28,601			16,717			1,202
Funds from operations — basic	$	244,471		$	238,254		$	211,670
Distributions to preferred stockholders — Series D and E (Convertible)		3,726			3,726			7,887
Funds from operations — diluted	$	248,197		$	241,980		$	219,557
Weighted average number of common shares and OP Units outstanding — basic		142,426			144,689			136,852
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted		147,981			150,141			145,842

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 year ended December 31, 2004, distributions to preferred stockholders exclude $5.7 million related to premiums on preferred stock conversions.

Net incremental gains on the sale of condominium homes and the net incremental gain on the disposition of real estate investments developed for sale 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 disposition of real estate investments developed for sale 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.

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The following table is our reconciliation of FFO share information to weighted average common shares outstanding, basic and diluted, reflected on the Consolidated Statements of Operations for the three years ended December 31, 2006(shares in thousands):

	2006			2005			2004
Weighted average number of common shares and OP units outstanding — basic		142,426			144,689			136,852
Weighted average number of OP units outstanding		(8,694	)		(8,546	)		(8,755	)
Weighted average number of common shares outstanding — basic per the Consolidated Statements of Operations		133,732			136,143			128,097
Weighted average number of common shares, OP units, and common stock equivalents outstanding — diluted		147,981			150,141			145,842
Weighted average number of OP units outstanding		(8,694	)		(8,546	)		(8,755	)
Weighted average number of incremental shares from assumed conversion of stock options		(966	)		(870	)		(897	)
Weighted average number of incremental shares from assumed conversion of $250 million convertible debt		(68	)		—			—
Weighted average number of Series A OPPSs outstanding		(1,717	)		(1,778	)		(1,791	)
Weighted average number of Series D preferred stock outstanding		—			—			(2,892	)
Weighted average number of Series E preferred stock outstanding		(2,804	)		(2,804	)		(3,410	)
Weighted average number of common shares outstanding — diluted per the Consolidated Statements of Operations		133,732			136,143			128,097

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):

	2006			2005			2004
Net cash provided by operating activities	$	229,613		$	248,186		$	251,747
Net cash used in investing activities		(149,973	)		(219,017	)		(595,966	)
Net cash (used in)/provided by financing activities		(93,040	)		(21,530	)		347,299

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

2006-vs.-2005

Net income available to common stockholders was $113.2 million ($0.85 per diluted share) for the year ended December 31, 2006, compared to $139.8 million ($1.03 per diluted share) for the year ended December 31, 2005, representing a decrease of $26.6 million ($0.18 per diluted share). The decrease for the year ended December 31, 2006, when compared to the same period in 2005, resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:

•  $31.7 million more in depreciation and amortization expense in 2006,

•  $18.5 million more in interest expense in 2006,

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•  $17.1 million less in non-property income in 2006, and

•  $6.4 million more in general and administrative expense in 2006.

These decreases in net income were partially offset by $5.1 million more in gains recognized from the sale of depreciable property and an unconsolidated joint venture, an $8.5 million decrease in losses on early debt retirement, and a $34.2 million increase in apartment community operating results in 2006 when compared to 2005.

2005-vs.-2004

Net income available to common stockholders was $139.8 million ($1.03 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 ($0.47 per diluted share). The increase in net income 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,

•  an $18.1 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 net 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.

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,
	2006			2005			% Change			2005			2004			% Change
Property rental income	$	736,329		$	700,344			5.1	%	$	700,344		$	649,952			7.8	%
Property operating expense*		(271,297	)		(269,486	)		0.7	%		(269,486	)		(251,697	)		7.1	%
Property operating income	$	465,032		$	430,858			7.9	%	$	430,858		$	398,255			8.2	%
Weighted average number of homes		73,731			76,069			(3.1	)%		76,069			76,873			(1.0	)%
Physical occupancy**		94.3	%		94.1	%		0.2	%		94.1	%		93.6	%		0.5	%

*	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.

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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):

	2006			2005			2004
Property operating income	$	465,032		$	430,858		$	398,255
Commercial operating (loss)/income		(350	)		1,997			427
Non-property income		3,590			20,672			2,606
Depreciation and amortization		(246,934	)		(215,192	)		(184,087	)
Interest		(181,183	)		(162,723	)		(124,001	)
General and administrative and property management		(51,463	)		(44,128	)		(37,197	)
Other operating expenses		(1,238	)		(1,178	)		(1,226	)
Net gain on the sale of land and depreciable property		148,614			139,724			52,903
Loss on early debt retirement		—			(8,483	)		—
Hurricane related expenses		—			—			(5,503	)
Hurricane related insurance recoveries		—			2,457			—
Minority interests		(7,463	)		(8,838	)		(5,025	)
Net income per the Consolidated Statements of Operations	$	128,605		$	155,166		$	97,152

2006-vs.-2005

Same Communities

Our same communities (those communities acquired, developed, and stabilized prior to December 31, 2005 and held on December 31, 2006, which consisted of 60,062 apartment homes) provided 82% of our property operating income for the year ended December 31, 2006.

For the year ended December 31, 2006, same community property operating income increased 8.6% or $30.4 million compared to 2005. The increase in property operating income was primarily attributable to a 6.0% or $34.2 million increase in revenues from rental and other income that was offset by a 1.8% or $3.9 million increase in operating expenses. The increase in revenues from rental and other income was primarily driven by a 4.9% or $28.4 million increase in rental rates, a 17.6% or $2.2 million decrease in concession expense, and a 12.5% or $5.0 million increase in utility reimbursement income and fee income. Physical occupancy increased 0.1% to 94.7%.

The increase in property operating expenses was primarily driven by a 15.8% or $1.6 million increase in insurance costs, a 4.4% or $1.5 million increase in utility costs, a 2.8% or $1.5 million increase in personnel costs, a 1.1% or $0.4 million increase in repair and maintenance expenses, and a 0.5% or $0.3 million increase in real estate taxes. These increases in operating expenses were partially offset by a 6.0% or $1.2 million decrease in administrative and marketing expenses.

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) increased 1.5% to 63.5%.

Non-Mature Communities

The remaining 18% of our property operating income during 2006 was generated from communities that we classify as “non-mature communities” (primarily those communities acquired or developed in 2005 and 2006, sold properties, and those properties classified as real estate held for disposition). The 16 communities with 5,324 apartment homes that we acquired in 2005 and 2006 provided $32.8 million of property operating income. The 46 communities with 14,005 homes and the 624 condominiums from five communities that we sold in 2005 and 2006 provided $18.3 million of property operating income. In addition, our development communities, which included 438 apartment homes completed in 2005 and 2006, provided $2.2 million of operating income and the two communities with 475 apartment homes, one community with 320 condominiums, and the one commercial unit classified as real estate held for disposition provided $5.5 million of

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property operating income. Other non-mature communities provided $23.1 million of property operating income for the year ended December 31, 2006.

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%.

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.

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

Real Estate Depreciation and Amortization

For the year ended December 31, 2006, real estate depreciation and amortization on both continuing and discontinued operations increased $31.7 million or 14.8% compared to 2005, primarily due to the significant increase in per home acquisition cost compared to the existing portfolio and other capital expenditures.

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.

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Interest Expense

For the year ended December 31, 2006, interest expense on both continuing and discontinued operations increased $18.5 million or 11.3% from 2005 primarily due to the issuance of debt and higher interest rates. For the year ended December 31, 2006, the weighted average amount of debt outstanding increased 11.7% or $350.4 million compared to 2005 and the weighted average interest rate increased from 5.3% to 5.4% during 2006. The weighted average amount of debt outstanding during 2006 is higher than 2005 as acquisition costs in 2005 and in 2006 have been funded, in most part, by the issuance of debt. The increase in the weighted average interest rate during 2006 reflects short-term bank borrowings and variable rate debt that had higher interest rates when compared to the prior year that were partially offset by the retirement of higher coupon debt with lower coupon debt.

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.

General and Administrative

For the year ended December 31, 2006, general and administrative expenses increased $6.4 million or 25.7% over 2005 due to a number of factors, including increases in incentive compensation, professional fees, relocation costs, and an operating lease on an airplane.

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.

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. UDR reported that 25 of our 34 Florida communities were affected by the hurricanes.

Gains on the Sale of Land, Depreciable Property and an Unconsolidated Joint Venture

For the years ended December 31, 2006 and 2005, we recognized after-tax gains for financial reporting purposes of $148.6 million and $143.5 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.

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.

15

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. In August 2006, we received an additional $0.8 million representing our portion of the escrow balance.

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, 2006(dollars in thousands):

	Payments Due by Period
Contractual Obligations	Total		2007		2008-2009		2010-2011		Thereafter
Long-Term Debt Obligations	$	3,338,785	$	248,985	$	695,892	$	946,462	$	1,447,446
Capital Lease Obligations		—		—		—		—		—
Operating Lease Obligations		32,882		2,770		5,460		3,681		20,971
Purchase Obligations		—		—		—		—		—
Other Long-Term Liabilities Reflected on the Balance Sheet Under GAAP		—		—		—		—		—

During 2006, we incurred interest costs of $181.2 million, of which $5.2 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, rental rates and purchase or sale prices of apartment communities,

•  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,

16

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

•  delays in completing developments andlease-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.

17

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

UDR, INC.

	Page
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
Report of Independent Registered Public Accounting Firm		19
Consolidated Balance Sheets at December 31, 2006 and 2005		20
Consolidated Statements of Operations for each of the three years in the period ended December 31, 2006		21
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2006		22
Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, 2006		23
Notes to Consolidated Financial Statements		25
SCHEDULE FILED AS PART OF THIS REPORT
Schedule III — Summary of Real Estate Owned		48

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.

18

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

UDR, Inc.

We have audited the accompanying consolidated balance sheets of UDR, Inc. (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006. Our audits also included the financial statement schedule listed in the Index. 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 UDR, Inc. at December 31, 2006 and 2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, 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, 2006, 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 23, 2007 (not provided herein) expressed an unqualified opinion thereon.

/s/  Ernst & Young LLP

Richmond, Virginia

February 23, 2007,
Except for Notes 2 and 3,
as to which the date is
May 17, 2007

19

UDR, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share data)

	December 31,
	2006			2005
ASSETS
Real estate owned:
Real estate held for investment	$	5,502,469		$	4,931,085
Less: accumulated depreciation		(1,237,010	)		(1,000,109	)
		4,265,459			3,930,976
Real estate under development (net of accumulated depreciation of $527 and $140)		203,786			90,769
Real estate held for disposition (net of accumulated depreciation of $16,190 and $123,580)		97,150			366,850
Total real estate owned, net of accumulated depreciation		4,566,395			4,388,595
Cash and cash equivalents		2,143			15,543
Restricted cash		5,602			4,583
Deferred financing costs, net		35,160			31,036
Notes receivable		10,500			64,805
Other assets		43,097			33,727
Other assets — real estate held for disposition		12,978			3,304
		��
Total assets	$	4,675,875		$	4,541,593
LIABILITIES AND STOCKHOLDERS’ EQUITY
Secured debt	$	1,182,919		$	1,062,526
Secured debt — real estate held for disposition		—			53,733
Unsecured debt		2,155,866			2,043,518
Real estate taxes payable		25,560			22,413
Accrued interest payable		34,347			26,672
Security deposits and prepaid rent		25,154			24,046
Distributions payable		46,936			45,313
Accounts payable, accrued expenses, and other liabilities		54,887			53,162
Other liabilities — real estate held for disposition		6,118			18,667
Total liabilities		3,531,787			3,350,050
Minority interests		88,833			83,819
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 2005)		135,400			135,400
2,803,812 shares 8.00% Series E Cumulative Convertible issued and outstanding (2,803,812 in 2005)		46,571			46,571
Common stock, $0.01 par value; 250,000,000 shares authorized, 135,029,126 shares issued and outstanding (134,012,053 in 2005)		1,350			1,340
Additional paid-in capital		1,682,809			1,680,115
Distributions in excess of net income		(810,875	)		(755,702	)
Total stockholders’ equity		1,055,255			1,107,724
Total liabilities and stockholders’ equity	$	4,675,875		$	4,541,593

See accompanying notes to consolidated financial statements.

20

UDR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

		Years Ended December 31,
		2006			2005			2004
REVENUES
Rental income		$	692,379		$	621,904		$	513,463
Non-property income:
Sale of technology investment			796			12,306			—
Sale of unconsolidated joint venture			—			3,823			—
Other income			2,789			4,535			2,608
Total non-property income			3,585			20,664			2,608
Total revenues			695,964			642,568			516,071
EXPENSES
Rental expenses:
Real estate taxes and insurance			83,058			74,510			59,795
Personnel			67,705			62,674			52,937
Utilities			39,767			36,494			30,897
Repair and maintenance			40,867			36,595			37,829
Administrative and marketing			21,263			21,463			17,904
Property management			20,265			19,309			17,881
Other operating expenses			1,238			1,178			1,226
Real estate depreciation and amortization			235,141			193,517			147,133
Interest			182,285			162,773			122,024
General and administrative			31,198			24,819			19,316
Other depreciation and amortization			3,009			2,655			3,201
Loss on early debt retirement			—			6,662			—
Total expenses			725,796			642,649			510,143
	��
(Loss)/income before minority interests and discontinued operations			(29,832	)		(81	)		5,928
Minority interests of outside partnerships			(103	)		(108	)		(182	)
Minority interests of unitholders in operating partnerships			2,710			918			1,230
(Loss)/income before discontinued operations, net of minority interests			(27,225	)		729			6,976
Income from discontinued operations, net of minority interests			155,830			154,437			90,176
Net income			128,605			155,166			97,152
Distributions to preferred stockholders — Series B			(11,644	)		(11,644	)		(11,644	)
Distributions to preferred stockholders — Series D (Convertible)			—			—			(3,473	)
Distributions to preferred stockholders — Series E (Convertible)			(3,726	)		(3,726	)		(4,414	)
Premium on preferred stock conversions			—			—			(5,729	)
Net income available to common stockholders		$	113,235		$	139,796		$	71,892
Earnings per common share — basic and diluted:
Loss from continuing operations available to common stockholders, net of minority interests		$	(0.32	)	$	(0.11	)	$	(0.14	)
Income from discontinued operations, net of minority interests		$	1.17		$	1.14		$	0.70
Net income available to common stockholders		$	0.85		$	1.03		$	0.56
Common distributions declared per share		$	1.25		$	1.20		$	1.17
Weighted average number of common shares outstanding — basic			133,732			136,143			128,097
Weighted average number of common shares outstanding — diluted			133,732			136,143			128,097

See accompanying notes to consolidated financial statements.

21

UDR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Years Ended December 31,
	2006			2005			2004
Operating Activities
Net income	$	128,605		$	155,166		$	97,152
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		246,934			215,192			184,088
Net gains on the sale of land and depreciable property		(148,614	)		(139,724	)		(52,903	)
Cancellation of operating partnership units in connection with the sale of equity investment		—			(1,000	)		—
Gain on the sale of technology investment		(796	)		(12,306	)		—
Gain on the sale of unconsolidated joint venture		—			(3,823	)		—
Distribution of earnings from unconsolidated joint venture		—			124			—
Minority interests		7,463			8,838			5,025
Amortization of deferred financing costs and other		6,063			5,287			7,206
Amortization of deferred compensation		—			2,939			2,780
Prepayments on income taxes		(6,288	)		—			—
Changes in operating assets and liabilities:
(Increase)/decrease in operating assets		(2,713	)		8,695			(1,769	)
(Decrease)/increase in operating liabilities		(1,041	)		8,798			10,168
Net cash provided by operating activities		229,613			248,186			251,747
Investing Activities
Proceeds from the sale of real estate investments, net		492,744			308,753			190,105
Repayment of notes receivable		59,805			64,845			75,586
Acquisition of real estate assets (net of liabilities assumed) and initial capital expenditures		(365,606	)		(413,744	)		(755,966	)
Development of real estate assets		(101,849	)		(49,343	)		(19,131	)
Capital expenditures and other major improvements — real estate assets, net of escrow reimbursement		(215,721	)		(156,122	)		(82,390	)
Capital expenditures — non-real estate assets		(3,465	)		(3,209	)		(1,578	)
Distributions to consolidated joint venture partners		(6,823	)		—			—
Proceeds from the sale of technology investment		796			12,306			—
Purchase deposits on pending real estate acquisitions		(4,354	)		—			—
Issuance of notes receivable		(5,500	)		—			—
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	)
Net cash used in investing activities		(149,973	)		(219,017	)		(595,966	)
Financing Activities
Proceeds from the issuance of secured debt		78,860			25,342			—
Scheduled principal payments on secured debt		(70,339	)		(8,611	)		(36,814	)
Non-scheduled principal payments on secured debt		—			(125,221	)		(95,011	)
Proceeds from the issuance of unsecured debt		375,000			499,983			475,775
Payments on unsecured debt		(138,849	)		(70,860	)		(46,585	)
Net (repayment)/proceeds of revolving bank debt		(123,600	)		(67,300	)		140,200
Purchase of capped call equity instrument		(12,588	)		—			—
Payment of financing costs		(10,284	)		(14,455	)		(8,849	)
Proceeds from the issuance of common stock		5,303			4,334			99,461
Proceeds from the repayment of officer loans		—			—			459
Proceeds from the issuance of performance shares		400			343			(50	)
Purchase of minority interests owned by Series A LLC		(2,059	)		—			—
Purchase of minority interest from outside partners		—			(522	)		—
Conversion of operating partnership units to cash		—			(50	)		—
Distributions paid to minority interests		(12,729	)		(12,900	)		(13,553	)
Distributions paid to preferred stockholders		(15,370	)		(15,370	)		(20,347	)
Distributions paid to common stockholders		(166,785	)		(163,001	)		(147,387	)
Repurchases of common and preferred stock		—			(73,242	)		—
Net cash (used in)/provided by financing activities		(93,040	)		(21,530	)		347,299
Net (decrease)/increase in cash and cash equivalents		(13,400	)		7,639			3,080
Cash and cash equivalents, beginning of year		15,543			7,904			4,824
Cash and cash equivalents, end of year	$	2,143		$	15,543		$	7,904
Supplemental Information:
Interest paid during the period	$	174,871		$	160,367		$	115,519
Non-cash transactions:
Conversion of operating partnership minority interests to common stock (381,001 shares in 2006, 99,573 shares in 2005, 170,209 shares in 2004)		7,988			1,444			2,035
Conversion of minority interests in Series B, LLC		—			690			—
Issuance of restricted stock awards		2,754			7,709			3,250
Issuance of operating partnership units in connection with acquisitions		—			7,653			—
Cancellation of a note receivable with the acquisition of a property		—			—			8,000
Secured debt assumed with the acquisition of properties		24,512			26,825			311,714
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			—
Non-cash transactions associated with consolidated joint venture:
Real estate assets acquired		62,059			—			—
Secured debt assumed		33,627			—			—
Operating liabilities assumed		3,840			—			—

See accompanying notes to consolidated financial statements.

22

UDR, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

																			Deferred			Notes
																Distributions			Compensation-			Receivable			Accumulated
																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, 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	)

23

UDR, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY — (Continued)

(In thousands, except share data)

															Deferred		Notes
												Distributions			Compensation-		Receivable		Accumulated
												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, 2005		8,219,821		181,971		134,012,053		1,340		1,680,115			(755,702	)		—		—		—		1,107,724
Comprehensive Income
Net income													128,605									128,605
Comprehensive income													128,605									128,605
Issuance of common and restricted shares and other						636,072		6		9,357												9,363
Adjustment for conversion of minority interests of unitholders in operating partnerships						381,001		4		7,984												7,988
Adjustment for conversion of minority interests owned by Series A LLC										(2,059	)											(2,059	)
Purchase of capped call equity instrument										(12,588	)											(12,588	)
Common stock distributions declared ($1.25 per share)													(168,408	)								(168,408	)
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, 2006		8,219,821	$	181,971		135,029,126	$	1,350	$	1,682,809		$	(810,875	)	$	—	$	—	$	—	$	1,055,255

See accompanying notes to consolidated financial statements.

24

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and formation

UDR, Inc., a Maryland corporation, was formed in 1972. We operate 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, 2006, we owned 242 communities and had five communities under development.

Basis of presentation

The accompanying consolidated financial statements include the accounts of UDR and its subsidiaries, including United Dominion Realty, L.P., (the “Operating Partnership”), and Heritage Communities L.P. (the “Heritage OP”), (collectively, “UDR”). As of December 31, 2006, there were 166,185,740 units in the Operating Partnership outstanding, of which 156,493,682 units or 94% were owned by UDR and 9,692,058 units or 6% were owned by limited partners (of which 1,650,322 are owned by the holders of the Series A OPPS). As of December 31, 2006, there were 5,542,200 units in the Heritage OP outstanding, of which 5,212,993 units or 94% were owned by UDR and 329,207 units or 6% were owned by limited partners. The consolidated financial statements of UDR 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 acquisitionand/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.

UDR 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.

UDR 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

25

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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. UDR 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. UDR determines the fair value of in-place leases by considering the cost of acquiring similar leases, the foregone rents associated with thelease-up period, and the carrying costs associated with thelease-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 actively marketed or contracted for sale which are expected to close within the next twelve months. 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 anasset-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 forlease-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 2006, 2005, and 2004, total interest capitalized was $5.2 million, $2.8 million, and $1.0 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 2006, 2005, and 2004, amortization expense was $6.1 million, $6.5 million, and $5.1 million, respectively.

26

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 UDR does not have control of the assets. Investments are recorded at cost and subsequently adjusted for equity in net income (loss) and cash contributions and distributions. UDR 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 UDR through fees during construction.

Revenue recognition

UDR’s apartment homes are leased under operating leases with terms generally of one year or less. Rental income is recognized as 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 2006, 2005, and 2004, total advertising expense was $9.3 million, $11.2 million, and $10.5 million, respectively.

Interest rate swap agreements

UDR 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, 2006, UDR has no derivative financial instruments reported on its Consolidated Balance Sheet. Prior to their maturity in July 2004, UDR’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 UDR’s overall interest rate risk management strategy, UDR used derivative financial instruments as a means to artificially fix variable rate debt or to hedge anticipated financing transactions. UDR’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 UDR. 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, UDR appropriately controlled the risk so that derivatives used for interest rate risk management would not have a material unintended effect on consolidated earnings. UDR does not enter into derivative financial instruments for trading purposes.

The fair value of UDR’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

27

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Comprehensive income

Comprehensive income, which is defined as all changes in equity during each period except for those resulting from investments by or distributions to stockholders, is displayed in the accompanying Statements of Stockholders’ Equity. Other comprehensive income for 2004 consisted of unrealized gains or losses from derivative financial instruments. There is no difference between net income and total comprehensive income for 2006 and 2005.

Stock-based employee compensation plans

UDR 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.” UDR adopted Statement 123(R) on January 1, 2006, and has continued to use the Black-Scholes-Merton formula to estimate the value of stock options granted to employees, which have not been granted since 2002. 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 (as of January 1, 2006, there were no unvested stock options). UDR adopted Statement 123 using the modified prospective transition method (which applied only to awards granted, modified or settled after the adoption date). The adoption of the provisions of Statement 123(R) did not have a material impact on our financial position, results of operations, or cash flows.

Minority interests of unitholders 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 UDR’s common stock on aone-for-one basis, at the option of UDR. OP Units, as a percentage of total OP Units and shares outstanding, were 6.1% at December 31, 2006, 5.9% at December 31, 2005, and 6.3% at December 31, 2004.

Minority interests of outside partnerships

UDR 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

28

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 UDR’s average stock price.

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

	2006			2005			2004
Numerator for basic and diluted earnings per share —
Net income available to common stockholders	$	113,235		$	139,796		$	71,892
Denominator:
Denominator for basic earnings per share —
Weighted average common shares outstanding		134,533			136,920			128,711
Non-vested restricted stock awards		(801	)		(777	)		(614	)
		133,732			136,143			128,097
Effect of dilutive securities:
Employee stock options, non-vested restricted stock awards, and convertible debt		—			—			—
Denominator for dilutive earnings per share		133,732			136,143			128,097
Basic earnings per share	$	0.85		$	1.03		$	0.56
Diluted earnings per share	$	0.85		$	1.03		$	0.56

The effect of the conversion of the operating partnership units, Series A, Series C, and Series D Out-Performance Partnership Shares, convertible preferred stock, and convertible debt 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, 2006, would be 8,693,981, 8,545,786, and 8,669,310 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, 2006, would be 1,716,659, 1,778,251, and 1,791,329 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, 2006, would be 2,803,812, 2,803,812, and 6,301,821 weighted average common shares, respectively. If the Series C and Series D Out-Performance Partnership Shares were converted to common stock, the additional shares of common stock outstanding for the year ended December 31, 2006, would be 313,145 and 75,869 weighted average common shares, respectively. If the convertible debt was converted to common stock, the additional shares of common stock outstanding for the year ended December 31, 2006, would be 68,132 weighted average common shares.

Income taxes

UDR 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. UDR 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

Consolidation of development partnerships

UDR adopted FASB Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities,” as required, effective March 31, 2004. The adoption required the consolidation of all previously unconsolidated development projects, in which UDR was deemed to be the primary beneficiary. FIN No. 46 requires the Company to consolidate the assets, liabilities and results of operations of the activities of a variable interest entity, for which the Company includes only its development partnerships, if the Company is the primary beneficiary of the partnership. The primary beneficiary is the partner that is entitled to receive a majority of the entity’s residual returnsand/or is subject to a majority of the risk of loss from such entity’s activities. As of December 31, 2006, UDR was the primary beneficiary of, and therefore consolidated, its three development partnerships.

Impact of recently issued accounting pronouncements

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.” This interpretation requires that income tax positions recognized in an entity’s tax returns have a more-likely-than-not chance of being sustained prior to recording the related tax benefit in the financial statements. Tax benefits would be derecognized if information became available which indicated that it was more-likely-than-not that the position would not be sustained. UDR will adopt this interpretation in the first quarter of fiscal 2007. The Company has substantially completed its analysis of the interpretation and does not expect it to have a material impact on its financial position.

2.   REAL ESTATE OWNED

UDR operates in 33 markets dispersed throughout 16 states. At December 31, 2006, our largest apartment market was Orange County, California, where we owned 12% of our apartment homes, based upon carrying value. Excluding Orange County, California, UDR did not own more than 7% of its apartment homes in any one market, based upon carrying value.

The following table summarizes real estate held for investment at December 31, with restated amounts that reflect discontinued operations as of March 31, 2007(dollars in thousands):

	2006			2005
Land and land improvements	$	1,347,707		$	1,220,654
Buildings and improvements		3,855,313			3,466,573
Furniture, fixtures, and equipment		299,449			243,858
Real estate held for investment		5,502,469			4,931,085
Accumulated depreciation		(1,237,010	)		(1,000,109	)
Real estate held for investment, net	$	4,265,459		$	3,930,976

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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, 2006 (dollars in thousands):

	Number of		Initial
	Apartment		Acquisition		Carrying		Accumulated
	Communities		Cost		Value		Depreciation		Encumbrances
WESTERN REGION
Orange County, CA		13	$	642,350	$	684,460	$	50,353	$	114,255
San Francisco, CA		9		371,164		388,672		42,068		19,645
Los Angeles, CA		6		186,774		197,287		21,291		90,722
San Diego, CA		5		154,551		162,878		15,434		39,176
Inland Empire, CA		3		91,763		145,540		14,124		13,394
Monterey Peninsula, CA		7		85,323		144,133		27,064		—
Seattle, WA		6		107,432		114,875		17,159		58,621
Portland, OR		5		76,990		86,271		14,912		20,576
Sacramento, CA		2		51,899		64,563		16,005		45,837
MID-ATLANTIC REGION
Metropolitan DC		8		214,961		249,271		39,663		30,691
Raleigh, NC		11		179,935		229,947		80,499		68,059
Baltimore, MD		10		146,257		176,424		46,277		13,286
Richmond, VA		9		106,326		174,696		62,532		61,532
Wilmington, NC		6		64,213		103,893		39,035		—
Charlotte, NC		6		63,833		88,685		24,081		—
Norfolk, VA		6		42,741		74,475		32,261		9,118
Other Mid-Atlantic		13		92,985		145,972		59,316		36,232
SOUTHEASTERN REGION
Tampa, FL		12		213,597		273,531		71,233		63,253
Orlando, FL		12		142,034		219,802		78,286		47,871
Nashville, TN		10		132,719		187,754		49,632		71,585
Jacksonville, FL		4		82,178		110,344		31,193		17,043
Atlanta, GA		6		57,669		84,779		32,394		23,884
Other Florida		8		132,913		164,164		39,076		52,588
Other Southeastern		7		54,609		79,467		34,947		—
SOUTHWESTERN REGION
Houston, TX		16		185,965		265,438		79,615		40,693
Dallas, TX		6		192,525		199,570		22,376		23,971
Arlington, TX		6		75,335		95,916		29,851		20,543
Austin, TX		5		75,779		87,073		24,055		6,073
Denver, CO		2		64,362		70,425		18,699		—
Phoenix, AZ		3		45,168		67,116		21,949		27,771
Other Southwestern		6		122,301		149,892		45,924		41,674
MIDWESTERN REGION
Columbus, OH		6		111,315		165,785		46,884		40,635
Other Midwestern		3		20,241		24,890		6,694		6,241
Richmond Corporate		—		554		4,091		1,137		—
Commercial		—		20,223		20,390		991		10,276
		237	$	4,408,984	$	5,502,469	$	1,237,010	$	1,115,245

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a summary of real estate held for disposition by major category at December 31, 2006, with restated amounts that reflect discontinued operations as of March 31, 2007 (dollars in thousands):

	Initial
	Acquisition		Carrying		Accumulated
	Cost		Value		Depreciation		Encumbrances
Apartments	$	107,117	$	109,193	$	16,190	$	—
Land		3,932		4,147		—		—
	$	111,049	$	113,340	$	16,190	$	—

The following is a summary of real estate under development by major category at December 31, 2006, with restated amounts that reflect discontinued operations as of March 31, 2007(dollars in thousands):

	Initial
	Acquisition		Carrying		Accumulated
	Cost		Value		Depreciation		Encumbrances
Apartments	$	20,752	$	34,377	$	—	$	—
Land and joint ventures		109,776		169,936		527		67,674
	$	130,528	$	204,313	$	527	$	67,674
Total Real Estate Owned	$	4,650,561	$	5,820,122	$	1,253,727	$	1,182,919

3.   INCOME FROM DISCONTINUED OPERATIONS

UDR 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 UDR’s real properties which have been sold or are held for disposition, be classified as discontinued operations and segregated in UDR’s Consolidated Statements of Operations and Balance Sheets. Properties classified as real estate held for disposition generally represent properties that are actively marketed or contracted for sale which 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 March 31, 2007, 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 March 31, 2007 within the Consolidated Statements of Operations for the years ended December 31, 2006, 2005, and 2004, and the reclassification of the assets and liabilities within the Consolidated Balance Sheets as of December 31, 2006 and 2005.

For the three months ended March 31, 2007, UDR sold two communities and eight condominiums from one community with a total of 320 condominiums, and one parcel of land. We recognized after-tax gains for financial reporting purposes of $41.5 million on these sales. At March 31, 2007, UDR had one community with a net book value of $54.9 million, one community with a total of 312 condominiums and a net book value of $20.6 million, and one commercial unit with a net book value of $0.4 million included in real estate held for disposition. For the year ended December 31, 2006, UDR sold 24 communities and 384 condominiums from four communities with a total of 612 condominiums. We recognized gains for financial reporting purposes of $148.6 million on these sales. At December 31, 2006, UDR had two communities with a net book value of $18.3 million, one community with a total of 320 condominiums and a net book value of $19.0 million, one commercial unit with a net book value of $0.4 million, and one parcel of land with a net book value of $4.1 million included in real estate held for disposition. During 2005, UDR sold 22 communities, 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. 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, 2006, all of the notes receivable had matured and had been repaid. We recognized previously deferred gains for financial reporting

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

purposes of $6.4 million for the twelve months ended December 31, 2006. During 2004, UDR sold 19 communities, 24 condominiums from a community of 36 condominiums, and one parcel of land. 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, with restated amounts that reflect discontinued operations as of March 31, 2007(dollars in thousands):

	2006			2005			2004
Rental income	$	44,534		$	80,466		$	136,944
Non-property income/(loss)		5			8			(2	)
		44,539			80,474			136,942
Rental expenses		19,571			35,321			57,866
Real estate depreciation		8,748			18,907			33,495
Interest		(1,102	)		(49	)		1,977
Loss on early debt retirement		—			1,821			—
Other expenses		36			113			258
		27,253			56,113			93,596
Income before net gain on the sale of depreciable property and minority interests		17,286			24,361			43,346
Net gain on the sale of land and depreciable property		148,614			139,724			52,903
Income before minority interests		165,900			164,085			96,249
Minority interests on income from discontinued operations		(10,070	)		(9,648	)		(6,073	)
Income from discontinued operations, net of minority interests	$	155,830		$	154,437		$	90,176

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4.   SECURED DEBT

Secured debt on continuing and discontinued operations of UDR’s real estate portfolio, which encumbers $1.9 billion or 33% of real estate owned based upon book value ($3.9 billion or 67% of UDR’s real estate owned is unencumbered) consists of the following as of December 31, 2006(dollars in thousands):

					Weighted			Weighted		Number of
	Principal Outstanding				Average			Average		Properties
	December 31,		December 31,		Interest Rate			Years to Maturity		Encumbered
	2006		2005		2006			2006		2006
Fixed Rate Debt
Mortgage notes payable	$	352,159	$	359,281		5.49	%		4.7		15
Tax-exempt secured notes payable		26,070		26,400		5.84	%		18.2		3
Fannie Mae credit facilities		399,362		363,875		6.09	%		4.4		9
Total fixed rate secured debt		777,591		749,556		5.81	%		5.0		27
Variable Rate Debt
Mortgage notes payable		105,089		66,464		6.42	%		4.3		4
Tax-exempt secured note payable		7,770		7,770		3.70	%		21.5		1
Fannie Mae credit facility		292,469		292,469		5.86	%		5.8		46
Total variable rate secured debt		405,328		366,703		5.97	%		5.7		51
Total secured debt	$	1,182,919	$	1,116,259		5.86	%		5.2		78

Fixed Rate Debt

Mortgage notes payable.  Fixed rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from December 2007 through July 2027 and carry interest rates ranging from 4.55% to 8.18%.

Tax-exempt secured notes payable.  Fixed 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 facilities.  At December 31, 2006, UDR’s fixed rate secured credit facilities consisted of $399.4 million of the $691.8 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, 2006, the fixed rate Fannie Mae credit facilities had a weighted average fixed rate of interest of 6.09%.

Variable Rate Debt

Mortgage notes payable.  Variable rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from October 2009 through July 2013. As of December 31, 2006, these notes had interest rates ranging from 5.99% to 7.70%.

Tax-exempt secured note payable.  The variable rate mortgage note payable that secures tax-exempt housing bond issues matures in July 2028. As of December 31, 2006, this note had an interest rate of 3.70%. Interest on this note is payable in monthly installments.

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Secured credit facilities.  At December 31, 2006, UDR’s variable rate secured credit facilities consisted of $292.5 million outstanding on the Fannie Mae credit facilities. As of December 31, 2006, the variable rate Fannie Mae credit facilities had a weighted average floating rate of interest of 5.86%.

The aggregate maturities of secured debt for the five years subsequent to December 31, 2006 are as follows(dollars in thousands):

	Fixed						Variable
	Mortgage		Tax-Exempt		Credit		Mortgage		Tax-Exempt		Credit
Year	Notes		Notes		Facilities		Notes		Notes		Facilities		Total
2007	$	81,376	$	345	$	—	$	—	$	—	$	—	$	81,721
2008		4,346		5,135		—		—		—		—		9,481
2009		27,763		245		—		45,403		—		—		73,411
2010		98,027		265		174,362		22,271		—		—		294,925
2011		11,726		280		50,000		—		—		39,513		101,519
Thereafter		128,921		19,800		175,000		37,415		7,770		252,956		621,862
	$	352,159	$	26,070	$	399,362	$	105,089	$	7,770	$	292,469	$	1,182,919

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.

35

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5.   UNSECURED DEBT

A summary of unsecured debt as of December 31, 2006 and 2005 is as follows(dollars in thousands):

	2006		2005
Commercial Banks
Borrowings outstanding under an unsecured credit facility due May 2008(a)	$	87,200	$	210,800
Senior Unsecured Notes — Other
7.95% Medium-Term Notes due July 2006		—		85,374
7.07% Medium-Term Notes due November 2006		—		25,000
7.25% Notes due January 2007(b)		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
3.625% Convertible Senior Notes due September 2011(c)		250,000		—
5.00% Medium-Term Notes due January 2012		100,000		100,000
6.05% Medium-Term Notes due June 2013		121,345		—
5.13% Medium-Term Notes due January 2014		200,000		200,000
5.25% Medium-Term Notes due January 2015		250,000		250,000
5.25% Medium-Term Notes due January 2016		100,000		100,000
8.50% Debentures due September 2024		54,118		54,118
4.00% Convertible Senior Notes due December 2035(d)		250,000		250,000
Other		167		370
		2,021,966		1,761,198
Unsecured Notes — Other
Verano Construction Loan due February 2006		—		24,820
ABAG Tax-Exempt Bonds due August 2008		46,700		46,700
		46,700		71,520
Total Unsecured Debt	$	2,155,866	$	2,043,518

(a)	UDR has a three-year $500 million unsecured revolving credit facility. The credit facility matures on May 31, 2008, and at UDR’s option, can be extended for an additional year. UDR has the right to increase the credit facility to $750 million under certain circumstances. Based on UDR’s current credit ratings, the credit facility carries an interest rate equal to LIBOR plus a spread of 57.5 basis points. Under a competitive bid feature, and for so long as UDR maintains an Investment Grade Rating, UDR has the right to bid out 100% of the commitment amount.
(b)	In January 2007, this medium-term note matured and was repaid using proceeds from property dispositions.
(c)	At any time on or after July 15, 2011, prior to the close of business on the second business day prior to September 15, 2011, and also following the occurrence of certain events, the notes will be convertible at the option of the holder. Upon conversion of the notes, UDR will deliver cash and common stock, if any,

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UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

based on a daily conversion value calculated on a proportionate basis for each trading day of the relevant 30 trading day observation period. The initial conversion rate for each $1,000 principal amount of notes is 26.6326 shares of our common stock, subject to adjustment under certain circumstances. In connection with the issuance of the 3.625% convertible senior notes, UDR entered into a capped call transaction with respect to its common stock. The convertible note and capped call transactions, both of which expire September 2011, must be net share settled. The maximum number of shares to be issued under the convertible notes is 6.7 million shares, subject to certain adjustment provisions. The capped call transaction combines a purchased call option with a strike price of $37.548 with a written call option with a strike price of $43.806. These transactions have no effect on the terms of the 3.625% convertible senior notes and are intended to reduce the potential dilution upon future conversion of the 3.625% convertible senior notes by effectively increasing the initial conversion price to $43.806 per share, representing a 40% conversion premium. The net cost of $12.6 million of the capped call transaction was included in stockholders’ equity.

(d)

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 UDR’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 UDR’s common stock at the above initial conversion rate. The initial conversion rate is subject to adjustment in certain circumstances.

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

	2006			2005			2004
Total revolving credit facilities at December 31	$	500,000		$	500,000		$	500,000
Borrowings outstanding at December 31		87,200			210,800			278,100
Weighted average daily borrowings during the year		264,102			315,487			127,665
Maximum daily borrowings during the year		415,800			440,200			356,500
Weighted average interest rate during the year		5.3	%		3.6	%		2.0	%
Weighted average interest rate at December 31		5.6	%		4.7	%		2.7	%

The aggregate maturities of unsecured debt for the five years subsequent to December 31, 2006 are as follows(dollars in thousands):

	Credit		Unsecured
Year	Facility		Debt		Total
2007	$	—	$	167,265	$	167,265
2008		87,200		275,790		362,990
2009		—		250,009		250,009
2010		—		50,010		50,010
2011		—		250,009		250,009
Thereafter		—		1,075,583		1,075,583
	$	87,200	$	2,068,666	$	2,155,866

37

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

Distributions declared on the Series B in 2006 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, 2006 and 2005, a total of 5,416,009 shares of the Series B were outstanding.

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.

Distributions declared on the Series E in 2006 were $1.33 per share or $0.3322 per quarter. The Series E is not listed on any exchange. At December 31, 2006 and 2005, a total of 2,803,812 shares of the Series E were outstanding.

UDR is authorized to issue up to 20,000,000 shares of our Series F Preferred Stock. The Series F Preferred Stock may be purchased by holders of UDR’s operating partnership units, or OP Units, at a purchase price of $0.0001 per share. OP Unitholders are entitled to subscribe for and purchase one share of UDR’s Series F Preferred Stock for each OP Unit held. At December 31, 2006, a total of 666,293 shares of the Series F Preferred Stock were outstanding at a value of $66.63. As of December 31, 2005, we had not issued any shares of our Series F Preferred Stock. Holders of the Series F Preferred Stock are 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

UDR’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 UDR’s common stock. As of December 31, 2006, 9,893,700 shares of common stock had been issued under the Stock Purchase Plan. Shares in the amount of 15,106,300 were reserved for further issuance under the Stock Purchase Plan as of December 31, 2006. During 2006, 44,691 shares were issued under the Stock Purchase Plan for a total consideration of approximately $1.3 million.

Restricted Stock Awards

UDR’s 1999 Long-Term Incentive Plan (“LTIP”) authorizes the grant of restricted stock awards to employees, officers, consultants, and directors of UDR. 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

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December 31, 2006, 2005 and 2004, we recognized $4.5 million, $3.2 million, and $2.7 million, respectively, of compensation expense related to the amortization of restricted stock. As of December 31, 2006, 1,268,448 shares of restricted stock have been issued under the LTIP.

Shareholder Rights Plan

UDR’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 UDR. The plan authorized a dividend of one Preferred Share Purchase Right (the “Rights”) on each share of common stock outstanding. Each Right, which is not currently exercisable, will entitle the holder to purchase 1/1000 of a share of a new series of UDR’s preferred stock, 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 UDR’s common stock or announces a tender offer that would result in the ownership of 15% of UDR’s common stock.

7.   FINANCIAL INSTRUMENTS

The following estimated fair values of financial instruments were determined by UDR 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 UDR 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 UDR’s financial instruments as of December 31, 2006 and 2005, are summarized as follows(dollars in thousands):

	2006				2005
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Secured debt	$	1,182,919	$	1,178,078	$	1,116,259	$	1,123,108
Unsecured debt		2,155,866		2,056,929		2,043,518		2,032,211

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

Cash equivalents

The carrying amount of cash equivalents approximates fair value.

Notes receivable

At December 31, 2006, UDR has a promissory note in the principal amount of $1.5 million that is due in February 2016. The note was received in connection with our investment in the development of an online leasing software and bears interest at 10.0%. In July 2006, UDR received a promissory note in the amount of $4.0 million that became due in January 2007. This note was received in connection with a joint venture project and bears interest at 6.8%. The carrying amount of these notes receivable approximate their fair value.

In July 2005, UDR 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, 2006, all of the notes receivable had matured and had been repaid. We recognized previously deferred gains for financial reporting purposes of $6.4 million during 2006.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In June 2003, UDR 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 this note receivable approximates its 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 UDR for the issuance of debt with similar terms and remaining lives. The carrying amount of UDR’s variable rate secured debt approximates fair value as of December 31, 2006 and 2005. The carrying amounts of UDR’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, 2006 and 2005.

8.   INCOME TAXES

The aggregate cost of our real estate assets for federal income tax purposes was approximately $5.3 billion at December 31, 2006.

The following table reconciles UDR’s net income to REIT taxable income for the three years ended December 31, 2006(dollars in thousands):

	2006			2005			2004
Net income	$	128,605		$	155,166		$	97,152
Elimination of TRS income		(6,955	)		(17,802	)		(1,120	)
Minority interest		(4,219	)		(1,828	)		(1,950	)
Depreciation and amortization expense		66,754			56,274			46,916
Disposition of properties		47,168			(74,323	)		(10,029	)
Revenue recognition timing differences		(1,249	)		(87	)		(195	)
Investment loss, not deductible for tax		—			—			(593	)
Capitalized interest		1,620			1,720			—
Compensation related differences		(3,264	)		(2,174	)		(3,174	)
Other expense timing differences		173			(706	)		2,102
Net operating loss		(47,522	)		—			—
REIT taxable income before dividends	$	181,111		$	116,240		$	129,109
Dividend paid deduction	$	181,111		$	149,475		$	153,409

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as a gain from the sale or exchange of that stockholder’s common shares. For the three years ended December 31, 2006, distributions paid per common share were taxable as follows:

	2006		2005		2004
Ordinary income	$	0.48	$	0.63	$	0.76
Long-term capital gain		0.46		0.22		0.20
Unrecaptured section 1250 gain		0.30		0.13		0.08
Return of capital		—		0.21		0.12
	$	1.24	$	1.19	$	1.16

We have taxable REIT subsidiaries that are subject to state and federal income taxes. Income tax expense consists of the following for the three years ended December 31, 2006, and is included in gains on the sales(dollars in thousands):

	2006			2005		2004
Income tax expense/(benefit)
Current	$	5,533		$	11,090	$	867
Deferred		(680	)		313		—
Total income tax expense	$	4,853		$	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 three years ended December 31, 2006, as follows(dollars in thousands):

	2006			2005		2004
Income tax expense/(benefit)
Computed tax expense	$	4,134		$	10,193	$	675
Permanent book/tax difference		(99	)		—		—
State income tax (net of federal benefit) and other		818			1,210		192
Total income tax expense	$	4,853		$	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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

tax purposes. Our taxable REIT subsidiary’s deferred tax assets and liabilities are as follows for the three years ended December 31, 2006(dollars in thousands):

	2006			2005			2004
Deferred tax assets:
Depreciation	$	550		$	—		$	—
Capitalized interest		159			—			—
Pre-paid rent		84			19			—
Warranty expense		11			—			—
Total deferred tax assets		804			19			—
Deferred tax liabilities:
Depreciation		—			(17	)		—
Interest		(437	)		(315	)		—
Total deferred tax liabilities		(437	)		(332	)		—
Net deferred tax asset/(liability)	$	367		$	(313	)	$	—

9.   EMPLOYEE BENEFIT PLANS

Profit Sharing Plan

Our Profit Sharing Plan (the “Plan”) is a defined contribution plan covering all eligible full-time employees. Under the Plan, UDR makes discretionary profit sharing and matching contributions to the Plan as determined by the Compensation Committee of the Board of Directors. Aggregate provisions for contributions, both matching and discretionary, which are included in UDR’s Consolidated Statements of Operations for the three years ended December 31, 2006, 2005, and 2004 were $0.7 million, $0.6 million, and $0.6 million, respectively.

Stock Option Plan

In May 2001, the stockholders of UDR 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.

UDR 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.” UDR adopted Statement 123(R) on January 1, 2006, and has continued to use the Black-Scholes-Merton formula to estimate the value of stock options granted to employees, which have not been granted since 2002. 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 (as of January 1, 2006, there were no unvested stock options). UDR adopted Statement 123 using the modified prospective transition method (which applied only to awards granted, modified or settled after the adoption date). The adoption of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the provisions of Statement 123(R) did not have a material impact on our financial position, results of operations, or cash flows.

A summary of UDR’s stock option activity during the three years ended December 31, 2006, is provided in the following table:

	Number			Weighted Average		Range of
	Outstanding			Exercise Price		Exercise Prices
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
Granted		—			—					—
Exercised		(315,333	)		13.52		9.63	—		15.38
Forfeited		(27,500	)		11.47		9.63	—		14.63
Balance, December 31, 2006		1,299,390			11.44		9.63	—		15.38
Exercisable at December 31, 2004		1,938,343		$	11.84	$	9.63	—	$	15.38
2005		1,635,666			11.82		9.63	—		15.38
2006		1,299,390			11.44		9.63	—		15.38

The weighted average remaining contractual life on all options outstanding is 3.7 years. 578,110 of share options had exercise prices between $9.63 and $10.88, 527,296 of share options had exercise prices between $11.15 and $12.23, and 193,984 of share options had exercise prices between $13.94 and $15.38.

As of December 31, 2006 and 2005, stock-based awards for 2,286,091 and 2,583,586 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

UDR is committed to completing its wholly owned real estate currently under development, which has an estimated cost to complete of $52.6 million as of December 31, 2006.

UDR is committed to completing its development joint venture projects, which have an estimated cost to complete of $235.5 million at December 31, 2006.

UDR has entered into three contracts to purchase apartment communities upon their development completion. Provided that the developer meets certain conditions, UDR will purchase these communities for approximately $105.0 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Land and Other Leases

UDR is party to several ground leases relating to operating communities. In addition, UDR is party to various other operating leases related to the operation of its regional offices and equipment. Future minimum lease payments for non-cancelable land and other leases as of December 31, 2006 are as follows(dollars in thousands):

	Ground		Operating
	Leases		Leases
2007	$	1,151	$	1,619
2008		1,151		1,573
2009		1,154		1,582
2010		1,154		1,065
2011		1,154		308
Thereafter		20,971		—
	$	26,735	$	6,147

UDR incurred $2.8 million, $2.4 million and $1.9 million of rent expense for the years ended December 31, 2006, 2005, and 2004.

Contingencies

Series C Out-Performance Program

In May 2005, the stockholders of UDR approved a new Out-Performance Program and the first series of new Out-Performance Partnership Shares under the program are the Series C Out-Performance Units (the “Series C Program”) pursuant to which certain executive officers and other key employees of UDR (the “Series C Participants”) were given the opportunity to purchase 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 the Operating Partnership (“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 UDR’s board of directors to be $750,000, assuming 100% participation, and was based upon the advice of an independent valuation expert. UDR’s performance for the Series C Program will be measured over the36-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 cumulative total return on UDR’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 UDR’s cumulative total 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 UDR’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 UDR’s market capitalization (defined as the average number of shares outstanding over the36-month period, including common stock, common stock equivalents and OP Units); and

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iii. dividing the number obtained in clause (ii) by the market value of one share of UDR’s common stock on the valuation date, computed as the volume-weighted average price per day of common stock for the 20 trading days immediately preceding the valuation date.

For the Series C OPPSs, the number determined pursuant to (ii) above is capped at 1% of market capitalization.

If, on the valuation date, the cumulative total return of UDR’s common stock does not meet the Minimum Return, then the Series C Participants will forfeit their entire initial investment.

Based on the results through December 31, 2006, 313,145 Series C OPPSs would have been issued had the Program terminated on that date. However, since the ultimate determination of Series C OPPSs to be issued will not occur until May 30, 2008, and the number of Series C OPPSs is determinable only upon future events, the financial statements do not reflect any impact for these events. Accordingly, the contingently issuable Series C OPPSs will only be included in basic earnings per share after the measurement period has ended and the applicable hurdle has been met. Furthermore, the Series C OPPSs will only be included in common stock and common stock equivalents in the calculation of diluted earnings per share after the measurement period has ended and the hurdle has been met at the end of the reporting period (if any), assuming the measurement period ended at the end of the reporting period.

Series D Out-Performance Program

In February 2006, the board of directors of UDR approved the Series D Out-Performance Program (the “Series D Program”) pursuant to which certain executive officers and other key employees of UDR (the “Series D Participants”) were given the opportunity to purchase interests in UDR Out-Performance IV, LLC, a Delaware limited liability company (the “Series D LLC”), the only asset of which is a special class of partnership units of the Operating Partnership (“Series D Out-Performance Partnership Shares” or “Series D OPPSs”) . The Series D Program is part of the New Out-Performance Program approved by UDR’s stockholders in May 2005. The Series D LLC has agreed to sell 830,000 membership units to members of UDR’s senior management at a price of $1.00 per unit. The aggregate purchase price of $830,000 for the Series D OPPSs, assuming 100% participation, is based upon the advice of an independent valuation expert. The Series D Program will measure the cumulative total return on our common stock over the36-month period beginning January 1, 2006 and ending December 31, 2008.

The Series D Program is designed to provide participants with the possibility of substantial returns on their investment if the cumulative total return on UDR’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 UDR’s cumulative total return satisfies these criteria, the Series D LLC as holder of the Series D OPPSs will receive (for the indirect benefit of the Series D Participants as holders of interests in the Series D 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 UDR’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 UDR’s market capitalization (defined as the average number of shares outstanding over the36-month period, including common stock, OP Units, common stock equivalents and OP Units); and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

iii. dividing the number obtained in (ii) by the market value of one share of UDR’s common stock on the valuation date, computed as the volume-weighted average price per day of the common stock for the 20 trading days immediately preceding the valuation date.

For the Series D OPPSs, the number determined pursuant to clause (ii) above is capped at 1% of market capitalization.

If, on the valuation date, the cumulative total return of UDR’s common stock does not meet the Minimum Return, then the Series D Participants will forfeit their entire initial investment.

Based on the results through December 31, 2006, 75,869 Series D OPPSs would have been issued had the Program terminated on that date. However, since the ultimate determination of Series D OPPSs to be issued will not occur until December 31, 2008, and the number of Series D OPPSs is determinable only upon future events, the financial statements do not reflect any impact for these events. Accordingly, the contingently issuable Series D OPPSs will only be included in basic earnings per share after the measurement period has ended and the applicable hurdle has been met. Furthermore, the Series D OPPSs will only be included in common stock and common stock equivalents in the calculation of diluted earnings per share after the measurement period has ended and the hurdle has been met at the end of the reporting period (if any), assuming the measurement period ended at the end of the reporting period.

Litigation and Legal Matters

UDR is subject to various legal proceedings and claims arising in the ordinary course of business. UDR cannot determine the ultimate liability with respect to such legal proceedings and claims at this time. UDR 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.

11.   INDUSTRY SEGMENTS

UDR owns and operates multifamily apartment communities throughout the United States that generate rental and other property related income through the leasing of apartment homes to a diverse base of tenants. UDR 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 UDR’s consolidated financial statements.

There are no tenants that contributed 10% or more of UDR’s total revenues during 2006, 2005, or 2004.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12.   UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA

Summarized consolidated quarterly financial data for the year ended December 31, 2006, with restated amounts that reflect discontinued operations as of March 31, 2007, is as follows(dollars in thousands, except per share amounts):

	Three Months Ended
	Previously						Previously						Previously						Previously
	Reported			Restated			Reported			Restated			Reported			Restated			Reported			Restated
	March 31			March 31			June 30			June 30			September 30			September 30			December 31			December 31
Rental income (a)	$	166,432		$	166,432		$	169,955		$	169,859		$	177,329		$	176,339		$	180,757		$	179,749
Loss before minority interests and discontinued operations		(7,193	)		(7,193	)		(6,120	)		(6,145	)		(7,434	)		(7,355	)		(9,279	)		(9,139	)
Gain on sale of depreciable property		15,347			15,347			33,482			33,482			65,669			65,669			34,116			34,116
Income from discontinued operations, net of minority interests		18,550			18,550			37,748			37,771			66,060			65,984			33,654			33,525
Net income available to common stockholders		8,165			8,165			28,342			28,342			55,510			55,510			21,218			21,218
Earnings per common share:
Basic	$	0.06		$	0.06		$	0.21		$	0.21		$	0.42		$	0.42		$	0.16		$	0.16
Diluted		0.06			0.06			0.21			0.21			0.42			0.42			0.16			0.16

(a) Represents rental income from continuing operations.

Summarized consolidated quarterly financial data for the year ended December 31, 2005, with restated amounts that reflect discontinued operations as of March 31, 2007, is as follows(dollars in thousands, except per share amounts):

	Three Months Ended
	Previously				Previously				Previously						Previously
	Reported		Restated		Reported		Restated		Reported			Restated			Reported			Restated
	March 31		March 31		June 30		June 30		September 30			September 30			December 31			December 31
Rental income (a)	$	148,552	$	148,552	$	153,466	$	153,466	$	157,683		$	157,683		$	162,203		$	162,203
Income/(loss) before minority interests and discontinued operations		1,427		1,427		322		322		(1,435	)		(1,435	)		(395	)		(395	)
Gain on sale of land and depreciable property		7,023		7,023		46,781		46,781		12,851			12,851			73,069			73,069
Income from discontinued operations, net of minority interests		13,424		13,424		51,957		51,957		16,224			16,224			72,832			72,832
Net income available to common stockholders		11,099		11,099		48,599		48,599		11,292			11,292			68,806			68,806
Earnings per common share:
Basic	$	0.08	$	0.08	$	0.36	$	0.36	$	0.08		$	0.08		$	0.51		$	0.51
Diluted		0.08		0.08		0.36		0.36		0.08			0.08			0.51			0.51

(a) Represents rental income from continuing operations.

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UDR, INC.

SCHEDULE III — REAL ESTATE OWNED

FOR THE YEAR ENDED DECEMBER 31, 2006

									Cost of
									Improvements
									Capitalized		Gross Amount at
			Initial Costs				Total		Subsequent		Which Carried at Close of Period
			Land and		Buildings		Initial		to Acquisition		Land and		Buildings		Total
			Land		and		Acquisition		(Net of		Land		and		Carrying		Accumulated		Date of	Date
Property	Encumbrances		Improvements		Improvements		Costs		Disposals)		Improvements		Improvements		Value(A)		Depreciation(B)		Construction	Acquired
WESTERN REGION
Harbor at Mesa Verde	$	—	$	20,476,466	$	28,537,805	$	49,014,271	$	7,898,037	$	20,493,875	$	36,418,434	$	56,912,308	$	7,521,490	1965	06/12/03
Pine Brook Village		18,270,000		2,581,763		25,504,086		28,085,849		3,840,197		3,812,777		28,113,269		31,926,046		5,694,666	1979	06/12/03
Pacific Shores		19,145,000		7,345,226		22,623,676		29,968,902		5,763,978		7,347,018		28,385,862		35,732,880		5,581,412	1971	06/12/03
Huntington Vista		—		8,055,452		22,485,746		30,541,198		3,736,930		8,073,730		26,204,398		34,278,128		5,299,661	1970	06/12/03
Pacific Palms		—		12,285,059		6,236,783		18,521,843		1,059,650		12,364,081		7,217,412		19,581,493		1,668,641	1962	07/31/03
Missions at Back Bay		—		229,270		14,128,763		14,358,033		492,828		10,618,842		4,232,020		14,850,861		837,406	1969	12/16/03
Coronado at Newport — North		54,532,170		62,515,901		46,082,056		108,597,957		6,900,069		62,543,888		52,954,139		115,498,026		6,926,335	1968	10/28/04
Huntington Villas		—		61,535,270		18,017,201		79,552,471		1,964,805		61,553,308		19,963,968		81,517,276		2,948,686	1972	09/30/04
Villa Venetia		—		70,825,106		24,179,600		95,004,706		2,739,272		70,837,402		26,906,575		97,743,977		3,719,872	1972	10/28/04
Vista Del Rey		—		10,670,493		7,079,834		17,750,327		694,513		10,673,012		7,771,827		18,444,840		1,102,112	1969	09/30/04
Foxborough		—		12,070,601		6,186,721		18,257,322		987,236		12,083,292		7,161,266		19,244,558		1,023,741	1969	09/30/04
Coronado South		—		58,784,785		50,066,757		108,851,542		3,141,813		58,806,208		53,187,147		111,993,355		5,706,733	1970	03/31/05
The Arboretum		22,307,984		29,562,468		14,283,292		43,845,760		2,890,338		29,597,246		17,138,852		46,736,098		2,322,134	1970	10/28/04
ORANGE COUNTY, CA		114,255,154		356,937,860		285,412,320		642,350,180		42,109,666		368,804,677		315,655,169		684,459,846		50,352,889
2000 Post Street		—		9,860,627		44,577,506		54,438,133		2,854,200		10,040,340		47,251,993		57,292,333		10,241,644	1987	12/07/98
Birch Creek		7,539,128		4,365,315		16,695,509		21,060,824		3,786,621		4,712,807		20,134,638		24,847,445		6,042,586	1968	12/07/98
Highlands of Marin		—		5,995,838		24,868,350		30,864,188		2,604,763		6,163,618		27,305,332		33,468,951		6,873,751	1991	12/07/98
Marina Playa		12,105,709		6,224,383		23,916,283		30,140,666		4,504,014		6,519,309		28,125,371		34,644,680		8,492,079	1971	12/07/98
Crossroads Apartments		—		4,811,488		10,169,520		14,981,008		1,174,160		4,872,226		11,282,941		16,155,167		1,680,557	1986	07/28/04
River Terrace		—		22,161,247		40,137,141		62,298,388		504,613		22,162,242		40,640,759		62,803,001		3,442,358	2005	08/01/05
Lake Pines		—		14,031,365		30,536,982		44,568,346		938,762		14,031,365		31,475,744		45,507,108		2,005,839	1972	11/29/05
Bay Terrace		—		8,544,559		14,457,992		23,002,551		419,043		8,544,559		14,877,035		23,421,594		1,082,437	1962	10/07/05
Mill Creek		—		48,202,012		41,608,035		89,810,047		721,547		19,115,710		71,415,884		90,531,594		2,206,269	2006	06/21/06
SAN FRANCISCO, CA		19,644,837		124,196,833		246,967,317		371,164,151		17,507,721		96,162,176		292,509,697		388,671,873		42,067,520
The Crest		59,634,693		21,953,480		67,808,654		89,762,134		4,477,221		21,956,364		72,282,990		94,239,354		9,548,287	1989	09/30/04
Rosebeach		—		8,414,478		17,449,593		25,864,072		687,590		8,422,028		18,129,634		26,551,661		2,460,100	1970	09/30/04
The Villas at San Dimas		13,055,042		8,180,619		16,735,364		24,915,983		905,412		8,181,107		17,640,288		25,821,395		2,312,119	1981	10/28/04
The Villas at Bonita		8,305,381		4,498,439		11,699,117		16,197,556		356,713		4,499,424		12,054,845		16,554,268		1,595,089	1981	10/28/04
Ocean Villa		9,726,936		5,134,982		12,788,885		17,923,867		477,275		5,134,982		13,266,160		18,401,142		1,705,851	1965	10/28/04
Pine Avenue DCO		—		5,805,234		6,305,030		12,110,264		3,609,014		5,805,499		9,913,779		15,719,278		3,669,273	1987	08/28/06
LOS ANGELES, CA		90,722,051		53,987,232		132,786,643		186,773,875		10,513,224		53,999,403		143,287,696		197,287,099		21,290,719
Presidio at Rancho Del Oro		13,325,000		9,163,939		22,694,492		31,858,431		2,502,405		9,303,196		25,057,640		34,360,836		3,891,997	1987	06/25/04
Villas at Carlsbad		9,284,568		6,516,636		10,717,601		17,234,237		671,327		6,558,856		11,346,708		17,905,564		1,464,906	1966	10/28/04
Summit at Mission Bay		—		22,598,529		17,181,401		39,779,930		1,782,975		22,598,529		18,964,377		41,562,905		2,622,184	1953	11/01/04
Rancho Vallecitos		16,566,301		3,302,967		10,877,286		14,180,253		2,601,972		3,529,902		13,252,324		16,782,225		6,058,377	1988	10/13/99
Milazzo		—		15,920,401		35,577,599		51,498,000		768,629		15,920,401		36,346,228		52,266,629		1,396,695	1986	05/04/06
SAN DIEGO, CA		39,175,869		57,502,471		97,048,379		154,550,850		8,327,310		57,910,883		104,967,277		162,878,160		15,434,159
Verano at Town Square		—		13,557,235		3,645,406		17,202,641		50,769,275		22,844,185		45,127,731		67,971,916		3,155,283	2006	10/18/02
Windemere at Sycamore Highland		13,394,266		5,809,490		23,450,119		29,259,609		581,529		5,821,751		24,019,386		29,841,138		6,011,635	2001	11/21/02
Waterstone at Murrieta		—		10,597,865		34,702,760		45,300,625		2,426,382		10,633,799		37,093,208		47,727,007		4,956,576	1990	11/02/04
INLAND EMPIRE, CA		13,394,266		29,964,590		61,798,285		91,762,875		53,777,185		39,299,735		106,240,324		145,540,060		14,123,494

48

UDR, INC.

SCHEDULE III — REAL ESTATE OWNED — (Continued)

									Cost of
									Improvements
									Capitalized			Gross Amount at
			Initial Costs				Total		Subsequent			Which Carried at Close of Period
			Land and		Buildings		Initial		to Acquisition			Land and		Buildings		Total
			Land		and		Acquisition		(Net of			Land		and		Carrying		Accumulated		Date of	Date
Property	Encumbrances		Improvements		Improvements		Costs		Disposals)			Improvements		Improvements		Value(A)		Depreciation(B)		Construction	Acquired
Boronda Manor		—		1,946,423		8,981,742		10,928,165		7,140,580			3,034,759		15,033,985		18,068,745		3,479,046	1979	12/07/98
Garden Court		—		888,038		4,187,950		5,075,988		3,572,799			1,422,217		7,226,571		8,648,787		1,719,856	1973	12/07/98
Cambridge Court		—		3,038,877		12,883,312		15,922,189		11,217,829			4,765,177		22,374,842		27,140,018		5,341,081	1974	12/07/98
Laurel Tree		—		1,303,902		5,115,356		6,419,258		4,522,311			2,003,855		8,937,714		10,941,569		2,120,975	1977	12/07/98
The Pointe at Harden Ranch		—		6,388,446		23,853,534		30,241,980		20,572,446			9,551,463		41,262,963		50,814,426		9,068,255	1986	12/07/98
The Pointe at Northridge		—		2,043,736		8,028,443		10,072,179		7,490,799			3,122,621		14,440,357		17,562,978		3,244,458	1979	12/07/98
The Pointe at Westlake		—		1,329,064		5,334,004		6,663,068		4,293,083			2,030,141		8,926,009		10,956,151		2,090,268	1975	12/07/98
MONTEREY PENINSULA, CA		—		16,938,486		68,384,341		85,322,827		58,809,846			25,930,232		118,202,441		144,132,673		27,063,939
Arbor Terrace		13,813,876		1,453,342		11,994,972		13,448,314		1,711,634			1,630,050		13,529,898		15,159,948		4,539,824	1996	03/27/98
Aspen Creek		—		1,177,714		9,115,789		10,293,503		956,344			1,350,100		9,899,748		11,249,847		2,845,033	1996	12/07/98
Crowne Pointe		10,142,815		2,486,252		6,437,256		8,923,508		2,570,696			2,611,640		8,882,564		11,494,204		2,914,212	1987	12/07/98
Hilltop		7,838,700		2,173,969		7,407,628		9,581,597		1,612,026			2,358,563		8,835,061		11,193,623		2,665,205	1985	12/07/98
The Hawthorne		26,825,490		6,473,970		30,226,079		36,700,049		645,782			6,475,086		30,870,745		37,345,831		2,709,656	2003	07/21/05
The Kennedy Building		—		6,178,440		22,306,568		28,485,008		(53,953	)		6,183,441		22,247,614		28,431,055		1,485,189	2005	11/10/05
SEATTLE, WA		58,620,881		19,943,687		87,488,292		107,431,979		7,442,529			20,608,880		94,265,628		114,874,508		17,159,119
Lancaster Commons		10,009,532		2,485,291		7,451,165		9,936,456		997,021			2,585,754		8,347,722		10,933,477		2,681,293	1992	12/07/98
Tualatin Heights		10,566,509		3,272,585		9,134,089		12,406,674		2,301,184			3,473,991		11,233,867		14,707,858		3,477,800	1989	12/07/98
Evergreen Park		—		3,878,138		9,973,051		13,851,189		2,162,074			4,151,437		11,861,826		16,013,263		3,848,761	1988	03/27/98
Andover Park		—		2,916,576		16,994,580		19,911,155		2,369,972			2,952,315		19,328,812		22,281,127		2,623,760	1989	09/30/04
Hunt Club		—		6,014,006		14,870,326		20,884,332		1,450,712			6,049,453		16,285,591		22,335,045		2,280,505	1985	09/30/04
PORTLAND, OR		20,576,041		18,566,596		58,423,211		76,989,807		9,280,963			19,212,951		67,057,819		86,270,770		14,912,118
Foothills Tennis Village		12,745,224		3,617,507		14,542,028		18,159,535		4,394,929			3,808,718		18,745,746		22,554,464		5,525,120	1988	12/07/98
Woodlake Village		33,091,932		6,772,438		26,966,750		33,739,188		8,269,271			7,299,491		34,708,967		42,008,459		10,479,355	1979	12/07/98
SACRAMENTO, CA		45,837,156		10,389,945		41,508,778		51,898,723		12,664,199			11,108,209		53,454,713		64,562,922		16,004,475
TOTAL WESTERN REGION		402,226,256		688,427,701		1,079,817,565		1,768,245,266		220,432,644			693,037,147		1,295,640,765		1,988,677,911		218,408,432
MID-ATLANTIC REGION
Dominion Middle Ridge		17,769,407		3,311,468		13,283,047		16,594,515		4,424,806			3,545,478		17,473,843		21,019,321		6,624,372	1990	06/25/96
Dominion Lake Ridge		12,921,808		2,366,061		8,386,439		10,752,500		3,795,102			2,621,422		11,926,180		14,547,602		4,665,266	1987	02/23/96
Presidential Greens		—		11,237,698		18,789,985		30,027,683		4,990,579			11,392,551		23,625,710		35,018,262		6,412,497	1938	05/15/02
Taylor Place		—		6,417,889		13,411,278		19,829,167		5,315,499			6,604,751		18,539,915		25,144,666		5,440,727	1962	04/17/02
Ridgewood		—		5,612,147		20,085,474		25,697,621		4,500,980			5,716,396		24,482,205		30,198,601		6,627,006	1988	08/26/02
The Calvert		—		262,807		11,188,623		11,451,430		3,566,136			2,349,837		12,667,728		15,017,566		2,673,577	1962	11/26/03
Commons at Town Square		—		135,780		7,723,647		7,859,427		664,623			6,865,580		1,658,470		8,524,050		381,593	1971	12/03/03
Waterside Towers		—		873,713		38,209,345		39,083,059		4,069,116			26,079,836		17,072,338		43,152,174		3,493,706	1971	12/03/03
Waterside Townhomes		—		129,000		3,723,896		3,852,896		344,481			2,724,788		1,472,589		4,197,377		286,986	1971	12/03/03
Wellington Place at Olde Town		—		13,753,346		36,059,193		49,812,539		2,638,247			13,757,766		38,693,020		52,450,786		3,057,445	1987	09/13/05
METROPOLITAN DC		30,691,215		44,099,910		170,860,927		214,960,836		34,309,568			81,658,405		167,612,000		249,270,405		39,663,175
Dominion on Spring Forest		—		1,257,500		8,586,255		9,843,755		6,279,928			1,900,016		14,223,667		16,123,683		8,837,637	1978/81	05/21/91
Remington on the Green		—		500,000		4,321,872		4,821,872		6,887,089			1,097,199		10,611,762		11,708,961		4,351,996	1987	09/27/91
Dominion on Lake Lynn		12,134,000		3,622,103		12,405,020		16,027,123		6,760,428			4,455,793		18,331,758		22,787,551		8,621,100	1986	12/01/92
Dominion Courtney Place		—		1,114,600		5,119,259		6,233,859		5,146,862			1,542,802		9,837,919		11,380,721		5,500,214	1979/81	07/08/93
Dominion Walnut Ridge		9,589,520		1,791,215		11,968,852		13,760,067		5,050,410			2,335,562		16,474,915		18,810,477		7,511,249	1982/84	03/04/94
Dominion Walnut Creek		15,153,866		3,170,290		21,717,407		24,887,697		7,554,723			3,834,317		28,608,102		32,442,420		13,042,915	1985/86	05/17/94
Dominion Ramsgate		—		907,605		6,819,154		7,726,759		2,386,160			1,091,589		9,021,330		10,112,919		3,612,372	1988	08/15/96
Copper Mill		—		1,548,280		16,066,720		17,615,000		2,628,922			1,997,913		18,246,010		20,243,922		6,245,825	1997	12/31/96
Trinity Park		12,258,453		4,579,648		17,575,712		22,155,360		3,575,763			4,736,740		20,994,383		25,731,123		7,172,677	1987	02/28/97
Meadows at Kildaire		18,923,619		2,846,027		20,768,425		23,614,452		2,644,303			6,951,720		19,307,035		26,258,755		8,369,917	2000	05/25/00
Oaks at Weston		—		9,943,644		23,305,862		33,249,506		1,096,793			10,230,376		24,115,923		34,346,299		7,233,394	2001	06/28/02
RALEIGH, NC		68,059,458		31,280,912		148,654,538		179,935,450		50,011,382			40,174,028		189,772,804		229,946,832		80,499,294

49

UDR, INC.

SCHEDULE III — REAL ESTATE OWNED — (Continued)

									Cost of
									Improvements
									Capitalized		Gross Amount at
			Initial Costs				Total		Subsequent		Which Carried at Close of Period
			Land and		Buildings		Initial		to Acquisition		Land and		Buildings		Total
			Land		and		Acquisition		(Net of		Land		and		Carrying		Accumulated		Date of	Date
Property	Encumbrances		Improvements		Improvements		Costs		Disposals)		Improvements		Improvements		Value(A)		Depreciation(B)		Construction	Acquired
Gatewater Landing		—		2,078,422		6,084,526		8,162,948		5,503,663		2,365,699		11,300,912		13,666,611		5,135,261	1970	12/16/92
Dominion Kings Place		—		1,564,942		7,006,574		8,571,516		2,495,532		1,675,898		9,391,151		11,067,048		4,342,446	1983	12/29/92
Dominion at Eden Brook		—		2,361,167		9,384,171		11,745,338		4,125,433		2,860,319		13,010,452		15,870,771		6,087,016	1984	12/29/92
Dominion Great Oaks		13,285,808		2,919,481		9,099,691		12,019,172		6,347,260		4,378,480		13,987,952		18,366,432		7,207,697	1974	07/01/94
Dominion Constant Friendship		—		903,122		4,668,956		5,572,078		1,952,758		1,089,062		6,435,774		7,524,836		2,757,593	1990	05/04/95
Lakeside Mill		—		2,665,869		10,109,175		12,775,044		1,957,319		2,717,825		12,014,538		14,732,363		5,455,022	1989	12/10/99
Tamar Meadow		—		4,144,926		17,149,514		21,294,440		2,619,873		4,422,508		19,491,805		23,914,313		4,967,216	1990	11/22/02
Calvert’s Walk		—		4,408,192		24,692,115		29,100,307		2,428,939		4,460,681		27,068,565		31,529,246		4,574,291	1988	03/30/04
Arborview		—		4,653,393		23,951,828		28,605,221		2,495,009		4,705,817		26,394,413		31,100,230		4,548,583	1992	03/30/04
Liriope		—		1,620,382		6,790,681		8,411,063		241,462		1,623,363		7,029,162		8,652,525		1,201,701	1997	03/30/04
BALTIMORE, MD		13,285,808		27,319,896		118,937,230		146,257,126		30,167,247		30,299,651		146,124,723		176,424,374		46,276,827
Dominion Olde West		—		1,965,097		12,203,965		14,169,062		6,727,029		2,511,753		18,384,338		20,896,091		10,389,533	1978/82/84/85/87	12/31/84 & 08/27/91
Dominion Creekwood		—		—		—		—		4,413,974		115,152		4,298,822		4,413,974		1,444,380	1984	08/27/91
Dominion Laurel Springs		—		464,480		3,119,716		3,584,196		4,231,864		806,530		7,009,530		7,816,060		3,435,508	1972	09/06/91
Dominion English Hills		—		1,979,174		11,524,313		13,503,487		8,223,926		2,873,091		18,854,322		21,727,413		11,134,039	1969/76	12/06/91
Dominion Gayton Crossing		10,063,000		825,760		5,147,968		5,973,728		8,350,375		1,469,022		12,855,080		14,324,103		8,185,363	1973	09/28/95
Dominion West End		16,896,683		2,059,252		15,049,088		17,108,340		6,878,137		2,899,915		21,086,563		23,986,477		8,870,459	1989	12/28/95
Courthouse Green		7,865,616		732,050		4,702,353		5,434,403		4,549,374		1,208,329		8,775,448		9,983,777		5,620,384	1974/78	12/31/84
Waterside at Ironbridge		11,297,000		1,843,819		13,238,590		15,082,409		3,047,486		2,087,051		16,042,844		18,129,895		5,208,493	1987	09/30/97
Carriage Homes at Wyndham		—		473,695		30,996,525		31,470,220		1,684,853		3,662,747		29,492,326		33,155,073		5,539,480	1998	11/25/03
Legacy at Mayland		15,409,295		—		—		—		20,263,426		1,496,149		18,767,277		20,263,426		2,704,133
RICHMOND, VA		61,531,594		10,343,327		95,982,518		106,325,845		68,370,445		19,129,740		155,566,550		174,696,290		62,531,772
Cape Harbor		—		1,891,671		18,113,109		20,004,780		3,359,257		2,341,503		21,022,534		23,364,037		7,907,042	1996	08/15/96
Mill Creek		—		1,404,498		4,489,398		5,893,896		15,734,895		2,026,791		19,602,000		21,628,791		7,985,208	1986/98	09/30/91
The Creek		—		417,500		2,506,206		2,923,706		3,428,950		586,069		5,766,587		6,352,656		3,338,217	1973	06/30/92
Forest Hills		—		1,028,000		5,420,478		6,448,478		6,066,265		1,242,984		11,271,759		12,514,743		5,360,176	1964/69	06/30/92
Clear Run		—		874,830		8,740,602		9,615,432		7,687,478		1,366,934		15,935,977		17,302,910		6,915,558	1987/89	07/22/94
Crosswinds		—		1,096,196		18,230,236		19,326,432		3,403,481		1,242,642		21,487,271		22,729,913		7,529,214	1990	02/28/97
WILMINGTON, NC		—		6,712,695		57,500,029		64,212,724		39,680,326		8,806,923		95,086,127		103,893,050		39,035,414
Dominion Harris Pond		—		886,788		6,728,097		7,614,885		2,995,445		1,322,977		9,287,353		10,610,330		4,165,275	1987	07/01/94
Dominion Mallard Creek		—		698,860		6,488,061		7,186,921		2,431,204		748,028		8,870,096		9,618,125		3,454,888	1989	08/16/94
Dominion at Sharon		—		667,368		4,856,103		5,523,471		2,178,737		1,009,817		6,692,391		7,702,208		2,834,563	1984	08/15/96
Providence Court		—		—		22,047,803		22,047,803		14,447,925		7,696,924		28,798,804		36,495,728		10,570,680	1997	09/30/97
Dominion Crossing		—		1,666,312		4,774,020		6,440,332		1,467,959		1,685,696		6,222,595		7,908,292		932,379	1985	08/31/04
Dominion Norcroft		—		1,968,664		13,051,238		15,019,902		1,330,002		2,018,804		14,331,099		16,349,904		2,122,702	1991/97	08/31/04
CHARLOTTE, NC		—		5,887,992		57,945,322		63,833,314		24,851,272		14,482,247		74,202,339		88,684,586		24,080,487
Forest Lake at Oyster Point		—		780,117		8,861,878		9,641,995		5,505,641		1,229,199		13,918,437		15,147,636		5,820,498	1986	08/15/95
Woodscape		—		798,700		7,209,525		8,008,225		6,823,032		1,890,883		12,940,374		14,831,257		7,470,647	1974/76	12/29/87
Eastwind		—		155,000		5,316,738		5,471,738		4,036,128		538,045		8,969,822		9,507,866		4,846,003	1970	04/04/88
Dominion Waterside at Lynnhaven		—		1,823,983		4,106,710		5,930,693		4,060,696		2,101,598		7,889,791		9,991,389		3,465,905	1966	08/15/96
Heather Lake		—		616,800		3,400,672		4,017,472		7,842,956		1,130,593		10,729,834		11,860,428		6,886,274	1972/74	03/01/80
Dominion Yorkshire Downs		9,117,528		1,088,887		8,581,771		9,670,658		3,465,925		1,374,411		11,762,173		13,136,583		3,772,126	1987	12/23/97
NORFOLK, VA		9,117,528		5,263,487		37,477,294		42,740,781		31,734,379		8,264,729		66,210,430		74,475,160		32,261,452

50

UDR, INC.

SCHEDULE III — REAL ESTATE OWNED — (Continued)

									Cost of
									Improvements
									Capitalized		Gross Amount at
			Initial Costs				Total		Subsequent		Which Carried at Close of Period
			Land and		Buildings		Initial		to Acquisition		Land and		Buildings		Total
			Land		and		Acquisition		(Net of		Land		and		Carrying		Accumulated		Date of	Date
Property	Encumbrances		Improvements		Improvements		Costs		Disposals)		Improvements		Improvements		Value(A)		Depreciation(B)		Construction	Acquired
Greens at Falls Run		—		2,730,722		5,300,203		8,030,925		2,761,845		2,953,583		7,839,187		10,792,770		3,201,703	1989	05/04/95
Manor at England Run		19,462,000		3,194,527		13,505,239		16,699,766		14,913,101		4,969,191		26,643,676		31,612,867		11,393,155	1990	05/04/95
Greens at Hollymead		—		965,114		5,250,374		6,215,488		2,020,953		1,102,913		7,133,528		8,236,441		2,858,040	1990	05/04/95
Brittingham Square		—		650,143		4,962,246		5,612,389		1,824,183		885,421		6,551,151		7,436,572		2,737,050	1991	05/04/95
Greens at Schumaker Pond		—		709,559		6,117,582		6,827,141		3,313,853		933,574		9,207,420		10,140,994		3,553,610	1988	05/04/95
Greens at Cross Court		—		1,182,414		4,544,012		5,726,426		2,665,852		1,405,739		6,986,539		8,392,278		2,920,437	1987	05/04/95
Greens at Hilton Run		16,770,382		2,754,447		10,482,579		13,237,026		4,240,703		3,128,107		14,349,623		17,477,729		5,882,280	1988	05/04/95
Dover Country		—		2,007,878		6,365,053		8,372,931		4,974,927		2,406,628		10,941,230		13,347,858		5,244,494	1970	07/01/94
Greens at Cedar Chase		—		1,528,667		4,830,738		6,359,405		1,867,601		1,731,782		6,495,224		8,227,006		2,669,514	1988	05/04/95
Colony Village		—		346,330		3,036,956		3,383,286		3,003,337		610,050		5,776,573		6,386,623		4,247,701	1972/74	12/31/84
Brynn Marr		—		432,974		3,821,508		4,254,482		3,924,564		819,623		7,359,423		8,179,046		5,188,293	1973/77	12/31/84
Liberty Crossing		—		840,000		3,873,139		4,713,139		4,485,672		1,560,651		7,638,160		9,198,811		5,493,595	1972/74	11/30/90
Bramblewood		—		401,538		3,150,912		3,552,450		2,990,610		639,007		5,904,053		6,543,060		3,926,399	1980/82	12/31/84
OTHER MID-ATLANTIC		36,232,382		17,744,313		75,240,541		92,984,854		52,987,201		23,146,267		122,825,788		145,972,055		59,316,272
TOTAL MID-ATLANTIC REGION		218,917,985		148,652,532		762,598,399		911,250,931		332,111,820		225,961,989		1,017,400,761		1,243,362,750		383,664,693
SOUTHEASTERN REGION
Bay Cove		—		2,928,847		6,578,257		9,507,104		8,516,181		3,550,944		14,472,341		18,023,285		7,818,429	1972	12/16/92
Summit West		—		2,176,500		4,709,970		6,886,470		5,422,337		2,712,176		9,596,632		12,308,807		5,566,869	1972	12/16/92
Pinebrook		—		1,780,375		2,458,172		4,238,547		5,815,264		2,080,783		7,973,028		10,053,811		4,728,118	1977	09/28/93
Lakewood Place		9,855,656		1,395,051		10,647,377		12,042,428		5,491,060		1,910,324		15,623,164		17,533,488		6,482,395	1986	03/10/94
Hunters Ridge		10,312,031		2,461,548		10,942,434		13,403,982		4,316,171		3,239,623		14,480,530		17,720,153		6,386,390	1992	06/30/95
Bay Meadow		—		2,892,526		9,253,525		12,146,051		6,399,960		3,668,346		14,877,665		18,546,011		6,027,750	1985	12/09/96
Cambridge		—		1,790,804		7,166,329		8,957,133		4,058,715		2,196,297		10,819,551		13,015,848		4,043,649	1985	06/06/97
Laurel Oaks		—		1,361,553		6,541,980		7,903,533		3,203,806		1,653,033		9,454,307		11,107,339		3,686,561	1986	07/01/97
Sugar Mill Creek		10,611,283		2,241,880		7,552,520		9,794,400		3,575,848		2,432,269		10,937,979		13,370,248		3,175,430	1988	12/07/98
Inlet Bay		—		7,701,679		23,149,670		30,851,349		6,454,915		7,853,451		29,452,813		37,306,264		6,567,452	1988/89	06/30/03
MacAlpine Place		32,474,234		10,869,386		36,857,512		47,726,898		1,135,543		10,882,698		37,979,743		48,862,441		4,992,293	2001	12/01/04
Gallery at Bayport II		—		5,775,144		17,236,146		23,011,290		6,624		8,599,879		14,418,034		23,017,913		78,283	1985/87	10/23/06
Island Walk		—		7,230,575		19,897,415		27,127,990		5,537,725		9,385,143		23,280,573		32,665,715		11,679,787	1985/87	07/10/06
TAMPA, FL		63,253,204		50,605,867		162,991,307		213,597,175		59,934,149		60,164,964		213,366,360		273,531,324		71,233,408
Fisherman’s Village		—		2,387,368		7,458,897		9,846,265		6,780,692		3,435,653		13,191,304		16,626,957		6,407,115	1984	12/29/95
Seabrook		—		1,845,853		4,155,275		6,001,128		5,460,882		2,451,952		9,010,058		11,462,010		4,893,939	1984	02/20/96
Dover Village		—		2,894,702		6,456,100		9,350,802		7,333,589		3,484,422		13,199,968		16,684,391		6,963,573	1981	03/31/93
Altamira Place		—		1,532,700		11,076,062		12,608,762		14,886,642		2,736,050		24,759,354		27,495,404		9,472,543	1984	04/14/94
Regatta Shore		—		757,008		6,607,367		7,364,375		9,448,831		1,593,516		15,219,690		16,813,206		8,007,464	1988	06/30/94
Alafaya Woods		8,950,593		1,653,000		9,042,256		10,695,256		5,472,442		2,255,451		13,912,247		16,167,698		6,136,872	1988/90	10/21/94
Andover Place		12,799,781		3,692,187		7,756,919		11,449,106		5,435,071		4,804,189		12,079,989		16,884,177		6,321,890	1988	09/29/95 & 09/30/96
Los Altos		12,134,612		2,803,805		12,348,464		15,152,269		5,196,855		3,532,884		16,816,240		20,349,124		6,993,240	1990	10/31/96
Lotus Landing		—		2,184,723		8,638,664		10,823,387		4,991,006		2,563,451		13,250,942		15,814,393		4,519,554	1985	07/01/97
Seville on The Green		—		1,282,616		6,498,062		7,780,678		4,880,179		1,589,137		11,071,719		12,660,857		3,869,689	1986	10/21/97
Ashton at Waterford		13,986,375		3,871,744		17,537,879		21,409,623		944,120		3,987,764		18,365,979		22,353,743		7,546,307	2000	05/28/98
Arbors at Lee Vista DCO		—		6,692,423		12,860,210		19,552,633		6,937,463		6,778,814		19,711,281		26,490,095		7,153,599	1992	08/28/06
ORLANDO, FL		47,871,361		31,598,129		110,436,155		142,034,284		77,767,772		39,213,283		180,588,772		219,802,055		78,285,784

51

UDR, INC.

SCHEDULE III — REAL ESTATE OWNED — (Continued)

									Cost of
									Improvements
									Capitalized		Gross Amount at
			Initial Costs				Total		Subsequent		Which Carried at Close of Period
			Land and		Buildings		Initial		to Acquisition		Land and		Buildings		Total
			Land		and		Acquisition		(Net of		Land		and		Carrying		Accumulated		Date of	Date
Property	Encumbrances		Improvements		Improvements		Costs		Disposals)		Improvements		Improvements		Value(A)		Depreciation(B)		Construction	Acquired
Legacy Hill		—		1,147,660		5,867,567		7,015,227		5,880,561		1,526,816		11,368,973		12,895,788		5,378,918	1977	11/06/95
Hickory Run		—		1,468,727		11,583,786		13,052,513		4,911,998		1,899,394		16,065,117		17,964,511		6,288,565	1989	12/29/95
Carrington Hills		19,751,087		2,117,244		—		2,117,244		27,526,840		3,967,960		25,676,124		29,644,084		8,960,927	1999	12/06/95
Brookridge		—		707,508		5,461,251		6,168,759		2,674,154		945,770		7,897,143		8,842,913		3,339,727	1986	03/28/96
Club at Hickory Hollow		11,884,206		2,139,774		15,231,201		17,370,975		3,722,807		2,805,862		18,287,920		21,093,782		7,206,173	1987	02/21/97
Breckenridge		—		766,428		7,713,862		8,480,290		2,322,278		1,057,665		9,744,904		10,802,568		3,532,759	1986	03/27/97
Williamsburg		—		1,376,190		10,931,309		12,307,499		3,123,604		1,709,625		13,721,478		15,431,103		4,741,104	1986	05/20/98
Colonnade		10,923,011		1,459,754		16,014,857		17,474,611		1,746,703		1,706,650		17,514,664		19,221,314		5,133,937	1998	01/07/99
The Preserve at Brentwood		14,945,588		3,181,524		24,674,264		27,855,788		1,886,898		3,182,047		26,560,639		29,742,686		4,316,251	1998	06/01/04
Polo Park		14,081,592		4,582,666		16,293,022		20,875,688		1,239,621		4,582,666		17,532,643		22,115,308		733,776	1987	05/02/06
NASHVILLE, TN		71,585,484		18,947,475		113,771,119		132,718,594		55,035,463		23,384,454		164,369,604		187,754,057		49,632,138
Greentree		17,042,773		1,634,330		11,226,990		12,861,320		8,429,832		2,567,951		18,723,201		21,291,152		8,656,402	1986	07/22/94
Westland		—		1,834,535		14,864,742		16,699,277		7,908,532		2,805,120		21,802,689		24,607,809		9,824,925	1990	05/09/96
Antlers		—		4,034,039		11,192,842		15,226,881		8,779,968		5,035,720		18,971,130		24,006,849		9,319,597	1985	05/28/96
St Johns Plantation		—		4,288,214		33,101,763		37,389,977		3,047,934		4,303,230		36,134,681		40,437,911		3,391,855	1989	06/30/05
JACKSONVILLE, FL		17,042,773		11,791,118		70,386,337		82,177,455		28,166,266		14,712,021		95,631,701		110,343,721		31,192,778
Stanford Village		—		884,500		2,807,839		3,692,339		2,899,122		1,225,530		5,365,931		6,591,461		3,127,231	1985	09/26/89
Griffin Crossing		—		1,509,633		7,544,018		9,053,651		3,382,405		1,896,449		10,539,607		12,436,056		4,978,117	1987/89	06/08/94
Gwinnett Square		6,384,352		1,924,325		7,376,454		9,300,779		4,262,517		2,269,177		11,294,119		13,563,296		4,753,528	1985	03/29/95
Dunwoody Pointe		8,530,388		2,763,324		6,902,996		9,666,320		7,697,445		3,470,002		13,893,762		17,363,765		7,502,215	1980	10/24/95
Riverwood		8,969,033		2,985,599		11,087,903		14,073,502		6,260,074		3,555,338		16,778,237		20,333,576		8,195,790	1980	06/26/96
Waterford Place		—		1,579,478		10,302,679		11,882,157		2,608,898		1,720,613		12,770,442		14,491,055		3,836,926	1985	04/15/98
ATLANTA, GA		23,883,773		11,646,859		46,021,889		57,668,748		27,110,461		14,137,110		70,642,099		84,779,209		32,393,807
Mallards of Wedgewood		—		959,284		6,864,666		7,823,950		3,240,693		1,270,466		9,794,177		11,064,643		4,480,124	1985	07/27/95
Vinyards		7,715,000		1,840,230		11,571,625		13,411,855		6,738,357		2,825,371		17,324,841		20,150,212		8,076,796	1984/86	10/31/94
Heron Lake		—		1,446,553		9,287,878		10,734,431		4,636,633		1,715,638		13,655,426		15,371,064		4,257,720	1989	03/27/98
Riverbridge		44,873,487		15,968,090		56,400,716		72,368,806		1,539,321		15,977,983		57,930,144		73,908,127		7,391,624	1999/2001	12/01/04
The Groves		—		789,953		4,767,055		5,557,008		4,111,047		1,523,927		8,144,128		9,668,055		3,662,332	1989	12/13/95
Mallards of Brandywine		—		765,949		5,407,683		6,173,632		2,236,521		1,022,210		7,387,943		8,410,153		3,032,559	1985	07/01/97
LakePointe		—		1,434,450		4,940,166		6,374,616		4,773,865		1,928,945		9,219,536		11,148,481		4,785,327	1984	09/24/93
Lakeside TRS		—		3,373,265		7,095,763		10,469,028		3,974,454		3,529,056		10,914,425		14,443,482		3,389,350	1985	12/29/05
OTHER FLORIDA		52,588,487		26,577,774		106,335,552		132,913,326		31,250,890		29,793,596		134,370,620		164,164,216		39,075,831
Gable Hill		—		824,847		5,307,194		6,132,041		2,729,836		1,232,747		7,629,130		8,861,877		4,356,816	1985	12/04/89
St. Andrews Commons		—		1,428,826		9,371,378		10,800,204		3,988,361		2,088,903		12,699,663		14,788,565		6,329,838	1986	05/20/93
Forestbrook		—		395,516		2,902,040		3,297,556		2,519,287		622,699		5,194,144		5,816,843		3,414,444	1974	07/01/93
Waterford		—		957,980		6,947,939		7,905,919		2,927,718		1,356,812		9,476,826		10,833,637		4,509,659	1985	07/01/94
Hampton Greene		—		1,363,046		10,118,453		11,481,499		2,779,701		2,032,419		12,228,781		14,261,200		5,671,906	1990	08/19/94
Rivergate		—		1,122,500		12,055,625		13,178,125		3,610,859		1,535,821		15,253,163		16,788,984		5,641,235	1989	08/15/96
Patriot Place		—		212,500		1,600,757		1,813,257		6,302,406		1,531,073		6,584,590		8,115,663		5,022,925	1974	10/23/85
OTHER SOUTHEASTERN		—		6,305,215		48,303,386		54,608,601		24,858,169		10,400,473		69,066,297		79,466,770		34,946,823
TOTAL SOUTHEASTERN REGION		276,225,082		157,472,437		658,245,744		815,718,182		304,123,170		191,805,900		928,035,452		1,119,841,352		336,760,569

52

UDR, INC.

SCHEDULE III — REAL ESTATE OWNED — (Continued)

									Cost of
									Improvements
									Capitalized		Gross Amount at
			Initial Costs				Total		Subsequent		Which Carried at Close of Period
			Land and		Buildings		Initial		to Acquisition		Land and		Buildings		Total
			Land		and		Acquisition		(Net of		Land		and		Carrying		Accumulated		Date of	Date
Property	Encumbrances		Improvements		Improvements		Costs		Disposals)		Improvements		Improvements		Value(A)		Depreciation(B)		Construction	Acquired
SOUTHWESTERN REGION
Woodtrail		—		1,543,000		5,457,000		7,000,000		4,875,303		1,983,968		9,891,335		11,875,303		4,498,164	1978	12/31/96
Green Oaks		—		5,313,920		19,626,181		24,940,101		6,845,183		6,216,165		25,569,119		31,785,284		9,853,306	1985	06/25/97
Sky Hawk		—		2,297,741		7,157,965		9,455,706		3,496,578		2,879,326		10,072,959		12,952,284		4,511,668	1984	05/08/97
South Grand at Pecan Grove		—		4,058,090		14,755,809		18,813,899		9,264,436		5,045,457		23,032,878		28,078,335		9,296,032	1985	09/26/97
Braesridge		12,938,750		3,048,212		10,961,749		14,009,961		4,326,210		3,677,697		14,658,474		18,336,171		5,606,722	1982	09/26/97
Skylar Pointe		—		3,604,483		11,592,432		15,196,915		6,404,146		3,886,426		17,714,635		21,601,061		7,886,279	1979	11/20/97
Stone Canyon		—		899,515		—		899,515		9,768,750		1,353,386		9,314,878		10,668,265		3,174,069	1998	12/17/97
Chelsea Park		5,411,501		1,991,478		5,787,626		7,779,104		4,097,253		2,548,802		9,327,555		11,876,357		3,557,782	1983	03/27/98
Country Club Place		5,843,563		498,632		6,520,172		7,018,804		2,236,784		745,468		8,510,120		9,255,588		3,037,259	1985	03/27/98
Arbor Ridge		—		1,688,948		6,684,229		8,373,177		1,326,208		2,155,086		7,544,298		9,699,385		3,112,033	1983	03/27/98
London Park		—		2,018,478		6,667,450		8,685,928		3,593,364		2,664,679		9,614,613		12,279,292		4,020,480	1983	03/27/98
Marymont		—		1,150,669		4,155,411		5,306,080		1,658,833		1,230,221		5,734,692		6,964,913		1,936,945	1983	03/27/98
Riviera Pines		—		1,413,851		6,453,847		7,867,698		3,031,406		1,627,436		9,271,668		10,899,104		2,654,183	1979	03/27/98
Towne Lake		—		1,333,958		5,308,884		6,642,842		2,473,736		1,743,690		7,372,888		9,116,578		3,121,533	1984	03/27/98
The Legend at Park 10		—		1,995,011		—		1,995,011		12,213,814		3,871,213		10,337,612		14,208,825		5,350,641	1998	05/19/98
The Bradford		16,498,944		1,151,180		40,829,514		41,980,694		3,860,925		6,682,943		39,158,677		45,841,620		7,997,604	1990/91	11/20/03
HOUSTON, TX		40,692,758		34,007,166		151,958 ,269		185,965,435		79,472,927		48,311,962		217,126,400		265,438,363		79,614,699
Highlands of Preston		—		2,151,056		8,167,630		10,318,686		3,432,019		2,558,931		11,191,774		13,750,705		4,164,586	1985	03/27/98
Meridian		23,970,724		6,012,806		29,094,186		35,106,992		1,858,096		6,462,648		30,502,441		36,965,088		10,668,030	2000/02	01/27/98 & 12/28/01
Lincoln Towne Square		—		7,541,141		31,484,858		39,025,999		1,042,371		7,566,237		32,502,133		40,068,370		5,910,584	1999	03/12/04
Highlands of Preston II		—		2,197,794		7,512,983		9,710,777		326,964		2,197,794		7,839,947		10,037,741		485,617	1986	01/12/06
The Park at Turtle Creek		—		24,035,881		33,227,383		57,263,264		272,053		24,035,881		33,499,436		57,535,317		713,774	1999	08/24/06
Greenhaven Village		—		916,415		14,996,331		15,912,747		46,527		916,415		15,042,858		15,959,274		312,939	1971	09/08/06
The Addison at Brookhaven		—		16,720,828		8,465,513		25,186,341		66,762		16,721,087		8,532,016		25,253,103		120,256	1975	10/31/06
DALLAS, TX		23,970,724		59,575,921		132,948,885		192,524,806		7,044,793		60,458,993		139,110,606		199,569,599		22,375,786
Autumnwood		—		2,412,180		8,687,820		11,100,000		3,346,127		2,859,893		11,586,234		14,446,127		4,593,190	1984	12/31/96
Cobblestone		—		2,925,372		10,527,738		13,453,110		5,267,966		3,355,646		15,365,430		18,721,076		6,377,939	1984	12/31/96
Summit Ridge		6,097,554		1,725,508		6,308,032		8,033,540		3,796,204		2,411,663		9,418,081		11,829,744		3,571,906	1983	03/27/98
Derby Park		10,843,584		3,121,153		11,764,974		14,886,127		3,831,323		3,926,609		14,790,840		18,717,450		5,890,696	1984	03/27/98
Aspen Court		3,601,515		776,587		4,944,947		5,721,534		2,031,575		1,174,640		6,578,469		7,753,109		2,496,717	1986	03/27/98
The Cliffs		—		3,483,876		18,657,051		22,140,927		2,307,396		3,857,526		20,590,797		24,448,323		6,920,305	1992	01/29/02
ARLINGTON, TX		20,542,653		14,444,676		60,890,562		75,335,238		20,580,591		17,585,977		78,329,852		95,915,829		29,850,752
Pecan Grove		—		1,406,750		5,293,250		6,700,000		1,867,698		1,541,867		7,025,831		8,567,698		2,367,353	1984	12/31/96
Anderson Mill		6,072,561		3,134,669		11,170,376		14,305,045		5,942,651		3,586,228		16,661,469		20,247,696		7,564,139	1984	03/27/97
Red Stone Ranch		—		1,896,723		17,525,536		19,422,259		1,007,281		5,437,249		14,992,291		20,429,540		7,006,485	2000	06/14/00
Barton Creek Landing		—		3,150,998		14,269,086		17,420,084		2,140,806		3,198,887		16,362,003		19,560,890		4,814,922	1986	03/28/02
Lakeline Villas		—		4,633,398		13,297,860		17,931,258		335,836		4,633,454		13,633,640		18,267,095		2,302,004	2002	07/15/04
AUSTIN, TX		6,072,561		14,222,538		61,556,108		75,778,646		11,294,273		18,397,685		68,675,235		87,072,919		24,054,903
Greensview		—		6,450,216		24,405,137		30,855,353		3,632,299		6,094,939		28,392,713		34,487,652		10,036,017	1987/2002	12/07/98
Reflections at Cherry Creek		—		6,305,326		27,201,579		33,506,905		2,430,753		6,547,710		29,389,948		35,937,658		8,662,968	1981/96	04/30/02
DENVER, CO		—		12,755,542		51,606,716		64,362,258		6,063,051		12,642,649		57,782,661		70,425,309		18,698,985
Finisterra		—		1,273,798		26,392,207		27,666,005		1,777,191		1,478,413		27,964,784		29,443,196		8,464,450	1997	03/27/98
Sierra Foothills		14,031,553		2,728,172		—		2,728,172		19,515,999		4,920,141		17,324,029		22,244,171		8,948,096	1998	02/18/98
Sierra Canyon		13,739,709		1,809,864		12,963,581		14,773,444		655,441		1,880,864		13,548,022		15,428,886		4,536,682	2001	12/28/01
PHOENIX, AZ		27,771,262		5,811,834		39,355,788		45,167,621		21,948,632		8,279,419		58,836,834		67,116,253		21,949,228

53

UDR, INC.

SCHEDULE III — REAL ESTATE OWNED — (Continued)

									Cost of
									Improvements
									Capitalized			Gross Amount at
			Initial Costs				Total		Subsequent			Which Carried at Close of Period
			Land and		Buildings		Initial		to Acquisition			Land and		Buildings		Total
			Land		and		Acquisition		(Net of			Land		and		Carrying		Accumulated			Date of	Date
Property	Encumbrances		Improvements		Improvements		Costs		Disposals)			Improvements		Improvements		Value(A)		Depreciation(B)			Construction	Acquired
Oak Park		18,278,466		3,966,129		22,227,701		26,193,830		4,471,487			5,719,991		24,945,327		30,665,317		10,132,043		1982/98	12/31/96
Oak Forest		23,395,160		5,630,740		23,293,922		28,924,662		12,284,148			6,629,796		34,579,014		41,208,810		14,553,835		1996/98	12/31/96
Mandolin		—		4,222,640		27,909,437		32,132,077		5,128,417			6,436,955		30,823,539		37,260,494		9,937,243		2001	12/28/01
Inn at Los Patios		—		3,005,300		11,544,700		14,550,000		(1,453,838	)		3,023,264		10,072,898		13,096,162		2,695,479		1990	08/15/98
Turtle Creek		—		1,913,177		7,086,823		9,000,000		2,912,753			2,352,966		9,559,787		11,912,753		3,633,576		1985	12/31/96
Shadow Lake		—		2,523,670		8,976,330		11,500,000		4,248,731			3,170,899		12,577,832		15,748,731		4,972,006		1984	12/31/96
OTHER SOUTHWESTERN		41,673,626		21,261,656		101,038,913		122,300,569		27,591,699			27,333,871		122,558,396		149,892,268		45,924,181
TOTAL SOUTHWESTERN REGION		160,723,584		162,079,333		599,355,241		761,434,574		173,995,966			193,010,556		742,419,985		935,430,540		242,468,534
MIDWESTERN REGION
Sycamore Ridge		—		4,067,900		15,433,285		19,501,185		3,169,803			4,443,889		18,227,099		22,670,988		5,547,075		1997	07/02/98
Heritage Green		—		2,990,199		11,391,797		14,381,996		10,218,635			3,267,000		21,333,631		24,600,631		6,805,931		1998	07/02/98
Alexander Court		13,498,020		1,573,412		—		1,573,412		22,065,445			6,394,096		17,244,761		23,638,857		8,122,928		1999	07/02/98
Governour’s Square		27,137,118		7,512,513		28,695,050		36,207,563		9,206,162			8,107,912		37,305,813		45,413,725		11,376,992		1967	12/07/98
Hickory Creek		—		3,421,413		13,539,402		16,960,815		5,260,716			3,854,636		18,366,895		22,221,531		5,392,660		1988	12/07/98
Britton Woods		—		3,476,851		19,213,411		22,690,262		4,549,064			4,254,912		22,984,415		27,239,326		9,638,687		1991	04/20/01
COLUMBUS, OH		40,635,138		23,042,288		88,272,945		111,315,233		54,469,827			30,322,445		135,462,615		165,785,060		46,884,273
Washington Park		—		2,011,520		7,565,279		9,576,799		1,466,386			2,158,441		8,884,744		11,043,185		2,878,092		1998	12/07/98
Fountainhead		—		390,542		1,420,166		1,810,708		674,637			455,858		2,029,487		2,485,345		711,070		1966	12/07/98
Jamestown of Toledo		6,241,270		1,800,271		7,053,585		8,853,856		2,507,791			1,981,133		9,380,514		11,361,647		3,104,798		1965	12/07/98
OTHER MIDWESTERN		6,241,270		4,202,333		16,039,030		20,241,363		4,648,814			4,595,432		20,294,745		24,890,177		6,693,959
TOTAL MIDWESTERN REGION		46,876,408		27,244,621		104,311,975		131,556,596		59,118,641			34,917,877		155,757,359		190,675,237		53,578,232
TOTAL APARTMENTS		1,104,969,315		1,183,876,624		3,204,328,925		4,388,205,549		1,089,782,240			1,338,733,469		4,139,254,322		5,477,987,790		1,234,880,461
REAL ESTATE HELD FOR DISPOSITION
Apartments
Beaumont		—		2,339,132		12,559,224		14,898,356		1,102,620			2,456,550		13,544,426		16,000,976		5,939,865		1996	06/14/00
Grand Terrace		—		2,144,340		6,594,615		8,738,955		2,215,995			2,264,606		8,690,344		10,954,950		2,740,486		1986	06/30/99
University Park TRS		—		3,079,034		7,256,292		10,335,326		(9,962,536	)		—		372,790		372,790		—		1980	02/11/05
Canyon Oaks		—		21,743,510		34,311,742		56,055,252		632,385			11,983,437		44,704,199		56,687,636		1,382,273		2005	06/21/06
Sierra Palms		—		5,091,616		11,997,769		17,089,385		8,087,301			5,345,615		19,831,071		25,176,686		6,127,850		1996	05/11/06
																	��
Total Apartments		—		34,397,632		72,719,642		107,117,274		2,075,764			22,050,208		87,142,829		109,193,037		16,190,474
Land
Fossil Creek		—		3,932,115		—		3,932,115		215,304			3,683,156		464,263		4,147,419		—
Total Held for Disposition		—		38,329,747		72,719,642		111,049,389		2,291,068			25,733,364		87,607,092		113,340,456		16,190,474
REAL ESTATE UNDER DEVELOPMENT
Apartments
2161 Sutter-TRS		—		1,755,643		7,753,477		9,509,120		744,530			1,755,643		8,498,007		10,253,650		—
Lincoln Towne Square PH II		—		2,951,277		—		2,951,277		1,432,854			2,939,593		1,444,538		4,384,131		—
Ridgeview PH I		—		2,341,936		—		2,341,936		5,954,451			1,789,978		6,506,409		8,296,387		(563	)
Ridgeview Townhomes		—		2,349,923		—		2,349,923		4,672,127			1,120,000		5,902,050		7,022,050		198
West & Gessner		—		3,600,000		—		3,600,000		820,995			3,823,625		597,370		4,420,995		—
Total Apartments		—		12,998,779		7,753,477		20,752,256		13,624,957			11,428,839		22,948,374		34,377,213		(364	)

54

UDR, INC.

SCHEDULE III — REAL ESTATE OWNED — (Continued)

									Cost of
									Improvements
									Capitalized		Gross Amount at
			Initial Costs				Total		Subsequent		Which Carried at Close of Period
			Land and		Buildings		Initial		to Acquisition		Land and		Buildings		Total
			Land		and		Acquisition		(Net of		Land		and		Carrying		Accumulated			Date of	Date
Property	Encumbrances		Improvements		Improvements		Costs		Disposals)		Improvements		Improvements		Value(A)		Depreciation(B)			Construction	Acquired
Land
Waterside		—		11,861,682		93,478		11,955,160		9,813		11,861,682		103,291		11,964,973		77,928
Ridgeview Ph II		—		1,918,411		—		1,918,411		33,951		1,469,609		482,753		1,952,362		(318	)
Parkers Landing II TRS		—		1,709,606		—		1,709,606		241,523		1,510,700		440,429		1,951,129		—
Presidio Lnd		—		1,523,922		—		1,523,922		198,292		1,300,000		422,214		1,722,214		—
UDR/ Pacific Los Alisos, LP		—		17,297,661		—		17,297,661		566,572		16,311,758		1,552,474		17,864,233		—
Jefferson JV LLC		—		—		—		—		1,026,785		—		1,026,785		1,026,785		—
Jefferson at Marina del Rey		45,403,222		55,651,137		—		55,651,137		19,923,573		55,651,137		19,923,573		75,574,710		—
Bellevue Plaza		22,270,500		5,793,892		—		5,793,892		28,077,606		31,590,000		2,281,498		33,871,498		450,000
Ashwood Commons II		—		13,926,400		—		13,926,400		9,733,535		13,926,400		9,733,535		23,659,935		—
Bellevue JV LLC		—		—		—		—		348,132		—		348,132		348,132		—
Total Land		67,673,722		109,682,711		93,478		109,776,189		60,159,782		133,621,286		36,314,684		169,935,971		527,610
Total Real Estate Under Development		67,673,722		122,681,490		7,846,955		130,528,445		73,784,739		145,050,126		59,263,058		204,313,184		527,246
Commercial Held for Investment
Hanover Village		—		1,623,910		—		1,623,910		5		1,103,600		520,315		1,623,915		491,869
The Calvert -commercial side		—		34,128		1,597,359		1,631,486		153		326,899		1,304,741		1,631,639		235,337
Grandview DCO		10,276,147		7,266,024		9,701,625		16,967,649		166,757		7,266,024		9,868,382		17,134,406		263,995		1980	11/21/06
Total Commercial		10,276,147		8,924,062		11,298,984		20,223,045		166,915		8,696,523		11,693,437		20,389,960		991,201
Richmond Corporate		—		277,225		277,225		554,450		3,536,315		227,225		3,863,540		4,090,765		1,137,400
Commercial & Corporate		10,276,147		9,201,287		11,576,209		20,777,495		3,703,230		8,923,748		15,556,977		24,480,725		2,128,601
TOTAL REAL ESTATE OWNED	$	1,182,919,185	$	1,354,089,149	$	3,296,471,730	$	4,650,560,879	$	1,169,561,277	$	1,518,440,706	$	4,301,681,449	$	5,820,122,155	$	1,253,726,781

(A)	The aggregate cost for federal income tax purposes was approximately $5.3 billion at December 31, 2006.
(B)	The depreciable life for all buildings is 35 years.

55

UDR, INC.

SCHEDULE III — REAL ESTATE OWNED — (Continued)

3-YEAR ROLLFORWARD OF REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION

The following is a reconciliation of the carrying amount of total real estate owned at December 31:

	2006			2005			2004
Balance at beginning of year	$	5,512,424,090		$	5,243,295,963		$	4,351,551,324
Real estate acquired		392,058,366			439,559,832			1,069,800,745
Capital expenditures & development		379,629,467			205,465,000			101,520,917
Real estate sold		(463,989,768	)		(375,896,705	)		(279,577,023	)
Balance at end of year	$	5,820,122,155		$	5,512,424,090		$	5,243,295,963

The following is a reconciliation of total accumulated depreciation for real estate owned at December 31:

	2006			2005			2004
Balance at beginning of year	$	1,123,829,081		$	1,007,887,007		$	896,630,032
Depreciation expense for the year		243,348,343			208,393,075			178,045,994
Accumulated depreciation on sales		(113,450,643	)		(92,451,001	)		(66,789,019	)
Balance at end of year	$	1,253,726,781		$	1,123,829,081		$	1,007,887,007

56

Exhibit 12

Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends

(Dollars in thousands)

	Years Ended December 31,
	2006			2005			2004			2003			2002
(Loss)/income before discontinued operations, net of minority interests	$	(27,225	)	$	729		$	6,976		$	7,086		$	(28,922	)
Add:
Portion of rents representative of the interest factor		679			667			651			651			691
Minority interests		(2,607	)		(810	)		(1,048	)		(2,047	)		(2,288	)
Interest on indebtedness from continuing operations		182,285			162,773			122,024			114,300			124,901
Earnings	$	153,132		$	163,359		$	128,603		$	119,990		$	94,382
Fixed charges and preferred stock dividend:
Interest on indebtedness from continuing operations	$	182,285		$	162,773		$	122,024		$	114,300		$	124,901
Capitalized interest		5,173			2,769			986			1,808			931
Portion of rents representative of the interest factor		679			667			651			651			691
Fixed charges		188,137			166,209			123,661			116,759			126,523
Add:
Preferred stock dividend		15,370			15,370			19,531			26,326			27,424
Accretion of preferred stock		—			—			5,729			19,271			—
Preferred stock dividend and accretion of preferred stock		15,370			15,370			25,260			45,597			27,424
Combined fixed charges and preferred stock dividend	$	203,507		$	181,579		$	148,921		$	162,356		$	153,947
Ratio of earnings to fixed charges		—			—			1.04	x		1.03	x		—
Ratio of earnings to combined fixed charges and preferred stock dividend		—			—			—			—			—

For the year ended December 31, 2006, the ratio of earnings to fixed charges was deficient of achieving a 1:1 ratio by $35.0 million.

For the year ended December 31, 2006, the ratio of earnings to combined fixed charges and preferred stock dividend was deficient of achieving a 1:1 ratio by $50.4 million.

For the year ended December 31, 2005, the ratio of earnings to fixed charges was deficient of achieving a 1:1 ratio by $2.9 million.

For the year ended December 31, 2005, the ratio of earnings to combined fixed charges and preferred stock dividend was deficient of achieving a 1:1 ratio by $18.2 million.

For the year ended December 31, 2004, the ratio of earnings to combined fixed charges and preferred stock dividend was deficient of achieving a 1:1 ratio by $20.3 million.

For the year ended December 31, 2003, the ratio of earnings to combined fixed charges and preferred stock dividend was deficient of achieving a 1:1 ratio by $42.4 million.

For the year ended December 31, 2002, the ratio of earnings to fixed charges was deficient of achieving a 1:1 ratio by $32.1 million.

For the year ended December 31, 2002, the ratio of earnings to combined fixed charges and preferred stock dividend was deficient of achieving a 1:1 ratio by $59.6 million.

57