# UDR, Inc. (UDR) FY 2021 MD&A Verbatim Item 7 Management's Discussion and Analysis from UDR, Inc.'s 10-K for fiscal year 2021. SEC filing source: https://www.sec.gov/Archives/edgar/data/74208/000007420822000010/udr-20211231x10k.htm Accession: 0000074208-22-000010 Filing date: 2022-02-15 Report date: 2021-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/UDR/ All MD&A years: /company/UDR/mda/ Next year: /company/UDR/mda/fy2022/ (FY 2022) 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, as amended (the “Exchange Act”). Such forward-looking statements include, without limitation, statements concerning property acquisitions and dispositions, development activity and capital expenditures, capital raising activities, rent growth, occupancy, rental expense growth and expected or potential impacts of the novel coronavirus disease (“COVID-19”) pandemic. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “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, the impact of the COVID-19 pandemic and measures intended to prevent its spread or address its effects, unfavorable changes in the apartment market, changing economic conditions, the impact of inflation/deflation on rental rates and property operating expenses, expectations concerning the availability of capital and the stability of the capital markets, the impact of competition and competitive pricing, acquisitions, developments and redevelopments not achieving anticipated results, delays in completing developments and redevelopments, delays in completing lease-ups on schedule or at expected rent and occupancy levels, expectations on job growth, home affordability and demand/supply ratio for multifamily housing, expectations concerning development and redevelopment activities, expectations on occupancy levels and rental rates, expectations concerning joint ventures and partnerships with third parties, expectations that automation will help grow net operating income, and expectations on annualized net operating income. The following factors, among others, could cause our future results to differ materially from those expressed in the forward-looking statements: [[GREPCENT_TABLE]] [["","\u25cf","the impact of the COVID-19 pandemic and measures intended to prevent its spread or address its effects;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","general economic conditions;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","unfavorable changes in apartment market and economic conditions that could adversely affect occupancy levels and rental rates, including as a result of COVID-19;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","the failure of acquisitions to achieve anticipated results;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","possible difficulty in selling apartment communities;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","competitive factors that may limit our ability to lease apartment homes or increase or maintain rents;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","insufficient cash flow that could affect our debt financing and create refinancing risk;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","failure to generate sufficient revenue, which could impair our debt service payments and distributions to stockholders;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","development and construction risks that may impact our profitability;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","potential damage from natural disasters, including hurricanes and other weather-related events, which could result in substantial costs to us;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","risks from climate change that impacts our properties or operations;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","risks from extraordinary losses for which we may not have insurance or adequate reserves;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","risks from cybersecurity breaches of our information technology systems and the information technology systems of our third party vendors and other third parties;"]] [[/GREPCENT_TABLE]] 37 Table of Contents [[GREPCENT_TABLE]] [["","\u25cf","uninsured losses due to insurance deductibles, self-insurance retention, uninsured claims or casualties, or losses in excess of applicable coverage;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","delays in completing developments and lease-ups on schedule;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","our failure to succeed in new markets;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","risks that third parties who have an interest in or are otherwise involved in projects in which we have an interest, including mezzanine borrowers, joint venture partners or other investors, do not perform as expected;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","changing interest rates, which could increase interest costs and affect the market price of our securities;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","potential liability for environmental contamination, which could result in substantial costs to us;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","the imposition of federal taxes if we fail to qualify as a REIT under the Code in any taxable year;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","our internal control over financial reporting may not be considered effective which could result in a loss of investor confidence in our financial reports, and in turn have an adverse effect on our stock price; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","changes in real estate laws, tax laws, rent control or stabilization laws or other laws affecting our business."]] [[/GREPCENT_TABLE]] A discussion of these and other factors affecting our business and prospects is set forth in Part I, Item 1A. Risk Factors. We encourage investors to review these risk factors. 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. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law. COVID-19 Update See Part I, Item 1. “Business – COVID-19 Update” above for more information on the impact of COVID-19 on the Company. ​ The following discussion should be read in conjunction with our consolidated financial statements appearing elsewhere herein and is based primarily on our consolidated financial statements for the years ended December 31, 2021, and 2020. This section of this Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020 of UDR, Inc. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. ​ Business Overview We are a self-administered real estate investment trust, or REIT, that owns, operates, acquires, renovates, develops, redevelops, disposes of, and manages multifamily apartment communities. 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 the Operating Partnership and the DownREIT Partnership. Unless the context otherwise requires, all references in this Report to “we,” “us,” “our,” “the Company,” or “UDR” refer collectively to UDR, Inc., its consolidated subsidiaries and its consolidated joint ventures. 38 Table of Contents At December 31, 2021, our consolidated real estate portfolio included 160 communities in 13 states plus the District of Columbia totaling 53,229 apartment homes. In addition, we have an ownership interest in 6,570 completed or to-be-completed apartment homes through unconsolidated joint ventures or partnerships, including 3,733 apartment homes owned by entities in which we hold preferred equity investments. The Same-Store Community apartment home population for the year ended December 31, 2021, was 45,143. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to use judgment in the application of accounting policies, including making estimates and assumptions. A critical accounting policy is one that is both important to our financial condition and results of operations as well as involves some degree of uncertainty. Estimates are prepared based on management’s assessment after considering all evidence available. Changes in estimates could affect our financial position or results of operations. Below is a discussion of the accounting policies that we consider critical to understanding our financial condition or results of operations where there is uncertainty or where significant judgment is required. A discussion of our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2, Significant Accounting Policies, to the Notes to the UDR, Inc. Consolidated Financial Statements included in this Report. Cost Capitalization In conformity with GAAP, we capitalize those expenditures that materially enhance the value of an existing asset or substantially extend the useful life of an existing asset. Expenditures necessary to maintain an existing property in ordinary operating condition are expensed as incurred. In addition to construction costs, we capitalize costs directly related to the predevelopment, development, and redevelopment of a capital project, which include, but are not limited to, interest, real estate taxes, insurance, and allocated development and redevelopment overhead related to support costs for personnel working on the capital projects. We use our professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. These costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress and such costs are incremental and identifiable to a specific activity to get the asset ready for its intended use. As each home in a capital project is completed and becomes available for lease-up, the Company ceases capitalization on the related portion. The costs capitalized are reported on the Consolidated Balance Sheets as Total real estate owned, net of accumulated depreciation. Amounts capitalized during the years ended December 31, 2021, 2020, and 2019 were $21.0 million, $19.0 million, and $13.5 million, respectively. Investment in Unconsolidated Entities We may enter into various joint venture agreements and/or partnerships with unrelated third parties to hold or develop real estate assets. We must determine for each of these ventures whether to consolidate the entity or account for our investment under the equity method of accounting. We determine whether to consolidate a joint venture or partnership based on our rights and obligations under the venture agreement, applying the applicable accounting guidance. The application of the rules in evaluating the accounting treatment for each joint venture or partnership is complex and requires substantial management judgment. We evaluate our accounting for investments on a regular basis including when a significant change in the design of an entity occurs. Throughout our financial statements, and in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we use the term “joint venture” or “partnership” when referring to investments in entities in which we do not have a 100% ownership interest. We continually evaluate our investments in unconsolidated joint ventures when events or changes in circumstances indicate that there may be an other-than-temporary decline in value. We consider various factors to determine if a decrease in the value of the investment is other-than-temporary. These factors include, but are not limited to, age of the venture, our intent and ability to retain our investment in the entity, the financial condition and long-term prospects of the entity, and the relationships with the other joint venture partners and its lenders. The amount of loss recognized is the excess of the investment’s carrying amount over its estimated fair value. If we believe that the decline in fair value is temporary, no impairment is recorded. The aforementioned factors are taken as a whole by management in determining the valuation of our investment property. Should the actual results differ from management’s judgment, the valuation could be negatively affected and may result in a negative impact to our Consolidated Financial Statements. 39 Table of Contents Impairment of Long-Lived Assets Quarterly or when changes in circumstances warrant, we will assess our real estate properties for indicators of impairment. The judgments regarding the existence of impairment indicators are based on certain factors. Such factors include, among other things, operational performance, market conditions, the Company’s intent and ability to hold the related asset, as well as any significant cost overruns on development properties. ​ If a real estate property has indicators of impairment, we assess whether the long-lived asset’s carrying value exceeds the community’s undiscounted future cash flows, which is representative of projected net operating income (“NOI”) plus the residual value of the community. Our future 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 and the carrying value exceeds the undiscounted cash flows of the community, an impairment loss is recognized equal to the excess of the carrying amount of the asset over its estimated fair value. Our estimates of fair value represent our best estimate based primarily upon unobservable inputs related to rental rates, operating costs, growth rates, discount rates, capitalization rates, industry trends and reference to market rates and transactions. 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 with the closing expected to occur 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 sell, determined on an asset-by-asset basis. Expenditures for ordinary repair and maintenance costs on held for disposition properties are charged to expense as incurred. Expenditures for improvements, renovations, and replacements related to held for disposition properties are capitalized at cost. Depreciation is not recorded on real estate held for disposition. Real Estate Investment Properties We purchase real estate investment properties from time to time and record the fair value to various components, such as land, buildings, and intangibles related to in-place leases, based on the fair value of each component. In making estimates of fair values for purposes of allocating purchase price, we utilize various sources, including independent appraisals, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. The fair value of buildings is determined as if the buildings were vacant upon acquisition and subsequently leased at market rental rates. As such, the determination of fair value considers the present value of all cash flows expected to be generated from the property including an initial lease-up period. We determine the fair value of in-place leases by assessing the net effective rent and remaining term of the lease relative to market terms for similar leases at acquisition. In addition, we consider the cost of acquiring similar leases, the foregone rents associated with the lease-up period, and the carrying costs associated with the lease-up period. The fair value of in-place leases is recorded and amortized as amortization expense over the remaining average contractual lease period. REIT Status We are a Maryland corporation that has elected to be treated for federal income tax purposes as a REIT. A REIT is a legal entity that holds interests in real estate and is required by the Code to meet a number of organizational and operational requirements, including a requirement that a REIT must distribute at least 90% of our REIT taxable income (other than our net capital gain) to our stockholders. If we were to fail to qualify as a REIT in any taxable year, we will be subject to federal and state income taxes at the regular corporate rates and may not be able to qualify as a REIT for four years. Based on the net earnings reported for the year ended December 31, 2021 in our Consolidated Statements of Operations, we would have incurred federal and state GAAP income taxes if we had failed to qualify as a REIT. 40 Table of Contents Summary of Real Estate Portfolio by Geographic Market The following table summarizes our market information by major geographic markets as of and for the year ended December 31, 2021: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","December 31, 2021","\u200b","Year Ended December 31, 2021"],["\u200b","","\u200b","","\u200b","","Percentage","","Total","","\u200b","","Monthly","","Net"],["\u200b","\u200b","Number of","\u200b","Number of","\u200b","of Total","\u200b","Carrying","\u200b","Average","\u200b","Income per","\u200b","Operating"],["\u200b","\u200b","Apartment","\u200b","Apartment","\u200b","Carrying","\u200b","Value (in","\u200b","Physical","\u200b","Occupied","\u200b","Income"],["Same-Store Communities","\u200b","Communities","\u200b","Homes","\u200b","Value","\u200b","thousands)","\u200b","Occupancy","\u200b","Home (a)","\u200b","(in thousands)"],["West Region","","","","","","","","\u200b","","","","","\u200b","","","\u200b"],["Orange County, CA","","10","","4,685","","9.8","%","$","1,441,386","","97.5","%","$","2,608","\u200b","$","111,261"],["San Francisco, CA","","11","","2,751","","6.1","%","\u200b","894,975","","95.3","%","\u200b","3,074","\u200b","\u200b","66,769"],["Seattle, WA","","14","","2,725","","6.5","%","","957,008","","97.2","%","","2,417","\u200b","","54,290"],["Monterey Peninsula, CA","","7","","1,565","","1.3","%","","188,914","","97.0","%","","2,012","\u200b","","28,556"],["Los Angeles, CA","","4","","1,225","","3.2","%","","467,814","","96.0","%","","2,728","\u200b","","27,116"],["Other Southern California","","3","","817","","1.5","%","","216,455","","98.2","%","","2,425","\u200b","","17,138"],["Portland, OR","","2","","476","","0.4","%","","53,306","","98.3","%","","1,726","\u200b","","7,211"],["Mid-Atlantic Region","","","","","","\u200b","\u200b","","","","","\u200b","","","\u200b"],["Metropolitan D.C.","","22","","8,003","","15.0","%","","2,229,593","","96.7","%","","2,138","\u200b","","135,905"],["Baltimore, MD","","5","","1,597","","2.3","%","","342,725","","97.6","%","","1,680","\u200b","","21,448"],["Richmond, VA","","4","","1,359","","1.1","%","","156,903","","98.2","%","","1,523","\u200b","","18,092"],["Northeast Region","","","","","","\u200b","\u200b","","","","","\u200b","","","\u200b"],["Boston, MA","","10","","4,139","","10.6","%","","1,557,982","","96.5","%","","2,689","\u200b","","91,483"],["New York, NY","","5","","1,825","","8.5","%","","1,255,445","","96.7","%","","3,731","\u200b","","40,238"],["Philadelphia, PA","\u200b","1","\u200b","313","\u200b","0.7","%","\u200b","108,042","\u200b","96.6","%","\u200b","2,294","\u200b","\u200b","5,610"],["Southeast Region","","","","","","\u200b","\u200b","","","","","\u200b","","","\u200b"],["Tampa, FL","","9","","2,911","","2.9","%","","427,964","","97.6","%","","1,655","\u200b","","36,438"],["Orlando, FL","","9","","2,500","","1.7","%","","245,992","","97.4","%","","1,475","\u200b","","30,332"],["Nashville, TN","","8","","2,260","","1.6","%","","229,634","","97.9","%","","1,431","\u200b","","26,472"],["Other Florida","","1","","636","","0.6","%","","92,007","","97.9","%","","1,779","\u200b","","8,819"],["Southwest Region","","","","","","\u200b","\u200b","","","","","\u200b","","","\u200b"],["Dallas, TX","","11","","3,866","","4.0","%","","584,254","","97.1","%","","1,536","\u200b","","43,150"],["Austin, TX","","4","","1,272","","1.2","%","","174,084","","98.1","%","","1,608","\u200b","","14,629"],["Denver, CO","\u200b","1","\u200b","218","\u200b","1.0","%","\u200b","145,451","\u200b","95.6","%","\u200b","3,138","\u200b","\u200b","5,541"],["Total/Average Same-Store Communities","","141","","45,143","","80.0","%","","11,769,934","","97.1","%","$","2,182","\u200b","","790,498"],["Non-Mature, Commercial Properties & Other","","19","","8,086","","17.4","%","","2,582,300","","","\u200b","","","\u200b","","77,044"],["Total Real Estate Held for Investment","","160","","53,229","","97.4","%","","14,352,234","","","\u200b","","","\u200b","","867,542"],["Real Estate Under Development (b)","","\u2014","","\u2014","","2.6","%","","388,569","","","\u200b","","","\u200b","","(417)"],["Total Real Estate Owned","","160","","53,229","","100.0","%","","14,740,803","","","\u200b","","","\u200b","$","867,125"],["Total Accumulated Depreciation","","","","","","","\u200b","","(5,137,096)","","","\u200b","","","\u200b"],["Total Real Estate Owned, Net of Accumulated Depreciation","","","","","","","\u200b","$","9,603,707","","","\u200b","","","\u200b"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(a)","Monthly Income per Occupied Home represents total monthly revenues divided by the average physical number of occupied apartment homes in our Same-Store portfolio."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(b)","As of December 31, 2021, the Company was developing five wholly owned communities with a total of 1,417 apartment homes, none of which have been completed."]] [[/GREPCENT_TABLE]] We report in two segments: Same-Store Communities and Non-Mature Communities/Other. Our Same-Store Communities segment represents those communities acquired, developed, and stabilized prior to January 1, 2020 and held as of December 31, 2021. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan to conduct substantial redevelopment activities, and the communities are not classified as held for disposition at year end. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months. Our Non-Mature Communities/Other segment represents those communities that do not meet the criteria to be included in Same-Store Communities, including, but not limited to, recently acquired, developed and redeveloped communities, and the non-apartment components of mixed use properties. 41 Table of Contents Liquidity and Capital Resources Liquidity is the ability to meet present and future financial obligations either through operating cash flows, sales of properties, borrowings under our credit agreements, and/or the issuance of debt and/or equity securities. 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, and borrowings under our credit agreements. We routinely use our working capital credit facility, our unsecured revolving credit facility and issuances of commercial paper to temporarily fund certain investing and financing activities prior to arranging for longer-term financing or the issuance of equity or debt securities. During the past several years, proceeds from the sale of real estate have been used for both investing and financing activities as we continue to execute on maintaining a diversified portfolio. We expect to meet our short-term liquidity requirements generally through net cash provided by property operations and borrowings under our credit agreements and our unsecured commercial paper program. 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 net cash provided by property operations, secured and unsecured borrowings, the issuance of debt or equity securities, and/or the disposition of properties. We believe that our net cash provided by property operations and borrowings under our credit agreements and our unsecured commercial paper program will continue to be adequate to meet both operating requirements and the payment of dividends by the Company in accordance with REIT requirements. Likewise, the budgeted expenditures for improvements and renovations of certain properties are expected to be funded from property operations, borrowings under credit agreements, the issuance of debt or equity securities, and/or dispositions of properties. We have a shelf registration statement filed with the Securities and Exchange Commission, or “SEC,” which provides for the issuance of common stock, preferred stock, depositary shares, debt securities, guarantees of debt securities, warrants, subscription rights, 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. In July 2021, the Company entered into an ATM sales agreement under which the Company may offer and sell up to 20.0 million shares of its common stock, from time to time, to or through its sales agents and may enter into separate forward sales agreements to or through its forward purchasers. Upon entering into the ATM sales agreement, the Company simultaneously terminated the sales agreement for its prior at-the-market equity offering program, which was entered into in July 2017. During the year ended December 31, 2021, the Company sold 1.6 million shares of common stock through its ATM program pursuant to the Company’s forward sales agreements described below. As of December 31, 2021, we had 18.4 million shares of common stock available for future issuance under the ATM program, including an aggregate of 4.4 million shares subject to the forward sales agreements described below. During the year ended December 31, 2021, the Company entered into forward sales agreements under its current or prior ATM programs for a total of 10.8 million shares of common stock at a weighted average initial forward price per share of $50.59, of which 4.4 million shares had not been settled. The actual forward price per share to be received by the Company upon settlement will be determined on the applicable settlement date based on adjustments made to the initial forward price to reflect the then-current federal funds rate and the amount of dividends paid to holders of UDR common stock over the term of the forward sales agreement. As of December 31, 2021, 6.4 million shares under the forward sales agreements under the ATM programs had been settled at a weighted average forward price per share of $47.79, which is inclusive of adjustments made to reflect the then-current federal funds rate, the amount of dividends paid to holders of UDR common stock and commissions paid to sales agents of approximately $2.6 million, for net proceeds of $306.6 million. The final dates by which the remaining shares sold under the forward sales agreements under the ATM programs must be settled range between August 1, 2022 and September 14, 2022. ​ In March 2021, the Company entered into forward sale agreements to sell 7.0 million shares of its common stock at an initial forward price per share of $43.51. The actual forward price per share to be received by the Company upon settlement was determined on the applicable settlement date based on adjustments made to the initial forward price to reflect the then-current federal funds rate and the amount of dividends paid to holders of UDR common stock over the term of the forward sales agreement. In September 2021, the Company settled all 7.0 million shares at a forward price per share of $42.65, which is inclusive of adjustments made to reflect the then-current federal funds rate, the amount of dividends paid to holders of UDR common stock and commissions paid to sales agents of approximately $6.0 million, for net proceeds of $298.5 million. ​ In June 2021, the Company entered into forward sale agreements to sell 6.1 million shares of its common stock at an initial forward price per share of $49.22. The actual forward price per share to be received by the Company upon 42 Table of Contents settlement will be determined on the applicable settlement date based on adjustments made to the initial forward price to reflect the then-current federal funds rate and the amount of dividends paid to holders of UDR common stock over the term of the forward sales agreement. In December 2021, the Company settled all 6.1 million shares at a forward price per share of $48.33, which is inclusive of adjustments made to reflect the then-current federal funds rate, the amount of dividends paid to holders of UDR common stock and commissions paid to sales agents of approximately $5.4 million, for net proceeds of $294.8 million. ​ During the year ended December 31, 2021, the Company settled 19.5 million shares in aggregate under forward sales agreements under the ATM programs and previously announced forward sales agreements for net proceeds of $900.0 million. Aggregate net proceeds from such forward sales, after deducting related expenses, were $899.1 million. ​ In February 2021, the Company issued $300.0 million of 2.10% senior unsecured medium-term notes due June 15, 2033. The notes were priced at 99.592% of the principal amount of the notes. The Company used the net proceeds to redeem its $300.0 million 4.00% senior unsecured medium-term notes due October 2025 (the “2025 Notes”) (plus the make-whole amount and accrued and unpaid interest). The combined prepayment and make-whole amounts for the purchase of the 2025 Notes totaled approximately $40.8 million. ​ In July 2021, the Company increased its maximum aggregate amount from $500.0 million to $700.0 million on its unsecured commercial paper program. ​ In September 2021, the Company entered into an amended and restated credit agreement (the “Credit Agreement”) that provides for a $1.3 billion unsecured revolving credit facility (the “Revolving Credit Facility”) and a $350.0 million unsecured term loan (the “Term Loan”). The Credit Agreement allows the total commitments under the Revolving Credit Facility and the total borrowings under the Term Loan to be increased to an aggregate maximum amount of up to $2.5 billion, subject to certain conditions, including obtaining commitments from one or more lenders. The Revolving Credit Facility has a scheduled maturity date of January 31, 2026, with two six-month extension options, subject to certain conditions. The Term Loan has a scheduled maturity date of January 31, 2027. The Credit Agreement also lowered the margin range for borrowings under the Revolving Credit Facility and the Term Loan. ​ The Credit Agreement amended and restated the Company’s prior credit agreement, which provided for: (i) a $1.1 billion revolving credit facility scheduled to mature in January 2023 and (ii) a $350.0 million term loan scheduled to mature in September 2023. The prior credit agreement allowed the total commitments under the revolving credit facility and total borrowings under the term loan to be increased to an aggregate maximum amount of up to $2.0 billion, subject to certain conditions. ​ Based on the Company’s current credit rating, the Revolving Credit Facility has an interest rate equal to LIBOR plus a margin of 77.5 basis points and a facility fee of 15 basis points, and the Term Loan has an interest rate equal to LIBOR plus a margin of 85 basis points. Depending on the Company’s credit rating, the margin under the Revolving Credit Facility ranges from 70 to 140 basis points, the facility fee ranges from 10 to 30 basis points, and the margin under the Term Loan ranges from 75 to 160 basis points. ​ In September 2021, the Company amended the Working Capital Credit Facility to extend the maturity date from January 14, 2022 to January 12, 2024 and lower the margin range for the interest rate. Based on the Company’s current credit rating, the Working Capital Credit Facility now has an interest rate equal to LIBOR plus a margin of 77.5 basis points. Depending on the Company’s credit rating, the margin ranges from 70 to 140 basis points. ​ In September 2021, the Company issued an additional $200.0 million of 3.00% medium-term notes due 2031 (the “2031 Notes”). The notes were priced at 106.388% of the principal amount of the notes to yield 2.259%. This was a further issuance of and forms a single series with the $400.0 million aggregate principal amount of the Company’s 2031 Notes that were issued in August 2019. ​ Future Capital Needs Future development and redevelopment expenditures may be funded through unsecured or secured credit facilities, unsecured commercial paper, proceeds from the issuance of equity or debt securities, sales of properties, joint ventures, and, to a lesser extent, from cash flows provided by property operations. Acquisition activity in strategic markets may be funded through joint ventures, by the reinvestment of proceeds from the sale of properties, through the 43 Table of Contents issuance of equity or debt securities, the issuance of operating partnership units and the assumption or placement of secured and/or unsecured debt. During 2022, we have approximately $1.1 million of secured debt maturing, comprised solely of principal amortization, and $220.0 million of unsecured debt maturing, comprised solely of the unsecured commercial paper. Additionally, the Company has no secured or unsecured debt maturing in 2023, aside from principal amortization. We anticipate repaying the debt due in 2022 and 2023 with cash flow from our operations, proceeds from debt or equity offerings, proceeds from dispositions of properties, or from borrowings under our credit agreements and our unsecured commercial paper program. The following table summarizes our material cash requirements as of December 31, 2021 (dollars in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Payments Due by Period"],["Material Cash Requirements","","2022","","2023-2024","","2025-2026","","Thereafter","","Total"],["Long-term debt obligations","\u200b","$","221,140","\u200b","$","143,179","\u200b","$","527,537","\u200b","$","4,507,096","\u200b","$","5,398,952"],["Interest on debt obligations (a)","\u200b","","152,508","\u200b","","302,804","\u200b","","284,032","\u200b","","452,570","\u200b","","1,191,914"],["Letters of credit","\u200b","","2,841","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","2,841"],["Operating lease obligations:","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Ground leases (b)","\u200b","","12,442","\u200b","","24,884","\u200b","","24,884","\u200b","","430,337","\u200b","","492,547"],["\u200b","\u200b","$","388,931","\u200b","$","470,867","\u200b","$","836,453","\u200b","$","5,390,003","\u200b","$","7,086,254"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(a)","Interest payments on variable rate debt instruments are based on each debt instrument\u2019s respective year-end interest rate at December 31, 2021."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(b)","For purposes of our ground lease contracts, the Company uses the minimum lease payment, if stated in the agreement. For ground lease agreements where there is a rent reset provision based on fair market value or changes in the consumer price index but does not include a specified minimum lease payment, the Company uses the current rent over the remainder of the lease term."]] [[/GREPCENT_TABLE]] During 2021, we incurred gross interest costs of $196.0 million, of which $9.7 million was capitalized. ​ In January 2022, the entire $220.0 million of outstanding unsecured commercial paper as of December 31, 2021 was repaid at maturity with additional proceeds of unsecured commercial paper with maturity dates in January 2022 and February 2022 and proceeds under the Working Capital Credit Facility. As of February 11, 2022, we had no borrowings outstanding under the Revolving Credit Facility, leaving $1.3 billion of unused capacity (excluding $2.6 million of letters of credit), and we had no borrowings outstanding under the Working Capital Credit Facility, leaving $75.0 million of unused capacity. Guarantor Subsidiary Summarized Financial Information ​ UDR has certain outstanding debt securities that are guaranteed by the Operating Partnership. With respect to this debt, as further outlined below, the Operating Partnership fully and unconditionally guarantees payment of any principal, premium and interest in full to the holders thereof. The Operating Partnership is a subsidiary of UDR, through which UDR conducts a significant portion of its business and holds a substantial amount of its assets. UDR also conducts business through other subsidiaries, including its taxable REIT subsidiaries. In addition to its ownership interest in the Operating Partnership, UDR holds interests in subsidiaries and joint ventures, owns and operates properties, issues securities from time to time and guarantees debt of certain of its subsidiaries. UDR, as the sole general partner of the Operating Partnership, owns 100 percent of the Operating Partnership’s general partnership interests and approximately 95 percent of its limited partnership interests and, by virtue thereof, has the ability to control all of the day-to-day operations of the Operating Partnership. UDR has concluded that it is the primary beneficiary of, and therefore consolidates, the Operating Partnership. ​ The Operating Partnership is the subsidiary guarantor of certain of our registered debt securities, including the $300 million of medium-term notes due September 2026, $300 million of medium-term notes due July 2027, $300 million of medium-term notes due January 2028, $300 million of medium-term notes due January 2029, $600 million of medium-term notes due January 2030, $600 million of medium-term notes due August 2031, $400 million of medium-term notes due August 2032, $350 million of medium-term notes due March 2033, $300 million of medium-term notes due in June 2033 and $300 million of medium-term notes due November 2034. 44 Table of Contents ​ The Operating Partnership fully and unconditionally guarantees payment of any principal, premium and interest in full to the holders of the notes described above. The guarantee forms part of the indenture under which the notes were issued. If, for any reason, we do not make any required payment in respect of the notes when due, the Operating Partnership will cause the payment to be made to, or to the order of, the applicable paying agent on behalf of the trustee. Holders of the notes may enforce their rights under the guarantee directly against the Operating Partnership without first making a demand or taking action against UDR or any other person or entity. The Operating Partnership may, without the consent of the holders of the notes, assume all of our rights and obligations under the notes and, upon such assumption, we will be released from our liabilities under the indenture and the notes. ​ The notes are UDR’s unsecured general obligations and rank equally with all of UDR’s other unsecured and unsubordinated indebtedness outstanding from time to time. As a result, our payment of amounts due on the notes is subordinated to all of our existing and future secured obligations to the extent of the value of the collateral pledged toward any such secured obligation. Our payment of amounts due on the notes also is effectively subordinated to all liabilities, whether secured or unsecured, of any of our non-guarantor subsidiaries because, in the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding with respect to such subsidiaries, we, as an equity holder of such subsidiaries, would not receive distributions from such subsidiaries until claims of any creditors of such subsidiaries are satisfied. ​ In March 2020, the SEC adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify disclosure requirements related to certain registered securities. The rule was effective for the Company on January 4, 2021. As a result of the amendments to Rule 3-10 of Regulation S-X, subsidiary guarantors of obligations issued by the parent are no longer required to provide separate financial statements subject to certain criteria. Such criteria include, among other things, that the parent company is an issuer or co-issuer of the debt, the consolidated financial statements of the parent company have been filed and the subsidiary guarantor is consolidated into those financial statements, and the guaranteed security is debt or debt-like. If the applicable criteria are met, the parent company is able to utilize alternative disclosures described in Rule 13-01 of Regulation S-X, which include summarized financial information of the subsidiary guarantor. We evaluated the criteria and determined that we are eligible for the exceptions, which allow us to provide alternative disclosures for the Operating Partnership. ​ As a result of the amendments, the Operating Partnership, as subsidiary guarantor, is no longer subject to the filing requirements under Section 15(d) of the Exchange Act, and will no longer file separate periodic and current reports in reliance on Rule 12h-5 under the Exchange Act. As such, we have presented summarized financial information for the Operating Partnership below. ​ The following tables present the summarized financial information for the Operating Partnership as of December 31, 2021 and 2020, and for the years ended December 31, 2021, 2020, and 2019. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis (dollars in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","December 31,","\u200b","December 31,"],["\u200b","","2021","","2020"],["Total real estate, net","","$","2,262,108","","$","2,151,714"],["Cash and cash equivalents","\u200b","","21","\u200b","","26"],["Operating lease right-of-use assets","\u200b","","198,835","\u200b","","202,438"],["Other assets","\u200b","","96,553","\u200b","","103,389"],["Total assets","","$","2,557,517","","$","2,457,567"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Secured debt, net","\u200b","$","143,745","\u200b","$","99,104"],["Notes payable to UDR (a)","\u200b","\u200b","972,283","\u200b","\u200b","810,700"],["Operating lease liabilities","\u200b","\u200b","193,892","\u200b","\u200b","197,135"],["Other liabilities","\u200b","","108,076","\u200b","","102,196"],["Total liabilities","\u200b","","1,417,996","\u200b","","1,209,135"],["Total capital","\u200b","$","1,139,521","\u200b","$","1,248,432"]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended"],["\u200b","\u200b","December 31,"],["\u200b","","2021","","2020","\u200b","2019"],["Total revenue","\u200b","$","440,631","","$","428,747","\u200b","$","441,773"]] [[/GREPCENT_TABLE]] 45 Table of Contents [[GREPCENT_TABLE]] [["Property operating expenses","\u200b","","(189,543)","\u200b","","(172,704)","\u200b","","(159,823)"],["Real estate depreciation and amortization","\u200b","","(152,520)","\u200b","","(143,005)","\u200b","","(139,975)"],["Gain/(loss) on sale of real estate","\u200b","\u200b","\u2014","\u200b","\u200b","57,960","\u200b","\u200b","\u2014"],["Operating income/(loss)","\u200b","","98,568","\u200b","","170,998","\u200b","","141,975"],["Interest expense (a)","\u200b","","(33,098)","\u200b","","(29,357)","\u200b","","(29,667)"],["Other income/(loss)","\u200b","","9,316","\u200b","","(5,543)","\u200b","","(8,313)"],["Net income/(loss)","\u200b","$","74,786","","$","136,098","","$","103,995"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(a)","All $972.3 million and $810.7 million notes payable to UDR as of December 31, 2021 and 2020, respectively, and $30.8 million, $26.5 million and $28.0 million of interest expense on notes payable to UDR for the years ended December 31, 2021, 2020, and 2019, respectively, eliminate upon consolidation of UDR\u2019s consolidated financial statements."]] [[/GREPCENT_TABLE]] ​ Statements of Cash Flows The following discussion explains the changes in Net cash provided by/(used in) operating activities, Net cash provided by/(used in) investing activities, and Net cash provided by/(used in) financing activities that are presented in our Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020. Operating Activities For the year ended December 31, 2021, our Net cash provided by/(used in) operating activities was $664.0 million compared to $604.3 million for 2020. The increase in cash flow from operating activities was primarily due to changes in operating assets and liabilities and an increase in net operating income. Investing Activities For the year ended December 31, 2021, Net cash provided by/(used in) investing activities was $(1.3) billion compared to $(460.8) million for 2020. The increase in cash used in investing activities was primarily due to an increase in acquisitions made during 2021, an increase in spend for development of real estate assets, an increase in investments in unconsolidated joint ventures and a decrease in distributions received from unconsolidated joint ventures, partially offset by the repayment of notes receivable. Acquisitions In January 2021, the Company acquired a 300 apartment home operating community located in Franklin, Massachusetts, for approximately $77.4 million. In connection with the acquisition, the Company assumed an above-market mortgage note payable secured by the community with an outstanding balance of approximately $51.8 million. The Company increased its real estate assets owned by approximately $82.0 million, recorded $2.0 million of in-place lease intangibles, and recorded a $6.6 million debt premium in connection with the above-market debt assumed. In April 2021, the Company acquired a 636 apartment home operating community located in Farmers Branch, Texas, for approximately $110.2 million. In connection with the acquisition, the Company assumed an above-market mortgage note payable secured by the community with an outstanding balance of approximately $42.0 million. The Company increased its real estate assets owned by approximately $111.5 million, recorded $3.0 million of in-place lease intangibles, and recorded a $4.3 million debt premium in connection with the above-market debt assumed. ​ The Company previously had a secured note with an unaffiliated third party with an aggregate commitment of $20.0 million. The note was secured by a parcel of land and related land improvements located in Alameda, California. In September 2020, the developer defaulted on the loan. As a result of the default, in April 2021, the Company took title to the property pursuant to a deed in lieu of foreclosure. The Company increased its real estate assets owned by approximately $25.0 million, the fair market value of the property on the date of the title transfer, and recorded a $0.1 million gain on extinguishment of the secured note to Interest income and other income/(expense), net on the Consolidated Statements of Operations. (See Note 2, Significant Accounting Policies for further discussion.) ​ In May 2021, the Company acquired a to-be-developed parcel of land located in Tampa, Florida, for approximately $6.6 million. ​ 46 Table of Contents In May 2021, the Company acquired a 945 apartment home operating community located in Frisco, Texas, for approximately $166.9 million. In connection with the acquisition, the Company assumed an above-market mortgage note payable secured by the community with an outstanding balance of approximately $89.5 million. The Company increased its real estate assets owned by approximately $169.9 million, recorded $4.1 million of in-place lease intangibles, and recorded a $7.1 million debt premium in connection with the above-market debt assumed. ​ In June 2021, the Company acquired a 468 apartment home operating community located in Germantown, Maryland, for approximately $121.9 million. The Company increased its real estate assets owned by approximately $119.3 million and recorded $2.6 million of in-place lease intangibles. ​ In July 2021, the Company acquired a 259 apartment home operating community located in Bellevue, Washington, for approximately $171.9 million. The Company previously had a $115.0 million secured note receivable associated with this operating community. The Company increased its real estate assets owned by approximately $169.1 million and recorded $2.8 million of in-place lease intangibles. In connection with the acquisition of this community, the note and the unpaid accrued interest were paid in full. (See Note 2, Significant Accounting Policies for further discussion.) ​ In August 2021, the Company acquired a 544 apartment home operating community located in Germantown, Maryland, for approximately $127.2 million. The Company increased its real estate assets owned by approximately $124.4 million and recorded $2.8 million of in-place lease intangibles. ​ In September 2021, the Company acquired a 320 apartment home operating community located in King of Prussia, Pennsylvania, for approximately $116.2 million. The Company increased its real estate assets owned by approximately $113.8 million and recorded $2.4 million of in-place lease intangibles. ​ In September 2021, the Company acquired a 192 apartment home operating community located in Towson, Maryland, for approximately $57.6 million. The Company increased its real estate assets owned by approximately $54.0 million and recorded $2.4 million of real estate tax intangibles and $1.2 million of in-place lease intangibles. ​ In September 2021, the Company acquired a 339 apartment home operating community located in Philadelphia, Pennsylvania, for approximately $147.0 million. The Company increased its real estate assets owned by approximately $136.7 million and recorded $7.1 million of real estate tax intangibles and $3.2 million of in-place lease intangibles. ​ In October 2021, the Company acquired its joint venture partner’s common equity interest in a 330 apartment home operating community located in Orlando, Florida, for a total purchase price of approximately $106.0 million. The Company paid for the community by issuing approximately 0.9 million OP Units (valued at $53.00 per unit per the agreement) to the seller, which equaled $47.9 million. In connection with the acquisition, the joint venture construction loan of approximately $39.6 million was repaid. The Company previously held a $16.4 million preferred equity investment in the entity on the date of acquisition, which it accounted for as an unconsolidated equity investment (see Note 5, Joint Ventures and Partnerships). As a result, in October 2021, the Company increased its ownership interest to 100% and consolidated the operating community. The Company accounted for the consolidation as an asset acquisition resulting in no gain or loss upon consolidation. The Company increased its real estate assets owned by approximately $103.6 million and recorded $2.4 million of in-place lease intangibles. ​ In October 2021, the Company acquired a 663 apartment home operating community located in Orlando, Florida, for approximately $177.8 million. The Company increased its real estate assets owned by approximately $174.1 million and recorded $3.7 million of in-place lease intangibles. ​ In November 2021, the Company acquired a 430 apartment home operating community located in Towson, Maryland, for approximately $125.3 million. The Company increased its real estate assets owned by approximately $122.6 million and recorded $2.7 million of in-place lease intangibles. ​ In January 2020, the Company acquired a 294 apartment home operating community located in Tampa, Florida, for approximately $85.2 million. The Company increased its real estate assets owned by approximately $83.1 million and recorded approximately $2.1 million of in-place lease intangibles. In January 2020, the Company increased its ownership interest from 49% to 100% in a 276 apartment home operating community located in Hillsboro, Oregon, for a cash purchase price of approximately $21.6 million. In 47 Table of Contents connection with the acquisition, the Company repaid approximately $35.6 million of joint venture construction financing. As a result, the Company consolidated the operating community. The Company had previously accounted for its 49% ownership interest as a preferred equity investment in an unconsolidated joint venture (see Note 5, Joint Ventures and Partnerships). The Company accounted for the consolidation as an asset acquisition resulting in no gain or loss upon consolidation and increased its real estate assets owned by approximately $67.8 million and recorded approximately $1.7 million of in-place lease intangibles. ​ In August 2020, the Company acquired a to-be-developed parcel of land located in King of Prussia, Pennsylvania, for approximately $16.2 million. ​ In November 2020, the Company acquired a 672 apartment home operating community located in Tampa, Florida, for approximately $122.5 million. The Company increased its real estate assets owned by approximately $119.4 million and recorded approximately $3.1 million of in-place lease intangibles. ​ In December 2020, the Company acquired a 400 apartment home operating community located in Herndon, Virginia, for approximately $128.6 million. The Company increased its real estate assets owned by approximately $125.9 million and recorded approximately $2.7 million of in-place lease intangibles. ​ Dispositions In February 2021, the Company sold an operating community located in Anaheim, California, with a total of 386 apartment homes for gross proceeds of $156.0 million, resulting in a gain of approximately $50.8 million. ​ In October 2021, the Company sold an operating community located in Anaheim, California, with a total of 265 apartment homes for a sales price of $126.0 million, resulting in a gain of approximately $85.2 million. ​ In May 2020, the Company sold an operating community located in Bellevue, Washington, with a total of 71 apartment homes for gross proceeds of $49.7 million, resulting in a gain of approximately $29.6 million. The sale was partially financed by the Company through the issuance of a promissory note totaling $4.0 million which was repaid in January 2021. (See Note 2, Significant Accounting Policies for further discussion.) The proceeds were designated for a tax-deferred Section 1031 exchange that were used to pay a portion of the purchase price for the above mentioned acquisition of an operating community in Tampa, Florida, in January 2020. In May 2020, the Company sold an operating community located in Kirkland, Washington, with a total of 196 apartment homes for gross proceeds of $92.9 million, resulting in a gain of approximately $31.7 million. ​ In October 2020, the Company sold an operating community located in Alexandria, Virginia, with a total of 332 apartment homes for gross proceeds of $145.0 million, resulting in a gain of approximately $58.0 million. The proceeds were designated for a tax-deferred Section 1031 exchange and were used to pay a portion of the purchase price for acquisitions in November and December 2020. ​ We plan to continue to pursue our strategy of exiting markets where long-term growth prospects are limited and redeploying capital to primary locations in markets we believe will provide the best investment returns. Capital Expenditures We capitalize those expenditures that materially enhance the value of an existing asset or substantially extend the useful life of an existing asset. Expenditures necessary to maintain an existing property in ordinary operating condition are expensed as incurred. For the year ended December 31, 2021, total capital expenditures of $153.3 million or $3,036 per stabilized home, which in aggregate include recurring capital expenditures and major renovations, were spent across our portfolio, excluding development, as compared to $165.8 million or $3,494 per stabilized home for the prior year. 48 Table of Contents The decrease in total capital expenditures was primarily due to: [[GREPCENT_TABLE]] [["","\u25cf","a decrease of 16.5%, or $8.0 million, in major renovations, which include major structural changes and/or architectural revisions to existing buildings;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","a decrease of 63.1%, or $7.5 million, in spend as compared to 2020 for our operations platform, which includes smart home installations at certain of our properties; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","a decrease of 8.3%, or $4.0 million, in NOI enhancing improvements, such as kitchen and bath remodels and upgrades to common areas."]] [[/GREPCENT_TABLE]] This was partially offset by: ​ [[GREPCENT_TABLE]] [["","\u25cf","an increase of 12.1%, or $6.9 million, in recurring capital expenditures, which include asset preservation and turnover related expenditures."]] [[/GREPCENT_TABLE]] The following table outlines capital expenditures and repair and maintenance costs for all of our communities, excluding real estate under development, for the years ended December 31, 2021 and 2020 (dollars in thousands except Per Home amounts): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Per Home"],["\u200b","\u200b","Year Ended December 31,","\u200b","Year Ended December 31,"],["\u200b","","2021","","2020","","% Change","","2021","","2020","","% Change"],["Turnover capital expenditures","\u200b","$","15,407","\u200b","$","12,978","","18.7","%","$","305","\u200b","$","273","","11.7","%"],["Asset preservation expenditures","\u200b","","48,413","\u200b","","43,946","","10.2","%","","959","\u200b","","926","","3.6","%"],["Total recurring capital expenditures","\u200b","","63,820","\u200b","","56,924","","12.1","%","","1,264","\u200b","","1,199","","5.4","%"],["NOI enhancing improvements (a)","\u200b","","44,727","\u200b","","48,752","","(8.3)","%","","886","\u200b","","1,027","","(13.7)","%"],["Major renovations (b)","\u200b","","40,339","\u200b","","48,317","","(16.5)","%","","799","\u200b","","1,018","","(21.5)","%"],["Operations platform","\u200b","\u200b","4,371","\u200b","\u200b","11,853","\u200b","(63.1)","%","\u200b","87","\u200b","\u200b","250","\u200b","(65.4)","%"],["Total capital expenditures (c)","\u200b","$","153,257","\u200b","$","165,846","","(7.6)","%","$","3,036","\u200b","$","3,494","","(13.1)","%"],["Repair and maintenance expense","\u200b","$","71,147","\u200b","$","56,794","","25.3","%","$","1,409","\u200b","$","1,196","","17.8","%"],["Average home count (d)","\u200b","","50,488","\u200b","","47,475","","6.3","%","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(a)","NOI enhancing improvements are expenditures that result in increased income generation or decreased expense growth."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(b)","Major renovations include major structural changes and/or architectural revisions to existing buildings."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(c)","Total capital expenditures includes amounts capitalized during the year. Cash paid for capital expenditures is impacted by the net change in related accruals."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(d)","Average number of homes is calculated based on the number of homes outstanding at the end of each month."]] [[/GREPCENT_TABLE]] ​ We intend to continue to selectively add NOI enhancing improvements, which we believe will provide a return on investment in excess of our cost of capital. Our objective in redeveloping a community is twofold: we aim to meaningfully grow rental rates while also achieving cap rate compression through asset quality improvement. Consolidated Real Estate Under Development and Redevelopment At December 31, 2021, our development pipeline consisted of five wholly-owned communities located in Denver, Colorado, Dublin, California, Addison, Texas, King of Prussia, Pennsylvania and Washington D.C., totaling 1,417 homes, none of which have been completed, with a budget of $501.5 million, in which we have a gross carrying value of $388.6 million. The communities are estimated to be completed between the second quarter of 2022 and the second quarter of 2023. During 2021, we incurred $178.0 million for development costs, an increase of $56.8 million as compared to costs incurred in 2020 of $121.2 million. At December 31, 2021, the Company was not redeveloping any communities. Unconsolidated Joint Ventures and Partnerships The Company recognizes income or losses from our investments in unconsolidated joint ventures and partnerships consisting of our proportionate share of the net income or losses of the joint ventures and partnerships. In 49 Table of Contents addition, we may earn fees for providing management services to the communities held by the unconsolidated joint ventures and partnerships. The Company’s Investment in and advances to unconsolidated joint ventures and partnerships, net, are accounted for under the equity method of accounting. For the year ended December 31, 2021: [[GREPCENT_TABLE]] [["","\u25cf","we made investments totaling $112.3 million in our unconsolidated joint ventures, including contributions of $67.5 million to certain unconsolidated investments under our Developer Capital Program, each of which earns a preferred return;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","our proportionate share of the net income/(loss) of the joint ventures and partnerships was $65.6 million; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","we received distributions of $60.7 million, of which $23.3 million were operating cash flows and $37.4 million were investing cash flows."]] [[/GREPCENT_TABLE]] We evaluate our investments in unconsolidated joint ventures and partnerships when events or changes in circumstances indicate that there may be an other-than-temporary decline in value. We consider various factors to determine if a decrease in the value of the investment is other-than-temporary. The Company did not recognize any other-than-temporary impairments in the value of its investments in unconsolidated joint ventures or partnerships during the years ended December 31, 2021 and 2020. Financing Activities For the years ended December 31, 2021 and 2020, Net cash provided by/(used in) financing activities was $612.5 million and $(152.6) million, respectively. The following significant financing activities occurred during the year ended December 31, 2021: [[GREPCENT_TABLE]] [["","\u25cf","issuance of $300.0 million of 2.10% senior unsecured medium-term notes due June 2033, for net proceeds of approximately $298.8 million;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","issuance of a principal amount of $200.0 million of 3.00% senior unsecured medium-term notes due August 2031, priced at 106.388% of the principal amount to yield 2.259%, resulting in net proceeds of approximately $212.8 million;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","repayment of $300.0 million senior unsecured medium-term notes due October 2025;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","net proceeds of $30.0 million on our unsecured commercial paper program;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","issuance of 19.5 million shares of common stock under forward sales agreements for aggregate net proceeds, after deducting related expenses, of approximately $899.1 million;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","distributions of $433.8 million to our common stockholders; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","payment of prepayment and extinguishment costs of $40.8 million from the early prepayment of debt."]] [[/GREPCENT_TABLE]] The following significant financing activities occurred during the year ended December 31, 2020: [[GREPCENT_TABLE]] [["","\u25cf","repayments of secured debt of $425.8 million, which was partially offset by proceeds from the issuance of secured debt of $160.9 million;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","issuance of $200.0 million of 3.20% senior unsecured medium-term notes due January 15, 2030, for net proceeds of approximately $211.3 million;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","issuance of $400.0 million of 2.10% senior unsecured medium-term notes due August 1, 2032, for net proceeds of approximately $399.6 million;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","issuance of $350.0 million of 1.90% senior unsecured medium-term notes due March 15, 2023, for net proceeds of approximately $348.5 million;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","repayment of $300.0 million senior unsecured medium-term notes due July 2024, $116.9 million of which was pursuant to our tender offer;"]] [[/GREPCENT_TABLE]] 50 Table of Contents [[GREPCENT_TABLE]] [["","\u25cf","net repayment of $110.0 million on our unsecured commercial paper program;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","issuance of 2.1 million shares of common stock under our forward sales agreement for aggregate net proceeds of $102.2 million at a price per share of $48.23;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","repurchase of 0.6 million common shares for approximately $19.8 million;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","distributions of $419.4 million to our common stockholders; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","payment of debt extinguishment costs of $62.6 million from the early prepayment of debt."]] [[/GREPCENT_TABLE]] Credit Facilities and Commercial Paper Program In September 2021, the Company entered into the Credit Agreement that provides for a $1.3 billion unsecured revolving credit facility and a $350.0 million unsecured term loan. The Credit Agreement allows the total commitments under the Revolving Credit Facility and the total borrowings under the Term Loan to be increased to an aggregate maximum amount of up to $2.5 billion, subject to certain conditions, including obtaining commitments from one or more lenders. The Revolving Credit Facility has a scheduled maturity date of January 31, 2026, with two six-month extension options, subject to certain conditions. The Term Loan has a scheduled maturity date of January 31, 2027. The Credit Agreement also lowered the margin range for the Revolving Credit Facility and the Term Loan. The Credit Agreement amended and restated the Company’s prior credit agreement, which provided for: (i) a $1.1 billion revolving credit facility scheduled to mature in January 2023 and (ii) a $350.0 million term loan scheduled to mature in September 2023. The prior credit agreement allowed the total commitments under the revolving credit facility and total borrowings under the term loan to be increased to an aggregate maximum amount of up to $2.0 billion, subject to certain conditions. ​ Based on the Company’s current credit rating, the Revolving Credit Facility has an interest rate equal to LIBOR plus a margin of 77.5 basis points and a facility fee of 15 basis points, and the Term Loan has an interest rate equal to LIBOR plus a margin of 85 basis points. Depending on the Company’s credit rating, the margin under the Revolving Credit Facility ranges from 70 to 140 basis points, the facility fee ranges from 10 to 30 basis points, and the margin under the Term Loan ranges from 75 to 160 basis points. As of December 31, 2021, we had no outstanding borrowings under the Revolving Credit Facility, leaving $1.3 billion of unused capacity (excluding $2.8 million of letters of credit at December 31, 2021), and $350.0 million of outstanding borrowings under the Term Loan. We have a working capital credit facility, which provides for a $75 million unsecured revolving credit facility (the “Working Capital Credit Facility”) with a previously scheduled maturity date of January 14, 2022. In September 2021, the Company amended the Working Capital Credit Facility to extend the maturity date from January 14, 2022 to January 12, 2024 and lower the margin range for the interest rate. Based on the Company’s current credit rating, the Working Capital Credit Facility now has an interest rate equal to LIBOR plus a margin of 77.5 basis points. Depending on the Company’s credit rating, the margin ranges from 70 to 140 basis points. As of December 31, 2021, we had $29.5 million of outstanding borrowings under the Working Capital Credit Facility, leaving $45.5 million of unused capacity. The bank revolving credit facilities and the term loan are subject to customary financial covenants and limitations, all of which we were in compliance with at December 31, 2021. We have an unsecured commercial paper program. Under the terms of the program, we may issue unsecured commercial paper up to a maximum aggregate amount outstanding of $700 million. In July 2021, the maximum aggregate amount was increased from $500.0 million to $700.0 million. The notes are sold under customary terms in the United States commercial paper market and rank pari passu with all of our other unsecured indebtedness. The notes are fully and unconditionally guaranteed by the Operating Partnership. As of December 31, 2021, we had issued $220.0 million of commercial paper, for one month terms, at a weighted average annualized rate of 0.34%, leaving $480.0 million of unused capacity. In January 2022, the entire $220.0 million of outstanding unsecured commercial paper as of December 31, 2021 was repaid at maturity with additional proceeds of unsecured commercial paper with maturity dates in January 2022 and February 2022 and proceeds under the Working Capital Credit Facility. 51 Table of Contents 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 and operations. 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. We had $311.5 million in variable rate debt that is not subject to interest rate swap contracts as of December 31, 2021. If market interest rates for variable rate debt increased by 100 basis points, our interest expense would increase by $5.0 million based on the average balance outstanding during the year. These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. This analysis does not consider the effects of the adjusted level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no change in our financial structure. The Company also utilizes derivative financial instruments to manage interest rate risk and generally designates these financial instruments as cash flow hedges. See Note 14, Derivatives and Hedging Activities, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional discussion of derivative instruments. A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended December 31,"],["\u200b","\u200b","2021","","2020"],["Net cash provided by/(used in) operating activities","","$","663,960","","$","604,316"],["Net cash provided by/(used in) investing activities","\u200b","","(1,272,253)","","","(460,842)"],["Net cash provided by/(used in) financing activities","\u200b","","612,540","","","(152,594)"]] [[/GREPCENT_TABLE]] ​ ​ Results of Operations The following discussion explains the changes in results of operations that are presented in our Consolidated Statements of Operations for the years ended December 31, 2021 and 2020. Net Income/(Loss) Attributable to Common Stockholders Net income/(loss) attributable to common stockholders was $145.8 million ($0.48 per diluted share) for the year ended December 31, 2021, as compared to $60.0 million ($0.20 per diluted share) for the comparable period in the prior year. The increase resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report: [[GREPCENT_TABLE]] [["","\u25cf","an increase in total property NOI of $13.4 million primarily due to operating communities acquired during 2021 and 2020, lower rent concessions, lower vacancy, and a decrease in personnel expense, partially offset by a decrease in rental rates, operating communities sold during 2021 and 2020 and higher repair and maintenance expense, insurance expense, and real estate tax expense;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","a decrease in interest expense of $16.4 million primarily due to $42.3 million of extinguishment cost from the prepayment of debt during the year ended December 31, 2021 as compared to $49.2 million for the year ended December 31, 2020, and lower interest rates partially offset by higher debt balances;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","a gain of $136.1 million from the sale of two operating communities located in Anaheim, California, during the year ended December 31, 2021, as compared to gains of $119.3 million from the sale of three operating communities located in Kirkland, Washington, Bellevue, Washington, and Alexandria, Virginia, during the year ended December 31, 2020; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","an increase in income/(loss) from unconsolidated entities of $46.8 million, primarily attributable to $50.8 million of investment income from RETV I, which was primarily attributable to unrealized gains from SmartRent, a portfolio investment held by the fund, becoming a public company during the year ended December 31, 2021, as compared to $5.1 million during the year ended December 31, 2020. A further"]] [[/GREPCENT_TABLE]] 52 Table of Contents [[GREPCENT_TABLE]] [["","","discussion can be found in Note 5, Joint Ventures and Partnerships, to the Notes to the UDR, Inc. Consolidated Financial Statements included in this Report."]] [[/GREPCENT_TABLE]] Apartment Community Operations Our net income results are primarily from NOI generated from the operation of our apartment communities. The Company defines NOI, which is a non-GAAP financial measure, as rental income less direct property rental expenses. Rental income represents gross market rent less adjustments for concessions, vacancy loss and bad debt. Rental expenses include real estate taxes, insurance, personnel, utilities, repairs and maintenance, administrative and marketing. Excluded from NOI is property management expense which is calculated as 3.0% of property revenue, and land rent. Property management expense covers costs directly related to consolidated property operations, inclusive of corporate management, regional supervision, accounting and other costs. Management considers NOI a useful metric for investors as it is a more meaningful representation of a community’s continuing operating performance than net income as it is prior to corporate-level expense allocations, general and administrative costs, capital structure and depreciation and amortization. Although the Company considers NOI a useful measure of operating performance, NOI should not be considered an alternative to net income or net cash flow from operating activities as determined in accordance with GAAP. NOI excludes several income and expense categories as detailed in the reconciliation of NOI to Net income/(loss) attributable to UDR, Inc. below. The following table summarizes the operating performance of our total property NOI for each of the periods presented (dollars in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended","\u200b","\u200b","\u200b","Year Ended","\u200b","\u200b","\u200b"],["\u200b","\u200b","December 31, (a)","\u200b","\u200b","\u200b","December 31, (b)","\u200b","\u200b","\u200b"],["\u200b","","2021","","2020","","% Change","","2020","","2019","","% Change","\u200b"],["Same-Store Communities:","\u200b","\u200b","\u200b","","\u200b","\u200b","","\u200b","","\u200b","\u200b","","\u200b","\u200b","\u200b","\u200b","\u200b"],["Same-Store rental income","\u200b","$","1,147,259","","$","1,130,760","","1.5","%","$","924,138","","$","953,121","\u200b","(3.0)","%"],["Same-Store operating expense (c)","\u200b","","(356,761)","","","(344,149)","","3.7","%","","(279,940)","","","(268,718)","\u200b","4.2","%"],["Same-Store NOI","\u200b","","790,498","","","786,611","","0.5","%","","644,198","","","684,403","\u200b","(5.9)","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Non-Mature Communities/Other NOI:","\u200b","\u200b","\u200b","","\u200b","\u200b","","\u200b","","\u200b","\u200b","","\u200b","\u200b","\u200b","\u200b","\u200b"],["Stabilized, non-mature communities NOI (d)","\u200b","\u200b","62,906","","","24,645","\u200b","155.2","%","\u200b","161,258","\u200b","\u200b","98,193","\u200b","64.2","%"],["Acquired communities NOI","\u200b","","4,156","","","\u2014","","\u2014","%","","7,919","","","762","\u200b","939.2","%"],["Development communities NOI","\u200b","","(417)","","","(127)","","NM","*","","214","","","(8)","\u200b","(2,775.0)","%"],["Non-residential/other NOI (e)","\u200b","\u200b","5,114","","","27,689","\u200b","(81.5)","%","\u200b","27,694","\u200b","\u200b","12,954","\u200b","113.8","%"],["Sold and held for disposition communities NOI","\u200b","\u200b","4,868","","","14,884","\u200b","(67.3)","%","\u200b","12,419","\u200b","\u200b","11,999","\u200b","3.5","%"],["Total Non-Mature Communities/Other NOI","\u200b","","76,627","","","67,091","","14.2","%","","209,504","","","123,900","\u200b","69.1","%"],["Total property NOI","\u200b","$","867,125","","$","853,702","","1.6","%","$","853,702","","$","808,303","\u200b","5.6","%"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["*","Not meaningful"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(a)","Same-Store consists of 45,143 apartment homes."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(b)","Same-Store consists of 37,607 apartment homes."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(c)","Excludes depreciation, amortization, and property management expenses."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(d)","Represents non-mature communities that have achieved 90% occupancy for three consecutive months but do not meet the criteria to be included in Same-Store Communities."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(e)","Primarily non-residential revenue and expense and straight-line adjustment for concessions."]] [[/GREPCENT_TABLE]] ​ 53 Table of Contents The following table is our reconciliation of Net income/(loss) attributable to UDR, Inc. to total property NOI for each of the periods presented (dollars in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended December 31,"],["\u200b","","2021","","2020","","2019"],["Net income/(loss) attributable to UDR, Inc.","\u200b","$","150,016","\u200b","$","64,266","\u200b","$","184,965"],["Joint venture management and other fees","\u200b","","(6,102)","\u200b","","(5,069)","\u200b","","(14,055)"],["Property management","\u200b","","38,540","\u200b","","35,538","\u200b","","32,721"],["Other operating expenses","\u200b","","21,649","\u200b","","22,762","\u200b","","13,932"],["Real estate depreciation and amortization","\u200b","","606,648","\u200b","","608,616","\u200b","","501,257"],["General and administrative","\u200b","","57,541","\u200b","","49,885","\u200b","","51,533"],["Casualty-related charges/(recoveries), net","\u200b","","3,748","\u200b","","2,131","\u200b","","474"],["Other depreciation and amortization","\u200b","","13,185","\u200b","","10,013","\u200b","","6,666"],["(Gain)/loss on sale of real estate owned","\u200b","","(136,052)","\u200b","","(119,277)","\u200b","","(5,282)"],["(Income)/loss from unconsolidated entities","\u200b","","(65,646)","\u200b","","(18,844)","\u200b","","(137,873)"],["Interest expense","\u200b","","186,267","\u200b","","202,706","\u200b","","170,917"],["Interest income and other (income)/expense, net","\u200b","\u200b","(15,085)","\u200b","\u200b","(6,274)","\u200b","\u200b","(15,404)"],["Tax provision/(benefit), net","\u200b","","1,439","\u200b","","2,545","\u200b","","3,838"],["Net income/(loss) attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership","\u200b","","10,873","\u200b","","4,543","\u200b","","14,426"],["Net income/(loss) attributable to noncontrolling interests","\u200b","","104","\u200b","","161","\u200b","","188"],["Total property NOI","\u200b","$","867,125","\u200b","$","853,702","\u200b","$","808,303"]] [[/GREPCENT_TABLE]] ​ Same-Store Communities Our Same-Store Community properties (those acquired, developed, and stabilized prior to January 1, 2020 and held on December 31, 2021) consisted of 45,143 apartment homes and provided 91.2% of our total NOI for the year ended December 31, 2021. NOI for our Same-Store Community properties increased 0.5%, or $3.9 million, for the year ended December 31, 2021 compared to the same period in 2020. The increase in property NOI was attributable to a 1.5%, or $16.5 million, increase in property rental income, which was partially offset by a 3.7%, or $12.6 million, increase in operating expenses. The increase in property rental income was primarily driven by an increase of $11.1 million from lower vacancy, a 4.7%, or $5.7 million, increase in reimbursement and ancillary and fee income, a decrease in bad debt expense of $5.6 million and a decrease of $5.1 million in rent concessions, partially offset by a 1.1%, or $11.5 million, decrease in rental rates. Physical occupancy increased by 1.0% to 97.1% and total monthly income per occupied home increased 0.4% to $2,182. The increase in operating expenses was primarily driven by a 17.2%, or $9.3 million, increase in repair and maintenance expense due to the increased use of third party vendors, a 29.4%, or $4.4 million, increase in insurance expense due to increased claims, and a 2.8%, or $4.1 million, increase in real estate taxes, which was primarily due to higher assessed valuations, partially offset by a 12.7%, or $7.7 million, decrease in personnel expense as a result of fewer employees. The operating margin (property net operating income divided by property rental income) was 68.9% and 69.6% for the years ended December 31, 2021 and 2019, respectively. Non-Mature Communities/Other UDR’s Non-Mature Communities/Other represent those communities that do not meet the criteria to be included in Same-Store Communities, which include communities recently developed or acquired, redevelopment properties, sold or held for disposition properties, and non-apartment components of mixed use properties. The remaining 8.8%, or $76.6 million, of our total NOI during the year ended December 31, 2021 was generated from our Non-Mature Communities/Other. NOI from Non-Mature Communities/Other increased by 14.2%, or $9.5 million, for the year ended December 31, 2021 as compared to the same period in 2020. The increase was primarily attributable to a $38.3 million increase in NOI from stabilized, non-mature communities, primarily due to communities acquired in 2021 and 2020 and a $4.2 million increase in acquired communities, partially offset by a $22.6 million 54 Table of Contents decrease in non-residential/other primarily due to changes in straight-line rent as a result of increased tenant rent concessions during 2020, and a $10.0 million decrease in sold and held for disposition communities. Gain/(Loss) on Sale of Real Estate Owned During the year ended December 31, 2021, the Company recognized gains of $136.1 million from the sale of two operating communities located in Anaheim, California. During the year ended December 31, 2020, the Company recognized gains of $119.3 million from the sale of three operating communities located in Kirkland, Washington, Bellevue, Washington, and Alexandria, Virginia. Income/(Loss) from Unconsolidated Entities For the years ended December 31, 2021 and 2020, we recognized income/(loss) from unconsolidated entities of $65.6 million and $18.8 million, respectively. The increase in 2021 as compared to 2020 was primarily due to $50.8 million of investment income from RETV I, which was primarily attributable to unrealized gains from SmartRent, a portfolio investment held by the fund, becoming a public company during the year ended December 31, 2021, as compared to $5.1 million during the year ended December 31, 2020. A further discussion can be found in Note 5, Joint Ventures and Partnerships, to the Notes to the UDR, Inc. Consolidated Financial Statements included in this Report. Interest expense For the years ended December 31, 2021 and 2020, the Company recognized interest expense of $186.3 million and $202.7 million, respectively. The decrease in 2021 as compared to 2020 was primarily attributable to $42.3 million of debt extinguishment costs from the prepayment of debt during the year ended December 31, 2021 as compared to $49.2 million for the year ended December 31, 2020, and lower interest rates, partially offset by higher debt balances. Inflation Inflation primarily impacts our results of operations as a result of wage pressures and increases in utilities and repair and maintenance costs. In addition, inflation could also impact our general and administrative expenses, the interest on our debt if variable or refinanced in a high-inflationary environment, and our cost of development activities. However, the majority of our apartment leases have initial terms of 12 months or less, which generally enables us to compensate for inflationary effects by increasing rents on our apartment homes. Although an extreme escalation in costs could have a negative impact on our residents and their ability to absorb rent increases, we do not believe this had a material impact on our results for the year ended December 31, 2021. 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. ​ Funds from Operations, Funds from Operations as Adjusted, and Adjusted Funds from Operations Funds from Operations Funds from operations (“FFO”) attributable to common stockholders and unitholders is defined as Net income/(loss) attributable to common stockholders (computed in accordance with GAAP), excluding impairment write-downs of depreciable real estate related to the main business of the Company or of investments in non-consolidated investees that are directly attributable to decreases in the fair value of depreciable real estate held by the investee, gains and losses from sales of depreciable real estate related to the main business of the Company and income taxes directly associated with those gains and losses, plus real estate depreciation and amortization, and after adjustments for noncontrolling interests, and the Company’s share of unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust’s (“Nareit”) definition issued in April 2002 and restated in November 2018. Historical cost accounting for real estate assets in accordance with GAAP 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 a REIT’s operating performance. In the computation of diluted FFO, if 55 Table of Contents OP Units, DownREIT Units, unvested restricted stock, unvested LTIP Units, stock options, and the shares of Series E Cumulative Convertible Preferred Stock are dilutive, they are included in the diluted share count. Management considers FFO a useful metric for investors as the Company uses FFO in evaluating property acquisitions and its operating performance, and believes that FFO should be considered along with, but not as an alternative to, net income and cash flow as a measure of the Company’s activities in accordance with GAAP. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of funds available to fund our cash needs. Funds from Operations as Adjusted FFO as Adjusted (“FFOA”) attributable to common stockholders and unitholders is defined as FFO excluding the impact of non-comparable items including, but not limited to, acquisition-related costs, prepayment costs/benefits associated with early debt retirement, impairment write-downs or gains and losses on sales of real estate or other assets incidental to the main business of the Company and income taxes directly associated with those gains and losses, casualty-related expenses and recoveries, severance costs and legal and other costs. Management believes that FFOA is useful supplemental information regarding our operating performance as it provides a consistent comparison of our operating performance across time periods and enables investors to more easily compare our operating results with other REITs. FFOA is not intended to represent cash flow or liquidity for the period, and is only intended to provide an additional measure of our operating performance. We believe that Net income/(loss) attributable to common stockholders is the most directly comparable GAAP financial measure to FFOA. However, other REITs may use different methodologies for calculating FFOA or similar FFO measures and, accordingly, our FFOA may not always be comparable to FFOA or similar FFO measures calculated by other REITs. FFOA should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity. Adjusted Funds from Operations Adjusted FFO (“AFFO”) attributable to common stockholders and unitholders is defined as FFOA less recurring capital expenditures on consolidated communities that are necessary to help preserve the value of and maintain functionality at our communities. Therefore, management considers AFFO a useful supplemental performance metric for investors as it is more indicative of the Company’s operational performance than FFO or FFOA. AFFO is not intended to represent cash flow or liquidity for the period, and is only intended to provide an additional measure of our operating performance. We believe that Net income/(loss) attributable to common stockholders is the most directly comparable GAAP financial measure to AFFO. Management believes that AFFO is a widely recognized measure of the operations of REITs, and presenting AFFO enables investors to assess our performance in comparison to other REITs. However, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not always be comparable to AFFO calculated by other REITs. AFFO should not be considered as an alternative to net income/(loss) (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. 56 Table of Contents The following table outlines our reconciliation of Net income/(loss) attributable to common stockholders to FFO, FFOA, and AFFO for the years ended December 31, 2021, 2020, and 2019 (dollars in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended December 31,"],["\u200b","","2021","","2020","","2019"],["Net income/(loss) attributable to common stockholders","\u200b","$","145,787","\u200b","$","60,036","\u200b","$","180,861"],["Real estate depreciation and amortization","\u200b","","606,648","\u200b","","608,616","\u200b","","501,257"],["Noncontrolling interests","\u200b","","10,977","\u200b","","4,704","\u200b","","14,614"],["Real estate depreciation and amortization on unconsolidated joint ventures","\u200b","","31,967","\u200b","","35,023","\u200b","","57,954"],["Net gain on the sale of unconsolidated depreciable property","\u200b","","(2,460)","\u200b","","\u2014","\u200b","","(125,407)"],["Net gain on the sale of depreciable real estate owned, net of tax","\u200b","","(136,001)","\u200b","","(118,852)","\u200b","","\u2014"],["FFO attributable to common stockholders and unitholders, basic","\u200b","$","656,918","\u200b","$","589,527","\u200b","$","629,279"],["Distributions to preferred stockholders \u2014 Series E (Convertible)","\u200b","","4,229","\u200b","","4,230","\u200b","","4,104"],["FFO attributable to common stockholders and unitholders, diluted","\u200b","$","661,147","\u200b","$","593,757","\u200b","$","633,383"],["Income/(loss) per weighted average common share, diluted","\u200b","$","0.48","\u200b","$","0.20","\u200b","$","0.63"],["FFO per weighted average common share and unit, basic","\u200b","$","2.04","\u200b","$","1.86","\u200b","$","2.04"],["FFO per weighted average common share and unit, diluted","\u200b","$","2.02","\u200b","$","1.85","\u200b","$","2.03"],["Weighted average number of common shares and OP/DownREIT Units outstanding \u2014 basic","\u200b","","322,744","\u200b","","316,855","\u200b","","308,020"],["Weighted average number of common shares, OP/DownREIT Units, and common stock equivalents outstanding \u2014 diluted","\u200b","","327,039","\u200b","","320,187","\u200b","","311,799"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Impact of adjustments to FFO:","\u200b","","\u200b","\u200b","","\u200b","\u200b"],["Debt extinguishment and other associated costs","\u200b","$","42,336","\u200b","$","49,190","\u200b","$","29,594"],["Debt extinguishment and other associated costs on unconsolidated joint ventures","\u200b","\u200b","1,682","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014"],["Promoted interest on settlement of note receivable, net of tax","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","(6,482)"],["Legal and other","\u200b","","5,319","\u200b","","8,973","\u200b","","3,660"],["Net gain on the sale of non-depreciable real estate owned","\u200b","","\u2014","\u200b","","\u2014","\u200b","","(5,282)"],["Realized (gain)/loss on real estate technology investments, net of tax","\u200b","\u200b","(1,980)","\u200b","\u200b","1,005","\u200b","\u200b","\u2014"],["Unrealized (gain)/loss on real estate technology investments, net of tax","\u200b","\u200b","(55,947)","\u200b","\u200b","(4,587)","\u200b","\u200b","(3,300)"],["Joint venture development success fee","\u200b","","\u2014","\u200b","","\u2014","\u200b","","(3,750)"],["Severance costs","\u200b","","2,280","\u200b","","1,948","\u200b","","390"],["Casualty-related charges/(recoveries), net","\u200b","","3,960","\u200b","","2,545","\u200b","","636"],["Casualty-related charges/(recoveries) on unconsolidated joint ventures, net","\u200b","","\u2014","\u200b","","31","\u200b","","(374)"],["\u200b","\u200b","$","(2,350)","\u200b","$","59,105","\u200b","$","15,092"],["FFOA attributable to common stockholders and unitholders, diluted","\u200b","$","658,797","\u200b","$","652,862","\u200b","$","648,475"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["FFOA per weighted average common share and unit, diluted","\u200b","$","2.01","\u200b","$","2.04","\u200b","$","2.08"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Recurring capital expenditures","\u200b","","(63,820)","\u200b","","(56,924)","\u200b","","(51,246)"],["AFFO attributable to common stockholders and unitholders, diluted","\u200b","$","594,977","\u200b","$","595,938","\u200b","$","597,229"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["AFFO per weighted average common share and unit, diluted","\u200b","$","1.82","\u200b","$","1.86","\u200b","$","1.92"]] [[/GREPCENT_TABLE]] ​ 57 Table of Contents The following table is our reconciliation of FFO share information to weighted average common shares outstanding, basic and diluted, reflected on the UDR Consolidated Statements of Operations for the years ended December 31, 2021, 2020, and 2019 (shares in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended December 31,"],["\u200b","","2021","","2020","","2019"],["Weighted average number of common shares and OP/DownREIT Units outstanding \u2014 basic","","322,744","","316,855","","308,020"],["Weighted average number of OP/DownREIT Units outstanding","","(22,418)","","(22,310)","","(22,773)"],["Weighted average number of common shares outstanding \u2014 basic per the Consolidated Statements of Operations","","300,326","","294,545","","285,247"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Weighted average number of common shares, OP/DownREIT Units, and common stock equivalents outstanding \u2014 diluted","","327,039","","320,187","","311,799"],["Weighted average number of OP/DownREIT Units outstanding","","(22,418)","","(22,310)","","(22,773)"],["Weighted average number of Series E Cumulative Convertible Preferred shares outstanding","","(2,918)","","(2,950)","","(3,011)"],["Weighted average number of common shares outstanding \u2014 diluted per the Consolidated Statements of Operations","","301,703","","294,927","","286,015"]] [[/GREPCENT_TABLE]] ​ ​ ​ ​ ​