UDR, Inc. 10-Q

Table of Contents ​ 33 ​ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ​ ​ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 ​ For the quarterly period ended September 30, 2020 OR ​ ​ ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 ​ For the transition period from to Commission file number 1-10524 (UDR, Inc.) 333-156002-01 (United Dominion Realty, L.P.) UDR, Inc. United Dominion Realty, L.P. (Exact name of registrant as specified in its charter) ​ ​ Maryland (UDR, Inc.) 54-0857512 Delaware (United Dominion Realty, L.P.) 54-1776887 (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) ​ 1745 Shea Center Drive, Suite 200 , Highlands Ranch , Colorado 80129 (Address of principal executive offices) (zip code) ( 720 ) 283-6120 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock , par value $0.01 UDR New York Stock Exchange ​ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ​ ​ UDR, Inc. Yes ⌧ No ◻ United Dominion Realty, L.P. Yes ⌧ No ◻ ​ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ​ ​ UDR, Inc. Yes ⌧ No ◻ United Dominion Realty, L.P. Yes ⌧ No ◻ ​ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ⌧ ​ ​ ​ UDR, Inc.: ​ ​ ​ Large Accelerated Filer ⌧ Accelerated Filer ◻ Non-Accelerated Filer ◻ Smaller Reporting Company ☐ ​ ​ ​ Emerging Growth Company ☐ ​ ​ ⌧ ​ ​ ​ United Dominion Realty, L.P.: ​ ​ ​ Large Accelerated Filer ◻ Accelerated Filer ◻ Non-Accelerated Filer ⌧ Smaller Reporting Company ☐ ​ ​ ​ Emerging Growth Company ☐ ​ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ​ ​ UDR, Inc. ☐ United Dominion Realty, L.P. ☐ ​ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ​ ​ UDR, Inc. Yes ☐ No ⌧ United Dominion Realty, L.P. Yes ☐ No ⌧ ​ The number of shares of UDR, Inc.’s common stock, $0.01 par value, outstanding as of October 27, 2020 was 294,481,498 . Table of Contents ​ UDR, INC. UNITED DOMINION REALTY, L.P. INDEX ​ PAGE PART I — FINANCIAL INFORMATION ​ ​ Item 1. Consolidated Financial Statements ​ ​ ​ UDR, INC. : ​ ​ ​ Consolidated Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019 (audited) 5 ​ ​ Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (unaudited) 6 ​ ​ Consolidated Statements of Comprehensive Income/(Loss) for the three and nine months ended September 30, 2020 and 2019 (unaudited) 7 ​ ​ Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2020 and 2019 (unaudited) 8 ​ ​ Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (unaudited) 10 ​ ​ Notes to Consolidated Financial Statements (unaudited) 12 ​ ​ UNITED DOMINION REALTY, L.P. : ​ ​ ​ Consolidated Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019 (audited) 44 ​ ​ Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (unaudited) 45 ​ ​ Consolidated Statements of Comprehensive Income/(Loss) for the three and nine months ended September 30, 2020 and 2019 (unaudited) 46 ​ ​ Consolidated Statements of Changes in Capital for the three and nine months ended September 30, 2020 and 2019 (unaudited) 47 ​ ​ Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (unaudited) 48 ​ ​ Notes to Consolidated Financial Statements (unaudited) 49 ​ ​ Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 70 ​ ​ Item 3. Quantitative and Qualitative Disclosures About Market Risk 94 ​ ​ Item 4. Controls and Procedures 94 ​ ​ PART II — OTHER INFORMATION ​ ​ Item 1. Legal Proceedings 95 ​ ​ Item 1A. Risk Factors 95 ​ ​ Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 111 ​ ​ Item 3. Defaults Upon Senior Securities 112 ​ ​ Item 4. Mine Safety Disclosures 112 ​ ​ Table of Contents ​ Item 5. Other Information 112 ​ ​ Item 6. Exhibits 113 ​ ​ Signatures 115 ​ ​ Exhibit 4.1 ​ Exhibit 31.1 ​ Exhibit 31.2 ​ Exhibit 31.3 ​ Exhibit 31.4 ​ Exhibit 32.1 ​ Exhibit 32.2 ​ Exhibit 32.3 ​ Exhibit 32.4 ​ ​ ​ ​ Table of Contents ​ EXPLANATORY NOTE This Report combines the quarterly reports on Form 10-Q for the quarter ended September 30, 2020 of UDR, Inc., a Maryland corporation, and United Dominion Realty, L.P., a Delaware limited partnership, of which UDR, Inc. is the parent company and sole general partner. Unless the context otherwise requires, all references in this Report to “we,” “us,” “our,” the “Company,” “UDR” or “UDR, Inc.” refer collectively to UDR, Inc., together with its consolidated subsidiaries and joint ventures, including United Dominion Realty, L.P. and UDR Lighthouse DownREIT L.P. (the “DownREIT Partnership”), also a Delaware limited partnership of which UDR is the sole general partner. Unless the context otherwise requires, the references in this Report to the “Operating Partnership” or the “OP” refer to United Dominion Realty, L.P., together with its consolidated subsidiaries. “Common stock” refers to the common stock of UDR and “stockholders” means the holders of shares of UDR’s common stock and preferred stock. The limited partnership interests of the Operating Partnership and the DownREIT Partnership are referred to as “OP Units” and “DownREIT Units,” respectively, and the holders of the OP Units and DownREIT Units are referred to as “unitholders.” This combined Form 10-Q is being filed separately by UDR and the Operating Partnership. There are a number of differences between the Company and the Operating Partnership, which are reflected in our disclosures in this Report. UDR is a real estate investment trust (“REIT”), whose most significant asset is its ownership interest in the Operating Partnership. UDR also conducts business through other subsidiaries, including its taxable REIT subsidiary (“TRS”). UDR acts as the sole general partner of the Operating Partnership, holds interests in subsidiaries and joint ventures, owns and operates properties, issues securities from time to time and guarantees debt of certain of our subsidiaries. The Operating Partnership conducts the operations of a substantial portion of the business and is structured as a partnership with no publicly traded equity securities. The Operating Partnership has guaranteed certain outstanding debt of UDR. As of September 30, 2020, UDR owned 0.1 million units (100%) of the general partnership interests of the Operating Partnership and 176.1 million OP Units, representing approximately 95.3% of the total outstanding OP Units in the Operating Partnership. UDR conducts a substantial amount of its business and holds a substantial amount of its assets through the Operating Partnership, and, by virtue of its ownership of the OP Units and UDR’s role as the Operating Partnership’s sole general partner, UDR has the ability to control all of the day-to-day operations of the Operating Partnership. Separate financial statements and accompanying notes, as well as separate discussions under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are presented in this report for each of UDR and the Operating Partnership. ​ ​ Table of Contents ​ UDR, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2020 2019 ​ ​ (unaudited) ​ (audited) ASSETS ​ ​ ​ ​ ​ ​ Real estate owned: ​ ​ Real estate held for investment ​ $ 12,533,801 ​ $ 12,532,324 Less: accumulated depreciation ​ ( 4,467,108 ) ​ ( 4,131,330 ) Real estate held for investment, net ​ 8,066,693 ​ 8,400,994 Real estate under development (net of accumulated depreciation of $ 510 and $ 23 , respectively) ​ 197,313 ​ 69,754 Real estate held for disposition (net of accumulated depreciation of $ 45,153 and $ 0 , respectively) ​ 84,243 ​ — Total real estate owned, net of accumulated depreciation ​ 8,348,249 ​ 8,470,748 Cash and cash equivalents ​ 927 ​ 8,106 Restricted cash ​ 23,273 ​ 25,185 Notes receivable, net ​ 156,996 ​ 153,650 Investment in and advances to unconsolidated joint ventures, net ​ 646,355 ​ 588,262 Operating lease right-of-use assets ​ ​ 201,754 ​ ​ 204,225 Other assets ​ 173,834 ​ 186,296 Total assets ​ $ 9,551,388 ​ $ 9,636,472 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND EQUITY ​ ​ Liabilities: ​ ​ Secured debt, net ​ $ 933,087 ​ $ 1,149,441 Unsecured debt, net ​ 3,984,559 ​ 3,558,083 Operating lease liabilities ​ ​ 196,346 ​ ​ 198,558 Real estate taxes payable ​ 49,239 ​ 29,445 Accrued interest payable ​ 30,606 ​ 45,199 Security deposits and prepaid rent ​ 46,861 ​ 48,353 Distributions payable ​ 115,055 ​ 109,382 Accounts payable, accrued expenses, and other liabilities ​ 102,197 ​ 90,032 Total liabilities ​ 5,457,950 ​ 5,228,493 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 13) ​ ​ ​ ​ ​ ​ ​ ​ ​ Redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership ​ 759,986 ​ 1,018,665 ​ ​ ​ ​ ​ ​ ​ Equity: ​ ​ Preferred stock, no par value; 50,000,000 shares authorized: ​ ​ 8.00 % Series E Cumulative Convertible; 2,695,363 and 2,780,994 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively ​ 44,764 ​ 46,200 Series F; 14,442,737 and 14,691,274 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively ​ 1 ​ 1 Common stock, $ 0.01 par value; 350,000,000 shares authorized: ​ ​ 294,479,942 and 294,588,305 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively ​ 2,945 ​ 2,946 Additional paid-in capital ​ 5,776,267 ​ 5,781,975 Distributions in excess of net income ​ ( 2,500,827 ) ​ ( 2,462,132 ) Accumulated other comprehensive income/(loss), net ​ ( 10,494 ) ​ ( 10,448 ) Total stockholders’ equity ​ 3,312,656 ​ 3,358,542 Noncontrolling interests ​ 20,796 ​ 30,772 Total equity ​ 3,333,452 ​ 3,389,314 Total liabilities and equity ​ $ 9,551,388 ​ $ 9,636,472 ​ See accompanying notes to consolidated financial statements. 5 Table of Contents ​ UDR, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2020 2019 ​ 2020 ​ 2019 REVENUES: ​ ​ ​ ​ Rental income ​ $ 308,845 ​ $ 289,008 ​ $ 934,920 ​ $ 835,393 Joint venture management and other fees ​ 1,199 ​ 6,386 ​ 3,861 ​ 11,982 Total revenues ​ 310,044 ​ 295,394 ​ 938,781 ​ 847,375 OPERATING EXPENSES: ​ ​ ​ ​ Property operating and maintenance ​ 53,385 ​ 46,869 ​ 151,585 ​ 131,702 Real estate taxes and insurance ​ 44,328 ​ 38,490 ​ 134,485 ​ 110,624 Property management ​ 8,879 ​ 8,309 ​ 26,879 ​ 24,018 Other operating expenses ​ 5,543 ​ 2,751 ​ 16,609 ​ 11,132 Real estate depreciation and amortization ​ 151,949 ​ 127,391 ​ 462,481 ​ 357,793 General and administrative ​ 11,958 ​ 12,197 ​ 37,907 ​ 37,002 Casualty-related charges/(recoveries), net ​ — ​ ( 1,088 ) ​ 1,353 ​ ( 842 ) Other depreciation and amortization ​ 3,887 ​ 1,619 ​ 7,939 ​ 4,953 Total operating expenses ​ 279,929 ​ 236,538 ​ ​ 839,238 ​ 676,382 Gain/(loss) on sale of real estate owned ​ ​ — ​ ​ — ​ ​ 61,303 ​ ​ 5,282 Operating income ​ 30,115 ​ 58,856 ​ 160,846 ​ 176,275 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income/(loss) from unconsolidated entities ​ 2,940 ​ 12,713 ​ 14,328 ​ 19,387 Interest expense ​ ( 62,268 ) ​ ( 42,523 ) ​ ( 140,182 ) ​ ( 110,482 ) Interest income and other income/(expense), net ​ 2,183 ​ 1,875 ​ 7,304 ​ 12,998 Income/(loss) before income taxes ​ ( 27,030 ) ​ 30,921 ​ 42,296 ​ 98,178 Tax (provision)/benefit, net ​ ( 187 ) ​ ( 1,499 ) ​ ( 1,877 ) ​ ( 3,836 ) Net income/(loss) ​ ( 27,217 ) ​ 29,422 ​ 40,419 ​ 94,342 Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership ​ 1,990 ​ ( 2,162 ) ​ ( 2,614 ) ​ ( 6,871 ) Net (income)/loss attributable to noncontrolling interests ​ ( 31 ) ​ ( 56 ) ​ ( 71 ) ​ ( 145 ) Net income/(loss) attributable to UDR, Inc. ​ ( 25,258 ) ​ 27,204 ​ 37,734 ​ 87,326 Distributions to preferred stockholders — Series E (Convertible) ​ ( 1,051 ) ​ ( 1,031 ) ​ ( 3,179 ) ​ ( 3,073 ) Net income/(loss) attributable to common stockholders ​ $ ( 26,309 ) ​ $ 26,173 ​ $ 34,555 ​ $ 84,253 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income/(loss) per weighted average common share: ​ ​ ​ ​ Basic ​ $ ( 0.09 ) ​ $ 0.09 ​ $ 0.12 ​ $ 0.30 Diluted ​ $ ( 0.09 ) ​ $ 0.09 ​ $ 0.12 ​ $ 0.30 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of common shares outstanding: ​ ​ ​ ​ Basic ​ 294,713 ​ 288,706 ​ 294,627 ​ 282,598 Diluted ​ 295,003 ​ 289,529 ​ 294,938 ​ 283,292 ​ See accompanying notes to consolidated financial statements. 6 Table of Contents ​ UDR, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (In thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2020 2019 ​ 2020 ​ 2019 Net income/(loss) ​ $ ( 27,217 ) ​ $ 29,422 ​ $ 40,419 ​ $ 94,342 Other comprehensive income/(loss), including portion attributable to noncontrolling interests: ​ ​ ​ ​ Other comprehensive income/(loss) - derivative instruments: ​ ​ ​ ​ Unrealized holding gain/(loss) ​ ( 30 ) ​ ( 659 ) ​ ( 3,241 ) ​ ( 7,181 ) (Gain)/loss reclassified into earnings from other comprehensive income/(loss) ​ 1,585 ​ ( 624 ) ​ 3,234 ​ ( 2,504 ) Other comprehensive income/(loss), including portion attributable to noncontrolling interests ​ 1,555 ​ ( 1,283 ) ​ ( 7 ) ​ ( 9,685 ) Comprehensive income/(loss) ​ ( 25,662 ) ​ 28,139 ​ 40,412 ​ 84,657 Comprehensive (income)/loss attributable to noncontrolling interests ​ 1,850 ​ ( 2,119 ) ​ ( 2,724 ) ​ ( 6,286 ) Comprehensive income/(loss) attributable to UDR, Inc. ​ $ ( 23,812 ) ​ $ 26,020 ​ $ 37,688 ​ $ 78,371 ​ See accompanying notes to consolidated financial statements. ​ 7 Table of Contents ​ UDR, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In thousands, except per share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Distributions ​ Accumulated Other Comprehensive ​ ​ ​ ​ ​ ​ ​ ​ Preferred ​ Common ​ Paid-in ​ in Excess of ​ Income/(Loss), ​ Noncontrolling ​ ​ ​ ​ ​ Stock ​ Stock ​ Capital ​ Net Income ​ net ​ Interests ​ Total Balance at June 30, 2020 ​ $ 44,765 ​ $ 2,951 ​ $ 5,794,428 ​ $ ( 2,432,882 ) ​ $ ( 11,940 ) ​ $ 17,623 ​ $ 3,414,945 Net income/(loss) attributable to UDR, Inc. ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 25,258 ) ​ ​ — ​ ​ — ​ ​ ( 25,258 ) Net income/(loss) attributable to noncontrolling interests ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 15 ​ ​ 15 Repurchase of common shares ​ ​ — ​ ​ ( 6 ) ​ ​ ( 19,789 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 19,795 ) Long Term Incentive Plan Unit grants/(vestings), net ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,158 ​ ​ 3,158 Other comprehensive income/(loss) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,446 ​ ​ — ​ ​ 1,446 Issuance/(forfeiture) of common and restricted shares, net ​ ​ — ​ ​ — ​ ​ 1,255 ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,255 Adjustment for conversion of noncontrolling interest of unitholders in the Operating Partnership and DownREIT Partnership ​ ​ — ​ ​ — ​ ​ 373 ​ ​ — ​ ​ — ​ ​ — ​ ​ 373 Common stock distributions declared ($ 0.36 per share) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 106,020 ) ​ ​ — ​ ​ — ​ ​ ( 106,020 ) Preferred stock distributions declared-Series E ($ 0.3898 per share) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1,051 ) ​ ​ — ​ ​ — ​ ​ ( 1,051 ) Adjustment to reflect redemption value of redeemable noncontrolling interests ​ ​ — ​ ​ — ​ ​ — ​ ​ 64,384 ​ ​ — ​ ​ — ​ ​ 64,384 Balance at September 30, 2020 ​ $ 44,765 ​ $ 2,945 ​ $ 5,776,267 ​ $ ( 2,500,827 ) ​ $ ( 10,494 ) ​ $ 20,796 ​ $ 3,333,452 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Distributions ​ Accumulated Other Comprehensive ​ ​ ​ ​ ​ ​ ​ ​ Preferred ​ Common ​ Paid-in ​ in Excess of ​ Income/(Loss), ​ Noncontrolling ​ ​ ​ ​ ​ Stock ​ Stock ​ Capital ​ Net Income ​ net ​ Interests ​ Total Balance at December 31, 2019 ​ $ 46,201 ​ $ 2,946 ​ $ 5,781,975 ​ $ ( 2,462,132 ) ​ $ ( 10,448 ) ​ $ 30,772 ​ $ 3,389,314 Net income/(loss) attributable to UDR, Inc. ​ ​ — ​ ​ — ​ ​ — ​ ​ 37,734 ​ ​ — ​ ​ — ​ ​ 37,734 Net income/(loss) attributable to noncontrolling interests ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 24 ​ ​ 24 Repurchase of common shares ​ ​ — ​ ​ ( 6 ) ​ ​ ( 19,789 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 19,795 ) Long Term Incentive Plan Unit grants/(vestings), net ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 10,000 ) ​ ​ ( 10,000 ) Other comprehensive income/(loss) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 46 ) ​ ​ — ​ ​ ( 46 ) Issuance/(forfeiture) of common and restricted shares, net ​ ​ — ​ ​ 1 ​ ​ 1,026 ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,027 Cumulative effect upon adoption of ASC 326 ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 2,182 ) ​ ​ — ​ ​ — ​ ​ ( 2,182 ) Conversion of Series E Cumulative Convertible shares ​ ​ ( 1,436 ) ​ ​ 1 ​ ​ 1,435 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Adjustment for conversion of noncontrolling interest of unitholders in the Operating Partnership and DownREIT Partnership ​ ​ — ​ ​ 3 ​ ​ 11,620 ​ ​ — ​ ​ — ​ ​ — ​ ​ 11,623 Common stock distributions declared ($ 1.08 per share) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 318,442 ) ​ ​ — ​ ​ — ​ ​ ( 318,442 ) Preferred stock distributions declared-Series E ($ 1.1694 per share) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 3,179 ) ​ ​ — ​ ​ — ​ ​ ( 3,179 ) Adjustment to reflect redemption value of redeemable noncontrolling interests ​ ​ — ​ ​ — ​ ​ — ​ ​ 247,374 ​ ​ — ​ ​ — ​ ​ 247,374 Balance at September 30, 2020 ​ $ 44,765 ​ $ 2,945 ​ $ 5,776,267 ​ $ ( 2,500,827 ) ​ $ ( 10,494 ) ​ $ 20,796 ​ $ 3,333,452 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Distributions Accumulated Other Comprehensive ​ ​ ​ ​ ​ ​ Preferred ​ Common ​ Paid-in ​ in Excess of ​ Income/(Loss), ​ Noncontrolling ​ ​ ​ ​ ​ Stock ​ Stock ​ Capital ​ Net Income ​ net ​ Interests ​ Total Balance at June 30, 2019 ​ $ 46,201 ​ $ 2,831 ​ $ 5,244,819 ​ $ ( 2,336,609 ) ​ $ ( 7,838 ) ​ $ 18,611 ​ $ 2,968,015 Net income/(loss) attributable to UDR, Inc. ​ — ​ — ​ — ​ 27,204 ​ — ​ — ​ 27,204 Net income/(loss) attributable to noncontrolling interests ​ — ​ — ​ — ​ — ​ — ​ 40 ​ 40 Long Term Incentive Plan Unit grants/(vestings), net ​ — ​ — ​ — ​ — ​ — ​ 6,562 ​ 6,562 Other comprehensive income/(loss) ​ — ​ — ​ — ​ — ​ ( 1,184 ) ​ — ​ ( 1,184 ) Issuance/(forfeiture) of common and restricted shares, net ​ — ​ — ​ 1,175 ​ — ​ — ​ — ​ 1,175 Issuance of common shares through public offering, net ​ — ​ 96 ​ 449,041 ​ — ​ — ​ — ​ 449,137 Adjustment for conversion of noncontrolling interest of unitholders in the Operating Partnership and DownREIT Partnership ​ — ​ 2 ​ 7,747 ​ — ​ — ​ — ​ 7,749 Common stock distributions declared ($ 0.3425 per share) ​ — ​ — ​ — ​ ( 100,657 ) ​ — ​ — ​ ( 100,657 ) Preferred stock distributions declared-Series E ($ 0.3708 per share) ​ — ​ — ​ — ​ ( 1,031 ) ​ — ​ — ​ ( 1,031 ) Adjustment to reflect redemption value of redeemable noncontrolling interests ​ — ​ — ​ — ​ ( 85,235 ) ​ — ​ — ​ ( 85,235 ) Balance at September 30, 2019 ​ $ 46,201 ​ $ 2,929 ​ $ 5,702,782 ​ $ ( 2,496,328 ) ​ $ ( 9,022 ) ​ $ 25,213 ​ $ 3,271,775 ​ 8 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Distributions Accumulated Other Comprehensive ​ ​ ​ ​ ​ ​ Preferred ​ Common ​ Paid-in ​ in Excess of ​ Income/(Loss), ​ Noncontrolling ​ ​ ​ ​ ​ Stock ​ Stock ​ Capital ​ Net Income ​ net ​ Interests ​ Total Balance at December 31, 2018 ​ $ 46,201 ​ $ 2,755 ​ $ 4,920,732 ​ $ ( 2,063,996 ) ​ $ ( 67 ) ​ $ 17,152 ​ $ 2,922,777 Net income/(loss) attributable to UDR, Inc. ​ — ​ — ​ — ​ 87,326 ​ — ​ — ​ 87,326 Net income/(loss) attributable to noncontrolling interests ​ — ​ — ​ — ​ — ​ — ​ 97 ​ 97 Contribution of noncontrolling interests in consolidated real estate ​ — ​ — ​ — ​ — ​ — ​ 125 ​ 125 Long Term Incentive Plan Unit grants/(vestings), net ​ — ​ — ​ — ​ — ​ — ​ 7,839 ​ 7,839 Other comprehensive income/(loss) ​ — ​ — ​ — ​ — ​ ( 8,955 ) ​ — ​ ( 8,955 ) Issuance/(forfeiture) of common and restricted shares, net ​ — ​ — ​ 877 ​ — ​ — ​ — ​ 877 Issuance of common shares through public offering, net ​ — ​ 145 ​ 661,864 ​ — ​ — ​ — ​ 662,009 Adjustment for conversion of noncontrolling interest of unitholders in the Operating Partnership and DownREIT Partnership ​ — ​ 29 ​ 119,309 ​ — ​ — ​ — ​ 119,338 Common stock distributions declared ($ 1.0275 per share) ​ — ​ — ​ — ​ ( 294,180 ) ​ — ​ — ​ ( 294,180 ) Preferred stock distributions declared-Series E ($ 1.1124 per share) ​ — ​ — ​ — ​ ( 3,073 ) ​ — ​ — ​ ( 3,073 ) Adjustment to reflect redemption value of redeemable noncontrolling interests ​ — ​ — ​ — ​ ( 222,405 ) ​ — ​ — ​ ( 222,405 ) Balance at September 30, 2019 ​ $ 46,201 ​ $ 2,929 ​ $ 5,702,782 ​ $ ( 2,496,328 ) ​ $ ( 9,022 ) ​ $ 25,213 ​ $ 3,271,775 ​ See accompanying notes to consolidated financial statements. ​ 9 Table of Contents ​ UDR, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, except for share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ 2020 2019 Operating Activities ​ ​ ​ Net income/(loss) ​ $ 40,419 ​ $ 94,342 Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities: ​ ​ Depreciation and amortization ​ 470,420 ​ 362,746 (Gain)/loss on sale of real estate owned ​ ( 61,303 ) ​ ( 5,282 ) (Income)/loss from unconsolidated entities ​ ( 14,328 ) ​ ( 19,387 ) Return on investment in unconsolidated joint ventures ​ 1,832 ​ 4,104 Amortization of share-based compensation ​ 15,086 ​ 13,020 Loss on extinguishment of debt, net ​ ​ 24,540 ​ ​ 6,283 Other ​ 4,771 ​ 7,815 Changes in operating assets and liabilities: ​ ​ (Increase)/decrease in operating assets ​ ( 22,628 ) ​ 49 Increase/(decrease) in operating liabilities ​ ( 2,217 ) ​ ( 6,814 ) Net cash provided by/(used in) operating activities ​ 456,592 ​ 456,876 ​ ​ ​ ​ ​ ​ ​ Investing Activities ​ ​ Acquisition of real estate assets ​ ( 157,101 ) ​ ( 1,269,618 ) Proceeds from sales of real estate investments, net ​ 133,934 ​ 38,000 Development of real estate assets ​ ( 88,261 ) ​ ( 19,248 ) Capital expenditures and other major improvements — real estate assets ​ ( 105,257 ) ​ ( 113,572 ) Capital expenditures — non-real estate assets ​ ( 11,345 ) ​ ( 11,147 ) Investment in unconsolidated joint ventures ​ ( 66,893 ) ​ ( 72,079 ) Distributions received from unconsolidated joint ventures ​ 8,085 ​ 61,412 Purchase deposits on pending acquisitions ​ ​ 500 ​ ​ ( 910 ) Repayment/(issuance) of notes receivable, net ​ ( 6,393 ) ​ 4,360 Net cash provided by/(used in) investing activities ​ ( 292,731 ) ​ ( 1,382,802 ) ​ ​ ​ ​ ​ ​ ​ Financing Activities ​ ​ Payments on secured debt ​ ( 358,098 ) ​ ( 160,547 ) Proceeds from the issuance of secured debt ​ 160,930 ​ 162,500 Payments on unsecured debt ​ ​ ( 116,894 ) ​ ​ ( 300,000 ) Net proceeds from the issuance of unsecured debt ​ 610,896 ​ 697,826 Net proceeds/(repayment) of commercial paper ​ ( 70,000 ) ​ ( 41,115 ) Net proceeds/(repayment) of revolving bank debt ​ 5,503 ​ 34,431 Proceeds from the issuance of common shares through public offering, net ​ — ​ 662,009 Repurchase of common shares ​ ​ ( 19,795 ) ​ ​ — Distributions paid to redeemable noncontrolling interests ​ ( 23,913 ) ​ ( 24,764 ) Distributions paid to preferred stockholders ​ ( 3,150 ) ​ ( 3,016 ) Distributions paid to common stockholders ​ ( 313,326 ) ​ ( 282,709 ) Payment of prepayment and extinguishment costs ​ ​ ( 35,495 ) ​ ​ ( 6,283 ) Other ​ ( 9,610 ) ​ 2,244 Net cash provided by/(used in) financing activities ​ ( 172,952 ) ​ 740,576 Net increase/(decrease) in cash, cash equivalents, and restricted cash ​ ( 9,091 ) ​ ( 185,350 ) Cash, cash equivalents, and restricted cash, beginning of year ​ 33,291 ​ 208,891 Cash, cash equivalents, and restricted cash, end of period ​ $ 24,200 ​ $ 23,541 ​ ​ ​ ​ ​ ​ ​ Supplemental Information: ​ ​ Interest paid during the period, net of amounts capitalized ​ $ 141,871 ​ $ 125,298 Cash paid/(refunds received) for income taxes ​ 864 ​ 1,953 Non-cash transactions: ​ ​ Transfer of investment in and advances to unconsolidated joint ventures to real estate owned ​ $ 14,700 ​ $ 15,639 Acquisition of intellectual property in exchange for cancellation of secured note receivable ​ ​ 2,250 ​ ​ — Recognition of allowance for credit losses ​ ​ 2,182 ​ ​ — Recognition of operating lease right-of-use assets ​ ​ — ​ ​ 94,349 Recognition of operating lease liabilities ​ ​ — ​ ​ 88,336 Right-of-use assets obtained in exchange for operating lease liabilities remeasurement ​ ​ — ​ ​ 42,143 Vesting of LTIP Units ​ ​ 23,501 ​ ​ 14,742 Development costs and capital expenditures incurred but not yet paid ​ 27,705 ​ 12,174 Conversion of Operating Partnership and DownREIT Partnership noncontrolling interests to common stock ( 271,176 shares in 2020 and 2,862,780 shares in 2019) ​ 11,623 ​ 119,338 Dividends declared but not yet paid ​ 115,055 ​ 108,939 ​ ​ ​ ​ ​ ​ ​ 10 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ 2020 2019 The following reconciles cash, cash equivalents, and restricted cash to amounts as shown above: ​ ​ ​ ​ ​ ​ Cash, cash equivalents, and restricted cash, beginning of year: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 8,106 ​ $ 185,216 Restricted cash ​ ​ 25,185 ​ ​ 23,675 Total cash, cash equivalents, and restricted cash as shown above ​ $ 33,291 ​ $ 208,891 Cash, cash equivalents, and restricted cash, end of period: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 927 ​ $ 1,895 Restricted cash ​ ​ 23,273 ​ ​ 21,646 Total cash, cash equivalents, and restricted cash as shown above ​ $ 24,200 ​ $ 23,541 ​ ​ See accompanying notes to consolidated financial statements. ​ 11 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2020 1. BASIS OF PRESENTATION Basis of Presentation UDR, Inc., collectively with our consolidated subsidiaries (“UDR,” the “Company,” “we,” “our,” or “us”), is a self-administered real estate investment trust, or REIT, that owns, operates, acquires, renovates, develops, redevelops, and manages apartment communities. The accompanying consolidated financial statements include the accounts of UDR and its subsidiaries, including United Dominion Realty, L.P. (the “Operating Partnership” or the “OP”) and UDR Lighthouse DownREIT L.P. (the “DownREIT Partnership”). As of September 30, 2020, there were 184.8 million units in the Operating Partnership (“OP Units”) outstanding, of which 176.2 million OP Units (including 0.1 million of general partnership units), or 95.3 %, were owned by UDR and 8.6 million OP Units, or 4.7 %, were owned by outside limited partners. As of September 30, 2020, there were 32.4 million units in the DownREIT Partnership (“DownREIT Units”) outstanding, of which 18.7 million, or 57.6 %, were owned by UDR (including 13.5 million DownREIT Units, or 41.6 %, that were held by the Operating Partnership) and 13.7 million, or 42.4 %, were owned by outside limited partners. The consolidated financial statements of UDR include the noncontrolling interests of the unitholders in the Operating Partnership and DownREIT Partnership. The accompanying interim unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments and eliminations necessary for the fair presentation of our financial position as of September 30, 2020, and results of operations for the three and nine months ended September 30, 2020 and 2019, have been included. Such adjustments are normal and recurring in nature. The interim results presented are not necessarily indicative of results that can be expected for a full year, particularly in light of the novel coronavirus disease (“COVID-19”) pandemic and measures intended to mitigate its spread. The accompanying interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2019 appearing in UDR’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 18, 2020. The accompanying interim unaudited consolidated financial statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the interim unaudited consolidated financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company evaluated subsequent events through the date its financial statements were issued. No significant recognized or non-recognized subsequent events were noted other than those noted in Note 3, Real Estate Owned . 2. SIGNIFICANT ACCOUNTING POLICIES Recent Accounting Pronouncements In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The updated standard will be effective for the Company on January 1, 2022, however, early adoption of the ASU is permitted on January 1, 2021. The Company is currently evaluating the effect that the updated standard will have on the consolidated financial statements and related disclosures. ​ 12 ​ Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 In April 2020, the FASB issued a Staff Q&A on accounting for leases during the COVID-19 pandemic, focused on the application of lease guidance in ASC 842, Leases . The Q&A states that some lease contracts may contain explicit or implicit enforceable rights and obligations that require lease concessions if certain circumstances arise that are beyond the control of the parties to the contract. Therefore, entities would need to perform a lease-by-lease analysis to determine whether contractual provisions in an existing lease agreement provide enforceable rights and obligations related to lease concessions. ​ The FASB determined it would be acceptable for entities to not perform a lease-by-lease analysis regarding rent concessions resulting from COVID-19, and to instead make a policy election regarding rent concessions, which would give entities the option to account or not to account for these rent concessions as lease modifications if the total payments required by the modified contract are substantially the same or less than the total payments required by the original contract. Entities making the election to account for these rent concessions as lease modifications would recognize the effects of rent abatements and rent deferrals on a prospective straight-line basis over the remainder of the modified contract. ​ We have made the election to not perform a lease-by-lease analysis to determine whether contractual provisions in an existing lease agreement provide enforceable rights and obligations related to lease concessions. By electing the FASB relief, we have also made an accounting policy election to account for rent abatements and rent deferrals given to lessees due to the COVID-19 pandemic as lease modifications. The lease concessions given to lessees due to the COVID-19 pandemic did not have a material impact on our consolidated financial statements. ​ In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) . ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. The ASU has not had a material impact on the consolidated financial statements and the Company does not expect the ASU to have a material impact on the consolidated financial statements on a prospective basis. ​ In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments . The standard required entities to estimate a lifetime expected credit loss for most financial assets, including trade and other receivables, held-to-maturity debt securities, loans and other financial instruments, and to present the net amount of the financial instrument expected to be collected. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which amended the transition requirements and scope of ASU 2016-13 and clarified that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard. The updated standard became effective for the Company on January 1, 2020 and was adopted on a modified retrospective basis through a cumulative-effect adjustment to retained earnings of approximately $ 2.2 million on that date, which was primarily associated with our notes receivable. The Company concluded the cumulative effect was not material to our consolidated financial statements. Disclosures were updated pursuant to the requirements of the ASU. ​ Principles of Consolidation The Company accounts for subsidiary partnerships, joint ventures and other similar entities in which it holds an ownership interest in accordance with the consolidation guidance. The Company first evaluates whether each entity is a variable interest entity (“VIE”). Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest. 13 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 Real Estate Sales Gain Recognition ​ For sale transactions resulting in a transfer of a controlling financial interest of a property, the Company generally derecognizes the related assets and liabilities from its Consolidated Balance Sheets and records the gain or loss in the period in which the transfer of control occurs. If control of the property has not transferred to the counterparty, the criteria for derecognition are not met and the Company will continue to recognize the related assets and liabilities on its Consolidated Balance Sheets. ​ Sale transactions to entities in which the Company sells a controlling financial interest in a property but retains a noncontrolling interest are accounted for as partial sales. Partial sales resulting in a change in control are accounted for at fair value and a full gain or loss is recognized. Therefore, the Company will record a gain or loss on the partial interest sold, and the initial measurement of our retained interest will be accounted for at fair value. ​ Sales of real estate to joint ventures or other noncontrolled investees are also accounted for at fair value and the Company will record a full gain or loss in the period the property is contributed. ​ To the extent that the Company acquires a controlling financial interest in a property that it previously accounted for as an equity method investment, the Company will not remeasure its previously held interest if the acquisition is treated as an asset acquisition. The Company will include the carrying amount of its previously held equity method interest along with the consideration paid and transaction costs incurred in determining the amounts to allocate to the related assets and liabilities acquired on its Consolidated Balance Sheets. When treated as an asset acquisition, the Company will not recognize a gain or loss on consolidation of a property. ​ Allowance for Credit Losses The Company accounts for allowance for credit losses under the current expected credit loss (“CECL”) impairment model for its financial assets, including trade and other receivables, held-to-maturity debt securities, loans and other financial instruments, and presents the net amount of the financial instrument expected to be collected. The CECL impairment model excludes operating lease receivables. The CECL impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, that considers forecasts of future economic conditions in addition to information about past events and current conditions. Based on this model, we analyze the following criteria, as applicable in developing allowances for credit losses: historical loss information, the borrower’s ability to make scheduled payments, the remaining time to maturity, the value of underlying collateral, projected future performance of the borrower and macroeconomic trends. ​ The Company measures credit losses of financial assets on a collective (pool) basis when similar risk characteristics exist. If the Company determines that a financial asset does not share risk characteristics with its other financial assets, the Company evaluates the financial asset for expected credit losses on an individual basis. Allowance for credit losses are recorded as a direct reduction from an asset’s amortized cost basis. Credit losses and recoveries are recorded in Interest income and other income/(expense), net on the Consolidated Statements of Operations. Recoveries of financial assets previously written off are recorded when received. For the three and nine months ended September 30, 2020, the Company recorded less than $ 0.1 million of credit losses on the Consolidated Statements of Operations. ​ The Company has made the optional election provided by the standard not to measure allowance for credit losses for accrued interest receivables as the Company writes off any uncollectible accrued interest receivables in a timely manner. The Company periodically evaluates the collectability of its accrued interest receivables. A write-off is recorded when the Company concludes that all or a portion of its accrued interest receivable balance is no longer collectible. ​ Notes Receivable Notes receivable relate to financing arrangements which are typically secured by real estate, real estate related projects or other assets. Certain of the loans we extend may include characteristics such as options to purchase the project within a specific time window following expected project completion. These characteristics can cause the loans to fall under the definition of a VIE, and thus trigger consolidation consideration. We consider the facts and 14 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 circumstances pertinent to each loan, including the relative amount of financing we are contributing to the overall project cost, decision making rights or control we hold, and our rights to expected residual gains or our obligations to absorb expected residual losses from the project. If we are deemed to be the primary beneficiary of a VIE due to holding a controlling financial interest, the majority of decision making control, or by other means, consolidation of the VIE would be required. The Company has concluded that it is not the primary beneficiary of the borrowing entities which were deemed to be VIEs. Additionally, we analyze each loan arrangement that involves real estate development to consider whether the loan qualifies for accounting as a loan or as an investment in a real estate development project. The Company has evaluated its real estate loans, where appropriate, for accounting treatment as loans versus real estate development projects, as required by ASC 310-10. For each loan, the Company has concluded that the characteristics and the facts and circumstances indicate that loan accounting treatment is appropriate. The following table summarizes our Notes receivable, net as of September 30, 2020 and December 31, 2019 ( dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate at ​ Balance Outstanding ​ September 30, September 30, December 31, ​ ​ 2020 ​ 2020 ​ 2019 Note due October 2020 (a) 8.00 % $ — ​ $ 2,250 Note due February 2021 (b) ​ N/A ​ ​ 4,000 ​ ​ — Note due May 2022 (c) ​ 8.00 % ​ 20,000 ​ ​ 20,000 Note due October 2022 (d) 4.75 % ​ 115,000 ​ ​ 115,000 Note due January 2023 (e) ​ 10.00 % ​ 18,785 ​ ​ 16,400 Notes Receivable ​ ​ ​ ​ 157,785 ​ ​ 153,650 Allowance for credit losses ​ ​ ​ ​ ( 789 ) ​ ​ — Total notes receivable, net ​ $ 156,996 ​ $ 153,650 (a) In March 2020, the Company entered into a purchase agreement to acquire all of the unaffiliated third party’s intellectual property in exchange for cancellation of the secured note and accrued interest. All property acquired was recorded in Other assets on the Consolidated Balance Sheets. (b) In May 2020, the Company entered into a promissory note with an unaffiliated third party with an aggregate commitment of $ 4.0 million, in connection with the sale of an operating community. No interest is due on the promissory note and the note matures in February 2021. (c) The Company has a secured note with an unaffiliated third party with an aggregate commitment of $ 20.0 million, all of which has been funded. The note is secured by a parcel of land and related land improvements. Interest payments up to December 2019 are due when the loan matures and interest payments after December 2019 are due monthly. In April 2020, the terms of the secured note were amended to extend the term to May 30, 2022, to adjust the interest rate to 8.0 % and require additional borrower covenants. In September 2020, the developer defaulted on the loan. As a result of the default, the Company expects to take title to the property pursuant to a deed in lieu of foreclosure. At that time, the Company will reclassify the related balance as Real estate owned on the Consolidated Balance Sheet and anticipates recording a gain on extinguishment of the secured note based upon the property’s fair market value on the date of the title transfer. (d) The Company has a secured note with an unaffiliated third party with an aggregate commitment of $ 115.0 million, all of which has been funded. Interest payments are due when the loan matures. The note is secured by a first priority deed of trust on a 259 apartment home operating community in Bellevue, Washington, which was completed in 2020. When the note was funded, the Company also entered into a purchase option agreement and paid a deposit of $ 10.0 million, which gave the Company the option to acquire the community at a fixed price of $ 170.0 million. In August 2020, the Company exercised the purchase option. The purchase is expected to close in 2021. The deposit is generally nonrefundable other than due to a failure of closing conditions pursuant to the terms of the agreement. If the Company fails to close the purchase other than due to seller’s failure or other breaches in the purchase option agreement, per the terms of the agreement, the note will be modified to extend the maturity date to 10 years following the date the temporary certificate of occupancy was issued, which was July 2020. Upon 15 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 modification, the loan would be interest only for the first three years and after such date payments will be based on a 30-year amortization schedule . (e) The Company has a secured note with an unaffiliated third party with an aggregate commitment of $ 20.0 million, of which $ 18.8 million has been funded, including $ 2.4 million funded during the nine months ended September 30, 2020. Interest payments are due monthly. The note matures at the earliest of the following: (a) the closing of any private or public capital raising in the amount of $ 5.0 million or greater; (b) an acquisition; (c) acceleration in the event of default; or (d) January 2023. During 2020, the terms of this secured note were amended to increase the aggregate commitment from $ 16.4 million to $ 20.0 million, to extend the maturity date of the note to January 2023 and to provide that the April 2020 through July 2020 interest payments are deferred and paid when the note matures . The Company recognized $ 2.0 million and $ 1.2 million of interest income from notes receivable described above during the three months ended September 30, 2020 and 2019, respectively, and $ 7.0 million and $ 3.5 million of interest income for the notes receivable described above during the nine months ended September 30, 2020 and 2019, respectively, none of which was related party interest. Interest income is included in Interest income and other income/(expense), net on the Consolidated Statements of Operations. Comprehensive Income/(Loss) Comprehensive income/(loss), which is defined as the change in equity during each period from transactions and other events and circumstances from nonowner sources, including all changes in equity during a period except for those resulting from investments by or distributions to stockholders, is displayed in the accompanying Consolidated Statements of Comprehensive Income/(Loss). For the three and nine months ended September 30, 2020 and 2019, the Company’s other comprehensive income/(loss) consisted of the gain/(loss) on derivative instruments that are designated as and qualify as cash flow hedges, (gain)/loss on derivative instruments reclassified from other comprehensive income/(loss) into earnings, and the allocation of other comprehensive income/(loss) to noncontrolling interests. The (gain)/loss on derivative instruments reclassified from other comprehensive income/(loss) is included in Interest expense on the Consolidated Statements of Operations. See Note 11, Derivatives and Hedging Activity, for further discussion. The allocation of other comprehensive income/(loss) to redeemable noncontrolling interests during the three months ended September 30, 2020 and 2019 was $ 0.1 million and $( 0.1 ) million, respectively, and during the nine months ended September 30, 2020 and 2019 was less than $ 0.1 million and $( 0.7 ) million, respectively. Income Taxes Due to the structure of the Company as a REIT and the nature of the operations for the operating properties, no provision for federal income taxes has been provided for at UDR. Historically, the Company has generally incurred only state and local excise and franchise taxes. UDR has elected for certain consolidated subsidiaries to be treated as taxable REIT subsidiaries (“TRS”). Income taxes for our TRS are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rate is recognized in earnings in the period of the enactment date. The Company’s deferred tax assets/(liabilities) are generally the result of differing depreciable lives on capitalized assets, temporary differences between book and tax basis of assets and liabilities and timing of expense recognition for certain accrued liabilities. As of September 30, 2020 and December 31, 2019, UDR’s net deferred tax asset/(liability) was $( 2.8 ) million and $( 1.6 ) million, respectively. GAAP defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. GAAP also provides guidance on derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition. The Company recognizes its tax positions and evaluates them using a two-step process. First, UDR determines whether a tax position is more likely than not (greater than 50 percent probability) to be sustained upon examination, 16 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 including resolution of any related appeals or litigation processes, based on the technical merits of the position. Second, the Company will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement. The Company invests in assets that qualify for federal investment tax credits (“ITC”) through our TRS. An ITC reduces federal income taxes payable when qualifying depreciable property is acquired. The ITC is determined as a percentage of cost of the assets. The Company accounts for ITCs under the deferral method, under which the tax benefit from the ITC is deferred and amortized as a tax benefit into Tax (provision)/benefit, net on the Consolidated Statements of Operations over the book life of the qualifying depreciable property. The ITCs are recorded in Accounts payable, accrued expenses and other liabilities on the Consolidated Balance Sheets. UDR had no material unrecognized tax benefit, accrued interest or penalties at September 30, 2020. UDR and its subsidiaries are subject to federal income tax as well as income tax of various state and local jurisdictions. The tax years 2016 through 2019 remain open to examination by tax jurisdictions to which we are subject. When applicable, UDR recognizes interest and/or penalties related to uncertain tax positions in Tax (provision)/benefit, net on the Consolidated Statements of Operations. ​ Forward Sales Agreements ​ The Company utilizes forward sales agreements for the future issuance of its common stock. When the Company enters into a forward sales agreement, the contract requires the Company to sell its shares to a counterparty at a predetermined price at a future date. The net sales price and proceeds attained by the Company will be determined on the dates of settlement, with adjustments during the term of the contract for the Company’s anticipated dividends as well as for a daily interest factor that varies with changes in the federal funds rate. The Company generally has the ability to determine the dates and method of settlement (i.e., gross physical settlement, net share settlement or cash settlement), subject to certain conditions and the right of the counterparty to accelerate settlement under certain circumstances. ​ The Company accounts for the shares of common stock reserved for issuance upon settlement as equity in accordance with ASC 815-40, Contracts in Entity's Own Equity , which permits equity classification when a contract is considered indexed to its own stock and the contract requires or permits the issuing entity to settle the contract in shares (either physically or net in shares). ​ The guidance establishes a two-step process for evaluating whether an equity-linked financial instrument is considered indexed to its own stock, first, evaluating the instrument’s contingent exercise provisions and second, evaluating the instrument’s settlement provisions. When entering into forward sales agreements, we determined that (i) none of the agreement’s exercise contingencies are based on observable markets or indices besides those related to the market for our own stock price; and (ii) none of the settlement provisions preclude the agreements from being indexed to our own stock. ​ Before the issuance of shares of common stock, upon physical or net share settlement of the forward sales agreements, the Company expects that the shares issuable upon settlement of the forward sales agreements will be reflected in its diluted income/(loss) per share calculations using the treasury stock method. Under this method, the number of shares of common stock used in calculating diluted income/(loss) per share is deemed to be increased by the excess, if any, of the number of shares of common stock that would be issued upon full physical settlement of the forward sales agreements over the number of shares of common stock that could be purchased by the Company in the open market (based on the average market price during the period) using the proceeds receivable upon full physical settlement (based on the adjusted forward sale price at the end of the reporting period). When the Company physically or net share settles any forward sales agreement, the delivery of shares of common stock would result in an increase in the number of weighted average common shares outstanding and dilution to basic income/(loss) per share. (See Note 8, Income/(Loss) per Share for further discussion.) ​ 17 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 Impact of COVID-19 Pandemic ​ The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business. The extent of the pandemic’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic and the duration of government measures to mitigate the pandemic, all of which continue to be uncertain and difficult to predict. ​ Given the uncertainty, we cannot predict the effect on future periods, but the adverse impact that could occur on the Company’s future financial condition, results of operations and cash flows could be material , including, but not limited to, as a result of extended eviction moratoriums, additional rent deferrals, payment plans, lease concessions, waiving late payment fees, charges from potential adjustments to the carrying amount of receivables, and asset impairment charges. ​ During the three and nine months ended September 30, 2020, the Company performed an analysis in accordance with the ASC 842, Leases, guidance to assess the collectibility of its operating lease receivables in light of the COVID-19 pandemic. This analysis included an assessment of collectibility of current and future rents and whether those lease payments were no longer probable of collection. In accordance with the leases guidance, if lease payments are no longer deemed to be probable over the life of the lease contract, we recognize revenue only when cash is received, and all existing contractual operating lease receivables and straight-line lease receivables are reserved. ​ As a result of its analysis, the Company reserved approximately $ 4.0 million of multifamily tenant lease receivables and approximately $ 0.8 million of retail tenant lease receivables (inclusive of less than $ 0.1 million of reserves on straight-line lease receivables) for its wholly-owned communities and communities held by joint ventures. In aggregate, the reserve is reflected as a $ 4.4 million reduction to Rental income and a $ 0.4 million reduction to Income/(loss) from unconsolidated entities on the Consolidated Statements of Operations for the three months ended September 30, 2020. For the nine months ended September 30, 2020, the Company reserved approximately $ 9.5 million of multifamily tenant lease receivables and approximately $ 4.3 million of retail tenant lease receivables (inclusive of $ 2.9 million of reserves on straight-line lease receivables) for its wholly-owned communities and communities held by joint ventures. In aggregate, the reserve is reflected as a $ 12.9 million reduction to Rental income and a $ 0.9 million reduction to Income/(loss) from unconsolidated entities on the Consolidated Statements of Operations for the nine months ended September 30, 2020. The impact to deferred leasing commissions was not material for the three and nine months ended September 30, 2020. ​ The Company did not recognize any other adjustments to the carrying amounts of assets or asset impairment charges due to the COVID-19 pandemic for the nine months ended September 30, 2020. ​ ​ ​ ​ 18 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 3. REAL ESTATE OWNED Real estate assets owned by the Company consist of income producing operating properties, properties under development, land held for future development, and held for disposition properties. As of September 30, 2020, the Company owned and consolidated 148 communities in 13 states plus the District of Columbia totaling 47,488 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of September 30, 2020 and December 31, 2019 (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2020 ​ 2019 Land ​ $ 2,144,489 ​ $ 2,164,032 Depreciable property — held and used: ​ ​ Land improvements ​ 230,291 ​ 224,964 Building, improvements, and furniture, fixtures and equipment ​ 10,118,451 ​ 10,102,758 Real estate intangible assets ​ ​ 40,570 ​ ​ 40,570 Under development: ​ ​ Land and land improvements ​ 56,361 ​ 29,226 Building, improvements, and furniture, fixtures and equipment ​ 141,462 ​ 40,551 Real estate held for disposition: ​ ​ Land and land improvements ​ 9,654 ​ — Building, improvements, and furniture, fixtures and equipment ​ 119,742 ​ — Real estate owned ​ 12,861,020 ​ 12,602,101 Accumulated depreciation ​ ( 4,512,771 ) ​ ( 4,131,353 ) Real estate owned, net ​ $ 8,348,249 ​ $ 8,470,748 ​ Acquisitions 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 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. ​ Dispositions ​ 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 and due in February 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 an 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. ​ 19 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 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 asset is included in Real estate held for disposition on the Consolidated Balance Sheet as of September 30, 2020. ​ Other Activity Predevelopment, development, and redevelopment projects and related costs are capitalized and reported on the Consolidated Balance Sheets as Total real estate owned, net of accumulated depreciation . The Company capitalizes 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. These costs, excluding the direct costs of development and redevelopment and capitalized interest, for the three months ended September 30, 2020 and 2019, were $ 1.6 million and $ 1.9 million, respectively, and $ 10.3 million and $ 6.9 million for the nine months ended September 30, 2020 and 2019, respectively. Total capitalized interest was $ 1.8 million and $ 1.4 million for the three months ended September 30, 2020 and 2019, respectively, and $ 4.9 million and $ 3.8 million for the nine months ended September 30, 2020 and 2019, respectively. As each apartment home in a capital project is completed and becomes available for lease-up, the Company ceases capitalization on the related portion of the costs and depreciation commences over the estimated useful life. We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book value of those assets. Our cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. The net book value of impaired assets is reduced to fair value. Our estimates of fair value represent our best estimate based upon Level 3 inputs such as industry trends and reference to market rates and transactions. The Company did not recognize any impairments in the value of its long-lived assets during the three and nine months ended September 30, 2020 and 2019. In connection with the acquisition of certain properties, the Company agreed to pay certain of the tax liabilities of certain contributors if the Company sells one or more of the properties contributed in a taxable transaction prior to the expiration of specified periods of time following the acquisition. The Company may, however, sell, without being required to pay any tax liabilities, any of such properties in a non-taxable transaction, including, but not limited to, a tax-deferred Section 1031 exchange. Further, the Company has agreed to maintain certain debt that may be guaranteed by certain contributors for specified periods of time following the acquisition. The Company, however, has the ability to refinance or repay guaranteed debt or to substitute new debt if the debt and the guaranty continue to satisfy certain conditions. 4. VARIABLE INTEREST ENTITIES The Company has determined that the Operating Partnership and DownREIT Partnership are VIEs as the limited partners lack substantive kick-out rights and substantive participating rights. The Company has concluded that it is the primary beneficiary of, and therefore consolidates, the Operating Partnership and DownREIT Partnership based on its role as the sole general partner of the Operating Partnership and DownREIT Partnership. The Company’s role as community manager and its equity interests give us the power to direct the activities that most significantly impact the economic performance and the obligation to absorb potentially significant losses or the right to receive potentially significant benefits of the Operating Partnership and DownREIT Partnership. See the consolidated financial statements of the Operating Partnership presented within this Report and Note 4, Unconsolidated Entities , to the Operating Partnership’s consolidated financial statements for the results of operations of the DownREIT Partnership. 20 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 5. JOINT VENTURES AND PARTNERSHIPS UDR has entered into joint ventures and partnerships with unrelated third parties to own, operate, acquire, renovate, develop, redevelop, dispose of, and manage real estate assets that are either consolidated and included in Real estate owned on the Consolidated Balance Sheets or are accounted for under the equity method of accounting, and are included in Investment in and advances to unconsolidated joint ventures, net , on the Consolidated Balance Sheets. The Company consolidates the entities that we control as well as any variable interest entity where we are the primary beneficiary. Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest. UDR’s joint ventures and partnerships are funded with a combination of debt and equity. Our losses are typically limited to our investment and except as noted below, the Company does not guarantee any debt, capital payout or other obligations associated with our joint ventures and partnerships. The Company recognizes earnings or losses from our investments in unconsolidated joint ventures and partnerships consisting of our proportionate share of the net earnings or losses of the joint ventures and partnerships. In addition, we may earn fees for providing management services to the unconsolidated joint ventures and partnerships. The following table summarizes the Company’s investment in and advances to unconsolidated joint ventures and partnerships, net, which are accounted for under the equity method of accounting as of September 30, 2020 and December 31, 2019 (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ Number of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating ​ Apartment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income/(loss) from investments ​ ​ ​ ​ Communities ​ Homes ​ Investment at ​ UDR’s Ownership Interest ​ ​ Three Months Ended ​ Nine Months Ended ​ Location of September 30, September 30, September 30, December 31, ​ September 30, ​ December 31, ​ September 30, ​ September 30, Joint Venture Properties 2020 2020 2020 2019 ​ 2020 ​ 2019 ​ 2020 2019 ​ 2020 2019 Operating: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ UDR/MetLife I ​ Los Angeles, CA ​ 1 ​ 150 ​ $ 27,192 ​ $ 28,812 ​ 50.0 % ​ 50.0 % ​ $ ( 751 ) ​ $ ( 500 ) ​ $ ( 1,863 ) ​ $ ( 1,625 ) UDR/MetLife II Various 7 1,250 ​ 149,237 ​ 150,893 ​ 50.0 % ​ 50.0 % ​ ​ ( 441 ) ​ ​ 702 ​ ​ ( 522 ) ​ ​ 1,912 Other UDR/MetLife Joint Ventures Various 5 1,437 ​ 85,662 ​ 98,441 ​ 50.6 % ​ 50.6 % ​ ​ ( 3,151 ) ​ ​ ( 1,205 ) ​ ​ ( 7,275 ) ​ ​ ( 4,666 ) West Coast Development Joint Ventures ​ Los Angeles, CA ​ 1 ​ 293 ​ ​ 34,283 ​ ​ 34,907 ​ 47.0 % ​ 47.0 % ​ ​ ( 148 ) ​ ​ ( 229 ) ​ ​ ( 284 ) ​ ​ ( 736 ) Sold Joint Ventures ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ — ​ — % ​ — % ​ ​ — ​ ​ 4,564 ​ ​ — ​ ​ 6,613 Investment in and advances to unconsolidated joint ventures, net, before preferred equity investments and other investments ​ $ 296,374 ​ $ 313,053 ​ ​ ​ ​ $ ( 4,491 ) ​ $ 3,332 ​ $ ( 9,944 ) ​ $ 1,498 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income/(loss) from investments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment at ​ Three Months Ended ​ Nine Months Ended ​ Developer Capital Program ​ ​ Years To ​ UDR September 30, December 31, September 30, ​ September 30, ​ and Other Investments (a) Location Rate Maturity ​ Commitment (b) 2020 2019 2020 2019 2020 2019 ​ Preferred equity investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ West Coast Development Joint Ventures (c) Hillsboro, OR 6.5 % N/A ​ $ — ​ $ — ​ $ 17,064 ​ $ — ​ $ ( 237 ) ​ $ ( 46 ) ​ $ ( 409 ) ​ 1532 Harrison ​ San Francisco, CA ​ 11.0 % 1.7 ​ ​ 24,645 ​ ​ 33,162 ​ ​ 30,585 ​ ​ 875 ​ ​ 802 ​ ​ 2,557 ​ ​ 2,324 ​ 1200 Broadway (d) ​ Nashville, TN ​ 8.0 % 2.0 ​ ​ 55,558 ​ ​ 67,940 ​ ​ 63,958 ​ ​ 1,347 ​ ​ 1,244 ​ ​ 3,934 ​ ​ 3,619 ​ Junction ​ Santa Monica, CA ​ 12.0 % 1.8 ​ ​ 8,800 ​ ​ 11,353 ​ ​ 10,379 ​ ​ 337 ​ ​ 299 ​ ​ 974 ​ ​ 861 ​ 1300 Fairmount (d) ​ Philadelphia, PA ​ Variable ​ 2.8 ​ ​ 51,393 ​ ​ 58,286 ​ ​ 51,215 ​ ​ 1,230 ​ ​ 930 ​ ​ 3,587 ​ ​ 1,724 ​ Essex ​ Orlando, FL ​ 12.5 % 2.9 ​ ​ 12,886 ​ ​ 16,253 ​ ​ 14,804 ​ ​ 501 ​ ​ 443 ​ ​ 1,448 ​ ​ 1,182 ​ Modera Lake Merritt (d) ​ Oakland, CA ​ 9.0 % 3.5 ​ ​ 27,250 ​ ​ 30,238 ​ ​ 22,653 ​ ​ 675 ​ ​ 366 ​ ​ 1,901 ​ ​ 622 ​ Thousand Oaks (e) ​ Thousand Oaks, CA ​ 9.0 % 4.3 ​ ​ 20,059 ​ ​ 13,693 ​ ​ — ​ ​ 240 ​ ​ — ​ ​ 417 ​ ​ — ​ Vernon Boulevard (f) ​ Queens, NY ​ 13.0 % 4.8 ​ ​ 40,000 ​ ​ 41,002 ​ ​ — ​ ​ 990 ​ ​ — ​ ​ 990 ​ ​ — ​ Other investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Portals ​ Washington, D.C. ​ 11.0 % 0.7 ​ ​ 38,559 ​ ​ 52,162 ​ ​ 48,181 ​ ​ 1,448 ​ ​ 1,287 ​ ​ 4,172 ​ ​ 3,694 ​ Other investment ventures ​ N/A ​ N/A ​ N/A ​ $ 34,500 ​ ​ 21,395 ​ ​ 13,598 ​ ​ ( 212 ) ​ ​ 4,247 ​ ​ 4,338 ​ ​ 4,272 ​ Total Preferred Equity Investments and Other Investments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 345,484 ​ ​ 272,437 ​ ​ 7,431 ​ ​ 9,381 ​ ​ 24,272 ​ ​ 17,889 ​ Total Joint Ventures and Developer Capital Program Investments, net (g) ​ ​ ​ ​ $ 641,858 ​ $ 585,490 ​ $ 2,940 $ 12,713 ​ $ 14,328 $ 19,387 ​ (a) The Developer Capital Program is the program through which the Company makes investments, including preferred equity investments, mezzanine loans or other structured investments that may receive a fixed yield on the 21 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 investment and may include provisions pursuant to which the Company participates in the increase in value of the property upon monetization of the applicable property and/or holds fixed price purchase options. (b) Represents UDR’s maximum funding commitment only and therefore excludes other activity such as income from investments. (c) In January 2020, the Company increased its ownership interest from 49 % to 100 % in the 276 apartment home operating community located in Hillsboro, Oregon, for a cash purchase price of approximately $ 21.6 million. As a result, the Company consolidated the operating community and it is no longer accounted for as a preferred equity investment in an unconsolidated joint venture (see Note 3, Real Estate Owned ). In connection with the purchase, the Company repaid the joint venture’s construction loan of approximately $ 35.6 million. (d) The Company’s preferred equity investment receives a variable percentage of the value created from the project upon a capital or liquidating event. (e) In February 2020, the Company entered into a joint venture agreement with an unaffiliated joint venture partner to develop and operate a 142 apartment home community in Thousand Oaks, CA. The Company’s preferred equity investment of up to $ 20.1 million earns a preferred return of 9.0 % per annum and receives a variable percentage of the value created from the project upon a capital or liquidating event. The unaffiliated joint venture partner is the managing member of the joint venture and the developer of the community. The Company has concluded that it does not control the joint venture and, therefore, accounts for it under the equity method of accounting. (f) In July 2020, the Company entered into a joint venture agreement with an unaffiliated joint venture partner to develop and operate a 534 apartment home community in Queens, New York. The Company’s preferred equity investment of $ 40.0 million earns a preferred return of 13.0 % per annum and receives a variable percentage of the value created from the project upon a capital or liquidating event. The unaffiliated joint venture partner is the managing member of the joint venture and the developer of the community. The Company has concluded that it does not control the joint venture and accounts for it under the equity method of accounting. (g) As of September 30, 2020, the Company’s negative investment in 13 th and Market Properties LLC of $ 4.5 million is included in Other UDR/MetLife Joint Ventures in the table above and recorded in Accounts payable, accrued expenses, and other liabilities on the Consolidated Balance Sheet. ​ As of September 30, 2020 and December 31, 2019, the Company had deferred fees of $ 8.6 million and $ 9.0 million, respectively, which will be recognized through earnings over the weighted average life of the related properties, upon the disposition of the properties to a third party, or upon completion of certain development obligations. The Company recognized management fees of $ 1.2 million and $ 6.4 million for the three months ended September 30, 2020 and 2019, respectively, and $ 3.9 million and $ 12.0 million for the nine months ended September 30, 2020 and 2019, respectively, for management of the communities held by the joint ventures and partnerships. The management fees are included in Joint venture management and other fees on the Consolidated Statements of Operations. The Company may, in the future, make additional capital contributions to certain of our joint ventures and partnerships should additional capital contributions be necessary to fund acquisitions or operations. We consider various factors to determine if a decrease in the value of our Investment in and advances to unconsolidated joint ventures, net 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. Based on the significance of the unobservable inputs, we classify these fair value measurements within Level 3 of the valuation hierarchy. The Company did not incur any other-than-temporary impairments in the value of its investments in unconsolidated joint ventures during the three and nine months ended September 30, 2020 and 2019. 22 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 Combined summary balance sheets relating to the unconsolidated joint ventures’ and partnerships’ (not just our proportionate share) are presented below as of September 30, 2020 and December 31, 2019 ( dollars in thousands ): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2020 2019 Total real estate, net $ 1,947,336 $ 1,901,081 Cash and cash equivalents ​ 30,924 ​ 29,823 Other assets ​ ​ 226,578 ​ 172,941 Total assets $ 2,204,838 $ 2,103,845 ​ ​ ​ ​ ​ ​ ​ Third party debt, net ​ $ 1,194,684 ​ $ 1,148,048 Accounts payable and accrued liabilities ​ ​ 49,352 ​ ​ 55,114 Total liabilities ​ 1,244,036 ​ 1,203,162 Total equity $ 960,802 $ 900,683 ​ Combined summary financial information relating to the unconsolidated joint ventures’ and partnerships’ operations (not just our proportionate share) is presented below for the three and nine months ended September 30, 2020 and 2019 ( dollars in thousands ) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2020 2019 2020 2019 Total revenues $ 36,335 $ 75,378 $ 114,961 $ 233,836 Property operating expenses ​ 16,697 ​ 27,505 ​ 46,462 ​ 87,073 Real estate depreciation and amortization ​ 16,929 ​ 26,027 ​ 50,085 ​ 83,661 Operating income/(loss) ​ 2,709 ​ ​ 21,846 ​ 18,414 ​ ​ 63,102 Interest expense ​ ( 9,955 ) ​ ( 20,779 ) ​ ( 30,451 ) ​ ( 64,309 ) Gain/(loss) on sale of property ​ ​ — ​ ​ 97,201 ​ ​ — ​ ​ 115,558 Net unrealized gain/(loss) on held investments ​ ​ ( 17 ) ​ ​ 25,669 ​ ​ 29,295 ​ ​ 27,191 Other income/(loss) ​ ​ 18 ​ ​ 82 ​ ​ 127 ​ ​ 194 Net income/(loss) $ ( 7,245 ) $ 124,019 $ 17,385 $ 141,736 ​ ​ 6. LEASES Lessee - Ground Leases UDR owns six communities that are subject to ground leases, under which UDR is the lessee, expiring between 2043 and 2103, inclusive of extension options we are reasonably certain will be exercised. All of these leases are classified as operating leases through the lease term expiration based on our election of the practical expedient provided by the leasing standard. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the remaining lease term. We currently do not hold any finance leases. The Company also elected the short-term lease exception provided by the leasing standard and therefore only recognizes right-of-use assets and lease liabilities for leases with a term greater than one year. No leases qualified for the short-term lease exception during the three and nine months ended September 30, 2020 and 2019. As of September 30, 2020, the Operating lease right-of-use assets was $ 201.8 million and the Operating lease liabilities was $ 196.3 million on our Consolidated Balance Sheet related to our ground leases. The value of the Operating lease right-of-use assets exceeds the value of the Operating lease liabilities due to prepaid lease payments and intangible assets for ground leases acquired in the purchase of real estate. The calculation of these amounts includes minimum lease payments over the remaining lease term (described further in the table below). Variable lease payments are excluded from the right-of-use assets and lease liabilities and are recognized in earnings in the period in which the obligation for those payments is incurred. 23 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 As the discount rate implicit in the leases was not readily determinable, we determined the discount rate for these leases utilizing the Company’s incremental borrowing rate at a portfolio level, adjusted for the remaining lease term, and the form of underlying collateral. The weighted average remaining lease term for these leases was 44.1 years at September 30, 2020 and the weighted average discount rate was 5.0 % at September 30, 2020. Future minimum lease payments and total operating lease liabilities from our ground leases as of September 30, 2020 are as follows (dollars in thousands): ​ ​ ​ ​ ​ ​ Ground Leases 2020 ​ $ 3,109 2021 ​ ​ 12,442 2022 ​ ​ 12,442 2023 ​ ​ 12,442 2024 ​ ​ 12,442 Thereafter ​ ​ 455,221 Total future minimum lease payments (undiscounted) ​ ​ 508,098 Difference between future undiscounted cash flows and discounted cash flows ​ ​ ( 311,752 ) Total operating lease liabilities (discounted) ​ $ 196,346 ​ For purposes of recognizing our ground lease contracts, the Company uses the minimum lease payments, if stated in the agreement. For ground lease agreements where there is a rent reset provision based on a change in an index or a rate (i.e., changes in fair market rental rates or changes in the consumer price index) but that does not include a specified minimum lease payment, the Company uses the current rent over the remainder of the lease term. If there is a contingency upon which some or all of the variable lease payments that will be paid over the remainder of the lease term are based, which is resolved such that those payments now meet the definition of lease payments, the Company will remeasure the right-of-use asset and lease liability on the reset date. The components of operating lease expenses were as follows (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ ​ 2020 ​ 2019 ​ 2020 ​ 2019 Lease expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contractual lease expense ​ $ 3,217 ​ $ 1,954 ​ $ 9,603 ​ $ 6,232 Variable lease expense (a) ​ ​ 33 ​ ​ 187 ​ ​ 120 ​ ​ 469 Total operating lease expense (b)(c) ​ $ 3,250 ​ $ 2,141 ​ $ 9,723 ​ $ 6,701 (a) Variable lease expense includes adjustments such as changes in the consumer price index and payments based on a percentage of income of the lessee. (b) Lease expense is reported within the line item Other operating expenses on the Consolidated Statements of Operations. (c) For the nine months ended September 30, 2020, Operating lease right-of-use assets and Operating lease liabilities amortized by $ 2.5 million and $ 2.2 million, respectively, and for the nine months ended September 30, 2019 Operating lease right-of-use assets and Operating lease liabilities amortized by $ 0.6 million and $ 0.3 million, respectively. Due to the net impact of the amortization, the Company recorded $ 0.1 million and $ 0.1 million of total operating lease expense during the three months ended September 30, 2020 and 2019, respectively, and $ 0.3 million and $ 0.3 million of total operating lease expense during the nine months ended September 30, 2020 and 2019, respectively. ​ Lessor - Apartment Home, Retail and Commercial Space Leases ​ UDR’s communities and retail and commercial space are leased to tenants under operating leases. As of September 30, 2020, our apartment home leases generally have initial terms of 12 months or less and represent approximately 97.5 % of our total lease revenue. As of September 30, 2020, our retail and commercial space leases 24 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 generally have initial terms of between 5 and 15 years and represent approximately 2.5 % of our total lease revenue. Our apartment home leases are generally renewable at the end of the lease term, subject to potential increases in rental rates, and our retail and commercial space leases generally have renewal options, subject to associated increases in rental rates due to market based or fixed price renewal options and certain other conditions. (See Note 14, Reportable Segments for further discussion around our major revenue streams and disaggregation of our revenue.) ​ Future minimum lease payments from our retail and commercial leases as of September 30, 2020 are as follows (dollars in thousands): ​ ​ ​ ​ ​ ​ Retail and Commercial Leases 2020 ​ $ 5,275 2021 ​ ​ 22,533 2022 ​ ​ 20,692 2023 ​ ​ 19,257 2024 ​ ​ 17,528 Thereafter ​ ​ 81,856 Total future minimum lease payments (a) ​ $ 167,141 (a) We have excluded our apartment home leases from this table as our apartment home leases generally have initial terms of 12 months or less. Certain of our leases with retail and commercial tenants provide for the payment by the lessee of additional variable rent based on a percentage of the tenant’s revenue. The amounts shown in the table above do not include these variable percentage rents. The Company recorded variable percentage rents of less than $ 0.1 million and $ 0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $ 0.1 million and $ 0.3 million during the nine months ended September 30, 2020 and 2019, respectively. ​ ​ ​ 25 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 7. SECURED AND UNSECURED DEBT, NET The following is a summary of our secured and unsecured debt at September 30, 2020 and December 31, 2019 ( dollars in thousands ): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal Outstanding ​ As of September 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Average ​ Number of ​ ​ September 30, ​ December 31, ​ Interest ​ Years to ​ Communities ​ 2020 2019 Rate Maturity Encumbered Secured Debt: ​ ​ ​ ​ ​ ​ ​ Fixed Rate Debt ​ ​ Mortgage notes payable (a) ​ $ 892,291 ​ $ 884,869 3.36 % 7.1 13 Credit facilities (b) ​ — ​ 204,590 — % — — Deferred financing costs and other non-cash adjustments (b) ​ 13,866 ​ 33,046 Total fixed rate secured debt, net ​ 906,157 ​ 1,122,505 3.36 % 7.1 13 Variable Rate Debt ​ ​ Tax-exempt secured notes payable (c) ​ 27,000 ​ 27,000 0.77 % 11.5 1 Deferred financing costs ​ ( 70 ) ​ ( 64 ) Total variable rate secured debt, net ​ 26,930 ​ 26,936 0.77 % 11.5 1 Total Secured Debt, net ​ 933,087 ​ 1,149,441 3.28 % 7.3 14 Unsecured Debt: ​ ​ Variable Rate Debt ​ ​ Borrowings outstanding under unsecured credit facility due January 2023 (d) (n) ​ — ​ — — % 2.3 Borrowings outstanding under unsecured commercial paper program due October 2020 (e) (n) ​ ​ 230,000 ​ ​ 300,000 ​ 0.30 % 0.1 ​ ​ Borrowings outstanding under unsecured working capital credit facility due January 2021 (f) ​ 22,086 ​ 16,583 0.97 % 1.3 Term Loan due September 2023 (d) (n) ​ 35,000 ​ 35,000 1.06 % 3.0 Fixed Rate Debt ​ ​ Term Loan due September 2023 (d) (n) ​ ​ 315,000 ​ 315,000 2.55 % 3.0 ​ ​ 3.75% Medium-Term Notes due July 2024 (net of discounts of $ 239 and $ 470 , respectively) (g) (n) ​ 182,867 ​ 299,530 3.69 % 3.8 8.50% Debentures due September 2024 ​ 15,644 ​ 15,644 8.50 % 4.0 4.00% Medium-Term Notes due October 2025 (net of discounts of $ 344 and $ 396 , respectively) (h) (n) ​ 299,656 ​ 299,604 4.53 % 5.0 2.95% Medium-Term Notes due September 2026 (n) ​ 300,000 ​ 300,000 2.95 % 5.9 3.50% Medium-Term Notes due July 2027 (net of discounts of $ 476 and $ 529 , respectively) (n) ​ ​ 299,524 ​ ​ 299,471 ​ 3.50 % 6.8 ​ ​ 3.50% Medium-Term Notes due January 2028 (net of discounts of $ 865 and $ 954 , respectively) (n) ​ ​ 299,135 ​ ​ 299,046 ​ 3.50 % 7.3 ​ ​ 4.40% Medium-Term Notes due January 2029 (net of discounts of $ 5 and $ 5 , respectively) (i) (n) ​ ​ 299,995 ​ ​ 299,995 ​ 4.27 % 8.3 ​ ​ 3.20% Medium-Term Notes due January 2030 (net of premiums of $ 12,756 and $ 2,281 , respectively) (j) (n) ​ ​ 612,756 ​ ​ 402,281 ​ 3.32 % 9.3 ​ ​ 3.00% Medium-Term Notes due August 2031 (net of discounts of $ 1,051 and $ 1,123 , respectively) (k) (n) ​ ​ 398,949 ​ ​ 398,877 ​ 3.01 % 10.9 ​ ​ 2.10% Medium-Term Notes due August 2032 (net of discounts of $ 417 and $ 0 , respectively) (l) (n) ​ ​ 399,583 ​ ​ — ​ 2.10 % 11.8 ​ ​ 3.10% Medium-Term Notes due November 2034 (net of discounts of $ 1,243 and $ 1,309 , respectively) (m) (n) ​ ​ 298,757 ​ ​ 298,691 ​ 3.13 % 14.1 ​ ​ Other ​ 11 ​ 13 Deferred financing costs ​ ( 24,404 ) ​ ( 21,652 ) Total Unsecured Debt, net ​ 3,984,559 ​ 3,558,083 3.08 % 7.7 Total Debt, net ​ $ 4,917,646 ​ $ 4,707,524 3.01 % 7.6 ​ 26 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 For purposes of classification of the above table, variable rate debt with a derivative financial instrument designated as a cash flow hedge is deemed as fixed rate debt due to the Company having effectively established a fixed interest rate for the underlying debt instrument. Our secured debt instruments generally feature either monthly interest and principal or monthly interest-only payments with balloon payments due at maturity. As of September 30, 2020, secured debt encumbered $ 1.5 billion or 11.6 % of UDR’s total real estate owned based upon gross book value ($ 11.4 billion or 88.4 % of UDR’s real estate owned based on gross book value is unencumbered). (a) At September 30, 2020, fixed rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from July 2023 through February 2031 and carry interest rates ranging from 2.62 % to 4.12 %. In July 2020, the Company refinanced a 4.35 % fixed rate mortgage note payable due in November 2020 with a balance of $ 79.3 million with a $ 160.9 million, 2.62 % fixed rate mortgage note payable due in 2031. The Company incurred net extinguishment costs of $ 0.5 million in connection with the refinancing. The incremental proceeds were used to reduce the Company’s borrowings under its unsecured commercial paper program. ​ During the three months ended September 30, 2020, the Company prepaid $ 43.9 million of its fixed rate mortgage notes payable with proceeds from the issuance of senior unsecured medium-term notes. The Company incurred net extinguishment costs of $ 2.2 million during both the three and nine months ended September 30, 2020, which was included in Interest expense on the Consolidated Statements of Operations. ​ The Company will from time to time acquire properties subject to fixed rate debt instruments. In those situations, the Company records the debt at its estimated fair value and amortizes any difference between the fair value and par value to interest expense over the life of the underlying debt instrument. (b) During the three months ended September 30, 2020, the Company prepaid the $ 201.9 million outstanding balance under its secured credit facility with New York Life with proceeds from the issuance of senior unsecured medium-term notes. The Company incurred net extinguishment costs of $ 9.0 million during both the three and nine months ended September 30, 2020, which was included in Interest expense on the Consolidated Statements of Operations. ​ During the three months ended September 30, 2020 and 2019, the Company had $ 14.0 million and $ 0.6 million, respectively, and during the nine months ended September 30, 2020 and 2019, the Company had $ 19.1 million and $ 1.7 million, respectively, of amortization of the fair market adjustment of debt assumed in the acquisition of properties inclusive of its fixed rate mortgage notes payable and credit facilities, which was included in Interest expense on the Consolidated Statements of Operations. The unamortized fair market adjustment was a net premium of $ 16.2 million and $ 35.3 million at September 30, 2020 and December 31, 2019, respectively. ​ (c) The variable rate mortgage note payable for $ 27.0 million secures a tax-exempt housing bond issue that matures in March 2032. Interest on this note is payable in monthly installments. As of September 30, 2020, the variable interest rate on the mortgage note was 0.77 %. (d) The Company has a $ 1.1 billion unsecured revolving credit facility (the “Revolving Credit Facility”) and a $ 350.0 million unsecured term loan (the “Term Loan”). The credit agreement for these facilities (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 $ 2.0 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, 2023, with two six-month extension options, subject to certain conditions. The Term Loan has a scheduled maturity date of September 30, 2023. Based on the Company’s current credit rating, the Revolving Credit Facility has an interest rate equal to LIBOR plus a margin of 82.5 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 90 basis points. Depending on the Company’s credit rating, the margin under the Revolving 27 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 Credit Facility ranges from 75 to 145 basis points, the facility fee ranges from 10 to 30 basis points, and the margin under the Term Loan ranges from 80 to 165 basis points. The Company previously entered into an interest rate swap to hedge against the interest rate risk on the Term Loan. As of September 30, 2020, the all-in weighted average interest rate, inclusive of the impact of the interest rate swap, was 2.55 % . ​ The Credit Agreement contains customary representations and warranties and financial and other affirmative and negative covenants. The Credit Agreement also includes customary events of default, in certain cases subject to customary periods to cure. The occurrence of an event of default, following the applicable cure period, would permit the lenders to, among other things, declare the unpaid principal, accrued and unpaid interest and all other amounts payable under the Credit Agreement to be immediately due and payable. The following is a summary of short-term bank borrowings under the Revolving Credit Facility at September 30, 2020 and December 31, 2019 (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2020 2019 ​ Total revolving credit facility ​ $ 1,100,000 ​ $ 1,100,000 ​ Borrowings outstanding at end of period (1) ​ — ​ — ​ Weighted average daily borrowings during the period ended ​ 56,350 ​ 55 ​ Maximum daily borrowings during the period ended ​ 375,000 ​ 20,000 ​ Weighted average interest rate during the period ended ​ 1.4 % 2.6 % Interest rate at end of the period ​ — % — % (1) Excludes $ 2.9 million and $ 2.9 million of letters of credit at September 30, 2020 and December 31, 2019, respectively . (e) The Company has an unsecured commercial paper program. Under the terms of the program, the Company may issue unsecured commercial paper up to a maximum aggregate amount outstanding of $ 500.0 million. The notes are sold under customary terms in the United States commercial paper market and rank pari passu with all of the Company’s other unsecured indebtedness. The notes are fully and unconditionally guaranteed by the Operating Partnership. The following is a summary of short-term bank borrowings under the unsecured commercial paper program at September 30, 2020 and December 31, 2019 (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2020 ​ 2019 Total unsecured commercial paper program $ 500,000 ​ $ 500,000 ​ Borrowings outstanding at end of period ​ 230,000 ​ 300,000 ​ Weighted average daily borrowings during the period ended ​ 212,682 ​ 173,353 ​ Maximum daily borrowings during the period ended ​ 500,000 ​ 435,000 ​ Weighted average interest rate during the period ended ​ 1.2 % 2.5 % Interest rate at end of the period ​ 0.3 % 2.0 % ​ (f) The Company has a working capital credit facility, which provides for a $ 75.0 million unsecured revolving credit facility (the “Working Capital Credit Facility”) with a previously scheduled maturity date of January 15, 2021. Based on the Company’s current credit rating, the Working Capital Credit Facility has an interest rate equal to LIBOR plus a margin of 82.5 basis points. Depending on the Company’s credit rating, the margin ranges from 75 to 145 basis points. In July 2020, the Company extended its working capital credit facility maturity date from January 15, 2021 to January 14, 2022. 28 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 The following is a summary of short-term bank borrowings under the Working Capital Credit Facility at September 30, 2020 and December 31, 2019 (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2020 ​ 2019 Total working capital credit facility ​ $ 75,000 ​ $ 75,000 ​ Borrowings outstanding at end of period ​ 22,086 ​ 16,583 ​ Weighted average daily borrowings during the period ended ​ 21,503 ​ 23,487 ​ Maximum daily borrowings during the period ended ​ 54,974 ​ 66,170 ​ Weighted average interest rate during the period ended ​ 1.5 % 3.1 % Interest rate at end of the period ​ 1.0 % 2.6 % ​ (g) The Company previously entered into forward starting interest rate swaps to hedge against interest rate risk on $ 100.0 million of this debt. The all-in weighted average interest rate, inclusive of the impact of these interest rate swaps, was 3.69 %. In July 2020, the Company announced that it commenced a cash tender offer for any and all of its outstanding 3.75 % unsecured medium-term notes due July 2024 (the “2024 Notes”). Pursuant to the tender offer, on July 21, 2020, the Company completed the purchase of $ 116.9 million aggregate principal amount of the 2024 Notes, or 39.0 % of the $ 300.0 million aggregate principal amount of the 2024 Notes. The tender offer consideration was $ 1,101.92 for each $1,000 principal amount of the 2024 Notes, plus accrued and unpaid interest to, but not including, July 21, 2020 . The Company incurred net extinguishment costs of $ 12.8 million during both the three and nine months ended September 30, 2020, which was included in Interest expense on the Consolidated Statements of Operations. (h) The Company previously entered into forward starting interest rate swaps to hedge against interest rate risk on $ 200.0 million of this debt. The all-in weighted average interest rate, inclusive of the impact of these interest rate swaps, was 4.53 %. (i) The Company previously entered into forward starting interest rate swaps to hedge against interest rate risk on $ 150.0 million of the initial $ 300.0 million issued. The all-in weighted average interest rate, inclusive of the impact of these interest rate swaps, was 4.27 %. (j) The Company previously entered into forward starting interest rate swaps to hedge against the interest rate risk of this debt. In connection with the additional $ 100.0 million issued in October 2019, the Company entered into treasury lock agreements to hedge against interest rate risk on all of this debt. In February 2020, the Company issued an additional $ 200.0 million of 3.20 % senior unsecured medium-term notes due 2030. Interest is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2020. The notes were priced at 105.660 % of the principal amount at issuance. This was a further issuance of the 2030 notes, and forms a single series with, the $ 300.0 million aggregate principal amount of the Company’s 3.20 % notes due 2030 that were issued in July 2019 and the $ 100.0 million aggregate principal amount of the Company’s 3.20 % notes due 2030 that were issued in October 2019. As of the completion of the offerings, the aggregate principal amount of outstanding 2030 notes was $ 600.0 million. The all-in weighted average interest rate, inclusive of the impact of the forward starting swaps and treasury locks, was 3.32 % for the 2030 notes. (k) The Company entered into a treasury lock agreement to hedge against interest rate risk on $ 150.0 million of this debt. The all-in weighted average interest rate, inclusive of the impact of the treasury lock, was 3.01 %. (l) In July 2020, the Company issued $ 400.0 million of 2.10 % senior unsecured medium-term notes due August 1, 2032. Interest is payable semi-annually in arrears on February 1 and August 1. The notes were priced at 99.894 % of the principal amount at issuance. The Company used a portion of the net proceeds to fund the purchase of the 2024 Notes accepted pursuant to the tender offer described above and to prepay $ 245.8 million of 4.64 % secured debt due in 2023 . The combined prepayment and make-whole amounts for the purchase of the 2024 Notes and the prepayment of the secured debt due in 2023, inclusive of the acceleration of fair market value adjustments originally recorded on secured 29 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 debt assumed in property acquisitions, totaled approximately $ 24.0 million, which was included in Interest expense on the Consolidated Statements of Operations. (m) The Company previously entered into forward starting interest rate swaps to hedge against the interest rate risk of this debt. The all-in weighted average interest rate, inclusive of the impact of these interest rate swaps, was 3.13 % . (n) The Operating Partnership is the guarantor of this debt. The aggregate maturities, including amortizing principal payments on secured and unsecured debt, of total debt for the next ten calendar years subsequent to September 30, 2020 are as follows (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Fixed Total Variable Total Total Total Year ​ Secured Debt ​ Secured Debt ​ Secured Debt ​ Unsecured Debt ​ Debt 2020 ​ $ 655 ​ $ — ​ $ 655 ​ $ 230,000 (a) $ 230,655 2021 ​ ​ 2,680 ​ ​ — ​ ​ 2,680 ​ ​ — ​ ​ 2,680 2022 ​ 2,788 ​ — ​ 2,788 ​ 22,086 ​ 24,874 2023 ​ 65,038 ​ — ​ 65,038 ​ 350,000 ​ 415,038 2024 ​ 95,280 ​ — ​ 95,280 ​ 198,750 ​ 294,030 2025 ​ 173,189 ​ — ​ 173,189 ​ 300,000 ​ 473,189 2026 ​ 51,070 ​ — ​ 51,070 ​ 300,000 ​ 351,070 2027 ​ 1,111 ​ — ​ 1,111 ​ 300,000 ​ 301,111 2028 ​ 122,466 ​ — ​ 122,466 ​ 300,000 ​ 422,466 2029 ​ 144,584 ​ — ​ 144,584 ​ 300,000 ​ 444,584 Thereafter ​ 233,430 ​ 27,000 ​ 260,430 ​ 1,700,000 ​ 1,960,430 Subtotal ​ 892,291 ​ 27,000 ​ 919,291 ​ 4,000,836 ​ 4,920,127 Non-cash (b) ​ 13,866 ​ ( 70 ) ​ 13,796 ​ ( 16,277 ) ​ ( 2,481 ) Total ​ $ 906,157 ​ $ 26,930 ​ $ 933,087 ​ $ 3,984,559 ​ $ 4,917,646 (a) All unsecured debt due in the remainder of 2020 is related to the Company’s commercial paper program. (b) Includes the unamortized balance of fair market value adjustments, premiums/discounts and deferred financing costs . The Company amortized $ 1.1 million and $ 1.1 million, respectively, during the three months ended September 30, 2020 and 2019, and $ 3.2 million and $ 3.1 million, respectively, during the nine months ended September 30, 2020 and 2019, of deferred financing costs into Interest expense. We were in compliance with the covenants of our debt instruments at September 30, 2020. ​ 30 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 8. INCOME/(LOSS) PER SHARE The following table sets forth the computation of basic and diluted income/(loss) per share for the periods presented (dollars and shares in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ ​ 2020 2019 2020 2019 ​ Numerator for income/(loss) per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income/(loss) ​ $ ( 27,217 ) ​ $ 29,422 ​ $ 40,419 ​ $ 94,342 ​ Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership ​ 1,990 ​ ( 2,162 ) ​ ( 2,614 ) ​ ( 6,871 ) ​ Net (income)/loss attributable to noncontrolling interests ​ ( 31 ) ​ ( 56 ) ​ ( 71 ) ​ ( 145 ) ​ Net income/(loss) attributable to UDR, Inc. ​ ( 25,258 ) ​ 27,204 ​ 37,734 ​ 87,326 ​ Distributions to preferred stockholders — Series E (Convertible) ​ ( 1,051 ) ​ ( 1,031 ) ​ ( 3,179 ) ​ ( 3,073 ) ​ Income/(loss) attributable to common stockholders - basic and diluted ​ $ ( 26,309 ) ​ $ 26,173 ​ $ 34,555 ​ $ 84,253 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Denominator for income/(loss) per share: ​ ​ ​ ​ ​ Weighted average common shares outstanding ​ 294,972 ​ 288,957 ​ 294,891 ​ 282,866 ​ Non-vested restricted stock awards ​ ( 259 ) ​ ( 251 ) ​ ( 264 ) ​ ( 268 ) ​ Denominator for basic income/(loss) per share ​ 294,713 ​ 288,706 ​ 294,627 ​ 282,598 ​ Incremental shares issuable from assumed conversion of unvested LTIP Units and unvested restricted stock ​ 290 ​ 823 ​ 311 ​ 694 ​ Denominator for diluted income/(loss) per share ​ 295,003 ​ 289,529 ​ 294,938 ​ 283,292 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income/(loss) per weighted average common share: ​ ​ ​ ​ ​ Basic ​ $ ( 0.09 ) ​ $ 0.09 ​ $ 0.12 ​ $ 0.30 ​ Diluted ​ $ ( 0.09 ) ​ $ 0.09 ​ $ 0.12 ​ $ 0.30 ​ ​ Basic income/(loss) per common share is computed based upon the weighted average number of common shares outstanding. Diluted income/(loss) per common share is computed based upon the weighted average number of common shares outstanding plus the common shares issuable from the assumed conversion of the OP Units and DownREIT Units, convertible preferred stock, stock options, unvested long-term incentive plan units (“LTIP Units”), unvested restricted stock and continuous equity program forward sales agreements. Only those instruments having a dilutive impact on our basic income/(loss) per share are included in diluted income/(loss) per share during the periods. For the three and nine months ended September 30, 2020 and 2019, the effect of the conversion of the OP Units, DownREIT Units, LTIP Units, the Company’s Series E preferred stock and shares issuable upon settlement of forward sales agreements was not dilutive and therefore not included in the above calculation. In July 2017, 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 April 2017, which replaced the prior at-the-market equity offering program entered into in April 2012. During the nine months ended September 30, 2020, the Company did not sell any shares of common stock through its ATM program. As of September 30, 2020, we had 11.7 million shares of common stock available for future issuance under the ATM program, including an aggregate of 2.1 million shares subject to the forward sales agreements described below. In connection with any forward sales agreement under the Company’s ATM program, the relevant forward purchasers will borrow from third parties and, through the relevant sales agent, acting in its role as forward seller, sell a number of shares of the Company’s common stock equal to the number of shares underlying the agreement. The Company does not initially receive any proceeds from any sale of borrowed shares by the forward seller. ​ During the nine months ended September 30, 2020, the Company entered into forward sales agreements under its ATM program for a total of 2.1 million shares of common stock at a weighted average initial forward price per share of $ 49.56 . The initial forward price per share to be received by the Company upon settlement will be determined on the 31 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 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 September 30, 2020, no shares under the forward sales agreements have been settled. The final dates by which shares sold under the forward sales agreements must be settled range between February 12, 2021 and March 3, 2021. ​ The Company generally has the ability to determine the dates and method of settlement (i.e., gross physical settlement, net share settlement or cash settlement), subject to certain conditions and the right of the counterparty to accelerate settlement under certain circumstances. The Company currently expects to fully physically settle each forward sales agreement with the relevant forward purchaser on one or more dates specified by the Company on or prior to the maturity date of that particular forward sales agreement, in which case the Company expects to receive aggregate net cash proceeds at settlement equal to the number of shares underlying the particular forward sales agreement multiplied by the relevant forward sale price. However, subject to certain exceptions, the Company may also elect, in its discretion, to cash settle or net share settle a particular forward sales agreement, in which case the Company may not receive any proceeds (in the case of cash settlement) or will not receive any proceeds (in the case of net share settlement), and the Company may owe cash (in the case of cash settlement) or shares of UDR common stock (in the case of net share settlement) to the relevant forward purchaser. ​ During the three and nine months ended September 30, 2020, the Company repurchased 0.6 million shares of its common stock at an average price of $ 33.11 per share for total consideration of approximately $ 19.8 million under its share repurchase program. ​ The following table sets forth the additional shares of common stock issuable, by equity instrument, if such equity instrument were converted to or redeemed for common stock for each of the three and nine months ended September 30, 2020 and 2019 (in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ ​ ​ 2020 ​ 2019 ​ 2020 ​ 2019 ​ OP/DownREIT Units 22,321 22,211 22,312 23,068 Convertible preferred stock 2,918 3,011 2,960 3,011 Unvested LTIP Units and unvested restricted stock 290 823 311 694 ​ ​ 9. NONCONTROLLING INTERESTS Redeemable Noncontrolling Interests in the Operating Partnership and DownREIT Partnership Interests in the Operating Partnership and the DownREIT Partnership held by limited partners are represented by OP Units and DownREIT Units, respectively. The income is allocated to holders of OP Units/DownREIT Units based upon net income attributable to common stockholders and the weighted average number of OP Units/DownREIT Units outstanding to total common shares plus OP Units/DownREIT Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to noncontrolling interests in accordance with the terms of the partnership agreements of the Operating Partnership and the DownREIT Partnership. Limited partners of the Operating Partnership and the DownREIT Partnership have the right to require such partnership to redeem all or a portion of the OP Units/DownREIT Units held by the limited partner at a redemption price equal to and in the form of the Cash Amount (as defined in the partnership agreement of the Operating Partnership or the DownREIT Partnership, as applicable), provided that such OP Units/DownREIT Units have been outstanding for at least one year , subject to certain exceptions. UDR, as the general partner of the Operating Partnership and the DownREIT Partnership may, in its sole discretion, purchase the OP Units/DownREIT Units by paying to the limited partner either the Cash Amount or the REIT Share Amount (generally one share of common stock of the Company for each OP Unit/DownREIT Unit), as defined in the partnership agreement of the Operating Partnership or the DownREIT Partnership, as applicable. Accordingly, the Company records the OP Units/DownREIT Units outside of permanent equity and reports the OP Units/DownREIT Units at their redemption value using the Company’s stock price at each balance sheet date. 32 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 The following table sets forth redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership for the following period ( dollars in thousands ): ​ ​ ​ ​ ​ Redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership, December 31, 2019 $ 1,018,665 ​ Mark-to-market adjustment to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership ​ ( 247,374 ) ​ Conversion of OP Units/DownREIT Units to Common Stock ​ ( 11,623 ) ​ Net income/(loss) attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership ​ 2,614 ​ Distributions to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership ​ ( 25,836 ) ​ Vesting of Long-Term Incentive Plan Units ​ ​ 23,501 ​ Allocation of other comprehensive income/(loss) ​ 39 ​ Redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership, September 30, 2020 ​ $ 759,986 ​ ​ Noncontrolling Interests Noncontrolling interests represent interests of unrelated partners and unvested LTIP Units in certain consolidated affiliates, and are presented as part of equity on the Consolidated Balance Sheets since these interests are not redeemable. Net (income)/loss attributable to noncontrolling interests was less than $( 0.1 ) million and $( 0.1 ) million during the three months ended September 30, 2020 and 2019, respectively, and $( 0.1 ) million and $( 0.1 ) million during the nine months ended September 30, 2020 and 2019, respectively. The Company grants LTIP Units to certain employees and non-employee directors. The LTIP Units represent an ownership interest in the Operating Partnership and have vesting terms of between one and three years , specific to the individual grants. Noncontrolling interests related to long-term incentive plan units represent the unvested LTIP Units of these employees and non-employee directors in the Operating Partnership. The net income/(loss) allocated to the unvested LTIP Units are included in Net (income)/loss attributable to noncontrolling interests on the Consolidated Statements of Operations. 10. FAIR VALUE OF DERIVATIVES AND FINANCIAL INSTRUMENTS Fair value is based on the price that would be received to sell an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level valuation hierarchy prioritizes observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below: ● Level 1 — Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. ● Level 2 — Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data. ● Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. 33 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 The estimated fair values of the Company’s financial instruments either recorded or disclosed on a recurring basis as of September 30, 2020 and December 31, 2019, are summarized as follows (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value at September 30, 2020, Using ​ ​ Total ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ Carrying ​ ​ ​ Prices in ​ ​ ​ ​ ​ ​ Amount in ​ ​ ​ Active ​ ​ ​ ​ ​ ​ ​ Statement of ​ ​ ​ ​ Markets ​ Significant ​ ​ ​ ​ ​ Financial ​ Fair Value ​ for Identical ​ Other ​ Significant ​ ​ Position at ​ Estimate at ​ Assets or ​ Observable ​ Unobservable ​ ​ September 30, ​ September 30, ​ Liabilities ​ Inputs ​ Inputs ​ ​ 2020 (a) ​ 2020 ​ (Level 1) ​ (Level 2) ​ (Level 3) Description: ​ ​ ​ ​ ​ ​ Notes receivable, net (b) ​ $ 156,996 ​ $ 168,122 ​ $ — ​ $ — ​ $ 168,122 Derivatives - Interest rate contracts (b) ​ 2 ​ 2 ​ — ​ 2 ​ — Total assets ​ $ 156,998 ​ $ 168,124 ​ $ — ​ $ 2 ​ $ 168,122 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivatives - Interest rate contracts (c) ​ $ 1,236 ​ $ 1,236 ​ $ — ​ $ 1,236 ​ $ — Secured debt instruments - fixed rate: (d) ​ ​ ​ ​ ​ ​ Mortgage notes payable ​ ​ 908,493 ​ ​ 959,213 ​ ​ — ​ ​ — ​ ​ 959,213 Secured debt instruments - variable rate: (d) ​ ​ ​ ​ ​ ​ Tax-exempt secured notes payable ​ 27,000 ​ 27,000 ​ — ​ — ​ 27,000 Unsecured debt instruments: (d) ​ ​ ​ ​ ​ ​ Working capital credit facility ​ ​ 22,086 ​ ​ 22,086 ​ ​ — ​ ​ — ​ ​ 22,086 Commercial paper program ​ ​ 230,000 ​ ​ 230,000 ​ ​ — ​ ​ — ​ ​ 230,000 Unsecured notes ​ ​ 3,756,877 ​ ​ 4,094,384 ​ ​ — ​ ​ — ​ ​ 4,094,384 Total liabilities ​ $ 4,945,692 ​ $ 5,333,919 ​ $ — ​ $ 1,236 ​ $ 5,332,683 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership (e) ​ $ 759,986 ​ $ 759,986 ​ $ — ​ $ 759,986 ​ $ — ​ 34 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value at December 31, 2019, Using ​ ​ Total ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ Carrying ​ ​ ​ Prices in ​ ​ ​ ​ ​ ​ Amount in ​ ​ ​ Active ​ ​ ​ ​ ​ ​ Statement of ​ ​ ​ Markets ​ Significant ​ ​ ​ ​ Financial ​ Fair Value ​ for Identical ​ Other ​ Significant ​ ​ Position at ​ Estimate at ​ Assets or ​ Observable ​ Unobservable ​ ​ December 31, ​ December 31, ​ Liabilities ​ Inputs ​ Inputs ​ 2019 (a) ​ 2019 ​ (Level 1) ​ (Level 2) ​ (Level 3) Description: ​ ​ ​ ​ ​ ​ Notes receivable, net (b) ​ $ 153,650 ​ $ 160,197 ​ $ — ​ $ — ​ $ 160,197 Derivatives - Interest rate contracts (c) ​ 6 ​ 6 ​ — ​ 6 ​ — Total assets ​ $ 153,656 ​ $ 160,203 ​ $ — ​ $ 6 ​ $ 160,197 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivatives - Interest rate contracts (c) ​ $ 142 ​ $ 142 ​ $ — ​ $ 142 ​ $ — Secured debt instruments - fixed rate: (d) ​ ​ ​ ​ ​ ​ Mortgage notes payable ​ ​ 906,228 ​ ​ 898,329 ​ ​ — ​ ​ — ​ ​ 898,329 Credit facilities ​ 218,490 ​ 213,661 ​ — ​ — ​ 213,661 Secured debt instruments - variable rate: (d) ​ ​ ​ ​ ​ ​ Tax-exempt secured notes payable ​ 27,000 ​ 27,000 ​ — ​ — ​ 27,000 Unsecured debt instruments: (d) ​ ​ ​ ​ ​ ​ ​ Working capital credit facility ​ ​ 16,583 ​ ​ 16,583 ​ ​ — ​ ​ — ​ ​ 16,583 Commercial paper program ​ ​ 300,000 ​ ​ 300,000 ​ ​ — ​ ​ — ​ ​ 300,000 Unsecured notes ​ ​ 3,263,152 ​ ​ 3,397,622 ​ ​ — ​ ​ — ​ ​ 3,397,622 Total liabilities ​ $ 4,731,595 ​ $ 4,853,337 ​ $ — ​ $ 142 ​ $ 4,853,195 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership (e) ​ $ 1,018,665 ​ $ 1,018,665 ​ $ — ​ $ 1,018,665 ​ $ — (a) Balances include fair market value adjustments and exclude deferred financing costs. (b) See Note 2, Significant Accounting Policies . (c) See Note 11, Derivatives and Hedging Activity . (d) See Note 7, Secured and Unsecured Debt, Net . (e) See Note 9, Noncontrolling Interests. There were no transfers into or out of any of the levels of the fair value hierarchy during the nine months ended September 30, 2020. Financial Instruments Carried at Fair Value The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair values of interest rate options are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. 35 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2020 and December 31, 2019, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. In conjunction with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. Redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership have a redemption feature and are marked to their redemption value. The redemption value is based on the fair value of the Company’s common stock at the redemption date, and therefore, is calculated based on the fair value of the Company’s common stock at the balance sheet date. Since the valuation is based on observable inputs such as quoted prices for similar instruments in active markets, redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership are classified as Level 2. Financial Instruments Not Carried at Fair Value At September 30, 2020 and December 31, 2019, the fair values of cash and cash equivalents, restricted cash, accounts receivable, prepaids, real estate taxes payable, accrued interest payable, security deposits and prepaid rent, distributions payable and accounts payable approximated their carrying values because of the short term nature of these instruments. The estimated fair values of other financial instruments, which includes notes receivable and debt instruments, are classified in Level 3 of the fair value hierarchy due to the significant unobservable inputs that are utilized in their respective valuations. 11. DERIVATIVES AND HEDGING ACTIVITY Risk Management Objective of Using Derivatives The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its debt funding and through the use of derivative financial instruments. Specifically, the Company may enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings. Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in Accumulated other comprehensive income/(loss), net on the Consolidated Balance Sheets and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three and nine months ended September 30, 2020 and 2019, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. 36 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 Amounts reported in Accumulated other comprehensive income/(loss), net on the Consolidated Balance Sheets related to derivatives that will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Through September 30, 2021, the Company estimates that an additional $ 2.8 million will be reclassified as an increase to Interest expense . As of September 30, 2020, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk ( dollars in thousands ): ​ ​ ​ ​ ​ ​ ​ Number of ​ Product ​ Instruments ​ Notional Interest rate swaps and caps ​ 2 ​ $ 334,880 ​ Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of GAAP. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. As of September 30, 2020, no derivatives not designated as hedges were held by the Company. Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheet The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 ( dollars in thousands ): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Asset Derivatives ​ Liability Derivatives ​ ​ (included in Other assets ) ​ (included in Other liabilities ) ​ ​ Fair Value at: ​ Fair Value at: ​ ​ September 30, ​ December 31, ​ September 30, ​ December 31, ​ ​ 2020 ​ 2019 ​ 2020 ​ 2019 Derivatives designated as hedging instruments: ​ ​ ​ ​ Interest rate products ​ $ 2 ​ $ 6 ​ $ 1,236 ​ $ 142 ​ Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statements of Operations The tables below present the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 ( dollars in thousands ): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain/(Loss) Recognized in ​ ​ ​ ​ Gain/(Loss) Reclassified ​ Interest expense ​ ​ Unrealized holding gain/(loss) ​ from Accumulated OCI into ​ (Amount Excluded from ​ ​ Recognized in OCI ​ Interest expense ​ Effectiveness Testing) Derivatives in Cash Flow Hedging Relationships 2020 2019 2020 2019 2020 2019 Three Months Ended September 30, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate products ​ $ ( 30 ) ​ $ ( 659 ) ​ $ ( 1,585 ) ​ $ 624 ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate products ​ $ ( 3,241 ) ​ $ ( 7,181 ) ​ $ ( 3,234 ) ​ $ 2,504 ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2020 ​ 2019 ​ 2020 ​ 2019 Total amount of Interest expense presented on the Consolidated Statements of Operations ​ $ 62,268 ​ $ 42,523 ​ $ 140,182 ​ $ 110,482 ​ Credit-risk-related Contingent Features The Company has agreements with its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness. 37 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 The Company has certain agreements with some of its derivative counterparties that contain a provision where, in the event of default by the Company or the counterparty, the right of setoff may be exercised. Any amount payable to one party by the other party may be reduced by its setoff against any amounts payable by the other party. Events that give rise to default by either party may include, but are not limited to, the failure to pay or deliver payment under the derivative agreement, the failure to comply with or perform under the derivative agreement, bankruptcy, a merger without assumption of the derivative agreement, or in a merger, a surviving entity’s creditworthiness is materially weaker than the original party to the derivative agreement. Tabular Disclosure of Offsetting Derivatives The Company has elected not to offset derivative positions on the consolidated financial statements. The tables below present the effect on its financial position had the Company made the election to offset its derivative positions as of September 30, 2020 and December 31, 2019 (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Net Amounts of Gross Amounts Not Offset ​ ​ ​ ​ ​ ​ ​ ​ Amounts ​ Assets ​ in the Consolidated ​ ​ ​ ​ ​ Gross ​ Offset in the ​ Presented in the ​ Balance Sheet ​ ​ ​ ​ ​ Amounts of ​ Consolidated ​ Consolidated ​ ​ ​ ​ Cash ​ ​ ​ ​ ​ Recognized ​ Balance ​ Balance Sheets ​ Financial ​ Collateral ​ ​ ​ Offsetting of Derivative Assets ​ Assets ​ Sheets ​ (a) ​ Instruments Received Net Amount September 30, 2020 ​ $ 2 ​ $ — ​ $ 2 ​ $ — ​ $ — ​ $ 2 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2019 ​ $ 6 ​ $ — ​ $ 6 ​ $ ( 3 ) ​ $ — ​ $ 3 (a) Amounts reconcile to the aggregate fair value of derivative assets in the “Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheets” located in this footnote. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Net Amounts of Gross Amounts Not Offset ​ ​ ​ ​ ​ ​ ​ ​ Amounts ​ Liabilities ​ in the Consolidated ​ ​ ​ ​ ​ Gross ​ Offset in the ​ Presented in the ​ Balance Sheet ​ ​ ​ ​ ​ Amounts of ​ Consolidated ​ Consolidated ​ ​ ​ ​ Cash ​ ​ ​ ​ ​ Recognized ​ Balance ​ Balance Sheets ​ Financial ​ Collateral ​ ​ ​ Offsetting of Derivative Liabilities Liabilities Sheets (a) Instruments Posted Net Amount September 30, 2020 ​ $ 1,236 ​ $ — ​ $ 1,236 ​ $ — ​ $ — ​ $ 1,236 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2019 ​ $ 142 ​ $ — ​ $ 142 ​ $ ( 3 ) ​ $ — ​ $ 139 (a) Amounts reconcile to the aggregate fair value of derivative liabilities in the “Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheets” located in this footnote. ​ ​ 12. STOCK BASED COMPENSATION The Company recognized stock based compensation expense, inclusive of awards granted to our non-employee directors, net of capitalization, of $ 4.3 million and $ 2.7 million during the three months ended September 30, 2020 and 2019, respectively, and $ 15.1 million and $ 13.0 million during the nine months ended September 30, 2020 and 2019, respectively. 38 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 13. COMMITMENTS AND CONTINGENCIES Commitments Real Estate Commitments The following summarizes the Company’s real estate commitments at September 30, 2020 ( dollars in thousands ): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number ​ UDR's ​ UDR's Remaining ​ ​ ​ Properties ​ Investment (a) ​ Commitment ​ Wholly-owned — under development 4 ​ $ 197,823 ​ $ 225,677 Wholly-owned — redevelopment 2 ​ ​ 20,825 ​ ​ 8,425 Joint ventures: ​ ​ Preferred equity investments 1 ​ ​ 13,693 (b) ​ 6,801 (b) Other investments ​ - ​ ​ 21,395 ​ ​ 21,150 ​ Total ​ $ 253,736 ​ $ 262,053 (a) Represents UDR’s investment as of September 30, 2020. (b) Represents UDR’s investment in and remaining commitment for Thousand Oaks, which is under development as of September 30, 2020. Contingencies Litigation and Legal Matters The Company is subject to various legal proceedings and claims arising in the ordinary course of business. The Company cannot determine the ultimate liability with respect to such legal proceedings and claims at this time. The Company believes that such liability, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on our financial condition, results of operations or cash flows. 14. REPORTABLE SEGMENTS GAAP guidance requires that segment disclosures present the measure(s) used by the Chief Operating Decision Maker to decide how to allocate resources and for purposes of assessing such segments’ performance. UDR’s Chief Operating Decision Maker is comprised of several members of its executive management team who use several generally accepted industry financial measures to assess the performance of the business for our reportable operating segments. UDR owns and operates multifamily apartment communities that generate rental and other property related income through the leasing of apartment homes to a diverse base of tenants. The primary financial measures for UDR’s apartment communities are rental income and net operating income (“NOI”). Rental income represents gross market rent less adjustments for concessions, vacancy loss and bad debt. NOI is defined as rental income less direct property rental expenses. 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 2.875 % 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. UDR’s Chief Operating Decision Maker utilizes NOI as the key measure of segment profit or loss. UDR’s two reportable segments are Same-Store Communities and Non-Mature Communities/Other : ● Same-Store Communities represent those communities acquired, developed, and stabilized prior to July 1, 2019 (for quarter-to-date comparison) and January 1, 2019 (for year-to-date comparison) and held as of September 30, 2020. A comparison of operating results from the prior year is meaningful as these communities were owned and had stabilized occupancy and operating expenses as of the beginning of the 39 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 prior period, there is no plan to conduct substantial redevelopment activities, and the community is not held for disposition within the current year. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months. ● Non-Mature Communities/Other represent 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. Management evaluates the performance of each of our apartment communities on a Same-Store Community and Non-Mature Community/Other basis, as well as individually and geographically. This is consistent with the aggregation criteria under GAAP as each of our apartment communities generally has similar economic characteristics, facilities, services, and tenants. Therefore, the Company’s reportable segments have been aggregated by geography in a manner identical to that which is provided to the Chief Operating Decision Maker. All revenues are from external customers and no single tenant or related group of tenants contributed 10% or more of UDR’s total revenues during the three and nine months ended September 30, 2020 and 2019. ​ The following is a description of the principal streams from which the Company generates its revenue: Lease Revenue ​ Lease revenue related to leases is recognized on an accrual basis when due from residents or tenants in accordance with ASC 842, Leases . Rental payments are generally due on a monthly basis and recognized on a straight-line basis over the noncancellable lease term because collection of the lease payments was probable at lease commencement, inclusive of any periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option. In addition, in circumstances where a lease incentive is provided to tenants, the incentive is recognized as a reduction of lease revenue on a straight-line basis over the lease term. ​ Lease revenue also includes all pass-through revenue from retail and residential leases and common area maintenance reimbursements from retail leases. These services represent non-lease components in a contract as the Company transfers a service to the lessee other than the right to use the underlying asset. The Company has elected the practical expedient under the leasing standard to not separate lease and non-lease components from its resident and retail lease contracts as the timing and pattern of revenue recognition for the non-lease component and related lease component are the same and the combined single lease component would be classified as an operating lease. ​ Other Revenue ​ Other revenue is generated by services provided by the Company to its retail and residential tenants and other unrelated third parties. Revenue is measured based on consideration specified in contracts with customers. The Company recognizes revenue when it satisfies a performance obligation by providing the services specified in a contract to the customer. These fees are generally recognized as earned. ​ Joint venture management and other fees ​ The Joint venture management and other fees revenue consists of management fees charged to our equity method joint ventures per the terms of contractual agreements and other fees. Joint venture fee revenue is recognized monthly as the management services are provided and the fees are earned or upon a transaction whereby the Company earns a fee. Joint venture management and other fees are not allocable to a specific reportable segment or segments. ​ The following table details rental income and NOI for UDR’s reportable segments for the three and nine months ended September 30, 2020 and 2019, and reconciles NOI to Net income/(loss) attributable to UDR, Inc. on the Consolidated Statements of Operations (dollars in thousands) : 40 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, (a) ​ September 30, (b) ​ 2020 2019 2020 2019 Reportable apartment home segment lease revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Same-Store Communities (a) ​ ​ ​ ​ ​ West Region ​ $ 102,609 ​ $ 110,860 ​ $ 294,355 ​ $ 301,291 Mid-Atlantic Region ​ 52,411 ​ 53,019 ​ 159,015 ​ 157,914 Northeast Region ​ 32,705 ​ 40,558 ​ 83,314 ​ 91,203 Southeast Region ​ 34,207 ​ 33,283 ​ 92,555 ​ 89,859 Southwest Region ​ 16,418 ​ 16,229 ​ 49,435 ​ 48,600 Non-Mature Communities/Other ​ 58,848 ​ 25,292 ​ 227,725 ​ 119,262 Total segment and consolidated lease revenue ​ $ 297,198 ​ $ 279,241 ​ $ 906,399 ​ $ 808,129 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reportable apartment home segment other revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Same-Store Communities (a) ​ ​ ​ ​ ​ West Region ​ $ 3,418 ​ $ 3,510 ​ $ 8,788 ​ $ 9,313 Mid-Atlantic Region ​ 1,831 ​ 2,012 ​ 4,725 ​ 5,611 Northeast Region ​ 1,102 ​ 1,008 ​ 2,051 ​ 2,200 Southeast Region ​ 1,436 ​ 1,782 ​ 3,949 ​ 5,115 Southwest Region ​ 710 ​ 749 ​ 1,815 ​ 2,191 Non-Mature Communities/Other ​ 3,150 ​ 706 ​ 7,193 ​ 2,834 Total segment and consolidated other revenue ​ $ 11,647 ​ $ 9,767 ​ $ 28,521 ​ $ 27,264 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total reportable apartment home segment rental income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Same-Store Communities (a) ​ ​ ​ ​ ​ West Region ​ $ 106,027 ​ $ 114,370 ​ $ 303,143 ​ $ 310,604 Mid-Atlantic Region ​ 54,242 ​ 55,031 ​ 163,740 ​ 163,525 Northeast Region ​ 33,807 ​ 41,566 ​ 85,365 ​ 93,403 Southeast Region ​ 35,643 ​ 35,065 ​ 96,504 ​ 94,974 Southwest Region ​ 17,128 ​ 16,978 ​ 51,250 ​ 50,791 Non-Mature Communities/Other ​ 61,998 ​ 25,998 ​ 234,918 ​ 122,096 Total segment and consolidated rental income ​ $ 308,845 ​ $ 289,008 ​ $ 934,920 ​ $ 835,393 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reportable apartment home segment NOI ​ ​ ​ ​ Same-Store Communities (a) ​ ​ ​ ​ West Region ​ $ 77,361 ​ $ 86,159 ​ $ 226,538 ​ $ 235,925 Mid-Atlantic Region ​ 37,258 ​ 38,483 ​ 113,913 ​ 114,892 Northeast Region ​ 18,981 ​ 27,962 ​ 52,020 ​ 63,012 Southeast Region ​ 23,714 ​ 24,033 ​ 66,029 ​ 66,301 Southwest Region ​ 10,496 ​ 10,449 ​ 32,019 ​ 31,221 Non-Mature Communities/Other ​ 43,322 ​ 16,563 ​ 158,331 ​ 81,716 Total segment and consolidated NOI ​ 211,132 ​ 203,649 ​ 648,850 ​ 593,067 Reconciling items: ​ ​ ​ ​ Joint venture management and other fees ​ 1,199 ​ 6,386 ​ 3,861 ​ 11,982 Property management ​ ( 8,879 ) ​ ( 8,309 ) ​ ( 26,879 ) ​ ( 24,018 ) Other operating expenses ​ ( 5,543 ) ​ ( 2,751 ) ​ ( 16,609 ) ​ ( 11,132 ) Real estate depreciation and amortization ​ ( 151,949 ) ​ ( 127,391 ) ​ ( 462,481 ) ​ ( 357,793 ) General and administrative ​ ( 11,958 ) ​ ( 12,197 ) ​ ( 37,907 ) ​ ( 37,002 ) Casualty-related (charges)/recoveries, net ​ — ​ 1,088 ​ ( 1,353 ) ​ 842 Other depreciation and amortization ​ ( 3,887 ) ​ ( 1,619 ) ​ ( 7,939 ) ​ ( 4,953 ) Gain/(loss) on sale of real estate owned ​ ​ — ​ ​ — ​ ​ 61,303 ​ ​ 5,282 Income/(loss) from unconsolidated entities ​ 2,940 ​ 12,713 ​ 14,328 ​ 19,387 Interest expense ​ ( 62,268 ) ​ ( 42,523 ) ​ ( 140,182 ) ​ ( 110,482 ) Interest income and other income/(expense), net ​ 2,183 ​ 1,875 ​ 7,304 ​ 12,998 Tax (provision)/benefit, net ​ ( 187 ) ​ ( 1,499 ) ​ ( 1,877 ) ​ ( 3,836 ) Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership ​ 1,990 ​ ( 2,162 ) ​ ( 2,614 ) ​ ( 6,871 ) Net (income)/loss attributable to noncontrolling interests ​ ( 31 ) ​ ( 56 ) ​ ( 71 ) ​ ( 145 ) Net income/(loss) attributable to UDR, Inc. ​ $ ( 25,258 ) ​ $ 27,204 ​ $ 37,734 ​ $ 87,326 (a) Same-Store Community population consisted of 40,258 apartment homes. (b) Same-Store Community population consisted of 37,607 apartment homes. ​ The following table details the assets of UDR’s reportable segments as of September 30, 2020 and December 31, 2019 (dollars in thousands) : 41 Table of Contents UDR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) SEPTEMBER 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2020 ​ 2019 Reportable apartment home segment assets: ​ ​ Same-Store Communities (a): ​ ​ West Region ​ $ 4,253,098 ​ $ 4,228,359 Mid-Atlantic Region ​ 2,244,315 ​ 2,222,405 Northeast Region ​ 2,079,168 ​ 2,073,052 Southeast Region ​ 967,465 ​ 953,029 Southwest Region ​ 607,326 ​ 600,349 Non-Mature Communities/Other ​ 2,709,648 ​ 2,524,907 Total segment assets ​ 12,861,020 ​ 12,602,101 Accumulated depreciation ​ ( 4,512,771 ) ​ ( 4,131,353 ) Total segment assets — net book value ​ 8,348,249 ​ 8,470,748 Reconciling items: ​ ​ Cash and cash equivalents ​ 927 ​ 8,106 Restricted cash ​ 23,273 ​ 25,185 Notes receivable, net ​ 156,996 ​ 153,650 Investment in and advances to unconsolidated joint ventures, net ​ 646,355 ​ 588,262 Operating lease right-of-use assets ​ ​ 201,754 ​ ​ 204,225 Other assets ​ 173,834 ​ 186,296 Total consolidated assets ​ $ 9,551,388 ​ $ 9,636,472 (a) Same-Store Community population consisted of 40,258 apartment homes. ​ Markets included in the above geographic segments are as follows: i. West Region — Orange County, San Francisco, Seattle, Monterey Peninsula, Los Angeles, Other Southern California and Portland ii. Mid-Atlantic Region — Metropolitan D.C., Richmond and Baltimore iii. Northeast Region — New York and Boston iv. Southeast Region — Tampa, Orlando, Nashville and Other Florida v. Southwest Region — Dallas, Austin and Denver ​ ​ ​ ​ ​ ​ ​ 42 Table of Contents [This page is intentionally left blank.] ​ ​ 43 ​ Table of Contents UNITED DOMINION REALTY, L.P. CONSOLIDATED BALANCE SHEETS (In thousands, except for unit data) ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2020 ​ 2019 ​ ​ (unaudited) ​ (audited) ASSETS ​ ​ Real estate owned: ​ ​ Real estate held for investment ​ $ 3,783,282 ​ $ 3,875,160 Less: accumulated depreciation ​ ( 1,856,928 ) ​ ( 1,796,568 ) Real estate held for investment, net ​ ​ 1,926,354 ​ ​ 2,078,592 Real estate held for disposition (net of accumulated depreciation of $ 45,153 and $ 0 , respectively) ​ ​ 84,243 ​ ​ — Total real estate owned, net of accumulated depreciation ​ 2,010,597 ​ 2,078,592 Cash and cash equivalents ​ 81 ​ 24 Restricted cash ​ 15,455 ​ 13,998 Investment in unconsolidated entities ​ 56,705 ​ 76,222 Operating lease right-of-use assets ​ ​ 203,163 ​ ​ 205,668 Other assets ​ 26,909 ​ 24,241 Total assets ​ $ 2,312,910 ​ $ 2,398,745 LIABILITIES AND CAPITAL ​ ​ Liabilities: ​ ​ Secured debt, net ​ $ 99,093 ​ $ 99,071 Notes payable due to the General Partner ​ 665,603 ​ 637,233 Operating lease liabilities ​ ​ 197,771 ​ ​ 200,001 Real estate taxes payable ​ 12,470 ​ 2,801 Accrued interest payable ​ 197 ​ 217 Security deposits and prepaid rent ​ 17,444 ​ 17,946 Distributions payable ​ 66,833 ​ 63,364 Accounts payable, accrued expenses, and other liabilities ​ 13,182 ​ 12,226 Total liabilities ​ 1,072,593 ​ 1,032,859 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 11) ​ ​ ​ ​ ​ ​ ​ ​ ​ Capital: ​ ​ Partners’ capital: ​ ​ General partner: ​ ​ 110,883 OP Units outstanding at September 30, 2020 and December 31, 2019 ​ 776 ​ 859 Limited partners: ​ ​ 184,724,677 and 183,952,659 OP Units outstanding at September 30, 2020 and December 31, 2019, respectively ​ 1,221,998 ​ 1,347,622 Accumulated other comprehensive income/(loss), net ​ ( 49 ) ​ — Total partners’ capital ​ 1,222,725 ​ 1,348,481 Noncontrolling interests ​ 17,592 ​ 17,405 Total capital ​ 1,240,317 ​ 1,365,886 Total liabilities and capital ​ $ 2,312,910 ​ $ 2,398,745 ​ See accompanying notes to the consolidated financial statements. ​ 44 ​ Table of Contents UNITED DOMINION REALTY, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per unit data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ ​ 2020 2019 2020 ​ 2019 ​ REVENUES: ​ ​ ​ ​ ​ Rental income ​ $ 107,694 ​ $ 111,700 ​ $ 325,060 ​ $ 330,384 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ OPERATING EXPENSES: ​ ​ ​ ​ ​ Property operating and maintenance ​ 18,389 ​ 17,835 ​ 51,623 ​ 50,945 ​ Real estate taxes and insurance ​ 14,556 ​ 13,033 ​ 42,008 ​ 37,788 ​ Property management ​ 3,095 ​ 3,211 ​ 9,345 ​ 9,498 ​ Other operating expenses ​ 4,110 ​ 2,301 ​ 11,806 ​ 7,123 ​ Real estate depreciation and amortization ​ 35,335 ​ 35,155 ​ 106,065 ​ 104,730 ​ General and administrative ​ 4,323 ​ 4,066 ​ 13,582 ​ 12,878 ​ Casualty-related charges/(recoveries), net ​ — ​ ( 1,088 ) ​ 188 ​ ( 1,169 ) ​ Total operating expenses ​ 79,808 ​ 74,513 ​ ​ 234,617 ​ 221,793 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ 27,886 ​ 37,187 ​ 90,443 ​ 108,591 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income/(loss) from unconsolidated entities ​ ( 1,562 ) ​ ( 2,383 ) ​ ( 4,984 ) ​ ( 6,917 ) ​ Interest expense ​ ( 686 ) ​ ( 538 ) ​ ( 2,136 ) ​ ( 889 ) ​ Interest expense on notes payable due to the General Partner ​ ( 6,581 ) ​ ( 6,983 ) ​ ( 19,765 ) ​ ( 21,358 ) ​ Net income/(loss) ​ 19,057 ​ 27,283 ​ 63,558 ​ 79,427 ​ Net (income)/loss attributable to noncontrolling interests ​ ( 435 ) ​ ( 448 ) ​ ( 1,445 ) ​ ( 1,252 ) ​ Net income/(loss) attributable to OP unitholders ​ $ 18,622 ​ $ 26,835 ​ $ 62,113 ​ $ 78,175 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income/(loss) per weighted average OP Unit - basic and diluted ​ $ 0.10 ​ $ 0.15 ​ $ 0.34 ​ $ 0.42 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average OP Units outstanding - basic and diluted ​ 184,836 ​ 184,064 ​ 184,725 ​ 184,024 ​ ​ See accompanying notes to the consolidated financial statements. ​ 45 Table of Contents ​ UNITED DOMINION REALTY, L.P. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (In thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ ​ 2020 2019 ​ 2020 ​ 2019 ​ Net income/(loss) $ 19,057 $ 27,283 $ 63,558 $ 79,427 ​ Other comprehensive income/(loss), including portion attributable to noncontrolling interests: ​ ​ ​ ​ ​ Other comprehensive income/(loss) - derivative instruments: ​ ​ ​ ​ ​ Unrealized holding gain/(loss) ​ ( 6 ) ​ — ​ ( 49 ) ​ — ​ Other comprehensive income/(loss), including portion attributable to noncontrolling interests ​ ( 6 ) ​ — ​ ( 49 ) ​ — ​ Comprehensive income/(loss) ​ 19,051 ​ 27,283 ​ 63,509 ​ 79,427 ​ Comprehensive (income)/loss attributable to noncontrolling interests ​ ( 435 ) ​ ( 448 ) ​ ( 1,445 ) ​ ( 1,252 ) ​ Comprehensive income/(loss) attributable to OP unitholders ​ $ 18,616 ​ $ 26,835 ​ $ 62,064 ​ $ 78,175 ​ ​ ​ ​ ​ 46 Table of Contents UNITED DOMINION REALTY, L.P. CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL (In thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Limited ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Class A ​ Partners ​ UDR, Inc. ​ Other ​ Total ​ ​ ​ ​ ​ ​ ​ Limited ​ and LTIP ​ Limited ​ General ​ Comprehensive ​ Partners’ ​ Noncontrolling ​ ​ ​ Partner Units Partner Partner Income/(Loss), net Capital Interests Total Balance at June 30, 2020 ​ $ 65,477 ​ $ 256,536 ​ $ 944,525 ​ $ 805 ​ $ ( 43 ) ​ $ 1,267,300 ​ $ 17,157 ​ $ 1,284,457 Net income/(loss) ​ ​ 176 ​ ​ 691 ​ ​ 17,744 ​ ​ 11 ​ ​ — ​ ​ 18,622 ​ ​ 435 ​ ​ 19,057 Distributions ​ ​ ( 631 ) ​ ​ ( 2,564 ) ​ ​ ( 63,400 ) ​ ​ ( 40 ) ​ ​ — ​ ​ ( 66,635 ) ​ ​ — ​ ​ ( 66,635 ) Adjustment to reflect limited partners’ capital at redemption value ​ ​ ( 7,900 ) ​ ​ ( 34,308 ) ​ ​ 42,208 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Long-Term Incentive Plan Unit grants ​ ​ — ​ ​ 3,444 ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,444 ​ ​ — ​ ​ 3,444 Unrealized gain/(loss) on derivative financial investments ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 6 ) ​ ​ ( 6 ) ​ ​ — ​ ​ ( 6 ) Balance at September 30, 2020 ​ $ 57,122 ​ $ 223,799 ​ $ 941,077 ​ $ 776 ​ $ ( 49 ) ​ $ 1,222,725 ​ $ 17,592 ​ $ 1,240,317 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Limited ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Class A ​ Partners ​ UDR, Inc. ​ Other ​ Total ​ ​ ​ ​ ​ ​ ​ Limited ​ and LTIP ​ Limited ​ General ​ Comprehensive ​ Partners’ ​ Noncontrolling ​ ​ ​ Partner Units Partner Partner Income/(Loss), net Capital Interests Total Balance at December 31, 2019 ​ ​ 81,803 ​ ​ 284,580 ​ ​ 981,239 ​ ​ 859 ​ ​ — ​ ​ 1,348,481 ​ ​ 17,405 ​ ​ 1,365,886 Net income/(loss) ​ ​ 589 ​ ​ 2,306 ​ ​ 59,181 ​ ​ 37 ​ ​ — ​ ​ 62,113 ​ ​ 1,445 ​ ​ 63,558 Distributions ​ ​ ( 1,893 ) ​ ​ ( 7,717 ) ​ ​ ( 190,198 ) ​ ​ ( 120 ) ​ ​ — ​ ​ ( 199,928 ) ​ ​ — ​ ​ ( 199,928 ) OP Unit redemptions for common shares of UDR ​ ​ — ​ ​ ( 110 ) ​ ​ 110 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Adjustment to reflect limited partners’ capital at redemption value ​ ​ ( 23,377 ) ​ ​ ( 67,368 ) ​ ​ 90,745 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Long-Term Incentive Plan Unit grants ​ ​ — ​ ​ 12,108 ​ ​ — ​ ​ — ​ ​ — ​ ​ 12,108 ​ ​ — ​ ​ 12,108 Unrealized gain/(loss) on derivative financial investments ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 49 ) ​ ​ ( 49 ) ​ ​ — ​ ​ ( 49 ) Net contributions/(distributions) to/(from) noncontrolling interests ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1,258 ) ​ ​ ( 1,258 ) Balance at September 30, 2020 ​ $ 57,122 ​ $ 223,799 ​ $ 941,077 ​ $ 776 ​ $ ( 49 ) ​ $ 1,222,725 ​ $ 17,592 ​ $ 1,240,317 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Limited ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Class A ​ Partners ​ UDR, Inc. ​ Total ​ ​ ​ ​ ​ ​ ​ Limited ​ and LTIP ​ Limited ​ General ​ Partners’ ​ Noncontrolling ​ ​ ​ Partner Units Partner Partner Capital Interests Total Balance at June 30, 2019 ​ $ 78,633 ​ $ 273,910 ​ $ 1,058,850 ​ $ 905 ​ $ 1,412,298 ​ $ 17,440 ​ $ 1,429,738 Net income/(loss) ​ ​ 255 ​ ​ 890 ​ ​ 25,674 ​ ​ 16 ​ ​ 26,835 ​ ​ 448 ​ ​ 27,283 Distributions ​ ​ ( 599 ) ​ ​ ( 2,416 ) ​ ​ ( 60,314 ) ​ ​ ( 38 ) ​ ​ ( 63,367 ) ​ ​ — ​ ​ ( 63,367 ) Adjustment to reflect limited partners’ capital at redemption value ​ ​ 6,632 ​ ​ 16,868 ​ ​ ( 23,500 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — Long-Term Incentive Plan Unit grants ​ ​ — ​ ​ 6,563 ​ ​ — ​ ​ — ​ ​ 6,563 ​ ​ — ​ ​ 6,563 Balance at September 30, 2019 ​ $ 84,921 ​ $ 295,815 ​ $ 1,000,710 ​ $ 883 ​ $ 1,382,329 ​ $ 17,888 ​ $ 1,400,217 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Limited ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Class A ​ Partners ​ UDR, Inc. ​ Total ​ ​ ​ ​ ​ ​ ​ Limited ​ and LTIP ​ Limited ​ General ​ Partners’ ​ Noncontrolling ​ ​ ​ Partner Units Partner Partner Capital Interests Total Balance at December 31, 2018 ​ $ 69,401 ​ $ 302,545 ​ $ 1,099,174 ​ $ 950 ​ $ 1,472,070 ​ $ 13,819 ​ $ 1,485,889 Net income/(loss) ​ ​ 743 ​ ​ 2,610 ​ ​ 74,775 ​ ​ 47 ​ ​ 78,175 ​ ​ 1,252 ​ ​ 79,427 Distributions ​ ​ ( 1,797 ) ​ ​ ( 7,095 ) ​ ​ ( 180,890 ) ​ ​ ( 114 ) ​ ​ ( 189,896 ) ​ ​ — ​ ​ ( 189,896 ) OP Unit redemptions for common shares of UDR ​ ​ — ​ ​ ( 78,622 ) ​ ​ 78,622 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Adjustment to reflect limited partners’ capital at redemption value ​ ​ 16,574 ​ ​ 54,397 ​ ​ ( 70,971 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — Long-Term Incentive Plan Unit grants ​ ​ — ​ ​ 21,980 ​ ​ — ​ ​ — ​ ​ 21,980 ​ ​ — ​ ​ 21,980 Net contributions/(distributions) to/from noncontrolling interests ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,817 ​ ​ 2,817 Balance at September 30, 2019 ​ $ 84,921 ​ $ 295,815 ​ $ 1,000,710 ​ $ 883 ​ $ 1,382,329 ​ $ 17,888 ​ $ 1,400,217 ​ See accompanying notes to the consolidated financial statements. ​ 47 Table of Contents UNITED DOMINION REALTY, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ 2020 ​ 2019 Operating Activities ​ ​ Net income/(loss) ​ $ 63,558 ​ $ 79,427 Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities: ​ ​ Depreciation and amortization ​ 106,065 ​ 104,730 (Income)/loss from unconsolidated entities ​ 4,984 ​ 6,917 Other ​ 4,382 ​ 843 Changes in operating assets and liabilities: ​ ​ ​ (Increase)/decrease in operating assets ​ ( 8,020 ) ​ 2,801 Increase/(decrease) in operating liabilities ​ 9,447 ​ 3,156 Net cash provided by/(used in) operating activities ​ 180,416 ​ 197,874 ​ ​ ​ ​ ​ ​ ​ Investing Activities ​ ​ Capital expenditures and other major improvements — real estate assets ​ ( 36,185 ) ​ ( 45,508 ) Distributions received from unconsolidated entities ​ 14,533 ​ 13,840 Net cash provided by/(used in) investing activities ​ ( 21,652 ) ​ ( 31,668 ) ​ ​ ​ ​ ​ ​ ​ Financing Activities ​ ​ Proceeds from the issuance of secured debt ​ — ​ 72,500 Issuance/(repayment) of notes payable to the General Partner ​ ​ ( 146,899 ) ​ ​ ( 231,011 ) Distributions paid to partnership unitholders ​ ( 10,340 ) ​ ( 6,330 ) Other ​ ( 11 ) ​ ( 376 ) Net cash provided by/(used in) financing activities ​ ( 157,250 ) ​ ( 165,217 ) Net increase/(decrease) in cash, cash equivalents, and restricted cash ​ 1,514 ​ 989 Cash, cash equivalents, and restricted cash, beginning of year ​ 14,022 ​ 13,688 Cash, cash equivalents, and restricted cash, end of period ​ $ 15,536 ​ $ 14,677 ​ ​ ​ ​ ​ ​ ​ Supplemental Information: ​ ​ Interest paid during the period, net of amounts capitalized ​ $ 31,613 ​ $ 28,755 Non-cash transactions: ​ ​ Development costs and capital expenditures incurred but not yet paid ​ ​ 3,834 ​ ​ 4,520 Recognition of operating lease right-of-use assets ​ ​ — ​ ​ 94,174 Recognition of operating lease liabilities ​ ​ — ​ ​ 88,161 Right-of-use assets obtained in exchange for new operating lease liabilities remeasurements ​ ​ — ​ ​ 42,143 Right-of-use asset obtained in exchange for new operating lease liability ​ ​ 163 ​ ​ — LTIP Unit grants ​ 12,108 ​ 21,980 Distributions declared but not yet paid ​ ​ 66,833 ​ ​ 63,367 ​ ​ ​ ​ ​ ​ ​ The following reconciles cash, cash equivalents, and restricted cash to the total of the same amounts as shown above: ​ ​ ​ ​ ​ ​ Cash, cash equivalents, and restricted cash, beginning of year ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 24 ​ $ 125 Restricted cash ​ ​ 13,998 ​ ​ 13,563 Total cash, cash equivalents, and restricted cash as shown above ​ $ 14,022 ​ $ 13,688 Cash, cash equivalents, and restricted cash, end of period ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 81 ​ $ 40 Restricted cash ​ ​ 15,455 ​ ​ 14,637 Total cash, cash equivalents, and restricted cash as shown above ​ $ 15,536 ​ $ 14,677 ​ See accompanying notes to the consolidated financial statements. ​ ​ 48 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 1. CONSOLIDATION AND BASIS OF PRESENTATION Basis of Presentation United Dominion Realty, L.P. (“UDR, L.P.,” the “Operating Partnership,” “we” or “our”) is a Delaware limited partnership, that owns, acquires, renovates, redevelops, manages, and disposes of multifamily apartment communities generally located in high barrier to entry markets located in the United States. The high barrier to entry markets are characterized by limited land for new construction, difficult and lengthy entitlement process, expensive single-family home prices and significant employment growth potential. UDR, L.P. is a subsidiary of UDR, Inc. (“UDR” or the “General Partner”), a self-administered real estate investment trust, or REIT, through which UDR conducts a significant portion of its business. During the three months ended September 30, 2020 and 2019, rental revenues of the Operating Partnership represented 35 % and 39 %, respectively, and for the nine months ended September 30, 2020 and 2019, 35 % and 40 %, respectively, of the General Partner’s consolidated rental revenues. As of September 30, 2020, the Operating Partnership’s apartment portfolio consisted of 52 communities located in 15 markets consisting of 16,434 apartment homes. Interests in UDR, L.P. are represented by operating partnership units (“OP Units”). The Operating Partnership’s net income is allocated to the partners, which is initially based on their respective distributions made during the year and secondly, their percentage interests. Distributions are made in accordance with the terms of the Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. (the “Operating Partnership Agreement”), on a per unit basis that is generally equal to the dividend per share on UDR’s common stock, which is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “UDR.” As of September 30, 2020, there were 184.8 million OP Units outstanding, of which 176.2 million, or 95.3 %, were owned by UDR and affiliated entities and 8.6 million, or 4.7 %, were owned by non-affiliated limited partners. There were 184.1 million OP Units outstanding as of December 31, 2019, of which 176.2 million, or 95.7 %, were owned by UDR and affiliated entities and 7.9 million, or 4.3 %, were owned by non-affiliated limited partners. See Note 10, Capital Structure . The accompanying interim unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments and eliminations necessary for the fair presentation of our financial position as of September 30, 2020, and results of operations for the three and nine months ended September 30, 2020 and 2019, have been included. Such adjustments are normal and recurring in nature. The interim results presented are not necessarily indicative of results that can be expected for a full year, particularly in light of the novel coronavirus disease (“COVID-19”) pandemic and measures intended to mitigate its spread. The accompanying interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2019 included in the Annual Report on Form 10-K filed by UDR and the Operating Partnership with the SEC on February 18, 2020. The accompanying interim unaudited consolidated statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the interim unaudited consolidated financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. All intercompany accounts and transactions have been eliminated in consolidation. The Operating Partnership evaluated subsequent events through the date its financial statements were issued. No significant recognized or non-recognized subsequent events were noted other than those noted in Note 3, Real Estate Owned. 49 ​ Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 2. SIGNIFICANT ACCOUNTING POLICIES Recent Accounting Pronouncements In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The updated standard will be effective for the Operating Partnership on January 1, 2022, however, early adoption of the ASU is permitted on January 1, 2021. The Operating Partnership is currently evaluating the effect that the updated standard will have on the consolidated financial statements and related disclosures. ​ In April 2020, the FASB issued a Staff Q&A on accounting for leases during the COVID-19 pandemic, focused on the application of lease guidance in ASC 842, Leases . The Q&A states that some lease contracts may contain explicit or implicit enforceable rights and obligations that require lease concessions if certain circumstances arise that are beyond the control of the parties to the contract. Therefore, entities would need to perform a lease-by-lease analysis to determine whether contractual provisions in an existing lease agreement provide enforceable rights and obligations related to lease concessions. ​ The FASB determined it would be acceptable for entities to not perform a lease-by-lease analysis regarding rent concessions resulting from COVID-19, and to instead make a policy election regarding rent concessions, which would give entities the option to account or not to account for these rent concessions as lease modifications if the total payments required by the modified contract are substantially the same or less than the total payments required by the original contract. Entities making the election to account for these rent concessions as lease modifications would recognize the effects of rent abatements and rent deferrals on a prospective straight-line basis over the remainder of the modified contract. ​ We have made the election to not perform a lease-by-lease analysis to determine whether contractual provisions in an existing lease agreement provide enforceable rights and obligations related to lease concessions. By electing the FASB relief, we have also made an accounting policy election to account for rent abatements and rent deferrals given to lessees due to the COVID-19 pandemic as lease modifications. The lease concessions given to lessees due to the COVID-19 pandemic did not have a material impact on our consolidated financial statements. ​ In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) . ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Operating Partnership elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Operating Partnership continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. The ASU has not had a material impact on the consolidated financial statements and the Operating Partnership does not expect the ASU to have a material impact on the consolidated financial statements on a prospective basis. ​ In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments . The standard required entities to estimate a lifetime expected credit loss for most financial assets, including trade and other receivables, held-to-maturity debt securities, loans and other financial instruments, and to present the net amount of the financial instrument expected to be collected. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which amended the transition requirements and scope of ASU 2016-13 and clarified that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard. The updated standard became effective for the Operating Partnership on January 1, 2020 and was adopted on a modified retrospective basis. However, as the Operating Partnership’s financial assets primarily relate to 50 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 receivables arising from operating leases, the ASU did not have a material impact on the consolidated financial statements. Disclosures were updated pursuant to the requirements of the ASU. ​ Principles of Consolidation The Operating Partnership accounts for subsidiary partnerships, joint ventures and other similar entities in which it holds an ownership interest in accordance with the consolidation guidance. The Operating Partnership first evaluates whether each entity is a variable interest entity (“VIE”). Under the VIE model, the Operating Partnership consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Operating Partnership consolidates an entity when it controls the entity through ownership of a majority voting interest. Income/(Loss) Per Operating Partnership Unit Basic income/(loss) per OP Unit is computed by dividing net income/(loss) attributable to the general and limited partner unitholders by the weighted average number of general and limited partner units outstanding during the year. Diluted income/(loss) per OP Unit reflects the potential dilution that could occur if securities or other contracts to issue OP Units were exercised or converted into OP Units or resulted in the issuance of OP Units and then shared in the income/(loss) of the Operating Partnership. Real Estate Sales Gain Recognition ​ For sale transactions resulting in a transfer of a controlling financial interest of a property, the Operating Partnership generally derecognizes the related assets and liabilities from its Consolidated Balance Sheets and records the gain or loss in the period in which the transfer of control occurs. If control of the property has not transferred to the counterparty, the criteria for derecognition are not met and the Operating Partnership will continue to recognize the related assets and liabilities on its Consolidated Balance Sheets. ​ Sale transactions to entities in which the Operating Partnership sells a controlling financial interest in a property but retains a noncontrolling interest are accounted for as partial sales. Partial sales resulting in a change in control are accounted for at fair value and a full gain or loss is recognized. Therefore, the Operating Partnership will record a gain or loss on the partial interest sold, and the initial measurement of our retained interest will be accounted for at fair value. ​ Sales of real estate to joint ventures or other noncontrolled investees are also accounted for at fair value and the Operating Partnership will record a full gain or loss in the period the property is contributed. ​ To the extent that the Operating Partnership acquires a controlling financial interest in a property that it previously accounted for as an equity method investment, the Operating Partnership will not remeasure its previously held interest if the acquisition is treated as an asset acquisition. The Operating Partnership will include the carrying amount of its previously held equity method interest along with the consideration paid and transaction costs incurred in determining the amounts to allocate to the related assets and liabilities acquired on its Consolidated Balance Sheets. When treated as an asset acquisition, the Operating Partnership will not recognize a gain or loss on consolidation of a property. ​ Income Taxes The taxable income or loss of the Operating Partnership is reported on the tax returns of the partners. Accordingly, no provision has been made in the accompanying financial statements for federal or state income taxes on income that is passed through to the partners. However, any state or local revenue, excise or franchise taxes that result from the operating activities of the Operating Partnership are recorded at the entity level. The Operating Partnership’s tax returns are subject to examination by federal and state taxing authorities. Net income for financial reporting purposes differs from the net income for income tax reporting purposes primarily due to temporary differences, principally real estate depreciation and the tax deferral of certain gains on property sales. The differences in depreciation result from differences in the book and tax basis of certain real estate assets and the differences in the methods of depreciation and lives of the real estate assets. 51 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 The Operating Partnership evaluates the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing the Operating Partnership’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management of the Operating Partnership is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states. The Operating Partnership has no examinations in progress and none are expected at this time. Management of the Operating Partnership has reviewed all open tax years (2017 through 2019) of tax jurisdictions and concluded there is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns. ​ Impact of COVID-19 Pandemic ​ The Operating Partnership continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business. The extent of the pandemic’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic and the duration of government measures to mitigate the pandemic, all of which continue to be uncertain and difficult to predict. ​ Given the uncertainty, we cannot predict the effect on future periods, but the adverse impact that could occur on the Operating Partnership ’s future financial condition, results of operations and cash flows could be material , including, but not limited to, as a result of extended eviction moratoriums, additional rent deferrals, payment plans, lease concessions, waiving late payment fees, charges from potential adjustments to the carrying amount of receivables, and asset impairment charges. ​ During the three and nine months ended September 30, 2020, the Operating Partnership performed an analysis in accordance with the ASC 842, Leases, guidance to assess the collectibility of its operating lease receivables in light of the COVID-19 pandemic. This analysis included an assessment of collectibility of current and future rents and whether those lease payments were no longer probable of collection. In accordance with the leases guidance, if lease payments are no longer deemed to be probable over the life of the lease contract, we recognize revenue only when cash is received, and all existing contractual operating lease receivables and straight-line lease receivables are reserved. ​ As a result of its analysis, the Operating Partnership reserved approximately $ 1.6 million of multifamily tenant lease receivables and approximately $ 0.4 million of retail tenant lease receivables (inclusive of zero reserves on straight-line lease receivables) for its wholly-owned communities. In aggregate, the reserve is reflected as a $ 2.0 million reduction to Rental income on the Consolidated Statements of Operations for the three months ended September 30, 2020. For the nine months ended September 30, 2020, the Operating Partnership reserved approximately $ 3.6 million of multifamily tenant lease receivables and approximately $ 3.0 million of retail tenant lease receivables (inclusive of $ 2.2 million of reserves on straight-line lease receivables) for its wholly-owned communities. In aggregate, the reserve is reflected as a $ 6.6 million reduction to Rental income on the Consolidated Statements of Operations for the nine months ended September 30, 2020. The impact to deferred leasing commissions was not material for the three and nine months ended September 30, 2020. ​ The Operating Partnership did not recognize any other adjustments to the carrying amounts of assets or asset impairment charges due to the COVID-19 pandemic for the nine months ended September 30, 2020. ​ 52 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 3. REAL ESTATE OWNED Real estate assets owned by the Operating Partnership consist of income producing operating properties, properties under development, land held for future development, and sold or held for disposition properties. At September 30, 2020, the Operating Partnership owned and consolidated 52 communities in nine states plus the District of Columbia totaling 16,434 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of September 30, 2020 and December 31, 2019 (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2020 ​ 2019 Land ​ $ 702,197 ​ $ 711,256 Depreciable property — held and used: ​ ​ ​ ​ Land improvements ​ ​ 100,593 ​ ​ 96,864 Buildings, improvements, and furniture, fixtures and equipment ​ 2,980,492 ​ 3,067,040 Real estate held for disposition: ​ ​ ​ ​ ​ ​ Land and land improvements ​ ​ 9,654 ​ ​ — Building, improvements, and furniture, fixtures and equipment ​ ​ 119,742 ​ ​ — Real estate owned ​ 3,912,678 ​ 3,875,160 Accumulated depreciation ​ ( 1,902,081 ) ​ ( 1,796,568 ) Real estate owned, net ​ $ 2,010,597 ​ $ 2,078,592 ​ Acquisitions The Operating Partnership did not have any acquisitions of real estate during the nine months ended September 30, 2020. Dispositions The Operating Partnership did not have any dispositions of real estate during the nine months ended September 30, 2020. In October 2020, the Operating Partnership 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 asset is included in Real estate held for disposition on the Consolidated Balance Sheet as of September 30, 2020. ​ 53 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 Other Activity Predevelopment, development, and redevelopment projects and related costs are capitalized and reported on the Consolidated Balance Sheets as Total real estate owned, net of accumulated depreciation . The Operating Partnership capitalizes 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. These costs, excluding the direct costs of development and redevelopment and capitalized interest, were $ 0.2 million and $ 0.3 million for the three months ended September 30, 2020 and 2019, respectively, and were $ 0.8 million and $ 0.6 million for the nine months ended September 30, 2020 and 2019, respectively. During both of the three months ended September 30, 2020 and 2019, total capitalized interest was less than $ 0.1 million, and during both of the nine months ended September 30, 2020, and 2019, total capitalized interest was $ 0.1 million. As each apartment home in a capital project is completed and becomes available for lease-up, the Operating Partnership ceases capitalization on the related portion of the costs and depreciation commences over the estimated useful life. The Operating Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book value of those assets. Cash flow estimates are based upon historical results adjusted to reflect management’s best estimate of future market and operating conditions and our estimated holding periods. The net book value of impaired assets is reduced to fair value. The General Partner’s estimates of fair value represent management’s estimates based upon Level 3 inputs such as industry trends and reference to market rates and transactions. The Operating Partnership did not recognize any impairments in the value of its long-lived assets during the three and nine months ended September 30, 2020 and 2019. In connection with the acquisition of certain properties, the Operating Partnership agreed to pay certain of the tax liabilities of certain contributors if the Operating Partnership sells one or more of the properties contributed in a taxable transaction prior to the expiration of specified periods of time following the acquisition. The Operating Partnership may, however, sell, without being required to pay any tax liabilities, any of such properties in a non-taxable transaction, including, but not limited to, a tax deferred Section 1031 exchange. Further, the Operating Partnership has agreed to maintain certain debt that may be guaranteed by certain contributors for specified periods of time following the acquisition. The Operating Partnership, however, has the ability to refinance or repay guaranteed debt or to substitute new debt if the debt and the guaranty continue to satisfy certain conditions. 4. UNCONSOLIDATED ENTITIES The DownREIT Partnership is accounted for by the Operating Partnership under the equity method of accounting and is included in Investment in unconsolidated entities on the Consolidated Balance Sheets. The Operating Partnership recognizes earnings or losses from its investments in unconsolidated entities consisting of our proportionate share of the net earnings or losses of the partnership in accordance with the Partnership Agreement. The DownREIT Partnership is a VIE as the limited partners lack substantive kick-out rights and substantive participating rights. The Operating Partnership is not the primary beneficiary of the DownREIT Partnership as it lacks the power to direct the activities that most significantly impact its economic performance and will continue to account for its interest as an equity method investment. See Note 2, Significant Accounting Policies . As of September 30, 2020, the DownREIT Partnership owned 12 communities with 5,657 apartment homes. The Operating Partnership’s investment in the DownREIT Partnership was $ 56.7 million and $ 76.2 million as of September 30, 2020 and December 31, 2019, respectively. We consider various factors to determine if a decrease in the value of our Investment in unconsolidated entities is other-than-temporary. These factors include, but are not limited to, age of the venture, our intent and ability to retain 54 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 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. Based on the significance of the unobservable inputs, we classify these fair value measurements within Level 3 of the valuation hierarchy. The Operating Partnership did not incur any other-than-temporary impairments in the value of its investments in unconsolidated joint ventures during the three and nine months ended September 30, 2020 and 2019. Combined summary balance sheets relating to the DownREIT Partnership (not just our proportionate share) are presented below as of September 30, 2020 and December 31, 2019 ( dollars in thousands ): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2020 2019 Total real estate, net $ 1,053,312 $ 1,106,703 Cash and cash equivalents ​ 23 ​ 20 Note receivable from the General Partner ​ 308,020 ​ 222,853 Other assets ​ 6,728 ​ 4,829 Total assets $ 1,368,083 $ 1,334,405 ​ ​ ​ ​ ​ ​ ​ Secured debt, net ​ $ 506,539 ​ $ 427,592 Other liabilities ​ 27,817 ​ 28,087 Total liabilities ​ 534,356 ​ 455,679 Total capital ​ $ 833,727 ​ $ 878,726 ​ Combined summary financial information relating to all of the DownREIT Partnership (not just our proportionate share) is presented below for the three and nine months ended September 30, 2020 and 2019 ( dollars in thousands ) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2020 2019 2020 2019 Total revenue $ 33,182 $ 32,434 ​ $ 97,967 $ 96,065 Property operating expenses ​ ( 13,345 ) ​ ( 13,087 ) ​ ( 39,334 ) ​ ( 38,934 ) Real estate depreciation and amortization ​ ( 21,229 ) ​ ( 20,620 ) ​ ( 63,326 ) ​ ( 61,424 ) Operating income/(loss) ​ ( 1,392 ) ​ ( 1,273 ) ​ ( 4,693 ) ​ ( 4,293 ) Interest expense ​ ( 4,179 ) ​ ( 4,162 ) ​ ( 11,405 ) ​ ( 11,979 ) Other income/(loss) ​ 2,228 ​ 2,054 ​ 6,057 ​ 6,060 Net income/(loss) $ ( 3,343 ) $ ( 3,381 ) ​ $ ( 10,041 ) $ ( 10,212 ) ​ ​ ​ ​ 5. LEASES Lessee - Ground and Equipment Leases The Operating Partnership owns six communities that are subject to ground leases, under which the Operating Partnership is the lessee, expiring between 2043 and 2103, inclusive of extension options we are reasonably certain will be exercised. All of these leases are classified as operating leases through the lease term expiration based on our election of the practical expedient provided by the leasing standard. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the remaining lease term. In addition, the Operating Partnership leases equipment at six communities from the General Partner, pursuant to leases that expire in 2030. We currently do not hold any finance leases. The Operating Partnership also elected the short-term lease exception provided by the leasing standard and therefore only recognizes right-of-use assets and lease liabilities for leases with a term greater than one year. No leases qualified for the short-term lease exception during the nine months ended September 30, 2020 and 2019. As of September 30, 2020, the Operating lease right-of-use assets was $ 203.2 million and the Operating lease liabilities was $ 197.8 million on our Consolidated Balance Sheets related to our ground and equipment leases. The value of the Operating lease right-of-use assets exceeds the value of the Operating lease liabilities due to prepaid lease payments and intangible assets for ground leases acquired in the purchase of real estate. The calculation of these amounts includes minimum lease payments over the remaining lease term (described further in the table below). 55 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 Variable lease payments are excluded from the right-of-use assets and lease liabilities and are recognized in earnings in the period in which the obligation for those payments is incurred. As the discount rate implicit in the leases was not readily determinable, we determined the discount rate for these leases utilizing the Operating Partnership’s incremental borrowing rate at a portfolio level, adjusted for the remaining lease term, and the form of underlying collateral. The weighted average remaining lease term for these leases was 43.9 years at September 30, 2020 and the weighted average discount rate was 5.0 % at September 30, 2020. Future minimum lease payments and total operating lease liabilities from our ground and equipment leases as of September 30, 2020 are as follows (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ground Leases ​ Equipment Leases ​ Total 2020 ​ $ 3,109 ​ $ 41 ​ $ 3,150 2021 ​ ​ 12,442 ​ ​ 164 ​ ​ 12,606 2022 ​ ​ 12,442 ​ ​ 167 ​ ​ 12,609 2023 ​ ​ 12,442 ​ ​ 171 ​ ​ 12,613 2024 ​ ​ 12,442 ​ ​ 174 ​ ​ 12,616 Thereafter ​ ​ 455,221 ​ ​ 901 ​ ​ 456,122 Total future minimum lease payments (undiscounted) ​ ​ 508,098 ​ ​ 1,618 ​ ​ 509,716 Difference between future undiscounted cash flows and discounted cash flows ​ ​ ( 311,752 ) ​ ​ ( 193 ) ​ ​ ( 311,945 ) Total operating lease liabilities (discounted) ​ $ 196,346 ​ $ 1,425 ​ $ 197,771 ​ For purposes of recognizing our ground lease contracts, the Operating Partnership uses the minimum lease payments, if stated in the agreement. For ground lease agreements where there is a rent reset provision based on a change in an index or a rate (i.e., changes in fair market rental rates or changes in the consumer price index) but that does not include a specified minimum lease payment, the Operating Partnership uses the current rent over the remainder of the lease term. If there is a contingency, upon which some or all of the variable lease payments that will be paid over the remainder of the lease term are based, which is resolved such that those payments now meet the definition of lease payments, the Operating Partnership will remeasure the right-of-use asset and lease liability on the reset date. 56 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 The components of operating lease expenses from our ground and equipment leases were as follows (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2020 ​ 2019 ​ 2020 ​ 2019 Ground lease expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contractual ground lease rent expense ​ $ 3,217 ​ $ 1,954 ​ $ 9,603 ​ $ 6,232 Variable ground lease expense (a) ​ ​ 33 ​ ​ 187 ​ ​ 120 ​ ​ 469 Total ground lease expense (b) ​ ​ 3,250 ​ ​ 2,141 ​ ​ 9,723 ​ ​ 6,701 Contractual equipment lease expense (b) ​ ​ 39 ​ ​ - ​ ​ 113 ​ ​ - Total operating lease expense (c) ​ $ 3,289 ​ $ 2,141 ​ $ 9,836 ​ $ 6,701 (a) Variable ground lease expense includes adjustments such as changes in the consumer price index and payments based on a percentage of income of the lessee. (b) Ground lease and equipment lease expense are reported within the line item Other operating expenses on the Consolidated Statements of Operations. (c) For the nine months ended September 30, 2020, Operating lease right-of-use assets and Operating lease liabilities amortized by $ 2.5 million and $ 2.2 million, respectively. Due to the net impact of the amortization, the Operating Partnership recorded $ 0.1 million and $ 0.1 million of total operating lease expense during the three months ended September 30, 2020 and 2019, respectively, and $ 0.3 million and $ 0.3 million of total operating lease expense during the nine months ended September 30, 2020 and 2019, respectively. ​ Lessor - Apartment Home and Retail and Commercial Leases ​ The Operating Partnership’s communities and retail and commercial space are leased to tenants under operating leases. As of September 30, 2020, our apartment home leases generally have initial terms of 12 months or less and represent 98.0 % of our total lease revenue. As of September 30, 2020, our retail and commercial space leases generally have initial terms between 5 and 15 years and represent approximately 2.0 % of our total lease revenue. Our apartment home leases are generally renewable at the end of the lease term, subject to potential increases in rental rates, and our retail and commercial space leases generally have renewal options, subject to associated increases in rental rates and certain other conditions. (See Note 12, Reportable Segments for further discussion around our major revenue streams and disaggregation of our revenue.) ​ Future minimum lease payments from our retail and commercial leases as of September 30, 2020 are as follows (dollars in thousands): ​ ​ ​ ​ ​ ​ Retail and Commercial Leases 2020 ​ $ 1,747 2021 ​ ​ 6,993 2022 ​ ​ 6,365 2023 ​ ​ 6,068 2024 ​ ​ 5,358 Thereafter ​ ​ 14,047 Total future minimum lease payments (a) ​ $ 40,578 (a) We have excluded our apartment home leases from this table as our apartment home leases generally have initial terms of 12 months of less. Certain of our leases with retail and commercial tenants provide for the payment by the lessee of additional variable rent based on a percentage of the tenant’s revenue. The amounts shown in the table above do not include these variable percentage rents. The Operating Partnership recorded variable percentage rents of zero and less than $ 0.1 million during the three months ended September 30, 2020 and 2019, respectively, and less than $ 0.1 million during both of the nine months ended September 30, 2020 and 2019. 57 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 ​ 6. DEBT, NET Our secured debt instruments generally feature either monthly interest and principal or monthly interest-only payments with balloon payments due at maturity. For purposes of classification in the following table, variable rate debt with a derivative financial instrument designated as a cash flow hedge is deemed as fixed rate debt due to the Operating Partnership having effectively established the fixed interest rate for the underlying debt instrument. Secured debt consists of the following as of September 30, 2020 and December 31, 2019 (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal Outstanding ​ As of September 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Average ​ ​ ​ ​ September 30, ​ December 31, ​ Average ​ Years to ​ Communities ​ ​ 2020 ​ 2019 ​ Interest Rate ​ Maturity ​ Encumbered Fixed Rate Debt ​ ​ Mortgage note payable ​ $ 72,500 ​ $ 72,500 3.10 % 9.3 1 Deferred financing costs ​ ( 337 ) ​ ( 365 ) Total fixed rate secured debt, net ​ 72,163 ​ 72,135 3.10 % 9.3 1 Variable Rate Debt ​ ​ Tax-exempt secured note payable ​ $ 27,000 ​ $ 27,000 0.77 % 11.5 1 Deferred financing costs ​ ( 70 ) ​ ( 64 ) Total variable rate secured debt, net ​ 26,930 ​ 26,936 0.77 % 11.5 1 Total Secured Debt, Net ​ $ 99,093 ​ $ 99,071 2.52 % 9.9 2 ​ The Operating Partnership may from time to time acquire properties subject to fixed rate debt instruments. In those situations, management will record the secured debt at its estimated fair value and amortize any difference between the fair value and par to interest expense over the life of the underlying debt instrument. The Operating Partnership did not have any unamortized fair value adjustments associated with the fixed rate debt instruments on the Operating Partnership’s properties. Fixed Rate Debt Mortgage note payable . At September 30, 2020, the Operating Partnership had a fixed rate mortgage note payable for $ 72.5 million with an interest rate of 3.10 %. Interest payments are due monthly and the note matures in February 2030. Variable Rate Debt Tax-exempt secured note payable . The variable rate mortgage note payable for $ 27.0 million that secures a tax-exempt housing bond issue matures in March 2032. Interest on this note is payable in monthly installments. The mortgage note payable has an interest rate of 0.77 % as of September 30, 2020. Guarantor on Unsecured Debt The Operating Partnership is the guarantor on the General Partner’s unsecured revolving credit facility with an aggregate borrowing capacity of $ 1.1 billion, an unsecured commercial paper program with an aggregate borrowing capacity of $ 500 million, a $ 350 million term loan due September 2023, $ 183 million of medium-term notes due July 2024, $ 300 million of medium-term notes due October 2025, $ 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, $ 400 million of medium-term notes due August 2031, $ 400 million of medium-term notes due August 2032 and $ 300 million of medium-term notes due November 2034. As of September 30, 2020 and December 31, 2019, the General 58 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 Partner did not have an outstanding balance under the unsecured revolving credit facility and had $ 230.0 million and $ 300.0 million, respectively, outstanding under its unsecured commercial paper program. 7. RELATED PARTY TRANSACTIONS Shared Services The Operating Partnership self-manages its own properties and is party to an Inter-Company Employee and Cost Sharing Agreement with the General Partner. This agreement provides for reimbursements to the General Partner for the Operating Partnership’s allocable share of costs incurred by the General Partner for (a) general and administrative costs, and (b) shared services of corporate level property management employees and related support functions and costs. Allocation of General and Administrative Expenses The General Partner shares various general and administrative costs, employees and other overhead costs with the Operating Partnership including legal assistance, acquisitions analysis, marketing, human resources, IT, accounting, rent, supplies and advertising, and allocates these costs to the Operating Partnership first on the basis of direct usage when identifiable, with the remainder allocated based on the reasonably anticipated benefits to the parties. The general and administrative expenses allocated to the Operating Partnership by UDR were $ 3.5 million and $ 2.7 million during the three months ended September 30, 2020 and 2019, respectively, and $ 10.1 million and $ 9.7 million during the nine months ended September 30, 2020 and 2019, respectively, and are included in General and administrative on the Consolidated Statements of Operations. In the opinion of management, this method of allocation reflects the level of services received by the Operating Partnership from the General Partner. During the three months ended September 30, 2020 and 2019, the Operating Partnership reimbursed the General Partner $ 3.9 million and $ 4.6 million, respectively, and during the nine months ended September 30, 2020 and 2019, the Operating Partnership reimbursed the General Partner $ 12.8 million and $ 12.7 million, respectively, for shared services related to corporate level property management costs incurred by the General Partner. These shared cost reimbursements are initially recorded within the line item General and administrative on the Consolidated Statements of Operations, and a portion related to management costs is reclassified to Property management on the Consolidated Statements of Operations. (See further discussion below.) Notes Payable to the General Partner The following table summarizes the Operating Partnership’s Notes payable due to the General Partner as of September 30, 2020 and December 31, 2019 ( dollars in thousands ): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate at ​ Balance Outstanding ​ September 30, ​ September 30, December 31, ​ ​ 2020 ​ 2020 ​ 2019 Note due August 2021 5.34 % ​ $ 5,500 ​ $ 5,500 Note due December 2023 5.18 % ​ 83,196 ​ 83,196 Note due April 2026 4.12 % ​ 184,638 ​ 184,638 Note due November 2028 ​ 4.69 % ​ ​ 133,205 ​ ​ 133,205 Note due December 2028 (a) ​ 3.01 % ​ ​ 259,064 ​ ​ 230,694 Total notes payable due to the General Partner ​ ​ $ 665,603 ​ $ 637,233 (a) There is no limit on the total commitments under this unsecured revolving note. Interest is incurred on the unpaid principal balance at a variable interest rate equivalent to the General Partner’s weighted average interest rate on borrowings, or 3.01 % as of September 30, 2020. The note matures on December 1, 2028. To the extent there is an outstanding principal balance on the revolving note payable, the General Partner, at its discretion, can demand payment at any time prior to the stated maturity date of the note. 59 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 Certain limited partners of the Operating Partnership have provided guarantees or reimbursement agreements related to these notes payable. The guarantees were provided by the limited partners in conjunction with their contribution of properties to the Operating Partnership. The Operating Partnership recognized interest expense on the notes payable of $ 6.6 million and $ 7.0 million during the three months ended September 30, 2020 and 2019, respectively, and $ 19.8 million and $ 21.4 million during the nine months ended September 30, 2020 and 2019, respectively. 8. FAIR VALUE OF DERIVATIVES AND FINANCIAL INSTRUMENTS Fair value is based on the price that would be received to sell an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level valuation hierarchy prioritizes observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below: ● Level 1 — Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. ● Level 2 — Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data. ● Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. The estimated fair values of the Operating Partnership’s financial instruments either recorded or disclosed on a recurring basis as of September 30, 2020 and December 31, 2019 are summarized as follows (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value at September 30, 2020, Using ​ Total ​ ​ Quoted ​ ​ ​ ​ ​ ​ Carrying ​ ​ ​ ​ Prices in ​ ​ ​ ​ ​ ​ ​ ​ Amount in ​ ​ ​ ​ Active ​ ​ ​ ​ ​ ​ ​ ​ Statement of ​ ​ ​ ​ Markets ​ Significant ​ ​ ​ ​ ​ Financial ​ Fair Value ​ for Identical ​ Other ​ Significant ​ ​ Position at ​ Estimate at ​ Assets or ​ Observable ​ Unobservable ​ ​ September 30, ​ September 30, ​ Liabilities ​ Inputs ​ Inputs ​ ​ 2020 (a) ​ 2020 ​ (Level 1) ​ (Level 2) ​ (Level 3) Description: ​ ​ ​ ​ ​ Derivatives- Interest rate contracts (b) ​ $ 6 ​ $ 6 ​ $ — ​ $ 6 ​ $ — Total assets ​ $ 6 ​ $ 6 ​ $ — ​ $ 6 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Secured debt instrument - fixed rate: (c) ​ ​ ​ ​ ​ Mortgage note payable ​ $ 72,500 ​ $ 78,907 ​ $ — ​ $ — ​ $ 78,907 Secured debt instrument - variable rate: (c) ​ ​ ​ ​ ​ ​ Tax-exempt secured note payable ​ ​ 27,000 ​ ​ 27,000 ​ ​ — ​ ​ — ​ ​ 27,000 Unsecured debt instruments: (d) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Notes payable due to the General Partner ​ ​ 665,603 ​ ​ 665,603 ​ ​ — ​ ​ — ​ ​ 665,603 Total liabilities ​ $ 765,103 ​ $ 771,510 ​ $ — ​ $ — ​ $ 771,510 ​ 60 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value at December 31, 2019, Using ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ Prices in ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ ​ ​ ​ Active ​ ​ ​ ​ ​ ​ ​ ​ Amount in ​ ​ ​ ​ Markets ​ ​ ​ ​ ​ ​ ​ ​ Statement of ​ ​ ​ ​ for Identical ​ Significant ​ ​ ​ ​ ​ Financial ​ Fair Value ​ Assets ​ Other ​ Significant ​ ​ Position at ​ Estimate at ​ or ​ Observable ​ Unobservable ​ ​ December 31, ​ December 31, ​ Liabilities ​ Inputs ​ Inputs ​ ​ 2019 (a) ​ 2019 ​ (Level 1) ​ (Level 2) ​ (Level 3) Description: ​ ​ ​ ​ ​ Secured debt instruments - fixed rate: (c) ​ ​ ​ ​ ​ Mortgage notes payable ​ $ 72,500 ​ $ 71,976 ​ $ — ​ $ — ​ $ 71,976 Secured debt instrument - variable rate: (c) ​ ​ ​ ​ ​ ​ Tax-exempt secured note payable ​ ​ 27,000 ​ ​ 27,000 ​ ​ — ​ ​ — ​ ​ 27,000 Unsecured debt instruments: (d) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Notes payable due to the General Partner ​ ​ 637,233 ​ ​ 637,233 ​ ​ — ​ ​ — ​ ​ 637,233 Total liabilities ​ $ 736,733 ​ $ 736,209 ​ $ — ​ $ — ​ $ 736,209 (a) Balances exclude deferred financing costs. (b) See Note 9, Derivatives and Hedging Activity. (c) See Note 6, Debt, Net. (d) See Note 7, Related Party Transactions. ​ There were no transfers into or out of each of the levels of the fair value hierarchy during the nine months ended September 30, 2020. ​ Financial Instruments Carried at Fair Value The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair values of interest rate options are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The General Partner, on behalf of the Operating Partnership, incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Operating Partnership has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. Although the General Partner, on behalf of the Operating Partnership, has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2020 and December 31, 2019, the Operating Partnership has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Operating Partnership has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. In conjunction with the FASB’s fair value measurement guidance, the Operating Partnership made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. 61 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 Financial Instruments Not Carried at Fair Value As of September 30, 2020, the fair values of cash and cash equivalents, restricted cash, accounts receivable, prepaids, real estate taxes payable, accrued interest payable, security deposits and prepaid rent, distributions payable and accounts payable approximated their carrying values because of the short term nature of these instruments. The estimated fair values of other financial instruments, which includes debt instruments, are classified in Level 3 of the fair value hierarchy due to the significant unobservable inputs that are utilized in their respective valuations. 9. DERIVATIVES AND HEDGING ACTIVITY Risk Management Objective of Using Derivatives The Operating Partnership is exposed to certain risks arising from both its business operations and economic conditions. The General Partner principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The General Partner manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and through the use of derivative financial instruments. Specifically, the General Partner enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The General Partner’s and the Operating Partnership’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the General Partner’s known or expected cash payments principally related to the General Partner’s borrowings . Cash Flow Hedges of Interest Rate Risk The General Partner’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the General Partner primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the General Partner making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium . The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated other comprehensive income/(loss), net on the Consolidated Balance Sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three and nine months ended September 30, 2020, one derivative was designated as a cash flow hedge by the Operating Partnership. No derivatives designated as cash flows hedges were held by the Operating Partnership in 2019. Amounts reported in Accumulated other comprehensive income/(loss), net on the Consolidated Balance Sheets related to derivatives that will be reclassified to interest expense as interest payments are made on the Operating Partnership’s variable-rate debt. Through September 30, 2021, the Operating Partnership estimates that less than $ 0.1 million will be reclassified as an increase to Interest expense . As of September 30, 2020, the Operating Partnership had the following outstanding interest rate derivative that was designated as cash flow hedge of interest risk (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ Product ​ Instruments ​ Notional Interest rate caps 1 ​ $ 19,880 ​ Derivatives not designated as hedges are not speculative and are used to manage the Operating Partnership’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of GAAP. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. As of September 30, 2020, no derivatives not designated as hedges were held by the Operating Partnership. Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheets 62 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 The table below presents the fair value of the Operating Partnership’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 ( dollars in thousands ): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Asset Derivatives ​ Liability Derivatives ​ ​ (included in Other assets) ​ (Included in Other liabilities) ​ ​ Fair Value at: ​ Fair Value at: ​ September 30, December 31, September 30, December 31, ​ ​ 2020 ​ 2019 ​ 2020 ​ 2019 Derivatives designated as hedging instruments: ​ ​ ​ ​ Interest rate caps ​ $ 2 ​ $ — ​ $ — ​ $ — ​ Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statements of Operations The tables below present the effect of the Operating Partnership’s derivative financial instruments on the Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 ( dollars in thousands ): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain/(Loss) Recognized in ​ ​ ​ ​ Gain/(Loss) Reclassified ​ Interest expense ​ ​ Unrealized holding gain/(loss) ​ from Accumulated OCI into ​ (Amount Excluded from ​ ​ Recognized in OCI ​ Interest expense ​ Effectiveness Testing) Derivatives in Cash Flow Hedging Relationships 2020 2019 2020 2019 2020 2019 Three Months Ended September 30, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate caps ​ $ ( 6 ) ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — Nine Months Ended September 30, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate caps ​ $ ( 49 ) ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2020 ​ 2019 ​ 2020 ​ 2019 Total amount of Interest expense presented on the Consolidated Statements of Operations ​ $ 686 ​ $ 538 ​ $ 2,136 ​ $ 889 ​ Credit-risk-related Contingent Features The General Partner has agreements with its derivative counterparties that contain a provision where the General Partner could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the General Partner’s default on the indebtedness. The General Partner has certain agreements with some of its derivative counterparties that contain a provision where, in the event of default by the General Partner or the counterparty, the right of setoff may be exercised. Any amount payable to one party by the other party may be reduced by its setoff against any amounts payable by the other party. Events that give rise to default by either party may include, but are not limited to, the failure to pay or deliver payment under the derivative agreement, the failure to comply with or perform under the derivative agreement, bankruptcy, a merger without assumption of the derivative agreement, or in a merger, a surviving entity’s creditworthiness is materially weaker than the original party to the derivative agreement. 10. CAPITAL STRUCTURE General Partnership Units The General Partner has complete discretion to manage and control the operations and business of the Operating Partnership, which includes but is not limited to the acquisition and disposition of real property, construction of buildings and making capital improvements, and the borrowing of funds from outside lenders or UDR and its subsidiaries to finance such activities. The General Partner can generally authorize, issue, sell, redeem or purchase any OP Unit or securities of the Operating Partnership without the approval of the limited partners. The General Partner can 63 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 also approve, with regard to the issuances of OP Units, the class or one or more series of classes, with designations, preferences, participating, optional or other special rights, powers and duties including rights, powers and duties senior to limited partnership interests without approval of any limited partners except holders of Class A Limited Partnership Units. There were 0.1 million General Partnership units outstanding at September 30, 2020 and December 31, 2019, all of which were held by UDR. Limited Partnership Units As of September 30, 2020 and December 31, 2019, there were 184.7 million and 184.0 million, respectively, of limited partnership units outstanding, of which 1.9 million were Class A Limited Partnership Units for both periods. UDR owned 176.1 million, or 95.3 %, and 176.1 million, or 95.7 %, of OP Units outstanding at September 30, 2020 and December 31, 2019, respectively, of which 0.1 million were Class A Limited Partnership Units for both periods. The remaining 8.6 million, or 4.7 %, and 7.9 million, or 4.3 %, of OP Units outstanding were held by non-affiliated partners at September 30, 2020 and December 31, 2019, respectively, of which 1.8 million were Class A Limited Partnership Units for both periods. Subject to the terms of the Operating Partnership Agreement, the limited partners have the right to require the Operating Partnership to redeem all or a portion of the OP Units held by the limited partner at a redemption price equal to and in the form of the Cash Amount (as defined in the Operating Partnership Agreement), provided that such OP Units have been outstanding for at least one year . UDR, as general partner of the Operating Partnership, may, in its sole discretion, purchase the OP Units by paying to the limited partner either the Cash Amount or the REIT Share Amount (generally one share of common stock of UDR for each OP Unit), as defined in the Operating Partnership Agreement. The non-affiliated limited partners’ capital is adjusted to redemption value at the end of each reporting period with the corresponding offset against UDR’s limited partner capital account based on the redemption rights noted above. The aggregate value upon redemption of the then-outstanding OP Units held by non-affiliated limited partners was $ 280.9 million and $ 366.4 million as of September 30, 2020 and December 31, 2019, respectively, based on the value of UDR’s common stock at each period end. A limited partner has no right to receive any distributions from the Operating Partnership on or after the date of redemption of its OP Units. Class A Limited Partnership Units Class A Limited Partnership Units have a cumulative, annual, non-compounded preferred return, which is equal to 8 % based on a value of $ 16.61 per Class A Limited Partnership Unit. Holders of the Class A Limited Partnership Units exclusively possess certain voting rights. The Operating Partnership may not do the following without approval of the holders of the Class A Limited Partnership Units: (i) increase the authorized or issued amount of Class A Limited Partnership Units, (ii) reclassify any other partnership interest into Class A Limited Partnership Units, (iii) create, authorize or issue any obligations or security convertible into or the right to purchase Class A Limited Partnership Units, (iv) enter into a merger or acquisition, or (v) amend or modify the Operating Partnership Agreement in a manner that adversely affects the relative rights, preferences or privileges of the Class A Limited Partnership Units. The following table shows OP Units outstanding and OP Unit activity as of and for the nine months ended September 30, 2020 ( units in thousands ): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ UDR, Inc. ​ ​ ​ Class A ​ ​ Class A ​ ​ ​ ​ Limited ​ Limited ​ Limited ​ Limited ​ General ​ ​ ​ ​ Partners ​ Partners ​ Partner ​ Partner ​ Partner ​ Total Ending balance at December 31, 2019 ​ 1,752 ​ 6,094 ​ 175,986 ​ 121 ​ 111 ​ 184,064 Vesting of LTIP Units ​ — ​ 772 ​ — ​ — ​ — ​ 772 OP redemptions for UDR stock — ( 3 ) ​ 3 — — — Ending balance at September 30, 2020 1,752 6,863 175,989 121 111 184,836 ​ 64 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 LTIP Units UDR grants long-term incentive plan units (“LTIP Units”) to certain employees and non-employee directors. The LTIP Units represent an ownership interest in the Operating Partnership and have voting and distribution rights consistent with OP Units. The LTIP Units are subject to the terms of UDR’s long-term incentive plan. Two classes of LTIP Units are granted, Class 1 LTIP Units and Class 2 LTIP Units. Class 1 LTIP Units are granted to certain employees and non-employee directors and vest over a period of up to four years . Class 2 LTIP Units are granted to certain employees and vest over a period from one to three years subject to certain performance and market conditions being achieved. Vested LTIP Units may be converted into OP Units provided that such LTIP Units have been outstanding for at least two years from the date of grant. Allocation of Profits and Losses Profit of the Operating Partnership is allocated in the following order: (i) to the General Partner and the Limited Partners in proportion to and up to the amount of cash distributions made during the year, and (ii) to the General Partner and Limited Partners in accordance with their percentage interests. Losses and depreciation and amortization expenses, non-recourse liabilities are allocated to the General Partner and Limited Partners in accordance with their percentage interests. Losses allocated to the Limited Partners are capped to the extent that such an allocation would not cause a deficit in the Limited Partners’ capital account. Such losses are, therefore, allocated to the General Partner. If any Partner’s capital balance were to fall into a deficit, any income and gains are allocated to each Partner sufficient to eliminate its negative capital balance . 11. COMMITMENTS AND CONTINGENCIES Commitments Real Estate Commitments The following summarizes the Operating Partnership’s real estate commitments at September 30, 2020 ( dollars in thousands ): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number ​ ​ ​ Operating Partnership's ​ ​ Properties ​ Investment ​ Remaining Commitment Real estate communities - redevelopment 1 ​ $ 11,747 ​ $ 3,253 ​ Contingencies Litigation and Legal Matters The Operating Partnership is subject to various legal proceedings and claims arising in the ordinary course of business. The Operating Partnership cannot determine the ultimate liability with respect to such legal proceedings and claims at this time. The General Partner believes that such liability, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on the Operating Partnership’s financial condition, results of operations or cash flows. 12. REPORTABLE SEGMENTS GAAP guidance requires that segment disclosures present the measure(s) used by the Chief Operating Decision Maker to decide how to allocate resources and for purposes of assessing such segments’ performance. The Operating Partnership has the same Chief Operating Decision Maker as that of its parent, the General Partner. The Chief Operating Decision Maker consists of several members of UDR’s executive management team who use several generally accepted industry financial measures to assess the performance of the business for our reportable operating segments. 65 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 The Operating Partnership owns and operates multifamily apartment communities throughout the United States that generate rental and other property related income through the leasing of apartment homes to a diverse base of tenants. The primary financial measures of the Operating Partnership’s apartment communities are rental income and net operating income (“NOI”), and are included in the Chief Operating Decision Maker’s assessment of the Operating Partnership’s performance on a consolidated basis. Rental income represents gross market rent less adjustments for concessions, vacancy loss and bad debt. NOI is defined as total revenues less direct property operating expenses. Rental expenses include real estate taxes, insurance, personnel, utilities, repairs and maintenance, administrative and marketing. Excluded from NOI are property management costs, which are the Operating Partnership’s allocable share of costs incurred by the General Partner for shared services of corporate level property management employees and related support functions and costs. The Chief Operating Decision Maker of the General Partner utilizes NOI as the key measure of segment profit or loss. The Operating Partnership’s two reportable segments are Same-Store Communities and Non-Mature Communities/Other: ● Same-Store Communities represent those communities acquired, developed, and stabilized prior to July 1, 2019 (for the quarter-to-date comparison) and January 1, 2019 (for the year-to-date comparison) and held as of September 30, 2020. A comparison of operating results from the prior year is meaningful as these communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior period, there is no plan to conduct substantial redevelopment activities, and the community is not held for disposition within the current year. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months. ● Non-Mature Communities/Other represent 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. Management of the General Partner evaluates the performance of each of the Operating Partnership’s apartment communities on a Same-Store Community and Non-Mature Community/Other basis, as well as individually and geographically. This is consistent with the aggregation criteria under GAAP as each of our apartment communities generally has similar economic characteristics, facilities, services, and tenants. Therefore, the Operating Partnership’s reportable segments have been aggregated by geography in a manner identical to that which is provided to the Chief Operating Decision Maker. All revenues are from external customers and no single tenant or related group of tenants contributed 10% or more of the Operating Partnership’s total revenues during the three and nine months ended September 30, 2020 and 2019. The following is a description of the principal streams from which the Operating Partnership generates its revenue: Lease Revenue ​ Lease revenue related to leases is recognized on an accrual basis when due from residents or tenants in accordance with ASC 842, Leases . Rental payments are generally due on a monthly basis and recognized on a straight-line basis over the noncancellable lease term because collection of the lease payments was probable at lease commencement, inclusive of any periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option. In addition, in circumstances where a lease incentive is provided to tenants, the incentive is recognized as a reduction of lease revenue on a straight-line basis over the lease term. ​ Lease revenue also includes all pass-through revenue from retail and residential leases and common area maintenance reimbursements from retail leases. These services represent non-lease components in a contract as the Operating Partnership transfers a service to the lessee other than the right to use the underlying asset. The Operating Partnership has elected the practical expedient under the leasing standard to not separate lease and non-lease components from its resident and retail lease contracts as the timing and pattern of revenue recognition for the non-lease component 66 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 and related lease component are the same and the combined single lease component would be classified as an operating lease. ​ Other Revenue ​ Other revenue is generated by services provided by the Operating Partnership to its retail and residential tenants and other unrelated third parties. The Operating Partnership recognizes revenue when it satisfies a performance obligation by providing the services specified in a contract to the customer. These fees are generally recognized as earned. 67 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 The following table details rental income and NOI for the Operating Partnership’s reportable segments for the three and nine months ended September 30, 2020 and 2019, and reconciles NOI to Net income/(loss) attributable to OP unitholders on the Consolidated Statements of Operations (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ September 30, (a) ​ September 30, (a) ​ ​ 2020 2019 2020 2019 ​ Reportable apartment home segment lease revenue ​ ​ ​ ​ ​ Same-Store Communities (a) ​ ​ ​ ​ ​ West Region ​ $ 58,848 ​ $ 62,760 ​ $ 182,988 ​ $ 185,840 ​ Mid-Atlantic Region ​ 12,482 ​ 12,805 ​ 38,018 ​ 38,187 ​ Northeast Region ​ 6,013 ​ 8,098 ​ 21,572 ​ 24,036 ​ Southeast Region ​ 13,189 ​ 12,808 ​ 39,124 ​ 37,957 ​ Southwest Region ​ ​ 1,762 ​ ​ 1,901 ​ ​ 5,426 ​ ​ 5,776 ​ Non-Mature Communities/Other ​ 10,316 ​ 9,563 ​ 26,822 ​ 27,924 ​ Total segment and consolidated lease revenue ​ $ 102,610 ​ $ 107,935 ​ $ 313,950 ​ $ 319,720 ​ Reportable apartment home segment other revenue ​ ​ ​ ​ ​ Same-Store Communities (a) ​ ​ ​ ​ ​ West Region ​ $ 1,996 ​ $ 2,063 ​ $ 5,375 ​ $ 5,908 ​ Mid-Atlantic Region ​ 482 ​ 476 ​ 1,180 ​ 1,308 ​ Northeast Region ​ 168 ​ 187 ​ 364 ​ 521 ​ Southeast Region ​ 663 ​ 799 ​ 1,856 ​ 2,301 ​ Southwest Region ​ ​ 65 ​ ​ 87 ​ ​ 171 ​ ​ 209 ​ Non-Mature Communities/Other ​ 1,710 ​ 153 ​ 2,164 ​ 417 ​ Total segment and consolidated other revenue ​ $ 5,084 ​ $ 3,765 ​ $ 11,110 ​ $ 10,664 ​ Total reportable apartment home segment rental income ​ ​ ​ ​ ​ Same-Store Communities (a) ​ ​ ​ ​ ​ West Region ​ $ 60,844 ​ $ 64,823 ​ $ 188,363 ​ $ 191,748 ​ Mid-Atlantic Region ​ 12,964 ​ 13,281 ​ 39,198 ​ 39,495 ​ Northeast Region ​ 6,181 ​ 8,285 ​ 21,936 ​ 24,557 ​ Southeast Region ​ 13,852 ​ 13,607 ​ 40,980 ​ 40,258 ​ Southwest Region ​ ​ 1,827 ​ ​ 1,988 ​ ​ 5,597 ​ ​ 5,985 ​ Non-Mature Communities/Other ​ 12,026 ​ 9,716 ​ 28,986 ​ 28,341 ​ Total segment and consolidated rental income ​ $ 107,694 ​ $ 111,700 ​ $ 325,060 ​ $ 330,384 ​ Reportable apartment home segment NOI ​ ​ ​ ​ ​ Same-Store Communities (a) ​ ​ ​ ​ ​ West Region ​ $ 45,011 ​ $ 49,528 ​ $ 142,148 ​ $ 146,673 ​ Mid-Atlantic Region ​ 8,781 ​ 9,244 ​ 26,984 ​ 27,508 ​ Northeast Region ​ 3,055 ​ 5,736 ​ 14,024 ​ 18,201 ​ Southeast Region ​ 9,355 ​ 9,371 ​ 27,926 ​ 27,984 ​ Southwest Region ​ ​ 1,266 ​ ​ 1,405 ​ ​ 3,991 ​ ​ 4,226 ​ Non-Mature Communities/Other ​ 7,281 ​ 5,548 ​ 16,356 ​ 17,059 ​ Total segment and consolidated NOI ​ 74,749 ​ 80,832 ​ 231,429 ​ 241,651 ​ Reconciling items: ​ ​ ​ ​ ​ Property management ​ ( 3,095 ) ​ ( 3,211 ) ​ ( 9,345 ) ​ ( 9,498 ) ​ Other operating expenses ​ ( 4,110 ) ​ ( 2,301 ) ​ ( 11,806 ) ​ ( 7,123 ) ​ Real estate depreciation and amortization ​ ( 35,335 ) ​ ( 35,155 ) ​ ( 106,065 ) ​ ( 104,730 ) ​ General and administrative ​ ( 4,323 ) ​ ( 4,066 ) ​ ( 13,582 ) ​ ( 12,878 ) ​ Casualty-related (charges)/recoveries, net ​ — ​ 1,088 ​ ( 188 ) ​ 1,169 ​ Income/(loss) from unconsolidated entities ​ ( 1,562 ) ​ ( 2,383 ) ​ ( 4,984 ) ​ ( 6,917 ) ​ Interest expense ​ ( 7,267 ) ​ ( 7,521 ) ​ ( 21,901 ) ​ ( 22,247 ) ​ Net (income)/loss attributable to noncontrolling interests ​ ( 435 ) ​ ( 448 ) ​ ( 1,445 ) ​ ( 1,252 ) ​ Net income/(loss) attributable to OP unitholders ​ $ 18,622 ​ $ 26,835 ​ $ 62,113 ​ $ 78,175 ​ (a) Same-Store Community population consisted of 15,609 apartment homes. ​ 68 Table of Contents UNITED DOMINION REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) September 30, 2020 The following table details the assets of the Operating Partnership’s reportable segments as of September 30, 2020 and December 31, 2019 (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2020 ​ 2019 Reportable apartment home segment assets ​ ​ Same-Store Communities (a): ​ ​ West Region ​ $ 2,030,008 ​ $ 2,011,495 Mid-Atlantic Region ​ 547,810 ​ 669,417 Northeast Region ​ 409,782 ​ 408,703 Southeast Region ​ 358,178 ​ 352,790 Southwest Region ​ ​ 144,858 ​ ​ 144,210 Non-Mature Communities/Other ​ 422,042 ​ 288,545 Total segment assets ​ 3,912,678 ​ 3,875,160 Accumulated depreciation ​ ( 1,902,081 ) ​ ( 1,796,568 ) Total segment assets - net book value ​ 2,010,597 ​ 2,078,592 Reconciling items: ​ ​ Cash and cash equivalents ​ 81 ​ 24 Restricted cash ​ 15,455 ​ 13,998 Investment in unconsolidated entities ​ 56,705 ​ 76,222 Operating lease right-of-use assets ​ ​ 203,163 ​ ​ 205,668 Other assets ​ 26,909 ​ 24,241 Total consolidated assets ​ $ 2,312,910 ​ $ 2,398,745 (a) Same-Store Community population consisted of 15,609 apartment homes. ​ Markets included in the above geographic segments are as follows: i. West Region — Orange County, San Francisco, Seattle, Monterey Peninsula, Los Angeles, Other Southern California and Portland ii. Mid-Atlantic Region — Metropolitan, D.C. and Baltimore iii. Northeast Region — New York and Boston iv. Southeast Region — Tampa, Nashville and Other Florida v. Southwest Region — Denver ​ ​ ​ ​ 69 Table of Contents Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, without limitation, statements concerning property acquisitions and dispositions, development activity and capital expenditures, capital raising activities, rent growth, occupancy, 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: ● the impact of the COVID-19 pandemic and measures intended to prevent its spread or address its effects; ● general economic conditions; ● unfavorable changes in apartment market and economic conditions that could adversely affect occupancy levels and rental rates, including as a result of COVID-19; ● the failure of acquisitions to achieve anticipated results; ● possible difficulty in selling apartment communities; ● competitive factors that may limit our ability to lease apartment homes or increase or maintain rents; ● insufficient cash flow that could affect our debt financing and create refinancing risk; ● failure to generate sufficient revenue, which could impair our debt service payments and distributions to stockholders; ● development and construction risks that may impact our profitability; ● potential damage from natural disasters, including hurricanes and other weather-related events, which could result in substantial costs to us; ● risks from climate change that impacts our properties or operations; ● risks from extraordinary losses for which we may not have insurance or adequate reserves; ● risks from cybersecurity breaches of our information technology systems and the information technology systems of our third party vendors and other third parties; ● uninsured losses due to insurance deductibles, self-insurance retention, uninsured claims or casualties, or losses in excess of applicable coverage; ● delays in completing developments and lease-ups on schedule; ● our failure to succeed in new markets; ● 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; 70 ​ Table of Contents ● changing interest rates, which could increase interest costs and affect the market price of our securities; ● potential liability for environmental contamination, which could result in substantial costs to us; ● the imposition of federal taxes if we fail to qualify as a REIT under the Code in any taxable year; ● 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 ● changes in real estate laws, tax laws, rent control or stabilization laws or other laws affecting our business. A discussion of these and other factors affecting our business and prospects is set forth in Part II, 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 On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The pandemic has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place or similar orders. While operations in certain areas have been allowed to fully or partially re-open, many areas are experiencing new closures or restrictions subsequent to re-opening and no assurance can be given that such closures or restrictions will not continue to occur. Our headquarters, all of our properties and our corporate offices are located in areas that are or have been subject to shelter-in-place orders and restrictions on the types of businesses that may continue to operate. These orders and restrictions and other impacts of the COVID-19 pandemic have adversely affected, and could continue to adversely affect, the ability of our residents and retail and commercial tenants to pay their rent. It is still uncertain how various legislation or orders adopted by the federal government and state and local governments, or those that may be modified or enacted in the future, have impacted, and may continue to impact, the ability of our residents and retail and commercial tenants to pay their rent. The governmental actions intended to prevent the spread of COVID-19 have also caused us to reduce staffing at certain of our locations, and have impacted, and may continue to impact, our ability to conduct our business in the ordinary course. Further, a number of the jurisdictions in which we operate have adopted, and may extend, eviction moratoriums, either directly or indirectly (such as through direction to law enforcement or courts not to serve notices or take actions related to eviction), which have negatively impacted, and may continue to negatively impact, our ability to remove residents or retail and commercial tenants who are not paying their rent and our ability to rent their units or other space to new residents or retail and commercial tenants, respectively. In addition, certain jurisdictions have restricted our ability to charge certain fees, including fees for late payment of rent. We have received, and continue to receive, more requests from our residents and retail and commercial tenants for assistance with respect to paying rent than we have historically received. In response, we have instituted a number of initiatives to assist residents and other tenants, including rent deferrals, payment plans, and waiving late payment fees when appropriate. In addition, we have seen an increase in tenant rent concessions compared to prior year periods, as discussed further below. In particular, the urban core markets of New York, NY, San Francisco Bay Area, CA, and Boston, MA have been more adversely impacted by the COVID-19 pandemic in comparison to our other markets, resulting in larger decreases in rental income from elevated rent concessions and lower occupancy in those markets. We also have experienced a decrease in resident move-outs and turnover on an annualized basis. With respect to leasing activities, leasing traffic and visits by potential residents had decreased during much of the year; however, they increased during the quarter ended September 30, 2020 as compared to the same quarter in 2019. Our percentage of leases entered into with a prospective tenant has increased year over year. 71 Table of Contents During the three and nine months ended September 30, 2020, the Company performed an analysis in accordance with the ASC 842, Leases, guidance to assess the collectibility of its operating lease receivables in light of the COVID-19 pandemic. This analysis included an assessment of collectibility of current and future rents and whether those lease payments were no longer probable of collection. In accordance with the leases guidance, if lease payments are no longer deemed to be probable over the life of the lease contract, we recognize revenue only when cash is received, and all existing contractual operating lease receivables and straight-line lease receivables are reserved. ​ As a result of its analysis, the Company reserved approximately $4.0 million of multifamily tenant lease receivables and approximately $0.8 million of retail tenant lease receivables (inclusive of less than $0.1 million of reserves on straight-line lease receivables) for its wholly-owned communities and communities held by joint ventures. In aggregate, the reserve is reflected as a $4.4 million reduction to Rental income and a $0.4 million reduction to Income/(loss) from unconsolidated entities on the Consolidated Statements of Operations for the three months ended September 30, 2020. For the nine months ended September 30, 2020, the Company reserved approximately $9.5 million of multifamily tenant lease receivables and approximately $4.3 million of retail tenant lease receivables (inclusive of $2.9 million of reserves on straight-line lease receivables) for its wholly-owned communities and communities held by joint ventures. In aggregate, the reserve is reflected as a $12.9 million reduction to Rental income and a $0.9 million reduction to Income/(loss) from unconsolidated entities on the Consolidated Statements of Operations for the nine months ended September 30, 2020. The impact to deferred leasing commissions was not material for the three and nine months ended September 30, 2020. ​ The Company did not recognize any other adjustments to the carrying amounts of assets or asset impairment charges due to the COVID-19 pandemic for the nine months ended September 30, 2020. As of October 26, 2020, we had collected 97.7%, 96.8% and 96.0% of billed monthly rents for our multifamily residents for July, August and September, respectively. October cash rents received are consistent with those for July, August and September at corresponding times of prior months. ​ Over the last several years, we have worked to consistently strengthen our balance sheet and improve our liquidity profile, which we believe positions us well to weather the current economic and market challenges. The extent of the COVID-19 pandemic’s effect on our operational and financial performance, however, will depend on future developments, including the duration, spread and intensity of the pandemic and the duration of government measures to mitigate the pandemic, all of which are uncertain and difficult to predict. Given this uncertainty, we cannot predict the effect on future periods, but the adverse impact on our future financial condition, results of operations, and cash flows could be material. ​ The following discussion should be read in conjunction with the consolidated financial statements appearing elsewhere herein and is based primarily on the consolidated financial statements for the three and nine months ended September 30, 2020 and 2019, of each of UDR, Inc. and United Domination Realty, L.P. UDR, Inc.: 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 subsidiaries and its consolidated joint ventures. At September 30, 2020, our consolidated real estate portfolio included 148 communities in 13 states plus the District of Columbia totaling 47,488 apartment homes. In addition, we have an ownership interest in 5,668 completed or to-be-completed apartment homes through unconsolidated joint ventures or partnerships, including 2,538 apartment homes owned by entities in which we hold preferred equity investments. The Same-Store Community apartment home population for the three and nine months ended September 30, 2020, was 40,258 and 37,607, respectively. 72 Table of Contents The following table summarizes our market information by major geographic markets as of and for the three and nine months ended September 30, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2020 ​ Three Months Ended September 30, 2020 ​ Nine Months Ended September 30, 2020 ​ ​ ​ Percentage Total ​ Monthly ​ Monthly ​ ​ Number of ​ Number of ​ of Total ​ Carrying ​ Average ​ Income per ​ Average ​ Income per ​ ​ Apartment ​ Apartment ​ Carrying ​ Value (in ​ Physical ​ Occupied ​ Physical ​ Occupied Same-Store Communities ​ Communities ​ Homes ​ Value ​ thousands) ​ Occupancy ​ Home (a) ​ Occupancy ​ Home (a) West Region ​ ​ ​ ​ Orange County, CA 12 5,336 12.7 % $ 1,614,197 ​ 96.1 % $ 2,452 96.5 % $ 2,340 San Francisco, CA 11 2,751 6.9 % ​ 882,555 ​ 86.3 % ​ 3,455 91.9 % ​ 3,623 Seattle, WA 14 2,725 7.4 % 948,121 ​ 95.6 % 2,444 96.6 % 2,501 Monterey Peninsula, CA 7 1,565 1.4 % 184,439 ​ 97.2 % 1,935 96.6 % 1,936 Los Angeles, CA 4 1,225 3.6 % 460,903 ​ 95.0 % 2,733 95.9 % 2,823 Other Southern California 2 654 0.9 % 111,056 ​ 97.9 % 2,066 97.2 % 2,046 Portland, OR 2 476 0.4 % 51,827 ​ 96.8 % 1,625 97.0 % 1,631 Mid-Atlantic Region ​ ​ ​ ​ ​ Metropolitan D.C. 20 7,496 15.0 % 1,935,192 ​ 96.4 % 2,068 96.8 % 2,082 Richmond, VA 4 1,358 1.2 % 153,285 ​ 98.1 % 1,434 97.5 % 1,418 Baltimore, MD 3 720 1.2 % 155,838 ​ 98.0 % 1,736 97.8 % 1,721 Northeast Region ​ ​ ​ ​ ​ Boston, MA 6 2,173 7.1 % 911,105 ​ 92.3 % 2,829 95.3 % 2,790 New York, NY 4 1,640 9.1 % 1,168,063 ​ 87.7 % 3,890 92.4 % 4,320 Southeast Region ​ ​ ​ ​ ​ Tampa, FL 9 2,908 3.2 % 417,933 ​ 96.9 % 1,540 96.9 % 1,473 Orlando, FL 9 2,500 1.8 % 237,769 ​ 97.2 % 1,408 96.8 % 1,408 Nashville, TN 8 2,260 1.7 % 223,311 ​ 97.8 % 1,398 97.8 % 1,373 Other Florida 1 636 0.7 % 88,452 ​ 97.7 % 1,659 97.2 % 1,641 Southwest Region ​ ​ ​ ​ ​ Dallas, TX 7 2,345 2.3 % 293,018 ​ 97.0 % 1,385 97.3 % 1,380 Austin, TX 4 1,272 1.3 % 169,450 ​ 97.6 % 1,570 97.7 % 1,547 Denver, CO ​ 1 ​ 218 ​ 1.1 % ​ 144,858 ​ 94.1 % ​ 2,968 ​ 93.1 % ​ 3,063 Total/Average Same-Store Communities 128 40,258 79.0 % 10,151,372 ​ 95.4 % $ 2,143 96.3 % $ 2,148 Non-Mature, Commercial Properties & Other 19 6,751 18.5 % 2,382,429 ​ ​ ​ Total Real Estate Held for Investment 147 47,009 97.5 % 12,533,801 ​ ​ ​ Real Estate Under Development (b) — 147 1.5 % 197,823 ​ ​ ​ Real Estate Held for Disposition (c) 1 332 1.0 % 129,396 ​ ​ ​ Total Real Estate Owned 148 47,488 100.0 % 12,861,020 ​ ​ ​ Total Accumulated Depreciation ​ (4,512,771) ​ ​ ​ Total Real Estate Owned, Net of Accumulated Depreciation ​ $ 8,348,249 ​ ​ ​ (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. (b) As of September 30, 2020, the Company was developing four wholly-owned communities with a total of 1,178 apartment homes, 147 of which have been completed. (c) The Company had one community located in Metropolitan D.C. that met the criteria to be classified as held for disposition at September 30, 2020. 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 July 1, 2019 (for quarter-to-date comparison) and January 1, 2019 (for year-to-date comparison) and held as of September 30, 2020. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior period, there is no plan to conduct substantial redevelopment activities, and the communities are not classified as held for disposition within the current year. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months. 73 Table of Contents 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. 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 2017, 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 April 2017, which replaced the prior at-the-market equity offering program entered into in April 2012. During the nine months ended September 30, 2020, the Company did not sell any shares of common stock through its ATM program, other than the forward sales described below. As of September 30, 2020, we had 11.7 million shares of common stock available for future issuance under the ATM program, including an aggregate of 2.1 million shares subject to the forward sales agreements described below. During the nine months ended September 30, 2020, the Company entered into forward sales agreements under its ATM program for a total of 2.1 million shares of common stock at a weighted average initial forward price per share of $49.56. The initial 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 September 30, 2020, no shares under the forward sales agreement have been settled. The final date by which shares sold under the forward sales agreements must be settled range between February 12, 2021 and March 3, 2021. See Note 8, Income/(Loss) per Share , in the Notes to the UDR Consolidated Financial Statements included in this Report for additional discussion of forward sales agreements. ​ During the three and nine months ended September 30, 2020, the Company repurchased 0.6 million shares of its common stock at an average price of $33.11 per share for total consideration of approximately $19.8 million under its share repurchase program. ​ In February 2020, the Company issued $200.0 million of 3.20% senior unsecured medium-term notes due 2030. Interest is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2020. The notes were priced at 105.660% of the principal amount at issuance. This was a further issuance of the 2030 notes, and form a single series 74 Table of Contents with, the $300.0 million aggregate principal amount of the Company’s 3.20% notes due 2030 that were issued in July 2019 and the $100.0 million aggregate principal amount of the Company’s 3.20% notes due 2030 that were issued in October 2019. As of the completion of the offering, the aggregate principal amount of outstanding 2030 notes was $600.0 million. In July 2020, the Company refinanced a 4.35% fixed rate mortgage note payable due in November 2020 with a balance of $79.3 million with a $160.9 million, 2.62% fixed rate mortgage note payable due in 2031. The Company incurred net extinguishment costs of $0.5 million in connection with the refinancing. The incremental proceeds were used to reduce the Company’s borrowings under its unsecured commercial paper program. ​ In July 2020, the Company announced that it commenced a cash tender offer for any and all of its outstanding 3.75% unsecured medium-term notes due July 2024 (the “2024 Notes”). Pursuant to the tender offer, on July 21, 2020, the Company completed the purchase of $116.9 million aggregate principal amount of the 2024 Notes, or 39.0% of the $300.0 million aggregate principal amount of the 2024 Notes. The tender offer consideration was $1,101.92 for each $1,000 principal amount of the 2024 Notes, plus accrued and unpaid interest to, but not including, July 21, 2020 . In July 2020 , the Company issued $400.0 million of 2.10% senior unsecured medium-term notes due August 1, 2032. Interest is payable semi-annually in arrears on February 1 and August 1. The notes were priced at 99.894% of the principal amount at issuance. The Company used a portion of the net proceeds to fund the purchase of the 2024 Notes accepted pursuant to the tender offer described above and to prepay $245.8 million of 4.64% secured debt due in 2023 . The combined prepayment and make-whole amounts for the purchase of the 2024 Notes and the prepayment of the secured debt due in 2023, inclusive of the acceleration of fair market value adjustments originally recorded on secured debt assumed in property acquisitions, totaled approximately $24.0 million . ​ 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 issuance of equity or debt securities, the issuance of operating partnership units and the assumption or placement of secured and/or unsecured debt. During the remainder of 2020, we have approximately $0.7 million of secured debt maturing, inclusive of principal amortization, and $230.0 million of unsecured debt maturing, comprised solely of unsecured commercial paper. We anticipate repaying the remaining debt 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. In October 2020, the entire $230.0 million of outstanding unsecured commercial paper as of September 30, 2020 was repaid at maturity with additional proceeds of unsecured commercial paper with maturity dates in November 2020 and proceeds under the Working Capital Credit Facility. As of October 27, 2020, we had no borrowings outstanding under the Revolving Credit Facility, leaving $1.1 billion of unused capacity (excluding $2.9 million of letters of credit), and we had no borrowings outstanding under the Working Capital Credit Facility, leaving $75.0 million of unused capacity . ​ Critical Accounting Policies and Estimates and New Accounting Pronouncements Our critical accounting policies are those having the most impact on the reporting of our financial condition and results and those requiring significant judgments and estimates. These policies include those related to (1) capital expenditures, (2) impairment of long-lived assets, (3) real estate investment properties, and (4) revenue recognition. Our critical accounting policies are described in more detail in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in UDR’s Annual Report on Form 10-K, filed with the SEC on February 18, 2020. There have been no significant changes in our critical accounting policies from those reported in our Form 10-K filed with the SEC on February 18, 2020. With respect to these critical accounting policies, we believe that the application of judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented. 75 Table of Contents 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 nine months ended September 30, 2020 and 2019. Operating Activities For the nine months ended September 30, 2020, our Net cash provided by/(used in) operating activities was $456.6 million, compared to $456.9 million for the comparable period in 2019. The decrease in cash flow from operating activities was primarily due to changes in operating assets and liabilities, partially offset by improved net operating income, primarily driven by net operating income from communities acquired in 2020 and 2019. Investing Activities For the nine months ended September 30, 2020, Net cash provided by/(used in) investing activities was $(292.7) million, compared to $(1.4) billion for the comparable period in 2019. The decrease in cash used in investing activities was primarily due to the decrease in acquisitions made during the current period and an increase in proceeds from sales of real estate investments, partially offset by an increase in spend for development of real estate assets and a decrease in distributions received from unconsolidated joint ventures. Acquisitions In January 2020, the Company acquired a 294 apartment home operating community located in Tampa, Florida for approximately $85.2 million. T he 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 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. ​ Dispositions ​ 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 and due in February 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 an 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. ​ 76 Table of Contents 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 nine months ended September 30, 2020, total capital expenditures of $106.1 million, or $2,236 per stabilized home, which in aggregate include recurring capital expenditures and major renovations, were spent across our portfolio, excluding development, as compared to $113.9 million, or $2,735 per stabilized home, for the comparable period in 2019. The decrease in total capital expenditures was primarily due to: ● a decrease of 63.9%, or $13.8 million, in spend as compared to the comparable period in 2019 for our operations platform, which includes smart home installations in certain of our properties; and ● a decrease of 10.1%, or 2.8 million, in NOI enhancing improvements, such as kitchen and bath remodels and upgrades to common areas. This was partially offset by: ● an increase of 18.0%, or $6.0 million, in recurring capital expenditures, which include asset preservation and turnover related expenditures; and ● an increase of 8.9%, or $2.8 million, in major renovations, which include major structural changes and/or architectural revisions to existing buildings. The following table outlines capital expenditures and repair and maintenance costs for all of our communities, excluding real estate under development, for the nine months ended September 30, 2020 and 2019 ( dollars in thousands except Per Home amounts ): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Per Home ​ ​ Nine Months Ended September 30, ​ Nine Months Ended September 30, ​ 2020 2019 % Change 2020 2019 % Change Turnover capital expenditures ​ $ 9,632 ​ $ 8,284 16.3 % $ 203 ​ $ 199 2.0 % Asset preservation expenditures ​ 29,478 ​ 24,861 18.6 % 621 ​ 597 4.0 % Total recurring capital expenditures ​ 39,110 ​ 33,145 18.0 % 824 ​ 796 3.5 % NOI enhancing improvements (a) ​ 25,105 ​ 27,939 (10.1) % 529 ​ 670 (21.0) % Major renovations (b) ​ 34,111 ​ 31,320 8.9 % 719 ​ 752 (4.4) % Operations platform ​ ​ 7,782 ​ ​ 21,538 ​ (63.9) % ​ 164 ​ ​ 517 ​ (68.3) % Total capital expenditures (c) ​ $ 106,108 ​ $ 113,942 (6.9) % $ 2,236 ​ $ 2,735 (18.2) % Repair and maintenance expense ​ $ 42,475 ​ $ 31,356 35.5 % $ 895 ​ $ 752 19.0 % Average home count (d) ​ 47,437 ​ 41,675 13.8 % ​ ​ ​ ​ ​ ​ ​ ​ (a) NOI enhancing improvements are expenditures that result in increased income generation or decreased expense growth. (b) Major renovations include major structural changes and/or architectural revisions to existing buildings. (c) Total capital expenditures includes amounts capitalized during the year. Cash paid for capital expenditures is impacted by the net change in related accruals. (d) Average number of homes is calculated based on the number of homes outstanding at the end of each month. 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 September 30, 2020, our development pipeline consisted of four wholly-owned communities totaling 1,178 apartment homes, 147 of which have been completed, with a budget of $423.5 million, in which we have a gross carrying value 77 Table of Contents of $197.8 million. The remaining homes are estimated to be completed between the first quarter of 2021 and the second quarter of 2023. At September 30, 2020, the Company was redeveloping two communities, located in New York, New York and Boston, Massachusetts, which are expected to be completed in the first quarter of 2021 and the second quarter of 2021, respectively. The redevelopments include the renovation of building exteriors, corridors, and common area amenities as well as individual apartment homes. During the nine months ended September 30, 2020, we incurred $34.1 million in major renovations, which include major structural changes and/or architectural revisions to existing buildings, an increase of $2.8 million compared to the nine months ended September 30, 2019. 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 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 nine months ended September 30, 2020: ● we made investments totaling $66.9 million in our unconsolidated joint ventures, including contributions of $62.4 million to four unconsolidated investments under our Developer Capital Program, which earn preferred returns ranging from 8.5% to 13.0%; ● our proportionate share of the net income/(loss) of the joint ventures and partnerships was $14.3 million; and ● we received distributions of $9.9 million, of which $1.8 million were operating cash flows and $8.1 million were investing cash flows. 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 nine months ended September 30, 2020 and 2019. Financing Activities For the nine months ended September 30, 2020, our Net cash provided by/(used in) financing activities was $(173.0) million, compared to $740.6 million for the comparable period of 2019. The following significant financing activities occurred during the nine months ended September 30, 2020: ● repayments of secured debt of $358.1 million, which was partially offset by proceeds from the issuance of secured debt of $160.9 million; ● issued $200.0 million of 3.20% senior unsecured medium-term notes due January 15, 2030, for net proceeds of approximately $211.3 million; ● issued $400.0 million of 2.10% senior unsecured medium-term notes due August 1, 2032, for net proceeds of approximately $399.6 million; ● repayment of $116.9 million senior unsecured medium-term notes due July 2024, pursuant to our tender offer; ● net repayment of $70.0 million on our unsecured commercial paper program; ● repurchase of 0.6 million common shares for approximately $19.8 million; ● payment of $313.3 million of distributions to our common stockholders; and ● payment of prepayment and extinguishment costs of $35.5 million from the early prepayment of debt. 78 Table of Contents Credit Facilities and Commercial Paper Program During the three months ended September 30, 2020, the Company prepaid the $201.9 million outstanding balance under its secured credit facility with New York Life with proceeds from the issuance of senior unsecured medium-term notes. The Company incurred net extinguishment costs of $9.0 million during both the three and nine months ended September 30, 2020, which was included in Interest expense on the Consolidated Statements of Operations. ​ The Company has a $1.1 billion unsecured revolving credit facility and a $350.0 million unsecured term loan. The Credit Agreement for these facilities 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 $2.0 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, 2023, with two six-month extension options, subject to certain conditions. The Term Loan has a scheduled maturity date of September 30, 2023. Based on the Company’s current credit rating, the Revolving Credit Facility has an interest rate equal to LIBOR plus a margin of 82.5 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 90 basis points. Depending on the Company’s credit rating, the margin under the Revolving Credit Facility ranges from 75 to 145 basis points, the facility fee ranges from 10 to 30 basis points, and the margin under the Term Loan ranges from 80 to 165 basis points. As of September 30, 2020, we had no outstanding borrowings under the Revolving Credit Facility, leaving $1.1 billion of unused capacity (excluding $2.9 million of letters of credit at September 30, 2020), 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 15, 2021. In July 2020, the Company extended its working capital credit facility maturity date from January 15, 2021 to January 14, 2022. Based on the Company’s current credit rating, the Working Capital Credit Facility has an interest rate equal to LIBOR plus a margin of 82.5 basis points. Depending on the Company’s credit rating, the margin ranges from 75 to 145 basis points. As of September 30, 2020, we had $22.1 million of outstanding borrowings under the Working Capital Credit Facility, leaving $52.9 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 September 30, 2020. 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 $500 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 September 30, 2020, we had issued $230.0 million of commercial paper, for one month terms, at a weighted average annualized rate of 0.30%, leaving $270.0 million of unused capacity. In October 2020, the entire $230.0 million of outstanding unsecured commercial paper as of September 30, 2020 was repaid at maturity with additional proceeds of unsecured commercial paper with maturity dates in November 2020 and proceeds under the Working Capital Credit Facility . 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 $314.1 million in variable rate debt that is not subject to interest rate swap contracts as of September 30, 2020. If market interest rates for variable rate debt increased by 100 basis points, our interest expense for the nine months ended September 30, 2020 would increase by $3.0 million based on the average balance outstanding during the period. 79 Table of Contents 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 11, 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 ): ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ 2020 2019 Net cash provided by/(used in) operating activities $ 456,592 $ 456,876 Net cash provided by/(used in) investing activities ​ (292,731) (1,382,802) Net cash provided by/(used in) financing activities ​ (172,952) 740,576 ​ ​ Results of Operations The following discussion explains the changes in results of operations that are presented in our Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019. Net Income/(Loss) Attributable to Common Stockholders Net income/(loss) attributable to common stockholders was $(26.3) million ($(0.09) per diluted share) for the three months ended September 30, 2020, as compared to $26.2 million ($0.09 per diluted share) for the comparable period in the prior year. The decrease resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report: ● an increase in depreciation expense of $24.6 million primarily due to communities acquired in 2020 and 2019, partially offset by a decrease from fully depreciated assets; ● an increase in interest expense of $19.7 million primarily due to $24.5 million from net extinguishment costs from the prepayment of debt during the three months ended September 30, 2020 as compared to $6.3 million for the three months ended September 30, 2019, and higher average debt balances; and ● a decrease in income/(loss) from unconsolidated entities of $9.8 million primarily due to a $5.3 million gain recognized on the sale of an operating property from our UDR/KFH joint venture in 2019 and a $4.4 million unrealized gain recorded on an unconsolidated technology investment in 2019. This was partially offset by: ​ ● an increase in total property NOI of $7.5 million primarily due to NOI from additional operating communities, including those acquired in 2020 and 2019, partially offset by an approximately $3.7 million reserve recorded on our multifamily tenant lease receivables. Net income/(loss) attributable to common stockholders was $34.6 million ($0.12 per diluted share) for the nine months ended September 30, 2020, as compared to $84.3 million ($0.30 per diluted share) for the comparable period in the prior year. The decrease resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report: ● an increase in depreciation expense of $104.7 million primarily due to communities acquired in 2020 and 2019, partially offset by a decrease from fully depreciated assets; and 80 Table of Contents ● an increase in interest expense of $29.7 million primarily due to $24.5 million from net extinguishment cost from the prepayment of debt during the nine months ended September 30, 2020 as compared to $6.3 million for the nine months ended September 30, 2019, and higher average debt balances. This was partially offset by: ​ ● gains of $61.3 million from the sale of two operating communities located in Kirkland, Washington and Bellevue, Washington during the nine months ended September 30, 2020, as compared to a gain of $5.3 million on the sale of a parcel of land in Los Angeles, California during the nine months ended September 30, 2019; and ● an increase in total property NOI of $55.8 million primarily due to NOI from additional operating communities, including those acquired in 2020 and 2019, partially offset by an approximately $8.8 million reserve recorded on our multifamily tenant lease receivables. 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 2.875% 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ Nine Months Ended ​ ​ ​ ​ ​ September 30, (a) ​ ​ ​ September 30, (b) ​ ​ ​ ​ 2020 2019 % Change 2020 2019 % Change ​ Same-Store Communities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Same-Store rental income ​ $ 246,847 $ 263,010 (6.1) % $ 700,002 $ 713,297 ​ (1.9) % Same-Store operating expense (c) ​ (79,037) (75,924) 4.1 % (209,483) (201,946) ​ 3.7 % Same-Store NOI ​ 167,810 187,086 (10.3) % 490,519 511,351 ​ (4.1) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-Mature Communities/Other NOI: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stabilized, non-mature communities NOI (d) ​ ​ 22,277 4,107 ​ 442.4 % ​ 115,815 ​ ​ 49,894 ​ 132.1 % Acquired communities NOI ​ 1,807 762 137.1 % 4,996 762 ​ 555.6 % Redevelopment communities NOI ​ ​ 2,152 ​ ​ 3,809 ​ (43.5) % ​ 11,522 ​ ​ 13,953 ​ (17.4) % Development communities NOI ​ (4) (2) 100.0 % (109) (2) ​ NM * Non-residential/other NOI (e) ​ ​ 15,850 4,712 ​ 236.4 % ​ 19,639 ​ ​ 9,536 ​ 105.9 % Sold and held for disposition communities NOI ​ ​ 1,240 3,175 ​ (60.9) % ​ 6,468 ​ ​ 7,573 ​ (14.6) % Total Non-Mature Communities/Other NOI ​ 43,322 16,563 161.6 % 158,331 81,716 ​ 93.8 % Total property NOI ​ $ 211,132 $ 203,649 3.7 % $ 648,850 $ 593,067 ​ 9.4 % * Not meaningful 81 Table of Contents (a) Same-Store consists of 40,258 apartment homes. (b) Same-Store consists of 37,607 apartment homes. (c) Excludes depreciation, amortization, and property management expenses. (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. (e) Primarily non-residential revenue and expense and straight-line adjustment for concessions. ​ 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ ​ 2020 2019 2020 2019 ​ Net income/(loss) attributable to UDR, Inc. ​ $ (25,258) ​ $ 27,204 ​ $ 37,734 ​ $ 87,326 ​ Joint venture management and other fees ​ (1,199) ​ (6,386) ​ (3,861) ​ (11,982) ​ Property management ​ 8,879 ​ 8,309 ​ 26,879 ​ 24,018 ​ Other operating expenses ​ 5,543 ​ 2,751 ​ 16,609 ​ 11,132 ​ Real estate depreciation and amortization ​ 151,949 ​ 127,391 ​ 462,481 ​ 357,793 ​ General and administrative ​ 11,958 ​ 12,197 ​ 37,907 ​ 37,002 ​ Casualty-related charges/(recoveries), net ​ — ​ (1,088) ​ 1,353 ​ (842) ​ Other depreciation and amortization ​ 3,887 ​ 1,619 ​ 7,939 ​ 4,953 ​ (Gain)/loss on sale of real estate owned ​ ​ — ​ ​ — ​ ​ (61,303) ​ ​ (5,282) ​ (Income)/loss from unconsolidated entities ​ (2,940) ​ (12,713) ​ (14,328) ​ (19,387) ​ Interest expense ​ 62,268 ​ 42,523 ​ 140,182 ​ 110,482 ​ Interest income and other (income)/expense, net ​ (2,183) ​ (1,875) ​ (7,304) ​ (12,998) ​ Tax provision/(benefit), net ​ 187 ​ 1,499 ​ 1,877 ​ 3,836 ​ Net income/(loss) attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership ​ (1,990) ​ 2,162 ​ 2,614 ​ 6,871 ​ Net income/(loss) attributable to noncontrolling interests ​ 31 ​ 56 ​ 71 ​ 145 ​ Total property NOI ​ $ 211,132 ​ $ 203,649 ​ $ 648,850 ​ $ 593,067 ​ ​ Same-Store Communities Our Same-Store Community properties, those acquired, developed, and stabilized prior to July 1, 2019 (for the quarter-to-date comparison) and January 1, 2019 (for the year-to-date comparison) and held on September 30, 2020 consisted of 40,258 and 37,607 apartment homes and provided 79.5% and 75.6% of our total NOI for the three and nine months ended September 30, 2020, respectively. Three Months Ended September 30, 2020 vs. Three Months Ended September 30, 2019 NOI for our Same-Store Community properties decreased 10.3%, or $19.3 million, for the three months ended September 30, 2020 compared to the same period in 2019. The decrease in property NOI was attributable to a 6.1%, or $16.2 million, decrease in property rental income and a 4.1%, or $3.1 million, increase in operating expenses. The decrease in property rental income was primarily driven by a $3.4 million increase in our reserve on multifamily tenant lease receivables, an increase of $7.2 million in rent concessions and an increase of $5.7 million in occupancy loss, partially offset by a 0.1%, or $0.3 million, increase in rental rates and a 0.6%, or $0.2 million, increase in reimbursement and ancillary and fee income . Physical occupancy decreased by 1.4% to 95.4% and total monthly income per occupied home decreased 4.8% to $2,143. The increase in operating expenses was primarily driven by a 5.4%, or $1.7 million, increase in real estate taxes, which was primarily due to higher assessed valuations, and an 18.0%, or $2.0 million, increase in repair and maintenance expense due to the increased use of third party vendors, partially offset by a 6.4%, or $1.0 million, decrease in personnel expense as a result of fewer employees. The operating margin (property net operating income divided by property rental income) was 68.0% and 71.1% for the three months ended September 30, 2020 and 2019, respectively. Nine Months Ended September 30, 2020 vs. Nine Months Ended September 30, 2019 82 Table of Contents NOI for our Same-Store Community properties decreased 4.1%, or $20.8 million, for the nine months ended September 30, 2020 compared to the same period in 2019. The decrease in property NOI was attributable to a 1.9%, or $13.3 million, decrease in property rental income and a 3.7%, or $7.5 million, increase in operating expenses . The decrease in property rental income was primarily driven by a $7.5 million increase in our reserve on multifamily tenant lease receivables, an increase of $8.2 million in rent concessions and an increase of $8.0 million in occupancy loss, partially offset by a 1.6%, or $10.4 million, increase in rental rates and a 0.4%, or $0.3 million, increase in reimbursement and ancillary and fee income. Physical occupancy decreased by 0.5% to 96.3% and total monthly income per occupied home decreased 1.3% to $2,148. The increase in operating expenses was primarily driven by a 6.7%, or $5.6 million, increase in real estate taxes, which was primarily due to higher assessed valuations, and a 12.4%, or $3.5 million, increase in repair and maintenance expense due to the increased use of third party vendors, partially offset by a 7.1%, or $2.9 million, decrease in personnel expense as a result of fewer employees. The operating margin (property net operating income divided by property rental income) was 70.1% and 71.7% for the nine months ended September 30, 2020 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. Three Months Ended September 30, 2020 vs. Three Months Ended September 30, 2019 The remaining 20.5%, or $43.3 million, of our total NOI during the three months ended September 30, 2020 was generated from our Non-Mature Communities/Other . NOI from Non-Mature Communities/Other increased by 161.6%, or $26.8 million, for the three months ended September 30, 2020 as compared to the same period in 2019. The increase was primarily attributable to an $18.2 million increase in stabilized, non-mature communities NOI due to operating communities acquired in 2020 and 2019 and an $11.1 million increase in non-residential/other primarily due to changes in straight-line rent as a result of increased tenant rent concessions during the period, partially offset by a $1.9 million decrease in NOI from sold and held for disposition communities. Nine Months Ended September 30, 2020 vs. Nine Months Ended September 30, 2019 The remaining 24.4%, or $158.3 million, of our total NOI during the nine months ended September 30, 2020 was generated from our Non-Mature Communities/Other . NOI from Non-Mature Communities/Other increased by 93.8%, or $76.6 million, for the nine months ended September 30, 2020 as compared to the same period in 2019. The increase was primarily attributable to a $65.9 million increase in stabilized, non-mature communities NOI due to operating communities acquired in 2020 and 2019, a $10.1 million increase in non-residential/other primarily due to changes in straight-line rent as a result of increased tenant rent concessions during the period and a $4.2 million increase in acquired communities, partially offset by a $2.4 million decrease in NOI from redevelopment communities. Real estate depreciation and amortization For the three months ended September 30, 2020 and 2019, the Company recognized real estate depreciation and amortization of $151.9 million and $127.4 million, respectively. The increase in 2020 as compared to 2019 was primarily attributable to communities acquired in 2020 and 2019, partially offset by a decrease from fully depreciated assets. For the nine months ended September 30, 2020 and 2019, the Company recognized real estate depreciation and amortization of $462.5 million and $357.8 million, respectively. The increase in 2020 as compared to 2019 was primarily attributable to communities acquired in 2020 and 2019, partially offset by a decrease from fully depreciated assets. Gain/(Loss) on sale of real estate owned During the nine months ended September 30, 2020, the Company recognized gains of $61.3 million from the sale of two operating communities located in Kirkland, Washington and Bellevue, Washington. During the nine months ended September 30, 2019, the Company recognized a gain of $5.3 million on the sale of a parcel of land in Los Angeles, California. 83 Table of Contents Interest expense For the three months ended September 30, 2020 and 2019, the Company recognized interest expense of $62.3 million and $42.5 million, respectively. The increase in 2020 as compared to 2019 was primarily due to $24.5 million from net extinguishment cost from the prepayment of debt during the three months ended September 30, 2020 as compared to $6.3 million for the three months ended September 30, 2019, and higher average debt balances. For the nine months ended September 30, 2020 and 2019, the Company recognized interest expense of $140.2 million and $110.5 million, respectively. The increase in 2020 as compared to 2019 was primarily due to $24.5 million from net extinguishment cost from the prepayment of debt during the nine months ended September 30, 2020 as compared to $6.3 million for the nine months ended September 30, 2019, and higher average debt balances. Income/(loss) from unconsolidated entities For the three months ended September 30, 2020 and 2019, we recognized income/(loss) from unconsolidated entities of $2.9 million and $12.7 million, respectively. The decrease in 2020 as compared to 2019 was primarily due to a $5.3 million gain recognized on the sale of an operating property from our UDR/KFH joint venture in 2019 and a $4.4 million unrealized gain recorded on an unconsolidated technology investment in 2019. Inflation We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results of operations as a result of wage pressures and increases in utilities and material costs, the majority of our apartment leases have initial terms of 12 months or less, which generally enables us to compensate for any inflationary effects by increasing rental rates 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 has had a material impact on our results for the three and nine months ended September 30, 2020. 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 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 84 Table of Contents 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 allows 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 flows 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 will enable 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 flows 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. 85 Table of Contents The following table outlines our reconciliation of Net income/(loss) attributable to common stockholders to FFO, FFOA, and AFFO for the three and nine months ended September 30, 2020 and 2019 ( dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ ​ 2020 2019 2020 2019 ​ Net income/(loss) attributable to common stockholders ​ $ (26,309) ​ $ 26,173 ​ $ 34,555 ​ $ 84,253 ​ Real estate depreciation and amortization ​ 151,949 ​ 127,391 ​ 462,481 ​ 357,793 ​ Noncontrolling interests ​ (1,959) ​ 2,218 ​ 2,685 ​ 7,016 ​ Real estate depreciation and amortization on unconsolidated joint ventures ​ 8,738 ​ 14,615 ​ 26,299 ​ 45,500 ​ Net gain on the sale of unconsolidated depreciable property ​ — ​ (5,259) ​ — ​ (10,510) ​ Net gain on the sale of depreciable real estate owned ​ — ​ — ​ (61,303) ​ — ​ FFO attributable to common stockholders and unitholders, basic ​ $ 132,419 ​ $ 165,138 ​ $ 464,717 ​ $ 484,052 ​ Distributions to preferred stockholders — Series E (Convertible) ​ 1,051 ​ 1,031 ​ 3,179 ​ 3,073 ​ FFO attributable to common stockholders and unitholders, diluted ​ $ 133,470 ​ $ 166,169 ​ $ 467,896 ​ $ 487,125 ​ Income/(loss) per weighted average common share, diluted ​ $ (0.09) ​ $ 0.09 ​ $ 0.12 ​ $ 0.30 ​ FFO per weighted average common share and unit, basic ​ $ 0.42 ​ $ 0.53 ​ $ 1.47 ​ $ 1.58 ​ FFO per weighted average common share and unit, diluted ​ $ 0.42 ​ $ 0.53 ​ $ 1.46 ​ $ 1.57 ​ Weighted average number of common shares and OP/DownREIT Units outstanding — basic ​ 317,034 ​ 310,917 ​ 316,939 ​ 305,666 ​ Weighted average number of common shares, OP/DownREIT Units, and common stock equivalents outstanding — diluted ​ 320,242 ​ 314,751 ​ 320,210 ​ 309,371 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impact of adjustments to FFO: ​ ​ ​ ​ ​ Costs associated with debt extinguishment and other ​ $ 24,540 ​ $ 6,283 ​ $ 24,540 ​ $ 6,283 ​ Promoted interest on settlement of note receivable, net of tax ​ ​ — ​ ​ — ​ ​ — ​ ​ (6,482) ​ Legal and other costs ​ 1,570 ​ — ​ 3,914 ​ 3,660 ​ Net gain on the sale of non-depreciable real estate owned ​ — ​ — ​ — ​ (5,282) ​ Unrealized (gain)/loss on unconsolidated technology investments, net of tax ​ ​ 155 ​ ​ (3,144) ​ ​ (3,147) ​ ​ (3,373) ​ Joint venture development success fee ​ — ​ (3,750) ​ — ​ (3,750) ​ Severance costs and other restructuring expense ​ 254 ​ 274 ​ 1,896 ​ 274 ​ Casualty-related charges/(recoveries), net ​ 74 ​ (1,088) ​ 1,722 ​ (827) ​ Casualty-related charges/(recoveries) on unconsolidated joint ventures, net ​ — ​ (651) ​ 31 ​ (424) ​ ​ ​ $ 26,593 ​ $ (2,076) ​ $ 28,956 ​ $ (9,921) ​ FFOA attributable to common stockholders and unitholders, diluted ​ $ 160,063 ​ $ 164,093 ​ $ 496,852 ​ $ 477,204 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FFOA per weighted average common share and unit, diluted ​ $ 0.50 ​ $ 0.52 ​ $ 1.55 ​ $ 1.54 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Recurring capital expenditures ​ (17,397) ​ (13,177) ​ (39,110) ​ (33,145) ​ AFFO attributable to common stockholders and unitholders, diluted ​ $ 142,666 ​ $ 150,916 ​ $ 457,742 ​ $ 444,059 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ AFFO per weighted average common share and unit, diluted ​ $ 0.45 ​ $ 0.48 ​ $ 1.43 ​ $ 1.44 ​ ​ 86 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 three and nine months ended September 30, 2020 and 2019 (shares in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2020 2019 2020 2019 Weighted average number of common shares and OP/DownREIT Units outstanding — basic 317,034 310,917 316,939 305,666 Weighted average number of OP/DownREIT Units outstanding (22,321) (22,211) (22,312) (23,068) Weighted average number of common shares outstanding — basic per the Consolidated Statements of Operations 294,713 288,706 294,627 282,598 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of common shares, OP/DownREIT Units, and common stock equivalents outstanding — diluted 320,242 314,751 320,210 309,371 Weighted average number of OP/DownREIT Units outstanding (22,321) (22,211) (22,312) (23,068) Weighted average number of Series E Cumulative Convertible Preferred shares outstanding (2,918) (3,011) (2,960) (3,011) Weighted average number of common shares outstanding — diluted per the Consolidated Statements of Operations 295,003 289,529 294,938 283,292 ​ ​ United Dominion Realty, L.P.: Business Overview United Dominion Realty, L.P. (the “Operating Partnership” or “UDR, L.P.”) is a Delaware limited partnership formed in February 2004 and organized pursuant to the provisions of the Delaware Revised Uniform Limited Partnership Act. The Operating Partnership is the successor-in-interest to United Dominion Realty, L.P., a limited partnership formed under the laws of Virginia, which commenced operations on November 4, 1995. Our sole general partner is UDR, Inc., a Maryland corporation (“UDR” or the “General Partner”), which conducts a substantial amount of its business and holds a substantial amount of its assets through the Operating Partnership. At September 30, 2020, the Operating Partnership’s real estate portfolio included 52 communities located in nine states and the District of Columbia with a total of 16,434 apartment homes. As of September 30, 2020, UDR owned 0.1 million units of our general partnership interests and 176.1 million units of our limited partnership interests (the “OP Units”), or approximately 95.3% of our outstanding OP Units. By virtue of its ownership of our OP Units and being our sole general partner, UDR has the ability to control all of the day-to-day operations of the Operating Partnership. Unless otherwise indicated or unless the context requires otherwise, all references in this section of this Report to the Operating Partnership or “we,” “us” or “our” refer to UDR, L.P. together with its consolidated subsidiaries, and all references in this section to “UDR” or the “General Partner” refer solely to UDR, Inc. UDR is a self-administered real estate investment trust, or REIT, that owns, acquires, renovates, develops, and manages apartment communities. The General Partner was formed in 1972 as a Virginia corporation and changed its state of incorporation from Virginia to Maryland in June 2003. At September 30, 2020, the General Partner’s consolidated real estate portfolio included 148 communities located in 13 states and the District of Columbia with a total of 47,488 apartment homes. In addition, the General Partner had an ownership interest in 5,668 completed or to-be-completed apartment homes through unconsolidated joint ventures or partnerships, including 2,538 apartment homes owned by entities in which we hold preferred equity investments. The Operating Partnership’s same-store community apartment home population for both the three and nine months ended September 30, 2020 was 15,609. 87 Table of Contents The following table summarizes our market information by major geographic markets as of and for the three and nine months ended September 30, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2020 ​ Three Months Ended September 30, 2020 ​ Nine Months Ended September 30, 2020 ​ ​ ​ Percentage Total ​ Monthly ​ Monthly ​ ​ Number of ​ Number of ​ of Total ​ Carrying ​ Average ​ Income per ​ Average ​ Income per ​ ​ Apartment ​ Apartment ​ Carrying ​ Value (in ​ Physical ​ Occupied ​ Physical ​ Occupied Same-Store Communities ​ Communities ​ Homes ​ Value ​ thousands) ​ Occupancy ​ Home (a) ​ Occupancy ​ Home (a) West Region ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Orange County, CA ​ 5 3,119 19.2 % $ 751,816 96.5 % $ 2,258 ​ 96.7 % $ 2,287 San Francisco, CA 9 2,185 15.7 % ​ 615,236 87.9 % ​ 3,193 ​ 92.7 % ​ 3,291 Seattle, WA 5 932 5.9 % ​ 232,569 96.3 % ​ 2,093 ​ 96.9 % ​ 2,105 Monterey Peninsula, CA 7 1,565 4.7 % ​ 184,439 97.2 % ​ 1,935 ​ 96.6 % ​ 1,936 Los Angeles, CA 2 344 3.0 % ​ 117,646 96.4 % ​ 2,697 ​ 96.7 % ​ 2,759 Other Southern California 1 414 2.0 % ​ 76,475 97.6 % ​ 2,199 ​ 97.2 % ​ 2,157 Portland, OR 2 476 1.3 % ​ 51,827 96.8 % ​ 1,625 ​ 97.0 % ​ 1,631 Mid-Atlantic Region ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Metropolitan D.C. 5 1,736 11.2 % ​ 439,939 95.7 % ​ 2,489 ​ 96.3 % ​ 2,535 Baltimore, MD 2 540 2.9 % ​ 107,871 98.1 % ​ 1,585 ​ 97.7 % ​ 1,557 Northeast Region ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ New York, NY 1 503 8.5 % ​ 334,110 80.5 % ​ 3,219 ​ 90.4 % ​ 3,670 Boston, MA 1 387 1.9 % ​ 75,672 96.7 % ​ 2,024 ​ 95.8 % ​ 2,071 Southeast Region ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tampa, FL 2 942 2.9 % ​ 112,445 97.6 % ​ 1,550 ​ 97.6 % ​ 1,541 Nashville, TN ​ 6 1,612 ​ 4.0 % ​ 157,281 97.6 % ​ 1,374 ​ 97.6 % ​ 1,348 Other Florida 1 636 2.3 % ​ 88,452 97.7 % ​ 1,659 ​ 97.2 % ​ 1,641 Southwest Region ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Denver, CO ​ 1 ​ 218 ​ 3.7 % ​ 144,858 ​ 94.1 % ​ 2,968 ​ 93.1 % ​ 3,063 Total/Average Same-Store Communities 50 15,609 ​ 89.2 % ​ 3,490,636 95.0 % $ 2,194 ​ 96.1 % $ 2,241 Non-Mature, Commercial Properties & Other 1 493 7.5 % ​ 292,646 ​ ​ ​ ​ ​ Total Real Estate Held for Investment ​ 51 ​ 16,102 ​ 96.7 % ​ 3,783,282 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real Estate Held for Disposition (b) ​ 1 ​ 332 ​ 3.3 % ​ 129,396 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Real Estate Owned 52 16,434 100.0 % ​ 3,912,678 ​ ​ ​ ​ ​ Total Accumulated Depreciation ​ ​ ​ ​ (1,902,081) ​ ​ ​ ​ ​ Total Real Estate Owned, Net of Accumulated Depreciation ​ ​ ​ $ 2,010,597 ​ ​ ​ ​ ​ (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. (b) The Operating Partnership had one community located in Metropolitan D.C. that met the criteria to be classified as held for disposition at September 30, 2020. ​ 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 July 1, 2019 (for quarter-to-date comparison) and January 1, 2019 (for year-to-date comparison) and held as of September 30, 2020. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior period, there is no plan to conduct substantial redevelopment activities, and the communities are not held for disposition within the current year. 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. 88 Table of Contents Liquidity and Capital Resources Liquidity is the ability to meet present and future financial obligations either through operating cash flows, the sale of properties, and the issuance of debt. Both the coordination of asset and liability maturities and effective capital management are important to the maintenance of liquidity. The Operating Partnership’s primary source of liquidity is cash flow from operations, as determined by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment homes, and borrowings owed by us under the General Partner’s credit agreements. The General Partner will routinely use its working capital credit facility, its 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 owed by us under the General Partner’s credit agreements. We expect to meet certain long-term liquidity requirements such as scheduled debt maturities and potential property acquisitions through net cash provided by property operations, borrowings and the disposition of properties. We believe that our net cash provided by property operations and borrowings will continue to be adequate to meet both operating requirements and the payment of distributions. Likewise, the budgeted expenditures for improvements and renovations of certain properties are expected to be funded from property operations, borrowings owed by us under the General Partner’s credit agreements, and the disposition of properties. Future Capital Needs Future capital expenditures are expected to be funded with proceeds from the issuance of secured debt or unsecured debt, sales of properties, borrowings owed by us under our General Partner’s credit agreements, and to a lesser extent, from cash flows provided by operating activities. As of September 30, 2020, the Operating Partnership does not have any debt maturing during the remainder of 2020. Critical Accounting Policies and Estimates and New Accounting Pronouncements Our critical accounting policies are those having the most impact on the reporting of our financial condition and results and those requiring significant judgments and estimates. These policies include those related to (1) capital expenditures, (2) impairment of long-lived assets, (3) real estate investment properties, and (4) revenue recognition. Our critical accounting policies are described in more detail in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Operating Partnership’s Annual Report on Form 10-K, filed with the SEC on February 18, 2020. There have been no significant changes in our critical accounting policies from those reported. With respect to these critical accounting policies, we believe that the application of judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented. 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 nine months ended September 30, 2020 and 2019. Operating Activities For the nine months ended September 30, 2020, Net cash provided by/(used in) operating activities was $180.4 million compared to $197.9 million for the comparable period in 2019. The decrease in cash flow from operating activities was primarily due to changes in operating assets and liabilities and a decrease in net operating income, primarily driven by a reserve recorded in 2020 on our multifamily tenant lease receivables. Investing Activities For the nine months ended September 30, 2020, Net cash provided by/(used in) investing activities was $(21.7) million compared to $(31.7) million for the comparable period in 2019. The decrease in cash used in investing activities was 89 Table of Contents primarily due to a decrease in capital expenditures during the nine months ended September 30, 2020, as compared to the same period in 2019. Acquisitions and Dispositions The Operating Partnership did not have any acquisitions or dispositions of real estate during the nine months ended September 30, 2020. Financing Activities For the nine months ended September 30, 2020 and 2019, our Net cash provided by/(used in) financing activities was $(157.3) million compared to $(165.2) million for the comparable period of 2019. The decrease in cash used in financing activities was primarily due to a decrease in repayments of notes payable to the General Partner, partially offset by proceeds from the issuance of secured debt in 2019. Guarantor on Unsecured Debt The Operating Partnership is the guarantor on the General Partner’s unsecured revolving credit facility with an aggregate borrowing capacity of $1.1 billion, an unsecured commercial paper program with an aggregate borrowing capacity of $500 million, a $350 million term loan due September 2023, $183 million of medium-term notes due July 2024, $300 million of medium-term notes due October 2025, $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, $400 million of medium-term notes due August 2031, $400 million of medium-term notes due August 2032 and $300 million of medium-term notes due November 2034. As of September 30, 2020 and December 31, 2019, the General Partner did not have an outstanding balance under the unsecured revolving credit facility and had $230.0 million and $300.0 million, respectively, outstanding under its unsecured commercial paper program. The credit facilities are subject to customary financial covenants and limitations. Interest Rate Risk We are exposed to interest rate risk associated with variable rate notes payable and maturing debt that has to be refinanced. We do not hold financial instruments for trading or other speculative purposes, but rather issue these financial instruments to finance our portfolio of real estate assets. Interest rate sensitivity is the relationship between changes in market interest rates and the fair value of market rate sensitive assets and liabilities. Our earnings are affected as changes in short-term interest rates impact our cost of variable rate debt and maturing fixed rate debt. We had $27.0 million in variable rate debt that is not subject to interest rate swap contracts as of September 30, 2020. If market interest rates for variable rate debt increased by 100 basis points, our interest expense for the nine months ended September 30, 2020 would increase by $0.2 million based on the average balance outstanding during the period. These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. These analyses do not consider the effects of the adjusted level of overall economic activity that could exist in such an environment. Further, in the event of a change of such amount, 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 General Partner also utilizes derivative financial instruments owed by the Operating Partnership to manage interest rate risk and generally designates these financial instruments as cash flow hedges. See Note 9, Derivatives and Hedging Activities , in the Notes to the Operating Partnership’s Consolidated Financial Statements for additional discussion of derivative instruments. 90 Table of Contents A presentation of cash flow metrics based on GAAP is as follows ( dollars in thousands ): ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ 2020 2019 Net cash provided by/(used in) operating activities ​ $ 180,416 ​ $ 197,874 Net cash provided by/(used in) investing activities ​ (21,652) ​ (31,668) Net cash provided by/(used in) financing activities ​ (157,250) ​ (165,217) ​ ​ Results of Operations The following discussion explains the changes in results of operations that are presented in our Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019. Net Income/(Loss) Attributable to OP Unitholders Net income attributable to OP unitholders was $18.6 million ($0.10 per diluted OP Unit) for the three months ended September 30, 2020, as compared to net income of $26.8 million ($0.15 per diluted OP Unit) for the comparable period in the prior year. The decrease in net income attributable to OP unitholders resulted primarily from the following items, which are discussed in further detail elsewhere within this Report: ● a decrease in total property NOI of $6.1 million, primarily due to an approximately $1.6 million reserve recorded on our multifamily tenant lease receivables, an increase in real estate taxes due to higher assessed valuations, and an increase in repair and maintenance expenses due to increased use of third party vendors, partially offset by a decrease in personnel expense as result of fewer employees; and ● an increase in other operating expenses of $1.8 million, primarily due to higher ground lease expense. Net income attributable to OP unitholders was $62.1 million ($0.34 per diluted OP Unit) for the nine months ended September 30, 2020, as compared to net income of $78.2 million ($0.42 per diluted OP Unit) for the comparable period in the prior year. The decrease in net income attributable to OP unitholders resulted primarily from the following items, which are discussed in further detail elsewhere within this Report: ● a decrease in total property NOI of $10.2 million, primarily due to an approximately $3.6 million reserve recorded on our multifamily tenant lease receivables, an increase in real estate taxes due to higher assessed valuations, and an increase in repair and maintenance expenses due to increased use of third party vendors, partially offset by a decrease in personnel expense as result of fewer employees; and ● an increase in other operating expenses of $4.7 million, primarily due to higher ground lease expense. Apartment Community Operations Our net income results primarily from NOI generated from the operation of our apartment communities. The Operating Partnership 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 are property management costs, which are the Operating Partnership’s allocable share of costs incurred by the General Partner for shared services of corporate level property management employees and related support functions and 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 we consider 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 OP unitholders below. 91 Table of Contents The following table summarizes the operating performance of our total property NOI for each of the periods presented (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ Nine Months Ended ​ ​ ​ ​ ​ September 30, (a) ​ % ​ September 30, (a) ​ % ​ ​ 2020 2019 Change 2020 2019 ​ Change Same-Store Communities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Same-Store rental income ​ $ 95,668 ​ $ 101,984 (6.2) % $ 296,074 ​ $ 302,043 ​ (2.0) % Same-Store operating expense (b) ​ (28,200) ​ (26,700) 5.6 % (81,001) ​ (77,451) ​ 4.6 % Same-Store NOI ​ 67,468 ​ 75,284 (10.4) % 215,073 ​ 224,592 ​ (4.2) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-Mature Communities/Other NOI: ​ ​ ​ ​ ​ ​ ​ ​ Redevelopment communities NOI ​ 965 ​ 2,535 (61.9) % 7,408 ​ 9,533 ​ (22.3) % Non-residential/other NOI (c) ​ ​ 5,076 ​ ​ 1,589 ​ 219.4 % ​ 4,669 ​ ​ 3,199 ​ 46.0 % Sold and held for disposition communities NOI ​ ​ 1,240 ​ ​ 1,424 ​ (12.9) % ​ 4,279 ​ ​ 4,327 ​ (1.1) % Total Non-Mature Communities/Other NOI ​ 7,281 ​ 5,548 31.2 % 16,356 ​ 17,059 ​ (4.1) % Total property NOI ​ $ 74,749 ​ $ 80,832 (7.5) % $ 231,429 ​ $ 241,651 ​ (4.2) % (a) Same-Store consists of 15,609 apartment homes. (b) Excludes depreciation, amortization, and property management expenses. (c) Primarily non-residential revenue and expense and straight-line adjustment for concessions. ​ The following table is our reconciliation of Net income/(loss) attributable to OP unitholders to total property NOI for each of the periods presented (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ ​ 2020 2019 2020 2019 ​ Net income/(loss) attributable to OP unitholders ​ $ 18,622 ​ $ 26,835 ​ $ 62,113 ​ $ 78,175 ​ Property management ​ 3,095 ​ 3,211 ​ 9,345 ​ 9,498 ​ Other operating expenses ​ 4,110 ​ 2,301 ​ 11,806 ​ 7,123 ​ Real estate depreciation and amortization ​ 35,335 ​ 35,155 ​ 106,065 ​ 104,730 ​ General and administrative ​ 4,323 ​ 4,066 ​ 13,582 ​ 12,878 ​ Casualty-related charges/(recoveries), net ​ — ​ (1,088) ​ 188 ​ (1,169) ​ (Income)/loss from unconsolidated entities ​ 1,562 ​ 2,383 ​ 4,984 ​ 6,917 ​ Interest expense ​ 7,267 ​ 7,521 ​ 21,901 ​ 22,247 ​ Net income/(loss) attributable to noncontrolling interests ​ 435 ​ 448 ​ 1,445 ​ 1,252 ​ Total property NOI ​ $ 74,749 ​ $ 80,832 ​ $ 231,429 ​ $ 241,651 ​ ​ Same-Store Communities Our Same-Store Community properties, those acquired, developed, and stabilized prior to July 1, 2019 (for quarter-to-date comparison) and January 1, 2019 (for year-to-date comparison) and held as of September 30, 2020, consisted of 15,609 apartment homes for both periods and provided 90.3% and 92.9% of our total NOI for the three and nine months ended September 30, 2020, respectively. Three Months Ended September 30, 2020 vs. Three Months Ended September 30, 2019 NOI for our Same-Store Community properties decreased 10.4%, or $7.8 million, for the three months ended September 30, 2020 compared to the same period in 2019. The decrease in property NOI was primarily attributable to a 6.2%, or $6.3 million, decrease in property rental income and a 5.6%, or $1.5 million, increase in operating expenses. The decrease in property rental income was primarily driven by a $1.7 million increase in our reserve on multifamily tenant lease receivables, a $2.5 million increase in rent concessions and a $2.7 million increase in occupancy loss, partially offset by a $0.4 million increase in rental rates and a $0.1 million increase in reimbursement and ancillary and fee income. Physical occupancy decreased 1.8% to 95.0% and total monthly income per occupied home decreased 4.4% to $2,194. The increase in operating expenses was primarily driven by a 7.8%, or $0.8 million, increase in real estate taxes, which was primarily due to higher assessed valuations and a 23.2%, or $1.0 million, increase in repair and maintenance 92 Table of Contents expense due to the increased use of third party vendors, partially offset by an 8.6%, or $0.5 million, decrease in personnel expense as a result of fewer employees. The operating margin (property net operating income divided by property rental income) was 70.5% and 73.8% for the three months ended September 30, 2020 and 2019, respectively. Nine Months Ended September 30, 2020 vs. Nine Months Ended September 30, 2019 NOI for our Same-Store Community properties decreased 4.2%, or $9.5 million, for the nine months ended September 30, 2020 compared to the same period in 2019. The decrease in property NOI was primarily attributable to a 2.0%, or $6.0 million, decrease in property rental income and a 4.6%, or $3.6 million, increase in operating expenses. The decrease in property rental income was primarily driven by a $3.8 million increase in our reserve on multifamily tenant lease receivables, a $3.1 million increase in rent concessions and a $3.9 million increase in occupancy loss, partially offset by a 1.7%, or $4.6 million, increase in rental rates and a 0.4%, or $0.2 million, increase in reimbursement and ancillary and fee income. Physical occupancy decreased 0.7% to 96.1% and total monthly income per occupied home increased 1.3% to $2,241. The increase in operating expenses was primarily driven by an 8.1%, or $2.3 million, increase in real estate taxes, which was primarily due to higher assessed valuations and a 15.3%, or $1.9 million, increase in repair and maintenance expense due to the increased use of third party vendors, partially offset by a 7.9%, or $1.3 million, decrease in personnel expense as a result of fewer employees. The operating margin (property net operating income divided by property rental income) was 72.6% and 74.4% for the nine months ended September 30, 2020 and 2019, respectively. Non-Mature Communities/Other The Operating Partnership’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 the non-apartment components of mixed use properties. Three Months Ended September 30, 2020 vs. Three Months Ended September 30, 2019 The remaining 9.7%, or $7.3 million, of our total NOI during the three months ended September 30, 2020 was generated from our Non-Mature Communities/Other . NOI from Non-Mature Communities/Other increased 31.2%, or $1.7 million, for the three months ended September 30, 2020, compared to the same period in 2019. The increase was primarily attributable to a $3.5 million increase in NOI from non-residential/other primarily due to changes in straight-line rent as a result of increased tenant rent concessions during the period, partially offset by a $1.6 million decrease in NOI from redevelopment communities. Nine Months Ended September 30, 2020 vs. Nine Months Ended September 30, 2019 The remaining 7.1%, or $16.4 million, of our total NOI during the nine months ended September 30, 2020 was generated from our Non-Mature Communities/Other . NOI from Non-Mature Communities/Other decreased 4.1%, or $0.7 million, for the nine months ended September 30, 2020, compared to the same period in 2019. The decrease was primarily attributable to a $2.1 million decrease in NOI from redevelopment communities, partially offset by an $1.5 million increase in NOI from non-residential/other primarily due to changes in straight-line rent as a result of increased tenant rent concessions during the period. Inflation We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results of operations as a result of wage pressures and increases in utilities and material costs, the majority of our apartment leases have initial terms of 12 months or less, which generally enables us to compensate for any inflationary effects by increasing rental rates 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 has had a material impact on our results for the three and nine months ended September 30, 2020. 93 Table of Contents 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. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company and the Operating Partnership are exposed to interest rate changes associated with our unsecured credit facility and other variable rate debt as well as refinancing risk on our fixed rate debt. The Company’s and the Operating Partnership’s involvement with derivative financial instruments is limited and we do not expect to use them for trading or other speculative purposes. The Company and the Operating Partnership use derivative instruments solely to manage their exposure to interest rates. See our Annual Report on Form 10-K for the year ended December 31, 2019 under the heading “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for a more complete discussion of our interest rate sensitive assets and liabilities. As of September 30, 2020, our market risk has not changed materially from the amounts reported in our Annual Report on Form 10-K for the year ended December 31, 2019. Item 4. CONTROLS AND PROCEDURES The disclosure controls and procedures of the Company and the Operating Partnership are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. As a result, our disclosure controls and procedures are designed to provide reasonable assurance that such disclosure controls and procedures will meet their objectives. As of September 30, 2020, we carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, of the effectiveness of the design and operation of the disclosure controls and procedures of the Company and the Operating Partnership. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer of the Company concluded that the disclosure controls and procedures of the Company and the Operating Partnership are effective at the reasonable assurance level described above. There have not been any changes in either the Company’s or the Operating Partnership’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter to which this report relates that materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of either the Company or the Operating Partnership. ​ 94 Table of Contents PART II — OTHER INFORMATION Item 1. LEGAL PROCEEDINGS The Company is a party to various claims and routine litigation arising in the ordinary course of business. We do not believe that the results of any such claims and litigation, individually or in the aggregate, will have a material adverse effect on our business, financial position or results of operations. Item 1A. RISK FACTORS There are many factors that affect the business and the results of operations of the Company and the Operating Partnership, some of which are beyond the control of the Company and the Operating Partnership. The following is a description of important factors that may cause the actual results of operations of the Company and the Operating Partnership in future periods to differ materially from those currently expected or discussed in forward-looking statements set forth in this Report relating to our financial results, operations and business prospects. 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. Risks Related to Our Real Estate Investments and Our Operations The Ongoing COVID-19 Pandemic and Measures Intended to Prevent its Spread Could Have a Material Adverse Effect on our Business, Results of Operations, Cash Flows and Financial Condition. Since being first reported in December 2019, COVID-19 has spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The pandemic has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders. While operations in certain areas have been allowed to fully or partially re-open, many areas are experiencing new closures or restrictions subsequent to re-opening and no assurance can be given that such closures or restrictions will not continue to occur. Our headquarters and all of our properties and our corporate offices are located in areas that are or have been subject to shelter-in-place orders and restrictions on the types of businesses that may continue to operate. The impact of the COVID-19 pandemic and measures to prevent its spread could materially and adversely affect our business in a number of ways. Our rental revenue and operating results depend significantly on the occupancy levels at our properties and the ability of our residents and retail and commercial tenants to meet their rent obligations to us, which have been in certain cases, and could continue to be, adversely affected by, among other things, job losses, furloughs, store closures, lower incomes and uncertainty about the future as a result of the COVID-19 pandemic. The deterioration of economic conditions as a result of the pandemic in certain locations have materially decreased, and in other locations may ultimately materially decrease, occupancy levels and rents in our portfolio, which could adversely affect the value of our properties. In addition, numerous state, local, federal and industry-initiated efforts, including eviction moratoriums, shelter-in-place orders and prohibitions on charging certain fees, have affected, and may continue to affect, our ability to collect rent or enforce remedies for the failure to pay rent, which have negatively impacted, and may continue to negatively impact, our ability to remove residents or retail and commercial tenants who are not paying rent and our ability to rent their units or other space to new residents or retail and commercial tenants, respectively. Even if these measures are lifted, additional cases of COVID-19 may result in governments reinstating these or similar measures. State, local, and federal governments also have increased, and may in the future increase, property taxes or other taxes, or fees, or may enact new taxes or fees, in order to increase revenue, which has in the past, and may in the future, increase our expenses. Our development and construction projects, including those in our Developer Capital Program, also could be adversely affected, including as a result of disruptions in supply chains and government restrictions on the types of projects that may continue during the pandemic or as a result of delayed construction schedules due to social distancing efforts or occurrences of the virus at a construction site. The COVID-19 pandemic and measures to prevent its spread also could adversely affect the businesses and financial condition of our counterparties, including our joint venture partners, borrowers under our mezzanine loans, and general contractors and their subcontractors, and their ability to satisfy their obligations to us and to complete transactions or projects with us as intended. In addition, a significant number of our retail tenants were, or have been, forced to close temporarily or operate on a limited basis as a result 95 Table of Contents of COVID-19 and related government actions, which has resulted in, and could continue to result in, delays in rent payments, rent concessions, early lease terminations or tenant bankruptcies. The COVID-19 pandemic also has caused, and may continue to cause, severe economic, market and other disruptions worldwide. Disruptions in the financial markets could adversely impact our access to equity and debt financing, including through our commercial paper program, on favorable terms or at all, which could adversely affect our ability to consummate acquisitions, fund developments and capital expenditures, and repay or refinance indebtedness as it becomes due. See “Risks Related to Our Indebtedness and Financings—Disruptions in Financial Markets May Adversely Impact Availability and Cost of Credit and Have Other Adverse Effects on Us and the Market Price of UDR’s Stock.” The extent of the COVID-19 pandemic’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic and the duration of, or the reinstatement of, government measures to mitigate the pandemic or address its effects, all of which are uncertain and difficult to predict. Due to the speed with which the situation is developing, we are not able at this time to estimate the full effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material. Unfavorable Apartment Market and Economic Conditions Could Adversely Affect Occupancy Levels, Rental Revenues and the Value of Our Real Estate Assets. Unfavorable market conditions in the areas in which we operate or unfavorable economic conditions generally, including as a result of COVID-19, may significantly affect our occupancy levels, our rental rates and collections, the value of our properties and our ability to acquire or dispose of apartment communities on economically favorable terms. Our ability to lease our properties at favorable rates is adversely affected by the increase in supply in the multifamily and other rental markets and is dependent upon the overall level in the economy, which is adversely affected by, among other things, job losses and unemployment levels, recession, debt levels, housing markets, stock market volatility and uncertainty about the future. Some of our major expenses generally do not decline when related rents decline. We would expect that declines in our occupancy levels and rental revenues would cause us to have less cash available to pay our indebtedness and to distribute to UDR’s stockholders, which could adversely affect our financial condition or the market value of our securities. Factors that may affect our occupancy levels, our rental revenues, and/or the value of our properties include the following, among others: ● downturns in the global, national, regional and local economic conditions, particularly increases in unemployment; ● declines in mortgage interest rates, making alternative housing more affordable; ● government or builder incentives with respect to home ownership, making alternative housing options more attractive; ● local real estate market conditions, including oversupply of, or reduced demand for, apartment homes; ● declines in the financial condition of our tenants, which may make it more difficult for us to collect rents from some tenants; ● changes in market rental rates; ● our ability to renew leases or re-lease space on favorable terms; ● the timing and costs associated with property improvements, repairs or renovations; ● changes in household formation; and ● rent control or stabilization laws, or other laws regulating or impacting rental housing, which could prevent us from raising rents to offset increases in operating costs or otherwise impact us. The Geographic Concentration of Our Communities in Certain Markets Could Have an Adverse Effect on Our Operations if a Particular Market is Adversely Impacted by Economic or Other Conditions. For the nine months ended September 30, 2020, approximately 51.4% of our total NOI was generated from communities located in the Washington, D.C. metropolitan area (15.9%), Orange County, CA (13.7%), the San Francisco Bay Area, CA (10.4%) and Boston, MA (11.4%). For the year ended December 31, 2019, approximately 52.7% of our total NOI was generated from communities located in the Washington, D.C. metropolitan area (16.2%), Orange County, CA (14.2%), the San Francisco Bay Area, CA (12.2%) and New York, NY (10.1%). As a result, if any one or more of these markets is adversely impacted by regional or local economic conditions or real estate market conditions, such conditions may have a greater adverse impact on our results of operations than if our portfolio was more geographically diverse. For example, the urban core markets of New York, NY, San Francisco Bay 96 Table of Contents Area, CA, and Boston, MA have been more adversely impacted by the COVID-19 pandemic in comparison to our other markets, resulting in larger decreases in rental income from elevated rent concessions and lower occupancy in those markets. In addition, if one or more of these markets is adversely affected by changes in regional or local regulations, including those related to rent control or stabilization, such regulations may have a greater adverse impact on our results of operation than if our portfolio was more geographically diverse. We May Be Unable to Renew Leases or Relet Apartment Units as Leases Expire, or the Terms of Renewals or New Leases May Be Less Favorable Than Current Leases. When our residents decide to leave our apartments, whether because they decide not to renew their leases or they leave prior to their lease expiration date, we may not be able to relet their apartment units. Even if the residents do renew or we can relet the apartment units, the terms of renewal or reletting may be less favorable than current lease terms. Furthermore, because the majority of our apartment leases have initial terms of 12 months or less, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms. If we are unable to promptly renew the leases or relet the apartment units, or if the rental rates upon renewal or reletting are lower than expected rates, then our results of operations and financial condition may be adversely affected. If residents do not experience increases in their income or if they experience decreases in their income or job losses, we may be unable to increase or maintain rent and/or delinquencies may increase. We Face Certain Risks Related to Our Retail and Commercial Space. Certain of our properties include retail or commercial space that we lease to third parties. The long term nature of our retail and commercial leases (generally five to ten years with market-based or fixed-price renewal options) and the characteristics of many of our tenants (generally small and/or local businesses) may subject us to certain risks, including risks related to such tenants being required not to operate, or to operate on a limited basis, due to the COVID-19 pandemic. The longer term leases could result in below market lease rates over time. Tenants may provide guarantees and other credit support which may prove to be inadequate or uncollectable, and the failure rate of small and/or local businesses may be higher than average. We may not be able to lease new space for rents that are consistent with our projections or for market rates. Also, when leases for our retail or commercial space terminate either at the end of the lease or because a tenant leaves early, the space may not be relet or the terms of reletting, including the cost of allowances and concessions to tenants, may be less favorable than the prior lease terms or we may incur additional expenses related to modifications of the spaces in order to satisfy new tenants. Our properties compete with other properties with retail or commercial space. The presence of competitive alternatives may adversely affect our ability to lease space and the level of rents we can obtain. If our retail or commercial tenants experience financial distress or bankruptcy, they have in the past and may in the future fail to comply with their contractual obligations, seek concessions in order to continue operations, or cease their operations, which could adversely impact our results of operations and financial condition. ​ Risk of Inflation/Deflation. Substantial inflationary or deflationary pressures could have a negative effect on rental rates and property operating expenses. The general risk of inflation is that interest on our debt, general and administrative expenses and other expenses increase at a rate faster than increases in our rental rates, which could adversely affect our financial condition or results of operations. We Are Subject to Certain Risks Associated with Selling Apartment Communities, Which Could Limit Our Operational and Financial Flexibility. We periodically dispose of apartment communities that no longer meet our strategic objectives, but adverse market conditions may make it difficult to sell apartment communities we own. We cannot predict whether we will be able to sell any property for the price or on the terms we set, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property. Furthermore, we may be required to expend funds to correct defects or to make improvements before a property can be sold or the purchase price may be reduced to cover any cost of correcting defects or making improvements. These conditions may limit our ability to dispose of properties and to change our portfolio in order to meet our strategic objectives, which could in turn adversely affect our financial condition, results of operations or our ability to fund other activities in which we may want to engage such as the purchase of properties, development or redevelopment, or funding the Developer Capital Program. We are also subject to the following risks in connection with sales of our apartment communities, among others: ● a significant portion of the proceeds from property sales may be held by intermediaries in order for some sales to qualify as like-kind exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended, or the “Code,” so that any related capital gain can be deferred for federal income tax purposes. As a result, we may not have immediate access to all of the cash proceeds generated from our property sales; and ● federal tax laws limit our ability to profit on the sale of communities that we have owned for less than two years, and this limitation may prevent us from selling communities when market conditions are favorable. 97 Table of Contents Competition Could Limit Our Ability to Lease Apartment Homes or Increase or Maintain Rents. Our apartment communities compete with numerous housing alternatives in attracting residents, including other apartment communities, condominiums and single-family rental homes, as well as owner occupied single- and multi-family homes. Competitive housing in a particular area could adversely affect our ability to lease apartment homes and increase or maintain rents, which could materially adversely affect our results of operations and financial condition. We May Not Realize the Anticipated Benefits of Past or Future Acquisitions, and the Failure to Integrate Acquired Communities and New Personnel Successfully Could Create Inefficiencies. We have selectively acquired in the past, and if presented with attractive opportunities we intend to selectively acquire in the future, apartment communities that meet our investment criteria. Our acquisition activities and their success are subject to the following risks, among others: ● we may be unable to obtain financing for acquisitions on favorable terms, including but not limited to interest rates, term and/or loan-to-value ratios, or at all, all of which could cause us to delay or even abandon potential acquisitions; ● even if we are able to finance the acquisition, cash flow from the acquisition may be insufficient to meet our required principal and interest payments on the debt used to finance the acquisition; ● even if we enter into an acquisition agreement for an apartment community, we may not complete the acquisition for a variety of reasons after incurring certain acquisition-related costs; ● we may incur significant costs and divert management attention in connection with the evaluation and negotiation of potential acquisitions, including potential acquisitions that we subsequently do not complete; ● when we acquire an apartment community, we may invest additional amounts in it with the intention of increasing profitability, and these additional investments may not produce the anticipated improvements in profitability; ● the expected occupancy rates and rental rates may differ from actual results; and ● we may be unable to quickly and efficiently integrate acquired apartment communities and new personnel into our existing operations, and the failure to successfully integrate such apartment communities or personnel will result in inefficiencies that could materially and adversely affect our expected return on our investments and our overall profitability. Competition Could Adversely Affect Our Ability to Acquire Properties. In the past, other real estate investors, including insurance companies, pension and investment funds, developer partnerships, investment companies and other public and private apartment REITs, have competed with us to acquire existing properties and to develop new properties, and such competition in the future may make it more difficult for us to acquire attractive investment opportunities on favorable terms, which could adversely affect our ability to grow or acquire properties profitably or with attractive returns. Development and Construction Risks Could Impact Our Profitability. In the past we have selectively pursued the development and construction of apartment communities, and we intend to do so in the future as appropriate opportunities arise. Development activities have been, and in the future may be, conducted through wholly-owned affiliated companies or through joint ventures with unaffiliated parties. Our development and construction activities are subject to the following risks, among others: ● we may be unable to obtain construction financing for development activities on favorable terms, including but not limited to interest rates, term and/or loan-to-value ratios, or at all, which could cause us to delay or even abandon potential developments; ● we may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental or quasi-governmental permits and authorizations, which could result in increased development costs, could delay initial occupancy dates for all or a portion of a development community, and could require us to abandon our activities entirely with respect to a project for which we are unable to obtain permits or authorizations; ● cost may be higher or yields may be less than anticipated as a result of delays in completing projects, costs that exceed budget and/or higher than expected concessions for lease up and lower rents than expected; ● we may abandon development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring such development opportunities; 98 Table of Contents ● we may be unable to complete construction and lease-up of a community on schedule, or incur development or construction costs that exceed our original estimates, and we may be unable to charge rents that would compensate for any increase in such costs; ● occupancy rates, rents and concessions at a newly developed community may fluctuate depending on a number of factors, including market and economic conditions, preventing us from meeting our expected return on our investment and our overall profitability goals; and ● when we sell communities or properties that we developed or renovated to third parties, we may be subject to warranty or construction defect claims that are uninsured or exceed the limits of our insurance. Bankruptcy or Defaults of Our Counterparties Could Adversely Affect Our Performance. We have relationships with and, from time to time, we execute transactions with or receive services from many counterparties, such as general contractors engaged in connection with our development activities, borrowers, or joint venture partners, among others. As a result, bankruptcies or defaults by these counterparties or their subcontractors could result in services not being provided, projects not being completed on time, or on budget, or at all, or contractual obligations to us not being satisfied, or volatility in the financial markets and economic weakness could affect the counterparties’ ability to complete transactions with us as intended, both of which could result in disruptions to our operations that may adversely affect our financial condition and results of operations. Property Ownership Through Partnerships and Joint Ventures May Limit Our Ability to Act Exclusively in Our Interest. We have in the past and may in the future develop and/or acquire properties in partnerships and joint ventures, including those in which we own a preferred interest, with other persons or entities when we believe circumstances warrant the use of such structures. As of September 30, 2020, we had active joint ventures and partnerships, including our preferred equity investments, with a total equity investment of $646.4 million. We could become engaged in a dispute with one or more of our partners which could adversely impact us. More