United Dominion Realty Trust, Inc. (UDR)

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UDR, Inc. (UDR)

Q2 2011 Earnings Conference Call

August 1, 2011 11:00 ET

Executives

Andrew Cantor – Vice President of Investor Relations

Tom Toomey – President and Chief Executive Officer

David Messenger – Chief Financial Officer

Jerry Davis – Senior Vice President, Property Operations

Analysts

Anthony Paolone – JPMorgan

Dave Bragg – Zelman and Associates

Eric Wolfe – Citigroup

Jeff Spector – Bank of America-Merrill Lynch

Jay Habermann – Goldman Sachs

Rob Stevenson – Macquarie

Alexander Goldfarb – Sandler O'Neill

Rich Anderson – BMO Capital Markets

Karin Ford – KeyBanc Capital Markets

Paula Poskon – Robert W. Baird

Michael Salinsky – RBC Capital Markets

Jeff Donnelly – Wells Fargo

Seth Laughlin – ISI Group

Derek Bower – UBS

Swaroop Yalla – Morgan Stanley

Presentation

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the UDR 2011 Second Quarter Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, Monday, August 1, 2011.

I would now like to turn the conference over to Mr. Andrew Cantor, Vice President of Investor Relations. Please go ahead.

Andrew Cantor – Vice President of Investor Relations

Thank you for joining us for UDR’s second quarter financial results conference call. Our second quarter press release and supplemental disclosure package were distributed earlier today and posted to our website, www.udr.com. In this supplement, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements.

I would like to note that statements made during this call, which are not historical, may constitute forward-looking statements. Although, we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met. A discussion of risks and risk factors are detailed in this morning’s press release and included in our filings with the SEC. We do not undertake a duty to update any forward-looking statement. When we get to the question-and-answer portion, we ask that you be respectful of everyone’s time and limit your questions and follow-up. Management will be available after the call for your questions that didn’t get answered on the call.

I will now turn the call over to our President and CEO, Tom Toomey.

Tom Toomey – President and Chief Executive Officer

Thank you, Andrew, and good morning, everyone. Welcome to UDR’s second quarter conference call. On the call with me today are David Messenger, Chief Financial Officer; and Jerry Davis, Senior Vice President of Operations who will discuss our results, as well as Senior Officers, Warren Troupe; Harry Alcock; and Matt Akin, who will be available to answer questions during the Q&A portion of the call.

On the call today, we will discuss our comments on four areas. First, a significant investment activity in 2011; second, capital markets activity; third, David will discuss our financial results and guidance for the remainder of the year; and finally, Gary will discuss our operations. The team has accomplished a great deal this year. I appreciate all of our hard work and believe we have a great deal of momentum to continue our success. With that, let’s just start the results.

In the first seven months of 2011, we have grown the portfolio by more than 15% or $1.2 billion through the acquisition of 2,600 homes in seven communities in Manhattan, Washington DC, San Francisco, and Boston. We have announced four new development projects continuing over 1,300 homes for an estimated cost of $375 million and the redevelopment of our Rivergate community for an estimated cost of $40 million to $60 million.

As shown by our investment activity, we believe there has been opportune time to continue to grow our company and take advantage of the multifamily tailwind and the long-term positive fundamentals of the business.

Let me take a minute to start the recent success in Manhattan and the rationale for nearly $1 billion investment in this market. I think it is clear we have demonstrated the ability to find the attractive off-market deals with above average growth prospect that will strengthen our portfolio. 10 Hanover Square, Rivergate, and 21 Chelsea were all acquired from three different families, each an off-market transaction. These types of acquisitions require an additional level of patience and creativity. Ultimately, we see significant value creation at these communities through the implementation of our operating platform and redevelopment expertise. We will continue to look for similar opportunities grow our presence in Manhattan. Gary will discuss in more detail the success we have already seen at 10 Hanover Square and Rivergate.

Turning to capital markets activity, our recently completed $500 million secondary offering was very well-received by the market. The deal was four times oversubscribed and it was priced an attractive 2% discount to the previous day’s close, demonstrating investor’s confidence in our strategy. The offering combined with the ATM and opening unit issuance bring our year-to-date equity raised over $930 million, which means we have funded over 75% of our acquisition through equity.

In summary, our company has gone through dramatic change since beginning of the year. And as a result, we have improved our balance sheet, a larger percentage of our NOI coming from above average growth market, and dramatically increased our income per occupied home. We have successfully executed on what we bet we are going to do, de-leveraging through acquisitions and high-barrier to entry market. We are done yet and we believe that this is the right time to enhance the quality and size of our portfolio through acquisitions, development, and redevelopment.

With that said, we also believe now it is an appropriate time to sell selected communities. As NOIs have recovered, combined with low interest rate provides us an opportunity to execute at attractive prices. In closing, with the substantial improvement to our portfolio and balance sheet as well as the continued success for our operating platform, we look forward to the remainder of the year.

With that, I would pass the call on to David.

David Messenger – Chief Financial Officer

Thanks, Tom. Earlier this morning, we reported a year-over-year 15% increase in our quarterly FFO to $0.31. This consisted of $0.32 from our core operations and a $0.01 charge from non-core items or $1.1 million. Our results are consistent with our original guidance announced in February. Further details are included in our press release and supplements.

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