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Section 1: 10-Q (10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10‑Q

 

 

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

 

For the quarterly period ended March 31, 2018

OR

 

 

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

 

For the transition period from                      to                    

Commission file number

1‑10524 (UDR, Inc.)

333‑156002‑01 (United Dominion Realty, L.P.)

UDR, Inc.

United Dominion Realty, L.P.

(Exact name of registrant as specified in its charter)

 

 

Maryland (UDR, Inc.)

54‑0857512

Delaware (United Dominion Realty, L.P.)

54‑1776887

(State or other jurisdiction of

(I.R.S. Employer

incorporation of organization)

Identification No.)

 

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

(Address of principal executive offices) (zip code)

(720) 283‑6120

(Registrant’s telephone number, including area code)

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

 

 

UDR, Inc.

Yes  No

United Dominion Realty, L.P.

Yes No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

 

UDR, Inc.

Yes No

United Dominion Realty, L.P.

Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act. (Check one):

 

 

 

UDR, Inc.:

 

 

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

(Do not check if a smaller reporting company)

Emerging growth company

 

 

 

 

United Dominion Realty, L.P.:

 

 

 

Large accelerated filer

Accelerated filer

Non-accelerated filer 

Smaller reporting company

 

 

(Do not check if a smaller reporting company)

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

UDR, Inc.

United Dominion Realty, L.P.

 

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

 

 

UDR, Inc.

Yes No

United Dominion Realty, L.P.

Yes No

 

The number of shares of UDR, Inc.’s common stock, $0.01 par value, outstanding as of April 24, 2018 was 267,600,380.

 

 

 

 


 

Table of Contents

UDR, INC.

UNITED DOMINION REALTY, L.P.

INDEX

 

PAGE

PART I — FINANCIAL INFORMATION 

 

 

Item 1. Consolidated Financial Statements 

 

 

 

UDR, INC.:

 

 

 

Consolidated Balance Sheets as of March 31, 2018  (unaudited) and December 31, 2017 (audited) 

5

 

 

Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017 (unaudited) 

6

 

 

Consolidated Statements of Comprehensive Income/(Loss) for the three months ended March 31, 2018 and 2017 (unaudited) 

7

 

 

Consolidated Statement of Changes in Equity for the three months ended March 31, 2018 (unaudited) 

8

 

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (unaudited) 

9

 

 

Notes to Consolidated Financial Statements (unaudited) 

10

 

 

UNITED DOMINION REALTY, L.P.:

 

 

 

Consolidated Balance Sheets as of March 31, 2018  (unaudited) and December 31, 2017 (audited) 

38

 

 

Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017 (unaudited) 

39

 

 

Consolidated Statements of Comprehensive Income/(Loss) for the three months ended March 31, 2018 and 2017 (unaudited) 

40

 

 

Consolidated Statement of Changes in Capital for the three months ended March 31, 2018 (unaudited) 

41

 

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (unaudited) 

42

 

 

Notes to Consolidated Financial Statements (unaudited) 

43

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 

61

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk 

81

 

 

Item 4. Controls and Procedures 

81

 

 

PART II — OTHER INFORMATION 

 

 

Item 1. Legal Proceedings 

82

 

 

Item 1A. Risk Factors 

82

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 

96


 

Table of Contents

 

 

Item 3. Defaults Upon Senior Securities 

97

 

 

Item 4. Mine Safety Disclosures 

97

 

 

Item 5. Other Information 

97

 

 

Item 6. Exhibits 

98

 

 

Signatures 

100

 

 

Exhibit 12.1

 

Exhibit 12.2

 

Exhibit 31.1

 

Exhibit 31.2

 

Exhibit 31.3

 

Exhibit 31.4

 

Exhibit 32.1

 

Exhibit 32.2

 

Exhibit 32.3

 

Exhibit 32.4

 

 

 

 


 

Table of Contents

EXPLANATORY NOTE

This Report combines the quarterly reports on Form 10‑Q for the quarter ended March 31, 2018 of UDR, Inc., a Maryland corporation, and United Dominion Realty, L.P., a Delaware limited partnership, of which UDR, Inc. is the parent company and sole general partner. Unless the context otherwise requires, all references in this Report to “we,” “us,” “our,” the “Company,” “UDR” or “UDR, Inc.” refer collectively to UDR, Inc., together with its consolidated subsidiaries and joint ventures, including United Dominion Realty, L.P. and UDR Lighthouse DownREIT L.P. (the “DownREIT Partnership”), both Delaware limited partnerships of which UDR is the sole general partner. Unless the context otherwise requires, the references in this Report to the “Operating Partnership” or the “OP” refer to United Dominion Realty, L.P., together with its consolidated subsidiaries. “Common stock” refers to the common stock of UDR and “stockholders” means the holders of shares of UDR’s common stock and preferred stock. The limited partnership interests of the Operating Partnership and the DownREIT Partnership are referred to as “OP Units” and “DownREIT Units,” respectively, and the holders of the OP Units and DownREIT Units are referred to as “unitholders.” This combined Form 10‑Q is being filed separately by UDR and the Operating Partnership.

There are a number of differences between the Company and the Operating Partnership, which are reflected in our disclosure in this Report. UDR is a real estate investment trust (“REIT”), whose most significant asset is its ownership interest in the Operating Partnership. UDR also conducts business through other subsidiaries, including its taxable REIT subsidiary (“TRS”). UDR acts as the sole general partner of the Operating Partnership, holds interests in subsidiaries and joint ventures, owns and operates properties, issues securities from time to time and guarantees debt of certain of our subsidiaries. The Operating Partnership conducts the operations of a substantial portion of the business and is structured as a partnership with no publicly traded equity securities. The Operating Partnership has guaranteed certain outstanding debt of UDR.

As of March 31, 2018, UDR owned 110,883 units (100%) of the general partnership interests of the Operating Partnership and 174,135,116 OP Units, representing approximately 94.8% of the total outstanding OP Units in the Operating Partnership. UDR conducts a substantial amount of its business and holds a substantial amount of its assets through the Operating Partnership, and, by virtue of its ownership of the OP Units and UDR’s role as the Operating Partnership’s sole general partner, UDR has the ability to control all of the day-to-day operations of the Operating Partnership. Separate financial statements and accompanying notes, as well as separate discussions under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are presented in this report for each of UDR and the Operating Partnership.

 

 


 

Table of Contents

UDR, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

    

2018

    

2017

ASSETS

 

 

 

 

 

 

Real estate owned:

 

 

  

 

 

  

Real estate held for investment

 

$

9,558,744

 

$

9,584,716

Less: accumulated depreciation

 

 

(3,407,025)

 

 

(3,326,312)

Real estate held for investment, net

 

 

6,151,719

 

 

6,258,404

Real estate under development (net of accumulated depreciation of $6,790 and $3,854, respectively)

 

 

644,207

 

 

588,636

Total real estate owned, net of accumulated depreciation

 

 

6,795,926

 

 

6,847,040

Cash and cash equivalents

 

 

1,083

 

 

2,038

Restricted cash

 

 

19,770

 

 

19,792

Notes receivable, net

 

 

39,469

 

 

19,469

Investment in and advances to unconsolidated joint ventures, net

 

 

732,578

 

 

720,830

Other assets

 

 

120,222

 

 

124,104

Total assets

 

$

7,709,048

 

$

7,733,273

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

  

 

 

  

Liabilities:

 

 

  

 

 

  

Secured debt, net

 

$

801,523

 

$

803,269

Unsecured debt, net

 

 

2,879,150

 

 

2,868,394

Real estate taxes payable

 

 

24,130

 

 

18,349

Accrued interest payable

 

 

28,850

 

 

33,432

Security deposits and prepaid rent

 

 

35,321

 

 

31,916

Distributions payable

 

 

95,122

 

 

91,455

Accounts payable, accrued expenses, and other liabilities

 

 

83,054

 

 

102,956

Total liabilities

 

 

3,947,150

 

 

3,949,771

 

 

 

 

 

 

 

Commitments and contingencies (Note 12)

 

 

  

 

 

  

 

 

 

 

 

 

 

Redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership

 

 

876,120

 

 

948,138

 

 

 

 

 

 

 

Equity:

 

 

  

 

 

  

Preferred stock, no par value; 50,000,000 shares authorized:

 

 

  

 

 

  

8.00% Series E Cumulative Convertible; 2,780,994 shares issued and outstanding at March 31, 2018 and December 31, 2017

 

 

46,200

 

 

46,200

Series F; 15,805,518 and 15,852,721 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively

 

 

 1

 

 

 1

Common stock, $0.01 par value; 350,000,000 shares authorized:

 

 

  

 

 

  

267,583,892 and 267,822,069 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively

 

 

2,676

 

 

2,678

Additional paid-in capital

 

 

4,638,766

 

 

4,651,205

Distributions in excess of net income

 

 

(1,808,907)

 

 

(1,871,603)

Accumulated other comprehensive income/(loss), net

 

 

(1,276)

 

 

(2,681)

Total stockholders’ equity

 

 

2,877,460

 

 

2,825,800

Noncontrolling interests

 

 

8,318

 

 

9,564

Total equity

 

 

2,885,778

 

 

2,835,364

Total liabilities and equity

 

$

7,709,048

 

$

7,733,273

 

See accompanying notes to consolidated financial statements.

5


 

Table of Contents

UDR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended

 

March 31, 

 

2018

 

2017

REVENUES:

 

  

    

 

  

Rental income

$

250,483

 

$

241,271

Joint venture management and other fees

 

2,822

 

 

2,570

Total revenues

 

253,305

 

 

243,841

OPERATING EXPENSES:

 

  

 

 

  

Property operating and maintenance

 

40,587

 

 

39,600

Real estate taxes and insurance

 

33,282

 

 

30,188

Property management

 

6,888

 

 

6,635

Other operating expenses

 

2,009

 

 

1,691

Real estate depreciation and amortization

 

108,136

 

 

105,032

General and administrative

 

11,759

 

 

13,075

Casualty-related charges/(recoveries), net

 

940

 

 

502

Other depreciation and amortization

 

1,691

 

 

1,608

Total operating expenses

 

205,292

 

 

198,331

Operating income

 

48,013

 

 

45,510

Income/(loss) from unconsolidated entities

 

(1,677)

 

 

11,198

Interest expense

 

(29,943)

 

 

(30,539)

Interest income and other income/(expense), net

 

2,759

 

 

427

Income/(loss) before income taxes and gain/(loss) on sale of real estate owned

 

19,152

 

 

26,596

Tax (provision)/benefit, net

 

(227)

 

 

(332)

Income/(loss) from continuing operations

 

18,925

 

 

26,264

Gain/(loss) on sale of real estate owned, net of tax

 

70,300

 

 

2,132

Net income/(loss)

 

89,225

 

 

28,396

Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership

 

(7,390)

 

 

(2,338)

Net (income)/loss attributable to noncontrolling interests

 

(79)

 

 

(91)

Net income/(loss) attributable to UDR, Inc.

 

81,756

 

 

25,967

Distributions to preferred stockholders — Series E (Convertible)

 

(955)

 

 

(929)

Net income/(loss) attributable to common stockholders

$

80,801

 

$

25,038

 

 

 

 

 

 

Common distributions declared per share

$

0.3225

 

$

0.3100

 

 

 

 

 

 

Income/(loss) per weighted average common share:

 

  

 

 

  

Basic

$

0.30

 

$

0.09

Diluted

$

0.30

 

$

0.09

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

  

 

 

  

Basic

 

267,546

 

 

266,790

Diluted

 

269,208

 

 

268,688

 

See accompanying notes to consolidated financial statements.

6


 

Table of Contents

UDR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

 

2018

 

2017

Net income/(loss)

 

$

89,225

 

$

28,396

Other comprehensive income/(loss), including portion attributable to noncontrolling interests:

 

 

  

 

 

  

Other comprehensive income/(loss) - derivative instruments:

 

 

  

 

 

  

Unrealized holding gain/(loss)

 

 

1,710

 

 

632

(Gain)/loss reclassified into earnings from other comprehensive income/(loss)

 

 

(172)

 

 

818

Other comprehensive income/(loss), including portion attributable to noncontrolling interests

 

 

1,538

 

 

1,450

Comprehensive income/(loss)

 

 

90,763

 

 

29,846

Comprehensive (income)/loss attributable to noncontrolling interests

 

 

(7,602)

 

 

(2,558)

Comprehensive income/(loss) attributable to UDR, Inc.

 

$

83,161

 

$

27,288

 

See accompanying notes to consolidated financial statements.

7


 

Table of Contents

UDR, INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

    

Distributions

    

Accumulated Other Comprehensive

    

 

 

    

 

 

 

 

Preferred

 

Common

 

Paid-in

 

in Excess of

 

Income/(Loss),

 

Noncontrolling

 

 

 

 

 

Stock

 

Stock

 

Capital

 

Net Income

 

net

 

Interests

 

Total

Balance at December 31, 2017

 

$

46,201

 

$

2,678

 

$

4,651,205

 

$

(1,871,603)

 

$

(2,681)

 

$

9,564

 

$

2,835,364

Net income/(loss) attributable to UDR, Inc.

 

 

 —

 

 

 —

 

 

 —

 

 

81,756

 

 

 —

 

 

 —

 

 

81,756

Net income/(loss) attributable to noncontrolling interests

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

70

 

 

70

Contribution of noncontrolling interests in consolidated real estate

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

108

 

 

108

Repurchase of common shares

 

 

 —

 

 

(6)

 

 

(19,982)

 

 

 —

 

 

 —

 

 

 —

 

 

(19,988)

Long Term and Short Term Incentive Plan Unit grants/(vestings), net

 

 

 —

 

 

 —

 

 

 —