Item 6. SELECTED FINANCIAL DATA

The following tables set forth selected consolidated financial and other information of UDR, Inc. and of the Operating Partnership as of and for each of the years in the five-year period ended December 31, 2014. The table should be read in conjunction with each of UDR, Inc.’s and the Operating Partnership’s respective consolidated financial statements and the notes thereto, and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, included elsewhere in this Report.

	UDR, Inc. Year Ended December 31, (In thousands, except per share data and apartment homes owned)
	2014				2013				2012				2011				2010
OPERATING DATA:
Rental income	$	805,002			$	746,484			$	704,701			$	613,689			$	503,097
Income/(loss) from continuing operations	16,260				2,340				(46,305		)		(126,869		)		(121,117		)
Income/(loss) from discontinued operations, net of tax	10				43,942				266,608				147,454				14,529
Net income/(loss)	159,842				46,282				220,303				20,585				(106,588		)
Distributions to preferred stockholders	3,724				3,724				6,010				9,311				9,488
Net income/(loss) attributable to common stockholders	150,610				41,088				203,376				10,537				(112,362		)
Common distributions declared	263,503				235,721				215,654				165,590				126,086
Income/(loss) per weighted average common share — basic:
Income/(loss) from continuing operations attributable to common stockholders	$	0.60			$	(0.01	)		$	(0.22	)		$	(0.65	)		$	(0.77	)
Income/(loss) from discontinued operations attributable to common stockholders	—				0.17				1.07				0.71				0.09
Net income/(loss) attributable to common stockholders	$	0.60			$	0.16			$	0.85			$	0.05			$	(0.68	)
Income/(loss) per weighted average common share — diluted:
Income/(loss) from continuing operations attributable to common stockholders	$	0.59			$	(0.01	)		$	(0.22	)		$	(0.65	)		$	(0.77	)
Income/(loss) from discontinued operations attributable to common stockholders	—				0.17				1.07				0.71				0.09
Net income/(loss) attributable to common stockholders	$	0.59			$	0.16			$	0.85			$	0.05			$	(0.68	)
Weighted average number of Common Shares outstanding — basic	251,528				249,969				238,851				201,294				165,857
Weighted average number of Common Shares outstanding — diluted	253,445				249,969				238,851				201,294				165,857
Weighted average number of Common Shares outstanding, OP Units and Common Stock equivalents outstanding — diluted	265,728				263,926				252,659				214,086				176,900
Common distributions declared	$	1.04			$	0.94			$	0.88			$	0.80			$	0.73
Balance Sheet Data:
Real estate owned, at cost (a)	$	8,383,259			$	8,207,977			$	8,055,828			$	8,074,471			$	6,881,347
Accumulated depreciation (a)	2,434,772				2,208,794				1,924,682				1,831,727				1,638,326
Total real estate owned, net of accumulated depreciation (a)	5,948,487				5,999,183				6,131,146				6,242,744				5,243,021
Total assets	6,846,534				6,807,722				6,859,103				6,692,254				5,500,597
Secured debt (a)	1,361,529				1,442,077				1,430,135				1,891,553				1,963,670
Unsecured debt	2,221,576				2,081,626				1,979,198				2,026,817				1,603,834
Total debt	3,583,105				3,523,703				3,409,333				3,918,370				3,567,504
Total stockholders’ equity	2,735,097				2,811,648				2,992,916				2,314,050				1,606,343
Number of Common Shares outstanding	255,115				250,750				250,139				219,650				182,496

	UDR, Inc. Year Ended December 31, (In thousands, except per share data and apartment homes owned)
	2014				2013				2012				2011				2010
OPERATING DATA (continued):
Other Data (a)
Total consolidated apartment homes owned (at end of year) (a)	39,851				41,250				41,571				47,343				48,553
Weighted average number of consolidated apartment homes owned during the year	40,644				41,392				42,747				48,531				47,571
Cash Flow Data:
Cash provided by/(used in) operating activities	$	392,360			$	339,902			$	327,187			$	251,411			$	214,180
Cash provided by/(used in) investing activities	(293,660		)		(123,209		)		(211,582		)		(1,054,683		)		(583,754		)
Cash provided by/(used in) financing activities	(113,725		)		(198,559		)		(115,993		)		806,289				373,075
Funds from Operations (b):
Funds from operations — basic	$	411,702			$	376,778			$	350,628			$	269,856			$	189,045
Funds from operations — diluted	415,426				380,502				354,532				273,580				192,771

(a)	Includes amounts classified as Held for Sale, where applicable.

(b)

Funds from operations, or FFO, is defined as net income (computed in accordance with generally accepted accounting principles, or “GAAP”), excluding impairment write-downs of depreciable real estate or of investments in non-consolidated investees that are driven by measurable decreases in the fair value of depreciable real estate held by the investee, gains (or losses) from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust’s definition issued in April 2002. We consider FFO a useful metric for investors as we use FFO in evaluating property acquisitions and our operating performance, and believe that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of our activities in accordance with GAAP. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of funds available to fund our cash needs.

Activities of our TRS include development and land entitlement. From time to time, we develop and subsequently sell a TRS property which results in a short-term use of funds that produces a profit that differs from the traditional long-term investment in real estate for REITs. We believe that the inclusion of these TRS gains in FFO is consistent with the standards established by NAREIT as the short-term investment is incidental to our main business. TRS gains on sales, net of taxes, are defined as net sales proceeds less a tax provision and the gross investment basis of the asset before accumulated depreciation.

See “Funds from Operations” in Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations for a reconciliation of FFO and Net income/(loss) attributable to UDR, Inc.

United Dominion Realty, L.P.

Year Ended December 31,

(In thousands, except per OP unit data

and apartment homes owned)

	2014				2013				2012				2011				2010
OPERATING DATA:
Rental income	$	422,634			$	401,853			$	384,946			$	344,937			$	297,380
Income/(loss) from continuing operations	33,544				32,766				(13,309		)		(40,744		)		(30,937		)
Income/(loss) from discontinued operations	—				45,176				57,643				70,973				10,243
Net income/(loss)	97,179				77,942				44,334				30,229				(20,694		)
Net income/(loss) attributable to OP unitholders	96,227				73,376				43,982				30,159				(20,735		)
Income/(loss) per weighted average OP Unit - basic and diluted:
Income/(loss) from continuing operations attributable to OP unitholder	$	0.53			$	0.16			$	(0.07	)		$	(0.22	)		$	(0.18	)
Income/(loss) from discontinued operations attributable to OP unitholder	—				0.24				0.31				0.39				0.06
Net income/(loss) attributable to OP unitholders	0.53				0.40				0.24				0.17				(0.12		)
Weighted average number of OP Units outstanding — basic and diluted	183,279				184,196				184,281				182,448				179,909
Balance Sheet Data:
Real estate owned, at cost (a)	$	4,238,770			$	4,188,480			$	4,182,920			$	4,205,298			$	3,706,184
Accumulated depreciation (a)	1,403,303				1,241,574				1,097,133				976,358				884,083
Total real estate owned, net of accumulated depreciation (a)	2,835,467				2,946,906				3,085,787				3,228,940				2,822,101
Total assets	2,878,284				2,993,241				3,136,254				3,292,167				2,861,395
Secured debt (a)	931,959				934,865				967,239				1,189,645				1,070,061
Total liabilities	1,144,233				1,190,144				1,217,498				1,438,798				1,299,772
Total partners’ capital	1,703,001				1,795,934				1,917,299				2,034,792				2,042,241
Advances to/(from) General Partner	(13,624		)		9,916				11,056				193,584				492,709
Number of OP units outstanding	183,279				183,279				184,281				184,281				179,909
Other Data:
Total consolidated apartment homes owned (at end of year) (a)	20,814				20,746				21,660				23,160				23,351
Cash Flow Data:
Cash provided by/(used in) operating activities	$	208,032			$	208,346			$	201,095			$	156,071			$	146,604
Cash provided by/(used in) investing activities	(46,650		)		(63,954		)		4,273				(226,980		)		(59,458		)
Cash provided by/(used in) financing activities	(162,777		)		(145,299		)		(203,268		)		70,693				(86,668		)

(a)	Includes amounts classified as Held for Sale, where applicable.

Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

Forward-Looking Statements

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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 and demand/supply ratio for multifamily housing, expectations concerning development and redevelopment activities, expectations on occupancy levels, expectations concerning the joint ventures 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:

•	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.

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 and the accompanying notes for the years ended December 31, 2014, 2013 and 2012 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, acquires, renovates, develops, and manages 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. 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 December 31, 2014, our consolidated real estate portfolio included 139 communities in 10 states plus the District of Columbia totaling 39,851 apartment homes, and our total real estate portfolio, inclusive of our unconsolidated communities, included an additional 36 communities with 10,055 apartment homes.

At December 31, 2014, the Company was developing one wholly-owned community with 369 apartment homes and three unconsolidated joint venture communities with 1,018 apartment homes, none of which have been completed. In addition, the Company was redeveloping 708 apartment homes, 694 of which have been completed, at one wholly-owned community with 739 apartment homes.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to use judgment in the application of accounting policies, including making estimates and assumptions. A critical accounting policy is one that is both important to our financial condition and results of operations as well as involves some degree of uncertainty. Estimates are prepared based on management’s assessment after considering all evidence available. Changes in estimates could affect our financial position or results of operations. Below is a discussion of the accounting policies that we consider critical to understanding our financial condition or results of operations where there is uncertainty or where significant judgment is required. A discussion of our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2, Significant Accounting Policies, to the Notes to the UDR Consolidated Financial Statements included in this Report.

Cost Capitalization

In conformity with GAAP, we capitalize those expenditures that materially enhance the value of an existing asset or substantially extend the useful life of an existing asset. Expenditures necessary to maintain an existing property in ordinary operating condition are expensed as incurred.

In addition, we capitalize costs directly related to the predevelopment, development, and redevelopment of a capital project, which include, but are not limited to, interest, real estate taxes, insurance, and allocated development and redevelopment overhead related to support costs for personnel working on the capital projects. We use our professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. These costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress and such costs are incremental and identifiable to a specific activity to get the asset ready for its intended use. As each home in a capital project is completed and becomes available for lease-up, the Company ceases capitalization on the related portion. The costs capitalized are reported on the Consolidated Balance Sheets as Total Real Estate Owned, Net of Accumulated Depreciation. Amounts capitalized during the years ended December 31, 2014, 2013, and 2012 were $29.2 million, $40.5 million, and $36.4 million, respectively.

Investment in Unconsolidated Joint Ventures

We may enter into various joint venture agreements and/or partnerships with unrelated third parties to hold or develop real estate assets. We must determine for each of these ventures whether to consolidate the entity or account for our investment under the equity method of accounting. We determine whether to consolidate a joint venture or partnership based on our rights and obligations under the venture agreement, applying the applicable accounting guidance. The application of the rules in evaluating the accounting treatment for each joint venture or partnership is complex and requires substantial management judgment. We evaluate our accounting for investments on a regular basis including when a significant change in the design of an entity occurs. Throughout our financial statements, and in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we use the term “joint venture” or “partnership” when referring to investments in entities in which we do not have a 100% ownership interest.

We continually evaluate our investments in unconsolidated joint ventures when events or changes in circumstances indicate that there may be an other-than-temporary decline in value. We consider various factors to determine if a decrease in the value of the investment is other-than-temporary. These factors include, but are not limited to, age of the venture, our intent and ability to retain our investment in the entity, the financial condition and long-term prospects of the entity, and the relationships with the other joint venture partners and its lenders. The amount of loss recognized is the excess of the investment’s carrying amount over its estimated fair value. If we believe that the decline in fair value is temporary, no impairment is recorded. The aforementioned factors are taken as a whole by management in determining the valuation of our investment property. Should the actual results differ from management’s judgment, the valuation could be negatively affected and may result in a negative impact to our Consolidated Financial Statements.

Impairment of Long-Lived Assets

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 market value. Our estimates of fair market value represent our best estimate based primarily upon unobservable inputs (defined as Level 3 inputs in the fair value hierarchy) related to rental rates, operating costs, growth rates, discount rates, capitalization rates, industry trends and reference to market rates and transactions.

Real Estate Investment Properties

We purchase real estate investment properties from time to time and record the fair value to various components, such as land, buildings, and intangibles related to in-place leases, based on the fair value of each component. In making estimates of fair values for purposes of allocating purchase price, we utilize various sources, including independent appraisals, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. The fair value of buildings is determined as if the buildings were vacant upon acquisition and subsequently leased at market rental rates. As such, the determination of fair value considers the present value of all cash flows expected to be generated from the property including an initial lease-up period. We determine the fair value of in-place leases by assessing the net effective rent and remaining term of the lease relative to market terms for similar leases at acquisition. In addition, we consider the cost of acquiring similar leases, the foregone rents associated with the lease-up period, and the carrying costs associated with the lease-up period. The fair value of in-place leases is recorded and amortized as amortization expense over the remaining average contractual lease period.

REIT Status

We are a Maryland corporation that has elected to be treated for federal income tax purposes as a REIT. A REIT is a legal entity that holds interests in real estate and is required by the Code to meet a number of organizational and operational requirements, including a requirement that a REIT must distribute at least 90% of our REIT taxable income (other than our net capital gain) to our stockholders. If we were to fail to qualify as a REIT in any taxable year, we will be subject to federal and state income taxes at the regular corporate rates and may not be able to qualify as a REIT for four years. Based on the net earnings reported for the year ended December 31, 2014 in our Consolidated Statements of Operations, we would have incurred federal and state GAAP income taxes if we had failed to qualify as a REIT.

Summary of Real Estate Portfolio by Geographic Market

The following table summarizes our market information by major geographic markets as of and for the year ended December 31, 2014.

				As of December 31, 2014										Year Ended December 31, 2014
Same-Store Communities	Number of Apartment Communities			Number of Apartment Homes			Percentage of Total Carrying Value			Total Carrying Value (in thousands)				Average Physical Occupancy			Monthly Income per Occupied Home (a)				Net Operating Income (in thousands)
West Region
San Francisco, CA	11			2,436			7.9	%		$	666,210			97.2	%		$	2,804			$	60,730
Orange County, CA	10			3,290			7.3	%		612,309				95.5	%		1,752				47,990
Seattle, WA	9			1,727			5.4	%		449,375				97.1	%		1,732				24,812
Los Angeles, CA	3			642			3.0	%		253,448				95.3	%		2,409				12,159
Monterey Peninsula, CA	7			1,565			1.9	%		161,635				95.8	%		1,216				15,326
Other Southern California	4			875			1.7	%		141,656				96.1	%		1,550				10,938
Portland, OR	3			716			0.9	%		73,811				97.6	%		1,195				6,971
Mid-Atlantic Region
Metropolitan D.C.	13			4,313			10.6	%		893,677				97.1	%		1,818				62,261
Baltimore, MD	11			2,301			3.7	%		309,894				96.6	%		1,462				27,431
Richmond, VA	4			1,358			1.7	%		139,538				96.5	%		1,220				14,309
Norfolk, VA	4			846			0.6	%		54,076				94.6	%		1,047				6,520
Other Mid-Atlantic	1			168			0.2	%		12,972				95.4	%		1,021				1,241
Southeast Region
Tampa, FL	9			2,775			3.3	%		275,354				96.6	%		1,126				23,276
Orlando, FL	10			2,796			2.8	%		238,375				96.7	%		1,045				22,839
Nashville, TN	8			2,260			2.3	%		191,393				97.5	%		1,053				18,922
Other Florida	1			636			1.0	%		81,316				96.5	%		1,362				6,491
Northeast Region
New York, NY	2			700			5.0	%		423,130				97.8	%		3,711				23,280
Boston, MA	4			1,179			3.9	%		323,420				96.3	%		2,225				21,617
Southwest Region
Dallas, TX	8			2,725			3.5	%		292,847				97.2	%		1,130				22,657
Austin, TX	4			1,273			1.8	%		147,873				97.1	%		1,274				11,068
Total/Average Same-Store Communities	126			34,581			68.5	%		5,742,309				96.7	%		$	1,573			440,838
Non Matures, Commercial Properties & Other	13			5,270			29.4	%		2,463,318											115,580
Total Real Estate Held for Investment	139			39,851			97.9	%		8,205,627											556,418
Real Estate Under Development (b)	—			—			2.1	%		177,632											(97		)
Total Real Estate Owned	139			39,851			100.0	%		8,383,259											$	556,321
Total Accumulated Depreciation										(2,434,772		)
Total Real Estate Owned, Net of Accumulated Depreciation										$	5,948,487

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

(b)	As of December 31, 2014, the Company was developing one wholly-owned community with 369 apartment homes, which has not been completed.

We report in two segments: Same-Store Communities and Non-Mature Communities/Other.

Our Same-Store Communities segment represents those communities acquired, developed, and stabilized prior to January 1, 2013 and held as of December 31, 2014. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan to conduct substantial redevelopment activities, and the communities are not classified as held for sale at year end. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months.

Our Non-Mature Communities/Other segment represents those communities that do not meet the criteria to be included in Same-Store Communities, including, but not limited to, recently acquired, developed and redeveloped communities, and the non-apartment components of mixed use properties.

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 unsecured revolving 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 property operations and borrowings under our 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/or the disposition of properties. We believe that our net cash provided by property 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, 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.

During 2014, the Company issued $300 million of 3.750% senior unsecured medium-term notes due July 1, 2024. Interest is payable semi-annually beginning on January 1, 2015. The notes were priced at 99.652% of the principal amount at issuance. We used the net proceeds to pay down borrowings outstanding on our $900 million unsecured credit facility and for general corporate purposes. The notes are fully and unconditionally guaranteed by the Operating Partnership.

In April 2012, the Company entered into a new equity distribution agreement, which was amended in July 2014, 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 year ended December 31, 2014, the Company sold 3,410,433 shares of common stock through this program for aggregate gross proceeds of approximately $102.1 million at a weighted average price per share of $29.95. Aggregate net proceeds from such sales, after deducting related expenses, including commissions paid to the sales agents of approximately $2.3 million, were approximately $99.8 million, which was primarily used to fund the Company's Steele Creek participating loan investment. As of December 31, 2014, we had 16,518,567 shares of common stock available for sale under the April 2012 program.

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, 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 2015, we have approximately $196.6 million of secured debt maturing, inclusive of principal amortization, and $324.3 million of unsecured debt maturing. In January 2015, we paid off $325.2 million of 5.25% medium-term notes due January 2015 with borrowings under the Company’s $900 million unsecured revolving credit facility. We anticipate repaying the remaining debt with cash flow from our operations, proceeds from debt or equity offerings, proceeds from the dispositions of properties, or from borrowings under our credit agreements.

Statements of Cash Flow

The following discussion explains the changes in Net cash provided by/(used in) operating activities, Net cash provided by/(used in) investing activities, and Net cash provided by/(used in) financing activities that are presented in our Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012.

Operating Activities

For the year ended December 31, 2014, Net cash provided by/(used in) operating activities was $392.4 million compared to $339.9 million for 2013. The increase in cash flow from operating activities was primarily due to improved income from continuing operations and changes in operating assets and liabilities.

For the year ended December 31, 2013, Net cash provided by/(used in) operating activities was $339.9 million compared to $327.2 million for 2012. The increase in cash flow from operating activities is primarily due to improved income from continuing operations, partially offset by changes in operating assets and operating liabilities.

Investing Activities

For the year ended December 31, 2014, Net cash provided by/(used in) investing activities was $(293.7) million compared to $(123.2) million for 2013. The increase in cash used in investing activities is primarily related to increased acquisitions of real estate and investments in unconsolidated joint ventures, partially offset by increased proceeds from sales of real estate, lower spend on development and redevelopment, and repayment of notes receivable.

For the year ended December 31, 2013, Net cash provided by/(used in) investing activities was $(123.2) million compared to $(211.6) million in 2012. The change in investing activities was due to changes in the level of investment activities, which reflect our strategy as it relates to our investments in unconsolidated joint ventures and partnerships, acquisitions, dispositions, capital expenditures, and development activities, all of which are discussed in further detail throughout this Report.

Acquisitions

In 2014, the Company acquired a fully-entitled land parcel for future development located in Huntington Beach, California for $77.8 million, two communities located in Seattle, Washington and Kirkland, Washington with a total of 358 apartment homes for $45.5 million and $75.2 million, respectively, and a land parcel for future development located in Boston, Massachusetts for $32.2 million The four acquisitions during the year ended December 31, 2014 were accomplished through tax-deferred exchanges under Section 1031 of the Internal Revenue Code.

The Company did not acquire any real estate assets in 2013. During 2012, the Company acquired the remaining 80% ownership interests in two apartment communities (633 homes) located in Austin, Texas for $11.7 million from its joint venture partner. In addition, the Company also acquired two parcels of land for development in San Francisco, California and Boston, Massachusetts for a total purchase price of $77.2 million.

Capital Expenditures

Total capital expenditures, which in aggregate include recurring capital expenditures and major renovations, of $90.1 million or $2,274 per stabilized home were spent on all of our communities, excluding development and commercial properties, for the year ended December 31, 2014 as compared to $145.2 million or $3,537 per stabilized home for the prior year.

The decrease in total capital expenditures was primarily due to a decrease in major renovations of 65.8% or $60.6 million. Major renovations of $31.5 million or $796 per home were spent for the year ended December 31, 2014 as compared to $92.1 million or $2,244 per home for the prior year. The decrease is primarily attributable to our 27 Seventy Five Mesa

Verde project in Orange County, which incurred a full year of major renovation costs in 2013. The renovation project was completed in the second quarter of 2014.

The following table outlines capital expenditures and repair and maintenance costs for all of our communities, excluding real estate under developments and commercial properties, for the years ended December 31, 2014 and 2013 (dollars in thousands):

												Per Home
	Year Ended December 31,											Year Ended December 31,
	2014				2013				% Change			2014				2013				% Change
Turnover capital expenditures	$	12,160			$	11,850			2.6	%		$	307			$	288			6.6	%
Asset preservation expenditures	31,761				30,857				2.9	%		801				752				6.5	%
Total recurring capital expenditures	43,921				42,707				2.8	%		1,108				1,040				6.5	%
Revenue-enhancing improvements	14,647				10,364				41.3	%		370				253				46.2	%
Major renovations	31,547				92,141				(65.8	)%		796				2,244				(64.5	)%
Total capital expenditures	$	90,115			$	145,212			(37.9	)%		$	2,274			$	3,537			(35.7	)%
Repair and maintenance expense	$	31,288			$	32,692			(4.3	)%		$	789			$	796			(0.9	)%
Average stabilized home count (a)	39,637				41,052

(a) Average number of homes is calculated based on the number of stabilized homes outstanding at the end of each

month.

This table reports amounts capitalized during the year. Actual capital spending is impacted by the net change in capital expenditure accruals.

We will continue to selectively add revenue 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. Recurring capital expenditures during 2015 are projected to be approximately $1,150 per home.

Real Estate Under Development and Redevelopment

At December 31, 2014, our development pipeline for one wholly-owned community totaled 369 homes with a budget of $217.7 million, in which we have a carrying value of $177.6 million. The estimated completion date for this community is in the second quarter of 2015. During 2014, we incurred $251.5 million for development costs, a decrease of $29.1 million from our 2013 level of $280.6 million.

The following wholly-owned projects were under development or recently completed as of December 31, 2014 (dollars in thousands):

		Location		Number of Apartment Homes			Completed Apartment Homes			Cost to Date				Budgeted Cost				Estimated Cost Per Home				Expected Completion Date
Projects Under Construction:
Pier 4		Boston, MA		369			—			$	177,632			$	217,700			$	590			2Q2015
Completed Projects, Non-Stabilized:
DelRay Tower (a)(b)		Alexandria, VA		332			332			124,873				132,000				398				4Q2014
Beach & Ocean (c)		Huntington Beach, CA		173			173			51,038				51,900				300				4Q2014
Los Alisos		Mission Viejo, CA		320			320			87,180				87,500				273				1Q2014
Total completed projects				825			825			263,091				271,400				329
Total Projects				1,194			825			$	440,723			$	489,100			$	410

(a) This project is held by the Operating Partnership.

(b) Formerly known as The Calvert.

(c) Formerly known as Beach Walk.

At December 31, 2014, the Company was redeveloping 708 apartment homes, 694 of which have been completed, at one wholly-owned community with 739 total apartment homes. During the year ended December 31, 2014, we incurred $31.5 million in major renovations, which include major structural changes and/or architectural revisions to existing buildings, a decrease of $60.6 million from our 2013 level of $92.1 million. The estimated completion date for this community is the second quarter of 2015.

At December 31, 2014, the following community was in redevelopment (dollars in thousands):

		Location		Number of Apartment Homes			Scheduled Redevelopment Homes			Completed Apartment Homes			Cost to Date				Budgeted Cost				Estimated Cost Per Home				Expected Completion Date
View 34 (a)		New York, NY		739			708			694			$	83,778			$	98,000			$	138			2Q2015

(a) Formerly known as Rivergate.

Consolidated Joint Ventures

In December 2013, the Company consolidated its 95%/5% development joint ventures 13th and Market in San Diego, California and Domain College Park in Metropolitan, D.C. The consolidation was due to the Company becoming the managing partner of each of the joint ventures pursuant to amendments to the LLC Agreements. In connection with the amendments, our partner received equity distributions reducing its capital account balances to zero, the Company replaced our partner as the managing partner, and our partner no longer has the ability to substantively participate in the decision-making process, with only protective rights remaining. We accounted for the consolidations as asset acquisitions since the joint ventures were under development and not complete at the time of consolidation resulting in no gain or loss upon consolidation and increasing our real estate owned by $129.4 million and our debt owed by $63.6 million. In addition pursuant to the amendments, the Company paid a non-refundable deposit to our partner in January 2014 of $2.0 million for each joint venture, or $4.0 million in total, for the right to exercise options in 2014 to acquire our partner’s upside participation in the joint ventures. The non-refundable deposits were applied towards the total purchase price of approximately $24.7 million when the Company acquired 100% of the interest in the joint ventures in November 2014.

In December 2014, the Company sold a 49% interest in 13th and Market to MetLife for $54.2 million, resulting in a gain, net of tax, of $7.2 million. Additionally, the Company sold a 50% interest in a wholly owned land parcel to MetLife for $8.3 million, resulting in a loss, net of tax, of $2.2 million. As a result, the Company no longer controls these two joint ventures and they were deconsolidated by the Company in December 2014.

Unconsolidated 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.

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 December 31, 2014 and 2013 (dollars in thousands):

Joint Venture		Location of Properties		Number of Properties		Number of Apartment Homes			Investment at								UDR’s Ownership Interest
		2014		2014			2014				2013				2014				2013
Operating and development:
UDR/MetLife I (a)		Various		4 land parcels		—			$	13,306			$	47,497			15.7			%	4.5			%
UDR/MetLife II (a)		Various		21 operating communities		4,642			431,277				327,926				50.0			%	50.0			%
Other UDR/MetLife Joint Ventures (a)		Various		1 operating community, 3 development communities (b), 2 land parcels		1,282			134,939				36,313				50.6			%	35.8			%
UDR/MetLife Vitruvian Park® (c)		Addison, TX		3 operating communities, 6 land parcels		1,394			80,302				79,318				50.0			%	50.0			%
UDR/KFH (d)		Washington, D.C.		3 operating communities		660			21,596				25,919				30.0			%	30.0			%
Texas (e)		Texas		8 operating communities		3,359			(25,901		)		(23,591		)		20.0			%	20.0			%
Investment in and advances to unconsolidated joint ventures, net, before participating loan investment									655,519				493,382
		Location		Preferred Return		Years To Maturity			Investment at								Income From Participating Loan Investment For The Year Ended
Participating loan investment:									2014				2013				2014		2013			2012
Steele Creek (f)		Denver, CO		6.5%		2.8			62,707				14,273				$2,350		$156			$—
Total investment in and advances to unconsolidated joint ventures, net									$	718,226			$	507,655

(a)

In January 2012, the Company formed a joint venture with an unaffiliated third party to acquire 399 Fremont (land for future development) in San Francisco, California, which is included in Other UDR/MetLife Joint Ventures in the table above. At closing, UDR owned a noncontrolling interest of 92.5% in the joint venture. The Company’s total investment was $55.5 million, which consisted of its initial investment of $37.3 million and an option to exercise its right to acquire its partner’s 7.5% ownership interest in the joint venture. In October 2012, the Company exercised its option and paid $13.5 million. In January 2013, the Company subsequently acquired its partner’s 7.5% ownership interest for $4.7 million. In December 2013, the Company sold a 49% ownership interest to MetLife in the fully-entitled 399 Fremont land parcel for approximately $29.9 million. In conjunction with the sale, the Company formed a new unconsolidated real estate joint venture with MetLife, UDR/MetLife 399 Fremont, to develop a $318 million, 447-home, luxury high-rise tower on the site. Construction commenced in the first quarter 2014. As the Company recently acquired the 399 Fremont land parcel, the sale price was equivalent to the cost basis resulting in no gain or loss on the transaction. Under the terms of the partnership, the Company serves as the general partner with significant participating rights held by our partner, and has the ability to earn fees for development management, property management, asset management, and financing transactions. The UDR/MetLife 399 Fremont Joint Venture is accounted for under the equity method of accounting. Our initial investment was approximately $31.1 million.

In June 2013 and within UDR/MetLife I, the Company exchanged with MetLife its approximately 10% ownership interest in four operating communities and paid MetLife an additional $15.6 million in cash for an increased ownership interest of approximately 35% in two high-rise operating communities, bringing UDR's ownership interest in the two high-rise operating communities to 50% each. The two high-rise operating communities are located in Denver, Colorado and San Diego, California and were subsequently contributed to UDR/MetLife II. The four operating communities in which UDR exchanged its ownership interest are located in Washington D.C.; San Francisco, California; Dallas, Texas; and Charlotte, North Carolina. UDR continues to fee manage these four operating communities.

In March 2014, the Company sold its minority ownership interests in two operating communities located in Los Angeles, California to MetLife for cash proceeds of $3.0 million, which resulted in an immaterial gain. In April 2014, the Company increased its ownership interest in the remaining six operating communities in the UDR/MetLife I Joint Venture from 12% to 50%, and MetLife and the Company contributed the communities to the UDR/MetLife II Joint Venture. The Company paid MetLife $82.5 million for the additional ownership interests. The Company continues to fee manage the operating communities that were contributed to the UDR/MetLife II Joint Venture as well as the two operating communities in which it sold its minority ownership interests.

In July 2014, the Company increased the ownership interest in two land sites in UDR/Metlife I to 50.1% and formed individual asset joint ventures, which are included in Other UDR/MetLife Joint Ventures in the table above. The remaining 49.9% continues to be held by our joint venture partner MetLife. The Company paid MetLife approximately $21.5 million for the additional ownership interests.

In December 2014, the Company increased its ownership interest in one land site in the UDR/MetLife I Joint Venture to 50%. Additionally, the Company increased its ownership interest in another land site to 50.1%, which MetLife and the Company contributed to a separate joint venture and is included in Other UDR/MetLife Joint Ventures in the table above. The Company paid MetLife approximately $15.3 million for the additional ownership interests. As of December 31, 2014, the remaining assets in the UDR/MetLife I Joint Venture were comprised of three potential development land sites in which the Company has an average ownership interest of approximately 5% and one fully entitled land parcel in which the Company owns 50%.

In December 2014, the Company sold a 49% interest in 13th and Market located in San Diego, California to MetLife for gross proceeds of $54.2 million, resulting in a gain, net of tax, of $7.2 million and a 50% interest in 3033 Wilshire in Los Angeles, California, also to MetLife for gross proceeds of $8.3 million, resulting in a loss, net of tax, of $2.2 million.

(b)	The number of apartment homes for the communities under development presented in the table above is based on the projected number of total homes. As of December 31, 2014, no apartment homes had been completed in Other UDR/MetLife Joint Ventures.

(c)

In June 2013, the Company sold a 50% interest in five partnerships (the “UDR/MetLife Vitruvian Park® Partnerships”) to MetLife for approximately $141.3 million. The transaction resulted in a gain of approximately $436,000 which the Company has deferred until the terms of the construction completion guarantee have been met. Under the terms of the UDR/MetLife Vitruvian Park® Partnerships, the Company serves as the general partner with significant participating rights held by our partner, and earns fees for property management, asset management, and financing transactions. The UDR/MetLife Vitruvian Park® Partnerships are accounted for under the equity method of accounting. Our initial investment was approximately $80.2 million, which consisted of approximately $140.0 million (50% of our net book value of the real estate at the time of the transaction) reduced by our share of the net proceeds received upon encumbering the assets of approximately $58.7 million and other operating adjustments.

At closing, a total of $118.3 million of secured debt was placed on the two operating communities and the community under development. The debt on the two operating communities carries an interest rate of 4.0% with a term of ten years and the non-recourse construction loan on the community under development carries an interest rate of LIBOR plus 175 basis points with a term of two years and two one-year extension options. The Company has guaranteed the completion of the construction of the development. Proceeds from the construction loan will be used for completion of construction of the development. Upon completion, at its 50% ownership, the Company's pro-rata share of the undepreciated book value of the UDR/MetLife Vitruvian Park® Partnerships' real estate assets and outstanding debt will be approximately $145.0 million and $62.8 million, respectively.

(d) UDR is a partner with an unaffiliated third party, which formed a joint venture for the investment of up to $450 million in multifamily properties located in key, high barrier to entry markets. The partners will contribute equity of $180 million of which the Company’s maximum equity will be 30% or $54 million when fully invested.

(e) In November 2007, UDR and an unaffiliated third party formed a joint venture to own and operate 10 communities located in Texas. UDR contributed cash and property equal to 20% of the fair value of the joint venture. During the year ended December 31, 2012, the Company acquired the remaining 80% ownership interests in two communities in Austin, Texas for $11.7 million. The Company’s investment in the joint venture at December 31, 2014 and 2013 was net of deferred profits on the sale of depreciable properties to the joint venture of $23.9 million and $24.0 million, respectively.

In January 2015, the eight communities held by the Texas joint venture were sold, generating proceeds to UDR of $43.5 million. The Company recorded promote and fee income of approximately $9.6 million and a gain of approximately $59.1 million (including $24.2 million of previously deferred gains) in connection with the sale.

(f) In October 2013, the Company entered into a participating debt financing arrangement with a third party that is developing a $108 million, 218-home, high-rise luxury community located adjacent to the Cherry Creek Mall in Denver, Colorado. Under the agreement, UDR will finance up to 85%, or approximately $92.0 million, of the development cost at an interest rate of 6.5% per annum on the outstanding debt balance. In addition, the Company has the option to purchase the community upon completion of construction and has a 50% participating interest in the profit upon the acquisition of the community or sale to a third party. The Company accounts for the arrangement consistent with an investment in real estate under the equity method of accounting.

As of December 31, 2014, and 2013, our participating loan investment was $62.7 million and $14.3 million, respectively, which was included in Investment in and advances to unconsolidated joint ventures, net on the Consolidated Balance Sheets. We also recognized $2.4 million and $156,000 of income included in Income/(loss) from unconsolidated entities on the Consolidated Statements of Operations for the years ended December 31, 2014 and 2013, respectively.

Dispositions

During the year ended December 31, 2014, the Company recognized gains on the sale of real estate, net of tax, of $143.6 million. The Company sold nine communities consisting of a total of 2,500 apartment homes, an adjacent parcel of land, and one operating property for gross proceeds of $328.4 million, resulting in net proceeds of $324.4 million and a total gain, net of tax, of $138.6 million. The Company also sold 49% interest in a recently completed development for gross proceeds of $54.2 million, resulting in a gain, net of tax, of $7.2 million, and 50% interest in a land parcel for gross proceeds of $8.3 million, resulting in a loss, net of tax, of $2.2 million. A portion of the sale proceeds was designated for tax-deferred exchanges under Section 1031 of the Internal Revenue Code and was used to fund acquisitions of real estate as discussed above.

In 2013, UDR sold two apartment communities in the Sacramento market, consisting of 914 apartment homes for gross proceeds of $81.1 million. UDR recognized gains of $41.9 million, which are included in Income/(loss) from discontinued operations, net of tax on the UDR Consolidated Statements of Operations. Proceeds were used primarily to fund development and redevelopment activity and reduce debt.

In 2012, UDR sold 21 apartment communities, which had 6,507 apartment homes for gross proceeds of $609.4 million. UDR recognized gains (before tax) of $260.4 million, which are included in Income/(loss) from discontinued operations, net of tax on the UDR Consolidated Statements of Operations. Proceeds were used primarily to fund development and redevelopment activity and reduce debt.

We plan to continue to pursue our strategy of exiting markets where long-term growth prospects are limited and redeploying capital to primary locations in markets we believe will provide the best investment returns.

Financing Activities

For the years ended December 31, 2014, 2013 and 2012, Net cash provided by/(used in) financing activities was $(113.7) million, $(198.6) million and ($116.0) million, respectively.

The following significant financing activities occurred during the year ended December 31, 2014:

•	repaid $81.0 million of secured debt;

•	repaid $184.0 million of 5.13% unsecured medium-term notes due January 2014;

•	repaid $128.5 million of 5.50% unsecured medium-term notes due April 2014;

•	issued $300.0 million of 3.750% senior unsecured medium-term notes due July 2024;

•	sold 3,410,433 shares of common stock for aggregate net proceeds of approximately $99.8 million after deducting related expenses;

•	net borrowings of $152.5 million under the Company’s $900 million unsecured revolving credit facility; and

•	paid distributions of $256.1 million to our common stockholders.

The following significant financing activities occurred during the year ended December 31, 2013:

•	issued $300 million of 3.70% senior unsecured medium-term notes due October 2020;

•	repaid $46.6 million of secured debt. The $46.6 million of secured debt included $42.2 million of mortgage payments and the repayment of $4.4 million of credit facilities;

•	repaid $122.5 million of 6.05% unsecured medium-term notes due June 2013; and

•	re-priced our $100 million and $250 million unsecured term notes from LIBOR plus 142.5 basis points to LIBOR plus 125 basis points, and extended the maturity dates from January 2016 to June 2018.

Credit Facilities

As of December 31, 2014, we have secured credit facilities with Fannie Mae with an aggregate commitment of $834.3 million, all of which was outstanding. The Fannie Mae credit facilities mature at various dates from May 2017 through July 2023, and bear interest at floating and fixed rates. The Company has $568.1 million of the funded balance fixed at a weighted average interest rate of 5.12% and the remaining balance of $266.2 million on these facilities had at a weighted average variable rate of 1.60% at December 31, 2014.

As of December 31, 2014, the Company has a $900 million unsecured revolving credit facility that matures in December 2017. The credit facility has a six month extension option and contains an accordion feature that allows us to increase the facility to $1.45 billion. Based on the Company’s current credit rating, the credit facility carries an interest rate equal to LIBOR plus a spread of 100 basis points and a facility fee of 15 basis points. As of December 31, 2014, we had $152.5 million of outstanding borrowings under the credit facility, leaving $747.5 million of unused capacity (excluding $1.9 million of letters of credit at December 31, 2014).

The Fannie Mae credit facilities and the bank unsecured revolving credit facility are subject to customary financial covenants and limitations. As of December 31, 2014, we were in compliance with all financial covenants under these credit facilities.

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 $579.7 million in variable rate debt that is not subject to interest rate swap contracts as of December 31, 2014. If market interest rates for variable rate debt increased by 100 basis points, our interest expense would increase by $6.9 million based on the average balance outstanding during the year.

These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. These analysis 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 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 13, Derivatives and Hedging Activities, in the Notes to Consolidated Financial Statements included in this Report for additional discussion of derivate instruments.

Funds from Operations, Funds from Operations as Adjusted, and Adjusted Funds from Operations

Funds from Operations

Funds from operations (“FFO”) is defined as net income (computed in accordance with GAAP), excluding impairment write-downs of depreciable real estate or of investments in non-consolidated investees that are driven by measurable decreases in the fair value of depreciable real estate held by the investee, gains or losses from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for 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 is comparable to FFO, diluted in the accompanying reconciliation. 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, OP Units, unvested restricted stock, stock options, and the shares of Series E Cumulative Convertible Preferred Stock are dilutive; therefore, they are included in the diluted share count.

Activities of our TRS include development and land entitlement. From time to time, we develop and subsequently sell a TRS property which results in a short-term use of funds that produces a profit that differs from the traditional long-term investment in real estate for REITs. We believe that the inclusion of these TRS gains in FFO is consistent with the standards established by NAREIT as the short-term investment is incidental to our main business. TRS gains on sales, net of taxes, are defined as net sales proceeds less a tax provision and the gross investment basis of the asset before accumulated depreciation.

We consider FFO a useful metric for investors as we use FFO in evaluating property acquisitions and our operating performance, and believe that FFO should be considered along with, but not as an alternative to, net income and cash flow as a measure of our activities in accordance with GAAP. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of funds available to fund our cash needs.

Funds from Operations as Adjusted

FFO as Adjusted is defined as FFO excluding the impact of acquisition-related costs and other non-comparable items including, but not limited to, prepayment costs/benefits associated with early debt retirement, gains on sales of marketable securities and TRS property, deferred tax valuation allowance increases and decreases, casualty-related expenses and recoveries, severance costs and legal costs. Management believes that FFO as Adjusted 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.

FFO as Adjusted 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 attributable to UDR, Inc. is the most directly comparable GAAP financial measure to FFO as Adjusted. However, other REITs may use different methodologies for calculating FFO as Adjusted or similar FFO measures and, accordingly, our FFO as Adjusted may not always be comparable to FFO as Adjusted or similar FFO measures calculated by other REITs. FFO as Adjusted 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, or “AFFO”, is a non-GAAP financial measure that management uses as a supplemental measure of our performance. AFFO is defined as FFO as Adjusted less recurring capital expenditures 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 FFO as Adjusted.

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 attributable to UDR, Inc. 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 (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.

The following table outlines our reconciliation of Net Income/(Loss) Attributable to UDR, Inc. to FFO, FFO as Adjusted, and AFFO for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands):

	Year Ended December 31,
	2014				2013				2012
Net income/(loss) attributable to UDR, Inc.	$	154,334			$	44,812			$	212,177
Distributions to preferred stockholders	(3,724		)		(3,724		)		(6,010		)
Real estate depreciation and amortization, including discontinued operations	358,154				341,490				350,400
Noncontrolling interests	5,508				1,470				8,126
Real estate depreciation and amortization on unconsolidated joint ventures	42,133				33,180				32,531
Net (gain)/loss on the sale of depreciable property, excluding TRS	(144,703		)		(40,450		)		(243,805		)
Premium on preferred stock redemption or repurchases, net	—				—				(2,791		)
Funds from operations (“FFO”), basic	411,702				376,778				350,628
Distribution to preferred stockholders — Series E (Convertible)	3,724				3,724				3,724
FFO, diluted	$	415,426			$	380,502			$	354,352
FFO per common share, basic	$	1.58			$	1.45			$	1.41
FFO per common share, diluted	$	1.56			$	1.44			$	1.40
Weighted average number of common shares and OP Units outstanding — basic	260,775				259,306				248,262
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted	265,728				263,926				252,659
Impact of adjustments to FFO:
Acquisition-related costs/(fees), including joint ventures	$	442			$	(254	)		$	2,762
Costs/(benefit) associated with debt extinguishment and tender offer	192				178				(277		)
Redemption of preferred stock	—				—				2,791
(Gain)/loss on sale of land	1,056				—				—
Net gain on prepayment of note receivable	(8,411		)		—				—
Tax benefit associated with the conversion of certain TRS entities into REITs	(5,770		)		—				—
Gain on sale of TRS property/marketable securities	—				(2,651		)		(7,749		)
Severance costs and other restructuring expense	—				—				733
Reversal of deferred tax valuation allowance	—				—				(21,530		)
Casualty-related (recoveries)/charges, net	541				(9,665		)		9,262
	$	(11,950	)		$	(12,392	)		$	(14,008	)
FFO as Adjusted, diluted	$	403,476			$	368,110			$	340,344
FFO as Adjusted per common share, diluted	$	1.52			$	1.39			$	1.35
Recurring capital expenditures	(43,921		)		(42,707		)		(42,249		)
AFFO	$	359,555			$	325,403			$	298,095
AFFO per common share, diluted	$	1.35			$	1.23			$	1.18

The following table is our reconciliation of FFO share information to weighted average common shares outstanding, basic and diluted, reflected on the Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012 (shares in thousands):

	Year Ended December 31,
	2014			2013			2012
Weighted average number of common shares and OP Units outstanding — basic	260,775			259,306			248,262
Weighted average number of OP Units outstanding	(9,247	)		(9,337	)		(9,411	)
Weighted average number of common shares outstanding — basic per the Consolidated Statements of Operations	251,528			249,969			238,851
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted	265,728			263,926			252,659
Weighted average number of OP Units outstanding	(9,247	)		(9,337	)		(9,411	)
Weighted average incremental shares from assumed conversion of stock options	—			(1,169	)		(1,213	)
Weighted average incremental shares from unvested restricted stock	—			(415	)		(148	)
Weighted average number of Series E preferred shares outstanding	(3,036	)		(3,036	)		(3,036	)
Weighted average number of common shares outstanding — diluted per the Consolidated Statements of Operations	253,445			249,969			238,851

A presentation of cash flow metrics based on GAAP is as follows (dollars in thousands):

	Year Ended December 31,
	2014				2013				2012
Net cash provided by/(used in) operating activities	$	392,360			$	339,902			$	327,187
Net cash provided by/(used in) investing activities	(293,660		)		(123,209		)		(211,582		)
Net cash provided by/(used in) financing activities	(113,725		)		(198,559		)		(115,993		)

Results of Operations

The following discussion explains the changes in results of operations that are presented in our Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012, and includes the results of both continuing and discontinued operations for the periods presented.

Net Income/(Loss) Attributable to Common Stockholders

2014 -vs- 2013

Net income attributable to common stockholders was $150.6 million ($0.59 per diluted share) for the year ended December 31, 2014 as compared to net income of $41.1 million ($0.16 per diluted share) for the prior year. The increase in net income attributable to common stockholders for the year ended December 31, 2014 resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:

•	gains, net of tax, of $143.6 million on the sale of real estate during the year ended December 31, 2014. These gains consisted of:

•	the sale of nine communities with a total of 2,500 apartment homes, an adjacent parcel of land, and one operating property for gross proceeds of $328.4 million, resulting in a gain, net of tax, of approximately $138.6 million; and

•	the sale of 49% interest in a recently completed development for gross proceeds of $54.2 million, resulting in a gain, net of tax, of $7.2 million and 50% interest in a land parcel for gross proceeds of $8.3 million, resulting in a loss, net of tax, of $2.2 million.

•	an increase in total property net operating income (“NOI”) primarily due to higher occupancy and higher revenue per occupied home, and NOI from the homes placed in service related to development and redevelopment projects completed in 2014 and 2013, partially offset by the disposition of communities in 2014 and 2013.

This was partially offset by:

•	an increase in depreciation and amortization expense primarily from the homes placed in service related to development and redevelopment projects completed in 2014 and 2013, partially offset by a decrease from sold communities and fully depreciated assets; and

•	casualty-related recoveries in 2013 resulting from the effects of Hurricane Sandy on three of our New York City communities in 2012 (see Note 4, Real Estate Owned, in the Notes to the UDR Consolidated Financial Statements for more details);

2013 -vs- 2012

Net income attributable to common stockholders was $41.1 million ($0.16 per diluted share) for the year ended December 31, 2013 as compared to net income of $203.4 million ($0.85 per diluted share) for the prior year. The decrease in net income attributable to common stockholders for the year ended December 31, 2013 resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:

•	a decrease in net gains of $218.5 million on the sale of depreciable property related to the disposition of two communities in 2013 as compared to 21 communities in 2012; and

•	a decrease of $23.0 million in tax benefit primarily due to the reversal of our tax valuation allowance during 2012.

This was partially offset by:

•	an increase in total property NOI primarily due to higher occupancy and higher revenue per occupied home partially offset by the disposition of 21 communities in 2012;

•	casualty-related recoveries in 2013 resulting from the effects of Hurricane Sandy on three of our New York, New York communities in 2012 (see Note 16, Casualty-Related (Recoveries)/Charges, in the Notes to the UDR Consolidated Financial Statements included in this Report for more details);

•	a decrease in depreciation and amortization expense primarily from the disposition of assets in 2012 and intangible assets related to in place leases acquired in 2011 and 2012 becoming fully amortized in 2012, which was partially offset by the depreciation from developed and redeveloped units placed in service in 2012 and 2013;

•	a decrease in loss from unconsolidated entities primarily due to an $8.3 million gain ($5.3 million net of tax expense) on the sale of our 95% interest in the Lodge at Stoughton; and

•	a decrease in interest expense due to lower average debt balances, lower average interest rates, and higher capitalized interest from development and redevelopment activities.

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 2.75% of property revenue to cover the regional supervision and accounting costs related to consolidated property operations and land rent.

Although the Company considers NOI a useful measure of a 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 (which includes discontinued operations) for each of the periods presented (dollars in thousands):

	Year Ended December 31, (a)											Year Ended December 31, (b)
	2014				2013				% Change			2013				2012				% Change
Same-Store Communities:
Same-store rental income	$	630,966			$	604,729			4.3	%		$	613,733			$	584,999			4.9	%
Same-store operating expense (c)	(190,128		)		(185,512		)		2.5	%		(189,224		)		(184,393		)		2.6	%
Same-store NOI	440,838				419,217				5.2	%		424,509				400,606				6.0	%
Non-Mature Communities/Other NOI:
Acquired communities NOI	17,788				14,997				18.6	%		19,291				16,709				15.5	%
Sold or held for sale communities NOI	14,108				28,662				(50.8	)%		7,932				29,941				(73.5	)%
Developed communities NOI	26,492				4,920				438.5	%		4,846				(334		)		(1,550.9	)%
Redeveloped communities NOI	45,578				36,229				25.8	%		44,991				42,026				7.1	%
Commercial NOI and other	11,517				10,016				15.0	%		12,472				15,252				(18.2	)%
Total non-mature communities/other NOI	115,483				94,824				21.8	%		89,532				103,594				(13.6	)%
Total Property NOI	$	556,321			$	514,041			8.2	%		$	514,041			$	504,200			2.0	%

(a) Same-store consists of 34,581 apartment homes.

(b) Same-store consists of 35,790 apartment homes.

(c) Excludes depreciation, amortization, and property management expenses.

The following table is our reconciliation of total property NOI to Net income/(loss) attributable to UDR, Inc. as reflected, for both continuing and discontinued operations, for the periods presented (dollars in thousands):

		Year Ended December 31,
		2014				2013				2012
Total property NOI		$	556,321			$	514,041			$	504,200
Joint venture management and other fees		13,044				12,442				11,911
Property management		(22,142		)		(20,780		)		(20,465		)
Other operating expenses		(8,271		)		(7,136		)		(5,718		)
Real estate depreciation and amortization		(358,154		)		(341,490		)		(350,401		)
General and administrative		(47,800		)		(42,238		)		(43,792		)
Casualty-related recoveries/(charges), net		(541		)		12,253				(8,495		)
Other depreciation and amortization		(5,775		)		(6,741		)		(4,105		)
Income/(loss) from unconsolidated entities		(7,006		)		(415		)		(8,579		)
Interest expense		(130,454		)		(126,083		)		(138,792		)
Interest and other income/(expense), net		11,837				4,681				2,703
Tax benefit/(provision), net		15,136				7,299				30,282
Gain/(loss) on sale of real estate owned, net of tax		143,647				40,449				251,554
Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership		(5,511		)		(1,530		)		(7,986		)
Net (income)/loss attributable to noncontrolling interests		3				60				(140		)
Net income/(loss) attributable to UDR, Inc.		$	154,334			$	44,812			$	212,177

Same -Store Communities

2014 -vs- 2013

Our same-store community properties (those acquired, developed, and stabilized prior to January 1, 2013 and held on December 31, 2014) consisted of 34,581 apartment homes and provided 79.2% of our total NOI for the year ended December 31, 2014.

NOI for our same-store community properties increased 5.2% or $21.6 million for the year ended December 31, 2014 compared to 2013. The increase in property NOI was attributable to a 4.3% or $26.2 million increase in property rental income, which was partially offset by a 2.5% or $4.6 million increase in operating expenses. The increase in revenues was primarily driven by a 3.5% or $20.2 million increase in rental rates and a 4.9% or $2.2 million increase in reimbursement and fee income. Physical occupancy increased 0.6% to 96.7% and total monthly income per occupied home increased by 3.8% to $1,573.

The increase in operating expenses was primarily driven by a 4.1% or $2.6 million increase in real estate tax caused by higher real estate valuations and a 15.5% or $1.3 million increase in insurance expense primarily caused by a higher volume of small claims.

As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 69.9% for the year ended December 31, 2014 as compared to 69.3% for 2013.

2013 -vs- 2012

Our same-store community properties (those acquired, developed, and stabilized prior to January 1, 2012 and held on December 31, 2013) consisted of 35,790 apartment homes and provided 82.6% of our total NOI for the year ended December 31, 2013.

NOI for our same-store community properties increased 6.0% or $23.9 million for the year ended December 31, 2013 compared to 2012. The increase in property NOI was attributable to a 4.9% or $28.7 million increase in property rental income, which was partially offset by a 2.6% or $4.8 million increase in operating expenses. The increase in revenues was primarily driven by a 4.0% or $22.7 million increase in rental rates and a 7.7% or $3.6 million increase in reimbursement and fee income. Physical occupancy increased 0.2% to 96.0% and total monthly income per occupied home increased by 4.7% to $1,488.

The increase in operating expenses was primarily driven by a 6.7% or $3.9 million increase in real estate tax and a 4.6% or $2.0 million increase in personnel costs, which was partially offset by a 4.2% or $1.3 million decrease in repair and maintenance expense.

As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 69.2% for the year ended December 31, 2013 as compared to 68.5% for 2012.

Non-Mature Communities/Other

2014 -vs- 2013

The remaining $115.5 million or 20.8% of our total NOI for the year ended December 31, 2014 was generated from our non-mature communities/other. UDR’s non-mature communities/other consist of communities that do not meet the criteria to be included in same-store communities, which includes communities developed or acquired, redevelopment properties, sold or held for sale properties, and non-apartment components of mixed use properties. NOI from non-mature communities/other increased by 21.8% or $20.7 million for the year ended December 31, 2014 compared to 2013. The increase was primarily driven by a increase in NOI of 438.5% or $21.6 million from development communities and 25.8% or $9.3 million from redevelopment communities completed in 2014 and 2013, which was partially offset by an decrease in NOI of 50.8% or $14.6 million from communities sold in 2014 and 2013.

2013 -vs- 2012

The remaining $89.5 million of our total NOI for the year ended December 31, 2013 was generated from our non-mature communities/other. NOI from non-mature communities decreased by 13.6% or $14.1 million for the year ended December 31, 2013 compared to 2012. The decrease was primarily driven by a decrease in NOI of 73.5% or $22.0 million from communities

sold in 2012, partially offset by an increase in NOI of 1,550.9% or $5.2 million from development communities completed in 2013 and 2012 and an increase in NOI of 7.1% or $3.0 million from redeveloped communities completed in 2013 and 2012.

Real Estate Depreciation and Amortization

For the year ended December 31, 2014, real estate depreciation and amortization on both continuing and discontinued operations increased 4.9% or $16.7 million as compared to 2013. The increase in depreciation and amortization for the year ended December 31, 2014 was primarily due to homes delivered from our development and redevelopment communities, partially offset by a decrease from sold communities and fully depreciated assets.

For the year ended December 31, 2013, real estate depreciation and amortization on both continuing and discontinued operations decreased 2.5% or $8.9 million as compared to 2012. The decrease in depreciation and amortization for the year ended December 31, 2013 was primarily from the disposition of assets in 2012 and intangible assets related to in place leases acquired in 2012 and 2011 becoming fully amortized in 2012. The decrease was partially offset by the depreciation from developed and redeveloped units placed in service in 2013 and 2012.

General and Administrative

For the year ended December 31, 2014, general and administrative expense increased 13.2% or $5.6 million from 2013. The increase was primarily due to a $3.8 million increase in stock-based compensation expense under the long-term incentive plan and salary and benefit increases.

For the year ended December 31, 2013, general and administrative expense decreased 3.5% or $1.6 million from 2012. The decrease was primarily due to acquisition costs incurred in 2012.

Interest Expense

For the year ended December 31, 2014, interest expense increased by 3.5% or $4.4 million as compared to 2013. The increase in interest expense was primarily due lower capitalized interest from development and redevelopment activities.

For the year ended December 31, 2013, interest expense decreased 9.2% or $12.7 million as compared to 2012. The decrease in interest expense was primarily due to lower debt balances and lower interest rates and higher capitalized interest from development and redevelopment activities.

Tax Benefit/(Provision), Net

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 recognized a Tax benefit/(provision), net of $15.1 million, $7.3 million and $30.3 million for the years ended December 31, 2014, 2013 and 2012, respectively. The increase from 2013 to 2014 is primarily attributable to a one-time benefit of $5.8 million related to the conversion of certain taxable REIT subsidiaries into REITs in 2014. The decrease from 2012 to 2013 was primarily attributable to the reversal of a $21.5 million net deferred tax asset valuation allowance in 2012. Prior to 2012, our TRS had a history of losses and, as a result, had historically recognized a valuation allowance for net deferred tax assets. Each quarter, the Company evaluates the need to retain all or a portion of the valuation allowance on its net deferred tax assets. In the first quarter of 2012, the Company determined that it is more likely than not that the deferred tax assets, including any remaining net operating losses, will be realized. In making this determination, the Company analyzed, among other things, its recent history of earnings, forecasts of future earnings from sales of depreciable property, and its cumulative earnings for the last twelve quarters.

Casualty-Related (Recoveries)/Charges, Net

In October 2012, Hurricane Sandy hit the East Coast, affecting three of the Company’s operating communities (1,706 apartment homes) located in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Company has insurance policies that provide coverage for property damage and business interruption, subject to applicable retention.

Based on the claims filed and management’s estimates, the Company recognized a $9.0 million impairment charge for the damaged assets’ net book value and incurred $10.4 million of repair and cleanup costs during the year ended December 31, 2012. The impairment charge and the repair and cleanup costs incurred were reduced as of December 31, 2012 by $14.5 million of estimated insurance recovery, and were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations. During the year ended December 31, 2013, no material adjustments to the impairment charge and the repair and cleanup costs incurred were recognized. With the exception of one of the properties that is under redevelopment at December 31, 2013, the rehabilitation of the remaining two properties was substantially completed as of December 31, 2013 and was completed during 2014.

As of December 31, 2013, the Company had settled the Hurricane Sandy claims and received insurance proceeds in excess of the $14.5 million estimated insurance recovery receivable related to the impairment charge and the repair and cleanup costs incurred. As a result, the Company recognized a Casualty-related recovery of approximately $4.8 million and a casualty gain of approximately $654,000 for the year ended December 31, 2013. Both the recovery and casualty gain were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.

Based on the claims filed and management’s estimates, the Company recognized $4.4 million of business interruption losses for the year ended December 31, 2012, of which $3.6 million were related to rent concession rebates provided to residents during the period the properties were uninhabitable and were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations, and $767,000 were related to rent that was not contractually receivable and were classified as a reduction to Rental income on the Consolidated Statements of Operations. As noted below, the Company recovered from the insurance carrier approximately $4.2 million of the $4.4 million of 2012 business interruption losses. The Company estimates that it incurred an additional $3.4 million of business interruption losses for the year ended December 31, 2013. As noted below, the Company recovered from the insurance carrier approximately $2.6 million of the $3.4 million of 2013 business interruption losses.

During the year ended December 31, 2013, the Company received approximately $6.8 million of insurance proceeds for recovery of business interruption losses. Of the $6.8 million of insurance proceeds received in 2013, $4.2 million related to recovery of business interruption losses incurred in 2012 and the remaining $2.6 million related to recovery of business interruption losses incurred in 2013. The $6.8 million of recovery was classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations as of December 31, 2013.

During the year ended December 31, 2014, the Company recorded $541,000 of casualty-related losses due to property damage incurred during an earthquake and a storm in California, all of which are included in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.

Income/(Loss) from Unconsolidated Entities

For the years ended December 31, 2014, 2013 and 2012, we recognized losses from unconsolidated entities of $7.0 million, $415,000, and $8.6 million, respectively. These losses relate to our investments in unconsolidated joint ventures and partnerships and are included in Income/(loss) from unconsolidated entities on the UDR Consolidated Statements of Operations included in this Report. The increase in loss in 2014 as compared to 2013, as well as the decrease in loss in 2013 as compared to 2012, was primarily due to an $8.3 million gain ($5.3 million net of tax expense) on the sale of our 95% interest in the Lodge at Stoughton in 2013.

Interest and other income/(expense), net

For the years ended December 31, 2014, 2013 and 2012, we recognized Interest and other income/(expense), net of $11.9 million, $4.6 million, and $3.5 million, respectively. The increase in 2014 as compared to 2013 and 2012 was primarily attributable to the net gain of $8.4 million realized on the repayment of a note receivable in 2014.

Gain/(Loss) on Sale of Real Estate Owned, Net of Tax

During the year ended December 31, 2014, the Company recognized gains on the sale of real estate, net of tax, of $143.6 million. The Company sold nine communities consisting of a total of 2,500 apartment homes, an adjacent parcel of land, and one operating property for gross proceeds of $328.4 million, resulting in net proceeds of $324.4 million and a total gain, net of tax, of $138.6 million. The Company also sold 49% interest in a recently completed development for gross proceeds of $54.2 million, resulting in a gain, net of tax, of $7.2 million; and our 50% interest in a land parcel for gross proceeds of $8.3 million, resulting in a loss, net of tax, of $2.2 million. A portion of the sale proceeds was designated for tax-deferred exchanges under Section 1031 of the Internal Revenue Code and was used to fund acquisitions of real estate as discussed below.

Due to the Company’s adoption ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, effective January 1, 2014, these gains, net of tax, are included in Gain/(loss) on sale of real estate owned, net of tax on the UDR Consolidated Statements of Operations. See Note 2, Significant Accounting Policies, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional information.

For the years ended December 31, 2013 and 2012, we recognized gains (before tax) of $41.9 million, and $260.4 million, respectively. These gains are included in Income/(loss) from discontinued operations, net of tax on the Consolidated Statements of Operations of UDR included in this Report. Changes in the level of gains recognized from period to period reflect the changing level of our divestiture activity from period to period as well as the extent of gains related to specific properties sold.

Inflation

We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results through wage pressures, utilities and material costs, the majority of our leases are for a term of fourteen months or less, which generally enables us to compensate for any inflationary effects by increasing rents on our apartment homes. Although an extreme escalation in energy and food 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 year ended December 31, 2014.

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.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2014 (dollars in thousands):

		Payments Due by Period
Contractual Obligations		2015				2016-2017				2018-2019				Thereafter				Total
Long-term debt obligations		$	520,934			$	644,155			$	1,190,637			$	1,227,379			$	3,583,105
Interest on debt obligations (a)		125,037				200,454				135,239				114,451				575,181
Letters of credit		1,866				—				—				—				1,866
Unfunded commitments on:
Development projects (b)		40,068				—				—				—				40,068
Unconsolidated joint ventures (b) (c)		—				172,155				—				—				172,155
Redevelopment projects (b)		14,222				—				—				—				14,222
Participating loan investments (d)		29,302																29,302
Operating lease obligations:
Operating space		709				200				152				109				1,170
Ground leases (e)		5,412				10,824				10,824				313,735				340,795
		$	737,550			$	1,027,788			$	1,336,852			$	1,655,674			$	4,757,864

(a)	Interest payments on variable rate debt instruments are based on each debt instrument’s respective year-end interest rate at December 31, 2014.

(b)	Any unfunded costs at December 31, 2014 are shown in the year of estimated completion.

(c)	Represents UDR’s contributed and remaining equity commitment in unconsolidated joint ventures.

(d)	Represents UDR’s remaining participating loan commitment for Steele Creek.

(e)	For purposes of our ground lease contracts, the Company uses the minimum lease payment, if stated in the agreement. For ground lease agreements where there is a reset provision based on the communities appraised value or consumer price index but does not included a specified minimum lease payment, the Company uses the current rent over the remainder of the lease term.

During 2014, we incurred gross interest costs of $150.7 million, of which $20.2 million was capitalized.

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 December 31, 2014, the Operating Partnership’s real estate portfolio included 68 communities located in nine states and the District of Columbia with a total of 20,814 apartment homes.

As of December 31, 2014, UDR owned 110,883 units of our general limited partnership interests and 174,002,342 units of our limited partnership interests (the “OP Units”), or approximately 95.0% 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. We refer to our General Partner together with its consolidated subsidiaries (including us) and the General Partner’s consolidated joint ventures as “UDR” or the “General Partner.”

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 September 2003. At December 31, 2014, the General Partner’s consolidated real estate portfolio included 139 communities located in 10 states and the District of Columbia with a total of 39,851 apartment homes. In addition, the General Partner had an ownership interest in 36 communities with 10,055 completed apartment homes through unconsolidated operating communities.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to use judgment in the application of accounting policies, including making estimates and assumptions. A critical accounting policy is one that is both important to our financial condition and results of operations as well as involves some degree of uncertainty. Estimates are prepared based on management’s assessment after considering all evidence available. Changes in estimates could affect our financial position or results of operations. Below is a discussion of the accounting policies that we consider critical to understanding our financial condition or results of operations where there is uncertainty or where significant judgment is required. A discussion of our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2, Significant Accounting Policies, to the Notes to the Operating Partnership’s Consolidated Financial Statements included in this Report.

Cost Capitalization

In conformity with GAAP, we capitalize those expenditures that materially enhance the value of an existing asset or substantially extend the useful life of an existing asset. Expenditures necessary to maintain an existing property in ordinary operating condition are expensed as incurred.

In addition, we capitalize costs directly related to the predevelopment, development, and redevelopment of a capital project, which include, but are not limited to, interest, real estate taxes, insurance, and allocated development and redevelopment overhead related to support costs for personnel working on the capital projects. We use our professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. These costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress and such costs are incremental and identifiable to a specific activity to get the asset ready for its intended use. As each home in a capital project is completed and becomes available for lease-up, the Operating Partnership ceases capitalization on the related portion. The costs capitalized are reported on the Consolidated Balance Sheets as Total real estate owned, net of accumulated depreciation. Amounts capitalized during the years ended December 31, 2014, 2013, and 2012, were $4.9 million, $8.4 million, and $5.8 million, respectively.

Impairment of Long-Lived Assets

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 market value. Our estimates of fair market value represent our best estimate based primarily upon unobservable inputs related to rental rates, operating costs, growth rates, discount rates, capitalization rates, industry trends and reference to market rates and transactions.

Real Estate Investment Properties

We purchase real estate investment properties from time to time and record the fair value to various components, such as land, buildings, and intangibles related to in-place leases, based on the fair value of each component. In making estimates of fair values for purposes of allocating purchase price, we utilize various sources, including independent appraisals, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. The fair value of buildings is determined as if the buildings were vacant upon acquisition and subsequently leased at market rental rates. As such, the determination of fair value considers the present value of all cash flows expected to be generated from the property including an initial lease-up period. We determine the fair value of in-place leases by assessing the net effective rent and remaining term of the lease relative to market terms for similar leases at acquisition. In addition, we consider the cost of acquiring similar leases, the foregone rents associated with the lease-up period, and the carrying costs associated with the lease-up period. The fair value of in-place leases is recorded and amortized as amortization expense over the remaining average contractual lease period.

Summary of Real Estate Portfolio by Geographic Market

The following table summarizes our market information by major geographic markets as of and for the year ended December 31, 2014.

					As of December 31, 2014										Year Ended December 31, 2014
Same-Store Communities		Number of Apartment Communities			Number of Apartment Homes			Percentage of Total Carrying Value			Total Carrying Value (in thousands)				Average Physical Occupancy			Monthly Income per Occupied Home (a)				Net Operating Income (in thousands)
West Region
San Francisco, CA		9			2,185			13.3	%		$	560,828			96.4	%		$	2,671			$	52,012
Orange County, CA		8			2,935			12.3	%		522,264				94.8	%		1,721				42,097
Seattle, WA		5			932			5.0	%		213,135				97.1	%		1,540				11,989
Los Angeles, CA		2			344			2.5	%		108,080				94.4	%		2,179				5,646
Monterey Peninsula, CA		7			1,565			3.8	%		161,635				93.7	%		1,243				15,325
Other Southern California		3			635			2.6	%		109,741				94.9	%		1,658				8,349
Portland, OR		3			716			1.7	%		73,811				96.8	%		1,204				6,970
Mid-Atlantic Region
Metropolitan D.C.		7			2,378			13.2	%		561,052				96.4	%		1,909				35,342
Baltimore, MD		5			994			3.6	%		152,041				87.8	%		1,558				11,297
Southeast Region
Tampa, FL		3			1,154			2.8	%		117,260				96.3	%		1,192				10,336
Nashville, TN		6			1,612			3.2	%		134,852				97.0	%		1,029				12,988
Other Florida		1			636			1.9	%		81,316				95.4	%		1,378				6,491
Northeast Region
New York, NY		1			493			6.3	%		268,662				96.9	%		3,528				16,193
Boston, MA		2			833			4.2	%		178,607				96.3	%		1,855				12,737
Southwest Region
Dallas, TX		2			1,348			4.5	%		189,458				95.6	%		1,410				14,020
Austin, TX		1			250			1.0	%		39,538				96.2	%		1,653				2,801
Total/Average Same-Store Communities		65			19,010			81.9	%		3,472,280				95.4	%		$	1,713			264,593
Non Matures, Commercial Properties & Other		3			1,804			18.1	%		766,490											35,720
Total Real Estate Owned		68			20,814			100	%		4,238,770											$	300,313
Total Accumulated Depreciation											(1,403,303		)
Total Real Estate Owned, Net of Accumulated Depreciation											$	2,835,467

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

We report in two segments: Same-Store Communities and Non-Mature Communities/Other.

Our Same-Store Communities segment represents those communities acquired, developed, and stabilized prior to January 1, 2013 and held as of December 31, 2014. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, there is no plan to conduct substantial redevelopment activities, and the communities are not classified as held for sale at year end. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months.

Our Non-Mature Communities/Other segment represents those communities that do not meet the criteria to be included in Same-Store Communities, including, but not limited to, recently acquired, developed and redeveloped communities, and the non-apartment components of mixed use properties.

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 allocated to us under the General Partner’s credit agreements. The General Partner will routinely use its 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 allocated to 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 borrowings and the disposition of properties. We believe that our net cash provided by 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, and borrowings allocated to us under the General Partner’s credit agreements.

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 allocated to us under our General Partner’s credit agreements, and to a lesser extent, from cash flows provided by operating activities.

As of December 31, 2014, the Operating Partnership had approximately $193.0 million of principal payments on secured debt maturing in 2015. We anticipate that we will repay that debt with operating cash flows or proceeds from borrowings allocated to us under our General Partner’s credit agreements. The repayment of debt will be recorded as an offset to the Advances (to)/from General Partner.

Statements of Cash Flows

The following discussion explains the changes in Net cash provided by/(used in) operating activities, Net cash provided by/(used in) investing activities, and Net cash provided by/(used in) financing activities that are presented in our Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012.

Operating Activities

For the year ended December 31, 2014, Net cash provided by/(used in) operating activities was $208.0 million compared to $208.3 million for 2013. The increase in cash flow due to improved income from continuing operations was offset by changes in operating assets and liabilities.

For the year ended December 31, 2013, Net cash provided by/(used in) operating activities was $208.3 million compared to $201.1 million for 2012. The increase in net cash flow from operating activities was 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 year ended December 31, 2014, Net cash provided by/(used in) investing activities was $(46.7) million compared to $(64.0) million for 2013. The decrease in cash used in investing activities was primarily related to lower spend on development and redevelopment.

For the year ended December 31, 2013, Net cash provided by/(used in) investing activities was $(64.0) million compared to $4.3 million for 2012. Changes in the level of investment activities from period to period reflect our strategy as it relates to acquisitions, dispositions, development, redevelopment, and capital expenditures.

Disposition of Investments

During the year ended December 31, 2014 the Operating Partnership sold one community and an adjacent parcel of land in San Diego, California for gross proceeds of $48.7 million, resulting in a $24.4 million gain and net proceeds of $47.9

million. The Operating Partnership also recorded gains of $39.2 million in connection with UDR’s sale of two communities in Tampa, Florida and Los Angeles, California, which were previously deferred. The total gains of $63.6 million were included in Gain/(loss) on sale of real estate owned on the Consolidated Statements of Operations.

In 2013, the Operating Partnership sold two apartment communities in the Sacramento market, consisting of 914 apartment homes for gross proceeds of $81.1 million. The Operating Partnership recognized a gain of $41.5 million, which is included in Income/(loss) from discontinued operations on the Operating Partnership’s Consolidated Statements of Operations. Proceeds were used primarily to fund development and redevelopment activity and reduce debt.

Also in 2013, the Operating Partnership distributed the development property Los Alisos to the General Partner as a capital distribution. Upon the distribution of the property, the Operating Partnership redeemed 1,002,556 limited partnership units owned by UDR and affiliated entities and reduced its receivable from the General Partner by $53.7 million, resulting in a net capital reduction of $77.0 million.

In 2012, the Operating Partnership sold four communities with 1,314 apartment homes for a gain of $51.1 million.

Financing Activities

For the year ended December 31, 2014, Net cash provided by/(used in) financing activities was $(162.8) million compared to $(145.3) million for 2013. The increase in cash used in financing activities was primarily due to increased advances to the General Partner, partially offset by decreased payments on secured debt and proceeds from the issuance of secured debt.

For the year ended December 31, 2013, Net cash provided by/(used in) financing activities was $(145.3) million compared to $(203.3) million for 2012. The decrease in cash used in financing activities was primarily due to a decrease in payments on secured debt, a decrease in advances from the General Partner, and a decrease in proceeds from the issuance of secured debt.

Credit Facilities

As of December 31, 2014, an aggregate commitment of $526.6 million of the General Partner's secured credit facilities with Fannie Mae was allocated to the Operating Partnership based on the ownership of the assets securing the debt. The entire commitment was outstanding at December 31, 2014. The Fannie Mae credit facilities mature at various dates from May 2017 through July 2023 and bear interest at floating and fixed rates. At December 31, 2014, $333.8 million of the outstanding balance was fixed at a weighted average interest rate of 4.90% and the remaining balance of $192.8 million on these facilities had a weighted average variable interest rate of 1.83%. During 2013, the General Partner reallocated an additional $13.7 million of the Fannie Mae credit facilities to the Operating Partnership.

The Operating Partnership is a guarantor on the General Partner’s unsecured revolving credit facility, with an aggregate borrowing capacity of $900 million, $250 million of term notes due June 2018, $100 million of term notes due June 2018, $300 million of medium-term notes due June 2018, $300 million of medium-term notes due October 2020, $400 million of medium-term notes due January 2022, and $300 million of medium-term notes due July 2024. As of December 31, 2014, there were $152.5 million outstanding borrowings under the unsecured credit facility. As of December 31, 2013, there was no outstanding balance under the unsecured credit facility.

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 $219.8 million in variable rate debt that is not subject to interest rate swap contracts as of December 31, 2014. If market interest rates for variable rate debt increased by 100 basis points, our interest expense would increase by $2.2 million based on the balance at December 31, 2014.

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 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 General Partner also utilizes derivative financial instruments allocated to the Operating Partnership to manage interest rate risk and generally designates these financial instruments as cash flow hedges. See Note 8, Derivatives and Hedging Activity, in the Notes to the Operating Partnership’s Consolidated Financial Statements included in this Report for additional discussion of derivative instruments.

Results of Operations

The following discussion explains the changes in results of operations that are presented in our Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012, and includes the results of both continuing and discontinued operations for the periods presented.

Net Income(Loss) Attributable to OP Unitholders

2014 -vs- 2013

Net income/(loss) attributable to OP unitholders was $96.2 million ($0.53 per OP Unit) for the year ended December 31, 2014 as compared to $73.4 million ($0.40 per OP Unit) for the the prior year. The increase resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:

•	the Operating Partnership sold one community and an adjacent parcel of land in San Diego, California for gross proceeds of $48.7 million, resulting in a $24.4 million gain and net proceeds of $47.9 million. The Operating Partnership also recorded gains of $39.2 million in connection with UDR’s sale of two communities in Tampa, Florida and Los Angeles, California, which were previously deferred;

•	an increase in total property net operating income (“NOI”) primarily due to higher occupancy and higher revenue per occupied home, and NOI from the homes placed in service related to development and redevelopment projects completed in 2014 and 2013, partially offset by the disposition of communities in 2014 and 2013.

This was partially offset by:

•	casualty-related recoveries in 2013 resulting from the effects of Hurricane Sandy on two of our New York City communities in 2012 (see Note 13, Casualty-Related (Recoveries)/Charges, in the Notes to the Operating Partnership’s Consolidated Financial Statements for more details).

2013 -vs- 2012

Net income/(loss) attributable to OP unitholders was $73.4 million ($0.40 per OP Unit) for the year ended December 31, 2013 as compared to $44.0 million ($0.24 per OP Unit) for the prior year. The increase resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:

•	an increase in total property NOI primarily due to higher occupancy and higher revenue per occupied home, partially offset by a decrease in NOI due to the disposition of four communities in 2012;

•	a decrease in depreciation and amortization expense primarily from the disposition of assets in 2012, partially offset by the depreciation from developed or redeveloped units placed in service in 2013 and 2012;

•	casualty-related recoveries in 2013 resulting from the effects of Hurricane Sandy on two of our New York, New York communities in 2012 (see Note 13, Casualty-Related (Recoveries)/Charges, in the Notes to the Operating Partnership’s Consolidated Financial Statements included in this Report for more details); and

•	a decrease in interest expense due to lower average debt balances, lower average interest rates, and higher capitalized interest from development and redevelopment activities.

This was partially offset by:

•	a decrease in net gains of $9.6 million on the sale of depreciable properties related to the disposition of two communities in 2013 as compared to four communities in 2012.

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 is property management expense which is calculated as 2.75% of property revenue to cover regional supervision and accounting costs related to consolidated property operations and land rent.

Although the Company considers NOI a useful measure of a 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.

The following table summarizes the operating performance of our total portfolio (which includes discontinued operations) for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands):

	Year Ended December 31, (a)											Year Ended December 31, (b)
	2014				2013				% Change			2013				2012				% Change
Same-Store Communities:
Same-store rental income	$	372,818			$	355,585			4.8	%		$	344,525			$	327,877			5.1	%
Same-store operating expense (c)	(108,225		)		(106,228		)		1.9	%		(103,252		)		(99,944		)		3.3	%
Same-store NOI	264,593				249,357				6.1	%		241,273				227,933				5.9	%
Non-Mature Communities/Other NOI:
Acquired communities NOI	16,417				14,998				9.5	%		14,997				14,160				5.9	%
Sold communities NOI	11				8,671				(99.9	)%		5,581				10,296				(45.8	)%
Developed communities NOI	(603		)		(17		)		3,447.1	%		(17		)		(2		)		750.0	%
Redeveloped communities NOI	14,245				10,084				41.3	%		18,848				20,093				(6.2	)%
Commercial NOI and other	5,650				4,442				27.2	%		6,853				9,058				(24.3	)%
Total non-mature communities/other NOI	35,720				38,178				(6.4	)%		46,262				53,605				(13.7	)%
Total Property NOI	$	300,313			$	287,535			4.4	%		$	287,535			$	281,538			2.1	%

(a)	Same-store consists of 19,010 apartment homes.

(b)	Same-store consists of 18,616 apartment homes.

(c)	Excludes depreciation, amortization, and property management expenses.

The following table is our reconciliation of total property NOI to Net income/(loss) attributable to OP unitholders as reflected, for both continuing and discontinued operations, for the years ended December 31, 2014, 2013 and 2012 (dollars in thousands):

	Year Ended December 31,
	2014				2013				2012
Total property NOI	$	300,313			$	287,535			$	281,538
Property management	(11,622		)		(11,298		)		(11,019		)
Other operating expenses	(5,172		)		(5,728		)		(5,272		)
Real estate depreciation and amortization	(179,176		)		(181,302		)		(195,051		)
General and administrative	(28,541		)		(24,808		)		(26,204		)
Casualty-related recoveries/(charges), net	(541		)		8,083				(5,518		)
Interest expense	(41,717		)		(36,058		)		(45,234		)
Gain/(loss) on sale of real estate owned	63,635				41,518				51,094
Net (income)/loss attributable to noncontrolling interests	(952		)		(4,566		)		(352		)
Net income/(loss) attributable to OP unitholders	$	96,227			$	73,376			$	43,982

Same-Store Communities

2014 -vs- 2013

Our same-store community properties (those acquired, developed, and stabilized prior to January 1, 2013 and held on December 31, 2014) consisted of 19,010 apartment homes and provided 88.1% of our total NOI for the year ended December 31, 2014.

NOI for our same-store community properties increased 6.1% or $15.2 million for the year ended December 31, 2014 compared to 2013. The increase in property NOI was primarily attributable to a 4.8% or $17.2 million increase in property rental income, which was partially offset by a 1.9% or $2.0 million increase in operating expenses. The increase in revenues was primarily driven by a 3.7% or $12.8 million increase in rental rates and a 4.0% or $1.1 million increase in reimbursement and fee income. Physical occupancy increased 0.2% to 95.4% and total monthly income per occupied home increased by 4.6% to $1,713 for the year ended December 31, 2014 compared to 2013.

The increase in operating expenses was primarily driven by a 4.2% or $1.5 million increase in real estate tax caused by higher real estate valuations and a 18.7% or $810,000 increase in insurance expense primarily caused by a higher volume of small claims, which was partially offset by a 2.3% or $367,000 decrease in repairs and maintenance costs.

As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 71.0% for the year ended December 31, 2014 as compared to 70.0% for 2013.

2013 -vs- 2012

Our same-store community properties (those acquired, developed, and stabilized prior to January 1, 2012 and held on December 31, 2013) consisted of 18,616 apartment homes and provided 83.9% of our total NOI for the year ended December 31, 2013.

NOI for our same-store community properties increased 5.9% or $13.3 million for the year ended December 31, 2013 compared to 2012. The increase in property NOI was primarily attributable to a 5.1% or $16.6 million increase in property rental income, which was partially offset by a 3.3% or $3.3 million increase in operating expenses. The increase in revenues was primarily driven by a 4.3% or $13.7 million increase in rental rates and a 6.8% or $1.8 million increase in reimbursement and fee income. Physical occupancy increased 0.2% to 95.8% and total monthly income per occupied home increased by 4.8% to $1,609 for the year ended December 31, 2013 compared to 2012.

The increase in operating expenses was primarily driven by a 7.0% or $2.3 million increase in real estate tax and a 5.2% or $1.2 million increase in personnel costs, which was partially offset by a 3.1% or $502,000 decrease in repairs and maintenance costs.

As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property net operating income divided by property rental income) increased to 70.0% for the year ended December 31, 2013 as compared to 69.5% for 2012.

Non-Mature Communities/Other

2014 -vs- 2013

The remaining $35.7 million or 11.9% of our total NOI during the year ended December 31, 2014 was generated from our non-mature communities/other. The Operating Partnership’s non-mature communities/other consist of communities that do not meet the criteria to be included in same-store communities, which includes communities developed or acquired, redevelopment properties, sold properties, and non-apartment components of mixed use properties. NOI from non-mature communities/other decreased 6.4% or $2.5 million for the year ended December 31, 2014 compared to 2013. The decrease was primarily driven by a decrease in NOI of 99.9% or $8.7 million from properties sold during 2014 and 2013, which was partially offset by an increase in NOI of 27.2% or $1.2 million from commercial/other properties, and an increase of 41.3% or $4.2 million from redevelopment properties.

2013 -vs- 2012

The remaining $46.3 million or 16.1% of our total NOI during the year ended December 31, 2013 was generated from our non-mature communities/other. The Operating Partnership’s non-mature communities/other consist of communities that do not meet the criteria to be included in same-store communities, which includes communities developed or acquired, redevelopment properties, sold properties, and non-apartment components of mixed use properties. NOI from non-mature communities/other decreased 13.7% or $7.3 million for the year ended December 31, 2013 compared to 2012. The decrease was primarily driven by a decrease in NOI of 45.8% or $4.7 million from properties sold during 2013 and 2012, a decrease in NOI of 24.3% or $2.2 million from commercial/other properties, and a decrease of 6.2% or $1.2 million from redevelopment properties.

Real Estate Depreciation and Amortization

For the year ended December 31, 2014, real estate depreciation and amortization from continuing and discontinued operations decreased by 1.2% or $2.1 million as compared to 2013. The decrease in depreciation and amortization for the year ended December 31, 2014 was primarily from disposition of assets in 2014 and 2013, partially offset by the depreciation from developed and redeveloped units placed in service in 2014 and 2013.

For the year ended December 31, 2013, real estate depreciation and amortization from continuing and discontinued operations decreased by 7.0% or $13.7 million as compared to 2012. The decrease in depreciation and amortization for the year ended December 31, 2013 was primarily from the disposition of assets in 2012.

Casualty-Related Recoveries/(Charges), Net

In October 2012, Hurricane Sandy hit the East Coast, affecting two of the Operating Partnership’s operating communities (1,001 apartment homes) located in New York City. The properties suffered some physical damage, and were closed to residents for a period following the hurricane. The Operating Partnership has insurance policies that provide coverage for property damage and business interruption, subject to applicable retention.

Based on the claims filed and management’s estimates, the Operating Partnership recognized a $7.1 million impairment charge for the damaged assets’ net book value and incurred $7.0 million of repair and cleanup costs during the year ended December 31, 2012. The impairment charge and the repair and cleanup costs incurred were reduced as of December 31, 2012 by $10.8 million of estimated insurance recovery, and were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations. During the year ended December 31, 2013, no material adjustments to the impairment charge and the repair and cleanup costs incurred were recognized. The rehabilitation of these two properties was substantially completed as of December 31, 2013.

As of December 31, 2013, the Operating Partnership had settled the Hurricane Sandy claims and received insurance proceeds in excess of the $10.8 million estimated insurance recovery receivable related to the impairment charge and the repair and cleanup costs incurred. As a result, the Company recognized a Casualty-related recovery of approximately $3.3 million and a casualty gain of approximately $582,000 for the year ended December 31, 2013. Both the recovery and casualty gain were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.

Based on the claims filed and management’s estimates, the Operating Partnership recognized $2.2 million of business interruption losses for the year ended December 31, 2012, of which $1.8 million were related to rent concession rebates provided to residents during the period the properties were uninhabitable and were classified in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations, and $400,000 were related to rent that was not contractually receivable and were classified as a reduction to Rental income on the Consolidated Statements of Operations. The Company estimates that it incurred an additional $2.1 million of business interruption losses for the year ended December 31, 2013. As noted, the Company settled the Hurricane Sandy claims as of December 31, 2013.

During the year ended December 31, 2013, the Operating Partnership received approximately $4.2 million of insurance proceeds for recovery of business interruption losses. Of the $4.2 million of insurance proceeds received during the year ended December 31, 2013, $2.1 million related to recovery of business interruption losses incurred in 2012 and the remaining $2.1 million related to recovery of business interruption losses incurred in 2013. The $4.2 million of recovery was included in Casualty-related (recoveries)/charges, net on the Operating Partnership’s Consolidated Statements of Operations.

During the year ended December 31, 2014, the Company recorded $541,000 of casualty-related losses due to property damage incurred during an earthquake and a storm in California, all of which are included in Casualty-related (recoveries)/charges, net on the Consolidated Statements of Operations.

Interest Expense

For the year ended December 31, 2014, interest expense increased by 15.7% or $5.7 million as compared to 2013, which was primarily due to lower portion of interest capitalized in 2014 as a result of completed developments, partially offset by a decrease in interest expense due to replacement of debt at lower rates.

For the year ended December 31, 2013, interest expense decreased by 20.3% or $9.2 million as compared to 2012, which was primarily due to lower portion of interest capitalized in 2013 as a result of completed developments, partially offset by a decrease in interest expense due to replacement of debt at lower rates.

Gain/(Loss) on the Sale of Real Estate Owned

For the year ended December 31, 2014, the Operating Partnership sold one community and an adjacent parcel of land in San Diego, California for gross proceeds of $48.7 million, resulting in a $24.4 million gain and net proceeds of $47.9 million. The Operating Partnership also recorded gains of $39.2 million in connection with UDR’s sale of two communities in Tampa, Florida and Los Angeles, California, which were previously deferred.

Due to the Company’s adoption ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, effective January 1, 2014, these gains were included in Gain/(loss) on sale of real estate owned on the Operating Partnership’s Consolidated Statements of Operations. See Note 2, Significant Accounting Policies, in the Notes to the Operating Partnership’s Consolidated Financial Statements included in this Report for additional information.

For the years ended December 31, 2013, and 2012, we recognized gains on sale of depreciable property of $41.5 million, and $51.1 million, respectively. These gains are included in Income/(loss) from discontinued operations on the Operating Partnership’s Consolidated Statements of Operations included in this Report. Changes in the level of gains recognized from period to period reflect the changing level of our divestiture activity from period to period as well as the extent of gains related to specific properties sold.

Net (Income)/Loss Attributable to Noncontrolling Interests

For the year ended December 31, 2014, net income attributable to noncontrolling interests was $952,000 as compared to $4.6 million for 2013. The decrease of $3.6 million was primarily due to the Operating Partnership correcting an error in the General Partner’s ownership interest in one of the consolidated subsidiaries resulting in a cumulative adjustment recorded in 2013 of $3.3 million. Management believes the impact of the cumulative adjustment in 2013 is immaterial to the financial statements taken as a whole.

Inflation

We believe that the direct effects of inflation on our operations have been immaterial. While the impact of inflation primarily impacts our results through wage pressures, utilities and material costs, substantially all of our leases are for a term of one year or less, which generally enables us to compensate for any inflationary effects by increasing rents on our apartment

homes. Although an extreme escalation in energy and food 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 year ended December 31, 2014.

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.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2014 (dollars in thousands):

		Payments Due by Period
Contractual Obligations		2015				2016-2017				2018-2019				Thereafter				Total
Long-term debt obligations		$	193,003			$	154,455			$	384,992			$	199,509			$	931,959
Interest on debt obligations (a)		40,906				49,287				33,497				11,132				134,822
Operating lease obligations — ground leases (b)		5,308				10,616				10,616				313,648				340,188
		$	239,217			$	214,358			$	429,105			$	524,289			$	1,406,969

(a)	Interest payments on variable rate debt instruments are based on each debt instrument’s respective year-end interest rate at December 31, 2014.

(b)	For purposes of our ground lease contracts, the Operating Partnership uses the minimum lease payment, if stated in the agreement. For ground lease agreements where there is a reset provision based on the communities appraised value or consumer price index but does not include a specified minimum lease payment, the Operating Partnership uses the current rent over the remainder of the lease term.