United Dominion Realty Trust, Inc. (UDR)

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UDR, Inc. (UDR)

Q4 2011 Earnings Call

February 6, 2012 11:00 am ET

Executives

Chris Van Ens - VP, IR

Tom Toomey - President and CEO

David Messenger - CFO

Jerry Davis - SVP, Operations

Warren Troupe - SEVP

Harry Alcock - SVP, Asset Management

Analysts

Dave Bragg - Zelman

Karin Ford - KeyBanc

Jana Galan - Bank of America Merrill Lynch

Eric Wolfe - Citi

Paula Poskon - Robert W. Baird

Michael Salinsky - RBC Capital Markets

Derek Bower - UBS

Alex Goldfarb - Sandler O'Neill

Robert Stevenson - Macquarie

Swaroop Yalla - Morgan Stanley

Rich Anderson - BMO Capital Markets

Tom Trujillo - Bank of America

Mark Fisher - Bloomberg

Taylor Schimkat - KBW

Presentation

Operator

Welcome to UDR's fourth quarter conference call. (Operator Instructions) This conference is being recorded today, Monday, February 6, 2012. I would now like to turn the conference over to Chris Van Ens, Vice President of Investor Relations.

Chris Van Ens

Thank you for joining us for UDR's fourth quarter financial results conference call. Our fourth quarter press release and supplemental disclosure package were distributed earlier today and posted to our website www.udr.com. In the supplement, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measures 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 the forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met. The 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 statements.

When we get to the question-and-answer portion, we ask that you to be respectful of everyone's time and limit your questions and follow-ups. Management will be available after the call for your questions that did not get answered on the call. I will now turn the call over to our President and CEO, Tom Toomey.

Tom Toomey

Thank you, Chris, and good morning everyone. Welcome to UDR's fourth 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 and Harry Alcock who will be available to answer questions during the Q&A portion of the call.

My comments today will focus on three topics: first, our fourth quarter and full year 2011 results; second, the summary of our 2011 accomplishments; and finally, our outlook for 2012. Following my comments, David will discuss our financial results and 2012 guidance, and Jerry will provide commentary on operational results and early 2012 trends.

First, UDR's business continues to improve, as evidenced by the accelerating revenue growth we reported during 2011. In the fourth quarter, core FFO per share rose 21% year-over-year, driven by same-store revenue and net operating income growth of 5.3% and 7.7% respectively.

For full year 2011, core FFO per share of $1.28 per share rose 13% year-over-year, driven by same-store revenue and net operating income of 4.1% and 5.6% respectively.

We expect that 2012 will even be better than 2011. Second, we accomplished a great deal in 2011, expanding our enterprise by $1.8 billion in key urban markets and disposing of nearly $600 million of non-core communities. At yearend, our equity market capitalization stood at $6 billion and our total enterprise value is nearly $10 billion.

Some additional highlights from the past year that demonstrate the progress we made in implementing our long-term strategic plan to improve our portfolio, strengthen our balance sheet and grow our cash flow include: we entered New York City market through four unique off-market transactions totaling $1.2 billion. These acquisitions offer meaningful operational upside as they continue to grow in excess of our original forecast. At the yearend, New York City accounted for 10% of our total net operating income versus 0% at the beginning of 2011.

We increased our ownership interest in Boston metro area, Washington, DC, and San Francisco through the purchase of approximately 1,800 apartment homes worth $606 million. At yearend, these markets accounted for 25% of our total net operating income versus 21% at the beginning of 2011.

As I mentioned earlier in my comments, we disposed of nearly 4,500 apartment homes in 18 communities for total proceeds of $594 million. We will continue to use the proceeds from non-core asset sales to help fund our development and redevelopment pipeline unless a 1031 exchange is necessary for tax purposes.

We commenced the development and redevelopment of nearly 4,300 homes in 11 communities located in markets such as New York, Southern California, Washington, DC, and Dallas for a total estimated cost of $808 million. Our in-progress development and redevelopment pipeline totaled $1.2 billion at yearend, of which 30% has already been funded. We expect to delivery roughly half of these homes by the end of 2013.

We increased our portfolio-wide total income per occupied home by 15% to approximately 1370 a month. This metric will trend higher as we continue to execute on our strategy of owning apartment homes in high barrier-to-entry markets, while also disposing up lower ramp non-core community.

We raised nearly $1 billion of equity consisting of $496 million to its secondary offering in July, $109 million in OP units and an additional $384 million through our At the Market program, all of which strengthened and delevered our balance sheet. We completed $300 million in offering of seven year unsecured note at 4.25% in May. And finally, we increased our annual dividend by 10% to $0.80 per share.

With the closing of 2011, the entire management team would like to thank nearly 1,700 associates for an outstanding year. We look forward to our continued success.

Turning to 2012, we are off to a great start on all fronts and looking forward to another successful year. I'd like first to briefly comment on a second real estate joint venture with MetLife, announced in early January. It's a new $1.3 billion 50-50 joint venture consist of 12 operating community containing 2,500 apartment homes, with an average income per occupied home of over $3,000 a month and is comprised of well-located communities in our core markets.

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