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, and rental expense growth. 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, unfavorable changes in the apartment market, changing economic conditions, the impact of inflation/deflation on rental rates and property operating expenses, expectations concerning availability of capital and the stabilization of the capital markets, the impact of competition and competitive pricing, acquisitions, developments and redevelopments not achieving anticipated results, delays in completing developments, redevelopments and lease-ups on schedule, expectations on job growth, home affordability an demand/supply ratio for multifamily housing, expectations concerning development and redevelopment activities, and expectations on occupancy levels.
The following factors, among others, could cause our future results to differ materially from those expressed in the forward-looking statements:

• general economic conditions;

• unfavorable changes in apartment market and economic conditions that could adversely affect occupancy levels and rental rates;

• 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 extraordinary losses for which we may not have insurance or adequate reserves;

• 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;

• 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 and 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. UDR, INC.:
Business Overview
UDR, Inc. is a self-administered real estate investment trust, or REIT, that owns, acquires, renovates, develops, and manages apartment communities. We were formed in 1972 as a Virginia corporation. In September 2003, we changed our state of incorporation from Virginia to Maryland. Our subsidiaries include an operating partnership United Dominion Realty, L.P., a Delaware limited 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, 2012, our consolidated real estate portfolio included 145 communities with 41,827 apartment homes, and our total real estate portfolio, inclusive of our unconsolidated communities, included an additional 43 communities with 10,717 apartment homes.

The following table summarizes our market information by major geographic markets as of September 30, 2012.

                                                                                    Three Months Ended September 30,     Nine Months Ended September 30,
                                             As of September 30, 2012                           2012 (a)                            2012 (a)

                   Number of      Number of       Percentage           Total           Average          Total Income       Average          Total Income
Same               Apartment      Apartment        of Total        Carrying (in       Physical          per Occupied      Physical          per Occupied
Communities       Communities       Homes       Carrying Value      thousands)        Occupancy             Home          Occupancy           Home (b)
Western Region
Orange Co, CA             10         3,290              7.7 %     $     601,459         94.8 %         $      1,622         94.9 %         $      1,611
San Francisco,
CA                         9         2,028              7.0 %           548,715         96.4 %                2,532         96.4 %                2,360
Seattle, WA               11         2,165              6.0 %           471,565         95.6 %                1,430         95.8 %                1,405
Los Angeles,
CA                         5           919              3.8 %           294,589         94.7 %                2,031         94.9 %                2,011
Monterey
Peninsula, CA              7         1,565              2.0 %           156,528         94.7 %                1,133         93.9 %                1,103
Inland Empire,
CA                         2           654              1.3 %           101,423         93.9 %                1,436         94.4 %                1,432
Sacramento, CA             2           914              0.9 %            69,689         93.2 %                  885         92.6 %                  888
Portland, OR               3           716              0.9 %            71,161         95.4 %                1,044         94.7 %                1,037
San Diego, CA              2           366              0.7 %            56,378         95.3 %                1,428         94.8 %                1,409
Mid-Atlantic
Region
Metropolitan
DC                        11         3,876              9.6 %           752,664         97.0 %                1,735         97.0 %                1,733
Baltimore, MD             11         2,301              3.9 %           302,430         96.7 %                1,442         96.7 %                1,425
Richmond, VA               4         1,358              1.7 %           136,640         95.5 %                1,193         95.3 %                1,171
Norfolk VA                 6         1,438              1.1 %            87,141         94.2 %                  989         94.6 %                  989
New York, NY               1           493              3.4 %           264,360         98.4 %                3,314            - %                    -
Boston MA                  4         1,179              4.0 %           316,272         95.9 %                2,011         96.4 %                2,735
Other
Mid-Atlantic               1           168              0.2 %            12,106         95.7 %                  977         95.0 %                  985
Southeastern
Region
Tampa, FL                 10         3,452              4.1 %           324,892         96.2 %                1,057         95.9 %                1,038
Orlando, FL               11         3,167              3.5 %           278,782         95.9 %                  974         95.6 %                  960
Nashville, TN              8         2,260              2.4 %           184,658         96.7 %                  966         97.0 %                  941
Other Florida              1           636              1.0 %            78,737         94.6 %                1,243         94.5 %                1,246
Southwestern
Region
Dallas, TX                 9         3,117              4.4 %           351,848         96.3 %                1,075         96.3 %                1,020
Austin, TX                 1           390              0.8 %            60,761         96.5 %                1,305         96.2 %                1,265
Total/Average
Same
Communities              129        36,452             70.4 %         5,522,798         95.8 %         $      1,402         95.7 %         $      1,323
Non Matures,
Commercial
Properties &
Other                     16         5,375             25.1 %         1,973,187
Total Real
Estate Held
for Investment           145        41,827             95.5 %         7,495,985
Real Estate
Under
Development
(c)                        -             -              4.5 %           355,465
Total Real
Estate Owned             145        41,827            100.0 %         7,851,450
Total
Accumulated
Depreciation                                                         (1,842,520 )
Total Real
Estate Owned,
Net of
Accumulated
Depreciation                                                      $   6,008,930

(a) Total Income per Occupied Home represents total monthly revenues divided by the product of occupancy and the number of mature apartment homes.

(b) The same community population for the nine months ended September 30, 2012 includes 33,823 homes.

(c) The Company is currently developing six wholly-owned communities with 1,921 apartment homes, none of which have been completed.

We report in two segments: Same Communities and Non-Mature/Other Communities. Our Same Communities segment includes those communities acquired, developed, and stabilized prior to July 1, 2011 and held as of September 30, 2012. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan to conduct substantial redevelopment activities, and the 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. Our Non-Mature/Other Communities segment includes those communities that were acquired or developed in 2011 or 2012, sold properties, redevelopment properties, joint venture properties, 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, the sale of properties, and the issuance of debt and equity. Both the coordination of asset and liability maturities and effective capital management are important to the maintenance of liquidity. 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 credit agreements. We routinely use our unsecured credit facility 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 repositioned our portfolio.
We expect to meet our short-term liquidity requirements generally through net cash provided by operations and borrowings under credit agreements. 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 secured and unsecured borrowings, the issuance of debt or equity securities, and the disposition of properties. We believe that our net cash provided by operations and borrowings under credit agreements 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 dispositions of properties. We have a shelf registration statement filed with the Securities and Exchange Commission, or "SEC" which provides for the issuance of an indeterminate amount of common stock, preferred stock, 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.

On January 10, 2012, the Company issued $400 million aggregate principal amount of 4.625% Medium Term Notes due January 2022. Interest is payable semiannually beginning in July 2012. The notes were priced at 99.100% of the principal amount plus accrued interest from January 10, 2012 to yield 4.739% to maturity. The notes are fully and unconditionally guaranteed by the Operating Partnership.

In March 2011, the Company entered into an equity distribution agreement under which the Company could offer and sell up to 20 million shares of its common stock over time to or through its sales agents. In September 2011, the Company entered into a new equity distribution agreement in connection with filing a new registration statement on Form S-3. The new equity distribution agreement replaced the March 2011 agreement, and no material changes were made to the equity distribution agreement. During the three months ended March 31, 2012, we sold all of the remaining 8,569,969 shares of common stock through this program for aggregate gross proceeds of approximately $220.2 million at a weighted average price per share of $25.69. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $4.4 million, were approximately $215.8 million, and were used to fund development and redevelopment activities, for working capital and for general corporate purposes.
On April 4, 2012, the Company entered into an equity distribution agreement, under which the Company could offer and sell up to 20 million shares of its common stock, from time to time, to or through its sales agents. During the nine months ended September 30, 2012, we sold 71,000 shares of common stock through this program for aggregate gross proceeds of approximately $1.9 million at weighted average price per share of $26.53. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $38,000, were approximately $1.8 million, and were used to fund development and redevelopment activities, for working capital and for general corporate purposes.
On May 31, 2012, the Company completed the redemption of all outstanding shares of its 6.75% Series G Cumulative Redeemable Preferred Stock. A total of 3,264,362 shares of the Series G Preferred Stock was redeemed at a redemption price of $25 per share in cash, plus accrued and unpaid dividends to the redemption date for a total cost of $82.1 million.

On June 4, 2012, the Company closed a public offering of 19,000,000 shares of its common stock, including 2,850,000 shares sold as a result of the underwriters' exercise of their overallotment option in full at the closing, at a price of $25.70 per share, for gross proceeds of approximately $561.5 million and net proceeds of approximately $538.8 million after underwriting discounts and commissions and estimated offering expenses. Proceeds from the sale of shares through this offering were used to repay approximately $363.9 million of the Company's 3.3% (weighted average interest rate) secured debt with various maturities from 2012 - 2014, to redeem all of its outstanding Series G Preferred Stock, to repay a portion of indebtedness outstanding under its unsecured credit facility, and the balance for working capital and general corporate purposes. On June 21, 2012, the Company purchased mezzanine debt securing a mortgage on a newly constructed, class A community in West Los Angeles. The $26.5 million loan was purchased at a discount of 6.99% and bears a coupon rate of 7.00%. Interest payments are due monthly and the note is due June 2022.
On August 15, 2012, the Company issued a $24.5 million unsecured note receivable with one of its unconsolidated joint ventures, which bears an interest rate of one month LIBOR plus 2.75% per annum. Interest payments are due monthly. The note is due October 2014, and may be extended for one year. Future Capital Needs
Future development and redevelopment expenditures may be funded through unsecured or secured credit facilities, proceeds from the issuance of equity or debt securities, the sale of properties and, to a lesser extent, from cash flows provided by operating activities. 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.
As of September 30, 2012, we had approximately $9.7 million of secured debt maturing during the remainder of 2012, which was subsequently paid in October 2012. We have no other secured and no unsecured debt maturing during the remainder of 2012. We anticipate repaying that debt with cash flow from our operations, debt and equity offerings, and proceeds from sold properties. Critical Accounting Policies and Estimates 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 other 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 current Report on Form 8-K, filed with the SEC on May 2, 2012. There have been no significant changes in our critical accounting policies from those reported in our Form 8-K filed with the SEC on May 2, 2012. 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 Flow
The following discussion explains the changes in net cash provided by operating activities, net cash used in investing activities, and net cash provided by financing activities that are presented in our Consolidated Statements of Cash Flows.
Operating Activities
For the nine months ended September 30, 2012, our net cash flow provided by operating activities was $245.4 million compared to $182.9 million for the comparable period in 2011. The increase in cash flow from operating activities is primarily due to an increase in property net operating income from our apartment community portfolio and changes in operating assets and operating liabilities.
Investing Activities
For the nine months ended September 30, 2012, net cash used in investing activities was $59.3 million compared to $1.1 billion for the comparable period in 2011. The decrease in net cash used for investing activities was due to changes in the level of investment activities, which reflect our strategy as it relates to our investments in joint ventures, dispositions, capital expenditures, and development activities, all of which are discussed in further detail throughout this Report.

Acquisitions and Dispositions
During the nine months ended September 30, 2012, the Company acquired the remaining 80% ownership interests in two apartment communities (633 homes) for $11.7 million from its Texas joint venture partner.
During the nine months ended September 30, 2012, the Company sold 21 communities with 6,507 apartment homes. The Company had no communities that met the criteria to be classified as held for sale and included in discontinued operations at September 30, 2012. During the nine months ended September 30, 2011, the Company sold nine communities with 2,157 apartment homes, which included six communities (1,418 homes) sold in conjunction with an asset exchange.
Our long-term strategic plan is to continue achieving greater operating efficiencies by investing in fewer, more concentrated markets. As a result, we have been seeking to expand our interests in communities located in Boston, California, Metropolitan Washington D.C., New York, and Washington state markets over the past years. Prospectively, we plan to continue to channel new investments into those markets we believe will provide the best investment returns. Markets will be targeted based upon defined criteria including above average job growth, low single family home ownership affordability and limited new supply for multifamily housing, which are three key drivers to strong rental growth.
Capital Expenditures
In conformity with GAAP, we capitalize those expenditures that materially enhance the value of an existing asset or substantially extend the useful life of an existing asset. Expenditures necessary to maintain an existing property in ordinary operating condition are expensed as incurred.
Total capital expenditures, which in aggregate include recurring capital expenditures and major renovations, of $109.6 million or $2,449 per stabilized home was spent on all of our communities, excluding development and commercial properties, for the nine months ended September 30, 2012 as compared to $59.4 million or $1,236 per home for the comparable period in prior year. Total recurring capital expenditures of $43.0 million or $961 per stabilized home was spent for the nine months ended September 30, 2012 as compared to $35.8 million or $746 per stabilized home for the comparable period in the prior year. A significant portion of this increase was attributable to an increase of 106.3% or $5.3 million in revenue enhancing capital expenditures, such as kitchen and bath remodels, on our existing operating portfolio. The remainder of the increase in total recurring capital expenditures includes expenditures related to exterior/interior upgrades, turnover related expenditures for floor coverings and appliances, other recurring capital expenditures such as exterior paint, roofs, siding, parking lots, and asset preservation capital expenditures. Major renovations of $66.6 million or $1,487 per home was spent for the nine months ended September 30, 2012 as compared to $23.6 million or $491 per home for the comparable period in prior year. Major renovations for the nine months ended September 30, 2012 were primarily attributable to our redevelopment of five wholly-owned communities (2,585 homes) with a budget of $279.0 million of which we have $65.3 million of costs incurred at September 30, 2012.

The following table outlines capital expenditures and repair and maintenance costs for all of our communities, excluding real estate under development, and commercial properties, for the nine months ended September 30, 2012 and 2011:

                          (dollars in thousands)                   Nine Months Ended September 30,
                   2012             2011         % Change         2012            2011        % Change
Revenue
enhancing
improvements  $      10,286     $    4,987         106.3  %   $       230     $      104         121.2 %
Turnover
capital
expenditures         11,040          9,315          18.5  %           247            194          27.3 %
Asset
preservation
expenditures         21,696         21,519           0.8  %           484            448           8.0 %
Total
recurring
capital
expenditures         43,022         35,821          20.1  %   $       961            746          28.8 %
Major
renovations          66,578         23,562         182.6  %         1,487            491         202.9 %
Total capital
expenditures  $     109,600     $   59,383          84.6  %   $     2,449     $    1,236          98.1 %
Repair and
maintenance
expense       $      27,937     $   28,411          (1.7 )%   $       624     $      592           5.4 %
Average
stabilized
home count           44,762         48,028

We will continue to selectively add revenue enhancing improvements which we believe will provide a return on investment substantially in excess of our cost of capital. We will continue to evaluate our existing portfolio for redevelopment opportunities, and have identified candidates located in key markets. 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. Recurring capital expenditures during 2012 are projected to be approximately $1,200 per home. Development
At September 30, 2012, our development pipeline for wholly-owned communities totaled 1,921 homes with a budget of $651.8 million in which we have a carrying value of $355.5 million. The estimated completion date for these communities will be through the second quarter of 2014. Consolidated Joint Ventures
In 2011, the Company invested in a joint venture with an unaffiliated third party to acquire and redevelop an existing commercial property into a 173 apartment home community in Orange County, California. At closing, the Company . . .